CORPORATE REORGANIZATION AGREEMENT
THIS CORPORATE REORGANIZATION AGREEMENT (the "Agreement") is made and
entered into as of the 13th day of August 2004, by and between the following:
XXXXX XXXXXXX, an individual, (hereinafter, the "Transferee"); and
GK INTELLIGENT SYSTEMS, INC., a Delaware corporation (hereinafter
"GKIG").
W I T N E S S E T H
WHEREAS, subject to the terms and conditions of this Agreement, GKIG
desires to transfer shares of its stock in exchange for all of the issued and
outstanding stock of Texas Source Group, Inc., a Texas corporation (the "TSG
Stock" and "TSG" respectively) from Transferee; and
WHEREAS, the Board of Directors of GKIG deems it desirable and in the
best interests of GKIG and its stockholders that GKIG obtain from Transferee
the TSG Stock in consideration of issuance by GKIG to Transferee an aggregate
of one million five hundred thousand dollars ($1,500,000) of GKIG Common Stock
(the "GKIG Shares"); and
WHEREAS, Transferee deems it desirable and in the best interests of
Transferee that Transferee exchange the TSG Stock for the GKIG Shares; and
WHEREAS, GKIG and Transferee desire to provide for certain undertakings,
conditions, representations, warranties, and covenants in connection with the
transactions contemplated by this Corporate reorganization Agreement; and
WHEREAS, Transferee and the Board of Directors of GKIG have approved and
adopted this Agreement, subject to the terms and conditions set forth herein.
The parties intend this transaction should qualify as a tax free
reorganization pursuant to Code Section 368 (a) (1) (B). Immediately after the
transaction, the acquiring company, GKIG, shall have control of the acquired
company, TSG.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto do hereby agree as
follows:
SECTION 1
DEFINITIONS
1.1 "Agreement", "TSG", "TSG Stock", "GKIG", "GKIG Shares",
"Transferee", respectively, shall have the meanings defined in the foregoing
preamble and recitals to this Agreement.
1.2 "Closing Date" shall mean 10:00 a.m., local time, August 19, 2004,
at Houston, Texas, the date on which the parties hereto shall close the
transactions contemplated herein; provided that the parties can change the
Closing Date and place of Closing to such other time and place as the parties
shall mutually agree, in writing. As of the Closing Date, all Exhibits to
this Agreement shall be complete and attached to this Agreement.
1.3 "1933 Act" shall mean the Securities Act of 1933, as amended.
1.4 "1934 Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.5 "SEC Documents" shall have the meaning defined in Section 3.5
hereof.
1.6 "Confidential information" shall have the meaning defined in
Section 11.1 hereof.
SECTION 2
AGREEMENT FOR STOCK EXCHANGE
2.1 Substantive Terms of the Stock Exchange of TSG Stock.
Transferee shall deliver to GKIG one hundred percent (100%) of the issued
and outstanding capital stock of TSG in a form enabling GKIG, then and there,
to become the record and beneficial owner of said common stock, consisting of
one thousand one hundred eleven (1,111) shares, which represent all of the
issued and outstanding capital stock of TSG.
2.2 Consideration by GKIG.
(a) GKIG shall deliver to Transferee the GKIG Shares, as
follows: an aggregate of one million five hundred thousand dollars
($1,500,000) of GKIG Common Stock in the name of Xxxxx Xxxxxxx. The exact
number of shares to be issued shall be determined by taking $1,500,000 and
dividing that sum by the average closing price for August 17, 2004 and August
18, 2004. The GKIG Shares shall be issued pursuant to an exemption from
registration under the 1933 Act and from registration under any and all
applicable state securities laws and the certificates representing the GKIG
Shares shall bear the restrictive legend set forth in Rule 144 of the Rules
and Regulations of the 1933 Act and any appropriate legend required under
applicable state securities laws. It is intended that the GKIG Shares shall
be included in a contemplated SB-2 registration statement. However, to the
extent that the GKIG Shares fail to be registered in the contemplated
registration statement, they will be subject to standard "piggy-back"
registration rights. The GKIG Shares shall be validly issued and outstanding,
fully paid, and non-assessable.
