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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is entered into as of February
7, 1997, among ▇▇▇▇▇ Advertising Company, a Delaware corporation ("BUYER"), and
the Persons listed on Schedules 3.2 and 4.2 hereto as sellers (each, a "SELLER"
and collectively, "SELLERS").
R E C I T A L S
WHEREAS, Penn Advertising, Inc., a Delaware corporation
("COMPANY"), engages in the outdoor advertising business and Appleton, Inc., a
Delaware corporation ("APPLETON"), owns certain shares of stock of Company.
WHEREAS, the Appleton Sellers own the equity securities of
Appleton listed opposite their names on Schedule 4.2 hereto (the "APPLETON
SHARES") and the Penn Sellers and Appleton own the equity securities of Company
listed opposite their names on Schedule 3.2 hereto (the "PENN SHARES").
WHEREAS, Sellers desire to sell, and Buyer desires to buy, the
Appleton Shares and the Penn Shares held by the Penn Sellers (collectively, the
"PURCHASED STOCK") for the consideration described herein.
WHEREAS, concurrently with the closing of the acquisition of
the Purchased Stock, all indebtedness for borrowed money of Company and Appleton
will be repaid in full.
WHEREAS, Sellers have invited Buyer to perform and Buyer has
performed certain due diligence and business investigations with respect to
Appleton, Company and its Subsidiary, with the intention that Buyer form its own
conclusions regarding the condition and value of the business, property,
liabilities, contracts and related matters of Appleton, Company and its
Subsidiary pursuant to the parties' express intention that the transactions
contemplated hereunder be without representation or warranty by Sellers, express
or implied, except as specifically set forth herein.
A G R E E M E N T
In consideration of the mutual promises contained herein and
intending to be legally bound the parties agree as follows:
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ARTICLE I
DEFINITIONS/PURCHASE & SALE/CLOSING
1.1 DEFINITIONS.
As used in this Agreement and the Exhibits and Schedules
delivered pursuant to this Agreement, the following definitions shall apply.
"ACTION" means any action, complaint, petition, investigation,
suit or other proceeding, whether civil or criminal, in law or in equity, or
before any arbitrator or Governmental Entity.
"AFFILIATE" means a Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, a specified Person.
"AGREEMENT" means this Stock Purchase Agreement by and among
Buyer and Sellers as amended or supplemented together with all Exhibits and
Schedules attached or incorporated by reference.
"APPLETON" means Appleton, Inc., a Delaware corporation.
"APPLETON INDEBTEDNESS" means the indebtedness of Appleton
owed to the Persons listed on Schedule 4.14, including principal, interest and
fees, if any.
"APPLETON SELLERS" means the holders of the Appleton Shares.
"APPLETON SHARES" means the equity securities of Appleton
listed opposite the names of the Appleton Sellers on Schedule 4.2 hereto.
"APPLICABLE SHARE" means, with respect to the amount to be
received or paid by Sellers under this Agreement, the respective portion thereof
to which a particular Seller is entitled or for which a particular Seller is
responsible, as the case may be, which shall be the proportions listed opposite
the name of such Seller on Schedules 3.2 or 4.2, as applicable.
"APPROVAL" means any approval, authorization, consent,
qualification or registration, or any waiver of any of the foregoing, required
to be obtained from, or any notice, statement or other communication required to
be filed with or delivered to, any Governmental Entity or any other Person.
"AREA" means the area in which the Business is conducted on
the Closing Date.
"ASSOCIATE" of a Person means:
(i) a corporation or organization (other than Company or a
party to this Agreement) of which such person is an officer or partner or is,
directly or indirectly, the beneficial owner of 10% or more of any class of
equity securities;
(ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar capacity; and
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(iii) any relative or spouse of such person or any relative of
such spouse who has the same home as such person or who is a director or officer
of Company or any of its Affiliates.
"BUSINESS" means the business of Company and its Subsidiary
taken as a whole, and shall be deemed to include all of the following aspects of
such business: income, operations, condition (financial or other), and assets
and properties (including without limitation goodwill).
"BUYER" has the meaning set forth in the Preamble hereto.
"BUYER'S AUDITORS" means KPMG Peat Marwick LLP, independent
public accountants to Buyer.
"CLOSING" means the consummation of the purchase and sale of
the Purchased Stock under this Agreement as described in Section 1.4.
"CLOSING DATE" means the date of the Closing.
"CLOSING DATE BALANCE SHEET" has the meaning set forth in
Section 1.5(a).
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the Recitals to this
Agreement.
"COMPANY'S AUDITORS" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ & Associates,
independent accountants to Company.
"CONTRACT" means any agreement, arrangement, bond, commitment,
franchise, indemnity, indenture, instrument, lease, license or understanding,
whether or not in writing.
"CURRENT ASSETS" means those categories of items identified as
current assets in Schedule 1.5B, determined in accordance with GAAP,
consistently applied with past practices of the Company.
"CURRENT LIABILITIES" means those categories of items
identified as current liabilities in Schedule 1.5B, determined in accordance
with GAAP, consistently applied with past practices of the Company.
"DISCLOSURE SCHEDULES" means the Schedules hereto delivered by
Sellers to Buyer, or Buyer to Sellers, as the case may be.
"ENCUMBRANCE" means any claim, charge, easement, encumbrance,
lease, covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise, except
for any restrictions on transfer generally arising under any applicable federal
or state securities law, except that "Encumbrance" does not, however, include
any of such items that (i) is reflected in the financial statements referred to
herein that have been delivered to Buyer, (ii) is not material in amount, (iii)
constitutes a statutory lien arising in the ordinary course of business, (iv)
does not in the aggregate materially detract from the value of the property or
materially detract from or interfere with the use of property in the ordinary
conduct of business as presently conducted, or (v) does not otherwise materially
impair the Business or have a Material Adverse Effect.
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"ENVIRONMENTAL LAWS" has the meaning set forth in Section
3.15.
"EQUITY SECURITIES" means any capital stock or other equity
interest or any securities convertible into or exchangeable for capital stock or
any other rights, warrants or options to acquire any of the foregoing
securities.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the related regulations and published interpretations.
"ERISA AFFILIATE" has the meaning set forth in Section
3.14(c).
"ESCROW ACCOUNTS" has the meaning set forth in Section 1.3.
"ESCROW AGENT" means Corestates Bank, N.A.
"ESCROW AGREEMENT" means that certain Escrow Agreement dated
as of the Closing Date among Buyer, Sellers and Escrow Agent, substantially in
the form of Exhibit C hereto.
"ESCROW FUND" has the meaning set forth in Section 1.3.
"FINANCIAL STATEMENTS" has the meaning set forth in Section
3.4(a).
"FIRST REPRESENTATIVE" has the meaning set forth in Section
12.13.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"GOVERNMENTAL ENTITY" means any government or any agency,
bureau, board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state or
local, domestic or foreign.
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the related regulations and published
interpretations.
"INDEMNIFIABLE CLAIM" means any Loss for or against which any
party is entitled to indemnification under this Agreement; "INDEMNIFIED PARTY"
means the party entitled to indemnity hereunder; and "INDEMNIFYING PARTY" means
the party obligated to provide indemnification hereunder.
"INTANGIBLE PROPERTY" means any trade secret, secret process
or other confidential information or know-how and any and all Marks.
"IRS" means the Internal Revenue Service or any successor
entity.
"LAW" means any constitutional provision, statute or other
law, rule, regulation, or interpretation of any Governmental Entity and any
Order.
"LABOR MATTERS" has the meaning set forth in Section 3.9.
"LOSS" means any action, cost, damage, disbursement, expense,
liability, loss, deficiency, diminution in value, obligation, penalty or
settlement of any kind or nature, whether
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foreseeable or unforeseeable, including but not limited to, interest or other
carrying costs, penalties, legal, accounting and other professional fees and
expenses incurred in the investigation, collection, prosecution and defense of
claims and amounts paid in settlement, that may be imposed on or otherwise
incurred or suffered by the specified person.
"▇▇▇▇" means any brand name, copyright, patent, service ▇▇▇▇,
trademark, tradename, and all registrations or application for registration of
any of the foregoing.
"MATERIAL ADVERSE EFFECT" means a fact, circumstance or event
which has had or would reasonably be expected to have, directly or indirectly, a
material adverse effect on the Business.
"MATERIAL CONTRACT" has the meaning set forth in Section 3.6.
"NET TAX BENEFIT" has the meaning set forth in Section
11.3(j).
"NET WORKING CAPITAL" means Current Assets less Current
Liabilities.
"ORDER" means any decree, injunction, judgment, order, ruling,
assessment or writ.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"PENN INDEBTEDNESS" means the indebtedness of Company owed to
the Persons listed on Schedule 3.4, including principal, interest and fees, if
any.
"PENN SELLERS" means the holders of the Penn Shares other than
Appleton.
"PENN SHARES" means the equity securities of Company listed
opposite the names of the Penn Sellers on Schedule 3.2 hereto and the equity
securities of Company held by Appleton.
"PERMIT" means any license, permit, franchise, certificate of
authority, or order, or any waiver of the foregoing, required to be issued by
any Governmental Entity.
"PRE-CLOSING APPLETON TAXES" has the meaning set forth in
Section 11.3(e).
"PRE-CLOSING TAXES" has the meaning set forth in Section
11.3(e).
"PERSON" means an association, a corporation, an individual, a
partnership, a trust, a limited liability company or any other entity or
organization, including a Governmental Entity.
"PURCHASE PRICE" has the meaning set forth in Section 1.3.
"PURCHASED STOCK" means the shares of stock being sold
hereunder, comprised of the Appleton Shares and the Penn Shares owned by the
Penn Sellers. Purchased Stock does not include the Penn Shares owned by
Appleton, which Penn Shares will continue to be owned by Appleton.
"SECOND REPRESENTATIVE" has the meaning set forth in Section
12.13.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
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"SELLERS" means the Penn Sellers and the Appleton Sellers.
"SELLER REPRESENTATIVES" has the meaning set forth in Section
12.13.
"SUBSIDIARY" means, with respect to Company, any Person in
which Company has a direct or indirect voting equity or voting ownership
interest equal to or in excess of 50%.
"TARGET WORKING CAPITAL" means $5,000,000.
"TAX" means any foreign, federal, state, county or local
income, sales and use, excise, franchise, real and personal property, transfer,
gross receipt, capital stock, production, business and occupation, disability,
employment, payroll, severance or withholding tax or charge imposed by any
Governmental Entity, any interest and penalties (civil or criminal) related
thereto or to the nonpayment thereof, and any Loss in connection with the
determination, settlement or litigation of any Tax liability.
"TAX BENEFIT" has the meaning set forth in Section 11.3(h).
"TAX REIMBURSEMENT AMOUNT" has the meaning set forth in
Section 11.3(j).
"TAX RETURN" means a report, return or other information
required to be supplied to a Governmental Entity with respect to Taxes
including, where permitted or required, combined or consolidated returns for any
group of entities that includes Company or its Subsidiary.
"TCW ENTITIES" means TCW Capital, a California general
partnership, acting solely in its capacity as Investment Manager pursuant to an
Investment Management Agreement dated as of April 18, 1990 and TCW Special
Placements Fund III, a California limited partnership.
"WARN ACT" means the Worker Adjustment and Retraining
Notification Act of 1988, 29 U.S.C. 2101 et seq., as amended.
"WORKING CAPITAL AND CLAIMS ESCROW ACCOUNT" has the meaning
set forth in Section 1.3.
"WORKING CAPITAL ESCROW ACCOUNT" has the meaning set forth in
Section 1.3.
1.2 TRANSFER OF PURCHASED STOCK.
Each Seller covenants and agrees with Buyer that, subject to
the terms and conditions of this Agreement, on the Closing Date, such Seller
shall sell and deliver to Buyer, and Buyer shall purchase from such Seller, all
right, title, and interest, legal and equitable, in and to the Purchased Stock
owned by such Seller and listed opposite such Seller's name as being purchased
by Buyer on Schedules 3.2 and 4.2 hereof in exchange for payment of the Purchase
Price in accordance with Section 1.3 hereof. Each Seller shall deliver the
certificates evidencing the Purchased Stock owned by such Seller to Buyer at the
Closing. The certificates will be properly endorsed for transfer to or
accompanied by a duly executed stock power in favor of Buyer or its nominee as
Buyer may have directed prior to the date hereof, otherwise in a form acceptable
for transfer on the books of the Company or Appleton, as the case may be.
Sellers will pay any Taxes payable with respect to the transfer of the Purchased
Stock.
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1.3 PURCHASE OF THE PURCHASED STOCK BY BUYER/
PURCHASE PRICE.
Subject to the terms and conditions of this Agreement, Buyer
agrees to (i) acquire the Purchased Stock from Sellers for an aggregate amount
of $167,000,000 (the "PURCHASE PRICE") and (ii) pay in immediately available
funds the Purchase Price at the Closing as follows: (a) pay to Escrow Agent an
amount equal to $3,500,000 (the "ESCROW FUND") for deposit in two escrow
accounts, one of which shall initially contain $500,000 (the "WORKING CAPITAL
ESCROW ACCOUNT") and the other shall initially contain $3,000,000 (the "WORKING
CAPITAL AND CLAIMS ESCROW ACCOUNT" and together with the Working Capital Escrow
Account, the "ESCROW ACCOUNTS"); (b) pay to the holders of the Penn Indebtedness
the outstanding amount of the Penn Indebtedness as of the Closing Date set forth
in Schedule 3.4; (c) pay to the holders of the Appleton Indebtedness the
outstanding amount of the Appleton Indebtedness as of the Closing Date set forth
in Schedule 4.14; and (d) pay to each Seller such Seller's Applicable Share of
the portion of the Purchase Price remaining after the payments described in
clauses (a) and (b) above, provided that the amount paid to each Appleton Seller
shall be reduced by such Appleton Seller's pro rata share (based on the number
of Appleton Shares held by such Appleton Seller) of the amount paid under clause
(c) above. The Purchase Price is subject to adjustment in accordance with
Section 1.5 below.
1.4 THE CLOSING.
Delivery of the Purchased Stock and payment of the Purchase
Price (the "CLOSING") shall take place at the offices of O'Melveny & ▇▇▇▇▇ LLP,
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇. Unless the parties otherwise mutually
agree in writing, the Closing shall occur on March 31, 1997; provided that the
Closing Date may be extended by either party by written notice to the other to
not later than April 30, 1997 if ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act approval has not been
obtained by March 31, 1997.
1.5 PURCHASE PRICE ADJUSTMENT.
Following the Closing, the Purchase Price shall be adjusted as
provided herein to reflect changes in Net Working Capital from Target Working
Capital.
(a) Within 60 days following the Closing, Sellers shall cause
to be prepared and delivered to Buyer a consolidated balance sheet for Company
and its Subsidiary as of the Closing Date (the "CLOSING DATE BALANCE SHEET")
along with a statement setting forth the Net Working Capital as calculated based
on the Closing Date Balance Sheet, and the amount, if any, owing by either
Sellers or Buyer as a result of the Net Working Capital as calculated based on
the Closing Date Balance Sheet being either less or more, respectively than
Target Working Capital. The Closing Date Balance Sheet shall be prepared in
accordance with GAAP, consistently applied with past practices of the Company.
Buyer shall cause the Company and its Subsidiary and their respective employees
and agents to assist the Sellers in the preparation of the Closing Date Balance
Sheet and to provide the Sellers access at all reasonable times to the
personnel, properties, books and records of the Company and its Subsidiary for
such purpose.
(b) Within 30 days after receipt of the Closing Date Balance
Sheet, Buyer shall, in a written notice to Seller Representatives, either accept
the Closing Date Balance Sheet or describe in reasonable detail any proposed
adjustments and the reasons therefor. Buyer agrees that the proposed
adjustments, if any, will not involve changes in the methodology of the
practices of the Company which have been consistently applied in determining the
carrying value of the assets and liabilities (including valuation accounts,
pools and reserves and recognition of contingent liabilities) as set forth in
the balance
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sheet included in the December 31, 1996 unaudited financial statements. Any such
notice of proposed adjustment shall be effective only if the Company receives a
letter from Buyer's Auditors to the effect that such proposed adjustments are
required in order to state the recorded assets and liabilities in accordance
with GAAP, consistently applied with past practices of Company, in accordance
with the provisions of this Agreement, and shall include copies of all detailed
calculations and supporting work papers for such proposed adjustments. No such
written notice shall be delivered to Seller Representatives if the net proposed
adjustments in the aggregate amount to a reduction in Net Working Capital of
less than $100,000. If Seller Representatives have not received such notice of
proposed adjustments within such 30 day period, Buyer will be deemed irrevocably
to have accepted the Closing Date Balance Sheet.
(c) Buyer and Seller Representatives shall negotiate in good
faith to resolve any disputes over any proposed adjustments to the Closing Date
Balance Sheet, provided, that if any such dispute is not resolved within 30 days
following Seller Representatives' receipt of the proposed adjustments, Buyer and
Seller Representatives shall jointly select and engage within 5 days a national
independent public accounting firm to resolve such disputes, which resolution
shall be final and binding and not subject to review or challenge of any kind.
