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EXHIBIT
2.1
EXECUTION COPY
ASSET PURCHASE AGREEMENT
by and among
GATEHOUSE MEDIA, INC.,
GATEHOUSE MEDIA WEST VIRGINIA HOLDINGS, INC.,
GATEHOUSE MEDIA ILLINOIS HOLDINGS, INC.,
CHAMPION PUBLISHING, INC.
AND
CHAMPION INDUSTRIES, INC.
Effective as of June 28, 2007
TABLE OF CONTENTS
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ARTICLE I. SALE OF ASSETS AND TERMS OF
PAYMENT |
1 |
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1.1
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Transfer
of Assets |
1 |
| 1.2 |
Excluded
Assets |
4 |
| 1.3 |
Liabilities. |
6 |
| 1.4 |
Consideration |
8 |
| 1.5 |
Manner
of Payment |
8 |
| 1.6 |
Adjustments |
9 |
| 1.7 |
Allocation
of Purchase Price |
11 |
| |
|
|
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ARTICLE II. THE CLOSING |
12 |
| 2.1 |
Time
and Place of Closing |
12
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| 2.2 |
Deliveries
by Sellers |
12 |
| 2.3 |
Deliveries
by Buyer |
13 |
| |
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ARTICLE III. REPRESENTATIONS AND WARRANTIES OF
SELLERS |
14 |
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3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
3.11
3.12
3.13
3.14
3.15
3.16
3.17
3.18
3.19
3.20
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Organization;
Qualification
Authority
Relative to this Agreement
Financial
Statements
Business
Since the Balance Sheet Date
No
Defaults
Undisclosed
Liabilities
Licenses
and Authorizations
Condition
and Adequacy of the Assets; Title
Contracts
and Arrangements
Real
Property
Intellectual
Property
Litigation
and Compliance with Laws
Employees
Personal
Property
Changes
Brokers
Environmental
Matters
Circulation
Insurance
Taxes
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14
14
15
16
16
17
17
17
17
18
19
20
20
22
22
22
22
22
24
24
24
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF
BUYER |
25 |
| |
|
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4.1
4.2
4.3
4.4
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Organization
Authority
Relative to this Agreement
No
Defaults
Brokers
|
25
25
25
25
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| |
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ARTICLE V. COVENANTS OF SELLER PENDING THE CLOSING
DATE.
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25 |
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| 5.1 |
Maintenance
of Business |
25 |
| 5.2 |
Organization;
Goodwill |
27 |
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5.3
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Access
to Facilities, Files and Records |
27 |
| 5.4 |
Representations
and Warranties |
27 |
| 5.5 |
Corporate
Action |
27 |
| 5.6 |
Consents |
27 |
| 5.7 |
Confidential
Information |
28 |
| 5.8 |
Consummation
of Agreement |
28 |
| 5.9 |
Notice
of Proceedings |
28 |
| 5.10 |
Interim
Financial Statements |
28 |
| 5.11 |
Taxes |
28 |
| 5.12 |
Audited
Financial Statements; Interim Financial
Statements |
29 |
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ARTICLE VI.COVENANTS OF BUYER PENDING THE CLOSING DATE
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30 |
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6.1
Representations and
Warranties
6.2 Corporate
Action
6.3 Confidential
Information
6.4 Consummation
of Agreement
6.5 Notice
of Proceedings
6.6 Maintenance
of Financial Position
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30
30
30
30
31
31
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ARTICLE VII. CONDITIONS TO THE OBLIGATIONS OF
SELLERS |
31 |
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7.1 Representations,
Warranties and Covenants
7.2 Proceedings.
7.3 Hart-Scott-Rodino
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31
32
32
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ARTICLE VIII. CONDITIONS TO THE OBLIGATIONS OF
BUYER |
33 |
8.1 Representations,
Warranties and Covenants
8.2 Proceedings
8.3 Hart-Scott-Rodino.
8.4 Consents.
8.5 Financing
8.6 Title
Insurance
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33
33
34
34
34
34
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ARTICLE IX. INDEMNIFICATION
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35 |
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9.1 Survival;
Limitations
9.2 Indemnification
of Buyer
9.3 Indemnification
of Sellers
9.4 Notice
of Claims
9.5 Defense
of Third Party Claims
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35
37
38
38
38
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ARTICLE X. MISCELLANEOUS
PROVISIONS |
39 |
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10.1 Risk
of Loss
10.2 Abandonment
of Agreement
10.3 Liabilities
Upon Abandonment
10.4 Expenses
10.5 Employees
and Employee Benefits
10.6 Further
Assurances and Consents
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39
40
40
41
41
42
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10.7 Waiver of
Compliance
10.8 Notices
10.9 Assignment
10.10 Governing
Law
10.11 Public
Announcements
10.12 No
Third Party Rights
10.13 Waiver
of Jury Trial
10.14 Counterparts
10.15 Headings
10.16 Specific
Performance
10.17 Severability
10.18 Confidentiality
10.19 Entire
Agreement; Amendments
10.20 Champion
Industries, Inc.
