ASSETS PURCHASE AGREEMENT
This agreement (the "Agreement") is entered into this 23rd day of February
1998, by and among UPPER MICHIGAN NEWSPAPERS, LLC., a Virginia limited liability
company ("Buyer"), STAR PUBLICATIONS, INC., a Michigan corporation ("Seller"),
with its principal office located at 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx
00000, and Xxxxxx X. Xxxxxxx, trustee; Xxxxxx X. Xxxxx, trustee; Xxxxx X.
Xxxxxxx; Xxxxx Xxxxxxxx, and Xxxx Xxxxx (jointly and severally "Shareholders").
RECITALS
Seller owns and publishes the following shopping guides: Northern Star,
Straits Area Star, Presque Isle Star, Alpena Star, Petosky Star Advertiser,
Charlevoix County Star, Star Advertiser, Roscommon County Star, and Star Buyer's
Guide (which shopping guides hereinafter are referred to collectively as the
"Shopping Guides"). Shareholders own all of the issued and outstanding shares of
Seller's capital stock. Buyer wishes to purchase from Seller, and Seller wishes
to sell and transfer to Buyer as an operating business, all, but not less than
all, of Seller's property and assets necessary, used, or useful for the
operation, production, publication, management, marketing, or sale of Shopping
Guides or Shopping Guides' advertising, all on the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of and relying upon the foregoing
recitals, each covenant, agreement, representation, and warranty set forth
herein, and each act done pursuant to this Agreement, Buyer, Seller, and
Shareholders agree as follows:
1. Purchase and Sale of Property and Assets.
1.1 Agreement to Purchase and to Sell. Upon and subject to compliance with
all terms and conditions of this Agreement, at Closing (hereinafter defined)
Buyer agrees to purchase from Seller, and Seller agrees to sell and deliver to
Buyer as herein provided, as an operating business, all right, title, and
interest in and to all, but not less than all, of the tangible and intangible
property, rights, and assets of Seller necessary, used, or useful for the
operation, production, publication, management, marketing, or sale of Shopping
Guides or Shopping Guides' advertising (jointly and severally the "Property
Sold"), excluding only the Excluded Property (hereinafter defined), and
including the following:
(a) all machinery, furniture, furnishings, composition and press
equipment, tools, and other equipment, including Seller's library and
morgue and all items of tangible personal property used to operate Shopping
Guides, including those briefly listed on Exhibit 1.01.1, and the spare
parts, repair parts, accessories, attachments, and appurtenances thereto
attached
or appertaining and all replacements thereof and any improvements or
additions thereto prior to the Closing Date;
(b) all of Seller's business, employee, payroll, advertiser, customer,
contractor, subscriber, circulation, and distribution records, its files,
studies, surveys, software, software programs, computer printouts, data
bases, and related items, and all other documents, instruments, and records
evidencing or pertaining to Shopping Guides or the Property Sold, in whole
or in part;
(c) all of Seller's automobiles, vehicles, vans, trucks, trailers, and
other mobile equipment, including those listed on Exhibit 1.01.2;
(d) all of Seller's inventories (including newsprint, paper, plates,
and film), work in process, raw materials, merchandise held for sale,
distribution and other supplies, and similar items ("Inventories") on hand
as of the Closing Date;
(e) as and to the extent provided in assumption agreements executed by
Buyer at Closing pursuant to paragraph 3.4, all of Seller's rights in the
Contracts (hereinafter defined) listed on Exhibit 1.01.3 (such Contracts
collectively, the "Assumed Contracts");
(f) all of Seller's rights in, to, and under all franchises, licenses,
permits, and authorizations applicable to the Shopping Guides;
(g) all of Seller's general intangibles and evidences thereof,
including the exclusive right to use the names listed on Exhibit 1.01.4
(the "Names"), and any copyrights, patents, patent applications,
servicemarks, trademarks, tradenames, or slogans now used or owned by
Seller or registered in its name;
(h) all other of Seller's interests in assets or property owned,
acquired, leased, or held for or used in Seller's operations, whether
tangible or intangible, and whether or not otherwise identified or
reflected herein or in the Financial Statements (hereinafter defined); and
(i) all property such as is described in (a) through (h) that is
hereafter acquired by Seller prior to Closing.
1.2 Excluded Property. The following ("Excluded Property") are not part of
the Property Sold and are not being sold to Buyer: Seller's (a) rights under
this Agreement, (b) cash on hand or in banks, cash items, cash equivalents,
deposits, deferred charges, marketable securities, the cash value of all life
insurance policies on the lives of any of the shareholders (or any
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of the trustees thereof), checks and drafts, (c) prepaid expenses, accounts
receivable, refunds, rebates, advances, and notes receivable, (d) corporate
stock records, seal, and minute book, (e) all insurance policies, (f) tax
records of Seller, (g) such items of the Property Sold as may be disposed of by
Seller before Closing in the ordinary course of Seller's business, for value in
accordance with Seller's past practices, and not in violation of this Agreement,
and (h) all other current assets other than Inventories.
2. Purchase Price.
2.1 The total purchase price for the Property Sold ("Purchase Price") shall
be Four Million Five Hundred Thousand and No/100 Dollars ($4,500,000.00)
adjusted as required by paragraph 2.2, allocated in accordance with Exhibit
2.01, and payable to Seller on Closing by Buyer by (a) cashiers check or wire
transfer of immediately available funds in the amount of Two Million Seven
Hundred Fifty Thousand and No/100 Dollars ($2,750,000.00), which amount shall be
adjusted before payment as required by paragraph 2.2, and (b) delivery of
Buyer's promissory notes (the "Notes"; singly, a "Note") payable to Seller in
the aggregate principal amount of One Million Seven Hundred Fifty Thousand and
No/100 Dollars ($1,750,000.00) bearing interest at the rate of seven percentum
(7%) per annum on any unpaid principal balance thereof from Closing until paid,
such Notes to be amortizable as if for a ten (10) year term as therein provided
for but to mature and be fully paid on or before the sixth (6th) anniversary of
the Closing Date, to be substantially in the form and contain the substance of
Exhibit 2.01.1, and to be secured by a security interest in the Property Sold
(free and clear of any lien created by Buyer) substantially in the form and
containing the substance of Exhibit 2.03.1.
2.2 Adjustments. Until Closing, operation of Shopping Guides and use of the
Property Sold, and any income or expenses attributable thereto, shall be for
Seller's account. In finally determining the Purchase Price, at Closing the
amount of the Purchase Price and the amount of cash Buyer is to pay at Closing
shall be adjusted up or down ("Closing Adjustments") as follows:
(a) at Closing there shall be a preliminary financial settlement by
Buyer and Seller to determine the Closing Adjustments (the "Preliminary
Adjustment"), which Preliminary Adjustment shall be based on the financial
statements and estimates of Seller (the "Preliminary Financials") then
reasonably available to approximate Buyer's and Seller's reasonable good
faith estimate of the Preliminary Adjustments as of such Closing Date (the
"Preliminary Settlement");
(b) within 60 days of the Closing Date and upon preparation of
satisfactory financial statements (the "Closing
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Financials") by which Buyer and Seller can determine the actual Adjustments
as of the Closing Date, a final settlement of the Closing Adjustment will
be determined and payment made to either Buyer or Seller by the Escrow
Agents (hereinafter defined) in the amount of the difference of the Closing
Adjustments determined in this final settlement and in the Preliminary
Settlement in order to reflect the computation of and complete the full and
final payment of the Purchase Price (the "Final Settlement"). Final
Settlement of the Closing Adjustments as of the Closing Date (i) shall be
based on calculations derived from the financial results and financial
condition of Seller's business reflected in the Closing Financials of
Seller for the period as of and ending on the Closing Date or (ii), if the
Closing Date is not the same date as the closing date for the period most
recently ended and preceding the Closing Date, then Final Settlement shall
be based on calculations derived from the financial results and financial
condition of Seller reflected in the Closing Financials of Seller (a) for
the period as of and ending most recently prior to the Closing Date and (b)
for the period next following as though still owned by Seller. If
determined under "(ii)" above, final Closing Adjustments will be (x)
derived from Closing Financials as though for and as of the period ending
prior to the Closing Date plus (y) the result of the financial impact to
Buyer and Seller of the Buyer realizing all benefit of the sales of Seller
(and ownership of resulting accounts receivable) for the period beginning
on the day next following the latest prior financial statement date and
continuing to the Closing Date, less (z) the expenses assumed by Buyer with
respect to such sales, "(y)" and "(z)" as determined by the calculation
process as follows: if not closing on the date of the end of a normal
reporting period, then Final Settlement will be partially determined by
computing the Closing Adjustments as though Closing had occurred at the end
of the latest prior reporting period. Sales of Buyer in the following
reporting period from that date to Closing will be deemed to be sales that
Buyer has purchased from Seller and for which Buyer will pay Seller by
further change to the Closing Adjustments. Direct expenses, principally
personnel and distribution expenses, will be the responsibility of the
party to which the corresponding sales relate; that is with respect to
personnel, Seller and Buyer will each incur their own payroll expense for
the period before and after Closing respectively; and with respect to
distribution, the distribution xxxxxxxx for each will correspond to the
publication dates on which the revenue was earned. All other appropriate
expenses for the reporting period will be pooled and the pool split between
Buyer and Seller in the same proportion as their respective publication
dates in the month.