Such accounting firm shall conduct an audit of those items in the Closing Date
Balance Sheet subject to dispute and deliver written notice to each of Buyer and
Sellers within 45 days after its engagement, setting forth what adjustments, if
any, to the Closing Date Balance Sheet are required in accordance with GAAP,
consistently applied with past practices of the Company, to resolve any such
disputes; provided that no such report shall require any adjustments if all such
adjustments would result in an aggregate increase or decrease in Net Working
Capital of less than $100,000. If the aggregate amount of the adjustments
required by such report results in any reduction in Net Working Capital, Sellers
shall pay a portion of the fees and expenses of such accounting firm based on
the ratio that the aggregate amount of such reduction in Net Working Capital
bears to the aggregate amount of all disputed items. Buyer shall be responsible
for all other fees and expenses of such accounting firm.
(d) Upon acceptance of the Closing Date Balance Sheet by Buyer
or the resolution of any disputes, (i) if the Net Working Capital as calculated
based on the Closing Date Balance Sheet is greater than Target Working Capital
by more than $500,000, Buyer promptly, but no later than 5 days after such
acceptance, shall pay to each Seller such Sellers' Applicable Share of the
amount of such difference in excess of such $500,000, together with interest
thereon from the Closing Date to the date of payment thereof as determined
below, and (ii) if the Net Working Capital as calculated based on the Closing
Date Balance Sheet is less than Target Working Capital by more than $500,000,
each Seller promptly, but no later than 5 days after such acceptance, shall
cause Escrow Agent to pay to Buyer from the Escrow Fund such Seller's Applicable
Share of the amount of such difference in excess of such $500,000, together with
interest thereon from the Closing Date to the date of payment thereof as
determined below.
(e) For the purposes of this Section 1.5, interest will be
payable at the "prime" rate, as announced by The Chase Manhattan Bank from time
to time to be in effect, or, if that rate is no longer established or published,
a comparable interest rate. For purposes of this Section 1.5, interest shall be
calculated based on a 365 day year and the actual number of days elapsed. Any
payment required to be made by Sellers under this Section 1.5 shall be made only
from the Escrow Fund in accordance with the Escrow Agreement, and no Seller
shall have any obligation to make any payment under this Section 1.5 other than
from the Escrow Accounts.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES REGARDING SELLERS AND
PURCHASED STOCK
Except as otherwise indicated in the Disclosure Schedules,
each Seller, severally and not jointly, represents, warrants and agrees as
follows, as to itself and its investment, as of the date hereof; provided that
the representation set forth in Section 2.4 is made only by the Penn Sellers and
the representation set forth in Section 2.5 is made only by the Appleton
Sellers:
2.1 ORGANIZATION.
Such Seller (if not a natural person) is either a corporation,
trust or partnership, duly organized, validly existing and, to the extent
applicable, in good standing under the laws of its jurisdiction of organization.
Such Seller has all requisite corporate, trust or partnership, as the case may
be, power and authority and legal right to own its properties and to carry on
its business.
2.2 AUTHORIZATION.
The execution, delivery and performance of this Agreement by
such Seller (if not a natural person) has been duly and validly authorized by
all necessary corporate, trust or partnership action, as the case may be, on the
part of such Seller. This Agreement has been duly and validly executed and
delivered by such Seller and constitutes the legally valid and binding
obligation of such Seller, enforceable against it in accordance with its terms
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws and equitable principles
relating to or limiting creditors rights generally.
2.3 NO CONFLICTS.
The execution, delivery and performance of this Agreement by
such Seller will not violate, or constitute a breach or default (whether upon
lapse of time and/or the occurrence of any act or event or otherwise) under, the
charter documents, by-laws, partnership agreement or other organizational
documents of such Seller or any Contract of such Seller relating to its
investment in the Company, result in the imposition of any material Encumbrance
against any material asset or properties of such Seller, or violate any Law
applicable to such Seller, where such violation would have a material adverse
effect on the ability of such Seller to perform its obligations hereunder.
2.4 PENN SHARES.
After giving effect to the conversion of certain notes to be
converted prior to Closing and the issuance of certain shares to be issued prior
to Closing, such Penn Seller will own the Penn Shares set forth opposite its
name on Schedule 3.2 hereto beneficially and of record. Such Penn Seller's Penn
Shares are and will be owned free and clear of any Encumbrance. At the Closing,
Buyer will acquire good and marketable title to and complete ownership of such
Penn Seller's Penn Shares to be sold hereunder, free of any Encumbrance.
2.5 APPLETON SHARES.
Such Appleton Seller owns the Appleton Shares set forth
opposite its name on Schedule 4.2 hereto beneficially and of record. After
giving effect to the issuance of certain shares to be issued
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prior to Closing, Appleton will own the Penn Shares set forth opposite its name
on Schedule 3.2 hereto beneficially and of record and free and clear of any
Encumbrance. Such Appleton Seller's Appleton Shares are owned free and clear of
any Encumbrance. At the Closing, Buyer will acquire good and marketable title to
and complete ownership of such Appleton Seller's Appleton Shares to be sold
hereunder, free of any Encumbrance.
ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING COMPANY
Except as otherwise indicated in the Disclosure Schedules,
each Seller, severally and not jointly, represents, warrants and agrees as
follows, as to itself, to its investment and to Company and its Subsidiary, as
of the date hereof:
3.1 ORGANIZATION AND GOOD STANDING.
Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Company has all
requisite corporate power and authority and legal right to own its properties
and to carry on its Business as the same is now being conducted and as the same
will be conducted upon the consummation of the Closing. Penn Advertising of
Baltimore, Inc. is the only Subsidiary of Company. Schedule 3.1 correctly sets
forth the capitalization of such Subsidiary and Company's ownership interest
therein and the jurisdiction in which Company and its Subsidiary were organized.
Such Subsidiary is duly organized, validly existing and in good standing under
the laws of the State of Delaware. Such Subsidiary has all requisite corporate
power and authority and legal right to own its properties and to carry on its
respective business as now being conducted and as will be conducted upon
consummation of the Closing. Each of Company and its Subsidiary is duly
licensed, qualified to do business and in good standing in each jurisdiction
except where the failure to be so licensed or qualified would not have a
Material Adverse Effect. The current locations of Company's and its Subsidiary's
executive offices and principal places of business, as well as each jurisdiction
where Company and its Subsidiary is qualified to do business, are set forth in
Schedule 3.1.
3.2 COMPANY STOCK.
As of the Closing Date, the Penn Shares will constitute all of
the issued and outstanding Equity Securities of Company, and Schedule 3.2 lists
the holders thereof. As of the Closing Date, the authorized capital stock of
Company will consist of (a) 125,000 shares of Class A Voting Common Stock, $1.00
par value, of which 110,237 shares will be issued and outstanding, and (b)
25,000 shares of Class B Non-Voting Common Stock, $1.00 par value, of which
6,320 shares will be issued and outstanding. As of the Closing Date, there will
be no outstanding Contracts or other rights to subscribe for or purchase, or
Contracts or other obligations to issue or grant any rights to acquire, any
Equity Securities of Company or its Subsidiary, or to restructure or
recapitalize Company or its Subsidiary. As of the Closing Date, there will be no
outstanding Contracts of such Seller, Company or its Subsidiary to repurchase,
redeem or otherwise acquire any Equity Securities of any of such entities. All
Equity Securities of Company and its Subsidiary, are duly authorized, validly
issued and are fully paid and nonassessable and issued in accordance with all
applicable federal and state securities laws. As of the Closing Date, there will
be no preemptive rights in respect of any Equity Securities of Company or its
Subsidiary. Any Equity Securities of Company or its Subsidiary which were issued
and reacquired by any of such entities were so reacquired (and, if reissued, so
reissued) in compliance with all applicable
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Laws, and neither Company nor its Subsidiary has any outstanding obligation or
liability with respect thereto.
3.3 NO CONFLICTS.
The execution, delivery and performance of this Agreement by
such Seller will not violate, or constitute a breach or default (whether upon
lapse of time and/or the occurrence of any act or event or otherwise) under, the
charter documents or by-laws of Company, result in the imposition of any
material Encumbrance against any material asset or properties of Company or its
Subsidiary, or violate any Law applicable to the Company or the Business where
such violation would have a Material Adverse Effect. Except as set forth in
Schedule 3.3, the execution, delivery and performance of this Agreement by such
Seller will not require any consent, waiver, authorization or approval of, or
the making of any filing with or giving of notice to, any Person or Governmental
Entity (other than as required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act), except for such
consents, waivers, authorizations or approvals which the failure to obtain would
not reasonably be expected to have a Material Adverse Effect.
3.4 FINANCIAL STATEMENTS; CHANGES; CONTINGENCIES.
(a) Audited Financial Statements. Sellers have delivered to
Buyer the consolidated balance sheets for Company and its Subsidiary at December
31, 1994 and December 31, 1995 and the related consolidated statements of income
and cash flow for the years then ended. Such balance sheets and statements of
income and cash flow (collectively, the "FINANCIAL STATEMENTS") have been
examined by the Company's Auditors whose reports thereon are included with the
Financial Statements. The Financial Statements have been prepared in conformity
with GAAP consistently applied, and present fairly, in all material respects,
the information set forth therein. Since December 31, 1995, there has been no
material change in any of the significant accounting policies, practices or
procedures of Company and its Subsidiary.
(b) Unaudited Financial Statements. Sellers have provided to
Buyer copies of the unaudited consolidated and consolidating balance sheet for
Company and its Subsidiary as of December 31, 1996 and the consolidated and
consolidating statements of income and the consolidated statement of cash flows
for the year then ended. Such financial statements have been prepared in
conformity with GAAP consistently applied with past practices of Company,
provided that such financial statements do not include footnotes, and present
fairly, in all material respects, the consolidated financial position of Company
and its Subsidiary as of such date and the consolidated results of operations of
Company and its Subsidiary for such period.
(c) No Material Adverse Changes. Except as set forth in
Schedule 3.4, since December 31, 1996, there has not been, occurred or arisen:
(i) any change in or event affecting Company or its Subsidiary
that has had or would have a Material Adverse Effect, other than any
change or event affecting economic conditions generally or changes
affecting generally the industry in which the Company operates,
(ii) any strike or other labor dispute, or
(iii) any casualty, loss, damage or destruction (whether or
not covered by insurance) of any material property of Company that has
involved or may involve a loss to Company of more than $100,000 in
excess of applicable insurance coverage.
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(d) No Other Liabilities or Contingencies. Neither Company nor
its Subsidiary has any material liabilities required to be disclosed in
accordance with GAAP which have not been disclosed in such December 31, 1996
financial statements set forth in clause (b) above, except for liabilities that
were incurred after December 31, 1996 in the ordinary course of business or as
set forth in Schedule 3.4; provided that such liabilities incurred in the
ordinary course of business have not had a Material Adverse Effect.
(e) No Representations Regarding Projections. Notwithstanding
anything to the contrary herein, no Seller makes any representation or warranty
with respect to any projections contained in any materials provided to Buyer.
3.5 TAXES AND TAX RETURNS.
Except as set forth on Schedule 3.5, Company and its
Subsidiary have timely filed or will file all required Tax Returns and have paid
all Taxes due for all periods ending on or before the date hereof. All required
Tax Returns, including amendments to date, have been prepared in good faith
without negligence or willful misrepresentation and are complete and accurate in
all material respects. Adequate provision has been made in the books and records
of Company and its Subsidiary, and to the extent required by GAAP consistently
applied with past practices of Company, in the financial statements referred to
in Section 3.4 above or delivered or to be delivered to Buyer, for all Taxes
whether or not due and payable and whether or not disputed. Neither Company nor
its Subsidiary has elected to be treated as a consenting corporation under
Section 341(f) of the Code. Except as set forth in Schedule 3.5, no Governmental
Entity has, during the past three years, examined or is in the process of
examining any Tax Return of Company or its Subsidiary. Except as set forth in
Schedule 3.5, no Governmental Entity has proposed, asserted or assessed or, to
the best knowledge of such Seller, threatened to propose or assert, any
deficiency, assessment or claim for Taxes.
3.6 MATERIAL CONTRACTS.
Schedule 3.6 lists each Contract to which Company or its
Subsidiary is a party or to which Company, its Subsidiary or any of their
respective properties is subject or by which any thereof is bound, that (a)
after December 31, 1996 obligates Company to pay an amount of $100,000 or more,
(b) represents a contract which is material to the Business, (c) provides for an
extension of credit other than consistent with normal credit terms, (d) limits
or restricts the ability of Company or its Subsidiary to compete or otherwise to
conduct its business in any manner or place or (e) provides for a guaranty or
indemnity by Company or its Subsidiary (each such Contract shall be deemed to be
a "MATERIAL CONTRACT"). True copies of the written agreements identified in
Schedule 3.6 have been made available to Buyer. Each Material Contract is valid
and subsisting; Company or its Subsidiary have duly performed all their material
obligations thereunder to the extent that such obligations to perform have
accrued; and except as set forth in Schedule 3.6, no material breach or default,
alleged material breach or default, or event which would (with the passage of
time, notice or both) constitute a material breach or default thereunder by
Company or its Subsidiary, as the case may be, or, to such Seller's knowledge,
any other party or obligor with respect thereto, has occurred or as a result of
the execution, delivery or performance of this Agreement will occur.
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3.7 REAL AND PERSONAL PROPERTY; TITLE TO PROPERTY; LEASES.
Company and its Subsidiary have title to or other right to
use, free of Encumbrances, all items of real property, including fees (for which
properties Company and its Subsidiary have good, valid and merchantable title),
leaseholds, easements and all other interests in real property, and such other
assets and properties that are material to the Business, except for (a)
Encumbrances consisting of liens for Taxes not yet due, (b) other Encumbrances,
defects or disputes with respect to leaseholds not accounting, in the aggregate,
for more than 2.5% of the gross revenue of Company and its Subsidiary for fiscal
year 1996, and (c) other matters disclosed in Schedule 3.7. All material
tangible properties of Company and its Subsidiary are in a good state of
maintenance and repair (except for ordinary wear and tear) and are adequate for
the Business. All leasehold properties held by Company or its Subsidiary as
lessee are held under valid, binding and enforceable leases, subject only to
such exceptions as are not, in the aggregate, reasonably expected to have a
Material Adverse Effect. All of Company's and its Subsidiary's outdoor
advertising structures, panels and faces, and all appurtenances thereto (a) are
in existence, as is all other tangible property, (b) meet the requirements of
all existing applicable outdoor advertising Contracts (including number of
boards and illumination) and (c) to the knowledge of such Seller, were built and
at such time were in conformity in all material respects with all applicable
Laws. All of the panels are legal and conforming, or legal and non-conforming,
and have valid state, county and city permits and tags (if required).
3.8 INTANGIBLE PROPERTY.
Company and its Subsidiary have complete rights to and
ownership of all Intangible Property required for use in connection with the
Business, the absence of which would have a Material Adverse Effect. Company and
its Subsidiary have in all material respects performed all obligations required
to be performed by them, and none of such entities is in default in any material
respect under any Material Contract relating to any of the foregoing. Neither
such Seller nor Company or its Subsidiary has received any written notice to the
effect that the Intangible Property or any use by Company or its Subsidiary of
any such property conflicts with or allegedly conflicts with or infringes or
allegedly infringes the rights of any Person or that any such Intangible
Property is owned or alleged to be owned by any other Person.
3.9 LEGAL PROCEEDINGS AND CERTAIN LABOR MATTERS.
(a) Legal Proceedings. Except as set forth on Schedule 3.9, as
of the date hereof there is no Order or Action pending, or, to such Seller's
knowledge, threatened, against or affecting Company or its Subsidiary or any of
their respective properties or assets. Except as otherwise indicated on Schedule
3.9, no Order or Action which is listed thereon if adversely determined is
reasonably expected to have a Material Adverse Effect.
(b) Labor Matters. There is no organized labor strike,
dispute, slowdown or stoppage, or collective bargaining or unfair labor practice
claim (collectively, "LABOR MATTERS"), pending or to the best knowledge of
Seller threatened, against or affecting Company or its Subsidiary or the
Business that if so determined would reasonably be expected to have a Material
Adverse Effect.
14
3.10 MINUTE BOOKS.
The minute books of Company and its Subsidiary accurately
reflect all material actions and proceedings taken to date by the respective
shareholders and boards of directors and committees of Company and its
Subsidiary, and such minute books contain true and complete copies of the
charter documents of Company and its Subsidiary and all related amendments. The
stock record books of Company and its Subsidiary reflect accurately all
transactions in their respective capital stock of all classes.
3.11 PERMITS.
Except as set forth in Schedule 3.11, Company and its
Subsidiary hold all Permits that are required by any Governmental Entity to
permit each of them to conduct their respective businesses as now conducted, and
all such Permits are valid and in full force and effect and will remain so upon
consummation of the transactions contemplated by this Agreement in each case
except where the failure to so hold or to be valid and in full force and effect
would not have a Material Adverse Effect. To such Seller's knowledge, no
suspension, cancellation or termination of any of such Permits is threatened or
imminent that could reasonably be expected to have a Material Adverse Effect.
3.12 COMPLIANCE WITH LAW.
Company is organized and has conducted its business in
accordance with applicable Laws, and the forms, procedures and practices of
Company are in compliance with all such Laws, to the extent applicable, the
failure to so conduct or the violation of which could reasonably be expected to
have a Material Adverse Effect (it being agreed that "legal non-conforming"
signs shall not be in violation of Law for purposes of this Section 3.12). Such
Seller neither has any information nor is aware of any facts indicating that any
Governmental Authority in the Area has declared a moratorium on the construction
of outdoor advertising displays.
