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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: May 16, 2000
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) Downers Grove Reporter, Inc. Acquisition
On May 1, 2000, the Registrant (through Liberty Group Suburban
Newspapers, Inc., a Delaware corporation and a wholly-owned subsidiary
of the Registrant (the "Registrant's Suburban Newspapers Subsidiary")),
purchased (i) all of the issued and outstanding shares of capital stock
(the "Downers Grove Shares") of Downers Grove Reporter, Inc., an
Illinois corporation ("Downers Grove"), from the shareholders of
Downers Grove (the "Shareholders"), and (ii) certain real property in
Downers Grove, Illinois (the "Reporter Real Property") owned by Downers
Grove Reporter, an Illinois general partnership (the "Reporter"), and
an affiliate of the Shareholders, and leased to Downers Grove. By
acquisition of the Downers Grove Shares, the Registrant acquired
substantially all of the assets owned by Downers Grove, 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 Downers Grove.
Prior to this transaction, other than the relationship between the
Shareholders and the Reporter, no material relationship existed between
the Registrant and the Shareholders or the Reporter, or between any
affiliates of such entities.
At the closing of this transaction, the Registrant (a) paid to the
Shareholders $8,419,496, in cash, and (b) deposited an additional
$1,000,000 of the cash purchase price otherwise payable to the
Shareholders for the Downers Grove Shares (collectively, the "Share
Purchase Price") into an escrow account until November 2, 2001 pursuant
to the Escrow Agreement between the Shareholders, the Registrant's
Subsidiary and Old Kent Bank, as escrow agent. In addition, the
Registrant paid $2,000,000 to the Reporter for the Reporter Real
Property.
The Share Purchase Price includes a payment for the net working capital
(cash, accounts receivable, inventory and other assets net of current
liabilities) of Downers Grove as of May 1, 2000 which was estimated to
be in the amount of approximately $980,000 for closing purposes and is
subject to a post-closing adjustment, as set forth in the purchase
agreement.
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.
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McDonough County Shopper, Inc./Fulton County Shopper, Inc. Acquisition
On May 1, 2000, the Registrant (through Liberty Group Illinois
Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of
the Registrant (the "Registrant's Illinois Subsidiary")), purchased
substantially all of the assets of the McDonough County Shopper, Inc.,
an Illinois corporation, and the Fulton County Shopper, Inc., an
Illinois corporation (collectively, the "Sellers"), 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 the Sellers.
Prior to this transaction, no material relationship existed between the
Registrant and the Sellers, or between any affiliates of such entities.
At the closing of this transaction, the Registrant (a) paid to the
Sellers $3,000,000 in cash, and (b) agreed to pay an additional
$500,000 in the aggregate in five (5) installments of $200,000,
$100,000, $100,000, $50,000 and $50,000 on the first, second, third,
fourth and fifth anniversaries of the closing date, together with
interest thereon at the rate set forth therein (collectively, the
"Asset Purchase Price").
The Asset Purchase Price is subject to a post-closing decrease, as set
forth in the purchase agreement, based upon the liabilities of the
Sellers as of May 1, 2000 which were assumed by Registrant's Illinois
Subsidiary under the purchase agreement.
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) Downers Grove Reporter, Inc. Acquisition
The Registrant acquired (i) the Downers Grove Shares from the
Shareholders and thereby acquired substantially all of the assets owned
by Downers Grove in its business of publishing, marketing and
distributing newspapers and (ii) the Reporter Real Property from the
Reporter. The Registrant will use these assets for the same purposes as
previously used by Downers Grove.
The foregoing summary of the terms of this transaction is qualified in
its entirety by reference to the provisions of the Purchase Agreement,
dated as of May 1, 2000, by and between the Shareholders, the Reporter
and the Registrant's Suburban Newspapers Subsidiary, a copy of which is
filed as an exhibit to this Report and is hereby incorporated herein by
reference.
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McDonough County Shopper, Inc./Fulton County Shopper, Inc. Acquisition
The Registrant acquired the Purchased Assets from the Sellers
substantially all of the assets owned by the Sellers in their business
of publishing, marketing and distributing newspapers. The Registrant
will use these assets for the same purposes as previously used by the
Sellers.
The foregoing summary of the terms of this transaction is qualified in
its entirety by reference to the provisions of the Purchase Agreement,
dated as of May 1, 2000, by and between the Sellers, James M. Helenthal
and the Registrant's Illinois 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 Downers Grove and the Sellers 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 Purchase Agreement, dated as of May 1, 2000, by and between the
shareholders of Downers Grove Reporter, Inc., Downers Grove Reporter
and Liberty Group Suburban Newspapers, Inc.
2.2 Purchase Agreement, dated as of May 1, 2000, by and between
McDonough County Shopper, Inc., Fulton County Shopper, Inc.,
James M. Helenthal and Liberty Group Illinois 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: May 16, 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 Purchase Agreement, dated as of May 1, 2000, by 7
and between the shareholders of Downers Grove
Reporter, Inc., Downers Grove Reporter and
Liberty Group Suburban Newspapers, Inc.
2.2 Purchase Agreement, dated as of May 1, 2000, by 51
and between McDonough County Shopper, Inc.,
Fulton County Shopper, Inc., James M. Helenthal
and Liberty Group Illinois Holdings, Inc.
</TABLE>
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EXHIBIT 2.1
PURCHASE AGREEMENT
DATED AS OF MAY 1, 2000
BY AND BETWEEN
THE
SHAREHOLDERS
OF
DOWNERS GROVE REPORTER, INC.,
DOWNERS GROVE REPORTER
AND
LIBERTY GROUP SUBURBAN NEWSPAPERS, INC.
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TABLE OF CONTENTS
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1. PURCHASE AND SALE OF THE SHARES AND THE REAL PROPERTY......................... 1
1.1. The Shares............................................................ 1
1.2. Share Purchase Price.................................................. 1
1.4. The Closing and Manner of Payment..................................... 1
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.............................................. 7
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................................................. 17
2.19. Employees, Officers and Directors..................................... 18
2.20. Contractual Obligations............................................... 19
2.21. Transactions with Affiliates.......................................... 20
2.22. Inventories........................................................... 20
2.23. Brokers and Finders................................................... 20
2.24. Insurance............................................................. 21
2.25. Corporate Names....................................................... 21
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
3.2. No Violation or Approval.............................................. 22
3.3. Brokers and Finders................................................... 22
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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.......................................... 23
4.5. Releases of Shareholders and the Landlord.............. 23
4.6. Resignations of Officers and Directors................. 23
4.7. Charter Documents...................................... 23
4.8. Injunctions............................................ 23
4.9. Consents Under Contractual Obligations................. 23
4.10. Governmental Approvals................................. 23
4.11. Noncompetition Agreements.............................. 24
4.12. Real Estate Documents.................................. 24
4.13. No Material Adverse Change............................. 25
4.14. Elimination of Liens and Encumbrances.................. 25
4.15. Payoff Letters......................................... 25
4.16. 401(k) Plan............................................ 25
4.17. March 31 Financials.................................... 25
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SHAREHOLDERS......... 26
5.1. Payment of the Purchase Price.......................... 26
5.2. Representations and Warranties......................... 26
5.3. Performance of Obligations............................. 26
5.4. Injunctions............................................ 26
5.5. Governmental Approvals................................. 26
6. COVENANTS OF THE PARTIES........................................ 27
6.1. Access to Premises and Information..................... 27
6.2. Lien Searches.......................................... 27
6.3. Public Announcements................................... 27
6.4. Environmental Reports.................................. 27
6.5. Maintenance of Plans................................... 28
6.6. Conduct of Business Prior to Closing................... 28
6.7. No Solicitation of Other Offers........................ 29
6.8. Preparation for Closing................................ 29
6.9. Distributions.......................................... 29
6.10. Tax Returns............................................ 29
6.11. Further Assurances..................................... 30
7. INDEMNIFICATION................................................. 30
7.1. Representations and Warranties......................... 30
7.2. Other Indemnification.................................. 31
7.3. Notice of Claims....................................... 33
</TABLE>
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7.4. Defense of Claims.................................... 33
8. NOTICES....................................................... 35
9. EXPENSES OF TRANSACTION....................................... 36
10. ENTIRE AGREEMENT.............................................. 36
11. BINDING EFFECT................................................ 37
12. GOVERNING LAW................................................. 37
13. WAIVER OF JURY TRIAL.......................................... 37
14. COUNTERPARTS.................................................. 37
15. HEADINGS...................................................... 37
17. CONFIDENTIAL INFORMATION...................................... 38
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PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of May 1, 2000,
is by and between the persons listed on Schedule 1 attached hereto
(collectively, the "Shareholders" and each individually a "Shareholder"),
Downers Grove Reporter, an Illinois general partnership comprised of Chester J.
Winter, Jr. and Patricia K. Winter ("Landlord"), and Liberty Group Suburban
Newspapers, Inc., a Delaware corporation (the "Buyer").
RECITALS
A. Downers Grove Reporter, Inc., an Illinois corporation (the "Company"),
is engaged in the business of publishing, marketing and distributing those
certain newspapers identified on Exhibit A attached hereto (the "Publications")
and operating printing facilities and distribution centers associated therewith
(the "Business").
B. The Shareholders collectively own, beneficially and of record, 4,000
issued and outstanding shares of Common Stock, no par value per share, of the
Company (the "Shares"), 1,000 of which are shares of Voting Common Stock and
3,000 of which are shares of Non-Voting Common Stock, 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 "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 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 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 2.2. 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 $8,500,000 minus the
Bank Payoff Amount (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 the amount by which the Net Working Capital (as
hereinafter defined) is less than zero, if the Net Working
Capital is less than zero;
(B) increased by the amount by which the Net Working Capital is
greater than zero, if the Net Working Capital is greater than
zero.
1.3. The 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 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 minus the Real
Estate Payoff Amount (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, except those which are (x) the responsibility of
the Company as tenant under that certain Commercial Lease dated May 1,
1998, by and between Landlord and the Company (the "Lease"), and (y)
included in Current Liabilities (as hereinafter defined) for purposes of
determining Net Working Capital (as hereinafter defined), with respect to
the Real Property shall be apportioned between the Buyer and the Landlord
as of the Closing Date. If any taxes are to be prorated and actual taxes
are not ascertainable as of the Closing Date, such prorations shall be made
based on 110% of 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,
except for items that are the responsibility of the Company under the Lease
and included in Current Liabilities for purposes of determining Net Working
Capital. The Buyer shall prepare (or cause the Company to prepare) a
proration schedule as promptly as practicable after Closing and deliver a
copy thereof to the Landlord. The Landlord will promptly provide to the
Buyer and the Company any information reasonably requested by the Buyer in
the preparation of such proration schedule. The parties hereto shall
cooperate in resolving any dispute with respect to such proration schedule
which may arise as soon as possible and in any event within thirty (30)
days after the Closing Date. If the amounts set forth in the proration
schedule under reimbursements to the Landlord exceed the reimbursements to
the Buyer, then the difference between such amounts shall be paid to the
Landlord by the Buyer as soon after the Closing Date as reasonably
practicable. If the amounts set forth in the proration schedule under
reimbursements to the Buyer exceed the
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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 Real Property (the "Closing") shall be held at the
offices of Katten Muchin Zavis, 525 West Monroe Street, Chicago, Illinois, at
10:00 a.m. (Central Standard time) on May 1, 2000 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 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 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 Real Property. For purposes of this Agreement, "Shareholder
Representative" shall mean Chris Winter. 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 special warranty deed conveying the 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 $9,419,496 (the "Estimated Share
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 Share Purchase Price,
which Estimated Share Purchase Price shall be paid pro rata to each
Shareholder based upon such Shareholder's proportionate ownership interest
in the Shares as set forth in Section 2.4 of the Disclosure Schedule, less
$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 Section 1.2 and employing the
procedures and criteria set forth in Section 1.5. If the Estimated Share
Purchase Price exceeds the Share Purchase Price, as ultimately determined
in accordance with Section 1.2 and Section 1.5, the Shareholders 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, and if the Share Purchase Price, as ultimately
determined in accordance with Section 1.2 and Section 1.5 exceeds the
Estimated Share Purchase Price, the Buyer shall promptly (but, in any
event, within five (5) days of the ultimate determination of the Share
Purchase Price) pay to the Shareholders (by wire transfer of immediately
available funds to the account designated by each Shareholder) the excess,
which excess 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;
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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
11:59 p.m. (Central Standard time) on April 30, 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"), except as set forth
in paragraph (c) of this Section 1.5, 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 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
receipt of the Closing Balance Sheet, the Statement and the Shareholder
Representative's
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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 (B) the
sum of the aggregate book value of the Current Liabilities as of the Price
Determination Time and the aggregate 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) subject to item (D) below, accounts and notes receivable,
including classified and advertising receivables, (ii) cash and cash
equivalents, (iii) newsprint inventory (which shall be valued for such
purposes at its current market value as of the Price Determination Time),
(iv) prepaid expenses, (v) the deposit on the purchase price of that
replacement image setter described in Section 2.7.2 of the Disclosure
Schedule (the "Imager") and (vi) a marketable securities (which shall be
valued at the amount at which the Company would receive if it sold all such
marketable securities on the Closing Date minus all expenses that would be
incurred by the Company in connection with such sale and all Taxes that
would be owed in connection with or as a result of such sale), but shall
expressly exclude (A) those assets listed on Schedule 1.5-A (collectively,
the "Excluded Assets"), (B) all deferred income tax benefits or similar
assets, (C) loans made to the Shareholders and (D) accounts receivable and
notes receivable of the Company existing as of the Price Determination Time
that are not collected by the Company or the Buyer on or prior to the date
ninety (90) days after the Closing Date ("Uncollected Receivables"), net of
the reserve for doubtful accounts included as an offset against Current
Assets in determining Net Working Capital, (2) "Current Liabilities" means
the current liabilities of the Company (excluding the portion of the Bank
Payoff Amount that constitutes current liabilities of the Company as of the
Price Determination Time) including, but not limited to, (i) all accounts
and notes payable and expenses accrued or required to be accrued in
accordance with GAAP, including, without limitation, the following (whether
or not required to be accrued in accordance with GAAP): (w) an accrual for
the cost of repairing the roof on the Real Property (the Buyer and the
Shareholder Representative shall mutually select the roofing
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contractor to perform such repairs and shall cooperate to complete such
repairs within 90 days of Closing), (x) an accrual with respect to rent,
unpaid earned vacation pay, wages, real property Taxes (with respect to
such real property Taxes for any real property based upon 110% of the most
recent ascertainable real property Taxes for such real property) and
withholding Taxes, (y) unless the Company has paid, prior to the Closing
Date, bonuses to employees who are not Shareholders or family members of
Shareholders with respect to the Company's 2000 fiscal year (excluding
bonuses of Company vehicles or cash bonuses that are used to purchase
Company vehicles) equal to or greater than the bonuses paid to employees
who are not Shareholders or family members of Shareholders with respect to
the Company's 1999 fiscal year, an accrual for employee bonuses, which
shall equal the aggregate amount of the employee bonuses paid or to be paid
with respect to the Company's fiscal year ended September 30, 1999,
multiplied by a fraction the numerator of which is the number of days which
have elapsed in the Company's current fiscal year from October 1, 1999
through the Price Determination Time, and the denominator of which is 366,
and (z) an accrual for employer contributions under or with respect to the
Downers Grove Reporter Profit Sharing and 401(k) Plan (the "Company's
401(k) Plan"), which shall equal the aggregate amount of such contributions
made or to be made with respect to the Company's fiscal year ended
September 30, 1999, multiplied by a fraction the numerator of which is the
number of days which have elapsed in the Company's current fiscal year from
October 1, 1999 through the Price Determination Time, and the denominator
of which is 366, (ii) checks payable by the Company which have not cleared
and as to which cash has not been debited, (iii) unearned subscription and
advertising income, and (iv) accrued but unpaid expenses with respect to
the Real Property which are the responsibility of the Company under the
Lease, but shall exclude the liability for the balance of the purchase
price of the Imager, and (3) "Other Liabilities" means all non-current,
non-operating and other non-current liabilities of the Company described on
Schedule 1.5-B, (other than the Bank Payoff Amount).
(d) From the Closing Date through the date ninety (90) days after the
Closing (the "Collection Period"), the Buyer shall cause the Company to
collect accounts receivable in accordance with the Buyer's customary
collection practices, provided, however, that the Buyer shall not be
obligated to cause the Company to initiate proceedings, or engage a
collection agency, to collect such accounts receivable. Any collections
from any account debtor who is an account debtor on any of the accounts
receivable outstanding as of the Closing shall be credited against the
oldest outstanding account of such account debtor unless otherwise
specifically directed by the account debtor as a result of a dispute as to
such accounts or otherwise. In the event that the Company receives a
payment on an Uncollected Receivable at any time after the Collection
Period, the Company shall pay such amount to the Shareholder
Representative, for distribution to the Shareholders, on a pro rata basis
based on each Shareholder's proportionate ownership interest in the Shares
as set forth in Section 2.4 of the Disclosure Schedule.
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.
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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 Illinois. The Company has full requisite power and
authority to carry on its business and to own and use the properties owned and
used by it. Accurate and complete copies of the articles of incorporation and
by-laws of the Company have heretofore been delivered to the Buyer. The Company
is duly qualified to do business in and is in good standing in each state in
which the failure to so qualify could have a material adverse effect,
individually or collectively, upon the Company, the Business or any of the
Publications and all such states are listed in Section 2.2 of the Disclosure
Schedule. All corporate action on the part of the Company, its directors and
shareholders necessary for the consummation of the transactions contemplated by
this Agreement and the Transaction Documents has been taken. The principal place
of business of the Company is at 922 Warren Avenue, Downers Grove, Illinois
60515, and the books and records of the Company are kept at such office. The
minute books of the Company, as made available to the Buyer and its
representatives, reflect all minutes of all meetings of Board of Directors of
the Company and all Committees thereof and the minutes of all meetings of
Shareholders prepared and maintained. At the Closing, the stock records and
minute books of the Company will be in the possession of the Buyer and all of
the other books and records of the Company will be in the possession of the
Buyer or the Company. The Landlord is a partnership duly organized, validly
existing and in good standing under the laws of the State of Illinois. The
Landlord has full requisite power and authority to carry on its business and to
own and use the properties owned and used by it. The partners of the Landlord
are listed on Section 2.2 of the Disclosure Schedule. All action on the part of
the Landlord and its partners necessary for the consummation of the transactions
contemplated by this Agreement and the Transaction Documents has been taken or
will be taken prior to the Closing.
2.3. Capitalization. The authorized capital stock of the Company consists
solely of 10,000 shares of Common Stock, no par value per share, 2,500 of which
are Voting Common Stock and 7,500 of which are Non-Voting Common Stock, of which
only the Shares are issued and outstanding. The Shares are owned of record and
beneficially by the Shareholders. All of the Shares are duly authorized, validly
issued, fully paid and nonassessable, were not issued in
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<PAGE> 12
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 and marketable 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. Upon the delivery of and
payment for the Shares at the Closing as provided for in this Agreement, the
Buyer will acquire good and marketable title thereto, free and clear of any and
all Liens and Encumbrances, subject to no rescission or similar rights.
2.5. No Violation or Approval. Except as set forth in Section 2.5 of the
Disclosure Schedule, 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, or
negotiation, declaration or filing with, any governmental authority or entity or
other party is required of the Company or any of the Shareholders in connection
with the execution and delivery of this Agreement or the Transaction Documents
to which it is a party or the consummation of any of the transactions
contemplated hereby or thereby. Except as set forth in Section 2.5 of the
Disclosure Section, 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
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<PAGE> 13
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 of the Disclosure Schedule contains
copies of the following financial statements of the Company: (i) the Company's
unaudited financial statements for the fiscal year ended September 30, 1999 (the
"1999 Balance Sheet Date") consisting of the balance sheet of the Company as of
such date (the "1999 Balance Sheet") and a statement of income of the Company
for the fiscal year ended on such date (together with the 1999 Balance Sheet,
the "1999 Financial Statements") and (ii) the Company's unaudited financial
statements for the fiscal month ended February 29, 2000 consisting of a balance
sheet of the Company as of such date (the "Interim Balance Sheet Date") and a
statement of income of the Company for the five-month period ended on such date
(the "Interim Financial Statements"). The 1999 Financial Statements present
fairly in all material respects the financial position of the Company and the
results of its operations as of the 1999 Balance Sheet Date and the one-year
period then ended, except as set forth in Section 2.6 of the Disclosure
Schedule. The 1999 Financial Statements and the Interim Financial Statements
were prepared in a manner consistent with the Federal income tax returns of the
Company for the Company's fiscal year ended September 30, 1999. The Interim
Financial Statements present fairly the financial position of the Company and
the results of its operations as of and for the five-month period ending
February 29, 2000, subject to year-end adjustments. 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.
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, arising in
the ordinary course of business in accordance with past practices since the
Interim Balance Sheet Date, or reflected in the Closing Balance Sheet, (B)
prepaid subscription and advertising Liabilities incurred in the ordinary
course of business in accordance with past practices, (C) the Other
Liabilities described on Schedule 1.5-B but only to the extent set forth 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,
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<PAGE> 14
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) material adverse
change in the condition (financial or otherwise), assets, business,
operations or prospects of the Company, (b) event or condition which,
directly or indirectly, individually or collectively, could reasonably be
expected to have such an effect or (c) change in the Company's practices
with respect to the collection of receivables or payment of payables.
2.7.3. Since the Interim Balance Sheet Date, except as expressly
contemplated by this Agreement or as set forth in Section 2.7.3 of the
Disclosure Schedule, the Company has not: (i) increased the compensation of
any of its directors, officers, employees or affiliates other than in the
ordinary course of business consistent with past practices; (ii) entered
into or performed any contract, agreement, deed, mortgage, lease, license,
other instrument, commitment, undertaking, arrangement or understanding, or
other transaction, not in the ordinary course of business and consistent
with past practices; (iii) made any loan or advance of funds or assets of
any kind to, or forgiven any loan or advance to, any person, entity or
business organization, other than in the ordinary course of business
consistent with past practices; (iv) made any dividend or distribution of
fixed assets to any Shareholder or other person, entity or business
organization (other than the distribution of the Excluded Assets); (v) made
or authorized any individual capital expenditure by the Company in excess
of $5,000 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 $5,000 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
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<PAGE> 15
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. Except as set forth in Section 2.7.4 of the Disclosure
Schedule, as of the Closing Date, the Company will not have any Liability
(fixed, contingent or otherwise) in respect of any Indebtedness.
"Indebtedness" means: (i) any indebtedness of the Company for borrowed
money, whether current or funded, secured or unsecured; (ii) any
indebtedness of the Company for the deferred purchase price of any assets
or services (other than trade accounts payable and accruals incurred in the
ordinary course of business consistent with past practices and prepaid
subscription liabilities and accrued payroll incurred in the ordinary
course of business); (iii) any indebtedness of the Company created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by the Company (even though the rights and
remedies of the seller or lender under such agreement in the event of a
default may be limited to repossession or sale of such property); (iv) any
indebtedness of the Company secured by a purchase money mortgage, lien or
other encumbrance to secure all or part of the purchase price of property
subject to such mortgage, lien or other encumbrance; (v) any obligations
under leases which shall have been or must be, in accordance with GAAP,
recorded as capital leases in respect of which the Company is liable as
lessee; (vi) any Liability of the Company in respect of banker's
acceptances or letters of credit (contingent or otherwise); (vii) any
indebtedness, whether or not assumed, secured by mortgages, liens or other
encumbrances on property acquired by the Company at the time of acquisition
thereof; and (viii) any indebtedness referred to in clause (i), (ii),
(iii), (iv), (v), (vi) or (vii) above which is directly or indirectly
guaranteed by the Company or which it has agreed (contingently or
otherwise) to purchase or otherwise acquire or in respect of which it has
otherwise assured a creditor against loss.
2.8. Taxes. Since 1987, the Company has been eligible to file, and has
properly filed, all elections and other instruments and documents necessary to
qualify as, and shall, as of the Closing, be an "S" corporation within the
meaning of Sections 1361 and 1362 of the Code. The Company has duly filed on a
timely basis all federal, state, local and foreign Tax returns that are required
to be filed in respect of the Company or any of the Plans (as hereinafter
defined), and all such Tax returns were true, accurate and complete. 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
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Disclosure Schedule, no taxing authority has asserted, either orally or in
writing, any adjustment that could result in an additional Tax for which the
Company is or may be liable. There is no pending audit, examination,
investigation, dispute, proceeding or claim for which the Shareholders or the
Company has received notice relating to any Tax for which the Company is or may
be liable. The Company has not filed a consent under section 341(f) of the Code,
concerning collapsible corporations. The Company is not a party to any contract,
agreement, plan or arrangement that, individually or collectively, could give
rise to any payment that would not be deductible by reason of section 280G of
the Code. The Company has never been a member of any affiliated group filing a
consolidated federal income return, and the Company has no Liability for the
Taxes of any other person, entity or business organization under Treas. Reg.
Section 1.1502-6 (or any similar provisions of state, local or foreign law), as
a transferee or successor, by contract or otherwise. The Company has disclosed
on its federal income Tax returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the meaning of
section 6662 of the Code. For purposes of this Agreement, "Tax" or "Taxes" shall
mean any income, corporation, gross receipts, profits, gains, capital stock,
capital duty, franchise, withholding, social security (including any social
security charge or premium), unemployment, disability, property, wealth,
welfare, stamp, excise, occupation, sales, use, transfer, value added,
alternative minimum, estimated or other tax (including any fee, assessment or
other charge in the nature of or in lieu of any tax) imposed by any governmental
entity (whether national, local, municipal or otherwise) or political
subdivision thereof, and any interest, penalties or additions to tax, and
including any transferee or secondary Liability in respect of any tax (whether
by applicable tax law, contractual agreement or otherwise) and any Liability in
respect of any tax as a result of being a member of any affiliated,
consolidated, combined, unitary or similar group.
2.9. Title to Assets. The Company has good title to or, in the case of
leases and licenses, valid and subsisting leasehold interests and licenses in,
all of its assets (tangible or intangible, real or personal or mixed) reflected
in the 1999 Balance Sheet (other than assets disposed of since the 1999 Balance
Sheet Date in the ordinary course of business or as permitted by this Agreement)
or acquired by the Company since the 1999 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.
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2.10. Business Real Estate.
(a) Section 2.10(a) of the Disclosure Schedule lists all real property and
improvements owned by the Company (the "Owned Real Estate"). The Company has
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) of the Disclosure Schedule lists all other real
property (including, but not limited to, the Real Property) used by the Company,
all of which is leased by the Company from 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 marketable fee simple
title to the Real Property, free and clear of any and all Liens and
Encumbrances, other than Permitted Liens and Encumbrances. 1.9.
(c) The Business Real Estate is in compliance in all material respects 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, except for encroachments
which do not adversely affect the operation of the Company's businesses on such
real estate. All buildings used by the Company in connection with the Business
are in compliance, in all material respects, with all applicable statutes,
ordinances, rules and regulations, federal, state and local (including, but not
limited to, applicable zoning and other land use restrictions) to the extent
required. No notice from any county, township or other governmental body has
been received by the Company or has been served upon the Real Property requiring
or calling attention to the need for any work, repair, construction, alteration
or installation on or in connection with the Business Real Estate which has not
been substantially completed, except to the extent set forth in Section 2.10(c)
of the Disclosure Schedule. No notice has been received by the Company or has
been served upon the Real Property 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. Except as set forth in Section
2.11 of the Disclosure Schedule, each of the tangible Assets owned by the
Company and the Business Real Estate that are currently used in the conduct of
the Business or were used in the conduct of the Business on or at any time after
September 30, 1999 (including, but not limited to, the heating, ventilation,
mechanical, electrical, sewer, sprinkler and air conditioning systems and
boilers located thereon) (i) is in satisfactory operating condition; (ii) is
available for use in the conduct and operations of the Business; and (iii) are,
in the aggregate, adequate for the Company's current
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use. Without limitation of the foregoing, the Assets set forth in Section 2.11
of the Disclosure Schedule are scheduled for repair.
2.12. Advertisers; Subscribers; Circulation. Except as set forth in Section
2.12 of the Disclosure Schedule, to the Shareholder's knowledge, none of the 10
persons, entities or business organizations that generated the greatest amount
of advertising revenues for each of the Publications during the period from
October 1, 1998 through September 30, 1999 intends to reduce the level at which
it purchases advertising space on a regular basis from the Company or any of the
Publications. The 10 persons, entities or business organizations that generate
the greatest amount of advertising revenues changes from year to year. Set forth
on Section 2.12 of the Disclosure Schedule or attached thereto, is (i) a
verified audit circulation report with respect to the total paid circulation and
the total unpaid circulation for each of the Publications as of March 31, 1999,
(ii) a list of the 10 businesses or entities that generated the greatest amount
of advertising revenues for each of the Publications during the period from
October 1, 1998 through September 30, 1999 and during the period from October
1,1998 through February 29, 2000 and the amount thereof, (iii) a list of all
advertisements published in each of the Publications during the period from
October 1, 1998 through February 29, 2000 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, (iv) a schedule of all sales during
the period from October 1, 1998 through February 29, 2000 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, (v) an accounts
receivable aging as of February 29, 2000 of the Company, and (vi) a description
of any circulation drives, including, but not limited to, any discounting or
other promotional programs, occurring in the period from October 1, 1998 through
February 29, 2000. 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 each of the Publications as of September 30, 1999 and March
31, 2000 is set forth in Section 2.12 of the Disclosure Schedule, which was
determined in a manner consistent with the same manner as paid circulation was
determined in the verified audit circulation report for the period ending March
31, 1999. The 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,
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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
lawsuits, 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) or material claims 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 as in affect on the date hereof, including but not
limited to, the Nationwide Life Insurance Company Group Annuity Contract, the
funding vehicle under the Company's 401(k) Plan. No communications have been
made indicating or agreeing that the terms of any such Plan are different than
the terms as set forth in such copies or summaries of such Plan. All Plans are
in compliance in all material respects with all applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended, and the regulations
issued thereunder ("ERISA"), as well as with all other applicable federal, state
and local statutes, ordinances and regulations. All 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 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
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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 in all material respects with all of its
obligations under COBRA, and does not expect to incur any Liability in
connection with the benefit continuation rights under COBRA with respect to its
employees or any other employees, other than the rights of employees whose
employment with the Company terminates on or after the Closing Date and the
rights of former employees of the Company who have elected or have a right to
elect health continuation coverage under COBRA as disclosed in Section 2.14 of
the Disclosure Schedule. No Plan is a multiple employer welfare arrangement. Any
Plan that is funded through a "welfare benefit fund" as defined in section
419(e) of the Code has complied and continues to comply in all material respects
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 dispute between the Company and
any group of its employees. The Company is in compliance, in all material
respects, with all employment agreements, collective bargaining agreements and
other agreements, whether oral or written, which are currently in effect or
binding upon the Company or under which the Company is currently operating, with
all past and present employees of the Company. None of the Company's employees
are represented by a labor union and, to the Shareholders' knowledge, there has
not been any labor union organizing activity by or among the Company's
employees. Neither the Company nor any of the Publications has engaged in any
unfair labor practice. There is no labor strike, slowdown, stoppage, grievance
or other group labor difficulty pending or, to the Shareholders' knowledge,
threatened against the Company or any of the Publications.
2.16. Licenses. All material 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
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Company in respect thereof, and there are no such potential violations. 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. 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 owned or used by the Company, together
with the date of registration (if any) of each such mark, patent or copyright
and the jurisdiction in which any such mark, patent or copyright is used. The
Company holds common law rights to use all material unregistered trademarks,
patents and copyrights used by it in the geographic areas in which they are
currently used. To the Shareholders' knowledge, no other person, entity or
business organization uses, or has used during the preceding five years, in the
geographic areas in which they are used by the Company, the mastheads, trade
names, trademarks, service marks, names, copyrights, patents and proprietary
rights owned or used by the Company. The Company's right to each of such trade
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 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) Except as set forth in Section 2.18(a) of the Disclosure Schedule, the
Company and the Business Real Estate are in compliance 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, including, but not limited to, all Environmental Laws.
For purposes of this Agreement, "Environmental Laws" means all laws, statutes,
rules, regulations and court decisions and administrative decisions that apply
to the Company, or its business assets, and that relate to environmental
matters, including, but not limited to, those relating to the release or
threatened release of Hazardous Substances (as hereinafter defined) and the
generation, use, storage, transportation, or disposal of Hazardous Substances in
any manner applicable to the Company or its assets, including, but not limited
to, the Comprehensive Environmental Response, Compensation and Liability Act of
1980 (42 U.S.C. sections 9601 et seq.), the Hazardous Materials Transportation
Act (49 U.S.C.sections 1801 et seq.), the Resource Conservation and Recovery Act
of 1976 (42 U.S.C. sections 6901 et seq.), the Federal Water Pollution Control
Act (33 U.S.C. sections 1251 et seq.), the Clean Air Act (42 U.S.C. sections
7401 et seq.), the Toxic Substances Control Act of 1976 (15 U.S.C. sections 2601
et seq.), the Safe Drinking Water Act (42 U.S.C. sections 300f-sections 300j-11
et seq.), the Occupational Safety and Health Act of 1970 (29 U.S.C. sections 651
et seq.), and the Emergency Planning and Community Right-to-Know
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Act (42 U.S.C. sections 11001 et seq.), each as amended or supplemented prior to
the date hereof, 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) Except as set forth in Section 2.18(b) of the Disclosure Schedule, the
Company does not have any Liability under any Environmental Law, including any
liability, responsibility, or obligation for fines or penalties, or for
investigation, expense, removal, or remedial action to effect compliance with or
discharge any duty, obligation, or claim under any such Environmental Law, and,
to the Shareholder's knowledge, there is no reason to believe that any such
claims, actions, suits, proceedings, or investigations under such laws or
regulations exist or will be brought or threatened.
(c) Except as set forth in Section 2.18(c) of the Disclosure Schedule, to
the Shareholders' knowledge, 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) Except as set forth in Section 2.18(d) of the Disclosure Schedule, to
the Shareholders' knowledge, there have been no Hazardous Substances of, or
generated by, the Company that have been disposed of or come to rest at any site
that has been included in any published federal, state or local "Superfund" site
list or any other list of hazardous or toxic waste sites.
(e) Except as set forth in Section 2.18(e) of the Disclosure Schedule, to
the Shareholders' knowledge, 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.
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(f) Except as set forth in Section 2.18(f) of the Disclosure Schedule,
there is no Hazardous Substance or other condition, whether natural or man-made,
or use of the Business Real Estate or, to the Shareholders' knowledge, any
neighboring property which, to the Shareholders' knowledge, poses a present or
potential threat of damage to the health of persons, to property, to natural
resources, or to the environment.
(g) Section 2.18(g) of the Disclosure Schedule attached to this Agreement
identifies all environmental audits or assessments or occupational health
studies undertaken by or on behalf of the Company or any Shareholder or, to the
Shareholders' knowledge, any third person, entity, business organization or
governmental agency with respect to the Business Real Estate or any other real
property previously owned, leased or used by the Company, the Company's
Business, activities or employees and the results of groundwater and soil
testing, underground storage tank tests, soil samples, and written
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 complete 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 March 31, 2000, 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 March 31, 2000 and the names of all whose employment with the
Company has terminated since March 31, 2000.
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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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, ink 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 by the Company;
2.20.11. All Contractual Obligations limiting or restraining the
Company from engaging or competing in any lines of business or geographic
areas with any person, entity or business organization; and
2.20.12. All Contractual Obligations with any of the Shareholders.
The Shareholders have heretofore delivered to the Buyer a true and complete copy
of each of the written Contractual Obligations and a written description of each
of the oral Contractual Obligations described above, including, but not limited
to, all amendments and supplements thereto and all waivers thereunder. Neither
the Company nor, to the Shareholders' knowledge, 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. Except as disclosed in
Section 2.20 of the Disclosure Schedule, the Company has a valid license for all
computer software (including all
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copies) possessed or used by it and the Company is in compliance with the terms
of each such license.
2.21. Transactions with Affiliates. Except as set forth in Section 2.21 of
the Disclosure Schedule, none of the Shareholders or the officers, directors,
members of management of the Company, or affiliates of any such persons, and no
member of the immediate family of any such individuals, and no entity in which
any such person, entity or business organization owns any material beneficial
interest, is a party to any agreement, arrangement, contract, commitment or
transaction with the Company or has any material interest in any property used
by the Company.
2.22. Inventories. All of the inventory of the Company to be reflected on
the Closing Balance Sheet (i) is useful or saleable in the normal course of the
Business, (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 1999 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.
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 for each policy the carrier, risks insured, amounts of
coverage, deductible, and expiration date. Such insurance policies provide
insurance coverage adequate to comply with all applicable laws, rules and
regulations and all Contractual Obligations to which the Company is a party or
by which it or its assets are bound. All such policies are in full force and
effect, all premiums due thereon have been paid, and the Company has complied in
all material respects with the provisions of such policies. There is no default
with respect to any provision contained in any such policy, and there has not
been any failure to give any notice or present any claim under any such policy
in a timely fashion or in the manner or detail required by the policy. No notice
of cancellation or nonrenewal with respect to or disallowance of any claim under
any such policy has been received by the Company. The Company is not liable or
obligated for any retroactive adjustment of premiums under any insurance policy
or arrangement.
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
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obligation to any other person, entity or business organization wherever the
Company conducts business.
2.26. Subsidiaries of the Company. The Company does not own of record or
beneficially, directly or indirectly, (a) any shares of outstanding capital
stock or securities convertible into capital stock of any corporation or (b) any
participating interest in any partnership, joint venture, limited liability
company or other noncorporate business enterprise, and the Company has no
agreement or commitment to purchase or otherwise acquire any such shares or
interest.
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 relating to the condition (financial or
otherwise), properties, assets, operations, prospects or business of the Company
that has not been disclosed in writing by the Company or the Shareholders to the
Buyer. The Company makes no other representations or warranties, express or
implied, including but not limited to, merchantability, fitness for a particular
purpose or otherwise.
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. 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
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contemplated hereby and thereby have been carried on without the intervention of
any person, entity or business organization acting on behalf of the Buyer in
such manner as to give rise to any valid claim against any of the Shareholders
or any of their affiliates for any brokerage or finder's commission, fee or
similar compensation.
4. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER. The Buyer's
obligation to purchase the Shares and the Real Property 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 McDermott,
Will & Emery, counsel to the Company and the Shareholders, dated the Closing
Date, in substantially the form of Exhibit D attached hereto.
4.5. Releases of Shareholders and the Landlord. All Shareholders and the
Landlord shall have executed and delivered to the Buyer releases, in
substantially the form of Exhibit E-1 and E-2, respectively, 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
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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 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 Craig R.
Winter and Christopher J. Winter shall have entered into separate Noncompetition
Agreements, dated the Closing Date, in the form of Exhibit F-1 attached hereto
and the Buyer, the Company and the other Shareholders shall have entered into
separate Noncompetition Agreements, dated the Closing Date, in the form of
Exhibit F-2 attached hereto (collectively, the "Noncompetition Agreements").
4.12. Real Estate Documents . The Shareholders and the Landlord 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 Real Property, as the case may be:
4.12.1. At the Closing, an ALTA 1992 owner's title policy (including
extended coverage over the standard printed exceptions, access, location,
environmental lien, survey, comprehensive endorsements, zoning (including
parking and loading) and contiguity) insuring title in the Company and the
Buyer of each parcel of Owned Real Estate and the Real Property and all
recorded easements appurtenant thereto upon Closing, subject only to the
Permitted Liens and Encumbrances, from Commonwealth Land Title Insurance
Company (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
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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 Real Property
from a surveyor duly licensed in Illinois which survey shall: (i) be
certified to the Company, the Buyer, the Title Insurance Company and to
such other parties as the Buyer may indicate, (ii) be dated within six
months of the Closing Date, (iii) indicate the location, legal description
and area and square feet of each parcel of Owned Real Estate and the Real
Property, (iv) locate all easements, utilities (including connections to
public streets), parking facilities, covenants and restrictions and rights
of way, (v) indicate adjoining streets, building lines, surface
improvements, encroachments, vehicular access and parking requirements,
(vi) identify which portions of the Owned Real Estate and the Real Property
are located in a 100 year flood plain area as identified under the National
Flood Insurance Program, (vii) such additional information as may be
required by the Title Company and (viii) 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 trustee's or special warranty deeds,
as the case may be, relating to the 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, together with all transfer declarations required
for the sate, county or municipality in which the Real Property is located.
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 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 Real
Property effected through a "New York style" closing, including, but not
limited to, owner's affidavits, personal undertaking (GAP) statements,
escrow instructions, any releases and settlement agreements from existing
creditors of the Landlord which may be necessary to assure delivery of
title to the 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, condition (financial or otherwise), operations,
assets or prospects of the Company or any Publication since the Interim Balance
Sheet Date.
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4.14. 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 4.14 attached hereto and security
interests securing the Permitted Indebtedness (collectively, the "Permitted
Liens and Encumbrances").
4.15. Payoff Letters. At the Closing, Firstar Bank 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
(the "Bank Payoff Amount") 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 Real Property (the "Real
Property Indebtedness"), showing the amount that would have to be paid in order
to satisfy such Real Property Indebtedness in full (the "Real Estate Payoff
Amount") and agreeing that upon payment of such amount all Liens and
Encumbrances in favor of the lender with respect to the Real Property
Indebtedness will be released.
4.16. 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.
4.17. March 31 Financials. On or prior to the Closing Date, the Company
shall have delivered to the Buyer financial statements of the Company as of
March 31, 2000 and for the six-month period then ended, together with a
certificate of the chief financial officer of the Company that such financial
statements present fairly the financial position of the Company and the results
of its operations as of and for the six-month period ending March 31, 2000.
4.18. 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 Estimated 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. Injunctions. No action or proceeding shall have been instituted or
threatened prior to or on the Closing Date before any court or governmental body
or authority pertaining to the transactions contemplated by this Agreement, the
result of which could prevent, or in any way limit or make illegal the
consummation of such transactions. No United States or state governmental
authority or other agency or commission or United States or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, injunction or other order (whether
temporary, preliminary, or permanent) that is in effect and has the effect of
limiting or prohibiting consummation of the transactions contemplated by this
Agreement.
5.5. Governmental Approvals. All governmental agencies, departments,
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation of the transactions 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.
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, during normal
business hours or at such other agreed-upon times, to the agreements, documents,
information, records and books of account of the Company (the "Records") in the
possession of the Shareholders or the Company that relate in any manner to the
conduct or operations, on or prior to the Closing Date, of the Company, the
Business or the Publications, including, but not limited to, Records in respect
of accounts payable, bank statements, financial statements and general ledgers.
In addition, prior to the Closing Date, the Shareholders will permit the Buyer
and each of its authorized representatives reasonable access to the Business
Real Estate, including, but not limited to, access sufficient to allow the Buyer
or its representatives to conduct such environmental site assessment (including
subsurface investigation) and environmental compliance review as it deems
appropriate. In connection with any such site assessment, the Buyer shall obtain
from the environmental consultant performing such site assessment a customary
indemnification agreement.
6.2. Lien Searches. At or prior to the Closing, the Shareholders shall
deliver (or cause the Company to obtain and deliver) to the Buyer Uniform
Commercial Code, tax lien and judgment lien searches for the Company at the
state level for Illinois, and at the county level for DuPage County, Illinois.
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.
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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"), with copies provided to the Shareholders and the
Landlord. The Buyer shall specify the scope of investigation to be conducted by
such environmental consultant in the preparation of the Environmental Report. In
the event that the Environmental Report discloses conditions or the possibility
of conditions which, in the Buyer's sole discretion, (a) might be expected to
impose a material Liability on the Buyer or the Company under applicable laws
for clean up or other costs, (b) may make it difficult to obtain financing
secured by the Business Real Estate or (c) are otherwise unsatisfactory to the
Buyer, the Buyer may elect to terminate this Agreement at any time prior to the
Closing.
6.5. Maintenance of Plans . Between the date of this Agreement and the
Closing, the Shareholders shall cause the Company to administer each and every
Plan in accordance with the provisions of such Plan and all applicable
provisions of the Code and ERISA.
6.6. Conduct of Business Prior to Closing. Prior to the Closing, the
Shareholders will cause the Company to (i) conduct the Business only in the
ordinary course consistent with past practices and (ii) use its best 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, excluding increases
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made in the ordinary course of business in accordance with past practices on the
anniversary date of an employee's hire, (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 6.9, (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 practices; other than fiscal
pro-rated bonuses and vehicle bonuses and sales listed in Section 6.6 of the
Disclosure Schedule. 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
best efforts to bring about the fulfillment of the conditions precedent
contained in Article IV, including, but not limited to, the obtaining of all
necessary consents, approvals and waivers for the consummation of the
transactions contemplated by this Agreement and the Transaction Documents.
6.9. Distributions . On and prior to the Closing Date, the Shareholders
shall cause the Company to distribute to the Shareholders the Excluded Assets.
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6.10. Tax Returns . The Shareholders shall, on a timely basis, prepare or
cause to be prepared and signed (through a designee who shall be designated by
the Company upon the recommendation of the Shareholders as an officer of the
Company solely for the purpose of preparing, signing and filing all Tax returns
for the Company for periods ending on or prior to the Closing Date) all Tax
returns for the Company for all periods ending on or prior to the Closing Date,
provided, however, that notwithstanding anything herein to the contrary, unless
required by law, neither party may, amend, nor authorize any officer designee to
amend, any previously filed Tax return for the Company (the "Pre-Closing Tax
Returns"), without the consent of the other party, which shall not be
unreasonably withheld. To the extent required by applicable law, the
Shareholders shall include any income, gain, loss, deduction or other Tax items
for such periods on their Tax returns in a manner consistent with the Schedule
K-1's furnished by the Company to the Shareholders for such periods.
The Buyer shall cause the Company to, and the Shareholders shall, cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with the filing of Pre-Closing Tax Returns pursuant to this Section
6.10. The Shareholders shall have the right, at their expense, to defend,
challenge or dispute any audit, litigation or other proceeding with respect to
Pre-Closing Tax Returns, with the cooperation of the Buyer and the Company. Such
cooperation shall include the retention and (upon the other party's request) the
provision of records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. Such cooperation shall also include, in
connection with audits of any of the Pre-Closing Tax Returns, the Shareholders
being advised of such audits or examinations promptly upon notice thereof. Each
of the Buyer, the Company and the Shareholders agree to retain all books and
records with respect to Tax matters pertinent to the Company relating to any
taxable period beginning before the Closing Date until the expiration of the
applicable statutes of limitations (and, to the extent notified by the Buyer or
the Shareholder, any extensions thereof) of the respective taxable periods, and
to abide by all record retention agreements entered into by such party with any
taxing authority.
6.11. Further Assurances . From time to time after the Closing, at the
request of the Buyer, the Shareholders shall execute and delivery any further
instruments and take such other action as the Buyer may reasonably request to
vest or confirm in the Buyer ownership of the Shares, free and clear of any and
all Liens and Encumbrances or otherwise carry out the transactions contemplated
hereby.
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
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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 Indemnitee shall not be entitled to
indemnification from the Shareholders pursuant to this Section 7.1(a) or
pursuant to Section 7.2(a)(viii) but only with respect to any Liability or
condition of which the Shareholders did not have knowledge as of the Closing
Date (other than with respect to any breaches of, or inaccuracy in, the
representations and warranties made by the Shareholders in Sections 2.3, 2.4 or
2.7.4) unless and until the aggregate amount of their Losses exceeds $75,000 as
to which the Shareholders shall be responsible only for the excess over $75,000.
(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 indemnification
from the Buyer pursuant to this Section 7.1(b) unless and until the aggregate
amount of their Losses exceed $75,000 as to which the Buyer shall be responsible
only for the excess over $75,000.
(c) The parties hereto agree that the representations and warranties made
herein shall survive the Closing and the consummation of the transactions
provided for herein and shall remain effective for a period of eighteen (18)
months thereafter; provided, however, that (i) the representations and
warranties made by the Shareholders in Section 2.8 shall remain effective until
thirty (30) days after the expiration of the applicable statutes of limitations
period (giving effect to any waiver, mitigation, or extension thereof), (ii) the
representations and warranties made by the Shareholders in Sections 2.3 and 2.4
shall remain effective without any time period limitation and (iii) the
representations and warranties made by the Shareholders in Section 2.18 shall
remain effective for a period of forty-eight (48) months after the Closing,
provided further however, that all representations and warranties shall survive
without time limitation with respect to any inaccuracy therein or breach
thereof, notice of which shall have been given within such applicable period to
the other parties.
(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.
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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) collected by the county or state on the transfer of the
Shares or the Owned Real Estate pursuant to this Agreement, and (C) arising
in connection with the distribution to the Shareholders of the Excluded
Assets pursuant to this Agreement or the sale of any Company vehicles at or
prior to the Closing;
(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, arising out of or
in connection with (i) an order of a governmental agency, action brought
by, or settlement with, any governmental agency or other third party, or
other requirement of Environmental Law to investigate or remediate, the
presence, treatment, storage, disposal, spillage, discharge,
transportation, emission, leakage, release or threatened release
("Presence" or "Release"), on or prior to the Closing Date, of any
Hazardous Substances which is at, in, on, under, about, from or affecting
any property owned or leased by the Company on the Closing Date or at any
time prior thereto or in which the Company has or had an interest,
including without limitation the Business Real Estate, regardless of when
the Presence or Release is discovered, or property damage (real or
personal) arising out of or related to any such Presence or Release, (ii)
the offsite transportation, treatment, storage or disposal of any such
Hazardous Substances, (iii) an order of a governmental agency, action
brought by, or settlement with, any governmental agency or other third
party, or other requirement of Environmental Law, to pay damages or provide
other remedies, with respect to, any personal injury (including wrongful
death) arising out of or related to any such Presence or Release, (iv) any
lawsuit brought, 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;
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(vi) any Liability or remediation cost relating to or in connection
with the Company's hazardous waste generator status;
(vii) any Liability or remediation cost relating to or in connection
with compliance with Illinois Air Pollution Control permit program
requirements;
(viii) the issuance or ownership of, or title to, the Shares or the
existence of any other capital stock or securities of the Company, or any
rights to purchase or acquire any capital stock or other securities of the
Company; and
(ix) 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, including, but
not limited to, the transactions contemplated by this Agreement and by the
Transaction Documents. Notwithstanding anything herein to the contrary, the
indemnification obligations under Section 7.2(a)(v) shall survive the Closing
and remain effective without any time period limitation with respect to any
Claim, Liability or Loss for which notice is provided pursuant to Section 7.3
within a period of forty-eight (48) months after the Closing and all other
indemnification obligations under Section 7.2(a) shall survive the Closing and
remain effective without any time period limitation.
(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. Notice of Claims . Within sixty (60) days after the receipt by the
Shareholders or the Buyer of notice of any claim against the Company, the
Shareholders or the Buyer, as the case may be, or of the commencement of any
action or proceeding against the Company, the Shareholders or the Buyer, as the
case may be, the Shareholder 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 7.3 shall hereinafter be referred to as a
"Claim."
7.4. Defense of Claims. An Indemnitee and its indemnifying party pursuant
to this Section 7 shall cooperate in the defense or compromise of any Claim, and
both such Indemnitee and such indemnifying party shall have the right to
participate under the direction of such Indemnitee and its counsel, at the
expense of such indemnifying party (which direction shall be reasonably
calculated to minimize the liability of such indemnifying party under this
Section 7 to
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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 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 7.4, whether as an Indemnitee or as an indemnifying party, shall be
taken or given by or to the Shareholder Representative.
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7.5 Limitations.
(a) Notwithstanding anything herein to the contrary, except as set
forth in the following sentence, the aggregate Losses payable by the
Shareholders to the Buyer Indemnitees under Section 7.1(a) (other than
Losses relating to breaches of, or inaccuracies with respect to, the
representations and warranties of the Shareholders set forth in Section
2.18 hereof) shall not exceed $1,250,000 and the aggregate Losses payable
by the Shareholders to the Buyer Indemnitees under Section 7.1(a)
(including, but not limited to, Losses relating to breaches of, or
inaccuracies with respect to, the representations and warranties of the
Shareholders set forth in Section 2.18 hereof) shall not exceed $2,000,000
(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 and 2.8, or (ii) any Losses
resulting from 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 $1,250,000 or $2,000,000, as the case
may be. 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) The representations and warranties contained in this Agreement are
exclusive and supersede any other representations and warranties, express
or implied in negotiations or otherwise, including but not limited to the
warranties of merchantability and fitness for a particular purpose. No
representations and warranties whatsoever are made as to any financial
forecasts or projections of the Company delivered to the Buyer.
(c) The Buyer shall not be entitled to indemnification to the extent
any liability is taken into account in determining Net Working Capital or
any current asset is not taken into account in determining Net Working
Capital.
(d) Absent actual fraud, the indemnification provisions of this
Section shall be the exclusive remedy following Closing for any claim
related to the transactions contemplated hereby, including without
limitation, any breaches or alleged breaches of any representation or
warranty or failure to fulfill any covenants or agreement contained herein.
(e) In determining the amount of any Loss pursuant to this Section 7,
appropriate adjustments shall be made for (i) Tax benefits actually
recognized by the Indemnitee with respect thereto (and adjusted for the
present value of such Tax benefits to be actually recognized in the
future), (ii) insurance proceeds received by the Indemnitee with respect
thereto, and (iii) indemnification proceeds received from any third party
with respect thereto pursuant to any agreement entered into by the Company,
prior to the Closing. For purposes of this Section 7.5(e), Tax benefits
shall be deemed to be, or to have been, "actually recognized" when the
amount of Tax actually paid by a party or its consolidated group during any
Tax year is (or will be) decreased as a result of such Loss. In making such
adjustments, due consideration shall be given as to whether the Indemnitee
35
<PAGE> 40
is (or will be) able to recognize a Tax benefit from the Loss and whether
such Tax Benefit is limited or otherwise unavailable under the Code, and
any future Tax benefits shall be discounted to the time the indemnification
payment is made using a rate of return of eight percent (8%). All
indemnification payments under Section 7 shall be treated as adjustments to
the Purchase Price.
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:
Downers Grove Reporter
922 Warren Avenue
Downers Grove, Illinois 60515
Attention: Chris Winter
with a copy to:
McDermott Will & Emery
227 West Monroe Street
Chicago, Illinois 60606
Attention: Neal White, Esq.
If to the Buyer, to:
Liberty Group Suburban Newspapers, Inc.
3000 Dundee Road
Northbrook, Illinois 60062
Attention: Kenneth L. Serota
President
with a copy to:
Katten Muchin Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661
Attention: Kenneth W. Miller, Esq.
9. EXPENSES OF TRANSACTION. Whether or not the transactions provided for
herein are consummated, each of the parties hereto will assume and bear all
expenses, costs and fees incurred by such party in connection with the
preparation, negotiation and execution of this Agreement and the Transaction
Documents and the consummation of the transactions contemplated
36
<PAGE> 41
hereby and thereby. The Shareholders shall be responsible for the payment of all
expenses incurred by the Company related hereto. All transfer and other Taxes
incurred in connection with the consummation of the transactions contemplated
hereby and thereby shall be paid by the Shareholders when due, and the
Shareholders will, at their own expense, file all necessary tax returns and
other documentation with respect to such transactions and other Taxes. The
Shareholders shall also be responsible for the payment of all recording charges
related to documents recorded prior to the deed, including the recording of
releases of any such documents.
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 Illinois. Each of the parties hereto
hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of Illinois and of the United States of
America located in the State of Illinois for any actions, suits or proceedings
arising out of or relating to this Agreement and the transactions contemplated
hereby, and each of the parties hereto agrees not to commence any action, suit
or proceeding relating hereto or thereto except in such courts. Each of the
parties hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby or thereby, in the courts of
the State of Illinois or the United States of America located in the State of
Illinois, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum. In any
action or suit to enforce any right or remedy under this Agreement or to
interpret any provision of this Agreement, the prevailing party shall be
entitled to recover its costs, including reasonable attorneys' fees.
13. 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.
37
<PAGE> 42
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 May 3, 2000, unless the failure of such consummation shall be due to
the Shareholders' 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 May 3, 2000;
(c) by the Buyer in the event the Closing has not occurred on or prior
to May 3, 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 May 3,
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 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.
(The remainder of this page is intentionally left blank.
Signature page follows.)
38
<PAGE> 43
The parties to this Agreement have duly executed it as of the day and year
first above written.
SHAREHOLDERS:
-------------------------------------------
Chester J. Winter, Jr.
-------------------------------------------
Patricia K. Winter
-------------------------------------------
Craig R. Winter
-------------------------------------------
Christopher J. Winter
BUYER:
LIBERTY GROUP SUBURBAN NEWSPAPERS, INC.
By:
----------------------------------------
Kenneth L. Serota, its President
LANDLORD:
DOWNERS GROVE REPORTER
By:
----------------------------------------
Chester J. Winter, Partner
By:
----------------------------------------
Patricia K. Winter, Partner
<PAGE> 44
LIST OF SCHEDULES
Schedule 1 Shareholders of the Company
Schedule 1.5-A Excluded Assets
Schedule 1.5-B Non-Operating Liabilities
Schedule 4.12 Title Insurance Amounts
Schedule 4.14 Permitted Liens and Encumbrances
LIST OF EXHIBITS
Exhibit A Publications
Exhibit B Description of 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
DISCLOSURE SCHEDULE
Section 2.2 Jurisdictions
Section 2.4 Title to Shares
Section 2.5 No Violation
Section 2.6 Financial Statements
Section 2.7.1 Liabilities
Section 2.7.2 Tangible Assets
Section 2.7.3 Absence of Changes
Section 2.7.4 Liability/Indebtedness
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 2.11 Operating Condition and Repair
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
<PAGE> 1
EXHIBIT 2.2
May 1, 2000
McDonough County Shopper, Inc. Mr. James M. Helenthal
411 S. Pearl c/o McDonough County Shopper, Inc.
Macomb, Illinois 61455 Fulton County Shopper, Inc.
Attention: Mr. James M. Helenthal 411 S. Pearl
Macomb, Illinois 61455
Fulton County Shopper, Inc.
411 S. Pearl
Macomb, Illinois 61520
Attention: Mr. James M. Helenthal
RE: PURCHASE OF ASSETS OF MCDONOUGH COUNTY SHOPPER, INC. AND FULTON COUNTY
SHOPPER, INC.
Ladies and Gentlemen:
This letter agreement will confirm and formalize our agreement for the
purchase and sale of the assets of McDonough County Shopper, Inc., an Illinois
corporation ("McDonough County"), and Fulton County Shopper, Inc., an Illinois
corporation ("Fulton County" and, together with McDonough County, the
"Sellers"), including, but not limited to, all of the assets of the Sellers
related to the publication and distribution of the publications set forth on
EXHIBIT A attached hereto (the "Publications"). The business of publishing and
distributing the Publications is referred to herein as the "Business".
1. On the Closing Date (as hereinafter defined) and effective as of the
close of business on April 30, 2000 (the "Closing Time"), except for the
Excluded Assets (as hereinafter defined), the Sellers will sell, assign, convey,
transfer and deliver to Liberty Group Illinois Holdings, Inc., a Delaware
corporation, or an assignee of its rights under this Agreement in accordance
with Section 14 hereof (the "Buyer"), all of the assets and properties of the
Sellers of every kind and description, real, personal and mixed, tangible and
intangible, including, but not limited to, (a) all rights to the use of the
names "McDonough County Shopper," "Fulton County Shopper" and "Custom Marketing
Materials" (and any variations thereof), (b) all circulation, customer,
advertising, accounting and other business records relating to the Publications,
(c) all mailing lists, licenses, permits, claims, leasehold rights,
improvements, franchises and authorizations of the Sellers, (d) all sales data,
advertiser lists, customer lists, trade names, trademarks, copyrights and all
other rights and privileges of the Sellers, (e) the business of the Publications
as going concerns and the goodwill related to the Publications, (f) all
vehicles, furniture, fixtures, equipment, computers, fixed assets, goods, tools,
supplies, inventory and machinery of the Sellers, including, but not limited to,
those assets listed on SCHEDULE 1 attached
<PAGE> 2
McDonough County Shopper, Inc.
Fulton County Shopper, Inc.
Mr. James M. Helenthal
May 1, 2000
Page 2
hereto, (g) all accounts receivable of the Sellers ("Accounts Receivable"), (h)
all rights under or pursuant to all advertising orders and contracts of the
Sellers (the "Advertising Contracts"), (i) all rights under the other
agreements, contracts, licenses and leases listed on SCHEDULE 2(A) attached
hereto (the "Other Assumed Contracts" and together with the Advertising
Contracts, the "Assumed Contracts"), and (j) the assets listed on SCHEDULE 2(B)
attached hereto which were previously leased by the Sellers under the leases
described in SCHEDULE 2(B) attached hereto (the "Paid Off Leases") but which are
owned by the Sellers as of the Closing (the "Formerly Leased Assets"), all such
assets as such assets shall exist as of the date of this Agreement or as may be
acquired by the Sellers after the date hereof and prior to the Closing Date (all
such assets being transferred hereunder are hereinafter collectively referred to
as the "Assets"). Notwithstanding the foregoing, the Assets do not include (i)
cash and cash equivalents of the Sellers on hand or on deposit in bank accounts
of the Sellers, (ii) any rights under the agreements, contacts, licenses and
leases listed on SCHEDULE 2(C) attached hereto (including, but not limited to,
the Paid off Leases) (the "Excluded Contracts") and (iii) the two automobiles
and personal office furniture and decorations currently located in James M.
Helenthal's office, in each case as listed on SCHEDULE 3 attached hereto
(collectively, the "Excluded Assets"). By bill(s) of sale, assignment(s), and
other appropriate document(s) delivered by the Sellers to the Buyer, in form and
substance acceptable to the Buyer, on the Closing Date, the Sellers shall
transfer and deliver to the Buyer good and marketable title to the Assets, free
and clear of any and all security interests, mortgages, charges, claims,
liabilities, obligations, pledges, covenants, encumbrances, liens, assessments,
leases, agreements, options, rights of first refusal, title defects, easements
and burdens of every kind or nature whatsoever (collectively, "Encumbrances").
2. (a) At the Closing (as hereinafter defined) and effective as of the
Closing Time, the Buyer shall agree to assume (i) the Sellers' contractual
commitments to be performed after the Closing Date under the Assumed Contracts,
other than liabilities or obligations relating to breaches or defaults under the
Assumed Contracts prior to the Closing, and (ii) the Current Liabilities (as
hereinafter defined) (collectively, items (i) and (ii) are referred to herein as
the "Assumed Liabilities"); provided, however that any such assumption by the
Buyer of such Assumed Contracts shall become effective if, and at such time as,
the Buyer receives all approvals necessary to perform such Assumed Contracts. At
the Closing, the Buyer and the Sellers shall execute and deliver an assignment
and assumption agreement evidencing the assignment and assumption of the Assumed
Liabilities, in form and substance acceptable to the Buyer and the Sellers.
(b) Except for the Assumed Liabilities, the Buyer shall not assume or be
liable for, nor shall the Buyer be deemed to have assumed or be liable for, any
liability or obligations of the Sellers or the Publications of any kind or
nature whatsoever (including, but not limited to,
<PAGE> 3
McDonough County Shopper, Inc.
Fulton County Shopper, Inc.
Mr. James M. Helenthal
May 1, 2000
Page 3
the Excluded Contracts), and the Assets shall be sold subject to no obligations
or liabilities of any kind or nature whatsoever. In any event, (i) the Sellers
shall pay and satisfy all of their current and non-current liabilities and
obligations (other than the Assumed Liabilities) and (ii) on or prior to the
Closing, the Sellers shall furnish the Buyer with appropriate evidence of (A)
the satisfaction of the Sellers' indebtedness, if any, (B) the payment in full
of any and all amounts payable under the Paid Off Leases and the conveyance to
the Sellers of good and marketable title to the Formerly Leased Assets and (C)
the release and termination of all security interests and other Encumbrances in
or on any of the Assets, in each case in form and substance satisfactory to the
Buyer.
3. (a) Against transfer and delivery to the Buyer of the Assets pursuant to
Section 1 above, subject to adjustment as provided in Section 3(b) hereof, the
purchase price to be paid to the Sellers by the Buyer for all of the Assets
shall be an aggregate amount of Three Million Five Hundred Thousand Dollars
($3,500,000) (the "Purchase Price"), payable as follows (i) Three Million
Dollars ($3,000,000) shall be paid to the Sellers on the Closing Date (as
hereinafter defined) to the Sellers (or, at the option of the Buyer, to any
person or entity having a security interest or other Encumbrance in or on any of
the Assets, to the extent of and in consideration for the immediate release and
termination of such security interest or other Encumbrance) by wire transfer of
funds to an account(s) designated by the Sellers; and (ii)(A) Two Hundred
Thousand Dollars ($200,000), together with any accrued but unpaid interest
thereon which shall have accrued at the T-Bill Rate (as hereinafter defined) per
annum on such amount from the Closing Date through the first anniversary of the
Closing Date, shall be paid to the Sellers by certified or cashier's check on
the first anniversary of the Closing Date, (B) One Hundred Thousand Dollars
($100,000), together with any accrued but unpaid interest thereon which shall
have accrued at the T-Bill Rate per annum on such amount from the Closing Date
through the second and third anniversaries of the Closing Date, shall be paid to
the Sellers by certified or cashier's check on each of the second and third
anniversaries of the Closing Date, and (C) Fifty Thousand Dollars ($50,000),
together with any accrued but unpaid interest thereon which shall have accrued
at the T-Bill Rate per annum on such amount from the Closing Date through the
fourth and fifth anniversaries of the Closing Date, shall be paid to the Sellers
by certified or cashier's check on each of the fourth and fifth anniversaries of
the Closing Date (collectively, the "Installment Payments"), provided, however,
that notwithstanding anything herein to the contrary, the parties hereto hereby
agree that the Installment Payments constitute security for the performance by
each of the Sellers, the Shareholder and the Shareholder's spouse of its, his or
her obligations under and pursuant to the Noncompetition Agreement (as
hereinafter defined) and, in addition to any other rights or remedies that the
Buyer may have under or with respect to the Noncompetition Agreement and any
breach thereof, the Sellers' right to receive any unpaid Installment Payments
(and any accrued but unpaid interest thereon) shall automatically
<PAGE> 4
McDonough County Shopper, Inc.
Fulton County Shopper, Inc.
Mr. James M. Helenthal
May 1, 2000
Page 4
terminate in the event that any of the Sellers, the Shareholder or the
Shareholders's spouse breach such Noncompetition Agreement. For purposes of this
Agreement, the T-Bill Rate shall mean the interest rate payable for or with
respect to United States treasury bills, as announced from time to time. The
Purchase Price will be allocated among the Assets in such manner as the Sellers
may reasonably determine, which determination shall be made by the Sellers
within thirty (30) days of the Closing Date and shall be reasonably acceptable
to the Buyer. The Sellers and the Buyer agree to report this transaction for all
applicable income tax and other purposes in a manner consistent with such
allocation.
(b) (i) On the Closing Date, the Sellers shall deliver to the Buyer a
list (the "Current Liability List"), including the dollar amount, of the regular
trade accounts payable and accruals of expenses of the Sellers arising in the
ordinary course of business consistent with past practices of the Sellers as of
the Closing Time, other than income taxes. The accounts payable and accruals set
forth on the Current Liability List, up to the dollar amount set forth on such
list, are referred to herein collectively as the "Current Liabilities." After
the Closing, the Buyer shall pay the Current Liabilities in the ordinary course
of business but in no event later than ninety (90) days after the Closing.
(ii) If the aggregate amount of the Assumed Liabilities exceeds
the aggregate amount of the Collected Accounts Receivable, the Sellers shall pay
to the Buyer an amount equal to such excess. Any such payment shall be made by
wire transfer of immediately available funds to the Buyer on the 91st day after
the Closing to a bank account designated by the Buyer.
(iii) For purposes of this Agreement, "Collected Accounts
Receivable" shall mean Accounts Receivable included in the Assets which are
collected by the Buyer within ninety (90) days after the Closing Date.
(iv) On the 91st day after the Closing, the Buyer shall assign
to the Sellers its rights in all Accounts Receivable included in the Assets that
are not Collected Accounts Receivable.
4. The closing of the transactions contemplated hereby (the "Closing")
shall take place by telephone and/or mail at the offices of Katten Muchin &
Zavis in Chicago, Illinois at 10:00 a.m. on May 1, 2000 or at such other time
and place as the parties shall mutually determine. The date of the Closing is
sometimes herein referred to as the "Closing Date."
<PAGE> 5
McDonough County Shopper, Inc.
Fulton County Shopper, Inc.
Mr. James M. Helenthal
May 1, 2000
Page 5
5. Each of the Sellers hereby, jointly and severally, represents and
warrants to the Buyer, as of the date hereof, as follows:
(a) Except as set forth on SCHEDULE 5(a) attached hereto, the Sellers
have good and marketable title to the Assets, free and clear of all
Encumbrances. Upon consummation of the transactions contemplated hereby, the
Buyer will acquire good and marketable title to the Assets, free and clear of
all Encumbrances. Other than general economic conditions, there are no
conditions or events known to the Sellers which would prevent continued normal
operation of the Business or use of the Assets by the Buyer after the Closing or
would otherwise adversely affect the ability of the Buyer to operate the
Business and/or use the Assets as currently used by the Sellers.
(b) Neither of the Sellers, nor any of the Publications nor any of
the Assets is a party to or bound by any agreement, contract, license, lease,
understanding, arrangement, commitment or obligation, whether oral or written,
contingent, fixed or otherwise (each, a "Contract"), except as set forth on
SCHEDULE 5(b) attached hereto. The Sellers have delivered to the Buyer true,
correct and complete copies of all written Contracts listed on SCHEDULE 5(b).
All such Contracts are valid and in full force and effect, no default under any
such Contract exists or has been declared thereunder and no basis for any such
default exists. No such Contract is subject to termination, modification or
acceleration as a result of the transactions contemplated hereby and all
filings, consents and approvals necessary to assign and transfer any such
Contracts that are included in the Assets to the Buyer have been obtained or
made. The Sellers hold all licenses, permits and authorizations required for the
ownership and use of the Assets and use of any real property leased by the
Sellers (the "Leased Real Property"), and the operations of the Business as
presently conducted or proposed to be conducted, which licenses, permits and
authorizations are listed on SCHEDULE 5(b) attached hereto. The Sellers have
complied with, and are in compliance with, all the terms, conditions,
requirements and provisions of all such licenses, permits and authorizations. No
such license, permit or authorization is subject to termination or modification
as a result of the transactions contemplated hereby and all filings, consents
and approvals necessary to assign and transfer all such licenses, permits and
authorizations to the Buyer have been obtained or made. All insurance policies
and coverage currently maintained by the Sellers and all existing claims under
such insurance policies, are described on SCHEDULE 5(B).
(c) Except as set forth on SCHEDULE 5(c) attached hereto, there are no
legal, administrative, arbitration or other claims, actions, suits or
proceedings, or governmental investigations, pending or threatened, against or
affecting the Sellers, the Publications or the Assets (and the Sellers are not
aware of any basis therefor), there has not been any such claim, action, suit or
proceeding, or investigation, pending or threatened against or affecting the
Sellers,
<PAGE> 6
McDonough County Shopper, Inc.
Fulton County Shopper, Inc.
Mr. James M. Helenthal
May 1, 2000
Page 2
the Publications or the Assets at any time since January 1, 1997 and, to the
knowledge of the Sellers, there is no basis for any such claim, action, suit,
proceeding or investigation. Neither of the Sellers nor any of their officers,
directors or employees is subject to any order, judgment, injunction, decree or
writ relating to any of the Assets or the Publications.
(d) The Sellers and the Business have complied, in all material
respects, with, and are in compliance, in all material respects, with, all
applicable federal, state and local laws and regulations relating to the
employment of labor and employment practices; neither the Sellers nor the
Business have engaged in any unfair labor practice. There is no collective
bargaining agreement involving employees of the Sellers, there has been no
attempt to organize the employees of the Sellers into a collective bargaining
unit, and there is no labor strike, slowdown, stoppage, grievance or other labor
difficulty pending or threatened against the Sellers or the Business (and the
Sellers are not aware of any basis therefor). There is no, and since January 1,
1997 has not been any, pension, profit-sharing, savings, thrift, medical
benefit, death benefit, disability, severance, stock purchase, stock option,
phantom stock, vacation, sick leave, bonuses, commissions, or other fringe or
employee benefit plan, policy or arrangement maintained or contributed to by the
Sellers or otherwise applicable to the employees of the Sellers, except as set
forth on SCHEDULE 5(d). The Sellers and the Business have complied with, and are
in compliance with, all applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the rules and regulations
thereunder. Each employee benefit plan maintained or contributed to by the
Sellers is in compliance with all applicable requirements of ERISA, the Internal
Revenue Code of 1986, as amended (the "Code"), and other laws. Neither of the
Sellers is a member of a controlled group of companies or a controlled group of
trades or businesses as described in Section 414(b) and 414(c), respectively, of
the Code or Section 4001 of ERISA. The Sellers have made all contributions and
other payments to each such employee benefit plan due or becoming due prior to
the Closing. The Sellers have provided the Buyer with true and complete copies
of all documents pursuant to which any such employee benefit plan is maintained
and administered and the most recent annual reports (Form 5500 and attachments)
for such employee benefit plan. The Sellers have not requested or received a
favorable determination letter from the Internal Revenue Service with respect to
any employee benefit plan that such plan is qualified under Section 401(a) of
the Code. The Sellers have delivered to the Buyer a complete and accurate copy
of all written employee manuals or handbooks of the Sellers. SCHEDULE 5(d)
contains a correct and complete list of the names, title and compensation of all
employees of the Sellers for the year ended December 31, 1998 and increases in
such compensation since December 31, 1998 and the date of the last increase in
such compensation for each such employee. SCHEDULE 5(d) also contains a correct
and complete list of the names, title and compensation of all employees of the
Sellers who were hired since January 1, 1999 or who were terminated or quit
since January 1, 1999.
<PAGE> 7
McDonough County Shopper, Inc.
Fulton County Shopper, Inc.
Mr. James M. Helenthal
May 1, 2000
Page 7
(e) The Sellers, the Business and the Assets and operation thereof
have complied with, and are in compliance with, all applicable federal, state
and local laws and regulations, ordinances, rules and orders, including, but not
limited to, those dealing with occupational safety and health and those dealing
with the use, generation, storage and disposal of hazardous, toxic and polluting
substances, underground storage tanks and all other environmental matters. The
Sellers have not transported, generated, stored or disposed of any hazardous,
toxic or polluting substances or arranged for the transportation of any such
substances to any location which is listed or proposed for listing under the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended ("CERCLA"), or which is the subject of any federal, state or local
enforcement actions or other investigations which may lead to claims against the
Sellers or the Assets for clean-up costs, remedial work, damages to natural
resources or personal injury claims, including, but not limited to, claims under
CERCLA or under applicable state laws or regulations.
(f) All significant items of tangible personal property and assets
owned or leased by the Sellers, including, but not limited to, all vehicles
owned by the Sellers are described on SCHEDULE 1. The Assets include all of the
assets of the Sellers shown on the balance sheets of the Sellers as of December
31, 1998, except for assets disposed of, or collected by the Sellers, in the
ordinary course of business since December 31, 1998. The Assets constitute all
of the assets required to operate the Business as presently conducted by the
Sellers. The Sellers do not own, and have not previously owned, any real
property. Except as set forth on SCHEDULE 5(f) attached hereto, all tangible
personal property and assets which are included in the Assets and all Leased
Real Property (including all buildings and other improvements thereon) are in
good operating condition and repair, subject only to normal wear and tear. The
Sellers have delivered to the Buyer true, correct and complete copies of all
leases of real and personal property to which either of the Sellers is a party
or by which either of the Sellers is bound. All such leases are valid and in
full force and effect, no event of default has been declared thereunder and no
basis for any such default exists. No such lease of real or personal property is
subject to termination, modification or acceleration as a result of the
transactions contemplated hereby and all filings, consents and approvals
necessary to assign and transfer any such leases that are included in the Assets
to the Buyer have been obtained or made.
(g) The balance sheets of each of the Sellers as of December 31, 1998
and December 31, 1999 and the income statements for the one-year period then
ended, copies of which have been delivered to the Buyer, are true, correct and
complete in all material respects, are consistent with the books and records of
the respective Seller, which have been maintained by the respective Seller in
the ordinary course of business in accordance with the respective Seller's
customary business practice, present fairly the financial condition and
operations of the
<PAGE> 8
McDonough County Shopper, Inc.
Fulton County Shopper, Inc.
Mr. James M. Helenthal
May 1, 2000
Page 8
respective Seller as of dates and for the periods represented thereby and have
been prepared in accordance with generally accepted accounting principles,
consistently applied ("GAAP"), except as noted therein. The aggregate Gross
Sales (defined below) for the Sellers for the twelve-month periods ended
December 31, 1998 and December 31, 1999, were at least $1,441,797 and
$1,728,301, respectively. For purposes hereof, "Gross Sales" shall mean the
aggregate amount of cash received by the Sellers from all sources whatsoever,
including, but not limited to, advertising sales. Since January 1, 1999, the
Sellers have conducted the business and operations of the Business only in the
ordinary course, and in accordance with past practices. Since January 1, 1999,
there has not been any material adverse change in the business, assets,
condition (financial or otherwise), operations, results of operations, prospects
or rights of the Sellers and there has not been any event which has had or could
have a material adverse effect on the business, assets, condition (financial or
otherwise), operations, results of operations, prospects or rights of the
Sellers or the Business.
(h) The average distributions per issue for the McDonough County
Shopper and the Fulton County Shopper for the twelve-month period ending
December 31, 1999 were not less than _____, and _____respectively. The average
distributions per issue of the Publications during the period since December 31,
1999 has not declined. The Accounts Receivable represent bona fide receivables
generated in the ordinary course of business. Since January 1, 1999, the Sellers
have collected their accounts receivable only in the ordinary course of business
and in accordance with their past practices.
(i) Since the date of its incorporation, each of the Sellers has been
eligible to file, and has properly filed, all elections and other instruments
and documents necessary to qualify as, and shall at the Closing be, an "S
corporation" within the meaning of Section 1361 of the Code. Each of the Sellers
has duly filed all tax reports and returns (including, but not limited to, all
federal, state and local income tax, franchise tax, gross receipts, sales tax,
use tax, wage tax and real and personal property tax reports and returns)
required to be filed by such Seller, has paid all taxes and other charges owed
by such Seller to, or claimed to be due from such Seller by, any federal, state
or local taxing authority, and has withheld all taxes and other amounts required
to be withheld by it by any federal, state or local taxing authority.
(j) Except as set forth on SCHEDULE 5(j) attached hereto, to the
knowledge of the Sellers, no person or entity that currently purchases
advertising space on a regular basis from any of the Publications intends to
reduce such purchases and no existing or potential competitor intends to take
any action with respect to any market in which any of the Publications are
distributed (including, but not limited to, the publication and marketing of a
new publication or expanded distribution into the geographic area served by any
of the Publications or the alteration
<PAGE> 9
McDonough County Shopper, Inc.
Fulton County Shopper, Inc.
Mr. James M. Helenthal
May 1, 2000
Page 9
of the format, schedule, advertising rates, distribution methods or practices or
marketing efforts of an existing publication). The Sellers have furnished to the
Buyer (i) a list of the ten (10) businesses or entities that generated the
greatest amount of advertising revenues for the Publications, as a whole, during
the period from January 1, 1998 through December 31, 1998 and the period from
January 1, 1999 through December 31, 1999 and (ii) a list of all advertisements
published in each of the Publications during the period from January 1, 1998
through December 31, 1998 and during the period from January 1, 1999 through
December 31, 1999 in exchange for goods or services, as opposed to cash payment.
(k) Except as set forth on SCHEDULE 5(k) attached hereto, the Sellers
have not used any corporate or fictitious name other than "McDonough County
Shopper", "Fulton County Shopper" and "Custom Marketing Materials" and, to the
knowledge of the Sellers, none of the Proprietary Rights included in the Assets
conflict with or infringe upon the rights of any other person or entity. The
Sellers are not aware of any claim, whether currently pending, outstanding or
threatened, or of grounds for any claim, by any third party contesting the
validity, enforceability, use or ownership of any Proprietary Rights of the
Sellers. The Sellers own and possess all right, title and interest in and to, or
have a valid and enforceable license to use, any and all Proprietary Rights
necessary for the operation of the Business as currently conducted, free and
clear of all Encumbrances. No person or entity is infringing upon any
Proprietary Rights of the Sellers. The loss or expiration of any such
Proprietary Right used by the Sellers is not threatened, pending or reasonably
foreseeable. For purposes hereof, "Proprietary Rights" means all (i) patents,
patent applications, patent disclosures and inventions, (ii) trademarks, service
marks, trade dress, trade names (including the names of the Publications) and
corporate names and registration and applications for registration thereof,
(iii) copyrights (registered or unregistered) and registrations and applications
for registration thereof, (iv) mask works and registrations and applications for
registration thereof, (v) computer software, data, databases and documentation,
(vi) trade secrets and other confidential information (including, but not
limited to, ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial and marketing plans and advertiser and subscriber
lists and information, (vii) other intellectual property rights and (viii)
copies and tangible embodiments thereof (in whatever form or medium).
(l) Except as set forth on SCHEDULE 5(l) attached hereto, no officer
or director of the Sellers, member of management of the Sellers or any of the
Publications, no member of the immediate family of the Sellers or any such
person or entity, and no entity in which the Sellers or any such person or
entity owns any material beneficial interest, is a party to any agreement,
<PAGE> 10
McDonough County Shopper, Inc.
Fulton County Shopper, Inc.
Mr. James M. Helenthal
May 1, 2000
Page 10
contract, commitment or transaction with the Sellers or has any material
interest in any property used by the Sellers.
(m) Each of the Sellers is a corporation duly organized, validly
existing and in good standing under the laws of the State of Illinois and has
full power and authority to conduct its business and to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. All actions of
each of the Sellers and the Shareholder necessary to authorize the execution,
delivery and performance of this Agreement and the Noncompetition Agreement (as
hereinafter defined) and the consummation of the transactions contemplated
hereby and thereby have been taken.
(n) This Agreement and the Noncompetition Agreement has been duly
executed by each of the Sellers and the Shareholder and constitutes the legal,
valid and binding obligation of each of the Sellers and the Shareholder,
enforceable against each of the Sellers and the Shareholder in accordance with
its terms.
(o) Neither the execution, delivery or performance by the Sellers or
the Shareholder of this Agreement or the Noncompetition Agreement nor the
consummation by the Sellers or the Shareholder of the transactions contemplated
hereby or thereby will (a) conflict with, violate or give rise to a right of
termination under, any agreement, contract or instrument by which the Sellers or
the Shareholder are bound or to which the Sellers, the Shareholder or any of the
Assets are subject, (b) violate any law applicable to the Sellers, the Assets or
the Business, (c) adversely affect any permit, license or authorization of the
Sellers, or (d) adversely affect any right, title and interest in and to the
Proprietary Rights owned by the Sellers or the ability of the Buyer to use such
Proprietary Rights. No consent, approval or other action by any federal, state
or local governmental authority is required in connection with the execution and
delivery by the Sellers or the Shareholder of this Agreement and the
consummation of the transactions contemplated hereby.
(p) All files, records and incidental documentation of the Sellers
(including, but not limited to, all contracts, computer records, general
ledgers, books and records, advertiser, customer and subscriber lists, contract
information, credit records and other information maintained by the Sellers) are
kept in the ordinary course of business in accordance with the Sellers'
customary business practice.
(q) Each parcel of Leased Real Property is in good order and repair
and there are no known structural defects in or otherwise related to such Leased
Real Property or mechanical defects in or otherwise related to the electrical,
plumbing, drainage, sewerage, or
<PAGE> 11
McDonough County Shopper, Inc.
Fulton County Shopper, Inc.
Mr. James M. Helenthal
May 1, 2000
Page 11
HVAC systems which comprise a portion of the improvements on such Leased Real
Property. The Leased Real Property and improvements thereon and use thereof
comply in all material respects with all applicable ordinances and regulations
and zoning, building and other laws. There are no permits, licenses and other
rights, contractual or otherwise, relating to or necessary for the operation of
the Leased Real Property. None of the improvements located on the Leased Real
Property encroaches upon land adjacent to, and all such improvements are within
all applicable building lines, on such land and no buildings, structures or
other improvements encroach on any parcel of the Leased Real Property.
(r) All of the issued and outstanding securities of the Sellers are
owned beneficially and of record by the Shareholder, and no other person or
entity has any right under any existing contract, option, warrant, call,
commitment or right of any character calling for or relating to the issuance or
transfer of any securities of the Sellers.
(s) Neither this Agreement nor any Schedule attached hereto nor any
document furnished by the Sellers or the Shareholder hereunder contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact which is necessary to make the statements contained herein or
therein not misleading. To the best knowledge of the Sellers, there is no
material fact relating to the Sellers, the representations and warranties made
by the Sellers hereunder, the Assets or the Business which might adversely
affect the Assets, the Business or the Buyer, which has not been disclosed to
the Buyer.
6. From and after the Closing Date, the Sellers and James M. Helenthal (the
"Shareholder") shall, jointly and severally, indemnify, defend and hold the
Buyer and its successors and assigns, employees, directors, officers and other
affiliates (the "Buyer Indemnified Parties") harmless from and against all
claims, losses, liabilities, costs, expenses, obligations and damages,
including, but not limited to, litigation costs and attorneys' fees, sustained,
incurred or required to be paid by the Buyer Indemnified Parties (collectively,
"Buyer's Damages") that: (a) result from or arise out of any breach or
inaccuracy of any of the representations or warranties of the Sellers or the
Shareholder set forth herein or in any document delivered to the Buyer in
connection herewith (including, but not limited to, the Employment Agreement (as
hereinafter defined) and the Noncompetition Agreement); (b) result from or arise
out of any breach of any of the covenants or agreements of the Sellers or the
Shareholder set forth herein or in any document delivered to the Buyer in
connection herewith (including, but not limited to, the Employment Agreement and
the Noncompetition Agreement); (c) relate to or arise out of the failure to
comply with any "bulk sales" or similar laws applicable to the transactions
contemplated hereby; (d) relate to or arise out of liabilities (including, but
not limited to, tax liabilities) of, or transactions, conditions (including, but
not limited to, the environmental condition or compliance
<PAGE> 12
McDonough County Shopper, Inc.
Fulton County Shopper, Inc.
Mr. James M. Helenthal
May 1, 2000
Page 12
status of the Leased Real Property or other areas affected by releases at or
pertaining to the Leased Real Property), or occurrences affecting, the Sellers
or the Business or the operations of the Sellers or the Business or ownership or
use of the Assets, which accrue, take place or exist on or prior to, or relate
to events occurring, or arise at, any time prior to, the Closing Date and which
do not constitute Assumed Liabilities; or (e) relate to, arise out of or in
connection with any pension plans or other employee benefit plans of the Sellers
or any controlled group of companies or any controlled group of trades or
Business as described in Section 414(b) and 414(c), respectively, of the Code or
Section 4001 of ERISA of which such entities are a member. The Buyer Indemnified
Parties shall be entitled to indemnification for Buyer's Damages up to the
cumulative maximum amount of $3,500,000 (the "Indemnification Cap"); provided,
however, that in no event shall the Sellers or the Shareholder be liable to any
Buyer Indemnified Party for Buyer's Damages that result from or arise out of a
breach of or inaccuracy with respect to a representation or warranty of the
Sellers or the Shareholder until the aggregate amount of Buyer's Damages exceeds
$10,000 (the "Indemnification Threshold"), at which time the Buyer Indemnified
Parties may seek to recover the entire amount of Buyer's Damages.
Notwithstanding the preceding sentence, the Buyer Indemnified Parties shall be
permitted to make a claim against the Sellers or the Shareholder for
indemnification for the breach of any of the representations, warranties,
covenants or agreements of the Sellers or the Shareholder set forth herein or in
any document delivered to the Buyer in connection herewith (including, but not
limited to, the Employment Agreement and the Noncompetition Agreement) that is
fraudulent or intentional, regardless of whether or not the aggregate of all
Buyer's Damages incurred pursuant to this Section 6 exceeds the Indemnification
Cap or the Indemnification Threshold at the time such claim is made. The
representations and warranties contained herein, or in a certificate delivered
pursuant hereto, shall survive the Closing and shall remain effective,
notwithstanding any investigation made by any party hereto, for a period of two
years following the Closing; provided, however, that (x) the representations and
warranties set forth in Section 5(i) shall survive until thirty (30) days after
the expiration of the period of limitations applicable to the tax liabilities in
question (giving effect to any waiver, mitigation or extension thereof); (y) the
representations and warranties set forth in Section 5(a) shall survive
indefinitely; and (z) the representations and warranties set forth in Section
5(e) shall survive until the fifth anniversary of the Closing Date; provided
further, that all representations and warranties shall survive without time
limitation with respect to any inaccuracy therein or breach thereof notice of
which shall have been duly given within such applicable period to the Sellers
and the Shareholder. No right of indemnification hereunder shall be affected by
any delay in giving notice to the Sellers or the Shareholder, unless, and then
only to the extent that, the rights and remedies of the Sellers or the
Shareholder shall have been materially prejudiced as a result of the delay in
giving such notice. No right or remedy conferred in this Section 6 is intended
to be exclusive of any other right or remedy available, now or hereafter, at
law, in equity or otherwise.
<PAGE> 13
McDonough County Shopper, Inc.
Fulton County Shopper, Inc.
Mr. James M. Helenthal
May 1, 2000
Page 13
7. From and after the Closing Date, the Buyer shall indemnify, defend and
hold the Sellers and their successors and assigns, employees, directors,
officers and other affiliates (the "Seller Indemnified Parties") harmless from
and against all claims, losses, liabilities, costs, expenses, obligations and
damages, including, but not limited to, litigation costs and attorneys' fees,
sustained, incurred or required to be paid by the Seller Indemnified Parties
(collectively, "Sellers' Damages") that: (a) result from or arise out of any
breach of any of the covenants or agreements of the Buyer set forth herein or in
any document delivered to the Sellers in connection herewith; or (b) arise out
of the operation of the Business after the Closing Date. The Seller Indemnified
Parties shall be entitled to indemnification for Sellers' Damages up to the
cumulative maximum amount of $3,500,000; provided, however, that in no event
shall the Buyer be liable to any Seller Indemnified Party for Sellers' Damages
that result from or arise out of a breach of or inaccuracy with respect to a
representation or warranty of the Buyer until the aggregate amount of Sellers'
Damages exceeds $10,000, at which time the Seller Indemnified Parties may seek
to recover the entire amount of Sellers' Damages. No right of indemnification
hereunder shall be affected by any delay in giving notice to the Buyer, unless,
and then only to the extent that, the rights and remedies of the Buyer shall
have been materially prejudiced as a result of the delay in giving such notice.
No right or remedy conferred in this Section 7 is intended to be exclusive of
any other right or remedy available, now or hereafter, at law, in equity or
otherwise.
8. The Sellers will take all actions reasonably requested by the Buyer to
assist the Buyer in hiring any employees of the Sellers that the Buyer desires
to hire. The Buyer has no obligation to offer employment to any of the Sellers'
employees. Any employees hired by the Buyer shall be employed under terms and
conditions of employment established solely by the Buyer pursuant to its hiring
practices and policies. The Sellers will be liable for, and will pay, all wages,
severance payments, accrued vacation and sick pay, COBRA benefits, and other
amounts and benefits, if any, due to any employees with respect to services
performed by such employees prior to the Closing, including, but not limited to,
severance payments paid to any employee of the Sellers not hired by the Buyer.
The Sellers shall comply or shall cause its insurer to comply with all
requirements under the Consolidated Omnibus Budget Reconciliation Act of 1984,
as amended ("COBRA"), in connection with notices of options for continuation of
health care coverage under COBRA with respect to any employee of the Sellers
prior to the Closing or any qualified beneficiary of such employee (as defined
in COBRA).
9. (a) The Sellers shall deliver to the Buyer, two (2) business days prior
to the Closing Date, pay-off letters from each person or entity that has a
security interest or other Encumbrance on or in any of the Assets on such
business day such that such person's or entity's security interest in the Assets
will be released upon payment in full of the amount set forth in such pay-off
letter.
<PAGE> 14
(b) Prior to the Closing, the Sellers shall conduct the business and
operations of the Business in the ordinary course, in accordance with past
practices, and use their best efforts to preserve their business organization
intact, all to the end that they may preserve their goodwill and business
relationships with customers, advertisers, suppliers, employees and others.
Prior to the Closing, and without limiting the generality of the foregoing, the
Sellers will not: (i) sell or otherwise dispose of or lease any of the Assets,
(ii) grant any increase in the compensation of any employees, whether now or
hereafter payable, or (iii) declare or make any payment or distribution to the
security holder or purchase or redeem any shares of its capital stock.
10. The Buyer's obligations to consummate the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Closing Date of
the conditions that: 13.
(a) All representations and warranties of the Sellers set forth in
this Agreement shall be true and correct as of the date hereof and true and
correct as of the Closing Date, as if made on and as of the Closing Date, the
Sellers shall have complied with all covenants and conditions contained herein
required to be performed or satisfied at or prior to the Closing Date and the
Buyer shall have received a certificate from each of the Sellers, dated the
Closing Date, to all such effects.
(b) All documents required to be delivered by the Sellers or the
Shareholder to the Buyer, and all actions required to have been taken by the
Sellers or the Shareholder, at or prior to the Closing, shall have been
delivered or taken.
(c) Each of the Sellers and the Shareholder shall have entered into
the Noncompetition Agreement with the Buyer, in substantially the form of
EXHIBIT B attached hereto (the "Noncompetition Agreement").
(d) None of the parties hereto shall be subject on the Closing Date to
any order, decree or injunction of a court of competent jurisdiction that
enjoins or prohibits the consummation of the transactions contemplated by this
Agreement, nor shall there be a pending suit or proceeding by any governmental
authority or other person or entity that seeks injunctive or other relief in
connection with such transactions.
(e) All consents, approvals, authorizations and orders of federal,
state or local governmental and regulatory authorities necessary to consummate
the transactions contemplated by this Agreement shall have been obtained and all
consents, approvals and authorizations from other third parties necessary to
consummate the transactions contemplated by this Agreement or to avoid a breach
or default under any of the Contracts included in the Assets in connection with
<PAGE> 15
McDonough County Shopper, Inc.
Fulton County Shopper, Inc.
Mr. James M. Helenthal
May 1, 2000
Page 15
the consummation of the transactions contemplated hereby shall have been
obtained and delivered to the Buyer.
(f) The Sellers shall have cooperated with the Buyer, and taken such
actions requested by the Buyer, in connection with the Buyer's due diligence
review of the business, assets, contracts, results of operations, rights and
prospects of the Sellers and the Business and such due diligence review shall
have been completed by Buyer and the results of such due diligence review shall
have been satisfactory to the Buyer, in its sole discretion.
(g) The Buyer shall have obtained Uniform Commercial Code, fixture
lien, tax lien and judgment lien searches for each of the Sellers at the state
level for the State of Illinois and at the county level for McDonough and Fulton
Counties in the State of Illinois and the Buyer shall be satisfied with the
results of such searches.
(h) The Sellers shall have delivered or caused to be delivered to the
Buyer legal and actual possession of the Assets, together with all rights of
access to the Assets, including all keys, key cards, combinations, access
devices, manuals and instructional materials necessary to obtain full access to
and use of the Leased Real Property and other Assets.
(i) James M. Helenthal shall have entered into an Employment Agreement
with the Buyer, dated as of the Closing Date and in the form of EXHIBIT C
attached hereto (the "Employment Agreement").
11. None of the parties hereto acknowledge that there are any bulk sales
laws applicable to this transaction. Notwithstanding the foregoing, the parties
hereto agree to waive the requirements of any "bulk sales" laws applicable to
the transactions contemplated hereby. All bulk sales or transfer taxes relating
to the sale of the Assets shall be borne solely by the Sellers. The Buyer shall
pay all documentary, filing, recording and vehicle registration fees payable as
a result of the transfer of the Assets hereunder. The Sellers shall furnish such
information and execute such certificates and other documents as the Buyer may
determine, and take such other actions as the Buyer may request, prior to and
after the Closing Date, in order to obtain any available tax clearance
certificates. Except as otherwise set forth in this Agreement, all other costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby (including, but not limited to, any broker's or finder's
fees) shall be paid by the party incurring such costs and expenses.
<PAGE> 16
McDonough County Shopper, Inc.
Fulton County Shopper, Inc.
Mr. James M. Helenthal
May 1, 2000
Page 16
12. Each party to this Agreement represents and warrants to the other party
that it has not incurred and will not incur any liability for brokerage fees,
finders' fees, agents' commissions, or similar obligations in connection with
this Agreement and the transactions contemplated hereby.
13. (a) The Sellers shall cooperate with and assist the Buyer in
connection with the collection of any Accounts Receivable and shall take all
actions reasonably requested by the Buyer in connection therewith. The Sellers
shall furnish the Buyer with a complete list of all Accounts Receivable at the
Closing Date. If the Sellers receive any payment with respect to the Accounts
Receivable prior to the assignment of Accounts Receivable contemplated by
Section 3(b)(iv), they shall deliver such payment in the form received to the
Buyer within three (3) business days of their receipt thereof. The Sellers shall
not have any claims, defenses or rights to set-off with respect to any such
payments. The Sellers shall not endorse or deposit any checks or other
instruments received in payment of the Accounts Receivable.
(b) In furtherance of Section 13(a) above, the Sellers, effective upon
the Closing, constitute and appoint the Buyer and its successors and assigns as
the agent of the Sellers in the collection of the Accounts Receivable and the
attorney-in-fact of the Sellers, with full power of substitution, to execute,
sign, endorse, or deliver, in the Sellers' name, receipts or any other document
necessary to evidence, collect, or otherwise realize upon any such Accounts
Receivable, and to institute and prosecute, in the name of the Sellers or the
Buyer but on behalf of and for the benefit of the Buyer, and at the expense of
the Buyer, all proceedings and actions which the Buyer may deem desirable to
collect, assert or enforce any claim, right or title of any kind in and to the
Accounts Receivable, and to defend and compromise any and all actions, suits or
proceedings which the owner of the Accounts Receivable is entitled to defend or
compromise; provided, however, that the Buyer shall not compromise any claim,
action, suit or proceeding without the approval of James Helenthal, which
approval shall not be unreasonably withheld. The Sellers agree that the
foregoing powers are coupled with an interest and are and shall be irrevocable
by the Sellers in any manner and for any reason (including the dissolution of
the Sellers).
(c) To the extent that the Buyer collects any payment from a debtor of
the Business, such payment shall first be applied to the settlement of any
Account Receivable attributable to such debtor which arose prior to the Closing
Date before such payment may be applied to the settlement of an account
receivable attributable to such debtor which arose after the Closing Date,
except to the extent that the payment has been specifically designated by the
debtor as being made in settlement of an account receivable arising after the
Closing Date.
14. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns and, with respect
to the Shareholder, his or her
<PAGE> 17
McDonough County Shopper, Inc.
Fulton County Shopper, Inc.
Mr. James M. Helenthal
May 1, 2000
Page 17
legal representatives, executors, administrators, heirs, legatees, and any
other person who shall succeed to all or part of the Shareholder's estate. The
Buyer's rights and obligations under this Agreement may be assigned and
delegated by the Buyer to any affiliate of the Buyer. This Agreement shall be
governed by and construed in accordance with the laws of the State of Illinois
without regard to its conflicts of law rules.
15. This Agreement may be executed in multiple counterparts, each of which
shall have the force and effect of an original.
16. All notices and other communications hereunder shall be in writing and
shall be deemed to have been given when delivered by hand, mailed by registered
or certified mail (return receipt requested), postage prepaid, or sent by
overnight courier service, to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) If to the Sellers or the Shareholder:
McDonough County Shopper, Inc.
Fulton County Shopper, Inc.
P.O. Box 795
Macomb, Illinois 61455
Attention: James M. Helenthal
With a copy to:
Hartzell Glidden Tucker and Hartzell
P.O. Box 70
Carthage, Illinois 62321
Attention: Stanley L. Tucker, Esq.
(b) If to the Buyer:
Liberty Group Illinois Holdings, Inc.
3000 Dundee Road
Suite 203
Northbrook, Illinois 60062
Attention: Kenneth L. Serota, President
<PAGE> 18
McDonough County Shopper, Inc.
Fulton County Shopper, Inc.
Mr. James M. Helenthal
May 1, 2000
Page 18
With a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661
Attn: Kenneth W. Miller, Esq.
17. The Sellers shall from time to time after the Closing, at the Buyer's
request and without further consideration, execute and deliver or cause to be
executed and delivered such instruments of transfer, conveyance and assignment
(in addition to those delivered at the Closing) prepared by the Buyer, and take
or cause to be taken such other action, as the Buyer may reasonably require, to
more effectively transfer, convey and assign to, and to put the Buyer in actual
possession and control of, the Assets, or to permit Buyer to more effectively
perform the Assumed Liabilities.
18. No person who is not a party to this Agreement, including, without
limitation, any employee or former employee of the Sellers, shall be deemed to
be a beneficiary of any provision of this Agreement, and no such person shall
have any claim, cause of action, right or remedy pursuant to this Agreement.
This Agreement, including the Exhibits and Schedules attached hereto (and any
other instruments executed and delivered at the Closing), embodies the entire
agreement and understanding of the parties with respect to the transactions
contemplated by this Agreement. This Agreement supersedes all prior discussions,
negotiations, agreements and understandings (both written and oral) between the
parties with respect to the transactions contemplated hereby that are not
reflected or set forth in this Agreement or the Exhibits and Schedules attached
hereto.
19. Within ten (10) days after the Closing, each of the Sellers shall amend
its articles of incorporation so as to change its name to a dissimilar name not
utilizing the phrase "McDonough County Shopper, Inc." "Fulton County Shopper,
Inc." or any derivation thereof and shall forever cease and refrain from
utilizing, or doing business as or under, or otherwise exploiting, the name
"McDonough County Shopper, Inc.", "Fulton County Shopper, Inc." or any
derivation thereof; provided, however, that the Sellers shall be permitted,
during the period from the Closing Date until June 30, 2000, (a) to continue to
use the name "McDonough County Shopper, Inc." or "Fulton County Shopper, Inc."
with respect to its checking accounts and checks drawn thereon for the purpose
of settling its liabilities after the Closing and (b) to use the name "McDonough
County Shopper, Inc." or "Fulton County Shopper, Inc." in connection with the
<PAGE> 19
McDonough County Shopper, Inc.
Fulton County Shopper, Inc.
Mr. James M. Helenthal
May 1, 2000
Page 19
collection of all Accounts Receivable that are not Collected Accounts Receivable
and are assigned by the Buyer to the Sellers in accordance with Section 3(b)(iv)
above.
20. After the Closing Date and as long as the Buyer is the sole owner of
any particular Publication, for a period of five (5) years after the Closing
Date, the Buyer shall provide the Sellers with access, upon reasonable notice,
at reasonable times and at Sellers' cost and expense, to such books and records
of the Sellers relating solely to periods prior to the Closing Date and included
in the Assets as may be reasonably necessary for any of them to prepare and file
any and all tax returns required to be filed with any taxing authority and/or to
respond to and conduct any tax audits and other tax determinations or
proceedings relating solely to such periods.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE FOLLOWS.]
<PAGE> 20
McDonough County Shopper, Inc.
Fulton County Shopper, Inc.
Mr. James M. Helenthal
May 1, 2000
Page 20
This letter agreement has been executed and delivered to you in duplicate.
If it accurately reflects our agreements, kindly so indicate by executing both
counterparts hereof in the space provided below, retaining one counterpart for
your records and returning the other counterpart to the undersigned. This letter
will then constitute a binding agreement between us.
Yours truly,
LIBERTY GROUP ILLINOIS HOLDINGS, INC.
By:
-------------------------------------
Title:
-----------------------------------
Accepted and agreed as of this 1st day of May, 2000
MCDONOUGH COUNTY SHOPPER, INC.
By:
-------------------------------------
Title:
----------------------------------
FULTON COUNTY SHOPPER, INC.
By:
-------------------------------------
Title:
----------------------------------
- ----------------------------------------
James M. Helenthal
<PAGE> 21
EXHIBIT A
McDonough County Shopper
Fulton County Shopper
<PAGE> 22
SCHEDULES AND EXHIBITS
Exhibit A - Publications
Exhibit B - Form of Noncompetition Agreement
Exhibit C - Form of Employment Agreement
Schedule 1 - Assets
Schedule 2(a) - Assumed Contracts
Schedule 2(b) - Paid Off Leases
Schedule 2(c) - Excluded Contracts
Schedule 3 - Excluded Assets
Schedule 5(a) - Title To Assets
Schedule 5(b) - Contracts
Schedule 5(c) - Litigation
Schedule 5(d) - Employee Benefit Plans
Schedule 5(f) - Condition of Assets
Schedule 5(j) - Advertising Customers
Schedule 5(k) - Fictitious Names
Schedule 5(l) - Affiliate Transactions
