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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: January 28, 1999
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Liberty Group Operating, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 333-46959 36-4197636
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
3000 Dundee Road, Northbrook, Illinois 60062
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (847) 272-2244
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) On January 13, 1999 (but effective by agreement for accounting purposes
as of January 1, 1999) the Registrant purchased (i) all of the issued and
outstanding shares of capital stock (the "Life Printing Shares") of Life
Printing & Publishing Co., Inc., an Illinois corporation ("Life
Printing"), from the shareholders of Life Printing (the "Shareholders"),
and (ii) certain real property in Oak Brook, Illinois (the "Jongo Real
Property") owned by Jongo Real Estate Partnership ("Jongo"), an Illinois
general partnership and an affiliate of the Shareholders, and leased to
Life Printing.
Prior to this transaction, other than the relationship between the
Shareholders and Jongo, no material relationship existed between the
Registrant and the Shareholders or Jongo, or between any affiliates of
such entities.
At the closing of the transaction, the Registrant (a) paid to the
Shareholders $23,784,004 in cash, (b) deposited an additional $2,500,000
of the cash purchase price otherwise payable to the Shareholders into an
escrow account until April 16, 2000 pursuant to the Escrow Agreement
between the Shareholders, the Registrant's Subsidiary and Old Kent Bank,
as escrow agent, and (c) assumed approximately $285,406 of bank
indebtedness which the Registrant paid in full immediately after the
closing. In addition, the Registrant paid $2,700,000 to Jongo for the
Jongo Real Property. By acquisition of the Life Printing Shares, the
Registrant acquired substantially all of the assets owned by Life
Printing, including the mastheads, trade names, trademarks, service
marks and other marks (and the goodwill associated therewith),
subscriber lists, cash on hand as of December 31, 1998 of $1,284,004,
inventory, accounts receivable (net of a reserve for bad debts) of
$1,054,062, equipment and real property located in Berwyn, Illinois of
the newspapers published, marketed and distributed by Life Printing.
The cash portion of the purchase price in this transaction was paid out
of proceeds from an existing credit facility with Citicorp USA, Inc., as
Administrative Agent and Swingline Lender, Citibank, N.A., as Issuing
Bank, BT Alex. Brown Incorporated as Syndication Agent, Wells Fargo Bank,
N.A., as Documentation Agent and Bank of America NT & SA, as Co-Agent.
(b) The Registrant acquired (i) the Life Printing Shares from the
Shareholders and thereby acquired substantially all of the assets owned
by Life Printing in its business of publishing, marketing and
distributing newspapers and (ii) the Jongo Real Property from Jongo. The
Registrant will use these assets for the same purposes as previously used
by Life Printing.
The foregoing summary of the terms of the transaction is qualified in its
entirety by reference to the provisions of the Stock Purchase Agreement dated as
of December 16, 1998 by and between the shareholders of Life Printing, Jongo and
Registrant's Subsidiary, a copy of which is filed as an exhibit to this Report
and is hereby incorporated herein by reference.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
Audited financial statements of Life Printing required pursuant to
Regulation S-X cannot be provided at this time, but shall be filed as
soon as practicable and in no event later than 60 days after the date by
which this Report on Form 8-K is required to be filed.
(b) Pro Forma Financial Information
The pro forma financial information required pursuant to Article 11 of
Regulation S-X cannot be provided at this time, but shall be filed as
soon as practicable and in no event later than 60 days after the date by
which this Report on Form 8-K is required to be filed.
(c) Exhibits
2.1 Stock Purchase Agreement, dated as of December 16, 1998, by and
between the shareholders of Life Printing & Publishing Co., Inc.,
Jongo Real Estate Partnership and Liberty Group Operating, Inc.
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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 hereunto duly authorized.
Liberty Group Operating, Inc.
Date: January 28, 1999 By: /s/ KENNETH L. SEROTA
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Title: President and Chief Executive Officer
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Exhibit Index
Exhibit # Item
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2.1 Stock Purchase Agreement, dated as of December
16, 1998, by and between the shareholders of
Life Printing & Publishing Co., Inc., Jongo
Real Estate Partnership and Liberty Group
Operating, Inc.
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
dated as of December 16, 1998
by and between
the
SHAREHOLDERS
OF
LIFE PRINTING & PUBLISHING CO., INC.,
JONGO REAL ESTATE PARTNERSHIP
and
LIBERTY GROUP OPERATING, INC.
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TABLE OF CONTENTS
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1. PURCHASE AND SALE OF THE SHARES AND THE OAK BROOK REAL PROPERTY 1
1.1. The Shares................................................ 2
1.2. Consideration............................................. 2
1.3. The Oak Brook Real Property............................... 2
1.4. The Closing............................................... 2
2. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS................. 3
2.1. Validity of Agreement..................................... 3
2.2. Organization and Good Standing............................ 4
2.3. Capitalization............................................ 4
2.4. Title to Shares........................................... 5
2.5. No Violation or Approval.................................. 5
2.6. Financial Statements...................................... 6
2.7. Liabilities; Absence of Changes; Operations in
Ordinary Course........................................... 6
2.8. Taxes..................................................... 8
2.9. Title to Assets........................................... 9
2.10. Business Real Estate...................................... 10
2.11. Operating Condition and Repair............................ 11
2.12. Advertisers; Subscribers; Circulation..................... 11
2.13. Operations in Conformity With Law; Litigation............. 12
2.14. Welfare and Benefit Plans................................. 12
2.15. Labor Relations........................................... 13
2.16. Licenses.................................................. 14
2.17. Proprietary Rights........................................ 14
2.18. Environmental Matters..................................... 15
2.19. Employees, Officers and Directors......................... 16
2.20. Contractual Obligations................................... 17
2.21. Transactions with Affiliates.............................. 18
2.22. Inventories............................................... 18
2.23. Brokers and Finders....................................... 18
2.24. Insurance................................................. 19
2.25. Corporate Names........................................... 19
2.26. Subsidiaries of the Company............................... 19
2.27. Disclosure................................................ 19
3. REPRESENTATIONS OF THE BUYER....................................... 19
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3.1. Due Organization, Authorization and Good Standing............... 19
3.2. No Violation or Approval........................................ 20
3.3. Brokers and Finders............................................. 20
4. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER..................... 20
4.1. Representations and Warranties.................................. 20
4.2. Performance of Obligations...................................... 20
4.3. Stock Certificates.............................................. 21
4.4. Legal Opinion................................................... 21
4.5. Releases of Shareholders........................................ 21
4.6. Resignations of Officers and Directors.......................... 21
4.7. Charter Documents............................................... 21
4.8. Injunctions..................................................... 21
4.9. Consents Under Contractual Obligations.......................... 21
4.10. Governmental Approvals; HSR Clearance........................... 22
4.11. Noncompetition Agreements....................................... 22
4.12. Employment Agreement............................................ 22
4.13. Real Estate Documents........................................... 22
4.14. No Material Adverse Change...................................... 23
4.15. Consents under Buyer's Credit Arrangements...................... 23
4.16. Elimination of Liens and Encumbrances........................... 23
4.17. Payoff Letters.................................................. 24
4.18. Salary and Fringe Benefit Adjustments........................... 24
4.19. Automobile Leases............................................... 24
4.20. Termination of Death Benefit Plan............................... 24
4.21. Cash Balance Certificate........................................ 24
4.22. General......................................................... 24
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SHAREHOLDERS.................. 24
5.1. Payment of the Purchase Price................................... 25
5.2. Representations and Warranties.................................. 25
5.3. Performance of Obligations...................................... 25
5.4. Injunctions..................................................... 25
5.5. Governmental Approvals.......................................... 25
5.6. Employment Agreement............................................ 25
6. COVENANTS OF THE PARTIES................................................. 25
6.1. Access to Premises and Information.............................. 25
6.2. Lien Searches................................................... 26
6.3. Public Announcements............................................ 26
6.4. Environmental Reports........................................... 26
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6.5. Maintenance of Plans............................................ 26
6.6. Conduct of Business Prior to Closing............................ 27
6.7. No Solicitation of Other Offers................................. 28
6.8. Preparation for Closing......................................... 28
6.9. HSR Act Filing.................................................. 28
6.10. Distributions................................................... 28
6.11. Further Assurances.............................................. 28
6.12. Tax Returns; Post-Closing Date Taxes............................ 28
7. INDEMNIFICATION.......................................................... 29
7.1. Representations and Warranties.................................. 29
7.2. Other Indemnification........................................... 31
7.3. Limitations on Indemnification Obligations...................... 32
7.4. Notice of Claims................................................ 33
7.5. Defense of Claims............................................... 33
8. NOTICES.................................................................. 34
9. EXPENSES OF TRANSACTION.................................................. 35
10. ENTIRE AGREEMENT......................................................... 35
11. BINDING EFFECT........................................................... 35
12. GOVERNING LAW............................................................ 35
13. COUNTERPARTS............................................................. 36
14. HEADINGS................................................................. 36
15. TERMINATION.............................................................. 36
16. CONFIDENTIAL INFORMATION................................................. 37
17. DISCLOSURE SCHEDULE...................................................... 37
18. KNOWLEDGE................................................................ 37
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of December
16, 1998, is by and between the persons listed on Schedule 1 attached hereto
(collectively, the "Shareholders" and each individually a "Shareholder"), Jongo
Real Estate Partnership, an Illinois general partnership (the "Landlord"), and
Liberty Group Operating, Inc., a Delaware corporation (the "Buyer").
RECITALS
A. Life Printing & Publishing Co., Inc., an Illinois corporation (the
"Company"), is engaged in the business of publishing, marketing and distributing
those certain newspapers identified on Exhibit A attached hereto (the
"Publications") and operations associated therewith (the "Business").
B. The Shareholders collectively own, beneficially and of record, 300
issued and outstanding shares of Common Stock (the "Shares"), which Shares
represent all of the outstanding capital stock of the Company as of the date
hereof.
C. The Landlord owns certain real property leased to the Company and
identified on Exhibit B attached hereto (the "Oak Brook Real Property").
D. The Buyer desires to purchase from the Shareholders and the
Landlord, and the Shareholders and the Landlord desire to sell to the Buyer, the
Shares and the Oak Brook Real Property for the consideration, on the terms and
subject to the conditions set forth in this Agreement.
AGREEMENTS
In consideration of the recitals, the premises, the respective
representations, warranties and covenants of the Buyer, the Shareholders and the
Landlord set forth below and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. PURCHASE AND SALE OF THE SHARES AND THE OAK BROOK REAL PROPERTY.
1.1. The Shares. Subject to compliance with all the terms and
conditions of this Agreement and in reliance on the representations and
warranties set forth in this Agreement, the Shareholders agree to sell to the
Buyer, and the Buyer agrees to purchase from the Shareholders, at the Closing
all of the Shares, free and clear of any and all liens, claims, charges, taxes,
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encumbrances, security interests, mortgages, deeds of trust, pledges, leases,
easements, claims of equitable interests, rights or restrictions of any kind
whatsoever (the "Liens and Encumbrances"), for the Share Purchase Price (as
hereinafter defined).
1.2. Consideration. The purchase price to be paid to the Shareholders
by the Buyer for all of the Shares shall be an aggregate amount equal to
$25,000,000 plus the amount of any cash or cash equivalents of the Company as of
December 31, 1998 (excluding cash necessary to satisfy the payment of all
outstanding checks (other than checks in payment of payroll accruing since
December 18, 1998) written by the Company on or prior to December 31, 1998 and
outstanding as of the close of business on such date ("Retained Cash")) that is
not distributed pursuant to Section 6.10 hereof as certified to the Buyer at the
Closing (the "Share Purchase Price"). The Share Purchase Price shall be payable
as specified in Section 1.4 hereof.
1.3. The Oak Brook Real Property.
(a) Subject to compliance with all the terms and conditions of
this Agreement and in reliance on the representations and warranties set forth
in this Agreement, the Landlord agrees to sell, convey, assign, transfer and
deliver to the Company, and the Buyer agrees to cause the Company to purchase
from the Landlord, at the Closing, the Oak Brook Real Property, free and clear
of any and all Liens and Encumbrances (other than Permitted Liens and
Encumbrances (as hereinafter defined)), for $2,700,000 (the "Real Property
Purchase Price"). The Real Property Purchase Price together with the Share
Purchase Price are herein referred to as the "Purchase Price."
(b) Proratable items with respect to the Oak Brook Real Property
shall be apportioned between the Buyer and the Landlord as of the Closing Date.
If actual taxes are not ascertainable as of the Closing Date, prorations shall
be made based on the most recent ascertainable taxes. Any item, to the extent it
relates to the period prior to the Closing Date, shall be apportioned to the
Landlord, and any such item to the extent it relates to the period on or after
the Closing Date shall be apportioned to the Buyer. The Buyer shall prepare (or
cause the Company to prepare) a proration schedule as promptly as practicable
after Closing and deliver a copy thereof to the Landlord. The Landlord will
promptly provide to the Buyer and the Company any information reasonably
requested by the Buyer in the preparation of such proration schedule. The
parties hereto shall cooperate in resolving any dispute with respect to such
proration schedule which may arise as soon as possible and in any event within
thirty (30) days after the Closing Date. If the amounts set forth in the
proration schedule under reimbursements to the Landlord exceed the
reimbursements to the Buyer, then the difference between such amounts shall be
paid to the Landlord by the Buyer as soon after the Closing Date as reasonably
practicable. If the amounts set forth in the proration schedule under
reimbursements to the Buyer exceed the reimbursements to the Landlord, then the
difference between such amounts shall be paid to the Buyer by the Landlord as
soon after the Closing date as reasonably practicable.
1.4. The Closing. The closing of the purchase and sale of the Shares
and the Oak Brook Real Property (the "Closing") shall be held at the offices of
Katten Muchin & Zavis, 525 West
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Monroe Street, Chicago, Illinois, at 10:00 a.m. (Central Standard time) on the
later of (i) January 7, 1999 or (ii) the earlier of (x) February 28, 1999 and
(y) two business days after the expiration or termination of the waiting period
under the HSR Act (as hereinafter defined) or on such other date as the Buyer
and the Shareholder Representatives (as hereinafter defined) may agree upon in
writing (the "Closing Date"). With respect to the Oak Brook Real Property, the
Closing shall be effected through a "New York style" closing in accordance with
the terms of this Section 1.4 in order to have the Company's title to the Oak
Brook Real Property insured at, and contemporaneously with, the Closing without
a "gap" in coverage from the time of the Closing until the time of recording of
the deed with respect to the Oak Brook Real Property. For purposes of this
Agreement, "Shareholder Representatives" shall mean Larry K. Randa and Jack R.
Kubik, acting together. At the Closing, (i) the Shareholders will deliver to the
Buyer stock certificates representing all the Shares, together with separate
stock powers duly executed in blank, and (ii) the Buyer shall deliver the Share
Purchase Price to the Shareholders as provided below. On the Closing Date, the
Purchase Price shall be payable as follows:
(a) the Buyer will pay to the Shareholders (by wire transfer of
immediately available funds to the account designated by the
Shareholder Representatives) the Share Purchase Price, which Share
Purchase Price shall be paid pro rata to each Shareholder based
upon such Shareholder's proportionate ownership interest in the
Shares as set forth in Section 2.4 of the Disclosure Schedule,
less $2,500,000 (the "Escrow Amount") (which Escrow Amount shall
for all purposes be allocated pro rata among the Shareholders);
(b) the Buyer will pay to the Landlord (by wire transfer of
immediately available funds to the account designated by the
Landlord) the Real Property Purchase Price; and
(c) the Escrow Amount shall be deposited with a financial institution
reasonably acceptable to the Shareholders and the Buyer as
designated in the Escrow Agreement (as hereinafter defined) (the
"Escrow Agent"), such funds to be maintained by the Escrow Agent
to secure the Shareholders' obligations under this Agreement and
to be administered and payable in accordance with an escrow
agreement, in substantially the form of Exhibit C attached hereto
(the "Escrow Agreement").
For accounting purposes, the Closing shall be deemed effective on January 1,
1999.
2. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. The
Shareholders, jointly and severally, make the representations and warranties to
the Buyer set forth in this Section 2.
2.1. Validity of Agreement. Each of the Shareholders is competent and
has the power and authority to execute and deliver this Agreement and the other
agreements or instruments executed pursuant hereto or thereto or in connection
with the consummation of the transactions
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contemplated hereby or thereby (collectively, the "Transaction Documents"), to
which it is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. With respect to
each Shareholder that is a trust, the trustee of such trust has full power and
authority to execute and deliver this Agreement and the Transaction Documents to
which such trust is a party, and to consummate the transactions contemplated
hereby and thereby, on behalf of such Shareholder. This Agreement constitutes,
and upon execution thereof the Transaction Documents will constitute, the valid
and legally binding obligation of each of the Shareholders that is a party
thereto, enforceable against each such Shareholder in accordance with its terms.
The Landlord has the power and authority to execute and deliver this Agreement
and the Transaction Documents to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. This Agreement constitutes, and upon execution thereof the
Transaction Documents will constitute, the valid and legally binding obligation
of the Landlord, enforceable against the Landlord in accordance with its terms.
2.2. Organization and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois. The Company has full requisite power and authority to carry on its
business and to own and use the properties owned and used by it. Accurate and
complete copies of the articles of incorporation and by-laws of the Company have
heretofore been delivered to the Buyer. The Company is duly qualified to do
business in and is in good standing in each state in which the failure to so
qualify could have a material adverse effect, individually or collectively, upon
the Company, the Business or any of the Publications and all such states are
listed in Section 2.2 of the Disclosure Schedule. All corporate action on the
part of the Company, its directors and shareholders necessary for the
consummation of the transactions contemplated by this Agreement and the
Transaction Documents has been taken. The principal place of business of the
Company is at 709 Enterprise Drive, Oak Brook, IL, and the books and records of
the Company are kept at such office. The minute books of the Company, as made
available to the Buyer and its representatives, are accurate and complete in all
material respects. At the Closing, the stock records and minute books of the
Company will be in the possession of the Buyer and all of the other books and
records of the Company will be in the possession of the Buyer or the Company.
The Landlord is a general partnership duly organized, validly existing and in
good standing under the laws of the State of Illinois. The Landlord has full
requisite power and authority to carry on its business and to own and use the
properties owned and used by it. The general partners of the Landlord are listed
on Section 2.2 of the Disclosure Schedule. All action on the part of the
Landlord and its partners necessary for the consummation of the transactions
contemplated by this Agreement and the Transaction Documents has been taken.
2.3. Capitalization. The authorized capital stock of the Company
consists solely of 10,000 shares of Common Stock, of which only the Shares are
issued and outstanding. The Shares are owned of record and beneficially by the
Shareholders. All of the issued and outstanding shares of Common Stock
(including, but not limited to, the Shares) are duly authorized, validly issued,
fully paid and nonassessable, were not issued in violation of any law
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or of the preemptive or similar rights of any shareholder or other person. There
is no warrant, right, option, conversion privilege, stock purchase plan or other
contractual obligation that obligates the Company to offer, issue, purchase or
redeem any shares of its capital stock or debt or other securities convertible
into or exchangeable for capital stock (now, in the future or upon the
occurrence of any contingency) or that provides for any stock appreciation,
phantom stock or similar rights or arrangements. No person, entity or business
organization has perfected any dissenters' or appraisal rights with respect to
any capital stock of the Company which was outstanding at any time.
2.4. Title to Shares. Each Shareholder has good title to the number of
Shares set forth next to such Shareholder's name in Section 2.4 of the
Disclosure Schedule, free and clear of any and all Liens and Encumbrances,
except for the Liens and Encumbrances listed on Section 2.4 of the Disclosure
Schedule which will not exist as of the Closing. None of the Shareholders is a
party to, or bound by, any option, warrant, purchase right, or other contract or
commitment that requires such Shareholder to sell, transfer, or otherwise
dispose of any capital stock of the Company. None of the Shareholders has
granted a proxy with respect to any of the Shares, and there is no voting or
voting trust agreement or any similar arrangement affecting any of the Shares.
Upon the delivery of and payment for the Shares at the Closing as provided for
in this Agreement, the Buyer will acquire good and valid title thereto, free and
clear of any and all Liens and Encumbrances, subject to no rescission or similar
rights.
2.5. No Violation or Approval. The execution, delivery and performance
by each Shareholder of this Agreement and the Transaction Documents to which it
is a party, the performance by each Shareholder of its respective obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby will not result in a breach or violation of, or a default
under, the Company's articles of incorporation or by-laws, the organizational
documents of any Shareholder that is not a natural person, any statute
applicable to the Company or any of the Shareholders, any agreement to which any
of the Shareholders or the Company is a party or by which any of the
Shareholders or the Company or any of their respective properties is bound, or
any order, judgment, decree, rule or regulation of any court or any governmental
agency or body having jurisdiction over, any of the Shareholders or the Company
or their respective properties. Except for filings under the HSR Act (as
hereinafter defined), no consent, approval, order or authorization of, or
negotiation, declaration or filing with, any governmental authority or entity or
other party is required of the Company or any of the Shareholders in connection
with the execution and delivery of this Agreement or the Transaction Documents
to which it is a party or the consummation of any of the transactions
contemplated hereby or thereby. The execution, delivery and performance by the
Landlord of this Agreement and the Transaction Documents to which it is a party,
the performance by the Landlord of its obligations hereunder and thereunder and
the consummation of the transactions contemplated hereby and thereby will not
result in a breach or violation of, or a default under, the Landlord's
organizational documents, any statute applicable to the Landlord, any agreement
to which the Landlord is a party or by which the Landlord or any of its
properties is bound, or any order, judgment, decree, rule or regulation of any
court or any governmental agency or body having
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jurisdiction over, the Landlord or its properties. No consent, approval, order
or authorization of, or negotiation, declaration or filing with, any
governmental authority or entity or other party is required of the Landlord in
connection with the execution and delivery of this Agreement or the Transaction
Documents to which it is a party or the consummation of any of the transactions
contemplated hereby or thereby.
2.6. Financial Statements. Section 2.6 in the Disclosure Schedule
contains copies of the following financial statements of the Company: (i) the
Company's unaudited compiled financial statements for the fiscal year ended
December 31, 1997 (the "1997 Balance Sheet Date") consisting of the balance
sheet of the Company as of such date (the "1997 Balance Sheet") and a statement
of income and cash flow of the Company for the fiscal year ended on such date
(together with the 1997 Balance Sheet, the "1997 Financial Statements") and (ii)
the Company's unaudited and internally prepared financial statements for the 10
fiscal months ended October 31, 1998 consisting of a balance sheet of the
Company as of such date and a statement of income of the Company for the
10-month period ended on such date (the "Interim Financial Statements"). The
1997 Financial Statements present fairly in all material respects the financial
position of the Company, the results of its operations and cash flow as of the
1997 Balance Sheet Date and the one-year period then ended in conformity with
United States generally accepted accounting principles, consistently applied
("GAAP"), except that such statements do not contain footnote disclosure and
other items as set forth on Section 2.6 of the Disclosure Schedule. The Interim
Financial Statements present fairly the financial position of the Company, the
results of its operations as of and for the 10-month period ending October 31,
1998 (the "Interim Balance Sheet Date") in conformity with GAAP, except that
such statements do not contain footnote disclosure, or normal recurring year-end
adjustments which adjustments will not be material, and other items as set forth
on Section 2.6 of the Disclosure Schedule. The accounts receivable shown on the
unaudited balance sheet contained in the Interim Financial Statements (the
"Interim Balance Sheet") represent bona fide receivables arising in the ordinary
course of business and, to the knowledge of the Shareholders, are collectible in
full, subject to the applicable reserves, if any, set forth in such balance
sheets.
2.7. Liabilities; Absence of Changes; Operations in Ordinary Course.
2.7.1. Except as set forth in Section 2.7.1 of the Disclosure
Schedule and except for Permitted Liabilities (as hereinafter defined),
the Company does not have any Liability. For purposes of this
Agreement, (i) "Liability" or "Liabilities" means any, direct or
indirect, Indebtedness (as hereinafter defined), liability, claim or
obligation, fixed or unfixed, matured or unmatured, known or unknown,
asserted or unasserted, liquidated or unliquidated, secured or
unsecured, contingent or otherwise and (ii) "Permitted Liabilities"
means (A) trade accounts payable and accruals of expenses of the
Company reflected on the Interim Balance Sheet or arising in the
ordinary course of business in accordance with past practices since
October 31, 1998, (B) prepaid subscription liabilities incurred in the
ordinary course of business and accrued payroll incurred in the
ordinary course of business after December 18, 1998, (C) Liabilities of
the Company as of the date hereof under or
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with respect to the executory portion of the Contractual Obligations
(as hereinafter defined) listed in Section 2.20 of the Disclosure
Schedule (other than Liabilities relating to breaches or defaults by
the Company under, or with respect to, any such Contractual Obligations
prior to the Closing), (D) Liabilities of the Company as of the date
hereof under or with respect to the executory portion of any contract,
agreement, deed, mortgage, lease, license, permit or other instrument
by which the Company is bound which is not required to be listed in
Section 2.20 of the Disclosure Schedule (other than Liabilities
relating to breaches or defaults by the Company under, or with respect
to, any such contract, agreement, deed, mortgage, lease, license,
permit, approval or other instrument, commitment, undertaking,
arrangement or understanding prior to the Closing) and (E) Permitted
Indebtedness (as hereinafter defined).
2.7.2. Since the Interim Balance Sheet Date, none of the tangible
assets of the Company has suffered any material damage, destruction or
loss (whether or not covered by insurance). Since the Interim Balance
Sheet Date, the Company has operated the Business only in the ordinary
course, in accordance with past practices, and, other than changes in
general or newspaper industry-wide economic conditions, there has been
no (a) material adverse change in the condition (financial or
otherwise), assets, business, operations or prospects of the Company,
other than as a result of the possible termination of the Company's
participation in the Chicago Sun-Times Newspaper Network or the
possible termination of the Company's printing contract with Hollinger
Inc., (b) event or condition which, directly or indirectly,
individually or collectively, could reasonably be expected to have such
an effect, or (c) change in the Company's practices with respect to the
collection of receivables or payment of payables.
2.7.3. Since the Interim Balance Sheet Date, except as expressly
contemplated by this Agreement or as set forth in Section 2.7.3 of the
Disclosure Schedule, the Company has not: (i) increased the
compensation of any of its directors, officers, employees or affiliates
other than in the ordinary course of business consistent with past
practices; (ii) entered into or performed any contract, agreement,
deed, mortgage, lease, license, other instrument, commitment,
undertaking, arrangement or understanding, or other transaction, not in
the ordinary course of business and consistent with past practices;
(iii) made any loan or advance of funds or assets of any kind to, or
forgiven any loan or advance to, any person, entity or business
organization, other than in the ordinary course of business consistent
with past practices; (iv) made any dividend or distribution of fixed
assets to any Shareholder or other person, entity or business
organization; (v) made or authorized any individual capital expenditure
by the Company in excess of $10,000 individually or made or authorized
capital expenditures by the Company of more than $100,000 in the
aggregate; (vi) sold, transferred or otherwise disposed of assets or
properties, real, personal, tangible or intangible, or mixed, having a
value in excess of $10,000 in the aggregate, other than newspapers
sold, or inventory used or consumed, in the ordinary course of business
consistent with past practices; (vii) made any material change in or
revoked any tax election or any agreement or settlement made by the
Company with any
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<PAGE> 12
taxing authority; (viii) paid, discharged or satisfied any Liability,
other than the payment, discharge, or satisfaction of Liabilities in
the ordinary course of business; (ix) except for a change in the manner
in which the Company accounts for prepaid subscription liabilities,
accrued payroll and accounts receivable as disclosed to the Buyer prior
to the date hereof, made any material change in any method of
accounting or keeping of books of account or accounting practices or
principles; (x) consummated any merger or consolidation with, or agreed
to merge or consolidate with, or any purchase of substantially all the
assets of, or other acquisition of any business of, any corporation,
partnership, entity, association, or other business organization or
division; (xi) consummated any repurchase or redemption, or agreed to
repurchase or redeem, any shares of its capital stock, any options or
other rights to acquire such stock or any securities convertible into
or exchangeable for such stock; (xii) paid any bonus, or made any
advance with respect to a bonus, to any Shareholder; (xiii) paid any
amounts to obtain the consents or approvals required by this Agreement
or the Transaction Documents or the transactions contemplated hereby or
thereby; (xiv) paid any Taxes (as hereinafter defined) except in the
ordinary course of business consistent with past practices; (xv) paid
any Liabilities other than Permitted Liabilities; or (xvi) entered into
any agreement, whether oral or written, to do any of the foregoing.