3.13 DIVIDENDS AND OTHER DISTRIBUTIONS.
Except as set forth on Schedule 3.13, there has been no
dividend or other distribution of assets or securities whether consisting of
money, property or any other thing of value, declared, issued or paid to or for
the benefit of such Seller subsequent to December 31, 1996.
3.14 EMPLOYEE BENEFITS.
(a) Employee Benefit Plans, Collective Bargaining and Employee
Agreements, and Similar Arrangements.
(1) Schedule 3.14 lists all employee benefit plans
and collective bargaining, employment or severance agreements or other similar
arrangements to which Company or its Subsidiary is a party or by which any of
them is bound, legally or otherwise, including, without limitation, (a) any
profit-sharing, deferred compensation, bonus, stock option, stock purchase,
pension, retainer, consulting, retirement, severance, welfare or incentive plan,
agreement or arrangement, (b) any plan, agreement or arrangement providing for
"fringe benefits" or perquisites to employees, officers, directors or agents,
including but not limited to benefits relating to Company automobiles, clubs,
vacation, child care, parenting, sabbatical, sick leave, medical, dental,
hospitalization, life insurance and other types of
15
insurance, (c) any employment agreement not terminable on 30 days (or less)
written notice, or (d) any other "employee benefit plan" (within the meaning of
Section 3(3) of ERISA).
(2) Sellers have delivered to Buyer true and complete
copies of all documents and summary plan descriptions with respect to such
plans, agreements and arrangements, or summary descriptions of any such plans,
agreements or arrangements not otherwise in writing.
(3) Company and its Subsidiary are in material
compliance with the applicable provisions of ERISA (as amended through the date
of this Agreement), the regulations and published authorities thereunder, and
all other Laws applicable with respect to all such employee benefit plans,
agreements and arrangements. To such Seller's knowledge, there are no Actions
(other than routine claims for benefits) pending or threatened against such
plans or their assets, or arising out of such plans, agreements or arrangements,
and, to such Seller's knowledge, no facts exist which could give rise to any
such Actions that might have a material adverse effect on such plans,
agreements, or arrangements or a Material Adverse Effect.
(4) Except as specified in Schedule 3.14, each of the
plans, agreements or arrangements can be terminated by Company or by its
Subsidiary within a period of 30 days following the Closing Date, without
payment of any additional compensation or amount or the additional vesting or
acceleration of any such benefits.
(b) Qualified Plans.
(1) Schedule 3.14A itemizes all "employee pension
benefit plans" (within the meaning of Section 3(2) of ERISA) required to be
scheduled which are also stock bonus, pension or profit-sharing plans within the
meaning of Section 401(a) of the Code.
(2) Each such plan is qualified in form and operation
under Section 401(a) of the Code and each trust under each such plan is exempt
from tax under Section 501(a) of the Code. No event has occurred that will or
could give rise to disqualification or loss of tax-exempt status of any such
plan or trust under such sections. No event has occurred that will or could
subject any such plans to tax under Section 511 of the Code. No prohibited
transaction (within the meaning of Section 4975 of the Code) or
party-in-interest transaction (within the meaning of Section 406 of ERISA) that
could give rise to liability to the Company, its Subsidiary or such plan has
occurred with respect to any of such plans.
(3) Sellers have delivered to Buyer for each such
plan copies of the following documents: (i) the Form 5500 filed in the most
recent plan year, (ii) the most recent determination letter from the IRS, (iii)
the consolidated statement of assets and liabilities of such plan as of its most
recent valuation date, and (iv) the statement of changes in fund balance and in
financial position or the statement of changes in net assets available for
benefits under such plan for the most recently ended plan year. The financial
statements so delivered fairly present in all material respects the financial
condition and the results of operations of each such plan as of such dates.
(c) Title IV Plans.
(1) Schedule 3.14B itemizes all plans required to be
scheduled which are also subject to Title IV of ERISA.
16
(2) With respect to each such plan in which Company,
its Subsidiary or any trade or business (whether or not incorporated) that is a
member of a group of which Company is a member and which is under common control
within the meaning of Section 414 (b) and (c) of the Code ("ERISA AFFILIATE")
participates or has participated, (i) neither Company nor its Subsidiary nor any
ERISA Affiliate has withdrawn from such plan during a plan year in which it was
a "substantial employer" (as defined in Section 4001(a) (2) of ERISA), (ii)
neither Company nor its Subsidiary nor any ERISA Affiliate has filed a notice of
intent to terminate any such plan or adopted any amendment to treat any such
plan as terminated, (iii) the PBGC has not instituted proceedings to terminate
any such plan, (iv) no accumulated funding deficiency, whether or not waived,
exists with respect to any such plan on an accumulated benefit obligation basis,
and (v) no reportable event, as described in Section 4043 of ERISA, has occurred
with respect to any such plan.
(d) Multiemployer Plans.
(1) Schedule 3.14C itemizes all plans required to be
scheduled that are also multiemployer plans within the meaning of Section 3(37)
of ERISA.
(2) With respect to each such multiemployer plan in
which Company, its Subsidiary or any ERISA Affiliate participates or has
participated, neither Company nor its Subsidiary nor any ERISA Affiliate has
withdrawn, partially withdrawn, or to such Seller's knowledge received any
notice of any claim or demand for withdrawal liability or partial withdrawal
liability.
3.15 ENVIRONMENTAL MATTERS.
Except as set forth in Schedule 3.15, to such Seller's
knowledge, (a) each of Company and its Subsidiary is in compliance in all
material respects with all applicable federal, state, foreign and local laws and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or sub-surface strata (collectively, "ENVIRONMENTAL LAWS");
(b) neither Company nor any of its Subsidiary has received written notice or is
the subject of any actions, causes of actions, claims, investigations, demand or
notices by any person or entity alleging liability or non-compliance with any
Environmental Law; (c) there are no conditions existing which would reasonably
be expected to form the basis of a claim against Company or its Subsidiary for
the violation or non-compliance with any Environmental Law; and (d) there are no
circumstances which would reasonably be expected to prevent or interfere in the
future with Company's and its Subsidiary's compliance in all material respects
with all Environmental Laws.
3.16 CERTAIN INTERESTS.
Except as set forth on Schedule 3.16, as of the Closing Date,
no Affiliate of such Seller, or to such Seller's knowledge no Affiliate of
Company or its Subsidiary nor any officer or director of any thereof, nor
Associate of any such individual, will have any material interest in any
property used in or pertaining to the Business; to such Seller's knowledge no
such Person will be indebted or otherwise obligated to Company or its
Subsidiary; and to such Seller's knowledge neither Company nor its Subsidiary
will be indebted or otherwise obligated to any such Person, except for amounts
due under normal arrangements applicable to all employees generally as to salary
or reimbursement of ordinary business expenses not unusual in amount or
significance.
17
3.17 INTERCOMPANY TRANSACTIONS.
Except as set forth on Schedule 3.16, the consummation of the
transactions contemplated by this Agreement will not (either alone, or upon the
occurrence of any act or event, or with the lapse of time, or both) result in
any payment arising or becoming due from Company or its Subsidiary or the
successor or assign of any thereof to such Seller or any Affiliate of such
Seller.
3.18 INSURANCE.
Schedule 3.18 lists all insurance policies and bonds that are
material to the Business. Neither Company nor its Subsidiary is in default under
any such policy or bond.
3.19 NO BROKERS OR FINDERS.
Other than ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation
(whose fees shall be paid as set forth in Section 12.14), neither such Seller
nor Company has employed any broker, finder, consultant or intermediary in
connection with the transactions contemplated by this Agreement who would be
entitled to a broker's, finder's or similar fee or commission in connection
therewith or upon the consummation thereof.
3.20 ACCURACY OF INFORMATION.
To the knowledge of such Seller, none of the written
information supplied by or on behalf of such Seller, Company or its Subsidiary
to any Person for inclusion in, and included in, any document or application
filed with any Governmental Entity in connection with the transactions
contemplated by this Agreement contained any untrue statement of a material
fact, or omitted any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
3.21 BASIS IN SUBSIDIARY STOCK.
As of December 31, 1996, the Company's basis of the stock in
its Subsidiary for federal income tax purposes was at least $33,000,000.
ARTICLE IV
ADDITIONAL REPRESENTATIONS OF THE APPLETON SELLERS
Except as otherwise indicated in the Disclosure Schedules,
each Appleton Seller, severally and not jointly, represents, warrants and agrees
as follows, as to itself and to Appleton, as of the date hereof:
4.1 ORGANIZATION AND GOOD STANDING.
Appleton is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Appleton has all
requisite corporate power and authority and legal right to own its properties
and to carry on its business as the same is now being conducted and as the same
will be conducted upon the consummation of the Closing. Appleton is not required
to be licensed or qualified to do business in any jurisdiction other than the
Commonwealth of Pennsylvania and the State
18
of Rhode Island. The current location of Appleton's executive office and
principal place of business is set forth in Schedule 4.1.
4.2 APPLETON STOCK.
The Appleton Shares constitute all of the issued and
outstanding Equity Securities of Appleton, and Schedule 4.2 lists the holders
thereof. The authorized capital stock of Appleton consists of (a) 10,000 shares
of Class A Voting Common Stock, $1.00 par value, of which 8,869.2 shares are
issued and outstanding, and (b) 10,000 shares of Class B Non-Voting Common
Stock, $1.00 par value, of which 173.84 shares are issued and outstanding. There
are no outstanding Contracts or other rights to subscribe for or purchase, or
Contracts or other obligations to issue or grant any rights to acquire, any
Equity Securities of Appleton, or to restructure or recapitalize Appleton. There
are no outstanding Contracts of such Appleton Seller or Appleton to repurchase,
redeem or otherwise acquire any Equity Securities of any of such entities. All
Equity Securities of Appleton are duly authorized, validly issued and are fully
paid and nonassessable and issued in accordance with all applicable federal and
state securities laws. There are no preemptive rights in respect of any Equity
Securities of Appleton. Any Equity Securities of Appleton which were issued and
reacquired by any of such entities were so reacquired (and, if reissued, so
reissued) in compliance with all applicable Laws, and Appleton has no
outstanding obligation or liability with respect thereto.
4.3 ASSETS AND CONDUCT OF BUSINESS.
Except as set forth in Schedule 4.3, Appleton does not now and
has not previously owned any assets, incurred any liabilities which remain
unsatisfied or conducted any business other than holding the Penn Shares.
4.4 TAXES AND TAX RETURNS.
Appleton has timely filed or will file all required Tax
Returns and has paid all Taxes due for all periods ending on or before December
31, 1996. All required Tax Returns, including amendments to date, have been
prepared in good faith without negligence or willful misrepresentation and are
complete and accurate in all material respects. Adequate provision has been made
in the books and records of Appleton for all Taxes, whether or not due and
payable and whether or not disputed. Appleton has not elected to be treated as a
consenting corporation under Section 341(f) of the Code. Except as set forth in
the Schedule 4.4, no Governmental Entity has, during the past three years,
examined or is in the process of examining any Tax Return of Appleton. Except as
set forth on Schedule 4.4, no Governmental Entity has proposed, asserted or
assessed or, to the best knowledge of such Appleton Seller, threatened to
propose or assert, any deficiency, assessment or claim for Taxes.
4.5 MATERIAL CONTRACTS.
As of the Closing Date, Appleton will neither be a party nor
will be subject to any Contract.
4.6 NO CONFLICTS.
The execution, delivery and performance of this Agreement by
such Appleton Seller will not violate, or constitute a breach or default
(whether upon lapse of time and/or the occurrence of any act or event or
otherwise) under, the charter documents or by-laws of Appleton, result in the
imposition
19
of any material Encumbrance against any material asset or properties of
Appleton, or violate any Law applicable to Appleton.
4.7 LEGAL PROCEEDINGS.
There is no Order or Action pending, or, to such Appleton
Seller's knowledge, threatened, against or affecting Appleton individually or
when aggregated with one or more other Orders or Actions that has had a material
adverse effect on such Appleton Seller's or Appleton's ability to perform under
this Agreement.
4.8 MINUTE BOOKS.
The minute books of Appleton accurately reflect all material
actions and proceedings taken to date by the shareholders and the board of
directors of Appleton, and such minute books contain true and complete copies of
the charter documents of Appleton and all related amendments. The stock record
books of Appleton reflect accurately all transactions in its capital stock of
all classes.
4.9 PERMITS.
Appleton holds all material Permits that are required by any
Governmental Entity to permit it to conduct its business as now conducted, and
all such material Permits are valid and in full force and effect and will remain
so upon consummation of the transactions contemplated by this Agreement. To such
Appleton Seller's knowledge, no suspension, cancellation or termination of any
of such material Permits is threatened or imminent.
4.10 COMPLIANCE WITH LAW.
Appleton is organized and has conducted its business in
accordance with applicable Laws in all material respects, and the forms,
procedures and practices of Appleton are in compliance in all material respects
with all such Laws, to the extent applicable.
4.11 DIVIDENDS AND OTHER DISTRIBUTIONS.
Except as set forth on Schedule 4.11, there has been no
dividend or other distribution of assets or securities whether consisting of
money, property or any other thing of value, declared, issued or paid to or for
the benefit of such Appleton Seller subsequent to December 31, 1996 by Appleton.
4.12 EMPLOYEE MATTERS.
As of the Closing Date, Appleton will have no employees and
there will be no employee benefit plans, collective bargaining, employment or
severance agreements or other similar arrangements to which Appleton is a party
or by which it is bound, legally or otherwise, including, without limitation,
(a) any profit-sharing, deferred compensation, bonus, stock option, stock
purchase, pension, retainer, consulting, retirement, severance, welfare or
incentive plan, agreement or arrangement, (b) any plan, agreement or arrangement
providing for "fringe benefits" or perquisites to employees, officers, directors
or agents, including but not limited to benefits relating to automobiles, clubs,
vacation, child care, parenting, sabbatical, sick leave, medical, dental,
hospitalization, life insurance and other types of insurance, (c) any employment
agreement not terminable on 30 days (or less) written notice, or (d) any other
"employee benefit plan" (within the meaning of Section 3(3) of ERISA).
20
4.13 ENVIRONMENTAL MATTERS.
Except as set forth in Schedule 4.13, (a) Appleton is in
compliance in all material respects with all Environmental Laws; (b) Appleton
has not received written notice, nor is it the subject, of any actions, causes
of actions, claims, investigations, demand or notices by any person or entity
alleging liability or non-compliance with any Environmental Law; (c) there are
no conditions existing which would reasonably be expected to form the basis of a
claim against Appleton for the violation or non-compliance with any
Environmental Law; and (d) there are no circumstances which would reasonably be
expected to prevent or interfere in the future with Appleton's material
compliance with all Environmental Laws.
4.14 INTERCOMPANY TRANSACTIONS.
The consummation of the transactions contemplated by this
Agreement will not (either alone, or upon the occurrence of any act or event, or
with the lapse of time, or both) result in any payment arising or becoming due
from Appleton or the successor or assign of Appleton to such Appleton Seller or
any Affiliate of such Appleton Seller, other than the payment of the Appleton
Indebtedness as set forth on Schedule 4.14.
4.15 ACCURACY OF INFORMATION.
To the knowledge of such Appleton Seller, none of the written
information supplied by or on behalf of such Appleton Seller to any Person for
inclusion in, and included in, any document or application filed with any
Governmental Entity in connection with the transactions contemplated by this
Agreement contained any untrue statement of a material fact, or omitted any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as otherwise indicated in the Disclosure Schedules,
Buyer represents, warrants and agrees as follows, as of the date hereof:
5.1 ORGANIZATION AND RELATED MATTERS.
Buyer is a corporation duly organized, validly existing and in
good standing under the laws of Delaware. Buyer has all necessary corporate
power and authority to carry on its business as now being conducted. Buyer has
the necessary corporate power and authority to execute, deliver and perform this
Agreement.
5.2 AUTHORIZATION.
The execution, delivery and performance of this Agreement by
Buyer have been duly and validly authorized by the Board of Directors of Buyer
and by all other necessary corporate action on the part of Buyer. This Agreement
constitutes the legal, valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms except as such enforceability may be
limited by bankruptcy,
21
insolvency, reorganization, moratorium and other similar laws and equitable
principles relating to or limiting creditors' rights generally.
5.3 NO CONFLICTS; CONSENTS.
The execution, delivery and performance of this Agreement by
Buyer will not violate the provisions of, or constitute a breach or default
whether upon lapse of time and/or the occurrence of any act or event or
otherwise under (a) the charter documents or bylaws of Buyer, (b) any Law to
which Buyer is subject or (c) any Contract to which Buyer is a party that is
material to the financial condition, results of operations or conduct of the
business of Buyer, provided (as to clauses (b) and (c) respectively) that the
appropriate regulatory approvals are received as contemplated by Section 9.1.
Except as set forth in Schedule 5.3, the execution of, delivery and performance
of this Agreement by Buyer will not require any consent, waiver, authorization
or approval of, or the making of any filing with or giving of notice to, any
Person or Governmental Entity (other than as required under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act).
