EXHIBIT 99.2
MASTER AGREEMENT
DATED AS OF
MAY 17, 1998
BY AND AMONG
THE SELLERS SET FORTH ON THE SIGNATURE PAGES HERETO;
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, AS DESIGNATED STOCKHOLDER;
AND
JOURNAL REGISTER COMPANY, AS BUYER
TABLE OF CONTENTS
PAGE
ARTICLE I Certain Definitions............................. 2
ARTICLE II Sale of Stock; Closing; Certain Other Matters.... 10
Section 2.1 Purchase and Sale................................ 10
Section 2.2 Time and Place of Closing........................ 11
Section 2.3 Purchase Price Adjustment........................ 11
ARTICLE III Representations and Warranties Relating to
the Company...................................... 15
Section 3.1 Incorporation; Authorization, Etc................ 15
Section 3.2 Capitalization................................... 17
Section 3.3 Assets........................................... 18
Section 3.4 Interests of Certain Persons..................... 18
Section 3.5 Ordinary Course.................................. 19
Section 3.6 Litigation....................................... 19
Section 3.7 Labor Relations.................................. 19
Section 3.8 Environmental Compliance......................... 20
Section 3.9 Title to Properties and Assets................... 22
Section 3.10 Financial Statements............................. 23
Section 3.11 Absence of Undisclosed Liabilities............... 24
Section 3.12 Compliance with Applicable Laws.................. 24
Section 3.13 Employee Benefit Plans........................... 24
Section 3.14 Taxes............................................ 27
Section 3.15 Material Contracts............................... 27
Section 3.16 Copyrights, Trademarks and Other Proprietary
Rights........................................... 28
Section 3.17 Inventories...................................... 29
Section 3.18 Circulation and Advertising...................... 29
Section 3.19 Subscription List............................... 30
Section 3.20 Accounts Receivable............................. 30
Section 3.21 Insurance....................................... 30
Section 3.22 Territorial Restrictions........................ 30
Section 3.23 Brokers, Finders, Etc........................... 31
ARTICLE IV Representations and Warranties of Buyer......... 31
Section 4.1 Authority....................................... 31
Section 4.2 Shares.......................................... 32
Section 4.3 Brokers......................................... 32
Section 4.4 Litigation...................................... 32
-i-
ARTICLE V Covenants of Sellers and Buyer.................. 32
Section 5.1 Investigation of Business....................... 32
Section 5.2 Obtaining Consents.............................. 33
Section 5.3 Conduct of Business............................ 33
Section 5.4 Certain Liabilities............................ 36
Section 5.5 Employee Benefits.............................. 36
Section 5.6 Sellers' Access to Records.................... 38
Section 5.7 Estate Tax Liens.............................. 38
Section 5.8 Other Seller Transactions..................... 38
Section 5.9 Releases; Non-Competition..................... 39
Section 5.10 Certain Beneficiaries......................... 40
Section 5.11 Certain Real Estate Transactions.............. 40
Section 5.12 Payments to Employees......................... 40
Section 5.13 Certain Documents and Proceedings............. 40
Section 5.14 Financing..................................... 41
Section 5.15 Workmen's Compensation........................ 41
ARTICLE VI Conditions to Buyer's Obligations............. 41
ARTICLE VII Conditions to Sellers' Obligations............ 44
ARTICLE VIII Termination, Amendment and
Modification.................................... 44
Section 8.1 Termination..................................... 44
Section 8.2 Amendment and Modification...................... 45
Section 8.3 Actions of Affiliates........................... 45
ARTICLE IX Indemnification................................. 45
ARTICLE X Tax Matters and Tax Indemnification............. 51
Section 10.1 Liability for Taxes............................. 51
Section 10.2 Tax Returns..................................... 54
Section 10.3 Tax Contests.................................... 55
Section 10.4 Assistance and Cooperation...................... 57
Section 10.5 Adjustment to Purchase Price.................... 57
Section 10.6 Survival of Obligations......................... 57
Section 10.7 Section 338 Election; Allocation Schedule....... 57
Section 10.8 Resolution of Disagreements Among Principal
Stockholders and Buyer.......................... 58
Section 10.9 Tax Sharing Agreements.......................... 58
Section 10.10 Information..................................... 58
Section 10.11 Definitions..................................... 59
-ii-
ARTICLE XI Miscellaneous.......................................... 60
Section 11.1 Counterparts.................................... 60
Section 11.2. Governing Law; Consent to Jurisdiction.......... 60
Section 11.3 Entire Agreement................................ 60
Section 11.4 Expenses........................................ 61
Section 11.5 Specific Performance............................ 61
Section 11.6 Interpretation.................................. 61
Section 11.7 Successors and Assigns.......................... 61
Section 11.8 No Third-Party Beneficiaries.................... 61
Section 11.9 Notices......................................... 61
Section 11.10 Designated Stockholder.......................... 63
Section 11.11 Additional Sellers, If Any...................... 63
Section 11.12 Further Assurances.............................. 63
Section 11.13 Effect of Headings.............................. 63
Section 11.14 Duplicative Payments............................ 63
Annex A Principal Stockholders
Annex B Other Stockholders
Annex C Form of Letter of Credit
Annex D Form of Refunding Agreement and Guaranty
Annex E Form of Opinion of Sellers' Counsel
Annex F Form of Irrevocable Power of Attorney
-iii-
MASTER AGREEMENT
MASTER AGREEMENT (the "Agreement"), dated as of May 17, 1998, by and
among each of the persons listed on Annex A hereto (the "Principal
Stockholders"), each of the persons listed on Annex B hereto (the "Other
Stockholders" and collectively with the Principal Stockholders, the "Sellers"
and each of the Sellers, individually, a "Seller"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, as
Designated Stockholder, and Journal Register Company, a Delaware corporation
("Buyer").
WHEREAS, Buyer desires to cause an affiliate to purchase from Sellers,
and Sellers desire to sell to an affiliate of Buyer, all of the shares of
outstanding capital stock of ▇▇▇▇ I Communications, Inc., a Delaware corporation
(the "Company," and such stock purchase, the "▇▇▇▇ I Purchase"), consisting of
(i) 97,609 shares of Class A Common Stock, par value $.01 per share ("Class A
Shares"), (ii) 51,541 shares of Class B Common Stock, par value $.01 per share
("Class B Shares"), (iii) 25,397 shares of Class C Common Stock, par value $.01
per share ("Class C Shares") and (iv) 40,000 shares of Class D Common Stock, par
value $.01 per share ("Class D Shares" and, together with the Class A Shares,
Class B Shares and Class C Shares (in each case, less any shares redeemed
pursuant to Section 5.8(c)) (the "▇▇▇▇ I Shares");
WHEREAS, concurrently with the consummation of the ▇▇▇▇ I Purchase,
Buyer desires to cause an affiliate to purchase from Sellers, and Sellers desire
to sell to an affiliate of Buyer, all of the shares of outstanding capital stock
of ▇▇▇▇ ▇▇▇▇▇▇▇ Enterprises, Ltd., a New York corporation ("MGE," and such
purchase, the "MGE Purchase"), consisting of 92.5 shares of Class A Common
Stock, without par value (the "MGE Shares");
WHEREAS, on the business day prior to the consummation of the ▇▇▇▇ I
Purchase, Buyer desires to cause an affiliate to purchase from entities
indirectly owned by Sellers, and Sellers desire to cause their indirect
subsidiaries to sell to an affiliate of Buyer, all of the shares of outstanding
capital stock of the following subsidiaries of ▇▇▇▇ I: Acme Newspapers, Inc.
("Acme," such shares, the "Acme Shares," and such purchase, the "Acme
Purchase"); Massillon Newspapers, Inc. ("Massillon," such shares, the "Massillon
Shares," and such purchase, the "Massillon Purchase"); and Oneida Publications,
Inc. ("Oneida," such shares, the "Oneida Shares," and such purchase, the "Oneida
Purchase"), it being the intent of Buyer and Sellers to make an election
pursuant to Section 338(h)(10) of the Code (as hereinafter defined) with respect
to the Acme Purchase, the Massillon Purchase and the Oneida Purchase;
WHEREAS, Buyer and Sellers have entered into, or caused their
affiliates to enter into, five separate stock purchase agreements (collectively,
the "Purchase Agreements") with respect to the ▇▇▇▇ I Purchase, the MGE
Purchase, the Acme Purchase, the Massillon Purchase and the Oneida Purchase
(collectively, the "Stock Purchases"); and
WHEREAS, Buyer and Sellers desire to set forth in this Agreement
certain purchase price adjustment provisions, representations and warranties,
covenants, indemnification provisions, closing conditions, and other provisions
applicable to the purchase and sale transactions contemplated by each of the
Purchase Agreements;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
As used in this Agreement each of the following terms shall have the
following respective meanings:
Section 1.1. "Accounts Receivable" shall have the meaning set forth
in Section 3.20.
Section 1.2. "Acme" shall have the meaning set forth in the Recitals.
Section 1.3. "Acme Purchase" shall have the meaning set forth in
the Recitals.
Section 1.4. "Acme Shares" shall have the meaning set forth in
the Recitals.
Section 1.5. "Acme Tax" shall have the meaning set forth in
Section 10.1(a).
Section 1.6. "Affiliate" or "affiliate" shall mean, as to any person,
any other person which, directly or indirectly, is in control of, is controlled
by, or is under common control with, such person. The term "control" (including,
with correlative meaning, the terms "controlled by" and "under common control
with"), as applied to any person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such person, whether through the ownership of voting securities or other
ownership interest, by contract or otherwise.
Section 1.7. "Aggregate Collected Accounts Receivable" shall have
the meaning set forth in Section 2.3(g).
Section 1.8. "Agreement" shall have the meaning set forth in the
Preamble.
Section 1.9. "Allocation Schedule" shall have the meaning set forth
in Section 10.7(a).
Section 1.10. "Alternate Transactions" shall have the meaning
set forth in Section 5.8(a).
Section 1.11. "Balance Sheets" shall have the meaning set forth
in Section 3.10(b).
Section 1.12. "Basket" shall have the meaning set forth in
Section 9.1(c).
Section 1.13. "Beneficiaries" shall have the meaning set forth
in Section 5.10.
-2-
Section 1.14. "Business" shall mean the business of owning and
operating the Newspapers.
Section 1.15. "Business Employee" shall mean an individual who is, as
of the Closing, actively employed by any Company Subsidiary, or is on leave of
absence with the right to return to such employment.
Section 1.16. "Business-Only Plans" shall have the meaning set
forth in Section 3.13(a).
Section 1.17. "Buyer" shall have the meaning set forth in the
Preamble.
Section 1.18. "Buyer Credit Agreement" shall have the meaning
set forth in Section 4.1(a).
Section 1.19. "Buyer Damages" shall have the meaning set forth
in Section 9.1(b).
Section 1.20. "Buyer Indemnitees" shall have the meaning set forth
in Section 9.1(b).
Section 1.21. "Carryback Refund" shall have the meaning set forth
in Section 10.1(b).
Section 1.22. "Claims" shall have the meaning set forth in
Section 9.1(g).
Section 1.23. "Class A Shares" shall have the meaning set forth
in the Recitals.
Section 1.24. "Class B Shares" shall have the meaning set forth
in the Recitals.
Section 1.25. "Class C Shares" shall have the meaning set forth
in the Recitals.
Section 1.26. "Class D Shares" shall have the meaning set
forth in the Recitals.
Section 1.27. "Closing" shall mean the consummation of the
transactions contemplated by the Purchase Agreements in accordance with the
terms and upon the conditions set forth herein.
Section 1.28. "Closing Date" shall have the meaning set forth in
Section 2.2.
Section 1.29. "Closing Date Collected Accounts Receivable" shall
have the meaning set forth in Section 2.3(g).
Section 1.30. "Closing Date Net Accounts Receivable" shall have
the meaning set forth in Section 2.3(g).
-3-
Section 1.31. "Closing Date Purchase Price" shall have the meaning
set forth in Section 2.3(b).
Section 1.32. "Closing Date Statement" shall have the meaning set
forth in Section 2.3(a).
Section 1.33. "Code" shall mean the Internal Revenue Code of
1986, as amended.
Section 1.34. "Company" shall have the meaning set forth in the
Recitals.
Section 1.35. "Company Affiliated Group" shall have the meaning
set forth in Section 3.14(a).
Section 1.36. "Company-Sponsored Plan" shall have the meaning set
forth in Section 5.5(c).
Section 1.37. "Company Subsidiaries and Company Subsidiary" shall
have the meaning set forth in Section 3.2(a).
Section 1.38. "Company's knowledge" shall have the meaning set
forth in Section 11.6.
Section 1.39. "Confidentiality Agreement" shall have the meaning
set forth in Section 8.1(c).
Section 1.40. "Controlled Group Liability" shall mean any and all
liabilities (i) under Title IV of ERISA (as hereinafter defined), (ii) under
section 302 of ERISA, (iii) under sections 412 and 4971 of the Code, (iv) as a
result of a failure to comply with the continuation coverage requirements of
section 601 et seq. of ERISA and section 4980B of the Code, and (v) under
corresponding or similar provisions of foreign laws or regulations, other than
such liabilities that arise solely out of, or relate solely to, Business-Only
Plans and Overlapping Plans.
Section 1.41. "Controlling Party" shall have the meaning set forth
in Section 10.11(a).
Section 1.42. "Covered Benefit Employees" shall have the meaning
set forth in Section 5.5(b).
Section 1.43. "Covered Benefits" shall have the meaning set forth
in Section 5.5(b).
Section 1.44. "Disclosure Schedule" shall have the meaning set
forth in Section 3.1(b).
Section 1.45. "Employee Benefit Plan" shall mean any employee benefit
plan, program, policy, practices, or other arrangement providing benefits to any
current or former
-4-
employee, officer or director of the Company or any of its subsidiaries or any
beneficiary or dependent thereof that is sponsored or maintained by the Company
or any of its subsidiaries or to which the Company or any of its subsidiaries
contributes or is obligated to contribute, whether or not written, including
without limitation any employee welfare benefit plan within the meaning of
Section 3(1) of ERISA, any employee pension benefit plan within the meaning of
Section 3(2) of ERISA (whether or not such plan is subject to ERISA) and any
bonus, incentive, deferred compensation, vacation, stock purchase, stock option,
severance, employment, change of control or fringe benefit plan, program or
agreement.
Section 1.46 "Environmental Laws" shall have the meaning set forth
in Section 3.8(a).
Section 1.47. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations thereunder.
Section 1.48. "ERISA Affiliate" shall mean, with respect to any
entity, trade or business, any other entity, trade or business that is a member
of a group described in Sections 414(b), (c), (m) or (o) of the Code or Section
4001(b)(1) of ERISA that includes the first entity, trade or business, or that
is a member of the same "controlled group" as the first entity, trade or
business pursuant to Section 4001(a)(14) of ERISA.
Section 1.49. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
Section 1.50. "Excluded Taxes" shall have the meaning set forth
in Section 10.1(a).
Section 1.51. "Executing Party" shall have the meaning set forth
in Section 3.1(d).
Section 1.52. "Final Date" shall have the meaning set forth in
Section 8.1(a).
Section 1.53. "Final Determination" shall have the meaning set
forth in Section 10.11(b).
Section 1.54. "Final Post-Closing Statement" shall have the
meaning set forth in Section 2.3(d).
Section 1.55. "Final Purchase Price" shall have the meaning set
forth in Section 2.3(e).
Section 1.56. "Financial Statements" shall have the meaning set
forth in Section 3.10(b).
Section 1.57. "Former Business Employee" shall mean an individual
who is not a Business Employee but was, at any time before the Closing Date,
actively employed by a
-5-
Company Subsidiary, and whose last active employment with the Company or any of
its subsidiaries was with a Company Subsidiary.
Section 1.58. "GAAP" shall have the meaning set forth in
Section 2.3(a).
Section 1.59. "GNG" shall have the meaning set forth in
Section 5.5(b).
Section 1.60. "Governmental Authority" shall mean any nation or
government, any state or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including, without limitation, any
government authority, agency, department, board, commission or instrumentality
of the United States, any State of the United States or any political
subdivision thereof, and any tribunal or arbitrator(s) of competent
jurisdiction, and any self-regulatory organization.
Section 1.61. "HSR Act" shall have the meaning set forth in
Section 3.1(e).
Section 1.62. "Indemnified Party" shall have the meaning set
forth in Section 9.1(g).
Section 1.63. "Indemnifying Party" shall have the meaning set
forth in Section 9.1(g).
Section 1.64. "Injunction" shall have the meaning set forth in
Section 6.1(b).
Section 1.65. "Intellectual Property" shall have the meaning set
forth in Section 3.16(a).
Section 1.66. "IRS" shall mean the Internal Revenue Service.
Section 1.67. "knowledge of the Company" shall have the meaning
set forth in Section 11.6.
Section 1.68. "Letter of Credit" shall have the meaning set forth
in Section 2.1(a).
Section 1.69. "Liens" shall have the meaning set forth in
Section 3.9.
Section 1.70. "▇▇▇▇ I Purchase" shall have the meaning set forth
in the Recitals.
Section 1.71. "▇▇▇▇ I Shares" shall have the meaning set forth
in the Recitals.
Section 1.72. "Marks" shall have the meaning set forth in
Section 3.16(a).
Section 1.73. "Massillon" shall have the meaning set forth in
the Recitals.
-6-
Section 1.74. "Massillon Purchase" shall have the meaning set
forth in the Recitals.
Section 1.75. "Massillon Shares" shall have the meaning set forth
in the Recitals.
Section 1.76. "Material Adverse Effect" shall mean a material adverse
effect upon the businesses, results of operations or financial condition of the
Company and the Company Subsidiaries, taken as a whole, provided that any rise
in newsprint costs shall not be deemed to constitute a Material Adverse Effect.
Section 1.77. "Material Contracts" shall have the meaning set forth
in Section 3.15.
Section 1.78. "MGE" shall have the meaning set forth in the
Recitals.
Section 1.79. "MGE Purchase" shall have the meaning set forth in
the Recitals.
Section 1.80. "MGE Shares" shall have the meaning set forth in
the Recitals.
Section 1.81. A "Multiemployer Plan" shall mean any "multiemployer
plan" within the meaning of Section 4001(a)(3) of ERISA.
Section 1.82. "Multiple Employer Plan" shall have the meaning set
forth in Section 3.13(f).
Section 1.83. "Neutral Auditors" shall have the meaning set forth
in Section 2.3(d).
Section 1.84. "Newspapers" shall mean collectively, the News of
Delaware County, Main Line Times, Germantown Courier, Mount Airy Times Express,
Daily Times, Sunday Times, Times Extra, The Daily ▇▇▇▇▇▇▇, The Independent,
Quality Time, Oneida Daily Dispatch, Oneida Pennysaver, Chitenango Pennysaver,
The Mercury, U.S. Express, Tri-County Market Place, The ▇▇▇▇▇ Pincher, Town Talk
Newspapers and various editions of the foregoing newspapers, as well as any
related publications published by the publisher of each such newspaper,
including, but not limited to, printed and electronic versions of any of the
foregoing, as well as the mastheads of all of the foregoing.
Section 1.85. "Non-Business Plans" shall have the meaning set
forth in Section 3.13(a).
Section 1.86. "Non-Competition Agreement" shall have the meaning
set forth in Section 5.9.
Section 1.87. "Noncontrolling Party" shall have the meaning set
forth in Section 10.11(c).
-7-
Section 1.88. "Oneida" shall have the meaning set forth in the
Recitals.
Section 1.89. "Oneida Purchase" shall have the meaning set forth
in the Recitals.
Section 1.90. "Oneida Shares" shall have the meaning set forth in
the Recitals.
Section 1.91. "Operating Reporting Packages" shall have the
meaning set forth in Section 3.10(a).
Section 1.92. "Order" shall have the meaning set forth in
Section 6.1(b).
Section 1.93. "Other Stockholders" shall have the meaning set
forth in the Preamble.
Section 1.94. "Other Subsidiaries" shall mean any subsidiaries
or former subsidiaries of the Company that are not Company Subsidiaries.
Section 1.95. "Other Transactions" shall have the meaning set
forth in Section 5.8(a).
Section 1.96. "Overlapping Plans" shall have the meaning set
forth in Section 3.13(a).
Section 1.97. "Permitted Liens" shall have the meaning set forth
in Section 3.9.
Section 1.98. "Person" or "person" shall include individuals,
corporations, partnerships, trusts, other entities and groups (which term shall
include a "group" as such term is defined in Section 13(d)(3) of the Exchange
Act).
Section 1.99. "Plan" shall mean any Employee Benefit Plan other
than a Multiemployer Plan.
Section 1.100. "Post-Closing Period" shall have the meaning set
forth in Section 10.1(a).
Section 1.101. "Post-Closing Statement" shall have the meaning set
forth in Section 2.3(c).
Section 1.102. "Post-Closing Taxable Period" shall have the
meaning set forth in Section 10.11(d).
Section 1.103. "Potential Withdrawal Liability" shall have the
meaning set forth in Section 5.5(e).
Section 1.104. "Pre-Closing Audits" shall have the meaning set
forth in Section 5.1.
-8-
Section 1.105. "Pre-Closing Period" shall have the meaning set
forth in Section 10.1(a).
Section 1.106. "Pre-Closing Taxable Period" shall have the meaning
set forth in Section 10.11(e).
Section 1.107. "Principal Stockholders" shall have the meaning set
forth in the Preamble.
Section 1.108. "Principal Stockholders' Claim Period" shall have
the meaning set forth in Section 9.1(a).
Section 1.109. "Prior Seller Payments" shall have the meaning set
forth in Section 10.1(e).
Section 1.110. "Purchase Agreements" shall have the meaning set
forth in the Recitals.
Section 1.111. "Qualified Plans" shall have the meaning set forth
in Section 3.13(c).
Section 1.112. "Refunding Agreement" shall have the meaning set
forth in Section 5.10.
Section 1.113. "Releases" shall have the meaning set forth in
Section 5.9.
Section 1.114. "Required Consents" shall have the meaning set
forth in Section 3.1(e).
Section 1.115. "Resolution Period" shall have the meaning set
forth in Section 2.3(c).
Section 1.116. "Seller" and "Sellers" shall have the meaning set
forth in the Preamble.
Section 1.117. "Seller Damages" shall have the meaning set forth
in Section 9.1(d).
Section 1.118. "Seller Group" shall have the meaning set forth in
Section 3.4.
Section 1.119. "Seller Indemnitees" shall have the meaning set
forth in Section 9.1(d).
Section 1.120. "Shares" shall mean, collectively, the ▇▇▇▇ I Shares,
the MGE Shares, the Acme Shares, the Massillon Shares and the Oneida Shares.
-9-
Section 1.121. "Stock Purchases" shall have the meaning set forth
in the Recitals.
Section 1.122. "Straddle Period" shall have the meaning set forth
in Section 10.11(f).
Section 1.123. "Tax Attributes" shall have the meaning set forth
in Section 10.1(f).
Section 1.124. "Tax Claim" shall have the meaning set forth in
Section 10.11(h).
Section 1.125. "Tax Package" shall have the meaning set forth in
Section 10.2(g).
Section 1.126. "Tax Return" shall have the meaning set forth in
Section 10.11(i).
Section 1.127. "Taxes" shall have the meaning set forth in
Section 10.11(j).
Section 1.128. "VEBA" shall have the meaning set forth in
Section 3.13(c).
Section 1.129. "VEBA Benefits" shall have the meaning set forth
in Section 3.13(c).
Section 1.130. "Warburg Pincus" shall have the meaning set forth
in Section 2.3(d).
Section 1.131. "WARN Act" shall have the meaning set forth in
Section 3.7.
Section 1.132. "Withdrawal Liability" shall mean liability to a
Multiemployer Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan, as those terms are defined in Part I of Subtitle E of Title
IV of ERISA.
ARTICLE II
Sale of Stock; Closing; Certain Other Matters
Section 2.1. Purchase and Sale. (a) On the basis of the
representations, warranties, covenants and agreements and subject to the
satisfaction or waiver of the conditions set forth herein and in the Purchase
Agreements, on the Closing Date, Sellers will sell or cause to be sold, and
Buyer will purchase or cause to be purchased, the Shares. The aggregate purchase
price for the Shares, as set forth in the several Purchase Agreements, shall be
the Closing Date Purchase Price, subject to further adjustment pursuant to
Section 2.3. At the Closing, Buyer shall deliver the Closing Date Purchase Price
by wire transfer of the Closing Date Purchase Price to accounts designated in
writing by Sellers at least three business days prior to the Closing. Sellers
-10-
shall deliver to Buyer at the closing a letter of credit from a major money
center bank in the amount of $10,000,000 substantially in the form attached as
Annex C hereto (the "Letter of Credit").
(b) At the Closing, Sellers shall deliver or cause to be delivered
certificates representing all of the Shares, with appropriate stock powers
attached, properly signed, together with evidence of payment of any applicable
stock transfer taxes, all in form and substance reasonably satisfactory to Buyer
and Buyer's counsel.
Section 2.2. Time and Place of Closing. The parties hereto agree that
the Closing shall occur on the date that is the later of (i) the 45th day
following the date hereof (or, if such date is not a business day, the first
business day thereafter) and (ii) the second business day following the day on
which the conditions to consummation of each of the Stock Purchases have been
satisfied or waived; provided, however, that if, as of such date, the Other
Transactions have not been consummated, the Closing shall occur on the date that
is the earlier of (i) the Final Date (or, if such date is not a business day,
the first business day prior to the Final Date) and (ii) the first business day
following the date on which the Other Transactions or the Alternate Transactions
have been consummated. Notwithstanding the foregoing, it is specifically
understood by the parties to this Agreement that "Closing Date" with respect to
the Acme Purchase, the Massillon Purchase, and the Oneida Purchase shall mean
the date immediately preceding the date determined by the foregoing provisions
of this Section 2.2. The Closing shall take place at 10:00 a.m., New York City
time, at the offices of Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other place or time as Buyer and the Designated
Stockholder may agree upon in writing.
Section 2.3. Purchase Price Adjustment. (a) Sellers shall deliver to
Buyer, four business days prior to the Closing Date, a statement (the "Closing
Date Statement") setting forth, as of the Closing Date (and after giving effect
to the transactions contemplated by Section 5.4 and Section 5.8), the Company's
estimated (i) total current assets and (ii) total liabilities, in each case
calculated in accordance with United States generally accepted accounting
principles ("GAAP") applicable in the preparation of a balance sheet,
consistently applied, including provisions for all liabilities relating to
post-retirement benefits and separation payments, including, but not limited to
those benefits for former employees listed on Section 3.13(h) of the Disclosure
Schedule, and including the employer share of taxes and employee benefits
related thereto. Such statement shall exclude any income tax asset or liability.
The Closing Date Statement delivered on such date shall be accompanied by a
certificate of the Chief Financial Officer of the Company stating that, to the
best knowledge of such individual, after due inquiry, the Closing Date Statement
is accurate in all material respects. The Closing Date Statement shall be used
to calculate the Closing Date Purchase Price pursuant to Section 2.3(b). Neither
the assets of the VEBA nor any liabilities assumed by Sellers and the Other
Subsidiaries pursuant to the last sentence of Section 5.5(c) shall be included
in any calculation made under this Section 2.3.