(c) all expenses applicable to Seller's business, including, without
limitation, employees' wages and other wage related expenses, Shopping
Guides, or to all or any part of the Property Sold, whether paid, prepaid,
or accrued and regardless of when assessed, determined, calculated, paid,
or collected, shall be Seller's sole responsibility for all periods ending
with, upon, or
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prior to Closing, and at and as of Closing shall be prorated between Buyer
and Seller and the amount of the Purchase Price and the amount of cash
Buyer is to pay at Closing adjusted accordingly so that Seller shall be
responsible for any and all of such expenses incurred or accrued for all
periods ending prior to or at Closing and so that Buyer shall be
responsible for Shopping Guides' expenses incurred or accrued thereafter;
(d) the amount of the Purchase Price and the amount of cash Buyer is
to pay at Closing also shall be reduced as appropriate, without
duplication, by deducting therefrom (i) the amount of any prepaid revenue
theretofore received by Seller as of the Closing Date, for goods or
services to be delivered or rendered by Buyer after the Closing Date, and
(ii) the amount of any discount outside of the ordinary course of Seller's
business given by Seller for such payments theretofore received by Seller.
Buyer hereby assumes and agrees to timely perform Seller's obligation to
render the services or deliver the goods for which adjustments are made
pursuant to this subparagraph. To this end, Seller shall prepare a
statement at Closing that shall contain Seller's description and
calculation of the amount of each item described in this subparagraph;
(e) if after Closing Buyer is to receive the benefit of any expenses
prepaid by Seller, the Purchase Price and the amount Buyer is required to
pay to Seller at Closing shall be increased by the amount of such prepaid
expenses, and such prepaid expense shall not be treated as Excluded
Property hereunder;
(f) the amount of the initial Purchase Price and the amount of cash
Buyer is to pay at Closing also shall be reduced by deducting therefrom (i)
the amount necessary to satisfy and cure each breach by Seller as of the
Closing Date of any representation, warranty, or covenant made by Seller in
this agreement and (ii) the amount necessary to discharge or cure each Lien
applicable to any part of the Property Sold as of the Closing Date, other
than Permitted Liens (hereinafter defined);
(g) from the amount of cash Buyer is to pay at Closing there also
shall be deducted $50,000.00, which, together with $50,000.00 in cash then
supplied by Buyer, Buyer and Seller shall pay into an escrow account (the
"Closing Escrow Account"), which shall be an account in the joint names of
Xxxx X. Xxxxx and Seller's president (jointly the "Escrow Agents"; each of
whom has signed this Agreement as "Escrow Agents" solely for the purpose of
agreeing to act as such) in such bank or other checking institution as the
Escrow Agents shall select. The Closing Escrow Account shall be used to pay
final Closing Adjustments to the party entitled thereto as and to the
extent herein provided, and
(h) as soon after Closing as is reasonably practicable, but in no
event later than 60 days following Closing,
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Buyer's employees, under the direction and supervision of Escrow Agents,
shall prepare and provide to each of Seller and Buyer a Statement (the
"Statement") of the foregoing Closing Adjustments. To the extent the
Statement indicates a net increase in the Purchase Price, Seller shall be
entitled to receive from the Closing Escrow Account, and the Escrow Agents
shall immediately return to Seller the $50,000 deposited by it in the
Closing Escrow Account plus an additional amount equal to the net increase
in the Purchase Price. Any amounts remaining in the Closing Escrow Account
after such payments have been made shall be immediately paid to Buyer. If
such increase in the Purchase Price is in excess of $50,000, then the
Escrow Agents immediately shall pay to Seller all amounts in the Closing
Escrow Account, and Buyer immediately shall pay to Seller the amount of
such excess by cashiers check or wire transfer of immediately available
funds. To the extent the Statement indicates a net decrease in the Purchase
Price, Buyer shall be entitled to receive from the Closing Escrow Account,
and the Escrow Agents immediately shall return to Buyer the $50,000
deposited by it in the Closing Escrow Account plus an additional amount
equal to the net decrease in the Purchase Price. Any amounts remaining in
the Closing Escrow Account after such payments have been made shall be
immediately paid to Seller. In the event such decrease in the Purchase
Price is in excess of $50,000, then the Escrow Agents shall immediately pay
to Buyer all amounts in the Closing Escrow Account, and Seller immediately
shall pay to Buyer the amount of such excess by cashiers check or wire
transfer of immediately available funds. If the Escrow Agent cannot agree
upon such final determination and payments, they shall retain Ernst &
Young, Xxx XXX Xxxxx, Xxxxxxx, Xxxxxxxx ("Accountants"), whose costs and
fees shall be borne equally by Seller and Buyer, to prepare a report making
such determination, which determination shall be final and binding upon all
parties.
2.3 Security. Subject to each Lien (hereinafter defined) then existing as
to any part of the Property Sold, at Closing Buyer shall duly execute and
deliver to Seller a security agreement in the form of Exhibit 2.03.1 ("Security
Agreement"), securing payment of the Note as and to the extent therein provided.
2.4 Preliminary and Closing Financials. Not less than seven (7) days before
the Closing Date, Seller will deliver to Buyer financial statements of Seller
("Preliminary Financials") sufficient for Buyer to make a tentative
determination of the Purchase Price and the Closing Adjustments prepared in
accordance with generally accepted accounting principles and practices applied
on a basis consistent with Seller's past practices, except that they shall be
prepared as if they were for a fiscal year of Seller then ending and normal
year-end adjusting entries had then been made. Such statements shall be
certified to Buyer by an appropriate officer of Seller as having been so
prepared and as fairly presenting Seller's then financial position and the
results of Seller's operations and the changes in its financial position as
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at the end of and for the period then ended and for the twelve months and
portion of the fiscal year to the end of such month, as adjusted in compliance
with this paragraph. Immediately upon the later of (a) thirty (30) days after
Closing, or (b) ten (10) days after Buyer's receipt of financial statements of
Seller ("Closing Financials") prepared and certified by Seller as at the end of
and for the normal reporting period ending either with or most nearly before or
after the Closing Date in the same manner as provided for the Preliminary
Financials, Buyer and Seller shall finally determine the final amount of the
Closing Adjustments required by paragraph 2.2 after a review and analysis of the
Closing Financials and, if necessary, of the books and records of Seller, and
thereafter the parties shall make final settlement of the Closing Adjustments.
If the parties determine as a result of such final settlement that one of the
parties is entitled to receive a payment from the other party for additional
Closing Adjustments, then the amount thereof shall be paid in cash first from
the Closing Escrow Account, with any unpaid balance to be paid thereafter by the
obligated party. When all Closing Adjustments have been determined and paid, any
balance remaining in the Closing Escrow Account shall be paid to the Seller. If
after receipt of the Accountants' report, and after exhausting the Closing
Escrow Account, and after taking into account the costs for having the report
prepared, either Buyer or Seller is entitled to receive more than Five Thousand
($5,000.00) in additional Closing Adjustments from the other party, the other
party promptly shall pay the amount actually owed in cash to the party entitled
thereto.
3. Closing.
3.1 Closing and Closing Date. Unless earlier terminated or postponed as
herein provided for, consummation of the sale and purchase contemplated by this
Agreement ("Closing") shall take place beginning at 10:00 o'clock a.m., local
time, on February ___, 1998 (or at such other time and place as Buyer and Seller
hereafter may agree upon in writing) (the "Closing Date") at the offices of
Seller in Gaylord, Michigan, and shall be effective as of 12:01 a.m. on
February, 1998.