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44
44
45
45
45
46
46
46
46
46
46
46
46
47
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| |
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Schedules
Schedule
1.2(j) Excluded
Assets
Schedule
1.6(c) Exceptions
to GAAP
Schedule
2.2(e) Transition
Services Table
Schedule
2.2(f) Non-Competition
Agreement
Schedule
3.3 Financial
Statements
Schedule
3.7 Licenses
and Permits
Schedule
3.9 Contracts
Schedule
3.10(a) Owned
Real Property
Schedule
3.10(b) Leased
Real Property
Schedule
3.11
Intellectual Property
Schedule
3.12 Litigation
and Compliance with Laws `
Schedule
3.13(a) Employees;
Salaries
Schedule
3.13(b) Labor
Agreements
Schedule
3.14 Tangible
Personal Property
Schedule
3.15 Changes
Since Balance Sheet Date
Schedule
3.17 Environmental
Matters
Schedule
3.18 Circulation
Reports
Schedule
5.1 Maintenance
of Business
Schedule
8.4 Material
Consents
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ASSET PURCHASE AGREEMENT
THIS
ASSET PURCHASE AGREEMENT (this “Agreement”),
effective as of June 28, 2007, is by and among Champion
Publishing, Inc., a West Virginia corporation
(“Buyer”), Champion Industries, Inc., a West
Virginia corporation (“Champion”), GateHouse
Media, Inc., a Delaware corporation (“GHS”),
GateHouse Media Illinois Holdings, Inc., a Delaware
corporation (“GHSI”), and GateHouse Media West
Virginia Holdings, Inc., a Delaware corporation
(“GHSWV”). GHS, GHSI and GHSWV are each
individually referred to herein as a “Seller” and
together referred to as “Sellers”.
WHEREAS,
Sellers own and publish the The Herald Dispatch , a
daily newspaper distributed in and around Huntington, West
Virginia, together with all related publications and services
and assets and facilities, all related web sites and all of
Sellers’ rights to prepare, publish, sell and distribute
any of the foregoing in all languages (collectively the
“Newspaper”) and the mastheads and
certain other intellectual property associated with the
Newspaper (the “Mastheads”); and
WHEREAS,
Sellers desire to sell and Buyer desires to purchase
substantially all of the assets related to the operation,
publication and distribution of the Newspaper as a going
concern, together with the Mastheads.
NOW,
THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth and based upon the
representations and warranties made by each party to the other
in this Agreement, the parties have agreed to consummate the
sale of the Newspaper on the terms contained
herein.
ARTICLE
I
SALE OF ASSETS AND TERMS OF PAYMENT
1.1
Transfer of Assets . Upon the terms and
subject to the conditions of this Agreement, on the Closing
Date (as defined in Section 2.1 hereof) Sellers will
sell, assign, convey or cause to be conveyed, transfer and
deliver to Buyer, and Buyer will purchase and accept from
Sellers, all of the assets and properties of Sellers, tangible
or intangible, of every kind and description, used by Sellers
that relate primarily to the business and operation of the
Newspaper as a going concern (all such assets being referred
to herein as the “Sellers’ Assets”), but
excluding the Excluded Assets described in Section 1.2
below.
In
addition, upon the terms and subject to the conditions of this
Agreement, on the Closing Date, Sellers will sell, assign,
convey or cause to be conveyed, transfer and deliver to Buyer,
and Buyer will purchase and accept from Sellers, the
Newspaper’s “Mastheads” which consist of the
mastheads, trademarks, trade dress, trade names, service
marks, registrations, domain names, and other property rights
relating thereto and all goodwill associated
therewith. The Sellers’ Assets along with the
Mastheads are hereinafter collectively referred to as the
“Assets”. The Assets include, without
limitation, the following:
(a) The
Real Property (as defined in Section 3.10(b));
(b) All
Leases (as defined in Section 3.9(e));
(c) Sellers
tangible personal property, editorial material, work in
process, finished goods, manuscripts, notes and drafts,
graphic artwork, cuts, photographs and negatives owned by
Sellers to the extent they relate primarily to the Newspaper;
promotional materials, inserts, and direct mail materials
owned by Sellers to the extent they relate primarily to the
Newspaper; stationery, supplies, purchase orders, forms,
labels, shipping materials and catalogs owned by Sellers to
the extent they relate primarily to the Newspaper; and all
lists owned by Sellers of contributors, authors,
correspondents, reviewers, photographers, illustrators and
editors who contribute or have contributed to the Newspaper;
other inventory and supplies, and other assets and equipment
relating primarily to the Newspaper, including without
limitation those listed in Schedule 3.14
hereto;
(d) All
contracts, agreements and similar documents that relate to the
operation of the Newspaper or are otherwise specifically
assumed pursuant hereto, together with all subscriptions and
all orders and agreements for the sale of advertising, space
reservations and insertion orders relating to the Newspaper,
including without limitation those described in
Schedule 3.9 hereto;
(e) All
of Sellers right, title and interest in and to all licenses,
Permits (as defined in Section 3.17), variances, franchises,
certifications, approvals and other governmental
authorizations relating primarily to the Newspaper, together
with any renewals, extensions or modifications thereof and
additions thereto;
(f) All
publishable materials of any nature, as used in the business
of the Newspaper, the names “ The Herald
Dispatch”, “The Lawrence
Herald” and “Putnam Herald”,
copyrights, patents, trademarks, service marks, logotypes and
trade names (including registrations and applications for
registration of any of the foregoing), web sites, domain
names, processes, inventions, computer software, computer
programs and software and program rights, trade secrets,
goodwill and other intangible rights and interests issued to
