AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of June
30, 1998, among The Xxxxx-X'Xxxx Company ("TKOG"), an Ohio corporation and a
party to this Agreement but not a constituent corporation in the Merger (as
hereinafter defined), Xxxxx-X'Xxxx Acquisition Co., Inc. ("BUYER"), an Illinois
corporation all of whose capital stock is owned directly by TKOG, Kizorek, Inc.
(the "COMPANY"), an Illinois corporation, and Xxxxxxx Xxxxxxx ("SELLER"), an
individual residing at 0000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx, 00000 and
the owner of all of the issued and outstanding capital stock of the Company.
WHEREAS, the Boards of Directors of Buyer and the Company, deeming
it advisable and for the respective benefit of Buyer and the Company, and their
shareholders, have approved the merger of Buyer with and into the Company on the
terms and conditions hereinafter set forth, and have approved this Agreement and
authorized the transactions contemplated hereby; and
WHEREAS, Seller, as the sole shareholder of the Company, by his
execution and delivery hereof, has approved this Agreement and the Merger; and
WHEREAS, TKOG, Buyer, the Company and Seller desire to make certain
representations, warranties and agreements in connection with, and establish
various conditions precedent to, the Merger;
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations and warranties herein contained, and subject to the
terms and conditions herein set forth,
AGREEMENT
the parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ARTICLES OF MERGER"--as defined in Section 2.2.
"BUYER"--as defined in the first paragraph of this Agreement.
"CLOSING"--as defined in Section 2.8.
"CLOSING DATE"--as defined in Section 2.8.
"CODE"--the Internal Revenue Code of 1986, as amended, or any successor
law, and the regulations and rules issued thereunder or any successor law.
"COMMISSION"--the United States Securities and Exchange Commission.
"COMPANY"--as defined in the first paragraph of this Agreement.
"COMPANY COMMON STOCK"--the common stock, $1.00 par value per share, of
the Company.
"CONTRACT"--any agreement, contract, obligation, promise or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"DAMAGES"--as defined in Section 11.2.
"DEFERRED COMPENSATION PLAN"--the Company's deferred compensation plan
for certain key senior employees effective as of November 1, 1997.
"DISCLOSURE SCHEDULE"--the disclosure schedule delivered by Seller to
TKOG concurrently with the execution and delivery of this Agreement.
"EFFECTIVE TIME"--as defined in Section 2.2.
"EMPLOYMENT AGREEMENT"--as defined in Section 2.9(a)(i).
"ENCUMBRANCE"--any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income or exercise of any other attribute of ownership.
"EFFECTIVE TIME"--as defined in Section 2.2.
"ENVIRONMENT"--soil, land surface or subsurface strata, surface waters,
groundwaters, drinking water supply, stream sediments, ambient air, plant and
animal life and any other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"--any cost, damage,
expense, liability, obligation or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to: (a) any environmental, health or safety matter or condition
(including on-site or off-site contamination, generation, handling and disposal
of hazardous substances, occupational safety and health and regulation of
chemical and hazardous substances or products); (b) fines, penalties, judgments,
awards,
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settlements, legal or administrative proceedings, damages, losses, litigation,
including civil and criminal claims, demands and response, investigative,
remedial, response or inspection costs and expenses arising under Environmental
Law or Occupational Safety and Health Law; (c) financial responsibility under
Environmental Law or Occupational Safety and Health Law for cleanup costs or
corrective action, including any investigation, cleanup, removal, containment or
other remediation or response actions required by applicable Environmental Law
or Occupational Safety and Health Law and for any natural resource damages; or
(d) any other compliance, corrective, investigative or remedial measures
required under Environmental Law or Occupational Safety and Health Law. The
terms "removal," "remedial" and "response action" include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 ET SEQ., as amended
("CERCLA").
"ENVIRONMENTAL LAW"--any and all federal, state, local, provincial and
foreign civil and criminal laws, statutes, ordinances, orders, codes, rules,
regulations, permits, policies, guidance documents, judgments, decrees or
agreements with any Governmental Authority of or relating to the protection of
health and the environment, worker health and safety and/or governing the
handling, use, generation, treatment, storage, transportation, disposal,
manufacture, distribution, packaging, labeling or release of Hazardous
Materials, including CERCLA; the Resource Conservation and Recovery Act,
42 U.S.C Section 6901 ET SEQ.; the Clean Air Act, 42 U.S.C Section 7401 ET
SEQ.; and the Occupational Safety and Health Act, 29 U.S.C Section 651 ET SEQ.;
and the state analogues thereto and any common law doctrine, including
negligence, nuisance, trespass, personal injury or property damage related or
arising out of the presence, release or exposure to Hazardous Materials.
"ERISA"--the Employee Retirement Income Security Act of 1974, as amended,
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"EXCHANGE ACT"-- the Securities Exchange Act of 1934, as amended, or any
successor law, and the regulations and rules issued pursuant to that Act or any
successor law.
"FACILITIES"--any real property, leaseholds or other interests currently
or formerly owned or operated by the Company and any buildings, plants,
structures or equipment (including motor vehicles) currently or formerly owned
or operated by the Company.
"FINANCIAL STATEMENTS"--as defined in Section 3.4(a).
"GAAP"--generally accepted United States accounting principles, applied
on a consistent basis.
"GOVERNMENTAL AUTHORITY"--any court, tribunal, authority, agency,
commission, bureau, department, official or other instrumentality of the United
States, any foreign country or any domestic, foreign, state, local, county, city
or other political subdivision.
"HAZARDOUS ACTIVITY"--the distribution, generation, handling,
manufacturing,
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processing, production, release, storage, transportation, treatment, disposal or
use of Hazardous Materials in, on, under, about or from the Facilities or any
part thereof into the Environment, and any other act, business or operation that
increases the danger or poses an unreasonable risk of harm to persons or
property on or off the Facilities or that may affect the value of the Facilities
or the Company.
"HAZARDOUS MATERIALS"--any waste or other substance that is listed,
defined, designated or classified as, or otherwise determined to be, hazardous,
radioactive or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law.
"IBCA"--as defined in Section 2.1.
"INTELLECTUAL PROPERTY ASSETS"--as defined in Section 3.21.
"INTERIM FINANCIAL STATEMENTS"--as defined in Section 3.4(a).
"IRS"--the United States Internal Revenue Service, or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"MARKET VALUE"--the average closing price of the TKOG Common Stock on the
NASDAQ National Market as listed in The Wall Street Journal during the five (5)
business days ending on the business day which is four (4) business days prior
to, but not including, the relevant date, as set forth herein.
"MATERIAL ADVERSE EFFECT"--means, with respect to any Person, any adverse
change, circumstance or effect that, individually or in the aggregate with all
other adverse changes, circumstances and effects, is or is reasonably likely to
be materially adverse to the business, operations, properties, prospects,
liabilities, results of operations, assets or condition (financial or otherwise)
of such Person and its Subsidiaries, if any, taken as a whole.
"MERGER"--as defined in Section 2.1.
"MERGER CONSIDERATION"--as defined in Section 2.7.
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any legal or governmental
requirement or obligation relating to safe and healthful working conditions and
to reduce occupational safety and health hazards, and any program, whether
governmental or private (including those promulgated or sponsored by industry
associations and insurance companies), designed to provide safe and healthful
working conditions.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or certificate of
incorporation and the bylaws or code of regulations of a corporation; (b) the
partnership agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited partnership
of a limited partnership; (d) the certificate of formation and operating
agreement of a limited liability company; (e) any charter or similar document
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adopted or filed in connection with the creation, formation or organization of a
Person; and (f) any amendment to any of the foregoing.
"PERSON"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union or other entity
or governmental body.
"PRE-CLOSING PERIOD"--all taxable periods ending on or before July 31,
1998 and the portion ending on or before July 31, 1998 of any taxable period
that includes (but does not end on) July 31, 1998.
"SECURITIES ACT"--the Securities Act of 1933, as amended, or any
successor law, and the regulations and rules issued pursuant to that Act or any
successor law.
"SELLER"--as defined in the first paragraph of this Agreement.
"SELLER'S KNOWLEDGE"--the actual knowledge of Seller after reasonable and
appropriate consultation with Senior Management of the Company.
"SENIOR MANAGEMENT"--means the Field Operations Manager, the Director of
Licensing, the Controller, each Vice President and each executive officer (other
than Seller) of the Company.
"SHARES"--as defined in Section 3.3.
"SURVIVING CORPORATION"--as defined in Section 2.1.
"TAXES"--all federal, local, foreign and other taxes, assessments or
other governmental charges, including income, estimated income, gross receipts,
business, capital, occupation, franchise, property, value added, goods and
services, sales, use, transfer, excise, employment, payroll and withholding
taxes, including interest, penalties and additions in connection therewith.
"TKOG"--as defined in the first paragraph of this Agreement.
"TKOG COMMON STOCK"--the common stock, $0.01 par value per share, of
TKOG.
"TKOG SHARES"--as defined in Section 2.7(a).
2. THE MERGER; CLOSING
2.1 THE MERGER
Upon the terms and subject to the conditions set forth in this Agreement,
and in accordance with the Illinois Business Corporation Act of 1983 (the
"IBCA"), Buyer shall be
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merged with and into the Company at the Effective Time (the "MERGER").
Following the Merger, the separate corporate existence of Buyer shall cease and
the Company shall continue as the surviving corporation (the "SURVIVING
CORPORATION") under the name "InPhoto Surveillance, Inc." The parties intend
that the Merger qualify as a tax-free reorganization pursuant to Section 368 of
the Code.
2.2 EFFECTIVE TIME
As soon as practicable following the Closing, the parties shall (i) file
articles of merger (the "ARTICLES OF MERGER") in such form as is required by and
executed in accordance with the relevant provisions of the IBCA, and (ii) make
all other filings or recordings required under the IBCA. The Merger shall
become effective at such time as the Articles of Merger are duly filed with the
Secretary of State of the State of Illinois or at such subsequent time as the
Company and TKOG shall agree and be specified in the Articles of Merger (the
date and time the Merger becomes effective being the "EFFECTIVE TIME").
2.3 EFFECTS OF THE MERGER
At and after the Effective Time, the Merger will have the effects set
forth in the IBCA. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time the Surviving Corporation shall thereupon
and thereafter possess all the rights, privileges, immunities, and franchises,
as of a public or a private nature, of each of Buyer and the Company; and all
property, real, personal, and mixed, and all debts due on whatever account,
including subscriptions to shares, and all other choses in action, and all and
every other interest, of or belonging to or due to each of Buyer and the
Company, shall be taken and deemed to be transferred to and vested in the
Surviving Corporation without further act or deed; and the title to any real
estate, or any interest therein, vested in Buyer and the Company shall not
revert or be in any way impaired by reason of the Merger.
2.4 ARTICLES OF INCORPORATION
At the Effective Time, the articles of incorporation of the Surviving
Corporation shall be amended in accordance with the IBCA such that the articles
of incorporation of the Surviving Corporation shall consist of the provisions of
the articles of incorporation of Buyer, until thereafter changed or amended as
provided therein or by applicable law, except that Article I of the Articles of
Incorporation of the Surviving Corporation shall be amended to read in its
entirety as follows: "The name of this Corporation is `InPhoto Surveillance,
Inc.'"
2.5 BY-LAWS
The by-laws of Buyer as in effect at the Effective Time shall be the
by-laws of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
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2.6 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION
The officers of the Company as of the Effective Time shall be the
officers of the Surviving Corporation, until the earlier of their resignation or
removal or otherwise ceasing to be an officer or until their respective
successors are duly elected and qualified. The directors of Buyer as of the
Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or otherwise ceasing to be a director or
until their respective successors are duly elected and qualified.
2.7 EFFECT ON CAPITAL STOCK.
(a) At the Effective Time by virtue of the Merger and without any action
on the part of Seller or the Company, each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time shall be converted into
(i) a number of shares of TKOG Common Stock equal to the result obtained by
dividing 352,381 by the number of shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time, and (ii) an amount in cash
equal to the result obtained by dividing $800,000 by the number of shares of
Company Common Stock issued and outstanding immediately prior to the Effective
Time (collectively, the "MERGER CONSIDERATION"). In no event shall any
fractional shares of TKOG Common Stock be issuable as a result of the
application of this Section 2.7(a). The Merger Consideration shall be paid,
without interest, to the holders of certificates of Company Common Stock upon
the surrender of such certificates to TKOG. The shares of the TKOG Common Stock
into which the shares of Company Common Stock are converted pursuant to this
Section 2.7(a) are referred to as the "TKOG Shares."
(b) As a result of the Merger and without any action on the part of
Seller, at the Effective Time, all shares of Company Common Stock shall cease to
be outstanding and shall be canceled and retired and shall cease to exist, and
the holder of certificates which immediately prior to the Effective Time
represented such shares shall thereafter cease to have any rights with respect
to such shares, except the right to receive the Merger Consideration upon the
surrender of such certificates.
(c) As a result of the Merger and without any action on the part of
Seller, Buyer or TKOG, at the Effective Time, each share of common stock, par
value $1.00 per share, of Buyer issued and outstanding immediately prior to the
Effective Time shall be converted into one validly issued, fully paid and
nonassessable share of common stock, par value $1.00 per share, of the Surviving
Corporation.
(d) Seller hereby approves the Merger and this Agreement and votes the
Shares in favor thereof, hereby and thereby waiving any right to dissent
pursuant to the IBCA.
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2.8 CLOSING
Subject to the fulfillment or waiver of the conditions set forth in
Sections 7 and 8, the closing of the transactions contemplated hereby (the
"CLOSING") will take place simultaneously with the execution and delivery of
this Agreement at the offices of Kramer, Levin, Naftalis & Xxxxxxx, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. The parties agree that such closing shall be
effective for financial reporting and accounting purposes as of the close of
business on June 30, 1998. The date on which the Closing occurs is herein
referred to as the "Closing Date."
2.9 CERTAIN ACTIONS AT CLOSING; ISSUANCE OF TKOG SHARES
At the Closing:
(a) Seller will deliver to TKOG:
(i) the employment agreement in the form of Exhibit 2.9(a)(i),
duly executed by Seller ("EMPLOYMENT AGREEMENT");
(ii) the opinion of Wildman, Harrold, Xxxxx & Xxxxx, counsel to
Seller and the Company, substantially in the form of Exhibit 2.9(a)(ii);
(iii) all consents required by any Contract;
(iv) the minute books, stock register, stock transfer records and
all other corporate records of the Company;
(v) such certificates of Seller, the Company and the officers of
the Company as TKOG or its counsel may reasonably request; and
(vi) the Articles or Merger duly executed by the Company.
