ASSET PURCHASE AGREEMENT
by and among
Liberty Group Publishing, Inc.,
Green Equity Investors II, L.P.
(for the limited purposes described herein),
Liberty Group Operating, Inc.,
▇▇▇▇▇▇▇▇▇ International Inc.,
APAC-90, Inc.,
American Publishing (1991) Inc. and
APAC-95, Inc.
Dated as of November 21, 1997
TABLE OF CONTENTS
ARTICLE I
Transfer of Assets and Consideration
1.1 Transfer of Assets...........................................2
1.2 Assumption of Liabilities....................................5
1.3 Consideration................................................8
ARTICLE II
Closing
2.1 Closing.....................................................11
2.2 Payments....................................................11
ARTICLE III
Representations and Warranties of the Company
3.1 Organization; Capitalization; Ownership; Charter
and Bylaws, Etc...........................................11
3.2 Corporate Authority and Approval............................12
3.3 Consents....................................................12
3.4 No Conflicts................................................12
3.5 Compliance with Laws........................................13
3.6 Financial Statements........................................14
3.7 Absence of Certain Changes or Events........................14
3.8 Title to and Sufficiency of Assets..........................15
3.9 Patents, Trademarks, Subscriber Lists.......................15
3.10 Commitments.................................................16
3.11 Litigation..................................................17
3.12 [Reserved]..................................................17
3.13 U.S. Employee Benefit Plans.................................17
3.14 Taxes.......................................................17
3.15 Undisclosed Liabilities.....................................18
3.16 Fees........................................................18
3.17 Labor Matters...............................................18
3.18 Real Property...............................................18
3.19 Leases......................................................19
3.20 Environmental Matters.......................................19
3.21 Pre-Closing Liabilities.....................................20
3.22 Agreements with Affiliates..................................20
3.23 Bulk Sales; Transfer Taxes..................................20
ARTICLE IV
Representations and Warranties of Investor
4.1 Organization and Good Standing..............................20
4.2 Corporate Authority and Approval............................20
4.3 Consents....................................................20
4.4 No Conflicts................................................21
4.5 Financing...................................................21
4.6 Litigation..................................................21
ARTICLE V
Covenants of the Company
5.1 Cooperation by the Company..................................21
5.2 Conduct of the Business.....................................22
5.3 Access......................................................23
5.4 Permits.....................................................24
5.5 Further Assurances..........................................24
5.6 Associated Agreements.......................................24
5.7 No Default..................................................24
5.8 Compliance with Laws........................................24
5.9 Supplemental Information....................................24
5.10 [Reserved]..................................................25
5.11 [Reserved]..................................................25
5.12 Transitional Services.......................................25
5.13 [Reserved]..................................................25
5.14 Employees...................................................25
5.15 Amended Disclosure Schedule.................................25
5.16 Insurance...................................................26
5.17 Lenders' Consent............................................26
5.18 Vehicular Titles............................................26
5.19 UCC Termination Statements..................................26
5.20 Real Estate Conveyance Documents and Lease
Assignments...............................................26
ARTICLE VI
Covenants of Investor
6.1 Cooperation by Investor.....................................26
6.2 Preservation of Books and Records...........................27
6.3 Employees...................................................27
ARTICLE VII
Conditions to Investor's Obligations
7.1 Representations, Warranties and Covenants of the
Company and the Associated Subsidiaries..................28
7.2 Consents....................................................28
7.3 No Prohibitions.............................................28
7.4 Closing Documents...........................................28
7.5 Opinion of Counsel..........................................29
7.6 Financing...................................................29
7.7 [Reserved]..................................................30
7.8 Like Kind Exchange..........................................30
7.9 Lender......................................................30
ARTICLE VIII
Conditions to the Company's Obligations
8.1 Representations, Warranties and Covenants of
Investor..................................................31
8.2 Consents....................................................31
8.3 No Prohibitions.............................................31
8.4 Closing Documents...........................................31
8.5 Opinion of Counsel..........................................32
8.6 Lenders' Consent............................................32
ARTICLE IX
Termination, Amendment and Waiver
9.1 Termination.................................................32
9.2 Effect on Obligations.......................................32
ARTICLE X
Employee Matters
10.1 Transferred Employees.......................................33
10.2 Employee Benefits...........................................33
10.3 Severance Claims............................................34
10.4 WARN Act Liability..........................................34
10.5 Undue Hardship to the Investor..............................34
ARTICLE XI
Survival and Indemnification
11.1 Survival....................................................35
11.2 Indemnification by the Company and the Associated
Subsidiaries..............................................35
11.3 Indemnification by CNCO and the Investor....................36
11.4 Matters Involving Third Parties.............................36
11.5 Environmental Remedies......................................38
ARTICLE XII
Miscellaneous
12.1 Expenses....................................................38
12.2 Exclusive Agreement; No Third-Party Beneficiaries...........39
12.3 Governing Law; Consent to Jurisdiction......................39
12.4 Successors and Assigns......................................39
12.5 Publicity...................................................40
12.6 Severability................................................40
12.7 Refunds.....................................................40
12.8 Notices.....................................................40
12.9 Counterparts................................................41
12.10 Interpretation..............................................41
12.11 Amendment...................................................42
12.12 Extension; Waiver...........................................42
12.13 Captions....................................................42
12.14 Further Assurances..........................................42
ARTICLE XIII
Limited Guarantee of Green Equity Investors II, L.P.
13.1 Limited Guarantee...........................................43
EXHIBITS
Exhibit A List of Community Newspapers
Exhibit 1.1(b) Retained Assets
Exhibit 3.6 Financial Statements
Exhibit 4.5-1 Commitment and Highly Confident Letters
Exhibit 4.5-2 Alternative Commitment Letter
Exhibit 5.12 Transitional Services Agreement
Exhibit 5.14 Employees
Exhibit 7.4(a) Form of ▇▇▇▇ of Sale, Assignment and Assumption
Exhibit 7.4(b) Form of Trademark and Trade Name Assignment
Exhibit 7.4(c) Non-Competition Agreement between the Company and CNCO
Exhibit 7.5-1 Form of Opinion of Cravath, Swaine & ▇▇▇▇▇
Exhibit 7.5-2 Form of Opinion of General Counsel of ▇▇▇▇▇▇▇▇▇
Exhibit 7.8 Like Kind Exchange Agreement
Exhibit 8.5 Form of Opinion of ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇
DISCLOSURE SCHEDULE
Schedule 3.1(a) Jurisdictional Qualification
Schedule 3.3 Consents
Schedule 3.4 Conflicts
Schedule 3.5 Noncompliance with Laws
Schedule 3.7 Certain Changes or Events
Schedule 3.8(a) Encumbrances on Title to Assets
Schedule 3.8(b) Exceptions to Sufficiency of Assets
Schedule 3.9 Patents and Trademark Rights
Schedule 3.10(a) Commitments Future Payments in Excess of $250,000
Schedule 3.10(b) Commitments for Restricting Business Practices
Schedule 3.10(c) Commitments for the Borrowing of Money
Schedule 3.10(d) Collective Bargaining Agreements
Schedule 3.10(e) Commitments for the Use of Patent and Trademark Rights
Schedule 3.10(f) Joint Ventures, Partnerships and Similar Agreements
Schedule 3.10(g) Commitments Relating to Employment or with
Employees, Officers, Directors or Shareholders
Schedule 3.10(h) Brokerage or Finder's Agreements
Schedule 3.10(i) Acquisition or Divestiture Agreements
Schedule 3.10(j) Other Material Commitments
Schedule 3.11 Litigation
Schedule 3.13 Benefit Plans
Schedule 3.15 Undisclosed Liabilities
Schedule 3.17 Labor Matters
Schedule 3.18 Real Property
Schedule 3.19 Real Property Leases
Schedule 3.20(a) Environmental Permits, Licenses or Authorizations
Schedule 3.20(b) Environmental Material Non-Compliance
Schedule 3.20(c) Environmental Actions
Schedule 3.20(d) Hazardous Materials
Schedule 3.22 Agreements with Affiliates Since September 30, 1997
INDEX OF TERMS
1998 Cash Disbursements...........................................8
1998 Cash Position Adjustment.....................................8
1998 Final Cash Position..........................................8
1998 Gross Cash...................................................8
1998 Net Cash Position............................................8
1998 Period.......................................................8
Accountant's Certificate..........................................9
Adjustment........................................................9
Agreement.........................................................1
AP-91.............................................................1
APAC-90...........................................................1
APAC-95...........................................................1
APC-Illinois.....................................................30
Asset Purchase Agreement..........................................1
Assets .........................................................2
Associated Agreements............................................25
Associated Subsidiaries...........................................1
Assumed Contracts.................................................3
Assumed Liabilities...............................................5
Benefit Plans....................................................17
Books and Records................................................27
Bulk Sales Laws..................................................20
Business..........................................................1
Claim Notice.....................................................37
Closing..........................................................11
Closing Date.....................................................11
CNCO..............................................................1
CNCO Damages.....................................................35
CNCO Indemnitees.................................................35
COBRA............................................................33
Commitments......................................................16
Company...........................................................1
Company Damages..................................................36
Company Indemnitees..............................................36
Consents.........................................................22
Current Asset Calculation.........................................9
Deductible.......................................................36
Direct Claim.....................................................37
Disclosure Schedule..............................................11
Effective Date....................................................8
Employees........................................................33
Encumbrances......................................................4
Environmental Law.................................................7
Environmental Tests..............................................38
ERISA............................................................17
Estimated 1998 net Cash Position..................................8
Exchangor........................................................30
Financial Statements.............................................14
GAAP..............................................................9
GEI II...........................................................43
Government Authority..............................................3
Greater than 120-Day Receivables..................................9
Guarantor.........................................................1
Hazardous Materials..............................................19
HSR Act ........................................................12
Improvements......................................................2
Indemnifying Party...............................................36
Investor .........................................................1
Leased Real Property..............................................2
Lenders Consent..................................................26
Like Kind Exchange...............................................30
Like Kind Exchange Agreement.....................................30
Litigation.......................................................17
Marks.............................................................1
Material.........................................................15
Material Adverse Effect..........................................12
Net Current Assets................................................9
Net Liabilities...................................................9
Owned Real Property...............................................2
Patent and Trademark Rights......................................15
Permits..........................................................13
Permitted Encumbrances............................................4
Receivables Notice................................................9
Retained Assets...................................................4
Retained Business.................................................4
Retained Liabilities..............................................6
Supplemental Commitment Letter...................................30
Tax..............................................................17
Taxes............................................................17
Third Party Claim................................................36
Trade Names.......................................................1
Trademark and Trade Name Assignments.............................28
Transfer Date....................................................33
Transitional Service Agreement...................................25
Transitional Services............................................25
WARN Act ........................................................18
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement"), dated as
of November 21, 1997, is by and among Liberty Group Publishing,
Inc., a Delaware corporation (the "Investor"), Liberty Group
Operating, Inc., a Delaware corporation and a wholly owned
subsidiary of the Investor, ("CNCO"; the term CNCO shall include
subsidiaries of CNCO unless the context otherwise provides),
▇▇▇▇▇▇▇▇▇ International Inc., a Delaware corporation (the
"Company"), APAC- 90 INC., a Delaware corporation and an indirect
wholly owned subsidiary of the Company ("APAC- 90"; the term APAC-90
shall include subsidiaries of APAC-90 unless the context otherwise
provides), American Publishing (1991) Inc., a Delaware corporation
and an indirect wholly owned subsidiary of the Company ("AP-91"; the
term AP-91 shall include subsidiaries of AP-91 unless the context
otherwise provides), and APAC-95 INC., a Delaware corporation and an
indirect wholly owned subsidiary of the Company ("APAC-95"; the term
APAC-95 shall include subsidiaries of
APAC-95 unless the context otherwise provides) (APAC-90 and each of
its subsidiaries, AP-91 and each of its subsidiaries, and APAC-95
and each of its subsidiaries are collectively referred to hereinas
the "Associated Subsidiaries", as such term is further explained in
Section 3.1) and, for the limited purposes described herein, Green
Equity Investors II, L.P., a Delaware limited partnership (the
"Guarantor").
W I T N E S S E T H:
WHEREAS, the Associated Subsidiaries are in the business
of publishing, marketing and distributing certain community
newspapers as further identified in Exhibit A hereto and operating
printing plants associated therewith (the "Business"; the term
Business expressly excludes the assets which the Investor or an
Affiliate (as defined in Section 3.22) of the Investor will receive
pursuant to the Like Kind Exchange (as defined in Section 7.8);
WHEREAS, the Investor wishes to cause CNCO to purchase the
assets constituting the business.
NOW, THEREFORE, in consideration of the promises and
of the respective representations, warranties, covenants and
agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
Transfer of Assets and Consideration
1.1 Transfer of Assets.
(a) Acquired Assets. Subject to the terms and conditions
hereof, the Company and the Associated Subsidiaries agree to sell to
CNCO, and the Investor agrees to cause CNCO to purchase from the
Company and the Associated Subsidiaries, at the Closing (as defined
in Section 2.1) all of the right, title and interest of the Company
and the Associated Subsidiaries in and to the Business and all
properties, assets and rights of every nature, kind and description
of the Company and the Associated Subsidiaries used or held for use
primarily in connection with the Business wherever located
(collectively, other than the Retained Assets (as defined in Section
1.1(b) hereof), the "Assets"), including the following:
(i) all of the rights of the Company or any Associated
Subsidiary to prepare, produce, publish, print, sell and/or
distribute, as the case may be, the community newspapers and
other publications which constitute the Business, together with
the goodwill of or relating to the Business;
(ii) all of the real property owned by the Company or any
Associated Subsidiary and primarily used in the operation of
the Business (the "Owned Real Property"), which Owned Real
Property is listed on Schedule 3.18 to the Disclosure Schedule
(as defined in Section 3.1(a)), and all of the buildings,
fixtures and improvements (the "Improvements") located in, on
and under the Owned Real Property;
(iii) all of the rights of the Company or any Associated
Subsidiary in any real property leased or subleased by the
Company or the Associated Subsidiaries and used primarily in
the operation of the Business (the "Leased Real Property"),
which Leased Real Property is listed on Schedule 3.19 to the
Disclosure Schedule, and all of the Improvements
located in, on and under the Leased Real Property to the extent
provided in the lease or sublease;
(iv) all of the materials, raw materials (including
paper), supplies, work in progress and other inventory owned by
the Company or any Associated Subsidiary and to the extent used
or held for use in the operation of the Business;
(v) all rights of the Company or any Associated Subsidiary
to fixed and other tangible personal property, whether owned or
leased, including furniture, equipment, computers and related
items, fixtures, machinery and tools owned by the Company or
any Associated Subsidiary and primarily used in the operation
of the Business;
(vi) all rights, subscription rights, obligations and
benefits of contracts, licenses (whether the Company or any
Associated Subsidiary is a licensee or licensor) or
arrangements of the Company or any Associated Subsidiary
primarily relating to the Business and the Assets
(collectively, the "Assumed Contracts"), including the items
listed on Schedules 3.10(a) through (j) of the Disclosure
Schedule;
(vii) all files, books and records of the Company or any
Associated Subsidiary dating back at least five full fiscal
years from the date of the Closing primarily relating to the
Business (but not minute books and corporate governance records
of the Company and the Associated Subsidiaries) which are not
physically located at the Owned Real Property or the Leased
Real Property and all files, books and records of the Business
which are physically located at the Owned Real Property or the
Leased Real Property, including financial statements and
records, advertising space reservations, advertising insertion
orders, promotional materials, all available records of current
and former advertisers in the newspapers and other publications
which comprise the Business or relating to the Business;
provided that the Company shall retain copies of all such
files, books and records;
(viii) all credits, prepaid costs and expenses, deposits
and retentions held by third parties under leases, licenses,
contracts and other arrangements, in each case to the extent
relating to the Business;
(ix) all current assets (except for cash and cash
equivalents), but specifically including accounts receivable;
provided that following the Effective Date (as defined in
Section 2.1) CNCO shall have the right to assign certain
accounts receivable to the Company in accordance with the terms
of Section 1.3(g) of this Agreement;
(x) all subscription, distribution, circulation and
mailing lists relating primarily to the Business and all
records and data relating to such lists;
(xi) any available editorial and photographic morgues and
any available back issues of the newspapers and other
publications which comprise the Business;
(xii) all registered United States and foreign patents,
trademarks, service marks, trade names, mastheads, copyrights
and applications therefore set forth on Schedule 3.9 of the
Disclosure Schedule (including rights to ▇▇▇ for and remedies
against present and future infringements thereof and rights of
priority and protection of interests) and the goodwill and
going concern value related thereto;
(xiii) all licenses and permits of any government or state
(or any subdivision thereof), whether domestic or
foreign, or any agency, authority, bureau, commission,
department or similar body or instrumentality thereof, or any
governmental court or tribunal, federal, state and local
("Government Authority"), to the extent they are transferable,
relating primarily to the Business or the Assets;
(xiv) all guaranties, warranties, indemnities and similar
rights in favor of the Company or any Associated Subsidiary to
the extent related to the Assets or the Business; and
(xv) all rights of the Company or any Associated
Subsidiary under any provision or covenant of any contract,
agreement or understanding in favor of the Company or any
Associated Subsidiary or their Affiliates to the extent
relating to the Business limiting the ability of any party to
sell any products or services, engage in any line of business
or compete with or to obtain products or services from any
person and any causes of action, lawsuits, claims and demands
available to the Company or any Associated Subsidiary in
respect of the foregoing whether arising before or after the
Closing.
The Assets shall be transferred free and clear of all
liens, easements, licenses, possessory rights, sales contracts,
building and use restrictions, reservations and limitations,
encumbrances, security interests, charges, pledges, mortgages, deeds
of trust, deed to secure debt, liabilities, debts, options or, to
the best knowledge of the Company and the Associated Subsidiaries,
any other adverse claims, restrictions or third party rights of any
kind and nature whatsoever (the "Encumbrances"), except for the
following (the "Permitted Encumbrances"): (i) liens for current
Taxes not yet due and payable, (ii) the encumbrances disclosed on
Schedule 3.8(a) of the Disclosure Schedule, (iii) mechanics',
carriers', workmen's, repairmen's or other like liens arising or
incurred in the ordinary course of business, liens arising under
original purchase price conditional sales contracts and equipment
leases with third parties entered into in the ordinary course of
business, and which are routinely and regularly extinguished by
payment of the charges to which they relate and which do not,
individually or in the aggregate, materially impair the continued
use and operation of the assets to which they relate in the
Business, taken as a whole, as presently conducted or (iv) other
imperfections of title or encumbrances, if any, which do not,
individually or in the aggregate, materially impair the continued
use and operation of the assets to which they relate in the
Business, taken as a whole, as presently conducted.
(b) Retained Assets. Except as set forth in Section
1.2(a), the Associated Subsidiaries shall retain the real and
personal property and other assets of the Associated Subsidiaries or
any of their Affiliates (as defined in Section 3.22) that relate
primarily to the businesses of the Associated Subsidiaries or any of
their Affiliates other than the Business (the "Retained Business")
and not primarily related to the Business or that relate primarily
to the Retained Liabilities (collectively, the "Retained Assets"),
including:
(i) all bank accounts and cash and cash equivalents of the
Associated Subsidiaries;
(ii) all rights, claims and credits of the Associated
Subsidiaries to the extent relating to any other Retained Asset
or any Retained Liability (as defined in Section 1.2(b)),
including any such items arising under insurance policies, and
all guarantees, warranties, indemnities and similar rights in
favor of the Associated Subsidiaries or any of their Affiliates
in respect of any other Retained Asset or any Retained
Liability;
(iii) [Reserved]
(iv) all rights of the Company and the Associated
Subsidiaries and their Affiliates under this Agreement, the
Transitional Services Agreement (as defined in Section 5.12 ),
the Non-Competition Agreement (as defined in Section 7.4) and
the other agreements and instruments executed and delivered in
connection with this Agreement;
(v) all documents prepared in connection with the sale of
the Business and the Assets to CNCO, exclusive of documents
prepared in the ordinary course of business in connection with
the operation of the Business;
(vi) all financial and Tax records relating to the
Business that form part of the Company's or the Associated
Subsidiaries' (or any of their Affiliates') general ledger and
all other files, books and records not referred to in Section
1.1(a)(vii) which the Company or the Associated Subsidiaries or
any of their respective Affiliates have in their possession;
provided that upon reasonable request by CNCO, CNCO shall be
provided with copies of the portions of such records that
reasonably relate to the Business (other than copies of the
Company's consolidated, combined or unitary income Tax returns,
provided that copies of back up for such returns may reasonably
be requested by CNCO); and
(vii) the Retained Assets described in Exhibit 1.1(b).
1.2 Assumption of Liabilities.
(a) Liabilities Assumed. On the Closing Date, CNCO will assume
and agree to pay, perform and discharge as and when due the
liabilities and obligations, whether fixed, absolute or contingent,
matured or unmatured, (the "Assumed Liabilities") relating to the
Business as the same exist on the Closing Date which are specified
below (provided, that in no event shall the Assumed Liabilities
include any Retained Liabilities, and CNCO shall assume no other
liabilities whatsoever of the Associated Subsidiaries or their
Affiliates):
(i) all accounts payable and trade obligations to the
extent relating to the Business, including those which are owed
to the Associated Subsidiaries or their Affiliates which were
incurred in the ordinary course of business;
(ii) all prepaid subscription and advertising obligations
to the extent relating to the Business;
(iii) all liabilities and obligations arising from
commitments (in the form of issued purchase orders or
otherwise) to purchase or acquire inventory, supplies or
services to the extent relating to the Business and reflected
on a balance sheet of the Business as of the Closing Date as
accounts payable or accrued expenses;
(iv) all liabilities and obligations under existing
licenses, permits, authorizations, leases or contracts which
are to be assigned to CNCO hereunder other than liabilities or
obligations for breaches or defaults that occurred prior to the
Closing;
(v) all liabilities or obligations for accrued but unpaid
vacation pay, sick pay and holiday pay for Employees (as
defined in Section 10.1) to the extent such pay is reflected in
the Net Liabilities (as defined in Section 1.3(f)) of the
Business as of the Effective Date; and
(vi) [Reserved]
(vii) all liabilities, other than Retained Liabilities
(including Tax (as defined in Section 3.14) liabilities), which
are reflected in the balance sheet included in the Financial
Statements dated as of September 30, 1997 provided pursuant to
Section 3.6 (except to the extent discharged prior to the
Closing Date) or incurred by the Business since the date of
such balance sheet not in breach of any representation or
covenant in this Agreement and in the ordinary course of
business which are of the type that would be reflected in a
balance sheet prepared in conformity with GAAP and consistent
with the Financial Statements.
(b) No Other Liabilities Assumed. Notwithstanding anything to
the contrary contained herein, except as provided in Section 1.2(a),
the parties agree that CNCO has not agreed to pay, shall not assume
and shall not have any liability or obligation with respect to, the
following liabilities and obligations (collectively, the "Retained
Liabilities"):
(i) any liability or obligation for any Tax of any kind
(including income, payroll, personnel, property, bulk transfer,
sales, use, ad valorem or franchise Taxes or assessments) owed
prior to or at Closing, or which may thereafter become due, to
any foreign, federal, state, local or other taxing authority
which liability relates to any transaction or period prior to
or upon the Closing (including as a result of Treasury
Regulation ss.1.1502-6(a) or any similar provision under state
or local law);
(ii) any liability or obligation relating to, resulting
from or arising out of workers' compensation claims resulting
from any injury, disease or disability which injury, disease or
disability occurred prior to Closing (whether or not any such
claim was filed prior to the Closing);
(iii) any liability or obligation relating to, resulting
from or arising out of any violation of law (whether known or
unknown) or license, which violation occurred on or prior to
the Closing Date;
(iv) any liability relating to the Owned Real Property or
Leased Real Property, or relating to discharges of hazardous
substances in violation of or giving rise to liability pursuant
to any Environmental Law (as defined below) by the Business,
the basis for which liability occurred or existed prior to the
Closing, including any investigation and remediation
liabilities to the extent arising under standards established
by any and all foreign, federal, state or local laws, rules,
orders, regulations, consent decrees, settlement agreements,
injunctions, statutes or requirements imposed by any
governmental authority relating to or concerning protection of
the environment and natural resource damages, including surface
water, soil, air and ground water ("Environmental Law") as
enacted or enforced on or prior to the Closing Date;
(v) any liability or obligation for severance, redundancy,
termination, payment in lieu of notice, indemnity or other
payments resulting from the transactions contemplated by this
Agreement or arising prior to the Transfer Date and any
liability or obligation arising prior to the Transfer Date to
or with respect to any employee or any employee matters,
including any employee benefit plan, other than those which are
expressly assumed by CNCO, pursuant to Section 10.1;
(vi) any liability or obligation of or incurred by the
Company or its Affiliates to the extent related to the Retained
Assets or not arising from the Business;
(vii) any liability or obligation under licenses, permits,
authorizations, leases or contracts which are not assigned to
CNCO hereunder;
(viii any liability or obligation for medical, dental and
disability benefits and any other welfare benefit, whether
insured or self-insured, incurred or existing at any time on or
prior to the Transfer Date, for current or past employees of
the Business;
(ix) all liability of the Associated Subsidiaries and
their Affiliates or former Affiliates arising from
indebtedness, including guaranty and similar obligations, for
borrowed money or long-term debt, except as provided in Section
1.2(a);
(x) any liability or obligation relating to or resulting
from breach of contract or tort claims where the event giving
rise to such claim occurred prior to the Closing Date;
(xi) any other liability or obligation of the Company or
the Associated Subsidiaries whatsoever not expressly assumed by
CNCO hereunder;
(xii) liabilities for officers and directors of the Company
and the Associated Subsidiaries with respect to pre-Closing
conduct;
(xiii) any liability or obligation for any intercompany
notes of the Company or any Associated Subsidiaries; and
(xiv) liability for travel vouchers or cash of $4,000 for
each publisher who exceeded budgeted gross operating profits
for 1997 by 10%.
1.3 Consideration. The consideration for the transfer of the
Assets described in Section 1.1(a) from the Associated Subsidiaries
to CNCO shall be as follows:
(a) Cash Purchase Price. The Investor will cause CNCO to pay a
cash purchase price of $233,765,884 for the Assets payable to the
Associated Subsidiaries.
(b) Assumption of Assumed Liabilities. CNCO shall assume and
agree to pay as they shall become due or discharge the Assumed
Liabilities as described in Section 1.2(a) hereof.
(c) [Reserved].
(d) Interest. At the Closing the Investor or CNCO will pay the
Company interest on $233,765,884 for the period from January 1, 1998
through the Closing Date at a rate equal to (i) the 30-day Treasury
▇▇▇▇ rate in effect on December 31, 1997 multiplied by (ii) a
fraction the numerator of which shall be the number of days from
January 1, 1998 through the Closing Date and the denominator of
which shall be 365.
(e) Determination of 1998 Net Cash Position; Payment of 1998
Estimated Net Cash.
(i) During the period from December 31, 1997 (the
"Effective Date") through the Closing Date (the "1998 Period"),
the Company shall cause the Associated Subsidiaries to maintain
financial records showing all cash and cash equivalents
received by or on behalf of the Business during the 1998 Period
(the "1998 Gross Cash") and all amounts of cash or cash
equivalents used to discharge accounts payable and other
obligations of the Business in the ordinary course consistent
with past practice, but excluding (w) interest on indebtedness
for borrowed money, (x) intercompany payments, but excluding
management fees charged at 1.6% of revenue for the 1998 Period,
(y) fees and expense relating to the transactions contemplated
by this Agreement and the Associated Agreements, and
(z) income Taxes, but excluding income Taxes for the 1998
Period (the "1998 Cash Disbursements"). The excess, if any, of
the 1998 Gross Cash over the 1998 Cash Disbursements shall be
the "1998 Net Cash Position."
(ii) At the Closing, the Company shall pay or cause to be
paid to CNCO, by wire transfer of immediately available funds
(or by intrabank transfer, if practicable), an amount equal to
an estimate determined in good faith by the Company of the 1998
Net Cash Position (the "Estimated 1998 Net Cash Position").
(iii) Within 60 days following the Closing, the Accounting
Firm (as defined in Section 1.3(f)) shall (x) determine (1) the
amount of the 1998 Net Cash Position (as so determined, the
"1998 Final Cash Position") and (2) the 1998 Final Cash
Position minus the 1998 Estimated Cash Position (the "1998 Cash
Position Adjustment", which may be positive or negative) and
(y) deliver a letter (the "1998 Cash Certification") (1)
setting forth the calculation of the 1998 Cash Position
Adjustment and its components and (2) certifying that such
calculations were made in compliance with this Section 1.3(e).
Such determinations and calculations will be conclusive absent
manifest error. If the 1998 Cash Position Adjustment is a
positive number, the Company shall pay such amount to CNCO
within three (3) business days of delivery of the 1998 Cash
Certification. If the 1998 Cash Position Adjustment is a
negative number, CNCO shall pay an amount equal to the absolute
value of such number to the Company within three (3) business
days of delivery of the 1998 Cash Certification. All payments
pursuant to this Section 1.3(e) shall be made by wire transfer
of immediately available funds (or by interbank transfer, if
practicable).
(f) Working Capital Adjustment. Within 60 days following the
Closing, KPMG Peat Marwick LLP or such other firm of independent
public accountants mutually agreed by the Investor and the Company
(the "Accounting Firm") shall (i) on a basis consistent with U.S.
generally accepted accounting principles as applied in the Financial
Statements (as defined in Section 3.6) ("GAAP") (x) determine the
Net Current Assets (as defined below) and the Net Liabilities (as
defined below) of the Business as of the Effective Date (the
"Current Asset Calculation") and (y) determine the amount of the
Adjustment (as defined below), if any, and (ii) deliver a letter
(the "Accountant's Certificate") (x) setting forth the calculation
of the Adjustment and its components and (y) certifying that each of
such calculations was made in compliance with this Section 1.3(f)
Such determinations and calculations shall be conclusive absent
manifest error. If the Adjustment is a positive number in excess of
$1,000,000, CNCO shall pay such excess to the Company within three
(3) business days following delivery of the Accountant's
Certificate. If the Adjustment is a negative number, the absolute
value of which is greater than $1,000,000, the Company shall pay
such excess to CNCO within three (3) business days following
delivery of the Accountant's Certificate. All payments pursuant to
this Section 1.3(f) shall be by wire transfer of immediately
available funds (or by interbank transfer, if applicable).
For purposes of this Section 1.3(f),
(1) "Net Current Assets" shall mean current assets
determined in a manner consistent with GAAP, but excluding
(i) cash and cash equivalents, (ii) current and deferred
Taxes and (iii) any other Retained Assets.
(2) "Net Liabilities" shall mean liabilities
determined in a manner consistent with GAAP, but excluding
(i) current and deferred Tax liabilities and (ii) any
other Retained Liabilities.
(3) The "Adjustment" means the amount (whether
positive or negative) equal to Net Current Assets minus
Net Liabilities.
(g) Uncollected Accounts Receivable. Within 135 days after the
Effective Date, CNCO shall have the right to (i) notify the Company
in writing (the "Receivables Notice") of the dollar amounts of the
accounts receivable of the Business existing on the Effective Date
that have not been collected by CNCO by the date of such notice and
which are more than 120 days past due as of the date of such notice
(the "Greater than 120-Day Receivables") and (ii) at its option,
assign to the Company 100% of the then-outstanding Greater than
120-Day Receivables. If so assigned, the Company shall purchase the
Greater than 120-Day Receivables for a price equal to (x) the face
amount of the Greater than 120-Day Receivables less (y) the full
amount of the reserve for receivables reflected in the Net Current
Assets, plus (z) interest on (x) minus (y) accrued from the
Effective Date at a rate equal to the 30-day Treasury ▇▇▇▇ rate in
effect on the Effective Date, payable by wire transfer of
immediately available funds to (or by interbank transfer, if
applicable) CNCO within 3 business days following receipt of the
Receivables Notice. In determining the amount collected with regard
to any account receivable, all amounts received from any obligor
shall be allocated to the receivable specified by such obligor, or
if not specified, to the receivables of such obligor in the order in
which such receivables arose. From and after the Closing, CNCO shall
continue collecting accounts receivable in all material respects in
accordance with the past practice of the Business prior to the
Closing Date and shall provide the Company reasonable access to
review all information relating to the foregoing, including all
write-offs. From and after the date CNCO exercises its option to
assign the Greater than 120-Day Receivables to the Company, CNCO
shall continue collecting such Greater than 120-Day Receivables on
behalf of the Company for a reasonable fee to be agreed upon by the
parties in proportion to the services rendered.
(h) Pro Forma Calculation. Notwithstanding anything to the
contrary contained in this Agreement or the Transfer Agreement (as
defined in Section 7.8), no payments shall be made under Sections
1.3(e), 1.3(f) or 1.3(g) of this Agreement unless such payment would
be required to be made if the determinations and calculations
required by such sections are made on a pro forma basis as if the
Business as defined in this Agreement and the Business as defined in
the Transfer Agreement were treated as a single business (subject to
a single $1,000,000 threshold for the purposes of calculating the
Adjustment pursuant to Section 1.3(f) of this Agreement and the
comparable provision of the Transfer Agreement), and in such event
the portion of such payment to be made pursuant to this Agreement
shall be equal to 265/309ths of such payment, and the balance of
such payment shall be made pursuant to the Transfer Agreement.
(i) Purchase Price Allocation. The purchase price for the
Assets (including the Assumed Liabilities) shall be allocated among
the Assets in accordance with Schedule 1.3(i), to be prepared by the
Investor and delivered to the Company within 180 days after the
Closing Date. Such allocation shall be subject to the Company's
consent, such consent not to be unreasonably withheld. Following the
Closing, the Investor and the Company, in connection with their
respective U.S. federal, state and local income Tax returns and
other filings (including, without limitation Internal Revenue
Service Form 8594), shall not take any position inconsistent with
such allocation. Any adjustment to the purchase price shall be
allocated as provided by Temp. Treas. Reg. ss. 1.1060-1T(f). For
purposes of this Section 1.3(i), the withholding by the Company of
its consent to a proposed allocation of purchase price to an asset
or class of assets shall be deemed to be reasonable if, within 30
days after receiving a copy of Schedule 1.3(i), the Company provides
to the Investor a written notice setting forth its proposed
allocation of purchase price to such asset or class of assets, and
such proposed allocation differs by more than 25% from the amount
allocated on Schedule 1.3(i) to such asset or class of assets, but
compliance with this sentence shall not be necessary for such
withholding of consent by the Company to be deemed reasonable. The
parties shall negotiate in good faith to timely resolve any
differences regarding such allocation.
(j) Proration of Taxes. All real estate, personal property and
ad valorem Taxes relating to the Assets which shall have accrued and
become payable prior to the Closing Date shall be paid by the
Company. All such Taxes which shall be accrued but unpaid shall be
prorated to the Closing Date. In connection with such proration of
Taxes, in the event that actual Tax figures are not available at the
Closing Date, proration of Taxes shall be based upon the actual
Taxes for the preceding year for which actual Tax figures are
available, and re-prorated when actual Tax figures become available.
The amount due one party as a result of such proration shall be paid
to the other party at the Closing, and the amount due one party as a
result of a re-proration of Taxes for a taxing jurisdiction shall be
paid to such party within 30 days after actual Tax figures become
available for such taxing jurisdiction.
ARTICLE II
Closing
2.1 Closing. The closing of the transactions contemplated
hereby (the "Closing") shall be held at the offices of ▇▇▇▇▇, ▇▇▇▇▇
& ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
commencing at 9:00 a.m., Chicago time, on January 30, 1998 or as
soon as practicable thereafter after the satisfaction or waiver of
the conditions to closing set forth in Article VII and Article VIII
of this Agreement, or at such other place, time or date as the
Investor and the Company may agree (the "Closing Date").
2.2 Payments. All payments hereunder shall be in U.S. dollars,
and shall be made no later than 12:00 noon on the Closing Date by
wire transfer of immediately available funds (or interbank transfer,
if applicable) to an account or accounts of the Company, CNCO or the
Investor, as applicable, at a bank or banks specified by the
Company, CNCO or the Investor, as applicable.
ARTICLE III
Representations and Warranties of the Company
The Company and the Associated Subsidiaries represent and
warrant to the Investor and CNCO as follows:
3.1 Organization; Capitalization; Ownership; Charter and
Bylaws, Etc.. (a) Organization and Good Standing. Section 3.1(a) of
the disclosure schedule delivered by the Company to the Investor
herewith (the "Disclosure Schedule") sets forth a complete list of
the subsidiaries of the Company through which the Business is
conducted, together with the subsidiaries owning the stock of such
subsidiaries. All such subsidiaries are included in the term
"Associated Subsidiaries" as defined in the preamble. Each of the
Company and each Associated Subsidiary is a corporation or limited
liability company duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
formation. Each of the Company and each Associated Subsidiary has ll
requisite corporate or limited liability company power and authority
to own, operate and lease the properties and assets it currently
owns, operates or leases and to carry on its business as it is
currently conducted. Each of the Company and each Associated
Subsidiary is duly licensed or qualified to do business as a foreign
corporation or limited liability company and is in good standing in
all jurisdictions in which the character of the properties and
assets owned or leased by it or the nature of the business conducted
by it requires it to be so licensed or qualified and except where
the failure so to qualify would not, individually or in the
aggregate, have or would not
reasonably be expected to have a Material Adverse Effect. Section
3.1(a) of the Disclosure Schedule contains a complete list of all
jurisdictions in which the Company and each Associated Subsidiary
are so qualified. The Company is the direct or indirect beneficial
and record holder of 100% of the capital stock of the Associated
Subsidiaries. "Material Adverse Effect" shall mean any event,
condition or circumstance which has or would reasonably be expected
to have a material adverse effect on the Business or on the
properties, assets, liabilities, results of operations or financial
condition of the Business taken as a whole.
3.2 Corporate Authority and Approval. Each of the Company and
each Associated Subsidiary has all requisite corporate power and
authority to execute, deliver and perform this Agreement and the
Associated Agreements (as defined in Section 5.12) and to consummate
the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Associated
Agreements by the Company and each Associated Subsidiary and the
consummation by the Company and each Associated Subsidiary of the
transactions contemplated hereby and thereby have been duly
authorized by all requisite corporate and action on the part of the
Company and the Associated Subsidiaries. Each of this Agreement and
the Associated Agreements constitutes the valid and binding
obligation of each of the Company and each Associated Subsidiary, to
the extent they are parties thereto, enforceable against the Company
and each Associated Subsidiary, to the extent they are parties
thereto, in accordance with its terms, except to the extent such
enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar
laws relating to creditors' rights generally and to general
principles of equity (regardless of whether enforcement is
considered in the proceeding in equity or at law).
3.3 Consents. Except as set forth in Section 3.3 of the
Disclosure Schedule, no consent, approval or authorization of, or
exemption by or with respect to the Company or any of the Associated
Subsidiaries, or filing with, notice to or permit from any court or
any federal, state, local, foreign or other governmental authority
or other person, other than pursuant to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder (the "HSR Act"), is required in
connection with the execution, delivery and performance by the
Company or each Associated Subsidiary of this Agreement and the
Associated Agreements or the taking by them of any other action
contemplated hereby, excluding, however, consents, approvals,
authorizations, exemptions and filings, if any, which the Investor
is required to obtain or make.
3.4 No Conflicts. Except as set forth in Section 3.4 of the
Disclosure Schedule, the execution, delivery and performance by the
Company and each Associated Subsidiary of this Agreement and the
Associated Agreements and all other instruments, agreements,
certificates and documents contemplated hereby and the consummation
by the Company and each Associated Subsidiary of the transactions
contemplated hereby and thereby will not, with or without the giving
of notice or the lapse of time, or both, subject to obtaining any
required consents referred to in Section 3.3, (i) violate or
conflict with any provision of the charter, by-laws or other
governing documents of the Company or any of the Associated
Subsidiaries, (ii) violate or conflict with any law, statute, rule,
regulation, order, judgment or decree applicable to or binding on
the Company or any of the Associated Subsidiaries, or any of their
respective properties or assets, or by which any of them is bound or
(iii) conflict with or result in the breach of, or constitute a
default under, or result in their termination, cancellation or
acceleration (whether after the giving of notice or the lapse of
time or both) of any right or obligation of the Company or any of
the Associated Subsidiaries under, any commitment or agreement
reflecting obligations of the Company or any of the Associated
Subsidiaries, or loss of a material benefit under or result in the
creation of any Encumbrance upon any of the assets of the Company or
any of the Associated Subsidiaries, except (in the case of (ii) and
(iii) only) for violations, conflicts, breaches, defaults,
terminations,
cancellations, accelerations or Encumbrances which, individually or
in the aggregate, would not have, and would not reasonably be
expected to have, a Material Adverse Effect or a material adverse
effect on the reasonably expected benefits to the Investor of the
transactions contemplated hereunder.
3.5 Compliance with Laws. Except as set forth in Section 3.5 of
the Disclosure Schedule, the Business as it is presently conducted
and as it will be conducted at the Closing is and will be in
compliance with all applicable federal, state local and foreign
laws, rules and regulations currently in effect, including, without
limitation, those relating to equal employment opportunity practices
and exports and imports from or to any jurisdiction, and all orders,
judgments and decrees but excluding those relating to environmental
matters (which are covered in Section 3.20 below) and except for
failures to comply which, individually or in the aggregate, do not
have and would reasonably not be expected to have a Material Adverse
Effect. Except as disclosed in Section 3.5 of the Disclosure
Schedule, neither the Company nor any of the Associated Subsidiaries
has received notice from any governmental regulatory or law
enforcement authority of any allegation that its business or
operations, as currently conducted or as it will be conducted on the
Closing Date, are not in compliance with applicable law and
regulations, or of any investigation or administrative proceeding to
determine such compliance, except for any such notice, investigation
or proceeding as to which there is no reasonable likelihood of a
Material Adverse Effect. Except for those relating to environmental
matters (which are covered in Section 3.20 below) and except as
disclosed in Section 3.5 of the Disclosure Schedule, each of the
Company and the Associated Subsidiaries has all governmental
permits, licenses and authorizations, approvals, exemptions,
certificates or similar instruments or documents ("Permits")
necessary for the conduct of the Business as presently conducted and
for the lawful operation of the Business except where the failure to
have such Permits does not individually or in the aggregate have and
would reasonably not be expected to have, a Material Adverse Effect.
Other than as disclosed in Section 3.5 of the Disclosure Schedule,
all such Permits will be in full force and effect at the time of the
Closing and will not be subject to forfeiture, revocation,
limitation or restriction as a result of the transactions
contemplated hereby except where the failure to have such Permits at
the time of the Closing does not individually or in the aggregate
have and would reasonably not be expected to have a Material Adverse
Effect.
3.6 Financial Statements. True and complete copies of the (i)
audited financial statements of the Business as at December 31,
1995, December 31, 1996 and September 30, 1997 and (ii) unaudited
financial statements of the Business (including for this purpose the
business relating to the Relinquished Property) as at September 30,
1996, (collectively, the "Financial Statements") are attached hereto
as Exhibit 3.6. The Financial Statements present fairly the
financial position and results of operations and cash flow of the
Business (including for this purpose the business relating to the
Relinquished Property) as of the respective dates indicated and for
the respective periods then ended in conformity with GAAP and
regulations of the Securities and Exchange Commission, except that
the interim financial statements do not contain all of the footnote
disclosure required by GAAP. "Relinquished Property" means the
assets acquired by the Investor pursuant to the Transfer Agreement.
3.7 Absence of Certain Changes or Events. Except as set forth
in Section 3.7 of the Disclosure Schedule and except as set forth in
the Financial Statements, since September 30, 1997 there have been
no events, and the Business has not suffered any changes, damage,
destruction or casualty loss, which individually or in the aggregate
have had or could reasonably be expected to have a Material Adverse
Effect. Except as listed on Section 3.7 of the Disclosure Schedule,
since September 30, 1997, the Business has been conducted in the
ordinary course consistent with past practice. Since September 30,
1997, except as disclosed in Section 3.7 of the Disclosure Schedule,
the Business has not:
(i) changed its accounting methods, systems, policies,
principles or practices, except as required by law, GAAP or
generally accepted accounting principles applicable to the
Company or any of the Associated Subsidiaries;
(ii) established or increased any bonus, insurance,
severance, deferred compensation, pension, profit sharing or
other employee benefit plan or otherwise increased the
compensation payable or to become payable to any officer,
director, employee, agent or consultant of the Company or any
of the Associated Subsidiaries, except as permitted by Section
5.14 herein;
(iii) made any borrowings, incurred any debt (other than
trade payables in the ordinary course of business and
consistent with past practice), or assumed, guaranteed,
endorsed (except for the negotiation or collection of
negotiable instruments in the ordinary course of business and
consistent with past practice) or otherwise become liable
(whether directly, contingently or otherwise) for the
obligations of any other person, or made any payment or
repayment in respect of any indebtedness (other than trade
payables and accrued expenses in the ordinary course of
business and consistent with past practice); or
(iv) failed to pursue the collection of receivables in the
ordinary course of business or failed to discharge its payables
in the ordinary course of business.
3.8 Title to and Sufficiency of Assets. (a) The Associated
Subsidiaries have, and upon Closing will transfer to CNCO, good and
marketable title to all of the assets and properties (real and
personal) constituting the Business, free and clear of all
Encumbrances, except (i) as set forth in Section 3.8(a) of the
Disclosure Schedule, (ii) for liens for Taxes not yet due or being
contested in good faith by appropriate proceedings and for which
appropriate reserves are being maintained in accordance with GAAP,
(iii) mechanics', carriers', workmen's, repairmen's or other like
liens arising or incurred in the ordinary course of business, liens
arising under original purchase price conditional sales contracts
and equipment leases with third parties entered into in the ordinary
course of business, and which are routinely and regularly
extinguished by payment of the charges to which they relate and
which do not, individually or in the aggregate, materially impair
the continued use and operation of the assets to which they relate
in the Business, taken as a whole, as presently conducted and (iv)
other imperfections of title or encumbrances, if any, which do not,
individually or in the aggregate, materially impair the continued
use and operation of the assets to which they relate in the
Business, taken as a whole, as presently conducted.
(b) Except as disclosed in Section 3.8(b) of the Disclosure
Schedule, the assets and properties of the Business used to operate
the Business in the manner in which it is currently conducted have
been taken as a whole, reasonably maintained and are in good
operating condition and repair (with the exception of normal wear
and tear), and, to the best of the Company's knowledge, are, taken
as a whole, free from defects other than such minor defects as do
not interfere with the intended use thereof in the conduct of normal
operations or adversely affect the resale value thereof. The
Associated Subsidiaries own or have a right to use the assets,
properties, rights, know-how, processes and ability which are
required for or currently used in connection with the operation of
the Business as it is presently conducted (the "Necessary Assets"),
and, at the Closing the Associate Subsidiaries shall transfer to
CNCO the ownership or right to use the Necessary Assets. Such
assets, properties and rights, except for changes of assets,
properties and rights in the ordinary course of business, together
with the assets of the Company and the Associated Subsidiaries
necessary for the Transitional Services (as defined in Section
5.12), are sufficient to conduct the Business substantially as it is
currently being conducted.
3.9 Patents, Trademarks, Subscriber Lists. Section 3.9 of the
Disclosure Schedule sets forth a list, as of the date hereof, of all
registered United States and foreign patents, trademarks, service
marks, trade names, mastheads, copyrights and applications therefor
which are used by the Company or any of the Associated Subsidiaries
in the conduct of the Business (the "Patent and Trademark Rights")
which are material as to the properties, assets, liabilities,
results of operations or financial condition of the Business as a
whole ("Material"). Except as set forth in Section 3.9 of the
Disclosure Schedule, (a) the Business owns or possesses adequate
licenses or other valid rights to use all Patent and Trademark
Rights; (b) to the Company's knowledge, the conduct of the Business
as now being conducted does not conflict with any valid patents,
trademarks, trade names, mastheads or copyrights of others in any
way which, individually or in the aggregate, has or would reasonably
be expected to have a Material Adverse Effect; and (c) to the
Company's knowledge, none of the Patent and Trademark Rights is
being infringed upon by others in any way which, individually or in
the aggregate, has or would reasonably be expected to have a
Material Adverse Effect. Except as set forth in Section 3.9 of the
Disclosure Schedule, neither the Company nor any of the Associated
Subsidiaries has received any written notice of infringement of any
Patent or Trademark Right of any other person. Except as set forth
in Section 3.9 of the Disclosure Schedule, each of the subscriber
lists used in the Business is owned by the Company and the
Associated Subsidiaries and the Company and the Associated
Subsidiaries have the exclusive rights to use each of such
subscriber lists.
3.10 Commitments. Section 3.10 of the Disclosure Schedule sets
forth a list of each contract, agreement (including, without
limitation, non-compete agreements) purchase or sale order, license,
or other commitment or arrangement (whether oral or in writing) with
respect to the Business (other than solely with respect to Retained
Liabilities or Retained Assets) to which the Company or any of the
Associated Subsidiaries is a party or by which the Company or any of
the Associated Subsidiaries is bound (collectively, the
"Commitments") (a) which provides for future payments thereunder of
more than $250,000 per year, including, without limitation, all such
Commitments which are (i) Commitments for capital expenditures, (ii)
distribution, dealer or sales agency Commitments, (iii) Commitments
for loans or advances or the incurrence of debt or guarantees of
third party obligations, and (iv) Commitments for the sale of any
assets, but excluding purchase orders or other Commitments for the
purchase of raw materials, components or supplies and sales orders
or other Commitments for the sale of finished goods entered into in
the ordinary course of business; (b) which restricts the kinds of
businesses in which the Business may engage or the geographical area
in which the Business may be conducted; (c) which is an indenture,
mortgage, loan agreement or other Commitment for the borrowing of
money or a line of credit; (d) which is a collective bargaining
agreement; (e) which is a license (whether as licensor or licensee)
or similar agreement permitting the use of any Patent and Trademark
Rights; (f) which is a joint venture, partnership or similar
agreement; (g) any Commitment which is an employment agreement or
severance agreement or bonus arrangement (either of an ongoing or
change of control nature) or Commitments of any kind with any
employee, officer or director of the Company or any Associated
Subsidiary or any of their respective Affiliates with respect to the
Business, or any Commitment of any kind with any shareholder of the
Company or any Affiliate of any shareholder of the Company; (h)
which is a brokerage or finder's agreement; (i) which is a stock
purchase agreement, asset purchase agreement or other acquisition or
divestiture agreement other than the acquisition agreements covering
the acquisition of the Business by the Company so long as such
acquisition agreements do not provide for any current obligation or
liability of the Business that will be an Assumed Liability; or (j)
which is not of the foregoing type and is Material. Except as set
forth in Section 3.10 of the Disclosure Schedule, each of such
Commitments, and each other Assumed Contract; is a valid and binding
obligation of the Company or the Associated Subsidiaries and, to the
knowledge of the Company, of the other parties to each of such
Commitments and each other Assumed Contract; each of such
Commitments is enforceable against the Company or an Associated
Subsidiary, as applicable, in accordance with its terms, except to
the extent such enforceability may
be limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws relating to creditors'
rights generally and to general principles of equity (regardless of
whether enforcement is considered in the proceeding in equity or at
law); and neither the Company nor the applicable Associated
Subsidiary nor, to the knowledge of the Company, any other party is
in violation or breach of or default under any Commitment except
where such violation, breach or default, individually or in the
aggregate, do not have and would reasonably not be expected to have
a Material Adverse Effect.
3.11 Litigation. Except as set forth in Section 3.11 of the
Disclosure Schedule and except as pertains to environmental matters
which are the subject of Section 3.20 below, as of the date of this
Agreement, there is no action, claim, suit, investigation or other
litigation or proceeding in any court or before any governmental
authority ("Litigation") pending or, to the Company's knowledge,
threatened against the Company or any of the Associated
Subsidiaries, or relating to the transactions contemplated by this
Agreement. Except as set forth in Section 3.11 of the Disclosure
Schedule, neither the Company, any of the Associated Subsidiaries
nor the Business is subject to any outstanding orders, rulings,
judgments or decrees which if adversely determined to the Company,
any of the Associated Subsidiaries or the Business would have or
would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
3.12 [Reserved].
3.13 U.S. Employee Benefit Plans. Section 3.13 of the
Disclosure Schedule lists (a) (i) all employee benefit plans (within
the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), (ii) all other
retirement or deferred compensation plans, incentive compensation
plans, stock plans, unemployment compensation plans, vacation pay,
severance pay, bonus or benefit arrangements, insurance or
hospitalization programs and (iii) all other fringe benefit
arrangements, in the case of each of (ii) and (iii), for any current
or former employee, director, consultant or agent, whether pursuant
to contract, arrangement, custom or informal understanding, which
does not constitute an employee benefit plan and which provides
benefits to employees in the U.S. or which is subject to U.S. law
and (b) all employment (excluding offer letters to at-will
employees) or consulting agreements, which relate to or cover
employees of the Business or with respect to which the Business has
any liability or contingent liability (the "Benefit Plans"). The
Investor has been supplied to the extent applicable true and
complete copies of all Benefit Plans and all contracts relating
thereto, or to the funding thereof, including, without limitation,
all trust agreements, insurance contracts, administration contracts,
investment management agreements, subscription and participation
agreements, and recordkeeping agreements, each as in effect on the
date hereof. In the case of any Benefit Plan which is not in written
form, the Investor has been supplied with an accurate description of
such Benefit Plan as in effect on the date hereof.
3.14 Taxes. No material Tax liens have been filed on the Assets
and no material claims are being asserted that could reasonably
result in a Tax lien on the Assets. For purposes of this Agreement,
(i) "Taxes" (including, with correlative meaning, the term "Tax")
shall mean all Taxes, charges, fees, levies, penalties or other
assessments imposed by any federal, state, local or foreign taxing
authority, including, but not limited to, income, gross receipts,
excise, property, sales, transfer, franchise, payroll, withholding,
social security and other Taxes, and shall include any interest,
penalties or additions attributable thereto.
3.15 Undisclosed Liabilities. There are no liabilities of any
nature, whether accrued, absolute, contingent or otherwise, whether
due or to become due, with respect to the Business, other than (a)
liabilities that are reflected in the Financial Statements; (b)
liabilities disclosed in Section 3.15 of the Disclosure Schedule;
(c) liabilities arising since September 30, 1997 in the
ordinary course of business; and (d) liabilities arising under this
Agreement or any of the Associated Agreements.
3.16 Fees. Except for the fees payable to ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ Securities Corporation, which are the sole responsibility
of the Company, neither the Company nor any Associated Subsidiary
has paid or become obligated to pay any fee or commission to any
broker, finder or intermediary in connection with the transactions
contemplated hereby.
3.17 Labor Matters. Except as disclosed on Section 3.17 of the
Disclosure Schedule, neither the Company nor any of the Associated
Subsidiaries is party to any collective bargaining agreement with
respect to the Business nor does any labor union or collective
bargaining agent represent any employees of the Company or any of
the Associated Subsidiaries who are employed with respect to the
Business. Except as set forth in Section 3.17 of the Disclosure
Schedule, there is no labor strike, slow-down or stoppage pending,
or to the Company's knowledge, threatened by the employees of the
Company or any of the Associated Subsidiaries, nor are there any
pending grievances (or arbitrations thereon), nor have any unfair
labor practice charges with respect to the Company or any of the
Associated Subsidiaries been filed with the National Labor Relations
Board, nor have any written or oral grievances had the result of
varying the terms or the effect of the terms of any collective
bargaining agreement to which the Company or any Associated
Subsidiary is a party which individually or in the aggregate have or
would reasonably be expected to have a Material Adverse Effect.
Except as set forth in Section 3.17 of the Disclosure Schedule,
neither the Company nor any Associated Subsidiary has taken any
action within the ninety (90) day period prior to the date hereof,
and will not take such action prior to Closing, which resulted in or
which will result in an "employment loss" as such term is defined in
the Worker Adjustment and Retraining Notification Act, 29 U.S.C.
Sections 2101-2109 (the "WARN Act"), with respect to any employee of
the Business. Except as set forth in Section 3.17 of the Disclosure
Schedule, since September 30, 1997, the Company and the Associated
Subsidiaries have not increased the compensation of employees of the
Business, except for increases for merit based promotions in the
ordinary course of business.
3.18 Real Property. Set forth on Section 3.18 of the Disclosure
Schedule is a list of all Owned Real Property and the name of the
record title holder thereof. Except as set forth in Section 3.18 of
the Disclosure Schedule, none of the Owned Real Property violates
any laws, rules, regulations, codes or ordinances of any
governmental authority or subdivision thereof in any material
respect. Except as set forth in Section 3.18 of the Disclosure
Schedule, all of the buildings, structures and appurtenances
situated on the Owned Real Property are in operating condition and
in a state of maintenance and repair adequate for the purposes for
which such buildings, structures and appurtenances are presently
being used.
3.19 Leases. Set forth on Section 3.19 of the Disclosure
Schedule is a list of all real property leases to which the Company
or any Associated Subsidiary is a party primarily used with respect
to the Business and of which any real property leased by the Company
or any Associated Subsidiary is a party primarily used with respect
to the Business is the subject. Except as set forth in Section 3.19
of the Disclosure Schedule, each such lease and all leases of
personal property are valid, binding and in full force and effect,
and all rent and other sums and charges currently payable under each
such lease have been paid, except where the failure to make such
payments individually and in the aggregate has not and would
reasonably not be expected to have a Material Adverse Effect. Except
as set forth in Section 3.19 of the Disclosure Schedule, since
September 30, 1997, neither the Company nor any Associated
Subsidiary has received any notice of default under any such lease
and no termination event or condition which, with the giving of
notice or the passage of time, or both, could reasonably be expected
to constitute a default thereunder on the part of the Company or any
of the Associated Subsidiaries or, to the Company's knowledge, the
lessor, exists
under any such lease which individually or in the aggregate have or
would reasonably be expected to have a Material Adverse Effect.
3.20 Environmental Matters. (a) Except as set forth on Section
3.20(a) of the Disclosure Schedule, the Company or the Associated
Subsidiaries have obtained, and disclosed to the Investor, all
applicable permits, licenses and other authorizations which are
required under any and all Environmental Laws with respect to all
real property owned, leased or operated with respect to the
Business.
(b) Except as set forth on Section 3.20(b) of the Disclosure
Schedule, the Business is in Material compliance with all terms and
conditions of any such required permits, licenses and
authorizations, and all applicable requirements of Environmental
Laws with respect to all real property owned, leased or operated
with respect to the Business.
(c) Except as set forth on Section 3.20(c) of the Disclosure
Schedule, there is no judicial or administrative proceeding,
investigation or remedial action pending or to the Company's
knowledge threatened against the Company or any of the Associated
Subsidiaries (A) alleging the violation of, noncompliance with, or
liability imposed under any Environmental Law or (B) alleging that
they are or may be responsible for any response, cleanup or
corrective action under any Environmental Law.
(d) Except as set forth on Section 3.20(d) of the Disclosure
Schedule, no generation, manufacture, storage, treatment,
transportation, disposal or release of Hazardous Materials (as
defined below) is occurring or has occurred so as to lead to
liability under any Environmental Law, on or from any real property
owned, leased or operated by the Business or otherwise used in
connection with the Business; nor have any Hazardous Materials
migrated from or threatened to migrate from other properties upon or
beneath any real property owned, leased or operated by the Business
or used with respect to the Business. "Hazardous Materials" means
any substance, waste, pollutant or contaminant denominated or
regulated as hazardous or toxic under any Environmental Law.
3.21 Pre-Closing Liabilities. Upon Closing, CNCO will not have
liabilities of any nature whether accrued, absolute, contingent or
otherwise, whether due or to become due, relating to the Business
which arise from any act, matter, circumstance or omission relating
to the period prior to the Closing Date except for the Assumed
Liabilities and liabilities of CNCO arising pursuant to this
Agreement and the Associated Agreements which are expressly intended
to be liabilities of CNCO from and after the Closing.
3.22 Agreements with Affiliates. Section 3.22 of the Disclosure
Schedule identifies all agreements, contracts and commitments
entered into since September 30, 1997 primarily related to the
Business between any Associated Subsidiary, on the one hand, and any
Affiliate of the Company or any shareholder of the Company, on the
other hand, other than the Transitional Services Agreement (as
defined in Section 5.12). (As used herein the term "Affiliate" shall
have the meaning set forth in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended.)
3.23 Bulk Sales; Transfer Taxes. The Company and all Associated
Subsidiaries have complied with all applicable bulk sale statutes,
other than provisions of state or local Tax laws requiring
notification of taxing authorities regarding sales of assets ("Bulk
Sales Laws") to, and has paid all transfer Taxes with respect to the
sale of the Business to, CNCO.
ARTICLE IV
Representations and Warranties of Investor
The Investor and CNCO hereby represent and warrant to the
Company as follows:
4.1 Organization and Good Standing. Each of the Investor and
CNCO is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation.
4.2 Corporate Authority and Approval. Each of the Investor and
CNCO has all requisite corporate power and authority to execute,
deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and
performance of this Agreement by the Investor and CNCO and the
consummation by the Investor and CNCO of the transactions
contemplated hereby have been duly authorized by all requisite
corporate action on the part of each of the Investor and CNCO. This
Agreement constitutes the valid and binding obligation of the
Investor enforceable against the Investor and CNCO in accordance
with its terms, except to the extent such enforceability may be
limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws relating to creditors'
rights generally.
4.3 Consents. Except as set forth in Exhibit 4.3, no consent,
approval or authorization of, or exemption by, or filing with,
notice to or permit from any court or any federal, state, local,
foreign or other governmental authority or other person, other than
pursuant to the HSR Act, is required in connection with the
execution, delivery and performance by the Investor and CNCO of this
Agreement or the taking by it of any other action contemplated
hereby, excluding, however, consents, approvals, authorizations,
exemptions and filings, if any, which the Company is required to
obtain or make.
4.4 No Conflicts. The execution, delivery and performance by
the Investor and CNCO of this Agreement and all other instruments,
agreements, certificates and documents contemplated hereby and the
consummation by the Investor and CNCO of the transactions
contemplated hereby will not, with or without the giving of notice
or the lapse of time, or both, subject to obtaining any required
consents referred to in Section 4.3, (i) violate or conflict with
any provision of its charter or bylaws, (ii) violate or conflict
with any law, statute, rule, regulation, order, judgment or decree
applicable to or binding on the Investor or CNCO, or (iii) conflict
with or result in the breach of any agreement reflecting obligations
of the Investor or CNCO for borrowed money, in each case except for
violations, conflicts or breaches which would not individually or in
the aggregate materially hinder or impair the consummation of the
transactions contemplated hereby.
4.5 Financing. The Investor has obtained commitment letters for
bank financing and a "highly confident" letter for Rule 144A
financing in amounts sufficient to complete the transactions. Copies
of such letters are attached hereto as Exhibit 4.5-1. However, if
the financing as provided in Exhibit 4.5-1 is not available, the
Investor has obtained commitment letters for alternative financing
in amounts sufficient to complete the transactions as set forth in
Exhibit 4.5-2. As of the date hereof, the Investor has no reason to
believe that any of the conditions to the financing will not be
satisfied or that the financing will not be available on a timely
basis to complete the transactions contemplated hereby.
4.6 Litigation. As of the date of this Agreement, there is no
Litigation pending or, to the Investor's or CNCO's knowledge,
threatened against the Investor or CNCO (a) with respect to which
there is a reasonable likelihood of a determination which,
individually or in the aggregate, would materially hinder or impair
the consummation of the transactions contemplated hereby or (b)
which
seeks to enjoin or obtain damages in respect of the consummation of
the transactions contemplated hereby.
ARTICLE V
Covenants of the Company
The Company and the Associated Subsidiaries hereby covenant and
agree with the Investor as follows:
5.1 Cooperation by the Company.
(a) Consents and Authorizations. The Company shall, and shall
cause its Associated Subsidiaries to, use all commercially
reasonable efforts and cooperate with the Investor to secure all
necessary consents, approvals, authorizations, beneficial
assignments, exemptions and waivers from third parties (collectively
"Consents") as shall be required in order to enable the Investor to
effect the transactions contemplated hereby and to prevent a breach
of, a default under, or a termination, change in the terms or
conditions or modification of, any instrument, contract, lease,
license or other agreement to which the Company or any of the
Associated Subsidiaries is a party or by which any of them is bound,
and shall otherwise use all commercially reasonable efforts to cause
the consummation of such transactions in accordance with the terms
and conditions hereof. Without limiting the provisions set forth in
this Section 5.1, the Company shall file, or cause to be filed, with
the Department of Justice and the Federal Trade Commission a
Pre-Merger Notification and Report Form pursuant to the HSR Act in
respect of the transactions contemplated hereby within ten business
days of the date of this Agreement and the Company shall use, and
shall cause each of its Associated Subsidiaries and Affiliates to
use, all reasonable efforts to take or cause to be taken all actions
necessary, including to promptly and fully comply with any requests
for information from regulatory authorities, to obtain any consent,
waiver, approval or authorization relating to the HSR Act that is
necessary to enable the parties to consummate the transactions
contemplated by this Agreement. Notwithstanding the foregoing, no
provision of this Agreement shall be construed as requiring the
Company or any of the Associated Subsidiaries to make payments of
any kind in order to obtain Consents.
(b) Nonassignable Contracts. Anything contained herein to the
contrary notwithstanding, this Agreement shall not constitute an
agreement to assign any Assumed Contract or other commitment or
asset if an assignment or attempted assignment of the same without
the consent of the other party or parties thereto would constitute a
breach thereof or in any way impair the rights of the Company or the
Associated Subsidiaries thereunder. If any consent necessary to
convey any Asset is not obtained or if an attempted assignment would
be ineffective or would impair any party's rights under any such
Assumed Contract or other Asset so that CNCO would not receive all
such rights, then (x) the Company shall use commercially reasonable
efforts (it being understood that such efforts shall not include any
requirement of the Company or the Associated Subsidiaries or CNCO or
the Investor to expend money or offer or grant any financial
accommodation) to provide or cause to be provided to CNCO, to the
extent permitted by law, the benefits of any such Assumed Contract
or other Asset, and the Company shall promptly pay or cause to be
paid to CNCO, when received, all moneys received by the Company or
the Associated Subsidiaries with respect to any such Assumed
Contract or other Asset and (y) in consideration thereof CNCO shall
pay, perform and discharge on behalf of the Company and the
Associated Subsidiaries debts, liabilities, obligations and
commitments thereunder in a timely manner and in accordance with the
terms thereof. In addition, the Company shall take such other
actions (at the expense of CNCO, as designated by the Investor) as
may reasonably be requested by the Investor in order to place CNCO,
insofar as reasonably possible, in the same position as if such
Assumed Contract or other Asset had been transferred as contemplated
hereby and so all the benefits and burdens relating thereto,
including possession, use, risk of loss, potential for gain and
dominion, control and command are to inure to CNCO. If and when such
consents and approvals are obtained, the transfer of the applicable
asset shall be effected in accordance with the terms of this
Agreement.
5.2 Conduct of the Business. (a) During the period from the
date of this Agreement to the Closing, except as otherwise
contemplated by this Agreement or as the Investor shall otherwise
agree in writing in advance with respect to the Business, the
Company covenants and agrees to, and shall cause the Associated
Subsidiaries to, (i) conduct the Business in the ordinary and usual
course in a manner consistent with past practice, (ii) use their
best efforts to preserve intact its present business organization,
(iii) make available to the Investor the services of the officers
and employees of the Business, (iv) preserve the good will and
relationships with customers, suppliers and others having business
dealings with the Business and (v) not take any action which would
cause any of the representations and warranties of the Company in
Article III to be untrue or incorrect in any material respect as of
the Closing. From December 31, 1997 through the Closing Date the
Company will not, and will cause the Associated Subsidiaries not to
(i) declare, set aside or pay any dividends with respect to their
respective capital stock, or redeem or otherwise acquire any of
their respective capital stock or other securities (except for
payments of cash dividends and redemptions for cash) or (ii) pay any
indebtedness or accounts payable except for indebtedness or accounts
payable of the Business to third parties in the ordinary course of
business (it being expressly understood that no payments will be
made on any intercompany notes).
(b) During the period from the date of this Agreement to the
Closing, except as otherwise provided for in this Agreement or
Section 5.2 of the Disclosure Schedule or as the Investor shall
otherwise consent, the Company covenants and agrees that, with
respect to the Business, it shall not, and it shall not permit its
Associated Subsidiaries to:
(i) other than (a) sales of products in the ordinary
course of business, or (b) sales of obsolete plants and
equipment in the ordinary course of business, sell, transfer,
convey, assign or otherwise dispose of, or agree to sell,
transfer, convey, assign or otherwise dispose of, any of its
assets or properties, or suffer or permit the creation of any
Encumbrance; other than in the ordinary course of business;
(ii) other than (a) Commitments to distributors in the
ordinary course of business consistent with past practice or
(b) in the ordinary course of business consistent with past
practice (x) take any action, or enter into or authorize any
Commitment or transaction or (y) terminate, modify, amend or
otherwise alter any material terms or provisions of any of its
Commitments, except as expressly contemplated by this
Agreement;
(iii) abandon, sell, pledge, alter, amend or enter into
any licensing or contractual arrangements with respect to any
Intellectual Property Rights;
(iv) fail to pursue the collection of receivables in the
ordinary course of business, fail to discharge its payables in
the ordinary course of business or otherwise make any material
change in the course of dealing with customers or suppliers as
a whole; or
(v) agree or commit to any of the foregoing.
5.3 Access. From the date hereof and prior to the Closing, the
Company shall provide the Investor with such information as the
Investor may from time to time reasonably request with respect to
the Company and the Associated Subsidiaries and the transactions
contemplated by this
Agreement, provide the Investor and its representatives reasonable
access during regular business hours and upon reasonable notice to
the properties, books and records of the Company, and the Associated
Subsidiaries as the Investor may from time to time reasonably
request, provided that the Company shall not be obligated to provide
the Investor with any information which would violate (i) any law,
rule or regulation or term of any Commitment, or (ii) any
confidentiality provision of any contract, or if the provision
thereof would adversely affect the ability of the Company or the
Associated Subsidiaries to assert attorney client, attorney work
product or other similar privilege. Notwithstanding the foregoing,
the Investor shall have the absolute right to review any Commitment
or other Assumed Contract.
5.4 Permits. The Company agrees to use commercially reasonable
efforts to assist the Investor in obtaining for CNCO all Permits
required for the Business to the extent they cannot be transferred
to CNCO pursuant to this Agreement. Notwithstanding the foregoing,
the Investor shall have the right to direct the Company to forego
one or more applications for Permits. The Company shall pay the
costs of such Permits.
5.5 Further Assurances. At any time after the Closing Date, the
Company shall promptly execute, acknowledge and deliver any other
assurances or documents reasonably requested by the Investor and
necessary for the Investor to satisfy its obligations hereunder or
obtain the benefits contemplated hereby.
5.6 Associated Agreements. The Company and the Associated
Subsidiaries covenant and agree that (i) they shall each enter into
each of the Associated Agreements (as defined in Section 5.12) in a
timely matter, (ii) they shall each perform their respective
obligations pursuant to, and fully comply with the terms of, the
Associated Agreements; and (iii) that the Investor is a third party
beneficiary of the Associated Agreements; and (iv) that the Investor
must approve any and all changes to the forms of Associated
Agreements that are exhibits to this Agreement.
5.7 No Default. Neither the Company nor the Associated
Subsidiaries shall do any act or omit to do any act, or permit any
act or omission to act, which will cause a breach of any Commitment
to which the Company or the Associated Subsidiaries are a party or
by which any of them or their assets are bound or the Business are
subject, the breach of which would have a Material Adverse Effect.
5.8 Compliance with Laws. Through the close of business on the
Closing Date, the Company shall, and shall cause the Associated
Subsidiaries to, comply with all laws, statutes, regulations, rules
and orders applicable to the Business or the operation of the
Company or the Associated Subsidiaries, except where the failure to
comply therewith, individually or in the aggregate, does not have a
Material Adverse Effect.
5.9 Supplemental Information. From time to time prior to the
Closing, the Company will promptly disclose in writing to the
Investor any matter hereafter arising which, if existing, occurring
or known at the date of this Agreement would have been required to
be disclosed to the Investor or which would render inaccurate any of
the representations, warranties or statements set forth in Article
III hereof. No information provided to a party pursuant to this
Section shall be deemed to cure any breach of any representation,
warranty or covenant made in this Agreement.
5.10[Reserved].
5.11[Reserved].
5.12 Transitional Services. The Company agrees to provide
transition management and administrative services ("Transitional
Services") to CNCO for a period of up to 3 years pursuant to the
Transitional Services Agreement substantially in the form of Exhibit
5.12 (the "Transitional Service Agreement"; the Transitional
Services Agreement, together with the Like Kind Exchange Agreement
(as defined in Section 7.8) and the Non-Competition Agreement (as
defined in Section 7.4), are collectively referred to as the
"Associated Agreements"). The Investor must approve any and all
changes to the form of Transitional Services Agreement that is an
exhibit to this Agreement.
5.13 [Reserved]
5.14 Employees. The Company agrees to cooperate with the
Investor with respect to the Investor's making of employment offers
to the employees of the Business on behalf of CNCO pursuant to
Section 10.1. Exhibit 5.14 sets forth a list of employees of the
Business. The Company will provide the Investor by November 25, 1997
with a substituted Exhibit 5.14, setting forth a list of the
employees of the Business as of the date hereof. At the request of
the Investor, the Company will forward employment offers on behalf
of the Investor to the employees of the Business. The Company will
permit the Investor to discuss employment offers with employees of
the Business during business hours and to make presentations to the
employees of the Business during business hours. The Company agrees
that beginning on the date of this Agreement until the second
anniversary of the Transfer Date (as defined in Section 10.1)
neither it nor any of its Affiliates or subsidiaries will directly
or indirectly solicit any employees of CNCO with respect to
employment, without the prior written consent of the Investor.
However, nothing herein prevents the Company or its Affiliates from
placing any general advertisements for employees or from hiring any
employees of CNCO at any time who initiate employment discussions
with the Company or its Affiliates or who respond to any general
advertisement for employees placed by the Company or its Affiliates.
During the period commencing on the date hereof through the Closing
Date, the Company and the Associated Subsidiaries will not increase
the compensation of employees of the Business, except that any
employee receiving a merit based promotion in the ordinary course of
business and resulting in increased responsibilities may receive a
raise appropriate to reflect such employee's new position. Bonuses
paid to employees of the Business for 1997 in amounts determined by
the Company in the ordinary course of business shall be reflected in
Net Liabilities of the Business for purposes of Section 1.3(f), and,
unless CNCO consents otherwise, CNCO will pay such bonuses after the
Closing Date. CNCO consents to the payment of such bonuses by the
Company if the Closing Date is later than January 30, 1998.
5.15 Amended Disclosure Schedule. The Company may provide an
amended Disclosure Schedule, adding solely matters that have arisen
since the date of this Agreement, to the Investor 48 hours prior to
Closing; provided, however, that such amended Disclosure Schedule
shall not affect any representation or warranty of the Company or
any Associated Subsidiary or the obligation of the Company to
satisfy the conditions to Closing set forth in Section 7.1. The
purpose of the additions to the Disclosure Schedule shall solely be
to provide the Investor with information for purposes of Section 7.1
below about the extent, if any, to which the Company's
representations and warranties will not be true and correct as of
the Closing, and any failure of the Company's representations and
warranties to be true and correct as of the Closing disclosed by
such additions shall not give rise to liability after the Closing if
the Closing occurs.
5.16 Insurance. The Company agrees to, and to cause the
Associated Subsidiaries to, maintain existing insurance on the
Business for the benefit of CNCO with respect to events happening on
or prior to the Closing Date.
5.17 Lenders' Consent. The Company agrees to obtain by three
weeks from the date of execution hereof the consent of its lenders
(the "Lenders' Consent") to the extent necessary to effect the
transactions contemplated by this Agreement and the Associated
Agreements.
5.18 Vehicular Titles. The Associated Subsidiaries agree to
provide the certificates transferring title to CNCO for all Assets
which are motor vehicles (the "Vehicular Titles") on the Closing
Date.
5.19 UCC Termination Statements. The Associated Subsidiaries
agree to deliver to CNCO on the Closing Date UCC termination
statements, releases of mortgages and/or deeds of trust and any
other documents as are necessary for the discharge of all
Encumbrances (other than Permitted Encumbrances) affecting the
Business or any other of the assets.
5.20 Real Estate Conveyance Documents and Lease Assignments.
The Associated Subsidiaries agree to deliver to CNCO on the Closing
Date real estate conveyance documents and lease assignments, as
applicable, with respect to all of the real property set forth on
Sections 3.18 and 3.19, as applicable, of the Disclosure Schedule,
as amended as of the Closing Date.
ARTICLE VI
Covenants of Investor
The Investor hereby covenants and agrees with the Company:
6.1 Cooperation by Investor. From the date hereof and prior to
the Closing, the Investor shall use all reasonable efforts, and
shall cooperate with the Company, to secure all necessary consents,
approvals, authorizations, exemptions and waivers from third parties
as shall be required in order to enable the Company to effect the
transactions contemplated hereby, and shall otherwise use all
reasonable efforts to cause the consummation of such transactions in
accordance with the terms and conditions hereof. Without limiting
the provisions set forth in this Section 6.1, the Investor shall
file with the Department of Justice and the Federal Trade Commission
a Pre-Merger Notification and Report Form pursuant to the HSR Act in
respect of the transactions contemplated hereby within ten business
days of the date of this Agreement, and the Investor shall use, and
shall cause each of its Affiliates to use, all reasonable efforts to
take or cause to be taken all actions necessary, including to
promptly and fully comply with any requests for information from
regulatory authorities, to obtain any consent, waiver, approval or
authorization relating to the HSR Act that is necessary to enable
the parties to consummate the transactions contemplated by this
Agreement.
6.2 Preservation of Books and Records. For a period of (i) five
years from the Closing Date with respect to Books and Records (as
defined below) relating to litigation, Tax or environmental matters
and (ii) three years from the Closing Date with respect to Books and
Records relating to all other matters:
(i) The Investor shall not dispose of or destroy any of
the books and records of CNCO relating to periods prior to the
Closing ("Books and Records") without first offering to turn
over possession thereof to the Company by written notice to the
Company at least 90 days prior to the proposed date of such
disposition or destruction.
(ii) The Investor shall allow the Company and its agents
access to all Books and Records on reasonable notice and at
reasonable times at the Investor's principal place
of business or at any location where any Books and Records are
stored, and the Company shall have the right, at their own
expense, to make copies of any Books and Records; provided,
however, that any such access or copying shall be had or done
in such a manner so as not to unduly interfere with the normal
conduct of the Investor's business and provided that the
Company shall maintain the confidentiality of such Books and
Records.
6.3 Employees. The Investor agrees that for the period
beginning as of the date hereof and ending on the second anniversary
of the Transfer Date, without the prior written consent of the
Company, neither it nor CNCO shall directly or indirectly solicit
any employees of the Company with respect to employment other than
persons employed by the Business at the Transfer Date. However,
nothing herein prevents the Investor or CNCO from placing any
general advertisement for employees or from hiring any employees of
the Company at any time who initiate employment discussions with the
Investor or CNCO or who respond to any general advertisement for
employees placed by CNCO or the Investor.
ARTICLE VII
Conditions to Investor's Obligations
The obligations of the Investor to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction
(or waiver, where permissible) at or prior to the Closing of all of
the following conditions:
7.1 Representations, Warranties and Covenants of the Company
and the Associated Subsidiaries. The Company and the Associated
Subsidiaries shall have complied in all material respects with each
of its agreements and covenants contained herein to be complied with
on or prior to the Closing Date. All the representations and
warranties of the Company and the Associated Subsidiaries set forth
in this Agreement that are qualified as to materiality shall be true
and correct, and the representations and warranties of the Company
and the Associated Subsidiaries set forth in this Agreement that are
not so qualified shall be true and correct in all material respects,
in each case as of the date of this Agreement, and as of the Closing
Date (after giving effect to the closings pursuant to each of the
Associated Agreements) as though made on and as of the Closing Date,
with future tense references in Section 3.1 being deemed to be
present tense references as of the Closing Date, except that the
accuracy of representations and warranties that by their terms speak
as of the date of this Agreement or some other date shall be
determined as of such date; provided that this condition shall not
be unsatisfied unless it would be unsatisfied if the representations
and warranties of the Company and the Associated Subsidiaries in
this Agreement were deemed to refer to the Business as defined in
this Agreement and the "Business" as defined in the Transfer
Agreement constituting a part of the Like Kind Exchange Agreement,
taken as a whole, and the Disclosure Schedule is read to apply to
such combination of both such Businesses. The Investor shall have
received a certificate executed by or on behalf of the Company and
the Associated Subsidiaries, dated as of the Closing Date,
certifying as to the fulfillment of the conditions set forth in this
Section 7.1.
7.2 Consents. The applicable waiting period under the HSR Act
shall have expired or been terminated and all other consents,
approvals, authorizations, exemptions and waivers by, or filing
with, notice to or permit from governmental agencies or other
persons that shall be required in order to enable the Investor to
consummate the transactions contemplated hereby shall have been
obtained (except for such consents, approvals, authorizations,
exemptions and waivers, filings, notices or permits, the absence of
which would not prohibit consummation of such transactions or render
such consummation illegal).
7.3 No Prohibitions. No statute, rule or regulation or order or
decree of any court or governmental body shall be in effect which
prohibits the Investor from consummating the transactions
contemplated by this Agreement.
7.4 Closing Documents. In addition to the other documents
expressly referenced in this Article VII, the Company or its
Affiliates shall have delivered or caused to be delivered the
following closing documents or payments in form and substance
satisfactory to the Investor:
(a) the Associated Subsidiaries shall have executed and
delivered (i) ▇▇▇▇ of Sale, Assignment and Assumption substantially
in the form of Exhibit 7.4(a) hereto and (ii) Trademark and Trade
Name Assignments substantially in the form of Exhibit 7.4(b) hereto
(the "Trademark and Trade Name Assignments").
(b) American Publishing Management Services Inc. shall have
executed and delivered the Transitional Services Agreement;
(c) the Company shall have executed and delivered a
non-competition agreement with CNCO substantially in the form of
Exhibit 7.4(c) hereto (the "Non-Competition Agreement);
(d) [Reserved];
(e) simultaneously with the Closing, the Company shall have
paid to CNCO an amount equal to the Estimated Net Cash Position;
(f) [Reserved];
(g) a copy of the resolution or resolutions duly adopted by the
board of directors of the Company and each Associated Subsidiary
authorizing the execution, delivery and performance of this
Agreement and the Associated Agreements and the transactions
contemplated hereby and thereby, certified by the Secretary or an
Assistant Secretary of such entity;
(h) a certificate of the Secretary or an Assistant Secretary of
the Company and each Associated Subsidiary as to the incumbency and
signatures of the officers of each such entity executing this
Agreement and the Associated Agreements;
(i) certificates issued by the Secretary of State of the State
of Delaware, as of a recent date, as to the good standing of each of
the Company and each Associated Subsidiary;
(j) certificates issued by the Secretary of State of each
jurisdiction in which the Company and each Associated Subsidiary is
licensed or qualified to do business as a foreign corporation, as of
a recent date, as to the good standing of each such entity;
(k) copies of all governmental consents, approvals and filings
which have been obtained by the Company pursuant hereto; and
(l) such other documents relating to the transactions
contemplated hereby and under the Associated Agreements as the
Investor or its counsel may reasonably request.
7.5 Opinion of Counsel. The Investor shall have received an
opinion of Cravath, Swaine & ▇▇▇▇▇, counsel for the Company,
substantially in the form of Exhibit 7.5-1 and the opinion of
internal counsel of the Company in the form of Exhibit 7.5-2.
7.6 Financing. The Investor shall have obtained (or the Company
shall have obtained for the benefit of the Investor) either (i)
financing of $350 million to complete the transactions contemplated
hereby and provide for working capital for CNCO on substantially the
terms set forth in the letters attached as Exhibit 4.5-1 or terms
which are more favorable to the Investor or (ii) financing of $205
million to complete the transactions contemplated hereby and provide
for working capital for CNCO on substantially the terms set forth in
the letters attached as Exhibit 4.5-2 or terms which are more
favorable to the Investor (it being understood that (x) in the case
of either (i) or (ii) the Investor may choose to finance a higher
portion of the amounts needed to complete the transactions
contemplated hereby and provide for working capital for CNCO than
the amounts specified in (i) or (ii), as the case may be, but that
the inability to finance such higher amounts shall not cause a
failure of the condition to closing set forth in this Section 7.6
and (y) in any event, the condition specified in this Section 7.6
will be satisfied if the financing referred to in clause (ii) is
available to the Investor). In connection with the financing
referred to in Exhibit 4.5-2, the Investor agrees (x) to cause the
notice required by paragraph 1 of the Supplemental Commitment Letter
contained in Exhibit 4.5-2 (the "Supplemental Commitment Letter")
for that financing to be given on a timely basis and (y) to cause
the conditions specified in paragraph 3.b(2) of the Supplemental
Commitment Letter to be satisfied, and further agrees that the
nonsatisfaction of the conditions specified in the foregoing clauses
(x) and (y) shall not be deemed to cause a failure of the condition
specified in this Section 7.6 to be satisfied. The Investor further
agrees that, for purposes of determining whether the condition in
this Section 7.6 is satisfied, the determination of whether
paragraph 3b(1) of the Supplemental Commitment Letter is satisfied
shall take into account only (x) with respect to paragraph 3b(1)(i)
of the Supplemental Commitment Letter, the amounts required to be
paid by the Investor, CNCO or any Affiliate (at the Closing or at a
later time in the ordinary course) pursuant to the transactions
contemplated by this Agreement and the Associated Agreements, (y)
with respect to paragraph 3b(1)(ii) of the Supplemental Commitment
Letter, indebtedness that is an Assumed Liability, and (z) with
respect to paragraph 3b(1)(iii) of the Supplemental Commitment
Letter, not more than $20 million of the fees, costs, expenses and
other amounts payable by the Investor, CNCO or any Affiliate in
respect of the transactions contemplated by this Agreement and the
Associated Agreements or the financing thereof or any services
related thereto.
7.7 [Reserved].
7.8 Like Kind Exchange. Simultaneously with the Closing, the
Investor and a subsidiary of the Company will close a like kind
exchange (the "Like Kind Exchange") pursuant to a transfer agreement
between American Publishing Company of Illinois ("APC-Illinois") and
the Investor (the "Transfer Agreement"), the Exchange Agreement
between APC-Illinois and Chicago Deferred Exchange Corporation (the
"Exchangor") and the Qualified Exchange Trust Agreement among the
Chicago Trust Company, the Exchangor and APC-Illinois substantially
in the form set forth in Exhibit 7.8 (collectively, the "Like Kind
Exchange Agreement"). The Investor must approve any and all changes
to the form of any of the components of the Like Kind Exchange
Agreement that is an exhibit to this Agreement.
7.9 Lenders' Consent. The Lenders' Consent shall have been
received.
ARTICLE VIII
Conditions to the Company's Obligations
The obligation of the Company to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction
(or waiver, where permissible) at or prior to the Closing of all of
the following conditions:
8.1 Representations, Warranties and Covenants of Investor. The
Investor shall have complied in all material respects with each of
its agreements and covenants contained herein to be complied with on
or prior to the Closing Date. All the representations and warranties
of the Investor set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and
warranties of the Investor set forth in this Agreement that are not
so qualified shall be true and correct in all material respects, in
each case as of the date of this Agreement, and as of the Closing
Date as though made on and as of the Closing Date, except that the
accuracy of representations and warranties that by their terms speak
as of the date of this Agreement or some other date shall be
determined as of such date. The Company shall have received a
certificate executed by or on behalf of the Investor, dated as of
the Closing Date, certifying as to the fulfillment of the conditions
set forth in this Section 8.1.
8.2 Consents. The applicable waiting period under the HSR Act
shall have expired or been terminated and all other consents,
approvals, authorizations, exemptions by, or filing with, notice to
or permit from governmental agencies or other persons that shall be
required in order to enable the Company to consummate the
transactions contemplated hereby shall have been obtained (except
for such consents, approvals, authorizations, exemptions, filings,
notices or permits, the absence of which would not prohibit
consummation of such transactions or render such consummation
illegal).
8.3 No Prohibitions. No statute, rule or regulation or order or
decree of any court or governmental body shall be in effect which
prohibits the Company from consummating the transactions
contemplated by this Agreement.
8.4 Closing Documents. In addition to the other documents
expressly referenced in this Article VIII, the Investor or CNCO
shall have delivered the following payments or closing documents in
form and substance satisfactory to the Company:
(a) simultaneously with the Closing, the Investor or CNCO shall
have made the cash payments required under Sections 1.3(a) and (d)
and shall have assumed the Assumed Liabilities;
(b) a copy of the resolution or resolutions duly adopted by the
board of directors of the Investor authorizing the execution,
delivery and performance of this Agreement and the Associated
Agreements and the transactions contemplated hereby and thereby;
(c) CNCO shall have executed and delivered the Transitional
Services Agreement and the Non-Competition Agreement;
(d) a certificate of the Secretary, or an Assistant Secretary
of the Investor as to the incumbency and signatures of the officers
executing the Agreement;
(e) certificates issued by the Secretary of State of Delaware
as to the good standing of the Investor; and
(f) such other documents relating to the transactions
contemplated hereby or under the Associated Agreements as the
Company or its counsel may reasonably request.
8.5 Opinion of Counsel. The Company shall have received an
opinion of ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇, counsel for the Investor,
substantially in the form of Exhibit 8.5.
8.6 Lenders' Consent. The Lenders' Consent shall have been
received.
ARTICLE IX
Termination, Amendment and Waiver
9.1 Termination. This Agreement may be terminated by either
party, by a written notice to the other parties, prior to Closing:
(a) by the mutual written consent of the Company and the
Investor;
(b) by either the Investor or the Company if the Closing shall
not have occurred on or before February 28, 1998; provided that this
right to terminate shall not be available to any party whose breach
of this Agreement has been the cause of, or resulted in, the Closing
not occurring;
(c) by the Investor if the Lenders' Consent has not been
received by three weeks from the date of execution hereof.
9.2 Effect on Obligations. (a) Termination of this Agreement
pursuant to this Article IX shall terminate all rights and
obligations of the parties hereunder and none of the parties shall
have any liability to the other party hereunder, except that Article
XII shall remain in effect, and provided that neither anything
herein nor the termination of this Agreement shall relieve any party
from liability for any breach of this Agreement prior to such
termination.
(b) In the event of a termination by the Company or the
Investor pursuant to Section 9.1, written notice thereof shall
forthwith be given to the other party. In addition, the Investor
shall return all documents and other material received from the
Company or the Associated Subsidiaries relating to the transactions
contemplated hereby, whether obtained before or after the execution
hereof, to the Company and shall destroy all analyses, notes,
reports, and other documents prepared in connection with the
transactions contemplated by this Agreement and shall deliver to the
Company a certificate signed by an officer of the Investor
certifying as to such destruction.
ARTICLE X
Employee Matters
10.1 Transferred Employees. Prior to the date on which
employees of the Business are transferred to CNCO (the "Transfer
Date", which date shall be the Closing Date or such later date as
the parties shall mutually agree in accordance with Section 10.3),
CNCO shall offer employment to each employee of the Business set
forth on Exhibit 5.14 (other than any such employees whose
employment has been terminated prior to the Transfer Date) and each
other person so employed on the Transfer Date whose employment
primarily relates to the Business (the "Employees") on such terms
and conditions (including salary and benefit level) that are not
materially less favorable (exclusive of any equity incentive
compensation provided by the Company), when taken in the
aggregate to the terms and conditions of the employee's employment
with the Company or the Associated Subsidiaries, as the case may be,
immediately prior to the Transfer Date. CNCO will give Employees
credit for accrued but unpaid vacation pay, sick pay and holiday pay
to the extent such pay is reflected in the Net Liabilities of the
Business as of the Effective Date.
10.2 Employee Benefits. CNCO shall recognize each Employee's
prior service with the Company, the Associated Subsidiaries and all
members of the Company's controlled group within the meaning of
Section 414(b), (c), (m), and (o) of the Internal Revenue Code of
1986, as amended (the "Code") for all purposes (other than benefit
accrual under a defined benefit plan) under each employee benefit
plan, policy or arrangement of CNCO. The Company and the Associated
Subsidiaries shall retain, and be solely responsible for, all
benefits and compensation payable to or with respect to Employees,
or other employees of the Associated Subsidiaries, with respect to
services performed, and claims incurred, in each case, prior to the
Closing Date under any welfare plan, pension plan, deferred
compensation plan, stock based plans, employee benefit pension plans
(as defined in ERISA) or any other plans, agreements, policies or
arrangements related to compensation, severance or other employee
benefits and all liabilities with respect to such plans, agreements,
policies or arrangements prior to the Closing Date. For purposes of
this Section, disability claims are incurred on the date on which
the disability was incurred or, in the case of a disability which is
not incurred on a single, identifiable date, the date on which the
disability was diagnosed; medical and dental services are incurred
when an individual is provided with medical or dental care; death
benefit claims are incurred at the time of death of the insured
notwithstanding any other provision of any welfare benefit plan to
the contrary. The Company and the Associated Subsidiaries shall be
responsible for all qualifying events under Part 6 of Title I of
ERISA and Section 4980B of the Code ("COBRA") and COBRA claims
incurred under the welfare plans of the Company and the Subsidiaries
on or before the Transfer Date.
10.3 Severance Claims. The Company and the Associated
Subsidiaries shall be responsible for any claim of severance by a
person who refuses CNCO's offer of employment made in accordance
with Section 10.1 hereof pursuant hereto. CNCO shall be responsible
for any claim of severance made by any person who accepts such offer
of employment, who becomes an employee of CNCO and whose employment
is thereafter terminated. CNCO shall reimburse the Company and the
Associated Subsidiaries for any payments made in respect of
severance to any person who does not accept CNCO's offer of
employment pursuant hereto but who is employed by CNCO or a
subsidiary or Affiliate within one year after the Transfer Date.
10.4 WARN Act Liability. The Company and the Associated
Subsidiaries shall be responsible for any claims or liabilities
relating to the Worker Adjustment and Retraining Notification Act,
29 U.S.C. Sections 2101-2109 (the "WARN Act") which arise in
connection with the Business or the Employees prior to the Closing
Date (whether or not filed prior to the Closing Date) or arise as a
result of the transactions contemplated by this Agreement (exclusive
of any action taken by or on behalf of CNCO after the Closing).
10.5 Undue Hardship to the Investor. Notwithstanding anything
to the contrary herein, if taking the actions required pursuant to
Section 10.1 prior to the Closing Date, in the judgment of the
Investor and the Company as mutually and reasonably agreed, would be
impracticable or would cause undue hardship to CNCO, the Investor or
any of their Affiliates or subsidiaries then (i) compliance with
Section 10.1 shall not be required on the Closing Date and (ii) the
Employees shall remain employees of the Company and its
subsidiaries, as applicable, until such date as it becomes
practicable for CNCO to comply with Section 10.1; provided that the
Transfer Date may be no later than 90 days following the Closing
Date. Without duplication of any other provision of this Agreement,
if the Transfer Date is not the Closing Date, CNCO shall indemnify,
defend and hold harmless the Company and its subsidiaries, and their
officers, directors, employees, advisors,
agents and representatives (except to the extent any such person is
an Employee, in which case this indemnification shall not apply to
such person) from and against any and all demands, claims,
complaints, actions or causes of action, suits, proceedings,
investigations, arbitrations, assessments, losses, settlements,
Taxes, damages, liabilities, costs and expenses, including interest,
penalties and reasonable attorneys' and accounting fees and
disbursements (including, but not limited to, all administrative
costs and expenses incurred as a result of the Employees remaining
employees of the Company or its subsidiaries after the Closing Date)
(including those relating to the enforcement of this indemnity)
related to Employees which arise between the Closing Date and the
Transfer Date as a result of the fact that the Transfer Date was not
the Closing Date; provided that CNCO shall not be required to make
any indemnification in connection with liabilities and obligations
relating to severance which arise prior to the Transfer Date or with
respect to any Employee to the extent he or she is not an employee
of the Business between the Closing Date and the Transfer Date. No
deductible shall apply to CNCO's indemnification obligation under
this Section 10.5. Without limiting the foregoing, if the Transfer
Date is not the Closing Date, the Company shall deliver to CNCO as
promptly as practicable after the Transfer Date a statement
itemizing all costs, expenses and obligations of any kind whatsoever
with respect to Employees, including all compensation and benefits
costs and Taxes related thereto but specifically excluding severance
costs and liabilities, incurred by the Company and the Associated
Subsidiaries between the Closing Date and the Transfer Date. CNCO
shall pay the amount set forth in such statement, unless it is
disputed, to the Company in immediately available funds within three
(3) business days after receiving such statement. Disputes as to
such amount shall be resolved by the Accounting Firm.
ARTICLE XI
Survival and Indemnification
11.1 Survival. All of the representations and warranties
contained in this Agreement or in any certificates delivered
pursuant to this Agreement will survive the Closing (except for
Section 3.14, which shall not survive the Closing) and continue in
full force and effect (i) in the case of the representations and
warranties contained in Sections 3.1, 3.2, 3.8(a), 3.21, 4.1 and
4.2, indefinitely, (ii) in the case of representations and
warranties contained in Section 3.20 until the third anniversary of
the Closing Date, and (iii) in the case of any other representation
or warranty contained in this Agreement or in any certificate
delivered pursuant to this Agreement, until eighteen months
following the Closing Date; provided, however, that if a written
claim for a breach of any representation or warranty is made before
the expiration thereof, such representation or warranty shall be
deemed to survive indefinitely for purposes of that claim. The
covenants and agreements contained in this Agreement or in any
certificates delivered pursuant to this Agreement shall survive the
Closing and continue in full force and effect indefinitely except
for the covenants contained in Sections 5.2, 5.7 and 5.8, which
shall survive the Closing and remain in full force and effect until
eighteen months following the Closing Date.
11.2 Indemnification by the Company and the Associated
Subsidiaries. Subject to the limitations of this Section 11.2 and
the conditions and provisions of Section 11.4, the Company and the
Associated Subsidiaries agree to indemnify, defend and hold harmless
the Investor, CNCO and their respective officers, directors,
employees, agents, advisors, representatives and Affiliates
(collectively, "CNCO Indemnitees") from and against any and all
demands, complaints, actions or causes of action, suits,
proceedings, investigations, arbitrations, assessments, losses,
settlements, Taxes, claims, judgments, damages, liabilities, costs
and expenses, including interest, penalties, reasonable attorneys'
and accounting fees and disbursements and costs of investigation
(including those relating to the enforcement of this indemnity)
("CNCO Damages"), asserted against, imposed upon or incurred by any
CNCO Indemnitee, directly or indirectly, by reason of, relating to
or resulting from (i) any Retained Assets or Retained Liabilities,
(ii) any nonfulfillment of any
agreement on the part of the Company or the Associated Subsidiaries
contained herein, or (iii) any breach of representation or warranty
on the part of the Company or the Associated Subsidiaries contained
herein. Breaches are to be determined for these purposes without
regard to any materiality, Material or Material Adverse Effect
standard or qualifier set forth in any representation or warranty,
covenant or certificate; provided that such materiality, Material
and Material Adverse Effect qualifiers shall apply to (i) any
obligation to list matters on the Disclosure Schedule where the
representation or warranty specifies that only Material matters are
to be so listed and (ii) Sections 3.7, 5.7 and 5.8. Notwithstanding
the foregoing, the Company will not have any obligation to indemnify
the Investor from and against any CNCO Damages with respect to
breaches of representations and warranties or of the covenant set
forth in Section 5.2 except to the extent that CNCO Damages arising
from any breaches of representations and warranties of this
Agreement and the Like Kind Exchange Agreement or of the covenants
set forth in Section 5.2 of this Agreement or the corresponding
section of the Like Kind Exchange Agreement, taken together, are
equal to or are greater than $1,000,000 (the "Deductible"),
whereupon the Company shall pay the Investor for all such CNCO
Damages in excess of the Deductible. The Deductible shall not apply
except as specifically provided in the preceding sentence, and the
circumstances under which the Deductible shall not apply include (w)
breaches of Section 3.8(a), (x) breaches of covenants or obligations
hereunder other than Section 5.2, (y) Retained Assets or Retained
Liabilities or (z) adjustments pursuant to Section 1.3. Recovery
pursuant to indemnification for Retained Liabilities shall be for
any and all CNCO Damages even if (i) the facts giving rise to such
indemnification may also give rise for a claim of breach of the
representation and warranties of this Agreement or the Like Kind
Exchange Agreement or (ii) facts relating to such Retained Liability
appear on the Disclosure Schedule. In addition to any
indemnification of any CNCO Indemnitee pursuant to this Section
11.2, such CNCO Indemnitee shall be entitled to its rights and
remedies pursuant to this Agreement, and otherwise at law or in
equity.
11.3 Indemnification by CNCO and the Investor. Subject to the
limitations of this Section 11.3 and the conditions and provisions
of Section 11.4, CNCO and the Investor agree to indemnify, defend
and hold harmless the Company and the Associated Subsidiaries, and
their officers, directors, employees, agents, advisors,
representatives and Affiliates (collectively, "Company Indemnitees")
from and against any and all demands, complaints, actions or causes
of action, suits, proceedings, investigations, arbitrations,
assessments, losses, settlements, Taxes, claims, judgments, damages,
liabilities, costs and expenses, including, but not limited to,
interest, penalties and reasonable attorneys' and accounting fees
and disbursements and costs of investigation (including those
relating to the enforcement of this indemnity) ("Company Damages"),
asserted against, imposed upon or incurred by any Company
Indemnitee, directly or indirectly, by reason of, relating to or
resulting from (i) all liabilities and obligations of CNCO relating
to or arising out of the conduct of the Business or the use of the
Assets following the Closing or the Assumed Liabilities following
the Closing or (ii) nonfulfillment of any agreement on the part of
the Investor or CNCO contained herein. In addition to any
indemnification of any Company Indemnitee pursuant to this Section
11.3, such Company Indemnitee shall be entitled to its rights and
remedies pursuant to this Agreement, and otherwise at law or in
equity.
11.4 Matters Involving Third Parties. The party or parties
making a claim for indemnification under this Article XI shall be
for the purposes of this Agreement referred to as the "Indemnified
Party" and the party or parties against whom such claims are
asserted under this Article XI shall be, for the purposes of this
Agreement, referred to as the "Indemnifying Party". All claims by
any Indemnified Party under this Article XI shall be asserted and
resolved as follows:
(i) In the event that (x) any claim, demand or action is
asserted or instituted by any person other than the parties to
this Agreement or their Affiliates which could give rise to
CNCO Damages or Company Damages, as applicable, for which an
Indemnifying Party
could be liable to an Indemnified Party under this Agreement
(such claim or demand or action, a "Third Party Claim" or (y)
any Indemnified Party under this Agreement shall have a claim
to be indemnified by any Indemnifying Party under this
Agreement which does not involve a Third Party Claim (such
claim, a "Direct Claim"), the Indemnified Party shall with
reasonable promptness send to the Indemnifying Party a written
notice specifying the nature of such claim, demand or action
and the amount or estimated amount thereof, provided that a
delay in notifying the Indemnifying Party shall not relieve the
Indemnifying Party of its obligations under this Agreement
except to the extent that (and only to the extent that) such
failure shall have caused the CNCO Damages or Company Damages,
as applicable, for which the Indemnifying Party is obligated to
be greater than such CNCO Damages or Company Damages, as
applicable, would have been had the Indemnified Party given the
Indemnifying Party prompt notice (which amount or estimated
amount shall not be conclusive of the final amount, if any, of
such claim, demand or action) (a "Claim Notice").
(ii) Except as provided below, in the event of a Third
Party Claim, the Indemnifying Party shall be entitled to
control the defense of such Third Party Claim and to appoint
counsel of the Indemnifying Party's choice at the expense of
the Indemnifying Party to represent the Indemnified Party and
any others the Indemnifying Party may reasonably designate in
connection with such claim, demand or action (in which case the
Indemnifying Party shall not thereafter be responsible for the
fees and expenses of any separate counsel retained by any
Indemnified Party except as set forth below); provided that
such counsel is reasonably acceptable to the Indemnified Party.
Notwithstanding an Indemnifying Party's election to appoint
counsel to represent an Indemnified Party in connection with a
Third Party Claim, an Indemnified Party shall have the right to
participate in the defense of such claim and to employ counsel
of its choice for such purpose; provided that the fees and
expenses of such separate counsel shall be borne by the
Indemnified Party (except as provided below and except for any
fees and expenses of such separate counsel that are incurred
prior to the date the Indemnifying Party effectively assumes
control of such defense which, notwithstanding the foregoing,
shall be borne by the Indemnifying Party). If requested by the
Indemnifying Party, the Indemnified Party agrees to cooperate
with the Indemnifying Party and its counsel in contesting any
claim, demand or action which the Indemnifying Party defends,
or, if appropriate and related to the claim, demand or action
in question, in making any counterclaim against the person
asserting the Third Party Claim, or any cross-complaint against
any person. The Indemnifying Party shall not be entitled to
assume control of the defense of a Third Party Claim and shall
pay the reasonable fees and expenses of counsel retained by the
Indemnified Party (provided that such counsel is reasonably
acceptable to the Indemnifying Party) if (i) the claim for
indemnification relates to or arises in connection with any
criminal proceeding, action, indictment, allegation or
investigation, (ii) an adverse determination with respect to
the action, lawsuit, investigation, proceeding or other claim
giving rise to such claim for indemnification would reasonably
be likely to be materially detrimental to the Indemnified
Party's reputation or business, (iii) the claim seeks an
injunction or equitable relief against the Indemnified Party or
(iv) the claim involves liabilities under environmental laws
that require remedial action at facilities that were
transferred pursuant to this Agreement, in which case the
Indemnified Party shall have control and management authority
over the resolution of such claims, including hiring
environmental consultants and conducting environmental
investigations and cleanups; provided that the Indemnified
Party shall keep the Indemnifying Party apprised of any major
developments relating to any such environmental claim and
provided further that, in the case of any of (i) through (iv)
above, (x) the Indemnified Party shall not agree to any
stipulation to or the entry of a court order that adversely
affects the Indemnifying Party without the Indemnifying Party's
consent and (y) the Indemnifying Party shall have the right to
retain counsel of its choice at its own expense and participate
in the defense of the Third Party
Claim, in which case the third sentence of this Section
11.4(ii) shall be fully applicable. No Third Party Claim
(regardless of whether the Indemnifying Party has assumed
control of such Third Party Claim or such Third Party Claim
falls into any of the categories set forth in (i) through (iv)
above) may be settled or compromised (i) by the Indemnified
Party without the prior written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld or
delayed or (ii) by the Indemnifying Party without the prior
written consent of the Indemnified Party, which consent shall
not be unreasonably withheld or delayed. In the event any
Indemnified Party settles or compromises or consents to the
entry of any judgment with respect to any Third Party Claim
without the prior written consent of the Indemnifying Party,
each Indemnified Party shall be deemed to have waived all
rights against the Indemnifying Party for indemnification under
this Article XI.
11.5 Environmental Remedies. The Investor shall not be entitled
to indemnification for a breach of Section 3.20 if the condition,
event or circumstance that gave rise to such breach was discovered
as a result of a Phase II or other intrusive environmental sampling,
testing or investigation (collectively, "Environmental Tests") at
any of the facilities of the Business that are transferred to CNCO
except for Environmental Tests undertaken (i) to respond to,
investigate, or otherwise remediate environmental conditions that
could reasonably be expected to create an imminent and substantial
endangerment to the health, safety and welfare of the employees of
CNCO, the public or the environment; (ii) in response to an inquiry,
request, claim or demand by a governmental entity or (iii) in
connection with a possible sale of all or part of CNCO or its
assets. For purposes of this Section 11.5, the Business shall
include the Relinquished Property.
ARTICLE XII
Miscellaneous
12.1 Expenses. The Company, on the one hand, and the Investor,
on the other hand, shall pay all costs and expenses incurred by such
party or on its behalf in connection with this Agreement and the
transactions contemplated hereby, including without limiting the
generality of the foregoing, fees and expenses of its financial
consultants, accountants and counsel. All excise, sales, use,
transfer (including real property transfer or gains), stamp,
documentary, filing recordation or other Taxes, if any, incident to
the transfer of the Assets to CNCO or which may be imposed or
assessed as a result of the transactions contemplated hereby and all
of the expenses relating to obtaining any governmental permits,
licenses and authorizations, approvals, exemptions, certificates or
similar instruments or documents which are necessary for the conduct
of the Business immediately after the Closing Date shall be paid by
the Company; provided that the Investor shall pay all of the
expenses relating to the qualification of CNCO to do business in
such foreign jurisdictions as are necessary or desirable for the
conduct of the Business immediately after the Closing Date.
12.2 Exclusive Agreement; No Third-Party Beneficiaries. This
Agreement (including the Disclosure Schedule and all Exhibits
hereto) constitute the sole understanding of the parties with
respect to the subject matter hereof. Any disclosure in the
Disclosure Schedule shall expressly not be deemed to constitute an
admission by the Company or to otherwise imply that any such matter
is Material for the purposes of this Agreement. Notwithstanding
anything contained in this Agreement to the contrary, nothing in
this Agreement, express or implied, is intended to confer on any
person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights,
remedies, obligations or liabilities under or by reason of this
Agreement.
12.3 Governing Law; Consent to Jurisdiction. This Agreement
shall be construed in accordance with and governed by the laws of
the State of Delaware applicable to agreements made and to be
performed wholly within such jurisdiction. All disputes, litigation,
proceedings or other legal actions by any party to this Agreement in
connection with or relating to this Agreement or any matters
described or contemplated in this Agreement shall be instituted in
the courts of the State of Delaware or of the United States sitting
in the State of Delaware. Each party to this Agreement irrevocably
submits to the exclusive jurisdiction of the courts of the State of
Delaware and of the United States sitting in the State of Delaware
in connection with any such dispute, litigation, action or
proceeding arising out of or relating to this Agreement. Each party
to this Agreement will maintain at all times a duly appointed agent
in the State of Delaware for the service of any process or summons
in connection with any such dispute, litigation, action or
proceeding brought in any such court and, if its fails to maintain
such an agent during any period, any such process or summons may be
served on it by mailing a copy of such process or summons to it at
its address set forth, and in the manner provided, in Section 12.8,
with such service deemed effective on the fifteenth day after the
date of such mailing.
Each party to this Agreement irrevocably waives the right to a
trial by jury in connection with any matter arising out of this
Agreement and, to the fullest extent permitted by applicable law,
any defense or objection it may now or hereafter have to the laying
of venue of any proceeding under this Agreement brought in the
courts of the State of Delaware or of the United States sitting in
the State of Delaware and any claim that any proceeding under this
Agreement brought in any such court has been brought in an
inconvenient forum.
12.4 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties hereto; provided,
however, that this Agreement may not be assigned by the Company and
may not be assigned by the Investor without the prior written
consent of the Company and any such assignment in violation of this
provision shall be null and void, except that the Investor may, at
its election, assign this Agreement to an Affiliate so long as (a)
the representations and warranties of the Investor made herein are
equally true of such assignee and (b) such assignment does not have
any adverse consequences to the Company or any of its Affiliates
(including, without limitation, any adverse Tax consequences or any
adverse effect on the ability of the Company to timely consummate
the transactions contemplated hereby), but no such assignment of
this Agreement or any of the rights or obligations hereunder shall
relieve the Investor of any of its obligations under this Agreement.
Such assignee shall execute a counterpart of this Agreement agreeing
to be bound by the provisions hereof as "Investor," and agreeing to
be jointly and severally liable with the Investor and any other
assignee for all of the obligations of the assignor hereunder.
12.5 Publicity. No public release or announcement concerning
the transactions contemplated hereby shall be issued by any party
without the prior consent of the other party (which consent shall
not be unreasonably withheld), except as such release or
announcement may be required by law or the rules or regulations of
any United States or foreign securities exchange, in which case the
party required to make the release or announcement shall give the
other party notice in advance of such issuance.
12.6 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any
rule of law or public policy, all other conditions and provisions of
this Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the transactions
contemplated hereby is not affected in any adverse manner to any
party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in
an acceptable manner so that the transactions contemplated hereby
are fulfilled to the greatest extent possible.
12.7 Refunds. The Company shall be entitled to any refunds or
credits of Taxes for any Taxable period (or portion thereof) ending
on or prior to the Closing Date. CNCO shall be entitled to any
refunds or credits of Taxes for any Taxable period (or portion
thereof) beginning after the Closing Date.
12.8 Notices. Any notice, request, instruction or other
document to be given hereunder by any party hereto to any other
party shall be in writing and shall be given (and will be deemed to
have been duly given upon receipt) by delivery in person, by
facsimile transmission, or by overnight courier or by registered or
certified mail, postage prepaid:
(a) If to the Company, to ▇▇▇▇▇▇▇▇▇ International Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Vice President and General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Cravath, Swaine & ▇▇▇▇▇
Worldwide Plaza
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
and with a copy to: ▇▇▇▇▇▇▇▇▇ Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: Vice President and General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Investor, to: Liberty Group Publishing, Inc.
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners, L.P.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners, L.P.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
and with a copy to: ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address for a party as shall be specified by
like notice.
12.9 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute but one and the same
agreement. Copies of executed counterparts transmitted by telecopy,
telefax or other electronic transmission service shall be considered
original executed counterparts for purposes of this Section,
provided receipt of copies of such counterparts is confirmed.
12.10 Interpretation. For the purposes hereof: (i) words in the
singular shall be held to include the plural and vice versa and
words of one gender shall be held to include the other gender as the
context requires; (ii) the terms "hereof," "herein," and "herewith"
and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole (including all of
the Schedules and Exhibits hereto) and not to any particular
provision of this Agreement, and Section, paragraph, Exhibit and
Schedule references are to the Sections, paragraphs, Exhibits and
Schedules to this Agreement unless otherwise specified; (iii) the
word "including" and words of similar import when used in this
Agreement shall mean "including, without limitation," unless the
context otherwise requires or unless otherwise specified; (iv) the
word "or" shall not be exclusive; and (v) this Agreement shall be
construed without regard to any presumption or rule requiring
construction or interpretation against the party drafting or causing
any instrument to be drafted.
12.11 Amendment. This Agreement may not be modified or amended
except by an instrument or instruments in writing signed by all
parties hereto. Any party hereto may, only by an instrument in
writing, waive compliance by the other party hereto with any term or
provision hereof on the part of such other party hereto to be
performed or complied with. The waiver by any party hereto of a
breach of any term or provision hereof shall not be construed as a
waiver of any subsequent breach.
12.12 Extension; Waiver. At any time the parties may extend the
time for the performance of any of the obligations or other acts of
the other party, waive any inaccuracies in the representations and
warranties contained in this Agreement and waive compliance with any
of the agreements or conditions contained in this Agreement. Any
agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument signed on behalf
of such party. The waiver by any party hereto of a breach of any
provision hereunder shall not operate to be construed as a waiver of
any prior or subsequent breach of the same or any other provision
hereunder.
12.13 Captions. The Section and other headings contained in
this Agreement are inserted for convenience of reference only and
will not affect the meaning or interpretation of this Agreement. All
references to Sections contained herein mean Sections of this
Agreement unless otherwise stated. All capitalized terms defined
herein are equally applicable to both the singular and plural forms
of such terms
12.14 Further Assurances. Following the Closing, CNCO, the
Company and each Associated Subsidiary shall each from time to time
at the other's reasonable request and without further consideration
execute and deliver to the other such additional instruments of
transfer and conveyance and take such action as may be reasonably
requested in order better to assure, convey
and confirm to CNCO all of the Associated Subsidiaries' right,
title, interest in and all benefits of and to the Assets to be
assigned, conveyed and transferred hereunder.
ARTICLE XIII
Limited Guarantee of Green Equity Investors II, L.P.
13.1 Limited Guarantee. Green Equity Investors II, L.P. ("GEI
II"), which shall be a party to this Agreement solely for purposes
of this Section 13.1 and Section 12.3, guarantees, subject to the
limitations provided below, the obligations of the Investor under
this Agreement and the Associated Agreements to the extent that such
obligations are to be performed on the Closing Date; provided that
GEI II's obligations hereunder shall be limited to the payment of
money not to exceed $150 million and shall terminate at the Closing
and provided further that GEI II's obligations hereunder shall be
further reduced to the extent GEI II makes payments under Section 21
of the Transfer Agreement (it being understood that GEI II shall in
no event be responsible for more than $150 million in the aggregate
under this Article XIII and Section 21 of the Transfer Agreement).
GEI II agrees to be bound by the provisions of Section 12.3 of this
Agreement with respect solely to its promises in this Section 13.1.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
INVESTOR:
LIBERTY GROUP PUBLISHING, INC.,
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
CNCO:
LIBERTY GROUP OPERATING, INC.,
By: /s/ ▇▇▇▇▇▇▇ ▇. Annick
-------------------------
Name: ▇▇▇▇▇▇▇ ▇. Annick
Title: Secretary
COMPANY:
▇▇▇▇▇▇▇▇▇ INTERNATIONAL INC.,
By: /s/ ▇. ▇. ▇▇▇▇▇▇▇▇
-----------------------
Name: ▇. ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
APAC-90, INC.,
By: /s/ ▇. ▇. ▇▇▇▇▇▇▇▇
-----------------------
Name: ▇. ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
AMERICAN PUBLISHING (1991) INC.,
By: /s/ ▇. ▇. ▇▇▇▇▇▇▇▇
-----------------------
Name: ▇. ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
APAC-95, INC.,
By: /s/ ▇. ▇. ▇▇▇▇▇▇▇▇
------------------------
Name: ▇. ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
In witness whereof, the undersigned have executed this
Agreement as of the date hereof solely for the purposes evidencing
its obligations pursuant to Section 12.3 and Article XIII hereof.
GUARANTOR:
GREEN EQUITY INVESTORS II, L.P.
By: Grand Avenue Capital Partners L.P.
its sole general partner
By: Grand Avenue Capital Corporation
its sole general partner
By: /s/ ▇▇▇▇▇▇▇ ▇. Annick
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. Annick
Title: President
EXHIBIT A
ALL OF ▇▇▇▇▇▇▇▇▇'▇ PUBLICATIONS AND PRINTING PRESSES
IN THE FOLLOWING LOCATIONS (OTHER THAN THOSE OWNED
BY AMERICAN PUBLISHING COMPANY OF ILLINOIS
AND THE ASSETS SET FORTH IN EXHIBIT 1.1(B))
CALIFORNIA MISSOURI ILLINOIS
Yreka Camdentown ▇▇▇▇▇▇
Mt. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ St. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Waynesville Herrin
ARIZONA ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Globe Neosho Murphysboro
Boonville West Frankfort
NEW YORK Brookfield Fairbury
Hornell Chillicothe ▇▇▇▇▇▇▇▇▇▇
Bath Kirksville ▇▇▇▇▇▇ City
Dansville Macon Pontiac
Penn ▇▇▇ ▇▇▇▇▇▇▇▇▇ Gallatia
Tonawanda Mexico Ridgway
Canisteo Monroe City Shawneetown
Herkimer Osage Beach
Little Falls Carthage MICHIGAN
Catskill Malden Cheybogan
Saugerties Ionia
Wellsville MINNESOTA Sault Ste. ▇▇▇▇▇
Canajoharie Crookston
ARKANSAS
PENNSYLVANIA KANSAS Heber Springs
Honesdale Leavenworth ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Stuttgart
▇▇▇▇ ▇▇▇▇▇▇▇ Newport
Punxsutawney Derby
Ridgway El Dorado
St. Mary's ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇ IOWA
Titusville ▇▇▇▇▇▇▇ City
▇▇▇▇▇▇
Waynesboro
EXHIBIT 1.1(b)
RETAINED ASSETS
1. 4 ▇▇▇▇ Community Press units stored at Little Falls, New York.
2. Upper former for ▇▇▇▇ folder located at Tonawanda, New York.
3. The right to refunds of all Taxes described in Section
1.2(b)(i).
4. The names "▇▇▇▇▇▇▇▇▇" and "American Publishing Company" and all
derivatives thereof.
EXHIBIT 3.6
FINANCIAL STATEMENTS
164 PUBLICATIONS OF AMERICAN PUBLISHING COMPANY
(a group of publishing businesses owned by
American Publishing Company or its subsidiaries)
Combined Financial Statements
(With Independent Auditors' Report Thereon)
PEAT MARWICK LLP
Peat Marwick Plaza
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Independent Auditors' Report
The Board of Directors
▇▇▇▇▇▇▇▇▇ International Inc.:
We have audited the accompanying combined statements of net assets of 164
Publications of American Publishing Company, a group of publishing
businesses owned by American Publishing Company or its subsidiaries (the
"Business"), a wholly-owned subsidiary of ▇▇▇▇▇▇▇▇▇ International Inc., as
of September 30, 1997 and December 31, 1996 and 1995, and the related
combined statements of operations and changes in net assets and cash flows
for the nine-month period ended September 30, 1997 and years ended December
31, 1996 and 1995. These combined financial statements are the
responsibility of the Business' management. Our responsibility is to
express an opinion on these combined financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined net assets of the Business
as of September 30, 1997 and December 31, 1996 and 1995, and the results of
their operations and their cash flows for the nine-month period ended
September 30, 1997 and years ended December 31, 1996 and 1995 in conformity
with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
November 6, 1997
164 PUBLICATIONS OF AMERICAN PUBLISHING COMPANY
Combined Statements of Net Assets
(Dollars in thousands)
September 30, December 31,
Assets 1997 1996 1995
Current assets:
Cash and cash equivalents $ 1,775 $ 1,768 $ 1,929
Accounts receivable, net of
allowance for doubtful
accounts of $994 in 1997,
$1,022 in 1996 and $968 in
1995 10,131 10,619 10,243
Inventories 2,100 1,611 3,461
Prepaid expenses and other
current assets 476 259 258
-------- -------- --------
Total current assets 14,482 14,257 15,891
Property, plant and equipment, net
of accumulated depreciation 20,904 21,552 21,992
Intangible assets, net of
accumulated amortization of
$63,227 in 1997, $60,108 in
1996, and $55,725 in 1995 75,645 77,165 82,287
Total assets $ 11,031 $112,974 $120,170
======== ======== ========
Liabilities and Net Assets
Current liabilities:
Current portion of long-term
liabilities 393 627 899
Accounts payable 1,523 1,204 1,781
Accrued expenses 2,488 2,016 1,788
Deferred revenue 4,362 4,329 4,139
Total current liabilities 8,766 8,176 8,607
Long-term liabilities, less
current portion 906 1,152 1,724
Deferred income taxes 1,219 666 2,894
Total liabilities 10,891 9,994 13,225
Net assets 100,140 102,980 106,945
Total liabilities and net assets $111,031 $112,974 $120,170
======== ======== ========
See accompanying notes to combined financial statements.
164 PUBLICATIONS OF AMERICAN PUBLISHING COMPANY
Combined Statements of Operations and Changes in Net Assets
(Dollars in thousands)
Nine months ended Years ended
September 30 December 31
1997 1996 1996 1995
(unaudited)
Revenues:
Advertising $ 50,780 $ 49,304 $ 66,816 $ 60,255
Circulation 16,694 16,542 22,004 19,058
Job printing 5,186 5,707 7,716 7,019
Other 599 740 1,006 1,035
----------------------------------- --------- --------- --------- ---------
73,259 72,293 97,542 87,367
----------------------------------- --------- --------- --------- ---------
Operating costs and expenses:
Operating costs 40,448 42,590 56,531 52,418
General and administrative 8,415 7,857 10,626 9,331
Management fees paid to APC 1,868 1,805 2,422 2,162
Amortization 3,119 3,286 4,383 4,172
Depreciation 2,401 2,598 3,471 3,118
Interest 7,955 8,240 10,968 11,195
----------------------------------- --------- --------- --------- ---------
Total operating costs and expenses 64,206 66,376 88,401 82,396
----------------------------------- --------- --------- --------- ---------
Earnings before income taxes 9,053 5,917 9,141 4,971
Income taxes 3,906 2,630 4,006 2,338
----------------------------------- --------- --------- --------- ---------
Net earnings 5,147 3,287 5,135 2,633
Net assets, beginning of period 102,980 106,945 106,945 96,355
Transfer (to) from APC, net (7,987) (5,021) (9,100) 7,957
----------------------------------- --------- --------- --------- ---------
Net assets, end of period $ 100,140 $ 105,211 $ 102,980 $ 106,945
=================================== ========= ========= ========= =========
See accompanying notes to combined financial statements.
164 PUBLICATIONS OF AMERICAN PUBLISHING COMPANY
Combined Statements of Cash Flows
(Dollars in thousands)
Nine months ended Years ended
September 30 December 31
----------------- ---------------
1997 1996 1996 1995
------ ------- ------- ------
(unaudited)
Cash flows from operating activities:
Net earnings $ 5,147 $ 3,287 $ 5,135 $ 2,633
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Amortization 3,119 3,286 4,383 4,172
Depreciation 2,401 2,598 3,471 3,118
Changes in assets and liabilities,
net of acquisitions:
Accounts receivable 488 22 (376) (1,391)
Inventories (489) 1,654 1,850 (1,969)
Prepaid expenses and other current
assets (217) (270) (1) 17
Accounts payable 319 (651) (577) 548
Accrued expenses 472 302 228 159
Deferred revenue 33 (24) 190 602
---------------------------------------- -------- -------- -------- --------
Cash provided by operating activities 11,273 10,204 14,303 7,889
---------------------------------------- -------- -------- -------- --------
Investing activities:
Purchase of property, plant and
equipment (1,332) (2,537) (3,081) (2,255)
Proceeds from sales of assets 35 414 342 29
Acquisitions, net of cash acquired (1,502) (1,781) (1,781) (12,680)
---------------------------------------- -------- -------- -------- --------
Cash used in investing activities (2,799) (3,904) (4,520) (14,906)
---------------------------------------- -------- -------- -------- --------
Financing activities:
Payments on long-term liabilities (480) (761) (844) (754)
Transfer (to) from APC, net (7,987) (5,021) (9,100) 7,957
---------------------------------------- -------- -------- -------- --------
Cash provided by (used in) financing
activities (8,467) (5,782) (9,944) 7,203
---------------------------------------- -------- -------- -------- --------
Net increase in cash and cash equivalents 7 518 (161) 186
Cash and cash equivalents, at beginning
of period 1,768 1,929 1,929 1,743
---------------------------------------- -------- -------- -------- --------
Cash and cash equivalents, at end of
period $ 1,775 $ 2,447 $ 1,768 $ 1,929
======================================== ======== ======== ======== ========
See accompanying notes to combined financial statements.
164 PUBLICATIONS OF AMERICAN PUBLISHING COMPANY
Notes to Combined Financial Statements
(Dollars in thousands)
(1) Description of Business and Summary of Significant Accounting Policies
(a) Description of Business
The 164 Publications of American Publishing Company (the "Business")
represent a portion of the small and mid-size daily and weekly
newspapers owned by American Publishing Company or its subsidiaries
("APC"), a wholly-owned subsidiary of ▇▇▇▇▇▇▇▇▇ International Inc.
("HII"). The Business is located in 11 states with the largest
concentration of newspapers being in the Midwest. Raw materials, mainly
newsprint and ink, are readily available, and the Business is not
dependent on a single or limited number of suppliers. Customers range
from individual subscribers to local and national advertisers. No
individual customer accounts for a significant percentage of revenues.
(b) Basis of Presentation
The accompanying combined financial statements represent all of the net
assets and associated revenues, expenses, and cash flows of the Business
assuming that the Business, currently part of APC, was organized for all
periods as a separate legal entity. Intercompany transactions between
entities comprising the Business have been eliminated. Certain net
assets of the Business are to be transferred to a separate legal entity
under an agreement in principle described in Note 10.
The September 30, 1996 combined statements of operations and changes in
net assets and cash flows are unaudited but include, in the opinion of
management of the Business, all adjustments, consisting only of normal
recurring items, necessary for a fair presentation of such financial
statements.
The Business maintains its own cash only for certain daily expenses;
principal operating cash disbursements are paid by APC on behalf of the
Business. Such cash disbursements, interest, income taxes, and
related-party transactions are paid by APC and are reflected as a change
in the net activity with APC.
APC has historically provided certain services to the Business,
including accounting, payroll administration, tax services, consulting
assistance on operational issues and financial reporting. The cost of
providing such services is recovered by APC by allocating to the
Business a management fee using a percentage of revenue method. In the
opinion of management of the Business, such management fee is
representative of the cost of performing such services.
As the Business' operations represent a portion of APC, the operations
of the Business have been financed through, and the assets of the
Business have been pledged as security for borrowings of, APC. The
Business' interest expense principally representsan allocation of APC's
interest expense (calculated as APC's weighted average interest rate of
10.44%, 10.45% and 10.46 for the nine months ended September 30, 1997
and years ended December 31, 1996 and 1995, respectively, applied to the
average balances of the net assets of the Business for each respective
period.) Subsequent to completion of the transactions described in Note
10, the Business is expected to have a capital structure different thatn
that in the accompanying combined statements of net assets and
accordingly, interest expense is not necessarily indicative of the
interest expense that the Business would have incurred as a separate
independent entity.
164 PUBLICATIONS OF AMERICAN PUBLISHING COMPANY
Notes to Combined Financial Statements
(Dollars in thousands)
Details with respect to the transfers (to) from APC, net, follow:
September 30, December 31
1997 1996 1995
Cash transferred to APC $(54,815) $(71,581) $(63,406)
Cash disbursements by APC on behalf of the
Business 32,848 44,983 55,520
Current income tax liabilities 4,157 4,108 2,486
Management fees 1,868 2,422 2,162
Interest 7,955 10,968 11,195
------------------------------------------- -------- -------- --------
$ (7,987) $ (9,100) $ 7,957
=========================================== ======== ======== ========
(c) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(d) Inventories
Inventories consist principally of newsprint which is valued at the
lower of cost or net realizable value. Cost is determined using the
first-in, first-out (FIFO) or moving-average method.
(e) Property, Plant and Equipment
Property, plant and equipment is recorded at cost. Routine maintenance
and repairs are expensed as incurred.
Depreciation is calculated under the straight-line method over the
estimated useful lives, principally 25 years for buildings and
improvements and 5 to 10 years for machinery and equipment. Leasehold
improvements are amortized using the straight-line method over the
shorter of the lease term or estimated useful life of the asset.
(f) Intangible Assets
Intangible assets consist principally of circulation-related assets,
noncompetition agreements with former owners of acquired newspapers, and
the excess of acquisition costs over estimated fair value of net assets
acquired (goodwill). The fair market vallue of intangible assets
purchased is determined primarily through the use of independent
appraisals. Amortization is calculated using the straight-line method
over the respective estimated useful lives ranging from 30 years for
circulation related assets, 3 to 15 years for noncompetition agreements,
and 40 years for goodwill.
164 PUBLICATIONS OF AMERICAN PUBLISHING COMPANY
The Business assesses the recoverability of its long-lived assets, such
as property, plant and equipment and intangible assets whenever events
or changes in business circumstances indicate the carrying amount of the
assets, or related group of assets, may not be fully recoverable.
Factors leading to impairment include a combination of historic losses,
anticipated future losses and inadequate cash flow. Any writedown is
reported with other income in the combined statement of operations and
changes in net assets. The assessment of recoverability is based on
management's estimate. If undiscounted operating cash flows do not
exceed the net book value of the long-lived assets, then a permanent
impairment has occurred. The Business would record the difference
between the net book value of the long-lived asset and the fair value of
such asset as a charge against income in the combined statement of
operations and changes in net assets if such a difference arose.
(g) Revenue Recognition
Circulation revenue, which is billed to the customers at the beginning
of the subscription period is recognized on a straight-line basis over
the term of the related subscription. Advertising revenue is recognized
upon publication of the advertisements. The revenue for job printing is
recognized upon delivery.
(h) Income Taxes
The Business represents a business unit of APC and as such does not file
separate income tax returns. The income tax provision included in the
accompanying combined statements of operations and changes in net assets
has been computed as if the Business were a separate company.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the difference between financial statement
carrying amounts of existing assets and liabilities and their respective
tax basis. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. Current income taxes are reflected as a decrease of transfers
to APC as APC is responsible for the payment of income tax liabilities.
State income taxes are computed utilizing a blended state rate of 5%,
which is net of Federal income tax benefit.
(i) Cash and cash equivalents
Cash and cash equivalents represent cash and highly liquid certificates
of deposit with a maximum term at origination of three months or less.
(2) Acquisitions
During the nine-month period ended September 30, 1997, and the years
ended December 31, 1996 and 1995, the Business acquired certain
newspaper businesses for $1,502, $1,781 and $12,680. Using the purchase
method of accounting, the purchase prices were allocated to the assets
and liabilities acquired based on their estimated fair values. The
excess of the purchase prices over the estimated fair value of the
tangible and identifiable intangible assets acquired (goodwill) was
$1,016, $1,369 and $4,396 for the nine-month period ended September 30,
1997, and the years ended December 31, 1996 and 1995, respectively.
Results of the acquired newspaper businesses have been included in
combined statements of operations and net assets since the date of
acquisition.
164 PUBLICATIONS OF AMERICAN PUBLISHING COMPANY
Notes to Combined Financial Statements
(Dollars in thousands)
(3) Property, Plant and Equipment
Property, plant and equipment consisted of the following:
September 30, December 31
1997 1996 1995
Land $ 2,117 $ 1,955 $ 1,954
Buildings and improvements 13,807 13,386 12,544
Machinery and equipment 19,669 18,826 18,454
Furniture and fixtures 10,269 9,456 8,076
------------------------------ ------- ------- -------
$45,862 $43,623 $41,028
Less accumulated depreciation 24,958 22,071 19,036
------------------------------ ------- ------- -------
$20,904 $21,552 $21,992
============================== ======= ======= =======
(4) Intangible Assets
Intangible assets consisted of the following:
September 30, December 31
1997 1996 1995
Non-compete agreements $ 28,646 $ 28,646 $ 28,526
Subscriber lists 50,741 50,741 50,741
Advertiser lists 21,214 21,214 21,214
Goodwill 38,271 36,672 37,531
------------------------------ -------- -------- --------
138,872 137,273 138,012
Less accumulated amortization 63,227 60,108 55,725
------------------------------ -------- -------- --------
$ 75,645 $ 77,165 $ 82,287
============================== ======== ======== ========
164 PUBLICATIONS OF AMERICAN PUBLISHING COMPANY
Notes to Combined Financial Statements
(Dollars in thousands)
(5) Accrued Expenses
Accrued expenses consisted of the following:
September 30, December 31
1997 1996 1995
Accrued payroll $ 933 $ 818 $ 727
Accrued vacation 310 330 339
Accrued bonus 580 520 392
Accrued realty tax 136 79 90
Accrued other 529 269 240
------------------------- ------ ------ ------
$2,488 $2,016 $1,788
========================= ====== ====== ======
(6) Long Term Liability
The long term liability represents amounts due under
non-interest-bearing non-compete agreements through 2004.
The aggregate amount of principal payments at September 30, 1997 are as
follows:
1998 $ 393
1999 267
200 217
2001 113
2002 73
Thereafter 236
-----------------------------------------
$1,299
=========================================
164 PUBLICATIONS OF AMERICAN PUBLISHING COMPANY
Notes to Combined Financial Statements
(Dollars in thousands)
(7) Income Taxes
Income tax expense for the periods shown below consists of:
Current Deferred Total
Nine months ended September 30, 1997:
U.S. Federal $ 3,630 (251) 3,379
State and local 527 -- 527
$ 4,517 (251) 3,906
Nine months ended September 30, 1996
(unaudited):
U.S. Federal $ 2,373 (79) 2,294
State and local 336 -- 336
$ 2,709 (79) 2,630
Year ended December 31, 1996:
U.S. Federal $ 3,599 (102) 3,497
State and local 509 -- 509
$ 4,108 (102) 4,006
Year ended December 31, 1995:
U.S. Federal $ 2,186 (148) 2,038
State and local 300 -- 300
$ 2,486 (148) 2,338
Income tax expense differed from the amounts computed by applying the
U.S. Federal income tax rate of 35% to earnings before income tax
expense as a result of the following:
Nine months
ended Years Ended
September 30 December 31
------------- -------------
1997 1996 1996 1995
(unaudited)
Computed "expected" tax expense $3,169 2,071 3,199 1,740
Increase in income taxes resulting from:
Amortization of goodwill 258 258 344 344
State and local income taxes 479 301 463 254
$3,906 2,630 4,006 2,338
164 PUBLICATIONS OF AMERICAN PUBLISHING COMPANY
Notes to Combined Financial Statements
(Dollars in Thousands)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at 1997, 1996 and
1995 are presented below:
September 30, December 31
1997 1996 1995
Deferred tax assets:
Accounts receivable, principally due
to allowance for doubtful accounts $ 397 409 387
Compensated absences, principally due
to accrual for financing reporting
purposes 124 132 135
Total gross deferred tax assets 521 600 522
Less valuation allowance -- -- --
Net deferred tax assets 521 600 522
Deferred tax liabilities:
Intangible assets, principally due to
differences in basis and
amortization 1,340 1,266 2,514
Property, plant and equipment,
principally due to differences in
depreciation 400 -- 902
Total gross deferred tax liabilities 1,740 1,266 3,416
Net deferred tax liability $1,219 666 2,894
(8) Employee Benefit Plans
The Business sponsors a noncontributory (defined contribution)
retirement savings plan for all employees satisfying minimum service
requirements as defined in the plan. The Business did not make any
contributions to the plan during 1997, 1996 or 1995.
(9) Financial Instruments
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instruments. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and, therefore, may
not represent actual values of the financial instruments that could be
realized in the future.
The carrying value of all financial instruments at September 30, 1997
and December 31, 1996 and 1995 approximated their estimated fair
values.
(10) Transfer of Assets (Unaudited)
APC and its ultimate parent, HII have entered into an agreement in
principle with LGP Holdings Inc. and Green Equity Investors II, L.P.,
a limited partnership (the "Investor"), to purchase the Business from
a limited liability company ("CNCO") to be formed by HII and into
which the Business will be transferred.
EXHIBIT 4.5-1
COMMITMENT AND HIGHLY CONFIDENT LETTERS
EXHIBIT 4.5-2
ALTERNATIVE COMMITMENT LETTER
EXHIBIT 5.12
TRANSITIONAL SERVICES AGREEMENT
===========================================================================
TRANSITIONAL SERVICES AGREEMENT
by and between
AMERICAN PUBLISHING MANAGEMENT SERVICES INC.
and
LIBERTY GROUP OPERATING, INC.
===========================================================================
This TRANSITIONAL SERVICES AGREEMENT (the "Transitional
Services Agreement") is entered into as of this [ ] day of [
], 1998 by and between AMERICAN PUBLISHING MANAGEMENT
SERVICES INC. a corporation organized and existing under the
laws of the state of Delaware ("APMS"), and LIBERTY GROUP
OPERATING, INC., a Delaware corporation ("CNCO"; the term
CNCO shall include all subsidiaries of CNCO unless the
context provides otherwise). CNCO and APMS are sometimes
hereinafter collectively referred to as the "Parties".
W I T N E S S E T H:
WHEREAS, ▇▇▇▇▇▇▇▇▇ INTERNATIONAL INC., a Delaware corporation
(the "Company"), APAC-90 INC., a Delaware corporation and an indirect
wholly owned subsidiary of the Company ("APAC-90"), AMERICAN PUBLISHING
(1991) INC., a Delaware corporation and an indirect wholly owned subsidiary
of the Company ("AP-91"), APAC-95 INC., a Delaware corporation and an
indirect wholly owned subsidiary of the Company ("APAC-95"), LIBERTY GROUP
PUBLISHING, INC., a Delaware Corporation (the "Investor"), GREEN EQUITY
INVESTORS II, L.P., a Delaware limited partnership (the "Guarantor") and
CNCO have entered into an Asset Purchase Agreement dated as of November 21,
1997 (the "Asset Purchase Agreement") relating to the sale to CNCO of
substantially all of the assets and the assumption of certain liabilities
of certain community newspapers and other publications (the "Business") as
further identified in Exhibit A to such Asset Purchase Agreement.
WHEREAS, AMERICAN PUBLISHING COMPANY OF ILLINOIS, a Delaware
corporation and an indirect wholly owned subsidiary of the Company ("APC
Illinois") (APC Illinois, APAC-90, AP-91 and APAC-95 collectively, the
"Subsidiaries"), CNCO, the Company, APAC-90, AP-91 and APAC- 95 have
entered into an Asset Purchase Agreement dated as of November 21, 1997 (the
"Illinois Asset Purchase Agreement") relating to the sale to CNCO of
substantially all of the assets and the assumption of certain liabilities
of certain community newspapers and other publications (the "Illinois
Business") (the Business and the Illinois Business together, the
"Transferred Business") as further identified in Schedule 1 to such
Illinois Asset Purchase Agreement.
2
WHEREAS, CNCO is interested in purchasing certain Services (as
defined in Section 1.04) from APMS, a subsidiary of the Company which was
responsible for providing such Services to the Subsidiaries prior to the
date hereof, during a transition period from the date hereof.
NOW, THEREFORE, the Parties, intending to become legally bound,
hereby agree as follows:
ARTICLE I
Definitions
For the purposes of this Transitional Services Agreement, the
following terms shall have the definitions hereinafter specified:
SECTION 1.01. "APMS" shall mean American Publishing Management
Services Inc. and any of its subsidiaries that perform the Services.
SECTION 1.02. "CNCO" shall mean Liberty Group Operating, Inc. and
its subsidiaries unless the context requires otherwise.
SECTION 1.03. "Parties" shall mean APMS and CNCO, collectively
(and each individually, a "Party").
SECTION 1.04. "Service" or "Services" shall mean those services
described on Schedule A hereto or otherwise provided by APMS pursuant to
Section 2.01.
SECTION 1.05. "Subsidiaries" shall mean APC Illinois, APAC-90,
AP-91 and APAC-95, collectively, as well as all subsidiaries of such
entities.
SECTION 1.06. "Transitional Services Agreement" shall mean this
contract between the Parties and all schedules hereto.
Except as otherwise defined in this Transitional Services
Agreement, all terms, the first letters of which are capitalized, shall
have the meanings assigned to them in the Asset Purchase Agreement or the
Illinois Asset Purchase Agreement, as the case may be.
3
ARTICLE II
Agreement to Sell and Buy
SECTION 2.01. (a) Provision of Services. APMS shall provide to
CNCO, the Services listed and described on Schedule A hereto. In addition,
APMS shall furnish to CNCO such other services ("Other Services") as CNCO
may reasonably request and to which APMS shall reasonably agree. In every
case, all of the Services shall be provided in accordance with the terms,
limitations and conditions set forth herein and on Schedule A. Other
Services shall be provided on such terms as the Parties may mutually agree,
subject to the terms and conditions of this Transitional Services
Agreement. Unless otherwise agreed by the Parties, the Services shall be
performed by APMS for CNCO in a manner that is substantially the same as
the manner in which such Services were generally performed by APMS for the
Subsidiaries prior to the date of this Transitional Services Agreement and
CNCO shall use such Services for substantially the same purposes and in
substantially the same manner as the Subsidiaries had used such Services
prior to the date hereof.
(b) Use of Services. APMS shall be required to provide Services
only to CNCO in connection with its conduct of the Transferred Business and
such other newspapers and similar publications as CNCO may acquire.
Notwithstanding the foregoing, CNCO shall not be required to provide any
Services or Other Services with respect to any business conducted by CNCO
other than its newspaper publishing business, which includes shoppers and
total market coverage publications. CNCO shall not resell any Services or
Other Services to any person whatsoever or permit the use of the Services
or Other Services by any person other than in connection with the conduct
of business in the ordinary course of CNCO and its subsidiaries.
(c) Relationship of Parties. APMS shall act under this
Transitional Services Agreement solely as an independent contractor and not
as an agent of CNCO. Employees or agents of APMS rendering services to CNCO
pursuant to this Transitional Services Agreement shall not be deemed
employees or agents of CNCO. APMS shall retain the exclusive right of
control with respect to such persons.
(d) Right to Shut Down. APMS shall have the right to shut down
temporarily for maintenance purposes the operation of the facilities
providing any Service or Other Service whenever in its judgment, reasonably
exercised, such
4
action is necessary. If the maintenance is non-scheduled, CNCO shall be
notified that maintenance is required. APMS shall give CNCO as much advance
notice of any such shutdown as is practicable. Where feasible, this notice
shall be given in writing. Where written notice is not feasible, oral
notice shall be given and promptly confirmed in writing. APMS shall be
relieved of its obligations to provide Services or Other Services during
the period that its facilities are so shut down but shall use reasonable
efforts to minimize each period of shutdown for such purpose and to
schedule such shutdown so as not to inconvenience or disrupt the conduct of
the Transferred Business by the CNCO.
SECTION 2.02. (a) National Classified Advertising Program. CNCO
shall participate in the program pursuant to which individual publications
owned by the Company's subsidiaries sell national classified advertising
(the "National Classified Advertising Program") on the same basis as the
publications which comprise the Transferred Business participated in such
National Classified Advertising Program prior to the Closing Date. CNCO's
participation in the National Classified Advertising Program and the
Services provided by APMS described in item D.3. of Schedule A with respect
thereto shall constitute Services for purposes of this Transitional
Services Agreement.
(b) AdQuest Advertising. APMS and CNCO shall jointly negotiate an
extension of the term of APMS's agreement with AdQuest relating to the
placement of classified advertising on the Internet if APMS and CNCO
mutually agree that such joint negotiation would be in the Parties
respective best interests.
SECTION 2.03. Mutual Cooperation. The Parties shall cooperate
with each other in connection with the performance of any Services or Other
Services hereunder and the transition at the end of the term of this
Transitional Services Agreement, including, without limitation, by making
available on a timely basis all information which is reasonably requested
with respect to the performance of Services and Other Services hereunder.
CNCO shall make available on a timely basis to APMS all information and
materials reasonably requested by APMS to enable it to provide the Services
and Other Services. CNCO shall give APMS reasonable access, during regular
business hours and at such other times as are reasonably required, to the
premises on which CNCO conduct business for the purposes of providing
Services and Other Services. During the term of this Agreement, for six
months following the expiration of this Transitional Services Agreement and
in connection with the
5
year end audit for the year that this Transitional Services Agreement
expires, the Parties shall make available to each other on a timely basis
all information with respect to the performance of Services and Other
Services hereunder which is reasonably requested.
SECTION 2.04. Books and Records. APMS shall keep books and
records of the Services and Other Services provided and reasonable
supporting documentation of all out-of-pocket costs incurred in connection
with providing such Services and Other Services, and shall make such books
and records available to CNCO, upon reasonable notice, during normal
business hours.
ARTICLE III
Fees; Payment; Independent Contractor
SECTION 3.01. Fees. APMS will provide the Services to CNCO at
Cost. "Cost" means a dollar amount equal to (x) APMS's annual cost to
operate its Marion, Illinois administrative office, exclusive of costs
(including employee costs) related to services which are not of the types
not provided hereunder, multiplied by (y) a ratio (the "Ratio") equal to
(i) the number of newspapers and other publications having daily
circulation owned by CNCO on the Closing Date, after giving effect to the
transactions contemplated by the Equity Purchase Agreement, divided by (ii)
the number of newspapers and other publications having daily circulation
owned by American Publishing Company (directly or indirectly) immediately
prior to the Closing; provided that Cost shall be adjusted for (i) changes
in the number of newspapers and other publications owned by CNCO, as the
parties shall mutually agree and (ii) changes (not in excess of 10% per
year) in the employee and other costs to APMS of providing the Services and
the Other Services. In addition, to the extent that APMS agrees to provide
any Other Services, the fee, for such Other Services shall be as mutually
agreed to by APMS and CNCO. Notwithstanding the foregoing, APMS shall
retain the right to charge payroll fees ("Payroll Fees") on behalf of CNCO
to each location based upon the number of employees at such location who
are paid via direct deposit in accordance with the schedule of fees then in
effect with respect to the Subsidiaries. Such Payroll Fees shall be paid
directly to CNCO or a subsidiary thereof. In addition, CNCO shall reimburse
APMS, within 30 days after the receipt of any invoice therefor and
presentation of any such supporting documentation that CNCO may reasonably
request,
6
for (i) any and all non-salary expenses related to training newspaper staff
in sourcing co-op advertising as described in item D.1. of Schedule A if
such training is requested by CNCO and (ii) any reasonable out-of-pocket
traveling expenses (including reimbursement for economy class travel and
accommodations) incurred at CNCO's request by employees of APMS in the
course of performing Services or Other Services hereunder during or any
time after the first calendar month which commences more than 90 days after
the date hereof. Notwithstanding anything to the contrary herein, the fee
for the classified advertising consulting Services provided by ▇▇▇▇▇▇ ▇▇▇▇
described in item D.2. of Schedule A shall be $300 per day plus reasonable
expenses.
SECTION 3.02. Payment. Itemized statements will be rendered each
month by APMS to CNCO for Services and Other Services delivered during the
preceding month, and each such statement shall set forth in reasonable
detail a description of such Services and Other Services and the amounts
charged therefor. The amounts due under each invoice shall be paid in full
within 30 days after the date thereof and such payment shall be accompanied
by a copy of the applicable invoice. Statements not paid within such 30-
day period shall be subject to late charges for each month or portion
thereof the statement is overdue, calculated as the lesser of the
following:
(i) the then current prime rate offered by The First National
Bank of Chicago, plus one percentage point, or
(ii) the maximum rate allowed by applicable law.
Notwithstanding the foregoing, if an invoice is disputed in good faith and
APMS receives prompt written notice of such dispute, late charges pursuant
to clauses (i) and (ii) above shall not begin to accrue until such dispute
is resolved.
SECTION 3.03. Disclaimer of Warranty. EXCEPT AS EXPRESSLY SET
FORTH IN THIS TRANSITIONAL SERVICES AGREEMENT, THE SERVICES AND OTHER
SERVICES AND GOODS TO BE PURCHASED UNDER THIS TRANSITIONAL SERVICES
AGREEMENT ARE FURNISHED AS IS, WHERE IS, WITH ALL FAULTS AND WITHOUT
WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. APMS DOES NOT MAKE
ANY WARRANTY THAT ANY SERVICE OR OTHER SERVICE COMPLIES WITH ANY LAW,
DOMESTIC OR FOREIGN.
7
SECTION 3.04. Taxes. All payments by CNCO to APMS under this
Transitional Services Agreement shall be grossed-up by CNCO to cover any
sales tax or similar tax ("Taxes") (but excluding any tax based upon the
net income of APMS) payable with respect to the provision by APMS of
Services, and APMS shall be solely responsible for paying any such Taxes to
the appropriate Governmental Authority.
ARTICLE IV
Term of Particular Services
SECTION 4.01. (a) Term of Services. The provision of Services
shall commence on the date hereof and, with respect to each Service and
Other Service, shall terminate on the third anniversary of the date hereof;
provided, however, that: (i) CNCO may cancel any Service or Other Service
upon 90 days' written notice and (ii) APMS may cease to provide any Service
or Other Service upon 60 days' written notice to CNCO if APMS ceases to
provide such Service or Other Service to the Company's subsidiaries,
divisions and business units; provided that APMS may not provide such
notice of its intent to cease providing any Service or Other Service
hereunder until one year from the date hereof. Notwithstanding the
foregoing, APMS may cease to provide the classified advertising consulting
Services of ▇▇▇▇▇▇ ▇▇▇▇ to CNCO at any time if ▇▇. ▇▇▇▇ ceases to be
employed by APMS.
(b) Return of Books and Records. Upon the termination of a
Service or Other Service with respect to which CNCO holds books, records or
files, including, but not limited to, current and archived copies of
computer files, owned by CNCO and used by APMS in connection with the
provision of a Service to CNCO, APMS shall return all of such books,
records or files as soon as reasonably practicable. APMS shall bear all
costs and expenses associated with the return of such documents. At its own
expense, APMS may make a copy of such books, records or files for its legal
files.
ARTICLE V
Benefits
SECTION 5.01. Savings Plan. Prior to the Transfer Date, CNCO
shall have established a defined
8
contribution plan within the meaning of Section 3(34) of the Employment
Retirement Income Security Act of 1974, as amended (the "CNCO 401k Plan"),
which is substantially similar in all material respects to the American
Publishing Retirement Savings Plan (the "AP 401k Plan"), for the benefit of
employees of CNCO, including the Employees, after the Transfer Date.
Effective as of the Transfer Date (i) APMS shall cause the Employees to
cease participation in the AP 401k Plan and (ii) the Employees who were
eligible to participate in the AP 401K Plan immediately prior to the
Transfer Date shall become participants in the CNCO 401k Plan. Employees
participating in the CNCO 401k Plan shall be vested in such CNCO 401k Plan
to the same extent that they were vested under the AP 401k Plan immediately
prior to the Transfer Date. Employees who receive an eligible rollover
distribution within the meaning of Section 402(f) of the Internal Revenue
Code of 1986, as amended (the "Code"), including a direct rollover
distribution (within the meaning of Section 401(a)(31) of the Code, and
regulations thereunder) from the AP 401k Plan shall be permitted to make a
rollover contribution to the CNCO 401k Plan. To the extent that an Employee
is eligible to make a rollover contribution of a direct rollover
distribution (within the meaning of Section 401(a)(31) of the Code and the
regulations thereunder) from the AP 401k Plan to the CNCO 401k Plan, such
rollover contribution may include promissory notes for loans made to such
Employee under the terms of the AP 401k Plan. Effective as of the date
immediately following the Transfer Date, APMS shall provide CNCO with
certain Services described in Schedule A hereto in connection with the
management and administration of the CNCO 401K Plan and such Other Services
with respect to the CNCO 401K Plan as APMS and CNCO may agree upon, subject
to the provisions of this Transitional Service Agreement. APMS and CNCO
shall cooperate in good faith to expedite the creation of the CNCO 401k
Plan.
SECTION 5.02. Medical and Dental Benefits. Effective as of the
date immediately following the Transfer Date, (i) APMS shall cause the
Employees to cease coverage under and participation in the American
Publishing Group Health Plan and the underlying insurance policy or
policies (the "AP Health Plan") and the other health plans and the
underlying insurance policies held in the names of the community newspapers
and other publications which comprise the Transferred Business which apply
to Employees not covered by the AP Health Plan (the "Other Health Plans")
and (ii) CNCO shall establish (a) health care plans (the "CNCO Health
Plans") substantially similar in all material respects to the AP Health
Plan and the Other Health Plans to
9
cover Employees (and their eligible dependents) who were covered by the AP
Health Plan and the Other Health Plans, as applicable, prior to the
Transfer Date on the substantially same basis and subject to substantially
the same conditions that would have applied to such Employees (and their
dependents) absent the transactions contemplated by the Equity Purchase
Agreement, the Transfer Service Agreement and the related documents and (b)
a corresponding Code Section 125 plan or plans. The CNCO Health Plans shall
waive any waiting period requirement and any pre-existing condition and
actively-at-work exclusions (but only to the extent that Employees were not
subject to such requirements and exclusions prior to the Transfer Date) and
shall provide that any expenses incurred on or before the Transfer Date
under the AP Health Plan or the Other Health Plans, as applicable, shall be
taken into account for purposes of satisfying applicable deductible,
coinsurance and maximum out-of-pocket provisions under the corresponding
CNCO Health Plans. Effective as of the date immediately following the
Transfer Date, APMS shall provide CNCO with certain Services described in
Schedule A hereto in connection with the management and administration of
the CNCO Health Plans and such Other Services with respect to the CNCO
Health Plans as APMS and CNCO may agree upon, subject to the provisions of
this Transitional Services Agreement. Notwithstanding the foregoing, APMS
shall not be required to provide any Services with respect to the CNCO
Health Plans if such CNCO Health Plans are not with the same health care
provider or providers and insurance carrier or carriers which covered the
Employees participating in the AP Health Plan prior to the Transfer Date
unless and until the Parties mutually agree on services to be provided, in
which case such services shall be treated as Other Services for purposes of
this Transitional Services Agreement.
SECTION 5.03. Disability Coverage. Effective as of the date
immediately following the Transfer Date (i) APMS shall cause the Employees
to cease coverage under and participation in (x) the Fortis Long-Term
Disability Plan and the underlying insurance policy or policies and (y) the
American Publishing Short Term Disability Plan and the underlying insurance
policy or policies and (ii) CNCO shall establish (x) a long-term disability
plan (the "CNCO Long- Term Disability Plan") which provides coverage to
Employees which is substantially similar in all material respects to the
coverage they received under the Fortis Long-Term Disability Plan and (y)
such other short-term disability plan or plans as it deems appropriate, if
any, (the "CNCO Short-Term Disability Plan"). CNCO shall use its
commercially reasonable efforts to ensure that no Employee
10
shall be subject to any waiting period or pre-existing condition exclusion
with respect to coverage under the CNCO Long-Term Disability Plan which
would not have applied absent his or her transfer of employment to CNCO.
Effective as of the date immediately following the Transfer Date, APMS
shall provide CNCO with certain Services described in Schedule A hereto in
connection with the management and the administration of the CNCO Long-Term
Disability Plan and such Other Services with respect to the CNCO Long-Term
Disability Plan as APMS and CNCO may agree upon, subject to the provisions
of this Transitional Services Agreement. APMS will not be required to
provide any services in connection with (i) the CNCO Long-Term Disability
plan if Fortis is not the insurance provider under such plan and (ii) the
CNCO Short-Term Disability Plan, if any, unless and until the Parties
mutually agree on services to be provided, in which case such services
shall be treated as Other Services for purposes of this Transitional
Services Agreement.
SECTION 5.04. Life Insurance. Effective as of the date
immediately following the Transfer Date (i) APMS shall cause the Employees
to cease coverage under and participation in the American Publishing Life
Insurance Plan and the underlying insurance policy or policies and (ii)
CNCO shall establish a life insurance plan (the "CNCO Life Insurance Plan")
which provides coverage to Employees (and their eligible dependents) which
is substantially similar in all material respects to the coverage they
received under the American Publishing Life Insurance Plan. CNCO shall use
its commercially reasonable efforts to ensure that no Employee shall be
subject to any waiting period with respect to such coverage under such CNCO
Life Insurance Plan which would not have applied absent his or her transfer
of employment to CNCO. Effective as of the date immediately following the
Transfer Date, APMS shall provide CNCO with certain services in connection
with the management and the administration of the CNCO Life Insurance Plan
described in Schedule A hereto and such Other Services with respect to the
CNCO Life Insurance Plan as APMS and CNCO may agree upon, subject to the
provisions of this Transitional Services Agreement.
SECTION 5.05 Other Insurance. Effective as of the date
immediately following the Transfer Date, (i) APMS shall terminate all
current policies of liability, fire, extended coverage, fidelity,
fiduciary, workers' compensation and other forms of insurance in force as
of the Transfer Date covering the Transferred Business (the "APMS Insurance
Policies") and (ii) CNCO shall obtain such
11
insurance policies (the "CNCO Insurance Policies") with respect to the
Transferred Business as it deems advisable; provided that CNCO shall cause
the Employees to be covered under a workers' compensation policy on the
same basis and subject to substantially the same conditions that would have
applied to such Employees absent the transactions contemplated by the
Equity Purchase Agreement, the Transfer Agreement and the other documents
referred to herein and therein. Effective as of the date immediately
following the Transfer Date, APMS shall provide CNCO with certain Services
described in Schedule A hereto in connection with the administration of the
CNCO Insurance Policies and such Other Services with respect to the CNCO
Insurance Policies as APMS and CNCO shall agree upon, subject to the
provisions of this Transitional Services Agreement. Notwithstanding the
foregoing, APMS shall not be required to provide any Services with respect
to the CNCO Insurance Policies if such policies are not with the same
insurance carriers which provided coverage to the Transferred Business
under the APMS Insurance Policies prior to the Transfer Date unless and
until the Parties mutually agree on services to be provided, in which case
such services shall be treated as Other Services for purposes of this
Transitional Services Agreement.
SECTION 5.06. Indemnification. Notwithstanding anything to the
contrary herein, all claims for indemnification and other claims relating
to any matter covered in Article V of this Transitional Services Agreement
shall be governed by the terms of the Transfer Agreement.
ARTICLE VI
Force Majeure
SECTION 6.01. Force Majeure. APMS shall not be liable for any
interruption of Service or Other Service, delay or failure to perform under
this Transitional Services Agreement when such interruption, delay or
failure results from causes beyond its reasonable control, including but
not limited to any strikes, lock-outs or other labor difficulties, acts or
any government, riot, insurrection or other hostilities, embargo, fuel or
energy shortage, fire, flood, acts of God, wrecks or transportation delays,
or inability to obtain necessary labor, materials or utilities. In any such
event, APMS's obligations hereunder shall be postponed for such time as its
performance is suspended or delayed on account thereof. APMS will promptly
notify CNCO, either orally or in writing, upon learning of the occurrence
12
of such event of force majeure. Upon the cessation of the force
majeure event, APMS will use commercially reasonable efforts to resume
its performance with the least possible delay.
ARTICLE VII
Liabilities
SECTION 7.01. Consequential and Other Damages. APMS shall not be
liable, whether in contract, in tort (including negligence and strict
liability), or otherwise, for any special, indirect, incidental or
consequential damages whatsoever, which in any way arise out of, relate to,
or are a consequence of, its performance or nonperformance hereunder, or
the provision of or failure to provide any Service or Other Service
hereunder, including but not limited to, loss of profits, business
interruptions and claims of customers.
SECTION 7.02. Limitation of Liability. In any event, the
liability of APMS with respect to this Transitional Services Agreement or
anything done in connection herewith, including but not limited to the
performance or breach hereof, or from the sale, delivery, provision or use
of any Service or Other Service or product provided under or covered by
this Transitional Services Agreement, whether in contract, tort (including
negligence or strict liability) or otherwise, shall not exceed the fees
previously paid to APMS by CNCO in respect of the Service or Other Service
from which such liability flows.
SECTION 7.03. Release and Indemnity. Except as specifically set
forth in this Transitional Services Agreement, CNCO hereby releases APMS,
its employees, agents, officers and directors ("APMS Indemnitees") and
agrees to indemnify and hold harmless APMS, its employees, agents, officers
and directors, from any and all claims, demands, complaints, liabilities,
losses, damages (other than special, indirect, incidental or consequential
damages of APMS Indemnitees) and all costs and expenses arising from or
relating to the use of any Service or Other Service or product provided
hereunder by CNCO or any person using such product or Service pursuant to
Section 3.06 of this Transitional Services Agreement to the extent not
arising from the gross negligence or willful misconduct of APMS. APMS
represents and warrants that it has all necessary right and authority to
provide the Services and Other Services to CNCO hereunder.
13
ARTICLE VIII
Termination
SECTION 8.01. Termination. This Transitional Services Agreement
shall terminate on the earliest to occur of (i) the third anniversary of
the Transfer Date, (ii) the date on which the provision of all Services and
Other Services have terminated or been canceled pursuant to Section 4 and
(iii) the date on which this Transitional Services Agreement is terminated
pursuant to Section 8.02.
SECTION 8.02. Breach of Transitional Services Agreement. If
either of the Parties shall cause or suffer to exist any breach of any of
its obligations under this Transitional Services Agreement, including but
not limited to any failure to make payments when due, and said Party does
not cure such default within 10 business days after receiving written
notice thereof form the non-breaching Party, the non-breaching Party may
terminate this Transitional Services Agreement, including the provision of
Services pursuant hereto, immediately by providing written notice of
termination.
SECTION 8.03. Sums Due. In the event of a termination of this
Transitional Services Agreement, APMS shall be entitled to all outstanding
amounts due from CNCO up to the date of termination.
SECTION 8.04. Effect of Termination. Sections 3.04, 4.01(b),
6.01, 7.01, 8.03 and 9.01 and this Section 8.04 shall survive any
termination of this Transitional Services Agreement.
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices. All notices or other communications made
in connection with this Transitional Services Agreement shall be in
writing. Any notice or other communication in connection herewith shall be
deemed duly given (i) two business days after it is sent by express,
14
registered or certified mail, return receipt requested, postage
prepaid or (ii) one business day after it is sent by overnight
courier, in every case, addressed as follows:
(i) If to CNCO:
Liberty Group Operating, Inc.
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners, L.P.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy (which shall not
constitute notice) to:
▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
(ii) If to APMS:
American Publishing Management Services Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
with copies (which shall not
constitute notice) to:
▇▇▇▇▇▇▇▇▇ Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇
Attn: Vice President and General Counsel
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
Cravath, Swaine & ▇▇▇▇▇
Worldwide Plaza
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
15
or, in each case, at such other address as may be specified in writing to
the other Parties hereto. Any Party may give notice or other communication
in connection herewith using any other means (including, but not limited
to, personal delivery, messenger service, telecopy, telex or ordinary
mail), but no such notice or other communication shall be deemed to have
been duly given unless and until it is actually received by the individual
for whom it is intended.
SECTION 9.02. Headings. The headings contained in this
Transitional Services Agreement are for purposes of convenience only and
shall not affect the meaning or interpretation of this Transitional
Services Agreement.
SECTION 9.03. Schedules. All schedules attached hereto or
referred to herein are hereby incorporated in and made a part of this
Transitional Services Agreement as if set forth in full herein. Capitalized
terms used in any schedule but not otherwise defined therein shall have the
respective meanings assigned to such terms in this Transitional Services
Agreement or in the Transfer Agreement, as applicable.
SECTION 9.04. Entire Agreement. This Transitional Services
Agreement and the other agreements, including the Transfer Agreement,
referred to herein and therein constitute the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
between the Parties with respect to the subject matter hereof.
SECTION 9.05. Counterparts. This Transitional Services Agreement
may be executed in several counterparts, each of which shall be deemed an
original and all of which shall together constitute one and the same
instrument.
SECTION 9.06. Governing Law. This Transitional Services Agreement
shall be governed in all respects, including, but not limited to, as to
validity, interpretation and effect, by the internal laws of the state of
Delaware, without giving effect to the conflict of laws rules thereof.
SECTION 9.07. Governing Law; Consent to Jurisdiction. This
Transitional Services Agreement shall be construed in accordance with and
governed by the laws of the State of Delaware applicable to agreements made
and to be performed wholly within such jurisdiction. All disputes,
litigation, proceedings or other legal actions by any Party to this
Transitional Services Agreement in connection with
16
or relating to this Transitional Services Agreement or any matters
described or contemplated in this Transitional Service Agreement shall be
instituted in the courts of the State of Delaware or of the United States
sitting in the State of Delaware. Each Party to this Transitional Service
Agreement irrevocably submits to the exclusive jurisdiction of the courts
of the State of Delaware and of the United States sitting in the State of
Delaware in connection with any such dispute, litigation, action or
proceeding arising out of or relating to this Transitional Services
Agreement. Each Party to this Agreement will maintain at all times a duly
appointed agent in the State of Delaware for the service of any process or
summons in connection with any such dispute, litigation, action or
proceeding brought in any such court and, if it fails to maintain such an
agent during any period, any such process or summons may be served on it by
mailing a copy of such process or summons to it at its address set forth,
and in the manner provided in Section 9.01, with such service deemed
effective on the fifteenth day after the date of such mailing. Each Party
to this Transitional Services Agreement irrevocably waives the right to a
trial by jury in connection with any matter arising out of this
Transitional Services Agreement and, to the fullest extent permitted by
applicable law, any defense or objection it may now or hereafter have to
the laying of venue of any proceeding under this Transitional Services
Agreement brought in the courts of the State of Delaware or of the United
States sitting in the State of Delaware and any claim that any proceeding
under this Transitional Services Agreement brought in any such court has
been brought in an inconvenient forum.
SECTION 9.08. Binding Effect. This Transitional Services
Agreement shall be binding upon and inure to the benefit of the Parties
hereto and their respective heirs, successors and permitted assigns.
SECTION 9.09. Assignment. This Transitional Services Agreement
shall not be assignable by any Party without the prior written consent of
other Parties; provided that (a) CNCO may assign this Transitional Services
Agreement to (i) the Investor and (ii) its permitted assigns under the
Equity Purchase Agreement and (b) APMS may delegate performance of all or
any part of its obligations under this Transitional Services Agreement to
(i) any subsidiary of APMS and (ii) third parties to the extent such third
parties are routinely used to provide such Services to other businesses of
the Company, provided, further, that, in each case, no such delegation
shall in any way affect APMS's obligations under this Transitional Services
Agreement. Any
17
purported assignment in violation of this Section 9.07 shall be void.
SECTION 9.10. No Third Party Beneficiaries. Except as provided in
Section 7.02 with respect to release and indemnity, nothing in this
Transitional Services Agreement shall confer any rights upon any person or
entity other than CNCO and APMS and each such Party's respective successors
and permitted assigns.
SECTION 9.11. Amendment; Waivers, etc. No amendment, modification
or discharge of this Transitional Services Agreement, and no waiver
hereunder, shall be valid or binding unless set forth in writing and duly
executed by the Party against whom enforcement of the amendment,
modification, discharge or waiver is sought. Any such waiver shall
constitute a waiver only with respect to the specific matter described in
such writing and shall in no way impair the rights of the Party granting
such waiver in any other respect or at any other time.
SECTION 9.12. Severability. If any provision of this Transitional
Services Agreement or the other agreements, including the Transfer
Agreement, referred to herein or therein, or the application thereof to any
person or circumstance is determined by a court of competent jurisdiction
to be invalid, void or unenforceable, the remaining provisions thereof, or
the application of such provision to persons or circumstances other than
those as to which it has been held invalid or unenforceable, shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated thereby, so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to
any Party. Upon any such determination, the Parties shall negotiate in good
faith in an effort to agree upon a suitable and equitable substitute
provision to effect the original intent of the Parties.
SECTION 9.13. (a) Confidentiality. Except as otherwise provided
in this Transitional Services Agreement, APMS will, and will cause its
affiliates (and their respective officers, employees, accountants, counsel,
financial advisors and other representatives to whom they disclose such
information) to hold in strict confidence and not use or disclose all
confidential and proprietary information relating to CNCO in the possession
of APMS or to which APMS is given access without the prior written consent
of CNCO and (b) CNCO will, and will cause its affiliates (and their
respective officers, employees, accountants,
18
counsel, financial advisors and other representatives to whom they disclose
such information) to hold in strict confidence and not use or disclose all
confidential and proprietary information relating to APMS in the possession
of CNCO or to which CNCO is given access that is not information that
relates solely to CNCO without the prior written consent of APMS.
Notwithstanding anything herein to the contrary, the provisions of this
Section 9.13 shall not apply to the disclosure by any Party hereto or their
respective affiliates of any information, documents or materials (i) which
are, or become, publicly available, other than by reason of a breach of
this Section 9.13 by the disclosing party or by any subsidiary or any
affiliate of the disclosing party, (ii) received from a third party not
bound by any confidentiality requirement with the other Parties hereto,
(iii) required by applicable law to be disclosed by such Party, or (iv)
necessary to establish such Party's rights under this Transitional Services
Agreement, the Transfer Agreement, the Equity Purchase Agreement or any
other agreement or document referred to herein or therein; provided that,
in the case of clauses (iii) and (iv), the person intending to make
disclosure of confidential information will promptly notify the Party to
whom it is obliged to keep such information confidential and, to the extent
practicable, provide such Party a reasonable opportunity to prevent such
public disclosure.
(b) Title to Data. CNCO acknowledges that it will acquire no
right, title or interest (including any license rights or rights of use) in
any firmware or software, and the licenses therefor which are owned by
APMS, by reason of APMS's provision of the Services provided hereunder.
APMS agrees that all records, data, files, input materials and other
information received or computed for the benefit of CNCO and which relate
to the conduct of the Transferred Business are the property of CNCO.
19
IN WITNESS WHEREOF, the Parties have executed this Transitional
Services Agreement as of the date first written above.
AMERICAN PUBLISHING MANAGEMENT
SERVICES INC.
by
-----------------------------
Name:
Title:
LIBERTY GROUP OPERATING, INC.
by
-----------------------------
Name:
Title:
SCHEDULE A
Services to be provided by APMS pursuant to the Transitional Services
Agreement.
A. Accounting and finance related information systems and administrative
processing support.
1. Maintenance of normal books and records, including, but not
limited to, general and subsidiary ledgers and appropriate
supporting documentation in both hard copy and electronic form.
2. Payroll system and related payroll accounting and payroll tax
processing support for Employees, including, but not limited to,
the following:
(a) Periodic payroll processing, check preparation, check
reconciliation and all related payroll record keeping.
(b) Reports and systems interfaces supporting employee benefits
processing and record keeping for both the employee benefit
programs that continue to be administered by APMS (as
described in paragraph C below) and deductions processing
and reporting for benefit programs that are no longer
directly administered by APMS but are transferred to other
insurance carriers or administrators.
(c) Access to and retrievals or reporting from the employee
information data base including the prior three years of
employee data and payroll statistics.
(d) Record retention archival and storage services.
3. Information systems, processing and administrative support for
fixed asset accounting and related tax functions, including, but
not limited to, capabilities such as the following:
(a) Storage on APMS's information system of fixed asset records
including asset information, original costs, tax and book
depreciation and
1
net book value (all as determined by taking into account
adjustments to basis, net book value and depreciation lives
and methods resulting from the purchase or other acquisition
of the Assets by CNCO).
(b) Access to APMS's information for the purpose of maintaining
and retrieving fixed asset records.
(c) Calculation of tax and book depreciation in a form
sufficient for generating accounting entries and any and all
currently available management reports (taking into account
the adjustments described in (a), above).
(d) Access to data and administrative processing and technical
support for preparation of personal property tax returns.
(e) Financial statement reporting, including audit support
services.
(f) Accounts payable, in the same manner as provided to the
Subsidiaries on the Closing Date.
(g) Capital expenditure tracking and review.
(h) Preparation for tax return preparation.
(i) Preparation for audit preparation.
4. Assistance with the budget process.
B. APMS will provide treasury services for CNCO in connection with all
aspects of investment of funds, cash management and general banking
relations.
C. Employee Benefits and Insurance Coverage, Administration and
Information Systems Processing Support.
1. APMS will provide administrative support, enrollment, premium
administration, claims processing, record keeping and
administration coordination with insurance carriers, third party
administrators, and utilization review vendors for the following
CNCO health and welfare and insurance plans:
2
(a) [insert names of the CNCO Health Plans, which plans are
required to be with the same insurance carriers and health
care providers as provided coverage under the AP Health
Plan]
(b) [insert name of CNCO Life Insurance Plan]
(c) [insert names of the CNCO Insurance Policies, which policies
shall be with the same insurance carriers which provided
coverage to the Transferred Business under the APMS
Insurance Policies]
(d) Unemployment Compensation
(e) Workers' Compensation
2. APMS will provide services limited to premium payroll deduction
processing for the following benefits:
(a) [insert name of CNCO Long-Term Disability Plan, which plan
must be provided by Fortis]
(b) AP 401(K) Plan
3. The following services will not be provided by APMS:
(a) Record keeping and reporting for other employee benefits,
including vacations and holidays
(b) [others]
D. Advertising Services.
1. APMS will provide co-op advertising services, including sourcing
of co-op advertising and training newspaper sales staff in
sourcing co-op advertising.
2. ▇▇▇▇▇▇ ▇▇▇▇ will provide classified advertising consulting
services.
3. APMS will distribute the proceeds of the central cash receipts
collected through the National Classified Advertising Program.
3
EXHIBIT 5.14
EMPLOYEES OF THE BUSINESS
EXHIBIT 7.4(a)
[FORM OF]
▇▇▇▇ OF SALE
▇▇▇▇ OF SALE, dated as of [ ], 1998, by and among ▇▇▇▇▇▇▇▇▇
INTERNATIONAL INC., a Delaware corporation (the "Company"), APAC-90
INC., a Delaware corporation, AMERICAN PUBLISHING (1991) INC., a
Delaware corporation, APAC-95 INC., a Delaware corporation, AMERICAN
GLOBE PUBLISHING COMPANY, a Delaware corporation, AMERICAN
PUBLISHING COMPANY OF ARKANSAS, a Delaware corporation, APAC-90
CALIFORNIA HOLDINGS, a Delaware corporation, AMERICAN PUBLISHING
COMPANY, a Delaware corporation, AMERICAN PUBLISHING COMPANY OF
ILLINOIS, a Delaware corporation, APAC ILLINOIS HOLDINGS, INC., a
Delaware corporation, MID-IOWA NEWSPAPER GROUP, INC., an Iowa
corporation, AMERICAN PUBLISHING COMPANY OF KANSAS, a Delaware
corporation, APAC-95 KANSAS HOLDINGS, INC., a Delaware corporation,
AMERICAN PUBLISHING COMPANY OF MICHIGAN, a Delaware corporation,
IONIA SENTINEL-STANDARD, INC., a Michigan corporation, APC MINNESOTA
HOLDINGS, INC., a Delaware corporation, APC MISSOURI HOLDINGS, INC.,
a Missouri corporation, KIRKSVILLE PUBLISHING COMPANY, a Delaware
corporation, AMERICAN PUBLISHING COMPANY OF NEW YORK, a Delaware
corporation, APAC-95 NEW YORK HOLDINGS, INC., a Delaware
corporation, AMERICAN PUBLISHING COMPANY OF PENNSYLVANIA, a Delaware
corporation, APC PENNSYLVANIA HOLDINGS, INC., a Delaware
corporation, APAC-95 MISSOURI HOLDINGS INC., a Delaware corporation,
and SOUTHERN SISKIYOU NEWSPAPERS INC., a California corporation
(collectively, the Associated Subsidiaries); and , Inc., a Delaware
corporation ("CNCO"; the term CNCO shall include subsidiaries of
CNCO unless the context otherwise provides).
WHEREAS pursuant to the Asset Purchase Agreement dated as
of the date hereof, among the Company, the Associated Subsidiaries,
LGP Holdings, Inc and CNCO (the "Asset Purchase Agreement"), the
Associated Subsidiaries have agreed to transfer to CNCO the Business
and the Assets and enter into certain ancillary agreements; and
WHEREAS pursuant to the Asset Purchase Agreement, CNCO has
agreed to assume the Assumed Liabilities.
NOW, THEREFORE, in consideration of the sale and
assignment of the Business and the assets contemplated to be
delivered to CNCO on the date of the Closing, the assumption of the
Assumed Liabilities contemplated to be assumed by CNCO on the date
of the Closing, the payment of the purchase price for the Assets as
provided for in the Asset Purchase Agreement and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
SECTION 1. Defined Terms. All capitalized terms used and
not otherwise defined herein shall have the meanings ascribed to
them in the Asset Purchase Agreement.
SECTION 2. Sale of Assets. Upon the terms and subject to
the conditions of the Asset Purchase Agreement, the Associated
Subsidiaries hereby sell, assign, transfer, convey and deliver to
CNCO, and CNCO hereby accepts from the Associated Subsidiaries,
effective as of the date of the Closing, all right, title and
interest of the Associated Subsidiaries and/or any of its
Affiliates or other entities in and to the Assets contemplated to be
delivered to CNCO on the Closing Date.
Whether or not all of the Assets contemplated to be
delivered to CNCO on the Closing Date shall have been legally
transferred to CNCO as of the Closing Date, CNCO shall have, and
shall be deemed to have acquired, complete and sole beneficial
ownership over all of the Assets contemplated to be delivered as of
the Closing Date.
SECTION 3. Survival of Certain Provisions. The parties
hereto acknowledge that the Asset Purchase Agreement includes
various provisions related hereto that expressly survive the Closing
Date, including, without limitation, provisions relating to
indemnification and cooperation after the Closing Date and
non-assignable contracts, and the parties agree that all such
provisions shall continue in full force and effect in accordance
with the Asset Purchase Agreement.
SECTION 4. Retained Assets. The parties hereby agree that
the Associated Subsidiaries do not hereby sell, assign, transfer,
convey or deliver to CNCO any Retained Assets.
SECTION 5. Counterparts. This ▇▇▇▇ of Sale may be executed
in one or more counterparts, each of which shall be deemed an
original and all of which shall, taken together, be considered one
and the same ▇▇▇▇ of Sale, it being understood that all parties need
not sign the same counterpart.
SECTION 6. Delaware Law. This ▇▇▇▇ of Sale shall be
governed by, and construed in accordance with, the laws of the State
of Delaware, without regard to its principles of conflicts of laws.
The parties agree that irreparable damage would occur in the event
that any of the provisions of this ▇▇▇▇ of Sale were not performed
in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this ▇▇▇▇ of Sale
and to enforce specifically the terms and provisions of this ▇▇▇▇ of
Sale in any court of the United States located in the State of
Delaware or in Delaware state court, this being in addition to any
other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself
to the personal jurisdiction of any Federal court located in the
State of Delaware or any Delaware state court in the event any
dispute arises out of this ▇▇▇▇ of Sale or any of the transactions
contemplated by this ▇▇▇▇ of Sale, (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court and (c) agrees that it
will not bring any action relating to this ▇▇▇▇ of Sale or any of
the transactions contemplated by this ▇▇▇▇ of Sale in any court
other than a Federal court sitting in the State of Delaware or in
Delaware state court.
SECTION 7. Assignment. Each party hereto consents to the
assignment of this ▇▇▇▇ of Sale, to any other person, in whole or in
part, whether by operation of law or otherwise, by the other party,
its successors or assigns.
SECTION 8. No Third Party Beneficiaries. This ▇▇▇▇ of Sale
is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
▇▇▇▇▇▇▇▇▇ INTERNATIONAL INC.,
By:______________________________
Name:
Title:
APAC-90 INC.,
By:______________________________
Name:
Title:
AMERICAN PUBLISHING (1991) INC.,
By:_______________________________
Name:
Title:
APAC-95 INC.,
By:_______________________________
Name:
Title:
AMERICAN GLOBE PUBLISHING COMPANY,
By:_______________________________
Name:
Title:
AMERICAN PUBLISHING COMPANY OF ARKANSAS,
By:_______________________________
Name:
Title:
APAC-90 CALIFORNIA HOLDINGS,
By:_______________________________
Name:
Title:
AMERICAN PUBLISHING COMPANY
By:_______________________________
Name:
Title:
AMERICAN PUBLISHING COMPANY OF ILLINOIS,
By:________________________________
Name:
Title:
APAC ILLINOIS HOLDINGS, INC.
By:________________________________
Name:
Title:
MID-IOWA NEWSPAPER GROUP, INC.,
By:________________________________
Name:
Title:
AMERICAN PUBLISHING COMPANY OF KANSAS,
By:________________________________
Name:
Title:
APAC-95 KANSAS HOLDINGS, INC.,
By:________________________________
Name:
Title:
AMERICAN PUBLISHING COMPANY OF MICHIGAN,
By:___________________________________
Name:
Title:
IONIA SENTINEL-STANDARD, INC.,
By:___________________________________
Name:
Title:
APC MINNESOTA HOLDINGS, INC.,
By:___________________________________
Name:
Title:
APC MISSOURI HOLDINGS, INC.,
By:____________________________________
Name:
Title:
KIRKSVILLE PUBLISHING COMPANY,
By:____________________________________
Name:
Title:
AMERICAN PUBLISHING COMPANY OF NEW
YORK,
By:____________________________________
Name:
Title:
APAC-95 NEW YORK HOLDINGS, INC.,
By:____________________________________
Name:
Title:
AMERICAN PUBLISHING COMPANY OF
PENNSYLVANIA,
By:____________________________________
Name:
Title:
APC PENNSYLVANIA HOLDINGS, INC.,
By:____________________________________
Name:
Title:
AMERICAN PUBLISHING HOLDINGS, INC.,
By:____________________________________
Name:
Title:
APAC-95 MISSOURI HOLDINGS INC.,
By:____________________________________
Name:
Title:
SOUTHERN SISKIYOU NEWSPAPERS INC.,
By:____________________________________
Name:
Title:
EXHIBIT 7.4(b)
[FORM OF]
TRADEMARK AND TRADE NAME ASSIGNMENT
THIS TRADEMARK AND TRADE NAME ASSIGNMENT (the
"Assignment") is made as of this ___ day of _______, 1998, by and
between _______________, Inc., a Delaware corporation ("CNCO"), with
its principal office at ____________________, and [INSERT NAME OF
COMPANY OR APPLICABLE SUBSIDIARY], a ________ corporation
("__________") and a wholly-owned subsidiary of
_________________________, with its principal office at
______________, ______, __________.
WHEREAS, CNCO and __________________ or its parents are
parties to that certain Asset Purchase Agreement, dated as of
___________, pursuant to which _________ has agreed to sell and CNCO
has agreed to purchase certain Assets (as defined in the Asset
Purchase Agreement) including, without limitation, the United States
trademark registrations identified and set forth on Schedule A
attached hereto and incorporated herewith (collectively, the
"Marks"), the unregistered trademarks and the trade names identified
and set forth on Schedule B, attached hereto and incorporated
herewith (collectively, the "Trade Names"), and the goodwill of the
business associated therewith; and
WHEREAS, CNCO wishes to acquire _______________'s entire
right, title and interest in and to the Marks, title and interest in
and to the Marks and the Trade Names, together with the goodwill of
the business in connection with which the Marks and the Trade Names
are used;
NOW THEREFORE, for good and valuable consideration, the
receipt of which is hereby acknowledged, _______ does hereby sell
and assign to CNCO all the right, title and interest ______________
has or may have in the Marks and in any and all other marks or names
owned or used by __________ or in which ____________ otherwise has
any ownership interest and which
include the listed terms of said Marks alone or in combination with
other words, figures, designs or indicia, including any rights,
title and interest as service marks, trademarks, tradenames and all
common law rights connected therewith, together with the goodwill of
the business with respect to which the Marks or any such other marks
or names have been used and/or registered and all claims and causes
of action relating to infringement of said Marks or said other marks
or name.
__________________ will assist in obtaining or providing any further
documents which may be required to confirm claim or title thereto.
Signed at _____________________ this ______ day of
___________________, 19___.
___________________________
By:________________________
Title:__________________
__________________, Inc.
By:________________________
Title:__________________
EXHIBIT 7.4(c)
NON-COMPETITION AGREEMENT BETWEEN
THE COMPANY AND CNCO
NON-COMPETITION AGREEMENT
NON-COMPETITION AGREEMENT dated as of [ , 1997],
between Liberty Group Operating, Inc., a Delaware
corporation ("CNCO"), and ▇▇▇▇▇▇▇▇▇ International
Inc., a Delaware corporation ("▇▇▇▇▇▇▇▇▇").
WHEREAS, Liberty Group Publishings, Inc., Green Equity
Investors II, L.P., CNCO, ▇▇▇▇▇▇▇▇▇, APAC-90 Inc., American
Publishing (1991) Inc. and APAC-95 Inc. have entered into an
Asset Purchase Agreement, dated November 21, 1997 (the "Asset
Purchase Agreement");
WHEREAS CNCO and ▇▇▇▇▇▇▇▇▇ are both engaged in the
newspaper business; and
WHEREAS CNCO desires that ▇▇▇▇▇▇▇▇▇'▇ newspaper business
not compete with CNCO's newspaper business;
Accordingly, CNCO and ▇▇▇▇▇▇▇▇▇ 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.
4. "Person" means any individual, corporation, limited
liability company, limited or general partnership, joint venture,
association, joint stock company, trust,
2
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"), ▇▇▇▇▇▇▇▇▇ 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).
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
3
ownership by ▇▇▇▇▇▇▇▇▇ or any Affiliate of ▇▇▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇▇▇ (A) which
▇▇▇▇▇▇▇▇▇ acquired after the Effective Date and (B) the value of
which at the time of the acquisition by ▇▇▇▇▇▇▇▇▇ represented less
than 5% of the total value of the transaction or transactions in
which ▇▇▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇▇▇, by wire transfer of
immediately available funds, an amount equal to $30,915,000 as
consideration for ▇▇▇▇▇▇▇▇▇ and its Affiliates not engaging in any
Competitive Activities.
3. Interest. Concurrently with the execution and delivery
of this Agreement, CNCO shall pay to ▇▇▇▇▇▇▇▇▇, 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 ▇▇▇▇ 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.
2. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be consid ered 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.
4
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,
[ ]
Attention: [ ]
with a copy to:
[ ]
Attention: ; and
(ii) if to ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ International Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
with a copy to:
Cravath, Swaine & ▇▇▇▇▇
Worldwide Plaza
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
5
5. Limitation Of Scope. It is the intention of ▇▇▇▇▇▇▇▇▇
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 ▇▇▇▇▇▇▇▇▇, 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 ▇▇▇▇▇▇▇▇▇'▇
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 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. ▇▇▇▇▇▇▇▇▇ agrees that during the
Term of this agreement, if ▇▇▇▇▇▇▇▇▇ 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
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ 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
6 fair market value to ▇▇▇▇▇▇▇▇▇ which is less than the fair market
value to ▇▇▇▇▇▇▇▇▇ of the Offer, or negotiate with a third party
with respect to such a sale. If ▇▇▇▇▇▇▇▇▇ does not accept the Offer
and does not complete the Proposed Sale to a third party within six
months of the Offer, ▇▇▇▇▇▇▇▇▇ must comply with the provisions of
this Section 7 before making any additional Proposed Sale.
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
----------------------------
Name:
Title:
▇▇▇▇▇▇▇▇▇ International Inc.,
by
----------------------------
Name:
Title:
EXHIBIT 7.5-1
FORM OF OPINION OF CRAVATH, SWAINE & ▇▇▇▇▇
EXHIBIT 7.5-1
FORM OF OPINION OF CRAVATH, SWAINE & ▇▇▇▇▇
1. Each of the Company and each Associated Subsidiary is a
corporation validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Each of the Company and each Associated
Subsidiary has all necessary corporate power to execute and deliver the
Agreement and the Associated Agreements to which it is a party, to perform
its obligations thereunder and to consummate the transactions contemplated
thereby.
2. The Agreement and the Associated Agreements each constitute the
valid and binding obligation of each of the Company and each Associated
Subsidiary, to the extent they are parties thereto, enforceable against the
Company and each Associated Subsidiary, to the extent they are parties
thereto, in accordance with its terms (subject to applicable bankruptcy,
insolvency, reorganization, fraudulent transfer, moratorium or other laws
affecting creditors' rights generally from time to time in effect). The
enforceability of the Company's and each Associated Subsidiary's
obligations is also subject to general principles of equity (regardless of
whether enforcement is considered in the proceeding in equity or at law).
3. Except as set forth in Section 3.4 of the Disclosure Schedule,
the execution, delivery and performance by the Company and each Associated
Subsidiary of the Agreement and the Associated Agreements and the
consummation by the Company and each Associated Subsidiary of the
transactions contemplated thereby does not conflict with or result in a
violation of the General Corporation Law of the State of Delaware or any
provision of the charter, by-laws or other governing documents of the
Company or any of the Associated Subsidiaries.
We are admitted to practice only in the State of New York and
express no opinion as to matters governed by any laws other than the laws
of the State of New York, the Federal laws of the United States of America
and the General Corporation Law of the State of Delaware. For purposes of
paragraph 2 herein as to enforceability and validity, we have assumed
without investigation that New York law is the same as Delaware law.
EXHIBIT 7.5-2
FORM OF OPINION OF GENERAL COUNSEL OF ▇▇▇▇▇▇▇▇▇
EXHIBIT 7.5-2
FORM OF OPINION OF INTERNAL COUNSEL ▇▇▇▇▇▇▇▇▇
1. Each of the Company and each Associated Subsidiary has all
requisite corporate or limited liability company power and authority to
own, operate and lease the properties and assets it currently owns,
operates or leases and to carry on its business as it is currently
conducted.
2. The execution and delivery by the Company and each Associated
Subsidiary of the Agreement and the Associated Agreements, the performance
by the Company and each Associated Subsidiary of its obligations thereunder
and the consummation by the Company and each Associated Subsidiary of the
transactions contemplated thereby have been duly and validly authorized by
all necessary corporate and limited liability company action on the part of
the Company and each Associated Subsidiary, as the case may be.
3. Except as set forth in Section 3.4 of the Disclosure Schedule,
the execution, delivery and performance by the Company and each Associated
Subsidiary of the Agreement and the Associated Agreements and the
consummation by the Company and each Associated Subsidiary of the
transactions contemplated thereby does not conflict with or result in the
breach of, or constitute a default under, or result in their termination,
cancellation or acceleration (whether after the giving of notice or the
lapse of time or both) of any right or obligation of the Company or any of
the Associated Subsidiaries under, any commitment or agreement (a) set
forth in the Disclosure Schedule, or (b) known to me without independent
investigation, in either case, reflecting obligations of the Company or any
of the Associated Subsidiaries, or loss of a material benefit under or
result in the creation of any Encumbrance upon any of the assets of the
Company or any of the Associated Subsidiaries, except for violations,
conflicts, breaches, defaults, terminations, cancellations, accelerations
or Encumbrances which, individually or in the aggregate, would not have,
and would not reasonably be expected to have, a Material Adverse Effect or
a material adverse effect on the reasonably expected benefits to the
Investor of the transactions contemplated under the Agreement.
4. To the best of my knowledge without independent investigation
and except as set forth in the Disclosure Schedule, there are no actions,
claims, suits, investigations or other litigation or proceedings in any
court or before any governmental authority pending or threatened against
the Company or any of the Associated Subsidiaries, or relating to the
transactions contemplated by the Agreement. To the best of my knowledge
without independent investigation and except as set forth in the Disclosure
Schedule, neither the Company, any of the Associated Subsidiaries or the
Business is subject to any outstanding orders, rulings, judgments or
decrees which if adversely determined to the Company, any of the Associated
Subsidiaries or the Business would have or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
I am admitted to practice only in the State of [ ] and express no
opinion as to matters governed by any laws other than the laws of the State
of [ ], the Federal laws of the United States of America and the General
Corporation Law of the State of Delaware.
EXHIBIT 7.8
LIKE KIND EXCHANGE AGREEMENT
EXHIBIT 8.5
FORM OF OPINION OF ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇
EXHIBIT 8.5
FORM OF OPINION OF ▇▇▇▇▇, BROWN& ▇▇▇▇▇
1. Each of the Investor and CNCO is a corporation validly existing
and in good standing under the laws of the jurisdiction of its
incorporation. The Guarantor is a limited partnership validly existing and
in good standing under the laws of the jurisdiction of its formation. Each
of thr Investor, CNCO and the Guarantor has all necessary corporate or
partnership power to execute and deliver the Agreement and the Associated
Agreements to which it is a party, to perform its obligations thereunder
and to consummate the transactions contemplated thereby.
2. The execution, delivery and performance of the Agreement and
the Associated Agreements by the Investor, CNCO and the Guarantor, to the
extent applicable, and the consummation by the Investor, CNCO and the
Guarantor, to the extent applicable, of the transactions contemplated by
the Agreement and the Associated Agreements have been duly authorized by
all requisite corporate and partnership action on the part of the Investor,
CNCO and the Guarantor, as the case may be. The Agreement and the
Associated Agreements each constitute the valid and binding obligation of
each of the Investor, CNCO and the Guarantor, to the extent applicable,
enforceable against the Investor, CNCO and the Guarantor, as applicable, in
accordance with its terms (subject to applicable bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or other laws affecting
creditors' rights generally from time to time in effect). The
enforceability of the Investor's, CNCO's and the Guarantor's obligations is
also subject to general principles of equity (regardless of whether
enforcement is considered in the proceeding in equity or at law).
3. The execution, delivery and performance by the Investor, CNCO
and the Guarantor, to the extent applicable, of the Agreement and the
Associated Agreements and the consummation by the Investor, CNCO and the
Guarantor, to the extent applicable, of the transactions contemplated by
the Agreement and the Associated Agreements does not conflict with or
result in a violation of the General Corporation Law of the State of
Delaware or any provision of the charter, bylaws, agreement of limited
partnership or other governing documents of the Investor, CNCO or the
Guarantor.
We are admitted to practice only in the State of Illinois and
express no opinion as to matters governed by any laws other than the laws
of the State of Illinois, the Federal laws of the United States of America
and the General Corporation Law of the State of Delaware. For purposes of
paragraph 2 herein as to enforceability and validity, we have assumed
without investigation that Illinois law is the same as Delaware law.