(b) The "Closing Date Purchase Price" paid to Sellers on the Closing
Date shall be an amount in cash equal to $300,000,000, as further (i) increased
dollar for dollar to the extent that (x) the Company's total current assets
exceed (y) the Company's total liabilities or (ii) de-
-11-
creased dollar for dollar to the extent that (x) the Company's total liabilities
exceed (y) the Company's total current assets, calculated in each case as of the
Closing Date, and in each case as presented on the Closing Date Statement
pursuant to Section 2.3(a).
(c) As soon as practicable, but in no event later than 60 business
days following the Closing Date, Buyer shall cause the Company to prepare a
statement (the "Post-Closing Statement") setting forth, as of the Closing Date,
the Company's actual total current assets and actual total liabilities. The
Post-Closing Statement shall be prepared in a manner consistent with the
requirements of Section 2.3(a) with respect to preparation of the Closing Date
Statement. The Designated Stockholder shall be permitted to select up to three
representatives, including accountants or financial advisors, and Buyer shall
use reasonable efforts to permit such representatives to participate in the
preparation of the Post-Closing Statement. It is the intention of the parties
that, by permitting such representatives to participate in the preparation of
the Post-Closing Statement, Buyer and Sellers will have an opportunity to
resolve any differences regarding such Post-Closing Statement on an accelerated
basis, provided, however, that determinations regarding the initial Post-Closing
Statement delivered to the Designated Stockholder shall be made by Buyer in its
sole discretion. Buyer shall deliver a copy of the Post-Closing Statement to the
Designated Stockholder promptly after it has been prepared. After receipt of the
Post-Closing Statement, the Designated Stockholder shall have 30 days to review
the Post-Closing Statement, together with the work papers used in the
preparation thereof. The Designated Stockholder and its authorized
representatives shall have full access to all relevant books and records and
employees of the Company, during regular business hours, to the extent required
to complete its review of the Post-Closing Statement. Unless the Designated
Stockholder delivers written notice to Buyer on or prior to the 30th day after
the Designated Stockholder's receipt of the Post-Closing Statement specifying in
reasonable detail all disputed items and the basis therefor, Sellers shall be
deemed to have accepted and agreed to the Post-Closing Statement, and any
further adjustment to the Closing Date Purchase Price, to the extent required,
shall be made in accordance with Section 2.3(e). If the Designated Stockholder
so notifies the Buyer of its objection to the Post-Closing Statement, Buyer and
the Designated Stockholder shall, within 30 days following such notice (the
"Resolution Period"), attempt to resolve their differences and any resolution by
them as to any disputed amounts shall be final, binding and conclusive.
(d) At the end of the Resolution Period, if the Designated
Stockholder and Buyer cannot resolve all remaining differences, then all amounts
remaining in dispute shall be submitted to Deloitte & Touche LLP (or, if such
firm is unwilling or unable to serve by virtue of a conflict or otherwise, to
KPMG Peat Marwick, LLP) (the "Neutral Auditors"), which shall make a
determination as to the Company's total current assets and total liabilities as
of the Closing Date based upon (i) all items which are not disputed and (ii) the
Neutral Auditors' determination as to all disputed items. Each party agrees to
execute, if requested by the Neutral Auditors, a reasonable engagement letter.
All fees and expenses relating to the work, if any, to be performed by the
Neutral Auditors shall be borne equally by the Principal Stockholders and Buyer.
The Neutral Auditors shall act as an arbitrator to determine, based solely on
presentations by the Designated Stockholder and Buyer, and not by independent
review, only those issues still in dispute. The Neutral Auditors' determination
shall be made within 30 business days following expiration of the Resolution
Period, shall be set forth in a written statement delivered to Sellers
-12-
and Buyer and shall be final, binding and conclusive. The term "Final
Post-Closing Statement," as hereinafter used, shall mean the definitive
Post-Closing Statement agreed to by Buyer and the Designated Stockholder in
accordance with Section 2.3(c) or the definitive Post-Closing Statement
resulting from the determinations made by the Neutral Auditors in accordance
with this Section 2.3(d) (in addition to those items theretofore agreed to by
the Designated Stockholder and Buyer). Buyer represents and warrants that
neither it nor its affiliates has any significant business relationship with
either Deloitte & Touche LLP or KPMG Peat Marwick, LLP, provided, however, that
for purposes of such representation, Warburg, ▇▇▇▇▇▇ Capital Company, L.P.,
Warburg, ▇▇▇▇▇▇ Capital Partners Liquidation Trust and Warburg, ▇▇▇▇▇▇
Investors, L.P. (collectively, "Warburg Pincus"), but not their respective
affiliates, shall be deemed affiliates of Buyer for purposes of this paragraph.
The Principal Stockholders hereby represent and warrant that no Seller has a
significant business relationship with either Deloitte & Touche LLP or KPMG Peat
Marwick LLP. The parties hereto agree that neither they nor their affiliates
shall engage in any significant business relationship with either Deloitte &
Touche LLP or KPMG Peat Marwick LLP until the Final Post-Closing Statement has
been agreed to and delivered. Notwithstanding anything to the contrary contained
herein, in the event the then existing Neutral Auditor has had any significant
business relationship with the Buyer, Sellers, or Warburg Pincus within two
years of the date they are requested to resolve any issue under this Agreement,
including, but not limited to, pursuant to Article X of this Agreement, the
Buyer and the Designated Stockholder shall promptly choose a new nationally
recognized accounting firm which has not had a significant business relationship
with any of the Sellers, Buyer or Warburg Pincus within such two year period to
serve as the Neutral Auditor.
(e) The sum, as of the Closing Date, of (i) $300,000,000, plus (ii)
the Company's total current assets, minus (iii) the Company's total liabilities,
based, in each case, upon the Final Post-Closing Statement, is hereinafter
referred to as the "Final Purchase Price." Promptly after the Final Post-Closing
Statement has been agreed upon, (i) Buyer shall pay to Sellers an amount in cash
equal to the excess, if any, of the Final Purchase Price over the Closing Date
Purchase Price, (ii) Sellers shall pay to Buyer an amount in cash equal to the
excess, if any, of the Closing Date Purchase Price over the Final Purchase
Price, or (iii) if the Closing Date Purchase Price and the Final Purchase Price
are identical, no further payment shall be made pursuant to this Section 2.3(e).
Any payment by Buyer or Sellers pursuant to clause (i) or (ii) of the preceding
sentence shall bear interest from (and including) the Closing Date through the
date of payment at the publicly announced prime interest rate of the Chase
Manhattan Bank in effect from time to time for unsecured short-term commercial
loans from the Closing Date to (and including) the date immediately preceding
the date of such payment. Any adjustments to the Closing Date Purchase Price
made pursuant to this Section 2.3(e) shall be paid by wire transfer in
immediately available funds to an account specified by the party to whom such
payment is owed within five business days after the Final Post-Closing Statement
is agreed to by Buyer and the Designated Stockholder.
(f) For purposes of this Section 2.3, the Closing Date Statement, the
Post-Closing Statement and the Final Post-Closing Statement, and all
calculations relating thereto, shall be prepared as though MGE were a Company
Subsidiary of the Company, and in calculating any amounts, the "Company" shall
mean the Company and the Company Subsidiaries, and
-13-
furthermore, all calculations shall be made on a combined basis for the Company
and the Company Subsidiaries, and all such calculations shall include normal
year-end adjustments. For purposes of the calculations made pursuant to this
Section 2.3, inventories shall be presented net of LIFO reserves in an amount
not less than $107,000, which $107,000 must be a reduction to inventory for
purposes of GAAP accountings.
(g) The parties agree that the Company's total Accounts Receivable
set forth on the Final Post-Closing Statement minus total reserves for bad debts
relating to Accounts Receivable set forth on the Final Post-Closing Statement
shall be referred to herein as the "Closing Date Net Accounts Receivable." The
parties agree that subject to the last sentence of this Section 2.3(g), 140 days
after the Closing the Buyer will notify the Designated Stockholder as to the
amount of (x) the Company's Accounts Receivable shown on the Final Post-Closing
Statement which have been collected by the 120th day after the Closing (the
"Closing Date Collected Accounts Receivable") plus (y) any Company Accounts
Receivable which were written off by the Company as uncollectible bad debts
prior to the Closing but which are collected by the Company on or after the
Closing and prior to the 120th day after the Closing minus (z) all credit
adjustments, including, but not limited to, make-goods, rebates, cash discounts,
write-offs and commissions which were applied to the Company's Accounts
Receivable existing on the Final Post-Closing Statement (collectively, (x) plus
(y) minus (z) shall be referred to as the "Aggregate Collected Accounts
Receivable"). To the extent the Aggregate Collected Accounts Receivable exceed
the Closing Date Net Accounts Receivable, Buyer shall promptly reimburse the
Sellers for such excess amount in immediately available funds. To the extent the
Aggregate Collected Accounts Receivable are less than the Closing Date Net
Accounts Receivable, the Principal Stockholders shall promptly reimburse the
Buyer for such shortfall in immediately available funds. In the event the Final
Post-Closing Statement is not completed 140 days after the Closing Date, Buyer
and the Designated Stockholder agree that the provisions of this Section 2.3(g)
will be implemented 10 days after the Final Post-Closing Statement is completed
and not 140 days after the Closing Date. Interest shall be paid on such payment
at Chase's prime rate from the Closing Date to the day the payment is made
hereunder.
ARTICLE III
Representations and Warranties Relating to the Company
For purposes of the representations and warranties contained in this
Article III, unless expressly provided to the contrary, representations
concerning the Company are deemed not to include any representations concerning
subsidiaries of the Company to the extent they do not hold assets, and to the
extent they are not subject to liabilities, related primarily to the Business.
For purposes of this Agreement, MGE shall be deemed to be a Company Subsidiary
and any covenant, agreement or representation made by, concerning, or with
respect to the Company or the Company Subsidiaries shall be deemed to include
representations concerning or with respect to MGE. Each Principal Stockholder
hereby represents and warrants, jointly and severally, to Buyer as follows:
-14-
Section 3.1. Incorporation; Authorization, Etc. (a) The Company and
each of the Company Subsidiaries is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of its incorporation.
The Company and each of the Company Subsidiaries (i) has full corporate power to
own all of its properties and assets and to carry on its business as it is now
being conducted, and (ii) is duly qualified to do business and is in good
standing, and is duly licensed, authorized or qualified to transact business in
each jurisdiction in which the ownership or lease of real property or the
conduct of its business requires it to be so qualified, except where the failure
to so qualify could not in the aggregate reasonably be expected to have a
Material Adverse Effect.
(b) The Company and each of its subsidiaries and Parent Enterprises,
Inc. (whether or not such subsidiaries hold assets or are subject to liabilities
relating to the Business) has full corporate or other power and authority to
effect the transactions contemplated by this Agreement and each of the Purchase
Agreements to which it is a party. The consummation of the transactions
contemplated hereby and by the Purchase Agreements have been duly authorized and
approved by all necessary corporate or other action on the part of the Company
and each of its subsidiaries and Parent Enterprises, Inc. (whether or not such
subsidiaries hold assets or are subject to liabilities relating to the
Business). Except as set forth on Section 3.1(b) of the disclosure schedule
delivered to Buyer by the Sellers on the date hereof (the "Disclosure
Schedule"), the execution and delivery of this Agreement and each of the
Purchase Agreements does not, and the consummation of the transactions
contemplated hereby and thereby will not, violate, breach or conflict with any
provision of, or constitute an event which (whether after the giving of notice
or the passage of time or both) will result in a violation of or breach of, or
result in the acceleration, termination or modification of, or entitle any party
to accelerate, terminate or modify (whether after the giving of notice or the
passage of time or both) any obligation under, or result in the imposition of or
the creation of any Lien upon any of the assets or properties of the Company or
any of the Company Subsidiaries or Parent Enterprises, Inc. pursuant to, any
mortgage, Lien, lease, agreement, instrument, certificate of incorporation,
by-law, deed of trust other organizational or governing document, order,
arbitration award, judgment or decree to which the Company or any Company
Subsidiary or Parent Enterprises, Inc. is a party or by which any such party or
any of their respective properties or assets are bound, except for such
violations, breaches, accelerations, terminations, modifications, creations or
impositions of Liens which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect, or which are cured,
waived or terminated prior to the Closing Date.
(c). Each Seller that is not a natural person (including, for such
purpose, any person serving as a trustee, executor or in a similar capacity) is
duly organized or created, validly existing and, if applicable, in good standing
under the laws of its jurisdiction of organization. Each Seller has full power
and authority to execute and deliver this Agreement and each of the Purchase
Agreements to which it is a party and to perform its obligations under this
Agreement and each of the Purchase Agreements to which it is a party. This
Agreement and each of the Purchase Agreements is the legal, valid and binding
obligation of each Seller party thereto, enforceable against each such person in
accordance with its terms. The execution and delivery of this Agreement and each
of the Purchase Agreements, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized and approved by all
necessary
-15-
action on the part of each Seller party thereto, and no further actions or
proceedings on the part of any Seller party thereto are necessary to authorize
this Agreement or any of the Purchase Agreements. Except as set forth on Section
3.1(c) of the Disclosure Schedule, the execution and delivery of this Agreement
and each of the Purchase Agreements does not, and the consummation of the
transactions contemplated hereby and thereby will not, violate, breach or
conflict with any provision of, or constitute an event which (whether after the
giving of notice or the passage of time or both) will result in a violation of
or breach of, or result in the acceleration, termination or modification of, or
entitle any party to accelerate, terminate or modify (whether after the giving
of notice or the passage of time or both) any obligation under, or result in the
imposition of any Lien upon any of the Shares pursuant to, any mortgage, Lien,
lease, agreement, instrument, certificate of incorporation, by-law, deed of
trust other organizational or governing document, order, arbitration award,
judgment or degree to which any Seller is a party or by which any Seller or the
properties or assets of any Seller are bound.
(d) Each party executing a Purchase Agreement (other than Sellers,
Buyer or affiliates of Buyer) (each, an "Executing Party") that is not a natural
person (including, for such purpose, any person serving as a trustee, executor
or in a similar capacity) is duly organized or created, validly existing and, if
applicable, in good standing under the laws of its jurisdiction of organization.
Each Executing Party has full power and authority to execute and deliver each of
the Purchase Agreements to which it is a party and to perform its obligations
under each of the Purchase Agreements to which it is a party. Each of the
Purchase Agreements is the legal, valid and binding obligation of each Executing
Party that is a party thereto, enforceable against each such person in
accordance with its terms. The execution and delivery of each of the Purchase
Agreements, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized and approved by all necessary action on the
part of each Executing Party that is a party thereto, and no further actions or
proceedings on the part of any Executing Party that is a party thereto are
necessary to authorize any of the Purchase Agreements. Except as set forth on
Section 3.1(c) of the Disclosure Schedule, the execution and delivery of each of
the Purchase Agreements does not, and the consummation of the transactions
contemplated thereby will not, violate, breach or conflict with any provision
of, or constitute an event which (whether after the giving of notice or the
passage of time or both) will result in a violation of or breach of, or result
in the acceleration, termination or modification of, or entitle any party to
accelerate, terminate or modify (whether after the giving of notice or the
passage of time or both) any obligation under, or result in the imposition of
any Lien upon any of the Shares pursuant to, any mortgage, Lien, lease,
agreement, instrument, certificate of incorporation, by-law, deed of trust other
organizational or governing document, order, arbitration award, judgment or
degree to which any Executing Party is a party or by which any Executing Party
or the properties or assets of any Executing Party are bound.
(e) Section 3.1(e) of the Disclosure Schedule contains a complete
list of all persons or parties, including Governmental Authorities, whose
consents or approvals, or notices to whom (collectively, "Required Consents"),
are required for the transactions contemplated hereunder, other than those the
failure of which to obtain could not reasonably be expected to have a Material
Adverse Effect or materially impair or delay the consummation of the
transactions
-16-
contemplated hereby, other than with respect to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(collectively, the "HSR Act").
Section 3.2. Capitalization. (a) The ▇▇▇▇ I Shares constitute all of
the outstanding and issued capital stock of the Company. The MGE Shares
constitute all of the outstanding and issued capital stock of MGE. All of the
▇▇▇▇ I Shares and the MGE Shares are validly issued, fully paid and
nonassessable, are free of preemptive rights (except such preemptive rights as
are provided by law). As a result of the consummation of the Stock Purchases,
Buyer shall become the sole owner of the Business and all outstanding ▇▇▇▇ I
Shares and MGE Shares. Section 3.2(a) of the Disclosure Schedule sets forth the
name of each corporation or other entity in which, as of the Closing, the
Company will own, directly or indirectly, 50% or more of the outstanding stock
or other equity interests (each such entity and MGE, individually, a "Company
Subsidiary," and collectively, together with MGE, the "Company Subsidiaries"),
its jurisdiction of incorporation or organization, the number of shares of its
capital stock or other equity interests of each class and the name of and number
of shares owned by each holder of any such shares of capital stock or other
equity interests. All of the issued and outstanding shares of capital stock or
other equity interests of the Company Subsidiaries are validly issued, fully
paid and nonassessable, and free of preemptive rights (except as may be required
by law). There are no outstanding obligations, options, warrants or other rights
of any kind (whether or not currently in effect) to acquire shares of capital
stock or other equity interests of any of the Company Subsidiaries or any
securities convertible into or exchangeable or exercisable for (whether or not
such right of conversion exchange or exercise is currently in effect) any such
capital stock or other equity interests. At the Closing, all of the shares of
capital stock or other equity interests of each Company Subsidiary will be owned
by the Company or by another Company Subsidiary (except for the MGE Shares, all
of which shares are owned directly by the Estate of ▇▇▇▇ ▇▇▇▇▇▇▇ or by an entity
which is 100% owned directly by the Estate of ▇▇▇▇ ▇▇▇▇▇▇▇) and, except as set
forth on Section 3.2 of the Disclosure Schedule, all of such shares are owned
free and clear of any Liens. Except as set forth on Section 3.2(a) of the
Disclosure Schedule, as of the Closing, neither the Company nor MGE will have
any equity investment in any corporation, association (except the Associated
Press or similar organizations), partnership, joint venture or other entity
other than the Company Subsidiaries.
(b) Except as set forth in Section 3.2(b) of the Disclosure Schedule,
each Seller's Shares are owned by such Seller and will, as of the Closing Date,
be owned by such Seller, in each case, free and clear of any Liens. There are no
outstanding obligations, options, warrants or other rights of any kind (whether
or not currently in effect) to acquire shares of capital stock or other equity
interests of the Company or any securities convertible into or exchangeable or
exercisable for (whether or not such right of conversion, exchange or exercise
is currently in effect) any such capital stock or other equity interests.
Section 3.3. Assets. The assets reflected on the most recent Balance
Sheet constitute all of the assets necessary in all material respects to own and
operate the business of the Newspapers in a manner consistent with past
practice. All of such assets are owned directly by the Company or the Company
Subsidiaries and except for (i) the real property referred to in Section 5.11,
which real property will be owned by the Company or a Company Subsidiary as of
-17-
the Closing Date, (ii) leases of real property set forth on Section 3.15 of the
Disclosure Schedule and (iii) changes to the current assets reflected on such
Balance Sheet which shall have occurred in the ordinary course of business
consistent with past practice, will be owned by the Company or the Company
Subsidiaries as of the Closing Date.
Section 3.4. Interests of Certain Persons. No shareholder, officer,
director or trustee of any Seller, the Company or any Company Subsidiary, no
Person with whom any such shareholder, officer, director or trustee has any
direct or indirect relation by blood, marriage or adoption, and no affiliate or
associate (as such term is defined in Rule 12b-2 promulgated under the Exchange
Act) of any such Person (collectively, the "Seller Group"), will have, upon
consummation of the transactions contemplated by this Agreement, any material
interest, directly or indirectly, in any asset of, or which relates, directly or
indirectly, to the business or operations of the Company, any Company Subsidiary
or the Newspapers. As of the Closing Date, no liability of the Company or any
Company Subsidiary and no liability to which any assets of the Company or any
Company Subsidiary will be subject or by which any of the foregoing will be
bound will exist for the benefit of, directly or indirectly, any member of the
Seller Group. Except as set forth on Section 3.4(a) of the Disclosure Schedule,
as of the date hereof, no liability of the Company or any Company Subsidiary and
no liability to which any assets of the Company or any Company Subsidiary is
subject or by which any of the foregoing is bound exist for the benefit of,
directly or indirectly, any member of the Seller Group. Except as set forth on
Section 3.4(b) of the Disclosure Schedule, as of the Closing Date, no liability
of the Company or any Company Subsidiary and no liability to which any assets of
the Company or any Company Subsidiary will be subject or by which any of the
foregoing will be bound shall exist for the benefit of, directly or indirectly,
any member of the Seller Group. Notwithstanding the foregoing, no member of the
Seller Group shall be deemed to have an interest in any asset of the Company or
a Company Subsidiary or a benefit of any liability of the Company or a Company
Subsidiary as a result of such person's ownership of less than 5% of the voting
stock of a publicly traded corporation.
Section 3.5. Ordinary Course. Except as set forth on Section 3.5 or
5.8 of the Disclosure Schedule, since December 31, 1997, the Company has not,
and neither Sellers nor any affiliate of any Seller has, directly or indirectly,
caused the Company or any Company Subsidiary to (i) operate its businesses other
than in the ordinary and usual course of business and in good faith, consistent
with past practices, or (ii) take any action which, if taken after the date
hereof, would constitute a breach of Section 5.3(a).
Section 3.6. Litigation. Except as set forth on Section 3.6 of the
Disclosure Schedule, there are not, in any court or before any arbitrator of any
kind or before or by any Governmental Authority or non-governmental body, any
actions, suits or proceedings, pending or, to the knowledge of the Company,
threatened (nor, to the knowledge of the Company is there any basis therefor)
against or in any other way relating to or affecting the Company or any Company
Subsidiary, or the Business or the assets related thereto, except actions, suits
or proceedings, that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
-18-
Section 3.7. Labor Relations. Except as set forth on Section 3.7 of
the Disclosure Schedule and except for matters which could not reasonably be
expected (other than in the case of clauses (ii), (iii) or (v) of this sentence,
as to which clauses no materiality qualifier shall apply) to result in a
Material Adverse Effect, (i) there is no labor strike, dispute, slowdown,
picketing, hand billing or boycott actually pending, or threatened against or
affecting the Company or any Company Subsidiary, and during the past three years
there has not been any such action; (ii) there are no collective bargaining
agreements, side letters or similar agreements between the Company or any
Company Subsidiary and any labor organization; (iii) except for employees
covered by the collective bargaining agreements set forth on Section 3.7 of the
Disclosure Schedule, none of the employees of the Company or any Company
Subsidiary is represented by any labor organization and the Company does not
have any knowledge of any current union organizing activities among the
employees of the Company or any Company Subsidiary or of any question concerning
representation regarding such employees; (iv) the Company and its subsidiaries
are, and have at all times been, in material compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment, wages, hours of work and occupational safety and health, and to the
knowledge of the Company are not engaged in any unfair labor practices as
defined in the National Labor Relations Act or other applicable law, ordinance
or regulation; (v) there is no unfair labor practice charge or complaint against
the Company or any of its subsidiaries pending or, to the knowledge of the
Company, threatened before the National Labor Relations Board or any similar
state or foreign agency; (vi) there is no grievance pursuant to the grievance
procedure under any collective bargaining agreement or other grievance
procedure; (vii) no charges with respect to or relating to the Company or any of
its subsidiaries are pending before the Equal Employment Opportunity Commission
or any other agency responsible for the prevention of unlawful employment
practices; (viii) neither the Company nor any of its subsidiaries has received
notice of the intent of any federal, state, local or foreign agency responsible
for the enforcement of labor or employment laws to conduct an investigation with
respect to or relating to the Company or any of its subsidiaries and no such
investigation is in progress; and (ix) there are no complaints, lawsuits or
other proceedings pending or, to the best knowledge of the Company, threatened
in any forum by or on behalf of any present or former employee of the Company or
any of its subsidiaries alleging breach of any express or implied contract of
employment, any law or regulation governing employment or the termination
thereof or other discriminatory, wrongful or tortious conduct in connection with
the employment relationship. Since January 1, 1989, there has not been (i) a
"plant closing" (as defined in the Worker Adjustment and Retraining Notification
Act (the "WARN Act") affecting any site of employment or one or more facilities
or operating units within any site of employment or facility of the Company or
any of its subsidiaries; or (ii) a "mass layoff" (as defined in the WARN Act)
affecting any site of employment or facility of the Company or any of its
subsidiaries; nor has the Company or any Company Subsidiary been affected by any
transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state or local law. Except as set
forth in Section 3.7 of the Disclosure Schedule, none of the employees of the
Company or any of its subsidiaries has suffered an "employment loss" (as defined
in the WARN Act) since three months prior to the date of this Agreement. Neither
the Company nor any Company Subsidiary has entered into any contract, agreement
or side letter with any union or other labor organization since March 1, 1998.
-19-
Section 3.8. Environmental Compliance. Except as disclosed on
Section 3.8 of the Disclosure Schedule:
(a) The Company and each Company Subsidiary has obtained all material
permits, licenses and other authorizations which are required with respect to
the operation of Company, the Company Subsidiaries and the Business under
federal, state and local laws and regulations relating to pollution or
protection of the environment, including laws relating to emissions, discharges,
releases or threatened releases or discharges of Hazardous Substances, Oils,
Pollutants or Contaminants (as such terms are defined in the National Oil and
Hazardous Substances Pollution Contingency Plan, 40 C.F.R. ss. 300.5) into the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances, Oils, Pollutants or Contaminants
(the "Environmental Laws"), except for the failure to have obtained such
permits, licenses and other authorizations as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(b) The Company and each Company Subsidiary is in material compliance
with all terms and conditions of the permits, licenses and authorizations
required by the Environmental Laws, and is also in material compliance with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in the
Environmental Laws or contained in any regulation, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered, promulgated or
approved thereunder. There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, investigation, proceeding, notice
or demand letter pending relating to the property or business of the Company or
any Company Subsidiary or, to the best knowledge of the Company, threatened
against the business or property of the Company or any Company Subsidiary
relating in any way to the Environmental Laws or any code, plan, order, or
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except for such noncompliance which could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(c) Neither the Company nor any Company Subsidiary has, and to the
best knowledge of the Company no other person has, placed, stored, buried,
released, dumped or disposed of any Hazardous Substances, Oils, Pollutants or
Contaminants in quantities requiring investigation or cleanup under
Environmental Laws in each case which have been produced by, or resulting from,
any business, commercial or industrial activities, operations, or processes, on
or beneath, the property of the Company or any Company Subsidiary, including, to
the knowledge of the Company, former properties for which the Company or a
subsidiary has retained or assumed liability either contractually or by
operation of law, except for inventories of such substances to be used, and
wastes generated therefrom, in the ordinary course of business of the Company or
such Company Subsidiary (which inventories and wastes, if any, were stored or
disposed of in accordance with applicable laws and regulations and in a manner
such that there was no material release of any such substances into the
environment) or except for such placement, storage, burial, release dumping or
disposal of such Hazardous Substances, Oils, Pollutants
-20-
or Contaminants which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(d) To the best knowledge of the Company, no cleanup has occurred at
any property owned or operated by the Company or any Company Subsidiary, which
could reasonably be expected to result in the assertion or creation of a Lien on
such property by any Governmental Authority with respect thereto, nor has any
such assertion of a Lien been made by any Governmental Authority with respect
thereto.