5.4 NO BROKERS OR FINDERS.
No agent, broker, finder or investment or commercial banker,
or other Person or firms engaged by or acting on behalf of Buyer or its
Affiliates in connection with the negotiation, execution or performance of this
Agreement or the transactions contemplated by this Agreement, is or will be
entitled to any broker's or finder's or similar fees or other commissions as a
result of this Agreement or such transactions.
5.5 LEGAL PROCEEDINGS.
There is no Order or Action pending or to Buyer's knowledge,
threatened against or affecting Buyer that individually or when aggregated with
one or more other Actions has or might reasonably be expected to have a material
adverse effect on Buyer's ability to perform this Agreement or any other aspect
of the transactions contemplated by this Agreement.
5.6 INVESTMENT REPRESENTATION.
Buyer is acquiring the Purchased Stock from the Sellers for
Buyer's own account, for investment purposes only and not with a view to or for
sale in connection with any distribution thereof in violation of the Securities
Act.
5.7 WARN ACT.
Buyer is not planning or contemplating, and has not made or
taken, any decisions or actions concerning the employees of the Company after
the Closing that require the service of notice under the WARN Act.
5.8 ACCURACY OF INFORMATION.
To Buyer's knowledge, none of the written information supplied
by or on behalf of Buyer to any Person for inclusion in, and included in, any
document or application filed with any Governmental Entity in connection with
the transactions contemplated by this Agreement contained any untrue statement
of a material fact, or omitted any material fact required to be stated therein,
in light of the circumstances under which they were made, not misleading. All
documents required to be filed by Buyer with any
22
Governmental Entity in connection with this Agreement or the transactions
contemplated by this Agreement will comply in all material respects with the
provisions of applicable Law.
ARTICLE VI
COVENANTS WITH RESPECT TO PERIOD PRIOR TO CLOSING
From the date hereof to and including the Closing Date, each
Seller covenants on behalf of itself, severally, to perform each of the
following covenants applicable to it and to cause Company to perform each of the
following covenants applicable to it and Buyer covenants to perform each of the
following covenants applicable to Buyer:
6.1 ACCESS.
Subject to applicable Laws, confidentiality agreements,
doctrines of attorney-client privilege and fiduciary and privacy obligations of
which Sellers will advise Buyer, such Seller shall cause Company and its
Subsidiary to authorize and permit Buyer and its representatives (which term
shall be deemed to include its independent accountants and counsel) to have
reasonable access during normal business hours, upon reasonable notice and in
such manner as will not unreasonably interfere with the conduct of their
respective businesses, to all of their respective properties, books, records,
operating instructions and procedures, Tax Returns of Company and/or its
Subsidiary and all other information with respect to the Business as Buyer may
from time to time request, and to make copies of such books, records and other
documents and to discuss their respective businesses with such other Persons,
including, without limitation, their respective directors, officers, employees,
accountants, counsel, suppliers, customers, and creditors, as Buyer reasonably
considers necessary in connection with the transactions contemplated by this
Agreement.
6.2 MATERIAL ADVERSE CHANGES; REPORTS; FINANCIAL STATEMENTS.
(a) Such Seller will promptly notify Buyer of any event of
which such Seller obtains knowledge which has had or might reasonably be
expected to have a Material Adverse Effect or which if known as of the date
hereof would have been required to be disclosed to Buyer.
(b) Such Seller will furnish to Buyer as soon as available (i)
copies of all nonconfidential portions of all reports, renewals, filings,
certificates, statements and other documents filed with any Governmental Entity
relating to Company or its Subsidiary and (ii) monthly unaudited consolidated
and consolidating balance sheets and consolidated and consolidating statements
of income for Company and its Subsidiary and (iii) such other reports as Buyer
may reasonably request relating to Company and its Subsidiary.
6.3 CONDUCT OF BUSINESS.
Except as set forth on Schedule 6.3, such Seller agrees with
and for the benefit of Buyer that neither Company nor its Subsidiary shall
without the prior consent in writing of Buyer which may not be unreasonably
withheld:
(a) conduct the Business in any manner except in the ordinary
course consistent with past practice; or
23
(b) except in the ordinary course of business, amend,
terminate, or renegotiate any Material Contract or default (or take or
omit to take any action that, with or without the giving of notice or
passage of time, would constitute a default) in any of its obligations
under any Material Contract; or
(c) terminate, amend or fail to renew any material insurance
policies or bonds; or
(d) terminate or fail to use reasonable efforts to renew or
preserve any Permits; or
(e) incur or agree to incur any obligation or liability
(absolute or contingent) that individually calls for payment by Company
or its Subsidiary of more than $10,000 in any specific case or $100,000
in the aggregate, except for liabilities incurred in the ordinary
course of business; or
(f) make any loan, guaranty or other extension of credit, or
enter into any commitment to make any loan, guaranty or other extension
of credit, to or for the benefit of any director, officer, employee,
stockholder or any of their respective Associates or Affiliates except
for customary advances of commissions, travel and entertainment
expenses consistent with past practice; or
(g) grant any general or uniform increase in the rates of pay
or benefits to officers, directors or employees (or a class thereof) or
any material increase in salary or benefits of any officer, director,
employee or agent, or pay any special bonus to any person, except in
the ordinary course of business consistent with past practice, or enter
into any new employment, collective bargaining or severance agreement;
or
(h) sell, transfer, mortgage, encumber or otherwise dispose of
any material assets or liabilities, except (i) for dispositions of
property not greater than $100,000 in the aggregate, or (ii) in the
ordinary course of business consistent with past practice; or
(i) issue, sell, redeem or acquire for value, or agree to do
so, any debt obligations or Equity Securities of Company or its
Subsidiary; or
(j) declare, issue, make or pay any dividend or other
distribution of assets, whether consisting of money, other personal
property, real property or other thing of value, to its shareholders
(except to Company), or split, combine, dividend, distribute or
reclassify any shares of its Equity Securities; or
(k) change or amend its charter documents or bylaws; or
(l) make any material investment, by purchase, contributions
to capital, property transfers, or otherwise, in any other Person; or
(m) agree to or make any commitment to take any actions
prohibited by this Section 6.3; or
(n) take any other action which would cause any of the
representations and warranties made by such Seller in this Agreement
not to be true and correct in all material respects on and as of the
Closing Date.
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6.4 NOTIFICATION OF CERTAIN MATTERS.
Such Seller shall give prompt notice to Buyer, and Buyer shall
give prompt notice to Sellers, of (i) the occurrence, or failure to occur, of
any event that would be likely to cause any representation or warranty of such
Person contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date of this Agreement to the Closing Date and (ii)
any failure of Buyer or such Seller, as the case may be, to comply with or
satisfy, in any material respect, any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement.
6.5 PERMITS, APPROVALS AND GOVERNMENTAL FILINGS.
Such Seller and Buyer agree to cooperate and use their best
efforts to obtain all (and will promptly prepare all registrations, filings and
applications, requests and notices preliminary to all) Approvals and Permits and
to make any filings that may be necessary to effect the transfer of the
Purchased Stock contemplated by this Agreement, including any and all filings
required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. Such Seller and Buyer shall furnish
each other such necessary information and reasonable assistance as the other may
reasonably request in connection with its preparation of necessary filings or
submissions under the provisions of such laws. Such Seller and Buyer will supply
to each other copies of all correspondence, filings or communications, including
file memoranda evidencing telephonic conferences, by such party or its
affiliates with any Governmental Entity or members of its staff, with respect to
the transactions contemplated by this Agreement and any related contemplated
transactions, except for documents filed pursuant to Item 4(c) of the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Notification and Report Form or communications regarding the
same.
ARTICLE VII
ADDITIONAL COVENANTS OF APPLETON SELLERS WITH RESPECT TO
PERIOD PRIOR TO CLOSING
From the date hereof to and including the Closing Date, each
Appleton Seller covenants on behalf of itself, severally, to perform each of the
following covenants applicable to it and to cause Appleton to perform each of
the following covenants applicable to it and Buyer covenants to perform each of
the following covenants applicable to Buyer:
7.1 ACCESS.
Subject to applicable Laws, confidentiality agreements,
doctrines of attorney-client privilege and fiduciary and privacy obligations of
which Sellers will advise Buyer, such Appleton Seller shall cause Appleton to
authorize and permit Buyer and its representatives (which term shall be deemed
to include its independent accountants and counsel) to have reasonable access
during normal business hours, upon reasonable notice and in such manner as will
not unreasonably interfere with the conduct of its business, to all of its
properties, books, records, operating instructions and procedures, Tax Returns
and all other information with respect to Appleton as Buyer may from time to
time request, and to make copies of such books, records and other documents and
to discuss its business with such other Persons, including, without limitation,
its directors, officers, employees, accountants, counsel, suppliers, customers,
and creditors, as Buyer reasonably considers necessary in connection with the
transactions contemplated by this Agreement.
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7.2 MATERIAL ADVERSE CHANGES.
Such Appleton Seller will promptly notify Buyer of any event
of which such Appleton Seller obtains knowledge which has had or might
reasonably be expected to have a material adverse effect on Appleton or which if
known as of the date hereof would have been required to be disclosed to Buyer.
7.3 CONDUCT OF BUSINESS.
Such Appleton Seller agrees with and for the benefit of Buyer
that Appleton shall not, without the prior consent in writing of Buyer which may
not be unreasonably withheld, (i) own any assets or conduct any business other
than as conducted immediately prior to the date hereof, the repayment of the
Appleton Indebtedness and the disposition of other assets and liabilities other
than the Penn Shares, or as otherwise contemplated herein, or (ii) take any
other action which would cause the representations and warranties made by such
Appleton Seller herein with respect to Appleton to be inaccurate in any material
respect.
7.4 NOTIFICATION OF CERTAIN MATTERS.
Such Appleton Seller shall give prompt notice to Buyer, and
Buyer shall give prompt notice to Appleton Sellers, of (i) the occurrence, or
failure to occur, of any event that would be likely to cause any representation
or warranty of such Appleton Seller contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date of this Agreement
to the Closing Date and (ii) any failure of Buyer or such Appleton Seller, as
the case may be, to comply with or satisfy, in any material respect, any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement.
7.5 PERMITS, APPROVALS AND GOVERNMENTAL FILINGS.
Such Appleton Seller and Buyer agree to cooperate and use
their best efforts to obtain all (and will promptly prepare all registrations,
filings and applications, requests and notices preliminary to all) Approvals and
Permits and to make any filings that may be necessary to effect the transfer of
the Purchased Stock contemplated by this Agreement, including any and all
filings required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. Such Appleton Seller and Buyer
shall furnish each other such necessary information and reasonable assistance as
the other may reasonably request in connection with its preparation of necessary
filings or submissions under the provisions of such laws. Such Appleton Seller
and Buyer will supply to each other copies of all correspondence, filings or
communications, including file memoranda evidencing telephonic conferences, by
such party or its affiliates with any Governmental Entity or members of its
staff, with respect to the transactions contemplated by this Agreement and any
related contemplated transactions, except for documents filed pursuant to Item
4(c) of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Notification and Report Form or communications
regarding the same.
ARTICLE VIII
ADDITIONAL CONTINUING COVENANTS
26
8.1 NONDISCLOSURE OF PROPRIETARY DATA.
After the Closing, each Seller agrees with respect to itself
that neither it nor any of its representatives shall, at any time, make use of,
divulge or otherwise disclose, directly or indirectly, any trade secret or other
proprietary data (including, but not limited to, any customer list, record or
financial information constituting a trade secret) concerning the business or
policies of Appleton, Company or its Subsidiary that any of such Seller or any
representative of such Seller may have learned as a shareholder, employee,
officer or director of, Appleton, Company or its Subsidiary unless such
information has become generally available and known to the public other than as
a result of a prohibited disclosure by such Seller or its representatives. Buyer
acknowledges that it remains subject to the Confidentiality Agreement dated
September 11, 1996 between it and ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities
Corporation, as Company's representatives.
8.2 TAX COOPERATION.
(a) Company Taxes. After the Closing, each Seller agrees with
respect to itself that it shall, and shall cause its respective subsidiaries and
Affiliates to, cooperate fully with Buyer, Company and its Subsidiary in the
preparation of all Tax Returns and shall provide, or cause to be provided at
Buyer's sole cost and expense, to Buyer, Company and its Subsidiary any records
and other information requested by such parties in connection therewith as well
as access to, and the cooperation of, the auditors of such Seller and its
Affiliates. Such Seller shall, and shall cause its Affiliates to, cooperate
fully with Buyer, Company and its Subsidiary in connection with any Tax
investigation, audit or other proceeding. Any information obtained pursuant to
this Section 8.2(a) or pursuant to any other Section hereof providing for the
sharing of information or the review of any Tax Return or other Schedule
relating to Taxes shall be subject to Section 12.9.
(b) Appleton Taxes. After the Closing, each Appleton Seller
agrees with respect to itself that it shall, and shall cause its respective
subsidiaries and Affiliates to, cooperate fully with Buyer, Appleton, Company
and its Subsidiary in the preparation of all Tax Returns and shall provide, or
cause to be provided at Buyer's sole cost and expense, to Buyer, Appleton,
Company and its Subsidiary any records and other information requested by such
parties in connection therewith as well as access to, and the cooperation of,
the auditors of such Appleton Seller and its Affiliates. Such Appleton Seller
shall, and shall cause its Affiliates to, cooperate fully with Buyer, Appleton,
Company and its Subsidiary in connection with any Tax investigation, audit or
other proceeding. Any information obtained pursuant to this Section 8.2(b) or
pursuant to any other Section hereof providing for the sharing of information or
the review of any Tax Return or other Schedule relating to Taxes shall be
subject to Section 12.9.
ARTICLE IX
CONDITIONS OF PURCHASE
9.1 GENERAL CONDITIONS.
The obligations of the parties to effect the Closing shall be
subject to the following conditions unless waived in writing by all parties:
27
(a) No Orders; Legal Proceedings. No Law or Order shall have
been enacted, entered, issued, promulgated or enforced by any
Governmental Entity which prohibits or restricts the transfer of the
Purchased Stock.
(b) Approvals. Any applicable waiting period under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall have expired or been terminated.
(c) Escrow Agreement. The Escrow Agreement shall have been
duly authorized, executed and delivered by all the parties thereto.
(d) Convertible Notes. The convertible notes issued to the TCW
Entities and referenced in Schedule 3.13 shall have been converted into
common stock of Company.
9.2 CONDITIONS TO OBLIGATIONS OF BUYER.
The obligations of Buyer to effect the Closing shall be
subject to the following conditions except to the extent waived in writing by
Buyer:
(a) Representations and Warranties and Covenants of Sellers.
The representations and warranties of Sellers herein contained shall be
true in all material respects at the Closing Date with the same effect
as though made at such time, except as affected by any transactions
contemplated by this Agreement; each Seller shall have in all material
respects performed all obligations and complied with all covenants and
conditions required by this Agreement to be performed or complied with
by it at or prior to the Closing Date, and each Seller shall have
delivered to Buyer certificates of such Seller in form and substance
satisfactory to Buyer and dated the Closing Date to such effect.
(b) Opinion of Counsel. Buyer shall receive at the Closing
from O'Melveny & ▇▇▇▇▇ LLP, special counsel to Company and the TCW
Entities, from ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., general counsel to Company, from
Nixon, Hargrave, Devans & ▇▇▇▇▇ and ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ & Mugel, LLP,
special counsel to the other Sellers and from ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.,
counsel to Appleton, opinions dated the Closing Date, in form and
substance substantially as set forth in Exhibits ▇-▇, ▇-▇, ▇-▇ and A-4
respectively.
(c) Consents. Sellers shall have obtained and provided to
Buyer all required Approvals and Permits listed on Schedule 3.3 and the
Appleton Sellers shall have obtained and provided to Buyer any required
Approvals and Permits required under Section 4.9.
(d) Repayment of Existing Indebtedness. Arrangements shall
have been made so that concurrently with the Closing, all Appleton
Indebtedness and Penn Indebtedness shall be repaid in full and all
liens relating thereto released.
(e) Non-competition. Buyer shall have received from A. ▇▇▇▇▇
▇▇▇▇ a non-competition agreement in the form of Exhibit D-1 and from
the TCW Entities and the Appleton Sellers non-competition agreements in
the form of Exhibit D-2.
(f) Sign Location Leases. Buyer shall have received executed
copies of new leases for the sign locations listed in part A of
Schedule 3.16 hereto, each with a 10 year term and annual rental
payments equal to the lesser of (i) the amount set forth on Schedule
9.2(f) for such sign location and (ii) 12% of gross revenues from the
sale of advertising on such sign location
28
for fiscal year 1996, subject to a cost of living adjustment after the
fifth year of such lease, and subject to the terms outlined in Schedule
9.2(f), with such other terms as are standard for Company sign location
leases.
9.3 CONDITIONS TO OBLIGATIONS OF SELLERS.
The obligations of each Seller to effect the Closing shall be
subject to the following conditions, except to the extent waived in writing by
such Seller:
(a) Representations and Warranties and Covenants of Buyer. The
representations and warranties of Buyer herein contained shall be true
in all material respects at the Closing Date with the same effect as
though made at such time, except as affected by any transactions
contemplated by this Agreement, Buyer shall have in all material
respects performed all obligations and complied with all covenants and
conditions required by this Agreement to be performed or complied with
by it at or prior to the Closing Date, and Buyer shall have delivered
to such Seller certificates of Buyer in form and substance satisfactory
to such Seller, dated the Closing Date and signed by its chief
executive officer, to such effect.
(b) Opinion of Counsel. Sellers shall receive at the Closing
from (i) Kean, Miller, Hawthorne, ▇'▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.,
special counsel to Buyer, and special New York counsel to Buyer
reasonably acceptable to Sellers, opinions dated the Closing Date, in
form and substance substantially as set forth in Exhibit B.
(c) Consents. Buyer shall have obtained and provided to such
Seller all required Approvals and Permits referenced in Section 5.3.
ARTICLE X
TERMINATION OF OBLIGATIONS
10.1 TERMINATION OF AGREEMENT.
Anything herein to the contrary notwithstanding, this
Agreement and the transactions contemplated by this Agreement shall terminate if
the Closing does not occur on or before the close of business on March 31, 1997,
unless the Closing Date is extended in accordance with Section 1.4 (in which
event this Agreement shall terminate on April 30, 1997 if the Closing has not
occurred on or prior to such date) and otherwise may be terminated at any time
before the Closing as follows and in no other manner:
(a) Mutual Consent. By mutual consent in writing of Buyer and
Sellers.
(b) Conditions to Buyer's Performance Not Met. By Buyer by
written notice to Sellers if any event occurs or condition exists which
would render impossible the satisfaction of one or more conditions to
the obligations of Buyer to consummate the transactions contemplated by
this Agreement as set forth in Sections 9.1 or 9.2.
(c) Conditions to Sellers' Performance Not Met. By Sellers by
written notice to Buyer if any event occurs or condition exists which
would render impossible the satisfaction of
29
one or more conditions to the obligation of Sellers to consummate the
transactions contemplated by this Agreement as set forth in Sections
9.1 or 9.3.
(d) Material Breach. By Buyer or Sellers by written notice to
the other party if there has been a material misrepresentation or other
material breach by the other party in its agreements, representations,
warranties and covenants set forth herein.
(e) Diligence Investigation. By Buyer upon delivery of written
notice of termination to Sellers no later than 14 days after the
commencement of its business investigation of Company (which
investigation shall commence no later than Wednesday, February 12,
1997), if Buyer in the reasonable exercise of its judgment in the
course of its on-going business investigation of Company shall discover
information relating to the Business or Company or its Subsidiary not
previously disclosed to Buyer or its representatives by Sellers or
their representatives which would have a Material Adverse Effect.
10.2 EFFECT OF TERMINATION; BREAK UP FEE.
(a) Effect. Subject to the immediately following sentence, if
this Agreement shall be terminated pursuant to Section 10.1, all further
obligations of the parties under this Agreement shall terminate without further
liability of any party to another; provided that the obligations of the parties
contained in Section 10.2(b), Section 12.9 and 12.14 shall survive any such
termination. A termination under Section 10.1 shall not relieve any party of any
liability for a breach of, or for any misrepresentation under this Agreement, or
be deemed to constitute a waiver of any available remedy (including specific
performance if available) for any such breach or misrepresentation.
(b) Break Up Fee. Buyer agrees to use its best efforts to
obtain the consents set forth in Schedule 5.3 as soon as possible. If (1) this
Agreement terminates because the Closing does not occur on or prior to the date
set forth in Section 10.1 or in accordance with Section 10.1(c), and (2) Buyer
has not obtained the consents set forth in Schedule 5.3, upon termination Buyer
shall pay to Company $10,000,000 in immediately available funds.
10.3 EFFECT OF CLOSING OVER KNOWN UNSATISFIED CONDITIONS.
No party hereto shall be deemed to have breached any
agreement, representation, warranty, or covenant if (i) such party shall have
notified the other parties hereto in writing or such other party has actual
knowledge, on or prior to the Closing Date, of the breach of, or inaccuracy in,
or of any facts or circumstances constituting or resulting in the breach of or
inaccuracy in, or modification to, such agreement, representation, warranty or
covenant, and (ii) such other parties have permitted the Closing to occur; and,
for purposes of this Agreement, such other parties are thereby deemed to have
waived such breach or inaccuracy; provided, however, that a disclosure pursuant
to this Section 10.3 shall not prejudice the rights of the parties pursuant to
Article IX hereof not to consummate the transactions contemplated by this
Agreement.
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ARTICLE XI
INDEMNIFICATION
11.1 OBLIGATIONS OF SELLERS.
Effective as of the Closing:
(a) each Seller severally agrees to indemnify and hold
harmless Buyer, Company and its Subsidiary, and their respective directors,
officers, employees, affiliates, agents and assigns from and against any and all
Losses of Buyer, Company or its Subsidiary, directly or indirectly, as a result
of, or based upon or arising from any material inaccuracy in or breach or
nonperformance of any of the representations or warranties made by such Seller
in or pursuant to Article II or any of the agreements or covenants made by such
Seller in or pursuant to Article VIII;
(b) each Seller severally agrees to indemnify and hold
harmless Buyer, Company and its Subsidiary, and their respective directors,
officers, employees, affiliates, agents and assigns from and against any and all
Losses of Buyer, Company or its Subsidiary, directly or indirectly, as a result
of, or based upon or arising from any material inaccuracy in or breach or
nonperformance of any of the representations or warranties made by such Seller
in or pursuant to Article III (provided, for purposes of this indemnity such
representations contained in Article III to be read without any materiality
qualification except (i) in the cases of the representations or warranties in
Sections 3.4(a), (b), (c)(i) and (d); the second sentence of Section 3.7; the
last sentence of Section 3.14(b)(3) and Section 3.20, (ii) in the case of
representations in Section 3.6, this proviso shall not cause such representation
to be read to cover any advertising Contracts of Company or its Subsidiary
entered into in the ordinary course of its business and not listed on Schedule
3.6, and (iii) to the extent that representations state that (A) a schedule
lists all relevant matters, (B) except as set forth on a schedule there are no
other relevant matters, or (C) copies of all such matters have been made
available) or any of the agreements or covenants made by such Seller in this
Agreement and not covered by clauses (a), (c), (d) and (e) of this Section 11.1;
(c) each Seller severally agrees to indemnify and hold
harmless Buyer, Company and its Subsidiary, and their respective directors,
officers, employees, affiliates, agents and assigns from and against any and all
Losses of Buyer, Company or its Subsidiary, directly or indirectly, as a result
of, or based upon or arising from any Order or Action arising out of operation
of the Business prior to the Closing Date, other than the Actions listed on
Schedule 11.1C;
(d) each Appleton Seller severally agrees to indemnify and
hold harmless Appleton, Buyer, Company and its Subsidiary, and their respective
directors, officers, employees, affiliates, agents and assigns from and against
any and all Losses of Appleton, Buyer, Company or its Subsidiary, directly or
indirectly, as a result of, or based upon or arising from any material
inaccuracy in or breach or nonperformance of any of the representations or
warranties made by such Appleton Seller in or pursuant to Article IV or any of
the agreements or covenants made by such Appleton Seller in or pursuant to
Article VII;
(e) each Appleton Seller severally agrees to indemnify and
hold harmless Appleton, Buyer, Company and its Subsidiary, and their respective
directors, officers, employees, affiliates, agents and assigns from and against
any and all Losses of Appleton, Buyer, Company or its Subsidiary, directly or
indirectly, as a result of, or based upon or arising out of the operation of
Appleton's business prior to the Closing Date; and
31
(f) each Seller severally agrees to indemnify and hold
harmless Buyer, Company and its Subsidiary, and their respective directors,
officers, employees, affiliates, agents and assigns from and against any and all
Losses of Buyer, Company or its Subsidiary as a result of or based upon any
claims by any employees of Company or its Subsidiary terminated on or after the
Closing Date for payments under the Company's and its Subsidiary's severance
plan dated as of October 11, 1996 in an aggregate amount not to exceed $307,000.
11.2 OBLIGATIONS OF BUYER.
Buyer agrees to indemnify and hold harmless each Seller from
and against any Losses of such Seller and their respective directors, officers,
employers, affiliates, partners, agents and assigns, directly or indirectly, as
a result of, or based upon or arising from (a) any material inaccuracy in or
breach or nonperformance of any of the representations, warranties, covenants or
agreements made by Buyer in or pursuant to this Agreement; or (b) any Order or
Action arising out of operation of the Business on or after the Closing Date.
11.3 PROCEDURE.
(a) Notice of Third Party Claims. Any party seeking
indemnification of any Loss or potential Loss arising from a claim asserted by a
third party (including but not limited to a notice of Tax audit or request to
waive or extend a statute of limitations applicable to any Tax) shall give
written notice to the party from whom indemnification is sought. Written notice
to the Indemnifying Party of the existence of a third-party Indemnifiable Claim
shall be given by the Indemnified Party within 30 days after its receipt of a
written assertion of liability from the third party, including in the case of
tax matters, written notice of any tax audit that might result in such a claim.
(b) Defense. At the request of the Indemnified Party, the
Indemnifying Party shall promptly assume the costs of defense of an
Indemnifiable Claim. The Indemnifying Party shall retain experienced counsel
reasonably satisfactory to the Indemnified Party and thereafter shall control
defense of the claim. If the Indemnifying Party does not assume such defense or
the Indemnified Party has the right to control the defense of the Indemnifiable
Claim, the Indemnified Party may compromise or settle the Indemnifiable Claim on
behalf of and for the account and risk of the Indemnifying Party with the prior
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. In all cases, the party without the right to control the
defense of the Indemnifiable Claim may participate in the defense at its own
expense.
(c) Settlement Limitations. Notwithstanding anything in this
Section 11.3 to the contrary, neither the Indemnifying Party nor the Indemnified
Party shall, without the written consent of the other Party, settle or
compromise any Indemnifiable Claim or permit a default or consent to entry of
any judgment unless the claimant and such party provide to such other Party an
unqualified release from all liability in respect of the Indemnifiable Claim.
Notwithstanding the foregoing, if a settlement offer solely for money damages is
made by the applicable third party claimant, and the Indemnifying Party notifies
the Indemnified Party in writing of the Indemnifying Party's willingness to
accept the settlement offer and, subject to the limitations of Section 11.5, pay
the amount called for by such offer, and the Indemnified Party declines to
accept such offer, the Indemnified Party may continue to contest such
Indemnifiable Claim, free of any participation by the Indemnifying Party, and
the amount of any ultimate liability with respect to such Indemnifiable Claim
that the Indemnifying Party has an obligation to pay hereunder shall be limited
to the lesser of (A) the amount of the settlement offer that the Indemnified
Party declined to accept plus the Losses of the Indemnified Party relating to
such Indemnifiable Claim through the date of its rejection of the settlement
offer or (B) the aggregate Losses of the Indemnified
32
Party with respect to such Indemnifiable Claim. If the Indemnifying Party makes
any payment on any Indemnifiable Claim, the Indemnifying Party shall be
subrogated, to the extent of such payment, to all rights and remedies of the
Indemnified Party to any insurance benefits or other claims of the Indemnified
Party with respect to such Indemnifiable Claim.
(d) Tax Matters. Notwithstanding anything to the contrary in
paragraph (b) or (c) above, the provisions of Sections 8.2, 8.3 and 11.3(a) and
this Section 11.3(d) through 11.3(i) below shall govern all Tax matters relating
to Indemnifiable Claims or Tax matters relating to the Business, Appleton or
this transaction.
(e) Tax Audits. (i) The Seller Representatives shall have the
sole right to represent Buyer's interest in any audit or administrative or court
proceeding relating to income, sales, use or value added Taxes, whether imposed
on Company, its Subsidiary or any holder of the Penn Shares, with respect to the
business, operations or activities of Company or its Subsidiary during periods
(or portions thereof) ending on or before the Closing Date ("PRE-CLOSING
TAXES"), and to employ counsel of its choice at its expense. The Second
Representative shall have the sole right to represent Buyer's interest in any
audit or administrative or court proceeding relating to income Taxes, whether
imposed on Appleton, or any owner of Appleton Shares, with respect to the
business, operations or activities of Appleton, including any transfers of
property contemplated by this transaction, during periods (or portions thereof)
ending on or before the Closing Date ("PRE-CLOSING APPLETON TAXES").
Notwithstanding the foregoing, neither the Seller Representatives nor the Second
Representative shall be entitled to settle, either administratively or after the
commencement of litigation, any claim for income, sales, use or value added
Taxes which would materially adversely affect the liability for income, sales,
use or value added Taxes of Buyer for any period (or portion thereof) beginning
after the Closing Date without the prior written consent of Buyer. Such consent
shall not be unreasonably withheld, and shall not be necessary to the extent
that (A) the settlement is consistent with the positions previously taken by
Company or its Subsidiary, or Appleton, as the case may be or (B) the Sellers
have agreed to indemnify Buyer against the effects of any such settlement.
(ii) Buyer shall have the right to represent its
interest in any audit or administrative or court proceeding relating to Taxes
other than Pre-Closing Taxes or Pre-Closing Appleton Taxes. Notwithstanding the
foregoing, Buyer shall not be entitled to settle, either administratively or
after the commencement of litigation, any claim for Taxes which could adversely
affect any Seller's liability for Pre-Closing Taxes or Pre-Closing Appleton
Taxes or its indemnification obligations under this Agreement without the prior
consent of the Seller Representatives. Such consent shall not be unreasonably
withheld, and shall not be necessary to the extent that (A) the settlement is
consistent with the positions previously taken by Company or its Subsidiary, or
Appleton, as the case may be or (B) Buyer has agreed to indemnify the Sellers
against the effects of any such settlement.
(iii) Sellers shall have no liability under this
Agreement for, and Buyer will indemnify Sellers against any Tax the payment of
which was made without Sellers' prior written consent, which may not be
unreasonably withheld, or any settlements effected without the consent of
Sellers, as required by paragraph (ii), or resulting from any claim, suit,
action, litigation or proceeding in which the Seller Representatives or Second
Representative were not permitted an opportunity to assume the defense as
required under paragraph (i).
(f) Tax Covenants. Buyer covenants that it will not, and will
not permit any Affiliate to, (i) make or change any Tax election, or amend any
Tax Return or take any Tax position on any Tax Return, take any action or omit
to take any action that results in any increased Tax liability of Sellers,
33
Appleton, Company or its Subsidiary with respect to any Tax period (or portion
thereof) ending on or before the close of business on the Closing Date.
(g) Refunds. (i) Any refund of Taxes with respect to the
business, operations or activities of Company or its Subsidiary, whether
received before or after the Closing, pertaining to periods (or portions
thereof) ending on or before the Closing, except to the extent such refund is an
asset on the books of Company or its Subsidiary on the Closing Date, shall be
paid to Sellers upon receipt by Buyer or its Affiliate in accordance with each
Seller's Applicable Share, after deducting any Losses for Taxes with respect to
the business, operations or activities of Company or its Subsidiary during
periods (or portions thereof) ending on or before the Closing Date to the extent
a claim for indemnification therefor would be available under Section 11.1
hereof but for the limitations contained in Section 11.5(b) hereof. Buyer agrees
that, upon the reasonable request and at the sole expense of the Sellers, Buyer
shall file an amended return or a claim for refund relating to such pre-Closing
period Taxes.
(ii) Any refund of Taxes with respect to the business,
operations or activities of Appleton, including any transfers of property
contemplated by this transaction, whether received before or after the Closing,
pertaining to periods (or portions thereof) ending on or before the Closing
shall immediately be paid to Appleton Sellers upon receipt by Buyer or its
Affiliate in accordance with each such Appleton Seller's pro rata share of the
Appleton Shares. Buyer agrees that, upon the reasonable request and at the sole
expense of the Appleton Sellers, Buyer shall file an amended return or a claim
for refund relating to such pre-Closing period Taxes.
(h) Tax Benefits. (i) If any adjustment shall be made to any
Tax Return of Appleton, Company or its Subsidiary relating to any taxable period
of Appleton, Company or its Subsidiary ending prior to or on or including the
Closing Date which results in any Tax detriment to any Seller and results in any
deduction, exclusion from income or other allowance (a "TAX BENEFIT") to Buyer
or any of its Affiliates in a taxable period (or portion thereof) beginning
after the Closing Date, Buyer shall pay to the Indemnified Parties the amount of
the Tax reduction attributable to such Tax Benefit at such time or times as, and
to the extent that, Appleton, Company, its Subsidiary or Buyer realizes such Tax
reduction.
(ii) If any adjustment shall be made to any Tax Return
relating to Buyer for any taxable period ending after the Closing Date
which results in any Tax detriment to Buyer or any of its Affiliates
and results in any Tax Benefit to the Sellers for any taxable period of
Appleton or Company ending on or prior to the Closing Date, the
Sellers, in the case of Company, and Appleton Sellers, in the case of
Appleton, shall pay to Buyer the amount of the Tax reduction
attributable to such Tax Benefit at such time or times as and to the
extent that such Sellers realize such Tax reduction.
