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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest event reported): January 5, 1999
TRANSWESTERN HOLDINGS L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 333-42117 33-0560667
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification Number)
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8344 CLAIREMONT MESA BOULEVARD 92111
SAN DIEGO, CALIFORNIA (Zip Code)
(Address of principal executive offices)
(619) 467-2800
(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets.
On January 5, 1999 TransWestern Publishing Company LLC (the "Company"),
a wholly-owned subsidiary of TransWestern Holdings, L.P. acquired 14 directories
(and related accounts receivable) in Texas from United Directory Services, Inc.
for cash of approximately $12.3 million, which was funded with cash of $9.3
million, $3.0 million of borrowings under the Company's revolving credit
facility, and a $2.0 million promissory note due in 18 months. The purchase
agreement also includes up to $2.75 million in contingent earn-out payments
based on the realized net contribution margin of the 1999, 2000 and 2001
editions of the Austin prototype directory. In connection with the acquisition,
the Company also assumed certain liabilities of United totaling approximately
$0.7 million. The acquisition will be accounted for as a purchase and
accordingly the purchase price will be allocated to the tangible and intangible
assets acquired based on their respective fair values at the date of
acquisition.
Item 7. Financial Statements and Exhibits
The Company will file the required financial statements for the assets acquired
and pro forma financial information no later than 60 days after this report must
be filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on January 14, 1999 on its
behalf by the undersigned thereunto duly authorized.
TRANSWESTERN HOLDINGS, L.P.
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(Registrant)
BY: TRANSWESTERN COMMUNICATIONS COMPANY, INC.
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(General Partner)
DATE: January 14, 1999 BY: /s/Joan M. Fiorito
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Name: Joan M. Fiorito
Title: Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
EXHIBIT INDEX
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Exhibit Number Description of Exhibit
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2.1 Asset Purchase Agreement dated as of November 24 1998, between
TransWestern Publishing Company LLC and United Directory Services, Inc.
99.1 Press Release
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EXHIBIT 2.1
EXECUTION COPY
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ASSET PURCHASE AGREEMENT
AMONG
TRANSWESTERN PUBLISHING COMPANY LLC,
A DELAWARE LIMITED LIABILITY COMPANY,
UNITED DIRECTORY SERVICES, INC.
A TEXAS CORPORATION,
AND
JOEL RAMSEY,
ITS SOLE SHAREHOLDER
DATED
AS OF
NOVEMBER 24, 1998
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TABLE OF CONTENTS
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PAGE
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ARTICLE 1 - DEFINITIONS......................................................................1
ARTICLE 2 - PURCHASE AND SALE................................................................6
2.1 Purchased Assets..............................................................6
(a) Asset Purchase.........................................................6
(b) Limited Assumed Liabilities............................................8
(c) Excluded Liabilities...................................................9
2.2 Purchase Price................................................................9
2.3 Closing Date Transactions.....................................................9
(a) Closing................................................................9
(b) Deliveries on the Closing Date.........................................9
2.4 Payment of Pre-Paid Costs on the Closing Date................................10
2.5 Seller Note Adjustment.......................................................10
2.6 Adjustment to Base Purchase Price............................................12
2.7 Payment of the Earn-Out Payments.............................................12
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES..................................................13
3.1 Representations and Warranties of Seller.....................................13
(a) Organization, Qualification and Corporate Power.......................14
(b) Authorization of Transaction..........................................14
(c) Noncontravention......................................................14
(d) Governmental Consent..................................................14
(e) Recent Events.........................................................14
(f) Intellectual Property.................................................16
(g) Contracts and Commitments.............................................16
(h) Financial Statements..................................................17
(i) Accuracy of Information Furnished.....................................17
(j) Customer Contract Receivables; Advance Payments.......................17
(k) Employees and Employee Benefit Plans..................................17
(l) Legal Compliance with Laws............................................18
(m) Litigation; Proceedings...............................................18
(n) Title and Sufficiency of Assets.......................................18
(o) Directory Listings....................................................18
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(p) Brokers' Fees.........................................................19
(q) Tax Matters...........................................................19
(r) Leases................................................................20
(s) Customers and Suppliers...............................................23
(t) Disclosure............................................................23
(u) Closing Date..........................................................23
3.2 Representations and Warranties of TransWestern...............................23
(a) Organization..........................................................24
(b) Authorization of Transaction..........................................24
(c) Noncontravention......................................................24
(d) Governmental Consent..................................................24
(e) Brokers' Fees.........................................................24
(f) Closing Date..........................................................24
ARTICLE 4 - COVENANTS.......................................................................25
4.1 Pre-Closing Covenants........................................................25
(a) Affirmative Covenants Concerning the Business.........................25
(b) Negative Covenants Concerning the Business............................26
(c) Exclusivity...........................................................27
(d) General Obligation to Close...........................................27
4.2 Other Covenants..............................................................27
(a) Full Access...........................................................27
(b) Notice of Developments................................................28
(c) Employee Matters......................................................28
4.3 TransWestern's Post-Closing Collection Obligation............................28
ARTICLE 5 - CONDITIONS.....................................................................29
5.1 Conditions To Closing........................................................29
(a) Conditions to Closing Obligations of TransWestern.....................29
(b) Conditions to Closing Obligations of Seller...........................31
ARTICLE 6 - TERMINATION.....................................................................32
6.1 Termination..................................................................32
6.2 Effect of Termination........................................................32
ARTICLE 7 - ADDITIONAL AGREEMENTS...........................................................33
7.1 Post-Closing Assistance......................................................33
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7.2 Confidentiality..............................................................33
(a) Information Concerning the Parties....................................33
(b) Notice of Compulsory Disclosure.......................................34
7.3 Non-Competition..............................................................34
7.4 Indemnification..............................................................35
7.5 Arbitration..................................................................37
7.6 Miscellaneous................................................................39
(a) Representations and Warranties........................................39
(b) Press Releases and Announcements; Notice to Customers.................39
(c) Further Transfers and Assurance.......................................39
(d) Name and Logos of Parties.............................................40
(e) No Third Party Beneficiaries..........................................40
(f) Entire Agreement......................................................40
(g) Succession and Assignment.............................................40
(h) Counterparts..........................................................40
(i) Headings..............................................................40
(j) Notices...............................................................40
(k) Governing Law.........................................................41
(l) Amendments and Waivers................................................41
(m) Severability..........................................................41
(n) Expenses..............................................................41
(o) Taxes; Recording Charges..............................................42
(p) Construction..........................................................42
(q) Incorporation of Exhibits and Schedules...............................42
(r) Number and Gender.....................................................42
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EXHIBITS
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Exhibit A Pro Forma
Exhibit B Form of Seller Note
Exhibit C Form of Bill of Sale
Exhibit D Form of Opinion of Seller's and Stockholders' Counsel
Exhibit E Bonus Payment Side Letter
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SCHEDULES Section Reference
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Contracts Schedule 2.1(a)(vi)
Assumed Lease Schedule 2.1(a)(vii)
Purchase Price Allocation Schedule 2.2(b)
Assumed Liability Schedule 2.1(b)(ii)
Recent Events Schedule 3.1(e)
Intellectual Property Schedule 3.1(f)
Financial Statements Schedule 3.1(h)
Litigation Schedule 3.1(m)
Taxes Schedule 3.1(q)
Real Property Schedule 3.1(r)
Employee Schedule 4.2(c)
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of November 24, 1998, by and among TransWestern Publishing
Company LLC, a Delaware limited liability company ("TransWestern"), United
Directory Services, Inc., a Texas corporation ("Seller"), and Joel Ramsey, the
sole shareholder of Seller ("Shareholder"). TransWestern, Seller and Shareholder
sometimes are referred to herein individually as a "Party" and collectively as
the "Parties."
Each of Seller and TransWestern is in the business of printing,
publishing and distributing telephone directory "yellow pages." Subject to the
terms and conditions set forth herein, TransWestern desires to acquire from
Seller and Seller desires to sell to TransWestern substantially all of its
businesses, assets and properties including all of its businesses and assets of
or relating to each of the Parker Directory, the Azle Directory, the Graham
Directory, the Wise Directory, the Tri- County Directory, the Mineral Wells
Directory, the Kerrville Directory, the Bastrop Directory, the Seguin Directory,
the New Braunfels Directory, the Marble Falls Directory, the NE San Antonio
Directory and the San Marcos Directory and the Austin Directory (each as defined
below and sometimes referred to herein collectively as the "Directories"; each,
a "Directory").
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties hereby agree as follows:
ARTICLE 1 - DEFINITIONS
"Accounts Receivable Measurement Date" means the last day of the
18-month period following the Closing Date.
"Actual Net Collection Amount" means the aggregate amount of cash
received by TransWestern after the Closing Date through the Accounts Receivable
Measurement Date with respect to any unpaid Customer Contract associated with
Prior Editions (other than the Austin Directory) identified on Seller's books
and records as of the Closing and included in the Purchased Assets.
"Advance Payment" means a customer payment received by Seller (or
TransWestern, as the case may be) with respect to any Customer Contract
associated with any edition of any Directory prior to publication of such
edition.
"Austin Directory" means the telephone directory owned by Seller
as of the date hereof and projected to cover those areas in Texas which fall
within the following zip codes: 76511, 76527, 76530, 76537, 78613, 78626, 78627,
78628, 78630, 78634, 78641, 78642, 78645 and 78646. The "1998 Austin Directory,"
for example, means the edition of such Directory published in November 1998.
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"Azle Directory" means the telephone directory owned by Seller as
of the date hereof which covers those areas which fall within the following zip
codes: 76020, 76052, 76071, 76135, 76136 and 76179. "1998 Azle Directory," for
example, means the edition of such Directory published in August 1998.
"Bastrop Directory" means the telephone directory owned by Seller
as of the date hereof which covers those areas which fall within the following
zip codes: 77853, 78942 and 78947. "1998 Bastrop Directory" means the edition of
such Directory published in May 1998.
"Code" means the Internal Revenue Code of 1986, as amended, and
all rules and regulations promulgated thereunder.
"Collected Accounts Receivable" means, with respect to any
edition of any Directory, all cash amounts collected by any Party with respect
to any Customer Contract relating to such edition of such Directory after the
date of the publication of such edition.
"Customer Contract" means any written contract or agreement
(other than trade contracts) between Seller and any of its customers (or under
which Seller has rights) which has been entered into and signed by the parties
thereto in connection with the publication of the Directories and corresponding
provision of Directory Services, and with respect to Seller, all of the Customer
Contracts identified by Seller to TransWestern as of the Closing Date.
"Direct Costs" means, collectively, determined with respect to
any Directory (or edition thereof) (i) sales commissions, salaries, benefits,
payroll taxes and related travel expenses for account executives only to the
extent allocable to or associated with such Directory (or edition thereof), (ii)
license fees for white pages, and (iii) third party paper, printing, production
(including, without limitation, ad creation, colorization, listing and keying)
and shipping costs and (iv) distribution costs.
"Directory Services" means the printing and publishing of
advertisements in any Directory.
"Earn-Out Payments" means the sum of the following amounts:
(i) the product of 2, multiplied by the aggregate Realized
Contribution Margin associated with the 1999 Austin Directory,
calculated as of the First Earn-Out Reconciliation Date (the "First
Earn-Out Payment"); plus
(ii) the product of 1.5, multiplied by the aggregate Realized
Contribution Margin associated with the 2000 Austin Directory calculated
as of the Second Earn-Out Reconciliation Date (the "Second Earn-Out
Payment"); plus
(iii) the lesser of (x) the aggregate Realized Contribution
Margin associated with the 2001 Austin Directory calculated as of the
Third Earn-Out Reconciliation Date and (y)
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such amount which, together with the First Earn-Out Payment and the
Second Earn-Out Payment, equals $2,750,000 (the "Third Earn-Out
Payment").
"Earn-Out Reconciliation Date" means, as applicable, the First
Earn-Out Reconciliation Date, the Second Earn-Out Reconciliation Date or the
Third Earn-Out Reconciliation Date.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and all rules and regulations promulgated thereunder.
"Established Directory" means each of the Directories other than
the Austin Directory.
"Estimated Net Collection Amount" means the aggregate amount due
and owing under all of Seller's Customer Contracts as of the Closing Date and
reflected as accounts receivable on Seller's books and records for the 13 most
recently published Prior Editions (excluding the Austin Directory), minus
[$___________].1
"First Earn-Out Reconciliation Date" means the date that is
twelve (12) months following the publication of the 1999 Austin Directory.
"Future Edition Customer Contract" means any Customer Contract
associated with any Future Edition.
"Future Editions" means, collectively, any edition of any of the
Directories which is published after the Closing Date.
"GAAP" means United States generally accepted accounting
principles applied in a manner consistent with the Latest Balance sheet (as
defined in Section 3.1(h)).
"Graham Directory" means the telephone directory owned by Seller
as of the date hereof which covers those areas of Texas which fall within the
following zip codes: 76366, 76372, 76374, 76427, 76450, 76458, 76459, 76460,
76481, 76486 and 76491. "1998 Graham Directory," for example, means the edition
of such Directory published in October 1998.
"Intellectual Property" means all (i) patents, patent
applications, patent disclosures, and improvements thereto, (ii) trademarks,
service marks, trade dress, logos, trade names, and corpo rate names and
registrations and applications for registration thereof, (iii) copyrights and
registrations and applications for registration thereof, (iv) mask works and
registrations and applications for registration thereof, (v) computer software,
data and documentation, (vi) trade secrets and confiden tial business
information (including ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
manufacturing and production processes and techniques, research and development
information, software products in development,
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1 Bad debt reserve amount to be agreed to by Seller and TransWestern.
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drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial (excluding employee benefit plans), marketing,
and business data, pricing and cost information, business and marketing plans,
and customer and supplier lists and information), and (vii) copies and tangible
embodiments thereof (in whatever form or medium).
"Kerrville Directory" means the telephone directory owned by
Seller as of the date hereof which covers those areas of Texas which fall within
the following zip codes: 78003, 78006, 78010, 78013, 78015, 78024, 78025, 78027,
78028, 78029, 78055, 78058, 78063, 78074, 78606, 78618, 78624, 78631, 78636,
78671 and 78675. "1998 Kerrville Directory," for example means the edition of
such Directory published in July 1998.
"Liability" or "Liabilities" means any liability (whether known
or unknown, whether asserted or not asserted, whether absolute or contingent,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for taxes.
"Loss" means any loss, Liability, damage or expense, whether or
not arising out of third party claims (including, without limitation, interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid in
investigation, defense or settlement of any of the foregoing).
"Marble Falls Directory" means the telephone directory owned by
Seller as of the date hereof which covers those areas of Texas which fall within
the following zip codes: 76539, 76550, 76832, 76853, 78605, 78607, 78608, 78611,
78636, 78639, 78643, 78654, 78663, 78669, 78672, 78675, 78733, 78734 and 78738.
"1998 Marble Falls Directory," for example, means the edition of such Directory
published in June 1998.
"Material Adverse Effect" means any change, event or occurrence
which has a material adverse effect upon the assets, business, operations,
prospects or condition (financial or otherwise) of any Directory or the
Directories considered as a whole or Seller and the Directories considered as a
whole.
"Mineral Wells Directory" means the telephone directory owned by
Seller as of the date hereof which covers those areas of Texas which fall within
the following zip codes: 76066, 76067, 76088, 76449, 76453, 76463, 76472, 76475,
76484 and 76486. "1998 Mineral Wells Directory," for example, means the edition
of such Directory published in February 1998.
"NE San Antonio Directory" means the telephone directory owned by
Seller as of the date hereof which covers those areas of Texas which fall within
the following zip codes: 78109, 78148, 78152, 78154, 78233 and 78266. "1998 NE
San Antonio Directory," for example, means the edition of such Directory
published in November 1998.
"New Braunfels Directory" means the telephone directory owned by
Seller as of the date hereof which covers those areas of Texas which fall within
the following zip codes: 78015, 78070, 78130, 78131, 78132, 78133 and 78154.
"1998 New Braunfels Directory," for example, means the edition of such Directory
published in February 1998.
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"Ordinary Course of Business" means the ordinary course of
business of Seller consistent with past custom and practice of Seller (including
with respect to quantity and frequency) during the twelve-month period prior to
the date hereof.
"Parker Directory" means the telephone directory owned by Seller
as of the date hereof which covers those areas of Texas which fall within the
following zip codes: 76008, 76066, 76082, 76086, 76087, 76088, 76439, 76485,
76487 and 76490. "1998 Parker Directory," for example, means the edition of such
Directory published in December 1998.
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof or any other entity.
"Pre-Paid Direct Costs" means any Direct Costs associated with
any Future Editions which are paid by Seller as of the Closing Date and which
are evidenced by a receipt in the amounts set forth on the Pro Forma attached
hereto.
"Prior Editions" means, collectively, all editions of any
Directory which have a publication date prior to the Closing Date.
"Pro Forma" means the pro forma statement of Direct Costs
(separately identifying the Pre-Paid Direct Costs and other Direct Costs)
delivered by Seller to TransWestern on the Closing Date and attached hereto as
Exhibit A.
"Purchased Receivables" means all unpaid and outstanding accounts
receivable reflected by Seller's books and records at Closing relating to all
1998 Directories and 1997 editions of the Wise Directory, the Parker Directory,
the NE San Antonio Directory and the Graham Directory.
"Realized Contribution Margin" means, with respect to any edition
of any Directory, the result of the following: (i) Realized Net Collections
minus (ii) the Direct Costs associated with such Directory.
"Realized Net Collections" means, with respect to any edition of
any Directory, the result of the following: (i) the Collected Accounts
Receivable associated with such edition of such Directory; plus (ii) the Advance
Payments associated with such edition of such Directory.
"San Marcos Directory" means the telephone directory owned by
Seller as of the date hereof which covers those areas of Texas which fall within
the following zip codes: 78610, 78616, 78619, 78640, 78644, 78655, 78656, 78666,
78667, 78670 and 78676. "1998 San Marcos Directory," for example, means the
edition of such Directory published in January 1998.
"Sales/Use Tax Liability" means any state sales and use Tax
Liability for periods (or portions thereof) ending on or prior to the Closing
Date relating to or arising in connection with Seller's or Shareholder's
business or operations.
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"Second Earn-Out Reconciliation Date" means the date that is
twelve (12) months following the publication of the 2000 Austin Directory.
"Security Interest" means any mortgage, pledge, security
interest, encumbrance, lien or charge, of any kind (including, without
limitation, any conditional sale or other title retention agreement or lease in
the nature thereof, any sale of receivables with recourse against Seller, any
Affiliate of Seller or any filing or agreement to file a financing statement as
debtor under the Uniform Commercial Code or any similar statute other than to
reflect ownership by a third party of property leased to Seller under a lease
which is not in the nature of a conditional sale or title retention agreement,
or any subordination arrangement in favor of another Person (other than any
subordination arising in the ordinary course of business).
"Seguin Directory" means the telephone directory owned by Seller
as of the date hereof which covers those areas of Texas which fall within the
following zip codes: 78115, 78123, 78124, 78140, 78160, 78622, 78629, 78638,
78648 and 78661. "1998 Sequin Directory," for example, means the edition of such
Directory published in March 1998.
"Tax" or "Taxes" means any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, communications,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Sec. 59A), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transaction, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
"Third Earn-Out Reconciliation Date" means the date that is
twelve (12) months following the publication of the 2001 Austin Directory.
"Tri-County Directory" means the telephone directory owned by
Seller as of the date hereof which covers those areas of Texas which fall within
the following zip codes: 75831, 75833, 75838, 75840, 75846, 75848, 75850, 75855,
75859, 75860, 76635, 76642, 76653, 76667, 76673, 76678, 76686, 76693, 77855,
77865 and 77871. "1998 Tri-County Directory," for example, means the edition of
such Directory published in April 1998.
"Wise Directory" means the telephone directory owned by Seller as
of the date hereof which covers those areas of Texas which fall within the
following zip codes: 76023, 76073, 76078, 76225, 76230, 76234, 76246, 76251,
76255, 76261, 76265, 76267, 76270, 76426 and 76431. "1998 Wise Directory," for
example, means the edition of such Directory published in September 1998.
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ARTICLE 2 - PURCHASE AND SALE
2.1 Purchased Assets.
(a) Asset Purchase. On the terms and subject to the conditions
set forth in this Agreement, at the closing of the transactions
contemplated herein (the "Closing"), TransWestern agrees to purchase
from Seller, and Seller agrees to (and Shareholder agrees to cause
Seller to) sell, transfer, convey and deliver to TransWestern, free and
clear of any Security Interest, all of Seller's right, title and
interest in and to the following assets (collectively, the "Purchased
Assets"):
(i) customer files and records and data (whether in hard
copy or in computer file format) contained therein (including,
without limitation, customer lists, customer correspondence and
customer telephone numbers) relating to any edition of any
Directory, together with copies of all Customer Contracts;
(ii) all Customer Contracts and the Purchased Receivables
with respect to all Future Editions and all Prior Editions;
(iii) Intellectual Property, goodwill associated
therewith, licenses and sublicenses granted and obtained with
respect thereto, and rights thereunder, reme dies against
infringements thereof, and rights to protection of interests
therein under the laws of all jurisdictions, in each case
associated with, relating to or used by Seller or Shareholder in
connection with the ownership, operation or publication of any
Directories;
(iv) all Advance Payments associated with any Customer
Contracts and all accounts, notes and other receivables arising
in connection with any edition of the Directories;
(v) all Pre-Paid Direct Costs;
(vi) agreements, contracts, purchase orders, contractual
rights and other similar arrangements identified as "Other
Assumed Contracts" on the attached "Contracts Schedule";
(vii) the leases set forth on the attached
"Assumed Leases Schedule";
(viii) all claims, refunds, rights of recovery, rights of
set off and rights of recoupment of any kind relating to any
Future Editions;
(ix) all franchises, approvals, permits, licenses, orders,
registrations, certif icates, variances and similar rights
obtained from governments and governmental agencies associated
with, relating to or arising out of or as a result of the
ownership or operation of the Directories;
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(x) rights to receive mail, telephone calls and other
communications addressed to or directed at Seller or Shareholder
(including mail, telephone calls and other communications from
customers (including, without limitation, any customer inquiries
regarding the terms or provision of Directory Services pursuant
to any Customer Contract), suppliers, distributors, agents and
others) and payments relating to the Purchased Assets;
(xi) ad-copy, drawings, specifications, advertising and
promotional materials, studies, reports and other printed or
written materials relating to, associated with or used by Seller
or Shareholder in connection with the ownership or publication of
any Directories; and
(xii) all other assets, rights, properties and interests
of every kind and nature, whether tangible or intangible, and
wherever located and possessed and owned by Seller or Shareholder
as of the Closing Date to the extent such assets relate to the
ownership of any Directories as now and as proposed to be owned
and operated or the advertising, publication or printing of any
Future Editions in a manner consistent with Seller's and
TransWestern's current practice and the intent of the Parties as
expressed in this Agreement; provided for further clarity that,
the Purchased Assets shall not include Seller's fixed assets or
office equipment (including any office supplies, furniture or
computer and computer peripheral hardware)(collectively, the
"Excluded Assets").
(b) Limited Assumed Liabilities. Notwithstanding anything herein
to the contrary, from and after the Closing Date, TransWestern will not
assume or in any way be responsible for any Liabilities of Seller or
Shareholder or any other Liabilities whatsoever arising out of or
relating to the condition or operation of the Directories at any time as
of or prior to the Closing Date or, except as set forth in the following
sentence, any other Liabilities. Subject to the terms and satisfaction
of the conditions in this Agreement, from and after the Closing Date,
TransWestern will assume and agree to pay, defend, discharge and perform
as and when due only the following specific Liabilities of Seller that
relate exclusively to the ownership and operation of the Directories
after the Closing (the "Assumed Liabilities"):
(i) Liabilities accruing on or after the Closing Date
pursuant to the contracts and leases which are set forth on the
attached "Contracts Schedule" or the "Assumed Lease Schedule,"
but only to the extent such contracts or leases are actually
assigned to TransWestern (but excluding any Liability relating to
or arising out of such contracts and leases as a result of (A)
any breach of such contracts or leases occurring on or prior to
the Closing Date, (B) any violation of law, breach of warranty,
tort or infringement occurring on or prior to the Closing Date,
(C) event or condition occurring or existing prior to the Closing
Date or (D) with respect to the foregoing items (A), (B) and (C),
any related charge, complaint, action, suit, proceeding, hearing,
investigation, claim or demand); and
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(ii) current Liabilities arising in the Ordinary Course of
Business and classified as such on the Latest Balance Sheet or
incurred after the date of the Latest Balance Sheet (as defined
in Section 3.1(h)) to the extent such current Liabilities are
reflected on the attached Assumed Liability Schedule and not paid
prior to the Closing Date.
(c) Excluded Liabilities. TransWestern shall not assume or be
liable for any Liability of Seller or Shareholder other than the Assumed
Liabilities (such other Liabilities being collectively referred to
herein as the "Excluded Liabilities") regardless of whether such other
Liability is disclosed herein or on any schedule hereto. Without in any
way limiting the generality of the foregoing sentence, Excluded
Liabilities specifically includes any Liability resulting from any
error, omission or illegality arising out of, relating to or in
connection with sales into or the printing or publication of any Prior
Editions or any edition of the Seller Directories or any pre-closing
sales into or actions, conditions or events occurring or existing prior
to the Closing in connection with the printing or publication of any
Future Edition. Seller and Shareholder each acknowledge that Seller is
retaining the Excluded Liabilities and that Seller and Shareholder,
severally, shall have full responsibility to pay, discharge and perform
any Excluded Liabilities promptly when due.
2.2 Purchase Price.
(a) The total purchase price payable by TransWestern to Seller
for the Purchased Assets (the "Purchase Price") shall be equal to the
result of:
(i) the assumption by TransWestern of the Assumed
Liabilities; plus
(ii) $12,300,000 (the "Base Purchase Price") as it may be
adjusted pursuant to Section 2.4; plus
(iii) a promissory note bearing interest at a rate of 6.5%
per annum, in an aggregate principal amount equal to the sum of
$2,000,000, plus the aggregate amount of the Purchased
Receivables, subject to adjustment pursuant to Sections 2.5 and
4.3, in the form set forth in Exhibit B (the "Seller Note"); plus
(iv) the Earn-Out Payments (as determined pursuant to
Section 2.6).
(b) The Purchase Price shall be allocated among the Purchased
Assets and the noncompetition agreement in Section 7.3 as set forth in
the "Purchase Price Allocation Schedule" attached hereto. The allocation
of the Purchase Price among the Purchased Assets and the noncompetition
agreement set forth in Section 7.3 hereof shall be made in a manner
consistent with the provisions of Section 1060 of the Code and
applicable Treasury Regulations thereunder. The fair market value of the
Purchased Assets shall be determined by TransWestern in good faith and
approved by the Sellers (such approval not to be unreasonably withheld)
and such determination shall be used by the Parties in allocating the
Purchase Price and in preparing (a) Form 8594, Asset Acquisition
Statement, for each of
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TransWestern and Sellers, and (b) all Tax Returns. Each of TransWestern
and Sellers shall file Form 8594, prepared in accordance with this
section, with its federal income Tax Return for its Tax period including
the Closing Date.
2.3 Closing Date Transactions.
(a) Closing. Subject to the terms and conditions set forth in
this Agreement, the Closing shall take place via facsimile and wire
transfer of funds within five (5) business days after satisfaction of
all of the conditions set forth in Article V or such other date which is
mutually acceptable to the parties (the "Closing Date").
(b) Deliveries on the Closing Date. On the Closing Date:
(i) TransWestern shall deliver to Seller the Base Purchase
Price, by wire transfer of immediately available funds to an
account designated by Seller.
(ii) TransWestern shall deliver to Seller the Seller Note.
(iii) TransWestern shall deliver to Seller (A) the various
certificates, instruments and documents referred to in Section
5.1(b) and (B) such other instruments of assumption as Seller may
reasonably request in form reasonably satisfactory to Seller and
consistent with the provisions of this Agreement.
(iv) Seller shall deliver to TransWestern a bill of sale
in the form attached hereto as Exhibit C.
(v) Seller shall deliver to TransWestern (A) the various
certificates, instruments and documents referred to in Section
5.1(a) and (B) all other documents, instruments of sale,
transfer, conveyance and assignment as TransWestern may
reasonably request with respect to the Purchased Assets in form
and substance reasonably satisfactory to TransWestern and
consistent with the provisions of this Agreement.
(vi) Seller shall deliver to TransWestern evidence that
all security interests and other liens or encumbrances in any of
the Purchased Assets have been released.
2.4 Payment of Pre-Paid Costs on the Closing Date. On the Closing
Date, TransWestern shall acquire the Pre-Paid Costs from Seller by offsetting
the aggregate amount of the Pre-Paid Costs against the aggregate amount of the
Advance Payments included in the Purchased Assets. At least three (3) but no
more than five (5) business days prior to the Closing Date, Seller shall deliver
to TransWestern a statement setting forth Seller's estimate as of the Closing of
the aggregate Advance Payments included in the Purchased Assets and of the
Pre-Paid Costs. TransWestern shall have the opportunity to review such statement
and raise questions or objections regarding the estimates set forth therein and
Seller shall deliver to TransWestern all documentation requested by TransWestern
or used by Seller in calculating such estimates. The Parties shall use
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their respective best efforts to agree on the aggregate amount of such Advance
Payments and the amount of Pre-Paid Costs as of the Closing Date, which
agreement shall be reflected on the Pro Forma and which shall be final and
binding on the Parties. If the aggregate amount of the Advance Payments included
in the Purchased Assets exceeds the Pre-Paid Direct Costs, the Base Purchase
Price shall be reduced dollar-for-dollar by the amount of such excess. If the
Pre-Paid Direct Costs exceed the aggregate amount of such Advance Payments, the
Base Purchase Price shall be increased dollar-by-dollar by the amount of such
difference.
2.5 Seller Note Adjustment
(a) For purposes of determining the Estimated Net Collection
Amount, Seller and TransWestern, at least two (2) business days prior to
the Closing Date, shall attempt in good faith to agree on such amount.
If the parties are unable to agree on the Estimated Net Collection
Amount, such amount shall be determined by the President of Seller in
good faith based on Seller's most recently available books and records.
(b) Not later than twenty (20) business days following the
Accounts Receivable Measurement Date, TransWestern shall in good faith
prepare and deliver to Seller a statement (the "Net Collections
Statement") setting forth, as of such date, its calculation of the
Actual Net Collection Amount as of the Accounts Receivable Measurement
Date, together with a statement of Collected Accounts Receivable and
Advance Payments received since the Closing Date, with respect to each
edition of each Established Directory. The Net Collections Statement
shall be based on Seller's and TransWestern's books and records and
customer checks, bank statements and other documentation then available
and provided to TransWestern by Seller and, if applicable, Shareholder
at TransWestern's request. Seller shall review the Net Collections
Statement and raise questions or objections regarding the Net
Collections Statement and the Parties shall use their respective best
efforts to agree on such Actual Net Collection Amount as soon as
practicable but in any event within five (5) business days of
TransWestern's delivery of the Net Collections Statement to Seller.
(c) In the event that Seller disputes TransWestern's calculation
of the Actual Net Collection Amount as set forth on the Net Collections
Statement, or any of the components thereof, and TransWestern and Seller
are unable to resolve any such disputed matters regarding the Net
Collections Statement within twenty (20) business days after the
delivery of the Net Collections Statement to Seller, TransWestern and
Seller shall refer all remaining disputes concerning the Net Collections
Statement to a certified public accounting firm mutually agreed to by
the Parties (the "Independent Accounting Firm"). The Parties shall
instruct the Independent Accounting Firm to promptly (and in any event
within twenty (20) business days after submission of the disputes to the
Independent Accounting Firm) resolve such disputed matters; provided,
that Seller and TransWestern are unable to agree upon an Independent
Accounting Firm within five (5) days, Seller and TransWestern shall,
within five (5) days thereafter select a nationally recognized
accounting firm by lot (after Seller and TransWestern each exclude one
such accounting firm). TransWestern and Seller will make available to
the Independent Accounting Firm at reasonable times and upon reasonable
notice during the pendency of any dispute under this clause (c) the work
papers and back-up
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<PAGE> 17
materials used in preparing the Net Collections Statement and the books
and records of Seller and shall have the right to meet with the
Independent Accounting Firm during this period and to present their
respective positions. The resolution of disputes by the Independent
Accounting Firm and its determination of the Actual Net Collection
Amount will be set forth in writing and will be conclusive and binding
upon the Parties.
(d) The Independent Accounting Firm will determine the allocation
of its costs and expenses in determining the Actual Net Collection
Amount based upon the percentage which the portion of the contested
amount not awarded to each Party bears to the amount actually contested
by such Party. For example, if Seller claims the Actual Net Collection
Amount is $1,000 greater than the amount determined by TransWestern and
its accountants, and TransWestern contests only $500 of the amount
claimed by Seller, and if the Independent Accounting Firm ultimately
resolves the dispute by awarding Seller $300 of the $500 contested, then
the costs and expenses of arbitration will be allocated 60% (i.e., 300 /
500) to TransWestern and 40% (i.e., 200 / 500) to Seller.
(e) Immediately after the Actual Net Collection Amount has been
determined pursuant to this Section 2.5,
(i) if the Actual Net Collection Amount exceeds the
Estimated Net Collection Amount (such excess, the "Excess Margin
Amount"), then the principal amount of the Seller Note shall be
increased automatically by an amount equal to the product of (x)
2.0 multiplied by (y) the Excess Margin Amount; and
(ii) if the Actual Net Collection Amount is less than the
Estimated Net Collections (such difference, the "Deficient
Collections Amount"), then the principal amount of the Seller
Note, if higher, shall be reduced automatically to $2,000,000 and
then reduced further by an amount equal to the product of (x) 2.0
multiplied by (y) the Deficient Collections Amount. The
adjustments to the principal amount of the Seller Note pursuant
to this Section 2.5(e)(ii) and Section 4.3 shall be deemed to
have occurred as of the Closing Date and no interest shall accrue
on the Seller Note other than on the final principal amount after
all adjustments have been made. In no event shall TransWestern
have recourse against Seller for the portion (if any) of the
Deficient Collections Amount which exceeds the principal amount
of the Seller Note.
2.6 Payment of the Earn-Out Payments.
(a) Subject to clause (c) of this Section 2.6, TransWestern shall
pay (subject to its right to offset any amounts owing to TransWestern by
Seller under the provisions of this Agreement) the amount of the First
Earn-Out Payment, the Second Earn-Out Payment or the Third Earn-Out
Payment, respectively (if any), calculated after taking into account any
other amounts credited or debited against the applicable Earn-Out
Payment in accordance with this Agreement, by wire transfer of
immediately available funds to an account designated by Seller.
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<PAGE> 18
(b) Twenty (20) business days prior to each Earn-Out
Reconciliation Date, TransWestern shall in good faith prepare and
deliver to Seller a statement (the "Earn-Out Reconciliation Statement")
setting forth, as of such date, its calculation of the Realized
Contribution Margin, together with a statement of Collected Accounts
Receivable and Advance Payments, in each case with respect to the 1999
Austin Directory, in the case of the First Earn-Out Reconciliation Date;
the 2000 Austin Directory, in the case of the Second Earn-Out
Reconciliation Date; and the 2001 Austin Directory, in the case of the
third Earn- Out Reconciliation Date. Such Earn-Out Reconciliation
Statement shall be based on Seller's and TransWestern's books and
records and customer checks, bank statements and other documentation
then available and provided to TransWestern by Seller and, if
applicable, Shareholders at TransWestern's request. Seller shall review
such Earn-Out Reconciliation Statement and raise questions or objections
regarding such Earn-Out Reconciliation Statement and the Parties shall
use their respective best efforts to agree on the aggregate Realized
Contribution Margin associated with the 1999 Austin Directory, the 2000
Austin Directory or the 2001 Austin Directory, as the case may be, as
soon as practicable but in any event within twenty (20) business days of
TransWestern's delivery of such Earn-Out Reconciliation Statement to
Seller.
(c) In the event that Seller disputes TransWestern's calculation
of such Realized Contribution Margin associated with the 1999 Austin
Directory, the 2000 Austin Directory or the 2001 Austin Directory, or
any of the components thereof set forth on any Earn-Out Reconciliation
Statement and TransWestern and Seller are unable to resolve any such
disputed matters regarding such Earn-Out Reconciliation Statement within
twenty (20) business days after the delivery of such Earn-Out
Reconciliation Statement to Seller, TransWestern and Seller shall refer
all remaining disputes concerning such Earn-Out Reconciliation Statement
to an Independent Accounting Firm and shall instruct such Independent
Accounting Firm to promptly (and in any event within twenty (20)
business days after submission of the disputes to such Independent
Accounting Firm) resolve such disputed matters. TransWestern and Seller
will make available to such Independent Accounting Firm at reasonable
times and upon reasonable notice during the pendency of any dispute
under this clause (c) the work papers and back-up materials used in
preparing the applicable Earn-Out Reconciliation Statement and the books
and records of Seller and shall have the right to meet with the
Independent Accounting Firm during this period and to present their
respective positions. The resolution of disputes by the Independent
Accounting Firm and its determination of the Realized Contribution
Margin associated with the 1999 Austin Directory, the 2000 Austin
Directory or the 2001 Austin Directory, as the case may be, will be set
forth in writing and will be conclusive and binding upon the Parties.
(d) Each of the Parties will pay their own fees and expenses
(including, without limitation, any attorney's fees and expenses and
fees and expenses of their respective accountants and other
representatives) in connection with the determination of the Realized
Contribution Margin associated with the 1999 Austin Directory, the 2000
Austin Directory or the 2001 Austin Directory, as the case may be.
Shareholders, on the one hand, and TransWestern, on the other hand,
shall be responsible for a portion of the fees and expenses
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<PAGE> 19
of the Independent Accounting Firm incurred in making such
determination, determined according to the relative difference between
Seller's and TransWestern's respective calculations of the Realized
Contribution Margin associated with 1999 Austin Directory, the 2000
Austin Directory or the 2001 Austin Directory, as the case may be, and
such Independent Accounting Firm's determination of such Realized
Contribution Margins.
(e) Notwithstanding any other provision of this Agreement, in the
event that prior to the Third Earn-Out Reconciliation Date, TransWestern
(i) publishes a yellow pages directory which targets regions currently
targeted by the Austin Directory or (ii) TransWestern shall cease to
publish the Austin Directory, TransWestern shall immediately pay to
Seller an amount equal to the difference between $2,750,000 and the
aggregate amount of Earn-Out Payments made by TransWestern to the Seller
as of such date (each, an "Earn-Out Acceleration"). In the event of an
Earn-Out Acceleration, TransWestern shall no longer be obligated to make
any further Earn-Out Payments.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Seller. As a material
inducement to TransWestern to enter into this Agreement and to consummate the
transactions contemplated hereby, Seller and Shareholder hereby jointly and
severally represent and warrant to TransWestern that:
(a) Organization, Qualification and Corporate Power. Seller is a
corporation duly organized, validly existing, and in good standing under
the laws of the State of Texas, is qualified to conduct business there,
which represents the sole jurisdiction in which Seller conducts its
business or owns property.
(b) Authorization of Transaction. Seller has full requisite
corporate power and authority and all material licenses, permits and
authorization necessary to own and operate the Directories, provide
Directory Services and carry on its telephone directory business as now
conducted and as proposed to be conducted, to execute and deliver this
Agreement and the other agreements contemplated hereby to which it is a
party and to perform its obligations hereunder and thereunder. Without
limiting the generality of the foregoing, Seller has obtained all
consents and approvals that are necessary for Seller to, and Shareholder
to cause Seller to, consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Shareholder and
Seller. Each of this Agreement and each of the other agreements
contemplated hereby to which Seller or Shareholder is a party
constitutes the valid and legally binding obligations of such Person,
enforceable against such Person in accordance with its respective terms
and conditions.
(c) Noncontravention. Neither the execution and the delivery of
this Agreement and the other agreements contemplated hereby, nor the
consummation of the transactions contemplated hereby or thereby will
violate, conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, termi nate, modify, or cancel, or require any authorization,
consent, approval, execution or other action by or notice to any third
party under, Seller's certificate of incorporation or bylaws or
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any contract, lease, sublease, license, sublicense, franchise, permit,
indenture, agreement, instrument of indebtedness, Lien, or other
arrangement by which Seller or Shareholder is bound or affected or to
which any of the Purchased Assets is subject, or any law, statute, rule,
regulation, order, judgment, decree, stipulation, injunction, charge or
other restriction, to which Seller or Shareholder is subject or to which
any of the Purchased Assets is subject.
(d) Governmental Consent. Seller is not required to give any
notice to, make any material declaration to or registration or filing
with, or to obtain any permit, license, consent, accreditation,
exemption, approval or authorization from, any governmental or
regulatory authority in connection with the execution, delivery or
performance of this Agreement or the consummation of any of the
transactions contemplated hereby.
(e) Recent Events. Except as described in the attached Recent
Events Schedule, since December 31, 1997, Seller has not experienced any
change that has had a Material Adverse Effect. Without limiting the
generality of the foregoing, since such date:
(i) Seller has not sold, leased, transferred or assigned
any of the Purchased Assets and Shareholder has not authorized
the sale, lease, transfer or assignment of any of the Purchased
Assets, except pursuant to this Agreement;
(ii) Seller has not entered into any agreement, contract,
lease or license with respect to the Directories (or any series
of related agreements, contracts, leases or licenses) other than
in the Ordinary Course of Business;
(iii) no party has, accelerated, terminated, modified or
canceled any contract, lease, sublease, license or sublicense (or
series of related contracts, leases, subleases, licenses and
sublicenses) involving more than $10,000 to which Seller is a
party or by which Seller is bound and to Seller's knowledge, no
party intends to take such action;
(iv) Seller has not delayed or postponed the payment of
accounts payable relating to or affecting the Directories or the
operation of the Directories or other Liabilities associated with
the operation of the Directories outside the Ordinary Course of
Business;
(v) there has not been any other material occurrence,
event, incident, action, failure to act or other transaction
outside the Ordinary Course of Business;
(vi) Seller has not increased or decreased billing rates
under its Customer Contracts and Seller has not agreed to payment
terms under any Customer Contract other than in the Ordinary
Course of Business;
(vii) neither Seller nor Shareholder has disclosed any
information required to be kept confidential pursuant to Section
7.2 hereof to any Person other than TransWestern and
TransWestern's agents, attorneys and accountants;
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<PAGE> 21
(viii) Seller has not suffered any extraordinary loss,
damage, destruction or casualty loss or waived any rights to any
Purchased Asset or any other asset which, if it existed and was
held by Seller on the Closing Date, would constitute a Purchased
Asset, whether or not covered by insurance and whether or not in
the Ordinary Course of Business;
(ix) neither Seller nor Shareholder has received any
notice, written or oral, that any customer or supplier intends or
is likely to cease, or materially reduce or adversely affect the
rate of business done with Seller with respect to the Directories
or in connection with the publication of the Directories;
(x) Seller has not entered into any other transaction
relating to or affecting the Directories, individually or as a
whole, other than in the Ordinary Course of Business; and
(xi) Seller has not committed to any of the foregoing.
(f) Intellectual Property. The attached "Intellectual Property
Schedule" contains a complete and accurate list of the Intellectual
Property owned or used by Seller in connection with its ownership and
publication of the Directories owned and such Intellectual Property
comprises all proprietary or other intellectual property rights
necessary for operation and publication of the Directories as currently
operated and published. The Intellectual Property Schedule identifies
each license, agreement, or other permission which Seller has granted to
any third party with respect to any of its Intellectual Property
(together with any exceptions). With respect to each item of
Intellectual Property that Seller or Shareholder owns in connection with
the operation of the Directories: (i) the identified owner possesses all
right, title, and interest in and to the item; (ii) the item is not
subject to any outstanding judgment, order, decree, stipulation,
injunction, or charge; and (iii) no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand is pending or, is
threatened which challenges the legality, validity, enforceability, use,
or ownership of the item. Seller has taken all necessary or desirable
action to protect each item of Intellectual Property that it owns or
uses.
(g) Contracts and Commitments. Except as set forth on the
attached "Contracts Schedule," other than the Seller's Customer
Contracts, neither Seller nor Shareholder is a party to any written or
oral contract or commitment that relates to the provision of Directory
Services in connection with any Directories or any of the Purchased
Assets (including, without limitation, any contract with a third party
or parties relating to the purchase or sale of services or products
relating to any Directories), or any agreement material to the
publication of any Directories, whether or not entered into in the
Ordinary Course of Business. Seller has delivered or otherwise made
available to TransWestern a correct and complete copy of the standard
forms of Customer Contract used in connection with any Directories and
each written agreement (including all amendments thereto) identified on
the Contracts Schedule. The Contracts Schedule identifies all contracts
(other than Seller's Customer Contracts) associated with the Prior
Editions and, to the extent available, the
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<PAGE> 22
Future Editions, and identifies all Other Assumed Contracts included in
the Purchased Assets. Seller has delivered to TransWestern a true and
complete list of all Customer Contracts associated with the Directories.
With respect to each agreement so identified on the Contract Schedule,
and each of Seller's Customer Contracts: (A) such agreement is legal,
valid, binding, enforceable, and will continue to be in full force and
effect after the consummation of the transactions contemplated hereby;
(B) such agreement will continue to be legal, valid, binding, and
enforceable and in full force and effect on identical terms immediately
after the Closing Date; and (C) neither Seller nor Shareholder nor any
other party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default by
Seller or Shareholder or permit termination, modification, or
acceleration (in each case, other than by Seller), under such agreement.
Neither Seller nor Shareholder has waived or modified any limitation on
liability or similar provision in any Customer Contract.
(h) Financial Statements. As of the date hereof, the attached
"Financial Statements Schedule" contains (i) the unaudited consolidated
and consolidating balance sheets of Seller as of December 31, 1995,
December 31, 1996 and December 31, 1997, and the related statements of
income, changes in stockholders' equity and cash flow for the
twelve-month periods then ended; and (ii) the unaudited balance sheet of
Seller as of October 31, 1998 (the "Latest Balance Sheet") and the
related statements of income, changes in stockholders' equity and cash
flow for the ten-month period then ended, and as of the Closing Date,
the Financial Statements Schedule will contain the Post Closing
Financial Statements. The Financial Statements required hereunder to be
set forth in the Financial Statements Schedule are referred to
collectively as the "Financial Statements."
Each of the Financial Statements (including in all cases the notes
thereto, if any) is accurate and complete in all material respects, is
consistent with the books and records of Seller (which, in turn, are
accurate and complete in all material respects) and presents fairly the
financial condition and results of operations of Seller. The unaudited
Financial Statements have been prepared in accordance with methods and
procedures of accounting historically followed by Seller and applied in
all respects in a manner consistent with the Latest Balance Sheet. The
audited Financial Statements have been prepared in accordance with GAAP
throughout the periods covered thereby. As of the Closing Date, there is
no material discrepancy between the Post-Closing Financial Statements
and the Financial Statements.
(i) Accuracy of Information Furnished. No representation or
warranty of Seller or of Shareholder contained in this Agreement or in
any document delivered to TransWestern by Seller or Shareholder in
connection with the transactions contemplated hereby (including, without
limitation, any Customer Contract, customer list, or other records or
data compiled in connection with the Directories) contains or will
contain as of the date such representation and warranty is made or other
document has been, is or will be furnished, any untrue statement of a
material fact or omitted, omits, or will omit to state as of the date
such representation or warranty is made or such document is or will be
furnished, any material fact which is necessary not to make the
statement contained herein or therein not misleading.
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<PAGE> 23
(j) Customer Contract Receivables; Advance Payments. The
receivables associated with Customer Contracts reflected on the books
and records of Seller as of the Closing Date are bona fide receivables
recorded in the Ordinary Course of Business. The Advance Payments
associated with Customer Contracts reflected on the books and records of
Seller as of the Closing Date are bona fide Advance Payments recorded in
the Ordinary Course of Business. Such books and records of Seller
identify receivables associated with the Prior Editions and the Future
Editions, respectively.
(k) Employees and Employee Benefit Plans. To each of Seller's and
Shareholder's knowledge, no employee of Seller has any plans to
terminate employment with Seller prior to the Closing. None of the
Purchased Assets is subject to any lien under ERISA or the Code; and
Seller has no liability or potential liability under Title IV of ERISA.
No employee of Seller is owed any sales commissions or bonus payments in
connection with any Prior Edition.
(l) Legal Compliance with Laws. Seller has complied and is in
compliance with all applicable laws, rules or regulations of any
federal, state, local or foreign government or agency thereof with
respect to any of the Directories and no notice, claim, charge,
complaint, action, suit, proceeding, investigation or hearing has been
received by Seller or filed, commenced or, threatened in writing against
Seller alleging any such violation.
(m) Litigation; Proceedings. Except as set forth in the attached
"Litigation Schedule," there are no actions, suits, proceedings,
hearings, orders, investigations, charges, complaints or claims, pending
or threatened, against or affecting, Seller, Shareholder or any of the
Directories or the Purchased Assets or to which Seller, Shareholder, the
Directories or the Purchased Assets may be bound or affected, at law or
in equity, or before or by any federal, state, municipal, foreign or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, and there is no basis for any of
the foregoing; Seller is not subject to any judgment, order or decree of
any court or governmental agency; neither Seller nor Shareholder has
received any opinion or memorandum or legal advice from legal counsel to
the effect that it or any of the Directories or the Purchased Assets is
exposed, from a legal standpoint, to any liability or disadvantage which
may be material to its business and neither Seller nor Shareholder is
engaged in any legal action to recover monies due it or for damages
sustained by it.
(n) Title and Sufficiency of Assets. Seller owns good and
marketable title, free and clear of all Liens, to all real property and
all personal and intangible personal property and assets used by Seller,
located on Seller's premises or shown on the Latest Balance Sheet. At
the Closing, Seller will convey good and marketable title to all of its
real property and all of its property and assets included within the
Purchased Assets, free and clear of all Liens (other than Liens and
other restrictions which do not impair the current use, occupancy value
or marketability of title and for current Taxes not yet due and payable
for which adequate reserves have been properly recorded). The Purchased
Assets so conveyed will include all of those assets (real, personal,
tangible and intangible) used in connection with the ownership and
operation of the Directories during the twelve months prior to the
Closing Date (other
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<PAGE> 24
than inventory or raw materials used, sold or consumed in the Ordinary
Course of Business and worn out or obsolete fixed assets disposed of in
the Ordinary Course of Business, other than office space and office
equipment leased by Seller in the Ordinary Course of Business) and will
enable TransWestern to own and operate Directories in the same manner as
operated by and conducted by Seller prior to and as of the Closing Date.
(o) Directory Listings. Each of the directory listings associated
with the Directories has been published in the Ordinary Course of
Business and in accordance with customary practices currently prevailing
in the telephone directory industry for companies of a size comparable
to Seller. No such listing has been published in violation of any
applicable law, code or regulation. Seller has provided TransWestern
with copies of all invoices (or other evidence reasonably satisfactory
to TransWestern) relating to the purchase by Seller of the white page
listings and yellow page listings used or to be used in connection with
the printing and publication of any Directory.
(p) Brokers' Fees. Neither Seller nor Shareholder has any
Liability to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement or which
TransWestern or any other party could become liable or obligated.
(q) Tax Matters.
(i) Seller timely filed all Tax Returns required to be
filed by it, each such Tax Return has been prepared in compliance
with all applicable laws and regulations, and all such Tax
Returns are true and accurate in all respects. Except as set
forth in the attached "Taxes Schedule," all Taxes due and payable
by Seller (whether or not shown on any Tax Return) have been
paid.
(ii) Except as set forth in the Taxes Schedule:
(A) with respect to each taxable period of Seller
either such taxable period has been audited by the
relevant taxing authority or the time for assessing or
collecting income Tax with respect to each such taxable
period has closed and such taxable period is not subject
to review by any relevant taxing authority;
(B) no deficiency or proposed adjustment which has
not been settled or otherwise resolved for any amount of
Tax has been proposed, asserted or assessed by any taxing
authority against Seller;
(C) Seller has not consented to extend the time in
which any Tax may be assessed or collected by any taxing
authority;
(D) Seller has not requested or been granted an
extension of the time for filing any Tax Return to a date
later than the Closing Date;
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(E) there is no action, suit, taxing authority
proceeding or audit now in progress, pending or threatened
against or with respect to Seller with respect to any Tax;
(F) Seller has not been a member of an Affiliated
Group or filed or been included in a combined,
consolidated or unitary income Tax Return (other than
consolidated Tax Return filed by Seller and Shareholder);
(G) Seller is not a party to or bound by any Tax
allocation or Tax sharing agreement and Seller has no
current or potential contractual obligation to indemnify
any other Person with respect to Taxes;
(H) Seller does not reasonably expect any taxing
authority to claim or assess any additional Taxes for any
period;
(I) the Assumed Liabilities do not include any
obligation to make any payment that will be non-deductible
under Section 280G of the Code (or any corresponding
provision of state, local or foreign Tax law);
(J) no claim has ever been made by a taxing
authority in a jurisdiction where Seller does not pay Tax
or file Tax Returns that Seller is or may be subject to
Taxes assessed by such jurisdiction;
(K) Seller has withheld and paid all Taxes required
to have been withheld and paid in connection with amounts
paid or owing to any employee, creditor, independent
contractor or other third party;
(L) Seller has not been a United States real
property holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period specified
in Code Section 897(c)(1)(A)(ii).
(iii) The Taxes Schedule contains a list of states,
territories and jurisdictions (whether foreign or domestic) in
which Seller is required to file Tax Returns.
(iv) Seller's unpaid Taxes (1) did not, as of the Latest
Balance Sheet, exceed the reserve for Tax Liability (rather than
any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of
Latest Balance Sheet (rather than in any notes thereto) and (2)
do not exceed that reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom and
practice of the division in filing its Tax Returns.
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<PAGE> 26
(r) Leases.
(i) The attached "Real Property Schedule" contains a brief
description of each parcel of real property used, whether owned
or leased, in the conduct of Seller's business (showing the
record owner, legal description, permanent index number and
location) (collectively, the "Real Property") and of each option
held by Seller or Shareholder to acquire any Real Property and
each option held by Seller or Shareholder to acquire any other
parcels of real property. Seller does not use any real property
in the conduct of its Business and the operation of the
Directories other than the Real Property. Seller owns good and
marketable fee simple absolute title to all of the Real Property
which it owns (collectively, the "Owned Real Property"), free and
clear of any and all Encumbrances, except Taxes which are not yet
due and payable. Except as set forth on the Real Property
Schedule, there are no contracts relating to any interest in the
Real Property or the use and occupancy thereof.
(ii) The attached "Assumed Lease Schedule" identifies all
of the Real Property leased or subleased to Seller. Seller has
delivered to TransWestern correct and complete copies of the
leases and subleases listed in the Assumed Lease Schedule
(collectively, the "Assumed Leases"). Each of the Assumed Leases
is legal, valid, binding, enforceable and in full force and
effect. Neither Seller nor any other party to such leases is in
breach or default of such Assumed Lease and no event has occurred
which, with notice or lapse of time, would constitute such a
breach or default or permit terminations, modification or
accelerations under the Assumed Leases. Neither Seller nor any
party to the Assumed Leases has repudiated any provision thereof
and there are no disputes, oral agreements, or forbearance
programs in effect as to the Assumed Lease. The Assumed Leases
have not been modified in any respect, except to the extent that
such modifications are disclosed by the documents delivered to
TransWestern, and Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the
Assumed Leases.
(iii) with respect to each parcel of Real Property:
(A) neither Seller nor Shareholder has received
notice of any condemnation proceedings with regard to all
or any part of such Real Property and to Seller's
knowledge, there are no such proceedings contemplated by
any governmental authority;
(B) all governmental licenses which are necessary
to permit the lawful access, use and operation of the
building and improvements thereon for their present and
intended use have been obtained, are in full force and
effect, and there is no pending threat of modification or
cancellation of any such governmental licenses; no
improvements located on such Real Property depend on any
variance, grandfather rights, special use permit or other
special municipal approval for their continuing legality;
all utilities required for the
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operation of such Real Property either enter such Real
Property through adjoining public streets or, if they pass
through adjoining private land, do so in accordance with
valid public or private easements which will inure to the
benefit of TransWestern; and all utilities are installed
and operating and all installation and connection charges
have been paid for in full;
(C) the present maintenance, operation, use and
occupancy of such Real Property as an office, warehouse,
distribution and/or manufacturing facility does not
violate any law, including any zoning, building, health,
environmental, pollution, fire or similar law, ordinance
or regulation; neither Seller nor Shareholder has received
any notices from any governmental body in respect to such
Real Property that have not been corrected; and to
Seller's knowledge, there is no plan, study, or effort by
any governmental body or any nongovernmental person or
agency which may adversely affect the present use of such
Real Property;
(D) the structural components of the buildings on
such Real Property are in a good state of repair and all
electrical, plumbing, water, sewer, air conditioning,
heating, ventilating, mechanical and other building
systems are in good working order and repair; the roofs of
such buildings are free from leaks and the improvements
are free from insect infestation; and there are no latent
defects in the condition of such Real Property or in the
soil or geology of the land;
(E) if such Real Property is Owned Real Property,
there are no Security Interests which: (i) interfere with
the current use of such Real Property as an office,
warehouse, distribution and manufacturing facility; (ii)
are currently violated; or (iii) provide for reversion or
forfeiture of title in the event of breach;
(F) neither Seller nor Shareholder has received any
notice and has no knowledge of any increase in any of the
factors comprising the real estate Tax bills for such Real
Property, including without limitation, the assessed
valuation and the Tax rate; to Seller's knowledge, there
are no assessments, general or special, which have been,
or are in the process of being levied against such Real
Property, and neither Seller nor Shareholder has no
knowledge of any contemplated assessments;
(G) there is not (i) any intended public
improvement which may involve any charge being levied or
assessed or which may result in the creation of any
Security Interest upon such Real Property; (ii) any
intended or proposed federal, state, or local statute,
ordinance, order, requirement, law, or regulation
(including, but not limited to, zoning changes) which may
adversely affect the current or planned use of such Real
Property; or (iii) any legal proceeding threatened or
pending against or affecting such Real
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<PAGE> 28
Property nor, to Seller's or Shareholder's knowledge, is
there any basis for any such matters;
(H) there are no encroachments onto such Real
Property from any improvements on adjoining property and
no improvements located on such Real Property encroach on
any adjoining property;
(I) there are no options or rights of any party
(including without limitation any tenants under any lease)
to purchase, or acquire any ownership interest in such
Real Property, and Seller shall not grant any such options
or rights after the date of this Agreement; and
(J) no portion of such Real Property lies within a
flood hazard zone.
(s) Customers and Suppliers. Neither Seller nor Shareholder
received any notice that any material customer or supplier intends to
terminate or materially reduce its business with Seller and no material
customer or supplier has terminated or materially reduced its business
with Seller in the last twelve (12) months.
(t) Disclosure. Neither this Section 3.1, the schedules hereto
nor any writing delivered by Seller or Shareholder to TransWestern in
connection with the transactions contemplated hereby contain any untrue
statement of a material fact or omit a material fact by Seller or
Shareholder necessary to make the statements contained herein or
therein, in light of the circumstances in which they were made, not
misleading. There is no material fact which has not been disclosed to
TransWestern which materially adversely affects or could reasonably be
anticipated to materially adversely affect the Directories. Except for
the representations and warranties contained in this Agreement and in
any schedule, exhibit or other written material delivered in connection
with this Agreement, neither Seller nor Shareholder has made any
representation or warranty in connection with the transactions
contemplated by this Agreement (including, without limitation, any oral
representations or warranties or any representation or warranty
regarding any financial projections heretofore delivered to
TransWestern).
(u) Closing Date. All of the representations and warranties made
by Seller and Shareholder contained in this Section 3.1 and elsewhere in
the Agreement and all information delivered in any schedule, attachment
or exhibit hereto or in any certificate delivered by Seller or
Shareholder to TransWestern shall be true and correct on the Closing
Date as though then made, except as affected by the transactions
expressly contemplated by this Agreement and except as expressly
disclosed in writing to TransWestern by Seller or Shareholder prior to
the Closing. Prior to the Closing Date, Seller and Shareholder shall
notify TransWestern of any information that came into existence after
the date hereof and would have been required to be disclosed on one or
more schedules or reflected in such representations or warranties if
such information was in existence on the date hereof and may or
supplement the disclosure schedules attached hereto to reflect such
information; it being
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<PAGE> 29
understood, however, that such revisions, supplements, amendments or
modifications, if any, permitted to be made pursuant to this Section
3.1(u) shall not modify the representations and warranties set forth
herein for purposes of determining whether the condition set forth in
Section 5.1 has been satisfied and shall not cure any default existing
as a result of a breach of any of Seller's or Shareholder's
representations or warranties contained in this Agreement.
3.2 Representations and Warranties of TransWestern. As a material
inducement to Seller and Shareholder to execute this Agreement and consummate
the transactions contemplated hereby, TransWestern hereby represents and
warrants to Seller and Shareholder that:
(a) Organization. TransWestern is a limited liability company
duly organized, validly existing and in good standing under the laws of
the State of Delaware. TransWestern is qualified to conduct business in
each other jurisdiction wherein the nature of its business or ownership
of property requires it to be so qualified except where failure to so
qualify would not materially adversely effect the assets, business,
operations or financial condition of TransWestern.
(b) Authorization of Transaction. TransWestern has the power and
authority to execute and deliver this Agreement and the other agreements
contemplated hereby to which it is a party and to perform its
obligations hereunder and thereunder. This Agreement and the other
agreements contemplated hereby to which TransWestern is a party have
been duly executed and delivered by TransWestern and constitute the
valid and legally binding obliga tions of TransWestern, enforceable
against TransWestern in accordance with their respective terms.
(c) Noncontravention. The consummation of the transactions
contemplated hereby will not violate or conflict with any statute,
regulation, rule, judgment, order, decree, stipulation, injunction,
charge, or other restriction of any government, governmental agency, or
court to which TransWestern is subject or any provision of the Operating
Agreement of Limited Liability Company of TransWestern.
(d) Governmental Consent. To the knowledge of TransWestern,
TransWestern is not required to give any notice to, make any material
declaration to or registration or filing with, or to obtain any material
permit, license, consent, accreditation, exemption, approval or
authorization from, any governmental or regulatory authority in
connection with the execution, delivery or performance of this Agreement
or the consummation of any of the transactions contemplated hereby.
(e) Brokers' Fees. TransWestern has no Liability to pay any fees
or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Seller or
Shareholder could become liable or obligated.
(f) Closing Date. All of the representations and warranties of
TransWestern contained in this Section 3.2 and elsewhere in this
Agreement and all information delivered in any schedule, attachment or
exhibit hereto or in any certificate delivered by TransWestern
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<PAGE> 30
shall be true and correct on the Closing Date as though then made and
except as expressly disclosed in writing to Seller by TransWestern prior
to the Closing. Prior to the Closing Date, TransWestern shall notify
Seller of any information that came into existence after the date hereof
and would have been required to be disclosed on one or more schedules or
reflected in such representations or warranties if such information was
in existence on the date hereof, may supplement this Agreement with
disclosure schedules, or otherwise amend or modify its representations
and warranties hereunder to reflect such information; it being
understood, however, that such revisions, supplements, amendments or
modifications, if any, permitted to be made pursuant to this Section
3.2(f), shall not modify the representations and warranties set forth
herein for purposes of determining whether the condition set forth in
Section 5.2 has been satisfied and shall not cure any default existing
as a result of a breach of any of TransWestern's representations or
warranties contained in this Agreement.
ARTICLE 4 - COVENANTS
4.1 Pre-Closing Covenants.
(a) Affirmative Covenants Concerning the Business. At all times
prior to the Closing Date, Seller and Shareholder each covenant and
agree that:
(i) Seller's telephone directory business and operations
shall be conducted only in the Ordinary Course of Business and
Seller and Shareholder shall use its or his best efforts to
preserve intact Seller's business organization and keep available
satisfactory relationships with suppliers, customers and others
having business relationships with it and promote the ordinary
and smooth transition of Seller's business and the Purchased
Assets to TransWestern;
(ii) Seller's cash management practices (including,
without limitation, the collection of receivables and the payment
of payables) and Seller's policies, practices and procedures
(including, without limitation, with respect to collection of
trade receivables and receivables associated with Customer
Contracts, establishment of reserves for uncollectible accounts,
accrual of accounts receivable, inventory control, prepayment of
expenses, payment of trade accounts payable, accrual of other
expenses, deferral of revenue, acceptance of Advance Payments or
other customer deposits and maintenance of the quality of the
Directories) shall be maintained and conducted in the Ordinary
Course of Business;
(iii) Seller's current insurance policies (to the extent
such policies relate to operation of the Directories) shall not
to be canceled or terminated and no action shall be taken (or
fail to be taken) to cause any of the coverage thereunder to
lapse, unless, simultaneously with such termination, cancellation
or lapse, replacement policies providing coverage equal to or
greater than the coverage under the canceled, terminated or
lapsed policies to the extent practicable for market premiums are
in full force and effect;
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<PAGE> 31
(iv) Seller and Shareholder shall use their respective
best efforts to retain the present employees and to maintain
Seller's relationships with its agents, distributors, licensees,
suppliers and customers relating to the operation of the
Directories;
(v) Seller's books, accounts and records shall be
maintained in Seller's ordinary course of business and in a
manner consistent with the accounting practices followed in
preparing the Latest Balance Sheet and all other financial
reports provided to TransWestern prior to Closing;
(vi) Seller's corporate name shall be maintained in full
force and effect;
(vii) Seller shall comply (and remain in compliance with)
all legal requirements and contractual obligations applicable to
or binding upon Seller;
(viii) Seller's city or county business licenses shall be
maintained in full force and effect; and
(ix) Seller shall duly and timely file (by the due date or
any duly granted extension thereof) all income Tax reports and
returns and non-income Tax reports and returns required to be
filed with federal, state, county, local, foreign and other Tax
authorities, promptly pay all Taxes indicated by such returns or
otherwise lawfully levied or assessed upon Seller or any of
Seller's properties, unless Seller is contesting such levy or
assessment in good faith and, if appropriate, has established
reasonable reserves therefor, and withhold or collect and pay to
the proper governmental authorities or hold in separate bank
accounts for such payment all Taxes required by law to be so
withheld or collected.
(b) Negative Covenants Concerning the Business. At all times
prior to the Closing Date, Seller and Shareholder covenants and agrees
that Seller will not (and Shareholder will not permit Seller to):
(i) forgive, cancel, or waive any rights or any debts or
other material obligations owed to Seller without obtaining
TransWestern's prior written consent;
(ii) merge or consolidate with, or purchase substantially
all of the stock or assets of, or otherwise acquire, any
corporation, partnership, association or other business
organization or entity or division thereof;
(iii) institute any material change in the methods of
purchase, sale, lease or accounting from those used in the
Ordinary Course of Business or in the collection of accounts
receivable (including receivables associated with Customer
Contracts) or the payment of accounts payable other than to the
extent consistent with the Ordinary Course of Business;
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<PAGE> 32
(iv) mortgage, pledge or subject to any Security Interest
(except those for Taxes not yet due and payable) any of the
Purchased Assets;
(v) sell, assign or transfer any of the Purchased Assets;
(vi) sell, assign or transfer any of Seller's patents or
other Intellectual Property or other intangible assets, or
disclose any proprietary information to any Person;
(vii) terminate or in any way encourage the resignation of
any employee or sales representative for any reason other than
such employee's gross negligence or wilful misconduct;
(viii) pay or commit to pay commissions on Customer
Contracts outside of the Ordinary Course of Business; or
(ix) enter into a binding commitment to do any of the
foregoing.
(c) Exclusivity. Neither Seller nor Shareholder will (and neither
will permit any Affiliate of or Persons acting in concert with either
Seller or Shareholder to) at any time prior to the Closing Date: (i)
solicit, initiate, or encourage the submission of any proposal or offer
from any Person relating to any (A) liquidation, dissolution, or
recapitalization, (B) merger or consolidation or share exchange, (C)
acquisition or purchase of securities or assets, or (D) similar
transaction or business combination involving Seller, Shareholder, the
Directories or any Purchased Assets or (ii) participate in any
discussions or negotiations regarding, furnish any information with
respect to, assist or participate in, execute, sign, deliver or enter
into any agreement (whether written or oral) relating to, or facilitate
in any other manner any effort or attempt by any person to do or seek
any of the foregoing. Seller or Shareholder (as the case may be) will
notify TransWestern immediately if any Person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing and the terms
thereof, the terms thereof and their response thereto.
(d) General Obligation to Close. Each of the Parties will use
their respective reasonable best efforts to take all actions and to do
all things necessary or desirable to consummate and make effective the
transactions contemplated by this Agreement (including, without
limitation, satisfaction, but not waiver, of the closing conditions set
forth in Article 5) and to cause the other conditions to TransWestern's
and Seller's obligations hereunder to be satisfied as soon as
practicable but in any event no later than required to permit the
Closing to occur on or prior to January 5, 1999.
4.2 Other Covenants.
(a) Full Access. At all times prior to the Closing Date, Seller
shall (and Shareholder will cause Seller to) permit TransWestern,
TransWestern's Affiliates, and their respective employees, accountants,
legal counsel and other representatives to have full access
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(at all reasonable times upon reasonable notice and in a manner so as
not to interfere with Seller's normal business operations) to their
premises, properties, personnel, books, records, contracts, Tax records,
and documents of or pertaining to Seller, the Purchased Assets or the
Directories, as is reasonably necessary or (in the opinion of
TransWestern) desirable to consummate all of the transactions
contemplated herein. All information given to TransWestern and its
representatives shall be subject to the confidentiality provisions set
forth in Section 7.2(a).
(b) Notice of Developments. At all times prior to the Closing
Date, (i) Seller will give prompt written notice to TransWestern of any
development affecting the condition, operation, results of operations,
or future prospects of the Directories or any Purchased Assets, and (ii)
each Party will give prompt written notice to the other of any
development affecting the ability of the notifying Party to consummate
the transactions contemplated by this Agreement. No disclosure by any
Party pursuant to this Section 4.2(b) shall be deemed to amend or
supplement the schedules attached hereto delivered by such Party or to
prevent or cure any misrepresentation, breach of warranty, or breach of
covenant by such Party.
(c) Employee Matters. Immediately prior to the Closing, Seller
shall terminate the employment of all of the employees identified (the
"Employees") on the attached "Employee Schedule," which schedule shall
be prepared and delivered by TransWestern to Seller at least two (2)
business days prior to the Closing. Immediately after the Closing,
TransWestern will offer employment to the Employees. Nothing in this
Agreement shall obligate TransWestern to offer employment to any
employee of Seller or any other individual other than the Employees; and
nothing in this Agreement shall limit the ability of TransWestern to
terminate the employment of any Employee at any time and for any reason,
whether for cause or without cause. From and after the Closing Date,
Seller shall retain all Liabilities arising under or in connection with
any "employee benefit plan" (as such term is defined in Section 3(3) of
ERISA) or any other employee benefit plan or arrangement at any time
maintained or contributed to by Seller, including, but not limited to,
those Liabilities arising under Part 6 of Title I of ERISA and Section
4980B of the Code. Seller shall be additionally responsible for all
Liabilities (i) relating to compensation (including vacation pay and
insurance benefits) of any Employee for periods prior to the Closing
Date and of any other employee of Seller for any period and/or (ii)
arising as a result of the transactions contemplated by this Agreement,
including, but not limited to, severance compensation and bonus
payments, except for Liabilities identified on the Assumed Liability
Schedule.
4.3 TransWestern's Post-Closing Collection Obligation. From and
after the Closing TransWestern shall assume complete responsibility for all
billing and collection activities associated with the Purchased Receivables,
including, but not limited to, collection of all outstanding trade accounts
receivable outstanding related thereto as of the Closing (including local,
foreign and national advertising accounts). TransWestern shall apply any
payments (including interest (if any)) collected by it hereunder to payment of
the Purchased Receivables on a customer-by-customer basis until either the
Purchased Receivables are paid in full or the occurrence of the Accounts
Receivable Measurement Date. During such time, and TransWestern agrees to use
collection methods consistent with its past custom and collection practice.
TransWestern and Seller shall cooperate and work
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<PAGE> 34
jointly to obtain payment of all Purchased Receivables and reach agreement with
respect to all adjustments, settlements, and write offs to be taken in
connection with any settlement or compromise of any Purchased Receivable. Seller
agrees to respond to all requests by TransWestern to evaluate any such
settlement in a timely manner (and, in any event, shall respond to such notice
by TransWestern within 48 hours after receipt thereof). TransWestern shall
deliver aging reports to Seller on a monthly basis prior to the Accounts
Receivable Measurement Date. At the time of the delivery of each such monthly
aging report, TransWestern shall pay to the Seller an amount equal to the
aggregate amount of all payments collected by it during such period (each
payment, an "Accounts Payment"). Until the Accounts Receivable Measuring Date,
simultaneous with each Accounts Payment, the amount of principal on the Seller
Note shall be adjusted downward in an amount equal to the amount of such
Accounts Payment. After the Accounts Receivable Measuring Date, TransWestern in
its discretion may terminate any collection efforts with respect to the
Purchased Receivables, but to the extent any amounts are collected, TransWestern
shall make payments to Seller on a monthly basis in amounts equal to the amounts
collected during the previous month.
4.4 TransWestern's Post-Closing Austin Directory Obligations.
During the period prior to the Third Earn-Out Reconciliation Date, TransWestern
shall:
(a) offer up to $500,000 in free advertisements in each of the
1999 Austin Directory, 2000 Austin Directory and 2001 Austin Directory
to customers or other Persons selected by TransWestern in its sole
discretion;
(b) dedicate a number of man-days to each of the 1999 Austin
Directory, 2000 Austin Directory and 2001 Austin Directory which is
consistent with the man-days expended by Seller's sales representatives
with respect to the 1998 Austin Directory during the 12- month period
prior to the Closing Date, not to be less than 1650 in any year; and
(c) not reduce the geographic scope of the Austin Directory from
its current scope; provided, that the foregoing notwithstanding,
TransWestern shall have no obligation under this Section 4.4 (x) in the
event of a breach of any representation, warranty, covenant or condition
hereunder or in any of the documents, certificates or other instruments
delivered by or on behalf of Seller or Shareholder in connection with
the transactions contemplated hereunder (including without limitation,
Section 7.3 hereof) or (y) upon the occurrence and during the
continuance of any change, event or condition adversely affecting the
yellow pages directory industry or economy generally, the result of
which is to cause TransWestern's compliance with the covenants set forth
in this Section 4.4 to have a Material Adverse Effect, individually or
in the aggregate.
4.5 No Assignment to Texas Entity Prior to Closing. Prior to the
Closing Date, TransWestern shall not assign, sell or otherwise transfer its
interest in Seller's assets to any business entity incorporated or organized
under the laws of the State of Texas.
4.6 Seller's and Shareholder's Obligation to Cooperate
TransWestern's Auditors. Prior to, and after the Closing, Seller and Shareholder
shall cooperate with, and provide all
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reasonable assistance to, and information required by, TransWestern's auditors,
Ernst & Young, so that they may expediently conclude an audit of Seller's
financial books and records and produce a consolidated and consolidating balance
sheet of Seller as of October 31, 1998, and the related statements of income,
changes in stockholders' equity and cash flow for the ten-month period then
ended (the "Post-Closing Financial Statements") in accordance with GAAP. The
results of the Post- Closing Financial Statements shall be conclusive and
binding on the parties and shall become a part of this Agreement upon their
delivery to the parties. TransWestern shall bear the costs of the audit.
ARTICLE 5 - CONDITIONS
5.1 Conditions To Closing.
(a) Conditions to Closing Obligations of TransWestern. The
obligation of TransWestern to consummate the transactions contemplated
hereby is subject to satisfaction at or prior to the Closing Date of the
following conditions:
(i) Seller's and Shareholder's representations and
warranties set forth in Section 3.1 shall be true and correct, in
each case at and as of the Closing Date, as though the Closing
Date were substituted for the date hereof throughout such
representations and warranties (without giving effect to any
disclosures made after the date hereof pursuant to Section
3.1(u), except for representations and warranties that are made
by their terms as of a specified date, which shall be true and
correct as of a specified date and except for changes
contemplated by this Agreement.
(ii) Each of Seller and Shareholder shall have performed
and complied with all of their respective covenants and
agreements set forth in this Agreement through the Closing Date.
(iii) All governmental or third party filings, licenses,
consents, authoriza tions, waivers and approvals (including,
without limitation, any consent or approval that may be required
from TransWestern's lenders) that are required to be made or
obtained for the transfer to TransWestern of the Purchased Assets
will have been duly made and obtained without conditions or
requirements that are materially adverse to TransWestern.
(iv) As of the Closing Date, no suit, action or proceeding
before any court or quasi-judicial or administrative agency shall
be pending or threatened wherein any adverse judgment, decree,
order or injunction would (i) prevent the consummation of the
transactions contemplated by this Agreement, (ii) cause any of
such transactions to be rescinded following consummation of the
transactions contemplated by this Agreement, (iii) materially and
adversely affect the right of TransWestern to operate or control
the Directories or (iv) result in a Material Adverse Effect (and
no such judgment, decree, order or injunction shall be in
effect).
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<PAGE> 36
(v) There shall have occurred no Material Adverse Effect
since December 31, 1997.
(vi) The key employees identified by TransWestern prior to
Closing shall have agreed to be employed after the Closing and to
continue to perform the services and provide the management
performed and provided by such persons prior to the Closing on
behalf of Seller, and such other duties as may be assigned by the
President of TransWestern or his designees
(vii) Seller shall have delivered to TransWestern a
certificate signed by an officer of Seller to the effect that
each of the conditions specified above in subsections
(a)(i)-(vi), inclusive, are satisfied in all respects.
(viii) Joel Ramsey shall have entered into a non-compete
agreement in form and substance satisfactory to TransWestern and
such agreement shall not have been amended or modified and shall
be in full force and effect.
(ix) TransWestern shall have received from Leach & Ames,
P.C., counsel to Seller and Shareholder, an opinion with respect
to the matters set forth in Exhibit C attached hereto, addressed
to TransWestern and dated as of the Closing Date; and
(x) On or prior to the Closing Date, Seller will have
delivered to TransWestern each of the following:
(A) copies of all governmental licenses, consents,
authorizations, accreditations, waivers and approvals and
of all consents, waivers and approvals by third parties
that are required to be obtained pursuant to subsection
(iii) above;
(B) a short-form good standing certificate of
Seller issued by the Secretary of State of the State of
Texas, dated as of a date within ten (15) days prior to
the Closing Date;
(C) the certificate of incorporation of Seller,
certified as of a date within ten (15) days prior to the
Closing Date by the Secretary of State of Texas, and
bylaws of Seller certified by its Secretary; and
(D) copies of all of the invoices or other
documentation satisfactory to TransWestern of all direct
sales costs associated with each of the Prior Editions and
the Future Editions, (ii) a copy of the licensing
agreement entered into by Seller for the licensing of
white pages in connection with publication of each of the
Future Editions, (iii) copies of printing quotes obtained
in connection with publication of each of the Future
Editions and (iv) the Pro Forma.
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<PAGE> 37
(xi) TransWestern shall have completed to its satisfaction
a business, legal, environmental and financial due diligence
review of Seller, the Directories and the Purchased Assets.
(b) Conditions to Closing Obligations of Seller. The obligation
of Seller and Shareholder to consummate the transactions contemplated
hereby is subject to satisfaction at or prior to the Closing Date of the
following conditions:
(i) TransWestern's representations and warranties set
forth in Section 3.2 shall be true and correct in all material
respects, in each case at and as of the Closing Date, as though
the Closing Date were substituted for the date hereof throughout
such representations and warranties (without giving effect to any
disclosures made after the date hereof pursuant to Section
3.2(f)) except for representations and warranties that are made
by their terms as of a specified date, which shall be true and
correct as of a specified date and except for changes
contemplated by this Agreement;
(ii) TransWestern shall have performed and complied with
all of its covenants and agreements set forth in this Agreement
through the Closing Date;
(iii) All governmental or third party filings, licenses,
consents, authorizations, waivers and approvals that are required
to be made or obtained by TransWestern for the transfer to
TransWestern of the Purchased Assets will have been duly made and
obtained without conditions or requirements that are materially
adverse to Seller;
(iv) TransWestern shall have delivered to Seller a
certificate signed by an officer of TransWestern to the effect
that each of the conditions specified in subsections (b)(i)
through (iii) are satisfied in all respects;
(v) TransWestern shall have entered into the Bonus Plan
Side Letter, a copy of which is attached hereto as Exhibit E and
such Side Letter shall be in full force and effect and shall not
have been amended or modified; and
(vi) TransWestern shall have paid the Base Purchase Price
to Seller and shall have delivered the Seller Note to Seller.
All actions to be taken by any Party in connection with
consummation of the transac tions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
other Party. Any Party may waive any condition to such Party's obligation, in
whole or in part, specified in this Section 5.1 if it executes a writing so
stating at or prior to the Closing Date or if the Closing occurs; provided,
however, that consummation of the Closing by a Party prior to the satisfaction
of any closing condition in this Section 5.1 shall not operate as a waiver of
such Party's right to terminate this Agreement under Section 6.1(b) or (c), as
applicable, and shall not operate as
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<PAGE> 38
a waiver of any indemnification rights such Party may otherwise have hereunder
as a result of any breach of any representation, warranty or covenant of the
other Party contained herein.
ARTICLE 6 - TERMINATION
6.1 Termination. The Parties may terminate this Agreement as
provided below:
(a) TransWestern and Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing.
(b) TransWestern may terminate this Agreement by giving written
notice to Seller at any time prior to the Closing Date in the event
Seller is in breach of any representation, warranty, covenant or closing
condition contained in this Agreement.
(c) Seller may terminate this Agreement by giving written notice
to TransWestern at any time prior to the Closing Date in the event
TransWestern is in breach of any represen tation, warranty, covenant or
closing condition contained in this Agreement.
(d) TransWestern may terminate this Agreement at any time prior
to the Closing Date if the Closing shall not have occurred on or prior
to the close of business on January 5, 1999 as a result of Seller's
inability to satisfy the conditions set forth in Article 5; provided
that TransWestern is not in material breach of any of its
representations, warranties or covenants contained in this Agreement;
and provided, further, that TransWestern will not be entitled to
terminate this Agreement pursuant to this Section 6.1(d) if
TransWestern's willful or knowing breach of this Agreement has prevented
the consummation of the transactions contemplated hereby.
(e) Seller may terminate this Agreement by giving written notice
to TransWestern at any time prior to the Closing Date if the Closing
shall not have occurred on or before the close of business on January 5,
1999 as a result of TransWestern's inability to satisfy the conditions
set forth in Article 5; provided that Seller is not in material breach
of any of its representations, warranties or covenants contained in this
Agreement; and provided, further, that Seller will not be entitled to
terminate this Agreement pursuant to this Section 6.1(e) if Seller's
willful or knowing breach of this Agreement has prevented the
consummation of the transactions contemplated hereby; provided, further,
that (i) if the Closing has not occurred by the close of business on
January 8, 1999, and (ii) if Seller is entitled to terminate this
Agreement under this Section 6.1(e) and provides notice of its desire to
terminate the Agreement and (iii) if and only if all of the conditions
precedent to TransWestern's closing of the transaction as set forth
herein have been satisfied, TransWestern shall pay to Seller the amount
of $500,000 (the "Liquidated Damages Payment"). In no event shall the
Seller be entitled to the Liquidated Damages Payment if (i) Seller does
not terminate the Agreement or (ii) if Seller and TransWestern
consummate a transaction substantially similar to the one contemplated
herein within one month of the termination of this Agreement.
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<PAGE> 39
6.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 6.1(a), all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach); provided, however, that Sections 7.2,
7.5 and 7.6(n) shall survive such termination.
ARTICLE 7 - ADDITIONAL AGREEMENTS
7.1 Post-Closing Assistance. In case at any time after the
Closing Date any further action is necessary or desirable to carry out the
purposes of this Agreement and to effect, consummate, confirm or evidence the
consummation of the transactions contemplated hereby (including, without
limitation, with respect to the sales into, printing and publication of each of
the Future Editions and with respect to TransWestern's collection obligations
under Section 4.4), each of the Parties will take such further action
(including, without limitation, the execution and delivery of such further
instruments and documents) as any other Party reasonably may request, at the
sole cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under Section 7.3). During the seven-year
period following the Closing Date, TransWestern shall have reasonable access to
Seller's or, if applicable, Shareholder's books and records (and to make copies
thereof at TransWestern's expense) for any proper purpose set forth by
TransWestern in a writing delivered to Seller or Shareholder.
7.2 Confidentiality.
(a) Information Concerning the Parties. Regardless of whether the
transactions hereunder are consummated, (i) TransWestern and its
Affiliates shall keep confidential all information regarding Seller's
telephone directory business which is or has been furnished to
TransWestern or its directors, officers, employees, representatives,
advisors or Affiliates by or on behalf of Seller and (ii) Seller and
Shareholder shall keep confidential all information regarding
TransWestern's business which is or has been furnished to Seller or
Shareholder, or any of their shareholders, partners, directors,
officers, employees, representatives, advisers or Affiliates by or on
behalf of TransWestern. In the event the transactions contemplated by
this Agreement are not consummated, the Parties shall return (or certify
the destruction of) all materials in their possession containing
confidential information belonging to another Party and shall not use
any such information for any purpose whatsoever. The foregoing
notwithstanding, none of the provisions in this Section 7.2(a) shall
apply to any information which (x) is already in a Party's possession
(provided that such information is not subject to another
confidentiality agreement with or other legal or fiduciary obligation of
secrecy to the Party to which the information relates (such agreements
and obligations being referred to as "Confidentiality Obligations"));
(y) becomes generally available to the public other than as a result of
any breach of this Section 7.2(a) or a Confidentiality Obligation; or
(z) becomes available to a Party on a non-confidential basis from a
source other than the Party to which the information relates (provided
that such source is not bound by a Confidentiality Obligation with, or
other legal or fiduciary obligation of, secrecy to the Party to which
the information relates).
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<PAGE> 40
(b) Notice of Compulsory Disclosure. In the event any Party
hereto is required to disclose any confidential information pursuant to
applicable law, such Party shall promptly notify each other Party in
writing, which notification shall include the nature of the legal
requirement and the extent of the required disclosure, and shall
cooperate with each other Party to preserve the confidentiality of such
information consistent with applicable law.
7.3 Non-Competition.
(a) As a material inducement to TransWestern to enter into and
perform its obligations under this Agreement, for a period of five years
following the Closing Date (the "Noncompetition Period"), neither Seller
nor Shareholder or any of their successors or affiliates will, directly
or indirectly, either for itself or for any partnership, individual,
corporation, joint venture or any other entity participate in any
business (including, without limitation, any division, group or
franchise of a larger organization) which engages in or proposes to
engage in the promotion, sale, distribution, production or printing of
telephone directory "yellow pages" or similar products or related
services (a "Yellow Pages Business") in any county of Oklahoma and Texas
which is covered by the Directories or by any other yellow-page
directory currently owned or published by TransWestern or any of its
affiliates. For purposes of this Agreement, the term "participate in"
shall include, without limitation, having any direct or indirect
interest in any corporation, partnership, joint venture or other entity,
whether as a sole proprietor, owner, shareholder, partner, joint
venturer, creditor or otherwise, or rendering any direct or indirect
service or assistance to any individual corporation, partnership, joint
venture and other business entity (whether as a director, officer,
manager, supervisor, employee, agent, consultant or otherwise).
(b) Each of Seller and Shareholder agree that TransWestern would
suffer irreparable harm from a breach by such Party of any of the
covenants or agreements contained in Section 7.3(a). Accordingly, in the
event of an alleged or threatened breach by Seller or Shareholder or any
of their affiliates of any of the provisions of this Section 7.2(c),
TransWestern or its successors or assigns may, in addition to all other
rights and remedies existing in its favor, apply to any court of
competent jurisdiction for specific performance and/or injunctive or
other relief in order to enforce or prevent any violations of the
provisions hereof equal to the length of the violation of this Section
7.3(a).
(c) If, at the time of enforcement of this Section 7.3(a), a
court shall hold that the duration, scope or area restrictions stated
herein are unreasonable under circumstances then existing, the Parties
agree that the maximum duration, scope or area reasonable under such
circumstances shall be substituted for the stated duration, scope or
area and that the court shall be allowed to revise the restrictions
contained herein to cover the maximum period, scope and area permitted
by law. Seller and Shareholder agree that the restrictions contained in
subsection 7.3(a) are reasonable.
(d) During the Non-Competition Period, none of Seller,
Shareholder or any of their affiliates shall (i) induce or attempt to
induce any employee of TransWestern to leave the employ of TransWestern,
or in any way interfere with the relationship between
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<PAGE> 41
TransWestern and any employee thereof, (ii) hire directly or through
another entity any person who was an employee of TransWestern at any
time during the Noncompetition Period, or (iii) induce or attempt to
induce any customer, supplier, licensee or other business relation of
TransWestern to cease doing business with TransWestern, or in any way
interfere with the relationship between any such customer, supplier,
licensee or business relation and TransWestern (including, without
limitation, making any negative statements or communications concerning
TransWestern).
(e) Each Party agrees that the covenants made in this Section 7.3
shall be construed as an agreement independent of any other provision of
this Agreement and shall survive any order of a court of competent
jurisdiction terminating any other provision of this Agreement.
7.4 Indemnification.
(a) In addition to all rights and remedies available to
TransWestern at law or in equity, Seller and Shareholder shall jointly
and severally indemnify TransWestern, its affiliates, members, managers,
officers, employees, agents, representatives, permitted successors and
assigns (collectively, the "TransWestern Indemnities") in respect of,
and save and hold each TransWestern Indemnitee harmless against, and pay
on behalf of or reimburse each TransWestern Indemnitee for, as and when
incurred at any time after the Closing Date or such earlier date when
this Agreement may be terminated pursuant to Article 6, any Loss which
any such TransWestern Indemnitee may suffer, sustain or become subject
to, as a result of, in connection with, relating or incidental to or by
virtue of:
(i) any breach of any representation, warranty, covenant
or agreement made by Seller or Shareholder in this Agreement or
any facts or circumstances constituting such a breach;
(ii) any Excluded Liability; or
(iii) any Sales/Use Tax Liability.
(b) In addition to all rights and remedies available to Seller at
law or in equity, TransWestern shall indemnify Seller and its
affiliates, officers, directors, employees, agents, representatives and
permitted successors and assigns (collectively, "Seller Indemnitees") in
respect of, and save and hold each of them harmless from and against,
and pay on behalf of or reimburse each Seller Indemnitee for, as and
when incurred at any time after the Closing Date or such earlier date
when this Agreement may be terminated pursuant to Article 6, any Loss
which such Seller Indemnitee may suffer, sustain or become subject to,
as the result of, in connection with, relating to or incidental to or by
virtue of the breach by TransWestern of any representation, warranty,
covenant or agreement made by TransWestern contained in this Agreement.
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<PAGE> 42
(c) If a party hereto seeks indemnification under this Section
7.4, such party (the "Indemnified Party") shall give written notice to
the other party (the "Indemnifying Party") of the facts and
circumstances giving rise to the claim. In that regard, if any suit,
action, claim, liability or obligation (a "Proceeding") shall be brought
or asserted by any third party which, if adversely determined, would
entitle the Indemnified Party to indemnity pursuant to this Section 7.4,
the Indemnified Party shall within thirty (30) days notify the
Indemnifying Party of the same in writing, specifying in detail the
basis of such claim and the facts pertaining thereto; provided, that the
failure to so notify an Indemnifying Party shall not relieve the
Indemnifying Party of its obligations hereunder except to the extent
such failure shall have harmed the Indemnifying Party. The Indemnifying
Party, if it so elects, shall assume and control the defense of such
Proceeding (and shall consult with the Indemnified Party with respect
thereto), including the employment of counsel reasonably satisfactory to
the Indemnified Party and the payment of expenses; provided however,
that in the event any Proceeding shall be brought or asserted by any
third party which, if adversely determined, would not entitle the
Indemnified Party to full Indemnity pursuant to Section 7.4, the
Indemnified Party may elect to participate in a joint defense of such
Proceeding (a "Joint Defense Proceeding") for which the expenses of such
joint defense will be shared equally by such parties and the employment
of counsel shall be reasonably satisfactory to both parties. If the
Indemnifying Party elects to assume and control the defense of a
Proceeding, it will provide notice thereof within thirty (30) days after
the Indemnified Party has given notice of the matter and if such
Proceeding is not a Joint Defense Proceeding, the Indemnified Party
shall have the right to employ counsel separate from counsel employed by
the Indemnifying Party in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel employed by
the Indemnified Party shall be at the expense of the Indemnified Party
unless (i) the employment thereof has been specifically authorized by
the Indemnifying Party in writing or (ii) the Indemnifying Party has
failed to assume the defense and employ counsel. The Indemnifying Party
shall not be liable for any settlement of any Proceeding, the defense of
which it has elected to assume, which settlement is effected without the
written consent of the Indemnifying Party; provided that no settlement
of a Joint Defense Proceeding may be effected without the written
consent of both parties. If there shall be a settlement to which the
Indemnifying Party consents or a final judgment for the plaintiff in any
Proceeding, the defense of which the Indemnifying Party has elected to
assume, the Indemnifying Party shall indemnify the Indemnified Party
with respect to the settlement or judgment. If the Indemnifying Party
elects to assume and control the defense or in the event of a Joint
Defense Proceeding, the Indemnified Party shall take all reasonable
efforts necessary to assist the Indemnifying Party in such defense.
(d) The Indemnifying Party shall pay the Indemnified Party in
immediately available funds promptly after the Indemnified Party
provides the Indemnifying Party with written notice of any Loss incurred
by the Indemnified Party hereunder but in any event not later than
thirty (30) days after Indemnifying Party received notice of a Loss.
(e) In addition to any other remedies, TransWestern shall be
entitled to set-off any amounts due or payable by Seller or Shareholder
to TransWestern pursuant to, under or in connection with this Agreement
against any amount (including, without limitation, in respect
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of the Seller Note) otherwise due or payable by TransWestern to Seller
or Shareholder under this Agreement.
7.5 Arbitration.
(a) The arbitration procedure set forth below shall be the sole
and exclusive method for resolving and remedying claims for money
damages arising out of the provisions of Section 7.3 (the "Disputes"),
provided that, nothing in this Section 7.4 shall prohibit a party hereto
from instituting litigation to enforce any Final Determination or
availing itself of the remedies set forth in Section 7.2(c). The Parties
hereby agree and acknowledge that, except as otherwise provided in this
Section 7.4 or in the Commercial Arbitration Rules of the American
Arbitration Association as in effect from time to time, the arbitration
procedures and any Final Determination hereunder shall be governed by,
and shall be enforced pursuant to the Uniform Arbitration Act and
applicable provisions of Texas law.
(b) In the event that any Party asserts that there exists a
Dispute, such Party shall deliver a written notice to each other Party
involved therein specifying the nature of the asserted Dispute and
requesting a meeting to attempt to resolve the same. If no such
resolution is reached within ten business days after such delivery of
such notice, the Party delivering such notice of Dispute (the "Disputing
Person") may, within 45 business days after delivery of such notice,
commence arbitration hereunder by delivering to each other Party
involved therein a notice of arbitration (a "Notice of Arbitration") and
by filing a copy of such Notice of Arbitration with the Dallas, Texas
office of the American Arbitration Association. Such Notice of
Arbitration shall specify the matters as to which arbitration is sought,
the nature of any Dispute, the claims of each Party to the arbitration
and shall specify the amount and nature of any damages, if any, sought
to be recovered as a result of any alleged claim, and any other matters
required by the Commercial Arbitration Rules of the American Arbitration
Association as in effect from time to time to be included therein, if
any.
(c) Seller and TransWestern each shall select one independent
arbitrator expert in the subject matter of the Dispute (the arbitrators
so selected shall be referred to herein as "Seller's Arbitrator" and
"TransWestern's Arbitrator," respectively). In the event that either
Party fails to select an independent arbitrator as set forth herein
within 20 days from delivery of a Notice of Arbitration, then the matter
shall be resolved by the arbitrator selected by the other Party.
Seller's Arbitrator and TransWestern's Arbitrator shall select a third
independent arbitrator expert in the subject matter of the dispute, and
the three arbitrators so selected shall resolve the matter according to
the procedures set forth in this Section 7.4. If Seller's Arbitrator and
TransWestern's Arbitrator are unable to agree on a third arbitrator
within 20 days after their selection, Seller's Arbitrator and
TransWestern's Arbitrator shall each prepare a list of three independent
arbitrators. Seller's Arbitrator and TransWestern's Arbitrator shall
each have the opportunity to designate as objectionable and eliminate
one arbitrator from the other arbitrator's list within 7 days after
submission thereof, and the third arbitrator shall then be selected by
lot from the arbitrators remaining on the lists submitted by Seller's
Arbitrator and TransWestern's Arbitrator.
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<PAGE> 44
(d) The arbitrator(s) selected pursuant to clause (c) will
determine the allocation of the costs and expenses of arbitration based
upon the percentage which the portion of the contested amount not
awarded to each Party bears to the amount actually contested by such
Party. For example, if TransWestern submits a claim for $1,000, and if
Seller contests only $500 of the amount claimed by TransWestern, and if
the arbitrator(s) ultimately resolves the dispute by awarding
TransWestern $300 of the $500 contested, then the costs and expenses of
arbitration will be allocated 60% (i.e. 300 / 500) to Seller and 40%
(i.e. 200 / 500) to TransWestern.
(e) The arbitration shall be conducted under the Commercial
Arbitration Rules of the American Arbitration Association as in effect
from time to time, except as otherwise set forth herein or as modified
by the agreement of all of the parties to this Agreement. The
arbitrator(s) shall so conduct the arbitration that a final result,
determination, finding, judgment and/or award (the "Final
Determination") is made or rendered as soon as practicable, but in no
event later than 90 business days after the delivery of the Notice of
Arbitration nor later than 10 days following completion of the
arbitration. The Final Determination must be agreed upon and signed by
the sole arbitrator or by at least two of the three arbitrators (as the
case may be). The Final Determination shall be final and binding on all
parties and there shall be no appeal from or reexamination of the Final
Determination, except for fraud, perjury, evident partiality or
misconduct by an arbitrator prejudicing the rights of any Party and to
correct manifest clerical errors.
(f) TransWestern and Seller may enforce any Final Determination
in any state or federal court having jurisdiction over the dispute. For
the purpose of any action or proceeding instituted with respect to any
Final Determination, each Party hereto hereby irrevocably submits to the
jurisdiction of such courts, irrevocably consents to the service of
process by registered mail or personal service and hereby irrevocably
waives, to the fullest extent permitted by law, any objection which it
may have or hereafter have as to personal jurisdiction, the laying of
the venue of any such action or proceeding brought in any such court and
any claim that any such action or proceeding brought in such court has
been brought in an inconvenient forum.
(g) If any Party shall fail to pay the amount of any damages, if
any, assessed against it within ten (10) days of the delivery to such
Party of such Final Determination, the unpaid amount shall bear interest
from the date of such delivery at the lesser of (i) 18% and (ii) the
maximum rate permitted by applicable usury laws. Interest on any such
unpaid amount shall be compounded semi-annually, computed on the basis
of a 360-day year consisting of twelve 30-day months and shall be
payable on demand. In addition, such Party shall promptly reimburse the
other Party for any and all costs or expenses of any nature or kind
whatsoever (including but not limited to all attorneys' fees) incurred
in seeking to collect such damages or to enforce any Final
Determination.
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<PAGE> 45
7.6 Miscellaneous.
(a) Representations and Warranties. All of the representations
and warranties made by TransWestern in this Agreement and all of the
representations and warranties made by Seller and Shareholder shall
survive the execution and delivery of this Agreement and consummation of
the transactions contemplated hereby, regardless of any investigation
made by any Party or on its behalf. Neither Party's participation in the
consummation of any transaction pursuant to this Agreement (or any
agreement contemplated hereby) nor any waiver of any condition to such
participation (including any condition that a representation or warranty
of any other Party be true and correct) will constitute a waiver by such
participating Party of any representation or warranty of any Party or
otherwise affect the survival of any such representation and warranty
which shall continue in full force and effect after the Closing.
(b) Press Releases and Announcements; Notice to Customers. All
press releases and other public announcements and all announcements to
Seller's customers, suppliers, licensees or employees relating to the
transactions contemplated hereby (including with respect to any
termination of this Agreement pursuant to Article 6) shall be prepared
jointly by Seller and TransWestern. Without in any way limiting the
generality of the foregoing, at the request of TransWestern, Seller
shall promptly notify (in a manner in form and substance mutually
satisfactory to TransWestern and Seller) each of its customers and each
other Person deemed by TransWestern to be an appropriate recipient of
such notice (i) that TransWestern will own and publish all editions of
the Directories as of the Closing Date and (ii) setting forth such other
information as TransWestern may reasonably request to confirm or
evidence the transfer of the Directories to TransWestern. After the
Closing until the Accounts Receivable Measurement Date, TransWestern may
use billing statements containing Seller's name in connection with its
collection obligations under Section 4.3 and to provide notice thereon
of the change in billing address resulting from the transactions
contemplated herein.
(c) Further Transfers and Assurance. Each Party will execute and
deliver such other documents as the other Party may reasonably request
to effect, consummate, confirm or evidence the transfer to such other
Party of the Purchased Assets and any other transactions contemplated
hereby. Without limiting the generality of the foregoing, to the extent
there are any assets necessary or (in the opinion of TransWestern)
advisable to the ownership and publication of the Directories as
presently owned and published by Seller and as proposed to be owned and
published by TransWestern that are not transferred hereunder to
TransWestern, Seller will execute and deliver such further instruments
of conveyance and transfer and take such additional action as may be
required to transfer such assets to TransWestern.
(d) Name and Logos of Parties. The Parties hereby agree that the
cover of the first edition of each Directory to be published after the
Closing shall be designed to reflect the names and logos of each of
TransWestern and Seller and shall be produced in a style and format
reasonably acceptable to TransWestern and Seller.
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<PAGE> 46
(e) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(f) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties
and supersedes any prior understandings, agreements, or representations
by or between the Parties, written or oral, that may have related in any
way to the subject matter hereof (including the letter agreement by
TransWestern to Seller dated June 19, 1998, as amended).
(g) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either
this Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the other Parties hereto.
(h) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(i) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(j) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given (i) when delivered, if personally delivered, (ii) when receipt is
electronically confirmed, if faxed (with hard copy to follow via first
class mail, postage prepaid) or (iii) one day after deposit with a
reputable overnight courier, in each case addressed to the intended
recipient as set forth below:
If to Seller: with a copy (which shall not constitute
------------ ---------------------------------------
notice) to:
-----------
Joel Ramsey
6908 Windswept Court Leach & Ames
Flowermound, TX 75028 1236 Southridge Court, Suite 101
Hurst, Texas 76053
Attn: Terry R. Leach
Telecopy #: (817) 282-4127
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If to TransWestern: with a copy (which shall not constitute
- ------------------ ---------------------------------------
notice) to:
-----------
TransWestern Publishing Company
8328 Clairemont Mesa Blvd. Kirkland & Ellis
San Diego, CA 92111 200 East Randolph Drive
Attn: Ricardo Puente Chicago, IL 60601
Joan Fiorito Attn: Wendy L. Chronister, Esq.
Chief Financial Officer Telecopy #: (312) 861-2200
Telecopy #: (619) 292-4125
Any Party may change the address and/or telecopier number to
which notices, requests, demands, claims, and other communications hereunder are
to be delivered by giving the other Party notice in the manner herein set forth.
(k) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF TEXAS,
WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION
OR RULE (WHETHER OF THE STATE OF TEXAS OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN
THE STATE OF TEXAS.
(l) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed
by each Party. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not,
shall be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(m) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.
If the final judgment of a court of competent jurisdiction declares that
any term or provision hereof is invalid or unenforceable, the Parties
agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or
area of the term or provision, to delete specific words or phrases, or
to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
(n) Expenses. Except as otherwise specifically provided herein,
Seller, Shareholder and TransWestern each will bear its own costs and
expenses (including legal and broker fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
- 42 -
<PAGE> 48
(o) Taxes; Recording Charges. All transfer, documentary, sales,
use, stamp, registration, conveyance, income, gains, value added or
other Taxes and fees arising out of the sale of the Purchased Assets or
otherwise incurred in connection with this Agreement or the consummation
of the transactions contemplated hereby and all charges for or in
connection with the recording of all of the documents and instruments
contemplated hereby shall be paid by Sellers.
(p) Construction. The Parties have jointly participated in the
negotiation and drafting of this Agreement. In the event of an ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumptions or
burdens of proof shall arise favoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to
any 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. Nothing in the disclosure
schedules shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the disclosure schedules
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that
there exists another representation, warranty, or covenant relating to
the same subject matter (regardless of the relative levels of
specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
(q) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(r) Number and Gender. Each defined term used in this Agreement
has a comparable meaning when used in its plural or singular form. Each
gender-specific term used herein has a comparable meaning whether used
in a masculine, feminine or gender- neutral form.
* * * * *
- 43 -
<PAGE> 49
IN WITNESS WHEREOF, the Parties hereto have executed this Asset
Purchase Agreement as of the date first above written.
TRANSWESTERN PUBLISHING COMPANY LLC
By: TransWestern Communications Company, Inc.
its Manager
By: ___________________________________________
Its: ___________________________________________
UNITED DIRECTORY SERVICES, INC.
--------------------------------------------------
Joel Ramsey, individually and as President of United
Directory Services, Inc.
(Signature Page to Asset Purchase Agreement)
<PAGE> 1
EXHIBIT 99.1
[TRANSWESTERN PUBLISHING LETTERHEAD]
PRESS RELEASE
Contact: Kimberley Beales
(619) 467-2815
FOR IMMEDIATE RELEASE
January 5, 1999
TRANSWESTERN PUBLISHING
PURCHASES 14 TEXAS DIRECTORIES
SAN DIEGO - TransWestern Publishing has purchased 14 telephone directories in
Texas from United Directory Services, Inc. The directories are:
Graham-Jacksboro-Olny; Mineral Wells; Wise-Montague Area; Weatherford-Parker
County; Azle Lake Worth Saginaw; Fairfield-Tri County; Austin-Williamson County;
Marble Falls Area; Bastrop; New Braunfels-Canyon Lake; San Marcos-Lockhart;
Kerrville-Heart of Hills; Seguin-Luling; and NE San Antonio.
"We're very excited to be a part of these Texas communities and will
continue to serve them through the local offices," said TransWestern
Publishing's President and Chief Executive Officer Rick Puente. "Most of these
directories have been published for over 20 years and, during that time, have
earned a reputation for quality and have established a dominate position in the
market."
TransWestern Publishing now serves 36 communities in Texas with complete
white and yellow page directories.
All of the United Account Executives and Sales Managers will be joining
TransWestern Publishing. Puente added, "Businesses can expect the same high
quality advertising and customer service that they have received in the past
from this outstanding staff."
Puente commented, "We plan to continue our expansion in contiguous and
strong stand alone markets around the country. During the next few years, you
can expect to see the ongoing growth of TransWestern Publishing."
TransWestern Publishing is a California-based independent yellow page
publisher which publishes 171 community-oriented directories in 14 states.
TransWestern Publishing completed their 1998 fiscal year on April 30 with $100.1
million in revenues and an EBITDA of $30.2 million.
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