2.7.4. As of the Closing Date, the Company will not have any
Liability (fixed, contingent or otherwise) in respect of any
Indebtedness other than Permitted Indebtedness. "Indebtedness" means:
(i) any indebtedness of the Company for borrowed money, whether current
or funded, secured or unsecured; (ii) any indebtedness of the Company
for the deferred purchase price of any assets or services (other than
trade accounts payable and accruals incurred in the ordinary course of
business consistent with past practices and prepaid subscription
liabilities and accrued payroll incurred in the ordinary course of
business); (iii) any indebtedness of the Company created or arising
under any conditional sale or other title retention agreement with
respect to property acquired by the Company (even though the rights and
remedies of the seller or lender under such agreement in the event of a
default may be limited to repossession or sale of such property); (iv)
any indebtedness of the Company secured by a purchase money mortgage,
lien or other encumbrance to secure all or part of the purchase price
of property subject to such mortgage, lien or other encumbrance; (v)
any obligations under leases which shall have been or must be, in
accordance with GAAP, recorded as capital leases in respect of which
the Company is liable as lessee; (vi) any Liability of the Company in
respect of banker's acceptances or letters of credit (contingent or
otherwise); (vii) any indebtedness, whether or not assumed, secured by
mortgages, liens or other encumbrances on property acquired by the
Company at the time of acquisition thereof; and (viii) any indebtedness
referred to in clause (i), (ii), (iii), (iv), (v), (vi) or (vii) above
which is directly or indirectly guaranteed by the Company or which it
has agreed (contingently or otherwise) to purchase or otherwise acquire
or in respect of which it has otherwise assured a creditor against
loss. "Permitted Indebtedness" means Indebtedness in a principal amount
not to exceed $297,750 owed to Manufacturers Bank, N.A., and interest
accrued thereon.
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2.8. Taxes. Since March 14, 1983, the Company has been eligible to file,
and has properly filed, all elections and other instruments and documents
necessary to qualify as, and shall as of the Closing be, an "S" corporation
within the meaning of Section 1361 of the Code. The Company has duly filed on a
timely basis all federal, state, local and foreign Tax returns that are required
to be filed in respect of the Company or any of the Plans (as hereinafter
defined), and all such Tax returns were true, accurate and complete in all
material respects. The Company has paid as of the date hereof all Tax
Liabilities of the Company (including interest and penalties) that have become
due. The Company is not a party to, or bound by, any tax sharing agreement. The
Company has paid all required withholding Taxes that are currently due with
respect to current or former employees, independent contractors, creditors,
shareholders, or other third parties. There are in effect no waivers or
extensions by the Company of the applicable statutes of limitations for Tax
Liabilities for any period, and no power of attorney has been executed or filed
by or on behalf of the Company with the Internal Revenue Service (the "IRS") or
any other taxing authority. No claim has ever been made by a taxing authority in
a jurisdiction where the Company does not file Tax returns that it is or may be
subject to taxation in that jurisdiction. Except as set forth in Section 2.8 of
the Disclosure Schedule, no taxing authority has asserted, either orally or in
writing, any adjustment that could result in an additional Tax for which the
Company is or may be liable. There is no pending audit, examination,
investigation, dispute, proceeding or claim for which the Shareholders or the
Company has received notice relating to any Tax for which the Company is or may
be liable. The Company has not filed a consent under section 341(f) of the Code,
concerning collapsible corporations. The Company is not a party to any contract,
agreement, plan or arrangement that, individually or collectively, could give
rise to any payment that would not be deductible by reason of section 280G of
the Code. The Company has never been a member of any affiliated group filing a
consolidated federal income return, and the Company has no Liability for the
Taxes of any other person, entity or business organization under Treas. Reg.
Section 1.1502-6 (or any similar provisions of state, local or foreign law), as
a transferee or successor, by contract or otherwise. The Company has disclosed
on its federal income Tax returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the meaning of
section 6662 of the Code. For purposes of this Agreement, "Tax" or "Taxes" shall
mean any income, corporation, gross receipts, profits, gains, capital stock,
capital duty, franchise, withholding, social security (including any social
security charge or premium), unemployment, disability, property, wealth,
welfare, stamp, excise, occupation, sales, use, transfer, value added,
alternative minimum, estimated or other tax (including any fee, assessment or
other charge in the nature of or in lieu of any tax) imposed by any governmental
entity (whether national, local, municipal or otherwise) or political
subdivision thereof, and any interest, penalties or additions to tax, and
including any transferee or secondary Liability in respect of any tax (whether
by applicable tax law, contractual agreement or otherwise) and any Liability in
respect of any tax as a result of being a member of any affiliated,
consolidated, combined, unitary or similar group.
2.9. Title to Assets. The Company has good title to or, in the case of
leases and licenses, valid and subsisting leasehold interests and licenses in,
all of its assets (tangible or intangible, real or personal or mixed) reflected
in the Interim Balance Sheet (other than assets
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<PAGE> 14
disposed of since the Interim Balance Sheet Date in the ordinary course of
business or as permitted by this Agreement) or acquired by the Company since the
Interim Balance Sheet Date (collectively, the "Assets"), including, but not
limited to, title to or unfettered right to the use of, or common law rights in,
the mastheads, trade names, trademarks, service marks and other marks, names and
proprietary rights set forth in Section 2.17 of the Disclosure Schedule and the
Business Real Estate (as hereinafter defined), free and clear of any and all
Liens and Encumbrances, other than those Liens and Encumbrances set forth in
Section 2.9 of the Disclosure Schedule and Permitted Liens and Encumbrances (as
hereinafter defined). No claim has been asserted by any person, entity or
business organization to prevent or in any way limit the use by the Company of
any of the Assets owned or used by it or challenging the validity or
effectiveness of the Company's ownership or use thereof. Except as set forth in
Section 2.9 of the Disclosure Schedule, none of the Company's rights in the
Assets owned or used by it arise pursuant to contract rights (i) that by their
terms are not assignable without the consent of the other contracting party or
parties, (ii) that may be terminated by the other party thereto as a result of
the consummation of the transactions contemplated by this Agreement or the
Transaction Documents or (iii) in respect of which the consummation of the
transactions contemplated by this Agreement or the Transaction Documents would
create a default.
2.10. Business Real Estate.
(a) Section 2.10(a) of the Disclosure Schedule lists all real property and
improvements owned by the Company (the "Owned Real Estate"). The Company has
good and clear record and marketable fee simple title to the Owned Real Estate,
free and clear of any and all Liens and Encumbrances, other than those Liens and
Encumbrances set forth in Section 2.10(a) of the Disclosure Schedule and
Permitted Liens and Encumbrances.
(b) Section 2.10(b) of the Disclosure Schedule lists all other real
property (including, but not limited to, the Oak Brook Real Property) used by
the Company, all of which is leased by the Company from the Landlord or third
parties, and indicates with respect to each such parcel of real property, the
owner thereof (the "Leased Real Estate"; the Owned Real Estate and the Leased
Real Estate are collectively referred to herein as the "Business Real Estate").
Accurate and complete copies of all existing lease agreements with respect to
the Leased Real Estate have heretofore been delivered to the Buyer. The Landlord
has good and clear record and marketable fee simple title to the Oak Brook Real
Property, free and clear of any and all Liens and Encumbrances, other than
Permitted Liens and Encumbrances.
(c) The Business Real Estate is in compliance with the terms of the
instruments that constitute the Permitted Liens and Encumbrances. None of the
Permitted Liens and Encumbrances interferes in any material respect with the
Company's current use or operations at or on the Business Real Estate. All
buildings and structures located on the Business Real Estate are located
completely within the boundary lines of the Business Real Estate, and no
buildings, structure or other improvements and appurtenances thereto owned by
others encroach onto or under the Business Real Estate. Except as set forth in
Section 2.10(c) of the Disclosure Schedule,
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<PAGE> 15
all buildings used by the Company in connection with the Business are in
compliance, in all material respects, with all applicable statutes, ordinances,
rules and regulations, federal, state and local (including, but not limited to,
applicable zoning and other land use restrictions) to the extent required.
Except as set forth on Section 2.10(c) of the Disclosure Schedule, there has
been no construction on the Business Real Estate within the six (6) months prior
to the date hereof. No work for municipal improvements has been commenced on or
in connection with any of the Business Real Estate or any street adjacent
thereto which has not been substantially completed. Except as set forth on
Section 2.10(c) of the Disclosure Schedule, no notice from any county, township
or other governmental body has been received by the Company or, to the Knowledge
of the Shareholders, has been served upon the Business Real Estate requiring or
calling attention to the need for any work, repair, construction, alteration or
installation on or in connection with the Business Real Estate which has not
been substantially completed. No written notice has been received by the Company
or has been served upon the Business Real Estate stating that the buildings on
the Business Real Estate, or the business presently conducted thereon by the
Company, are not in compliance with any applicable statutes, ordinances, rules
or regulations, federal, state or local (including, but not limited to,
applicable zoning and other land use restrictions).
2.11. Operating Condition and Repair. Each of the material tangible
Assets owned by the Company and the Business Real Estate (including, but not
limited to, the heating, ventilation, mechanical, electrical, sewer, sprinkler
and air conditioning systems and boilers located thereon) (i) is in operating
condition and repair, and (ii) is adequate for the particular purposes for which
it is presently used, and is available, and will be available as of the Closing,
for immediate use in the conduct and operations of the Business. EXCEPT AS
EXPRESSLY PROVIDED HEREIN, THE SHAREHOLDERS EXPRESSLY DISCLAIM ANY WARRANTY OF
FITNESS FOR ANY PARTICULAR PURPOSE OR OF MERCHANTABILITY WITH RESPECT TO ANY
SUCH TANGIBLE PERSONAL PROPERTY.
2.12. Advertisers; Subscribers; Circulation. To the Knowledge of the
Shareholders, except for the possible termination of advertising by the Chicago
Sun Times Network, none of the 20 persons, entities or business organizations
that generated the greatest amount of advertising revenues for each of the
Publications during the period from January 1, 1998 through October 31, 1998
intends to reduce the level at which it purchases advertising space on a regular
basis from the Company or any of the Publications. The Shareholders have
delivered to the Buyer or attached to Section 2.12 of the Disclosure Schedule
(i) a verified audit circulation report with respect to the total paid
circulation and the total unpaid circulation for each of the Publications as of
the 1997 Balance Sheet Date and as of October 31, 1998, (ii) a list of the 10
businesses or entities that generated the greatest amount of advertising
revenues for the Publications during the period from January 1, 1997 through the
1997 Balance Sheet Date and during the period from January 1, 1998 through
October 31, 1998, (iii) a list of all existing arrangements pursuant to which
the Company is obligated to publish advertisements in any of the Publications
after the date hereof in exchange for goods or services, as opposed to cash
payment and (iv) an accounts receivable aging as of October 31, 1998 of the
Company. All of the information specified in the
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<PAGE> 16
preceding sentence as furnished to the Buyer is true, correct and complete in
all material respects. The Company has met and fulfilled all requirements to
publish legal notices insofar as those requirements relate to the types of legal
notices heretofore published in any of the Publications. The Shareholders have
delivered to the Buyer an accurate and complete copy of the current published
rates for advertising in each of the Publications as of October, 1998.
2.13. Operations in Conformity With Law; Litigation. The Company is
not, and has not been, in violation, in any material respect, of, or in default,
in any material respect, under, any law, statute, ordinance, code, order, rule,
regulation, judgment or decree, whether heretofore or now in effect. Without
limiting the foregoing, (i) each of the tangible Assets owned by the Company and
the Business Real Estate is in compliance, in all material respects, with all
applicable statutes, ordinances, rules and regulations and (ii) the Company is
in compliance, in all material respects, with all federal, state and municipal
laws, rules and regulations with respect to nondiscrimination in employment and
the payment of wages to the employees of the Company, with respect to the
classification of editorial employees employed by the Company, and with respect
to the uses of such Assets and the Business Real Estate. Except to the extent
set forth in Section 2.13 of the Disclosure Schedule, there are no pending or,
to the Knowledge of the Shareholders, threatened claims, lawsuits or
administrative proceedings (including, but not limited to, with respect to
harassment or discrimination with respect to any employee of the Company, or
with respect to libel or slander) against the Company or any employee of the
Company (in its capacity as such or as a result of conduct during the course of
employment) or, any investigation involving the Company and any of the foregoing
types of actions.
2.14. Welfare and Benefit Plans. Section 2.14 of the Disclosure
Schedule contains a list of all severance pay, vacation, sick leave, medical,
dental, life insurance, disability or other welfare plans, savings, profit
sharing or other retirement plans and all bonus or other incentive plans,
contracts, arrangements or practices (the "Plans") maintained or contributed to
by the Company and in which any one or more of the current or former employees
of the Company (including beneficiaries of employees or former employees)
participates, is eligible to participate or has participated and with respect to
which the Company has any Liabilities. The Shareholders have furnished the Buyer
with true and complete copies of all written Plans and written summaries of the
material terms of all unwritten Plans. No communications have been made
indicating or agreeing that the terms of any such Plan are different than the
terms as set forth in such copies or summaries of such Plan. All Plans are in
compliance, in all material respects, with all applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended, and the regulations
issued thereunder ("ERISA"), as well as with all other applicable federal, state
and local statutes, ordinances and regulations. All material reports or other
documents required by law or contract to be filed with any governmental agency,
or distributed to Plan participants or beneficiaries, with respect to the Plans
have been timely filed or distributed. Neither the Company, nor the
Shareholders, nor any Company Plan Affiliates (as hereinafter defined) nor any
trustee or any other fiduciary of any of the Plans have engaged in any
prohibited transaction within the meaning of sections 406 and 407 of ERISA or
section 4975 of the Code with respect to any of the Plans that has occurred.
Except as disclosed in Section 2.14 of the Disclosure
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Schedule, the Company has not maintained, or been obligated to contribute to, a
Plan that is subject to the provisions of Title IV of ERISA, and the Company, or
any other entity with whom the Company is under common control (as such term is
used in section 4001(b) of ERISA), has no Liability under section 4201 of ERISA
with respect to any "multi-employer plan" (as such term is defined in section
4001(a)(3) of ERISA) or any other plan subject to Title IV of ERISA, and the
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents will not constitute a complete or partial withdrawal from
or with respect to any such "multi-employer plan" or other plan subject to Title
IV of ERISA or any collective bargaining agreement to which the Company is a
party or by which the Company is bound or otherwise give rise to any Liability
of the Company in connection therewith. Each of the Plans maintained by the
Company which is intended to be "qualified" within the meaning of section 401(a)
of the Code and any trust maintained in connection with any of the Plans which
trust is exempt under section 501(a) of the Code (a) has been determined by the
IRS to be so qualified and exempt, as the case may be, and such determinations
have not been modified, revoked or limited and nothing has occurred (or failed
to occur) since the receipt of such determination letters that could adversely
affect any such Plan's qualification or any such trust's exempt status or (b) is
a prototype standardized plan with respect to which the prototype plan sponsor
has received an opinion letter from the IRS. The Company neither maintains nor
is obligated to provide benefits under any life, medical or health plan that
provides benefits to retirees or other terminated employees other than (a)
benefit continuation rights under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA") and (b) benefits under insured plans
maintained by the Company provided in the event an employee is disabled at the
time of termination of the employee's employment with the Company and the
conversion privileges provided under such insured plans. The Company has
complied, in all material respects, with all of its obligations under COBRA, and
does not expect to incur any Liability in connection with the benefit
continuation rights under COBRA with respect to its employees or any other
employees, other than the rights of employees whose employment with the Company
terminates on or after the Closing Date and the rights of former employees of
the Company who have elected or have a right to elect health continuation
coverage under COBRA as disclosed in Section 2.14 of the Disclosure Schedule. No
Plan is a multiple employer welfare arrangement. Any Plan that is funded through
a "welfare benefit fund" as defined in section 419(e) of the Code has complied
and continues to comply with all requirements of section 419 and 419A of the
Code and regulations thereunder. Except for the deferred compensation
arrangements and split dollar and reverse split dollar life insurance
arrangements set forth on Section 2.14 of the Disclosure Schedule (collectively,
the "Deferred Compensation Arrangements"), which will be terminated prior to the
Closing, at the Shareholders' expense, the Company does not maintain any
unfunded deferred compensation arrangement with respect to any employee or any
former employee. There are no current or former Company Plan Affiliates. The
board of directors of the Company has the right, power and authority to
terminate the death benefit plan of the Company described on Section 2.14 of the
Disclosure Schedule without the consent of any beneficiary of, or participant
in, such plan and without the payment of any money or other consideration to any
such beneficiary or participant. The Company will not incur any Liability in
connection with the termination of such death benefit plan. For purposes of this
Agreement, "Company Plan Affiliates" means each person, entity or business
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<PAGE> 18
organization with whom the Company constitutes or has constituted all or part of
a controlled group, or which would be treated or has been treated with the
Company as under common control or whose employees would be treated or have been
treated as employed by the Company, under section 414 of the Code or section
4001(b) of ERISA.
2.15. Labor Relations. Except as set forth in Section 2.15 of the
Disclosure Schedule, the Company is not a party to, bound by or operating under
any employment agreement, collective bargaining agreement or other agreement
with any union. There presently is no existing material dispute between the
Company and any of its employees. The Company is in compliance, in all material
respects, with all employment agreements, collective bargaining agreements and
other agreements, whether oral or written, which are currently in effect or
binding upon the Company or under which the Company is currently operating, with
all past and present employees of the Company. To the Knowledge of the
Shareholders, none of the Company's employees are represented by a labor union
and there has not been any labor union organizing activity by or among the
Company's employees. Neither the Company nor any of the Publications has engaged
in any unfair labor practice. There is no labor strike, slowdown, stoppage,
grievance or other labor difficulty pending or, to the Knowledge of the
Shareholders, threatened against the Company or any of the Publications.
2.16. Licenses. All governmental or regulatory licenses and permits
necessary in connection with the present possession, use and operation
(including any pending construction) of the Business Real Estate and the other
Assets or the operation of the Business or any of the Publications are held by
the Company and are in full force and effect and are listed in Section 2.16 of
the Disclosure Schedule, no notice of violations have been received by the
Company in respect thereof, and, to the Knowledge of the Shareholders, there are
no such potential violations. No proceeding or investigation is pending or
threatened that could reasonably be expected to result, directly or indirectly,
in the revocation or limitation of any such licenses or permits. All reports
filed with the United States Postal Service in connection with any postal
permits were true and correct in all material respects at the time such reports
were filed. Neither the Company nor any of the Publications are currently the
subject of any audit to determine compliance with any such postal permits or to
any order or determination arising out of any completed audit and affecting
continued operations under that permit.
2.17. Proprietary Rights. Section 2.17 in the Disclosure Schedule lists
all registered and material unregistered trade names, trademarks, patents,
mastheads, service marks and copyrights owned or used by the Company, together
with the date of registration (if any) of each such mark, patent or copyright
and the jurisdiction in which any such mark, patent or copyright is used. The
Company holds common law rights to use all material unregistered trademarks,
patents and copyrights used by it in the geographic areas in which they are
currently used. To the Shareholders' Knowledge, no other person, entity or
business organization uses, or has used during the preceding five years, in the
geographic areas in which they are used by the Company, the mastheads, trade
names, trademarks, service marks, names, copyrights, patents and proprietary
rights owned or used by the Company. The Company's right to each of such trade
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names, trademarks, mastheads, service marks and other marks, names, copyrights,
patents and proprietary rights are held by the Company, free and clear of any
and all Liens and Encumbrances, other than Permitted Liens and Encumbrances, and
during the preceding five years, no claims have been asserted or, to the
Knowledge of the Shareholders, threatened by any person, entity or business
organization to prevent or in any way limit the use or exercise by the Company
of any of such assets or challenging the validity or effectiveness of the
ownership thereof by the Company.
2.18. Environmental Matters.
(a) The Company has complied, and the Company and the Business Real
Estate are in compliance, in all material respects, with all federal, state and
local laws, ordinances, orders, rules and regulations relating to the operation
of the Business and the operation, occupancy or condition of the Business Real
Estate or, to the Shareholders' Knowledge, any other real property previously
leased or owned by the Company, including, but not limited to, all Environmental
Laws. For purposes of this Agreement, "Environmental Laws" means all laws,
statutes, rules, regulations and court and administrative decisions which are
applicable to the Company, or its business assets, relating to environmental,
safety, or health matters, including, but not limited to, those relating to the
release or threatened release of Hazardous Substances (as hereinafter defined)
and the generation, use, storage, transportation, or disposal of Hazardous
Substances in any manner applicable to the Company or its assets, including, but
not limited to, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. Sections 1801 et seq.), the Resource Conservation
and Recovery Act of 1976 (42 U.S.C. Sections 6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. Sections 1251 et seq.), the Clean Air Act (42
U.S.C. Sections 7401 et seq.), the Toxic Substances Control Act of 1976 (15
U.S.C. Sections 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. Sections
300f-Sections 300j-11 et seq.), the Occupational Safety and Health Act of 1970
(29 U.S.C. Sections 651 et seq.), and the Emergency Planning and Community
Right-to-Know Act (42 U.S.C. Sections 11001 et seq.), each as heretofore amended
or supplemented, and any analogous federal, state or local statutes, rules and
regulations promulgated thereunder or pursuant thereto, and any other present
law, ordinance, rule, regulation, permit or order, which are applicable to the
Company or its business or assets, addressing environmental, safety or health
issues, of or by the federal government, any state or political subdivision
thereof, or any agency, court, or body of the federal government or any state or
political subdivision thereof.
(b) The Company does not have any Liability under any Environmental
Law, including any liability, responsibility, or obligation for fines or
penalties, or for investigation, expense, removal, or remedial action to effect
compliance with or discharge any duty, obligation, or claim under any such
Environmental Law, and there is no reason to believe that any such claims,
actions, suits, proceedings, or investigations under such laws or regulations
exist or may be brought or threatened.
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(c) To the Shareholders' Knowledge, there never has been any, and is no
current, release or threat of release of any Hazardous Substance into the
environment at, on, from, onto or under the Business Real Estate or, to the
Shareholders' Knowledge, any real property previously leased or owned by the
Company, other than releases and threats of release made in the ordinary course
of business and in compliance with all Environmental Laws, and there are no
Hazardous Substances at, on or under the Business Real Estate, other than
Hazardous Substances at (but not on or under) the Business Real Estate that are
currently used by the Company in the ordinary course of business and in
compliance with all Environmental Laws. For purposes of this Agreement,
"Hazardous Substances" means (a) any chemical, material or substance defined as
or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous waste," "restricted hazardous
waste," "medical waste", "toxic pollutants," "contaminants," "pollutants,"
"toxic substances," or words of similar import under any applicable
Environmental Law, (b) any oil, petroleum, petroleum product or petroleum
derived substance in a liquid state at normal temperatures or atmospheric
pressures, any flammable substances or explosives, or any radioactive materials,
(c) any asbestos and asbestos-containing materials in any form which is or is
likely to become friable, (d) any radon gas, urea formaldehyde foam insulation,
dielectric fluid, and polychlorinated biphenyls, and (e) any other chemical,
material or substance which is prohibited, limited or regulated by any foreign,
federal, state and local governmental departments, offices, agencies and
authorities.
(d) There have been no Hazardous Substances of, or generated by, the
Company that have been disposed of or come to rest at any site that has been
included in any published federal, state or local "Superfund" site list or any
other list of hazardous or toxic waste sites.
(e) There never have been any and are no underground or above-ground
storage tanks located on, no polychlorinated biphenyls ("PCBs") or
PCB-containing equipment used or stored on, and no hazardous waste, as defined
by the RCRA or comparable state or local laws, stored on, the Business Real
Estate or, to the Shareholders' Knowledge, other real property previously owned,
leased or used by the Company.
(f) To the Shareholders' Knowledge, there is no Hazardous Substance or
other condition or use of the Business Real Estate or any other real property
previously leased or owned by the Company or their surrounding area, whether
natural or man-made, which poses a present or potential threat of damage to the
health of persons, to property, to natural resources, or to the environment.
(g) Section 2.18 of the Disclosure Schedule attached hereto identifies
all environmental audits or assessments or occupational health studies
undertaken by or on behalf of the Company, or any third person, entity, business
organization or governmental agency of which the Company has knowledge with
respect to the Business Real Estate or any other real property previously owned,
leased or used by the Company, the Company's Business, activities or employees
and the results of groundwater and soil testing, underground storage tank tests,
soil samples, and written notice of violation of any Environmental Law from any
federal, state, or local governmental
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entity, and the Company has provided the Buyer with copies of all such audits,
assessments, studies, results, tests samples and notices.
2.19. Employees, Officers and Directors. Section 2.19 of the Disclosure
Schedule contains a true and complete list, as of October 31, 1998, of the
names, titles, full, part-time or temporary status, annual salary and any
salary, bonus or other compensation arrangements, including the date and amount
of the last compensation change, of all of the employees of the Company, whether
oral or written. Except as set forth on Section 2.19 of the Disclosure Schedule,
as of the date hereof, no such employee is receiving or claiming to be entitled
to receive, and there are no pending filings, claims or applications for,
disability benefits or workers' compensation, other than filings, claims or
applications arising in the ordinary course of business which are not, in the
aggregate, material. Section 2.19 of the Disclosure Schedule contains a true and
complete list of all directors and officers of the Company, indicating each
office held by each such person. Section 2.19 of the Disclosure Schedule further
contains a true and complete list of the names, titles, full, part-time or
temporary status, annual salary and any salary, bonus or other compensation
arrangements, including the date and amount of the last compensation change, of
any employees of the Company, whether oral or written, hired after October 31,
1998 and the names of all whose employment with the Company has terminated since
October 31, 1998.
2.20. Contractual Obligations. Section 2.20 of the Disclosure Schedule
contains a true and complete list of all contracts, agreements, deeds,
mortgages, leases, licenses, instruments, commitments, undertakings,
arrangements or understandings, written or oral, to which or by which the
Company is a party or otherwise bound or to which or by which any of the Assets
is subject or bound in each case involving post-Closing obligations equal to or
exceeding $10,000 per annum or in the aggregate (collectively, the "Contractual
Obligations") of the types described below that are currently in effect (other
than advertising contracts and subscription agreements entered into in the
ordinary course of business consistent with past practices), including, but not
limited to:
2.20.1. All outstanding offers of employment and all employment
and consulting agreements;
2.20.2. All Contractual Obligations (including, but not limited
to, options) to sell or lease (as lessor) any property or asset used by
the Company except newspapers and newsprint in the ordinary course of
business consistent with past practices;
2.20.3. All Contractual Obligations pursuant to which the Company
possesses or uses or has agreed to acquire (including, but not limited
to, leases) any properties or assets;
2.20.4. All Contractual Obligations (including licenses) pursuant
to which the Company possesses or uses any computer software, other
than "off-the-shelf" personal computer software licensed pursuant to
"shrink wrap" licenses;
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2.20.5. All Contractual Obligations with advertising customers of
the Business, except advertising contracts of the Publications entered
into in the ordinary course of business consistent with past practices;
2.20.6. All Contractual Obligations involving profit
participation features;
2.20.7. All Contractual Obligations that would be violated, or
pursuant to which a breach or default would occur, by the consummation
of the transactions contemplated by this Agreement and the Transaction
Documents;
2.20.8. All Contractual Obligations with suppliers or providers
of goods or services to the Company, including, but not limited to,
purchase orders;
2.20.9. All Contractual Obligations for or relating to the
borrowing of money, extensions of credit or Indebtedness;
2.20.10. All Contractual Obligations involving or relating to
indemnification;
2.20.11. All Contractual Obligations limiting or restraining the
Company from engaging or competing in any lines of business or
geographic areas with any person, entity or business organization; and
2.20.12. All Contractual Obligations with any of the
Shareholders.
The Shareholders have heretofore delivered to the Buyer a true and complete copy
of each of the written Contractual Obligations and a written description of each
of the oral Contractual Obligations described above, including, but not limited
to, all amendments and supplements thereto and all waivers thereunder. Neither
the Company nor, to the Knowledge of the Shareholders, any other party is in
default under or in breach or violation of, nor has an event occurred that (with
or without notice, lapse of time or both) would constitute a default by the
Company or, to the Knowledge of the Shareholders, any other party under any
Contractual Obligation. The Company has a valid license for all computer
software (including all copies) possessed or used by it and the Company is in
compliance with the terms of each such license.
2.21. Transactions with Affiliates. Except as set forth in Section 2.21
of the Disclosure Schedule, none of the Shareholders or the officers, directors,
members of management of the Company, or affiliates of any such persons, and no
member of the immediate family of any such individuals, and no entity in which
any such person, entity or business organization owns any material beneficial
interest, is a party to any agreement, arrangement, contract, commitment or
transaction with the Company or has any material interest in any property used
by the Company. Section 2.21 of the Disclosure Schedule contains a true and
complete list of all advertisements published in each of the Publications since
January 1, 1998 in exchange for goods or services
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provided to or for the benefit of any Shareholder or any member of any
Shareholder's family, as opposed to the Company.
2.22. Inventories. Neither the Shareholders nor the Company has changed
the methods or procedures under which reserves for obsolete inventory are
established and maintained. Since the Interim Balance Sheet Date, the amounts of
obsolete inventories have not changed other than in the ordinary course of
business consistent with past practices.
2.23. Brokers and Finders. All negotiations relating to this Agreement
and the Transaction Documents and the transactions contemplated hereby and
thereby have been carried on without the intervention of any person, entity or
business organization acting on behalf of the Company or any of the Shareholders
or any of their affiliates in such manner as to give rise to any valid claim
against the Company or the Buyer for any brokerage or finder's commission, fee
or similar compensation.
2.24. Insurance. Section 2.24 of the Disclosure Schedule contains a
true and complete list of all policies of insurance of which the Company is the
owner or insured or covering any of its property, that are currently effective,
indicating for each policy the carrier, risks insured, amounts of coverage,
deductible, and expiration date. Such insurance policies provide insurance
coverage adequate to comply with all applicable laws, rules and regulations and
all Contractual Obligations to which the Company is a party or by which it or
its assets are bound. All such policies are in full force and effect, all
premiums due thereon have been paid, and the Company has complied in all
material respects with the provisions of such policies. There is no default with
respect to any provision contained in any such policy, and there has not been
any failure to give any notice or present any claim under any such policy in a
timely fashion or in the manner or detail required by the policy. No notice of
cancellation or nonrenewal with respect to or disallowance of any claim under
any such policy has been received by the Company. The Company is not liable or
obligated for any retroactive adjustment of premiums under any insurance policy
or arrangement, other than under its workers' compensation insurance policy.
2.25. Corporate Names. The Company has not used during the last five
(5) years and is not currently using any corporate, fictitious or assumed name,
other than the names listed in Section 2.25 of the Disclosure Schedule. The
Company is entitled to use its name and any other name under which it previously
conducted or presently conducts business without any liability or obligation to
any other person, entity or business organization wherever the Company conducts
business.
2.26. Subsidiaries of the Company. The Company does not own of record
or beneficially, directly or indirectly, (a) any shares of outstanding capital
stock or securities convertible into capital stock of any corporation or (b) any
participating interest in any partnership, joint venture, limited liability
company or other noncorporate business enterprise, and the Company has no
agreement or commitment to purchase or otherwise acquire any such shares or
interest.
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2.27. Disclosure. Neither this Agreement, nor any Transaction Document
nor any Schedule or Exhibit attached hereto or thereto contains any untrue
statement of a material fact or, to the Shareholder's Knowledge, omits to state
a material fact necessary to make the statements made herein or therein not
misleading.
3. REPRESENTATIONS OF THE BUYER. The Buyer represents and warrants to
the Shareholders as follows:
3.1. Due Organization, Authorization and Good Standing. The Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, has the requisite corporate power and authority to
execute and deliver this Agreement and the Transaction Documents to which the
Buyer is a party and to perform its obligations hereunder or thereunder and has
taken all action required by law and its certificate of incorporation and
by-laws to authorize such execution, delivery and performance. This Agreement
constitutes, and upon execution thereof, the Transaction Documents (other than
the Noncompetition Agreements) to which the Buyer is a party will constitute,
the valid and legally binding obligation of the Buyer, enforceable against the
Buyer in accordance with its terms.
3.2. No Violation or Approval. The execution, delivery and performance
by the Buyer of this Agreement and the Transaction Documents to which it is a
party and the consummation of the transactions contemplated hereby and thereby
will not result in a breach or violation of, or a default under, its certificate
of incorporation or by-laws, any statute applicable to it, any agreement to
which it is a party or by which it or any of its properties are bound, any
fiduciary duty of, or any order, judgment, decree, rule or regulation of any
court or any governmental agency or body having jurisdiction over, it or its
properties. Except for filings under the HSR Act, no consent, approval, order or
authorization of, or negotiation, declaration or filing with, any governmental
authority or other entity is required of, and has not been obtained or made by,
the Buyer in connection with the execution and delivery by the Buyer of this
Agreement and the Transaction Documents to which it is a party or the
consummation of the transactions contemplated hereby or thereby.
3.3. Brokers and Finders. All negotiations relating to this Agreement
and the Transaction Documents and the Transaction Documents to which it is a
party and the transactions contemplated hereby and thereby have been carried on
without the intervention of any person, entity or business organization acting
on behalf of the Buyer in such manner as to give rise to any valid claim against
any of the Shareholders or any of their affiliates for any brokerage or finder's
commission, fee or similar compensation.
4. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER. The Buyer's
obligation to purchase the Shares and to consummate the other transactions
contemplated hereby is subject to the satisfaction on or prior to the Closing
Date of each of the following conditions, unless expressly waived in writing by
the Buyer at or prior to the Closing:
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4.1. Representations and Warranties. The representations and warranties
made by the Shareholders in this Agreement shall have been true and correct as
of the date hereof and the representations and warranties of the Shareholders
contained in this Agreement that are qualified by materiality shall be true and
correct on and as of the Closing Date, as if made on and as of the Closing Date,
and the representations and warranties of the Shareholders contained in this
Agreement that are not qualified by materiality shall be true and correct in all
material respects as of the Closing Date, as if made on and as of the Closing
Date, and the Shareholders shall have delivered to the Buyer a certificate to
such effect executed by the Shareholders.
4.2. Performance of Obligations. The Shareholders shall have performed
and complied in all material respects with all agreements and covenants required
by this Agreement or the Transaction Documents to which any of the Shareholders
is a party to be performed or complied with thereby hereunder or thereunder at
or prior to the Closing Date, and the Shareholders shall have delivered to the
Buyer a certificate to such effect executed by the Shareholders.
4.3. Stock Certificates. The Shareholders shall have delivered to the
Buyer the stock certificates representing all of the Shares, in form
satisfactory for transfer and reflecting the Shareholders as owners, together
with separate stock powers executed in blank.
4.4. Legal Opinion. The Buyer shall have received an opinion of Holleb
& Coff, counsel to the Company and the Shareholders, dated the Closing Date, in
substantially the form of Exhibit D attached hereto.
4.5. Releases. All Shareholders shall have executed and delivered to
the Buyer releases, in substantially the form of Exhibit E attached hereto and
the Landlord shall have executed and delivered to the Buyer a release of all
Liabilities of, and other claims against, the Company under the lease for the
Oak Brook Real Property.
4.6. Resignations of Officers and Directors. All officers and directors
of the Company shall have resigned or been removed, in each case effective upon
the Closing.
4.7. Charter Documents. The Shareholders shall have delivered such
certificates or other documents as may be reasonably requested by the Buyer,
including, but not limited to, a certified copy of the Company's certificate or
articles of incorporation and by-laws, certificates of good standing or legal
existence of the Company and certified copies of the other charter documents on
file with the Secretary of State of each relevant jurisdiction with respect to
the Company, and appropriate evidence as to the authority of the Shareholders,
the authorization of the transactions contemplated by this Agreement and the
Transaction Documents and any other relevant matters.
4.8. Injunctions. No action or proceeding shall have been instituted or
threatened prior to or on the Closing Date before any court or governmental body
or authority pertaining to the transactions contemplated by this Agreement or
the Transaction Documents, the result of which
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could prevent, or in any way limit or make illegal the consummation of such
transactions. No United States or state governmental authority or other agency
or commission or United States or state court of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, injunction or other order (whether temporary, preliminary, or
permanent) that is in effect and has the effect of limiting or prohibiting
consummation of the transactions contemplated by this Agreement.
4.9. Consents Under Contractual Obligations. The Shareholders shall
have obtained and delivered to the Buyer all consents, waivers and approvals
required under any Contractual Obligations of the Company to (i) permit the
valid execution, delivery and performance by the Shareholders of this Agreement
and the Transaction Documents or (ii) prevent any such Contractual Obligation
from terminating or being amended prior to its scheduled termination as a result
of the consummation of the transactions contemplated hereby.
4.10. Governmental Approvals; HSR Clearance. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent, authorization
or approval of which is necessary under any applicable law, rule, order or
regulation for the consummation of the transactions contemplated by this
Agreement shall have consented to, authorized, permitted or approved such
transactions, and the waiting period (and any extensions thereof) under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act"), applicable to the
transactions contemplated by this Agreement and the Transaction Documents shall
have expired or been terminated without any condition attached to such
expiration or termination.
4.11. Noncompetition Agreements. The Buyer, the Company and the
persons listed on Schedule 4.11 attached hereto shall have entered into separate
Noncompetition Agreements, dated the Closing Date, in the form of Exhibit F
attached hereto (the "Noncompetition Agreements").
4.12. Employment Agreement. The Buyer and Larry K. Randa shall have
entered into an Employment and Non-Competition Agreement, dated the Closing
Date, in the form of Exhibit G attached hereto (the "Employment Agreement").
4.13. Real Estate Documents. The Shareholders shall have delivered to
the Buyer, at the Shareholders' expense, each of the following, in form and
substance reasonably satisfactory to the Buyer, covering the Owned Real Estate
and/or the Oak Brook Real Property, as the case may be:
4.13.1 At the Closing, an ALTA 1990 owner's title policy
(including extended coverage over the standard printed exceptions,
access, location, environmental lien, survey and comprehensive
endorsements) insuring title in the Company and the Buyer of each
parcel of Owned Real Estate and the Oak Brook Real Property and all
recorded easements appurtenant thereto upon Closing, subject only to
the Permitted Liens and Encumbrances, from Chicago Title Insurance
Company (the "Title Insurance Company") in the amount set forth with
respect to such parcel of Business Real Estate on Schedule 4.13
attached
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hereto, together in each case with any title insurance affidavit signed
by the Company or the Landlord required by the Title Insurance Company
and copies of all documents referenced in the policy as exceptions
(collectively, the "Title Insurance Policies").
4.13.2. At least five (5) days prior to the Closing Date, an
as-built survey relating to each parcel of Owned Real Estate and the
Oak Brook Real Property from a surveyor duly licensed in Illinois which
survey shall: (i) be certified to the Company, the Buyer, the Title
Insurance Company and to such other parties as the Buyer may indicate,
(ii) be dated within six months of the Closing Date, (iii) indicate the
location, legal description and area and square feet of each parcel of
Owned Real Estate and the Oak Brook Real Property, (iv) locate all
easements, utilities (including connections to public streets), parking
facilities, restrictions and rights of way, (v) indicate adjoining
streets, building lines, surface improvements, encroachments and
vehicular access and the number and location of parking spaces, (vi)
identify which portions of the Owned Real Estate and the Oak Brook Real
Property are located in a 100 year flood plain area as identified under
the National Flood Insurance Program and (vii) satisfy the Minimum
Standard Detail Requirements for ALTA/ACSM (1997) Land Title Surveys,
including Table A requirements 3, 4, 6, 7, 8, 9, 10, 11 (but not 11(a)
and 11(b)) and 13.
4.13.3. At the Closing, a stamped trustee's or general warranty
deed relating to the Oak Brook Real Property, duly executed and
acknowledged by the Landlord (the "Oak Brook Deed"), free and clear of
all Liens and Encumbrances and leases and any other matters affecting
title, except the Permitted Liens and Encumbrances and other matters,
reasonably acceptable to the Buyer, that are insured over by the Title
Insurance Company.
4.13.4. A written certification in accordance with section 1445
of the Code certifying that the Landlord is not a "foreign person" as
defined in section 1445 of the Code and that the Landlord is therefore
exempt from the withholding requirements of said section.
4.13.5. All keys, key cards, combinations, access devices and
manuals and instructional materials in the Company's possession
necessary to obtain full access to and use of the Owned Real Estate and
the Oak Brook Real Property.
4.13.6. Such other documents as may be reasonably necessary to
consummate the Company's acquisition of the Owned Real Estate and the
Oak Brook Real Property effected through a "New York style" closing,
including, but not limited to, escrow instructions, any releases and
settlement agreements from existing creditors of the Landlord which may
be necessary or desirable to assure delivery of title to the Oak Brook
Real Property, subject only to the Permitted Liens and Encumbrances.
4.14 No Material Adverse Change. There shall have been no material
adverse change in the business, condition (financial or otherwise), operations,
assets or prospects of the Company
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or any Publication since the Interim Balance Sheet Date, other than as a result
of the termination of the Company's participation in the Chicago Sun-Times
Newspaper Network or the termination of the Company's printing contract with The
Sun-Times Company.
4.15. Consents under Buyer's Credit Arrangements. The Buyer shall have
received all consents, waivers and approvals required under any its credit
arrangements to consummate and finance the transactions contemplated by this
Agreement and the Transaction Documents.
4.16. Elimination of Liens and Encumbrances. As of the Closing, all of
the assets of the Company (tangible or intangible, real or personal or mixed)
shall be free and clear of any and all Liens and Encumbrances (including, but
not limited to, those Liens and Encumbrances listed in Section 2.9 of the
Disclosure Schedule), other than those listed on Schedule 4.16 attached hereto
and security interests securing the Permitted Indebtedness (collectively, the
"Permitted Liens and Encumbrances").
4.17. Payoff Letters. At the Closing, the Company shall have delivered
to the Buyer a pay-off letter for the Permitted Indebtedness, showing the amount
that would have to be paid in order to satisfy such Permitted Indebtedness in
full and agreeing that upon payment of such amount all Liens and Encumbrances in
favor of the lender with respect to the Permitted Indebtedness will be released.
At the Closing, the Landlord shall deliver to the Buyer a pay-off letter for all
indebtedness secured by the Oak Brook Real Property (the "Oak Brook
Indebtedness"), showing the amount that would have to be paid in order to
satisfy such Oak Brook Indebtedness in full and agreeing that upon payment of
such amount all Liens and Encumbrances in favor of the lender with respect to
the Oak Brook Indebtedness will be released.
4.18. Salary and Fringe Benefit Adjustments. The Company shall have
terminated the employees set forth on Schedule 4.18 effective as of 12:01 a.m.
(Central Standard time) January 1, 1999.
4.19.Automobile Leases. The person identified next to each automobile
lease listed on Section 6.10 of the Disclosure Schedule shall have assumed any
and all of the Company's obligations under each such lease and shall have agreed
to indemnify the Company for any Loss (as hereinafter defined) incurred by the
Company in connection with such lease and use of the automobile from and after
the Closing Date.
4.20. Termination of Death Benefit Plan. The death benefit plan of the
Company described on Section 2.14 of the Disclosure Schedule shall have been
terminated by the board of directors of the Company pursuant to the terms of
such plan without the Company incurring any Liability in connection with such
termination.
4.21. Cash Balance Certificate. The Shareholders shall have delivered
to the Buyer, a certificate of the Shareholders certifying to the Buyer the
amount of cash and cash equivalents held
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by the Company as of December 31, 1998 (excluding Retained Cash) and not
distributed to the Shareholders pursuant to Section 6.10.
4.22. General. All instruments and legal and corporate proceedings in
connection with the transactions contemplated by this Agreement and the
Transaction Documents shall be satisfactory in form and substance to the Buyer,
and the Buyer shall have received counterpart original, or certified or other
copies, of all documents, including records of corporate proceedings, that the
Buyer may reasonably request in connection therewith.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SHAREHOLDERS. The
Shareholders' obligations to sell the Shares to the Buyer and to consummate the
other transactions contemplated hereby is subject to the satisfaction on prior
to the Closing Date of each of the following conditions, unless expressly waived
in writing by the Shareholders at or prior to Closing:
5.1. Payment of the Purchase Price. The Buyer shall have delivered to
the Shareholders the Share Purchase Price less the Escrow Amount. The Buyer
shall have also delivered (or caused the Company to deliver) to the Landlord the
Real Property Purchase Price.
5.2. Representations and Warranties. The representations and warranties
of the Buyer in this Agreement shall have been true and correct as of the date
hereof and shall be true and correct as of the Closing Date as if made on and as
of the Closing Date, and the Buyer shall have delivered to the Shareholders a
certificate to such effect executed by the President of the Buyer.
5.3. Performance of Obligations. The Buyer shall have performed and
complied in all material respects with all agreements and covenants required by
this Agreement or any Transaction Document to be performed or complied with
thereby hereunder or thereunder at or prior to the Closing Date, and the Buyer
shall have delivered to the Shareholders a certificate to such effect executed
by the President of the Buyer.
5.4. Injunctions. No action or proceeding shall have been instituted or
threatened prior to or on the Closing Date before any court or governmental body
or authority pertaining to the transactions contemplated by this Agreement, the
result of which could prevent, or in any way limit or make illegal the
consummation of such transactions. No United States or state governmental
authority or other agency or commission or United States or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, injunction or other order (whether
temporary, preliminary, or permanent) that is in effect and has the effect of
limiting or prohibiting consummation of the transactions contemplated by this
Agreement.
5.5. Governmental Approvals. All governmental agencies, departments,
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation of the transactions
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contemplated by this Agreement shall have consented to, authorized, permitted or
approved such transactions, and the waiting period (and any extensions thereof)
under the HSR Act applicable to the transactions contemplated by this Agreement
and the Transaction Documents shall have expired or been terminated without any
condition attached to such expiration or termination.
5.6. Employment Agreement. The Buyer and Larry K. Randa shall have
entered into the Employment Agreement.
6. COVENANTS OF THE PARTIES.
6.1. Access to Premises and Information. On and prior to the Closing
Date, the Shareholders will permit, and will cause the Company to permit, the
Buyer and its authorized representatives to have reasonable access to the
agreements, documents, information, records and books of account of the Company
(the "Records") in the possession of the Shareholders or the Company that relate
in any manner to the conduct or operations, on or prior to the Closing Date, of
the Company, the Business or the Publications, including, but not limited to,
Records in respect of accounts payable, bank statements, financial statements
and general ledgers. In addition, prior to the Closing Date, the Shareholders
will permit the Buyer and each of its authorized representatives reasonable
access to the Business Real Estate, including, but not limited to, access
sufficient to allow the Buyer or its representatives to conduct such
environmental site assessment (including subsurface investigation) and
environmental compliance review as it deems appropriate.
6.2. Lien Searches. At or prior to the Closing, the Shareholders shall
deliver (or cause the Company to obtain and deliver) to the Buyer Uniform
Commercial Code, tax lien and judgment lien searches for the Company at the
state level for Illinois, and at the county level for DuPage, Kane, McHenry and
Cook Counties, Illinois. Such searches shall be conducted under the present name
of the Company and such other names as it has used during the past five years.
All such names are listed in Section 2.25 of the Disclosure Schedule.
6.3. Public Announcements. Subject to applicable legal requirements,
each party hereto agrees that any public announcement regarding the transactions
contemplated by this Agreement and the Transaction Documents will be made only
upon the mutual agreement of the Buyer and the Shareholders. The foregoing shall
encompass any so-called "farewell editorials" published in the Publications on
or prior to the Closing. No provision of this Section 6.3 shall be construed as
prohibiting the following disclosures: (i) disclosures of such information as
may be required for federal securities, tax, accounting or other reporting
purposes, (ii) disclosures to employees or independent contractors concerning
changes in their status and/or benefits, (iii) disclosures to legal counsel,
independent accountants and other representatives, (iv) disclosures to corporate
parents and other corporate affiliates, (v) disclosures pursuant to the terms of
an order of a court or other governmental authority of competent jurisdiction,
(vi) disclosures required in connection with legal proceedings, (vii)
disclosures required under the terms of loan, credit or similar agreement or
(viii) disclosures of matters of which there is public knowledge other than as a
result of disclosures made in breach hereof.
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6.4. Environmental Reports. The Buyer may retain an environmental
consultant to prepare, at the Buyer's expense, an environmental assessment
evaluation report with respect to each parcel of the Business Real Estate (an
"Environmental Report"). The Buyer shall specify the scope of investigation to
be conducted by such environmental consultant in the preparation of the
Environmental Report. In the event that the Environmental Report discloses
conditions or the possibility of conditions which, in the Buyer's sole
discretion, (a) might be expected to impose a material Liability on the Buyer or
the Company under applicable laws for clean up or other costs, (b) may make it
difficult to obtain financing secured by the Business Real Estate or (c) are
otherwise unsatisfactory to the Buyer, the Buyer may elect to terminate this
Agreement at any time prior to the Closing.
6.5. Maintenance of Plans. Between the date of this Agreement and the
Closing, the Shareholders shall cause the Company to administer each and every
Plan in accordance with the provisions of such Plan and all applicable
provisions of the Code and ERISA.
6.6. Conduct of Business Prior to Closing. Prior to the Closing, the
Shareholders will cause the Company to (i) conduct the Business only in the
ordinary course consistent with past practices and (ii) use commercially
reasonable efforts to preserve the business organization of the Business intact,
all to the end that it may preserve the goodwill and business relationships of
the Business with employees, customers, clients, suppliers and others, other
than Hollinger, Inc. and the Chicago Sun Times.
Without limiting the generality of the foregoing, except as set forth
on Section 6.6 of the Disclosure Schedule, the Shareholders will not permit,
without the prior consent of the Buyer, the Company to (a) increase the
compensation (including, but not limited to, bonus) payable on or after Closing
or to become payable on or after Closing to any employee of the Company, except
with respect to any employee who is not a Shareholder or a relative of any
Shareholder, in the ordinary course of business in accordance with past
practices, (b) sell or permit the sale of advertising or subscription orders for
the Publications, or enter into other transactions, at rates or prices lower
than the rates and prices in effect for such transactions on the date hereof,
other than volume discounts offered to advertisers in the ordinary course of
business at levels consistent with past practices and other than promotion
discounts offered to subscribers in the ordinary course of business consistent
with past practices, (c) alter its methods, practices or terms in respect of
billing or collection of accounts receivable or sale of subscriptions or
pre-paid advertising, (d) incur any Liability other than Permitted Liabilities,
(e) make any dividend or distribution of assets to any Shareholder or other
person, entity or business organization except as expressly contemplated by
Section 6.10, (f) incur any Indebtedness, (g) consummate any repurchase or
redemption, or agreed to repurchase or redeem, any shares of its capital stock,
any options or other rights to acquire such stock or any securities convertible
into or exchangeable for such stock, (h) amend its certificate or articles of
incorporation, by-laws, or other organizational documents, (i) issue or agree to
issue any additional shares of capital stock of any class or series, or any
securities convertible into or exchangeable for shares of capital stock, or any
options, warrants, or other rights to acquire any shares of capital stock, (j)
make any payment, loan, or
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<PAGE> 32
advance to or make an investment in or capital contribution to any person or
entity, other than in the ordinary course of business in accordance with past
practice; or (k) pay any bonus, or make any advance with respect to a bonus, to
any Shareholders or other employee of the Company other than in the ordinary
course of business in accordance with past practice. Prior to the Closing, the
Shareholders will cause the Company to (u) furnish to the Buyer, not later than
twenty (20) days after the close of each month ending prior to the Closing Date,
an unaudited statement of income and expense reflecting the operations of the
Company for such month and an unaudited balance sheet reflecting the assets and
liabilities with respect to the Company as at the close of such month, (v) pay
accounts payable and other obligations when they become due and payable in the
ordinary course of business, (w) comply in all material respects with all
applicable laws, (x) collect accounts receivable in the ordinary course of
business consistent with past practice, and (y) maintain levels of inventory
consistent with past practice. After December 31, 1998, the Shareholders will
not permit the Company to pay any cost, expense, tax, Liability or other Loss
for which the Shareholders would be obligated to indemnify the Buyer, without
the prior written consent of the Buyer.
6.7. No Solicitation of Other Offers. Neither any of the Shareholders
nor the Company will, or will permit any of their representatives or agents,
directly or indirectly, to entertain, solicit or initiate or enter into
discussions, transactions or contractual obligations with, or encourage or
provide any information to, any person, entity or business organization (other
than the Buyer and its designees) concerning any sale of any or all of the
Company, the Business, the Publications, the Shares or the Assets.
6.8. Preparation for Closing. Each of the Shareholders agrees to use
its reasonable efforts to bring about the fulfillment of the conditions
precedent contained in Article IV, including, but not limited to, the obtaining
of all necessary consents, approvals and waivers for the consummation of the
transactions contemplated by this Agreement and the Transaction Documents.
6.9. HSR Act Filing. Within five (5) business days after the date of
hereof, the Shareholders (and/or the Company) and the Buyer shall file or cause
to be filed with the United States Federal Trade Commission ("FTC") and the
United States Department of Justice ("DOJ") their respective filings and any
other required submissions under the HSR Act. Without limiting the generality of
the preceding sentence, the Shareholder (and/or the Company) and the Buyer shall
promptly file or cause to be filed any additional documents with the FTC, the
DOJ and any other governmental authority or agency that are required to be filed
by such parties and their affiliates under the HSR Act or otherwise in
connection with this Agreement and the transactions contemplated hereby and
shall use reasonable efforts to comply in a timely manner with all requests for
further information by the FTC or DOJ or other governmental authority or agency
in connection therewith.
6.10. Distributions. On and prior to the Closing Date, the Shareholders
and the Buyer agree that the Shareholders may cause the Company to distribute to
the Shareholders all cash and
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<PAGE> 33
cash equivalents (other than Retained Cash), marketable securities and life
insurance policies, in each case owned by the Company on December 31, 1998, and
the automobiles and automobile leases listed on Section 6.10 of the Disclosure
Schedule.
6.11. Further Assurances . From time to time after the Closing, at the
request of the Buyer, the Shareholders shall execute and delivery any further
instruments and take such other action as the Buyer may reasonably request to
vest or confirm in the Buyer ownership of the Shares, free and clear of any and
all Liens and Encumbrances or otherwise carry out the transactions contemplated
hereby.
6.12. Tax Returns; Post-Closing Date Taxes. The Shareholders shall, on
a timely basis, prepare or cause to be prepared and signed (through a designee
who shall be designated by the Company upon the recommendation of the
Shareholders as an officer of the Company solely for the purpose of preparing,
signing and filing income Tax returns for the Company for periods ending on or
prior to the Closing Date) all income Tax returns for the Company for all
periods ending on or prior to the Closing Date, provided, however, that
notwithstanding anything herein to the contrary, the Shareholders may not, and
may not authorize any officer designee, to amend any previously filed income Tax
return for the Company without the Buyer's consent, which may be withheld in the
Buyer's sole discretion (the "Pre-Closing Tax Returns"). To the extent required
by applicable law, the Shareholders shall include any income, gain, loss,
deduction or other Tax items for such periods on their Tax returns in a manner
consistent with the Schedule K-1's furnished by the Company to the Shareholders
for such periods. The Buyer shall not amend, or waive the statute of limitations
with respect to, any such Pre-Closing Tax Returns without the prior consent of
the Shareholders. The officer designee or other authorized representative
designated by the Company upon the recommendation of the Shareholders shall be
granted a general power of attorney to deal with any taxing authority with
respect to Taxes reflected on the Pre-Closing Tax Returns. The Buyer shall cause
the Company to, and the Shareholders shall, cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the filing of
Pre-Closing Tax Returns pursuant to this Section 6.12. The Shareholders shall
have the right, at their expense, to defend, challenge or dispute any audit,
litigation or other proceeding with respect to Pre-Closing Tax Returns, with the
cooperation of the Buyer and the Company. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. Such cooperation shall also include, in connection with audits of any
of the Pre-Closing Tax Returns, the Shareholders' being advised of such audits
or examinations promptly upon notice thereof. Each of the Buyer, the Company and
Shareholders agree to retain all books and records with respect to Tax matters
pertinent to the Company relating to any taxable period beginning before the
Closing Date until the expiration of the applicable statutes of limitations
(and, to the extent notified by the Buyer or the Shareholders, any extensions
thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into by such party with any taxing authority.
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<PAGE> 34
7. INDEMNIFICATION.
7.1. Representations and Warranties.
(a) The Shareholders hereby agree to jointly and severally indemnify
the Buyer, its affiliates (including the Company), and all of their officers,
directors, employees, and agents (each, a "Buyer Indemnitee") from, and hold
each Buyer Indemnitee harmless from, against, and in respect of the following:
any and all damages, deficiencies, actions, suits, proceedings, demands,
assessments, judgments, claims, losses, costs, expenses, fees, and Liabilities
(including costs of collection and reasonable attorneys' fees and expenses)
(herein called a "Loss" or "Losses") arising from or directly related to any
breach of, or inaccuracy in, any representation or warranty made by or on behalf
of any Shareholder in this Agreement or any Transaction Document or any Schedule
or Exhibit hereto or thereto (including, but not limited to, the Disclosure
Schedule, or in any certificate executed in connection herewith or therewith and
delivered on the date hereof. The Buyer Indemnitees shall not be entitled to
make any claim under this Section 7.1(a) (other than with respect to any breach
of, or inaccuracy in, the representations and warranties made by the
Shareholders in Section 2.3, 2.4, or 2.7.4), Section 7.2(a)(v) and Section
7.2(a)(vi) until the aggregate cumulative amount of Losses arising from claims
under this Section 7.1(a), Section 7.2(a)(v) and Section 7.2(a)(vi) exceeds
$275,000 (the "Deductible") in which event the Buyer Indemnitees may assert a
claim against the Shareholders only for the amount of such Losses in excess of
$275,000. In addition, the Buyer Indemnitees shall not be entitled to make any
claim under this Section 7.1(a) with respect to any breach of, or inaccuracy in,
any representations or warranties made by the Shareholders in the third sentence
of Section 2.10(c) and the first and second sentences of Section 2.13 to the
extent such representations or warranties relate to the compliance of the Owned
Real Estate in Berwyn, Illinois with applicable laws (other than Environmental
Laws) until the aggregate cumulative amount of Losses arising from such claims
exceed $20,000 (the "Berwyn Deductible"), in which event, subject to the
Deductible, the Buyer Indemnitees may assert a claim against the Shareholders
only for the amount of such Losses in excess of $20,000 (and Losses which do
not, in the aggregate, exceed the Berwyn Deductible will not count towards the
Deductible).
(b) The Buyer hereby agrees to indemnify the Shareholders (each, a
"Shareholder Indemnitee"; a Buyer Indemnitee and a Shareholder Indemnitee are
sometimes referred to herein as an "Indemnitee") from, and hold each Shareholder
Indemnitee harmless from, against, and in respect of any Losses arising from or
related to any breach of or inaccuracy in any representation or warranty made by
or on behalf of the Buyer in this Agreement or any Transaction Document or in
any certificate or agreement executed or delivered in connection herewith or
therewith. The Shareholder Indemnitees shall not be entitled to make any claim
under this Section 7.1(b) until the aggregate cumulative amount of such Losses
arising from claims under this Section 7.1(b) exceeds $250,000 in which event
the Shareholder Indemnitees may assert a claim against the Buyer only for the
amount of such Losses in excess of $250,000.
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<PAGE> 35
(c) The parties hereto agree that (i) the representations and
warranties made by the Shareholders in Sections 2.1, 2.3 and 2.4, shall survive
the Closing and the consummation of the transactions provided for herein and
shall remain effective without any time period limitation for asserting claims
for breach of such representations and warranties pursuant to Section 7.1(a),
(ii) the representations and warranties made by the Buyer in Section 3.1 shall
survive the Closing and the consummation of the transactions provided for herein
and shall remain effective without any time period limitation for asserting
claims for breach of such representations and warranties pursuant to Section
7.1(b), (iii) the representations and warranties made by the Shareholders in
Section 2.8 shall survive the Closing and the consummation of the transactions
provided for herein and shall remain effective until the thirtieth (30th) day
following the expiration of the applicable statute of limitations period for the
bringing of any claim by any relevant taxing authority, (iv) the representations
and warranties made by the Shareholders in Section 2.18 shall survive the
Closing and the consummation of the transactions provided for herein and shall
remain effective without any time period limitation for asserting claims for
breach of such representations and warranties, and (v) all other representations
and warranties made by the Shareholders and the Buyer hereunder shall survive
the Closing and the consummation of the transactions provided for herein and
shall remain effective until April 15, 2000; it being understood that a Buyer
Indemnitee or a Shareholder Indemnitee, as the case may be, shall not be
entitled to recover under Section 7.1(a) or Section 7.1(b), as the case may be,
with respect to the representations and warranties described in the foregoing
clause (v) unless a claim has been asserted by written notice, specifying the
material details of the alleged breach of representation or warranty, delivered
to the Shareholder Representatives or the Buyer, as the case may be, on or prior
to April 15, 2000, in which case any such claim with respect to which notice has
been given hereunder to the party prior to such date shall survive such date.
(d) In this Section 7, for purposes of determining the existence of any
inaccuracy of any representation or breach of any warranty of the Shareholders
contained in this Agreement or any certificate or agreement delivered or
executed by the Shareholders in connection herewith, any materiality
qualification in any representation or warranty or any requirement in any
representation or warranty that an event or fact be material or have a material
adverse effect in order for such event or fact to constitute an inaccuracy of a
representation or breach of a warranty shall be disregarded.
7.2. Other Indemnification.
(a) The Shareholders hereby agree to jointly and severally indemnify
each Buyer Indemnitee from, and hold each Buyer Indemnitee harmless from,
against and in respect of any Loss to the extent it arises from or directly
relates to:
(i) any breach by the Shareholders of any covenant or agreement set
forth in this Agreement or any Transaction Document;
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<PAGE> 36
(ii) any and all Taxes (A) in excess of the accrued amounts with
respect thereto on the balance sheet included in the Interim Financial
Statements imposed on or with respect to the Company, the Business, the
Business Real Estate or their assets, operations or activities for any
tax period ending on or before the Closing Date and the portion ending
on the Closing Date of any tax period that begins before and ends after
the Closing Date, and (B) arising in connection with the transfer of
the Shares or the Owned Real Estate and the Oak Brook Real Property
pursuant to this Agreement or the distribution of assets prior to the
Closing;
(iii) any Company Transaction Costs (as hereinafter defined);
(iv) any Losses arising from or relating to the Deferred
Compensation Arrangements or the death benefit plan listed on Section
2.14 of the Disclosure Schedule or the termination of any such
arrangements or plan;
(v) any Liability or remediation cost of the Company relating to
(i) the presence, treatment, storage, disposal, spillage, discharge,
transportation, emission, leakage, release or threatened release
("Presence" or "Release"), on or prior to the Closing Date, of any
Hazardous Substances which is at, in, on, under, about, from or
affecting any property owned or leased by the Company on the Closing
Date or at any time prior thereto or in which the Company has or had an
interest, including without limitation the Business Real Estate,
regardless of when the Presence or Release is discovered, (ii) the
offsite transportation, treatment, storage or disposal of any Hazardous
Substances, (iii) any personal injury (including wrongful death) or
property damage (real or personal) arising out of or related to any
such Presence or Release, (iv) any lawsuit brought or threatened,
settlement reached, or order or directive of or by any governmental
authority relating to such Presence or Release, or (v) any violation or
alleged violation of any Environmental Law by the Company at any time
on or prior to the Closing Date;
(vi) any amount owed by the Company for retroactive increases in
premiums under any workers' compensation insurance policy maintained by
the Company with respect to any period prior to the Closing Date to the
extent the aggregate amount of such increases exceeds $10,000, any
Losses arising from or relating to the Defined Benefit Pension Plan
listed on Section 2.14 of the Disclosure Schedule or the termination
thereof, and any Losses arising from or relating to the failure to
comply with any laws relating to the Cafeteria Plan listed on Section
2.14 of the Disclosure Schedule; and
(vii) any Liability related to the termination of employees
contemplated by Section 4.18, including but not limited to severance
payments, COBRA benefits, lease obligations with respect to automobiles
leased for the use of such employees and other compensation and
benefits.
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For purposes of this Agreement, "Company Transaction Costs" means the costs and
expenses of the Company incurred prior to the Closing in connection with the
sale of the Company, the Shares, the Business or the Publications, including,
but not limited to, the transactions contemplated by this Agreement and by the
Transaction Documents.
(b) The Buyer hereby agrees to indemnify each Shareholder Indemnitee
from, and hold each Shareholder Indemnitee harmless from, against and in respect
of any Loss to the extent it arises from or relates to (i) any breach of
covenant by the Buyer of any covenant thereof set forth in this Agreement or any
Transaction Document, or (ii) any Buyer Transaction Cost (as hereinafter
defined). For purposes of this Agreement, "Buyer Transaction Costs" means the
costs and expenses of the Buyer incurred in connection with the transactions
contemplated by this Agreement and by the Transaction Documents.
7.3. Limitations on Indemnification Obligations. Except as set forth
in the following sentence, the aggregate Losses payable by the Shareholders to
the Buyer Indemnitees under Section 7 shall not exceed $5,000,000 (the "Cap").
Nothing contained herein shall in any way limit, or be deemed to limit, or
otherwise affect the Buyer Indemnitee's rights to indemnification under, and the
Cap shall not apply to, (i) claims under Section 7.1(a) with respect to the
representations and warranties of the Shareholders in Sections 2.3, 2.4 and
2.7.4, (ii) claims under Section 7.1(a) with respect to the representations and
warranties of the Shareholders in Section 2.8 and claims under Section
7.2(a)(ii), (iii) claims under Section 7.1(a) with respect to the
representations and warranties of the Shareholders in Section 2.18 and claims
under Section 7.2(a)(v), or (iv) any Losses arising out of or as a result of
fraud by any Shareholder or the Company, and Losses in connection with any such
matters shall not count in determining whether the Losses payable by the
Shareholders exceed the Cap.
7.4. Notice of Claims. Within sixty (60) days after the receipt by the
Shareholders or the Buyer of notice of any claim against the Company, the
Shareholders or the Buyer, as the case may be, or of the commencement of any
action or proceeding against the Company, the Shareholders or the Buyer, as the
case may be, the Shareholder Representatives or the Buyer, as the case may be,
shall, if a claim with respect thereto is or may be made against an party
pursuant to this Section 7, give such party (or, if such party is the
Shareholders, to the Shareholder Representatives) written notice thereof. The
failure to give any notice required by this Section 7 shall not relieve any
party of any obligations contained in this Section 7 except and only to the
extent that the failure to give such notice actually and materially prejudices
the rights of such party. Each and every claim, action, proceeding or remedial
action referenced in this Section 7.4 shall hereinafter be referred to as a
"Claim."
7.5. Defense of Claims. An Indemnitee and its indemnifying party
pursuant to this Section 7 shall cooperate in the defense or compromise of any
Claim, and both such Indemnitee and such indemnifying party shall have the right
to participate under the direction of such Indemnitee and its counsel, at the
expense of such indemnifying party (which direction shall be reasonably
calculated to minimize the liability of such indemnifying party under this
Section 7 to
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<PAGE> 38
the extent consistent with the legitimate business interests of such
Indemnitee), in the defense of such Claim. Such indemnifying party shall have
the right, at its expense, for its counsel to participate in such defense.
Notwithstanding the foregoing, such indemnifying party may assume the defense of
a Claim by written notice to such Indemnitee within sixty (60) days after such
indemnifying party receives notice of such Claim, if and only if such
indemnifying party confirms in its notice to such Indemnitee that it is
obligated hereunder to indemnify the relevant Indemnitee with respect to such
Claim. In the case of such an assumption, such indemnifying party shall have the
authority to negotiate, compromise and settle such Claim, provided that, unless
the relevant Indemnitee shall have previously agreed otherwise in writing, any
compromise or settlement of such Claim shall include a complete release of all
other Claims by the third party bringing the Claim against such Indemnitee and
provided further that except for the settlement of a Claim that involves the
payment of money only (in which case such indemnifying party shall give such
Indemnitee the opportunity to discuss with it such payment, which opportunity
shall not affect the right of such indemnifying party to effect such settlement
in its discretion), such indemnifying party shall not settle or compromise any
claim without the prior written consent of such Indemnitee. Such Indemnitee
shall retain the right to employ its own counsel and to participate in the
defense of any Claim, the defense of which has been assumed by such indemnifying
party pursuant hereto, but such Indemnitee shall bear and shall be solely
responsible for its own costs and expenses in connection with such
participation. Such Indemnitee may compromise or settle any Claim against it at
any time, but if such compromise or settlement is made without the prior written
consent of such indemnifying party (which prior written consent may not be
unreasonably withheld or delayed), such indemnifying party shall not be required
to pay such Indemnitee in respect of any liability resulting from such
compromise or settlement; provided, however, that if in the reasonable judgment
of such Indemnitee it would be materially harmed or otherwise materially
prejudiced by not entering into a proposed settlement or compromise and such
indemnifying party withholds consent to such settlement or compromise, such
Indemnitee may enter into such settlement or compromise and such settlement or
compromise shall not be conclusive as to the liability of such indemnifying
party to such Indemnitee. Notwithstanding anything herein to the contrary, any
action to be taken by, or notice to be given to or by, the Shareholders under
this Section 7.5, whether as an Indemnitee or as an indemnifying party, shall be
taken or given by or to the Shareholder Representatives.
8. NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and shall be sent by hand delivery or overnight
courier delivered or addressed as follows or to such other address or addresses
of which the respective party shall have notified the other parties.
If to the Shareholders, to the Shareholder Representatives at:
Life Printing & Publishing Co., Inc.
709 Enterprise Drive
Oak Brook, Illinois 60521
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with a copy to:
Holleb & Coff
55 East Monroe
Chicago, Illinois 60603
Attention: Allan Wulfstat, Esq.
If to the Buyer, to:
Liberty Group Operating, Inc.
3000 Dundee Road
Northbrook, Illinois 60062
Attention: Kenneth L. Serota
President
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661
Attention: Kenneth W. Miller, Esq.
9. EXPENSES OF TRANSACTION. Whether or not the transactions provided
for herein are consummated, each of the parties hereto will assume and bear all
expenses, costs and fees incurred by such party in connection with the
preparation, negotiation and execution of this Agreement and the Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby. The Shareholders shall be responsible for the payment of all expenses
incurred by the Company related hereto. All transfer and other Taxes incurred in
connection with the consummation of the transactions contemplated hereby and
thereby shall be paid by the Shareholders when due, and the Shareholders will,
at their own expense, file all necessary tax returns and other documentation
with respect to such transactions and other Taxes. The Shareholders shall also
be responsible for the payment of all recording charges related to documents
recorded prior to the deed, including the recording of releases of any such
documents, and the Buyer shall be responsible for recording the Oak Brook Deed.
10. ENTIRE AGREEMENT. The agreement of the parties that is comprised of
this Agreement, the Exhibits and Schedules hereto, and the other documents
referred to herein, sets forth the entire agreement and understanding between
the parties and supersedes any prior agreement or understanding, whether oral or
written, relating to the subject matter of this Agreement.
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11. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the successors and assigns of the
Shareholders and the Buyer and, with respect to the Shareholders, their legal
representatives, executors, administrators, heirs, legatees and any other
person, entity or business organization who shall succeed to all or any part of
the Shareholders' estate.
12. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois. Each of the parties hereto
hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of Illinois and of the United States of
America located in the State of Illinois for any actions, suits or proceedings
arising out of or relating to this Agreement and the transactions contemplated
hereby, and each of the parties hereto agrees not to commence any action, suit
or proceeding relating hereto or thereto except in such courts. Each of the
parties hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby or thereby, in the courts of
the State of Illinois or the United States of America located in the State of
Illinois, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum. In any
action or suit to enforce any right or remedy under this Agreement or to
interpret any provision of this Agreement, the prevailing party shall be
entitled to recover its costs, including reasonable attorneys' fees.
13. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original for all purposes and all
of which together shall constitute one and the same instrument.
14. HEADINGS. The headings contained in this Agreement are inserted
only for convenience of reference and in no way define, limit, or describe the
scope or intent of this Agreement.
15. TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) by the written agreement of the Shareholders and the Buyer;
(b) by the Shareholders in the event the Closing has not occurred
on or prior to February 28, 1999, unless the failure of such consummation shall
be due to the Shareholder's material breach of a representation or warranty
contained herein or the failure of the Shareholders to comply in all material
respects with the agreements and covenants contained herein to be performed by
the Shareholders on or before February 28, 1999;
(c) by the Buyer in the event the Closing has not occurred on or
prior to February 28, 1999, unless the failure of such consummation shall be due
to the Buyer's material
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<PAGE> 41
breach of a representation or warranty contained herein or the failure of the
Buyer to comply in all material respects with the agreements and covenants
contained herein to be performed by the Buyer on or before February 28, 1999; or
(d) by either the Buyer or the Shareholders if (i) the
representations and warranties of the Shareholders or the Buyer, as the case may
be, shall not have been true and correct, in all material respects, as of the
date when made, (ii) the Shareholders or the Buyer, as the case may be, shall
have failed to perform and comply with, in all material respects, all agreements
and covenants required by this Agreement to have been performed or complied with
by such party or parties prior to the time of such termination and such failure
to perform or comply shall be incurable or shall not have been cured within a
reasonable period of time but not less than ten (10) days in duration following
notice of such failure, provided that the terminating party shall have performed
and complied with, in all material respects, all agreements and covenants
required by this Agreement to have been performed or complied with by such
terminating party prior to such time, or (iii) any event shall have occurred or
any fact or condition shall exist that shall have made it impossible to satisfy
a condition precedent to the terminating party's obligations to consummate the
transactions contemplated by this Agreement, unless the occurrence of such event
or existence of such fact or condition shall be due to the failure of the party
or parties seeking to terminate this Agreement to perform or comply with any of
the covenants, agreements, or conditions hereof to be performed or complied with
by such party or parties prior to the Closing.
16. CONFIDENTIAL INFORMATION. From and after the Closing Date, each of
the Shareholders shall keep confidential and refrain from disclosing to any
third party, without the prior written consent of the Buyer, any and all
financial, technical, commercial or other information concerning the Business.
18. DISCLOSURE SCHEDULE. Any information disclosed in any Section of
the Disclosure Schedule, if reasonably related to any other Section or Sections
of the Disclosure Schedule and described in reasonable detail to allow a
reasonable person to make the applicable connection, shall be deemed disclosed
in reference to all applicable Sections of the Disclosure Schedule.
19. KNOWLEDGE.
(a) The terms "the Shareholders' Knowledge", "Knowledge of the
Shareholders", "Knowledge" or similar terms as used in this Agreement shall mean
the actual knowledge or belief of Larry K. Randa or Jack R. Kubik, after
reasonable inquiry of the directors and officers of the Company.
(b) The Buyer's knowledge prior to the Closing of any inaccuracy or
breach of any representation, warranty or covenant made or to be performed by
the Shareholders set forth in this Agreement (i) shall not in any way limit or
affect any of the Buyer's rights or remedies under this
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<PAGE> 42
Agreement, (ii) shall not in any way limit or affect the Buyer's right to
recover under Section 7, and (iii) shall not be deemed a waiver of any condition
contained in Section 4.
(c) The Shareholders' knowledge prior to the Closing of any inaccuracy
or breach of any representation, warranty or covenant made or to be performed by
the Buyer set forth in this Agreement (i) shall not in any way limit or affect
any of the Shareholders; rights or remedies under this Agreement, (ii) shall not
in any way limit or affect the stockholder's right to recover under Section 7,
and (iii) shall not be deemed a waiver of any condition contained in Section 5.
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The parties to this Agreement have duly executed it as of the day and
year first above written.
SHAREHOLDERS:
-------------
/s/ Lynne L. Dougherty
---------------------------------------------------------
Lynne L. Dougherty
/s/ Lynne L. Dougherty
---------------------------------------------------------
Lynne L. Dougherty as custodian for Matthew Dougherty
under the Illinois Uniform Gifts to Minors Act
/s/ Lynne L. Dougherty
---------------------------------------------------------
Lynne L. Dougherty as custodian for Katherine
Dougherty under the Illinois Uniform Gifts to Minors Act
/s/ Larry K. Randa
---------------------------------------------------------
Larry K. Randa as custodian for Jill K. Randa
under the Illinois Uniform Gifts to Minors Act
/s/ Larry K. Randa
---------------------------------------------------------
Larry K. Randa as custodian for Jennifer Randa
under the Illinois Uniform Gifts to Minors Act
/s/ Larry K. Randa
---------------------------------------------------------
Larry K. Randa
/s/ Barbara L. Kubik
---------------------------------------------------------
Barbara L. Kubik
<PAGE> 44
/s/ Jack R. Kubik
---------------------------------------------------------
Jack R. Kubik
/s/ Donna E. Larson
---------------------------------------------------------
Donna E. Larson
/s/ Jack L. Kubik
---------------------------------------------------------
Jack L. Kubik
/s/ Patricia J. Kocka
---------------------------------------------------------
Patricia J. Kocka
/s/ Paul Donars
---------------------------------------------------------
Paul Donars
/s/ Jeanne K. Donars
---------------------------------------------------------
Jeanne K. Donars, as Trustee of the Jeanne K. Donars
Trust, dated May 6, 1981
/s/ Kerry M. Donars
---------------------------------------------------------
Kerry M. Donars
/s/ Scott Donars
---------------------------------------------------------
Scott Donars
/s/ Kimberly Ella Donars
---------------------------------------------------------
Kimberly Ella Donars
/s/ Stacey Switala
---------------------------------------------------------
Stacey Switala
<PAGE> 45
/s/ Donald J. Randa /s/ Larry K. Randa
---------------------------------------------------------
Donald J. Randa and Larry K. Randa, as Trustees of the
Larry K. Randa Gift Trust
/s/ Mary A. Randa /s/ Lynne Randa Dougherty
---------------------------------------------------------
Mary A. Randa and Lynne Randa Dougherty, as Trustees
of the Lynne R. Dougherty Gift Trust
/s/ Mary Mossar Randa
---------------------------------------------------------
Mary Mossar Randa, as Trustee of the Mary Mossar
Randa Trust dated March 10, 1981
/s/ Donald J. Randa
---------------------------------------------------------
Donald J. Randa, as Trustee of the Donald J. Randa
Trust dated January 20, 1972
LANDLORD:
---------
JONGO REAL ESTATE PARTNERSHIP
By: /s/ LARRY K. RANDA
--------------------------------------------
Its: MANAGING PARTNER
--------------------------------------------
BUYER
-----
LIBERTY GROUP OPERATING, INC.
By: /s/ Kenneth L. Serota
---------------------------------------------
Kenneth L. Serota, its President
<PAGE> 46
LIST OF SCHEDULES
-----------------
Schedule 1 Shareholders of the Company
Schedule 4.11 Noncompetition Agreements
Schedule 4.13 Title Insurance Amounts
Schedule 4.16 Permitted Liens and Encumbrances
Schedule 4.18 Family Employees
LIST OF EXHIBITS
----------------
Exhibit A Publications
Exhibit B Description of Oak Brook Real Property
Exhibit C Form of Escrow Agreement
Exhibit D Form of Holleb & Coff Opinion
Exhibit E Form of Release
Exhibit F Form of Noncompetition Agreement
Exhibit G Form of Employment Agreement
DISCLOSURE SCHEDULE
-------------------
Section 2.2 Jurisdictions
Section 2.4 Title to Shares
Section 2.6 Financial Statements
Section 2.7.3 Absence of Changes
Section 2.8 Taxes
Section 2.9 Title to Assets
Section 2.10(a) Owned Real Estate
Section 2.10(b) Leased Real Estate
Section 2.10(c) Business Real Estate Noncompliance
Section 2.12 Advertisers; Subscribers; Circulation
Section 2.13 Conformity with Law; Litigation and Proceedings
Section 2.14 Welfare and Benefit Plans
Section 2.15 Labor Relations
Section 2.16 Licenses
Section 2.17 Proprietary Rights
Section 2.18 Environmental
Section 2.19 Employees, Officers and Directors
Section 2.20 Contractual Obligations
Section 2.21 Transactions with Affiliates
Section 2.24 Insurance Policies
Section 2.25 Corporate Names
Section 6.6 Conduct of Business Prior to Closing
Section 6.10 Automobiles and Automobile Leases