(i) Returns and Reports. (i) The Seller Representatives shall
cause to be filed (or provided to Buyer for filing, if appropriate) when due all
Tax Returns with respect to income Taxes that are required to be filed by or
with respect to Company or its Subsidiary for taxable periods ending on or
before the Closing Date. The Second Representative shall cause to be filed (or
provided to Buyer for filing, if appropriate) when due all Tax returns with
respect to income Taxes that are required to be filed by or with respect to
Appleton for taxable periods ending on or before the Closing Date. Without
Buyer's consent, no position may be taken in such Tax Returns inconsistent with
prior reporting practice if such position could increase the Buyer's Tax
liabilities for any period beginning after the Closing Date.
(ii) Subject to paragraph (f) above, Buyer shall file
or cause to be filed when due all other Tax Returns that are required
to be filed by or with respect to Appleton, Company
34
or its Subsidiary (or the Business) after the Closing Date. The Seller
Representatives shall have the right to approve (which approval shall
not unreasonably be withheld) such Tax Return prior to the filing
thereof to the extent it could affect any Seller's liability for
Pre-Closing Taxes or its indemnification obligations under this
Agreement.
(j) Tax Adjustments. Any amounts payable by the Indemnifying
Party to or on behalf of an Indemnified Party in respect of a Loss shall be
adjusted as follows:
(i) If such Indemnified Party is liable for any
additional Taxes as a result of the payment of amounts in respect of an
Indemnifiable Claim, the Indemnifying Party will pay to the Indemnified
Party in addition to such amounts in respect of the Loss within 10 days
after being notified by the Indemnified Party of the payment of such
liability (x) an amount equal to such additional Taxes (the "TAX
REIMBURSEMENT AMOUNT") plus (y) any additional amounts required to pay
additional Taxes imposed with respect to the Tax Reimbursement Amount
and with respect to amounts payable under this clause (y), with the
result that the Indemnified Party shall have received from the
Indemnifying Party, net of the payment of Taxes, an amount equal to the
Loss.
(ii) The Indemnified Party shall reimburse the
Indemnifying Party an amount equal to the net reduction in any year in
the liability for Taxes (that are based upon or measured by income) of
the Indemnified Party or any member of a consolidated or combined tax
group of which the Indemnified Party is, or was at any time, part,
which reduction is actually realized with respect to any period after
the Closing Date and which reduction would not have been realized but
for the amounts paid (or any audit adjustment or deficiency with
respect thereto, if applicable) in respect of a Loss, or amounts paid
by the Indemnified Party pursuant to this paragraph (a "NET TAX
BENEFIT"). The amount of any Net Tax Benefit shall be paid not later
than 15 days after the date on which such Net Tax Benefit shall be
realized. For purposes of this clause (ii), the Net Tax Benefit shall
be deemed to be actually realized on the date on which such Net Tax
Benefit is used to compute an obligation to pay installments of
estimated tax or, if earlier, reported earnings; provided, however,
that if the amount of any Net Tax Benefit is subsequently affected by
reason of any event or events, including, without limitation, any
payment of Taxes by such Indemnified Party with respect to the loss of
such Net Tax Benefit upon audit or litigation, appropriate adjustments
and payments to take into account the increase or decrease in such Net
Tax Benefit shall be made between the Indemnified Party and the
Indemnifying Party within 15 days after such event or events. Any
expenses associated with the realization of a Net Tax Benefit or any
contest or proceeding with respect to a Net Tax Benefit shall be deemed
to reduce such Net Tax Benefit. Buyer agrees to provide each Seller or
its designated representatives with such assistance and such documents
and records reasonably requested by them that are relevant to their
ability to determine whether a Net Tax Benefit has been realized,
including but not limited to copies of any Tax Returns, estimated tax
payments, schedules, and related supporting documents.
11.4 SURVIVAL.
The representations and warranties and agreements contained in
or made pursuant to this Agreement shall expire on the first anniversary of the
Closing, except that (i) the representations and warranties contained in
Sections 2.1 [Organization], 2.2 [Authorization], 2.4 [Penn Shares], 2.5
[Appleton Shares], 3.1 [Organization and Good Standing], 3.2 [Company Stock],
4.1 [Organization and Good Standing], 4.2 [Appleton Stock], 5.1 [Organization
and Related Matters], and 5.2 [Authorization] shall survive the Closing and
shall remain in full force and effect indefinitely, (ii) the representations and
35
warranties contained in Section 3.5 [Taxes and Tax Returns] shall survive the
Closing and shall remain in full force and effect for the period of the
applicable statute of limitations with respect to such claims, (iii) the
agreements contained in Article VIII, in Sections 11.3(d)-(i) and in Section
12.21 shall survive the Closing and remain in full force and effect indefinitely
and (iv) if a claim or notice is given under this Article XI with respect to any
representation or warranty or agreement prior to the applicable expiration date
set forth in this Section 11.4, such representation or warranty or agreement
shall continue indefinitely only for the purposes of such claim until such claim
is finally resolved. The indemnification set forth in this Article XI shall
survive the Closing and shall remain in effect for a period of one year after
the Closing Date, except for any indemnification for a breach of a
representation or warranty or agreement which survives indefinitely in
accordance with the terms of this Section 11.4. Any matter as to which a claim
has been asserted by notice to the other party that is pending or unresolved at
the end of any applicable limitation period shall continue to be covered by this
Article XI notwithstanding any applicable statute of limitations (which the
parties hereby waive) until such matter is finally terminated or otherwise
resolved by the parties under this Agreement or by a court of competent
jurisdiction and any amounts payable hereunder are finally determined and paid.
11.5 LIMITATIONS ON INDEMNIFICATION.
(a) [Reserved].
(b) Breach Regarding Company. No payment shall be required
under or pursuant to Sections 11.1(b) (other than with respect to a breach of
Section 3.2 or any obligation under Article VIII hereof) and 11.1(c) unless the
aggregate of all amounts for which indemnity would otherwise be payable under
such portions of Section 11.1(b) and under Section 11.1(c) exceeds in the
aggregate $750,000 and, in such event, indemnity under such portions of Section
11.1(b) and under Section 11.1(c) shall be limited to the amount in excess of
such $750,000.
(c) [Reserved].
(d) Dollar Limitation. Notwithstanding anything to the
contrary herein, in no event shall the aggregate amount payable by any Seller
under this Article XI exceed an amount equal to the difference between (i) such
Seller's Applicable Share of the Purchase Price and (ii) such Seller's
Applicable Share of the amount payable under Section 1.3(ii)(b).
(e) Escrow; Limitation on Recourse. Notwithstanding anything
to the contrary herein, the parties hereto agree that any amounts payable under
or pursuant to Section 1.5 will be paid first out of the Working Capital Escrow
Account and any excess out of the Working Capital and Claims Escrow Account and
any amounts payable under or pursuant to Sections 11.1(b) (other than with
respect to a breach of Section 3.2 hereof or any obligation under Article VIII),
11.1(c) and 11.1(f) (or any settlement of any Indemnifiable Claims in accordance
with Section 11.3(c)) will be paid solely out of the Working Capital and Claims
Escrow Account, in each case in accordance with the Escrow Agreement, and no
Seller will have any obligation to make any payments under such Sections other
than from the Escrow Accounts.
(f) Breach Regarding Buyer. Buyer shall not be required to
indemnify any other Person under or pursuant to Section 11.2 unless the
aggregate of all amounts for which indemnity would otherwise be payable by Buyer
under Section 11.2 exceeds $100,000 and, in such event, the Indemnifying Party
shall be responsible only for the amount in excess of such $100,000.
36
(g) Net Working Capital. Notwithstanding anything to the
contrary herein, Sellers shall not be obligated to indemnify any Person against
any Losses as a result of, or based upon or arising from any claim or liability
to the extent such claim or liability is taken into account in determining Net
Working Capital as calculated based on the Closing Date Balance Sheet.
11.6 EXCLUSIVE REMEDY.
Notwithstanding anything to the contrary herein, the indemnity
provided in this Article XI, as it relates to a breach of a representation or
warranty or a failure to perform any covenant or agreement, shall be the
exclusive remedy with respect to matters addressed by such covenant, agreement,
representation or warranty other than any rights to specific performance
available for a breach of a covenant hereunder.
11.7 ACTUAL DAMAGES.
Any Indemnifiable Claim, whether with respect to any breach or
nonperformance by either party of a representation, warranty, covenant or
agreement or otherwise, shall be limited to the amount of actual Losses
sustained by the Indemnified Party by reason of such breach or nonperformance
and shall be net of any insurance proceeds received from insurance companies,
including affiliated insurance companies. Notwithstanding anything to the
contrary herein, no party (or its Affiliates) shall, in any event, be liable to
any other party (or its Affiliates) for any punitive, incidental or
consequential damages, including, but not limited to, loss of revenue or income,
or loss of business reputation or opportunity relating to the breach or alleged
breach of this Agreement.
11.8 TREATMENT OF PAYMENTS.
All payments made pursuant to this Article XI shall be treated
as adjustments to the Purchase Price for the Purchased Stock.
11.9 PRE-CLOSING WORKER'S COMPENSATION CLAIMS.
Each Seller severally agrees to indemnify and hold harmless
Buyer, Company and its Subsidiary, and their respective directors, officers,
employees, affiliates, agents and assigns from and against any and all Losses of
Buyer, Company or its Subsidiary as a result of any claims made under Company
and Subsidiary's worker's compensation policies arising out of operation of the
Business prior to the Closing Date. Any refunds of premiums paid by Company or
its Subsidiary, any other retroactive adjustments or any dividends under such
worker's compensation policy received after the Closing shall be paid by Buyer
or caused to be paid by Buyer to Sellers upon receipt by Buyer, Company or its
Subsidiary in accordance with each Seller's Applicable Share, except to the
extent such amount is included in Net Working Capital on the financial
statements of Company or its Subsidiary on the Closing Date.
ARTICLE XII
GENERAL
12.1 AMENDMENTS; WAIVERS.
This Agreement and any schedule or exhibit attached hereto may
be amended only by agreement in writing of all parties. Except as otherwise
provided herein, no waiver of any provision nor
37
consent to any exception to the terms of this Agreement shall be effective
unless in writing and signed by the party to be bound and then only to the
specific purpose, extent and instance so provided. No failure on the part of any
party to exercise or delay in exercising any right hereunder shall be deemed a
waiver thereof, nor shall any single or partial exercise preclude any further or
other exercise of such or any other right.
12.2 SCHEDULES; EXHIBITS; INTEGRATION.
Each schedule and exhibit delivered pursuant to the terms of
this Agreement shall be in writing and shall constitute a part of this Agreement
and are deemed incorporated herein by this reference, although schedules need
not be attached to each copy of this Agreement. This Agreement, together with
such schedules and exhibits, constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior agreements and
understandings of the parties in connection therewith.
12.3 BEST EFFORTS; FURTHER ASSURANCES.
(a) Standard. Each party will use its best efforts to cause
all conditions to its obligations to be timely satisfied. The parties shall
cooperate with each other in such actions and in securing requisite Approvals.
Each party shall deliver such further certificates, agreements and other
documents and take such other actions as the other party may reasonably request
to consummate or implement the transactions contemplated hereby or to evidence
such events or matters.
(b) Limitation. As used in this Agreement, the term "best
efforts" shall not mean efforts which require the performing party to do any act
that is unreasonable under the circumstances, to make any capital contribution
or to expend any funds other than reasonable out-of-pocket expenses incurred in
satisfying its obligations hereunder, including but not limited to the fees,
expenses and disbursements of its accountants, actuaries, counsel and other
professionals.
12.4 GOVERNING LAW.
This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to conflicts
of law principles.
12.5 NO ASSIGNMENT.
Neither this Agreement nor any rights or obligations under it
are assignable except that Buyer may assign its rights hereunder (including but
not limited to its rights under Article XI) to any wholly-owned subsidiary of
Buyer. Buyer shall remain liable to Sellers for the payment of the Purchase
Price and other obligations of Buyer hereunder notwithstanding a permitted
assignment.
12.6 HEADINGS.
The descriptive headings of the Articles, Sections and
subsections of this Agreement are for convenience only and do not constitute a
part of this Agreement.
12.7 COUNTERPARTS.
This Agreement and any amendment hereto or any other agreement
(or document) delivered pursuant hereto may be executed in one or more
counterparts and by different parties in
38
separate counterparts. All of such counterparts shall constitute one and the
same agreement (or other document) and shall become effective (unless otherwise
provided therein) when one or more counterparts have been signed by each party
and delivered to the other party.
12.8 PUBLICITY AND REPORTS.
Sellers and Buyer shall coordinate all publicity relating to
the transactions contemplated by this Agreement and no party shall issue any
press release, publicity statement or other public notice relating to this
Agreement, or the transactions contemplated by this Agreement, without
consulting with the other party, and in no event may any such public disclosure
refer to the purchase price payable to Sellers hereunder, except to the extent
that independent legal counsel to Sellers or Buyer, as the case may be, shall
deliver a written opinion to the other party that a particular action is
required by applicable law.
12.9 CONFIDENTIALITY.
All information disclosed in writing, whether before or after
the date hereof, in connection with the transactions contemplated by, or the
discussions and negotiations preceding, this Agreement to any other party (or
its representatives) shall be kept confidential by such other party and its
representatives and shall not be used by any such Persons other than as
contemplated by this Agreement, except to the extent that (i) such information
was known by the recipient when received, (ii) such information is or hereafter
becomes lawfully obtainable from other sources, (iii) such information is
necessary or appropriate to disclose to a Governmental Entity having
jurisdiction over the parties, (iv) may otherwise be required by law or (v) such
duty as to confidentiality is waived in writing by the other party. If this
Agreement is terminated, each party shall use all reasonable efforts to return
upon written request from the other party all documents (and reproductions
thereof) received by it or its representatives from such other party (and, in
the case of reproductions, all such reproductions made by the receiving party)
that include information not within the exceptions contained in the first
sentence of this Section 12.9, unless the recipients provide assurances
reasonably satisfactory to the requesting party that such documents have been
destroyed.
12.10 PARTIES IN INTEREST.
This Agreement shall be binding upon and inure to the benefit
of each party, and nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement except for Section 12.5 and this Section
12.10 (which are intended to be for the benefit of the persons provided for
therein and may be enforced by such persons). Except as set forth in Section
11.3(c), nothing in this Agreement is intended to relieve or discharge the
obligation of any third person to (or to confer any right of subrogation or
action over against) any party to this Agreement.
12.11 PERFORMANCE BY SUBSIDIARY.
Each party agrees to cause its subsidiaries to comply with any
obligations hereunder relating to such subsidiaries and to cause its
subsidiaries to take any other action which may be necessary or reasonably
requested by the other party in order to consummate the transactions
contemplated by this Agreement.
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12.12 NOTICES AND PAYMENT INSTRUCTIONS.
Any notice or other communication hereunder must be given in
writing and (a) delivered in person, (b) transmitted by telex, telefax or
telecommunications mechanism provided that any notice so given is also mailed as
provided in clause (c) or (c) mailed by certified or registered mail, postage
prepaid), receipt requested (A) if to any Seller, to the address for such Seller
listed on Schedules 3.2 or 4.2 with a copy to each Seller Representative and to
O'Melveny & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., and (B) if to Buyer to ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, with a copy to
Kean, Miller, Hawthorne, ▇'▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., or, in each
case, to such other address or to such other person as either party shall have
last designated by such notice to the other party. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to) this
Section 12.12 and an appropriate answerback is received, (ii) if given by mail,
three days after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any other means,
when actually received at such address.
With respect to any payments to be made hereunder to any
party, such payment shall be made by wire transfer in immediately available
funds to the account of such party designated in writing to the other parties
hereto.
12.13 APPOINTMENT OF SELLER REPRESENTATIVES.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III (the "FIRST REPRESENTATIVE") and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ (the "SECOND REPRESENTATIVE"), jointly are hereby irrevocably
appointed as agent and attorney-in-fact of Sellers (in such capacity, together
"SELLER REPRESENTATIVES") for the actions or decisions requiring instructions
from or the consent of Seller Representatives as provided herein or in the
Escrow Agreement, and any such action or decisions taken by Seller
Representatives jointly shall be binding and conclusive on Sellers, and may be
relied upon by Buyer. Each Seller agrees to indemnify and hold harmless the
Seller Representatives for any act or failure to act of Seller Representatives
taken jointly on behalf of Sellers, except for Seller Representatives' gross
negligence or willful misconduct. In the event of the death or incapacity of
either Seller Representative, Sellers shall appoint a replacement for such
Seller Representative, with the TCW Entities entitled to appoint any replacement
for the First Representative and the Appleton Sellers entitled to appoint any
replacement for the Second Representative.
12.14 EXPENSES.
Sellers and Buyer shall each pay their own expenses incident
to the negotiation, preparation and performance of this Agreement and the
transactions contemplated hereby, including but not limited to the fees,
expenses and disbursements of their respective investment bankers, accountants
and counsel; provided, further, that such fees, expenses and disbursements of
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation shall be paid by the Sellers
in accordance with such Seller's Applicable Share. The expenses of Company and
its Subsidiary will be paid by Company and its Subsidiary at Closing, and the
expenses of Appleton will be paid by Appleton Sellers. Fees and expenses
relating to the transaction contemplated hereby shall not be a liability of
Company at Closing.