3.2 Duties of Seller at Closing. At Closing and contemporaneously with
Buyer's performance of its obligations described in paragraph 3.3, Seller agrees
to, and at Seller's sole expense, shall tender and deliver to Buyer at 10:00
o'clock a.m., local time, on the Closing Date, in form and substance reasonably
satisfactory to Buyer and its counsel each of the following:
(a) such documents and duly executed instruments as shall be necessary
and appropriate to carry out the transactions contemplated by and the
intent of this Agreement, including, without limitation, and instruments of
conveyance, assignment, consent, or transfer sufficient to assign, convey,
transfer to, and vest in Buyer all right, title, and interest in and to
Shopping
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Guides and each item of the Property Sold free and clear of any and all
Liens and subject only to Permitted Liens;
(b) peaceful, exclusive, and unencumbered possession of the Property
Sold, subject only to Permitted Liens, in the same condition as at this
date, ordinary wear-and-tear excepted;
(c) a copy, certified by an appropriate officer of Seller as being
true and complete, of Seller's bylaws and articles of incorporation as then
in effect and of necessary corporate proceedings and resolutions heretofore
duly adopted by Seller's board of directors and Seller's Shareholders
authorizing and approving Seller's execution and delivery of this Agreement
and consummation of the transactions contemplated hereby;
(d) the legal opinion of Honigman, Miller, Xxxxxxxx and Xxxx, 2290
First National Bank Bldg., 000 Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx
00000-0000 ("Seller's Counsel") dated as of the Closing Date, substantially
in the form and substance of Exhibit 3.02;
(e) each financial statement, document, opinion, waiver, consent,
certificate, or instrument that Seller is required to deliver under this
Agreement;
(f) a copy of the Security Agreement dated as of the Closing Date and
duly executed by all parties thereto other than Buyer;
(g) a copy of a Noncompetition Agreement substantially in the form and
containing the substance of Exhibit 3.02.1 hereto (the "Noncompetition
Agreement") duly executed by each of the Shareholders;
(h) within five (5) days after the Closing Date, an aged (30, 60, 90
days, etc.) list of all accounts receivable of Seller as of the latest
period end at or prior to the Closing Date listing for each such account
the account name, address, amount due, due date of the oldest portion, and
date to which service has been provided ("Accounts Receivable List"), which
Accounts Receivable List shall be updated to the Closing Date, as
necessary, through the efforts of Buyer and Seller;
(i) a duly executed copy of each instrument of consent, waiver, or
approval described in paragraph 6.4 and of each instrument necessary or
effective to terminate as of the Closing Date each employee benefit plan
(if any) applicable to any of Seller's employees;
(j) the Assumption Agreements (hereinafter defined) duly executed by
each party thereto other than Buyer;
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(k) a copy of a lease in the form and substance attached hereto as
Exhibit 3.02.2 (the "Lease"), duly executed by all parties other than
Buyer; and
(l) each other document opinion, waiver, consent, certificate,
statement, or instrument that this Agreement requires Seller to deliver.
3.3 Duties of Buyer at Closing. At Closing, and contemporaneously with
Seller's performance of its obligations described in paragraph 3.2, Buyer agrees
to and at Buyer's sole expense shall tender and deliver to Seller in form and
substance reasonably satisfactory to Seller and Seller's Counsel, each of the
following:
(a) the Purchase Price, as adjusted, paid as herein agreed;
(b) a duly executed copy of the Security Agreement, dated as of the
Closing Date, together with such financing statements and other
documentation reasonably necessary to perfect Seller's security interest;
(c) the legal opinion of Xxxxxxxx & XxXxxxxx, P.C., 100 Shockoe Slip,
Xxxxxxxx, Xxxxxxxx 00000, dated as of the Closing Date, substantially in
the form and containing the substance of Exhibit 3.03;
(d) the Noncompetition Agreement(s) duly executed by Buyer and all
parties thereto, together with proof of payment of any amounts therein
specified to be paid by Buyer at Closing;
(e) the Lease, duly executed by Buyer and all parties thereto;
(f) the Assumption Agreements duly executed by Buyer;
(g) a copy, certified by the managing member of Buyer as being true
and complete, of Buyer's articles of organization and operating agreement,
a certificate of good standing of Buyer, and a certified copy of the
resolutions of Buyer's member(s) approving and authorizing the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby; and
(h) each other document, opinion, waiver, consent, certificate,
statement, or instrument that this Agreement requires Buyer to deliver.
3.4 Certain Liabilities. On and after Closing, and as expressly set forth
in assumption instruments executed and
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delivered by Buyer at Closing (the "Assumption Agreements"), Buyer will assume
and agree to perform and discharge in accordance with the terms thereof, all of
Seller's obligations arising subsequent to Closing under the Assumed Contracts
that are listed and described on Exhibit 1.01.3, true copies of which shall have
been supplied to Buyer before the Closing Date. Buyer assumes and shall be
liable for no other liability of Seller, contractual or otherwise, and Seller
covenants and agrees with and for the benefit of Buyer that Seller will perform
and discharge all obligations of Seller (contractual or otherwise) not expressly
so assumed by Buyer in writing at Closing, including, without limitation, any
obligation for payment of Seller's accounts payable. Without limiting the
generality of the foregoing, Seller agrees that Buyer is not, directly or
indirectly, assuming or agreeing to assume and shall not be liable for any
liability or obligation of Seller to Seller's employees, including without
limitation any such liability or obligation in respect of wages, salaries,
bonuses, or accrued vacation, sick, or other pay, except that Buyer hereby
assumes and shall be responsible for payment of normal earned vacation
eligibility or unpaid vacation pay for each of Seller's employees hired by Buyer
for vacation earned within one year prior to the Closing Date but not yet taken
by any such hired employee as of the Closing Date and the pro rata vacation
earned between any such hired employee's last previous anniversary date and the
Closing Date, unpaid vacation pay of Xxxxx X. Xxxxxxx ("Xxxxxxx"), whether or
not he is hired by Buyer, in the amount of Two Thousand Two Hundred Thirty and
73/100 ($2,230.73). In the case of Xxxxxxx, such amount shall be paid by Buyer
to Xxxxxxx at Closing. All such unpaid vacation pay and eligibility is described
on the attached Exhibit 3.04.
3.5 Consents; Further Assurances. Seller shall obtain all material
agreements, consents, waivers, or approvals of third parties necessary or
appropriate for Closing or consummation of the transactions contemplated hereby.
After Closing, on Buyer's reasonable request and at Buyer's expense, at any time
or from time to time, Seller shall take or cause to be taken all such further
actions and shall execute, acknowledge, and deliver all such instruments as
reasonably may be required to memorialize or effectuate the transactions
occurring at Closing in order to ensure that Buyer receives and realizes all of
Seller's rights in the Property Sold as of Closing.
3.6 Collection of Accounts Receivable. At Closing, Seller will deliver
Seller's existing accounts receivable on the Accounts Receivable List. Such
Accounts Receivable List will be used by Buyer for purposes of collection only
for the period of one hundred twenty (120) days immediately following Closing
(the "Collection Period"). Acting as Seller's agent, during the Collection
Period Buyer shall have the exclusive right to and shall make commercially
reasonable efforts to collect Seller's accounts receivable listed on the
Accounts Receivable List, but shall not be
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required to expend or advance any of its funds, to locate any debtor, or to
institute or defend any suit, action, claim, or counterclaim in any legal or
equitable proceeding. Under no circumstances shall Buyer be required to engage
counsel or any outside collection agency or facility in collecting Seller's
accounts receivable. Payments received on an account from any customer of Buyer
that is an account debtor for an account of Seller on the Accounts Receivable
List shall be applied first to the Seller's account on such list, unless such
customer shall designate some other application of such payment or shall contest
the account receivable, in which case Buyer shall promptly notify Seller of such
designation or contest and return to Seller the account relating to such
customer and thereafter shall have no further obligation with respect thereto.
If Seller requests, Buyer also shall promptly return to Seller any account of
Seller that is over 90 days old, and Buyer shall have no further obligation with
respect to such account. Buyer shall transmit all monies collected on Seller's
accounts receivable to Seller within fifteen (15) days after the end of each
month in which such monies are collected. Upon expiration of the Collection
Period, Buyer shall be relieved of all responsibility for, or to attempt
collection of, Seller's accounts receivable, and thereafter Seller alone shall
be responsible for collection of any balances due on such accounts. Within
twenty (20) days after expiration of the Collection Period, Buyer will make
final payment to Seller of the amounts collected on Seller's accounts and shall
return to Seller each then uncollected Seller's account together with a final
statement of the accounts outstanding.
4. Seller's and Shareholders' Representations and Warranties.
To induce Buyer to enter into and perform pursuant to this Agreement,
Seller and Shareholders, jointly and severally, represent and warrant to Buyer
that each of the following is true:
4.1 Corporate Organization, Qualification, Authorization, etc. Seller is a
corporation duly incorporated, validly existing, and in good standing under the
laws of the state of its incorporation, has no subsidiaries, has all corporate
power and authority to conduct its business as it is now being conducted, to own
and operate Shopping Guides, and to own, possess, occupy, use, or operate the
Property Sold and is duly qualified to do business in any state where the nature
of its business or properties requires it to be so qualified. To Seller's
knowledge, Seller has not violated and has duly complied with all applicable
laws, rules, and regulations relating to the ownership and use of its properties
and the conduct of its business and knows of no law, rule, or regulation that
will require a material, adverse change in Shopping Guides' present operation or
the use and enjoyment of the Property Sold or that will cause Buyer to incur any
material liability after Closing.
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4.2 Seller's Property. Seller is the sole owner and publisher of the
Shopping Guides and has good and valid title to the Property Sold free and clear
of Liens other than Permitted Liens. To Seller's knowledge, Seller has the
exclusive right to use of the Names in each of counties where such Names are
registered.
4.3 Distribution. For the six (6) consecutive publication days ending
December 28, 1997, the average distribution of Shopping Guides was not less than
___________, which is within the normal range expected to be attained by
Shopping Guides during that period.
4.4 Financial Statements. Seller has furnished Buyer with the following
financial statements: Seller's (a) financial report with additional information
December 31, 1997; (b) year end adjusted as of December 31, 1997, balance sheet;
(c) balance sheet/financial statement as of December 31, 1996 -- operating
adjusted; (d) balance sheet/financial statement as of December 31, 1995 --
operating adjusted; (e) financial report with additional information December
31, 1996; and (f) financial statements and supplementary information for the
years ended December 31, 1995 and 1994 (collectively, the "Financial
Statements"). Each book or record of Seller that has been or may be exhibited to
or examined by Buyer before Closing is and will be true, correct, and complete.
