EXHIBIT 2
SECURITIES PURCHASE AND SUBSCRIPTION AGREEMENT
between and among
GSIG, LLC,
GSWG, LLC,
XXXXXXX XXXX GROUP, INC.,
XXXXX X. XXXXX,
CALOYERAS 1982 REVOCABLE TRUST,
CALOYERAS FAMILY PARTNERSHIP,
XXXXX X. XXXXXX,
XXX X. XXXXXX,
TOROTEL INC.,
GOVERNANCE SOLUTIONS, LLC
AND
APEX INNOVATIONS, INC.
Dated as of March 29, 2002
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS.....................................................................2
1.1 CERTAIN DEFINITIONS............................................................2
1.2 CROSS-REFERENCED DEFINITIONS...................................................3
1.3 RULES OF CONSTRUCTION..........................................................4
ARTICLE 2 INCORPORATION...................................................................5
2.1 THE INCORPORATOR...............................................................5
ARTICLE 3 SUBSCRIPTION OF SECURITIES......................................................5
3.1 GSIG CONSIDERATION.............................................................5
3.2 GSWG CONSIDERATION.............................................................5
3.3 SRG CONSIDERATION..............................................................5
3.4 XXXXX CONSIDERATION............................................................6
3.5 CALOYERAS TRUST CONSIDERATION..................................................6
3.6 CALOYERAS PARTNERSHIP CONSIDERATION............................................6
3.7 WAA CONSIDERATION..............................................................6
3.8 JGA CONSIDERATION..............................................................6
3.9 TOROTEL CONSIDERATION..........................................................6
ARTICLE 4 CLOSING.........................................................................6
4.1 THE CLOSING....................................................................6
4.2 INTERDEPENDENCE OF CLOSING TRANSACTIONS........................................6
4.3 DELIVERABLES AT THE CLOSING: TENDER FROM EACH PARTY............................7
4.4 DELIVERABLES AT CLOSING: DUE TO EACH PARTY.....................................9
ARTICLE 5 REPRESENTATIONS AND WARRANTIES.................................................10
5.1 GSLLC AND CORPORATE REPRESENTATIONS...........................................10
5.2 MUTUAL REPRESENTATIONS........................................................19
ARTICLE 6 PRE-CLOSING COVENANTS..........................................................21
6.1 ACCESS TO PROPERTIES AND RECORDS..............................................21
6.2 ADDITIONAL DISCLOSURE.........................................................22
6.3 CONDUCT OF BUSINESS...........................................................22
6.4 PRE-CLOSING ACTION............................................................22
ARTICLE 7 POST-CLOSING COVENANTS.........................................................23
7.1 PUBLIC ANNOUNCEMENTS..........................................................23
7.2 FURTHER ASSURANCES............................................................23
ARTICLE 8 CONDITIONS TO OBLIGATIONS OF THE PARTIES.......................................23
8.1 CONDITIONS TO OBLIGATIONS OF THE PARTIES......................................23
8.2 CONDITIONS TO OBLIGATIONS OF GSLLC AND THE CORPORATION........................25
ARTICLE 9 TERMINATION AND ABANDONMENT....................................................27
9.1 TERMINATION...................................................................27
9.2 EFFECT OF TERMINATION.........................................................28
ARTICLE 10 INDEMNIFICATION...............................................................28
10.1 INDEMNIFICATION BY TOROTEL, CALOYERAS TRUST, CALOYERAS PARTNERSHIP AND XXXXX..28
10.2 INDEMNIFICATION BY SRG, GSWG AND GSIG.........................................29
10.5 NOTICE AND DEFENSE OF CLAIMS..................................................30
10.5.1 NOTICE.................................................................30
10.5.2 DEFENSE OF CLAIMS OR ACTIONS...........................................30
10.6 CONFIDENTIALITY...............................................................31
10.7 SOLE REMEDY...................................................................31
ARTICLE 11 MISCELLANEOUS PROVISIONS......................................................31
11.1 TRANSFER TAXES................................................................31
11.2 AMENDMENT AND MODIFICATION....................................................31
11.3 WAIVER........................................................................32
11.4 EXPENSE.......................................................................32
11.5 NOTICES.......................................................................32
11.6 CONFIDENTIALITY...............................................................33
11.7 ASSIGNMENT....................................................................33
11.8 GOVERNING LAW.................................................................33
11.9 HEADINGS......................................................................33
11.10 ENTIRE AGREEMENT..............................................................33
11.11 COUNTERPARTS..................................................................33
11.12 SEVERABILITY..................................................................33
SECURITIES PURCHASE AND SUBSCRIPTION AGREEMENT
THIS
SECURITIES PURCHASE AND SUBSCRIPTION AGREEMENT ("Agreement") is
effective as of March 29, 2002, by, between and among:
- GSIG, LLC, a
Kansas limited liability company ("GSIG"),
- GSWG, LLC, a
Kansas limited liability company ("GSWG"),
- Xxxxxxx Xxxx Group, Inc., a Missouri Corporation ("SRG"),
- Xxxxx X. Xxxxx, an individual ("Xxxxx" as beneficial owner of the
Common Stock to be issued to the XXX Bank pursuant to Section 8.3
hereof),
- Xxxxx Xxxxxxxxx as Trustee of the Caloyeras 1982 Revocable Trust
("Caloyeras Trust"),
- Caloyeras Family Partnership, a California limited partnership
("Caloyeras Partnership"),
- Xxxxx X. Xxxxxx, an individual ("WAA"),
- Xxx X. Xxxxxx, an individual ("JGA"),
-
Torotel Inc, a Missouri corporation ("Torotel"), (each of GSIG, GSWG,
SRG, Xxxxx, Xxxxxxxxx Trust, Caloyeras Partnership, WAA, JGA and
Torotel may, in the singular, be referred to as a "Party" and
collectively referred to as the "Parties"),
- Governance Solutions, LLC, a
Kansas limited liability company
("GSLLC"), and
- Apex Innovations, Inc., a Delaware corporation (the "Corporation").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Parties desire to convert GSLLC from a
Kansas limited
liability company to a Delaware corporation, raise additional capital for such
corporation and provide the number of shares of capital stock that will be
issued to each of the stockholders in the Corporation; and
WHEREAS, the Corporation proposes to undertake a series of interdependent
transactions involving multiple parties to accomplish the conversion stated
above, as more expressly set forth herein, and in the Schedules and Exhibits
hereto; and
WHEREAS, to obtain funding for said transactions, the Corporation desires
to authorize, issue and sell to the Parties shares of Common Stock (as defined
below) of the Corporation, in consideration of an investment by the Parties, on
the terms and conditions set forth in this Agreement.
NOW, therefor, in consideration of the premises and the mutual promises
herein contained, the Parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 CERTAIN DEFINITIONS. When used in this Agreement, each of the terms set
forth in this Section 1.1 shall have the meaning indicated below; other terms
being defined throughout the body of this Agreement:
"Accredited Investor" shall have the meaning provided in Rule 501(a) of
Regulation D of the Securities Act.
"Affiliate" of a specified Person means a Person that directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such specified Person or a member of such specified
Person's immediate family; provided, however, that none of the Parties hereto or
any of their Affiliates shall be deemed to be an Affiliate of the Corporation
solely as a result of the Parties' ownership of the Securities. "Control"
(including the terms "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a Person, whether through the ownership
of voting securities, by contract, credit arrangement, agency or otherwise.
"Applicable Law" means any and all applicable provisions of any and all (i)
constitutions, treaties, statutes, laws (including the common law and all
environmental laws), rules, regulations, ordinances, codes or orders of any
Governmental Authority, (ii) governmental approvals, and (iii) orders,
decisions, injunctions, judgments, awards and decrees of or agreements with any
Governmental Authority.
"Business Day" means any day that is not (i) a Saturday or Sunday; or (ii)
a day on which banks are authorized by Applicable Law to close in
Kansas City,
Missouri.
"Closing" means the consummation of the various acts and transactions
required or contemplated by the terms of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commission" means the United States Securities and Exchange Commission.
"Common Stock" means the common stock of the Corporation, $.001 par value
per share.
"Common Stockholders" means, collectively, the holders of Common Stock.
"Entity" means a Person other than a human being or a grantor trust.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
(including any government authority,
agency, department, board, commission or instrumentality of the United States,
any State of the United States or any political subdivision thereof), any
tribunal or arbitrator(s) of competent jurisdiction, or any self-regulatory
organization.
"Lien" means any mortgage, pledge, hypothecation, right of others, claim,
security interest, encumbrance, lease, sublease, license, occupancy agreement,
adverse claim or interest, easement, covenant, encroachment, burden, title
defect, title retention agreement, voting trust agreement, interest, equity,
option, lien, right of first refusal, charge or other restriction or limitation.
"Material Adverse Change" or "Material Adverse Effect" means any event,
circumstance, occurrence, fact, condition, change or effect that is materially
adverse to the business, operations, results of operations, condition (financial
or other), properties, assets or liabilities of the Corporation and/or its
Affiliates, taken as a whole.
"Operative Documents" means, collectively, this Agreement, the Schedules
hereto, the Exhibits hereto, and any additional schedules and exhibits to the
Exhibits.
"Person" means any natural person, firm, partnership, association,
corporation, company, limited liability company, limited partnership, trust,
business trust, Governmental Authority or other entity.
"Securities" means the Common Stock to be issued and sold to the Parties
hereunder.
"Securities Act" means the Securities Act of 1933, as amended, and the
regulations promulgated thereunder.
"Taxes" means all taxes, charges, fees, interest, penalties, additions to
tax or other assessments, including but not limited to income (whether net or
gross), excise, property, sales, transfer, use, value added, franchise, payroll,
wage, unemployment, worker's compensation, social security, capital, occupation,
estimated taxes, and customs duties imposed by any tax authority.
1.2 CROSS-REFERENCED DEFINITIONS. The following terms are defined in the
provisions of this Agreement cross-referenced below:
"Agreement" Preamble
"Apex Stock Purchase Agreement" Section 4.3.3(c)
"Authorizations" Section 5.1.7
"Xxxxx" Preamble
"Caloyeras Partnership" Preamble
"Caloyeras Trust" Preamble
"Closing Date" Section 4.1
"Contracts" Section 5.1.20
"Convertible Promissory Note" Section 3.1
"Corporation" Preamble
"Deliverables" Section 4.3
"Employee Plans" Section 5.1.21
"Exhibits" Section 1.3
"Financial Statements" Section 5.1.11
"GAAP" Section 5.1.13
"GSIG" Preamble
"GSLLC" Preamble
"GSWG" Preamble
"Intellectual Property" Section 5.1.19
"Interim Financial Statements" Section 5.1.11
"XXX Bank" Signature Page
"JGA" Preamble
"JGA Earn Out Promissory Note" Section 4.3.3(e)
"JGA Note Pledge Agreement" Section 4.3.8(b)
"JGA Promissory Note" Section 3.8
"Loan Agreement" Section 3.1
"Parties" Preamble
"Party" Preamble
"Permitted Liens" Section 5.1.22
"Purchase Price" Article 3
"Returns" Section 5.1.17
"Schedules" Section 1.3
"Shareholder Agreement" Section 4.3.1(d)
"SRG" Preamble
"Torotel" Preamble
"WAA" Preamble
"WAA Earn Out Promissory Note" Section 4.3.3(d)
"WAA Note Pledge Agreement" Section 4.3.7(b)
"WAA Promissory Note" Section 3.7
1.3 RULES OF CONSTRUCTION. Words such as "herein," "hereinafter," "hereto,"
"hereby" and "hereunder," when used with reference to this Agreement, refer to
this Agreement as a whole, unless the context otherwise requires. The words
"include," "includes," "included" and "including" shall be construed as if
followed by the phrase "without being limited to." The phrase "to a [Person's]
knowledge" means, (i) with respect to an Entity, to the knowledge of the
Entity's executive officers (or persons serving in a similar capacity) after due
inquiry, and (ii) with respect to an individual, his or her personal knowledge
after due inquiry. Unless the context requires otherwise: (a) the gender (or
lack of gender) of all words used in this Agreement includes the masculine,
feminine, and neuter; (b) references to Articles and Sections are to Articles
and Sections of this Agreement; (c) references to a Schedule or an Exhibit are
to a Schedule or Exhibit attached to this Agreement, each of which is made a
part hereof for all purposes; (d) references to agreements and contracts include
any amendments and supplements executed from time to time; (e)
references to Applicable Law are to such Applicable Law as it is amended from
time to time, and references to particular provisions of Applicable Law are to
corresponding provisions of any successor Applicable Law; and (f) references to
money are to legal currency of the United States of America.
