1
EXHIBIT 10.2
TKZ HOLDING CORP.,
TUKAIZ LITHO, INC.
XXXXX XXXXXX, XX.
AND
TUKAIZ COMMUNICATIONS, L.L.C.
MEMBERSHIP INTEREST AGREEMENT
Dated as of January 31, 1997
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TABLE OF CONTENTS
Page
ARTICLE I - PARTIES; CLOSING
1.01 Parties 1
1.02 Closing 1
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF XXXXXX
2.01 Power and Authority of Xxxxxx 2
2.02 Enforceability 2
2.03 Absence of Conflicts 3
2.04 Litigation and Claims Against Xxxxxx 3
2.05 Brokers' Fees 3
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF XXXXXX AND TUKAIZ
3.01 Organization and Authority 3
3.02 Capitalization 3
3.03 Due Authorization 4
3.04 Absence of Conflicts 4
3.05 Financial Information 4
3.06 Absence of Material Changes 5
3.07 Title to Properties; Liens 5
3.08 Contracts and Agreements 6
3.09 Customers and Suppliers 6
3.10 Employment Agreements 6
3.11 Employee Benefit Plans 7
3.12 Patents, Trademarks, Copyrights, Licenses and
Secrecy Agreements 8
3.13 Trade Secrets 9
3.14 Governmental Licenses and Permits 9
3.15 Indebtedness and Commitments 9
3.16 Taxes 9
3.17 Insurance 11
3.18 Litigation and Claims 11
3.19 Compliance with Laws 11
3.20 Environmental and Occupational Safety Matters 11
3.21 Brokers' Fees 12
3.22 Contingencies 12
3.23 Employee Severance Claims 12
3.24 Bank Accounts 12
3.25 Accounts Receivable 12
3.26 Condition of Tangible Assets 12
3.27 Inventory 12
3.28 Hazardous Wastes 13
3.29 Warranty Expense 13
3.30 Powers-of-Attorney 13
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Page
3.31 Books and Records 13
3.32 No Undisclosed Information 13
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF TKZ
4.01 Organization and Authority 13
4.02 Due Authorization 13
4.03 Absence of Conflicts 14
4.04 Litigation and Claims Against TKZ 14
4.05 Brokers' Fees 14
ARTICLE V - COVENANTS OF XXXXXX
5.01 Certain Changes and Conduct of Business 15
5.02 Access to Information 16
5.03 Governmental Approvals 16
5.04 Consents and Approvals 16
5.05 All Reasonable Efforts 16
5.06 Exclusivity 16
5.07 Disclosure Schedule 16
5.08 Loans with Tukaiz 16
ARTICLE VI - COVENANTS OF TKZ
6.01 Information Kept Confidential 17
6.02 Governmental Approvals 17
6.03 Consents and Approvals 17
6.04 All Reasonable Efforts 18
ARTICLE VII - CONDITIONS OF CLOSING
7.01 Preamble 18
7.02 Conditions to Obligations All Parties 18
7.03 Conditions to Obligations of TKZ 18
7.04 Conditions to Obligations of Xxxxxx 20
ARTICLE VIII - PUT/CALL PROVISIONS
8.01 Certain Put/Call Definitions 20
8.02 Put/Call Rights 21
8.03 Closing of Put/Call Rights 22
8.04 Operation of Business 22
ARTICLE IX - CORPORATE GOVERNANCE; TAX NOTE
9.01 Board of Managers 22
9.02 TKZ Note 22
9.03 Tax Obligations 23
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Page
ARTICLE X - MEMBERSHIP INTEREST TRANSFER RESTRICTIONS
10.01 Restriction on Transfer of Membership Interests 23
10.02 Voluntary Sales 23
10.03 Sale of Membership Interests Upon Death 24
10.04 Payment of Purchase Price 24
10.05 Endorsement of Membership Interest Certificates 24
10.06 Other Members 25
10.07 Term 25
10.08 Specific Covenants of the Company 25
ARTICLE XI - REMEDIES OF BREACHES OF THIS AGREEMENT
11.01 Survival of Representations, Warranties and
Covenants 25
11.02 Indemnification Provisions for Benefit
of TKZ 25
11.03 Indemnification Provisions for Benefit
of Xxxxxx 25
11.04 Notice of Claim for Indemnification 25
11.05 Matters Involving Third Parties 26
11.06 Treatment of Indemnification Payments 26
11.07 Other Indemnification Provisions 26
ARTICLE XII - DEFINITIONS 27
ARTICLE XIII - MISCELLANEOUS
13.01 Termination 31
13.02 Further Assurances; Books and Records 31
13.03 Press Releases and Public Announcements 31
13.04 Expenses 32
13.05 Governing Law; Submission to Jurisdiction 32
13.06 Entire Agreement; Modification; Waiver 32
13.07 Notices 32
13.08 Counterparts 33
13.09 Matters of Construction, Interpretation and
the Like 33
13.10 No Third-Party Beneficiaries 33
13.11 Succession and Assignment 33
EXHIBITS
Exhibit A Form of Opinion of Counsel to Xxxxxx and the Company
Exhibit B Form of Note
Exhibit C Form of Employment Agreement
Exhibit D Form of Lease
Exhibit E Form of Subordinated Convertible Note
Exhibit F Form of Tax Note
Exhibit G Form of Opinion of Counsel to Xxxxxxxx
Exhibit H Form of Guaranty
Exhibit I Form of Release
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SCHEDULES
Schedule 2.03 - Third Party Consents for Xxxxxx
Schedule 3.01 - Subsidiaries and Investments; Foreign Jurisdictions
Schedule 3.02 - Capitalization
Schedule 3.04 - Third Party Consents for the Company
Schedule 3.05 - Financial Statements
Schedule 3.06 - Changes Since January 31, 1996
Schedule 3.07(a) - Real Property
Schedule 3.07(b) - Buildings and Plants
Schedule 3.07(c) - Other Assets
Schedule 3.08 - Contracts and Agreements
Schedule 3.09 - Customers and Suppliers
Schedule 3.10 - Employment and Collective Bargaining Agreements
Schedule 3.11 - Employee Benefit Plans
Schedule 3.12 - Patents, Trademarks and Copyrights
Schedule 3.13 - Trade Secrets
Schedule 3.14 - Governmental Licenses and Permits
Schedule 3.15 - Indebtedness and Commitments
Schedule 3.16 - Taxes
Schedule 3.17 - Insurance
Schedule 3.18 - Litigation and Claims
Schedule 3.19 - Compliance with Laws
Schedule 3.20 - Environmental and Occupational Safety Matters
Schedule 3.24 - Bank Accounts
Schedule 3.30 - Powers-of-Attorney
6 MEMBERSHIP INTEREST AGREEMENT
THIS MEMBERSHIP INTEREST AGREEMENT (this "Agreement") dated as of January 31,
1997, among TKZ HOLDING CORP., a Pennsylvania corporation ("TKZ") and a
wholly-owned subsidiary of Xxxxxxxx International Corporation, a Pennsylvania
corporation ("Xxxxxxxx"), TUKAIZ LITHO, INC., an Illinois corporation
("Tukaiz"), XXXXX XXXXXX, XX., an individual 50% shareholder of Tukaiz
("Xxxxxx") and, upon its later signature hereto as set forth in Section 1.01
below, TUKAIZ COMMUNICATIONS, L.L.C., an Illinois limited liability company
(the "Company"). TKZ and Tukaiz are herein sometimes referred to individually
as "Member" and together as the "Members". Capitalized terms used in this
Agreement which are not otherwise defined herein are defined in Article XII
hereof.
WITNESSETH:
WHEREAS, Xxxxxx, along with Xxxxxxx Xxxxxxx ("Vitallo"), own all of the
outstanding capital stock of Tukaiz, which is at present Common Stock, without
par value (the "Common Stock");
WHEREAS, concurrently with the execution of this Agreement, TKZ is entering
into a transaction to purchase a 50% interest in the assets and liabilities of
Tukaiz pursuant to an Asset Purchase Agreement of even date herewith among
TKZ, Tukaiz and Vitallo (the "Asset Purchase Agreement"), the closing of which
shall be held at of the same time as the Closing hereunder;
WHEREAS, at the Closing TKZ and Tukaiz then intend to contribute all the
assets of Tukaiz into the Company in exchange for 50% of the Membership
Interests for each of TKZ and Tukaiz;
WHEREAS, this Agreement is intended to, among other things, (i) set forth the
terms of a put/call arrangement for the purchase by TKZ of Xxxxxx'x Membership
Interests; (ii) provide for a line of credit to be supplied by the Company to
Xxxxxx after the Closing; (iii) provide for an employment agreement to be
entered into by Xxxxxx at the Closing; (iv) set forth certain matters of
corporate governance between the Members; (v) set forth certain matters
regarding a Subordinated Convertible Note to be issued by the Company in favor
of Venetian Investment Corporation, a Delaware corporation and a wholly owned
subsidiary of Xxxxxxxx, in exchange for a cash payment to the Company of
$5,500,000 to be used to prepay all existing non-trade debt of the Company
(other than that owed to Xxxxxx or Xxxxxxx) which is prepayable without
penalty, with the remainder to be used as working capital for the Company;
(vi) set forth certain matters concerning the Tax Note to be issued by Xxxxxx
in favor of TKZ; and (vii) set forth certain restrictions on the transfer of
Membership Interests; and
WHEREAS, the Members also desire to effectively control the ultimate
management of the Company for their mutual interests and to protect against
the divisive results of outsiders acquiring Membership Interests who may not
prove compatible with the remaining Members by providing for the rights of
first refusal set forth herein;
NOW, THEREFORE, for and in consideration of their mutual covenants herein
contained, and with the intent to be legally bound hereby, the parties agree
as follows:
ARTICLE I
Parties; Closing
1.01 Parties. TKZ, Tukaiz and Xxxxxx acknowledge and agree that the Company
has not been organized at the time that such parties are signing this
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Agreement and therefore has not signed this Agreement, but this Agreement
nevertheless is a binding and enforceable agreement among the signing parties
as to their respective rights and obligations hereunder. The Company shall
sign this Agreement at the Closing and thereby become bound by the rights and
obligations hereunder, and at that time this Agreement shall remain in full
force and effect without further action by any other party hereto.
1.02 Closing. Subject to the terms and conditions set forth herein, the
closing of this Agreement and the transactions contemplated hereby (the
"Closing") shall be held at the offices of Xxxx Xxxxx Xxxx & XxXxxx, 000 Xxxxx
Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxxxx at 10:00 a.m., prevailing Pittsburgh time, on
January 31, 1997 or such other date mutually agreeable to the parties which is
following the satisfaction of the conditions contained in Article VII hereof
(the date of the Closing is referred to herein as the "Closing Date"). If the
Closing Date is January 31, 1997, such Closing shall be deemed to be effective
as 12:01 a.m. on February 1, 1997.
ARTICLE II
Representations and Warranties of Xxxxxx
Xxxxxx represents and warrants to TKZ that the statements contained in this
Article II are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Article II), except in each case as set forth in the
Disclosure Schedule.
2.01 Power and Authority of Xxxxxx. Xxxxxx has the unrestricted right and
power to execute and deliver this Agreement and the other Transaction
Documents to which he is a party and to perform his obligations hereunder and
thereunder.
2.02 Enforceability. This Agreement and each of the other Transaction
Documents to which Xxxxxx is a party constitute the legal, valid and binding
obligations of Xxxxxx enforceable against Xxxxxx in accordance with their
respective terms, subject to bankruptcy, insolvency or other similar laws of
general application affecting creditors' rights and general principles of
equity.
2.03 Absence of Conflicts. Neither the execution and delivery by Xxxxxx of
this Agreement or the other Transaction Documents to which Xxxxxx is a party,
the compliance by Xxxxxx with the terms and conditions hereof and thereof, nor
the consummation by Xxxxxx of the transactions contemplated hereby and thereby
will:
(a) violate any provision of, or require any consent, authorization or
approval under, any law or administrative regulation or any judicial,
administrative or arbitration order, award, judgment, writ, injunction or
decree applicable to, or any governmental permit or license issued to, or
notice to or filing with a governmental body with respect to Xxxxxx,
(b) conflict with, result in a breach of, constitute a default under (whether
with notice or the lapse of time or both), or accelerate or permit the
acceleration of the performance required by, or require any consent,
authorization or approval under, any indenture, mortgage, Lien, lease,
agreement or instrument to which Xxxxxx is a party or by which Xxxxxx is bound
or to which any property of Xxxxxx is subject,
(c) result in the creation of any Lien upon any of the assets of Xxxxxx, or
(d) give to others any material rights or interests (including rights of
purchase, termination, cancellation or acceleration), under any such
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indenture, mortgage, Lien, lease, agreement or instrument,
except that prior to the Closing of the transactions contemplated hereby the
consents, approvals and filings referred to in Schedule 2.03 have to be
obtained or made.
2.04 Litigation and Claims Against Xxxxxx. There are no actions, suits or
proceedings pending or threatened against Xxxxxx which could reasonably be
expected, if adversely determined, to delay, prevent or hinder the
consummation of the transactions contemplated by this Agreement.
2.05 Brokers' Fees. Xxxxxx has not incurred any liability for brokerage
fees, finder's fees,agent's commissions or other similar forms of compensation
in connection with this Agreement or any transaction contemplated hereby.
ARTICLE III
Representations and Warranties of Xxxxxx and Tukaiz
Each of Xxxxxx and Tukaiz represents and warrants to TKZ that the statements
contained in this Article III are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article III), except in each case as set forth in
the Disclosure Schedule.
3.01 Organization and Authority. Tukaiz is a corporation duly organized,
validly existing and in good standing under the laws of the State of Illinois.
Tukaiz (i) has full corporate power and authority to own and lease the
property and assets it now owns and leases and to carry on its business as and
where such property and assets are now owned or leased and such business is
now conducted and (ii) is duly licensed or qualified to do business as a
foreign corporation and is in good standing in all jurisdictions in which the
character of the property and assets now owned or leased by it or the nature
of the business now conducted by it requires it to be so licensed or qualified
and (iii) except as set forth on Schedule 3.01, has not owned and does not now
own directly or indirectly any debt or equity securities issued by any other
corporation, or any interest in any partnership, joint venture or other
business enterprise. Seller is not authorized to do business as a foreign
corporation in any jurisdiction. The copies of the articles of incorporation
and bylaws of the Company, which have previously been delivered to TKZ, are
complete and correct and in either case have not been amended since prior to
June 1, 1996. Tukaiz has the corporate power and authority to execute and
deliver this Agreement and the other Transaction Documents to which it is a
party and to perform its obligations hereunder and thereunder. There are no
dissolution, liquidation or bankruptcy proceedings pending, contemplated by or
threatened against the Company.
3.02 Capitalization. The entire authorized capital stock of Tukaiz, and the
capital stock of Tukaiz which is as of the date of this Agreement issued and
outstanding, is as set forth on Schedule 3.02. All such outstanding shares of
capital stock of Tukaiz as set forth on Schedule 3.02 are validly issued,
fully paid and nonassessable and are owned beneficially and of record by the
persons set forth on such Schedule, free and clear of all Liens. Except as
set forth on Schedule 3.02, there are outstanding no securities,
subscriptions, options, warrants, phantom stock rights, calls or rights of any
kind, or rights with respect to convertible debt, issued or granted by, or
binding upon, Tukaiz or Xxxxxx to purchase or otherwise acquire any shares of
capital stock of Tukaiz, or other equity securities or equity interests in
Tukaiz.
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3.03 Due Authorization. The execution and delivery by Tukaiz of this
Agreement and the other Transaction Documents to which it is a party, the
performance by it of all the terms and conditions hereof and thereof to be
performed by it and the consummation of the transactions contemplated hereby
and thereby, have been duly authorized and approved by all necessary corporate
proceedings on the part of Tukaiz. This Agreement and each of the other
Transaction Documents to which Tukaiz is a party constitute the legal, valid
and binding obligations of Tukaiz enforceable against Company in accordance
with their respective terms, subject to bankruptcy, insolvency or other
similar laws of general application affecting creditors' rights and general
principles of equity.
3.04 Absence of Conflicts. Neither the execution and delivery by Tukaiz of
this Agreement or the other Transaction Documents to which Company is a party,
the compliance by Company with the terms and conditions hereof and thereof,
nor the consummation by Tukaiz of the transactions contemplated hereby and
thereby will:
(a) conflict with any of the terms, conditions or provisions of the articles
of incorporation or bylaws of Tukaiz,
(b) violate any provision of, or require any consent, authorization or
approval under, any law or administrative regulation or any judicial,
administrative or arbitration order, award, judgment, writ, injunction or
decree applicable to, or any governmental permit or license issued to, or
notice to or filing with a governmental body with respect to Tukaiz,
(c) conflict with, result in a breach of, constitute a default under (whether
with notice or the lapse of time or both), or accelerate or permit the
acceleration of the performance required by, or require any consent,
authorization or approval under, any indenture, mortgage, Lien, lease,
agreement or instrument to which Tukaiz is a party or by which it is bound or
to which any property of Tukaiz is subject,
(d) result in the creation of any Lien upon any of the assets of Tukaiz, or
(e) give to others any material rights or interests (including rights of
purchase, termination, cancellation or acceleration), under any such
indenture, mortgage, Lien, lease, agreement or instrument,
except that prior to the Closing of the transactions contemplated hereby the
consents, approvals and filings referred to in Schedule 3.04 have to be
obtained or made.
3.05 Financial Information. Xxxxxx has heretofore furnished to TKZ the
financial statements and information with respect to Tukaiz described on
Schedule 3.05 (the "Financial Statements"). The Financial Statements were
prepared in accordance with generally accepted accounting principles
consistently applied and fairly present:
(a) the consolidated financial position of Tukaiz as at October 31, 1996 and
as of January 31, 1996, 1995 and 1994, and
(b) the consolidated results of operations and changes in financial position
of Tukaiz for the period ending October 31, 1996 and for the years ended
January 31, 1996, 1995 and 1994.
The books and records of Tukaiz from which the Financial Statements were
prepared properly and accurately record the transactions and activities which
they purport to record.
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3.06 Absence of Material Changes. Except as set forth in Schedule 3.06 or
the Financial Statements, since January 31, 1996 there has not been:
(a) any Material Adverse Effect with respect to Tukaiz, or any event,
condition or state of facts which could be reasonably expected (i) to have a
Material Adverse Effect on Tukaiz, or (ii) to impair materially the ability of
Tukaiz or Xxxxxx to perform its obligations under this Agreement,
(b) any damage, destruction, condemnation or loss, whether covered by
insurance or not, which has had, or could reasonably be expected to have, a
Material Adverse Effect on Tukaiz,
(c) any strikes or work stoppages against the operations of Tukaiz relating
to the conduct of its business or any injunction, order, writ or decree of any
court or other governmental agency or instrumentality against such strikes or
work stoppages, or
(d) any action taken by Tukaiz of the nature referred to in Section 5.01
hereof.
3.07 Title to Properties; Liens.
(a) Real Property. Tukaiz does not own any real property in fee. Schedule
3.07(a) identifies all interests of Tukaiz in leaseholds under leases and
material easements and other material interests in real property owned by
Tukaiz (the "Real Property"). Except for the Real Property, no other real
property is used in the business of Tukaiz. Schedule 3.07(a) identifies, and
Xxxxxx has heretofore made available to TKZ true and complete copies of, all
leases or other instruments, in each case as in effect on the date hereof (the
"Real Property Instruments"), which evidence the interests of Tukaiz in the
Real Property. Except as set forth in Schedule 3.07(a), all of such leases
and other instruments are in full force and effect and there is no material
default, nor any event which with notice or the lapse of time or both will
become a material default, under any such leases or other instruments, by
Tukaiz or, to the knowledge of Xxxxxx, any other party thereto. To the best
of Xxxxxx'x and Tukaiz's knowledge, the Real Property includes all material
easements and rights-of-way necessary for present access to and use of the
Real Property. The Real Property conforms to all applicable zoning laws and
regulations and no notice of violation of any such laws or regulations
relating to any of the Real Property has been received by Tukaiz or Xxxxxx.
No condemnation proceedings are proposed, threatened or pending which would
materially affect the Real Property.
(b) Buildings and Equipment. Schedule 3.07(b) hereto identifies separately:
(i) all buildings in which Tukaiz has an interest or which are used in the
business of Company,
(ii) all machinery and equipment owned or leased by Tukaiz as lessee or used
in its business having a current replacement cost in excess of $10,000 and the
location thereof (the "Equipment"),
(iii) all leases and other instruments which evidence the interests of Tukaiz
in Equipment and any other equipment leases under which Company is lessee and
which provide for aggregate rental payments after January 1, 1996 in excess of
$10,000 (the "Equipment Instruments") and
(iv) any other equipment used but not owned or leased by Tukaiz.
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Xxxxxx has heretofore delivered to TKZ true and complete copies of all
Equipment Instruments, in each case as in effect on the date hereof. Except
as set forth in Schedule 3.07(b), all such Equipment Instruments are in full
force and effect and there is no material default, nor any event which with
notice or the lapse of time or both will become a material default, under any
such Equipment Instruments, by Tukaiz or, to the knowledge of Xxxxxx, any
other party thereto. Except as set forth in Schedule 3.07(b), Tukaiz has good
title to the Equipment it owns, free and clear of any and all Liens other than
Permitted Liens. The buildings and plants referred to in clause (i) of this
Section 3.07(b) and the Equipment do not encroach on the property of others.
(c) Other Assets. Except as set forth in Schedule 3.07(c), all other assets
of Tukaiz, including all assets shown on the consolidated balance sheet of
Company as at January 31, 1996 described in Section 3.05 hereof (other than
assets disposed of in the ordinary course of business since such date) are
owned by Tukaiz , as the case may be, free and clear of any and all Liens
other than Permitted Liens.
3.08 Contracts and Agreements. Schedule 3.08 identifies all of the
contracts, commitments and agreements of Tukaiz, not otherwise identified in
any other Schedule, which
(i) individually or in the aggregate involve purchases after the date hereof
of more than $10,000 from any one seller or group of related sellers,
(ii) individually or in the aggregate involve sales or leases after the date
hereof of more than $10,000 to any one buyer or lessee or group of related
buyers or lessees,
(iii) are contracts, commitments or agreements or involve transactions, with
any Affiliate of Tukaiz,
(iv) are contracts, commitments and agreements not in the ordinary course of
business of Tukaiz, or
(v) are contracts, commitments or agreements otherwise material to the
business of Tukaiz.
The contracts, commitments and agreements listed on Schedule 3.08 are
hereinafter called the "Contracts". Xxxxxx has heretofore delivered to TKZ
true and complete copies of all Contracts as in effect on the date hereof.
Except as set forth in Schedule 3.08, all Contracts are in full force and
effect (other than those which have been duly performed) and there is no
material default, nor any event which with notice or the lapse of time or both
will become a material default, under any of the Contracts, by Tukaiz or, to
the knowledge of Xxxxxx, any other party thereto.
3.09 Customers and Suppliers. Schedule 3.09 identifies each of the customers
and suppliers of Tukaiz whose purchases from or sales to Company constituted 5
percent or more of the combined net revenues or net purchases, respectively,
of Tukaiz taken as a whole during the year ended January 31, 1996, and during
the nine fiscal months ended October 31, 1996, showing, with respect to each,
the name and address, dollar volume and nature of the relationship (including
the principal categories of products leased or sold).
3.10. Employment Agreements. Schedule 3.10 identifies
(a) each management or employment contract or contract for personal services
with any officer, consultant, salesman or other non-union employee or agent of
Tukaiz which is not by its terms terminable at will or on less than 30 days'
notice without penalty,
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(b) each officer, consultant, salesman or other non-union employee or agent
of Tukaiz receiving as at the date hereof compensation (including bonuses and
commissions, if any) at an annual rate of $50,000 or more, specifying the rate
of such compensation (including such bonuses and commissions) and the
positions held by such persons, and
(c) each collective bargaining agreement or other agreement covering
unionized or hourly employees to which Tukaiz is a party or which covers
employees of Tukaiz .
The contracts and agreements identified on Schedule 3.10 are hereinafter
called the "Employment Contracts." Xxxxxx has heretofore made available to
TKZ true and complete copies of each of the Employment Contracts as in effect
on the date hereof. Except as listed on Schedule 3.10, there are no material
disputes presently subject to any grievance procedure, arbitration or
litigation under the Employment Contracts nor is there any material default,
or any event which with notice or the lapse of time or both will become a
material default, under the Employment Contracts, by Tukaiz or, to the
knowledge of Xxxxxx, any other party thereto. There are no strikes, lockouts
or work stoppages or slowdowns or, to the knowledge of Xxxxxx, jurisdictional
disputes or organizing activity occurring or threatened with respect to the
business operations of Tukaiz.
3.11 Employee Benefit Plans.
(a) Schedule 3.11 lists each Employee Benefit Plan that Tukaiz maintains or
to which Tukaiz contributes:
(i) Each such Employee Benefit Plan (and each related trust, insurance
contract or fund) complies in form and operation in all respects with the
applicable requirements of ERISA, the Code and other applicable Laws.
(ii) All required reports and descriptions (including Form 5500 Annual
Reports, Summary Annual Reports, PBGC-1's and Summary Plan Descriptions) have
been filed or distributed appropriately with respect to each such Employee
Benefit Plan. The requirements of Part 6 of Subtitle B of Title I of ERISA
and of Code Section 4980B have been met with respect to each such Employee
Benefit Plan which is an Employee Welfare Benefit Plan.
(iii) All contributions (including all employer contributions and employee
salary reduction contributions) which are due have been paid to each such
Employee Benefit Plan which is an Employee Pension Benefit Plan, and all
contributions for any period ending on or before the Closing Date which are
not yet due have been or will be paid to each such Employee Pension Benefit
Plan before the Closing Date or within 60 days after the Closing Date. All
premiums or other payments for all periods ending on or before the Closing
Date have been paid, or will be paid before the Closing Date, with respect to
each such Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(iv) Each such Employee Benefit Plan which is an Employee Pension Benefit
Plan meets the requirements of a "qualified plan" under Code Section 401(a)
and has received a favorable determination letter from the Internal Revenue
Service.
(v) The market value of assets under each such Employee Benefit Plan which is
an Employee Pension Benefit Plan (other than any Multiemployer Plan) equals or
exceeds the present value of all vested and nonvested Liabilities thereunder,
determined in accordance with PBGC methods, factors and assumptions applicable
to an Employee Pension Benefit Plan terminating on the date for determination.
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(vi) Xxxxxx has delivered to TKZ correct and complete copies of the plan
documents and summary plan descriptions, the most recent determination letter
received from the Internal Revenue Service, the most recent Form 5500 Annual
Report and all related trust agreements, insurance contracts and other funding
agreements which implement each such Employee Benefit Plan.
(b) With respect to each Employee Benefit Plan that Tukaiz maintains or ever
has maintained or to which it contributes, ever has contributed or ever has
been required to contribute:
(i) No such Employee Benefit Plan which is an Employee Pension Benefit Plan
(other than any Multiemployer Plan) has been completely or partially
terminated or been the subject of a Reportable Event as to which notices would
be required to be filed with the PBGC. No proceeding by the PBGC to terminate
any such Employee Pension Benefit Plan (other than any Multiemployer Plan) has
been instituted or, to the knowledge of any of Xxxxxx, threatened.
(ii) There have been no Prohibited Transactions with respect to any such
Employee Benefit Plan. No Fiduciary has any Liability for breach of fiduciary
duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee Benefit Plan.
No action, suit, proceeding, hearing or investigation with respect to the
administration or the investment of the assets of any such Employee Benefit
Plan (other than routine claims for benefits) is pending or, to the knowledge
of Xxxxxx, threatened, except that the former plan administrator is being
investigated for self dealing practices with all of his clients, with respect
to which Seller is not involved in such investigation as a possible defendant.
Xxxxxx has no knowledge of any basis for any such action, suit, proceeding,
hearing or investigation.
(iii) Tukaiz has not incurred, and Xxxxxx has no reason to expect that Tukaiz
will incur, any Liability to the PBGC (other than PBGC premium payments) or
otherwise under Title IV of ERISA (including any withdrawal Liability) or
under the Code with respect to any such Employee Benefit Plan which is an
Employee Pension Benefit Plan.
(c) Tukaiz has not contributed to or been required to contribute to any
Multiemployer Plan, and Tukaiz has no Liability (including withdrawal
Liability) under any Multiemployer Plan.
(d) Tukaiz has not maintained or contributed to or been required to
contribute to any Employee Welfare Benefit Plan providing medical, health or
life insurance or other welfare-type benefits for current or future retired or
terminated employees, their spouses or their dependents (other than in
accordance with Code Section 4980B).
3.12 Patents, Trademarks, Copyrights, Licenses and Secrecy Agreements.
Schedule 3.12 identifies all patents, patent applications, trademarks,
trademark applications, trade names and copyrights owned by Tukaiz and all
patent, trademark, copyright, trade name and technology licenses or secrecy
agreements of Tukaiz. All such patents, trademarks, copyrights and
applications have been duly registered in, filed in or issued by the United
States Patent and Trademark Office, the United States Registrar of Copyrights
or the corresponding offices of other countries, and have been properly
maintained and renewed in accordance with applicable laws and regulations.
Except as disclosed in Schedule 3.12, there is no patent, copyright, trade
name or trademark infringement or similar proceeding pending or, to the
knowledge of Xxxxxx, threatened against Tukaiz. Xxxxxx has no knowledge of
any substantial basis for any contention that
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(a) any of the material patents, trademarks, trade names, copyrights or
applications therefor of Tukaiz are invalid or subject to claim of patent
abuse,
(b) Tukaiz is infringing in any material respect any patents, trademarks,
trade names or copyrights of others,
(c) Tukaiz is violating in any material respect any technology or secrecy
rights of any person, or
(d) any patents, trademarks, trade names, copyrights, technology or secrecy
rights are being used contrary to the provisions of any material licensing or
other agreement.
Schedule 3.12 lists all material licenses and other rights which have been
granted by Tukaiz for the use of any patents, trademarks, trade names,
copyrights, trade secrets and similar rights.
3.13 Trade Secrets. Tukaiz has the right to use, subject to the license and
secrecy agreements listed on Schedule 3.13 hereto, free and clear of any
claims of others (pending or threatened), all trade secrets, customer lists
and technical information being used in the business and operations of Tukaiz
to the extent and on the products on which, or in respect of which, such items
are being used.
3.14 Governmental Licenses and Permits. Schedule 3.14 hereto identifies all
licenses, permits and variances of all United States Federal, state and local
governmental authorities relating to the business and operations of Tukaiz
(the "Permits"). Xxxxxx has heretofore delivered to TKZ true and complete
copies of the Permits as in effect on the date hereof. Except as set forth in
Schedule 3.14, all governmental licenses and permits material to or necessary
in the conduct of the business of Tukaiz have been obtained and are in full
force and effect, and Company is not in material violation of any such
licenses or permits, and no proceeding is pending or threatened to revoke or
limit any thereof.
3.15 Indebtedness and Commitments. Schedule 3.15 hereto identifies each
contract or agreement under which Tukaiz has outstanding any indebtedness,
obligation (including without limitation guarantees) or liability for borrowed
money or the deferred purchase price of property or has the right or
obligation to incur any such indebtedness, obligation or liability (the "Debt
Instruments"). Xxxxxx has heretofore delivered to TKZ true and complete
copies of each of the Debt Instruments as in effect on the date hereof.
Except as set forth in Schedule 3.15, there is no event of default or
condition or event which, with the giving of notice or the lapse of time or
both, could become an event of default under any of the Debt Instruments.
3.16 Taxes. Except as set forth in Schedule 3.16 hereto:
(a) as of the Closing Date, Tukaiz will have prepared and executed and duly
filed when due all United States Federal, state and other Tax Returns required
to be filed by applicable laws and regulations for all periods to and
including periods ending on such date and all Taxes or installments thereof
that are shown to be due on such Tax Returns will have been duly and timely
paid,
(b) with respect to any period for which Tax Returns have not yet been filed,
or for which Taxes are not yet due or owing, Tukaiz has made due and
sufficient current accruals for such Taxes in its financial statements, and
15
Tukaiz has made all required estimated Tax payments sufficient to avoid any
underpayment penalty,
(c) Xxxxxx has furnished to TKZ complete and correct copies of all United
States Federal, state and local income Tax Returns relative to the operations
of Tukaiz for the period beginning January 1, 1988 and ending January 31,
1996, together with complete and correct copies of all reports of United
States Federal, state and local Tax authorities relating to examinations of
such returns,
(d) there are no agreements, waivers or arrangements by Tukaiz for the
extension of the time for the assessment of any material amounts of Tax, and
no power of attorney granted by Tukaiz with respect to any Taxes is currently
in effect. No closing agreement under Section 7121 of the Code or any similar
provision of any state, or local law has been entered into by or with respect
to Tukaiz,
(e) all United States Federal, state and local income Tax Returns of Tukaiz
for each year to and including the year ended December 31, 1993 have been
examined by or accepted as filed with the relevant Tax authorities and any
asserted deficiencies settled and paid,
(f) the consolidated balance sheets of Tukaiz as at January 31, 1996 and
October 31, 1996 adequately provide (either in accruals for Taxes, deductions
from refundable Taxes or in other recorded liability or reserve accounts) for
the payment of all Taxes payable by Tukaiz for the period ended on each such
date and for all periods prior thereto,
(g) there have been no deficiencies proposed as a result of the examination
of any United States Federal, state or other Tax Returns filed by Tukaiz. No
audit or other proceeding by any court, governmental or regulatory authority,
or similar person, is pending or threatened with respect to any Taxes due from
or with respect to Tukaiz or any Tax Return filed by or with respect to
Company, and no assessment of Tax is proposed against Company or any of its
respective assets,
(h) Tukaiz has not filed or consented to the filing of any United States
Federal or state consolidated income Tax Return with any other person,
(i) Tukaiz does not have any liability or potential liability with respect to
any consolidated Tax Return filed or to be filed by any person,
(j) Tukaiz has not consented to the application to it of Section 341(f)(2) of
the Code,
(k) there are no Liens with respect to Taxes upon any of the assets of
Tukaiz, other than Liens with respect to Taxes that are not yet due or remain
payable without penalty or are being contested in good faith and by
appropriate proceedings and for which adequate current reserves have been
established in accordance with generally accepted accounting principles, and
(l) Tukaiz has not been nor is it in violation (or with notice or lapse of
time or both, would be in violation) of any applicable law relating to the
payment or withholding of Taxes. Tukaiz has duly and timely withheld from
employee salaries, wages, and other compensation and paid over to the
appropriate Taxing authorities all amounts required to be so withheld and paid
over for all periods under all applicable laws.
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3.17 Insurance. Schedule 3.17 hereto is a complete and correct list of all
material insurance policies of Tukaiz or by which Tukaiz or any of its
properties or assets is covered, all of which are presently in full force and
effect. Xxxxxx has furnished to TKZ complete and correct copies of such
policies as in effect on the date hereof.
3.18 Litigation and Claims. Except as set forth in Schedule 3.18:
(a) there are no actions, suits or proceedings pending or threatened against
Tukaiz which could reasonably be expected, if adversely determined, to have a
Material Adverse Affect on Tukaiz taken as a whole, or to delay, prevent or
hinder the consummation of the transactions contemplated by this Agreement,
(b) Tukaiz has not been charged with violating or threatened with a charge of
violating, nor is it under investigation with respect to a possible violation
of, any provision of any United States Federal, state, local or foreign law or
administrative ruling or regulation, and
(c) Tukaiz has not received any currently effective notice of any default,
nor is in default, under any order, writ, injunction, decree or permit of any
court or of any commission or other administrative or regulatory agency.
To the knowledge of Xxxxxx, except as set forth in Schedule 3.18, there is no
investigation of the business or properties of Tukaiz being conducted by any
governmental authority or agency which, individually or in the aggregate,
could reasonably be expected to result in any action which might have a
Material Adverse Effect on Tukaiz.
3.19 Compliance with Laws. Except as set forth in Schedule 3.19, Tukaiz has
complied with all laws, regulations, orders, judgments or decrees of any
United States Federal, state or local court or any governmental authority,
noncompliance with which, in the aggregate, might have a Material Adverse
Effect on Tukaiz.
3.20 Environmental and Occupational Safety Matters. Except as set forth in
Schedule 3.20
(a) To the best of Xxxxxx'x and Tukaiz's knowledge, Tukaiz has been and is in
compliance with all Environmental, Health and Safety Laws, and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand or
notice has been filed or commenced against Tukaiz alleging any failure to so
comply. Without limiting the generality of the preceding sentence, Tukaiz has
obtained, and has been and is in compliance with all of the terms and
conditions of, all permits, licenses and other authorizations which are
required under, and has complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables which are contained in, all Environmental, Health and Safety Laws
applicable to it. No such permits, licenses or other authorizations have
expired, have been administratively extended or will lapse or become void as a
result of the transactions contemplated by this Agreement.
(b) To the best of Xxxxxx'x and Tukaiz's knowledge, Tukaiz does not have any
liability (and Tukaiz has not handled or disposed of any substance, arranged
for the disposal of any substance, exposed any employee or other individual
to any substance or condition, or owned or operated any property or facility,
in any manner that could form the basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim or demand
against Tukaiz giving rise to any liability) for response or remediation
costs, fines or penalties at any site, location or body of water (surface or
subsurface),
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for any illness of or personal injury to any employee or other individual, or
for any other reason, under any Environmental, Health or Safety Law.
3.21 Brokers' Fees. Neither Xxxxxx nor Tukaiz has incurred any liability for
brokerage fees, finder's fees, agent's commissions or other similar forms of
compensation in connection with this Agreement or any transaction contemplated
hereby for which TKZ or Tukaiz will be responsible.
3.22 Contingencies. Except for:
(a) liabilities which are disclosed and fully provided for in the most recent
balance sheet referred to in Section 3.05, and
(b) liabilities incurred in the usual and ordinary course of business of
Tukaiz subsequent to the date of such balance sheet and on or prior to the
Closing Date,
Tukaiz has no material liabilities or obligations (absolute or contingent,
known or unknown, asserted or unasserted), including without limitation
contingent liability for the performance of any obligation by any other
person.
3.23 Employee Severance Claims. There will be no liability of Tukaiz in
respect of severance or separation pay to persons employed by Company on the
Closing Date as a result of the consummation of this Agreement and the
transactions contemplated hereby.
3.24 Bank Accounts. Schedule 3.24 sets forth a true and complete list of the
names and locations of all banks, trust companies, savings and loan
associations and other financial institutions at which Tukaiz maintains
accounts of any nature and the names of all persons authorized to draw thereon
or make withdrawals therefrom.
3.25 Accounts Receivable. All accounts receivable of Tukaiz represent bona
fide claims against debtors for sales, leases, services performed or other
charges arising on or before the Closing Date. To the best of Xxxxxx'x and
Tukaiz's knowledge, said accounts receivable are subject to no material
defenses, counterclaims or rights of setoff, other than cash discounts,
returns and allowances and credits for freight granted in the ordinary course
of business and are otherwise fully collectible in the ordinary course of
business.
3.26 Condition of Tangible Assets. Except for ordinary wear and tear, the
tangible assets of Tukaiz are in all material respects (i) structurally sound
with no material defects, (ii) in good operating condition and repair, (iii)
adequate for the uses to which they are presently being put, and (iv) not in
need of maintenance or repairs except for ordinary, routine maintenance and
repairs.
3.27 Inventory. The inventory of Tukaiz is (except to the extent of any
reserves reflected on the most recent balance sheet set forth in Section 3.05
hereof) in all material respects of a quality and quantity usable and salable
in the ordinary course of business and all such inventory is reflected on such
balance sheet, with adequate provisions or adjustments having been made for
excess inventory, slow-moving inventory and inventory obsolescence and
shrinkage, in accordance with generally accepted accounting principles
consistently applied.
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3.28 Hazardous Wastes.
(a) To the best of Xxxxxx'x and Tukaiz's knowledge, all properties and
equipment used by Tukaiz are and have been free of asbestos, PCB's,
underground storage tanks, methylene chloride, trichloroethylene,
1,2-transdichloroethylene, dioxins, dibenzofurans and Extremely Hazardous
Substances.
(b) No Extremely Hazardous Substances, have been disposed of, discharged,
spilled, placed or applied on or below the surface of any other property by or
on behalf of Tukaiz.
3.29 Warranty Expense. The aggregate expense incurred by Tukaiz to satisfy
uninsured warranty claims has not exceeded in the aggregate $50,000 in any of
the past three fiscal years, and since January 1, 1993 Tukaiz has not incurred
any material increase in such warranty expense or made any material change in
its warranty practices or policies.
3.30 Powers-of-Attorney. Except as set forth on Schedule 3.30, no person has
been authorized to exercise a power-of-attorney, or to act as
attorney-in-fact, with respect to Tukaiz.
3.31 Books and Records. To the best of Xxxxxx'x and Tukaiz's knowledge, the
minute books and other similar records of Tukaiz contain a true and materially
complete record, in all material respects, of all actions taken at all
meetings and by all written consents in lieu of meetings of Tukaiz's
stockholders, boards of directors, and committees thereof. Such books and
records have been maintained, in all material respects, in accordance with
good business and bookkeeping practices.
3.32 No Undisclosed Information. Except as disclosed herein, Xxxxxx does not
have any knowledge of any matter involving Tukaiz which might have a Material
Adverse Effect on Company. Neither this Agreement nor any document,
certificate or statement furnished or to be furnished to TKZ by or on behalf
of Xxxxxx in connection with the transactions provided for herein contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements contained
herein or therein not misleading.
ARTICLE IV
Representations and Warranties of TKZ
TKZ represents and warrants to Xxxxxx that the statements contained in this
Article IV are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date was substituted for the date of this Agreement
throughout this Article IV).
4.01 Organization and Authority. TKZ is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania. TKZ has the corporate power and authority to execute and
deliver this Agreement and each of the other Transaction Documents to which it
is a party and to perform its obligations hereunder and thereunder.
4.02 Due Authorization. The execution and delivery by TKZ of this Agreement
and each of the other Transaction Documents to which it is a party, the
performance by it of all the terms and conditions hereof and thereof to be
performed by it and the consummation of the transactions contemplated hereby
and thereby have been duly authorized and approved by all necessary corporate
proceedings on the part of TKZ. This Agreement and the other Transaction
Documents to which TKZ is a party constitute the legal, valid and binding
19
obligations of TKZ enforceable against TKZ in accordance with their respective
terms, subject to bankruptcy, insolvency or other similar laws of general
application affecting creditors' rights and general principles of equity.
4.03 Absence of Conflicts. Neither the execution and delivery by either TKZ
of this Agreement and the other Transaction Documents to which it is a party,
the compliance by TKZ with the terms and conditions hereof or thereof, nor the
consummation by TKZ of the transactions contemplated hereby or thereby will
(a) conflict with any of the terms, conditions or provisions of the articles
of incorporation or bylaws of TKZ,
(b) violate any provision of, or require any consent, authorization or
approval under, any law or administrative regulation or any judicial,
administrative or arbitration order, award, judgment, writ, injunction or
decree applicable to, or any governmental permit or license issued to, or
notice to or filing with a governmental body with respect to TKZ,
(c) conflict with, result in a breach of, constitute a default under (whether
with notice or the lapse of time or both), or accelerate or permit the
acceleration of the performance required by, or require any consent,
authorization or approval under, any indenture, mortgage, Lien, lease,
agreement or instrument to which TKZ is a party or by which it is bound or to
which any of its property is subject,
(d) result in the creation of any Lien upon any of the assets of TKZ, or
(e) give to others any material rights or interests (including rights of
purchase, termination, cancellation or acceleration) under any such indenture,
mortgage, Lien, lease, agreement or instrument,
which, with respect to the matters specified in clauses (b) through (e) of
this Section 4.03 could reasonably be expected to delay, prevent or hinder in
any material respect the transactions contemplated hereby.
4.04 Litigation and Claims Against TKZ. There are no actions, suits or
proceedings pending or threatened against TKZ which could reasonably be
expected, if adversely determined, to delay, prevent or hinder the
consummation of the transactions contemplated by this Agreement.
4.05. Brokers' Fees. TKZ has not incurred any liability for brokerage fees,
finder's fees, agent's commissions or other similar forms of compensation in
connection with this Agreement or any transactions contemplated hereby for
which Xxxxxx will be responsible.
ARTICLE V
Covenants of Xxxxxx
Xxxxxx covenants and agrees as follows:
5.01 Certain Changes and Conduct of Business.
(a) Negative Covenants. From and after the date of this Agreement and until
the Closing, without the prior written consent of TKZ, Xxxxxx will not permit
Tukaiz to:
(i) make any material change in the conduct of its business or operations;
(ii) issue any additional shares of capital stock or equity securities or pay
any dividends or make any distributions with respect to its capital stock;
20
(iii) incur any indebtedness for borrowed money, issue any notes, bonds,
debentures or other corporate securities or grant any option, warrant or right
to purchase any thereof, except transactions pursuant to existing contracts or
entered into in the usual and ordinary course of business;
(iv) make any sale, assignment, transfer or other conveyance of any of its
assets or any part thereof, except transactions pursuant to existing contracts
or entered into in the usual and ordinary course of business;
(v) subject any of its assets or any part thereof to any Lien or suffer such
to be imposed;
(vi) enter into any new, or amend any existing, contracts, commitments or
agreements which meet the criteria set forth in any of subparagraphs (i)
through (v) of Section 3.08 of this Agreement, except contracts for the
purchase or sale of inventory, equipment, supplies or raw materials entered
into in the usual and ordinary course of business and the pending purchase of
new machinery already disclosed to Buyer to meet its anticipated contractual
obligations to Xxxxxxx and State Farm Insurance Company;
(vii) enter into any new, or amend in any material respect any existing,
employee benefit plan, policy, agreement, arrangement or understanding, except
as required by law, or grant any material increases in rates of pay to hourly
or salaried employees except as required by law or by any existing collective
bargaining or employment agreement;
(viii) enter into any transaction otherwise than in the usual and ordinary
course of business;
(ix) take or omit to take any action which would cause Xxxxxx to be unable to
furnish the certificate called for by Section 7.03(a) hereof; or
(x) commit itself to do any of the foregoing.
(b) Affirmative Covenants. From and after the date of this Agreement and
until the Closing, Xxxxxx will cause Tukaiz to:
(i) continue to maintain its properties in accordance with present practice
in a condition suitable for their current use;
(ii) maintain all existing material insurance policies in full force and
effect;
(iii) file when due all required United States Federal, state, foreign and
other Tax Returns and other reports required to be filed and pay when due all
Taxes, assessments, fees and other charges lawfully levied or assessed against
it, unless the validity thereof is contested in good faith and by appropriate
proceedings diligently conducted and an adequate bond is posted or other
appropriate action is taken to assure that none of its assets shall be
subjected to any Lien therefor, foreclosed against or taken in payment
thereof;
(iv) continue to conduct its businesses in the ordinary course;
(v) keep its books of account, records and files in the ordinary course in
accordance with their existing practices; and
(vi) continue to maintain existing business relationships with suppliers,
customers and vendors of leased equipment.
21
5.02 Access to Information. From and after the date of this Agreement and
until the Closing Date, Xxxxxx will, and will cause Tukaiz to, afford to TKZ
and TKZ's authorized representatives reasonable access to the officers,
employees, properties, books and records of Tukaiz and will, and will cause
Tukaiz to, furnish or make available to TKZ such additional financial and
operating data and other information pertaining to Tukaiz as TKZ may
reasonably request. Any furnishing of such information to TKZ or
investigation by TKZ shall not affect the right of TKZ to rely upon the
representations and warranties of Xxxxxx in this Agreement.
5.03 Governmental Approvals. Xxxxxx shall
(a) in a timely, accurate and complete manner make, or cause Tukaiz to make,
such required filings with and prepare such required applications to any
governmental agency with which such filings or applications are required to be
made or whose approval or consent is required for the consummation by Xxxxxx
or Tukaiz of the transactions contemplated by this Agreement, and
(b) provide to TKZ such information as TKZ may require to make such filings
and prepare such applications as may be required for the consummation by TKZ
of the transactions contemplated by this Agreement.
5.04 Consents and Approvals. Xxxxxx shall take, and shall cause Tukaiz to
take, all necessary action and use all reasonable efforts to obtain all
consents, approvals, permits and licenses required of any of them to carry out
the transactions contemplated in this Agreement.
5.05 All Reasonable Efforts. Xxxxxx shall, and shall cause Tukaiz to, use
all reasonable efforts to cause all the conditions precedent to the
consummation of the transactions contemplated hereby applicable to Xxxxxx and
Tukaiz to be met as promptly as practicable.
5.06 Exclusivity. Until the Closing Date, Xxxxxx shall not (i) entertain any
proposal or offer from any Person relating to the acquisition of any capital
stock or other voting securities or any of the assets of Tukaiz (including any
acquisition structured as a merger, consolidation or share exchange) or to any
other transaction which could result in control of Tukaiz by any Person other
than TKZ, or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or
seek any of the foregoing. Xxxxxx shall notify TKZ immediately if any Person
makes any proposal, offer, inquiry or contact with respect to any such
acquisition or transaction.
5.07 Disclosure Schedule. Xxxxxx shall promptly supplement the Disclosure
Schedule if events occur prior to the Closing that would have been required to
be disclosed had they existed at the time of executing this Agreement. The
Disclosure Schedule, as supplemented prior to the Closing, will contain a
true, correct and complete list and description of all items required to be
set forth therein. Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein
unless the Disclosure Schedule identifies such exception with particularity.
22
5.08 Loans with Tukaiz. Xxxxxx acknowledges and agrees that the loans from
Xxxxxx to Tukaiz and from Tukaiz to Xxxxxx shall remain with Tukaiz and not be
transferred to the Company.
ARTICLE VI
Covenants of TKZ
TKZ covenants and agrees as follows:
6.01 Information Kept Confidential. Unless and until the transactions
contemplated hereby have been consummated, TKZ and its officers, employees,
agents and representatives will hold in strict confidence, and not use in any
way except in connection with the transactions contemplated by this Agreement,
all data and information obtained in connection with the transactions
contemplated by this Agreement from Xxxxxx or Tukaiz or from any officer,
employee, agent or representative of any of them whether pertaining to the
financial condition, results of operations, methods of operations or products
of Tukaiz or otherwise, except any of the same which
(a) was in the public domain prior to being furnished to TKZ,
(b) was known to TKZ prior to its disclosure to TKZ by Xxxxxx or Tukaiz,
(c) is required to be disclosed by TKZ or by its officers, agents or
representatives in connection with any court action or any proceeding before a
governmental regulatory or administrative body or in connection with securing
any consent or approval required hereunder or any financing contemplated
hereby,
(d) is disclosed to TKZ by a third party, who did not unlawfully acquire or
receive such information on a confidential basis from Xxxxxx or Tukaiz
subsequent to its disclosure to TKZ by Xxxxxx or Tukaiz , or
(e) after being furnished to TKZ, entered the public domain through no act or
failure to act on the part of TKZ.
In the event that this Agreement shall be terminated (whether or not as
permitted by Section 13.01), TKZ and its authorized representatives shall
promptly destroy or return to Tukaiz all information furnished by Xxxxxx or
Company and any copies or extracts thereof; provided, however, that TKZ may
retain such information until final resolution of any claim made by or against
TKZ pursuant to Section 13.01(b).
6.02 Governmental Approvals. TKZ shall
(a) in a timely, accurate and complete manner make such required filings with
and prepare such required applications to any governmental agency with which
such filings or applications are required to be made or whose approval or
consent is required for the consummation by TKZ of the transactions
contemplated by this Agreement, and
(b) provide to Xxxxxx such information concerning TKZ as Xxxxxx may require
to make such filings and prepare such applications as may be required for the
consummation by Xxxxxx of the transactions contemplated by this Agreement.
6.03 Consents and Approvals. TKZ shall use all reasonable efforts to obtain
all consents, approvals, permits and licenses required of it to carry out the
transactions contemplated in this Agreement.
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6.04 All Reasonable Efforts. TKZ shall use all reasonable efforts to cause
all the conditions precedent to the consummation of the transactions
contemplated hereby applicable to TKZ to be met as promptly as practicable.
ARTICLE VII
Conditions of Closing
7.01 Preamble. The respective obligations set forth herein of Xxxxxx, Tukaiz
and TKZ to consummate the agreements and the transactions contemplated hereby
shall be subject to the fulfillment, on or before the Closing, in the case of
the obligations of TKZ, of the conditions set forth in Sections 7.02 and 7.03,
and, in the case of the obligations of Xxxxxx and Tukaiz, of the conditions
set forth in Sections 7.02 and 7.04. Any of the following conditions may be
waived in whole or in part by the party or parties whose obligations are
subject to such conditions.
7.02 Conditions to Obligations All Parties.
(a) No Orders. There shall be in force no order or decree restraining,
enjoining, prohibiting, invalidating or otherwise preventing to a material
degree the consummation of the transactions contemplated by this Agreement or
the other agreements or documents described herein.
(b) No Litigation. No governmental department, agency, commission or other
governmental entity shall have notified any party hereto of its intention to
institute any suit, proceeding or investigation, and no such suit, proceeding
or investigation and no suit instituted by any person shall be pending (except
for suits, proceedings or investigations which, in the opinions of counsel for
TKZ and Xxxxxx, have no substantial likelihood of success) against any party
hereto to restrain, enjoin, prohibit, invalidate or otherwise prevent to a
material degree the transactions contemplated by this Agreement or the other
agreements or documents described herein, or to obtain substantial damages
from any party hereto in connection with this Agreement or the other
agreements and documents described herein or the consummation of the
transactions contemplated hereby or thereby.
(c) Consents and Approvals. Any and all consents, orders, permits, licenses,
qualifications, authorizations or approvals from governmental authorities
required for the consummation of the transactions contemplated by this
Agreement shall have been obtained.
(d) Vitallo Transaction. The closing with Vitallo and Tukaiz under an Asset
Purchase Agreement acceptable to both Vitallo and TKZ shall occur
simultaneously with the Closing.
(e) Creation of the Company. The Company shall have been formed, the
operating agreement with respect thereto shall have been signed and TKZ and
Tukaiz shall have contributed their assets of Tukaiz to the Company in
exchange for 50% of the Membership Interests of the Company for each of TKZ
and Tukaiz; provided, however, that the assets of Tukaiz contributed to the
Company shall not include the Excluded Assets.
(f) Line of Credit Funding Requirements. The Company shall have entered into
a bank line of credit in order to fund its obligations under the Note.
7.03 Conditions to Obligations of TKZ.
(a) Representations and Warranties of Xxxxxx; Performance of Covenants.
Except as otherwise consented to in writing by TKZ, the representations and
warranties in Article II and Article III hereof shall be true and correct in
all material respects when made and at and as of the Closing Date with the
same force and effect as though made at and as of such time. Except as
otherwise consented to in writing by TKZ, Xxxxxx shall have complied in all
24
material respects with all covenants and conditions contained herein required
to be performed or complied with by it at or before the Closing. At the
Closing TKZ shall have received a certificate of Xxxxxx to the foregoing
effects, which certificates shall list or attach copies of any such written
consents by TKZ.
(b) Opinion of Counsel for Xxxxxx. TKZ shall have received from Xxxxxxx
Xxxxxxx, Esquire or other counsel satisfactory to TKZ a favorable written
opinion, dated the Closing Date and in substantially the form attached hereto
as Exhibit A. In rendering the foregoing opinion, such counsel may rely on
the opinions, satisfactory in form and substance to TKZ, of other counsel
satisfactory to TKZ.
(c) Permits, Consents, Etc. Any and all orders, permits, licenses,
qualifications, authorizations or approvals, and any and all consents with
respect to agreements required for the closing of the transactions
contemplated by this Agreement to have been obtained by Xxxxxx shall have been
obtained.
(d) TCS Stock. Xxxxxx and Xxxxxxx shall have contributed their shares of
capital stock of TCS to Tukaiz prior to Tukaiz contributing its assets
(including such stock) to the Company.
(e) Transaction Documents. The parties thereto shall have entered into the
Note substantially in form of Exhibit B hereto, the Employment Agreement
substantially in the form of Exhibit C hereto, the Lease substantially in the
form of Exhibit D hereto, the Subordinated Convertible Note substantially in
the form of Exhibit E hereto (and the funding thereunder shall have occurred)
and the Tax Note substantially in the form of Exhibit F hereto (and the
funding thereunder shall have occurred). In addition, certain key employees
of Tukaiz shall have entered in employment agreements with the Company, to the
reasonable satisfaction of TKZ.
(f) Proceedings and Incumbency. On the Closing Date there shall have been
delivered to TKZ a certificate in form and substance satisfactory to TKZ,
dated the Closing Date and signed on behalf of Tukaiz by the Secretary or an
Assistant Secretary of Tukaiz, certifying as to (a) true copies of the
articles of incorporation and bylaws of such entity as in effect on such date,
(b) true copies of all corporate action taken by such entity relative to this
Agreement and the other Transaction Documents to which it is a party, and (c)
the names, true signatures and incumbency of the officer or officers of such
entity authorized to execute and deliver this Agreement and the other
Transaction Documents to which it is a party.
(g) Results of "Due Diligence" Inquiry. Any investigation of Tukaiz and
Xxxxxx undertaken by TKZ shall not have resulted in the discovery of any
information or matter which TKZ in its sole discretion has determined to be
material and adverse.
(h) Material Adverse Change. Seller shall not have suffered any change in
its condition (financial or otherwise) or in its assets, liabilities (absolute
or contingent) or business, except changes in the lawful and ordinary course
of business, and none of such changes as may have occurred, individually or in
the aggregate, shall have materially and adversely affected its business,
property, assets, condition or prospects.
(i) Legal Matters. All actions, proceedings, instruments and documents
required to carry out this Agreement and to close the transactions
contemplated hereby and all other related legal matters shall be satisfactory
to counsel for TKZ.
25
7.04 Conditions to Obligations of Xxxxxx.
(a) Representations and Warranties of TKZ; Performance of Covenants. Except
as otherwise consented to in writing by Xxxxxx, the representations and
warranties in Article IV hereof shall be true and correct in all material
respects when made and at and as of the Closing Date with the same force and
effect as though made at and as of such time. Except as otherwise consented
to in writing by Xxxxxx, TKZ shall have complied in all material respects with
all covenants and conditions contained herein required to be performed or
complied with by it at or before the Closing. At the Closing Xxxxxx shall
have received a certificate of TKZ to the foregoing effects, which certificate
shall list or attach copies of any such written consents of Xxxxxx.
(b) Opinion of Counsel for TKZ. Xxxxxx shall have received from Xxxx Xxxxx
Xxxx & XxXxxx, counsel to TKZ, a favorable opinion, dated the Closing Date and
in substantially the form attached hereto as Exhibit G. In rendering the
foregoing opinion, such counsel may rely on the opinions, satisfactory in form
and substance to Xxxxxx, of other counsel satisfactory to Xxxxxx.
(c) Permits, Consents, Etc. Any and all orders, permits, licenses,
qualifications, authorizations or approvals, and any and all consents with
respect to agreements required for the closing of the transactions
contemplated by this Agreement to have been obtained by TKZ shall have been
obtained.
(d) Transaction Documents. The parties thereto shall have entered into the
Note substantially in form of Exhibit B hereto, the Employment Agreement
substantially in the form of Exhibit C hereto, the Lease substantially in the
form of Exhibit D hereto, the Subordinated Convertible Note substantially in
the form of Exhibit E hereto (and the funding thereunder shall have occurred),
the Tax Note substantially in the form of Exhibit F hereto (and the funding
thereunder shall have occurred) and the Guaranty substantially in the form of
Exhibit H hereto.
(e) Proceedings and Incumbency. On the Closing Date there shall have been
delivered to Xxxxxx a certificate in form and substance satisfactory to
Xxxxxx, dated the Closing Date and signed on behalf of TKZ by the Secretary or
an Assistant Secretary of such entity, certifying as to (a) true copies of the
articles of incorporation and bylaws of such entity as in effect on such date,
(b) true copies of all corporate action taken by such entity relative to this
Agreement and the other Transaction Documents to which it is a party, and (c)
the names, true signatures and incumbency of the officer or officers of such
entity authorized to execute and deliver this Agreement and the other
Transaction Documents to which it is a party.
(f) Legal Matters. All actions, proceedings, instruments and documents
required to carry out this Agreement and to close the transactions
contemplated hereby and all other related legal matters shall be satisfactory
to counsel for Xxxxxx.
ARTICLE VIII
Put/Call Provisions
8.01 Certain Put/Call Definitions. The following definitions shall apply to
the Put/Call Rights described in this Article VIII:
(a) "Applicable Percentage" shall mean, at any time, the ratio that a
Member's Membership Interests bears to the total Membership Interests then
outstanding (without considering the conversion rights which may be then
outstanding under the Subordinated Convertible Note).
26
(b) "Calculated Amount" shall mean, at any time, (i) the indebtedness of the
Company (including without limitation amounts outstanding under the
Subordinated Convertible Note) other than trade debt and any amounts
outstanding under the Note, (ii) less the cash balances of the Company,
(iii) plus $137,500.
(c) "EBIT" shall mean Tukaiz's or the Company's, as the case may be, net
earnings prior to goodwill amortization, interest and taxes, and not including
any allocations for overhead costs attributable to Xxxxxxxx (as opposed to the
Company), as determined in accordance with generally accepted accounting
principles and consistent with past practice by the accountants of Tukaiz or
the Company, as the case may be, in their annual review (including calculating
depreciation on a straight line method).
(d) "Put/Call Purchase Price" shall mean, at any time, the Applicable
Percentage of the Total Equity Value, but subject to Section 8.02(d).
8.02 Put/Call Rights. Commencing 30 days after the fiscal year of the
Company which ends in 2001, and on each anniversary of such date thereafter,
for a period of 45 days from each such date (the "Exercise Period"), the
following put/call rights shall apply to TKZ and Tukaiz (the "Put/Call
Rights"):
(a) Tukaiz shall have a put right enabling it (or its successor or
representative, as the case may be) to require TKZ to purchase all, but not
less than all, of its Membership Interests at a purchase price equal to the
Put/Call Purchase Price. The put rights shall be exercisable by Tukaiz (or
its successor or representative, as the case may be) during the Exercise
Period by written notice to TKZ.
(b) TKZ shall have a call right enabling TKZ to require Tukaiz (or its
successor or representative, as the case may be) to sell all, but not less
than all, of its Membership Interests at a purchase price equal to the
Put/Call Purchase Price. The call rights shall be exercisable by TKZ during
the Exercise Period by written notice to Tukaiz.
(c) "Total Equity Value" shall be determined by the following formula:
TEV = ((EBIT 1 + EBIT 2) / 2 x 8) less the Calculated Amount
where TEV = Total Equity Value
EBIT 1 = EBIT for the full fiscal year immediately preceding
the date of calculation of Total Equity Value
EBIT 2 = EBIT for the second full fiscal year preceding the
date of calculation of Total Equity Value
(d) Notwithstanding the foregoing or any other provisions of this Agreement,
the Put/Call Purchase Price shall be no less than $2,000,000 or greater than
$6,000,000.
(e) Notwithstanding the foregoing (i) the Put/Call Rights shall be deemed to
be exercised upon the death or disability (as determined under Xxxxxx'x
Employment Agreement) of Xxxxxx and (ii) the year "2001" set forth in the
introduction paragraph to this Section 8.02(e) shall be deemed to be "1999"
if, but only if, Xxxxxxxx is merged into another entity.
27
8.03 Closing of Put/Call Rights.
(a) Any purchase by TKZ of any Membership Interests as a result of the
occurrence of the exercise of a Put/Call Right shall take place at the
principal office of the Company no later than the 45 days (the "Scheduled
Put/Call Closing Date") following the date the applicable Put/Call Rights are
exercised, with a cash payment by TKZ to Tukaiz on such date.
(b) On the Scheduled Put/Call Closing Date, TKZ shall make the cash payment
to Tukaiz referred to in Section 8.03(a) above, but shall offset (i) any
amount due to the Company under the Note, and shall pay such amounts that are
offset directly to the Company on behalf of Xxxxxx to settle and cancel such
Note in full and (ii) any amount due to Venetian under the Tax Note, and shall
pay such amounts that are offset directly to Venetian on behalf of Xxxxxx to
settle and cancel such Note in full.
(c) On the Scheduled Put/Call Closing Date, the Company shall use its
reasonable efforts to cause Xxxxxx to be released from any and all pre-closing
third party obligations with respect to the Company, including any guarantees
on third-party debt of the Company, and shall indemnify Xxxxxx against any
such obligations which are not so released. Tukaiz, Xxxxxx and the Company
shall execute and deliver a Release (the "Release") substantially in the form
of Exhibit I attached hereto.
8.04 Operation of Business. Xxxxxx shall cause the Company to be operated in
the ordinary course of business prior to any calculation of Total Equity Value
and not in a manner which would materially affect such calculation.
ARTICLE IX
Corporate Governance; Tax Note
9.01 Board of Managers.
(a) At the Closing, Tukaiz and TKZ shall elect a Board of Managers of the
Company, to consist of Xxxxxx and Xxxxxxxx Xxxxxxxx of Xxxxxxxx.
(b) If EBIT is less than $1,250,000 for the two consecutive twelve month
fiscal years ending January 31, 1998 and January 31, 1999 (or if the fiscal
year end of the Company is changed to September 30, September 30, 1998 and
September 30, 1999), or any two consecutive twelve month fiscal years
thereafter, TKZ shall have the right to immediately appoint an additional
manager to provide it with a majority of the managers on the Board, and Tukaiz
shall vote its Membership Interests to elect such manager. Such right of TKZ
to elect a majority of the managers on the Board shall thereafter continue.
(c) Notwithstanding the foregoing, if Venetian converts its Subordinated
Convertible Note into Membership Interests (pursuant to the terms of such
Subordinated Convertible Note or this Agreement) and Xxxxxxxx (through one or
more of its subsidiaries) thereby becomes the owner of a majority of
Membership Interests of the Company, Xxxxxxxx shall have the rights provided
to a majority owner under the certificate of organization and operating
agreement of the Company, including the right to elect such managers as it so
chooses from time to time.
9.02 Tax Note. TKZ and Tukaiz shall cause the Company to distribute to
Tukaiz at or prior to the end of each calendar quarter an amount of cash
necessary for Xxxxxx to pay his interest obligations under the Tax Note and to
distribute a like amount of cash to TKZ.
28
9.03 Tax Obligations. TKZ and Tukaiz shall cause the Company to distribute
quarterly to Tukaiz and TKZ an equal amount of cash sufficient to pay the
greater of the tax obligations of TKZ or Xxxxxx.
ARTICLE X
Membership Interest Transfer Restrictions
10.01 Restriction on Transfer of Membership Interests. During the term of
this Agreement, no Member shall sell, give, pledge, assign or otherwise
dispose of any or all of his Membership Interests to any other person or
entity except in accordance with the terms hereof.
10.02 Voluntary Sales.
(a) If a Member has received a bona fide written offer stated in terms of
cash or cash equivalents from a prospective purchaser of any or all of his
Membership Interests (herein referred to as the "Offered Membership
Interests"), before accepting such offer, such Member (herein referred to as
the "Offering Member") shall offer such Membership Interests in writing to the
Company at the price and on the other terms and conditions contained in such
offer; provided, however, that the Company shall not be required to meet any
non-monetary terms of the offer, including without limitation delivery of
other securities in exchange for the Offered Membership Interests. The notice
given by the Offering Member shall contain a complete copy of the offer
received by him from the bona fide offeror.
(b) The Company shall have the right, within thirty (30) days after receipt
of such notice, to notify the Offering Member of its election to purchase,
specifying the number of interests it desires to purchase. In such notice,
the Company shall also fix a closing date not more than thirty (30) days after
the date of its notice of election to purchase.
(c) Should the Company not desire to purchase the Membership Interests
offered, the Company shall promptly communicate the offer for the remaining
interests to the other Members who shall have thirty (30) days from the date
of such notice within which to notify the Offering Member and the Company of
their respective elections to purchase. The other Members shall have the
option of purchasing the Membership Interests at the same price and terms as
the Company. The closing date of any purchase hereunder by such other Members
shall be not more than thirty (30) days after the date of their notice of
election to purchase. Any Membership Interests purchased by the other Members
shall be purchased in proportion to their holdings. That is, the number of
Offered Membership Interests that each other Member shall be entitled to
purchase hereunder shall be determined by multiplying the total Offered
Membership Interests by a fraction, the numerator of which shall be the number
of Membership Interests then owned by the purchasing Member (or which the
purchasing Member shall have the right to acquire by reason of a then pending
offer to purchase) and the denominator of which shall be the number of
Membership Interests then owned by all purchasing Members then participating
in such offer.
(d) Unless the Company and the other Members agree to purchase the Offered
Membership Interests pursuant to the terms hereof, their right to purchase
said interests shall terminate and the Offering Member shall be free for a
period of ninety (90) days to sell the Offered Membership Interests to the
third person at the same price and on the same terms set forth in the Offering
Member's notice of intended sale. Any person who acquires such Membership
Interests shall automatically be bound by the terms of this Agreement
(including the Put/Call provisions set forth herein) and shall be required to
join in and execute and deliver a copy of this Agreement as an additional
Member party. If the Membership Interests are not sold by the Offering Member
within the ninety (90) day period, all rights to transfer the Membership
Interests free of the foregoing restrictions shall terminate.
29
10.03 Sale of Membership Interests Upon Death.
(a) Following the death of a Member, the Company and the remaining Members
shall have the option to purchase all of the Membership Interests held by the
deceased Member on the date of his death, and the estate of the deceased
Member shall be obligated to sell all of its said interests all on terms
herein provided if the Company or the remaining Members exercise their
respective options hereunder.
(b) The Company shall have the right, within thirty days after receipt of
notice of the death of a Member, to notify the estate of such Member of its
election to purchase. In such notice, the Company shall also fix a Closing
Date not more than thirty days (30) after the date of its notice of election
to purchase.
(c) Should the Company not desire to purchase the Membership Interests of the
deceased Member, the Company shall promptly communicate the same to the other
Members who shall have thirty (30) days from the date of such notice within
which to notify the estate of the deceased Member and the Company of their
respective elections to purchase all of such interests. The other Members
shall have the option of purchasing interests at the same price and terms as
the Company. The closing date of any purchase hereunder by such other Members
shall not be more than thirty (30) days after the date of their notice of
election to purchase. Any Membership Interests purchased by the other Members
shall be purchased in proportion to their holdings, calculated in the manner
set forth in Section 10.02(c) hereof.
(d) Subject to Section 8.02(e) hereof, which shall govern with respect to the
death of Xxxxxx, the price to be paid for the purchased Membership Interest
under this Paragraph shall be the Applicable Percentage of Total Equity Value
(as such terms are used and defined in Article VIII hereof), and the terms of
purchase shall be the Agreement Terms as described in Section 10.04 hereof.
The representative of the estate of a deceased Member shall cooperate with the
Company and the remaining Members to effectuate the purposes of this
Agreement.
10.04 Payment of Purchase Price.
(a) The purchase price for any interests purchased pursuant to this Agreement
shall be paid in cash on the closing date.
(b) Upon payment for the Membership Interest purchased hereunder the selling
Member or his estate shall deliver the certificates therefor to the purchaser
or purchasers, with appropriately executed assignments and endorsements, with
all required federal and state tax stamps attached.
(c) The terms of purchase for the Membership Interest determined in
accordance with the foregoing shall be the "Agreement Terms" as that term is
used herein.
10.05 Endorsement of Membership Interest Certificates. All certificates for
Membership Interest subject to this Agreement shall bear the following legend:
"The transfer of these interests is restricted by the terms of a Membership
Interest Agreement dated January 3, 1997 which grants certain option rights in
the Membership Interests to the Company and to certain other Members and which
must be executed by all parties to whom such interests may be transferred. A
copy of said Agreement is on file at the offices of the Company."
30
10.06 Other Members. Upon the issuance by the Company of its Membership
Interest to other parties, unless all of the Members otherwise agree, the
Company shall require as a condition precedent to such issuance that such
issuee execute and agree to be bound by all of the terms and conditions of
this Agreement, whereupon the issuee shall be considered a "Member" as that
term is defined and used herein.
10.07 Term. This Article X shall terminate upon the voluntary agreement of
all Members who are then bound by the terms hereof.
10.08 Specific Covenants of the Company. In addition to agreeing to comply
with all provisions of this Agreement, the Company specifically covenants:
(a) To register no change of ownership of a Membership Interest certificate
on the books of the Company until all the requirements of this Agreement have
been satisfied.
(b) To promptly notify the Members in writing of its intention to waive any
option rights given by this Agreement once a corporate decision has been
reached to so waive any rights.
ARTICLE XI
Remedies for Breaches of this Agreement
11.01 Survival of Representations, Warranties and Covenants. All of the
representations, warranties and covenants of the parties contained in this
Agreement shall survive the Closing (even if the damaged party knew or had
reason to know of any misrepresentation or breach of warranty at the time of
the Closing) and shall continue in full force and effect thereafter until any
claim with respect thereto is barred by the applicable statute of limitations.
11.02 Indemnification Provisions for Benefit of TKZ. If there is any breach
of any of the representations, warranties or covenants of Xxxxxx and/or Tukaiz
contained herein, or if any third party alleges facts that, if true, would
mean that such a breach existed, and provided that TKZ deliver to Xxxxxx,
pursuant to Section 11.04 hereof, a claim for indemnification with respect to
such alleged breach, then Xxxxxx shall indemnify TKZ for any breach of a
representation or warranty or a covenant of Xxxxxx and/or Tukaiz contained
herein by Xxxxxx and/or Tukaiz from and against all Adverse Consequences that
TKZ has suffered or may suffer caused by, resulting from, arising out of or
relating to such breach through and after the date of such claim.
11.03 Indemnification Provisions for Benefit of Xxxxxx. If there is any
material breach of any of the representations, warranties or covenants of TKZ
contained herein, or if any third party alleges facts that, if true, would
mean that such a breach existed, and provided that Xxxxxx deliver to TKZ
pursuant to Section 11.04 hereof a claim for indemnification with respect to
such alleged breach, then TKZ shall indemnify Xxxxxx from and against all
Adverse Consequences that Xxxxxx has suffered or may suffer caused by,
resulting from, arising out of or relating to such breach through and after
the date of such claim.
11.04. Notice of Claim for Indemnification. No claim for indemnification
hereunder shall be valid unless notice of such claim is delivered to TKZ (in
the case of a claim by Xxxxxx) or to Xxxxxx (in the case of a claim by TKZ).
Any such notice shall set forth in reasonable detail, to the extent known by
the person giving such notice, the facts on which such claim is based and the
estimated amount of Adverse Consequences resulting therefrom.
31
11.05. Matters Involving Third Parties.
(a) If TKZ or Xxxxxx receives notice or acquires knowledge of any matter
which may give rise to a claim by another person and which may then result in
a claim for indemnification under this Article XI, then (i) if such notice or
knowledge is received or acquired by TKZ, TKZ shall promptly notify Xxxxxx
thereof, and (ii) if such notice or knowledge is received or acquired by
Xxxxxx, he shall promptly notify TKZ thereof; provided, however, that no delay
in giving such notice shall diminish any obligation under this Article XI to
provide indemnification unless (and then solely to the extent that) the party
from whom such indemnification is sought is prejudiced.
(b) Any party from whom such indemnification is sought (the "Indemnifying
Party") shall have the right to defend the party seeking such indemnification
(the "Indemnified Party") against such claim by another person (the "Third
Party Claim") with counsel of the Indemnifying Party's choice reasonably
satisfactory to the Indemnified Party so long as (i) within fifteen days after
the Indemnified Party has given notice of the Third Party Claim to the
Indemnifying Party, the Indemnifying Party notifies the Indemnified Party that
the Indemnifying Party will indemnify the Indemnified Party from and against
all Adverse Consequences the Indemnified Party may suffer caused by, resulting
from, arising out of or relating to such Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
satisfactory to the Indemnified Party that the Indemnifying Party has the
financial resources necessary to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, (iii) the Third Party Claim
seeks only money damages and not an injunction or other equitable relief,
(iv) settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice adverse to the continuing business
interests of the Indemnified Party, and (v) the Indemnifying Party conducts
the defense of the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of the Third
Party Claim in accordance with Section 11.05(b) hereof, (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (ii) the Indemnified
Party shall not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior consent of
the Indemnifying Party, and (iii) the Indemnifying Party shall not consent to
the entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior consent of the Indemnified Party.
(d) If any of the conditions specified in Section 11.05(b) hereof is or
becomes unsatisfied, however, (i) the Indemnified Party, upon prior written
notice to the Indemnifying Party, may defend against, and consent to the entry
of any judgment or enter into any settlement with respect to, the Third Party
Claim in any manner it may deem advisable (and the Indemnified Party need not
consult with, or obtain any consent from, any Indemnifying Party in connection
therewith), (ii) the Indemnifying Parties shall reimburse the Indemnified
Party promptly and periodically for the costs of defending against the Third
Party Claim (including reasonable attorneys' and accountants' fees and
disbursements and amounts paid in settlement), and (iii) the Indemnifying
Party shall remain responsible for any Adverse Consequences the Indemnified
Party may suffer caused by, resulting from, arising out of or relating to such
Third Party Claim to the fullest extent provided in this Article XI.
11.06. Treatment of Indemnification Payments. All indemnification payments
made by Xxxxxx or TKZ under this Article XI shall be deemed adjustments to the
Purchase Price.
11.07. Other Indemnification Provisions. The indemnification provisions in
32
this Article XI are in addition to, and not in derogation of, any statutory,
equitable or common law remedy any party may have for breach of
representation, warranty or covenant.
ARTICLE XII
Definitions
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, liabilities, obligations, Taxes, Liens, losses, expenses and
fees, including court costs and attorneys' and accountants' fees and
disbursements.
"Affiliate" shall mean a person who, directly or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with, the person specified.
"Agreement" shall have the meaning provided in the preamble hereto.
"Agreement Terms" shall have the meaning set forth in Section 10.04 hereof.
"Applicable Percentage" shall have the meaning set forth in Section 8.01.
"Asset Purchase Agreement" shall have the meaning set forth in the recitals
hereto.
"Book Value" shall have the meaning set forth in Section 10.03 hereof.
"Calculated Amount" shall have the meaning set forth in Section 8.01.
"Closing" shall have the meaning set forth in Section 1.02.
"Closing Date" shall have the meaning set forth in Section 1.02.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall have the meaning set forth in the recitals hereto.
"Company" shall have the meaning set forth in the preamble hereto.
"Confidential Information" includes information concerning Tukaiz's sales,
sales volume, sales methods, sales proposals, customers and prospective
customers, identity of customers and prospective customers, identity of key
purchasing personnel in the employ of customers and prospective customers,
amount or kind of customer's purchases from Tukaiz, its sources of supply, its
computer programs, system documentation, special hardware, product hardware,
related software development, its manuals, formulae, processes, methods,
machines, compositions, ideas, improvements, inventions or other confidential
or proprietary information belonging to Tukaiz or relating to its affairs.
"Contracts" shall have the meaning set forth in Section 3.08.
"Debt Instruments" shall have the meaning set forth in Section 3.15.
"Xxxxxx" shall have the meaning set forth in the preamble hereto.
"Disclosure Schedule" shall mean the disclosure schedule dated the date
hereof, as supplemented from time to time to the Closing on the Closing Date
33
furnished by Xxxxxx to TKZ and containing all lists, descriptions, exceptions,
and other information and materials as are required to be included therein
pursuant to this Agreement.
"EBIT" shall have the meaning set forth in Section 8.01.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), (d) Employee Welfare Benefit Plan or (e) other plan or
practice of Tukaiz, whether formal or informal, written or oral, and whether
or not legally enforceable, providing or which may provide benefits to
employees of Tukaiz in connection with their employment or the termination of
their employment by retirement or otherwise.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Employment Agreement" shall mean the Employment Agreement dated as of the
Closing Date between Xxxxxx and the Company.
"Employment Contracts" shall have the meaning set forth in Section 3.10.
"Environmental, Health and Safety Laws" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource Conservation
and Recovery Act of 1976, and the Occupational Safety and Health Act of 1970,
each as amended, together with all other laws of federal, state, local, and
foreign governments (and all agencies thereof) concerning pollution or
protection of the environment, public health and safety or employee health and
safety, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants or chemical, medical,
industrial, hazardous or toxic materials or wastes into ambient air, surface
water, ground water or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants or chemical, medical, industrial,
hazardous or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Equipment" shall have the meaning set forth in Section 3.07(b).
"Equipment Instruments" shall have the meaning set forth in Section 3.07(b).
"Excluded Assets" shall mean the tax deposit receivable due to Tukaiz from the
IRS with respect to Tukaiz's election of its taxable year.
"Extremely Hazardous Substance" has the meaning set forth in Section 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Exercise Period" shall have the meaning set forth in Section 8.01.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
34
"Financial Statements" shall have the meaning set forth in Section 3.05.
"Guaranty" shall mean the Guaranty Agreement of even date herewith of Xxxxxxxx
in favor of Xxxxxx.
"Indemnified Party" has the meaning set forth in Section 11.05(b) hereof.
"Indemnifying Party" has the meaning set forth in Section 11.05(b) hereof.
"Lease" shall mean the Lease Agreement dated the Closing Date among Vitallo,
Defino and the Company with respect to the Company facilities.
"Lien" means any mortgage, pledge, encumbrance, charge or other security
interest other than Permitted Liens.
"Material Adverse Effect" shall mean a material adverse effect on the
business, property, financial condition or results of operations of a
specified Person.
"Xxxxxxxx" shall have the meaning set forth in the preamble hereto.
"Member" and "Members" shall have the meanings set forth in the preamble
hereto.
"Membership Interests" shall mean the membership interests in the Company.
"Multiemployer Plan" means any employee benefit plan which is a "multiemployer
plan" within the meaning of Section 4001(a)(3) of ERISA and to which Tukaiz
has an obligation to contribute.
"Note" shall mean the Revolving Credit Note dated the Closing Date in the
principal amount of $500,000 made by Xxxxxx in favor of the Company,
representing a line of credit for Xxxxxx.
"Offered Membership Interests" shall have the meaning set forth in Section
10.02(a) hereof.
"Offering Member" shall have the meaning set forth in Section 10.02(a) hereof.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permits" shall have the meaning set forth in Section 3.14.
"Permitted Liens" shall mean landlord's, workmen's, warehousemen's,
materialmen's or other statutory liens or easements, covenants and
encumbrances which are not material in character, amount or extent and do not
materially detract from the value or materially interfere with the use of the
properties subject thereto or affected thereby or otherwise materially impair
the business operations being conducted thereon or therewith.
"Person" shall mean any individual, partnership, joint venture, corporation,
trust, unincorporated organization or government or any department or agency
thereof.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406 and
Code Section 4975.
"Put/Call Purchase Price" shall have the meaning set forth in Section 8.01.
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"Put/Call Rights" shall have the meaning set forth in Section 8.01.
"Real Property" shall have the meaning set forth in Section 3.07(a).
"Real Property Instruments" shall have the meaning set forth in Section
3.07(a).
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Release" shall have the meaning set forth in Section 8.03(d).
"Scheduled Put/Call Closing Date" shall have the meaning set forth in Section
8.01.
"Stock Purchase Agreement and General Release" shall mean the Stock Purchase
and General Release dated as of the Closing Date between Vitallo and Tukaiz.
"Subordinated Convertible Note" shall mean the $5,500,000 Subordinated
Convertible Note dated the Closing Date from the Company in favor of Venetian.
"Tax" or "Taxes" means any United States Federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added,
alternative minimum, estimated or other tax of any kind whatsoever, including
any interest, penalty or addition thereto, whether disputed or not.
"Tax Note" shall mean the Promissory Note dated the Closing Date from Xxxxxx
in favor of TKZ, in an amount equal to Xxxxxx'x tax liability with respect to
the sale of Tukaiz's assets to TKZ under the Asset Purchase Agreement.
"Tax Return" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TCS" shall mean Tukaiz Creative Services, Inc., an Illinois corporation.
"TKZ" shall have the meaning set forth in the preamble hereto.
"Third-Party Claim" has the meaning set forth in Section 11.05(b) hereof.
"Total Equity Value" shall have the meaning set forth in Section 8.01.
"Tukaiz" shall have the meaning set forth in the preamble hereto.
"Transaction Documents" shall mean this Agreement, the Employment Agreement,
the Note, the Subordinated Convertible Note, the Tax Note and the Lease.
"Venetian" shall have the meaning provided in the recitals hereto.
"Vitallo" shall have the meaning provided in the recitals hereto.
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ARTICLE XIII
Miscellaneous
13.01 Termination.
(a) This Agreement may be terminated at any time prior to the Closing:
(i) by the mutual written agreement of Xxxxxx, Tukaiz and TKZ;
(ii) by TKZ or Xxxxxx or Tukaiz after February 15, 1997 if the Closing of the
transactions contemplated hereby has not occurred by that date and if the
party exercising the right of termination provided by this clause (ii) is not,
at the time of such exercise, in breach of its material obligations under this
Agreement;
(iii) by TKZ on the Closing Date if any of the conditions provided in Section
7.02 or Section 7.03 have not been met and have not been waived;
(iv) by Xxxxxx or Tukaiz on the Closing Date if any of the conditions
provided in Section 7.02 or Section 7.04 have not been met and have not been
waived; or
(v) by TKZ or Xxxxxx or Tukaiz if there is an order or decree restraining,
enjoining, prohibiting, invalidating or otherwise preventing to a material
degree the consummation of the transactions contemplated by this Agreement or
the other agreements or documents described herein.
TKZ or Xxxxxx or Tukaiz, as the case may be, shall exercise a right of
termination provided above by written notice to the other parties hereto.
(b) If this Agreement is terminated by TKZ or Xxxxxx or Tukaiz as permitted
in Section 13.01(a), such termination shall be without liability of any party
to any other party to this Agreement; provided, however, that if such
termination shall result from (i) the willful failure of any party to fulfill
a condition precedent to the performance of another party or to perform a
material covenant of this Agreement or (ii) a material and willful breach by
any party of this Agreement, then such party shall be fully liable for any and
all damages, costs and expenses (including, but not limited to, reasonable
counsel fees) sustained or incurred by the other party or parties in
connection herewith.
13.02 Further Assurances; Books and Records. From time to time at TKZ's
request (whether at or after the Closing) and without further consideration,
Xxxxxx will execute and deliver such further instruments of conveyance and
transfer as TKZ may reasonably request in order to effectively convey and
transfer the Membership Interests.
13.03 Press Releases and Public Announcements. Except as otherwise required
by law, prior to the Closing, neither TKZ, Tukaiz nor Xxxxxx shall issue or
permit to be issued any press release, make or permit to be made any public
announcement or otherwise disclose or permit to be disclosed any information
for the purpose of publication by any print, broadcast or other public media,
relating to the transactions contemplated by this Agreement, without the prior
written consent of Xxxxxx (in the case of an announcement or disclosure other
than by Xxxxxx) or TKZ (in the case of an announcement or disclosure other
than by TKZ); provided, however, that the parties acknowledge that press
releases shall be issued upon signing this Agreement and at Closing and agree
to cooperate to issue a mutual press release. In the event that such
disclosure is required by law, the disclosing party shall be required to give
written notice of such requirement to the other party prior to making any such
disclosure.
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13.04 Expenses. Xxxxxx (and not Tukaiz or the Company) will pay all costs
and expenses attributable to the performance of and compliance with all
agreements and conditions contained in this Agreement to be performed or
complied with by them, including, without limitation, all accounting and legal
fees and expenses of Xxxxxx. TKZ will pay all costs and expenses attributable
to the performance of and compliance with all agreements and conditions
contained in this Agreement to be performed or complied with by them,
including, without limitation, all accounting and legal fees and expenses of
TKZ.
13.05 Governing Law; Submission to Jurisdiction. This Agreement shall be
governed by and construed and enforced in accordance with the laws of the
Commonwealth of Pennsylvania. TKZ, Tukaiz and Xxxxxx submit to the
jurisdiction of any state or federal court sitting in Pittsburgh, Pennsylvania
or Chicago, Illinois, in any action or proceeding arising out of or relating
to this Agreement and agree that all claims in respect of the action or
proceeding may be heard and determined in any such court. TKZ, Tukaiz and
Xxxxxx waive any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waive any bond, surety, or other security
that might be required of any other party with respect thereto.
13.06 Entire Agreement; Modification; Waiver. This Agreement, including the
exhibits, schedules and appendices hereto, constitutes the entire Agreement
among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties and there are no warranties,
representations or other agreements, express or implied, made by any party to
any other party in connection with the subject matter hereof except as
specifically set forth herein or in documents delivered pursuant hereto. To
the fullest extent permitted by law, unless otherwise expressly provided for
herein, no supplement, modification, waiver or termination of this Agreement
shall be binding unless executed in writing by the party to be bound thereby.
No waiver of any provision of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar),
nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
13.07 Notices. All notices, demands, claims, requests, undertakings,
consents, opinions and other communications which may or are required to be
given hereunder or with respect hereto shall be in writing, shall be given
either by personal delivery or by mail, facsimile transmission (with
confirmation of receipt), telegraph, telex or similar means of communication,
and shall be deemed to have been given or made when delivered, if personally
delivered, and otherwise when received, addressed to the respective parties as
follows:
If to TKZ:
c/o Matthews International corporation
Two XxxxxXxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: President
If to Xxxxxx or Tukaiz:
c/o Xxxxx Xxxxxx, Xx.
0000 X. Xxxxxxx Xxxx
Xxxxxxxx Xxxx, XX 00000
38
with a copy to:
Xxxxxxx Xxxxxxx, Attorney
000 X. Xxxxx Xxxxxx, Xxxxx X
Xxxxxxxx, XX 00000
13.08 Counterparts. This Agreement may be executed in as many counterparts
as may be deemed necessary and convenient, and by the different parties hereto
on separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute but one and the same
instrument.
13.09 Matters of Construction, Interpretation and the Like.
(a) Construction. TKZ, Tukaiz and Xxxxxx have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by TKZ, Tukaiz and Xxxxxx and no presumption or burden of
proof shall arise favoring or disfavoring either TKZ, Tukaiz or Xxxxxx because
of the authorship of any of the provisions of this Agreement. Any reference
to any United States Federal, state, local or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise. Unless the context of this Agreement
otherwise requires, (a) words of any gender are deemed to include each other
gender; (b) words using the singular or plural number also include the plural
or singular number, respectively; (c) the terms "hereof," "herein," "hereby,"
"hereto," and derivative or similar words refer to this entire Agreement;
(d) the terms "ARTICLE" or "Section" refer to the specified ARTICLE or Section
of this Agreement; (e) the term "or" means "and/or"; (f) the term "party"
means, on the one hand, TKZ, on the other hand, Xxxxxx and Tukaiz, (g) the
word "including" means "including without limitation"; and (h) all references
to "dollars" or "$" refer to currency of the United States of America. Each
representation, warranty and covenant contained herein shall have independent
significance. If TKZ or Xxxxxx and Tukaiz materially breach in any respect
any representation, warranty, covenant or other obligation contained herein or
created hereby, the fact that there exists another representation, warranty,
covenant or obligation relating to the same subject matter (regardless of the
relative levels of specificity) which has not been breached shall not detract
from or mitigate the consequences of such breach. The rights and remedies
expressly specified in this Agreement are cumulative and are not exclusive of
any rights or remedies which any party would otherwise have. The exhibits and
schedules specified in this Agreement are incorporated herein by reference and
made a part hereof. The article and section headings hereof are for
convenience only and shall not affect the meaning or interpretation of this
Agreement.
(b) Severability. The invalidity or unenforceability of one or more of the
provisions of this Agreement in any situation in any jurisdiction shall not
affect the validity or enforceability of any other provision hereof or the
validity or enforceability of the offending provision in any other situation
or jurisdiction.
13.10 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than Xxxxxxxx, TKZ, Xxxxxx, Tukaiz,
the Company and their respective heirs, legal representatives, successors and
permitted assigns.
39
13.11 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their respective heirs,
legal representatives, successors and permitted assigns. No party may assign
this Agreement or any of such party's rights, interests or obligations
hereunder without the prior approval of the other parties hereto, except that
TKZ can assign its Put/Call Rights to another entity controlled by Xxxxxxxx if
sole member limited liability companies are not permitted by Illinois law at
the time of the Put/Call Exercise.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement or
have caused this Agreement to be duly executed as of the date first above
written.
TKZ HOLDING CORP.
By Xxxxx X. Xxxxx
---------------------------------
Title: President
------------------------------
TUKAIZ LITHO, INC.
By Xxxxx Xxxxxx Xx.
---------------------------------
Title: President
------------------------------
WITNESS: Xxxxx X. Xxxxxx
----------------------------
Xxxxx Xxxxxx Xx.
----------------------------
Xxxxx Xxxxxx, Xx.
To be signed at Closing:
TUKAIZ COMMUNICATIONS, L.L.C.
By Xxxxxxxx X. Xxxxxxxx
---------------------------------
Title: Secretary and Treasurer
------------------------------
