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ASSET PURCHASE AGREEMENT
by and among
GATEHOUSE MEDIA, INC.,
GATEHOUSE MEDIA OPERATING, INC.,
MORRIS PUBLISHING GROUP, LLC,
MPG ALLEGAN PROPERTY, LLC,
BROADCASTER PRESS, INC.,
MPG HOLLAND PROPERTY, LLC,
THE OAK RIDGER, LLC,
YANKTON PRINTING COMPANY
AND
MORRIS COMMUNICATIONS COMPANY, LLC
Effective as of October 23, 2007
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TABLE OF CONTENTS
ARTICLE I. SALE OF ACQUIRED ASSETS AND TERMS OF
PAYMENT
1.1 Transfer
of Acquired Assets
1.2 Excluded
Assets
1.3 Liabilities.
1.4 Purchase
Price; Payment of Purchase Price
1.5 Manner
of Payment
1.6 Adjustments
1.7 Allocation
of Purchase Price
2.1 Time
and Place of Closing
2.2 Deliveries
by Seller
2.3 Deliveries
by Buyer
2.4 Taking
of Necessary Action; Further Action 16
3.1 Organization;
Qualification
3.2 Authority
Relative to this Agreement
3.3 Income
Statements
3.4 Business
Since the Income Statement Date
3.5 Non-Contravention;
No Defaults
3.6 Undisclosed
Liabilities
3.7 Licenses
and Authorizations
3.8 Condition
and Adequacy of the Acquired Assets; Title
3.9 Contracts
and Arrangements
3.10 Real
Property
3.11 Intellectual
Property
3.12 Litigation
and Compliance with Laws
3.13 Labor
Relations and Employee Issues; Employee Benefit Programs;
ERISA
3.14 INTENTIONALLY
OMITTED
3.15 Changes
3.16 Environmental
Matters
3.17 INTENTIONALLY
OMITTED
3.18 Insurance
3.19 Taxes
3.20 Investment
Representations
3.21 Brokers
4.1 Organization
4.2 Authority
Relative to this Agreement
4.3 No
Defaults
4.4 Non-Contravention;
No Defaults
4.5
Financial Capability
4.6 Reports
and Financial Statements
4.7 Absence
of Certain Changes or Events
4.8 Brokers
5.1 Maintenance
of Business
5.2 Organization;
Goodwill
5.3 Access
to Facilities, Files and Records
5.4 Representations
and Warranties
5.5 Corporate
Action
5.6 Consents
5.7 Confidential
Information
5.8 Consummation
of Agreement
5.9 Notice
of Proceedings
5.10 Interim
Financial Statements
5.11 Taxes
5.12 Audited
Financial Statements; Interim Financial
Statements
5.13 Title
Matters
5.14 Buyer's
Representations and Warranties
5.15 Corporate
Action
5.16 Consummation
of Agreement
5.17 Notice
of Proceedings
5.18 No
Solicitation; Acquistion Proposals
5.19 Phase
I Environmental Site Accessment
5.20 Bulk
Transfer Laws
6.1 No
Securities Transactions
7.1 Representations,
Warranties and Covenants
7.2 Proceedings.
7.3 Hart-Scott-Rodino.
8.1 Representations,
Warranties and Covenants
8.2 Proceedings
8.3 Hart-Scott-Rodino.
8.4 Consents.
8.5 Title
Insurance
8.6 Real
Property Phase I Reports
8.7 Landlord
Estoppel Certificates
9.2 Indemnification
of Buyer and GateHouse Media
9.3 Indemnification
of Sellers and Morris Communications
9.4 Notice
of Claims
9.5 Defense
of Third Party Claims
10.1 Risk
of Loss
10.2 Termination
of Agreement
10.3 Liabilities
Upon Termination
10.4 Expenses
10.5 Employees
and Employee Benefits
10.6 Further
Assurances and Consents
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 Entire
Agreement; Amendments
10.19
Guaranties
10.20
Knowledge
ii
. List of Schedules (Delivered
Concurrently)
Schedule
1.1(f) Names of Publications
Schedule
1.2(h) Excluded Assets
Schedule
1.6(a) Sellers Accounting Practices
Schedule
3.3 Income
Statements
Schedule
3.4 Business Since Income
Statement Date
Schedule
3.5 Non-Contravention; No
Defaults
Schedule
3.7 Material
Permits
Schedule
3.8 Condition and Adequacy of
the Acquired Assets; Title
Schedule
3.9 Material
Contracts
Schedule
3.10(a) Owned Real Property
Schedule
3.10(b) Leased Real Property
Schedule
3.10(f) Flood Plains
Schedule
3.10(g) Facilities
Schedule
3.10(h) Improvements
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
3.15 Changes Since
Income Statement Date
Schedule
3.16 Environmental
Matters
Schedule
3.18 Insurance
Schedule
3.19 Taxes
Schedule
4.4 Non-Contravention;
No Defaults
Schedule
5.1 Maintenance
of Business
Exhibits
Exhibit
A Publications
iii
ASSET PURCHASE AGREEMENT
THIS
ASSET PURCHASE AGREEMENT (this “Agreement”), is
made effective as of _____ , 2007, by and among GateHouse
Media Operating, Inc., a Delaware corporation
(“Buyer”), GateHouse Media, Inc., a Delaware
corporation (“GateHouse Media”), Morris
Communications Company LLC, a Georgia limited liability
company (“Morris Communications”), Morris
Publishing Group, LLC, a Georgia limited liability company
(“Morris Publishing”), MPG Allegan Property, LLC,
a Georgia limited liability company (“MPG
Allegan”), Broadcaster Press, Inc., a South Dakota
corporation (“Broadcaster”), MPG Holland Property,
LLC, a Georgia limited liability company (“MPG
Holland”), The Oak Ridger, LLC, a Tennessee limited
liability company (“Oak Ridger”) and Yankton
Printing Company, a South Dakota corporation
(“Yankton” and collectively, with Morris
Publishing, MPG Allegan, Broadcaster, MPG Holland and Oak
Ridger, are referred to herein as “Sellers” and
each individually as a “Seller”. As
used herein, and as the context requires, the term
“Sellers” shall also refer to
“Seller”).