ARTICLE 2
INCORPORATION
2.1 THE INCORPORATOR: The Incorporator has filed a Certificate of
Incorporation for the Corporation with the Secretary of State of Delaware as of
February 26, 2002. The Incorporator has appointed those persons listed in
EXHIBIT 2.1 to serve as the initial Board of Directors of the Corporation until
such time as this Agreement has been executed and implemented.
ARTICLE 3
SUBSCRIPTION OF SECURITIES
Subject to the terms and conditions set forth herein and for the
consideration provided below, each of the Parties hereby subscribes for and
agrees to purchase the following number of shares of Common Stock, and the
Corporation hereby agrees to issue, sell and deliver to each of the Parties at
the Closing, the following shares of Common Stock:
3.1 GSIG CONSIDERATION. GSIG shall contribute to the Corporation (i) all of
its membership interests in GSLLC, (ii) the amount of $450,000 of principal and
$3,712.50 of accrued but unpaid interest due to GSIG from GSLLC under that
certain Loan Agreement (the "Loan Agreement") and Convertible Promissory Note
("Convertible Promissory Note") each dated February 12, 2002 and attached hereto
as EXHIBIT 3.1, and (iii) Three Hundred Seventy Thousand Dollars ($370,000) in
immediately available funds. GSIG shall receive, as consideration for the above
contribution, (a) 2,000,000 shares of Common Stock for its membership interests
in GSLLC, (b) 1,800,000 shares of Common Stock for the amount of principal due
GSIG under the Loan Agreement and Convertible Promissory Note, (c) 14,850 shares
of Common Stock for the amount of accrued but unpaid interest due GSIG under the
Loan Agreement and Convertible Promissory Note, and (d) 1,480,000 shares of
Common Stock for the immediately available funds. GSIG shall receive an
aggregate of 5,294,850 shares of Common Stock for its contribution to the
Corporation;
3.2 GSWG CONSIDERATION. GSWG shall contribute to the Corporation all of its
membership interests in GSLLC and receive, as consideration therefor, 5,000,000
shares of Common Stock;
3.3 SRG CONSIDERATION. SRG shall contribute to the Corporation all of its
membership interests in GSLLC and receive, as consideration therefor, 2,000,000
shares of Common Stock and One Million Five Hundred Thousand Dollars
($1,500,000) in immediately available funds at the Closing;
3.4 XXXXX CONSIDERATION. Subject to Section 8.3 hereof, Xxxxx shall
contribute to the Corporation Two Hundred Fifty Thousand Dollars ($250,000) and
receive, as consideration therefor, 1,000,000 shares of Common Stock;
3.5 CALOYERAS TRUST CONSIDERATION. Caloyeras Trust shall contribute to the
Corporation Two Hundred Fifty Thousand Dollars ($250,000) and receive, as
consideration therefor, 1,000,000 shares of Common Stock;
3.6 CALOYERAS PARTNERSHIP CONSIDERATION. Caloyeras Partnership shall
contribute to the Corporation Seven Hundred Fifty Thousand Dollars ($750,000)
and receive, as consideration therefor, 3,000,000 shares of Common Stock;
3.7 WAA CONSIDERATION. WAA shall contribute to the Corporation a Promissory
Note in the principal sum of One Hundred Fifty Thousand Dollars ($150,000),
substantially in the form of EXHIBIT 3.7 ("WAA Promissory Note") attached hereto
and receive, as consideration therefor, 600,000 shares of Common Stock;
3.8 JGA CONSIDERATION. JGA shall contribute to the Corporation a Promissory
Note in the principal sum of One Hundred Fifty Thousand Dollars ($150,000)
substantially in the form of EXHIBIT 3.8 ("JGA Promissory Note") attached hereto
and receive, as consideration therefor, 600,000 shares of Common Stock; and
3.9 TOROTEL CONSIDERATION. Torotel shall contribute to the Corporation One
Million Dollars($1,000,000) and receive, as consideration therefor, 4,000,000
shares of Common Stock.
The aggregate of all the contributions to the Corporation from each of the
parties shall constitute the "Purchase Price" for the Securities.
ARTICLE 4
CLOSING
4.1 THE CLOSING. The Closing shall occur at the later of (i) the date upon
which all conditions set forth in Sections 8.1 and 8.2 have been satisfied and
the time at which all deliveries contemplated in Section 4.3 can be effected and
(ii) March 28, 2002 (the "Closing
Date"), unless the same is extended by consent of the Parties. The Closing shall
take place on the Closing Date at 1:00 PM Central Time at the offices of
Xxxxxxxx Xxxxxxx & Xxxxxx, PC, 000 X. 00xx Xxxxxx, Xxxxxx Xxxx, Xxxxxxxx 00000.
4.2 INTERDEPENDENCE OF CLOSING TRANSACTIONS. Because the Closing of this
Agreement is expressly conditioned upon the simultaneous closing of the related
transactions set forth in Sections 8.1 and in 8.2, the parties agree, and each
of the Exhibits hereto requires those other parties to agree, that all events at
the Closing shall be deemed to have occurred simultaneously, and that none shall
be effective until all have been concluded.
4.3 DELIVERABLES AT THE CLOSING: TENDER FROM EACH PARTY. On the Closing
Date, the items stated herein shall be delivered ("Deliverables"). In each case
where an additional agreement or document is identified (generally as an
Exhibit), delivery shall include all appropriate schedules and exhibits to that
other or additional agreement or document.
4.3.1 GSIG shall deliver:
(1) All of its membership interests in GSLLC free and clear
of all Liens;
(2) The Loan Agreement and Convertible Promissory Note marked
canceled and paid in full;
(3) The sum of $370,000 in immediately available funds, and
(4) An executed Shareholder Agreement together with an
executed Registration Rights Agreement as required under such Shareholder
Agreement substantially in the form of EXHIBIT 4.3.1(d) attached hereto
(collectively, the "Shareholder Agreement").
4.3.2 GSWG shall deliver:
(1) All of its membership interests in GSLLC free and clear
of all Liens; and
(2) An executed Shareholder Agreement.
4.3.3 SRG shall deliver:
(1) All of its membership interests in GSLLC free and clear
of all Liens;
(2) An executed Shareholder Agreement;
(3) An executed Apex Stock Purchase Agreement, together with
all Schedules and Exhibits thereto, substantially in the form of EXHIBIT
4.3.3(c) attached hereto ("Apex Stock Purchase Agreement");
(4) An executed WAA Earn Out Promissory Note from SRG to WAA
pursuant to the Apex Stock Purchase Agreement in the form of EXHIBIT 4.3.3(d)
("WAA Earn Out Promissory Note"); and
(5) An executed JGA Earn Out Promissory Note from SRG to JGA
pursuant to the Apex Stock Purchase Agreement in the form of EXHIBIT 4.3.3(e)
("JGA Earn Out Promissory Note").
4.3.4 Xxxxx shall deliver an executed Shareholder Agreement. In
addition, Xxxxx shall make the deliveries required by Section 8.3 hereof.
4.3.5 Caloyeras Trust shall deliver:
(1) Two Hundred Fifty Thousand Dollars ($250,000) in
immediately available funds; and
(2) An executed Shareholder Agreement.
4.3.6 Caloyeras Partnership shall deliver:
(1) Seven Hundred Fifty Thousand Dollars ($750,000) in
immediately available funds; and
(2) An executed Shareholder Agreement.
4.3.7 WAA shall deliver:
(1) An executed WAA Promissory Note;
(2) An executed Note Pledge Agreement substantially in the
form of EXHIBIT 4.3.7(b) pledging the WAA Earnout Promissory Note ("WAA Note
Pledge Agreement") to secure the WAA Promissory Note; and
(3) An executed Shareholder Agreement.
4.3.8 JGA shall deliver:
(1) An executed JGA Promissory Note;
(2) An executed Note Pledge Agreement substantially in the
form of EXHIBIT 4.3.8(b) pledging the JGA Earnout Promissory Note ("JGA Note
Pledge Agreement") to secure the JGA Promissory Note; and
(3) An executed Shareholder Agreement.
4.3.9 Torotel shall deliver:
(1) One Million Dollars ($1,000,000) in immediately available
funds; and
(2) An executed Shareholder Agreement.
4.3.10 The Corporation shall deliver:
(1) Stock certificates representing the Securities, which
Securities shall be registered on the Stock Register of the Corporation in the
names of each of the respective Parties hereto;
(2) One Million Five Hundred Thousand Dollars ($1,500,000)
in immediately available funds to SRG;
(3) An executed WAA Note Pledge Agreement;
(4) An executed JGA Note Pledge Agreement;
(5) An executed Apex Stock Purchase Agreement; and
(6) An executed Shareholder Agreement.
In each case, documents delivered under this Section 4.3 will be duly
executed by the parties thereto and, if necessary, authenticated by the party or
parties delivering the same.
4.4 DELIVERABLES AT CLOSING: DUE TO EACH PARTY. Each Party shall receive at
the Closing the following Deliverables:
4.4.1 GSIG shall receive a certificate for the number of shares
specified in Section 3.1, and an executed copy of the Shareholder Agreement;
4.4.2 GSWG shall receive a certificate for the number of shares
specified in Section 3.2, and an executed copy of the Shareholder Agreement;
4.4.3 SRG shall receive a certificate for the number of shares, the
amount of immediately available funds specified in Section 3.3, and executed
copies of the Apex Stock
Purchase Agreement, all deliverables due under the Apex Stock Purchase Agreement
and the Shareholder Agreement;
4.4.4 If and at such time as Xxxxx complies with the provisions of
Section 8.3 Xxxxx shall receive a certificate for the number of shares specified
in Section 3.4, an executed copy of the Shareholder Agreement, and such
additional documents as may reasonably be required and agreed to between Xxxxx
and the Corporation pursuant to Section 8.3 hereof.