or owned by Sellers and used in connection with the operation,
publication and distribution of the Newspaper;
(g) All
of Sellers accounts or other receivables, claims, evidences of
debt owed to Sellers, utility deposits and other deposits and
prepaid expenses arising out of Sellers’ operation of
the Newspaper together with all records relating
thereto;
(h) All
of the Newspaper’s files and other records in whatever
form relating to the operation of the Newspaper, including
without limitation all of its historical materials relating to
the Newspaper’s advertising, circulation and
distribution, all circulation, subscriber, delivery and
mailing lists and carrier routes maintained by Sellers to the
extent they relate to the Newspaper, all data related to such
lists, all circulation readership studies, audience surveys
and research owned by Sellers, and all other mailing lists,
together with all records, reports and tapes of computer data
owned by Sellers, in each case to the extent they relate
primarily to the Newspaper, rate cards, verification cards,
advertising insertion orders, specimen copies of all
advertisements carried in the Newspaper, and copies of current
price lists, discount lists, catalogs, public relations
materials, sales correspondence, call reports, call books,
advertiser lists and sales promotion lists;
(i) All
claims, causes of action, rights of recovery and rights of
set-off of any kind (including, without limitation, rights
under and pursuant to all warranties, representations and
guarantees made by suppliers of products, materials or
equipments, or components thereof) to the extent they relate
to the Newspaper, are owned by Sellers and relate to the
period of time following the Closing Date;
(j) All
of Sellers libraries of back and current issues of the
Newspaper;
(k) All
of Sellers goodwill in and going concern value of the
Newspaper;
(l) Any
prepaid taxes of Sellers which are included as Assets on the
Closing Date Balance Sheet (as defined in Section
2.6(d));
(m) All
of Sellers right, title and interest in and to any
non-solicitation agreements benefiting the
Newspaper;
(n) Without
duplication, all assets relating primarily to the operations
of the Newspaper reflected in the Newspaper’s balance
sheet included in the Financial Statements dated as of the
Balance Sheet Date (each as defined in Section 3.3), together
with changes in the ordinary course of business or as
otherwise allowed under this Agreement up to and including the
Closing Date; and
(o) Partial
assignment of Sellers’ rights to indemnification under
the Amended and Restated Asset Purchase Agreement effective as
of April 12, 2007 by and among Gannett Satellite Information
Network, Inc., Gannett River States Publishing Corporation,
Pacific and Southern Company, Inc., Federated Publications,
Inc., Media West – GSI, Inc., Media West – GRS,
Inc., GateHouse Media Illinois Holdings, Inc. and GateHouse
Media, Inc., pursuant to which the indemnity obligations of
the Gannett Parties with respect to the Newspaper are
partially assigned to Buyer and Champion Industries,
Inc. Notwithstanding anything to the contrary
contained herein, it is understood that Sellers are not making
any representation, warranty or guarantee as to the
enforceability or collectibility of such assignment against
the Gannett Parties.
1.2
Excluded Assets . The following assets
relating to the business of operating, publishing and
distributing the Newspaper shall be retained by Sellers and
shall not be sold, assigned, conveyed, transferred or
delivered to Buyer (the “Excluded
Assets”):
(a) Claims
by Sellers with respect to the Excluded Assets and liabilities
not assumed by Buyer, including without limitation all refunds
and claims for tax refunds (except for prepaid taxes acquired
by Buyer pursuant to Section 1.1(l) above) and counterclaims
with respect to obligations and liabilities not being assumed
by Buyer hereunder;
(b) All
contracts of insurance, tax records and tax
returns;
(c) All
Employee Benefits Plans (as defined in Section
3.13(b));
(d) The
right to use the “GateHouse” and “GateHouse
Media” names and, except for the agreements described in
Schedule 3.9, the right to participate in any plan, procedure
or right that was made available to the Newspaper by or
through GHS, or any of its affiliates;
(e) All
claims, refunds, causes of action, choses in action, rights of
recovery, rights of set off and rights of recoupment of
Sellers related to the businesses of the Newspaper on or prior
to the Closing Date, exclusive of the rights granted in
Sections 1.1(g) and 1.1(o);
(f) (i)
the franchise to be a corporation ; (ii) the organizational
documents (including articles or certificate of incorporation
or bylaws (as applicable)); (iii) in respect of Sellers which
are corporations: (A) the corporate seal, (B) the minute
books, (C) the stock books, and (D) the stock
certificates; (iv) the qualifications to transact business as
a foreign corporation; (v) the arrangements with registered
agents relating to foreign qualifications, taxpayer and other
identification numbers; (vi) other records or similar
documents relating to the organization, maintenance and
existence of Sellers as a corporation; and (vii) any other
corporate records relating to the corporate organization or
capitalization (as applicable) of Sellers;
(g) All
items of a corporate overhead nature that are controlled by or
located at the corporate offices of Sellers;
(h) Any
right, property or asset described in Schedule 1.2(j)
hereto, including the property and rights which are shared
with affiliates of Sellers and not used primarily in the
businesses of the Newspaper;
(i) Any
assets or properties of Seller, tangible or intangible, of
every kind and description which are not used primarily in
connection with the businesses of the Newspaper and are not
included in the Financial Statements; and
(j) Sellers’
rights under this Agreement.