(b) It is the present intention of GKIG that, following the
Closing Date, TSG will operate as a wholly owned subsidiary ("TSG-Sub") of
GKIG.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF GKIG
GKIG, in order to execute this Agreement and to consummate the
transactions contemplated herein, represents and warrants to Transferee, as
follows:
3.1 Organization and Qualification. GKIG is a corporation duly
organized, validly existing, and in good standing under the laws of Delaware,
with all requisite power and authority to own its property and to carry on its
business as it is now being conducted. GKIG is duly qualified as a foreign
corporation and in good standing in each jurisdiction where the ownership,
lease, or operation of property or the conduct of business requires such
qualification, except where the failure to be in good standing or so qualified
would not have a material, adverse effect on the financial condition or
business of GKIG.
3.2 Ownership of GKIG. GKIG is authorized to issue two classes of
stock of up to 275,000,000 common shares, $0.001 par value per share, of which
approximately 77,373,892 are currently issued and outstanding, and up to
10,000,000 preferred shares, $0.001 par value per share of which there are no
shares outstanding.
3.3 Authorization and Validity. GKIG has the requisite power and is
duly authorized to execute and deliver and to carry out the terms of this
Agreement. The board of directors and stockholders of GKIG have taken all
action required by law, its Articles of Incorporation and Bylaws, both as
amended, or otherwise to authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby,
subject to the satisfaction or waiver of the conditions precedent set forth in
Section 8 of this Agreement. Assuming this Agreement has been approved by all
action necessary on the part of Transferee, this Agreement is a valid and
binding agreement of GKIG.
3.4 No Defaults. GKIG is not in default under or in violation of any
provision of its Articles of Incorporation or Bylaws, both as amended. GKIG
is not in default under or in violation of any material provision of any
indenture, mortgage, deed of trust, lease, loan agreement, or other agreement
or instrument to which it is a party or by which it is bound or to which any
of its assets is subject, if such default would have a material, adverse
effect on the financial condition or business of GKIG. GKIG is not in
violation of any statute, law, ordinance, order, judgment, rule, regulation,
permit, franchise, or other approval or authorization of any court or
governmental agency or body having jurisdiction over it or any of its
properties which, if enforced, would have a material, adverse effect on the
financial condition or business of GKIG. Neither the execution and delivery
of this Agreement, nor the consummation of the transactions contemplated
herein, will conflict with or result in a breach of or constitute a default
under any of the foregoing or result in the creation of any lien, mortgage,
pledge, charge, or encumbrance upon any asset of GKIG and no consents or
waivers thereunder are required to be obtained in connection therewith in
order to consummate the transactions contemplated by this Agreement.
3.5 SEC Documents; Financial Statements. As of the Closing, GKIG has
filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC pursuant to the reporting requirements of the
1934 Act (all of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
Documents"). As of their respective dates, the SEC Documents substantially
complied in all material respects with the requirements of the 1934 Act and
the rules and regulations of the SEC promulgated thereunder applicable to the
SEC Documents, and none of the SEC Documents, at the time they were filed with
the SEC, contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial statements
of GKIG included in the SEC Documents substantially complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in substantial accordance with generally
accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of GKIG as of the dates thereof and the results of its operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). No other information
provided by or on behalf of GKIG to the Transferee which is not included in
the SEC Documents, including, without limitation, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they are or were made, not misleading. Neither the Company nor any of
its officers, directors, employees or agents has provided the Transferee with
any material, non-public information.
3.6 Absence of Certain Changes. Since the most recent filing by GKIG
with the SEC, there has been no material adverse change and no material
adverse development in the business, properties, operations, financial
condition, results of operations or prospects of GKIG. GKIG has not taken any
steps, and does not currently expect to take any steps, to seek protection
pursuant to any bankruptcy law nor does GKIG have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy
proceedings.
3.7 Documents. The copies of all agreements and other instruments
that have been delivered by GKIG to Transferee are true, correct, and complete
copies of such agreements and instruments and include all amendments thereto.
