SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) October 31, 1995
KNIGHT-RIDDER, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 1-7553 No. 38-0723657
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
ONE HERALD PLAZA, MIAMI, FLORIDA 33132
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (305) 376-3800
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NOT APPLICABLE
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(Former name or former address, if changed since last report.)
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Item 2 Acquisition or Disposition of Assets.
On October 31, 1995, Knight-Ridder, Inc., a Florida corporation (the
"Registrant"), consummated its acquisition (the "Acquisition") of all
of the outstanding shares of common stock of Lesher Communications,
Inc. ("Lesher"), a California corporation, from Margaret L. Lesher,
individually, Melinda K. Lesher, individually, and Margaret L.
Lesher, Melinda K. Lesher and Robert G. Smith, as trustees of the
Margaret L. Lesher QTIP Trust, Melinda K. Lesher Trust, Cynthia Ann
Lesher Trust, Patricia Ryan Hilton Trust, Roxanne Ryan Gibson Trust
and Sarah Margaret Alves Trust (the "Sellers"), for a purchase price
of $360,000,000, subject to certain adjustments, as set forth in the
Stock Purchase Agreement, dated August 28, 1995, between the
Registrant and Sellers, which is attached as Exhibit 2.1 to this Form
8-K. The funds utilized by the Registrant to consummate the
Acquisition were derived from commercial paper borrowings and the
Registrant's working capital.
Lesher publishes several newspapers in the East Bay area of Northern
California. The Registrant intends to continue to manage and operate
Lesher as a newspaper company.
<PAGE>
Item 7 Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
It is impracticable for the Registrant to file the financial
information of the business acquired required hereunder at this
time and such information will be filed by amendment to this
Form 8-K within sixty days from November 15, 1995.
(b) Pro-Forma Financial Information
It is impracticable for the Registrant to file the pro-forma
financial information required hereunder at this time and such
information will be filed by amendment to this Form 8-K within sixty
days from November 15, 1995.
(c) Exhibits
Attached as Exhibit 2.1 to this Form 8-K is the Stock Purchase
Agreement, dated August 28, 1995, by and among the Registrant and the
Sellers.
Attached as Exhibit 2.2 to this Form 8-K is the First Amendment to
the Stock Purchase Agreement, dated as of August 28, 1995, by and
among the Registrant and the Sellers.
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SIGNATURES
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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.
KNIGHT-RIDDER, INC.
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(Registrant)
Dated: November 13, 1995 By: /s/ Ross Jones
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Ross Jones
Senior Vice President and
Chief Financial Officer
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[CAPTION]
EXHIBIT INDEX
<TABLE>
EXHIBIT NO. DESCRIPTION PAGE
<S> <C> <C>
2.1 Stock Purchase Agreement, dated August 28, 1995,
by and among Knight-Ridder, Inc. and Margaret L.
Lesher, individually, Melinda K. Lesher, individually,
and Margaret L. Lesher, Melinda K. Lesher and Robert G.
Smith, as trustees of the Margaret L. Lesher QTIP
Trust, Melinda K. Lesher Trust, Cynthia Ann Lesher
Trust, Patricia Ryan Hilton Trust, Roxanne Ryan Gibson
Trust and Sarah Margaret Alves Trust (the "Sellers"). 6
2.2 First Amendment to the Stock Purchase Agreement, dated
as of August 28, 1995, by and among Knight-Ridder,
Inc. and Sellers. 87
</TABLE>
<PAGE>
Exhibit 2.1
STOCK PURCHASE AGREEMENT
by and among
KNIGHT-RIDDER, INC.
and
MARGARET L. LESHER,
Individually,
MELINDA K. LESHER,
Individually,
and
MARGARET L. LESHER,
MELINDA K. LESHER,
and
ROBERT G. SMITH
as Trustees of the
MARGARET L. LESHER QTIP TRUST,
MELINDA K. LESHER TRUST,
CYNTHIA ANN LESHER TRUST,
PATRICIA RYAN HILTON TRUST,
ROXANNE RYAN GIBSON TRUST,
SARAH MARGARET ALVES TRUST
DATED AUGUST 28, 1995
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is entered into as of
August 28, 1995, by and between Knight-Ridder, Inc. (the "Buyer") and the
persons listed on the signature pages as sellers of stock of Lesher
Communications, Inc. (the "Corporation") pursuant to this Agreement (the
"Sellers").
RECITALS
A. The Sellers own all of the outstanding shares of the common stock
(the "Stock") of the Corporation. The Corporation engages in the
business of publishing, commercial printing and selling advertising
in newspapers. References in this Agreement to the "Business" of the
Corporation shall mean all activities of the Corporation except those
conducted using the Excluded Assets.
B. The Buyer wishes to acquire and the Sellers wish to sell, transfer
and convey to the Buyer, subject to the terms and conditions set
forth herein, all of the Stock which remains outstanding after the
Redemption (as defined in Section 1.2).
C. The Sellers are one individual and the trustees of six trusts.
Pursuant to Section 9.18 of this Agreement, the Sellers have
designated the Margaret L. Lesher QTIP Trust as their representative
as more fully described in Section 9.18.
D. Unless otherwise specified, definitions of capitalized terms are as
set forth in the Definitions Schedule attached hereto.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties agree as follows:
1. ACQUISITION
1.1 Purchase And Sale of Stock; Price. Subject to the terms and
conditions of this Agreement, the Sellers agree to sell, convey and assign the
Stock listed on Schedule 1.1, which will constitute all of the issued and
outstanding capital stock of the Corporation as of the Closing, and deliver the
certificates evidencing the Stock to the Buyer at the Closing. The
certificates will be properly endorsed for transfer to or accompanied by a duly
executed stock power in favor of the Buyer or its nominee as the Buyer may have
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directed prior to the Closing Date and otherwise in a form acceptable to the
Buyer for transfer on the books of the Corporation, as applicable. The Sellers
will pay any stamp, stock transfer and Income Taxes payable with respect to the
transfer of the Stock.
Subject to the terms and conditions of this Agreement, the Buyer
agrees to acquire the Stock from the Sellers and to pay funds to the Escrow
Agent and the Sellers as more fully described below, at the Closing, in
exchange for the Stock:
(a) Three Hundred Sixty Million Dollars ($360,000,000) (the "Base
Purchase Price"); plus
(b) the Estimated Purchase Price Interest Amount (as defined in
Section 1.4(d) hereof), if any; minus
(c) $15,500,000; minus
(d) the Wells Fargo Amount (as defined in Section 4.13 hereof); and
plus or minus (as applicable)
(e) the Estimated Adjustment Amount.
Such net amount is hereinafter referred to as the "Initial Purchase
Price." The Initial Purchase Price will be paid in funds immediately available
in the City of San Francisco as follows:
(i) $25,000,000 which the Buyer shall pay to the Escrow Agent to be
held in interest bearing escrow accounts in accordance with the terms of
Section 1.6 hereof and the Escrow Agreement; and
(ii) the balance to the Sellers in the proportions set forth in
Schedule 1.1 hereto. The amounts payable to the Sellers shall be paid to such
accounts as the Sellers shall have notified the Buyer in writing no later than
two business days prior to the Closing Date. The Initial Purchase Price is
subject to further adjustment after the Closing in accordance with Section 1.4
hereof.
1.2 Redemption; Excluded Assets. Anything in Section 1.1 to the
contrary notwithstanding, immediately before the Closing, the Sellers will
cause the Corporation to transfer the following assets (the "Excluded Assets")
to the Sellers in redemption of the Stock listed on Schedule 1.2:
(a) The accounts receivable from the Sellers or any Affiliate
of the Sellers which do not relate to goods or services supplied to such
Sellers or any of their Affiliates and which are listed on Schedule 1.2(a);
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(b) The rights to any of the Corporation's claims for any
federal, state or local Tax refunds with respect to periods ending on or before
the Closing; and
(c) The items set forth on Schedule 1.2(c) subject to the
liabilities set forth on Schedule 1.2(c) (the "Excluded Liabilities"). At the
Closing the Sellers shall deliver to the Buyer a transfer and assumption
instrument executed by the Sellers and the Corporation in form and substance
reasonably satisfactory to the Buyer.
If the Corporation sells any Excluded Assets before the Closing
Date, the proceeds of such sale net of applicable Taxes imposed on the
Corporation as a result of such sale and transaction costs thereof, rather than
the Excluded Assets themselves, will be distributed to the Sellers pursuant to
this Section 1.2.
The Sellers will use commercially reasonable efforts to prevent
the Corporation from entering into any agreement with respect to the sale of
the Excluded Assets unless such agreement contains a provision to the effect
that upon consummation of the Contemplated Transactions the Sellers shall
assume all of the obligations of the Corporation under such sales agreement and
the Corporation shall be released from all obligations thereunder. In the
event that the Sellers are not able despite using such commercially reasonable
efforts to obtain such release of liability provision in such sales agreement,
the Sellers will not enter into any such sales agreement which contains any non-
monetary obligations of the Corporation which would survive the consummation of
the Contemplated Transactions without the prior consent of the Buyer, which
consent will not be unreasonably withheld or delayed. The parties acknowledge
and agree that the Sellers shall jointly and severally indemnify the Buyer and
the Corporation for any liabilities arising out of the Excluded Assets and
Excluded Liabilities with no liability threshold in accordance with Article 7
hereof.
The transaction referred to in this Section 1.2 is hereinafter
referred to as the "Redemption."
1.3 Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement (the "Contemplated Transactions") shall take
place at the offices of Crosby, Heafey, Roach & May Professional Corporation,
1999 Harrison Street, Oakland, California 94612, at 10:00 a.m. California time,
on (i) the fiftieth day after the Initial Filing Date, (ii) such later date,
not later than the Termination Date or the Sellers' Extended Termination Date,
as the case may be, which is designated by the Buyer and reasonably
<PAGE>
satisfactory to the Sellers and is not more than 5 business days after the
satisfaction or waiver of the last of the conditions required to be satisfied
or waived pursuant to Articles 5 or 6 hereof (other than those requiring the
delivery of a certificate or other document, or the taking of other action, at
the Closing) or (iii) at such other place and at such other date and time as
the Sellers and the Buyer may mutually agree in writing (the "Closing Date").
1.4 Purchase Price Adjustment.
(a) Estimated Stockholders Investment; Estimated Purchase Price
Interest Amount. At least five (5) business days prior to the Closing Date,
the Sellers shall cause to be prepared and delivered to the Buyer a statement
certified by Blanding, Boyer & Rockwell or another independent accounting firm
designated by Sellers ("Sellers' Accountants") setting forth, in reasonable
detail, the Sellers' good faith estimate of (i) the Stockholders Investment (as
hereinafter defined) as of the Closing Date (the "Sellers' Estimated
Stockholders Investment") and (ii) the Purchase Price Interest Amount, if any
(the "Sellers' Estimated Purchase Price Interest Amount") along with a copy of
the computations and workpapers used in connection with the Sellers'
determination of the Sellers' Estimated Stockholders Investment and the
Sellers' Estimated Purchase Price Interest Amount, if any. The Buyer shall
have the right to review and copy the computations and workpapers (including
Sellers' Accountant's work papers) and the underlying books and records used in
connection with the Sellers' determination of the Sellers' Estimated
Stockholders Investment and the Sellers' Estimated Purchase Price Interest
Amount, if any, and to have access to the Corporation's officers, employees,
books and records in connection with its review of the Sellers' Estimated
Stockholders Investment and the Sellers' Estimated Purchase Price Interest
Amount, if any. The Sellers' Estimated Stockholders Investment, with such
changes, if any, determined by the Sellers' Accountant and modified, if at all,
by agreement between the Sellers' Accountant and the Buyer, shall be referred
to as the "Estimated Stockholders Investment." The Sellers Estimated Purchase
Price Interest Amount, if any, with such changes, if any, determined by the
Sellers' Accountant and modified, if at all, by agreement between the Sellers'
Accountant and the Buyer, shall be referred to as the "Estimated Purchase Price
Interest Amount." If the Estimated Stockholders Investment exceeds $3,893,763,
the Base Purchase Price shall be increased by such excess as provided in
Section 1.1(e). If the Estimated Stockholders Investment is less than
$3,893,763 the Base Purchase Price shall be decreased by such deficiency as
provided in Section 1.1(e). Such increase or decrease, as the case may be,
shall be referred to herein as the "Estimated Adjustment Amount."
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(b) Review of Estimated Stockholders Investment and Estimated
Purchase Price Interest Amount. As soon as practicable (but in no event more
than 120 days) after the Closing Date, the Buyer shall deliver to the Sellers a
statement (the "Buyer Closing Statement") certified by at Buyer's election, an
officer of the Buyer, Ernst & Young or another independent public accounting
firm designated by the Buyer (the "Buyer's Accountant") setting forth its
estimate of the amount of the Stockholders Investment of the Corporation as at
the Closing Date and the Purchase Price Interest Amount, if any. The certified
amount of the Stockholders Investment of the Corporation set forth in the Buyer
Closing Statement is hereinafter referred to as the "Certified Stockholders
Investment Amount" and the certified amount of Purchase Price Interest Amount,
if any, set forth in the Buyer Closing Statement is hereafter referred to as
the "Certified Purchase Price Interest Amount." The Certified Stockholders
Investment Amount and the Certified Purchase Price Interest Amount, if any,
shall become final and binding on the Sellers and the Buyer on the thirtieth
day after delivery of the Buyer Closing Statement unless, with respect to
either or both of such amounts, the Sellers give the Buyer written notice of
their disagreement (a "Notice of Disagreement") within 30 days following the
receipt by the Sellers of the Buyer Closing Statement setting forth the
Certified Stockholders Investment Amount and the Certified Purchase Price
Interest Amount, if any. The Sellers' Accountants and their representatives
will be entitled to review and copy, during normal business hours, the books,
records and work papers of the Corporation for purposes of this Section 1.4.
Any such Notice of Disagreement shall specify in reasonable detail the nature
of any disagreements so asserted. During a period of 30 days following the
aforesaid 30-day period, the Buyer and the Sellers shall attempt to resolve in
writing any differences which they may have with respect to any matter
specified in any Notice of Disagreement. If at the end of such 30-day period,
the Buyer and the Sellers shall have failed to reach written agreement with
respect to all of such matters, then all such matters as specified in any
Notice of Disagreement as to which such written agreement has not been reached
(the "Disputed Matters") shall be submitted to and reviewed by KPMG Peat
Marwick LLP or such other nationally recognized accounting firm as the Buyer
and the Sellers shall agree to retain (the "Arbitrator"). The Arbitrator shall
consider only the Disputed Matters. The Arbitrator shall act promptly to
resolve all Disputed Matters and its decision with respect to all Disputed
Matters shall be final and binding upon the Buyer and the Sellers. Upon
resolution of all Disputed Matters, the Arbitrator shall cause to be prepared
and shall deliver to the Buyer and the Sellers its determination of the
Stockholders Investment of the Corporation as of the Closing Date and, if
applicable, its determination of the Purchase Price Interest Amount which
<PAGE>
determination or determinations shall be final and binding upon the Buyer and
the Sellers.
(c) Definition of Stockholders Investment. For purposes of
this Agreement, "Stockholders Investment" of the Corporation shall mean the
excess, if any, of "assets" of the Corporation over "liabilities" of the
Corporation, determined in accordance with generally accepted accounting
principles in a manner consistent with the application of such principles in
the preparation of the 1994 Financial Statements. Notwithstanding the
foregoing, the parties agree that the following policies and procedures shall
be followed in the determination of Stockholders' Investment: (i) inventory
will be calculated as if the Corporation used the "first in, first out" method
of accounting for inventory, (ii) Stockholders Investment will not take into
account the Excluded Assets and Excluded Liabilities if the Redemption has
taken place, (iii) if any item comprising "assets" or "liabilities" on the
Balance Sheet was not calculated in accordance with generally accepted
accounting principles, then the manner and method of calculation pursuant to
this Section 1.4(c) shall be consistent with generally accepted accounting
principles, (iv) the Wells Fargo Amount will be included as a liability of the
Corporation notwithstanding the repayment thereof contemplated by Section 4.13;
(v) to the extent not already included in the Corporation's liabilities for the
purpose of making this computation, all federal and state Income Taxes imposed
on the Corporation as a result of the deemed sale of its assets pursuant to the
Election as defined in Section 4.11(a), the sale of any Excluded Assets and the
Redemption will be included as a liability of the Corporation, (vi) liabilities
shall be increased by an amount equal to the liability required to be
recognized by the Corporation if it were to establish a liability account
pursuant to the requirements of FASB 106 (except that, for purposes of
calculating post-Closing benefits to persons not retired from the Corporation,
such benefits shall be calculated utilizing the least costly of (x) the
Corporation's existing medical benefit plans or (y) the medical benefits
available to similarly situated non-union employees of the Buyer and its
subsidiaries as of the Closing Date; provided, however, that if the
determination of costs associated with the medical benefits is made under
clause (y), the parties shall utilize computational assumptions consistent with
the Buyer's policies, and (vii) to the extent that the Corporation has not paid
in full its obligation for severance pay to certain former employees described
on Schedule 1.4(c)(vii), such amount shall be included in the Corporation's
liabilities for the purpose of making this computation.
(d) Definition of Purchase Price Interest Amount. For purposes
of this Agreement, "Purchase Price Interest Amount" shall mean, the amount, if
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any, greater than zero, but not less than zero, equal to (i) the sum of (A) the
Final Purchase Price that would have been payable to the Sellers under this
Agreement if the Closing had occurred on the First Termination Date (as defined
below), exclusive of this Purchase Price Interest Amount, minus (B) the sum of
(x) all Taxes, if any, that would have been payable by the Sellers during the
Interim Period (as defined below) (including Taxes payable as a result of the
Election) on the amount they would have received pursuant to the foregoing
clause (A) if the Closing had occurred on the First Termination Date, plus (y)
the amount of all transaction costs, including investment banking fees and
other transaction expenses incurred by the Sellers and the Corporation in
connection with the Contemplated Transactions, plus (z) the net income of the
Corporation determined in accordance with generally accepted accounting
principles during the period from the First Termination Date to the Closing
Date ("Interim Period") plus any distributions in excess of net income made by
the Corporation to the Sellers during the Interim Period, (ii) multiplied by a
fraction, the numerator of which is the number of days during the Interim
Period, and the denominator of which is 365, (iii) multiplied by .08; provided,
however, that for purposes of computing the number of days during the Interim
Period under clause (ii), the number of days during the Interim Period shall be
reduced by the number of days during the Interim Period on which less than all
of the conditions to the Buyer's obligations to consummate the Contemplated
Transactions have been satisfied or waived by the Buyer or would reasonably
have been expected to be satisfied other than the conditions to the Buyer's
obligation under Section 6.8 hereof.
(e) Stockholders Investment Adjustment. In the event that the
amount of the Stockholders Investment of the Corporation, as finally determined
pursuant to Section 1.4(b) (the "Final Stockholders Investment Amount") is less
than the Estimated Stockholders Investment, the Sellers shall pay to the Buyer
within five business days following the date upon which the determination of
the Stockholders Investment of the Corporation becomes final and binding upon
the parties as an adjustment to the Initial Purchase Price, an amount equal to
such deficiency, plus interest thereon from the Closing Date to the date of
payment at a rate of 8% per year. In the event that the Final Stockholders
Investment Amount is greater than the Estimated Stockholders Investment, the
Buyer shall pay to the Sellers within five business days following the date
upon which the determination of the Stockholders Investment becomes final and
binding upon the parties as an adjustment to the Initial Purchase Price, an
amount equal to such excess, plus interest thereon from the Closing Date to the
date of payment at a rate of 8% per year.