4.4.5 Caloyeras Trust shall receive a certificate for the number of
shares specified in Section 3.5, and an executed copy of the Shareholder
Agreement;
4.4.6 Caloyeras Partnership shall receive a certificate for the
number of shares specified in Section 3.6, and an executed copy of the
Shareholder Agreement;
4.4.7 WAA shall receive the WAA Earn Out Promissory Note, a
certificate for the number of shares specified in Section 3.7, executed copies
of the Apex Stock Purchase Agreement, all deliverables due under the Apex Stock
Purchase Agreement, and the Shareholder Agreement;
4.4.8 JGA shall receive the JGA Earn Out Promissory Note, and a
certificate for the number of shares specified in Section 3.8, executed copies
of the Apex Stock Purchase Agreement, all deliverables due under the Apex Stock
Purchase Agreement, and the Shareholder Agreement;
4.4.9 Torotel shall receive a certificate for the number of shares
specified in Section 3.9, and an executed copy of the Shareholder Agreement; and
4.4.10 The Corporation shall receive from the Parties the Purchase
Price, executed copies of the Apex Stock Purchase Agreement, the WAA Promissory
Note specified in Section 4.3.7(a), the JGA Promissory Note specified in Section
4.3.8(a), the WAA Note Pledge Agreement specified in Section 4.3.7(b), the JGA
Note Pledge Agreement specified in Section 4.3.8(b) and the Shareholder
Agreement.
4.5 ADDITIONAL DELIVERABLES AT CLOSING. Each Party shall further deliver to
and receive from the other Parties all items and deliverables required for the
closing of the Apex Stock Purchase Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 GSLLC AND CORPORATE REPRESENTATIONS. Each of GSLLC, SRG, GSIG and GSWG,
jointly and severally, and the Corporation represent and warrant to the Parties
as follows:
5.1.1 ORGANIZATION. The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
has full power and authority to own or lease properties and carry on business as
it is contemplated under this Agreement, and as a successor in interest to
GSLLC. The Corporation is qualified to transact business in Missouri, which is
the only jurisdiction in which the nature of its business or the ownership of
its properties requires such qualification.
5.1.2 AUTHORITY OF GSLLC. GSLLC is the predecessor to the
Corporation. GSIG, GSWG, and SRG constitute all of the Members of GSLLC. GSIG,
GSWG, and SRG have all requisite power and authority to bind GSLLC to any of the
commitments, representations, warranties or other terms of this Agreement made
hereunder by or on behalf of GSLLC. GSLLC has all requisite legal power to enter
into this Agreement and any other Operative Document to which it may be a party.
5.1.3 CAPITALIZATION. The authorized capital of the Corporation
consists of 30,000,000 authorized shares of Common Stock, $.001 par value per
share, of which 22,494,850 have been subscribed pursuant to this Agreement.
Prior to the Closing, the Corporation will have no issued and outstanding
securities.
5.1.4 STATUS OF SECURITIES.
(1) Except for the Shareholder Agreement and this Agreement,
there are no outstanding subscriptions, options, rights, warrants, stock-based
or stock-related awards, convertible, exercisable or exchangeable securities, or
other agreements or commitments obligating the Corporation to issue, grant,
award, purchase, acquire, sell or transfer any securities of the Corporation
(including any agreement or commitment obligating the Corporation to enter into
any employee compensation arrangement based on any valuation or transaction
price of, or change of ownership in, shares of its capital stock).
(2) As of the Closing Date and after giving effect to the
transactions contemplated hereby, except for the Shareholder Agreement, this
Agreement and the Operative Documents, there are no agreements among the
Corporation's shareholders with respect to any of the Corporation's capital
stock.
(3) The Securities, when delivered for the consideration
specified herein, will be duly and validly issued, fully paid and non-assessable
shares of the Corporation and shall be free and clear of all Liens (except any
Liens created by the Parties).
5.1.5 POWER, AUTHORIZATION, ENFORCEABILITY. The Corporation has all
requisite legal and corporate power to enter into this Agreement and the
Operative Documents to which it is a party and to carry out and perform all of
its respective obligations under the terms hereof and thereof. All corporate
action on the part of the Corporation and its respective officers, directors and
stockholders that is necessary for the due and valid authorization, execution
and delivery of this Agreement and the other Operative Documents to which it is
a party and for the performance of its respective obligations hereunder and
thereunder, including the issuance and delivery of the stock certificates
representing the Securities, has been taken and will not have been rescinded;
and this Agreement, the other Operative Documents and all other agreements and
written obligations entered into and undertaken by the Corporation in connection
with the transactions contemplated hereby and thereby constitute or, when
executed and delivered pursuant hereto, will constitute the valid and binding
obligations of the Corporation, enforceable against it in accordance with their
respective terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other similar laws of general applicability relating to
creditors' rights and to general principles of equity.
5.1.6 NO VIOLATION. Neither the execution and delivery of this
Agreement or the Operative Documents nor the consummation of the transactions
contemplated hereby and thereby will conflict with or result in any violation of
or default under (or would with the passage of time or notice or both result in
a violation of or default under) (i) any provision of the Certificate of
Incorporation, Articles of Organization, Operating Agreement or By-Laws, as the
case may be, of either GSLLC or the Corporation, or (ii) any agreement to which
either the Corporation or GSLLC is a party.
5.1.7 COMPLIANCE WITH LAW. Each of the Corporation and GSLLC (i)
hold and are in compliance with all permits, consents, rights and privileges,
certificates, licenses, registrations and authorizations (collectively,
"Authorizations") under all Applicable Laws in connection with the business
operations of GSLLC and all Authorizations are valid and in full force and
effect, (ii) have complied with all Applicable Laws applicable to the business,
properties or operations as conducted in the past and as presently conducted by
GSLLC and the Corporation, and (iii) have not been issued any citations, notices
or orders of non-compliance under any Applicable Law at any time preceding the
Closing Date. Neither ownership nor use of GSLLC's or the Corporation's
properties nor the conduct of their businesses conflicts with the rights of any
other Person, firm or corporation. Neither the Corporation's or GSLLC's
ownership nor use of the Corporation's or GSLLC's properties nor the conduct of
their business violates or, with or without the giving of notice or the passage
of time, or both, will violate, conflict with or result in a default, right to
accelerate or loss of rights under, any terms or provisions of their Certificate
of Incorporation, Articles of Organization, Bylaws or Operating Agreement,
respectively, as presently in effect, or any lien, encumbrance, mortgage, deed
of trust, lease, license, agreement, understanding, law, ordinance, rule or
regulation, or any order, judgment or
decree to which the Corporation or GSLLC are a party or by which they may be
bound or affected.
5.1.8 BROKERS. Neither GSLLC nor the Corporation has made any
agreement or taken any other action which might cause any other person or entity
to become entitled to a broker's fee or commission as a result of the
transactions contemplated by this Agreement.
5.1.9 NON-REGISTRATION OF SECURITIES. The Securities being issued by
the Corporation have not been registered under the Securities Act, nor have the
Securities been registered under the securities laws of any state. Assuming the
accuracy of the representations and warranties of each of the Parties set forth
in this Agreement, the subscription, sale and issuance of the Securities
hereunder do not and will not require registration under the Securities Act or
any applicable state securities laws. The subscription, issuance and sale of the
Securities is being made by the Corporation in reliance on Section 4(2) of the
Securities Act and/or Regulation D promulgated thereunder as a transaction not
involving a public offering. Neither the Corporation nor GSLLC has violated any
applicable federal or state securities laws in connection with the subscription,
sale or issuance of any of its Securities. As a prerequisite to any sale, the
Corporation will be relying on the representations and warranties from the
Parties hereto as set forth in this Agreement and providing, in part, that the
Parties are acquiring the Securities solely for their own account and not with a
view toward distribution or transfer of such Securities.
5.1.10 CONSENTS. No consent or approval of any third party or
Governmental Authority is required for the consummation by the Corporation or
GSLLC of the transaction contemplated by this Agreement, the other Operative
Documents or any other agreements and obligations entered into and undertaken by
the Corporation or GSLLC in connection with the transactions contemplated hereby
and thereby, including the merger of GSLLC with and into the Corporation.
5.1.11 FINANCIAL STATEMENTS. The audited balance sheet and audited
income statement of GSLLC for the fiscal years ended December 31, 2000 and
December 31, 2001("Financial Statements") have been delivered to the Parties by
GSLLC and are attached hereto as SCHEDULE 5.1.11. In addition, the audited
balance sheet and audited income statement of GSLLC for the two months ended
February 28, 2002 are attached hereto as part of SCHEDULE 5.1.11 ("Interim
Financial Statement"). The Financial Statements and the Interim Financial
Statements (i) fairly present the financial condition of GSLLC as of the date
thereof and the results of operations for the period covered thereby, (ii) were
prepared in accordance with generally accepted accounting principles,
consistently applied ("GAAP"), and (iii) reflect all necessary accruals and
reserves. The statement of income does not contain any items of special or
non-recurring income or any other income not earned in the ordinary course of
business except as expressly specified therein, and the Financial Statements
include all adjustments (including all normal recurring accruals for unusual or
non-recurring items) considered necessary for a fair presentation, and no
adjustments or restatements are or will be necessary in respect of any items of
an unusual or non-recurring nature, except as expressly specified therein.
5.1.12 ABSENCE OF CHANGES OR EVENTS. Since the date of the Interim
Financial Statements, each of GSLLC and the Corporation have conducted their
businesses only in the usual and ordinary course consistent with past practices
and there has not been any:
(i) declaration, payment of or set aside for payment of any dividend
or other distribution or repayment in respect to the shares of the
capital stock of the Corporation or the membership interests of GSLLC
or any repurchase or redemption of any such shares of capital stock,
membership interests or other securities;
(ii) adoption of or change in any employee benefit plan or labor
policy, or any loan made by either GSLLC or the Corporation to any
employee, manager or director or any change in any compensation
arrangement with any employee;
(iii) damage, destruction, or loss to any assets or property of GSLLC
or the Corporation, whether or not covered by insurance;
(iv) sale (other than sales of inventory in the ordinary course of
business), assignment, conveyance, lease or other disposition of any
asset or property of GSLLC or the Corporation or mortgage, pledge or
imposition of any lien or other encumbrance on any assets or property
of GSLLC or the Corporation;
(v) occurrence or repayment of any liability or obligation (whether
absolute or contingent) to any related party or other Affiliate or,
other than current liabilities incurred and obligations under
agreements entered into in the ordinary course of business consistent
with past practice, to any other Person or discharge or satisfaction
of any lien, claim or encumbrance, other than in the ordinary course
of business consistent with past practice;
(vi) write-down or write-off of the value of any asset except for
write-downs and write-offs in the ordinary course of business
consistent with past practice, or any cancellation or waiver of any
other rights or claims;
(vii) change in the business or operations of either GSLLC or the
Corporation or in the manner of conducting the same or entry by either
GSLLC or the Corporation into any transaction, other than in the
ordinary course of business consistent with past practice;
(viii) change in the accounting methods, principles or practices
followed by GSLLC or the Corporation, except as required by GAAP, or
any change in any of the assumptions underlying, or methods of
calculating, any bad debt, contingency, or other reserve;
(ix) an occurrence of any event, fact, conditional change or effect
that is or could be adverse to the business, operations, results of
operations, condition (financial or otherwise), assets, earnings,
prospects or liabilities of GSLLC or the Corporation;
(x) Any capital expenditure outside the ordinary course of
business, except for the lease-purchase of certain computer equipment
in the approximate amount of $100,000; or
(xi) any agreement or commitment, whether or not in writing, to
do any of the foregoing by GSLLC or the Corporation.
5.1.13 NO UNDISCLOSED LIABILITIES. Except as disclosed on SCHEDULE
5.1.13, the Corporation and GSLLC have no debts, liabilities or financial
obligations (whether absolute, accrued, contingent or otherwise) which are not
disclosed in the Financial Statements and the notes thereto as required by GAAP.