Except as otherwise expressly disclosed therein, each of the Financial
Statements was prepared in accordance with generally accepted accounting
principles and policies consistently applied throughout the periods involved
(except that the Seller provides pension benefits to retired officers and
records these benefits when paid), and, subject to any qualifications therein
expressly stated (and to normal year-end audit adjustments in the case of
interim financial statements), the Financial Statements fairly present Seller's
then financial position and the changes in financial position and results of
operations for the time periods covered and as at the times therein indicated,
and the revenues and accounts therein reflected arose from bona-fide
transactions in the ordinary course of Seller's business. Except as, and only to
the extent disclosed on Exhibit 4.04 or fully and fairly identified, separately
disclosed, and properly reflected or reserved against in the Financial
Statements, Seller has received no material items of extraordinary,
non-recurring, or non-operating revenues or income, and has no material debts,
liabilities, or other obligations (including, without limitation, obligations
for federal, state, or local taxes or other governmental assessments or
penalties, and obligations for advances, directly or indirectly, incurred or
made to any affiliate or stockholder of Seller), direct or indirect, absolute,
contingent, or otherwise, due or to become due [other than normal and usual
forward obligations (other than for borrowed money) incurred in the ordinary
course of Seller's business] that do not in the aggregate have a material,
adverse effect on Seller, and there have been no changes in the accounting
principles,
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estimates, methods, or practices applied in preparing the Financial Statements,
except that classified advertising sales have been recorded as income when
produced rather than on a cash basis. Seller maintains such books and records as
are customarily kept under current business practices by businesses of
equivalent size and nature, and such books and records fully and fairly reflect
all of Seller's transactions. Seller will furnish Buyer with Seller's usual
interim operating statements and balance sheets for Shopping Guides as of each
month-end (and as of and for each reporting period then ending) until Closing,
and each of these statements shall be correct and complete. The Financial
Statements include as revenues only those revenues arising from Seller's
operations conducted in the ordinary course and in a fashion consistent with
Seller's past practices and reflect all expenses incurred in the operations of
Seller for each period of time covered therein. See Rider 4.4 attached.
4.5 Conduct of Business; Absence of Change. Since the date that is twelve
(12) months earlier than the date hereof, there has been: (i) no material,
adverse change in the condition (financial or otherwise) of Seller, or in
Seller's overall business, revenues, expenses, liabilities, financial condition,
properties, or operations, or to Seller's knowledge, in any laws, rules, or
regulations applicable thereto; (ii) no fire, explosion, storm, accident,
condemnation, damage, theft, destruction, fraud, or loss (whether or not covered
by insurance) materially affecting Shopping Guides, Seller's business, or any
part of the Property Sold; and (iii) to Seller's knowledge, no other occurrence,
event, condition, change in condition, or state of facts that affected, affects,
or may affect Seller, Seller's business, Shopping Guides, or any part of the
Property Sold in any material, adverse manner.
4.6 Title to Property Sold. Except as otherwise expressly disclosed and
described in Exhibit 4.06 as permitted liens ("Permitted Liens") and except for
property leased by Seller pursuant to leases disclosed to Buyer, Seller is the
sole owner of and has, and at Closing will convey and transfer to Buyer, good,
valid, and marketable title to and all rights in (and the right to immediate,
exclusive, peaceful, and unencumbered possession of) the Property Sold free and
clear of any and all Liens except any then existing Permitted Liens, and
Seller's said title is warranted against the claims of any and all persons. The
Property Sold and the Excluded Property include all property used by Seller in
the operation of Shopping Guides and its business to produce the revenues
reflected in the Preliminary Financials and to be reflected in the Closing
Financials.
4.7 Absence of Certain Actions. Since the date hereof Seller has not taken
any action described in paragraph 5.2 of this Agreement, and Seller and
Shareholders have complied with each applicable term, covenant, agreement, and
condition of this Agreement.
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4.8 Claims or Litigation. Other than a dispute with Publishing Partners
International, the details of which have been disclosed to Buyer, there are not
pending or, to Seller's knowledge, any basis for or threatened, any suits,
actions, proceedings, charges, claims, disputes, investigations, or inquiries,
against, or relating to, or that might result, singly or in the aggregate, in
any material, adverse change in the operations or condition of Seller, the
Property Sold, the Shopping Guides, Seller's business, or any part or parts
thereof, and nothing restrains or prohibits or seeks to restrain or prohibit
consummation of the transactions contemplated hereby or questions the legality,
validity, or enforceability of this Agreement or any action taken or to be taken
pursuant hereto or in connection with the transactions contemplated hereby; to
Seller's knowledge, Seller has at all times complied in all material respects
with all applicable laws, ordinances, rules, and regulations (including those
relating to zoning and use of the Property Sold), and Seller knows of no
violation of any law, ordinance, rule, or regulation by Seller or by any of its
officers, directors, agents, servants, or employees, and there are no material
injunctions, judgments, orders, or decrees outstanding or being sought against
Seller, any part of the Property Sold, or any of Seller's publications,
products, or services.
4.9 Licenses and Permits. Seller has all franchises, licenses,
certificates, and permits needed to possess, own, lease, use, or occupy the
Property Sold, to operate and publish the Shopping Guides, and to conduct
Seller's present business; each is in full force and effect, and no action is
pending or, to Seller's knowledge, threatened looking toward any amendment,
revocation, or limitation thereof.
4.10 Tax Matters. Seller has properly filed in correct form with
appropriate governmental agencies all tax returns required to be filed by it;
all taxes due and payable by Seller have been properly reported, determined, and
paid, and Seller has no liability for payment of any unpaid tax or penalty. No
waiver of any statute of limitations has been given by Seller, and there are no
agreements or applications by Seller for any extension of time for the
assessment or payment of any tax. Except for title and transfer charges for
transferring title to Seller's vehicles, Seller has paid or shall pay any and
all taxes (excluding all sales or use taxes) arising out of or becoming due or
payable because of Closing or the purchase and sale of the Property Sold as
contemplated hereby and all taxes and assessments levied against Seller, or the
Property Sold with reference to or arising out of events occurring prior to
Closing. If requested by Seller, Buyer will furnish Seller with Buyer's employer
identification number and a certification that Buyer is purchasing the
Inventories for resale.
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4.11 Condition of Property Sold. Except as disclosed on Exhibit 4.011, each
tangible item of the Property Sold is in good and proper operating condition and
repair and to Seller's knowledge free of defects (ordinary wear-and-tear
excepted).
4.12 Advertising Rates. Seller has supplied Buyer with schedules of the
current advertising rates customarily being charged and received by Seller with
regard to Shopping Guides.
4.13 Employee Status. Seller has delivered to Buyer an accurate and
complete copy of Seller's current payroll roster showing the name and address of
each person entitled to receive compensation from Seller for services as an
employee of Seller and for each: his or her job title and description, nature of
compensation (salary, wages, and/or commissions), current rate of compensation,
bonus to which entitled during the current year, or, if none, the amount of
bonus paid during the last year, each vacation period (with pay) to which
entitled during this calendar year, and each fringe benefit or other significant
arrangement with respect to such person's employment by Seller. Immediately
prior to the Closing Date Seller will deliver to Buyer a then current version of
each such payroll roster. Within the last six months there have been no
significant increases other than increases consistent with Seller's past
practices in the salaries payable to Seller's employees, and no commitments or
agreements have been made, or are anticipated relating to employees' salaries or
compensation, except that each of Seller's employees will receive a bonus based
upon a percentage of their annual compensation multiplied by the number of years
employed by Seller. Except for vacation pay to certain employees assumed by
Buyer as provided in paragraph 3.4, within ten days after Closing each of
Seller's employees will have been paid all wages, salaries, commissions,
severance pay, vacation pay, sick leave, or other pay, benefits, or entitlements
earned or accrued by or for each such employee as of, prior to, or as a result
of Closing. Seller knows of no plan by any employee of Seller to refuse later
employment with Buyer (if such employment is offered on the same or similar
terms) that has not been disclosed to Buyer.
4.14 Operating Agreements; Working Conditions. Except as disclosed to
Buyer, Seller has no written or oral contract, express or implied, with any of
its executives or other employees, is not a party to any contract with a labor
organization or to any collective bargaining agreement covering or relating to
any employee(s) and has not recognized, is not required to recognize, and has
received no petition or demand for election or recognition of, a collective
bargaining representative or agent for any of its employees. Seller is not
affected by any present or, to Seller's knowledge, threatened strike or other
labor dispute or disturbance, has complied in all material respects with all
applicable laws, rules and regulations relating to conditions for employment or
discharge of its employees, including those relating to wages,
15
hours, discrimination, occupational safety and health, collective bargaining,
and the withholding and payment of taxes and contributions, has withheld all
amounts required by law or agreement to be withheld from the wages or salaries
of its employees, and is not liable for any arrearages of wages or for any tax
or penalty for any failure to comply with such laws, rules, or regulations.
There are no material controversies pending or to Seller's knowledge threatened
between Seller and any employees or any labor union.