40
12.15 LITIGATION.
All litigation relating to or arising under or in connection
with this Agreement shall be brought only in the federal or state courts located
in the State and County of New York, which shall have exclusive jurisdiction to
resolve any disputes with respect to this Agreement, with each party irrevocably
consenting to the jurisdiction thereof for any actions, suits or proceedings
arising out of or relating to this Agreement. The parties hereto irrevocably
waive trial by jury. Subject to Sections 11.5 and 11.6, in the event of any
breach of the provisions of this Agreement, the non-breaching party shall be
entitled to equitable relief, including in the form of injunctions and orders
for specific performance, where the applicable legal standards for such relief
in such courts are met, in addition to all other remedies available to the
non-breaching party with respect thereto at law or in equity.
12.16 ATTORNEY'S FEES.
In the event of any Action for the breach of this Agreement or
misrepresentation by any party, the prevailing party shall be entitled to
reasonable attorney's fees, costs and expenses incurred in such Action.
12.17 REPRESENTATION BY COUNSEL.
Sellers and Buyer each acknowledge that each party to this
Agreement has been represented by counsel in connection with this Agreement and
the transactions contemplated by this Agreement. Accordingly, any rule of Law or
any legal decision that would require interpretation of any claimed ambiguities
in this Agreement against the party that drafted it has no application and is
expressly waived.
12.18 INTERPRETATION.
The provisions of this Agreement shall be interpreted in a
reasonable manner to effect the intent of Buyer and Sellers. Further, "hereof,"
"herein," "hereunder," "hereto," "this Agreement" and comparable terms refer to
the entire instrument, including any exhibits or schedules to the instrument,
and not to any particular article, section or other subdivision of the
instrument.
12.19 SEVERABILITY.
If any provision of this Agreement is determined to be
invalid, illegal or unenforceable by any Governmental Entity, the remaining
provisions of this Agreement to the extent permitted by Law shall remain in full
force and effect provided that the essential terms and conditions of this
Agreement for all parties remain valid, binding and enforceable; provided that
the economic and legal substance of the transactions contemplated is not
affected in any manner materially adverse to any party. In event of any such
determination, the parties agree to negotiate in good faith to modify this
Agreement to fulfill as closely as possible the original intents and purposes
hereof. To the extent permitted by Law, the parties hereby to the same extent
waive any provision of Law that renders any provision hereof prohibited or
unenforceable in any respect.
12.20 KNOWLEDGE CONVENTION.
Whenever any statement herein or in any schedule, exhibit,
certificate or other documents delivered to any party pursuant to this Agreement
is made "to [its] knowledge" or "to [its] best knowledge" or words of similar
intent or effect of any party or its representative, each statement shall
41
be deemed to include a representation that a reasonable investigation has been
conducted. A reasonable investigation shall mean that the senior representatives
of the party have reviewed the relevant statement and have consulted with the
appropriate management individuals as to whether they have knowledge of any fact
or circumstance that would make any such statement untrue and have reviewed
documents in the possession of such representatives. Knowledge of an individual
shall be limited to the actual knowledge of such individual after giving effect
to the investigation described above and shall not include any matter, fact or
circumstance which such individual otherwise should have known.
12.21 RELEASE.
Effective solely upon the occurrence of the Closing Date, each
Seller severally agrees to release and forever discharge Company, its Subsidiary
and each officer, director, agent, or other representative of Company or its
Subsidiary from any and all claims which such Seller or its heirs, executors,
legal representatives, administrators, successors and assigns, ever had or now
have or may in the future have against any such Person, jointly or severally,
for or by reason of any matter, cause, or thing done, admitted to, or suffered
to be done by the Company or its Subsidiary, jointly or severally, at any time
prior to the Closing Date, provided that this release shall not apply to any
claims such Seller may have under any written agreements descriptions or copies
of which were delivered to Buyer or with respect to severance payments, employee
benefits or compensation copies of written documents relating to, or summary
descriptions of which have been delivered to Buyer.
[Remainder of Page Intentionally Left Blank]
42
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officers as of the day and year
first above written.
BUYER ▇▇▇▇▇ ADVERTISING COMPANY
By:_________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇
Chief Financial Officer
[Remainder of Page Intentionally Left Blank]
43
PENN SELLERS TCW CAPITAL, SOLELY IN ITS CAPACITY AS INVESTMENT
MANAGER PURSUANT TO AN INVESTMENT MANAGEMENT
AGREEMENT DATED AS OF APRIL 18, 1990,
By: TCW Asset Management Company
Its: Managing General Partner
By:_______________________________________
Name:
Title:
By:_______________________________________
Name:
Title:
TCW SPECIAL PLACEMENTS FUND III
By: TCW Capital
Its: General Partner
By: TCW Asset Management Company
Its: Managing General Partner
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
_____________________________________________
A. ▇▇▇▇▇ ▇▇▇▇
_____________________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
44
_____________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_____________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
_____________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
_____________________________________________
▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
_____________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
_____________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
_____________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_____________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_____________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
_____________________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
45
_____________________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇.
_____________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
_____________________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
APPLETON SELLERS ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ AND ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III, TRUSTEES
U/D/T FOR ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III,
By: _____________________________________________
Name:
Title:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ AND ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇, TRUSTEES
U/D/T FOR ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
By: _____________________________________________
Name:
Title:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ AND ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, TRUSTEES
U/D/T ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
By: _____________________________________________
Name:
Title:
▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇, TRUSTEE U/D/T DATED JUNE 18, 1980,
46
By: _____________________________________________
Name:
Title:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, TRUSTEE U/D/T DATED DECEMBER 31,
1980,
By: _____________________________________________
Name:
Title:
_____________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
_____________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
_____________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
47
EXHIBIT A-1
TEXT OF OPINION OF O'MELVENY & ▇▇▇▇▇ LLP
1. TCW Capital is a duly formed and validly existing general partnership under
the laws of the State of California, with the power under its partnership
agreement (the "CAPITAL PARTNERSHIP AGREEMENT") to enter into the Agreements and
to perform its obligations under the Stock Purchase Agreement, the Escrow
Agreement and the Non-Competition Agreement (collectively, the "AGREEMENTS").
2. TCW Special Placements Fund III is a duly formed and validly existing limited
partnership under the laws of the State of California, with the power under
California Revised Uniform Limited Partnership Act (the "ACT") and the TCW
Special Placements Fund III Partnership Agreement (the "SPF PARTNERSHIP
AGREEMENT" and together with the Capital Partnership Agreement, the "PARTNERSHIP
AGREEMENTS") to enter into the Agreements and to perform its obligations under
the Agreements.
3. The execution, delivery and performance of the Agreements have been duly
authorized by all necessary action under the Act and the Partnership Agreements
on the part of the TCW Entities, and the Agreements have been duly executed and
delivered by the TCW Entities.
4. The Agreements (other than the Non-Competition Agreement) constitute the
legally valid and binding obligations of the TCW Entities enforceable against
them in accordance with their terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally (including, without limitation, fraudulent
conveyance laws) and by general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good faith and fair dealing
and the possible unavailability of specific performance or injunctive relief,
regardless of whether considered in a proceeding in equity or at law.
5. The TCW Entities' execution and delivery of, and performance of their
respective obligations under, the Agreements do not violate their respective
Partnership Agreements.
6. The execution and delivery by the TCW Entities of, and performance of its
obligations under, the Agreements do not violate any New York, California or
federal statute or regulation that we have, in the exercise of customary
professional diligence, recognized as applicable to the TCW Entities or to
transactions of the type contemplated by the Agreements.
7. No order, consent, permit or approval of any New York, California or federal
governmental authority that we have, in the exercise of customary professional
diligence, recognized as applicable to the TCW Entities or to transactions of
the type contemplated by the Agreements is required on the part of the TCW
Entities for the execution and delivery of, and performance of its obligations
under, the Agreements[, except for such as have been obtained].
8. Upon payment for and delivery of the Penn Shares to be sold by the TCW
Entities in accordance with the Stock Purchase Agreement, assuming Buyer is
acquiring them in good faith without notice of any adverse claim, Buyer will own
such Penn Shares free and clear of any adverse claim.
A-1-1
48
EXHIBIT A-2
TEXT OF OPINION ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ESQ., GENERAL COUNSEL OF COMPANY
1. Company has been duly incorporated, and is validly existing in good standing
under the laws of the State of Delaware and has the requisite corporate power
and authority to own and operate its properties and to carry on its business.
The Company is in good standing in all other jurisdictions in which the nature
of the Company's business or its properties makes such qualification necessary.
2. Based solely on my review of the Company's stock records, the authorized
capital stock of the Company consists of 125,000 shares of Class A Common Stock,
$1.00 par value, of which 110,237 shares are outstanding, and 25,000 shares of
Class B Common Stock, $1.00 par value, of which 6,320 shares are outstanding.
All of the outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable and, based
solely on my review of the Company's stock records, are held of record by the
stockholders as described on Exhibit A hereto. All the outstanding shares of
capital stock of the Company have been issued in full compliance with all
federal and state securities laws. To my knowledge there are no outstanding
subscriptions, options, warrants, calls, restrictions to the transfer of the
Penn Shares, or rights of any kind relating to or providing for the issuance,
sale, delivery or transfer of securities of any class of securities of the
Company issued or granted by the Company (including any right of conversion or
exchange under any outstanding security or other instrument).
3. Subsidiary has been duly incorporated, and is validly existing in good
standing under the laws of the State of Delaware and has the requisite corporate
power and authority to own and operate its properties and to carry on its
business. Subsidiary is in good standing in all other jurisdictions in which the
nature of Subsidiary's business or its properties makes such qualification
necessary.
4. Based solely on my review of Subsidiary's stock records, all of the issued
and outstanding shares of Subsidiary are owned, beneficially and as of record,
by the Company, and have been duly authorized and validly issued and are fully
paid and nonassessable. To my knowledge there are no outstanding subscriptions,
options, warrants, calls, restrictions to the transfer of the shares of the
Subsidiary, or rights of any kind relating to or providing for the issuance,
sale, delivery or transfer of securities of any class of securities of the
Subsidiary issued or granted by the Subsidiary (including any right of
conversion or exchange under any outstanding security or other instrument).
5. The Penn Sellers' execution and delivery of, and performance of their
obligations under, the Stock Purchase Agreement, the Escrow Agreement and the
Non-Competition Agreements (collectively, the "AGREEMENTS") do not violate the
Certificate of Incorporation, Bylaws, or any Shareholder's Agreement to which
the Company is a party.
6. No order, consent, permit or approval of any Pennsylvania or federal
governmental authority that we have, in the exercise of customary professional
diligence, recognized as applicable to Company or to transactions of the type
contemplated by the Agreements is required on the part of Company for the
execution and delivery of, and performance of its obligations under, the
Agreements by Sellers[, except for such as have been obtained].
A-2-1
49
7. To my knowledge, except as set forth in the schedule attached hereto, there
is no Order or Action pending or threatened against or affecting Company, the
Subsidiary or any of their properties or assets that individually or when
aggregated with one or more other Orders or Actions has had or can be reasonably
expected to have a Material Adverse Effect.
A-2-2
50
EXHIBIT A-3
TEXT OF OPINION OF OTHER SELLERS' COUNSEL*
1. Based solely on our review of the stock record books, the
individuals listed on Exhibit A hereto (hereinafter singularly referred to as a
"SELLER" and collectively as "SELLERS") are the owners of record of the [Penn
Shares] [Appleton Shares] shown as being owned by them on Exhibit A hereto.
2. The execution, deliver and performance of the Stock
Purchase Agreement, the Escrow Agreement and the Non-Competition Agreements
(collectively, the "AGREEMENTS") have been duly authorized by all necessary
actions on the part of the Sellers that are parties thereto, and the Agreements
have been duly executed and delivered by the Sellers that are parties thereto.
3. The Stock Purchase Agreement and the Escrow Agreement
constitute valid and binding obligations of Sellers, enforceable against Sellers
in accordance with their terms, except as may be limited or otherwise affected
by (i) bankruptcy, insolvency, involuntary liquidation, fraudulent conveyance,
reorganization, moratorium or other similar laws, regulations or equitable
principles affecting the enforcement of creditors' rights in general or (ii) the
unavailability of, or any limitation upon the availability of, any particular
right or remedy because of the discretion of a court, the principle of election
of remedies or any requirement as to commercial reasonableness, conscionability
or good faith. Furthermore, we express no pinion concerning (a) usury, (b) the
validity, binding effect or enforceability of any provisions of any document
giving consent or waiving a right, remedy or defense or (c) the validity,
binding effect or enforceability or a document or a provision of any document
with respect to any person or entity other than the Sellers.
4. The execution and delivery by each Seller of, and
performance of his obligations under, the Agreements do not violate any New York
or federal statute or regulation that we have, in the exercise of customary
professional diligence, recognized as applicable to such Seller or to the
transactions contemplated by the Agreements.
5. No order, consent, permit or approval of any New York or
federal governmental authority that we have, in the exercise of customary
professional diligence, recognized as applicable to Sellers or to the
transactions contemplated by the Agreements is required on the part of Sellers
for the execution and delivery of, and performance of their obligations under,
the Agreements (except for these consents, permits and approvals contemplated
under the Stock Purchase Agreement).
6. Upon payment for and delivery of the certificates
representing the [Penn Shares] [Appleton Shares] to be sold by the Sellers in
accordance with the Stock Purchase Agreement appropriately endorsed, assuming
Buyer is acquiring such [Penn Shares] [Appleton Shares] in good faith without
notice of any adverse claim, Buyer will own such [Penn Shares] [Appleton Shares]
free and clear of any adverse claim.
--------
* Additional opinions should be added for Sellers that are not
individuals.
A-3-1
51
7. To our knowledge, there is no material suit or proceeding
pending or threatened against Sellers which would prevent the consummation of
the transactions contemplated by the Agreements.
A-3-2
52
EXHIBIT A-4
TEXT OF OPINION OF APPLETON'S COUNSEL
1. Appleton has been duly incorporated, and is validly existing in good standing
under the laws of the State of Delaware. Appleton has the requisite corporate
power and authority to own and operate its properties and to carry on its
business. Appleton is in good standing in all other jurisdictions in which the
nature of Appleton's business or its properties makes such qualification
necessary.
2. Based solely on my review of the Appleton stock records, the authorized
capital stock of Appleton consists of 10,000 shares of Class A Common Stock,
$1.00 par value, of which 8,869.2 shares are outstanding, and 10,000 shares of
Class B Common Stock, $1.00 par value, of which 173.84 shares are outstanding.
All of the outstanding shares of capital stock of Appleton have been duly
authorized and validly issued, are fully paid and nonassessable and, based
solely on my review of the Appleton stock records, are held of record by the
stockholders as described on Exhibit A hereto. To my knowledge there are no
outstanding subscriptions, options, warrants, calls or restrictions to the
transfer of the Appleton Shares, or rights of any kind relating to, or providing
for, the issuance, sale, delivery or transfer of securities of any class of
securities of Appleton issued or granted by Appleton (including any right of
conversion or exchange under any outstanding security or other instrument).
3. The Appleton Sellers' execution and delivery of, and performance of their
obligations under, the Stock Purchase Agreement, the Escrow Agreement and the
Non-competition Agreements (collectively, the "AGREEMENTS") do not violate the
Certificate of Incorporation, By-laws or any Shareholder's Agreement to which
Appleton is a party.
4. No order, consent, permit or approval of any Pennsylvania or federal
governmental authority or of any other person that I have, in the exercise of
customary professional diligence, recognized as applicable to Company or to
transactions of the type contemplated by the Agreements is required on the part
of Company for the execution and delivery of, and performance of its obligations
under, the Agreements by Appleton Sellers [except for such as have been
obtained].
5. To my knowledge, [except as set forth in the officer's certificate attached
hereto], there is no Order or Action pending or threatened against or affecting
Appleton or any of its properties or assets that individually or when aggregated
with one or more other Orders or Actions has had or can be reasonably expected
to have a material adverse effect on the business of Appleton or any of its
properties or assets.
A-4-1
53
EXHIBIT B
TEXT OF OPINION OF BUYER'S COUNSEL
1. ▇▇▇▇▇ Advertising Company ("BUYER") has been duly incorporated, and is
validly existing in good standing under the laws of the State of Delaware, with
corporate power to enter into the Stock Purchase Agreement and the Escrow
Agreement (collectively, the "AGREEMENTS"), and to perform its obligations under
the Agreements.
2. The execution, delivery and performance of the Agreements have been duly
authorized by all necessary corporate action on the part of Buyer and the
Agreements have been duly executed and delivered by Buyer.
*3. The Agreements constitute the legally valid and binding obligations of
Buyer, enforceable against Buyer in accordance with their terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally (including, without
limitation, fraudulent conveyance laws) and by general principles of equity,
including, without limitation, concepts of materiality, reasonableness, good
faith and fair dealing and the possible unavailability of specific performance
or injunctive relief, regardless of whether considered in a proceeding in equity
or at law.
4. Buyer's execution and delivery of, and performance of its obligations under,
the Agreements do not violate Buyer's Certificate of Incorporation and By-laws.
**5. The execution and delivery by Buyer of, and performance of its obligations
under, the Agreements do not violate any New York or federal statute or
regulation that we have, in the exercise of customary professional diligence,
recognized as applicable to Buyer or to transactions of the type contemplated by
the Agreements.