The Corporation and GSLLC have no other liabilities or obligations of any nature
which are not required by GAAP to be set forth on their respective balance
sheets, whether absolute, accrued, contingent or otherwise, whether due or to
become due, which are not reflected in such balance sheet and does not know of
any basis for the assertion against the Corporation or GSLLC of any such
liability or obligation.
5.1.14 CLAIMS AND PROCEEDINGS. Except as set forth in SCHEDULE
5.1.14, there are no actions, suits, claims, legal or administrative proceedings
or investigations pending or, to the best knowledge of GSLLC and the
Corporation, threatened, against or relating to the Company, their respective
officers, directors, managers or employees, their properties, assets or business
or the transactions contemplated by this Agreement, and neither GSLLC nor the
Corporation knows of, nor has any reason to be aware of, any basis for the same.
5.1.15 INSURANCE. SCHEDULE 5.1.15 sets forth a complete and correct
list of all insurance policies (including a brief description of the nature and
terms thereof and any amounts paid or payable to GSLLC or the Corporation
thereunder, their respective expiration dates, deductibles and stop-loss
thresholds) providing coverage in favor of GSLLC and the Corporation or any of
their respective properties. Each policy is valid, in full force and effect and
will remain in full force and effect at least through the respective dates set
forth on SCHEDULE 5.1.15 without the payment of additional premiums other than
additional premiums in the ordinary course of business prior to the Closing. No
notice of termination, cancellation or reservation of rights has been received
with respect to any such policy, and there has not been any failure to give any
notice or present any claim under any such policy in a timely fashion or in the
manner or detail required by any such policy. Each of GSLLC and the Corporation
have insurance in an amount and of a type normal in the ordinary course for
businesses similar to GSLLC and the Corporation. Neither GSLLC nor the
Corporation have received notice of any proposed increase in premiums or
deductible amounts, decrease in coverage, or termination of any policy.
5.1.16 LABOR MATTERS. Neither GSLLC nor the Corporation currently has
or has ever had employees.
5.1.17 TAXES. With respect to GSLLC and the Corporation:
(1) each has filed, been included in or sent, all returns,
declarations and reports and information returns and statements required to be
filed or sent by or relating to it relating to any Taxes with respect to any
income, properties or operations of either (collectively, the "Returns");
(2) as of the time of filing, the Returns correctly reflect
in all respects the facts regarding the income, business, assets, operations,
activities and status of GSLLC and the Corporation and any other information
required to be shown therein;
(3) each has timely paid all Taxes that are due and payable,
whether or not such Taxes were shown on any Return;
(4) each has made or will make provision for all Taxes
payable for any periods that end before the Closing for which no Returns have
yet been filed and for any periods that begin before the Closing and end after
the Closing to the extent such Taxes are attributable to the portion of any such
period before the Closing;
(5) the charges, accruals and reserves for taxes reflected on
the books of each are adequate to cover the Tax liabilities accruing or payable
by each in respect of periods prior to the date hereof;
(6) neither is delinquent in the payment of any Taxes nor has
requested any extension of time within which to file or send any Return, which
Return has not since been filed or sent;
(7) no deficiency for any Taxes has been proposed, asserted
or assessed against either (or any member of any affiliated or combined group of
which either is or has been a member for which either could be liable);
(8) neither has been granted any extension of the limitation
period applicable to any Tax claims;
(9) neither is subject to liability for Taxes of any Person
(other than itself), including, without limitation, liability arising from the
application of U.S. Treasury Regulations Section 1.1502-6 or any analogous
provision of state, local or foreign law;
(10) neither is nor has been a party to any tax sharing
agreement with any corporation which is not currently a member of the affiliated
group of which either is currently a member.
(11) no claim has ever been made by an authority in a
jurisdiction where either does not file Returns that it is or may be subject to
taxation by that jurisdiction;
(12) each has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party;
(13) neither has made any payments, is obligated to make any
payments, or is a party to any agreement that under certain circumstances could
obligate it to make any payments that will not be deductible under Code Sec. 162
(as unreasonable compensation), Code Sec. 162(m) or Code Sec. 280G; and
(14) no Returns currently are the subject of audit.
(15) "Taxes" means with respect to any person (i) any net
income, gross income, gross receipts, sales, use ad valorem, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, value-added, windfall profits, custom duty or other tax,
governmental fee, capital stock, social security (or similar), unemployment,
disability, transfer, registration, alternative or add-on minimum, estimated or
other like assessment or charge of any kind whatsoever, together with any
interest and any penalty, addition to tax or additional amount imposed by any
taxing authority (domestic or foreign) on such person, and (ii) any liability of
the company for the payment of any amount of the type described in clause (i) as
a result of being a member of an affiliated group or combined group.
5.1.18 REAL ESTATE. Neither the Corporation nor GSLLC currently owns
or has ever owned any real property. Neither the Corporation nor GSLLC is or has
been a party to any lease or has ever leased any real property.
5.1.19 INTELLECTUAL PROPERTY. Attached hereto as SCHEDULE 5.1.19 is
an accurate and complete list and brief description of all patents, patent
applications, trademarks, trade names, logos, service marks, copyrights or
applications therefor or other intellectual property owned by or registered in
the name of GSLLC or the Corporation or in which GSLLC or the Corporation has
any rights, licenses, or immunities (the "Intellectual Property"). GSLLC has
furnished the Parties with copies of all license agreements to which either
GSLLC or the Corporation is a party, either as licensor or licensee, with
respect to any patents, trademarks, trade names, or copyrights. Except as
described on SCHEDULE 5.1.19 hereto, GSLLC has, and the Corporation will have,
good and marketable title to or the right to use such assets and all inventions,
processes, designs, formulas, trade secrets and know-how used in and/or
necessary for the conduct of the business of GSLLC as presently conducted and as
will be conducted by the Corporation without the payment of any royalty or
similar payment. To their knowledge, (i) neither GSLLC nor the Corporation
infringes or unlawfully or wrongly uses any Intellectual Property claimed by
another Person, and (ii) neither GSLLC nor the Corporation knows of any use that
has been or is now being made by another Person of the Intellectual Property or
that would infringe GSLLC's or the Corporation's rights. Neither GSLLC nor the
Corporation has sold, licensed or otherwise disposed of or transferred or
granted any interest in Intellectual Property. GSLLC and the Corporation have
taken all reasonable measures to maintain and protect the Intellectual Property.
No claims have been asserted by any Person related to the use or validity of the
Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement related thereto, and there is no valid
basis for any such claim. None of the Intellectual Property is subject to any
outstanding order, judgment, decree, stipulation or agreement restricting the
use thereof or licensing thereof by GSLLC or the Corporation. Neither GSLLC nor
the Corporation has entered into any agreement to indemnify any other Person
against any charge of infringement of the Intellectual Property.
5.1.20 CONTRACTS AND COMMITMENTS. Attached hereto as SCHEDULE 5.1.20
is a list and brief description of all written or oral contracts, commitments,
leases, and other agreements (including, without limitation, promissory notes,
loan agreements, and other evidences of indebtedness, guarantees, agreements
with distributors, suppliers, dealers, franchisers and
customers, and service agreements) to which GSLLC and the Corporation are a
party or by which GSLLC or the Corporation or their respective properties are
bound pursuant to which the obligations thereunder of either party thereto are,
or are contemplated as being, $5,000 or more (collectively, the "Contracts").
Except as set forth on SCHEDULE 5.1.20, (i) all of the Contracts are valid,
binding and enforceable and in full force and effect in accordance with their
respective terms, and there is no existing default that would permit the other
party to a Contract to terminate the Contract, not perform its obligations under
the Contract or accelerate payment of money, and no condition exists that, with
notice or lapse of time or both, would constitute a default under any Contract
by GSLLC or the Corporation or any other party under any Contract; (ii) all of
the respective parties' contracts and obligations under all Contracts accrued to
the date hereof have been performed; (iii) no party has made or asserted or has
any defense, setoff or counterclaim under any Contract; (iv) neither GSLLC nor
the Corporation has notice that any party under any Contract has exercised any
option granted to it to cancel or terminate its Contract, to shorten the term of
its Contract or to renew or extend the term (other than automatic renewals) of
the Contract, (v) neither GSLLC nor the Corporation has received any notice
(written or otherwise) of cancellation or termination of, or any expression or
indication of an intention or desire to cancel or terminate, any of the
Contracts; and (vi) no Contract is the subject of, or has been threatened to
made the subject of, any arbitration, suit or other legal proceeding. Except as
noted on SCHEDULE 5.1.20, every Contract listed on such schedule may be assigned
or otherwise transferred pursuant to this Agreement or the transactions
contemplated hereby without the consent of any third party. Except as set forth
on SCHEDULE 5.1.20, none of the Contracts have provisions in them which would
allow the other party to terminate said Contract because of the transactions
contemplated herein and none of the other parties have informed GSLLC or the
Corporation that the transactions contemplated herein may result in the other
party's termination of said Contract or ceasing to do business with GSLLC or the
Corporation.
5.1.21 EMPLOYEE BENEFITS AND ERISA. Neither the Corporation nor GSLLC
maintains any employee benefit plans, as that term is defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
SCHEDULE 5.1.21 lists any stock, bonus, deferred compensation or other formal or
informal, written or unwritten, plans and individual arrangements in which one
or more current or former employees of the Corporation or GSLLC participate, to
which the Corporation or GSLLC contributes or pursuant to which the Corporation
or GSLLC have any obligation (the "Employee Plans"). Each of the Employee Plans
have been administered in accordance with their terms and with all applicable
provisions of ERISA, the Code and other applicable federal and state laws.
5.1.22 TITLE TO ASSETS. Except as disclosed on SCHEDULE 5.1.22, GSLLC
has, and at the Closing, the Corporation will have, good, valid and merchantable
or marketable title (as the case may be) to all its respective properties and
assets, whether real, personal, mixed, tangible and intangible, other than those
that are leased, free and clear of any Lien other than (i) those Liens disclosed
on SCHEDULE 5.1.22, and (ii) Liens for current taxes not yet due and payable
(the items described in clauses (i) and (ii) are "Permitted Liens").
5.1.23 LEASES. Except as disclosed on SCHEDULE 5.1.23, (i) all leases
pursuant to which the Corporation leases, or upon closing of the transactions
under this Agreement will
lease, personal property are, or will be, valid, binding and enforceable in
accordance with their respective terms, and are, or will be, in full force and
effect, subject, as to enforcement, to bankruptcy, insolvency, reorganization
and other similar laws of general applicability relating to creditors' rights
and to general principles of equity; (ii) there are no existing defaults in any
lease by the Corporation or GSLLC; and (iii) no event of default under any lease
has occurred which (whether with or without notice, lapse of time or occurrence
of any other event) would constitute a default of such lease thereunder.
5.1.24 CONDITION OF EQUIPMENT, ETC. Upon the Closing hereof, the
Corporation will own all equipment used in connection with its business, and the
equipment owned or leased by the Corporation will be in good, operating
condition, well maintained, and is, or will be, suitable for the operation of
the business of the Corporation.
5.1.25 EQUITY INVESTMENTS. Neither GSLLC nor the Corporation owns,
directly or indirectly, any capital stock or other equity interest or right to
acquire any equity interest in any other entity. There are no outstanding
subscriptions, options, convertible securities, warrants, calls or rights of any
kind issued or granted by, or binding upon, GSLLC or the Corporation to purchase
or otherwise acquire any security of, or equity interest in, any entity. Neither
GSLLC nor the Corporation owns any note, bond, debenture or other evidence of
indebtedness and is not otherwise a creditor, of any entity, other than in the
ordinary course of business. Neither GSLLC nor the Corporation has subsidiaries
except for Apex Associates, Inc., a
Kansas corporation, as of the Closing.