(e) Neither the Company nor any Company Subsidiary has received any
notice from any Governmental Authority or private or public entity or individual
seeking information in connection with or advising it that it is responsible
for, or potentially responsible for, costs with respect to a release, a
threatened release or clean-up of Hazardous Substances, Oils, Pollutants, or
Contaminants generated, stored, treated, disposed of or transported by the
Company or any Company Subsidiary, and neither the Company nor any Company
Subsidiary has entered into any agreement to the effect that it is or may be
liable to any public or private entity or individual for the clean-up of any
Hazardous Substances, Oils, Pollutants or Contaminants, except, in either case,
for matters that have been fully resolved and as to which neither the Company
nor any Company Subsidiary has any further potential liability.
(f) To the knowledge of the Company, there is not at, on or in any
property owned or operated by the Company or any Company Subsidiary, (i) any
friable asbestos-containing material as defined by the Toxic Substances Control
Act, as amended; (ii) any polychlorinated biphenyls used in hydraulic oils,
electrical transformers or other equipment in concentrations that would impose
regulatory obligations on the Company or any of the Company Subsidiaries,
provided, that this representation does not include equipment that is neither
owned nor operated by the Company or any of the Company Subsidiaries (including,
without limitation, transformers owned by public utilities); or (iii) other than
naturally occurring radioactive materials that are present at any property
covered by this representation, such as radon, any radioactive material
including, but not limited to, any source, special nuclear or byproduct material
as defined in 42 U.S.C. ss. 2011 et seq., as amended or hereafter amended.
(g) To the knowledge of the Company, there are no underground storage
tanks or regulated surface impoundments at, on or in any property owned or
operated by the Company or any Company Subsidiary, including any former property
of the Company or a Company subsidiary for which the Company or a subsidiary has
retained or assumed liability either contractually or by operation of law.
(h) Notwithstanding the foregoing, to the knowledge of the Company,
there has been no disposal or release of Hazardous Substances, Oils, Pollutants
or Contaminants at the Kingston, New York property of the Business that requires
investigation or cleanup pursuant to any Environmental Laws.
(i) The representations and warranties set forth in this Section 3.8
are the sole and exclusive representations and warranties being made by Sellers
in this Agreement with respect to environmental matters.
-21-
Section 3.9. Title to Properties and Assets. Except as set forth in
Section 3.9(a) of the Disclosure Schedule, the Company and each Company
Subsidiary has good title to all of the assets and properties which it purports
to own, and such assets and properties are free and clear of all liens,
easements, building and use restrictions, encumbrances, security interests,
charges, pledges, mortgages, deeds of trust, deeds to secure debt, options or,
to the best knowledge of the Company, any other adverse claims, restrictions or
third party rights of any kind and nature whatsoever (collectively, "Liens") ,
except in each case for (i) Liens for Taxes which are not yet due and payable or
which are being contested in good faith, (ii) statutory common law, builder,
mechanic, warehouseman, materialmen, contractor, workmen, repairman, carrier or
other Liens which do not interfere with the use by the Business of the assets
relating thereto or (iii) encumbrances, easements, rights of way, restrictions,
encroachments, conditions, covenants and other restrictions on the use of real
property which do not interfere with the conduct of the Business in the ordinary
course or materially impair the use or value of real property (collectively,
"Permitted Liens"). Except as set forth in Section 3.9(b) of the Disclosure
Schedule, there are no rights of tenants or parties in possession with respect
to any real property owned by the Company or any Company Subsidiary. Except as
set forth on Section 3.9(b) of the Disclosure Schedule, all leases of real
property on which facilities operated by the Company and the Company
Subsidiaries are situated, are valid and in full force and effect.
Section 3.10. Financial Statements. Sellers have delivered to Buyer
prior to the execution of this Agreement the following financial information,
copies of which are set forth on Section 3.10 of the Disclosure Schedule:
(a) Unaudited operating reporting packages for the Business
(including balance sheet, profit and loss and departmental expenses), for the
full years ended 1996 and 1995, for the months of February and March 1998, each
month of calendar year 1997, and the month of December 1996, provided that each
such reporting package also includes year-to-date cumulative information for the
Business based upon a December 31 fiscal year (collectively, the "Operating
Reporting Packages").
(b) Unaudited combined and combining balance sheets of the Business
at December 31, 1997, December 31, 1996, December 31, 1995 and March 31, 1998
(the "Balance Sheets") and profit and loss statements of the Business for the
12-month periods ended December 31, 1997, December 31, 1996 and December 31,
1995 and the three-month period ended March 31, 1998 (excluding footnotes)
(collectively, the Balance Sheets and the profit and loss statements of the
Business are referred to herein as the "Financial Statements").
No adjustments of the Financial Statements or the Operating Reporting Packages
are required for a fair presentation of the results of operations and financial
position of the Business in accordance with GAAP (other than (i) in case of the
statements for the 3 months ended March 31, 1998, normal year-end adjustments
and (ii) the exceptions to GAAP and the other matters set forth on Sections
3.10(a) and 3.10(b) of the Disclosure Schedule). Sellers have delivered to Buyer
a draft report and, prior to the Closing shall deliver a final report, of
"Agreed upon Special Procedures" prepared by Price Waterhouse LLP with respect
to the Financial Statements in the form set forth on Section 3.10(b) of the
Disclosure Schedule (other than those financial state-
-22-
ments set forth on such Section 3.10(b) relating to the three months ended March
31, 1998). Amounts shown in the following asset and liability categories on the
Balance Sheets are not part of the Business and for purposes of this agreement
shall not for any reason be deemed part of the Balance Sheets:
Asset side of Balance Sheets:
Dues from affiliates
Due from subsidiaries
Due from parent
Investment in subsidiaries
Liability side of Balance Sheets:
Due to affiliates
Minority interest
Subsidiaries' investment in parent
(c) The information set forth on Section 3.10(c) of the Disclosure
Schedule is true and accurate in all material respects.
Section 3.11. Absence of Undisclosed Liabilities. Except as set forth
on Section 3.11 of the Disclosure Schedule, there are no liabilities, debts,
obligations or claims against the Company or the Company Subsidiaries or
otherwise relating to or arising in connection with the Business either known or
unknown, accrued, fixed, contingent or otherwise (whether or not required to be
disclosed pursuant to GAAP) which could individually or in the aggregate
reasonably be expected to have a Material Adverse Effect, except as and to the
extent reflected or reserved against in the most recent Balance Sheet
specifically disclosed in this Agreement or in the Disclosure Schedule, and
except for liabilities, debts, obligations and claims which (i) were incurred in
the ordinary course of business or consistent with past practice since December
31, 1997 and (ii) could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
Section 3.12. Compliance with Applicable Laws. Except as set forth on
Section 3.12 of the Disclosure Schedule and except for matters relating to
Environmental Laws (which matters are covered exclusively in Section 3.8), (i)
the Company and the Company Subsidiaries hold all material permits, licenses and
approvals of all Governmental Authorities necessary for the operation of the
Business and (ii) the business operations of the Company and the Company
Subsidiaries have been conducted in compliance with all laws, ordinances and
regulations of any Governmental Authority, except for violations which could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section 3.13. Employee Benefit Plans. (a) Section 3.13(a) of the
Disclosure Schedule includes a complete list of all material Employee Benefit
Plans, and identifies which
-23-
such plans provide benefits exclusively for Business Employees and Former
Business Employees and beneficiaries and dependents thereof ("Business-Only
Plans"), and which provide benefits exclusively for individuals who are not
Business Employees, Former Business Employees or beneficiaries or dependents
thereof ("Non-Business Plans") and which provide benefits to both such groups of
individuals ("Overlapping Plans"). A true, complete and correct copy of each of
the foregoing Employee Benefit Plans has been delivered by the Company to Buyer.
(b) With respect to each Plan, the Company has delivered to Buyer a
true, correct and complete copy of: (i) each writing constituting a part of such
Plan, including without limitation all plan documents, employee communications,
benefit schedules, trust agreements, and insurance contracts and other funding
vehicles; (ii) the three most recent Annual Reports (Form 5500 Series) and
accompanying schedules, if any; (iii) the current summary plan description and
any material modifications thereto, if any (in each case, whether or not
required to be furnished under ERISA); (iv) the most recent annual financial
report, if any; (v) the most recent actuarial report, if any; and (vi) the most
recent determination letter from the IRS, if any. Except as specifically
provided in the foregoing documents delivered to Buyer, there are no amendments
to any Plan that have been adopted or approved nor has the Company or any of its
subsidiaries undertaken to make any such amendments or to adopt or approve any
new Plan. No plan merger, consolidation, transfer of assets or liabilities,
re-valuation of assets or liabilities, or other event not arising in the normal
course of business of any Plan has occurred after the period reflected on the
documents identified in clauses (ii), (iv) or (v) of the first sentence of this
paragraph (b) which would render such documents materially misleading.
(c) Section 3.13(c)(i) of the Disclosure Schedule identifies each
Plan that is intended to be a "qualified plan" within the meaning of Section
401(a) of the Code ("Qualified Plans"). The IRS has issued a favorable
determination letter with respect to each Qualified Plan and the related trust
that has not been revoked, and there are no existing circumstances nor any
events that have occurred that could reasonably be expected to adversely affect
the qualified status of any Qualified Plan or the related trust. The GNG Master
Welfare Plan Trust II (the "VEBA") is the only Plan which is intended to meet
the requirements of Code Section 501(c)(9), and the VEBA meets such requirements
and provides no disqualified benefits (as such term is defined in Code Section
4976(b). Section 3.13(c)(ii) of the Disclosure Schedule identifies all benefits
that are funded through the VEBA (the "VEBA Benefits").
(d) All contributions required to be made to any Plan by applicable
law or regulation or by any plan document or other contractual undertaking, and
all premiums due or payable with respect to insurance policies funding any Plan,
for any period through the date hereof have been timely made or paid in full or,
to the extent not required to be made or paid on or before the date hereof, have
been fully reflected on the most recent audited year-end financial statements of
GNG or MGE provided to Buyer. Each Employee Benefit Plan that is an employee
welfare benefit plan under Section 3(1) of ERISA (i) is funded through an
insurance company contract and is not a "welfare benefit fund" within the
meaning of Section 419 of the Code, (ii) is funded through the VEBA, or (iii) is
unfunded.
-24-
(e) With respect to each Employee Benefit Plan, the Company and its
subsidiaries have complied, and are now in compliance, in all material respects
with all provisions of ERISA, the Code and all laws and regulations applicable
to such Employee Benefit Plans and each Employee Benefit Plan has been
administered in all material respects in accordance with its terms. There is not
now, nor do any circumstances exist that could reasonably be expected to give
rise to, any requirement for the posting of security with respect to a Plan or
the imposition of any lien on the assets of the Company or any of its
subsidiaries under ERISA or the Code.
(f) Except as set forth in Section 3.13(f) of the Disclosure
Schedule, no Plan is subject to Title IV or Section 302 of ERISA or Section 412
or 4971 of the Code. Except as set forth in Section 3.13(f) of the Disclosure
Schedule: (i) no Employee Benefit Plan is a Multiemployer Plan or a plan that
has two or more contributing sponsors at least two of whom are not under common
control, within the meaning of Section 4063 of ERISA (a "Multiple Employer
Plan"); (ii) none of the Company and its subsidiaries nor any of their
respective ERISA Affiliates has, at any time during the last six years,
contributed to or been obligated to contribute to any Multiemployer Plan or
Multiple Employer Plan; and (iii) neither the consummation of the transactions
contemplated hereby, nor any event that will have occurred prior thereto, nor
any combination thereof, will result in a withdrawal or partial withdrawal on
the part of the Company or any of its ERISA Affiliates from any Multiemployer
Plan. With respect to each Plan that is a Multiemployer Plan: (i) none of the
Company and its subsidiaries nor any of their respective ERISA Affiliates has
incurred any Withdrawal Liability that has not been satisfied in full, and (ii)
none of the Company and its subsidiaries nor any of their respective ERISA
Affiliates has received any notification, nor has any reason to believe, that
any such Plan is in reorganization, has been terminated, is insolvent, or may
reasonably be expected to be in reorganization, to be insolvent, or to be
terminated.
(g) There does not now exist, nor do any circumstances exist that
could reasonably be expected to result in, any Controlled Group Liability that
would be a liability of the Company following the Closing. Without limiting the
generality of the foregoing, neither the Company nor any ERISA Affiliate of the
Company has engaged in any transaction described in Section 4069 or Section 4204
or 4212(c) of ERISA.
(h) Except as set forth on Section 3.13(h) of the Disclosure
Schedule, the Company has no liability for life, health, medical or other
welfare benefits to former employees or beneficiaries or dependents thereof,
except for health continuation coverage as required by Section 4980B of the Code
or Part 6 of Title I of ERISA and at no expense to the Company. There has been
no official or authorized communication to employees or former employees by the
Company or any of its subsidiaries which could reasonably be interpreted to
promise or guarantee any such employees or former employees retiree health or
life insurance or other retiree welfare benefits on an indefinite or permanent
basis.
(i) Except as set forth in Section 3.13(i) of the Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) result in, cause the accelerated vesting or
delivery of, or increase the amount or value of, any payment or benefit to any
em-
-25-
ployee, officer or director of the Company or any of its subsidiaries. Without
limiting the generality of the foregoing, no amount paid or payable by the
Company or any of its subsidiaries in connection with the transactions
contemplated hereby (either solely as a result thereof or as a result of such
transactions in conjunction with any other event or any other previous
transaction) will be an "excess parachute payment" within the meaning of Section
280G of the Code.
(j) None of the Company and its subsidiaries nor any other person,
including any fiduciary, has engaged in any "prohibited transaction" (as defined
in Section 4975 of the Code or Section 406 of ERISA), which could subject any of
the Employee Benefit Plans or their related trusts, the Company, any of its
subsidiaries or any person that the Company or any of its subsidiaries has an
obligation to indemnify, to any material tax or penalty imposed under Section
4975 of the Code or Section 502 of ERISA.
(k) There are no pending or threatened claims (other than claims for
benefits in the ordinary course), lawsuits or arbitrations which have been
asserted or instituted, or to Company's knowledge, no set of circumstances
exists which may reasonably be expected to give rise to a claim or lawsuit,
against the Plans, any fiduciaries thereof with respect to their duties to the
Plans or the assets of any of the trusts under any of the Plans which could
reasonably be expected to result in any material liability of the Company or any
of its subsidiaries to the Pension Benefit Guaranty Corporation, the Department
of Treasury, the Department of Labor, any Multiemployer Plan, any Plan or any
participant in a Plan.
(l) For purposes of this Section 3.13, the term "employee" shall be
considered to include individuals rendering personal services to the Company as
independent contractors.
Section 3.14. Taxes. Except as set forth on Section 3.14 of the
Disclosure Schedules or as could not individually or in the aggregate reasonably
be expected to have a Material Adverse Effect:
(a) The Company and each of the Company Subsidiaries and each
affiliated, combined, consolidated, unitary or aggregate group of which the
Company or any of the Company Subsidiaries is a member (a "Company Affiliated
Group") has timely filed (or there has been filed on its behalf) all federal,
state, local and foreign income Tax Returns (as hereinafter defined) required to
be filed by it, and all other Tax Returns required to be filed by it, and has
paid or caused to be paid all Taxes required to be paid in respect of the
periods covered by such returns. There are no outstanding agreements, waivers or
requests for waivers in writing or comparable written consents extending the
statutory period of limitation applicable to any Tax Return of the Company, any
of the Company Subsidiaries or any Company Affiliated Group. Neither the Company
nor any of the Company Subsidiaries (i) has been a member of a group filing
consolidated returns for federal income tax purposes (except for the group of
which the Company is the common parent), or (ii) is a party to or has any
liability pursuant to a Tax sharing or Tax indemnity agreement or any other
agreement of a similar nature that will remain in effect after the Closing.
-26-
(b) All Taxes which the Company or any of the Company Subsidiaries is
required by law to withhold or to collect for payment have been duly withheld
and collected and timely remitted and deposited in accordance with applicable
law.
Section 3.15. Material Contracts. The Company has provided or made
available to Buyer (i) true and complete copies of all written material
contracts and agreements ("Material Contracts") relating to the Business, or
(ii) with respect to such Material Contracts that have not been reduced to
writing, a written description thereof, each of which is listed on Section 3.15
of the Disclosure Schedule. Neither the Company nor any Company Subsidiary is,
or has received any notice or has any knowledge that any other party is, in
default in any respect under any such Material Contract, except for those
defaults which could not, either individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect; and there has not occurred any event
that, with the lapse of time or the giving of notice or both, would constitute a
default that could reasonably be expected to have a Material Adverse Effect.
Section 3.16. Copyrights, Trademarks and Other Proprietary Rights.
(a) For purposes of Section 3.16:
(i) "Intellectual Property" shall mean the following items used in
connection with the Newspapers or otherwise in the conduct of the Business:
all registered and common law trademarks, service marks, trade names,
worldwide web names and addresses, and copyrights, all applications for
registration of the foregoing, all mastheads, all logos and all trade
dress; and
(ii) "Marks" shall mean the following items used in connection with
the Newspapers or otherwise in the conduct of the Business: (A) all
registered and material common law trademarks, service marks, worldwide web
sites and addresses, and trade names listed in Section 3.16(a) of the
Disclosure Schedule; (B) all applications for registration of the
foregoing; (C) all mastheads; (D) all logos; and (E) all trade dress.
(b) Except as set forth in 3.16(b)(i) of the Disclosure Schedule, the
validity of the rights of the Company and the Company Subsidiaries to such
Intellectual Property have not, to the best knowledge of the Company, been
challenged or questioned by others, nor is there: (i) any pending or, to the
best knowledge of the Company, threatened litigation involving any of said
Intellectual Property or (ii) any basis for any claim which, if successful,
could not reasonably be expected to have a Material Adverse Effect on the
Company. All material contracts to which the Company is a party relating to the
licensing or other use of the Intellectual Property are set forth in Section
3.16(b)(ii) of the Disclosure Schedule. To the knowledge of the Company, the
conduct of the Business does not infringe or otherwise conflict with any rights
of any Person in respect of any Intellectual Property. To the knowledge of the
Company, none of the Intellectual Property is being infringed by any other
Person. With respect to all Intellectual Property:
(i) Neither Sellers, the Company nor any Company Subsidiary is
liable, nor have any made any material contract or arrangement whereby they
are liable, to any person for any royalty or other compensation for the use
of the Intellectual Property ex-
-27-
cept as described in Section 3.16(b)(iii) of the Disclosure Schedule, and
to the extent Sellers, the Company or any Company Subsidiary is obligated
to make any such royalty or other compensation payment, such person has
made all such payments for payment periods prior to the date hereof and has
adequately reserved for payments accruing through the date hereof. Each of
the Company and the Company Subsidiaries are the sole owners of and/or
have, at least, the non-exclusive rights to use the Intellectual Property
to create, publish and distribute the Newspapers in the geographic areas in
which the Newspapers are distributed to the extent that the Intellectual
Property is being used in connection with the Newspapers. Except as set
forth in Section 3.16(b)(iv) of the Disclosure Schedule, each of the
Company and the Company Subsidiaries are the sole owners of and/or have the
exclusive rights to use the Marks to create, publish and distribute the
Newspapers in the geographic areas in which the Newspapers are distributed
to the extent they are being used in connection with the Newspapers. Except
as set forth in Section 3.16(b)(v) of the Disclosure Schedule, the
Intellectual Property that is owned by each of the Company and the Company
Subsidiaries is owned free of all Liens.
(ii) Except as otherwise set forth in Section 3.16(b)(vi) of the
Disclosure Schedule, the registrations and applications described in
Section 3.16(a) of the Disclosure Schedule are presently in full force and
effect and have not been abandoned or withdrawn and, to the best knowledge
of the Company with respect to Marks, no other Person anywhere in the
geographic areas in which the Newspapers are distributed or within 35 miles
of such geographic areas is using any Marks on any products of the same
general type as the Newspapers. The Marks are currently in use in
connection with the Newspapers.
Section 3.17. Inventories. Except as set forth in Section 3.17
of the Disclosure Schedule, the inventories of the Company and the Company
Subsidiaries consist of a quality and quantity which are reasonably usable and
salable in the ordinary and usual course of business.
Section 3.18. Circulation and Advertising. The Company has supplied
to Buyer complete monthly unaudited Operating Report Packages provided pursuant
to Section 3.10 for the Business for the period January 1, 1996 through March
31, 1998 (excluding the month of January 1998). These packages contain true and
complete summaries in all material respects of the circulations of the
newspapers since January 1, 1996, whether paid or unpaid, audited or unaudited,
including Total Market Coverage publications. Section 3.18 of the Disclosure
Schedule sets forth a summary of the distribution of the Company's free
newspapers for the period from January 1, 1996 through March 31, 1998, as well
as copies of the latest two years' ABC or CAC audit reports for each of the
audited newspapers. The information provided to ABC and CAC in connection with
the preparation of their reports was true in all material respects as of the
date provided. To the best knowledge of the Company all information contained in
the ABC and CAC audit reports is true and correct in all material respects.
Since the dates of each of those reports each of the Newspapers has conducted
its circulation operations in the ordinary course of business and in a manner
consistent with past practice, except as listed on Section 3.18(a) of the
Disclosure Schedule. Since January 1, 1997 (or such later date with respect to
which an audit report is included in Section 3.18(a) of the Disclosure
Schedule), there has been no material change in circulation of any of the
newspapers, other than normal seasonal or periodic fluctua-
-28-
tions. The Operating Report Packages set forth true and complete summaries in
all material respects of lineage and preprint volumes and average rates by month
since January 1, 1996 and for the calendar years ended December 31, 1997 and
December 31, 1996 and by month and for the year to date period ended March 31,
1998 (excluding the month of January 1998). Since January 1, 1997 and except as
listed in Section 3.18(b) of the Disclosure Schedule, neither the Company nor
any Company Subsidiary has given advertising discounts other than in the
ordinary course of business.
Section 3.19. Subscription List. (a) Section 3.19(a) of the
Disclosure Schedule sets forth a list of subscribers, which list is true and
complete in all material respects, for each Newspaper as of the date of such
reports contained in the system generated Subscriber/Non Subscriber Report, the
first and last page of each of which is attached.
(b) Section 3.19(b) of the Disclosure Schedule sets forth list, which
list is true and complete in all material respects, of the unearned subscription
liability, by subscriber, for each Newspaper, as of the date of such report, the
first and last page of each of which is attached.
Section 3.20. Accounts Receivable. All accounts receivable of the
Company or any Company Subsidiary that are reflected on the Balance Sheets or on
the accounting records of the Company or any Company Subsidiary as of the
Closing Date (collectively, the "Accounts Receivable"), in all cases net of
reserves on the Balance Sheets (which reserves are adequate and calculated in
accordance with GAAP) and excluding any intercompany receivables on the Balance
Sheets, have been calculated in a manner consistent with past practice and
represent or will represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of the Business.
Section 3.21. Insurance. Section 3.21(a) of the Disclosure Schedule
contains a complete and correct list and summary description of all insurance
policies maintained by the Company or any Company Subsidiary for the benefit of
or in connection with the Newspapers or the Business, including the annual
premiums relating thereto. Section 3.21(b) of the Disclosure Schedule sets out
all material claims made by the Company or any Company Subsidiary under any
policy of insurance which are currently pending. Except as set forth on Section
3.21(c) of the Disclosure Schedule, none of the insurance policies set forth on
Section 3.21(a) of the Disclosure Schedule will lapse or become subject to
termination by the insurer as a result of the transactions contemplated by this
Agreement. All of the insurance policies set forth on Section 3.21(a) of the
Disclosure Schedule are terminable by the holder thereof without penalty, and
the premiums set forth on such Section 3.21(a) of the Disclosure Schedule fully
reflect the annual premiums related to such policies.
Section 3.22. Territorial Restrictions. Except as set forth on Section
3.22 of the Disclosure Schedule, neither the Company nor any Company Subsidiary
is restricted by any written agreement or understanding with any other person
from operating a newspaper or other business anywhere in the world. Except as
set forth on Section 3.22 of the Disclosure Schedule, Buyer, as a result of its
purchase of the Shares from the Sellers pursuant hereto, will not thereby become
restricted in carrying on any business anywhere in the world.
-29-
Section 3.23. Brokers, Finders, Etc. Except for ▇▇▇▇▇, Van Essen &
Associates, who shall receive a fee from Sellers, neither Sellers, the Company,
any subsidiary of the Company nor any of their respective affiliates or
associates, has employed, and none is subject to any claim of, any broker,
finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement who might be entitled to a fee or commission from
Buyer, the Company, any Company Subsidiary or any of their respective affiliates
or associates, upon the consummation of the transactions contemplated hereby.
ARTICLE IV
Representations and Warranties of Buyer
Buyer hereby represents and warrants to Sellers as follows:
Section 4.1. Authority. (a) Buyer and each affiliate of Buyer that is
party to a Purchase Agreement is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization. Buyer and each
such affiliate has full corporate or other power and authority to effect the
transactions contemplated by this Agreement and each of the Purchase Agreements
to which it is a party, as the case may be. The consummation of the transactions
contemplated hereby and by the Purchase Agreements have been duly authorized and
approved by all necessary corporate action on the part of Buyer or any of its
Affiliates. Except with respect to the Credit Agreement, dated as of May 2, 1997
between Buyer, each of the banks and other financial institutions party thereto
and The Chase Manhattan Bank, as Agent (the "Buyer Credit Agreement"), the
execution and delivery of this Agreement and each of the Purchase Agreements
does not, and the consummation of the transactions contemplated hereby and
thereby will not, violate, breach or conflict with any provision of, or
constitute an event which (whether after giving of notice or the passage of time
or both) will result in a violation of or breach of, or result in the
acceleration, termination or modification of, or entitle any party to
accelerate, terminate or modify (whether after the giving of notice or the
passage of time or both) any obligation under, or result in the imposition of
any Lien upon assets or properties of Buyer or any of its subsidiaries pursuant
to, any Lien, lease, agreement, instrument, certificate of incorporation,
by-law, deed of trust other organizational or governing document, order,
arbitration award, judgment decree to which the Buyer or any of its subsidiaries
is a party or by which any such party or any of their respective properties or
assets are bound, except for such violations, breaches, accelerations,
terminations, modifications and creations of Liens which, individually or in the
aggregate, would not materially interfere with the consummation by Buyer (or
Buyer's affiliates which are party to any Purchase Agreement) of the
transactions contemplated by this Agreement and the Purchase Agreements, or
which are cured, waived or terminated prior to the Closing Date. This Agreement
and each of the Purchase Agreements to which Buyer is a party is a legal, valid
and binding agreement of Buyer, enforceable against Buyer in accordance with its
terms. Each Purchase Agreement to which an affiliate of Buyer is a party is the
legal, valid and binding agreement of such affiliate, enforceable against such
affiliate in accordance with its terms.