1.3
Liabilities .
(a) The
Assets shall be sold and conveyed to Buyer free and clear of
all Liens (as defined in Section 3.8), except for Permitted
Encumbrances (as defined in Section 3.10), except that Buyer
shall assume, discharge and perform the following liabilities
(the “Assumed Liabilities”):
(i) those
liabilities and obligations of Sellers under the contracts
assigned to Buyer which are described in Subsection 1.1(d)
(other than any obligation under any such contract related or
arising prior to the Closing Date, including, without
limitation, any liability for breach or nonperformance);
provided, however, that if any such contract requires a
consent to the assignment thereof to Buyer and such consent
has not been obtained, then this Agreement, to the extent
permitted by law, shall constitute an equitable assignment by
Sellers to Buyer of all rights, benefits, title and interest,
liabilities and obligations under such contract;
(ii) those
liabilities and obligations of Sellers as of the Closing Date
under agreements for advertising to the extent to be run in
issues of the Newspaper published after the Closing Date
(subject to the adjustment provisions of Section 1.6
below);
(iii) those
liabilities and obligations of Sellers for trade accounts
payable, advertising rebates payable and taxes which are
included on the Closing Date Balance Sheet (to the extent of
the amount reflected on such balance sheet as a liability) and
any expenses for which Buyer is responsible under Section
1.6(a); and
(iv) those
liabilities and obligations of Sellers and the Newspaper
included on the Closing Date Balance Sheet, which shall
include paid in advance subscriptions and accrued liabilities
of Sellers to employees of the Newspaper for unused vacation,
sick leave, holiday and personal days (to the extent of the
amounts reflected on such balance sheet and only to the extent
Sellers do not have a legal obligation to pay such amounts
upon termination of employment on or before the Closing
Date).
(b) Except
as set forth in Section 1.3(a) above or as otherwise expressly
set forth herein, Buyer does not assume and will not be liable
for, and Sellers shall remain unconditionally liable for, all
other liabilities or obligations of Sellers (or any other
person, in the case of liabilities or obligations for taxes)
(the “Excluded Liabilities”), including, but not
limited to:
(i) any
liability or obligation arising prior to Closing under any
contract not described in Subsection 1.1(d)
above;
(ii) any
liability under any contract of insurance or relating to any
other Excluded Assets;
(iii) any
liability to any of the Newspaper’s employees of any
nature whatsoever related to the period on or prior to the
Closing Date, including under any employee benefit plan of any
nature and including any unemployment or workers compensation
claims;
(iv) any
liability arising out of any termination by any Seller of the
employment of any employee, consultant or independent
contractor of the Newspaper on or prior to the Closing Date,
or who retired on or prior to the Closing Date;
(v) any
liability under any litigation, proceeding or claim of any
nature related to the Newspaper arising during, or brought by
any person or entity with respect to, the period of time on or
prior to the Closing Date, whether or not such litigation,
proceeding or claim is pending, threatened or asserted before,
on or after the Closing Date;
(vi) any
liability for (I) any taxes (other than taxes of Sellers
assumed by Buyer pursuant to Section 1.3(a)(iii) above) with
respect to the Newspaper or the Assets for periods ending on
or prior to the Closing Date and taxes deemed, pursuant to
Section 1.6(b), payable for the portion ending on the Closing
Date of a Straddle Period (as defined in Section 1.6(b)), (II)
except as allocated in Section 10.4, any taxes imposed on the
transfer of the Assets or the Newspaper on or prior to the
Closing Date and, (III) any estate or gift taxes imposed with
respect to Sellers, the Assets or the Newspaper on or prior to
the Closing Date; provided, however, that Transfer Taxes (as
defined in Section 10.4) on the transfer of the Assets
pursuant to this Agreement shall be paid by Buyer as provided
in Section 10.4;
(vii) except
as otherwise set forth in this Agreement, any and all
liabilities incurred by Sellers in connection with the
negotiation, execution or performance of this Agreement
(including, without limitation, all legal, accounting,
brokers, finders and other professional fees and expenses);
or
(viii) any
and all obligations, liabilities and/or commitments, including
but not limited to obligations, liabilities and/or commitments
pursuant to Environmental Laws, arising out of or related to
conditions or events arising from or related to the Real
Property and/or the operation of the Newspaper thereon that
occurred on or prior to the Closing Date. The
obligations, liabilities and/or commitments contemplated by
this Section 1.3(b)(viii) include, but are not limited to, all
matters arising from or relating to Item 2 of Schedule
3.17 and all facts and circumstances underlying or leading
to such implementation or that made such implementation
necessary.