**6. No order, consent, permit or approval of any New York or federal
governmental authority that we have, in the exercise of customary professional
diligence, recognized as applicable to Buyer or to transactions of the type
contemplated by the Agreements is required on the part of Buyer for the
execution and delivery of, and performance of its obligations under, the
Agreements[, except for such as have been obtained].
--------
* To be provided by New York counsel.
** As to New York law matters only, to be provided by New York counsel.
B-1
54
EXHIBIT C
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is entered into as of [_________, 1997]
by and among ▇▇▇▇▇ Advertising Company, a Delaware corporation ("BUYER"), the
persons listed as Sellers on Schedules 3.2 and 4.2 of the Stock Purchase
Agreement (defined below) and CORESTATES BANK, N.A. ("ESCROW AGENT").
R E C I T A L S:
WHEREAS, Buyer and the Sellers have entered into that certain
Stock Purchase Agreement dated February 7, 1997 (the "STOCK PURCHASE AGREEMENT";
capitalized terms used herein without definition shall have the meanings given
such terms in the Stock Purchase Agreement), which provides for the purchase by
Buyer of all of the Penn Shares held by the Penn Sellers and all of the Appleton
Shares; and
WHEREAS, the Stock Purchase Agreement also provides for (i) an
adjustment to the Purchase Price and (ii) Sellers to indemnify Buyer under
certain circumstances for certain Losses from an escrow fund; and
WHEREAS, the parties desire to arrange for such escrow and
appoint Escrow Agent as escrow agent in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the closing of the
transactions contemplated by the Stock Purchase Agreement and the agreements
herein the parties agree as follows:
1. APPOINTMENT OF ESCROW AGENT. Escrow Agent is hereby
appointed to act as escrow agent in accordance with the terms hereof, and Escrow
Agent hereby accepts such appointment. Escrow Agent shall have all the rights,
powers, duties and obligations provided herein.
2. DEPOSIT OF ESCROW ASSETS. A total of $3,500,000 by wire
transfer in immediately available funds (the "ESCROW FUND") is hereby delivered
and deposited with the Escrow Agent. The Escrow Agent shall hold the Escrow Fund
in accordance with the terms of this Escrow Agreement in two escrow accounts,
one of which shall initially contain $500,000 (the "WORKING CAPITAL ESCROW
ACCOUNT") and the other shall initially contain $3,000,000 (the "WORKING CAPITAL
AND CLAIMS ESCROW ACCOUNT" and together with the Working Capital Escrow Account,
the "ESCROW ACCOUNTS"). The Escrow Fund shall serve as a method of discharging
any Claims (as defined below) of Buyer made prior to the date one year following
the Closing Date (such period referred to herein as the "ESCROW PERIOD") and for
any payment required to be made to Buyer pursuant to Section 1.5 of the Stock
Purchase Agreement.
3. INVESTMENT. Unless jointly instructed otherwise in writing
by Buyer and Seller Representatives, Escrow Agent shall invest the Escrow Fund
subject to the following limitations:
C-1
55
(a) DEBT INSTRUMENTS. The Escrow Fund may be invested only in
debt instruments having maturities of not more than 180 days. The
Escrow Fund may be invested and, upon the joint written request of
Buyer and Seller Representatives, shall be invested, as jointly
directed by the Buyer and Seller Representatives, by the Escrow Agent.
Permitted investments shall be limited to (i) certificates of deposit
of banks, savings and loan associations or trust companies (including
the Escrow Agent) organized under the laws of the United States of
America, or any state thereof, which have capital and surplus of at
least $250,000,000, (ii) direct obligations of the United States of
America or its agencies or instrumentalities as to which principal and
interest constitute full faith and credit obligations of the United
States of America, (iii) commercial paper or other debt instruments
rated not less than prime 1 or A-1 or their equivalent by Moody's
Investor's Service or Standard & Poor's Ratings Services or their
successors, (iv) "money market" mutual funds required by their most
recent prospectus to invest at least 80% of their assets in the
foregoing, or (v) pooled or commingled investment vehicles administered
by a bank meeting the foregoing size requirement that is limited to
investments as described above. To the extent Buyer and Seller
Representatives do not direct Escrow Agent as to investment of any
portion of the Escrow Fund, such funds shall be invested by Escrow
Agent within 1 business day in investments of the type described in
clause (iv) above.
(b) PENDING CLAIMS. As soon as practicable, a portion of the
Escrow Fund equal to the amount of all pending Claims shall be
converted to debt instruments rated as above, having maturities of 30
days or less.
(c) INCOME. All income on the Escrow Fund shall be reported as
income of the Sellers for tax purposes, and distributed to Sellers at
the end of each calendar quarter, unless contrary instructions are
given pursuant to Sections 4(c). Escrow Agent shall disburse to each
Seller such Seller's Applicable Share of any such income within 5 days
of the end of such calendar quarter as provided in Section 6(b).
(d) OTHER PROVISIONS. The Escrow Agent may sell or present for
redemption any obligations so purchased whenever it shall be necessary
in order to provide money to meet payments hereunder, and shall not be
liable or responsible for any loss resulting from any investment. The
Escrow Agent may act as principal or agent in the making in disposing
of any investment.
4. PURCHASE PRICE ADJUSTMENT; INDEMNIFICATION AND RESOLUTION
OF DISPUTES.
(a) PURCHASE PRICE ADJUSTMENT. Upon acceptance of the Closing
Date Balance Sheet and the resolution of any disputes relating thereto in
accordance with Section 1.5 of the Stock Purchase Agreement, if Sellers are
required to make any payment under Section 1.5(d) of the Stock Purchase
Agreement, Seller Representatives shall promptly in writing instruct Escrow
Agent to make such payment to Buyer first out of the Working Capital Escrow
Account and any excess out of the Working Capital and Claims Escrow Account
within the period specified therefor in Section 1.5(d) of the Stock Purchase
Agreement.
(b) ASSERTION OF INDEMNIFIABLE CLAIMS. From time to time
during the term of the escrow, Buyer (on its own behalf or on behalf of the
Company) or its successors or assigns may assert a claim to which it is entitled
to indemnification pursuant to Sections 11.1(b), (c) or (f) of the Stock
C-2
56
Purchase Agreement (any such claim for indemnification, a "CLAIM") against
Sellers and demand satisfaction thereof out of the Working Capital and Claims
Escrow Account by sending a written notice, stating the amount of the Claim in
dollars, and in general terms the basis of the Claim, to Sellers, to Seller
Representatives and to the Escrow Agent. If the Escrow Agent shall receive such
notice from Buyer before any distribution of the Escrow Fund is made to Sellers
at the end of the Escrow Period, the notice shall be deemed to represent a
pending Claim (or Claims).
(c) ESCROW AGENT'S ROLE. The Escrow Agent shall have no
responsibility or obligation for investigating or determining the validity or
sufficiency of any pending Claim. The Escrow Agent shall, however, deliver a
full copy of any pending Claim to Seller Representatives promptly upon receipt
thereof. It shall distribute money out of the Escrow Fund to Buyer upon its
receipt of any of the following:
(i) Written instructions from Seller Representatives pursuant
to Section 4(a) hereof;
(ii) Written instructions from Seller Representatives to
distribute funds to pay or reimburse a pending Claim out of the Working
Capital and Claims Escrow Account; or
(iii) A certified order or ruling from a court ordering or
instructing it to do so.
Distributions shall be made 30 days after receipt of any such
instruction, order or ruling (immediately in the case of instructions under
clauses (i) or (iii) above) even if the Escrow Agent has been advised that an
appeal or other relief is being sought, so long as it has not received actual
service of a stay of such order or ruling pending appeal. The Escrow Agent shall
also pay any pending Claim out of the Working Capital and Claims Escrow Account
as to which it has not received actual notice of Seller Representatives'
objection thereto within 30 calendar days of the Escrow Agent's having delivered
a copy of such pending Claim to Seller Representatives.
5. NO TRANSFER OF INTEREST IN ESCROW FUND.
Except as otherwise expressly provided hereunder, Sellers may
not assign or transfer, whether or not in accordance with the terms of the Stock
Purchase Agreement, any interest in the Escrow Fund in whole or in part. The
Escrow Fund shall remain subject to this Escrow Agreement and no assignment or
transfer by Sellers shall in any way affect any rights Buyer may have in such
Escrow Fund. Subject to the foregoing, this Escrow Agreement shall be binding
upon and inure to the benefit of the parties hereto, their respective heirs,
administrators, executors, successors and assigns.
6. PAYMENTS FROM ESCROW ACCOUNT.
(a) TERMINATION OF ESCROW. Escrow Agent shall hold the Escrow
Fund in the Working Capital Escrow Account in escrow until acceptance of the
Closing Date Balance Sheet and the resolution of any disputes relating thereto
in accordance with Section 1.5 of the Stock Purchase Agreement. At such time any
funds remaining in such account after any payment contemplated by Section 4(a)
above, shall be immediately distributed by Escrow Agent to each Seller in
accordance with such Seller's Applicable Share and upon such payment, the
Working Capital Escrow Account shall terminate. Escrow Agent shall hold the
Escrow Fund in the Working Capital and Claims Escrow Account in escrow until the
later to occur of (a) the end of the Escrow Period or (b) if Buyer has asserted
C-3
57
a Claim under Section 4 hereof prior to such time, 5 days after such Claim is
finally resolved in accordance with the provisions of this Escrow Agreement, and
the full amount of all payments to Buyer required thereby have been disbursed to
Buyer (the "FINAL SETTLEMENT TIME"). Immediately after the Final Settlement
Time, Escrow Agent shall disburse to each Seller such Seller's Applicable Share
of any amounts remaining in the Escrow Fund in the Working Capital and Claims
Escrow Account and the escrow shall terminate; provided, however, that if at any
time prior to the Final Settlement Time the Escrow Fund shall equal zero, then
the escrow shall terminate at such earlier time. If at any time after the end of
the Escrow Period the Escrow Fund in the Working Capital and Claims Escrow
Account exceeds the amount of any then pending Claims, Escrow Agent shall
immediately distribute to each Seller such Seller's Applicable Share of such
excess amount.
(b) METHOD OF PAYMENT. Any payments to be made hereunder shall
be made by wire transfer in immediately available funds to the account of such
party designated in accordance with Section 12.12 of the Stock Purchase
Agreement or as otherwise designated by such party in writing to the other
parties.
7. EXPENSES.
Buyer shall bear 50% and each Seller shall bear such Seller's
Applicable Share of 50% of the charges of the Escrow Agent in carrying out its
duties hereunder. The Escrow Agent shall be compensated for services hereunder
in accordance with a fee letter heretofore delivered to Buyer and Sellers and
shall be reimbursed for its ordinary out-of-pocket expenses including, but not
by way of limitation, the fees and costs of attorneys or agents that it may find
necessary to engage in performance of its duties hereunder and costs arising
from the defense of any suits in which the Escrow Agent is named as a defendant
in its capacity as Escrow Agent. If it shall become necessary that the Escrow
Agent shall perform extraordinary services, it shall be entitled to reasonable
extra compensation therefor and to reimbursement for reasonable and necessary
extraordinary out-of-pocket expenses unless such extraordinary service or
expense is occasioned by the neglect or breach of the Stock Purchase Agreement
by the Escrow Agent.
8. NOTICES.
Any notice required or permitted to be given hereunder shall
be deemed to be sufficiently given if sent by registered or certified mail,
postage prepaid, addressed to the addressee at his or its address last furnished
to the sender in writing by the addressee for the purpose of receiving notices
under this Escrow Agreement, or, unless and until such address shall have been
so furnished, addressed to the addressee as set forth in Schedule 12.12 to the
Stock Purchase Agreement or, in the case of Seller Representatives or Escrow
Agent, in Schedule I hereto.
9. LIABILITY OF ESCROW AGENT.
The Escrow Agent's sole liability hereunder shall be to hold
and invest the Escrow Fund and any moneys or other properties received with
respect thereto, to make payments and distributions therefrom in accordance with
the terms of this Escrow Agreement, to distribute information as provided in
Section 4 hereof and otherwise to discharge its obligations hereunder. Escrow
Agent shall not be liable for any act performed in good faith or in reliance on
any document instrument or statement believed by it to be genuine. Escrow Agent
may act upon any notice, certificate, instrument, request, paper or other
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document believed by it to be genuine or to have been made, sent, signed,
prescribed or presented by the proper person or persons. It shall be under no
obligation to institute or defend any action, suit or legal proceeding in
connection herewith, or to take any other action likely to involve it in expense
unless first indemnified to its satisfaction by the party or parties who desire
that it undertake such action.
If any dispute should arise with respect to the payment or
ownership or right of possession of the Escrow Fund, or any part thereof, at any
time, that cannot be settled under other provisions hereof, the Escrow Agent is
authorized to retain in its possession, without liability to anyone, all or any
part of the Escrow Fund or the proceeds from any sale thereof until such dispute
shall have been settled either by mutual agreement between the parties concerned
or until otherwise ordered by a court having jurisdiction over it. In either
case the Escrow Agent will not release any assets in the Escrow Fund until Buyer
has exhausted its remedies and has no further right of appeal in the courts;
provided, however, if after the expiration of the Escrow Period, Sellers have
received a certified order or ruling from a court ordering or instructing the
Escrow Agent to distribute all or any portion of the Escrow Fund to Sellers, and
such order or ruling has not been stayed within 30 days of such order or ruling,
pending appeal, the Escrow Agent may distribute the amounts so ordered.
Buyer and Sellers jointly and severally agree to indemnify and
hold harmless the Escrow Agent from all losses, costs and expenses that may be
incurred as a result of its involvement in any litigation arising from the
performance of its duties hereunder, provided that such losses costs and
expenses shall not have resulted from any action taken or omitted by the Escrow
Agent and for which it shall have been adjudged negligent or engaged in
misconduct or have acted in bad faith or willful disregard of its duties. The
Escrow Agent may rely upon any instruction by the Seller Representatives as to
the interests of Sellers. Until it receives written notice of any change, Escrow
Agent shall be entitled to rely on the oral instructions of the Seller
Representatives. The Seller Representatives shall confirm such instructions in
writing as soon as practicable.
10. RESIGNATION OR REMOVAL OF ESCROW AGENT.
The Escrow Agent may resign as such following the giving of
thirty days' prior written notice to the other parties hereto. Similarly, the
Escrow Agent may be removed and replaced following the giving of thirty days'
prior written notice to the Escrow Agent by all of the other parties hereto. In
either event, the duties of the Escrow Agent shall terminate thirty days after
the date of such notice (or as of such earlier date as may be mutually
agreeable); and the Escrow Agent shall then deliver the balance of the Escrow
Fund then in its possession to a successor Escrow Agent as shall be appointed by
the other parties hereto as evidenced by a written notice filed with the Escrow
Agent.
If the other parties hereto are unable to agree upon a
successor or shall have failed to appoint a successor prior to the expiration of
thirty days following the date of notice of resignation or removal, the
then-acting Escrow Agent may petition any court of competent jurisdiction for
the appointment of a successor Escrow Agent or otherwise appropriate relief, and
any such resulting appointment shall be binding upon all of the parties hereto.
Upon acknowledgement by any successor Escrow Agent of the
receipt of the then remaining balance of Escrow Fund, the then-acting Escrow
Agent shall be fully released and relieved of all duties, responsibilities, and
obligations under this Escrow Agreement.
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11. CONTINUANCE OF ESCROW AGREEMENT.
This Escrow Agreement shall be binding upon the parties hereto
and their respective transferees, successors, assigns, legal representatives,
heirs and legatees.
12. GOVERNING LAW.
This Escrow Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York.
13. INTERPRETATION AND DEFINITIONS. This Escrow Agreement is
being executed and delivered pursuant to and is subject to the Stock Purchase
Agreement and is the escrow agreement referred to therein. The provisions of
this Escrow Agreement shall not in any event be construed so as to enlarge or
diminish the rights of Sellers or Buyer under the Stock Purchase Agreement.
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60
IN WITNESS WHEREOF, the parties hereto have executed this
Escrow Agreement as of the date and year first above written.
ESCROW AGENT CORESTATES BANK, N.A.
By: ____________________________________________
Name:
Title:
BUYER ▇▇▇▇▇ ADVERTISING COMPANY
By: ____________________________________________
Name:
Title:
S-1
61
PENN SELLERS TCW CAPITAL, SOLELY IN ITS CAPACITY AS INVESTMENT
MANAGER PURSUANT TO AN INVESTMENT MANAGEMENT
AGREEMENT DATED AS OF APRIL 18, 1990,
By: TCW Asset Management Company
Its: Managing General Partner
By: ____________________________________
Name:
Title:
By: ____________________________________
Name:
Title:
TCW SPECIAL PLACEMENTS FUND III
By: TCW Capital
Its: General Partner
By: TCW Asset Management Company
Its: Managing General Partner
By: ____________________________________
Name:
Title:
By: ____________________________________
Name:
Title:
S-2
62
By: ____________________________________
Name of Shareholder
By: ____________________________________
Name of Shareholder
By: ____________________________________
Name of Shareholder
By: ____________________________________
Name of Shareholder
APPLETON SELLERS [NAME OF SELLER],
By: ____________________________________
Name:
Title:
By: ____________________________________
Name of Shareholder
By: ____________________________________
Name of ▇▇▇▇▇▇▇▇▇▇▇
▇-▇