4.15 Benefit Plans. Seller maintains certain employee benefit plans for the
benefit of its employees. Buyer shall have and incur no funding or other
obligation or liability in connection with any such plans, their funding or
termination, or any withdrawal therefrom, in whole or in part. Seller shall be
responsible for compliance with Code Section 4980B as applied to its current and
former employees and to those employees who experience a qualifying even as a
result of this transaction.
4.16 Authorization for Agreement. Seller has full power and authority to
execute, perform, and deliver this Agreement and to consummate the transactions
contemplated hereby. Seller's execution of, delivery of, performance of,
compliance with, and Closing of this Agreement have been duly and validly
authorized by all necessary corporate action and will not (a) constitute or
result in a breach of (or default under) any term, condition, or provision of
(or result in the creation of any Lien, charge, or encumbrance upon any of the
Property Sold pursuant to) any of the Contracts (hereinafter defined), any
articles of incorporation, bylaw, contract, mortgage, lien, indenture, lease,
agreement, commitment, arrangement or understanding, or any other instrument to
which Seller is a party or by or to which it or any of the Property Sold is
bound or subject, (b) to Seller's knowledge violate any statute, law, ordinance,
rule, regulation, judgment, or order binding upon or applicable to Seller or the
Property Sold, in whole or in part, (c) to Seller's knowledge expose Seller or
Buyer to any liability or penalty under any law, (d) result in any loss to or
restriction upon Shopping Guides or upon the use of any of the Property Sold,
(e) to Seller's knowledge adversely affect the validity, continuation, or
effectiveness of any permit, license, franchise, or right enjoyed by Seller, (f)
give any party to any of the Contracts, or any other agreement to which Seller
is a party, any right of cancellation or termination, or (g) give anyone any
right to accelerate the maturity of any indebtedness for which Seller is a
direct or indirect, or primary or secondary, obligor, or to claim any fraud,
default, or breach with respect to anyone or any such indebtedness. This
Agreement and its execution by Seller have been duly approved by a vote of
Seller's Shareholders.
4.17 Agreements, Contracts, Leases, etc. Exhibit 4.017 contains an accurate
and complete list and brief description of each material agreement, obligation,
contract, and commitment (oral
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or written, express or implied) to which Seller is a party, or by which it is
bound, or by which the Property Sold is bound (including all of Seller's
delivery, advertising, or printing contracts, if any) ["Contract(s)"], and an
accurate and complete copy or statement of the terms of each such Contract has
been or will be forthwith supplied to Buyer. Except as so listed and described
in Exhibit 4.017, Seller is not a party to any other material contract,
obligation, or agreement (oral or written, express or implied), including,
without limitation, any (i) bonus, retirement, deferred-compensation, pension,
profit-sharing, stock option, hospitalization, or employee stock purchase or
retirement agreement, policy, or plan, or other employee benefit plan; (ii)
agreement with any employee; (iii) agreement of guarantee or indemnification;
(iv) loan or credit agreement; (v) employment contract; (vi) lease to or for any
material property, real or personal; (vii) material sales or advertising agency
contract; (viii) contract or commitment under which there is an obligation on
any party thereto to pay more than $5,000.00; (ix) service or commission
contract for a period in excess of thirty (30) days; or (x) any agreement or
commitment containing a covenant limiting Seller's freedom to compete with any
person or to engage in any line of business. Each Contract is in full force and
effect, legal, valid, binding, and enforceable in accordance with its terms;
Seller has not defaulted as to or breached, nor has it received notice of any
claim or assertion that it has defaulted as to or breached, any term or
condition of any Contract or of any other agreement, obligation, contract,
lease, or commitment applicable to it, and no event has occurred that with
notice or the lapse of time, or both, would constitute such a breach or default.
Seller's rights under each Contract are assignable to Buyer, and Seller now
knows of no term, condition, or provision of, or event affecting, any Contract,
Lease, or other agreement, contract, lease, obligation, or commitment that might
affect the validity, continuation, or effectiveness thereof upon assignment to
Buyer, or that might prevent Buyer from realizing Seller's present rights and
benefits to accrue thereunder in due course after Closing.
4.18 Insurance. Seller has delivered to Buyer a list and brief description
of Seller's insurance policies.
4.19 Environmental Matters. To Seller's knowledge, no part of the Property
Sold ever has been used in violation of any applicable Environmental Law to
generate, manufacture, refine, transport, release, treat, store, handle, or
dispose of any hazardous, industrial, toxic, or harmful substances, wastes, or
materials (e.g. asbestos, urea formaldehyde, polychlorinated biphenyls, or other
waste exhibiting hazardous characteristics) or any substance or element the
generation, release, storage, use, or handling of which is prohibited or
regulated (singly, a "Hazardous Material"; collectively, "Hazardous Materials")
by or pursuant to any law, rule, or regulation (federal, state, or local)
regarding, in whole or in part, (a) health or safety, or (b) the effect of
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Hazardous Materials on land, water, air, or the environment (e.g. the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended; 42 U.S.C.; ss. 6.01 et seq.; the Resource Conservation and Recovery
Act; or similar acts), or (c) the use, transport, handling, storage, treatment,
release, or disposal of any such Hazardous Materials (singly, an "Environmental
Law," collectively, the "Environmental Laws"). To Seller's knowledge, Seller
always has materially complied with each and all such Environmental Laws. To
Seller's knowledge, no event has occurred at the Property Sold and no condition
now exists at or affects any part of the Property Sold that is likely to result
in any material complaint, notice, citation, action, proceeding, or
investigation before any governmental authority in connection with any Hazardous
Material or any Environmental Law or the violation thereof, or any claim against
or liability of Seller or Buyer to any authority, person, or persons arising out
of or based on any Environmental Law or the breach or enforcement thereof.
4.20 Execution, Validity. This Agreement is lawful and has been duly
executed and delivered by Seller and each of Shareholders, which execution and
delivery by Seller was duly and validly authorized by all necessary corporate
action by Seller and its Shareholders, and this Agreement constitutes a legal,
valid, and binding agreement of Seller and each of Shareholders enforceable
against Seller and each of Shareholders in accordance with its terms. Each of
Shareholders executing this Agreement as a trustee or other fiduciary has all
requisite power and authority to enter into and perform this Agreement as so
agreed.
4.21 Statements, Etc., True and Not Misleading. No representation or
warranty made by Seller or the Shareholders in this Agreement contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact necessary in order to make the statements contained herein or
therein not misleading in the circumstances.
4.22 Conveyances, Etc. When executed and delivered to Buyer at Closing,
each instrument of conveyance, assignment, consent, or transfer will constitute
the legal, valid, and binding obligation of the parties thereto, and such
instruments will be effective to vest in Buyer, and as of Closing Buyer will
thereby receive and become the sole, vested owner of all right, title, and
interest in and to the Property Sold, subject only to any then existing
Permitted Liens.
4.23 Investment. On Closing Seller will take the Notes for its own account,
for investment purposes only, and not with a view or intention to distribute or
otherwise dispose of all or any part thereof. Seller understands that each Note
is to be issued without registration under any "blue sky" law and pursuant to an
exemption from registration under provisions of the Securities Act of 1993 as
amended (the "Act") and that Seller may not hypothecate
18
or otherwise transfer or dispose of any Note except upon registration under the
Act, unless an exemption from registration provisions of the Act is available.
Before transferring or disposing of any Note in a transaction Seller believes to
be so exempt from registration Seller will give Buyer notice of such proposed
disposition accompanied by an opinion of counsel satisfactory to Buyer in all
respects to the effect that an exemption from registration under the Act is
available with respect to the proposed disposition, and any new note issued by
Buyer under such circumstances shall bear a legend similar in form and substance
to that appearing on Exhibit 2.01.1. Seller is aware that Buyer is a newly
formed company with limited capital and no previous financial or operating
history, that for the foreseeable future payment of the Notes probably will be
derived solely from Buyer's publication of Shopping Guides and its use of the
Property Sold. Seller is able to bear the economic risk of holding the Notes for
an indefinite period and has received or had free access to all necessary
information, financial or otherwise, concerning Buyer.
5. CONDUCT PRIOR TO CLOSING.
Seller covenants and agrees that from the date hereof and until Closing:
5.1 Conduct of Business. Seller will operate Shopping Guides' business and
conduct its business only in the ordinary course of business, in accordance with
Seller's customary policies and practices, in material compliance with all
applicable laws, rules, and regulations, and substantially in the same manner as
heretofore and will use its reasonable efforts to discharge and satisfy all of
its obligations in due course, to preserve Seller's present business
organization intact, to preserve Seller's business reputation, to keep available
the services of Seller's present officers, agents, and employees, to prevent any
material, adverse change in Seller, Seller's business, the Shopping Guides, or
any part of the Property Sold, and to preserve Seller's present customers and
present relationships with those having business dealings with Seller. Seller
will take reasonable actions so that each condition of Section 6. of this
Agreement will be satisfied as of the Closing Date, will maintain in full force
and effect all franchises, licenses, and permits held by it, and will maintain
the Property Sold in the same repair, order, and condition as at the date
hereof, ordinary wear-and-tear excepted.