(b) Buyer will deliver, or cause to be delivered, to Seller:
(i) the Employment Agreement, duly executed by TKOG;
(ii) such certificates of TKOG and Buyer and their respective
officers as Seller or his counsel may reasonably request;
(iii) the opinion of Kramer, Levin, Naftalis & Xxxxxxx, counsel to
TKOG and Buyer, substantially in the form of Exhibit 2.9(b)(iii); and
(iv) the Articles of Merger duly executed by Buyer.
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3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to TKOG as follows, except as set forth in
the Disclosure Schedule, which will be arranged in paragraphs corresponding to
the lettered and numbered paragraphs contained in this Section 3.
3.1 ORGANIZATION AND GOOD STANDING
(a) Section 3.1 of the Disclosure Schedule contains a complete and
accurate list for the Company of its name, its jurisdiction of incorporation,
other jurisdictions in which it is authorized to do business, and its
capitalization (including the identity of each shareholder and the number of
shares held by each). The Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its business
as it is now being conducted and to own or use the properties and assets that it
purports to own or use. The Company is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each state or
other jurisdiction in which either the ownership or use of the properties owned
or used by it, or the nature of the activities conducted by it, requires such
qualification, except where the failure to be so qualified could not reasonably
be expected to have a Material Adverse Effect on the Company.
(b) Seller has delivered to TKOG correct and complete copies of the
Organizational Documents of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) Seller and the Company each has the right, power, authority and
capacity to execute and deliver this Agreement and the Employment Agreement, to
consummate the Merger and to perform their respective obligations under this
Agreement and the Employment Agreement. This Agreement has been duly executed
and delivered by Seller and the Company and constitutes the legal, valid and
binding obligation of Seller and the Company, enforceable against each of them
in accordance with its terms. Upon the execution and delivery by Seller of the
Employment Agreement, the Employment Agreement will constitute the legal, valid
and binding obligation of Seller, enforceable against Seller in accordance with
its terms.
(b) Except as set forth in Section 3.2 of the Disclosure Schedule,
neither the execution and delivery of this Agreement or the Employment Agreement
nor the consummation or performance by Seller or the Company of the Merger or of
any of the other transactions contemplated hereby or thereby will, directly or
indirectly (with or without notice or lapse of time or both):
(i) contravene, conflict with, or result in a violation or
breach of (A) any provision of the Organizational Documents of the Company,
(B) any resolution adopted by the board of directors or the shareholders of the
Company, (C) any legal requirement or any order to which the Company, Seller or
any of the assets owned or used by the Company may be
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subject, or (D) any governmental authorization, including any private
investigatory license or other similar license, which is held by the Company or
that otherwise relates to the business of, or any of the assets owned or used
by, the Company;
(ii) result in a breach of or constitute a default, give rise to
a right of termination, cancellation or acceleration, result in the creation or
imposition of any Encumbrance upon any property or assets of Seller or the
Company, create any entitlement to any payment or benefit, or require the
consent or approval of or any notice to or filing with any third party or
governmental authority, under any Contract to which Seller or the Company is a
party or to which their respective assets are bound or to which either Seller or
the Company or their respective assets are subject; or
(iii) result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by the Company,
except, with respect to clauses (i)(C) or (D), (ii) or (iii) of this Section
3.2, where any such contravention, conflict, violation, breach, default,
termination right, cancellation or acceleration right or Encumbrance would not
have a Material Adverse Effect on Seller or the Company or on the ability of
Seller or the Company to consummate the Merger or the other transactions
contemplated by this Agreement.
No representation is made with respect to any effect of this Agreement on
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, the
Securities Act, the Exchange Act, the Trust Indenture Act of 1939, as amended,
or any state securities laws.
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3.3 CAPITALIZATION
The authorized capital stock of the Company consists of one hundred (100)
shares of common stock, no par value per share, of which ten (10) shares (the
"SHARES") have been duly authorized and are validly issued and outstanding,
fully paid and nonassessable. Seller is the record and beneficial owner and
holder of, and has good, valid and marketable title to all of the Shares, free
and clear of all Encumbrances. Except for the Shares, there are no outstanding
shares of capital stock of the Company and there are no outstanding or
authorized options, warrants, calls, rights, commitments, conversion rights or
agreements of any character to which the Company or Seller is a party or by
which either the Company or Seller is bound which could require the Company to
issue, deliver, sell or otherwise transfer or cause to be issued, delivered,
sold, transferred or offered for sale or transfer, any shares of capital stock
of the Company or securities convertible into or exchangeable for shares of
capital stock of the Company or that could require either the Company or Seller
to grant, extend or enter into any such option, warrant, call, right,
commitment, conversion right or agreement. There are no voting trusts or other
agreements or understandings to which either the Company or Seller is a party
with respect to the transfer, voting or registration of the capital stock of the
Company. There are no Contracts relating to the issuance, sale or transfer of
any equity securities or other securities of the Company. None of the
outstanding capital stock or other securities of the Company was issued in
violation of the Securities Act or any state securities laws. The Company does
not own or have any Contract to acquire any equity securities or other
securities of any Person or any, direct or indirect, equity or ownership
interest in any other business. No Person has any preemptive rights with
respect to any security of the Company.
3.4 FINANCIAL STATEMENTS
(a) For purposes of this Agreement: "FINANCIAL STATEMENTS" shall mean
the balance sheet of the Company audited by Xxxxx, Xxxxxx and Company LLP, dated
as of October 31, 1997, and the related statements of income, stockholder's
equity and cash flows for the year then ended (the "OCTOBER 1997 FINANCIAL
STATEMENTS"), and the unaudited balance sheet of the Company dated as of June
30, 1998 and the related income statement for the eight months ended on such
date (the "INTERIM FINANCIAL STATEMENTS"). The Company has delivered to TKOG
true and complete copies of the Financial Statements.
(b) Except as disclosed in Section 3.4 of the Disclosure Schedule, the
October 1997 Financial Statements, which are incorporated herein by reference,
(i) have been prepared from the books and records of the Company in accordance
with GAAP, (ii) fully reflect all liabilities and contingent liabilities of the
Company required to be reflected therein on such basis as, at and for the date
thereof, and (iii) fairly present in all material respects the financial
position of the Company as, at and for the date thereof and the results of its
operations for the period indicated. Except as disclosed in Section 3.4 of the
Disclosure Schedule, the Interim Financial Statements, which are incorporated
herein by reference, (i) have been prepared from the books and records of the
Company in accordance with GAAP on a basis consistent with the October 1997
Financial Statements, and (ii) fairly present in all material respects the
financial position
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of the Company as, at and for the date of the balance sheet included therein and
the results of its operations for the period indicated; provided, however, the
Interim Financial Statements (v) are subject to normal year-end adjustments, (w)
do not include footnotes, (x) do not include a statement of cash flows, (y) do
not reflect any deferred income tax obligation and (z) do not consolidate the
Company's South African operations, which have no material assets, liabilities
or obligations (whether absolute, accrued or contingent).
3.5 BOOKS AND RECORDS
Except as disclosed in Section 3.5 of the Disclosure Schedule, the books
of account and other records of the Company, all of which have been made
available to TKOG, are true, complete and correct in all material respects.
Except as disclosed in Section 3.5 of the Disclosure Schedule, the minute books
of the Company contain true, accurate and complete records in all material
respects of all meetings held of, and corporate action taken by, the
shareholders, the Board of Directors and committees of the Board of Directors of
the Company. The stock books of the Company are true, accurate and complete.
At the Closing, all of those books and records will be in the possession of the
Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Section 3.6 of the Disclosure Schedule contains a complete and accurate
list of all real property, leaseholds, or other interests therein owned, leased
or used by the Company. The Company does not own, and has not owned, any real
property. Seller has delivered or made available to TKOG copies of the real
property leases to which the Company is a party or pursuant to which it uses or
occupies any real property. Section 3.6 of the Disclosure Schedule also
contains a complete and accurate list of all licensed vehicles owned or leased
by the Company and the fixed assets used in the business of the Company and
carried on its books for tax purposes. Except as set forth in Section 3.6 of
the Disclosure Schedule, the Company has good title to all of the properties and
assets, real and personal, tangible and intangible, it owns or purports to own,
or uses in its business, including those reflected on its books and records and
in the Financial Statements (except for accounts receivable collected and
materials and supplies disposed of after the date of the most recent Financial
Statements). The Company has a valid leasehold, license or other interest in
all of the other assets, real or personal, tangible or intangible, which are
used in the operation of its business. Except as set forth in Section 3.6 of
the Disclosure Schedule, all material properties and assets owned or leased by
the Company are free and clear of all Encumbrances.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The leased real property, vehicles and equipment of the Company are
structurally sound, are in good operating condition and repair, and are adequate
for the uses to which they are being put. Seller has caused such vehicles and
equipment to be maintained and repaired in the ordinary course of business,
consistent with past practice, in accordance with industry standards such that,
to Seller's Knowledge, without investigation of each vehicle, none of such
vehicles or equipment requires maintenance or repairs other than ordinary,
routine
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maintenance and repairs. To Seller's Knowledge, the leased real property,
vehicles and equipment of the Company are sufficient for the continued conduct
of the Company's business after the Closing in substantially the same manner as
conducted prior to the Closing.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that are reflected on the
Financial Statements or on the accounts receivable ledger of the Company as of
the Closing Date (collectively, the "ACCOUNTS RECEIVABLE") represent valid
obligations arising from sales actually made or services actually performed in
the ordinary course of business. Except as set forth in Section 3.8 of the
Disclosure Schedule, other than those Accounts Receivables which are older than
sixty (60) days as of the Closing Date, all Accounts Receivable are, to Seller's
Knowledge, current and collectible at the full recorded amount thereof, less any
applicable reserves established in accordance with GAAP, in the ordinary course
of business without resort to litigation. As of the date this Agreement is
executed, there has been no contest or claim, nor is there any right of set-off
under any Contract with any obligor of an Accounts Receivable relating to the
amount or validity of such Accounts Receivable. Section 3.8 of the Disclosure
Schedule contains a complete and accurate list of all Accounts Receivable of the
Company as of the date set forth therein, which list sets forth the aging of
such Accounts Receivable.
3.9 NO UNDISCLOSED LIABILITIES
Except as set forth in Section 3.9 of the Disclosure Schedule, the
Company has no liabilities or obligations of any nature (whether absolute,
accrued or contingent) except for liabilities or obligations reflected in the
footnotes to the Financial Statements or reserved against in the Financial
Statements and current liabilities incurred in the ordinary course of business
since the date of the Financial Statements consistent with the representations
and warranties contained in this Agreement, which liabilities will not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
3.10 TAXES
(a) All federal, state, local and other tax returns with respect to the
Company required to be filed on or before the Closing Date will have been duly
and timely filed or the time for filing such return shall have been validly
extended to a date after the Closing Date as set forth in Section 3.10(a) of the
Disclosure Schedule. In the event any federal, state or local tax return has
not been duly and timely filed, or in the event the amount of Taxes paid is
ultimately determined to be insufficient, then the combined effect of such
events would not have a Material Adverse Effect on the Company. Except for
Taxes reserved for in the Financial Statements, all Taxes due and payable, or
required to be collected and withheld, by the Company on or before the Closing
Date will by the Closing Date have been duly and timely paid. All such tax
returns were correct in all material respects as filed. No claims have been
assessed with respect to any alleged deficiency of any Tax and the Company (and
Seller) has not been notified of any proposed claim or assessment with respect
to any Tax. The provisions made for Taxes on the balance sheets of the Company
included in the Financial Statements are sufficient in all material respects for
the payment of all Taxes whether disputed
- 13 -
or not that are due or are hereafter found to have been due with respect to the
conduct of the business of the Company up to and through the date of such
Financial Statements. Except as otherwise set forth in Schedule 3.10(a) of the
Disclosure Schedule, there are no present disputes as to Taxes of any nature
payable by the Company, nor any Tax liens whether existing or inchoate on any of
the assets of the Company, except for current year Taxes not presently due and
payable. Except as set forth on Schedule 3.10(a) of the Disclosure Schedule,
the federal income tax returns of the Company have never been audited and no IRS
or foreign, state, county or local tax audit is currently in progress. The
Company has not waived the expiration of the statute of limitations with respect
to any Taxes. The Company has been a Subchapter S Corporation (as defined in
Section 1361(a)(1) of the Code) since May 1, 1993.
(b) The Company has made or will make provision for all Taxes payable by
it with respect to any Pre-Closing Period which are not payable prior to the
Closing Date and for which the failure to do so would have a Material Adverse
Effect on the Company. The provisions for Taxes with respect to the Company for
any Pre-Closing Period (excluding any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) are adequate to cover
all Taxes with respect to such period. The deferred taxes at October 31, 1997
attributable to the Company's use of the cash basis of accounting for income tax
purposes do not exceed $800,000. The amount of deferred tax as of July 31, 1998
may be higher or lower, depending on the actual operations of the Company during
the period beginning November 1, 1997 through July 31, 1998.
3.11 NO MATERIAL ADVERSE CHANGE
Since June 30, 1998 there has not been any material adverse change in the
business, operations, properties, prospects, liabilities, results of operations,
assets or condition (financial or otherwise) of the Company and no event has
occurred or, to Seller's Knowledge, circumstance exists that may result in a
Material Adverse Effect.
3.12 EMPLOYEE BENEFITS
(a) Except as listed on Section 3.12 of the Disclosure Schedule,
neither the Company nor any ERISA Affiliate maintains any Employee Benefit
Plans. "EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined in
Section 3(3) of ERISA and any other plan, policy, program, practice, agreement,
understanding or arrangement (whether written or oral) providing compensation or
other benefits to any current or former director, officer, employee or
consultant (or to any dependent or beneficiary thereof), of the Company or any
ERISA Affiliate, which are now, or were within the past six years, maintained by
the Company or any ERISA Affiliate, or under which the Company or any ERISA
Affiliate has any obligation or liability, whether actual or contingent,
including, without limitation, all incentive, bonus, deferred compensation,
vacation, holiday, cafeteria, medical, disability, stock purchase, stock option,
stock appreciation, phantom stock, restricted stock or other stock-based
compensation plans, policies, programs, practices or arrangements. "ERISA
AFFILIATE" means any entity (whether or not incorporated) other than the Company
that, together with the Company, is or was a member of (i) a controlled group of
corporations
- 14 -
within the meaning of Section 414(b) of the Code; (ii) a group of trades or
businesses under common control within the meaning of Section 414(c) of the
Code; or (iii) an affiliated service group within the meaning of Section 414(m)
of the Code.
The Company has delivered to TKOG or its counsel true and complete
copies of (i) any employment agreements and any procedures and policies relating
to the employment of employees of the Company and the use of temporary employees
and independent contractors by the Company (including summaries of any
procedures and policies that are unwritten), (ii) plan instruments and
amendments thereto for all Employee Benefit Plans and related trust agreements,
insurance and other contracts, summary plan descriptions, and summaries of
material modifications, and material communications distributed to the
participants of each Plan, (iii) to the extent annual reports on Form 5500 are
required with respect to any Employee Benefit Plan, the three most recent annual
reports and attached schedules for each Employee Benefit Plan as to which such
report is required to be filed and (iv) where applicable, the most recent (A)
opinion, notification and determination letters, (B) audited financial
statements, (C) actuarial valuation reports and (D) nondiscrimination tests
performed under the Code (including 401(k) and 401(m) tests) for each Employee
Benefit Plan.
(b) Neither the Company nor any ERISA Affiliate maintains or has
ever maintained an Employee Benefit Plan subject to Title IV of ERISA.
(c) To Seller's Knowledge, with respect to each Employee Benefit
Plan, (i) no party in interest or disqualified person (as defined in Section
3(14) of ERISA and Section 4975 of the Code, respectively) has at any time
engaged in a transaction which could subject TKOG, Buyer or the Company,
directly or indirectly, to a tax, penalty or liability for prohibited
transactions imposed by ERISA or the Code, other than those prohibited
transactions which have been adequately corrected and for which appropriate
excise taxes, penalties or liabilities have been paid, and (ii) no fiduciary (as
defined in Section 3(21) of ERISA) with respect to any Employee Benefit Plan, or
for whose conduct the Company could have any liability (by reason of indemnities
or otherwise), has breached any of the responsibilities or obligations imposed
upon the fiduciary under Title I of ERISA.
(d) Each Employee Benefit Plan which is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA (a "PENSION PLAN") and
which is subject to Sections 201, 301 or 401 of ERISA has received a favorable
determination letter from the Internal Revenue Service covering all amendments
required by the Tax Reform Act of 1986 and prior legislation and, to Seller's
Knowledge, there are no circumstances that are reasonably likely to result in
revocation of any such favorable determination letter. To Seller's Knowledge,
each Employee Benefit Plan is and has been operated in all material respects in
compliance with its terms and all applicable laws, and by its terms can be
amended and/or terminated at any time. As of and including the Closing Date,
Company shall have made all contributions required to be made by it up to and
including the Closing Date with respect to each Employee Benefit Plan, or
adequate accruals therefor will have been provided for and will be reflected on
the Financial Statements provided to TKOG by the Company. All notices, filings
and disclosures required by ERISA or the Code (including notices under Section
4980B
- 15 -
of the Code) have been timely made.
(e) Neither the Company nor Seller has received or is aware of
any actions, claims (other than routine claims for benefits), lawsuits or
arbitrations pending or, to Seller's Knowledge, threatened with respect to any
Employee Benefit Plan or against any fiduciary of any Employee Benefit Plan, and
neither Seller nor the Company has knowledge of any facts that could give rise
to any such actions, claims, lawsuits or arbitrations. To Seller's Knowledge,
there has not occurred any circumstances by reason of which the Company may be
liable for an act, or a failure to act, by a fiduciary with respect to any
Employee Benefit Plan.
(f) No Employee Benefit Plan provides for medical or health
benefits (through insurance or otherwise) or provided for the continuation of
such benefits or coverage for any participant or any dependent or beneficiary of
any participant after such participant's retirement or other termination of
employment except as may be required by Part 6 of Subtitle B of Title I of ERISA
and Section 4980B of the Code ("COBRA").
(g) Neither the Company nor any ERISA Affiliate has ever
contributed to, or withdrawn in a partial or complete withdrawal from, any
"multiemployer plan" (as defined in Section 3(37) of ERISA) or has any fixed or
contingent liability under Section 4204 of ERISA.
(h) No Employee Benefit Plan is a "multiple employer plan" as
described in Section 3(40) of ERISA or Section 413(c) of the Code.
(i) No Employee Benefit Plan, other than a "pension plan" within
the meaning of Section 3(2) of ERISA ("Pension Plan"), is funded through a trust
intended to be exempt from tax pursuant to Section 501 of the Code.
(j) Except as required by law, neither the Company nor the
Seller has proposed or has agreed to any changes to any Employee Benefit Plan
that would cause an increase in benefits under any such Employee Benefit Plan
(or the creation of new benefits or plans) or to change any employee coverage
which would cause an increase in the expense of maintaining any such plan.
(k) Except as provided in Section 3.12 of the Disclosure
Schedule, no person or entity has an employment, severance, consulting or
independent contractor agreement with the Company. No "leased employee" (within
the meaning of Section 414(n) or (o) of the Code) performs any material services
for the Company.
(l) The Company has no material obligation or liability, whether
absolute, accrued or contingent, including any obligation or liability under the
Employee Benefit Plans, with respect to any misclassification of a person
performing services for the Company as an independent contractor rather than as
an employee.
Except as set forth in Section 3.12 of the Disclosure Schedule, the
- 16 -
consummation of the transactions contemplated by this Agreement will not result
in (i) any payment (including, without limitation, severance, unemployment
compensation, golden parachute or bonus payments or otherwise) becoming due to
any director, officer, employee or consultant of the Company, (ii) any increase
in the amount of compensation or benefits payable in respect of any director,
officer, employee or consultant of the Company, or (iii) accelerate the vesting
or timing of payment of any benefits or compensation payable in respect of any
director, officer, employee or consultant of the Company. No Employee Benefit
Plan provides benefits or payments contingent upon, triggered by, or increased
as a result of a change in the ownership or effective control of the Company.
3.13 COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Section 3.13 of the Disclosure Schedule, the
Company is in compliance in all material respects with all laws, regulations,
licenses, orders, ordinances, judgments and decrees affecting the assets owned
or used by the Company, the business or operations of the Company, including,
without limitation, federal, state and local: (i) Occupational Safety and
Health Laws; (ii) private investigatory and other similar laws; (iii) securities
laws, rules and regulations; and (iv) any federal, state or local law regarding
or relating to trespass or privacy rights. The Company has not been charged
with violating, nor to Seller's Knowledge, threatened with a charge of
violating, nor, to Seller's Knowledge, is the Company under investigation with
respect to a possible violation of, any provision of any federal, state or local
law, order or administrative ruling, license or regulation relating to any of
their assets or properties (used or owned by the Company) or any aspect of its
business.
(b) Section 3.13 of the Disclosure Schedule contains a complete and
accurate list of each governmental authorization, license or permit that is held
by the Company or that otherwise relates to the business of, or to any of the
assets owned or used by, the Company. Each governmental authorization listed or
required to be listed in Section 3.13 of the Disclosure Schedule is valid and in
full force and effect in all material respects.
3.14 LEGAL PROCEEDINGS
(a) Except as set forth in Section 3.14 of the Disclosure Schedule,
there is no pending and served, or to Seller's Knowledge pending but not served,
claim, action, investigation, arbitration, litigation or other proceeding
("PROCEEDING"):
(i) that has been commenced by or against the Company or that
otherwise relates to or may affect the business of, or any of the assets owned
or used by, the Company; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the transactions
contemplated hereby.
To Seller's Knowledge (A) no such Proceeding has been threatened, and (B)
no event has occurred or circumstance exists that may give rise to or serve as a
basis for the
- 17 -
commencement of any such Proceeding. Seller has made available to TKOG copies
of all pleadings, correspondence and other documents relating to each Proceeding
listed in Section 3.14 of the Disclosure Schedule. Except as set forth in
Section 3.14 of the Disclosure Schedule, the Company has insurance coverage for
all Proceedings listed therein and no plaintiff has made demands or claims that
exceed the Company's insurance coverage.
3.15 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in the Interim Financial Statements or in Section
3.15 of the Disclosure Schedule, since October 31, 1997, the Company has
conducted its businesses only in the ordinary course of business and there has
not been any:
(a) declaration or payment of any dividend or other distribution or
repurchase or payment in respect of shares of capital stock (other than as
expressly permitted by Section 5.9 hereof);
(b) issuance or sale or authorization for issuance or sale, or grant of
any options with respect to, any shares of its capital stock or any other type
of its securities, or any change in its outstanding shares of capital stock or
other ownership interests or its capitalization, whether by reason of a
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, stock dividends or otherwise;
(c) payment or increase by the Company of any bonus, salary or other
compensation to any stockholder, director, officer, consultant or (except in the
ordinary course of business consistent with past practice) employee or entry
into any employment, severance or similar Contract with any director, officer or
employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement or other employee benefit plan for or with any employees of the
Company;
(e) damage to or destruction or loss of any customer, asset or property
of the Company, whether or not covered by insurance, which could reasonably be
expected to have a Material Adverse Effect on the Company;
(f) termination or modification of, or receipt of notice of termination
of any Contract or transaction involving a total remaining commitment by or to
the Company of at least $50,000, except for terminations of Contracts upon their
expiration during such period in accordance with their terms;
(g) incurrence or assumption of any indebtedness for borrowed money or
guarantee of any obligation of the net worth of any Person, except for
endorsements of negotiable instruments for collection in the ordinary course of
business and except pursuant to existing lines of credit with third party
lenders as set forth in Section 3.15 of the Disclosure Schedule;
- 18 -
(h) sale, lease, or other disposition (other than in the ordinary course
of business) of any asset or property of the Company or mortgage, pledge or
imposition of any Encumbrance on any asset or property of the Company with a
fair market value in excess of $50,000;
(i) cancellation or waiver of any claims or rights with a value to the
Company in excess of $50,000;
(j) material change in the accounting methods used by the Company; or
(k) agreement, whether oral or written, by the Company to do any of the
foregoing.
3.16 CONTRACTS; NO DEFAULTS
(a) Section 3.16(a) of the Disclosure Schedule contains a complete and
accurate list, and Seller has delivered to TKOG true and complete copies, of:
(i) each Contract that involves performance of services or
delivery of goods or materials by the Company of an amount or value in excess of
$50,000 or that is a master agreement for the performance of services or
delivery of goods or materials by the Company from time to time over an
indefinite period of time;
(ii) each Contract that involves performance of services or
delivery of goods or materials to the Company of an amount or value in excess of
$50,000;
(iii) each lease, license, and other Contract affecting any
leasehold or other interest in, any real or personal property with unfulfilled
obligations in excess of $50,000;
(iv) each lease agreement with respect to the vehicles used by
the Company in the conduct of its business;
(v) each licensing agreement or other Contract with respect
to patents, trademarks, copyrights, trade secrets or other intellectual
property, including agreements with current or former employees, consultants
or contractors regarding the appropriation or the non-disclosure of any
intellectual property;
(vi) each collective bargaining agreement and other Contract to
or with any labor union or other employee representative of a group of
employees;
(vii) each joint venture, partnership and other Contract involving
a sharing of profits, losses, costs, or liabilities by the Company with any
other Person or requiring the Company to make any capital contribution;
(viii) each Contract containing a covenant that in any way purports
to restrict the business activity of the Company or Seller or limits the freedom
of the Company or Seller to engage in any line of business or to compete with
any Person or hire any Person or
- 19 -
containing any change of control provision;
(ix) each employment agreement;
(x) each power of attorney that is currently effective and
outstanding; and
(xi) each Contract for capital expenditures in excess of $25,000.
(b) Except as set forth in Section 3.16(b) of the Disclosure Schedule,
Seller has not or may not acquire any rights under, and Seller has not or may
not become subject to any obligation or liability under, any Contract that
relates to the business of, or any of the assets owned or used by, the Company.
(c) Except as set forth in Section 3.16(c) of the Disclosure Schedule,
each Contract identified or required to be identified in Section 3.16(a) of the
Disclosure Schedule is in full force and effect and is valid and enforceable
against the Company and, to Seller's Knowledge, against the other parties
thereto, in accordance with its terms, subject to limitations imposed by
bankruptcy, insolvency, reorganization or other laws affecting the rights of
creditors generally and subject to general equity principles and to limitations
on availability of equitable relief, including specific performance. The
Company is not aware, and has not been informed, of any bankruptcy proceedings
pending which would affect the enforceability of the Contracts.
(d) Except for the limitations set forth in Section 3.16(c) above and
except as set forth in Section 3.16(d) of the Disclosure Schedule:
(i) the Company is in full compliance with all applicable terms
and requirements of each Contract under which the Company has or had any
obligation or liability or by which the Company or any of the assets owned or
used by the Company is or was bound;
(ii) to Seller's Knowledge, each other Person that has or had any
obligation or liability under any Contract under which the Company has or had
any rights is in full compliance with all applicable terms and requirements of
such Contract; and
(iii) no event has occurred and, to Seller's Knowledge, no
circumstance exists that (with or without notice or lapse of time or both) may
result in a violation or breach of any Contract.
- 20 -
3.17 INSURANCE
Section 3.17 of the Disclosure Schedule sets forth the premium payments
and describes all material insurance policies of the Company, which policies are
in full force and effect in accordance with their terms and expire on the dates
shown on Schedule 3.17 of the Disclosure Schedule. There has been no default in
the payment of premiums on any of such policies, and, to Seller's Knowledge,
there is no ground for cancellation or avoidance of any such policies, or any
increase in the premiums thereof, or for reduction of the coverage provided
thereby. Such policies insure the Company in amounts and against losses and
risks customary and sufficient for businesses similar to that of the Company,
and, to Seller's Knowledge, such policies shall continue in full force and
effect up to the expiration dates shown in Section 3.17 of the Disclosure
Schedule. True and correct copies of all insurance policies listed in Section
3.17 of the Disclosure Schedule have been previously furnished to TKOG.
3.18 ENVIRONMENTAL MATTERS
Except as set forth in Section 3.18 of the Disclosure Schedule:
(a) The Company is, and at all times has been, in full compliance with,
and has not been and is not in violation of or liable under, any Environmental
Law. The Company has obtained and is in compliance with all permits required
under Environmental Laws. Neither Seller nor the Company has any basis to
expect, nor has either of them received, any actual or threatened order, notice
or other communication from any Governmental Authority or third party, or from
the current or prior owner or operator of any Facilities, of any actual or
potential violation or failure to comply with any Environmental Law or of any
actual or threatened Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets in which the Company
has had an interest or the operation of the Company's business or with respect
to any property or Facility at or to which Hazardous Materials were generated,
manufactured, transported, used or processed by the Company.
(b) There are no pending or, to Seller's Knowledge, threatened claims,
Encumbrances, or other restrictions of any nature, resulting from any
Environmental, Health, and Safety Liabilities or arising under or pursuant to
any Environmental Law, with respect to or affecting any of the Facilities or any
other properties and assets in which the Company has or had an interest.
(c) Neither Seller nor the Company has Knowledge of any basis to expect,
nor has any of them received, any inquiry, notice, order or other communication
that relates to Hazardous Activity, Hazardous Materials, or any violation or
failure to comply with any Environmental Law, or of any obligation to undertake
or bear the cost of any Environmental, Health, and Safety Liabilities with
respect to any of the Facilities or any other properties or assets in which the
Company has or had an interest, or with respect to any property or facility to
which Hazardous Materials generated, manufactured, transported, used, or
processed by the Company, have been transported, treated, stored, handled or
disposed.
- 21 -
(d) Neither Seller nor the Company has any Environmental, Health, and
Safety Liabilities with respect to the Facilities or with respect to any other
properties and assets in which the Company (or any predecessor) has or had an
interest.
(e) Neither Seller nor the Company has permitted or conducted, or is
aware of, any Hazardous Activity conducted with respect to the Facilities or any
other properties or assets in which the Company has or had an interest except in
full compliance with all applicable Environmental Laws.
(f) The Company has caused no release or, to Seller's Knowledge, threat
of release, of any Hazardous Materials at or from the Facilities or at any other
locations where any Hazardous Materials were generated, manufactured,
transported, produced, used, disposed, or processed by the Company from or by
the Facilities, or from or by any other properties and assets in which the
Company has or had an interest.
(g) There are no reports, studies, analyses, tests or monitoring
possessed or initiated by Seller or the Company pertaining to Hazardous
Materials or Hazardous Activities in, on, or under the Facilities, or concerning
compliance by the Company, with Environmental Laws.
3.19 EMPLOYEES
(a) Section 3.19 of the Disclosure Schedule contains a complete and
accurate list of the following information for each employee of the Company:
name; job title; and current compensation. Section 3.19 of the Disclosure
Schedule is accurate as of the date stated therein.
(b) No key employee of the Company is a party to, or is otherwise bound
by, any agreement or arrangement, including any confidentiality, noncompetition
or proprietary rights agreement, between such employee and any other Person that
in any way adversely affects or will affect the performance of his duties as an
employee or officer of the Company or the ability of the Company to conduct its
business. To Seller's Knowledge, no other employee is a party to, or otherwise
bound by, any such agreement that in any way adversely affects or will affect
the performance of his duties as an employee or officer of the Company or the
ability of the Company to conduct its business. To Seller's Knowledge, no
director, officer or other key employee of the Company intends to terminate his
employment with the Company.
3.20 LABOR RELATIONS
Except as set forth in Section 3.20 of the Disclosure Schedule:
(a) To Seller's Knowledge, the Company has satisfactory relationships
with its employees.
(b) No condition or state of facts or circumstances exists with respect
to the
- 22 -
Company's relations with its employees, including the consummation of the
transactions contemplated by this Agreement, that could have a Material Adverse
Effect on the Company; provided that TKOG does not institute material changes in
the Company's working environment.
(c) The Company is in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours and is not engaged in any unfair
labor practice.
(d) No collective bargaining agreement with respect to the business of
the Company is currently in effect or being negotiated. The Company has not
encountered any labor union or collective bargaining organizing activity with
respect to its employees. The Company has no obligation to negotiate any such
collective bargaining agreement, and, to Seller's Knowledge, there is no
indication that the employees of the Company desire to be covered by a
collective bargaining agreement.
(e) There are no strikes, slowdowns, work stoppages or other labor
trouble pending or, to Seller's Knowledge, threatened with respect to the
employees of the Company, nor has any or the above occurred or, to Seller's
Knowledge, been threatened.
(f) There is no representation claim or petition pending before the
National Labor Relations Board or any state or local labor agency and, to
Seller's Knowledge, no question concerning representation has been raised or
threatened respecting the employees of the Company.
(g) There are no complaints or charges against the Company pending
before the National Labor Relations Board or any state or local labor agency
and, to Seller's Knowledge, no complaints or charges have been filed or
threatened to be filed against the Company with any such board or agency.
(h) To Seller's Knowledge, no charges with respect to or relating to the
business of the Company are pending before the Equal Employment Opportunity
Commission or any state or local agency responsible for the prevention of
unlawful employment practices.
(i) Section 3.20 of the Disclosure Schedule accurately sets forth all
unpaid severance which, as of the date hereof, is due or claimed, in writing, to
be due from the Company to any Person whose employment with Seller was
terminated.
(j) Neither Seller nor the Company has received notice of the intent of
any government body responsible for the enforcement of labor or employment laws
to conduct an investigation of the Company and no such investigation is in
progress.
(k) No employee of the Company is, and the Company is not, in violation
of any term of any employment agreement, non-disclosure agreement, non-compete
agreement or any other agreement regarding an employee's employment with the
Company.
- 23 -
(l) The Company has paid any and all wages which are both due and
payable to each employee of the Company and each independent contractor employed
by the Company.
3.21 INTELLECTUAL PROPERTY
(a) INTELLECTUAL PROPERTY ASSETS--The term "Intellectual Property
Assets" includes: (i) all registered and unregistered trademarks, service
marks and applications for trademarks or service marks, business names, trade
names and brand names (collectively, "MARKS"); (ii) all patents, patent
applications and inventions and discoveries that may be patentable
(collectively, "PATENTS"); (iii) all copyrights in both published works and
unpublished works, including training manuals and videos (collectively,
"COPYRIGHTS"); and (iv) all know-how, trade secrets, confidential
information, customer lists, software, technical information, data, plans,
drawings and blue prints (collectively, "TRADE SECRETS") owned, used or
licensed by the Company as licensee or licensor. The Intellectual Property
Assets are all those necessary for the operation of the Company's businesses
as it is currently conducted and proposed to be conducted.
(b) AGREEMENTS--Section 3.21(b) of the Disclosure Schedule contains a
complete and accurate list and summary description, including any royalties paid
or received by the Company, of all Contracts relating to the Intellectual
Property Assets to which the Company is a party or by which the Company is
bound.
(c) PATENTS--(i) Section 3.21(c) of Disclosure Schedule contains a
complete and accurate list of all Patents; (ii) the Company is the owner of all
right, title and interest in and to each of the Patents, free and clear of all
Encumbrances; (iii) all Patents that have been filed with the United States
Patent and Trademark Office are currently in compliance with all formal legal
requirements and are valid and enforceable; (iv) no Patent is infringed or, to
Seller's Knowledge, has been challenged or threatened in any way. To Seller's
Knowledge, none of the Patents used by the Company infringes or is alleged to
infringe any patent of any third party.
(d) TRADEMARKS--(i) The Company does not own or use any Marks other than
the registered Marks; (ii) Section 3.21(d) of Disclosure Schedule contains a
complete and accurate list of all registered Marks; (ii) the Company is the
owner of all right, title and interest in and to each of the registered Marks,
free and clear of all Encumbrances; (iii) all Marks that have been registered
with the United States Patent and Trademark Office are currently in compliance
with all formal legal requirements and are valid and enforceable; (iv) no Xxxx
is infringed or, to Seller's Knowledge, has been challenged or threatened in any
way. To Seller's Knowledge, none of the Marks used by the Company infringes or
is alleged to infringe any trade name, trademark, or service xxxx of any third
party.
(e) COPYRIGHTS--(i) Section 3.21(e) of the Disclosure Schedule contains
a complete and accurate list of all Copyrights; (ii) the Company is the owner of
all right, title and interest in and to each of the Copyrights, free and clear
of all Encumbrances; (iii) all the Copyrights have been registered and are
currently in compliance with formal legal requirements, and are
- 24 -
valid and enforceable; (iv) no Copyright is infringed or, to Seller's Knowledge,
has been challenged or threatened in any way; (v) to Seller's Knowledge, none of
the subject matter of any of the Copyrights infringes or is alleged to infringe
any copyright of any third party or is a derivative work based on the work of a
third party; and (vi) all works encompassed by the Copyrights have been marked
with the proper copyright notice.
(f) TRADE SECRETS--(i) Seller and, to Seller's Knowledge, the Company
have taken all reasonable precautions to protect the secrecy, confidentiality
and value of its Trade Secrets; and (ii) the Company has good title and an
absolute right to use the Trade Secrets. The Trade Secrets, to Seller's
Knowledge, have not been used, divulged or appropriated either for the benefit
of any Person (other than the Company) or to the detriment of the Company. No
Trade Secret is subject to any adverse claim or has been challenged or
threatened in any way.
(g) CORPORATE NAME--The Company owns and has the exclusive right, title
and interest in and to the registered Xxxx "InPhoto Surveillance" and, to
Seller's Knowledge, no other Person has the right to use the same, or any
confusing derivative thereof, as its corporate name or otherwise in connection
with the operation of any business similar or related to the business conducted
by the Company.
3.22 CERTAIN PAYMENTS
Neither the Company nor any director, officer, agent, or employee of the
Company, or to Seller's Knowledge, any other Person associated with or acting
for or on behalf of the Company, has directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback or other
payment to any Person, private or public, regardless of form, whether in money,
property, or services (i) to obtain favorable treatment in securing business,
(ii) to pay for favorable treatment for business secured, (iii) to obtain
special concessions or for special concessions already obtained, for or in
respect of the Company or any affiliate of the Company, or (iv) in violation of
any legal requirement, or (b) established or maintained any fund or asset that
has not been recorded in the books and records of the Company. The Company has
utilized Company funds for the promotion of the Company's business, including
client entertainment, but all such promotion and entertainment is both legal and
in the ordinary course of business.
3.23 RELATIONSHIPS WITH RELATED PERSONS
(a) Except as set forth in Section 3.23 of the Disclosure Schedule,
neither Seller, nor any officer, director or employee of the Company, nor any
spouse or child of any of them or any Person associated with any of them
("RELATED PERSON") has any interest in any property used in or pertaining to the
Company's businesses. Except as set forth in Section 3.23 of the Disclosure
Schedule, neither Seller nor any Related Person has owned an equity interest or
any other financial or profit interest in a Person that has (i) had business
dealings with the Company, or (ii) engaged in competition with the Company.
Except as set forth in Section 3.23 of the Disclosure Schedule, neither Seller
nor any Related Person is a party to any Contract with, or has any claim or
right against, the Company.
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(b) Each of "Ban the Xxxx, Inc." and PSI, Inc. is a personal investment
of Seller that is completely and accurately described in all material respects
in Section 3.23 of the Disclosure Schedule. The Company has no liability or
obligation of any nature (whether absolute, accrued or contingent) with respect
or relating to or arising out of or in connection with "Ban the Xxxx, Inc." or
PSI, Inc. PSI, Inc. has the right to publish the 10 books written by Seller
listed in Section 3.23 of the Disclosure Schedule. The Company has from time to
time purchased such books from PSI, Inc. but has no commitment to make such
purchases in the future. No promotional materials utilized by the Company in
the marketing of its products or services (other than such 10 books) are owned
or published by PSI, Inc. Any future books authored by Seller on his own time
shall be his sole property.
3.24 BROKERS OR FINDERS
Neither the Company nor Seller nor their respective agents has incurred
any obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement.
3.25 DEPOSIT ACCOUNTS
Section 3.25 of the Disclosure Schedule contains a complete and accurate
list of (a) the name of each financial institution in which the Company has an
account or safe deposit box, (b) the names in which each account or box is held,
(c) the type of account, and (d) the name of each person authorized to draw on
or have access to each account or box.
3.26 CUSTOMER RELATIONSHIPS
To Seller's Knowledge, except as set forth in Section 3.26 of the
Disclosure Schedule, there are no facts or circumstances that are likely to
result in the loss of any customer of the Company or a material change in the
relationship of the Company with such a customer.
3.27 CONDUCT OF BUSINESS
The businesses carried on by the Company have been conducted by the
Company and not through any affiliate of any stockholder, officer, director or
employee of the Company or through any other Person.
3.28 RESTRICTIONS ON BUSINESS ACTIVITIES
There is no written (or to Seller's Knowledge, oral) agreement, judgment,
injunction, order or decree binding upon the Company or Seller or, to Seller's
Knowledge, threatened that has or could reasonably be expected to have the
effect of prohibiting or materially impairing any business practice of the
Company (either individually or in the aggregate), any acquisition of property
by the Company (either individually or in the aggregate), providing of any
service by the Company or the hiring of employees or the conduct of business by
the Company (either
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individually or in the aggregate) as currently conducted.
3.29 PAYABLES
There has been no adverse change since the date of the Financial
Statements in the amount or delinquency of accounts payable of the Company
(either individually or in the aggregate), which would have a Material Adverse
Effect upon the Company.
3.30 OUTSTANDING INDEBTEDNESS
Section 3.30 of the Disclosure Schedule sets forth as of June 30, 1998
(a) the amount of all indebtedness for borrowed money of the Company then
outstanding and the interest rate applicable thereto, (b) any Encumbrances which
relate to such indebtedness and (c) the name of the lender or the other payee of
each such indebtedness.
3.31 SUBSIDIARIES
The Company has no subsidiaries. The Company does not, directly or
indirectly, own or have any investment in any of the capital stock of, or any
other proprietary interest in, any other Person. The Company is not a partner
or joint venturer in or a member of any partnership, joint venture or limited
liability company.
3.32 NO DEFAULTS
Except as set forth in Section 3.32 of the Disclosure Schedule, the
Company is not in default under any Contract to which it is a party, and no
event, condition or occurrence currently exists, or will result from the
execution, delivery and performance by the Company or Seller of this Agreement,
the Employment Agreement and the transactions contemplated hereby and thereby,
which, with or without notice or lapse of time or both, will constitute such a
default by the Company under any Contract to which it is a party.
3.33 CUSTOMERS AND CONTRACTORS
Section 3.33 of the Disclosure Schedule contains a complete list of the
28 largest clients of the Company (measured by fee volume), including the
amounts they paid to the Company in the last year. Section 3.33 of the
Disclosure Schedule contains a complete list of all material contractors and
material subcontractors used by the Company.
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3.34 PRIVATE INVESTIGATION LICENSE
Section 3.34 of the Disclosure Schedule contains a complete list of all
private investigation licenses or other similar licenses held by the Company or
any employee of the Company that the Company utilizes in the conduct of its
business and the jurisdictions in which each such license was granted. Each
such private investigation license is in full force and effect in all material
respects. To Seller's Knowledge, there has been no violation of such private
investigation licenses. Neither the Company nor Seller conducts any business or
takes or performs any other action which would require either of them to be
licensed as a private investigator in any jurisdiction other than those listed
in Section 3.34 of the Disclosure Schedule.
3.35 DISCLOSURE
(a) Except as otherwise qualified by Seller's Knowledge, no
representation or warranty of Seller in this Agreement and no statement in the
Disclosure Schedule omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading in any material respect.
(b) Except as set forth in Section 3.35(b) of the Disclosure Schedule,
there is no fact known to Seller that has specific application to the Company
(other than general economic or industry conditions) and, as far as Seller can
reasonably foresee, that could have a Material Adverse Effect on the Company
that has not been set forth in this Agreement or in other sections of the
Disclosure Schedule.
3.36 INVESTMENT REPRESENTATIONS OF SELLER
(a) The TKOG Shares are being acquired by Seller for his own account,
and not for any other Person, for investment only and with no present intention
of distributing or reselling (and Seller will not distribute or resell) such
TKOG Shares or any part thereof or interest therein in any transaction that
would violate the securities laws of the United States of America, or any state,
without prejudice, however, to the rights of Seller at all times to sell or
otherwise dispose of all or any part of the TKOG Shares under an effective
registration statement or applicable exemption from registration under the
Securities Act and any applicable state securities law. Seller has no present
contract, undertaking, agreement or arrangement with any Person to sell,
transfer or pledge to such Person the TKOG Shares, any interest therein, or any
part thereof, and Seller has no present plans to enter into any such contract,
undertaking, agreement or arrangement.
(b) Seller is an accredited investor as that term is defined in Rule 501
promulgated under the Securities Act, and has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of an investment in TKOG Common Stock. By reason of Seller's business or
financial experience, he is a sophisticated investor who has the capacity to
protect his interest in connection with the transactions contemplated hereunder
and has both appropriate knowledge and experience with the current
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business operations and prospects of TKOG and in financial and business matters
to evaluate properly the merits and risks of the TKOG Shares and the related
transactions contemplated hereunder.
(c) Seller has read this Agreement and all other documents provided by
TKOG in connection herewith and fully understands the terms under which the TKOG
Shares are being issued to him. TKOG and Buyer have made available to Seller
the opportunity to ask questions of and receive answers from TKOG and Buyer
concerning TKOG and the terms and conditions under which TKOG Shares will be
issued to him and to obtain any additional information which TKOG or Buyer
possesses or can acquire without unreasonable effort or expense that is
necessary to verify the accuracy of information furnished in connection with
this Agreement or in response to any request for information.
(d) Seller agrees that, so long as required by law, certificates
evidencing the TKOG Shares and any securities issued in exchange for or in
respect thereof shall bear a legend to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS."
4. REPRESENTATIONS AND WARRANTIES OF TKOG AND BUYER
TKOG and Buyer each represents and warrants to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Illinois. TKOG is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Ohio. Each of TKOG and Buyer has full corporate power and authority to conduct
its business as it is now being conducted and to own or use the properties and
assets that it purports to own or use. Each of TKOG and Buyer is duly qualified
to do business as a foreign corporation and is in good standing under the laws
of each state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification, except where the failure to be so qualified could
not reasonably be expected to have a Material Adverse Effect on TKOG.
- 29 -
4.2 AUTHORITY; NO CONFLICT
(a) TKOG has the right, power and authority to execute and deliver this
Agreement and the Employment Agreement and to perform its obligations under this
Agreement and the Employment Agreement. Buyer has the right, power and
authority to execute and deliver this Agreement, to consummate the Merger, and
to perform its obligations hereunder. This Agreement has been duly executed and
delivered by Buyer and TKOG and constitutes the legal, valid and binding
obligation of Buyer and TKOG, enforceable against Buyer and TKOG in accordance
with its terms. Upon the execution and delivery by TKOG of the Employment
Agreement, the Employment Agreement will constitute the legal, valid and binding
obligation of TKOG, enforceable against TKOG in accordance with its terms.
(b) Neither the execution and delivery of this Agreement or the
Employment Agreement nor the consummation or performance by TKOG or Buyer of the
Merger or any of the other transactions contemplated hereby or thereby will,
directly or indirectly (with or without notice or lapse of time or both):
(i) contravene, conflict with, or result in a violation or
breach of (A) any provision of the Organizational Documents of TKOG or Buyer,
(B) any resolution adopted by the board of directors or the shareholders of TKOG
or Buyer, (C) any legal requirement or any order to which TKOG or Buyer or any
of the assets owned or used by them may be subject, or (D) any governmental
authorization, which is held by TKOG or Buyer or that otherwise relates to the
business of, or any of the assets owned or used by, TKOG or Buyer;
(ii) result in a breach of or constitute a default, give rise to
a right of termination, cancellation or acceleration, result in the creation or
imposition of any Encumbrance upon any property or assets of TKOG or Buyer,
create any entitlement to any payment or benefit, or require the consent or
approval of or any notice to or filing with any third party or governmental
authority, under any Contract to which TKOG or Buyer is a party or to which
their assets are bound or to which either TKOG, Buyer or their assets are
subject; or
(iii) result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by TKOG or Buyer,
except, with respect to clause (i) (C) or (D), (ii) or (iii) of this Section
4.2, where any such contravention, conflict, violation, breach, default,
termination right, cancellation or acceleration right or Encumbrance would not
have a Material Adverse Effect on TKOG or on the ability of TKOG or Buyer to
consummate the Merger or the other transactions contemplated by this Agreement.
- 30 -
4.3 CAPITALIZATION; TKOG SHARES
(a) The authorized capital stock of TKOG consists of 1,000,000 shares of
preferred stock, $0.01 par value per share, of which as of the date of this
Agreement no shares are issued or outstanding, and 50,000,000 shares of TKOG
Common Stock, of which as of August 5, 1998 17,306,717 shares were issued and
outstanding. All of the authorized capital stock of Buyer is owned of record
and beneficially by TKOG.
(b) The TKOG Shares issuable as a result of the Merger have been duly
authorized and upon the Effective Time, will be validly issued, fully paid and
nonassessable and available for quotation on the NASDAQ National Market.
4.4 FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION
(a) TKOG has delivered to Seller true, correct and complete copies of
its Prospectus dated April 30, 1998 as filed with the Commission (the
"PROSPECTUS"), its Annual Report on Form 10-K for the year ended December 31,
1997 (the "FORM 10-K"), its Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998 (the "MARCH FORM 10-Q"), and its Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998 (the "JUNE FORM 10-Q," and together with the
March Form 10-Q, the "FORMS 10-Q"). The Prospectus, the Form 10-K and the Forms
10-Q have been timely filed pursuant to the Securities Act or the Exchange Act,
as applicable.
(b) The Prospectus, the Form 10-K and the Forms 10-Q complied as to form
in all material respects with the requirements of the Securities Act and the
Exchange Act, as applicable, in effect on the respective dates thereof. None of
the Prospectus, the Form 10-K or the Forms 10-Q, when filed pursuant to the
Securities Act or the Exchange Act, as applicable, contained any untrue
statement of a material fact or omitted to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(c) Each of the financial statements (including the related notes)
included in the Prospectus, the Form 10-K and the Forms 10-Q presents fairly, in
all material respects, the consolidated financial position and consolidated
results of operations and cash flows of TKOG as of the respective dates or for
the respective periods set forth therein, all in conformity with GAAP
consistently applied during the periods involved except as otherwise noted
therein, and subject, in the case of any unaudited interim financial statements
included therein, to normal and recurring year-end adjustments that have not
been and are not expected to be material in amount.
4.5 RESALE OF BUSINESS
Neither Buyer nor TKOG has discussed any resale or repurchase of all or
any significant portion of the assets or any capital stock of the Company with
any other Person. Neither Buyer nor TKOG currently has the intention to offer
to sell or resell all or any
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significant portion of the assets or any capital stock of the Company.
4.6 BROKERS OR FINDERS
Neither TKOG nor Buyer nor their respective agents has incurred any
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement, other than to J. Xxxxxxx Xxxxxxx & Co., which TKOG agrees to pay.
4.7 NO MATERIAL ADVERSE CHANGE
Since June 30, 1998, there has not been any material adverse change in
the business, operations, properties, prospects, liabilities, results of
operations, assets or condition (financial or otherwise) of TKOG and its
subsidiaries, taken as a whole, and no event has occurred or, to the knowledge
of TKOG, circumstance exists that may result in a Material Adverse Effect.
4.8 ACCESS TO INFORMATION
In connection with TKOG's and Buyer's investigation of the Company both
TKOG and Buyer have received from Seller and the Company certain projections and
other forecasts for the Company. Both TKOG and Buyer acknowledge that there are
uncertainties inherent in attempting to make such projections and forecasts and
that both TKOG and Buyer are familiar with such uncertainties and that TKOG and
Buyer are taking full responsibility for making their own respective evaluation
of the adequacy and accuracy of all projections and forecasts so furnished to
it. Accordingly, both TKOG and Buyer acknowledge that Seller makes no
representation or warranty with respect to any projections or forecasts
previously shared with TKOG or Buyer or their respective representatives, or any
other representation or warranty with respect to the business, operations,
assets, liabilities or financial condition of the Company other than as
specifically set forth in this Agreement or in the Disclosure Schedule.
4.9 DISCLOSURE
Except as otherwise qualified by the knowledge of TKOG or Buyer herein,
no representation or warranty of TKOG or Buyer in this Agreement omits to state
a material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading in any material
respect.
5. COVENANTS OF SELLER
Seller hereby covenants and agrees as follows:
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5.1 NORMAL COURSE
From the date hereof until the Closing, Seller will cause the Company to:
(a) maintain its corporate existence in good standing; (b) maintain the general
character of its business; (c) use all reasonable best efforts to maintain in
effect all of its presently existing insurance coverage (or substantially
equivalent insurance coverage), preserve its business organization substantially
intact, keep the services of its present principal employees and preserve its
present business relationships with its material suppliers and customers;
(d) permit TKOG, Buyer, their accountants, their legal counsel and their other
representatives full access to its management, minute books and stock transfer
records, other books and records, contracts, agreements, properties and
operations at all reasonable times and upon reasonable notice; and (e) except as
permitted by Section 5.9, in all respects conduct its business in the usual and
ordinary manner consistent with past practice and perform in all material
respects all agreements or other obligations with banks, customers, suppliers,
employees and others.
5.2 CONDUCT OF BUSINESS
From the date hereof until the Closing, Seller will cause the Company not
to, without the prior written consent of TKOG:
(a) amend or otherwise modify its constituting documents or by-laws (or
similar organizational documents);
(b) issue or sell or authorize for issuance or sale, or grant any
options or make other agreements of the type referred to in Section 3.3 with
respect to, any shares of its capital stock or any other of its securities, or
alter any term of any of its outstanding securities or make any change in its
outstanding shares of capital stock or other ownership interests or its
capitalization, whether by reason of a reclassification, recapitalization, stock
split or combination, exchange or readjustment of shares, stock dividend or
otherwise;
(c) mortgage, pledge or grant any security interest in any of its
assets, except security interests solely in tangible personal property granted
pursuant to any purchase money agreement, conditional sales contract or capital
lease under which there exists an aggregate future liability not in excess of
$25,000 (which amount is not more than the purchase price for such personal
property and which security interest does not extend to any other item or items
of personal property);
(d) declare, set aside, make or pay any dividend or other distribution
to any shareholder with respect to its capital stock;
(e) redeem, purchase or otherwise acquire, directly or indirectly, any
capital stock;
(f) increase the compensation of any of its employees who hold
management positions, except for amounts accrued as of June 30, 1998 and
reflected in the Interim Financial Statements;
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(g) adopt or (except as otherwise required by law) amend any Employee
Benefit Plan or enter into any collective bargaining agreement;
(h) terminate or modify any Contract, except for terminations of
Contracts upon their expiration during such period in accordance with their
terms;
(i) incur or assume any indebtedness for borrowed money or guarantee any
obligation or the net worth of any Person in an aggregate amount in excess of
$25,000, except for endorsements of negotiable instruments for collection in the
ordinary course of business and except for borrowings allowed under existing
lines of credit with the Company's third party lenders up to the maximum credit
limit in effect as of October 31, 1997;
(j) discharge or satisfy any Encumbrance other than those which are
required to be discharged or satisfied during such period in accordance with
their original terms;
(k) pay any material obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except for any current
liabilities, and the current portion of any long term liabilities, shown on the
Financial Statements (or not required as of the date thereof to be shown thereon
in accordance with GAAP) or incurred since the date of the most recent balance
sheet in the ordinary course of business consistent with past practice;
(l) sell, transfer, lease to others or otherwise dispose of any of its
properties or assets having a fair market value in the aggregate in excess of
$25,000, except in the ordinary course of business consistent with past
practice;
(m) cancel or compromise any material debt or claim;
(n) make any loan or advance to any Person other than travel and other
similar routine advances in the ordinary course of business consistent with past
practice, or acquire any capital stock or other securities of any other
corporation or any ownership interest in any other business enterprise;
(o) make any capital expenditure or capital addition or betterment in
amounts which exceed $25,000 in the aggregate, except as contemplated in capital
budgets in effect on the date of this Agreement;
(p) change its method of accounting or the accounting principles or
practices utilized in the preparation of the Financial Statements, other than as
required by GAAP;
(q) institute or settle any litigation or any legal, administrative or
arbitration action or proceeding before any court or governmental body relating
to it or its property;
(r) except in the ordinary course of business consistent with past
practice, commit to provide services for an indefinite period or a period of
more than two (2) months; or
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(s) enter into other agreements, commitments or contracts, except
agreements, commitments or contracts made in the ordinary course of business
consistent with past practice; or
(t) enter into any commitment to do any of the foregoing.
5.3 CERTAIN FILINGS
Seller agrees to cooperate with TKOG with respect to all filings with
regulatory authorities that are required to be made, respectively, by Seller
or by the Company to carry out the transactions contemplated by this Agreement.
Seller shall assist and shall cause the Company to assist TKOG and Buyer in
making all such filings, applications and notices as may be necessary or
desirable in order to obtain the authorization, approval or consent of any
governmental entity which may be reasonably required or which TKOG and Buyer may
reasonably request in connection with the consummation of the transactions
contemplated hereby, including as may be required under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended.
5.4 CONSENTS AND APPROVALS
Seller shall use his best efforts to obtain as promptly as practicable
all consents, authorizations, approvals and waivers required in connection with
the consummation of the transactions contemplated by this Agreement.
5.5 BEST EFFORTS TO SATISFY CONDITIONS
Seller shall use his best efforts to cooperate with TKOG for purposes of
satisfying the conditions set forth in Sections 7 and 8 that are within the
control of Seller.
5.6 INTERCOMPANY PAYMENTS
All loans, payables and other amounts due to or from the Company and its
affiliates as listed in Section 5.6 of the Disclosure Schedule shall be paid in
full, written off or adjusted to zero balances at or prior to the Closing. Such
amounts due may be paid from cash on hand or as may otherwise be available to
the Company from existing lines of credit with third party lenders.
5.7 NOTIFICATION OF CERTAIN MATTERS
Seller shall promptly notify TKOG of (i) the occurrence or non-occurrence
of any fact or event of which Seller has Knowledge which would be reasonably
likely (A) to cause any representation or warranty of Seller contained in this
Agreement to be untrue or inaccurate in any material respect at any time from
the date hereof to the Closing Date or (B) to cause any covenant, condition or
agreement of Seller in this Agreement not to be complied with or
- 35 -
satisfied in any material respect and (ii) any failure of Seller to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by him or it hereunder in any material respect; provided, however,
that no such notification shall affect the representations or warranties of
Seller, or the right of TKOG to rely thereon, or the conditions to the
obligations of TKOG. Seller shall give prompt notice to TKOG and of any
notice or other communication from any third party alleging that the consent
of such third party is or may be required in connection with the transactions
contemplated by this Agreement.
5.8 RESTRICTIVE COVENANT
(a) SCOPE AND REASONABLENESS. Seller acknowledges that TKOG would not
consummate the transactions contemplated by this Agreement without the assurance
that Seller will not engage in the activities prohibited by this Section 5.8 as
and for the period set forth below. In order to induce TKOG to consummate the
transactions contemplated by this Agreement, Seller agrees to restrict his
actions and activities throughout United States and Canada (the "TERRITORY") as
provided in this Section 5.8. Seller acknowledges and agrees that the
restrictions in this Section 5.8 are reasonable in light of the benefits of the
transactions contemplated by this Agreement to Seller.
(b) NON-COMPETITION. Seller hereby covenants and agrees that until the
earlier of (i) the fifth (5th) anniversary of the Closing Date or (ii) until
Seller's employment with TKOG is terminated by TKOG without Cause (as defined in
the Employment Agreement) or, by the Executive with Good Reason (as defined in
the Employment Agreement), he will not in the Territory, directly or indirectly,
(a) engage on his own behalf in the Investigative and Intelligence Business (as
hereinafter defined), or (b) own any interest in or engage in or perform any
service for any person, firm, corporation or other entity, either as a partner,
owner, employee, consultant, agent officer, director or shareholder that
(A) derives a meaningful portion of its revenues from the Investigative and
Intelligence Business or (B) is a meaningful competitor in the Investigative and
Intelligence Business. Notwithstanding any provision of this Section 5.8(b), it
shall not be a violation of this Section 5.8(b) for Seller to own five percent
(5%) or less of a public company, PROVIDED THAT, Seller does not exert or have
the power to exert any management or other control over such public company.
The Investigative and Intelligence Business shall mean the business of private
investigations, executive protection, corporate investigation, insurance fraud
or claims investigation, risk and crisis management, forensic auditing and/or
business intelligence, but shall exclude any activity of Seller relating to
teaching (other than on behalf of an entity engaged in the Investigative and
Intelligence Business), writing and expert witness testimony.
(c) NON-SOLICITATION. So long as Seller has not been terminated without
Cause and so long as Seller has not left the employ of TKOG for Good Reason (as
"Cause" and "Good Reason" are defined in the Employment Agreement), Seller
hereby covenants and agrees that from the date of the Closing through the fifth
(5th) anniversary thereof, he will not induce or attempt to induce, in any
manner, directly or indirectly, any employee, agent, representative, customer or
any other person or concern dealing with or in any way associated with the
Company or any of its affiliates to terminate or to modify, in any other fashion
to the detriment
- 36 -
of the Company or any of its affiliates, such association with the Company or
any of its affiliates. Seller acknowledges that the provisions of Sections
5.8(b) and 5.8(c) are Seller's separate agreement and are not intended to
replace or, in any way modify, the provisions of Section 4.2(d) of the
Employment Agreement.
(d) REMEDIES. The parties hereto agree that Seller's agreements
contained in this Section 5.8 relate to matters of unique character and peculiar
value impossible of replacement, that breach of such agreements by Seller will
cause the Company great and irreparable injury therefor, that the remedy at law
for any breach of the agreements contained in this Section 5.8 will be
inadequate and that TKOG, in addition to any other relief available to it, shall
be entitled to temporary restraining orders and temporary and permanent
injunctive relief or other equitable relief without the necessity of proving
actual damage or of providing bond so as to prevent a breach of any of the
agreements contained in this Section 5.8 and to secure the enforcement thereof.
5.9 DISTRIBUTIONS
(a) The Company has approved the Deferred Compensation Plan, in form and
substance satisfactory to TKOG, effective as of November 1, 1997, and has
authorized the payment of $1,350,000 in deferred compensation and accrued
bonuses to certain key employees of the Company pursuant to such plan.
(b) Prior to June 30, 1998, the Company has made distributions to Seller
in an amount equal to $794,837.75.
(c) If the product of 40% and the taxable income of the Company for the
period beginning on November 1, 1997 and ended on July 31, 1998 as shown in the
tax returns prepared and filed pursuant to Section 10.1 (such product, the
"TAX"), is less than $94,837.75, Seller shall, promptly upon receipt of notice
thereof from TKOG, pay to the Company in cash, without interest, the amount by
which $94,837.75 exceeds the Tax and if the Tax is greater than $94,837.75, the
Company shall promptly upon the filing of such tax return, pay to Seller in
cash, without interest, the amount by which the Tax exceeds $94,837.75.
(d) Any distributions of deferred compensation paid pursuant to Section
5.9(a) shall be paid to those key employees designated by Seller pursuant to the
Deferred Compensation Plan. Interest shall accrue with respect to such
distributions from the Closing Date at the rate per annum equal to the treasury
rate for one year notes in effect on each anniversary of the Closing Date for
the one year period thereafter.
(e) Except as specifically provided in this Section 5.9, the Company
will not make any distributions to Seller as a stockholder.
5.10 NO SOLICITATION
Prior to the Effective Time, or, if sooner, until September 30, 1998,
none of Seller, the
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Company or any of their respective officers, employees, representatives or
agents shall solicit or entertain an offer from, engage in discussions or
otherwise negotiate with, or provide information to, any Person other than Buyer
or TKOG with respect to a merger, share exchange, consolidation, business
combination, or similar transaction involving, or any purchase or sale of all or
any significant portion of, the assets or any capital stock of the Company.
5.11 EMPLOYEES
Seller shall reasonably cooperate with TKOG to request that the key
employees listed on Exhibit 5.11(a) enter into employment agreements with TKOG
to be effective on the Closing Date. Each employment agreement will be in
substantially the form attached as Exhibit 5.11(b) hereto.
6. COVENANTS OF TKOG AND BUYER
Each of TKOG and Buyer, jointly and severally, hereby covenants and
agrees as follows:
6.1 CERTAIN FILINGS
TKOG and Buyer agree to make or cause to be made all filings with
regulatory authorities that are required to be made by TKOG or Buyer or their
respective affiliates to carry out the transactions contemplated by this
Agreement, including, without limitation, as may be required under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended.
6.2 BEST EFFORTS TO SATISFY CONDITIONS
Each of TKOG and Buyer agrees to use its best efforts to satisfy the
conditions set forth in Sections 7 and 8 that are within their control.
6.3 NOTIFICATION OF CERTAIN MATTERS
TKOG and Buyer shall promptly notify Seller of (i) the occurrence or
non-occurrence of any fact or event of which TKOG or Buyer has knowledge which
would be reasonably likely (A) to cause any representation or warranty of Buyer
or TKOG contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Closing Date or (B) to cause any
covenant, condition or agreement of Buyer or TKOG in this Agreement not to be
complied with or satisfied in any material respect and (ii) any failure of Buyer
or TKOG to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder in any material respect; provided,
however, that no such notification shall affect the representations or
warranties of Buyer and TKOG, or Seller's right to rely thereon, or the
conditions to the obligations of Seller. TKOG and Buyer shall give prompt
notice to Seller of any notice or other communication from any third party
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alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement.
6.4 REGISTRATION
(a) TKOG shall, at its cost and expense, on not more than two occasions
file as promptly as possible, but in no event more than 21 days, after a
written demand therefor by Seller, a registration statement (the "REGISTRATION
STATEMENT") on the appropriate form pursuant to the Securities Act covering the
resale of the TKOG Shares. TKOG shall allow Seller the opportunity to review
the Registration Statement prior to filing. TKOG shall use its best efforts to
cause the Registration Statement to become effective as promptly as possible
after filing. TKOG will use its reasonable best efforts to maintain
effectiveness of the Registration Statement for a period of 30 days, or, if
sooner, until the TKOG Shares covered thereby have been sold.
(b) Notwithstanding the provisions of Section 6.4(a), if TKOG determines
that, in its reasonable judgment, it would (because of the existence of, or in
anticipation of, any acquisition or corporate reorganization or other
transaction, financing activity, stock repurchase or development involving TKOG
or any subsidiary or the unavailability for reasons substantially beyond TKOG's
control of any required financial statements, or any other event or condition of
similar significance to TKOG) be disadvantageous (a "MATERIAL DEVELOPMENT
CONDITION") to TKOG or any of its subsidiaries or its stockholders for such a
Registration Statement to become effective or to be maintained effective or for
sales of TKOG Shares to continue pursuant to the Registration Statement, TKOG
shall, notwithstanding Section 6.4(a), be entitled, upon the giving of a written
notice (a "DELAY NOTICE") to such effect to Seller (i) to cause sales of TKOG
Shares by Seller pursuant to such Registration Statement to cease, (ii) to cause
such Registration Statement to be withdrawn and the effectiveness of such
Registration Statement to be terminated, or (iii) in the event no such
Registration Statement has yet been filed, to delay filing any such Registration
Statement, until, in the reasonable judgment of TKOG, such Material Development
Condition no longer exists (notice of which TKOG shall promptly deliver to
Seller). In the event a Registration Statement is filed and subsequently
withdrawn by reason of any existing or anticipated Material Development
Condition as hereinbefore provided, TKOG shall use its reasonable efforts to
cause a new Registration Statement covering resales by Seller of the TKOG Shares
to be filed with the Commission not later than the ten business days after date
on which such Material Development Condition expires and to use its reasonable
efforts to cause such Registration Statement to become effective as soon as
practicable after such Material Development Condition expires and to remain
effective for a period of 30 days, or, if sooner, until the TKOG Shares covered
thereby have been sold.
(c) Seller agrees to promptly furnish to TKOG true, correct and complete
information about Seller, his proposed distribution of TKOG Shares pursuant to
the Registration Statement and such other relevant matters as TKOG may
reasonably request or require under the Securities Act for inclusion in the
Registration Statement. Seller agrees that he will comply with the Securities
Act in connection with his sale of TKOG Shares pursuant to
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the Registration Statement, including the delivery of a prospectus in connection
therewith if required under the Securities Act. Seller further agrees to
immediately cease all sales of TKOG Shares pursuant to the Registration
Statement upon receiving a Delay Notice.
(d) (i) None of the information supplied or to be supplied by TKOG
for inclusion or incorporation by reference in the Registration Statement will,
at the time the Registration Statement is filed with the Commission, at any time
it is amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. The Registration Statement will comply as to
form in all material respects with the requirements of the Exchange Act and the
Securities Act and the rules and regulations of the Commission thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
6.4(d), no representation or warranty is made by TKOG with respect to statements
made or incorporated by reference in the Registration Statement based on
information supplied by Seller for inclusion or incorporation by reference
therein.
(e) (i) None of the information supplied or to be supplied by
Seller for inclusion or incorporation by reference in the Registration
Statement will, at the time the Registration Statement is filed with the
Commission, at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
(ii) Notwithstanding the foregoing provisions of this Section
6.4(e), no representation or warranty is made by Seller with respect to
statements made or incorporated by reference in the Registration Statement based
on information supplied by TKOG for inclusion or incorporation by reference
therein.
(f) (i) TKOG shall indemnify Seller against any and all loss,
liability, claim, damage and expense arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, but only
in each case with respect to information provided by or on behalf of TKOG
relating to TKOG and its subsidiaries and contained in or omitted from the
Registration Statement.
(ii) Seller shall indemnify TKOG and its directors, controlling
persons and officers who sign the Registration Statement against any and all
loss, liability, claim, damage and expense arising out of any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, but only
in each case with respect to information provided by or on behalf of Seller
relating to Seller and contained in or
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omitted from the Registration Statement.
(iii) Any Person entitled to indemnification hereunder will (x)
give prompt notice to the indemnifying party of any claim with respect to which
it seeks indemnification, and (y) permit such indemnifying party to assume the
defense of such claim with counsel reasonably satisfactory to the indemnified
party; PROVIDED, HOWEVER, that any Person entitled to indemnification hereunder
shall have the right to employ separate counsel and to participate in, but not
control, the defense of such claim, but the fees and expenses of such counsel
shall be at the expense of such indemnified Person, unless (I) the indemnifying
party has agreed to pay such fees or expenses, (II) the indemnifying party shall
have failed to assume the defense of such claim and employ counsel reasonably
satisfactory to the indemnified party in a timely manner, or (III) in the
reasonable judgment of any such Person, based upon written advice of its
counsel, a conflict of interest may exist between such Person and the
indemnifying party with respect to such claims (in which case, if the Person
notifies the indemnifying party in writing that such Person elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of any such claim as to
which such conflict of interest may exist). The indemnifying party will not be
subject to any liability for any settlement made without its consent. No
indemnified party will be required to consent to the entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such claim or litigation. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of the claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, as well as one local counsel in each relevant jurisdiction.
7. CONDITIONS TO OBLIGATIONS OF TKOG AND BUYER
The obligations of TKOG and Buyer under Section 2 shall be subject to the
satisfaction at or prior to the Closing of the following conditions, any one or
more of which may be waived by TKOG or Buyer:
7.1 REPRESENTATIONS AND WARRANTIES
Each and every representation and warranty of Seller contained in this
Agreement, any Schedule or any certificate delivered pursuant hereto shall be
true and accurate as of the date when made, shall be deemed repeated at the time
of the Closing and shall then be true and accurate in all respects.
7.2 COMPLIANCE WITH COVENANTS
Seller shall have performed and observed in all material respects all
covenants and agreements to be performed or observed by Seller under this
Agreement at or before the Closing.
- 41 -
7.3 LACK OF ADVERSE CHANGE
Except as set forth in Section 7.3 of the Disclosure Schedule, since the
date of the most recent balance sheet, there shall not have occurred any
incident or event which, individually or in the aggregate, has had or is
reasonably likely to result in a Material Adverse Effect on the Company,
including, without limitation, a material decrease in the Company's revenue or
the loss of significant business from any of its customers or the loss of any
significant customers of the Company.
7.4 UPDATE CERTIFICATE
TKOG shall have received a favorable certificate, dated the Closing Date,
signed by Seller as to the matters set forth in Sections 7.1, 7.2 and 7.3.
7.5 OPINIONS
TKOG shall have received the opinion of Wildman, Harrold, Xxxxx & Xxxxx,
counsel to Seller and the Company, dated the Closing Date, substantially in the
form attached hereto as Exhibit 2.9(a)(ii).
7.6 REGULATORY APPROVALS
All material approvals and consents of regulatory authorities required to
carry out the transactions contemplated by this Agreement shall have been
received.
7.7 CONSENTS OF THIRD PARTIES TO CONTRACTS
All consents from third parties to any Contracts or from any governmental
authority with respect to any license, approval, authorization, franchise or
permit that are required to be listed in the Disclosure Schedule in order to
avoid a misrepresentation under Section 3.2(b)(ii) shall have been obtained in
writing.
7.8 NO LITIGATION
No litigation is pending, or to Seller's Knowledge, threatened by any
Person before any court or other tribunal which seeks to enjoin or question the
validity of this Agreement or the transactions contemplated hereby.
7.9 NO VIOLATION OR ORDERS
No preliminary or permanent injunction or other order issued by any court
or governmental or regulatory authority, nor any statute, rule, regulation,
decree or executive order promulgated or enacted by any governmental or
regulatory authority that declares this Agreement invalid or unenforceable in
any material respect or that prevents the consummation of the transactions
contemplated hereby or which imposes restrictions on TKOG's right or
- 42 -
ability to operate the business of the Company shall be in effect; and no action
or proceeding before any court or regulatory authority shall have been
instituted or, to Seller's Knowledge, threatened by any governmental or
regulatory authority, or by any other Person, which seeks to prevent or delay
the consummation of the transactions contemplated by this Agreement or which
challenges the validity or enforceability of this Agreement or which seeks to
impose restrictions on TKOG's right or ability to operate the business of the
Company, and which in any such case has a reasonable likelihood of success in
the reasonable opinion of counsel to TKOG.
7.10 EMPLOYMENT AGREEMENTS
Seller shall have entered into the Employment Agreement. The employment
agreements referred to in Section 5.11 shall have been executed by those
employees listed on Exhibit 5.11(a).
7.11 OTHER CLOSING MATTERS
TKOG shall have received such other supporting information in
confirmation of the representations, warranties, covenants and agreements of
Seller and the satisfaction of the conditions to TKOG's obligation to close
hereunder as TKOG or its counsel may reasonably request.
8. CONDITIONS TO OBLIGATIONS OF SELLER AND THE COMPANY
The obligations of Seller and the Company under Section 2 shall be
subject to the satisfaction at or prior to the Closing of the following
conditions, any one or more of which may be waived by Seller:
8.1 REPRESENTATIONS AND WARRANTIES
Each and every representation and warranty of TKOG and Buyer contained in
this Agreement, any Schedule or any certificate delivered pursuant hereto shall
be true and accurate as of the date when made, shall be deemed repeated at the
time of the Closing and shall then be true and accurate in all respects.
8.2 COMPLIANCE WITH COVENANTS
TKOG and Buyer shall have performed and observed in all material respects
all covenants and agreements to be performed or observed by them under this
Agreement at or before the Closing.
8.3 UPDATE CERTIFICATE
Seller shall have received a favorable certificate, dated the Closing
Date, signed by TKOG and Buyer as to the matters set forth in Sections 8.1, 8.2
and 8.6.
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8.4 REGULATORY APPROVALS
All material approvals and consents of regulatory authorities required to
carry out the transactions contemplated by this Agreement shall have been
received.
8.5 NO VIOLATION OF ORDERS
No preliminary or permanent injunction or other order issued by any court
or governmental or regulatory authority, nor any statute, rule, regulation,
decree or executive order promulgated or enacted by any governmental or
regulatory authority that declares this Agreement invalid or unenforceable in
any material respect or that prevents the consummation of the transactions
contemplated hereby shall be in effect.
8.6 LACK OF ADVERSE CHANGE
Since June 30, 1998, there shall not have occurred any incident or event
which, individually or in the aggregate, has had or is reasonably likely to
result in any material adverse change in the business, operations, properties,
prospects, liabilities, results of operations, assets or condition (financial or
otherwise) of TKOG and its subsidiaries, taken as a whole, including a material
decrease in TKOG's revenue or the loss of significant business from any of its
customers or the loss of any significant customers of TKOG. For purposes of
this Section 8.6, a material adverse change shall be deemed to have occurred if
the Market Value at the Closing Date of one share of TKOG Common Stock is less
than $14.00.
8.7 OPINIONS
Seller shall have received the opinion of Kramer, Levin, Naftalis &
Xxxxxxx, counsel to TKOG and Buyer, substantially in the form of Exhibit
2.9(b)(iii).
9. TERMINATION OF AGREEMENT
This Agreement may be terminated:
9.1 MUTUAL CONSENT
At any time prior to the Effective Time, by mutual consent of TKOG,
Buyer, Seller and the Company.
9.2 TRANSACTION DATE
By TKOG, Buyer or Seller if the Effective Time shall not have occurred by
September 30, 1998, unless such failure shall be due to a material breach of any
representation or warranty, or the nonfulfillment in a material respect, and
failure to cure such nonfulfillment, of any covenant or agreement contained
herein on the part of the party or parties seeking to
- 44 -
terminate.
9.3 MATERIAL ADVERSE CHANGE
(a) By TKOG or Buyer if, after the date hereof, there has occurred any
incident or event which, individually or in the aggregate, has had or is
reasonably likely to result in a Material Adverse Effect on the Company,
including a material decrease in the Company's revenue or the loss of
significant business from any of its customers or the loss of any significant
customers of the Company.
(b) By Seller if, after the date hereof, there has occurred any incident
or event which, individually or in the aggregate, has had or is reasonably
likely to result in a Material Adverse Effect on TKOG and its subsidiaries,
taken as a whole, including, without limitation, a material decrease in TKOG's
revenue or the loss of significant business from any of its customers or the
loss of any significant customers of TKOG. For purposes of this Section 9.3, a
material adverse change shall be deemed to have occurred if the Market Value at
the Closing Date of one share of TKOG Common Stock is less than $14.00.
10. TAX MATTERS
10.1 TAX PREPARATION
Seller shall have the exclusive right and obligation to prepare and
timely file, or cause to be prepared and timely filed, at the Company's sole
cost and expense, all tax returns of the Company that are due with respect to
all periods that end on or prior to July 31, 1998. TKOG and the Company shall
prepare and file, or cause to be prepared and filed, all tax returns of the
Company for all periods ending after July 31, 1998. Seller's authority in
preparing the returns for which he is responsible shall include, but not be
limited to, the determination of the manner in which any items of income, gain,
deduction, loss or credit arising out of the income, properties and operations
of the Company shall be reported or disclosed in such returns; provided, that
such returns shall be prepared by treating items on such returns in a manner
consistent with past practices with respect to such items, and in accordance
with applicable law. Seller shall provide to TKOG drafts of the short year S
Corporation tax returns of the Company at least 30 days prior to the date for
the filing of such returns. Within 15 days after receipt of such draft returns,
TKOG shall notify Seller of the existence of any objection (specifying in
reasonable detail the nature and basis of such objection) TKOG may have to any
item set forth on such draft returns. All parties agree to consult and resolve
in good faith any such objection. Seller shall pay all Taxes of the Company
with respect to all Pre-Closing Periods (other than periods that begin on July
31, 1998 as a result of termination of S Corporation status).
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10.2 TAX PREPARATION, COOPERATION
All parties shall cooperate, and TKOG shall cause the Company to
cooperate with Seller, with respect to the preparation and filing of any return
for which the other is responsible pursuant to this Section 10 (including, but
not limited to, providing workpapers and schedules). The parties agree to
retain, and to cause the Company to retain all books, records, returns,
schedules, documents, workpapers, and other items of information relating to
taxes for periods (or portions thereof) ending on or prior to July 31, 1998 for
the longer of (i) the seven-year period beginning on July 31, 1998, or (ii) the
full period of the applicable statute of limitations, including any extension
thereof.
10.3 TAX AUDITS OR ASSESSMENTS
All parties shall promptly notify the other in writing within ten
business days from the receipt of a written notice of any pending or threatened
Tax audits or assessments of the Company. Seller shall have the right to
represent the interests of the Company in any Tax audit or administrative or
court proceeding to the extent relating to federal and state income taxes for
periods prior to July 31, 1998 and to employ counsel of his choice at his
expense. TKOG shall have the right to represent the interests of the Company in
any tax audit or administrative or court proceeding not described in the
immediately preceding sentence and to employ counsel of its choice at its
expense. All parties shall reasonably cooperate, and TKOG shall cause the
Company to reasonably cooperate with Seller, with respect to any tax audit or
administrative or court proceeding relating to taxes referred to in this Section
10.3. Such cooperation shall include providing all relevant information
available to Seller or TKOG (through the Company or otherwise), as the case may
be, with respect to any such audit or proceeding and making personnel available
at and for reasonable times, including, without limitation, to prepare responses
to requests for information, provided that the foregoing shall be done in a
manner so as not to interfere unreasonably with the conduct of the business of
the parties.
10.4 TAX INDEMNITIES
(a) Except as set forth in Section 10.4 of the Disclosure Schedule, from
and after July 31, 1998, Seller agrees to indemnify TKOG and Buyer without
gross-up for Taxes, against all Taxes imposed on Seller or the Company, with
respect to any Pre-Closing Period (other than periods that begin July 31, 1998
as a result of termination of S Corporation status). No indemnity shall be
provided under this Section 10.4(a) for any federal or state income tax
resulting from any transaction of the Company occurring after July 31, 1998.
(b) From and after July 31, 1998, TKOG and Buyer shall indemnify Seller,
without gross-up for Taxes, against all federal and state income taxes imposed
on or with respect to TKOG, Buyer and the Company, with respect to any taxable
period commencing after July 31, 1998. No indemnity shall be provided under
this Section 10.4(b) for any federal or state income tax resulting from any
transaction of the Company occurring for any period of time up to July 31, 1998.
- 46 -
10.5 REFUNDS AND TAX BENEFITS
TKOG shall promptly cause the Company to pay to Seller any refund or
credit (including any interest paid or credited with respect thereto) received
by TKOG of Taxes (other than refunds or credits of Taxes reflected on the
Financial Statements) (i) relating to Pre-Closing Periods or (ii) attributable
to an amount paid by Seller under Section 10.4 hereof. TKOG shall, if Seller so
requests and at Seller's expense, cause the relevant entity to file for and
obtain any refund to which Seller is entitled under this Section 10.5. TKOG
shall permit Seller to control (at Seller's expense) the prosecution of any such
refund claimed, and shall cause the relevant entity to authorize by appropriate
power of attorney such persons as Seller shall designate to represent such
entity with respect to such refund claimed. In the event that any refund or
credit of Taxes for which a payment has been made pursuant to this
Section 10.5(a) is subsequently reduced or disallowed, Seller shall indemnify
and hold harmless TKOG and the Company for any Taxes owed, including interest
and penalties, assessed against TKOG or the Company by reason of the reduction
or disallowance.
11. INDEMNIFICATION; REMEDIES
11.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
(a) All representations, warranties, covenants and obligations in this
Agreement, the Disclosure Schedule and any other certificate or document
delivered pursuant to this Agreement will survive the Closing and the Effective
Time and continue in full force and effect: (a) in the case of the
representations and warranties of Seller in Sections 3.10, 3.12 and 3.18, until
the expiration of the statute of limitations with respect to the matter to which
the claim relates, (b) in the case of the representations and warranties of
Seller in Sections 3.4, 3.8, 3.9 and 3.29, until 15 business days after the
release of the audited consolidated financial statements of TKOG for the year
ending December 31, 1998, and (c) in the case of all other representations and
warranties of Seller (other than the representations and warranties in Sections
3.2(a), 3.3, 3.21(g), 3.23, 3.24 and 3.36), and all of the representations and
warranties of TKOG and Buyer (other than the representations and warranties in
Sections 4.2(a), 4.3, 4.5 and 4.6), until the first anniversary of the Closing
Date; unless in any such case notice of a claim for indemnity with respect to
any representation or warranty pursuant to Section 11.4 shall have been given in
writing on or before any such relevant date, in which case the representation or
warranty to which such notice applies (and the indemnification obligations under
Section 11.2 or 11.3, as the case may be, arising therefrom) shall survive in
respect of such claim until the final determination or settlement of such claim,
it being understood and agreed that if a notice of a claim pursuant to such 11.4
shall not have been given on or before any such relevant date, no claim for
indemnification hereunder may be made pursuant to Section 11.4. The
representations and warranties of Seller in Sections 3.2(a), 3.3, 3.21(g), 3.23,
3.24 and 3.36, the representations and warranties of TKOG and Buyer in Sections
4.2(a), 4.3, 4.5 and 4.6 and all of the covenants of Seller and TKOG and Buyer
contained in this Agreement shall survive the Closing and the Effective Time and
- 47 -
continue in full force and effect forever thereafter.
(b) Neither party will have the right to indemnification, payment of
Damages (as defined below) or other remedy based on any matter which was
disclosed in the Disclosure Schedule or any representation, warranty, covenant
or obligation from the other party to the extent that the party seeking
indemnification, Damages or any other remedy had actual knowledge prior to the
Closing Date of the breach of any such representation, warranty, covenant or
obligation; provided that if any such breach was disclosed in the Disclosure
Schedule, such disclosure is complete in all material respects.
11.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER
(a) Seller will indemnify and hold harmless TKOG, Buyer and their
respective representatives (including all officers and directors), stockholders,
controlling persons and Affiliates (collectively, the "INDEMNIFIED PERSONS")
for, and will pay to the Indemnified Persons the amount of, any loss, liability,
claim, damage (including incidental and consequential damages), expense
(including costs of investigation and defense and reasonable attorneys' and
experts' fees) or diminution of value, whether or not involving a third-party
claim (collectively, "DAMAGES"), arising, directly or indirectly, from or in
connection with:
(i) any breach of any representation or warranty made by Seller
in this Agreement, the Disclosure Schedule, or any other certificate or document
delivered by Seller pursuant to this Agreement;
(ii) any breach by Seller of any covenant or obligation of Seller
in this Agreement;
(iii) any claim based upon fraud;
(iv) any unpaid or past due Taxes for the Pre-Closing Period,
except for those Taxes reserved in the Financial Statements or set forth in
Section 10.4 of the Disclosure Schedule;
(v) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Seller or the Company in
connection with the transactions contemplated hereby; and
(vi) any liability or obligation of any nature (whether absolute,
accrued or contingent) with respect or relating to or arising out of or in
connection with "Ban the Xxxx, Inc." or PSI, Inc.
(b) Notwithstanding anything in this Section 11.2 to the contrary,
Seller shall not have any obligation to indemnify TKOG and Buyer for any Damages
resulting from the breach of any representation or warranty of Seller contained
in Section 3 of this Agreement (other
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than the representations and warranties contained in Section 3.23(b)): (i)
until TKOG or Buyer has suffered aggregate Damages, by reason of all such
breaches (excluding breaches or series of related breaches resulting in Damages
of less than $10,000 (the "MINIMUM CLAIM AMOUNT")), in excess of $250,000 (the
"BASKET"); provided that once TKOG's or Buyer's aggregate Damages exceed the
Basket, Seller shall indemnify TKOG and Buyer for all Damages suffered by TKOG
or Buyer in excess of $125,000, and (ii) to the extent the aggregate Damages
TKOG or Buyer has suffered by reason of all such breaches of representations and
warranties of Seller in this Agreement or in any Schedule or certificate
delivered pursuant hereto exceed $2,000,000 (the "CAP"), in the absence of fraud
or intentional misrepresentation, Seller will have no obligation to indemnify
TKOG or Buyer for further Damages in excess of the Cap. For purposes of
determining whether a breach of any representation or warranty of Seller
contained in Section 3 of this Agreement has occurred and results in Damages in
excess of the Minimum Claim Amount, the Basket or the Cap, any requirement in
any representation or warranty that an event or fact be material, have a
Material Adverse Effect or be qualified to Seller's Knowledge in order for such
event or fact to constitute a breach of such representation or warranty (a
"MATERIALITY CONDITION") shall be ignored, and if each of the claims for
indemnification for breaches of representation or warranty that are subject to
the Minimum Claim Amount exceeds the Minimum Claim Amount and the aggregate of
all such claims exceeds the Basket, in each case ignoring all Materiality
Conditions, TKOG and Buyer shall be indemnified in accordance with Section 11
hereof.
(c) The remedies provided in this Section 11.2 will not be exclusive of
or limit any other remedies that may be available to TKOG, Buyer or the other
Indemnified Persons.
(d) Seller shall have no claim against the Company for contribution or
otherwise in the event he makes a payment of Damages pursuant to this Section
11.2.
11.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY TKOG AND BUYER
TKOG will indemnify and hold harmless Seller and his heirs, estate and
personal representatives ("SELLER PARTY") for, and will pay to Seller Party the
amount of any Damages arising, directly or indirectly, from or in connection
with, (a) any breach of any representation or warranty made by TKOG or Buyer in
this Agreement or in any certificate delivered by TKOG or Buyer pursuant to this
Agreement, (b) any breach by TKOG or Buyer of any covenant or obligation of TKOG
or Buyer in this Agreement, (c) any claim based upon fraud, (d) any claim by any
Person for brokerage or finder's fees or commissions or similar payments based
upon any agreement or understanding alleged to have been made by such Person
with TKOG or Buyer in connection with the transactions contemplated hereby, or
(e) any obligation or liability of the Company under the agreements specified in
Section 11.3 of the Disclosure Schedule as approved by TKOG. The remedies
provided in this Section 11.3 will not be exclusive of or limit any other
remedies that may be available to Seller Party.
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11.4 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
Promptly after receipt by an indemnified party of notice of the
commencement of any proceeding against it, such indemnified party will, if a
claim is to be made against an indemnifying party, give notice to the
indemnifying party of the commencement of such claim, but the failure to notify
the indemnifying party will not relieve the indemnifying party of any liability
that it may have to any indemnified party, except to the extent that the
indemnifying party demonstrates that the defense of such action is materially
prejudiced by the indemnified party's failure to give such notice.
12. GENERAL PROVISIONS
12.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution and performance of this Agreement, including all fees and
expenses of agents, representatives, counsel and accountants. Seller will cause
the Company not to incur any out-of-pocket expenses in connection with this
Agreement. Notwithstanding the foregoing, following the Effective Time, the
Company shall reimburse Seller within thirty (30) days after presentment for
Seller's reasonable attorney's fees, accounting fees, other reasonable
consulting fees and other reasonable out of pocket costs associated with the
consummation of the transactions contemplated hereby, up to an aggregate of
$210,000.
12.2 PUBLIC ANNOUNCEMENTS
Unless required by law or by the NASDAQ National Market, any public
announcement or similar publicity with respect to this Agreement, the Merger or
the other transactions contemplated hereby will be issued, if at all, at such
time and in such manner as TKOG determines with the concurrence of Seller.
Prior to the Effective Time, Seller and the Company shall keep this Agreement
strictly confidential and may not make any disclosure of this Agreement to any
Person. Seller and TKOG will consult with each other concerning the means by
which the Company's employees, customers and suppliers and others having
dealings with the Company will be informed of this Agreement and the
transactions contemplated hereby, and TKOG may, at its option, be present for
any such communication.
12.3 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by fax (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service, in each case to the
appropriate addresses and fax numbers set forth below (or to such other
addresses and fax numbers as a party may designate by notice to the other
parties):
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Seller: Xxxxxxx Xxxxxxx
0000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Fax No.: (000) 000-0000
with a copy to: Wildman, Harrold, Xxxxx & Xxxxx
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxx Xxxxxxxxx, Esq.
Fax No.: (000) 000-0000
TKOG or Buyer: Xxxxx X. Xxxxxx
Vice President & General Counsel
The Xxxxx-X'Xxxx Company
0000 XxXxxxx Xxxxx
Xxxxxxxxx, Xxxx 00000
Fax No.: (000) 000-0000
with a copy to: Kramer, Levin, Naftalis & Xxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Fax No.: (000) 000-0000
12.4 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of Illinois, County of DuPage, or the United
States District Court for the Northern District of Illinois, and each of the
parties consents to the non-exclusive jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein.
12.5 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
12.6 WAIVER
Neither the failure nor any delay by any party in exercising any right,
power, or privilege under this Agreement or the documents referred to in this
Agreement will operate as
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a waiver of such right, power or privilege.
12.7 ENTIRE AGREEMENT AND MODIFICATION
Except for the Confidentiality Agreement dated March 31, 1998 between
TKOG and the Company, this Agreement supersedes all prior agreements between the
parties with respect to its subject matter (including any correspondence between
TKOG and Seller) and constitutes (along with the documents referred to in this
Agreement) the entire agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement
executed by each of the parties to this Agreement.
12.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without
the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and permitted assigns and the heirs and
personal representatives of the parties hereto. Nothing expressed or referred to
in this Agreement will be construed to give any Person other than the parties to
this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement, except as
contemplated by Sections 6.4 and 11.
12.9 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid
or unenforceable only in part will remain in full force and effect to the extent
not held invalid or unenforceable.
12.10 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All words used in
this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms. References herein to
Sections, Schedules or Exhibits mean and refer to Sections of, and Schedules and
Exhibits to, this Agreement, unless otherwise specified.
12.11 GOVERNING LAW
This Agreement will be governed by the laws of the State of New York
without regard to conflicts of law principles, except that the Merger shall be
governed by the IBCA.
12.12 COUNTERPARTS
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This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
12.13 GUARANTEE
TKOG guarantees the full and prompt performance of Buyer pursuant to this
Agreement. Seller shall not be required to exhaust any remedies it may have
against Buyer before proceeding directly against TKOG.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
THE XXXXX-X'XXXX COMPANY
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
XXXXX-X'XXXX ACQUISITION CO., INC.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
KIZOREK, INC.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
--------------------------------
Xxxxxxx Xxxxxxx
EXHIBITS
2.9(a)(i) Form of Employment Agreement
2.9(a)(ii) Opinion of Seller's counsel
2.9(b)(iii) Opinion of Buyer's counsel
5.10 Form of Deferred Compensation Plan
5.11(a) List of Employees
5.11(b) Terms of Employment Agreement
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EXHIBIT 2.9(a)(ii)
Opinion of Counsel to Seller
1. The Company is a corporation organized, validly existing and in good
standing under the laws of Illinois, with full corporate power and authority to
own its properties and to engage in its business as presently conducted, and is
duly qualified and in good standing as a foreign corporation under the laws of
each other jurisdiction in which it is authorized to do business.
2. The authorized capital stock of the Company consists of 100 shares
of common stock, $1.00 par value, of which 10 shares have been duly authorized
and are validly issued and outstanding, fully paid and nonassessable. Seller is
the record and beneficial owner and holder of all of the Shares, free and clear
of all Encumbrances.
3. Except for the Shares, to the best of our knowledge, after
reasonable inquiry, there are no outstanding shares of capital stock of the
Company and there are no outstanding or authorized options, warrants, calls,
rights, commitments, conversion rights or agreements of any character to which
the Company or Seller is a party or by which either the Company or Seller is
bound which could require the Company to issue, deliver, sell or otherwise
transfer or cause to be issued, delivered, sold, transferred or offered for sale
or transfer, any shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company or
that could require either the Company or Seller to grant, extend or enter into
any such option, warrant, call, right, commitment, conversion right or
agreement. To the best of our knowledge, after reasonable inquiry, there are no
voting trusts or other agreements or understandings to which either the Company
or Seller is a party with respect to the transfer, voting or registration of the
capital stock of the Company. To the best of our knowledge, after reasonable
inquiry, there are no Contracts relating to the issuance, sale or transfer of
any equity securities or other securities of the Company.
4. The Agreement and the Employment Agreement have been duly executed
and delivered by Seller and are legal, valid and binding obligations of Seller,
enforceable against him in accordance with the respective terms of such
Agreements. The execution and delivery by the Company of the Agreement and
consummation by the Company of the Merger and the other transactions
contemplated by the Agreement have been duly authorized by all necessary
corporate action of the Company. The Agreement is a legal, valid and binding
obligation of the Company, enforceable against it in accordance with the terms
of the Agreement.
5. The Merger has been approved by all required action of the Company
and its shareholders and upon the filing of the Articles of Merger, the Merger
will be effective, Buyer will be merged with and into the Company pursuant to
the Agreement and the Company will be a wholly-owned subsidiary of TKOG.
6. Neither the execution and delivery by the Seller or the Company of
the Agreement or the Employment Agreement nor the consummation by them of the
Merger or
any of the other transactions contemplated by the Agreement and the Employment
Agreement (a) violates any provision of the Organizational Documents of the
Company, (b) breaches or constitutes a default (or an event that, with notice or
lapse of time or both, would constitute a default) under, or results in the
termination of, or accelerates the performance required by, or causes the
acceleration of the maturity of any debt or obligation pursuant to, or results
in the creation or imposition of any lien, claim or encumbrance upon any
property or assets of the Company under, any Contract, of which we are aware, to
which the Company or Seller is a party, or to which any of the properties or
assets of the Company are subject, (c) violates (i) any statute, regulation or
rule (provided that no opinion is given in this paragraph as to federal or state
securities laws) applicable to Seller or the Company, or (ii) any judgment,
decree or order of any court or other governmental body, of which we are aware,
applicable to the Company, or (d) requires the consent, approval or
authorization of, or declaration, filing or registration with, any governmental
body of the State of Illinois or the United States of America (other than filing
the Articles of Merger with the Secretary of State of the State of Illinois).
EXHIBIT 2.9(b)(iii)
Opinion of Counsel to Buyer
1. TKOG is a corporation organized, validly existing and in good
standing under the laws of Ohio, with full corporate power and authority to
enter into the Agreement and to perform its obligations under the Agreement.
Buyer is a corporation organized, validly existing and in good standing under
the laws of Illinois.
2. The TKOG Shares have been duly authorized, and upon the Effective
Time such shares will be validly issued, fully paid and nonassessable.
3. The execution and delivery by TKOG of the Agreement and the
Employment Agreement and the consummation by TKOG of the transactions
contemplated thereby have been duly authorized by all necessary corporate action
of TKOG. The Agreement and the Employment Agreement are legal, valid and
binding obligations of TKOG, enforceable against TKOG in accordance with the
respective terms of such Agreements. The execution and delivery by Buyer of the
Agreement and consummation by Buyer of the Merger and the other transactions
contemplated by the Agreement have been duly authorized by all necessary
corporate action of Buyer. The Agreement is a legal, valid and binding
obligation of Buyer, enforceable against it in accordance with the terms of the
Agreement.
4. Neither the execution and delivery by TKOG or Buyer of the Agreement
or the Employment Agreement nor the consummation by them of the Merger or any of
the other transactions contemplated by the Agreement and the Employment
Agreement (a) violates any provision of the Organizational Documents of TKOG or
Buyer, (b) violates (i) any statute, regulation or rule of the State of New York
or the United States of America (provided that no opinion is given in this
paragraph as to federal or state securities laws), or (ii) any judgment, decree
or order of any court or other governmental body, of which we are aware,
applicable to TKOG or Buyer, or (c) requires the consent, approval or
authorization of, or declaration, filing or registration with, any governmental
body of the State of New York or the United States of America.
Exhibit 5.11(a)
List of Employees