-30-
(b) Except with respect to the Buyer Credit Agreement and the HSR
Act, no consents, approvals, or notices to any persons, including Governmental
Authorities, are required for the consummation by Buyer of the transactions
contemplated hereunder, other than those the failure of which to obtain would
not impair or delay the consummation of the transactions contemplated hereby.
Section 4.2. Shares. Buyer (and any affiliate of Buyer acquiring
shares pursuant to a Purchase Agreement) is acquiring the Shares for its own
account, for investment purposes only and not with a view to, or for sale in
connection with, a distribution thereof within the meaning of the Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder.
Section 4.3. Brokers. Neither Buyer nor any of its affiliates or
associates has employed any broker, finder, consultant or other intermediary in
connection with the transactions contemplated by this Agreement who might be
entitled to a fee or commission from the Sellers upon the consummation of the
transactions contemplated hereby.
Section 4.4. Litigation. There are not, in any court or before any
arbitrator of any kind or before or by any Governmental Authority or
non-governmental body, any actions, suits or proceedings, pending or, to the
knowledge of Buyer, threatened against Buyer or any of its subsidiaries which
challenges the validity of this Agreement or any of the Purchase Agreements or
any action taken by Buyer pursuant to this Agreement or the Purchase Agreements
or in connection with the transactions contemplated hereby.
ARTICLE V
Covenants of Sellers and Buyer
Section 5.1. Investigation of Business. Sellers agree that Buyer and
its representatives (including its independent accountants and its attorneys)
shall have, upon reasonable advance notice by Buyer, after the date of execution
hereof, reasonable access during regular business hours to the Company's
premises and to all the books and records of the Company which relate primarily
to the Business (including such financial and operating data and other
information with respect to the Business), as well as such other information not
primarily related to the Business as Buyer shall reasonably require to ensure
that the transactions contemplated by Section 5.8 are being effected in a manner
that will not result in an adverse impact upon the Business or the business of
Buyer. Notwithstanding the foregoing, Buyer shall have no right to review or
comment on the actual agreements or documents (or drafts thereof) relating to
the transactions contemplated by Section 5.8 hereof, provided, however, that
Buyer shall be entitled to receive such other information, including oral and
written descriptions and an opportunity to ask questions of Sellers and Company
employees, consistent with the previous sentence, which relates to such
transactions as they may affect Buyer or the Company after the Closing. In
addition, Seller shall use its reasonable best efforts to cause the Company's
independent public accountants to make available to Buyer, its independent
public accountants, its attorneys and its financing sources and the independent
public accountants and attorneys of Buyer's financing
-31-
sources, upon reasonable advance notice by Buyer, during regular business hours,
reasonable access to their personnel, work papers and such other reasonably
requested documentation relating to their work papers and to their reports on
the books and records of the Company, in each case which relate primarily to the
Business, as well as such other information not primarily related to the
Business as Buyer and such other parties shall reasonably require to ensure that
the transactions contemplated by Section 5.8 are being effected in a manner that
will not result in a material adverse impact upon the Business or the business
of Buyer, as is reasonably requested in connection with any investigation that
Buyer or Buyer's financing sources may undertake. From and after the date
hereof, Sellers and the Company shall cooperate, and Sellers shall use their
reasonable best efforts to cause the Company's auditors to cooperate, in the
preparation of such audited financial statements as Buyer may request
(collectively, the "Pre-Closing Audits"), provided that the cost of such audits
(including the fees and expenses of the Company's accountants to the extent
their services are required in connection therewith) shall be borne by Buyer and
shall be completed within 5 weeks from the date hereof, unless Buyer in its sole
discretion elects not to have such audits completed. Buyer shall inform the
Designated Stockholder and ▇▇▇ ▇▇▇▇▇▇▇▇▇ on a weekly basis if and to the extent
Buyer is of the belief that Sellers, the Company or the Company's auditors are
not providing the cooperation required pursuant to this Section 5.1 in
connection with the Pre-Closing Audits. Buyer agrees that the provision of
information to Buyer pursuant to this Section 5.1 does not give rise to any
inference that Buyer's obligation to consummate the transactions contemplated
hereby is subject to a financing condition.
Section 5.2. Obtaining Consents. Sellers and Buyer will cooperate and
use their respective reasonable best efforts to consummate the transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing, Sellers and Buyer agree to make (or in the case of Sellers, to cause
the Company and its subsidiaries to make) promptly all registrations, filings
and applications, to give all notices and to use reasonable best efforts to
obtain all Required Consents and other transfers, approvals, orders,
qualifications and waivers, including the filing of the Pre-Merger Notification
Form under the HSR Act, necessary or desirable in order to effect the transfer
or renewal of any other licenses, approvals and authorizations.
Section 5.3. Conduct of Business. (a) Except as contemplated by this
Agreement, as set forth in Sections 5.3 or 5.8 of the Disclosure Schedule, or as
expressly agreed to in writing by Buyer, and except as may relate to the
ownership and operation of subsidiaries of the Company that are not Company
Subsidiaries, during the period from the date of this Agreement to and including
the Closing Date, Sellers shall cause the Company and each Company Subsidiary to
conduct its operations according to its ordinary and usual course of business
and consistent with past practice (including with respect to the continuance of
capital expenditures) and Sellers shall, and shall cause the Company and the
Company Subsidiaries to, use their respective reasonable best efforts to
preserve intact the Business, keep available the services of their current
officers and employees and preserve relationships with customers, suppliers,
licensors, licensees, advertisers, distributors and others having business
dealings with them and to preserve goodwill. Without limiting the generality of
the foregoing, and except as (x) otherwise expressly provided in this Agreement,
(y) required by law, or (z) set forth on Sections 5.3 or 5.8 of the Disclosure
Schedule, prior to the Closing, Sellers shall cause the Company and the Company
Subsidiaries not to, without the consent of Buyer (which consent shall not be
unreasonably withheld):
-32-
(i) except with respect to (x) annual bonuses and (y) wage and salary
increases, in each case made in the ordinary course of business consistent
with past practice to persons who are not officers and directors, adopt or
amend in any material respect any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, pension,
retirement, employment or other employee benefit agreement, trust, plan or
other arrangement for the benefit or welfare of any director, officer or
employee of the Company or any Company Subsidiary or increase in any manner
the compensation or fringe benefits of any director, officer or employee of
the Company or any Company Subsidiary or pay any benefit not required by
any existing agreement or place any assets in any trust for the benefit of
any director, officer or employee of the Company or any Company Subsidiary;
(ii) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien (other than Permitted Liens) or otherwise dispose of any
properties or assets other than immaterial properties or assets (or
immaterial portions of properties or assets), except in the ordinary course
of business consistent with past practice;
(iii) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock (except for dividends
paid by subsidiaries to the Company with respect to capital stock), (y)
split, combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (z) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any of its
subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(iv) authorize for issuance, issue, deliver, sell or agree or commit
to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise), pledge or otherwise encumber any shares of its capital stock or
the capital stock of any of its subsidiaries, any other voting securities
or any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities or
any other securities or equity equivalents (including, without limitation,
stock appreciation rights);
(v) amend its certificate or articles of incorporation, by-laws, code
of regulations or equivalent organizational documents or alter through
merger, liquidation, reorganization, restructuring or in any other fashion
the corporate structure or ownership of any Company Subsidiary;
(vi) make or agree to make any acquisition of assets which is
material to the Company or any Company Subsidiary or the Business, except
for (x) capital expenditures in the ordinary course of business which are
paid for or accrued for prior to the Closing, (y) purchases of inventory in
the ordinary course of business or (z) (1) purchase orders for newsprint
entered into in the ordinary course of business or (2) purchase orders
other than
-33-
for newsprint entered into in the ordinary course of business
which do not call for payments in excess of $25,000 per annum;
(vii) settle or compromise any shareholder derivative suits arising
out of the transactions contemplated hereby or any other litigation
affecting the Company or any Company Subsidiary or the Business (whether or
not commenced prior to the date of this Agreement) or settle, pay or
compromise any claims not required to be paid, individually in an amount in
excess of $25,000, other than in consultation and cooperation with Buyer,
and, with respect to any such settlement, with the prior written consent of
Buyer;
(viii) hire any independent contractor having an annualized income
(including benefits) of in excess of $25,000 or hire any new employee;
(ix) change, or agree to change, any business or accounting policies
which relate to advertising, pricing, personnel, labor relations, sales,
returns, or product acquisitions, in each case in a manner which could
reasonably be expected to have a Material Adverse Effect; or
(x) effect any transaction with an affiliate on a basis less
favorable than would at the time be obtainable for a comparable transaction
in arms-length dealing with an unrelated third party.
(b) From and after the date hereof, Sellers shall, and shall cause
the Company and the Company Subsidiaries to (i) consult with Buyer on all
matters concerning unions and labor organizations relating to the Business and
(ii) permit Buyer to participate in all significant meetings and discussions
involving the Company or any Company Subsidiary with unions and labor
organizations relating to the Business. Sellers shall not, and shall not permit
the Company or any of the Company Subsidiaries to, enter into any agreement,
side letter or understanding with any union or labor organization, or take any
new action related to any of the foregoing, without the prior written consent of
Buyer.
(c) Notwithstanding anything to the contrary in Section 5.3(a), as of
the Closing Date, Sellers shall cause all intercompany accounts and all
receivables and payables between or among the Company and its subsidiaries to be
cancelled except for accounts payable and accounts receivable of the Company or
any Company Subsidiary which are set forth on Section 5.3(c) of the Disclosure
Schedule.
Section 5.4. Certain Liabilities. Sellers will take all action
necessary to discharge and release (without any continuing adverse effect upon
the Business) on or prior to the Closing all debts for money borrowed with the
result that none of the Company or any subsidiary of the Company shall have on
or after the Closing, directly or indirectly, any liability or obligation of any
kind, contingent or otherwise, for any such debts. Sellers will take all action
necessary to cause the release (without any continuing adverse effect upon the
Business) on or prior to the Closing of any Liens or other charges which
encumber any assets of the Company (including the shares of any Company
Subsidiary) or any person that as of the Closing will be a subsidiary
-34-
of the Company and which in each case secure, directly or indirectly, any such
debts or which exist for the benefit, directly or indirectly, of any Sellers or
any affiliate or associate of Sellers.
Section 5.5. Employee Benefits. (a) For a period of one year from the
Closing Date, Buyer shall maintain the severance policies of the Newspapers set
forth on Section 5.5(a) of the Disclosure Schedule for non-union employees.
Notwithstanding the foregoing, neither Buyer nor any of its subsidiaries or any
of the Newspapers shall be obligated to pay severance benefits under any of the
foregoing severance policies to any individual who receives or has the right to
receive separation bonuses, separation payments or other similar payments in
connection with the transactions contemplated hereby.
(b) Buyer shall maintain the medical, dental and vision care plans
set forth on Section 5.5(b) of the Disclosure Schedule (or comparable plans)
(collectively, the "Covered Benefits") for the benefit of the three individuals
specified on Section 5.5(b) of the Disclosure Schedule (the "Covered Benefit
Employees"). For purposes of the preceding sentence, a "comparable plan" shall
include any plan of Buyer as may be in effect from time to time which generally
provides the same types of benefits as are available under the plans set forth
on Section 5.5(b) of the Disclosure Schedule, provided that Covered Benefit
Employees shall be permitted to participate in such comparable plans at the same
premium levels to employees of Buyer generally under such comparable plans
applicable to employees of Buyer generally under such comparable plans. A
particular type of Covered Benefit (i.e., medical, dental, or vision care) shall
be available to a Covered Benefit Employee (and to such employee's spouse and
eligible dependent children) only if (i) such Covered Benefit Employee (or
spouse or dependent child) was enrolled and participating in such Covered
Benefit as of the date hereof and as of the Closing Date, (ii) as of or at any
time following the Closing, such Covered Benefit Employee ceases to be employed
by the ▇▇▇▇▇▇▇ Newspaper Group, Inc. or its subsidiaries, affiliates, successors
or assigns (collectively, "GNG"), and (iii) such employee notifies the Company
(or Buyer or their respective successors and assigns) in writing at the time
such employee ceases to be employed by GNG (or within 60 days thereafter) of
such employee's desire to continue to receive the Covered Benefits. If the
Company timely receives such notice from a Covered Benefit Employee, Buyer shall
provide (or cause the Company to provide) the applicable Covered Benefits to
such Covered Benefit Employee (and such employee's spouse and eligible dependent
children) until the earliest to occur of the date the Covered Employee (i)
becomes eligible for Medicare coverage, (ii) becomes eligible for medical
benefits coverage under a new employer's plan or plans, (iii) becomes eligible
for medical benefits coverage under a spouse's plan or plans or (iv) begins
employment or conducts activity which would be prohibited by the Non-Competition
Agreements assuming such individual were subject to such an agreement and
regardless of whether such agreement is or would still be in effect. Covered
Benefit Employees shall, as a condition to receiving Covered Benefits, agree at
or prior to the Closing to inform the Company of any change affecting their
status as Covered Benefit Employees and to refund to the Company any expenses
incurred by the Company and any payments made to them in connection with Covered
Benefits to which they were not entitled. To the extent Buyer or the Company
replaces (or causes to be replaced) a Covered Benefit plan (or comparable plan)
with a replacement or successor plan, the obligation to provide Covered Benefits
(or portion thereof) shall be deemed
-35-
satisfied if coverage under such replacement or successor plans is offered on
the same terms as offered to employees of Buyer generally.
(c) Before the Closing Date, the Sellers and the Company shall take
all steps necessary or appropriate so that, except as specifically provided in
Section 5.5(d) and except with respect to any Withdrawal Liability described in
the last sentence of Section 9.1(b), effective no later than the day before the
Closing Date: (i) the Business-Only Plans are sponsored solely by the Company
and/or one or more Company Subsidiaries; (ii) the Non-Business Plans are
sponsored and administered solely by Other Subsidiaries; (iii) each Overlapping
Plan is sponsored and administered solely by either the Company and the Company
Subsidiaries, on the one hand, or Other Subsidiaries, on the other hand; (iv) no
Business Employee is an active participant in a Plan sponsored by Other
Subsidiaries; (v) no individual who is not a Business Employee is a participant
in a Plan sponsored by the Company or any Company Subsidiary (a
"Company-Sponsored Plan"); and (vi) Sellers and the Other Subsidiaries shall
assume and be solely responsible for, and the Principal Stockholders shall
indemnify the Company, the Company Subsidiaries and the Company-Sponsored Plans
for, any and all liabilities (A) with respect to benefits or otherwise to any
individual who is not a Business Employee or a Former Business Employee or
beneficiary or dependent thereof, or (B) relating to, arising out of or under
any Overlapping Plan that is not a Company-Sponsored Plan or any Non-Business
Plan, in each case regardless of when such liability arose or was incurred.
Without limiting the generality of the foregoing and subject to Section 5.5(b):
(X) Sellers and the Other Subsidiaries shall assume and be solely responsible
for, and the Principal Stockholders shall indemnify the Company, the Company
Subsidiaries and the Company-Sponsored Plans for, any and all liabilities with
respect to claims by or with respect to individuals who are not Business
Employees or Former Business Employees or beneficiaries or dependents thereof
under any Plan that is a "welfare plan" as defined in Section 3(1) of ERISA,
regardless of whether such claims are incurred before, on or after the Closing
Date, and any and all liabilities with respect to claims incurred on or before
the Closing Date by or with respect to Business Employees or Former Business
Employees and their beneficiaries and dependents under any such Plan, and to the
extent the Company, any Company Subsidiary or any Company-Sponsored Plan pays
any such claim, the Other Subsidiaries and the Principal Stockholders shall be
obligated to reimburse the payor promptly for such payment; and (Y) effective on
or before the Closing, the Company shall assign to the Sellers or their designee
all of its rights and obligations under the VEBA.
(d) Sellers agree to, as soon as practicable following the date
hereof, cause the Company or the appropriate Company Subsidiary, as the case may
be, to formally request (pursuant to Section 4221(e) of ERISA) from each
Multiemployer Plan listed in Section 3.13(a), Item 3 of the Disclosure Schedule,
an estimate of the Company's or Company Subsidiary's potential Withdrawal
Liability attributable to such Multiemployer Plan, as of the most recent date
possible (on or before the Closing). Following the Closing, Buyer and Sellers
further agree to cooperate to determine the aggregate amount of Withdrawal
Liability attributable to either the Company or any Company Subsidiary which
would have existed had the Company or Company Subsidiary fully withdrawn from
each such Multiemployer Plan as of the Closing Date, excluding any Withdrawal
Liability described in clause (x) of the last sentence of Section 9.1(b) hereof
(such amount, the "Potential Withdrawal Liability").
-36-
Section 5.6. Sellers' Access to Records. Buyer will, for a period of
six years after the Closing Date (provided that this time period will be
extended with respect to a particular Seller or group of Sellers if, at the end
of such six year period, any of such Sellers are then involved in a litigation,
Tax dispute or other similar matter and require continued access), give to the
Designated Stockholder and its authorized representatives, during normal
business hours, such access to all books, records, files and documents relating
to the Company, the Business or the assets relating thereto prior to the Closing
Date as Sellers may reasonably require to enable Sellers to prepare and file Tax
Returns, prepare for litigation, participate or cooperate in any Tax-related
audits or other reasonable purposes. During such period (including any
extensions referred to herein), Buyer shall preserve all books and records
acquired by Buyer on the Closing Date which relate to the Company and its
present and former subsidiaries. Buyer shall not require Sellers to pay any
access or general overhead charge in connection with the foregoing, provided
that Sellers shall be responsible for any out-of-pocket expenses of Buyer
related to the foregoing.
Section 5.7. Estate Tax Liens. Sellers shall cause the Estate of ▇▇▇▇
▇▇▇▇▇▇▇ to obtain and deliver to Buyer, at or prior to the Closing, a New York
Estate Tax Waiver and a Federal Release of Lien, in each case with respect to
any and all Shares owned by the Estate of ▇▇▇▇ ▇▇▇▇▇▇▇, as well as the proceeds
received by such estate of the sale of the Shares.
Section 5.8. Other Seller Transactions. (a) Other than the Company's
principal credit facility, the obligations of Sellers with respect to which are
among the matters addressed in Section 5.4, Section 5.8(a) of the Disclosure
Schedule sets forth a description, which description is accurate in all material
respects, of all material transactions (the "Other Transactions") contemplated
to be effected by Sellers, the Company and subsidiaries of the Company prior to
the Closing relating to the sale, transfer or extinguishing of all assets and
liabilities of the Company and each entity which will, as of the Closing, be a
subsidiary of the Company, in each case which are not primarily related to the
Business. Subject to the next two sentences, Sellers shall cause the Other
Transactions to be effected prior to the Closing. Notwithstanding the foregoing,
if in the reasonable judgment of the Designated Stockholder, Sellers cannot
effect any of the Other Transactions prior to the Closing, Sellers shall instead
take such actions as are necessary to cause the removal of the assets and
liabilities of the Company and its subsidiaries (including the Company
Subsidiaries) which are not primarily related to the Business by effecting
spin-off, dividend or similar transactions (collectively, the "Alternate
Transactions"), provided, however, that Sellers shall consummate the Alternate
Transactions in a manner such that the Alternate Transactions shall not have any
additional adverse effect on Buyer, the Company or the Company Subsidiaries than
that which would have resulted from consummation of the Other Transactions. If
Sellers have not effected the Other Transactions prior to the Closing, Sellers
shall be required to effect the Alternate Transactions prior to the Closing and
shall use their best efforts to cause such Alternate Transactions to be
completed in sufficient time to permit the Closing to occur as contemplated by
Section 2.2 hereof. Sellers shall, and shall cause the Company and its
subsidiaries to, refrain from taking any action in connection with such
Alternate Transactions which could reasonably be expected to have an adverse
impact upon Buyer, the Business or Buyer's ability to acquire the Business
pursuant to the Agreement and the Purchase Agreements.
-37-
(b) Sellers shall take such steps as are necessary to ensure that,
except as set forth on Section 5.8(a) of the Disclosure Schedule (including as a
result of the transactions described thereon), as of the Closing, Buyer shall
not acquire from Sellers the capital stock of any person other than the Company
and the Company Subsidiaries. Sellers shall, prior to the Closing, take such
steps as are necessary to cause the Company to extinguish any liabilities or
obligations of any kind which are not primarily related to the ongoing operation
of the Business such that, as of the Closing, neither the Company nor any
subsidiary of the Company shall be subject to any such liabilities or
obligations which are not reflected on the most recent Balance Sheet. It is
specifically understood by the parties hereto that none of the direct
liabilities or direct assets of ▇▇▇▇ I, The ▇▇▇▇▇▇▇ Holding Company, Inc., nor
GNG (other than the stock of such of their respective subsidiaries as are being
acquired by Buyer) as of the date of this Agreement, including without
limitation their respective employees, are primarily related to the Business.
(c) Prior to the Closing, Company shall redeem a portion of its
capital stock with (i) all or a portion of the proceeds from the dispositions of
stock and assets contemplated by Section 5.8(a), (ii) the capital stock of
certain subsidiaries of the Company, and (iii) assets unrelated to the Business
(including all or a portion of the cash proceeds, if any, from the sale of such
assets), all as described in Section 5.8(a) of the Disclosure Schedule. Such
redemption will not give rise to any adjustment of the Closing Date Purchase
Price or the Final Purchase Price pursuant to this Agreement or the Purchase
Agreements.
Section 5.9. Releases; Non-Competition. Sellers shall cause (i) all
directors, officers and employees entitled to receive any payments or benefits
in connection with or as a result of the transactions contemplated by Section
5.8 and (ii) all parties who, in connection with transactions contemplated by
Section 5.8, purchase stock or assets of the Company or any of its subsidiaries,
or assume liabilities of Sellers, the Company or any of its subsidiaries, to
execute documents in form and substance satisfactory to Buyer (the "Releases")
releasing Buyer, the Company, the Company Subsidiaries, and their respective
officers, directors, employees, agents, advisors, representatives and affiliates
from and against any liabilities or other obligations whatsoever in connection
with the transactions contemplated by Section 5.8, with the effect that former
employees of the Company and parties who purchase stock or assets or assume
liabilities unrelated to the Business prior to the Closing look only to the
Principal Stockholders (or to third parties other than Buyer and its affiliates,
it being understood that the Company and the Company Subsidiaries are affiliates
for this purpose) in connection with any claims, damages, or other liabilities
arising therefrom. Sellers represent and warrant that the persons who deliver
Releases to Buyer at or prior to the Closing constitute all of the persons who
Sellers are required, pursuant to this Section 5.9, to cause to deliver such
Releases. Sellers shall cause the individuals set forth on Section 5.9 of the
Disclosure Schedule to execute and deliver to the Company non-competition
agreements (each, a "Non-Competition Agreement") in the form attached to such
Section 5.9 of the Disclosure Schedule.
Section 5.10. Certain Beneficiaries. At or prior to the Closing,
Sellers shall cause each of the residuary beneficiaries (collectively, the
"Beneficiaries") of the Estate of ▇▇▇▇ ▇▇▇▇▇▇▇ to execute and deliver to Buyer a
Refunding Agreement and Guaranty in the form attached as Annex D hereto (each, a
"Refunding Agreement").
-38-
Section 5.11. Certain Real Estate Transactions. Sellers shall cause
the real property currently used or held for use in connection with the
operation of the newspaper businesses owned by Acme to be wholly owned by Acme
as of the Closing Date without any liability to, or continuing adverse effect
upon, the Business.
Section 5.12. Payments to Employees. Sellers shall cause the Company
and its subsidiaries to pay on or prior to the Closing, any bonus, incentive,
separation, severance or other payments to directors, officers and employees of
the Company and its subsidiaries that are, pursuant to agreements in effect
prior to the Closing, currently payable, become payable at or prior to the
Closing, or become payable as a result of the transactions contemplated by this
Agreement. The parties hereto agree that none of the liabilities referred to in
this Section 5.12 shall be deemed to be primarily related to the Business.
Section 5.13. Certain Documents and Proceedings. (a) Sellers shall
deliver to Buyer, and shall use reasonable best efforts to cause any other
person to deliver to Buyer, such documents as Buyer, its financing sources and
their respective representatives may reasonably require in connection with the
transactions contemplated by this Agreement and the Purchase Agreements
(including Buyer's financing thereof), in form and substance reasonably
satisfactory to Buyer and its counsel, including evidence that all proceedings
to be taken in connection with the transactions contemplated by this Agreement
and the Purchase Agreements shall have been taken. Buyer shall deliver to the
Designated Stockholder, and shall use reasonable best efforts to cause any other
person to deliver to the Designated Stockholder, such documents as the
Designated Stockholder or its representatives may reasonably request in
connection with the transactions contemplated by this Agreement and the Purchase
Agreements, including evidence that all proceedings to be taken in connection
the transactions contemplated by this Agreement and the Purchase Agreements
shall have been taken. Buyer, on the one hand, and Sellers, on the other hand,
shall cause each of their respective affiliates who is a party to a Purchase
Agreement to execute, deliver and perform such agreement in accordance with the
terms thereof. Sellers shall use their reasonable best efforts to obtain or
cause to be obtained, prior to the Closing, all Required Consents.
(b). As soon as practicable after the execution hereof, the Company
shall provide to Buyer statements of Withdrawal Liability with respect to each
Multiemployer Plan required to be disclosed in Section 3.13(f) of the Disclosure
Schedule.
Section 5.14. Financing. Buyer shall ensure that it has, upon the
Closing, immediately available funds in an amount sufficient to pay the Closing
Date Purchase Price. Nothing in the previous sentence shall create any inference
that Buyer's obligation to consummate the transactions contemplated hereby is
subject to a financing condition.
Section 5.15. Workmen's Compensation. Except for any amounts reflected
in the calculations pursuant to Section 2.3, the parties agree that to the
extent the insurance company of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ & Co. provides documentation
to the Sellers and Buyer no later than 120 days after the Closing supporting
refund amounts due to the Company related to the period prior to Closing under
the Company's workmen's compensation policies covering periods prior
-39-
to the Closing, Buyer will reimburse Sellers for such refund amounts promptly in
immediately available funds upon receipt of such refunds from the insurance
companies giving such refunds.
ARTICLE VI
Conditions to Buyer's Obligations
Section 6.1. The obligation of Buyer to consummate the stock purchase
transactions contemplated hereby and by each of the Purchase Agreements is
subject to the satisfaction on or prior to the Closing Date of all of the
following conditions (any of which may be waived by Buyer):
(a) The representations and warranties of Sellers herein contained
which are qualified as to materiality or Material Adverse Effect shall be true
as of and at the time of the Closing with the same effect as though made at such
time; all other representations and warranties of Sellers herein contained shall
be true as of and at the time of the Closing with the same effect as though made
at such time, except where the failure of such representations to be true as of
and at such time could not reasonably be expected to have a Material Adverse
Effect; and the parties (other than Buyer) to this Agreement and the Purchase
Agreements shall have performed all obligations and complied with all covenants
and agreements required by this Agreement and the Purchase Agreements to be
performed by them or complied with at or prior to the Closing.
(b) No order shall have been entered in any action or proceeding
before any Governmental Authority (an "Order"), or a preliminary or permanent
injunction by a United States court of competent jurisdiction shall have been
issued and remain in effect (an "Injunction"), which, in either case, would have
the effect of (i) preventing consummation of any of the Stock Purchases, or (ii)
imposing material limitations on the ability of Buyer effectively to acquire or
hold the Shares or the Business or to exercise full rights of ownership of the
Shares acquired by it.
(c) There shall not be pending by any Governmental Authority any
suit, action or proceeding (or, by any other person, (other than suits by
lenders under the Buyer Credit Agreement brought in their capacity as such), any
suit, action or proceeding which has a reasonable likelihood, in the written
opinion of counsel to Buyer, of success), (i) challenging or seeking to restrain
or prohibit the consummation of any of the Stock Purchases or any of the other
transactions contemplated by this Agreement or the Purchase Agreements or
seeking to obtain from Buyer, the Company or any of their affiliates any damages
that are material to any such party (ii) seeking to prohibit or limit the
ownership or operation by the Company or any of its subsidiaries of any material
portion of the business or assets of the Company or any of its subsidiaries, to
dispose of or hold separate any material portion of the business or assets of
the Company or any of its subsidiaries, as a result of any of the Stock
Purchases or any of the other transactions contemplated by this Agreement or the
Purchase Agreements or (iii) seeking to impose limitations on the ability of
Buyer to acquire or hold, or exercise full rights of ownership of, any Shares.
-40-
(d) All applicable waiting periods with respect to the HSR Act shall
have expired or been terminated.
(e) Sellers shall have obtained and delivered to Buyer the Required
Consents which are set forth on Section 6.1(e) of the Disclosure Schedule.
(f) There shall not have occurred a Material
Adverse Effect.
(g) There shall have been delivered to Buyer a certificate executed
by the Designated Stockholder dated as of the Closing Date, certifying as to the
fulfillment of the conditions set forth in Section 6.1(a).
(h) Buyer shall have received an opinion of counsel to each Principal
Stockholder dated as of the Closing, substantially in accordance with the forms
attached as Annex E hereto.
(i) Buyer shall have received evidence reasonably satisfactory to it
that real property currently used or held for use in connection with the
operation of the newspaper businesses owned by Acme is wholly owned by Acme.
(j) Buyer shall have received (from third parties or otherwise)
documentary evidence reasonably satisfactory to Buyer that Sellers have
satisfied their obligations set forth in Section 5.4, including, without
limitation, documentary evidence reasonably satisfactory to Buyer from the banks
that are parties to the Credit Agreement identified on Section 6.1 of the
Disclosure Schedule.
(k) Buyer shall have obtained the Releases contemplated by Section
5.9, and the Beneficiaries shall have executed and delivered the Refunding
Agreements.
(l) The transactions contemplated by Section 5.8 hereof shall have
been consummated in a manner such that neither the Company nor any Company
Subsidiary shall be subject to any liability or other obligation not primarily
related to the Business.
(m) The individuals set forth on Section 5.9 of the Disclosure
Schedule hereto shall have executed and delivered to the Company the
Non-Competition Agreements in the forms attached to such Section 5.9 of the
Disclosure Schedule.
(n) The Estate of ▇▇▇▇ ▇▇▇▇▇▇▇ shall have received and delivered to
Buyer the New York Estate Tax Waiver and the Federal Release of Lien
contemplated by Section 5.7.
(o) The Pre-Closing Audits shall have been completed, provided,
however, that Buyer may not invoke this condition if Sellers are in compliance
with Section 5.1 hereof and the failure of the Pre-Closing Audits to have been
completed is due to (i) the failure of Buyer's auditors to complete such audits
within the five-week time period specified in Section 5.1, (ii) Buyer's failure
to be satisfied with the results of such audits or (iii) Buyer's decision not to
complete such audits.
-41-
(p) The Letter of Credit shall have been executed and delivered
to Buyer.
ARTICLE VII
Conditions to Sellers' Obligations
Section 7.1. The obligation of each Seller to consummate the Stock
Purchase is subject to the satisfaction on or prior to the Closing Date of all
of the following conditions (any of which may be waived only by the Designated
Stockholder on behalf of all Sellers):
(a) Buyer shall have made the payment of the Closing Date Purchase
Price in accordance with Section 2.1.
(b) The representations and warranties of Buyer herein contained
shall be true as of and at the time of the Closing with the same effect as
though made at such time; Buyer shall have performed all obligations and
complied with all covenants and agreements required by this Agreement and the
Purchase Agreements to be performed by it or complied with by it at or prior to
the Closing.
(c) There shall not be pending by any Governmental Authority any
suit, action or proceeding (or by any other person any suit, action or
proceeding which has a reasonable likelihood, in the opinion of counsel to
Sellers, of success), challenging or seeking to restrain or prohibit the
consummation of any of the Stock Purchases or any of the other transactions
contemplated by this Agreement or the Purchase Agreements or seeking to obtain
from Sellers, the Company or any of their affiliates any damages that are
material to any such party.
(d) All applicable waiting periods with respect to the HSR Act shall
have expired or been terminated.
(e) No Order shall have been entered and no Injunction shall be in
effect which, in either case, would have the effect of preventing consummation
of any of the Stock Purchases.
(f) There shall have been delivered to the Designated Stockholder a
certificate executed by the President or any Vice President of Journal Register
Company, dated as of the Closing Date, certifying as to the satisfaction of the
conditions set forth in Section 7.1(b).
ARTICLE VIII
Termination, Amendment and Modification
Section 8.1. Termination. (a) This Agreement and each of the Purchase
Agreements may be terminated at any time prior to the Closing (i) by mutual
consent of the Designated Stockholder and Buyer and (ii) by the Designated
Stockholder or Buyer in the event the Closing shall not have occurred on or
prior to August 25, 1998 (the "Final Date") provided that Sellers and Buyer
agree to use their reasonable best efforts to cure the breach of any
repre-
-42-
sentation or warranty and the nonperformance of any covenant or agreement
made by it in this Agreement and any Purchase Agreement, and provided further
that termination pursuant to clause (ii) of this Section 8.l shall not be
available to any party if the Closing shall have been delayed by any action or
failure of such party or by any breach of any provision of this Agreement or any
Purchase Agreement by such party.
(b) If this Agreement or any Purchase Agreement is terminated
pursuant to this Section 8.1, then this Agreement and all Purchase Agreements
shall be deemed terminated.
(c) In the event of termination of this Agreement pursuant to Section
8.1(a), this Agreement and each of the Purchase Agreements shall forthwith
become void and no party hereto or thereto and none of their respective
directors, officers, stockholders, affiliates or controlling persons shall have
any liability or further obligation to any other party to this Agreement or any
Purchase Agreement; provided that the foregoing shall not relieve any party from
liability for breach of any of its representations, warranties, covenants or
agreements prior to such termination; and provided, further, that Sections 11.2,
11.4, and this Section 8.1(c) hereof and the letter agreement dated March 6,
1998 between ▇▇▇▇ I and MGE, on the one hand, and the Journal Register Company,
on the other hand, (the "Confidentiality Agreement") shall remain in effect
notwithstanding any such termination.
Section 8.2. Amendment and Modification. This Agreement and any
Purchase Agreement may be amended, modified or supplemented only by written
agreement of the Designated Stockholder and Buyer at any time prior to the
Closing with respect to any of the terms contained herein.
Section 8.3. Actions of Affiliates. If, pursuant to this Article VIII,
the parties agree in writing that any Purchase Agreement shall be amended,
modified or terminated, Buyer and the Designated Stockholder shall cause their
respective affiliates who are parties to such Purchase Agreement to make such
amendment, modification or termination.
ARTICLE IX
Indemnification
Section 9.1. (a) Survival of the Principal Stockholders'
Representations. Except as otherwise provided below, the representations and
warranties made by the Principal Stockholders in this Agreement and the Purchase
Agreements or pursuant hereto or thereto shall survive the Closing and continue
until the date which is 18 months following the Closing Date (except for (i)
representations or warranties made pursuant to Sections 3.7, 3.8 and 3.13,
respectively, which shall survive for 37 months, 37 months and 5 years,
respectively, (ii) representations or warranties made pursuant to Section 3.14
and Article X, which shall survive until the expiration of the applicable
statutes of limitations (as extended) relating to Taxes and tax matters, and
(iii) representations and warranties made pursuant to Section 3.2(b), which
shall survive the Closing and continue indefinitely without any limitation),
provided further, that such limitation shall not affect any claim for
indemnification written notice of which was provided to the Desig-
-43-
nated Stockholder prior to the expiration of the applicable time limitation (the
"Principal Stockholders' Claim Period") and in addition shall survive and shall
be unaffected by (and shall not be deemed waived by) any investigation, audit,
appraisal or inspection at any time made by or on behalf of Buyer, provided that
the claim related to such investigation, audit, appraisal or inspection was
timely made. Any notice of claim for indemnification shall set forth in
reasonable detail the basis for the asserted breach of representation, warranty,
covenant or agreement and the amount of the claim (if reasonably possible to
estimate) and shall be submitted by Buyer to the Designated Stockholder prior to
the expiration of the applicable Principal Stockholders' Claim Period and
reasonably promptly after the occurrence or discovery of the matter giving rise
to the claim for indemnification, but if such notice is actually served within
the applicable Principal Stockholders' Claim Period, the failure to so
reasonably promptly notify the Designated Stockholder will not release the
Principal Stockholders from any liability which they may have to Buyer except to
the extent that the failure to so reasonably promptly notify prejudices the
Principal Stockholders in any material respect. Any claims for indemnification
made by Buyer in accordance with this Section prior to the expiration of the
applicable Principal Stockholders' Claim Period shall survive and shall not be
extinguished by the expiration of such period.
(b) Indemnification by Principal Stockholders. Subject to the
limitations of this Section 9.1(b) and the conditions and provisions of Sections
9.1(c) and 9.1(e)-(j), and without limiting the rights and obligations of Buyer
and the Principal Stockholders pursuant to Article X, the Principal Stockholders
agree to indemnify, defend and hold harmless, Buyer, its officers, directors,
employees, agents, advisors, representatives and affiliates (collectively,
"Buyer Indemnitees") from and against any and all demands, claims, complaints,
actions or causes of action, suits, proceedings, investigations, arbitrations,
assessments, losses, damages, liabilities, costs and expenses, including, but
not limited to, interest, penalties and reasonable attorneys' and accounting
fees and disbursements ("Buyer Damages"), asserted against, imposed upon or
incurred by any Buyer Indemnitee, directly or indirectly, by reason of, relating
to or resulting from (i) any breach of representation or warranty on the part of
any person (other than Buyer) contained herein or in any Purchase Agreement
(other than those contained in Section 3.2(b)) or any misrepresentation or
omission from any certificate, schedule, exhibit, annex, financial statement,
document or other instrument or instruments furnished to Buyer hereunder or
thereunder or in connection herewith or therewith, (ii) any breach of
representation or warranty on the part of the Principal Stockholders contained
in Section 3.2(b), (iii) any breach of any covenant or agreement on the part of
any person (other than Buyer) contained herein or in any Purchase Agreement or
(iv) any assets, liabilities, obligations or other matters not primarily related
to the Business. It is specifically understood and agreed by the parties hereto
that under no circumstances shall assets and liabilities of ▇▇▇▇ I, The ▇▇▇▇▇▇▇
Holding Company, Inc., or GNG as of the date hereof be deemed "primarily related
to" the Business, other than direct assets and direct liabilities of
subsidiaries of GNG which are being acquired by Buyer. For purposes of the
foregoing, and without limiting the generality thereof, the following
liabilities shall be deemed not to relate primarily to the Business: (u) any
workmen's compensation liability that is incurred prior to the Closing and which
is not covered by the Company's workmen's compensation policies which were in
effect at or prior to the Closing; (v) any liabilities incurred by Buyer or its
affiliates in connection with events occurring at or prior to the Closing which
would otherwise have been covered under the fiduciary insurance policy between
▇▇▇▇▇▇▇ Newspaper Group, Inc. and National Union; (w)
-44-
any Withdrawal Liability that arises solely out of or in connection with an
event or series of events occurring at or before the Closing; (x) any Withdrawal
Liability, to the extent the amount of such Withdrawal Liability exceeds the
amount of the Withdrawal Liability that would have been incurred if the Company
and its ERISA Affiliates had never conducted any business other than the
Business and had never employed any individuals other than the Business
Employees and the Former Business Employees; (y) any other Withdrawal Liability
attributable to the participation of the Company or a Company Subsidiary in any
Multiemployer Plan prior to the Closing Date, up to the Potential Withdrawal
Liability; and (z) any and all liabilities arising out of any matter referred to
in the letter, dated May 8, 1998, sent by the United States Environmental
Protection Agency to ▇▇▇▇ ▇▇▇▇▇▇▇ Enterprises, Ltd., stating that ▇▇▇▇ ▇▇▇▇▇▇▇
Enterprises, Ltd. is a potentially responsible party under the federal
Comprehensive Environmental Response, Compensation and Liability Act with
respect to the ▇▇▇▇▇▇ Landfill Superfund Site, located in Clintondale, Town of
Plattekill, Ulster County, New York.
(c) The Principal Stockholders shall not be obligated to make any
indemnification under clause (i) of Section 9.1(b) with respect to Buyer Damages
(other than Buyer Damages by reason of, relating to or resulting from a breach
of the representations and warranties contained in Sections 3.1, 3.2, and 3.14
and Article X hereof (to which the Basket shall not be applicable)) by reason
of, relating to or resulting from the matters specified in clause (i) of Section
9.1(b), unless the aggregated amount of Buyer Damages sustained by Buyer
Indemnitees as a whole (whether or not covered by insurance) exceeds $1,500,000
(the "Basket"); provided that, for purposes of determining whether any breach
has occurred respecting a claim for indemnification or measuring Buyer Damages
hereunder, any requirement or qualification in any representation, warranty,
covenant or agreement of any party (other than Buyer) contained in this
Agreement or any Purchase Agreement that an event or fact be material or have a
Material Adverse Effect or similar language, or qualification by such terms or
by knowledge or similar language, shall be ignored and all representations,
warranties, covenants and agreements shall be deemed to have been made without
any qualification by materiality, Material Adverse Effect, knowledge or similar
language; provided, further, that Buyers shall not be entitled to
indemnification pursuant to this Article IX in connection with any individual
claim or any series of related claims unless the aggregate amount of Buyer
Damages associated with such claim or series of related claims exceeds $50,000,
and provided, further, that if the Principal Stockholders' indemnification
obligations exceed the Basket, the Principal Stockholders shall be obligated to
indemnify from the first dollar of damages, including the amount of the Basket.
It is the intention of the parties hereto that the Basket shall not be
applicable to a claim under this Section 9.1 with respect to Buyer Damages by
reason of, relating to or resulting from a breach of the representations and
warranties contained in Sections 3.1, 3.2, and 3.14 and Article X hereof or by
reason of, relating to or resulting from the matters specified in clauses (iii)
and (iv) of Section 9.1(b). Notwithstanding any other provision of Sections
9.1(a) and 9.1(b), the Principal Stockholders shall indemnify, defend and hold
harmless the Buyer Indemnitees, forever and without limitation, from and against
any and all Buyer Damages relating to or arising out of liabilities or matters
which are not related to the operation of the Business, including without
limitation, those Buyer Damages asserted against, imposed upon or incurred by
the Buyer Indemnitees in connection with the transactions contemplated by
Section 5.8. The parties hereto agree that it is their intention that, except as
specifically contemplated by this Agreement or any Purchase Agreement, Buyer
shall
-45-
not be entitled to indemnification in respect of breaches of representations or
warranties, or in respect of other damages, which in each case do not relate to
the Business, except to the extent of damages suffered by Buyer and its
affiliates. Notwithstanding the foregoing provisions of this Section 9.1, if,
and only if, the Closing occurs, the Principal Stockholders shall not be
required to make indemnification payments pursuant to this Article IX in excess
of the Closing Date Purchase Price (as such price may be adjusted pursuant to
Section 2.3), except to the extent such indemnification payments relate to (i)
breaches of covenants or agreements relating to Sellers' obligations to
consummate the Other Transactions or the Alternate Transactions in the manner
contemplated by Section 5.8 or (ii) relate to Buyer Damages arising out of any
assets or liabilities not primarily related to the Business.
(d) Indemnification by Buyer. Subject to the provisions of Section
9.1(e), and without limiting the rights and obligations of Buyer and the
Principal Stockholders pursuant to Article X, Buyer agrees to indemnify, defend
and hold harmless each Seller, its officers, directors, employees, agents,
advisors, representatives, beneficiaries, stockholders and affiliates
(collectively, "Seller Indemnitees") from and against any and all demands,
claims, complaints, actions or causes of action, suits, proceedings,
investigations, arbitrations, assessments, losses, damages, liabilities, costs
and expenses, including, but not limited to, interest, penalties and reasonable
attorneys' and accounting fees and disbursements (including those relating to
the enforcement of this indemnity) ("Seller Damages"), asserted against, imposed
upon or incurred by any Seller Indemnitee, directly or indirectly, by reason of,
relating to or resulting from (i) any breach of any covenant or agreement on the
part of Buyer contained herein, or (ii) any breach of representation or warranty
on the part of Buyer contained herein or any misrepresentation or any omission
from any certificate, schedule, exhibit, financial statement, document or other
instrument or instruments furnished to Sellers hereunder or in connection
herewith. In addition to any indemnification of any Seller Indemnitee pursuant
to this Section 9.1(d), such Seller Indemnitee shall be entitled to its rights
and remedies pursuant to this Agreement, and otherwise at law or in equity.
(e) Nothing in this Section 9.1 shall be construed to affect the
rights to reimbursement or indemnification under other provisions of this
Agreement, notwithstanding that the matter for which reimbursement or indemnity
is sought also constitutes a matter for which an indemnity could be sought under
this Section 9.1; provided, however, that there shall not be any duplication of
reimbursement or indemnification with respect to any such matter.
(f) After the Closing, the express indemnification provisions
contained in this Article IX and in Article X shall provide the sole and
exclusive remedy for any misrepresentation, breach of representation, warranty,
covenant or other agreement, or other claim arising out of this Agreement or the
Purchase Agreements or the transactions contemplated hereby or thereby. Except
with respect to the remedies referred to in this Section 9.1(f), Buyer
Indemnitees hereby waive, to the fullest extent permitted under applicable law,
and forever release Principal Stockholders, in connection with the Company and
the Company Subsidiaries, from and against any and all claims or Buyer Damages.
Except with respect to the remedies referred to in this Section 9.1(f), Seller
Indemnitees hereby waive to the fullest extent permitted under applicable law,
and forever release Buyer, in connection with the Company and the Company
Subsidiaries,
-46-
from and against any and all claims or Seller Damages. Notwithstanding anything
to the contrary in this Section 9.1(f) or elsewhere in this Agreement, neither
Buyer nor any Seller waives any common law rights it may have to pursue claims
for fraud in connection with this Agreement and the transactions related
thereto.
(g) Conditions of Indemnification. The obligations and liabilities of
the Principal Stockholders and of Buyer hereunder with respect to their
respective indemnities pursuant to this Section 9.1 resulting from any claim or
other assertion of liability by third parties (hereinafter called collectively
"Claims"), shall be subject to the following terms and conditions:
(i) The Buyer Indemnitee or Seller Indemnitee seeking indemnification
(the "Indemnified Party") must give the other party or parties (it being
understood that the Designated Stockholder shall receive all notices
pursuant to this Section 9.1(g)), as the case may be (the "Indemnifying
Party"), written notice of any such Claim reasonably promptly after the
Indemnified Party receives notice thereof, provided that if such notice is
actually served within the applicable time period, the failure to so
reasonably promptly notify shall not release the Indemnifying Party from
any liability which they may have to the Indemnified Party except to the
extent that the failure to so reasonably promptly notify prejudices the
Indemnifying Party in any material respect. Such notice shall state the
amount or estimated amount of such Claim to the extent reasonably
practicable.
(ii) The Indemnifying Party shall have the right to undertake, by
counsel or other representatives of its own choosing and reasonably
acceptable to the Indemnified Party, the defense of such Claim.
(iii) In the event that the Indemnifying Party shall elect not to
undertake such defense, or within 30 days after delivery of notice of any
such Claim from the Indemnified Party shall fail to defend, the Indemnified
Party (upon further written notice to the Indemnifying Party) shall have
the right to undertake the defense, compromise or settlement of such Claim,
by counsel or other representatives of its own choosing, on behalf of and
for the account and risk of the Indemnifying Party.
(iv) Anything in this Section 9.1(g) to the contrary notwithstanding:
(A) the Indemnified Party shall have the right, at its own
cost and expense, to have its own counsel to participate in the
defense, compromise or settlement of the Claim;
(B) the Indemnified Party shall not settle a Claim for which
it is indemnified by the Indemnifying Party without the written consent
of the Indemnifying Party, unless the Indemnifying Party elects in
writing not to undertake defense or fails to defend such Claim pursuant
to Section 9.1(g)(iii);
(C) the Indemnifying Party shall not, without the Indemnified
Party's written consent (which consent shall not be unreasonably
withheld), settle or compromise any Claim or consent to entry of any
judgment which does not in-
-47-
clude as an unconditional term thereof the giving by the claimant or
the plaintiff to the Indemnified Party of a release from all liability
in respect of such Claim;
(D) the Indemnified Party, by counsel or other representative
of its own choosing and at its sole cost and expense, shall have the
right to consult with the Indemnifying Party and its counsel or other
representatives concerning such Claim and the Indemnifying Party and
the Indemnified Party and their respective counsel shall reasonably
cooperate with respect to such Claim; and
(E) the Indemnifying Party shall not, without the prior
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld), take any measure or step that imposes an
unreasonable burden or encumbrance upon the operation or conduct of the
Business.
(h) Notwithstanding the foregoing, the Principal Stockholders shall
not be required to indemnify Buyer pursuant to this Article IX for a breach of
any representation or warranty contained in Section 3.14 if such indemnification
is for Taxes that would otherwise be indemnifiable under Article X. The
Principal Stockholders' general indemnification obligations relating to Taxes
shall be subject to the provisions of Article X.
(i) Only the Principal Stockholders shall have indemnification
obligations under this Agreement, and it is the intention of the parties hereto
that Buyer shall look only to the Principal Stockholders for remedies in
connection with Buyer Damages (other than pursuant to common law fraud claims).
No Other Stockholder shall have any liability in connection with the Principal
Stockholders' indemnification obligations under this Agreement.
(j) Notwithstanding anything in this Article IX to the contrary, the
Principal Stockholders shall not be required to indemnify Buyer for any Buyer
Damages Buyer may suffer as a result of changes to the trading price of Buyer's
publicly traded common stock on or after the date hereof in the event the Stock
Purchases are not consummated.
(k) Buyer's rights to indemnity pursuant to this Article IX or
Article X shall not be limited by or to any amounts available under the Letter
of Credit. In addition to any other right or remedy available to Buyer under
this Article IX, Article X or otherwise, Buyer may pursue collection of any
indemnification claims against Sellers under the Letter of Credit.
ARTICLE X
Tax Matters and Tax Indemnification
Section 10.1. Liability for Taxes. (a) The Principal
Stockholders shall indemnify and hold Buyer and Buyer's subsidiaries and
Affiliates harmless from and against the following:
(i) any liability for Taxes for any Pre-Closing Period (as defined
below) imposed on the Company and the Company Subsidiaries as
members of
-48-
the "affiliated group" (within the meaning of Section
1504(a) of the Code) of which the Company (or any predecessor
or successor) is the common parent (or as members of any other
affiliated group prior to the Closing) that arises under
Treasury Regulation Section 1.1502-6(a) or comparable
provisions of foreign, state or local law;
(ii) any liability for Taxes (including, without limitation, any
liability for Taxes (other than Excluded Taxes, as defined
below) resulting from any of the transactions described on
Section 5.8 of the Disclosure Schedule) imposed on the Company
or any of Sellers or the Company Subsidiaries, or for which the
Company or any of Sellers or the Company Subsidiaries may
otherwise be liable, for any Pre-Closing Taxable Period and,
with respect to any Straddle Period, the portion of such
Straddle Period deemed to end on and include the Closing Date
(each, a "Pre-Closing Period");
(iii)any liability for Taxes (including reduction of Tax benefits)
for any period arising by reason of the failure of MGE or Parent
Enterprises, Inc. to qualify as an "S corporation" within the
meaning of the Code (or a comparable provision of state or local
law) for any period or portion thereof on or prior to the
Closing Date or the failure of MGE to be treated as a "qualified
subchapter S subsidiary" within the meaning of the Code (or a
comparable provision of state or local law) on the Closing Date
or arising out of or relating to the failure of the purchase of
the stock of MGE to be treated as a purchase of the assets of
MGE for Federal, state and local income tax law purposes; and
(iv) any liability for Taxes arising by reason of any inclusion of
any income or gain in a taxable year or period that begins after
the Closing Date or, with respect to a Straddle Period, the
portion of such Straddle Period deemed to begin after the
Closing Date (each, a "Post-Closing Period") from (A) an
"intercompany transaction," within the meaning of Treasury
Regulation Section 1.1502-13, of the Company or any of the
Company Subsidiaries that occurred prior to the Closing or (B)
an "excess loss account" within the meaning of Treasury
Regulation Section 1.1502-19 of the Company or any of the
Company Subsidiaries that existed on the Closing Date (excluding
any portion of the Closing Date after the Closing);
provided, however, the Principal Stockholders shall not be liable for and shall
not indemnify Buyer (and its subsidiaries and Affiliates) for any liability for
(x) Taxes resulting from transactions or actions taken by the Company or any of
the Company Subsidiaries or Other Subsidiaries on the Closing Date after the
Closing except for transactions or actions undertaken in the ordinary course of
business or (y) Pennsylvania state income and franchise Taxes arising as a
result of the Section 338(h)(10) elections for Acme and Town Talk Newspapers,
Inc. (the "Acme Tax")
-49-
(Taxes described in this proviso are referred to hereinafter as "Excluded
Taxes"). The Principal Stockholders shall be entitled to any refund of (or
credit for) Taxes allocable to any taxable year or period that ends on or before
the Closing Date and, with respect to a Straddle Period, the portion of such
Straddle Period deemed to end on and include the Closing Date, other than
Carryback Refunds, as defined below.
(b) Buyer shall indemnify and hold the Principal Stockholders and
their Affiliates harmless from and against
(i) Taxes imposed on the Company or any Company Subsidiary for any
Post-Closing Taxable Period and, with respect to any Straddle Period, the
portion of such Straddle Period deemed to begin after the Closing Date; and
(ii) Excluded Taxes.
Buyer shall be entitled to any refund of (or credit for) Taxes allocable to any
Post-Closing Period and any refund or credit arising by reason of a carryback of
any Tax Attribute arising in a Post-Closing Period to a Pre-Closing Period (a
"Carryback Refund") (it being agreed and understood that a Seller shall not bear
any expense with respect thereto or liability arising therefrom). For purposes
of determining whether a refund or credit is a Carryback Refund in the case of a
Straddle Period, such period shall be treated as ending on the Closing Date.
(c) To the extent permitted by law or administrative practice, (i)
the taxable year of the Company or any of the Company Subsidiaries which
includes the Closing Date shall close on (and include) the Closing Date (and any
election necessary or permitted to effect such treatment shall be made) and (ii)
all transactions not in the ordinary course of business occurring after the
Closing shall be reported on Buyer's consolidated United States federal income
Tax Return to the extent permitted by Treasury Regulation Section
1.1502-76(b)(1)(ii)(B) and shall be similarly reported on other Tax Returns of
Buyer or its Affiliates to the extent permitted by law. For purposes of
paragraphs (a) and (b), where it is necessary to apportion between the Principal
Stockholders and Buyer the Tax liability of an entity for a Straddle Period
(which is not treated under the immediately preceding sentence as closing on the
Closing Date), such liability shall be apportioned between the period deemed to
end at the close of the Closing Date and the period deemed to begin at the
beginning of the day following the Closing Date on the basis of an interim
closing of the books, except that Taxes (such as real property Taxes) imposed on
a periodic basis shall be apportioned on a daily basis and exemptions,
allowances and deductions that are otherwise calculated on an annual basis (such
as deductions for depreciation) shall be apportioned on a daily basis; provided,
however, that in the event that Buyer determines to file a Tax Return of a
Company or Company Subsidiary with respect to a Straddle Period in a manner that
is inconsistent with the past practice of such Company or Company Subsidiary,
then there shall also be apportioned to Buyer the excess, if any, of the Tax for
such Straddle Period that would have been apportioned to the Principal
Stockholders in the absence of this proviso over the Tax for such Straddle
Period that would have been apportioned to the Principal Stockholders if such
Tax Returns had been filed consistent with past practice.
-50-
(d) Any real property transfer or gains tax, sales Tax, use Tax,
stamp Tax, stock transfer Tax, or other similar Tax imposed on Sellers, the
Company or any Company Subsidiary by reason of the transactions contemplated by
this Agreement shall be borne by Principal Stockholders.
(e) In determining the Principal Stockholders' liability for income
(or similar) Taxes pursuant to Section 10.1(a), the Principal Stockholders shall
be credited with the amount of estimated Taxes and any other deposits or
prepayments in respect of Taxes paid by or on behalf of the Company and the
Company Subsidiaries prior to Closing and any amounts paid in respect of
estimated Taxes and any other deposits or prepayments in respect of Taxes by the
Principal Stockholders after the Closing (the "Prior Seller Payments").
(f) The Principal Stockholders and Buyer expressly agree that the
Principal Stockholders make no representation, warranty or covenant with respect
to the amount of, or the ability of Buyer to utilize, any net operating loss
carryovers, net capital loss carryovers, alternative minimum tax loss
carryovers, alternative minimum tax credit carryovers or similar items
(collectively, the "Tax Attributes") of the Company or any Company Subsidiary at
any time. Without limiting the generality of the foregoing, the Principal
Stockholders shall have no liability for a reduction in or elimination of any
Tax Attribute as a result of income or gain realized by the Company, any Company
Subsidiary or any Affiliate thereof on or prior to the Closing Date or as a
result of any action, suit, investigation, audit, claim, assessment or amended
Tax Return relating to taxable years or periods (or portions thereof) that end
on or before the Closing Date. In the event that the Principal Stockholders have
any liability for Taxes pursuant to Section 10.1(a), any Tax Attributes shall be
applied to reduce the Taxes giving rise to such liability to the full extent
permitted by law, and the Principal Stockholders shall have no liability to
Buyers, its subsidiaries and its Affiliates for any increase in their liability
for Taxes pursuant to Section 10.1(b) as a result of such reapplication of Tax
Attributes. If Buyer has utilized any Tax Attributes in computing its liability
for Taxes pursuant to Section 10.1(b), in determining the liability of the
Principal Stockholders pursuant to Section 10.1(a), Buyer shall be treated as if
it has not utilized such Tax Attributes and the Principal Stockholders'
liability will be reduced by such Tax Attributes (and any other available Tax
Attributes).
Section 10.2. Tax Returns. (a) Except with respect to the Pennsylvania
state income and franchise Tax Returns that include Acme Tax, the Principal
Stockholders shall prepare or cause to be prepared and file or cause to be filed
when due all Tax Returns that are required to be filed by or with respect to the
Company and each Company Subsidiary for taxable years or periods ending on or
before the Closing Date and the Principal Stockholders shall remit (or cause to
be remitted) any Taxes due in respect of such Tax Returns. Such Tax Returns
shall be prepared and filed in good faith in a manner consistent with past
practice. To the extent necessary or required by law, Buyer shall cooperate with
the Principal Stockholders to effect the filing of any Tax Return described in
this Section 10.2(a).
(b) Buyer shall prepare or cause to be prepared and file or cause to
be filed when due all Tax Returns that are required to be filed by or with
respect to the Company and each Company Subsidiary for taxable years or periods
ending after the Closing Date and all
-51-
Pennsylvania state income and franchise Tax Returns that include the Acme Tax
and Buyer shall remit (or cause to be remitted) any Taxes due in respect of such
Tax Returns. In preparing any Tax Return for Acme, Massillon or Oneida pursuant
to this Section 10.2(b), Buyer shall take (or cause to be taken) the position
that the distribution of Class B common stock of The ▇▇▇▇▇▇▇ Holding Company,
Inc. to each corporation's stockholder is made pursuant to a plan of liquidation
under Section 332 of the Code that occurs in connection with the Section
338(h)(10) election made for each corporation, provided that a plan of
liquidation is adopted prior to such distribution, unless required to do
otherwise pursuant to a Final Determination.
(c) Any Tax Return required to be prepared and filed by the Principal
Stockholders pursuant to this Section 10.2 shall be submitted to Buyer for
Buyer's review not less than 45 days prior to the due date (including
extensions) for the filing of such Tax Return. In the event that Buyer objects
in good faith to any such Tax Return on the basis that (i) such Tax Return has
not been prepared consistent with past practice, (ii) an item or position does
not have a reasonable basis or substantial authority or (iii) in connection with
such Tax Return, an election is proposed to be made that would apply with
respect to a period after the Closing, then such Tax Return shall be revised
prior to filing in the manner requested in writing by Buyer with respect to the
matters referred to in clauses (i), (ii) and (iii) above; provided, however,
that in the event that the Principal Stockholders disagree with Buyer's
objection, the parties shall attempt in good faith to resolve the dispute, and
failing that, the dispute shall be resolved expeditiously by the Neutral
Auditors prior to filing.
(d) Any Tax Return required to be filed by Buyer pursuant to this
Section 10.2 with respect to a Straddle Period or the Acme Tax shall be
submitted to the Principal Stockholders for the Principal Stockholders' review
not less than 45 days prior to the due date (including extensions) for the
filing of such Tax Return. In the event that the Principal Stockholders object
in good faith to any such Tax Return on the basis that (i) such Tax Return has
not been prepared consistent with past practice, (ii) an item or position does
not have a reasonable basis or substantial authority, or (iii) in connection
with such Tax Return an election is proposed to be made that would apply with
respect to a Pre-Closing Taxable Period other than a Straddle Period, such Tax
Return shall be revised prior to filing in the manner requested in writing by
the Principal Stockholders with respect to such matter; provided, however, that
in the event that Buyer disagrees with the Principal Stockholders' objection,
the parties shall attempt in good faith to resolve the dispute, and failing
that, the dispute shall be resolved expeditiously by the Neutral Auditors prior
to filing.
(e) The Principal Stockholders shall pay Buyer no later than five
days prior to the due date (including extensions) of any Tax Return required to
be filed, or caused to be filed, by Buyer for a Straddle Period or with respect
to the Acme Tax pursuant to this Section 10.2 the Taxes for which the Principal
Stockholders are liable pursuant to Section 10.1 in connection with such Tax
Return, taking into account any Prior Seller Payments. To the extent that the
Principal Stockholders' liability for income Taxes pursuant to Section 10.1(a)
for a Straddle Period Tax Return filed by Buyer pursuant to this Section 10.2 is
less than the amount of the Prior Seller Payments in respect of such Tax Return,
Buyer shall pay the Principal Stockholders the differ-
-52-
ence within five days after Buyer files, or causes to be filed, the Tax Return
relating to such income Taxes.
(f) None of Buyer or any Affiliate of Buyer shall (or shall cause or
permit the Company or any of the Company Subsidiaries to) amend, refile or
otherwise modify (except for amendments, refilings and modifications relating to
Carryback Refunds) any Tax Return relating in whole or in part to the Company or
any of the Company Subsidiaries with respect to any taxable year or period
ending on or before the Closing Date (or with respect to any Straddle Period if
such amendment, refiling or modification would increase the amount of Tax for
which the Principal Stockholders are responsible under Section 10.1) without the
prior written consent of the Principal Stockholders, which consent shall not be
unreasonably withheld.
(g) Within 45 days after the Closing Date, Buyer shall cause the
Company and each of the Company Subsidiaries to prepare and provide to the
Principal Stockholders (or cause to be prepared and provided by outside experts
at the expense of the Principal Stockholders), a package of Tax information
materials, including, without limitation, schedules and work papers (the "Tax
Package") required by the Principal Stockholders to enable them to prepare and
file all Tax Returns required to be prepared and filed by the Principal
Stockholders pursuant to this Section 10.2. The Tax Package shall be prepared in
good faith in a manner consistent with past practice.
Section 10.3. Tax Contests. (a) Buyer shall promptly notify the
Principal Stockholders upon receipt of written notice of any Tax Claim relating
to the Company or any of the Company Subsidiaries if such Tax Claim could give
rise to a claim against Buyer for indemnification pursuant to this Article X and
shall thereafter promptly forward to the Principal Stockholders copies of any
written communications received from any Governmental Authority by the Company
or the Company Subsidiaries in connection with any Tax Claim with respect to
which the Principal Stockholders are the Controlling Party; provided, however,
that the failure of Buyer to give the Principal Stockholders such prompt notice
or to forward such written communications as required herein shall not relieve
the Principal Stockholders of any obligations under this Article X, except to
the extent that the Principal Stockholders are materially prejudiced thereby.
The Principal Stockholders shall promptly notify Buyer upon their receipt of
written notice of any Tax Claim relating to the Company or the Company
Subsidiaries; provided, however, that the failure of the Principal Stockholders
to give the Buyer such prompt notice shall not relieve the Buyer of any
obligations under this Article X, except to the extent that the Buyer is
materially prejudiced thereby. In the case of any Tax Claim with respect to a
proposed assessment described in this Section 10.3, the Controlling Party shall
be entitled to appoint legal counsel of its choice at its expense and shall
control the conduct of the Tax Claim; provided, however, that in the case of any
Tax Claim with respect to a Pre-Closing Taxable Period or a Straddle Period, (i)
the Controlling Party shall provide the Noncontrolling Party with a timely and
reasonably detailed account of each stage of such Tax Claim and a copy of the
portions of all documents relating to such Tax Claim which are relevant to any
Tax for which the Noncontrolling Party may be required to indemnify or may
otherwise be liable, (ii) the Controlling Party shall consult with the
Noncontrolling Party before taking any significant action in connection with
such Tax Claim that might adversely affect the Noncontrolling Party, (iii) the
Controlling Party shall consult with
-53-
the Noncontrolling Party and offer the Noncontrolling Party an opportunity to
comment before submitting any written materials prepared or furnished in
connection with such Tax Claim (including, to the extent practicable, any
documents furnished to the applicable Governmental Authority in connection with
any discovery request) to the extent such materials concern matters in such Tax
Claim that could adversely affect the Noncontrolling Party, (iv) the Controlling
Party shall defend such Tax Claim diligently and in good faith as if the
Controlling Party were the only party in interest in connection with such Tax
Claim, and the Noncontrolling Party shall reasonably facilitate to the extent
requested by the Controlling Party, and shall not impede, such Tax Claim, (v)
the Controlling Party shall not settle, compromise or abandon any such Tax Claim
without obtaining the prior written consent, which consent shall not be
unreasonably withheld, of the Noncontrolling Party if such settlement,
compromise or abandonment could have an adverse impact on the Noncontrolling
Party. In the event that the Noncontrolling Party reasonably withholds such
consent pursuant to the preceding clause (v), the Noncontrolling Party may
assume the defense of the Tax Claim at its expense and the Controlling Party's
liability with respect thereto shall not exceed the amount of liability that the
Controlling Party would have had under the proposed settlement. Buyer shall have
the sole right to represent the Company and each of the Company Subsidiaries'
interests in any Tax Claim relating to a taxable period that begins after the
Closing Date, and the Principal Stockholders shall have the sole right to
represent the Company and each of the Company Subsidiaries' interests in any Tax
Claim relating to a Pre-Closing Taxable Period (other than a Straddle Period).
(b) If the Taxes of the Company or the Company Subsidiaries are
redetermined for a Pre-Closing Taxable Period or Straddle Period as part of a
Final Determination, then the Company or the applicable Company Subsidiary shall
timely remit to the applicable Governmental Authority the amount required to be
so remitted pursuant to such Final Determination, and the Principal Stockholders
shall pay Buyer the amount of Tax for which the Principal Stockholders are
responsible pursuant to Section 10.1 five days prior to the date that such
amount is due to the applicable Governmental Authority, except to the extent
provided in Section 10.1(f).
Section 10.4. Assistance and Cooperation. After the Closing Date,
each of the Principal Stockholders and Buyer shall (and shall cause their
respective Affiliates to):
(a) to the extent permitted by law, timely sign and deliver such
certificates or forms as may be necessary or appropriate to establish an
exemption from (or otherwise reduce) Taxes described in Section 10.1(d)
(relating to sales, transfer and similar Taxes);
(b) assist the other party in preparing any Tax Returns which such
other party is responsible for preparing and filing in accordance with Section
10.2;
(c) cooperate fully in preparing for any audits of, or disputes with
taxing authorities regarding, any Tax Returns of the Company and each
Company Subsidiary; and
(d) make available to the other and to any taxing authority as
reasonably requested in connection with any Tax Return described in Section 10.2
or any audit or other proceeding described in Section 10.3, all information
relating to any Taxes or Tax Returns of the Company and each of the Company
Subsidiaries.
-54-
Section 10.5. Adjustment to Purchase Price. For all Tax purposes, any
payment by Buyer or the Principal Stockholders under this Agreement will be
treated as an adjustment to the Purchase Price and will not be treated as
ordinary income by the Buyer or the Principal Stockholders.
Section 10.6. Survival of Obligations. Notwithstanding anything to the
contrary in this Agreement, and notwithstanding Article IX, the obligation of
the parties set forth in this Article X shall be unconditional and absolute and
shall remain in effect until 90 days after the expiration of the applicable
statute of limitations (including extensions).
Section 10.7. Section 338 Election; Allocation Schedule. (a) Except
with respect to Acme, Oneida and Massillon, with respect to which an election
under Section 338(h)(10) of the Code (and any comparable provisions of state and
local law) is made, Buyer shall neither make nor allow the Company or the
Company Subsidiaries to make, and Buyer shall neither take any action nor allow
the Company or the Company Subsidiaries to take any action which would result in
the making of, any election under Section 338 of the Code (or any comparable
provisions of state tax law) in connection with the Stock Purchase. Within 60
days following the Closing Date, with respect to the sale of the stock of MGE,
Acme, Oneida and Massillon, Buyer and the Principal Stockholders shall negotiate
in good faith and agree on a schedule (the "Allocation Schedule") allocating in
the case of Acme, Oneida and Massillon, the modified adjusted deemed sales price
of each of Acme, Oneida and Massillon, as defined in Treasury Regulation Section
1.338(h)(10)-1(f) and, in the case of MGE, the portion of the purchase price
allocated to MGE. The Allocation Schedule shall be reasonable, shall be based on
fair market values and shall be prepared in accordance with Section 338(h)(10)
of the Code and the regulations thereunder (in the case of Acme, Oneida and
Massillon) and Section 1060 of the Code (in the case of MGE). Each of Buyer and
the Principal Stockholders agrees to file all Tax Returns in accordance with the
Allocation Schedule. Any reference in this Agreement, the Disclosure Schedule or
any Purchase Agreement to an election with respect to Acme under Section
338(h)(10) of the Code (or any comparable provision of state or local law) shall
also be treated as a reference to such an election with respect to Town Talk
Newspapers, Inc.
(b) The parties hereby agree that the aggregate fair market value of
the stock of each of Acme, Oneida, Massillon and MGE, respectively, is set forth
on Section 10.7 of the Disclosure Schedule. All allocations by the parties for
purposes of Section 338 of the Code shall be made consistent with such
agreement, unless the parties otherwise agree in writing.
Section 10.8. Resolution of Disagreements Among Principal Stockholders
and Buyer. If Principal Stockholders and Buyer disagree as to the amount of
Taxes for which each is liable under this Agreement or to any item in the
Allocation Schedule, Principal Stockholders and Buyer shall promptly consult
each other in an effort to resolve such dispute. If any such point of
disagreement cannot be resolved within 15 days of the date of consultation, the
Neutral Auditors will act as an arbitrator to resolve such points of
disagreement with respect to this Agreement.
-55-
Section 10.9. Tax Sharing Agreements. Any and all agreements or
arrangements with respect to the sharing or allocation of Taxes between the
Company and the Company Subsidiaries, on the one hand, and any other person, on
the other hand, shall be terminated on the Closing Date. From and after such
date, neither the Company and the Company Subsidiaries, on the one hand, nor any
other person, on the other hand, shall have any further rights or liabilities
thereunder against the other.
Section 10.10. Information. Notwithstanding any other provision, no
Person shall have any right to receive or obtain any information, or have any
rights with respect to, any information relating to consolidated, combined or
unitary Taxes of Buyer or any of its subsidiaries (if such Person is acting on
behalf of a Seller) or of any Seller (if such Person is acting on behalf of
Buyer or any of its subsidiaries or Affiliates) other than information relating
solely to items of the Company or the Company Subsidiaries.
Section 10.11. Definitions.
(a) "Controlling Party" shall mean (x) the Principal Stockholders
for any audit or proceeding relating to a Pre-Closing Taxable Period and (y)
Buyer for any audit or proceeding relating to a Straddle Period.
(b) "Final Determination" shall mean the final resolution of
liability for any Tax, which resolution may be for a specific issue or
adjustment or for a taxable period, (i) by Internal Revenue Service Form 870 or
870-AD (or any successor forms thereto), on the date of acceptance by or on
behalf of the taxpayer, or by a comparable form under the laws of a state or
local taxing jurisdiction, except that a Form 870 or 870-AD or comparable form
shall not constitute a Final Determination to the extent that it reserves
(whether by its terms or by operation of law) the right of the taxpayer to file
a claim for refund or the right of the taxing authority to assert a further
deficiency in respect of such issue or adjustment or for such taxable period (as
the case may be); (ii) by a decision, judgment, decree, or other order by a
court of competent jurisdiction, which has become final and unappealable; (iii)
by a closing agreement or accepted offer in compromise under Sections 7121 or
7122 of the Code, or a comparable agreement under the laws of a state or local
taxing jurisdiction; (iv) by any allowance of a refund or credit in respect of
an overpayment of income Tax, but only after the expiration of all periods
during which such refund may be recovered (including by way of offset) by the
jurisdiction imposing such income Tax; or (v) by any other final disposition,
including by reason of the expiration of the applicable statute of limitations
or by mutual agreement of the parties.
(c) "Noncontrolling Party" shall mean (y) the Principal Stockholders
in the case of audits or proceedings with respect to which Buyer is the
Controlling Party and (z) Buyer in the case of audits or proceedings with
respect to which the Principal Stockholders are the Controlling Party.
(d) "Post-Closing Taxable Period" shall mean any taxable year or
period that begins (or is deemed to begin) after the Closing Date.
-56-
(e) "Pre-Closing Taxable Period" shall mean any taxable year or
period that ends (or is deemed to end) on or before the Closing Date.
(f) "Straddle Period" shall mean any taxable year or period
beginning before and ending after the Closing Date.
(g) "Tax Attribute" shall have the meaning set forth in Section
10.1(f).
(h) "Tax Claim" shall mean a notice of Tax deficiency, proposed Tax
adjustment, Tax assessment, Tax audit, Tax examination or other administrative
or court proceeding, suit, dispute or other claim with respect to Taxes.
(i) "Tax Return" means any return, report or statement required to be
filed with respect to any Tax (including any attachments thereto) including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
(j) "Taxes" means (i) all taxes (whether federal, state, local or
foreign) based upon or measured by income or any other tax, custom, duty,
governmental fee or similar assessment or charge of any kind whatsoever,
including, without limitation, gross receipts, profits, sales, use, occupation,
value added, ad valorem, real property, transfer, franchise, withholding,
payroll, employment, excise or property taxes, together with any interest,
penalties, additions to tax or additional amount imposed with respect thereto
and (ii) any obligations under any agreements or arrangements with respect to
any Taxes described in clause (i) above.
ARTICLE XI
Miscellaneous
Section 11.1. Counterparts. This Agreement and each Purchase
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties.
Section 11.2. Governing Law; Consent to Jurisdiction. (a) THIS
AGREEMENT AND EACH PURCHASE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE
CHOICE OF LAW PRINCIPLES THEREOF.
(b) THE PARTIES HERETO HEREBY CONSENT TO THE EXCLUSIVE JURISDICTION
OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND
ANY OF THE COURTS OF THE STATE OF NEW YORK LOCATED IN NEW YORK COUNTY HAVING
SUBJECT MATTER JURISDICTION IN A DISPUTE ARISING UNDER THIS AGREEMENT AND ANY OF
THE PURCHASE AGREEMENTS AND THE PARTIES HEREBY WAIVE ANY OBJECTION TO THE
PERSONAL JURISDICTION OR VENUE AS TO SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
SUCH COURTS, AND THE PARTIES AGREE FURTHER THAT SERVICE
-57-
OF PROCESS OR NOTICE IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE EFFECTIVE
IF IN WRITING AND SENT BY HAND OR OVERNIGHT COURIER SERVICE, AS PROVIDED IN
SECTION 11.9 HEREOF.
Section 11.3. Entire Agreement. This Agreement and the schedules,
annexes and exhibits hereto, together with the Purchase Agreements and the
Confidentiality Agreement, constitutes the entire agreement between the parties
with respect to the matters contemplated hereby and supersedes all prior
agreements and understandings between the parties with respect to the subject
matter hereof. Notwithstanding the foregoing, parties to the Purchase Agreements
specified above who are not parties to this Agreement shall not be deemed to be
parties hereto or to be subject to any liabilities or obligations of any nature
whatsoever hereunder, except as specifically contemplated by such agreements.
Section 11.4. Expenses. Except as set forth in this Agreement or any
of the Purchase Agreements, all legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by Sellers, if incurred by the Seller Group, and by Buyer, if incurred by
Buyer and its affiliates.
Section 11.5. Specific Performance. Sellers and Buyer each acknowledge
that, in view of the uniqueness of the Company, there would not be an adequate
remedy at law for money damages in the event that this Agreement or any of the
Purchase Agreements were not performed in accordance with its terms, and
therefore Sellers, on the one hand, and Buyer, on the other hand, agree that the
other shall be entitled to specific enforcement of the terms hereof in addition
to any other remedy to which it may be entitled, at law or in equity.
Section 11.6. Interpretation. Any certificate signed by any officer of
any party hereto pursuant to this Agreement or any Purchase Agreement shall be
deemed a representation and warranty by the Principal Stockholders party as to
the matters covered thereby. Whenever this Agreement or any Purchase Agreement
refers to Seller or Sellers, such reference shall, unless this Agreement or such
Purchase Agreement expressly provides to the contrary, be deemed an act,
obligation, representation of, or other matter of or relating to, as the case
may be, (i) each Seller and (ii) all Sellers jointly and severally. Whenever
this Agreement or any Purchase Agreement refers to the "knowledge of the
Company" or to the "Company's knowledge," such reference shall mean the
knowledge of any Seller or ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ or any publisher of any of the Newspapers, in each
case after due inquiry.
Section 11.7. Successors and Assigns. Neither this Agreement nor any
Purchase Agreement may be assigned by any party (except by operation of law) and
shall be binding upon and inure to the benefit of the parties hereto and their
successors and permitted assigns; provided, however, that Buyer may assign its
rights under this Agreement or any Purchase Agreement to any of its affiliates;
provided, further, however, that any such assignment shall not relieve Buyer of
its obligations hereunder or thereunder.
Section 11.8. No Third-Party Beneficiaries. This Agreement and each
Purchase Agreement is being entered into solely for the benefit of the parties
hereto, and the parties do not
-58-
intend that any employee or any other Person shall be a third-party beneficiary
of the covenants and agreements by Sellers or Buyer contained in this Agreement
or any Purchase Agreement.
Section 11.9. Notices. All notices hereunder or under any Purchase
Agreement shall be sufficiently given for all purposes hereunder if in writing
and delivered personally or sent by hand or by overnight courier service to the
appropriate address as set forth below. Notices to any Seller or to the
Designated Stockholder shall be addressed to the Designated Stockholder at:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
c/o Anchin, Block & Anchin LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address and to the attention of such other person as the
Designated Stockholder may designate by written notice to the other parties to
this Agreement.
Notices to Buyer shall be addressed to:
c/o Journal Register Company
State Street Square
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address and to the attention of such other person as Buyer may
designate by written notice to the other parties to this Agreement. The
Designated Stockholder shall maintain
-59-
a current list of the names, addresses and telecopier numbers for all Principal
Stockholders, and shall make such list available to Buyer from time to time upon
request.
Any notice shall be deemed to have been served or given as of the date such
notice is personally delivered or one business day after it is sent by overnight
courier.
Section 11.10. Designated Stockholder. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ shall be
the Designated Stockholder for purposes of this Agreement and each Purchase
Agreement. Each Seller hereby represents and warrants that such Seller has
executed an irrevocable Power of Attorney in substantially the form attached as
Annex F hereto appointing ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ as the Designated Stockholder.
Following execution of this Agreement, (i) any action required to be taken
pursuant to this Agreement or any Purchase Agreement by the Designated
Stockholder or (ii) any action required to be taken pursuant to this Agreement
or any Purchase Agreement by Sellers for purposes of amending, waiving,
terminating, negotiating, resolving claims or disputes relating to, making
determinations relating to or otherwise administering matters relating to, such
agreements (including determinations as to the satisfaction or waiver of
conditions), shall be taken exclusively by the Designated Stockholder on behalf
of Sellers, and the Designated Stockholder's actions and decisions in such
regard shall be binding and conclusive on all Sellers. If ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
shall be unable to serve as Designated Stockholder (including by reason of
disability or incapacity), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall replace him as Designated
Stockholder.
Section 11.11. Additional Sellers, If Any. Sellers agree to cause any
person who, following execution of this Agreement and prior to the Closing,
becomes a holder of Class C Shares or Class D Shares, to become a party to this
Agreement and to the applicable Purchase Agreements by executing and delivering
to Buyer counterpart copies of such agreements in their capacity as Sellers.
Section 11.12. Further Assurances. Each Seller agrees that, from time
to time, whether at or after the Closing Date, it will execute and deliver such
further instruments of conveyance and transfer and take such other action as is
necessary to carry out the terms of this Agreement and each Purchase Agreement.
Buyer and each Seller further agrees that it will not take any action which will
prevent its performance of this Agreement or any Purchase Agreement in
accordance with its terms.
Section 11.13. Effect of Headings. The descriptive headings contained
herein and in each Purchase Agreement are for convenience only and shall not
affect in any way the meaning or interpretation of this Agreement or any
Purchase Agreement.
Section 11.14. Duplicative Payments. Nothing in this Agreement is
intended to provide that either party shall be entitled to any payment, whether
as a purchase price adjustment, indemnification or payment, or payment for loss
or damage or otherwise, to the extent such payment is for an amount which has
otherwise been paid pursuant to a separate provision of this Agreement. Buyer
and Sellers agree that no party is entitled to be paid twice for the same matter
or obligation, notwithstanding any provision to the contrary in this Agreement.
-60-
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties as of the day first above written.
JOURNAL REGISTER COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
-61-
ESTATE OF ▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as Co-Executor
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, as Co-Executor
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, as Co-Executor
FF&E TRUST
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as Trustee
/s/ Royal ▇. ▇▇▇▇▇▇▇▇
Royal ▇. ▇▇▇▇▇▇▇▇, as Trustee
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, as Trustee
-62-
GRANNY ▇▇▇▇▇▇ TRUSTS
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as Trustee
/s/ Royal ▇. ▇▇▇▇▇▇▇▇
Royal ▇. ▇▇▇▇▇▇▇▇, as Trustee
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, as Trustee
As Trustees of the following Trusts:
Mission Trust Orange Trust Sonoma Trust
Ocean Trust Hampton Trust Onondaga Trust
▇▇▇▇▇▇▇▇▇ Trust Bayshore Trust Brighton Trust
Firestone Trust Highland Trust Rockland Trust
Olympic Trust ▇▇▇▇▇▇▇ Trust Palm Trust
Victory Trust Oswego Trust
▇▇▇▇ I COMMUNICATIONS MANAGEMENT
INCENTIVE TRUST
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, as Trustee
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as Trustee
-63-
PARENT ENTERPRISES, INC.
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Vice President and Secretary
OTHER STOCKHOLDERS
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
DESIGNATED STOCKHOLDER
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Name:▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Executor of the Estate of ▇▇▇▇
▇▇▇▇▇▇▇ and Trustee of the FF&E
Trust and the Granny ▇▇▇▇▇▇ Trusts
-64-
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ CUTT 1995
REVOCABLE TRUST
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, as Co-Trustee
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Cutt
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Cutt, as Co-Trustee
-65-
/s/ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
-66-
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-67-
ANNEX A
The Estate of ▇▇▇▇ ▇▇▇▇▇▇▇
The FF&E Trust
The Granny ▇▇▇▇▇▇ Trusts
Which consist of the following trusts:
Mission Trust Orange Trust Sonoma Trust
Ocean Trust Hampton Trust Onondaga Trust
▇▇▇▇▇▇▇▇▇ Trust Bayshore Trust Brighton Trust
Firestone Trust Highland Trust Rockland Trust
Olympic Trust ▇▇▇▇▇▇▇ Trust Palm Trust
Victory Trust Oswego Trust
ANNEX B
▇▇▇▇ I Communications Management Incentive Trust
Parent Enterprises, Inc.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Cutt 1995 Revocable Trust
▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
ANNEX C
[FORM OF LETTER OF CREDIT]
STANDBY LETTER OF CREDIT
Letter of Credit No. __________
__________ __, 1998
[Buyer]
[Address]
Ladies and Gentlemen:
1. By order of the [Designated Stockholder] (the ["Designated
Stockholder"]), the undersigned (the "Bank") hereby issues its standby letter of
credit No. ______ in your favor for a maximum amount (the "Stated Amount") not
to exceed US$10,000,000 (TEN MILLION DOLLARS). This Letter of Credit is
irrevocable. The purpose of this Letter of Credit is to provide payment to you
of certain contingent indemnification obligations under that certain Master
Agreement, dated as of May __, 1998, by and among you, [the Designated
Stockholder] and the other parties thereto (the "Master Agreement").
2. Until the Expiration Date (as hereafter defined), you may draw on
this Letter of Credit (i) on any one or more occasions (each, an "L/C Drawing"),
(ii) only for an aggregate amount under all L/C Drawings not in excess of the
Stated Amount, and (iii) only upon presentation at the time of each L/C Drawing
of your sight draft and a Litigation Certificate or Resolution Certificate, as
provided in paragraph 3 below. This Letter of Credit is effective immediately
and expires at the close of business on the Expiration Date (as defined below).
The obligation of the Bank under this Letter of Credit is an individual
obligation of the Bank and is in no way contingent upon reimbursement with
respect thereto.
3. Amounts under this Letter of Credit will be made available to you
until the Expiration Date upon your delivery of (i) your sight draft drawn on
the Bank, stating on its face: "Drawn under Letter of Credit No. ______ issued
by [Issuing Bank]" and (ii) either (a) a certificate in the form of Annex 1 (a
"Litigation Certificate"), completed and signed by you, and with the required
attachment, or (b) a certificate in the form of Annex 2 (a "Resolution
Certificate"), completed and signed by you and [the Designated Stockholder].
Such sight draft and Litigation Certificate or Resolution Certificate shall be
dated the date of presentation and shall be made between the hours of 9:00 a.m.
and 5:00 p.m., New York time, at the Bank's offices at _____________________
_________________, referencing Letter of Credit No. _____.
4. Subject to extension pursuant to Paragraph 5 below, this Letter of
Credit shall automatically terminate on the date (the "Expiration Date") which
is the earliest of (i) the date on which the Bank honors one or more L/C
Drawings that in the aggregate (together with all prior L/C Drawings) are equal
to the Stated Amount, (ii) [one year after closing], 1999 (such date, as it
may be extended pursuant to paragraph 5, "Outside Expiration Date") and (iii)
the date on which the Bank receives a notice in the form of Annex 3 (a "Notice
of Termination") signed by you and [the Designated Stockholder]. Upon such
termination, you shall deliver this Letter of Credit to the Bank for
cancellation, but delivery or non-delivery of this Letter of Credit shall not in
any event affect the termination hereof.
5. If, at any time prior to the Expiration Date, the Bank receives a
certificate in the form of Annex 4 (a "Pending Claim Certificate") signed by
you, (i) the then effective Outside Expiration Date of this Letter of Credit
shall be automatically extended 360 days and (ii) if the remaining availability
hereunder at such date exceeds the amount set forth in the Pending Claim
Certificate, the availability shall be automatically reduced to the amount set
forth in such Pending Claim Certificate*. You may present one or more Pending
Claim Certificates under this Letter of Credit.
6. Provided that the sight draft and the Litigation Certificate or the
Resolution Certificate, as the case may be, presented in connection with an L/C
Drawing conform to the terms and conditions of this Letter of Credit: (i) if the
L/C Drawing is made by you hereunder at or prior to _____p.m. New York time on a
Business Day (as hereinafter defined), payment shall be made to you or to your
order of the amount specified, in immediately available funds, on the same
Business Day; and (ii) if the L/C Drawing is made by you hereunder after _____
p.m. New York time on a Business Day, payment shall be made to you of the amount
specified, in immediately available funds, on the next succeeding Business Day.
If requested by you, payment under this Letter of Credit may be made by wire
transfer of federal funds of United States dollars to your account in the United
States or by deposit of immediately available funds into an account designated
by you and maintained with the Bank. As used herein "Business Day" means a day
that is not a Saturday or Sunday or other day on which banks located in New
York, New York are authorized or required by law, regulation or executive order
to close.
7. All documents presented to the Bank in connection with your demands
for payment hereunder, as well as all notices and other communications to the
Bank in respect of this Letter of Credit, shall be in writing addressed to ____
_____________________________________, referencing letter of Credit No. _____.
8. Only you may make an L/C Drawing under this Letter of Credit. By
paying to you the amount demanded in accordance herewith, the Bank makes no
representation as to the correctness of the amount demanded.
__________________________
* If Issuing Bank will not agree to automatically extend the outside Expiration
Date upon Buyer's delivery of a Pending Claim Certificate, the Letter of Credit
shall permit Buyer to make an L/C Drawing for the amount subject to the pending
claim in the event the L/C is not in fact extended as provided in paragraph 5
upon presentation of a Pending Claim Certificate. Promptly upon any such
drawing, Buyer and the Principal Stockholders shall enter into an Escrow
Agreement substantially in the form attached hereto and Buyer shall deposit the
L/C Drawing proceeds into the escrow created thereby.
-2-
9. This Letter of Credit sets forth in full the Bank's undertaking, and
such undertaking shall not in any way be modified, amended, amplified or limited
by reference to any document, instrument or agreement referred to herein except
only the Annexes hereto, and the sight draft and any such reference shall not be
deemed to incorporate herein by reference any document, instrument or agreement
except as set forth above.
-3-
10. This Letter of Credit shall be governed by the Uniform Customs and
Practice for Documentary Credits (1993 Revision) (the "UCP"), International
Chamber of Commerce Publication 500.
Very truly yours,
By______________________
Title:
-4-
Annex 1 to
Letter of Credit No. ___
LITIGATION CERTIFICATE
The undersigned, a duly authorized officer of [Buyer], a Delaware
corporation ("[Buyer]"), hereby certifies to (the "Bank"), with reference to
Letter of Credit No. _______ (the "Letter of Credit"), that
(a) attached hereto is a final order of a court of competent
jurisdiction which order provides that [Buyer] is entitled to payment of
US$_________ (the "Owed Amount") pursuant to that certain Master Agreement,
dated as of May __,1998, by and among [Buyer], [the Designated Stockholder] and
the other parties thereto; and
(b) the dollar amount of the sight draft accompanying this
Certificate, US$_____________, is less than or equal to the Owed Amount and is
an amount that, in the aggregate with all other prior drawings (if any) under
the Letter of Credit, is not in excess of the Stated Amount of the Letter of
Credit (as defined therein); and
(c) a copy of this Litigation Certificate and the related attachments
have been delivered to [the Designated Stockholder].
IN WITNESS WHEREOF, [Buyer] has executed and delivered this Certificate
as of the___day of ___, 19__.
Very truly yours,
[Buyer]
By:__________________________
(Insert Name and Title of
Authorized Officer)
-5-
Annex 2 to
Letter of Credit No.__
RESOLUTION CERTIFICATE
The undersigned, [Buyer], a Delaware corporation ("[Buyer]"), and
[Designated Stockholder] , a Delaware corporation ("Designated Stockholder"),
hereby jointly certify, with reference to Letter of Credit No. _______
(the "Letter of Credit"), that:
Section 12.
(a) (i) [Buyer] and [Designated Stockholder] have resolved certain
issues related to that certain Master Agreement, dated as of May __, 1998, by
and among [Buyer], [the Designated Stockholder] and the other parties thereto
and (ii) the agreed amount payable to [Buyer] as a result of such resolution is
US$___________ (the "Owed Amount"); and
(b) The dollar amount of the sight draft accompanying this
Certificate, US$_____________, is less than or equal to the Owed Amount and is
an amount that, in the aggregate with all other prior drawings (if any) under
the Letter of Credit, is not in excess of the Stated Amount of the Letter of
Credit (as defined therein).
This Certificate may be delivered in counterparts, provided that unless
counterparts signed by both [Buyer] and [Designated Stockholder] are received by
[the Issuing Bank] in accordance with the terms of the Letter of Credit, the
drawing under the Letter of Credit requested hereby shall not be honored.
IN WITNESS WHEREOF, [Buyer] and [Designated Stockholder] have each
executed and delivered this Certificate as of the day of__, 19__.
Very truly yours,
[Buyer]
By:________________________
(Insert Name and Title of
Authorized Officer)
[Designated Stockholder]
By:________________________
(Insert Name and Title of
Authorized Officer)
-6-
Annex 3 to
Letter of Credit No.__
NOTICE OF TERMINATION
The undersigned, a duly authorized officer of [Buyer], a Delaware
corporation ("[Buyer]") hereby certifies to [Issuing Bank] (the "Bank"), with
reference to Letter of Credit No. _______ (the "Letter of Credit"), that the
Letter of Credit is to be terminated forthwith. The original Letter of Credit is
attached to this Notice.
IN WITNESS WHEREOF, [Buyer] has executed and delivered this Certificate
as of the ___ day of___, 19__.
Very truly yours,
[Buyer]
By:___________________________
(Insert Name and Title of
Authorized Officer)
-7-
Annex 4 to
Letter of Credit No. ______
PENDING CLAIM CERTIFICATE
The undersigned, a duly authorized officer of [Buyer], Delaware
Corporation ("[Buyer]"), hereby certifies to [the Issuing Bank], with reference
to Letter of Credit No. _______ (the "Letter of Credit"), that
(a) pursuant to that certain Master Agreement dated as of May __,
1998, by and among [Buyer], [the Designated Stockholder], and the other
parties thereto (the "Master Agreement"), Buyer has asserted bona fide
pending claims in the amount of US$_________ (the "Pending Claims Amount")
for which it is, in accordance with the provisions of the Master Agreement,
entitled to indemnification; and
(b) the date on which this Certificate is being delivered is no later
than the Outside Expiration Date (as defined the Letter of Credit) as in
effect immediately prior to the delivery hereof.
If the remaining availability under the Letter of Credit exceeds the Pending
Claims Amount stated above, the undersigned hereby authorizes and directs you to
reduce the remaining availability thereunder to the Pending Claims Amount as so
stated above.
IN WITNESS WHEREOF, [Buyer] has executed and delivered this Certificate
as of the ______ day of _____________, 19__.
Very truly yours,
[Buyer]
By:____________________________
(Insert Name and Title of
Authorized Officer)
-8-
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of _________, 199_, by and among _________,
a Delaware corporation ("Buyer"), the Principal Stockholders listed on the
signature pages hereto (the "Principal Stockholders"), _________, as the
Designated Stockholder (the "Designated Stockholder") and ___________________
(the "Escrow Agent").
Upon the terms and subject to the conditions of that certain Master
Agreement (the "Master Agreement"), dated as of May __, 1998, by and among the
Principal Stockholders, the Designated Stockholder, the other sellers party
thereto (together with the Principal Stockholders, the "Sellers") and Buyer, and
certain related Purchase Agreements by and among Buyer and the Sellers
(collectively, the "Purchase Agreements"), the Sellers are, as of the date
hereof, selling to Buyer, and Buyer is purchasing and acquiring from the
Sellers, all of the Sellers' right, title and interest in and to the ▇▇▇▇ I
Shares, the MGE Shares, the Massillon Shares, the Acme Shares and the Oneida
Shares. Pursuant to the Master Agreement, Buyer is as of the date hereof
depositing the sum of $10,000,000 with the Escrow Agent in order to secure
certain potential indemnity obligations of the Principal Stockholders to Buyer
Indemnitees as set forth in Section 3 below. Buyer and the Principal
Stockholders understand and agree that the indemnification by the Principal
Stockholders of Buyer Indemnities is not limited to the amount of the Escrowed
Cash, and this Agreement is without prejudice to any rights Buyer may have under
the Master Agreement, applicable law or otherwise.
Capitalized terms used herein and not otherwise defined have the
meanings ascribed to them in the Master Agreement. The Designated Stockholder is
authorized to act on behalf of the Principal Stockholders for all purposes under
this Escrow Agreement.
NOW THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
1. Appointment and Agreement of Escrow Agent. [Escrow Agent] is hereby
appointed as, and [Escrow Agent] hereby agrees to perform the duties of, Escrow
Agent under this Escrow Agreement. This Escrow Agreement shall be administered
at and funds held in New York, New York, by the Escrow Department of the Escrow
Agent, currently located at _______________________.
2. Deposit of Escrowed Cash. Buyer has, concurrently with the execution
and delivery of this Agreement, delivered [$10,000,000] in cash to the Escrow
Agent for deposit in escrow pursuant to the provisions hereof (the "Aggregate
Principal Amount"). The Aggregate Principal Amount of cash so delivered to the
Escrow Agent for deposit, plus all interest and other income accrued with
respect thereto ("Income"), is hereinafter referred to as the "Escrowed Cash".
3. Covered Liabilities. This Escrow Agreement has been executed and the
deposit of the Escrowed Cash hereunder is made for the purpose of providing for
the payment of indemnity obligations to Buyer pursuant to Articles IX and X of
the Master Agreement (such obligations, the "Covered Liabilities").
4. Delivery of Escrowed Cash. Whenever the Escrow Agent receives
either:
(i) a certificate signed by Buyer and the Designated Stockholder,
certifying, or
(ii) a certificate signed by Buyer attaching a copy of a final
judgment or award determining,
that Buyer has incurred Covered Liabilities and specifying the amount thereof,
the Escrow Agent shall deliver to Buyer an amount in cash equal to the lesser of
(1) the amount of the Covered Liabilities as set forth in such certificate or
judgment or award and (2) the amount of Escrowed Cash then held by the Escrow
Agent.
5. Investment of Escrowed Cash. (a) Escrowed Cash (including any
Reserved Amounts, as defined in Section 7(a)) shall, upon the written direction
of the Designated Stockholder, be invested by the Escrow Agent from time to time
in securities designated thereby which are
(i) obligations of or guaranteed by the United States Government with
a maturity date not longer than 180 days from the date of purchase,
(ii) certificates of deposit maturing within 180 days issued by any
commercial bank, having a combined capital and surplus in excess of
$100,000,000 organized under the laws of any state of the United States or
any political subdivision thereof, or
(iii) commercial paper of companies organized under the laws of any
state of the United States or any political subdivision thereof and in each
case having a rating assigned to such commercial paper by Standard & Poor's
Corporation or ▇▇▇▇▇'▇ Investors Service, Inc., equal to the highest rating
assigned by such organization.
(b) Whenever the Escrow Agent is required to deliver Escrowed Cash to
Buyer pursuant to Section 4 or to the Designated Stockholder pursuant to Section
9, the Escrow Agent shall, if the cash held by it hereunder is insufficient for
such purpose, liquidate such of the securities held hereunder as the Designated
Stockholder selects or, in the lack of such selection, in the order of maturity,
in order to make the delivery required by Section 4 or Section 9. When trading
investments, the Escrow Agent may use its own bond department or that of any
affiliate. The Escrow Agent shall not be liable for any diminution in the
Escrowed Cash due to losses resulting from investments or their liquidation.
6. Termination of Escrow. (a) On the first anniversary of the date
hereof (the "Distribution Date"), the Escrow Agent (i) shall set aside from the
funds on deposit the Reserved
-2-
Amount and (ii) shall distribute to the Designated Stockholder all amounts
remaining on deposit after reduction for the amounts set aside pursuant to
clause (i) of this sentence. The Escrow Agent is authorized to liquidate the
securities (other than securities set aside for the benefit of Buyer or pursuant
to Section 7(a)) held hereunder (unless directed in writing by the Designated
Stockholder to distribute such securities in some other specified manner) to the
extent necessary to distribute to the Designated Stockholder the Escrowed Cash
as provided for in the preceding sentence.
(b) This Escrow Agreement may be terminated at any time by and upon the
receipt by the Escrow Agent of a written notice of termination executed by Buyer
and the Designated Stockholder directing the distribution of all property then
held by the Escrow Agent under and pursuant to this Escrow Agreement. This
Escrow Agreement shall automatically terminate if and when all the Escrowed Cash
(and all the securities in which any of the Escrowed Cash shall have been
invested) has been distributed by the Escrow Agent in accordance with the terms
of this Escrow Agreement.
7. Retention of Escrowed Cash Following the Distribution Date. (a) In
the event that, at the Distribution Date, Buyer has incurred any Covered
Liabilities, or there is pending any claim for Buyer Damages made in accordance
with Article IX of the Master Agreement or for indemnification pursuant to
Article X thereof ("Tax Indemnification"), then Buyer may, not later than the
second business day immediately prior to the Distribution Date, notify the
Escrow Agent and the Designated Stockholder to such effect in writing, which
written notice shall describe (such description to be without prejudice to or
waiver of any rights of Buyer under the Master Agreement or otherwise, including
to pursue a different amount or basis thereafter) in reasonable detail the
nature of each such Covered Liability (or pending claim for Buyer Damages or Tax
Indemnification), the facts and circumstances which give rise to each such
Covered Liability (or pending claim for Buyer Damages or Tax Indemnification)
and the sections of the Master Agreement with respect to which such item may be
a Covered Liability, and the amount of each such Covered Liability (or, in the
case of a pending claim for Buyer Damages or Tax Indemnification, Buyer's good
faith reasonable estimate of the amount of such claim). The Escrow Agent shall
have no obligation to verify that delivery of such notice has been made by Buyer
to the Designated Stockholder, but agrees to forward to the Designated
Stockholder promptly, by first class mail, a copy of the notice received by it.
On the Distribution Date, the Escrow Agent shall set aside and reserve Escrowed
Cash in an amount equal to the total of the amounts set forth in such written
notice with respect to the claim or claims described therein (whether incurred
or pending) (such amount so set aside and reserved pursuant to the provisions of
this Section 7(a) being herein called the "Reserved Amount").
(b) Any portion of the Reserved Amount retained by the Escrow Agent
shall be distributed to the Designated Stockholder in accordance with the
provisions hereof upon the resolution or disposition (including by virtue of a
judgment or award so stating) of all such outstanding claims against which the
Reserve Amount was (in whole or in part) reserved, and the payment, if any, of
Escrowed Cash with respect thereto pursuant to Section 4.
-3-
8. Taxation of Escrowed Cash. Each Principal Stockholder shall provide
the Escrow Agent with its Tax Identification Number (TIN) as assigned by the
Internal Revenue Service. The parties agree that, upon termination of the Escrow
pursuant to Section 6, the Principal Stockholders shall at that time become, for
federal and state tax purposes, the owners of their respective pro rata shares
(as set forth on Schedule I hereto) (the "Pro Rata Shares") of any remaining
Escrowed Cash. The Principal Stockholders shall also become, for federal and
state tax purposes, the owners of their respective Pro Rata Shares of any
Reserved Amount but only at such time as such amount is distributed to them
pursuant to Section 7(b). Notwithstanding the foregoing, the Principal
Stockholders agree that they shall include their respective Pro Rata Shares of
the net taxable Income of the Escrow in their gross income for the taxable year
ending December 31 in which such Income is received (the "Taxable Year"),
without regard to whether such Income is received by the Principal Stockholders
in such Taxable Year pursuant to Section 6 or 7(b).
9. No Transfer of Escrowed Cash. While the Escrow Agent continues to
hold Escrowed Cash, the Principal Stockholders shall not transfer, sell, pledge
or otherwise dispose of their rights to any Escrowed Cash or any of the
securities in which Escrowed Cash is invested pursuant to Section 5, except that
such rights may be transferred, subject to the provisions of this Escrow
Agreement, by will or the laws of descent and distribution.
10. Notices and Distributions. Any and all notices or other instruments
or papers to be sent to any party hereto shall be sufficiently given for all
purposes hereunder if in writing and delivered personally or sent by documented
overnight delivery service or, to the extent receipt is confirmed and a copy
also sent thereafter by personal delivery or documented overnight delivery
service, telecopy, telefax or other electronic transmission service to the
address or number set forth below pending designation in writing of another
address. Any distributions of cash or securities to the Designated Stockholder
or Buyer hereunder shall be made, unless otherwise previously instructed by the
intended recipient thereof, if in cash, by bank checks of the Escrow Agent
payable to the order of the Designated Stockholder or Buyer, as the case may be,
or, if in physical securities, the physical securities in good deliverable form,
sent by registered mail or nationally recognized overnight courier service, to
their respective addresses below pending designation in writing of another
address.
(a) If to the Designated Stockholder:
(b) If to the Escrow Agent:
-4-
(c) If to Buyer:
11. Escrow Agent's Liability. The Escrow Agent may act upon any
instrument or other writing believed by it in good faith to be genuine, and to
be signed or presented by the proper person, and shall not be liable in
connection with the performance by it of its duties pursuant to the provisions
of this Escrow Agreement, except for its own gross negligence or willful
misconduct. The Escrow Agent shall be under no duty to inquire into or
investigate the validity, accuracy or content of any such document.
12. Escrow Agent to Follow Instructions of Buyer and the Designated
Stockholder. Notwithstanding any provision herein contained to the contrary,
the Escrow Agent shall at any time and from time to time take such action
hereunder with respect to the Escrowed Cash (and the securities in which any of
the Escrowed Cash has been invested) as shall be agreed to in writing by Buyer
and the Designated Stockholder, provided that the Escrow Agent shall first be
indemnified to its satisfaction with respect to any of its costs or expenses
which might be involved.
13. Escrow Agent's Fees. The Principal Stockholders hereby agree to (i)
pay the Escrow Agent upon execution of this Agreement reasonable compensation
for the services to be rendered hereunder and (ii) pay or reimburse the Escrow
Agent upon request for all expenses, disbursement and advances, including
reasonable attorney's fees, incurred or made by it in connection with the
preparation, execution, performance, delivery, modification and termination of
this Agreement.
14. Successors. The obligations imposed and the rights conferred by
this Escrow Agreement shall be binding upon and inure to the benefit of the
respective successors and assigns of Buyer, the Principal Stockholders, the
Designated Stockholder and the Escrow Agent.
15. Governing Law. This Escrow Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
its principles of conflicts of laws and any action brought hereunder shall be
brought in the courts of the State of New York, located in the County of New
York. Each party hereto irrevocably waives any objection on the grounds of
venue, forum non-conveniens or any similar grounds and irrevocably consents to
service of process by mail or in any other manner permitted by applicable law
and consents to the jurisdiction of said courts.
-5-
16. Entire Agreement. This Escrow Agreement together with the Master
Agreement (including the Schedules and Exhibits thereto) contains the entire
agreement between the parties hereto other than the Escrow Agent with respect to
the transactions contemplated herein. This Escrow Agreement alone contains the
entire agreement of the Escrow Agent with respect to the transactions
contemplated herein and the Escrow Agent's duties are set forth in this Escrow
Agreement only. The Escrow Agent is not responsible for any provisions of the
Master Agreement which purport or imply any duties on the Escrow Agent.