<PAGE>
(f) Purchase Price Interest Adjustment. In the event that the
amount of the Purchase Price Interest Amount, if any, as finally determined
pursuant to Section 1.4(b) (the "Final Purchase Price Interest Amount") is less
than the Estimated Purchase Price Interest Amount, if any, the Sellers shall
pay to the Buyer within five business days following the date upon which the
determination of the Purchase Price Interest Amount becomes final and binding
upon the parties as an adjustment to the Initial Purchase Price an amount equal
to such deficiency, plus interest thereon from the Closing Date to the date of
payment at a rate of 8% per year. In the event that the Final Purchase Price
Interest Amount is greater than the Estimated Purchase Price Interest Amount,
the Buyer shall pay to the Sellers within 5 business days following the date
upon which the determination of the Purchase Price Interest Amount becomes
final and binding upon the parties as an adjustment to the Initial Purchase
Price, an amount equal to such excess, plus interest thereon from the Closing
Date to the date of payment at a rate of 8% per year.
(g) Purchase Price. Any amounts required to be paid pursuant
to this Section 1.4 shall be made by wire transfer of immediately available
funds to accounts to be designated by the Buyer or the Sellers, as the case may
be. The Initial Purchase Price as finally adjusted pursuant to this Section
1.4, is hereinafter referred to as the "Final Purchase Price."
(h) Expenses of Post-Closing Adjustments. The fees and
expenses of the Sellers' Accountants incurred in connection with the
determination of the amount of the Stockholders Investment and the Purchase
Price Interest Amount of the Corporation shall be paid by the Sellers. The
fees and expenses of the Buyer's Accountants shall be paid by the Buyer. The
fees and expenses, if any, of the Arbitrator incurred in connection with the
review and determination of any Disputed Matters shall be borne one-half by the
Buyer and one-half by the Sellers.
1.5 Transfer Taxes; Title Insurance Fees. Except as otherwise
provided in Section 1.1, all documentary, sales, use, transfer, registration,
recordation and other such taxes and fees (collectively, "Transfer Taxes"), if
any, and all premiums for policies of title insurance, whether on the sale of
the Shadelands Property or otherwise, including title insurance on all Owned
Real Property, incurred in connection with this Agreement and the Contemplated
Transactions (other than the Redemption with respect to which the Sellers shall
be solely responsible for Transfer Taxes, premiums for policies of title
insurance and related expenses) shall be paid one-half by the Buyer and one-
half by the Sellers and the Buyer shall prepare and properly file accurate tax
<PAGE>
returns and other documentation with respect to the Transfer Taxes on a timely
basis. The costs of preparing such returns shall be paid one-half by the Buyer
and one-half by the Sellers. If any party receives a notice of collection or
assessment of an amount that is payable by another party under this Section
1.5, the receiving party shall deliver such notice to the other parties and
shall cooperate with them in any such inquiry, examination or proceeding and
after determination thereof, the applicable party shall promptly make any
required payments.
1.6 Escrow. The Buyer and the Sellers shall, and shall cause the
Escrow Agent contemplated thereby to enter an Escrow Agreement reasonably
satisfactory to the parties at the Closing in connection with the deposit by
the Buyer into the Escrow Account of Twenty-Five Million Dollars ($25,000,000),
which Escrow Agreement shall include provisions reasonably satisfactory to the
parties, among others, substantially similar to the following:
(a) If any amounts are owed by the Sellers to the Buyer in
accordance with Sections 1.4, 4.7, 4.11 or Article 7 or otherwise hereunder,
the Buyer may instruct the Escrow Agent to pay such amounts out of the escrow
account to the Buyer as provided in the Escrow Agreement; provided, however,
the Buyer has the right to proceed directly against the Sellers rather than or
in addition to seeking recovery under the Escrow Agreement.
(b) If on the first anniversary of the Closing Date, the
balance in the escrow account exceeds Fifteen Million Dollars ($15,000,000)
plus the sum of (x) the amount that has been reserved to pay any disputed
claims in accordance with the Escrow Agreement and (y) the amount that has been
released to the Buyer during such 12-month period, plus (z) the income earned
on such amounts, the Buyer and the Sellers shall instruct the Escrow Agent to
pay such excess amount to the Sellers by wire transfer in accordance with wire
instructions provided by the Sellers not less than 2 days before such payment
is to be made. Any disputes with respect to disbursements from the Escrow
Account shall be handled in accordance with the terms of the Escrow Agreement.
(c) If on the second anniversary of the Closing Date, the
balance in the escrow account exceeds Five Million Dollars ($5,000,000) plus
the sum of (x) the amount that has been reserved to pay any disputed claims in
accordance with the Escrow Agreement and (y) the amount that has been released
to the Buyer during such second 12-month period, plus the income earned on such
amounts, the Buyer and the Sellers shall instruct the Escrow Agent to pay such
excess amount to the Sellers by wire transfer in accordance with wire
instructions, provided by the Sellers not less than 2 days before such payment
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is to be made. Any disputes with respect to disbursements from the Escrow
Account shall be handled in accordance with the terms of the Escrow Agreement.
(d) If at any time from time to time after the end of the
thirty-sixth month following the Closing Date, the balance in the escrow
account exceeds the amount that has been reserved to pay any disputed claims in
accordance with the Escrow Agreement, plus the income earned on such amount,
the Buyer and the Sellers shall instruct the Escrow Agent to pay such excess
amount to the Sellers by wire transfer in accordance with wire instructions,
provided by the Sellers not less than 2 days before such payment is to be made.
Any disputes with respect to disbursements from the Escrow Account shall be
handled in accordance with the terms of the Escrow Agreement.
1.7 Payments to Sellers. All amounts payable to the Sellers under
this Agreement and/or the Escrow Agreement shall be paid to them in the
proportions set forth in Schedule 1.1 hereto.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
As an inducement for the Buyer to enter into this Agreement, each
Seller jointly and severally hereby represents and warrants to the Buyer as
follows:
2.1 Corporate Existence and Rights. The Corporation (i) is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California and (ii) has all requisite corporate power and
lawful authority to own, lease and operate its properties and other assets and
to carry on its business as now being and heretofore conducted. The
Corporation has no subsidiaries. The copies of the articles of incorporation
and bylaws of the Corporation, which have been previously delivered to the
Buyer, are complete and correct. The Corporation is duly qualified and in good
standing in the jurisdictions set forth on Schedule 2.1, which are the only
jurisdictions in which such qualification is required by law and in which the
failure so to qualify would have a material adverse effect on the business,
results of operations or financial condition of the Corporation or its assets
and liabilities taken as a whole ("Material Adverse Effect"). Schedule 2.1
correctly lists the current directors and officers of the Corporation.
2.2 Stock.
(a) Each Seller represents that (i) such Seller owns all of the
outstanding Stock beneficially and of record, as described in Schedule 2.2;
(ii) the Stock owned by such Seller is owned free and clear of any Claim except
for the pledge of that Stock to Wells Fargo, which pledge will be released at
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the Closing upon payment of the Wells Fargo Amount to Wells Fargo as described
in Section 4.13 and an unrecorded lien under section 6324 of the Code for
payment of estate taxes on the estate of Dean S. Lesher, which lien will be
divested in accordance with Section 6324 of the Code upon the Closing; (iii)
there are no outstanding contracts for any such Seller to acquire or transfer
any Stock or any rights or interests therein; and (iv) at the Closing, the
Buyer will acquire good, valid and marketable title to and complete ownership
of such Seller's Stock, free and clear of any Claim.
(b) The authorized capital stock of the Corporation consists of
(x) 25,000 shares of common stock, $100 par value, of which 16,829.02 shares
will be issued and outstanding immediately prior to the Redemption and
16,596.86 shares will be issued and outstanding as of the Closing, and (y)
5,000 shares of preferred stock, $100 par value, none of which is or will be
outstanding. Except for the Sellers, and the interests of Wells Fargo Bank and
the Internal Revenue Service, as described in Section 2.2(a), which will be
released and/or divested at the Closing, no person owns any interest in or any
right to any capital stock or other equity security of the Corporation. Except
for the transactions contemplated by this Agreement, and provisions of the
Corporation's articles of incorporation granting preemptive rights which will
be deleted prior to Closing, there is no security, option, warrant, right
(including preemptive rights), put, call, subscription, agreement, commitment,
understanding or claim of any nature whatsoever, fixed or contingent, that
directly or indirectly (i) calls for the issuance, sale, pledge, delivery or
other disposition of any securities of the Corporation or any securities
convertible into, or other rights to acquire, any securities of the Corporation
(ii) relates to the voting or control of any securities of the Corporation or
(iii) obligates the Corporation or any of its Affiliates to grant, offer or
enter into any of the foregoing. There are no outstanding contracts of the
Corporation to repurchase, redeem or otherwise acquire any Stock. All of the
Stock is duly authorized, validly issued and outstanding and fully paid and
nonassessable and was issued in conformity with applicable laws. None of the
Stock was issued in violation of preemptive rights. At the Closing there will
be no preemptive rights in respect of the Stock. Any Stock of the Corporation
which was issued and reacquired by the Corporation, including, but not limited
to, the Redemption, was so reacquired (and, if reissued, so reissued) in
compliance with all applicable laws, and the Corporation has no outstanding
obligation or liability with respect thereto.
2.3 Agreements Authorized. Each Seller has the requisite power and
authority to execute, deliver and perform the terms and conditions of this
<PAGE>
Agreement and the Escrow Agreement and consummate the Contemplated Transactions
and, if such Seller is a trustee, has taken all necessary action under the
governing trust instrument to authorize the execution, delivery and performance
of this Agreement and the Escrow Agreement. Each Seller that is a trustee or
trustees under a will, trust agreement, trust indenture or other instrument
creating the trust or trusts of which such Seller is a trustee or trustees (i)
is or are acting in his, her, its or their capacity or capacities as trustee or
trustees, (ii) is or are all of the trustee or trustees acting under such will,
trust agreement, trust indenture or other instrument (iii) has or have the
power under such will, trust agreement, trust indenture or other instrument to
sell the Stock owned by such Seller as trustee or trustees, (iv) if acting as
trustee or trustees under a will, is or are duly appointed by and in good
standing with the court having jurisdiction over the will, (v) if acting as
trustee or trustees under a trust agreement, trust indenture or other
instrument other than a will, is or are the trustee or trustees named in such
agreement, indenture or other instrument, or have been duly appointed as
successor or substitute trustee or trustees pursuant to the provisions of such
agreement, indenture or other instrument. Except as set forth in Schedule 2.3,
the execution, delivery and performance by the Sellers of this Agreement and
the Escrow Agreement in accordance with its terms and the consummation of the
Contemplated Transactions will not require notice to, filing with or the
consent, approval or waiver of, any Government Authority or other person,
except for the filing under the HSR Act (as defined in Section 4.5), consents
required under contracts to which the Seller is a party as specified in
Schedule 2.3 or regulatory approvals or notices required where the failure to
obtain such consent or give such notice would not, individually or in the
aggregate, have a Material Adverse Effect or impair the Sellers' ability to
consummate the Contemplated Transactions. This Agreement has been duly
executed and delivered by the Sellers, or, if any Seller is a trustee or
trustees acting in his or its or their capacity or capacities as trustee or
trustees, by such Seller as trustee or trustees of the trust or trusts in which
the Stock of such Seller are held, and at the Closing, the Escrow Agreement
will be so delivered and duly executed by each such Seller, and in each case,
creates legal, valid and binding obligations of the Sellers enforceable against
each such Seller in accordance with their respective terms.
2.4 No Conflict. Except as set forth on Schedule 2.4, the
execution, delivery and performance by the Sellers of this Agreement and the
Escrow Agreement and the Consummation of the Contemplated Transactions will
not, and would not, with the giving of notice, lapse of time or both: (i)
<PAGE>
modify, breach or constitute grounds for the occurrence or declaration of a
default under or give rise to a right to terminate, modify or accelerate
obligations under any agreement, indenture, undertaking, lease, sublease or
other instrument to which any Seller or the Corporation is a party or by which
any Seller, the Corporation or any of its assets may be bound or affected, (ii)
violate or conflict with any Legal Requirements to which any Seller or the
Corporation is subject, (iii) violate any provision of the articles of
incorporation or bylaws of the Corporation, or (iv) if any Seller is a trustee
or trustees acting in his, its or their capacity or capacities as trustee or
trustees, violate any provision of the will, trust agreement, trust indenture
or other instrument creating the trust or trusts of which such Seller is
trustee or trustees.
2.5 Financial Statements.
(a) Audited Financial Statements. The Sellers have delivered
to the Buyer audited balance sheets of the Corporation as at December 27, 1992,
December 26, 1993 and December 25, 1994 (the 1994 balance sheet being referred
to hereinafter as the "Balance Sheet"), income statements, statements of
changes in stockholders' equity and cash flows of the Corporation for the
fiscal years ended December 27, 1992, December 26, 1993 and December 25, 1994,
all of which were audited and reported on by Blanding, Boyer & Rockwell. The
balance sheets, income statements, statements of stockholders' equity and cash
flows are collectively referred to as the "Financial Statements." Except for
the retired lives reserve included in Schedule 1.2(c), the Financial Statements
(i) fairly reflect the information contained in the books and records of the
Corporation in all material respects, (ii) present fairly the financial
condition, results of operations, stockholders' equity and cash flows of the
Corporation as at and for the periods indicated therein, and (iii) have been
prepared in accordance with generally accepted accounting principles for the
described periods consistently applied.
(b) Unaudited Pro Forma Balance Sheet and Interim Financial
Statements. Sellers have delivered to Buyer an unaudited consolidated balance
sheet of the Corporation as of July 2, 1995 (the "July 2 Balance Sheet") and
the related consolidated statement of operations for the period then ended.
The pro forma balance sheet dated December 31, 1994, which has been delivered
to the Buyer prior to the date of this Agreement (i) fairly reflects the
information contained in the books and records of the Corporation (other than
Excluded Assets and Excluded Liabilities) in all material respects, (ii)
presents fairly the proforma assets and liabilities of the Corporation (other
than Excluded Assets and Excluded Liabilities) as at December 31, 1994, and
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(iii) has been prepared in accordance with generally accepted accounting
principles consistently applied. The July 2 Balance Sheet and statement of
operations for the period ending July 2, 1995 have been certified by the
Corporation's controller and other than with respect to the Excluded Assets and
Excluded Liabilities, (i) fairly reflect the information contained in the books
and records of the Corporation in all material respects, (ii) present fairly
the assets, liabilities, financial condition and results of operations of the
Corporation as at and for the periods indicated therein, and (iii) have been
prepared in accordance with generally accepted accounting principles for the
described period consistently applied, except for changes, if any, required by
generally accepted accounting principles and disclosed therein. The interim
balance sheet and statement of operations reflect all adjustments (which
consist only of normal recurring adjustments not material in amount and include
but are not limited to estimated provisions for year-end adjustments) necessary
for a fair presentation. The adjustments set forth on Schedule 2.5 were made
in accordance with the Corporation's books and records as at the date indicated
which were audited by the Sellers' Accountants and found to be in accordance
with generally accepted accounting principles.
2.6 Compliance with Laws; Litigation and Claims. There are no
outstanding orders, judgments, decrees, writs, injunctions, stipulations or
awards of any Government Authority against or involving the Corporation or its
assets and the Corporation is not in violation of any Legal Requirements
applicable to the Corporation or its assets other than such violations which
would not, individually or in the aggregate, have a Material Adverse Effect.
Except as set forth on Schedule 2.6, (i) there is no pending or, to the
Sellers' and the Corporation's knowledge, threatened, claim, litigation,
arbitration, administrative or other formal proceeding against or affecting the
Sellers, the Corporation or their or its assets, and there is no pending or, to
the Sellers' and the Corporation's knowledge, threatened, investigation or
other proceeding (formal or informal) or third party claim, including without
limitation claims by customers, or claims by any Government Authority or any
other person, whether or not covered by insurance, which individually or in the
aggregate would have a Material Adverse Effect, (ii) the use and operation of
the Corporation's assets comply in all material respects with all Legal
Requirements and, to the Sellers' and the Corporation's knowledge, there is no
reasonable basis for any litigation, investigation, arbitration or other
proceeding (formal or informal), or third party claim, which, based upon known
facts and circumstances, would individually or in the aggregate have a Material
Adverse Effect. The Corporation is not in default with respect to any order,
<PAGE>
judgment, writ, injunction, decree, stipulation or demand of any court or other
Government Authority.
2.7 Business Changes.
(a) Except as provided in this Agreement or as set forth on
Schedule 2.7(a), since July 2, 1995 (the "Interim Balance Sheet Date"), the
Corporation (i) has conducted its business in the ordinary course and
consistent with past practices, and, (ii) has not:
(A) hired, or agreed to hire, any person whose current
annual compensation (including bonuses and commissions) exceeds $100,000, or
entered into or amended, or agreed to enter into or amend, any employment
agreement with any employee whose compensation exceeds $100,000; or entered
into or amended, or agreed to enter into or amend, any Benefit Plan;
(B) waived, or agreed to waive, any right of material
value to the Corporation except for consideration reasonably deemed adequate by
the Corporation;
(C) materially changed, or agreed to materially change,
any of its business or accounting policies or practices, including, without
limitation, advertising, marketing, pricing, purchasing, personnel, sales,
returns, budget or product acquisition policies or practices;
(D) made any wage or salary increase or bonus, or increase
in any other direct or indirect compensation for or to any employee, in each
case other than in the ordinary course of business and consistent with past
practice and in no event in excess of 5% of the base compensation during the
prior fiscal year or any accrual for or commitment or agreement to make or pay
the same;
(E) except in the ordinary course of business and
consistent with past practice made, or agreed to make, any payment or
commitment to pay any severance or termination pay to any employees;
(F) suffered or incurred any damage, destruction or loss
(whether or not covered by insurance) which individually or in the aggregate
would have a Material Adverse Effect;
(G) terminated, agreed to terminate, or failed to renew
any insurance coverage, permit, contract or other agreement where such
termination or failure to renew would have a Material Adverse Effect;
<PAGE>
(H) entered into or amended, or agreed to enter into or
amend, any other contract or other agreement or other transaction material to
the assets, operations, prospects or financial condition of the Corporation;
(I) suffered any strike or other labor disputes which,
individually or in the aggregate, would have a Material Adverse Effect;
(J) mortgaged, pledged or otherwise encumbered any assets
and, except for Excluded Assets, sold, leased, subleased, surrendered or
disposed of any assets, except at arm's length, for fair value in the ordinary
course of business and consistent with past practice;
(K) borrowed or agreed to borrow any funds (except for
advances drawn on the Corporation's line of credit agreement as in effect on
the date of this Agreement) or incurred, assumed or guaranteed any obligation
or liability (absolute or contingent);
(L) except for distributions to shareholders to pay
quarterly estimates of income taxes payable with respect to the Corporation's
income and monthly distributions of $97,000 to shareholders of the Corporation,
declared or paid any dividend or other distribution in respect of its capital
stock and, except for the Redemption, has not directly or indirectly acquired
or redeemed or split, combined or reclassified any shares of capital stock of
the Corporation;
(M) changed or amended its articles of incorporation or
bylaws, except to eliminate preemptive rights and rights of first referral to
purchase the Stock.
(b) Except as disclosed in Schedule 2.7(b), since July 2, 1995,
there has been no material adverse change in the business, operations,
properties, results of operations or financial condition of the Corporation or
its assets and liabilities taken as a whole, other than changes affecting the
newspaper industry generally.
2.8 Real Property.
(a) Owned Real Property. The Corporation has good, insurable
and marketable title to the land described on Schedule 2.8(a) and to all of the
buildings, structures and other improvements located thereon (collectively, the
"Owned Real Property") free and clear of all Claims other than (i) liens for
taxes not yet due or which may thereafter be paid without penalty, (ii)
mechanics', carriers, workmen's, repairman's or other like liens arising or
<PAGE>
incurred in the ordinary course of business and consistent with past practice
and securing debts reflected in the Financial Statements, (iii) imperfections
of title or non-monetary encumbrances, if any, which do not individually or in
the aggregate affect the marketability of the Owned Real Property subject
thereto, materially reduce the fair market value of the Owned Real Property
below the fair market value the Owned Real Property would have had but for such
encumbrances, and do not impair the use, occupancy or operation of the Owned
Real Property subject thereto in the Business as presently conducted, and (iv)
such Claims securing indebtedness disclosed in the Financial Statements. The
Corporation is not in default with respect to any security agreement, mortgage
agreement, or other financing agreement involving the Owned Real Property
except for such defaults which would not individually or in the aggregate have
a Material Adverse Effect. At the Closing, the Shadelands Property will be
Owned Real Property and the representations and warranties in this Section
2.8(a) will be true and correct with respect to it.
(b) Leased Real Property. Schedule 2.8(b) is a true, correct
and complete schedule of all leases, subleases, licenses and other agreements,
and all modifications, amendments and supplements thereto (collectively, the
"Real Property Leases") under which the Corporation uses or occupies or has the
right to use or occupy, now or in the future, any real property (the land,
buildings and improvements covered by such Real Property Leases being referred
to herein as the "Leased Real Property"). The Sellers have made available to
the Buyer true and complete copies of all of the Real Property Leases prior to
the date hereof. Each of the Real Property Leases is in full force and effect,
all rents and other sums due and payable by the Corporation thereunder have
been paid and the Corporation is not in material default thereunder. To the
Seller's and the Corporation's knowledge, no lessor under any such leases is in
material default thereunder. Each of the Real Property Leases is a legal and
binding obligation of, and enforceable in accordance with its terms, against
the Corporation, and is a legal and binding obligation of, and enforceable in
accordance with its terms against, the applicable lessor. No termination event
or condition or uncured default on the part of the Corporation exists under any
Real Property Lease. No event has occurred and no condition exists which, with
the giving of notice or the lapse of time or both, would constitute such a
default or termination event or condition under any Real Property Lease.
Except as set forth on Schedule 2.8(b), there is no underlying mortgage, deed
of trust, lease, grant of term or other estate in or interest affecting any
portion of the Leased Real Property which is superior to the interest of the
Corporation as tenant under each of the Real Property Leases. The Corporation
<PAGE>
holds the leasehold estate under and interest in each Real Property Lease free
and clear of all Claims, except as set forth on Schedule 2.8(b).
(c) Use of Real Property. All of the land, buildings,
structures, plants, facilities and other improvements used in the conduct of
the Business are included in the Owned Real Property and the Leased Real
Property. The Owned Real Property and the Leased Real Property are sometimes
referred to herein collectively as the "Real Property." The Real Property is
in full compliance with all applicable building, zoning, subdivision and other
land use and similar laws, codes, ordinances, rules, regulations and orders of
Government Authorities other than such failures to comply as would not
individually or in the aggregate have a Material Adverse Effect. No dispute
currently exists with any Government Authority with respect to the application
of any Legal Requirement to the Real Property. Except as set forth on Schedule
2.8(c), the Corporation does not own or hold, and is not obligated under or a
party to, any option, right of first refusal or other contractual right to
purchase, acquire, sell or dispose of the Real Property or any part thereof (or
interest therein). No portion of the Real Property has suffered any damage by
fire or other casualty which would individually or in the aggregate have a
Material Adverse Effect and which has not been heretofore completely repaired
and restored to its original condition. No portion of the Real Property is
located in a special flood hazard area as designated by federal governmental
authorities. The Corporation has legal and practical access to all Real
Property sufficient to continue to operate its business in the manner currently
operated. The Owned Real Property is in compliance with all restrictions of
record and other recorded Claims.
2.9 Taxes.
(a) S Corporation Issues. Except as set forth in Schedule
2.9(a):
(i) The Company made a valid election to be taxed as an S
corporation within the meaning of Section 1361(a)(1) of the Code (an "S
Corporation") on December 30, 1986. That election served as a valid election
for California income and franchise tax purposes.
(ii) Each Seller that is not an individual is a qualified
Subchapter S trust within the meaning of Section 1361(d)(3) of the Code and a
valid election under Section 1361(d)(2) of the Code has been timely filed with
respect to each such trust.
<PAGE>
(iii) (A) The Corporation for each of its taxable years
since its taxable year beginning October 1, 1987, has been, and through the
Closing Date will remain, an S Corporation for federal income and California
income and franchise Tax purposes; (B) no asset of the Corporation the basis of
which is determined in whole or in part by reference to the basis of such asset
in the hands of a "C Corporation" (as such term is defined in Section
1361(a)(2) of the Code) was acquired from any C Corporation; (C) no termination
of the Corporation's S Corporation election has occurred pursuant to Section
1362(d) of the Code or otherwise; (D) the Corporation has no liability for Tax
under Section 1371 of the Code.
(b)Compliance. The Corporation has timely filed or will timely
file all required Returns, has paid all Income Taxes due for all periods ending
on or before December 31, 1994, and has, or as of the Closing Date will have,
paid all (i) other Taxes due for all periods ending on or before the Closing
Date and (ii) Income Taxes shown to be due on any Returns. Adequate provision
has been made in the books and records of the Corporation, and (to the extent
required to be made thereon in accordance with generally accepted accounting
principles) in the financial statements referred to in Section 2.5 above for
all Taxes due and payable or properly accruable. The Corporation is not a
"United States real property holding corporation" within the meaning of Section
897(c) of the Code. As of the Closing Date, the Corporation will have no
liability for Taxes other than Taxes for which full provision will have been
made in the determination of the Final Stockholders Investment Amount. The
Corporation is not liable for any foreign Taxes or any state or local Taxes
outside of California. The Sellers have made available to the Buyer prior to
the date of this Agreement complete and accurate copies of all Returns filed by
the Corporation for periods for which the statute of limitations is still open.
The Corporation does not have in effect, and has not been requested to make,
any waiver or extension of any statute of limitations with respect to Taxes.
None of the Sellers is a foreign person subject to withholding under Section
1445 of the Code and the Treasury Regulations promulgated thereunder, and
certification to that effect will be delivered to the Buyer at or prior to the
Closing. Schedule 2.9(b) lists the date or dates through which any Government
Authority has examined the United States federal income tax returns and any
other Returns of the Corporation. All required Returns, including amendments
to date, have been prepared in good faith without negligence or willful
misrepresentation and are complete and accurate in all material respects.
Except as set forth in Schedule 2.9(b), no Government Authority has, during the
past three years, examined or is in the process of examining any Returns of the
Corporation. Except as set forth on Schedule 2.9(b), no Government Authority
<PAGE>
has proposed (tentatively or definitively), asserted or assessed or, to the
Sellers' and the Corporation's knowledge, threatened to propose or assert, any
deficiency, assessment or claim for Taxes and, to the Sellers' and the
Corporation's knowledge, there would be no proper basis for any such
delinquency assessment or claim.
(c) Except as set forth on Schedule 2.9(c), the Corporation has
complied in all material respects with all applicable laws, rules and
regulations relating to information reporting with respect to payments made to
third parties and the withholding of and payment of withheld Taxes and has
timely withheld from employee wages and other payments and paid over to the
proper Government Authority all amounts required to be so withheld and paid
over for all periods under all applicable laws.
(d) Miscellaneous Tax Issues. Except as set forth on Schedule
2.9(d):
(i) No property of the Corporation is subject to a tax
benefit transfer lease subject to the provisions of former Section 168(f)(8) of
the Code.
(ii) The Corporation has not filed a consent under Section
341(f) of the Code.
(iii) The Corporation has not agreed and is not required to
make any adjustment under Section 481(a) of the Code.
(iv) The Corporation has not been included in any
consolidated, combined or unitary Tax Returns.
(v) The Corporation is not liable for the Taxes of any
person as a "transferee" within the meaning of Section 6901 of the Code.
All references in this Section 2.9 to any provision of the Code
and to federal Income Tax regulations shall be deemed to include the analogous
provisions of California law.
All references in this Section 2.9 to the Corporation shall be
deemed to include any predecessors thereto (including any entities that have
merged into the Corporation).
2.10 Improvements and Personal Property. Except as set forth on
Schedule 2.10, the Corporation has good and marketable title to and all right
to use all personal property (other than the Excluded Assets) material to the
operation of the business as currently conducted. The tangible assets and
properties of the Corporation used in the Business, taken as a whole, are in
good operating condition, reasonable wear and tear excepted. The Stock is
<PAGE>
sold on the basis that the buildings, offices, and any other structures and
improvements included within the Real Property or occupied by the Corporation
and all machinery, equipment, fixtures, furniture, leasehold improvements and
motor vehicles relating to or used in the Corporation's business are accepted
by the Buyer on an "AS IS, WHERE IS" BASIS AND, EXCEPT AS TO THE EXPRESS
WARRANTIES SET FORTH HEREIN, THE SELLERS EXCLUDE ALL WARRANTIES, EXPRESS OR
IMPLIED, IN LAW OR IN FACT, WITH RESPECT TO THE CORPORATION'S ASSETS, INCLUDING
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. There is
no pending, or to the Sellers' and the Corporation's knowledge, threatened or
contemplated condemnation proceeding or any sale or other disposition in lieu
of condemnation, eminent domain or inverse condemnation affecting the Real
Property or any part thereof which individually or in the aggregate would have
a Material Adverse Effect. Except as disclosed in Schedule 2.10, during the
past three years there has not been any interruption of the operations of the
Corporation's business due to inadequate maintenance of any personal property
other than those individually or in the aggregate which have not had a Material
Adverse Effect.
2.11 Restrictive Agreements. Except as set forth in Schedule 2.11,
there are no contracts or agreements to which the Corporation is a party or
under which the Corporation or its assets are in any way bound that in any way
excludes or materially restricts the Corporation or its assets, or would
exclude or restrict the Buyer, any of its Affiliates, or the Corporation upon
consummation of the Contemplated Transactions, from competing in any geographic
area.
2.12 Intellectual Property.
(a) List of Intellectual Property. Schedule 2.12 sets forth:
(i) all patents issued to or patent rights enjoyed by the
Corporation and all pending patent applications filed by or on behalf of the
Corporation relating to its business and assets;
(ii) all Trademarks issued to or trademark rights used by
the Corporation relating to its business and assets;
(iii) all copyrights, including copyrights for printed
matter, databases, software, CD/ROM discs, software and CD/ROM disc source
codes, copyright registrations and all pending applications for copyright
registration filed by or on behalf of or issued to the Corporation;
<PAGE>
(iv) all existing license agreements or arrangements to
which the Corporation is party, whether as licensor or licensee or otherwise,
with respect to any Trademark which are used or are contemplated to be used in
the conduct of or otherwise relate to the Business, except for software license
agreements generally available to the public under which the Corporation is a
licensee; and
(v) all existing license agreements or arrangements to
which the Corporation is a party, whether as licensor or licensee or otherwise,
with respect to any patent or copyright or any registration or any application
therefor which are used or are contemplated to be used in the conduct of or
otherwise relate to the Business, except for software license agreements
generally available to the public under which the Corporation is a licensee.
(b) Right to Use Intellectual Property. Except as set forth on
Schedule 2.12, to the Sellers' and the Corporation's knowledge, there are no
patents, Trademarks, copyrights or license agreements presently being used in,
or which are contemplated being used by the Corporation in, the conduct of the
Business. Except as stated on Schedule 2.12, the Corporation owns or, in the
case of licenses, possesses adequate, enforceable and assignable licenses to
use, free and clear of any and all Claims, each of the items set forth on
Schedule 2.12 and the other Intellectual Property used by the Corporation, and
the use of all Intellectual Property by the Corporation does not infringe on
any patent, Trademark, copyright or other Intellectual Property right of any
other person. The Corporation has received no notice and neither the Sellers
nor the Corporation otherwise has any knowledge of any adversely held patent,
invention, Trademark or copyright of any other person and has no notice of any
claim of any other person that it has infringed upon or is infringing upon, or
has engaged in and is engaging in any unauthorized use or misappropriation with
respect to any of the property set forth on Schedule 2.12 or any other
Intellectual Property or Confidential Information of the Corporation. The
Corporation has the right to use, free and clear of any claims of infringement
by or rights of others, all trade secrets, know-how, processes, technology,
blueprints, and designs utilized in or incident to their business as presently
conducted ("Confidential Information") and, such use does not infringe on any
patent, trademark, copyright, service mark, trade name or other proprietary
right of any third party. The Corporation has taken all action in its judgment
reasonably necessary to protect each item of Intellectual Property that it owns
or uses and, except as set forth on Schedule 2.12, has made no outstanding
claims that any other person has violated or infringed its rights with respect
<PAGE>
to any Intellectual Property and knows of no basis for the making of any such
claim. All licenses, agreements or arrangements listed on Schedule 2.12 are in
full force and effect. Neither the Corporation nor, to the Sellers' and the
Corporation's knowledge, any other party to any such licenses, agreements or
arrangements is in default or alleged default thereunder.
(c) Except as set forth in Schedule 2.12, no source code
listing for any software or computer programs that are being used by the
Corporation has ever been sold, licensed, leased, conveyed, delivered or, to
the Sellers' knowledge, disclosed or otherwise made available or known, in
whole or in part, by the Corporation or any of its Affiliates to any third
party.
2.13 Insurance. Schedule 2.13 sets forth a list (specifying the
insurer, describing each pending claim thereunder and setting forth the
aggregate amounts paid out under each such policy through the date hereof and
the aggregate limit, if any, of the insurer's liability thereunder) of all
policies or binders of fire, liability, product liability, worker's
compensation, vehicular and other insurance (including insurance policies,
relating to the leasing, use, occupancy or operation of the Real Property or
any portion thereof) held by or on behalf of the Corporation other than those
related exclusively to the Excluded Assets. Copies of such policies have been
made available to the Buyer prior to the date hereof and are accurate and
complete in all material respects. Furthermore, (i) the Corporation is not in
default in any material respect under any such policies, and (ii) the
Corporation has not received any notice of cancellation, non-renewal, material
increase in any premium or future unavailability of current coverage on similar
terms, with respect to any such policy.
2.14 Contracts. Schedule 2.14 sets forth all material contracts,
other than those which constitute Excluded Assets and Excluded Liabilities, to
which the Corporation is a party or by which it and/or any of its assets are
bound, including all amendments, modifications and waivers (the "Contracts").
Complete and accurate copies of the Contracts (including all amendments,
modifications and waivers) have been made available to the Buyer. To the
Sellers' and the Corporation's knowledge, no party (other than the Corporation)
under any contract (including without limitation the Contracts) to which the
Corporation is a party or by which its assets are bound is in default, or with
the giving of notice, lapse of time or both, would be in default thereunder,
except for such defaults as would not individually or in the aggregate have a
Material Adverse Effect. Each of the contracts (including all amendments,
modifications and waivers and including without limitation the Contracts) to
<PAGE>
which the Corporation is a party or by which its assets are bound is in full
force and effect in accordance with its terms without any amendment,
modification or waiver not reflected in the contracts made available to the
Buyer, except where the failure of such contracts to be in full force and
effect would not, individually or in the aggregate, have a Material Adverse
Effect.
The Corporation is not in default under any contract (including
without limitation the Contracts) to which it is a party or by which its assets
are bound, or, with the giving of notice, lapse of time or both would the
Corporation be in default, other than such defaults which would not,
individually or in the aggregate, have a Material Adverse Effect.
2.15 Employees. Schedule 2.15 sets forth the names of all present
employees of the Corporation in the Business who receive a base compensation in
excess of $75,000 per annum.
2.16 Employee Benefits.
(a) List of Benefit Plans. Schedule 2.16 sets forth all
employee benefit plans or arrangements of any type within the meaning of
section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder ("ERISA"), and all other material
employee benefit plans or arrangements, whether written or oral, including,
without limitation, any bonus, incentive, deferred compensation, severance,
sick pay, vacation, disability, workers compensation, flexible spending, fringe
benefit, voluntary employees beneficiary association, insurance plans or
arrangements, other than employee fringe benefits with inconsequential costs,
under which the Corporation has, or in the future could have, any actual or
contingent liability (whether direct or indirect) with respect to any current
or former employee, director or consultant of the Corporation or any person
("Commonly Controlled Entity") affiliated with Corporation under Code section
414 (the "Benefit Plans"). No such Benefit Plan is a "multiemployer plan"
(within the meaning of ERISA Section 3(37)(A) and the Corporation has no
outstanding liability (contingent or otherwise) with respect to a multiemployer
plan. No Benefit Plan covers employees other than employees of the
Corporation. The Corporation has made no commitment to adopt a new Benefit
Plan.
(b) Plan Documents. With respect to each Benefit Plan (where
applicable): the Corporation has made available to the Buyer prior to the date
hereof complete and accurate copies of (i) all plan texts and agreements (or a
written description of any unwritten Benefit Plan); (ii) all material
communications to employees (including summary plan descriptions); (iii) the
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three most recent annual reports; (iv) the most recent annual and periodic
accounting of plan assets; (v) the most recent determination letter received
from the Internal Revenue Service and any pending application for a
determination letter; and (vi) the most recent actuarial valuation, if
applicable; and (vii) any related trust, insurance contract or other funding
vehicle.
(c) Plan Compliance. Except as set forth on Schedule 2.16(c),
with respect to each Benefit Plan: (i) such Benefit Plan is and has been
maintained and administered at all times in material compliance with its terms
and Legal Requirements; (ii) such Benefit Plan is and has been operated in
accordance with the reporting and disclosure requirements of ERISA and the
Code; (iii) no event has occurred and there exists no circumstance under which
the Corporation or any Commonly Controlled Entity would be expected to incur
liability under ERISA, the Code or otherwise (other than routine claims for
benefits); (iv) there are no actions, suits or claims (other than routine
claims for benefits) pending or, to the Sellers' and the Corporation's
knowledge, threatened, with respect to any Benefit Plan or against the assets
of any Benefit Plan; (v) there are no pending governmental audits or
investigations; (vi) all contributions required to have been made have been
made when due; and (vii) all contributions that have not been made to a Benefit
Plan have been properly recorded on the books of the Corporation or any
Commonly Controlled Entity to the extent required by generally accepted
accounting principles. Each Benefit Plan which is intended to be qualified
under Code Section 401(a) has received a favorable determination letter from
the IRS and no event has occurred or circumstances exist which could adversely
affect the validity of such letter.
(d) Welfare Plan Compliance. Except as set forth in Schedule
2.16, with respect to each Benefit Plan that is a "welfare plan" (as defined in
ERISA Section 3(1)): (i) no such plan provides medical or death benefits
(whether or not insured) with respect to current or former employees beyond
their termination of employment (other than coverage mandated by law); (ii) the
Corporation has the ability to amend or terminate any such plan without
liability for claims incurred after the amendment or termination; and (iii) the
Corporation and each Commonly Controlled Entity have complied with the
requirements of Code Section 4980B.
(e) Defined Benefit Plan Compliance. Except as set forth in
Schedule 2.16, with respect to each Benefit Plan maintained by the Corporation
or a Commonly Controlled Entity which is a "defined benefit plan" within the
meaning of ERISA Section 3(35): (i) no liability has been incurred to the
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Pension Benefit Guaranty Corporation ("PBGC") other than for premiums not yet
due; (ii) there is no pending or, to the Seller's and the Corporation's
knowledge, threatened termination other than a standard termination under ERISA
Section 4041(b); (iii) no "reportable event" within the meaning of ERISA
Section 4043 has occurred within the last 6 years for which the requirement of
notice to the PBGC has not been waived; (iv) there exists no "accumulated
funding deficiency" within the meaning of Code Section 412, whether or not
waived; and (v) the Plan's assets are sufficient to meet the Plan's "projected
benefit obligation" under Financial Accounting Standards No. 87 using the
actuarial assumptions used in the most recent actuarial valuation report for
the Plan, provided that the interest rate assumption shall not exceed 8.5% and
the salary scale assumption shall not be less than 3.5%.
(f) Contemplated Transaction Events. Except as described in
Section 4.8, the consummation of the Contemplated Transactions will not (i)
entitle any individual to severance pay, or (ii) accelerate the time of payment
or vesting of, or increase the amount of, compensation due to any individual,
or (iii) result in the payment of an amount that will be taken into account in
determining whether there is an "excess parachute payment" under Code section
280G(b)(1).
2.17 Environmental Matters.
The Corporation has made available to the Buyer all material
information which it possesses or controls pertaining to the use, generation,
storage, handling, treatment or disposal of Hazardous Materials on the Real
Property and any sampling and test results obtained samples, tests and
monitoring programs taken or conducted by the Corporation (or otherwise in its
possession or control) at and around the Real Property with respect to
Hazardous Materials. Except as disclosed on Schedule 2.17, the Corporation has
materially complied with, and the Corporation and the Real Property are in
material compliance with, the provisions of all applicable Environmental Laws.
The Corporation has not received any written notice and, to the Sellers' and
the Corporation's knowledge, is not otherwise aware of claims by any Government
Authority or any third party that the Corporation or the condition of the Real
Property has violated or is subject to liability pursuant to any Environmental
Law. Except as disclosed on Schedule 2.17, there are no facts, events or
conditions with respect to the past or present operation of the Business or any
Environmental Conditions at any of the Real Properties which could reasonably
be expected to interfere with or prevent continued compliance with, or could
reasonably be expected to give rise to any Claim under Environmental Laws other
than those which, individually and in the aggregate, would not have a Material
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Adverse Effect. Except as set forth on Schedule 2.17, the Corporation is not
subject to any liability, past or present, fixed, contingent or inchoate under
any Environmental Law, except where such liability would not, individually, or
in the aggregate, have a Material Adverse Effect.
Except as set forth in Schedule 2.17, there are no underground
storage tanks on or under any of the real property owned or leased by the
Corporation.
2.18 Permits. The Corporation has all licenses, permits, franchises,
registrations, certificates, consents, and other authorizations of any
Government Authority ("Authorizations") necessary to the conduct of the
business of the Corporation as currently conducted except for such failures as
would not, individually or in the aggregate, have a Material Adverse Effect.
Schedule 2.18 sets forth a complete list of all Authorizations known by the
Sellers to be required for the ownership, use, occupancy, operation or conduct
of the Business and its assets and all Authorizations, regardless of whether
set forth on Schedule 2.18, are in full force and effect, except where failure
to be in full force and effect would not individually or in the aggregate, have
a Material Adverse Effect. Each Authorization is presently valid and in full
force and effect; no material violations are or have been recorded in respect
of any Authorization; no proceeding is pending or to the Sellers' and the
Corporation's knowledge threatened to revoke, limit or negate any such
Authorization; and no such Authorization has ever been revoked, limited or
negated or been, to the Sellers' and the Corporation's knowledge, threatened
with such action. Except as set forth on Schedule 2.18, no Authorization will
lapse as a result of the consummation of the Contemplated Transactions and upon
such consummation each Authorization will be valid and in full force and effect
except where the failure to have any such Authorization would not, individually
or in the aggregate, have a Material Adverse Effect.
2.19 Labor Relations; Employees. The Corporation currently employs a
total of approximately 1,600 employees in the Business. Except as set forth on
Schedule 2.19, the Corporation is not a party to any employment, severance or
consulting agreement, contract or arrangement calling for payments to an
employee, director or consultant in excess of $100,000 per year. The
Corporation is not delinquent in payments to any employees for any wages,
salaries, commissions, benefits, bonuses or other direct or indirect
compensation for any services performed by him or her or amounts required to be
reimbursed to any of its employees. There is no unfair labor practice
complaint against the Corporation pending before the National Labor Relations
<PAGE>
Board or any comparable state, local or foreign agency. There is no labor
strike, dispute, slowdown or stoppage pending or to the Sellers' and the
Corporation's knowledge threatened against or involving the Corporation and its
business. The Corporation is not a party to nor is it subject to any
collective bargaining agreement and none is currently being negotiated, and
neither the Sellers nor the Corporation have knowledge of any union organizing
activities with respect to the Corporation or its employees.
2.20 Finder's Fee. Except for compensation payable by the Sellers to
George Riggs disclosed on Schedule 2.20 and an investment banking fee payable
by the Sellers to Goldman, Sachs & Co. (the "Goldman Sachs Fee"), neither the
Sellers nor the Corporation has incurred any liability to any broker, finder or
agent for any brokerage fees, finder's fees, commissions or similar amounts
with respect to the Contemplated Transactions.
2.21 Suppliers and Customers. Except as set forth on Schedule 2.21,
no single customer has accounted for more than $1,000,000 of the sales of the
Corporation for the fiscal year ended July 2, 1995. Except as set forth on
Schedule 2.21, no sole source supplier (other than public utilities) is of
material importance to the Business. The Corporation's relationships with each
of its suppliers and customers are typical commercial working relationships and
no customer or supplier of material importance to the Corporation since July 2,
1995, has canceled or otherwise terminated, or threatened to cancel or
otherwise terminate, its relationship with the Corporation, or has during the
last twelve months, decreased materially, or threatened to decrease or limit
materially, its purchases from or supplies to the Corporation.
2.22 Minute Books. Except as set forth in Schedule 2.22, the minute
books of the Corporation accurately reflect all actions and proceedings taken
by the shareholders, board of directors and committees of the Corporation, and
such minute books contain true and complete copies of the articles of
incorporation and bylaws of the Corporation and all related amendments.
2.23 Certain Interests. Schedule 2.23 sets forth a complete and
accurate (a) list of all contracts to which any Seller or any of its Affiliates
or relatives (the "Insiders"), on the one hand, and the Corporation, on the
other hand, is a party, other than those contracts included in the Excluded
Assets and Excluded Liabilities, contracts entered into on an arm's length
basis at fair market terms, all of which contracts are disclosed in the
Financial Statements and (b) a description of all transactions which are not
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the subject of the agreements described in clause (a) above (the "Insider
Transactions") between the Corporation, on the one hand, and any Insider, on
the other hand, that have occurred since December 25, 1994. Except as
disclosed in Schedule 2.20, the consummation of the Contemplated Transactions
will not (either alone, or upon the occurrence of any act or event, or with the
lapse of time, or both) result in any benefit or payment (severance or other)
arising or becoming due from the Corporation to any person.
2.24 Bank Accounts, Powers, Etc. Schedule 2.24 lists each bank,
trust company, savings institution, brokerage firm, mutual fund or other
financial institution with which the Corporation has an account or safe deposit
box and the names and identification of all persons authorized to draw thereon
or to have access thereto, and lists the names of each person holding powers of
attorney or agency authority from the Corporation and a summary of the terms
thereof.
2.25 Disclosure. All documents and other papers required to be
delivered by or on behalf of the Sellers and the Corporation pursuant to the
terms of this Agreement are true, complete and correct. The information
furnished by or on behalf of the Sellers and the Corporation to Buyer or its
representatives pursuant to the terms of this Agreement and the Contemplated
Transactions does not contain any untrue statement of a material fact and does
not omit to state any material fact necessary to make the statements made, in
the context in which made, not false or misleading.
2.26 Totality of Assets. Except for the Excluded Assets and as set
forth on Schedule 2.26, the assets of the Corporation upon the consummation of
the Closing will include all of the assets or rights necessary for the
continued operation of the Business of the Corporation substantially in the
same manner as currently operated.
2.27 Undisclosed Liabilities. Except as set forth in Schedule 2.27,
the Corporation does not have any liabilities or obligations of any nature
(whether known or unknown, due or to become due, absolute, accrued, contingent
or otherwise, and whether or not determined or determinable), and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability or obligation, (excluding any
liabilities or obligations under any Environmental Law) or any unfunded
obligation under any Benefit Plan, except for (a) obligations under contracts
listed on Schedules to this Agreement or other contracts not required by the
first sentence of Section 2.14 to be listed on such Schedules (b) liabilities
or obligations reflected or reserved against in the Balance Sheet, (c) claims
<PAGE>
of third parties for torts or violations of law which are set forth on the
Schedules to the Agreement, and (d) liabilities incurred in the ordinary course
of business and consistent with past practice since December 25, 1994, which
individually and in the aggregate do not have a Material Adverse Effect.
2.28 Circulation and Advertising.
(a) ABC Reports. Schedule 2.28 sets forth (i) drafts of the
Audit Bureau of Circulations Annual Audit Reports for each of the Newspapers
for the twelve-month period ended October 2, 1994, and (ii) true and complete
copies of the publisher's statements submitted to Audit Bureau of Circulations
by the Corporation for the six-month period ended April 2, 1995 with respect to
each of the Newspapers. All representations contained in such publisher's
statements and other materials submitted by the Corporation to the Audit Bureau
of Circulations for the periods covered by such publisher's statements and
audit reports have been true and complete in all material respects.
(b) Effort to Reduce Circulation. Since December 31, 1994, the
Corporation has not taken any action which was designed to result in a
reduction in circulation of any of the Newspapers.
(c) Discounts. The Corporation has not, during the past twelve
months, circulated any of the Newspapers at discounts materially more than the
discounts reported to the Audit Bureau of Circulations.
(d) Advertising Lineage Rates. Schedule 2.28(d) sets forth a
complete and correct list of the published rates for advertising lineage for
each of the Newspapers.
(e) Mail Permits. All reports filed by the Corporation with
the United States Postal Service in connection with, and second class mail
postal permits applicable to, the Newspapers were true and correct in all
material respects at the time of their filing.
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER
As an inducement for the Sellers to enter into this Agreement, the
Buyer hereby represents and warrants to the Sellers that each of the statements
in this Article 3 is complete and correct as of the date hereof and shall be
true and correct as of the Closing Date:
3.1 Existence and Rights. The Buyer (i) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
<PAGE>
Florida, and (ii) has requisite corporate power and authority to own its
properties and other assets and to carry on its businesses as now conducted.
3.2 Agreements Authorized. The execution, delivery and performance
of this Agreement and the Escrow Agreement and the Contemplated Transactions by
the Buyer have been duly authorized by all necessary corporate and other action
on the part of Buyer and, except as set forth in Schedule 3.2, do not require
notice to, or the consent or approval of, any Government Authority or other
person, except for the filing under the HSR Act and filings under applicable
federal and state securities laws, or third party consents, regulatory
approvals or notices required where the failure to obtain such consent or give
such notice would not, individually or in the aggregate, materially impair the
Buyer's ability to consummate the Contemplated Transactions. This Agreement
has been duly executed and delivered by the Buyer and, at the Closing, the
Escrow Agreement will be delivered and duly executed by the Buyer, and in each
case creates legal, valid and binding obligations of the Buyer enforceable
against the Buyer in accordance with their respective terms.
3.3 No Conflict. Except as set forth on Schedule 3.3, the
execution, delivery and performance by the Buyer of this Agreement and the
Escrow Agreement will not, with the giving of notice, lapse of time or both,
(i) violate or conflict with any Legal Requirements to which the Buyer is
subject; (ii) violate any provision of the charter documents or bylaws of the
Buyer; or (iii) constitute a breach under any contract to which the Buyer is a
party where such breach would materially adversely affect the Buyer's ability
to consummate the Contemplated Transactions.
3.4 Finder's Fee. None of the Buyer, any of the Buyer's officers,
Affiliates, directors, agents or employees incurred any liability to any
broker, finder or agent for any brokerage fees, finder's fees, commissions or
similar amounts with respect to the Contemplated Transactions for which the
Sellers or the Corporation could be liable.
3.5 Investment Representations.
(a) The Buyer is acquiring the Stock from the Sellers for the
Buyer's own account, for investment purposes only and not with a view to or for
sale in connection with the distribution thereof in violation of federal or
state securities laws.
(b) The Buyer is capable of evaluating the merits and risks of
the purchase of the Stock and protecting its own interests in connection
<PAGE>
therewith because the Buyer has sufficient knowledge and experience in
financial and business matters.
(c) The Buyer understands that the sale of the Stock hereunder
has not been registered under applicable federal securities laws or qualified
under applicable state securities laws and therefore cannot be sold unless
subsequently registered under applicable federal securities laws and qualified
under applicable state securities laws, or unless resale is exempt from
registration and qualification thereunder; and further acknowledges that the
Buyer must bear the economic risk of ownership thereof for an indefinite period
of time.
3.6 No Change. Since the Buyer's most recent filing with the
Securities and Exchange Commission of SEC Form 10Q, there has been no material
adverse change in its business properties, assets, liabilities, results of
operations or financial condition which would materially adversely affect the
Buyer's ability to perform its obligations under this Agreement or to
consummate the Contemplated Transactions.
4. ADDITIONAL COVENANTS, AGREEMENTS AND UNDERSTANDINGS OF THE PARTIES
4.1 Conduct Prior to Closing. The Sellers covenant and agree that
from the date hereof through the earlier of Closing or termination of this
Agreement:
(a) Conduct of Business. The Corporation shall conduct its
business only in the ordinary and usual course consistent with past practice
(including, but not limited to, maintaining the quality of publications,
quality of service, quantity of inventory, business hours and pricing at
substantially the same levels as heretofore maintained), and the Corporation
will not institute any new methods of purchase, sale, lease, management,
accounting or operation or engage in any transaction or activity, enter into
any agreement or make any commitment relating to the Business, except in the
ordinary course of business and consistent with past practice, or except with
the prior consent of the Buyer.
(b) Maintain Business Relationships. The Sellers shall, and
will cause the Corporation (i) to use commercially reasonable efforts
consistent with the Sellers' reasonable business judgment to preserve intact
the Corporation's corporate existence and business organization relating to the
Business, (ii) not to terminate without cause the Corporation's officers and
the employees to whom it is paying compensation at an annual rate of more than
$75,000 for services rendered in connection with the Business, and (iii) to
<PAGE>
preserve its relationship with licensors, suppliers, distributors, customers
and others having business relationships with it in connection with the
Business, except with the prior consent of the Buyer.
(c) New Contract. No contract or commitment will be entered
into, and no purchase of raw materials or supplies and no sale of assets (other
than Excluded Assets) will be made, by or on behalf of the Corporation except
that the Corporation may enter into contracts, commitments, purchases or sales
in the ordinary course of business and consistent with past practice, or
contracts, commitments, purchases or sales involving $100,000 individually or
$500,000 in the aggregate, without the prior consent of the Buyer.
(d) Insurance. The Corporation will maintain in full force and
effect all policies of insurance with respect to its assets and the Business
now in effect and will give all notices and present all claims under all such
policies in a timely fashion.
(e) Encumbrances and Sale of Assets. The Corporation will not
(i) mortgage, pledge or otherwise encumber any assets and, (ii) except for
Excluded Assets, sell, lease, sublease, surrender or dispose of any assets,
except at arm's length, for fair value and in the ordinary course of the
Business and consistent with past practice.
(f) Indebtedness and Payment. The Corporation will not (i)
create, incur or assume any indebtedness, including in respect of capital
leases (except (x) advances drawn on the Corporation's line of credit pursuant
to its revolving credit loan agreement in existence on the date hereof and (y)
purchase money indebtedness incurred in the ordinary course of business and
consistent with past practices), (ii) assume, guarantee, endorse or otherwise
agree to become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any person), (iii) make any loans, advances
or capital contributions to or investments in any person except for customary
advances to employees, or incur, assume or guaranty any obligation or liability
(absolute or contingent) which is not incurred in the ordinary course of
business and consistent with past practices, or (iv) pay, discharge or satisfy
any claim, liability or obligation other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice of liabilities or obligations reflected or reserved against on the
Balance Sheet or incurred after the dates thereof in the ordinary course of
business and consistent with past practice.
<PAGE>
(g) Contract Compliance. The Corporation will not do any act
or omit to do any act, or permit any act or omission to act (if within its
control), which could reasonably be expected to cause a breach of a contract or
commitment of the Corporation which individually or in the aggregate would
cause a breach of any representation and warranty made hereunder.
(h) Compliance with Law. The Corporation will duly comply in
all material respects with all Legal Requirements applicable to it and its
properties, operations, business and employees.
(i) Waiver of Rights. The Corporation will not waive any
claims or rights of substantial value with respect to the business or its
assets.
(j) Intellectual Property. Except in respect of Excluded
Assets, the Corporation will not dispose of or permit to lapse any rights to
the use of any Intellectual Property or dispose of or disclose to any person
any Confidential Information, formula, process or know how related to the
Business not theretofore a matter of public knowledge.
(k) Compensation. The Corporation will not (i) grant any
increase in compensation of any of its directors, officers, employees or
consultants (including any such increase pursuant to any bonus, pension, profit
sharing or other plan or commitment) in excess of the limitation in Section
2.7(a)(ii)(D), (ii) pay or agree to pay any pension, retirement allowance or
similar employee benefit to any director, officer, employee or consultant of
the Corporation other than those set forth in Schedule 2.16, (iii) enter into
any new employment, severance, consulting or other compensation agreement with
any existing director, officer, employee or consultant of the Corporation, (iv)
commit itself to any pension, profit-sharing, deferred compensation, group
insurance, severance pay, retirement or other employee benefit plan, fund or
similar arrangement or amend or commit itself to amend any of such plans, funds
or similar arrangements in existence on the date of this Agreement other than
as required pursuant to Benefit Plans set forth in Schedule 2.16, or (v) enter
into any collective bargaining agreement.
(l) Tax Election. The Corporation will not change any material
election, method or position in connection with any tax returns that it files
after the date of this Agreement.
<PAGE>
(m) Accounting Changes. The Corporation will not adopt any
material change in any method of accounting or accounting practice.
(n) Business Changes. The Corporation will not take any action
of the kind which would cause any of the representations and warranties set
forth in Section 2.7(a)(i) not to be true and correct.
(o) Continue Operations. The Corporation will not discontinue
operations in any facility which is not part of the Excluded Assets.
(p) Articles and Bylaws. The Corporation will not change or
amend its articles of incorporation or bylaws, except that the Sellers shall
cause the Corporation to amend its articles of incorporation to delete the
preemptive right provision.
(q) Stock Transactions. Except for the Redemption and the
amendment of its articles of incorporation as described in Section 4.1(p),
above, the Corporation will not (i) issue, grant, sell or encumber any shares
of its capital stock or other securities, (ii) issue, grant, sell or encumber
any security, option, warrant, put, call, subscription or other right of any
kind, fixed or contingent, that directly or indirectly calls for the
acquisition, issuance, sale, pledge or other disposition of any shares of its
capital stock or other securities, (iii) enter into any agreement, commitment
or understanding calling for any transaction referred to in clause (i) or (ii)
of this paragraph (q), or (iv) make any other changes in its capital structure;
(r) Distributions. Except for distributions to shareholders to
pay quarterly estimates of income taxes payable with respect to the
Corporation's income and monthly distributions of $97,000 to shareholders, the
Corporation shall not declare or pay any dividend or other distribution in
respect of any of its capital stock nor shall the Corporation, directly or
indirectly, purchase, acquire or redeem or split, combine or reclassify any
shares of its capital stock other than in connection with the Redemption;
(s) Agreement. The Corporation will not agree whether in
writing or otherwise to do any of the foregoing.
4.2 Financial Statements. The Sellers shall cause the Corporation,
within twenty (20) days after the end of each calendar month, commencing with
the end of the first calendar month after the date of this Agreement, to
<PAGE>
provide the Buyer with copies of the unaudited statement of operations of the
Corporation for such month, and the unaudited balance sheet of the Corporation
as of the end of such month both in the form customarily prepared by the
Corporation and any other regularly generated financial information relating to
the Corporation reasonably requested by the Buyer.
4.3 Access. From the date hereof through the Closing, the Sellers
will (a) permit the Buyer and its authorized representatives to make such
investigation as it wishes and in connection therewith to have full access
during normal business hours and under reasonable conditions to senior
management of the Corporation and any and all premises, properties, employees,
files, books, records, documents and other information relating to the
Corporation (other than the Excluded Assets) or any other matter relating to
this Agreement, (b) provide the Buyer and its authorized representatives with
all information which they reasonably request concerning the foregoing matters,
including without limitation, the financial condition and results of
operations, (c) otherwise reasonably cooperate, and cause its employees to
reasonably cooperate, with and assist the Buyer and its authorized
representatives in connection with their investigation, and (d) upon the
request of the Buyer, deliver to them or their representatives true and correct
copies of any documents requested. No investigation by the Buyer or its
representatives or Affiliates shall diminish or obviate any of the
representations, warranties, covenants or agreements of the Sellers contained
in this Agreement.
4.4 Fulfill Conditions; Consents. The Buyer and the Sellers will
use commercially reasonable efforts to fulfill the conditions to the Closing
and to obtain at the earliest practicable date prior to the Closing all
consents, authorizations, and declarations from all third parties and
government agencies required under laws applicable to the Corporation, or
contracts to which the Corporation is a party, for the parties to consummate
the Contemplated Transactions. All such consents shall be in writing and
delivered to the Buyer. In obtaining a consent, no party shall be required to
modify or alter the terms of the agreements, contracts or leases to which such
consent relates.
4.5 Hart-Scott-Rodino. As promptly as practicable after the date
hereof, the Sellers and the Buyer shall effect all necessary filings pursuant
to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"). Each party shall provide any other party reasonably requesting
such information with any information needed for the other party's filing under
the HSR Act within the reasonable time period specified in the requests (such
<PAGE>
reasonableness to be determined in light of the intentions of the parties
referred to in Section 4.6). The Buyer will pay all fees payable to Government
Authorities required in connection with the filing.
4.6 HSR Act Information Requests. The Buyer and the Sellers
acknowledge and agree that it is critical that the parties comply promptly and
completely, and that the Sellers cause the Corporation to promptly and
completely comply with all information and other requests received from
Government Authorities with respect to the Contemplated Transactions in order
to assure that the parties are able to obtain clearance for the Contemplated
Transactions under the HSR Act and other Antitrust Laws in as expeditious
manner as possible. Without limitation of the foregoing, both the Buyer and
the Sellers agree that they will, and the Sellers agree that they will cause
the Corporation to promptly and fully comply with any "second request" received
by the parties from any Government Authority in connection with compliance
with the HSR Act as soon as possible but no later than 14 days after receipt of
such second request.
4.7 Expenses of Sale; Brokerage Fees. The Sellers agree to pay:
(a) all fees and expenses of the Sellers' and the Corporation's
counsel, accountants and other experts and other advisors in connection with
the negotiation, preparation and execution of this Agreement; and
(b) all brokerage commissions, finders fees or similar fees or
commissions payable to any broker, finder, agent, financial advisor or other
representative acting or having acted on behalf of or employed by the Sellers
or the Corporation in connection with this Agreement or any of the Contemplated
Transactions, including, without limitation, bonus compensation payable to
George Riggs as set forth in Schedule 2.20 and the Goldman Sachs Fee (as
hereinafter defined).
The Sellers agree to indemnify and save harmless the Buyer and
its Affiliates from any claim or demand for commission or other compensation by
any broker claiming to have been employed by or on behalf of the Sellers, the
Corporation or any of their Affiliates, and to bear the cost of legal expenses
incurred in defending against any such claim. The Buyer agrees to indemnify
and save harmless the Sellers and any of their Affiliates from any claim or
demand for commission or other compensation by any broker claiming to have been
employed by or on behalf of the Buyer or any of its Affiliates (other than the
Corporation after the Closing), and to bear the cost of legal expenses incurred
in defending against any such claim.
<PAGE>
4.8 Matters Related to Employees.
(a) Employment. The Buyer agrees that, on the Closing Date,
the Corporation will continue to offer employment to all full-time employees of
the Business, at levels of base compensation paid to such employees on the
Closing Date; provided, however, that, except as provided in Section 4.8(b),
nothing herein shall be construed to require the Buyer (i) to continue in
employment any such employee who accepts employment, or (ii) to continue to
maintain any employee's level of base compensation, or (iii) to continue any
particular employee benefit plan, agreement, arrangement or commitment, for any
period of time after the Closing.
(b) Operating Directors. The Buyer agrees to cause the
Corporation to fulfill the obligations under its employment agreement with
George Riggs which became effective July 1, 1994, except for the obligation to
pay the bonus set forth in Schedule 2.20 which shall be paid by Sellers
pursuant to Section 4.8. The Buyer further agrees to cause the Corporation to
retain the eight key management personnel of the Corporation listed on Schedule
4.8(b), commonly referred to as its "operating directors," as employees for one
year following the Closing Date.
The Buyer further agrees that during this one-year period, the
compensation, duties, and specific job titles of each of the operating
directors will not be reduced or diminished in any manner whatsoever without
their express consent.
The Buyer further agrees that in the event it desires to
terminate the employment of any or all of the operating directors during the
initial one-year period of its ownership, it will provide severance equal to
the balance of one year's compensation from the Closing Date, less any amount
actually paid after the Closing Date through the termination date.
The Buyer acknowledges that the Corporation will be deemed bound
by the terms of this Section 4.8. However, the Buyer shall itself have no
obligation to fulfill the Corporation's obligations with respect thereto or to
provide funds to the Corporation to fulfill its obligations under this Section
4.8.
4.9 Exclusivity. Neither the Sellers nor the Corporation nor any of
the officers, directors, employees or agents of the Corporation will take any
action, directly or indirectly, to encourage, solicit, commence, initiate,
engage in, or continue discussions or negotiations with, or provide any
information to, any person, group or other entity, other than the Buyer,
<PAGE>
concerning any purchase of any capital stock or assets of the Corporation or
any merger or similar transaction involving the Corporation.
4.10 Efforts. Subject to the terms and conditions set forth herein,
each party agrees to use commercially reasonable efforts to take, or cause to
be taken, all action, and to do, or cause to be done, all things necessary or
advisable to consummate the Contemplated Transactions.
4.11 Certain Tax Matters.
(a) Section 338(h)(10). The Buyer and the Sellers will make a
timely election or elections pursuant to section 338(h)(10) of the Code and
comparable state income tax provisions (the "Election") to treat the sale of
the Stock for Income Tax purposes as a sale of assets rather than a sale of
stock. The Buyer and the Sellers will execute the Election on or before the
Closing Date and will jointly prepare and timely file IRS Form 8023 and any
comparable state income tax form.
(b) Allocation of Purchase Price. For purposes of implementing
the election under section 338(h)(10) of the Code, the purchase price shall be
allocated among the assets in accordance with a schedule to be prepared on the
basis of an appraisal prepared by the American Appraisal Company (the
"Allocation Schedule"), which appraisal shall be submitted to the Sellers and
the Buyer within 90 days after the Closing. Such appraisal shall also address
valuations relevant to the calculation of built-in gain pursuant to Section
1374 of the Code and comparable state Income Tax provisions. The costs and
expenses for the services of the American Appraisal Company shall be borne
equally by the Buyer and the Sellers. The Sellers and the Buyer agree to
prepare and file all Returns and other Tax filings reflecting the Contemplated
Transactions on a basis consistent with the Election and the Allocation
Schedule, and to cooperate with each other in good faith in preparing any and
all statements required to be included in the Returns reflecting such
allocation. The Sellers and the Buyer further agree that they shall not make
any inconsistent written statement or take any inconsistent position on any
Returns, in any refund claim, during the course of any Internal Revenue Service
or other Tax audit, so long as there exists a reasonable basis in law to
maintain the position reflected by such Allocation Schedule. Each party shall
notify the other party if it receives notice that the Internal Revenue Service
or any other taxing authority proposes any allocation that is different from
the allocation set forth on the Allocation Schedule.
<PAGE>
(c) Audit Matters. The Buyer will promptly notify the Sellers
in writing upon receipt by the Buyer or any of its Affiliates (including the
Corporation) of notice of any pending or threatened audit or assessment with
respect to income taxes for which the Sellers would be required to pay or
indemnify the Buyer or any of its Affiliates pursuant to Section 4.11(f). The
Sellers shall have the responsibility for, and the right to control, at the
Sellers' expense, the audit (and disposition thereof) and any judicial
proceedings relating to any Income Tax Return of the Corporation relating to
periods ending on or prior to the Closing Date. The Sellers shall prepare all
S Corporation Income Tax Returns including any final Return due after the
Closing, which Returns shall be submitted to and subject to reasonable review
by the Buyer prior to filing. The Sellers and the Buyer hereby agree that the
Corporation will maintain its status as an S Corporation for federal income and
California income and franchise tax purposes during the S Short Year. The
Buyer shall have the right directly or through its designated representatives,
to review in advance and comment upon all submissions made in the course of
audits or appeals thereof to any Government Authority or judicial proceedings
relating to periods ending on or prior to the Closing Date and to approve the
disposition of any audit adjustment or settlement of judicial proceedings with
respect to such periods if such disposition or settlement will or might
reasonably be expected to result in an increase in Taxes of the Buyer or the
Corporation for any period beginning after the Closing Date. After the Closing
Date, each of the Buyer and the Sellers will provide the other (subject to
reimbursement by the other party for any out-of-pocket expenses), with such
assistance as may reasonably be requested by the other party in connection with
the preparation of any Return or any administrative or judicial proceeding
relating to liability for Taxes of the Corporation, the Buyer and the Sellers.
(d) California Tax Ruling; Sellers Indemnity. The Buyer shall
promptly and in good faith prepare, and the Sellers and the Buyer shall
promptly execute and file, a request for a ruling from the California state
Franchise Tax Board (the "Ruling") with respect to the effect of the Election
for California Income Tax purposes. If the Ruling is obtained, the Election
shall also apply to all California Returns. If a Ruling in form and substance
reasonably satisfactory to the Buyer shall not have been obtained on or before
the Closing Date, then Section 4.11(b) shall nevertheless apply to all
California income and franchise tax Returns and the Buyer and the Sellers
shall nevertheless proceed as if the Election is valid for California franchise
and income tax purposes. In such event, the Sellers shall indemnify the Buyer
and its Affiliates against the loss of any California franchise or Income Tax
benefit and against all interest, penalties, and additions to Tax resulting
<PAGE>
from a final non-appealable determination of a Government Authority that the
Election is invalid or inapplicable for purposes of the California franchise
and Income Tax. The Sellers shall also indemnify the Buyer from any expenses
of contesting the matter.
(e) Final S Corporation Year. The Sellers and the Buyer hereby
acknowledge that, effective as of the day immediately after the Closing Date,
the Corporation will cease to be an S Corporation. As a result, the
Corporation's taxable year as an S Corporation will terminate as of the close
of business on the Closing Date and the Corporation will be required to file
federal and California Income Tax Returns and/or a California franchise tax
return for the period ending on the Closing Date (the "S Short Year"). The
Corporation is an S corporation for federal and state Income Tax purposes. The
Buyer and the Sellers shall themselves elect and cause the Corporation to elect
to have section 1362(e)(2) of the Code not apply so that the Corporation's
taxable income for its S Short Year will be determined without regard to events
following the Closing Date. No amendment to any Income Tax Return, claim for
refund, change in accounting method or other Tax related document shall be
filed after the Closing Date with respect to Tax periods ending on or before
the Closing Date during which the Corporation was an S Corporation without the
prior written consent of the Sellers.
(f) Seller Indemnity. The Sellers will pay, and will hold
harmless the Corporation, the Buyer and its Affiliates from and against, all
Income Taxes for which the Corporation is liable for all periods ending on or
prior to the Closing Date, including any Income Taxes resulting from the
Redemption and the Election, except to the extent that such Income Taxes are
taken into account in calculating the Final Stockholders Investment Amount.
(g) Prior Period Refunds. Except as otherwise permitted by
this Section 4.11(g), the Sellers will be entitled to retain, or receive prompt
payment from the Buyer or the Corporation of, any refund or credit of Income
Taxes for which the Sellers are responsible pursuant to Section 4.11(f) or any
rights assigned under Section 1.2(b), plus any interest received with respect
thereto from the relevant taxing authorities, that are taken into account in
calculating the Final Stockholders Investment Amount. The Buyer will, if the
Sellers so request and at their expense, cause the Corporation to promptly file
for and obtain any refunds or credits to which the Sellers are entitled under
this section 4.11(g). The Buyer will permit the Sellers to control (at their
expense) the prosecution of any such claim for refund and, when deemed
appropriate by the Sellers, will cause the Corporation to authorize by
<PAGE>
appropriate power of attorney such person as the Sellers may designate to
represent the Corporation with respect to such refund claimed. For purposes of
this Section 4.11(g), a party will be deemed to have made prompt payment of a
refund or credit if such payment is made within ten (10) days of the receipt by
such party of such refund or of the use by such party of such credit.
4.12 Shadelands Property. The Sellers and the Buyer will cause the
Corporation to purchase the Shadelands Property from Margaret L. Lesher and the
Margaret L. Lesher QTIP Trust for Fifteen Million Five Hundred Thousand Dollars
($15,500,000), in cash, which amount shall be reduced by the amount of the
security deposit held by the Sellers on behalf of the Corporation in connection
with the leases thereon on or before the Closing Date. No later than the
Closing, Margaret L. Lesher and the Margaret L. Lesher QTIP Trust shall cause
good, insurable and marketable fee simple title to the Shadelands Property to
be vested in the Corporation, subject only to current real property taxes and
to exceptions which have been approved by the Buyer in writing. Title to the
Shadelands Property shall be evidenced by an ALTA Extended Coverage Policy of
Title Insurance issued by a nationally recognized title insurance company with
such endorsements as the Buyer may reasonably require. The Buyer will pay one-
half and the Sellers will pay one-half of the title insurance premium and all
other costs incurred in connection with the sale of the Shadelands Property.
4.13 Wells Fargo Bank Loan. As of August 11, 1995, the Corporation
owed approximately $52,250,000 plus accrued and unpaid interest to Wells Fargo
Bank ("Wells Fargo") under the Credit Agreement ("Credit Agreement") dated as
of July 26, 1994 between the Corporation and Wells Fargo relating to term and
revolving credit loans. Simultaneously with the consummation of the Closing,
the Buyer will cause to be paid to Wells Fargo the amount required to repay
Wells Fargo for all outstanding principal and accrued and unpaid interest under
the Credit Agreement and all prepayment penalties under the Credit Agreement,
all promissory notes issued in connection therewith and any such other related
agreements, including any interest rate swap agreements which amount (the
"Wells Fargo Amount") shall reduce the Base Purchase Price as provided in
accordance with Section 1.1(d).
4.14 Notification of Certain Matters. Between the date hereof and
the Closing, each of the parties will give notice to the other promptly upon
such party's becoming aware of (i) any information that indicates that any
representation and warranty of such party or any other party contained herein
will not be true and correct in all material respects, as of the Closing
(except to the extent changes are permitted or required or otherwise
<PAGE>
contemplated pursuant to this Agreement), (ii) the occurrence of any event
which will result, or has a reasonable prospect of resulting, in the failure to
satisfy a condition specified in Article 5 or 6 hereof, as the case may be, or
(iii) any notice or other communication from any third person alleging that the
consent of such third person is or may be required in connection with the
consummation of the Contemplated Transactions.
4.15 Notice of Proceedings; Agreement to Defend.
(a) Notice of Proceedings. Each party to this Agreement will
notify the others promptly in writing upon (i) such party's becoming aware of
any order, judgment or decree restraining or enjoining the consummation of this
Agreement or the Contemplated Transactions or any complaint or overtly
threatened complaint seeking such an order, judgment or decree or material
damages in respect of such consummation or (ii) such party's receiving any
notice from any Government Authority of its intention (A) to institute an
investigation into, or institute a suit or proceeding to restrain or enjoin,
the consummation of this Agreement or the Contemplated Transactions or (B) to
nullify or render ineffective this Agreement or such transactions or to seek to
impose damages, fines or other penalties in respect thereof if consummated.
(b) Agreement to Defend. In the event any person brings a suit
or claim, or commences an action, investigation or other proceeding, which
challenges the validity or legality of this Agreement or the transactions
contemplated by this Agreement or any instrument or document contemplated
hereby or seeks damages, fines or other penalties in respect thereof, the
parties agree to consult and to cooperate with each other and use all
reasonable efforts to defend against such suit, claim, action, investigation or
other proceeding and, in the event an injunction or other order is issued in
connection with any of the foregoing, to use all reasonable efforts to have
such injunction lifted or such order set aside so that the transactions
contemplated by this Agreement and the instruments and documents contemplated
hereby may proceed; provided that nothing in this Section 4.15(b) shall limit
the Buyer's obligation under Section 7.2(d).
5. CONDITIONS TO OBLIGATIONS OF THE SELLERS
The obligations of the Sellers under this Agreement shall be subject
to the satisfaction or waiver by the Sellers, at or before the Closing Date, of
each of the following conditions:
5.1 Representations and Warranties True. The representations and
warranties of the Buyer contained herein, or in any certificate delivered by
<PAGE>
the Buyer or its agents to the Sellers pursuant hereto or in connection with
the Contemplated Transactions, shall be true and correct in all material
respects on and as of the date of this Agreement and shall be true and correct
in all material respects on the Closing Date, as through made at and as of such
time (except where such representation and warranty is made as of a date
specifically set forth herein, in which case such representation and warranty
shall be true and correct in all material respects as of such date); provided,
however, that if any such representation or warranty is already qualified by
materiality, for purposes of determining whether this condition has been
satisfied, such representation or warranty as so qualified must be true and
correct in all respects, and the Buyer shall have delivered to the Sellers a
certificate dated the date of the Closing and signed by an officer of the
Buyer, to the foregoing effect.
5.2 Performance. The Buyer shall have performed and complied in all
material respects with all agreements, covenants and obligations required by
this Agreement to be performed or complied with at or prior to the Closing Date
and have delivered a certificate dated the Closing Date signed by an officer of
the Buyer to such effect.
5.3 HSR Act. All waiting periods applicable to the Contemplated
Transactions under the HSR Act shall have expired or terminated.
5.4 No Injunction. At the Closing Date, there shall be no
injunction, restraining order or decree of any nature of any court or other
Government Authority of competent jurisdiction that is in effect that restrains
or prohibits the consummation of the purchase of the Stock and the Contemplated
Transactions.
5.5 Escrow Agreement. The Buyer and the Sellers shall have entered
into the Escrow Agreement.
6. CONDITIONS TO OBLIGATIONS OF THE BUYER
The obligations of the Buyer under this Agreement shall be subject to
the satisfaction or waiver, at or before the Closing Date, of each of the
following conditions:
6.1 Representations and Warranties True. The representations and
warranties of the Sellers contained herein or in any certificate delivered by
the Sellers or their agents to the Buyer pursuant hereto or in connection with
the Contemplated Transactions shall be true and correct in all material
respects on and as of the date of this Agreement and shall be true and correct
in all material respects on the Closing Date, as though made at and as of such
<PAGE>
time (except where such representation and warranty is made as of a date
specifically set forth therein in which case such representation or warranty
shall be true and correct in all material respects as of such date); provided,
however, that if any such representation or warranty is already qualified by
materiality, for purposes of determining whether this condition has been
satisfied, such representation or warranty as so qualified must be true and
correct in all respects and the Sellers shall have delivered to the Buyer a
certificate to such effect.
6.2 Performance. The Sellers shall have performed and complied in
all material respects with all agreements, covenants and obligations required
by this Agreement to be performed or complied with by them at or prior to the
Closing Date and have delivered a certificate of the Sellers dated the date of
the Closing signed by the Sellers to such effect.
6.3 Opinion of Counsel. The Buyer shall have received the opinion
of Crosby, Heafey, Roach & May dated as of the Closing Date, in a form
reasonably satisfactory to the Buyer, to the effect, in all material respects,
set forth in Schedule 6.3.
6.4 Resignations of Directors; Minute Books. The Corporation's
directors shall have submitted their resignations as directors and, except for
George Riggs, as officers and employees of the Corporation in writing to the
Corporation. The Corporation shall have delivered its minute books and
corporate seal to the Buyer. The directors, other than George Riggs, shall
have delivered a release, in form and substance reasonably satisfactory to the
Buyer, of any indemnification obligations to the directors from the Corporation
to the extent such waiver does not compromise the availability or coverage of
directors' and officers' liability "tail" coverage.
6.5 Shadelands Property. The Buyer shall have received evidence
reasonably satisfactory to it that the Corporation owns the Shadelands Property
and holds a title insurance policy which complies with Section 4.12.
6.6 Redemption. The Redemption shall have been completed and all
amounts to be paid and all Excluded Assets to be distributed shall have been
paid and distributed.
6.7 No Injunction. At the Closing Date, there shall be no
injunction, restraining order or decree of any nature of any court or other
Government Authority of competent jurisdiction that is in effect that restrains
or prohibits the consummation of the purchase of the Stock and the other
transactions contemplated hereby.
<PAGE>
6.8 HSR Act. All waiting periods applicable to the Contemplated
Transactions under the HSR Act shall have expired or terminated.
6.9 Trust Action. The Sellers shall have provided the Buyer with a
copy of the resolutions or other actions of the trustees authorizing the
execution, delivery and performance of this Agreement and the consummation of
the Contemplated Transactions and, a certificate signed by the trustees that
such resolutions and/or actions are in full force and effect and true, correct
and complete as of the Closing Date.
6.10 Escrow Agreement. Buyer and the Sellers shall have entered into
the Escrow Agreement.
6.11 Retired Lives Benefits. Prior to Closing, the Sellers shall
have delivered to the Buyer evidence reasonably satisfactory to the Buyer that
the employees of the Corporation listed on Schedule 6.11 have released the
Corporation from all liability with respect to Retired Lives Benefits described
in such Schedule or provided the Buyer with other evidence reasonably
satisfactory to the Buyer that such liability has been fully reserved for by
the Corporation and will be reflected in the Final Stockholders Investment
Amount or funded by the Corporation or the Sellers prior to the Closing. The
Sellers shall obtain the prior approval from the Buyer before selecting one of
the foregoing alternatives, such approval not to be unreasonably withheld or
delayed.
7. INDEMNIFICATION
7.1 Obligation of the Sellers to Indemnify. Subject to the
limitations contained in Sections 7.3, 7.4 and 7.5, the Sellers jointly and
severally agree to indemnify, defend and hold harmless on an after-Tax basis
the Corporation, the Buyer, and their directors, officers, employees,
Affiliates and permitted assigns from and against (i) any claims, losses,
liabilities, damages, deficiencies, costs or expenses (including interest,
penalties, reasonable attorneys' fees and disbursements, including those
incurred in connection with investigative, administrative or judicial
proceedings commenced or threatened, whether or not such person shall be
designated a party thereto, and those incurred in connection with any claim for
indemnity hereunder) but (ii) reduced by the present value of any tax savings
actually realized by the Indemnitee ("Losses") based upon, arising out of or
otherwise in respect of:
(a) any inaccuracy in, or any breach of, as of the date of this
Agreement or the Closing Date, any representation or warranty of the Sellers
<PAGE>
contained in this Agreement or any certificates or schedules delivered by the
Sellers pursuant to this Agreement; provided, however, that (i) if any
inaccuracy in, or breach or nonperformance of any representation and warranty
gives rise to a purchase price adjustment pursuant to Section 1.4, then such
inaccuracy or breach shall not give rise to any obligation hereunder to the
extent so reflected; and (ii) notwithstanding anything to the contrary
contained in this Agreement, to determine if there had been an inaccuracy or
breach of a representation or warranty of the Sellers and the Losses arising
from such inaccuracy or breach for purposes of this Section 7.1, such
representation or warranty shall be read as if it were not qualified by
materiality, including qualifications indicating accuracy "in all material
respects," or accuracy except to the extent the inaccuracy will not have a
"Material Adverse Effect";
(b) any breach by the Sellers of any covenant or agreement of
the Sellers contained in this Agreement or the Escrow Agreement;
(c) any Excluded Liabilities; or
(d) any claim for indemnification by any of the directors,
other than George Riggs, against the Corporation which is not waived in
accordance with Section 6.4.
7.2 Obligation of the Buyer to Indemnify. Subject to the
limitations contained in Sections 7.3, 7.4 and 7.5, the Buyer shall indemnify,
defend and hold harmless on an after-Tax basis the Sellers, their Affiliates
and permitted assigns from and against any Losses based upon, arising out of or
otherwise in respect of:
(a)any inaccuracy in, or any breach of, as of the date of this
Agreement or the Closing Date, any representation or warranty of the Buyer
contained in this Agreement or any certificate delivered by the Buyer pursuant
to this Agreement; provided, however, that notwithstanding anything to the
contrary contained in this Agreement, to determine if there had been an
inaccuracy or breach for purposes of this Section 7.2, of a representation or
warranty of the Buyer and the Losses arising from such inaccuracy or breach,
such representation or warranty shall be read as if it were not qualified by
materiality, including qualifications indicating accuracy "in all material
respects," or accuracy except to the extent the inaccuracy will not have a
"Material Adverse Effect";
(b) any breach by the Buyer of any covenant or agreement of the
Buyer contained in this Agreement;
<PAGE>
(c) the operation of the Business after the Closing Date with
respect to events giving rise to such Loss occurring after the Closing; or
(d) any violation or alleged violation of the Sherman Act, the
Clayton Act, or any other anti-monopoly, anti-trust or similar laws, statutes
or regulations pertaining to a restraint of competition (each an "Antitrust
Law") that arises from or in connection with the Contemplated Transactions.
7.3 Limitation on Indemnification.
(a) Liability Threshold. Except with respect to matters
covered by Sections 2.1, 2.2, 2.3, 2.9, 2.16, 4.7, 4.11 and the last sentence
of 2.5(b), but anything else in this Agreement to the contrary notwithstanding,
no Indemnitee shall be entitled to make a claim against an Indemnifying Party
arising out of the breach of any representation or warranty in this Agreement
or arising under Section 7.1(a) unless and until the aggregate amount of Losses
incurred by the Indemnitee and its Affiliates in respect of all such events or
occurrences giving rise to such Losses exceeds $3,600,000 (the "Threshold
Limit") in which event such Indemnitee may assert its right to indemnification
hereunder only with respect to such Losses in excess of the Threshold Limit.
(b) Liability Cap. Notwithstanding any other provision of this
Agreement but subject to the remainder of this Section 7.3, the
indemnification obligations of Sellers, in the aggregate, shall not exceed
$36,000,000 (the "Lower Cap Limit"). Notwithstanding the foregoing, the
maximum indemnification obligation of $36,000,000 contemplated by the
immediately preceding sentence shall: (A) not apply to any breach of a
representation or warranty as set forth in Sections 2.1, 2.2, 2.3, 2.4, 2.6,
2.9, 2.16, 2.20, 2.22 or 2.27 (collectively the "Purchase Price Capped
Representations") to the extent that such breach relates to an event or
circumstance occurring prior to the consummation of the Contemplated
Transaction (it being understood that all breaches of the representations and
warranties contained in Section 2.9 and 2.16 shall be deemed to relate to an
event or circumstance occurring prior to such consummation), and the related
indemnification obligations under this Section 7.1(a) hereof; provided, however
that to the extent that a breach of one of the Purchase Price Capped
Representations also constitutes a breach of one of the following
representations and warranties (such following representations and warranties
are referred to as the "Lower Capped Representations"), the liability cap
related to the Lower Capped Representations shall apply: Sections 2.7(a), 2.8,
2.10 (other than the first sentence thereof), 2.12, 2.13, 2.14, 2.15, 2.17,
2.19, 2.21, 2.23, 2.24, 2.26 and 2.28; (B) not apply to breaches by the Sellers
<PAGE>
of any covenants or agreements of the Sellers contained herein and the related
indemnification obligations under Sections 7.1(b), 7.1(c) and 7.1(d) (the
"Purchase Price Capped Covenants") other than the covenants contained in
Sections 4.1, 4.2, 4.3, 4.4, 4.10, 4.12, 4.14 and 4.15; and (C) not apply to
any breach of the representation or warranty contained in Section 2.17, and the
related indemnification obligations contained in Section 7.1(a) hereof (the
"Environmental Breaches"). Instead, the maximum indemnification obligation of
Sellers in respect of (A) the Purchase Price Capped Representations and the
Purchase Price Capped Covenants, shall be limited to an amount equal to the
Final Purchase Price, less all other indemnified claims paid or payable by the
Sellers to the Buyer hereunder, and (B) Environmental Breaches, shall be
limited to $40,000,000 less all other indemnified claims paid or payable by the
Sellers to the Buyer hereunder. In addition, all amounts paid or payable in
respect of Environmental Breaches shall also be counted against, and thereby
reduce Sellers' obligations under, the Lower Cap Limit. However, amounts paid
or payable in respect of the Purchase Price Capped Representations and the
Purchase Price Capped Covenants shall not be counted against, and therefore
shall not reduce Sellers' obligations under the Lower Cap Limit until the
aggregate amount paid or payable in respect of the Purchase Price Capped
Representations and the Purchase Price Capped Covenants exceeds the difference
between the Final Purchase Price and $40,000,000 (less any amounts paid or
payable in respect of Environmental Breaches).
7.4 Remedies; Joint and Several Liability. The parties' only
remedies for breach of this Agreement or any related matter shall be those
provided in the Escrow Agreement described in Section 1.6, Sections 4.7 and
4.11, this Article 7, Article 8 and Section 9.16. Except as provided in
Sections 4.7 and 4.11, no party shall be able to avoid the limitations
expressly set forth in this Section and Sections 7.3 and 7.5 by electing to
pursue a remedy other than the indemnification rights provided in this Article
7 or specific performance as set forth in Section 9.16 and each party waives
to the fullest extent permitted by law all rights, claims and actions under any
securities, environmental and other laws which such party may have against
another party hereto. The Sellers' liability pursuant to this Article 7 and
otherwise under this Agreement shall be joint and several.
7.5 Survival of Representations and Warranties. Except as
expressly provided in the last sentence of Section 8.3, all of the
representations, warranties, covenants and agreements of the parties contained
in this Agreement or in any certificate, document or other instrument delivered
<PAGE>
in connection herewith shall survive (and not be affected in any respect by)
the Closing and any investigation conducted by any party hereto and any
information which any party may receive. Notwithstanding the foregoing, the
representations and warranties contained herein are material, shall be deemed
to have been relied upon by the party to whom they are made and shall survive
the Closing for a period of eighteen (18) months, except for: (i) the
representations and warranties made in Sections 2.1, 2.2, 2.3, 2.20, 3.1 and
3.2, which shall survive in perpetuity; (ii) the representations and warranties
made in Sections 2.9 and 2.16, which shall survive until thirty (30) days after
the expiration of the statute of limitations for assessment (including any
waivers or extensions thereof) applicable to all potential claims against the
Corporation or Benefit Plans by all Government Authorities or any other person,
including but not limited to, claims by employees or former employees, or their
dependents, which could arise out of the subject matter of such representations
and warranties; (iii) the representations and warranties made in Section
2.17, which shall survive the Closing for a period of two (2) years; and (iv)
the representations and warranties made in Sections 2.4, 2.5 (the last sentence
only), 2.6, 2.18 (other than the second sentence), 2.22 and 2.27, which shall
survive the Closing for a period of four (4) years. Notwithstanding the
foregoing, the covenants contained in the first sentence of Section 8.3 and all
of Section 4.14 shall terminate upon the consummation of the Closing.
The representations and warranties, and the liability of any party
with respect thereto, shall not terminate with respect to any claim, whether or
not fixed as to liability or liquidated as to amount, with respect to which
such party has been given written notice setting forth the facts upon which the
claim for indemnification is based and, if possible, a reasonable estimate of
the amount of the claims prior to the applicable 18-month, two-year or four-
year, anniversary of the Closing Date or the date that is 30 days after such
expiration of the applicable statute of limitations (or extension or waivers
thereof), as the case may be.
7.6 Procedures for Indemnification.
(a) The Buyer or the Sellers Claim. If either the Buyer or a
Seller, as the case may be, or any other indemnified person hereunder (the
"Indemnitee"), has a claim or potential claim or receives notice of any claim,
potential claim or the commencement of any action or proceeding which could
give rise to an obligation on the part of the Sellers or the Buyer, as the case
may be, to provide indemnification (the "Indemnifying Party") pursuant to
Section 7.1 or 7.2, the Indemnitee shall promptly give the Indemnifying Party
<PAGE>
notice thereof and in any case prior to expiration of the applicable time
limitations in Section 7.5. Such timely notice shall be a condition precedent
to any liability of the Indemnifying Party under the provisions for
indemnification contained in this Agreement with respect to a claim by the
other party. If the Sellers are the Indemnifying Parties, the Buyer shall only
be required to notify the Sellers' representative designated in Section 9.18.
(b) Third Party Claims. In the event of a claim, a potential
claim or the commencement of any action or proceeding by a third party which
could give rise to an obligation to provide indemnification pursuant to Section
7.1 or 7.2 the Indemnitee will give the Indemnifying Party prompt written
notice thereof (the "Claim Notice"), but in any event not later than 30
calendar days after receipt of such third party claim; provided, however, that
the failure of Indemnitee to so notify the Indemnifying Party within such 30-
day period shall not prevent any Indemnitee from being indemnified for any
Losses except to the extent that the failure to so promptly notify actually
damages the Indemnifying Party or unless the Claim Notice is given after the
expiration of the applicable time limitation in Section 7.5. The Claim Notice
will describe the third party claim in reasonable detail, will include copies
of all material written evidence thereof and will indicate the estimated amount
if reasonably practicable, of the Loss that has been or may be sustained by the
Indemnitee. If the Indemnifying Party confirms in writing to Indemnitee within
30 days after receipt of the Claim Notice the Indemnifying Party's
responsibility to indemnify, reimburse and hold harmless the Indemnified Party
therefore and within such 30 day period demonstrates to Indemnitee's reasonable
satisfaction that, as of such time the Indemnifying Party has sufficient
financial reserves in order to indemnify for the full amount of any potential
liability in connection with such claim, the Indemnifying Party may elect to
compromise or defend, at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, which counsel shall be reasonably
satisfactory to Indemnitee, any such matter involving the asserted liability of
the Indemnitee. If the Indemnifying Party elects to compromise or defend such
asserted liability, it shall within 30 days (or sooner, if the nature of the
asserted liability so requires) notify the Indemnitee of its intent to do so,
and the Indemnitee shall cooperate, at the expense of the Indemnifying Party,
in the compromise of, or defense against, any such asserted liability;
provided, that (i) Indemnitee may, if it so desires, employ counsel at its own
expense to assist in the handling of such third party claim, (ii) the
Indemnifying Party shall keep Indemnitee advised of all material events with
respect to such third party claim, (iii) the Indemnifying Party shall obtain
the prior written approval of Indemnitee (which approval may not be
<PAGE>
unreasonably withheld) before ceasing to defend against such third party claim
or entering into any settlement, adjustment or compromise of such third party
claim involving injunctive or similar equitable relief being asserted against
any Indemnitee or any of their Affiliates. Notwithstanding anything contained
herein to the contrary, the Indemnifying Party shall not be entitled to control
(but shall be entitled to assist, at its own expense, in the defense of), and
Indemnitee shall be entitled to have sole control over, the defense,
settlement, adjustment or compromise of any third party non-monetary claim to
the extent it seeks an order, injunction or other equitable relief against any
Indemnified Party which, if successful, could materially interfere with the
business, assets, liabilities, obligations, prospects, financial condition or
results of operations of the Indemnitee or any of its Affiliates. If the
Indemnifying Party elects not to compromise or defend against the asserted
liability, or fails to notify the Indemnitee of its election as herein
provided, the Indemnitee may, at the Indemnifying Party's expense, pay,
compromise or defend such asserted liability. In any event, notwithstanding
anything to the contrary contained in this Agreement, the Indemnitee and the
Indemnifying Party may each participate, at its own expense, in the defense of
such asserted liability; provided that in the event that under then applicable
standards of professional conduct the Indemnitee is required to be represented
by separate counsel and elects to be represented by separate counsel, the
Indemnifying Party shall pay the fees and expenses of one law firm incurred by
the Indemnitee in the compromise or defense of such matter.
7.7 Other Indemnification Obligations. Article 7 shall not apply to
matters to the extent covered by Section 4.7 and 4.11.
8. TERMINATION
8.1 Termination Permitted. This Agreement may be terminated at any
time on or prior to the Closing Date as follows:
(a) Mutual Agreement. By mutual agreement of the Sellers and
the Buyer;
(b) Termination Date. By the Sellers or the Buyer if the
Closing shall not have been consummated on or before one hundred fifty (150)
days after the date that the parties have completed (the date of such
completion is the "Initial Filing Date") the Initial Filings under the HSR Act
described in Section 4.5 (such "out" date is referred to as the "Termination
Date"); provided, however, that the date after which the Sellers may terminate
this Agreement pursuant to this Section 8.1(b) shall be extended by one day for
<PAGE>
each day that any of the Sellers is in breach of his, her or its obligations
under Section 4.5 or 4.6, (such Termination Date as so extended with respect to
the Sellers is referred to as "Sellers' Extended Termination Date"); provided,
however, that there shall be no extension beyond the Termination Date unless
all conditions to the Buyer's obligations to consummate the Contemplated
Transactions, other than the condition set forth in Section 6.8, have been
satisfied or waived by Buyer or would be satisfied or would reasonably be
expected to be satisfied as of the Termination Date, and; provided, further,
however that the right to terminate this Agreement pursuant to this Section
8.1(b) shall not be available to any party who has materially breached any of
such party's representations, warranties or covenants under this Agreement.
(c) Material Breach. By the Sellers upon a material breach of
any representation, warranty or covenant of this Agreement by the Buyer, and by
the Buyer upon a material breach of any representation, warranty or covenant of
this Agreement by the Sellers, but only if such breach cannot be cured or is
not cured by the scheduled Closing Date.
(d) Buyer Special Termination Right. By the Buyer at any time
on or after the 60th day after the Initial Filing Date (such 60th day is
referred to as the "First Termination Date"), if the Buyer notifies the Sellers
that it believes in good faith based on advice of counsel that the Contemplated
Transactions cannot be consummated in accordance with the terms hereof (after
expiration of any HSR waiting period) without violating Antitrust Laws;
provided that, (i) the Buyer shall not have materially breached its obligation
under Sections 4.5 and 4.6 and (ii) the Buyer is unwilling to take any action
to solve any issues raised by any Government Authority under Antitrust Laws
with respect to the Contemplated Transaction.
(e) Sellers Special Termination Right. By the Sellers during
the period from the 90th day after the Initial Filing Date until the tenth
business day thereafter (such ten business day period is referred to as the
"Sellers' Early Termination Period"), if the Sellers notify the Buyer that they
believe in good faith based on advice of counsel that the Contemplated
Transactions cannot be consummated in accordance with the terms hereof (after
expiration of any HSR waiting period) without violating Antitrust Laws;
provided, however, that (i) the first day of the Sellers' Early Termination
Period shall be delayed by one day for each day that any of the Sellers is in
breach of her, his or its obligations under Sections 4.5 and/or 4.6, and (ii)
the Sellers may not exercise the termination right under this Section 8.1(e)
<PAGE>
unless after discussions with the Buyer, the Sellers in good faith believe that
the Buyer is unwilling or unable to take the actions which would solve any
issues raised under the Antitrust Laws in connection with the Contemplated
Transactions so as to permit the Closing to occur on or before the Termination
Date.
8.2 Effects of Termination. If this Agreement is terminated under
any of Sections 8.1(b), (d) or (e), this Agreement shall be terminated without
liability of any party to any other party, except as expressly provided in
Sections 8.4 and 8.5. If this Agreement is terminated for any other reason,
nothing contained in this Section 8.2 shall relieve any party of liability for
any breach of this Agreement which occurred prior to the date of termination of
this Agreement.
8.3 Notice, Cure and Remedies. If at any time prior to the Closing
either party becomes aware of any circumstance which constitutes or evidences
any breach or potential breach of any agreement or covenant or any
representation or warranty contained in this Agreement, or which indicates that
any condition to the Closing may not be timely satisfied, such party shall
immediately notify the others of such circumstance in writing. The party who
is obligated to perform such agreement or covenant, or who is or may be in
breach of a provision of this Agreement by reason of such circumstance, shall
be entitled to cure such breach or cause the satisfaction of such condition at
any time prior to the then scheduled Closing Date, and if it does so, the other
party shall have no right to terminate this Agreement. If prior to the Closing
one party delivers to the other party a written notice (the "Claims Breach
Notice") stating that a representation and warranty has been breached in a
manner such as to entitle the other party not to consummate the Closing and
containing a reasonably detailed description of such breach or breaches, and
such other party nonetheless consummates the Closing, the other party shall not
be entitled to indemnification for any Losses arising out of the matters
expressly contained in the Claims Breach Notice.
8.4 Termination Payments.
(a) Buyer Termination. In the event that the Buyer terminates
this Agreement in accordance with Section 8.1(d) (the date of such termination
is referred to as the "Buyer Termination Date") and at the date of such
termination all of the conditions to the Buyer's obligations to consummate the
Contemplated Transactions other than the conditions set forth in Section 6.8
have been satisfied or waived (or would be satisfied or would reasonably be
expected to be satisfied on or before the Termination Date), then within 4
business days after the date of such termination, the Buyer shall pay to the
<PAGE>
Sellers an amount equal to the sum of (i) $15,000,000, plus (ii) $200,000
multiplied by the excess, if any, of the number of days, if any, that have
elapsed since the First Termination Date over the number of days that the
Sellers have been in breach of their obligations under Sections 4.5 and 4.6
through the Buyer Termination Date, plus (iii) the Interest Amount.
(b) Sellers Termination. In the event that the Sellers
terminate this Agreement in accordance with Section 8.1(e) (the date of such
termination is referred to as the "Sellers Early Termination Date") and at the
date of such termination all of the conditions to the Buyer's obligations to
consummate the Contemplated Transactions other than the conditions set forth in
Section 6.8 have been satisfied or waived (or would be satisfied or would
reasonably be expected to be satisfied on or before the Termination Date), then
within 4 business days after the date of such termination, the Buyer shall pay
to the Sellers an amount equal to the Interest Amount.
(c) Sellers Regular Termination. In the event that the Sellers
terminate this Agreement in accordance with Section 8.1(b) (the date of such
termination is referred to as the "Sellers Regular Termination Date") and at
the date of such termination all of the conditions to the Buyer's obligations
to consummate the Contemplated Transactions other than the conditions set forth
in Section 6.8 have been satisfied or waived (or would be satisfied or would
reasonably be expected to be satisfied on or before the Termination Date), then
within 4 business days after the date of such termination, the Buyer shall pay
to the Sellers an amount equal to the sum of (i) $15,000,000, plus (ii)
$200,000 multiplied by excess, if any, of the number of days that have elapsed
since the First Termination Date over the number of days that the Sellers have
been in breach of their obligations under Sections 4.5 and 4.6 through the
Sellers' Regular Termination Date, plus (iii) the Interest Amount.
(d) Interest Amount. No later than 2 days after the delivery
by the Sellers or the Buyer of a notice terminating this Agreement pursuant to
Section 8.1(b), (d) or (e), in a case which could entitle the Sellers to a
termination payment under this Section 8.4, the Sellers shall deliver to the
Buyer (i) a certificate containing the Sellers' good faith estimate of the
Interest Amount due and payable upon such termination, and (ii) the workpapers
of the Sellers and their accountants used in determining such amount. Within
30 days after the applicable date of termination of this Agreement, the Sellers
shall deliver to the Buyer (i) a certificate of the Sellers containing the
Sellers' determination (the "Sellers Interest Determination") of the actual
Interest Amount, and the workpapers of the Sellers and their accountants used
in the determination of such amount. The Sellers shall provide, and shall
<PAGE>
cause the Corporation to provide the Buyer and its representatives full access
during normal business hours to the books, records and employees of the
Corporation and the Sellers and their accountants in order to assist the Buyer
in its review of the Sellers Interest Determination. If the Buyer does not
object to the Sellers Interest Determination within 30 days after receipt
thereof, such determination shall be final and binding upon the parties. If
within such period the Buyer objects to the Sellers Interest Determination, it
shall provide the Sellers with written evidence thereof and parties shall
negotiate in good faith for a 30 day period to resolve any such dispute within
such 30 day period. If the parties are unable to resolve any such dispute, the
parties shall submit the dispute to the Arbitrator for final resolution
thereof. The Arbitrator shall only consider disputed matters and shall be
directed to act promptly to resolve the disputed matters and render its
decision. The Arbitrator's decision shall be binding on the parties. The fees
and expenses of the Arbitrator shall be borne equally by the parties.
(e) Within 4 business days after the final determination of the
Interest Amount, (i) if the final determination of the Interest Amount exceeds
the estimate of the Interest Amount paid by the Buyer, the Buyer shall pay to
the Sellers an amount equal to such excess plus interest thereon at a rate of
8% per annum or (ii) if the estimate of the Interest Amount paid to the Sellers
by the Buyer exceeds the final Interest Amount the Sellers shall pay to the
Buyer an amount equal to such excess plus interest thereon at a rate of 8% per
annum.
(f) For purposes of this Section 8.4, the "Interest Amount"
shall equal to (i) the sum of (A) the Final Purchase Price that would have
been payable to the Sellers under this Agreement if the Closing had occurred on
the First Termination Date, exclusive of the Purchase Price Interest Amount,
minus (B) the sum of (x) all Taxes, if any, that would have been payable by the
Sellers during the Special Period (as defined below) (including Taxes payable
as a result of the Election) on the amount they would have received pursuant to
the foregoing clause (A) above, if the Closing had occurred on the First
Termination Date, plus (y) the amount of all transaction costs including
investment banking fees and other transaction expenses that would have been
paid or payable by the Sellers and the Corporation in connection with the
Contemplated Transactions had the Closing occurred on the Buyer Termination
Date, the Sellers Regular Termination Date or the Sellers Early Termination
Date, as the case may be, plus (z) the net income of the Corporation determined
in accordance with generally accepted accounting principles, consistent with
<PAGE>
the principles utilized by the Corporation in the Financial Statements for 1994
except that the FIFO rather than LIFO inventory method will be utilized, during
the period from the First Termination Date to the Buyer Termination Date, the
Sellers Regular Termination Date or the Sellers Early Termination Date, as the
case may be (the "Special Period"), plus any distributions in excess of net
income made by the Corporation to the Sellers during the Special Period, (ii)
multiplied by a fraction, the numerator of which is the number of days during
the Special Period, and the denominator of which is 365 days, (iii) multiplied
by .08; provided, however, the number of days during the Special Period shall
be reduced by the number of days on which less than all of the conditions to
Buyer's obligations to consummate the Contemplated Transactions, other than the
conditions set forth in Section 6.8, have been satisfied or waived or would be
satisfied or would reasonably be expected to be satisfied on or before the
Termination Date (the amount determined pursuant to clause (i) is referred to
as the "Termination Date Closing Price."
8.5 Reimbursements
In the event that (i) the Buyer has terminated this Agreement
pursuant to Section 8.1(d) and makes the payment contemplated by Section 8.4(a)
or (ii) the Sellers have terminated this Agreement pursuant to Section 8.1(b)
or 8.1(e) and the Sellers were entitled to receive and did receive the payment
contemplated by Section 8.4(c), then if the Sellers enter into an agreement to
sell the Stock (including as a result of a merger or similar transactions) or
all or substantially all of the assets of the Corporation on or before the
eighteen month anniversary of the Buyer Termination Date, the Sellers Early
Termination Date or the Sellers Regular Termination Date, as the case may be,
the Sellers (which obligation shall be joint and several) shall pay to the
Buyer no later than 2 business days following the consummation of such
transaction the amount by which the proceeds paid, directly or indirectly to
the Sellers in connection with such transaction (and taking into account any
benefits that the Sellers and their Affiliates may receive in connection with
such transaction as proceeds but excluding any assumption of, or payment of,
the Wells Fargo Amount by the buyer in that transaction) exceeds the
Termination Date Closing Price, but in no event shall such payment exceed the
amount paid by the Buyer to the Sellers pursuant to Section 8.4(a) or 8.4(c),
as the case may be, less the Interest Amount.
9. MISCELLANEOUS
9.1 Announcements. Before the Closing Date, except as required by
law or New York Stock Exchange ("NYSE") rules, neither the Sellers nor the
Buyer shall make, nor cause to be made, any news releases or other public
<PAGE>
announcements pertaining to the transactions contemplated hereby without the
prior written consent of the other. If a news release or public announcement
is required by law or NYSE rules, the Buyer will consult with Sellers regarding
the contents thereof before making such release or announcement.
9.2 Cooperation. Each party hereto agrees, both before, at and
after the Closing, to execute any and all further documents and writings and
perform such other reasonable actions which may be or become necessary or
expedient to effectuate and carry out the Contemplated Transactions.
9.3 Expenses. Except as otherwise expressly set forth in this
Agreement, whether or not the Contemplated Transactions are consummated, none
of the parties hereto shall have any obligation to pay any of the fees and
expenses of any other party incident to the negotiation, preparation and
execution of this Agreement, including the fees and expenses of counsel,
accountants (including expenses for the audit of the Sellers' financial
statements), investment bankers and other experts.
9.4 Waivers. No waiver or extension of time shall be effective
unless expressly contained in a writing signed by the waiving party or its
representative and no alteration, modification or impairment shall be implied
by reason of any previous waiver, extension of time, delay or omission in
exercise or other indulgence.
9.5 Amendments, Supplements. This Agreement may be amended or
supplemented at any time, before, on or after the Closing Date, but only by a
writing executed by the Buyer and the Sellers.
9.6 Entire Agreement. This Agreement, its exhibits and schedules,
and the documents executed on the Closing Date in connection herewith, and the
Confidentiality Agreement between the parties, constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral and written, between
the parties hereto with respect to the subject matter hereof. No
representation, warranty, promise, inducement or statement of intention has
been made by either party which is not embodied in this Agreement or such other
documents, and neither party shall be bound by, or be liable for, any alleged
representation, warranty, promise, inducement or statement of intention not
embodied herein or therein.
<PAGE>
9.7 Third-Party Benefits. None of the provisions of this Agreement
shall be for the benefit of, or enforceable by, any third-party beneficiary.
9.8 Binding Effect. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns. The Melinda K. Lesher Trust will terminate by its terms
upon the Closing of the Contemplated Transactions, and the assets of said trust
will then be distributed free of trust to Melinda K. Lesher. Therefore,
Melinda K. Lesher in her individual capacity assumes, effective upon the
termination of the Melinda K. Lesher Trust, all obligations which said Trust
would have had under the Agreement had said Trust not so terminated and agrees
that all such obligations shall be binding on her in her individual capacity
after the termination of said Trust. Buyer agrees that, effective upon the
termination of said trust, all of Buyer's obligations to said Trust under the
Agreement shall insure to the benefit of Melinda K. Lesher in her individual
capacity. The Sellers that are Trustees agree that in the event that there are
insufficient funds in the applicable trust to pay any indemnification claims,
hereunder, such Sellers shall use commercially reasonable efforts to seek
recovery from distributees of the applicable trust in order to provide
sufficient funds to pay such indemnification claims.
9.9 Assignability. Neither this Agreement nor any of the parties'
rights hereunder shall be assignable except by operation of law by a party
without the prior written consent of the other parties except that the Buyer,
without the Sellers' consent without releasing or otherwise affecting Buyer's
obligations hereunder, may assign its rights hereunder to any of direct or
indirect subsidiary of Buyer.
9.10 Certain Remedies. No party hereto shall be entitled to any
punitive or exemplary damages arising out of any breach of any covenant,
representation or warranty set forth herein, except that such limitation shall
not apply to a willful and intentional breach of Sellers' obligations to sell
the Stock or Buyer's obligation to purchase the Stock.
9.11 Notices. All notices under this Agreement shall be in writing
and shall be delivered by personal service, overnight service, telecopy (with
receipt acknowledged) or certified mail (if such service is not available, then
by first class mail), postage prepaid, to such address as may be designated
from time to time by the relevant party, and which shall initially be as set
forth below. Any notice sent by certified or first class mail shall be deemed
to have been given four business days after the date on which it is mailed.
<PAGE>
All other notices shall be deemed given when received. No objection may be
made to the manner of delivery of any notice actually received in writing by an
authorized agent of a party. Notices shall be addressed as follows or to such
other address as the party to whom the same is directed shall have specified in
conformity with the foregoing:
(a) If to the Buyer:
Cristina L. Mendoza, Esq.
Knight-Ridder, Inc.
One Herald Plaza
Miami, FL 33132-1693
With a copy to:
Garett J. Albert, Esq.
Hughes Hubbard & Reed
One Battery Park Plaza
New York, NY 10004-1482
(b) If to the Sellers:
Margaret L. Lesher QTIP Trust
c/o Blanding, Boyer & Rockwell
1660 Olympic Boulevard, 3rd Floor
Walnut Creek, CA 94596-5198
With a copy to:
John L. McDonnell, Jr., Esq.
Crosby, Heafey, Roach & May
1999 Harrison Street
Oakland, CA 94612
9.12 Governing Law. This Agreement shall be governed and construed
in accordance with laws of the State of California applicable to agreements
made and to be performed entirely within such State, without regard to the
conflict or choice of law provisions thereof.
9.13 Submission to Jurisdiction; Waivers. Each party to this
Agreement hereby irrevocably and unconditionally:
(1) (i) agrees that any suit, action or proceeding against it
by the other party or parties with respect to this Agreement or the
Contemplated Transaction may be instituted, and that any suit, action or
proceeding by it against the other with respect to this Agreement or the
Contemplated Transaction shall be instituted, only in the California State
<PAGE>
Court located in Contra Costa County, or the U.S. District Court for the
Northern District of California (and appellate courts from any of the
foregoing), as the party instituting such suit, action or proceeding may elect
in its sole discretion, (ii) consents and submits, for itself and its property,
to the jurisdiction of such courts for the purpose of any such suit, action or
proceeding instituted against it by the other and (iii) agrees that a final
judgment in any such suit, action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
(2) agrees that service of all writs, process and summonses in
any suit, action or proceeding pursuant to Section 9.13 may be effected by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
Buyer or Sellers, as the case may be, at its address for notices pursuant to
Section 9.11 hereof (with copies to other persons as specified therein), such
service to become effective in accordance with the notice provisions of
Section 9.11, provided that nothing contained in this Section 9.13(2) shall
affect the right of Buyer or Sellers, as the case may be, to serve process in
any other manner permitted by law.
(3) (i) waives any objection which it may now or hereafter have
to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement or the Contemplated Transaction brought in any court
specified in Section 9.13(1), (ii) waives any claim that any such suit, action
or proceeding brought in any such court has been brought in an inconvenient
forum and (iii) agrees not to plead or claim either of the foregoing; and
(4) WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY
DISPUTE ARISING OUT OF OR RELATING TO THIS AGREEMENT AND AGREES THAT ANY SUCH
DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
9.14 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
9.15 Headings. The headings in this Agreement are for reference only
and shall not affect the interpretation of this Agreement.
9.16 Specific Performance. Each of the parties hereto acknowledge
that Buyer would not have an adequate remedy at law for money damages in the
<PAGE>
event that any of the covenants or agreements set forth in this Agreement were
not performed by the Sellers in accordance with its terms and therefore the
Sellers agree that Buyer shall be entitled to injunctive and other equitable
relief in addition to any other remedy to which it may be entitled at law or in
equity (without the necessity of proving the inadequacy as a remedy of money
damages).
9.17 Interpretation. For the purposes hereof, (i) words in the
singular shall be held to include the plural and vice versa and words of one
gender shall be held to include the other genders as the context requires, (ii)
the terms "hereof," "herein," and "herewith" and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement as a whole
(including all of the Schedules and Exhibits hereto) and not to any particular
provision of this Agreement, and Article, Section, paragraph, Exhibit and
Schedule references are to the Articles, Sections, paragraphs, Exhibits and
Schedules to this Agreement unless otherwise specified, (iii) the word
"including" and words of similar import when used in this Agreement shall mean
"including, without limitation," unless the context otherwise requires or
unless otherwise specified, and (iv) the word "or" shall not be exclusive.
9.18 Sellers' Representative. Whenever any action, notice or
communication is required of the Sellers pursuant to this Agreement or the
Escrow Agreement, the Buyer may rely upon communication from the Margaret L.
Lesher QTIP Trust as the applicable Sellers' representative to take such
action and/or receive or send such notice or communication for and act on
behalf of such Sellers. The Buyer is entitled to rely on all determinations,
actions, communications and notices of the Margaret L. Lesher QTIP Trust as the
determinations, actions, communications and notices of all of the Sellers. In
the event that the Margaret L. Lesher QTIP Trust is terminated, the Sellers
shall promptly thereafter designate a new representative to act on behalf of
all the Sellers under this Agreement and the Escrow Agreement.
9.19 Change of Corporation's Name. The Lesher name is one of the
Excluded Assets. Therefore, immediately after the Closing, the Buyer agrees to
cause the Corporation to change its corporate name from "Lesher Communications,
Inc." to "LCI" or another name which does not contain the Lesher name;
provided, however, that the Sellers hereby grant to Buyer effective upon
consummation of the Closing a royalty free license to use the Lesher
Communications, Inc. name during a reasonable transition period.
9.20 Other Matters. Any matter disclosed in or with respect to any
Schedule to this Agreement shall be deemed to have been disclosed in and with
<PAGE>
respect to every other Schedule as to which its relation is reasonably
apparent. Whenever any statement in Article 2 is made "to Sellers' and
Corporation's knowledge" or words of similar intent or effect, such statement
shall be deemed to include a representation that a reasonable investigation of
the subject matter thereof has been conducted.
9.21 Insurance. Following the Closing, Buyer will use reasonable
efforts to cause the Corporation to obtain, at the expense of the Sellers,
directors and officers and errors and omissions insurance covering the period
prior to the Closing to the extent available, if such insurance can be obtained
without adversely affecting the Corporation's or the Buyer's insurance rating.
9.22 Preemptive Rights Waiver. By execution of this Agreement, the
Sellers hereby waive any rights inconsistent with this Agreement, including
without limitation any preemptive rights with respect to the Corporation's
stock.
IN WITNESS WHEREOF, this Stock Purchase Agreement has been duly
executed and delivered by the duly authorized representatives of the parties
hereto as of the date first above written.
"BUYER"
Knight-Ridder, Inc.
By: /s/ P. Anthony Ridder
---------------------------
Name: P. Anthony Ridder
Title: Chairman & CEO
"SELLERS"
/s/ Margaret L. Lesher /s/ Melinda K. Lesher
- ------------------------------ -----------------------------
Margaret L.Lesher, Melinda K. Lesher
Individually Individually
/s/ Margaret L. Lesher /s/ Melinda K. Lesher
- ------------------------------ -----------------------------
Margaret L. Lesher, Melinda K. Lesher
Trustee Trustee
/s/ Robert G. Smith
- ------------------------------
Robert G. Smith
Trustee
<PAGE>
Execution of this Agreement by the above-named Trustees is on behalf of, and in
their respective capacities as Trustees of each of the following Trusts:
Margaret L.Lesher QTIP Trust
Melinda K. Lesher Trust
Cynthia Ann Lesher Trust
Patricia Ryan Hilton Trust
Roxanne Ryan Gibson Trust
Sarah Margaret Alves Trust
<PAGE>
DEFINITIONS SCHEDULE
"Affiliate" with respect to a person or entity means another person
or entity that controls, is controlled by, or is under common control with,
such entity, including without limitation, a shareholder of such entity.
"Allocation Schedule" shall have the meaning set forth in Section
4.11(b) of this Agreement.
"Antitrust Law" shall have the meaning set forth in Section 7.2(d)
hereof.
"Arbitrator" shall have the meaning set forth in Section 1.4(b) of
this Agreement.
"Authorizations" shall have the meaning set forth in Section 2.18 of
this Agreement.
"Balance Sheet" shall have the meaning set forth in Section 2.5 of
this Agreement.
"Balance Sheet Date" shall have the meaning set forth in Section 2.7
of this Agreement.
"Base Purchase Price" shall have the meaning set forth in Section
1.1(a) of the Agreement.
"Benefit Plans" shall have the meaning set forth in Section 2.17(a)
of this Agreement.
"Business" shall have the meaning set forth in Recital A of this
Agreement.
"Buyer" shall have the meaning set forth in the preamble on page 1 of
this Agreement.
"Buyer's Accountant" shall have the meaning set forth in Section
1.4(b) of this Agreement.
"Certified Purchase Price Interest Amount" shall have the meaning set
forth in Section 1.4(b).
"Certified Stockholders Investment Amount" shall have the meaning set
forth in Section 1.4(b) of this Agreement.
"Claim Notice" shall have the meaning set forth in Section 7.6(b)
hereof.
"Claims" shall mean any and all liens, mortgages, charges, claims,
liabilities, options, debts, security interests, secured claims, encroachments,
<PAGE>
restrictive covenants, easements, servitudes, leases, options, rights of first
refusal, title defects and other encumbrances of any kind or nature whatsoever,
whether or not contingent, liquidated, disputed or known.
"Claims Breach Notice" shall have the meaning set forth in Section
8.3 hereof.
"Closing" shall have the meaning set forth in Section 1.3 of this
Agreement.
"Closing Date" shall have the meaning set forth in Section 1.3 of
this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commonly Controlled Entity" shall have the meaning set forth in
Section 2.16(a) of this Agreement.
"Confidential Information" shall have the meaning set forth in
Section 2.12(b) of this Agreement.
"Contemplated Transactions" shall have the meaning set forth in
Section 1.3 of this Agreement.
"Contracts" shall have the meaning set forth in Section 2.15 of this
Agreement.
"Corporation" shall have the meaning set forth in the preamble on
page 1 of this Agreement.
"Credit Agreement" shall have the meaning set forth in Section 4.13
hereof.
"Disputed Matters" shall have the meaning set forth in Section 1.4(b)
of this Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Election" shall have the meaning set forth in Section 4.11 hereof.
"Environmental Breaches" shall have the meaning set forth in Section
7.3(b) hereof.
"Environmental Condition" shall mean the presence in the environment
(which shall include natural resources, flora and fauna, soil, surface water,
ground water, and present or potential drinking water supply, subsurface strata
<PAGE>
or ambient air inside and outside of buildings) of any Hazardous Material or
the exposure of any persons to Hazardous Materials.
"Environmental Laws" shall mean all federal, state, local and foreign
statutes and codes or regulations, rules or ordinances issues, promulgated, or
approved thereunder, now or hereafter in effect (including those with respect
to asbestos or asbestos containing material or exposure to asbestos or asbestos
containing material), relating to (a) emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or industrial toxic
or hazardous constituents, substances or wastes, including any Hazardous
Material, petroleum, including crude oil or any fraction thereof, any petroleum
product or other waste, chemicals or substances regulated by any Environmental
Law into the environment (including ambient air, surface water, ground water,
land surface or subsurface strata), (b) the manufacture, processing,
distribution, use, generation, treatment, storage, disposal, transport or
handling of any Hazardous Material, petroleum, including crude oil or any
fraction thereof, any petroleum product or other waste, chemicals or substances
regulated by any Environmental Law, (c) underground storage tanks and related
piping, and emissions, discharges and releases or threatened releases
therefrom, and (d) laws governing reclamation or restoration of real property.
"Escrow Agent" shall mean the person so designated in the Escrow
Agreement.
"Escrow Agreement" shall mean the agreement the terms of which are
generally described in Section 1.6 of this Agreement and otherwise reasonably
satisfactory to Buyer and the Sellers.
"Estimated Adjustment Amount" shall have the meaning set forth in
Section 1.4(a).
"Estimated Purchase Price Interest Amount" shall have the meaning set
forth in Section 1.4(a).
"Estimated Stockholders Investment" shall have the meaning set forth
in Section 1.4(a).
"Estimated Stockholders Investment Adjustment" shall have the meaning
set forth in Section 1.4(a).
"Estimated Stockholders Investment Amount" shall have the meaning set
forth in Section 1.4(a).
"Excluded Assets" shall have the meaning set forth in Section 1.2 of
this Agreement.
<PAGE>
"Excluded Liabilities" shall have the meaning set forth in Section
1.2 of this Agreement.
"Final Purchase Price" shall have the meaning set forth in Section
1.4(g) of this Agreement.
"Final Purchase Price Interest Amount" shall have the meaning set
forth in Section 1.4(f).
"Final Stockholders Investment Amount" shall have the meaning set
forth in Section 1.4(e) of this Agreement.
"Financial Statements" shall have the meaning set forth in Section
2.5(a) of this Agreement.
"First Termination Date" shall have the meaning set forth in Section
8.1(d) of this Agreement.
"Goldman Sachs Fee" shall have the meaning set forth in Section 2.20
of this Agreement.
"Government Authority" shall mean any government or state (or any
subdivision thereof), whether domestic, foreign or multinational, or any
agency, authority, bureau, commission, department or similar body or
instrumentality thereof, or any governmental court or tribunal.
"HSR Act" shall have the meaning set forth in Section 4.5 of this
Agreement.
"Hazardous Materials" shall mean all pollutants, contaminants,
chemicals, wastes, and any other carcinogenic, ignitable, corrosive, reactive,
flammable, explosive, toxic, radioactive or otherwise hazardous substances or
materials (whether solids, liquids or gases) subject to regulation, control or
remediation under Environmental Law; including, by way of example only,
petroleum, urea formaldehyde, PCBs, pesticides, herbicides, asbestos, sludge,
slag, acids, metals, solvents, and waste water.
"Higher Cap Breaches" shall have the meaning set forth in Section 7.3
of this Agreement.
"Income Tax Return" shall mean any Return relating to Income Taxes.
"Income Taxes" shall mean any Taxes in the nature of income or
franchise taxes.
"Indemnifying Party" shall have the meaning set forth in Section
7.6(a) of this Agreement.
<PAGE>
"Indemnitee" shall have the meaning set forth in Section 7.6(a) of
this Agreement.
"Initial Filings" shall mean the filing by the Buyer and the Sellers
of all documents and information deemed by a Government Authority to be in
compliance with the HSR Act and to commence the initial waiting period with
respect to the Contemplated Transaction.
"Initial Filing Date" shall have the meaning set forth in Section
8.1(d) hereof.
"Initial Purchase Price" shall have the meaning set forth in Section
1.1 hereof.
"Insiders" shall have the meaning set forth in Section 2.23 hereof.
"Insider Transactions" shall have the meaning set forth in Section
2.23 hereof.
"Intellectual Property" shall mean Trademarks, patents (including
those applied for or pending), copyrights (including registrations or
applications with respect thereto), trade secrets and licenses or rights under
the same for any of the foregoing.
"Interim Balance Sheet Date" shall have the meaning set forth in
Section 2.7 of this Agreement.
"Interim Period" shall have the meaning set forth in Section 1.4(d)
of this Agreement.
"July 2 Balance Sheet" shall have the meaning set forth in Section
2.5(b) of this Agreement.
"Leased Real Property" shall have the meaning set forth in Section
2.8(b) of this Agreement.
"Legal Requirement" shall mean any law, statute, ordinance, code,
rule, regulation, standard, judgment, decree, writ, ruling, arbitration award,
injunction, order or other requirement of any Government Authority.
"Losses" shall have the meaning set forth in Section 7.1 of this
Agreement.
"Lower Cap Limit" shall have the meaning set forth in Section 7.3 of
this Agreement.
<PAGE>
"Lower Capped Representations" shall have the meaning set forth in
Section 7.3(b) hereof.
"Material Adverse Effect" shall have the meaning set forth in Section
2.1 of this Agreement.
"Newspapers" shall mean the Contra Costa Times, the West County
Times, the Valley Times, the San Ramon Valley Times, the Ledger Dispatch, the
Brentwood News, the Contra Costa Sun, Concord Transcript, Walnut Creek Journal,
Martinez Record, Pleasant Hill Record, Solano Times, Times Ad Delivery and
Marketplace.
"Notice of Disagreement" shall have the meaning set forth in Section
1.4(a) of this Agreement.
"Owned Real Property" shall have the meaning set forth in Section
2.8(a) of this Agreement.
"PBGC" shall have the meaning set forth in Section 7.16 hereof.
"Permits" shall mean any and all federal, state and local
governmental licenses, consents, approvals, authorizations, registrations,
franchises, Certificates of Occupancy, and permits, including, without
limitation, those relating to (i) air emissions, (ii) water discharges, (iii)
solid or liquid waste disposal of Hazardous Materials and (v) other
environmental, health and safety matters.
"Purchase Price Capped Covenants" shall have the meaning set forth in
Section 7.3(b) hereof.
"Purchase Price Capped Representations" shall have the meaning set
forth in Section 7.3(b) hereof.
"Purchase Price Interest Amount" shall have the meaning set forth in
Section 1.4(d) of this Agreement.
"Real Property" shall have the meaning set forth in Section 2.8(c) of
this Agreement.
"Real Property Leases" shall have the meaning set forth in Section
2.8(b) of this Agreement.
"Redemption" shall have the meaning set forth in Section 1.2 of this
Agreement.
"Returns" shall mean all returns, declarations, statements, reports,
estimates, forms or other documents or information, including any amendments to
<PAGE>
any of the foregoing, required to be filed with or supplied to any Government
Authority with respect to Taxes.
"Ruling" shall have the meaning set forth in Section 4.11(d) hereof.
"S Corporation" shall have the meaning set forth in Section 2.9 of
this Agreement.
"Sellers" shall have the meaning set forth in the preamble on page 1
of this Agreement.
"S Short Year" shall have the meaning set forth in Section 4.11(e)
hereof.
"Sellers' Accountant" shall have the meaning set forth in Section
1.4(a) of this Agreement.
"Sellers Early Termination Date" shall have the meaning set forth in
Section 8.4 hereof.
"Sellers Estimated Purchase Price Interest Amount" shall have the
meaning set forth in Section 1.4(a) of this Agreement.
"Sellers Estimated Stockholders Investment" shall have the meaning
set forth in Section 1.4(a) of this Agreement.
"Sellers Extended Termination Date" shall have the meaning set forth
in Section 8.1(b) hereof.
"Sellers Regular Termination Date" shall have the meaning set forth
in Section 8.4(c) hereof.
"Shadelands Property" shall mean the real property located at 2640
Shadelands Drive, Walnut Creek, California, more particularly described on
Schedule 4.12.
"Special Period" shall have the meaning set forth in Section 8.4 of
this Agreement.
"Stock" shall have the meaning set forth in Recital A of this
Agreement.
"Stockholders Investment" shall have the meaning set forth in Section
1.4(c) of this Agreement.
"Tax or Taxes" shall mean any and all federal, state, county, local,
foreign and other taxes, fees, levies, customs duties, assessments, or charges
of any kind whatsoever (including, without limitation, gross income, net
<PAGE>
income, gross receipts, windfall profits, value-added, license, stamp, capital
stock, net worth, alternative or add-on minimum, environmental, business and
occupation, disability, real or personal property taxes, income, profits,
premium, estimated, excise, sales, use, occupancy, gross receipts, franchise,
ad valorem, severance, capital levy, production, transfer, withholding,
employment, unemployment compensation, payroll related, property, import duties
and other governmental charges and assessments), whether or not measured in
whole or in part by net income, and including deficiencies, interest, additions
to tax or interest, and penalties with respect thereto, and including expenses
associated with contesting any proposed adjustment related to any of the
foregoing and any obligations under any tax sharing, tax allocation, tax
indemnity or similar agreements to which the Corporation is a party.
"Termination Date" shall have the meaning set forth in Section 8.1(b)
of this Agreement.
"Termination Date Closing Price" shall have the meaning set forth in
Section 8.4(f) hereof.
"Threshold Limit" shall have the meaning set forth in Section 7.3(a)
hereof.
"Trademarks" shall mean (i) all trademarks, service marks,
tradenames, corporate names, trade dress, designs, and logos, including all
registrations or applications to register the foregoing, in every country and
jurisdiction throughout the world, (ii) all variations, derivations, and
combinations thereof, including those not yet developed, and (iii) all goodwill
associated therewith.
"Transfer Taxes" shall have the meaning set forth in Section 1.5 of
this Agreement.
"Wells Fargo" shall have the meaning set forth in Section 4.13 of
this Agreement.
"Wells Fargo Amount" shall have the meaning set forth in Section 4.13
of this Agreement.
<PAGE>
Exhibit 2.2
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
This First Amendment to Stock Purchase Agreement is entered into as
of August 28, 1995, by and between Knight-Ridder, Inc. (the "Buyer") and the
persons listed on the signature pages as sellers of stock of Lesher
Communications, Inc. (the "Corporation") pursuant to the Stock Purchase
Agreement dated as of August 28, 1995 among the same parties (the "Sellers").
In consideration of the premises and the mutual covenants hereinafter
set forth and set forth in the Stock Purchase Agreement dated as of August 28,
1995 among the Sellers, as amended, the parties agree as follows:
1. Amendment to Section 2.2(b). The first four (4) lines of
Section 2.2(b) are amended to read as follows:
The Authorized capital stock of the Corporation consists of (x)
25,000 shares of common stock, $100 par value, of which 18,000.15 shares will
be issued and outstanding immediately prior to the Redemption and 17,755.17
shares will be issued and outstanding as of the Closing, and....
2. Amendment to Schedule 1.1. Schedule 1.1 is amended to read as
attached.
3. Amendment to Schedule 1.2. Schedule 1.2 is amended to read as
attached.
4. Amendment to Schedule 1.2(c). Schedule 1.2(c) is amended to
read as attached.
5 Amendment to Schedule 2.2. Schedule 2.2 is amended to read as
attached.
6. Amendment to Schedule 2.7(b). Schedule 2.7(b) is hereby amended
to add the following item under Material Adverse Change in Business since July
2, 1995:
In September-October, 1995, The New York Times Sales, Inc. ("TNYTSI")
notified the Corporation of its intent to terminate the contract between TNYTSI
and the Corporation (Item 12 on Schedule 2.14).
7. Amendment to Schedule 2.8(a). Schedule 2.8(a) is hereby amended
to add the following parcels of Owned Real Property:
188 Cirby Way, Roseville, CA (Excluded Asset, Schedule 1.2(c), Item
2(a)
<PAGE>
412 Lincoln Way, Roseville, CA (Excluded Asset, Schedule 1.2(c), Item
2(b)
1315 Airport Boulevard, Santa Rosa (Excluded Asset, Schedule 1.2(c),
Item 1a
Vacant Land north of Evora Road (Highway 4), Concord, CA (Excluded
Asset, Schedule 1.2(c), Item 4
3470 Santa Rosa Avenue, Santa Rosa, CA (Excluded Asset, Schedule
1.2(c), Item 5
Bethel Island Road/Cypress Road, Oakley, CA (Lesher Lakes) (Excluded
Asset, Schedule 1.2(c), Item 3
8. Amendment to Schedule 2.8(b). Schedule 2.8(b) is hereby amended
to add the following sublease under Item 6, Lease for Distribution Facility
located at 6303 Sierra Court, Dublin, CA:
(a) Sublease for approximately 1,500 square feet of
Distribution Facility located at 6303 Sierra Court, Dublin, CA, dated August
23, 1995, between the Corporation, as sublessor, and Twisted Pair
Communications, as sublessee, beginning on September 11, 1995 and ending on
October 31, 1997, at a monthly rent of $850.00.
9. Amendment to Schedule 2.9(b). Schedule 2.9(b) is hereby amended
to add the following under Federal and State Income and Other Tax Examinations,
Deficiency Assessments or Claims:
The California Employment Development Department ("EDD") notified the
Corporation in September 28, 1995 that its account was scheduled for audit of
the period from 1992 to the present. The Corporation has responded to the
notice with information concerning the availability of Corporation records.
EDD has not yet scheduled an initial interview. This is not a disclosure under
the final sentence of Section 2.9(b) of the Stock Purchase Agreement.
10. Amendment to Schedule 2.10. Schedule 2.10 is hereby amended to
add the following under Exceptions to Ownership or Right to Use Improvements
and Personal Property Material to Business:
<PAGE>
In addition to the listed UCC-1 filings in connection with the Wells
Fargo Bank Loan, the following UCC-1 statements are on file:
AT&T Credit Corp. - AT&T System 75XE leased under Lease No. 02058.
Original filing date was November 6, 1987, for notification purposes only.
Continuation statement filed August 28, 1992.
AT&T Credit Corp. - AT&T New Definity System leased under Lease No.
0002058. Original filing date was September 28, 1989, for notification
purposes only Continuation statement filed on March 30, 1994.
Agfa Division of Miles, Inc. - Agfasolid Dry Mixer. Original filing
date was August 31, 1994.
11. Amendment to Schedule 2.11. Schedule 2.11 is hereby amended to
add item 4 under Restrictive Agreements, as follows:
4. Telegraph News Publications (Excluded Asset) Restrictive
Covenant in contract with Placer Community Newspapers, Inc.
(W.J. Brehm Communications) re competition in Placer and
Sacramento Counties for a period of four years.
12. Amendment to Schedule 2.14. Schedule 2.14 is hereby amended to
add at the end of Item 13 (Cresmer, Woodward, O'Mara & Ormsbee, Inc.
advertising sales representative agreement) the following:
The Agreement has been canceled, effective December 1, 1995, after
informing and consulting with Buyer.
13. Amendment to Schedule 2.19. Schedule 2.19 is hereby amended to
add the following under Employment or Consulting Agreements calling for base
compensation in excess of $100,000:
5. Agreement to pay $150,000 commission on the sale of Telegraph
News Publications to J. Shaver, payable at the closing by the Sellers.
14. Amendment to Schedule 2.24. Schedule 2.24 is hereby amended to
add the following persons who hold power of attorney or agency authority from
the Corporation:
The accounting firm of Blanding, Boyer & Rockwell holds a power of
attorney, Internal Revenue Service Form 2848, given by the Corporation, in
connection with the income tax returns of the Corporation. The Power of
<PAGE>
Attorney authorizes the attorney in fact/representative to represent the
Corporation before the Internal Revenue Service, to receive and inspect
confidential tax information and to perform any and all acts that the
Corporation can perform with respect to the particular tax matters for which
the power of attorney is given, including the power to sign consents,
agreements and other documents.
15. Amendment to Schedule 4.8(b). Schedule 4.8(b) is hereby amended
to delete the name of Chris Tucher as an Operating Director of the Corporation.
Chris Tucher resigned as operating director in charge of circulation in
September, 1995.
16. Amendment to Schedule 4.12. Schedule 4.12 is amended to add the
following in connection with the legal description of the Shadelands Property:
The Shadelands Property consists of two parcels, Assessors Parcel
Number 143-040-031 (Parcel One) and Assessors Parcel Number 143-040-050 (Parcel
Two). Parcel Two is the 80 foot wide vacant strip of land adjacent to Parcel
One, the large parcel on which the Corporation's headquarters is located. The
legal description of Parcel Two when it was initially conveyed from the City of
Walnut Creek on January 5, 1978, contained several errors in directional
references. These errors have been repeated in all subsequent deeds. As part
of the conveyance of the Shadelands Property to the Corporation, Sellers shall
obtain and cause to be recorded a corrective deed.
17. Binding Effect. All remaining provisions of the Stock Purchase
Agreement shall remain in full force and effect without modification.
<PAGE>
IN WITNESS WHEREOF, this First Amendment to Stock Purchase Agreement
has been duly executed and delivered by the duly authorized representatives of
the parties hereto as of the date first above written.
"BUYER"
Knight-Ridder, Inc.
By: /s/ Cristina L. Mendoza
------------------------------------
Name: Cristina L. Mendoza
Title: Vice President/General Counsel
"SELLERS"
/s/ Margaret L. Lesher /s/ Melinda K. Lesher
- ------------------------------ -----------------------------
Margaret L. Lesher, Melinda K. Lesher
Individually Individually
/s/ Margaret L. Lesher /s/ Melinda K. Lesher
- ------------------------------ -----------------------------
Margaret L. Lesher, Melinda K. Lesher
Trustee Trustee
/s/ Robert G. Smith
- ------------------------------
Robert G. Smith
Trustee
<PAGE>
Execution of this Agreement by the above-named Trustees is on behalf of, and in
their respective capacities as Trustees of each of the following Trusts:
Margaret L. Lesher QTIP Trust
Melinda K. Lesher Trust
Cynthia Ann Lesher Trust
Patricia Ryan Hilton Trust
Roxanne Ryan Gibson Trust
Sarah Margaret Alves Trust