5.1.26 FULL DISCLOSURE. The representations and warranties of the
Corporation and GSLLC under this Agreement and all statements in all Schedules,
Exhibits or Operative Documents delivered or to be delivered hereunder by the
Corporation or GSLLC are, or when delivered will be, true and complete in all
material respects and do not, or will not, contain any untrue statement of a
material fact or omit to state a material fact necessary to be stated therein to
make the statements not misleading under the circumstances under which they were
or are made. The representations and warranties contained in this Article 5
shall not be affected or deemed waived by reason of the fact that any Party or
its representatives and agents should have known that any such representation or
warranty is or might be inaccurate in any respect.
5.2 MUTUAL REPRESENTATIONS. Each of the Parties hereby represents and
warrants to GSLLC and the Corporation as follows:
5.2.1 ORGANIZATION. Each Party that is an Entity is duly organized,
validly existing and in good standing under the laws of the state of its
incorporation or organization.
5.2.2 POWER, AUTHORIZATION; ENFORCEABILITY.
(10 Each Party that is an Entity has all requisite legal and
company or corporate power to enter into this Agreement and the Operative
Documents and to carry out and perform all of its respective obligations under
the terms hereof and thereof. All company or corporate action on the part of
such Party and its members, managers, partners, officers, directors
and/or shareholders that is necessary for the authorization, execution and
delivery of this Agreement and the other Operative Documents by such Party and
for the performance of the Party's obligations hereunder and thereunder have
been taken or will have been taken prior to the Closing and will not have been
rescinded. This Agreement and the Operative Documents and all other agreements
and written obligations entered into and undertaken by such Party in connection
with the transactions contemplated hereby or thereby constitute, or, when
executed and delivered pursuant hereto or thereto will constitute, the valid and
binding obligations of such Party, enforceable against it in accordance with
their respective terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other similar laws of general applicability relating to
creditors' rights and to general principles of equity.
(20 Each of Xxxxx, WAA and JGA represents and warrants to
each of the other Parties to this Agreement that he is legally competent to
execute this Agreement and is not restricted by any outstanding contractual
limitations or judgments from being freely able to execute this Agreement.
(30 Caloyeras Trust is a family trust created solely for the
purpose of estate planning, of which Xxxxx Xxxxxxxxx is the settlor, trustee and
sole beneficiary. Caloyeras has the legal right, power and authority to enter
into this Agreement and the Operative Documents and to carry out and perform all
of its respective obligations under the terms hereof.
5.2.3 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES AND OTHER
PERSONS. Except as set forth in SCHEDULE 5.2.3, no consent, license, approval,
order or authorization of, or registration, filing or declaration with, any
Governmental Authority is required to be obtained by any Party or made prior to
the Closing, and no consent of any other Person is required to be obtained by
the Parties in connection with their execution, delivery and performance of this
Agreement and the Operative Documents or the consummation of the transactions
contemplated hereby and thereby.
5.2.4 CLEAR TITLE. All assets contributed to the Corporation as part
of the Purchase Price are free and clear of all Liens.
5.2.5 BROKERS. The Parties have not made any agreement or taken any
other action which might cause any other person or entity to become entitled to
a broker's fee or commission as a result of the transactions contemplated by
this Agreement.
5.2.6 ENCUMBRANCE OF SECURITIES. At the Closing, no Party will have
made an assignment for the benefit of its creditors, filed a voluntary petition
of bankruptcy, been adjudicated as a bankrupt or insolvent, filed a petition or
answer seeking any reorganization, liquidation, dissolution or similar relief
under any statute, law or regulation, be unable to pay his/its debts and
liabilities as they become due and payable or otherwise have filed against them
any judgment or be involved or engaged in any action or cause of action that may
create any lien, restriction, claim of right of a third party or any other
encumbrance, whether through a criminal conviction, divorce decree with respect
to an individual Party, bankruptcy or any other action or proceeding.
5.2.7 SECURITIES LAWS MATTERS.
(10 INVESTMENT FOR OWN ACCOUNT. Each Party is acquiring the
Securities purchased hereunder, for his or its own account for investment, not
as a nominee for any other Person, and not with a present view towards the
resale, transfer or distribution thereof.
(20 OFFERING EXEMPTION. Each Party understands that the
Securities have not been registered under the Securities Act, nor qualified
under any foreign or state securities laws, and that the Securities are being
offered and sold pursuant to an exemption from such registration and
qualification based in part upon the representations of each Party contained
herein.
(30 INVESTOR STATUS. Each Party hereby represents and
warrants to the Corporation that he/it either (i) is an Accredited Investor, or
(ii) is a sophisticated investor within the meaning of Rule 506(b)(2)(ii) of the
Commission. Each Party agrees to provide such evidence of his/its accredited or
sophisticated status to the Corporation as it may reasonably require.
(40 LIMITATIONS ON DISPOSITION. Each Party recognizes that no
public market exists for the Securities. No representation has been made to any
Party that any such public market will exist in the future. Each Party
understands that he/it must bear the economic risk of this investment
indefinitely (i) unless the Securities are registered pursuant to the Securities
Act or an exemption from such registration is available, and (ii) unless the
disposition of the Securities is qualified under applicable state securities
laws or an exemption from such qualification is available. The Corporation has
no present obligation of so registering or qualifying the Securities
(50 ACCESS TO CORPORATE DOCUMENTS. Each Party has had full
opportunity to ask questions of the Corporation or GSLLC concerning the
Corporation and GSLLC and the terms and conditions of the purchase of the
Securities hereunder, and any such questions asked have been answered to each
Parties' satisfaction. Each Party has relied solely on (i) the representations
and warranties contained herein and to the other provisions of this Agreement
and the Operative Documents, and (ii) each Party's own knowledge and experience
in making a decision to purchase these Securities. Other than the
representations and warranties in this Agreement and the Operative Documents,
the Parties have received no other representations or warranties from the
Corporation or any of its controlling persons, directors, officers, employees or
agents.
(60 FINANCIAL STATEMENTS. Each Party has received, reviewed
and is familiar with the Financial Statements of GSLLC provided in EXHIBIT
5.1.11.
5.2.8 FULL DISCLOSURE. The representations and warranties of the
Parties under this Agreement and all statements in all Schedules, Exhibits or
Operative Documents delivered or to be delivered hereunder by the Parties are,
or when delivered will be, true and complete in all material respects and do
not, or will not, contain any untrue statement of a material fact or omit
to state a material fact necessary to be stated therein to make the statements
not misleading under the circumstances under which they were or are made. The
representations and warranties contained in this Agreement shall not be affected
or deemed waived by reason of the fact that any Party, the Corporation, GSLLC,
or any of its or their representatives and agents should have known that any
such representation or warranty is or might be inaccurate in any respect.
ARTICLE 6
PRE-CLOSING COVENANTS
Unless otherwise provided in this Article 6, from the date hereof and until
the Closing, the Corporation and GSLLC jointly agree as follows:
6.1 ACCESS TO PROPERTIES AND RECORDS. To assist each of the Parties in
evaluating its investment in the Corporation hereunder and the risks attendant
thereto, GSLLC and the Corporation shall afford to the directors, members,
managers, partners, officers, employees, attorneys, accountants and other
authorized representatives of the Parties, free and full access upon reasonable
notice and during normal business hours to all books, records and financial
statements of GSLLC and the Corporation as may reasonably be necessary for each
of the Parties to investigate the business, properties and affairs of GSLLC and
the Corporation.
6.2 ADDITIONAL DISCLOSURE. From time to time, GSLLC and the Corporation
will deliver or cause to be delivered to the Parties, and the Parties will
deliver or cause to be delivered to GSLLC and the Corporation, supplemental
information concerning events subsequent to the date hereof which would render
any statement, representation or warranty made in this Agreement or any
information contained in a Schedule required by this Agreement inaccurate or
incomplete in any material respect. No supplement to or amendment of any
Schedule made pursuant to this Section shall be deemed to cure any breach of any
representation or warranty made in this Agreement unless the Parties or the
Corporation, respectively, specifically agrees thereto in writing.
6.3 CONDUCT OF BUSINESS. Except as otherwise expressly permitted by this
Agreement or as otherwise consented to by each of the Parties in writing, the
Corporation and GSLLC shall:
6.3.1 carry on its business in the ordinary course, consistent with
past practices and in substantially the same manner as heretofore conducted; use
commercially reasonable best efforts to maintain its business in its current
condition; preserve its relationships with customers, suppliers and others
having business dealings with GSLLC and the Corporation; and take all steps
reasonably necessary to maintain the assets of GSLLC and the Corporation;
6.3.2 not sell, assign, license, dispose of, or transfer any of the
assets of GSLLC or the Corporation other than in the ordinary course of
business;
6.3.3 not incur any liabilities or obligations (including liabilities
with respect to indebtedness, capital leases or guarantees thereof) other than
in the ordinary course of business;
6.3.4 not issue (or commit to issue) any capital stock of the
Corporation or membership interest in GSLLC other than the membership interests
which may be issued pursuant to the Convertible Promissory Note; and
6.3.5 not take any action or omit to take any action that would cause
any of the representations or warranties contained herein of GSLLC or the
Corporation not to be true and correct at any time between the date hereof and
the Closing Date.
6.4 PRE-CLOSING ACTION. As promptly as practicable, GSLLC and the
Corporation will: (i) use commercially reasonable efforts to take all actions
and to do all things necessary, proper or advisable to consummate the
transactions contemplated hereby by the Closing Date; (ii) file or supply, or
cause to be filed or supplied, all applications, notifications and information
required to be filed or supplied by GSLLC or the Corporation pursuant to
Applicable Law in connection with this Agreement, the sale and transfer of the
Securities pursuant hereto and the consummation of the other transactions
contemplated hereby; and (iii) use all commercially reasonable efforts to
obtain, or cause to be obtained, all consents necessary to be obtained by them
in order to consummate the transactions contemplated pursuant to this Agreement.
ARTICLE 7
POST-CLOSING COVENANTS
7.1 PUBLIC ANNOUNCEMENTS.
Except as required by Applicable Law, neither the Corporation nor the
Parties shall make any announcement in respect of this Agreement or the
transactions contemplated hereby without the prior written consent of the other
Parties hereto, which consent may be withheld in the sole and absolute
discretion of any Party.
7.2 FURTHER ASSURANCES.
7.2.1 Following the Closing, the Corporation shall from time to time
execute and deliver such additional instruments, documents, conveyances or
assurances and take such other actions as shall be necessary, or otherwise
reasonably requested by the Parties, to confirm and assure the rights and
obligations provided for in this Agreement and render effective the consummation
of the transactions contemplated hereby.
7.2.2 Following the Closing, the Parties shall from time to time
execute and deliver such additional instruments, documents, conveyances or
assurances and take such other actions as shall be necessary, or otherwise
reasonably requested by the Corporation, to confirm and assure the rights and
obligations provided for in this Agreement and render effective the consummation
of the transactions contemplated hereby.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF THE PARTIES
8.1 CONDITIONS TO OBLIGATIONS OF THE PARTIES. Each and every obligation of
the Parties under this Agreement to be performed at or before the Closing shall
be subject to the satisfaction (or the written waiver), at or before the
Closing, of the following conditions:
8.1.1 MERGER OF GSLLC. GSLLC and the Corporation shall have entered
into a Plan and Agreement of Merger and Articles of Merger substantially in the
form of EXHIBIT 8.1.1, pursuant to which GSLLC shall at Closing merge with and
into the Corporation with the Corporation being the surviving entity. No
securities in the Corporation shall be issued to any party as a result of the
merger.
