EXHIBIT 3
APEX INNOVATIONS, INC.
SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT is made and entered into this 29th day of March,
2002, by, between, and among Apex Innovations, Inc., a Delaware corporation (the
"Corporation") and each of the Shareholders of the Corporation listed on
SCHEDULE A hereto (collectively the "Shareholders").
WHEREAS, the Shareholders listed on SCHEDULE A own all of the issued and
outstanding shares of the common stock of the Corporation; and
WHEREAS, the Shareholders and the Corporation desire to enter into this
Agreement for the purpose of imposing certain restrictions and obligations upon
themselves relating to the Transfer of Stock (as defined below), the election of
Directors of the Corporation and various other matters.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained
herein, the parties hereto agree as follows:
1 DEFINITIONS:
When used in this Agreement, each of the terms set forth in this Section 1
has the meaning indicated below; other terms are defined throughout the body of
this Agreement:
1.1 AFFILIATE 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 Stock.
1.2 AGREEMENT means this Shareholder Agreement and any amendments,
modifications and supplements hereto.
1.3 BENEFICIALLY OWNED means beneficial ownership as defined in Rule 13d-3
under the Exchange Act. With respect to an individual, the term "Beneficially
Owned" includes any shares that are Beneficially Owned by such person's spouse.
1.4 BONA FIDE OFFER means a written offer to purchase or otherwise Transfer
Stock from a financially responsible Person identified therein by name and
address, reasonably appearing able to comply with the terms of such offer. In
the event that the Person making such offer is a partnership, limited
partnership, limited liability company or corporation, all general partners,
limited partners, members or shareholders owning more than 10% of its
partnership interests, membership interest or stock shall be identified.
1.5 COMMISSION means the United States Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
1.6 COMMON STOCK means the shares of common stock, par value $.001 per
share, authorized by the Corporation's Certificate of Incorporation.
1.7 DIRECTOR means a member of the Board of Directors of the Corporation.
1.8 EFFECTIVE DATE means the date upon which a Notice of Offer is deemed to
have been first delivered to the Company.
1.9 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended from
time to time, and rules and regulations of the Commission promulgated
thereunder.
1.10 FAMILY MEMBER means the spouse, parents, lineal descendants, spouses
of lineal descendants, brothers and sisters, spouses of brothers and sisters,
and the lineal descendants of brothers and sisters. Spouse includes former
spouses; parents include stepparents; lineal descendants include legally adopted
children; brothers/sisters include half brothers and half sisters; and spouses
of siblings or lineal descendants include former spouses.
The term Family Member as applied to a Shareholder which is a corporation,
a partnership, a trust or other entity means the relevant relationship, stated
above, applied to an officer, director, grantor, member, partner or shareholder
of the entity.
1.11 MATERIAL ADVERSE EFFECT means (a) a material adverse effect upon the
business, operations, prospects, properties, assets or condition (financial or
otherwise) of the Corporation and its Subsidiaries, taken as a whole, or (b) a
material adverse effect on the ability of the Corporation to perform its
obligations under this Agreement.
1.12 NEW SECURITIES means (i) any shares of Stock now or hereafter
authorized and (ii) any rights, options or warrants to acquire Stock or any
other securities of any nature that are or may become convertible into Stock
that the Corporation proposes to sell to any Person.
1.13 NOTICE OF EXERCISE means the written notice required to be given by
the Corporation or a Shareholder to exercise the option to purchase the Stock
offered for Transfer.
1.14 NOTICE OF OFFER means the written notice of a Shareholder's intention
to Transfer any of his/its Stock, which sets forth the name of the proposed
Transferee, the number of shares of Stock to be Transferred and the material
terms and conditions of the proposed Transfer including, without limitation, the
purchase price and proposed closing date. Such notice shall be accompanied by a
copy of a Bona Fide Offer received in connection with such proposed Transfer.
1.15 PERMITTED TRANSFER means a Transfer of Stock described in Section 9
hereof.
1.16 PERSON shall be construed as broadly as possible and shall include an
individual, a partnership (including a limited liability partnership), a
corporation, an association, a joint stock company, a limited liability company,
a trust, a joint venture, an unincorporated organization, a political
subdivision or other governmental regulatory agency and any other entity.
1.17 PREEMPTION ACCEPTANCE means the written notice of a Shareholder's
irrevocable election to accept an offer by the Corporation to sell New
Securities to such Shareholder pursuant to Section 12 hereof.
1.18 PREEMPTION NOTICE means the written notice from the Corporation
offering to sell a pro rata portion of New Securities to a Shareholder
containing the information specified in Section 12 hereof.
1.19 PUBLIC OFFERING means any offering of Common Stock to the public,
either on behalf of the Corporation or any of its security holders, pursuant to
an effective registration statement under the Securities Act.