3.8 Disclosure. The representations and warranties made by GKIG
herein and in any schedule, statement, certificate, or document furnished or
to be furnished by GKIG to Transferee pursuant to the provisions hereof or in
connection with the transactions contemplated hereby, taken as a whole, do not
and will not as of their respective dates contain any untrue statements of a
material fact, or omit to state a material fact necessary to make the
statements made not misleading.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF TRANSFEREE
Transferee, in order to execute this Agreement with GKIG and to
consummate the transactions contemplated herein, represents and warrants to
GKIG as follows:
4.1 Organization and Qualification. TSG is a Texas corporation,
duly organized, validly existing, and in good standing under the laws of the
state of Texas with all requisite power and authority to own its property and
assets and to carry on its business as it is now being conducted. TSG is
qualified as a foreign corporation and is in good standing in each
jurisdiction where the ownership, lease, or operation of property or the
conduct of its business requires such qualification, except where the failure
to be in good standing or so qualified would not have a material, adverse
effect on the financial condition and business of TSG.
4.2 Ownership of TSG Stock. TSG is authorized to issue one class of
stock, of up to one hundred thousand (100,000) shares of common stock, at $
1.00 par value per share. At the date hereof, of such authorized shares, one
thousand one hundred eleven (1,111) shares of common stock have been validly
issued and are outstanding, fully paid, and non-assessable. All of the shares
of common stock are owned of record and beneficially by the Transferee, who
has not granted any options, warrants, or other securities outstanding which
are exercisable or convertible into, or any calls, commitments, or agreements
of any kind relating to any issued equity securities of TSG. There are no
options, warrants, or other securities outstanding which are exercisable or
convertible into or any calls, commitments, or agreements of any kind relating
to any unissued or issued equity securities of TSG by or on behalf of TSG and
there shall be none outstanding as of the Close. The TSG Stock is now, and
shall be as of the Close, free and clear of all security interests, pledges,
liens, judgments or other encumbrances.
4.3 Authorization and Validity. The Transferee has the requisite
power and is duly authorized to execute and deliver and to carry out the terms
of this Agreement. Assuming this Agreement has been approved by all action
necessary on the part of GKIG, this Agreement is a valid and binding agreement
of Transferee.
4.4 TSG Financial Statements.
(a) TSG financial statements (as prepared by Transferee as the
management of TSG) for the current fiscal year ending December 31, 2003 and
any notes thereto, fairly and accurately present the financial condition and
the results of operations, income, expenses, assets, liabilities, changes in
shareholders' equity, and cash flows of TSG, consistent with the past
practices of TSG (collectively, "TSG Financial Statements").
(b) TSG Financial Statements are capable of being examined and
reported upon with an unqualified opinion expressed by an independent public
or certified public accountant and will comply with the requirements and
standards set forth in Regulation S-X, as promulgated and adopted by the
Securities and Exchange Commission.
4.5 Conduct and Transactions of TSG. Since inception, TSG has
conducted the operations of its business consistent with past practice and
used its best efforts to maintain and preserve its properties, key employees,
and relationships with customers and suppliers. Without limiting the
foregoing, during such period TSG did not:
(a) Incur any liabilities except to maintain its facilities
and assets in the ordinary course of its business;
(b) Declare or pay any dividends on any shares of capital
stock or make any other distribution of assets to the holders thereof;
(c) Issue, reissue, or sell, or issue options or rights to
subscribe to, or enter into any contract or commitment to issue, reissue, or
sell, any shares of capital stock or acquire or agree to acquire any shares of
capital stock;
(d) Amend its Articles of Incorporation or Bylaws or merge or
consolidate with or into any other corporation or sell all or substantially
all of its assets or change in any manner the rights of its capital stock or
other securities;
(e) Pay or incur any obligation or liability, direct or
contingent, except in the ordinary course of its business;
(f) Incur any indebtedness for borrowed money, assume,
guarantee, endorse, or otherwise become responsible for obligations of any
other party, or make loans or advances to any other party except in the
ordinary course of its business;
(g) Increase in any manner the compensation, direct or
indirect, of any of its officers or executive employees, except as otherwise
disclosed in Exhibit 4.5(g), hereto; or
(h) Make any capital expenditures except in the ordinary
course of its business.
