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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: October 15, 1999
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Liberty Group Publishing, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 333-46957 36-4197635
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
3000 Dundee Road, Northbrook, Illinois 60062
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (847) 272-2244
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Item 2. Acquisition or Disposition of Assets.
(a) On October 1, 1999 the Registrant (through wholly-owned subsidiaries)
consummated an exchange of assets with Lee Enterprises, Incorporated.
The Registrant transferred to Lee Enterprises substantially all the
assets used in, and the liabilities related to, the publication,
marketing and distribution of six local newspapers and related
publications in Beatrice, Nebraska, together with $8.4 million in
cash. The assets transferred to Lee Enterprises had a book value of
$13.6 million. In exchange, the Registrant accepted substantially all
the assets used in, and the liabilities related to, the publication,
marketing and distribution of ten local newspapers and related
publications in Kewanee and Geneseo, Illinois and Ottumwa, Iowa. The
Registrant believes that the assets received from Lee Enterprises in
the exchange had an approximate value equal to the sum of the book
value of the assets transferred to Lee Enterprises plus the cash paid
to Lee Enterprises.
In addition, on October 1, 1999 the Registrant also consummated the
acquisition from Lee Enterprises of substantially all the assets used
in, and the liabilities related to, the publication, marketing and
distribution of four local newspapers and related publications in
Aledo, Illinois. The purchase price was $900,000 in cash paid at the
closing.
At the closing of the asset exchange and asset purchase, Lee
Enterprises paid to the Registrant $52,980 in cash which is the
estimated amount by which the net working capital of the publication
groups transferred to Lee Enterprises exceeded the net working capital
of the publication groups transferred to and purchased by the
Registrant. A final accounting for the adjustment for the net working
capital of the publication groups is to be made no later than the 90th
day after the closing.
Prior to this transaction, no material relationship existed between the
Registrant and Lee Enterprises, or between any affiliates of such
entities.
The funds for the exchange and purchase by the Registrant were provided
under the credit facility the Registrant has in place which is led by
Citicorp USA, Inc., as administrative agent.
(b) The Registrant intends to continue to use the acquired assets for the
same purposes as previously used by Lee Enterprises.
The foregoing brief summary of the terms of the asset exchange and the asset
purchase is qualified in its entirety by reference to the provisions of,
respectively, the Asset Exchange Agreement dated as of August 26, 1999 between
the Registrant and Lee Enterprises, Incorporated, a Delaware corporation, and
the Asset Purchase Agreement dated as of August 26, 1999 between the Registrant
and Lee Enterprises, each of which is filed as an exhibit to this Report and is
hereby incorporated herein by reference.
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Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
Audited financial statements of the acquired businesses required
pursuant to Regulation S- X cannot be provided at this time, but shall
be filed as soon as practicable and in no event later than 60 days
after the date by which this Report on Form 8-K is required to be
filed.
(b) Pro Forma Financial Information
The pro forma financial information required pursuant to Article 11 of
Regulation S-X cannot be provided at this time, but shall be filed as
soon as practicable and in no event later than 60 days after the date
by which this Report on Form 8-K is required to be filed.
(c) Exhibits
2.1 Asset Exchange Agreement, dated as of August 26, 1999, between
the Registrant and Lee Enterprises, Incorporated
2.2 Asset Purchase Agreement, dated as of August 26, 1999, between
the Registrant and Lee Enterprises, Incorporated
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Liberty Group Publishing, Inc.
Date: October 15, 1999 By: /s/ KENNETH L. SEROTA
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Title: President and Chief Executive Officer
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Exhibit Index
Exhibit # Item
2.1 Asset Exchange Agreement, dated as of
August 26, 1999, between the Registrant
and Lee Enterprises, Incorporated
2.2 Asset Purchase Agreement, dated as of
August 26, 1999, between the Registrant
and Lee Enterprises, Incorporated
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Exhibit 2.1
ASSET EXCHANGE AGREEMENT
THIS ASSET EXCHANGE AGREEMENT (this "Agreement"), is dated as of August
26, 1999, between LIBERTY GROUP PUBLISHING, INC., a Delaware corporation
("Liberty"), and LEE ENTERPRISES, INCORPORATED, a Delaware corporation ("Lee").
BACKGROUND STATEMENT
Liberty (or an Affiliate thereof) is the owner and publisher of the
newspapers and related publications set forth on EXHIBIT A attached hereto and
made a part hereof (the "Liberty Newspapers"). Lee is the owner and publisher of
the newspapers and related publications set forth on EXHIBIT B attached hereto
and made a part hereof (the "Lee Newspapers"). Lee desires to exchange all of
the Lee Acquired Assets (as hereinafter defined) for the Liberty Acquired Assets
(as hereinafter defined), and Liberty desires to exchange all of the Liberty
Acquired Assets for the Lee Acquired Assets, upon the terms and subject to the
conditions set forth in this Agreement.
The definitions of certain capitalized terms used herein are set forth
in EXHIBIT C hereto.
Accordingly, in consideration of the premises and of the respective
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE 1
PURCHASE AND SALE OF ACQUIRED ASSETS
1.1 Exchange of Assets. Subject to the terms and conditions set forth
herein, at the Closing, Lee shall transfer, assign and convey to Liberty (or one
or more Affiliates of Liberty as designated by Liberty) and Liberty (or one or
more Affiliates of Liberty as designated by Liberty) shall acquire from Lee all
of Lee's right, title and interest in and to the Lee Acquired Assets, and in
exchange thereof, Liberty shall transfer, assign and convey to Lee and Lee shall
acquire from Liberty all of Liberty's right, title and interest in and to the
Liberty Acquired Assets, and Liberty shall pay to Lee $8,400,000 payable in cash
("Cash Consideration") to Lee or in Lee's discretion to an escrow agent
designated by Lee and reasonably acceptable to Liberty ("Escrow Agent") to be
administered pursuant to a mutually agreeable Escrow Agreement between Lee and
Escrow Agent. Any payments to be made pursuant to this Section 1.1 shall be made
by wire transfer of immediately available funds to an account designated by Lee
on the date any such payment shall be delivered hereunder.
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1.2 Acquired Assets.
(a) As used herein, "Liberty Acquired Assets" shall mean all of the
assets, properties, rights, interests and claims (other than Liberty Excluded
Assets), that are used or held for use solely in connection with the Liberty
Business and the operation of the Liberty Newspapers. The Liberty Acquired
Assets referred to above include, without limitation, the following assets
(other than Liberty Excluded Assets):
(i) the Liberty Equipment and Liberty Motor Vehicles;
(ii) all inventory of the Liberty Business, including, ink,
newsprint, packaging materials and supplies;
(iii) the Liberty Intangible Property, including, the
trademarks, trade names, licenses and mastheads of the Liberty
Newspapers and all derivations thereof;
(iv) all un-expired contracts, leases, licenses and other
agreements (whether written or oral) to which Liberty is a party, and
relating solely to the Liberty Business (the "Liberty Contracts")
excluding therefrom Liberty Contracts which have already been completed
or will expire or be terminated prior to the Closing;
(v) all licenses, permits or other governmental
authorizations (the "Liberty Permits") relating solely to the Liberty
Business or the Liberty Acquired Assets;
(vi) the Liberty Records;
(vii) all prepaid expenses relating solely to the Liberty
Business;
(viii) all warranties and guarantees received from vendors,
suppliers or manufacturers (the "Liberty Warranties") relating solely
to the Liberty Acquired Assets;
(ix) all customer, sampling and marketing lists relating
solely to the Liberty Business;
(x) the Liberty Real Property;
(xi) all accounts receivable generated solely from the
Liberty Business;
(xii) all promotional material used solely in the Liberty
Business;
(xiii) all subscription, bulk sales, circulation, dealer and
sub-dealer lists relating solely to the Liberty Newspapers, together
with all records, and other lists relating to or concerning routes,
distribution, delivery, sale, returns and pre-paid subscriptions; and
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(xiv) all of Liberty's goodwill in, and going concerning
value relating solely to the Liberty Newspapers, except for any
goodwill relating to the Liberty Trademarks and Logos.
(b) As used herein, "Lee Acquired Assets" shall mean all of the assets,
properties, rights, interests and claims (other than Lee Excluded Assets), that
are used or held for use solely in connection with the Lee Business and the
operation of the Lee Newspapers. The Lee Acquired Assets referred to above
include, without limitation, the following assets (other than Lee Excluded
Assets):
(i) the Lee Equipment and Lee Motor Vehicles;
(ii) all inventory of the Lee Business, including ink,
newsprint, packaging materials and supplies;
(iii) the Lee Intangible Property, including the trademarks,
trade names, licenses and mastheads of the Lee Newspapers and all
derivations thereof;
(iv) all un-expired contracts, leases, licenses and other
agreements (whether written or oral) to which Lee is a party, and
relating solely to the Lee Business (the "Lee Contracts") but excluding
therefrom Lee Contracts which have already been completed or will
expire or be terminated prior to the Closing;
(v) all licenses, permits or other governmental
authorizations (the "Lee Permits") relating solely to the Lee Business;
(vi) the Lee Records;
(vii) all prepaid expenses relating solely to the Lee
Business;
(viii) all warranties and guarantees received from vendors,
suppliers or manufacturers (the "Lee Warranties") relating solely to
the Lee Acquired Assets;
(ix) all customer, sampling and marketing lists relating
solely to the Lee Business;
(x) the Lee Real Property;
(xi) all accounts receivable generated solely from the Lee
Business;
(xii) all promotional material used solely in the Lee
Business;
(xiii) all subscriptions, bulk sales, circulation, dealer and
sub-dealer lists relating solely to the Lee Newspapers, together with
all records, and other lists relating
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to or concerning routes, distribution, delivery, sale, returns and
pre-paid subscriptions to the Lee Newspapers; and
(xiv) all of Lee's goodwill in, and going concern value
relating solely to the Lee Newspapers, except for any goodwill relating
to the Lee Trademarks and Logos.
1.3 Excluded Assets.
(a) The following assets ("Liberty Excluded Assets") are not included
in the Liberty Acquired Assets, and Liberty shall not transfer, assign or convey
to Lee and Lee shall not acquire from Liberty the following assets:
(i) corporate minute books, seals, stock records and other
corporate documentation of Liberty;
(ii) all tax returns, reports, forms and other tax records
pertaining to Liberty's operations prior to the Closing Date
(collectively, "Liberty Tax Records");
(iii) any intercompany debt owing to Liberty including all
interest thereon and all other intercompany agreements;
(iv) the name "Liberty" or "Liberty Group" any trade names,
trademarks, identifying logos or service marks employing the words
"Liberty Group Publishing" or any part or variation thereof or the
trade name, trademark, identifying logo or service mark of any Liberty
Affiliate or division not being exchanged hereby or any confusingly
similar trade name, trademark, logo or service mark (collectively, the
"Liberty Group Trademarks and Logos") and from and after Closing, Lee
hereby agrees to completely and permanently remove all Liberty Group
Trademarks and Logos prior to using any item containing such marks and
logos, including promotional materials, packaging materials,
stationery, signs, business cards and use of the Liberty Group
Trademarks and Logos in the Liberty Newspapers. If all Liberty
Trademarks and Logos cannot be completely and permanently removed from
any such item, Lee shall promptly destroy such item. Any destroyed
items shall be considered Liberty Excluded Assets;
(v) any rights or claims of Liberty or any of its
Affiliates related to or contingent on the satisfaction of Liberty
Retained Liabilities or Liberty Excluded Assets;
(vi) all insurance policies and binders owned or held by
Liberty or any of its Affiliates and claims with respect thereto;
(vii) all rights and claims which Liberty or any of its
Affiliates may have for refund or credit with respect to Income Taxes
(including estimated Income Taxes);
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(viii) any claim, right or obligation owing to Liberty from
any of its Affiliates, including, without limitation, on account of any
inter- or intra-company Indebtedness;
(ix) any corporate allocations to health and welfare, and
property and casualty insurance, including, without limitation, prepaid
insurance expenses, pension expenses and workers' compensation
expenses;
(x) any assets of a Liberty Benefit Plan, except as
expressly provided in Section 10.1;
(xi) the items referred to in the proviso to the definition
of Liberty Records;
(xii) all rights of Liberty under (i) this Agreement, (ii)
the Letter of Intent dated as of June 15, 1999 (the "LOI"), between
Liberty and Lee, (iii) all documents and analyses prepared by Liberty
or any of its Affiliates for internal evaluation purposes in connection
with the sale of the Liberty Newspapers and the Liberty Business, and
(iv) any Ancillary Instrument;
(xiii) cash on hand and in bank accounts and other investment
accounts and cash equivalents, including, but not limited to,
investments securities as of the Closing; and
(xiv) the contracts, leases, licenses and other agreements
(whether written or oral listed in Section 1.3(a)(xiv) of the Liberty
Disclosure Letter (the "Liberty Excluded Contracts").
(b) The following assets ("Lee Excluded Assets") are not included in
the Lee Acquired Assets and Lee shall not transfer, assign or convey to Liberty
and Liberty shall not acquire from Lee the following assets:
(i) corporate minute books, seals, stock records and other
corporate documentation of Lee;
(ii) all tax returns, reports, forms and other tax records
pertaining to Lee or Lee's operations prior to the Closing Date
(collectively, "Lee Tax Records");
(iii) any intercompany debt owing to Lee including all
interest thereon and all other intercompany agreements;
(iv) the name "Lee" or "Lee Enterprises" or any trade names,
trademarks, identifying logos or service marks employing the words
"Lee" or "Lee Enterprises" or any part or variation thereof or the
trade name, trademark, identifying logo or service mark of any Lee
Affiliate or division not being exchanged hereby or any confusingly
similar trade name, trademark, logo or service mark (collectively, the
"Lee Trademarks and Logos") and the trademark, Forever Young, described
in Section
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4.16, Part B of the Lee Disclosure Letter, which Lee shall license to
Liberty under a perpetual, fully-paid and non-assignable, transferable
license under a License Agreement in a form to be agreed upon by mutual
agreement of the parties hereafter (the "License Agreement") and from
and after Closing, Liberty hereby agrees to completely and permanently
remove all Lee Group Trademarks and Logos prior to using any item
containing such marks and logos, including promotional materials,
packaging materials, stationery, signs, business cards and use of the
Lee Trademarks and Logos in the Lee Newspapers. If all Lee Trademarks
and Logos cannot be completely and permanently removed from any such
item, Liberty shall promptly destroy such item. Any destroyed items
shall be considered Lee Excluded Assets;
(v) any rights or claims of Lee or any of its Affiliates
related to or contingent on the satisfaction of Lee Retained
Liabilities or Lee Excluded Assets;
(vi) all insurance policies and binders owned or held by Lee
or any of its Affiliates and claims with respect thereto;
(vii) all rights and claims which Lee or any of its
Affiliates may have for refund or credit with respect to Income Taxes
(including estimated Income Taxes);
(viii) any claim, right or obligation owing to Lee from any of
its Affiliates, including, without limitation, on account of any inter-
or intra-company Indebtedness;
(ix) any corporate allocations to health and welfare, and
property and casualty insurance, including, without limitation, prepaid
insurance expenses, pension expenses and workers' compensation
expenses;
(x) any assets of a Lee Benefit Plan, except as expressly
provided in Section 10.2;
(xi) the items referred to in the proviso to the definition
of Lee Records;
(xii) all rights of Lee under (i) this Agreement, (ii) the
LOI, (iii) all documents and analyses prepared by Lee or any of its
Affiliates for internal evaluation purposes in connection with the sale
of the Lee Newspapers and the Lee Business, and (iv) any Ancillary
Instrument;
(xiii) cash on hand and in bank accounts and other investment
accounts and cash equivalents, including, but not limited to,
investment securities as of the Closing;
(xiv) the contracts, leases, licenses and other agreements
(whether written or oral) listed in Section 1.3(b)(xiv) of the Lee
Disclosure Letter (collectively, the "Lee Excluded Contracts"); and
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(xv) the Lee Employee Computer Purchase Agreements listed in
SCHEDULE 1.3(B)(XV) and related accounts receivable therefor.
1.4 Assumed Liabilities.
(a) Subject to the terms and conditions set forth herein, at the
Closing, Lee shall assume and be liable and otherwise responsible for the
following liabilities and obligations of Liberty:
(i) the liabilities and obligations of Liberty under the
Liberty Contracts to the extent arising from and after the Closing
(other than liabilities and obligations relating to pre-closing
breaches);
(ii) all current liabilities of Liberty as of the Closing to
the extent such liabilities are reflected on the Liberty Balance Sheet
(as defined in Section 3.6(a)) or incurred after July 31, 1999 and
which in each case are included in the computation of Liberty Net
Working Capital;
(iii) the liabilities and obligations of Liberty relating to
the Liberty Transferred Employees expressly assumed by Lee pursuant to
Article 10; and
(iv) the liabilities and obligations of Liberty under the
leases relating to the leased Liberty Real Property to the extent
arising from and after the Closing (other than liabilities and
obligations relating to pre-closing breaches) (all of the foregoing are
referred to herein collectively as the "Liberty Assumed Liabilities");
provided, however, that Liberty Assumed Liabilities shall not include, among
others, (u) except to the extent included in the Liberty Net Working Capital
pursuant to clause (ii) above, any liability or obligation under any Liberty
Contract required by the terms thereof to be discharged prior to the Closing,
(v) any liability or obligation incurred in violation of the provisions of this
Agreement, (w) any liability or obligation arising out of a breach or default by
Liberty prior to the Closing (including an event that with the passage of time
or the giving of notice, or both, would become such a breach or default) under
any Liberty Contract, (x) any liability for Taxes of Liberty except as expressly
provided herein, (y) any liability for deferred compensation or for
post-retirement welfare, medical or life insurance benefits, (z) any
Indebtedness of Liberty and any obligation or liability relating thereto, (uu)
except as provided in Section 10.3, any liability or obligation relating to
costs and expenses incurred by Liberty in connection with the sale of the
Liberty Acquired Assets or the Liberty Business, (vv) any liability or
obligation of Liberty under this Agreement, (ww) any liability or obligation of
Liberty owing to any of its Affiliates, including, but not limited to,
management fees, (xx) any liability or obligation of any current or former
Affiliates of Liberty for which Liberty is liable as a member of a consolidated
group, controlled group or affiliated group or otherwise, or (yy) except as
provided for in Article 10, any liability or obligation of Liberty relating to
the
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termination by Liberty at or prior to the Closing of any of its employees;
(zz) the Liberty Excluded Contracts.
(b) Subject to the terms and conditions set forth herein, at the
Closing, Liberty shall assume and be liable and otherwise responsible for the
following liabilities and obligations of the Lee:
(i) the liabilities and obligations of the Lee Newspapers,
under the Lee Contracts to the extent arising from and after the
Closing (other than liabilities and obligations relating to pre-closing
breaches);
(ii) all current liabilities of the Lee Newspapers as of the
Closing to the extent such liabilities are reflected on the Lee Balance
Sheets (as defined in Section 4.6(a)) or incurred after July 31, 1999
and which in each case are included in the computation of Lee Net
Working Capital;
(iii) the liabilities and obligations of Lee relating to the
Lee Transferred Employees expressly assumed by Liberty pursuant to
Article 10; and
(iv) the liabilities and obligations of Lee under the leases
relating to the leased Lee Real Property to the extent arising from and
after the Closing (other than liabilities and obligations relating to
pre-closing breaches) (all of the foregoing are referred to herein
collectively as the "Lee Assumed Liabilities");
provided, however, that Lee Assumed Liabilities shall not include, among others,
(u) except to the extent included in the Lee Net Working Capital pursuant to
clause (ii) above, any liability or obligation under any Lee Contract required
by the terms thereof to be discharged prior to the Closing, (v) any liability or
obligation incurred in violation of the provisions of this Agreement, (w) any
liability or obligation arising out of a breach or default by Lee prior to the
Closing (including an event that with the passage of time or the giving of
notice, or both, would become such a breach or default) under any Lee Contract,
(x) any liability for Taxes of Lee, except as expressly provided herein, (y) any
liability for deferred compensation or for post-retirement welfare, medical or
life insurance benefits, (z) any Indebtedness of Lee and any obligation or
liability relating thereto, (uu) except as provided in Section 10.3, any
liability or obligation relating to costs and expenses incurred by Lee in
connection with the sale of the Lee Acquired Assets or the Lee Business, (vv)
any liability or obligation of Lee under this Agreement, (ww) any liability or
obligation of Lee owing to any of its Affiliates, including, but not limited to,
management fees, (xx) any liability or obligation of any current or former
Affiliates of Lee for which Lee is liable as a member of a consolidated group,
controlled group or affiliated group or otherwise, (yy) except as provided for
in Article 10, any liability or obligation of Lee relating to the termination by
Lee at or prior to the Closing of any of its employees, (zz) the Lee Excluded
Contracts or (zzz) any liability or obligation arising out of or relating to any
release, discharge or leak from the sumps and the pipes leading to and from the
sumps at the Lee Real Property located in Ottumwa, Iowa prior to the Closing
(the "Ottumwa Pre-Closing Sump Liability").
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1.5 Retained Liabilities.
(a) Liberty shall retain as of the Closing (and Lee shall not
assume or be responsible for) all liabilities and obligations of Liberty,
whether arising before or after the Closing, disclosed or undisclosed, known or
unknown, absolute, contingent or otherwise and whether due or to become due
(including, but not limited to, the Liberty Excluded Contracts), except for the
Liberty Assumed Liabilities (the "Liberty Retained Liabilities").
(b) Lee shall retain as of the Closing (and Liberty shall not
assume or be responsible for) all liabilities and obligations of Lee, whether
arising before or after the Closing, disclosed or undisclosed, known or unknown,
absolute, contingent or otherwise and whether due or to become due (including,
but not limited to, the Lee Excluded Contracts and the Ottumwa Pre-Closing Sump
Liability), except for the Lee Assumed Liabilities (the "Lee Retained
Liabilities").
ARTICLE 2
PURCHASE PRICE; CLOSING
2.1 Assumption of Liabilities. Subject to the terms and conditions
set forth herein, at the Closing (a) Liberty shall assign to Lee, and Lee shall
assume, the Liberty Assumed Liabilities pursuant to an instrument in a mutually
agreeable form (the "Lee Assumption Agreement"), and (b) Lee shall assign to
Liberty (or one or more Affiliates of Liberty designated by Liberty), and
Liberty (or one or more Affiliates of Liberty designated by Liberty) shall
assume, the Lee Assumed Liabilities pursuant to an instrument or instruments in
mutually agreeable forms (the "Liberty Assumption Agreement").
2.2 Closing Date. Unless the parties hereto shall agree in writing
upon a different location, time or date, the closing of the exchange of the Lee
Acquired Assets and the Liberty Acquired Assets (the "Closing") shall take place
at the offices of Lee's counsel, Lane & Waterman, 220 North Main Street, Suite
600, Davenport, Iowa 52801, at 10:00 A.M. on September 30, 1999. The term
"Closing" means the date and time at which the Closing occurs.
2.3 Deliveries. Subject to the terms and conditions set forth in
this Agreement, as of the date hereof or at the Closing, as the case may be:
(a) Liberty shall deliver to Lee:
(i) at the Closing, a bill of sale and assignment for the
Liberty Acquired Assets in a mutually agreeable form, duly executed by
Liberty, together with one or more deeds (which shall be equivalent to
a Special Warranty Deed) executed and acknowledged by Liberty or its
Affiliates, as the case may be, conveying to Lee all of
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such transferor's right, title and interest in and to the Liberty Real
Property owned by Liberty or such Affiliates;
(ii) at the Closing, the Liberty Assumption Agreement;
(iii) at the Closing, the Lee Assumption Agreement;
(iv) at the Closing, an instrument of assignment in a
mutually agreeable form, duly executed by Liberty, of all registered
(and applications therefor) Liberty Intangible Property;
(v) at the Closing, title to the Liberty Motor Vehicles;
(vi) at the Closing, a Lease Assignment and Assumption in a
mutually agreeable form, duly executed by Liberty and the lessor under
any of the leases relating to the leased Liberty Real Property (the
"Liberty Lease Assignment");
(vii) at the Closing, a Lease Assignment and Assumption in a
mutually agreeable form, duly executed by Liberty (or its Affiliate)
under any of the leases relating to the leased Lee Real Property (the
"Lee Lease Assigment");
(viii) at the Closing, all certificates and other instruments
and documents which are expressly required or reasonably requested by
Lee pursuant to this Agreement to be delivered by Liberty to Lee at the
Closing in form and substance reasonably satisfactory to Lee;
(ix) as of the date hereof, the Liberty Disclosure Letter,
dated as of the date hereof in the form of SCHEDULE 2.3(A)(IX) attached
hereto, and again at the Closing as provided in Section 3.21;
(x) at the Closing, the Cash Consideration as provided in
Section 1.1;
(xi) at the Closing, a list of the Lee Transferred
Employees;
(xii) at the Closing, a list of the inventory of newsprint
used solely in the Liberty Business as of at least two days prior to
the Closing Date; and
(xiii) at the Closing, an assignment of the rights, remedies
and benefits of Liberty and its Affiliates involving existing
non-competition and non-solicitation agreements related to the Liberty
Business or similar undertaking for the benefit of Lee reasonably
satisfactory to Lee.
(b) Lee shall deliver to Liberty:
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(i) at the Closing, one or more bills of sale and
assignment for the Lee Acquired Assets in a mutually agreeable form,
duly executed by Lee, together with one or more deeds (which shall be
equivalent to a Special Warranty Deed) duly executed and acknowledged
by Lee or its Affiliates, as the case may be, conveying to Liberty (or
one or more Affiliates of Liberty designated by Liberty) all of such
transferor's right, title and interest in and to the Lee Real Property
owned by Lee or its Affiliates;
(ii) at the Closing, the Lee Assumption Agreement;
(iii) at the Closing, the Liberty Assumption Agreement;
(iv) at the Closing, an instrument of assignment in a
mutually agreeable form, duly executed by Lee, of all registered (and
applications therefor) Lee Intangible Property;
(v) at the Closing, title to the Lee Motor Vehicles;
(vi) at the Closing, the Lee Lease Assignment, duly executed
by Lee and the lessor under any of the leases relating to the leased
Lee Real Property;
(vii) at the Closing, the Liberty Lease Assignment, duly
executed by Lee;
(viii) at the Closing, all certificates and other instruments
and documents which are expressly required or reasonably requested by
Liberty pursuant to this Agreement to be delivered by Lee to Liberty at
the Closing in form and substance reasonably satisfactory to Liberty;
(ix) as of the date hereof, the Lee Disclosure Letter, dated
as of the date hereof in the form of SCHEDULE 2.3(B)(IX) attached
hereto, and again at the Closing, as provided in Section 4.21;
(x) at the Closing, a list of the Liberty Transferred
Employees;
(xi) at the Closing, a list of the Lee Employee Computer
Purchase Agreements;
(xii) at the Closing, a list of the inventory of newsprint
used solely in the Lee Business as of at least two days prior to the
Closing Date;
(xiii) at the Closing, a list of the outstanding balances as
of the Closing of the Lee Computer Purchase Agreements for each of the
Lee Transferred Employees, which list shall be certified by the
Secretary or Assistant Secretary of Lee to be true, accurate and
complete as of the Closing; and
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(xiv) at the Closing, an assignment of the rights, remedies
and benefits of Lee and its Affiliates involving existing
non-competition and non-solicitation agreements related to the Lee
Business or similar undertaking for the benefit of Liberty reasonably
satisfactory to Liberty.
2.4 Consent of Third Parties. Anything in this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign any of the Liberty Contracts, Liberty Permits, Liberty Warranties, Lee
Contracts, Lee Permits or Lee Warranties or any claim, right or benefit arising
thereunder or resulting therefrom if an attempted assignment thereof, without
the consent of a third Person thereto, would constitute a breach or other
contravention thereof or in any way adversely affect the rights of Lee or
Liberty, as the case may be, thereunder. Liberty or Lee, as applicable, will use
reasonable best efforts to obtain the consent of the other parties to any such
Liberty Contract, Liberty Permit, Liberty Warranty, Lee Contract, Lee Permit or
Lee Warranty, as the case may be, for the assignment thereof to Lee or Liberty,
as applicable. If such consent is not obtained prior to the Closing, or if an
attempted assignment thereof would be ineffective or would adversely affect the
rights of Lee or Liberty, as the case may be, thereunder so that Lee or Liberty,
as applicable, would not in fact receive all such rights, Liberty and Lee will
cooperate to achieve a mutually agreeable arrangement under which (i) Lee would
obtain the benefits and assume the obligations thereunder (but only to the
extent such obligations would have constituted Liberty Assumed Liabilities if
such assignment occurred on the Closing Date) from and after the Closing Date in
accordance with this Agreement, including subcontracting, sublicensing or
subleasing to Lee, or under which Liberty would enforce for the benefit of Lee,
with Lee assuming Liberty's obligations to the same extent as if it would have
constituted a Liberty Assumed Liability, and any and all rights of Liberty
against a third Person thereto; and (ii) Liberty would obtain the benefits and
assume the obligations thereunder (but only to the extent such obligations would
have constituted Lee Assumed Liabilities if such assignment occurred on the
Closing Date) from and after the Closing Date in accordance with this Agreement,
including subcontracting, sublicensing or subleasing to Liberty or under which
Lee would enforce for the benefit of Liberty with Liberty assuming Lee's
obligations to the same extent as if it would have constituted a Lee Assumed
Liability, and any and all rights of Lee against a third Person thereto. Liberty
or Lee as applicable, will pay promptly to the other applicable party when
received all monies received by Liberty or Lee, as applicable, after the Closing
Date under any of the Liberty Contracts, Liberty Permits, Liberty Warranties,
Lee Contracts, Lee Permits or Lee Warranties, as the case may be, or any claim,
right or benefit arising thereunder to the extent that Lee or Liberty, as
applicable, would be entitled thereto pursuant hereto.
2.5 Adjustments to Working Capital.
(a) In accordance with this Section 2.5, Liberty shall pay to Lee
the amount, if any, by which the Lee Net Working Capital exceeds the Liberty Net
Working Capital or Lee shall pay to Liberty the amount, if any, by which the
Liberty Net Working Capital exceeds the Lee Net Working Capital. The payments to
be made pursuant to this Section 2.5 shall be made by
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wire transfer of immediately available funds to an account designated by the
party to receive such payment on the date any such payment shall be delivered
hereunder.
(b) At least five days prior to the Closing Date, (i) Liberty shall
deliver to Lee its good faith written determination of the Liberty Net Working
Capital, which determination shall be made based upon the most recent balance
sheets of the Liberty Newspapers available prior to the Closing Date (with any
adjustment thereto agreed to by Liberty prior to the Closing Date, the "Liberty
Estimated Net Working Capital"), and (ii) Lee shall deliver to Liberty its good
faith written determination of the Lee Net Working Capital, which determination
shall be made based upon the most recent balance sheets of the Lee Newspapers
available prior to the Closing Date (with any adjustments thereto agreed to by
Lee prior to the Closing Date, the "Lee Estimated Net Working Capital");
provided, however, if Lee and Liberty do not agree upon the Lee Estimated Net
Working Capital and the Liberty Estimated Net Working Capital prior to the
Closing, the Closing shall not be delayed and the Lee Estimated Net Working
Capital and the Liberty Estimated Net Working Capital shall each be deemed to
equal zero unless Lee and Liberty shall otherwise agree. Liberty shall make
available to Lee and Lee shall make available to Liberty, in each case during
normal business hours and on reasonable notice, all workpapers and other books
and records utilized in preparing the Liberty Estimated Net Working Capital or
Lee Estimated Net Working Capital, as the case may be, and will make available
to each other, in each case during normal business hours and on reasonable
notice, the appropriate personnel involved in the preparation of such
determinations. At the Closing, Liberty shall pay to Lee the amount, if any, by
which the Lee Estimated Net Working Capital exceeds the Liberty Estimated Net
Working Capital or Lee shall pay to Liberty the amount, if any, by which the
Liberty Estimated Net Working Capital exceeds the Lee Estimated Net Working
Capital.
(c) On or prior to the ninetieth (90th) day following the Closing Date,
(i) Lee shall notify Liberty in writing (the "Lee Determination Notice") of its
determination of the final Liberty Net Working Capital, and (ii) Liberty shall
notify Lee in writing (the "Liberty Determination Notice") of its determination
of the final Lee Net Working Capital, each of which determinations shall set
forth in reasonable detail the basis for such determinations. Each of Lee and
Liberty will provide the other party or parties and their respective
representatives with access during normal business hours to its personnel, books
and records to assist the other party in the preparation of its, and review of
the other party's, determination of the final Liberty Net Working Capital or Lee
Net Working Capital, as the case may be. If Liberty or Lee utilizes the services
of its respective firm of independent certified public accountants in connection
with the Liberty Determination Notice or the Lee Determination Notice, as the
case may be, then Liberty or Lee, as applicable, shall each cause such firm of
independent certified public accountants to (y) deliver to Lee or Liberty, as
the case may be, all workpapers and other books and records utilized by such
firm of independent certified public accountants in preparing, or assisting
Liberty or Lee, as the case may be, to prepare the Liberty Determination Notice
or Lee Determination Notice, as the case may be, and (z) make available to Lee
or Liberty, as the case may be, in each case during normal business hours and on
reasonable notice, the appropriate personnel involved in the preparation of such
determinations. Liberty shall notify Lee in writing (the "Liberty Dispute
Notice") and Lee
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shall notify Liberty in writing (the "Lee Dispute Notice") within thirty (30)
days after receiving the Lee Determination Notice or the Liberty Determination
Notice, as the case may be, if Liberty or Lee disagrees with the other party's
calculation of Liberty Net Working Capital or Lee Net Working Capital, as the
case may be, which notice shall set forth in reasonable detail the basis for
such dispute and the dollar amounts involved and such objecting party's good
faith estimate of the final Liberty Net Working Capital or Lee Net Working
Capital, as the case may be. If no Liberty Dispute Notice or Lee Dispute Notice
is received or given, by Lee or Liberty, as the case may be, within such thirty
(30) day period, then Lee's or Liberty's determination of the final Liberty Net
Working Capital or Lee Net Working Capital, as the case may be, set forth in the
applicable Determination Notice shall be final and binding upon the parties.
(d) Upon receipt of a Liberty Dispute Notice or a Lee Dispute Notice,
Lee and Liberty shall negotiate in good faith to resolve any disagreement with
respect to the final Liberty Net Working Capital and/or Lee Net Working Capital,
as the case may be. To the extent Lee and Liberty are unable to agree with
respect to the final Liberty Net Working Capital and/or Lee Net Working Capital
within thirty (30) days after either party notifies the other of a disagreement
with respect thereto, Lee and Liberty shall select a mutually acceptable
national accounting firm with no material relationship to Lee or Liberty or
their Affiliates, and submit their dispute to such accounting firm for a binding
resolution. The cost of such accounting firm shall be paid one half by Liberty
and one half by Lee.
(e) Upon the final determination of both the Liberty Net Working
Capital and Lee Net Working Capital in accordance herewith, Liberty or Lee, as
the case may be, will make the appropriate payment to the other Person within
two (2) business days of such final determination.
(f) Within two (2) business days of the final determination required in
(e) above, Liberty will pay Lee by wire transfer the amount of the outstanding
balance of the Lee Computer Purchase Agreements for any Lee Transferred
Employee. Upon receipt of such payment, Lee shall provide Liberty within two (2)
business days thereof an executed assignment of the Lee Employee Computer
Purchase Agreements for Lee Transferred Employees and related accounts
receivable in a mutually agreeable form.
(g) In making the adjustments pursuant to this Section 2.5, all prepaid
expenses, to the extent included in the Lee Acquired Assets or the Liberty
Acquired Assets, and accrued expenses, including real property, personal
property and payroll Taxes, to the extent included in the Lee Assumed
Liabilities, or the Liberty Assumed Liabilities, of the Lee Newspapers or the
Liberty Newspapers which are properly included in the determination of Lee Net
Working Capital or Liberty Net Working Capital shall, except as otherwise
expressly provided herein, be adjusted and allocated among Lee and Liberty to
reflect the principle that all expenses arising from the operation of the Lee
Newspapers before the opening of business on the Closing Date and the Liberty
Newspapers from and after the opening of business on the Closing Date shall be
for the account of Lee, and all expenses arising from the operation of the
Liberty Newspapers before the opening of business on the Closing Date and the
Lee
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Newspapers from and after the opening of business on the Closing Date shall be
for the account of Liberty.
(h) For purposes of determination of Net Working Capital for both Lee
and Liberty, (i) only those accounts receivable actually collected on or prior
to the 90th day following the Closing Date shall be included and any accounts
receivable not so collected will be assigned to the original transferring party
on the 91st day following the Closing Date and (ii) notwithstanding anything
herein to the contrary, for purposes of application of the foregoing, unless
otherwise designated by the account debtor based upon a dispute, all payments
made by an account debtor with respect to accounts receivable outstanding as of
the Closing shall be applied in payment of the oldest outstanding account
receivable with respect to said account debtor as of the Closing. Neither Lee
nor Liberty shall take any action to induce an account debtor to designate the
application of any accounts receivable payable by such account debtor.
2.6 Allocation of Purchase Price. Liberty and Lee shall allocate the
consideration paid for the Liberty Acquired Assets and the Lee Acquired Assets
in a manner agreed upon by the parties after the Closing. Neither party shall
take any position inconsistent with such allocations, and the parties shall file
all Tax returns and reports (including IRS Forms 8824 and 8594, if required)
with respect to the transaction contemplated hereby, including, but not limited
to, all Federal, state and local tax returns, on a basis consistent with such
allocations, and each party shall promptly give to the other written notice of
any disallowance of or challenge to such reporting by any taxing governmental
authority.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF LIBERTY
Liberty represents and warrants to Lee as follows.
3.1 Organization and Good Standing. Liberty is a corporation duly
incorporated and validly existing as a corporation in good standing under the
laws of the State of Delaware. Liberty (or an Affiliate thereof) has the
corporate power to carry on the Liberty Business, is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
where qualification as a foreign corporation is required, except for such
failures to be qualified and in good standing that would not, in the aggregate,
have a Liberty Material Adverse Effect.
3.2 Authority. Liberty has the corporate power and corporate authority
to execute and deliver this Agreement and the other Ancillary Instruments to
which it is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions provided for hereby and thereby, and all corporate
action of Liberty necessary for the making and performance of this Agreement by
Liberty has been duly taken. Except as set forth in Section 3.2 of the Liberty
Disclosure Letter, the execution, delivery and performance by Liberty of this
Agreement and the other Ancillary Instruments to which it is a party do not and
will not
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(i)(A) contravene any provisions of the certificate of incorporation or
by-laws of Liberty, (B) with or without the giving of notice or the passage of
time or both, result in any breach by Liberty of, or default or permitted or
required acceleration of performance by Liberty under, or the creation of any
Lien upon the Liberty Acquired Assets which would remain on the Liberty Acquired
Assets after the Closing Date, or the creation in favor of any third party of
any right of termination of, any contract, lease, license or other agreement to
which Liberty is a party or by which Liberty or the Liberty Acquired Assets are
bound, or (C) assuming that the Governmental Actions/Filings referred to in
Section 3.2 of the Liberty Disclosure Letter are obtained or made, result in any
violation by Liberty of any law, rule or regulation applicable to either of
them, (ii) result in any violation by Liberty of any judgment, injunction or
decree of, or any license or permit issued by, any court or governmental
authority applicable to either of them, or (iii) assuming that the notices
referred to in Section 3.2 of the Liberty Disclosure Letter are made, require
any Governmental Action/Filing to be made or obtained by Liberty except (A) any
federal, state or local Tax filings and (B) any PBGC "Notice of Reportable
Event" required under Section 4043(c) of ERISA. This Agreement and each of the
Ancillary Instruments to which Liberty is a party has been duly executed and
delivered by Liberty. This Agreement and each of the Ancillary Instruments to
which Liberty is a party constitutes the valid and binding obligation of Liberty
enforceable against Liberty in accordance with its terms except that such
enforcement may be limited by any bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other laws (whether statutory, regulatory or
decisional), now or hereafter in effect, relating to or affecting the rights of
creditors generally or by equitable principles (regardless of whether considered
in a proceeding at law or in equity).
3.3 Acquired Assets. Except (i) as set forth in Part A Section 3.3 of
the Liberty Disclosure Letter, (ii) for the Liberty Excluded Assets and (iii)
for such assets that are consumed or disposed of in the ordinary course of the
Liberty Business and consistent with prior practice after the date of this
Agreement, the Liberty Acquired Assets include all of the assets, properties and
rights of every type and description, real, personal and mixed, tangible and
intangible, that are owned, leased or licensed by Liberty and used solely in the
conduct of the Liberty Business in the manner in which the Liberty Business is
now conducted.
Except as set forth in Part B of Section 3.3 of the Liberty Disclosure
Letter, Liberty does not use any assets solely in the conduct of the Liberty
Business which in the aggregate are material to the Liberty Business and which
it does not own or lease. Except as set forth in Part C of Section 3.3 of the
Liberty Disclosure Letter, the tangible Liberty Acquired Assets are in good
operating condition, reasonable wear and tear excepted, and except for such
failures, to be in such good operating condition, individually or in the
aggregate, have not had and are not reasonably likely to have incurred a Liberty
Material Adverse Effect. The Liberty Acquired Assets constitute all of the
assets necessary to conduct the Liberty Business as currently conducted. Part A
of Section 3.3 of the Liberty Disclosure Letter also contains a true, accurate
and complete list of substantially all material tangible assets and properties,
real, personal and mixed, used primarily, but not solely, in the conduct of the
Liberty Business.
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3.4 Title to Acquired Assets; Liens. Except as set forth in Section 3.4
of the Liberty Disclosure Letter, Liberty (or an Affiliate thereof) owns good
title to or has valid leasehold interests in all of the Liberty Acquired Assets
and at the Closing good title to or valid leasehold interests in (and consents
to the assignment thereof) such Liberty Acquired Assets shall be transferred to
Lee free and clear of any and all Liens except (i) for Liberty Permitted Liens,
and (ii) any restriction on assignment of Liberty Contracts which is contained
in such Liberty Contract or which arises by law.
3.5 Contracts and Agreements; Defaults.
(a) Part A of Section 3.5 of the Liberty Disclosure Letter contains a
list of (i) all outstanding mortgages, indentures, notes, guarantees,
installment obligations or other contracts or instruments evidencing or
providing any Indebtedness to which Liberty is a party and which relate solely
to the Liberty Business or by which Liberty or any of its assets are bound and
which relate solely to the Liberty Business, (ii) all outstanding contracts
containing non-competition covenants of Liberty and which relate solely to the
Liberty Business, (iii) all outstanding leases to which Liberty is a party and
which relate solely to the Liberty Business or by which Liberty is bound and
which relate solely to the Liberty Business, (iv) all outstanding contracts of
Liberty to sell assets, other than in the ordinary course of business, and which
relate solely to the Liberty Business, (v) all collective bargaining agreements
of Liberty with any labor union or other employee representative or a group of
employees and which relate solely to the Liberty Business, (vi) any joint
venture or partnership agreements to which Liberty is a party relating solely to
the Liberty Business, and (vii) all other outstanding contracts to which Liberty
is a party and which relate solely to the Liberty Business or by which Liberty
or any of its assets are bound and which relate solely to the Liberty Business,
which require or are likely to require the payment by Liberty of an amount, or
require Liberty to provide goods or services having a fair market value or
aggregate sales price, of more than $10,000 per annum, except (1) contracts
entered into in the ordinary course of business of Liberty that can be
terminated by Liberty on 60 or fewer days' notice without penalty, (2)
subscriptions to the Liberty Newspapers and contracts for advertising or
commercial printing which Liberty entered in the ordinary course of business
each involving aggregate amounts of less than $10,000 per annum, and (3) Liberty
Excluded Assets. Liberty has delivered to Lee a correct and complete copy of
each written agreement listed on Part A of Section 3.5 of the Liberty Disclosure
Letter (the "Liberty Material Contracts").
(b) Except as set forth in Part B of Section 3.5 of the Liberty
Disclosure Letter, (i) neither Liberty, nor, to the Knowledge of Liberty, any
other party to any contract, lease, license or other agreement to which Liberty
is a party or by which Liberty or any of the Liberty Acquired Assets are bound
(other than contracts, licenses, leases or other agreements that constitute
Liberty Excluded Assets and do not relate solely to the Liberty Business) is in
material breach of or default under any such contract, lease, license or other
agreement and (ii) no event has occurred which (after notice or lapse of time or
both) would become a material breach or default by Liberty under any such
contract, lease, license or other agreement.
3.6 Financial Statements.
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(a) Attached as Part A of Section 3.6 of the Liberty Disclosure Letter
are true and complete copies of (i) the unaudited balance sheets of the Liberty
Newspapers as at December 31, 1998 and (ii) the unaudited balance sheets of the
Liberty Newspapers as at July 31, 1999 (the July 31, 1999 balance sheets are
referred to as the "Liberty Balance Sheet"), and the related unaudited
statements of income for the twelve month and seven month periods then ended
(collectively, the "Liberty Financial Statements"). Except as disclosed in Part
A of Section 3.6 of the Liberty Disclosure Letter, the Liberty Financial
Statements fairly present in all material respects the financial position of the
Liberty Newspapers as at December 31, 1998 and July 31, 1999 and the results of
operations for the twelve months ended December 31, 1998, and the seven months
ended July 31, 1999 in accordance with GAAP, except that the Liberty Financial
Statements are summary in nature and do not include the notes and related
disclosures required by GAAP.
(b) Except for Liberty Excluded Assets and except for cash distributed
to Liberty and its Affiliates, the Liberty Balance Sheet reflects all of the
Liberty Acquired Assets that will be acquired by Lee at the Closing other than
such assets as are disposed of or consumed in the ordinary course of the Liberty
Business and consistent with past practice since July 31, 1999 or such
additional assets as are acquired by the Liberty Newspapers in the ordinary
course of business since July 31, 1999.
(c) Except as set forth in Part B of Section 3.6 of the Liberty
Disclosure Letter or as reflected, reserved against or otherwise disclosed in
the Liberty Balance Sheet and liabilities and obligations incurred in the
ordinary course of business since July 31, 1999, Liberty does not have any
material liabilities or obligations related solely to the Liberty Business that
would have been required to be reflected or otherwise disclosed by Liberty in
the Liberty Balance Sheet in accordance with GAAP.
3.7 Business Since July 31, 1999. Except as disclosed in Part A of
Section 3.7 of the Liberty Disclosure Letter and except as required or otherwise
contemplated by this Agreement, since July 31, 1999 (i) the Liberty Business has
been conducted in all material respects in the ordinary course, consistent with
past practices, (ii) neither the Liberty Business nor its condition nor assets
has experienced a Liberty Material Adverse Effect and (iii) no event or events
has or have occurred that individually or in the aggregate has or have had or is
or are reasonably likely to have a Liberty Material Adverse Effect. Since July
31, 1999, except as described in Part B of Section 3.7 of the Liberty Disclosure
Letter, there has not been:
(a) any material damage, destruction, or loss to the Liberty Acquired
Assets outside the ordinary course of business;
(b) any making or authorization of any capital expenditure relating
solely to the Liberty Business by Liberty in excess of $10,000 individually or
the making or authorization of capital expenditures relating solely to the
Liberty Business by Liberty of more than $25,000 in the aggregate;
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(c) any sale, transfer, or other disposition of assets or properties,
real, personal, tangible or intangible, or mixed, relating solely to the Liberty
Business by Liberty, other than in the ordinary course of business;
(d) other than pursuant to existing collective bargaining agreements
or pursuant to regular salary reviews in the ordinary course of business
consistent with past practices, any increase in the compensation payable or to
become payable to any employees or agents of Liberty that are involved in the
Liberty Business, or any bonus arrangement made with any thereof; or
(e) no material increase in the operating costs of any of the Liberty
Newspapers, whether arising from or in connection with the sale of real property
or otherwise, has occurred.
3.8 Compliance with Law, Litigation, Injunctions. Liberty is not in
violation in any material respect of any law, rule, permit, regulation, order,
judgment or decree applicable to it, except as set forth in Part A of Section
3.8 of the Liberty Disclosure Letter, the violation of which could reasonably
have a Liberty Material Adverse Effect. Except for the matters set forth in Part
B of Section 3.8 of the Liberty Disclosure Letter and for claims fully covered
by liability insurance of Liberty, (i) there is no action, suit or other
proceeding pending or, to Liberty's Knowledge threatened, at law or in equity,
before any federal, state or municipal court, administrative agency or
arbitrator against Liberty and relating to the Liberty Newspapers which is
reasonably expected to have a Liberty Material Adverse Effect, and (ii) Liberty
is not a party to, or subject to or bound by, any order, injunction or decree of
any court or governmental authority relating to the Liberty Newspapers.
3.9 Licenses. With such exceptions as are set forth in Section 3.9 of
the Liberty Disclosure Letter (a) all licenses, permits, registrations or
authorizations of any governmental department or agency that are presently
required solely for the operation of the Liberty Business as presently conducted
have been duly obtained and are in full force and effect, the absence of which
would have a Liberty Material Adverse Effect and (b) no consent, authorization
or approval is required to transfer such licenses, permits, registrations or
authorizations to Lee pursuant to this Agreement.
3.10 Taxes. Except as set forth in Section 3.10 of the Liberty
Disclosure Letter:
(a) Liberty and any consolidated, combined or unitary group of which
Liberty is or was a member have timely filed all Tax returns and reports with
respect to Taxes ("Tax Returns") which are required to be filed, and all Taxes
shown to be due on such Tax Returns have been timely paid. All such Tax Returns
were true and correct in all material respects. On July 31, 1999, Liberty had no
liability for Taxes (other than Income Taxes) that would have been required to
be reflected in the Liberty Balance Sheet in accordance with GAAP, except to the
extent that such Taxes are reflected, reserved against or otherwise disclosed in
the Liberty Balance Sheet or will be paid prior to the Closing Date. There is no
dispute or claim
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concerning any liability for Taxes of Liberty with respect to the Liberty
Business that is either (1) claimed or raised by any authority in writing or (2)
as to which any of the directors and officers (or employees responsible for Tax
matters) of Liberty has any knowledge based upon personal contact with any agent
of such authority. Liberty has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Section 6662 of the Code. Liberty has
withheld and paid over all Taxes required to have been withheld and paid over in
connection with amounts paid or owing to any employee, creditor, independent
contractor, or other third Person.
(b) No property of Liberty is subject to a tax benefit transfer lease
subject to the provisions of former Section 168(f)(8) of the Internal Revenue
Code of 1954.
(c) Liberty is not a foreign person subject to withholding under
Section 1445 of the Code and the regulations promulgated thereunder, and, at the
Closing Date, Liberty shall deliver to Lee a certificate to that effect.
(d) Liberty is not bound by or obligated under any tax sharing or
similar agreement or arrangement, other than related to Liberty's consolidated
Tax return filing.
(e) For purposes of this Agreement, "Taxes" shall mean all federal,
state, local and foreign taxes, including, without limitation, all net income,
gross income, gross receipts, sales, use, value added, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
estimated, severance, stamp, occupation, property or other taxes and customs
duties of any kind whatsoever, together with any interest, penalties and
additions to tax or additional amounts relating thereto, imposed by any
governmental authority.
3.11 Affiliated Transactions. Section 3.11 of the Disclosure Letter
sets forth a complete and accurate list of all contracts in connection with the
Liberty Business to which Liberty on the one hand, and Liberty and any other
Affiliate of Liberty on the other hand, is a party.
3.12 Brokers. Neither Liberty nor any of its directors, officers,
employees or Affiliates has employed any broker or finder or has incurred or
will incur any broker's, finder's or similar fees, commissions or expenses, in
each case in connection with the transactions contemplated by this Agreement.
3.13 Labor.
(a) Except as set forth in Part A of Section 3.13 of the Liberty
Disclosure Letter, (i) Liberty does not have any contracts of employment with
any of its employees, or consulting agreements with any consultants, involved
solely in the Liberty Business, (ii) no union has been certified as representing
any of Liberty's employees involved in the Liberty Business and (iii) Liberty is
not a party to or currently negotiating any collective bargaining agreements
with respect to its employees involved in the Liberty Business, (iv) to
Liberty's Knowledge, there is no currently pending union representation
activity involving any employees of Liberty involved
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in the Liberty Business, (v) to Liberty's Knowledge, no demand has been
made for recognition by a labor organization by or with respect to any employees
of Liberty involved in the Liberty Business, and (vi) none of the employees of
Liberty involved in the Liberty Business is represented by any labor union or
organization. Except as set forth in, Part B of Section 3.13 of the Liberty
Disclosure Letter, there are no pending or, to Liberty's Knowledge, overtly
threatened (i) claims of employment discrimination, wage and hour claims, OSHA
claims, unemployment claims or worker's compensation claims or (ii) unfair labor
practice claims before the National Labor Relations Board.
(b) There is not presently pending and during the last five years there
has not been (i) any strike, picketing or work stoppage by any employees
involved solely in connection with the Liberty Business or (ii) any application
for certification of a collective bargaining agreement with respect to employees
of Liberty involved in the Liberty Business. There is no lockout of any employee
by Liberty involved solely in the Liberty Business and no such action is
contemplated by Liberty.
3.14 Employee Benefits.
(a) For purposes of this Agreement, an "Employee Benefit Plan" is (i)
each "employee benefit plan," within the meaning of Section 3(3) of ERISA and
(ii) each other retirement, deferred compensation, medical, dental, vision,
disability, educational assistance, dependent care, life insurance, flexible
spending account, cafeteria plan (within the meaning of Code Section 125),
workers compensation, stock option, stock purchase, other stock-based
compensation, severance, vacation pay, other fringe or welfare benefits, change
in control or incentive or bonus plan, fund, policy or arrangement. Section
3.14(a) of the Liberty Disclosure Letter lists each Employee Benefit Plan
maintained or contributed to by Liberty or any of its ERISA Affiliates for
current or former employees of Liberty involved solely in the Liberty Business
(collectively, "Liberty Benefit Plans"). Liberty has delivered or made available
to Lee a copy of each Liberty Benefit Plan (and each trust maintained in
connection with any such Liberty Benefit Plan) or a written summary of any
material unwritten Liberty Benefit Plan and any summary plan description
relating to a Liberty Benefit Plan and, with respect to each Liberty Benefit
Plan under which liabilities are assumed by Lee under Section 10.1 (an "Assumed
Liberty Benefit Plan") the most recent Internal Revenue Service ("IRS") Form
5500 and, where applicable, the most recent IRS determination letter.
(b) Except as set forth in Section 3.14(b) of the Liberty Disclosure
Letter with respect to each Assumed Liberty Benefit Plan (i) each such plan is
in material compliance with all applicable laws and regulations and has been
administered substantially in accordance with its terms; and (ii) each such plan
intended to be tax-qualified under Section 401(a) of the Code has received a
favorable determination letter from the IRS as to its tax-qualified status under
the Code and, to the Knowledge of Liberty, there are no existing circumstances
likely to result in the revocation of any such determination letter. There are
no actions, suits or claims pending or, to Liberty's Knowledge, threatened
(other than routine claims for benefits) with respect to any Liberty Benefit
Plan which are likely to result in the imposition of liability on Lee.
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(c) Except as set forth in Section 3.14(c) of the Liberty Disclosure
Letter, no Liberty Benefit Plan is a "single-employer" plan within the meaning
of Section 4001(a)(15) of ERISA or a "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA. Liberty has not incurred any liability under Title
IV of ERISA with respect to any Assumed Liberty Benefit Plan other than for PBGC
premiums not yet due.
(d) To the Knowledge of Liberty, no audit or investigation of any
Liberty Benefit Plan by the IRS, the Department of Labor or the PBGC is pending
or threatened.
(e) All contributions to the Assumed Liberty Benefit Plans that will
have been required to be made with respect to periods prior to the Closing Date
under such Assumed Liberty Benefit Plans will have been made or accrued as of
the Closing Date.
(f) Neither Liberty nor any of its ERISA Affiliates nor, to Liberty's
Knowledge, any other Person, has taken any action or failed to take any action
with respect to any Employee Benefit Plan maintained or contributed to or
previously maintained or contributed to by Liberty, or any of its ERISA
Affiliates for which Liberty or any of its ERISA Affiliates may have any
liability, contingent or otherwise, or permitted any circumstance to exist that
may subject Lee or any Assumed Liberty Benefit Plan to any Tax, penalty, fine or
other liability under the Code or ERISA.
(g) Except as set forth in Section 3.14(g) of the Liberty Disclosure
Letter, there is no individual who is not, as of the date of this Agreement, an
active employee of Liberty or an ERISA Affiliate and who would at any future
date be entitled to any form of reemployment rights with Liberty or an ERISA
Affiliate with respect to the Liberty Business if (i) there were no exchange of
assets pursuant to this Agreement and (ii) Liberty continued to maintain the
Liberty Business.
3.15 Environmental Matters. Except as set forth on Section 3.15 of
the Liberty Disclosure Letter to Liberty's Knowledge:
(a) there has not been any past or continuing release or threat of
release of any Hazardous Substance in violation of Environmental Laws into the
environment at, on or from the Liberty Real Property or any other real property
currently or previously leased or owned by Liberty and used in the Liberty
Business and there are no Hazardous Substances at, on or under the Liberty Real
Property in violation of Environmental Laws;
(b) there have been no Hazardous Substances generated solely in
connection with the Liberty Business that have been disposed of or come to rest
at any site that has been included in any federal, state or local priority list
of hazardous or toxic waste sites published by any governmental body, agency or
authority;
(c) (i) there are no underground or above-ground storage tanks located
on the Liberty Real Property;
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(ii) there are no polychlorinated biphenyls ("PCBs") or
PCB-containing equipment used or stored on the Liberty Real Property;
(d) a copy of any environmental investigations, studies, audits,
tests, reviews or analyses relating to the Liberty Acquired Assets conducted by
Liberty, or any consultant engaged by Liberty within the last five years, if
any, have previously been provided to Lee;
(e) Liberty has operated in compliance with all applicable
Environmental Laws, the violation of which could reasonably be expected to have
a Liberty Material Adverse Effect;
(f) Liberty has not received any directive, order or notice from
any government body alleging any violation of or failure to comply with
Environmental Laws at the Liberty Real Property by Liberty;
(g) Liberty has not received any directive, order or notice from
any government body or any other Person alleging that Liberty is actually or
potentially liable under Environmental Laws for the costs of environmental
investigation or remediation of the Liberty Real Property, or other real
property to which Hazardous Substances generated by Liberty in connection with a
Liberty Business were transferred for disposal; and
(h) The Liberty Real Property is not subject to any Lien, securing
the costs of environmental remediation, arising under Environmental Laws.
3.16 Intangible Property.
(a) Except for Liberty Excluded Assets, Liberty owns or possesses
adequate and enforceable licenses or other rights to use all Liberty Intangible
Property used solely in connection with the Liberty Business as currently
conducted. There are no existing, or to the Knowledge of Liberty, overtly
threatened claims of any third Person based on the use by Liberty, or
challenging the ownership, use, scope, enforceability or validity, of any of the
Liberty Intangible Property used in the Liberty Business. To the Knowledge of
Liberty, there is no infringing use by any Person of the Liberty Intangible
Property used in the Liberty Business and Liberty's use of the Liberty
Intangible Property does not infringe on the rights of any other Person.
(b) All Liberty Copyrights and Liberty Trademarks described in
Parts A and B, respectively, of Section 3.16(b) of the Liberty Disclosure Letter
are transferable to Lee without the consent of any third party, and Section
3.16(b) constitutes a complete listing of all such Liberty Copyrights and
Liberty Trademarks material to the Liberty Business. The Liberty Business
possesses valid licenses for all material software used therein.
(c) Except as otherwise disclosed in Section 3.16(c) of the
Liberty Disclosure Letter, any reprogramming required to permit the proper
functioning (but only to the extent that such proper functioning would otherwise
be impaired by the occurrence of the year 2000)
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in and following the year 2000 of any software owned by or licensed to or used
by the Liberty Business, or the computer systems and other equipment containing
embedded microchips of the Liberty Business, in either case owned or operated by
or used or relied upon in the conduct of such business (including any such
systems and other equipment supplied by others or with which the computer
systems of the Liberty Business interface), and the testing of all such
software, systems and other equipment as so reprogrammed, has been completed and
paid for in full and such software, systems and other equipment shall function
properly, without material errors or omissions, upon the occurrence of the year
2000 (but only to the extent that such proper functioning would otherwise be
impaired by the occurrence of the year 2000).
3.17 Insurance. All policies of insurance to which Liberty is a party
or which provide insurance coverage to Liberty, taken together, provide adequate
insurance coverage for the material Liberty Acquired Assets and Liberty for all
risks to which the material Liberty Acquired Assets are normally exposed in the
ordinary course of the Liberty Business.
3.18 Advertisers, Subscribers, Circulation. To Liberty's Knowledge,
none of the advertisers that currently represent the Liberty Newspapers' ten
largest advertisers intends to materially reduce such purchases. Set forth on
Section 3.18 of the Liberty Disclosure Letter is (i) the total paid circulation
and the total unpaid circulation for each Liberty Newspaper as of December 31,
1998 and as of June 30, 1999, (ii) a list of the ten businesses or entities that
generated the greatest amount of advertising revenues for each Liberty Newspaper
during the periods from January 1, 1998 through December 31, 1998 and January 1,
1999 through June 30, 1999 and (iii) a schedule of all sales during the period
from January 1, 1999 through June 30, 1999 of, commitments during such period to
sell, or representations during such period that it will sell, advertising space
in any Liberty Newspaper to any party involving the receipt of non-cash
consideration in excess of $2,500. The Liberty Newspapers have no lifetime
subscription liabilities.
3.19 Real Property.
(a) The Liberty Real Property complies in all material respects with
all zoning, building, fire, use restriction, air, water or other pollution
control, environmental protection, waste disposal, safety or health codes,
ordinances, laws, rules or regulations. All of the buildings and other
improvements located upon the Liberty Real Property are in a good state of
repair, reasonable wear and tear excepted.
(b) No condemnation proceedings have been instituted or, to the
Knowledge of Liberty, threatened against Liberty or the Liberty Real Property.
(c) Except as otherwise described in Section 3.19 of the Liberty
Disclosure Letter, all buildings and structures located on the Liberty Real
Property are located completely within the boundary lines of the Liberty Real
Property, no buildings, structures or other improvements owned by others
encroach onto or under the Liberty Real Property, and the Liberty Real Property
has access to public roads. Liberty has all easements and rights
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necessary to conduct the Liberty Business on the Liberty Real Property in the
manner presently conducted.
3.20 Employment Matters. Except as otherwise described in Section
3.20 of the Liberty Disclosure Letter, since July 1, 1999, Liberty has not
transferred, or permitted or solicited the transfer of, any employee involved in
the Liberty Business to another newspaper or business owned or operated by
Liberty or any of its Affiliates.
3.21 Accuracy of Representations. No representation or warranty
made by Liberty in this Agreement or any document delivered, or to be delivered,
by or on behalf of Liberty pursuant hereto, including the Liberty Disclosure
Letter, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading; provided, however, that Liberty may submit, at any time up to the
end of the Business Day two Business Days prior to the Closing Date, a revised
version of the Liberty Disclosure Letter (and any attachment or schedule
thereto), which shall amend the Liberty Disclosure Letter only upon being
accepted by Lee in writing. Lee acknowledges that its sole remedy for any breach
of a representation or warranty caused by Lee's refusal to accept an amended
Liberty Disclosure Letter shall be termination of this Agreement in accordance
with Section 9.1(d).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF LEE
Lee represents and warrants to Liberty as follows.
4.1 Organization and Good Standing. Lee is a Delaware corporation
duly incorporated and validly existing as a corporation in good standing under
the laws of the State of Delaware, Lee has the corporate power to carry on the
Lee Business, is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where qualification as a foreign
corporation is required, except for such failures to be qualified and in good
standing that would not, in the aggregate, have a Lee Material Adverse Effect.
4.2 Authority. Lee has the corporate power and corporate authority
to execute and deliver this Agreement and the other Ancillary Instruments to
which it is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions provided for hereby and thereby, and all corporate
action of Lee necessary for the making and performance of this Agreement by Lee
has been duly taken. Except as otherwise provided in Section 4.2 of the Lee
Disclosure Letter, the execution, delivery and performance by Lee of this
Agreement and the other Ancillary Instruments to which it is a party do not and
will not (i)(A) contravene any provisions of the certificate of incorporation or
by-laws of Lee, (B) with or without the giving of notice or the passage of time
or both, result in any breach by Lee of, or default or permitted or required
acceleration of performance by Lee under, or the creation of any Lien upon the
Lee Acquired Assets which would remain on the Lee Acquired Assets after the
Closing Date,
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or the creation in favor of any third party of any right of termination of, any
contract, lease, license or other agreement to which Lee is a party or by which
Lee or the Lee Acquired Assets are bound, or (C) assuming that the Governmental
Actions/Filings referred to in Section 4.2 of the Lee Disclosure Letter are
obtained or made, result in any violation by Lee of any law, rule or regulation
applicable to it, (ii) result in any violation by Lee of any judgment,
injunction or decree of, or any license or permit issued by, any court or
governmental authority applicable to it, or (iii) assuming that the notices
referred to in Section 4.2 of the Lee Disclosure Letter are made, require any
Governmental Action/Filing to be made or obtained by Lee except (A) any federal,
state or local Tax filings, and (B) any PBGC "Notice of Reportable Event"
required under Section 4043(c) of ERISA. This Agreement and each of the
Ancillary Instruments to which it is a party has been duly executed and
delivered by Lee. This Agreement and each of the Ancillary Instruments to which
it is a party constitutes the valid and binding obligation of Lee, enforceable
against Lee in accordance with its terms except that such enforcement may be
limited by any bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other laws (whether statutory, regulatory or decisional), now or
hereafter in effect, relating to or affecting the rights of creditors generally
or by equitable principles (regardless of whether considered in a proceeding at
law or in equity).
4.3 Acquired Assets. Except (i) as set forth in Part A of Section
4.3 of the Lee Disclosure Letter, (ii) for the Lee Excluded Assets and (iii) for
such assets that are consumed or disposed of in the ordinary course of the Lee
Business and consistent with prior practice after the date of this Agreement,
the Lee Acquired Assets include all of the assets, properties and rights of
every type and description, real, personal and mixed, tangible and intangible,
that are owned, leased or licensed by Lee or any of its Affiliates and used
solely in the conduct of the Lee Business in the manner in which the Lee
Business is now conducted.
Except as set forth in Part B of Section 4.3 of the Lee Disclosure
Letter, Lee does not use any assets solely in the conduct of the Lee Business
which in the aggregate are material to the Lee Business and which it does not
own or lease. Except as set forth in Part C of Section 4.3 of the Lee Disclosure
Letter, the tangible Lee Acquired Assets are in good operating condition,
reasonable wear and tear excepted, and except for such failures, to be in such
good operating condition, individually or in the aggregate, have not had and are
not reasonably likely to have incurred a Lee Material Adverse Effect. The Lee
Acquired Assets constitute all of the assets necessary to conduct the Lee
Business as currently conducted. Part A of Section 4.3 of the Lee Disclosure
Letter also contains a true, accurate and complete list of all material tangible
assets and properties, real, personal and mixed, used primarily, but not solely,
in the conduct of the Lee Business.
4.4 Title to Acquired Assets; Liens. Except as set forth in
Section 4.4 of the Lee Disclosure Letter, Lee owns good title to or has valid
leasehold interests in all of the Lee Acquired Assets and at the Closing good
title to or valid leasehold interests in (and consents to the assignment
thereof) such Lee Acquired Assets shall be transferred to Liberty, free and
clear of any and all Liens except (i) for Lee Permitted Liens, and (ii) any
restriction on assignment of Lee Contracts which is contained in such Lee
Contract or which arises by law.
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4.5 Contracts and Agreements; Defaults.
(a) Part A of Section 4.5 of the Lee Disclosure Letter contains a
list of: (i) all outstanding mortgages, indentures, notes, guarantees,
installment obligations or other contracts or instruments evidencing or
providing any Indebtedness to which Lee is a party and which relate solely to
the Lee Business or by which it or any of its assets are bound and which relate
solely to the Lee Business; (ii) all outstanding contracts containing
noncompetition covenants of Lee which relate solely to the Lee Business; (iii)
all outstanding leases to which Lee is a party and which relate solely to the
Lee Business or by which it is bound and which relate solely to the Lee
Business; (iv) all outstanding contracts of Lee to sell assets, other than in
the ordinary course of business, and which relate solely to the Lee Business;
(v) all collective bargaining agreements of Lee with any labor union or other
employee representative or a group of employees and which relate to the Lee
Business; (vi) any joint venture or partnership agreements to which Lee is a
party relating solely to the Lee Business; and (vii) all other outstanding
contracts to which Lee is a party and which relate solely to the Lee Business or
by which it or any of its assets are bound and which relate solely to the Lee
Business, which require or are likely to require the payment by Lee of an
amount, or require Lee to provide goods or services having a fair market value
or aggregate sales price, of more than $10,000 per annum, except (1) contracts
entered into in the ordinary course of business of Lee that can be terminated by
Lee on 60 or fewer days' notice without penalty, (2) subscriptions to the Lee
Newspapers and contracts for advertising or commercial printing which Lee
entered in the ordinary course of business each involving aggregate amounts of
less than $10,000 per annum, and (3) Lee Excluded Assets. Lee has delivered to
Liberty a correct and complete copy of each written agreement listed on Part A
of Section 4.5 of the Lee Disclosure Letter (the "Lee Material Contracts").
(b) Except as set forth in Part B of Section 4.5 of the Lee
Disclosure Letter, (i) neither Lee, nor, to the Knowledge of Lee, any other
party to any contract, lease, license or other agreement to which Lee is a party
or by which Lee or any of the Lee Acquired Assets are bound (other than
contracts, licenses, leases or other agreements that constitute Lee Excluded
Assets and do not relate solely to the Lee Business) is in material breach of or
default under any such contract, lease, license or other agreement and (ii) no
event has occurred which (after notice or lapse of time or both) would become a
material breach or default by Lee under any such contract, lease, license or
other agreement.
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4.6 Financial Statements; Undisclosed Liabilities.
(a) Attached as Part A of Section 4.6 of the Lee Disclosure Letter
are true and complete copies of (i) the unaudited balance sheet of the Lee
Newspapers as at September 30, 1998 and (ii) the unaudited balance sheet of the
Lee Newspapers as at July 31, 1999 (July 31, 1999 balance sheet is referred to
as the "Lee Balance Sheet"), and the related unaudited statements of income for
the twelve month and ten month periods then ended (collectively, the "Lee
Financial Statements"). Except as disclosed in Part A of Section 4.6 of the Lee
Disclosure Letter, the Lee Financial Statements fairly present in all material
respects the financial position of Lee Newspapers as at September 30, 1998 and
July 31, 1999 and the results of operations for the twelve months ended
September 30, 1998, and the ten months ended July 31, 1999 in accordance with
GAAP, except that the Lee Financial Statements are summary in nature and do not
include the notes and related disclosures required by GAAP.
(b) Except for Lee Excluded Assets and except for cash distributed
to Lee and its Affiliates, the Lee Balance Sheet reflects all of the Lee
Acquired Assets that will be acquired by Liberty at the Closing other than such
assets as are disposed of or consumed in the ordinary course of the Lee Business
and consistent with past practice since July 31, 1999 or such additional assets
as are acquired by the Lee Newspapers in the ordinary course of business since
July 31, 1999.
(c) Except as set forth in Part B of Section 4.6 of the Lee
Disclosure Letter or as reflected, reserved against or otherwise disclosed in
the Lee Balance Sheet and liabilities and obligations incurred in the ordinary
course of business since July 31, 1999, Lee does not have any material
liabilities or obligations related solely to the Lee Business that would have
been required to be reflected or otherwise disclosed by Lee in the Lee Balance
Sheet in accordance with GAAP.
4.7 Business Since July 31, 1999. Except as disclosed in Part A of
Section 4.7 of the Lee Disclosure Letter and except as required or otherwise
contemplated by this Agreement, since July 31, 1999 (i) the Lee Business has
been conducted in all material respects in the ordinary course, consistent with
past practices, (ii) neither the Lee Business nor its condition nor assets has
experienced a Lee Material Adverse Effect and (iii) no event or events has or
have occurred that individually or in the aggregate has or have had or is or are
reasonably likely to have a Lee Material Adverse Effect. Since July 31, 1999,
except as described in Part B of Section 4.7 of the Lee Disclosure Letter, there
has not been:
(a) any material damage, destruction, or loss to the Lee
Acquired Assets outside the ordinary course of business;
(b) any making or authorization of any capital expenditure
relating solely to the Lee Business by Lee in excess of $10,000 individually or
the making or authorization of capital expenditures relating solely to the Lee
Business by Lee of more than $25,000 in the aggregate;
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(c) any sale, transfer, or other disposition of assets or
properties, real, personal, tangible or intangible, or mixed, relating solely to
the Lee Business, by Lee, other than in the ordinary course of business;
(d) other than pursuant to existing collective bargaining
agreements or pursuant to regular salary reviews in the ordinary course of
business consistent with past practices, any increase in the compensation
payable or to become payable to any employees or agents of Lee that are involved
in the Lee Business, or any bonus arrangement made with any thereof; or
(e) no material increase in the operating costs of any of the Lee
Newspapers, whether arising from or in connection with the sale of real property
or otherwise, has occurred.
4.8 Compliance with Law; Litigation; Injunctions. Lee is not in
violation in any material respect of any law, rule, permit, regulation, order,
judgment or decree applicable to it, except as set forth in Part A of Section
4.8 of the Lee Disclosure Letter, the violation of which could reasonably have a
Lee Material Adverse Effect. Except for the matters set forth in Part B of
Section 4.8 of the Lee Disclosure Letter and for claims fully covered by
liability insurance of Lee, (i) there is no action, suit or other proceeding
pending or, to Lee's Knowledge, threatened, at law or in equity, before any
federal, state or municipal court, administrative agency or arbitrator against
Lee and relating to the Lee Newspapers which is reasonably expected to have a
Lee Material Adverse Effect and (ii) Lee is not a party to, or subject to or
bound by, any order, injunction or decree of any court or governmental authority
relating to the Lee Newspapers.
4.9 Licenses. With such exceptions as are set forth in Section 4.9
of the Lee Disclosure Letter (a) all licenses, permits, registrations or
authorizations of any governmental department or agency that are presently
required solely for the operation of the Lee Business as presently conducted
have been duly obtained and are in full force and effect, the absence of which
would have a Lee Material Adverse Effect and (b) no consent, authorization or
approval is required to transfer such licenses, permits, registrations or
authorizations to Liberty (or one or more Affiliates of Liberty as designated by
Liberty) pursuant to this Agreement.
4.10 Taxes. Except as set forth in Section 4.10 of the Lee
Disclosure Letter:
(a) Lee and any consolidated, combined or unitary group of which
Lee is or was a member have timely filed all Tax Returns which are required to
be filed, and all Taxes shown to be due on such Tax Returns have been timely
paid. All such Tax Returns were true and correct in all material respects. On
July 31, 1999, Lee had no liability for Taxes (other than Income Taxes) that
would have been required to be reflected in the Lee Balance Sheet in accordance
with GAAP, except to the extent that such Taxes are reflected, reserved against
or otherwise disclosed in the Lee Balance Sheet or will be paid prior to the
Closing Date. There is no dispute or claim concerning any liability for Taxes of
Lee with respect to the Lee Business that is either (1) claimed or raised by any
authority in writing or (2) as to which any of the directors and officers (or
employees responsible for Tax matters) of Lee has any knowledge
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based upon personal contact with any agent of such authority. Lee has disclosed
on its federal income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the meaning of
Section 6662 of the Code. Lee has withheld and paid over all Taxes required to
have been withheld and paid over in connection with amounts paid or owing to any
employee, creditor, independent contractor, or other third Person.
(b) No property of Lee is subject to a tax benefit transfer lease
subject to the provisions of former Section 168(f)(8) of the Internal Revenue
Code of 1954.
(c) Lee is not a foreign person subject to withholding under
Section 1445 of the Code and the regulations promulgated thereunder, and, at the
Closing Date, Lee shall deliver to Liberty a certificate to that effect.
(d) Lee is not bound by or obligated under any tax sharing or
similar agreement or arrangement, other than related to Lee's consolidated Tax
return filing.
4.11 Affiliated Transactions. Section 4.11 of the Lee Disclosure
Letter sets forth a complete and accurate list of all contracts in connection
with the Lee Business to which Lee on the one hand, and any of its Affiliates on
the other hand, is a party.
4.12 Brokers. Neither Lee nor any of its directors, officers,
employees or Affiliates has employed any broker or finder or has incurred or
will incur any broker's, finder's or similar fees, commissions or expenses, in
each case in connection with the transactions contemplated by this Agreement.
4.13 Labor.
(a) Except as set forth in Part A of Section 4.13 of the Lee
Disclosure Letter, (i) Lee does not have any contracts of employment with any of
its employees, or consulting agreements with any consultants, involved solely in
the Lee Business, (ii) no union has been certified as representing any of Lee's
employees involved in the Lee Business, (iii) Lee is not a party to or currently
negotiating any collective bargaining agreements with respect to its employees
involved in the Lee Business, (iv) to Lee's Knowledge, there is no currently
pending union representation activity involving any employees of Lee involved in
the Lee Business, (v) to Lee's Knowledge, no demand has been made for
recognition by a labor organization by or with respect to any employees of Lee
involved in the Lee Business, and (vi) none of the employees of Lee involved in
the Lee Business is represented by any labor union or organization. Except as
set forth in, Part B of Section 4.13 of the Lee Disclosure Letter, there are no
pending or, to Lee's Knowledge, overtly threatened (i) claims of employment
discrimination, wage and hour claims, OSHA claims, unemployment claims or
worker's compensation claims or (ii) unfair labor practice claims before the
National Labor Relations Board.
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(b) There is not presently pending and during the last five years
there has not been (i) any strike, picketing or work stoppage by any employees
involved solely in connection with the Lee Business or (ii) any application for
certification of a collective bargaining agreement. There is no lockout of any
employee by Lee involved solely in the Lee Business, and no such action is
contemplated by Lee.
4.14 Employee Benefits.
(a) For purposes of this Agreement, an "Employee Benefit Plan" is
(i) each "employee benefit plan," within the meaning of Section 3(3) of ERISA
and (ii) each other retirement, deferred compensation, medical, dental, vision,
disability, educational assistance, dependent care, life insurance, flexible
spending account, cafeteria plan (within the meaning of Code Section 125),
workers compensation, stock option, stock purchase, other stock-based
compensation, severance, vacation pay, other fringe or welfare benefits, change
in control or incentive or bonus plan, fund, policy or arrangement. Section
4.14(a) of the Lee Disclosure Letter lists each Employee Benefit Plan maintained
or contributed to by Lee or any of its ERISA Affiliates for current or former
employees of Lee involved solely in the Lee Business (collectively, "Lee Benefit
Plans"). Lee has delivered or made available to Liberty a copy of each Lee
Benefit Plan (and each trust maintained in connection with any such Lee Benefit
Plan) or a written summary of any material unwritten Lee Benefit Plan and any
summary plan description relating to a Lee Benefit Plan and, with respect to
each Lee Benefit Plan under which liabilities are assumed by Liberty under
Section 10.1 (an "Assumed Lee Benefit Plan") the most recent Internal Revenue
Service ("IRS") Form 5500 and, where applicable, the most recent IRS
determination letter.
(b) Except as set forth in Section 4.14(b) of the Lee Disclosure
with respect to each Assumed Lee Benefit Plan, (i) each such plan is in material
compliance with all applicable laws and regulations and has been administered
substantially in accordance with its terms; and (ii) each such plan intended to
be tax-qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS as to its tax-qualified status under the Code
and, to the Knowledge of Lee, there are no existing circumstances likely to
result in the revocation of any such determination letter. There are no actions,
suits or claims pending or, to Lee's Knowledge, threatened (other than routine
claims for benefits) with respect to any Lee Benefit Plan which are likely to
result in the imposition of liability on Liberty.
(c) Except as set forth in Section 4.14(c) of the Lee Disclosure
Letter, no Lee Benefit Plan is a "single-employer" plan within the meaning of
Section 4001(a)(15) of ERISA or a "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA. Lee has not incurred any liability under Title IV
of ERISA with respect to any Assumed Lee Benefit Plan other than for PBGC
premiums not yet due.
(d) To the Knowledge of Lee, no audit or investigation of any Lee
Benefit Plan by the IRS, the Department of Labor or the PBGC is pending or
threatened.
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(e) All contributions to the Assumed Lee Benefit Plans that will
have been required to be made with respect to periods prior to the Closing Date
under such Assumed Lee Benefit Plans will have been made or accrued as of the
Closing Date.
(f) Neither Lee nor any of its ERISA Affiliates nor, to Lee's
Knowledge, any other Person, has taken any action or failed to take any action
with respect to any Employee Benefit Plan maintained or contributed to or
previously maintained or contributed to by Lee or any of its ERISA Affiliates
for which Lee or any of its ERISA Affiliates may have any liability, contingent
or otherwise, or permitted any circumstance to exist that may subject Liberty or
any Assumed Lee Benefit Plan to any Tax, penalty, fine or other liability under
the Code or ERISA.
(g) Except as set forth in Section 4.14(g) of the Lee Disclosure
Letter, there is no individual who is not, as of the date of this Agreement, an
active employee of Lee or an ERISA Affiliate and who would at any future date be
entitled to any form of reemployment rights with Lee or an ERISA Affiliate with
respect to the Lee Business if (i) there were no exchange of assets pursuant to
this Agreement and (ii) Lee continued to maintain the Lee Business.
4.15 Environmental Matters. Except as set forth on Section 4.15 of
the Lee Disclosure Letter to Lee's Knowledge:
(a) there has not been any past or continuing release or threat of
release of any Hazardous Substance in violation of Environmental Laws into the
environment at, on or from the Lee Real Property or any other real property
currently or previously leased or owned by Lee and used in the Lee Business and
there are no Hazardous Substances at, on or under the Lee Real Property in
violation of Environmental Laws;
(b) there have been no Hazardous Substances generated solely in
connection with the Lee Business that have been disposed of or come to rest at
any site that has been included in any federal, state or local priority list of
hazardous or toxic waste sites published by any governmental body, agency or
authority;
(c) (i) there are no underground or above-ground storage tanks
located on the Lee Real Property;
(ii) there are no PCBs or PCB-containing equipment used or
stored on the Lee Real Property;
(d) a copy of any environmental investigations, studies, audits,
tests, reviews or analyses relating to the Lee Acquired Assets conducted by Lee
or any consultant engaged by Lee within the last five years, if any, have
previously been provided to Liberty;
(e) Lee has operated in compliance with all applicable
Environmental Laws, the violation of which could reasonably be expected to have
a Lee Material Adverse Effect;
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(f) Lee has not received any directive, order or notice from any
government body alleging any violation of or failure to comply with
Environmental Laws at the Lee Real Property by Lee;
(g) Lee has not received any directive, order or notice from any
government body or any other Person alleging that Lee is actually or potentially
liable under Environmental Laws for the costs of environmental investigation or
remediation of the Lee Real Property, or other real property to which Hazardous
Substances generated by Lee in connection with a Lee Business were transferred
for disposal; and
(h) The Lee Real Property is not subject to any Lien, securing the
costs of environmental remediation, arising under Environmental Laws.
4.16 Intangible Property.
(a) Except for Lee Excluded Assets, Lee owns or possesses valid,
adequate and enforceable licenses or other rights to use all Lee Intangible
Property used solely in connection with the Lee Business as currently conducted.
There are no existing, or to the Knowledge of Lee, overtly threatened claims of
any third Person based on the use by Lee, or challenging the ownership, use,
scope, enforceability or validity, of any of the Lee Intangible Property used in
the Lee Business. To the Knowledge of Lee, there is no infringing use by any
Person of the Lee Intangible Property used in the Lee Business. Lee's use of the
Lee Intangible Property does not infringe on the rights of any other Person.
(b) All Lee Copyrights and Lee Trademarks described in Parts A and
B, respectively, of Section 4.16(b) of the Lee Disclosure Letter are
transferable to Liberty without the consent of any third party, and Section
4.16(b) constitutes a complete listing of all such Lee Copyrights and Lee
Trademarks material to the Lee Business. The Lee Business possesses valid
licenses for all material software used therein.
(c) Except as otherwise disclosed in Section 4.16(c) of the Lee
Disclosure Letter, any reprogramming required to permit the proper functioning
(but only to the extent that such proper functioning would otherwise be impaired
by the occurrence of the year 2000) in and following the year 2000 of any
software owned by or licensed to or used by the Lee Business, or the computer
systems and other equipment containing embedded microchips of the Lee Business,
in either case owned or operated by or used or relied upon in the conduct of
such business (including any such systems and other equipment supplied by others
or with which the computer systems of the Lee Business interface), and the
testing of all such software, systems and other equipment as so reprogrammed,
has been completed and paid for in full and such software, systems and other
equipment shall function properly, without material errors or omissions, upon
the occurrence of the year 2000 (but only to the extent that such proper
functioning would otherwise be impaired by the occurrence of the year 2000).
4.17 Insurance. All policies of insurance to which Lee is a party
or which provide insurance coverage to Lee, taken together, provide adequate
insurance coverage for the
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material Lee Acquired Assets and Lee for all risks to which the material Lee
Acquired Assets and Lee are normally exposed in the ordinary course of the Lee
Business.
4.18 Advertisers, Subscribers, Circulation. Except as disclosed in
Section 4.18 of the Lee Disclosure Letter, to Lee's Knowledge, none of the
advertisers that currently represent the Lee Newspapers' ten largest advertisers
intends to materially reduce such purchases. Set forth on Section 4.18 of the
Lee Disclosure Letter is (i) the total paid circulation and the total unpaid
circulation for each Lee Newspaper as of December 31, 1998 and as of July 31,
1999, (ii) a list of the ten businesses or entities that generated the greatest
amount of advertising revenues for each Lee Newspaper during the periods from
October 1, 1997 through September 30, 1998 and October 1, 1998 through June 30,
1999 and (iii) a schedule of all sales during the period from October 1, 1998
through June 30, 1999 of, commitments during such period to sell, or
representations during such period that it will sell, advertising space in any
Lee Newspaper to any party involving the receipt of non-cash consideration in
excess of $2,500. The Lee Newspapers have no lifetime subscription liabilities.
4.19 Real Property.
(a) The Lee Real Property complies in all material respects with
all zoning, building, fire, use restriction, air, water or other pollution
control, environmental protection, waste disposal, safety or health codes,
ordinances, laws, rules or regulations. All of the buildings and other
improvements located upon the Lee Real Property are in a good state of repair,
reasonable wear and tear excepted.
(b) No condemnation proceedings have been instituted or, to the
Knowledge of Lee, threatened against Lee or the Lee Real Property.
(c) Except as otherwise described in Section 4.19 of the Lee
Disclosure Letter, all buildings and structures located on the Lee Real Property
are located completely within the boundary lines of the Lee Real Property, no
buildings, structure or other improvements owned by others encroach onto or
under the Lee Real Property, and the Lee Real Property has access to public
roads. Lee has all easements and rights necessary to conduct the Lee Business on
the Lee Real Property in the manner presently conducted.
4.20 Employment Matters. Except as otherwise disclosed in Section
4.20 of the Lee Disclosure Letter, since July 1, 1999, Lee has not transferred,
or permitted or solicited the transfer of, any employee involved in the Lee
Business to another newspaper or business owned or operated by Lee or any of its
Affiliates.
4.21 Accuracy of Representations. No representation or warranty
made by Lee in this Agreement or any document delivered, or to be delivered, by
or on behalf of Lee pursuant hereto, including the Lee Disclosure Letter,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading; provided, however, that Lee may submit, at any time up to the end of
the Business Day two Business Days prior to the Closing Date, a revised version
of the Lee Disclosure
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Letter (and any attachment or schedule thereto), which shall amend the Lee
Disclosure Letter only upon being accepted by Liberty in writing. Liberty
acknowledges that its sole remedy for any breach of a representation or warranty
caused by Liberty's refusal to accept an amended Lee Disclosure Letter shall be
termination of this Agreement in accordance with Section 9.1(c).
ARTICLE 5
[INTENTIONALLY LEFT BLANK]
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF LIBERTY
6.1 Liberty's Closing Conditions. The obligations of Liberty under
this Agreement to effect the Closing are, at its option, subject to the
fulfillment of the following conditions prior to or at the Closing, each of
which may be waived (as conditions to its obligations) by Liberty in its
absolute discretion:
(a) Representations, Warranties, Covenants.
(i) The representations and warranties of Lee contained in
Article 4 of this Agreement shall be true and correct in all material
respects as though such representations and warranties were made, as
written herein, immediately prior to the Closing (except to the extent
changes are permitted, required or otherwise contemplated pursuant to
this Agreement) provided, however, if any such representation or
warranty is already qualified by materiality in any manner (including,
but not limited to, any materiality qualification contained in a
definition of a capitalized term used in such representation or
warranty), for purposes of determining whether this condition has been
satisfied, such representation or warranty as so qualified must be true
and correct in all respects;
(ii) Lee shall have performed and complied in all material
respects with each and every covenant and agreement required by this
Agreement to be performed or complied with by it at or prior to the
Closing; and
(iii) Lee shall have furnished Liberty with a certificate,
dated the Closing Date and duly executed on behalf of Lee by an officer
of Lee, to the effect that the conditions set forth in clauses (i) and
(ii) of this Section 6.1(a) have been satisfied.
(b) Proceedings. No action or proceeding shall have been instituted or
threatened prior to or on the Closing Date before any court or governmental body
or authority pertaining to the transactions contemplated by this Agreement or
the Ancillary Instruments, the result of
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which could prevent, or in any way limit or make illegal, the consummation of
such transactions or operation of the Lee Newspapers after the Closing. No
United States or state governmental authority or other agency or commission or
United States or state court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order (whether temporary, preliminary, or permanent) that is
in effect and has the effect of limiting or prohibiting consummation of the
transactions contemplated by this Agreement.
(c) Consents Under Contracts. Lee shall have obtained and
delivered to Liberty all consents, waivers and approvals required under any Lee
Material Contract (without any materially adverse provision or condition) to (i)
permit the valid execution, delivery and performance by Lee of this Agreement
and the Ancillary Instruments or (ii) prevent any Lee Material Contract from
terminating or being amended prior to its scheduled termination as a result of
the consummation of the transactions contemplated hereby and thereby.
(d) Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent, authorization
or approval of which is necessary under any applicable law, rule, order or
regulation for the consummation of the transactions contemplated by this
Agreement and the Ancillary Instruments shall have consented to, authorized,
permitted or approved such transactions, and the waiting period (and any
extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder (the "HSR
Act"), applicable to the transactions contemplated by this Agreement and the
Ancillary Instruments shall have expired or been terminated without any
condition attached to such expiration or termination.
(e) Noncompetition/Nonsolicitation Agreement. Lee and Liberty
shall have entered into a Noncompetition/Nonsolicitation Agreement, dated the
Closing Date, in a mutually agreeable form.
(f) Real Estate Documents. Liberty shall have obtained, at Lee's
expense, each of the following, in form and substance reasonably satisfactory to
Liberty, covering the Lee Real Property.
(i) An ALTA 1990 owner's title policy (including extended
coverage over the standard printed exceptions, access, location,
environmental lien, survey and comprehensive endorsements) insuring
title in Liberty (or one or more Affiliates of Liberty designated by
Liberty) of each parcel of owned Lee Real Property and all recorded
easements appurtenant thereto upon Closing, subject only to the Lee
Permitted Liens, in the amount set forth with respect to each such
parcel on SCHEDULE 6.1(F)(I) attached hereto, together in each case
with any title insurance affidavit signed by Lee or its Affiliates
required by the title insurance company issuing such policy and copies
of all documents referenced in the policy as exceptions.
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(ii) An as-built survey relating to each parcel of owned Lee
Real Property which survey shall: (i) indicate the location, legal
description and area and square feet of each parcel of owned Lee Real
Property, (ii) locate all easements, utilities (including connections
to public streets), parking facilities, covenants and restrictions and
rights of way, (iii) indicate adjoining streets, building lines,
surface improvements, encroachments, vehicular access and parking
requirements, (iv) identify which portions of owned Lee Real Property
are located in a 100 year flood plain area as identified under the
National Flood Insurance Program and (v) satisfy the Minimum Standard
Detail Requirements for ALTA/ACSM (1992) Land Title Surveys, including
Table A requirements 3, 4, 6, 7, 8, 9, 10, 11 and 13.
Lee shall have delivered to Liberty such other documents as may be reasonably
necessary to consummate the acquisition of the owned Lee Real Property effected
through a "New York style" escrow closing, including, but not limited to, escrow
instructions, any releases and settlement agreements from existing creditors of
Lee or its Affiliates which may be necessary to assure delivery of title to the
owned Lee Real Property (including, but not limited to, the Lee Real Property
owned by Affiliates of Lee), subject only to Lee Permitted Liens.
(g) Environmental Reports. Liberty shall have obtained, at Lee's
expense, (i) an environmental assessment evaluation "Phase I" report with
respect to each parcel of the owned Lee Real Property designated by Liberty (the
"Lee Environmental Reports") from an environmental consultant selected, and
directed as to the scope thereof, by Lee and (ii) a repair plan to reseal the
Ottumwa sumps and to evaluate the integrity of, and, if necessary, repair or
replace any broken or leaking pumps leading to or from such sumps with respect
to the Ottumwa Pre-Closing Sump Liability, which plan shall be acceptable to
Liberty, in its sole discretion (the "Sump Resealing Plan"). Liberty may
undertake such further inspections and testing at its expense after the date
hereof and prior to the Closing with respect to the owned Lee Real Property.
Liberty shall be satisfied, in Liberty's sole discretion, that all such
environmental reports, inspections and testing do not disclose conditions or the
possibility of conditions which (a) might be expected to impose a material
liability on Liberty (or one or more Affiliates of Liberty) under applicable
laws for clean-up or other costs or (b) may make it difficult to obtain
financing secured by the owned Lee Real Property. Lee shall have completed, at
Lee's expenses, the repair activities set forth in the Sump Resealing Plan and
the disposal of the containers containing waste relating thereto, given such
repair activities and disposal are in accordance with all applicable
Environmental Laws, and Liberty shall, in its sole discretion, be satisfied
therewith.
(h) Closing Documents. Lee shall have delivered to Liberty the
documents specified in Section 2.3(b) hereof.
(i) Leases. Liberty shall have received from each landlord under a
lease of the leased Lee Real Property an estoppel certificate in form and
substance reasonably satisfactory to Liberty and covering such other matters as
Liberty reasonably may require.
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(j) Foreign Person. Liberty shall have received from Lee an
affidavit (1) confirming its representation in Section 4.10(c), (2) setting
forth Lee's taxpayer identification number, and (3) granting Liberty permission
to furnish a copy of such affidavit to the Internal Revenue Service.
(k) Transition Services. Liberty shall have received from Lee a
Transition Services Agreement, referred to in Section 11.20, duly executed by
Lee and acceptable to Liberty, and such agreement shall be in full force and
effect.
(l) Additional Financial Statements. Lee shall have provided to
Liberty the Lee financial statements, in such form and prepared in accordance
with Section 4.6(a), for any month-end occurring after July 31, 1999 within 15
days of such month-end. If the Closing will occur prior to 15 days after a
month-end, Lee shall not be obligated to provide such financial statements for
such month-end, but Liberty shall be permitted to make inquiry of Lee management
of trends and other information with respect to such Lee financial statements
not yet available for any month then ended, and there shall be no Lee Material
Adverse Effect shown or expressed therein in the Lee Business.
(m) License Agreement. Liberty shall have received from Lee the
License Agreement, duly executed by Lee.
(n) Aledo Purchase Agreement. At the Closing, Liberty and Lee
shall have consummated the transactions contemplated by the Aledo Purchase
Agreement.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF LEE
7.1 Lee's Closing Conditions. The obligations of Lee under this
Agreement to effect the Closing are, at its option, subject to the fulfillment
of the following conditions prior to or at the Closing Date, each of which may
be waived (as conditions to its obligations) by Lee in its absolute discretion:
(a) Representations, Warranties, Covenants.
(i) The representations and warranties of Liberty contained
in Article 3 of this Agreement shall be true and correct in all
material respects as though such representations and warranties were
made, as written herein, immediately prior to the Closing (except to
the extent changes are permitted, required or otherwise contemplated
pursuant to this Agreement) provided, however, if any such
representation or warranty is already qualified by materiality in any
manner (including, but not limited to, any materiality qualification
contained in a definition of a capitalized term used in such
representation or warranty), for purposes of determining whether this
condition has
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been satisfied, such representation or warranty as so qualified must be
true and correct in all respects;
(ii) Liberty shall have performed and complied in all
material respects with each and every covenant and agreement required
by this Agreement to be performed or complied with by them at or prior
to the Closing Date; and
(iii) Liberty shall have furnished Lee with a certificate,
dated the Closing Date and duly executed on behalf of Liberty by an
officer of Liberty, to the effect that the conditions set forth in
clauses (i) and (ii) of this Section 7.1(a) have been satisfied.
(b) Proceedings. No action or proceeding shall have been
instituted or threatened prior to or on the Closing Date before any court or
governmental body or authority pertaining to the transactions contemplated by
this Agreement or the Ancillary Instruments, the result of which could prevent,
or in any way limit or make illegal, the consummation of such transactions. No
United States or state governmental authority or other agency or commission or
United States or state court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order (whether temporary, preliminary, or permanent) that is
in effect and has the effect of limiting or prohibiting consummation of the
transactions contemplated by this Agreement.
(c) Consents Under Contracts. Liberty shall have obtained and
delivered to Lee all consents, waivers and approvals required under any Liberty
Material Contract (without any materially adverse provision or condition) to (i)
permit the valid execution, delivery and performance by Liberty of this
Agreement and the Ancillary Instruments or (ii) prevent any Liberty Material
Contract from terminating or being amended prior to its scheduled termination as
a result of the consummation of the transactions contemplated hereby and
thereby.
(d) Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent, authorization
or approval of which is necessary under any applicable law, rule, order or
regulation for the consummation of the transactions contemplated by this
Agreement and the Ancillary Instruments shall have consented to, authorized,
permitted or approved such transactions, and the waiting period (and any
extensions thereof) under the HSR Act applicable to the transactions
contemplated by this Agreement and the Ancillary Instruments shall have expired
or been terminated without any condition attached to such expiration or
termination.
(e) Noncompetition/Nonsolicitation Agreement. Lee and Liberty
shall have entered into a Noncompetition/Nonsolicitation Agreement, dated the
Closing Date, in a mutually agreeable form.
(f) Real Estate Documents. Lee shall have obtained, at Liberty's
expense, each of the following, in form and substance reasonably satisfactory to
Lee, covering the Liberty Real Property:
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(i) An ALTA 1990 owner's or leasehold title policy
(including extended coverage over the standard printed exceptions,
access, location, environmental lien, survey and comprehensive
endorsements) insuring title in Lee of each parcel of owned Liberty
Real Property and all recorded easements appurtenant thereto upon the
Closing Date, subject only to the Liberty Permitted Liens, in the
amount set forth with respect to each such parcel on SCHEDULE
7.1(F)(I), together in each case with any title insurance affidavit
signed by Liberty or its Affiliates required by the title insurance
company issuing such policy and copies of all documents referenced in
the policy as exceptions.
(ii) An as-built survey relating to each parcel of owned
Liberty Real Property which survey shall: (i) indicate the location,
legal description and area and square feet of each parcel of owned
Liberty Real Property, (ii) locate all easements, utilities (including
connections to public streets), parking facilities, covenants and
restrictions and rights of way, (iii) indicate adjoining streets,
building lines, surface improvements, encroachments, vehicular access
and parking requirements, (iv) identify which portions of the owned
Liberty Real Property are located in a 100 year flood plain area as
identified under the National Flood Insurance Program and (v) satisfy
the Minimum Standard Detail Requirements for ALTA/ACSM (1992) Land
Title Surveys, including Table A requirements 3, 4, 6, 7, 8, 9, 10, 11
and 13.
Liberty shall have delivered to Lee such other documents as may be reasonably
necessary to consummate the acquisition of the owned Liberty Real Property
effected through a "New York style" escrow closing, including, but not limited
to, escrow instructions, any releases and settlement agreements from existing
creditors of Liberty or its Affiliates which may be necessary to assure delivery
of title to the owned Liberty Real Property (including, but not limited to, the
Liberty Real Property owned by Affiliates of Liberty), subject only to Liberty
Permitted Liens.
(g) Environmental Reports. Lee shall have obtained, at Liberty's
expense, an environmental assessment evaluation "Phase I" report with respect to
each parcel of the owned Liberty Real Property designated by Lee from an
environmental consultant selected, and directed as to the scope thereof, by
Liberty. Lee may undertake such further inspections and testing at its expense
after the date hereof and prior to the Closing with respect to the owned Liberty
Real Property. Lee shall be satisfied, in Lee's sole discretion, that all such
environmental reports, inspections and testing do not disclose conditions or the
possibility of conditions which (a) might be expected to impose a material
liability on Lee under applicable laws for clean-up or other costs or (b) may
make it difficult to obtain financing secured by the Liberty Real Property.
(h) Closing Documents. Liberty shall have delivered to Lee the
documents specified in Section 2.3(a) hereof.
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(i) Leases. Lee shall have received from each landlord under a
lease of the leased Liberty Real Property an estoppel certificate in form and
substance reasonably satisfactory to Lee and covering such other matters as Lee
reasonably may require.
(j) Foreign Person. Lee shall have received from Liberty an
affidavit (1) confirming its representation in Section 3.10(c), (2) setting
forth Liberty's taxpayer identification number, and (3) granting Lee permission
to furnish a copy of such affidavit to the Internal Revenue Service.
(k) Transition Services. Lee shall have received from Liberty a
Transition Services Agreement, referred to in Section 11.20, duly executed by
Liberty and acceptable to Lee, and such agreement shall be in full force and
effect
(l) Additional Financial Statements. Liberty shall have provided
to Lee the Liberty financial statements, in such form and prepared in accordance
with Section 3.6(a), for any month-end occurring after July 31, 1999 within 15
days of such month-end. If the Closing will occur prior to 15 days after a
month-end, Liberty shall not be obligated to provide such financial statements
for such month-end, but Lee shall be permitted to make inquiry of Liberty
management of trends and other information with respect to such Liberty
financial statements not yet available for any month then ended, and there shall
be no Liberty Material Adverse Effect shown or expressed therein in the Liberty
Business.
(m) License Agreement. Lee shall have received from Liberty the
License Agreement, duly executed by Liberty.
(n) Aledo Purchase Agreement. At the Closing, Liberty and Lee
shall have consummated the transactions contemplated by the Aledo Purchase
Agreement.
ARTICLE 8
SURVIVAL; INDEMNIFICATION
8.1 Survival. All representations, warranties, covenants and
agreements contained in this Agreement, the Liberty Disclosure Letter, the Lee
Disclosure Letter or in any exhibit, certificate, agreement, document or
statement delivered pursuant hereto, (an "Ancillary Instrument"), shall survive
(and not be affected in any respect by) the Closing Date and any investigation
conducted by any party hereto. Notwithstanding the foregoing, the
representations and warranties contained in or made pursuant to this Agreement
or any Ancillary Instrument, respectively, shall terminate on, and no claim or
action with respect thereto may be brought after, the date that is twelve months
after the Closing Date, except that (1) the representations and warranties
contained in Sections 3.10, 3.14, 3.15, 4.10, 4.14 and 4.15 hereof shall
terminate on, and no claim or action with respect thereto may be brought after,
the expiration date of the applicable statute of limitations (giving effect to
any waiver, stay or extension thereof), and (2) the representations and
warranties contained in Sections 3.4
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and 4.4 hereof shall survive in perpetuity. The representations and warranties
which terminate on the date that is twelve months after the Closing Date, and
upon the expiration date of the applicable statute of limitations (giving effect
to any waiver, stay or extension thereof), and the liability of any party hereto
with respect thereto pursuant to this Article 8, shall not terminate with
respect to any claim, whether or not fixed as to liability or liquidated as to
amount, with respect to which the Indemnifying Party (as defined in Section
8.2(c)) has been given written notice setting forth the material facts upon
which the claim for indemnification is based and, if feasible, a reasonable
estimate of the amount of the claims prior to the date that is twelve months
after the Closing Date or that is the date of expiration of the applicable
statute of limitations, as the case may be.
8.2 Indemnification. The parties hereto shall indemnify each
other as set forth below:
(a) Subject to Section 8.1 and to the other provisions of
this Section 8.2, Liberty hereby agrees to indemnify and hold Lee harmless from,
and to reimburse Lee for any Losses (including, without limitation, any
reasonable Legal Expenses) which result from or arise out of:
(i) the breach of any representation or warranty of Liberty
contained in this Agreement or any Ancillary Instrument;
(ii) the breach by Liberty of, or failure by Liberty, to
perform any of its respective covenants or agreements contained in this
Agreement or any Ancillary Instrument;
(iii) the Liberty Retained Liabilities;
(iv) the Lee Assumed Liabilities;
(v) the operation of the Lee Business or the ownership of
the Lee Acquired Assets following the Closing Date; or
(vi) non-compliance with any applicable bulk sales law
insofar as it relates to the Liberty Acquired Assets;
provided, however, that with respect to the Liberty Newspapers (A) Liberty shall
not be responsible for any Losses with respect to the matters referred to in
clause (i) of this Section 8.2(a) until the cumulative aggregate amount of such
Losses exceeds $140,000 (the "Liberty Basket Amount"), in which case Liberty
shall then be liable only for such Losses in excess of the Liberty Basket Amount
and (B) the cumulative aggregate indemnity obligation of Liberty under Section
8.2(a)(i) shall in no event exceed $1,400,000.
As used herein, "Legal Expenses" shall mean the fees, costs and
expenses of any kind incurred by any Person indemnified herein and its counsel
in investigating, preparing for,
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defending against or providing evidence, producing documents or taking other
action with respect to any threatened or asserted claim.
(b) Subject to Section 8.1 and to the other provisions of this
Section 8.2, Lee hereby agrees to indemnify and hold Liberty harmless from, and
to reimburse Liberty for any Losses (including, without limitation, any
reasonable Legal Expenses) which result from or arise out of:
(i) the breach of any representation or warranty of Lee
contained in this Agreement or any Ancillary Instrument;
(ii) the breach by Lee of or failure by Lee to perform any
of its respective covenants or agreements contained in this Agreement
or any Ancillary Instrument;
(iii) the Lee Retained Liabilities (including, but not
limited to, the Ottumwa Pre-Closing Sump Liability);
(iv) the Liberty Assumed Liabilities;
(v) the operation of the Liberty Business or the ownership
of the Liberty Acquired Assets following the Closing Date; or
(vi) non-compliance with any applicable bulk sales law
insofar as it relates to the Lee Acquired Assets;
provided, however, that (A) Lee shall not be responsible for any Losses with
respect to the matters referred to in clause (i) of this Section 8.2(b), until
the cumulative aggregate amount of such Losses exceeds $140,000 (the "Lee Basket
Amount"), in which case Lee shall then be liable only for such Losses in excess
of the Lee Basket Amount and (B) the cumulative aggregate indemnity obligation
of Lee under Section 8.2(b)(i) shall in no event exceed $1,400,000;
provided further, however, that Lee's obligation to indemnify Liberty under
Section 8.2(b)(iii) with respect to the Ottumwa Pre-Closing Sump Liability shall
only arise in the event that Liberty incurs any Losses in connection with or in
relation to the Ottumwa Pre-Closing Liability as a result of or in connection
with (a) an action, claim, charge, proceeding, investigation, order, judgment or
decree relating to the Ottumwa Pre-Closing Sump Liability and brought by or
initiated by a federal, state, local or municipal court, administrative agency
or other governmental authority (including, but not limited to, the U.S.
Environmental Protection Agency or Iowa Department of Natural Resources)
(collectively "Governmental Agency or Agencies"), an unaffiliated third party
purchaser of the owned Lee Real Property located in Ottumwa, Iowa or another
unaffiliated third party or (b) any remediation, clean-up or indemnity of or
with respect to the Ottumwa Pre-Closing Sump Liability which is required, as an
express condition of purchase by an unaffiliated third party prospective
purchaser of the owned Lee Real Property located in Ottumwa, Iowa.
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(c) As promptly as practicable, and in any event within 30 days,
after Lee or any of its Affiliates, on the one hand, or Liberty or any of its
Affiliates, on the other hand, shall receive any notice of, or otherwise become
aware of, the commencement of any action, suit or proceeding, the assertion of
any claim, or the incurrence of any Loss, for which indemnification is provided
for (assuming, only for the purposes of this Section 8.2(c) and of the terms
defined in this Section 8.2(c), that the Liberty Basket Amount or the Lee Basket
amount, as the case may be, was zero) by Section 8.2(a) or 8.2 (b) (an
"Indemnification Event"), the party entitled to such indemnification (an
"Indemnified Party") shall give written notice (an "Indemnification Claim") to
the party from which such indemnification is (or, under such assumption, could
be) sought (an "Indemnifying Party") describing in reasonable detail the
Indemnification Event and the basis on which indemnification is (or, under such
assumption, could be) sought. If the Indemnifying Party is not so notified by
the Indemnified Party within 30 days after the date of the receipt by the
Indemnified Party or any of its Affiliates of notice of, or of the Indemnified
Party or any of its Affiliates otherwise becoming aware of, any particular
Indemnification Event, the Indemnifying Party shall be relieved of all liability
hereunder in respect of such Indemnification Event (or the facts or
circumstances giving rise thereto) to the extent that such Indemnifying Party is
prejudiced or harmed as a consequence of such failure (and, to such extent, the
Losses resulting from such Indemnification Event shall be disregarded for
purposes of determining whether the Liberty Basket Amount or the Lee Basket
Amount, as the case may be, has been exceeded).
(d) If any Indemnification Event involves the claim of any third
party (a "Third-Party Claim"), the Indemnifying Party shall (whether or not the
Indemnified Party is entitled to claim indemnification under Section 8.2(a) or
8.2 (b),as the case may be) be entitled to, and the Indemnified Party shall
provide the Indemnifying Party with the right to, participate in, and assume
sole control over, the defense and settlement of such Third-Party Claim (with
counsel reasonably satisfactory to the Indemnified Party); provided, however,
that (i) the Indemnified Party shall be entitled to participate in the defense
of such Third-Party Claim and to employ counsel at its own expense to assist in
the handling of such Third-Party Claim, and (ii) the Indemnifying Party shall
obtain the prior written approval of the Indemnified Party before entering into
any settlement of such Third-Party Claim or ceasing to defend against such
Third-Party Claim, such approval not to be unreasonably withheld or delayed, if
(x) as a result of such settlement or ceasing to defend, injunctive or other
equitable relief would be imposed against the Indemnified Party or (y) in the
case of a settlement, the Indemnified Party would not thereby receive from the
claimant an unconditional release from all further liability in respect of such
Third-Party Claim. After written notice by the Indemnifying Party to the
Indemnified Party of its election to assume control of the defense of any such
Third-Party Claim, the Indemnifying Party shall not be liable hereunder to
indemnify any Person for any Legal Expenses subsequently incurred in connection
therewith except as provided below. If the Indemnifying Party does not assume
sole control over the defense or settlement of such Third-Party Claim as
provided in this Section 8.2(d) within a reasonable period of time, or, after
assuming such control, fails to defend against such Third-Party Claim (it being
agreed that settlement of such Third-Party Claim does not constitute such a
failure to defend), the Indemnified Party shall have the right (as to itself) to
defend and, upon obtaining the written
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consent of the Indemnifying Party, which shall not be unreasonably withheld or
delayed, settle the claim in such manner as it may deem appropriate, and the
Indemnifying Party shall promptly reimburse the Indemnified Party therefor in
accordance with (and to the extent provided for (subject to, and not
disregarding, the provisos to Section 8.2(a) or 8.2(b) in Section 8.2(a) or
8.2(b)), as appropriate. Notwithstanding the foregoing provisions of this
Section 8.2(d), the Indemnified Party shall have the right at all times to take
over and assume the control (as to itself) of the defense or settlement of any
Third-Party Claim; provided, however, that in such event (x) the Indemnifying
Party shall cease to have any obligation under Section 8.2(a) or 8.2(b), as the
case may be, in respect of such Third-Party Claim and (y) all Losses resulting
from such Third-Party Claim will not be considered for purposes of determining
whether the Liberty Basket Amount or the Lee Basket Amount, as the case may be,
has been exceeded. The Indemnifying Party shall not be liable under this Section
8.2 for any settlement or compromise effected without its consent.
(e) The Indemnified Party and the Indemnifying Party shall each
cooperate (and shall each cause its Affiliates to cooperate) with the other in
the defense of any Third-Party Claim pursuant to Section 8.2(d). Without
limiting the generality of the foregoing, each such Person shall furnish the
other such Person with such documentary or other evidence as is then in its or
any of its Affiliate's possession as may reasonably be requested by the other
Person for the purpose of defending against any such Third-Party Claim.
(f) Upon payment of any amount pursuant to any Indemnification
Claim, the Indemnifying Party shall be subrogated, to the extent of such
payment, to all of the Indemnified Party's rights of recovery against any third
party with respect to the matters to which such Indemnification Claim relates.
(g) Liberty and Lee each agree that: (i) if the Closing occurs,
the rights to indemnification set forth in Section 8.2 (a) or 8.2(b) shall,
except as otherwise required by law, be the sole and exclusive remedy that any
Indemnified Party has against the other party with respect to breaches of
representations or warranties under this Agreement; (ii) prior to the Closing
Date, the sole and exclusive remedies of Liberty and Lee for breaches of
representations or warranties hereunder shall be either of the following: (A) to
enforce its rights set forth in Section 11.18 or (B) to terminate this Agreement
as provided in Section 9.1; and (iii) at the Closing each party will confirm to
the other in writing whether it has actual knowledge of an Indemnification Event
existing at the Closing Date and a description of any such claim. Neither party
shall have an obligation to the other under Section 8.2(a) or 8.2 (b) with
respect to any Indemnification Event actually known to the other party and not
so disclosed at the Closing. All claims for indemnification must be asserted, if
at all, in good faith and in accordance with the provisions of Section 8.2(c)
hereof and, to the extent applicable to such claims, within the relevant time
period set forth in the last sentence of Section 8.1 hereof.
(h) If at any time subsequent to the receipt by an Indemnified
Party of an indemnity payment hereunder, such Indemnified Party (or any
Affiliate thereof) receives any recovery, settlement or other similar payment
with respect to the Loss for which it received such
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indemnity payment (the "Recovery"), such Indemnified Party shall promptly pay to
the Indemnifying Party an amount equal to the amount of such Recovery, less any
expense, including reasonable attorneys' fees, incurred by such Indemnified
Party (or its Affiliates) in connection with such Recovery, but in no event
shall any such payment exceed the amount of such indemnity payment.
ARTICLE 9
TERMINATION
9.1 Termination of Agreement. This Agreement may be terminated at
any time on or prior to the Closing Date:
(a) by the mutual written consent of Liberty and Lee;
(b) by either Liberty or Lee, if the Closing Date has not taken place
by September 30, 1999 and the terminating party is not in material breach of its
obligations hereunder;
(c) by Liberty as provided in Section 4.21;
(d) by Lee as provided in Section 3.21; or
(e) by either Liberty or Lee, if any court or governmental body of
competent jurisdiction in the United States shall have issued an order, stay,
judgment or decree, or taken any other action, permanently prohibiting the
transactions contemplated by this Agreement, and such order, stay, judgment,
decree, or other action, shall have become final and non-appealable; or
(f) by either Liberty or Lee in the event the Aledo Purchase
Agreement is terminated by either Lee or Liberty in accordance with its terms.
If Liberty or Lee shall terminate this Agreement pursuant to the
foregoing provisions of this Section 9.1, such termination shall be effected by
written notice to the other party specifying the provision pursuant to which
such termination is made.
9.2 Liabilities Upon Termination. Except for the terms of Section
11.2 hereof (and, to the extent relevant thereto, the terms of Sections 8.2,
11.4, 11.5, 11.6, 11.7, 11.14, 11.16, 11.17 and 11.19 hereof), which shall
survive any termination of this Agreement, upon the termination of this
Agreement pursuant to Section 9.1 hereof, this Agreement shall forthwith become
null and void, and no party hereto or any of its officers, directors, employees,
agents, consultants, stockholders or principals shall have any rights,
liabilities or obligations hereunder or with respect hereto; provided, however,
that nothing contained in Section 9.1 or this Section 9.2 shall (i) relieve any
party from liability for any willful failure to comply with any covenant or
agreement contained herein (and the terms of Sections 8.2, 11.4, 11.5, 11.6,
11.7, 11.14,
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11.16, 11.17 and 11.19 hereof shall apply to any such failure) or (ii) affect
the Confidentiality Agreement, which shall survive any termination of this
Agreement in accordance with the Confidentiality Agreement's terms and
conditions.
ARTICLE 10
EMPLOYEE AND CERTAIN TAX MATTERS
10.1 Liberty Employee Matters.
(a) (i) Liberty shall, after notifying Lee of its intent thereto and
after first allowing Lee to be present at and to participate during or
in connection with such notification (if Lee desires), provide all
current Liberty employees involved solely in the Liberty Business with
all appropriate notification of the sale of the Liberty Business and
the termination of each such employee's employment with Liberty as a
result thereof.
(ii) Lee shall have no obligation to hire any of Liberty's
current or former employees involved in the Liberty Business. Promptly
after the date hereof, Lee shall have the right to review all
employment records and files of the Liberty employees involved solely
in the Liberty Business, after Liberty obtains a written release of
each such employee's personnel file from such employee, and to
interview current Liberty employees involved solely in the Liberty
Business for employment after the Closing Date. Lee may make an offer
of employment to any Liberty Business employee involved solely in the
Liberty Business, which offer shall be subject to, and effective,
immediately following the Closing Date. Any employee of Liberty
involved in the Liberty Business who commences employment with Lee as
of the Closing Date is referred to herein as a "Liberty Transferred
Employee."
(b) Except to the extent prohibited by the Code, ERISA, or other
applicable law, each Employee Benefit Plan established or maintained by Lee or
its ERISA Affiliates for Liberty Transferred Employees ("Lee Plan") shall grant
credit to each Liberty Transferred Employee for all service on or prior to the
Closing Date with Liberty or any predecessor or ERISA Affiliate of Liberty, for
purposes of eligibility, vesting and seniority; provided, however, that such
credit shall only be provided to the extent that such service is documented by
Liberty substantially contemporaneously with the Closing Date and in a manner
reasonably satisfactory to Lee; provided further, no such credit shall be
provided with respect to any group health plan (other than a health flexible
spending arrangement) maintained by Lee or an ERISA Affiliate; provided further,
that credit for such service shall not be required for any purpose under any
post-retirement medical or life insurance plan or for purposes of benefit
accrual under any plan; and provided further, that any Lee Plan may be designed
to offset, or otherwise avoid duplication of, any benefits to which a Liberty
Transferred Employee is entitled under any comparable Liberty Benefit Plan on or
prior to the Closing Date.
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(c) During the period that begins on the Closing Date and ends on the
last day of the calendar month in which the Closing Date occurs, Liberty shall
continue group health plan coverage for Liberty Transferred Employees and their
family members in the same manner and under the same terms as if such Liberty
Transferred Employees had remained employees of Liberty. As of the first day
after the period described in the preceding sentence, Lee shall establish or
maintain a group health plan which shall cover all Liberty Transferred Employees
and their family members (as defined in the plan established or maintained by
Lee) who immediately prior to the Closing Date were covered under any group
health plan (other than a health flexible spending arrangement) maintained by
Liberty. As of the same date any such group health plan (other than a health
flexible spending arrangement) established or maintained by Lee shall, with
respect to Liberty Transferred Employees and their family members (as defined in
the plan established or maintained by Lee), (i) waive any waiting period, (ii)
waive any exclusion or limitation for preexisting conditions which were covered
(generally and/or specifically as to any individual) under any group health plan
maintained by Liberty prior to the Closing Date and (iii) grant credit (for
purposes of annual deductibles, co-payments and out-of-pocket limits) for any
covered claims incurred or payments made prior to the Closing Date during the
plan year in which the Closing Date occurs.
(d) A 401(k) Plan maintained by Lee shall accept direct rollovers of
distributions from Liberty's 401(k) Plan for electing Liberty Transferred
Employees, but only to the extent that:
(i) the plan administrator of Lee's 401(k) Plan receives such
statements, certifications, and documentation as are considered by such
plan administrator to be necessary or appropriate for such plan
administrator to reasonably conclude that such rollovers are valid
rollover contributions;
(ii) the plan administrator of Lee's 401(k) Plan does not
subsequently determine that one or more of such rollovers was an
invalid rollover contribution;
(iii) the electing Liberty Transferred Employee is an employee
of Lee or an ERISA Affiliate as of the date of the rollover
contribution; and
(iv) the rollover contribution consists exclusively of cash.
(e) Lee will assume and satisfy Liberty's liability with respect to
all earned and unpaid vacation pay to which Liberty Transferred Employees are
entitled, if any, as of the Closing Date, either by providing such employees
with their eligible paid vacation time or a payment in lieu thereof consistent
with Lee's past practices. Lee will give the Liberty Transferred Employees
credit for past service with Liberty and its Affiliates in determining the
amount of paid vacation to which they may become entitled after the Closing Date
in accordance with Lee's vacation policies in effect from time to time;
provided, however, that such credit shall only be provided to the extent that
such service is documented by Liberty substantially contemporaneously with the
Closing Date and in a manner reasonably satisfactory to Lee.
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(f) Liberty shall remain liable for and shall pay all short-term
disability benefits payable to any Liberty Transferred Employee with respect to
any illness or injury which occurred or existed on or prior to the Closing Date.
Lee shall be liable for and shall pay all short-term disability benefits payable
to any Liberty Transferred Employee with respect to any illness or injury which
occurred or existed on or after the Closing Date in accordance with the terms of
any applicable Lee employee benefit plan.
(g) Liberty shall be responsible for providing long-term disability
benefits to any current or former employees of Liberty who are receiving
long-term disability benefits as of the Closing Date in accordance with the
terms of Liberty's long-term disability plan and to any employees on short-term
disability leave as of the Closing Date who subsequently qualify for long-term
disability benefits.
(h) Liberty shall be responsible for any covered claims incurred by
any Liberty Transferred Employee under Liberty's medical or dental plans prior
to the Closing Date in accordance with the terms of such plans. Lee shall be
responsible for any claims incurred by any Liberty Transferred Employee
participating in Lee's medical or dental plans after the Closing Date, to the
extent such claims are covered by, and in accordance with the terms of, Lee's
plans.
(i) Liberty shall be responsible for providing continuation of group
health coverage required by Section 4980B of the Code or Sections 601 through
608 of ERISA ("COBRA") to any current or former employee of Liberty or any
"qualified beneficiary" (within the meaning of Section 4980B of the Code) of any
such current or former employee who has incurred a "qualifying event" (within
the meaning of Section 4980B of the Code) under any Liberty Benefit Plan on or
prior to the Closing Date. Lee shall not require, recommend or encourage any
Liberty Transferred Employee to elect continuation of coverage under a Liberty
group health plan pursuant to COBRA. Lee shall be responsible for providing
COBRA coverage to any Liberty Transferred Employee or any "qualified
beneficiary" of a Liberty Transferred Employee who incurs a "qualifying event"
under any Lee Benefit Plan after the Closing Date.
(j) Liberty shall be responsible for providing any post-employment
benefits, including medical and life insurance benefits, to any employees or
former employees of Liberty (and their family members) in accordance with the
terms of Liberty's Plans, if applicable.
(k) Liberty shall be responsible for any workers compensation claims
which are reported or incurred by any Liberty Transferred Employee prior to the
Closing Date. Lee shall be responsible for any workers compensation claims which
are incurred by any Liberty Transferred Employee on or after the Closing Date.
(l) Except as otherwise specifically provided herein, Lee, its
Affiliates, and its ERISA Affiliates shall have no responsibility for, and
Liberty shall be solely responsible for, all benefits, compensation, or other
liabilities attributable to (i) services rendered to Liberty on
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or prior to the Closing Date by a Liberty Transferred Employee or by any other
individual as an employee of Liberty or otherwise, or (ii) any act or omission
of Liberty with respect to any individual described in clause (i), including any
agreement, plan, fund, policy, or arrangement maintained at any time by Liberty.
No other provision of this Section 10.1 describing Liberty's liability or
responsibility shall be interpreted to limit the liability or responsibility
that Liberty has under this paragraph (l) except to the extent that such other
provision specifically makes Lee liable or responsible. For purposes of this
paragraph (l), references to Liberty shall include Liberty, its Affiliates, its
ERISA Affiliates, and all predecessors of any of such entities.
(m) The parties agree that, to the extent permissible under
applicable law (i) Lee shall be a successor employer with respect to the Liberty
Transferred Employees for purposes of the Federal Insurance Contributions Act,
as codified at 26 U.S.C. ss 3101-3128 and the Federal Unemployment Tax Act,
as codified at 26 U.S.C. ss 3301-3311, and (ii) to the extent that Lee
elects, it shall be treated as a successor employer under any applicable state
unemployment compensation laws. Liberty and Lee agree to provide each other with
such wage, tax and other information as may reasonably be required for those
purposes.
(n) Liberty shall, upon the request of Lee, deliver such documents,
personnel or benefit information and other information in its possession, as may
be necessary or desirable from time to time for the administration, analysis and
operation of the Lee Plans. Such documents and information may be provided at
such times and in such form (including any electronic media) as may reasonably
be requested by either party.
10.2 Lee Employee Matters.
(a) (i) Lee shall, after notifying Liberty of its intent thereto and
after first allowing Liberty to be present at and to participate during
or in connection with such notification (if Liberty desires), provide
all current Lee employees involved solely in the Lee Business with all
appropriate notification of the sale of the Lee Business and the
termination of each such employee's employment with Lee as a result
thereof.
(ii) Liberty shall have no obligation to hire any of Lee
current or former employees involved in the Lee Business. Promptly
after the date hereof, Liberty shall have the right to review all
employment records and files of Lee employees involved solely in the
Lee Business, after Lee obtains a written release of each such
employee's personnel file from such employee, and to interview current
Lee employees involved solely in the Lee Business for employment after
the Closing Date. Liberty may make an offer of employment to any Lee
Business employee involved solely in the Lee Business, which offer
shall be subject to, and effective, immediately following the Closing
Date. Any employee of Lee involved in the Lee Business who commences
employment with Liberty as of the Closing Date (or one or more
Affiliates of Liberty designated by Liberty) is referred to herein as a
"Lee Transferred Employee."
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(b) Except to the extent prohibited by the Code, ERISA, or other
applicable law, each Employee Benefit Plan established or maintained by Liberty
or its ERISA Affiliates for Lee Transferred Employees ("Liberty Plan") shall
grant credit to each Lee Transferred Employee for all service on or prior to the
Closing Date with Lee or any predecessor or ERISA Affiliate of the foregoing,
for purposes of eligibility, vesting and seniority; provided, however, that such
credit shall only be provided to the extent that such service is documented by
Lee substantially contemporaneously with the Closing Date and in a manner
reasonably satisfactory to Liberty; provided further, no such credit shall be
provided with respect to any group health plan (other than a health flexible
spending arrangement) maintained by Liberty or an ERISA Affiliate; provided
further, that credit for such service shall not be required for any purpose
under any post-retirement medical or life insurance plan or for purposes of
benefit accrual under any plan; and provided further, that any Liberty Plan may
be designed to offset, or otherwise avoid duplication of, any benefits to which
a Lee Transferred Employee is entitled under any comparable Lee Benefit Plan on
or prior to the Closing Date.
(c) During the period that begins on the Closing Date and ends on the
last day of the calendar month in which the Closing Date occurs, Lee shall
continue group health plan coverage for Lee Transferred Employees and their
family members in the same manner and under the same terms as if such Lee
Transferred Employees had remained employees of Lee. As of the first day after
the period described in the preceding sentence, Liberty shall establish or
maintain a group health plan which shall cover all Lee Transferred Employees and
their family members ( as defined in the plan established or maintained by
Liberty) who immediately prior to the Closing Date were covered under any group
health plan (other that a health flexible spending arrangement) maintained by
Lee. As of the same date, any such group health plan (other than a health
flexible spending arrangement) established or maintained by Liberty shall, with
respect to Lee Transferred Employees and their family members (as defined in the
plan established or maintained by Liberty), (i) waive any waiting period, (ii)
waive any exclusion or limitation for preexisting conditions which were covered
(generally and/or specifically as to any individual) under any group health plan
maintained by Lee prior to the Closing Date and (iii) grant credit (for purposes
of annual deductibles, co-payments and out-of-pocket limits) for any covered
claims incurred or payments made prior to the Closing Date during the plan year
in which the Closing Date occurs.
(d) A 401(k) Plan maintained by Liberty shall accept direct
rollovers of distributions from Lee's 401(k) Plan for electing Lee Transferred
Employees, but only to the extent that:
(i) the plan administrator of Liberty's 401(k) Plan
receives such statements, certifications, and documentation as
are considered by such plan administrator to be necessary or
appropriate for such plan administrator to reasonably conclude
that such rollovers are valid rollover contributions;
(ii) the plan administrator of Liberty's 401(k) Plan does
not subsequently determine that one or more of such rollovers was
an invalid rollover contribution;
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(iii) the electing Lee Transferred Employee is an employee of
Liberty or an ERISA Affiliate as of the date of the rollover
contribution; and
(iv) the rollover contribution consists exclusively of cash.
(e) Liberty will assume and satisfy Lee's liability with respect to
all earned and unpaid vacation pay to which Lee Transferred Employees are
entitled, if any, as of the Closing Date, either by providing such employees
with their eligible paid vacation time or a payment in lieu thereof consistent
with Liberty's past practices. Liberty will give the Lee Transferred Employees
credit for past service with Lee and its Affiliates in determining the amount of
paid vacation to which they may become entitled after the Closing Date, in
accordance with Liberty's vacation policies in effect from time to time;
provided, however, that such credit shall only be provided to the extent that
such service is documented by Lee substantially contemporaneously with the
Closing Date and in a manner reasonably satisfactory to Liberty.
(f) Lee shall remain liable for and shall pay all short-term
disability benefits payable to any Lee Transferred Employee with respect to any
illness or injury which occurred or existed on or prior to the Closing Date.
Liberty shall be liable for and shall pay all short-term disability benefits
payable to any Lee Transferred Employee with respect to any illness or injury
which occurred or existed on or after the Closing Date in accordance with the
terms of any applicable Liberty employee benefit plan.
(g) Lee shall be responsible for providing long-term disability
benefits to any current or former employees of Lee who are receiving long-term
disability benefits as of the Closing Date in accordance with the terms of Lee's
long-term disability plan and to any employees on short-term disability leave as
of the Closing Date who subsequently qualify for long-term disability benefits.
(h) Lee shall be responsible for any covered claims incurred by any
Lee Transferred Employee under Lee's medical, dental or vision plans prior to
the Closing Date in accordance with the terms of such plans. Liberty shall be
responsible for any claims incurred by any Lee Transferred Employee
participating in Liberty's medical, dental or vision plans after the Closing
Date, to the extent such claims are covered by, and in accordance with the terms
of, Liberty's plans.
(i) Lee shall be responsible for providing COBRA coverage to any
current or former employee of Lee or any "qualified beneficiary" (within the
meaning of Section 4980B of the Code) of any such current or former employee who
has incurred a "qualifying event" (within the meaning of Section 4980B of the
Code) under any Lee Benefit Plan on or prior to the Closing Date. Liberty shall
not require, recommend or encourage any Lee Transferred Employee to elect
continuation of coverage under a Lee group health plan pursuant to COBRA.
Liberty shall be responsible for providing COBRA coverage to any Lee Transferred
Employee or any "qualified beneficiary" of a Lee Transferred Employee who incurs
a "qualifying event" under any Liberty Benefit Plan after the Closing Date.
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(j) Lee shall be responsible for providing any post-employment
benefits, including medical and life insurance benefits, to any employees or
former employees of Lee (and their family members) in accordance with the terms
of Lee's Plans, if applicable.
(k) Lee shall be responsible for any workers compensation claims
which are reported or incurred by any Lee Transferred Employee prior to the
Closing Date. Liberty shall be responsible for any workers compensation claims
which are incurred by any Lee Transferred Employee on or after the Closing Date.
(l) Except as otherwise specifically provided herein, Liberty, its
Affiliates, and its ERISA Affiliates shall have no responsibility for, and Lee
shall be solely responsible for, all benefits, compensation, or other
liabilities attributable to (i) services rendered to Lee on or prior to the
Closing Date by a Lee Transferred Employee or by any other individual as an
employee of Lee or otherwise, or (ii) any act or omission of Lee with respect to
any individual described in clause (i), including any agreement, plan, fund,
policy, or arrangement maintained at any time by Lee. No other provision of this
Section 10.2 describing Lee's liability or responsibility shall be interpreted
to limit the liability or responsibility that Lee has under this paragraph (l)
except to the extent that such other provision specifically makes Liberty liable
or responsible. For purposes of this paragraph (l), references to Lee shall
include Lee, its Affiliates, its ERISA Affiliates, and all predecessors of any
of such entities.
(m) The parties agree that, to the extent permissible under
applicable law (i) Liberty shall be a successor employer with respect to the Lee
Transferred Employees for purposes of the Federal Insurance Contributions Act,
as codified at 26 U.S.C. ss.ss. 3101-3128 and the Federal Unemployment Tax Act,
as codified at 26 U.S.C. ss.ss. 3301-3311, and (ii) to the extent that Liberty
elects, it shall be treated as a successor employer under any applicable state
unemployment compensation laws. Lee and Liberty agree to provide each other with
such wage, tax and other information as may reasonably be required for those
purposes.
(n) Lee shall, upon the request of Liberty deliver such documents,
personnel or benefit information and other information in its possession, as may
be necessary or desirable from time to time for the administration, analysis and
operation of the Liberty Plans. Such documents and information may be provided
at such times and in such form (including any electronic media) as may
reasonably be requested by either party.
10.3 Certain Tax Matters. All federal, state, local and other
transfer, sales and use Taxes imposed upon the transfer to Liberty (or one or
more Affiliates of Liberty as designated by Liberty) of the Lee Acquired Assets
or to Lee of the Liberty Acquired Assets as contemplated by this Agreement will
be shared equally by Liberty on the one hand and Lee on the other.
ARTICLE 11
MISCELLANEOUS
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11.1 Exclusivity of Representations, Reliance on Representations.
(a) THE REPRESENTATIONS AND WARRANTIES MADE BY LIBERTY AND LEE,
RESPECTIVELY, IN THIS AGREEMENT ARE IN LIEU OF AND ARE EXCLUSIVE OF ALL OTHER
REPRESENTATIONS AND WARRANTIES, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE AND ANY OTHER
IMPLIED WARRANTIES, OF LIBERTY AND LEE RESPECTIVELY. LIBERTY AND LEE EACH HEREBY
DISCLAIMS ANY SUCH OTHER OR IMPLIED REPRESENTATIONS OR WARRANTIES,
NOTWITHSTANDING THE DELIVERY OR DISCLOSURE BY LIBERTY OR ANY OTHER PERSON TO LEE
OR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR REPRESENTATIVES, OR BY
LEE OR ANY OTHER PERSON TO LIBERTY, ANY OF ITS RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR REPRESENTATIVES, OF ANY DOCUMENTATION OR OTHER INFORMATION
IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(b) Lee represents and warrants to Liberty that in making its
decision to enter into this Agreement it is not relying on any information
provided or statements made by Liberty or any of its respective agents,
representatives, employees or affiliates other than the specific representations
and warranties made by Liberty in this Agreement.
(c) Liberty represents and warrants to Lee that in making its
decision to enter into this Agreement it is not relying on any information
provided or statements made by Lee or any of its respective agents,
representatives, employees or affiliates other than the specific representations
and warranties made by Lee in this Agreement.
11.2 Expenses. Except as expressly set forth in this Section 11.2 and
Section 10.3 and Section 11.13, regardless of whether the Closing Date occurs,
each party hereto shall bear all of its expenses incurred in connection with the
transactions contemplated by this Agreement, including, without limitation,
accounting and legal fees incurred in connection herewith. Notwithstanding the
foregoing, the fees of all filings required under the HSR Act in connection with
the transactions contemplated by this Agreement and the Ancillary Instruments
will be shared equally by the parties.
11.3 Further Assurances, Bulk Transfer. Subject to Section 9.1 hereof,
from time to time prior to, at and after the Closing Date, without the payment
of any additional consideration except as otherwise set forth in this Agreement,
each party hereto will execute all such instruments and take all such actions as
the other party shall reasonably request in connection with carrying out and
effectuating the intent and purpose hereof and all transactions and things
contemplated by this Agreement. The parties hereby waive compliance with the
provisions of any applicable bulk sales law of any jurisdiction in connection
with the transactions contemplated hereby and no representation, warranty or
covenant contained in this Agreement shall be deemed to have been breached as a
result of such non-compliance.
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11.4 Notices. Notices and other communications provided for herein
shall be in writing (which shall include notice by facsimile transmission) and
shall be delivered or mailed (or if by facsimile communications equipment of the
sending party hereto, delivered by such equipment), addressed as follows:
If to Liberty: Liberty Group Publishing, Inc.
3000 Dundee Road
Northbrook, Illinois 60062
Attn: Kenneth L. Serota
with a copy to: Katten Muchin & Zavis
525 W. Monroe Street
Suite 1600
Chicago, Illinois 60661
Attn: Kenneth W. Miller
If to Lee: Lee Enterprises, Incorporated
215 North Main Street, Ste. 400
Davenport, IA 52801
Attn: Larry L. Bloom
with a copy to: Lane & Waterman
220 N. Main Street, Ste. 600
Davenport, IA 52801
Attn: C. Dana Waterman III
or to such other address as a party may from time to time designate in writing
in accordance with this section. All notices and other communications given to
any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt.
11.5 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, that neither
this Agreement nor any of the rights, interests, or obligations hereunder may be
assigned by any of the parties hereto without the prior written consent of the
other parties, except that Liberty and Lee may assign any or all of their
respective rights and obligations hereunder to any of their Affiliates without
the consent of the other parties; provided, that any such assignment shall not
relieve Liberty or Lee, as the case may be, from any liability hereunder.
11.6 Construction.
(a) Unless otherwise expressly specified herein, (i) defined terms in
the singular shall also include the plural and vice versa, (ii) the words
"hereof", "herein", "hereunder"
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and other similar words refer to this Agreement as a whole, (iii) Article,
Section and Schedule references in this Agreement are to Articles of, Sections
of, Schedule to and Exhibits to this Agreement and (iv) words of any gender
(masculine, feminine, neuter) mean and include correlative words of the other
genders.
(b) The captions in this Agreement are for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.
(c) All references to "days" shall be to calendar days unless
business days are specified.
(d) Unless the context otherwise requires, (i) "or" is not exclusive
and (ii) "including" means "including but not limited to" and "including without
limitation".
(e) As used herein, the phrases "date of this Agreement" and "date
hereof' and any other phrases of similar import shall mean August 26, 1999
(regardless, with respect to representations and warranties, of the date or time
as of which such representations and warranties are made or deemed to have been
made or as of which the accuracy or inaccuracy thereof is measured or
determined).
11.7 Law Governing. THIS AGREEMENT IS INTENDED AS A CONTRACT UNDER AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LOCAL LAW OF THE STATE OF ILLINOIS,
INCLUDING WITHOUT LIMITATION AS TO ALL MATTERS OF CONSTRUCTION, VALIDITY,
ENFORCEABILITY AND PERFORMANCE.
11.8 Waiver of Provisions. The provisions, terms, covenants,
representations, warranties and conditions of this Agreement may be waived only
by a written instrument executed by the party hereto waiving compliance. The
failure of any party hereto at any time or times to require performance of any
provision of this Agreement shall in no manner affect the right of such party at
a later date to enforce the same. No waiver by any party hereto of any condition
or the breach of any provision, term, covenant, representation or warranty
contained in this Agreement, whether by conduct or otherwise, in any one or more
instances shall be deemed to be or construed as a further or continuing waiver
of any such condition or of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.
11.9 Counterparts. This Agreement may be executed in several
counterparts, and all counterparts so executed shall constitute one agreement,
binding on the parties hereto, notwithstanding that such parties are not
signatory to the same counterpart.
11.10 Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes and cancels any and all prior agreements
between them relating to the subject matter hereof, excluding the
Confidentiality Agreement (which shall remain in full
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force and effect in accordance with its terms and conditions), and may not be
amended or modified except by a written agreement signed by Lee and Liberty.
11.11 Access to Books and Records.
(a) After the Closing Date, Lee shall, upon Liberty's request from
time to time, and upon reasonable notice, in connection with the preparation by
Liberty or its Affiliates of Tax returns, audited financial statements
incorporating the Lee Newspapers and the Lee Business and all requisite
securities law filings (including, but not limited to, a Form 8K filing, if
required, with respect to the transactions contemplated by this Agreement) and
the initiation or defense of litigation with third parties involving Lee Assumed
Liabilities, (i)(A) provide to the officers and other authorized representatives
of Liberty, and its Affiliates reasonable access, during normal business hours,
to any and all premises, properties, files, books, records, documents and other
information (including, but not limited to, workpapers in the possession of
current and former accountants of the Lee Newspapers) relating to the Liberty
Business and Lee Business with respect to the period prior to the Closing Date
(including, but not limited to, with respect to liabilities for Taxes included
in the computation of Lee Net Working Capital, Lee Tax Records), (B) cause its
officers to furnish to Liberty and its authorized representatives any and all
financial, technical and operating data and other information (including, but
not limited to, workpapers in the possession of current and former accountants
of the Lee Newspapers) pertaining to the Liberty Business and Lee Business with
respect to the period prior to the Closing Date, and (C) make available to
Liberty, and its authorized representatives personnel of Lee to consult with
such personnel and (ii) make available for inspection and copying by Liberty at
Liberty's expense true and complete copies of any documents relating to the
foregoing. In exercising its rights under the foregoing provisions of this
Section 11.11(a), Liberty, and its representatives shall not interfere with the
normal operations of the Liberty Business. Lee shall retain the files, books,
records and documents relating to the Liberty Business for at least six years
after the Closing Date. In addition, after the Closing Date, upon Liberty's
request from time to time, Lee shall cause each of the Persons from whom Lee
acquired the Lee Newspapers and their Affiliates and predecessors to (i) provide
to the officers and other authorized representatives (including, but not limited
to, accountants) of Liberty and its Affiliates reasonable access, during normal
business hours, to any and all files, books, records, documents, financial and
operating data and other information (including, but not limited to, workpapers
in the possession of current and former accountants of the Lee Newspapers)
relating to the Lee Newspapers and the Lee Business (collectively, the
"Historical Books and Records"), (ii) cause its officers to furnish to, or make
available for inspection and copying, at Liberty's expense, by, Liberty and its
Affiliates and their authorized representatives (including, but not limited to,
accountants) true and complete copies of all such Historical Books and Records,
and (iii) make available to Liberty and its Affiliates and their authorized
representatives its personnel to consult with such representatives, in each case
in connection with, and as necessary in relation to, the preparation by Liberty
and its Affiliates of audited financial statements incorporating the Lee
Newspapers and the Lee Business and all requisite securities law filings
(including, but not limited to, a Form 8-K filing, if required, with respect to
the transactions contemplated by this Agreement).
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(b) After the Closing Date, Liberty shall, upon Lee's request from
time to time, and upon reasonable notice, in connection with the preparation by
Lee or its Affiliates of Tax returns and the initiation or defense of litigation
with third parties involving Liberty Assumed Liabilities, (i)(A) provide to the
officers and other authorized representatives of Lee and its Affiliates
reasonable access, during normal business hours, to any and all premises,
properties, files, books, records, documents and other information relating to
the Lee Business and Liberty Business with respect to the period prior to the
Closing Date (including, with respect to liabilities for Taxes included in the
computation of Liberty Net Working Capital, Liberty Tax Records), (B) cause its
officers to furnish to Lee and its authorized representatives any and all
financial, technical and operating data and other information pertaining to the
Lee Business and Liberty Business with respect to the period prior to the
Closing Date, and (C) make available to Lee and its authorized representatives
personnel of Liberty to consult with such personnel and (ii) make available for
inspection and copying by Lee at Lee's expense true and complete copies of any
documents relating to the foregoing. In exercising its rights under the
foregoing provisions of this Section 11.11(b), Lee and its representatives shall
not interfere with the normal operations of the Lee Business. Liberty shall
retain the files, books, records and documents relating to the Lee Business for
at least six years after the Closing Date.
11.12 Disclosure Letters. Any information disclosed in any section of
the Liberty Disclosure Letter delivered on the date hereof or the Lee Disclosure
Letter if reasonably related to any other section or sections of the Liberty
Disclosure Letter or the Lee Disclosure Letter, as the case may be, and
described in reasonable detail to allow a reasonable person to make the
applicable connection to such section, shall be deemed fully disclosed for the
purposes of all such applicable sections of the Liberty Disclosure Letter or the
Lee Disclosure Letter, as the case may be. Neither the specification (directly
or indirectly by reference to a defined term hereof) of any dollar amount in the
representations and warranties set forth in Article 3 or Article 4 or the
indemnification provisions of Article 8 nor the inclusion of any items in the
Liberty Disclosure Letter or the Lee Disclosure Letter shall be deemed to
constitute an admission by Liberty or Lee, or otherwise imply, that any such
amount or such items so included are material for the purposes of this
Agreement. The inclusion of, or reference to, any item within any particular
section of the Liberty Disclosure Letter or the Lee Disclosure Letter does not
constitute an admission by either Liberty or Lee that such item meets any or all
of the criteria set forth in this Agreement for inclusion in such section of the
Liberty Disclosure Letter or the Lee Disclosure Letter, as the case may be.
11.13 Cooperation.
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(a) From and after the Closing Date, Lee will cooperate with Liberty
in the investigation, defense or prosecution of any action, suit, proceeding or
other litigation, at law or in equity, which is pending or threatened against
Liberty or any of its Affiliates and which relates to the Liberty Business or
the Liberty Newspapers. Without limiting the generality of the foregoing, Lee
will make available its employees engaged in the Liberty Business to give
depositions or testimony and will furnish all documentary or other evidence in
each case as Liberty may reasonably request. Liberty shall reimburse Lee for all
reasonable and necessary out-of-pocket expenses incurred in connection with the
performance of its obligations under this Section 11.13(a).
(b) From and after the Closing Date, Liberty will cooperate with Lee
in the investigation, defense or prosecution of any action, suit, proceeding or
other litigation, at law or in equity, which is pending or threatened against
Lee or any of its Affiliates and which relates to the Lee Business or the Lee
Newspapers. Without limiting the generality of the foregoing, Liberty will make
available its employees engaged in the Lee Business to give depositions or
testimony and will furnish all documentary or other evidence in each case as Lee
may reasonably request. Lee shall reimburse Liberty for all reasonable and
necessary out-of-pocket expenses incurred in connection with the performance of
its obligations under this Section 11.13(b).
11.14 No Third Party Beneficiary. This Agreement is for the sole
benefit of the parties hereto and their respective successors and permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other Person any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
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11.15 Insurance.
(a) Lee acknowledges that all insurance policies maintained by
Liberty and its Affiliates with respect to the Liberty Business and Liberty
Acquired Assets will be terminated effective on the Closing Date.
(b) Liberty acknowledges that all insurance policies maintained by
Lee and its Affiliates with respect to the Lee Business and Lee Acquired Assets
will be terminated effective on the Closing Date.
11.16 No Presumption. With regard to each and every term and condition
of this Agreement and any and all agreements and instruments subject to the
terms hereof or referred to herein, the parties hereto understand and agree that
the same have or has been mutually negotiated, prepared and drafted, and if at
any time the parties hereto desire or are required to interpret or construe any
such term or condition or any agreement or instrument subject hereto, no
consideration shall be given to the issue of which party hereto actually
prepared, drafted or requested any term or condition of this Agreement or any
agreement or instrument subject hereto.
11.17 Severability. To the fullest extent that they may effectively do
so under applicable law, the parties hereto hereby waive any provision of law
which renders any provision of this Agreement invalid, illegal or unenforceable
in any respect. Such parties further agree that any provision of this Agreement
which, notwithstanding the preceding sentence, is rendered or held invalid,
illegal or unenforceable in any respect in any jurisdiction shall be
ineffective, but such ineffectiveness shall be limited as follows: (i) if such
provision is rendered or held invalid, illegal or unenforceable in such
jurisdiction only as to a particular Person or Persons or under any particular
circumstance or circumstances, such provision shall be ineffective, but only in
such jurisdiction and only with respect to such particular Person or Persons or
under such particular circumstance or circumstances, as the case may be; (ii)
without limitation of clause (i), such provision shall in any event be
ineffective only as to such jurisdiction and only to the extent of such
invalidity, illegality or unenforceability, and such invalidity, illegality or
unenforceability in such jurisdiction shall not render invalid, illegal or
unenforceable such provision in any other jurisdiction; and (iii) without
limitation of clause (i) or (ii), such ineffectiveness shall not render invalid,
illegal or unenforceable this Agreement or any of the remaining provisions
hereof. Without limitation of the preceding sentence, (A) it is the intent of
the parties hereto that, in the event that in any court proceeding, such court
determines that any provision of this Agreement is illegal, invalid or
unenforceable in any jurisdiction to any extent, such court shall have the power
to, and shall, (1) modify such provision (including by limiting the Persons
against whom, or the circumstances under which, such provision shall be
effective in such jurisdiction) for purposes of such proceeding to the minimum
extent necessary so that such provision, as so modified, may then be enforced in
such proceeding and (2) enforce such provision, as so modified pursuant to
clause (1), in such proceeding and (B) upon any determination that any provision
of this Agreement is invalid, illegal or unenforceable, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of such parties as closely as possible in a mutually
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acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the greatest extent possible.
11.18 Specific Performance. Each of Liberty and Lee acknowledges that
the rights of each party to consummate the transactions contemplated hereby are
unique and recognizes and affirms that in the event of a breach of this
Agreement by any party, money damages may be inadequate and the non-breaching
party may have no adequate remedy at law. Accordingly, the parties agree that
such non-breaching party shall have the right, in addition to any other rights
and remedies existing in their favor at law or in equity, to enforce their
rights and the other party's obligations hereunder not only by an action or
actions for damages but also by an action or actions for specific performance,
injunctive and/or other equitable relief (without posting of bond or other
security).
11.19 Announcements. None of the parties hereto will (and each such
party will cause its Affiliates not to) issue any press release or otherwise
make any public statement with respect to the transactions contemplated hereby
without the prior written consent of the other parties, except as and to the
extent that such party or any of its Affiliates determines in good faith that it
is so obligated by law or stock exchange rules, in which case such party shall
use reasonable efforts to give notice to the other parties in advance of such
party's or its Affiliate's intent to make such announcement or issue such press
release and the parties hereto shall use reasonable efforts to cause a mutually
agreeable release or announcement to be issued.
11.20 Transition Services Agreement.
(a) In order to allow Lee and Liberty to make suitable alternative
arrangements, for a period of 3 months following the Closing, Lee shall use its
reasonable efforts to provide or cause to be provided to Liberty or its
designated Affiliates the transition services (the "Lee Transition Services")
listed and described in the Transition Services Agreement consistent with the
provisions hereof which Lee or the Lee Newspapers are currently receiving from
Lee, an outside third party vendor or from another newspaper owned by Lee (the
"Lee Transition Services Provider"), and Liberty shall use its reasonable
efforts to provide or cause to be provided to Lee the transition services (the
"Liberty Transition Services" and, together with the Lee Transition Services,
the "Transition Services") listed and described in the Transition Services
Agreement consistent with the provisions hereof which Liberty or the Liberty
Newspapers are currently receiving from Liberty, an outside third party vendor
or from another newspaper owned by Liberty or its Affiliates (the "Liberty
Transition Services Provider"). The Transition Services shall be provided in a
manner consistent with the manner in which they were provided to the Lee
Newspapers or the Liberty Newspapers, as the case may be, by the applicable
Transition Services Provider prior to the Closing. Without limiting the
generality of the previous sentence, Lee will make payment (including, without
limitation, the payment for the service) to the Lee Transition Services Provider
and Liberty will submit such payment to Lee within 30 days of receiving Lee's
invoice therefor, and Liberty will make payment (including, without limitation,
the payment for the service) to the Liberty Transition Services Provider and Lee
will submit such payment to Liberty within 30 days of receiving Liberty's
invoice therefor. If any such payments were previously made by inter-company
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journal entries, after the Closing, such payments will be made by check at the
same time as the payment would have been made by inter-company journal entry.
(b) The obligation of Lee or Liberty, as the case may be, to
provide, or cause to be provided, Transition Services under this section (the
"Providing Party") shall be suspended with respect to any specified Transition
Services to the extent that any Transition Services Provider is prevented or
hindered from providing such services by any law or governmental order, rule,
regulation or direction, whether domestic or foreign or by any cause beyond the
control of such Transition Services Provider, including acts of God, strikes,
lockouts and other labor and industrial disputes and disturbances, civil
disturbances, accidents, acts of war or conditions arising out of or
attributable to war (whether declared or undeclared), shortage of necessary
equipment, failures of equipment or information systems, materials of labor or
restrictions thereon or limitations upon the use thereof and delays in
transportation or the refusal of the Transition Services Provider to allow the
Transition Services to be provided to the Lee Newspapers or the Liberty
Newspapers, as the case may be, following the Closing. In such event, the
applicable Providing Party shall give written notice as soon as reasonably
practicable to the other party (the "Recipient Party") stating the date and
extent of such suspension and the cause thereof, and the Providing Party shall
resume the performance of other obligations under this section as soon as
reasonably practicable after the removal of the cause.
(c) Neither Lee nor Liberty shall have any duties or
responsibilities pursuant to this section other than those specifically set
forth herein and no implied obligations shall be read into this section. Neither
Lee or Liberty nor any of their respective officers, directors, employees,
agents, attorneys in fact or Affiliates shall be liable for any act taken or
omitted to be taken by it under or in connection with this section except that
Lee or Liberty, as the Providing Party, shall only be liable for losses incurred
by the applicable Recipient Party arising out of its gross negligence or willful
misconduct in the performance of the Transition Services.
(d) Lee or Liberty, as the case may be, may, as the Recipient Party,
terminate or partially limit any Transition Services being provided to it at any
time, in its sole discretion, upon 10 days' prior written notice to the
applicable Providing Party.
(e) The Transition Services shall be billed at the Providing Party's
commercial customer charges and rates, or at commercially reasonable hourly
rates, as the case may be, with reimbursement for the Providing Party's long
distance line charges. The Transition Services Agreement shall provide such
reasonable provisions necessary to insure the Providing Party's license
agreements, confidential information and proprietary systems are not breached.
11.21 Transfer of Liberty Acquired Assets and Lee Acquired Assets. To
the extent that any of the Liberty Acquired Assets or the Lee Acquired Assets
are held by Affiliates of Liberty or Lee, Liberty or Lee shall take all actions
necessary to cause its Affiliates to convey the Liberty Acquired Assets or the
Lee Acquired Assets, as the case may be, to Lee or Liberty, respectively.
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11.22 Environmental Testing. With respect to the owned Lee Real
Property located in Ottumwa, Iowa, Liberty agrees that, after the Closing,
Liberty (a) shall not conduct a Phase I or Phase II environmental assessment
with respect to such owned Lee Real Property unless (i) mandated by a
Governmental Agency having jurisdiction with respect thereto, (ii) requested by
an unaffiliated third party purchaser or prospective purchaser of such owned Lee
Real Property as an express condition of purchase or (iii) required by Liberty's
lenders and other financing sources and (b) shall not disclose the Ottumwa
Pre-Closing Sump Liability or any Phase I or Phase II environmental assessments,
testing, investigations, proposals, or invoices with respect thereto
(collectively, "Environmental Assessment") to any unaffiliated third party,
including Governmental Agencies, except (i) as required by law or stock exchange
rules, (ii) to Liberty's lenders and other financing sources and (iii) to an
unaffiliated third party purchaser or prospective purchaser of such owned Lee
Real Property. The disclosure of any Environmental Assessment shall not be made
pursuant to (b)(iii) above until Liberty has received a confidentiality
agreement reasonably acceptable to Liberty and Lee from such party referred to
in (b)(iii) above pursuant to which such party shall agree not to disclose the
Ottumwa Pre-Closing Sump Liability and Environmental Assessment except (i) as
required by law or stock exchange rules, (ii) to Liberty's lenders and other
financing sources and (iii) to an unaffiliated third party purchaser or
prospective purchaser of such owned Lee Real Property.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
LIBERTY GROUP PUBLISHING, INC.
By: /s/ Kenneth L. Serota
Name: Kenneth L. Serota
Its: Authorized Representative
LEE ENTERPRISES, INCORPORATED
By: /s/ Larry Bloom
Name: Larry Bloom
Its: Authorized Representative
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EXHIBIT A
Beatrice, NE, Daily Sun
Beatrice, NE, Penny Press 5
Beatrice, NE, Plug Nickel
Beatrice, NE, Sunday & Wednesday Weekender
Beatrice, NE, Sunland
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EXHIBIT B
Kewanee, IL, Star Courier
Kewanee, IL, Star Extra
Kewanee, IL, Atkinson-Annawan News
Geneseo, IL, Henry County Advertizer
Ottumwa, IA, Ottumwa Courier
Ottumwa, IA, Wapello County Shopper
Ottumwa, IA, Forever Young
Ottumwa, IA, Area Visitors Guide
Ottumwa, IA, Neighbors
Ottumwa, IA, Homes
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EXHIBIT C
For purposes of the Agreement to which this EXHIBIT C is attached (the
"Agreement"), the following terms shall have the following meanings:
"Affiliate" means, as to any Person, any other Person which, directly
or indirectly, through one or more intermediaries, controls, is controlled by or
is under common control with, such Person. For the purposes of this definition,
"control" means the possession, directly or indirectly of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
"Aledo Purchase Agreement" means that certain Asset Purchase Agreement
dated as of the date hereof between Liberty and Lee.
"Ancillary Instrument" shall have the meaning ascribed to such term in
Section 8.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" means the Confidentiality and Negotiation
Agreement between Lee and Liberty dated June 1, 1999.
"ERISA Affiliate(s)" shall mean, with respect to any specified Person,
any other Person which is treated as a single employer with such specified
Person under Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of
ERISA.
"Environmental Laws" means all federal, state and local laws,
regulations, ordinances and rules of common law relating to environmental
matters, including those relating to fines, orders, injunctions, penalties,
damages, contribution, cost recovery compensation, losses, or injuries resulting
from the release or threatened release of Hazardous Substances and the
generation, use, storage, transportation, or disposal of Hazardous Substances in
any manner applicable to the Lee Business or Liberty Business or as to Lee the
Liberty Acquired Assets, and as to Liberty the Lee Acquired Assets, including,
but not limited to, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. ss.ss. 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. ss.ss. 1801 et seq.), the Resource Conservation
and Recovery Act of 1976 (42 U.S.C. ss.ss. 6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. ss.ss. 1251 et seq.), the Clean Air Act (42
U.S.C. ss.ss. 7401 et seq.), the Toxic Substances Control Act of 1976 (15 U.S.C.
ss.ss. 2601 et seq.,) the Safe Drinking Water Act (42 U.S.C. ss.ss. 300f-ss.ss.
300j-11 et seq.), and the Emergency Planning and Community Right-to-Know Act (42
U.S.C. ss.ss. 1101 et seq.), each as heretofore amended and supplemented, or any
analogous present federal, state or local statutes, rules, and regulations
promulgated thereunder or pursuant thereto, and any other present law,
ordinance, rule, regulation, permit, order, or directive addressing
environmental, safety or health issues, of or
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by the federal government, any state or political subdivision thereof, or any
agency, court, or body of the federal government or any state or political
subdivision thereof.
"GAAP" means generally accepted United States accounting principles,
applied on a consistent basis.
"Hazardous Substances" means (a) any chemical, material or substance
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous waste," "restricted
hazardous waste," "medical waste, "toxic pollutants," "contaminants,"
"pollutants," "toxic substances," or words of similar import under any
applicable Environmental Law, (b) any oil, petroleum, petroleum product or
petroleum derived substance, any flammable substances or explosives, any
radioactive materials, (c) asbestos and asbestos containing materials in any
form which is or could become friable, and (d) radon gas, urea formaldehyde,
lead-based paint, dielectric fluid, and polychlorinated biphenyls.
"Income Taxes" means Taxes in the nature of any federal, state, local
or foreign income or franchise taxes, including interest, penalties and
additions to tax with respect thereto.
"Indebtedness" means, with respect to Lee or Liberty, as the case may
be, (a) all indebtedness of such party for borrowed money, whether current or
funded, secured or unsecured, (b) all indebtedness of such party for the
deferred purchase price of any assets or services, (c) all indebtedness of such
party created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such party (even though the
rights and remedies of such party or lender under such agreement in the event of
a default may be limited to repossession or sale of such property), (d) all
indebtedness of such party secured by a purchase money mortgage or other lien to
secure all or part of the purchase price of property subject to such mortgage or
lien, (e) all obligations of such party under leases which shall have been or
must be, in accordance with generally accepted accounting principles, recorded
as capital leases in respect of which such party is liable as lessee, (f) any
liability of such party in respect of banker's acceptances or letters of credit,
(g) any indebtedness, whether or not assumed by such party, secured by liens on
property acquired by such party at the time of acquisition thereof and (h) all
guaranties by such party of the obligations, indebtedness or liabilities of any
other Person or which such party has agreed (contingently or otherwise) to
purchase or otherwise acquire or in respect of which it has otherwise assured a
creditor against loss.
"Knowledge of Lee" or "Lee's Knowledge" (or words of similar import)
means the actual knowledge of any of the officers or directors of Lee or the
employee at each respective Lee Newspaper who is the highest ranking manager at
such Lee Newspaper.
"Knowledge of Liberty" or "Liberty's Knowledge" (or words of similar
import) means the actual knowledge of any of the officers or directors of
Liberty or the employee at each respective Liberty Newspaper who is the highest
ranking manager at such Liberty Newspaper.
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"Lee Business" shall mean the business and the operation of the Lee
Newspapers, including without limitation the publication of such newspapers.
"Lee Copyrights" means all copyrights, including copyrights for printed
matter, databases, software, CD/ROM discs, software and CD/ROM disc source
codes, copyright registrations and all pending applications for copyright
registration owned by Lee and used solely in connection with the Lee Business,
including those items described in Part A of Section 4.16(b) of the Lee
Disclosure Letter.
"Lee Disclosure Letter" means the disclosure letter, dated the date of
the Agreement (or if accepted by Liberty, the Closing Date), delivered to
Liberty.
"Lee Employee Computer Purchase Agreements" means the agreements
between Lee and the Lee employees listed in Schedule 1.3(b)(xv) involving a Lee
employee's installment purchase of a personal computer for personal use outside
of the workplace.
"Lee Equipment" means all machinery, presses, equipment, furniture,
computer equipment (including software), fixtures, furnishings, toolings, parts
and other items of tangible personal property owned or leased by Lee and used
solely in connection with the Lee Business.
"Lee Intangible Property" means solely in connection with the Lee
Business: (i) the Lee Copyrights; (ii) the Lee Trademarks; (iii) the Lee Trade
Secrets; and (iv) all goodwill, if any, associated therewith.
"Lee Material Adverse Effect" means any material adverse changes in, or
material adverse effect on, (i) the operations, results of operations or
condition (financial or otherwise) of Lee or the Lee Business or (ii) the Lee
Acquired Assets taken as a whole; provided, however, no change or effect shall
be considered a "Lee Material Adverse Effect" if (a) such change or effect is
caused primarily by, and is of similar magnitude to, changes in the newspaper
industry generally; (b) such change or effect is substantially the result of
circumstances that are not likely to recur and have been substantially remedied
and any material reduction in the revenues of the Lee Business attributable to
such change or effect has been restored ; or (c) such change or effect is
related to the announcement of the transactions contemplated by this Agreement.
"Lee Motor Vehicles" means all motor vehicles owned by Lee and used
solely in the operation of the Lee Business, including those listed in Section
1.2(b)(i) of the Lee Disclosure Letter.
"Lee Net Working Capital" means an amount equal to current assets
included within the Lee Acquired Assets, minus current liabilities included
within the Lee Assumed Liabilities, in each case calculated in accordance with
GAAP and past practice and applied on a basis consistent with the Lee Balance
Sheet, including the exceptions to GAAP listed in Part A of
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Section 4.6 of the Lee Disclosure Letter, except for purposes of determining Lee
Net Working Capital:
(a) newsprint inventory shall be valued at $600 per metric ton without
the inclusion of any additional costs or fees;
(b) prepaid insurance and other prepaid expenses, to the extent Liberty
will not receive a dollar for dollar monetary benefit after the Closing Date,
will not be included;
(c) accounts receivable that are not collected on or prior to the 90th
day after the Closing Date will not be included;
(d) current liabilities shall include an accrual for the vacation pay
liability assumed by Liberty pursuant to Section 10.2; and
(e) current liabilities shall include deferred subscription revenue.
"Lee Permitted Liens" means (i) Liens for Taxes not yet due and
payable, that are payable without penalty or that are being contested in good
faith and for which adequate reserves have been taken, (ii) Liens arising or
resulting from any action taken by Liberty or any of its Affiliates, (iii) Liens
created by, arising out of or specifically contemplated by the Agreement, (iv)
Liens identified as Lee Permitted Liens in the Lee Disclosure Letter, (v)
materialmen's, mechanics', workmen's, repairmen's, employees' or other similar
Liens arising in the course of construction or in the ordinary course of
operations or maintenance in each such case securing obligations which are not
delinquent or are being contested in good faith and for which adequate reserves
have been taken or securing obligations which are bonded in a reasonable manner,
(vi) zoning restrictions, easements, licenses or other restrictions on the use
of real property or other minor irregularities in title thereto, so long as the
same do not, individually or in the aggregate, materially interfere with or
impair the use of such real property in the manner normally used, and (vii)
Liens arising out of judgments or awards with respect to which at the time an
appeal or proceeding for review is being prosecuted in good faith if adequate
reserves with respect thereto have been established and are being maintained and
with respect to which there shall have been secured a stay of execution pending
such appeal or proceeding for review.
"Lee Real Property" means Lee's fee simple, leasehold or other interest
in the real property listed in Section 1.2(b)(x) of the Lee Disclosure Letter
and all buildings, improvements and fixtures thereon, together with all strips
and gores, rights of way, easements, privileges and appurtenances pertaining
thereto, including any right, title and interest of Lee in and to any street
adjoining any portion of the Lee Real Property.
"Lee Records" means files and records, including schematics, technical
information and engineering data, programming information, correspondence, books
of account, employment records, customer files, purchase and sales records and
correspondence, advertising records, files and literature, and other written
materials of Lee relating solely to the
70
<PAGE> 71
Lee Acquired Assets, or the Lee Business, other than duplicates of such files
and records retained by Lee; provided, however, that Lee Records shall not mean
or include the corporate minute books and stock records of Lee and any shares of
capital stock of Lee nor shall they include any communications that do not
relate solely to the Lee Acquired Assets or the Lee Business that are currently
protected from disclosure by Lee by virtue of the attorney-client privilege.
"Lee Trade Secrets" means all formulae, processes, procedures, designs,
ideas, research records, inventions, records of inventions, test information,
technical information, marketing know-how, proprietary information, know-how,
and trade secrets (and all related manuals, books, files, journals, models,
instructions, patterns, drawings, blueprints, plans, designs specifications,
equipment lists, parts lists, descriptions, data, art work, software, computer
programs and source code data related thereto including all current and
historical data bases) owned, used or held for use by Lee solely in connection
with the Lee Newspapers or the Lee Business.
"Lee Trademarks" means all of those trade names, trademarks, service
marks, slogans, logos, trademark and service mark registrations and trademark
and service mark applications owned, used, held for use, licensed by or leased
by Lee solely in connection with the Lee Newspapers or the Lee Business, but
including those items described in Part B of Section 4.16(b) of the Lee
Disclosure Letter.
"Letter of Intent" or "LOI" shall have the meaning ascribed to such
term in Section 1.3(a).
"Legal Expenses" shall have the meaning ascribed to such term in
Section 8.2(a).
"Legal Requirements" means all governmental statutes, ordinances, codes
and regulations.
"Liberty Business" means the business and operations of the Liberty
Newspapers, including without limitation the publication of the Liberty
Newspapers.
"Liberty Copyrights" means all copyrights, including copyrights for
printed matter, databases, software, CD/ROM discs, software and CD/ROM disc
source codes, copyright registrations and all pending applications for copyright
registration owned by Liberty and used solely in connection with the Liberty
Business, including those items described in Part A of Section 3.16(b) of the
Liberty Disclosure Letter.
"Liberty Disclosure Letter" means the disclosure letter, dated the date
of the Agreement (or if accepted by Lee, the Closing Date), delivered to Lee.
"Liberty Equipment" means all machinery, presses, equipment, furniture,
computer equipment (including software), fixtures, furnishings, toolings, parts
and other items of
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<PAGE> 72
tangible personal property owned or leased by Liberty, as the case may be, and
used solely in the operation of the Liberty Business.
"Liberty Intangible Property" means, solely in connection with the
Liberty Business: (i) the Liberty Copyrights; (ii) the Liberty Trademarks; (iii)
the Liberty Trade Secrets and (iv) all goodwill, if any, associated therewith.
"Liberty Material Adverse Effect" means any material adverse changes,
in, or material adverse effect on (i) the operations, results of operation or
conditions (financial or otherwise) of Liberty or the Liberty Business or (ii)
the Liberty Acquired Assets taken as a whole; provided, however, no change or
effect shall be considered a "Liberty Material Adverse Effect" if (a) such
change or effect is caused primarily by, and is of similar magnitude to, changes
in the newspaper industry generally; (b) such change or effect is substantially
the result of circumstances that are not likely to recur and have been
substantially remedied and any material reduction in the revenues of the Liberty
Business attributable to such change or effect has been restored; or (c) such
change or effect is related to the announcement of the transactions contemplated
by this Agreement.
"Liberty Motor Vehicles" means all motor vehicles owned by Liberty and
used solely in the operation of the Liberty Business, including those listed in
Section 1.2(a)(i) of the Liberty Disclosure Letter.
"Liberty Net Working Capital" means an amount equal to current assets
included within the Liberty Acquired Assets, minus current liabilities included
within the Liberty Assumed Liabilities, in each case calculated in accordance
with GAAP and past practice and applied on a basis consistent with the Liberty
Balance Sheet, including the exceptions to GAAP listed in Part A of Section 3.6
of the Liberty Disclosure Letter, except for purposes of determining Liberty Net
Working Capital:
(a) newsprint inventory shall be valued at $600 per metric ton without
the inclusion of any additional costs or fees;
(b) prepaid insurance and other prepaid expenses, to the extent Lee
will not receive a dollar for dollar monetary benefit after the Closing, will
not be included;
(c) accounts receivable that are not collected on or prior to the 90th
day after the Closing Date will not be included;
(d) current liabilities shall include an accrual for the vacation pay
liability assumed by Lee pursuant to Section 10.1; and
(e) current liabilities shall include deferred subscription revenue.
"Liberty Permitted Liens" means (i) Liens for Taxes not yet due and
payable, that are payable without penalty or that are being contested in good
faith and for which adequate
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<PAGE> 73
reserves have been taken, (ii) Liens arising or resulting from any action taken
by Lee, or any of its Affiliates, (iii) Liens created by, arising out of or
specifically contemplated by the Agreement, (iv) Liens identified as Liberty
Permitted Liens in the Liberty Disclosure Letter, (v) materialmen's, mechanics',
workmen's, repairmen's, employees' or other similar Liens arising in the course
of construction or in the ordinary course of operations or maintenance in each
such case securing obligations which are not delinquent or are being contested
in good faith and for which adequate reserves have been taken or securing
obligations which are bonded in a reasonable manner, (vi) zoning restrictions,
easements, licenses or other restrictions on the use of real property or other
minor irregularities in title thereto or Liens thereon, so long as the same do
not, individually or in the aggregate, materially interfere with or impair the
use of such real property in the manner normally used, and (vii) Liens arising
out of judgments or awards with respect to which at the time an appeal or
proceeding for review is being prosecuted in good faith if adequate reserves
with respect thereto have been established and are being maintained and with
respect to which there shall have been secured a stay of execution pending such
appeal or proceeding for review.
"Liberty Real Property" means Liberty's fee simple, leasehold or other
interest in the real property listed in Section 1.2(a)(x) of the Liberty
Disclosure Letter and all buildings, improvements and fixtures thereon, together
with all strips and gores, rights of way, easements, privileges and
appurtenances pertaining thereto, including any right, title and interest, in
and to any street adjoining any portion of the Liberty Real Property.
"Liberty Records" means files and records, including schematics,
technical information and engineering data, programming information,
correspondence, books of account, employment records, customer files, purchase
and sales records and correspondence, advertising records, files and literature,
and other written materials of Liberty relating solely to the Liberty Acquired
Assets or the Liberty Business other than duplicates of such files and records
retained by Liberty; provided, however, that Liberty Records shall not mean or
include the corporate minute books and stock records of Liberty, and any shares
of capital stock of Liberty nor shall they include any communications that do
not relate solely to the Liberty Acquired Assets or the Liberty Business that
are currently protected from disclosure by Liberty by virtue of the
attorney-client privilege.
"Liberty Trade Secrets" means all formulae, processes, procedures,
designs, ideas, research records, inventions, records of inventions, test
information, technical information, marketing know-how, proprietary information,
know-how, and trade secrets (and all related manuals, books, files, journals,
models, instructions, patterns, drawings, blueprints, plans, designs
specifications, equipment lists, parts lists, descriptions, data, art work,
software, computer programs and source code data related thereto including all
current and historical data bases) owned, used or held for use by Liberty solely
in connection with the Liberty Newspapers.
"Liberty Trademarks" means all of those trade names, trademarks,
service marks, slogans, logos, trademark and service mark registrations and
trademark and service mark applications owned, used, held for use, licensed by
or leased by Liberty solely in connection
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<PAGE> 74
with the Liberty Newspapers, excluding the Liberty Trademarks and Logos, but
including those items described in Part B of Section 3.16(b) of the Liberty
Disclosure Letter.
"Lien" means any lien (including any Tax lien), mortgage, security
interest, claim, charge, defect in title or other encumbrance.
"Loss(es)" means all losses, damages, liabilities and claims, and fees,
costs and expenses of any kind related thereto.
"Person" includes any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or association,
government or any agency or political subdivision thereof.
"Subsidiary" means, with respect to any Person, any other corporation,
partnership, joint venture, association or other entity in respect of which such
Person directly, or indirectly through one or more other Subsidiaries, both (i)
owns not less than a majority of the overall economic equity and (ii) has the
power to elect a majority of the board of directors (or individuals serving a
function similar to that of a board of directors of a corporation).
"Taxes" shall have the meaning ascribed to such term in Section
3.10(e).
"Third Party Claim" shall have the meaning ascribed to such term in
Section 8.2(d).
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<PAGE> 75
SCHEDULE 1.3(b)(xv)
Lee Employee Computer Purchase Agreements
<TABLE>
<CAPTION>
EMPLOYEE LOAN BALANCE
<S> <C>
Geneseo
May $ 813.55
Walker $ 361.94
Ottumwa
Babb $1,014.75
Box $ 243.57
Davidson $1,100.97
Jones $ 178.97
Kraemer $1,311.75
Parson $ 240.00
Simpson $1,348.47
Thomason $1,194.39
Tucker $1,198.11
Welker $1,318.47
Kewanee
Barry $ 338.04
Hunter $1,102.99
Leon $ 531.28
Part $1,120.53
Vandewoestyn $ 736.03
</TABLE>
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<PAGE> 76
SCHEDULE 6.1(f)(i)
OWNER'S TITLE INSURANCE POLICY AMOUNTS
<TABLE>
<S> <C>
Kewanee $361,200
Ottumwa $303,600
</TABLE>
(based upon assesed valuation plus 20%)
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<PAGE> 77
SCHEDULE 7.1(f)(i)
OWNER'S TITLE INSURANCE POLICY AMOUNTS
<TABLE>
<S> <C>
Beatrice $275,000
</TABLE>
77
<PAGE> 1
Exhibit 2.2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), is dated as of August
26, 1999, between LIBERTY GROUP PUBLISHING, INC., a Delaware corporation
("Liberty"), and LEE ENTERPRISES, INCORPORATED, a Delaware corporation ("Lee").
BACKGROUND STATEMENT
Lee is the owner of the Aledo, IL, Times Record, Town Crier, The Ridge and the
publisher of the Target (the "Newspapers"), which Lee desires to sell to Liberty
and which Liberty desires to purchase from Lee.
The definitions of certain capitalized terms used herein are set forth
in EXHIBIT A hereto.
Accordingly, in consideration of the premises and of the respective
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE 1
PURCHASE AND SALE OF ACQUIRED ASSETS
1.1 Purchase and Sale of Assets. Subject to the terms and conditions
set forth herein, at the Closing, Lee shall sell, transfer, assign and convey to
Liberty (or one or more Affiliates of Liberty as designated by Liberty) and
Liberty (or one or more Affiliates of Liberty as designated by Liberty) shall
purchase from Lee all of Lee's right, title and interest in and to the Acquired
Assets in exchange for Nine Hundred Thousand Dollars ($900,000.00) (the
"Purchase Price"). The Purchase Price shall be paid by wire transfer of
immediately available funds to an account designated by Lee on the date any such
payment shall be delivered hereunder.
1.2 Acquired Assets.
As used herein, "Acquired Assets" shall mean all of the assets,
properties, rights, interests and claims (other than Excluded Assets), that are
used or held for use solely in connection with the Business and the operation of
the Newspapers. The Acquired Assets referred to above include, without
limitation, the following assets (other than Excluded Assets):
(i) the Equipment and Motor Vehicles;
<PAGE> 2
(ii) all inventory of the Business, including ink,
newsprint, packaging materials and supplies;
(iii) the Intangible Property, including the trademarks,
trade names, licenses and mastheads of the Newspapers and all
derivations thereof;
(iv) all un-expired contracts, leases, licenses and other
agreements (whether written or oral) to which Lee is a party, and
relating solely to the Business (the "Contracts") but excluding
therefrom Contracts which have already been completed or will expire or
be terminated prior to the Closing;
(v) all licenses, permits or other governmental
authorizations (the "Permits") relating solely to the Business;
(vi) the Records;
(vii) all prepaid expenses relating solely to the Business;
(viii) all warranties and guarantees received from vendors,
suppliers or manufacturers (the "Warranties") relating solely to the
Acquired Assets;
(ix) all customer, sampling and marketing lists relating
solely to the Business;
(x) the Real Property;
(xi) all accounts receivable generated solely from the
Business;
(xii) all promotional material used solely in the Business;
(xiii) all subscription, bulk sales, circulation, dealer and
sub-dealer lists relating solely to the Newspapers, together with all
records, and other lists relating to or concerning routes,
distribution, delivery, sale, returns and pre-paid subscriptions to the
Newspapers; and
(xiv) all of the goodwill in, and going concern value
relating solely to the Newspapers, except for any goodwill relating to
the Lee Trademarks and Logos.
1.3 Excluded Assets:.
The following assets ("Excluded Assets") are not included in
the Acquired Assets and Lee shall not transfer, assign or convey to Liberty and
Liberty shall not acquire from Lee the following assets:
2
<PAGE> 3
(i) corporate minute books, seals, stock records and other
corporate documentation of Lee;
(ii) all tax returns, reports, forms and other tax records
pertaining to Lee's operations prior to the Closing (collectively, "Tax
Records");
(iii) any intercompany debt owing to Lee including all
interest thereon and all other intercompany agreements;
(iv) the name "Lee" or "Lee Enterprises" or any trade names,
trademarks, identifying logos or service marks employing the words
"Lee" or "Lee Enterprises" or any part or variation thereof or the
tradename, trademark, identifying logo or service mark of any Lee
Affiliate or division not being exchanged hereby or any confusingly
similar trade name, trademark or logo (collectively, the "Lee
Trademarks and Logos") and such other trademarks stated in Section 4.16
of the Lee Disclosure Letter and from and after Closing, Liberty hereby
agrees to completely and permanently remove all Lee Trademarks and
Logos prior to using any item containing such marks and logos,
including promotional materials, packaging materials, stationery,
signs, business cards and such use in the Newspapers. If all Trademarks
and Logos cannot be completely and permanently removed from any such
item, Liberty shall promptly destroy such item. Any destroyed items
shall be considered Excluded Assets;
(v) any rights or claims of Lee or any of its Affiliates
related to or contingent on the satisfaction of Retained Liabilities or
Excluded Assets;
(vi) all insurance policies and binders owned or held by Lee
or any of its Affiliates and claims with respect thereto;
(vii) all rights and claims which Lee or any of its
Affiliates may have for refund or credit with respect to Income Taxes
(including estimated Income Taxes);
(viii) any claim, right or obligation owing to Lee from any of
its Affiliates, including, without limitation, on account of any inter-
or intra-company indebtedness;
(ix) any corporate allocations to health and welfare, and
property and casualty insurance, including, without limitation, prepaid
insurance expenses, pension expenses and workers' compensation
expenses;
(x) any assets of a Benefit Plan, except as expressly
provided in Section 10.1;
(xi) the items referred to in the proviso to the
definition of Records;
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<PAGE> 4
(xii) all rights of Lee under (i) this Agreement, (ii) the
LOI, (iii) all documents and analyses prepared by Lee or any of its
Affiliates for internal evaluation purposes in connection with the sale
of the Business, and (iv) any Ancillary Instrument;
(xiii) cash on hand and in bank accounts and other investment
accounts and cash equivalents, including, but not limited to,
investment securities as of the Closing;
(xiv) the Lee Employee Computer Purchase Agreements listed in
SCHEDULE 1.3(B)(XIV); and
(xv) the contracts, leases, licenses and other agreements
(whether written or oral) listed in Section 1.3(xv) of the Lee
Disclosure Letter (collectively the "Excluded Contracts").
1.4 Assumed Liabilities.
Subject to the terms and conditions set forth herein, at the
Closing, Liberty shall assume and be liable and otherwise responsible for the
following liabilities and obligations of the Newspapers:
(i) the liabilities and obligations of the Newspapers,
under the Contracts to the extent arising from and after the Closing
(other than liabilities and obligations relating to pre-closing
breaches);
(ii) all current liabilities of Lee as of the Closing to the
extent such liabilities are reflected on the Balance Sheet (as defined
in Section 4.6(a)) or incurred after July 31, 1999 and which in each
case are included in the computation of Net Working Capital;
(iii) the liabilities and obligations of Lee relating to the
Transferred Employees expressly assumed by Liberty pursuant to Article
10; and
(iv) the liabilities and obligations of Lee under the leases
relating to the leased Real Property to the extent arising from and
after the Closing (other than liabilities and obligations relating to
pre-closing breaches) (all of the foregoing are referred to herein
collectively as the "Assumed Liabilities");
provided, however, that Assumed Liabilities shall not include, among others, (u)
except to the extent included in the Net Working Capital pursuant to clause (ii)
above, any liability or obligation under any Contract required by the terms
thereof to be discharged prior to the Closing, (v) any liability or obligation
incurred in violation of the provisions of this Agreement, (w) any liability or
obligation arising out of a breach or default by Lee prior to the Closing
(including an event that with the passage of time or the giving of notice, or
both, would become such a breach or default) under any Contract, (x) any
liability for Taxes of Lee,
4
<PAGE> 5
except as expressly provided herein, (y) any liability for deferred compensation
or for post-retirement welfare, medical or life insurance benefits, (z) any
Indebtedness of Lee and any obligation or liability relating thereto (uu) except
as provided in Section 10.2, any liability or obligation relating to costs and
expenses incurred by Lee in connection with the sale of the Acquired Assets or
the Business, (vv) any liability or obligation of Lee under this Agreement, (ww)
any liability or obligation of Lee owing to any of its Affiliates, including,
but not limited to, management fees, (xx) any liability or obligation of any
current or former Affiliates of Lee for which Lee is liable as a member of a
consolidated group, controlled group or affiliated group or otherwise, (yy)
except as provided for in Article 10, any liability or obligation of Lee
relating to the termination by Lee at or prior to the Closing of any of its
employees or (zz) the Excluded Contracts.
1.5 Retained Liabilities.
Lee shall retain as of the Closing (and Liberty shall not assume or be
responsible for) all liabilities and obligations of Lee, whether arising before
or after the Closing, disclosed or undisclosed, known or unknown, absolute,
contingent or otherwise and whether due or to become due (including, but not
limited to, the Excluded Contracts), except for the Assumed Liabilities (the
"Retained Liabilities").
ARTICLE 2
PURCHASE PRICE; CLOSING
2.1 Assumption of Liabilities. Subject to the terms and conditions
set forth herein, at the Closing, Lee shall assign to Liberty (or one or more
Affiliates of Liberty designated by Liberty), and Liberty (or one or more
Affiliates of Liberty designated by Liberty) shall assume, the Assumed
Liabilities pursuant to an instrument or instruments in a mutually agreeable
form (the "Assumption Agreement").
2.2 Closing. Unless the parties hereto shall agree in writing upon
a different location, time or date, the closing of the purchase and sale of the
Acquired Assets (the "Closing") shall take place at the offices of Lee's
counsel, Lane & Waterman, 220 North Main Street, Suite 600, Davenport, Iowa
52801, at 10:00 A.M. on September 30, 1999. The term "Closing" means the date
and time at which the Closing occurs.
2.3 Deliveries. Subject to the terms and conditions set forth in
this Agreement, as of the date hereof or at the Closing, as the case may be:
(a) Liberty shall deliver to Lee:
(i) at the Closing, the Assumption Agreement;
5
<PAGE> 6
(ii) at the Closing, all certificates and other instruments
and documents which are expressly required or reasonably requested by
Lee pursuant to this Agreement to be delivered by Liberty to Lee at the
Closing in form and substance reasonably satisfactory to Lee;
(iii) as of the date hereof, the Liberty Disclosure Letter in
the form of SCHEDULE 2.3 (A)(III) attached hereto, and again at the
Closing, as provided in Section 3.4;
(iv) at the Closing, the Purchase Price as provided in
Section 1.1; and
(v) at the Closing, a list of the Transferred Employees.
(b) Lee shall deliver to Liberty:
(i) at the Closing, one or more bills of sale and
assignment for the Acquired Assets in mutually agreeable forms, duly
executed by Lee;
(ii) at the Closing, the Assumption Agreement, duly executed
by Lee;
(iii) at the Closing, an instrument of assignment in a
mutually agreeable form, duly executed by Lee, of all registered (and
applications therefore) Intangible Property;
(iv) at the Closing, title to the Motor Vehicles;
(v) at the Closing, all certificates and other instruments
and documents which are expressly required or reasonably requested by
Liberty pursuant to this Agreement to be delivered by Lee to Liberty at
the Closing in form and substance reasonably satisfactory to Liberty;
(vi) as of the date hereof, the Lee Disclosure Letter in the
form of SCHEDULE 2.3(B)(VI) attached hereto, and again at the Closing,
as provided in Section 4.21;
(vii) at Closing, a Lease Assignment and Assumption in a
mutually agreeable form, duly executed by Lee and the lessors with
respect to the Real Property;
(viii) at the Closing, a list of the Employee Computer
Purchase Agreements; along with a list of outstanding balances as of
Closing for each Transferred Employee, which list shall be certified by
the Secretary or Assistant Secretary of Lee to be true, accurate and
complete as of the Closing;
(ix) at the Closing, a list of the inventory of newsprint
used solely in the Business as of at least two days prior to the
Closing; and
6
<PAGE> 7
(x) at the Closing, an assignment of rights, remedies and
benefits of Lee and its Affiliates involving existing non-competition
and non-solicitation agreements related to the Business or similar
undertaking for the benefit of Liberty reasonably satisfactory to
Liberty.
2.4 Consent of Third Parties. Anything in this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign any of the Contracts, Permits or Warranties or any claim, right or
benefit arising thereunder or resulting therefrom if an attempted assignment
thereof, without the consent of a third Person thereto, would constitute a
breach or other contravention thereof or in any way adversely affect the rights
of Liberty thereunder. Lee will use reasonable best efforts to obtain the
consent of the other parties to any such Contract, Permit, Warranty, as the case
may be, for the assignment thereof to Liberty. If such consent is not obtained
prior to the Closing, or if an attempted assignment thereof would be ineffective
or would adversely affect the rights of Liberty thereunder so that Liberty,
would not in fact receive all such rights, Liberty and Lee will cooperate to
achieve a mutually agreeable arrangement under which Liberty would obtain the
benefits and assume the obligations thereunder (but only to the extent such
obligations would have constituted Assumed Liabilities if such assignment
occurred on the Closing) from and after the Closing in accordance with this
Agreement, including subcontracting, sublicensing or subleasing to Liberty or
under which Lee would enforce for the benefit of Liberty with Liberty assuming
Lee's obligations to the same extent as if it would have constituted an Assumed
Liability, and any and all rights of Lee against a third Person thereto. Lee
will pay promptly to Liberty when received all monies received by Lee after the
Closing under any of the Contracts, Permits, Warranties, or any claim, right or
benefit arising thereunder to the extent that Liberty would be entitled thereto
pursuant hereto.
2.5 Adjustments to Working Capital.
(a) In determining the Purchase Price to be paid to Lee by Liberty
for the Acquired Assets, the parties have assumed the Net Working Capital would
be zero, accordingly, the Purchase Price shall be subject to adjustment as
specified in this Section 2.5. In accordance with this Section 2.5, if the Net
Working Capital is greater than zero, Liberty shall pay to Lee the amount, if
any, by which the Net Working Capital exceeds zero, and if the Net Working
Capital is less than zero, Lee shall pay to Liberty the amount, if any, by which
zero exceeds the Net Working Capital. The payments to be made pursuant to this
Section 2.5 shall be made by wire transfer of immediately available funds to an
account designated by Lee or Liberty, as the case may be, as the party entitled
to receive such payment hereunder on the date any such payment shall be
delivered hereunder.
(b) At least five days prior to the Closing, Lee shall deliver to
Liberty its good faith written determination of the Net Working Capital, which
determination shall be made based upon the most recent balance sheets of the
Newspapers available prior to the Closing (with any adjustments thereto agreed
to by Liberty prior to the Closing, the "Estimated Net Working Capital");
provided, however, if Lee and Liberty do not agree upon the Estimated
7
<PAGE> 8
Net Working Capital prior to the Closing, the Closing shall not be delayed and
the Estimated Net Working Capital shall be deemed to be an amount equal to zero.
Lee shall make available to Liberty, during normal business hours and on
reasonable notice, all work papers and other books and records utilized in
preparing the Estimated Net Working Capital, and will make available to Liberty
during normal business hours and on reasonable notice, the appropriate personnel
involved in the preparation of such determinations. At the Closing, Liberty
shall pay to Lee the amount, if any, by which the Estimated Net Working Capital
exceeds zero, or Lee shall pay to Liberty the amount, if any, by which zero
exceeds the Estimated Net Working Capital.
(c) On or prior to the ninetieth (90th) day following the Closing,
Liberty shall notify Lee in writing (the "Determination Notice") of its
determination of the final Net Working Capital, which determination shall set
forth in reasonable detail the basis for such determination. Each of Lee and
Liberty will provide the other party and their respective representatives with
access during normal business hours to its personnel, books and records to
assist it in the preparation of its, and review of the other party's
determination of the final Net Working Capital. If Liberty utilizes the services
of independent, certified public accountants in connection with the
Determination Notice, then Liberty shall cause such firm of independent
certified public accountants to (y) deliver to Lee, all workpapers and other
books and records utilized by such firm of independent certified public
accountants in preparing, or assisting Liberty in preparing the Determination
Notice and (z) make available to Lee during normal business hours and on
reasonable notice, the appropriate personnel involved in the preparation of such
determinations. Lee shall notify Liberty in writing (the "Dispute Notice")
within thirty (30) days after receiving the Determination Notice, if Lee
disagrees with Liberty's calculation of the final Net Working Capital which
notice shall set forth in reasonable detail the basis for such dispute and the
dollar amounts involved and Lee's good faith estimate of the final Net Working
Capital. If no Dispute Notice is given by Lee during such thirty (30) day
period, then Liberty's determination of the final Net Working Capital set forth
in the applicable Determination Notice shall be final and binding upon the
parties.
(d) Upon receipt of a Dispute Notice, Lee and Liberty shall negotiate
in good faith to resolve any disagreement with respect to the final Net Working
Capital. To the extent Lee and Liberty are unable to agree with respect to the
final Net Working Capital within thirty (30) days after either party notifies
the other of a disagreement with respect thereto, Lee and Liberty shall select a
mutually acceptable national accounting firm with no material relationship to
Lee or Liberty or their Affiliates, and submit their dispute to such accounting
firm for a binding resolution. The cost of such accounting firm shall be paid
one half by Liberty and one half by Lee.
(e) Upon the final determination of the Net Working Capital, if any, in
accordance herewith, Liberty or Lee, as the case may be, will make the
appropriate payment to the other party within two (2) business days of such
final determination.
(f) Within two (2) business days of the final determination required in
(e) above, Liberty will pay Lee by wire transfer the amount of the outstanding
balance of the Lee
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Computer Purchase Agreements for any Transferred Employee. Upon receipt of such
payment, Lee shall provide Liberty within two (2) business days thereof an
executed assignment of the Lee Employee Computer Purchase Agreements for
Transferred Employees and related accounts receivable in a mutually agreeable
form.
(g) In making the adjustments pursuant to this Section 2.5, all prepaid
expenses, to the extent included in the Acquired Assets and accrued expenses,
including real property, personal property and payroll Taxes, to the extent
included in the Assumed Liabilities, of the Newspapers which are properly
included in the determination of Net Working Capital shall, except as otherwise
expressly provided herein, be adjusted and allocated among Lee and Liberty to
reflect the principle that all expenses arising from the operation of the
Newspapers before the opening of business on the Closing Date shall be for the
account of Lee and after the opening of business on the Closing Date shall be
for the account of Liberty.
(h) For purposes of determination of Net Working Capital (i) only those
accounts receivable actually collected on or prior to the 90th day following the
Closing Date shall be included and any accounts receivable not so collected will
be assigned to Lee on the 91st day following the Closing Date and (ii)
notwithstanding anything herein to the contrary, for purposes of application of
the foregoing, unless otherwise designated by the account debtor based upon a
dispute, all payments made by an account debtor with respect to accounts
receivable outstanding as of the Closing shall be applied in payment of the
oldest outstanding account receivable with respect to said account debtor as of
the Closing. Lee shall not take any action to induce an account debtor to
designate the application of any accounts receivable payable by such account
debtor.
2.6 Allocation of Purchase Price. Liberty and Lee shall allocate the
consideration paid for the Acquired Assets in a manner agreed upon the parties
after the Closing. Neither party shall take any position inconsistent with such
allocations, and the parties shall file all Tax returns and reports (including
IRS Forms 8824 and 8594, if required) with respect to the transaction
contemplated hereby, including, but not limited to, all Federal, state and local
tax returns, on a basis consistent with such allocations, and each party shall
promptly give to the other written notice of any disallowance of or challenge to
such reporting by any taxing governmental authority.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF LIBERTY
Liberty represents and warrants to Lee as follows.
3.1 Organization and Good Standing. Liberty is a corporation duly
incorporated and validly existing as a corporation in good standing under the
laws of the State of Delaware. Liberty is duly qualified to do business and is
in good standing as a foreign corporation in each jurisdiction where
qualification as a foreign corporation is required, except for such failures to
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be qualified and in good standing that would not, in the aggregate, have a
Liberty Material Adverse Effect.
3.2 Authority. Liberty has the corporate power and corporate authority
to execute and deliver this Agreement and the other Ancillary Instruments to
which it is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions provided for hereby and thereby, and all corporate
action of Liberty necessary for the making and performance of this Agreement by
Liberty has been duly taken. Except as set forth in Section 3.2 of the Liberty
Disclosure Letter, the execution, delivery and performance by Liberty of this
Agreement and the other Ancillary Instruments to which it is a party do not and
will not (i)(A) contravene any provisions of the certificate of incorporation or
by-laws of Liberty, or (B) assuming that the Governmental Actions/Filings
referred to in Section 3.2 of the Liberty Disclosure Letter are obtained or
made, result in any violation by Liberty of any law, rule or regulation
applicable to either of them, (ii) result in any violation by Liberty of any
judgment, injunction or decree of, or any license or permit issued by, any court
or governmental authority applicable to either of them, or (iii) assuming that
the notices referred to in Section 3.2 of the Liberty Disclosure Letter are
made, require any Governmental Action/Filing to be made or obtained by Liberty
except (A) any federal, state or local Tax filings and (B) any PBGC "Notice of
Reportable Event" required under Section 4043(c) of ERISA. This Agreement and
each of the Ancillary Instruments to which Liberty is a party has been duly
executed and delivered by Liberty. This Agreement and each of the Ancillary
Instruments to which Liberty is a party constitutes the valid and binding
obligation of Liberty enforceable against Liberty in accordance with its terms
except that such enforcement may be limited by any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws (whether
statutory, regulatory or decisional), now or hereafter in effect, relating to or
affecting the rights of creditors generally or by equitable principles
(regardless of whether considered in a proceeding at law or in equity).
3.3 Brokers. Neither Liberty nor any of its directors, officers,
employees or Affiliates has employed any broker or finder or has incurred or
will incur any broker's, finder's or similar fees, commissions or expenses, in
each case in connection with the transactions contemplated by this Agreement.
3.4 Accuracy of Representations. No representation or warranty made by
Liberty in this Agreement or any document delivered, or to be delivered, by or
on behalf of Liberty pursuant hereto, including the Liberty Disclosure Letter,
will contain any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading; provided, however, that Liberty may submit, at any time up to the
end of the Business Day two Business Days prior to the Closing, a revised
version of the Liberty Disclosure Letter (and any attachment or schedule
thereto), which shall amend the Liberty Disclosure Letter only upon being
accepted by Lee in writing. Lee acknowledges that its sole remedy for any breach
of a representation or warranty caused by Lee's refusal to accept an amended
Liberty Disclosure Letter shall be termination of this Agreement in accordance
with Section 9.1(d).
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF LEE
Lee represents and warrants to Liberty as follows.
4.1 Organization and Good Standing. Lee is a corporation duly
incorporated and validly existing as a corporation in good standing under the
laws of the State of Delaware, Lee has the corporate power to carry on the
Business, is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where qualification as a foreign corporation is
required, except for such failures to be qualified and in good standing that
would not, in the aggregate, have a Lee Material Adverse Effect.
4.2 Authority. Lee has the corporate power and corporate authority to
execute and deliver this Agreement and the other Ancillary Instruments to which
it is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions provided for hereby and thereby, and all corporate
action of Lee necessary for the making and performance of this Agreement by Lee
has been duly taken. Except as otherwise provided in Section 4.2 of the Lee
Disclosure Letter, the execution, delivery and performance by Lee of this
Agreement and the other Ancillary Instruments to which it is a party do not and
will not (i)(A) contravene any provisions of the certificate of incorporation or
by-laws of Lee, (B) with or without the giving of notice or the passage of time
or both, result in any breach by Lee of, or default or permitted or required
acceleration of performance by Lee under, or the creation of any Lien upon the
Acquired Assets which would remain on the Acquired Assets after the Closing, or
the creation in favor of any third party of any right of termination of, any
contract, lease, license or other agreement to which Lee is a party or by which
Lee or the Acquired Assets are bound, or (C) assuming that the Governmental
Actions/Filings referred to in Section 4.2 of the Lee Disclosure Letter are
obtained or made, result in any violation by Lee of any law, rule or regulation
applicable to it, (ii) result in any violation by Lee of any judgment,
injunction or decree of, or any license or permit issued by, any court or
governmental authority applicable to it, or (iii) assuming that the notices
referred to in Section 4.2 of the Lee Disclosure Letter are made, require any
Governmental Action/Filing to be made or obtained by Lee except (A) any federal,
state or local Tax filings, and (B) any PBGC "Notice of Reportable Event"
required under Section 4043(c) of ERISA. This Agreement and each of the
Ancillary Instruments to which it is a party has been duly executed and
delivered by Lee. This Agreement and each of the Ancillary Instruments to which
it is a party constitutes the valid and binding obligation of Lee, enforceable
against Lee in accordance with its terms except that such enforcement may be
limited by any bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other laws (whether statutory, regulatory or decisional), now or
hereafter in effect, relating to or affecting the rights of creditors generally
or by equitable principles (regardless of whether considered in a proceeding at
law or in equity).
4.3 Acquired Assets. Except (i) as set forth in Part A of Section 4.3
of the Lee Disclosure Letter, (ii) for the Excluded Assets and (iii) for such
assets that are consumed or
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disposed of in the ordinary course of the Business and consistent with prior
practice after the date of this Agreement, the Acquired Assets include all of
the assets, properties and rights of every type and description, real, personal
and mixed, tangible and intangible, that are owned, leased or licensed by Lee or
any of its Affiliates and used solely in the conduct of the Business in the
manner in which the Business is now conducted.
Except as set forth in Part B of Section 4.3 of the Lee Disclosure
Letter, Lee does not use any assets solely in the conduct of the Business which
in the aggregate are material to the Business and which it does not own or
lease. Except as set forth in Part C of Section 4.3 of the Lee Disclosure
Letter, the tangible Acquired Assets are in good operating condition, reasonable
wear and tear excepted, and except for such failures, to be in such good
operating condition, individually or in the aggregate, have not had and are not
reasonably likely to have incurred a Lee Material Adverse Effect. The Acquired
Assets constitute all of the assets necessary to conduct the Business as
currently conducted. Part A of Section 4.3 of the Lee Disclosure Letter also
contains a true, accurate and complete list of all material tangible assets and
properties, real, personal and mixed, used primarily, but not solely, in the
conduct of the Business.
4.4 Title to Acquired Assets; Liens. Except as set forth in Section 4.4
of the Lee Disclosure Letter, Lee owns good title to or has valid leasehold
interests in all of the Acquired Assets and at the Closing good title to or
valid leasehold interests in (and consents to the assigment thereof) such
Acquired Assets shall be transferred to Liberty, free and clear of any and all
Liens except (i) for Permitted Liens, and (ii) any restriction on assignment of
Contracts which is contained in such Contract or which arises by law.
4.5 Contracts and Agreements; Defaults.
(a) Part A of Section 4.5 of the Lee Disclosure Letter contains a list
of (i) all outstanding mortgages, indentures, notes, guarantees, installment
obligations or other contracts or instruments evidencing or providing any
Indebtedness to which Lee is a party and which relate solely to the Business or
by which it or any of its assets are bound and which relate solely to the
Business, (ii) all outstanding contracts containing noncompetition covenants of
Lee which relate solely to the Business, (iii) all outstanding leases to which
Lee is a party and which relate solely to the Business or by which it is bound
and which relate solely to the Business, (iv) all outstanding contracts of Lee
to sell assets, other than in the ordinary course of business, and which relate
solely to the Business, (v) all collective bargaining agreements of Lee with any
labor union or other employee representative or a group of employees and which
relate to the Business, (vi) any joint venture or partnership agreements to
which Lee is a party relating solely to the Business, and (vii) all other
outstanding contracts to which Lee is a party and which relate solely to the
Business or by which it or any of its assets are bound and which relate solely
to the Business, which require or are likely to require the payment by Lee of an
amount, or require Lee to provide goods or services having a fair market value
or aggregate sales price, of more than $10,000 per annum, except (1) contracts
entered into in the ordinary course of business of Lee that can be terminated by
Lee on 90 or fewer days' notice without penalty, (2) subscriptions to the
Newspapers and contracts for advertising or commercial
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printing which Lee entered in the ordinary course of business each involving
aggregate amounts of less than $10,000 per annum, and (3) Excluded Assets. Lee
has delivered to Liberty a correct and complete copy of each written agreement
listed on Part A of Section 4.5 of the Lee Disclosure Letter (the "Lee Material
Contracts").
(b) Except as set forth in Part B of Section 4.5 of the Lee Disclosure
Letter, (i) neither Lee, nor, to the Knowledge of Lee, any other party to any
contract, lease, license or other agreement to which Lee is a party or by which
Lee or any of the Acquired Assets are bound (other than contracts, licenses,
leases or other agreements that constitute Excluded Assets and do not relate
solely to the Business) is in material breach of or default under any such
contract, lease, license or other agreement and (ii) no event has occurred which
(after notice or lapse of time or both) would become a material breach or
default by Lee under any such contract, lease, license or other agreement.
4.6 Financial Statements; Undisclosed Liabilities.
(a) Attached as Part A of Section 4.6 of the Lee Disclosure Letter are
true and complete copies of (i) the unaudited balance sheet of the Newspapers as
at September 30, 1998 and (ii) the unaudited balance sheet of the Newspapers as
at July 31, 1999 (the July 31, 1999 balance sheet is referred to as the "Balance
Sheet"), and the related unaudited statements of income for the twelve month and
ten month periods then ended (collectively, the "Financial Statements"). Except
as disclosed in Part A of Section 4.6 of the Lee Disclosure Letter, the
Financial Statements fairly present in all material respects the financial
position of Newspapers as at September 30, 1998 and July 31, 1999 and the
results of operations for the twelve months ended September 30, 1998, and the
ten months ended July 31, 1999 in accordance with GAAP, except that the
Financial Statements are summary in nature and do not include the notes and
related disclosures required by GAAP.
(b) Except for Excluded Assets and except for cash distributed to Lee
and its Affiliates, the Balance Sheet reflects all of the Acquired Assets that
will be acquired by Liberty at the Closing other than such assets as are
disposed of or consumed in the ordinary course of the Business and consistent
with past practice since July 31, 1999 or such additional assets as are acquired
by the Newspapers in the ordinary course of business since July 31, 1999.
(c) Except as set forth in Part B of Section 4.6 of the Lee Disclosure
Letter or as reflected, reserved against or otherwise disclosed in the Balance
Sheet and liabilities and obligations incurred in the ordinary course of
business since July 31, 1999, Lee does not have any material liabilities or
obligations related solely to the Business that would have been required to be
reflected or otherwise disclosed by Lee in the Balance Sheet in accordance with
GAAP.
4.7 Business Since July 31, 1999. Except as disclosed in Section 4.7 of
the Lee Disclosure Letter and except as required or otherwise contemplated by
this Agreement, since July 31, 1999 (i) the Business has been conducted in all
material respects in the ordinary course, consistent with past practices, (ii)
neither the Business nor its condition nor assets has
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experienced a Lee Material Adverse Effect and (iii) no event or events has or
have occurred that individually or in the aggregate has or have had or is or are
reasonably likely to have a Lee Material Adverse Effect. Since July 31, 1999,
except as described in Part B of Section 4.7 of the Lee Disclosure Letter, there
has not been:
(a) any material damage, destruction, or loss to the Acquired Assets
outside the ordinary course of business;
(b) any making or authorization of any capital expenditure relating
solely to the Business by Lee in excess of $10,000 individually or the making or
authorization of capital expenditures relating solely to the Business by Lee of
more than $25,000 in the aggregate;
(c) any sale, transfer, or other disposition of assets or properties,
real, personal, tangible or intangible, or mixed, relating solely to the
Business, by Lee, other than in the ordinary course of business;
(d) other than pursuant to existing collective bargaining agreements or
pursuant to regular salary reviews in the ordinary course of business consistent
with past practices, any increase in the compensation payable or to become
payable to any employees or agents of Lee that are involved in the Business, or
any bonus arrangement made with any thereof; or
(e) no material increase in the operating costs of any of the
Newspapers, whether arising from or in connection with the sale of real property
or otherwise, has occurred.
4.8 Compliance with Law; Litigation; Injunctions. Lee is not in
violation in any material respect of any law, rule, permit, regulation, order,
judgment or decree applicable to it, except as set forth in Part A of Section
4.8 of the Lee Disclosure Letter, the violation of which could reasonably have a
Lee Material Adverse Effect. Except for the matters set forth in Part B of
Section 4.8 of the Lee Disclosure Letter and for claims fully covered by
liability insurance of Lee, (i) there is no action, suit or other proceeding
pending or, to Lee's Knowledge, threatened, at law or in equity, before any
federal, state or municipal court, administrative agency or arbitrator against
Lee and relating to the Newspapers which, is reasonably expected to have a Lee
Material Adverse Effect and (ii) Lee is not a party to, or subject to or bound
by, any order, injunction or decree of any court or governmental authority
relating to the Newspapers.
4.9 Licenses. With such exceptions as are set forth in Section 4.9 of
the Lee Disclosure Letter (a) all licenses, permits, registrations or
authorizations of any governmental department or agency that are presently
required solely for the operation of the Business as presently conducted have
been duly obtained and are in full force and effect, the absence of which would
have a Lee Material Adverse Effect and (b) no consent, authorization or approval
is required to transfer such licenses, permits, registrations or authorizations
to Liberty (or one or more Affiliates of Liberty as designated by Liberty)
pursuant to this Agreement.
4.10 Taxes. Except as set forth in Section 4.10 of the Lee Disclosure
Letter:
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(a) Lee and any consolidated, combined or unitary group of which Lee
is or was a member have timely filed all Tax Returns which are required to be
filed, and all Taxes shown to be due on such Tax Returns have been timely paid.
All such Tax Returns were true and correct in all material respects. On July 31,
1999, Lee had no liability for Taxes (other than Income Taxes) that would have
been required to be reflected in the Balance Sheet in accordance with GAAP,
except to the extent that such Taxes are reflected, reserved against or
otherwise disclosed in the Balance Sheet or will be paid prior to the Closing.
There is no dispute or claim concerning any liability for Taxes of Lee with
respect to the Business that is either (1) claimed or raised by any authority in
writing or (2) as to which any of the directors and officers (or employees
responsible for Tax matters) of Lee has any knowledge based upon personal
contact with any agent of such authority. Lee has disclosed on its federal
income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Section
6662 of the Code. Lee has withheld and paid over all Taxes required to have been
withheld and paid over in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third Person.
(b) No property of Lee is subject to a tax benefit transfer lease
subject to the provisions of former Section 168(f)(8) of the Internal Revenue
Code of 1954.
(c) Lee is not a foreign person subject to withholding under Section
1445 of the Code and the regulations promulgated thereunder, and, at the
Closing, Lee shall deliver to Liberty a certificate to that effect.
(d) Lee is not bound by or obligated under any tax sharing or similar
agreement or arrangement, other than related to Lee's consolidated Tax return
filing.
4.11 Affiliated Transactions. Section 4.11 of the Lee Disclosure Letter
sets forth a complete and accurate list of all contracts in connection with the
Business to which Lee on the one hand, and any of its Affiliates on the other
hand, is a party.
4.12 Brokers. Neither Lee nor any of its directors, officers, employees
or Affiliates has employed any broker or finder or has incurred or will incur
any broker's, finder's or similar fees, commissions or expenses, in each case in
connection with the transactions contemplated by this Agreement.
4.13 Labor.
(a) Except as set forth in Part A of Section 4.13 of the Lee
Disclosure Letter, (i) Lee does not have any contracts of employment with any of
its employees, or consulting agreements with any consultants, involved solely in
the Business, (ii) no union has been certified as representing any of Lee's
employees involved in the Business, (iii) Lee is not a party to or currently
negotiating any collective bargaining agreements with respect to its employees
involved in the Business, (iv) to Lee's Knowledge, there is no currently pending
union representation activity involving any employees of Lee involved in the
Business, (v) to
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Lee's Knowledge, no demand has been made for recognition by a labor organization
by or with respect to any employees of Lee involved in the Business, and (vi)
none of the employees of Lee involved in the Business is represented by any
labor union or organization. Except as set forth in, Part B of Section 4.13 of
the Lee Disclosure Letter, there are no pending or, to Lee Knowledge, overtly
threatened (i) claims of employment discrimination, wage and hour claims, OSHA
claims, unemployment claims or worker's compensation claims or (ii) unfair labor
practice claims before the National Labor Relations Board.
(b) There is not presently pending and during the last five years there
has not been (i) any strike, picketing or work stoppage by any employees
involved solely in connection with the Business or (ii) any application for
certification of a collective bargaining agreement. There is no lockout of any
employee by Lee involved solely in the Business, and no such action is
contemplated by Lee.
4.14 Employee Benefits.
(a) For purposes of this Agreement, an "Employee Benefit Plan" is (i)
each "employee benefit plan," within the meaning of Section 3(3) of ERISA and
(ii) each other retirement, deferred compensation, medical, dental, vision,
disability, educational assistance, dependent care, life insurance, flexible
spending account, cafeteria plan (within the meaning of Code Section 125),
workers compensation, stock option, stock purchase, other stock-based
compensation, severance, vacation pay, other fringe or welfare benefits, change
in control or incentive or bonus plan, fund, policy or arrangement. Section
4.14(a) of the Lee Disclosure Letter lists each Employee Benefit Plan maintained
or contributed to by Lee or any of its ERISA Affiliates for current or former
employees of Lee involved solely in the Business (collectively, "Benefit
Plans"). Lee has delivered or made available to Liberty a copy of each Benefit
Plan (and each trust maintained in connection with any such Benefit Plan) or a
written summary of any material unwritten Benefit Plan and any summary plan
description relating to a Benefit Plan and, with respect to each Benefit Plan
under which liabilities are assumed by Liberty under Section 10.1 (an "Assumed
Benefit Plan") the most recent Internal Revenue Service ("IRS") Form 5500 and,
where applicable, the most recent IRS determination letter.
(b) Except as set forth in Section 4.14(b) of the Lee Disclosure with
respect to each Assumed Benefit Plan, (i) each such plan is in material
compliance with all applicable laws and regulations and has been administered
substantially in accordance with its terms; and (ii) each such plan intended to
be tax-qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS as to its tax-qualified status under the Code
and, to the Knowledge of Lee, there are no existing circumstances likely to
result in the revocation of any such determination letter. There are no actions,
suits or claims pending or, to Lee's Knowledge, threatened (other than routine
claims for benefits) with respect to any Benefit Plan which are likely to result
in the imposition of liability on Liberty.
(c) Except as set forth in Section 4.14(c) of the Lee Disclosure
Letter, no Benefit Plan is a "single-employer" plan within the meaning of
Section 4001(a)(15) of ERISA or a "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA. Lee has not
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incurred any liability under Title IV of ERISA with respect to any Assumed
Benefit Plan other than for PBGC premiums not yet due.
(d) To the Knowledge of Lee, no audit or investigation of any Benefit
Plan by the IRS, the Department of Labor or the PBGC is pending or threatened.
(e) All contributions to the Assumed Benefit Plans that will have been
required to be made with respect to periods prior to the Closing Date under such
Assumed Benefit Plans will have been made or accrued as of the Closing.
(f) Neither Lee nor any of its ERISA Affiliates nor, to Lee's
Knowledge, any other Person, has taken any action or failed to take any action
with respect to any Employee Benefit Plan maintained or contributed to or
previously maintained or contributed to by Lee or any of its ERISA Affiliates
for which Lee or any of its ERISA Affiliates may have any liability, contingent
or otherwise, or permitted any circumstance to exist that may subject Liberty or
any Assumed Benefit Plan to any Tax, penalty, fine or other liability under the
Code or ERISA.
(g) Except as set forth in Section 4.14(g) of the Lee Disclosure
Letter, there is no individual who is not, as of the date of this Agreement, an
active employee of Lee or an ERISA Affiliate and who would at any future date be
entitled to any form of reemployment rights with Lee or an ERISA Affiliate with
respect to the Business if (i) there were no sale of assets pursuant to this
Agreement and (ii) Lee continued to maintain the Business.
4.15 Environmental Matters. Except as set forth on Section 4.15
of the Lee Disclosure Letter to Lee's Knowledge:
(a) there has not been any past or continuing release or threat of
release of any Hazardous Substance in violation of Environmental Laws into the
environment at, on or from the Real Property or any other real property
currently or previously leased or owned by Lee and used in the Business and
there are no Hazardous Substances at, on or under the Real Property in violation
of Environmental Laws;
(b) there have been no Hazardous Substances generated solely in
connection with the Business that have been disposed of or come to rest at any
site that has been included in any federal, state or local priority list of
hazardous or toxic waste sites published by any governmental body, agency or
authority;
(c) (i) there are no underground or above-ground storage tanks located
on the Real Property, and(ii) there are no PCBs or PCB-containing equipment used
or stored on the Real Property;
(d) a copy of any environmental investigations, studies, audits,
tests, reviews or analyses relating to the Acquired Assets conducted by Lee or
any consultant engaged by Lee within the last five years, if any, have
previously been provided to Liberty;
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(e) Lee has operated in compliance with all applicable Environmental
Laws, the violation of which could reasonably be expected to have a Lee Material
Adverse Effect;
(f) Lee has not received any directive, order or notice from any
government body alleging any violation of or failure to comply with
Environmental Laws at the Real Property by Lee;
(g) Lee has not received any directive, order or notice from any
government body or any other Person alleging that Lee is actually or potentially
liable under Environmental Laws for the costs of environmental investigation or
remediation of the Real Property, or other real property to which Hazardous
Substances generated by Lee in connection with the Business were transferred for
disposal; and
(h) The Real Property is not subject to any Lien, securing the costs of
environmental remediation, arising under Environmental Laws.
4.16 Intangible Property.
(a) Except for Excluded Assets, Lee owns or possesses valid, adequate
and enforceable licenses or other rights to use all Intangible Property used
solely in connection with the Business as currently conducted. There are no
existing, or to the Knowledge of Lee, overtly threatened claims of any third
Person based on the use by Lee, or challenging the ownership, use, scope,
enforceability or validity, of any of the Intangible Property used in the
Business. To the Knowledge of Lee, there is no infringing use by any Person of
the Intangible Property used in the Business. Lee's use of the Intangible
Property does not infringe on the rights of any other Person.
(b) All Copyrights and Trademarks described in Parts A and B,
respectively, of Section 4.16(b) of the Lee Disclosure Letter are transferable
to Liberty without the consent of any third party, and Schedule 4.16(b)
constitutes a complete listing of all such Copyrights and Trademarks material to
the Business. The Business possesses valid licenses for all material software
used therein.
(c) Except as otherwise disclosed in Section 4.16(c) of the Lee
Disclosure Letter, any reprogramming required to permit the proper functioning
(but only to the extent that such proper functioning would otherwise be impaired
by the occurrence of the year 2000) in and following the year 2000 of any
software owned by or licensed to or used by the Business, or the computer
systems and other equipment containing embedded microchips of the Business, in
either case owned or operated by or used or relied upon in the conduct of such
business (including any such systems and other equipment supplied by others or
with which the computer systems of the Business interface), and the testing of
all such software, systems and other equipment as so reprogrammed, has been
completed and paid for in full and such software, systems and other equipment
shall function properly, without material errors or omissions, upon the
occurrence of the year 2000 (but only to the extent that such proper functioning
would otherwise be impaired by the occurrence of the year 2000).
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4.17 Insurance. All policies of insurance to which Lee is a party or
which provide insurance coverage to Lee, taken together, provide adequate
insurance coverage for the material Acquired Assets and Lee for all risks to
which the material Acquired Assets and are normally exposed in the ordinary
course of the Business.
4.18 Advertisers, Subscribers, Circulation. Except as disclosed in
Section 4.18 of the Lee Disclosure Letter, to Lee's Knowledge, none of the
advertisers that currently represent the Newspapers' ten largest advertisers
intends to materially reduce such purchases. Set forth on Section 4.18 of the
Lee Disclosure Letter is (i) the total paid circulation and the total unpaid
circulation for each Newspaper as of December 31, 1998 and as of July 31, 1999,
(ii) a list of the ten businesses or entities that generated the greatest amount
of advertising revenues for each Newspaper during the periods from October 1,
1997 through September 30,1998 and October 1, 1998 through June 30, 1999 and
(iii) a schedule of all sales during the period from October 1, 1998 through
June 30, 1999 of, commitments during such period that it will sell, or
representations during such period that it will sell, advertising space in any
Newspaper to any party involving the receipt of non-cash consideration in excess
of $2,500. The Newspapers have no lifetime subscription liabilities.
4.19 Real Property.
(a) The Real Property complies in all material respects with all
zoning, building, fire, use restriction, air, water or other pollution control,
environmental protection, waste disposal, safety or health codes, ordinances,
laws, rules or regulations. All of the buildings and other improvements located
upon the Real Property are in a good state or repair, reasonable wear and tear
excepted.
(b) No condemnation proceedings have been instituted or, to the
Knowledge of Lee, threatened against Lee or the Real Property.
(c) Except as otherwise described in Section 4.19 of the Lee
Disclosure Letter, all buildings and structures located on the Real Property are
located completely within the boundary lines of the Real Property, no buildings,
structure or other improvements owned by others encroach onto or under the Real
Property, and the Real Property has access to public roads. Lee has all
easements and rights necessary to conduct the Business on the Real Property in
the manner presently conducted.
4.20 Employment Matters. Except as otherwise disclosed in Section 4.20
of the Lee Disclosure letter, since July 1, 1999, Lee has not transferred, or
permitted or solicited the transfer of, any employee involved in the Business to
another newspaper or business owned or operated by Lee or any of its Affiliates.
4.21 Accuracy of Representations. No representation or warranty made by
Lee in this Agreement or any document delivered, or to be delivered, by or on
behalf of Lee pursuant hereto, including the Lee Disclosure Letter, contains any
untrue statement of a material fact or
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omits to state a material fact necessary to make the statements contained herein
or therein not misleading; provided, however, that Lee may submit, at any time
up to the end of the Business Day two Business Days prior to the Closing, a
revised version of the Lee Disclosure Letter (and any attachment or Schedule
thereto), which shall amend the Lee Disclosure Letter only upon being accepted
by Liberty in writing. Liberty acknowledges that its sole remedy for any breach
of a representation or warranty caused by Liberty's refusal to accept an amended
Lee Disclosure Letter shall be termination of this Agreement in accordance with
Section 9.1(c).
ARTICLE 5
INTENTIONALLY LEFT BLANK
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF LIBERTY
6.1 Liberty's Closing Conditions. The obligations of Liberty under
this Agreement to effect the Closing are, at its option, subject to the
fulfillment of the following conditions prior to or at the Closing, each of
which may be waived (as conditions to its obligations) by Liberty in its
absolute discretion:
(a) Representations, Warranties, Covenants.
(i) The representations and warranties of Lee contained in
Article 4 of this Agreement shall be true and correct in all material
respects as though such representations and warranties were made, as
written herein, immediately prior to the Closing (except to the extent
changes are permitted, required or otherwise contemplated pursuant to
this Agreement) provided, however, if any such representation or
warranty is already qualified by materiality in any manner (including,
but not limited to, any materiality qualification contained in a
definition of a capitalized term used in such representation or
warranty), for purposes of determining whether this condition has been
satisfied, such representation or warranty as so qualified must be true
and correct in all respects;
(ii) Lee shall have performed and complied in all material
respects with each and every covenant and agreement required by this
Agreement to be performed or complied with by it at or prior to the
Closing; and
(iii) Lee shall have furnished Liberty with a certificate,
dated the Closing and duly executed on behalf of Lee by an officer of
Lee, to the effect that the conditions set forth in clauses (i) and
(ii) of this Section 6.1(a) have been satisfied.
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(b) Proceedings. No action or proceeding shall have been instituted or
threatened prior to or on the Closing before any court or governmental body or
authority pertaining to the transactions contemplated by this Agreement or the
Ancillary Instruments, the result of which could prevent, or in any way limit or
make illegal, the consummation of such transactions or operation of the
Newspapers after the Closing. No United States or state governmental authority
or other agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, injunction or other order (whether temporary,
preliminary, or permanent) that is in effect and has the effect of limiting or
prohibiting consummation of the transactions contemplated by this Agreement.
(c) Consents under Contracts. Lee shall have obtained and delivered to
Liberty all consents, waivers and approvals required under any Lee Material
Contract (without any materially adverse provision or condition) to (i) permit
the valid execution, delivery, and performance by Lee of this Agreement and the
Ancillary Instruments, or (ii) prevent any Lee Material Contract from
terminating or being amended prior to its scheduled termination as a result of
the consummation of the transactions contemplated by this Agreement and the
Ancillary Instruments.
(d) Governmental Approvals. All governmental agencies, departments,
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation of the transactions contemplated by this Agreement and the
Ancillary Instruments shall have consented to, authorized, permitted or approved
such transactions, and the waiting period (and any extensions thereof) under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act"), applicable to the
transactions contemplated by this Agreement and the Ancillary Instruments shall
have expired or been terminated without any condition attached to such
expiration or termination.
(e) Noncompetition/Nonsolicitation Agreement. Lee and Liberty shall
have entered into a Noncompetition/Nonsolicitation Agreement, dated the Closing
Date, in a mutually agreeable form.
(f) Closing Documents. Lee shall have delivered to Liberty the
documents specified in Section 2.3(b) hereof.
(g) Foreign Person. Liberty shall have received from Lee an affidavit
(1) confirming its representation in Section 4.10(c), (2) setting forth Lee's
taxpayer identification number, and (3) granting Liberty permission to furnish a
copy of such affidavit to the Internal Revenue Service.
(h) Transition Services. Liberty shall have received from Lee a
Transition Services Agreement, referred to in Section 11.20, duly executed by
Lee and acceptable to Liberty, and such agreement shall be in full force and
effect.
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(i) Leases. Liberty shall have received from each landlord under a
lease of the Real Property one estoppel certificate and consent to assignment in
form and substance reasonably satisfactory to Liberty and covering such other
matters as Liberty reasonably may require.
(j) Additional Financial Statements. Lee shall have provided to Liberty
the Lee financial statements, in such form and prepared in accordance with
Section 4.6 (a), for any month-end occurring after July 31, 1999, within fifteen
(15) days of such month-end. If the Closing will occur prior to fifteen (15)
days after month-end, Lee shall not be obligated to provide such financial
statements for such month-end, but Liberty shall be permitted to make inquiry of
Lee management of trends and other information with respect to such Lee
financial statements not yet available for any month then ended, and there shall
be no Lee Material Adverse Effect shown or expressed therein in the Business.
(k) Asset Exchange Agreement. At the Closing, Liberty and Lee shall
have consummated the transactions contemplated by the Asset Exchange Agreement.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF LEE
7.1 Lee's Closing Conditions. The obligations of Lee under this
Agreement to effect the Closing are, at its option, subject to the fulfillment
of the following conditions prior to or at the Closing, each of which may be
waived (as conditions to its obligations) by Lee in its absolute discretion:
(a) Representations, Warranties, Covenants.
(i) The representations and warranties of Liberty contained
in Article 3 of this Agreement shall be true and correct in all
material respects as though such representations and warranties were
made as written herein, immediately prior to the Closing (except to
the extent changes are permitted, required or otherwise contemplated
pursuant to this Agreement) provided, however, if any such
representation or warranty is already qualified by materiality in any
manner (including, but not limited to, any materiality qualification
contained in a definition of a capitalized term used in such
representation or warranty), for purposes of determining whether this
condition has been satisfied, such representation or warranty as so
qualified must be true and correct in all respects;
(ii) Liberty shall have performed and complied in all material
respects with each and every covenant and agreement required by this
Agreement to be performed or complied with by them at or prior to the
Closing; and
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(iii) Liberty shall have furnished Lee with a certificate,
dated the Closing and duly executed on behalf of Liberty by an
officer of Liberty, to the effect that the conditions set forth
in clauses (i) and (ii) of this Section 7.1(a) have been
satisfied.
(b) Proceedings. No action or proceeding shall have been
instituted or threatened prior to or on the Closing before any court or
governmental body or authority pertaining to the transactions contemplated by
this Agreement or the Ancillary Instruments, the result of which could prevent,
or in any way limit or make illegal, the consummation of such transactions. No
United States or state governmental authority or other agency or commission or
United States or state court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order (whether temporary, preliminary, or permanent) that is
in effect and has the effect of limiting or prohibiting consummation of the
transactions contemplated by this Agreement.
(c) Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent, authorization
or approval of which is necessary under any applicable law, rule, order or
regulation for the consummation of the transactions contemplated by this
Agreement and the Ancillary Instruments shall have consented to, authorized,
permitted or approved such transactions, and the waiting period (and any
extensions thereof) under the HSR Act applicable to the transactions
contemplated by this Agreement and the Ancillary Instruments shall have expired
or been terminated without any condition attached to such expiration or
termination.
(d) Noncompetition/Nonsolicitation Agreement. Lee and Liberty
shall have entered into a Noncompetition/Nonsolicitation Agreement, dated the
Closing Date, in a mutually agreeable form.
(e) Closing Documents. Liberty shall have delivered to Lee the
documents specified in Section 2.3(a) hereof.
(f) Transition Services. Lee shall have received from Liberty a
Transition Services Agreement referred to in Section 11.20, duly executed by
Liberty and acceptable to Lee, and such agreement shall be in full force and
effect.
(g) Asset Exchange Agreement. At the Closing, Liberty and Lee
shall have consummated the transactions contemplated by the Asset Exchange
Agreement.
ARTICLE 8
SURVIVAL; INDEMNIFICATION
8.1 Survival. All representations, warranties, covenants and
agreements contained in this Agreement, the Liberty Disclosure Letter, the Lee
Disclosure Letter or in any exhibit, certificate, agreement, document or
statement delivered pursuant hereto (an "Ancillary
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Instrument") shall survive (and not be affected in any respect by) the Closing
and any investigation conducted by any party hereto. Notwithstanding the
foregoing, the representations and warranties contained in or made pursuant to
this Agreement or any Ancillary Instrument, respectively, shall terminate on,
and no claim or action with respect thereto may be brought after, the date that
is twelve months after the Closing, except that (1) the representations and
warranties contained in Sections 4.10, 4.14 and 4.15 hereof shall terminate on,
and no claim or action with respect thereto may be brought after, the expiration
date of the applicable statute of limitations (giving effect to any waiver, stay
or extension thereof), and (2) the representations and warranties contained in
Section 4.4 hereof shall survive in perpetuity. The representations and
warranties which terminate on the date that is twelve months after the Closing,
and upon the expiration date of the applicable statute of limitations (giving
effect to any waiver, stay or extension thereof), and the liability of any party
hereto with respect thereto pursuant to this Article 8, shall not terminate with
respect to any claim, whether or not fixed as to liability or liquidated as to
amount, with respect to which the Indemnifying Party (as defined in Section
8.2(c)) has been given written notice setting forth the material facts upon
which the claim for indemnification is based and, if feasible, a reasonable
estimate of the amount of the claims prior to the date that is twelve months
after the Closing or that is the date of expiration of the applicable statute of
limitations, as the case may be.
8.2 Indemnification. The parties hereto shall indemnify each other as
set forth below:
(a) Subject to Section 8.1 and to the other provisions of this
Section 8.2, Liberty hereby agrees to indemnify and hold Lee harmless from, and
to reimburse Lee for any Losses (including, without limitation, any reasonable
Legal Expenses) which result from or arise out of:
(i) the breach of any representation or warranty of
Liberty contained in this Agreement or any Ancillary Instrument;
(ii) the breach by Liberty of, or failure by Liberty, to
perform any of its respective covenants or agreements contained
in this Agreement or any Ancillary Instrument;
(iii) the Assumed Liabilities; or
(iv) the operation of the Business or the ownership of the
Acquired Assets following the Closing Date;
provided, however, that (A) Liberty shall not be responsible for any Losses with
respect to the matters referred to in clause (i) of this Section 8.2(a) until
the cumulative aggregate amount of such Losses exceeds $10,000 (the "Liberty
Basket Amount"), in which case Liberty shall then be liable only for such Losses
in excess of the Liberty Basket Amount and (B) the cumulative aggregate
indemnity obligation of Liberty under Section 8.2(a)(i) shall in no event exceed
$100,000.
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As used herein, "Legal Expenses" shall mean the fees, costs and
expenses of any kind incurred by any Person indemnified herein and its counsel
in investigating, preparing for, defending against or providing evidence,
producing documents or taking other action with respect to any threatened or
asserted claim.
(b) Subject to Section 8.1 and to the other provisions of this Section
8.2, Lee hereby agrees to indemnify and hold Liberty harmless from, and to
reimburse Liberty for any Losses (including, without limitation, any reasonable
Legal Expenses) which result from or arise out of:
(i) the breach of any representation or warranty of Lee
contained in this Agreement or any Ancillary Instrument;
(ii) the breach by Lee of or failure by Lee to perform any of
its respective covenants or agreements contained in this Agreement or
any Ancillary Instrument;
(iii) the Retained Liabilities; or
(iv) non-compliance with any applicable bulk sales law
insofar as it relates to the Acquired Assets;
provided, however, that (A) Lee shall not be responsible for any Losses with
respect to the matters referred to in clause (i) of this Section 8.2(b), until
the cumulative aggregate amount of such Losses exceeds $10,000 (the "Lee Basket
Amount"), in which case Lee shall then be liable only for such Losses in excess
of the Lee Basket Amount and (B) the cumulative aggregate indemnity obligation
of Lee under Section 8.2(b)(i) shall in no event exceed $100,000.
(c) As promptly as practicable, and in any event within 30 days,
after Lee or any of its Affiliates, on the one hand, or Liberty or any of its
Affiliates, on the other hand, shall receive any notice of, or otherwise become
aware of, the commencement of any action, suit or proceeding, the assertion of
any claim, or the incurrence of any Loss, for which indemnification is provided
for (assuming, only for the purposes of this Section 8.2(c) and of the terms
defined in this Section 8.2(c), that the Liberty Basket Amount or the Lee Basket
Amount, as the case may be, was zero) by Section 8.2(a) or 8.2(b) (an
"Indemnification Event"), the party entitled to such indemnification (an
"Indemnified Party") shall give written notice (an "Indemnification Claim") to
the party from which such indemnification is (or, under such assumption, could
be) sought (an "Indemnifying Party") describing in reasonable detail the
Indemnification Event and the basis on which indemnification is (or, under such
assumption, could be) sought. If the Indemnifying Party is not so notified by
the Indemnified Party within 30 days after the date of the receipt by the
Indemnified Party or any of its Affiliates of notice of, or of the Indemnified
Party or any of its Affiliates otherwise becoming aware of, any particular
Indemnification Event, the Indemnifying Party shall be relieved of all liability
hereunder in respect of such Indemnification Event (or the facts or
circumstances
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giving rise thereto) to the extent that such Indemnifying Party is prejudiced or
harmed as a consequence of such failure (and, to such extent, the Losses
resulting from such Indemnification Event shall be disregarded for purposes of
determining whether the Liberty Basket Amount or the Lee Basket Amount, as the
case may be, has been exceeded).
(d) If any Indemnification Event involves the claim of any third party
(a "Third-Party Claim"), the Indemnifying Party shall (whether or not the
Indemnified Party is entitled to claim indemnification under Section 8.2(a) or
8.2(b), as the case may be) be entitled to, and the Indemnified Party shall
provide the Indemnifying Party with the right to, participate in, and assume
sole control over, the defense and settlement of such Third-Party Claim (with
counsel reasonably satisfactory to the Indemnified Party); provided, however,
that (i) the Indemnified Party shall be entitled to participate in the defense
of such Third-Party Claim and to employ counsel at its own expense to assist in
the handling of such Third-Party Claim, and (ii) the Indemnifying Party shall
obtain the prior written approval of the Indemnified Party before entering into
any settlement of such Third-Party Claim or ceasing to defend against such
Third-Party Claim, such approval not to be unreasonably withheld or delayed, if
(x) as a result of such settlement or ceasing to defend, injunctive or other
equitable relief would be imposed against the Indemnified Party or (y) in the
case of a settlement, the Indemnified Party would not thereby receive from the
claimant an unconditional release from all further liability in respect of such
Third-Party Claim. After written notice by the Indemnifying Party to the
Indemnified Party of its election to assume control of the defense of any such
Third-Party Claim, the Indemnifying Party shall not be liable hereunder to
indemnify any Person for any Legal Expenses subsequently incurred in connection
therewith except as provided below. If the Indemnifying Party does not assume
sole control over the defense or settlement of such Third-Party Claim as
provided in this Section 8.2(d) within a reasonable period of time, or, after
assuming such control, fails to defend against such Third-Party Claim (it being
agreed that settlement of such Third-Party Claim does not constitute such a
failure to defend), the Indemnified Party shall have the right (as to itself) to
defend and, upon obtaining the written consent of the Indemnifying Party, which
shall not be unreasonably withheld or delayed, settle the claim in such manner
as it may deem appropriate, and the Indemnifying Party shall promptly reimburse
the Indemnified Party therefor in accordance with (and to the extent provided
for (subject to, and not disregarding, the provisos to Section 8.2(a) or 8.2(b)
in Section 8.2(a) or 8.2(b)), as appropriate. Notwithstanding the foregoing
provisions of this Section 8.2(d), the Indemnified Party shall have the right at
all times to take over and assume the control (as to itself) of the defense or
settlement of any Third-Party Claim; provided, however, that in such event (x)
the Indemnifying Party shall cease to have any obligation under Section 8.2(a)
or 8.2(b), as the case may be, in respect of such Third-Party Claim and (y) all
Losses resulting from such Third-Party Claim will not be considered for purposes
of determining whether the Liberty Basket Amount or the Lee Basket Amount, as
the case may be, has been exceeded. The Indemnifying Party shall not be liable
under this Section 8.2 for any settlement or compromise effected without its
consent.
(e) The Indemnified Party and the Indemnifying Party shall each
cooperate (and shall each cause its Affiliates to cooperate) with the other in
the defense of any Third-Party Claim pursuant to Section 8.2(d). Without
limiting the generality of the foregoing, each such
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<PAGE> 27
Person shall furnish the other such Person with such documentary or other
evidence as is then in its or any of its Affiliate's possession as may
reasonably be requested by the other Person for the purpose of defending against
any such Third-Party Claim.
(f) Upon payment of any amount pursuant to any Indemnification Claim,
the Indemnifying Party shall be subrogated, to the extent of such payment, to
all of the Indemnified Party's rights of recovery against any third party with
respect to the matters to which such Indemnification Claim relates.
(g) Liberty and Lee each agree that: (i) if the Closing occurs, the
rights to indemnification set forth in Section 8.2 (a) or 8.2 (b) shall except
as otherwise required by law, be the sole and exclusive remedy that any
Indemnified Party has against the other party with respect to breaches of
representations or warranties under this Agreement; (ii) prior to the Closing,
the sole and exclusive remedies of Liberty and Lee for breaches of
representations or warranties hereunder shall be either of the following: (A) to
enforce its rights set forth in Section 11.18 or (B) to terminate this Agreement
as provided in Section 9.1; and (iii) at the Closing each party will confirm to
the other in writing whether it has actual knowledge of an Indemnification Event
existing at the Closing and a description of any such claim. Neither party shall
have any obligation to the other under Section 8.2(a) or 8.2(b) with respect to
any Indemnification Event actually known to the other party and not so disclosed
at the Closing. All claims for indemnification must be asserted, if at all, in
good faith and in accordance with the provisions of Section 8.2(c) hereof and,
to the extent applicable to such claims, within the relevant time period set
forth in the last sentence of Section 8.1 hereof.
(h) If at any time subsequent to the receipt by an Indemnified Party of
an indemnity payment hereunder, such Indemnified Party (or any Affiliate
thereof) receives any recovery, settlement or other similar payment with respect
to the Loss for which it received such indemnity payment (the "Recovery"), such
Indemnified Party shall promptly pay to the Indemnifying Party an amount equal
to the amount of such Recovery, less any expense, including reasonable attorneys
fees, incurred by such Indemnified Party (or its Affiliates) in connection with
such Recovery, but in no event shall any such payment exceed the amount of such
indemnity payment.
ARTICLE 9
TERMINATION
9.1 Termination of Agreement. This Agreement may be terminated at
any time on or prior to the Closing:
(a) by the mutual written consent of Liberty and Lee;
(b) by either Liberty or Lee, if the Closing has not taken place by
September 30, 1999 and the terminating party is not in material breach of its
obligations hereunder;
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(c) by Liberty as provided in Section 4.21;
(d) by Lee as provided in Section 3.4;
(e) by either Liberty or Lee, if any court or governmental body of
competent jurisdiction in the United States shall have issued an order, stay,
judgment or decree, or taken any other action, permanently prohibiting the
transactions contemplated by this Agreement, and such order, stay, judgment,
decree, or other action, shall have become final and non-appealable; or
(f) by either Liberty or Lee in the event that the Asset Exchange
Agreement is terminated by either Liberty or Lee in accordance with its terms.
If Liberty or Lee shall terminate this Agreement pursuant to the
foregoing provisions of this Section 9.1, such termination shall be effected by
written notice to the other party specifying the provision pursuant to which
such termination is made.
9.2 Liabilities Upon Termination. Except for the terms of Section 11.2
hereof (and, to the extent relevant thereto, the terms of Sections 8.2, 11.4,
11.5, 11.6, 11.7, 11.14, 11.16, 11.17 and 11.19 hereof), which shall survive any
termination of this Agreement, upon the termination of this Agreement pursuant
to Section 9.1 hereof, this Agreement shall forthwith become null and void, and
no party hereto or any of its officers, directors, employees, agents,
consultants, stockholders or principals shall have any rights, liabilities or
obligations hereunder or with respect hereto; provided, however, that nothing
contained in Section 9.1 or this Section 9.2 shall (i) relieve any party from
liability for any willful failure to comply with any covenant or agreement
contained herein (and the terms of Sections 8.2, 11.4, 11.5, 11.6, 11.7, 11.14,
11.16, 11.17 and 11.19 hereof shall apply to any such failure) or (ii) affect
the Confidentiality Agreement, which shall survive any termination of this
Agreement in accordance with the Confidentiality Agreement's terms and
conditions.
ARTICLE 10
EMPLOYEE AND CERTAIN TAX MATTERS
10.1 Lee Employee Matters.
(a) (i) Lee shall, after notifying Liberty of its intent thereto and
after first allowing Liberty to be present at and to participate during
or in connection with such notification (if Liberty desires), provide
all current Lee employees involved solely in the Business with all
appropriate notification of the sale of the Business and the
termination of each such employee's employment with Lee as a result
thereof.
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(ii) Liberty shall have no obligation to hire any of Lee
current or former employees involved in the Business. Promptly after
the date hereof Liberty shall have the right to review all employment
records and files of Lee involved solely in the Business, after Lee
obtains a written release of such employee's personnel file from such
employee, and to interview current Lee employees involved solely in the
Business for employment after the Closing Date. Liberty may make an
offer of employment to any Business employee involved solely in the
Business, which offer shall be subject to, and effective, immediately
following the Closing Date. Any employee of Lee involved in the
Business who commences employment with Liberty (or one or more
Affiliates of Liberty as of the Closing Date designated by Liberty) is
referred to herein as a "Transferred Employee."
(b) Except to the extent prohibited by the Code, ERISA, or other
applicable law, each Employee Benefit Plan established or maintained by Liberty
or its ERISA Affiliates for Transferred Employees ("Liberty Plan") shall grant
credit to each Transferred Employee for all service on or prior to the Closing
Date with Lee or any predecessor or ERISA Affiliate of the foregoing, for
purposes of eligibility, vesting and seniority; provided, however, that such
credit shall only be provided to the extent that such service is documented by
Lee substantially contemporaneously with the Closing Date and in a manner
reasonably satisfactory to Liberty; provided further, no such credit shall be
provided with respect to any group health plan (other than a health flexible
spending arrangement) maintained by Liberty or an ERISA Affiliate; provided
further, that credit for such service shall not be required for any purpose
under any post-retirement medical or life insurance plan or for purposes of
benefit accrual under any plan; and provided further, that any Liberty Plan may
be designed to offset, or otherwise avoid duplication of, any benefits to which
a Transferred Employee is entitled under any comparable Benefit Plan on or prior
to the Closing Date.
(c) During the period that begins on the Closing Date and ends on the
last day of the calendar month in which the Closing occurs, Lee shall continue
group health plan coverage for Transferred Employees and their family members in
the same manner and under the same terms as if such Transferred Employees had
remained employees of Lee. As of the first day after the period described in the
preceding sentence, Liberty shall establish or maintain a group health plan
which shall cover all Transferred Employees and their family members (as defined
in the plan established or maintained by Liberty) who immediately prior to the
Closing were covered under any group health plan (other that a health flexible
spending arrangement) maintained by Lee. As of the same date, any such group
health plan (other than a health flexible spending arrangement) established or
maintained by Liberty shall, with respect to Transferred Employees and their
family members (as defined in the plan established or maintained by Liberty),
(i) waive any waiting period, (ii) waive any exclusion or limitation for
preexisting conditions which were covered (generally and/or specifically as to
any individual) under any group health plan maintained by Lee prior to the
Closing Date and (iii) grant credit (for purposes of annual deductibles,
co-payments and out-of-pocket limits) for any covered claims incurred or
payments made prior to the Closing during the plan year in which the Closing
Date occurs.
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(d) A 401(k) Plan maintained by Liberty shall accept direct rollovers
of distributions from Lee's 401(k) Plan for electing Transferred Employees, but
only to the extent that:
(i) the plan administrator of Liberty's 401(k) Plan receives
such statements, certifications, and documentation as are considered by
such plan administrator to be necessary or appropriate for such plan
administrator to reasonably conclude that such rollovers are valid
rollover contributions;
(ii) the plan administrator of Liberty's 401(k) Plan does not
subsequently determine that one or more of such rollovers was an
invalid rollover contribution;
(iii) the electing Transferred Employee is an employee of
Liberty or an ERISA Affiliate as of the date of the rollover
contribution; and
(iv) the rollover contribution consists exclusively of cash.
(e) Liberty will assume and satisfy Lee's liability with respect to all
earned and unpaid vacation pay to which Transferred Employees are entitled, if
any, as of the Closing Date, either by providing such employees with their
eligible paid vacation time or a payment in lieu thereof consistent with
Liberty's past practices. Liberty will give the Transferred Employees credit for
past service with Lee and its Affiliates in determining the amount of paid
vacation to which they may become entitled after the Closing Date, in accordance
with Liberty's vacation policies in effect from time to time; provided, however,
that such credit shall only be provided to the extent that such service is
documented by Lee substantially contemporaneously with the Closing Date and in a
manner reasonably satisfactory to Liberty.
(f) Lee shall remain liable for and shall pay all short-term disability
benefits payable to any Transferred Employee with respect to any illness or
injury which occurred or existed on or prior to the Closing. Liberty shall be
liable for and shall pay all short-term disability benefits payable to any
Transferred Employee with respect to any illness or injury which occurred or
existed on or after the Closing Date in accordance with the terms of any
applicable Liberty employee benefit plan.
(g) Lee shall be responsible for providing long-term disability
benefits to any current or former employees of Lee who are receiving long-term
disability benefits as of the Closing Date in accordance with the terms of Lee's
long-term disability plan and to any employees on short-term disability leave as
of the Closing Date who subsequently qualify for long-term disability benefits.
(h) Lee shall be responsible for any covered claims incurred by any
Transferred Employee under Lee's medical, dental or vision plans prior to the
Closing Date in accordance with the terms of such plans. Liberty shall be
responsible for any claims incurred by any Transferred Employee participating in
Liberty's medical, dental or vision plans after the
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Closing Date, to the extent such claims are covered by, and in accordance with
the terms of, Liberty's plans.
(i) Lee shall be responsible for providing COBRA coverage to any
current or former employee of Lee or any "qualified beneficiary" (within the
meaning of Section 4980B of the Code) of any such current or former employee who
has incurred a "qualifying event" (within the meaning of Section 4980B of the
Code) under any Benefit Plan on or prior to the Closing Date. Liberty shall not
require, recommend or encourage any Transferred Employee to elect continuation
of coverage under a Lee group health plan pursuant to COBRA. Liberty shall be
responsible for providing COBRA coverage to any Transferred Employee or any
"qualified beneficiary" of a Transferred Employee who incurs a "qualifying
event" under any Liberty Benefit Plan after the Closing Date.
(j) Lee shall be responsible for providing any post-employment
benefits, including medical and life insurance benefits, to any employees or
former employees of Lee (and their family members) in accordance with the terms
of Lee's Plans, if applicable.
(k) Lee shall be responsible for any workers compensation claims which
are reported or incurred by any Transferred Employee prior to the Closing Date.
Liberty shall be responsible for any workers compensation claims which are
incurred by any Transferred Employee on or after the Closing Date.
(l) Except as otherwise specifically provided herein, Liberty, its
Affiliates, and its ERISA Affiliates shall have no responsibility for, and Lee
shall be solely responsible for, all benefits, compensation, or other
liabilities attributable to (i) services rendered to Lee on or prior to the
Closing Date by a Transferred Employee or by any other individual as an employee
of Lee or otherwise, or (ii) any act or omission of Lee with respect to any
individual described in clause (i), including any agreement, plan, fund, policy,
or arrangement maintained at any time by Lee. No other provision of this Section
10.1 describing Lee's liability or responsibility shall be interpreted to limit
the liability or responsibility that Lee has under this paragraph (l) except to
the extent that such other provision specifically makes Liberty liable or
responsible. For purposes of this paragraph (l), references to Lee shall include
Lee, its Affiliates, its ERISA Affiliates, and all predecessors of any of such
entities.
(m) The parties agree that, to the extent permissible under applicable
law (i) Liberty shall be a successor employer with respect to the Transferred
Employees for purposes of the Federal Insurance Contributions Act, as codified
at 26 U.S.C. ss.ss. 3101-3128 and the Federal Unemployment Tax Act, as codified
at 26 U.S.C. ss.ss. 3301-3311, and (ii) to the extent that Liberty elects, it
shall be treated as a successor employer under any applicable state unemployment
compensation laws. Lee and Liberty agree to provide each other with such wage,
tax and other information as may reasonably be required for those purposes.
(n) Lee shall, upon the request of Liberty deliver such documents,
personnel or benefit information and other information in its possession, as may
be necessary or desirable from time to time for the administration, analysis and
operation of the Liberty Plans. Such
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documents and information may be provided at such times and in such form
(including any electronic media) as may reasonably be requested by either party.
10.2 Certain Tax Matters. All federal, state, local and other transfer,
sales and use Taxes imposed upon the transfer to Liberty (or one or more
Affiliates of Liberty as designated by Liberty) of the Acquired Assets will be
shared equally by Liberty and Lee.
ARTICLE 11
MISCELLANEOUS
11.1 Exclusivity of Representations, Reliance on Representations.
(a) THE REPRESENTATIONS AND WARRANTIES MADE BY LIBERTY AND LEE,
RESPECTIVELY, IN THIS AGREEMENT ARE IN LIEU OF AND ARE EXCLUSIVE OF ALL OTHER
REPRESENTATIONS AND WARRANTIES, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE AND ANY OTHER
IMPLIED WARRANTIES, OF LIBERTY AND LEE RESPECTIVELY. LIBERTY AND LEE EACH HEREBY
DISCLAIMS ANY SUCH OTHER OR IMPLIED REPRESENTATIONS OR WARRANTIES,
NOTWITHSTANDING THE DELIVERY OR DISCLOSURE BY LIBERTY OR ANY OTHER PERSON TO LEE
OR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR REPRESENTATIVES, OR BY
LEE OR ANY OTHER PERSON TO LIBERTY, ANY OF ITS RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR REPRESENTATIVES, OF ANY DOCUMENTATION OR OTHER INFORMATION
IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(b) Lee represents and warrants to Liberty that in making its decision
to enter into this Agreement it is not relying on any information provided or
statements made by Liberty or any of its respective agents, representatives,
employees or affiliates other than the specific representations and warranties
made by Liberty in this Agreement.
(c) Liberty represents and warrants to Lee that in making its decision
to enter into this Agreement it is not relying on any information provided or
statements made by Lee or any of their respective agents, representatives,
employees or affiliates other than the specific representations and warranties
made by Lee in this Agreement.
11.2 Expenses. Except as expressly set forth in this Section 11.2 and
Sections 10.2 and 11.13 regardless of whether the Closing occurs, each party
hereto shall bear all of its expenses incurred in connection with the
transactions contemplated by this Agreement, including, without limitation,
accounting and legal fees incurred in connection herewith. Notwithstanding the
foregoing, the fees of all filings required under the HSR Act in connection
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with the transactions contemplated by this Agreement and the Ancillary
Instruments will be shared equally by the parties.
11.3 Further Assurances, Bulk Transfer. Subject to Section 9.1 hereof,
from time to time prior to, at and after the Closing, without the payment of any
additional consideration except as otherwise set forth in this Agreement, each
party hereto will execute all such instruments and take all such actions as the
other party shall reasonably request in connection with carrying out and
effectuating the intent and purpose hereof and all transactions and things
contemplated by this Agreement. The parties hereby waive compliance with the
provisions of any applicable bulk sales law of any jurisdiction in connection
with the transactions contemplated hereby and no representation, warranty or
covenant contained in this Agreement shall be deemed to have been breached as a
result of such non-compliance.
11.4 Notices. Notices and other communications provided for herein
shall be in writing (which shall include notice by facsimile transmission) and
shall be delivered or mailed (or if by facsimile communications equipment of the
sending party hereto, delivered by such equipment), addressed as follows:
If to Liberty: Liberty Group Publishing, Inc.
3000 Dundee Road
Northbrook, Illinois 60062
Attn: Kenneth L. Serota
with a copy to: Katten Muchin & Zavis
525 W. Monroe Street
Suite 1600
Chicago, Illinois 60661
Attn: Kenneth W. Miller, Esq.
If to Lee: Lee Enterprises, Incorporated
215 North Main Street, Ste. 400
Davenport, IA 52801
Attn: Larry L. Bloom
with a copy to: Lane & Waterman
220 N. Main Street, Ste. 600
Davenport, IA 52801
Attn: C. Dana Waterman III, Esq.
or to such other address as a party may from time to time designate in writing
in accordance with this section. All notices and other communications given to
any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt.
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11.5 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, that neither
this Agreement nor any of the rights, interests, or obligations hereunder may be
assigned by any of the parties hereto without the prior written consent of the
other parties, except that Liberty and Lee may assign any or all of their
respective rights and obligations hereunder to any of their Affiliates without
the consent of the other parties; provided, that any such assignment shall not
relieve Liberty or Lee, as the case may be, from any liability hereunder.
11.6 Construction.
(a) Unless otherwise expressly specified herein, (i) defined terms in
the singular shall also include the plural and vice versa, (ii) the words
"hereof", "herein", "hereunder" and other similar words refer to this Agreement
as a whole, (iii) Article, Section and Schedule references in this Agreement are
to Articles of, Sections of, Schedule to and Exhibits to this Agreement and (iv)
words of any gender (masculine, feminine, neuter) mean and include correlative
words of the other genders.
(b) The captions in this Agreement are for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.
(c) All references to "days" shall be to calendar days unless business
days are specified.
(d) Unless the context otherwise requires, (i) "or" is not exclusive
and (ii) "including" means "including but not limited to" and "including without
limitation".
(e) As used herein, the phrases "date of this Agreement" and "date
hereof' and any other phrases of similar import shall mean August 26, 1999
(regardless, with respect to representations and warranties, of the date or time
as of which such representations and warranties are made or deemed to have been
made or as of which the accuracy or inaccuracy thereof is measured or
determined).
11.7 Law Governing. THIS AGREEMENT IS INTENDED AS A CONTRACT UNDER AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LOCAL LAW OF THE STATE OF ILLINOIS,
INCLUDING WITHOUT LIMITATION AS TO ALL MATTERS OF CONSTRUCTION, VALIDITY,
ENFORCEABILITY AND PERFORMANCE.
11.8 Waiver of Provisions. The provisions, terms, covenants,
representations, warranties and conditions of this Agreement may be waived only
by a written instrument executed by the party hereto waiving compliance. The
failure of any party hereto at any time or times to require performance of any
provision of this Agreement shall in no manner affect the right of such party at
a later date to enforce the same. No waiver by any party hereto of any condition
or the breach of any provision, term, covenant, representation or warranty
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contained in this Agreement, whether by conduct or otherwise, in any one or more
instances shall be deemed to be or construed as a further or continuing waiver
of any such condition or of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.
11.9 Counterparts. This Agreement may be executed in several
counterparts, and all counterparts so executed shall constitute one agreement,
binding on the parties hereto, notwithstanding that such parties are not
signatory to the same counterpart.
11.10 Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes and cancels any and all prior agreements
between them relating to the subject matter hereof, excluding the
Confidentiality Agreement (which shall remain in full force and effect in
accordance with its terms and conditions), and may not be amended or modified
except by a written agreement signed by Lee and Liberty.
11.11 Access to Books and Records.
(a) After the Closing, Lee shall, upon Liberty's request from time to
time, and upon reasonable notice, in connection with the preparation by Liberty
or its Affiliates of Tax returns, audited financial statements incorporating the
Newspapers and the Business and all requisite securities law filings (including,
but not limited to, a Form 8K filing, if required, with respect to the
transactions contemplated by this Agreement) and the initiation or defense of
litigation with third parties involving Assumed Liabilities, (i)(A) provide to
the officers and other authorized representatives of Liberty, and its Affiliates
reasonable access, during normal business hours, to any and all files, books,
records, documents and other information (including, but not limited to,
workpapers in the possession of current and former accountants of the
Newspapers) relating to the Business with respect to the period prior to the
Closing (including, but not limited to, with respect to liabilities for Taxes
included in the computation of Net Working Capital, Tax Records), (B) make
available to Liberty, and its authorized representatives personnel of Lee to
consult with such personnel and (ii) make available for inspection and copying
by Liberty at Liberty's expense true and complete copies of any documents
relating to the foregoing. In exercising its rights under the foregoing
provisions of this Section 11.11(a). In addition, after the Closing, upon
Liberty's request from time to time, Lee shall cause each of the Persons from
whom Lee acquired the Newspapers and their Affiliates and predecessors to (i)
provide to the officers and other authorized representatives (including, but not
limited to, accountants) of Liberty and its Affiliates reasonable access, during
normal business hours, to any and all files, books, records, documents,
financial and operating data and other information (including, but not limited
to, workpapers in the possession of current and former accountants of the
Newspapers relating to the Newspapers and the Business (collectively, the
"Historical Books and Records"), (ii) cause its officers to furnish to, or make
available for inspection and copying, at Liberty's expense, by, Liberty and its
Affiliates and their authorized representatives (including, but not limited to,
accountants) true and complete copies of all such Historical Books and Records,
and (iii) make available to Liberty and its Affiliates and their authorized
representatives its personnel to consult with such representatives, in each case
in connection with, and as necessary in relation to, the
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preparation by Liberty and its Affiliates of audited financial statements
incorporating the Newspapers and the Business and all requisite securities law
filings (including, but not limited to, a Form 8-K filing, if required, with
respect to the transactions contemplated by this Agreement).
(b) After the Closing, Liberty shall, upon Lee's request from time to
time, and upon reasonable notice, in connection with the preparation by Lee or
its Affiliates of Tax returns and the initiation or defense of litigation with
third parties involving Assumed Liabilities, (i)(A) provide to the officers and
other authorized representatives of Lee and its Affiliates reasonable access,
during normal business hours, to any and all premises, properties, files, books,
records, documents and other information relating to the Business with respect
to the period prior to the Closing (including, with respect to liabilities for
Taxes included in the computation of Net Working Capital, Tax Records), (B)
cause its officers to furnish to Lee and its authorized representatives any and
all financial, technical and operating data and other information pertaining to
the Business with respect to the period prior to the Closing, and (C) make
available to Lee and its authorized representatives personnel of Liberty to
consult with such personnel and (ii) make available for inspection and copying
by Lee, at Lee's expense, true and complete copies of any documents relating to
the foregoing. In exercising its rights under the foregoing provisions of this
Section 11.11(b), Lee and its representatives shall not interfere with the
normal operations of the Business. Liberty shall retain the files, books,
records and documents relating to the Business for at least six years after the
Closing.
11.12 Disclosure Letters. Any information disclosed in any section of
the Liberty Disclosure Letter delivered on the date hereof or the Lee Disclosure
Letter if reasonably related to any other section or sections of the Liberty
Disclosure Letter or the Lee Disclosure Letter, as the case may be, and
described in reasonable detail to allow a reasonable person to make the
applicable connection to such section, shall be deemed fully disclosed for the
purposes of all such applicable sections of the Liberty Disclosure Letter or the
Lee Disclosure Letter, as the case may be. Neither the specification (directly
or indirectly by reference to a defined term hereof) of any dollar amount in the
representations and warranties set forth in Article 3 or Article 4 or the
indemnification provisions of Article 8 nor the inclusion of any items in the
Liberty Disclosure Letter or the Lee Disclosure Letter shall be deemed to
constitute an admission by Liberty or Lee, or otherwise imply, that any such
amount or such items so included are material for the purposes of this
Agreement. The inclusion of, or reference to, any item within any particular
section of the Liberty Disclosure Letter or the Lee Disclosure Letter does not
constitute an admission by either Liberty or Lee that such item meets any or all
of the criteria set forth in this Agreement for inclusion in such section of the
Liberty Disclosure Letter or the Lee Disclosure Letter, as the case may be.
11.13 Cooperation.
(a) From and after the Closing, Liberty will cooperate with Lee in
the investigation, defense or prosecution of any action, suit, proceeding or
other litigation, at law or in equity, which is pending or threatened against
Lee or any of its Affiliates and which relates to the Business or the
Newspapers. Without limiting the generality of the foregoing, Liberty will
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make available its employees engaged in the Business to give depositions or
testimony and will furnish all documentary or other evidence in each case as Lee
may reasonably request. Lee shall reimburse Liberty for all reasonable and
necessary out-of-pocket expenses incurred in connection with the performance of
its obligations under this Section 11.13(a).
(b) From and after the Closing, Lee will cooperate with Liberty in
the investigation, defense or prosecution of any action, suit, proceeding or
other litigation, at law or in equity, which is pending or threatened against
Liberty or any of its Affiliates and which relates to the Business or the
Newspapers. Without limiting the generality of the foregoing, Lee will make
available its employees to give depositions or testimony and will furnish all
documentary or other evidence in each case as Liberty may reasonably request.
Liberty shall reimburse Lee for all reasonable and necessary out-of-pocket
expenses incurred in connection with the performance of its obligations under
this Section 11.13(b).
11.14 No Third Party Beneficiary. This Agreement is for the sole
benefit of the parties hereto and their respective successors and permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other Person any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
11.15 Insurance. Liberty acknowledges that all insurance policies
maintained by Lee and its Affiliates with respect to the Business and Acquired
Assets will be terminated effective on the Closing Date.
11.16 No Presumption. With regard to each and every term and condition
of this Agreement and any and all agreements and instruments subject to the
terms hereof or referred to herein, the parties hereto understand and agree that
the same have or has been mutually negotiated, prepared and drafted, and if at
any time the parties hereto desire or are required to interpret or construe any
such term or condition or any agreement or instrument subject hereto, no
consideration shall be given to the issue of which party hereto actually
prepared, drafted or requested any term or condition of this Agreement or any
agreement or instrument subject hereto.
11.17 Severability. To the fullest extent that they may effectively do
so under applicable law, the parties hereto hereby waive any provision of law
which renders any provision of this Agreement invalid, illegal or unenforceable
in any respect. Such parties further agree that any provision of this Agreement
which, notwithstanding the preceding sentence, is rendered or held invalid,
illegal or unenforceable in any respect in any jurisdiction shall be
ineffective, but such ineffectiveness shall be limited as follows: (i) if such
provision is rendered or held invalid, illegal or unenforceable in such
jurisdiction only as to a particular Person or Persons or under any particular
circumstance or circumstances, such provision shall be ineffective, but only in
such jurisdiction and only with respect to such particular Person or Persons or
under such particular circumstance or circumstances, as the case may be; (ii)
without limitation of clause (i), such provision shall in any event be
ineffective only as to such jurisdiction and only to the extent of such
invalidity, illegality or unenforceability, and such invalidity, illegality or
unenforceability in such jurisdiction shall not render invalid, illegal or
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unenforceable such provision in any other jurisdiction; and (iii) without
limitation of clause (i) or (ii), such ineffectiveness shall not render invalid,
illegal or unenforceable this Agreement or any of the remaining provisions
hereof. Without limitation of the preceding sentence, (A) it is the intent of
the parties hereto that, in the event that in any court proceeding, such court
determines that any provision of this Agreement is illegal, invalid or
unenforceable in any jurisdiction to any extent, such court shall have the power
to, and shall, (1) modify such provision (including by limiting the Persons
against whom, or the circumstances under which, such provision shall be
effective in such jurisdiction) for purposes of such proceeding to the minimum
extent necessary so that such provision, as so modified, may then be enforced in
such proceeding and (2) enforce such provision, as so modified pursuant to
clause (1), in such proceeding and (B) upon any determination that any provision
of this Agreement is invalid, illegal or unenforceable, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of such parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby be consummated as originally
contemplated to the greatest extent possible.
11.18 Specific Performance. Each of Liberty and Lee acknowledges that
the rights of each party to consummate the transactions contemplated hereby are
unique and recognizes and affirms that in the event of a breach of this
Agreement by any party, money damages may be inadequate and the non-breaching
party may have no adequate remedy at law. Accordingly, the parties agree that
such non-breaching party shall have the right, in addition to any other rights
and remedies existing in their favor at law or in equity, to enforce their
rights and the other party's obligations hereunder not only by an action or
actions for damages but also by an action or actions for specific performance,
injunctive and/or other equitable relief (without posting of bond or other
security).
11.19 Announcements. None of the parties hereto will (and each such
party will cause its Affiliates not to) issue any press release or otherwise
make any public statement with respect to the transactions contemplated hereby
without the prior written consent of the other parties, except as and to the
extent that such party or any of its Affiliates determines in good faith that it
is so obligated by law or stock exchange rules, in which case such party shall
use reasonable efforts to give notice to the other parties in advance of such
party's or its Affiliate's intent to make such announcement or issue such press
release and the parties hereto shall use reasonable efforts to cause a mutually
agreeable release or announcement to be issued.
11.20 Transition Services Agreement.
(a) In order to allow Liberty to make suitable alternative
arrangements, for a period of 3 months following the Closing, Lee shall use its
reasonable efforts to provide or cause to be provided to Liberty or its
designated Affiliates the transition services (the "Transition Services") listed
and described in the Transition Services Agreement consistent with the
provisions hereof which Lee or the Newspapers are currently receiving from Lee,
an outside third party vendor or from another newspaper owned by Lee (the
"Transition Services Provider"). The Transition Services shall be provided in a
manner consistent with the manner in which they were provided to the Newspapers
by the applicable Transition Services Provider
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prior to the Closing. Without limiting the generality of the previous sentence,
Lee will make payment (including, without limitation, the payment for the
service) to the Transition Services Provider and Liberty will submit such
payment to Lee within 30 days of receiving Lee's invoice therefor. If any such
payments were previously made by inter-company journal entries, after the
Closing, such payments will be made by check at the same time as the payment
would have been made by inter-company journal entry.
(b) The obligation of Lee to provide, or cause to be provided,
Transition Services under this Section shall be suspended with respect to any
specified Transition Services to the extent that any Transition Services
Provider is prevented or hindered from providing such services by any law or
governmental order, rule, regulation or direction, whether domestic or foreign
or by any cause beyond the control of such Transition Services Provider,
including acts of God, strikes, lockouts and other labor and industrial disputes
and disturbances, civil disturbances, accidents, acts of war or conditions
arising out of or attributable to war (whether declared or undeclared), shortage
of necessary equipment, failures of equipment or information systems, materials
of labor or restrictions thereon or limitations upon the use thereof and delays
in transportation or the refusal of the Transition Services Provider to allow
the Transition Services to be provided to the Newspapers following the Closing.
In such event, Lee shall give written notice as soon as reasonably practicable
to Liberty stating the date and extent of such suspension and the cause thereof,
and Lee shall resume the performance of other obligations under this section as
soon as reasonably practicable after the removal of the cause.
(c) Neither Lee nor Liberty shall have any duties or responsibilities
pursuant to this section other than those specifically set forth herein and no
implied obligations shall be read into this section. Neither Lee or Liberty nor
any of their respective officers, directors, employees, agents, attorneys in
fact or Affiliates shall be liable for any act taken or omitted to be taken by
it under or in connection with this section except that Lee, shall only be
liable for losses incurred by Liberty arising out of its gross negligence or
willful misconduct in the performance of the Transition Services.
(d) Liberty may terminate or partially limit any Transition Services
being provided to it at any time, in its sole discretion, upon 10 days' prior
written notice Lee.
(e) The Transition Services shall be billed at Lee's commercial
customer charges and rates, or at commercially reasonable hourly rates, as the
case may be, with reimbursement for the Lee's long distance line charges. The
Transition Services Agreement shall provide such reasonable provisions necessary
to insure Lee's license agreements, confidential information and proprietary
systems are not breached.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
LIBERTY GROUP PUBLISHING, INC.
By: /s/ Kenneth L. Serota
Name: Kenneth L. Serota
Its: Authorized Representative
LEE ENTERPRISES, INCORPORATED
By: /s/ Larry Bloom
Name: Larry Bloom
Its: Authorized Representative
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EXHIBIT A
For purposes of the Agreement to which this EXHIBIT A is attached (the
"Agreement"), the following terms shall have the following meanings:
"Affiliate" means, as to any Person, any other Person which, directly
or indirectly, through one or more intermediaries, controls, is controlled by or
is under common control with, such Person. For the purposes of this definition,
"control" means the possession, directly or indirectly of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
"Ancillary Instrument" shall have the meaning ascribed to such term in
Section 8.1.
"Asset Exchange Agreement" means that certain Asset Exchange Agreement
dated as of the date hereof, between Liberty and Lee.
"Business" shall mean the business and the operation of the Newspapers,
including without limitation the publication of such Newspapers.
"Copyrights" means all copyrights, including copyrights for printed
matter, databases, software, CD/ROM discs, software and CD/ROM disc source
codes, copyright registrations and all pending applications for copyright
registration owned by Lee and used solely in connection with the Business,
including those items described in Part A of Section 4.16(b) of the Lee
Disclosure Letter.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" means the Confidentiality and Negotiation
Agreement between Lee and Liberty dated June 1, 1999.
"Employee Computer Purchase Agreements" means the agreements between
Lee and the Lee employees listed in Schedule 1.3(b)(xiv) involving a Lee
employee's installment purchase of a personal computer for personal use outside
of the workplace.
"Environmental Laws" means all federal, state and local laws,
regulations, ordinances and rules of common law relating to environmental
matters, including those relating to fines, orders, injunctions, penalties,
damages, contribution, cost recovery compensation, losses, or injuries resulting
from the release or threatened release of Hazardous Substances and the
generation, use, storage, transportation, or disposal of Hazardous Substances in
any manner applicable to the Business or as to the Acquired Assets, including,
but not limited to, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. ss.ss. 9601 et seq. ), the Hazardous Materials
Transportation Act (49 U.S.C. ss.ss. 1801 et seq.), the Resource Conservation
and Recovery Act of 1976 (42 U.S.C. ss.ss. 6901 et seq.), the Federal
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Water Pollution Control Act (33 U.S.C. ss.ss. 1251 et seq.), the Clean Air Act
(42 U.S.C. ss.ss. 7401 et seq.), the Toxic Substances Control Act of 1976 (15
U.S.C. ss.ss. 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. ss.ss.
300f-ss.ss. 300j-11 et seq.), and the Emergency Planning and Community
Right-to-Know Act (42 U.S.C. ss.ss. 1101 et seq.), each as heretofore amended
and supplemented, or any analogous present federal, state or local statutes,
rules, and regulations promulgated thereunder or pursuant thereto, and any other
present law, ordinance, rule, regulation, permit, order, or directive addressing
environmental, safety or health issues, of or by the federal government, any
state or political subdivision thereof, or any agency, court, or body of the
federal government or any state or political subdivision thereof.
"Equipment" means all machinery, presses, equipment, furniture,
computer equipment (including software), fixtures, furnishings, toolings, parts
and other items of tangible personal property owned or leased by Lee and used
solely in connection with the Business.
"ERISA Affiliate" shall mean, with respect to any specified Person, any
other Person which is treated as a single employer with such specified Person
under Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA.
"GAAP" means generally accepted United States accounting principles,
applied on a consistent basis.
"Hazardous Substances" means (a) any chemical, material or substance
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous waste," "restricted
hazardous waste," "medical waste, "toxic pollutants," "contaminants,"
"pollutants," "toxic substances," or words of similar import under any
applicable Environmental Law, (b) any oil, petroleum, petroleum product or
petroleum derived substance, any flammable substances or explosives, any
radioactive materials, (c) asbestos and asbestos containing materials in any
form which is or could become friable, and (d) radon gas, urea formaldehyde,
lead-based paint, dielectric fluid, and polychlorinated biphenyl's.
"Income Taxes" means Taxes in the nature of any federal, state, local
or foreign income or franchise taxes, including interest, penalties and
additions to tax with respect thereto.
"Indebtedness" means, with respect to Lee, (a) all indebtedness of such
party for borrowed money, whether current or funded, secured or unsecured, (b)
all indebtedness of such party for the deferred purchase price of any assets or
services, (c) all indebtedness of such party created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such party (even though the rights and remedies of such party or
lender under such agreement in the event of a default may be limited to
repossession or sale of such property), (d) all indebtedness of such party
secured by a purchase money mortgage or other lien to secure all or part of the
purchase price of property subject to such mortgage or lien, (e) all obligations
of such party under leases which shall have been or must be, in accordance with
generally accepted accounting principles, recorded as capital leases in respect
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of which such party is liable as lessee, (f) any liability of such party in
respect of banker's acceptances or letters of credit, (g) any indebtedness,
whether or not assumed by such party, secured by liens on property acquired by
such party at the time of acquisition thereof and (h) all guaranties by such
party of the obligations, indebtedness or liabilities of any other Person or
which such party has agreed (contingently or otherwise) to purchase or otherwise
acquire or in respect of which it has otherwise assured a creditor against loss.
"Intangible Property" means solely in connection with the
Business: (i) the Copyrights; (ii) the Trademarks; (iii) the Trade Secrets; and
(iv) all goodwill, if any, associated therewith.
"Knowledge of Lee" or "Lee's Knowledge" (or words of similar import)
means the actual knowledge of any of the officers or directors of Lee or the
employee at each respective Newspaper who is the highest ranking manager at such
Newspaper.
"Knowledge of Liberty" or "Liberty's Knowledge" (or words of similar
import) means the actual knowledge of any of the officers or directors of
Liberty.
"Lee Disclosure Letter" means the disclosure letter, dated the date of
the Agreement (or if accepted by Liberty, the Closing), delivered to Liberty.
"Lee Material Adverse Effect" means any material adverse changes in, or
material adverse effect on, (i) the operations, results of operations or
condition (financial or otherwise) of Lee or the Business or (ii) the Acquired
Assets taken as a whole; provided, however, no change or effect shall be
considered a "Lee Material Adverse Effect" if (a) such change or effect is
caused primarily by, and is of similar magnitude to, changes in the newspaper
industry generally; (b) such change or effect is substantially the result of
circumstances that are not likely to recur and have been substantially remedied
and any material reduction in the revenues of the Business attributable to such
change or effect has been restored; or (c) such change or effect is related to
the announcement of the transactions contemplated by this Agreement.
"Letter of Intent" or "LOI" shall have the meaning ascribed to such
term in Section 1.3(xii).
"Legal Expenses" shall have the meaning ascribed to such term in
Section 8.2(a).
"Legal Requirements" means all governmental statutes, ordinances, codes
and regulations.
"Liberty Disclosure Letter" means the disclosure letter, dated the date
of the Agreement (or if accepted by Lee, the Closing), delivered to Lee.
"Lien" means any lien (including any Tax lien), mortgage, security
interest, claim, charge, defect in title or other encumbrance.
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"Losses" means all losses, damages, liabilities and claims, and fees,
costs and expenses of any kind related thereto.
"Motor Vehicles" means all motor vehicles owned by Lee and used solely
in the operation of the Business, including those listed in Section 1.2(b)(i) of
the Lee Disclosure Letter.
"Net Working Capital" means an amount equal to current assets included
within the Acquired Assets, minus current liabilities included within the
Assumed Liabilities, in each case calculated in accordance with GAAP and past
practice and applied on a basis consistent with the Balance Sheet, including the
exceptions to GAAP listed in Part A of Section 4.6 of the Lee Disclosure Letter,
except for purposes of determining Net Working Capital:
(a) newsprint inventory shall be valued at $600 per metric ton without
the inclusion of any additional costs or fees;
(b) prepaid insurance and other prepaid expenses, to the extent Liberty
will not receive a dollar for dollar monetary benefit after the Closing Date,
will not be included;
(c) accounts receivable that are not collected on or prior to the 90th
day after the Closing Date will not be included;
(d) current liabilities shall include an accrual for the vacation pay
liability assumed by Liberty pursuant to Section 10.1; and
(e) current liabilities shall include deferred subscription revenue.
"Newspapers" shall have the meaning ascribed to such term in the
Background Statement.
"Permitted Liens" means (i) Liens for Taxes not yet due and payable,
that are payable without penalty or that are being contested in good faith and
for which adequate reserves have been taken, (ii) Liens arising or resulting
from any action taken by Liberty or any of its Affiliates, (iii) Liens created
by, arising out of or specifically contemplated by the Agreement, (iv) Liens
identified as Permitted Liens in the Lee Disclosure Letter, (v) materialmen's,
mechanics', workmen's, repairmen's, employees' or other similar Liens arising in
the course of construction or in the ordinary course of operations or
maintenance in each such case securing obligations which are not delinquent or
are being contested in good faith and for which adequate reserves have been
taken or securing obligations which are bonded in a reasonable manner, (vi)
zoning restrictions, easements, licenses or other restrictions on the use of
real property or other minor irregularities in title thereto, so long as the
same do not, individually or in the aggregate, materially interfere with or
impair the use of such real property in the manner normally used, and (vii)
Liens arising out of judgments or awards with respect to which at the time an
appeal or proceeding for review is being prosecuted in good faith if adequate
reserves with respect thereto have been established and are being maintained
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and with respect to which there shall have been secured a stay of execution
pending such appeal or proceeding for review.
"Person" includes any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or association,
government or any agency or political subdivision thereof.
"Real Property" means Lee's fee simple, leasehold or other interest in
the real property listed in Section 1.2 (x) of the Lee Disclosure Letter and all
buildings, improvements and fixtures thereon, together with all strips and
gores, rights of way, easements, privileges and appurtenances pertaining
thereto, including any right, title and interest of Lee in and to any street
adjoining any portion of the Real Property.
"Records" means files and records, including schematics, technical
information and engineering data, programming information, correspondence, books
of account, employment records, customer files, purchase and sales records an
correspondence, advertising records, files and literature, and other written
materials of Lee relating solely to the Acquired Assets, or the Business, other
than duplicates of such files and records retained by Lee; provided, however,
that Records shall not mean or include the corporate minute books and stock
records of Lee and any shares of capital stock of Lee nor shall they include any
communications that do not relate solely to the Acquired Assets or the Business
that are currently protected from disclosure by Lee by virtue of the
attorney-client privilege.
"Subsidiary" means, with respect to any Person, any other corporation,
partnership, joint venture, association or other entity in respect of which such
Person directly, or indirectly through one or more other Subsidiaries, both (i)
owns not less than a majority of the overall economic equity and (ii) has the
power to elect a majority of the board of directors (or individuals serving a
function similar to that of a board of directors of a corporation).
"Taxes" means any federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, real property or other capital gains, registration, value added,
excise, natural resources, severance, stamp, occupation, windfall profits,
environmental (under Section 59A of the Code), customs duties, real property,
personal property, capital stock, social security (or similar), unemployment,
disability, payroll, license, employee or other withholding, or other tax, of
any kind whatsoever, including any interest, penalties or additions to tax or
similar items in respect of the foregoing (whether disputed or not).
"Third Party Claim" shall have the meaning ascribed to such term in
Section 8.2(d).
"Trade Secrets" means all formulae, processes, procedures, designs,
ideas, research records, inventions, records of inventions, test information,
technical information, marketing know-how, proprietary information, know-how,
and trade secrets (and all related manuals, books, files, journals, models,
instructions, patterns, drawings, blueprints, plans, designs
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specifications, equipment lists, parts lists, descriptions, data, art work,
software, computer programs and source code data related thereto including all
current and historical data bases) owned, used or held for use by Lee solely in
connection with the Newspapers or the Business.
"Trademarks" means, all of those trade names, trademarks, service
marks, slogans, logos, trademark and service mark registrations and trademark
and service mark applications owned, used, held for use, licensed by or leased
by Lee solely in connection with the Newspapers or the Business, but including
those items described in Part B of Section 4.16(b) of the Lee Disclosure Letter.
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SCHEDULE 1.3(b)(xiv)
Aledo
<TABLE>
<S> <C>
McParland $ 1,716.30
Berenger $ 845.37
Larson $ 401.77
Lefever $ 653.68
Polk $ 1,312.29
</TABLE>
47
