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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of Earliest Event Reported): February 23, 1998
Brill Media Company, LLC
(Exact name of registrant as specified in its charter)
Virginia 333-44177 52-2071822
(State or other (Commission (IRS employer
jurisdiction of file number) identification no.)
incorporation)
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SEE TABLE OF
ADDITIONAL
REGISTRANTS
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420 N.W. FIFTH STREET, EVANSVILLE, INDIANA 47708
(Address of principal executive offices)
(Zip code)
Registrant's telephone number, including area code:
(812) 423-6200
TABLE OF ADDITIONAL REGISTRANTS
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STATE OR OTHER I.R.S. EMPLOYER
JURISDICTION OF COMMISSION IDENTIFICATION
NAME INCORPORATION FILE NUMBER NUMBER
- ---------------------------------- --------------- ----------- ----------------
<S> <C> <C> <C>
Brill Media Management, Inc. Virginia 333-44177 54-1877458
Advisers P.S., LLC Virginia 333-44177 38-3393217
BMC Holdings, Inc. Virginia 333-44177 54-1889308
BMC Holdings, LLC Virginia 333-44177 52-2071824
Brill Newspapers, Inc. Virginia 333-44177 54-1170289
Brill Radio, Inc. Virginia 333-44177 54-1148743
Cadillac Newspapers, Inc. Virginia 333-44177 54-1170305
Central Michigan Distribution Co., Virginia 333-44177 38-2438162
Inc.
Central Michigan Distribution Co., Virginia 333-44177 62-1356763
L.P.
Central Michigan Newspapers, Inc. Virginia 333-44177 54-1170307
Central Missouri Broadcasting, Virginia 333-44177 54-1163979
Inc.
Central Printing Service, LLC Virginia 333-44177 38-3393221
CMB II, Inc. Virginia 333-44177 43-1671356
CMN Associated Publications, Inc. Virginia 333-44177 38-2438130
CMN Holding, Inc. Virginia 333-44177 54-1170293
Gladwin Newspapers, Inc. Virginia 333-44177 54-1170304
Graph Ads Printing, Inc. Virginia 333-44177 38-2438126
Huron Holdings, LLC Virginia 333-44177 54-1867829
Huron Holdings Management, Inc. Virginia 333-44177 54-1889311
Huron Newspapers, LLC Virginia 333-44177 38-3372402
Huron Newspapers Management, Inc. Virginia 333-44177 54-1889312
Huron P.S., LLC Virginia 333-44177 38-3372410
Huron P.S. Management, Inc. Virginia 333-44177 54-1889314
Midland Buyers Guide, Inc. Virginia 333-44177 38-2438164
NB II, Inc. Virginia 333-44177 41-1803205
</TABLE>
<PAGE>
<TABLE>
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STATE OR OTHER I.R.S. EMPLOYER
JURISDICTION OF COMMISSION IDENTIFICATION
NAME INCORPORATION FILE NUMBER NUMBER
- ---------------------------------- --------------- ----------- ----------------
<S> <C> <C> <C>
NCH II, LLC Virginia 333-44177 54-1851918
NCR II, Inc. Virginia 333-44177 84-1347311
NCR III, LLC Virginia 333-44177 54-1851920
Northern Colorado Holdings, LLC Virginia 333-44177 54-1862076
Northern Colorado Holdings Virginia 333-44177 54-1889315
Management, Inc.
Northern Colorado Radio, Inc. Virginia 333-44177 84-1091274
Northland Broadcasting, LLC Virginia 333-44177 41-1862832
Northern Broadcasting Management, Virginia 333-44177 54-1889316
Inc.
Northland Holdings, LLC Virginia 333-44177 54-1838750
Northland Holdings Management, Virginia 333-44177 54-1889317
Inc.
Reading Radio, Inc. Virginia 333-44177 54-1163978
St. Johns Newspapers, Inc. Virginia 333-44177 38-3299223
Tri-State Broadcasting, Inc. Virginia 333-44177 35-1888093
Upper Michigan Holdings, Inc. Virginia 333-44177 54-1882775
Upper Michigan Holdings, LLC Virginia 333-44177 54-1882773
Upper Michigan Management, Inc. Virginia 333-44177 54-1882776
Upper Michigan Newspapers, LLC Virginia 333-44177 38-3393224
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<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 23, 1998, three wholly-owned subsidiaries of Brill Media
Company, LLC (together with its wholly-owned subsidiaries, the "Company")
acquired certain newspaper publishing, printing and distribution assets in
northern Michigan (the "Star Group") from Star Publications, Inc., Advertiser's
Postal Service Corporation and Central Printing Corporation (collectively the
"Sellers") pursuant to three assets purchase agreements. Total consideration
amounted to approximately $8.7 million (the "Purchase Price") and included cash
of approximately $5.7 million (funded from the proceeds of the December 1997
Senior Notes offering) and seller notes valued at approximately $3.0 million
(the "Seller Notes"). The Seller Notes have a stated amount of $3.65 million and
a stated interest rate of 7% per annum, but were valued at $3.0 million using a
12% effective rate (the Company's incremental borrowing rate for similar
securities). In addition, the Company agreed to pay to certain of the Sellers'
shareholders approximately $0.7 million over a six-year term without interest as
consideration for unsecured noncompetition agreements with such shareholders.
The noncompetition agreements were valued at $0.4 million using a 20% effective
rate for financial reporting purposes.
The Seller Notes are secured by a security interest in the Star Group
assets, are to be fully repaid on or prior to the sixth anniversary of the
closing date, and prior to such repayment amortize as if for a ten year term.
The Purchase Price was determined by arms-length negotiations between
representatives of the Company and the Sellers based on factors such as the
Sellers' financial condition, results of the operations and cash flows and the
Company's potential for utilization of the Star Group assets.
The Star Group assets constitute inventory, leasehold improvements,
equipment and other assets as well as intangibles used in the newspaper
publishing, printing and distribution operations and will continue to be
utilized by the Company for such purposes.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired - Star Publications, Inc.,
Central Printing Corporation and Advertiser's Postal Service Corporation
(incorporated by reference to Exhibit 99(a) hereto)
(1) Independent Auditor's Report
(2) Combined Balance Sheet as of December 31, 1997
(3) Combined Statement of Income and Retained Earnings for the year ended
December 31, 1997
(4) Combined Statement of Cash Flows for the year ended December 31, 1997
(5) Notes to Combined Financial Statements
(b) Pro Forma Financial Information of Brill Media Company, LLC (incorporated
by reference to Exhibit 99(b) hereto)
(1) Unaudited Pro Forma Condensed Combined Statement of Operations for the
year ended February 28, 1997
(2) Notes to Unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended February 28, 1997
<PAGE>
(3) Unaudited Pro Forma Condensed Combined Statement of Operations for the
nine months ended November 30, 1997
(4) Notes to Unaudited Pro Forma Condensed Combined Statement of
Operations for the nine months ended November 30, 1997
(5) Unaudited Pro Forma Condensed Combined Balance Sheet as of November
30, 1997
(6) Notes to Unaudited Pro Forma Condensed Combined Balance Sheet as of
November 30, 1997
(c) Exhibits
2(a) Assets Purchase Agreement dated February 23, 1998 by and among Upper
Michigan Newspapers, LLC, Star Publications, Inc., Gordon G. Everett
(as trustee), Daniel F. Walsh (as trustee), James R. Glasser, David
Baragrey and Mike Adams
2(b) Assets Purchase Agreement dated February 23, 1998 by and among
Advertisers P.S., LLC, Advertiser's Postal Service Corp., Gordon G.
Everett (as trustee), Daniel F. Walsh (as trustee), James R. Glasser,
August A. Tranquilla, Clara Tranquilla, Douglas C. Johnson, Sherry L.
Johnson, Mike Adams and Ken Bradstreet
2(c) Assets Purchase Agreement dated February 23, 1998 by and among Central
Printing Service, LLC, Central Printing Corporation, Gordon G. Everett
(as trustee), Daniel F. Walsh (as trustee), James R. Glasser, August
A. Tranquilla, Clara Tranquilla, William L. Ezo, Jeffery Bodette,
Frank E. Noverr, Paul Gunderson, Douglas C. Johnson and Sherry L.
Johnson
10(a) Form of Seller Note
99(a)Financial Statements of Business Acquired - Star Publications, Inc.,
Central Printing Corporation and Advertiser's Postal Service
Corporation
99(b) Pro Forma Financial Information of Brill Media Company, LLC
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BRILL MEDIA COMPANY, LLC
By: BRILL MEDIA MANAGEMENT, INC.,
Manager
MAY 11, 1998 By /s/ ALAN R. BRILL
-----------------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF
EXECUTIVE OFFICER AND TREASURER
Pursuant to the requirements of the Securities Exchange Act of 1934, the
additional registrants have duly caused this report to be signed on their behalf
by the undersigned hereunto duly authorized.
BMC HOLDINGS, INC.
BRILL MEDIA MANAGEMENT, INC.
BRILL NEWSPAPERS, INC.
BRILL RADIO, INC.
CADILLAC NEWSPAPERS, INC.
CENTRAL MICHIGAN DISTRIBUTION CO., INC.
CENTRAL MICHIGAN NEWSPAPERS, INC.
CENTRAL MISSOURI BROADCASTING, INC.
CMB II, INC.
CMN ASSOCIATED PUBLICATIONS, INC.
CMN HOLDING, INC.
GLADWIN NEWSPAPERS, INC.
GRAPH ADS PRINTING, INC.
HURON HOLDINGS MANAGEMENT, INC.
HURON NEWSPAPERS MANAGEMENT, INC.
HURON P.S. MANAGEMENT, INC.
MIDLAND BUYERS GUIDE, INC.
NB II, INC.
NCR II, INC.
NORTHERN COLORADO RADIO, INC.
NORTHERN COLORADO HOLDINGS MANAGEMENT, INC.
NORTHLAND BRAODCASTING MANAGEMENT, INC.
NORTHLAND HOLDINGS MANAGEMENT, INC.
READING RADIO, INC.
ST. JOHNS NEWSPAPERS, INC.
TRI-STATE BROADCASTING, INC.
UPPER MICHIGAN HOLDINGS, INC.
UPPER MICHIGAN MANAGEMENT, INC.
MAY 11, 1998 By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
BMC HOLDINGS, LLC
By: BRILL MEDIA COMPANY, LLC,
Manager
By: BRILL MEDIA MANAGEMENT, INC.
Manager
MAY 11, 1998 By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF
EXECUTIVE OFFICER AND TREASURER
<PAGE>
ADVERTISERS P.S., LLC
CENTRAL PRINTING SERVICE, LLC
HURON HOLDINGS, LLC
HURON NEWSPAPERS, LLC
NCH II, LLC
NORTHERN COLORADO HOLDINGS, LLC
NORTHLAND HOLDINGS, LLC
UPPER MICHIGAN HOLDINGS, LLC
UPPER MICHIGAN NEWSPAPERS, LLC
By: BMC HOLDINGS, LLC
Manager
By: BRILL MEDIA COMPANY, LLC
Manager
By: BRILL MEDIA MANAGEMENT, INC.
Manager
MAY 11, 1998 By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF
EXECUTIVE OFFICER AND TREASURER
CENTRAL MICHIGAN DISTRIBUTION CO., L.P.
By: CENTRAL MICHIGAN DISTRIBUTION CO., INC.
General Partner
MAY 11, 1998 By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
HURON P.S., LLC
By: HURON HOLDINGS, LLC
Manager
By: BMC HOLDINGS, LLC
Manager
By: BRILL MEDIA COMPANY, LLC
Manager
By: BRILL MEDIA MANAGEMENT, INC.
Manager
MAY 11, 1998 By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF
EXECUTIVE OFFICER AND TREASURER
<PAGE>
NCR III, LLC
By: NCH II, LLC
Manager
By: BMC HOLDINGS, LLC
Manager
By: BRILL MEDIA COMPANY, LLC
Manager
By: BRILL MEDIA MANAGEMENT, INC.
Manager
MAY 11, 1998 By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF
EXECUTIVE OFFICER AND TREASURER
NORTHLAND BROADCASTING, LLC
By: NORTHLAND HOLDINGS, LLC
Manager
By: BMC HOLDINGS, LLC
Manager
By: BRILL MEDIA COMPANY, LLC
Manager
By: BRILL MEDIA MANAGEMENT, INC.
Manager
MAY 11, 1998 By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF
EXECUTIVE OFFICER AND TREASURER
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
2(a) Assets Purchase Agreement dated February 23, 1998 by and among
Upper Michigan Newspapers, LLC, Star Publications, Inc., Gordon
G. Everett (as trustee), Daniel F. Walsh (as trustee), James R.
Glasser, David Baragrey and Mike Adams
2(b) Assets Purchase Agreement dated February 23, 1998 by and among
Advertisers P.S., LLC, Advertiser's Postal Service Corp., Gordon
G. Everett (as trustee), Daniel F. Walsh (as trustee), James R.
Glasser, August A. Tranquilla, Clara Tranquilla, Douglas C.
Johnson, Sherry L. Johnson, Mike Adams and Ken Bradstreet
2(c) Assets Purchase Agreement dated February 23, 1998 by and among
Central Printing Service, LLC, Central Printing Corporation,
Gordon G. Everett (as trustee), Daniel F. Walsh (as trustee),
James R. Glasser, August A. Tranquilla, Clara Tranquilla, William
L. Ezo, Jeffery Bodette, Frank E. Noverr, Paul Gunderson, Douglas
C. Johnson and Sherry L. Johnson
10(a) Form of Seller Note
99(a) Financial Statements of Business Acquired - Star Publications,
Inc., Central Printing Corporation and Advertiser's Postal
Service Corporation
99(b) Pro Forma Financial Information of Brill Media Company, LLC
ASSETS PURCHASE AGREEMENT
This agreement (the "Agreement") is entered into this 23rd day of February
1998, by and among UPPER MICHIGAN NEWSPAPERS, LLC., a Virginia limited liability
company ("Buyer"), STAR PUBLICATIONS, INC., a Michigan corporation ("Seller"),
with its principal office located at 1966 South Otsego Avenue, Gaylord, Michigan
49735, and Gordon G. Everett, trustee; Daniel F. Walsh, trustee; James R.
Glasser; David Baragrey, and Mike Adams (jointly and severally "Shareholders").
RECITALS
Seller owns and publishes the following shopping guides: Northern Star,
Straits Area Star, Presque Isle Star, Alpena Star, Petosky Star Advertiser,
Charlevoix County Star, Star Advertiser, Roscommon County Star, and Star Buyer's
Guide (which shopping guides hereinafter are referred to collectively as the
"Shopping Guides"). Shareholders own all of the issued and outstanding shares of
Seller's capital stock. Buyer wishes to purchase from Seller, and Seller wishes
to sell and transfer to Buyer as an operating business, all, but not less than
all, of Seller's property and assets necessary, used, or useful for the
operation, production, publication, management, marketing, or sale of Shopping
Guides or Shopping Guides' advertising, all on the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of and relying upon the foregoing
recitals, each covenant, agreement, representation, and warranty set forth
herein, and each act done pursuant to this Agreement, Buyer, Seller, and
Shareholders agree as follows:
1. Purchase and Sale of Property and Assets.
1.1 Agreement to Purchase and to Sell. Upon and subject to compliance with
all terms and conditions of this Agreement, at Closing (hereinafter defined)
Buyer agrees to purchase from Seller, and Seller agrees to sell and deliver to
Buyer as herein provided, as an operating business, all right, title, and
interest in and to all, but not less than all, of the tangible and intangible
property, rights, and assets of Seller necessary, used, or useful for the
operation, production, publication, management, marketing, or sale of Shopping
Guides or Shopping Guides' advertising (jointly and severally the "Property
Sold"), excluding only the Excluded Property (hereinafter defined), and
including the following:
(a) all machinery, furniture, furnishings, composition and press
equipment, tools, and other equipment, including Seller's library and
morgue and all items of tangible personal property used to operate Shopping
Guides, including those briefly listed on Exhibit 1.01.1, and the spare
parts, repair parts, accessories, attachments, and appurtenances thereto
attached
<PAGE>
or appertaining and all replacements thereof and any improvements or
additions thereto prior to the Closing Date;
(b) all of Seller's business, employee, payroll, advertiser, customer,
contractor, subscriber, circulation, and distribution records, its files,
studies, surveys, software, software programs, computer printouts, data
bases, and related items, and all other documents, instruments, and records
evidencing or pertaining to Shopping Guides or the Property Sold, in whole
or in part;
(c) all of Seller's automobiles, vehicles, vans, trucks, trailers, and
other mobile equipment, including those listed on Exhibit 1.01.2;
(d) all of Seller's inventories (including newsprint, paper, plates,
and film), work in process, raw materials, merchandise held for sale,
distribution and other supplies, and similar items ("Inventories") on hand
as of the Closing Date;
(e) as and to the extent provided in assumption agreements executed by
Buyer at Closing pursuant to paragraph 3.4, all of Seller's rights in the
Contracts (hereinafter defined) listed on Exhibit 1.01.3 (such Contracts
collectively, the "Assumed Contracts");
(f) all of Seller's rights in, to, and under all franchises, licenses,
permits, and authorizations applicable to the Shopping Guides;
(g) all of Seller's general intangibles and evidences thereof,
including the exclusive right to use the names listed on Exhibit 1.01.4
(the "Names"), and any copyrights, patents, patent applications,
servicemarks, trademarks, tradenames, or slogans now used or owned by
Seller or registered in its name;
(h) all other of Seller's interests in assets or property owned,
acquired, leased, or held for or used in Seller's operations, whether
tangible or intangible, and whether or not otherwise identified or
reflected herein or in the Financial Statements (hereinafter defined); and
(i) all property such as is described in (a) through (h) that is
hereafter acquired by Seller prior to Closing.
1.2 Excluded Property. The following ("Excluded Property") are not part of
the Property Sold and are not being sold to Buyer: Seller's (a) rights under
this Agreement, (b) cash on hand or in banks, cash items, cash equivalents,
deposits, deferred charges, marketable securities, the cash value of all life
insurance policies on the lives of any of the shareholders (or any
2
<PAGE>
of the trustees thereof), checks and drafts, (c) prepaid expenses, accounts
receivable, refunds, rebates, advances, and notes receivable, (d) corporate
stock records, seal, and minute book, (e) all insurance policies, (f) tax
records of Seller, (g) such items of the Property Sold as may be disposed of by
Seller before Closing in the ordinary course of Seller's business, for value in
accordance with Seller's past practices, and not in violation of this Agreement,
and (h) all other current assets other than Inventories.
2. Purchase Price.
2.1 The total purchase price for the Property Sold ("Purchase Price") shall
be Four Million Five Hundred Thousand and No/100 Dollars ($4,500,000.00)
adjusted as required by paragraph 2.2, allocated in accordance with Exhibit
2.01, and payable to Seller on Closing by Buyer by (a) cashiers check or wire
transfer of immediately available funds in the amount of Two Million Seven
Hundred Fifty Thousand and No/100 Dollars ($2,750,000.00), which amount shall be
adjusted before payment as required by paragraph 2.2, and (b) delivery of
Buyer's promissory notes (the "Notes"; singly, a "Note") payable to Seller in
the aggregate principal amount of One Million Seven Hundred Fifty Thousand and
No/100 Dollars ($1,750,000.00) bearing interest at the rate of seven percentum
(7%) per annum on any unpaid principal balance thereof from Closing until paid,
such Notes to be amortizable as if for a ten (10) year term as therein provided
for but to mature and be fully paid on or before the sixth (6th) anniversary of
the Closing Date, to be substantially in the form and contain the substance of
Exhibit 2.01.1, and to be secured by a security interest in the Property Sold
(free and clear of any lien created by Buyer) substantially in the form and
containing the substance of Exhibit 2.03.1.
2.2 Adjustments. Until Closing, operation of Shopping Guides and use of the
Property Sold, and any income or expenses attributable thereto, shall be for
Seller's account. In finally determining the Purchase Price, at Closing the
amount of the Purchase Price and the amount of cash Buyer is to pay at Closing
shall be adjusted up or down ("Closing Adjustments") as follows:
(a) at Closing there shall be a preliminary financial settlement by
Buyer and Seller to determine the Closing Adjustments (the "Preliminary
Adjustment"), which Preliminary Adjustment shall be based on the financial
statements and estimates of Seller (the "Preliminary Financials") then
reasonably available to approximate Buyer's and Seller's reasonable good
faith estimate of the Preliminary Adjustments as of such Closing Date (the
"Preliminary Settlement");
(b) within 60 days of the Closing Date and upon preparation of
satisfactory financial statements (the "Closing
3
<PAGE>
Financials") by which Buyer and Seller can determine the actual Adjustments
as of the Closing Date, a final settlement of the Closing Adjustment will
be determined and payment made to either Buyer or Seller by the Escrow
Agents (hereinafter defined) in the amount of the difference of the Closing
Adjustments determined in this final settlement and in the Preliminary
Settlement in order to reflect the computation of and complete the full and
final payment of the Purchase Price (the "Final Settlement"). Final
Settlement of the Closing Adjustments as of the Closing Date (i) shall be
based on calculations derived from the financial results and financial
condition of Seller's business reflected in the Closing Financials of
Seller for the period as of and ending on the Closing Date or (ii), if the
Closing Date is not the same date as the closing date for the period most
recently ended and preceding the Closing Date, then Final Settlement shall
be based on calculations derived from the financial results and financial
condition of Seller reflected in the Closing Financials of Seller (a) for
the period as of and ending most recently prior to the Closing Date and (b)
for the period next following as though still owned by Seller. If
determined under "(ii)" above, final Closing Adjustments will be (x)
derived from Closing Financials as though for and as of the period ending
prior to the Closing Date plus (y) the result of the financial impact to
Buyer and Seller of the Buyer realizing all benefit of the sales of Seller
(and ownership of resulting accounts receivable) for the period beginning
on the day next following the latest prior financial statement date and
continuing to the Closing Date, less (z) the expenses assumed by Buyer with
respect to such sales, "(y)" and "(z)" as determined by the calculation
process as follows: if not closing on the date of the end of a normal
reporting period, then Final Settlement will be partially determined by
computing the Closing Adjustments as though Closing had occurred at the end
of the latest prior reporting period. Sales of Buyer in the following
reporting period from that date to Closing will be deemed to be sales that
Buyer has purchased from Seller and for which Buyer will pay Seller by
further change to the Closing Adjustments. Direct expenses, principally
personnel and distribution expenses, will be the responsibility of the
party to which the corresponding sales relate; that is with respect to
personnel, Seller and Buyer will each incur their own payroll expense for
the period before and after Closing respectively; and with respect to
distribution, the distribution billings for each will correspond to the
publication dates on which the revenue was earned. All other appropriate
expenses for the reporting period will be pooled and the pool split between
Buyer and Seller in the same proportion as their respective publication
dates in the month.
(c) all expenses applicable to Seller's business, including, without
limitation, employees' wages and other wage related expenses, Shopping
Guides, or to all or any part of the Property Sold, whether paid, prepaid,
or accrued and regardless of when assessed, determined, calculated, paid,
or collected, shall be Seller's sole responsibility for all periods ending
with, upon, or
4
<PAGE>
prior to Closing, and at and as of Closing shall be prorated between Buyer
and Seller and the amount of the Purchase Price and the amount of cash
Buyer is to pay at Closing adjusted accordingly so that Seller shall be
responsible for any and all of such expenses incurred or accrued for all
periods ending prior to or at Closing and so that Buyer shall be
responsible for Shopping Guides' expenses incurred or accrued thereafter;
(d) the amount of the Purchase Price and the amount of cash Buyer is
to pay at Closing also shall be reduced as appropriate, without
duplication, by deducting therefrom (i) the amount of any prepaid revenue
theretofore received by Seller as of the Closing Date, for goods or
services to be delivered or rendered by Buyer after the Closing Date, and
(ii) the amount of any discount outside of the ordinary course of Seller's
business given by Seller for such payments theretofore received by Seller.
Buyer hereby assumes and agrees to timely perform Seller's obligation to
render the services or deliver the goods for which adjustments are made
pursuant to this subparagraph. To this end, Seller shall prepare a
statement at Closing that shall contain Seller's description and
calculation of the amount of each item described in this subparagraph;
(e) if after Closing Buyer is to receive the benefit of any expenses
prepaid by Seller, the Purchase Price and the amount Buyer is required to
pay to Seller at Closing shall be increased by the amount of such prepaid
expenses, and such prepaid expense shall not be treated as Excluded
Property hereunder;
(f) the amount of the initial Purchase Price and the amount of cash
Buyer is to pay at Closing also shall be reduced by deducting therefrom (i)
the amount necessary to satisfy and cure each breach by Seller as of the
Closing Date of any representation, warranty, or covenant made by Seller in
this agreement and (ii) the amount necessary to discharge or cure each Lien
applicable to any part of the Property Sold as of the Closing Date, other
than Permitted Liens (hereinafter defined);
(g) from the amount of cash Buyer is to pay at Closing there also
shall be deducted $50,000.00, which, together with $50,000.00 in cash then
supplied by Buyer, Buyer and Seller shall pay into an escrow account (the
"Closing Escrow Account"), which shall be an account in the joint names of
Alan R. Brill and Seller's president (jointly the "Escrow Agents"; each of
whom has signed this Agreement as "Escrow Agents" solely for the purpose of
agreeing to act as such) in such bank or other checking institution as the
Escrow Agents shall select. The Closing Escrow Account shall be used to pay
final Closing Adjustments to the party entitled thereto as and to the
extent herein provided, and
(h) as soon after Closing as is reasonably practicable, but in no
event later than 60 days following Closing,
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<PAGE>
Buyer's employees, under the direction and supervision of Escrow Agents,
shall prepare and provide to each of Seller and Buyer a Statement (the
"Statement") of the foregoing Closing Adjustments. To the extent the
Statement indicates a net increase in the Purchase Price, Seller shall be
entitled to receive from the Closing Escrow Account, and the Escrow Agents
shall immediately return to Seller the $50,000 deposited by it in the
Closing Escrow Account plus an additional amount equal to the net increase
in the Purchase Price. Any amounts remaining in the Closing Escrow Account
after such payments have been made shall be immediately paid to Buyer. If
such increase in the Purchase Price is in excess of $50,000, then the
Escrow Agents immediately shall pay to Seller all amounts in the Closing
Escrow Account, and Buyer immediately shall pay to Seller the amount of
such excess by cashiers check or wire transfer of immediately available
funds. To the extent the Statement indicates a net decrease in the Purchase
Price, Buyer shall be entitled to receive from the Closing Escrow Account,
and the Escrow Agents immediately shall return to Buyer the $50,000
deposited by it in the Closing Escrow Account plus an additional amount
equal to the net decrease in the Purchase Price. Any amounts remaining in
the Closing Escrow Account after such payments have been made shall be
immediately paid to Seller. In the event such decrease in the Purchase
Price is in excess of $50,000, then the Escrow Agents shall immediately pay
to Buyer all amounts in the Closing Escrow Account, and Seller immediately
shall pay to Buyer the amount of such excess by cashiers check or wire
transfer of immediately available funds. If the Escrow Agent cannot agree
upon such final determination and payments, they shall retain Ernst &
Young, One IBM Plaza, Chicago, Illinois ("Accountants"), whose costs and
fees shall be borne equally by Seller and Buyer, to prepare a report making
such determination, which determination shall be final and binding upon all
parties.
2.3 Security. Subject to each Lien (hereinafter defined) then existing as
to any part of the Property Sold, at Closing Buyer shall duly execute and
deliver to Seller a security agreement in the form of Exhibit 2.03.1 ("Security
Agreement"), securing payment of the Note as and to the extent therein provided.
2.4 Preliminary and Closing Financials. Not less than seven (7) days before
the Closing Date, Seller will deliver to Buyer financial statements of Seller
("Preliminary Financials") sufficient for Buyer to make a tentative
determination of the Purchase Price and the Closing Adjustments prepared in
accordance with generally accepted accounting principles and practices applied
on a basis consistent with Seller's past practices, except that they shall be
prepared as if they were for a fiscal year of Seller then ending and normal
year-end adjusting entries had then been made. Such statements shall be
certified to Buyer by an appropriate officer of Seller as having been so
prepared and as fairly presenting Seller's then financial position and the
results of Seller's operations and the changes in its financial position as
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at the end of and for the period then ended and for the twelve months and
portion of the fiscal year to the end of such month, as adjusted in compliance
with this paragraph. Immediately upon the later of (a) thirty (30) days after
Closing, or (b) ten (10) days after Buyer's receipt of financial statements of
Seller ("Closing Financials") prepared and certified by Seller as at the end of
and for the normal reporting period ending either with or most nearly before or
after the Closing Date in the same manner as provided for the Preliminary
Financials, Buyer and Seller shall finally determine the final amount of the
Closing Adjustments required by paragraph 2.2 after a review and analysis of the
Closing Financials and, if necessary, of the books and records of Seller, and
thereafter the parties shall make final settlement of the Closing Adjustments.
If the parties determine as a result of such final settlement that one of the
parties is entitled to receive a payment from the other party for additional
Closing Adjustments, then the amount thereof shall be paid in cash first from
the Closing Escrow Account, with any unpaid balance to be paid thereafter by the
obligated party. When all Closing Adjustments have been determined and paid, any
balance remaining in the Closing Escrow Account shall be paid to the Seller. If
after receipt of the Accountants' report, and after exhausting the Closing
Escrow Account, and after taking into account the costs for having the report
prepared, either Buyer or Seller is entitled to receive more than Five Thousand
($5,000.00) in additional Closing Adjustments from the other party, the other
party promptly shall pay the amount actually owed in cash to the party entitled
thereto.
3. Closing.
3.1 Closing and Closing Date. Unless earlier terminated or postponed as
herein provided for, consummation of the sale and purchase contemplated by this
Agreement ("Closing") shall take place beginning at 10:00 o'clock a.m., local
time, on February ___, 1998 (or at such other time and place as Buyer and Seller
hereafter may agree upon in writing) (the "Closing Date") at the offices of
Seller in Gaylord, Michigan, and shall be effective as of 12:01 a.m. on
February, 1998.
3.2 Duties of Seller at Closing. At Closing and contemporaneously with
Buyer's performance of its obligations described in paragraph 3.3, Seller agrees
to, and at Seller's sole expense, shall tender and deliver to Buyer at 10:00
o'clock a.m., local time, on the Closing Date, in form and substance reasonably
satisfactory to Buyer and its counsel each of the following:
(a) such documents and duly executed instruments as shall be necessary
and appropriate to carry out the transactions contemplated by and the
intent of this Agreement, including, without limitation, and instruments of
conveyance, assignment, consent, or transfer sufficient to assign, convey,
transfer to, and vest in Buyer all right, title, and interest in and to
Shopping
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Guides and each item of the Property Sold free and clear of any and all
Liens and subject only to Permitted Liens;
(b) peaceful, exclusive, and unencumbered possession of the Property
Sold, subject only to Permitted Liens, in the same condition as at this
date, ordinary wear-and-tear excepted;
(c) a copy, certified by an appropriate officer of Seller as being
true and complete, of Seller's bylaws and articles of incorporation as then
in effect and of necessary corporate proceedings and resolutions heretofore
duly adopted by Seller's board of directors and Seller's Shareholders
authorizing and approving Seller's execution and delivery of this Agreement
and consummation of the transactions contemplated hereby;
(d) the legal opinion of Honigman, Miller, Schwartz and Cohn, 2290
First National Bank Bldg., 660 Woodward Avenue, Detroit, Michigan
48226-3583 ("Seller's Counsel") dated as of the Closing Date, substantially
in the form and substance of Exhibit 3.02;
(e) each financial statement, document, opinion, waiver, consent,
certificate, or instrument that Seller is required to deliver under this
Agreement;
(f) a copy of the Security Agreement dated as of the Closing Date and
duly executed by all parties thereto other than Buyer;
(g) a copy of a Noncompetition Agreement substantially in the form and
containing the substance of Exhibit 3.02.1 hereto (the "Noncompetition
Agreement") duly executed by each of the Shareholders;
(h) within five (5) days after the Closing Date, an aged (30, 60, 90
days, etc.) list of all accounts receivable of Seller as of the latest
period end at or prior to the Closing Date listing for each such account
the account name, address, amount due, due date of the oldest portion, and
date to which service has been provided ("Accounts Receivable List"), which
Accounts Receivable List shall be updated to the Closing Date, as
necessary, through the efforts of Buyer and Seller;
(i) a duly executed copy of each instrument of consent, waiver, or
approval described in paragraph 6.4 and of each instrument necessary or
effective to terminate as of the Closing Date each employee benefit plan
(if any) applicable to any of Seller's employees;
(j) the Assumption Agreements (hereinafter defined) duly executed by
each party thereto other than Buyer;
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(k) a copy of a lease in the form and substance attached hereto as
Exhibit 3.02.2 (the "Lease"), duly executed by all parties other than
Buyer; and
(l) each other document opinion, waiver, consent, certificate,
statement, or instrument that this Agreement requires Seller to deliver.
3.3 Duties of Buyer at Closing. At Closing, and contemporaneously with
Seller's performance of its obligations described in paragraph 3.2, Buyer agrees
to and at Buyer's sole expense shall tender and deliver to Seller in form and
substance reasonably satisfactory to Seller and Seller's Counsel, each of the
following:
(a) the Purchase Price, as adjusted, paid as herein agreed;
(b) a duly executed copy of the Security Agreement, dated as of the
Closing Date, together with such financing statements and other
documentation reasonably necessary to perfect Seller's security interest;
(c) the legal opinion of Thompson & McMullan, P.C., 100 Shockoe Slip,
Richmond, Virginia 23219, dated as of the Closing Date, substantially in
the form and containing the substance of Exhibit 3.03;
(d) the Noncompetition Agreement(s) duly executed by Buyer and all
parties thereto, together with proof of payment of any amounts therein
specified to be paid by Buyer at Closing;
(e) the Lease, duly executed by Buyer and all parties thereto;
(f) the Assumption Agreements duly executed by Buyer;
(g) a copy, certified by the managing member of Buyer as being true
and complete, of Buyer's articles of organization and operating agreement,
a certificate of good standing of Buyer, and a certified copy of the
resolutions of Buyer's member(s) approving and authorizing the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby; and
(h) each other document, opinion, waiver, consent, certificate,
statement, or instrument that this Agreement requires Buyer to deliver.
3.4 Certain Liabilities. On and after Closing, and as expressly set forth
in assumption instruments executed and
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delivered by Buyer at Closing (the "Assumption Agreements"), Buyer will assume
and agree to perform and discharge in accordance with the terms thereof, all of
Seller's obligations arising subsequent to Closing under the Assumed Contracts
that are listed and described on Exhibit 1.01.3, true copies of which shall have
been supplied to Buyer before the Closing Date. Buyer assumes and shall be
liable for no other liability of Seller, contractual or otherwise, and Seller
covenants and agrees with and for the benefit of Buyer that Seller will perform
and discharge all obligations of Seller (contractual or otherwise) not expressly
so assumed by Buyer in writing at Closing, including, without limitation, any
obligation for payment of Seller's accounts payable. Without limiting the
generality of the foregoing, Seller agrees that Buyer is not, directly or
indirectly, assuming or agreeing to assume and shall not be liable for any
liability or obligation of Seller to Seller's employees, including without
limitation any such liability or obligation in respect of wages, salaries,
bonuses, or accrued vacation, sick, or other pay, except that Buyer hereby
assumes and shall be responsible for payment of normal earned vacation
eligibility or unpaid vacation pay for each of Seller's employees hired by Buyer
for vacation earned within one year prior to the Closing Date but not yet taken
by any such hired employee as of the Closing Date and the pro rata vacation
earned between any such hired employee's last previous anniversary date and the
Closing Date, unpaid vacation pay of James R. Glasser ("Glasser"), whether or
not he is hired by Buyer, in the amount of Two Thousand Two Hundred Thirty and
73/100 ($2,230.73). In the case of Glasser, such amount shall be paid by Buyer
to Glasser at Closing. All such unpaid vacation pay and eligibility is described
on the attached Exhibit 3.04.
3.5 Consents; Further Assurances. Seller shall obtain all material
agreements, consents, waivers, or approvals of third parties necessary or
appropriate for Closing or consummation of the transactions contemplated hereby.
After Closing, on Buyer's reasonable request and at Buyer's expense, at any time
or from time to time, Seller shall take or cause to be taken all such further
actions and shall execute, acknowledge, and deliver all such instruments as
reasonably may be required to memorialize or effectuate the transactions
occurring at Closing in order to ensure that Buyer receives and realizes all of
Seller's rights in the Property Sold as of Closing.
3.6 Collection of Accounts Receivable. At Closing, Seller will deliver
Seller's existing accounts receivable on the Accounts Receivable List. Such
Accounts Receivable List will be used by Buyer for purposes of collection only
for the period of one hundred twenty (120) days immediately following Closing
(the "Collection Period"). Acting as Seller's agent, during the Collection
Period Buyer shall have the exclusive right to and shall make commercially
reasonable efforts to collect Seller's accounts receivable listed on the
Accounts Receivable List, but shall not be
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required to expend or advance any of its funds, to locate any debtor, or to
institute or defend any suit, action, claim, or counterclaim in any legal or
equitable proceeding. Under no circumstances shall Buyer be required to engage
counsel or any outside collection agency or facility in collecting Seller's
accounts receivable. Payments received on an account from any customer of Buyer
that is an account debtor for an account of Seller on the Accounts Receivable
List shall be applied first to the Seller's account on such list, unless such
customer shall designate some other application of such payment or shall contest
the account receivable, in which case Buyer shall promptly notify Seller of such
designation or contest and return to Seller the account relating to such
customer and thereafter shall have no further obligation with respect thereto.
If Seller requests, Buyer also shall promptly return to Seller any account of
Seller that is over 90 days old, and Buyer shall have no further obligation with
respect to such account. Buyer shall transmit all monies collected on Seller's
accounts receivable to Seller within fifteen (15) days after the end of each
month in which such monies are collected. Upon expiration of the Collection
Period, Buyer shall be relieved of all responsibility for, or to attempt
collection of, Seller's accounts receivable, and thereafter Seller alone shall
be responsible for collection of any balances due on such accounts. Within
twenty (20) days after expiration of the Collection Period, Buyer will make
final payment to Seller of the amounts collected on Seller's accounts and shall
return to Seller each then uncollected Seller's account together with a final
statement of the accounts outstanding.
4. Seller's and Shareholders' Representations and Warranties.
To induce Buyer to enter into and perform pursuant to this Agreement,
Seller and Shareholders, jointly and severally, represent and warrant to Buyer
that each of the following is true:
4.1 Corporate Organization, Qualification, Authorization, etc. Seller is a
corporation duly incorporated, validly existing, and in good standing under the
laws of the state of its incorporation, has no subsidiaries, has all corporate
power and authority to conduct its business as it is now being conducted, to own
and operate Shopping Guides, and to own, possess, occupy, use, or operate the
Property Sold and is duly qualified to do business in any state where the nature
of its business or properties requires it to be so qualified. To Seller's
knowledge, Seller has not violated and has duly complied with all applicable
laws, rules, and regulations relating to the ownership and use of its properties
and the conduct of its business and knows of no law, rule, or regulation that
will require a material, adverse change in Shopping Guides' present operation or
the use and enjoyment of the Property Sold or that will cause Buyer to incur any
material liability after Closing.
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4.2 Seller's Property. Seller is the sole owner and publisher of the
Shopping Guides and has good and valid title to the Property Sold free and clear
of Liens other than Permitted Liens. To Seller's knowledge, Seller has the
exclusive right to use of the Names in each of counties where such Names are
registered.
4.3 Distribution. For the six (6) consecutive publication days ending
December 28, 1997, the average distribution of Shopping Guides was not less than
___________, which is within the normal range expected to be attained by
Shopping Guides during that period.
4.4 Financial Statements. Seller has furnished Buyer with the following
financial statements: Seller's (a) financial report with additional information
December 31, 1997; (b) year end adjusted as of December 31, 1997, balance sheet;
(c) balance sheet/financial statement as of December 31, 1996 -- operating
adjusted; (d) balance sheet/financial statement as of December 31, 1995 --
operating adjusted; (e) financial report with additional information December
31, 1996; and (f) financial statements and supplementary information for the
years ended December 31, 1995 and 1994 (collectively, the "Financial
Statements"). Each book or record of Seller that has been or may be exhibited to
or examined by Buyer before Closing is and will be true, correct, and complete.
Except as otherwise expressly disclosed therein, each of the Financial
Statements was prepared in accordance with generally accepted accounting
principles and policies consistently applied throughout the periods involved
(except that the Seller provides pension benefits to retired officers and
records these benefits when paid), and, subject to any qualifications therein
expressly stated (and to normal year-end audit adjustments in the case of
interim financial statements), the Financial Statements fairly present Seller's
then financial position and the changes in financial position and results of
operations for the time periods covered and as at the times therein indicated,
and the revenues and accounts therein reflected arose from bona-fide
transactions in the ordinary course of Seller's business. Except as, and only to
the extent disclosed on Exhibit 4.04 or fully and fairly identified, separately
disclosed, and properly reflected or reserved against in the Financial
Statements, Seller has received no material items of extraordinary,
non-recurring, or non-operating revenues or income, and has no material debts,
liabilities, or other obligations (including, without limitation, obligations
for federal, state, or local taxes or other governmental assessments or
penalties, and obligations for advances, directly or indirectly, incurred or
made to any affiliate or stockholder of Seller), direct or indirect, absolute,
contingent, or otherwise, due or to become due [other than normal and usual
forward obligations (other than for borrowed money) incurred in the ordinary
course of Seller's business] that do not in the aggregate have a material,
adverse effect on Seller, and there have been no changes in the accounting
principles,
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estimates, methods, or practices applied in preparing the Financial Statements,
except that classified advertising sales have been recorded as income when
produced rather than on a cash basis. Seller maintains such books and records as
are customarily kept under current business practices by businesses of
equivalent size and nature, and such books and records fully and fairly reflect
all of Seller's transactions. Seller will furnish Buyer with Seller's usual
interim operating statements and balance sheets for Shopping Guides as of each
month-end (and as of and for each reporting period then ending) until Closing,
and each of these statements shall be correct and complete. The Financial
Statements include as revenues only those revenues arising from Seller's
operations conducted in the ordinary course and in a fashion consistent with
Seller's past practices and reflect all expenses incurred in the operations of
Seller for each period of time covered therein. See Rider 4.4 attached.
4.5 Conduct of Business; Absence of Change. Since the date that is twelve
(12) months earlier than the date hereof, there has been: (i) no material,
adverse change in the condition (financial or otherwise) of Seller, or in
Seller's overall business, revenues, expenses, liabilities, financial condition,
properties, or operations, or to Seller's knowledge, in any laws, rules, or
regulations applicable thereto; (ii) no fire, explosion, storm, accident,
condemnation, damage, theft, destruction, fraud, or loss (whether or not covered
by insurance) materially affecting Shopping Guides, Seller's business, or any
part of the Property Sold; and (iii) to Seller's knowledge, no other occurrence,
event, condition, change in condition, or state of facts that affected, affects,
or may affect Seller, Seller's business, Shopping Guides, or any part of the
Property Sold in any material, adverse manner.
4.6 Title to Property Sold. Except as otherwise expressly disclosed and
described in Exhibit 4.06 as permitted liens ("Permitted Liens") and except for
property leased by Seller pursuant to leases disclosed to Buyer, Seller is the
sole owner of and has, and at Closing will convey and transfer to Buyer, good,
valid, and marketable title to and all rights in (and the right to immediate,
exclusive, peaceful, and unencumbered possession of) the Property Sold free and
clear of any and all Liens except any then existing Permitted Liens, and
Seller's said title is warranted against the claims of any and all persons. The
Property Sold and the Excluded Property include all property used by Seller in
the operation of Shopping Guides and its business to produce the revenues
reflected in the Preliminary Financials and to be reflected in the Closing
Financials.
4.7 Absence of Certain Actions. Since the date hereof Seller has not taken
any action described in paragraph 5.2 of this Agreement, and Seller and
Shareholders have complied with each applicable term, covenant, agreement, and
condition of this Agreement.
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4.8 Claims or Litigation. Other than a dispute with Publishing Partners
International, the details of which have been disclosed to Buyer, there are not
pending or, to Seller's knowledge, any basis for or threatened, any suits,
actions, proceedings, charges, claims, disputes, investigations, or inquiries,
against, or relating to, or that might result, singly or in the aggregate, in
any material, adverse change in the operations or condition of Seller, the
Property Sold, the Shopping Guides, Seller's business, or any part or parts
thereof, and nothing restrains or prohibits or seeks to restrain or prohibit
consummation of the transactions contemplated hereby or questions the legality,
validity, or enforceability of this Agreement or any action taken or to be taken
pursuant hereto or in connection with the transactions contemplated hereby; to
Seller's knowledge, Seller has at all times complied in all material respects
with all applicable laws, ordinances, rules, and regulations (including those
relating to zoning and use of the Property Sold), and Seller knows of no
violation of any law, ordinance, rule, or regulation by Seller or by any of its
officers, directors, agents, servants, or employees, and there are no material
injunctions, judgments, orders, or decrees outstanding or being sought against
Seller, any part of the Property Sold, or any of Seller's publications,
products, or services.
4.9 Licenses and Permits. Seller has all franchises, licenses,
certificates, and permits needed to possess, own, lease, use, or occupy the
Property Sold, to operate and publish the Shopping Guides, and to conduct
Seller's present business; each is in full force and effect, and no action is
pending or, to Seller's knowledge, threatened looking toward any amendment,
revocation, or limitation thereof.
4.10 Tax Matters. Seller has properly filed in correct form with
appropriate governmental agencies all tax returns required to be filed by it;
all taxes due and payable by Seller have been properly reported, determined, and
paid, and Seller has no liability for payment of any unpaid tax or penalty. No
waiver of any statute of limitations has been given by Seller, and there are no
agreements or applications by Seller for any extension of time for the
assessment or payment of any tax. Except for title and transfer charges for
transferring title to Seller's vehicles, Seller has paid or shall pay any and
all taxes (excluding all sales or use taxes) arising out of or becoming due or
payable because of Closing or the purchase and sale of the Property Sold as
contemplated hereby and all taxes and assessments levied against Seller, or the
Property Sold with reference to or arising out of events occurring prior to
Closing. If requested by Seller, Buyer will furnish Seller with Buyer's employer
identification number and a certification that Buyer is purchasing the
Inventories for resale.
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4.11 Condition of Property Sold. Except as disclosed on Exhibit 4.011, each
tangible item of the Property Sold is in good and proper operating condition and
repair and to Seller's knowledge free of defects (ordinary wear-and-tear
excepted).
4.12 Advertising Rates. Seller has supplied Buyer with schedules of the
current advertising rates customarily being charged and received by Seller with
regard to Shopping Guides.
4.13 Employee Status. Seller has delivered to Buyer an accurate and
complete copy of Seller's current payroll roster showing the name and address of
each person entitled to receive compensation from Seller for services as an
employee of Seller and for each: his or her job title and description, nature of
compensation (salary, wages, and/or commissions), current rate of compensation,
bonus to which entitled during the current year, or, if none, the amount of
bonus paid during the last year, each vacation period (with pay) to which
entitled during this calendar year, and each fringe benefit or other significant
arrangement with respect to such person's employment by Seller. Immediately
prior to the Closing Date Seller will deliver to Buyer a then current version of
each such payroll roster. Within the last six months there have been no
significant increases other than increases consistent with Seller's past
practices in the salaries payable to Seller's employees, and no commitments or
agreements have been made, or are anticipated relating to employees' salaries or
compensation, except that each of Seller's employees will receive a bonus based
upon a percentage of their annual compensation multiplied by the number of years
employed by Seller. Except for vacation pay to certain employees assumed by
Buyer as provided in paragraph 3.4, within ten days after Closing each of
Seller's employees will have been paid all wages, salaries, commissions,
severance pay, vacation pay, sick leave, or other pay, benefits, or entitlements
earned or accrued by or for each such employee as of, prior to, or as a result
of Closing. Seller knows of no plan by any employee of Seller to refuse later
employment with Buyer (if such employment is offered on the same or similar
terms) that has not been disclosed to Buyer.
4.14 Operating Agreements; Working Conditions. Except as disclosed to
Buyer, Seller has no written or oral contract, express or implied, with any of
its executives or other employees, is not a party to any contract with a labor
organization or to any collective bargaining agreement covering or relating to
any employee(s) and has not recognized, is not required to recognize, and has
received no petition or demand for election or recognition of, a collective
bargaining representative or agent for any of its employees. Seller is not
affected by any present or, to Seller's knowledge, threatened strike or other
labor dispute or disturbance, has complied in all material respects with all
applicable laws, rules and regulations relating to conditions for employment or
discharge of its employees, including those relating to wages,
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hours, discrimination, occupational safety and health, collective bargaining,
and the withholding and payment of taxes and contributions, has withheld all
amounts required by law or agreement to be withheld from the wages or salaries
of its employees, and is not liable for any arrearages of wages or for any tax
or penalty for any failure to comply with such laws, rules, or regulations.
There are no material controversies pending or to Seller's knowledge threatened
between Seller and any employees or any labor union.
4.15 Benefit Plans. Seller maintains certain employee benefit plans for the
benefit of its employees. Buyer shall have and incur no funding or other
obligation or liability in connection with any such plans, their funding or
termination, or any withdrawal therefrom, in whole or in part. Seller shall be
responsible for compliance with Code Section 4980B as applied to its current and
former employees and to those employees who experience a qualifying even as a
result of this transaction.
4.16 Authorization for Agreement. Seller has full power and authority to
execute, perform, and deliver this Agreement and to consummate the transactions
contemplated hereby. Seller's execution of, delivery of, performance of,
compliance with, and Closing of this Agreement have been duly and validly
authorized by all necessary corporate action and will not (a) constitute or
result in a breach of (or default under) any term, condition, or provision of
(or result in the creation of any Lien, charge, or encumbrance upon any of the
Property Sold pursuant to) any of the Contracts (hereinafter defined), any
articles of incorporation, bylaw, contract, mortgage, lien, indenture, lease,
agreement, commitment, arrangement or understanding, or any other instrument to
which Seller is a party or by or to which it or any of the Property Sold is
bound or subject, (b) to Seller's knowledge violate any statute, law, ordinance,
rule, regulation, judgment, or order binding upon or applicable to Seller or the
Property Sold, in whole or in part, (c) to Seller's knowledge expose Seller or
Buyer to any liability or penalty under any law, (d) result in any loss to or
restriction upon Shopping Guides or upon the use of any of the Property Sold,
(e) to Seller's knowledge adversely affect the validity, continuation, or
effectiveness of any permit, license, franchise, or right enjoyed by Seller, (f)
give any party to any of the Contracts, or any other agreement to which Seller
is a party, any right of cancellation or termination, or (g) give anyone any
right to accelerate the maturity of any indebtedness for which Seller is a
direct or indirect, or primary or secondary, obligor, or to claim any fraud,
default, or breach with respect to anyone or any such indebtedness. This
Agreement and its execution by Seller have been duly approved by a vote of
Seller's Shareholders.
4.17 Agreements, Contracts, Leases, etc. Exhibit 4.017 contains an accurate
and complete list and brief description of each material agreement, obligation,
contract, and commitment (oral
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or written, express or implied) to which Seller is a party, or by which it is
bound, or by which the Property Sold is bound (including all of Seller's
delivery, advertising, or printing contracts, if any) ["Contract(s)"], and an
accurate and complete copy or statement of the terms of each such Contract has
been or will be forthwith supplied to Buyer. Except as so listed and described
in Exhibit 4.017, Seller is not a party to any other material contract,
obligation, or agreement (oral or written, express or implied), including,
without limitation, any (i) bonus, retirement, deferred-compensation, pension,
profit-sharing, stock option, hospitalization, or employee stock purchase or
retirement agreement, policy, or plan, or other employee benefit plan; (ii)
agreement with any employee; (iii) agreement of guarantee or indemnification;
(iv) loan or credit agreement; (v) employment contract; (vi) lease to or for any
material property, real or personal; (vii) material sales or advertising agency
contract; (viii) contract or commitment under which there is an obligation on
any party thereto to pay more than $5,000.00; (ix) service or commission
contract for a period in excess of thirty (30) days; or (x) any agreement or
commitment containing a covenant limiting Seller's freedom to compete with any
person or to engage in any line of business. Each Contract is in full force and
effect, legal, valid, binding, and enforceable in accordance with its terms;
Seller has not defaulted as to or breached, nor has it received notice of any
claim or assertion that it has defaulted as to or breached, any term or
condition of any Contract or of any other agreement, obligation, contract,
lease, or commitment applicable to it, and no event has occurred that with
notice or the lapse of time, or both, would constitute such a breach or default.
Seller's rights under each Contract are assignable to Buyer, and Seller now
knows of no term, condition, or provision of, or event affecting, any Contract,
Lease, or other agreement, contract, lease, obligation, or commitment that might
affect the validity, continuation, or effectiveness thereof upon assignment to
Buyer, or that might prevent Buyer from realizing Seller's present rights and
benefits to accrue thereunder in due course after Closing.
4.18 Insurance. Seller has delivered to Buyer a list and brief description
of Seller's insurance policies.
4.19 Environmental Matters. To Seller's knowledge, no part of the Property
Sold ever has been used in violation of any applicable Environmental Law to
generate, manufacture, refine, transport, release, treat, store, handle, or
dispose of any hazardous, industrial, toxic, or harmful substances, wastes, or
materials (e.g. asbestos, urea formaldehyde, polychlorinated biphenyls, or other
waste exhibiting hazardous characteristics) or any substance or element the
generation, release, storage, use, or handling of which is prohibited or
regulated (singly, a "Hazardous Material"; collectively, "Hazardous Materials")
by or pursuant to any law, rule, or regulation (federal, state, or local)
regarding, in whole or in part, (a) health or safety, or (b) the effect of
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Hazardous Materials on land, water, air, or the environment (e.g. the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended; 42 U.S.C.; ss. 6.01 et seq.; the Resource Conservation and Recovery
Act; or similar acts), or (c) the use, transport, handling, storage, treatment,
release, or disposal of any such Hazardous Materials (singly, an "Environmental
Law," collectively, the "Environmental Laws"). To Seller's knowledge, Seller
always has materially complied with each and all such Environmental Laws. To
Seller's knowledge, no event has occurred at the Property Sold and no condition
now exists at or affects any part of the Property Sold that is likely to result
in any material complaint, notice, citation, action, proceeding, or
investigation before any governmental authority in connection with any Hazardous
Material or any Environmental Law or the violation thereof, or any claim against
or liability of Seller or Buyer to any authority, person, or persons arising out
of or based on any Environmental Law or the breach or enforcement thereof.
4.20 Execution, Validity. This Agreement is lawful and has been duly
executed and delivered by Seller and each of Shareholders, which execution and
delivery by Seller was duly and validly authorized by all necessary corporate
action by Seller and its Shareholders, and this Agreement constitutes a legal,
valid, and binding agreement of Seller and each of Shareholders enforceable
against Seller and each of Shareholders in accordance with its terms. Each of
Shareholders executing this Agreement as a trustee or other fiduciary has all
requisite power and authority to enter into and perform this Agreement as so
agreed.
4.21 Statements, Etc., True and Not Misleading. No representation or
warranty made by Seller or the Shareholders in this Agreement contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact necessary in order to make the statements contained herein or
therein not misleading in the circumstances.
4.22 Conveyances, Etc. When executed and delivered to Buyer at Closing,
each instrument of conveyance, assignment, consent, or transfer will constitute
the legal, valid, and binding obligation of the parties thereto, and such
instruments will be effective to vest in Buyer, and as of Closing Buyer will
thereby receive and become the sole, vested owner of all right, title, and
interest in and to the Property Sold, subject only to any then existing
Permitted Liens.
4.23 Investment. On Closing Seller will take the Notes for its own account,
for investment purposes only, and not with a view or intention to distribute or
otherwise dispose of all or any part thereof. Seller understands that each Note
is to be issued without registration under any "blue sky" law and pursuant to an
exemption from registration under provisions of the Securities Act of 1993 as
amended (the "Act") and that Seller may not hypothecate
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or otherwise transfer or dispose of any Note except upon registration under the
Act, unless an exemption from registration provisions of the Act is available.
Before transferring or disposing of any Note in a transaction Seller believes to
be so exempt from registration Seller will give Buyer notice of such proposed
disposition accompanied by an opinion of counsel satisfactory to Buyer in all
respects to the effect that an exemption from registration under the Act is
available with respect to the proposed disposition, and any new note issued by
Buyer under such circumstances shall bear a legend similar in form and substance
to that appearing on Exhibit 2.01.1. Seller is aware that Buyer is a newly
formed company with limited capital and no previous financial or operating
history, that for the foreseeable future payment of the Notes probably will be
derived solely from Buyer's publication of Shopping Guides and its use of the
Property Sold. Seller is able to bear the economic risk of holding the Notes for
an indefinite period and has received or had free access to all necessary
information, financial or otherwise, concerning Buyer.
5. CONDUCT PRIOR TO CLOSING.
Seller covenants and agrees that from the date hereof and until Closing:
5.1 Conduct of Business. Seller will operate Shopping Guides' business and
conduct its business only in the ordinary course of business, in accordance with
Seller's customary policies and practices, in material compliance with all
applicable laws, rules, and regulations, and substantially in the same manner as
heretofore and will use its reasonable efforts to discharge and satisfy all of
its obligations in due course, to preserve Seller's present business
organization intact, to preserve Seller's business reputation, to keep available
the services of Seller's present officers, agents, and employees, to prevent any
material, adverse change in Seller, Seller's business, the Shopping Guides, or
any part of the Property Sold, and to preserve Seller's present customers and
present relationships with those having business dealings with Seller. Seller
will take reasonable actions so that each condition of Section 6. of this
Agreement will be satisfied as of the Closing Date, will maintain in full force
and effect all franchises, licenses, and permits held by it, and will maintain
the Property Sold in the same repair, order, and condition as at the date
hereof, ordinary wear-and-tear excepted.
5.2 Restricted Activities and Transactions. From the date hereof, until
Closing, except as may otherwise be permitted or required hereby, without
Buyer's prior consent expressly identifying and referring to this paragraph 5.2,
which consent shall not be unreasonably withheld or delayed, Seller will not
directly or indirectly do or agree to do, and within the past forty-five (45)
days Seller directly or indirectly has not done or
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agreed to do, any one or more of the following:
(a) encumber, mortgage, pledge, or subject the Property Sold or any
part thereof to any Lien, security interest, charge, or encumbrance;
(b) grant, agree to, offer, or pay any kickback, discount, incentive
payment, commission, or promotional or other allowance to any person, or
sell or agree to sell or otherwise dispose of any part of the Property Sold
in each case other than sales for value, at usual rates, and in the
ordinary and normal course of business;
(c) agree to terminate, amend, restrict, extend, or waive any material
right under or materially affecting any Contract or the value of all or any
material part of the Property Sold;
(d) conduct its business or operate the Shopping Guides other than in
the normal and usual manner in the ordinary course, or other than in
material compliance with all applicable laws, rules, and regulations of all
local, state, and federal authorities, entities, and agencies;
(e) vary materially from the advertising rates currently being charged
and received by Seller;
(f) except as disclosed to Buyer, pay, paid, or agreed to pay, any
bonus to any person, or make or agree to make any material change in the
compensation payable or to become payable to any employee or agent of
Shopping Guides;
(g) enter into any employment contract or lease; or
(h) except as disclosed to Buyer, enter into any contract or other
commitment binding upon Seller or Shopping Guides for a period of more than
thirty (30) days or other than in the ordinary course of business.
5.3 Full Access. At reasonable times during normal business hours after
notice from Buyer, Seller will afford Buyer, or Buyer's representatives, agents,
attorneys, employees, or accountants, full access to Seller's and Shopping
Guides' premises, the Property Sold, and all facilities, equipment, offices,
properties, books, and records relating thereto in order that Buyer may cause to
be made desired investigations of Seller's affairs or necessary copies of its
records, and will cause Seller's officers to furnish Buyer with such information
concerning Shopping Guides, Seller's business, and the Property Sold as Buyer
reasonably may request.
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5.4 Reports; Taxes; Etc. Seller will properly and timely file all reports
or returns it is required to file with federal, state, foreign, local, or other
authorities (including taxing authorities) and will pay all required taxes,
charges, and assessments as required in due course, and on or before the Closing
Date Seller will pay all required taxes, charges, or assessments due and payable
by Seller on or before the Closing Date.
5.5 Waiver of Bulk Sales Compliance. Buyer and Seller each waives
compliance with the provisions of applicable statutes relating to bulk transfers
or bulk sales. Seller and Shareholders agree to indemnify Buyer from any loss,
costs, or damage arising out of such waiver.
5.6 Termination of Plans. At its sole expense, and without any liability to
Buyer, Seller shall terminate or cause to be terminated each pension, profit
sharing, or other employee benefit plan applicable to Seller's employees, all in
accordance with the provisions thereof and applicable laws, rules, and
regulations and shall satisfy and discharge each withdrawal, termination, or
other liability thereunder.
5.7 Notice of Breach or Change. Seller will promptly notify Buyer if Seller
believes or realizes that Seller will be unable to comply with or satisfy any
condition of Section 6.
5.8 Taxes. Buyer will pay all title and transfer charges for transferring
title to Seller's vehicles and all sales or use taxes arising out of or becoming
due and payable because of Closing or the purchase and sale of the Property Sold
as contemplated hereby.
6. CONDITIONS TO BUYER'S OBLIGATIONS:
As conditions precedent for the sole benefit of Buyer, which Buyer may
waive only by and to the extent of its express written waiver given hereafter,
Closing and each obligation of Buyer under this Agreement shall be subject to
and conditioned upon Buyer being satisfied, on or before and as of Closing, of
each of the following:
6.1 Compliance with Agreement; No Prohibition. Each material term,
covenant, agreement, and condition of this Agreement to be complied with or
performed by Seller or Shareholders until, at, or prior to Closing shall have
been complied with or performed in all material respects, or waived by Buyer,
this Agreement shall not have been terminated by Buyer as permitted hereby, and
nothing then shall (and no action shall have been commenced seeking to)
restrain, inhibit, penalize, or prohibit Closing or the conduct of the Shopping
Guides' business by Buyer after Closing as contemplated hereby.
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6.2 Representations and Warranties. Unless waived, each of Seller's
representations and warranties contained herein shall in all material respects
have been true and correct when made, shall be deemed to be made again at and as
of Closing, and then shall be in all material respects true and correct.
6.3 Delivery. Buyer shall not have terminated this Agreement as permitted
hereby, and Seller shall have delivered to Buyer each item described in
paragraph 3.2.
6.4 Approvals and Consents. All material agreements, consents, waivers, or
approvals of each public authority or other person or entity, natural or
corporate, public or private, necessary or appropriate for Closing or for
consummation of the transactions contemplated hereby without diminution, loss,
termination, or restriction of any material right of Seller shall have been
obtained from such parties in such form and substance as is reasonably
satisfactory to Buyer, and copies thereof delivered to Buyer. If necessary and
requested by Buyer, the other parties to any material agreements to which Seller
is a party shall have consented to Closing.
6.5 Contracts. Seller shall have assigned, set over, and transferred to
Buyer all of its right, title, and interest in each Assumed Contract identified
on Exhibit 1.01.3 in a form reasonably satisfactory to Buyer's counsel and at
Closing shall have delivered to Buyer peaceful possession of the Property Sold.
6.6 Other Contracts. On or before Closing hereunder, Closing (as therein
defined) shall occur or have occurred as to each of the following contracts
("Affiliated Contracts"), including the execution of each of the noncompetition
agreements associated therewith (jointly and severally with the Noncompetition
Agreement, the "Noncompetition Agreements"): Advertisers PS, LLC and
Advertiser's Postal Service Corporation, and Central Printing Service, LLC and
Central Printing Corporation.
6.7 Inventories. As of Closing, Seller's Inventories shall be at usual and
normal levels and sufficient to satisfy the Shopping Guides' needs for at least
45 days following Closing.
6.8 Liabilities Current. As of Closing each of Seller's liabilities
(including all current liabilities, long term debt, and lease obligations) shall
be current, not in default, and not past due.
7. INDEMNIFICATION AND RISK OF LOSS:
7.1 Indemnity of Buyer. Subject to the limitations of paragraph 7.3, Seller
and Shareholders, jointly and severally, agree to indemnify, defend, and hold
Buyer, its owners, officers, agents, representatives, successors and assigns,
jointly and
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severally, harmless from and against each, any, and all actions, suits, causes
of action, losses, costs, claims, assessments, damages, response costs,
liabilities, fines, funding or termination liabilities, judgments, and expenses
(singly, a "Claim", collectively, the "Claims") asserted by a third party or
parties against each, any, or all of them arising from, based upon, or on
account of, in whole or in part, each, any one or more, or all of the following,
whenever occurring: (i) any breach, failure to perform, or non-fulfillment by
Seller or Shareholders of any covenant, agreement, term, condition, certificate,
representation, or warranty contained in this Agreement or in any document
delivered, or caused to be delivered to Buyer by Seller or the Shareholders,
(ii) any untruth, misrepresentation, omission, or inaccuracy with respect to or
contained in any such covenant, agreement, certificate, representation, or
warranty, including any statement or figure contained in any of the Financial
Statements, (iii) any violation of any law, rule, or regulation (or any act or
failure to act) by Seller or any one or more of its officers, directors, agents,
servants, or employees (or by others for whom Seller is responsible), (iv) any
agreement made by, Claim against, or asserted liability of Seller, other than
those expressly assumed by Buyer at Closing pursuant to paragraph 3.4, (v) the
conduct of Seller's business or Seller's ownership, use, or operation of the
Shopping Guides or the Property Sold, or any part or parts thereof, (vi) any
payment received by Seller, directly or indirectly, (vii) any failure by Seller
to comply with the laws of the state of Seller's domicile relating to or
applicable to the sale of Seller's assets contemplated hereby, or (viii) any
Lien as to all or any part of the Property Sold, other than a Permitted Lien;
provided, however, that the obligation to indemnify hereunder shall in no event
exceed, in the aggregate, the amount of the Purchase Price. As to each Claim,
the obligations arising hereunder shall include, but not be limited to, an
obligation to pay to or for Buyer all costs incurred in investigating,
defending, or settling such Claim (including all reasonable attorneys' or
experts' fees).
7.2 Indemnity of Seller. Subject to the limitations of paragraph 7.3, Buyer
agrees to indemnify, defend and hold Seller and each Shareholder harmless from
and against each, any, and all Claims asserted by a third party or parties
against Seller or any Shareholder arising from, based upon, or on account of any
breach, failure to perform, or non-fulfillment by Buyer of any covenant,
agreement, term, condition, certificate, representation, or warranty contained
in this Agreement; provided, however, that the obligation to indemnify hereunder
shall in no event exceed, in the aggregate, the amount of the Purchase Price. As
to each Claim, the obligations arising hereunder shall include but not be
limited to an obligation to pay to or for Seller and Shareholders all costs
incurred in investigating, defending, or settling such Claim (including all
reasonable attorneys' or experts' fees).
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7.3 Limitations. The right to indemnification under Section 7.1 or Section
7.2 is subject to the following limitation: no party shall be entitled to
indemnification until the aggregate amount of all Claims that would be
indemnifiable for such party but for application of this Section 7.3 exceeds
Thirty Thousand and no/100 Dollars ($30,000), whereupon such party shall become
entitled to indemnification for all such Claims. In addition, Seller's and
Shareholders' obligation to indemnify shall be net of the effect of any tax
benefit realized by Buyer arising from such Claims, and the aggregate amount of
all Claims for which Seller and Shareholders shall be held liable shall not
exceed the Purchase Price as adjusted.
7.4 Conditions of Indemnification. The obligation to indemnify any party
(the "Indemnified Party") with respect to each Claim also shall be subject to
the following terms and conditions: (a) the Indemnified Party will give prompt
notice of any such Claim to the other party(ies) hereto (the "Indemnifying
Party"), and the Indemnifying Party (or any of them) shall have the right to
undertake the defense thereof and compromise and settle such Claim at the
Indemnifying Party's expense using counsel chosen by the Indemnifying Party; and
(b) if within forty-five (45) days after receipt of notice of any such Claim,
the Indemnifying Party shall fail to assume the defense thereof, the Indemnified
Party shall (after notice to the Indemnifying Party) have the right to undertake
the defense of such Claim, subject to the right of the Indemnifying Party to
assume the defense of such Claim at any time prior to final resolution thereof
upon the prior payment to the Indemnified Party of all attorneys' and experts'
fees theretofore expended by the Indemnified Party in defense of such Claim.
7.5 Investigation. Seller and Shareholders acknowledge and agree that,
notwithstanding any right of Buyer fully to investigate the affairs of Seller
and notwithstanding any knowledge of facts determined or determinable by Buyer
pursuant to any such investigation, Buyer has the right to rely upon the
representations, warranties, covenants, and agreements of Seller and
Shareholders contained in this Agreement, and regardless of any knowledge or
facts determined or determinable by such an investigation, such representations,
warranties, covenants, and agreements, and Buyer's right to rely, and its
reliance thereon, shall not be affected in any way by any such knowledge or
investigation.
7.6 Risk of Loss. The risk of destruction of or loss or damage to the
Shopping Guides or any part of the Property Sold arising from any actual or
proposed condemnation or taking of any part of the Property Sold or of Shopping
Guides by governmental authority or by exercise of the power of eminent domain,
or from any fire, explosion, riot, flood, war, or other cause shall remain with
Seller until Closing. If Seller becomes aware of any such actual or potential
taking, loss, damage, or destruction, Seller
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will promptly notify Buyer of all particulars thereof and will cause any such
affected property to be replaced or to be repaired and restored to its condition
existing prior to such loss, damage, or destruction, at Seller's expense. If
such damaged property is not completely replaced or repaired and restored to its
former condition before Closing then Buyer at its sole option may: (a) by notice
to Seller postpone the Closing Date until such time as the property shall have
been completely replaced or repaired and restored, or (b) by notice to Seller
abandon and terminate this Agreement and all obligations of Buyer hereunder, or
(c) effect Closing on the Closing Date as initially established, in which event
(i) Seller shall assign to Buyer all then unexpended proceeds of insurance
received or to be received by Seller with respect to the Property Sold, and (ii)
Buyer and Seller shall agree upon an appropriate reduction in the Purchase Price
reflecting any then existing uninsured loss, damage, or destruction to the
Shopping Guides or to the Property Sold.
8. BUYER'S REPRESENTATIONS AND WARRANTIES.
To induce Seller to enter into and perform pursuant to this Agreement,
Buyer represents and warrants to Seller that each of the following is true:
8.1 Organization. Buyer is a limited liability company duly organized,
validly existing, and in good standing under the laws of the Commonwealth of
Virginia and has full legal power and authority to conduct its business as it is
now being conducted and to own its properties and assets.
8.2 Authorization for Agreement. Buyer's execution and delivery of this
Agreement have been duly and validly authorized by all necessary legal action on
the part of Buyer, and, relying on Seller's and Shareholders' representations
and warranties herein, this Agreement constitutes a legal, valid, and binding
obligation of Buyer. As of Closing execution and delivery of the Note, the
Security Agreement, and the Noncompetition Agreements will have been duly
authorized by all necessary legal action on the part of Buyer, and when executed
and delivered each will constitute a valid and binding obligation of Buyer.
Buyer's execution of, delivery of, performance of, compliance with, and Closing
of this Agreement will not (a) constitute or result in a breach of (or default
under) any term, condition, or provision of any articles of incorporation,
bylaw, contract, mortgage, lien, indenture, lease, agreement, commitment,
arrangement or understanding, or any other instrument to which Buyer is a party
or by or to which it or any of the Buyer's property is bound or subject, (b) to
Buyer's knowledge violate any statute, law, ordinance, rule, regulation,
judgment, or order binding upon or applicable to Buyer, in whole or in part, (c)
to Buyer's knowledge expose Seller or Buyer to any liability or penalty under
any law, (d) to Buyer's knowledge adversely affect the validity, continuation,
or effectiveness of any permit,
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license, franchise, or right enjoyed by Buyer, (e) give any party to any
contract, or any other agreement to which Buyer is a party, any right of
cancellation or termination, or (g) give anyone any right to accelerate the
maturity of any indebtedness for which Buyer is a direct or indirect, or primary
or secondary, obligor, or to claim any fraud, default, or breach with respect to
anyone or any such indebtedness.
8.3 Execution, Validity. This Agreement is lawful and has been duly
executed and delivered by Buyer, which execution and delivery by Buyer was duly
and validly authorized by all necessary company action by Buyer and its members,
and this Agreement constitutes a legal, valid, and binding agreement of Buyer
enforceable against Buyer in accordance with its terms.
8.4 Litigation. Buyer is not a party to any pending or threatened
litigation or proceeding that affects in any material, adverse manner Buyer's
power, authority, or ability to effect Closing.
8.5 Compliance. Buyer has complied with each applicable term, covenant,
agreement, and condition of this Agreement.
9. CONDITIONS TO SELLER'S OBLIGATIONS:
As conditions precedent for the sole benefit of Seller, which Seller may
waive only by and to the extent of its express written waiver given hereafter,
Closing and each obligation of Seller under this Agreement shall be subject to
and conditioned upon Seller being satisfied, on or before and as of Closing, of
each of the following:
9.1 Representations and Warranties. Unless waived, each of Buyer's
representations and warranties contained here in Section 8. shall be in all
material respects true and correct when made, shall be deemed to be made again
at and as of Closing, and they shall be in all material respects true and
correct as of Closing. Each material term, covenant, agreement, and condition of
this Agreement to be complied with or performed by Buyer until, at, or prior to
Closing shall have been complied with or performed in all material respects, or
waived by Seller, this Agreement shall not have been terminated by Seller as
permitted hereby, and nothing then shall (and no action shall have been
commenced seeking to) restrain, inhibit, penalize, or prohibit Closing.
9.2 Delivery. Buyer shall have delivered to Seller each item listed in
paragraph 3.3.
10. MISCELLANEOUS:
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10.1 Notices. Each notice, consent, request, demand, or other communication
required or permitted hereunder must be in writing and shall be deemed to have
been duly given only upon the earlier of receipt thereof (by facsimile or
otherwise) or ten (10) days after having been mailed, certified or registered
United States mail, postage prepaid, addressed as follows:
(a) if to Seller or Shareholders:
Star Publications, Inc.
Post Office Box 620
Gaylord, Michigan 49734
Copy to:
Samuel T. Stahl, Esquire
Honigman, Miller, Schwartz and Cohn
2290 First National Bank Bldg.
660 Woodward Avenue
Detroit, Michigan 48226-3583
(b) if to Buyer;
Upper Michigan Newspapers, LLC
c/o Brill Media Company, L.P.
420 NW Fifth Street, Suite 3-B
Evansville, Indiana 47708
Attention: Mr. Alan R. Brill
copy to:
Charles W. Laughlin, Esquire
Thompson & McMullan
100 Shockoe Slip
Richmond, Virginia 23219
or when so received or mailed to such other place or person as a party hereafter
may from time to time have designated in a prior written notice to the other
party given as herein required.
10.2 Survival. Each covenant, representation, and warranty made by Seller,
Shareholders, or Buyer in this Agreement or at Closing shall survive the Closing
and shall remain operative and in full force and effect regardless of Closing or
of any investigation made or knowledge obtained by or on behalf of Seller,
Shareholders, or Buyer at any time prior to Closing and shall survive Closing
for a period of eighteen (18) months, except that the representations and
warranties contained in Section 4.10 shall survive for the applicable statute of
limitations period, and the representations and warranties contained in sections
4.6, 4.16 and section 8.2 shall survive indefinitely.
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10.3 Limitations.
(a) Concerning actions by Buyer to recover damages for any default or
breach of contract (or for indemnification) under this Agreement:
(i) Buyer shall name Seller as a co-defendant with any Shareholder
defendants unless Seller then has been dissolved, either by action of the
Shareholders or by operation of law;
(ii) collection of any judgment for any such default, breach, or
indemnification shall first be recouped, offset against, and satisfied out
of that part of any balance then still owing on the Notes that becomes
payable within the twelve months immediately following entry of such
judgment, and
(iii) in no event shall any Shareholder's individual aggregate
liability for any such defaults, breaches, indemnifications, or judgments
exceed an amount equal to the Purchase Price as adjusted multiplied by such
Shareholder's percentage reflected on Exhibit 10.03.
(b) No Shareholder shall be held liable for a violation of his
Noncompetition Agreement solely because of another Shareholder's violation of a
Noncompetition Agreement.
10.4 Successors and Assigns. This Agreement and each provision hereof shall
be biding upon and inure to the benefit of the parties hereto and their
respective successors and assigns and may not be assigned without the prior
written consent of all parties hereto.
10.5 Indemnity Concerning Brokers. Buyer and Seller represent and warrant
each to the other that Dirks, Van Essen & Associates is the only broker
connected with this transaction, and Seller shall be solely responsible for, and
will indemnify, defend, and hold Buyer harmless from any and all commissions,
fees, expenses, or charges due and owing on account of services rendered to
Seller. Seller agrees to indemnify, defend, and save harmless Buyer from and
against each liability, cost, or expense, including attorneys' fees, that may be
asserted on account of any broker's commission or similar obligation or by
reason of any agreement made by Seller or Shareholders with any broker or
finder.
10.6 Additional Remedies. Without waiving or prejudicing and in addition to
and not to the exclusion of or in limitation of any other rights or remedies
available to Buyer hereunder, or otherwise, upon and for Seller's or
Shareholders' material default under or breach or prospective breach of any
covenant, agreement, term, condition, representation, or warranty contained in
this Agreement, at its sole election Buyer shall be
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entitled but not obligated to do each or any one or more of the following: (a)
to obtain specific performance or injunctive relief (since monetary damages will
not be sufficient to afford Buyer full compensation for any such breach or
breaches), or (b) to take any action including the making of any payment or
payments necessary to cure any such default or breach not cured before the
thirtieth (30th) day after receiving notice thereof from Buyer, or (c) to bring
an action to recover damages for such default or breach of contract (either with
or without an action for injunctive relief) and either (i) to enforce any
resulting judgment in favor of Buyer as permitted by law or (ii) to offset and
deduct the amount of any such judgment and the costs of any such action
(including, without limitation, interest on any such payment at the rate of ten
percentum per annum, and reasonable attorneys' fees), in whole or in part, (x)
from the Purchase Price, or (y) from any collections on Seller's accounts
receivable, or (z) from any payment thereafter due on the Purchase Price or one
or more of the Notes; provided, however, that such offset and deduction may and
shall not be taken until the amount thereof shall have been agreed upon by Buyer
and Seller or established by the judgment of a court of competent jurisdiction
in such action.
10.7 Amendment and Waiver. Except for a waiver by Buyer pursuant to Section
6., or by Seller pursuant to Section 9., no term or condition of this Agreement
may be amended or its observance waived (whether generally or in a particular
instance and whether retroactively or prospectively) except with and by Buyer's,
on the one hand, or Seller's and Shareholders' on the other hand, express
written consent. No other act, failure to act, or course of dealing by Buyer
shall be or constitute a waiver by Buyer.
10.8 Audits. At its sole expense, at any time within two (2) years
following Closing, after reasonable notice to Seller, Buyer may cause Seller's
books and records to be examined by auditors in order to produce audited
financial statements of Seller's affairs for up to three years preceding
Closing. Seller will cooperate with any such audit and auditors and will provide
to Buyer or its agents or representatives reasonable access to Seller's books,
records, and personnel for such purpose and will maintain and retain such books
and records in a reasonably orderly fashion for a period of at least three years
after Closing in order that such audit procedures may be performed.
10.9 Definitions. Wherever used in this Agreement or any instrument
incorporating such term or terms:
(a) the term "Liens" (singly, "Lien") shall mean and include each and
any liens, mortgages, security interests, pledges, title retention devices,
claims (legal or equitable, including, without limitation, liability to or
claims of any taxing authority, creditor, or other person), conditional
sale or other
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agreements, encumbrances, leases, trusts, options, servitudes, rights,
charges, assessments, consignments or bailments, reservations, exceptions,
encroachments, easements, rights-of-way, conditions, restrictions,
imperfections or deficiencies of title, or liabilities of any nature and
however arising [including those arising from violation of or noncompliance
with any law, ordinance, rule or regulation (including, without limitation,
municipal ordinances relating to zoning, occupancy, or use of real
property), whether recorded or unrecorded, choate or inchoate, or
appurtenant or non-appurtenant, and whether dependent on or independent of
possession, whether know or unknown, and whether now in existence or to
come into existence merely by the giving of notice or the lapse of time, or
both;
(b) the terms "knowledge", "know", or other similar phrases when used
in reference to Seller shall mean the actual knowledge without inquiry of
any of the officers, directors, or Shareholders of Seller and when used in
reference to Shareholders shall mean their actual knowledge without
inquiry; and
(c) each of the following terms shall have the meaning defined in the
paragraph of this Agreement identified below:
Term Paragraph
---- ---------
Accountants 2.2(h)
Accounts Receivable List 3.2(h)
Act 4.23
Affiliated Contracts 6.6
Agreement Preamble
Assumed Contracts 1.1(e)
Assumption Agreements 3.4
Buyer Preamble
Claim(s) 7.1
Closing 3.1
Closing Adjustments 2.2
Closing Date 3.1
Closing Escrow Account 2.2(g)
Closing Financials 2.2(b)
Collection Period 3.6
Contract(s) 4.17
Environmental Law(s) 4.19
Escrow Agents 2.2(g)
Excluded Property 1.2
Final Settlement 2.2(b)
Financial Statements 4.4
Glasser 3.4
Hazardous Material(s) 4.19
Indemnified Party 7.4
Indemnifying Party 7.4
Inventories 1.1(d)
30
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Lease 3.2(k)
Lien; Liens 10.9(a)
Names 1.1(g)
Noncompetition Agreement 3.2(g)
Noncompetition Agreements 6.7
Note(s) 2.1
Permitted Liens 4.6
Preliminary Adjustment 2.2(a)
Preliminary Financials 2.2(a)
Preliminary Settlement 2.2(a)
Property Sold 1.1
Purchase Price 2.1
Real Property 1.1(a)
Security Agreement 2.3
Seller Preamble
Seller's Counsel 3.2(d)
Shareholders Preamble
Shopping Guides Recitals
Statement 2.2(h)
10.10 Governing Law. This Agreement, its enforceability or interpretation,
and the legal relationships between Buyer, Seller, and Shareholders created
hereby shall be governed by and construed in accordance with the laws of the
State of Michigan, notwithstanding application of laws or choice of law
principles.
10.11 Headings. The headings of the Sections and paragraphs of this
Agreement are for convenience only and are not a substantive part hereof.
10.12 Entire Agreement. This Agreement, including its exhibits, contains
the entire understanding of the parties hereto with respect to the subject
matter hereof; there are no other representations and warranties made by any
party hereto other than as expressly set forth herein; no party hereto will rely
on any information, representation, or warranty except as expressly set forth
herein, and any and all prior understandings or agreements among Buyer, Seller,
and Shareholders (their agents, principals, or representatives) are merged into
this Agreement, which replaces and supersedes all prior memoranda,
understandings, representations, correspondence, agreements, conversations, and
negotiations concerning the subject matter hereof.
10.13 Counterparts. This Agreement may be executed in any number of
counterparts, and when Seller, Shareholders, and Buyer shall have executed at
least one such counterpart they shall constitute but one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused their signatures to be
hereunto appended and affixed by their duly authorized representatives as of the
day, month, and year first above written.
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Buyer:
UPPER MICHIGAN NEWSPAPERS, LLC
by: Upper Michigan Management, Inc.
its manager
by: /s/ ALAN R. BRILL
-------------------------
a duly authorized officer
Seller:
STAR PUBLICATIONS, INC.
by /s/ JAMES R. GLASSER
--------------------------------
a duly authorized officer
Shareholders:
/s/ GORDON G. EVERETT
-----------------------------------
Gordon G. Everett, Trustee
/s/ DANIEL F. WALSH
-----------------------------------
Daniel F. Walsh, Trustee
/s/ JAMES R. GLASSER
------------------------------------
James R. Glasser
/s/ DAVID BARAGREY
-----------------------------------
David Baragrey
/s/ MIKE ADAMS
-----------------------------------
Mike Adams
Escrow Agents:
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/s/ ALAN R. BRILL
-----------------------------------
Alan R. Brill
/s/ JAMES R. GLASSER
-----------------------------------
James R. Glasser
33
ASSETS PURCHASE AGREEMENT
This agreement (the "Agreement") is entered into this 23rd day of February
1998, by and among ADVERTISERS P.S., LLC., a Virginia limited liability company
("Buyer"), ADVERTISER'S POSTAL SERVICE CORP., a Michigan corporation ("Seller"),
with its principal office located at 1001 Dickerson Road, Gaylord, Michigan
49735, and Gordon G. Everett, trustee; Daniel F. Walsh, trustee; James R.
Glasser; August A. Tranquilla; Clara Tranquilla; Douglas C. Johnson, Sherry L.
Johnson, Mike Adams, and Ken Bradstreet (jointly and severally "Shareholders").
RECITALS
Seller owns and operates a distribution service located in Michigan.
Shareholders own all of the issued and outstanding shares of Seller's capital
stock. Buyer wishes to purchase from Seller, and Seller wishes to sell and
transfer to Buyer as an operating business, all, but not less than all, of
Seller's property and assets necessary, used, or useful for the operation, of
its business, all on the terms and subject to the conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of and relying upon the foregoing
recitals, each covenant, agreement, representation, and warranty set forth
herein, and each act done pursuant to this Agreement, Buyer, Seller, and
Shareholders agree as follows:
1. Purchase and Sale of Property and Assets.
1.1 Agreement to Purchase and to Sell. Upon and subject to compliance with
all terms and conditions of this Agreement, at Closing (hereinafter defined)
Buyer agrees to purchase from Seller, and Seller agrees to sell and deliver to
Buyer as herein provided, as an operating business, all right, title, and
interest in and to all, but not less than all, of the tangible and intangible
property, rights, and assets of Seller necessary, used, or useful for the
operation of Seller's business (jointly and severally the "Property Sold"),
excluding only the Excluded Property (hereinafter defined), and including the
following:
(a) all machinery, furniture, furnishings, and other equipment,
including all items of tangible personal property used to operate Seller's
business, including those briefly listed on Exhibit 1.01.1, and the spare
parts, repair parts, accessories, attachments, and appurtenances thereto
attached or appertaining and all replacements thereof and any improvements
or additions thereto prior to the Closing Date;
(b) all of Seller's business, employee, payroll, customer, contractor,
and distribution records, its files, studies, surveys, software, software
programs, computer printouts, data bases, and related items, and all other
documents, instruments, and
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records evidencing or pertaining to the Property Sold, in whole or in part;
(c) all of Seller's automobiles, vehicles, vans, trucks, trailers, and
other mobile equipment, including those listed on Exhibit 1.01.2;
(d) all of Seller's inventories, work in process, raw materials,
merchandise held for sale, distribution and other supplies, and similar
items ("Inventories") on hand as of the Closing Date;
(e) as and to the extent provided in assumption agreements executed by
Buyer at Closing pursuant to paragraph 3.4, all of Seller's rights in the
Contracts (hereinafter defined) listed on Exhibit 1.01.3 (such Contracts
collectively, the "Assumed Contracts");
(f) all of Seller's rights in, to, and under all franchises, licenses,
permits, and authorizations applicable to its business;
(g) all of Seller's general intangibles and evidences thereof,
including the exclusive right to use any copyrights, patents, patent
applications, servicemarks, trademarks, tradenames, or slogans now used or
owned by Seller or registered in its name;
(h) all other of Seller's interests in assets or property owned,
acquired, leased, or held for or used in Seller's operations, whether
tangible or intangible, and whether or not otherwise identified or
reflected herein or in the Financial Statements (hereinafter defined); and
(i) all property such as is described in (a) through (h) that is
hereafter acquired by Seller prior to Closing.
1.2 Excluded Property. The following ("Excluded Property") are not part of
the Property Sold and are not being sold to Buyer: Seller's (a) rights under
this Agreement, (b) cash on hand or in banks, cash items, cash equivalents,
deposits, deferred charges, marketable securities, the cash value of all life
insurance policies on the lives of any of the shareholders (or any of the
trustees thereof), checks and drafts, (c) prepaid expenses, accounts receivable,
refunds, rebates, advances, and notes receivable, (d) corporate stock records,
seal, and minute book, (e) all insurance policies, (f) tax records of Seller,
(g) such items of the Property Sold as may be disposed of by Seller before
Closing in the ordinary course of Seller's business, for value in accordance
with Seller's past practices, and not in violation of this Agreement, and (h)
all other current assets other than Inventories.
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2. Purchase Price.
2.1 The total purchase price for the Property Sold ("Purchase Price") shall
be One Million Fifty Thousand and No/100 Dollars ($1,050,000.00) adjusted as
required by paragraph 2.2, allocated in accordance with Exhibit 2.01, and
payable to Seller on Closing by Buyer by (a) cashiers check or wire transfer of
immediately available funds in the amount of Five Hundred Fifty Thousand and
No/100 Dollars ($550,000.00), which amount shall be adjusted before payment as
required by paragraph 2.2, and (b) delivery of Buyer's promissory notes (the
"Notes"; singly, a "Note") payable to Seller in the aggregate principal amount
of Five Hundred Thousand and No/100 Dollars ($500,000.00) bearing interest at
the rate of seven percentum (7%) per annum on any unpaid principal balance
thereof from Closing until paid, such Notes to be amortizable as if for a ten
(10) year term as therein provided for but to mature and be fully paid on or
before the sixth (6th) anniversary of the Closing Date, to be substantially in
the form and contain the substance of Exhibit 2.01.1, and to be secured by a
security interest in the Property Sold (free and clear of any lien created by
Buyer) substantially in the form and containing the substance of Exhibit 2.03.1.
2.2 Adjustments. Until Closing, operation and use of the Property Sold, and
any income or expenses attributable thereto, shall be for Seller's account. In
finally determining the Purchase Price, at Closing the amount of the Purchase
Price and the amount of cash Buyer is to pay at Closing shall be adjusted up or
down ("Closing Adjustments") as follows:
(a) at Closing there shall be a preliminary financial settlement by
Buyer and Seller to determine the Closing Adjustments (the "Preliminary
Adjustment"), which Preliminary Adjustment shall be based on the financial
statements and estimates of Seller (the "Preliminary Financials") then
reasonably available to approximate Buyer's and Seller's reasonable good
faith estimate of the Preliminary Adjustments as of such Closing Date (the
"Preliminary Settlement");
(b) within 60 days of the Closing Date and upon preparation of
satisfactory financial statements (the "Closing Financials") by which Buyer
and Seller can determine the actual Adjustments as of the Closing Date, a
final settlement of the Closing Adjustment will be determined and payment
made to either Buyer or Seller by the Escrow Agents (hereinafter defined)
in the amount of the difference of the Closing Adjustments determined in
this final settlement and in the Preliminary Settlement in order to reflect
the computation of and complete the full and final payment of the Purchase
Price (the "Final Settlement"). Final Settlement of the Closing Adjustments
as of the Closing Date (i) shall be based on calculations derived from the
financial results and financial condition of Seller's business reflected in
the Closing
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Financials of Seller for the period as of and ending on the Closing Date or
(ii), if the Closing Date is not the same date as the closing date for the
period most recently ended and preceding the Closing Date, then Final
Settlement shall be based on calculations derived from the financial
results and financial condition of Seller reflected in the Closing
Financials of Seller (a) for the period as of and ending most recently
prior to the Closing Date and (b) for the period next following as though
still owned by Seller. If determined under "(ii)" above, final Closing
Adjustments will be (x) derived from Closing Financials as though for and
as of the period ending prior to the Closing Date plus (y) the result of
the financial impact to Buyer and Seller of the Buyer realizing all benefit
of the sales of Seller (and ownership of resulting accounts receivable) for
the period beginning on the day next following the latest prior financial
statement date and continuing to the Closing Date, less (z) the expenses
assumed by Buyer with respect to such sales, "(y)" and "(z)" as determined
by the calculation process as follows: if not closing on the date of the
end of a normal reporting period or extending such period to correspond,
then Final Settlement will be partially determined by computing the Closing
Adjustments as though Closing had occurred at the end of the latest prior
reporting period. Sales of Buyer in the following reporting period from
that date to closing will be deemed to be sales that Buyer has purchased
and for which Buyer will pay Seller by further change to the Closing
Adjustments. Direct expenses, principally personnel and distribution
expenses, will be the responsibility of the party to which the
corresponding sales relate; that is with respect to personnel, Seller and
Buyer will each incur their own payroll expense for the period before and
after Closing respectively; and with respect to distribution, the
distribution expenses for each will correspond to the distribution dates on
which the revenue was earned. All other appropriate expenses for the
reporting period will be pooled and the pool split between Buyer and Seller
in the same proportion as their respective distribution dates in the
reporting period.
(c) all expenses applicable to Seller's business, including, without
limitation, employees' wages and other wage related expenses, or to all or
any part of the Property Sold, whether paid, prepaid, or accrued and
regardless of when assessed, determined, calculated, paid, or collected,
shall be Seller's sole responsibility for all periods ending with, upon, or
prior to Closing, and at and as of Closing shall be prorated between Buyer
and Seller and the amount of the Purchase Price and the amount of cash
Buyer is to pay at Closing adjusted accordingly so that Seller shall be
responsible for any and all of such expenses incurred or accrued for all
periods ending prior to or at Closing and so that Buyer shall be
responsible for business' expenses incurred or accrued thereafter;
(d) the amount of the Purchase Price and the amount of cash Buyer is
to pay at Closing also shall be reduced as
4
<PAGE>
appropriate, without duplication, by deducting therefrom (i) the amount of
any prepaid revenue theretofore received by Seller as of the Closing Date,
for goods or services to be delivered or rendered by Buyer after the
Closing Date, and (ii) the amount of any discount outside of the ordinary
course of Seller's business given by Seller for such payments theretofore
received by Seller. Buyer hereby assumes and agrees to timely perform
Seller's obligation to render the services or deliver the goods for which
adjustments are made pursuant to this subparagraph. To this end, Seller
shall prepare a statement at Closing that shall contain Seller's
description and calculation of the amount of each item described in this
subparagraph;
(e) if after Closing Buyer is to receive the benefit of any expenses
prepaid by Seller, the Purchase Price and the amount Buyer is required to
pay to Seller at Closing shall be increased by the amount of such prepaid
expenses, and such prepaid expense shall not be treated as Excluded
Property hereunder;
(f) the amount of the initial Purchase Price and the amount of cash
Buyer is to pay at Closing also shall be reduced by deducting therefrom (i)
the amount necessary to satisfy and cure each breach by Seller as of the
Closing Date of any representation, warranty, or covenant made by Seller in
this agreement and (ii) the amount necessary to discharge or cure each Lien
applicable to any part of the Property Sold as of the Closing Date, other
than Permitted Liens (hereinafter defined);
(g) from the amount of cash Buyer is to pay at Closing there also
shall be deducted $30,000.00, which, together with $30,000.00 in cash then
supplied by Buyer, Buyer and Seller shall pay into an escrow account (the
"Closing Escrow Account"), which shall be an account in the joint names of
Alan R. Brill and Seller's president (jointly the "Escrow Agents"; each of
whom has signed this Agreement as "Escrow Agents" solely for the purpose of
agreeing to act as such) in such bank or other checking institution as the
Escrow Agents shall select. The Closing Escrow Account shall be used to pay
final Closing Adjustments to the party entitled thereto as and to the
extent herein provided, and
(h) as soon after Closing as is reasonably practicable, but in no
event later than 60 days following Closing, Buyer's employees, under the
direction and supervision of Escrow Agents, shall prepare and provide to
each of Seller and Buyer a Statement (the "Statement") of the foregoing
Closing Adjustments. To the extent the Statement indicates a net increase
in the Purchase Price, Seller shall be entitled to receive from the Closing
Escrow Account, and the Escrow Agents shall immediately return to Seller
the $30,000 deposited by it in the Closing Escrow Account plus an
additional amount equal to the net increase in the Purchase Price. Any
amounts remaining in the Closing Escrow Account after such payments have
been made shall be immediately
5
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paid to Buyer. If such increase in the Purchase Price is in excess of
$30,000, then the Escrow Agents immediately shall pay to Seller all amounts
in the Closing Escrow Account, and Buyer immediately shall pay to Seller
the amount of such excess by cashiers check or wire transfer of immediately
available funds. To the extent the Statement indicates a net decrease in
the Purchase Price, Buyer shall be entitled to receive from the Closing
Escrow Account, and the Escrow Agents immediately shall return to Buyer the
$30,000 deposited by it in the Closing Escrow Account plus an additional
amount equal to the net decrease in the Purchase Price. Any amounts
remaining in the Closing Escrow Account after such payments have been made
shall be immediately paid to Seller. In the event such decrease in the
Purchase Price is in excess of $30,000, then the Escrow Agents shall
immediately pay to Buyer all amounts in the Closing Escrow Account, and
Seller immediately shall pay to Buyer the amount of such excess by cashiers
check or wire transfer of immediately available funds. If the Escrow Agent
cannot agree upon such final determination and payments, they shall retain
Ernst & Young, One IBM Plaza, Chicago, Illinois ("Accountants"), whose
costs and fees shall be borne equally by Seller and Buyer, to prepare a
report making such determination, which determination shall be final and
binding upon all parties.
2.3 Security. Subject to each Lien (hereinafter defined) then existing as
to any part of the Property Sold, at Closing Buyer shall duly execute and
deliver to Seller a security agreement in the form of Exhibit 2.03.1 ("Security
Agreement"), securing payment of the Note as and to the extent therein provided.
2.4 Preliminary and Closing Financials. Not less than seven (7) days before
the Closing Date, Seller will deliver to Buyer financial statements of Seller
("Preliminary Financials") sufficient for Buyer to make a tentative
determination of the Purchase Price and the Closing Adjustments prepared in
accordance with generally accepted accounting principles and practices applied
on a basis consistent with Seller's past practices, except that they shall be
prepared as if they were for a fiscal year of Seller then ending and normal
year-end adjusting entries had then been made. Such statements shall be
certified to Buyer by an appropriate officer of Seller as having been so
prepared and as fairly presenting Seller's then financial position and the
results of Seller's operations and the changes in its financial position as at
the end of and for the period then ended and for the twelve months and portion
of the fiscal year to the end of such month, as adjusted in compliance with this
paragraph. Immediately upon the later of (a) thirty (30) days after Closing, or
(b) ten (10) days after Buyer's receipt of financial statements of Seller
("Closing Financials") prepared and certified by Seller as at the end of and for
the normal reporting period ending either with or most nearly before or after
the Closing Date in the same manner as provided for the Preliminary Financials,
Buyer and Seller shall finally determine the final amount of the Closing
Adjustments required by
6
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paragraph 2.2 after a review and analysis of the Closing Financials and, if
necessary, of the books and records of Seller, and thereafter the parties shall
make final settlement of the Closing Adjustments. If the parties determine as a
result of such final settlement that one of the parties is entitled to receive a
payment from the other party for additional Closing Adjustments, then the amount
thereof shall be paid in cash first from the Closing Escrow Account, with any
unpaid balance to be paid thereafter by the obligated party. When all Closing
Adjustments have been determined and paid, any balance remaining in the Closing
Escrow Account shall be paid to the Seller. If after receipt of the Accountants'
report, and after exhausting the Closing Escrow Account, and after taking into
account the costs for having the report prepared, either Buyer or Seller is
entitled to receive more than Five Thousand ($5,000.00) in additional Closing
Adjustments from the other party, the other party promptly shall pay the amount
actually owed in cash to the party entitled thereto.
3. Closing.
3.1 Closing and Closing Date. Unless earlier terminated or postponed as
herein provided for, consummation of the sale and purchase contemplated by this
Agreement ("Closing") shall take place beginning at 10:00 o'clock a.m., local
time, on February, 1998 (or at such other time and place as Buyer and Seller
hereafter may agree upon in writing) (the "Closing Date") at the offices of
Seller in Gaylord, Michigan, and shall be effective as of 12:01 a.m. on
February, 1998.
3.2 Duties of Seller at Closing. At Closing and contemporaneously with
Buyer's performance of its obligations described in paragraph 3.3, Seller agrees
to, and at Seller's sole expense, shall tender and deliver to Buyer at 10:00
o'clock a.m., local time, on the Closing Date, in form and substance reasonably
satisfactory to Buyer and its counsel each of the following:
(a) such documents and duly executed instruments as shall be necessary
and appropriate to carry out the transactions contemplated by and the
intent of this Agreement, including, without limitation, and instruments of
conveyance, assignment, consent, or transfer sufficient to assign, convey,
transfer to, and vest in Buyer all right, title, and interest in and to
each item of the Property Sold free and clear of any and all Liens and
subject only to Permitted Liens;
(b) peaceful, exclusive, and unencumbered possession of the Property
Sold, subject only to Permitted Liens, in the same condition as at this
date, ordinary wear-and-tear excepted;
(c) a copy, certified by an appropriate officer of Seller as being
true and complete, of Seller's bylaws and articles
7
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of incorporation as then in effect and of necessary corporate proceedings
and resolutions heretofore duly adopted by Seller's board of directors and
Seller's Shareholders authorizing and approving Seller's execution and
delivery of this Agreement and consummation of the transactions
contemplated hereby;
(d) the legal opinion of Honigman, Miller, Schwartz and Cohn, 2290
First National Bank Bldg., 660 Woodward Avenue, Detroit, Michigan
48226-3583 ("Seller's Counsel") dated as of the Closing Date, substantially
in the form and substance of Exhibit 3.02;
(e) each financial statement, document, opinion, waiver, consent,
certificate, or instrument that Seller is required to deliver under this
Agreement;
(f) a copy of the Security Agreement dated as of the Closing Date and
duly executed by all parties thereto other than Buyer;
(g) a copy of a Noncompetition Agreement substantially in the form and
containing the substance of Exhibit 3.02.1 hereto (the "Noncompetition
Agreement") duly executed by each of the Shareholders;
(h) within five (5) days after the Closing Date, an aged (30, 60, 90
days, etc.) list of all accounts receivable of Seller as of the latest
period end at or prior to the Closing Date listing for each such account
the account name, address, amount due, due date of the oldest portion, and
date to which service has been provided ("Accounts Receivable List"), which
Accounts Receivable List shall be updated to the Closing Date, as
necessary, through the efforts of Buyer and Seller;
(i) a duly executed copy of each instrument of consent, waiver, or
approval described in paragraph 6.4 and of each instrument necessary or
effective to terminate as of the Closing Date each employee benefit plan
(if any) applicable to any of Seller's employees;
(j) the Assumption Agreements (hereinafter defined) duly executed by
each party thereto other than Buyer;
(k) a copy of a lease in the form and substance attached hereto as
Exhibit 3.02.2 (the "Lease"), duly executed by all parties other than
Buyer; and
(l) each other document opinion, waiver, consent, certificate,
statement, or instrument that this Agreement requires Seller to deliver.
8
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3.3 Duties of Buyer at Closing. At Closing, and contemporaneously with
Seller's performance of its obligations described in paragraph 3.2, Buyer agrees
to and at Buyer's sole expense shall tender and deliver to Seller in form and
substance reasonably satisfactory to Seller and Seller's Counsel, each of the
following:
(a) the Purchase Price, as adjusted, paid as herein agreed;
(b) a duly executed copy of the Security Agreement, dated as of the
Closing Date, together with such financing statements and other
documentation reasonably necessary to perfect Seller's security interest;
(c) the legal opinion of Thompson & McMullan, P.C., 100 Shockoe Slip,
Richmond, Virginia 23219, dated as of the Closing Date, substantially in
the form and containing the substance of Exhibit 3.03;
(d) the Noncompetition Agreement(s) duly executed by Buyer and all
parties thereto, together with proof of payment of any amounts therein
specified to be paid by Buyer at Closing;
(e) the Lease, duly executed by Buyer and all parties thereto;
(f) the Assumption Agreements duly executed by Buyer;
(g) a copy, certified by the managing member of Buyer as being true
and complete, of Buyer's articles of organization and operating agreement,
a certificate of good standing of Buyer, and a certified copy of the
resolutions of Buyer's member(s) approving and authorizing the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby; and
(h) each other document, opinion, waiver, consent, certificate,
statement, or instrument that this Agreement requires Buyer to deliver.
3.4 Certain Liabilities. On and after Closing, and as expressly set forth
in assumption instruments executed and delivered by Buyer at Closing (the
"Assumption Agreements"), Buyer will assume and agree to perform and discharge
in accordance with the terms thereof, all of Seller's obligations arising
subsequent to Closing under the Assumed Contracts that are listed and described
on Exhibit 1.01.3, true copies of which shall have been supplied to Buyer before
the Closing Date. Buyer assumes and shall be liable for no other liability of
Seller, contractual or otherwise, and Seller covenants and agrees with and for
the benefit
9
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of Buyer that Seller will perform and discharge all obligations of Seller
(contractual or otherwise) not expressly so assumed by Buyer in writing at
Closing, including, without limitation, any obligation for payment of Seller's
accounts payable. Without limiting the generality of the foregoing, Seller
agrees that Buyer is not, directly or indirectly, assuming or agreeing to assume
and shall not be liable for any liability or obligation of Seller to Seller's
employees, including without limitation any such liability or obligation in
respect of wages, salaries, bonuses, or accrued vacation, sick, or other pay,
except that Buyer hereby assumes and shall be responsible for payment of normal
earned vacation eligibility or unpaid vacation pay for each of Seller's
employees hired by Buyer for vacation earned within one year prior to the
Closing Date but not yet taken by any such hired employee as of the Closing Date
and the pro rata vacation earned between any such hired employee's last previous
anniversary date and the Closing Date, unpaid vacation pay of James R. Glasser
("Glasser") whether or not he is hired by Buyer, in the amount of One Thousand
Nine Hundred Thirty and 65/100 Dollars ($1,930.65). In the case of Glasser, such
amount shall be paid by Buyer to Glasser at Closing. All such unpaid vacation
pay and eligibility is described on the attached Exhibit 3.04.
3.5 Consents; Further Assurances. Seller shall obtain all material
agreements, consents, waivers, or approvals of third parties necessary or
appropriate for Closing or consummation of the transactions contemplated hereby.
After Closing, on Buyer's reasonable request and at Buyer's expense, at any time
or from time to time, Seller shall take or cause to be taken all such further
actions and shall execute, acknowledge, and deliver all such instruments as
reasonably may be required to memorialize or effectuate the transactions
occurring at Closing in order to ensure that Buyer receives and realizes all of
Seller's rights in the Property Sold as of Closing.
3.6 Collection of Accounts Receivable. At Closing, Seller will deliver
Seller's existing accounts receivable on the Accounts Receivable List. Such
Accounts Receivable List will be used by Buyer for purposes of collection only
for the period of one hundred twenty (120) days immediately following Closing
(the "Collection Period"). Acting as Seller's agent, during the Collection
Period Buyer shall have the exclusive right to and shall make commercially
reasonable efforts to collect Seller's accounts receivable listed on the
Accounts Receivable List, but shall not be required to expend or advance any of
its funds, to locate any debtor, or to institute or defend any suit, action,
claim, or counterclaim in any legal or equitable proceeding. Under no
circumstances shall Buyer be required to engage counsel or any outside
collection agency or facility in collecting Seller's accounts receivable.
Payments received on an account from any customer of Buyer that is an account
debtor for an account of Seller on the Accounts Receivable List shall be applied
first to
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the Seller's account on such list, unless such customer shall designate some
other application of such payment or shall contest the account receivable, in
which case Buyer shall promptly notify Seller of such designation or contest and
return to Seller the account relating to such customer and thereafter shall have
no further obligation with respect thereto. If Seller requests, Buyer also shall
promptly return to Seller any account of Seller that is over 90 days old, and
Buyer shall have no further obligation with respect to such account. Buyer shall
transmit all monies collected on Seller's accounts receivable to Seller within
fifteen (15) days after the end of each month in which such monies are
collected. Upon expiration of the Collection Period, Buyer shall be relieved of
all responsibility for, or to attempt collection of, Seller's accounts
receivable, and thereafter Seller alone shall be responsible for collection of
any balances due on such accounts. Within twenty (20) days after expiration of
the Collection Period, Buyer will make final payment to Seller of the amounts
collected on Seller's accounts and shall return to Seller each then uncollected
Seller's account together with a final statement of the accounts outstanding.
4. Seller's and Shareholders' Representations and Warranties.
To induce Buyer to enter into and perform pursuant to this Agreement,
Seller and Shareholders, jointly and severally, represent and warrant to Buyer
that each of the following is true:
4.1 Corporate Organization, Qualification, Authorization, etc. Seller is a
corporation duly incorporated, validly existing, and in good standing under the
laws of the state of its incorporation, has no subsidiaries, has all corporate
power and authority to conduct its business as it is now being conducted, to
own, possess, occupy, use, or operate the Property Sold and is duly qualified to
do business in any state where the nature of its business or properties requires
it to be so qualified. To Seller's knowledge, Seller has not violated and has
duly complied with all applicable laws, rules, and regulations relating to the
ownership and use of its properties and the conduct of its business and knows of
no law, rule, or regulation that will require a material, adverse change in the
use and enjoyment of the Property Sold or that will cause Buyer to incur any
material liability after Closing.
4.2 Seller's Property. Seller is the sole owner and publisher of the
Property Sold and has good and valid title to the Property Sold free and clear
of Liens other than Permitted Liens. To Seller's knowledge, Seller has the
exclusive right to use of the Names in each of counties where such Names are
registered.
4.3 Insurance. Seller has delivered to Buyer a list and brief description
of Seller's insurance policies.
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4.4 Financial Statements. Seller has furnished Buyer with the following
financial statements: Seller's (a) December 31, 1997/1996 financial statement
with additional information; (b) December 21, 1996, financial statement/balance
sheet, adjusted; (c) December 23, 1995, financial statement/balance sheet,
adjusted; (d) December 31, 1996/1995, financial statement/balance sheet with
supplementary information; and (e) December 31, 1995/1994, financial
statement/balance sheet with supplementary information (collectively, the
"Financial Statements"). Each book or record of Seller that has been or may be
exhibited to or examined by Buyer before Closing is and will be true, correct,
and complete. Except as otherwise expressly disclosed therein, each of the
Financial Statements was prepared in accordance with generally accepted
accounting principles and policies consistently applied throughout the periods
involved (except that the Seller provides pension benefits to retired officers
and records these benefits when paid), and, subject to any qualifications
therein expressly stated (and to normal year-end audit adjustments in the case
of interim financial statements), the Financial Statements fairly present
Seller's then financial position and the changes in financial position and
results of operations for the time periods covered and as at the times therein
indicated, and the revenues and accounts therein reflected arose from bona-fide
transactions in the ordinary course of Seller's business. Except as, and only to
the extent fully and fairly identified, separately disclosed, and properly
reflected or reserved against in the Financial Statements, Seller has received
no material items of extraordinary, non-recurring, or non-operating revenues or
income, and has no material debts, liabilities, or other obligations (including,
without limitation, obligations for federal, state, or local taxes or other
governmental assessments or penalties, and obligations for advances, directly or
indirectly, incurred or made to any affiliate or stockholder of Seller), direct
or indirect, absolute, contingent, or otherwise, due or to become due [other
than normal and usual forward obligations (other than for borrowed money)
incurred in the ordinary course of Seller's business] that do not in the
aggregate have a material, adverse effect on Seller, and there have been no
changes in the accounting principles, estimates, methods, or practices applied
in preparing the Financial Statements. Seller maintains such books and records
as are customarily kept under current business practices by businesses of
equivalent size and nature, and such books and records fully and fairly reflect
all of Seller's transactions. Seller will furnish Buyer with Seller's usual
interim operating statements and balance sheets for its business as of each
month-end (and as of and for each reporting period then ending) until Closing,
and each of these statements shall be correct and complete. The Financial
Statements include as revenues only those revenues arising from Seller's
operations conducted in the ordinary course and in a fashion consistent with
Seller's past practices and reflect all expenses incurred in the operations of
Seller for each period of time covered therein. See Rider 4.4 attached.
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4.5 Conduct of Business; Absence of Change. Since the date that is twelve
(12) months earlier than the date hereof, there has been: (i) no material,
adverse change in the condition (financial or otherwise) of Seller, or in
Seller's overall business, revenues, expenses, liabilities, financial condition,
properties, or operations, or to Seller's knowledge, in any laws, rules, or
regulations applicable thereto; (ii) no fire, explosion, storm, accident,
condemnation, damage, theft, destruction, fraud, or loss (whether or not covered
by insurance) materially affecting Seller's business or any part of the Property
Sold; and (iii) to Seller's knowledge, no other occurrence, event, condition,
change in condition, or state of facts that affected, affects, or may affect
Seller, Seller's business, or any part of the Property Sold in any material,
adverse manner.
4.6 Title to Property Sold. Except as otherwise expressly disclosed and
described in Exhibit 4.06 as permitted liens ("Permitted Liens") and except for
property leased by Seller pursuant to leases disclosed to Buyer, Seller is the
sole owner of and has, and at Closing will convey and transfer to Buyer, good,
valid, and marketable title to and all rights in (and the right to immediate,
exclusive, peaceful, and unencumbered possession of) the Property Sold free and
clear of any and all Liens except any then existing Permitted Liens, and
Seller's said title is warranted against the claims of any and all persons. The
Property Sold and the Excluded Property include all property used by Seller in
the operation of its business to produce the revenues reflected in the
Preliminary Financials and to be reflected in the Closing Financials.
4.7 Absence of Certain Actions. Since the date hereof Seller has not taken
any action described in paragraph 5.2 of this Agreement, and Seller and
Shareholders have complied with each applicable term, covenant, agreement, and
condition of this Agreement.
4.8 Claims or Litigation. There are not pending or, to Seller's knowledge,
any basis for or threatened, any suits, actions, proceedings, charges, claims,
disputes, investigations, or inquiries, against, or relating to, or that might
result, singly or in the aggregate, in any material, adverse change in the
operations or condition of Seller, the Property Sold, Seller's business, or any
part or parts thereof, and nothing restrains or prohibits or seeks to restrain
or prohibit consummation of the transactions contemplated hereby or questions
the legality, validity, or enforceability of this Agreement or any action taken
or to be taken pursuant hereto or in connection with the transactions
contemplated hereby; to Seller's knowledge, Seller has at all times complied in
all material respects with all applicable laws, ordinances, rules, and
regulations (including those relating to zoning and use of the Property Sold),
and Seller knows of no violation of any law, ordinance, rule, or regulation by
Seller or by any of its officers,
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directors, agents, servants, or employees, and there are no material
injunctions, judgments, orders, or decrees outstanding or being sought against
Seller, any part of the Property Sold, or any of Seller's products or services.
4.9 Licenses and Permits. Seller has all franchises, licenses,
certificates, and permits needed to possess, own, lease, use, or occupy the
Property Sold and to conduct Seller's present business; each is in full force
and effect, and no action is pending or, to Seller's knowledge, threatened
looking toward any amendment, revocation, or limitation thereof.
4.10 Tax Matters. Seller has properly filed in correct form with
appropriate governmental agencies all tax returns required to be filed by it;
all taxes due and payable by Seller have been properly reported, determined, and
paid, and Seller has no liability for payment of any unpaid tax or penalty. No
waiver of any statute of limitations has been given by Seller, and there are no
agreements or applications by Seller for any extension of time for the
assessment or payment of any tax. Except for title and transfer charges for
transferring title to Seller's vehicles, Seller has paid or shall pay any and
all taxes (excluding all sales or use taxes) arising out of or becoming due or
payable because of Closing or the purchase and sale of the Property Sold as
contemplated hereby and all taxes and assessments levied against Seller, or the
Property Sold with reference to or arising out of events occurring prior to
Closing. If requested by Seller, Buyer will furnish Seller with Buyer's employer
identification number and a certification that Buyer is purchasing the
Inventories for resale.
4.11 Condition of Property Sold. Except as disclosed on Exhibit 4.011, each
tangible item of the Property Sold is in good and proper operating condition and
repair and to Seller's knowledge free of defects (ordinary wear-and-tear
excepted).
4.12 Execution, Validity. This Agreement is lawful and has been duly
executed and delivered by Seller and each of Shareholders, which execution and
delivery by Seller was duly and validly authorized by all necessary corporate
action by Seller and its Shareholders, and this Agreement constitutes a legal,
valid, and binding agreement of Seller and each of Shareholders enforceable
against Seller and each of Shareholders in accordance with its terms. Each of
Shareholders executing this Agreement as a trustee or other fiduciary has all
requisite power and authority to enter into and perform this Agreement as so
agreed.
4.13 Employee Status. Seller has delivered to Buyer an accurate and
complete copy of Seller's current payroll roster showing the name and address of
each person entitled to receive compensation from Seller for services as an
employee of Seller and for each: his or her job title and description, nature of
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compensation (salary, wages, and/or commissions), current rate of compensation,
bonus to which entitled during the current year, or, if none, the amount of
bonus paid during the last year, each vacation period (with pay) to which
entitled during this calendar year, and each fringe benefit or other significant
arrangement with respect to such person's employment by Seller. Immediately
prior to the Closing Date Seller will deliver to Buyer a then current version of
each such payroll roster. Within the last six months there have been no
significant increases other than increases consistent with Seller's past
practices in the salaries payable to Seller's employees, and no commitments or
agreements have been made, or are anticipated relating to employees' salaries or
compensation, except that each of Seller's employees will receive a bonus based
upon a percentage of their annual compensation multiplied by the number of years
employed by Seller. Except for vacation pay to certain employees assumed by
Buyer as provided in paragraph 3.4, within ten days after Closing each of
Seller's employees will have been paid all wages, salaries, commissions,
severance pay, vacation pay, sick leave, or other pay, benefits, or entitlements
earned or accrued by or for each such employee as of, prior to, or as a result
of Closing. Seller knows of no plan by any employee of Seller to refuse later
employment with Buyer (if such employment is offered on the same or similar
terms) that has not been disclosed to Buyer.
4.14 Operating Agreements; Working Conditions. Except as disclosed to
Buyer, Seller has no written or oral contract, express or implied, with any of
its executives or other employees, is not a party to any contract with a labor
organization or to any collective bargaining agreement covering or relating to
any employee(s) and has not recognized, is not required to recognize, and has
received no petition or demand for election or recognition of, a collective
bargaining representative or agent for any of its employees. Seller is not
affected by any present or, to Seller's knowledge, threatened strike or other
labor dispute or disturbance, has complied in all material respects with all
applicable laws, rules and regulations relating to conditions for employment or
discharge of its employees, including those relating to wages, hours,
discrimination, occupational safety and health, collective bargaining, and the
withholding and payment of taxes and contributions, has withheld all amounts
required by law or agreement to be withheld from the wages or salaries of its
employees, and is not liable for any arrearages of wages or for any tax or
penalty for any failure to comply with such laws, rules, or regulations. There
are no material controversies pending or to Seller's knowledge threatened
between Seller and any employees or any labor union.
4.15 Benefit Plans. Seller maintains certain employee benefit plans for the
benefit of its employees. Buyer shall have and incur no funding or other
obligation or liability in connection with any such plans, their funding or
termination, or any
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withdrawal therefrom, in whole or in part. Seller shall be responsible for
compliance with Code Section 4980B as applied to its current and former
employees and to those employees who experience a qualifying even as a result of
this transaction.
4.16 Authorization for Agreement. Seller has full power and authority to
execute, perform, and deliver this Agreement and to consummate the transactions
contemplated hereby. Seller's execution of, delivery of, performance of,
compliance with, and Closing of this Agreement have been duly and validly
authorized by all necessary corporate action and will not (a) constitute or
result in a breach of (or default under) any term, condition, or provision of
(or result in the creation of any Lien, charge, or encumbrance upon any of the
Property Sold pursuant to) any of the Contracts (hereinafter defined), any
articles of incorporation, bylaw, contract, mortgage, lien, indenture, lease,
agreement, commitment, arrangement or understanding, or any other instrument to
which Seller is a party or by or to which it or any of the Property Sold is
bound or subject, (b) to Seller's knowledge violate any statute, law, ordinance,
rule, regulation, judgment, or order binding upon or applicable to Seller or the
Property Sold, in whole or in part, (c) to Seller's knowledge expose Seller or
Buyer to any liability or penalty under any law, (d) result in any loss to or
restriction upon the use of any of the Property Sold, (e) to Seller's knowledge
adversely affect the validity, continuation, or effectiveness of any permit,
license, franchise, or right enjoyed by Seller, (f) give any party to any of the
Contracts, or any other agreement to which Seller is a party, any right of
cancellation or termination, or (g) give anyone any right to accelerate the
maturity of any indebtedness for which Seller is a direct or indirect, or
primary or secondary, obligor, or to claim any fraud, default, or breach with
respect to anyone or any such indebtedness. This Agreement and its execution by
Seller have been duly approved by a vote of Seller's Shareholders.
4.17 Agreements, Contracts, Leases, etc. Exhibit 4.017 contains an accurate
and complete list and brief description of each material agreement, obligation,
contract, and commitment (oral or written, express or implied) to which Seller
is a party, or by which it is bound, or by which the Property Sold is bound
(including all of Seller's delivery, advertising, or printing contracts, if any)
["Contract(s)"], and an accurate and complete copy or statement of the terms of
each such Contract has been or will be forthwith supplied to Buyer. Except as so
listed and described in Exhibit 4.017, Seller is not a party to any other
material contract, obligation, or agreement (oral or written, express or
implied), including, without limitation, any (i) bonus, retirement,
deferred-compensation, pension, profit-sharing, stock option, hospitalization,
or employee stock purchase or retirement agreement, policy, or plan, or other
employee benefit plan; (ii) agreement with any employee; (iii) agreement of
guarantee or indemnification; (iv) loan or credit agreement; (v) employment
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contract; (vi) lease to or for any material property, real or personal; (vii)
material sales or advertising agency contract; (viii) contract or commitment
under which there is an obligation on any party thereto to pay more than
$5,000.00; (ix) service or commission contract for a period in excess of thirty
(30) days; or (x) any agreement or commitment containing a covenant limiting
Seller's freedom to compete with any person or to engage in any line of
business. Each Contract is in full force and effect, legal, valid, binding, and
enforceable in accordance with its terms; Seller has not defaulted as to or
breached, nor has it received notice of any claim or assertion that it has
defaulted as to or breached, any term or condition of any Contract or of any
other agreement, obligation, contract, lease, or commitment applicable to it,
and no event has occurred that with notice or the lapse of time, or both, would
constitute such a breach or default. Seller's rights under each Contract are
assignable to Buyer, and Seller now knows of no term, condition, or provision
of, or event affecting, any Contract, Lease, or other agreement, contract,
lease, obligation, or commitment that might affect the validity, continuation,
or effectiveness thereof upon assignment to Buyer, or that might prevent Buyer
from realizing Seller's present rights and benefits to accrue thereunder in due
course after Closing.
4.18 Environmental Matters. To Seller's knowledge, no part of the Property
Sold ever has been used in violation of any applicable Environmental Law to
generate, manufacture, refine, transport, release, treat, store, handle, or
dispose of any hazardous, industrial, toxic, or harmful substances, wastes, or
materials (e.g. asbestos, urea formaldehyde, polychlorinated biphenyls, or other
waste exhibiting hazardous characteristics) or any substance or element the
generation, release, storage, use, or handling of which is prohibited or
regulated (singly, a "Hazardous Material"; collectively, "Hazardous Materials")
by or pursuant to any law, rule, or regulation (federal, state, or local)
regarding, in whole or in part, (a) health or safety, or (b) the effect of
Hazardous Materials on land, water, air, or the environment (e.g. the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended; 42 U.S.C.; ss. 6.01 et seq.; the Resource Conservation and Recovery
Act; or similar acts), or (c) the use, transport, handling, storage, treatment,
release, or disposal of any such Hazardous Materials (singly, an "Environmental
Law," collectively, the "Environmental Laws"). To Seller's knowledge, Seller
always has materially complied with each and all such Environmental Laws. To
Seller's knowledge, no event has occurred at the Property Sold and no condition
now exists at or affects any part of the Property Sold that is likely to result
in any material complaint, notice, citation, action, proceeding, or
investigation before any governmental authority in connection with any Hazardous
Material or any Environmental Law or the violation thereof, or any claim against
or liability of Seller or Buyer to any authority, person, or persons arising out
of or based on any Environmental Law or the breach or enforcement thereof.
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4.19 Statements, Etc., True and Not Misleading. No representation or
warranty made by Seller or the Shareholders in this Agreement contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact necessary in order to make the statements contained herein or
therein not misleading in the circumstances.
4.20 Conveyances, Etc. When executed and delivered to Buyer at Closing,
each instrument of conveyance, assignment, consent, or transfer will constitute
the legal, valid, and binding obligation of the parties thereto, and such
instruments will be effective to vest in Buyer, and as of Closing Buyer will
thereby receive and become the sole, vested owner of all right, title, and
interest in and to the Property Sold, subject only to any then existing
Permitted Liens.
4.21 Investment. On Closing Seller will take the Notes for its own account,
for investment purposes only, and not with a view or intention to distribute or
otherwise dispose of all or any part thereof. Seller understands that the Notes
are to be issued without registration under any "blue sky" law and pursuant to
an exemption from registration under provisions of the Securities Act of 1993 as
amended (the "Act") and that Seller may not hypothecate or otherwise transfer or
dispose of any Note except upon registration under the Act, unless an exemption
from registration provisions of the Act is available. Before transferring or
disposing of any Note in a transaction Seller believes to be so exempt from
registration Seller will give Buyer notice of such proposed disposition
accompanied by an opinion of counsel satisfactory to Buyer in all respects to
the effect that an exemption from registration under the Act is available with
respect to the proposed disposition, and any new note issued by Buyer under such
circumstances shall bear a legend similar in form and substance to that
appearing on Exhibit 2.01.1. Seller is aware that Buyer is a newly formed
company with limited capital and no previous financial or operating history,
that for the foreseeable future payment of the Notes probably will be derived
solely from Buyer's use of the Property Sold. Seller is able to bear the
economic risk of holding the Note for an indefinite period and has received or
had free access to all necessary information, financial or otherwise, concerning
Buyer.
5. CONDUCT PRIOR TO CLOSING.
Seller covenants and agrees that from the date hereof and until Closing:
5.1 Conduct of Business. Seller will operate and conduct its business only
in the ordinary course of business, in accordance with Seller's customary
policies and practices, in material compliance with all applicable laws, rules,
and regulations, and substantially in the same manner as heretofore and
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will use its reasonable efforts to discharge and satisfy all of its obligations
in due course, to preserve Seller's present business organization intact, to
preserve Seller's business reputation, to keep available the services of
Seller's present officers, agents, and employees, to prevent any material,
adverse change in Seller, Seller's business, or any part of the Property Sold,
and to preserve Seller's present customers and present relationships with those
having business dealings with Seller. Seller will take reasonable actions so
that each condition of Section 6. of this Agreement will be satisfied as of the
Closing Date, will maintain in full force and effect all franchises, licenses,
and permits held by it, and will maintain the Property Sold in the same repair,
order, and condition as at the date hereof, ordinary wear-and-tear excepted.
5.2 Restricted Activities and Transactions. From the date hereof, until
Closing, except as may otherwise be permitted or required hereby, without
Buyer's prior consent expressly identifying and referring to this paragraph 5.2,
which consent shall not be unreasonably withheld or delayed, Seller will not
directly or indirectly do or agree to do, and within the past forty-five (45)
days Seller directly or indirectly has not done or agreed to do, any one or more
of the following:
(a) encumber, mortgage, pledge, or subject the Property Sold or any
part thereof to any Lien, security interest, charge, or encumbrance;
(b) grant, agree to, offer, or pay any kickback, discount, incentive
payment, commission, or promotional or other allowance to any person, or
sell or agree to sell or otherwise dispose of any part of the Property Sold
in each case other than sales for value, at usual rates, and in the
ordinary and normal course of business;
(c) agree to terminate, amend, restrict, extend, or waive any material
right under or materially affecting any Contract or the value of all or any
material part of the Property Sold;
(d) conduct its business other than in the normal and usual manner in
the ordinary course, or other than in material compliance with all
applicable laws, rules, and regulations of all local, state, and federal
authorities, entities, and agencies;
(e) vary materially from the charges for its services currently being
charged and received by Seller;
(f) except as disclosed to Buyer, pay, paid, or agreed to pay, any
bonus to any person, or make or agree to make any material change in the
compensation payable or to become payable to any employee or agent of
Seller;
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(g) enter into any employment contract or lease; or
(h) except as disclosed to Buyer, enter into any contract or other
commitment binding upon Seller for a period of more than thirty (30) days
or other than in the ordinary course of business.
5.3 Full Access. At reasonable times during normal business hours after
notice from Buyer, Seller will afford Buyer, or Buyer's representatives, agents,
attorneys, employees, or accountants, full access to Seller's premises, the
Property Sold, and all facilities, equipment, offices, properties, books, and
records relating thereto in order that Buyer may cause to be made desired
investigations of Seller's affairs or necessary copies of its records, and will
cause Seller's officers to furnish Buyer with such information concerning
Seller's business and the Property Sold as Buyer reasonably may request.
5.4 Reports; Taxes; Etc. Seller will properly and timely file all reports
or returns it is required to file with federal, state, foreign, local, or other
authorities (including taxing authorities) and will pay all required taxes,
charges, and assessments as required in due course, and on or before the Closing
Date Seller will pay all required taxes, charges, or assessments due and payable
by Seller on or before the Closing Date.
5.5 Waiver of Bulk Sales Compliance. Buyer and Seller each waives
compliance with the provisions of applicable statutes relating to bulk transfers
or bulk sales. Seller and Shareholders agree to indemnify Buyer from any loss,
costs, or damage arising out of such waiver.
5.6 Termination of Plans. At its sole expense, and without any liability to
Buyer, Seller shall terminate or cause to be terminated each pension, profit
sharing, or other employee benefit plan applicable to Seller's employees, all in
accordance with the provisions thereof and applicable laws, rules, and
regulations and shall satisfy and discharge each withdrawal, termination, or
other liability thereunder.
5.7 Notice of Breach or Change. Seller will promptly notify Buyer if Seller
believes or realizes that Seller will be unable to comply with or satisfy any
condition of Section 6.
5.8 Taxes. Buyer will pay all title and transfer charges for transferring
title to Seller's vehicles and all sales or use taxes arising out of or becoming
due and payable because of Closing or the purchase and sale of the Property Sold
as contemplated hereby.
6. CONDITIONS TO BUYER'S OBLIGATIONS:
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As conditions precedent for the sole benefit of Buyer, which Buyer may
waive only by and to the extent of its express written waiver given hereafter,
Closing and each obligation of Buyer under this Agreement shall be subject to
and conditioned upon Buyer being satisfied, on or before and as of Closing, of
each of the following:
6.1 Compliance with Agreement; No Prohibition. Each material term,
covenant, agreement, and condition of this Agreement to be complied with or
performed by Seller or Shareholders until, at, or prior to Closing shall have
been complied with or performed in all material respects, or waived by Buyer,
this Agreement shall not have been terminated by Buyer as permitted hereby, and
nothing then shall (and no action shall have been commenced seeking to)
restrain, inhibit, penalize, or prohibit Closing or the conduct of Seller's
business by Buyer after Closing as contemplated hereby.
6.2 Representations and Warranties. Unless waived, each of Seller's
representations and warranties contained herein shall in all material respects
have been true and correct when made, shall be deemed to be made again at and as
of Closing, and then shall be in all material respects true and correct.
6.3 Delivery. Buyer shall not have terminated this Agreement as permitted
hereby, and Seller shall have delivered to Buyer each item described in
paragraph 3.2.
6.4 Approvals and Consents. All material agreements, consents, waivers, or
approvals of each public authority or other person or entity, natural or
corporate, public or private, necessary or appropriate for Closing or for
consummation of the transactions contemplated hereby without diminution, loss,
termination, or restriction of any material right of Seller shall have been
obtained from such parties in such form and substance as is reasonably
satisfactory to Buyer, and copies thereof delivered to Buyer. If necessary and
requested by Buyer, the other parties to any material agreements to which Seller
is a party shall have consented to Closing.
6.5 Contracts. Seller shall have assigned, set over, and transferred to
Buyer all of its right, title, and interest in each Assumed Contract identified
on Exhibit 1.01.3 in a form reasonably satisfactory to Buyer's counsel and at
Closing shall have delivered to Buyer peaceful possession of the Property Sold.
6.6 Other Contracts. On or before Closing hereunder, Closing (as therein
defined) shall occur or have occurred as to each of the following contracts
("Affiliated Contracts"), including the execution of each of the noncompetition
agreements associated therewith (jointly and severally with the Noncompetition
Agreement, the "Noncompetition Agreements"): Upper Michigan Newspapers, LLC
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and Star Publications, Inc., and Central P.S., LLC and Central Printing
Corporation.
6.7 Inventories. As of Closing, Seller's Inventories shall be at usual and
normal levels and sufficient to satisfy Buyer's needs for at least 45 days
following Closing.
6.8 Liabilities Current. As of Closing each of Seller's liabilities
(including all current liabilities, long term debt, and lease obligations) shall
be current, not in default, and not past due.
7. INDEMNIFICATION AND RISK OF LOSS:
7.1 Indemnity of Buyer. Subject to the limitations of paragraph 7.3, Seller
and Shareholders, jointly and severally, agree to indemnify, defend, and hold
Buyer, its owners, officers, agents, representatives, successors and assigns,
jointly and severally, harmless from and against each, any, and all actions,
suits, causes of action, losses, costs, claims, assessments, damages, response
costs, liabilities, fines, funding or termination liabilities, judgments, and
expenses (singly, a "Claim", collectively, the "Claims") asserted by a third
party or parties against each, any, or all of them arising from, based upon, or
on account of, in whole or in part, each, any one or more, or all of the
following, whenever occurring: (i) any breach, failure to perform, or
non-fulfillment by Seller or Shareholders of any covenant, agreement, term,
condition, certificate, representation, or warranty contained in this Agreement
or in any document delivered, or caused to be delivered to Buyer by Seller or
the Shareholders, (ii) any untruth, misrepresentation, omission, or inaccuracy
with respect to or contained in any such covenant, agreement, certificate,
representation, or warranty, including any statement or figure contained in any
of the Financial Statements, (iii) any violation of any law, rule, or regulation
(or any act or failure to act) by Seller or any one or more of its officers,
directors, agents, servants, or employees (or by others for whom Seller is
responsible), (iv) any agreement made by, Claim against, or asserted liability
of Seller, other than those expressly assumed by Buyer at Closing pursuant to
paragraph 3.4, (v) the conduct of Seller's business or Seller's ownership, use,
or operation of the the Property Sold, or any part or parts thereof, (vi) any
payment received by Seller, directly or indirectly, (vii) any failure by Seller
to comply with the laws of the state of Seller's domicile relating to or
applicable to the sale of Seller's assets contemplated hereby, or (viii) any
Lien as to all or any part of the Property Sold, other than a Permitted Lien;
provided, however, that the obligation to indemnify hereunder shall in no event
exceed, in the aggregate, the amount of the Purchase Price. As to each Claim,
the obligations arising hereunder shall include, but
22
<PAGE>
not be limited to, an obligation to pay to or for Buyer all costs incurred in
investigating, defending, or settling such Claim (including all reasonable
attorneys' or experts' fees).
7.2 Indemnity of Seller. Subject to the limitations of paragraph 7.3, Buyer
agrees to indemnify, defend and hold Seller and each Shareholder harmless from
and against each, any, and all Claims asserted by a third party or parties
against Seller or any Shareholder arising from, based upon, or on account of any
breach, failure to perform, or non-fulfillment by Buyer of any covenant,
agreement, term, condition, certificate, representation, or warranty contained
in this Agreement; provided, however, that the obligation to indemnify hereunder
shall in no event exceed, in the aggregate, the amount of the Purchase Price. As
to each Claim, the obligations arising hereunder shall include but not be
limited to an obligation to pay to or for Seller and Shareholders all costs
incurred in investigating, defending, or settling such Claim (including all
reasonable attorneys' or experts' fees).
7.3 Limitations. The right to indemnification under Section 7.1 or Section
7.2 is subject to the following limitation: no party shall be entitled to
indemnification until the aggregate amount of all Claims that would be
indemnifiable for such party but for application of this Section 7.3 exceeds
Thirty Thousand and no/100 Dollars ($30,000), whereupon such party shall become
entitled to indemnification for all such Claims. In addition, Seller's and
Shareholders' obligation to indemnify shall be net of the effect of any tax
benefit realized by Buyer arising from such Claims, and the aggregate amount of
all Claims for which Seller and Shareholders shall be held liable shall not
exceed the Purchase Price as adjusted.
7.4 Conditions of Indemnification. The obligation to indemnify any party
(the "Indemnified Party") with respect to each Claim shall be subject to the
following terms and conditions: (a) the Indemnified Party will give prompt
notice of any such Claim to the other party(ies) hereto (the "Indemnifying
Party"), and the Indemnifying Party (or any of them) shall have the right to
undertake the defense thereof and compromise and settle such Claim at the
Indemnifying Party's expense using counsel chosen by the Indemnifying Party; and
(b) if within forty-five (45) days after receipt of notice of any such Claim,
the Indemnifying Party shall fail to assume the defense thereof, the Indemnified
Party shall (after notice to the Indemnifying Party) have the right to undertake
the defense of such Claim, subject to the right of the Indemnifying Party to
assume the defense of such Claim at any time prior to final resolution thereof
upon the prior payment to the Indemnified Party of all attorneys' and experts'
fees theretofore expended by the Indemnified Party in defense of such Claim.
7.5 Investigation. Seller and Shareholders acknowledge and agree that,
notwithstanding any right of Buyer fully to
23
<PAGE>
investigate the affairs of Seller and notwithstanding any knowledge of facts
determined or determinable by Buyer pursuant to any such investigation, Buyer
has the right to rely upon the representations, warranties, covenants, and
agreements of Seller and Shareholders contained in this Agreement, and
regardless of any knowledge or facts determined or determinable by such an
investigation, such representations, warranties, covenants, and agreements, and
Buyer's right to rely, and its reliance thereon, shall not be affected in any
way by any such knowledge or investigation.
7.6 Risk of Loss. The risk of destruction of or loss or damage to any part
of the Property Sold arising from any actual or proposed condemnation or taking
of any part of the Property Sold by governmental authority or by exercise of the
power of eminent domain, or from any fire, explosion, riot, flood, war, or other
cause shall remain with Seller until Closing. If Seller becomes aware of any
such actual or potential taking, loss, damage, or destruction, Seller will
promptly notify Buyer of all particulars thereof and will cause any such
affected property to be replaced or to be repaired and restored to its condition
existing prior to such loss, damage, or destruction, at Seller's expense. If
such damaged property is not completely replaced or repaired and restored to its
former condition before Closing then Buyer at its sole option may: (a) by notice
to Seller postpone the Closing Date until such time as the property shall have
been completely replaced or repaired and restored, or (b) by notice to Seller
abandon and terminate this Agreement and all obligations of Buyer hereunder, or
(c) effect Closing on the Closing Date as initially established, in which event
(i) Seller shall assign to Buyer all then unexpended proceeds of insurance
received or to be received by Seller with respect to the Property Sold, and (ii)
Buyer and Seller shall agree upon an appropriate reduction in the Purchase Price
reflecting any then existing uninsured loss, damage, or destruction to the
Property Sold.
8. BUYER'S REPRESENTATIONS AND WARRANTIES.
To induce Seller to enter into and perform pursuant to this Agreement,
Buyer represents and warrants to Seller that each of the following is true:
8.1 Organization. Buyer is a limited liability company duly organized,
validly existing, and in good standing under the laws of the Commonwealth of
Virginia and has full legal power and authority to conduct its business as it is
now being conducted and to own its properties and assets.
8.2 Authorization for Agreement. Buyer's execution and delivery of this
Agreement have been duly and validly authorized by all necessary legal action on
the part of Buyer, and, relying on Seller's and Shareholders' representations
and warranties herein,
24
<PAGE>
this Agreement constitutes a legal, valid, and binding obligation of Buyer. As
of Closing execution and delivery of the Note, the Security Agreement, and the
Noncompetition Agreements will have been duly authorized by all necessary legal
action on the part of Buyer, and when executed and delivered each will
constitute a valid and binding obligation of Buyer. Buyer's execution of,
delivery of, performance of, compliance with, and Closing of this Agreement will
not (a) constitute or result in a breach of (or default under) any term,
condition, or provision of any articles of incorporation, bylaw, contract,
mortgage, lien, indenture, lease, agreement, commitment, arrangement or
understanding, or any other instrument to which Buyer is a party or by or to
which it or any of the Buyer's property is bound or subject, (b) to Buyer's
knowledge violate any statute, law, ordinance, rule, regulation, judgment, or
order binding upon or applicable to Buyer, in whole or in part, (c) to Buyer's
knowledge expose Seller or Buyer to any liability or penalty under any law, (d)
to Buyer's knowledge adversely affect the validity, continuation, or
effectiveness of any permit, license, franchise, or right enjoyed by Buyer, (e)
give any party to any contract, or any other agreement to which Buyer is a
party, any right of cancellation or termination, or (g) give anyone any right to
accelerate the maturity of any indebtedness for which Buyer is a direct or
indirect, or primary or secondary, obligor, or to claim any fraud, default, or
breach with respect to anyone or any such indebtedness.
8.3 Execution, Validity. This Agreement is lawful and has been duly
executed and delivered by Buyer, which execution and delivery by Buyer was duly
and validly authorized by all necessary company action by Buyer and its members,
and this Agreement constitutes a legal, valid, and binding agreement of Buyer
enforceable against Buyer in accordance with its terms.
8.4 Litigation. Buyer is not a party to any pending or threatened
litigation or proceeding that affects in any material, adverse manner Buyer's
power, authority, or ability to effect Closing.
8.5 Compliance. Buyer has complied with each applicable term, covenant,
agreement, and condition of this Agreement.
9. CONDITIONS TO SELLER'S OBLIGATIONS:
As conditions precedent for the sole benefit of Seller, which Seller may
waive only by and to the extent of its express written waiver given hereafter,
Closing and each obligation of Seller under this Agreement shall be subject to
and conditioned upon Seller being satisfied, on or before and as of Closing, of
each of the following:
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9.1 Representations and Warranties. Unless waived, each of Buyer's
representations and warranties contained here in Section 8. shall be in all
material respects true and correct when made, shall be deemed to be made again
at and as of Closing, and they shall be in all material respects true and
correct as of Closing. Each material term, covenant, agreement, and condition of
this Agreement to be complied with or performed by Buyer until, at, or prior to
Closing shall have been complied with or performed in all material respects, or
waived by Seller, this Agreement shall not have been terminated by Seller as
permitted hereby, and nothing then shall (and no action shall have been
commenced seeking to) restrain, inhibit, penalize, or prohibit Closing.
9.2 Delivery. Buyer shall have delivered to Seller each item listed in
paragraph 3.3.
10. MISCELLANEOUS:
10.1 Notices. Each notice, consent, request, demand, or other communication
required or permitted hereunder must be in writing and shall be deemed to have
been duly given only upon the earlier of receipt thereof (by facsimile or
otherwise) or ten (10) days after having been mailed, certified or registered
United States mail, postage prepaid, addressed as follows:
(a) if to Seller or Shareholders:
Advertiser's Postal Service Corp.
Post Office Box 620
Gaylord, Michigan 49734
Copy to:
Samuel T. Stahl, Esquire
Honigman, Miller, Schwartz and Cohn
2290 First National Bank Bldg.
660 Woodward Avenue
Detroit, Michigan 48226-3583
(b) if to Buyer;
Upper Michigan Newspapers, LLC
c/o Brill Media Company, L.P.
420 NW Fifth Street, Suite 3-B
Evansville, Indiana 47708
Attention: Mr. Alan R. Brill
copy to:
Charles W. Laughlin, Esquire
Thompson & McMullan
100 Shockoe Slip
26
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Richmond, Virginia 23219
or when so received or mailed to such other place or person as a party hereafter
may from time to time have designated in a prior written notice to the other
party given as herein required.
10.2 Survival. Each covenant, representation, and warranty made by Seller,
Shareholders, or Buyer in this Agreement or at Closing shall survive the Closing
and shall remain operative and in full force and effect regardless of Closing or
of any investigation made or knowledge obtained by or on behalf of Seller,
Shareholders, or Buyer at any time prior to Closing and shall survive Closing
for a period of eighteen (18) months, except that the representations and
warranties contained in Section 4.10 shall survive for the applicable statute of
limitations period, and the representations and warranties contained in sections
4.6, 4.16 and section 8.2 shall survive indefinitely.
10.3 Limitations.
(a) Concerning actions by Buyer to recover damages for any default or
breach of contract (or for indemnification) under this Agreement:
(i) Buyer shall name Seller as a co-defendant with any Shareholder
defendants unless Seller then has been dissolved, either by action of the
Shareholders or by operation of law;
(ii) collection of any judgment for any such default, breach, or
indemnification shall first be recouped, offset against, and satisfied out
of that part of any balance then still owing on the Notes that becomes
payable within the twelve months immediately following entry of such
judgment, and
(iii) in no event shall any Shareholder's individual aggregate
liability for any such defaults, breaches, indemnifications, or judgments
exceed an amount equal to the Purchase Price as adjusted multiplied by such
Shareholder's percentage reflected on Exhibit 10.03.
(b) No Shareholder shall be held liable for a violation of his
Noncompetition Agreement solely because of another Shareholder's violation of a
Noncompetition Agreement.
10.4 Successors and Assigns. This Agreement and each provision hereof shall
be biding upon and inure to the benefit of the parties hereto and their
respective successors and assigns and may not be assigned without the prior
written consent of all parties hereto.
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10.5 Indemnity Concerning Brokers. Buyer and Seller represent and warrant
each to the other that Dirks, Van Essen & Associates is the only broker
connected with this transaction, and Seller shall be solely responsible for, and
will indemnify, defend, and hold Buyer harmless from any and all commissions,
fees, expenses, or charges due and owing on account of services rendered to
Seller. Seller agrees to indemnify, defend, and save harmless Buyer from and
against each liability, cost, or expense, including attorneys' fees, that may be
asserted on account of any broker's commission or similar obligation or by
reason of any agreement made by Seller or Shareholders with any broker or
finder.
10.6 Additional Remedies. Without waiving or prejudicing and in addition to
and not to the exclusion of or in limitation of any other rights or remedies
available to Buyer hereunder, or otherwise, upon and for Seller's or
Shareholders' material default under or breach or prospective breach of any
covenant, agreement, term, condition, representation, or warranty contained in
this Agreement, at its sole election Buyer shall be entitled but not obligated
to do each or any one or more of the following: (a) to obtain specific
performance or injunctive relief (since monetary damages will not be sufficient
to afford Buyer full compensation for any such breach or breaches), or (b) to
take any action including the making of any payment or payments necessary to
cure any such default or breach not cured before the thirtieth (30th) day after
receiving notice thereof from Buyer, or (c) to bring an action to recover
damages for such default or breach of contract (either with or without an action
for injunctive relief) and either (i) to enforce any resulting judgment in favor
of Buyer as permitted by law or (ii) to offset and deduct the amount of any such
judgment and the costs of any such action (including, without limitation,
interest on any such payment at the rate of ten percentum per annum, and
reasonable attorneys' fees), in whole or in part, (x) from the Purchase Price,
or (y) from any collections on Seller's accounts receivable, or (z) from any
payment thereafter due on the Purchase Price or one or more of the Notes;
provided, however, that such offset and deduction may and shall not be taken
until the amount thereof shall have been agreed upon by Buyer and Seller or
established by the judgment of a court of competent jurisdiction in such action.
10.7 Amendment and Waiver. Except for a waiver by Buyer pursuant to Section
6., or by Seller pursuant to Section 9., no term or condition of this Agreement
may be amended or its observance waived (whether generally or in a particular
instance and whether retroactively or prospectively) except with and by Buyer's,
on the one hand, or Seller's and Shareholders' on the other hand, express
written consent. No other act, failure to act, or course of dealing by Buyer
shall be or constitute a waiver by Buyer.
28
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10.8 Audits. At its sole expense, at any time within two (2) years
following Closing, after reasonable notice to Seller, Buyer may cause Seller's
books and records to be examined by auditors in order to produce audited
financial statements of Seller's affairs for up to three years preceding
Closing. Seller will cooperate with any such audit and auditors and will provide
to Buyer or its agents or representatives reasonable access to Seller's books,
records, and personnel for such purpose and will maintain and retain such books
and records in a reasonably orderly fashion for a period of at least three years
after Closing in order that such audit procedures may be performed.
10.9 Definitions. Wherever used in this Agreement or any instrument
incorporating such term or terms:
(a) the term "Liens" (singly, "Lien") shall mean and include each and
any liens, mortgages, security interests, pledges, title retention devices,
claims (legal or equitable, including, without limitation, liability to or
claims of any taxing authority, creditor, or other person), conditional
sale or other agreements, encumbrances, leases, trusts, options,
servitudes, rights, charges, assessments, consignments or bailments,
reservations, exceptions, encroachments, easements, rights-of-way,
conditions, restrictions, imperfections or deficiencies of title, or
liabilities of any nature and however arising [including those arising from
violation of or noncompliance with any law, ordinance, rule or regulation
(including, without limitation, municipal ordinances relating to zoning,
occupancy, or use of real property), whether recorded or unrecorded, choate
or inchoate, or appurtenant or non-appurtenant, and whether dependent on or
independent of possession, whether know or unknown, and whether now in
existence or to come into existence merely by the giving of notice or the
lapse of time, or both;
(b) the terms "knowledge", "know", or other similar phrases when used
in reference to Seller shall mean the actual knowledge without inquiry of
any of the officers, directors, or Shareholders of Seller and when used in
reference to Shareholders shall mean their actual knowledge without
inquiry; and
(c) each of the following terms shall have the meaning defined in the
paragraph of this Agreement identified below:
Term Paragraph
---- ---------
Accountants 2.2(h)
Accounts Receivable List 3.2(h)
Act 4.23
Affiliated Contracts 6.6
Agreement Preamble
Assumed Contracts 1.1(e)
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Assumption Agreements 3.4
Buyer Preamble
Claim(s) 7.1
Closing 3.1
Closing Adjustments 2.2
Closing Date 3.1
Closing Escrow Account 2.2(g)
Closing Financials 2.2(b)
Collection Period 3.6
Contract(s) 4.17
Environmental Law(s) 4.19
Escrow Agents 2.2(g)
Excluded Property 1.2
Final Settlement 2.2(b)
Financial Statements 4.4
Glasser 3.4
Hazardous Material(s) 4.19
Indemnified Party 7.4
Indemnifying Party 7.4
Inventories 1.1(d)
Lease 3.2(k)
Lien; Liens 10.9(a)
Noncompetition Agreement 3.2(g)
Noncompetition Agreements 6.7
Note(s) 2.1
Permitted Liens 4.6
Preliminary Adjustment 2.2(a)
Preliminary Financials 2.2(a)
Preliminary Settlement 2.2(a)
Property Sold 1.1
Purchase Price 2.1
Real Property 1.1(a)
Security Agreement 2.3
Seller Preamble
Seller's Counsel 3.2(d)
Shareholders Preamble
Statement 2.2(h)
10.10 Governing Law. This Agreement, its enforceability or interpretation,
and the legal relationships between Buyer, Seller, and Shareholders created
hereby shall be governed by and construed in accordance with the laws of the
State of Michigan, notwithstanding application of laws or choice of law
principles.
10.11 Headings. The headings of the Sections and paragraphs of this
Agreement are for convenience only and are not a substantive part hereof.
10.12 Entire Agreement. This Agreement, including its exhibits, contains
the entire understanding of the parties hereto with respect to the subject
matter hereof; there are no other representations and warranties made by any
party hereto other than
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as expressly set forth herein; no party hereto will rely on any information,
representation, or warranty except as expressly set forth herein, and any and
all prior understandings or agreements among Buyer, Seller, and Shareholders
(their agents, principals, or representatives) are merged into this Agreement,
which replaces and supersedes all prior memoranda, understandings,
representations, correspondence, agreements, conversations, and negotiations
concerning the subject matter hereof.
10.13 Counterparts. This Agreement may be executed in any number of
counterparts, and when Seller, Shareholders, and Buyer shall have executed at
least one such counterpart they shall constitute but one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused their signatures to be
hereunto appended and affixed by their duly authorized representatives as of the
day, month, and year first above written.
Buyer:
ADVERTISERS P.S., LLC
by: Upper Michigan Management, Inc.
its manager
by: /s/ ALAN R. BRILL
----------------------------
a duly authorized officer
Seller:
ADVERTISER'S POSTAL SERVICE, INC.
by /s/ JAMES R. GLASSER
--------------------------------
a duly authorized officer
Shareholders:
/s/ GORDON G. EVERETT
-----------------------------------
Gordon G. Everett, Trustee
/s/ DANIEL F. WALSH
-----------------------------------
Daniel F. Walsh, Trustee
/s/ JAMES R. GLASSER
------------------------------------
James R. Glasser
/s/ AUGUST A. TRANQUILLA
-----------------------------------
August A. Tranquilla
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/s/ CLARA TRANQUILLA
------------------------------------
Clara Tranquilla
/s/ DOUGLAS C. JOHNSON
-----------------------------------
Douglas C. Johnson
/s/ SHERRY L. JOHNSON
-----------------------------------
Sherry L. Johnson
/s/ MIKE ADAMS
-----------------------------------
Mike Adams
/s/ KEN BRADSTREET
-----------------------------------
Ken Bradstreet
Escrow Agents:
/s/ ALAN R. BRILL
-----------------------------------
Alan R. Brill
/s/ JAMES R. GLASSER
-----------------------------------
James R. Glasser
32
ASSETS PURCHASE AGREEMENT
This agreement (the "Agreement") is entered into this 23rd day of February
1998, by and among CENTRAL PRINTING SERVICE, LLC., a Virginia limited liability
company ("Buyer"), CENTRAL PRINTING CORPORATION, a Michigan corporation
("Seller"), with its principal office located at 112 E. Sixth Street, Gaylord,
Michigan 49735, and Gordon G. Everett, trustee; Daniel F. Walsh, trustee; James
R. Glasser; August A. Tranquilla; Clara Tranquilla; William L. Ezo; Jeffery
Bodette; Frank E. Noverr; Paul Gunderson; Douglas C. Johnson, and Sherry L.
Johnson (jointly and severally "Shareholders").
RECITALS
Seller owns and operates a printing business, located in Gaylord, Michigan.
Shareholders own all of the issued and outstanding shares of Seller's capital
stock. Buyer wishes to purchase from Seller, and Seller wishes to sell and
transfer to Buyer as an operating business, all, but not less than all, of
Seller's property and assets necessary, used, or useful for the operation of
Seller's business, all on the terms and subject to the conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of and relying upon the foregoing
recitals, each covenant, agreement, representation, and warranty set forth
herein, and each act done pursuant to this Agreement, Buyer, Seller, and
Shareholders agree as follows:
1. Purchase and Sale of Property and Assets.
1.1 Agreement to Purchase and to Sell. Upon and subject to compliance with
all terms and conditions of this Agreement, at Closing (hereinafter defined)
Buyer agrees to purchase from Seller, and Seller agrees to sell and deliver to
Buyer as herein provided, as an operating business, all right, title, and
interest in and to all, but not less than all, of the tangible and intangible
property, rights, and assets of Seller necessary, used, or useful for the
operation of Seller's business (jointly and severally the "Property Sold"),
excluding only the Excluded Property (hereinafter defined), and including the
following:
(a) all machinery, furniture, furnishings, composition, printing, and
press equipment, tools, and other equipment, and all items of tangible
personal property used to operate Seller's business, including those
briefly listed on Exhibit 1.01.1, and the spare parts, repair parts,
accessories, attachments, and appurtenances thereto attached or
appertaining and all replacements thereof and any improvements or additions
thereto prior to the Closing Date;
(b) all of Seller's business, employee, payroll, customer, contractor,
and other records, its files, studies,
<PAGE>
surveys, software, software programs, computer printouts, data bases, and
related items, and all other documents, instruments, and records evidencing
or pertaining to its business, in whole or in part;
(c) all of Seller's automobiles, vehicles, vans, trucks, trailers, and
other mobile equipment, including those listed on Exhibit 1.01.2;
(d) all of Seller's inventories (including newsprint, paper, plates,
and film), work in process, raw materials, merchandise held for sale,
distribution and other supplies, and similar items ("Inventories") on hand
as of the Closing Date;
(e) as and to the extent provided in assumption agreements executed by
Buyer at Closing pursuant to paragraph 3.4, all of Seller's rights in the
Contracts (hereinafter defined) listed on Exhibit 1.01.3 (such Contracts
collectively, the "Assumed Contracts");
(f) all of Seller's rights in, to, and under all franchises, licenses,
permits, and authorizations applicable to its business;
(g) all of Seller's general intangibles and evidences thereof,
including the exclusive right to use any copyrights, patents, patent
applications, servicemarks, trademarks, tradenames, or slogans now used or
owned by Seller or registered in its name;
(h) all other of Seller's interests in assets or property owned,
acquired, leased, or held for or used in Seller's operations, whether
tangible or intangible, and whether or not otherwise identified or
reflected herein or in the Financial Statements (hereinafter defined); and
(i) all property such as is described in (a) through (h) that is
hereafter acquired by Seller prior to Closing.
1.2 Excluded Property. The following ("Excluded Property") are not part of
the Property Sold and are not being sold to Buyer: Seller's (a) rights under
this Agreement, (b) cash on hand or in banks, cash items, cash equivalents,
deposits, deferred charges, marketable securities, the cash value of all life
insurance policies on the lives of any of the shareholders (or any of the
trustees thereof), checks and drafts, (c) prepaid expenses, accounts receivable,
refunds, rebates, advances, and notes receivable, (d) corporate stock records,
seal, and minute book, (e) all insurance policies, (f) tax records of Seller,
(g) such items of the Property Sold as may be disposed of by Seller before
Closing in the ordinary course of Seller's business, for value in
2
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accordance with Seller's past practices, and not in violation of this Agreement,
and (h) all other current assets other than Inventories.
2. Purchase Price.
2.1 The total purchase price for the Property Sold ("Purchase Price") shall
be Three Million Six Hundred Thousand and No/100 Dollars ($3,600,000.00)
adjusted as required by paragraph 2.2, allocated in accordance with Exhibit
2.01, and payable to Seller on Closing by Buyer by (a) cashiers check or wire
transfer of immediately available funds in the amount of Two Million Two Hundred
Thousand and No/100 Dollars ($2,200,000.00), which amount shall be adjusted
before payment as required by paragraph 2.2, and (b) delivery of Buyer's
promissory notes (the "Notes"; singly, a "Note") payable to Seller in the
aggregate principal amount of One Million Four Hundred Thousand and No/100
Dollars ($1,400,000.00) bearing interest at the rate of seven percentum (7%) per
annum on any unpaid principal balance thereof from Closing until paid, such
Notes to be amortizable as if for a ten (10) year term as therein provided for
but to mature and be fully paid on or before the sixth (6th) anniversary of the
Closing Date, to be substantially in the form and contain the substance of
Exhibit 2.01.1, and to be secured by a security interest in the Property Sold
(free and clear of any lien created by Buyer) substantially in the form and
containing the substance of Exhibit 2.03.1.
2.2 Adjustments. Until Closing, operation and use of the Property Sold, and
any income or expenses attributable thereto, shall be for Seller's account. In
finally determining the Purchase Price, at Closing the amount of the Purchase
Price and the amount of cash Buyer is to pay at Closing shall be adjusted up or
down ("Closing Adjustments") as follows:
(a) at Closing there shall be a preliminary financial settlement by
Buyer and Seller to determine the Closing Adjustments (the "Preliminary
Adjustment"), which Preliminary Adjustment shall be based on the financial
statements and estimates of Seller (the "Preliminary Financials") then
reasonably available to approximate Buyer's and Seller's reasonable good
faith estimate of the Preliminary Adjustments as of such Closing Date (the
"Preliminary Settlement");
(b) within 60 days of the Closing Date and upon preparation of
satisfactory financial statements (the "Closing Financials") by which Buyer
and Seller can determine the actual Adjustments as of the Closing Date, a
final settlement of the Closing Adjustment will be determined and payment
made to either Buyer or Seller by the Escrow Agents (hereinafter defined)
in the amount of the difference of the Closing Adjustments determined in
this final settlement and in the Preliminary Settlement in order to reflect
the computation of and complete the full and final payment
3
<PAGE>
of the Purchase Price (the "Final Settlement"). Final Settlement of the
Closing Adjustments as of the Closing Date (i) shall be based on
calculations derived from the financial results and financial condition of
Seller's business reflected in the Closing Financials of Seller for the
period as of and ending on the Closing Date or (ii), if the Closing Date is
not the same date as the closing date for the period most recently ended
and preceding the Closing Date, then Final Settlement shall be based on
calculations derived from the financial results and financial condition of
Seller reflected in the Closing Financials of Seller (a) for the period as
of and ending most recently prior to the Closing Date and (b) for the
period next following as though still owned by Seller. If determined under
"(ii)" above, final Closing Adjustments will be (x) derived from Closing
Financials as though for and as of the period ending prior to the Closing
Date plus (y) the result of the financial impact to Buyer and Seller of the
Buyer realizing all benefit of the sales of Seller (and ownership of
resulting accounts receivable) for the period beginning on the day next
following the latest prior financial statement date and continuing to the
Closing Date, less (z) the expenses assumed by Buyer with respect to such
sales, "(y)" and "(z)" as determined by the calculation process as follows:
if not closing on the date of the end of a normal reporting period or
extending such period to correspond, then Final Settlement will be
partially determined by computing the Closing Adjustments as though Closing
had occurred at the end of the latest prior reporting period. Sales of
Buyer in the following reporting period from that date to closing will be
deemed to be sales that Buyer has purchased and for which Buyer will pay
Seller by further change to the Closing Adjustments. Direct expenses,
principally personnel and inventory expenses, will be the responsibility of
the party to which the corresponding sales relate; that is with respect to
personnel, Seller and Buyer will each incur their own payroll expense for
the period before and after Closing respectively; and with respect to
inventory, the inventory usage for each will correspond to the materials
determined to have been used in the respective ownership portions of the
reporting period. All other appropriate expenses for the reporting period
will be pooled and the pool split between Buyer and Seller in the same
proportion as their respective revenue splits for the reporting period.
(c) all expenses applicable to Seller's business, including, without
limitation, employees' wages and other wage related expenses, or to all or
any part of the Property Sold, whether paid, prepaid, or accrued and
regardless of when assessed, determined, calculated, paid, or collected,
shall be Seller's sole responsibility for all periods ending with, upon, or
prior to Closing, and at and as of Closing shall be prorated between Buyer
and Seller and the amount of the Purchase Price and the amount of cash
Buyer is to pay at Closing adjusted accordingly so that Seller shall be
responsible for any and all of such expenses incurred or accrued for all
periods ending prior to or at Closing and so that
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Buyer shall be responsible for business' expenses incurred or accrued
thereafter;
(d) the amount of the Purchase Price and the amount of cash Buyer is
to pay at Closing also shall be reduced as appropriate, without
duplication, by deducting therefrom (i) the amount of any prepaid revenue
theretofore received by Seller as of the Closing Date, for goods or
services to be delivered or rendered by Buyer after the Closing Date, and
(ii) the amount of any discount outside of the ordinary course of Seller's
business given by Seller for such payments theretofore received by Seller.
Buyer hereby assumes and agrees to timely perform Seller's obligation to
render the services or deliver the goods for which adjustments are made
pursuant to this subparagraph. To this end, Seller shall prepare a
statement at Closing that shall contain Seller's description and
calculation of the amount of each item described in this subparagraph;
(e) if after Closing Buyer is to receive the benefit of any expenses
prepaid by Seller, the Purchase Price and the amount Buyer is required to
pay to Seller at Closing shall be increased by the amount of such prepaid
expenses, and such prepaid expense shall not be treated as Excluded
Property hereunder;
(f) the amount of the initial Purchase Price and the amount of cash
Buyer is to pay at Closing also shall be reduced by deducting therefrom (i)
the amount necessary to satisfy and cure each breach by Seller as of the
Closing Date of any representation, warranty, or covenant made by Seller in
this agreement and (ii) the amount necessary to discharge or cure each Lien
applicable to any part of the Property Sold as of the Closing Date, other
than Permitted Liens (hereinafter defined);
(g) from the amount of cash Buyer is to pay at Closing there also
shall be deducted $50,000.00, which, together with $50,000.00 in cash then
supplied by Buyer, Buyer and Seller shall pay into an escrow account (the
"Closing Escrow Account"), which shall be an account in the joint names of
Alan R. Brill and Seller's president (jointly the "Escrow Agents"; each of
whom has signed this Agreement as "Escrow Agents" solely for the purpose of
agreeing to act as such) in such bank or other checking institution as the
Escrow Agents shall select. The Closing Escrow Account shall be used to pay
final Closing Adjustments to the party entitled thereto as and to the
extent herein provided, and
(h) as soon after Closing as is reasonably practicable, but in no
event later than 60 days following Closing, Buyer's employees, under the
direction and supervision of Escrow Agents, shall prepare and provide to
each of Seller and Buyer a Statement (the "Statement") of the foregoing
Closing Adjustments. To the extent the Statement indicates a net increase
in the Purchase Price, Seller shall be entitled to receive from the
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Closing Escrow Account, and the Escrow Agents shall immediately return to
Seller the $50,000 deposited by it in the Closing Escrow Account plus an
additional amount equal to the net increase in the Purchase Price. Any
amounts remaining in the Closing Escrow Account after such payments have
been made shall be immediately paid to Buyer. If such increase in the
Purchase Price is in excess of $50,000, then the Escrow Agents immediately
shall pay to Seller all amounts in the Closing Escrow Account, and Buyer
immediately shall pay to Seller the amount of such excess by cashiers check
or wire transfer of immediately available funds. To the extent the
Statement indicates a net decrease in the Purchase Price, Buyer shall be
entitled to receive from the Closing Escrow Account, and the Escrow Agents
immediately shall return to Buyer the $50,000 deposited by it in the
Closing Escrow Account plus an additional amount equal to the net decrease
in the Purchase Price. Any amounts remaining in the Closing Escrow Account
after such payments have been made shall be immediately paid to Seller. In
the event such decrease in the Purchase Price is in excess of $50,000, then
the Escrow Agents shall immediately pay to Buyer all amounts in the Closing
Escrow Account, and Seller immediately shall pay to Buyer the amount of
such excess by cashiers check or wire transfer of immediately available
funds. If the Escrow Agent cannot agree upon such final determination and
payments, they shall retain Ernst & Young, One IBM Plaza, Chicago, Illinois
("Accountants"), whose costs and fees shall be borne equally by Seller and
Buyer, to prepare a report making such determination, which determination
shall be final and binding upon all parties.
2.3 Security. Subject to each Lien (hereinafter defined) then existing as
to any part of the Property Sold, at Closing Buyer shall duly execute and
deliver to Seller a security agreement in the form of Exhibit 2.03.1 ("Security
Agreement"), securing payment of the Note as and to the extent therein provided.
2.4 Preliminary and Closing Financials. Not less than seven (7) days before
the Closing Date, Seller will deliver to Buyer financial statements of Seller
("Preliminary Financials") sufficient for Buyer to make a tentative
determination of the Purchase Price and the Closing Adjustments prepared in
accordance with generally accepted accounting principles and practices applied
on a basis consistent with Seller's past practices, except that they shall be
prepared as if they were for a fiscal year of Seller then ending and normal
year-end adjusting entries had then been made. Such statements shall be
certified to Buyer by an appropriate officer of Seller as having been so
prepared and as fairly presenting Seller's then financial position and the
results of Seller's operations and the changes in its financial position as at
the end of and for the period then ended and for the twelve months and portion
of the fiscal year to the end of such month, as adjusted in compliance with this
paragraph. Immediately upon the later of (a) thirty (30) days after Closing, or
(b) ten (10) days after Buyer's receipt of financial statements of Seller
("Closing
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Financials") prepared and certified by Seller as at the end of and for the
normal reporting period ending either with or most nearly before or after the
Closing Date in the same manner as provided for the Preliminary Financials,
Buyer and Seller shall finally determine the final amount of the Closing
Adjustments required by paragraph 2.2 after a review and analysis of the Closing
Financials and, if necessary, of the books and records of Seller, and thereafter
the parties shall make final settlement of the Closing Adjustments. If the
parties determine as a result of such final settlement that one of the parties
is entitled to receive a payment from the other party for additional Closing
Adjustments, then the amount thereof shall be paid in cash first from the
Closing Escrow Account, with any unpaid balance to be paid thereafter by the
obligated party. When all Closing Adjustments have been determined and paid, any
balance remaining in the Closing Escrow Account shall be paid to the Seller. If
after receipt of the Accountants' report, and after exhausting the Closing
Escrow Account, and after taking into account the costs for having the report
prepared, either Buyer or Seller is entitled to receive more than Five Thousand
($5,000.00) in additional Closing Adjustments from the other party, the other
party promptly shall pay the amount actually owed in cash to the party entitled
thereto.
3. Closing.
3.1 Closing and Closing Date. Unless earlier terminated or postponed as
herein provided for, consummation of the sale and purchase contemplated by this
Agreement ("Closing") shall take place beginning at 10:00 o'clock a.m., local
time, on February __, 1998 (or at such other time and place as Buyer and Seller
hereafter may agree upon in writing) (the "Closing Date") at the offices of
Seller in Gaylord, Michigan, and shall be effective as of 12:01 a.m. on
February, 1998.
3.2 Duties of Seller at Closing. At Closing and contemporaneously with
Buyer's performance of its obligations described in paragraph 3.3, Seller agrees
to, and at Seller's sole expense, shall tender and deliver to Buyer at 10:00
o'clock a.m., local time, on the Closing Date, in form and substance reasonably
satisfactory to Buyer and its counsel each of the following:
(a) such documents and duly executed instruments as shall be necessary
and appropriate to carry out the transactions contemplated by and the
intent of this Agreement, including, without limitation, and instruments of
conveyance, assignment, consent, or transfer sufficient to assign, convey,
transfer to, and vest in Buyer all right, title, and interest in and to
each item of the Property Sold free and clear of any and all Liens and
subject only to Permitted Liens;
(b) peaceful, exclusive, and unencumbered possession of the Property
Sold, subject only to Permitted Liens,
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in the same condition as at this date, ordinary wear-and-tear excepted;
(c) a copy, certified by an appropriate officer of Seller as being
true and complete, of Seller's bylaws and articles of incorporation as then
in effect and of necessary corporate proceedings and resolutions heretofore
duly adopted by Seller's board of directors and Seller's Shareholders
authorizing and approving Seller's execution and delivery of this Agreement
and consummation of the transactions contemplated hereby;
(d) the legal opinion of Honigman, Miller, Schwartz and Cohn, 2290
First National Bank Bldg., 660 Woodward Avenue, Detroit, Michigan
48226-3583 ("Seller's Counsel") dated as of the Closing Date, substantially
in the form and substance of Exhibit 3.02;
(e) each financial statement, document, opinion, waiver, consent,
certificate, or instrument that Seller is required to deliver under this
Agreement;
(f) a copy of the Security Agreement dated as of the Closing Date and
duly executed by all parties thereto other than Buyer;
(g) a copy of a Noncompetition Agreement substantially in the form and
containing the substance of Exhibit 3.02.1 hereto (the "Noncompetition
Agreement") duly executed by each of the Shareholders;
(h) within five (5) days after the Closing Date, an aged (30, 60, 90
days, etc.) list of all accounts receivable of Seller as of the latest
period end at or prior to the Closing Date listing for each such account
the account name, address, amount due, due date of the oldest portion, and
date to which service has been provided ("Accounts Receivable List"), which
Accounts Receivable List shall be updated to the Closing Date, as
necessary, through the efforts of Buyer and Seller;
(i) a duly executed copy of each instrument of consent, waiver, or
approval described in paragraph 6.4 and of each instrument necessary or
effective to terminate as of the Closing Date each employee benefit plan
(if any) applicable to any of Seller's employees;
(j) the Assumption Agreements (hereinafter defined) duly executed by
each party thereto other than Buyer;
(k) a copy of a lease in the form and substance attached hereto as
Exhibit 3.02.2 (the "Lease"), duly executed by all parties other than
Buyer; and
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(l) each other document opinion, waiver, consent, certificate,
statement, or instrument that this Agreement requires Seller to deliver.
3.3 Duties of Buyer at Closing. At Closing, and contemporaneously with
Seller's performance of its obligations described in paragraph 3.2, Buyer agrees
to and at Buyer's sole expense shall tender and deliver to Seller in form and
substance reasonably satisfactory to Seller and Seller's Counsel, each of the
following:
(a) the Purchase Price, as adjusted, paid as herein agreed;
(b) a duly executed copy of the Security Agreement, dated as of the
Closing Date, together with such financing statements and other
documentation reasonably necessary to perfect Seller's security interest;
(c) the legal opinion of Thompson & McMullan, P.C., 100 Shockoe Slip,
Richmond, Virginia 23219, dated as of the Closing Date, substantially in
the form and containing the substance of Exhibit 3.03;
(d) the Noncompetition Agreement(s) duly executed by Buyer and all
parties thereto, together with proof of payment of any amounts therein
specified to be paid by Buyer at Closing;
(e) the Lease, duly executed by Buyer and all parties thereto;
(f) the Assumption Agreements duly executed by Buyer;
(g) a copy, certified by the managing member of Buyer as being true
and complete, of Buyer's articles of organization and operating agreement,
a certificate of good standing of Buyer, and a certified copy of the
resolutions of Buyer's member(s) approving and authorizing the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby; and
(h) each other document, opinion, waiver, consent, certificate,
statement, or instrument that this Agreement requires Buyer to deliver.
3.4 Certain Liabilities. On and after Closing, and as expressly set forth
in assumption instruments executed and delivered by Buyer at Closing (the
"Assumption Agreements"), Buyer will assume and agree to perform and discharge
in accordance with the terms thereof, all of Seller's obligations arising
subsequent to Closing under the Assumed Contracts that are listed and
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described on Exhibit 1.01.3, true copies of which shall have been supplied to
Buyer before the Closing Date. Buyer assumes and shall be liable for no other
liability of Seller, contractual or otherwise, and Seller covenants and agrees
with and for the benefit of Buyer that Seller will perform and discharge all
obligations of Seller (contractual or otherwise) not expressly so assumed by
Buyer in writing at Closing, including, without limitation, any obligation for
payment of Seller's accounts payable. Without limiting the generality of the
foregoing, Seller agrees that Buyer is not, directly or indirectly, assuming or
agreeing to assume and shall not be liable for any liability or obligation of
Seller to Seller's employees, including without limitation any such liability or
obligation in respect of wages, salaries, bonuses, or accrued vacation, sick, or
other pay, except that Buyer hereby assumes and shall be responsible for payment
of normal earned vacation eligibility or unpaid vacation pay for each of
Seller's employees hired by Buyer for vacation earned within one year prior to
the Closing Date but not yet taken by any such hired employee as of the Closing
Date and the pro rata vacation earned between any such hired employee's last
previous anniversary date and the Closing Date, unpaid vacation pay of James R.
Glasser ("Glasser") whether or not he is hired by Buyer, in the amount of Two
Thousand Two Hundred One and 34/100 ($2,201.34). In the case of Glasser, such
amount shall be paid by Buyer to Glasser at Closing. All such unpaid vacation
pay and eligibility is described on the attached Exhibit 3.04.
3.5 Consents; Further Assurances. Seller shall obtain all material
agreements, consents, waivers, or approvals of third parties necessary or
appropriate for Closing or consummation of the transactions contemplated hereby.
After Closing, on Buyer's reasonable request and at Buyer's expense, at any time
or from time to time, Seller shall take or cause to be taken all such further
actions and shall execute, acknowledge, and deliver all such instruments as
reasonably may be required to memorialize or effectuate the transactions
occurring at Closing in order to ensure that Buyer receives and realizes all of
Seller's rights in the Property Sold as of Closing.
3.6 Collection of Accounts Receivable. At Closing, Seller will deliver
Seller's existing accounts receivable on the Accounts Receivable List. Such
Accounts Receivable List will be used by Buyer for purposes of collection only
for the period of one hundred twenty (120) days immediately following Closing
(the "Collection Period"). Acting as Seller's agent, during the Collection
Period Buyer shall have the exclusive right to and shall make commercially
reasonable efforts to collect Seller's accounts receivable listed on the
Accounts Receivable List, but shall not be required to expend or advance any of
its funds, to locate any debtor, or to institute or defend any suit, action,
claim, or counterclaim in any legal or equitable proceeding. Under no
circumstances shall Buyer be required to engage counsel or any
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outside collection agency or facility in collecting Seller's accounts
receivable. Payments received on an account from any customer of Buyer that is
an account debtor for an account of Seller on the Accounts Receivable List shall
be applied first to the Seller's account on such list, unless such customer
shall designate some other application of such payment or shall contest the
account receivable, in which case Buyer shall promptly notify Seller of such
designation or contest and return to Seller the account relating to such
customer and thereafter shall have no further obligation with respect thereto.
If Seller requests, Buyer also shall promptly return to Seller any account of
Seller that is over 90 days old, and Buyer shall have no further obligation with
respect to such account. Buyer shall transmit all monies collected on Seller's
accounts receivable to Seller within fifteen (15) days after the end of each
month in which such monies are collected. Upon expiration of the Collection
Period, Buyer shall be relieved of all responsibility for, or to attempt
collection of, Seller's accounts receivable, and thereafter Seller alone shall
be responsible for collection of any balances due on such accounts. Within
twenty (20) days after expiration of the Collection Period, Buyer will make
final payment to Seller of the amounts collected on Seller's accounts and shall
return to Seller each then uncollected Seller's account together with a final
statement of the accounts outstanding.
4. Seller's and Shareholders' Representations and Warranties.
To induce Buyer to enter into and perform pursuant to this Agreement,
Seller and Shareholders, jointly and severally, represent and warrant to Buyer
that each of the following is true:
4.1 Corporate Organization, Qualification, Authorization, etc. Seller is a
corporation duly incorporated, validly existing, and in good standing under the
laws of the state of its incorporation, has no subsidiaries, has all corporate
power and authority to conduct its business as it is now being conducted and to
own, possess, occupy, use, or operate the Property Sold and is duly qualified to
do business in any state where the nature of its business or properties requires
it to be so qualified. To Seller's knowledge, Seller has not violated and has
duly complied with all applicable laws, rules, and regulations relating to the
ownership and use of its properties and the conduct of its business and knows of
no law, rule, or regulation that will require a material, adverse change in the
use and enjoyment of the Property Sold or that will cause Buyer to incur any
material liability after Closing.
4.2 Seller's Property. Seller has good and valid title to the Property Sold
free and clear of Liens other than Permitted Liens. To Seller's knowledge,
Seller has the exclusive right to
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use of the Names in each of counties where such Names are registered.
4.3 Insurance. Seller has delivered to Buyer a list and brief description
of Seller's insurance policies.
4.4 Financial Statements. Seller has furnished Buyer with the following
financial statements: Seller's (a) December 31, 1997/1996 financial
statements/balance sheets with additional information; (b) December 25, 1997,
financial statement/balance sheet, adjusted; (c) December 25, 1996, financial
statement/balance sheet, adjusted; (d) December 31, 1996/1995, financial
statements/balance sheet with supplementary information; (e) December 31,
1995/1994, financial statements/balance sheets with supplementary information;
(f) December 25, 1995, financial statement/balance sheet, adjusted; and (g)
December 24, 1996, AR aging summary (collectively, the "Financial Statements").
Each book or record of Seller that has been or may be exhibited to or examined
by Buyer before Closing is and will be true, correct, and complete. Except as
otherwise expressly disclosed therein, each of the Financial Statements was
prepared in accordance with generally accepted accounting principles and
policies consistently applied throughout the periods involved (except that the
Seller provides pension benefits to retired officers and records these benefits
when paid), and, subject to any qualifications therein expressly stated (and to
normal year-end audit adjustments in the case of interim financial statements),
the Financial Statements fairly present Seller's then financial position and the
changes in financial position and results of operations for the time periods
covered and as at the times therein indicated, and the revenues and accounts
therein reflected arose from bona-fide transactions in the ordinary course of
Seller's business. Except as fully and fairly identified, separately disclosed,
and properly reflected or reserved against in the Financial Statements, Seller
has received no material items of extraordinary, non-recurring, or non-operating
revenues or income, and has no material debts, liabilities, or other obligations
(including, without limitation, obligations for federal, state, or local taxes
or other governmental assessments or penalties, and obligations for advances,
directly or indirectly, incurred or made to any affiliate or stockholder of
Seller), direct or indirect, absolute, contingent, or otherwise, due or to
become due [other than normal and usual forward obligations (other than for
borrowed money) incurred in the ordinary course of Seller's business] that do
not in the aggregate have a material, adverse effect on Seller, and there have
been no changes in the accounting principles, estimates, methods, or practices
applied in preparing the Financial Statements. Seller maintains such books and
records as are customarily kept under current business practices by businesses
of equivalent size and nature, and such books and records fully and fairly
reflect all of Seller's transactions. Seller will furnish Buyer with Seller's
usual interim operating statements and balance sheets for the business as of
each month-end
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(and as of and for each reporting period then ending) until Closing, and each of
these statements shall be correct and complete. The Financial Statements include
as revenues only those revenues arising from Seller's operations conducted in
the ordinary course and in a fashion consistent with Seller's past practices and
reflect all expenses incurred in the operations of Seller for each period of
time covered therein. See Rider 4.4 attached.
4.5 Conduct of Business; Absence of Change. Since the date that is twelve
(12) months earlier than the date hereof, there has been: (i) no material,
adverse change in the condition (financial or otherwise) of Seller, or in
Seller's overall business, revenues, expenses, liabilities, financial condition,
properties, or operations, or to Seller's knowledge, in any laws, rules, or
regulations applicable thereto; (ii) no fire, explosion, storm, accident,
condemnation, damage, theft, destruction, fraud, or loss (whether or not covered
by insurance) materially affecting Seller's business or any part of the Property
Sold; and (iii) to Seller's knowledge, no other occurrence, event, condition,
change in condition, or state of facts that affected, affects, or may affect
Seller, Seller's business, or any part of the Property Sold in any material,
adverse manner.
4.6 Title to Property Sold. Except as otherwise expressly disclosed and
described in Exhibit 4.06 as permitted liens ("Permitted Liens") and except for
property leased by Seller pursuant to leases disclosed to Buyer, Seller is the
sole owner of and has, and at Closing will convey and transfer to Buyer, good,
valid, and marketable title to and all rights in (and the right to immediate,
exclusive, peaceful, and unencumbered possession of) the Property Sold free and
clear of any and all Liens except any then existing Permitted Liens, and
Seller's said title is warranted against the claims of any and all persons. The
Property Sold and the Excluded Property include all property used by Seller in
the operation of its business to produce the revenues reflected in the
Preliminary Financials and to be reflected in the Closing Financials.
4.7 Absence of Certain Actions. Since the date hereof Seller has not taken
any action described in paragraph 5.2 of this Agreement, and Seller and
Shareholders have complied with each applicable term, covenant, agreement, and
condition of this Agreement.
4.8 Claims or Litigation. There are not pending or, to Seller's knowledge,
any basis for or threatened, any suits, actions, proceedings, charges, claims,
disputes, investigations, or inquiries, against, or relating to, or that might
result, singly or in the aggregate, in any material, adverse change in the
operations or condition of Seller, the Property Sold, Seller's business, or any
part or parts thereof, and nothing restrains or prohibits or seeks to restrain
or prohibit consummation of the transactions
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contemplated hereby or questions the legality, validity, or enforceability of
this Agreement or any action taken or to be taken pursuant hereto or in
connection with the transactions contemplated hereby; to Seller's knowledge,
Seller has at all times complied in all material respects with all applicable
laws, ordinances, rules, and regulations (including those relating to zoning and
use of the Property Sold), and Seller knows of no violation of any law,
ordinance, rule, or regulation by Seller or by any of its officers, directors,
agents, servants, or employees, and there are no material injunctions,
judgments, orders, or decrees outstanding or being sought against Seller, any
part of the Property Sold, or any of Seller's publications, products, or
services.
4.9 Licenses and Permits. Seller has all franchises, licenses,
certificates, and permits needed to possess, own, lease, use, or occupy the
Property Sold and to conduct Seller's present business; each is in full force
and effect, and no action is pending or, to Seller's knowledge, threatened
looking toward any amendment, revocation, or limitation thereof.
4.10 Tax Matters. Seller has properly filed in correct form with
appropriate governmental agencies all tax returns required to be filed by it;
all taxes due and payable by Seller have been properly reported, determined, and
paid, and Seller has no liability for payment of any unpaid tax or penalty. No
waiver of any statute of limitations has been given by Seller, and there are no
agreements or applications by Seller for any extension of time for the
assessment or payment of any tax. Except for title and transfer charges for
transferring title to Seller's vehicles, Seller has paid or shall pay any and
all taxes (excluding all sales or use taxes) arising out of or becoming due or
payable because of Closing or the purchase and sale of the Property Sold as
contemplated hereby and all taxes and assessments levied against Seller, or the
Property Sold with reference to or arising out of events occurring prior to
Closing. If requested by Seller, Buyer will furnish Seller with Buyer's employer
identification number and a certification that Buyer is purchasing the
Inventories for resale.
4.11 Condition of Property Sold. Except as disclosed on Exhibit 4.011, each
tangible item of the Property Sold is in good and proper operating condition and
repair and to Seller's knowledge free of defects (ordinary wear-and-tear
excepted).
4.12 Conveyances, Etc. When executed and delivered to Buyer at Closing,
each instrument of conveyance, assignment, consent, or transfer will constitute
the legal, valid, and binding obligation of the parties thereto, and such
instruments will be effective to vest in Buyer, and as of Closing Buyer will
thereby receive and become the sole, vested owner of all right, title, and
interest in and to the Property Sold, subject only to any then existing
Permitted Liens.
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4.13 Employee Status. Seller has delivered to Buyer an accurate and
complete copy of Seller's current payroll roster showing the name and address of
each person entitled to receive compensation from Seller for services as an
employee of Seller and for each: his or her job title and description, nature of
compensation (salary, wages, and/or commissions), current rate of compensation,
bonus to which entitled during the current year, or, if none, the amount of
bonus paid during the last year, each vacation period (with pay) to which
entitled during this calendar year, and each fringe benefit or other significant
arrangement with respect to such person's employment by Seller. Immediately
prior to the Closing Date Seller will deliver to Buyer a then current version of
each such payroll roster. Within the last six months there have been no
significant increases other than increases consistent with Seller's past
practices in the salaries payable to Seller's employees, and no commitments or
agreements have been made, or are anticipated relating to employees' salaries or
compensation, except that each of Seller's employees will receive a bonus based
upon a percentage of their annual compensation multiplied by the number of years
employed by Seller. Except for vacation pay to certain employees assumed by
Buyer as provided in paragraph 3.4, within ten days after Closing each of
Seller's employees will have been paid all wages, salaries, commissions,
severance pay, vacation pay, sick leave, or other pay, benefits, or entitlements
earned or accrued by or for each such employee as of, prior to, or as a result
of Closing. Seller knows of no plan by any employee of Seller to refuse later
employment with Buyer (if such employment is offered on the same or similar
terms) that has not been disclosed to Buyer.
4.14 Operating Agreements; Working Conditions. Except as disclosed to
Buyer, Seller has no written or oral contract, express or implied, with any of
its executives or other employees, is not a party to any contract with a labor
organization or to any collective bargaining agreement covering or relating to
any employee(s) and has not recognized, is not required to recognize, and has
received no petition or demand for election or recognition of, a collective
bargaining representative or agent for any of its employees. Seller is not
affected by any present or, to Seller's knowledge, threatened strike or other
labor dispute or disturbance, has complied in all material respects with all
applicable laws, rules and regulations relating to conditions for employment or
discharge of its employees, including those relating to wages, hours,
discrimination, occupational safety and health, collective bargaining, and the
withholding and payment of taxes and contributions, has withheld all amounts
required by law or agreement to be withheld from the wages or salaries of its
employees, and is not liable for any arrearages of wages or for any tax or
penalty for any failure to comply with such laws, rules, or regulations. There
are no material controversies pending or to Seller's knowledge threatened
between Seller and any employees or any labor union.
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4.15 Benefit Plans. Seller maintains certain employee benefit plans for the
benefit of its employees. Buyer shall have and incur no funding or other
obligation or liability in connection with any such plans, their funding or
termination, or any withdrawal therefrom, in whole or in part. Seller shall be
responsible for compliance with Code Section 4980B as applied to its current and
former employees and to those employees who experience a qualifying even as a
result of this transaction.
4.16 Authorization for Agreement. Seller has full power and authority to
execute, perform, and deliver this Agreement and to consummate the transactions
contemplated hereby. Seller's execution of, delivery of, performance of,
compliance with, and Closing of this Agreement have been duly and validly
authorized by all necessary corporate action and will not (a) constitute or
result in a breach of (or default under) any term, condition, or provision of
(or result in the creation of any Lien, charge, or encumbrance upon any of the
Property Sold pursuant to) any of the Contracts (hereinafter defined), any
articles of incorporation, bylaw, contract, mortgage, lien, indenture, lease,
agreement, commitment, arrangement or understanding, or any other instrument to
which Seller is a party or by or to which it or any of the Property Sold is
bound or subject, (b) to Seller's knowledge violate any statute, law, ordinance,
rule, regulation, judgment, or order binding upon or applicable to Seller or the
Property Sold, in whole or in part, (c) to Seller's knowledge expose Seller or
Buyer to any liability or penalty under any law, (d) result in any loss to or
restriction upon the use of any of the Property Sold, (e) to Seller's knowledge
adversely affect the validity, continuation, or effectiveness of any permit,
license, franchise, or right enjoyed by Seller, (f) give any party to any of the
Contracts, or any other agreement to which Seller is a party, any right of
cancellation or termination, or (g) give anyone any right to accelerate the
maturity of any indebtedness for which Seller is a direct or indirect, or
primary or secondary, obligor, or to claim any fraud, default, or breach with
respect to anyone or any such indebtedness. This Agreement and its execution by
Seller have been duly approved by a vote of Seller's Shareholders.
4.17 Agreements, Contracts, Leases, etc. Exhibit 4.017 contains an accurate
and complete list and brief description of each material agreement, obligation,
contract, and commitment (oral or written, express or implied) to which Seller
is a party, or by which it is bound, or by which the Property Sold is bound
(including all of Seller's delivery, advertising, or printing contracts, if any)
["Contract(s)"], and an accurate and complete copy or statement of the terms of
each such Contract has been or will be forthwith supplied to Buyer. Except as so
listed and described in Exhibit 4.017, Seller is not a party to any other
material contract, obligation, or agreement (oral or written, express or
implied), including, without limitation, any (i) bonus, retirement,
deferred-compensation, pension, profit-sharing, stock
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option, hospitalization, or employee stock purchase or retirement agreement,
policy, or plan, or other employee benefit plan; (ii) agreement with any
employee; (iii) agreement of guarantee or indemnification; (iv) loan or credit
agreement; (v) employment contract; (vi) lease to or for any material property,
real or personal; (vii) material sales or advertising agency contract; (viii)
contract or commitment under which there is an obligation on any party thereto
to pay more than $5,000.00; (ix) service or commission contract for a period in
excess of thirty (30) days; or (x) any agreement or commitment containing a
covenant limiting Seller's freedom to compete with any person or to engage in
any line of business. Each Contract is in full force and effect, legal, valid,
binding, and enforceable in accordance with its terms; Seller has not defaulted
as to or breached, nor has it received notice of any claim or assertion that it
has defaulted as to or breached, any term or condition of any Contract or of any
other agreement, obligation, contract, lease, or commitment applicable to it,
and no event has occurred that with notice or the lapse of time, or both, would
constitute such a breach or default. Seller's rights under each Contract are
assignable to Buyer, and Seller now knows of no term, condition, or provision
of, or event affecting, any Contract, Lease, or other agreement, contract,
lease, obligation, or commitment that might affect the validity, continuation,
or effectiveness thereof upon assignment to Buyer, or that might prevent Buyer
from realizing Seller's present rights and benefits to accrue thereunder in due
course after Closing.
4.18 Environmental Matters. Except as disclosed on Exhibit 4.018, to
Seller's knowledge, no part of the Property Sold ever has been used in violation
of any applicable Environmental Law to generate, manufacture, refine, transport,
release, treat, store, handle, or dispose of any hazardous, industrial, toxic,
or harmful substances, wastes, or materials (e.g. asbestos, urea formaldehyde,
polychlorinated biphenyls, or other waste exhibiting hazardous characteristics)
or any substance or element the generation, release, storage, use, or handling
of which is prohibited or regulated (singly, a "Hazardous Material";
collectively, "Hazardous Materials") by or pursuant to any law, rule, or
regulation (federal, state, or local) regarding, in whole or in part, (a) health
or safety, or (b) the effect of Hazardous Materials on land, water, air, or the
environment (e.g. the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended; 42 U.S.C.; ss. 6.01 et seq.; the Resource
Conservation and Recovery Act; or similar acts), or (c) the use, transport,
handling, storage, treatment, release, or disposal of any such Hazardous
Materials (singly, an "Environmental Law," collectively, the "Environmental
Laws"). Except as disclosed on Exhibit 4.018, to Seller's knowledge, Seller
always has materially complied with each and all such Environmental Laws. Except
as disclosed on Exhibit 4.018, to Seller's knowledge, no event has occurred at
the Property Sold and no condition now exists at or affects any part of the
Property Sold that is likely to result in any material
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complaint, notice, citation, action, proceeding, or investigation before any
governmental authority in connection with any Hazardous Material or any
Environmental Law or the violation thereof, or any claim against or liability of
Seller or Buyer to any authority, person, or persons arising out of or based on
any Environmental Law or the breach or enforcement thereof.
4.19 Execution, Validity. This Agreement is lawful and has been duly
executed and delivered by Seller and each of Shareholders, which execution and
delivery by Seller was duly and validly authorized by all necessary corporate
action by Seller and its Shareholders, and this Agreement constitutes a legal,
valid, and binding agreement of Seller and each of Shareholders enforceable
against Seller and each of Shareholders in accordance with its terms. Each of
Shareholders executing this Agreement as a trustee or other fiduciary has all
requisite power and authority to enter into and perform this Agreement as so
agreed.
4.20 Statements, Etc., True and Not Misleading. No representation or
warranty made by Seller or the Shareholders in this Agreement contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact necessary in order to make the statements contained herein or
therein not misleading in the circumstances. See Exhibit 4.20.
4.21 Investment. On Closing Seller will take the Notes for its own account,
for investment purposes only, and not with a view or intention to distribute or
otherwise dispose of all or any part thereof. Seller understands that each Note
is to be issued without registration under any "blue sky" law and pursuant to an
exemption from registration under provisions of the Securities Act of 1993 as
amended (the "Act") and that Seller may not hypothecate or otherwise transfer or
dispose of any Note except upon registration under the Act, unless an exemption
from registration provisions of the Act is available. Before transferring or
disposing of any Note in a transaction Seller believes to be so exempt from
registration Seller will give Buyer notice of such proposed disposition
accompanied by an opinion of counsel satisfactory to Buyer in all respects to
the effect that an exemption from registration under the Act is available with
respect to the proposed disposition, and any new note issued by Buyer under such
circumstances shall bear a legend similar in form and substance to that
appearing on Exhibit 2.01.1. Seller is aware that Buyer is a newly formed
company with limited capital and no previous financial or operating history,
that for the foreseeable future payment of the Notes probably will be derived
solely from Buyer's use of the Property Sold. Seller is able to bear the
economic risk of holding the Notes for an indefinite period and has received or
had free access to all necessary information, financial or otherwise, concerning
Buyer.
5. CONDUCT PRIOR TO CLOSING.
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Seller covenants and agrees that from the date hereof and until Closing:
5.1 Conduct of Business. Seller will operate and conduct its business only
in the ordinary course of business, in accordance with Seller's customary
policies and practices, in material compliance with all applicable laws, rules,
and regulations, and substantially in the same manner as heretofore and will use
its reasonable efforts to discharge and satisfy all of its obligations in due
course, to preserve Seller's present business organization intact, to preserve
Seller's business reputation, to keep available the services of Seller's present
officers, agents, and employees, to prevent any material, adverse change in
Seller, Seller's business, or any part of the Property Sold, and to preserve
Seller's present customers and present relationships with those having business
dealings with Seller. Seller will take reasonable actions so that each condition
of Section 6. of this Agreement will be satisfied as of the Closing Date, will
maintain in full force and effect all franchises, licenses, and permits held by
it, and will maintain the Property Sold in the same repair, order, and condition
as at the date hereof, ordinary wear-and-tear excepted.
5.2 Restricted Activities and Transactions. From the date hereof, until
Closing, except as may otherwise be permitted or required hereby, without
Buyer's prior consent expressly identifying and referring to this paragraph 5.2,
which consent shall not be unreasonably withheld or delayed, Seller will not
directly or indirectly do or agree to do, and within the past forty-five (45)
days Seller directly or indirectly has not done or agreed to do, any one or more
of the following:
(a) encumber, mortgage, pledge, or subject the Property Sold or any
part thereof to any Lien, security interest, charge, or encumbrance;
(b) grant, agree to, offer, or pay any kickback, discount, incentive
payment, commission, or promotional or other allowance to any person, or
sell or agree to sell or otherwise dispose of any part of the Property Sold
in each case other than sales for value, at usual rates, and in the
ordinary and normal course of business;
(c) agree to terminate, amend, restrict, extend, or waive any material
right under or materially affecting any Contract or the value of all or any
material part of the Property Sold;
(d) conduct its business other than in the normal and usual manner in
the ordinary course, or other than in material compliance with all
applicable laws, rules, and regulations of all local, state, and federal
authorities, entities, and agencies;
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(e) vary materially from charges for its services currently being
charged and received by Seller;
(f) except as disclosed to Buyer, pay, paid, or agreed to pay, any
bonus to any person, or make or agree to make any material change in the
compensation payable or to become payable to any employee or agent of
Seller's business;
(g) enter into any employment contract or lease; or
(h) except as disclosed to Buyer, enter into any contract or other
commitment binding upon Seller for a period of more than thirty (30) days
or other than in the ordinary course of business.
5.3 Full Access. At reasonable times during normal business hours after
notice from Buyer, Seller will afford Buyer, or Buyer's representatives, agents,
attorneys, employees, or accountants, full access to Seller's premises, the
Property Sold, and all facilities, equipment, offices, properties, books, and
records relating thereto in order that Buyer may cause to be made desired
investigations of Seller's affairs or necessary copies of its records, and will
cause Seller's officers to furnish Buyer with such information concerning
Seller's business and the Property Sold as Buyer reasonably may request.
5.4 Reports; Taxes; Etc. Seller will properly and timely file all reports
or returns it is required to file with federal, state, foreign, local, or other
authorities (including taxing authorities) and will pay all required taxes,
charges, and assessments as required in due course, and on or before the Closing
Date Seller will pay all required taxes, charges, or assessments due and payable
by Seller on or before the Closing Date.
5.5 Waiver of Bulk Sales Compliance. Buyer and Seller each waives
compliance with the provisions of applicable statutes relating to bulk transfers
or bulk sales. Seller and Shareholders agree to indemnify Buyer from any loss,
costs, or damage arising out of such waiver.
5.6 Termination of Plans. At its sole expense, and without any liability to
Buyer, Seller shall terminate or cause to be terminated each pension, profit
sharing, or other employee benefit plan applicable to Seller's employees, all in
accordance with the provisions thereof and applicable laws, rules, and
regulations and shall satisfy and discharge each withdrawal, termination, or
other liability thereunder.
5.7 Notice of Breach or Change. Seller will promptly notify Buyer if Seller
believes or realizes that Seller will be unable to comply with or satisfy any
condition of Section 6.
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5.8 Taxes. Buyer will pay all title and transfer charges for transferring
title to Seller's vehicles and all sales or use taxes arising out of or becoming
due and payable because of Closing or the purchase and sale of the Property Sold
as contemplated hereby.
6. CONDITIONS TO BUYER'S OBLIGATIONS:
As conditions precedent for the sole benefit of Buyer, which Buyer may
waive only by and to the extent of its express written waiver given hereafter,
Closing and each obligation of Buyer under this Agreement shall be subject to
and conditioned upon Buyer being satisfied, on or before and as of Closing, of
each of the following:
6.1 Compliance with Agreement; No Prohibition. Each material term,
covenant, agreement, and condition of this Agreement to be complied with or
performed by Seller or Shareholders until, at, or prior to Closing shall have
been complied with or performed in all material respects, or waived by Buyer,
this Agreement shall not have been terminated by Buyer as permitted hereby, and
nothing then shall (and no action shall have been commenced seeking to)
restrain, inhibit, penalize, or prohibit Closing or the conduct of Seller's
business by Buyer after Closing as contemplated hereby.
6.2 Representations and Warranties. Unless waived, each of Seller's
representations and warranties contained herein shall in all material respects
have been true and correct when made, shall be deemed to be made again at and as
of Closing, and then shall be in all material respects true and correct.
6.3 Delivery. Buyer shall not have terminated this Agreement as permitted
hereby, and Seller shall have delivered to Buyer each item described in
paragraph 3.2.
6.4 Approvals and Consents. All material agreements, consents, waivers, or
approvals of each public authority or other person or entity, natural or
corporate, public or private, necessary or appropriate for Closing or for
consummation of the transactions contemplated hereby without diminution, loss,
termination, or restriction of any material right of Seller shall have been
obtained from such parties in such form and substance as is reasonably
satisfactory to Buyer, and copies thereof delivered to Buyer. If necessary and
requested by Buyer, the other parties to any material agreements to which Seller
is a party shall have consented to Closing.
6.5 Contracts. Seller shall have assigned, set over, and transferred to
Buyer all of its right, title, and interest in each Assumed Contract identified
on Exhibit 1.01.3 in a form reasonably satisfactory to Buyer's counsel and at
Closing shall have delivered to Buyer peaceful possession of the Property Sold.
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6.6 Other Contracts. On or before Closing hereunder, Closing (as therein
defined) shall occur or have occurred as to each of the following contracts
("Affiliated Contracts"), including the execution of each of the noncompetition
agreements associated therewith (jointly and severally with the Noncompetition
Agreement, the "Noncompetition Agreements"): Upper Michigan Newspapers, LLC and
Star Publications, Inc., and Advertisers P.S., LLC and Advertiser's Postal
Service Corporation.
6.7 Inventories. As of Closing, Seller's Inventories shall be not less than
One Hundred Sixty Six Thousand Seven Hundred Seventy Four and no/100 Dollars
($166,774.00) in the aggregate [this is the average amount of inventory during
calendar year 1997]. Buyer and Seller will conduct an inventory at or shortly
before Closing to determine the dollar amount of the Inventories. To the extent
the amount of the Inventories at Closing is greater than $166,774.00, the amount
paid by Buyer to Seller at Closing shall be increased by such excess.
Conversely, to the extent the amount of the Inventories is less than
$166,774.00, the amount paid by Buyer to Seller shall be reduced by such
deficit.
6.8 Liabilities Current. As of Closing each of Seller's liabilities
(including all current liabilities, long term debt, and lease obligations) shall
be current, not in default, and not past due.
7. INDEMNIFICATION AND RISK OF LOSS:
7.1 Indemnity of Buyer. Subject to the limitations of paragraph 7.3, Seller
and Shareholders, jointly and severally, agree to indemnify, defend, and hold
Buyer, its owners, officers, agents, representatives, successors and assigns,
jointly and severally, harmless from and against each, any, and all actions,
suits, causes of action, losses, costs, claims, assessments, damages, response
costs, liabilities, fines, funding or termination liabilities, judgments, and
expenses (singly, a "Claim", collectively, the "Claims") asserted by a third
party or parties against each, any, or all of them arising from, based upon, or
on account of, in whole or in part, each, any one or more, or all of the
following, whenever occurring: (i) any breach, failure to perform, or
non-fulfillment by Seller or Shareholders of any covenant, agreement, term,
condition, certificate, representation, or warranty contained in this Agreement
or in any document delivered, or caused to be delivered to Buyer by Seller or
the Shareholders, (ii) any untruth, misrepresentation, omission, or inaccuracy
with respect to or contained in any such covenant, agreement, certificate,
representation, or warranty, including any statement or figure contained in any
of the Financial Statements, (iii) any violation of any law, rule, or regulation
(or any act or failure to act) by Seller or any one or more of its officers,
directors, agents,
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servants, or employees (or by others for whom Seller is responsible), (iv) any
agreement made by, Claim against, or asserted liability of Seller, other than
those expressly assumed by Buyer at Closing pursuant to paragraph 3.4, (v) the
conduct of Seller's business or Seller's ownership, use, or operation of the
Property Sold, or any part or parts thereof, (vi) any payment received by
Seller, directly or indirectly, (vii) any failure by Seller to comply with the
laws of the state of Seller's domicile relating to or applicable to the sale of
Seller's assets contemplated hereby, or (viii) any Lien as to all or any part of
the Property Sold, other than a Permitted Lien; provided, however, that the
obligation to indemnify hereunder shall in no event exceed, in the aggregate,
the amount of the Purchase Price. As to each Claim, the obligations arising
hereunder shall include, but not be limited to, an obligation to pay to or for
Buyer all costs incurred in investigating, defending, or settling such Claim
(including all reasonable attorneys' or experts' fees).
7.2 Indemnity of Seller. Subject to the limitations of paragraph 7.3, Buyer
agrees to indemnify, defend and hold Seller and each Shareholder harmless from
and against each, any, and all Claims asserted by a third party or parties
against Seller or any Shareholder arising from, based upon, or on account of any
breach, failure to perform, or non-fulfillment by Buyer of any covenant,
agreement, term, condition, certificate, representation, or warranty contained
in this Agreement; provided, however, that the obligation to indemnify hereunder
shall in no event exceed, in the aggregate, the amount of the Purchase Price. As
to each Claim, the obligations arising hereunder shall include but not be
limited to an obligation to pay to or for Seller and Shareholders all costs
incurred in investigating, defending, or settling such Claim (including all
reasonable attorneys' or experts' fees).
7.3 Limitations. The right to indemnification under Section 7.1 or Section
7.2 is subject to the following limitation: no party shall be entitled to
indemnification until the aggregate amount of all Claims that would be
indemnifiable for such party but for application of this Section 7.3 exceeds
Thirty Thousand and no/100 Dollars ($30,000), whereupon such party shall become
entitled to indemnification for all such Claims. In addition, Seller's and
Shareholders' obligation to indemnify shall be net of the effect of any tax
benefit realized by Buyer arising from such Claims, and the aggregate amount of
all Claims for which Seller and Shareholders shall be held liable shall not
exceed the Purchase Price as adjusted.
7.4 Conditions of Indemnification. The obligation to indemnify any party
(the "Indemnified Party") with respect to each Claim also shall be subject to
the following terms and conditions: (a) the Indemnified Party will give prompt
notice of any such Claim to the other party(ies) hereto (the "Indemnifying
Party"), and the Indemnifying Party (or any of them) shall have the right to
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undertake the defense thereof and compromise and settle such Claim at the
Indemnifying Party's expense using counsel chosen by the Indemnifying Party; and
(b) if within forty-five (45) days after receipt of notice of any such Claim,
the Indemnifying Party shall fail to assume the defense thereof, the Indemnified
Party shall (after notice to the Indemnifying Party) have the right to undertake
the defense of such Claim, subject to the right of the Indemnifying Party to
assume the defense of such Claim at any time prior to final resolution thereof
upon the prior payment to the Indemnified Party of all attorneys' and experts'
fees theretofore expended by the Indemnified Party in defense of such Claim.
7.5 Investigation. Seller and Shareholders acknowledge and agree that,
notwithstanding any right of Buyer fully to investigate the affairs of Seller
and notwithstanding any knowledge of facts determined or determinable by Buyer
pursuant to any such investigation, Buyer has the right to rely upon the
representations, warranties, covenants, and agreements of Seller and
Shareholders contained in this Agreement, and regardless of any knowledge or
facts determined or determinable by such an investigation, such representations,
warranties, covenants, and agreements, and Buyer's right to rely, and its
reliance thereon, shall not be affected in any way by any such knowledge or
investigation.
7.6 Risk of Loss. The risk of destruction of or loss or damage to any part
of the Property Sold arising from any actual or proposed condemnation or taking
of any part of the Property Sold by governmental authority or by exercise of the
power of eminent domain, or from any fire, explosion, riot, flood, war, or other
cause shall remain with Seller until Closing. If Seller becomes aware of any
such actual or potential taking, loss, damage, or destruction, Seller will
promptly notify Buyer of all particulars thereof and will cause any such
affected property to be replaced or to be repaired and restored to its condition
existing prior to such loss, damage, or destruction, at Seller's expense. If
such damaged property is not completely replaced or repaired and restored to its
former condition before Closing then Buyer at its sole option may: (a) by notice
to Seller postpone the Closing Date until such time as the property shall have
been completely replaced or repaired and restored, or (b) by notice to Seller
abandon and terminate this Agreement and all obligations of Buyer hereunder, or
(c) effect Closing on the Closing Date as initially established, in which event
(i) Seller shall assign to Buyer all then unexpended proceeds of insurance
received or to be received by Seller with respect to the Property Sold, and (ii)
Buyer and Seller shall agree upon an appropriate reduction in the Purchase Price
reflecting any then existing uninsured loss, damage, or destruction to the
Property Sold.
8. BUYER'S REPRESENTATIONS AND WARRANTIES.
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To induce Seller to enter into and perform pursuant to this Agreement,
Buyer represents and warrants to Seller that each of the following is true:
8.1 Organization. Buyer is a limited liability company duly organized,
validly existing, and in good standing under the laws of the Commonwealth of
Virginia and has full legal power and authority to conduct its business as it is
now being conducted and to own its properties and assets.
8.2 Authorization for Agreement. Buyer's execution and delivery of this
Agreement have been duly and validly authorized by all necessary legal action on
the part of Buyer, and, relying on Seller's and Shareholders' representations
and warranties herein, this Agreement constitutes a legal, valid, and binding
obligation of Buyer. As of Closing execution and delivery of the Note, the
Security Agreement, and the Noncompetition Agreements will have been duly
authorized by all necessary legal action on the part of Buyer, and when executed
and delivered each will constitute a valid and binding obligation of Buyer.
Buyer's execution of, delivery of, performance of, compliance with, and Closing
of this Agreement will not (a) constitute or result in a breach of (or default
under) any term, condition, or provision of any articles of incorporation,
bylaw, contract, mortgage, lien, indenture, lease, agreement, commitment,
arrangement or understanding, or any other instrument to which Buyer is a party
or by or to which it or any of the Buyer's property is bound or subject, (b) to
Buyer's knowledge violate any statute, law, ordinance, rule, regulation,
judgment, or order binding upon or applicable to Buyer, in whole or in part, (c)
to Buyer's knowledge expose Seller or Buyer to any liability or penalty under
any law, (d) to Buyer's knowledge adversely affect the validity, continuation,
or effectiveness of any permit, license, franchise, or right enjoyed by Buyer,
(e) give any party to any contract, or any other agreement to which Buyer is a
party, any right of cancellation or termination, or (g) give anyone any right to
accelerate the maturity of any indebtedness for which Buyer is a direct or
indirect, or primary or secondary, obligor, or to claim any fraud, default, or
breach with respect to anyone or any such indebtedness.
8.3 Execution, Validity. This Agreement is lawful and has been duly
executed and delivered by Buyer, which execution and delivery by Buyer was duly
and validly authorized by all necessary company action by Buyer and its members,
and this Agreement constitutes a legal, valid, and binding agreement of Buyer
enforceable against Buyer in accordance with its terms.
8.4 Litigation. Buyer is not a party to any pending or threatened
litigation or proceeding that affects in any material, adverse manner Buyer's
power, authority, or ability to effect Closing.
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8.5 Compliance. Buyer has complied with each applicable term, covenant,
agreement, and condition of this Agreement.
9. CONDITIONS TO SELLER'S OBLIGATIONS:
As conditions precedent for the sole benefit of Seller, which Seller may
waive only by and to the extent of its express written waiver given hereafter,
Closing and each obligation of Seller under this Agreement shall be subject to
and conditioned upon Seller being satisfied, on or before and as of Closing, of
each of the following:
9.1 Representations and Warranties. Unless waived, each of Buyer's
representations and warranties contained here in Section 8. shall be in all
material respects true and correct when made, shall be deemed to be made again
at and as of Closing, and they shall be in all material respects true and
correct as of Closing. Each material term, covenant, agreement, and condition of
this Agreement to be complied with or performed by Buyer until, at, or prior to
Closing shall have been complied with or performed in all material respects, or
waived by Seller, this Agreement shall not have been terminated by Seller as
permitted hereby, and nothing then shall (and no action shall have been
commenced seeking to) restrain, inhibit, penalize, or prohibit Closing.
9.2 Delivery. Buyer shall have delivered to Seller each item listed in
paragraph 3.3.
10. MISCELLANEOUS:
10.1 Notices. Each notice, consent, request, demand, or other communication
required or permitted hereunder must be in writing and shall be deemed to have
been duly given only upon the earlier of receipt thereof (by facsimile or
otherwise) or ten (10) days after having been mailed, certified or registered
United States mail, postage prepaid, addressed as follows:
(a) if to Seller or Shareholders:
Central Printing Corporation
Post Office Box 620
Gaylord, Michigan 49734
Copy to:
Samuel T. Stahl, Esquire
Honigman, Miller, Schwartz and Cohn
2290 First National Bank Bldg.
660 Woodward Avenue
Detroit, Michigan 48226-3583
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(b) if to Buyer;
Upper Michigan Newspapers, LLC
c/o Brill Media Company, L.P.
420 NW Fifth Street, Suite 3-B
Evansville, Indiana 47708
Attention: Mr. Alan R. Brill
copy to:
Charles W. Laughlin, Esquire
Thompson & McMullan
100 Shockoe Slip
Richmond, Virginia 23219
or when so received or mailed to such other place or person as a party hereafter
may from time to time have designated in a prior written notice to the other
party given as herein required.
10.2 Survival. Each covenant, representation, and warranty made by Seller,
Shareholders, or Buyer in this Agreement or at Closing shall survive the Closing
and shall remain operative and in full force and effect regardless of Closing or
of any investigation made or knowledge obtained by or on behalf of Seller,
Shareholders, or Buyer at any time prior to Closing and shall survive Closing
for a period of eighteen (18) months, except that the representations and
warranties contained in Section 4.10 shall survive for the applicable statute of
limitations period, and the representations and warranties contained in sections
4.6, 4.16 and section 8.2 shall survive indefinitely.
10.3 Limitations.
(a) Concerning actions by Buyer to recover damages for any default or
breach of contract (or for indemnification) under this Agreement:
(i) Buyer shall name Seller as a co-defendant with any Shareholder
defendants unless Seller then has been dissolved, either by action of the
Shareholders or by operation of law;
(ii) collection of any judgment for any such default, breach, or
indemnification shall first be recouped, offset against, and satisfied out
of that part of any balance then still owing on the Notes that becomes
payable within the twelve months immediately following entry of such
judgment, and
(iii) in no event shall any Shareholder's individual aggregate
liability for any such defaults, breaches, indemnifications, or judgments
exceed an amount equal to the
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Purchase Price as adjusted multiplied by such Shareholder's percentage
reflected on Exhibit 10.3.
(b) No Shareholder shall be held liable for a violation of his
Noncompetition Agreement solely because of another Shareholder's violation of a
Noncompetition Agreement.
10.4 Successors and Assigns. This Agreement and each provision hereof shall
be biding upon and inure to the benefit of the parties hereto and their
respective successors and assigns and may not be assigned without the prior
written consent of all parties hereto.
10.5 Indemnity Concerning Brokers. Buyer and Seller represent and warrant
each to the other that Dirks, Van Essen & Associates is the only broker
connected with this transaction, and Seller shall be solely responsible for, and
will indemnify, defend, and hold Buyer harmless from any and all commissions,
fees, expenses, or charges due and owing on account of services rendered to
Seller. Seller agrees to indemnify, defend, and save harmless Buyer from and
against each liability, cost, or expense, including attorneys' fees, that may be
asserted on account of any broker's commission or similar obligation or by
reason of any agreement made by Seller or Shareholders with any broker or
finder.
10.6 Additional Remedies. Without waiving or prejudicing and in addition to
and not to the exclusion of or in limitation of any other rights or remedies
available to Buyer hereunder, or otherwise, upon and for Seller's or
Shareholders' material default under or breach or prospective breach of any
covenant, agreement, term, condition, representation, or warranty contained in
this Agreement, at its sole election Buyer shall be entitled but not obligated
to do each or any one or more of the following: (a) to obtain specific
performance or injunctive relief (since monetary damages will not be sufficient
to afford Buyer full compensation for any such breach or breaches), or (b) to
take any action including the making of any payment or payments necessary to
cure any such default or breach not cured before the thirtieth (30th) day after
receiving notice thereof from Buyer, or (c) to bring an action to recover
damages for such default or breach of contract (either with or without an action
for injunctive relief) and either (i) to enforce any resulting judgment in favor
of Buyer as permitted by law or (ii) to offset and deduct the amount of any such
judgment and the costs of any such action (including, without limitation,
interest on any such payment at the rate of ten percentum per annum, and
reasonable attorneys' fees), in whole or in part, (x) from the Purchase Price,
or (y) from any collections on Seller's accounts receivable, or (z) from any
payment thereafter due on the Purchase Price or one or more of the Notes;
provided, however, that such offset and deduction may and shall not be taken
until the amount thereof shall have been agreed upon by Buyer and
28
<PAGE>
Seller or established by the judgment of a court of competent jurisdiction in
such action.
10.7 Amendment and Waiver. Except for a waiver by Buyer pursuant to Section
6., or by Seller pursuant to Section 9., no term or condition of this Agreement
may be amended or its observance waived (whether generally or in a particular
instance and whether retroactively or prospectively) except with and by Buyer's,
on the one hand, or Seller's and Shareholders' on the other hand, express
written consent. No other act, failure to act, or course of dealing by Buyer
shall be or constitute a waiver by Buyer.
10.8 Audits. At its sole expense, at any time within two (2) years
following Closing, after reasonable notice to Seller, Buyer may cause Seller's
books and records to be examined by auditors in order to produce audited
financial statements of Seller's affairs for up to three years preceding
Closing. Seller will cooperate with any such audit and auditors and will provide
to Buyer or its agents or representatives reasonable access to Seller's books,
records, and personnel for such purpose and will maintain and retain such books
and records in a reasonably orderly fashion for a period of at least three years
after Closing in order that such audit procedures may be performed.
10.9 Definitions. Wherever used in this Agreement or any instrument
incorporating such term or terms:
(a) the term "Liens" (singly, "Lien") shall mean and include each and
any liens, mortgages, security interests, pledges, title retention devices,
claims (legal or equitable, including, without limitation, liability to or
claims of any taxing authority, creditor, or other person), conditional
sale or other agreements, encumbrances, leases, trusts, options,
servitudes, rights, charges, assessments, consignments or bailments,
reservations, exceptions, encroachments, easements, rights-of-way,
conditions, restrictions, imperfections or deficiencies of title, or
liabilities of any nature and however arising [including those arising from
violation of or noncompliance with any law, ordinance, rule or regulation
(including, without limitation, municipal ordinances relating to zoning,
occupancy, or use of real property), whether recorded or unrecorded, choate
or inchoate, or appurtenant or non-appurtenant, and whether dependent on or
independent of possession, whether know or unknown, and whether now in
existence or to come into existence merely by the giving of notice or the
lapse of time, or both;
(b) the terms "knowledge", "know", or other similar phrases when used
in reference to Seller shall mean the actual knowledge without inquiry of
any of the officers, directors, or Shareholders of Seller and when used in
reference to Shareholders shall mean their actual knowledge without
inquiry; and
29
<PAGE>
(c) each of the following terms shall have the meaning defined in the
paragraph of this Agreement identified below:
Term Paragraph
---- ---------
Accountants 2.2(h)
Accounts Receivable List 3.2(h)
Act 4.23
Affiliated Contracts 6.6
Agreement Preamble
Assumed Contracts 1.1(e)
Assumption Agreements 3.4
Buyer Preamble
Claim(s) 7.1
Closing 3.1
Closing Adjustments 2.2
Closing Date 3.1
Closing Escrow Account 2.2(g)
Closing Financials 2.2(b)
Collection Period 3.6
Contract(s) 4.17
Environmental Law(s) 4.19
Escrow Agents 2.2(g)
Excluded Property 1.2
Final Settlement 2.2(b)
Financial Statements 4.4
Glasser 3.4
Hazardous Material(s) 4.19
Indemnified Party 7.4
Indemnifying Party 7.4
Inventories 1.1(d)
Lease 3.2(k)
Lien; Liens 10.9(a)
Noncompetition Agreement 3.2(g)
Noncompetition Agreements 6.7
Note(s) 2.1
Permitted Liens 4.6
Preliminary Adjustment 2.2(a)
Preliminary Financials 2.2(a)
Preliminary Settlement 2.2(a)
Property Sold 1.1
Purchase Price 2.1
Real Property 1.1(a)
Security Agreement 2.3
Seller Preamble
Seller's Counsel 3.2(d)
Shareholders Preamble
Statement 2.2(h)
10.10 Governing Law. This Agreement, its enforceability or interpretation,
and the legal relationships between Buyer,
30
<PAGE>
Seller, and Shareholders created hereby shall be governed by and construed in
accordance with the laws of the State of Michigan, notwithstanding application
of laws or choice of law principles.
10.11 Headings. The headings of the Sections and paragraphs of this
Agreement are for convenience only and are not a substantive part hereof.
10.12 Entire Agreement. This Agreement, including its exhibits, contains
the entire understanding of the parties hereto with respect to the subject
matter hereof; there are no other representations and warranties made by any
party hereto other than as expressly set forth herein; no party hereto will rely
on any information, representation, or warranty except as expressly set forth
herein, and any and all prior understandings or agreements among Buyer, Seller,
and Shareholders (their agents, principals, or representatives) are merged into
this Agreement, which replaces and supersedes all prior memoranda,
understandings, representations, correspondence, agreements, conversations, and
negotiations concerning the subject matter hereof.
10.13 Counterparts. This Agreement may be executed in any number of
counterparts, and when Seller, Shareholders, and Buyer shall have executed at
least one such counterpart they shall constitute but one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused their signatures to be
hereunto appended and affixed by their duly authorized representatives as of the
day, month, and year first above written.
Buyer:
CENTRAL PRINTING SERVICE, LLC
by: Upper Michigan Management, Inc.
its manager
by: /s/
------------------------------
a duly authorized officer
Seller:
CENTRAL PRINTING CORPORATION
by /s/ JAMES R. GLASSER
---------------------------------
a duly authorized officer
31
<PAGE>
Shareholders:
/s/ GORDON G. EVERETT
-----------------------------------
Gordon G. Everett, Trustee
/s/ DANIEL F. WALSH
-----------------------------------
Daniel F. Walsh, Trustee
/s/ JAMES R. GLASSER
------------------------------------
James R. Glasser
/s/ AUGUST A. TRANQUILLA
-----------------------------------
August A. Tranquilla
/s/ CLARA TRANQUILLA
-----------------------------------
Clara Tranquilla
/s/ WILLIAM L. EZO
-----------------------------------
William L. Ezo
/s/ JEFFERY BODETTE
-----------------------------------
Jeffery Bodette
/s/ FRANK E. NOVERR
-----------------------------------
Frank E. Noverr
/s/ PAUL GUNDERSON
------------------------------------
Paul Gunderson
/s/ DOUGLAS C. JOHNSON
-----------------------------------
Douglas C. Johnson
32
<PAGE>
/s/ SHERRY L. JOHNSON
------------------------------------
Sherry L. Johnson
Escrow Agents:
/s/ ALAN R. BRILL
-----------------------------------
Alan R. Brill
/s/ JAMES R. GLASSER
-----------------------------------
James R. Glasser
33
Form of
NOTE
THE WITHIN NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD, OR OTHERWISE
TRANSFERRED OR DISPOSED OF UNLESS AND UNTIL (i) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT OR (ii) IN
THE PRIOR WRITTEN OPINION OF COUNSEL DIRECTED TO MAKER, WHICH OPINION
IS REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO COUNSEL FOR THE
MAKER, SUCH OFFER, SALE, OR OTHER TRANSFER IS IN COMPLIANCE WITH THE
ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
______________________, LLC
Promissory Note
Number ___
$_________________ _____________, 1998
For value received, ____________________, LLC, a Virginia limited liability
company ("Maker"), promises to pay to __________________, a Michigan corporation
with its principal office presently located in Gaylord, Michigan ("Payee"), or
order to the record holder hereof, at 1966 South Otsego Avenue, Gaylord,
Michigan 49735, the principal sum of [here insert in each note the amount of the
relevant Shareholder's percentage of $1,750,000.00] in lawful money of the
United States of America, together with simple interest in like money at the
rate of seven percentum (7%) per annum, from the date hereof until payment in
full, on any principal balance hereof from time to time then remaining unpaid,
such principal and interest to be due and payable in the following manner on the
following obligatory schedule:
except as and to the extent anticipated or prepaid, in whole or in
part, and subject to Maker's claim(s) in recoupment and rights of
offset and any necessary adjustments therefor, all as and to the
extent herein provided for, quarterly during the period from the date
hereof until ___________________, 2004, in equal payments each in the
amount of ___________________________ and no/100 Dollars
<PAGE>
($________.00) [to be calculated as if the principal and interest on
this note were to be amortized in quarterly payments over a period of
ten (10) years], each due and payable on the ___ day of _____________,
______________, ___________________, and ___________________, in each
year until the ___ day of ________ in the year 2004 when the amount of
all then unpaid principal and interest shall be due and payable in
full.
The Maker reserves the right to anticipate and prepay at any time or from
time to time, without penalty, all or any part of the indebtedness evidenced by
this note. Any partial prepayment of principal also shall include accrued
interest on the unpaid principal balance to the date of such prepayment, and
each prepayment shall be applied to and be deducted from the scheduled
obligatory payments falling due hereunder in the inverse order of their
scheduled due dates. All prepayments on this note shall be recorded when made on
the reverse side hereof by the then record holder of this note.
This note (as the "Note" identified therein) and all rights of Payee or any
record holder hereof are made, issued, and created in reliance upon, pursuant
and subject to the terms and provisions of, and as part of the same transaction
that gave rise to (a) a certain Assets Purchase Agreement dated
_________________, 1998, by and among Maker, Payee, and certain of Payee's
Shareholders (the "Agreement"), and (b) a certain Noncompetition Agreement of
even date with the Agreement and entered into by and between the Maker and [here
insert relevant Shareholder's name] as "Principal" (the "Noncompetition
Agreement") all provisions of which (including all definitions) are incorporated
herein by reference as if set forth herein word for word.
The principal amount of this note and payment of the principal balance and
interest hereon and all amounts payable hereunder when otherwise due and payable
are subject to Maker's prior claim(s) in recoupment and rights of offset and/or
postponement and accordingly shall be discharged as against the Payee and any
subsequent record holder hereof in the amount and as and for the reasons and as
and to the extent provided for and described in the Agreement and also, with
respect to the Noncompetition Agreement, as follows:
From and after the tenth day following the initial filing date of any
action filed by the Maker against the Principal (the "Principal")
named in the Noncompetition Agreement (the "Action") in a court of
competent jurisdiction for one or more breaches or violations by
Principal of the Noncompetition Agreement and seeking injunctive
relief, along with any
2
<PAGE>
other relief demanded, the Maker shall not be required to make any
scheduled obligatory payment of principal or interest on this note
until such time as the Action shall have been finally determined by a
final non-appealable judgment, except during an appeal by Maker from a
judgment adverse to Maker.
Upon final determination of the Action by entry of a final
non-appealable judgment: (a) if the court shall have determined in
such Action that Principal has violated or breached the Noncompetition
Agreement, then, in addition to any other relief awarded to Maker,
Maker shall be entitled to recoup and offset against the then
principal balance of this note (including from the scheduled
obligatory principal or interest payments otherwise deferred during
the Action's pendency) the sum of: (x) the amount of damages, if any,
awarded to the Maker in the Action, (y) the amount of liquidated
damages specified in the Noncompetition Agreement, less the amount of
any damages described in (x), if any, and (z) all costs and expenses
reasonably incurred by Maker in the Action, together with reasonable
attorneys' and experts' fees, and
(b) if the court shall have determined in such Action that Principal
has not violated or breached the Noncompetition Agreement, then
Principal shall be entitled to recover from the Maker (a) payment of
all amounts of principal and interest that Maker was not required to
pay during pendency of the Action, and (b) payment of all costs and
expenses reasonably incurred by Principal in the Action together with
reasonably attorneys' and experts' fees.
Any amount recouped or offset against this note by Maker as herein
provided for in (x) or (y) of subparagraph (a) above shall first be
deducted from the then principal balance of this Note as if a payment
of principal in that amount then had been made, and all scheduled
obligatory payments on the Note shall be recalculated and the new
schedule entered hereon on the face of this Note.
3
<PAGE>
To the extent only as in such agreement expressly provided, this note is
secured by a Security Agreement made by Maker, Central Printing Service, LLC and
Advertisers P.S., LLC as Buyers and Payee, Central Printing Corporation, and
Advertiser's Postal Service Corporation as Sellers of even date herewith and
given pursuant to and identified in the Agreement.
The following, and only the following, shall constitute an "Event of
Default" under this note:
(a) any failure of Maker to make (or to cause to be made) to (i) Payee or
(ii) any other then record holder of this note any scheduled obligatory payment
of principal or interest as and when due and payable, which failure shall have
continued for a period of at least ten (10) consecutive calendar days after
written notice describing such failure has been given to Maker by Payee or such
other record holder hereof, or
(b) the commencement by Maker of a voluntary case under and within the
meaning of the federal Bankruptcy Code, or
(c) entry by a court of competent jurisdiction of an order in an
involuntary case commenced against Maker under and within the meaning of the
federal Bankruptcy Code that (i) forbids the Maker to continue to use, acquire,
or dispose of property as if no such involuntary case had been commenced, or
(ii) is for relief against Maker, or (iii) appoints an interim trustee to take
possession of Maker's property, or (iv) orders the liquidation of Maker, and, in
each case, ninety (90) consecutive calendar days shall have elapsed since entry
of any such order, such order shall then be unstayed and effective, and such
involuntary case shall then still be pending and not dismissed, or
(d) any continuing, uncured Event of Default under any of the notes of even
date herewith made by Central Printing Service, LLC or Advertisers P.S., LLC,
and payable respectively to (i) Central Printing Corporation as payee, and (ii)
to Advertiser's Postal Service Corporation as payee.
Upon the occurrence and during the continuation of an Event of Default, and
not otherwise, the then record holder of this note, at such holder's sole
election made by a written notice ("Notice of Acceleration") executed by such
record holder (expressly referring to and describing this note and the Event of
Default) and given to Maker, may declare all of the then unpaid principal
balance of this note, together with any interest accrued thereon, to be, and
they shall thereupon become, immediately due and payable without presentment,
demand, protest, or other notice of any kind.
At any and all times the Maker shall recognize as the Payee or holder of
this note (and such Payee or holder shall be) only the
4
<PAGE>
person or persons so recorded as such holder on Maker's books and records, and
any transfer of this note or of the rights of the Payee or any other holder
hereof at any time or from time to time shall be effective only with the prior
consent of Maker and upon the recordation of such transfer in Maker's books and
records. When otherwise due and payable, each payment of principal or interest
hereunder shall be made only to such then record holder(s), and each payment to
the then record holder(s) shall discharge the Maker of any and all liability
hereunder for and to the amount of each such payment.
Any notice to Maker shall be deemed to have been given only upon the
earlier to occur of (a) actual receipt of such notice by Maker, or (b) the tenth
day after the date of deposit of such notice in the U.S. mail, postage prepaid,
certified or registered, with return receipt or proof of deliver required,
addressed to Maker at the address for Maker shown above or at such other address
for Maker as Maker then shall have notified Payee by a writing addressed to
Payee at Payee's address as shown in the Agreement.
Mere delay or failure to act shall not preclude the exercise or enforcement
of any right or remedy hereunder; all such rights and remedies shall be
cumulative and may be exercised singularly or concurrently, and the exercise or
enforcement of any one such right or remedy shall neither be a condition to nor
bar the exercise or enforcement of any other.
The rights of all parties hereto and of each record holder hereof shall be
governed by and enforced or construed only in accordance with the domestic,
substantive laws of the State of Michigan excluding those relating to conflicts
of laws.
Maker agrees to pay all reasonable attorneys' fees that may be incurred in
collecting this note after an Event of Default, but not to exceed 5% of any then
due and payable principal balance.
IN WITNESS WHEREOF, Maker has caused this note to be executed by its duly
authorized representative on the day, month, and year first above written.
_____________________________, LLC
by: UPPER MICHIGAN MANAGEMENT, Inc.
its manager
by:___________________________
a duly authorized officer
5
Star Publications Inc., Central
Printing Corporation and
Advertisers Postal Service
Corporation
- --------------------------------------------------------------------------------
Combined Financial Report
December 31, 1997
<PAGE>
Star Publications Inc., Central Printing Corporation and Advertisers Postal
Service Corporation
- --------------------------------------------------------------------------------
Contents
Report Letter 1
Financial Statements
Combined Balance Sheet 2
Combined Statement of Income and Retained Earnings 3
Combined Statement of Cash Flows 4
Notes to Combined Financial Statements 5-10
<PAGE>
Independent Auditor's Report
To the Board of Directors
Star Publications Inc., Central Printing Corporation and Advertisers Postal
Service Corporation
We have audited the accompanying combined balance sheet of Star Publications
Inc., Central Printing Corporation and Advertisers Postal Service Corporation
(the Companies) as of December 31, 1997, and the related combined statements of
income and retained earnings, and cash flows for the year then ended. These
combined financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these combined
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the combined financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the combined financial statements above present fairly, in all
material respects, the combined financial position of Star Publications, Inc.,
Central Printing Corporation and Advertisers Postal Service Corporation as of
December 31, 1997, and the results of their combined operations and their
combined cash flows for the year then ended in conformity with generally
accepted accounting principles.
As disclosed in Note 11 of the combined financial statements, the Companies sold
substantially all of their assets subsequent to December 31, 1997.
As disclosed in Note 12 of the combined financial statements, the Companies
changed their method of accounting for nonqualified retirement contracts in
1997.
Plante & Moran, LLP
Gaylord, Michigan
March 17, 1998
<PAGE>
Star Publications Inc., Central Printing Corporation and
Advertisers Postal Service Corporation
- --------------------------------------------------------------------------------
Combined Balance Sheet
December 31, 1997
Assets
Current Assets
Cash $1,084,866
Short-term bond fund 13,959
Accounts receivable, less allowance for doubtful
accounts of $12,868 1,108,158
Notes receivable - Current portion (Note 6) 67,815
Inventories (Note 3) 184,903
Prepaid expenses and other current assets 37,662
----------
Total current assets 2,497,363
Equipment and Leasehold improvements (Note 4) 1,161,021
Other Assets
Advances receivable from officer under
split dollar life insurance contract (Note 5) 115,400
Notes receivable - Noncurrent portion (Note 6) 50,508
Goodwill - Net of accumulated amortization 130,208
----------
Total other assets 296,116
Total assets $3,954,500
==========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 456,540
Accrued liabilities 434,992
Dividends payable 177,592
----------
Total current liabilities 1,069,124
Retirement Benefits payable (Note 10) 197,068
Stockholders' Equity
Common stock (Note 7) 96,384
Additional paid-in capital (Note 8) 300,106
Retained earning (Note 9) 2,291,818
----------
Total stockholders' equity 2,688,308
Total liabilities and stockholders' equity $3,954,500
==========
See Notes to Combined Financial Statements
<PAGE>
Star Publications Inc., Central Printing Corporation and
Advertisers Postal Service Corporation
- --------------------------------------------------------------------------------
Combined Statement of Income and Retained Earnings
Year Ended December 31, 1997
Sales $ 7,421,270
Cost of Sales 4,912,626
-----------
Gross Profit 2,508,644
Operating Expenses 1,782,317
-----------
Income from Operations 726,327
Other Income (Expenses)
Interest income 44,826
Interest expense (9,101)
Loss on disposal of equipment (17,844)
-----------
Other income - Net 17,881
-----------
Income - Before taxes income 744,208
Michigan Single Business Tax 58,764
-----------
Net Income 685,444
Retained Earnings - Beginning of year 2,308,941
Dividends Declared
(702,567)
-----------
Retained Earnings - End of year $ 2,291,818
-----------
See Notes to Combined Financial Statements
<PAGE>
Star Publications Inc., Central Printing Corporation and
Advertisers Postal Service Corporation
- --------------------------------------------------------------------------------
Combined Statement of Cash Flows
Year Ended December 31, 1997
Cash Flows from Operating Activities
Net income $ 685,444
Adjustments to reconcile net income to net cash
from operations:
Depreciation and amortization 377,624
Bad debt expense 33,728
Loss on disposal of equipment 17,844
(Increase) decrease in assets:
Short-term bond fund (824)
Accounts receivable (277,338)
Inventories (40,814)
Prepaid expenses and other current assets (1,755)
Increase (decrease) in liabilities:
Accounts payable 327,864
Accrued liabilities 35,497
Retirement benefits payable (49,204)
-----------
Net cash provided by operating activities 1,108,066
Cash Flows from Investing Activities
Issuance of notes receivable (5,000)
Proceeds from sale of equipment 12,470
Principal collection on notes receivable 59,974
Purchases of equipment and leasehold improvements (525,709)
Advances to officer under split dollar insurance contract (5,770)
-----------
Net cash used in investing activities (464,035)
Cash Flows from Financing Activities
Dividends paid (524,975)
-----------
Net Increase in Cash 119,056
Cash - Beginning of year 965,810
-----------
Cash - End of year $ 1,084,866
===========
See Notes to Combined Financial Statements
<PAGE>
Star Publications Inc., Central Printing Corporation and
Advertisers Postal Service Corporation
- --------------------------------------------------------------------------------
Notes to Combined Financial Statements
December 31, 1997
Note 1 - Nature of Business and Significant Accounting Policies
The accompanying combined financial statements include the accounts of Star
Publications Inc., Central Printing Corporation and Advertisers Postal
Service Corporation. The Companies share common ownership and management.
All significant intercompany transactions and balances have been
eliminated.
The Companies' primary business activities are the publication, printing
and distribution of shopping guides and advertising circulars throughout
Northern Michigan. The Companies' customers consist of distributors of home
shopping guides, retail stores and educational institutions.
Short-Term Bond Fund - The Companies' investment in a short-term bond fund
is considered to be a trading security. As a trading security, the
investment is carried at fair value with unrealized gains and losses
included in income. There were no significant unrealized gains or losses
included in income in 1997.
Inventories - Inventories are stated at the lower of cost or market. Cost
is determined by the first-in, first-out method.
Equipment and Leasehold Improvements - Equipment and leasehold improvements
are recorded at cost. Depreciation is computed using straight-line and
accelerated methods over the estimated useful lives of the assets.
Maintenance and repairs which do not extend the useful lives of the assets
are charged to expense as incurred. When depreciable assets are retired,
the cost and related accumulated depreciation is removed from the records
and the resulting gain or loss is credited or charged to income.
Goodwill - Goodwill is amortized over a fifteen year period on the straight
line basis.
Income Taxes - The Companies have elected to be taxed under the provisions
of Subchapter S of the Internal Revenue Code. Under these provisions, the
Companies do not pay federal corporate income taxes. The stockholders of
each company are liable for federal income taxes on their respective shares
of the company's income. Therefore, these statements do not include any
provision for federal income taxes.
<PAGE>
Star Publications Inc., Central Printing Corporation and
Advertisers Postal Service Corporation
- --------------------------------------------------------------------------------
Notes to Combined Financial Statements
December 31, 1997
Note 1 - Nature of Business and Significant Accounting Policies
(Continued)
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those estimates.
Fair Value of Financial Instruments - The fair value of short-term
financial instruments, including cash, trade accounts receivable and
payable, approximate their carrying amounts in the financial statements due
to the short maturity of such instruments.
Note 2 - Concentration of Credit Risk
At December 31, 1997, the Companies had cash deposits at certain banks in
excess of the federally insured limits.
Note 3 - Inventories
Inventories consist of the following at December 31, 1997:
Paper $139,917
Photo and supplies 13,608
Press supplies 17,492
Bindery supplies 3,670
Twine 1,407
Tubes 3,619
Stakes and hardware 4,040
Plastic bags 1,150
--------
Total inventories $184,903
========
<PAGE>
Star Publications Inc., Central Printing Corporation and
Advertisers Postal Service Corporation
- --------------------------------------------------------------------------------
Notes to Combined Financial Statements
December 31, 1997
Note 4 - Equipment and Leasehold Improvements
Cost of equipment and leasehold improvements are summarized as follows:
Equipment $1,791,317
Vehicles 310,821
Leasehold improvements 362,190
Office furniture 19,876
Tubes 56,049
Computer equipment 381,966
Computer software 157,443
Custom programming 81,526
----------
Total cost 3,161,188
Less accumulated depreciation 2,000,167
----------
Net carrying amount $1,161,021
----------
Note 5 - Advances Receivable from Officer Under Split Dollar Life Insurance
Contract
The Companies have entered into an agreement with a key officer to pay the
annual premium on a policy insuring his life. These premium advances will
be repaid from the death benefit or from the cash surrender value of the
policy at redemption. In accordance with the agreement, there is no
interest income accruing to the Companies related to these advances. The
cash surrender values at December 31, 1997 were approximately $57,800. The
policy has been assigned as collateral against the advances.
<PAGE>
Star Publications Inc., Central Printing Corporation and
Advertisers Postal Service Corporation
- --------------------------------------------------------------------------------
Notes to Combined Financial Statements
December 31, 1997
Note 6 - Related Party Transactions
The Companies have a common president and accounting department with APS
Mini Warehouses Partnership, Webtek Venture Partnership and Wegbuild
Venture Partnership.
Notes Receivable - The Companies have notes receivable from APS Mini
Warehouse Partnership, collateralized by the assets of the partnership,
which is controlled by individuals who have controlling interest in Star
Publications, Inc. and Advertisers Postal Service Corporation. The
Companies have a note receivable from Paul Gunderson, a stockholder. The
notes are collateralized by his stock in Central Printing Corporation. The
terms of the notes are as follows:
Original Face Maturity Date Interest Rate Balance
- --------------------------------------------------------------------------------
APS Mini Warehouse
$ 100,000 Nov. 1999 7% $ 55,057
$ 40,000 Dec. 1999 8.5% 21,628
$ 90,000 Nov, 1999 7% 34,138
Paul Gunderson
$ 2,500 Dec. 2006 None 2,500
$ 5,000 Jun. 1998 8.5% 5,000
---------
Total notes receivable 118,323
Less current portion 67,815
---------
Noncurrent portion $ 50,508
=========
Rent - Star Publications, Inc. rents two buildings from Wegbuild Venture
Partnership on a month to month basis. Three stockholders of Star
Publications, Inc.'s are the sole partners of Wegbuild Venture Partnership.
Total rent expense for the year ended December 31, 1997 was $57,375.
<PAGE>
Star Publications Inc., Central Printing Corporation and
Advertisers Postal Service Corporation
- --------------------------------------------------------------------------------
Notes to Combined Financial Statements
December 31, 1997
Note 6 - Related Party Transactions (Continued)
Central Printing Corporation rents its operating facility from Webtek
Venture Partnership at a monthly rate of $500 plus 4 percent of Central
Printing Corporation's prior month's net sales. The partners of Webtek
Venture Partnership are also stockholders of Central Printing Corporation.
The rental lease agreement is renewable annually. Total rent expense for
the year ended December 31, 1997 was $136,225.
Advertisers Postal Service rents facilities from APS Mini Warehouse
Partnership. The monthly rental amount is $1,000. The owners of APS Mini
Warehouse Partnership also own Advertisers Postal Service Corporation. The
rental lease agreement is renewable annually. Total rent expense for the
year ended December 31, 1997 was $12,000.
Note 7 - Common Stock
Common stock for each company at December 31, 1997 is as follows:
<TABLE>
<CAPTION>
Issued and
Par Autorized Outstanding
Value Shares Shares Balance
----- ------ ------ -------
<S> <C> <C> <C> <C>
Star Publications, Inc. $ 1 50,000 32,334 $ 32,334
Central Printing Corporation $ 1 100,000 60,000 60,000
Advertisers Postal Service Corp. $ 1 50,000 4,050 4,050
--------
Total $ 96,384
========
</TABLE>
Note 8 - Additional Paid-in Capital
Additional paid-in capital for each company at December 31, 1997 is as
follows:
Star Publications, Inc. $ 57,556
Central Printing Corporation 62,100
Advertisers Postal Service Corp. 180,450
----------
Total $ 300,106
==========
<PAGE>
Star Publications Inc., Central Printing Corporation and
Advertisers Postal Service Corporation
- --------------------------------------------------------------------------------
Notes to Combined Financial Statements
December 31, 1997
Note 9 - Retained Earnings
Retained earnings for each company at December 31, 1997 is as follows:
Star Publications, Inc. $ 865,642
Central Printing Corporation 809,755
Advertisers Postal Service Corporation 616,421
------------
Total $ 2,291,818
============
Note 10- Retirement Plans
401(k) Plan - The Companies have 401(k) profit-sharing plans covering
substantially all employees after one year of service. The Companies match
a certain percentage of employees contributions. Total 401(k) plan expense
for the year ended December 31, 1997 was $49,753.
Non-Qualified Retirement Contracts - The Companies maintain two
non-qualified, unfunded retirement contracts with retired officers. The
board of directors has discretion to increase or decrease the amounts of
retirement income based on provisions in the contract. All retirement
benefits shall terminate upon death of the retired officer or upon sale of
60 percent of the capital stock to person(s) having no present ownership
interest in the Company. The amount of benefits paid during 1997 was
$79,244, of which $30,040 was charged as an expense in the current year.
The net present value of estimated payments have been recorded as a
liability on the balance sheet.
Note 11- Sale of Assets
On February 23, 1998, the Companies sold substantially all their assets,
except cash or receivables. The Companies received cash of $5,547,402 and
notes totaling $3,650,154, payable in equal quarterly installments totaling
$123,233 including interest at 7% through 2004.
Note 12- Accounting Change
Retained earnings at the beginning of 1997 has been reduced by $300,397 to
correct the accounting for the non-qualified retirement contracts discussed
in Note 10. Had the contracts been accounted for correctly in prior years,
net income for 1996 would have been increased by $44,731 from the amount
previously reported.
PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)
The following unaudited pro forma financial information gives effect to a
number of transactions of the Company that have occurred since March 1, 1996.
The Company's subsidiaries, Central Missouri Broadcasting, Inc. and CMB II, Inc.
(collectively the "Missouri Properties") have entered into agreements for the
sale of substantially all of the assets of the Missouri Properties for a net
cash purchase price of approximately $7.4 million, plus assumed liabilities of
$256,000. The net book value of the assets is approximately $1.8 million at
November 30, 1997. The Company expects to record a pre-tax gain of approximately
$5.5 million after expenses. Pursuant to the terms of a time brokerage agreement
("TBA") which provides for monthly payments of $50,000 to the Missouri
Properties, the purchaser is providing operating and management services to the
Missouri Properties pending closing of the purchase. Closing of the sale and
purchase is expected to occur immediately upon the Federal Communications
Commission ("FCC") granting requisite approval for transfer of the broadcast
licenses associated with these stations. Applications for transfer of the
broadcast licenses of the Missouri Properties have been filed with the FCC by
the purchasers. A local market competitor has objected to the transfer of the
licenses and on December 12, 1997, filed with the FCC a Petition to Deny the
license transfers and to terminate the TBA. No action has been taken on the
Petition to Deny by the FCC, and the Company believes that even if the Petition
to Deny were granted, the consequences would not be material to the Company. The
Attorney General of the State of Missouri on January 9, 1998 filed a civil
investigative demand on the Company to provide documents in order to consider
whether the proposed transaction would violate federal or Missouri antitrust
laws. The Company has complied with the demand.
The Company's subsidiary, NCR II, Inc., presently provides management and
programming services to radio station KTRR-FM in Loveland, Colorado pursuant to
a TBA with Onyx Broadcasting, Inc., has executed an option to purchase
substantially all of the assets of KTRR-FM for a purchase price of $2.0 million,
and will enter into a covenant not to compete with the sellers, with a stated
consideration of $500,000, payable over its five year term. It is expected that
closing of the purchase of KTRR-FM will occur shortly after execution of a
definitive asset purchase agreement for this transaction and required approval
for transfer of the broadcast licenses by the FCC.
On December 30, 1997, the Company issued $105,000,000 of 12% Senior Notes
("Senior Notes") due in 2007 and $3,000,000 of Appreciation Notes ("Appreciation
Notes") due in 2007. The Senior Notes bear cash interest, payable semiannually,
at a rate of 7 1/2% through December 15, 1999, and at 12% after such date until
maturity. The Appreciation Notes entitle the holder to a cash payment, at
maturity, equal to the principal amount plus the amount by which the Specified
Percentage of the Value of the Company at maturity, exceeds the principal
amount. The Specified Percentage is approximately 5% and the Value of the
Company is equal to 12 times Media Cashflow for the most recent four fiscal
quarters plus the cash and cash equivalents less the aggregate amount of
Indebtedness of the Company and its subsidiaries (the terms Specified
Percentage, Value, Media Cashflow and Indebtedness are as defined in the Senior
Notes and Appreciation Notes indentures).
The Company used approximately $5.5 million of the proceeds for fees and
expenses associated with the Senior Notes and the Appreciation Notes and $74.7
million of the proceeds to refinance its existing senior notes of $70 million,
pay accrued interest of approximately $1.9 million and pay a prepayment penalty
of $2.8 million.
On October 1, 1997 two of the Company's newspaper subsidiaries acquired the
assets of Huron Postal Service, Inc. ("Huron") and Northeastern Printers, Inc.
("Northeastern"), newspapers located on the coast of Lake Huron, Michigan for
total consideration of $2.8 million.
The Company loaned approximately $900,000 of the proceeds of the Senior
Notes to Managed Affiliates and received in return therefor Managed Affiliate
Notes which are unsecured, mature on January 1, 2001 and bear interest at a rate
of 12% per annum (the Terms Managed Affiliate and Managed Affiliate Notes are as
defined in the Senior Notes indenture). Such amounts are in addition to the
$15.4 million already loaned by the Company to the Managed Affiliates at
November 30, 1997. The proceeds of such loans were used by the Managed
Affiliates to purchase property, equipment, and intangibles and to provide
working capital for operations.
<PAGE>
On February 23, 1998 the Company completed the asset acquisition of certain
newspaper publishing, printing and distribution operations located in northern
Michigan. Total consideration amounted to approximately $8.7 million and
included cash of $5.7 million and seller notes valued at $3.0 million. The
Seller Notes have a stated amount of $3.65 million and a stated rate of 7%, but
were valued at $3.0 million using a 12% effective rate (the Company's
incremental borrowing rate for similar securities) for financial reporting
purpose. In addition, the Company agreed to pay to certain of the Sellers'
shareholders approximately $0.7 million over a six year term without interest as
consideration for unsecured noncompetition agreements with such shareholders.
The noncompetition agreements were valued at $0.4 million using a 20% effective
rate for financial reporting purposes.
The pending sale of the Missouri Properties, pending purchase of KTRR-FM,
the Senior Notes financing, the Huron and Northeastern acquisitions, the Managed
Affiliate loans, the northern Michigan newspaper, printing and distribution
acquisition the Clinton acquisition and the Fargo sale are collectively referred
to as the Transactions.
The following unaudited pro forma condensed combined balance sheet of the
Company gives effect to the Transactions as if they had occurred on November 30,
1997. The following unaudited condensed combined statements of operations for
the year ended February 28, 1997 and the nine months ended November 30, 1997
give effect to the Transactions as if they had occurred March 1, 1996.
The acquisitions which comprise part of the Transactions will be accounted
for using the purchase method of accounting. The total cost of such acquisitions
will be allocated to the tangible and intangible assets acquired and liabilities
assumed based upon their respective fair values. The allocation of the
respective purchase prices of such acquisitions included in the pro forma
financial information is preliminary and is subject to revisions when additional
information concerning certain asset valuations is obtained and such revisions
could be material.
The pro forma adjustments are based on available information and certain
assumptions that the Company believes are reasonable under the circumstances.
The pro forma financial information should be read in conjunction with the
separate historical combined financial statements of The Radio and Newspaper
Businesses of Alan R. Brill, and related notes thereto. The unaudited pro forma
condensed combined financial statements are presented for illustrative purposes
only, and do not purport to be indicative of the results that actually would
have been obtained had the Transactions occurred as of the assumed dates and for
the periods presented, and are not intended to be a projection of future results
or trends.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1997
<TABLE>
<CAPTION>
ACQUISITIONS
AND
COMPANY-- DISPOSITIONS-- PRO FORMA COMBINED
HISTORICAL HISTORICAL (a) ADJUSTMENTS PRO FORMA
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Broadcasting ................ $ 13,555,820 $ (2,151,413) $ -- $ 11,404,407
Newspaper ................... 13,440,395 2,330,070 -- 15,770,465
Management fees ............. 40,000 -- 200,000(k) 240,000
------------ ------------ ------------ ------------
Total revenues ............ 27,036,215 178,657 200,000 27,414,872
Operating expenses:
Operating departments ....... 19,042,885 317,397 (213,372)(g) 19,146,910
Incentive plan .............. 627,966 -- -- 627,966
Management fees ............. 1,944,699 (192,047) 116,504(e) 1,869,156
Time brokage agreement ...... (54,500) 82,500 (28,000)(f) --
fee, net
Consulting .................... 140,992 (22,992) (118,000)(f) --
Depreciation ................ 1,025,543 (180,082) (26,615)(h) 818,846
Amortization ................ 369,484 (83,929) 253,928(i) 539,483
------------ ------------ ------------ ------------
Total operating expenses .. 23,097,069 (79,153) (15,555) 23,002,361
------------ ------------ ------------ ------------
Operating income .............. 3,939,146 257,810 215,555 4,412,511
Other income (expense):
Interest--Managed Affiliates -- -- 1,957,915(d) 1,957,915
Interest--stockholder and
affiliates, net ........... 246,909 133,937 (380,846)(l) --
Interest--other, net ........ (7,190,504) 961,656 (7,724,607)(b)(c)(j) (13,953,455)
Amortization of deferred
financing costs ........... (488,712) 76,348 (142,540)(b)(c) (554,904)
Gain on sale of assets, net . 1,076,181 (1,067,360) -- 8,821
Other, net .................. (68,689) 13,095 -- (55,594)
------------ ------------ ------------ ------------
Total other income(expense) (6,424,815) 117,676 (6,290,078) (12,597,217)
------------ ------------ ------------ ------------
Loss before income taxes ...... (2,485,669) 375,486 (6,074,523) (8,184,706)
Income tax provision .......... 286,504 (14,300) -- 272,204
------------ ------------ ------------ ------------
Net loss ...................... $ (2,772,173) $ 389,786 $ (6,074,523) $ (8,456,910)
============ ============ ============ ============
<CAPTION>
STAR GROUP
ACQUISITION PRO FORMA COMBINED
HISTORICAL(m) ADJUSTMENTS PRO FORMA
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Broadcasting ................ $ -- $ -- $ 11,404,407
Newspaper ................... 6,620,640 -- 22,391,105
Management fees ............. -- -- 240,000
------------ ------------ ------------
Total revenues ............ 6,620,640 -- 34,035,512
Operating expenses:
Operating departments ....... 5,453,508 (319,231)(r)(s)(u) 24,281,187
Incentive plan .............. -- -- 627,966
Management fees ............. -- 331,032(t) 2,200,188
Time brokage agreement ...... -- -- --
fee, net
Consulting .................... -- -- --
Depreciation ................ 372,166 11,414(p) 1,202,426
Amortization ................ 1,567 197,832(q) 738,882
------------ ------------ ------------
Total operating expenses .. 5,827,241 221,047 29,050,649
------------ ------------ ------------
Operating income .............. 793,399 (221,047) 4,984,863
Other income (expense):
Interest--Managed Affiliates -- -- 1,957,915
Interest--stockholder and
affiliates, net ........... -- -- --
Interest--other, net ........ 34,600 (465,503)(n)(o) (14,384,358)
Amortization of deferred
financing costs ........... -- -- (544,904)
Gain on sale of assets, net . (14,626) -- (5,805)
Other, net .................. -- -- (55,594)
------------ ------------ ------------
Total other income(expense) 19,974 (465,503) (13,042,746)
------------ ------------ ------------
Loss before income taxes ...... 813,373 (686,550) (8,057,883)
Income tax provision .......... 41,793 -- 313,997
------------ ------------ ------------
Net loss ...................... $ 771,580 $ (686,550) $ (8,371,880)
============ ============ ============
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Statement of
Operations
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1997
(a) To reflect the inclusion of the results of operations of Clinton
Distribution, Inc. ("Clinton") (acquisitions closed July, 1996) and Huron Postal
Service, Inc. ("Huron") and Northeastern Printers, Inc. ("Northeastern")
(acquisitions closed October, 1997) in the period prior to their respective
acquisitions and combination with the Company. To reflect the elimination of the
results of operations of radio stations KQWB-FM and KQFN-AM located in Fargo,
North Dakota and Moorhead, Minnesota (sale closed August, 1996). To reflect the
elimination of the results of operations of Central Missouri Broadcasting, Inc.
and CMB II, Inc. in the period prior to their respective sales and dissolution
with the Company.
(b) To reflect the elimination of interest expense in the amount of
$5,891,548 and deferred financing amortization of $407,460 relating to the
existing senior notes.
(c) To reflect interest expense of $12,834,872 (at 12.2% assumed effective
rate) associated with the Senior Notes and $399,283 (at 17% assumed effective
rate) associated with the Appreciation Notes and deferred financing amortization
of $550,000.
(d) To reflect a $16.3 million loan made during fiscal 1998 and related
interest income, at the assumed effective rate of 12%, of $1,957,915 related to
the Managed Affiliates (WSTO-FM, WVJS-AM and WKDQ-FM).
(e) To reflect the additional management fee expense calculated at 5% of
revenues in the period prior to the acquisition and combination with the Company
for Clinton, Huron and Northeastern.
(f) To reflect the elimination of TBA and consulting expenses recorded in
operations for KTRR-FM prior to the acquisition and combination with the
Company.
(g) To reflect the elimination of operating expenses which represent prior
owners' compensation and benefits totaling $213,372 of Huron and Northeastern
prior to acquisition and combination with the Company.
(h) To reflect depreciation expense for purchase accounting allocations
made for the acquisitions based on preliminary allocations of consideration as
follows:
KTRR-FM HURON and NORTHEASTERN
------- ----------------------
ALLOCATED PRO FORMA ALLOCATED PRO FORMA
COST DEPRECIATION COST DEPRECIATION
--------- ------------ --------- ------------
Property and equipment $ -- $ -- $275,000 $ 19,000
======== ========
Less depreciation reported -- 45,615
-------- --------
Pro forma adjustment $ -- $ (26,615)
======== =========
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED FEBRUARY 28, 1997
(i) To reflect amortization expense for purchase accounting allocations made
for the acquisitions based on preliminary allocations of consideration as
follows:
KTRR-FM HURON and NORTHEASTERN
------- ----------------------
ALLOCATED PRO FORMA ALLOCATED PRO FORMA
COST AMORTIZATION COST AMORTIZATION
---------- ------------ ---------- ------------
FCC licenses and/or $2,000,000 $ 50,000 $1,339,037 $ 33,476
goodwill
Noncompetition agreements 179,850 35,970 672,411 134,482
---------- ---------- ---------- ----------
$2,179,850 85,970 $2,011,448 167,958
========== ==========
Less amortization reported -- --
---------- ----------
Pro forma adjustment $ 85,970 $ 167,958
========== ==========
(j) To reflect interest expense for Huron and Northeastern in the amount of
$214,000 and KTRR-FM in the amount of $168,000 related to debt incurred to
finance their respective acquisitions.
(k) To reflect income from the management agreements with the Managed
Affiliates prior to their respective effective dates of December 1, 1996 for the
WSTO-FM and WVJS-AM stations and February 1, 1997 for the WKDQ-FM station.
(l) To reflect the elimination of interest income from affiliate notes
receivable satisfied through distributions to the stockholder.
(m) To reflect the inclusion of the results of operations of the Star Group
(acquisition closed February 1998) in the period prior to its acquisition and
combination with the Company.
(n) To reflect the elimination of interest income of $34,600 of the Star
Group.
(o) To reflect interest expense of $73,860 (at 20% assumed effective rate)
associated with noncompetition agreements valued at $385,184, and interest
expense of $357,043 (at 12% assumed effective rate) associated with seller notes
valued at $3,031,524 with the former owners of the Star Group.
(p) To reflect depreciation expense for purchase accounting allocations
made for the acquisition of the Star Group based on preliminary allocation
consideration as follows:
ALLOCATED PRO FORMA
COST DEPRECIATION
---------- ------------
Property and equipment $3,025,000 $ 383,580
========== ----------
Less depreciation reported 372,166
----------
Pro forma adjustment $ 11,414
==========
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED FEBRUARY 28, 1997
(q) To reflect amortization expense for purchase accounting allocations
made for the acquisition of the Star Group based on preliminary allocations of
consideration as follows:
ALLOCATED PRO FORMA
COST DEPRECIATION
---------- ------------
Goodwill $5,408,082 $ 135,202
Noncompetition agreements 385,184 64,197
---------- ----------
$5,793,266 199,399
==========
Less amortization reported 1,567
----------
Pro forma adjustment $ 197,832
==========
(r) To reflect the elimination of operating expenses which represent prior
owners' compensation and benefits of $221,573 of the Star Group prior to
acquisition and combination with the Company.
(s) To reflect the elimination of prior owners' director's fees of $40,250
of the Star Group prior to the acquisition and combination with the Company.
(t) To reflect the additional management fee expense of $331,032 calculated
at 5% of revenues in the period prior to the acquisition and combination with
the Company for the Star Group.
(u) To reflect the reduction of certain facility lease costs associated
with lease agreements with the prior owners of the Star Group consummated
simultaneously with the acquisition of the Star Group assets.
PRO FORMA
LEASE EXPENSE
-------------
Lease expense per lease agreements $ 140,000
Less lease expense reported 197,408
---------
Pro forma adjustment $ (57,408)
=========
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT
OF OPERATIONS
NINE MONTHS ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
ACQUISITOPNS
AND
COMPANY-- DISPOSITIONS-- PRO FORMA COMBINED
HISTORICAL HISTORICAL (a) ADJUSTMENTS PRO FORMA
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Broadcasting ................. $ 11,674,292 $ (1,643,944) $ -- $ 10,030,348
Newspaper .................... 11,120,715 1,251,816 -- 12,372,531
Management fees .............. 180,000 -- -- 180,000
------------ ------------ ------------ ------------
Total revenues ............. 22,975,007 (392,128) -- 22,582,879
Operating expenses:
Operating departments ........ 15,685,093 (247,440) (120,625)(g) 15,317,028
Incentive plan ............... 545,000 -- -- 545,000
Management fees .............. 1,598,431 (143,695) 62,591(e) 1,517,327
Time brokeage ................ 36,000 -- (36,000)(f) --
Agreement fee, net
Consulting ................... 180,994 (14,994) (166,000)(f) --
Depreciation ................. 772,720 (134,268) (5,367)(h) 633,085
Amortization ................. 525,165 (61,838) 162,454(i) 625,781
------------ ------------ ------------ ------------
Total operating expns ...... 19,343,403 (602,235) (102,947) 18,638,221
------------ ------------ ------------ ------------
Operating income ............... 3,631,604 210,107 102,947 3,944,658
Other income (expense):
Interest--Managed Affltes .... 1,220,225 -- 248,212(d) 1,468,437
Interest--stockholder and
affiliates, net ............ 193,318 93,391 (286,709)(k) --
Interest--other, net ......... (7,450,455) 879,928 (3,904,853)(b)(c)(j) (10,475,380)
Amortization of deferred
financing costs ............ (481,824) 81,388 (12,064)(b)(c) (412,500)
Loss on sale of assets, net .. (6,592) -- -- (6,592)
Other, net ................... (44,808) 9,238 -- (35,570)
------------ ------------ ------------ ------------
Total other income expense.. (6,570,136) 1,063,945 (3,955,414) (9,461,605)
------------ ------------ ------------ ------------
Loss before income taxes ....... (2,938,532) 1,274,052 (3,852,467) (5,516,947)
Income tax provision ........... 102,750 9,275 -- 112,025
------------ ------------ ------------ ------------
Net loss ....................... $ (3,041,282) $ 1,264,777 $ (3,852,467) $ (5,628,972)
============ ============ ============ ============
<CAPTION>
STAR GROUP
HISTORICAL PRO FORMA COMBINED
ACQUISITION (l) ADJUSTMENTS PRO FORMA
--------------- -------------- ------------
<S> <C> <C> <C>
Revenues:
Broadcasting ................. $ -- $ -- $ 10,030,348
Newspaper .................... 4,962,378 -- 17,334,909
Management fees .............. -- -- 180,000
------------ ------------ ------------
Total revenues ............. 4,962,378 -- 27,545,257
Operating expenses:
Operating departments ........ 4,020,140 (223,663)(q)(r)(t) 19,113,505
Incentive plan ............... -- -- 545,000
Management fees .............. -- 248,119(s) 1,765,446
Time brokeage ................ -- -- --
Agreement fee, net
Consulting ................... -- -- --
Depreciation ................. 208,083 79,604(o) 920,772
Amortization ................. 7,059 142,491(p) 775,331
------------ ------------ ------------
Total operating expns ...... 4,235,282 246,551 23,120,054
------------ ------------ ------------
Operating income ............... 727,096 (246,551) 4,425,203
Other income (expense):
Interest--Managed Affltes .... -- -- 1,468,437
Interest--stockholder and
affiliates, net ............ -- -- --
Interest--other, net ......... 18,751 (341,928)(m)(n) (10,798,557)
Amortization of deferred
financing costs ............ -- -- (412,500)
Loss on sale of assets, net .. -- -- (6,592)
Other, net ................... -- -- (35,570)
------------ ------------ ------------
Total other income expense.. 18,751 (341,928) (9,784,782)
------------ ------------ ------------
Loss before income taxes ....... 745,847 (588,479) (5,359,579)
Income tax provision ........... 30,810 -- 142,835
------------ ------------ ------------
Net loss ....................... $ 715,037 $ (588,479) $ (5,502,414)
============ ============ ============
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Statement of
Operations
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED NOVEMBER 30, 1997
(a) To reflect the inclusion of the results of operations of Huron and
Northeastern in the period prior to their respective acquisitions and
combination with the Company (acquisition closed October, 1997). To reflect the
elimination of the results of operations of Central Missouri Broadcasting, Inc.
and CMB II, Inc. in the period prior to their sale and dissolution with the
Company.
(b) To reflect the elimination of interest expense in the amount of
$6,271,597 and deferred financing amortization of $400,436 related to the
existing senior notes.
(c) To reflect interest expense of $9,626,154 (at 12.2% assumed effective
rate) associated with the Senior Notes and $299,463 (at 17% assumed effective
rate) associated with the Appreciation Notes and deferred financing amortization
of $412,500.
(d) To reflect a $16.3 million loan made during fiscal 1998 and additional
related interest income, at the assumed effective rate of 12%, of $248,212
related to the Managed Affiliates (WSTO-FM, WVJS-AM and WKDQ-FM).
(e) To reflect the additional management fee expense calculated at 5% of
revenues in the period prior to the acquisition and combination with the Company
for Huron and Northeastern.
(f) To reflect the elimination of TBA and consulting expenses recorded in
operations for KTRR-FM prior to the acquisition and combination with the
Company.
(g) To reflect the elimination of operating expenses which represent prior
owners' compensation and benefits totaling $120,625 of Huron and Northeastern
prior to acquisition and combination with the Company.
(h) To reflect depreciation expense for purchase accounting allocations
made for the acquisitions based on preliminary allocations of consideration as
follows:
KTRR-FM HURON and NORTHEASTERN
------- ----------------------
ALLOCATED PRO FORMA ALLOCATED PRO FORMA
COST AMORTIZATION COST AMORTIZATION
---------- ------------ ---------- ------------
Property and equipment $ -- $ -- $ 275,000 $ 11,083
========== ==========
Less depreciation reported -- 16,450
------------ ------------
Pro forma adjustment $ -- $ (5,367)
============ ============
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED STATEMENT OF OPERATIONS (CONTINUED)
NINE MONTHS ENDED NOVEMBER 30, 1997
(i) To reflect amortization expense for purchase accounting allocations made
for the acquisitions based on preliminary allocations of consideration as
follows:
KTRR-FM HURON and NORTHEASTERN
------- ----------------------
ALLOCATED PRO FORMA ALLOCATED PRO FORMA
COST AMORTIZATION COST AMORTIZATION
---------- ------------ ---------- ------------
FCC licenses and/or $2,000,000 $ 37,500 $1,339,037 $ 19,528
goodwill
Noncompetition agreements 179,850 26,978 672,411 78,448
---------- ----------- ---------- ------------
$2,179,850 64,478 $2,011,448 97,976
========== ==========
Less amortization reported -- --
------------ ------------
Pro forma adjustment $ 64,478 $ 97,976
============ ============
(j) To reflect interest expense for Huron and Northeastern in the amount of
$124,833 and KTRR-FM in the amount of $126,000 related to debt incurred to
finance their respective acquisitions.
(k) To reflect the elimination of the interest income from affiliate notes
receivable satisfied through distributions to the Stockholder.
(l) To reflect the inclusion of the results of operations of the Star Group
(acquisition closed February 1998) in the period prior to its acquisition and
combination with the Company.
(m) To reflect the elimination of interest income of $18,751 of the Star
Group.
(n) To reflect interest expense of $55,395 (at 20% assumed effective rate)
associated with noncompetition agreements valued at $385,184, and interest
expense of $267,782 (at 12% assumed effective rate) associated with seller notes
valued at $3,031,524 with the former owners of the Star Group.
(o) To reflect depreciation expense for purchase accounting allocations
made for the acquisition of the Star Group based on preliminary allocation of
consideration as follows:
ALLOCATED PRO FORMA
COST DEPRECIATION
---------- ------------
Property and equipment $3,025,000 $ 287,685
==========
Less depreciation reported 208,081
------------
Pro forma adjustment $ 79,604
============
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED STATEMENT OF OPERATIONS (CONTINUED)
NINE MONTHS ENDED NOVEMBER 30, 1997
(p) To reflect amortization expense for purchase accounting allocations
made for the acquisition of the Star Group based on preliminary allocations of
consideration as follows:
ALLOCATED PRO FORMA
COST AMORTIZATION
---------- ------------
Goodwill $5,408,082 $ 101,402
Noncompetition agreements 385,184 48,148
---------- ----------
$5,793,266 149,550
==========
Less amortization reported 7,059
----------
Pro forma adjustment $ 142,491
==========
(q) To reflect elimination of operating expenses which represent prior
owners' compensation and benefits of $144,431 of the Star Group prior to
acquisition and combination with the Company.
(r) To reflect the elimination of prior owners' director's fees of $30,500
of the Star Group prior to the acquisition and combination with the Company.
(s) To reflect the additional management fee expense of $248,119 calculated
at 5% of revenues in the period prior to the acquisition and combination with
the Company for the Star Group.
(t) To reflect the reduction of certain facility lease costs associated
with lease agreements with the prior owners of the Star Group consummated
simultaneously with the acquisition of the Star Group assets.
PRO FORMA
LEASE EXPENSE
-------------
Lease expense per the lease agreement $ 105,000
Less lease expense reported 153,732
---------
Pro forma adjustment $ (48,732)
=========
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET
AS OF NOVEMBER 30, 1997
<TABLE>
<CAPTION>
ACQUISITION
COMPANY-- AND PRO FORMA
HISTORICAL DISPOSITION(a) ADJUSTMENTS
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash & cash equivalents ... $ 109,155 $ 5,816,205 $ 16,713,211(b)(c)(d)
Accounts receivable,
Net of allowance ........ 4,026,176 (186,874) --
doubtful accounts
Inventories ............... 483,374 -- --
Other current assets ...... 412,553 (75,727) --
------------- ------------- -------------
Total current assets .. 5,031,258 5,553,604 16,713,211
Notes receivable from Managed
Affiliates .............. 15,423,339 -- 892,623(d)
Property and equipment ...... 17,383,715 (2,613,302) --
Less accumulated depreciation (8,561,054) 1,844,659 --
------------- ------------- -------------
Net property and ...... 8,822,661 (768,643) --
equipment
Goodwill and FCC licenses, .. 6,670,508 1,253,221 --
net
Covenants not to compete, ... 3,650,786 99,960 --
net
Other assets, net ........... 1,852,769 (150,790) 4,038,133(b)(c)
Other long term assets ...... 223,349 (214,672) --
------------- ------------- -------------
12,397,412 987,719 4,038,133
------------- ------------- -------------
Total assets ................ $ 41,674,670 $ 5,772,680 $ 21,643,967
============= ============= =============
LIABILITIES AND NET CAPITAL DEFICIENCY
Current liabilities:
Short term notes .......... $ 500,000 $ -- $ --
Due to affiliates ......... 110,245 (2,845) --
Accounts payable .......... 1,199,183 (112,287) --
Other accrued expenses .... 617,254 (13,692) --
Current maturities of
Long-term obligations ... 745,855 (232,031) --
------------- ------------- -------------
Total current liabilities . 3,172,537 (360,855) --
Long-term obligations:
Senior notes .............. 70,904,166 -- 23,557,110(b)(c)
Secured seller ............ 1,311,138 1,045,217 --
obligations
Mortgages & purchase money 1,048,712 (173,174) --
Obligations under capital . 868,267 (362,095) --
leases
Secured subordinated ...... 1,055,050 -- --
obligations
Appreciation Notes ........ -- -- 2,348,724
Unsecured obligations ..... 1,218,900 (202,515) --
Incentive plan liability .. 4,700,000 -- --
Less current maturities
Of long-term obligations .. (745,855) 232,031 --
------------- ------------- -------------
80,360,378 539,464 25,905,834
Capital deficiency:
Capital ................... 7,770 (1,100) --
Additional paid-in ........ 1,792,852 -- --
capital
Accumulated deficit ......... (43,658,867) 5,595,171 (4,261,867)(b)
------------- ------------- -------------
Net capital
deficiency ......... (41,858,245) 5,594,071 (4,261,867)
------------- ------------- -------------
$ 41,674,670 $ 5,772,680 $ 21,643,967
============= ============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMBINED STAR GROUP COMBINED
PRO FORMA ACQUISITION(e) PRO FORMA
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash & cash equivalents ... $ 22,638,571 $ (5,674,231) $ 16,964,340
Accounts receivable,
Net of allowance ........ 3,839,302 -- 3,839,302
doubtful accounts
Inventories ............... 483,374 231,634 715,008
Other current assets ...... 336,826 41,039 377,865
------------- ------------- -------------
Total current assets .. 27,298,073 (5,401,558) 21,896,515
Notes receivable from Managed
Affiliates .............. 16,315,962 -- 16,315,962
Property and equipment ...... 14,770,413 3,025,000 17,795,413
Less accumulated depreciation (6,716,395) -- (6,716,395)
------------- ------------- -------------
Net property and ...... 8,054,018 3,025,000 11,079,018
equipment
Goodwill and FCC licenses, .. 7,923,729 5,408,082 13,331,811
net
Covenants not to compete, ... 3,750,746 385,184 4,135,930
net
Other assets, net ........... 5,740,112 -- 5,740,112
Other long term assets ...... 8,677 -- 8,677
------------- ------------- -------------
17,423,264 5,793,266 23,216,530
------------- ------------- -------------
Total assets ................ $ 69,091,317 $ 3,416,708 $ 72,508,025
============= ============= =============
LIABILITIES AND NET CAPITAL DEFICIENCY
Current liabilities:
Short term notes .......... $ 500,000 $ -- $ 500,000
Due to affiliates ......... 107,400 -- 107,400
Accounts payable .......... 1,086,896 -- 1,086,896
Other accrued expenses .... 603,562 -- 603,562
Current maturities of
Long-term obligations ... 513,824 -- 513,824
------------- ------------- -------------
Total current liabilities . 2,811,682 -- 2,811,682
Long-term obligations:
Senior notes .............. 94,461,276 -- 94,461,276
Secured seller ............ 2,356,355 3,031,524 5,387,879
obligations
Mortgages & purchase money 875,538 -- 875,538
Obligations under capital . 506,172 -- 506,172
leases
Secured subordinated ...... 1,055,050 -- 1,055,050
obligations
Appreciation Notes ........ 2,348,724 -- 2,348,724
Unsecured obligations ..... 1,016,385 385,184 1,401,569
Incentive plan liability .. 4,700,000 -- 4,700,000
Less current maturities
Of long-term obligations .. (513,824) -- (513,824)
------------- ------------- -------------
106,805,676 3,416,708 110,222,384
Capital deficiency:
Capital ................... 6,670 -- 6,670
Additional paid-in ........ 1,792,852 -- 1,792,852
capital
Accumulated deficit ......... (42,325,563) -- (42,325,563)
------------- ------------- -------------
Net capital
deficiency ......... (40,526,041) -- (40,526,041)
------------- ------------- -------------
$ 69,091,317 $ 3,416,708 $ 72,508,025
============= ============= =============
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Balance Sheet
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED BALANCE SHEET
AS OF NOVEMBER 30, 1997
(a) To reflect the purchase of assets of KTRR-FM for $2 million and the
sale of all of the operating assets of Central Missouri Broadcasting, Inc. and
CMB II, Inc. for a net cash price of $7,419,000 and assumed liabilities of
$256,000. The $2 million purchase price of KTRR-FM will be allocated to goodwill
and FCC licenses. The acquisition will be financed with cash of $750,000
($200,000 already on deposit) and a $1,250,000 note payable to the seller. The
Company will also enter into a 5 year $500,000 covenant not to compete. In
connection with the sale of the Missouri Properties, the Company will repay
approximately $1.1 million of long-term debt. The pretax gain on the sale is
expected to be approximately $5.5 million, net of related expenses.
(b) To reflect payment of the senior note in the amount of $70,904,166,
related prepayment penalty of $2,800,000 and corresponding write-off of net book
value of deferred financing costs of $1,461,867.
(c) To reflect proceeds from the Senior Notes and Appreciation Notes of
$96,810,000 net of $5,500,000 to be applied towards deferred financing costs.
The Appreciation Notes have been valued at an estimated fair value of $2,348,724
based on an assumed 17% discount rate and $3,000,000 payout on the first call
date of June 15, 1999.
(d) To reflect an additional loan of $892,623 to the Managed Affiliates
(WSTO-FM, WVJS-AM, and WKDQ-FM).
CASH TRANSACTIONS
- -----------------
Payment of senior note .................................. $(70,904,166) (see b)
Payment of senior note--prepayment penalty .............. (2,800,000) (see b)
Net proceeds from the Senior Notes and Appreciation Notes 91,310,000 (see c)
Loans to Managed Affiliates ............................. (892,623) (see d)
------------
$ 16,713,211
============
ACCUMULATED DEFICIT TRANSACTIONS
Senior note--prepayment penalty......................... $ 2,800,000 (see b)
Write-off of deferred financing costs................... 1,461,867 (see b)
------------
$ 4,261,867
============
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED BALANCE SHEET (CONTINUED)
AS OF NOVEMBER 30, 1997
(e) To reflect the purchase of assets of the Star Group.
PURCHASE PRICE ALLOCATION
- -------------------------
Inventories and other current assets $ 272,673
Property and equipment 3,025,000
Goodwill 5,408,082
----------
$8,705,755
==========
CONSIDERATION
- -------------
Cash $5,674,231
Seller Notes (assumed effective interest rate of 12%) 3,031,524
----------
$8,705,755
==========
The Company also entered into six year covenants not to compete valued at
$385,184 at assumed effective interest rate of 20%.