5.2 Restricted Activities and Transactions. From the date hereof, until
Closing, except as may otherwise be permitted or required hereby, without
Buyer's prior consent expressly identifying and referring to this paragraph 5.2,
which consent shall not be unreasonably withheld or delayed, Seller will not
directly or indirectly do or agree to do, and within the past forty-five (45)
days Seller directly or indirectly has not done or
19
agreed to do, any one or more of the following:
(a) encumber, mortgage, pledge, or subject the Property Sold or any
part thereof to any Lien, security interest, charge, or encumbrance;
(b) grant, agree to, offer, or pay any kickback, discount, incentive
payment, commission, or promotional or other allowance to any person, or
sell or agree to sell or otherwise dispose of any part of the Property Sold
in each case other than sales for value, at usual rates, and in the
ordinary and normal course of business;
(c) agree to terminate, amend, restrict, extend, or waive any material
right under or materially affecting any Contract or the value of all or any
material part of the Property Sold;
(d) conduct its business or operate the Shopping Guides other than in
the normal and usual manner in the ordinary course, or other than in
material compliance with all applicable laws, rules, and regulations of all
local, state, and federal authorities, entities, and agencies;
(e) vary materially from the advertising rates currently being charged
and received by Seller;
(f) except as disclosed to Buyer, pay, paid, or agreed to pay, any
bonus to any person, or make or agree to make any material change in the
compensation payable or to become payable to any employee or agent of
Shopping Guides;
(g) enter into any employment contract or lease; or
(h) except as disclosed to Buyer, enter into any contract or other
commitment binding upon Seller or Shopping Guides for a period of more than
thirty (30) days or other than in the ordinary course of business.
5.3 Full Access. At reasonable times during normal business hours after
notice from Buyer, Seller will afford Buyer, or Buyer's representatives, agents,
attorneys, employees, or accountants, full access to Seller's and Shopping
Guides' premises, the Property Sold, and all facilities, equipment, offices,
properties, books, and records relating thereto in order that Buyer may cause to
be made desired investigations of Seller's affairs or necessary copies of its
records, and will cause Seller's officers to furnish Buyer with such information
concerning Shopping Guides, Seller's business, and the Property Sold as Buyer
reasonably may request.
20
5.4 Reports; Taxes; Etc. Seller will properly and timely file all reports
or returns it is required to file with federal, state, foreign, local, or other
authorities (including taxing authorities) and will pay all required taxes,
charges, and assessments as required in due course, and on or before the Closing
Date Seller will pay all required taxes, charges, or assessments due and payable
by Seller on or before the Closing Date.
5.5 Waiver of Bulk Sales Compliance. Buyer and Seller each waives
compliance with the provisions of applicable statutes relating to bulk transfers
or bulk sales. Seller and Shareholders agree to indemnify Buyer from any loss,
costs, or damage arising out of such waiver.
5.6 Termination of Plans. At its sole expense, and without any liability to
Buyer, Seller shall terminate or cause to be terminated each pension, profit
sharing, or other employee benefit plan applicable to Seller's employees, all in
accordance with the provisions thereof and applicable laws, rules, and
regulations and shall satisfy and discharge each withdrawal, termination, or
other liability thereunder.
5.7 Notice of Breach or Change. Seller will promptly notify Buyer if Seller
believes or realizes that Seller will be unable to comply with or satisfy any
condition of Section 6.
5.8 Taxes. Buyer will pay all title and transfer charges for transferring
title to Seller's vehicles and all sales or use taxes arising out of or becoming
due and payable because of Closing or the purchase and sale of the Property Sold
as contemplated hereby.
6. CONDITIONS TO BUYER'S OBLIGATIONS:
As conditions precedent for the sole benefit of Buyer, which Buyer may
waive only by and to the extent of its express written waiver given hereafter,
Closing and each obligation of Buyer under this Agreement shall be subject to
and conditioned upon Buyer being satisfied, on or before and as of Closing, of
each of the following:
6.1 Compliance with Agreement; No Prohibition. Each material term,
covenant, agreement, and condition of this Agreement to be complied with or
performed by Seller or Shareholders until, at, or prior to Closing shall have
been complied with or performed in all material respects, or waived by Buyer,
this Agreement shall not have been terminated by Buyer as permitted hereby, and
nothing then shall (and no action shall have been commenced seeking to)
restrain, inhibit, penalize, or prohibit Closing or the conduct of the Shopping
Guides' business by Buyer after Closing as contemplated hereby.
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6.2 Representations and Warranties. Unless waived, each of Seller's
representations and warranties contained herein shall in all material respects
have been true and correct when made, shall be deemed to be made again at and as
of Closing, and then shall be in all material respects true and correct.
6.3 Delivery. Buyer shall not have terminated this Agreement as permitted
hereby, and Seller shall have delivered to Buyer each item described in
paragraph 3.2.
6.4 Approvals and Consents. All material agreements, consents, waivers, or
approvals of each public authority or other person or entity, natural or
corporate, public or private, necessary or appropriate for Closing or for
consummation of the transactions contemplated hereby without diminution, loss,
termination, or restriction of any material right of Seller shall have been
obtained from such parties in such form and substance as is reasonably
satisfactory to Buyer, and copies thereof delivered to Buyer. If necessary and
requested by Buyer, the other parties to any material agreements to which Seller
is a party shall have consented to Closing.
6.5 Contracts. Seller shall have assigned, set over, and transferred to
Buyer all of its right, title, and interest in each Assumed Contract identified
on Exhibit 1.01.3 in a form reasonably satisfactory to Buyer's counsel and at
Closing shall have delivered to Buyer peaceful possession of the Property Sold.
6.6 Other Contracts. On or before Closing hereunder, Closing (as therein
defined) shall occur or have occurred as to each of the following contracts
("Affiliated Contracts"), including the execution of each of the noncompetition
agreements associated therewith (jointly and severally with the Noncompetition
Agreement, the "Noncompetition Agreements"): Advertisers PS, LLC and
Advertiser's Postal Service Corporation, and Central Printing Service, LLC and
Central Printing Corporation.
6.7 Inventories. As of Closing, Seller's Inventories shall be at usual and
normal levels and sufficient to satisfy the Shopping Guides' needs for at least
45 days following Closing.
6.8 Liabilities Current. As of Closing each of Seller's liabilities
(including all current liabilities, long term debt, and lease obligations) shall
be current, not in default, and not past due.
7. INDEMNIFICATION AND RISK OF LOSS:
7.1 Indemnity of Buyer. Subject to the limitations of paragraph 7.3, Seller
and Shareholders, jointly and severally, agree to indemnify, defend, and hold
Buyer, its owners, officers, agents, representatives, successors and assigns,
jointly and
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severally, harmless from and against each, any, and all actions, suits, causes
of action, losses, costs, claims, assessments, damages, response costs,
liabilities, fines, funding or termination liabilities, judgments, and expenses
(singly, a "Claim", collectively, the "Claims") asserted by a third party or
parties against each, any, or all of them arising from, based upon, or on
account of, in whole or in part, each, any one or more, or all of the following,
whenever occurring: (i) any breach, failure to perform, or non-fulfillment by
Seller or Shareholders of any covenant, agreement, term, condition, certificate,
representation, or warranty contained in this Agreement or in any document
delivered, or caused to be delivered to Buyer by Seller or the Shareholders,
(ii) any untruth, misrepresentation, omission, or inaccuracy with respect to or
contained in any such covenant, agreement, certificate, representation, or
warranty, including any statement or figure contained in any of the Financial
Statements, (iii) any violation of any law, rule, or regulation (or any act or
failure to act) by Seller or any one or more of its officers, directors, agents,
servants, or employees (or by others for whom Seller is responsible), (iv) any
agreement made by, Claim against, or asserted liability of Seller, other than
those expressly assumed by Buyer at Closing pursuant to paragraph 3.4, (v) the
conduct of Seller's business or Seller's ownership, use, or operation of the
Shopping Guides or the Property Sold, or any part or parts thereof, (vi) any
payment received by Seller, directly or indirectly, (vii) any failure by Seller
to comply with the laws of the state of Seller's domicile relating to or
applicable to the sale of Seller's assets contemplated hereby, or (viii) any
Lien as to all or any part of the Property Sold, other than a Permitted Lien;
provided, however, that the obligation to indemnify hereunder shall in no event
exceed, in the aggregate, the amount of the Purchase Price. As to each Claim,
the obligations arising hereunder shall include, but not be limited to, an
obligation to pay to or for Buyer all costs incurred in investigating,
defending, or settling such Claim (including all reasonable attorneys' or
experts' fees).
7.2 Indemnity of Seller. Subject to the limitations of paragraph 7.3, Buyer
agrees to indemnify, defend and hold Seller and each Shareholder harmless from
and against each, any, and all Claims asserted by a third party or parties
against Seller or any Shareholder arising from, based upon, or on account of any
breach, failure to perform, or non-fulfillment by Buyer of any covenant,
agreement, term, condition, certificate, representation, or warranty contained
in this Agreement; provided, however, that the obligation to indemnify hereunder
shall in no event exceed, in the aggregate, the amount of the Purchase Price. As
to each Claim, the obligations arising hereunder shall include but not be
limited to an obligation to pay to or for Seller and Shareholders all costs
incurred in investigating, defending, or settling such Claim (including all
reasonable attorneys' or experts' fees).