1.4
Consideration . Subject to the conditions
contained in this Agreement, and in consideration of the sale
of the Assets, Buyer will pay on the Closing Date the sum of
Seventy-Seven Million dollars ($77,000,000) (the “Base
Purchase Price”), as adjusted pursuant to Section 1.6
below (the “Purchase Price”).
1.5
Manner of Payment . The Purchase Price shall
be paid to Sellers on the Closing Date in immediately
available funds by wire transfer to bank accounts designated
by Sellers in writing at least two (2) business days prior to
the Closing Date. Notwithstanding the foregoing,
each of Sellers may, without the consent of Buyer or
GateHouse, assign to one or more of its affiliates (the
“Sellers Designee(s)”) all or a portion of its
rights to receive payment of the Purchase Price in accordance
with the terms and conditions of this
Agreement. Either of Sellers shall notify Buyer at
least two (2) business days prior to the Closing Date as to
the identity of the Sellers Designee(s), if any.
1.6
Adjustments .
(a)
Issues Prior to the Closing Date/Working Capital
Adjustment . Sellers shall be entitled to all
income earned and collected and be responsible for all
expenses incurred in connection with the business and
operation of the Newspaper on or prior to the Closing
Date. Buyer shall be entitled to all income earned
and be responsible for all expenses incurred in connection
with the business and operation of the Newspaper after the
Closing Date. In addition to the Purchase Price
Buyer shall pay to Sellers the additional sum of Eight Hundred
Thirty Seven Thousand Five Hundred Fifty-Four Dollars
($837,554) (the “Additional Sum”) subject to a
further adjustment for any change in working capital (the
“Adjustment”). The Adjustment is
premised upon the “Working Capital” of the
Newspaper from Newspaper’s Closing Date Balance Sheet
being One Million Six Hundred Seventy-Five Thousand One
Hundred Seven Dollars ($1,675,107). To the extent
that the Working Capital on the Closing Date Balance Sheet
varies from One Million Six Hundred Seventy-Five Thousand One
Hundred Seven Dollars ($1,675,107), the Additional Sum and, if
necessary, the Purchase Price shall be increased or decreased,
as the case may be, One Dollar ($1.00) for each One Dollar
($1.00) of variance. For example, if Working
Capital on the Closing Date is One Million Eight Hundred
Thirty-Seven Thousand Five Hundred Fifty-Four Dollars
($1,837,554) Buyer would pay the Seventy Seven Million Dollars
($77,000,000) Base Purchase Price plus the Additional Sum
(Eight Hundred Thirty Seven Thousand Five Hundred Fifty-Four
Dollars ($837,554)) plus the Adjustment of One Hundred
Sixty-Two Thousand Four Hundred Forty-Seven Dollars ($162,447)
[$1,837,554 – $1,675,107]. If Working Capital
on the Closing Date is Three Hundred Thirty-Seven Thousand
Five Hundred Fifty-Three Dollars ($337,553) Buyer would pay as
Purchase Price Seventy Six Million Five Hundred Thousand
Dollars ($76,500,000) to reflect the One Million Three Hundred
Thirty-Seven Thousand Five Hundred Fifty-Four Dollar
($1,337,554) [$1,675,107 - $337,553] decrease in Working
Capital [$77,000,000 + $837,554 –
$1,337,554].
In
computing the adjustment described above, the Closing Date
Balance Sheet (as defined in subsection (c)) shall be prepared
in accordance with Sellers historical accounting practices
which reflect accrual basis accounting and are in accordance
with generally accepted accounting principles other than as
set forth on Schedule 1.6(c) . All
intercompany and affiliate receivables or liabilities will be
treated as shareholders’ equity and will be excluded
from the balance sheet adjustment and will not be assumed by
Buyer. All prepaid advertising and subscriptions
shall be accrued as liabilities in the amount of such
prepayments.
(b)
Other Adjustments . All items of income and
expense directly relating to the business of operating the
Newspaper, other than the income and expenses referred to
above, shall be prorated between Sellers and Buyer as of the
close of business on the Closing Date. Such items
to be prorated shall include, without limitation, power and
utility charges, personal property taxes and real property
taxes. The portion of any personal property taxes
and real property taxes for a taxable period that includes the
Closing Date (a “Straddle Period”) that shall be
deemed to be payable for the portion of the period ending on
the Closing Date shall be the amount of such taxes for the
entire period (or, in the case of such taxes determined on an
arrears basis, the amount of such taxes for the immediately
preceding period) multiplied by a fraction the numerator of
which is the number of calendar days in the period ending on
the Closing Date and the denominator of which is the number of
calendar days in the entire period. The portion of
any other taxes for a Straddle Period that shall be deemed to
be payable for the portion of the period ending on the Closing
Date shall be determined based on an interim closing of the
books to the extent practicable and otherwise based on the
formula described in the immediately preceding
sentence.