1.20 REGISTRABLE SECURITIES means the outstanding Common Stock held by the
Shareholders or issued to the Shareholders in the future, including shares of
Common Stock in connection with any stock split, stock dividend,
recapitalization or similar event. Registrable Securities shall cease to be
Registrable Securities when (x) a registration statement with respect to the
sale of such securities shall have been declared effective under the Securities
Act and such securities shall have been disposed of in accordance with such
registration statement, (y) such securities shall be eligible to be distributed
pursuant to Rule 144 under the Securities Act in a single three-month period by
the holder thereof or (z) such securities shall have ceased to be outstanding.
1.21 RELATED PARTY as to the Corporation means a direct or indirect
Shareholder, a Director, a Family Member of a Shareholder or a Family Member of
a Director, or any Affiliate of a Shareholder or any Affiliate of a Director.
1.22 REQUISITE MAJORITY means a 100% vote of all issued and outstanding
Stock. Wherever a Requisite Majority vote is required, it may be had either at a
meeting duly called for that purpose or by the written consent of those
Shareholders who own not less than 100% of the issued and outstanding Stock.
1.23 SCHEDULE A means the attached list of Shareholders, their addresses,
other useful notice information such as telephone, facsimile, e-mail address,
and the number of shares of Stock owned by each.
1.24 SECURITIES ACT means the Securities Act of 1933, as amended from time
to time, and the rules and regulations of the Commission promulgated thereunder.
1.25 SELLING SHAREHOLDER means any Shareholder who has delivered a Notice
of Offer.
1.26 SHAREHOLDERS mean the Persons which hold of record the issued and
outstanding shares of Common Stock of the Corporation and which are parties to
this Agreement.
1.27 STOCK means the issued and outstanding shares of the Common Stock of
the Corporation, and any New Securities issued or substituted therefor.
1.28 SUBSIDIARY shall mean, at any time, with respect to any Person (the
"Subject Person"), (i) any Person which owns either (x) more than 50% of the
shares of stock or other interests entitled to vote in the election of directors
or comparable Persons performing similar functions (excluding shares or other
interests entitled to vote only upon the failure to pay dividends thereon or
other contingencies) or (y) more than a 50% interest in the profits or capital
of such Person which are at the time owned or controlled directly or indirectly
by the Subject Person or through one or more Subsidiaries of the Subject Person
or by the Subject Person and one or more Subsidiaries of the Subject Person, or
(ii) any Person whose assets, or portions thereof, are consolidated with the net
earnings of the Subject Person and are recorded on the books of the Subject
Person for financial reporting purposes in accordance with generally accepted
accounting principles.
1.29 SUPER MAJORITY means a vote of not less than 66 2/3% of all issued and
outstanding shares of Stock. Wherever a Super Majority vote is required, it may
be had either at a meeting duly called for that purpose or by the written
consent of those Shareholders who own not less than 66 2/3% of the issued and
outstanding shares of Stock.
1.30 TRANSFER means to directly or indirectly sell, assign, hypothecate,
transfer, pledge, mortgage, gift, or in any other way encumber or dispose of
Stock and shall be defined to include the process whereby Stock is transferred.
1.31 TRANSFEREE means the Person to which a Selling Shareholder desires to
Transfer Stock or to whom Stock is transferred in accordance with the terms of
this Agreement.
1.32 UNRELATED PARTY means any Person who is not a RELATED PARTY.
The following terms are defined in the text where indicated:
"Co-Sale Right" Section 11.1
"Co-Selling Shareholder" Section 11.3
"Confidential Information" Section 7.5.2
"Corporation" Preamble
"Major Decisions" Section 5
"Majority Shareholders" Section 11.6
"Maker" Section 6.1
"Must Along Rights" Section 11.6
"Payee" Section 6.1
"Term" Section 3
2 SCOPE OF AGREEMENT:
During its Term, this Agreement shall apply to and control:
2.1 All Transfers of Stock. No Shareholder shall Transfer any Stock that
such Shareholder may now or hereafter hold, nor shall any such Stock be
transferable except in compliance with the terms of this Agreement, provided
that no Stock issued or transferred pursuant to an effective registration
statement filed with the Commission shall be subject to, or encumbered by, this
Agreement.
2.2 The duty of each Shareholder to vote his/its Stock in the manner and
for the purposes stated herein.
2.3 The ability of the Directors to amend selected provisions of the By
Laws.
2.4 The right of the Shareholders to approve or disapprove certain Major
Decisions.
3 TERM
The Term of this Agreement shall commence on the effective date hereof.
This Agreement shall continue in full force and effect until the first to occur
of (1) the successful closing by the Corporation of its initial Public Offering
with proceeds of at least $10,000,000 with respect to the Stock; or (2) the
written agreement of all the parties.
Upon termination, this Agreement shall be of no further force or effect;
provided however, that those Directors currently serving at the time that this
Agreement terminates shall continue until the end of their initial or current
term of office, as the case may be.
4 CORPORATE STRUCTURE:
The Shareholders agree to vote their Stock as required herein. Attached
hereto as EXHIBIT 4(a) is the Certificate of Incorporation of Corporation and
attached hereto as EXHIBIT 4(b) are the By-Laws of the Corporation. The
Certificate of Incorporation may be amended by a Super Majority vote. The
provision authorizing preemptive rights for Shareholders shall not be amended
other than by a Requisite Majority, unless such amendment changing pre emptive
rights is in connection with a registration statement filed with the Commission,
in which case only a Super Majority vote will be needed to effect such
amendment.
The By-Laws may be amended by the Board of Directors provided that the
provision of the By-Laws fixing the number of directors at five (5) may not be
amended except by a Super Majority vote of the Shareholders.
5 MAJOR DECISIONS: Each of the following actions of the Corporation ("Major
Decisions") must be approved by the Board of Directors of the Corporation, and
must thereafter be approved by a Super Majority.
5.1 Any issuance of Stock of any class in a single transaction or series of
related transactions where the consideration to be received for the Stock
exceeds $1,000,000.
5.2 Any issuance of any Stock of any class in a single transaction or a
series of related transactions where, immediately upon the conclusion of the
transaction or transactions, the holders of the newly issued Stock would own or
control, directly or indirectly, more than 10% of the then outstanding Common
Stock of the Corporation, or would hold securities convertible into more than
10% of the then outstanding Common Stock of the Corporation.
5.3 Entering into any oral contract or arrangement or the execution of any
written contract for the purchase or sale of any goods or services of any kind
to or from a Related Party.
5.4 Making loans to, or accepting loans from, any Related Party.
5.5 The creation of any stock option or stock bonus plan.
5.6 The execution of any employment agreement with any Shareholder, any
Director, or any Family Member of any Shareholder or any Director, for any
person not presently employed by the Corporation or its subsidiary.
5.7 Any arrangement for the sale of all, or substantially all, of the
assets of the Corporation, or any merger, recapitalization, or similar
transaction.
6 ELECTION OF DIRECTORS; BOARD MATTERS. During the Term of this Agreement:
6.1 Each of the Shareholders agree to vote their Stock at any annual or
special meeting of Shareholders (or in connection with any action taken by
written consent without a meeting) in such a manner as to cause to be elected
five (5) Persons to the Board of Directors of the Corporation as follows: (i)
two Directors nominated by the GSIG, LLC and GSWG, LLC, (ii) two Directors
nominated by Torotel, Inc., Caloyeras Family Partnership and the Caloyeras 1982
Revocable Trust, provided however that Xxxxxxx Xxxx Group will nominate one of
these two Directors so long as that certain Promissory Note dated March 28,
2002, by and between the Corporation ("Maker"), and Xxxxxxx Xxxx Group, Inc.,
("Payee") remains outstanding; and (iii) one Director nominated by the Directors
nominated by the respective Shareholders pursuant to (i) and (ii).
6.2 In the event of the resignation, death, removal or disqualification of
a Director selected by GSIG, LLC and GSWG, LLC,
Torotel Inc. or Xxxxxxx Xxxx
Group, Inc., as the case may be, each of the aforesaid Shareholders, as the case
may be, shall promptly designate for election a representative, and, after
written notice of the nomination has been given by the aforesaid Shareholder to
the other parties, each Shareholder shall vote or act with respect to his, her
or its Stock of the Corporation so as to elect such designee to the Board of
Directors.
6.3 GSIG, LLC and GSWG, LLC,
Torotel Inc. or Xxxxxxx Xxxx Group, Inc., as
the case may be, may remove its designated Director at any time and from time to
time, with or without cause (subject to any requirements of law), in their sole
discretion, and after written notice to each of the parties hereto of the new
nominee to replace such Director. Each Shareholder shall promptly vote his, her
or its shares of Stock of the Corporation to elect such nominee to the Board of
Directors.
6.4 Each Director designated by GSIG, LLC, GSWG, LLC,
Torotel Inc. and
Xxxxxxx Xxxx Group, Inc. shall recuse himself from any discussion or vote of the
Board of Directors to pursue a claim or other cause of action on behalf of the
Corporation against the Person designating such Director for that Person's
breach or violation of any or all of the representations, warranties or
covenants contained in the Securities Purchase and Subscription Agreement of
even date herewith among and between the Corporation, Governance Solutions, LLC
and the Shareholders, or contained in the Apex Associates Stock Purchase
Agreement of even date hereto. In such event, the non-interested Directors shall
proceed with bringing a claim or cause of action on behalf of the Corporation if
fifty percent (50%) of the non-interested Directors approve such action.