WHEREAS,
Sellers operate businesses which own and publish various daily
and non-daily publications which
are distributed in South Dakota,
Florida, Kansas, Michigan, Missouri, Nebraska, Oklahoma and
Tennessee, together with all related publications (as set
forth on Exhibit A hereto) and services and assets and
facilities, all related domain names, with related HTML design
and data and all of Sellers’ rights to prepare, publish,
sell and distribute any of the foregoing in all languages
(collectively, the “Publications”) and the
mastheads and certain other intellectual property associated
with the Publications (collectively, the
“Mastheads”, which term is more particularly
defined in Section 1.1);
WHEREAS,
Sellers operate the Publications from facilities in South
Dakota, Florida, Kansas, Michigan, Missouri, Nebraska,
Oklahoma and Tennessee which are owned or leased by Sellers,
together with all printing sites, buildings, offices,
structures, residences, fixtures, and improvements, including
all real property, whether developed or undeveloped, owned or
leased by Sellers or associated with any of the foregoing
(collectively, the “Facilities”); and
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WHEREAS,
Sellers desire to sell and Buyer desires to purchase
substantially all of the assets related to the operation,
publication and distribution of the Publications 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 of the parties to
the other in this Agreement, the parties have agreed to
consummate the sale of the Publications and the Mastheads on
the terms contained herein.
ARTICLE I.
SALE OF ACQUIRED ASSETS AND TERMS OF
PAYMENT
1.1
Transfer of Acquired 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 Publications 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, transferred and delivered to
Buyer, and Buyer will purchase and accept from Sellers, the
Publications’ “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
“Acquired Assets.” The Acquired Assets
include, without limitation, the following:
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(a) The
Owned Real Property (as defined in Section
3.10(a));
(b) All
Real Property Leases for the Leased Real Property (as such
terms are defined in Section 3.9 and Section 3.10(b)
respectively);
(c) All
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
Publications; all promotional materials, inserts, and direct
mail materials owned by Sellers to the extent they relate
primarily to the Publications; all stationery, supplies,
purchase orders, forms, labels, shipping materials and
catalogs owned by Sellers to the extent they relate primarily
to the Publications; and all lists owned by Sellers of
contributors, authors, correspondents, reviewers,
photographers, illustrators and editors who contribute or have
contributed to the Publications; all other inventory and
supplies, and other assets and equipment relating primarily to
the Publications;
(d) All
contracts, agreements and similar documents that relate
primarily to the operation of the Publications 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 Publications, including without limitation
those described in Schedule 3.9 ;
(e) All
of Sellers’ right, title and interest in and to all
licenses, Permits (as defined in Section 3.16), variances,
franchises, certifications, approvals and other governmental
authorizations relating primarily to the Publications,
together with any renewals, extensions or modifications
thereof and additions thereto;
(f) All
publishable materials of any nature primarily used by the
Publications, the names used by each Publication
including but not limited to those set forth on Schedule
1.1(f) , all copyrights, patents,
trademarks, service marks, logotypes and trade names
(including registrations and applications for registration of
any of the foregoing), domain names (including HTML design and
data related to said 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 primarily
in connection with the operation, publication and distribution
of the Publications or primarily in connection with the
ownership of any of the Acquired Assets (collectively referred
to herein as the “Rights”), it being understood
that computers and servers located at Sellers’ home
office in Augusta, Georgia, and
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software
developed by Sellers for use beyond the Publications are not
used primarily by the Publications and are not
“Rights”;
(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 Publications, together with all records
relating thereto;
(h) All
of the Publications’ files and other records, in
whatever form is reasonably practicable, relating to the
operation of the Publications, including without limitation
all of the historical materials relating to the
Publications’ advertising, circulation and distribution,
all circulation, subscriber, delivery and mailing lists and
carrier routes maintained by Sellers, 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 disks of computer data
owned by Sellers, rate cards, verification cards, advertising
insertion orders, specimen copies of all advertisements
carried in the Publications, and copies of current price
lists, discount lists, catalogs, public relations materials,
sales correspondence, call reports, call books, advertiser
lists and sales promotion lists, in each case to the extent
they relate primarily to the Publications;
(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, distributors or vendors of
products, materials or equipments, or components thereof) to
the extent they relate to the Publications, which are owned by
Sellers and relate to the period of time following the
Closing;
(j) All
of Sellers’ libraries of back and current issues of the
Publications, in whatever medium;
(k) All
of Sellers’ goodwill in and going concern value of the
Publications;
(l) Any
prepaid Taxes of Sellers which are included as Acquired Assets
on the Closing Date Balance Sheet (as defined in Section
1.6(c));
(m) All
of Sellers’ right, title and interest in and to any
non-solicitation, non-competition and non-disclosure
agreements to the extent benefiting the
Publications;
(n) The
bank accounts and the cash contained therein as of the Closing
Date used as operating accounts for the Publications, a list
of which shall be provided by Sellers to Buyer prior to
Closing and the balances of which shall be included on the
Closing Date Balance Sheet; and
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(o) Without
duplication, all assets relating primarily to the operations
of the Publications reflected in the Closing Date Balance
Sheet.
1.2
Excluded Assets .
The following assets relating to the business of
operating, publishing and distributing the Publications 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 Benefit Programs (as defined in Section
3.13(g));
(d) The
right to use the “Morris” and “Morris
Publishing” 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
Publications by or through Morris Communications, or any of
its Affiliates (as defined below), including but not limited
to any Employee Benefit Program (as defined in Section
3.13(g));
(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 Publications on or
prior to the Closing, exclusive of the rights granted in
Section 1.1(g) ;
(f) (i)
the franchise to be a limited liability company or
corporation; (ii) the organizational documents (including
articles or certificate of formation or bylaws (as
applicable)); (iii) the minute books; (iv) the stock and/or
membership interest ledgers and all stock and/or
membership certificates; (v) the qualifications to transact
business as a foreign entity; (vi) the arrangements with
registered agents relating to foreign qualifications, taxpayer
and other identification numbers; (vii) other records or
similar documents relating to the organization, maintenance
and existence of Sellers as limited liability companies and/or
corporations; and (vii) any other corporate records relating
to the limited liability company and/or corporate organization
or capitalization (as applicable) of Sellers;
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(g) All
items that are located at the headquarters offices of Morris
Communications or otherwise not located at the Real Property
(as defined in Section 3.10) included in the Acquired Assets
except for the data relating to the Publications described in
Section 1.1(h) stored on Sellers’ server at the
headquarters offices, copies of which will be delivered or
transmitted to Buyer in whatever form is reasonably
practicable for the parties;
(h) Any
right, property or asset described in Schedule 1.2(h) ,
including the property and rights which are shared with any
Affiliates of any Seller and not used primarily in the
businesses of the Publications;
(i) Any
assets or properties of Sellers, tangible or intangible, of
every kind and description which are not used primarily in
connection with the businesses and operation of the
Publications and are not included in the Closing Date Balance
Sheet;
(j) Sellers’
rights under this Agreement;
(k) Cornerstone
Property, 2.86 acres (Block 69, Parcel B) at corner of Highway
50 and Burleight Street, Yankton, Yankton County, South
Dakota;
(l) All
tax sharing agreements and management agreements with Morris
Communications; and
(m) All
equity interests in third parties, including but not limited
to equity interests of any Seller in any Affiliate of Morris
Communications;
(n) For
purposes of this Agreement, “Affiliate” of a
person means any other person that directly or indirectly
controls, is controlled by, or is under common control with,
such person. The term “control”,
“controlled by” and “under common control
with”, as used with respect to any person, means the
possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such
person, whether through the ownership of securities, by
contract or otherwise.
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1.3
Liabilities .
(a) The
Acquired 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 Section 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 Publications 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 (as defined Section
1.6(c) below) (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 the Publications included on
the Closing Date Balance Sheet, which shall include paid in
advance subscriptions and accrued liabilities of Sellers to
employees of Sellers 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, any
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:
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(i) any
liability or obligation arising prior to the Closing under
any contract not described in Section 1.1(d)
above;
(ii) any
liability under any contract of insurance or relating to any
Excluded Assets;
(iii) any
liability to any of Sellers’ 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, but not limited to, any Employee Benefit
Programs, and any unemployment or workers compensation
claims;
(iv) any
liability arising out of any termination by any of Sellers of
the employment of any employee, consultant or independent
contractor of any of Sellers 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 Publications 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 (A) any Taxes (other than Taxes of Sellers
assumed by Buyer pursuant to Section 1.3(a)(iii) above) with
respect to the Publications or the Acquired 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)), (B) except as allocated in Section 10.4, any Taxes
imposed on the transfer of the Acquired Assets or the
Publications on or prior to the Closing Date and, (C) any
estate or gift Taxes imposed with respect to Sellers, the
Acquired Assets or the Publications on or prior to the Closing
Date; provided, however, that Transfer Taxes (as defined in
Section 10.4) on the transfer of the Acquired 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);
(viii) any
and all obligations, liabilities and/or commitments, including
but not limited to obligations, liabilities and/or commitments
pursuant to any Environmental Law (as defined in Section
3.16), arising out of or related to facts, circumstances,
conditions or
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events
arising from or related to the Real Property (as defined in
Section 3.10) and/or the operation of the Publications thereon
that occurred on or prior to the Closing Date;
and
(ix) the
Bank Liens (as defined in Section 3.10(l)).
1.4
Purchase Price; Payment of Purchase Price
. Subject to the conditions contained
in this Agreement, and in consideration of the sale of the Acquired
Assets as set forth herein, Buyer agrees to pay the Purchase Price
to Sellers, at Closing, in an amount equal to One-Hundred Fifteen
Million dollars ($115,000,000.00) (the “Base Purchase
Price”), as adjusted by the Closing Date Working Capital
Adjustment pursuant to Section 1.6 below (the “Purchase
Price”).
The
Base Purchase Price will be payable as follows: (a) One
Hundred Five Million Dollars ($105,000,000) in cash (the
“Cash Portion”) and (b) the balance by GateHouse
Media issuing a promissory note (the “Note”) in
favor of Sellers (or their designee) in the principal amount
of Ten Million Dollars ($10,000,000). The Note
shall have a one year term; accrue interest on the unpaid
balance at the rate of eight percent (8%) per annum (which
interest shall be payable quarterly); and may be prepaid at
any time without penalty. The Note will also
provide that except pursuant to corporate credit facilities,
finance leases and purchase money security interests,
GateHouse Media will not grant any third party a position
senior to that of Buyer as the Note holder. The
form of the Note, which shall be in accordance with the above,
unless agreed otherwise, will be agreed upon by Sellers and
Buyer prior to the Closing Date.
1.5
Manner of Payment .
The Cash Portion shall be paid to Sellers on the
Closing Date in immediately available funds by wire transfer to a
bank account or bank accounts designated by Sellers in writing at
least two (2) business days prior to the Closing
Date. At the Closing, GateHouse Media shall deliver the
Note to Sellers.
1.6
Adjustments .
(a)
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 Publications
on or prior to the Closing Date. Buyer shall be
entitled to all
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income
earned and be responsible for all expenses incurred in
connection with the business and operation of the Publications
after the Closing Date. The Purchase Price is
subject to a further adjustment for working capital (the
“Closing Date Working Capital Adjustment”) as
determined in accordance with Section 1.6(c)
below. The Closing Date Working Capital Adjustment
shall be an amount, as of the Closing Date, equal to the
dollar value of the current assets of the Publications
less the dollar value of the current liabilities of the
Publications (including, but not limited to, accounts payable,
prepaid advertising, unearned subscription revenue, accrued
salary, payroll and wages, vacation and sick pay, and similar
items with respect to New Employees (as defined in Section
10.5), and net of Sellers’ reserves for uncollectible
receivables established by Sellers in the ordinary course of
business consistent with past practice, in each case only to
the extent included in the Acquired Assets or the Assumed
Liabilities and as set forth in the Closing Date Balance
Sheet).
In
computing the Closing Date Working Capital Adjustment,
components of the Closing Date Balance Sheet (as defined in
Section 1.6(c)) shall be derived from subsidiary ledgers
maintained in accordance with Sellers’ historical
accounting practices which reflect accrual basis accounting
and are utilized by Morris Publishing in the preparation of
consolidated financial statements in accordance with generally
accepted accounting principles in the United States
(“GAAP”). The Closing Date Balance Sheet shall be
prepared in a manner consistent with the notes to the Working
Capital History set forth on Schedule 1.6(a) , each
line item of which shall reflect components derived from and
prepared consistently with the methods used in the preparation
of Morris Publishing’s balance sheets which methods are
used by Sellers in the ordinary cause of business consistent
with past practice and are in accordance with GAAP
(“Sellers Accounting Practices”). All
intercompany and Affiliate receivables or liabilities will be
treated as shareholders’ equity and will be excluded
from the Closing Date Working Capital Adjustment and will not
be assumed by Buyer. All prepaid advertising and
unearned subscription revenue 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
Publications, 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
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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 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 item of income or expense 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
Cash Portion of the Base Purchase Price on the basis of the
then most recently available financial statements of the
Publications, which shall be reflected on a preliminary
balance sheet for the Publications (the “Preliminary
Balance Sheet”) prepared by Sellers in accordance with
Sellers Accounting Practices. Within ninety
(90) days after the Closing Date, Sellers will prepare an
adjusted balance sheet for the Publications (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
Buyer’s confirmation of the calculations
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 one-hundred fifty (150) 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
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such
amount is not in dispute. If Buyer does not notify
Sellers within forty-five (45) 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 the
forty-five (45) day period of receiving the Closing Date
Balance Sheet, and if such dispute cannot be resolved by the
parties within thirty (30) days thereafter, such dispute shall
be referred to a mutually satisfactory independent public
accounting firm of national stature which has not been
employed by any of the parties herein for the two (2) years
preceding the Closing Date. If Buyer and Sellers
cannot agree upon an independent public accounting firm to
perform the valuation of the Acquired Assets, then Buyer and
Sellers shall each select an independent public accounting
firm which firms shall select and engage an independent public
accounting firm to perform and prepare a written determination
of the adjustments or dispute between the parties. The
determination of such independent accounting 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 ten (10) days of such
determination. The fees of such firm shall be
shared equally by Morris Publishing and Buyer.
1.7
Allocation of Purchase Price
. Buyer and Sellers shall reasonably cooperate and, at
the request of the other party, exchange information, including
copies of IRS Form 8594, regarding allocation of the Purchase Price
to the Acquired Assets. Notwithstanding anything herein to the
contrary, Buyer and Sellers agree that the allocation of the
Purchase Price attributable to the Real Property shall be
determined as follows. As soon as practicable after the
date of this Agreement but in no event later than ten (10) days
after the date of this Agreement, Buyer and Sellers shall agree,
and Sellers shall engage an independent and mutually acceptable
appraiser to perform and prepare a written valuation of the Real
Property. The cost of the valuation prepared by an
agreed appraiser shall be borne by Buyer. If Buyer
and Sellers cannot agree upon an independent appraiser to perform
the valuation of the Real Property, then Buyer and Sellers shall
each select an independent appraiser which appraisers shall select
and engage an independent appraiser to perform and prepare a
written valuation of the Real Property. In such
event, the cost of the valuation shall be borne equally between
Buyer and Sellers. The
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written
valuation shall be binding on and used by Buyer and Sellers in
allocating the Purchase Price to the Real
Property. The entire portion of the Purchase Price
allocated to the Real Property shall be paid from the Cash
Portion of the Purchase Price.
ARTICLE II.
THE CLOSING
2.1
Time and Place of Closing . The
closing (the “Closing”) of the sale and purchase of the
Acquired Assets shall be held in the offices of Sellers’
counsel, Hull, Towill, Norman, Barrett & Salley, on the third
(3 rd ) 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 Seller .
At the Closing, Sellers, will deliver to Buyer the
following, each of which shall be in form and substance
satisfactory to the parties hereto:
(a) Bills
of sale, special 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
Acquired Assets to Buyer, subject only to Permitted
Encumbrances;
(b) Assignments
of all Sellers’ domain names and other Rights relating
to the Publications;
(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 , as well as any other
consents obtained by Sellers;
(d) Receipt
for the Purchase Price;
(e) If
agreed upon prior to Closing, commercially reasonable
transition services agreements among Sellers and Buyer
executed by Sellers, in form and substance mutually agreeable
to Sellers and Buyer, which, among other things, shall provide
for Sellers to continue to provide certain services with
respect to the Publications for various periods of time after
the Closing Date (the “Transition Services
Agreements”);
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(f) Non-competition
and non-solicitation agreements among Morris Communications,
Sellers and Buyer executed by Morris Communications and
Sellers in form and substance mutually agreeable to Sellers
and Buyer (the “Non-Competition
Agreements”). The Non-Competition Agreements
shall provide that, among other things, until the fifth
anniversary (or, with respect to non-newspaper products, the
third anniversary) of the Closing Date, none of Morris
Communications or Sellers will, whether as a partner,
principal, stockholder, member of in any other equity
investment or profits interest capacity, directly or
indirectly, either alone or in concert with others, (i)
establish or launch, be connected with or and or otherwise
assist any daily, bi-weekly or weekly newspaper or other
publication, either in print or online, which is primarily
targeted at and is primarily intended to serve any portion or
portions of or any or all of the counties which any of the
Publications currently serve (collectively, the
“Territory”), or (ii) acquire any equity or
profits or other financial interest in any such daily,
bi-weekly or weekly newspaper or other publication (other than
a non-controlling or non-management interest of any publicly
owned company), Notwithstanding anything to the contrary
contained herein, the foregoing restrictions in
clauses (i)–(ii) will not apply with respect to (A) any
of Morris Communications or Sellers’ businesses (other
than the Publications) as in effect (and to the same scope and
extent) as of the date hereof, (B) any “national”
publications not intended to primarily or exclusively serve
any or all of the Territory, (C) non-newspaper publications
focused on the metropolitan areas of Kansas City, Kansas or
Missouri; Orlando, Florida; Knoxville,
Tennessee; or Wichita, Kansas which do not directly
or indirectly solicit local advertisers within or focused on
the Territory, and (D) new publications similar to existing
(on the date hereof) Morris Communications visitor, niche or
other non-newspaper publications (such as Where, Guest
Informant, Best Read Guides or Skirt Magazines) focused on the
Kansas City, Kansas or Missouri metropolitan area which may
solicit advertisers within such area. For purposes
of the Non-Competition Agreements, “newspapers”
shall include daily and weekly publications, as well as
similar on-line publications, which deal with the general
dissemination of news. In addition, none of Morris
Communications or Sellers will, whether as a partner,
principal, stockholder, member of in any other equity
investment or profits interest capacity, directly or
indirectly, either alone or in concert with others, until the
third anniversary of the Closing Date, recruit or hire (other
than as a result of a general solicitation), or otherwise
solicit for employment, any employees, or former employees of
the Publications hired by Buyer or its
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Affiliates
at the Closing within six (6) months following their
termination of employment with Buyer or its Affiliates
(provided that the restriction in this sentence shall not
apply to any such employees terminated by Buyer or its
Affiliates; and provided further that the restrictions in this
sentence shall only apply until the first anniversary of the
Closing Date with respect to any such employees who
voluntarily leave the employ or Buyer or its Affiliates
without any solicitation, inducement or influence of any type
by Morris Communications or Sellers);
(g) Certificates,
dated as of the Closing Date, of an appropriate officer of
Morris Communications and each Seller as to approval of Morris
Communications and each Seller relating to this Agreement and
the transactions contemplated hereby;
(h) Certificates
of an appropriate officer of Morris Communications and 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 its
status as a non-foreign entity; and
(j) Such
other certificates, instruments and documents as are required
to be delivered by Morris Communications and Sellers pursuant
to the terms of this Agreement or as may be reasonably
requested by Buyer.
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 Cash Portion in such manner as described in
Section 1.5 above;
(b) The
Note, duly executed by GateHouse Media;
(c) An
instrument of assumption pursuant to which Buyer shall assume
the Assumed Liabilities as provided in Section 1.3
hereof
(d) The
Transition Services Agreements, if agreed upon prior to
Closing, executed by Buyer;
(e) The
Non-Competition Agreements, executed by Buyer;
(f) Certificate
dated the Closing Date, of an officer of Buyer and GateHouse
Media as to the approval of Buyer and GateHouse Media relating
to this Agreement and the transactions contemplated
hereby;
(g) Certificate
of an officer of Buyer and GateHouse Media certifying the
fulfillment of the conditions set forth in Sections 7.1(a) and
7.1(b) below; and
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(h) Such
other certificates, instruments and documents as are required
to be delivered by Buyer and GateHouse Media pursuant to the
terms of this Agreement or as may be reasonably requested by
Sellers.
2.4
Taking of Necessary Action; Further Action
. If, at any time after the Closing, any further action is
necessary to carry out the intent or purposes of this Agreement and
to vest Buyer with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of Sellers in
the Acquired Assets and the Publications, Sellers will take all
such lawful and necessary action and execute all such documents or
agreements as may be reasonably requested by Buyer.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLERS AND MORRIS
COMMUNICATIONS
Morris
Communications and Sellers, jointly and severally represent
and warrant to Buyer and GateHouse Media that the
statements contained in this Article III are correct and
complete as of the date of this Agreement and will be correct
and complete as of the Closing Date, except as may be set
forth in the disclosure schedules delivered pursuant
hereto. Disclosure made in a specific section or
subsection of the disclosure schedules shall not be deemed to
have been made with respect to any other section or subsection
herein unless an explicit cross-reference appears in such
disclosure schedule to that effect or such disclosure is
reasonably apparent on its face.
3.1
Organization; Qualification
. Each Seller is duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its respective organization or
incorporation. Each Seller has the full power and
authority to own and operate the Acquired Assets (excluding the
Mastheads) and carry on the business and operations of the
Publications as are now being conducted. Each Seller has
the full power and authority to own the Masthead and the
Rights. 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
related to the Publications requires it to be so
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qualified,
and (b) has all Permits (as defined in Section 3.16)
necessary to own its properties and assets and carry on its
business related to the Publications as it is now being
conducted, except in each case, for any failures to be so
qualified or licensed, or to have such Permits which would
not, individually, or in the aggregate have or be reasonably
expected to have a Material Adverse Effect (as defined in
Section 3.4 hereof). Any applications for the
renewal of any such Permits related to the Publications that
are due prior to the Closing Date have been timely made or
filed by Sellers prior to the Closing Date. No proceeding to
renew, suspend, modify, suspend, revoke, withdraw, terminate
or otherwise limit any such Permit related to the Publications
is pending or threatened.
3.2
Authority Relative to this Agreement
. Each of Morris Communications and 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 Morris Communications and Sellers and,
assuming due authorization, execution and delivery by Buyer and
GateHouse Media, constitutes a legal, valid and binding obligation
of Morris Communications and Sellers enforceable against Morris
Communications and Sellers 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
Income Statements .
Schedule 3.3 sets forth (a) the unaudited consolidated
statement of income (before taxes and interest) of the Publications
for the fiscal year ended December 31, 2006 and (b) unaudited
consolidated statement of income (before taxes and interest) of the
Publications for the period through June 30, 2007 (the
“Income Statement Date”) (the financial statements
referred to in clauses (a) and (b) being “Income
Statements”). Morris Publishing operates (and
reports its financial results) as a single operating
segment. Accordingly, separate balance sheets, income
statements or other financial statements are not maintained for the
Publications as a group, or for any individual
Publication. The Income Statements were
prepared, (i) specifically in contemplation of this
Agreement, (ii) following the guidance of the Securities and
Exchange Commission (the “SEC”) for preparing full
carve-out income
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statements
(but disregarding interest and taxes, as described in
Schedule 3.3), (iii) from Morris Publishing’s
consolidated statements of income, and (iv) on the accrual
basis in accordance with GAAP. Schedule 3.3
also sets forth a true and complete line item reconciliation
of such Income Statements to GAAP and to the requirements for
“carve out” financial statements. The
Income Statements reflect fees for management and shared
services paid to Affiliates and allocations of shared expenses
based upon various factors (such as a percentage of
circulation, advertising revenue, total revenue, newsprint
consumption or employees) deemed by Morris Publishing as of
the Income Statement Date to be appropriate for such expenses,
but no attempt has been made to determine what such costs
would have been if the Publications had been operated on a
stand-alone basis. Subject to the foregoing, the
Income Statements fairly present in all material respects the
results of operations of the Publications (before interest and
taxes) for the periods covered thereby and have been prepared
in conformity with Sellers Accounting
Practices. The Working Capital History has been
prepared in accordance with Sellers Accounting Practices and
consistent with past practice. Sellers shall
deliver on the Closing Date to Buyer a schedule of the
Publications’ outstanding accounts receivable as of the
Closing Date. All such accounts receivable have
arisen in the ordinary course of business consistent with past
practice and represent bona fide indebtedness incurred by the
applicable account debtor and have been properly adjusted for
bankrupt and other uncollectible accounts in accordance with
Sellers Accounting Practices. Assuming reasonable
collection efforts by Buyer, Morris Communications and 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 business consistent with past
practice).
3.4
Business Since the Income Statement Date
. Except as set forth on Schedule
3.4 , since the Income Statement Date, the business of the
Publications has been conducted in the ordinary course of business
and in substantially the same manner as it was before the Income
Statement Date. Since the Income Statement Date, there
has been no change in the business, condition (financial or
otherwise), properties, operations or prospects of the Publications
or other event or occurrence which has had or would reasonably be
expected to have a material adverse effect on the business,
operations, properties, condition or prospects (financial or
otherwise) of the Publications taken as a whole (“Material
Adverse Effect”) as of the Closing Date.
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3.5
Non-Contravention; No Defaults .
(a) Except
as disclosed in Schedule 3.5 , the execution, delivery
and performance of this Agreement by Sellers and Morris
Communications will not (i) conflict with any provision
of the governing documents of Morris Communications or
Sellers, (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 or operation of the Publications or to which any of
the Acquired Assets may be subject, except for any such
defaults which would not, individually or in the aggregate,
have or be reasonably expected to have a Material Adverse
Effect or a material adverse effect on Morris
Communications’ or Sellers’ ability to consummate
the transactions contemplated hereby, (iii) violate any
law, statute, rule, regulation, order, injunction or decree of
any government or any agency, bureau, board, commission,
court, department, officer, official, employee, agent,
political subdivision, tribunal or other instrumentality of
any government, whether federal, state, local or foreign (each
a “Governmental Authority”) applicable to Sellers
or any of the Acquired Assets except for any such violations
which would not individually or in the aggregate, have, or be
reasonably expected to have a Material Adverse Effect or a
material adverse effect on Sellers’ ability to
consummate the transactions contemplated hereby, or
(iv) result in the creation or imposition of any Lien of
any nature whatsoever on any of the Acquired
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”), neither
Morris Communications nor any Seller is required to submit any
notice, report or other filing with, or obtain any consent,
approval or waiver from, any Governmental Authority or any
other third party in connection with the execution, delivery
or performance of this Agreement or the
consummation of the transactions contemplated hereby, except
for any such failure which would not individually or in the
aggregate have or be
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reasonably
expected to have a material adverse effect on Sellers’
ability to consummate the transactions contemplated
hereby.
3.6
Undisclosed Liabilities .
Sellers have no obligation or liability required to be
reflected or reserved against in any of the Income Statements in
accordance with GAAP which is not fully reflected or reserved
against in such Income Statements except for liabilities which have
arisen after the Income Statement Date in the ordinary course of
business consistent with past practice, liabilities disclosed in
the disclosure schedules delivered pursuant hereto, Excluded
Liabilities and Taxes payable to Morris Communications pursuant to
Sellers’ Tax sharing agreement with Morris Communications as
set forth in Section 1.2(l).
3.7
Licenses and Authorizations
. All Permits required to own the
Acquired Assets and to conduct the business of the Publications are
held by Sellers and are in full force and effect with no violations
of any of them having occurred except for any such violations which
would not, individually or in the aggregate, have or be reasonably
expected to have a Material Adverse Effect. All such
material Permits known by Sellers without further inquiry are
listed in Schedule 3.7 . Prior to the Closing,
Sellers shall update Schedule 3. 7 to include all material
Permits. Except as disclosed in Schedule 3.7
, no proceeding is pending or, to the knowledge of Sellers,
threatened, seeking the suspension, revocation, modification,
cancellation or limitation of any such Permit and, to the knowledge
of Morris Communications and Sellers, there is no basis for taking
any such action.