(c)
Adjustment Calculations . Three (3) business
days prior to the Closing Date, to the extent practicable, the
adjustments provided in this Section 1.6 shall be made to the
Base Purchase Price on the basis of the then most recently
available financial statements of the Newspaper, which shall
be reflected on a preliminary balance sheet for the Newspaper
(the “Preliminary Balance Sheet”) prepared by
Sellers. Within 90 days after the Closing
Date, Sellers will prepare an adjusted balance sheet for the
Newspaper (the “Closing Date Balance Sheet”) as of
the close of business on the Closing Date, reflecting the
adjustments provided in this Section 1.6 and showing the
recalculation of adjustments reflected on the Preliminary
Balance Sheet, along with back-up materials necessary for
Buyer’s understanding of the Closing Date Balance Sheet
and the calculation thereof.
Sellers
and their accountants will provide Buyer’s accountants
with reasonable access to the books, records and working
papers of Sellers necessary to review such
calculations. Within 120 days after the Closing
Date, final adjustments pursuant to this Section 1.6 and
any required refund or payment shall be made on the basis of
the Closing Date Balance Sheet (the “Adjustment Payment
Date,” provided that if any amounts are in dispute, the
Adjustment Payment Date for the disputed amounts shall be the
date payment is required to be made as required
below). 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 Buyer does not notify Sellers within 75
days of receiving the Closing Date Balance Sheet that Buyer
disputes the information contained therein, then Buyer shall
be deemed to agree to the Closing Date Balance Sheet and to
have waived all further right to dispute the information
contained therein and its use in applying the provisions of
this Agreement. If Buyer does notify Sellers of a
dispute regarding the Closing Date Balance Sheet within 75
days of receiving it, and if such dispute cannot be resolved
by the parties within 30 days thereafter, 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 and any required payment
or refund in accordance therewith shall be made in immediately
available funds within 10 days of such
determination. The fees of such firm shall be
shared equally by each party.
1.7
Allocation of Purchase Price . As soon as
practicable after the date hereof, but in no event later than
ninety (90) days after the Closing Date, Buyer and Sellers
will negotiate, in good faith, with a view towards allocating,
as of the Closing Date, the Purchase Price (as adjusted in
accordance with this Article I ) among the
Assets.
If
Buyer and Sellers agree upon an allocation, then both parties
agree to file Federal Form 8594 consistent with such an
agreement. If an agreement cannot be reached prior
to the Closing, the parties shall engage an independent and
mutually acceptable appraiser to perform a valuation of the
Assets. This valuation shall be used in allocating
the Purchase Price. Buyer and Sellers shall use
such allocation for all purposes, including tax and financial
reporting. If, contrary to the intent of the
parties hereto as expressed in this Section 1.7, any taxing
authority makes or proposes an allocation different from that
contemplated in this Section 1.7, Sellers and Buyer shall
cooperate with each other in good faith to contest such taxing
authority’s allocation (or proposed allocation);
provided , however , that, after consultation
with the party adversely affected by such allocation (or
proposed allocation), the other party hereto may file such
protective claims or returns as may reasonably be required to
protect its interest.
ARTICLE
II.
THE CLOSING
2.1
Time and Place of Closing . The closing (the
“Closing”) of the sale and purchase of the Assets
shall be held in the offices of Sellers, 350 WillowBrook
Office Park, Fairport, New York 14450 on the third business
day following the satisfaction or waiver of all of the
conditions to closing set forth in Articles VII and VIII, or
at such other time and place as shall be mutually agreed upon
by the parties (the “Closing
Date”). Closing shall be deemed effective at
11:59 p.m. local time on the Closing Date.
2.2
Deliveries by Sellers . At the Closing,
Sellers, as appropriate, will deliver to Buyer the following,
each of which shall be in form and substance satisfactory to
the parties hereto:
(a) Bills
of sale, general warranty deeds, assignments and other
instruments of transfer and documents as shall be appropriate
to carry out the intent of this Agreement and sufficient to
sell, assign, convey and transfer good and valid (or in the
case of real property, good and marketable) title to the
Assets to Buyer, subject to Permitted
Encumbrances;
(b) Assignments
of Sellers domain names relating to the
Newspaper;
(c) Any
consents to assignments from third parties obtained by Sellers
relating to the Material Contracts that require such consent
as shown on Schedule 3.9 hereto, as well as any other
consents obtained by Sellers;
(d) Receipt
for the Purchase Price;
(e) Transition
services agreements among Sellers and Buyer executed by
Sellers, which, among other things, provide for Sellers to
continue to provide certain services with respect to the
Newspaper for various periods of time after the Closing Date,
substantially in accordance with Schedule 2.2(e) , as
set forth in such agreements (the “Transition Services
Agreements”);
(f) A
non-competition and non-solicitation agreement between Sellers
and Buyer executed by Sellers substantially in the form set
forth in Schedule 2.2(f) (the “Non-Competition
Agreement”);
(g) Certificates,
dated the Closing Date, of an appropriate officer of each
Seller as to approval of such Seller relating to this
Agreement and the transactions contemplated
hereby;
(h) Certificates
of an appropriate officer of each Seller certifying the
fulfillment of the conditions set forth in Sections 8.1(a) and
8.1(b) below;
(i) A
certificate of an appropriate officer of each Seller as to
that Seller’s status as a non-foreign entity;
and
(j) Such
other certificates, instruments and documents as are required
to be delivered by Sellers pursuant to the terms of this
Agreement.
2.3
Deliveries by Buyer . At the Closing, Buyer
will deliver to Sellers the following, each of which shall be
in form and substance satisfactory to the parties
hereto:
(a) Funds
equal to the Purchase Price in such manner as described in
Section 1.5 above;
(b) An
instrument of assumption pursuant to which Buyer shall assume
the Assumed Liabilities as provided in Section 1.3
hereof;
(c) The
Transition Services Agreements, executed by
Buyer;
(d) The
Non-Competition Agreement, executed by Buyer;
(e) A
Publisher’s Agreement, effective on the Closing Date
with a termination date of December 31, 2012, between the
Newspaper and USA WEEKEND and on the same economic terms in
effect between the Newspaper and USA WEEKEND immediately prior
to Closing, in substantially the form attached hereto as
Exhibit 2.3(f) ;
(f) Certificate
dated the Closing Date, of the Secretary of Buyer as to
approval of Buyer relating to this Agreement and the
transactions contemplated hereby;
(g) Certificate
of an officer of Buyer certifying the fulfillment of the
conditions set forth in Sections 7.1(a) and 7.1(b) below;
and
(h) Such
other certificates, instruments and documents as are required
to be delivered by Buyer pursuant to the terms of this
Agreement.
ARTICLE
III.
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers,
as appropriate, represent and warrant to Buyer as
follows:
3.1
Organization; Qualification . Each Seller is
a corporation validly existing and in good standing under the
laws of its state of incorporation. The applicable
Seller has the full power and authority to own and operate the
Assets (excluding the Mastheads) and carry on the business
operations of the Newspaper as such operations are now being
conducted. The applicable Seller has the full power
and authority to own the Mastheads. Each Seller
(a) is duly qualified to do business and in good
standing, and is duly licensed, authorized or qualified to
transact business in each jurisdiction in which the ownership
or lease of real property or the conduct of its business
requires it to be so qualified, and (b) has all
government licenses, Permits, approvals and other
authorizations necessary to own its properties and assets and
carry on its business as it is now being conducted, except
such licenses, Permits, approvals and other authorizations
described in clauses (a) and (b) the lack of which would not
have a Material Adverse Effect (as defined in Section
3.4).
3.2
Authority Relative to this Agreement . Each
Seller has the full power, authority and legal right to
execute and deliver this Agreement and to consummate the
transactions and perform its obligations as contemplated
hereby.
The
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly
authorized by all necessary action, and this Agreement has been
duly and validly executed and delivered by each Seller and,
assuming due authorization, execution and delivery by Buyer,
constitutes a legal, valid and binding obligation of such Seller
enforceable against such Seller in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency or
similar law affecting the rights of creditors
generally.
3.3
Financial Statements . Schedule 3.3
sets forth (a) the unaudited financial statements of the
Newspaper for the fiscal year ended December 31, 2006 and (b)
unaudited financial statements for the period through March
4, 2007 (the “Balance Sheet Date”) (the financial
statements referred to in clauses (a) and (b) being
“Financial Statements”). The
representations and warranties in this Section 3.3 are
qualified by the pro forma adjustments which were made in the
Financial Statements pursuant to adjustments shown on
Schedule 3.3 furnished to Buyer, including: (x)
pension plan expense was eliminated, (y) newsprint expense
was adjusted to approximate market price, and
(z) intercompany allocations for the Sellers News
Service have been eliminated. The Financial
Statements fairly present in all material respects the
financial position of the Newspaper and the results of
operations of the Newspaper as at and for the periods covered
thereby and have been prepared in conformity with Sellers
historical accounting practices which reflect accrual basis
accounting and are in accordance with generally accepted
accounting principles, except as otherwise noted therein or
as set forth on Schedule 1.6(c) . No
material adjustments of the Financial Statements are required
for a fair presentation of the results of operations and
financial position of the Newspaper on an accrual
basis. Except as set forth on Schedule 3.3
, the Financial Statements are correct and complete in
accordance with the books and records regularly maintained by
the Newspaper which reflect accrual basis
accounting. The Financial Statements fairly
present the results of operations and financial position of
the Newspaper as of the dates and for the periods set forth
therein. Sellers shall deliver on the Closing Date
to Buyer a schedule of the Newspaper’s outstanding
accounts receivable as of the Closing Date. All
such accounts receivable have arisen in the ordinary course
of business and represent bona fide indebtedness incurred by
the applicable account debtor and have been properly adjusted
for bankrupt and other uncollectible
accounts. Assuming reasonable collection efforts
by Buyer, Sellers have no reason to believe that such
accounts receivable would not be collectible (net of Sellers
reserves for uncollectible receivables established by Sellers
in the ordinary course of its business consistent with past
practice). Sellers make no representations,
however, about the future business or financial prospects of
the Newspaper for Buyer’s intended
purposes.
3.4
Business Since the Balance Sheet Date
. Except as set forth on Schedule 3.15 ,
since the Balance Sheet Date, the business of the Newspaper
has been conducted in the ordinary course of business and in
substantially the same manner as it was before the Balance
Sheet Date. Since the Balance Sheet Date, there has
been no change in the business, condition (financial or
otherwise), properties or operations of the Newspaper or other
event or occurrence which has had or would reasonably be
expected to have a material adverse effect on the business,
operations, properties or condition (financial or otherwise)
of the Newspaper taken as a whole (“Material Adverse
Effect”) as of the Closing Date.
3.5
No Defaults .
(a) The
execution, delivery and performance of this Agreement by
Sellers will
not
(i) conflict with any provision of the Certificates of
Incorporation or Bylaws of any Seller, (ii) result in a
default (or give rise to any right of termination,
cancellation or acceleration), with notice or passage of time
or both, under or conflict with any of the terms, conditions
or provisions of any Material Contract (as defined in Section
3.9), note, bond, mortgage or other instrument, obligation or
agreement relating to the business of the Newspaper or to
which any of the Assets may be subject, and which default or
conflict, singly or in the aggregate, would or would
reasonably be expected to have a Material Adverse Effect,
(iii) violate any law, statute, rule, regulation, order,
injunction or decree of any federal, state or local
governmental authority or agency applicable to Seller or any
of the Assets, or (iv) result in the creation or
imposition of any Lien of any nature whatsoever on any of the
Assets.
(b) Except
for the required consents with respect to the contracts
referred to in Section 3.9 and the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the “Hart-Scott-Rodino Act”), Sellers are
not required to submit any notice, report or other filing
with, or obtain any consent, approval or waiver from, any
governmental or regulatory authority or instrumentality or any
other third party in connection with the execution, delivery
or performance of this Agreement by Sellers or the
consummation of the transactions contemplated hereby, except
where failure to give such notice, report or other filing, or
to obtain such consent, approval or waiver would have no, and
would not be reasonably expected to have a, Material Adverse
Effect.
3.6
Undisclosed Liabilities . No Seller has any
obligation or liability to be reflected or reserved against in
any of the Financial Statements which is not fully reflected
or reserved against in such Financial Statements except for
liabilities which have arisen after the Balance Sheet Date in
the ordinary course of business.
3.7
Licenses and Authorizations . All licenses,
Permits and authorizations required to own the Assets and to
conduct the business of the Newspaper are held by Sellers are
in full force and effect with no violations of any of them
having occurred, other than violations that would not have,
and would be reasonably expected to have, a Material Adverse
Effect. All such material licenses, Permits and
Authorizations are listed in Schedule 3.
7. Except as disclosed in Schedule 3.12
, no proceeding is pending or, to the knowledge of Sellers,
threatened in writing, seeking the revocation or limitation of
any such license, Permit or other authorization.
3.8
Condition and Adequacy of the Assets; Title
. The tangible assets included in the Assets are in
adequate operating condition and repair, ordinary wear and
tear excepted, and are adequate and suitable in accordance
with general industry practices and applicable law for the
purposes for which they are currently used. Each
Seller has good and marketable title to all of the Assets
which it purports to own free and clear of all security
interests, mortgages, conditional sales agreements, charges,
liens and other encumbrances (“Liens”), except for
Permitted Encumbrances . All inventory of each
Seller included in the Assets is useful in the ordinary course
of such Seller’s business. Without limiting
the generality of any of the foregoing, except as indicated on
Schedule 3.8 , no Seller uses furniture, fixtures,
equipment, inventory or supplies in connection with the
operation of the Newspaper which it does not
own. Except for the Excluded Assets, the Assets
are, in the aggregate, all of the assets which are necessary
to operate the Newspaper in the manner in which the Newspaper
was operated during the 12-month period ending on the Balance
Sheet Date and since such time, except for additions thereto
and deletions therefrom in the ordinary course of business and
consistent with past practice.
3.9
Contracts and Arrangements . As used herein,
“Material Contracts” means all of the following
contracts, agreements and arrangements (written or oral)
included in the Assets involving annual consideration of more
than $25,000:
(a) Sales
agency or advertising representation contracts;
(b) Contracts
for the future construction or purchase of capital
improvements, purchase of materials, supplies or equipment, or
for the sale of assets;
(c) Consulting
contracts, employment agreements or freelance
agreements;
(d) Licenses
or agreements under which Seller is authorized to publish
materials supplied by others in future issues of the
Newspaper;
(e) Leases
of real and personal property (collectively, the
“Leases”); and
(f) Any
other contract or lease not made in the usual and ordinary
course of business, or not terminable by Sellers without
liability upon not more than 90 days’ written
notice.
All
of the Material Contracts are listed on Schedule 3.9
. Schedule 3.9 specifies those Material
Contracts, the assignment of which requires the consent of a
third party. Provided that any requisite consent to
the assignment of Material Contracts to Buyer is obtained, to
the knowledge of Sellers, each of the contracts and leases
which is assigned to and assumed by Buyer on the Closing Date
is valid and in full force and effect. There is no
existing default, event of default or other event under such
Material Contracts which, with or without notice or lapse of
time or both, would constitute a default or an event of
default by a Seller under any su
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