4.6 Compensation Due Employees. As of the Closing Date, TSG will not
have any outstanding liability for payment of wages, payroll taxes, vacation
pay (whether accrued or otherwise), salaries, bonuses, pensions, contributions
under any employee benefit plans or other compensation, current or deferred,
under any labor or employment contracts, whether oral or written, based upon
or accruing in respect of those services of employees of TSG that have been
performed prior to the Closing Date, except as specified on Exhibit 4.6
hereto. As of the Closing Date, TSG will not have any unfunded, contingent or
other liability under any defined benefits plan or any other retirement or
retirement-type plan, whether such plan(s) are to continue or are thereupon
terminated, except for the normal on-going obligations for future
contributions under such plan(s) not related, generally or specifically, to
the termination of such plan(s) or except as specified on Exhibit 4.6 hereto.
4.7 Union Agreements and Employment Agreements. TSG is not a party to
any union agreement or any organized labor dispute. TSG has no written or
verbal employment agreements with any of its employees, except as listed in
Exhibit 4.7 hereto.
4.8 Contracts and Leases. Except as listed in Exhibit 4.8 hereto, TSG
is not a party to any written or oral leases, commitments, or any other
agreements. On the Closing Date, TSG has paid or performed in all material
respects all obligations required to be paid or performed by any of them to
such date and will not be in default under any document, contract, agreement,
lease, or other commitment to which any of them is a party.
4.9 Insurance. All insurance against losses or damages or other risks
which are in force for the benefit of any of TSG are set forth in Exhibit 4.9
hereto.
4.10 Liabilities. TSG has no liabilities, except as described in
Exhibit 4.10 hereto, which liabilities are also set forth in relevant detail
on TSG Financial Statements.
4.11 Proprietary Rights. TSG owns or is duly licensed to use such
trademarks and copyrights as are necessary to conduct its business as
presently conducted. The conduct of business by TSG does not, to the best
knowledge of Transferee, infringe upon the trademarks or copyrights of any
third party.
4.12 Internal Controls. Since inception,
(a) There have been no transactions except in accordance with
the general or specific authorization of management of TSG;
(b) TSG has devised and maintained systems of internal
accounting controls and procedures (the "Internal Controls") that were
designed with the objective of providing reasonable assurance that (1) TSG
transactions were properly authorized; (2) TSG assets were safeguarded against
unauthorized or improper use; and (3) TSG transactions were properly recorded
and reported, all (i) to permit the preparation of TSG financial statements in
conformity with generally accepted accounting principles and (ii) to maintain
accountability for assets and expenses.
(c) TSG's chief executive officer, to the best of her ability,
has evaluated TSG Internal Controls, which evaluation included a review of the
controls' objectives and design and the controls' implementation by TSG and
its management. In the course of the Internal Controls' evaluation, TSG
management sought to identify data errors, controls problems, or acts of fraud
and to confirm that appropriate corrective action, including process
improvements, were being undertaken. The Internal Controls were also
evaluated on an ongoing basis by other personnel in TSG organization. Among
other matters, TSG has sought to determine whether there were any "significant
deficiencies" or "material weaknesses" in the Internal Controls, or whether
TSG had identified any acts of fraud involving personnel who had a significant
role in the Internal Controls. For purposes of this subsection, "significant
deficiencies" means "reportable conditions" (control issues that could have a
significant adverse effect on the ability to record, process, summarize and
report financial data in the financial statements) and "material weakness"
means a particularly serious reportable condition where the Internal Controls
do not reduce to a relatively low level the risk that misstatements caused by
error or fraud may occur in amounts that would be material in relation to TSG
Financial Statements and not be detected within a timely period by employees
in the normal course of performing their assigned functions. TSG has also
sought to deal with other Internal Controls matters in the evaluation thereof,
and, in each case if a problem were identified, TSG considered what revision,
improvement and/or correction to make in accord with its on-going procedures.
4.13 Contracts and Agreements. TSG is not a party to any material
contracts or agreements in respect of the operation of its business, except as
listed in Exhibit 4.13 hereto.
4.14 Minute Books. To the extent that minute books exist, the minute
books of TSG contain true, complete, and accurate records of all meetings and
other corporate actions of its shareholders and Board of Directors, and true
and accurate copies thereof have been delivered to counsel for GKIG prior to
the Closing Date. The signatures appearing on all documents contained therein
are the true signatures of the persons purporting to have signed the same.
4.15 Litigation. Except as set forth in Exhibit 4.15, there are no
actions, suits, proceedings, orders, investigations, or claims (whether or not
purportedly on behalf of TSG) pending against or affecting TSG at law or in
equity or before or by any federal, state, municipal, or other governmental
department, commission, board, agency, or instrumentality, domestic or
foreign, nor has any such action, suit, proceeding, or investigation been
pending or threatened in writing during the 12-month period preceding the date
hereof, which, if adversely determined, would materially and adversely affect
the financial condition of TSG which seeks to prohibit, restrict, or delay
the consummation of the stock sale contemplated hereby. TSG is not operating
under or subject to, or in default with respect to, any order, writ,
injunction, or decree of any court or federal, state, municipal, or other
governmental department, commission, board, agency, or instrumentality.
4.16 Taxes. At the Closing Date, all tax returns required to be filed
with respect to the operations or assets of TSG prior to Closing Date have
been correctly prepared in all material respects and timely filed, and all
taxes required to be paid in respect of the periods covered by such returns
have been paid in full or adequate reserves have been established for the
payment of such taxes. Except as set forth in Exhibit 4.16, as of the Closing
Date, TSG has not requested any extension of time within which to file any
tax returns, and all known deficiencies for any tax, assessment, or
governmental charge or duty shall have been paid in full or adequate reserves
have been established for the payment of such taxes. TSG tax returns are true
and complete in all material respects. No audits by federal or state
authorities are currently pending or threatened.
4.17 No Defaults. TSG is not in default under or in violation of any
provision of its Articles of Incorporation or Bylaws. TSG is not in default
under or in violation of any material provision of any indenture, mortgage,
deed of trust, lease, loan agreement, or other agreement or instrument to
which it is a party or by which it is bound or to which any of its assets are
subject, if such default would have a material, adverse effect on the
financial condition or business of TSG. TSG is not in violation of any
statute, law, ordinance, order, judgment, rule, regulation, permit, franchise,
or other approval or authorization of any court or governmental agency or body
having jurisdiction over it or any of its properties which, if enforced, would
have a material, adverse effect on the financial condition or business of TSG.
Neither the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated herein, will conflict with or result in a breach
of or constitute a default under any of the foregoing or result in the
creation of any lien, mortgage, pledge, charge, or encumbrance upon any asset
of TSG and no consents or waivers thereunder are required to be obtained in
connection therewith in order to consummate the transactions contemplated by
this Agreement.
4.18 Absence of Certain Changes. Since the date of the financial
statements specified in Section 4.4(a), there has been no material adverse
change and no material adverse development in the business, properties,
operations, financial condition, results of operations or prospects of TSG.
TSG has not taken any steps, and does not currently expect to take any steps,
to seek protection pursuant to any bankruptcy law nor does TSG have any
knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings.
4.19 Documents. The copies of all agreements and other instruments
that have been delivered by Transferee to GKIG are true, correct, and complete
copies of such agreements and instruments and include all amendments thereto.
4.20 Disclosure. The representations and warranties made by Transferee
herein and in any schedule, statement, certificate, or document furnished or
to be furnished by TSG and/or either of Transferee to GKIG pursuant to the
provisions hereof or in connection with the transactions contemplated hereby
taken as a whole do not and will not as of their respective dates contain any
untrue statements of a material fact, or omit to state a material fact
necessary to make the statements made not misleading.
SECTION 5
INVESTIGATION; PRESS RELEASE
5.1 Investigation.
(a) GKIG acknowledges that it has made an investigation of TSG
to confirm, among other things, the assets, liabilities, and status of
business of TSG and the cash position, accounts receivable, liabilities, and
mortgages in process. In the event of termination of this Agreement, GKIG
will deliver to Transferee all documents, work papers, and other materials and
all copies thereof obtained by GKIG, or on its behalf, from TSG or
Transferee, whether obtained before or after the execution hereof, will not
use, directly or indirectly, any confidential information obtained from TSG
or Transferee hereunder or in connection herewith, and will keep all such
information confidential and not used in any way detrimental to TSG or
Transferee except to the extent the same is publicly disclosed by TSG or
Transferee.
(b) Transferee acknowledges that he has made an investigation
of GKIG, which has included, among other things, the opportunity of
discussions with executive officers of GKIG, and its accountants, investment
bankers, and counsel. In the event of termination of this Agreement,
Transferee will deliver to GKIG all documents, work papers, and other
materials and all copies thereof obtained by either of them, or on behalf of
either of them, from GKIG, whether obtained before or after the execution
hereof and will not use, directly or indirectly, any confidential information
obtained from GKIG hereunder or in connection herewith, and will keep all such
information confidential and not used in any way detrimental to GKIG, except
to the extent the same is publicly disclosed by GKIG.
(c) Except in the event that any party hereto discovers in the
course of its respective investigation any breach of a representation or
warranty by the other party hereto and does not disclose it to such other
party prior to the Closing Date, no investigation pursuant to this Section 5.1
shall affect or be deemed to modify any representation or warranty made by any
party hereto.
5.2 Press Release. GKIG and Transferee shall agree with each other as
to the form and substance of any press releases and the filing of any
documents with any federal or state agency related to this Agreement and the
transactions contemplated hereby and shall consult with each other as to the
form and substance of other public disclosures related thereto; provided,
however, that nothing contained herein shall prohibit either party from making
any disclosure that its counsel deems necessary.
SECTION 6
BROKERAGE
6.1 Brokers and Finders. Except for Stanton, Walker & Company,
neither GKIG nor Transferee, or any of their respective officers, directors,
employees, or agents, has employed any broker, finder, or financial advisor or
incurred any liability for any fee or commissions in connection with
initiating the transactions contemplated herein. Stanton, Walker & Company
has been engaged by GKIG and GKIG is solely liable for any fee or commission
earned by Stanton, Walker & Company. Each party hereto agrees to indemnify and
hold the other party harmless against or in respect of any other commissions,
finder's fees, or brokerage fees incurred or alleged to have been incurred
with respect to initiating the transactions contemplated herein as a result of
any action of the indemnifying party.
SECTION 7
CLOSING AGREEMENTS AND POST-CLOSING
7.1 Closing Agreements. On the Closing Date, the following activities
shall occur, the following agreements shall be executed and delivered, and the
respective parties thereto shall have performed all acts that are required by
the terms of such activities and agreements to have been performed
simultaneously with the execution and delivery thereof as of the Closing Date:
(a) Transferee shall have executed and delivered documents to
GKIG sufficient then and there to transfer record and beneficial ownership to
GKIG of the TSG Stock, consisting of an aggregate of one thousand one hundred
eleven (1,111) shares of common stock of TSG, which shall represent one
hundred percent (100%) of all of the issued and outstanding securities of TSG
as of the Close;
(b) GKIG shall have delivered to Transferee the GKIG Shares
in the name of Xxxxx Xxxxxxx as follows: an aggregate of one million five
hundred thousand dollars ($1,500,000) of GKIG Common Stock. The exact number
of shares to be issued shall be determined by taking $ 1,500,000 and dividing
that sum by the average closing price for August 17, 2004 and August 18, 2004.
(c) Transferee shall have mutually executed an Employment
Agreement with TSG-Sub in substantially the form attached hereto as Exhibit
7.1(c), whereby Transferee will have agreed to continue to act as the
President of TSG-Sub for a twenty-four month period of time and thereafter by
mutual agreement for additional twelve month periods of time and to not
compete with GKIG or any of its subsidiaries or affiliates for a period of
twenty-four months from the Close.
SECTION 8
CONDITIONS PRECEDENT TO GKIG'S OBLIGATIONS TO CLOSE
The obligations of GKIG to consummate this Agreement are subject to
satisfaction on or prior to the Closing Date of the following conditions:
8.1 Representations and Warranties. The representations and
warranties of Transferee contained in this Agreement shall be true and correct
in all material respects on and as of the Closing Date, and Transferee shall
have performed in all material respects all of her obligations hereunder
theretofore to be performed.
8.2 Audited Financial Statements. GKIG shall have sent a
representative to inspect TSG's books and records prior to the Close and shall
have determined in its sole judgment that TSG's books and records are capable
of being audited by an auditing firm of its selection at a reasonable cost at
a reasonable period of time and Transferee shall deliver financial statements
developed under GAAP for a period agreeable to GKIG and by an auditing firm
which shall be found acceptable by GKIG. The cost to develop these audited
financial statements shall be borne by GKIG.
8.3 Other. The joint conditions precedent in Section 10 hereof shall
have been satisfied and all documents required for Closing shall be acceptable
to Counsel for GKIG.
SECTION 9
CONDITIONS PRECEDENT TO TRANSFEREE'S OBLIGATIONS TO CLOSE
The obligation of Transferee to consummate this Agreement is subject to
the satisfaction on or prior to the Closing Date of the following conditions:
9.1 Representations and Warranties. The representations and
warranties of GKIG contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date, and GKIG shall have
performed in all material respects all of its obligations hereunder
theretofore to be performed.
9.2 Other. The joint conditions precedent in Section 10 hereof shall
have been satisfied.
SECTION 10
JOINT CONDITIONS PRECEDENT
The obligations of GKIG and Transferee to consummate this Agreement shall
be subject to satisfaction or waiver in writing by all parties of each and all
of the following additional conditions precedent at or prior to the Closing
Date:
10.1 Other Agreements. All of the agreements contemplated by Section
7.1 of this Agreement shall have been executed and delivered, and all acts
required to be performed thereunder as of the Closing Date shall have been
duly performed, including, without limitation, completion of all exhibits to
this Agreement.
10.2 Absence of Litigation. At the Closing Date, there shall be no
action, suit, or proceeding pending or threatened against any of the parties
hereto by any person, governmental agency, or subdivision thereof, nor shall
there be pending or threatened any action in any court or administrative
tribunal, which would have the effect of inhibiting the consummation of the
transactions contemplated herein.
SECTION 11
CONFIDENTIALITY
11.1 GKIG acknowledges that its principals have, and will, acquire
information and materials from Transferee and/or TSG and knowledge about the
technology, business, products, strategies, customers, clients and suppliers
of TSG and that all such information, materials and knowledge acquired, are
and will be trade secrets and confidential and proprietary information of TSG
(collectively, such acquired information, materials, and knowledge are the
"Confidential Information"). GKIG, itself, and on behalf of its principals,
covenants to hold such Confidential Information in strict confidence, not to
disclose it to others or use it in any way, commercially or otherwise, except
in connection with the transactions contemplated by this Agreement and not to
allow any unauthorized person access to such Confidential Information.
11.2 The Confidential Information disclosed by the Transferee and/or
TSG to GKIG shall remain the property of the disclosing party.
11.3 GKIG, and its principals, shall maintain in secrecy all
Confidential Information disclosed to them by Transferee and/or TSG using not
less than reasonable care. GKIG, and its principals, shall not use or
disclose in any manner to any third party any Confidential Information without
the express written consent of the Transferee unless or until the Confidential
Information is:
(a) publicly available or otherwise in the public domain; or
(b) rightfully obtained by any third party without
restriction; or
(c) disclosed by Transferee and/or TSG without restriction
pursuant to judicial action, or government regulations or other requirements.
11.4 The obligations of GKIG under Sections 11.1, 11.2, and 11.3 of
this Agreement shall expire upon the sooner of the Closing or one year from
the date hereof as to Confidential Information consisting of commercial and
financial information and two years from the date hereof as to Confidential
Information consisting of technical information. For this purpose, technical
information shall include without limitation all developments, inventions,
innovations, designs, discoveries, trade secrets and know-how, whether or not
patentable or copyrightable.
SECTION 12
TERMINATION AND WAIVER
12.1 Termination. This Agreement may be terminated and abandoned on
the Closing Date by:
(a) the mutual consent in writing of the parties hereto;
(b) GKIG, if the conditions precedent in Sections 8 and 10 of
this Agreement have not been satisfied or waived by the Closing Date; and
(d) Transferee, if the conditions precedent in Sections 9 and
10 of this Agreement have not been satisfied or waived by the Closing Date.
If this Agreement is terminated pursuant to Section 12.1, the parties hereto
shall not have any further obligations under this Agreement, and each party
shall bear all costs and expenses incurred by it, except as otherwise
specified in Section 8.2.
SECTION 13
NATURE AND SURVIVAL OF REPRESENTATIONS, ETC.
13.1 All statements contained in any certificate or other instrument
delivered by or on behalf of GKIG or Transferee pursuant to this Agreement or
in connection with the transactions contemplated hereby shall be deemed
representations and warranties by such party. All representations and
warranties and agreements made by GKIG or Transferee in this Agreement or
pursuant hereto shall survive the Closing Date hereunder until the expiration
of the 12th month following the Closing Date.
SECTION 14
MISCELLANEOUS
14.1 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if written and delivered in
person or sent by registered mail, postage prepaid, addressed as follows:
to Transferee: Xxxxx Xxxxxxx
Texas Source Group, Inc.
000 Xxxxxxxxx
Xxxxxxx, XX 00000
to GKIG: GK Intelligent Systems, Inc.
Attn: Xxxx Xxxxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
or such other address as shall be furnished in writing by the appropriate
person, and any such notice or communication shall be deemed to have been
given as of the date so mailed.
14.2 Time of the Essence. Time shall be of the essence of this
Agreement.
14.3 Costs. Each party will bear the costs and expenses incurred by it
in connection with this Agreement and the transactions contemplated hereby,
except as otherwise specified in Section 8.2.
14.4 Cancellation of Agreement. In the event that this Agreement is
canceled by mutual agreement of the parties or by failures of any of the
conditions precedent set forth in Paragraphs 8, 9, and 10, neither Transferee
nor GKIG shall be entitled to any damages, fees, costs, or other
consideration.
14.5 Entire Agreement and Amendment. This Agreement and documents
delivered at the Closing Date hereunder contain the entire agreement between
the parties hereto with respect to the transactions contemplated by this
Agreement and supersedes all other agreements, written or oral, with respect
thereto. This Agreement may be amended or modified in whole or in part, and
any rights hereunder may be waived, only by an agreement in writing, duly and
validly executed in the same manner as this Agreement or by the party against
whom the waiver would be asserted. The waiver of any right hereunder shall be
effective only with respect to the matter specifically waived and shall not
act as a continuing waiver unless it so states by its terms.
14.6 Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed to constitute an original and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party.
14.7 Governing Law. This Agreement shall be governed by, and construed
and interpreted in accordance with, the laws of the State of Texas.
14.8 Attorneys' Fees and Costs. In the event any party to this
Agreement shall be required to initiate legal proceedings to enforce
performance of any term or condition of this Agreement, including, but not
limited to, the interpretation of any term or provision hereof, the payment of
moneys or the enjoining of any action prohibited hereunder, the prevailing
party shall be entitled to recover such sums, in addition to any other damages
or compensation received, as will reimburse the prevailing party for
reasonable attorneys' fees and court costs incurred on account thereof
(including, without limitation, the costs of any appeal) notwithstanding the
nature of the claim or cause of action asserted by the prevailing party.
14.9 Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs,
executors, personal representatives, successors, and assigns, as the case may
be.
14.10 Access to Counsel. Each party hereto acknowledges that each has
had access to legal counsel of her or its own choice and has obtained such
advice therefrom, if any, as such party has deemed necessary and sufficient
prior to the execution hereof. Each party hereto acknowledges that the
drafting of this Agreement has been a joint effort and any ambiguities or
interpretative issues that may arise from and after the execution hereof shall
not be decided in favor of, or against, any party hereto because the language
reflecting any such ambiguities or issues may have been drafted by any
specific party or her or its counsel.
14.11 Captions. The captions appearing in this Agreement are inserted
for convenience of reference only and shall not affect the interpretation of
this Agreement.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
GK INTELLIGENT SYSTEMS, INC.
By: /s/ Xxxx Xxxxxxx
-----------------------
Xxxx Xxxxxxx
President & CEO
TRANSFEREE
/s/ Xxxxx Xxxxxxx
-------------------------
Xxxxx Xxxxxxx