17. Amendment. This Escrow Agreement cannot be terminated, altered or
amended except pursuant to an instrument in writing signed by Buyer, the
Designated Stockholder and the Escrow Agent.
18. Interpretation; Absence of Presumption. (a) For the purposes
hereof, (i) words in the singular shall be held to include the plural and vice
versa and words of one gender shall be held to include the other gender as the
context requires, (ii) the terms "hereof," "herein," "hereto," and "herewith"
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Article, Section and paragraph references are to the Articles,
Sections and paragraphs to this Agreement unless otherwise specified, (iii) the
word "including" and words of similar import when used in this Agreement shall
mean "including, without limitation," unless the context otherwise requires or
unless otherwise specified, (iv) the word "or" shall not be exclusive, and (v)
provisions shall apply, when appropriate, to successive events and transactions.
This Agreement shall be construed without regard to any presumption or rule
requiring construction or interpretation against the party drafting or causing
any instrument to be drafted.
19. Severability. Any provision hereof which is invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions hereof.
20. Right of Escrow Agent to Act in Good Faith. The Escrow Agent shall
not be liable for any action taken by it in good faith and believed by it to be
authorized or within the rights or powers conferred upon it by this Escrow
Agreement, and may consult with counsel of its own choice and shall have full
and complete authorization and protection for any action taken or suffered by it
hereunder in good faith and in accordance with the opinion of such counsel. The
Escrow Agent shall not incur any liability for following the instructions herein
contained or expressly provided for, or written instructions given by the other
parties hereto.
21. Resignation of Escrow Agent. The Escrow Agent may resign and be
discharged from its duties or obligations hereunder by giving notice in writing
of such resignation specifying a date when such resignation shall take effect,
which date shall be a date not less than 60 days after the date of the notice in
writing of such resignation. In the event of such resignation, a successor
Escrow Agent shall be agreed upon between Buyer and the Designated Stockholder
and shall be a bank having trust powers. If Buyer and the Designated Stockholder
are unable to agree upon an acceptable successor Escrow Agent, then application
shall be made to the Supreme Court of the State of New York for the appointment
of such successor. After the
-6-
date designated for the effectiveness of resignation, the Escrow Agent shall
have no duties hereunder except to hold the Escrowed Cash and investments until
a successor is appointed and to deliver to such successor the Escrowed Cash and
investments in an orderly and timely manner.
22. Indemnification of Escrow Agent. Buyer and the Principal
Stockholders shall jointly indemnify and hold harmless the Escrow Agent against
any loss, liability or expense incurred without gross negligence or willful
misconduct on the part of the Escrow Agent, arising out of or in connection with
its entering into this Escrow Agreement and carrying out its duties hereunder,
including the costs and expenses of defending itself against any claim of
liability with respect thereto and costs and expenses of enforcing this right of
indemnification. Anything in this Escrow Agreement to the contrary
notwithstanding, in no event shall the Escrow Agent be liable for special,
indirect or consequential loss or damage of any kind whatsoever (including, but
not limited to, lost profits), even if the Escrow Agent has been advised of the
likelihood of such loss or damage and regardless of the form of action. This
right of indemnification shall survive the termination of this Escrow Agreement.
23. Authority of Designated Stockholder. The Designated Stockholder has
been authorized and empowered to act on behalf of the Principal Stockholders.
Buyer and the Escrow Agent are entitled to rely upon any action by the
Designated Stockholder. If the Designated Stockholder resigns or otherwise is
unable to serve as Designated Stockholder, the Principal Stockholders shall
select a replacement, who shall be a Principal Stockholder or a representative
of a Principal Stockholder. The former Designated Stockholder shall provide
written notification to Buyer and the Escrow Agent of the replacement of a
Designated Stockholder and the identity of the substitute Designated
Stockholder.
24. Writs, Orders, Judgments or Decrees. If any property subject hereto
is at any time attached, garnished or levied upon, under any court order, or in
case the payment, assignment, transfer, conveyance or delivery of any such
property shall be stayed or enjoined by any court order, or in case any order,
judgment or decree shall be made or entered by any court affecting the property,
or any party thereof, then in any of such events the Escrow Agent is authorized,
in its sole discretion, to rely upon and comply with any such order, writ,
judgment or decree, which it is advised by legal counsel (of its own choosing)
is binding upon it, and if it complies with any such order, writ, judgment or
decree, it shall not be liable to any of the parties hereto or any other person,
firm or corporation by reason of such compliance, even though such order, writ,
judgment or decree may be subsequently reversed, modified, annulled, set aside
or vacated.
25. Disputes. In the event any disagreement among the parties hereto
results in adverse claims or demands being made in connection with the property
held by the Escrow Agent, or in the event the Escrow Agent in good faith is in
doubt as to what action it should take hereunder, the Escrow Agent shall
maintain the property until the Escrow Agent has received (a) an enforceable
final order of a court of competent jurisdiction directing delivery of such
property or (b) a written agreement of all of the parties hereto (other than the
Escrow Agent) directing delivery of the property. The Escrow Agent shall deliver
the property in accordance with such order or agreement. The foregoing
notwithstanding, the Escrow Agent may, but shall not be
-7-
required to, interplead such property at the expense of Buyer with any court of
competent jurisdiction.
26. Headings. The section and other headings contained in this
Agreement are inserted for convenience of reference only and shall not affect
the meaning or interpretation of this Agreement.
27. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties hereto and delivered to the other parties hereto. Copies of executed
counterparts transmitted by telecopy, telefax or other electronic transmission
service shall be considered original executed counterparts for purposes of this
Section, provided that receipt of copies of such counterparts is confirmed.
28. Confirmation of Instructions. (a) In the event funds transfer
instructions are given (other than in writing at the time of execution of this
Escrow Agreement), whether in writing, by telecopier or otherwise, the Escrow
Agent is authorized to seek confirmation of such instructions by telephone
call-back to the person or persons designated on Schedule II hereto, and the
Escrow Agent may rely upon the confirmations of anyone purporting to be the
person or persons so designated. The persons and telephone numbers for
call-backs may be changed only in a writing actually received and acknowledged
by the Escrow Agent. The parties to this Agreement acknowledge that such
security procedure is commercially reasonable.
(b) It is understood that the Escrow Agent and the beneficiary's
bank in any funds transfer may rely solely upon any account numbers or similar
identifying number provided by any of the other parties hereto to identify (i)
the beneficiary, (ii) the beneficiary's bank, or (iii) an intermediary bank. The
Escrow Agent may apply any of the Escrowed Cash for any payment order it
executes using any such identifying number, even when its use may result in a
person other than the beneficiary being paid, or the transfer of funds to a bank
other than the beneficiary's bank, or an intermediary bank designated.
29. Assignments. Neither this Escrow Agreement nor any right or
interest hereunder may be assigned in whole or in part by any party without the
prior consent of the other parties.
-8-
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be duly executed as of the date first above written.
[BUYER]
By:___________________________
Name:
Title:
[DESIGNATED STOCKHOLDER]
By:____________________________
Name:
Title:
________________________________,
as Escrow Agent
By:_____________________________
Name:
Title:
[PRINCIPAL STOCKHOLDERS]
By:_____________________________
Name:
Title:
-9-
SCHEDULE I
Principal Stockholder Pro Rata Share
SCHEDULE II
Telephone Number(s) for Call-Backs and
Person(s) Designated to Confirm Funds Transfer
Instructions
If to Buyer:
Name Telephone Number
If to Designated Stockholder:
Name Telephone Number
ANNEX D
[FORM OF REFUNDING AGREEMENT AND GUARANTY]
Refunding Agreement and Guaranty, dated as of ____________, 1998 by and
among ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (each, a Guarantor and
collectively, the Guarantors"), for the benefit of the Obligees as defined
below. Capitalized terms used herein without definition shall have the meanings
assigned to them in the Master Agreement (as defined below).
WHEREAS, the Estate of ▇▇▇▇ ▇▇▇▇▇▇▇ (the "Estate"), together with the
other stockholders of ▇▇▇▇ I Communications, Inc. (collectively, "Sellers"),
have entered into a Master Agreement, dated as of May ____, 1998 (the "Master
Agreement"), by and among Sellers, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, as Designated
Stockholder, and Buyer (as defined therein);
WHEREAS, pursuant to the Master Agreement and the Purchase Agreements,
the Estate will receive substantial proceeds from the sale of the Shares to
Buyer, and, as beneficiaries of the Estate, the Guarantors are expected to
receive substantial benefits from such sale; and
WHEREAS, it is a condition to Buyer's obligation to consummate the
transactions consummated by the Master Agreement that the Guarantors shall have
executed and delivered this Refunding Agreement and Guaranty.
NOW, THEREFORE, in order to induce Buyer to consummate the transactions
consummated by the Master Agreement and the Purchase Agreements, and in
consideration of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each Guarantor, each Guarantor
hereby agrees as follows:
1. Guaranty of Payment. Each Guarantor hereby, jointly and severally
with each other Guarantor, unconditionally and irrevocably guarantees to each
Buyer and its successors, endorsees, transferees and assigns (collectively, the
"Obligees") the full and punctual performance and payment when due of any
obligation of the Estate (as a Seller or Principal Stockholder) arising out of,
under, or in connection with the Master Agreement (including Articles IX and X
thereof) (collectively, the "Guaranteed Obligations") owing to such Obligee,
without regard to any counterclaim, set-off, deduction or defense of any kind
which any Guarantor may have or may assert, and without abatement, suspension,
deferment or diminution on account of any occurrence whatsoever, provided,
however, that no Guarantor shall be liable for any amount hereunder unless,
within 10 days following (A) entry of a final judgment by a court or arbitral
tribunal of competent jurisdiction in respect of payments owed by Sellers or the
Principal Stockholders (or any of them) to Buyer or (B) the execution by the
Designated Stockholder or the Estate of a document acknowledging liability to
Buyer, any Principal Stockholder shall have failed to pay the full amount of
such Guaranteed Obligations. Such guaranty is an absolute, unconditional,
continuing guaranty of payment and not of collectibility, and is in no way
conditioned or contingent upon any attempt to collect from the Estate, from any
other Guarantor or
from any other person, firm or corporation obligated with respect to, or any
other guarantor of, the Guaranteed Obligations or upon any other condition or
contingency. Each Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the Estate, any Guarantor
or any guarantor with respect to the Guaranteed Obligations. The liability of
any Guarantor shall not be deemed modified, released or otherwise affected by
any payment or payments at any time or from time to time in respect of the
Guaranteed Obligations (x) made by the Estate, any Guarantor, any other
guarantor or any other person or (y) received or collected by any Obligee from
the Estate, any Guarantor, any other guarantor or any other person by virtue of
any action or proceeding or any set-off or appropriation or application, and
such Guarantor shall remain liable for the Guaranteed Obligations, until all
Guaranteed Obligations indefeasibly are paid in full. Notwithstanding anything
in this Refunding Agreement and Guaranty to the contrary, no Guarantor shall be
liable hereunder for any amount in excess of the aggregate amount of all
distributions made by the Estate to such Guarantor from and after the date
hereof. For purposes of this Refunding Agreement and Guaranty, the term "final
judgment" means a judgment or order of a court as entered on the docket which
(i) shall not have been revered, stayed, modified or amended and as to which the
time to appeal, or to seek review or rehearing, shall have expired and as to
which no appeal or petition for review, rehearing or certiorari is pending or
(ii) if appealed, shall have been affirmed (or the appeal denied or dismissed)
and the time to appeal from such affirmance or to seek review or rehearing
thereof shall have expired or as to which no further hearing, appeal or petition
for certiorari can be taken or granted.
2. Costs and Expenses. Each Guarantor will pay all reasonable costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses) incurred by or on behalf of each Obligee in enforcing the obligations
of such Guarantor hereunder.
3. Obligations of Guarantors Not Affected. This Refunding Agreement and
Guaranty and the obligations of each Guarantor hereunder shall remain in full
force and effect without regard to and shall not be affected or impaired in any
respect by:
(a) any transfer, modification or cancellation of or supplement to
the Master Agreement, any Purchase Agreement, the Letter of Credit or
any other agreement or document in respect of the Guaranteed
Obligations (other than this Refunding Agreement and Guaranty in
respect of such Guarantor) or any other guaranty agreement with respect
to the Guaranteed Obligations;
(b) the invalidity, unenforceability or unavailability of any
Transaction Document;
(c) any exercise, non-exercise, waiver, release or cancellation by
any Obligee of any right, remedy, power or privilege under or in
respect of the Guaranteed Obligations, or (ii) any Transaction
Document;
(d) any consent, extension or other action, or inaction under or in
respect of the Guaranteed Obligations, or any Transaction Document;
(e) any change in the corporate existence, structure or ownership
of the Estate or any or all of the Guarantors, or any insolvency,
bankruptcy, liquidation, reorganization, arrangement, readjustment,
composition, dissolution, receivership or other similar proceeding
involving or affecting the Estate, any Guarantor, or any or all assets
of the Estate or any Guarantor; or
(f) any other cause or circumstance whatsoever, including, without
limitation, any other act, thing, omission or delay which would or
might in any manner or to any extent vary the risk of any or all of the
Guarantors or which would or might otherwise operate as a discharge of
any or all of the Guarantors as a matter of law;
whether or not any or all of the Guarantors shall have notice or knowledge of
any of the foregoing and whether or not the Obligees shall have reserved their
rights hereunder. Each Guarantor assumes the responsibility for being and
keeping informed of the financial condition of the Estate and of all other
circumstances bearing upon the risk of non-payment of the Guaranteed
Obligations, and agrees that the Obligees shall have no duty to advise such
Guarantor of information regarding any such condition or circumstance, or any
change in such condition or circumstance.
4. Waiver. Without limitation of anything else contained in this
Refunding Agreement and Guaranty, the following are unconditionally waived by
each of the Guarantors to the extent permitted by applicable law: (a) notice of
any of the matters referred to in Paragraph 3 hereof, (b) all notices which may
be required by statute, rule of law or otherwise to preserve any rights of any
Obligee against the Estate, any or all of the Guarantors or other guarantors,
including, without limitation, presentment to, demand of payment from, and
protest to the Estate, other guarantors or any or all of the Guarantors, and
(c) any right to the enforcement, assertion, exercise or non-exercise by any
Obligee of any right, power, or remedy conferred in the Transaction Documents,
any document related thereto or any other agreement or document whatsoever. No
failure to exercise and no delay in exercising, on the part of the any Obligee,
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege preclude
any other or further exercise thereof, or the exercise of any other power or
right. The rights and remedies herein provided are cumulative and not exclusive
of any rights or remedies provided by law.
5. No Subrogation; Subordination. Notwithstanding any payment or
payments made by any or all of the Guarantors or any setoff or application of
funds of any Guarantor by any Obligee, any right of subrogation, reimbursement,
or indemnity of any kind arising in favor of any Guarantor against the Estate,
any other Guarantor, or any collateral, security or guaranty or right of offset
held by any Obligee for the payment of the Guaranteed Obligations shall be
postponed until all amounts owing to each Obligee by the Estate for or on
account of the Guaranteed Obligations are paid in full, and any such right shall
be subject and subordinate to such payment in full. Any and all other present
and future debts and obligations of the Estate or any Guarantor to another
Guarantor are hereby waived and postponed in favor of and subordinated to the
full payment and performance of the Guaranteed Obligations.
6. Notices. [INCLUDE A NOTICE PROVISION]
7. Miscellaneous. Neither this Refunding Agreement and Guaranty nor any
term hereof may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. No amendment, modification,
waiver, discharge or termination of any term hereunder shall be effective
without the written consent of the Obligees. All of the terms of this Refunding
Agreement and Guaranty shall be binding upon and inure to the benefit of the
parties hereto and their respective representatives, successors, endorsees,
transferees and assigns; provided, however, that no Guarantor may assign by
operation of law or otherwise any of its rights or obligations hereunder without
the consent of the Obligees.
8. Severability. The invalidity or unenforceability of any provision of
this Refunding Agreement and Guaranty shall not affect the validity or
enforceability of any other provision of this Refunding Agreement and Guaranty,
each of which shall remain in full force and effect.
9. Applicable Law. This Refunding Agreement and Guaranty shall be
governed by and construed in accordance with the internal laws of the State of
New York.
10. Each Guarantor hereby consents to the exclusive jurisdiction of the
United States District Court for the Southern District of New York and any of
the courts of the State of New York located in New York County (other than
Surrogate's Court) having subject matter jurisdiction in a dispute arising under
this Refunding Agreement and Guaranty or the Master Agreement and waives any
objection to the personal jurisdiction or venue as to such action brought in
such courts, and the Guarantor further agrees that service of process or notice
in any such action shall be effective if in writing and sent by hand or
overnight courier service as provided in Section 11.9 of the Master Agreement.
11. Applicable Law. This Refunding Agreement and Guaranty shall be
governed by and construed in accordance with the internal laws of the State of
New York.
12. Counterparts. This Refunding Agreement and Guaranty may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement.
______________________________
▇▇▇▇ ▇▇▇▇▇▇
______________________________
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
______________________________
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
ANNEX E
[LETTERHEAD OF ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP]
Journal Register Company
Ladies and Gentlemen:
We have acted as special counsel to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇ ▇▇▇▇▇▇, as executors (the "Executors") of the Estate of ▇▇▇▇ ▇▇▇▇▇▇▇
(the "Estate"), in connection with the transaction contemplated by the Stock
Purchase Agreement, dated as of May, , 1998 (the "Agreement") by and among
▇▇▇▇▇▇▇, ▇▇▇▇ ▇ Communications, Inc., a _________ Corporation and ▇▇▇▇ ▇▇▇▇▇▇▇
Enterprises, Ltd., a _____________________ Corporation,
__________________________ (the "Buyer"), and the Executors. We are furnishing
this opinion to you pursuant to Sections ____________ of the Agreement. All
capitalized terms used and not specifically defined herein shall have the
meanings ascribed to such terms in the Agreement.
In connection with this opinion, we have reviewed executed copies of
the Agreement and each of the following: ____________ (the "Related
Agreements"). We have also reviewed originals, telecopies or copies of such
other documents as we have deemed necessary or appropriate as a basis for the
opinions set forth below. As to questions of fact material to this opinion, we
have relied to the extent we have deemed appropriate upon, and have assumed the
correctness of, the representations and warranties of the Sellers contained in
the Agreement, and certificates of representatives of the Sellers, of the
Executors and of public officials. We have made such investigations of law as we
have deemed necessary or appropriate for purposes of this opinion and have
assumed the genuineness of all signatures and the authenticity of all documents
submitted to us as original documents. We have also assumed that all documents
referred to herein which are to have been executed by any of the Buyers of their
Affiliates have been duly authorized, executed and delivered by such entity and
constitute the legal, valid and binding obligations of such entity.
Based upon and subject to the foregoing, and subject to the
qualifications, assumptions and exceptions herein contained, it is our opinion
that:
1. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ are the
currently acting Executors of the Estate.
2. The Executors have all requisite power and authority to
execute, deliver and perform their obligations under, and to consummate the
transactions contemplated by, the
▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP
June __, 1998
Page 6
Agreement and to bind the Estate. The execution and delivery of the Agreement by
the Executors, and the consummation of the transactions provided for therein,
have been duly authorized by all requisite action on the part of the Executors.
The Agreement is, and each of the Related Agreements is, the legal, valid and
binding obligations of the Executors, enforceable against the Estate in
accordance with their terms.
3. Neither the execution and delivery of the Agreement and the
Related Agreements by the Executors, nor the consummation of the transactions
contemplated thereby, (a) violates or conflicts with the Last Will and Testament
of ▇▇▇▇ ▇▇▇▇▇▇▇ or any other agreements or obligations currently in effect or
reasonably anticipated; or (b) except as set forth on Schedule __ to the
Agreement, requires the Executors to obtain any authorization, consent, approval
or waiver from, or to make any filing with, any Person, court, public body or
authority.
Our opinion above as the enforceability of the agreements
referred to in paragraph 1, above, is subject to the qualification that we
express no opinion as to whether any court other than a court of the State of
New York or federal court sitting in the State of New York and applying New York
law would give effect (A) to the choice of New York law to govern any such
document, or (B) to any provision as to forum selection or as to the submission
to jurisdiction.
We are attorneys admitted to practice in the State of New York,
and the opinions expressed herein and any references to statutes, rules or
regulations are limited to the law of the State of New York and the federal laws
of the United States of America. We do not express any opinion herein with
respect to any other law.
This opinion is being furnished only to the addresses and are
solely for their benefit in connection with the above transaction and may not be
relief upon for any other purpose, or relied upon by any other person, firm or
corporation for any purpose, without our prior written consent. This opinion may
not be relief upon unless and until the Final Closing occurs in accordance with
the terms and conditions of the Agreement. We have no obligation to modify,
amend or update this opinion set forth herein for any reason.
Very truly yours,
ANNEX E -- CONTINUED
[Letterhead of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP]
Journal Register Company
State Street Square
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
We are acting as special counsel to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and
Royal ▇. ▇▇▇▇▇▇▇▇, the Co-Trustees of certain trusts established by ▇▇▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇ (the "Co-Trustees" and "Trust Agreements") in
connection with the transaction contemplated by the Master Agreement, dated as
of May __, 1998, (the "Agreement") by and among the Sellers (as defined
therein), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, as Designated Stockholder and Journal Register
Company (the "Buyer"). We are furnishing this opinion to our pursuant to
Sections ____ of the Agreement. All capitalized terms used and not specifically
defined herein shall have the meanings ascribed to such terms in the Agreement.
In connection with this opinion, we have reviewed executed copies of
the Agreement and the Stock Purchase Agreement and Receipt, Release,
Indemnification and Refunding Agreement (the "Related Agreements"). We have also
reviewed originals, telecopies or copies of such other documents as we have
deemed necessary or appropriate as a basis for the opinions set forth below. As
to questions of fact material to this opinion, we have relied to the extent we
have deemed appropriate upon, and have assumed the correctness of, the
representations and warranties of the Sellers contained in the Agreement, and
certificates of representatives of the Sellers, of the Co-Trustees and of public
officials. We have made such investigations of law as we have deemed necessary
or appropriate for purposes of this opinion and have assumed the genuineness of
all signatures and the authenticity of all documents submitted to us as original
documents. We have also assumed that all documents referred to herein which are
to have been executed by any of the Buyers or their Affiliates have been duly
authorized, executed and delivered by such entity and constitute the legal,
valid and binding obligations of such entity.
Based upon and subject to the foregoing, and subject to the
qualifications, assumptions and exceptions herein contained, it is our opinion
that:
1. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and Royal ▇. ▇▇▇▇▇▇▇▇ are the
currently acting co-Trustees of the Trust Agreements.
2. The Co-Trustees have all requisite power and authority to
execute, deliver and perform their obligations under, and to
consummate the transactions contemplated by, the Agreement and to
bind the Trusts. The execution
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
June __, 1998
Page 2
and delivery of the Agreement, and any Stock Purchase Agreement
to which the Co-Trustees are parties, by the Co-Trustees, and the
consummation of the transactions provided for therein, have been
duly authorized by all requisite action on the part of the
Co-Trustees. The Agreement is, and each of the Related Agreements
is, the legal, valid and binding obligation of the Co-Trustees,
enforceable against the Trusts of which the Co-Trustees are
acting in accordance with their terms.
3. Neither the execution and delivery of the Agreement and the
Related Agreements by the Co-Trustees, nor the consummation of the
transaction contemplated thereby (a) violates or conflicts with
the Trust Agreements or any other agreements or obligations
currently in effect or reasonably anticipated; or (b) except as
set forth in Schedule __ to the Agreement requires the Co-Trustees
to obtain any authorization, consent, approval or waiver form, or
to make any filing with, any person, court, public body or
authority.
Our opinion above as to the enforceability of the agreements referred
to in paragraph 1 above, is subject to the qualification that we express no
opinion as to whether any court other than a court of the State of California,
or federal court sitting in the State of California and applying California law
would give effect (A) to the choice of California law to govern any such
document, or (B) to any provision as to forum selection or as to the submission
to jurisdiction.
We are attorneys admitted to practice in the State of California, and
the opinions expressed herein and any reference to statutes, rules or
regulations are limited to the law of the State of California and the federal
law of the United States of America. We do not express any opinion herein with
respect to any other law.
The opinions rendered herein are further subject to the following
limitations, qualifications and exceptions:
1. The effect of applicable bankruptcy, reorganization,
insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting the rights and remedies of creditors or
secured parties (including, without limitation, the effect of
statutory or other laws regarding fraudulent or preferential
transfers).
2. Limitations which may arise under general principles of equity
including concepts of materiality, reasonableness, good faith and
fair dealing (regardless of whether considered in a proceeding at
laws or in equity).
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
June __, 1998
Page 3
3. Limitations upon the availability of specific equitable
remedies such as injunctive relief and the remedy of specific
performance which may arise under general principles of equity.
This opinion is being furnished only to the addresses and is solely for
their benefit in connection with the above transaction and may not be relied
upon for any other purpose, or relied upon by any other person, firm or
corporation for any purpose, without our prior written consent. This opinion may
not be relied upon unless and until the Final Closing occurs in accordance with
the terms and conditions of the Agreement. We have no obligation to modify,
amend or update this opinion set forth herein for any reason.
Very truly yours,
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
ANNEX F
[FORM OF IRREVOCABLE POWER OF ATTORNEY]
KNOW ALL MEN BY THESE PRESENTS, that [Name of Seller] hereby constitutes
and appoints, as of the date hereof, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ to be the Designated
Stockholder (the "Designated Stockholder"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to be the
successor Designated Stockholder in the event ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ is unable or
unwilling to serve as the Designated Stockholder (in which event ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
shall be deemed the Designated Stockholder), pursuant (i) the Master Agreement
(the "Master Agreement"), by and among the Estate of ▇▇▇▇ ▇▇▇▇▇▇▇, the FF&E
Trust, the Granny ▇▇▇▇▇▇ Trusts, Parent Enterprises, Inc., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, the ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Cutt
1995 Revocable Trust and the Journal Register Company and certain of its
affiliated subsidiaries, and (ii) the Purchase Agreements (as such term is
defined in the Master Agreement) and hereby appoint the Designated Stockholder
its true and lawful attorney-in-fact and agent with full power of substitution
and resubstitution, for it and in its name, place and stead, in any and all
capacities, to take any action required pursuant to the Master Agreement
(including, but not limited to, Section 11.10 of the Master Agreement) and the
Purchase Agreements and to sign any and all documents pertaining to such
agreements, including any certificates required to be executed in connection
therewith and any amendments thereto, granting unto such attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as it might or could do in person, thereby ratifying and
confirming all that such attorney-in-fact and agent or his respective
substitute, may lawfully do or cause to be done by virtue hereof. This power of
attorney is an agency coupled with an interest and all authority conferred
hereby shall be irrevocable.