8.1.2 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of GSLLC and the Corporation contained in Article 5 hereof that are
qualified as to materiality shall be true and accurate in all respects, and the
representations and warranties of GSLLC and the Corporation contained in Article
5 that are not qualified as to materiality shall be true and accurate in all
material respects, in each case as of the Closing Date as though such
representations and warranties were made on or as of such date.
8.1.3 PERFORMANCE OF COVENANTS. GSLLC and the Corporation shall have
performed and complied in all respects with each and every covenant, agreement
and condition required to be performed or complied with by it prior to or at the
Closing.
8.1.4 EXISTENCE AND CONSUMMATION OF INTERDEPENDENT TRANSACTIONS. Each
Party shall have received each of the Deliverables provided in Article 4. Every
one of the Operative Documents and each of the Deliverables provided in Article
4 shall have been executed, shall be in full force and effect and binding, and
shall be closed simultaneously with the Closing of this Agreement. All such
documents delivered shall be in form and substance satisfactory to the Parties
and their respective counsel.
8.1.5 CONTRACTS. The ordinance adopted by the City Council of the
City of
Kansas City, Missouri approving the Services Contract denominating GSLLC
as a Program Project Management Application Services Provider among and between
GSLLC and the City of
Kansas City, Missouri, Information Technology Department
is attached hereto as EXHIBIT 8.1.5, and such Services Contract is in full force
and effect and binding upon each of the parties thereto.
8.1.6 ABSENCE OF CHALLENGE. No order of any Governmental Authority
shall be in effect which enjoins, restrains or prohibits the transactions
contemplated hereby, and no suit, action, investigation, inquiry or other
proceeding by any Governmental Authority or other Person shall have been
instituted or threatened by any Governmental Authority which questions the
validity or legality of, or seeks to otherwise restrain, the transactions
contemplated hereby or seeks to impose any liability on the Parties as a result
of the transactions contemplated hereby.
8.1.7 APPROVALS AND CONSENTS. All consents and approvals, or
disapprovals within applicable time periods, of any Governmental Authority, and
all approvals of any other Persons, the granting or absence of which is
necessary for the consummation of the transactions contemplated by this
Agreement and the Operative Documents, shall have been obtained or, in the case
of such disapprovals, shall be absent.
8.1.8 NO MATERIAL ADVERSE CHANGE. There shall not have been any
Material Adverse Change in the ability of GSLLC or the Corporation to perform
its obligations pursuant to this Agreement and the other Operative Documents
hereunder, or in the business, results of that operation or financial condition
of GSLLC on the Corporation.
8.1.9 CERTIFIED RESOLUTIONS AND OTHER CORPORATE DOCUMENTS. The
Corporation shall have furnished the Parties with the following: (i) a certified
copy of the resolutions duly adopted by the Board of Directors and, as required,
the Shareholders of the Corporation authorizing and approving the execution,
delivery and performance of this Agreement and the other Operative Documents,
pursuant to this Agreement and the consummation of the other transactions
contemplated hereby and thereby; (ii) the Certificate of Incorporation,
certified by the Secretary of State of the State of Delaware; (iii) a
certificate of good standing for the Corporation from the Secretary of State of
Delaware, as of a recent date; (iv) a Certificate of Merger from the Secretary
of State of the State of Delaware evidencing the merger of GSLLC with and into
the Corporation; and (v) a copy of the By-Laws of the Corporation as in effect
on the Closing Date, certified by the Secretary of the Corporation.
8.1.10 OPINION OF COUNSEL. The Parties shall have received the
opinion, dated the Closing Date, of Xxxxxxxx Xxxxxxxx & Xxxxxx, PC counsel for
GSLLC and the Corporation, substantially in the form of EXHIBIT 8.1.10 hereto.
8.2 CONDITIONS TO OBLIGATIONS OF GSLLC AND THE CORPORATION. Each and every
obligation of GSLLC and the Corporation under this Agreement to be performed at
or before the Closing shall be subject to the satisfaction (or the written
waiver), at or before the Closing, of the following conditions:
8.2.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of each of the Parties contained in this Agreement that are qualified
as to materiality shall be true and accurate in all respects and the
representations and warranties of the Parties contained in this Agreement that
are not qualified as to materiality shall be true and accurate in all material
respects, in each case as of the Closing Date as though such representations and
warranties were made on or as of such date.
8.2.2 PERFORMANCE OF COVENANTS. The Parties shall have performed and
complied in all respects with each and every covenant, agreement and condition
required by this Agreement to be performed or complied with by it prior to or at
the Closing.
8.2.3 EXISTENCE AND CONSUMMATION OF INTERDEPENDENT TRANSACTIONS. The
Corporation shall have received the Purchase Price from the Parties and each of
the Deliverables
provided in Article 4. Each and every one of the Deliverables and the Operative
Documents described in Article 4 shall have been executed, shall be in full
force and binding, and shall be closed simultaneously with the Closing of this
Agreement. All such documents delivered shall be in form and substance
satisfactory to the Corporation and its counsel.
8.2.4 ABSENCE OF CHALLENGE. No order of any Governmental Authority or
other Person shall be in effect which enjoins, restrains or prohibits the
transactions contemplated hereby, and no suit, action, investigation, inquiry or
other proceeding by any Governmental Authority or other Person shall have been
instituted or threatened by any Governmental Authority or other Person which
questions the validity or legality of, or seeks to otherwise restrain, the
transactions contemplated hereby or seeks to impose any liability on GSLLC or
the Corporation as a result of the transactions contemplated hereby.
8.2.5 APPROVALS AND CONSENTS. All consents and approvals, or
disapprovals within applicable time periods, of any Governmental Authority, and
all approvals of any other Persons, the granting or absence of which is
necessary for the consummation of the transactions contemplated by this
Agreement and the Operative Documents, shall have been obtained or, in the case
of such disapprovals, shall be absent.
8.2.6 CERTIFIED RESOLUTIONS AND OTHER CORPORATE OR COMPANY DOCUMENTS.
Each Party that is an Entity shall have furnished the Corporation with the
following: (i) a certified copy of the resolutions duly adopted by its Board of
Directors, Manager(s), or Partners and, as required, the Stockholders of a
corporation, the General Partner of a limited partnership or the Members of a
limited liability company, authorizing and approving the execution, delivery and
performance of this Agreement and the other Operative Documents, pursuant to
this Agreement and the consummation of the transactions contemplated hereby and
thereby; and (ii) a certificate of good standing for the Entity from the
Secretary of State of the state of his/its organization, as of a recent date.
8.2.7 NO MATERIAL ADVERSE CHANGE. There shall not have been any
Material Adverse Change in the ability of any of the Parties to perform his/its
obligations pursuant to this Agreement and the other Operative Documents
hereunder.
8.2.8 OPINION OF COUNSEL. The Corporation shall have received the
opinion, dated as of the Closing Date, of Shook Hardy & Bacon L.L.P., counsel
for Torotel, substantially in the form of EXHIBIT 8.2.8 hereto.
8.2.9 OPINION OF COUNSEL. The Corporation shall have received the
opinion, dated as of the Closing Date, of Xxxxx Xxxx, LLP counsel for SRG,
substantially in the form of EXHIBIT 8.2.9 hereto.
8.2.10 OPINION OF COUNSEL. The Corporation shall have received the
opinion, dated as of the Closing Date, of Xxxxx, Xxxxx & Xxxxxx, LLP, counsel
for Caloyeras Trust and Caloyeras Partnership substantially in the form of
EXHIBIT 8.2.10 hereto.
8.3 ACCESSION BY THE XXX BANK. Notwithstanding any other provision of this
Agreement, and except if Xxxxx waives the conditions and provisions of this
Section 8.3 and directly purchases Common Stock in accordance with the terms
hereof on or before 5:00 PM, Wednesday, April 10, 2002, the parties agree as
follows, and upon accession by the XXX Bank, the XXX Bank agrees as follows:
8.3.1 The obligations of Xxxxx and the XXX Bank under this Agreement
shall be subject to Xxxxx, on or before 5:00 PM, Wednesday, April 10, 2002,
procuring (i) the execution and delivery of this Agreement by the XXX Bank or
(ii) documentation reasonably acceptable to the Corporation, including without
limitation the adoption by the XXX Bank of this Agreement and becoming a Party
hereto (the "XXX Bank Accession").
8.3.2 Within two (2) business days after the XXX Bank Accession, the
XXX Bank shall make payment of Two Hundred Fifty Thousand Dollars ($250,000) to
the Corporation in immediately available funds. Within two (2) business days
after receipt of such payment, the Corporation shall issue to the XXX Bank a
stock certificate (titled in the name of the XXX Bank "for the benefit of Xxxxx
X. Xxxxx XXX") for 1,000,000 shares of Common Stock as provided in Section 4.4.4
hereof.
8.3.3 If the XXX Bank Accession has not been procured and such
payment has not been tendered by the XXX Bank or Xxxxx to the Corporation within
such time requirements, the following documents shall be deemed to be void AB
INITIO solely with respect to Xxxxx as if such documents had never been executed
by Xxxxx: (i) this Agreement, (ii) that certain Shareholder Agreement of even
date herewith (the "Shareholder Agreement"), and (iii) that certain Registration
Rights Agreement of even date herewith (the "Registration Rights Agreement").
Then all Parties hereto agree that Xxxxx shall cease to be a Party to this
Agreement and the Shareholder Agreement. The Parties further agree that Xxxxx'x
withdrawal from this Agreement and the Shareholder Agreement will be considered
as if Xxxxx had never been a Party to said Agreements and Xxxxx and the Party's,
individually and collectively, shall have no liability to each other for Xxxxx'x
failure to fulfill his obligations under Section 4.3.4. The Parties agree
further that Xxxxx'x cessation will not be a default under this Agreement or the
Shareholder Agreement and that the delivery of the Xxxxx Deliverables shall not
be considered a condition to the other parties obligations and liabilities
hereunder.
8.3.4 The XXX Bank undertakes and agrees not to directly or
indirectly sell, assign, hypothecate, transfer, pledge, mortgage, gift or in any
other way encumber or dispose of the Common Stock held by the XXX Bank for
Xxxxx, except as (i) expressly directed in writing by Xxxxx, and (ii) in
accordance with the applicable provisions of the Shareholder Agreement and the
Registration Rights Agreement. By executing this Agreement, the XXX Bank
acknowledges receipt of copies of the Shareholder Agreement and the Registration
Rights Agreement, and agrees to be bound thereby.
8.3.5 The XXX Bank acknowledges and agrees that Xxxxx shall have the
sole right and discretion to exercise all rights (including without limitation
the exercise of the voting rights of such Common Stock by irrevocable proxy
which shall be coupled with a legal interest), and shall have the sole
obligation to perform all obligations, under this Agreement and such
Shareholder Agreement and Registration Rights Agreement, except for rights and
obligations related to the legal title of the Common Stock held by the XXX Bank
for Xxxxx.
ARTICLE 9
TERMINATION AND ABANDONMENT
9.1 TERMINATION. This Agreement may be terminated and the transactions
herein contemplated may be abandoned at any time prior to or at the Closing:
9.1.1 by mutual consent of the Corporation and each of the Parties;
9.1.2 by any of the non-breaching Parties or the Corporation, if
there has been a material misrepresentation or a material breach of a warranty
or covenant herein on the part of the other parties hereto;
9.1.3 by any of the Parties or the Corporation if any event occurs
after the date hereof which results in a Material Adverse Change; or
9.1.4 by any of the Parties or the Corporation, on or after March 28,
2002, if any of the conditions to their obligations specified in Sections 8.1
and 8.2, respectively, have not been satisfied.
9.2 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 9.1.1, the respective obligations of the Parties and the Corporation
under Sections 11.4 and 11.6 shall continue, but all further obligations of the
Corporation and the Parties under this Agreement shall terminate without further
liability of the Corporation or the Parties. If this Agreement is terminated for
any other reason, then the respective obligations of the Parties and the
Corporation under Sections 11.4 and 11.6 shall continue, but each Party and the
Corporation shall be entitled to any and all of their respective remedies at law
or in equity.
ARTICLE 10
INDEMNIFICATION
10.1 INDEMNIFICATION BY TOROTEL, CALOYERAS TRUST, CALOYERAS PARTNERSHIP AND
XXXXX. Each of Torotel, Caloyeras Trust, Caloyeras Partnership and Xxxxx
(collectively "New Parties"), severally, but not jointly, shall indemnify,
defend and save harmless the Corporation and its successors and assigns from,
against, for and in respect of any and all damages, losses, liabilities, costs
and expenses (including reasonable attorneys' fees) arising in connection with
or resulting from (i) any breach of any representation or warranty made by such
New Party in the Agreement (but not for other New Parties), or (ii) the breach
of any covenant or agreement by such New Party in the Agreement (but not for
other New Parties) or in any document delivered by such New Party pursuant to
the Agreement; provided however, that the Corporation shall not be
entitled to recover from any of the New Parties pursuant to this Section 10.1
until the aggregate amount of any liability, loss or damage exceeds the sum of
$50,000 ("Liability Threshold"), at which time the Corporation shall be entitled
only to recover an aggregate amount for liabilities, losses and damages in
excess of the Liability Threshold; PROVIDED, FURTHER, that the aggregate amount
of all liability, loss or damage hereunder shall not exceed the following
amounts for each of such New Parties (this amount shall be in addition to their
contributions to the Corporation under the Agreement):
Xxxxx $ 250,000
Caloyeras Trust $ 250,000
Caloyeras Partnership $ 750,000
Torotel $1 million;
The New Parties shall have the option to fully satisfy their indemnity
obligations hereunder by (i) cash in the amount of a proper indemnity claim, or
(ii) surrender a portion of such New Party's Common Stock to the Corporation,
which shall be credited against a proper indemnity claim for a price of $.25 per
share, or (iii) surrender of all of such New Party's Common Stock to the
Corporation, which shall be deemed for all purposes hereunder to be full and
complete satisfaction of all of such New Party's obligations under this Section
10.1, whereupon such New Party shall be released of all further obligations
hereunder.
10.2 INDEMNIFICATION BY SRG, GSWG AND GSIG.
10.2.1 Each of SRG, GSWG and GSIG (the "Indemnitors") shall indemnify,
defend and save harmless the Corporation and its successors and assigns, from,
against, for and in respect of any damages, losses, liabilities, costs and
expenses (including reasonable attorneys' fees), arising in connection with or
resulting from: (i) any breach of any representation or warranty made by such
Indemnitors in Section 5.1 of the Agreement which indemnity shall be the joint
and several liability of the Indemnitors under this subsection (i), or (ii) the
breach of any other representation, covenant or agreement by an Indemnitor in
the Agreement or in any document delivered by an Indemnitor pursuant to the
Agreement (but not for the other Indemnitors); PROVIDED, HOWEVER, that such
indemnity obligations for each Indemnitor shall be limited by the Liability
Threshold provision of Section 10.1 hereof; PROVIDED, FURTHER, that the
Liability Threshold shall not apply to breaches of representations, warranties
and covenants regarding tax matters under Section 5.1.17, employee benefits
under Section 5.1.21, ERISA under Section 5.1.21, or title to Membership
Interests and Purchased Shares.
10.2.2 Each of the Indemnitors agree and acknowledge that in the event
of any damages, losses or liabilities in the aggregate of $1,000,000 or less,
the Indemnitors shall pay the difference between the Liability Threshold and the
$1,000,000 to the Corporation. In the event the amount of the claim for
indemnity is more than an aggregate of $1,000,000, the Indemnitors agree and
acknowledge that, if requested by one or more of the New Parties, the
Indemnitors shall purchase all, but not less than all, the Common Stock of the
requesting New Parties for a price of twenty-five cents ($.25) per share, which
shall be the sole remedy of the New Parties and the Corporation, and upon the
purchase of such shares in accordance with this section, the Indemnitors shall
be fully and finally released from any and all liabilities for indemnification
hereunder.
10.2.3 Notwithstanding anything said herein to the contrary in no
event shall the aggregate liability of all Indemnitors exceed the Purchase
Price.
10.3 The parties hereto agree that any individual claim for indemnification
in the amount of $2,500 or less shall be considered DE MINIMIS and shall not be
subject to and included in any Liability Threshold; and no party shall be liable
for any such DE MINIMIS amount.
10.4 The representations, warranties, covenants and agreements set forth in
this Agreement and in any certificate or instrument delivered in connection
herewith shall survive the Closing for a period of two (2) years; provided,
however, that as to any claims brought within said two (2) years period, the
same shall survive until the final and non-appealable resolution thereof;
provided, further, that the representations, warranties and covenants regarding
tax matters under Section 5.1.17, compliance with laws (including environmental
laws under Section 5.1.17), employee benefits and ERISA under Section 5.1.21,
and title to the Membership Interests and Purchased Shares shall survive until
the end of any applicable statute of limitations.
10.5 NOTICE AND DEFENSE OF CLAIMS. The obligations and liabilities of each
indemnifying party hereunder shall be subject to the following terms and
conditions:
10.5.1 NOTICE. The indemnified party shall use its best efforts to
give prompt written notice to the indemnifying party of any claim or event known
to it which does or may give rise to a claim by the indemnified party against
the indemnifying party based on this Agreement, stating the nature and basis of
said claims or events and the amounts thereof, to the extent known. Such notice
shall be given in accordance with Section 11.5
10.5.2 DEFENSE OF CLAIMS OR ACTIONS.
(1) In the event any claim, action, suit or proceeding is made
or brought by third parties, with respect to which a party may be entitled to
indemnity hereunder, the indemnified parties shall give written notice of such
claim, action, suit or proceeding and a copy of the claim, process and all legal
pleadings with respect thereto to the indemnifying party within ten (10)
business days of being served with such claim, process or legal pleading. Such
notice shall not be a condition precedent to any liability of the indemnifying
party under this Agreement unless the failure to give such notice prejudices the
indemnifying party.
(2) The indemnifying party shall have the right to assume the
defense of any such claim or action. If the indemnifying party wishes to assume
the defense of such claim or action, such assumption shall be evidenced by
written notice to the indemnified parties. After such notice, the indemnifying
party shall engage independent legal counsel of reputable standing selected by
it, and reasonably acceptable to the indemnified party, to assume the defense.
Neither party may contest, pay, settle or compromise any such claim or action
unless it first obtains the consent of the other, which shall not be
unreasonably withheld. If the indemnifying party assumes the defense of any such
claim, action, suit or proceeding, the indemnified parties shall have the right
to employ their own counsel, at their own expense, and if the indemnified
parties shall have reasonably concluded and specifically notified the
indemnifying party either that there may be specific defenses available to them
which are different from or additional to those available to the indemnifying
party or that such claim, action, suit or proceeding involves or could have an
adverse effect upon them with respect to matters beyond the scope of the
indemnity provided hereunder, then the counsel representing them, to the extent
made necessary by such defenses, shall have the right to direct such defenses of
such claim, action, suit or proceeding in its behalf.
(3) In the event that the indemnifying party shall have
failed, after the lapse of a reasonable time after written notice to it of such
suit, to take action to defend such claim or action, the indemnified parties may
engage independent counsel of reputable standing selected by them to assume the
defense and to charge the indemnifying party with the reasonable costs of such
defense, including reasonable attorneys' fees, and may contest, pay, settle or
compromise any such claim or action on such terms and conditions as the
indemnified parties reasonably may determine, after notifying, but without
consulting, the indemnifying parties.
(4) The indemnified parties and the indemnifying party shall
cooperate in good faith in connection with such defense and all such parties
shall have the right to employ their own counsel, but, except as provided above,
the fees and expenses of their counsel shall be at their own expense. The
indemnified parties or the indemnifying party, as the case may be, shall be kept
fully informed of such claim, action, suit or proceeding at all stages thereof
whether or not they are represented by their own counsel. Where counsel has been
selected by the indemnifying party or by the indemnified parties pursuant
hereto, the indemnifying party or the indemnified parties, as the case may be,
shall be entitled to rely upon the advice of such counsel in the conduct of the
defense, and no indemnifying party shall be relieved of liability hereunder by
reason of such reliance on the defense conducted by such counsel.
10.6 CONFIDENTIALITY. The parties agree to cooperate in such a manner as to
preserve in full the confidentiality of all confidential business records and
the attorney-client and work product privileges. In connection therewith, each
party agrees that (i) it will use its best efforts, in any action, suit or
proceeding in which it has assumed or participated in the defense, to avoid
production of confidential business records and (ii) all communications between
any party hereto and counsel responsible for or participating in the defense of
any action, suit or proceeding shall, to the extent possible, be made so as to
preserve any applicable attorney-client or work-product privilege.
10.7 SOLE REMEDY. The indemnification obligations under this Section 10.7
shall be the sole and exclusive remedy of the parties for monetary damages with
respect to any breach of any representation, warranty, covenant or agreement
made under this Agreement by any party hereto, except that nothing contained
herein shall be construed as limiting or impairing any of the rights and
remedies that any of the parties hereto may have at equity to injunctive relief
or for specific performance.
ARTICLE 11
MISCELLANEOUS PROVISIONS
11.1 TRANSFER TAXES. The Corporation shall pay all sales, transfer and like
taxes, if any, required to be paid in connection with the issuance and sale of
the Securities. Notwithstanding the foregoing, each party hereto shall bear the
cost of all Taxes incurred by such party with respect to income.
11.2 AMENDMENT AND MODIFICATION. This Agreement may be amended, modified
and supplemented by mutual consent of the parties hereto, with respect to any of
the terms contained herein, in such manner as may be agreed upon in writing by
all of the parties hereto. This Agreement is not subject to amendment by course
of conduct.
11.3 WAIVER. Any failure of any party to comply with any obligation,
covenant, agreement or condition herein may be expressly waived, in writing, by
the other party or parties, as the case may be. Such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure to comply.
11.4 EXPENSE. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses.
11.5 NOTICES. All notices, consents, approvals, or other communications
hereunder shall be in writing and shall be deemed validly given if sent or
delivered by a means acceptable under this Section 11.5 to the Person or Persons
entitled to receive the same as set forth on SCHEDULE 11.5.
Any notice, consent, approval and other communication shall be deemed
given and received as follows:
11.5.1 PERSONAL DELIVERY. When personally delivered to the recipient,
notice is effective on delivery.
11.5.2 ELECTRONIC MAIL. When sent via electronic mail, notice is
effective on receipt, provided that the receiving Party delivers a confirmation
of receipt by any means acceptable hereunder.
11.5.3 FACSIMILE TRANSMISSION. When sent by facsimile to the last
facsimile number of the recipient known to the Party giving notice, notice is
effective on receipt, provided that (a) a duplicate copy of the notice is
promptly given by first-class or certified mail, or (b) the receiving Party
delivers a written confirmation of receipt. Any notice given by facsimile shall
be deemed received on the next business day if it is received after 5:00 p.m.
(recipient's time) or on a non-business day.
11.5.4 US POST COURIER SERVICE. When sent via US Post Courier Service,
notice is effective upon receipt, if delivery is confirmed by US Post Courier
Service.
11.5.5 FIRST-CLASS MAIL. When mailed first-class to the last address
of the recipient known to the Party giving notice, notice is effective three (3)
mail days after deposit in a United States Postal Service office or mailbox.
11.5.6 CERTIFIED MAIL. When mailed certified mail, return receipt
requested, notice is effective on receipt, if delivery is confirmed by a return
receipt.
11.5.7 OVERNIGHT DELIVERY. When delivered by private overnight
delivery service such as Federal Express, Airborne, United Parcel Service, or
DHL Worldwide Express, charges pre-paid or charged to the sender's account,
notice is effective on delivery, if delivery is confirmed by the delivery
service.
11.6 CONFIDENTIALITY. GSLLC, the Corporation, and each of the Parties shall
keep the contents of this Agreement and the Schedules hereto, the other
Operative Documents and all other documents and information relating hereto and
thereto, or furnished or acquired pursuant to or in connection with, this
Agreement and the Schedules hereto and the other Operative Documents, or the
transactions contemplated hereby or thereby, confidential; provided, however,
that any party may disclose such information to (i) its parent, subsidiaries,
Affiliates, directors, officers, employees, its counsel, accountants and
auditors, in any case, as and to the extent necessary to enable them to perform
their respective services to such party, so long as such Person is informed by
the disclosing party of the confidential nature of the information so disclosed,
and (ii) any Governmental Authority as and to the extent required by Applicable
Law; provided, however, that, in connection with such disclosure, the disclosing
party shall inform the other parties of such disclosure and shall take all
reasonable available measures to protect the confidentiality of such disclosed
information.
11.7 ASSIGNMENT. This Agreement and all the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of each of the other parties.
11.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of
Kansas (without giving effect to its
principles of conflict of laws).
11.9 HEADINGS. The headings of the Articles and Sections of this Agreement
are for convenience only and in no way alter, modify, amend, limit or restrict
the contractual obligations of the parties.
11.10 ENTIRE AGREEMENT. This Agreement, including all Exhibits, Schedules
and Operative Documents attached hereto represents the entire understanding of
the parties hereto in respect of the subject matter contained herein. There are
no restrictions, promises, representations, warranties, covenants or
undertakings, other than those expressly set forth or referred to herein. This
Agreement supersedes all prior agreements and understandings between
the parties with respect to such subject matter, including the letter
agreements, memoranda of understanding or similar documents.
11.11 COUNTERPARTS. This Agreement may be signed in counterparts with the
same effect as if the signatures thereto and hereto were upon the same
instrument. Signatures on documents delivered by electronic facsimile shall be
given the same effect as original signatures.
11.12 SEVERABILITY. If any provision of this Agreement or the application
thereof to any party shall be invalid, illegal or unenforceable to any extent,
the remainder of this Agreement and the application thereof shall not be
affected and shall be enforceable to the fullest extent permitted by law.
11.13 ARBITRATION. Any controversy, dispute or claim arising out of, in
connection with or in relation to the interpretation, performance or breach of
this Agreement or any Operative Document, or any amount due hereunder or
thereunder, shall be settled by arbitration. Any arbitration pursuant to this
Agreement shall be conducted in Overland Park,
Kansas and in accordance with the
then existing Rules for Commercial Arbitration of the American Arbitration
Association. Discovery under any arbitration proceeding shall be governed by the
Federal Rules of Civil Procedure. The claimant or party initiating any
arbitration under this Agreement shall, at his/its sole discretion, select one
(1) arbitrator, and the person(s) against whom the claimant is initiating the
arbitration proceeds shall select, in his/its/their discretion, one (1)
arbitrator. The two (2) arbitrators so selected shall then select a third
arbitrator to preside over the arbitration proceedings. Any arbitration award
shall be final and binding. Any judgment upon any interim or final award
rendered by the arbitrator may be entered by any state or federal court having
jurisdiction thereof. The parties intend that any agreement pursuant hereto
subject to arbitration be valid, enforceable and irrevocable. The non-prevailing
party in such arbitration shall bear all costs and expenses (including expert
witness and attorneys' fees) of each party in investigating, preparing and
pursuing such arbitration claim unless the arbitrator determines otherwise.
Nothing in this Agreement shall be interpreted to limit any party's right to
pursue preliminary or provisional equitable relief pending the arbitration
award, including specific performance or a temporary restraining order or
preliminary injunctive relief in a court of competent jurisdiction.
[Signature Pages Follow]
THIS PAGE INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GSIG, LLC
By: /s/ Xxxxx X. Xxxxxx
---------------------------------
Name:
Title:
GSWG, LLC
By: /s/ Xxx X. Xxxxxx
---------------------------------
Name:
Title:
XXXXXXX XXXX GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------
Name:
Title:
/s/ Xxxxx X. Xxxxx
------------------------------------
Xxxxx X. Xxxxx
CALOYERAS 1982 REVOCABLE TRUST
By: /s/ Xxxxx X. Xxxxxxxxx
---------------------------------
Xxxxx X. Xxxxxxxxx, Trustee
CALOYERAS FAMILY PARTNERSHIP
By: /s/ Xxxxx X. Xxxxxxxxx
---------------------------------
General Partner
/s/ Xxxxx X. Xxxxxx
------------------------------------
Xxxxx X. Xxxxxx
/s/ Xxx X. Xxxxxx
------------------------------------
Xxx X. Xxxxxx
GOVERNANCE SOLUTIONS, LLC
By: /s/ Xxxxx X. Xxxxxx
---------------------------------
Name:
Title:
TOROTEL INC.
By: /s/ Xxxx X. Xxxxxxxx
---------------------------------
Name:
Title:
APEX INNOVATIONS, INC.
By: /s/ Xxxxx X. Xxxxxx
---------------------------------
Name:
Title:
The "XXX Bank," joining as a party to this Agreement solely for the limited
purposes of Section 8.3 hereof:
Name of Institution
--------------------------------
For the benefit of Xxxxx X. Xxxxx Individual
Retirement Account
By:
------------------------------------------------
Name:
Title:
Date:
------------------------
EXHIBITS
--------
Certificate of Incorporation 2.1
Loan Agreement 3.1
Promissory Note from Xxxxx X. Xxxxxx 3.7
Promissory Note from Xxx X. Xxxxxx 3.8
Shareholder Agreement 4.3.1(d)
Apex Stock Purchase Agreement 4.3.3(c)
WAA Earnout Promissory Note 4.3.3(d)
JGA Earnout Promissory Note 4.3.3(e)
Note Pledge Agreement from WAA 4.3.7(b)
Note Pledge Agreement from JGA 4.3.8(b)
Plan of Merger/Articles of Merger 8.1.1
Program Project Management Application
Services Provider Services Contract between
City of Kansas City, Missouri, Information
Technology Department and Governance
Selections, LLC 8.1.5
Xxxxxxxx Xxxxxxx & Xxxxxx, P.C. Opinion 8.1.10
Shook Hardy & Bacon LLP Opinion 8.2.8
Xxxxx Xxxx, LLP Opinion 8.2.9
Xxxxx, Xxxxx & Xxxxxx, LLP Opinion 8.2.10
SCHEDULES
---------
Financial Statements 5.1.11
Undisclosed Liabilities 5.1.13
Claims and Proceedings 5.1.14
Insurance 5.1.15
Intellectual Property 5.1.19
Material Contracts 5.1.20
Employee Benefit Plans 5.1.21
Liens and Title to Assets 5.1.22
Lease Defaults 5.1.23
Required Consents 5.2.3
Notification Information 11.5
SCHEDULE 11.5
The following information will be valid for purposes of notices under this
Agreement until a Party notifies the Corporation and the other Parties of any
changes thereto.
If to the Corporation, to:
Xxxxx X. Xxxxxx
000 X. 00xx Xxxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
Email: xxxxx.xxxxxx@xxxxxxxxxx.xxx
If to GSIG, LLC
GSIG, LLC
0000 Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Email: xxxxx.xxxxxx@xxxxxxxxxx.xxx
If to GSWG, LLC
GSWG, LLC
0000 Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxx X. Xxxxxx
Email: xxx.xxxxxx@xxxxxxxxxx.xxx
If to GSLLC
Governance Solutions, LLC
000 X. 00xx Xxxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
Email: xxxxx.xxxxxx@xxxxxxxxxx.xxx
in each case with copies to:
Xxxxxxxx Xxxxxxxx & Xxxxxx, PC
000 Xxxx 00xx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Fax: 000-000-0000
Email: xxxxxxxx@xxxxxx.xxx
If to Xxxxxxx Xxxx Group
Xxxxxxx Xxxx Group
0000 Xxxxxxx Xxxxxxxxx, Xxxxx 0
Xxxxxxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, President
Fax: 000-000-0000
email: xxxx.xxxxx@xxxxxxxxxxx.xxx
with copies to:
Xxxxx Xxxx, LLP
000 Xxxxxxxx Xxxxx
000 Xxxx 00xx Xxxxxx
Xxxxxx Xxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxx
Fax: (000) 000-0000
Email: xxxxxx.xxxx@xxxxxxxxx.xxx
If to Xxxxx
Xxxxx X. Xxxxx
00000 Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
Email: xxxxxxx00@xxxxx.xxx
with copies to:
Xxxxxxx Xxxxx
000 X. Xxxxxx Xx
Xxxxxxxxxxxx, XX 00000
Fax: 000-000-0000
Email: xxxxxx@xxxxxxxxxx.xxx
If to Caloyeras Trust
Caloyeras 1982 Revocable Trust
0000 Xxxx 000xx Xxxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Email: xxxxxxxxxxx@xxxxxxxxx.xxx
If to Caloyeras Partnership
Caloyeras Family Partnership
0000 Xxxx 000xx Xxxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Email: xxxxxxxxxxx@xxxxxxxxx.xxx
in each case with copies to:
XXXXX, XXXXX & XXXXXX, LLP
0000 Xxxxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxx
Fax: (000) 000-0000
Email: xxxxxxx@xxxxxx.xxx
If to WAA
Xxxxx X. Xxxxxx
0000 Xxxxxx
Xxxxxxx, XX 00000
Email: xxxxx.xxxxxx@xxxxxxxxxx.xxx
If to JGA
Xxx X. Xxxxxx
0000 Xxxxxx
Xxxxxxx, XX 00000
Email: xxx.xxxxxx@xxxxxxxxxx.xxx
in each case with copies to:
Xxxxxxxx Xxxxxxxx & Xxxxxx, PC
000 Xxxx 00xx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: J. Xxxxxx Xxxxxxx, Esq.
Fax: 000-000-0000
Email: xxxxxxxx@xxxxxx.xxx
If to Torotel, to:
Torotel Inc.
00000 X. 00 Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxxxx, Xx.
Fax: 000-000-0000
Email: xxxxxxxxx@Xxxxxxxxxxx.xxx
with copies to:
Shook Hardy & Bacon LLP
0000 Xxxxx, 0xx Xxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxxx Xxxxxxxxxx
Fax: (000) 000-0000
Email: xxxxxxxxxxx@xxx.xxx