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7.3 Limitations. The right to indemnification under Section 7.1 or Section
7.2 is subject to the following limitation: no party shall be entitled to
indemnification until the aggregate amount of all Claims that would be
indemnifiable for such party but for application of this Section 7.3 exceeds
Thirty Thousand and no/100 Dollars ($30,000), whereupon such party shall become
entitled to indemnification for all such Claims. In addition, Seller's and
Shareholders' obligation to indemnify shall be net of the effect of any tax
benefit realized by Buyer arising from such Claims, and the aggregate amount of
all Claims for which Seller and Shareholders shall be held liable shall not
exceed the Purchase Price as adjusted.
7.4 Conditions of Indemnification. The obligation to indemnify any party
(the "Indemnified Party") with respect to each Claim also shall be subject to
the following terms and conditions: (a) the Indemnified Party will give prompt
notice of any such Claim to the other party(ies) hereto (the "Indemnifying
Party"), and the Indemnifying Party (or any of them) shall have the right to
undertake the defense thereof and compromise and settle such Claim at the
Indemnifying Party's expense using counsel chosen by the Indemnifying Party; and
(b) if within forty-five (45) days after receipt of notice of any such Claim,
the Indemnifying Party shall fail to assume the defense thereof, the Indemnified
Party shall (after notice to the Indemnifying Party) have the right to undertake
the defense of such Claim, subject to the right of the Indemnifying Party to
assume the defense of such Claim at any time prior to final resolution thereof
upon the prior payment to the Indemnified Party of all attorneys' and experts'
fees theretofore expended by the Indemnified Party in defense of such Claim.
7.5 Investigation. Seller and Shareholders acknowledge and agree that,
notwithstanding any right of Buyer fully to investigate the affairs of Seller
and notwithstanding any knowledge of facts determined or determinable by Buyer
pursuant to any such investigation, Buyer has the right to rely upon the
representations, warranties, covenants, and agreements of Seller and
Shareholders contained in this Agreement, and regardless of any knowledge or
facts determined or determinable by such an investigation, such representations,
warranties, covenants, and agreements, and Buyer's right to rely, and its
reliance thereon, shall not be affected in any way by any such knowledge or
investigation.
7.6 Risk of Loss. The risk of destruction of or loss or damage to the
Shopping Guides or any part of the Property Sold arising from any actual or
proposed condemnation or taking of any part of the Property Sold or of Shopping
Guides by governmental authority or by exercise of the power of eminent domain,
or from any fire, explosion, riot, flood, war, or other cause shall remain with
Seller until Closing. If Seller becomes aware of any such actual or potential
taking, loss, damage, or destruction, Seller
24
will promptly notify Buyer of all particulars thereof and will cause any such
affected property to be replaced or to be repaired and restored to its condition
existing prior to such loss, damage, or destruction, at Seller's expense. If
such damaged property is not completely replaced or repaired and restored to its
former condition before Closing then Buyer at its sole option may: (a) by notice
to Seller postpone the Closing Date until such time as the property shall have
been completely replaced or repaired and restored, or (b) by notice to Seller
abandon and terminate this Agreement and all obligations of Buyer hereunder, or
(c) effect Closing on the Closing Date as initially established, in which event
(i) Seller shall assign to Buyer all then unexpended proceeds of insurance
received or to be received by Seller with respect to the Property Sold, and (ii)
Buyer and Seller shall agree upon an appropriate reduction in the Purchase Price
reflecting any then existing uninsured loss, damage, or destruction to the
Shopping Guides or to the Property Sold.
8. BUYER'S REPRESENTATIONS AND WARRANTIES.
To induce Seller to enter into and perform pursuant to this Agreement,
Buyer represents and warrants to Seller that each of the following is true:
8.1 Organization. Buyer is a limited liability company duly organized,
validly existing, and in good standing under the laws of the Commonwealth of
Virginia and has full legal power and authority to conduct its business as it is
now being conducted and to own its properties and assets.
8.2 Authorization for Agreement. Buyer's execution and delivery of this
Agreement have been duly and validly authorized by all necessary legal action on
the part of Buyer, and, relying on Seller's and Shareholders' representations
and warranties herein, this Agreement constitutes a legal, valid, and binding
obligation of Buyer. As of Closing execution and delivery of the Note, the
Security Agreement, and the Noncompetition Agreements will have been duly
authorized by all necessary legal action on the part of Buyer, and when executed
and delivered each will constitute a valid and binding obligation of Buyer.
Buyer's execution of, delivery of, performance of, compliance with, and Closing
of this Agreement will not (a) constitute or result in a breach of (or default
under) any term, condition, or provision of any articles of incorporation,
bylaw, contract, mortgage, lien, indenture, lease, agreement, commitment,
arrangement or understanding, or any other instrument to which Buyer is a party
or by or to which it or any of the Buyer's property is bound or subject, (b) to
Buyer's knowledge violate any statute, law, ordinance, rule, regulation,
judgment, or order binding upon or applicable to Buyer, in whole or in part, (c)
to Buyer's knowledge expose Seller or Buyer to any liability or penalty under
any law, (d) to Buyer's knowledge adversely affect the validity, continuation,
or effectiveness of any permit,
25
license, franchise, or right enjoyed by Buyer, (e) give any party to any
contract, or any other agreement to which Buyer is a party, any right of
cancellation or termination, or (g) give anyone any right to accelerate the
maturity of any indebtedness for which Buyer is a direct or indirect, or primary
or secondary, obligor, or to claim any fraud, default, or breach with respect to
anyone or any such indebtedness.
8.3 Execution, Validity. This Agreement is lawful and has been duly
executed and delivered by Buyer, which execution and delivery by Buyer was duly
and validly authorized by all necessary company action by Buyer and its members,
and this Agreement constitutes a legal, valid, and binding agreement of Buyer
enforceable against Buyer in accordance with its terms.
8.4 Litigation. Buyer is not a party to any pending or threatened
litigation or proceeding that affects in any material, adverse manner Buyer's
power, authority, or ability to effect Closing.
8.5 Compliance. Buyer has complied with each applicable term, covenant,
agreement, and condition of this Agreement.
9. CONDITIONS TO SELLER'S OBLIGATIONS:
As conditions precedent for the sole benefit of Seller, which Seller may
waive only by and to the extent of its express written waiver given hereafter,
Closing and each obligation of Seller under this Agreement shall be subject to
and conditioned upon Seller being satisfied, on or before and as of Closing, of
each of the following:
9.1 Representations and Warranties. Unless waived, each of Buyer's
representations and warranties contained here in Section 8. shall be in all
material respects true and correct when made, shall be deemed to be made again
at and as of Closing, and they shall be in all material respects true and
correct as of Closing. Each material term, covenant, agreement, and condition of
this Agreement to be complied with or performed by Buyer until, at, or prior to
Closing shall have been complied with or performed in all material respects, or
waived by Seller, this Agreement shall not have been terminated by Seller as
permitted hereby, and nothing then shall (and no action shall have been
commenced seeking to) restrain, inhibit, penalize, or prohibit Closing.
9.2 Delivery. Buyer shall have delivered to Seller each item listed in
paragraph 3.3.
10. MISCELLANEOUS:
26
10.1 Notices. Each notice, consent, request, demand, or other communication
required or permitted hereunder must be in writing and shall be deemed to have
been duly given only upon the earlier of receipt thereof (by facsimile or
otherwise) or ten (10) days after having been mailed, certified or registered
United States mail, postage prepaid, addressed as follows:
(a) if to Seller or Shareholders:
Star Publications, Inc.
Xxxx Xxxxxx Xxx 000
Xxxxxxx, Xxxxxxxx 00000
Copy to:
Xxxxxx X. Xxxxx, Esquire
Honigman, Miller, Xxxxxxxx and Xxxx
2290 First National Bank Bldg.
000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
(b) if to Buyer;
Upper Michigan Newspapers, LLC
c/o Brill Media Company, L.P.
000 XX Xxxxx Xxxxxx, Xxxxx 0-X
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxx X. Xxxxx
copy to:
Xxxxxxx X. Xxxxxxxx, Esquire
Xxxxxxxx & XxXxxxxx
100 Shockoe Slip
Xxxxxxxx, Xxxxxxxx 00000
or when so received or mailed to such other place or person as a party hereafter
may from time to time have designated in a prior written notice to the other
party given as herein required.
10.2 Survival. Each covenant, representation, and warranty made by Seller,
Shareholders, or Buyer in this Agreement or at Closing shall survive the Closing
and shall remain operative and in full force and effect regardless of Closing or
of any investigation made or knowledge obtained by or on behalf of Seller,
Shareholders, or Buyer at any time prior to Closing and shall survive Closing
for a period of eighteen (18) months, except that the representations and
warranties contained in Section 4.10 shall survive for the applicable statute of
limitations period, and the representations and warranties contained in sections
4.6, 4.16 and section 8.2 shall survive indefinitely.
27
10.3 Limitations.
(a) Concerning actions by Buyer to recover damages for any default or
breach of contract (or for indemnification) under this Agreement:
(i) Buyer shall name Seller as a co-defendant with any Shareholder
defendants unless Seller then has been dissolved, either by action of the
Shareholders or by operation of law;
(ii) collection of any judgment for any such default, breach, or
indemnification shall first be recouped, offset against, and satisfied out
of that part of any balance then still owing on the Notes that becomes
payable within the twelve months immediately following entry of such
judgment, and
(iii) in no event shall any Shareholder's individual aggregate
liability for any such defaults, breaches, indemnifications, or judgments
exceed an amount equal to the Purchase Price as adjusted multiplied by such
Shareholder's percentage reflected on Exhibit 10.03.
(b) No Shareholder shall be held liable for a violation of his
Noncompetition Agreement solely because of another Shareholder's violation of a
Noncompetition Agreement.
10.4 Successors and Assigns. This Agreement and each provision hereof shall
be biding upon and inure to the benefit of the parties hereto and their
respective successors and assigns and may not be assigned without the prior
written consent of all parties hereto.
10.5 Indemnity Concerning Brokers. Buyer and Seller represent and warrant
each to the other that Xxxxx, Van Essen & Associates is the only broker
connected with this transaction, and Seller shall be solely responsible for, and
will indemnify, defend, and hold Buyer harmless from any and all commissions,
fees, expenses, or charges due and owing on account of services rendered to
Seller. Seller agrees to indemnify, defend, and save harmless Buyer from and
against each liability, cost, or expense, including attorneys' fees, that may be
asserted on account of any broker's commission or similar obligation or by
reason of any agreement made by Seller or Shareholders with any broker or
finder.
10.6 Additional Remedies. Without waiving or prejudicing and in addition to
and not to the exclusion of or in limitation of any other rights or remedies
available to Buyer hereunder, or otherwise, upon and for Seller's or
Shareholders' material default under or breach or prospective breach of any
covenant, agreement, term, condition, representation, or warranty contained in
this Agreement, at its sole election Buyer shall be
28
entitled but not obligated to do each or any one or more of the following: (a)
to obtain specific performance or injunctive relief (since monetary damages will
not be sufficient to afford Buyer full compensation for any such breach or
breaches), or (b) to take any action including the making of any payment or
payments necessary to cure any such default or breach not cured before the
thirtieth (30th) day after receiving notice thereof from Buyer, or (c) to bring
an action to recover damages for such default or breach of contract (either with
or without an action for injunctive relief) and either (i) to enforce any
resulting judgment in favor of Buyer as permitted by law or (ii) to offset and
deduct the amount of any such judgment and the costs of any such action
(including, without limitation, interest on any such payment at the rate of ten
percentum per annum, and reasonable attorneys' fees), in whole or in part, (x)
from the Purchase Price, or (y) from any collections on Seller's accounts
receivable, or (z) from any payment thereafter due on the Purchase Price or one
or more of the Notes; provided, however, that such offset and deduction may and
shall not be taken until the amount thereof shall have been agreed upon by Buyer
and Seller or established by the judgment of a court of competent jurisdiction
in such action.
10.7 Amendment and Waiver. Except for a waiver by Buyer pursuant to Section
6., or by Seller pursuant to Section 9., no term or condition of this Agreement
may be amended or its observance waived (whether generally or in a particular
instance and whether retroactively or prospectively) except with and by Buyer's,
on the one hand, or Seller's and Shareholders' on the other hand, express
written consent. No other act, failure to act, or course of dealing by Buyer
shall be or constitute a waiver by Buyer.
10.8 Audits. At its sole expense, at any time within two (2) years
following Closing, after reasonable notice to Seller, Buyer may cause Seller's
books and records to be examined by auditors in order to produce audited
financial statements of Seller's affairs for up to three years preceding
Closing. Seller will cooperate with any such audit and auditors and will provide
to Buyer or its agents or representatives reasonable access to Seller's books,
records, and personnel for such purpose and will maintain and retain such books
and records in a reasonably orderly fashion for a period of at least three years
after Closing in order that such audit procedures may be performed.
10.9 Definitions. Wherever used in this Agreement or any instrument
incorporating such term or terms:
(a) the term "Liens" (singly, "Lien") shall mean and include each and
any liens, mortgages, security interests, pledges, title retention devices,
claims (legal or equitable, including, without limitation, liability to or
claims of any taxing authority, creditor, or other person), conditional
sale or other
29
agreements, encumbrances, leases, trusts, options, servitudes, rights,
charges, assessments, consignments or bailments, reservations, exceptions,
encroachments, easements, rights-of-way, conditions, restrictions,
imperfections or deficiencies of title, or liabilities of any nature and
however arising [including those arising from violation of or noncompliance
with any law, ordinance, rule or regulation (including, without limitation,
municipal ordinances relating to zoning, occupancy, or use of real
property), whether recorded or unrecorded, xxxxxx or inchoate, or
appurtenant or non-appurtenant, and whether dependent on or independent of
possession, whether know or unknown, and whether now in existence or to
come into existence merely by the giving of notice or the lapse of time, or
both;
(b) the terms "knowledge", "know", or other similar phrases when used
in reference to Seller shall mean the actual knowledge without inquiry of
any of the officers, directors, or Shareholders of Seller and when used in
reference to Shareholders shall mean their actual knowledge without
inquiry; and
(c) each of the following terms shall have the meaning defined in the
paragraph of this Agreement identified below:
Term Paragraph
---- ---------
Accountants 2.2(h)
Accounts Receivable List 3.2(h)
Act 4.23
Affiliated Contracts 6.6
Agreement Preamble
Assumed Contracts 1.1(e)
Assumption Agreements 3.4
Buyer Preamble
Claim(s) 7.1
Closing 3.1
Closing Adjustments 2.2
Closing Date 3.1
Closing Escrow Account 2.2(g)
Closing Financials 2.2(b)
Collection Period 3.6
Contract(s) 4.17
Environmental Law(s) 4.19
Escrow Agents 2.2(g)
Excluded Property 1.2
Final Settlement 2.2(b)
Financial Statements 4.4
Xxxxxxx 3.4
Hazardous Material(s) 4.19
Indemnified Party 7.4
Indemnifying Party 7.4
Inventories 1.1(d)
30
Lease 3.2(k)
Lien; Liens 10.9(a)
Names 1.1(g)
Noncompetition Agreement 3.2(g)
Noncompetition Agreements 6.7
Note(s) 2.1
Permitted Liens 4.6
Preliminary Adjustment 2.2(a)
Preliminary Financials 2.2(a)
Preliminary Settlement 2.2(a)
Property Sold 1.1
Purchase Price 2.1
Real Property 1.1(a)
Security Agreement 2.3
Seller Preamble
Seller's Counsel 3.2(d)
Shareholders Preamble
Shopping Guides Recitals
Statement 2.2(h)
10.10 Governing Law. This Agreement, its enforceability or interpretation,
and the legal relationships between Buyer, Seller, and Shareholders created
hereby shall be governed by and construed in accordance with the laws of the
State of Michigan, notwithstanding application of laws or choice of law
principles.
10.11 Headings. The headings of the Sections and paragraphs of this
Agreement are for convenience only and are not a substantive part hereof.
10.12 Entire Agreement. This Agreement, including its exhibits, contains
the entire understanding of the parties hereto with respect to the subject
matter hereof; there are no other representations and warranties made by any
party hereto other than as expressly set forth herein; no party hereto will rely
on any information, representation, or warranty except as expressly set forth
herein, and any and all prior understandings or agreements among Buyer, Seller,
and Shareholders (their agents, principals, or representatives) are merged into
this Agreement, which replaces and supersedes all prior memoranda,
understandings, representations, correspondence, agreements, conversations, and
negotiations concerning the subject matter hereof.
10.13 Counterparts. This Agreement may be executed in any number of
counterparts, and when Seller, Shareholders, and Buyer shall have executed at
least one such counterpart they shall constitute but one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused their signatures to be
hereunto appended and affixed by their duly authorized representatives as of the
day, month, and year first above written.
31
Buyer:
UPPER MICHIGAN NEWSPAPERS, LLC
by: Upper Michigan Management, Inc.
its manager
by: /s/ XXXX X. XXXXX
-------------------------
a duly authorized officer
Seller:
STAR PUBLICATIONS, INC.
by /s/ XXXXX X. XXXXXXX
--------------------------------
a duly authorized officer
Shareholders:
/s/ XXXXXX X. XXXXXXX
-----------------------------------
Xxxxxx X. Xxxxxxx, Trustee
/s/ XXXXXX X. XXXXX
-----------------------------------
Xxxxxx X. Xxxxx, Trustee
/s/ XXXXX X. XXXXXXX
------------------------------------
Xxxxx X. Xxxxxxx
/s/ XXXXX XXXXXXXX
-----------------------------------
Xxxxx Xxxxxxxx
/s/ XXXX XXXXX
-----------------------------------
Xxxx Xxxxx
Escrow Agents:
32
/s/ XXXX X. XXXXX
-----------------------------------
Xxxx X. Xxxxx
/s/ XXXXX X. XXXXXXX
-----------------------------------
Xxxxx X. Xxxxxxx
33