7 FINANCIAL AND BUSINESS INFORMATION.
During the Term, the Corporation shall deliver to the Parties the
following:
7.1 QUARTERLY STATEMENTS. As soon as practicable after the end of each
quarter of the Corporation, and in any event within 30 days thereafter:
7.1.1 a balance sheet of the Corporation as of the end of such
quarter; and
7.1.2 statements of income, stockholders' equity and cash flows of
the Corporation for such quarter, setting forth in each case in comparative form
the figures for the previous quarter, all in reasonable detail and accompanied
by a certificate of the Chief Financial Officer of the Corporation verifying the
accuracy of the statements.
7.2 ANNUAL STATEMENTS. As soon as practicable after the end of each fiscal
year of the Corporation, and in any event within 90 days thereafter:
7.2.1 a balance sheet of the Corporation as of the end of such year;
and
7.2.2 statements of income, stockholders' equity and cash flows of
the Corporation for such year, setting forth in each case in comparative form
the figures for the previous fiscal year, all in reasonable detail and
accompanied by an opinion thereon of a firm of independent certified public
accountants of recognized standing selected by the Corporation, which opinion
shall state that such financial statements fairly present the financial position
of the Corporation and have been prepared in accordance with generally accepted
accounting principles consistently applied (except for changes in application in
which such accountants concur) and that the examination of such accountants in
connection with such financial statements have been made in accordance with
generally accepted auditing standards, and accordingly included such tests of
the accounting records and such other auditing procedures as were considered
necessary in the circumstances.
7.3 INTERNAL CONTROL LETTER. Promptly upon receipt thereof, the
Corporation shall deliver to the Parties a copy of any internal control letter
submitted to the Corporation by independent
accountants in connection with any annual, interim or special audit made by them
of the books of the Corporation, as applicable as well as any responses of the
Corporation thereto.
7.4 INFORMATION TO SHAREHOLDERS. Each Shareholder shall receive the same
materials and agenda items which the Board of Directors may receive at any
regular or special meeting of the Board of Directors; provided however, that
some materials to be covered in a meeting of the Directors may be deemed
confidential in the reasonable discretion of the Chairman of the Board, which
confidential materials may not be furnished to any Person which is not a
Director.
7.5 CONFIDENTIAL INFORMATION. At all times during the Term of this
Agreement, any materials or agenda items of a meeting of the Directors delivered
to a Shareholder pursuant to this Section 7.5 shall be deemed Confidential
Information (as defined below) and shall be restricted as provided herein.
7.5.1 No party to this Agreement will (a) disclose, furnish or
deliver any Confidential Information to any other Person or entity, (b) copy or
otherwise reproduce Confidential Information, or (c) use the Confidential
Information in any manner detrimental to the Corporation, including without
limitation, using the Confidential Information in connection with the
solicitation of any customers, supplies or employees of the Corporation or any
of its Affiliates. No party shall use the Confidential Information to create or
form any business or enterprise, which would compete with the business of the
Corporation.
7.5.2 For purposes of this Agreement, the term "Confidential
Information" shall include all information provided by the Corporation or its
representatives to a party to this Agreement which is not generally known to the
public, including, without limitation, all business records, financial
information, information concerning personnel, customers, suppliers, contracts,
assets and operations of the Corporation or its Affiliates, whether in writing,
or at oral presentations or interviews and further including analyses,
compilations, forecasts, studies or other documents prepared by the Corporation
or its representatives. Confidential Information will not apply to such portions
of the Confidential Information which (i) are or become generally available to
the public through no action by a party hereto, or (ii) are or become available
to a party to this Agreement on a non-confidential basis from a source, which
such party believes, after reasonable inquiry, is not prohibited from disclosing
such portions by a contractual, legal or fiduciary obligation.
8 TRANSFER RESTRICTIONS:
8.1 No less than 60 days prior to any proposed Transfer, other than a
Permitted Transfer, a Shareholder desiring to Transfer Stock shall furnish a
Notice of Offer to the Corporation and to each other Shareholder. For a period
of 10 business days after the Effective Date thereof, the Corporation shall have
an option to purchase all or any portion of the Stock offered for Transfer by
the Selling Shareholder on the same terms and conditions as set forth in the
Notice of Offer. If the Corporation elects to exercise such option, it must
deliver to the Selling Shareholder a Notice of Exercise within said 10 business
days of the Effective Date.
8.2 If the Corporation elects not to exercise the option to purchase all
of the Stock to be Transferred by the Selling Shareholder, then it shall give
written notice thereof within said 10 business days of the Effective Date to the
other Shareholders, after which the other Shareholders will have an option
ending 45 days following the Effective Date to purchase all or any portion of
the remaining Stock offered for Transfer by the Selling Shareholder on the same
terms and conditions as set forth in the Notice of Offer. If a Shareholder
elects to exercise its option to acquire Stock to be transferred, it must
deliver to the Selling Shareholder a Notice of Exercise within 45 days of the
Effective Date. If more than one Shareholder exercises said option, then each
such Shareholder shall have the right to purchase Stock of the Selling
Shareholder on a pro rata basis based on the current number of shares of Stock
owned by each purchasing Shareholder.
8.3 The Notice of Exercise delivered by the Corporation or any Shareholder
shall specify a closing date not more than 60 days after the Effective Date of
the Notice of Offer. The Selling Shareholder and the Corporation or other
Shareholders, as the case may be, may extend the closing date by mutual written
consent.
8.4 If either the Corporation or any Shareholder elects to exercise its
option to purchase all, but not less than all of the Stock proposed to be
Transferred, then the Selling Shareholder may not Transfer such Stock to any
other party. If the periods during which the Corporation and the other
Shareholders are entitled to exercise their options to purchase such Stock
expire without the exercise of said options with respect to all, but not less
than all of the Stock so offered or the Corporation and the other Shareholders
fail to purchase the Stock offered for Transfer on the closing date or any
extension thereof prescribed in Section 8.3, then the Selling Shareholder shall,
for a period ending 30 days after the termination of the last applicable option
period, be free to Transfer the Stock to the Transferee making the Bona Fide
Offer contained in the Notice of Offer, but only so long as such Transfer is
effected on terms and conditions no less favorable to the Selling Shareholder
than those set forth in the Notice of Offer and no Co-Selling Shareholder has
exercised his/its Co-Sale Right pursuant to Section 11, if applicable. Any
Transferee shall, as a condition to the recognition by the Corporation of such
Transfer, execute an instrument acceptable to the Corporation acknowledging the
terms and restrictions of this Agreement and the Transferee's obligation to be
bound hereby.
8.5 If the Selling Shareholder does not Transfer the Stock within the
period specified in Section 8.4 hereof, then such Stock shall again become
subject to the restrictions of this Agreement.
8.6 Any Stock purchased by the Corporation shall be restored to the status
of authorized but unissued Stock.
8.7 Whenever any Stock is purchased pursuant to the option created under
this Section 8 and the parties agree that the entire purchase price for the
Stock will not be paid at closing, then the purchasing Shareholder(s) may
endorse the certificates for the purchased Stock and deliver the same to the
Selling Shareholder as collateral security for the payment of the unpaid
purchase price, and such Stock may be so held until the entire purchase price
shall have been paid. While such Stock shall be so held as collateral security
and so long as the purchasing Shareholder is not
in default, the purchasing Shareholder shall be entitled to all rights of a
Shareholder, including voting rights and rights to all dividends, with respect
to such Stock.
8.8 The Selling Shareholder will be responsible for the payment of any and
all expenses incurred by the Selling Shareholder in the exercise of the rights
specified in this Section 8 and the sale of his or its Stock.
8.9 Upon the death of a Shareholder who is an individual, upon the
liquidation or other termination of an entity which is a Shareholder, or upon
the filing of any bankruptcy by any Shareholder, then the legal successor in
interest shall choose one of the procedures described below. Legal successor in
interest includes a personal representative for a decedent so long as his or its
actions have the power to bind any beneficiaries; the trustee of a bankruptcy
estate; the successors to a liquidated entity, and like Persons. To the extent
that any of such legal successors lacks the power to bind those parties or
beneficiaries to whom further Transfer of the Stock would be made, then those
parties or beneficiaries shall be required to make the choices herein.
8.9.1 The legal successor may execute this Agreement and consent to
be bound by its terms. Upon such consent and execution, the Stock shall be
promptly transferred to the new Shareholder; or
8.9.2 The legal successor may send a Notice of Offer as if the legal
successor were a Shareholder; provided that the legal successor sending the
Notice of Offer may stipulate that a binding sale will occur even if only part
of the Stock offered for sale is subscribed to by the Corporation or the other
Shareholders.
9 PERMITTED TRANSFERS.
9.1 The following types of Transfers shall constitute a Permitted Transfer
and may be consummated notwithstanding the provisions of Section 8 of this
Agreement:
9.1.1 a Transfer by any Shareholder of all or any portion of his/its
Stock, whether or not for adequate consideration, either by the laws of descent
or distribution or directly to or indirectly in trust for a Family Member of
such Shareholder, or to a corporation or other entity of which such
Shareholder's Family Members beneficially own 100% of the equity interests; and
9.1.2 a Transfer by a Shareholder of all or any portion of his/its
Stock to one or more of its Subsidiaries.
9.1.3 a Transfer to Xxxx X. Xxxxxxxx, Xx. and Xxxxxxx X. Xxxxxxxx.
9.2 A Shareholder making a Permitted Transfer shall notify the Corporation
of (i) the name of the Transferee, (ii) the relationship of the Transferee to
the Shareholder, (iii) the number of shares and class of the Stock transferred
and (iv) the date of the Transfer. The Corporation will be under no obligation
to register such Transfer on its books and records or recognize the Transferee
as the holder of the Stock unless the Transferee executes a counterpart copy of
this
Agreement or other instrument acceptable to the Corporation acknowledging the
terms and restrictions of this Agreement and the Transferee's obligation to be
bound hereby.
