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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 18, 2000
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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 3, 2000 (but effective by agreement for accounting purposes
as of January 1, 2000), the Registrant (through Liberty Group Nevada
Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of
the Registrant (the "Registrant's Subsidiary")) purchased (i) all of
the issued and outstanding shares of capital stock (the "Elko Shares")
of Elko Daily Free Press, Inc., a Nevada corporation ("Elko"), from the
shareholders of Elko (the "Shareholders"), and (ii) certain real
property in Elko, Nevada (the "Free Press Real Property") owned by Free
Press Properties, LLC ("Free Press"), a Nevada limited liability
company and an affiliate of the Shareholders, and leased to Elko. By
acquisition of the Elko Shares, the Registrant acquired substantially
all of the assets owned by Elko, including the mastheads, trade names,
trademarks, service marks and other marks (and the goodwill associated
therewith), subscriber lists, cash on hand, inventory, accounts
receivable and equipment of the newspapers published, marketed and
distributed by Elko.
Prior to this transaction, other than the relationship between the
Shareholders and Free Press, no material relationship existed between
the Registrant and the Shareholders or Free Press, or between any
affiliates of such entities.
At the closing of the transaction, the Registrant (a) paid to the
Shareholders $10,127,507.60, in cash, and (b) deposited an additional
$1,000,000 of the cash purchase price otherwise payable to the
Shareholders for the Elko Shares (collectively, the "Share Purchase
Price") into an escrow account until July 15, 2001 pursuant to the
Escrow Agreement between the Shareholders, the Registrant's Subsidiary
and U.S. Trust Company, N.A., as escrow agent. In addition, the
Registrant paid $2,000,000 to Free Press for the Free Press Real
Property.
The Share Purchase Price is subject to a post-closing adjustment, as
set forth in the stock purchase agreement, based upon Elko's net
working capital as of January 1, 2000.
The cash portion of the purchase price in this transaction was provided
under the credit facility the Registrant has in place which is led by
Citicorp USA, Inc., as administrative agent.
(b) The Registrant acquired (i) the Elko Shares from the Shareholders and
thereby acquired substantially all of the assets owned by Elko in its
business of publishing, marketing and distributing newspapers and (ii)
the Free Press Real Property from Free Press. The Registrant will use
these assets for the same purposes as previously used by Elko.
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 January 3, 2000, by and between the
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Shareholders, Free Press and the Registrant's Subsidiary, a copy of which is
filed as an exhibit to this Report and is hereby incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
Audited financial statements of Elko 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 January 3, 2000, by and
between the shareholders of Elko Daily Free Press, Inc., Free
Press Properties, LLC and Liberty Group Nevada Holdings, 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 18, 2000 By: /s/ KENNETH L. SEROTA
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Title: President and Chief Executive
Officer
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Exhibit Index
<TABLE>
<CAPTION>
Sequential
Page
Exhibit # Item Number
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<S> <C> <C>
2.1 Stock Purchase Agreement, dated as of 6
January 3, 2000, by and between the shareholders of
Elko Daily Free Press, Inc., Free Press Properties,
LLC and Liberty Group Nevada Holdings, Inc.
</TABLE>
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STOCK PURCHASE AGREEMENT
DATED AS OF JANUARY 3, 2000
BY AND BETWEEN
THE
SHAREHOLDERS
OF
ELKO DAILY FREE PRESS, INC.,
FREE PRESS PROPERTIES, LLC
AND
LIBERTY GROUP NEVADA HOLDINGS, INC.
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TABLE OF CONTENTS
<TABLE>
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<S> <C>
1. PURCHASE AND SALE OF THE SHARES AND THE ELKO REAL
PROPERTY...............................................................................................-1-
1.1. The Shares....................................................................................-1-
1.2. Share Purchase Price..........................................................................-2-
1.3. The Elko Real Property........................................................................-2-
1.4. The Closing and Manner of Payment.............................................................-3-
1.5. Determination of the Net Working Capital and the Share Purchase Price. ......................-4-
2. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.....................................................-6-
2.1. Validity of Agreement.........................................................................-6-
2.2. Corporate Organization and Good Standing of the Company.......................................-6-
2.3. Capitalization................................................................................-7-
2.4. Title to Shares...............................................................................-7-
2.5. No Violation or Approval......................................................................-8-
2.6. Financial Statements..........................................................................-8-
2.7. Liabilities; Absence of Changes; Operations in Ordinary Course................................-9-
2.8. Taxes........................................................................................-11-
2.9. Title to Assets..............................................................................-12-
2.10. Business Real Estate.........................................................................-12-
2.11. Good Operating Condition and Repair..........................................................-13-
2.12. Advertisers; Subscribers; Circulation........................................................-13-
2.13. Operations in Conformity With Law; Litigation................................................-14-
2.14. Welfare and Benefit Plans....................................................................-14-
2.15. Labor Relations..............................................................................-15-
2.16. Licenses.....................................................................................-16-
2.17. Proprietary Rights...........................................................................-16-
2.18. Environmental Matters........................................................................-16-
2.19. Employees, Officers and Directors............................................................-18-
2.20. Contractual Obligations......................................................................-18-
2.21. Transactions with Affiliates.................................................................-20-
2.22. Inventories..................................................................................-20-
2.23. Brokers and Finders..........................................................................-20-
2.24. Insurance....................................................................................-20-
2.25. Corporate Names..............................................................................-20-
2.26. Subsidiaries of the Company..................................................................-21-
2.27. Disclosure...................................................................................-21-
3. REPRESENTATIONS OF THE BUYER..........................................................................-21-
3.1. Due Organization, Authorization and Good Standing............................................-21-
</TABLE>
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<TABLE>
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3.2. No Violation or Approval.....................................................................-21-
3.3. Brokers and Finders..........................................................................-21-
4. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER..................................................-22-
4.1. Representations and Warranties...............................................................-22-
4.2. Performance of Obligations...................................................................-22-
4.3. Stock Certificates...........................................................................-22-
4.4. Legal Opinion................................................................................-22-
4.5. Releases of Shareholders.....................................................................-22-
4.6. Resignations of Officers and Directors.......................................................-22-
4.7. Charter Documents............................................................................-22-
4.8. Injunctions..................................................................................-22-
4.9. Consents Under Contractual Obligations.......................................................-23-
4.10. Governmental Approvals; HSR Clearance........................................................-23-
4.11. Noncompetition Agreements....................................................................-23-
4.12. Real Estate Documents........................................................................-23-
4.13. No Material Adverse Change...................................................................-24-
4.14. Consents under Buyer's Credit Arrangements...................................................-24-
4.15. Elimination of Liens and Encumbrances........................................................-24-
4.17. Due Diligence................................................................................-25-
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SHAREHOLDERS...............................................-25-
5.1. Payment of the Purchase Price................................................................-25-
5.2. Representations and Warranties...............................................................-26-
5.3. Performance of Obligations...................................................................-26-
5.4. Release......................................................................................-26-
5.5. Injunctions..................................................................................-26-
5.6. Governmental Approvals.......................................................................-26-
6. COVENANTS OF THE PARTIES..............................................................................-26-
6.1. Access to Premises and Information...........................................................-26-
6.2. Lien Searches................................................................................-27-
6.3. Public Announcements.........................................................................-27-
6.4. Environmental Reports........................................................................-27-
6.5. Maintenance of Plans.........................................................................-27-
6.6. Conduct of Business Prior to Closing.........................................................-28-
6.7. No Solicitation of Other Offers..............................................................-28-
6.8. Preparation for Closing......................................................................-28-
6.9. Distributions................................................................................-29-
6.11. Tax Returns..................................................................................-29-
6.12. Further Assurances...........................................................................-29-
</TABLE>
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<TABLE>
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7. INDEMNIFICATION.......................................................................................-30-
7.1. Representations and Warranties...............................................................-30-
7.2. Other Indemnification........................................................................-31-
7.3. Limitations on Indemnification Obligations...................................................-32-
7.4. Notice of Claims.............................................................................-32-
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. WAIVER OF JURY TRIAL. ...............................................................................-36-
14. COUNTERPARTS. .......................................................................................-36-
15. HEADINGS. ...........................................................................................-36-
17. CONFIDENTIAL INFORMATION..............................................................................-37-
18. LIKE KIND EXCHANGE....................................................................................-37-
</TABLE>
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of January
3, 2000, is by and between the persons listed on Schedule 1 attached hereto
(collectively, the "Shareholders" and each individually a "Shareholder"), Free
Press Properties, LLC, a Nevada limited liability company ("Landlord") and
Liberty Group Nevada Holdings, Inc., a Delaware corporation (the "Buyer").
RECITALS
A. Elko Daily Free Press, Inc., a Nevada 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 operating printing facilities and distribution centers associated therewith
(the "Business").
B. The Shareholders collectively own, beneficially and of record,
206.37 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 "Elko 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 Elko 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 ELKO 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,
encumbrances, security interests, mortgages, deeds of trust, pledges, leases,
easements, claims of equitable interests, rights or restrictions of any kind
whatsoever ("Liens and Encumbrances"), for the Share Purchase Price (as
hereinafter defined).
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1.2. Share Purchase Price. Subject to adjustment as provided in this
Section 1.2, the purchase price to be paid to the Shareholder by the Buyer for
all of the Shares shall be an aggregate amount equal to $11,097,000 (the "Share
Purchase Price"). The Share Purchase Price shall be payable as specified in
Section 1.4 hereof. The Share Purchase Price shall be:
(A) reduced by an amount equal to the amount by which the
Net Working Capital (as hereinafter defined) is less
than $875,000, if the Net Working Capital is greater
than or equal to zero but less than $875,000;
(B) reduced by an amount equal to $875,000 plus the
difference between zero and the Net Working Capital,
if the Net Working Capital is less than zero; and
(C) increased by an amount equal to the lesser of (i) the
difference between the Net Working Capital and $875,000
and (ii) the amount by which the sum of the Company's
Cash (as hereinafter defined) plus the Net Realizable
Value (as hereinafter defined) of the Company's
Investments (as hereinafter defined) as of the Price
Determination Time (as hereinafter defined) exceeds
$636,423, if the Net Working Capital exceeds $875,000.
For purposes of this Agreement, "Cash" means the
Company's cash and cash equivalents on hand as of the
Price Determination Time, and "Investments" means
marketable securities and similar assets included in
current assets for purposes of determining the Net
Working Capital.
1.3. The Elko 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
Elko Real Property, free and clear of any and all Liens and
Encumbrances (other than Permitted Liens and Encumbrances (as
hereinafter defined)), for $2,000,000 (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 Elko 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
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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 and Manner of Payment. The closing of the purchase and
sale of the Shares and the Elko Real Property (the "Closing") shall be held at
the offices of Avansino, Melarkey, Knobel & Mulligan, 165 West Liberty Street,
Reno, Nevada, at 10:00 a.m. (Pacific time) on January 3, 1999 or on such other
date as the Buyer and the Shareholder Representative (as hereinafter defined)
may agree upon in writing (the "Closing Date"). With respect to the Elko 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 Elko 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 Elko Real Property. For purposes of
this Agreement, "Shareholder Representative" shall mean Kim G. Steninger. 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, (ii) the Landlord shall deliver to the Buyer a general warranty deed
conveying the Elko Real Property to the Buyer and (iii) the Buyer shall deliver
the Share Purchase Price to the Shareholders as provided below and the Real
Property Purchase Price to the Landlord as provided below. On the Closing Date,
the Purchase Price shall be payable as follows:
(a) For purposes of the Closing, the parties mutually agree that
the Share Purchase Price shall be deemed to be $11,127,507.60 (the
"Estimated Purchase Price"). On the Closing Date and subject to the
terms and conditions set forth in this Agreement and in consideration
of the sale, assignment, transfer and delivery of all of the Shares,
the Buyer will pay to the Shareholders (by wire transfer of immediately
available funds to the account designated by each Shareholder) the
Estimated Purchase Price, which Estimated 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 $1,000,000 (the "Escrow Amount")
(which Escrow Amount shall for all purposes be allocated pro rata among
the Shareholders). After the Closing, the actual Share Purchase Price
shall be determined, taking into account the adjustments required
pursuant to this Section 1.4 and employing the procedures and criteria
set forth in Section 1.5. If the Estimated Purchase Price exceeds the
Share Purchase Price, as ultimately determined in accordance with this
Section 1.4 and Section 1.5, the Shareholder shall promptly (but, in
any event, within five (5) business days of the ultimate determination
of the Share Purchase Price) pay to the Buyer (by wire transfer of
immediately available funds to the account designated by the Buyer) the
excess;
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(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").
1.5. Determination of the Net Working Capital and the Share Purchase
Price. The Net Working Capital and the Share Purchase Price (taking into account
the adjustments required pursuant to Section 1.2) shall be determined in
accordance with this Section 1.5.
(a) As promptly as practicable after the Closing Date, and in any
event on or before the expiration of ninety (90) days from the Closing
Date, the Shareholders shall cause to be prepared and furnished to the
Buyer, a balance sheet of the Company (the "Closing Balance Sheet") as
of 12:01 a.m. (Central Standard time) on January 1, 2000 (the "Price
Determination Time"). Subject to Section 1.5(c) below, the Closing
Balance Sheet shall be prepared in accordance with United States
generally accepted accounting principles, consistently applied
("GAAP"), in a manner consistent with those used in the preparation of
the 1998 Balance Sheet (as hereinafter defined), after giving effect to
the transactions contemplated by this Agreement to occur on or prior to
the Closing (including, but not limited to, the distribution to the
Shareholders of the Excluded Assets (as hereinafter defined), but not
including the payment of any Other Liabilities on or prior to the
Closing), but prior to the application of purchase accounting to
reflect the acquisition of the Shares pursuant to this Agreement. The
Shareholder Representative shall also prepare (or cause to be prepared)
and furnish to the Buyer not later than the date by which the Closing
Balance Sheet is required to be delivered, a written statement based
upon the Closing Balance Sheet reflecting only those assets and
liabilities of the Company as of the Price Determination Time which are
required to be included in the determination of the Net Working Capital
in accordance with this Section 1.5 and calculating the Net Working
Capital and the Share Purchase Price (collectively the "Statement").
The Shareholder Representative and the Shareholders' accountants shall
have reasonable access during normal business hours to all documents,
records, work papers, facilities and personnel reasonably necessary to
prepare the Closing Balance Sheet and the Statement. The Buyer and the
Buyer's accountants shall have reasonable access during normal business
hours to all documents, records, work papers, facilities and personnel
reasonably necessary to review the Closing Balance Sheet and the
Statement.
(b) If the Buyer disputes any of the elements or amounts reflected
on the Closing Balance Sheet or the Statement or the Shareholder
Representative's calculation of the Net Working Capital or the Share
Purchase Price (a "Dispute"), the Buyer shall give the Shareholder
Representative written notice of such Dispute within thirty (30) days
of
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receipt of the Closing Balance Sheet, the Statement and the Shareholder
Representative's calculation of the Net Working Capital or the Share
Purchase Price. If, after good-faith negotiations, the Shareholder
Representative and the Buyer are unable to resolve the Dispute within
thirty (30) days of the Buyer giving the Shareholder Representative
notice of the Dispute, the Buyer and the Shareholder Representative
shall promptly submit the Dispute to Arthur Andersen LLP or another
independent public accountant selected by mutual agreement of the
Shareholder Representative and the Buyer (the "Independent Accountant")
for resolution. In connection with the resolution of any Dispute, the
Independent Accountant shall have reasonable access during normal
business hours to all documents, records, work papers, facilities and
personnel of the parties reasonably necessary to perform its functions
hereunder. The Independent Accountant's function shall be to review
only those items set forth on the Closing Balance Sheet, the Statement
or the Shareholder Representative's calculation of the Net Working
Capital or the Purchase Price that are the subject of the Dispute. The
decision of the Independent Accountant with respect to any Dispute
shall be final and binding on the parties. The fees and expenses of the
Independent Accountant shall be borne equally by the Shareholders and
the Buyer.
(c) For purposes of this Agreement, "Net Working Capital" means an
amount equal to the difference between (A) the sum of the aggregate
book value of the Current Assets as of the Price Determination Time and
the Net Realizable Value of the Other Assets as of the Price
Determination Time, minus (B) the sum of the book value of the Current
Liabilities as of the Price Determination Time and the book value of
the Other Liabilities as of the Price Determination Time, all as
determined in accordance with this Section 1.5 and the Closing Balance
Sheet. For such purposes, (1) "Current Assets" means the current assets
of the Company including, but not be limited to, (i) accounts and notes
receivable that are collected by the Company or the Buyer on or prior
to the date ninety (90) days after the Closing Date, (ii) cash and cash
equivalents, (iii) inventory (which shall be valued for such purposes
at its historical cost on a FIFO basis), and (iv) prepaid expenses
(other than prepaid insurance) to the extent such prepaid expenses
provide a monetary benefit to the Buyer in the conduct of the Company's
business after the Closing, but shall expressly exclude (i) those
assets listed on Schedule 1.5-A (collectively, the "Excluded Assets"),
(ii) prepaid insurance and other prepaid expenses to the extent such
prepaid expenses do not provide a monetary benefit to the Buyer in the
conduct of the Company's business after the Closing, (iii) all deferred
income tax benefits or similar assets, (iv) loans made to the
Shareholders and (v) accounts receivable and notes receivable that are
not collected by the Company or the Buyer on or prior to the date
ninety (90) days after the Closing Date, (2) "Other Assets" means the
non-current, non- operating assets of the Company specifically listed
on Schedule 1.5-B, (3) "Current Liabilities" means the current
liabilities of the Company including, but not be limited to, (i) all
trade accounts payable and accrued expenses, including, without
limitation, (x) an accrual with respect to rent, unpaid earned vacation
pay, wages, real property Taxes and withholding Taxes, and (y) an
accrual for employee bonuses, which shall be a pro rata share of the
aggregate amount of the employee bonuses paid or to be paid with
respect to the Company's current fiscal year, and employer
contributions under or with respect to the Company's 401(k) Profit
Sharing Plan (the "Company's 401(k) Plan"), which shall be a
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pro rata share of the aggregate amount of such contributions made or to
be made with respect to the Company's current fiscal year, (ii) checks
payable by the Company which have not cleared, and (iii) unearned
subscription and advertising income, and (4) "Other Liabilities" means
all non-current, non-operating and other non-current liabilities of the
Company, including but not limited to those liabilities described on
Schedule 1.5-C. The pro rata share for employee bonuses and employer
contributions described in (i)(y) above shall be determined on the
basis of the number of days which have elapsed in the Company's current
fiscal year from April 1, 1999 through the Price Determination Time,
divided by 365. For purposes of this Agreement, "Net Realizable Value"
means the amount the Company would receive as proceeds from the assets
if the Company sold such assets on the Closing Date, net of all
expenses and Taxes that would be incurred or owed in connection with or
as a result of such sale.
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. Shareholders shall not be deemed to have
made to Buyer any representation or warranty other than as expressly made by
Shareholders in Section 2 hereof. Without limiting the generality of the
foregoing, Shareholders make no representation or warranty to Buyer regarding
any information or documents made available to Buyer or its representatives
except as expressly covered in the representations and warranties contained in
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 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. 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. Corporate Organization and Good Standing of the Company. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada. The Company has full requisite power and
authority to carry on its business and to own and use the properties presently
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
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shareholders necessary for the consummation of the transactions contemplated by
this Agreement and the Transaction Documents has been taken or will be taken
prior to the Closing. The principal place of business of the Company is at 3720
Idaho Street, Elko, Nevada, and the books and records of the Company are kept at
such office. The minute books of the Company, have been made available to the
Buyer and its representatives, and accurately reflect all material transactions
of the Company. 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 maintained by the Company at any time during the last two
(2) years will remain at the Company's principal office. The Landlord is a
Nevada limited liability company duly organized, validly existing and in good
standing under the laws of the State of Nevada. 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 members 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 or will be taken prior to
the Closing.
2.3. Capitalization. The authorized capital stock of the Company
consists solely of 2,500 shares of Common Stock, of which only the Shares are
issued and outstanding, and 2,500 shares of Preferred Stock, none of which are
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 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, and is the
record and beneficial owner of, 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, other than proxies which have been
revoked or have expired according to their terms or by operation of law prior to
the date hereof. Upon the delivery of and payment for the Shares at the Closing
as provided for in this Agreement, the Buyer will acquire good title thereto and
will be the record and beneficial owner thereof, free and clear of any and all
Liens and Encumbrances, subject to no rescission or similar rights not possessed
entirely by the Buyer.
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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, 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. No consent, approval, order or authorization of,
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 jurisdiction over, the Landlord or its properties. No consent,
approval, order or authorization of, 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 reviewed financial statements for the fiscal year ended March 31, 1999
(the "1998 Balance Sheet Date") consisting of the balance sheet of the Company
as of such date (the "1998 Balance Sheet") and a statement of income and cash
flow of the Company for the fiscal year ended on such date (together with the
1998 Balance Sheet, the "1998 Financial Statements") and (ii) the Company's
unaudited financial statements for the six fiscal months ended September 30,
1999 consisting of a balance sheet of the Company as of such date (the "Interim
Balance Sheet Date") and a statement of income and cash flow of the Company for
the six-month period ended on such date (the "Interim Financial Statements").
The 1998 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 1998 Balance Sheet Date and the one-year period then ended in
conformity with GAAP. The Interim Financial Statements present fairly the
financial position of the Company, the results of its operations and cash flow
as of and for the six-month period ending September 30, 1999 in conformity with
GAAP. 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 bad debt
reserves, if any, set forth in such balance sheets.
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<PAGE> 13
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 the
Interim Balance Sheet Date, (B) prepaid subscription Liabilities
incurred in the ordinary course of business in accordance with past
practices, (C) all non-current, non-operating and other non-current
liabilities of the Company, including those liabilities described on
Schedule 1.5-C, all of which will be included as a liability on the
Closing Balance Sheet, (D) Liabilities of the Company under or 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), and (E)
Liabilities of the Company 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).
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). Except as set forth in
Section 2.7.2 of the Disclosure Schedule, since the Interim Balance
Sheet Date, the Company has operated the Business only in the ordinary
course, in accordance with past practices, and there has been no (a)
,other than changes in general or newspaper industry-wide economic
conditions, material adverse change in the condition (financial or
otherwise), assets, business, operations or prospects of the Company,
(b) ,to the Shareholders' knowledge, other than changes in general or
newspaper industry-wide economic conditions, 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 other transaction, not in the
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<PAGE> 14
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, other
than the distribution of the assets described on Schedule 1.5-A; (v)
made or authorized any individual capital expenditure by the Company in
excess of $15,000 individually or made or authorized capital
expenditures by the Company of more than $50,000 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
$15,000 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
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) 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, except for
Indebtedness described on Section 2.7.4 of the Disclosure Schedule to the extent
the amount of such Indebtedness is included as a liability on the Closing
Balance Sheet. "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
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<PAGE> 15
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.
2.8. Taxes. 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. The Company has paid 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.
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<PAGE> 16
2.9. Title to Assets. The Company has good and marketable 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 1998 Balance Sheet (other than assets disposed of since
the 1998 Balance Sheet Date in the ordinary course of business or as permitted
by this Agreement) or acquired by the Company since the 1998 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) in 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 Permitted Liens
and Encumbrances.
(b) Section 2.10(b) in the Disclosure Schedule lists all other real
property (including, but not limited to, the Elko 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 Elko 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 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. All buildings used by the Company in connection with
the Business are in
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<PAGE> 17
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. There
has been no construction on the Business Real Estate within the six (6) months
prior to the date hereof. No notice from any county, township or other
governmental body has been received by the Company or, to the Shareholders'
knowledge, has been served upon the Business Real Estate requiring 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
notice has been received by the Company or, to the Shareholders' knowledge, 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. Good Operating Condition and Repair. Each of the 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 good operating
condition and repair; (ii) has been maintained in accordance with past
practices; and (iii) is available for immediate use in the conduct and
operations of the Business.
2.12. Advertisers; Subscribers; Circulation. 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 April
1, 1998 through September 30, 1999 has given notice that they will reduce the
level at which it purchases advertising space on a regular basis from the
Company or any of the Publications, and, to the Shareholders' knowledge, no
existing or potential competitor has taken any action with respect to any market
in which any of the Publications are sold or distributed (including, but not
limited to, the publication and marketing of a new newspaper or expanded
circulation into the geographic area served by any of the Publications or the
alteration of the format, schedule, advertising rates, subscription price,
distribution methods or practices or marketing efforts of an existing
newspaper). Set forth on Section 2.12 of the Disclosure Schedule or attached
thereto, is (i) the total paid circulation and the total unpaid circulation for
each of the Publications as of the 1998 Balance Sheet Date and as of September
30, 1999, (ii) a list of all advertisements published in each of the
Publications during the period from April 1, 1999 through September 30, 1999 in
exchange for goods or services, as opposed to cash payment, provided, however,
that no such list is required to be delivered if the aggregate value of all such
advertisements during such period by all of the Publications, based upon the
published rate for the type of advertising involved, is less than $5,000, (iii)
a schedule of all sales during the period from April 1, 1999 through September
30, 1999 of, commitments during such period to sell, or representations during
such period that it will sell, advertising space in any of the Publications to
any party at a rate below the published rate for the type of advertising sold or
to be sold, (iv) an accounts receivable aging as of September 30, 1999 of the
Company, (v) a description of any circulation drives, including, but not limited
to, any discounting or other promotional programs, occurring in the period from
April 1, 1999 through September 30, 1999 and (vi) an accounts receivable aging
as of September 30, 1999. All of the information set forth on Section 2.12 of
the Disclosure Schedule or attached thereto is true, correct and complete. The
total paid circulation of any of the Publications has not declined since
September 30, 1999. The
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Company has met and fulfilled all qualification standards and done all acts
under any state or local law, rule, regulation or ordinance with respect to
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.
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 Shareholders' knowledge, 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 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 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 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
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<PAGE> 19
term is used in section 4001(b) of ERISA), has not incurred any 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 would 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 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. 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. For purposes of this Agreement, "Company Plan
Affiliates" means each person, entity or business 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 claim by an employee against the
Company. The Company is in compliance 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. None of
the Company's employees are represented by a labor union and there has not been
any labor union organizing
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activity by or among the Company's employees. The Company has not engaged in any
unfair labor practice. There is no labor strike, slowdown, stoppage, grievance
or other labor difficulty pending or, to the Shareholders' knowledge, 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. No proceeding or investigation is pending or, to the
Shareholders' knowledge, threatened that could reasonably be expected to result,
directly or indirectly, in the revocation or limitation of any such licenses or
permits which are material to the Company, the Assets or the Business. 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 of the Disclosure Schedule lists
all registered and material unregistered trade names, trademarks, patents,
mastheads, service marks and copyrights presently used or used at any time
during the last three (3) years by the Company in the operation of its Business,
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 listed on Section 2. 17 of the Disclosure
Schedule 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 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 Shareholders'
knowledge, 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, regulations, and moratoria relating to
the operation of the Business and the operation, occupancy or condition of the
Business Real Estate or any other real property previously leased or owned by
the Company, including, but not limited to, all Environmental Laws. For purposes
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of this Agreement, "Environmental Laws" means all laws, statutes, rules,
regulations and court decisions 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. Section
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, order, or directive 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.
(c) There never has been any and is no past or continuing release or
threat of release of any Hazardous Substance into the environment at, on, from,
onto or under the Business Real Estate or any real property previously leased or
owned by the Company and there are no Hazardous Substances at, on or under the
Business Real Estate. 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 could 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.
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<PAGE> 22
(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 other real property previously owned, leased or used by the Company.
(f) 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, Landlord or any Shareholder with
respect to the Business Real Estate or any other real property previously owned,
leased or used by the Company or, the Company's Business, and the results of
groundwater and soil testing, underground storage tank tests, soil samples, and
written communications with federal, state, or local governments on
environmental and Occupational Safety and Health Act of 1970 matters relating
thereto, and the Company has provided the Buyer with true, correct and copies of
all such audits, assessments, studies, results, tests samples and
communications.
2.19. Employees, Officers and Directors. Section 2.19 of the Disclosure
Schedule contains a true and complete list, as of October 31, 1999, 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. 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, correct 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, 1999 and the names of all whose employment with the
Company has terminated since October 31, 1999.
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 $5,000 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;
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<PAGE> 23
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;
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 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 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, in all material respects, with the terms of each such license.
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<PAGE> 24
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.
2.22. Inventories. All of the inventory of the Company taken as a whole
(i) is used or useful or saleable in the normal course of the Business (less
applicable reserves reflected on the Closing Balance Sheet), (ii) is not
excessive in kind to a material degree or in a material amount in light of the
Business and (iii) is carried at amounts, net of any reserves, that reflect the
lower of the cost or fair market value of such inventory. Neither the
Shareholders nor the Company has changed the methods or procedures under which
reserves for obsolete inventory are established and maintained. Since the 1998
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, any of the Shareholders
or the Landlord 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, except as set forth in Section 2.23 of
the Disclosure Schedule.
2.24. Insurance. Section 2.24 of the Disclosure Schedule contains a
true, complete, and correct 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 the carrier for each policy. 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.
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.
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<PAGE> 25
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.
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 omits to state a material fact necessary to make
the statements made herein or therein not misleading. To the Shareholders'
knowledge, there is no material fact which adversely affects the financial
condition, properties, assets, operations, or business of the Company that has
not been disclosed in writing by the Company or the Shareholders to the Buyer.
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.
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<PAGE> 26
4. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER. The Buyer's
obligation to purchase the Shares and the Elko Real Property 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:
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 shall be true and correct 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
Avansino, Melarkey, Knobel & Mulligan, counsel to the Company, the Shareholders
and the Landlord, dated the Closing Date, in substantially the form of Exhibit D
attached hereto.
4.5. Releases of Shareholders. All Shareholders shall have executed and
delivered to the Buyer releases, in substantially the form of Exhibit E attached
hereto.
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 could prevent, or in any way
limit or make illegal the consummation of such transactions. No
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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. 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.
4.11. Noncompetition Agreements. The Buyer, the Company and each of the
Shareholders shall have entered into separate Noncompetition Agreements, dated
the Closing Date, in the form of Exhibit F attached hereto (the "Noncompetition
Agreements").
4.12. 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 Elko Real Property, as the case may be:
4.12.1. 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 Elko Real Property and all recorded
easements appurtenant thereto upon Closing, subject only to the
Permitted Liens and Encumbrances, from First American Title Company of
Nevada (the "Title Insurance Company") in the amount set forth with
respect to such parcel of Business Real Estate on Schedule 4.12
attached 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").
4.12.2. At least five (5) days prior to the Closing Date, an
as-built survey relating to each parcel of Owned Real Estate and the
Elko Real Property from a surveyor duly licensed in Nevada 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)
indicate the location, legal description and area and square feet of
each parcel of Owned Real Estate and the Elko Real Property, (iii)
locate all easements, utilities (including
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connections to public streets), parking facilities, covenants and
restrictions and rights of way, (iv) indicate adjoining streets,
building lines, surface improvements, encroachments, vehicular access
and parking requirements, (v) identify which portions of the Owned Real
Estate and the Elko Real Property are located in a 100 year flood plain
area as identified under the National Flood Insurance Program and (vi)
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 and 13.
4.12.3. At the Closing, stamped general warranty deeds relating to
the Elko Real Property, duly executed and acknowledged by the Landlord,
free and clear of all Liens and Encumbrances and leases and any other
matters affecting title, except the Permitted Liens and Encumbrances.
4.12.4. A written certification(s) 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.
4.12.5. All keys, key cards, combinations, access devices, manuals
(if any) and instructional materials (if any) necessary to obtain full
access to and use of the Owned Real Estate and the Elko Real Property.
4.12.6. Such other documents as may be reasonably necessary to
consummate the Company's acquisition of the Owned Real Estate and the
Elko 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 to assure delivery of title to the Elko Real Property,
subject only to the Permitted Liens and Encumbrances.
4.13. No Material Adverse Change. There shall have been no material
adverse change in the business, financial condition, operations or assets of the
Company or any Publication since the Interim Balance Sheet Date.
4.14. 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.
4.15. 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 4.15 attached hereto
and security interests securing the Permitted Indebtedness (collectively, the
"Permitted Liens and Encumbrances").
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4.16. Payoff Letters. At the Closing, the Company shall have delivered
to the Buyer a pay-off letter for any Indebtedness of the Company, showing the
amount that would have to be paid in order to satisfy such Indebtedness in full
and agreeing that upon payment of such amount all Liens and Encumbrances in
favor of the lender with respect to such Indebtedness will be released. At the
Closing, the Landlord shall deliver to the Buyer a pay-off letter for all
indebtedness secured by the Elko Real Property (the "Elko Indebtedness"),
showing the amount that would have to be paid in order to satisfy such Elko
Indebtedness in full and agreeing that upon payment of such amount all Liens and
Encumbrances in favor of the lender with respect to the Elko Indebtedness will
be released.
4.17. Due Diligence. The Buyer shall have completed its due diligence
review (including, but not limited to, its review with respect to environmental
matters) of the Company, the Business, the Publications, the Shares, the Assets,
the Contractual Obligations, the Business Real Estate and any other real
property previously owned, leased or used by the Company, the present and past
business, operations and condition of the Company, the Business and the
Publications (including financial statements through October 31, 1999) and other
matters, and the results of such due diligence review shall be satisfactory to
the Buyer, in its sole and absolute discretion.
4.18. Release of Liens on Shares. The liens on the Shares that the
Shareholders pledged as security under that certain Stock Redemption Agreement
dated May 1, 1992 between the Company and Mel and Mae Steninger, shall have been
terminated and such Shares shall have been released from escrow.
4.19. 401(k) Plan. On or prior to the day immediately preceding the
Closing Date, the board of directors of the Company shall have adopted a
resolution terminating the Company's 401(k) Plan in accordance with the
provisions thereof and all applicable laws and such resolution shall not have
been amended or rescinded prior to the Closing.
4.20. 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.
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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. Release. The Buyer shall have executed and delivered to the
Shareholders releases, in substantially the form of Exhibit G attached hereto.
5.5. 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.
5.6. 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 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.
5.7 Transaction Documents. All instruments and Transaction Documents
shall be satisfactory in form and substance to Shareholders and Landlord.
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
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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. In the event the
transactions contemplated by this Agreement are not consummated, Buyer agrees to
return all Records of the Company to the Shareholders in at least the same
condition as such Records were in prior to Buyer's access, and repair to any
damage to the Business Real Estate caused by the Buyer's investigation thereof.
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 Nevada, and at the county level for Elko County, Nevada. Such
searches shall be conducted under the present name of the Company and the
Publications and such other names as the Company 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.
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.
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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 its 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. Without
limiting the generality of the foregoing, without the prior consent of the
Buyer, the Shareholders will not permit 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, (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 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.
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 commercially reasonable efforts to bring about the fulfillment of the
conditions precedent contained in Article
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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. Distributions. On and prior to the Closing Date, the Shareholders
shall cause the Company to distribute to the Shareholders the Excluded Assets.
6.10. Post-Closing Inspections. For a period of five (5) years after
the Closing Date, the Shareholders and the Landlord shall make their books and
records relating to the ownership and operation of the Company, the
Publications, the Business and the Business Real Estate prior to the Closing
(including work papers in the possession of their accountants, except where such
disclosure would constitute a waiver of a legal privilege) available for
inspection by the Buyer and its duly appointed representatives, and the Buyer
shall cause the Company to make its books and records relating to the ownership
and operation of the Company, the Publications, the Business and the Business
Real Estate prior to the Closing (including work papers in the possession of its
accountant, except where such disclosure would constitute a waiver of a legal
privilege) available for inspection by the Shareholders and their duly appointed
representatives, at mutually agreeable reasonable times during normal business
hours. Any inspections performed by the Buyer or the Shareholders shall be made
solely for purposes of, or with respect to, the enforcement of this Agreement
(including, but not limited to, Section 7 hereof), any indemnification claims by
the parties hereunder, any tax matters relating to the ownership and operation
of the Company and any lawsuits, causes of action or disputes relating to any of
the foregoing. As used in this Section 6.10, the right of inspection includes
the right to make extracts or copies, at the inspecting party's expense. The
representatives of a party inspecting the records of the other party shall be
reasonably satisfactory to the providing party.
6.11. Tax Returns. The Buyer agrees not to amend any Tax return(s) of
the Company for any tax period ending on or before the Closing Date unless (a)
the Buyer determines that the calculation of the Tax owed in connection with
such Tax return was inaccurate or that the positions taken by the Company in
such Tax return were in violation of the Code, or (b) the IRS or any other
taxing authority makes a determination or a finding that such a Tax return must
be amended or challenges the calculation of the Tax to be paid in connection
with such Tax return or any position taken by the Company in such Tax return in
any proceeding, investigation or action.
6.12. Payment of Note Payable. The Buyer agrees to pay, or cause the
Company to pay, the obligations of the Company under that certain Promissory
Note dated May 1, 1992, issued by the Company in favor of Mel and Mae Steninger
within one business day of the Closing Date.
6.13. 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.
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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) until the aggregate cumulative
amount of Losses arising from claims under this Section 7.1(a) exceeds $50,000
in which event the Buyer Indemnitees may assert a claim against the Shareholders
for the entire amount of such Losses (including the amount of such Losses under
$50,000).
(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 $50,000 in which event the
Shareholder Indemnitees may assert a claim against the Buyer for the entire
amount of such Losses (including the amount of such Losses under $50,000).
(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
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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 July 15, 2001; it being understood that any claim asserted by
written notice specifying the alleged breach of representation or warranty,
delivered to the party against whom such claim is being made prior to any such
date shall survive such date without limitation as to time.
(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;
(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, (B) arising in connection with the transfer of the
Shares or the Owned Real Estate and the Elko Real Property pursuant to
this Agreement, and (C) arising in connection with the distribution to
the Shareholders of the Excluded Assets pursuant to this Agreement;
(iii) any Company Transaction Costs (as hereinafter defined);
(iv) any Losses arising from or relating to any matter disclosed
in Section 2.13 of the Disclosure Schedule (the "Disclosed Matters");
(v) any Liability or remediation cost 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 the Elko Real Property or any other 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
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the Business Real Estate, regardless of when the Presence or Release is
discovered, (ii) the offsite transportation, treatment, storage or
disposal of any such 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; and
(vi) any Liability (other than Permitted Liabilities) relating to
any event occurring prior to the Closing or any condition existing as
of the Closing.
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, the Publications or the Elko Real
Property, 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 any breach of covenant by
the Buyer of any covenant thereof set forth in this Agreement or any Transaction
Document.
7.3. Limitations on Indemnification Obligations. The Indemnifying
Shareholders' and the Buyer's obligations under this Section 7 are subject to
the following limitations in addition to those expressly specified elsewhere in
this Section 7):
(a) Notwithstanding anything herein to the contrary, except as set
forth in the following sentence, the aggregate Losses payable by the
Indemnifying Shareholders to the Buyer Indemnitees under Section 7.1(a) shall
not exceed $1,000,000 (the "Cap"). Notwithstanding the foregoing, 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) Section 7.1(a) with respect to the representations and
warranties of the Shareholders in Sections 2.3, 2.4, 2.7.4, 2.8 and 2.18, or
(ii) any Losses resulting from actual fraud by the Shareholders and Losses in
connection with such matters shall not count in determining whether the Losses
payable by the Indemnifying Shareholders exceed $1,000,000. Any amounts finally
determined or agreed as owed to a Buyer Indemnitee by any Shareholder pursuant
to this Agreement shall first be satisfied by recovery from the funds held
pursuant to the Escrow Agreement.
(b) Any losses payable to the Buyer Indemnitees pursuant to Sections
7.1(a) or 7.2(a) shall be net of any insurance proceeds received by the Company
or any Buyer Indemnitee under any insurance policy maintained by the Company or
the Buyer, including but not limited to the Title Insurance Policies delivered
by the Landlord to the Buyer pursuant to Section 4.12.1.
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
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Shareholders or the Buyer, as the case may be, the Shareholder Representative 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 Representative) 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 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 each of the
following conditions is satisfied:
(a) 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; and
(b) the relevant Indemnitee does not give such indemnifying party
written notice, within thirty (30) days after it receives such notice
from such indemnifying party, that it has determined, in the exercise
of its reasonable discretion based upon a legal opinion of the
indemnifying party's counsel, that a conflict of interest makes
separate representation by such Indemnitee's own counsel advisable.
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
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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 Representative.
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 Representative at:
Kim G. Steninger
724 Goldenrod Drive
Elko, Nevada 89815
with a copy to:
Avansino, Melarkey, Knobel & Mulligan
165 West Liberty Street
Suite 210
Reno, Nevada 89501
Attention: Michael J. Melarkey
If to the Buyer, to:
Liberty Group Nevada Holdings, Inc.
3000 Dundee Road
Northbrook, Illinois 60062
Attention: Kenneth L. Serota
President
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<PAGE> 39
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, except for those costs paid by the
Company prior to the Closing Date. 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, other than Taxes incurred by
the Company as a result of an election by the Buyer under section 338 of the
Code. 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.
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.
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 Nevada. Each of the parties hereto
hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the federal courts of the United States of America located in
Reno, Nevada 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 federal courts of the United States of America located
in Reno, Nevada, 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
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brought in any such court has been brought in an inconvenient forum. If the
federal courts do not have jurisdiction, then the parties consent to submit to
the jurisdiction of the state courts in the State of Nevada located in Reno,
Nevada. 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. WAIVER OF JURY TRIAL. The Shareholders and the Buyer hereby
irrevocably waive, to the fullest extent permitted by law, all rights to trial
by jury in any action, proceeding, or counterclaim (whether based upon contract,
tort or otherwise) arising out of or relating to this Agreement or any of the
transactions contemplated hereby.
14. 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.
15. 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.
16. 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 January 31, 2000, 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 January 31, 2000;
(c) by the Buyer in the event the Closing has not occurred on or
prior to January 31, 2000, unless the failure of such consummation shall be due
to the Buyer's material 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 January 31, 2000; 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 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
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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.
17. 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,
other than pursuant to a subpoena or court order, as necessary to prepare a tax
return or to Shareholders' accountant, attorney or financial advisor.
18. LIKE KIND EXCHANGE. The Buyer acknowledges that it is or may be the
Shareholders' intention to include this transaction as one part of a
tax-deferred exchange as recognized under Section 1031 of the Code. The Buyer
shall execute such reasonable documents as may be required to qualify the
Shareholders' transaction for treatment under that section, provided that in no
event shall the Buyer be required to take title to any exchange property. Any
such exchange shall be performed at the Shareholders' sole cost and expense, and
the Shareholders hereby indemnify and hold the Buyer harmless from and against
any Loss arising out of or resulting from such exchange. The Shareholders
acknowledge that the Shareholders are relying on the Shareholders' own legal and
accounting advice in accomplishing such exchange, and the Buyer makes no
representation as to the appropriateness or acceptance by the IRS or any other
taxing authority with jurisdiction of any exchange.
(The remainder of this page is intentionally left blank.
Signature page follows.)
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The parties to this Agreement have duly executed it as of the day and
year first above written.
SHAREHOLDERS:
/s/ Rex E. Steninger
------------------------------------------
Rex E. Steninger
/s/ Kim G. Steninger
------------------------------------------
Kim G. Steninger
/s/ Dan M. Steninger
------------------------------------------
Dan M. Steninger
LANDLORD
FREE PRESS PROPERTIES, LLC
By: /s/ Kim G. Steninger
--------------------------------------
Its:
--------------------------------------
BUYER:
LIBERTY GROUP NEVADA HOLDINGS, INC.
By: /s/ Kenneth L. Serota
---------------------------------------
Kenneth L. Serota, its President
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LIST OF SCHEDULES
Schedule 1 Shareholders of the Company
Schedule 1.5-A Excluded Assets
Schedule 1.5-B Non-Operating Assets
Schedule 1.5-C Non-Operating Liabilities
Schedule 4.12 Title Insurance Amounts
Schedule 4.15 Permitted Liens and Encumbrances
LIST OF EXHIBITS
Exhibit A Publications
Exhibit B Description of Elko Real Property
Exhibit C Form of Escrow Agreement
Exhibit D Form of Shareholders' Counsel Opinion
Exhibit E Form of Release
Exhibit F Form of Noncompetition Agreement
Exhibit G Form of Buyer's Release
DISCLOSURE SCHEDULE
Section 2.2 Jurisdictions
Section 2.4 Title to Shares
Section 2.6 Financial Statements
Section 2.7.1 Liabilities
Section 2.7.2 Tangible Assets
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 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