3.8
Condition and Adequacy of the Acquired Assets;
Title . Except as
disclosed in Schedule 3.8 , the material tangible assets
included in the Acquired Assets, taken as a whole, 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 of Sellers has good, valid and
marketable title to all of the Acquired Assets which such Seller
purports to own free and clear of all security interests,
mortgages, conditional sales agreements, charges, liens and other
encumbrances (collectively, the “Liens”), except for
Permitted Encumbrances (as defined in Section 3.10(c)
below). All inventory of Sellers included in the
Acquired Assets is useful in the ordinary course of
business
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and
operation of the Publications and none of which is
slow-moving, obsolete, damaged or
defective. Without limiting the generality of any
of the foregoing, except as indicated on Schedule 3.8 ,
Sellers do not use furniture, fixtures, equipment, inventory
or supplies in connection with the operation of the
Publications which they do not own. Except for the
Excluded Assets or as indicated on Schedule 3.8 , the
Acquired Assets are, in the aggregate, all of the assets which
are necessary to operate the Publications in the manner in
which the Publications were operated during the 12-month
period ending on the Income Statement Date and since such
time, except for additions thereto and deletions therefrom in
the ordinary course of business and consistent with past
practice. No asset primarily used in the
Publications or the Acquired Assets is located in Morris
Communications corporate headquarters or at any location not
included in the Acquired Assets.
3.9
Contracts and Arrangements
. Schedule 3.9 lists the following written,
oral, implied or other agreements, contracts, understandings,
arrangements, instruments, notes, guaranties, indemnities,
representations, warranties, deeds, assignments, powers of
attorney, certificates, purchase orders, work orders, insurance
policies, benefit plans, commitments, covenants, assurances and
undertakings of any nature relating primarily to the Publications
or the Acquired Assets (collectively, the “Material
Contracts”), to which any of Sellers is a party:
(a) Sales
agency or advertising representation contracts involving
annual consideration of more than $100,000;
(b) Contracts
for the future construction or purchase of capital
improvements, purchase of materials, supplies or equipment, or
for the sale of assets involving annual consideration of more
than $100,000;
(c) Consulting
contracts, employment agreements or freelance agreements
involving annual consideration of more than
$100,000;
(d) Licenses
or agreements involving annual consideration of more than
$100,000 under which Sellers are authorized to publish
materials supplied by others in future issues of the
Publications;
(e) Leases
or subleases of Real Property (collectively, the “Real
Property Leases”);
(f) Leases
of any personal property involving annual consideration of
more than $100,000;
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(g) All
contracts which are licenses and sublicenses (in which any of
Sellers is licensor or licensee) involving annual
consideration of more than $100,000;
(h) Any
contract for the purchase or sale of products, or other
personal property, or for the furnishing or receipt of
services, involving annual consideration of more than
$100,000;
(i) Any
contract concerning a partnership or joint
venture;
(j) Any
contract under which Sellers have created, incurred, assumed,
or guaranteed any indebtedness for borrowed money or pursuant
to which Sellers have advanced or loaned money;
(k) Any
contract with any Affiliates of Sellers, or any entity in
which any Affiliates of Sellers holds an equity or any other
economic interest;
(l) Any
contract concerning non-disclosure, confidentiality or
noncompetition;
(m) Any
contract under which the consequences of a default or
termination could have an effect on the business, financial
condition, operations, results of operations, or future
prospects of any of Sellers in an amount in excess of
$100,000; or
(n) Any
other contract (or group of related contracts) the performance
of which involves consideration in excess of $100,000, or
cannot be terminated without penalty, payment or breach on
ninety (90) days or less notice.
Schedule 3.9 also 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, 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 Sellers under any such contract. To
the knowledge of Seller, there is not, under any of the Material
Contracts, any existing default or event of default which, with or
without notice or lapse of time or both would constitute a default
or event of default on the part of any other party
thereto. Prior to the Closing Date, Sellers will make
available to Buyer true, correct and complete copies (or written
summaries of oral contracts) of all of the Material
Contracts.
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3.10
Real Property.
(a) All
of the real property owned by Sellers and used primarily in
the business and operation of the Publications is identified
on Schedule 3.10(a) , together with all buildings,
structures, residences, fixtures, landscaping, utility lines,
roads, driveways, fences, parking areas, contiguous and
adjacent entry rights, construction in progress, and all other
improvements to such real property that are owned by Sellers
or any Affiliate, located in and upon such real property, and
used primarily in the business and operation of the
Publications, together with all rights, privileges, and
easements appurtenant to the foregoing (all of the foregoing
collectively referred to as the “Owned Real
Property”);
(b)
Schedule 3.10(b) sets forth a complete and accurate
list of all leasehold interests of Sellers used primarily in
the business and operation of the Publications (the
“Leased Real Property”). The Leased
Real Property and the Owned Real Property are collectively
referred to as the “Real Property”.
(c) Good
and marketable fee title to each parcel of Owned Real Property
disclosed on Schedule 3.10(a) is owned by Sellers set
forth on such schedule, free and clear of any Liens,
easements, rights-of-way, licenses, use restrictions, claims,
charges, options, rights of first offer, rights of first
refusal or title defects, of any nature whatsoever, except for
Permitted Encumbrances (as defined below). As used
in this Agreement, the term “Permitted
Encumbrances” means (i) Liens for Taxes not yet due and
payable; (ii) Liens for Taxes which are being contested in
good faith and by appropriate proceedings in the amount of
which a reserve has been created and set forth on the Closing
Date Balance Sheet; (iii) carriers’,
warehousemen’s, mechanics’, materialmen’s,
repairmen’s or other like Liens arising in the ordinary
course of business consistent with past practice or which are
being contested in good faith and by appropriate proceedings
in the amount of which a reserve has been created on the
Closing Date Balance Sheet (which reserve under clauses (ii)
or (iii) shall, to the extent Sellers are successful in
finally, definitively and irrevocably contesting any such
Liens and Buyer effectively gets the benefit thereof, will
upon written notice and delivery of satisfactory proof
thereof, be refunded to Sellers); (iv) easements,
rights-of-way, encroachments, licenses, restrictions,
conditions and other similar encumbrances which do not
materially interfere with the current use of any of the Owned
Real Property;
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(d) Each
Seller has a valid and enforceable interest in each parcel of
Leased Real Property disclosed in Schedule 3.10(b) as
being leased by such Seller; and
(e) There
is no action or proceeding pending or, to the knowledge of
Sellers, threatened by any Governmental Authority for
assessment or collection of past-due Taxes, impact fees or
special assessments affecting any part of any Owned Real
Property, and no condemnation or eminent domain proceeding is
pending or, to the knowledge of Sellers, threatened against
any part of any Real Property.
(f) Except
as set forth in Schedule 3.10(f) , none of the Real
Property is located within a flood plain or lakeshore erosion
hazard area, fresh water wetlands as defined under applicable
laws or coastal zone management area protected, regulated or
controlled by any laws.
(g) Except
as set forth in Schedule 3.10(g) (which schedule is as
of the date hereof prepared to Sellers’ knowledge
without further inquiry and which schedule will, prior to
Closing, be updated to Sellers’ knowledge after due
inquiry), (i) the Facilities are in an adequate
state of repair and condition, ordinary wear and tear
excepted; (ii) there are no conditions or defects which pose a
significant danger to life or human health existing upon or in
the Facilities; (iii) there are no structural defects in the
Real Property that would adversely affect the operation of any
of the Facilities as presently conducted; and (iv) there are
no life safety code deficiencies or other survey requirements
which are not subject to waiver or currently the subject of a
plan of correction which is being implemented.
(h) Except
as set forth in Schedule 3.10(h) (which schedule is as
of the date hereof prepared to Sellers’ knowledge
without further inquiry and which schedule will, prior to
Closing, be updated to Sellers’ knowledge after due
inquiry), all buildings, structures, fixtures, building
systems and equipment, and all components thereof, including
the roof, foundation, load-bearing walls and other structural
elements thereof, heating, ventilation, air conditioning,
mechanical, electrical, plumbing and other building systems,
environmental control, remediation and abatement systems,
sewer, storm and waste water systems, irrigation and other
water distribution systems, parking facilities, fire
protection, security and surveillance systems, and
telecommunications, computer, wiring and cable installations,
included in any Real Property (collectively, the
“Improvements”) are in adequate condition and
repair, have been appropriately and routinely maintained, and
are sufficient for the business and operation of the
Publications. Except as set forth in Schedule 3.10(h) ,
to Sellers’ and Morris Communications’
knowledge,
-24-
there
are no structural deficiencies or latent defects affecting any
of the Improvements and there are no facts or conditions
affecting any of the Improvements which would, individually or
in the aggregate, interfere in any respect with the use or
occupancy of the Improvements or any portion thereof in the
operation of the Publications as currently conducted
thereon.
(i) The
current use and occupancy of the Real Property and the
business and operation of the Publications as currently
conducted thereon do not violate any easement, covenant,
condition, restriction or similar provision in any instrument
of record or other unrecorded agreement affecting such Real
Property except for any such violations, which would not,
individually or in the aggregate, have or be reasonably
expected to have a material adverse effect on such Real
Property or Buyer’s intended use of such Real Property
or the continued business and operation of the Publications as
currently conducted therein. Sellers have not received any
notice of violation of any such documents, and to their
knowledge there is no basis for the issuance of any such
notice or the taking of any action for such
violation.
(j) None
of the Improvements encroach on any land which is not included
in the Real Property or on any easement affecting such Leased
Real Property, or violate any building lines or set-back
lines, and there are no encroachments onto any of the Real
Property, or any portion thereof, which encroachment would
interfere with the use or occupancy of such Real Property or
the continued business and operation of the Publications as
currently conducted thereon except for any such violations,
which would not individually or in the aggregate, have or be
reasonably expected to have a material adverse effect on such
Real Property or Buyer’s intended use of such Real
Property or the continued business and operation of the
Publications as currently conducted therein.
(k)
There are no taxes, assessments, fees, charges or similar
costs or expenses imposed by any Governmental Authority,
association or other entity having jurisdiction over the Real
Property with respect to any Real Property or portion thereof
which are delinquent.
(l) Prior
to the Closing, all Liens under all of Sellers’ existing
secured financing arrangements will be released (the
“Bank Liens”). Notwithstanding anything
to the contrary contained herein, the existence of Bank Liens
shall not be considered a breach of any representation or
warranty hereunder, provided such Bank Liens are released at
Closing.
-25-
3.11
Intellectual Property .
Except for the Excluded Assets (as defined in Section
1.2) and any matter relating thereto, all Rights are valid, in good
standing and uncontested. The Rights include, but are
not limited to, those Rights of Sellers relating to the business
and operation of the Publications or related to the ownership of
any of the Acquired Assets as set forth in Schedule 3.11.
Sellers possess adequate rights, licenses or other
authority necessary to use and own the Acquired Assets, to use and
own the Rights and to conduct the business and operations of the
Publications as currently conducted. Sellers have not
received any notice with respect to any alleged infringement or
unlawful or improper use of any Rights owned or alleged to be owned
by others. Neither any Affiliate of Sellers nor any
officer or employee of Sellers has any interest in any Rights, all
of which are free and clear of any Lien. Sellers have no
knowledge of any infringement of any of the Rights.
3.12
Litigation and Compliance with Laws
. Except as set forth on
Schedule 3.12 : (a) the Publications have
not been operating under or subject to, or in default with respect
to, any order, writ, injunction, judgment or decree of any
Governmental Authority; (b) neither Sellers nor any of their
agents or Affiliates has received any inquiry, written or oral,
from any such authority concerning any of the
operations
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