[Federal Register Volume 75, Number 47 (Thursday, March 11, 2010)]
[Notices]
[Pages 11682-11727]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-5095]
[[Page 11681]]
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Part III
Department of Justice
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Antitrust Division
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United States v. Daily Gazette Company and Medianews Group, Inc.;
Proposed Final Judgment and Competitive Impact Statement; Notice
Federal Register / Vol. 75, No. 47 / Thursday, March 11, 2010 /
Notices
[[Page 11682]]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Daily Gazette Company and Medianews Group, Inc.;
Proposed Final Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Stipulation, and Competitive Impact Statement have been filed with the
United States District Court for the Southern District of West Virginia
in United States of America v. Daily Gazette Company and MediaNews
Group, Inc, No. 2:07-cv-0329. On May 22, 2007, the United States filed
a Complaint alleging that the Defendants violated Section 7 of the
Clayton Act, 15 U.S.C. 18, and Sections 1 and 2 of the Sherman Act, 15
U.S.C. 1 & 2, by entering into a May 2004 transaction that consolidated
ownership and control of the only two daily newspapers in Charleston,
West Virginia under the Daily Gazette Company and eliminated
competition between the Defendants. The proposed Final Judgment, filed
on January 20, 2010, requires the Defendants to restructure their joint
operating arrangement to provide MediaNews Group with governance rights
and independent control over the editorial operations of the Charleston
Daily Mail; prohibits the Defendants from discriminating against the
Daily Mail in circulation and advertising sales and other key aspects
of newspaper operations; requires the Defendants to take remedial
action to rebuild the circulation of the Daily Mail by offering
specially-discounted subscriptions for a period of six months;
establishes various economic incentives for MediaNews to compete with
the Daily Gazette Company for readers; prevents the unjustified
termination of publication of the Daily Mail unless it is financially
failing and the United States approves; and specifies procedures for
the disposition of the Daily Mail's intellectual property in the event
that the newspaper ceases publication. The Final Judgment will expire
ten years from the date of entry unless the Court grants an extension.
Copies of the Complaint, proposed Final Judgment and Competitive
Impact Statement are available for inspection at the Department of
Justice, Antitrust Division, Antitrust Documents Group, 450 5th Street,
NW., Room 1010, Washington, DC 20530 (telephone: 202-514-2481), on the
Department of Justice's Web site at http://www.usdoj.gov/atr, and at
the Office of the Clerk of the United States District Court for the
Southern District of West Virginia. Copies of these materials may be
obtained from the Antitrust Division upon request and payment of the
copying fee set by Department of Justice regulations.
Public comment is invited within 60 days of the date of this
notice. Such comments, and responses thereto, will be published in the
Federal Register and filed with the Court. Comments should be addressed
to John R. Read, Chief, Litigation III Section, Antitrust Division,
U.S. Department of Justice, 450 5th Street, NW., Suite 4000,
Washington, DC 20530, (202) 307-0468.
J. Robert Kramer II,
Director of Operations, Antitrust Division.
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF WEST VIRGINIA
CHARLESTON DIVISION
UNITED STATES OF AMERICA, Plaintiff, v. DAILY GAZETTE COMPANY, and
MEDIANEWS GROUP, INC. Defendants.
Civil Action No. 2:07-0329.
Filed: May 22, 2007.
Stamp: COPY--The original was filed in the Clerk's Office at
Charleston on May 22, 2007.
TERESA L. DEPPNER, CLERK, U.S. District Court, Southern District of
West Virginia
Complaint
The United States of America, acting under the direction of the
Attorney General of the United States, brings this civil antitrust
action to obtain equitable and other relief to prevent and restrain
defendants Daily Gazette Company (``Gazette Company'') and MediaNews
Group, Inc. (``MediaNews Group'') from continuing to violate Section 7
of the Clayton Act, 15 U.S.C. 18, and Sections 1 and 2 of the Sherman
Act, 15 U.S.C. 1 & 2, as amended. The United States complains and
alleges as follows:
I. Nature of the Action
1. This lawsuit challenges a series of transactions in 2004 that
extinguished competition between Charleston's two daily newspapers by
combining The Charleston Gazette and the Charleston Daily Mail under
the common ownership of Gazette Company as part of a plan to terminate
the publication of the Charleston Daily Mail and leave Charleston with
a single daily newspaper.
2. For over 100 years, the citizens of Charleston have enjoyed the
benefits of two local daily newspapers. Between 1958 and May 7, 2004,
the owners of the Charleston Gazette and the Charleston Daily Mail
eliminated some--but not all--elements of competition between the two
newspaper owners by forming a joint operating agreement (``JOA''),
referred to as Charleston Newspapers. Under the agreement, the two
newspapers coordinated certain financial and operational aspects of
producing the two newspapers--principally, the printing, distribution,
and sales of subscriptions and advertisements. Importantly, however,
the two newspapers did not combine all of their operations or
ownership. Until May 2004, the Gazette Company maintained separate
ownership of and independently made decisions regarding the content and
style of the Charleston Gazette that determined the attractiveness and
worth of the paper to readers. Similarly, MediaNews Group and its
predecessors maintained separate ownership of the Charleston Daily Mail
and independently made all decisions regarding the content and style of
the Charleston Daily Mail that determined the attractiveness and worth
of the paper to readers in the Charleston area. The attractiveness to
readers of each paper directly affected the value of the separate
ownership interest of each company.
3. On May 7, 2004, Gazette Company, the Charleston Gazette's owner,
acquired all of the assets of the Charleston Daily Mail, its only
competitor, from MediaNews Group. On that same day, Gazette Company and
MediaNews Group also entered into a new arrangement that gave MediaNews
Group nominal responsibility for the news and editorial content of the
Charleston Daily Mail, but gave Gazette Company ultimate control over
the budgets, management, and news gathering and reporting of both
newspapers, as well as the right to receive all the profits of both
newspapers. The arrangement also gave Gazette Company the unilateral
right to shut down the Charleston Daily Mail.
4. The May 2004 transactions eliminated all remaining competition
between the owners of the papers by consolidating the two papers under
the ownership and control of Gazette Company as part of a plan by the
Gazette Company to terminate publication of the Charleston Daily Mail
and thereby force upon consumers in Charleston a single newspaper.
Gazette Company's plan was to use that control to weaken the Daily Mail
to the point where it would fail and could be eliminated as a
competitor to the Charleston Gazette, and Gazette Company acted quickly
to carry out that
[[Page 11683]]
plan--until the Department's investigation interrupted those efforts.
5. Because the May 2004 transactions were part of a plan to
terminate the publication of one of the two newspapers, the
transactions eliminated any claim that the arrangement is immune from
antitrust scrutiny under the Newspaper Preservation Act (``NPA''), 15
U.S.C. 1801, et seq. The NPA permits JOAs to be used to coordinate many
of the commercial activities of otherwise independent newspapers,
including the prices the newspapers charge for subscriptions and
advertising, but only if the participants meet the Act's requirements
by, inter alia, preserving the existence of two newspapers with
independent editorial and reportorial operations. The May 2004
transactions invalidated any claim by Charleston Newspapers to
antitrust immunity under the NPA because they were part of a plan to
terminate publication of the Charleston Daily Mail, leaving only one
daily newspaper in the Charleston area.
6. Without the benefit of antitrust immunity, the arrangement and
the May 2004 transactions violated the antitrust laws. The Charleston
Gazette and the Charleston Daily Mail are the only two daily newspapers
in the Charleston area, so elimination of competition between them
unreasonably restrains competition in two distinct respects. First, by
consolidating ownership of the two newspapers under Gazette Company,
the transactions eliminated the economic incentives that previously had
existed for each owner to increase the attractiveness of its newspaper
to readers in the Charleston area. This reduction in competition
violated Sections 1 and 2 of the Sherman Act, 15 U.S.C. 1 and 2, and
Section 7 of the Clayton Act, 15 U.S.C. 18. Second, the arrangement
eliminated competition between the two newspapers in the sale of
subscriptions and advertising. Because the two newspapers did not enjoy
antitrust immunity under the NPA at least as of May 7, 2004, and
because, as of May 2004, neither of the two papers qualified as a
failing firm within the meaning of the antitrust laws, such an
elimination of competition violated Sections 1 and 2 of the Sherman
Act.
7. Consequently, as discussed more fully herein, the United States
seeks, inter alia, an order: (a) Rescinding the May 7 transactions; and
(b) requiring Gazette Company and MediaNews Group to restore the
Charleston Daily Mail's competitiveness to the level that existed prior
to the May 7 transactions.
II. Jurisdiction and Venue
8. Both Gazette Company and MediaNews Group are engaged in, and
their activities substantially affect, interstate commerce. Through
subsidiaries and partnerships it controls, Gazette Company sells
advertising, which is published in the Charleston Gazette and the
Charleston Daily Mail, to national advertisers located throughout the
United States. In addition, Gazette Company and Media News Group
regularly publish news, syndicated material, and other information in
the Charleston Gazette and the Charleston Daily Mail that is gathered
from other states and nations. In turn, they communicate to newspapers
outside West Virginia the news and information that their staffs
gather.
9. The Court has subject matter jurisdiction under 15 U.S.C. 4 and
25, and 28 U.S.C. 1331, 1337(a), and 1345, to prevent and restrain the
Defendants from continuing to violate 15 U.S.C. 1, 2 and 18.
10. The defendants maintain offices, transact business, and are
found in Charleston, West Virginia. A substantial part of the events
giving rise to the violations alleged herein occurred in Charleston,
West Virginia. Accordingly, this Court has personal jurisdiction over
the Defendants and venue is proper in this judicial district under
Section 12 of the Clayton Act, 15 U.S.C. 22, and under 28 U.S.C. 1391.
III. Defendants
11. Defendant Gazette Company, the owner and publisher of the
Charleston Gazette and, since May 2004, the owner of the Charleston
Daily Mail, is a privately-held corporation organized and existing
under the laws of the State of West Virginia, with its principal place
of business in Charleston, West Virginia. Through its subsidiaries,
Daily Gazette Publishing Company LLC and Daily Gazette Holding Company
LLC, and in its capacity as General Partner of Charleston Newspapers
Holdings Limited Partnership, Gazette Company owns all the assets and
controls all the business operations of Charleston Newspapers.
Charleston Newspapers is responsible for printing, circulating,
promoting and marketing both the Charleston Gazette and the Charleston
Daily Mail.
12. Defendant MediaNews Group, the owner and publisher of the
Charleston Daily Mail from about September 1998 until May 2004, is a
corporation organized and existing under the laws of the State of
Delaware, with its principal place of business in Denver, Colorado.
MediaNews Group owns and publishes several dozen daily newspapers in
various markets throughout the United States. On or about May 7, 2004,
MediaNews Group sold the Charleston Daily Mail and related assets to
Gazette Company. Today, MediaNews Group purports to provide
``management and supervision'' services for the Charleston Daily Mail
in return for a fixed fee paid by Gazette Company. In reality, however,
the news and editorial assets and resources of the Charleston Daily
Mail are under the ownership and control of Gazette Company.
IV. Background
A. Competition Between the Two Newspaper Owners
13. For many years, the Charleston Gazette, founded in 1873, and
the Charleston Daily Mail, founded in 1880, operated completely
independently. In 1958, the then-owners of the two newspapers entered
into a JOA, which combined the two newspapers' printing, advertising,
subscription sales, and distribution functions under a single
management. Congress, in 1970, seeking to preserve the ability of
independent newspapers to reduce operating expenses through JOAs, gave
JOA arrangements then in effect explicit, but limited, antitrust
immunity when it passed the Newspaper Preservation Act, 15 U.S.C. 1801,
et seq., as long as they met certain requirements. To receive that
immunity, Congress required, inter alia, that the newspapers in a JOA
be separately owned or controlled, that they maintain separate newsroom
staffs, that their editorial policies be ``independently determined,''
and that at the time the JOA was entered, no more than one newspaper in
the JOA ``was likely to remain or become a financially sound
publication * * *.'' Id.
14. Until May 7, 2004, the Gazette Company and MediaNews Group were
equal partners in the JOA, with each company separately owning its
respective newspaper. In addition, each company appointed half of the
representatives to a JOA committee that approved all significant
decisions, including each newspaper's budget and its advertising and
subscription rates. That committee also selected a General Manager who
was responsible for the Charleston JOA's day-to-day operations.
15. Within the Charleston JOA, each company shared profits and
losses equally. However, each company had an independent economic
incentive to increase the value of its respective newspaper ownership
interest by attracting readers to that newspaper. The number of
newspapers circulated or
[[Page 11684]]
sold is an important yardstick for measuring the franchise or sales
value of a newspaper asset. In general, a newspaper that invests in
increasing its quality and its appeal will attract more readers and
advertisers, will have a longer lifespan, and will have an increased
market value. Maintaining or increasing the value of a newspaper within
a JOA can affect the outcome of, among other things, renegotiations of
the terms or renewal of a JOA, negotiations over one or both JOA
newspapers operating outside a JOA, and the identity and viability of
the newspapers following the expiration or termination of a JOA. Thus,
the owners of the Charleston newspapers had a variety of long and
short-term economic incentives to compete to attract readers to their
respective newspapers.
16. The owners of the Charleston Gazette and the Charleston Daily
Mail competed vigorously against each other for readers prior to the
May 7 transactions. They did so in various ways, such as seeking to
generate original news and other content of interest to readers; trying
to cover local news with greater depth, breadth and accuracy; breaking
stories first; and offering the most attractive mix of news, features
and editorials to readers. All of these decisions were outside the
cooperation authorized under the JOA. This head to-head competition
between the owners of the Charleston Gazette and the Charleston Daily
Mail benefitted readers by giving them a choice between two daily
newspapers with unique news and other content.
17. The Charleston Gazette and the Charleston Daily Mail remained
consistently profitable through May 2004. Neither newspaper was in
danger of failing in the near future.
B. Prelude to the May 7 Transactions
18. In late 2003, MediaNews Group negotiated to sell the Charleston
Daily Mail along with MediaNews Group's 50 percent stake in the
Charleston JOA to an experienced third-party newspaper company. On
December 18, 2003, that company signed a Letter of Intent to purchase
the Charleston Daily Mail and MediaNews Group's share of the Charleston
JOA for $55 million. MediaNews Group, pursuant to a Right of First
Refusal provision included in the Charleston JOA, was required to
notify Gazette Company of the Letter of Intent and give Gazette Company
the opportunity to match the terms offered by the third party.
19. Gazette Company sought to eliminate competition from the
Charleston Daily Mail, rather than have a new owner continue that
competition. Gazette Company achieved that goal by matching the third
party's $55 million offer to acquire all of the ownership interest in
the Charleston Daily Mail. During this time, Gazette Company developed
a plan to shut down the Charleston Daily Mail and thus become the
publisher of the sole remaining daily newspaper in Charleston. This
plan, formulated with the advice of an outside consultant and shared
with Gazette Company's lenders, called for the rapid reduction of the
Charleston Daily Mail's circulation to a level at which the newspaper
would no longer be economically viable (projected to be achieved within
two or three years). Gazette Company believed it could then
successfully argue to the Department of Justice that it should not
oppose the termination of the JOA because the Charleston Daily Mail
would be a ``failing company.'' Over the years, the Department of
Justice has elected not to challenge the decision of several newspaper
companies to stop publishing one of the newspapers in a JOA based on a
demonstration that circulation for the newspaper had shrunk to the
point where the paper was not economically viable and no buyer could be
found.
C. The May 7 Transactions
20. On May 7, 2004, Gazette Company and MediaNews Group entered
into two simultaneous transactions that had the purpose and effect of
lessening competition between the Charleston Gazette and the Charleston
Daily Mail, with the ultimate goal of creating a monopoly. First,
Gazette Company acquired from MediaNews Group control of the Charleston
Daily Mail's assets and MediaNews Group's 50 percent ownership interest
in the Charleston JOA, for a purchase price of approximately $55
million. Second, the parties entered into a new contract that preserved
the appearance that the Charleston Daily Mail was still being published
by MediaNews Group but, in fact, gave Gazette Company control over
Charleston Newspapers, which is now owned 100 percent by Gazette
Company. Under the new arrangement, MediaNews Group no longer shares in
the profits or losses of the two newspapers nor contributes to the
capital costs of the business. The arrangement allows Gazette Company
unfettered discretion to set the news and editorial budget for the
Charleston Daily Mail and gives Gazette Company the sole power to
terminate publication of the Charleston Daily Mail when it sees fit.
21. The May 7 transactions ended the prior JOA and created an
entirely new arrangement between Gazette Company and MediaNews Group
that does not meet the statutory definition of a JOA under Newspaper
Preservation Act. The arrangement created by the May 7 transactions
does not qualify for the limited antitrust immunity under the Newspaper
Preservation Act for several reasons, including that it has not been
approved by the Attorney General and that it was part of a plan to
terminate one of the two daily newspapers.
22. The May 7 transactions gave Gazette Company, acting through its
control of Charleston Newspapers, the unilateral right to take
immediate and deliberate steps to implement its plan to shut down the
Charleston Daily Mail by 2007. Shortly after the May 7 transactions
were consummated, Gazette Company stopped all promotions and discounts
for the Charleston Daily Mail; it stopped soliciting new readers for
the Charleston Daily Mail; it stopped delivering the Charleston Daily
Mail to thousands of customers; it attempted to convert existing
Charleston Daily Mail home delivery subscribers to Charleston Gazette
subscriptions; it stopped publishing a Saturday edition of the
Charleston Daily Mail; it allowed almost half of the Charleston Daily
Mail's reporters to leave the newspaper without permitting
replacements, thus crippling the ability of the Charleston Daily Mail
to cover the news; and it cut the Charleston Daily Mail's newsroom
budget substantially in both 2004 and 2005, which forced the Charleston
Daily Mail to continue reducing the breadth and depth of its news
coverage.
23. As a result of Gazette Company's actions following the May 7
transactions, the Charleston Daily Mail's circulation dropped from
35,076 in February 2004 to 23,985 in January 2005. This decline in
circulation matched almost precisely the projections that Gazette
Company and its consultants made as part of Gazette Company's pre-
acquisition plan to shut down the Charleston Daily Mail by 2007. During
that same February 2004 to January 2005 time period, the Charleston
Gazette's circulation increased slightly, peaking at over 52,000. Only
after learning in or about December 2004 that the Antitrust Division of
the Department of Justice was investigating the May 7 transactions did
defendant Gazette Company take any steps to limit further damage to the
Charleston Daily Mail caused by the actions described above. These
steps, however, failed to restore the competitive conditions that had
existed prior to the May 7 transactions.
[[Page 11685]]
V. Relevant Markets
A. The Relevant Product Markets
24. Local daily newspapers, such as the Charleston Gazette and the
Charleston Daily Mail, provide a unique package of attributes for their
readers. They provide national, state, and local news in a timely
manner and in a convenient, hardcopy format. The news stories featured
in such newspapers are more detailed, when compared to the news
reported by radio or television, and they cover a wide range of topics
of interest to local readers, not just major news highlights.
Newspapers, such as the Charleston Gazette and the Charleston Daily
Mail, are portable and allow the reader to read the news,
advertisements, and other information at his or her own convenience.
Readers also value other features of local daily newspapers, such as
calendars of local events, movie and TV listings, classified
advertisements, commercial advertisements, legal notices, comics,
syndicated columns, and obituaries. Most readers of local daily
newspapers in the Charleston area do not consider weekly newspapers,
radio news, television news, Internet news, or any other media to be
adequate substitutes for the two local daily newspapers serving the
Charleston area. Thus, in the event of a small but significant increase
in the price of local daily newspapers, the number of readers who would
switch to other sources of local news and information, and would stop
buying any daily local newspaper, would not be sufficient to make such
a price increase unprofitable.
25. Advertising in the Charleston Gazette and the Charleston Daily
Mail allows advertisers to reach a broad cross-section of consumers in
the Charleston metropolitan area with a detailed message in a timely
manner. A substantial portion of advertisers seeking to reach
Charleston area consumers do not consider other types of advertising,
such as that in weekly newspapers, on radio, on television, or on the
Internet to be adequate substitutes for advertising in a local daily
newspaper. Thus, in the event of a small but significant increase in
the price of daily newspaper local advertising, the number of
advertisers seeking to reach Charleston area consumers that would
substitute these other types of advertising for advertising in a local
daily newspaper, or would reduce their purchase of advertising in a
local daily newspaper, would not be sufficient to make such a price
increase unprofitable.
26. Accordingly, the sale of local daily newspapers to readers, and
the sale of access to those readers to advertisers in those newspapers,
each constitutes a line of commerce and a relevant product market
within the meaning of Section 7 of the Clayton Act and for purposes of
Sections 1 and 2 of the Sherman Act.
B. The Relevant Geographic Market
27. The Charleston Gazette and the Charleston Daily Mail are both
produced, published, and distributed to readers in the Charleston, West
Virginia area (primarily Kanawha and Putnam Counties). Both newspapers
provide news relating to the Charleston area in addition to state and
national news.
28. Local daily newspapers that serve areas outside of the
Charleston area do not regularly provide local news specific to the
Charleston area. From a reader's standpoint, local daily newspapers
serving areas outside of the Charleston area are not acceptable
substitutes for the Charleston Gazette and the Charleston Daily Mail.
For this reason, local daily newspapers outside of the Charleston area
do not have any significant circulation or sales in Charleston. In the
event of a small but significant increase in the price of local daily
newspapers in Charleston, the number of readers who would substitute
local daily newspapers outside of the Charleston area, and would stop
buying any daily local newspaper, would not be sufficient to make such
a price increase unprofitable.
29. The Charleston Gazette and the Charleston Daily Mail allow
advertisers to target readers in the Charleston area. From the
standpoint of an advertiser selling goods or services in the Charleston
area, advertising in local daily newspapers serving areas outside of
the Charleston area is not an acceptable substitute for advertising in
the Charleston Gazette and the Charleston Daily Mail. In the event of a
small but significant increase in the price of advertisements in local
daily newspapers serving the Charleston area, the number of advertisers
that would substitute local daily newspapers outside of the Charleston
area, and would reduce their purchase of advertising in a local daily
newspaper, would not be sufficient to make such a price increase
unprofitable.
30. Accordingly, the Charleston, West Virginia area is a section of
the country and a relevant geographic market within the meaning of
Section 7 of the Clayton Act and for purposes of Sections 1 and 2 of
the Sherman Act.
VI. Anticompetitive Effects
31. The May 7 transactions have and will continue to substantially
lessen competition in the local daily newspaper market in the
Charleston, West Virginia area by giving Gazette Company a monopoly in
the Charleston local daily newspaper market. These transactions gave
Gazette Company control over and the power to weaken or eliminate the
Charleston Daily Mail and have already had, and will continue to have,
among others, the following adverse effects on competition:
a. Reduced output (both quantity and quality) of newspapers; and
b. Increased prices to readers and advertisers.
VII. Entry
32. Entry by local daily newspapers into the Charleston, West
Virginia, area is time-consuming and difficult, and is not likely to
prevent the anticompetitive effects of the May 7 transactions by
constraining Gazette Company's market power in the foreseeable future.
Local daily newspapers incur significant fixed costs, many of which are
sunk. Examples of these sunk costs include building or gaining access
to a printing facility, establishing a distribution network, hiring
reporters and editors, news gathering, and marketing the very existence
of the new paper, all of which take substantial time. These costs often
are termed ``first copy'' costs because they are costs that newspaper
companies must incur before they print the first copies of their
newspapers. In the event that the entrant fails or exits the newspaper
industry, it cannot recover all of these costs, making entry risky and
likely unprofitable. As a result, entry into Charleston daily newspaper
market would not be timely, likely, or sufficient to prevent the harm
to competition resulting from the May 7 transactions. Since May 7, 2004
there have been no attempts to enter the local daily newspaper market
in the Charleston area.
VIII. Violations
Count One
(Violation of Section 7 of the Clayton Act)
33. Each and every allegation in paragraphs 1 through 32 of this
Complaint is here realleged with the same force and effect as though
said paragraphs were here set forth in full.
34. Gazette Company and MediaNews Group are hereby named as
defendants on Count One of this Complaint.
35. The May 7 transactions constitute an acquisition of assets by
Gazette Company from MediaNews Group, the effect of which has been and
is likely to continue to be to lessen competition substantially and to
tend to create a monopoly in interstate trade and
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commerce in the sale of local daily newspapers and advertising in those
newspapers in the Charleston, West Virginia area, in violation of
Section 7 of the Clayton Act, 15 U.S.C. 18.
36. The May 7 transactions, in violation of Section 7 of the
Clayton Act, 15 U.S.C. 18, have had the substantial anticompetitive
effects set forth in ] 31 above, and, unless rescinded and restrained,
those effects likely will continue.
Count Two
(Violation of Section 1 of the Sherman Act)
37. Each and every allegation in paragraphs 1 through 32 of this
Complaint is here realleged with the same force and effect as though
said paragraphs were here set forth in full.
38. Gazette Company and MediaNews Group are hereby named as
defendants on Count Two of this Complaint.
39. The May 7 transactions have eliminated the incentives and
ability for MediaNews Group to compete effectively with Gazette Company
in Charleston and have given Gazette Company the power to control and,
ultimately, eliminate the Charleston Daily Mail. The arrangement
created by the May 7 transactions is not immune under the Newspaper
Preservation Act. For the above reasons, the May 7 transactions
constitute a contract, combination or conspiracy by and among
defendants that has unreasonably restrained trade and commerce in
violation of Section 1 of the Sherman Act, 15 U.S.C. 1.
40. The May 7 transactions have had and will continue to have
anticompetitive effects in the relevant market, including among others,
those set forth in ] 31, above.
41. The above violation is continuing and will continue unless the
relief requested hereinafter is granted.
Count Three
(Violation of Section 2 of the Sherman Act)
42. Each and every allegation in paragraphs 1 through 32 of this
Complaint is here realleged with the same force and effect as though
said paragraphs were here set forth in full.
43. Gazette Company is hereby named as the defendant on Count Three
of this Complaint.
44. Through the anticompetitive conduct described herein, Gazette
Company has monopolized the Charleston, West Virginia, local daily
newspaper market. As a result of defendants' actions, Gazette Company
now possesses substantial monopoly power in the sale of local daily
newspapers in the Charleston area. Gazette Company has willfully
maintained, and unless restrained by the Court will continue to
willfully maintain, this unlawful monopoly power through
anticompetitive and unreasonably exclusionary conduct. Defendants'
actions and practices constitute unlawful monopolization in violation
of Section 2 of the Sherman Act, 15 U.S.C. 2.
IX. Requested Relief
45. The United States requests that the Court:
a. Adjudge and decree that the May 7, 2004, transactions are
illegal, and their effects may be substantially to lessen competition,
or to tend to create a monopoly in violation of Section 7 of the
Clayton Act, 15 U.S.C. 18;
b. Adjudge and decree that the May 7 transactions constitute an
illegal restraint of interstate trade and commerce in violation of
Section 1 of the Sherman Act, 15 U.S.C. 1;
c. Adjudge and decree that Gazette Company has unlawfully
monopolized the Charleston daily newspaper market in violation of
Section 2 of the Sherman Act, 15 U.S.C. 2;
d. Rescind the May 7 transactions;
e. Direct the defendants to restore the Charleston Daily Mail to
its pre-May 7, 2004 competitive condition;
f. Award the United States such other and further relief as the
Court may deem just and proper to redress and prevent recurrence of the
above violations, to dissipate their anticompetitive effects, and to
restore effective competition in the Charleston daily newspaper market;
and
g. Award the United States the costs of this action.
DATED: May 22, 2007
FOR PLAINTIFF UNITED STATES OF AMERICA
THOMAS O. BARNETT,
Assistant Attorney General, Antitrust Division
DAVID L. MEYER,
Deputy Assistant Attorney General, Antitrust Division
J. ROBERT KRAMER II,
Director of Operations
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CHARLES T. MILLER,
United States Attorney, Southern District of West Virginia, by
Stephen M. Horn /s/by CAD, Assistant United States Attorney, WV
State Bar Number 1788, P.O. Box 1713, Charleston, WV 25326, Phone:
304-345-2200 Fax: 304-347-5443, E-mail: [email protected]
JOHN R. READ,
Chief, Litigation III
NINA B. HALE,
Assistant Chief, Litigation III
THOMAS J. HORTON
BENNETT J. MATELSON
WILLIAM H. JONES II
MARK A. MERVA
MATTHEW J. BESTER
JENNIFER A. WAMSLEY
BERNARD M. HOLLANDER,
Senior Trial Attorney, Attorneys for the United States, United
States Department of Justice, Antitrust Division, Litigation III
Section, 325 7th Street, NW., Suite 300, Washington, DC 20530,
Phone: 202-616-5871 Fax: 202-514-7308, E-mail:
[email protected], [email protected]
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
CHARLESTON DIVISION
UNITED STATES OF AMERICA, Plaintiff, v. DAILY GAZETTE COMPANY, and
MEDIANEWS GROUP, INC., Defendants.
Civil Action No. 2:07-0329.
Judge Copenhaver.
Magistrate Judge Stanley.
Filed: January 20, 2010
[Proposed] Final Judgment
Whereas, Plaintiff, United States of America, filed its Complaint
on May 22, 2007, the United States and Defendants, Daily Gazette
Company and MediaNews Group, Inc., by their respective attorneys, have
consented to the entry of this Final Judgment without trial or
adjudication of any issue of fact or law, and without this Final
Judgment constituting any evidence against or admission by any party
regarding any issue of fact or law;
And whereas, Defendants agree to be bound by the provisions of this
Final Judgment pending its approval by the Court;
And whereas, the essence of this Final Judgment is the prompt
adoption of certain procedures and prohibitions by Defendants to assure
that competition is not substantially lessened;
And whereas, the United States requires Defendants to agree to
certain procedures and prohibitions for the purpose of remedying the
loss of competition alleged in the Complaint;
And whereas, Defendants have represented to the United States that
the actions required below can and will be made and that Defendants
will later raise no claim of hardship or difficulty as grounds for
asking the Court to modify any of the provisions contained below;
Now therefore, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon
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consent of the parties, it is ordered, adjudged and decreed:
I. Jurisdiction
This Court has jurisdiction over the subject matter of and each of
the parties to this action. The Complaint states a claim upon which
relief may be granted against Defendants under Section 7 of the Clayton
Act, as amended (15 U.S.C. 18), and Sections 1 and 2 of the Sherman
Act, as amended (15 U.S.C. 1 & 2).
II. Definitions
As used in this Final Judgment:
A. ``Charleston Daily Mail'' means the Daily Newspaper of that name
distributed in the Charleston, West Virginia Area.
B. ``Charleston Gazette'' means the Daily Newspaper of that name
distributed in the Charleston, West Virginia Area.
C. ``Charleston Newspapers'' means the unincorporated joint venture
operating under the laws of West Virginia, with its principal place of
business in Charleston, West Virginia, its successors and assigns, and
its subsidiaries, divisions, groups, affiliates, partnerships and joint
ventures, and their shareholders, directors, officers, managers,
agents, and employees.
D. ``Charleston Newspapers Holdings, L.P.'' means the Delaware
Limited Partnership formed on May 7, 2004.
E. ``Charleston, West Virginia Area'' means Kanawha and Putnam
Counties in West Virginia.
F. ``Daily Newspaper'' means a print publication which is published
no fewer than five days per week and in which a substantial portion of
the content is devoted to the dissemination of news and editorial
opinion.
G. ``Editorial Content'' means the news, feature, and opinion
content of, and the format, dress, makeup, and design of, a Daily
Newspaper.
H. ``Failing Firm'' means a firm that has satisfied all of the
conditions stated in the U.S. Department of Justice and Federal Trade
Commission Horizontal Merger Guidelines as applied by the Department of
Justice and/or federal courts to newspapers published in a joint
operating agreement under the Newspaper Preservation Act, 15 U.S.C.
1801-1804.
I. ``Final Judgment'' includes the following agreements attached as
Exhibit A: Amended and Restated Limited Partnership Agreement for
Charleston Newspapers Holdings L.P.; Amended and Restated Operating
Agreement of Daily Gazette Holding Company, LLC; Second Amended and
Restated Joint Operating Agreement; the Put/Call Agreement; and the
Charleston Newspapers Holdings L.P. Warrant to Purchase Class B Limited
Partnership Units Initially Constituting a 20% Percentage Interest.
J. ``Gazette Company'' means defendant Daily Gazette Company, a
privately-held corporation organized and existing under the laws of the
State of West Virginia, with its principal place of business in
Charleston, West Virginia, its successors and assigns, and its
subsidiaries, divisions, groups, affiliates, partnerships and joint
ventures, and their shareholders, directors, officers, managers,
agents, and employees. Without limiting the foregoing, Gazette Company
shall include Charleston Newspapers.
K. ``Intellectual Property of the Charleston Daily Mail'' includes
the masthead, trademarks, copyrights, trade names, service names and
service marks of the Charleston Daily Mail; its subscriber lists and
advertiser lists; print and electronic archives; associated Web sites
and URLs (including ``dailymail.com''); and all legal rights associated
with these assets.
L. ``MediaNews Group'' means defendant MediaNews Group, Inc., now
known as Affiliated Media, Inc., a corporation organized and existing
under the laws of the State of Delaware, with its principal place of
business in Denver, Colorado, its successors and assigns, and their
shareholders, subsidiaries, divisions, groups, affiliates, partnerships
and joint ventures, and their directors, officers, managers, agents,
and employees. Without limiting the foregoing, MediaNews Group shall
include Charleston Publishing Company.
M. ``Person'' means any natural person, corporate entity,
partnership, joint venture, association, government entity, trust, or
other business or legal entity, whether private or governmental.
N. ``Publication'' means all activities associated with the
business of offering a Daily Newspaper to the public as a commercial
endeavor, including but not limited to, editing, writing, printing,
circulating, operating, marketing, and distributing such Daily
Newspapers and selling advertisements and promotions therein.
O. ``Relating to'' or ``Relates to'' means in whole or in part
constituting, containing, concerning, discussing, describing,
analyzing, identifying, or stating.
P. ``United States'' means the Department of Justice, Antitrust
Division.
Q. The terms ``and'' and ``or'' have both conjunctive and
disjunctive meanings.
III. Applicability
This Final Judgment applies to Gazette Company and MediaNews Group,
as defined above, and all other persons in active concert or
participation with any of them who receive actual notice of this Final
Judgment by personal service or otherwise.
IV. Required and Prohibited Conduct
A. (1) Within 5 business days after the entry of this Final
Judgment, Gazette Company and MediaNews Group shall enter into, and
abide by the terms of, the Amended and Restated Limited Partnership
Agreement for Charleston Newspapers Holdings L.P.; the Amended and
Restated Operating Agreement of Daily Gazette Holding Company, LLC; the
Second Amended and Restated Joint Operating Agreement; the Put/Call
Agreement; and the Charleston Newspapers Holdings L.P. Warrant to
Purchase Class B Limited Partnership Units Initially Constituting a 20%
Percentage Interest, which are incorporated into this Final Judgment
and attached hereto as Exhibit A. Gazette Company and MediaNews Group
shall operate Charleston Newspapers, Charleston Newspapers Holdings
L.P., the Charleston Gazette and the Charleston Daily Mail in
accordance with the terms of the agreements in Exhibit A. No agreement
in Exhibit A may be modified, amended, superseded or terminated without
the prior written approval of the United States for the term of the
Final Judgment. Upon entering into the contracts in Exhibit A, any
existing agreements between Gazette Company and MediaNews Group
relating to the Publication of any Daily Newspaper in Charleston, West
Virginia, other than those contained in Exhibit A, shall be void and
shall not be enforced thereafter. Except as expressly authorized by the
agreements in Exhibit A, Gazette Company and MediaNews Group shall not
directly or indirectly enter into any agreement subsequent to the entry
of this Final Judgment that relates to the Publication of any Daily
Newspaper in Charleston, West Virginia, other than agreements entered
into with third parties in the ordinary course of business, without the
prior written consent of the United States.
(2) Defendants shall not, without the prior written consent of the
United States, pledge or otherwise offer as security or collateral, the
assets comprising the Intellectual Property of the Charleston Daily
Mail, in whole or in part, for credit or other consideration, to a
greater extent than such assets were
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pledged or offered as security or collateral as of December 11, 2009.
B. The Charleston Daily Mail shall continue to be published as a
Daily Newspaper. The publication of the Charleston Daily Mail as a
Daily Newspaper shall not be terminated unless it is a Failing Firm and
the United States has given its prior written approval, which approval
shall not be unreasonably withheld. Prior to receiving written approval
from the United States to terminate publication of the Charleston Daily
Mail as a Daily Newspaper, Gazette Company and MediaNews Group may not
establish a termination date for the Charleston Daily Mail. Disputes
regarding the application of the provisions of this Section IV(B) may
be submitted to the Court for resolution.
C. If during the term of this Final Judgment the Charleston Daily
Mail shall cease publication as a Daily Newspaper, or the operating
agreement between Defendants governing Charleston Newspapers is
dissolved or terminated, or Charleston Newspapers Holdings, L.P. is
dissolved or terminated (collectively referred to as ``Termination
Events''), ownership of the Intellectual Property of the Charleston
Daily Mail shall, after the prior satisfaction of the claims of all
creditors of Charleston Newspapers Holdings, L.P. in accordance with
the provisions of Section 7.3 of the Amended and Restated Limited
Partnership Agreement for Charleston Newspapers Holdings, L.P.,
immediately transfer to MediaNews Group at no cost. Within ninety days
prior to the occurrence of any of the Termination Events, Gazette
Company shall hire, subject to the approval of the United States, an
appraiser experienced in the newspaper industry to perform an
assessment of the fair market value, separately, of each asset
comprising the Intellectual Property of the Charleston Daily Mail. To
the extent the valuations determine that any assets comprising the
Intellectual Property of the Charleston Daily Mail may be freely
disposed of by Gazette Company under the terms of Section 7.8 of the
United Bank Loan Agreement or the equivalent provision of any future
credit agreement, Gazette Company shall transfer those assets to
MediaNews Group (or its assignee) at no cost. In the event Gazette
Company is unable to transfer immediately all or some of the assets
comprising the Intellectual Property of the Charleston Daily Mail due
to any security interest or lien held on those assets by any creditor,
Gazette Company shall use its good faith efforts to (1) persuade any
such creditor to release the security interest or lien on those assets;
(2) assist any third party seeking such a release; or (3) transfer the
assets as soon as possible in the next fiscal year (to the extent
permissible under the United Bank Loan Agreement or any future credit
agreement). Any assets that are released by the creditors shall be
transferred to MediaNews Group (or its assignee) at no cost. In the
event that the Charleston Daily Mail's print and electronic archives
are not transferred to MediaNews Group, Charleston Newspapers will
grant to MediaNews Group (or its assignee) a royalty-free license to
use the Charleston Daily Mail's print and electronic archives for the
sole purpose of continuing to publish the Charleston Daily Mail for so
long as MediaNews Group (or its assignee) publishes the Charleston
Daily Mail as a Daily Newspaper in Charleston. Except as expressly
authorized by this Final Judgment, Gazette Company shall not directly
or indirectly transfer to any other Person the ownership of some or all
of the Intellectual Property of the Charleston Daily Mail without the
prior written consent of the United States. If during the term of this
Final Judgment the ownership of some or all of the Intellectual
Property of the Charleston Daily Mail is transferred from Gazette
Company to any other Person, Gazette Company shall not reacquire any
part of the Intellectual Property of the Charleston Daily Mail during
the term of this Final Judgment. Transfer of title to the Intellectual
Property of the Charleston Daily Mail by Gazette Company shall be made
free and clear of any liens or other encumbrances to the free transfer
of title by the acquirer (including but not limited to rights of first
refusal).
D. The Editorial Content of the Charleston Daily Mail shall be
determined solely by MediaNews Group and the staff of the Charleston
Daily Mail. The Editorial Content of the Charleston Gazette shall be
determined solely by Gazette Company and the staff of the Charleston
Gazette. Gazette Company shall not, directly or indirectly, take any
action to influence the Editorial Content of the Charleston Daily Mail,
nor shall MediaNews Group, directly or indirectly, take any action to
influence the Editorial Content of the Charleston Gazette. Gazette
Company and MediaNews Group shall not enter into any agreement limiting
the separate and independent determination of the Editorial Content of
their respective Daily Newspapers.
E. Gazette Company and MediaNews Group shall not take any action
with the intent to cause the Charleston Daily Mail to become a Failing
Firm. Neither Gazette Company nor MediaNews Group shall discriminate
against, or cause Charleston Newspapers to discriminate against, the
Charleston Daily Mail in performing circulation sales or advertising
sales activities.
F. Commencing no later than thirty (30) days after the entry of
this Final Judgment and continuing for a period of no less than six (6)
months thereafter, Defendants shall cause Charleston Newspapers to
offer the Charleston Daily Mail at a discount of no less than fifty
(50) percent off the regular retail price to all new subscribers.
Charleston Newspapers shall inform prospective new subscribers of this
discount in any subscription solicitation efforts that it undertakes.
During this period, Charleston Newspapers may not extend this same
discount, or any greater discount, to subscribers of the Charleston
Gazette.
V. Affidavits
Within sixty (60) calendar days of the entry of this Final Judgment
in this matter, and every year thereafter until the expiration of this
Final Judgment, Defendants shall deliver to the United States an
affidavit as to the fact and manner of their compliance with Section IV
of this Final Judgment. Assuming the information set forth in the
affidavit is true and complete, any objection by the United States to
information provided by Defendants, including limitation on
information, shall be made within fourteen (14) calendar days of
receipt of such affidavit.
VI. Compliance Inspection
A. For the purposes of determining or securing compliance with this
Final Judgment, or of determining whether the Final Judgment should be
modified or vacated, or determining whether to consent to any proposed
agreement per Section IV(A), or whether to approve a termination of
publication per Section IV(B), or whether to consent to any transfer
per Section IV(C), and subject to any legally recognized privilege,
from time to time authorized representatives of the United States,
including consultants and other persons retained by the United States,
shall, upon written request of an authorized representative of the
Assistant Attorney General in charge of the Antitrust Division, and on
reasonable notice to defendants, be permitted:
(1) access during defendants' office hours to inspect and copy,
or at the option of the United States, to require defendants to
provide hard copy or electronic copies of, all books, ledgers,
accounts, records, data, and
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documents in the possession, custody, or control of defendants,
relating to any matters contained in this Final Judgment; and
(2) to interview, either informally or on the record,
defendants' officers, employees, or agents, who may have their
individual counsel present, regarding such matters. The interviews
shall be subject to the reasonable convenience of the interviewee
and without restraint or interference by defendants.
B. Upon the written request of an authorized representative of the
Assistant Attorney General in charge of the Antitrust Division,
defendants shall submit written reports or response to written
interrogatories, under oath if requested, relating to any of the
matters contained in this Final Judgment as may be requested.
C. No information or documents obtained by the means provided in
this Section shall be divulged by the United States to any person other
than an authorized representative of the executive branch of the United
States, except in the course of legal proceedings to which the United
States is a party (including grand jury proceedings), or for the
purpose of securing compliance with this Final Judgment, or as
otherwise required by law.
D. If at the time information or documents are furnished by
defendants to the United States, defendants represent and identify in
writing the material in any such information or documents to which a
claim of protection may be asserted under Rule 26(c)(1)(G) of the
Federal Rules of Civil Procedure, and defendants mark each pertinent
page of such material, ``Subject to claim of protection under Rule
26(c)(1)(G) of the Federal Rules of Civil Procedure,'' then the United
States shall give defendants ten (10) calendar days notice prior to
divulging such material in any legal proceeding (other than a grand
jury proceeding).
VII. Retention of Jurisdiction
This Court retains jurisdiction to enable any party to this Final
Judgment to apply to this Court at any time for further orders and
directions as may be necessary or appropriate to carry out or construe
this Final Judgment, including the agreements of the parties attached
hereto as Exhibit A, to modify any of their provisions, to enforce
compliance, and to punish violations of their provisions.
VIII. Expiration of Final Judgment
Unless this Court grants an extension, this Final Judgment shall
expire ten (10) years from the date of its entry. The expiration of
this Final Judgment shall not automatically trigger the termination of
the agreements contained in Exhibit A. After the expiration of this
Final Judgment, the agreements contained in Exhibit A will be governed
by their own terms.
IX. Public Interest Determination
Entry of this Final Judgment is in the public interest. The parties
have complied with the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16, including making copies available to the
public of this Final Judgment, the Competitive Impact Statement, and
any comments thereon and the United States's responses to comments.
Based upon the record before the Court, which includes the Competitive
Impact Statement and any comments and response to comments filed with
the Court, entry of this Final Judgment is in the public interest.
Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. 16.
Dated:
John T. Copenhaver, Jr.
United States District Judge
EXHIBIT A
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
FOR
CHARLESTON NEWSPAPERS HOLDINGS, L.P.
A DELAWARE LIMITED PARTNERSHIP
------------------------, 2009
THIS AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT is entered
into as of ------------------------, 2009 by and among Daily Gazette
Holding Company, LLC, a Delaware limited liability company (``DGHC'')
and Charleston Publishing Company, a Delaware corporation (``CPC'').
Recitals
Whereas, the Partnership was formed on May 7, 2004 in connection
with the transactions contemplated by that certain Master Restructuring
and Purchase Agreement (the ``Master Restructuring Agreement'') entered
into on May 7, 2004, by Daily Gazette Company, MediaNews Group, Inc.
(now known as Affiliated Media, Inc.) (``MNG''), CPC and the Joint
Venture;
Whereas, the Partnership has managed and will, pursuant to the
Second Amended and Restated Joint Venture Agreement dated as of even
date herewith (the ``JOA''), continue to manage the business and
affairs of the Joint Venture; and
Whereas, DGHC and CPC desire to amend various provisions of the
Limited Partnership Agreement dated May 7, 2004 (the ``Prior
Partnership Agreement''), by and among DGHC, CPC and ABRY/Charleston,
Inc. to restate it in its entirety and to supplement it, as herein
provided; Now, therefore, the parties agree as follows:
Article I
Definitions
1.1 Definitions. As used herein, the following terms shall have the
following meanings:
1.1.1 Act: the Delaware Revised Uniform Limited Partnership Act, 6
Del. Code, as it may be amended from time to time, and any successor to
such Act.
1.1.2 Affiliate: with respect to any Person, any other Person
directly or indirectly controlling or controlled by such Person or
under direct or indirect common control with such Person.
1.1.3 Adjusted Capital Account: with respect to any Partner, the
deficit balance, if any, in such Partner's Capital Account as of the
end of the relevant Fiscal Year or other period, after giving effect to
the following adjustments:
(i) Crediting to such Capital Account any amounts that such Partner
is obligated to restore to the Partnership pursuant to this Agreement
or as otherwise described Treasury Regulations Section 1.704-
1(b)(2)(ii)(c) or is deemed to be obligated to restore pursuant to the
penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1)
and 1.704-2(i)(5); and
(ii) Debiting from such Capital Account the items described in
Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-
1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to
comply with the provisions of Treasury Regulations Section 1.704-
1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
1.1.4 Agreement: this Amended and Restated Limited Partnership
Agreement, as it may be amended from time to time.
1.1.5 Capital Account: with respect to any Partner, the account
maintained for such Partner in accordance with the capital accounting
rules of Section 704(b) of the Code and the provisions of Treasury
Regulations Section 1.704-1(b)(2)(iv). Subject to any contrary
requirements of the Code and the Treasury Regulations issued
thereunder, each Partner's Capital Account shall equal (1)(i) the
amount set forth as such Partner's capital account as of the date
hereof as set forth on Exhibit B; (ii) the amount of money which has
been contributed by that Partner to the
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Partnership after the date hereof, if any; (ii) the fair market value,
determined without regard to Code Section 7701(g) of the property, if
any, which has been contributed by that Partner to the Partnership
after the date hereof (net of any liabilities that are secured by such
contributed property or that the Partnership or any other Partner is
considered to assume under Code Section 752); (iii) allocations which
have been made to that Partner of Net Profit and items of income and
gain pursuant to Article V after the date hereof; and (iv) other
additions which have been made in accordance with the Code after the
date hereof, decreased by (2)(i) the amount of cash which has been
distributed to that Partner by the Partnership after the date hereof;
(ii) allocations which have been made to that Partner of Net Loss and
items of loss and deduction pursuant to Article V after the date
hereof; (iii) the fair market value, determined without regard to Code
Section 7701(g), of any property which has been distributed to that
Partner by the Partnership after the date hereof (net of any
liabilities that are secured by such distributed property or that such
Partner is considered to assume or take under Code Section 752); and
(iv) other deductions which have been made in accordance with the Code
after the date hereof.
1.1.6 Capital Contribution: with respect to any Partner, any cash
or other property that such Partner has contributed to the capital of
the Partnership pursuant to the terms of this Agreement.
1.1.7 Certificate of Limited Partnership: the certificate of
limited partnership of the Partnership, as amended.
1.1.8 Class A Limited Partner: a Person owning Class A Limited
Partner Units that has been admitted to the Partnership as a Limited
Partner pursuant to the terms of this Agreement.
1.1.9 Class A Limited Partnership Interest: the Partnership
Interest with respect to the Class A Limited Partner Units.
1.1.10 Class A Limited Partner Unit: any Partnership Unit having
the rights and obligations specified in this Agreement with respect to
a Class A Limited Partner Unit.
1.1.11 Class B Limited Partner: a Person owning Class B Limited
Partner Units that has been admitted to the Partnership as a Limited
Partner pursuant to the terms of this Agreement.
1.1.12 Class B Limited Partner Unit: any Partnership Unit having
the rights and obligations specified in this Agreement with respect to
a Class B Limited Partner Unit.
1.1.13 Code: the Internal Revenue Code of 1986, as amended.
1.1.14 Depreciation: with respect to each Fiscal Year, an amount
equal to the depreciation, amortization or other cost recovery
deduction allowable with respect to an asset for such Fiscal Year,
except that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such
Fiscal Year, Depreciation shall be determined in the manner that is
described in Treasury Regulations Section 1.704-1(b)(2)(iv)(g)(3) or
Treasury Regulations Section 1.704-3(d)(2), as applicable.
1.1.15 Fair Market Value of the Partnership: has the meaning given
such term in Section 5.2.3(b).
1.1.16 Fiscal Year: the calendar year or, in the case of the first
and the last fiscal years, the fraction thereof commencing on the date
on which the Partnership is formed under the Act or ending on the date
on which the winding up of the Partnership is completed, as the case
may be.
1.1.17 General Partner: DGHC and any successor General Partner.
1.1.18 General Partner Unit: any Partnership Unit having the rights
and obligations specified in this Agreement with respect to a General
Partner Unit.
1.1.19 GP Board: has the meaning given such term in Section 4.5.2.
1.1.20 Gross Asset Value: with respect to any asset, the asset's
adjusted basis for Federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership after the date hereof shall be the gross
fair market value of such asset as determined by the contributing
Partner and the General Partner;
(ii) The Gross Asset Value of each Partnership asset shall be
adjusted to equal its gross fair market value, as determined by the
General Partner, as of the following times: (a) The acquisition of an
additional interest in the Partnership by any new or existing Partner
in exchange for more than a de minimis Capital Contribution; (b) the
distribution by the Partnership to a Partner of more than a de minimis
amount of Partnership property as consideration for an interest in the
Partnership; and (c) the liquidation of the Partnership within the
meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g). However,
the adjustments which are described in clauses (a) and (b) above shall
be made only if the General Partner reasonably determines that such
adjustments are necessary or appropriate to reflect the relative
economic interests of the Partners in the Partnership;
(iii) The Gross Asset Value of any Partnership asset distributed to
any Partner shall be adjusted to equal the gross fair market value of
such asset on the date of distribution, as determined by the
distributee Partner and the General Partner; and
(iv) The Gross Asset Value of each Partnership asset shall be
increased (or decreased) to reflect any adjustments to the adjusted
basis of such asset pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(m) and Section 5.3.8. However,
Gross Asset Value shall not be adjusted pursuant to this clause (iv) to
the extent that an adjustment pursuant to clause (ii) is necessary or
appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this clause (iv).
If the Gross Asset Value of an asset has been determined or
adjusted pursuant to clauses (i), (ii) or (iv) of this definition, such
Gross Asset Value shall thereafter be adjusted by the Depreciation
taken into account with respect to such asset for purposes of computing
Net Profit and Net Loss.
1.1.21 Indemnified Person: has the meaning given such term in
Section 4.7.
1.1.22 JOA: has the meaning given such term in the Recitals to this
Agreement, as such agreement may be amended from time to time.
1.1.23 Joint Venture: Charleston Newspapers, an unincorporated West
Virginia joint venture.
1.1.24 Limited Partner: any Class A Limited Partner or Class B
Limited Partner.
1.1.25 Limited Partner Unit: any Class A Limited Partner Unit or
Class B Limited Partner Unit.
1.1.26 Mail: The Charleston Daily Mail.
1.1.27 MNG: has the meaning given such term in the Recitals to this
Agreement, and includes any successor or assign.
1.1.28 Net Cumulative Profit: with respect to a Partner, an amount
equal to the excess, if any, of (i) the aggregate Net Profits and items
of income and gain allocated to such Partner pursuant to Article V for
all Fiscal Years (or other periods) after the date hereof, over (ii)
the aggregate Net Loss and items of loss and deduction allocated to
such Partner pursuant to Article V for all Fiscal Years (or other
periods) after the date hereof.
1.1.29 Net Profit and Net Loss: with respect to each Fiscal Year or
other period, an amount which is equal to the Partnership's taxable
income or loss for such year or period, as determined in
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accordance with Code Section 703(a) (for this purpose, all items of
income, gain, loss or deduction that are required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:
(i) Any income of the Partnership that is exempt from Federal
income tax and not otherwise taken into account in computing Net Profit
or Net Loss shall be added to such taxable income or loss;
(ii) Any expenditures of the Partnership described in Code Section
705(a)(2)(B), or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and
which are not otherwise taken into account in computing Net Profit or
Net Loss, shall be subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Partnership asset
is adjusted pursuant to clause (ii) or (iii) of the definition of Gross
Asset Value, the amount of such adjustment shall be taken into account
as gain or loss from the disposition of such asset for purposes of
computing Net Profit or Net Loss;
(iv) Gain or loss resulting from any disposition of Partnership
property with respect to which gain or loss is recognized for Federal
income tax purposes shall be computed by reference to the Gross Asset
Value of the property disposed of, notwithstanding that the adjusted
tax basis of such property differs from its Gross Asset Value;
(v) In lieu of the depreciation, amortization and other cost
recovery deductions that are taken into account in computing such
taxable income or loss, there shall be taken into account Depreciation
for such Fiscal Year or other period;
(vi) Notwithstanding anything to the contrary that may be contained
in the definition of the terms ``Net Profit'' and ``Net Loss,'' any
items that are specially allocated pursuant to Section 5.3 or 5.4
hereof shall be excluded in computing Net Profit or Net Loss; and
(vii) For purposes of this Agreement, any deduction for a loss on a
sale or exchange of Partnership property which is disallowed to the
Partnership under Code Section 267(a)(1) or 707(b) shall be treated as
a Code Section 705(a)(2)(B) expenditure.
The amounts of the items of Partnership income, gain, loss, or
deduction available to be specially allocated pursuant to Section 5.3
or 5.4 shall be determined by applying rules analogous to those set
forth in this definition of Net Profit and Net Loss.
1.1.30 Newspapers: The Charleston Gazette, The Saturday Gazette-
Mail, The Sunday Gazette-Mail and the Mail collectively, and a
``Newspaper'' means any one of the Newspapers.
1.1.31 Nonrecourse Deductions: losses, deductions or Code Section
705(a)(2)(B) expenditures that are attributable to Nonrecourse
Liabilities of the Partnership. The amount of Nonrecourse Deductions
for a Fiscal Year shall be determined in accordance with Treasury
Regulations Section 1.704-2(c).
1.1.32 Nonrecourse Liability: has the meaning set forth in Treasury
Regulations Sections 1.704-2(b)(3) and 1.752-1(a)(2).
1.1.33 Partner: any of the General Partner and the Limited Partners
individually, and ``Partners'' means each of the General Partner and
the Limited Partners collectively.
1.1.34 Partner Nonrecourse Debt: has the meaning set forth in
Treasury Regulations Section 1.704-2(b)(4).
1.1.35 Partner Nonrecourse Debt Minimum Gain: has the meaning set
forth in Treasury Regulations Section 1.704-2(i)(2). The amount of
Partner Nonrecourse Debt Minimum Gain shall be determined in accordance
with Treasury Regulations Section 1.704-2(i)(3).
1.1.36 Partner Nonrecourse Deductions: losses, deductions or Code
Section 705(a)(2)(B) expenditures that are attributable to Partner
Nonrecourse Debt. The amount of Partner Nonrecourse Deductions for a
Fiscal Year shall be determined in accordance with Treasury Regulations
Section 1.704-2(i)(2).
1.1.37 Partner Ratio Percentage: with respect to any Class B
Limited Partner, the percentage obtained by dividing the Percentage
Interest of such Class B Limited Partner by the General Partner's
Percentage Interest.
1.1.38 Partnership: Charleston Newspapers Holdings, L.P., a
Delaware limited partnership.
1.1.39 Partnership Interest: means the entire ownership interest of
a Partner in the Partnership at any particular time, including all of
its rights and obligations hereunder and under the Act.
1.1.40 Partnership Minimum Gain: has the meaning set forth in
Treasury Regulations Section 1.704-2(b)(2). The amount of Partnership
Minimum Gain for a Fiscal Year shall be determined in accordance with
Treasury Regulations Section 1.704-2(d).
1.1.41 Percentage Interest: with respect to any Class B Limited
Partner and the General Partner, means the ratio of the number of Units
held by such Partner divided by the total number of Class B Limited
Partner Units and General Partner Units outstanding.
1.1.42 Person: means any individual, partnership, joint venture,
association, corporation, trust, estate, limited liability company,
limited liability partnership or any other legal entity.
1.1.43 Put/Call Agreement: a put/call agreement entered into by a
Class B Limited Partner, DGHC and the Partnership in connection with
the exercise by the Warrant Holder of its right to purchase Class B
Limited Partner Units pursuant to the terms of the Warrant, in
substantially the form attached to the Warrant as Exhibit B thereto.
1.1.44 Regulatory Allocations: has the meaning given such term in
Section 5.4.
1.1.45 Subsidiary: means any Person (including the Joint Venture)
that is controlled by the Partnership.
1.1.46 Tax-Adjusted Percentage Interests: with respect to any Class
B Limited Partner, the percentage determined by dividing (i) such Class
B Limited Partner's Percentage Interest by (ii) one (1) minus the Tax
Rate; and with respect to the General Partner, the percentage
determined as one (1) minus the Tax-Adjusted Percentage Interest of
such Class B Limited Partner. By way of illustration, if such Class B
Limited Partner's Percentage Interest is 6.42% and the Tax Rate is 40%,
such Class B Limited Partner's Tax Adjusted Percentage Interest shall
be 10.70% and the General Partner's Tax-Adjusted Percentage Interest
shall be 89.30%.
1.1.47 Tax Distributions: distributions made pursuant to Section
5.1.2.
1.1.48 Tax Gross-Up Amount: has the meaning given such term in
Section 5.2.3(a)(ii)(4).
1.1.49 Tax Rate: the highest effective combined rate of federal,
state and local income and franchise tax applicable to corporations
doing business in Charleston, West Virginia.
1.1.50 Tax Shortfall: has the meaning given such term in Section
5.1.2(b).
1.1.51 Transfer: has the meaning given to such term in Section
6.1.1.
1.1.52 Transferee: any Person that acquires a Partnership Interest
from a Partner in accordance with the provisions of this Agreement.
1.1.53 Treasury Regulations: the Income Tax Regulations that have
been promulgated under the Code, as such regulations may be amended
from time to time.
1.1.54 Unit: an undivided share of the interests in the Partnership
of all the
[[Page 11692]]
Partners, which include General Partner Units, Class A Limited Partner
Units, and Class B Limited Partner Units, as set forth on Exhibit A
attached hereto, as amended from time to time.
1.1.55 Value of the Partnership's Business: has the meaning given
such term in Section 5.2.3.
1.1.56 Warrant: that certain warrant, dated as of even date
herewith, granted to the Warrant Holder by the Partnership to purchase
Class B Limited Partner Units.
1.1.57 Warrant Holder: CPC or any permitted transferee of the
Warrant.
Article II
Formation of the Partnership
2.1 Formation. The Partnership was formed as a Delaware limited
partnership pursuant to the terms of the Act and the Prior Partnership
Agreement. The rights and liabilities of the Partners shall be
determined pursuant to the Act and this Agreement. To the extent the
rights or obligations of any Partner are different by reason of any
provision of this Agreement than they would be in the absence of such
provision, this Agreement shall, to the extent permitted by the Act,
control.
2.2 Partners. As of the date hereof, DGHC is the sole General
Partner of the Partnership, CPC is the sole Class A Limited Partner of
the Partnership and there is no Class B Limited Partner.
2.3 Name. The name of the Partnership is ``Charleston Newspapers
Holdings, L.P.'' The business of the Partnership may be conducted under
that name or, upon compliance with applicable laws, any other name that
the General Partner deems appropriate or advisable.
2.4 Purpose. The purposes of the Partnership shall be (i) to own,
directly and indirectly, all the interests in the Joint Venture, (ii)
to engage in the business, directly and indirectly, of owning,
operating and managing newspaper properties, including managing the
business and affairs of the Joint Venture in accordance with the JOA,
(iii) to borrow or raise money, to guarantee the obligations of others,
and to secure the payment thereof by mortgage upon or pledge of the
whole or any part of the property of the Partnership, (iv) to exercise
all rights, powers, privileges and other incidents of ownership or
possession with respect to securities or other assets held or owned by
the Partnership, and (v) to do any act and thing and to enter into any
contract incidental to, or necessary, proper or advisable for, the
accomplishment of such purposes as determined by the General Partner in
its sole discretion, including without limitation, entering into the
JOA, the Warrant and a Put/Call Agreement and performing thereunder.
2.5 Place of Business. The principal place of business of the
Partnership is c/o Daily Gazette Company, 1001 Virginia Street, East,
Charleston, West Virginia 25301, subject to change by the General
Partner upon notice to all Partners.
2.6 Agent for Service of Process. The agent of the Partnership for
service of process in Delaware is the Corporation Service Company, 2711
Centerville Road, Suite 400, Wilmington, Delaware 19808, subject to
replacement from time to time by direction of the General Partner.
2.7 Term. The term of the Partnership commenced on the date the
Certificate of Limited Partnership was filed with the Secretary of
State of the State of Delaware, and shall continue until June 30, 2024,
unless sooner terminated as provided in this Agreement.
2.8 Tax Matters. The parties acknowledge that for income tax
purposes, the Partnership shall be treated as the continuation of the
Joint Venture following the deemed merger of the Joint Venture and the
Partnership.
Article III
Capital of the Partnership
3.1 Transfers to Partnership. DGHC and CPC each made the transfers
to the Partnership specified on Exhibit A and received the Units
specified in Exhibit A.
3.2 Future Capital Contributions; Capital Assets.
3.2.1 The Limited Partners shall have no obligation to make any
further contributions to the capital of the Partnership, subject to
CPC's obligation to reimburse the Joint Venture for any expenses paid
by the Joint Venture on behalf of CPC in accordance with the provisions
of the JOA.
3.2.2 DGHC shall in the future make such additional contributions
to the capital of the Partnership as shall be necessary in its
reasonable judgment to (1) fund acquisitions of capital assets
necessary for the business and operations of the Partnership and/or the
Joint Venture; (2) fund acquisitions of capital assets necessary for
the business and operations of the editorial departments of each of the
Newspapers to the extent such editorial departments' tangible capital
assets on the date hereof require supplementation or replacement, (3)
provide the Partnership and the Joint Venture with adequate working
capital, and (4) ensure that the Partnership has adequate funds to make
on a timely basis the cash distributions to CPC contemplated by Section
V J (1) through (3) of the JOA, provided this is not intended to impose
any greater obligation on the General Partner than is imposed on
general partners generally under applicable law. The General Partner
shall not have any personal liability for the repayment of the Capital
Contributions of any other Partner; provided that the General Partner
shall promptly return to the Partnership or to the Partner or Partners
entitled thereto any distributions received by the General Partner in
excess of those to which the General Partner is entitled under this
Agreement.
3.3 Interest on Capital Contributions. No interest shall be paid by
the Partnership on Capital Contributions.
3.4 Liability Limited to Capital. Except as otherwise provided
under applicable law, the liability of a Limited Partner shall be
limited to the total amount of Capital Contributions which such Limited
Partner has made or is required to make pursuant to Section 3.1 hereof,
and the Limited Partners shall have no further personal liability to
contribute money to or in respect of the liabilities or obligations of
the Partnership, nor shall the Limited Partners, as such, be personally
liable for any obligation of the Partnership. A Limited Partner may,
under certain circumstances, be required by law to return to the
Partnership, for the benefit of the Partnership's creditors, amounts
previously distributed. No Limited Partner shall be obligated by this
Agreement to pay those distributions to or for the account of the
Partnership or any creditor of the Partnership. However, if any court
of competent jurisdiction holds that, notwithstanding the provisions of
this Agreement, a Limited Partner must return or pay over any part of
those distributions, the obligation shall be that of such Limited
Partner alone and not of any other Partner. Any payment returned to the
Partnership by a Partner or made directly by a Partner to a creditor of
the Partnership shall be deemed a Capital Contribution by such Partner.
3.5 Withdrawal of Capital. A Partner shall not be entitled to
withdraw any part of its Capital Contribution or to receive any
distribution from the Partnership, except as provided in this Agreement
or the JOA.
[[Page 11693]]
Article IV
Management of the Partnership
4.1 General Partner. DGHC shall serve as the General Partner of the
Partnership.
4.2 Partnership Powers. In furtherance of its purposes, the
Partnership is hereby authorized to enter into any kind of lawful
activity and to enter into, perform and carry out contracts of any kind
in connection with the purposes of the Partnership.
4.3 Authority, Responsibilities and Powers of General Partner.
Subject to Section 4.5.2 hereof, the General Partner shall have
complete authority over and exclusive control and management of the
business and affairs of the Partnership and all of the rights, powers
and privileges of partners of a general partnership and of general
partners of a limited partnership under the laws of the State of
Delaware. The General Partner shall devote such time to the Partnership
as it may reasonably deem to be required for the achievement of its
purposes. In connection with such management, the General Partner (i)
may delegate such general or specific authority to the officers and
employees of the Partnership and its Affiliates with respect to the
business and day-to-day operations of the Partnership and its
Affiliates as it may from time to time consider desirable, and the
officers and employees of the Partnership may exercise the authority
granted to them, and (ii) may employ on behalf of the Partnership any
other Persons to perform services for the Partnership, including
Affiliates of any Partner.
4.4 No Management Participation by any Limited Partner. Subject to
Section 4.5.2, no Limited Partner shall take part in, or at any time
interfere in any manner with, the management, conduct or control of the
business and operations of the Partnership, nor have any right or
authority as such to act for or bind the Partnership in any manner
whatsoever. No Partner shall have the power, right or authority to
remove DGHC as the General Partner.
4.5 Scope of Authority of the General Partner.
4.5.1 Subject to Section 4.5.2 and 4.5.3 hereof, all decisions to
be made on behalf of the Partnership shall be made by the General
Partner and all actions to be taken or documents to be executed on
behalf of the Partnership shall be taken and executed by the General
Partner.
4.5.2 While the general authority to manage the day-to-day business
and affairs of the General Partner shall be vested in its members, the
management of the General Partner shall be delegated to a board of
managers of the General Partner (the ``GP Board'') consisting of up to
five individual managers appointed by Daily Gazette Company and in no
event may the GP Board consist of more than five managers without the
consent of the managers appointed pursuant to Section 5(b) of the
Operating Agreement of DGHC by the Warrant Holder or the Class B
Limited Partner(s), as applicable; provided, however, that in no event
may the GP Board consist of more than five managers unless not fewer
than forty percent (40%) are appointed by the Warrant Holder or the
Class B Limited Partner(s), as applicable. Unless and until the Warrant
Holder exercises its rights under the Warrant to purchase any Class B
Limited Partner Units, Daily Gazette Company shall delegate its right
to appoint two (2) of the members of the GP Board (or such greater
number as required by Section 5(b)(ii) of the Operating Agreement of
DGHC) to the Warrant Holder, and upon the purchase by the Warrant
Holder of any Class B Limited Partner Units pursuant to the Warrant,
Daily Gazette Company shall delegate its right to appoint two (2) of
the members of the GP Board (or such greater number as required by
Section 5(b)(ii) of the Operating Agreement of DGHC) to the Class B
Limited Partner(s). If there is more than one Class B Limited Partner,
then the right to appoint two (2) of the members of the GP Board (or
such greater number as required by Section 5(b)(ii) of the Operating
Agreement of DGHC) will be vested solely in the Class B Limited Partner
that supervises editorial and reportorial functions of the Mail
pursuant to Section 9.1 hereof. Neither the Warrant Holder nor the
Class B Limited Partner(s) may appoint current employees of the Joint
Venture, Daily Gazette Company, DGHC, the Partnership or Daily Gazette
Publishing Company, LLC to represent it on the GP Board. The GP Board
shall only have the power and authority to act by the vote of the
constituent managers and no individual manager, in the capacity of
manager, shall have the power or authority to bind the General Partner.
Voting by the managers shall be on a per capita basis. Actions may be
taken by the GP Board by, but only by, a majority vote of the managers;
provided, however, that actions by the GP Board concerning (x) the
budgeted Editorial Expenses (as that term is defined in the JOA) for
The Charleston Gazette and the Mail or (y) ``news hole'' and color
usage allocations for The Charleston Gazette and the Mail shall require
the prior approval of at least 75% of the managers of the GP Board
(i.e., if the GP Board consists of four managers, not fewer than three
managers must vote in favor of the particular action, and if the GP
Board consists of five managers, not fewer than four managers must vote
in favor of the particular action). Either Daily Gazette Company or, as
applicable, the Warrant Holder or the Class B Limited Partner(s) may at
any time, by written notice to the other, remove its managers, with or
without cause, and substitute managers to serve in their stead. No
manager shall be removed from office, with or without cause, without
the consent of the Person that designated him. Each member of the GP
Board appointed by the Warrant Holder or the Class B Limited Partner(s)
may act (or refrain from acting), and the Warrant Holder or the Class B
Limited Partner(s) may instruct such members of the GP Board, in their
capacity as such, to act (or refrain from acting) solely according to
the interests (or the perceived interests) of the Warrant Holder or the
Class B Limited Partner(s) and none of the foregoing shall be deemed to
breach any fiduciary duty that, pursuant to this Agreement or at law or
in equity, the Warrant Holder or the Class B Limited Partner(s)
otherwise would be deemed to have to the Partnership, the General
Partner or Daily Gazette Company. The GP Board shall hold such meetings
no less frequently than once per calendar quarter and at such times and
places as shall be determined by the members of the GP Board. Special
meetings of the GP Board may be called at any time by agreement of the
members of the GP Board. The GP Board may establish such procedures for
the conduct of meetings as may be agreed by the members of the GP
Board.
4.5.3 Without the written consent of the Limited Partners, or
except as specifically authorized in this Agreement, the General
Partner may not:
(a) Do any act in contravention of this Agreement, the JOA or the
Certificate of Limited Partnership.
(b) Do any act that would make it impossible to carry on the
ordinary business of the Partnership.
(c) Change the purposes of the Partnership as set forth in Section
2.4 hereof.
(d) Dissolve the Partnership.
(e) Make any disposition of assets contributed by CPC to the
Partnership on the date of the Prior Partnership Agreement that would
impair the ability of the Partnership to make the terminating
distributions to CPC that are contemplated by Section 7.3 hereof
(provided no consent of the Limited
[[Page 11694]]
Partners will be required for any disposition of such assets pursuant
to any foreclosure action of the Joint Venture's lenders).
4.6 Liability. If any provision herein shall, under applicable law,
subject any Limited Partner to liability as a general partner of the
Partnership, such provision shall be deemed suspended and of no force
and effect until such time as the effectiveness of such provision does
not subject such Limited Partner to such liability.
4.7 Indemnification. The Partnership shall indemnify the General
Partner and its Affiliates and the employees, officers, directors, each
member of the GP Board, shareholders, partners, members and agents of
such Persons (each an ``Indemnified Person'') and shall defend and hold
the Indemnified Persons harmless from any claim, demand, judgment, cost
or expense (including attorneys' fees, which shall be paid as incurred)
arising out of or related to any act or omission by such Indemnified
Persons on behalf of the Partnership, except for any act or omission
which is finally adjudicated to have constituted willful misconduct on
the part of such Indemnified Person. In no event shall any Indemnified
Person be liable to the Partnership or to any other Partner, except for
conduct which is finally adjudicated to have constituted willful
misconduct on the part of such Indemnified Person. Any Person who is
within the definition of ``Indemnified Person'' at the time of any act
or omission shall be entitled to the benefits of this Section 4.7 as an
``Indemnified Person'' regardless of whether such Person continues to
be within the definition of ``Indemnified Person'' at the time of his
or its claim for indemnification or exculpation hereunder.
4.8 Partnership Expenses. The Partnership shall pay for all
necessary and reasonable direct expenses of the Partnership.
4.9 Other Ventures. Subject to the terms of the JOA, neither Daily
Gazette Company, nor any Partner, may engage in other ventures in the
Charleston, West Virginia market that are competitive with that of the
Partnership or any of its Subsidiaries. For purposes of this Section
4.9, any competitive venture undertaken by an Affiliate of a Partner in
the Charleston, West Virginia market will be deemed to be a competitive
venture undertaken by such Partner and a breach of this Agreement by
such Partner.
Article V
Distributions and Allocations
5.1 Distributions.
5.1.1 Distributions to Class A Limited Partner. With respect to
each Fiscal Year that the Class A Limited Partner produces editorial
and news copy for the Mail, the General Partner shall cause the
Partnership to distribute cash to the Class A Limited Partner in an
amount equal to the cash received by the Partnership with respect to
its interest in the Joint Venture, pursuant to and subject to the terms
of paragraphs (1), (2) and (3) of Section V J of the JOA. Such cash
shall be distributed by the Partnership to the Class A Limited Partner
as soon as reasonably practicable following its receipt by the
Partnership.
5.1.2 Tax Distributions.
(a) During each Fiscal Year, the General Partner shall cause the
Partnership to distribute cash to the Class B Limited Partner(s) and to
the General Partner in an amount equal to the excess, if any, of (i)
the product of (1) the Net Cumulative Profit allocated to such Partner
and (2) the Tax Rate with respect to such Fiscal Year, over (ii) the
aggregate distributions to such Partner after the date hereof pursuant
to Section 5.1.4 and this Section 5.1.2 (such excess being such
Partner's ``Tax Shortfall''). For purposes of this Section 5.1.2(a),
distributions made within 120 days of the end of any Fiscal Year may be
designated by the General Partner as Tax Distributions with respect to
such Fiscal Year and shall be treated for purposes of this Section
5.1.2(a) as having been made during such Fiscal Year.
(b) If the aggregate amount to be distributed by the Partnership
pursuant to Section 5.1.2(a) is less than the aggregate amount of the
Tax Shortfall for all Partners, then the amount to be distributed will
be distributed among the Partners pro rata in accordance with the
amounts of their respective Tax Shortfalls.
5.1.3 Distributions to General Partner. With respect to a Fiscal
Year, after the distributions required by Sections 5.1.1 and 5.1.2, the
General Partner shall cause the Partnership to distribute cash in an
amount not to exceed $650,000 to the General Partner. The distributions
provided in this Section 5.1.3 shall be made only to the extent such
distributions are not prohibited by the Partnership's credit agreements
or other agreements to which the Partnership is a party.
5.1.4 Other Cash Distributions. During a Fiscal Year, after the
distributions required by Sections 5.1.1, 5.1.2 and 5.1.3, the General
Partner may cause the Partnership to distribute additional cash at such
times and in such amounts as the General Partner may determine to be
appropriate in its sole discretion, in the following order and
priority:
(a) If the product of the Partner Ratio Percentage of any Class B
Limited Partner and the sum of all distributions to the General Partner
pursuant to Section 5.1.2 is greater than the sum of all distributions
to such Class B Limited Partner pursuant to Section 5.1.2, cash shall
be distributed to such Class B Limited Partner in the amount of such
excess;
(b) If the sum of all distributions to any Class B Limited Partner
pursuant to Section 5.1.2 is greater than the product of Partner Ratio
Percentage of such Class B Limited Partner and the sum of all
distributions to the General Partner pursuant to Section 5.1.2, cash
shall be distributed to the General Partner in the amount of such
excess;
(c) Thereafter, cash shall be distributed to the Class B Limited
Partner(s) and the General Partner pro rata in accordance with their
Capital Account balances until such Capital Account balances are zero;
and
(d) Any additional cash shall be distributed to the Class B Limited
Partner(s) and the General Partner in accordance with their Percentage
Interests.
5.1.5 Withholding. Any amount that has been withheld pursuant to
the Code or any provision of any state or local tax law with respect to
any payment or distribution to the Partnership or the Partners shall be
treated as an amount which was distributed to a Partner pursuant to
Section 5.1 hereof for all purposes of this Agreement.
5.2 Allocations of Net Profit and Net Loss.
5.2.1 Net Profit. Except as otherwise provided in this Agreement,
Net Profit of the Partnership for each Fiscal Year shall be allocated
as follows:
(a) first, Net Profit shall be allocated so as to offset any Net
Loss allocated to the General Partner pursuant to Section 5.2.2(c);
(b) second, Net Profit shall be allocated to the Class B Limited
Partner(s) and to the General Partner so as to offset any Net Loss
allocated to them pursuant to Section 5.2.2(b), pro rata in proportion
to the amount of Net Loss to be offset; and
(c) thereafter, Net Profit shall be allocated to the Class B
Limited Partner(s) and the General Partner in accordance with their
Tax-Adjusted Percentage Interests.
[[Page 11695]]
5.2.2 Net Loss. Except as otherwise provided in this Agreement, Net
Loss of the Partnership for each Fiscal Year shall be allocated as
follows:
(a) first, Net Loss shall be allocated to the Class B Limited
Partner(s) and to the General Partner so as to offset any Net Profit
allocated to them pursuant to Section 5.2.1(c) (to the extent not
distributed pursuant to Section 5.1), pro rata in proportion to the
amount of Net Profit to be offset.
(b) second, Net Loss shall be allocated to the Class B Limited
Partner(s) and the General Partner in accordance with their Percentage
Interests until the Class B Limited Partner's or Partners' Adjusted
Capital Account balance is zero; and
(c) thereafter, all remaining Net Loss shall be allocated to the
General Partner.
5.2.3 Allocations of Net Profit and Net Loss Following Dissolution.
(a) Notwithstanding Sections 5.2.1 and 5.2.2, following the
dissolution of the Partnership pursuant to Article VII, beginning in
the Fiscal Year in which such dissolution occurs or beginning in any
Fiscal Year prior to the Fiscal Year in which such dissolution occurs
if the Partnership's Federal income tax return for such prior Fiscal
Year has not yet been required to be filed (not including extensions),
items of income, gain, loss and deduction described in clause (iii) of
Section 1.1.29 that are attributable to the adjustment to the Gross
Asset Value of assets distributed in kind to the Class A Limited
Partner pursuant to Section 7.3.2 (if any) shall be allocated to the
Class A Limited Partner, and thereafter, all remaining items of income,
gain, loss and deduction shall be allocated among the Partners so as to
cause the credit balance in each Partner's Capital Account to equal the
amount of distributions such Partner would be entitled to receive if
the Partnership were to distribute an amount equal to the aggregate
credit balances in all Partners' Capital Accounts (after such
allocations of income and gain, loss and deduction) in accordance with
the following:
(i) First, the Partnership would distribute to the Class A Limited
Partner cash in an amount equal to the aggregate cash distributed to
the Partnership pursuant to clause (2)(a) of Section VI B of the JOA;
(ii) Second, the Partnership would distribute to each Class B
Limited Partner cash in an amount equal to the following:
(1) the product of such Class B Limited Partner's Percentage
Interest and the Fair Market Value of the Partnership; plus
(2) the excess (only if such amount is greater than zero) of (A)
the product of such Class B Limited Partner's Partner Ratio Percentage
and the sum of all distributions to the General Partner pursuant to
Section 5.1.2 over (B) the sum of all distributions to such Class B
Limited Partner pursuant to Section 5.1.2; less
(3) the excess (only if such amount is greater than zero) of (A)
the sum of all distributions to such Class B Limited Partner pursuant
to Section 5.1.2 over (B) the product of such Class B Limited Partner's
Partner Ratio Percentage and the sum of all distributions to the
General Partner pursuant to Section 5.1.2; plus
(4) an amount equal to the excess, if any, of (A) the quotient
obtained by dividing Net Cumulative Profits allocated to such Class B
Limited Partner by one (1) minus the Tax Rate then in effect, over (B)
Net Cumulative Profits allocated to such Class B Limited Partner (such
amount being the ``Tax Gross-Up Amount'').
(iii) Thereafter, the Partnership would distribute all remaining
cash and other assets of the Partnership to the General Partner.
(b) For purposes of this Section 5.2.3, the ``Fair Market Value of
the Partnership'' shall equal:
(i) the Value of the Partnership's Business, plus
(ii) any current assets of the Partnership, calculated as of the
date of dissolution, as defined and determined in accordance with
generally accepted accounting principles, less
(iii) the sum of $2,448,300 (which the parties agree shall
represent the amount of the unfunded accrued benefit obligation for the
Charleston Newspapers Retirement Benefit Plan as of the date of
dissolution), and $506,731 (which the parties agree shall represent the
amount of the unfunded accrued benefit obligation for the Charleston
Newspapers Post Retirement Medical Benefit Program as of the date of
dissolution), less
(iv) any debts and liabilities of the Partnership and reserves for
unmatured, contingent or unforeseen liabilities of the Partnership
(other than unfunded obligations under the Charleston Newspapers
Retirement Benefit Plan and Post-Retirement Medical Benefit Program),
calculated as of the date of dissolution, as defined and determined in
accordance with Section 7.3 and generally accepted accounting
principles, less
(v) the costs of an investment banking firm or appraisal firm or
firms selected to determined the Fair Market Value of the Partnership,
less
(vi) the amount determined in Sections 5.2.3(a)(ii)(2) and
5.2.3(a)(ii)(3), if any. The ``Value of the Partnership's Business''
shall be the going concern value of the Partnership as of the date of
dissolution as determined by mutual agreement of the General Partner
and the Class B Limited Partner(s) or by appraisals in accordance with
this Section 5.2.3. In determining the Value of the Partnership's
Business, the General Partner and the Class B Limited Partner(s), or
the appraisers selected to determine the Fair Market Value of the
Partnership, as the case may be, (1) shall assume that the value of any
business is the cash price at which the assets of such business as a
going concern would change hands between a willing buyer and a willing
seller (neither acting under compulsion) in an arms-length transaction,
on terms and subject to conditions and costs applicable in the
newspaper publishing industry, (2) shall assume that all assets used in
the operation of the business of the Partnership and its Subsidiaries,
whether owned by or licensed to the Partnership or any of its
Subsidiaries (and all other assets of any Affiliate of the Partnership
that are used by the Partnership or any of its Subsidiaries), were
entirely owned directly by the Partnership, (3) shall not take into
account expenditures in respect of any management agreements entered
into by the Joint Venture. In the event the General Partner and the
Class B Limited Partner(s) do not agree on the Fair Market Value of the
Partnership within twenty days, then within fifteen days of the
expiration of such twenty day period (or such longer period as the
General Partner and the Class B Limited Partner(s) mutually agree),
each of the General Partner and the Class B Limited Partner(s) shall
select a nationally recognized appraiser with experience in the
newspaper industry to prepare, using the methodology described in this
paragraph, a written appraisal setting forth such appraiser's
determination of the Fair Market Value of the Partnership. If either
the General Partner and the Class B Limited Partner(s) fail to so
appoint an appraiser within such fifteen day period, then its right to
do so shall lapse and the appraisal made by the one appraiser who is
timely appointed shall be the Fair Market Value of the Partnership. If
two appraisals are made, unless the higher of the two appraisals is
more than 110% more than the lower appraisal, the Fair Market Value of
the Partnership will be the average of the two appraisals, and if the
higher of the two appraisals is more than 110% more than the lower of
the appraisals, the General Partner and the Class B Limited Partner(s)
shall jointly
[[Page 11696]]
select a third appraiser, and the Fair Market Value will be the average
of the two of the three appraisals that are closest together in amount.
All appraisals will be made within twenty days of appointment of such
appraiser and must separately identify the amount of each of the items
described in clauses (i) through (vi) of Section 5.2.3(b). A written
notice of the results of each such appraisal shall be given to the
General Partner and the Class B Limited Partner(s). The General Partner
and the Class B Limited Partner(s) will each pay the fees of the
appraiser selected by it, and the General Partner and the Class B
Limited Partner(s) will share equally the fees of the third appraiser,
if any. The General Partner and each Member will cooperate fully with
each appraiser's attempt to determine the Fair Market Value of the
Partnership.
5.3 Special Allocations.
5.3.1 Limited Partners.
(a) The Partnership shall specially allocate to the Class A Limited
Partner (in its capacity as such) items of Partnership income for each
Fiscal Year in an amount equal to the cash distributed to the Class A
Limited Partner (in its capacity as such) pursuant to Section 5.1.1.
Notwithstanding any other provisions of this Agreement, except Section
5.2.3 and this Section 5.3.1, no other items of income, gain, loss or
deduction shall be allocated to the Class A Limited Partner (in its
capacity as such).
(b) The Partnership shall specially allocate to the General Partner
items of Partnership income and gain in the amount of $650,000 for each
Fiscal Year.
5.3.2 Minimum Gain Chargeback. Notwithstanding any other provision
of this Article V to the contrary, if there is a net decrease in
Partnership Minimum Gain for any Fiscal Year, each of the General
Partner and each Class B Limited Partner shall be specially allocated
items of Partnership income and gain for such Fiscal Year (and if
necessary, for succeeding Fiscal Years) in an amount equal to such
Partner's share of the net decrease in Partnership Minimum Gain as
determined in accordance with Treasury Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each
Partner pursuant thereto. However, this Section 5.3.2 shall not apply
to the extent that the circumstances which are described in Treasury
Regulations Sections 1.704-2(f)(2), 1.704-2(f)(3), 1.704-2(f)(4) or
1.704-2(0(5) exist. The items of Partnership income and gain that are
to be allocated pursuant to this Section 5.3.2 shall be determined in
accordance with Treasury Regulations Sections 1.704-2(f)(6) and 1.704-
2(j)(2). This Section 5.3.2 is intended to comply with the minimum gain
chargeback requirement of Treasury Regulations Section 1.704-2(f) and
shall be interpreted consistently therewith.
5.3.3 Partner Minimum Gain Chargeback. Notwithstanding any other
provision of this Article V, except Section 5.3.2, to the contrary, if,
during any Fiscal Year, there is a net decrease in Partner Nonrecourse
Debt Minimum Gain attributable to a Partner Nonrecourse Debt, each of
the General Partner and each Class B Limited Partner with a share of
that Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt (as determined in accordance with Treasury Regulations
Section 1.704-2(i)(5)) as of the beginning of such Fiscal Year shall be
specially allocated items of Partnership income and gain for the Fiscal
Year (and, if necessary, for succeeding Fiscal Years) in an amount
equal to such Partner's share of the net decrease in the Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse
Debt in accordance with Treasury Regulations Section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each
Partner pursuant thereto. The items of Company income and gain to be
allocated pursuant to this Section 5.3.3 shall be determined in
accordance with Treasury Regulations Sections 1.704-2(i)(4) and 1.704-
2(j)(2). This Section 5.3.3 is intended to comply with the minimum gain
chargeback requirement in Treasury Regulations Section 1.704-2(i)(4)
and shall be interpreted consistently therewith.
5.3.4 Qualified Income Offset. In the event that any Partner
unexpectedly receives any of the adjustments, allocations or
distributions described in Treasury Regulations Section 1.704-
1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b) (2)(ii)(d)(6),
items of Partnership income and gain shall be specially allocated to
such Partner in an amount and manner sufficient to eliminate, to the
extent required by the Treasury Regulations, any deficit balance of
such Partner's Adjusted Capital Account as quickly as possible.
However, an allocation shall be made pursuant to this Section 5.3.4 if,
and only to the extent that, such Partner would have a deficit balance
in its Adjusted Capital Account after all of the other allocations that
are provided for in this Article V have been tentatively made as if
this Section 5.3.4 were not a part of this Agreement.
5.3.5 Gross Income Allocation. In the event that any Partner has a
deficit Capital Account at the end of any Fiscal Year that is in excess
of the sum of (i) the amount such Partner is obligated to restore to
the Partnership pursuant to this Agreement or as otherwise described in
Treasury Regulations Section 1.704-1(b)(2)(ii)(c), (ii) the amount such
Partner is deemed to be obligated to restore pursuant to the
penultimate sentence of Treasury Regulations Section 1.704-2(g)(1) and
(iii) the amount such Partner is deemed to be obligated to restore
pursuant to the penultimate sentence of Treasury Regulations Section
1.704-2(i)(5), such Partner shall be specially allocated items of
Partnership income and gain in the amount of such excess as quickly as
possible. However, an allocation shall be made pursuant to this Section
5.3.5 if, and only to the extent that such Partner would have a deficit
Capital Account in excess of such sum after all of the other
allocations that are provided for in this Article V have been
tentatively made as if Section 5.3.4 and this Section 5.3.5 were not a
part of this Agreement.
5.3.6 Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal
Year or other period shall be specially allocated to the General
Partner.
5.3.7 Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Fiscal Year or other period shall be specially
allocated to the Partner who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with Treasury
Regulation Section 1.704-2(i).
5.3.8 Section 754 Adjustment.
(a) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or 743(b) is required
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be
taken into account in determining Capital Accounts as a result of a
distribution other than in liquidation of a Partner's Partnership
Interest, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the basis of such asset) or loss (if
the adjustment decreases the basis of the asset) from the disposition
of the asset and shall be taken into account for purposes of computing
Net Profit and Net Loss.
(b) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section
743(b) is required, pursuant to Treasury Regulations
[[Page 11697]]
Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken
into account in determining Capital Accounts as the result of a
distribution to a Partner in complete liquidation of its interest, the
amount of such adjustment to Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or
loss (if the adjustment decreases such basis) from the disposition of
the asset and shall be specially allocated to the Partners as Net
Profit or Net Loss in the event Treasury Regulations Section 1.704-
1(b)(2)(iv)(m)(2) applies, or to the Partner to whom such distribution
is made in the event Treasury Regulations Section 1.704-
1(b)(2)(iv)(m)(4) applies.
5.4 Curative Allocations. The allocations set forth in Sections
5.3.2, 5.3.3, 5.3.4, 5.3.5, 5.3.6, 5.3.7 and 5.3.8 hereof (the
``Regulatory Allocations'') are intended to comply with certain
requirements of the Treasury Regulations. It is the intent of the
Partners that, to the extent possible, all Regulatory Allocations shall
be offset either with other Regulatory Allocations or with special
allocations of other items of income, gain, loss, or deduction pursuant
to this Section 5.4. Therefore, notwithstanding any other provision of
this Article V (other than the Regulatory Allocations), the General
Partner shall make such offsetting special allocations of income, gain,
loss, or deduction in whatever manner it determines appropriate so
that, after such offsetting allocations are made, each Partner's
Capital Account balance is, to the extent possible, equal to the
Capital Account balance such Partner would have had if the Regulatory
Allocations were not in this Agreement. In exercising its discretion
under this Section 5.4, the General Partner shall take into account
future Regulatory Allocations under Sections 5.3.2 and 5.3.3 that,
although not yet made, are likely to offset other Regulatory
Allocations previously made under Sections 5.3.6 and 5.3.7.
5.5 Tax Allocations; Code Section 704(c).
5.5.1 Except as otherwise provided in this Section 5.5, each item
of income, gain, loss and deduction of the Partnership recognized for
income tax purposes shall be allocated to the Partners in accordance
with the allocation of the corresponding ``book'' items pursuant to
Sections 5.2, 5.3 and 5.4.
5.5.2 In accordance with Code Section 704(c) and the Treasury
Regulations thereunder, income, gain, loss and deduction with respect
to any property contributed to the capital of the Partnership shall,
solely for tax purposes, be allocated among the Partners so as to take
account of any variation between the adjusted basis of such property to
the Partnership for Federal income tax purposes and its initial Gross
Asset Value in accordance with Code Section 704(c) and the Treasury
Regulations thereunder, provided, however, that no such Section 704(c)
allocations shall be made to the Class A Limited Partner (in its
capacity as such).
5.5.3 In the event that the Gross Asset Value of any Partnership
asset is adjusted pursuant to clause (ii) of the definition of Gross
Asset Value, subsequent allocations of income, gain, loss and deduction
with respect to such asset shall take account of any variation between
the adjusted basis of such asset for Federal income tax purposes and
its Gross Asset Value in accordance with Code Section 704(c) and the
Treasury Regulations thereunder, provided, however, that no such
Section 704(c) allocations shall be made to the Class A Limited Partner
(in its capacity as such).
5.5.4 Any elections or other decisions relating to such allocations
shall be made by the Tax Matters Partner in any manner that reasonably
reflects the purpose and intention of this Agreement. Allocations that
are made pursuant to this Section 5.5 are made solely for purposes of
Federal, state and local taxes and shall not affect, or in any way be
taken into account in computing, any Partner's Capital Account or share
of Net Profit, Net Loss or other items or distributions pursuant to any
provision of this Agreement.
5.6 Allocation in Event of Transfer. If a Partnership Interest is
Transferred in accordance with Article VI of this Agreement, the Net
Profit and Net Loss of the Partnership shall be calculated as of the
end of the month immediately prior to the month in which the transfer
is effective. The transferor Partner shall be allocated an amount which
is equal to the Net Profit and Net Loss of the Partnership that is
allocable to the period ending on the last day of the month immediately
prior to the Transfer. The Transferee shall be allocated an amount
which is equal to the Net Profit and Net Loss of the Partnership that
is allocable to the remainder of the calendar year. As of the effective
date of such Transfer, the Transferee shall succeed to the Capital
Account of the transferor Partner with respect to the Transferred
Partnership Interest. This Section 5.6 shall apply for purposes of
computing a Partner's Capital Account and for Federal income tax
purposes.
Article VI
Transfer of Partnership Interests
6.1 Limitations on Transfers.
6.1.1 Except as provided in Section 6.1.2, no sale, assignment,
transfer, pledge, hypothecation or other disposition (any or all of the
foregoing, a ``Transfer'') of a Partnership Interest will be effective
nor will any purported Transferee become a Partner or otherwise be
entitled to any of the attributes of ownership of the Partnership
purportedly Transferred.
6.1.2 The restrictions of Section 6.1.1 shall not apply to:
(a) a Transfer pursuant to Article VII;
(b) in the case of the Class A Limited Partner, a Transfer of its
entire Class A Limited Partnership Interest approved by the General
Partner, which approval shall not be unreasonably withheld (the Class A
Limited Partner acknowledges and agrees that the General Partner's
ability to grant consent to a Transfer is circumscribed by certain
contractual restrictions under the Joint Venture's financing
arrangements and the withholding of consent by the General Partner in
order to comply with these contractual restrictions will not be
considered unreasonable);
(c) in the case of a Class B Limited Partner, a Transfer permitted
by and made in accordance with the provisions of the Put/Call Agreement
to which such Class B Limited Partner is a party;
(d) in the case of the General Partner or any permitted Transferee
of the General Partner, any Transfer to an Affiliate of the General
Partner and any other Transfer so long as at the time of such Transfer
the Joint Venture is current in the distributions and payments required
to be made to the Class A Limited Partner pursuant to Section V J(l)
through (4) of the JOA, and provided that if the Joint Venture is not
so current, the General Partner shall obtain the consent of the Class A
Limited Partner prior to any Transfer pursuant to this Section
6.1.2(d);
(e) a Transfer pursuant to a foreclosure action by the Joint
Venture's lenders; or
(f) any Transfer of all or any portion of the ownership interests
in the Class A Limited Partnership Interest or the Partnership Interest
with respect to any of the Class B Limited Partner Units to MNG or an
Affiliate of MNG so long as (1) all of the other requirements of this
Article VI have been complied with and (2) MNG or an Affiliate of MNG
holds and maintains, directly or indirectly, voting control of such
Transferee following such Transfer.
6.2 Transferees.
[[Page 11698]]
6.2.1 Notwithstanding any provision to the contrary contained
herein, no Partnership Interest may be transferred unless such Transfer
is made in accordance with the provisions of this Article VI and the
transferor and the Transferee have complied with the following
conditions:
(a) the transferor has executed and delivered to the General
Partner a copy of the assignment of the Partnership Interest to
Transferee in form and substance reasonably satisfactory to the General
Partner; and
(b) the Transferee, if not already a party to this Agreement,
becomes a party to this Agreement, assumes all of the obligations
hereunder of its transferor in respect of such Partnership Interest and
agrees to be bound by the terms and conditions hereof in the same
manner as the transferor.
6.2.2 Upon compliance with Section 6.1 and 6.2.1, any Transferee
shall be substituted as a Partner for, and shall enjoy the same rights
and be subject to the same obligations as, its predecessor as a Partner
hereunder, and the General Partner shall prepare and file as soon as
practicable, if required by law, an amendment to the Certificate of
Limited Partnership and any other qualification documents. Exhibit A
hereto shall also be amended to reflect such Transfer.
6.2.3 If there is a permitted Transfer of a Partnership Interest
under this Agreement:
(a) In the case of a Transfer by any Partner, such Partner shall,
upon the effectiveness of such Transfer, be released and discharged
from any further liability under this Agreement in respect of such
Partnership Interest, provided, however, that such transferring Partner
shall remain liable to the Partnership for any Partnership
distributions wrongfully paid to or received by such transferring
Partner or that are required by law to be returned to the Partnership;
and
(b) If requested to do so by any transferring Partner or by the
Transferee by notice given to the Partners, the Partnership shall make
an election under Section 754 of the Code (and a corresponding election
under applicable state and local law). Upon the request of any Partner,
the Partnership shall also make a timely election under Section 754 of
the Code upon a distribution of property or money to a Partner.
6.3 Transfers of Interests in Partners.
6.3.1 The transfer of a majority of the issued and outstanding
capital stock (or equivalent interest) of a Partner or a controlling
interest of a Partner, however accomplished, whether in a single
transaction or in a series of related or unrelated transactions, and
whether directly or by transfer of stock (or equivalent interest) of a
direct or indirect parent corporation or other entity or otherwise,
shall be deemed to be a purported Transfer of an interest in the
Partnership for purposes of this Agreement.
6.3.2 Except as provided in Section 6.3.3, MNG agrees that it will
not Transfer (whether voluntarily, involuntarily or by operation of
law) all or any part of its ownership interest in the Class A Limited
Partner, without the consent of the General Partner, which consent
shall not be unreasonably withheld (MNG acknowledges and agrees that
the General Partner's ability to grant consent to a Transfer is
circumscribed by certain contractual restrictions under the Joint
Venture's financing arrangements, and the withholding of consent by the
General Partner in order to comply with these contractual restrictions
will not be considered unreasonable).
6.3.3 The restriction of Section 6.3.1 shall not apply and no
consent of the General Partner shall be required for (x) a Transfer
directly or indirectly by MNG or CPC of its ownership interests in the
Class A Limited Partner or any Class B Limited Partner to an Affiliate
of MNG so long as (1) all of the other requirements of this Article VI
have been complied with and (2) MNG or a MNG Affiliate holds and
maintains, directly or indirectly, voting control of such Transferee
following such Transfer, and (y) the grant of a security interest in
the ownership interests in the Class A Limited Partner or any Class B
Limited Partner.
6.4 Other Consents and Requirements. Any Transfer must be in
compliance with all requirements imposed by any state securities
administrator having jurisdiction over the Transfer and the United
States Securities and Exchange Commission.
6.5 Assignment Not in Compliance. Any Transfer in contravention of
any of the provisions of this Article VI (whether voluntarily,
involuntarily or by operation of law) shall be void and of no effect,
and shall neither bind nor be recognized by the Partnership.
6.6 Pledge. Each Partner and any permitted Transferee of each
Partner may collaterally assign its Partnership Interest and its
attendant rights under this Agreement to the Joint Venture's lenders
for security purposes. Each Limited Partner may at any time assign its
Partnership Interest and its rights under this Agreement as collateral
security to Persons extending financing to such Limited Partner or any
of its Affiliates (and such Persons may at any time foreclose on such
security interest).
6.7 Division of Partnership Interests. The several rights and
obligations inherent in the Capital Account and Partnership Interest
are indivisible except in equal proportions, such that the assignment
of a specified percentage of a Partner's Partnership Interest may only
represent an equal percentage of the total Capital Account that was
attributable to such Partner's Partnership Interest prior to the
assignment.
6.8 Withdrawal of Partners. No Partner may withdraw from the
Partnership except upon the transfer of its Partnership Interest
permitted under the provisions of this Agreement or upon the
dissolution and winding up of the Partnership in accordance with the
provisions of Article VII. For purposes of this Agreement, the term
``withdrawal'' does not include the happening of any event described in
Section 17-402(a)(4) or (5) of the Act, and no Partner shall cease to
be a Partner solely upon the happening of such event(s). The withdrawal
of a Partner shall not alter the allocations and distributions to be
made to the Partners pursuant to this Agreement.
6.9 Issuance of Partnership Interests. Subject to the provisions of
any Put/Call Agreement, the General Partner may cause the Partnership
to issue additional Partnership Interests to any Person and may admit
to the Partnership as additional Partners the Person acquiring such
Partnership Interests, if such Persons were not previously admitted as
Partners. The Persons acquiring such Partnership Interests shall have
the rights and be subject to the obligations set forth in this
Agreement as it may be amended in accordance with Section 9.8 in
connection therewith. A Person admitted as a new Partner shall only be
entitled to distributions and allocations of Net Profit and Net Loss
attributable to the period beginning on the effective date of its
admission to the Partnership, and the Partnership shall attribute Net
Profit and Net Loss to the period before the effective date of the
admission of a new Partner and to the period beginning on the effective
date of the admission of a new Partner by the closing of the books
method. The Partnership will not issue any additional Class A Limited
Partner Units to any other Person without the consent of the Class A
Limited Partner and will not issue Class B Limited Partner Units to any
other Person without the consent of the holders of the majority of the
Class B Limited Partner Units.
[[Page 11699]]
Article VII
Dissolution and Liquidation
7.1 Events of Dissolution. The Partnership shall be dissolved,
terminated and liquidated upon the happening of any of the following
events:
(a) the expiration of the term of the Partnership as set forth in
Section 2.7;
(b) at such time as the JOA shall expire or otherwise terminate;
(c) upon mutual agreement of the Partners; or subject to any
provision of this Agreement that limits or prevents dissolution, the
happening of any event that, under applicable law, causes the
dissolution of a limited partnership.
7.2 Liquidation. Upon dissolution of the Partnership for any
reason, the Partnership shall immediately commence to wind up its
affairs in accordance with this Article VII. A reasonable period of
time shall be allowed for the orderly termination of the Partnership's
business, discharge of its liabilities, and distribution or liquidation
of the remaining assets so as to enable the Partnership to minimize the
normal losses attendant to the liquidation process. The dissolution and
liquidation of the Partnership shall be conducted and supervised by the
General Partner, who is hereby authorized and empowered to execute on
behalf of the Partnership any and all documents necessary or desirable
to effectuate the dissolution and liquidation of the Partnership and
the transfer of any property of the Partnership.
7.3 Priority on Liquidation. The General Partner shall, to the
extent feasible, liquidate and/or distribute the assets of the
Partnership as promptly as shall be practicable consistent with the
other provisions hereof. Such assets, or the proceeds of such
liquidation, shall be applied as follows:
7.3.1 first, to the payment of the debts and liabilities of the
Partnership, in the order of priority provided by law (excluding any
loans by any Partner to the Partnership);
7.3.2 second, the Partnership shall distribute to the Class A
Limited Partner the Mail masthead, all trademarks, copyrights, trade
names, service names and service marks of the Mail, subscriber and
advertiser lists, print and electronic archives of the Mail, associated
Websites and URLs (including ``dailymail.com'') and all legal rights
associated with these assets, subject to such dispositions, additions
or substitutions relating thereto which may have occurred in the
ordinary course of the operations of the Partnership or the Joint
Venture subsequent to the date hereof, including in particular, any and
all lists of advertisers and subscribers to Mail, together with copies
of any contracts with such subscribers relating to Mail and any
executory contracts for the purchase of advertising in Mail, free and
clear of any lien, encumbrance, right or interest (including any option
or any license or other right of use) of or in favor of a third party,
transfer restriction (including any right of first offer or refusal or
similar provision) or any other similar right or interest whatsoever;
7.3.3 third, to the payment of loans by any Partner to the
Partnership and the payment of the expenses of liquidation;
7.3.4 fourth, to the setting up of any reserve which the General
Partner may deem reasonably necessary for contingent or unforeseen
liabilities or obligations of the Partnership or any liability or
obligation not then due and payable; provided, however, that any such
reserve shall be paid over by the General Partner into a Partnership
account established for such purpose, to be held in such account for
the purpose of disbursing such reserves in payment of such liabilities,
and, at the expiration of such holdback period as the General Partner
shall deem advisable, to distribute the balance thereafter remaining in
the manner herein provided; and
7.3.5 fifth, to payment to the Partners, in accordance with the
following order of priority:
(a) First, the Partnership shall distribute to the Class A Limited
Partner, subject to the prior satisfaction of the claims of all
creditors, cash in an amount equal to the aggregate cash distributed to
the Partnership from the Joint Venture pursuant to clause (2)(a) of
Section VI B of the JOA.
(b) Thereafter, the Partnership shall distribute all remaining
assets to the Class B Limited Partner(s) and the General Partner in
accordance with their respective Capital Account balances.
7.4 Statements on Liquidation. Each of the Partners shall be
furnished with a statement which shall set forth the assets and
liabilities of the Partnership as at the date of dissolution and as at
the date of complete liquidation, the share of each Partner thereof,
and a reasonably detailed report of the manner of disposition of the
assets of the Partnership. Upon compliance with the foregoing
distribution plan and completion of the winding up process, the
Partnership shall be terminated and the General Partner shall cause the
cancellation of the Certificate of Limited Partnership and all
qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware and shall take such
other action as may be necessary to terminate the Partnership.
7.5 Return of Capital or Partition. No Partner shall have any right
to receive its Capital Contribution or any profit of the Partnership or
to obtain a partition of assets of the Partnership or to cause the
dissolution of the Partnership other than as provided in this
Agreement. The General Partner shall not be personally liable for the
return of the Capital Contributions of the Limited Partners, or of any
portion thereof, it being expressly understood that any such return
shall be made solely from Partnership assets.
Article VIII
Records and Accounting
8.1 Books and Records. At all times during the continuance of the
Partnership, the General Partner shall keep or cause to be kept books
of account of the transactions of the Partnership consistent with the
provisions of the JOA. The books of account, records and all documents
and other writings of the Partnership shall be kept and maintained at
the principal office of the Partnership or of the General Partner. Each
Partner and its representatives shall, upon reasonable notice to the
General Partner, have access to such books, records and documents
during reasonable business hours and may inspect and make copies of any
of them at its own expense.
8.2 Bank Accounts. The General Partner may from time to time open
and maintain on behalf of the Partnership a bank account or accounts
with such depositaries as the General Partner shall determine, in which
monies received by or on behalf of the Partnership shall be deposited.
All withdrawals from such accounts shall be made upon the signature of
such Person or Persons as the General Partner may from time to time
designate.
8.3 Required Filings. The General Partner shall cause the
Partnership to file, on or before the dates the same may be due, giving
effect to extensions obtained, all reports, returns and applications
which may be required by any taxing authority or other governmental
body having jurisdiction. The General Partner shall timely deliver to
each of the Partners such information, including Schedules K-1, as may
be necessary for the preparation by such Partner of its Federal, state
or other tax returns.
[[Page 11700]]
Article IX
Miscellaneous
9.1 Supervision of Editorial Staff. In order to fulfill its
obligations under the JOA, CPC shall exercise exclusive supervision
over all editorial and reportorial functions of the Mail. CPC shall
select the staff, designate all editors and newsroom managers, make all
newsroom assignments, and set all editorial policies for the Mail.
DGHC, as General Partner of the Partnership, shall cause the Joint
Venture to employ the employees selected by CPC and to assign those
employees to work exclusively as the staff of the Mail. CPC shall have
complete control and authority over the editors and other staff of the
editorial department of the Mail (including the exclusive authority to
determine the number, identity and salaries of the editorial department
of the Mail and to make hiring and firing decisions, so long as the
Editorial Expense for the Mail does not exceed the approved budgeted
amount for the Mail). The term ``editorial department'' as used herein
shall include the news, editorial, editorial promotion and photographic
functions of the Mail.
9.2 Notices. All notices, demands and other communications which
may or are to be given hereunder or with respect hereto shall be in
writing, shall be given either by personal delivery, facsimile or by
certified or special express mail or recognized overnight delivery
service, first class postage prepaid, or when delivered to such
delivery service, charges prepaid, return receipt requested, and shall
be deemed to have been given or made when personally received by the
addressee, addressed as follows:
(1) If to the Class A Limited Partner, to:
MediaNews Group, Inc., 101 W. Colfax Ave., Suite 1100, Denver, CO
80202, Attn: Joseph J. Lodovic, IV President, Facsimile: (303) 954-
6320.
With a copy to:
Hughes Hubbard & Reed LLP, One Battery Park Plaza, New York, New York
10004-1482, Attn: James Modlin, Facsimile: (212) 422-4726.
or such other addresses as the Class A Limited Partner may from time to
time designate.
(2) If to the General Partner or the Partnership, to:
Daily Gazette Company, 1001 Virginia Street, East Charleston, WV 25301,
Attn: Ms. Elizabeth E. Chilton, President, Facsimile: (304) 348-5180.
And
Attn. Mr. Norman Watts Shumate III, Facsimile: (304) 348-1795.
With a copy to:
Edmondson + Blumenthal PLLC, 12 Cadillac Drive, Suite 210, Brentwood,
TN 37027, Attn: Steven E. Blumenthal, Facsimile: (615) 296-4600.
or such other addresses as the General Partner or the Partnership may
from time to time designate.
9.3 Further Assurances. The Partners will execute and deliver such
further instruments and do such further acts and things as may be
required to carry out the intent and purposes of this Agreement.
9.4 Agreement in Counterparts. This Agreement may be executed in
counterparts and all counterparts so executed shall constitute one
agreement binding on all the parties hereto notwithstanding that all
the parties hereto are not signatories to the original or to the same
counterpart.
9.5 Captions. Captions contained in this Agreement are inserted as
a matter of convenience and in no way define the scope of this
Agreement or the intent of any provision hereof.
9.6 Construction. None of the provisions of this Agreement shall be
for the benefit of or be enforceable by any creditor of the Partnership
or of any Partner (subject to the security interest and other rights in
favor of the Joint Venture's lenders).
9.7 Successors. Except as otherwise expressly provided in this
Agreement, all provisions of this Agreement shall be binding upon,
inure to the benefit of, and be enforceable by or against the
successors and permitted assigns of the parties hereto.
9.8 Amendments.
9.8.1 This Agreement may be modified or amended only upon the
written agreement of each of the Partners (and subject to any
applicable contractual restrictions under the Joint Venture's financing
arrangements), except that this Agreement may be amended from time to
time by the General Partner without the consent of the Limited
Partners:
(a) to reflect the rights and obligations of a Person admitted as a
Partner upon the issuance of Partnership Interests pursuant to Section
6.9 and any change in the rights and obligations of any existing
Partner upon the issuance to any Person of partnership interests
pursuant to Section 6.9, provided that the consent of an affected
Limited Partner and/or the Warrant Holder shall be required to the
extent such amendment adversely affects the interests of such Limited
Partner and/or the Warrant Holder, as the case may be;
(b) to change the Partnership's principal office or other place of
business;
(c) to change the Partnership's method of allocating income and
loss for tax purposes to the extent required by new or changes to
Treasury Regulations, Internal Revenue Service announcements or
rulings, or final courts decisions, provided that the consent of an
affected Limited Partner and/or the Warrant Holder shall be required to
the extent such amendment adversely affects the interests of such
Limited Partner and/or the Warrant Holder, as the case may be;
(d) to add to the representations, duties or obligations of the
General Partner (other than duties or obligations relating to the
editorial and reportorial functions of the Mail); and
(e) to cause to be deleted from this Agreement any provision or
part of any provision that is found by a court of competent
jurisdiction to be invalid or unenforceable in any respect, which
provision may be deleted from this Agreement by the General Partner to
the extent of such invalidity or unenforceability without in any way
affecting the remaining parts of such provision or the remaining
provisions of this Agreement.
No change in the number of General Partner Units or Class B Limited
Partner Units (whether by an amendment or otherwise) will be effective
unless it has been executed or approved in writing by the holders of a
majority of the Class B Limited Partner Units (or, prior to the
exercise in full of the Warrant (or the termination of the Warrant),
the Warrant Holder).
9.8.2 The General Partner will give notice to the Limited Partners
(and, prior to the exercise in full (or termination) of the Warrant,
the Warrant Holder) ten days prior to any modification or amendment to
this Agreement pursuant to this Section 9.8.
9.8.3 The General Partner will cause the Partnership to prepare and
file any amendment to the Certificate of Limited Partnership that may
be required to be filed under the Act as a consequence of any amendment
to this Agreement.
9.9 Governing Law. This Agreement and the rights and obligations of
the Partners shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to its conflicts of laws
principles.
9.10 Integration. This Agreement amends and restates the Prior
Partnership Agreement in its entirety. This Agreement, together with
the JOA and the Warrant, constitutes the entire agreement among the
parties hereto pertaining to the subject matter hereof
[[Page 11701]]
and supersedes all prior agreements (oral or written) and
understandings pertaining thereto. In the event of any conflict between
this Agreement and the JOA, this Agreement shall control.
9.11 Severability. The invalidity of any article, section,
subsection, clause or provision of this Agreement shall not affect the
validity of the remaining articles, sections, subsections, clauses or
provisions hereof.
9.12 Representations by Partners. Each Partner represents and
warrants to the other Partners and the Partnership that this Agreement
is and will remain its valid and binding agreement, enforceable in
accordance with its terms. Each Partner represents and warrants to the
Partnership and the other Partners that: (i) it is fully aware that its
Partnership Interest is not being registered under the Securities Act
of 1933, as amended, and has been issued and sold in reliance upon
federal and state exemptions for transactions not involving a public
offering, that its Partnership Interest cannot and will not be sold or
transferred except in a transaction that is exempt from registration
under federal and state securities laws, and that such Partner is an
``accredited investor'' within the meaning of Regulation D under the
Securities Act of 1933, as amended.
9.13 Non-Disclosure. Each Partner agrees that, except as otherwise
consented to by the General Partner, all non-public information
furnished to it or to which it has access pursuant to this Agreement
will be kept confidential and will not be disclosed by such Partner or
by any of its agents, representatives or employees, in any manner
whatsoever, in whole or in part, except that:
(a) each Partner shall be permitted to disclose such information to
those of its (and its Affiliates') Affiliates, agents, representatives
and employees who need to be familiar with such information in
connection with such Partner's investment in the Partnership and who
agree to maintain the confidentiality thereof in accordance with the
provisions of this Section 9.13;
(b) each Partner shall be permitted to disclose such information to
its Affiliates;
(c) each Partner shall be permitted to disclose information to the
extent required by law, including federal or state securities laws or
regulations, by the rules and regulations of any stock exchange or
association on which securities of such Partner or any of its
Affiliates are traded or by subpoena or other legal process so long as
such Partner shall have first given the Partnership notice in advance
of such disclosure (so that the Partnership may attempt to contest the
necessity of disclosing such information) to the extent practicable
under the circumstances;
(d) each Partner shall be permitted to disclose information to the
extent necessary for the enforcement of any right of such Partner
arising under this Agreement;
(e) each Partner shall be permitted to disclose information to a
permitted Transferee or a prospective Permitted Transferee, so long as
such Person agrees (in a writing which provides the Partnership with an
independent right of enforcement) to be bound by the provisions of this
Section;
(f) each Partner shall be permitted to disclose information that is
or becomes generally available to the public other than as a result of
a disclosure by such Partner, its agents, representatives, or
employees; and
(g) each Partner shall be permitted to disclose information that
becomes available to such Partner on a nonconfidential basis from a
source (other than the Partnership, any other Partner, or their
respective agents, representatives, and employees) that, to the best of
such Partner's knowledge, is not prohibited from disclosing such
information to such Partner by a legal, contractual, or fiduciary
obligation to the Partnership or any other Partner or hat is derived by
such Partner or its agents without reliance on information the
disclosure of which is prohibited by this Section 9.13.
9.14 Execution of Papers. The Partners agree that they will not
unreasonably refuse to execute such instruments, documents and papers
as the General Partner deems necessary or appropriate to carry out the
intent of this Agreement.
IN WITNESS WHEREOF, the parties hereto have each caused this
Agreement to be duly executed by their respective officers duly
authorized.
DAILY GAZETTE HOLDING COMPANY, LLC
By: Daily Gazette Company, Sole Member
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
CHARLESTON PUBLISHING COMPANY
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
MEDIANEWS GROUP, INC. now known as AFFILIATED MEDIA, INC. (for purposes
of Section 6.3)
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
DAILY GAZETTE COMPANY (for purposes of Section 4.9)
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
Exhibit A--Transfers to Partnership by Partners
------------------------------------------------------------------------
Partner Contribution Units received
------------------------------------------------------------------------
Daily Gazette Holding (i) 100% of the 9,358 General
Company, LLC. ownership interests Partner Units.
in Daily Gazette
Publishing Company,
LLC.
(ii) cash and other
assets provided in
Master
Restructuring
Agreement.
Charleston Publishing Intangible and other 1 Class A Limited
Company. assets more fully Partnership Unit.
described in Master
Restructuring
Agreement.
------------------------------------------------------------------------
Exhibit B--Capital Account Balances as of Date Hereof
------------------------------------------------------------------------
Partner Value
------------------------------------------------------------------------
Daily Gazette Holding Company, LLC........................ $63,750,000
Charleston Publishing Company............................. $1
------------------------------------------------------------------------
AMENDED AND RESTATED OPERATING AGREEMENT
OF
DAILY GAZETTE HOLDING COMPANY, LLC
THIS AMENDED AND RESTATED OPERATING AGREEMENT OF DAILY GAZETTE
HOLDING COMPANY, LLC, is entered into effective as of ------------,
2009, by and between Daily Gazette Holding Company, LLC, a limited
liability company organized pursuant to the Delaware Limited Liability
Company Act (the ``Company''), and Daily Gazette Company, a West
Virginia corporation, its sole member.
[[Page 11702]]
Recital
The parties desire to amend and restate the Operating Agreement of
the Company, dated as of May 7, 2004, as set forth herein.
Agreement
In consideration of the mutual covenants and agreements set forth
in this Agreement, the parties agree as follows.
1. Definitions
The following terms, as used in this Agreement, have the meanings
set forth in this Section:
``Act'' means the Delaware Limited Liability Company Act.
``Affiliate'' means, with respect to any Person, any other Person
that directly or indirectly through one or more intermediaries
controls, is controlled by, or is under common control with such
Person. For purposes of this definition, the term ``controls'' means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract, or otherwise. The
terms ``controlled by'' and ``under common control with'' have meanings
corresponding to the meaning of ``controls.''
``Agreement'' means this Amended and Restated Operating Agreement,
as it may be amended, restated, modified, or supplemented from time to
time in accordance with its terms.
``Board of Managers'' shall have the meaning set forth in Section 5
hereof.
``Certificate'' is the Certificate of Formation of Daily Gazette
Holding Company, LLC as filed with the Secretary of State of the State
of Delaware, as the same may be amended from time to time.
``Class B Limited Partner'' shall have the meaning set forth in
Section 1.1.11 of the Partnership Agreement.
``Class B Limited Partner Unit'' shall have the meaning set forth
in Section 1.1.12 of the Partnership Agreement.
``Class B Managers'' means the Managers appointed by either the
Warrant Holder or the Class B Limited Partner(s) pursuant to Section
5(b)(ii) hereof.
``JOA'' means that certain Second Amended and Restated Joint
Venture Agreement dated as of even date herewith, as such agreement may
be amended from time to time.
``Joint Venture'' means Charleston Newspapers, an unincorporated
West Virginia joint venture.
``Manager'' means a member of the Board of Managers.
``Member'' means Daily Gazette Company and its successors-in-
interest under this Agreement.
``Person'' means an individual, corporation, limited liability
company, association, general partnership, limited partnership, limited
liability partnership, joint venture, trust, estate, or other entity or
organization.
``Partnership'' means Charleston Newspapers Holdings, L.P., a
Delaware limited partnership.
``Partnership Agreement'' means that certain Amended and Restated
Limited Partnership Agreement for Charleston Newspapers Holdings, L.P.,
dated as of even date herewith, as such agreement may be amended from
time to time
``Put/Call Agreement'' means a put/call agreement entered into by a
Class B Limited Partner, the Company and the Partnership in connection
with the exercise by the Warrant Holder of its right to purchase Class
B Limited Partner Units pursuant to the terms of the Warrant, in
substantially the form attached to the Warrant as Exhibit B thereto.
``Warrant'' means that certain warrant, dated as of even date
herewith, granted to the Warrant Holder by the Partnership to purchase
Class B Limited Partner Units.
``Warrant Holder'' means Charleston Publishing Company or any
permitted transferee of the Warrant.
2. The Company and Its Business
(a) Formation. The Company was formed on April 12, 2004, pursuant
to the provisions of the Act. Except as provided in this Agreement, all
rights, liabilities, and obligations among the Member, the Company, and
other Persons, shall be as provided in the Act, and this Agreement
shall be construed in accordance with the provisions of the Act. To the
extent that the rights or obligations of the Member are different by
reason of any provision of this Agreement than they would be in the
absence of such provision, this Agreement shall, to the extent
permitted by the Act, control.
(b) Filing of Certificate of Limited Liability Company. The Member
has caused the Certificate to be filed with the Secretary of State of
Delaware and shall cause the Certificate to be filed or recorded in any
other public office where filing or recording is required or advisable.
The Member shall do, and continue to do, all other things that are
required or advisable to maintain the Company as a limited liability
company existing pursuant to the laws of the State of Delaware.
(c) Company Name. The name of the Company shall be ``Daily Gazette
Holding Company, LLC.'' The business of the Company may be conducted
under that name or, upon compliance with applicable laws, any other
name that the Member deems appropriate or advisable. The Member shall
file any assumed name certificates and similar filings, and any
amendments thereto, that the Member considers appropriate or advisable.
(d) Term of the Company. The term of the Company commenced on the
date of the filing of the Certificate with the Secretary of State of
the State of Delaware and shall continue until the Company is dissolved
and its affairs wound up in accordance with the Act and Article 8 of
this Agreement.
(e) Purpose of the Company. The purpose of the Company is to do all
lawful acts and things necessary, appropriate, proper, advisable,
incidental to, or convenient for the furtherance and accomplishment of
the foregoing purpose.
(f) Authority of the Company. The Company shall be empowered and
authorized to do all lawful acts and things necessary, appropriate,
proper, advisable, incidental to, or convenient for the furtherance and
accomplishment of its purposes.
(g) Principal Office and Other Offices; Registered Agent. The
address of the Company's registered office which is required to be
maintained by the Company in the State of Delaware pursuant to Section
18-104 of the Act shall be located at Corporation Service Company, 2711
Centerville Road, Suite 400, Wilmington, Delaware 19808, and the name
of the Company's registered agent at such address is Corporation
Service Company. The principal office of the Company shall be c/o
Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, Delaware 19808. The Company may maintain any other offices
at any other places that the Board of Managers deems advisable. The
Company may, upon compliance with the applicable provisions of the Act,
change its principal office or registered agent from time to time at
the discretion of the Board of Managers.
(h) Foreign Qualification. The Company shall take all necessary
actions to be authorized to conduct business legally in all appropriate
jurisdictions, including registration or qualification of the Company
as a foreign limited liability company in those jurisdictions that
provide for registration or qualification.
(i) Fiscal Year. The fiscal year of the Company shall be the
calendar year. The Company shall have the same fiscal year for income
tax purposes and for financial accounting purposes.
3. Company Capital
[[Page 11703]]
(a) Capital Contributions. The Member shall make such capital
contributions to the Company as it deems appropriate.
(b) Disbursements. Subject to Section 5 hereof, the Company shall
pay all costs and expenses of the Company business. The Company may set
aside funds for any items that are proper Company purposes, as
determined by the Board of Managers.
4. Cash Distributions; Allocations of Profits and Losses
(a) Distributions. All cash of the Company available for
distribution shall be distributed to the Member at such times and in
such amounts as the Board of Managers may determine.
(b) Allocations of Profits and Losses. All profits and losses of
the Company shall be allocated to the Member.
5. Rights and Powers of the Member; Board of Managers.
(a) Management Rights Generally. The responsibility and control of
the management and conduct of the Company's day-to-day activities and
operations shall be vested in the Member, subject to Section 5(b)
below.
(b) Board of Managers.
(i) The business and affairs of the Company shall be managed by or
under the direction of a Board of Managers (the ``Board of Managers'')
and all actions outside of the ordinary course of business of the
Company, to be taken by or on behalf of the Company, shall require the
approval of the Board of Managers. Except as otherwise provided in this
Agreement, the Board of Managers shall have the duties, powers and
rights of the board of directors of a corporation organized under the
General Corporation Law of the State of Delaware (it being understood
and agreed, nonetheless, that the individual Managers appointed by the
Warrant Holder or the Class B Limited Partner(s) as provided below
represent the interests of the Warrant Holder or the Class B Limited
Partner(s)).
(ii) The Board of Managers shall consist of up to five individual
Managers appointed by the Member and in no event may the Board of
Managers consist of more than five Managers without the consent of the
Class B Managers; provided, however, that in no event may the Board of
Managers consist of more than five Managers unless not fewer than forty
percent (40%) of the Managers are Class B Managers. Unless and until
the Warrant Holder exercises its rights under the Warrant to purchase
any Class B Limited Partner Units, the Member shall delegate its right
to appoint two (2) of the Managers (or such greater number as required
by the first sentence of this section) to the Warrant Holder, and upon
the purchase by the Warrant Holder of any Class B Limited Partner Units
pursuant to the Warrant, the Member shall delegate its right to appoint
two (2) of the Managers (or such greater number as required by the
first sentence of this section) to the Class B Limited Partner(s). If
there is more than one Class B Limited Partner, then the right to
appoint two (2) of the Managers (or such greater number as required by
the first sentence of this section) will be vested solely in the Class
B Limited Partner that supervises editorial and reportorial functions
of The Charleston Daily Mail pursuant to Section 9.1 of the Partnership
Agreement. Neither the Warrant Holder nor the Class B Limited
Partner(s) may appoint current employees of the Joint Venture, the
Member, the Company, the Partnership or Daily Gazette Publishing
Company, LLC to represent it on the Board of Managers.
(iii) The Board of Managers shall only have the power and authority
to act by the vote of the constituent Managers and no individual
Manager, in the capacity of Manager, shall have the power or authority
to act as the agent or representative of the Company or to otherwise
bind the Company. Voting by the Managers shall be on a per capita
basis. Actions may be taken by the Board of Managers by, but only by, a
majority vote of the Managers; provided, however, that actions by the
Board of Managers concerning (x) the budgeted Editorial Expenses (as
that term is defined in the JOA) for The Charleston Gazette and The
Charleston Daily Mail or (y) ``news hole'' and color usage allocations
for The Charleston Gazette and The Charleston Daily Mail shall require
the prior approval of at least 75% of the Managers (i.e., if the Board
of Managers consists of four Managers, not fewer than three Managers
must vote in favor of the particular action, and if the Board of
Managers consists of five Managers, not fewer than four Managers must
vote in favor of the particular action); provided further that no
Manager appointed by the Warrant Holder or the Class B Limited
Partner(s), as the case may be, shall participate in any decisions
concerning the news, editorial policy or content of The Charleston
Gazette or The Charleston Gazette-Mail or have any connection with the
news and editorial operations of The Charleston Gazette or The
Charleston Gazette-Mail, and all such decisions shall be made
exclusively by the Managers appointed by the Member. Either the Member
or, as applicable, the Warrant Holder or the Class B Limited Partner(s)
may at any time, by written notice to the other, remove its Managers,
with or without cause, and substitute Managers to serve in their stead.
No Manager shall be removed from office, with or without cause, without
the consent of the Person that designated such Manager. Each Manager
appointed by the Warrant Holder or the Class B Limited Partner(s) may
act (or refrain from acting), and the Warrant Holder or the Class B
Limited Partner(s) may instruct such Managers, in their capacity as
such, to act (or refrain from acting) solely according to the interests
(or the perceived interests) of the Warrant Holder or the Class B
Limited Partner(s) and none of the foregoing shall be deemed to breach
any fiduciary duty that, pursuant to this Agreement or at law or in
equity, the Warrant Holder or the Class B Limited Partner(s) otherwise
would be deemed to have to the Company, the Partnership or the Member.
The Board of Managers shall hold such meetings no less frequently than
once per calendar quarter and at such times and places as shall be
determined by the Managers. Special meetings of the Board of Managers
may be called at any time by agreement of the Managers. The Board of
Managers may establish such procedures for the conduct of meetings as
may be agreed by the Managers.
(c) Officers. The Board of Managers may appoint such officers, from
time to time, as the Board of Managers deems necessary and advisable.
(d) Authority of the Member. Subject to the management of the
business and affairs of the Company by the Board of Managers pursuant
to Section 5(b) hereof, the Member shall have all powers necessary to
manage and control the day-to-day activities and operations of the
Company.
(e) Admission of Additional Members. The Member, in its discretion,
may admit additional members to the Company on terms and conditions
agreed to by the Member and the Person being admitted as an additional
member; provided, however, that the Board of Managers shall not consist
of more than five Managers without the consent of the Class B Managers
and in no event may the Board of Managers consist of more than five
Managers if fewer than forty percent (40%) of the Managers are Class B
Managers.
(f) Limitation of Liability of the Member and Managers. The debts,
obligations, and liabilities of the Company, whether arising in
contract, tort, or otherwise, shall be solely the debts, obligations,
and liabilities of the Company; and the Member and the Managers shall
not be obligated
[[Page 11704]]
personally for any such debt, obligation, or liability of the Company
solely by reason of being the Member or a Manager, except and only to
the extent as otherwise expressly required by law.
(g) Indemnification.
(i) In any threatened, pending, or completed claim, action, suit,
or proceeding to which the Member or a Manager was or is a party or is
threatened to be made a party by reason of its activities on behalf of
the Company, the Company shall indemnify and hold harmless such Member
and Manager against losses, damages, expenses (including attorneys' and
accountants' fees), judgments, and amounts paid in settlement actually
and reasonably incurred in connection with such claim, action, suit, or
proceeding, except that the Member and the Managers shall not be
indemnified for actions constituting the improper receipt of personal
benefits, willful misconduct, recklessness, or gross negligence with
respect to the business of the Company; provided, however, that to the
extent the Member or a Manager has been successful on the merits or
otherwise in defense of any action, suit, or proceeding to which it was
or is a party or is threatened to be made a party by reason of the fact
that it was or is a Member or Manager of the Company, or in defense of
any claim, issue, or matter in connection therewith, the Company shall
indemnify such Member and Manager and hold him harmless against the
expenses (including attorneys' and accountants' fees) actually incurred
by such Member and Manager in connection therewith.
(ii) Expenses (including attorneys' and accountants' fees) incurred
in defending a civil or criminal claim, action, suit, or proceeding
shall be paid by the Company in advance of the final disposition of the
matter upon receipt of an undertaking by or on behalf of the Member or
a Manager to repay such amount if such Member or Manager is ultimately
determined not to be entitled to indemnity.
(iii) For purposes of this Section 5(g), the termination of any
action, suit, or proceeding by judgment, order, settlement, or
otherwise adverse to the Member or a Manager shall not, of itself,
create a presumption that the conduct of such Member or Manager
constitutes willful misconduct, recklessness, or gross negligence with
respect to the business of the Company.
6. Permitted Transactions
(a) Other Businesses. The Member, the Managers and their respective
affiliates, agents, and representatives, may engage in or possess an
interest in other business ventures of any nature or description,
independently or with others, whether currently existing or hereafter
created and whether or not competitive with or advanced by the business
of the Company. The Company shall not have any rights in or to the
income or profits derived therefrom.
(b) Transactions with the Company. The Company may, in the sole
discretion of the Board of Managers, contract with any Person
(including the Member or any Person affiliated with the Member or in
which the Member may be interested) for the performance of any services
which may reasonably be required to carry on the business of the
Company, and any such Person dealing with the Company, whether as an
independent contractor, agent, employee, or otherwise, may receive from
others or from the Company profits, compensation, commissions, or other
income incident to such dealings.
7. Assignment, Transfer, or Sale of Interests in the Company
Subject to the Put/Call Agreement, the Company may sell, assign,
pledge, or otherwise encumber or transfer all or any part of its
interest in the Company to any Person.
8. Dissolution and Termination of the Company
(a) Events of Dissolution. The Company shall dissolve upon the
earlier to occur of:
(i) an election to dissolve the Company made by the Board of
Managers, subject to any restriction in any agreement to which the
Company is a party; or
(ii) the happening of any event that, under the Act, causes the
dissolution of a limited liability company.
(b) Actions on Dissolution. Upon the dissolution of the Company,
the Board of Managers shall act as liquidator to wind up the Company.
The proceeds of liquidation shall be applied first to the payment of
the debts and liabilities of the Company (including any loans to the
Company made by the Member), the expenses of liquidation, and the
establishment of any reserves that the liquidator deems necessary for
potential or contingent liabilities of the Company. Remaining proceeds
shall be distributed to the Member as provided in Section 4(a). Upon
the dissolution and winding up of the Company, the liquidator shall
file a certificate of cancellation with the Secretary of State of
Delaware in accordance with Section 18-203 of the Act. Upon the
completion of the distribution of Company assets and the proceeds of
liquidation as provided in this Section 8(b), the Company shall be
terminated.
9. Books, Records, and Returns
(a) Books of Account and Records. A copy of this Agreement and any
other records required to be maintained by the Act shall be maintained
at the principal office of the Company at the location specified in
Section 2(g). All such books and records shall be available for
inspection and copying by the Member or its duly authorized
representatives during ordinary business hours. The Company shall keep
accurate books and records of the operation of the Company which shall
reflect all transactions, be appropriate and adequate for the Company's
business and for carrying out the provisions of this Agreement.
(b) Deposit of Company Funds. All revenues, assessments, loan
proceeds, and other receipts of the Company will be maintained on
deposit in interest-bearing and non-interest bearing accounts and other
investments as the Board of Managers deems appropriate.
10. Miscellaneous
(a) Captions. All section or paragraph captions contained in this
Agreement are for convenience only and shall not be deemed part of this
Agreement.
(b) Pronouns, Singular and Plural Form. All pronouns and any
variations thereof shall be deemed to refer to the masculine, feminine,
and neuter as the identity of the Person or Persons referred to may
require, and all words shall include the singular or plural as the
context or the identity of Persons may require.
(c) Further Action. The parties shall execute and deliver all
documents, provide all information, and take, or forbear from, all
actions that may be necessary or appropriate to achieve the purposes of
this Agreement.
(d) Entire Agreement. Except as to matters with respect to which
additional agreements are referenced herein, this Agreement contains
the entire understanding among the parties and supersedes any prior
understandings and agreements between them regarding the subject matter
of this Agreement.
(e) Agreement Binding. This Agreement shall be binding upon the
successors and assigns of the parties.
(f) Severability. If any provision or part of any provision of this
Agreement shall be invalid or unenforceable in any respect, such
provision or part of any provision shall be ineffective to the extent
of such invalidity or unenforceability only, without in any way
affecting the remaining parts of such provision or the remaining
provision of this Agreement.
(g) Counterparts. This Agreement may be signed in counterparts with
the same effect as if the signature on each counterpart were upon the
same instrument.
[[Page 11705]]
(h) Governing Law. This Agreement shall be governed, construed, and
enforced in accordance with the laws of the State of Delaware (without
regard to the choice of law provisions thereof).
(i) Amendment. This Agreement shall not be amended without the
prior written consent of the Warrant Holder or, if applicable, the
Class B Limited Partner(s).
(j) No Third-Party Beneficiaries. With the exception of the Warrant
Holder, the Class B Limited Partner(s) and the Class B Managers, this
Agreement is not intended to, and shall not be construed to, create any
right enforceable by any Person not a party hereto, including any
creditor of the Company or of the Member.
IN WITNESS WHEREOF, the undersigned have executed this Agreement to
be effective as of the date first above written.
DAILY GAZETTE COMPANY
By:--------------------------------------------------------------------
Elizabeth B. Chilton
President
DAILY GAZETTE HOLDING COMPANY, LLC
By: Daily Gazette Company, its sole member
By:--------------------------------------------------------------------
Elizabeth B. Chilton
President
SECOND AMENDED AND RESTATED JOINT OPERATING AGREEMENT BY AND AMONG
DAILY GAZETTE COMPANY, A WEST VIRGINIA CORPORATION; DAILY GAZETTE
HOLDING COMPANY, LLC, A DELAWARE LIMITED LIABILITY COMPANY; CHARLESTON
NEWSPAPERS, A WEST VIRGINIA UNINCORPORATED JOINT VENTURE; CHARLESTON
NEWSPAPERS HOLDING, L.P., A DELAWARE LIMITED PARTNERSHIP; DAILY GAZETTE
PUBLISHING COMPANY, LLC, A DELAWARE LIMITED LIABILITY COMPANY; AND
CHARLESTON PUBLISHING COMPANY, A DELAWARE CORPORATION
----------------, 2009
THIS SECOND AMENDED AND RESTATED JOINT OPERATING AGREEMENT (this
``JOA'') is dated as of ----------------, 2009 by and among Daily
Gazette Company, a West Virginia corporation (``DGC''); Daily Gazette
Holding Company, LLC, a Delaware limited liability company (``DGHC'');
Charleston Newspapers, a West Virginia unincorporated joint venture
(the ``Joint Venture''); Charleston Newspapers Holdings, L.P., a
Delaware limited partnership (the ``Limited Partnership''); Daily
Gazette Publishing Company, LLC, a Delaware limited liability company
(``DGPC''); and Charleston Publishing Company, a Delaware corporation
(``CPC'').
Whereas, DGHC, the Joint Venture, the Limited Partnership, DGPC and
CPC previously entered into an Amended and Restated Joint Venture
Agreement dated as of May 7, 2004 (the ``Prior JVA''), pursuant to
which the Joint Venture prior to the date hereof managed and operated
The Charleston Gazette (``Gazette''), The Sunday Gazette-Mail
(``Gazette-Mail'') and The Charleston Daily Mail (``Mail'')
(collectively, the ``Newspapers'' and individually a ``Newspaper''),
except for the news and editorial departments of Gazette and Gazette-
Mail, on one hand, and Mail, on the other, which have remained separate
and independent;
Whereas, simultaneously with the execution of this agreement, DGC
and CPC and certain affiliated parties are effectuating certain
transactions relating to the ownership and management of the Joint
Venture and which are described herein;
Whereas, DGC, CPC, DGHC, DGPC, the Limited Partnership and the
Joint Venture desire to amend various provisions of the Prior JVA, to
restate it in its entirety and to supplement it, as herein provided;
Whereas, the purpose and intent of the JOA is to provide a plan of
common operation of the Newspapers, so as to (1) provide efficient
newspaper operations, (2) produce high quality newspapers that are
attractive to readers and advertisers and (3) maintain the separate
identities and free editorial and news voices of the Newspapers; and
Whereas, the JOA will continue to maintain as separate and
independent the respective news and editorial operations of the
Newspapers consistent with the requirements of the Newspaper
Preservation Act, 15 U.S.C. 1801 et seq.;
Now Therefore, in consideration of the mutual promises contained
herein and other good and valuable consideration, the parties hereby
agree as follows:
I. The Limited Partnership
A. General. On May 7, 2004, a limited partnership (the ``Limited
Partnership'') was formed by DGHC, as the sole General Partner, CPC, as
the sole Class A Limited Partner, and ABRY/Charleston, Inc., as the
sole Class B Limited Partner. Prior to the date hereof, ABRY/
Charleston, Inc.'s entire interest as a Class B Limited Partner in the
Limited Partnership was redeemed by the Partnership. Simultaneously
herewith, the Limited Partnership is granting to CPC (in its capacity
as the holder of the Warrant and any permitted transferee of the
Warrant, the ``Warrant Holder'') a warrant (the ``Warrant'') to
subscribe for and purchase up to an aggregate number of Class B Limited
Partner Units in the Limited Partnership that constitute a twenty
percent (20%) Percentage Interest (as defined in the Amended and
Restated Limited Partnership Agreement of the Limited Partner dated as
of the date hereof (the ``Limited Partnership Agreement''), by and
among DGHC and CPC, the Limited Partnership) as of the date of
exercise, subject to adjustment as provided therein.
B. Future Capital Contributions; Capital Assets. CPC and any other
limited partners of the Limited Partnership shall have no obligation to
make any further contributions to the capital of the Limited
Partnership. DGHC shall in the future make such additional
contributions to the capital of the Limited Partnership as shall be
necessary in its reasonable judgment to (1) fund acquisitions of
capital assets necessary for the business and operations of the Limited
Partnership and/or the Joint Venture; (2) fund acquisitions of capital
assets necessary for the business and operations of the editorial
departments of each of the Newspapers to the extent such editorial
departments' tangible capital assets on the date hereof require
supplementation or replacement, (3) provide the Limited Partnership and
the Joint Venture with adequate working capital, and (4) ensure that
the Limited Partnership and the Joint Venture have adequate funds to
make on a timely basis the cash distributions and payments contemplated
by Section V J (1) through (4) of this JOA. DGHC may from time to time
cause the Limited Partnership or the Joint Venture to distribute and
transfer to it one or more capital assets of the Limited Partnership so
long as after such transfer the Limited Partnership and the Joint
Venture shall have, as a result of their remaining capital assets and
any other capital assets which DGHC shall at the time contribute or
make available to the Limited Partnership and/or the Joint Venture
pursuant hereto, capital assets whose adequacy and suitability for the
Limited Partnership's and/or the Joint Venture's performance of the
business and operations of the Newspapers are substantially the same as
prior to such transfer.
C. Management of Partnership and General Partner. The Limited
Partnership shall be managed exclusively by DGHC as the General Partner
of the Limited Partnership. The
[[Page 11706]]
members of DGHC have delegated the management of DGHC to a board of
managers consisting of up to five individual managers, and in no event
may the board of managers consist of more than five managers without
the consent of the managers appointed pursuant to Section 5(b) of the
Operating Agreement of DGHC by the Warrant Holder or the Class B
Limited Partner(s), as applicable; provided, however, that in no event
may the board of managers consist of more than five managers unless not
fewer than forty percent (40%) are appointed by the Warrant Holder or
the Class B Limited Partner(s), as applicable. DGC will appoint the
members of DGHC's board of managers; provided, however, that until and
unless the Warrant Holder exercises its rights under the Warrant and
purchases any Class B Limited Partner Units, DGC will delegate to the
Warrant Holder the right to appoint two (2) of the members of DGHC's
board of managers (or such greater number as required by Section
5(b)(ii) of the Operating Agreement of DGHC) and, upon the purchase by
the Warrant Holder of any Class B Limited Partner Units pursuant to the
Warrant, DGC will delegate to the Class B Limited Partner(s) the right
to appoint two (2) of the members of DGHC's board of managers (or such
greater number as required by Section 5(b)(ii) of the Operating
Agreement of DGHC). If there is more than one Class B Limited Partner,
then the right to appoint two (2) of the members of DGHC's board of
managers (or such greater number as required by Section 5(b)(ii) of the
Operating Agreement of DGHC) will be vested solely in the Class B
Limited Partner that supervises editorial and reportorial functions of
the Mail pursuant to Section V H hereof. The Warrant Holder or the
Class B Limited Partner(s), as applicable, may not appoint any person
who is, at the time of his or her appointment, an employee of the Joint
Venture, DGC, DGHC, the Limited Partnership or DGPC to represent it on
DGHC's board of managers.
II. The Joint Venture
A. Continuation of Joint Venture. By this JOA, the Limited
Partnership and DGPC shall continue the conduct of a joint venture for
the publication of the Newspapers; provided (1) that there shall
continue to be no merger, combination or amalgamation of the editorial
or reportorial staff of Gazette and Gazette-Mail, on the one hand, and
Mail, on the other hand, (2) that CPC shall continue to independently
determine the editorial, news policy and content of Mail and (3) that
DGHC shall continue to independently determine the editorial, news
policy and content of Gazette and Gazette-Mail.
B. Name and Place of Business. The Joint Venture shall continue to
be conducted under the name ``Charleston Newspapers'' from its place of
business at 1001 Virginia Street, East, City of Charleston, County of
Kanawha, State of West Virginia.
C. Ownership of and Title to Property. All of the parties hereto
hereby confirm and agree that the ownership of and title to all real
property and all tangible personal property used in and useful to the
Joint Venture is exclusively in the Joint Venture rather than in any
other party to this JOA, jointly or individually, and without regard to
whether any property was contributed by any party to this JOA to the
Joint Venture, was otherwise made available to the Joint Venture by any
party to this JOA or was otherwise acquired by the Joint Venture,
except that certain property is owned by G.M. Properties, Inc., a West
Virginia corporation, of which all the outstanding shares are owned by
the Joint Venture.
D. Revenues, Expenses and Obligations. The Joint Venture shall
receive all income and revenues of the Joint Venture and shall pay all
expenses incurred or assumed by it. No party hereto shall be or shall
become liable upon any contract or other obligation of the Joint
Venture or any other party hereto, unless such party shall expressly
assume such contract or other obligation or liability is imposed by
law.
E. Management of Joint Venture. Subject to the provisions of this
JOA concerning the editorial independence of the Newspapers and such
other limitations as are expressly set forth in this JOA or the Limited
Partnership Agreement, the Limited Partnership shall have complete
authority over and exclusive control and management of the business and
affairs of the Joint Venture. The Limited Partnership may delegate such
general or specific authority to the officers and employees of the
Joint Venture with respect to the business and day-to-day operations of
the Joint Venture as it may from time to time consider desirable, and
the officers and employees of the Joint Venture may exercise the
authority granted to them. The Joint Venture shall indemnify, defend
and hold harmless DGPC and the Limited Partnership and its partners
(and their respective shareholders, members, partners, directors,
managers, officers, employees and agents) from any liability, loss or
damage suffered by them by reason of any act or omission by them in
connection with the business of the Joint Venture; provided, however,
that indemnification shall not be available for any claim that results
from the willful misconduct of such person or the breach by such person
of its obligations under this JOA or other agreements to which such
person may be subject. The Limited Partnership shall not be liable, in
damages or otherwise, to the Joint Venture or its direct or indirect
partners for any act or omission in the absence of willful misconduct.
III. Editorial Independence
Preservation of the editorial independence of the Newspapers is the
essence of this JOA. DGHC and CPC each agree to strictly maintain the
separateness of their respective limited liability company and
corporate identities, as the case may be, and to retain the editorial
independence of Gazette and Gazette-Mail, on the one hand, and Mail, on
the other hand. CPC agrees that neither it nor any affiliate shall have
any connection with the news or editorial operations of Gazette or
Gazette-Mail. The separate editorial and reportorial staffs of Gazette
and Gazette-Mail, on the one hand, and Mail, on the other hand, shall
be independent and shall not be merged, combined or amalgamated, and
their editorial policies shall be independently determined. DGHC agrees
that neither it nor any affiliate shall have any connection with the
news or editorial operations of Mail. Actions of DGHC with respect to
Mail shall be confined exclusively to its role as General Partner of
the Limited Partnership and in such role to cause the Joint Venture to
print, sell and distribute the Newspapers, and to solicit and sell
advertising space therein, and to perform such other functions as are
described in this JOA.
IV. Term
Unless sooner terminated in accordance with the terms hereof, this
JOA shall continue in effect from the date hereof through the close of
business on June 30, 2024. This JOA shall thereupon be automatically
renewed for additional five-year terms unless any party hereto gives
written notice to the contrary to each of the other parties hereto at
least 12 months prior to the end of the then-current term.
V. Continuing Operations
A. General. On and after the date hereof the Joint Venture shall
control, supervise, manage and perform all operations (other than the
news and editorial operations of the Newspapers) involved in producing,
printing, selling
[[Page 11707]]
and distributing the Newspapers; to determine press runs, press times,
page sizes and cutoffs of the Newspapers; to determine whether
supplemental products will be distributed in or with one or more
Newspapers, including whether and how certain products will be
distributed to non-subscribers; to purchase newsprint, materials and
supplies as required; to solicit and sell advertising space in the
Newspapers; to collect the Newspapers' circulation and advertising
accounts receivable; to provide or make available to each Newspaper
such parking, subscriptions, messenger services, and data processing
services as are reasonable and appropriate (the costs for which shall
be borne by the Joint Venture and which shall not be an Editorial
Expense); and to make all determinations and decisions and do any and
all acts and things necessarily connected with the foregoing
activities, including maintaining insurance coverage that is normal and
appropriate for similarly-situated businesses. The parties recognize
that DGHC as General Partner of the Limited Partnership shall have
general charge and supervision of the business of the Newspapers, but
shall treat each of the Newspapers as separate and distinct editorial
products, and shall have no duties or authority with respect to the
news or editorial functions of Mail.
B. Production. On and after the date hereof, the Joint Venture
shall print the Newspapers on equipment owned or leased by the Joint
Venture in plant or plants located at such place or places as the Joint
Venture may determine, and all operations under this JOA, except the
operation of the Newspapers' editorial departments, shall be carried on
and performed by the Joint Venture with equipment from the Joint
Venture's plant or plants or by independent contractors or agents
selected by the Joint Venture. During the term of this JOA, CPC agrees
to produce Mail's editorial and news copy, and DGHC agrees to produce
Gazette's and Gazette-Mail's editorial and news copy, on equipment
which is provided by the Joint Venture or which is compatible with the
equipment used by the Joint Venture in its production facilities.
C. Advertising and Circulation.
(1) In general and subject to the exceptions set forth in clauses
(a) through (d) below, the Joint Venture shall have complete control of
and the right to determine the advertising and circulation rates for
each of the Newspapers, and the Joint Venture shall use its reasonable
efforts to sell advertising space in each Newspaper and to sell,
promote and distribute each Newspaper as widely as practicable,
consistent, however, with the objective of enhancing the overall
economic performance of the Joint Venture and the Newspapers considered
together in a manner that does not have a material adverse impact on
the cash flow of the Joint Venture and the ability of the Joint Venture
to make on a timely basis the cash distributions to the Limited
Partnership and the payments to CPC contemplated by Section V J (1)
through (4) hereof.
(a) The Joint Venture may not reduce the primary circulation area
of Mail as of August 1, 2009 without CPC's approval.
(b) For a six month period commencing within a reasonable time
after the date hereof, the Joint Venture will promote Mail by offering
subscriptions at a 50% discounted rate. This promotion will be
applicable solely to Mail.
(c) Except as set forth in clause (b) above or as otherwise
approved by CPC, the Joint Venture will offer the same promotions for
Mail and Gazette to potential subscribers.
(d) The Joint Venture will not discriminate against Mail in
advertising, promotions or other sales or marketing efforts.
(2) The Joint Venture shall be free to select and alter from time
to time the national advertising representative(s) for each of the
Newspapers and the commission payable to such national advertising
representative(s) and any other terms of such arrangement(s) shall be
determined by the Joint Venture; provided, however that the Joint
Venture will not discriminate against Mail in advertising, promotions
or other sales or marketing efforts.
(3) The Joint Venture will pay to each of the Publisher of Mail and
the Circulation Director of the Joint Venture a bonus for increases in
Mail's average daily paid print circulation (as stated in the most
recent six month audit conducted by the Audit Bureau of Circulations or
other reputable third party media auditor). If the average daily paid
print circulation of Mail for a six month audit period is greater than
the average daily paid print circulation for the immediately preceding
six month audit period, the bonus will be $3.00 per each additional
subscriber and will be paid within a reasonable time after the Joint
Venture receives the applicable six month audit.
D. Publication Schedule. DGHC shall publish Gazette daily on
weekdays and Saturday mornings and Gazette-Mail on Saturday and Sunday
mornings, and CPC shall publish Mail daily on weekday mornings. The
Joint Venture will not change the press deadlines, delivery targets,
number of editions and days of publication of Mail without CPC's
approval. If at any time DGHC determines in the good faith exercise of
business judgment as General Partner of the Limited Partnership that
the continuation of any scheduled publication of any edition(s) of
Gazette or Gazette-Mail is no longer in the best interests of those
Newspapers and the Joint Venture considered together, then, subject to
the Newspaper Preservation Act, 15 U.S.C. 1801 et seq. (the ``Act''),
within thirty days after written notice by the Limited Partnership to
CPC, the scheduled publication of such edition(s) may be discontinued.
The Joint Venture will not discontinue publication of Mail without
CPC's approval unless (i) the incremental revenue from Mail fails to
cover Mail's incremental costs and the discontinuation of Mail can be
effected by satisfying the failing firm test as applicable to joint
operating agreement newspapers under the Act and (ii) the U.S.
Department of Justice approves the discontinuation of publication of
Mail.
E. Office Space and Equipment. On and after the date hereof, the
Joint Venture shall furnish reasonably adequate office space for the
separate use of the editorial departments of the Gazette, on the one
hand, and Mail on the other hand. Such space shall be furnished with
furniture and equipment which in the Joint Venture's reasonable
judgment is sufficient and technologically adequate for each
Newspaper's news and editorial operations.
F. Other Services. The parties recognize that in addition to the
operations with respect to the Newspapers contemplated by this JOA, the
Joint Venture may also utilize its production and other facilities,
personnel, and agents for any other lawful activities it may deem
appropriate, including distributing news, advertising or other
information to non-subscribers; distributing or making available all or
a portion of the information or advertising in the Newspapers to
subscribers by means of electronic distribution, microfilm, microfiche
or mail; commercial printing, including commercial printing of other
newspapers; distribution services; and any other activities not
inconsistent with its principal business; provided, however, that such
activities shall not unreasonably interfere with the printing or
distribution of the Newspapers.
G. Future Purchases. On and after the date hereof, subject to
Section V H, the Joint Venture shall be responsible for the purchase of
all inventory, supplies,
[[Page 11708]]
equipment and services as it deems to be necessary or desirable in
connection with the operation of the Newspapers and other functions as
are described in this JOA. In the event of shortages of inventory,
supplies, equipment or services, no Newspaper shall be unfairly favored
or discriminated against as regards the other.
H. News and Editorial Matters. DGHC and CPC shall furnish complete
news and editorial services necessary and appropriate for the
publication of their respective Newspapers in the manner provided in
this JOA.
(1) Each of DGHC and CPC shall have complete and exclusive control
and direction of the editorial department and editorial policies of its
respective Newspapers and shall be responsible for and shall bear all
of its respective Editorial Expense (as defined below). Without
limiting the generality of the foregoing, each of DGHC and CPC shall
have the exclusive right to determine the editorial format, dress,
makeup and news and feature content of its respective Newspapers
(including the content of all advertisements and advertising matter),
and each shall have complete control and authority over the editors and
editorial department staff of its respective Newspapers (including the
exclusive authority to determine the number, identity and salaries of
the editorial department of its respective Newspapers and to make
hiring and firing decisions, so long as the Editorial Expense for each
Newspaper does not exceed the budgeted amount for such Newspaper for
the applicable year determined in accordance with Section V J(8)
below). The term ``editorial department'' as used herein shall include
the news, editorial, editorial promotion and photographic functions of
the applicable Newspaper. DGHC and CPC each recognize the importance of
the editorial quality of their respective Newspapers and each of them
agrees to use reasonable efforts to provide editorial products for
their Newspapers which are compatible with the needs of the Charleston,
West Virginia area newspaper market and to preserve with respect to
their Newspapers a high standard of newspaper quality and journalistic
excellence.
(2) The amount of reading content (sometimes known as ``news
hole'') and the amount of color usage of each of the Newspapers shall
be determined by the board of managers of the Limited Partnership
during the annual budgeting process; provided, however, that the news
hole and color usage allocations will be budgeted at the same level for
both Mail and Gazette. Each Newspaper may elect to publish pages in
excess of their news hole and/or exceed the amount of color usage
determined for such Newspapers by the Joint Venture, provided the Joint
Venture has the production capacity to accommodate such excesses.
However, if any of the Newspapers exceeds its budgeted news hole
allocation or color usage, then any newsprint and other production
costs attributable to such excess shall be borne by such Newspaper, and
upon being invoiced therefor by the Joint Venture, DGHC or CPC, as
appropriate, shall reimburse the Joint Venture for such expense. If,
from time to time following the determination by the Joint Venture of
the news hole allocation, the Joint Venture shall require a greater
news hole allocation for one or more editions of one or more of the
Newspapers, the Newspapers shall have no obligation to reimburse the
Joint Venture for any additional expense the Joint Venture may incur as
a consequence thereof, and the Joint Venture shall reimburse the
Newspapers promptly upon being invoiced therefor for any additional
expenses the Newspapers may incur as a consequence thereof.
(3) DGHC, independently of CPC, shall develop standards for
determining the acceptability of advertising copy for publication in
Gazette and Gazette-Mail. CPC, independently of DGHC and the Joint
Venture, shall develop standards for determining the acceptability of
advertising copy for publication in Mail.
(4) Except as provided otherwise herein, the term ``Editorial
Expense'' as used in this JOA shall mean all costs and expenses
associated with the news and editorial departments of each Newspaper,
including but not limited to: (a) Compensation, including payroll
taxes, retirement, pension, health and death benefits, worker's
compensation insurance and group insurance of news and editorial
employees; (b) severance pay of news and editorial employees; (c)
travel and other expenses of news and editorial employees; (d) press
association assessments and charges; (e) charges for news services and
editorial wire services; (f) charges for the right to publish news and
editorial features, daily or weekly comics and other editorial material
of every kind and character; (g) the cost of news and editorial
materials, printing, stationery, office supplies and postage for the
news and editorial department; (h) donations; (i) the cost of editorial
promotions; (j) telegraphic, telephone, long-distance telephone and
internet access charges of the news and editorial departments; (k)
charges for the purchase, rental, repair and maintenance of editorial
department cameras and related photographic equipment (provided,
however, that the term ``Editorial Expense'' shall not include any
cost, charge or expense related to any camera or other equipment made
available to the editorial departments of the Newspapers pursuant to
Section V E of this JOA, or to any equipment that is an integral part
of the production process even though located in the news and/or
editorial department of a Newspaper, or related to any editorial
department capital assets owned by either Newspaper); (l) the cost of
liability insurance and insurance with respect to libel and right of
privacy and similar hazards; and (m) the cost of any Charleston, West
Virginia based executive-level management of Mail. Notwithstanding the
foregoing, the following shall not be included in the term ``Editorial
Expense'' and shall be separately borne by the Newspaper which incurs
them: (i) Certain uninsured liabilities for published or excluded
material as provided in Section VII B, (ii) costs for excess news hole
allocation or color usage as provided in Section V H(2), (iii) costs
related to material changes from present, usual or customary practices
as provided in Section V H(5), (iv) any interest, indebtedness,
amortization, organizational costs or other costs or expenses relating
to Mail and (v) except as described in (m) above, any portion of any
salaries, expenses, overhead or corporate allocation attributable to
any non-Charleston, West Virginia based ownership, management or
supervision of Mail.
(5) All Editorial Expense of the editorial departments of Gazette
and Gazette-Mail shall be borne by DGHC, and all Editorial Expense of
the editorial department of Mail shall be borne by CPC; provided,
however, that costs resulting from any material change by any Newspaper
from its present, usual or customary practices that result in
additional future newsprint, production or other costs to be incurred
on the part of the Joint Venture shall be borne by such Newspaper, and
upon being invoiced therefor by the Joint Venture, DGHC or CPC, as
appropriate, shall reimburse the Joint Venture for such costs.
I. Accounting Matters. The Joint Venture shall cause to be
maintained full and accurate books of account and records showing all
transactions hereunder. Such books and records shall be kept on the
basis of a year ending December 31 and under the accounting methods
currently employed by DGC in accordance with generally accepted
accounting principles, and shall at all times be kept at the principal
[[Page 11709]]
place of business of the Joint Venture. The independent auditors of the
Joint Venture shall be the independent auditors of DGC. Any changes in
accounting method shall be consistent with accepted accounting
principles and with changes made generally by DGC, and CPC shall
receive prompt notice of any such changes that could reasonably be
expected to have an adverse effect on its interests under this JOA or
the Limited Partnership Agreement. CPC and its respective authorized
agents or representatives shall have access to and may inspect such
books and records at any time and from time to time during ordinary
business hours. Statements shall be rendered and settlements under this
JOA shall be made on a monthly basis on the 15th day following the end
of each monthly accounting period, with annual adjustments as soon as
practicable at the conclusion of each year during the term of this JOA.
An annual statement shall be furnished by the Joint Venture to the
Limited Partnership not later than the 31st day of March of each year,
summarizing in reasonable detail and fairly reflecting the transactions
and the results of operations under this JOA during the preceding year.
All payments shown to be due by CPC, DGHC or the Joint Venture shall be
paid within thirty (30) days after the delivery of the applicable
statement.
J. Distributions to Partners.
(1) For each year of this JOA, the Joint Venture shall distribute
to the Limited Partnership cash equal to the amount actually expended
or accrued as a current liability in accordance with generally accepted
accounting principles by CPC for Editorial Expenses during such year;
provided, however, that the amount distributed by the Joint Venture to
the Limited Partnership pursuant to this Section V J(1) shall not, in
respect of any year, exceed the budgeted amount for such year
determined by the Joint Venture in accordance with Section V J(8)
below; and provided further that the amount to be distributed by the
Joint Venture to the Limited Partnership shall be reduced by any
obligation of CPC to reimburse the Joint Venture for expenses paid by
the Joint Venture on behalf of CPC. The Limited Partnership shall in
turn distribute such net amount to CPC.
(2) If, for any year, with the prior written concurrence of the
Joint Venture, CPC makes a permanent reduction in its editorial
workforce in accordance with the requirements of applicable laws,
regulations and agreements, and if and to the extent the severance
costs associated with such reduction are not included in CPC's
applicable budgeted Editorial Expenses for such year determined in
accordance with Section V J(8) below, then (a) the Joint Venture shall,
in addition to the cash amounts described in subsection (1) above,
distribute to the Limited Partnership in cash an amount equal to that
portion of such severance costs that is reasonable and required to be
incurred for such year pursuant to applicable laws, regulations or
agreements, and that in any event does not exceed the costs DGHC would
have incurred if DGHC had made corresponding reductions.
(3) The distributions described in subsection (1) above shall be
made on a monthly basis in increments of 1/12 of the applicable
budgeted amount determined by the Joint Venture, subject to adjustment
by the Joint Venture at the end of each year so that such aggregate
distributions for the year are in such amounts as the Joint Venture
shall determine (based on such records and evidence as the Joint
Venture may request from CPC) are equal to the amounts expended or
accrued by CPC for such year as provided in Section V J(8), but no
greater than the budgeted Editorial Expenses of Mail for such year. The
distributions described in subsection (2) above shall also be made on a
monthly basis and shall be in such amounts as the Joint Venture shall
determine (based on such records and evidence as the Joint Venture may
request from CPC) are equal to the amounts expended or accrued by CPC
for such period within the applicable budget amounts, with such
subsequent adjustment as may be appropriate.
(4) In addition to the distributions to the Limited Partnership
and, in turn, to CPC provided for in Sections V J(1)-(3) above, there
also shall be paid to CPC a fee for its services in the management and
supervision of the news and editorial operations of the Mail. The
management fee shall be paid on May 7 of each year during the term of
this JOA (each date a ``Payment Date''). The amount of the management
fee payable on May 7, 2010 shall be $225,000. For each Payment Date
after May 7, 2010, the management fee payable to CPC shall be $225,000
adjusted to reflect the aggregate change since May 7, 2010 in the
Consumer Price Index. The ``Consumer Price Index'' for purposes of this
JOA shall mean ``The Consumer Price Index for All Urban Consumers (CPI-
U) for the U.S. City Average for All Items, 1982-84 = 100'' released by
the U.S. Department of Labor, Bureau of Labor Statistics, or any
similar replacement index. For each Payment Date after May 7, 2010, the
management fee payable to CPC shall also be adjusted annually on a non-
cumulative basis as follows:
(a) If Mail's average daily paid print circulation for the most
recent 12 month audited period exceeds the average daily paid print
circulation for the immediately preceding 12 month audited period by
more than 1%, the management fee payable on such Payment Date will be
increased by $25,000.
(b) If Mail's average daily paid print circulation for the most
recent 12 month audited period is the same as the average daily paid
print circulation for the immediately preceding 12 month audited period
or if Mail's average daily paid print circulation for the most recent
12 month audited period exceeds the average daily paid print
circulation for the immediately preceding 12 month audited period by 1%
or less, the management fee payable on such Payment Date will be
increased by $10,000.
(c) If Mail's average daily paid print circulation for the most
recent 12 month audited period decreases by 1% or less from the average
daily paid print circulation for the immediately preceding 12 month
audited period, the management fee payable on such Payment Date will be
decreased by $10,000 (provided that in no event will the management fee
payable on any Payment Date be reduced to an amount below $225,000).
(d) If Mail's average daily paid print circulation for the most
recent 12 month audited period decreases by more than 1% from the
average daily paid print circulation for the immediately preceding 12
month audited period, the management fee payable on such Payment Date
will be decreased by $25,000 (provided that in no event will the
management fee payable on any Payment Date be reduced to an amount
below $225,000).
For purposes of the adjustments described in clauses (a) through
(d) above, Mail's average daily paid print circulation will be
determined based on 12 month audits conducted by the Audit Bureau of
Circulations or other reputable third party media auditor.
(5) Except for the foregoing distributions to the Limited
Partnership, and except for such cash as the Limited Partnership may
from time to time determine is necessary or desirable to retain in the
Joint Venture for working capital purposes, the Joint Venture shall
(subject to any applicable contractual restrictions under the Joint
Venture's financing arrangements) distribute all remaining cash
(including without
[[Page 11710]]
limitation the proceeds from any sale or disposition of Joint Venture
capital assets) equally to the Limited Partnership and DGPC. Such
distributions shall be made from time to time as determined by the
Limited Partnership, but no such distributions shall be made at any
time when the Joint Venture is not current in making the distributions
to the Limited Partnership and the payments to CPC described in Section
V J(l) through (4) hereof.
(6) Pending the distributions contemplated by this Section V J,
DGHC shall be authorized to manage the Joint Venture's cash pursuant to
the corporate-wide policies of DGC.
(7) All income, gain, profits, losses, and expenses of the Joint
Venture shall be allocated between the Limited Partnership and DGPC in
proportion to the cash distributed to them pursuant to this Section V
J.
(8) For each year of this JOA, the budgeted Editorial Expenses for
Mail and Gazette shall be in amounts determined by the board of
managers of DGHC and approved by at least 75% of the members of the
board of managers (i.e., if the board consists of four members, not
fewer than three members must vote in favor, and if the board consists
of five members, not fewer than four members must vote in favor);
provided, however that for Mail's 2010 annual Editorial Expense budget
the staffing level in Mail's news and editorial departments will be
budgeted at thirty-two (32) full time employees. Any Editorial Expense
budget may be adjusted by action of the board of managers of DGHC
(subject to the 75% supermajority voting requirement) from time to time
during the course of a year of this JOA to take appropriate account of
developments in products or technologies, material changes in any
Newspaper's editorial workforce, or other material changes which may
occur relative to any Newspaper's operations or circulation in any
given year.
VI. Termination
A. Termination.
(1) If DGHC or CPC defaults by failing to make any payment
hereunder when due or by otherwise failing to fulfill in any material
respect any of its obligations under this JOA and the party in default
does not correct its default within ninety (90) days after receipt from
the other of written notice specifying the default, then the non-
defaulting party may, at its election, terminate this JOA upon ninety
(90) days' prior written notice.
(2) If publication of Mail is discontinued in accordance with the
terms of this JOA or the Limited Partnership is dissolved, terminated
and liquidated, this JOA shall terminate.
B. Action After Termination.
(1) It is understood that, as soon as practicable after the
termination of this JOA by lapse of time or otherwise, the Limited
Partnership shall, subject to the prior satisfaction of the claims of
all creditors (other than the partners of the Limited Partnership) and
the payment of the fee provided in Section V J(4), distribute to CPC,
the Mail masthead, all trademarks, copyrights, trade names, service
names and service marks of the Mail, the Mail subscriber and advertiser
lists, print and electronic archives of the Mail, associated web sites
and URLs (including ``dailymail.com'') and all legal rights associated
with these assets, subject to such dispositions, additions or
substitutions relating thereto which may have occurred in the ordinary
course of the operations of the Limited Partnership or the Joint
Venture or in satisfaction of the claims of creditors subsequent to the
formation of the Limited Partnership, including, in particular, any and
all lists of subscribers to Mail, together with copies of any contracts
with such subscribers relating to Mail and any executory contracts for
the purchase of advertising in Mail, free and clear of any lien,
encumbrance, right or interest (including any option or any license or
other right of use) of or in favor of a third party, transfer
restriction (including any right of first offer or refusal or similar
provision) or any other similar right or interest whatsoever.
(2) Upon the termination of this JOA by lapse of time or otherwise,
the Joint Venture shall dissolve and shall distribute its assets as
follows:
(a) That portion of any distributions to which the Limited
Partnership may be entitled but which has not yet been distributed for
the period up to the date of termination pursuant to Section V J(1)
through (3) hereof, shall be distributed to the Limited Partnership.
(b) All other assets of the Joint Venture shall be distributed
equally to DGPC and the Limited Partnership.
(3) A partial accounting and partial settlement under this JOA
shall be made as promptly as practicable and a final accounting and
final settlement shall be made not later than the 31st day of March of
the year following the year in which this JOA is terminated.
VII. Miscellaneous Provisions
A. Certain Liabilities; Force Majeure. Except as otherwise provided
in this JOA, no party shall be charged with or held responsible for any
contract, debt, claim, demand, damage, suit, action, obligation or
liability arising by reason of any act or omission on the part of any
other party, and no party shall be liable to any other for any failure
or delay in performance under this JOA occasioned by war, riot, act of
God or the public enemy, strike, labor dispute, shortage of any
supplies, failure of supplier or workmen, or any cause beyond the
control of the party required to perform, and such failure or delay
shall not be considered a default hereunder.
B. Liabilities for Published or Excluded Material. The Joint
Venture shall obtain insurance to insure each of the Newspapers against
liability for libel and right of privacy in such amount as it deems
appropriate, with the premiums for such insurance being an Editorial
Expense as provided in Section V H(4). However, the entire cost and
expense of defending, settling, paying and discharging any liability or
other claim which is not covered by the libel insurance obtained by the
Joint Venture (excluding any such cost or expense which is not covered
as a result of the application of any deductible amount or co-payment
requirement provided under the insurance policy) for Gazette and
Gazette-Mail on account of anything published in or excluded from
Gazette or Gazette-Mail, or arising by reason of anything done or
omitted to be done by the editorial departments thereof, shall be borne
by DGHC; and any similar cost and expense on account of anything
published in or excluded from Mail, or arising by reason of anything
done or omitted to be done by the editorial department thereof, shall
be borne by CPC. DGHC and CPC each agree to indemnify and hold the
other party, the Joint Venture and the Limited Partnership harmless
against any cost, expense or liability which such other party, the
Joint Venture or the Limited Partnership may suffer or incur as a
result of any such action or inaction for which the indemnifying party
is responsible as provided above.
C. Contravention of Law. Nothing contained in this JOA shall be
construed to permit any party acting jointly or by unified action to
engage in any predatory pricing, predatory practice or any other
conduct which would be unlawful under any antitrust law as engaged in
by any single entity. The parties hereto further mutually agree that if
any part or provision of this JOA shall hereafter become, or be
determined by action in any proper court to be, in contravention of
law, this JOA shall not thereby be considered or adjudged to be a
nullity, but that all parties shall, and each hereby agrees,
immediately to take, or authorize such action to be taken, to reform
this JOA,
[[Page 11711]]
or to modify, alter or supplement any of its provisions, as may be
necessary to permit the intention and purpose of the parties hereto to
be properly and lawfully carried out.
D. Further Assurances. From time to time on and after the date
hereof, each of the parties hereto will execute all such instruments
and take all such actions as the other party shall reasonably request
in connection with carrying out and effectuating the intention and
purpose hereof and all transactions and things contemplated by this
JOA, including, without limitation, the execution and delivery of any
and all confirmatory and other instruments and the taking of any and
all actions which may reasonably be necessary or desirable to complete
the transactions contemplated thereby.
E. Assignments and Transfers.
(1) Except as authorized under the Limited Partnership Agreement,
CPC may not sell, assign or transfer (including any pledge or
hypothecation), any of its rights or interests under this JOA or
pertaining to the Joint Venture or the Limited Partnership or the
Newspapers to any person without the prior written consent of DGHC,
which shall not be unreasonably withheld. Without limiting the
generality of the foregoing, except as authorized under the Limited
Partnership Agreement, a controlling interest in the capital stock of
CPC may not be sold, assigned or transferred to any person without the
prior written consent of DGHC, which shall not be unreasonably
withheld. No consent of DGHC shall be required for a transfer relative
to the Limited Partnership or any interests therein that is expressly
authorized and made in compliance with the transfer provisions under
the Limited Partnership Agreement, and, the foregoing transfer
restrictions shall not apply to any transfer of any right or interest
under this JOA or pertaining to the Joint Venture or the Newspapers to
MNG or an affiliate of MNG so long as MNG or an affiliate of MNG holds
and maintains, directly or indirectly, voting control of such
transferee following such transfer. CPC acknowledges and agrees that
DGHC's ability to grant consent to a transfer is circumscribed by
certain contractual restrictions under the Joint Venture's financing
arrangements and the withholding of consent by DGHC in order to comply
with these contractual restrictions will not be considered
unreasonable.
(2) DGC, DGHC, the Limited Partnership, DGPC and the Joint Venture
may, without the consent of CPC, sell, assign or transfer a part or all
or substantially all of the assets of Gazette and Gazette-Mail as a
going concern to any person and assign a part or all of their rights
and obligations under this JOA to the purchaser thereof, or sell,
assign or transfer part or all of their direct or indirect interests in
DGHC, the Limited Partnership, DGPC and the Joint Venture to any
person, so long as (1) at the time of such sale the Joint Venture is
current in the distributions required to be made to the Limited
Partnership and the payments required to be made to CPC pursuant to
Section V J(1) through (4) hereof, and (2) the purchaser assumes (in
the case of an assets sale) all of the obligations of the assignors
pursuant to this JOA. In the event DGC, DGHC, the Limited Partnership,
DGPC or the Joint Venture engages in an assets sale contemplated by
this Section VII E, they shall, effective on the closing thereof, be
released and discharged from any further liability under this JOA. No
consent of CPC shall be required for (i) a pledge by DGC, DGHC, the
Limited Partnership, DGPC or the Joint Venture of their rights under
this JOA or their direct or indirect interests in DGHC, the Limited
Partnership, DGPC and the Joint Venture to the Joint Venture's lenders
for security purposes or a transfer of such interests and rights
pursuant to any foreclosure action by the Joint Venture's lenders or
any transfer in lieu of foreclosure.
F. Other Ventures. Neither DGC nor any Partner of the Limited
Partnership may engage in other ventures in the Charleston, West
Virginia market that are competitive with that of the Limited
Partnership or any of its Subsidiaries (including the Joint Venture).
For purposes of this Section VII F, any competitive venture undertaken
by an affiliate of a Partner in the Charleston, West Virginia market
will be deemed to be a competitive venture undertaken by such Partner.
G. Entire Agreement. This JOA amends and restates the Prior JVA in
its entirety.
H. Notices. All notices, requests, demands, claims and other
communications which may or are to be given hereunder or with respect
hereto shall be in writing, shall be given either by personal delivery,
facsimile or by certified or special express mail or recognized
overnight delivery service, first class postage prepaid, or when
delivered to such delivery service, charges prepaid, return receipt
requested, and shall be deemed to have been given or made when
personally received by the addressee, addressed as follows:
(1) If to CPC, to:
Affiliated Media, Inc., 101 W. Colfax Avenue, Suite 1100, Denver, CO
80202. Attn: Joseph J. Lodovic, IV President, Facsimile: (303) 954-
6320.
With a copy to:
Hughes Hubbard & Reed LLP, One Battery Park Plaza, New York, New York
10004. Attn: James Modlin, Facsimile: (212) 422-4726.
or such other addresses as CPC may from time to time designate.
(2) If to DGC, DGHC, DGPC, the Joint Venture or the Limited
Partnership, to:
Daily Gazette Company, 1001 Virginia Street, East, Charleston, WV
25301. Attn: Ms. Elizabeth E. Chilton, President, Facsimile: (304) 348-
5180.
And
Attn: Mr. Norman Watts Shumate III, Facsimile: (304) 348-1795.
With a copy to:
Baker & Hostetler LLP, 1050 Connecticut Avenue, NW., Suite 1100,
Washington, DC 20036. Attn: Lee H. Simowitz, Facsimile: (202) 861-1783.
or such other addresses as DGHC, DGC, DGPC, the Joint Venture or the
Limited Partnership may from time to time designate.
I. Announcements/Disclosures. The parties agree that, except as
required by law, and then only upon the maximum advance notice to the
other parties which is practicable under the circumstances, they will
make no public announcement concerning this JOA and the transactions
contemplated hereby prior to the first mutually agreed upon
announcement thereof without the consent of the other parties as to the
form, content, and timing of such announcement or announcements.
J. Headings. Titles, captions or headings contained in this JOA are
inserted only as a matter of convenience and for reference and in no
way define, limit, extend or describe the scope of this JOA or the
intent of any provisions hereof.
K. Governing Law. This JOA shall be construed and enforced in
accordance with the internal laws of the State of West Virginia.
L. Modifications. This JOA shall be amended only by an agreement in
writing and signed by the party against whom enforcement of any waiver,
modification or discharge is sought (subject to any applicable
contractual restrictions under the Joint Venture's financing
arrangements).
M. Specific Performance. In addition to any other remedies the
parties may have, each party shall have the right to enforce the
provisions of this JOA
[[Page 11712]]
through injunctive relief or by a decree or decrees of specific
performance.
N. No Third Party Beneficiaries. Nothing in this JOA, express or
implied, shall give to anyone other than the parties hereto (and the
parties entitled to indemnification hereunder) and their respective
permitted successors and assigns any benefit, or any legal or equitable
right, remedy or claim, under or in respect of this JOA.
O. Nature of Relationship. Nothing contained in this JOA shall
constitute the parties hereto as alter egos or joint employers or as
having any relationship other than as specifically provided herein and
in any other agreement to which they are subject. DGHC and CPC each
will retain and be responsible for (and will indemnify the other
parties, the Joint Venture and the Limited Partnership against) all of
their respective debts, obligations, liabilities, and commitments which
have not been expressly assumed by the Joint Venture pursuant to this
JOA or the Limited Partnership, or for which the Joint Venture was not
already liable under the Prior JVA.
O. Survival. The expiration or termination of this JOA shall not
abrogate the rights and obligations of the parties under Section VII(B)
or any other provision of this JOA that contemplates actions to be
taken after the expiration or termination of this JOA.
P. Dispute Resolution. The terms of Exhibit A attached hereto,
which include provisions related to the procedures pursuant to which
the parties shall resolve any disputes, claims or controversies arising
under, out of or in connection with this JOA are incorporated herein by
this reference as if set out herein in full.
DAILY GAZETTE COMPANY
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
DAILY GAZETTE HOLDING COMPANY, LLC
By: Daily Gazette Company, Sole Member
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
CHARLESTON PUBLISHING COMPANY
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
CHARLESTON NEWSPAPERS
By: Charleston Newspapers Holdings, L.P., General Partner
By: Daily Gazette Holding Company, LLC, General Partner
By: Daily Gazette Company, Sole Member
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
DAILY GAZETTE PUBLISHING COMPANY, LLC
By: Charleston Newspapers Holdings, L.P., Sole Member
By: Daily Gazette Holding Company, LLC, General Partner
By: Daily Gazette Company, Sole Member
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
CHARLESTON NEWSPAPERS HOLDINGS, L.P.
By: Daily Gazette Holding Company, LLC, General Partner
By: Daily Gazette Company, Sole Member
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
Exhibit A to Amended and Restated Joint Operating Agreement
Dispute Resolution
(a) Any dispute, claim or controversy arising under, out of, in
connection with or relating to this JOA, or any course of conduct,
course of dealing, statements (oral or written), or actions of any
party relating to this JOA, including any claim based on or arising
from an alleged tort (each, a ``Dispute''), shall be resolved solely in
the following manner:
(i) Pre-arbitration procedures.
(A) Each party shall cause one of its senior officers to first meet
with the other party's senior officer and attempt to resolve the
Dispute by agreement.
(B) Failing resolution, either party may submit to the other party
a written request for non-binding mediation. Within ten (10) business
days after such written request is made, the parties shall attempt to
agree on a single mediator. If the parties cannot agree on a mediator
within such period, either party may proceed to implement the
arbitration provisions of clause (a)(ii) below.
(C) Mediation shall take place at the place or places and at the
time or times set by the mediator, but shall not be held in public. The
rules of procedure, evidence and discovery with respect to any
mediation shall be as directed by the mediator. Neither party may be
represented at hearings before the mediator by an attorney but the
parties may consult with counsel outside the hearing room and counsel
may assist in preparing any written materials to be used in the
mediation, including statements and briefs.
(D) The mediator shall facilitate communications between the
parties and assist them in attempting to reach a mutually acceptable
resolution of the Dispute by agreement. The mediator shall make no
binding determinations, findings, or decisions.
(E) The mediator's expenses shall be borne equally by the parties.
(F) At any point in the mediation process after the initial meeting
with the mediator, either party may declare in writing that an impasse
exists, and thereafter either party may proceed to implement the
arbitration provisions of clause (a)(ii) below. If the parties have not
resolved their dispute pursuant to the provisions of this clause (a)(i)
within thirty (30) days after appointment of the mediator, the parties
shall immediately proceed to implement the arbitration provisions of
clause (a)(ii) below.
(ii) Arbitration.
(A) All Disputes between the parties that are not resolved under
clause (a)(i) above shall be finally resolved by arbitration in
accordance with the rules of JAMS (or its successor) described below,
subject to the limitations of this clause (a)(ii).
(B) Except as provided in clause (a)(ii)(C), with respect to a
Dispute in which the claim, counterclaim or amount in controversy does
not exceed Two Hundred Fifty Thousand Dollars ($250,000) (a ``Minor
Dispute''), a single arbitrator shall decide the Minor Dispute in
accordance with the JAMS Streamlined Arbitration Rules and Procedures
then in effect (the ``Streamlined Rules''). In the event the parties
are unable to agree upon an arbitrator, the arbitrator shall be
appointed by JAMS under the Streamlined Rules. The arbitrator shall
determine the Minor Dispute in accordance with the terms of this JOA
and the laws designated in Section VII K of the JOA and shall have
authority to render a maximum award of Two Hundred Fifty Thousand
Dollars ($250,000), including all damages of any kind and costs, fees
and the like.
(C) With respect to a Dispute in which (x) the claim, counterclaim
or amount in controversy exceeds Two Hundred Fifty Thousand Dollars
($250,000), or (y) the resolution of the Dispute may give a party a
right to terminate this JOA (``Major Dispute''), any such Major Dispute
shall be decided by a majority vote of three arbitrators. In the event
the parties are unable to agree on the three arbitrators, the three
arbitrators shall be appointed by JAMS under the JAMS Comprehensive
Arbitration Rules and Procedures then in effect (the ``Comprehensive
Rules''). The three arbitrators shall determine the Major Dispute in
accordance with the terms of this JOA and the laws designated in
Section VII K of this JOA. The majority of the three arbitrators may
grant any award, remedy or relief (``Award'') that they deem just and
equitable and within the scope of this JOA. The majority of
[[Page 11713]]
the arbitrators may also grant such ancillary relief as is necessary to
make effective the Award, including injunctive relief and/or specific
performance. In all arbitration proceedings in connection with a Major
Dispute, the arbitrators shall make specific, written findings of fact
and conclusions of law. In all Major Disputes, the parties shall, in
addition to the limited statutory right to seek vacation or
modification of any Award pursuant to applicable law, have the right to
seek vacation or modification of any Award that is based in whole, or
in part, on an incorrect or erroneous ruling of law by appeal to an
appropriate court having jurisdiction; provided, however, that any
application for vacation or modification of an Award based on an
incorrect ruling of law must be filed in a court having jurisdiction
pursuant to clause (c) below within thirty (30) days from the date the
Award is rendered. The findings of fact made by the arbitrators shall
be binding on all parties and shall not be subject to further review
except as otherwise allowed by applicable law.
(D) The non-prevailing party, as determined by the arbitrator or
arbitrators, shall be required to pay all of the arbitrator's fees and
shall reimburse the prevailing party for any advances made by such
party in respect of such fees.
(E) The arbitrator(s) shall not have the power to award (i) damages
inconsistent with this JOA or (ii) punitive damages or any other
damages not measured by the prevailing party's actual damages, and the
parties expressly waive their right to obtain such damages in
arbitration or in any other forum. In no event, even if any other
portion of these provisions is held to be invalid or unenforceable,
shall the arbitrator(s) have power to make an award or impose a remedy
that could not be made or imposed by a court deciding the matter under
the law designated in Section VII K of this JOA.
(F) The arbitrator(s) shall have the authority to order the parties
to produce documents or things for inspection and to provide
appropriate discovery to each other, including the depositions of
witnesses and the exchange of expert reports.
(G) Neither the parties nor any arbitrator may disclose the
existence, content or results of the arbitration, except as necessary
to enforce an Award or comply with legal or regulatory requirements.
Before making any such disclosure, a party shall give written notice to
all other parties and shall afford these parties a reasonable
opportunity to protect their interests.
(H) Except as otherwise provided in clause (a)(ii)(C) above, the
result of the arbitration will be binding on the parties, and judgment
on the arbitrator's Award may be entered in a court designated in
clause (c) below.
(I) At the request of either party, arbitration proceedings shall
include an oral hearing for the presentation of oral testimony and oral
argument. Written presentations may also be received. The parties shall
have the right to cross-examine witnesses, if requested. The
arbitrator(s) shall have the authority to administer oaths and to issue
orders requiring the presence of witnesses at the hearing if consistent
with the law designated in Section VII K of this JOA, or to apply to a
court designated in clause (c) below to issue such orders.
(J) All arbitration hearings will be commenced within sixty (60)
days of demand for arbitration by any party, provided, upon a showing
of cause, the arbitrator or arbitrators may extend the commencement of
such hearing for up to an additional thirty (30) days.
(b) Limitations on Arbitration Requirement.
(i) No provision of, nor the exercise of any rights under, this JOA
regarding arbitration shall limit the right of either party to join the
other party in litigation in the event of any litigation or proceeding
commenced by any third party against a party to this JOA in which the
other party is an indispensable party or potential third party
defendant (e.g., where such other party may be obligated to indemnify
the defendant in such third party action).
(ii) No provision of, nor the exercise of any rights under, this
JOA regarding arbitration shall limit the right of either party to seek
provisional or ancillary judicial remedies with respect to any Dispute,
such as preliminary injunctive relief, sequestration, attachment,
garnishment, or the appointment of a receiver from a court having
jurisdiction before, during or after the pendency of any arbitration.
The institution and maintenance of an action for such judicial remedies
shall not constitute a waiver of the right of any party, including the
claimant in such action, to submit to arbitration nor render
inapplicable the compulsory arbitration provisions hereof.
(iii) Nothing in this JOA shall be deemed to limit applicability of
any otherwise applicable statutes of limitation and any waivers
contained in this JOA. No provision in this Exhibit regarding
submission to jurisdiction and/or venue in any court is intended or
shall be construed to be in derogation of the provisions in this
Exhibit for arbitration of any Dispute.
(c) WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDING RELATING TO ANY
AWARD OR ANY ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO
COMPEL ARBITRATION OF ANY DISPUTE TO WHICH THIS EXHIBIT APPLIES, AND
FOR ANY OTHER MATTER SO DESIGNATED IN THIS EXHIBIT, EACH PARTY
IRREVOCABLY (1) CONSENTS AND SUBMITS TO THE EXCLUSIVE JURISDICTION OF
ANY UNITED STATES FEDERAL COURT OR WEST VIRGINIA STATE COURT SITTING IN
THE CITY OF CHARLESTON IN THE STATE OF WEST VIRGINIA, (2) WAIVES ANY
OBJECTION THAT IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH COURT, (3) WAIVES ANY
CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, (4) WAIVES THE RIGHT
TO OBJECT, WITH RESPECT TO ANY SUCH CLAIM, SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE JURISDICTION
OVER THE PARTY, AND (5) WAIVES ALL RIGHT TO TRIAL BY JURY.
Put/Call Agreement
PUT/CALL AGREEMENT, dated as of ---------------- (the ``Effective
Date''), among DAILY GAZETTE HOLDING COMPANY, LLC, a limited liability
company organized under the laws of the State of Delaware (``DGHC'');
CHARLESTON NEWSPAPERS HOLDINGS, L.P., a limited partnership organized
under the laws of the State of Delaware (the ``Limited Partnership'');
and ----------------, a ---------------- (the ``Class B Partner'').
Recitals
Whereas, the parties desire to enter into this Agreement to set
forth certain agreements with respect to the Class B Partner's
ownership of its Class B Limited Partner Units, including put rights
and call rights;
Now, Therefore, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the parties agree as
follows:
Article I
Definitions
1.1 Definitions. The following terms used in this Agreement have
the
[[Page 11714]]
meanings given such terms in this Section 1.1:
``Affiliate'' means, with respect to any Person, any other Person
that directly or indirectly through one or more intermediaries
controls, is controlled by or is under common control with such first-
named Person.
``Agreement'' means this Put/Call Agreement, as it may be amended,
restated, modified or supplemented from time to time in accordance with
its terms.
``Buyer'' has the meaning given such term in Section 3.1(a).
``Call'' has the meaning given such term in Section 5.1(b).
``Call Notice'' has the meaning given such term in Section 5.1(b).
``Class B Limited Partner'' has the meaning given such term in
Section 1.1.12 of the Limited Partnership Agreement.
``Class B Limited Partner Unit'' has the meaning given such term in
Section 1.1.14 of the Limited Partnership Agreement.
``CPC'' means Charleston Publishing Company, a Delaware
corporation.
``DGC'' means Daily Gazette Company, a corporation organized under
the laws of the State of West Virginia.
``DGHC'' has the meaning given such term in the Preamble.
``Drag-Along Notice'' has the meaning given such term in Section
4.1(a).
``Drag-Along Right'' has the meaning given such term in Section
4.1(a).
``Election Notice'' has the meaning given such term in Section 6.1.
``Fair Market Value of the Partnership'' has the meaning given such
term in Section 5.2.3 of the Limited Partnership Agreement.
``General Partner'' means DGHC and any successor General Partner.
``General Partner Unit'' has the meaning given such term in Section
1.1.18 of the Limited Partnership Agreement.
``JOA'' means the Second Amended and Restated Joint Operating
Agreement dated as of the date hereof, by and among DGC, DGHC, the
Joint Venture, the Limited Partnership, Daily Gazette Publishing
Company, LLC, a Delaware limited liability company, and CPC.
``Joint Venture'' means Charleston Newspapers, a West Virginia
unincorporated joint venture.
``Limited Partnership Agreement'' means that certain Amended and
Restated Limited Partnership Agreement for Charleston Newspapers
Holdings, L.P. dated as of --------------------, 2009, by and among
DGHC and CPC, as such agreement may be amended, restated, modified or
supplemented from time to time in accordance with its terms.
``New Units'' means any Units offered by the Limited Partnership
after the date of this Agreement.
``Partner'' means any Person admitted as a Partner of the Limited
Partnership in accordance with the provisions of the Limited
Partnership Agreement.
``Permitted Transferee'' means any other Person that directly or
indirectly succeeds to any or all of its Class B Limited Partner Units
in accordance with the provisions of this Agreement and Article VI of
the Limited Partnership Agreement and is admitted as a Partner in
accordance with the provisions of Article VI of the Limited Partnership
Agreement.
``Person'' means any individual, general partnership, limited
partnership, corporation, limited liability company, limited liability
partnership, joint venture, trust, business trust, cooperative,
association, governmental agency or a division or subdivision of any of
the foregoing, and the heirs, executors, administrators, legal
representatives, successors and assigns of such Person where the
context so permits.
``Pro Rata Portion'' means the Class B Partner's Percentage
Interest in the Limited Partnership (as defined in the Limited
Partnership Agreement).
``Residual Class B Partner Percentage'' means, as of any date, the
percentage of the aggregate distributions by the Limited Partnership to
the General Partner and the Class B Partner that the Class B Partner
would be entitled to receive under Section 7.3 of the Limited
Partnership Agreement if (i) the Limited Partnership were to sell its
assets at the Fair Market Value of the Partnership, (ii) income, gain,
loss and deduction arising from such sale were allocated among the
Partners in accordance with Section 5.2.3 of the Limited Partnership
Agreement, but without giving effect to any allocation of income or
gain attributable to the Tax Gross-Up Amount (as defined in the Limited
Partnership Agreement), and (iii) the Limited Partnership were then
liquidated on such date, taking into account all unrealized
appreciation or decline in value of the assets of the Limited
Partnership, and assuming all reserves were distributed.
``Subsidiary'' means any Person (including the Joint Venture) that
is controlled by the Limited Partnership.
``Tax-Adjusted Residual Class B Partner Percentage'' means, as of
any date, the percentage of the aggregate distributions by the Limited
Partnership to the General Partner and the Class B Partner that the
Class B Partner would be entitled to receive under Section 7.3 of the
Limited Partnership Agreement if (i) the Limited Partnership were to
sell its assets at the Fair Market Value of the Partnership, (ii)
income, gain, loss and deduction arising from such sale were allocated
among the Partners in accordance with Section 5.2.3 of the Limited
Partnership Agreement, and (iii) the Limited Partnership were then
liquidated on such date, taking into account all unrealized
appreciation or decline in value of the assets of the Limited
Partnership, and assuming all reserves were distributed.
``Taxes'' means any and all taxes, fees, duties, tariffs, imposts
and other charges of any kind imposed by any government or taxing
authority, including, without limitation: federal, state, local, or
foreign income, gross receipts, windfall profits, severance, property,
ad valorem, sales, use, license, excise franchise, capital, transfer,
recordation, employment, withholding, or other tax or governmental
assessment.
``Tax Interest'' means any interest, additions, or penalties with
respect to Taxes and any interest in respect of such additions or
penalties.
``Unit'' means an undivided share of the interests in the Limited
Partnership of all the Partners, which include the General Partner
Units and Class B Limited Partner Units.
``Unpaid Tax Liabilities'' means the sum of (i) all unpaid Transfer
Tax Liabilities, plus (ii) all unpaid Taxes of the Class B Partner due
and owing (but, in the case of any Tax attributable to income or gain
allocated to the Class B Partner by the Limited Partnership, only to
the extent that such Tax would have been paid by the Class B Partner if
the Class B Partner had used the full amount of all distributions
received by it from the Limited Partnership after such Tax became due
and payable to pay such Tax and all other Taxes arising thereafter),
plus Tax Interest attributable thereto.
Article II
Restriction on Transfer
2.1 Restriction on Transfer of Class B Limited Partner Units.
(a) Permitted Transfer. Except as otherwise specifically provided
in Section 2.1(c), the Class B Partner shall have the right to sell,
exchange, transfer, pledge, hypothecate, assign or otherwise dispose of
(any of the foregoing transactions referred to herein as a
``Transfer'') all or any part of its Class B Limited Partner Units to
any Person.
(b) Transfer to an Affiliate. The Class B Partner shall be
permitted to Transfer its Class B Limited Partner Units to an Affiliate
of the Class B Partner and to assign its Class B Limited Partner Units
[[Page 11715]]
and its rights under this Agreement as collateral security to Persons
extending financing to such Limited Partner or any of their Affiliates
(and such Persons may at any time foreclose on such security interest).
(c) Restriction on Transfer. Notwithstanding anything contained in
Sections 2.1(a) or 2.1(b) to the contrary, the Class B Partner shall
not have the right to Transfer all or any part of its Class B Limited
Partner Units to any Person that is, or that is an Affiliate of a
Person that is, a publisher of a general circulation daily newspaper
(other than a newspaper published by the Joint Venture) whose principal
newsroom is located in Kanawha County, West Virginia, or Putnam County,
West Virginia; provided, however, that the foregoing restriction shall
not apply to a publisher of a general circulation daily newspaper with
a circulation market share in Kanawha and Putnam Counties of 5% or
less. Any Transfer that is made in violation of this Section 2.1(c)
shall not be permitted and shall be null and void for all purposes.
(d) Transfer Tax Liabilities. Upon a Transfer of any Class B
Limited Partner Units by the Class B Partner pursuant to this Section
2.1, the Class B Partner and/or the transferee of such Class B Limited
Partner Units shall be liable for all Taxes and Tax Interest, resulting
from such Transfer (``Transfer Tax Liabilities'') and shall not be
entitled to receive any tax distributions under the Limited Partnership
Agreement in respect thereof (provided that this Section 2.1(d) shall
not affect the Class B Partner's rights to receive distributions in
accordance with the Limited Partnership Agreement).
(e) Transfer in Compliance with the Limited Partnership Agreement;
Agreement to be Bound by this Agreement. No Transfer may be made
pursuant to this Section 2.1 unless such Transfer is also made in
accordance with Article VI of the Limited Partnership Agreement and,
without limiting the generality of the foregoing, the transferee of any
Class B Limited Partner Units pursuant to this Section 2.1, if not
already a party to this Agreement, shall execute and deliver an
agreement to the General Partner by which it agrees to become a party
to this Agreement, assume all of the obligations hereunder of its
transferor with respect to the Class B Limited Partner Units
transferred to it and be bound by the terms and conditions hereof in
the same manner as the transferor with respect to such Units. Without
limiting the generality of the foregoing, any and all Class B Limited
Partner Units transferred pursuant to this Section 2.1 shall remain
subject to, and shall enjoy the rights under, the Tag-Along Right,
Drag-Along Right, Put and Call provisions set forth in Articles III, IV
and V hereof and the Class B Limited Partner shall continue to have the
Class B Partner Board Right set forth in Article VII hereof and the
Limited Partnership Agreement. No Transfer may be made pursuant to this
Section 2.1 unless such Transfer is also made in accordance with all
applicable laws, including federal and state securities laws.
Article III
Tag-Along Rights
3.1 Tag-Along Rights
(a) If the General Partner proposes to Transfer any General Partner
Units (``Transferor Units''), to one or more Persons who is not an
Affiliate of the General Partner (each such Person, a ``Buyer''), then,
as a condition to such transfer, the General Partner shall cause the
Buyer to include an offer (the ``Tag-Along Offer'') to the Class B
Partner to purchase from the Class B Partner, at the option of the
Class B Partner, that number of Class B Limited Partner Units as
determined in accordance with Section 3.1(b), on the same terms and
conditions as are applicable to the Transferor Units (with the portion
of the purchase price payable to the Class B Partner being the
aggregate amount of the purchase price for all Units included in such
sale multiplied by the Tax-Adjusted Residual Class B Partner
Percentage). The General Partner shall provide a written notice (the
``Tag-Along Notice'') of the Tag-Along Offer to the Class B Partner,
which may accept the Tag-Along Offer by providing a written notice of
acceptance of the Tag-Along Offer to the General Partner within thirty
(30) days of the delivery of the Tag-Along Notice. Subject to Section
3.1(e), if the Class B Partner fails to accept a Tag Along Offer within
thirty (30) days of delivery of the Tag-Along Notice, the Class B
Partner shall cease to have any rights hereunder with respect to such
Tag-Along Offer.
(b) The Class B Partner shall have the right (a ``Tag-Along
Right'') to sell pursuant to the Tag-Along Offer the percentage of its
Class B Limited Partner Units then held equal to the percentage of
General Partner Units proposed to be sold by the General Partner (which
percentage of General Partner Units may be reduced in the sole
discretion of the General Partner and the Buyer).
(c) The Class B Partner's Tag-Along Right shall not apply to any
(i) pledge by the General Partner of Units for security purposes under
any bona fide loan transaction; (ii) Transfer of Units pursuant to a
foreclosure action under any bona fide loan transaction; or (iii)
Transfer of Units by the General Partner to an Affiliate. If the
General Partner Transfers any General Partner Units to an Affiliate of
the General Partner, such Affiliate transferee shall become a party to
and be bound by the terms of this Agreement to the same extent as the
General Partner.
(d) If the Class B Partner fails to accept a Tag-Along Offer within
thirty (30) days of delivery of the Tag-Along Notice, the Buyer shall
have one hundred twenty (120) days, commencing on the thirtieth (30th)
day after delivery of the Tag-Along Notice to the Class B Partner, in
which to purchase on terms no more favorable to the transferor than the
terms set forth in the Tag-Along Offer from the General Partner the
number of Transferor Units with respect to which the Tag-Along Notice
was delivered. If such purchase and sale is not consummated on terms no
more favorable to the transferor than the terms set forth in the Tag-
Along Offer within such one hundred twenty (120) day period, any
Transfer of the Transferor Units shall again be subject to the
provisions of this Section 3.1.
(e) The provisions of this Section 3.1 shall apply to a sale of any
membership interest in the General Partner to the same extent as such
provisions apply to a sale of Units by the General Partner.
Article IV
Drag-Along Rights
4.1 Drag-Along Rights. In the event the General Partner proposes to
Transfer all of its General Partner Units for cash, in a single
transaction or a series of related transactions, to a Person that is
not an Affiliate of the General Partner, the General Partner shall have
the right (the ``Drag-Along Right'') to cause the Class B Partner to
sell all of its Class B Limited Partner Units to such Person on the
same terms and conditions as the General Partner proposes to Transfer
its General Partner Units (with the portion of the purchase price
payable to the Class B Partner being the aggregate amount of the
purchase price for all Units included in such sale multiplied by the
Tax-Adjusted Residual Class B Partner Percentage). The General Partner
may exercise its Drag-Along Right by giving written notice of such
exercise (the ``Drag-Along Notice'') to the Class B Partner not fewer
than ten (10) days prior to the consummation of the Transfer that is
the subject of the Drag-Along Right. The Drag-Along Notice shall
contain a copy of any definitive documentation pursuant to which
[[Page 11716]]
Transfer is to be made and will state the name and address of the
purchaser and the anticipated closing date of such Transfer. Upon
delivery of the Drag-Along Notice, the Class B Partner shall be
obligated to Transfer and deliver its Class B Limited Partner Units on
the terms and conditions applicable to the Transfer and shall use
commercially reasonable efforts to cooperate in the Transfer and take
all necessary actions to enter into appropriate Transfer or transaction
documents. The Class B Partner's indemnification obligations under the
transaction documents governing a Transfer pursuant to this Section 4.1
shall be limited to the amount of any portion of the proceeds paid for
the Class B Limited Partner Units sold in such transaction that is held
in escrow for such purpose and not paid to the Class B Partner, such
transaction documents shall not require the Class B Partner to make any
representations other than those with respect to the Class B Partner's
ownership of and its ability to Transfer the Class B Limited Partner
Units to be sold in such transaction and any indemnification
obligations shall be limited to breach of such representations only.
Article V
Put and Call Rights
5.1 Put and Call Rights.
(a) Class B Partner Put Right. Upon the cessation of the
publication of The Charleston Daily Mail, the Class B Partner shall be
required to sell to the General Partner (or an Affiliate or designee
thereof) and the General Partner (or an Affiliate or designee thereof),
shall be required, subject to the terms and conditions set forth in
this Agreement, to purchase from the Class B Partner all, but not less
than all, of the Class B Limited Partner Units. Additionally, at any
time from and after the termination of the JOA by lapse of time or
otherwise and/or dissolution and/or termination of the Joint Venture or
upon the occurrence of any event which constitutes or results in a
Change of Control (as defined below) of the Joint Venture, the Class B
Partner shall have the right to sell to the General Partner (or an
Affiliate or designee thereof) and the General Partner (or an Affiliate
or designee thereof), shall be required, subject to the terms and
conditions set forth in this Agreement, to purchase from the Class B
Partner all, but not less than all, of the Class B Limited Partner
Units. The obligation or right to sell and obligation to buy set forth
in the preceding two sentences shall be referred to herein as the
``Put''. With respect to the Put described in the second sentence of
this Section 5.1(a), if the Class B Partner elects to exercise the Put,
it shall send written notice thereof to the General Partner (the ``Put
Notice)''. The General Partner's designation of an Affiliate or other
designee to purchase the Class B Limited Partner Units in connection
with the exercise of the Put will not relieve the General Partner of
its obligations hereunder. For purposes of this Section, ``Change of
Control'' means any event, transaction or occurrence as a result of
which DGC ceases to control the General Partner, and ``control'' means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a person, whether through
the ownership of voting securities, by contract, or otherwise.
(b) General Partner Call Right. At any time from and after the
termination of the JOA by lapse of time or otherwise and/or the
dissolution and/or termination of the Joint Venture, the General
Partner (or an Affiliate or designee thereof) shall have the right to
purchase from the Class B Partner, and the Class B Partner shall be
required, subject to the terms and conditions set forth in this
Agreement, to sell to the General Partner (or an Affiliate or designee
thereof), all, but not less than all, of the Class B Limited Partner
Units (such right to purchase, the ``Call''. If the General Partner
elects to exercise the Call, it shall send written notice thereof to
the Class B Partner (the ``Call Notice'').
(c) Purchase Price. The purchase price to be paid to the Class B
Partner upon the exercise of the Put or Call (the ``Put/Call Purchase
Price'') shall be equal to (A) the amount that would be distributed to
the Class B Partner under Section 7.3 of the Limited Partnership
Agreement if the Limited Partnership were to sell its assets on the
Put/Call Closing Date for the Fair Market Value of the Partnership and
the income, gain, loss and deduction arising from such sale were
allocated among the Partners in accordance with Section 5.2.3 of the
Limited Partnership Agreement, but without giving effect to any
allocation of income or gain attributable to the Tax Gross-Up Amount
(as defined in the Limited Partnership Agreement), and the Limited
Partnership were then liquidated in accordance with Article VII of the
Limited Partnership Agreement on the Put/Call Closing Date, minus (B)
the amount of any Unpaid Tax Liabilities or other outstanding
liabilities of the Class B Partner (other than liabilities for Taxes
and Tax Interest). The Fair Market Value of the Partnership shall be
determined as of the Put/Call Closing Date by mutual agreement of the
General Partner and the Class B Partner or by appraisals in accordance
with the terms hereof. In the event the General Partner and the Class B
Partner do not agree on the Fair Market Value of the Partnership within
twenty days, then within fifteen days of the expiration of such twenty-
day period (or such longer period as the General Partner and the Class
B Partner mutually agree), each of the General Partner and the Class B
Partner shall select a nationally recognized appraiser with experience
in the newspaper industry to prepare, using the methodology described
in Exhibit A attached hereto, a written appraisal setting forth such
appraiser's determination of the Fair Market Value of the Partnership.
If either the General Partner and the Class B Partner fail to so
appoint an appraiser within such fifteen-day period, then its right to
do so shall lapse and the appraisal made by the one appraiser who is
timely appointed shall be the Fair Market Value of the Partnership. If
two appraisals are made, unless the higher of the two appraisals is
more than 110% more than the lower appraisal, the Fair Market Value of
the Partnership will be the average of the two appraisals, and if the
higher of the two appraisals is more than 110% more than the lower of
the appraisals, the General Partner and the Class B Partner shall
jointly select a third appraiser, and the Fair Market Value will be the
average of the two of the three appraisals that are closest together in
amount. All appraisals will be made within twenty days of appointment
of such appraiser and must separately identify the amount of each of
the items described in clauses (i) through (vi) of Section 5.2.3(b) of
the Limited Partnership Agreement. A written notice of the results of
each such appraisal shall be given to the General Partner and the Class
B Partner. The General Partner and the Class B Partner will each pay
the fees of the appraiser selected by it, and the General Partner and
the Class B Partner will share equally the fees of the third appraiser,
if any. The General Partner and each Member will cooperate fully with
each appraiser's attempt to determine the Fair Market Value of the
Partnership.
(d) Closing. The closing of the transaction pursuant to the
exercise of the Put or Call, as the case may be, shall take place at
the principal offices of the Limited Partnership no later than the
thirtieth (30th) day following the final determination of the Put/Call
Purchase Price; provided that such date shall be extended as necessary
and for so long as
[[Page 11717]]
necessary to permit the parties to comply with applicable law to obtain
all regulatory approvals, if any, necessary to consummate such
transaction (such 30th day, as it may be extended, the ``Put/Call
Closing Date''). The General Partner shall be responsible (solely at
the General Partner's expense) for obtaining all approvals and consents
necessary to permit the General Partner and Class B Partner to
consummate such transactions (other than any such approvals or consents
that are unique to the Class B Partner). Each party agrees to use its
commercially reasonable efforts to cooperate in obtaining any
regulatory approvals necessary to consummate such transaction as
promptly as possible. If the closing of the transaction pursuant to the
exercise of the Put has not occurred by the tenth (10th) day after the
Put/Call Closing Date, the General Partner shall pay to the Class B
Partner at the closing interest in an amount equal to 14.5% of the Put/
Call Purchase Price accruing daily on the basis of a 360-day year and
compounding at the end of each 90-day period after the Put/Call Closing
Date. At the closing of the Put or Call, as the case may be, the
General Partner shall pay the Put/Call Purchase Price and any interest
accrued thereon to the Class B Partner in cash or immediately available
funds and the Class B Partner shall deliver instruments, in form and
substance reasonably satisfactory to the General Partner, assigning all
of its interest in the Class B Limited Partner Units to the General
Partner free and clear of all liens, claims and encumbrances of any
nature whatsoever (other than those arising under this Agreement, the
Limited Partnership Agreement or the JOA or in favor of any lender(s)
to the Limited Partnership or any of its Subsidiaries) against payment
of the Put/Call Purchase Price therefor.
Article VI
Preemptive Rights
6.1 Class B Partner Preemptive Rights. Prior to issuing any New
Units to any Person (``New Unit Offerees''), the Limited Partnership
shall offer (the ``New Unit Offer'') the Class B Partner an opportunity
to purchase all or a portion of its Pro Rata Portion of such New Units
upon the same terms and conditions offered to the New Unit Offerees,
The Limited Partnership shall make such New Unit Offer by providing the
Class B Partner with notice (the ``New Unit Notice'') setting forth:
(i) The Class B Partner's Pro Rata Portion of such New Units; (ii) the
consideration to be paid for each of the New Units; and (iii) all other
material terms of such New Units. The Class B Partner may elect to
accept the New Unit Offer by delivering written notice of its
acceptance to the Limited Partnership within thirty (30) days after
delivery of the New Unit Notice (the ``Election Notice'') setting forth
the number of New Units the Class B Partner wishes to purchase. If the
Class B Partner elects to purchase all or a portion of its Pro Rata
Portion of such New Units, the sale thereof shall be consummated on the
closing date applicable to all New Unit Offerees. In the event the
Class B Partner elects not to exercise its right pursuant to this
Section 6.1, fails to timely give an Election Notice or fails to
purchase the New Units allocated to it at the closing designated
therefor by the Limited Partnership, the Class B Partner shall cease to
have any rights hereunder with respect to such New Unit Offer, provided
that if there is any material change to the terms of the New Unit Offer
following such non-exercise or failure, the Class B Partner's rights
under this Section 6.1 will be reinstated.
6.2 Issuance of New Units. In the event the Limited Partnership
issues any New Units for no consideration or for consideration which is
less than the fair market value of such New Units at the time of sale
(as mutually determined by the General Partner and the Class B Partner
or if the General Partner and Class B Partner cannot agree, pursuant to
an appraisal process similar to the process set forth in Section 5.1(c)
and at the Limited Partnership's expense) and the New Units are
entitled to a portion of the net equity value of the Limited
Partnership on liquidation and/or distributions under the Limited
Partnership Agreement, then the Limited Partnership Agreement shall be
amended to change the terms of the Class B Limited Partner Units so
that, after giving effect to such amendment, the value of the net
equity of the Limited Partnership and distributions by the Limited
Partnership to which the Class B Partner is entitled by virtue of its
ownership of Class B Limited Partner Units is the same as the value of
the net equity of the Limited Partnership and distributions by the
Limited Partnership to which the Class B Partner was entitled prior to
giving effect to such issuance and such amendment (the intention of the
parties being such amendment will afford the Class B Partner a benefit
of the type afforded by a customary weighted-average antidilution
adjustment). The parties will act in good faith to agree upon and
execute such amendment to the Limited Partnership Agreement, which
shall also provide for additional distributions to be paid to the Class
B Partner on the date such amendment becomes effective in order to give
effect to the terms of such amendment with respect to distributions (if
any) made by the Limited Partnership after such issuance but prior to
such amendment becoming effective.
6.3 Termination of Preemptive Rights. The Class B Partner's
preemptive rights pursuant to this Article VI shall terminate upon the
completion of a successful underwritten public offering by the Limited
Partnership (or any corporate successor thereto).
6.4 Application of Article VI to Joint Venture. The provisions of
this Article VI shall apply mutatis mutandis if the Joint Venture or
any other Subsidiary of the Limited Partnership issues any new equity
interests (other than any such equity interest issued to the Limited
Partnership or another Subsidiary or the Limited Partnership).
Article VII
DGHC Board Representation
7.1 Class B Partner Board Representation. The Class B Partner
(together with any other Class B Limited Partners) shall have the right
to appoint two (2) members to the board of managers of DGHC or such
greater number as required by Section 5(b)(ii) of the Operating
Agreement of DGHC (the ``Class B Partner Board Right''), which board of
managers shall be governed by the Limited Partnership Agreement and the
Operating Agreement of DGHC attached hereto as Exhibit B. The board of
managers shall consist of up to five individual managers and in no
event may the board of managers consist of more than five managers
without the consent of the managers appointed by the Class B Partner(s)
pursuant to Section 5(b) of the Operating Agreement of DGHC; provided,
however, that in no event may the board of managers consist of more
than five managers unless not fewer than forty percent (40%) of the
managers are appointed by the Class B Partner(s) pursuant to Section
5(b) of the Operating Agreement of DGHC. If there is more than one
Class B Limited Partner, then the Class B Partner Board Right will be
vested solely in the Class B Limited Partner that supervises editorial
and reportorial functions of the The Charleston Daily Mail pursuant to
Section 9.1 of the Limited Partnership Agreement. In no event may the
Class B Limited Partner(s) appoint as members to the board of managers
of DGHC any person who is, at the time of his or her appointment, an
employee of the Joint Venture, DGC, DCHC, the Limited
[[Page 11718]]
Partnership or Daily Gazette Publishing Company, LLC.
Article VIII
Miscellaneous
8.1 Registration Rights. The parties agree that prior to the
consummation of any public offering of the Limited Partnership (or any
corporate successor thereto), the parties will agree on a registration
rights agreement which will include one demand registration and an
unlimited number of piggyback registrations with respect to the Class B
Partner's securities of the Limited Partnership (or any corporate
successor thereto), in each case, at the Limited Partnership's (or any
corporate successor thereto's) expense, containing customary terms and
conditions and otherwise in form and substance reasonably acceptable to
the parties.
8.2 Assignment. This Agreement shall be binding upon and inure only
to the benefit of and be enforceable against the parties hereto and
their respective permitted successors and assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any Person,
other than the parties hereto and their respective permitted successors
and assigns, any rights or remedies under or by reason of this
Agreement. The Class B Partner may assign this Agreement and such
party's rights hereunder to any Permitted Transferee hereunder. The
General Partner may assign this Agreement and its rights hereunder to
any of its Affiliates, to a successor General Partner or as collateral
for a loan or other financing; provided that no such assignment shall
release the General Partner from any obligation hereunder.
8.3 Amendment. This Agreement may not be amended except by a
written instrument signed by the General Partner, the Limited
Partnership and the Class B Partner.
8.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of West Virginia,
without regard to its conflicts of law principles.
8.5 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been
duly given or made as of the date delivered if delivered by hand, by
telecopier device or by overnight courier service to the parties at the
following addresses:
If to General Partner:
c/o Daily Gazette Company, 1001 Virginia Street, East, Charleston, WV
25301. Attn: Ms. Elizabeth E. Chilton, President, Facsimile: (304) 348-
5180; and Attn: Mr. Norman Watts Shumate III, Facsimile: (304) 348-
1795.
With A Copy to:
Edmondson + Blumenthal PLLC, 12 Cadillac Drive, Suite 210, Brentwood,
TN 37027. Attn: Steven E. Blumenthal Facsimile: (615) 296-4600.
If to Class B Partner:
[insert notice information]
8.6 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is
not affected in any manner adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the greatest
extent possible.
8.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which
taken together shall constitute one and the same agreement.
8.8 Headings. The section headings used in this Agreement are for
reference purposes only and shall not affect the meaning or
interpretation of any term or provision of this Agreement.
8.9 Integration. This Agreement (together with the Limited
Partnership Agreement and the JOA) represents the entire understanding
of the parties with reference to the matters set forth herein. This
Agreement supersedes all prior negotiations, discussions,
correspondence, communications and prior agreements among the parties
relating to the subject matter herein.
IN WITNESS WHEREOF, the parties have caused this Put/Call Agreement
to be duly executed as of the date first above written.
DAILY GAZETTE HOLDING COMPANY, LLC
By: Daily Gazette Company, its sole member
By:
Name:------------------------------------------------------------------
Title:-----------------------------------------------------------------
CHARLESTON NEWSPAPERS HOLDINGS, L.P.
By: Daily Gazette Holding Company, LLC, its general partner
By: Daily Gazette Company, its sole member
By:
Name:------------------------------------------------------------------
Title:-----------------------------------------------------------------
[insert name of Class B Partner]
By:
Name:------------------------------------------------------------------
Title:-----------------------------------------------------------------
DAILY GAZETTE COMPANY (solely for the purposes of Article VII)
By:
Name:------------------------------------------------------------------
Title:-----------------------------------------------------------------
Exhibit A
Appraisal Methodology
In determining the Fair Market Value, the appraiser will use the
following methodology:
The appraiser shall determine the Fair Market Value of the
Partnership based on the going concern value of the Partnership as of
the relevant date. In determining the Partnership's going concern
value, the appraiser (i) shall assume that the value of any business is
the cash price at which the assets of such business as a going concern
would change hands between a willing buyer and a willing seller
(neither acting under compulsion) in an arms-length transaction, on
terms and subject to conditions and costs applicable in the newspaper
publishing industry, (ii) shall assume that all assets used in the
operation of the business of the Partnership and its Subsidiaries,
whether owned by or licensed to the Partnership or any of its
Subsidiaries (and all other assets of any Affiliate of the Partnership
that are used by the Partnership or any of its Subsidiaries), were
entirely owned directly by the Partnership, and (iii) shall not take
into account expenditures in respect of any management agreements
entered into by the Joint Venture.
Exhibit B
Operating Agreement of DGHC
NEITHER THIS WARRANT NOR THE CLASS B LIMITED PARTNER UNITS TO BE
ISSUED UPON EXERCISE HEREOF HAS BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE ``SECURITIES ACT''). NO SALE OR OTHER
DISPOSITION OF THIS WARRANT OR THE CLASS B LIMITED PARTNER UNITS
ISSUABLE UPON EXERCISE HEREOF MAY BE MADE WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT. THIS WARRANT IS
[[Page 11719]]
ALSO SUBJECT TO CERTAIN ADDITIONAL TRANSFER RESTRICTIONS PROVIDED FOR
HEREIN.
Charleston Newspapers Holdings, L.P.
Warrant To Purchase Class B Limited Partner Units Initially
Constituting a 20% Percentage Interest
This certifies that Charleston Publishing Company, a Delaware
corporation (``Holder''), is entitled to subscribe for and purchase
from Charleston Newspapers Holdings, L.P., a Delaware limited
partnership (hereinafter, the ``Partnership''), up to an aggregate
number of duly authorized, validly issued, fully paid and nonassessable
Class B Limited Partner Units equal to the Warrant Units Amount, at a
purchase price per Class B Limited Partner Unit equal to the Warrant
Price (as defined below), subject to the provisions and upon the terms
and conditions hereinafter set forth. Capitalized terms used herein and
not otherwise defined herein shall have the meanings assigned to them
in that certain Amended and Restated Limited Partnership Agreement for
Charleston Newspapers Holdings, L.P. by and among Daily Gazette Holding
Company, LLC, a Delaware limited liability company (``DGHC''), and
Charleston Publishing Company (as it may be amended from time to time,
the ``Partnership Agreement'').
The purchase price of each Class B Limited Partner Unit shall be
the price per Class B Limited Partner Unit determined in accordance
with Exhibit A attached hereto and set forth in an addendum to this
Warrant executed by Holder and the Partnership (the ``Warrant Price'').
The maximum number of Class B Limited Partner Units to be issued upon
exercise of this Warrant (as adjusted from time to time, the ``Warrant
Units Amount'') shall be equal to the number of Class B Limited Partner
Units that constitute a twenty percent (20%) Percentage Interest in the
Partnership (subject to adjustment as provided below (as adjusted from
time to time, the ``Warrant Percentage Amount'') as of the date of
exercise. The term ``Class B Units'' shall mean, unless the context
otherwise requires, the Class B Limited Partner Units and other
property at the time receivable upon the exercise of this Warrant. The
term ``Warrant(s)'' as used herein shall include this Warrant and any
warrant(s) delivered in substitution or exchange therefor as provided
herein.
Method of Exercise; Payment
The purchase right represented by this Warrant may be exercised by
Holder, in whole or in part, by:
The surrender of this Warrant at the principal office of the
Partnership located at c/o Daily Gazette Company, 1001 Virginia Street,
East, Charleston, WV 25301, Attn: Ms. Elizabeth Chilton, President,
together with a written notice of Holder's election to exercise this
Warrant, which notice shall specify the number of Class B Units (or the
Percentage Interest of the Partnership) to be purchased;
the payment to the Partnership, by wire transfer of immediately
available funds to an account designated by the Partnership, of an
amount equal to the aggregate Warrant Price of the Class B Units being
purchased;
if Holder is not already a party to the Partnership Agreement, the
execution and delivery by Holder of an amendment to the Partnership
Agreement (in a form prepared by Holder and reasonably acceptable to
the General Partner) pursuant to which Holder will become a party to
the Partnership as a Class B Limited Partner and agree to be bound by
the terms and conditions of the Partnership Agreement (a ``Partnership
Amendment''); and
if Holder is not already a party to a put/call agreement in
substantially the form attached to this Warrant as Exhibit B (a ``Put/
Call Agreement''), the execution and delivery by Holder of a Put/Call
Agreement.
Class B Units purchased pursuant to this Warrant shall be
uncertificated. