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EXECUTION COPY
EXHIBIT 10.3
NON-COMPETITION AGREEMENT
NON-COMPETITION AGREEMENT dated as of January 27, 1998
between Liberty Group Operating, Inc., a Delaware
corporation ("CNCO"), and Xxxxxxxxx International Inc., a
Delaware corporation ("Xxxxxxxxx").
WHEREAS, Liberty Group Publishing, Inc. ("LGP"), Green Equity
Investors II, L.P. ("Green"), CNCO, Xxxxxxxxx, APAC-90 Inc. ("APAC-90),
American Publishing (1991) Inc. ("AP-91") and APAC-95 Inc. ("APAC-95")
have entered into an Asset Purchase Agreement, dated November 21, 1997
(the "Asset Purchase Agreement") and LGP, Green, CNCO, American
Publishing Company of Illinois, Xxxxxxxxx, APAC-90, AP-91 and APAC-95
have entered into an Asset Purchase Agreement, dated November 21, 1997;
WHEREAS CNCO and Xxxxxxxxx are both engaged in the newspaper
business; and
WHEREAS CNCO desires that Xxxxxxxxx'x newspaper business not compete
with CNCO's newspaper business;
Accordingly, CNCO and Xxxxxxxxx hereby agree as follows:
ARTICLE I
Definitions
1. "Affiliate" means, with respect any Person, any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person directly or indirectly,
whether through ownership of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
2. "Closing Date" shall mean the Closing Date as defined in the Asset
Purchase Agreement.
3. "Effective Date" shall mean the Effective Date as defined in the Asset
Purchase Agreement.
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4. "Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivisions thereof.
5. "Publication" means any daily or weekly newspaper or other paid or free
publication having regional, local or targeted markets, including a publication
having limited or no news or editorial content such as shoppers or other "total
market coverage" publications, which in the case of any daily newspaper has a
circulation of 10,000 issues or less in any one regular distribution.
6. "Voting Stock" means stock of the class or classes pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
a corporation (irrespective of whether or not at the time stock of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency).
ARTICLE II
Non-Competition Provisions
1. Non-Competition. For a period of 5 years from the Closing Date (the
"Term"), Xxxxxxxxx shall not, and shall cause each of its Affiliates not to,
directly or indirectly engage in the business of distributing, including
by means of acquisition, any Publication within any postal zip code in which
any Publication owned by CNCO on the Effective Date ("Initial Publication") is
distributed (the "Restricted Area") or providing any financing for any Person
to do any of the foregoing ("Competitive Activities"); provided, however, that
if CNCO (i) discontinues the operations of any Initial Publication or (ii)
transfers, sells, pledges, conveys or disposes of substantially all of the
assets of any Initial Publication, the Restricted Area with respect to CNCO
will no longer consist of those postal zip codes in which such Initial
Publication was distributed as of the Effective Date, unless another Initial
Publication was distributed in those same postal zip codes on the Effective
Date (it being understood that, subject to the limits set forth herein, this
covenant may be assigned to certain transferees of Initial Publications
pursuant to Section 6 hereof).
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Notwithstanding anything to the contrary contained in this Section, CNCO
hereby agrees that the foregoing covenant shall not be deemed breached as a
result of (i) the ownership by Xxxxxxxxx or any Affiliate of Xxxxxxxxx of (A)
less than an aggregate of 5% of any class of stock of a Person engaged,
directly or indirectly, in Competitive Activities; (B) less than 5% in value of
any instrument of indebtedness of a Person engaged, directly or indirectly, in
Competitive Activities; or (C) a Person which engages, directly or indirectly,
in Competitive Activities if such Competitive Activities account for less than
5% of such Person's consolidated annual revenues, (ii) any Competitive
Activities conducted by any Affiliate of Xxxxxxxxx (A) which Xxxxxxxxx acquired
after the Effective Date and (B) the value of which at the time of the
acquisition by Xxxxxxxxx represented less than 5% of the total value of the
transaction or transactions in which Xxxxxxxxx acquired the Affiliate (an
"Incidental Acquisition")(provided that after such transaction such Affiliate
does not distribute at any time during the Term a new product which would
constitute a Competitive Activity), or (iii) any incidental distribution within
the Restricted Area of any Xxxxxxxxx Publication that is intended to be
distributed primarily outside the Restricted Area.
2. Consideration. Upon the execution and delivery of this Agreement, CNCO
shall pay to Xxxxxxxxx, by wire transfer of immediately available funds, an
amount equal to $30,915,000 as consideration for Xxxxxxxxx and its Affiliates
not engaging in any Competitive Activities.
3. Interest. Concurrently with the execution and delivery of this
Agreement, CNCO shall pay to Xxxxxxxxx, by wire transfer of immediately
available funds, an amount equal to interest on $30,915,000 at a rate equal to
the 30 day Treasury xxxx rate in effect on December 31, 1997, for the period
from but including the Effective Date through but excluding the Closing Date.
ARTICLE III
Miscellaneous
1. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Illinois, without regard to
the conflicts of law principles of such State.
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2. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other party.
3. No Waiver. Any failure of any party hereto to comply with any of its
obligations or agreements or to fulfill any conditions herein contained may be
waived only by written waiver from the other party. No failure by any party
hereto to exercise, and no dely in exercising, any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder by any party preclude any other or future exercise of that
right or any other right hereunder by that party.
4. Notices. All notices or other communications required or permitted to
be given hereunder shall be in writing and shall be delivered by hand or sent
by prepaid telex, cable or telecopy or sent, postage prepaid, by registered,
certified or express mail or reputable overnight courier service and shall be
deemed given when so delivered by hand, telexed, cabled or telecopied, or if
mailed, three days after mailing (one business day in the case of express mail
or overnight courier service), as follows:
(i) if to CNCO,
Liberty Group Operating, Inc.
c/o Liberty Group Publishing, Inc.
0000 Xxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
with a copy to:
Xxxxx, Xxxxx & Xxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.; and
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(ii) if to Xxxxxxxxx,
Xxxxxxxxx International Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: General Counsel
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Xx.
5. Limitation Of Scope. It is the intention of Xxxxxxxxx and CNCO that if
any of the restrictions or covenants contained in this agreement is held by a
court of competent jurisdiction to cover a geographic area or to be for a
length of time that is not permitted by the Governing Law, or is in any way
construed by a court of competent jurisdiction to be too broad or to any extent
invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would be valid or enforceable under
the Governing Law, a court of competent jurisdiction shall construe and
interpret or reform this agreement to provide for a covenant having the maximum
enforceable geographic area, time period and other provisions (not greater than
those contained in this agreement) as shall be valid and enforceable under such
Governing Law.
6. Assignment. This agreement and the rights and obligations hereunder
shall not be assignable or transferable by CNCO (including by operation of law
in connection with a merger or consolidation) without the prior written consent
of Xxxxxxxxx, its successors or assigns. Notwithstanding the foregoing, if
CNCO sells, transfers or otherwise conveys all of the assets of an Initial
Publication within the Term of this agreement to any Person ("Subsequent
Purchaser"), CNCO may assign without Xxxxxxxxx'x consent its rights
corresponding to such Initial Publication under this agreement to such
Subsequent Purchaser; provided that with respect to any assignment of any
rights and obligations under this agreement to a
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Subsequent Purchaser, "Restricted Area" as defined in Section 1 (and subject to
further limitation as provided in that Section) shall mean any postal zip code
or codes in which the Initial Publication acquired by such Subsequent
Purchaser was distributed on the Effective Date.
7. First Offer Rights. Xxxxxxxxx agrees that during the Term of this
agreement, if Xxxxxxxxx decides to sell or otherwise dispose of any Incidental
Acquisition (other than in circumstances where such Incidental Acquisition
represents less than 50% of the proposed transaction) (a "Proposed Sale"), it
shall provide notice of such Proposed Sale and CNCO shall have 30 days in which
to provide, in writing, the terms and conditions under which it would offer to
purchase the Incidental Acquisition (the "Offer") which is the subject of the
Proposed Sale. If such Offer is so received by Xxxxxxxxx, Xxxxxxxxx will not,
within six months of receipt of such Offer, enter into any agreement to sell
or otherwise dispose of such Incidental Acquisition to a third party for
consideration that has a fair market value to Xxxxxxxxx which is less than the
fair market value to Xxxxxxxxx of the Offer, or negotiate with a third party
with respect to such a sale. If Xxxxxxxxx does not accept the Offer and does
not complete the Proposed Sale to a third party within six months of the
Offer, Xxxxxxxxx must comply with the provisions of this Section 7 before
making any additional Proposed Sale.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
Liberty Group Operating, Inc.,
by /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
Title: President
Xxxxxxxxx International Inc.,
by
/s/ X. X. Xxxxxxxx
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Name:
Title:
