ASSET EXCHANGE AGREEMENT

Exhibit 99.5

 

This Asset Exchange Agreement has been filed to provide investors with information regarding its terms. It is not intended to provide any other factual information about Knight Ridder or its affiliated entities. The representations and warranties of the parties in this Asset Exchange Agreement were made to, and solely for the benefit of, the other parties. The assertions embodied in the representations and warranties are qualified by information included in disclosure schedules exchanged by the parties that may modify or create exceptions to the representations and warranties. Accordingly, investors should not rely on the representations and warranties as characterizations of the actual state of facts at the time they were made or otherwise.

EXECUTION COPY

 

ASSET EXCHANGE AGREEMENT

 

by and among

 

GANNETT CO., INC.,

 

GANNETT SATELLITE INFORMATION NETWORK, INC.,

 

DES MOINES REGISTER AND TRIBUNE COMPANY,

 

MEDIA WEST-FPI, INC.,

 

FEDERATED PUBLICATIONS, INC.,

 

KNIGHT-RIDDER, INC.,

 

KR U.S.A., INC.,

 

KNIGHT RIDDER DIGITAL

 

AND

 

TALLAHASSEE DEMOCRAT, INC.

 

Dated: August 3, 2005

TABLE OF CONTENTS

 

 

(i)

 

(ii)

 

(iii)

Schedules

 

 

(iv)

 

Exhibits

 

 

(v)

ASSET EXCHANGE AGREEMENT

 

THIS ASSET EXCHANGE AGREEMENT is dated as of August 3, 2005, and is by and among Federated Publications, Inc. (“Federated”), Media West-FPI, Inc. (“Media West”), Gannett Satellite Information Network, Inc. (“GANSAT”), Des Moines Register and Tribune Company (“DRTC”) and Gannett Co., Inc. (“Gannett,” and with Federated, Media West, GANSAT and DRTC, collectively, the “Gannett Companies”), and Tallahassee Democrat, Inc. (“TDI”), KR U.S.A., Inc. (“KR USA”), Knight Ridder Digital (“KR Digital”) and Knight-Ridder, Inc. (“KRI,” and with TDI, KR USA and KR Digital, collectively, the “KRI Companies”).

 

RECITALS

 

A. GANSAT will contribute to Federated prior to Closing (as defined below) certain assets relating to The Olympian .

 

B. Federated is the owner and operator of The Bellingham Herald , The Olympian and The Idaho Statesman (which terms shall include all revenue-generating publications (e.g. niche publications, free dailies and free weeklies, except for USA TODAY, USA WEEKEND, Clipper and related coupon publications) circulated primarily to customers in the newspaper designated markets of The Bellingham Herald , The Olympian or The Idaho Statesman , collectively, the “Federated Newspapers”).

 

C. Media West is the owner of the masthead, trademarks, domain names and certain other intellectual property associated with the Federated Newspapers.

 

D. DRTC is the owner of certain real property used in the business of the Federated Newspapers.

 

E. TDI is the owner and operator of The Tallahassee Democrat (which term shall include all revenue-generating publications (e.g. niche publications, free dailies and free weeklies) circulated primarily to customers in the newspaper designated market of The Tallahassee Democrat , collectively, the “Tallahassee Democrat,” and with the Federated Newspapers, collectively, the “Newspapers”).

 

F. KR USA is the owner of the masthead, trademarks, and certain other intellectual property associated with the Tallahassee Democrat.

 

G. KR Digital is the owner of the web site and certain other intellectual property associated with the Tallahassee Democrat.

 

H. The Gannett Companies and the KRI Companies desire to exchange ownership of the Federated Assets for the Tallahassee Democrat Assets and cash boot, in an exchange intended to qualify as a like-kind exchange pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”) under the terms set forth below.

 

I. The parties have negotiated the amount of Cash Consideration (as defined in Section 3.1 below) payable to the Gannett Companies based on the assumption that the exchange

transaction would be completed prior to the beginning of the fourth quarter, which has historically been the Federated Newspapers’ most profitable quarter. In view of the disparity in the relative cash flows of the Federated Assets and Tallahassee Democrat Assets (as those terms are defined in Sections 1.1 and 2.1 below, respectively), and taking into account seasonality in the newspaper business, the parties have agreed to an adjustment to the Cash Consideration payable on the Closing Date, under the terms set forth below, if for any reason the Closing has not been completed by September 25, 2005. The parties have also agreed to adjust the amount of Cash Consideration based on current assets and total liabilities of the Newspapers from those set forth on the Federated Financial Schedules and TDI Financial Schedules (as those terms are defined in Sections 5.3 and 6.3 below, respectively) pursuant to the balance sheet test set forth in Section 3.3(a) below.

 

Based upon the representations and warranties made by each party to the other in this Agreement, the parties agree to consummate the exchange of the Federated Assets and the Tallahassee Democrat Assets, and the payment of the Cash Consideration, on the terms and conditions contained herein.

 

ARTICLE I. TRANSFER OF THE FEDERATED ASSETS

 

1.1 Transfer of the Federated Assets . Upon the terms and subject to the conditions of this Agreement, on the Closing Date (as defined in Section 4.1 hereof) Federated, Media West and DRTC will exchange, assign, transfer, convey or cause to be conveyed, and deliver to TDI, KR USA and KR Digital, and TDI, KR USA and KR Digital will acquire and accept from Federated, Media West and DRTC, the assets and properties, tangible or intangible, of every kind and description used or held for use in connection with the business and operation of the Federated Newspapers, which assets shall include the GANSAT assets listed on Schedule 5.10(d) (all such assets being referred to herein as the “Federated Assets”), but excluding the Excluded Federated Assets described in Section 1.2 below. The Federated Assets include, but are not limited to, the following:

 

(a) All of the tangible personal property, assets and equipment used in connection with the business and operation of the Federated Newspapers, including without limitation all inventory, raw materials, supplies, work in process and finished goods (“Federated Inventory”) and those assets listed in Schedule 1.1(a) and any replacements and less any retirements or dispositions thereof made between the date hereof and the Closing Date in the ordinary course of the Federated Newspapers’ business (“Federated Tangible Personal Property”);

 

(b) All real property and leasehold and other interests in and rights to real property owned by any of the Gannett Companies and used primarily in connection with the business and operation of the Federated Newspapers (together with all easements and other rights appurtenant thereto and all structures, fixtures and improvements located thereon, which need not be listed) and all such properties and interests listed in Schedule 5.10(a) and Schedule 5.10(b) , together with any additions thereto between the date hereof and the Closing Date (“Federated Real Property”);

 

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(c) All of Federated’s outstanding accounts receivable as of the Closing Date arising out of the business of the Federated Newspapers;

 

(d) All right, title and interest in and to all contracts, leases, agreements and similar arrangements (whether written or oral) that relate to the publication and distribution of the Federated Newspapers or are otherwise assumed pursuant hereto, including, but not limited to, all orders and agreements for the sale of advertising relating to the Federated Newspapers (collectively, the “Federated Contracts”), including those described in Schedule 5.9(a) hereto;

 

(e) All of Federated’s right, title and interest in and to all licenses and other governmental authorizations relating to the Federated Newspapers;

 

(f) All publishable materials of any nature, as used in the business of the Federated Newspapers, the names “The Bellingham Herald,” “The Olympian” and “The Idaho Statesman” and all related mastheads, copyrights, patents, trademarks (other than the Gannett Marks (as defined below in Section 1.2(i)), service marks, logotypes and trade names (including registrations and applications for registration of any of the foregoing), web sites, Internet domain names, processes, inventions, computer programs, trade secrets, promotional designs, concepts and materials, advertiser lists, mailing lists, subscriber lists and other intangible rights issued to or owned by Federated or Media West and used in connection with the publication and distribution of the Federated Newspapers (“Federated Names and Intangibles”);

 

(g) Federated’s library or “morgue” of back and current issues of the Federated Newspapers, including all files of clippings, photographs (negatives and positives) and related publication material, together with all bound files and file copies of the Federated Newspapers and microfilms and electronic files thereof and all rights of use relating thereto (“Federated Morgue”);

 

(h) All of the Federated Newspapers’ files and other records (whether in paper, electronic or other formats) relating to the ownership of the Federated Assets or operation of the Federated Newspapers (other than duplicate copies of such files and records that are maintained in the offices of the Gannett Companies or their affiliates); and

 

(i) All of any Gannett Company’s right, title and interest in or with respect to confidentiality obligations of third parties in favor of any Gannett Company relating primarily to the business or operations of the Federated Newspapers or use restrictions imposed on third parties with respect to any Federated Names and Intangibles.

 

1.2 Excluded Federated Assets . The following assets relating to the business and operation of the Federated Newspapers shall be retained by the Gannett Companies and shall not be exchanged, assigned or transferred to TDI, KR USA or KR Digital (the “Excluded Federated Assets”):

 

(a) All assets of the Gannett Companies not used primarily or solely in connection with the business of the Federated Newspapers, other than those listed in Schedules hereto;

 

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(b) Claims by the Gannett Companies with respect to the Excluded Federated Assets and liabilities not assumed by TDI, including without limitation claims for tax refunds and counterclaims with respect to obligations and liabilities not being assumed by TDI hereunder;

 

(c) All contracts of insurance and all insurance proceeds or claims made by the Gannett Companies, tax records and tax returns;

 

(d) All employee benefit plans of any nature and their assets;

 

(e) Cash on hand and in banks, other cash items and cash equivalents;

 

(f) All tangible personal property of the Gannett Companies disposed of or consumed in the ordinary course of the operation of the Federated Newspapers or with the consent of TDI between the date of this Agreement and the Closing Date;

 

(g) The right to use the name “Gannett”;

 

(h) Federated’s corporate seal, minute books, charter documents, corporate stock record books and such other books and records as pertain to the organization, existence or share capitalization of Federated and duplicate copies of such records as are necessary to enable the Gannett Companies to file their tax returns and reports as well as any other records or materials relating to the Gannett Companies generally and not involving or relating to the Federated Assets or the operation of the Federated Newspapers;

 

(i) All “house” and other marks of the Gannett Companies not primarily used in connection with the business of the Federated Newspapers (the “Gannett Marks”); and

 

(j) Any right, property or asset described in Schedule 1.2 hereto.

 

1.3 Liabilities . The Federated Assets shall be exchanged, transferred and conveyed to TDI, KR USA and KR Digital free and clear of all liabilities, liens, security interests and encumbrances of any kind, except for (i) liens for taxes not yet due and payable, (ii) those liens listed on Schedule 1.3 hereto and (iii) any encumbrances referenced in Section 5.10(a). TDI shall assume, discharge and perform (a) the liabilities and obligations of the Gannett Companies to the extent arising and required to be performed after the Closing under the Federated Contracts listed on Schedule 5.9(a) (including, without limitation, the Federated Labor Agreements) and any contracts (other than leases of real property) to which any of the Gannett Companies is a party that are used in the ordinary course of business and either involve annual consideration of less than $10,000 or are terminable by the Gannett Companies without penalty or other financial obligation upon notice of thirty (30) days or less; (b) those liabilities and obligations of Federated as of the Closing Date under agreements for advertising to be run in whole or in part in issues of the Federated Newspapers published after the Closing Date (subject to adjustment as provided in Section 3.3 below); and (c) those liabilities of the Federated Newspapers to the extent reflected on or reserved against on the Actual Federated Closing Date Balance Sheet, but only in the amounts shown therein (collectively, the “Assumed Federated Liabilities”). Except for the Assumed Federated Liabilities, the KRI Companies do not assume and will not be liable for any other liability, obligation, claim, lien, security interest or

 

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encumbrance of the Gannett Companies or the Federated Newspapers, including without limitation long-term liabilities, liabilities for taxes and obligations to employees. Subject to the terms and conditions of this Agreement, if TDI (or the TDI Designee or any TDI Designee) does not timely discharge and perform any of the Assumed Federated Liabilities, KRI shall discharge and perform, or cause TDI (or such TDI Designee) to discharge and perform, such Assumed Federated Liabilities.

 

1.4 TDI Designee . Each of TDI, KR USA and KR Digital may, without the consent of any Gannett Company, assign to one or more of its affiliates (the “TDI Designee(s)”) all or any portion of its rights to acquire any Federated Assets or to assume, discharge and perform any of its liabilities or other obligations described in Section 1.3 above, in each case in accordance with the terms and conditions of this Agreement. TDI, KR USA or KR Digital, as the case may be, shall notify Gannett at least two business days prior to the Closing as to the identity of the TDI Designee(s), if any. The TDI Designee(s) shall agree in writing that, from and after the Closing, the TDI Designee(s) will be bound by and subject to the provisions of this Agreement with respect to any Federated Assets acquired by it and any liabilities or other obligations assumed by it.

 

ARTICLE II. TRANSFER OF THE TALLAHASSEE DEMOCRAT ASSETS

 

2.1 Transfer of the Tallahassee Democrat Assets . Upon the terms and subject to the conditions of this Agreement, on the Closing Date TDI, KR USA and KR Digital will exchange, assign, transfer, convey or cause to be conveyed, and deliver to Federated and Media West, and Federated and Media West will acquire and accept from TDI, KR USA and KR Digital, the assets and properties, tangible or intangible, of every kind and description used or held for use in connection with the business and operation of the Tallahassee Democrat (all such assets being referred to herein as the “Tallahassee Democrat Assets”), but excluding the Excluded Tallahassee Democrat Assets described in Section 2.2 below. The Tallahassee Democrat Assets include, but are not limited to, the following:

 

(a) All of the tangible personal property, assets and equipment used in connection with the business and operation of the Tallahassee Democrat, including without limitation all inventory, raw materials, supplies, work in process and finished goods (“Tallahassee Inventory”) and those assets listed in Schedule 2.1(a) and any replacements and less any retirements or dispositions thereof made between the date hereof and the Closing Date in the ordinary course of the Tallahassee Democrat’s business (“Tallahassee Tangible Personal Property”);

 

(b) All real property and leasehold and other interests in and rights to real property owned by any KRI Company and used primarily in connection with the business and operation of the Tallahassee Democrat (together with all easements and other rights appurtenant thereto and all structures, fixtures, and improvements located thereon, which need not be listed) and all such properties and interests listed in Schedules 6.10(a) and 6.10(b) , together with any additions thereto between the date hereof and the Closing Date (“Tallahassee Real Property”);

 

(c) All of TDI’s outstanding accounts receivable as of the Closing Date arising out of the business of the Tallahassee Democrat;

 

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(d) All right, title and interest in and to all contracts, leases, agreements and similar arrangements (whether written or oral) that relate to the publication and distribution of the Tallahassee Democrat or are otherwise assumed pursuant hereto, including, but not limited to, all orders and agreements for the sale of advertising relating to the Tallahassee Democrat (collectively, the “Tallahassee Democrat Contracts”), including those described in Schedule 6.9(a) hereto;

 

(e) All of TDI’s right, title and interest in and to all licenses and other governmental authorizations relating to the Tallahassee Democrat;

 

(f) All publishable materials of any nature, as used in the business of the Tallahassee Democrat, the name “The Tallahassee Democrat” and all related mastheads, copyrights, patents, trademarks (other than the KRI Marks (as defined below in Section 2.2(i)), service marks, logotypes and trade names (including registrations and applications for registration of any of the foregoing), web sites, Internet domain names, processes, inventions, computer programs, trade secrets, promotional designs, concepts and materials, advertiser lists, mailing lists, subscriber lists and other intangible rights issued to or owned by TDI, KR USA and KR Digital and used in connection with the publication and distribution of the Tallahassee Democrat (“Tallahassee Names and Intangibles”);

 

(g) TDI’s library or “morgue” of back and current issues of the Tallahassee Democrat, including all files of clippings, photographs (negatives and positives) and related publication material, together with all bound files and file copies of the Tallahassee Democrat and microfilms and electronic files thereof and all rights of use relating thereto (“Tallahassee Morgue”);

 

(h) All of the Tallahassee Democrat’s files and other records (whether in paper, electronic or other formats) relating to the ownership of the Tallahassee Democrat Assets or operation of the Tallahassee Democrat (other than duplicate copies of such files and records that are maintained in the offices of the KRI Companies or their affiliates); and

 

(i) All of any KRI Company’s right, title and interest in or with respect to confidentiality obligations of third parties in favor of any KRI Company relating primarily to the business or operations of the Tallahassee Democrat or use restrictions imposed on third parties with respect to any Tallahassee Names and Intangibles.

 

2.2 Excluded Tallahassee Democrat Assets . The following assets relating to the business and operation of the Tallahassee Democrat shall be retained by the KRI Companies and shall not be exchanged, assigned or transferred to Federated and Media West (the “Excluded Tallahassee Democrat Assets”):

 

(a) All assets of the KRI Companies not used primarily or solely in connection with the business of the Tallahassee Democrat, other than those listed in Schedules hereto;

 

(b) Claims by the KRI Companies with respect to the Excluded Tallahassee Democrat Assets and liabilities not assumed by Federated, including without limitation claims

 

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for tax refunds and counterclaims with respect to obligations and liabilities not being assumed by Federated hereunder;

 

(c) All contracts of insurance and all insurance proceeds or claims made by the KRI Companies, tax records and tax returns;

 

(d) All employee benefit plans of any nature and their assets;

 

(e) Cash on hand and in banks, other cash items and cash equivalents;

 

(f) All tangible personal property of the KRI Companies disposed of or consumed in the ordinary course of the operation of the Tallahassee Democrat or with the consent of Federated between the date of this Agreement and the Closing Date;

 

(g) The right to use the name “Knight Ridder”;

 

(h) TDI’s corporate seal, minute books, charter documents, corporate stock record books and such other books and records as pertain to the organization, existence or share capitalization of TDI and duplicate copies of such records as are necessary to enable the KRI Companies to file their tax returns and reports as well as any other records or materials relating to KRI Companies generally and not involving or relating to the Tallahassee Democrat Assets or the operation of the Tallahassee Democrat;

 

(i) All “house” and other marks of the KRI Companies not primarily used in connection with the business of the Tallahassee Democrat (the “KRI Marks”);

 

(j) Any right, property or asset described in Schedule 2.2 hereto.

 

2.3 Liabilities . The Tallahassee Democrat Assets shall be exchanged, transferred and conveyed to Federated and Media West free and clear of all liabilities, liens, security interests and encumbrances of any kind, except for (i) liens for taxes not yet due and payable, (ii) those liens listed on Schedule 2.3 hereto and (iii) any encumbrances referenced in Section 6.10(a). Federated shall assume, discharge and perform (a) the liabilities and obligations of the KRI Companies to the extent arising and required and to be performed after the Closing under the Tallahassee Democrat Contracts listed on Schedule 6.9(a) and any contracts (other than leases of real property) to which any of the KRI Companies is a party that are used in the ordinary course of business and either involve annual consideration of less than $10,000 or are terminable by the KRI Companies without penalty or other financial obligation upon notice of thirty (30) days or less; (b) those liabilities and obligations of TDI as of the Closing Date under agreements for advertising to be run in whole or in part in issues of The Tallahassee Democrat published after the Closing Date (subject to adjustment as provided in Section 3.3 below); and (c) those liabilities of the Tallahassee Democrat to the extent reflected on or reserved against on the Actual TDI Closing Date Balance Sheet, but only in the amounts shown therein (collectively, the “Assumed Tallahassee Liabilities”). Except for the Assumed Tallahassee Liabilities, the Gannett Companies do not assume and will not be liable for any other liability, obligation, claim, lien, security interest or encumbrance of the KRI Companies or the Tallahassee Democrat, including without limitation long-term liabilities, liabilities for taxes and obligations to employees. Subject to the terms and conditions of this Agreement, if Federated (or the Federated

 

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Designee or any Federated Designee) does not timely discharge and perform any of the Assumed Tallahassee Liabilities, Gannett shall discharge and perform, or cause Federated (or such Federated Designee) to discharge and perform, such Assumed Tallahassee Liabilities.

 

2.4 Federated Designee . Each of Federated and Media West may, without the consent of any KRI Company, assign to one or more of its affiliates (the “Federated Designee(s)”) all or any portion of its rights to acquire any Tallahassee Democrat Assets or to assume, discharge and perform any of its liabilities or other obligations described in Section 2.3 above, in each case in accordance with the terms and conditions of this Agreement. Federated or Media West, as the case may be, shall notify KRI at least two business days prior to the Closing as to the identity of the Federated Designee(s), if any. The Federated Designee(s) shall agree in writing that, from and after the Closing, the Federated Designee(s) will be bound by and subject to the provisions of this Agreement with respect to any Tallahassee Democrat Assets acquired by it and any liabilities or other obligations assumed by it.

 

ARTICLE III. CONSIDERATION

 

3.1 Consideration .

 

(a) In exchange for the Tallahassee Democrat Assets, the payment to Federated and Media West of an aggregate of Two Hundred Thirty-Seven Million Dollars ($237,000,000) (the “Cash Consideration”), subject to adjustment as provided in Section 3.3 below, and the assumption of certain obligations of the Gannett Companies pursuant to Section 1.3 above, Federated, Media West and GANSAT shall, subject to Article VIII below, at the Closing, deliver to TDI, KR USA and KR Digital the Federated Assets, and Federated will assume the obligations of the KRI Companies pursuant to Section 2.3 hereof

 

(b) In exchange for the Federated Assets and the assumption of certain obligations of the KRI Companies pursuant to Section 2.3 above, TDI, KR USA and KR Digital shall, subject to Article IX below, at the Closing, deliver to Federated and Media West the Tallahassee Democrat Assets and pay the Cash Consideration to Federated and Media West, and TDI, KR USA and KR Digital will assume the obligations of the Gannett Companies pursuant to Section 1.3 hereof.

 

3.2 Allocation of Consideration . After the Closing Date, the parties shall attempt in good faith to agree upon the allocation of the Federated Assets and the Tallahassee Democrat Assets among exchange groups and, if applicable, a residual group as provided in Treasury Regulations Section 1.1031(j)-1 and the assignment of fair market values to each of the Federated Assets and the Tallahassee Democrat Assets (such allocation and assignment of fair market values, the “Allocation”). For the purpose of the Allocation, the Federated Assets and the Tallahassee Democrat Assets shall include but not be limited to all tangible personal property, real property and intangible property. If the parties are unable to agree upon the Allocation within 90 days following the Closing Date, the Allocation shall be determined based on an appraisal of the assets by the valuation of firm of Deloitte Financial Advisory Services LLP (the “Appraiser”), whose fees shall be paid equally by the Gannett Companies and KRI Companies. The parties agree not to voluntarily take any position for tax purposes inconsistent with the Allocation and will prepare and file all tax returns and reports relating to the exchanges

 

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contemplated by this Agreement, including all original and amended federal, state and local income tax returns, in a manner which is consistent with the Allocation.

 

3.3 Purchase Price Adjustments .

 

(a) The parties acknowledge and agree that the Cash Consideration is based in part upon the Federated Adjustment Amount (as defined below), as described in the Federated Financial Schedules defined in Section 5.3, and the TDI Adjustment Amount (as defined below), as described in the TDI Financial Schedules defined in Section 6.3. If on the Closing Date the Federated Adjustment Amount is greater than the TDI Adjustment Amount, the Cash Consideration will be increased by such excess. If on the Closing Date the TDI Adjustment Amount is greater than the Federated Adjustment Amount, the Cash Consideration will be reduced by such excess. The calculations described above are referred to herein as the “Balance Sheet Test.” For the purposes of this Agreement, (i) the “Federated Adjustment Amount” means the excess of the current assets of the Federated Newspapers over the total liabilities of the Federated Newspapers on the Closing Date, which amount shall be a negative number if such current assets do not exceed such total liabilities; and (ii) the “TDI Adjustment Amount” means the excess of the current assets of the Tallahassee Democrat plus $300,000 over the total liabilities of the Tallahassee Democrat on the Closing Date, which amount shall be a negative number if such current assets plus $300,000 do not exceed such total liabilities. For purposes of this Agreement, “current assets” and “total liabilities” of each of the Federated Newspapers and the Tallahassee Democrat shall consist of the types of items described in Schedule 3.3(a) .

 

(b) The parties acknowledge and agree that the Cash Consideration is based in part on the assumption that the Closing will occur on or before September 25, 2005 (the “Target Closing Date”). If, for any reason, the Closing has not occurred by the Target Closing Date, the Cash Consideration shall be adjusted pursuant to this Section 3.3(b). If on the Closing Date the Federated Seasonality Adjustment (as defined below) is greater than the Tallahassee Seasonality Adjustment (as defined below), the Cash Consideration will be reduced by such excess. If on the Closing Date the Tallahassee Seasonality Adjustment (as defined below) is greater than the Federated Seasonality Adjustment, the Cash Consideration will be increased by such excess. For the purposes of this Agreement, the “Federated Seasonality Adjustment” means: (i) the earnings before interest, depreciation, amortization and any other non-cash items, but after taxes (“After Tax Cash Flow”) of the Federated Newspapers generated during the period from and including September 26, 2005 through 12:01 a.m. (local time) on the Closing Date (the “Federated Adjustment Period”), as calculated initially by Federated in accordance with generally accepted accounting principles applied on a consistent basis, except that, whether or not required to be so treated by generally accepted accounting principles (x) newsprint expense for such period will be computed on a FIFO cost basis, (y) a combined federal, state and local effective tax rate of 36% will be used for such period, and (z) any portion of the salaries, benefits, memberships, travel or other expenses, overhead or corporate allocation attributable to the ownership, management or supervision of the Federated Newspapers for such period by any corporate headquarters personnel of Gannett will be eliminated; reduced by (ii) an amount equal to the product of $237,000,000 multiplied by Gannett’s weighted average cost of commercial paper during the Federated Adjustment Period (which shall be determined initially by Gannett). Notwithstanding the foregoing, if any Federated Casualty (as defined in Section 7.13) shall have occurred during the Federated Adjustment Period, with respect to any day during the Federated Adjustment

 

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Period for which any Federated Newspaper is not being published in a manner consistent with its past operations as a result of such Federated Casualty, the Federated Seasonality Adjustment attributable to such Federated Newspaper for such day shall be equal to 1/364 th of the average After Tax Cash Flow of such Federated Newspaper generated during the twelve accounting periods immediately preceding the date of the occurrence of such Federated Casualty, as adjusted by Federated in accordance with the preceding sentence. For purposes of this Agreement, the “Tallahassee Seasonality Adjustment” means the After Tax Cash Flow of The Tallahassee Democrat generated during the period from and including September 26, 2005 through 12:01 a.m. (local time) on the Closing Date (the “Tallahassee Adjustment Period”), as calculated initially by TDI in accordance with generally accepted accounting principles applied on a consistent basis, except that, whether or not required to be so treated by generally accepted accounting principles (i) newsprint expense for such period will be computed on a FIFO cost basis, (ii) a combined federal, state and local effective tax rate of 36% will be used for such period, and (iii) any portion of the salaries, benefits, memberships, travel or other expenses, overhead or corporate allocation attributable to the ownership, management or supervision of The Tallahassee Democrat for such period by any corporate headquarters personnel of KRI will be eliminated. Notwithstanding the foregoing, if any TDI Casualty (as defined in Section 7.12) shall have occurred during the Tallahassee Adjustment Period, with respect to any day during the Tallahassee Adjustment Period for which the Tallahassee Democrat is not being published in a manner consistent with its past operations as a result of such TDI Casualty, the Tallahassee Seasonality Adjustment for such day shall be equal to 1/364 th of the average After Tax Cash Flow of the Tallahassee Democrat generated during the twelve accounting periods immediately preceding the date of the occurrence of such TDI Casualty, as adjusted by TDI in accordance with the preceding sentence.

 

(c) In computing the adjustment described in Section 3.3(a) above, at least two business days but not more than five business days prior to the Closing, an estimated Closing Date balance sheet for the Federated Newspapers (the “Estimated Federated Closing Date Balance Sheet”) shall be prepared by Federated in accordance with generally accepted accounting principles, except that accrued vacation (to the extent not required to be paid at Closing under applicable law), accrued rebates, paid-in-advance subscription liabilities and prepaid advertising, including, without limitation, those trade or barter obligations acquired hereunder (valued at fair value as determined by Federated), will be included in total liabilities, whether or not required to be so treated by generally accepted accounting principles. Except for accrued vacation, total liabilities will not include any liabilities relating to the Federated Benefit Plans (including, without limitation, retiree health and life insurance benefits). All federal, state and local taxes for which the Gannett Companies remain liable, all Excluded Federated Assets, all sick pay accruals and all intercompany and affiliate receivables or liabilities will be excluded from the Federated Adjustment Amount.

 

(d) In computing the adjustment described in Section 3.3(a) above, at least two business days but not more than five business days prior to the Closing, an estimated Closing Date balance sheet for the Tallahassee Democrat (the “Estimated TDI Closing Date Balance Sheet”) shall be prepared by TDI in accordance with generally accepted accounting principles, except that accrued vacation (to the extent not required to be paid at Closing under applicable law), accrued rebates, paid-in-advance subscription liabilities and prepaid advertising, including, without limitation, those trade or barter obligations acquired hereunder (valued at fair

 

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value as determined by TDI), will be included in total liabilities, whether or not required to be so treated by generally accepted accounting principles. Except for accrued vacation, total liabilities will not include any liabilities relating to the TDI Benefit Plans (including, without limitation, retiree health and life insurance benefits). All federal, state and local taxes for which the KRI Companies remain liable, all Excluded Tallahassee Democrat Assets, all sick pay accruals and all intercompany and affiliate receivables or liabilities will be excluded from the TDI Adjustment Amount.

 

(e) If, for any reason, the Closing has not occurred by the Target Closing Date, the adjustment described in Section 3.3(b) above shall be computed as provided in this Section 3.3. In such event, at least two business days, but not more than five business days, prior to the Closing, (i) an estimated statement of After Tax Cash Flow for the Federated Newspapers for the Federated Adjustment Period (the “Estimated Federated Statement of After Tax Cash Flow”) shall be prepared by Federated in accordance with Section 3.3(b) above and delivered to TDI; and (ii) an estimated statement of After Tax Cash Flow for The Tallahassee Democrat for the Tallahassee Adjustment Period (the “Estimated TDI Statement of After Tax Cash Flow”) shall be prepared by TDI in accordance with Section 3.3(b) above and delivered to Federated.

 

(f) On the day preceding the Closing Date, to the extent practical, the adjustments provided in this Section 3.3 shall be made to the Cash Consideration on the basis of the then most recent period end financial information of the Federated Newspapers and the Tallahassee Democrat, which shall be reflected on (i) the Estimated Federated Closing Date Balance Sheet and the Estimated TDI Closing Date Balance Sheet, respectively; and (ii), if required as provided above, the Estimated Federated Statement of After Tax Cash Flow and the Estimated TDI Statement of After Tax Cash Flow, respectively. Within 120 days after the Closing Date, (i) Federated will prepare an adjusted balance sheet (“Actual TDI Closing Date Balance Sheet”) of the Tallahassee Democrat as of 12:01 a.m. (local time) on the Closing Date, reflecting the adjustments provided in this Section 3.3 and showing the recalculation of adjustments reflected on the Estimated TDI Closing Date Balance Sheet; (ii) TDI will prepare an adjusted balance sheet (“Actual Federated Closing Date Balance Sheet”) of the Federated Newspapers as of 12:01 a.m. (local time) on the Closing Date, reflecting the adjustments provided in this Section 3.3 and showing the recalculation of adjustments reflected on the Estimated Federated Closing Date Balance Sheet; (iii) if required as provided above, TDI will prepare a revised statement of After Tax Cash Flow (“Actual TDI Statement of After Tax Cash Flow”) of the Tallahassee Democrat for the Tallahassee Adjustment Period, reflecting the adjustments provided in this Section 3.3 and showing the recalculation of adjustments reflected on the Estimated TDI Statement of After Tax Cash Flow; and (iv) if required as provided above, Federated will prepare a revised statement of After Tax Cash Flow (the “Actual Federated Statement of After Tax Cash Flow”) of the Federated Newspapers for the Federated Adjustment Period, reflecting the adjustments provided in this Section 3.3 and showing the recalculation of adjustments reflected on the Estimated Federated Statement of After Tax Cash Flow. Within 150 days after the Closing Date, final adjustments pursuant to this Section 3.3 and any required refund or payment shall be made on the basis of the Actual Federated Closing Date Balance Sheet, Actual TDI Closing Date Balance Sheet, and if required as provided above, Actual TDI Statement of After Tax Cash Flow and Actual Federated Statement of After Tax Cash Flow. If any dispute arises over the amount to be refunded or paid, such refund or payment shall nonetheless be promptly made to the extent such amount is not in dispute. If any such dispute

 

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cannot be resolved by the parties, it shall be referred to a mutually satisfactory independent public accounting firm of national stature which has not been employed by either party for the two years preceding the Closing Date. The determination of such firm shall be conclusive and binding on each party. The fees of such firm shall be shared equally by Federated and TDI.

 

3.4 Newspaper Issues . The Gannett Companies shall be entitled to all income earned and be responsible for all expenses incurred in connection with the business and operation of the Federated Newspapers prior to the Closing Date and in connection with the business and operation of the Tallahassee Democrat on or subsequent to the Closing Date. The KRI Companies shall be entitled to all income earned and be responsible for all expenses incurred in connection with the business and operation of the Tallahassee Democrat prior to the Closing Date and in connection with the business and operation of the Federated Newspapers on or subsequent to the Closing Date. Items to be prorated hereunder and reflected on the Actual TDI Closing Date Balance Sheet or the Actual Federated Closing Date Balance Sheet, as applicable, shall be prorated as of 12:01 a.m., local time of the applicable newspaper, on the Closing Date and shall include, without limitation, power and utility charges, rent, personal property taxes and real property taxes.

 

ARTICLE IV. THE CLOSING

 

4.1 Time and Place of Closing . Subject to the provisions of Articles VIII and IX below, the closing (the “Closing”) of the exchange of the Federated Assets and the Tallahassee Democrat Assets shall be held in the offices of Nixon Peabody LLP, 401 9 ^th Street, NW, Washington, DC 20004 at 10:00 a.m. on August 28, 2005 or, if later, the date five (5) business days after satisfaction of the conditions set forth in Articles VIII and IX or such other time and place as shall be mutually agreed upon by the parties (the “Closing Date”).

 

4.2 Deliveries by the Gannett Companies . At the Closing, Federated and Media West will deliver to TDI, KR USA and KR Digital the following:

 

(a) Bills of sale, deeds, assignments and other instruments of transfer and conveyance transferring and assigning the Federated Assets to TDI (other than certain Federated Names and Intangibles, which shall be assigned to KR USA or KR Digital), in form and substance satisfactory to the parties, including a bill of sale and assignment in the form attached hereto as Exhibit 4.2(a1) , warranty deeds in the forms attached hereto as Exhibit 4.2(a2) and one or more assignments of trademark rights in the form attached hereto as Exhibit 4.2(a3) ;

 

(b) Consents to assignment from third parties relating to the Material Federated Contracts listed on Schedule 12.8(a) hereto, as well as any other consents obtained by Federated;

 

(c) An assumption agreement pursuant to which Federated shall assume the KRI Companies’ liabilities and obligations as provided in Section 2.3 hereof in the form attached hereto as Exhibit 4.2(c) ;

 

(d) Discharges of mortgages and liens, including UCC-3 termination statements, signed by every secured party, in recordable form, of all Liens (as defined below) on

 

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the assets to be transferred to TDI, KR USA and KR Digital, other than Liens for taxes not yet due and payable;

 

(e) A certificate of non-foreign person status for purposes of Section 1445 of the Code (a “FIRPTA Certificate”) and an owner’s affidavit in commercially reasonable form, to the extent such affidavit is required by TDI’s title company to obtain title insurance with respect to the real property to be transferred to TDI;

 

(f) Certificate of an officer of Federated in the form attached hereto as Exhibit 4.2 (f) ;

 

(g) The Transition Services Agreement between Gannett and KRI (the “Transition Services Agreement”) in substantially the form attached hereto as Exhibit 4.2(g) ; and

 

(h) Such other certificates, instruments and documents as are reasonably required to be delivered by the Gannett Companies pursuant to this Agreement.

 

4.3 Deliveries by the KRI Companies . At the Closing, the KRI Companies will deliver to Federated and Media West the following:

 

(a) Bills of sale, deeds, assignments and other instruments of transfer and conveyance transferring and assigning the Tallahassee Democrat Assets to Federated (other than certain Tallahassee Names and Intangibles, which shall be assigned to Media West), in form and substance satisfactory to the parties, including a bill of sale and assignment in the form attached hereto as Exhibit 4.3(a1) , warranty deeds in the forms attached hereto as Exhibit 4.3(a2) and one or more assignments of trademark rights in the form attached hereto as Exhibit 4.3(a3) ;

 

(b) Consents to assignment from third parties relating to the Material Tallahassee Democrat Contracts listed on Schedule 12.8(b) hereto, as well as any other consents obtained by TDI;

 

(c) An assumption agreement pursuant to which TDI shall assume the Gannett Companies’ liabilities and obligations as provided in Section 1.3 hereof in the form attached hereto as Exhibit 4.3(c) ;

 

(d) Discharges of mortgages and liens, including UCC-3 termination statements, signed by every secured party, in recordable form, of all Liens on the assets to be transferred to Federated and Media West, other than Liens for taxes not yet due and payable;

 

(e) A FIRPTA Certificate and an owner’s affidavit in a commercially reasonable form, to the extent such affidavit is required by the Federated’s title company to obtain title insurance with respect to the real property to be transferred to Federated;

 

(f) Certificate of an officer of TDI in the form attached hereto as Exhibit 4.3(g) ;

 

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(g) Payment of the Cash Consideration by wire transfer to an account which shall be designated in writing by Federated and Media West at least three business days prior to the Closing;

 

(h) Transition Services Agreement; and

 

(i) Such other certificates, instruments and documents as are reasonably required to be delivered by the KRI Companies pursuant to this Agreement.

 

ARTICLE V. REPRESENTATIONS AND WARRANTIES OF FEDERATED

 

Each of Gannett and Federated, jointly and severally, represents and warrants to the KRI Companies as follows:

 

5.1 Organization; Qualification . Each of the Gannett Companies is a corporation duly organized, validly existing and in good standing under the laws of its respective state of incorporation. Federated has the full power and authority to own and operate the Federated Assets and to carry on the business operations of the Federated Newspapers as such operations are now being conducted.

 

5.2 Authority Relative to this Agreement . The Gannett Companies have the full corporate power, authority and legal right to execute and deliver this Agreement and to consummate the transactions and perform their obligations as contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been or will be duly and validly authorized by all necessary corporate and shareholder action, and this Agreement has been duly and validly executed and delivered by the Gannett Companies and constitutes a legal, valid and binding obligation of the Gannett Companies enforceable against the Gannett Companies in accordance with its terms.

 

5.3 Financial Schedules . Federated has furnished to the KRI Companies (i) the unaudited income statement and balance sheet of Federated with respect to each of the Federated Newspapers for the fiscal year ended December 26, 2004 and (ii) unaudited income statement and balance sheet for the six months ended and as of June 26, 2005 (the “Federated Financial Schedules”). June 26, 2005 is the “Federated Balance Sheet Date.” The Federated Financial Schedules have been prepared from and are in accordance with the books and records regularly maintained by Federated and Gannett with respect to the Federated Newspapers. The Federated Financial Schedules present fairly the financial condition and results of operations of the Federated Newspapers for the periods indicated, other than certain employee benefit liabilities which are accrued on Gannett’s balance sheet. No material adjustments of the Federated Financial Schedules are required for a fair presentation of the financial condition and the results of the Federated Newspapers’ operations for the periods indicated, other than certain employee benefit liabilities which are accrued on Gannett’s balance sheet. Federated makes no representations, however, about the future business or financial prospects of the Federated Newspapers for the KRI Companies’ intended purposes.

 

5.4 Business Since the Federated Balance Sheet Date . Since the Federated Balance Sheet Date: (a) the business of the Federated Newspapers has been conducted in the ordinary course of business and in substantially the same manner as it was before the Federated

 

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Balance Sheet Date, and (b) there have been no material adverse changes in the business, condition (financial or otherwise) or results of the Federated Newspapers’ operations.

 

5.5 No Defaults . The execution, delivery and performance of this Agreement by the Gannett Companies will not (a) conflict with any provision of their respective articles (or certificate) of incorporation or bylaws, (b) result in a default (or give rise to any right of termination, cancellation or acceleration) under or conflict with any of the terms, conditions or provisions of any Material Federated Contract (as defined in Section 12.8 below), (c) violate any law, statute, rule, regulation, order, injunction or decree of any federal, state or local governmental authority or agency applicable to the Gannett Companies or any of the Federated Assets, or (d) result in the creation or imposition of any Lien on any of the Federated Assets.

 

5.6 No Undisclosed Liabilities . The Gannett Companies have no obligation or liability to be reflected or reserved against in any of the Federated Financial Schedules which is not fully reflected or reserved against in such Federated Financial Schedules or otherwise disclosed hereunder related to the Federated Newspapers, and there is no asserted or, to the knowledge of Federated (as defined in Section 5.13(b) below), unasserted claim or contingent liability whether or not required to be reflected or reserved against in the Federated Financial Schedules, which in reasonable likelihood could after Closing result in any form of transferee liability against the KRI Companies or subject the Federated Assets to any Lien, or otherwise affect the full, free and unencumbered use of the Federated Assets by the KRI Companies in any material respect.

 

5.7 Licenses and Authorizations . Schedule 5.7 to this Agreement lists all the licenses, permits and authorizations that are held by the Gannett Companies as of the date hereof that are required for the conduct of the Federated Newspapers’ business operations, as presently conducted, and which, if not present or not in full force and effect, would have a material adverse effect on such business operations. All such licenses, permits and authorizations are in full force and effect with no violations of any of them having occurred.

 

5.8 Condition and Adequacy of the Federated Assets .

 

(a) The tangible assets included in the Federated Assets are in good operating condition and repair, ordinary wear and tear excepted, and are adequate and suitable in accordance with general industry practices for the purposes for which they are currently used and intended to be used. Attached as Schedule 5.8 are complete and correct publisher’s statements submitted to the Audit Bureau of Circulations for the six months ended March 31, 2005 for each of the Federated Newspapers, and, since March 31, 2005, there has been no materially adverse change in the data presented in such publisher’s statements. Schedule 5.8 also sets forth, with respect to each of the Federated Newspapers, the total daily and weekly paid subscribers as of June 30, 2005 and a statement of whether its circulation has been audited by the Audit Bureau of Circulations or the Certified Audit of Circulations. All information relating to the Federated Newspapers, their distribution and subscribers provided to the Audit Bureau of Circulations or the Certified Audit of Circulations was true, correct and complete in all material respects as of and for the periods related thereto.

 

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(b) The Work (as defined in the USA TODAY Print Agreement listed on Schedule 5.9(a) (“USAT Print Agreement”)) performed by The Olympian under the USAT Print Agreement conforms to the Specifications and other Work Criteria (as such terms are defined in the USAT Print Agreement). The press and other equipment used for the Work also meet, and since January 1, 2005 have met, the Specifications required under the USAT Print Agreement for producing USA TODAY. Employees of The Olympian are adequately trained in the daily operation and maintenance of such equipment and the performance of the Work. The Gannett Companies are not aware of any material capital expenditures that would be required, within the 18-month period following the date of this Agreement, in order to continue to conform to the Specifications. The Federated Financial Schedules reflect accruals in accordance with generally accepted accounting principles for the expenses associated with the distribution of USA WEEKEND by the Federated Newspapers.

 

5.9 Contracts and Arrangements .

 

(a) Schedule 5.9(a) hereto contains true and complete lists of all Federated Contracts included in the Federated Assets, except for those contracts (other than leases of real property) involving annual consideration of less than $10,000 or which are terminable by the Gannett Companies without penalty or other financial obligation upon notice of thirty (30) days or less, including, but not limited to the following Federated Contracts: (i) barter or trade contracts; (ii) sales agency or advertising representation contracts; (iii) contracts for future construction or purchase of capital improvements or equipment; (iv) license agreements (other than licenses for “off-the-shelf” third party application software) and any agreements under which any Federated Newspaper is authorized to publish materials supplied by others in future issues of the newspaper; (v) leases of real property and personal property; (vi) printing contracts; (vii) supply agreements (including contracts for the supply of newsprint); (viii) franchises, joint venture and partnership agreements; (ix) collective bargaining agreements, employment agreements and any contract or other arrangement relating to any Federated Newspaper between Federated and any current or former director or officer or affiliate of Federated; (x) any contract relating to any Federated Newspaper which limits its freedom to engage in any line of business or to compete with any other person; (xi) any contract relating to any Federated Newspaper that has a change of control, due on sale or similar provision; and (xii) any other contract, agreement or commitment not entered into in the ordinary course of business.

 

(b) Subject to Section 12.8 hereof, provided that any requisite consent to the assignment of the Federated Contracts to TDI is obtained, each of the Federated Contracts which is assigned to and assumed by TDI on the Closing Date is valid and in full force and effect.

 

(c) Subject to Federated obtaining all necessary third-party consents, Federated has full legal power and authority to assign its rights under the Federated Contracts to TDI in accordance with this Agreement, and such assignment shall not affect the validity, enforceability and continuity of any of the Federated Contracts. Neither Federated, nor to its knowledge any other party, has defaulted or caused an event of default or other event which with notice or lapse of time or both, would, in reasonable likelihood, constitute a default or an event of default, under any such Federated Contract, which defaults or events of default in the aggregate would exceed $100,000 and/or could reasonably be expected to result in an eviction

 

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under a lease of real property. Federated has provided the KRI Companies with complete copies of all of the Federated Contracts.

 

5.10 Title .

 

(a) Schedule 5.10(a) lists all real property owned by the Gannett Companies and included in the Federated Assets. Federated owns and has good and valid marketable title to such properties, free and clear of all security interests, mortgages, conditional sales agreements, charges, liens and other encumbrances (“Liens”), except for (i) liens for taxes not yet due and payable, (ii) those liens set forth on Schedule 5.10(a) which will be removed at or prior to Closing and (iii) any encumbrances (but not other Liens) that could not reasonably be expected to materially impair the use of any parcel of real property for the purposes for which it is currently used.

 

(b) Schedule 5.10(b) lists all real property leased by the Gannett Companies and used in the operation of the Federated Newspapers.

 

(c) Schedule 1.1(a) lists all material tangible personal property included in the Federated Assets and describes any Liens on such property. Except as set forth in Schedule 1.1(a) or Schedule 5.10(b) , Federated owns and has good and valid title to such properties, free and clear of all Liens, except for liens for taxes not yet due and payable.

 

(d) Other than the Excluded Federated Assets, neither Gannett nor any of its affiliates (other than Federated, Media West and GANSAT) owns any assets or properties, tangible or intangible, used primarily in the business and operations of any of the Federated Newspapers. Media West does not own any assets or properties, tangible or intangible, used primarily in the business and operations of any of the Federated Newspapers other than the Federated Names and Intangibles. Other than the Excluded Federated Assets, GANSAT does not own any assets or properties, tangible or intangible, used primarily in the business and operations of any of the Federated Newspapers other than the items listed on Schedule 5.10(d) .

 

5.11 Intellectual Property . Schedule 5.11 to this Agreement sets forth a correct and complete list of all the trademarks, trade names, service marks, mastheads, logotypes, domain names and patents which are owned or held for use by any of the Gannett Companies in connection with the business and operation of the Federated Newspapers (the “Federated Rights”). The registrations (if any) for the Federated Rights and any copyrights included in the Federated Assets (the “Federated Copyrights”) are valid, in good standing and uncontested. Federated possesses adequate rights, licenses or other authority to use all Federated Rights and Federated Copyrights necessary to conduct the business of the Federated Newspapers as presently conducted. Federated has not received any notice with respect to any alleged infringement or unlawful or improper use of any Federated Rights or Federated Copyrights owned or alleged to be owned by others. No director, officer or employee of the Gannett Companies or of any of its affiliates has any interest in any Federated Right listed on Schedule 5.11 or any Federated Copyrights, all of which are free and clear of any Lien. Federated has not granted any outstanding licenses or other rights to any Federated Rights listed on Schedule 5.11 or any Federated Copyrights, and Federated has no knowledge of any infringement of any of the Federated Rights or any Federated Copyrights.

 

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5.12 Litigation and Compliance with Laws . Except as set forth on Schedule 5.12 : (a) none of the Gannett Companies, with respect to the Federated Newspapers, has been operating under or subject to, or in default with respect to, any order, writ, injunction, judgment or decree of any court or federal, state, or local governmental authority or agency which has or could reasonably be expected to have a material adverse effect on the business, operations or financial condition of the Federated Newspapers; (b) none of the Gannett Companies nor any of their officers or agents has received any inquiry, written or oral from any such authority or agency concerning any of the operations or business of the Federated Newspapers during the 12-month period prior to the date of this Agreement which could reasonably be expected to have a material adverse effect on the business, operations or financial condition of the Federated Newspapers; and (c) there is no litigation pending by or against, or to Federated’s knowledge threatened against, any of the Gannett Companies or the Federated Newspapers related to or affecting any of the Federated Assets. Except as disclosed in Schedule 5.12 and except for environmental matters which will be governed exclusively by Section 5.18 below, the Gannett Companies have complied in all material respects with all laws, regulations, orders or decrees applicable to the Federated Newspapers, and the present uses by the Gannett Companies of the Federated Assets do not violate any such laws, regulations, orders or decrees, in any material respect, including, with respect to any owned or leased real property, any applicable zoning ordinance and other governmental regulations, and, to Federated’s knowledge, there is no basis for any claim for compensation or damage or other relief from any violation of the foregoing.

 

5.13 Employees and Employee Relations .

 

(a) Schedule 5.13(a) lists the names and salaries of all the full and part-time employees of the Federated Newspapers identifying those paid on a commission basis; all such employees are employed by Federated and not by any other Gannett Company or affiliate thereof. Any collective bargaining agreement or any other labor agreement covering or relating to any of the employees of the Federated Newspapers is listed on Schedule 5.9(a) hereto. Apart from such collective bargaining agreements, the Gannett Companies have not recognized, and Federated has not received a demand for recognition of, any collective bargaining representative of employees of the Federated Newspapers. To the knowledge of Federated, except as set forth on Schedule 5.13(a) , Federated is in compliance in all material respects with all applicable federal, state and local laws respecting employment, occupational safety and health, employment practices, terms and conditions of employment and wages and hours of employment with respect to the current and former employees of the Federated Newspapers.

 

(b) Except as set forth on Schedule 5.13(b) , each collective bargaining agreement to which Federated is a party is in full force and effect, and Federated is not and, to the knowledge of Federated, no other party thereto is in material breach of its obligations thereunder and no event has occurred which would (with notice or the passage of time or both) constitute such a material breach. Except as set forth on Schedule 5.13(b) , with respect to the employees of the Federated Newspapers, (i) no Gannett Company is a party to or subject to any labor or employment dispute, and (ii) within the two (2) year period immediately preceding the date of this Agreement, no Gannett Company has received any written notice that any labor union or bargaining agent or representative is or was attempting to apply to be elected, recognized or certified as the bargaining agent of any of its employees. All labor union or

 

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collective bargaining agreements set forth in Schedule 5.9(a) cover only employees of the Federated Newspapers.

 

For purposes of this Agreement, “to the knowledge of Federated” or similar terms means the actual current (as of the date hereof or as of the Closing Date) knowledge with respect to a fact or matter of the publisher of any of the Federated Newspapers or any officer or director of Federated.

 

5.14 Taxes . The Gannett Companies do not and will not in the future have any liability, fixed or contingent, for any unpaid federal, state or local taxes or other governmental or regulatory charges whatsoever which could result in a Lien on the Federated Assets after conveyance thereof to TDI, KR USA and KR Digital or in any other form of transferee liability to TDI, KR USA and KR Digital. No pending tax audit or other governmental proceeding and no outstanding agreement or waiver extending the statutory period of limitations applicable to any federal, state or local tax return or any period is reasonably likely to result in a lien on any Federated Assets or the imposition on TDI, KR USA and KR Digital or any liability for any taxes or assessments related to the Federated Assets.

 

5.15 Instruments of Conveyance; Good Title . The instruments to be executed by Federated and Media West and delivered to TDI, KR USA and KR Digital at the Closing conveying the Federated Assets to TDI, KR USA and KR Digital will transfer good and marketable title to the Federated Assets free and clear of all liabilities, obligations and encumbrances, except as provided elsewhere in this Agreement.

 

5.16 Changes . Except as shown on Schedule 5.16 to this Agreement, since the Federated Balance Sheet Date, the Gannett Companies have not, with respect to the business of the Federated Newspapers: (a) mortgaged, pledged or subjected to a Lien or any other encumbrance any of the Federated Assets; (b) sold or transferred any material asset used or useful in the business of the Federated Newspapers; or (c) increased the compensation payable or to become payable to any employee or agent, except regularly scheduled increases in accordance with historical practices described on Schedule 5.16 .

 

5.17 Brokers . There is no broker or finder or other person who would have any valid claim against the KRI Companies for a commission or brokerage in connection with this Agreement or the transactions contemplated hereby as a result of any agreement, understanding or action by any of the Gannett Companies.

 

5.18 Environmental .

 

(a) Except as disclosed on Schedule 5.18 to this Agreement, in connection with the operation of the Federated Newspapers, to the knowledge of Federated, no Release of Hazardous Materials, including, without limitation, Polychlorinated Biphenyls (“PCBs”), hazardous waste or air pollutants or toxic pollutants, as defined under any Environmental Laws, by the Gannett Companies, and to the knowledge of Federated, by any other person, has occurred, is presently occurring, or is anticipated to occur in excess of permitted levels or reportable quantities, under any Environmental Laws. To the knowledge of Federated, no

 

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Hazardous Materials have been disposed of by the Gannett Companies or, by any other person on the real property occupied by the Federated Newspapers.

 

(b) To the knowledge of Federated, the Gannett Companies’ present use of the Federated Assets does not violate any Environmental Laws, occupational safety and health or other applicable law, the effect of which violation could materially adversely affect the business, condition (financial or otherwise) or results of the Federated Newspapers’ operations. To the knowledge of Feder