9.3 Notwithstanding any other provision of this Agreement, Shareholders
may pledge, hypothecate or otherwise encumber their Stock to, or in favor of,
any national or state bank or other financial institution in order to secure a
loan made by such institution to the Corporation; provided, however, that such
bank or financial institution must agree to become bound by the terms and
conditions of the Agreement upon a foreclosure of the Stock in accordance with
Section 8.9 hereof.
10 PIGGYBACK RIGHTS ON REGISTRATION
10.1 This Agreement shall be executed simultaneously with that certain
Registration Rights Agreement of even date herewith among and between each of
the parties hereto and attached hereto as EXHIBIT 10.
11 CO-SALE AND MUST ALONG RIGHTS
11.1 If one or more Shareholders propose to Transfer shares of Stock
exceeding 33 a% of all shares of the Stock Beneficially Owned by all of the
Shareholders, and neither the Corporation nor the Shareholders have delivered
Notices of Exercise sufficient to acquire all the Stock described in the Notice
of Offer within the time period prescribed in Section 8 with respect to such
proposed Transfer, then each other Shareholder shall have the right (the
"Co-Sale Right") to participate in such sale of Stock on the terms and
conditions specified in the Notice of Offer relating thereto.
11.2 The provisions of this Section 11 shall not apply to any Permitted
Transfer.
11.3 In order to exercise the Co-Sale Right, a Shareholder (a "Co-Selling
Shareholder") must give written notice thereof to the Shareholders who are
proposing to Transfer Stock within 50 days of the Effective Date and deliver to
the Selling Shareholder(s), for Transfer to the prospective purchaser, one or
more certificates, properly endorsed for Transfer, which represent no less than
the number of shares of Stock the Co-Selling Shareholder desires to sell. Upon
receipt of such notice and certificates, the Selling Shareholder(s) shall notify
the proposed purchaser of the Stock of the exercise of such right and ascertain
the total number of shares of Stock such purchaser is willing to acquire from
the Selling Shareholder and Co-Selling Shareholder(s). If the purchaser is
unwilling to purchase all shares of Stock to be sold by the Selling
Shareholder(s) and the Co-Selling Shareholder(s), then each Selling Shareholder
and Co-Selling Shareholder may sell that number of shares of Stock equal to the
product obtained by multiplying (i) the aggregate number of shares of Stock that
the purchaser is willing to purchase by (ii) a fraction the numerator of which
is the number of shares of Stock at the time Beneficially Owned by such Selling
Shareholder or Co-Selling Shareholder and the denominator of which is the total
number of shares of Stock at the time Beneficially Owned by all Selling
Shareholders and Co-Selling Shareholders participating in such sale.
11.4 At the closing for the sale of such shares of Stock, the Selling
Shareholder(s) shall deliver for Transfer to the prospective purchaser in
consummation of the sale pursuant to the terms and conditions specified in the
Notice of Offer, the certificates representing all shares of Stock being sold by
the Co-Selling Shareholders. Within 2 business days of such closing, the Selling
Shareholder(s) shall remit to each Co-Selling Shareholder that portion of the
sale proceeds to which such Co-Selling Shareholder is entitled by reason of its
participation in such sale. The Selling Shareholder(s) shall also arrange for
the delivery to the Co-Selling Shareholder(s) any certificates representing
shares of Stock which were not Transferred by the Co-Selling Shareholder(s) in
connection with such sale. All expenses of any such sale shall be borne
proportionately by the Selling Shareholder(s) and Co-Selling Shareholder(s).
11.5 The exercise or non-exercise of the Co-Sale Right by any Shareholder
shall not adversely affect the right of such Shareholder to exercise Co-Sale
Rights in connection with subsequent Transfers of Stock subject to this Section
11.
11.6 If one or more Shareholders proposes to Transfer shares of Stock
exceeding 66 b% of all shares of the Stock Beneficially Owned by all of the
Shareholders ("Majority Shareholders"), neither the Corporation nor the
Shareholders have delivered a Notice of Exercise within the time prescribed in
Section 8 and the Co-Sale Rights provided in this Section 11 are not fully
exercised by the Corporation or the Shareholders with respect to such proposed
Transfer, then the Majority Shareholders shall have the right (the "Must Along
Rights") to require the other Shareholders to sell the number of shares of Stock
proposed for Transfer in the Bona Fide Offer on a pro rata basis, based upon the
terms and conditions specified in the Notice of Offer relating thereto.
12 PREEMPTIVE RIGHTS:
12.1 The Corporation hereby agrees that each Shareholder shall have a
preemptive right on the terms and conditions set forth below in this Section 12
to purchase a pro rata portion of any New Securities that the Corporation
proposes to issue or sell to any person or entity; provided, however, that such
preemptive rights will not apply to any issuance of New Securities by the
Corporation:
12.1.1 to employees of the Corporation or its Subsidiaries pursuant
to any employee benefit plans established by the Corporation or its
Subsidiaries;
12.1.2 made in connection with the acquisition of the capital stock
or assets of another unrelated corporation or other unrelated entity or the
merger of the Corporation therewith; or
12.1.3 the issuance of New Securities in connection with a Public
Offering.
12.2 If the Corporation proposes to make any sale, assignment or transfer
of any of the New Securities to which the preemptive right described herein
apply, the Corporation shall deliver a Preemption Notice to each of the
Shareholders no less than 30 days prior to such proposed sale, assignment or
transfer which shall include (i) a statement of the Corporation's intention to
sell, assign or transfer the New Securities, (ii) the name and address of the
proposed purchaser(s), assignee(s) or transferee(s), (iii) the nature and
quantity of the New Securities to be
sold, assigned or transferred, (iv) the sale price per share (or equivalent) of
the New Securities and (v) the other terms and conditions of the proposed sale,
assignment or transfer. The Preemption Notice shall constitute an irrevocable
offer on the part of the Corporation to sell to each Shareholder a pro rata
portion of the New Securities on the same per share terms and conditions stated
in the Preemption Notice. A Shareholder's pro rata portion of the New Securities
shall be the percentage determined by dividing (i) the sum of the total shares
of Stock which such Shareholder beneficially owns as of the date of the
Preemption Notice by (ii) the sum of the total shares of Stock outstanding on
the date of the Preemption Notice.
12.3 A Shareholder may elect to accept the offer to purchase New
Securities set forth in a Preemption Notice only by delivery of a Preemption
Acceptance to the Corporation within 30 days after delivery of the Preemption
Notice. If a Shareholder elects to purchase his or its pro rata portion of the
New Securities, the closing of the purchase and sale shall occur no later than
90 days after delivery to the Corporation of the Preemption Acceptance. At the
closing, such Shareholder shall deliver to the Corporation an amount in cash as
payment for its New Securities for delivery by the Corporation of certificates
evidencing such securities.
12.4 If no Shareholder delivers a Preemption Acceptance for any portion of
the shares of the New Securities within 30 days of the Preemption Notice (or if
all Shareholders sooner reject the Company's offer), the Corporation shall be
free for a period of 120 days thereafter to sell, assign or transfer any shares
of the New Securities for which no Preemption Acceptance has been delivered to
any Person or entity on terms and conditions which are no less favorable to the
Corporation as those specified in the Preemption Notice. Any such Person or
entity who purchases, or accepts the assignment or transfer of such shares of
New Securities as provided herein, shall execute a counterpart copy of this
Agreement or other instrument acceptable to the Corporation acknowledging the
terms and conditions of this Agreement and such Person's obligation to be bound
hereby. If the Corporation does not sell, assign or transfer such New Securities
within such 120 day period, then such New Securities shall again become subject
to the provisions of this Section 12.
12.5 The acceptance or failure to accept any Preemption Notice by a
Shareholder shall not affect its preemptive rights under this Section 12 to
acquire his or its pro rata portion of any New Securities that the Corporation
proposes to sell, assign or transfer to any person or entity in the future.
13 MISCELLANEOUS:
13.1 All Shares of the Corporation shall bear the following notation, in
addition to any other required notations, prominently marked on the face of the
certificate:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH STOCK HAS BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT WITH RESPECT THERETO UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT, THE
AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY.
THE STOCK EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO THE TRANSFER
RESTRICTIONS AND VOTING RESTRICTIONS CONTAINED IN A
SHAREHOLDER AGREEMENT BY AND
AMONG THE CORPORATION AND ITS SHAREHOLDERS, AS AMENDED, A COPY OF WHICH IS ON
FILE AT THE OFFICE OF THE COMPANY. TRANSFERS IN VIOLATION OF THE
SHAREHOLDER
AGREEMENT ARE VOID. BY ACCEPTANCE OF THIS CERTIFICATE THE HOLDER HEREOF AGREES
TO BE BOUND BY THE TERMS OF THE
SHAREHOLDER AGREEMENT.
13.2 All notices, requests, demands, or other communications under this
Agreement shall be in writing. Such notices or other communications shall be
sent to each Shareholder at their respective addresses, as set forth on Schedule
A hereto, unless other addresses are subsequently specified in writing. Notice
shall be sufficiently given for all purposes as follows:
13.2.1 When personally delivered to the recipient, notice is effective
on delivery.
13.2.2 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.
13.2.3 When sent via US Electronic Post Courier Service, notice is
effective upon receipt, if delivery is confirmed by US Post CS.
13.2.4 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.
13.2.5 When mailed certified mail, return receipt requested, notice is
effective on receipt, if delivery is confirmed by a return receipt.
13.2.6 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.
13.2.7 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 by any method acceptable hereunder. 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.
13.3 This Agreement shall be governed by and construed in accordance with
the internal substantive laws, and not the choice of law rules, of the State of
Delaware.
13.4 Any judicial proceeding brought with respect to this Agreement must be
brought in a court of competent jurisdiction in the State of Kansas, with venue
agreed to be appropriate in Olathe, Xxxxxxx County, Kansas or Kansas City,
Wyandotte County, Kansas, and, by execution and delivery of this Agreement, each
party (i) accepts, generally and unconditionally, the exclusive jurisdiction of
such courts and any related appellate court, and irrevocably agrees to be bound
by any judgment rendered thereby in connection with this Agreement and (ii)
irrevocably waives any objection it may now or hereafter have as to the venue of
any such suit, action or proceeding brought in such a court or that such court
is an inconvenient forum. THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING TO WHICH THEY ARE BOTH PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT.
13.5 This Agreement may be executed in one or more counterparts, including
execution by facsimile, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
13.6 The section headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
13.7 This Agreement, including the Schedules and Exhibits hereto and the
documents referred to herein, embodies the entire agreement and understanding of
the parties hereto in respect to the subject matter contained herein. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter. There are no representations, promises,
warranties, covenants or undertakings of the parties other than as expressly set
forth herein or therein.
13.8 This Agreement may be amended or modified only by written agreement of
a Requisite Majority of the Shareholders hereto.
13.9 This Agreement and each and every covenant, term and condition herein
is binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns.
13.10 Any failure of any party hereto to comply with any obligation,
covenant, 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 or condition shall not operate
as a waiver of, or estoppel with respect to, any subsequent or other failure to
comply.
13.11 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.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be duly
executed by its execution below, and the Shareholders have caused this Agreement
to be
executed by their respective execution of SCHEDULE A attached hereto, each as of
the date first above written.
Apex Innovations, Inc.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
---------------------------------
Name:
-------------------------------
Title:
------------------------------
SCHEDULE A
APEX INNOVATIONS, INC.
SHAREHOLDER AGREEMENT
Shareholder Number of Shares
----------- ----------------
Xxxxxxx Xxxx Group, Inc. 2,000,000
0000 Xxxxxxx Xxxxxxxxx, Xxxxx 0
Xxxxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Email: Xxxx.Xxxxx@XxxxxxxXxxx.xxx
By: /s/ Xxxxxxx X. Xxxxx Date: 3/29/02
----------------------------- -------------
Xxxxxxx X. Xxxxx
GSIG, LLC 5,294,850
0000 Xxxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Email: xxxxx.xxxxxx@xxxxxxxxxx.xxx
By: /s/ Xxxxx X. Xxxxxx Date: 3/29/02
----------------------------- -------------
Xxxxx X. Xxxxxx
GSWG, LLC 5,000,000
0000 Xxxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Email: xxxxx.xxxxxx@xxxxxxxxxx.xxx
By: /s/ Xxx X. Xxxxxx Date: 3/29/02
----------------------------- -------------
Xxx X. Xxxxxx
Shareholder Number of Shares
----------- ----------------
/s/ Xxxxx X. Xxxxxx Date: 3/29/02 600,000
-------------------------------- -------------
Xxxxx X. Xxxxxx, an individual
0000 Xxxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Email: xxxxx.xxxxxx@xxxxxxxxxx.xxx
/s/ Xxx X. Xxxxxx Date: 3/29/02 600,000
-------------------------------- -------------
Xxx X. Xxxxxx, an individual
0000 Xxxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Email: xxx.xxxxxx@xxxxxxxxxx.xxx
Torotel Inc. 4,000,000
00000 X. 00 Xxxxxxx
Xxxxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Email: x.xxxxxxxx@xxxxxxxxxxx.xxx
By: /s/ Xxxx X. Xxxxxxxx Date: 3/29/02
----------------------------- -------------
Caloyeras 1982 Revocable Trust 1,000,000
0000 Xxxx 000xx Xxxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Email: xxxxxxxxxxx@xxxxxxxxx.xxx
By: /s/ Xxxxx X. Xxxxxxxxx Date: 3/29/02
----------------------------- -------------
Shareholder Number of Shares
----------- ----------------
Caloyeras Family Partnership 3,000,000
0000 Xxxx 000xx Xxxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Email: xxxxxxxxxxx@xxxxxxxxx.xxx
By: /s/ Xxxxx X. Xxxxxxxxx Date: 3/29/02
----------------------------- -------------
/s/ Xxxxx X. Xxxxx Date: 3/29/02 1,000,000
-------------------------------- -------------
Xxxxx X. Xxxxx, an individual
00000 Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
(H) Telephone: (913) 469-080
(O) Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Email: xxxxxxx00@xxxxx.xxx
