<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 13, 1997
-----------------------------
Garden State Newspapers, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 22-2675173
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1560 Broadway, Suite 1450, Denver, CO 80202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 837-0886
No Change
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(Former name or former address, if changed since last report.)
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<PAGE> 2
Item 2. Acquisition or Disposition of Assets
Effective February 14, 1997, Garden State Newspapers, Inc. (the "Registrant"),
sold substantially all the assets used in the publication of the Potomac News
and two weekly publications to Community Newspaper Holdings, Inc. for $48.0
million in cash, plus an adjustment for working capital.
The disposition was consummated in accordance with the Asset Purchase Agreement
dated February 13, 1997 (the "Agreement") between Garden State Newspapers, Inc.
and Community Newspaper Holdings, Inc. The description contained herein is
qualified by reference to the Agreement, which is attached as an Exhibit
hereto.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
The following Financial Statements and Pro Forma Financial Information are
hereby filed as a part of this report.
(a) Financial Statements of Business Acquired
Not applicable.
(b) Unaudited Pro Forma Financial Information
Unaudited pro forma financial information has been presented for the
disposition of substantially all the assets used in the publication of
the Potomac News beginning at page 4 of this report.
(c) Exhibits
2.1 Asset Purchase Agreement dated February 13, 1997, by and among
Garden State Newspapers, Inc., as Seller, and Community
Newspaper Holdings, Inc., as Buyer.
1
<PAGE> 3
GARDEN STATE NEWSPAPERS, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The accompanying unaudited pro forma balance sheet as of December 31, 1996,
gives effect to the sale of substantially all the assets used in the
publication of the Potomac News and two related weekly publications, as if the
sale had occurred as of December 31, 1996.
The accompanying unaudited pro forma consolidated statements of operation for
the six months ended December 31, 1996, and for the year ended June 30, 1996,
give effect to the February 13, 1997, sale of the Potomac News and the October
31, 1996, acquisition of the Star-News, Whittier Daily News, San Gabriel Valley
Tribune, Times-Standard, The Evening Sun and various related publications,
collectively referred to as the "Acquisition/Disposition Transactions," as if
the Acquisition/Disposition Transactions had occurred on July 1, 1996 and July
1, 1995, respectively. The pro forma adjustments related to the October 31,
1996, acquisitions were previously reported on Form 8-K/A filed on January 13,
1997.
These pro forma statements are not necessarily indicative of the future
operations or of the consolidated results of operations had the
Acquisition/Disposition Transactions actually taken place on July 1, 1996 or
July 1, 1995. The pro forma financial information should be read in
conjunction with the Company's historical financial statements and notes
thereto appearing in the Company's Forms 10-K and 10-Q for the periods ending
June 30, 1996 and December 31, 1996, respectively.
2
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GARDEN STATE NEWSPAPERS, INC.
Date: February 28, 1997 By: /s/ Joseph J. Lodovic, IV
---------------------------------
Joseph J. Lodovic, IV
Executive Vice President,
Chief Financial Officer
3
<PAGE> 5
GARDEN STATE NEWSPAPERS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
ASSETS As Pro Forma
Reported Adjustments Pro Forma
-------- ----------- ---------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . $ 2,168 $ 48,400 (c) $ 50,568
Accounts receivable, less allowance
for doubtful accounts . . . . . . . . . . . . . . 37,091 (2,158) (a) 34,933
Inventories of newsprint and supplies . . . . . . . 6,168 (130) (a) 6,038
Prepaid expenses and other assets . . . . . . . . . 4,390 (163) (a) 4,227
-------- -------- --------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . 49,817 45,949 95,766
PROPERTY, PLANT AND EQUIPMENT
Land . . . . . . . . . . . . . . . . . . . . . . . 7,567 (800) (a) 6,767
Buildings and improvements . . . . . . . . . . . . 37,956 (727) (a) 37,229
Machinery and equipment . . . . . . . . . . . . . . 114,278 (5,197) (a) 109,081
-------- -------- --------
Total Property, Plant and Equipment . . . . . . 159,801 (6,724) 153,077
Less accumulated depreciation and amortization . . (54,837) 2,893 (a) (51,944)
-------- -------- --------
Net Property, Plant and Equipment . . . . . . . 104,964 (3,831) 101,133
OTHER ASSETS
Investment in partnership . . . . . . . . . . . . 6,614 -- 6,614
Subscriber accounts, net of accumulated
amortization . . . . . . . . . . . . . . . . . . . 57,069 -- 57,069
Excess of cost over fair value of net assets
acquired, 148,731 (12,760) (a) 135,971
net of accumulated amortization . . . . . . . . .
Covenants net of compete and other identifiable
intangible assets, not to accumulated amortization 7,588 -- 7,588
Other . . . . . . . . . . . . . . . . . . . . . . . 1,862 (3) (a) 1,859
-------- -------- --------
TOTAL OTHER ASSETS . . . . . . . . . . . . . . 221,864 (12,763) 209,101
-------- -------- --------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . $376,645 $ 29,355 $406,000
======== ======== ========
</TABLE>
See notes to unaudited pro forma financial information.
4
<PAGE> 6
GARDEN STATE NEWSPAPERS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, 1996
(In Thousands)
<TABLE>
<CAPTION>
As Pro Forma
Reported Adjustments Pro Forma
-------- ----------- ---------
<S> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Trade accounts payable . . . . . . . . . . . . . . . . . . $ 3,576 $ (287) (a) $ 3,289
Accrued liabilities . . . . . . . . . . . . . . . . . . . . 21,818 35 (a)(b) 21,853
Unearned income . . . . . . . . . . . . . . . . . . . . . . 9,494 (212) (a) 9,282
Income taxes . . . . . . . . . . . . . . . . . . . . . . . 750 3,050 (e) 3,800
Current portion of long-term debt and
capital lease obligation . . . . . . . . . . . . . . . . 12,162 -- 12,162
-------- -------- --------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . 47,800 (2,586) 50,386
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATION . . . . . . . . . . . . . . . . . . . . . . . . . 341,049 -- 341,049
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . 5,796 -- 5,796
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . 11,617 (3,996) (e) 7,621
SHAREHOLDERS' DEFICIT
Common stock . . . . . . . . . . . . . . . . . . . . . . . 1 -- 1
Additional paid in capital . . . . . . . . . . . . . . . . 78,570 -- 78,570
Deficit . . . . . . . . . . . . . . . . . . . . . . . . . (108,188) 30,765 (d) (77,423)
-------- -------- --------
TOTAL SHAREHOLDERS' DEFICIT . . . . . . . . . . . . . . . (29,617) 30,765 1,148
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'
DEFICIT . . . . . . . . . . . . . . . . . . . . . . . . . $376,645 $ 29,355 $406,000
======== ======== ========
</TABLE>
See notes to unaudited pro forma financial information.
5
<PAGE> 7
GARDEN STATE NEWSPAPERS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended December 31, 1996
(In Thousands)
<TABLE>
<CAPTION>
Acquisition Disposition
and and
As Pro Forma Pro Forma
Reported Adjustments Adjustments Pro Forma
---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . . $ 139,965 $ 23,225 $ (6,336) (i) $ 156,854
COST AND EXPENSES
Cost of sales . . . . . . . . . . . . . 50,289 7,539 (a)(c)(e) (2,148) (i) 55,680
Selling, general, and administrative . 58,187 9,571 (b)(c)(d) (2,228) (i) 65,530
Depreciation and amortization . . . . . 10,967 2,151 (f) (687) (i) 12,431
Interest expense . . . . . . . . . . . 14,390 3,303 (g) -- 17,693
Other, (net) . . . . . . . . . . . . . 14,274 -- 27 (i) 14,301
---------- ----------- ----------- -----------
TOTAL COST AND EXPENSES . . . . . . . 148,107 22,564 5,036 165,635
INCOME (LOSS) BEFORE INCOME TAXES . . . . (8,142) 661 (1,300) (8,781)
INCOME TAX EXPENSE . . . . . . . . . . . (683) (16) (h) (27) (j) (726)
---------- ----------- ----------- -----------
NET INCOME (LOSS) . . . . . . . . . . . . $ (8,825) $ 645 $ (1,327) $ (9,507)
========== =========== =========== ===========
</TABLE>
See notes to unaudited pro forma financial information.
6
<PAGE> 8
GARDEN STATE NEWSPAPERS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended June 30, 1996
(In Thousands)
<TABLE>
<CAPTION>
Acquisition Disposition
and and
As Pro Forma Pro Forma
Reported Adjustments Adjustments Pro Forma
---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . .$ 245,430 $ 68,912 $ (12,040) (i) $ 302,302
COST AND EXPENSES
Cost of sales . . . . . . . . . . . . . . . 98,469 28,700 (a)(c)(e) (4,525) (i) 122,644
Selling, general, and administrative . . . 102,238 24,611 (b)(c)(d) (4,287) (i) 122,562
Depreciation and amortization . . . . . . . 21,841 6,453 (f) (2,369) (i) 25,925
Interest expense . . . . . . . . . . . . . 27,414 9,909 (g) -- 37,323
Other, (net) . . . . . . . . . . . . . . . 4,511 -- (223) (i) 4,288
---------- ------------ ----------- -----------
TOTAL COST AND EXPENSES . . . . . . . . . 254,473 69,673 (11,404) 312,742
GAIN ON SALE OF NEWSPAPER PROPERTY . . . . . 8,291 -- -- 8,291
---------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES . . . . . . (752) (761) (636) (2,149)
INCOME TAX BENEFIT . . . . . . . . . . . . . 2,012 -- (h) (274) (j) 1,738
---------- ----------- ----------- -----------
NET INCOME (LOSS) . . . . . . . . . . . . . .$ 1,260 $ (761) $ (910) $ (411)
========== =========== =========== ===========
</TABLE>
See notes to unaudited pro forma financial information.
7
<PAGE> 9
GARDEN STATES NEWSPAPERS, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
NOTE 1: UNAUDITED PRO FORMA BALANCE SHEETS
(a) To eliminate the assets and liabilities of the
Potomac News as of December 31, 1996, which were sold
pursuant to the February 13, 1997, Asset Purchase
Agreement.
(b) Accrue certain estimated costs which were directly
associated with the sale of the Potomac News.
(c) Increase cash to reflect the estimated working
capital payment and the proceeds from the sale. The
proceeds from the sale will be reinvested in an
acquisition expected to close on February 28, 1997.
(d) Adjust retained earning to reflect the gain on the
sale of the Potomac News as of December 31, 1996.
(e) Deferred taxes have been eliminated and the majority
reclassified to current income taxes to reflect the
estimated taxes payable associated with the sale of
the Potomac News.
NOTE 2: UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(a) Adjust cost of sales to reflect the newsprint savings
of adjusting the web width of the presses to 50
inches and to reflect the Company's historical cost
of newsprint.
(b) Pension expense was eliminated as the pension plan
was not acquired and no new defined benefit pension
plan will be installed at any of the acquired
newspapers.
(c) Certain personnel who were employed by the newspapers
prior to acquisition were not hired or replaced by
Garden State subsequent to the acquisition.
Accordingly, the cost of employing these individuals
has been eliminated.
(d) Certain excessive executive bonuses have been
eliminated.
8
<PAGE> 10
GARDEN STATE NEWSPAPERS, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION--CONTINUED
NOTE 2: UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS--CONTINUED
(e) Effective with the acquisition, certain cost savings
have been implemented with respect to the acquired
newspapers including the cost of acquiring plates,
comics, TV books and Sunday magazines. The cost
savings have been reflected as a pro forma
adjustment.
(f) Depreciation and amortization expense of the acquired
assets has been adjusted to reflect the fair market
value of the acquired assets and the useful lives
assigned to these assets.
(g) Interest expense has been adjusted to reflect the
borrowings and rates of debt utilized in the
acquisition of the assets.
(h) Income taxes reflect the estimated state taxes that
would be due if Garden State had owned the acquired
newspapers during the pro forma periods presented.
Historical income taxes have been eliminated.
(i) Eliminate revenues and expenses directly associated
with the operations of the Potomac News.
(j) Income taxes have been adjusted to eliminate the
deferred tax benefit associated with the Potomac News
assets and liabilities.
NOTE 3: The unaudited pro forma consolidated statements of operations for the
six months ended December 31, 1996, and year ended June 30, 1996, do
not reflect the estimated pretax gain on the sale of the Potomac News
of approximately $31.0 million.
9
<PAGE> 1
ASSET PURCHASE AGREEMENT
DATED AS OF February 13, 1997
BY AND AMONG
MID-STATES NEWSPAPERS, INC., AS SELLER
AND
NEWSPAPER HOLDINGS, INC., AS BUYER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE 1
SALE AND TRANSFER
1.1 The Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3 Assumption of Obligations and Liabilities . . . . . . . . . . . . . . 5
ARTICLE 2
PURCHASE PRICE CLOSING ADJUSTMENTS
2.1 Purchase Price and Covenants Not to Compete . . . . . . . . . . . . . 7
2.2 Working Capital Settlement . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 3
THE CLOSING
3.1 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Deliveries by Seller . . . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Deliveries by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Authority Relative to this Agreement . . . . . . . . . . . . . . . . 14
4.3 Noncontravention; Consents and Approvals . . . . . . . . . . . . . . 15
4.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . 16
4.6 Certain Contracts and Arrangements . . . . . . . . . . . . . . . . . 17
4.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.8 Labor Matters; Personnel Data . . . . . . . . . . . . . . . . . . . . 18
4.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.10 Licenses and Authorizations . . . . . . . . . . . . . . . . . . . . . 19
4.11 Title to Real Property . . . . . . . . . . . . . . . . . . . . . . . 20
4.12 Title to Personal Property . . . . . . . . . . . . . . . . . . . . . 21
4.13 Condition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.14 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.15 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.16 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . 22
4.17 Circulation and Advertising Linage . . . . . . . . . . . . . . . . . 22
4.18 Postal Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.19 ABC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.20 Legal Advertisements . . . . . . . . . . . . . . . . . . . . . . . . 23
4.21 Subscribers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.22 Newsrack Locations . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.23 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.24 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . 25
4.25 Relationships with Affiliates . . . . . . . . . . . . . . . . . . . . 25
4.26 Totality of Assets . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.27 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.28 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
- i -
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.2 Authority Relative to this Agreement . . . . . . . . . . . . . . . . 26
5.3 Noncontravention; Consents and Approvals . . . . . . . . . . . . . . 27
5.4 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.5 Hart-Scott-Rodino . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 6
COVENANTS OF THE PARTIES
6.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.2 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . 29
6.3 Other Consents, Waivers and Approvals . . . . . . . . . . . . . . . . 30
6.4 Consummation of Agreement . . . . . . . . . . . . . . . . . . . . . . 30
6.5 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . 30
6.6 Solicitation of Employees . . . . . . . . . . . . . . . . . . . . . . 30
6.7 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . 30
6.8 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . 31
6.9 Release of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.10 Environmental and Health and Safety Matters . . . . . . . . . . . . . 31
6.11 Billing Services . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.12 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF BUYER
7.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . 33
7.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.3 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.4 Certain Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.6 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . 33
7.7 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.8 Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.9 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.10 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.11 Circulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.12 Seller's Actions . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.13 Document Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF SELLER
8.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . 35
8.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.3 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.4 Certain Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.6 Document Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 9
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
9.1 Survival of Representations . . . . . . . . . . . . . . . . . . . . . 36
9.2 Seller's Agreement to Indemnify . . . . . . . . . . . . . . . . . . . 37
9.3 Buyer's Agreement to Indemnify . . . . . . . . . . . . . . . . . . . 39
ARTICLE 10
TERMINATION
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2 Procedure and Effect of Termination . . . . . . . . . . . . . . . . . 41
ARTICLE 11
MISCELLANEOUS PROVISIONS
11.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.2 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.3 Amendment and Modification . . . . . . . . . . . . . . . . . . . . . 43
11.4 Waiver of Compliance; Consents . . . . . . . . . . . . . . . . . . . 43
11.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.6 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.7 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.9 Consent to Jurisdiction, etc. . . . . . . . . . . . . . . . . . . . . 45
11.10 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . 45
11.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.12 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.13 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.15 Bulk Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.16 Cooperation With Respect to Taxes and Other Matters . . . . . . . . . 46
11.17 Glossary of Defined Terms . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
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<PAGE> 5
EXHIBITS
<TABLE>
<S> <C>
Exhibit A - Assignment and Assumption Agreement
Exhibit B - Form of Covenant Not to Compete
Exhibit C - Pre-Closing Statement of Current Assets and Current Liabilities
Exhibit D - Closing Statement of Current Assets and Current Liabilities
Exhibit E - Seller's Officer's Certificate
Exhibit F- Opinion of Counsel to Seller
Exhibit G - Buyer's Officer's Certificate
Exhibit H - Opinion of Counsel to Buyer
</TABLE>
DISCLOSURE SCHEDULE
<TABLE>
<S> <C> <C>
1.2(g) - Corporate Overhead Assets
2.1(a) - Individuals Executing Covenant Not to Compete
4.3(a) - Transaction Conflicts
4.3(b) - Required Consents
4.4 - Financial Statement Exceptions
4.5 - Certain Changes
4.6 - Certain Contracts and Arrangements
4.7 - Litigation
4.8(a) - Collective Bargaining Agreements
4.8(b) - Employees
4.9 - Tax Matters
4.10 - Licenses
4.11 - Real Property Owned or Leased by Seller
4.12 - Personal Property
4.14 - Value of Inventories
4.16 - Intellectual Property
4.17 - Circulation and Advertising Linage
4.20 - Legal Notice Jurisdictions
4.21 - Subscribers
4.22 - Newsrack Locations
4.23 - Environmental Matters
4.25 - Relationship with Affiliates
</TABLE>
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<PAGE> 6
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is entered into as of
February 13, 1997, by and between Mid-States Newspapers, Inc., a Delaware
corporation ("Seller"); and Newspaper Holdings, Inc., a Delaware corporation
("Buyer").
PRELIMINARY STATEMENTS
A. Seller owns and operates The Potomac News, The Stafford County
Sun, The Potomac News Market Place and The Manassas Extra located in
Woodbridge, Virginia and the assets related thereto (the "Newspapers").
B. Buyer desires to acquire the ongoing businesses and all of the
assets owned by Seller and used or useful in connection with the operation of
the Newspapers (except assets specifically excluded herein), and Seller desires
to sell such businesses and assets to Buyer, upon the terms and conditions
stated herein.
In consideration of the mutual covenants and agreements set forth
herein, and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
SALE AND TRANSFER
1.1 The Sale. Upon the terms and subject to the conditions set forth
in this Agreement, on the Closing Date (as defined in Section 3.1 hereof),
Seller agrees to sell, assign, transfer and deliver to Buyer, and Buyer agrees
to purchase and accept from Seller, free and clear of all liens, encumbrances,
mortgages or security interests, except as expressly permitted in Section
3.2(a), all of the assets and properties of Seller, whether real, personal,
tangible or intangible, which are owned by Seller and used or
useful in connection with the Newspapers as their businesses are currently
conducted (specifically excepting the Excluded Assets described in Section 1.2
hereof), including all additions thereto through and including the Closing
Date, but less all dispositions thereof as permitted pursuant to Section 6.1
hereof through and including the Closing Date, such assets and properties being
referred to herein as the "Assets", and including without limitation the
following:
(a) Seller's parcels of real property owned in fee and used or
useful in the ownership or operation of the Newspapers as their businesses are
currently conducted, and all buildings, structures and other improvements
located thereon, and all easements, rights of way and similar authorizations
used or
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useful in the conduct of the businesses and operations of the Newspapers,
including the parcels of real property owned in fee and all easements, rights
of way and similar authorizations, all of which are described in Section 4.11
of a document delivered by Seller to Buyer contemporaneously with the execution
of this Agreement (such document is referred to herein as the "Disclosure
Schedule");
(b) All of the tangible personal property other than that
described as an Excluded Asset below in Section 1.2 which is owned and used or
useful in the conduct of the businesses and operations of the Newspapers,
including furniture, fixtures, machinery, equipment and vehicles, including
without limitation, the tangible personal property listed in Section 4.12 of
the Disclosure Schedule;
(c) All contracts, agreements, options, leases (whether of
realty or personalty), and commitments of Seller which are related to the
conduct of the businesses and operations of the Newspapers, other than those
described as Excluded Assets in Section 1.2 below, whether oral or written,
express or implied, including leases of property used in the operations of the
Newspapers, rights and interests in and under purchase contracts for new
equipment, including purchase price deposits, advertising sales and newspaper
distribution contracts, supplier contracts, advertising service contracts and
all service and feature or other information provider contracts, and which
either (i) are listed in Section 4.6 of the Disclosure Schedule; (ii) are
advertising contracts entered into in the ordinary course of business at
published rates and on a form substantially the same as one of the forms
included in Section 4.6 of the Disclosure Schedule; (iii) are news carrier
contracts entered into in the ordinary course of business and on a form
substantially the same as the form included in Section 4.6 of the Disclosure
Schedule; (iv) are other contracts which were entered into in the ordinary
course of business consistent with past practice and do not involve monetary
obligations individually or in the aggregate of more than Fifty Thousand
Dollars ($50,000); or (v) are entered into after the date hereof in the
ordinary course of business in accordance with Section 6.1 hereof or with the
prior written consent of Buyer (all of such contracts, agreements, options,
leases or commitments are sometimes referred to herein collectively as the
"Contracts");
(d) All orders for the sale of advertising and subscriptions
which relate to the Newspapers;
(e) All permits, licenses and authorizations issued by local,
state and federal authorities, and applications
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therefor, which are held by Seller or any Newspaper, that are used or useful in
the conduct of the business of any Newspaper as currently conducted, including
those set forth in Section 4.11 of the Disclosure Schedule (all of such
licenses, permits and authorizations are sometimes collectively referred to
herein as the "Licenses");
(f) All mastheads, trade names, trademarks, service marks,
service names and other similar intangible rights and interests, which are used
or useful in connection with the business and operations of any Newspaper as
currently conducted;
(g) All artwork, copyrights and other ownership rights related
to the contents of the Newspapers, all copies of previously published editions
of the Newspapers the Newspapers' morgue or library and copies of all material
files, financial information and all accounting records relating to the assets
or operations of the Newspapers and located at any offices or facilities of the
Newspapers, including without limitation any current financial data with
respect to the Newspapers, together with computer print-outs thereof containing
all current and historical financial information (including state income tax
returns relating to the Newspapers and sales, use and property tax returns for
the Newspapers) maintained by Seller with respect to the Newspapers (separate
from any such data maintained for any other publications of Seller) and all
related intellectual property;
(h) All prepaid taxes (excluding income taxes) and expenses
with respect to the businesses and operations of the Newspapers;
(i) All inventories of newsprint, ink, film, photographic
paper and plates, spare parts, supplies, fuel and other consumable items used
or useful in connection with the businesses and operations of the Newspapers as
currently conducted;
(j) All surety bonds, surety deposits and security deposits
posted by or on behalf of Seller as security for its or the Newspapers'
performance of any Contract or obligation to be assumed by Buyer pursuant to
this Agreement;
(k) All cash bonds and trust accounts related to carriers for
the Newspapers;
(l) All subscriber, advertiser and trade accounts receivable
due to Seller as a result of the businesses and
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operations of the Newspapers prior to the Adjustment Time (as hereinafter
defined);
(m) To the extent in existence, all contracts of life
insurance and any cash surrender value in regard thereto;
(n) Seller's records, files and data used in the business and
operations of the Newspapers, including maps, plans, diagrams, engineering
data, blueprints and schematics, if any;
(o) All other current assets of Seller, other than Excluded
Assets, to the extent reflected on the final Closing Date Statement of Current
Assets and Current Liabilities arising prior to the Adjustment Time; and
(p) All other assets owned by Seller and used or useful in the
businesses and operations of the Newspapers as currently conducted not
specifically referred to above and not described below as Excluded Assets.
1.2 Excluded Assets. Notwithstanding anything contained herein to
the contrary, the following properties and assets (the "Excluded Assets") shall
be retained by Seller and shall not be sold, assigned or transferred to Buyer:
(a) all of Seller's cash in its bank accounts;
(b) any Employee Plan, Compensation Arrangement or Multi-
employer Plan (all as defined below in Section 1.3);
(c) contracts for acquisition of newsprint and any other
contracts or agreements of any nature whatsoever of Seller or the Newspapers
not specifically assumed by Buyer hereunder, including, without limitation, the
car lease applicable to the publisher (or former publisher) of The Potomac
News;
(d) all contracts of property and casualty insurance and all
insurance plans and the assets thereof and all bonds, letters of credit or
similar items and any cash surrender value in regard thereto;
(e) any and all claims of Seller with respect to transactions
occurring prior to the Closing Date, including, without limitation, rights and
interests of Seller in and to any claims for tax refunds (including, but not
limited to, federal, state or local franchise, income or other taxes) and all
causes of action and claims of Seller under contracts and with respect to other
transactions with respect to events occurring prior to
<PAGE> 10
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the Closing Date and all claims for other refunds of monies paid to any
governmental agency;
(f) Seller's minute books, stock ledgers and other books and
records that pertain to internal matters of Seller and Seller's account books
of original entry with respect to any Newspaper or any Assets, and all original
accounts, checks, payment records, tax records (including payroll,
unemployment, real estate and other tax records) and other similar books,
records and information of Seller relating to Seller's operation of the
business of any Newspaper or any Assets, prior to Closing; and
(g) assets of a corporate overhead nature, described on
Schedule 1.2(g) hereto, that are utilized in the business or operations of one
or more affiliates of the Newspapers; provided that such assets shall not
include operating and financial computer hardware located at the site of the
Newspapers.
1.3 Assumption of Obligations and Liabilities. As of the Closing
Date, Buyer shall assume, pay, discharge and perform the following:
(a) all the obligations and liabilities of Seller under the
Contracts which are attributable to the period after 11:59 p.m. on February 13,
1997 (the "Adjustment Time"), by the terms thereof, are to be observed, paid,
discharged or performed, as the case may be, at any time after the Adjustment
Time;
(b) all obligations and liabilities (other than those relating
to any contract or agreement which is not a Contract) arising out of any fact
or circumstance which relates to the ownership and operation of the Newspapers
and the Assets and which occurs after the Adjustment Time;
(c) all trade accounts payable accrued with respect to the
Newspapers as of the Adjustment Time to the extent, but only to the extent,
reflected on the Closing Date Statement of Current Assets and Current
Liabilities, as hereinafter defined;
(d) all liabilities of Seller as of the Adjustment Time with
respect to the delivery of copies of the Newspapers for the then remaining term
of any and all prepaid subscriptions to the extent, but only to the extent,
reflected on the Closing Date Statement of Current Assets and Current
Liabilities, as hereinafter defined;
<PAGE> 11
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(e) all real estate, personal property, sales and use taxes
arising out of the operations of the Newspapers prior to the Adjustment Time
and accrued as of the Adjustment Time to the extent, but only to the extent,
reflected on the Closing Date Statement of Current Assets and Current
Liabilities, as hereinafter defined;
(f) all accrued vacation benefits for employees of Seller
hired by Buyer as of the Adjustment Time with respect to work performed prior
thereto to the extent, but only to the extent, reflected on the Closing Date
Statement of Current Assets and Current Liabilities, as hereinafter defined;
and
(g) all other current liabilities of the Seller to the extent,
but only to the extent, reflected on the Closing Date Statement of Current
Assets and Current Liabilities, as hereinafter defined, and the $5000
relocation bonus referred to in Section 2.2(a)(i) hereof.
With respect to subsections (c) through (g) above, it is the intent and
agreement of the parties that the Closing Date Statement of Current Assets and
Current Liabilities will reflect all Current Liabilities of the Seller which
are required in accordance with the terms of this Agreement to be reflected on
such statement and Buyer, in preparing such statement, will reflect on such
Statement such Current Liabilities of which it is aware at the time of
preparing such statement.
Other than as expressly specified in this Agreement or in the Assignment
and Assumption Agreement (the "Assumption Agreement") in the form annexed
hereto as Exhibit A, Buyer shall not, nor shall it have the obligation to
assume, pay, perform, discharge or be responsible or liable for, any
obligations, duties, claims, commitments, expenses, current or deferred income
taxes, agreements or other liabilities of Seller or relating to the Newspapers
of any nature whatsoever, which obligations, duties and liabilities shall
remain the obligations, duties and liabilities of Seller. Without limiting the
generality of the foregoing, except as otherwise may be provided in this
Agreement or the Assumption Agreement, Buyer shall not be liable for any (i)
litigation or other proceedings of any nature whatsoever attributable to the
period prior to the Adjustment Time; (ii) any workmen's compensation claims
attributable to the period prior to the Adjustment Time; (iii) obligation under
any Employee Plan, Compensation Arrangement, Multi-employer Plan; (iv) any
obligation to employees of the Newspapers to pay wages, commissions, salaries,
bonuses, severance, accrued sick leave, accrued vacation; or (v) any other form
of employee compensation or benefits earned, vested or accrued prior to the
Adjustment
<PAGE> 12
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Time or arising out of the transactions contemplated by this Agreement,
including without limitation, any such compensation or benefits arising out of
the termination of employment of any employee of the Newspapers resulting from
the transactions contemplated by this Agreement.
The following definitions shall be used in this Agreement:
(i) "Compensation Arrangement" shall mean any plan or
compensation arrangement other than an Employee Plan, whether written or
unwritten, which provides to employees or former employees of the Newspaper any
compensation or other benefits, whether deferred or not, in excess of base
salary or wages and excluding overtime pay, including, but not limited to, any
bonus or incentive plan, stock rights plan, deferred compensation arrangement,
life insurance, stock purchase plan, severance pay plan and any other
perquisites and employee fringe benefit plan.
(ii) "Employee Plan" shall mean any pension, retirement,
profit-sharing, deferred compensation, vacation, severance, bonus, incentive,
medical, vision, dental, disability, life insurance or any other employee
benefit plan as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), to which Seller or any entity
related to Seller (under the terms of Sections 414(b), (c), (m) or (o) of the
Internal Revenue Code of 1986, as amended (the "Code")) contributes or to which
Seller or any entity related to Seller (under the terms of Sections 414(b),
(c), (m) or (o) of the Code), sponsors, maintains or otherwise is bound.
(iii) "Multi-employer Plan" shall mean a plan, as defined
in ERISA Section 3(37), to which Seller or any entity related to Seller (under
the terms of Sections 414(b), (c), (m) or (o) of the Code) contributes or is
required to contribute.
ARTICLE 2
PURCHASE PRICE CLOSING ADJUSTMENTS
2.1 Purchase Price and Covenants Not to Compete.
(a) In consideration of Forty Eight Million Dollars
($48,000,000)(subject to adjustment, as provided for in Section 2.2, the
"Purchase Price"), at the Closing (as hereinafter defined) Seller agrees to
sell, transfer and assign the Assets to Buyer, Seller and Guarantor (as
hereinafter defined) agree to enter into the Covenant Not to Compete,
<PAGE> 13
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substantially in the form of Exhibit B attached hereto (a "Covenant Not to
Compete"), and Seller agrees to cause the individual listed in Section 2.1(a)
of the Disclosure Schedule to execute a Covenant Not to Compete at Closing.
Notwithstanding the foregoing, the individual listed in Section 2.1(a) of the
Disclosure Schedule shall receive a payment from Buyer of $1000 in
consideration of such individual's execution of the Covenant Not to Compete,
such amount to be deducted from the Purchase Price to be paid to Seller.
(b) The Purchase Price shall be payable by wire transfer in
immediately available funds payable at the Closing (as hereinafter defined) to
a bank account to be designated by Seller.
2.2 Working Capital Settlement.
(a) For purposes of this Agreement, the following terms shall
have the following meanings:
(i) "Current Liabilities" shall be all the current
liabilities (including liabilities, whether recorded or unrecorded, for
employee vacations and all employee benefits to the extent not discharged by
Seller) attributable to the operations of the Newspapers determined in
accordance with generally accepted accounting principles ("GAAP") as of the
Adjustment Time, but excluding federal and state income taxes payable
(including the current portion of deferred taxes) and intercompany liabilities
including, but not limited to, intercompany management and accounting fees
payable, and subject to the other provisions of this Section 2.2. Current
Liabilities shall also include a $5000 relocation bonus to be paid after the
Closing Date by Buyer to the circulation manager of The Potomac News and an
amount of $5,250 in respect of correction of certain matters specified in that
certain draft Environmental and Workplace Audit Report for The Potomac News,
Woodbridge, Virginia dated January 29, 1997, prepared by Goldman Environmental
Consultants, Inc.
For purposes of clarification, it is understood and agreed by the
parties that Current Liabilities shall not include (1) any adjustment for
accrued sick leave, if in accordance with Seller's past practices, there is no
legal obligation to pay any cash amount to such employees in respect of such
sick leave; provided that if there is such an obligation, an adjustment shall
be made and, in such event, Buyer shall assume such obligation to the extent of
the adjustment; (2) any adjustment for any severance liability of Seller (and
which it is understood and agreed shall be retained by Seller) in respect of
employees of the Newspapers; and (3) any adjustment for wages, commissions,
carrier tips, salaries, bonuses, vacation, benefit plan contributions or other
form of employee compensation and related payroll and other taxes
(collectively, "Employee Related Payments") attributable to the employees of
<PAGE> 14
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the Newspapers accrued prior to the Adjustment Time to the extent Seller has
made payment in respect of the same for the period prior to the Adjustment Time
in accordance with the following paragraph. If Seller has not made such
payment of Employee Related Payments, Current Liabilities shall include
Employee Related Payments attributable to the period prior to the Adjustment
Time for employees of the Newspapers who accepted employment with Buyer.
Employee Related Payments shall not include the $5000 relocation bonus referred
to above.
Seller agrees that it shall cause to be paid on or prior to the Closing
Date, all Employee Related Payments attributable to the period prior to the
Adjustment Time with respect to all persons employed by the Newspapers as of or
prior to the Adjustment Time. With respect to the payment of subsequent
payrolls for employees of the Newspapers who are employed by Buyer subsequent
to the Closing Date, it is Buyer and Seller's intention that, to the extent
legally permissible, Buyer be treated as a successor employer for federal
payroll tax purposes under the alternative procedures set forth in Rev. Proc.
96-60. To this end, if the treatment in the foregoing sentence is legally
permissible, Seller and Buyer covenant that they will file Internal Revenue
Service Form 941.
(ii) "Current Assets" shall be the following, determined
in accordance with GAAP as of the Adjustment Time:
(A) All cash on hand that is received by Buyer
and is not an Excluded Asset;
(B) All prepaid expenses attributable to the
Newspapers classified as current assets and that are not attributable to
Excluded Assets;
(C) Inventory attributable to the Newspapers;
(D) Deposits attributable to the Newspapers
classified as current assets and that are not attributable to Excluded Assets;
and
(E) All other current assets attributable to the
Newspapers and that are not attributable to
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Excluded Assets, stated at cost (excluding cash in banks retained by Seller,
income taxes receivable, the current portion of deferred income taxes and
intercompany receivables); provided that in the case of accounts receivable, an
adequate allowance for doubtful accounts determined in accordance with GAAP in
accordance with Seller's past practices shall be made.
(iii) "Working Capital" shall mean the excess of Current
Assets over Current Liabilities, as such terms are defined above and subject to
calculation in accordance with the applicable provisions of this Section 2.2,
including, without limitation, Section 2.2(e) hereof.
(b) At the Closing, Seller shall prepare and deliver to Buyer
an estimated Statement of Current Assets and Current Liabilities reasonably
acceptable to Buyer, substantially in the form of Exhibit C attached hereto as
of the Adjustment Time (the "Pre-Closing Statement of Current Assets and
Current Liabilities") for the Newspapers.
(c) Prior to, or as of the Closing, Seller shall (i) cause all
liabilities of the Newspapers not included in the Pre-Closing Statement of
Current Assets and Current Liabilities and/or Closing Date Statement of Assets
and Liabilities, or not otherwise expressly assumed by Buyer at the Closing, to
be discharged in full, at no cost or expense to Buyer or the Newspapers; or
(ii) if not so discharged, Seller shall retain all responsibility and
obligation for such liabilities.
(d) At the Closing, the Purchase Price shall be (i) increased
by the amount that estimated Working Capital as of the Adjustment Time as set
forth in the Pre-Closing Statement of Current Assets and Current Liabilities
exceeds Three Hundred Thousand Dollars ($300,000), up to but not exceeding an
amount of Seven Hundred Thousand Dollars ($700,000) or (ii) decreased by the
amount that estimated Working Capital as of the Adjustment Time as set forth in
the Pre-Closing Statement of Current Assets and Current Liabilities is less
than Three Hundred Thousand Dollars ($300,000).
(e) (i) Within one hundred ninety(190) days after the Closing,
Buyer shall prepare a Statement of Current Assets and Current Liabilities,
substantially in the form of Exhibit D attached hereto as of the Adjustment
Time (the "Closing Date Statement of Current Assets and Current Liabilities"),
and submit such statement to Seller for review and approval.
(ii) Notwithstanding anything to the contrary contained
herein, for purposes of preparing the Closing Date
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Statement of Current Assets and Current Liabilities, in determining Current
Assets as of the Adjustment Time the calculation of accounts receivable of
Seller attributable to the Newspapers as of the Adjustment Time shall be
determined based on the actual amounts collected by Buyer in respect of such
accounts receivable during the one hundred eighty (180) day period following
Closing, irrespective of any reserves or allowances in respect of such accounts
receivable provided for in the Pre-Closing Date Statement of Current Assets and
Current Liabilities.
(iii) Buyer will use all commercially reasonable efforts
during the one hundred eighty (180) day period specified above to collect
Seller's accounts receivable attributable to the Newspapers as of the
Adjustment Time, but will not be required to exercise extraordinary efforts to
collect such receivables, including without limitation, the institution of
litigation or the referral of such accounts to an attorney or collection agency
for collection. Buyer shall not settle or adjust the amount of any such
accounts receivable without the written consent of Seller. If Buyer receives
money from an account debtor of Buyer that is also an account debtor of Seller
with respect to any of such accounts receivable of Seller subject hereto, Buyer
shall credit the sums received to the oldest account due, unless there is a
good faith dispute with respect to either account and the account debtor
specifically identifies the invoice being paid, in which case any payment by
such account debtor shall be applied in accordance with any remittance advice
or instructions from the account debtor; provided that to the extent any amount
in excess of the amount of such invoice is received by Buyer, Buyer shall
credit such amounts received to the oldest account due.
(iv) After expiration of the one hundred eighty
(180) day period, at the same time Buyer delivers to Seller the Closing Date
Statement of Current Assets and Current Liabilities, Buyer will deliver to
Seller a list of the amounts collected in respect of such accounts receivable
of Seller subject hereto.
(v) Any accounts receivable of Seller subject
hereto and not collected during such one hundred eighty (180) day period shall
be retained by Buyer and Seller shall have no further right or interest
therein.
(vi) To the extent the actual amount collected in
respect of Seller's accounts receivable during the one hundred eighty (180) day
collection period (1) exceeds the amount of accounts receivable (net of the
allowance for doubtful accounts) included in Current Assets and shown on the
Pre-Closing
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Date Statement of Current Assets and Current Liabilities, Seller shall be
entitled to an increase in Current Assets equal to interest on such excess
computed from the Closing Date to the date of payment on the settlement of the
Purchase Price based upon the finally agreed upon Closing Date Statement of
Current Assets and Current Liabilities at a rate of interest equal to 7% (seven
percent) per annum; or (2) is less than the amount of accounts receivable (net
of the allowance for doubtful accounts) included in Current Assets and shown on
the Pre-Closing Date Statement of Current Assets and Liabilities, Buyer shall
be entitled to have Current Liabilities increased by an amount equal to
interest on such shortfall computed from the Closing Date to the date of
payment on the settlement of the Purchase Price based upon the finally agreed
upon Closing Date Statement of Current Assets and Current Liabilities at a rate
of interest equal to 7% (seven percent) per annum.
(f) Within thirty (30) days after receipt of the Closing Date
Statement of Current Assets and Current Liabilities, Seller shall notify Buyer
of any objections Seller may have to the Closing Date Statement of Current
Assets and Current Liabilities. In the absence of any such objections, Seller
shall be deemed to have approved the Closing Date Statement of Current Assets
and Current Liabilities for purposes of the adjustment to be made pursuant to
this subsection 2.2(f). If Seller notifies Buyer of any such objections, Buyer
and Seller shall attempt to resolve such objections in good faith for a period
of thirty (30) days from the date of such notice of objections. If any
objections of Seller cannot be resolved by Seller and Buyer within such thirty
(30) day period, such dispute shall immediately be referred to a mutually
satisfactory independent certified public accounting firm of national
reputation which has not been employed by Seller or Buyer during the one year
period preceding the date of such referral, and which has agreed to meet the
time deadlines imposed herein. The determination of such firm with respect to
such dispute, which shall occur on or prior to one hundred twenty (120) days
after Seller's receipt of the Closing Date Statement of Current Assets and
Current Liabilities, shall be conclusive and binding on Seller and Buyer.
Seller and Buyer shall each pay one-half of the fees of such firm.
(g) Within three business days after agreement on the Closing
Statement of Current Assets and Current Liabilities, Buyer and Seller shall
conduct a final settlement of the Purchase Price based on the Closing Date
Statement of Current Assets and Current Liabilities. At such time the
Purchase Price shall be (i) increased by the amount that actual Working Capital
as set forth in the Closing Date Statement of Current Assets and
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Current Liabilities exceeds the estimated Working Capital as set forth in the
Pre-Closing Statement of Current Assets and Current Liabilities; provided that
in no event shall Buyer be obligated to pay, in the aggregate at the Closing
and the Post-Closing settlement provided for herein, for more than Seven
Hundred Thousand Dollars ($700,000) in Working Capital; or (ii) decreased by
the amount that actual Working Capital as set forth in the Closing Date
Statement of Current Assets and Current Liabilities is less than estimated
Working Capital as set forth in the Pre-Closing Statement of Current Assets and
Current Liabilities; provided if there is no Working Capital because Current
Liabilities exceed Current Assets, appropriate calculation of the decrease
shall be made based on such negative Working Capital. Buyer or Seller, as the
case may be, shall make payment of any amount due hereunder within three
business days after agreement on the Closing Date Statement of Current Assets
and Current Liabilities.
ARTICLE 3
THE CLOSING
3.1 Time and Place of Closing. Subject to (a) satisfaction or, to
the extent permissible by law, waiver (by the party for whose benefit the
closing condition is imposed), on or prior to the Closing Date, of the closing
conditions described in Articles 7 and 8, and (c) the provisions of Article 10
hereof, the closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Dow, Lohnes & Albertson, PLLC,
1200 New Hampshire Avenue, N.W., Washington, D.C. or at such other place as the
parties shall mutually agree, at 10:00 a.m., local time, on February 13, 1997,
or if the closing conditions described in Articles 7 and 8 have not then been
satisfied or waived, on the date (the "Closing Date") that shall be a business
day specified by written notice from Buyer to Seller upon at least five (5)
days prior notice and not more than five (5) days following the satisfaction or
waiver of all such closing conditions.
3.2 Deliveries by Seller. At the Closing, Seller shall deliver to
Buyer the following:
(a) General Warranty Deeds to the parcels of real property
owned by Seller in fee to be transferred to Buyer hereunder, together with
bills of sale of personal property, assignments and other instruments of
transfer and conveyance, transferring and assigning to Buyer the Assets, free
and clear of all liens, mortgages, pledges and encumbrances other than for (i)
real estate taxes not yet due and payable and (ii) easements,
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rights of way, mineral rights or other restrictions and encumbrances relating
to real property, which are of record, are not of a monetary nature and which
individually or in the aggregate do not materially and adversely affect the
value of such real property or materially interfere with the use of such real
property in the businesses and operations of the Newspapers as currently
conducted (collectively, "Permitted Liens");
(b) The Assumption Agreement duly executed by Seller;
(c) The opinions, certificates, consents and other documents
contemplated by Article 7 hereof;
(d) The Covenants Not to Compete, duly executed by Seller,
Guarantor and parties specified in Schedule 2.1(a) hereto;
(e) All other documents, certificates, instruments and
writings expressly required hereunder to be delivered by Seller at or prior to
the Closing or which Buyer reasonably may request.
3.3 Deliveries by Buyer. At the Closing, Buyer shall deliver to
Seller the following:
(a) Funds equal to the Purchase Price;
(b) The opinions, certificates and other documents
contemplated by Article 8 hereof;
(c) The Assumption Agreement, duly executed by Buyer;
(d) The Covenants Not to Compete, duly executed by Buyer; and
(e) All other documents, certificates, instruments and
writings expressly required hereunder to be delivered by Buyer at or prior to
the Closing or which Seller reasonably may request.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
4.1 Organization. Seller is a corporation duly incorporated, and
validly existing under the laws of the State of
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Delaware. Seller has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
Seller is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary.
Seller has delivered to Buyer true and correct copies of its articles of
incorporation and bylaws, as amended to date.
4.2 Authority Relative to this Agreement. Seller has the full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized and approved by all necessary corporate
action by Seller. This Agreement has been duly and validly executed and
delivered by Seller and, assuming this Agreement constitutes a legal, valid and
binding agreement of Buyer, constitutes a legal, valid and binding agreement of
Seller, enforceable against Seller in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and to general principles of equity (collectively, hereinafter "Bankruptcy Laws
and Certain Creditors' Rights").
4.3 Noncontravention; Consents and Approvals.
(a) Except as set forth in Section 4.3(a) and 4.3(b) of the
Disclosure Schedule, the execution and delivery of this Agreement by Seller and
the consummation by Seller of the transactions contemplated hereby and thereby
will not (i) conflict with or result in any breach of any provisions of the
certificate of incorporation or bylaws, of Seller, (ii) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture or other evidence or instrument of, or agreement
relating to, indebtedness to which Seller is a party or by which it or any of
its properties or assets are bound, (iii) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation, or acceleration)
under, any of the terms, conditions or provisions of any license, agreement or
other instrument or obligation to which Seller is a party or by which it or any
of its properties or assets is bound, or (iv) violate any order, writ,
injunction, decree, statute, rule or
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regulation applicable to Seller or any of its properties or assets.
(b) Except for those consents and approvals as set forth on
Section 4.3(b) of the Disclosure Schedule (the "Required Consents"), no filing
or registration with, or notification to, and no permit, authorization, consent
or approval of, any governmental entity is necessary for the execution and
delivery of this Agreement by Seller or the consummation by Seller of the
transactions contemplated by this Agreement, except such filings,
registrations, notifications, permits, authorizations, consents or approvals
that result solely from the specific legal or regulatory status of Buyer or as
a result of any other facts that specifically relate to the business or
activities in which Buyer is engaged.
4.4 Financial Statements. Seller has furnished Buyer, with respect
to the Newspapers, (i) unaudited balance sheets as of June 30, 1996, June 30,
1995, June 30, 1994 and June 30, 1993, and statements of income for the fiscal
years then ended, prepared in accordance with GAAP except for information
ordinarily contained in footnotes to audited financial statements, and (ii) an
unaudited balance sheet as of December 31, 1996 and unaudited statements of
income for the six (6) months then ended, each prepared in accordance with
GAAP, except for information ordinarily contained in footnotes to financial
statements and subject to customary year end adjustments (collectively, the
"Financial Statements"). Except as disclosed in Section 4.4 of the Disclosure
Schedule, the Financial Statements fairly present the results of operations and
balance sheets of the Newspapers for the periods and as of the dates set forth
in accordance with GAAP except for information ordinarily contained in
footnotes to audited financial statements and, in the case of any financial
statements not as of the end of a fiscal year, subject to customary year-end
adjustments.
4.5 Absence of Certain Changes. Except as disclosed in Section 4.5
of the Disclosure Schedule, since June 30, 1996, Seller has conducted the
businesses of the Newspapers only in the ordinary course of business consistent
with past practices, and (i) there has not been since December 31, 1996 any
material adverse change in the financial condition, properties, business or
results of operations of any Newspaper, taken as a whole; or (ii) since June
30, 1996 (1) any change by Seller in accounting principles, practices or
methods of any Newspaper; (2) any material increase in the number of employees
of any Newspaper or any material increase, individually or in the aggregate, in
the rate or terms of compensation payable to or to become payable to employees
of any Newspaper; (3) any material modifications in
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employee benefits to the employees of any Newspaper; (4) entry into,
termination of (except by reason of the occurrence of a contractually specified
termination date) or material amendment to any contract or commitment or
license or permit material to the business of any Newspaper as currently
conducted, except for the entry into advertising contracts at published rates
on a form substantially the same as one of the forms included in Section 4.6 of
the Disclosure Schedule or the entry into news carrier contracts on a form
substantially the same as the form included in Section 4.6 of the Disclosure
Schedule; (5) any creation of or assumption of any mortgage, pledge or other
lien or encumbrance upon any of the Assets other than Permitted Liens; (6) any
sale, assignment, lease, transfer or other disposition of any material assets
of any Newspaper; (7) entry into any agreement pursuant to which the aggregate
financial obligation of any Newspaper may exceed Fifty Thousand Dollars
($50,000), or which is not terminable by such Newspaper without penalty upon
ninety (90) days' notice or less, except for the entry into advertising
contracts at published rates on a form substantially the same as one of the
forms included in Section 4.6 of the Disclosure Schedule; (8) any commitment to
make any purchase or sale of any inventories except in the ordinary course of
business consistent with past practice; (9) any commitment in excess of Ten
Thousand Dollars ($10,000) individually or in the aggregate for any capital
expenditure for which Buyer shall have any financial obligation to discharge
subsequent to the Closing; or (10) any other material transaction not in the
ordinary course of business consistent with past practice.
4.6 Certain Contracts and Arrangements. All Contracts to which
Seller is a party with respect to the Newspapers including, without limitation,
all options to lease or purchase real property used or useful in the ownership
or operation of the Newspapers, (other than those which are Excluded Assets)
are either (i) listed in Section 4.6 of the Disclosure Schedule; (ii)
advertising contracts entered into in the ordinary course of business at
published rates and on a form substantially the same as one of the forms
included in Section 4.6 of the Disclosure Schedule; (iii) news carrier
contracts entered into in the ordinary course of business and on a form
substantially the same as the form included in Section 4.6 of the Disclosure
Schedule; or (iv) entered into in the ordinary course of business consistent
with past practices and do not involve monetary obligations individually or in
the aggregate of more than Fifty Thousand Dollars ($50,000). Except as set
forth in Section 4.6 of the Disclosure Schedule, all Contracts are in full
force and effect and constitute legal, valid and binding obligations of the
parties thereto and there is not, under any of the Contracts, any (A) existing
default, (B) event of default or (C) other event
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which, with or without due notice or lapse of time or both, would constitute a
default or event of default on the part of Seller or any Newspaper, nor, to the
knowledge of Seller, any other party thereto.
4.7 Litigation. Except as set forth on Section 4.7 of the Disclosure
Schedule, there are no legal, administrative, arbitration or other proceedings
or governmental investigations pending against Seller, any Newspaper or the
Assets. To the knowledge of Seller, except as set forth on Section 4.7 of the
Disclosure Schedule, there are no such proceedings or investigations threatened
against Seller, any Newspaper or the Assets.
4.8 Labor Matters; Personnel Data.
(a) Except as set forth in Section 4.8 (a) of the Disclosure
Schedule, neither Seller nor any Newspaper is a party to any collective
bargaining agreement or any other union labor agreement covering or relating to
any of the employees of any Newspaper, or has recognized, agreed to recognize
or received a demand for recognition of any collective bargaining
representative with respect thereto. No collective bargaining representative
has been certified as representing any of the employees of any Newspaper. To
Seller's knowledge, there is no union organizing activity underway or
threatened relating to any of the employees of any Newspaper. There are no
strikes, work stoppages, work slowdowns, picketing or any other labor dispute
in effect or, to Seller's knowledge, threatened against Seller or any
Newspaper. Seller has materially complied with all applicable laws and
regulations with respect to the employment of labor, including without
limitation, those related to wages, hours, collective bargaining, occupational
safety, discrimination, and the payment of Social Security or similar payroll
taxes. There are no unfair labor practices claims or charges pending or, to
the best of Seller's knowledge, threatened, involving Seller or any Newspaper.
(b) Section 4.8(b) of the Disclosure Schedule lists the names,
titles, accrued vacation and sick leave as of January 31, 1997 and current
rates of pay or total annual compensation of all persons employed by Seller or
the Newspapers in connection with the businesses or operations of the
Newspapers or the Assets. Except as set forth in Section 4.8(b) of the
Disclosure Schedule, neither Seller nor any Newspaper has any employment
agreement of any kind, oral or written, express or implied, that would require
Buyer to employ any employee of Seller or any Newspaper after the Adjustment
Time. Seller has provided Buyer with a true and correct copy of each employee
<PAGE> 24
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handbook and employment policy applicable to any of the employees of the
Newspapers.
(c) Seller does not contribute to and is not required to
contribute to any Multi-employer Plan with respect to its employees, and
neither Seller nor any other trade or business under common control with Seller
(within the meaning of Section 414(b), (c), (m) or (o) of the Code) has
incurred or reasonably expects to incur any "withdrawal liability," as defined
under Section 4201 et. seq. of ERISA.
4.9 Taxes. Except as set forth in Section 4.9 of the Disclosure
Schedule and except for federal and state income tax returns for which the
filing dates have been lawfully extended, all tax returns, reports, statements
and other similar filings required to be filed by Seller with respect to the
Newspapers (collectively, "Tax Returns") with respect to any taxes,
assessments, interest, penalties, deficiencies, fees and other governmental
charges or impositions (including without limitation all income tax,
unemployment compensation, social security, payroll, sales and use, excise,
privilege, property, ad valorem, franchise, license, school and any other tax
or similar governmental charge or imposition under laws of the United States or
any state or municipality or political subdivision thereof or any foreign
country or political subdivision thereof) (collectively, "Taxes") have been
filed with the appropriate governmental agencies in all jurisdictions in which
such Tax Returns are required to be filed. All Taxes, including without
limitation those that are called for by the Tax Returns, or heretofore claimed
to be due by any taxing authority from Seller with respect to the Newspapers,
have been properly accrued or paid. Seller has not received any notice of
assessment or proposed assessment in connection with any Tax Returns and there
is not any pending tax examination of or tax claim asserted against Seller or
any of its assets or properties with respect to the Newspapers. Except as set
forth in Section 4.9 of the Disclosure Schedule and except for federal and
state income taxes, Seller has not extended, or waived the application of, any
statute of limitations of any jurisdiction regarding the assessment or
collection of any Taxes with respect to the Newspapers. There are no tax liens
(other than any lien for current taxes not yet due and payable) on any of the
assets or properties of Seller. Seller has no knowledge of any basis for any
additional assessment of any Taxes with respect to the Newspapers. There is
not, and there will not be, any liability for any Taxes arising out of, or
attributable to, or affecting the Assets or the Newspapers through the
Adjustment Time, or attributable to the conduct of the operations of Seller at
any time for which Buyer will have any liability for payment or
<PAGE> 25
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otherwise, except as may be reflected in the Closing Date Statement of Current
Assets and Current Liabilities. There does not exist any liability for Taxes
(except for sales, use, property and transfer taxes, if any, incident to the
consummation of the transactions contemplated herein) which may be asserted by
any taxing authority against the Assets or the businesses and operations of the
Newspapers, and no lien or other encumbrance for Taxes has attached or, to
Seller's knowledge, could attach to the Assets or the operations of the
Newspapers. Seller is not a "United States real property holding corporation"
within the meaning of Section 897 of the Code.
4.10 Licenses and Authorizations. Section 4.10 of the Disclosure
Schedule lists all Licenses. All the Licenses are in full force and effect,
with no material violations of any of them having occurred or, to the knowledge
of Seller, alleged to have occurred, and with no proceedings pending or, to the
knowledge of Seller, threatened, that would have the effect of revoking or
materially limiting or materially affecting the transfer or renewal of any of
the Licenses. Except as set forth in Section 4.10 of the Disclosure Schedule,
(a) the Licenses are not subject to any restrictions or conditions that would
limit the businesses of the Newspapers in any material manner as presently
conducted and (b) there are no applications by Seller or to Seller's knowledge,
complaints by others pending or threatened in writing before any governmental
agency relating to Seller or the Newspapers.
4.11 Title to Real Property. Section 4.11 of the Disclosure Schedule
contains reasonably complete description of all real property currently owned
or leased by Seller (hereinafter "Real Property") in connection with the
businesses or operations of the Newspapers, and the Real Property constitutes
all real property interests necessary to conduct the business or operations of
the Newspapers as now conducted. Seller has good and marketable fee simple
title to all of such owned Real Property and good and valid title to all of its
leasehold interests in Real Property, in each case which at the Closing
hereunder will be free and clear of all liens, mortgages, pledges, covenants,
options, rights of first refusal, easements, restrictions, encroachments,
leases and encumbrances whatsoever other than Permitted Liens. No condemnation
of any such Real Property has occurred, is pending or, to the knowledge of
Seller, is threatened. Seller has delivered to Buyer true and complete copies
of all leases listed in Section 4.11 of the Disclosure Schedule, all of which
are in full force and effect and constitute legal, valid and binding
obligations of the parties thereto subject to Bankruptcy Laws and Certain
Creditor's Rights and with respect to which Seller is not in default, nor, to
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Seller's knowledge, is any other party to any such lease in default. Seller
has delivered to Buyer true and complete copies of all deeds, leases,
easements, rights-of-way or other instruments pertaining to the Real Property
(including any and all amendments and other modifications of such instruments).
All of the Real Property has full legal and practical access to public roads or
streets and has all utilities and services necessary for the property and
lawful conduct and operation of the Newspapers as currently conducted. All
improvements utilized in connection with the Newspaper are maintained, placed
and located in accordance with the provisions of all applicable laws, rules,
regulations, deeds, leases, licenses, permits or other legally enforceable
arrangements and are located entirely on the Real Property either owned or
leased by Seller. Except as set forth on Schedule 4.11, all leasehold
interests included in the Real Property are duly and property recorded in all
appropriate public offices. All Real Property (including the improvements
thereon) (A) is available to Seller (and Buyer, as assignee of Seller) for
immediate use in the conduct of the business or operations of the Newspapers as
currently conducted, and (B) complies in all material respects with all
applicable building or zoning codes and the regulations of any governmental
authority having jurisdiction.
4.12 Title to Personal Property. Section 4.12 of the Disclosure
Schedule lists all tangible personal property owned or leased by Seller in
connection with the businesses and operations of the Newspapers, other than
assets with an original cost of less than Five Hundred Dollars ($500)
individually. The tangible personal property being purchased by Buyer from
Seller at the Closing includes all tangible personal property owned or leased
by Seller in connection with the business or operations of the Newspaper as of
December 31, 1996, except for Excluded Assets, assets with an original cost of
less than Five Hundred Dollars ($500) individually, and except as set forth on
Section 4.12 of the Disclosure Schedule, where any transfer or disposition of
any such tangible personal property is specifically described. Seller owns and
has good and valid title to such properties, free and clear of all liens and
encumbrances, other than Permitted Liens. Seller has delivered to Buyer true
and complete copies of all leases and other agreements or documents affecting
the properties listed in Section 4.12 of the Disclosure Schedule, all of which
are valid and binding on Seller except for Bankruptcy Laws and Certain
Creditor's Rights, and with respect to which Seller is not in material default.
4.13 Condition of Assets. Except for the parking lot, the Real
Property including buildings, plant and structures owned by Seller and used in
the businesses of the Newspapers are
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structurally sound with no known defects and are in good operating condition
and repair, normal wear and tear excepted in consideration for age of each
asset, none of such buildings, plant or structures is in need of maintenance or
repairs except for ordinary, routine maintenance and repairs that are not
material in nature or cost. All other Assets except for the printing press
used in the businesses of the Newspapers, (including, without limitation, all
personal property and equipment) owned by Seller and used in the businesses of
the Newspapers are in good operating condition and repair, normal wear and tear
excepted in consideration for the age of each Asset and none of such Assets is
in need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in nature or cost. The parking lot and printing
press are structurally sound with no known defects and are in satisfactory
operating condition and repair, normal wear and tear except in consideration
for age of each asset, none of such assets is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost.
4.14 Inventory.
(a) Except as set forth on Section 4.14 of the Disclosure
Schedule, the value at which the inventory of the Newspapers is booked
appropriately reflects the value of all items that are below standard quality,
damaged, obsolete or of a quantity or quality not usable or suitable in the
ordinary course of the businesses of the Newspapers.
(b) The amount of inventory of the Newspapers on the Closing
Date will be sufficient to permit the continued maintenance and operation of
the business and operations conducted by the Newspapers as currently conducted
for a period of at least ten (10) days.
4.15 Accounts Receivable. All of the trade accounts receivable of the
Newspaper are valid and bona fide and were acquired or arose in the ordinary
course of business consistent with past practices.
4.16 Intellectual Property. All registered trademarks, registered
copyrights, patents or patent applications owned by Seller with respect to the
Newspapers or otherwise included within the Assets are listed in Section 4.16
of the Disclosure Schedule. Seller has the right to use all patents,
trademarks, trade names, and copyrights as the Newspapers presently use them.
To the knowledge of Seller, no patent, trademark, trade name, or copyright used
by the Newspapers or
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otherwise included within the Assets is the subject of any infringement action
or action seeking to deny, modify or revoke any registration or application
therefor or renewal thereof. Each Newspaper is entitled to use all designs,
processes and licenses and all other industrial property or intellectual
property rights used by it, and except as disclosed in Section 4.16 of the
Disclosure Schedule, Seller has not granted to any third party any right, title
or interest in or to any such intellectual property.
4.17 Circulation and Advertising Linage. Section 4.17 of the
Disclosure Schedule sets forth the paid circulation as of June 30, 1994, June
30, 1995 and June 30, 1996, and as of December 31, 1996 for each of the
Newspapers which has a paid circulation. There has been no material decline in
paid circulation for such Newspapers since December 31, 1996. Section 4.17 of
the Disclosure Schedule sets forth circulation as of June 30, 1994, June 30,
1995 and June 30, 1996, and as of December 31, 1996, for each of the Newspapers
which does not have a paid circulation. There has been no material decline in
circulation for any of such Newspapers since December 31, 1996. Section 4.17
of the Disclosure Schedule includes a description of the monthly advertising
linage sold for each Newspaper for the twelve-month period ending June 30, 1996
and for the six-month period ending December 31, 1996. The difference between
advertising linage for each of the Newspapers as of December 31, 1995 and
advertising linage as of February 13, 1996 shall not be materially greater than
the difference between advertising linage for such Newspaper as of December 31,
1996 and advertising linage as of February 13, 1997.
4.18 Postal Permits. All reports filed with the United States Postal
Service in connection with any Second-Class Mail postal permit applicable to
the Newspapers were true and correct in all material respects at the time of
filing. True and complete copies of all such reports for Second-Class postage
qualification filed in 1996 have previously been furnished to Buyer.
4.19 ABC Reports. All reports filed with the Audit Bureau of
Circulation ("ABC") during the preceding three years in connection with the
Newspapers which are audited by the ABC were true and correct in all material
respects at the time of filing. True and complete copies of all such reports
for the past year which have been filed by the Newspapers with ABC have
previously been furnished to Buyer.
4.20 Legal Advertisements. The Newspapers are qualified under
Virginia law to accept and publish legal notices
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required by the governmental units described in Section 4.20 of the Disclosure
Schedule.
4.21 Subscribers. Section 4.21 of the Disclosure Schedule lists all
of the subscribers of the Newspapers as of the month immediately preceding the
date of this Agreement.
4.22 Newsrack Locations. Section 4.22 of the Disclosure Schedule
lists the location of all newsracks and the names and addresses of dealers
through which the Newspapers are distributed.
4.23 Environmental Laws.
(a) Except as disclosed in Section 4.23 of the Disclosure
Schedule, (i) Seller's operations with respect to the Newspapers, and all Real
Property owned or leased by Seller in connection with the Newspapers,
materially comply with all applicable Environmental Orders and Laws (as defined
below) and all applicable health and safety laws, (ii) none of Seller's
operations on such Real Property is subject to any pending judicial or
administrative proceeding alleging the violation of any Environmental Order or
Law or any applicable health or safety law, (iii) none of such Real Property
is, to Seller's knowledge, the subject of any federal or state investigation
concerning any use or release of any Hazardous Material (as defined below),
(iv) neither Seller nor, to Seller's knowledge, any predecessor-in-title to
such Real Property has filed any notice under federal or state law indicating
past or present treatment, storage or disposal of a hazardous waste or
reporting a spill or release of a Hazardous Material into the environment, (v)
Seller has no contingent liability in connection with any release of any
Hazardous Material into the environment and no release which could require
remediation has occurred, (vi) none of Seller's operations on such Real
Property involves the generation, transportation, treatment, storage or
disposal of Hazardous Materials of "Reportable Quantity" (as defined by the
Comprehensive Environmental Response Compensation Liability Act, as amended, 42
U.S.C. Section 9601, et seq. ("CERCLA")), and (vii) except in accordance with
all requirements of law, Seller has not disposed of any Hazardous Material of
Reportable Quantity in, on or about such Real Property and, to Seller's
knowledge, neither has any lessee, prior owner or other person.
(b) Except as described in Section 4.23 of the Disclosure
Schedule, no surface impoundments or underground storage tanks are located in,
on or about such Real Property, and no surface impoundments have ever existed
on such Real Property for the period of time Seller has owned such Real
Property. All
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underground storage tanks which have been removed from such Real Property have
been removed in material compliance with all then and currently applicable
Environmental Orders and Laws (as defined below).
"Environmental Orders and Laws" means any applicable order,
judgment, injunction, award, decree or writ or any applicable law, statute,
code, ordinance, regulation or other requirement of any government or political
subdivision thereof, whether federal, state, local or foreign, or any agency,
regulatory authority or instrumentality of any such government or political
subdivision, or any court or arbitrator relating to pollution or protection of
health, public welfare or the environment, including, without limitation,
Environmental Orders and Laws relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials.
"Hazardous Materials" means (1) hazardous materials,
contaminants, constituents, hazardous wastes and hazardous substances as those
terms are defined in the following statutes and their implementing regulations,
as amended: the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801
et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
seq., the Comprehensive Environmental Response, Compensation and Liability Act,
as amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C.
Section 9601 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq.,
and the Toxic Substance Control Act, 15 U.S.C. Section 2601 et seq., (2)
petroleum, including crude oil and any fractions thereof, (3) natural gas,
synthetic gas and any mixtures thereof, (4) friable asbestos and/or friable
asbestos-containing materials, (5) PCBs, or PCB-containing materials or fluids
and (6) any other hazardous or noxious substance, material, pollutant or solid
or liquid waste that is regulated by any Environmental Orders and Laws.
4.24 Compliance with Laws. Seller has materially complied, and is in
material compliance with, all applicable laws relating to ownership, leasing
and operation of the Assets and the conduct of the businesses of the
Newspapers.
4.25 Relationships with Affiliates. Except as set forth in Section
4.25 of the Disclosure Schedule, neither the stockholders of Seller nor any
Affiliate of Seller, individually or collectively, owns or has owned of record
or beneficially, an equity interest or any other financial or profit interest
in any firm, corporation or any other entity or person that has had business
dealings or a financial interest in any transaction with Seller with respect to
the businesses of the Newspapers or the
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Assets. Except as set forth in Section 4.25 of the Disclosure Schedule, no
stockholder of Seller or any Affiliate of Seller or such stockholder is in
competition with Seller with respect to the businesses of the Newspapers or the
Assets, or any lease, sublease, indebtedness, contract, agreement, commitment,
understanding or arrangement of any kind whatsoever with any other stockholder
of Seller or any Affiliate of Seller or such stockholder pertaining to the
businesses or operations of the Newspapers or the Assets. No stockholder of
Seller or any Affiliate of Seller has any right or claim against Seller with
respect to the Newspapers. Since December 31, 1996, Seller has not made any
sales, transfers or conveyances of any kind of inventory or other assets
related to the Newspapers or the Assets to a stockholder or Affiliate of Seller
other than those for which the Newspapers has received fair market value. For
purposes of this Agreement, an "Affiliate" shall mean, with respect to either
Seller or Buyer, a person, corporation, partnership or other entity that is
controlled by, controls or is under common control with such Seller or Buyer.
4.26 Totality of Assets. The Assets (other than the Excluded Assets)
include all of the tangible and intangible assets and rights necessary to
conduct the businesses and operations of the Newspapers as presently conducted.
4.27 Brokers and Finders. Neither Seller nor any of its officers,
directors, or employees has employed any broker or finder in connection with
the transactions contemplated by this Agreement.
4.28 Disclosure. No representation or warranty by Seller in this
Agreement (including the Disclosure Schedule) contains any untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make any statement made therein, in light of the circumstances
under which it is made, not misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
5.2 Authority Relative to this Agreement. Buyer has the full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated
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hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized and
approved by the Board of Directors of Buyer, and no other corporate proceedings
on the part of Buyer are necessary to authorize the execution or performance of
this Agreement or the consummation of the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Buyer and,
assuming this Agreement constitutes a legal, valid and binding agreement of
Buyer, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and to general principles of equity.
5.3 Noncontravention; Consents and Approvals.
(a) Assuming that all filings, permits, authorizations,
consents and approvals or waivers thereof have been duly made or obtained as
contemplated by Section 5.3(b), the execution and delivery of this Agreement by
Buyer and the consummation by Buyer of the transactions contemplated hereby
will not (i) conflict with or result in any breach of any provision of the
certificate of incorporation or bylaws of Buyer, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default under the terms, conditions or provisions of any note, bond,
mortgage, indenture, license agreement or other instrument or obligation to
which Buyer is a party, or by which Buyer or any of its properties or assets is
bound, or (iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Buyer or any of its properties or assets.
(b) Assuming the accuracy of the representations and
warranties of Seller set forth in Article IV, no filing or registration with,
or notification to, and no permit, authorization, consent or approval of, any
governmental entity is required by Buyer in connection with the execution and
delivery of this Agreement by Buyer or the consummation by Buyer of the
transactions contemplated hereby.
5.4 Brokers and Finders. Neither Buyer nor any officers, directors
or employees has employed any broker or finder in connection with the
transactions contemplated by this Agreement.
5.5 Hart-Scott-Rodino. Buyer has prepared and delivered to the
United States Federal Trade Commission (the "FTC") a balance sheet in the
ordinary course of business which
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does not include the Assets and has received, based upon such balance sheet, a
staff interpretation from the FTC that the Buyer and Seller are not required to
file a notification and report form under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
ARTICLE 6
COVENANTS OF THE PARTIES
6.1 Conduct of Business. Except as specifically provided in this
Agreement, during the period from the date of this Agreement to the Closing
Date, Seller will conduct the business and operations of each Newspaper in the
ordinary course of business consistent with past practices. Without limiting
the generality of the foregoing, except as otherwise expressly provided in this
Agreement, prior to the Closing Date, without the prior written consent of
Buyer, Seller will not:
(a) sell, transfer, lease, license, pledge, encumber,
mortgage, remove from the premises of any Newspaper or otherwise dispose of, or
agree to sell, transfer, lease, license, pledge, encumber, mortgage, remove
from the premises of any Newspaper or otherwise dispose of ("Transfer"), any
assets or properties, real or personal, relating to any Newspaper, except in
the ordinary course of business consistent with past practice and, in no event
shall Seller Transfer any such assets or properties, the original cost of which
exceeds Ten Thousand Dollars ($10,000) in the aggregate, other than to the
extent such assets are ordinarily consumed in connection with the production of
newspapers or other printed material sold by Seller in the ordinary course of
business consistent with past practices;
(b) enter into or renew any agreements, commitments or
contracts relating to the Newspapers, except agreements for the purchase, sale
or lease of goods or services in the ordinary course of business consistent
with past practices and, in no event, to exceed obligations of any Newspaper in
excess of Fifty Thousand Dollars ($50,000) in the aggregate (other than with
respect to advertising contracts entered into in the ordinary course of
business at published rates and on one of the forms included in Section 4.6 of
the Disclosure Schedule or news carrier contracts entered into in the ordinary
course of business and on a form substantially the same as the form included in
Section 4.6 of the Disclosure Schedule), or modify, amend, waive or terminate
any of the Contracts;
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(c) authorize or commit to make capital expenditures in an
amount in excess of Ten Thousand Dollars ($10,000) in the aggregate;
(d) (i) increase the compensation of any employees of any
Newspaper without the consent of Buyer; (ii) increase the number of employees
of any Newspaper; or (iii) become obligated under any new pension plan, welfare
plan, multiemployer plan, employee benefit plan, benefit arrangement, or
similar plan or arrangement with respect to any employees or former employees
of any Newspaper, including any bonus, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, group insurance, severance
pay, employment agreement, retirement or other benefit plan, agreement or
arrangement, with or for the benefit of any person, or amend any of such plans
or any of such agreements in existence on the date hereof;
(e) permit any insurance policy relating to the Newspapers to
be canceled or terminated;
(f) make any change to the accounting methods, principles or
practices with respect to the Newspapers or the Assets;
(g) maintain the books and records of the Newspapers in a
manner other than in the ordinary course of business consistent with past
practices;
(h) fail to maintain all tangible personal property in good
operating condition (other than the printing press which shall be maintained in
satisfactory operating condition), ordinary wear and tear excepted, or to
replace any of the tangible personal property which is ordinary and necessary
to the operation of the Newspapers which shall be worn out or damaged;
(i) fail to use all reasonable efforts to preserve intact its
present business organizations, keep available the services of its employees or
preserve its relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with it, to the end that its
goodwill and on-going businesses shall not be impaired in any material respect
at the Effective Date; or
(j) fail to maintain levels of inventory and spare parts
consistent with past practices and the requirements of Sections 4.14 and 7.10.
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6.2 Access to Information. From the date of this Agreement to the
Closing Date, Seller will (a) give Buyer and its authorized representatives
reasonable access during normal business hours to the facilities, personnel and
operations of the Newspapers and to all of its books and records relating to
the Newspapers including, without limitation, all personnel records, (b) permit
Buyer and such authorized representatives to make such inspections thereof as
Buyer may reasonably request and to conduct such tests, studies and surveys and
take samples as it deems necessary for evaluating the structural and
environmental condition of the property and improvements thereon (including
without limitation, the Assessments referred to in Section 6.9), and (c) cause
its officers or other appropriate officials to furnish Buyer with such
financial and operating data and other information with respect to the business
operations of the Newspapers as Buyer may from time to time reasonably request.
6.3 Other Consents, Waivers and Approvals. Seller shall, at its own
expense, use its commercially reasonable efforts in (i) taking all actions that
may be reasonable and necessary to obtain any consent necessary to the
assignment of any of the Contracts and Licenses to Buyer, including without
limitation, the Required Consents; provided it is understood and agreed that
Buyer shall have no obligation to accept any changes, other than ministerial,
immaterial changes, to any of the Contracts or Licenses as a condition to
obtaining any consent, and (ii) causing all actions to be taken that may be
reasonable and necessary to effectuate the assignment of any of the Contracts
and Licenses to Buyer, including without limitation, any actions to be taken
after the Closing Date.
6.4 Consummation of Agreement. Each of Seller and Buyer will use
commercially reasonable efforts to perform or fulfill all other conditions and
obligations to be performed or fulfilled by it under this Agreement so that the
transactions contemplated hereby shall be consummated as expeditiously as
possible. If any event should occur, either within or outside the control of
Seller or Buyer that would materially delay or prevent fulfillment of the
conditions upon the obligations of any party hereto to consummate the
transactions contemplated by this Agreement, Seller and Buyer will use their
respective commercially reasonable efforts to cure or minimize the same as
expeditiously as possible.
6.5 Public Announcements. The parties will not disclose to any
person or entity (other than their respective officers, directors, employees,
lenders and other advisors who need to know such information and who shall be
informed by the party making disclosure of the confidential nature of such
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information and shall be directed to treat such information confidentially) any
information regarding the existence of the transactions herein contemplated or
the Assets except to the extent previously disclosed with respect to the
agreement in principle between the parties.
6.6 Solicitation of Employees. For a period of five (5) years from
the Closing Date of this Agreement, neither Seller nor any of its respective
Affiliates, agents or representatives shall directly or indirectly solicit or
cause or assist in the solicitation of the employment of, or employ, any
executive, management or other employee of the Newspaper.
6.7 Intentionally Omitted.
6.8 Allocation of Purchase Price. The parties shall use reasonable
efforts to agree upon the allocation of the Purchase Price among the Assets for
purposes of any filings required by Section 1060 of the Code and agree to
allocate in respect of Seller and Guarantor One Thousand Dollars ($1,000) of
the Purchase Price in consideration for the execution of the Covenants Not to
Compete as contemplated herein.
6.9 Release of Liens. Before or concurrent with the Closing, Seller
shall deliver to Buyer (i) terminations (or a letter from the holder of the
security interest in form and substance reasonably satisfactory to Buyer
agreeing to terminate the security interest, mortgage, pledge, lien or other
encumbrance upon receipt of payment) of any security interest, mortgage,
pledge, lien or other encumbrance held in respect of any of the Assets other
than Permitted Liens. All such terminations, releases, or acknowledgments
shall be in form and substance reasonably satisfactory to Buyer.
6.10 Environmental and Health and Safety Matters. If Buyer chooses to
do so, Seller will cooperate with Buyer in obtaining, at Buyer's expense, from
a nationally recognized engineer selected by Buyer (the "Environmental
Engineer"), a Phase I environmental report for each parcel of Real Property and
a health and safety audit of the facilities and operations of the Newspapers
(together with any Phase II Environmental Report or other follow-up report, the
"Assessments"). If the Phase I environmental report shows any potential
environmental liability, or if any health and safety audit shows any potential
health or safety liability, Buyer may choose to obtain, and Seller shall
cooperate with Buyer in obtaining, at Buyer's expense, as soon as is reasonably
practicable after such potential liability becomes known to Buyer, a Phase II
environmental report for each parcel of Real Property with any potential
environmental liability or a
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follow-up health and safety audit with respect to any health or safety
liability. Such Assessments shall, in addition to any other matters
customarily shown in such reports, identify the scope and source of any actual
or potential liability or problem on the Real Property or newspaper facilities
and set forth an estimate of the cost of remediating such liability or problem.
Buyer shall promptly forward to Seller a copy of the Assessments after receipt
thereof by Buyer.
6.11 Billing Services. For a period not to exceed six months
following the Closing Date, at Buyer's request, Seller will perform billing,
circulation, accounting and classified services for the Newspapers, including,
without limitation, processing, reporting and related services, and Buyer shall
have the right to use all operating and financial computer software during such
period in connection with such services. Buyer shall pay to Seller the sum of
$2000 per month (prorated for any partial month) during the period in which
Buyer requests Seller to provide the services contemplated hereby. The first
payment shall be made by Buyer five days after Closing in respect of the first
month's services and on the corresponding day of each month thereafter during
the period in which such services are requested and provided hereunder. It is
understood and agreed that Seller shall continue to provide such services to
Buyer in the same manner as if Seller still owned the Newspapers in accordance
with Seller's prior practices and, without the prior written consent of Buyer,
Seller shall not subcontract such services to any third party.
6.12 Employees. Effective as of the Closing Date, Buyer shall offer
employment to each active employee of Seller who is employed at any Newspaper
immediately prior to the Closing Date (collectively, the "Assumed Employees").
Buyer shall offer employment to the Assumed Employees at compensation levels
substantially similar to those levels currently applicable to such employees,
and on other terms and conditions (including health care benefits) as Buyer or
its affiliates customarily provide to its similarly-situated employees;
provided that if Buyer sells or transfers the Assets to be acquired pursuant to
this Agreement to a third party within ninety (90) days of the Closing
hereunder, such terms and conditions shall be the same as those customarily
provided by such third party or its affiliates to its similarly situated
employees. Buyer shall not be obligated to assume any contracts of employment
and nothing herein shall be deemed to require Buyer to employ such Assumed
Employees for any specific period of time. The provisions hereof shall be for
the exclusive benefit of the parties hereto (and their successors and assigns)
and shall not be for the benefit of
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any other person or entity, including without limitation, any Assumed
Employees.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF BUYER
The obligations of Buyer to purchase the Assets from Seller and to
perform its other obligations hereunder to be performed at or subsequent to the
Closing shall be subject to the fulfillment at or prior to the Closing of each
of the following additional conditions, any one or more of which may be waived
by Buyer:
7.1 Representations and Warranties. All representations and
warranties of Seller contained herein shall be true and correct in all material
respects on the Closing Date as though such representations and warranties were
made as of such date except for changes expressly permitted by this Agreement.
7.2 Covenants. Seller shall have performed and complied in all
material respects with all material covenants and agreements contained in this
Agreement required to be performed or complied with by it on or prior to the
Closing Date.
7.3 Certificate. Seller shall have furnished a certificate of an
authorized officer to evidence compliance with the conditions set forth in
Sections 7.1 and 7.2 substantially in the form of Exhibit E attached hereto.
7.4 Certain Proceedings. No writ, order, decree or injunction of a
court of competent jurisdiction or governmental entity shall have been entered
against Buyer or Seller that prohibits or restricts the sale of Assets
contemplated hereby, materially limits or restricts the operation of the
businesses of the Newspapers or other Assets as they are currently conducted,
or otherwise materially restricts Buyer's exercise of full rights to own and
operate the Newspapers and other Assets, and no action, proceeding,
investigation, regulation or legislation shall have been instituted or
threatened before any court, governmental agency or legislative body which (i)
questions the validity or legality of the transactions contemplated hereby or
seeks to enjoin, restrain, prohibit or obtain substantial damages in respect
of, or which is related to, or arising out of, this Agreement or the
consummation of the transaction contemplated hereby, (ii) seeks material
damages against Buyer as a result of the transactions contemplated hereby; or
(iii) can otherwise reasonably be expected to materially and adversely affect
Buyer.
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7.5 Opinion of Counsel. Buyer shall have received the favorable
opinion of Verner, Liipfert, Bernhard, McPherson and Hand, counsel to Seller,
substantially in the form of Exhibit F attached hereto.
7.6 No Material Adverse Change. Since the date of this Agreement,
Seller shall have suffered no material adverse change to the business,
operations, assets or financial condition of the Newspapers or the Assets.
7.7 Consents. All Required Consents, and all consents necessary to
the assignment of any of the Contracts to Buyer in accordance with Section 6.3,
shall have been duly and validly obtained and shall remain effective as of the
Closing, and all consents shall be in form and substance satisfactory to Buyer,
including without limitation, imposing no conditions or changes (other than
ministerial, immaterial things or conditions) in the underlying Contract.
7.8 Releases. At or prior to Closing, Seller shall have obtained the
release of all liens and encumbrances on the assets or properties other than
Permitted Liens in the manner specified in Section 6.8.
7.9 Real Property. Seller shall have furnished to Buyer, at Buyer's
expense, (i) an extended coverage owner's policy of title insurance from a
reputable title insurance company for each owned parcel of Real Property,
without a survey exception and subject only to Permitted Liens and such other
liens as do not, in Buyer's reasonable judgement, materially and adversely
affect the use of such Real Property in the business as currently conducted or
the value of such Real Property, and (ii) a current and complete survey of each
such parcel of Real Property made by a competent registered surveyor in
accordance with the American Land Title Association guidelines.
7.10 Inventory. The amount of inventory relating to the Newspapers on
the Closing Date shall be sufficient to permit the continued maintenance and
operation of the business and operations conducted by the Newspaper for a
period of at least ten (10) days.
7.11 Circulation. The average paid daily or Sunday circulation of
each Newspaper with a paid circulation shall, for the most recent month
practical for its calculation prior to the Closing Date, not have fallen more
than 3% below such Newspaper's paid circulation for the month of December 1996.
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7.12 Seller's Actions. All proceedings to be taken by Seller in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to Buyer and Buyer's counsel, and Seller shall have made available to
Buyer for examination the originals or true and correct copies of all documents
which Buyer may reasonably request in connection with the transactions
contemplated by this Agreement.
7.13 Document Delivery. Seller shall have delivered the following
documents, appropriately executed, to Buyer:
(a) All documents required to be delivered to Buyer pursuant
to Section 3.2;
(b) Certified copies of the resolutions of the Board of
Directors of Seller authorizing the execution and delivery of this Agreement
and consummation of the transactions contemplated hereby;
(c) Certificates of good standing for Seller from its state of
incorporation issued as of a date not more than 10 days prior to the Closing
Date;
(d) Possession of all books, accounts, records, documents,
files, agreements and reports located at the offices or premises of the
Newspapers relating to the Newspaper or the Assets;
(e) All such other documents as may be reasonably requested by
Buyer, including a secretary's certificate relating to incumbency and corporate
proceedings;
(f) All Required Consents and copies of all other consents
received; and
(g) Such other and further releases or other documents as may
be reasonably necessary, in the opinion of counsel to Buyer, to effectuate the
transactions contemplated by this Agreement.
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement to effect the sale of the
Assets to Buyer and to perform its other obligations hereunder to be performed
at the Closing shall be subject to the fulfillment at or prior to the Closing
of each of
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the following additional conditions, any one or more of which may be waived by
Seller:
8.1 Representations and Warranties. All representations and
warranties of Buyer contained herein shall be true and correct in all material
respects on the Closing Date as though such representations and warranties were
made as of such date except for changes expressly permitted by this Agreement.
8.2 Covenants. Buyer shall have performed and complied in all
material respects with all material covenants and agreements contained in this
Agreement required to be performed or complied with by it on or prior to the
Closing Date.
8.3 Certificate. Buyer shall have furnished a certificate of an
authorized officer to evidence compliance with the conditions set forth in
Sections 8.1 and 8.2 substantially in the form of Exhibit G hereto.
8.4 Certain Proceedings. No writ, order, decree or injunction of a
court of competent jurisdiction or governmental entity shall have been entered
against Buyer or Seller which prohibits or restricts the sale of Assets
contemplated hereby.
8.5 Opinion of Counsel. Seller shall have received the favorable
opinion of Robinson, Bradshaw & Hinson, P.A., counsel to Buyer, substantially
in the form of Exhibit H attached hereto.
8.6 Document Delivery. Buyer shall have delivered the following to
Seller, and where documents are involved, the documents shall be appropriately
executed:
(a) Payment of the Purchase Price to Seller and/or the Escrow
Agent as contemplated by Section 2.2;
(b) All documents required to be delivered to Seller pursuant
to Section 3.3;
(c) Certified copy of the resolutions of the Board of
Directors of Buyer authorizing the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby;
(d) Certificate of good standing from the State of Delaware
issued with respect to Buyer as of a date not more than 10 days prior to the
Closing Date; and
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(e) All such other documents as may be reasonably requested by
Seller, including a secretary's certificate relating to incumbency and
corporate proceedings.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
9.1 Survival of Representations. All representations, warranties,
covenants and agreements made by any party in this Agreement or in documents
and instruments delivered pursuant hereto shall survive the Closing, but all
claims made by virtue of such representations, warranties and agreements shall
be made under, and subject to the limitations set forth in, this Article 9.
9.2 Seller's Agreement to Indemnify.
(a) Indemnification. Subject to the limitations, conditions
and provisions set forth herein, Seller agrees to indemnify, defend and hold
harmless Buyer (including Buyer's officers, directors, shareholders, employees,
agents or affiliates) (collectively, "Buyer's Indemnitees") from and against
all demands, claims, actions, losses, damages, liabilities, costs and expenses,
including without limitation, reasonable attorney's fees, asserted against or
incurred by Buyer's Indemnitees resulting from (i) a breach of any covenant,
agreement, representation or warranty of Seller to Buyer contained in this
Agreement or any other document or instrument delivered pursuant hereto; (ii)
liabilities or other obligations relating to any Employee Plan, Compensation
Arrangement or Multi-employer Plan; (iii) liabilities which arise from or
relate to any litigation referred to or disclosed in Section 4.7 of the
Disclosure Schedule; (iv) liabilities which arise from facts which occurred
prior to the Closing Date or which relate to the operation of the Newspapers or
the Assets prior to the Closing Date and which have not been assumed by Buyer;
or (v) any failure by Seller to comply with any applicable bulk sales law
(collectively, "Buyer's Damages").
(b) Limitation of Liability. Seller's obligation to indemnify
Buyer against any Buyer's Damages shall be subject to all of the following
limitations:
(i) No indemnification shall be required to be made by
Seller for Buyer's Damages resulting from a breach of representation or
warranty under Section 9.2(a)(i) (other than for Buyer's Damages on account of
Seller's breach of any representation or warranty respecting environmental and
health and safety matters) until the aggregate amount of such Buyer's
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Damages exceeds Two Hundred Thousand Dollars ($200,000); provided that once
Buyer's Damages exceed Two Hundred Thousand Dollars ($200,000), indemnification
shall be made by Seller for all Buyer's Damages without regard to such
limitation.
(ii) Buyer's Indemnitees shall be entitled to indemnity
only for those Buyer's Damages as to which Buyer has given Seller written
notice thereof (A) with respect to Buyer's Damages resulting from a breach of
any representation or warranty as set forth in Section 9.2(a)(i), above, within
one (1) year after the Closing Date, and (B) with respect to Buyer's Damages
resulting from a breach of any covenant or agreement set forth in Section
9.2(a)(i) or any of the matters set forth in Section 9.2(a)(ii), (iii), (iv) or
(v) above, within the applicable statute of limitations with respect thereto;
provided, that with respect to Buyer's Damages arising out of any failure of
Seller to convey good and marketable title to the Assets, Seller shall be
obligated to indemnify Buyer for all Buyer's Damages arising on and after the
Closing Date without time limitation. Any written notice delivered by Buyer to
Seller pursuant to this subparagraph (ii) shall set forth with reasonable
specificity to the extent practicable the basis of the claim for Buyer's
Damages and a reasonable estimate of the amount thereof, based on all of the
facts then known by Buyer.
(c) Condition of Indemnification. The obligations and
liabilities of Seller under Section 9.2(a) hereof with respect to claims for
Buyer's Damages ("Buyer's Claims"), shall be subject to the following terms and
conditions:
(i) Buyer will give Seller notice of any Buyer's Claim
within ten (10) business days after receiving notice, or becoming aware,
thereof.
(ii) After Seller receives notice of a Buyer's Claim
which relates to an assertion of liability by a third party other than Buyer or
an Affiliate of Buyer, Seller shall have the right to defend any such claim and
to control negotiations toward resolution of such claim, and, if litigation
ensues, to defend the same with counsel chosen by Seller, at Seller's expense.
Buyer shall extend reasonable cooperation to Seller's in connection with such
defense. In the event that, within thirty (30) business days (or earlier, to
the extent Buyer's rights would be materially and adversely affected by a
failure to give notice earlier than such 30 day period) after notice of any
such Buyer's Claim, Seller fails to notify Buyer of Seller's intention to
defend, Buyer will (upon further notice to Seller) have the right (but not the
obligation) to undertake the defense, compromise or settlement of such Buyer's
Claim for the
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account of Buyer. Seller shall have the right to assume the defense of such
Buyer's Claim at any time prior to final settlement, compromise or
determination thereof, provided that any such assumption shall be conditioned
upon Seller's written acknowledgment of its indemnification obligation for such
claim.
(iii) Notwithstanding anything in subparagraphs (i) and
(ii) of this Section 9.2(c) to the contrary, a failure by any party to meet the
time limits prescribed in such subparagraphs shall not affect the rights
provided to the parties in this Agreement, unless the rights of the party not
required to meet such time limits are materially and adversely affected by the
failure to comply with such time limit.
9.3 Buyer's Agreement to Indemnify.
(a) Indemnification. Subject to the limitations, conditions
and provisions set forth herein, Buyer hereby agrees to indemnify, defend and
hold Seller (and its officers, directors, shareholders, employees, agents or
affiliates) (collectively, the "Seller's Indemnitees") harmless from and
against all demands, claims, actions, losses, damages, liabilities, costs and
expenses, including without limitation, reasonable attorney's fees, asserted
against or incurred by the Seller's Indemnitees resulting from (i) a breach of
any covenant, agreement, representation or warranty of Buyer contained in this
Agreement or any other document or instrument delivered pursuant hereto; or
(ii) liabilities which relate to the operation of the Newspaper or the Assets
after the Closing Date (collectively, "Seller's Damages").
(b) Limitation of Liability. Buyer's obligation to indemnify
against Seller's Damages shall be subject to all of the following limitations:
(i) No indemnification shall be required to be made by
Buyer for Seller's Damages resulting from a breach of representation or
warranty under Section 9.3(a)(i) until the aggregate amount of such Seller's
Damages exceeds Two Hundred Thousand Dollars ($200,000); provided that once
Seller's Damages exceed Two Hundred Thousand Dollars ($200,000),
indemnification shall be made by Buyer for all Seller's Damages without regard
to such limitation.
(ii) Seller's Indemnitees shall be entitled to indemnity
with respect to claims only for those Seller's Damages as to which Seller has
given Buyer written notice thereof (A) or with respect to Seller's Damages
resulting from a breach
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of any representation or warranty as set forth in Section 9.3(a)(i) above,
within one (1) year after the Closing Date and (B) with respect to Seller's
Damages resulting from a breach of any covenant or agreement as set forth in
Section 9.3(a)(i) or any of the matters set forth in Section 9.3(a)(ii), within
the applicable statute of limitations with respect thereto. Any written notice
delivered by Seller to Buyer pursuant to this subparagraph (ii) shall set forth
with reasonable specificity to the extent practicable the basis of the claim
for Seller's Damages and a reasonable estimate of the amount thereof, based on
all of the facts then known by Seller.
(c) Conditions of Indemnification. The obligations and
liabilities of Buyer under Section 9.3(a) hereof with respect to claims for
Seller's Damages ("Seller's Claims"), shall be subject to the following terms
and conditions:
(i) Seller will give Buyer notice of Seller's Claim
within ten (10) business days after receiving notice, or becoming aware,
thereof.
(ii) After Buyer receives notice of Seller's Claim which
relates to an assertion of liability by a third party other than Seller or an
affiliate of Seller, Buyer shall have the right to defend any such claim and to
control negotiations toward resolution of such claim and, if litigation ensues,
to defend the same with counsel chosen by Buyer, at Buyer's expense. Seller
shall extend reasonable cooperation to Buyer in connection with such defense.
In the event that, within thirty (30) business days (or earlier, to the extent
Seller's rights would be materially and adversely affected by a failure to give
notice earlier than such 30 day period) after notice of Seller's Claim, Buyer
fails to notify Seller of its intention to defend Seller's Claim, Seller will
(upon further notice to Buyer) have the right (but not the obligation) to
undertake the defense, compromise or settlement of Seller's Claim for the
account of Seller. In such event, Buyer shall have the right to assume the
defense of Seller's Claim at any time prior to final settlement, compromise or
determination thereof, provided that any such assumption shall be conditioned
upon Buyer's acknowledgment of its indemnification obligation for such claim.
(iii) Notwithstanding anything in subparagraphs (i) and
(ii) of this Section 9.3(c) to the contrary, a failure by any party to meet the
time limits prescribed in such subparagraphs shall not affect the rights
provided to the parties in this Agreement, unless the rights of the party not
required to meet such time limits are materially
<PAGE> 46
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and adversely affected by the failure to comply with such time limit.
ARTICLE 10
TERMINATION
10.1 Termination. This Agreement may be terminated:
(a) at any time by mutual consent of Seller and Buyer;
(b) by either party, if the Closing hereunder has not taken
place on or before April 30, 1997, provided that the party seeking such
termination shall not then be in breach of its obligations under this
Agreement;
(c) by Seller if all conditions set forth in Article 8 have
not been satisfied or waived on or prior to April 30, 1997, and Seller is not
in breach of its obligations under this Agreement; and
(d) by Buyer if all conditions set forth in Article 7 have not
been satisfied or waived on or prior to April 30, 1997; and Buyer is not in
breach of its obligations under this Agreement.
10.2 Procedure and Effect of Termination.
(a) In the event of termination of this Agreement and
abandonment of the transactions contemplated hereby by any or all of the
parties pursuant to Section 10.1, prompt written notice thereof shall forthwith
be given to the other party and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned without further action by
any of the parties hereto. If this Agreement is terminated as provided herein:
(i) None of the parties hereto nor any of their
directors, officers, shareholders, employees, agents or affiliates shall have
any liability or further obligation to the other party or any of its directors,
officers, shareholders, employers, agents or affiliates pursuant to this
Agreement with respect to which termination has occurred, except as stated in
Sections 10.2(b) hereof;
(ii) All filings, applications and other submissions
relating to the transactions contemplated hereby shall, to the extent
practicable, be withdrawn from the agency or other person to which made; and
<PAGE> 47
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(iii) Buyer shall return any information received by
Buyer from Seller and will cause all confidential information obtained by Buyer
from Seller concerning the Newspaper to be treated as such.
(b) Notwithstanding anything to the contrary contained in this
Agreement, if Seller or Buyer is in breach of its respective obligations under
this Agreement prior to the date of termination of this Agreement, then and in
that event, as appropriate, the following provisions shall apply:
(i) if Seller is in breach of its obligations under
this Agreement, Buyer shall have the right to seek all remedies available to it
as provided hereunder or at law or equity, including the remedy of specific
performance as provided in Section 11.10; and
(ii) if Buyer is in breach of its obligations under this
Agreement, Seller shall have the right to seek all remedies available to it as
provided hereunder or at law or equity.
ARTICLE 11
MISCELLANEOUS PROVISIONS
11.1 Expenses. Whether or not the transactions contemplated hereby
are consummated, except as otherwise specifically provided herein, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby will be paid by the party incurring such costs and
expenses; provided, that payment of all real property transfer taxes and all
documentary stamps, filing fees and any penalties or interest with respect
thereto, (collectively, "Transfer Taxes") payable in connection with
consummation of the transactions contemplated by this Agreement shall be paid
by Seller to the extent imposed by statute on Seller and by Buyer to the extent
imposed by statute on Buyer; provided that Seller shall pay Buyer's share of
such Transfer Taxes at Closing and Buyer shall reimburse Seller in connection
with the final settlement of Working Capital for its share of such Transfer
Taxes. Payment of any sales and use taxes, if any, in connection with
consummation of the transactions contemplated by this Agreement shall be paid
by Seller. Payment of any real estate recording fees shall be divided equally
between Buyer and Seller.
11.2 Further Assurances. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things
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necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the sale contemplated by this Agreement. From
time to time after the Closing Date, without further consideration, Seller
will, at its expense, execute and deliver, or cause to be executed and
delivered, such documents to Buyer as Buyer may reasonably request in order to
more effectively vest in Buyer good title to the Assets and to evidence the
representations and warranties of Seller. From time to time after the Closing
Date, without further consideration, Buyer will, at Buyer's expense, execute
and deliver such documents to Seller as Seller may reasonably request in order
more effectively to consummate the sale of the Assets pursuant to this
Agreement.
11.3 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by written agreement of Seller and Buyer.
11.4 Waiver of Compliance; Consents. Except as otherwise provided in
this Agreement, any failure of any of the parties to comply with any
obligation, representation, warranty, covenant, agreement or condition herein
may be waived by the party entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver, but such waiver or failure
to insist upon strict compliance with such obligation, representation,
warranty, covenant, agreement or condition shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing in a manner consistent with the requirements
for a waiver of compliance as set forth in this Section 11.4.
11.5 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered personally or by facsimile
transmission, telexed or mailed by registered or certified mail (return receipt
requested), postage prepaid, to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice; provided
that notices of a change of address shall be effective only upon receipt
thereof):
<PAGE> 49
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(a) to Seller:
Mid-States Newspapers, Inc.
1560 Broadway
Suite 1485
Denver, Colorado 80202
Attention: Mr. W. Dean Singleton
Telecopy: (303) 820-9340
with a copy (which shall not constitute notice) to:
Verner, Liipfert, Bernhard, McPherson and Hand, Chartered
901 15th Street, N.W., Suite 700
Washington, DC 20005
Attention: Howell E. Begle, Jr., Esquire
Telecopy: (202) 371-6279
(b) if to Buyer:
Newspaper Holdings, Inc.
3309 Brighton Place
Lexington, Kentucky 40509
Attention: Ralph I. Martin
Telecopy: (606) 252-2234
with a copy (which shall not constitute notice) to:
Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246
Attention: Thomas B. Henson, Esquire
Telecopy: (704) 373-3918
11.6 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but, except as provided in Section
11.16(b) with respect to Seller and Buyer, as the case may be, which shall not
require any consent of the other party, neither this Agreement nor any of the
rights, interest or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other parties, nor is this Agreement
intended to confer upon any other person except the parties hereto and their
respective successors and permitted assigns any rights or remedies hereunder.
Notwithstanding the foregoing, following the Closing Date, Buyer shall be
entitled to assign its
<PAGE> 50
- 45 -
rights, interest and obligations under this Agreement to Media General, Inc. or
any Media General Affiliate, or any Affiliate of Buyer without the consent of
Seller and upon such assignment Buyer shall be released from any obligations
hereunder. Upon any such assignment pursuant to the preceding sentence, for
all purposes of this Agreement, including without limitation, Section 2.2 and
for purposes of determining if employees accepted employment with Buyer,
references to Buyer shall be deemed to refer to the assignee. For purposes of
this Section 11.6, a "Media General Affiliate" shall mean a person,
corporation, partnership or other entity that is controlled by, controls or is
under common control with Media General, Inc. Following any such assignment,
notices under this Agreement shall be sent to such parties as designated in
writing by the assignee to Seller.
11.7 No Solicitation. From the date hereof until the termination of
this Agreement pursuant to Article 10, Seller shall not (nor will it permit any
of its respective officers, directors, stockholders, affiliates or agents to)
directly or indirectly solicit or participate or engage in or initiate any
negotiations or discussions, or enter into (or authorize) any agreement or
agreement in principle, or announce any intention to do any of the foregoing,
with respect to any offer or proposal to acquire all or a substantial part of
the Assets, whether by merger, purchase of assets or equity or otherwise,
except with respect to Buyer as contemplated by this Agreement.
11.8 Governing Law. This agreement shall be governed by the laws of
the Commonwealth of Virginia (but not the laws pertaining to choice of law) as
to all matters, including but not limited to matters of validity, construction,
effect, performance and remedies.
11.9 Consent to Jurisdiction, etc. The parties hereto hereby
irrevocably consent to the nonexclusive jurisdiction and venue of any Federal
court located in the City of Richmond, Commonwealth of Virginia or to the
extent such courts are not available due to lack of jurisdiction, any court in
the City of Richmond, Commonwealth of Virginia, in connection with any action
or proceeding arising out of or relating to this Agreement. The parties hereto
hereby waive personal service of any process in connection with any such action
or proceeding and agree that the service thereof may be made by certified or
registered mail addressed to or by personal delivery to the other party at such
other party's address set forth pursuant to Section 11.5 hereof. In the
alternative, in its discretion, any of the parties hereto may effect service
upon any other party in any other form or manner permitted by law.
<PAGE> 51
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11.10 Specific Performance. The parties recognize that if Seller
breaches this Agreement and refuses to perform under the provisions of this
Agreement, monetary damages alone would not be adequate to compensate Buyer for
its injury, due to the unique nature of the Newspaper and the Assets. Buyer
shall therefore be entitled, in addition to any other remedies that may be
available, including money damages and reimbursement of all related costs and
expenses (including legal fees and expenses), to obtain specific performance of
the terms of this Agreement. If any action is brought by Buyer to enforce this
Agreement, Seller shall waive the defense that there is an adequate remedy at
law.
11.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.12 Interpretation. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
11.13 Entire Agreement. This Agreement, including the Exhibits hereto,
the Disclosure Schedule and the documents delivered pursuant to this Agreement,
together with the Escrow Agreement, embody the entire agreement and
understanding of the parties hereto in respect of the transactions contemplated
by this Agreement and supersedes all prior agreements and understandings
relating to such subject matter, including, without limitation the Letter
Agreement dated as of January 7, 1997 between Seller and Buyer. The Exhibits
hereto and the Disclosure Schedule are an integral part of this Agreement and
are incorporated by reference herein.
11.14 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
11.15 Bulk Sales. Buyer hereby waives any necessary compliance by
Seller with any bulk sales laws. Seller hereby agrees to indemnify, defend and
hold Buyer harmless from and against any loss, claim, liability, cost or
expense which Buyer may suffer or incur because of Seller's non-compliance with
such bulk sales laws.
<PAGE> 52
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11.16 Cooperation With Respect to Taxes and Other Matters.
(a) Seller and Buyer will cooperate fully, including allowing
each other full access to and right to copy documents, with each other after
the Closing in connection with any audit examination by any governmental taxing
authority or otherwise with respect to the business of the Newspaper or any of
the Assets including, but not limited to, furnishing or making available
records, files, financial information, accounting records, books of account or
other materials (the "Tax and Accounting Records") necessary or helpful for the
defense against the assertions of any taxing authority as to any tax returns,
tax declarations or tax reports of Buyer, Seller or any of their respective
Affiliates, or otherwise reasonably required by Buyer in the operation of the
Newspaper or the Assets. Neither Buyer nor Seller will destroy any Tax and
Accounting Records for a period of six (6) years after the Closing Date without
having given thirty (30) days prior notice to Seller or Buyer, respectively,
and, in the event Seller or Buyer wishes to copy any such records, cooperate in
making such records available for such copying, provided arrangements are made
for reimbursement of all expenses reasonably incurred as a result of such
cooperation.
(b) Seller and Buyer agree that Seller's transfer of the
Assets to Buyer shall, at Buyer's or Seller's election, be accomplished in a
manner enabling the transfer to qualify as part of a like-kind exchange of
property within the meaning of Section 1031 of the Code. If Buyer or Seller so
elects, Buyer and Seller shall cooperate with one another to effect such
like-kind exchange, which cooperation shall include, without limitation, taking
such actions as either Buyer or Seller reasonably requests in order to effect
the transfer of the Assets in a manner which enables such transfer to qualify
as part of a like-kind exchange of property within the meaning of Section 1031
of the Code and Buyer and Seller agree that either party may assign its rights
and interest (but not its obligations) under this Agreement to an escrow agent
acting as a qualified intermediary under United States Treasury Regulations, to
qualify the transfer of the Assets as part of a like-kind exchange of property
within the meaning of Section 1031 of the Code.
11.17 Glossary of Defined Terms. The following is a list of terms used
in this Agreement and a reference to the section hereof in which such term is
defined:
<PAGE> 53
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<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
ABC 4.20
Adjustment Time 1.3(a)
Agreement Preamble
Affiliate 4.25
Assessments 6.9
Assets 1.1
Assumption Agreement 1.3
Buyer Preamble
Buyer's Claims 9.2(c)
Buyer's Damages 9.2(a)
Buyer's Indemnitees 9.2(a)
CERCLA 4.24(a)
Closing 3.1
Closing Date 3.1
Closing Date Statement of Current Assets and Current 2.3(e)
Liabilities
Code 1.3
Compensation Arrangement 1.3
Contracts 1.1(c)
Covenants Not to Compete 2.1(a)
Current Assets 2.2(a)(ii)
Current Liabilities 2.2(a)(i)
Disclosure Schedule 1.1(a)
Employee Plan 1.3
Environmental Engineer 6.9
Environmental Orders and Laws 4.24
Excluded Assets 1.2
</TABLE>
<PAGE> 54
- 49 -
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Financial Statements 4.4
GAAP 2.1(a)(i)
Hazardous Materials 4.23
Liabilities 2.2(a)(i)
Licenses 1.1(e)
Material Adverse Effect 4.1
Media General Affiliate 11.6
Multi-employer Plan 1.3
Newspaper Preliminary Statements
Permitted Liens 3.2(a)
Pre-Closing Statement of Current Assets and Current 2.3(b)
Liabilities
Purchase Price 2.1(a)
Real Property 4.11
Reportable Quantity 4.23(a)
Required Consents 4.3(b)
Seller Preamble
Seller's Claims 9.3(c)
Seller's Damages 9.3(a)
Seller's Indemnities 9.3(a)
Target Working Capital 2.2
Tax and Accounting Records 11.16
Tax Returns 4.9
Taxes 4.9
Transfer 6.1(a)
Transfer Taxes 11.1
Working Capital 2.2
</TABLE>
<PAGE> 55
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IN WITNESS WHEREOF, Seller and Buyer have caused this Asset Purchase
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
BUYER:
-----
NEWSPAPER HOLDINGS, INC.
By:
--------------------------------------
Name :
Title:
SELLER:
------
MID-STATES NEWSPAPERS, INC.
By:
--------------------------------------
Name:
Title:
Garden State Newspapers, Inc. ("Guarantor") hereby unconditionally
guarantees the due and punctual performance and payment in full when due of all
obligations and liabilities of Mid-States Newspapers, Inc. under the foregoing
Asset Purchase Agreement and waives any circumstance that might constitute a
defense available to, or discharge of, Guarantor.
GUARANTOR:
---------
GARDEN STATE NEWSPAPERS, INC.
By:
--------------------------------------
Name:
Title:
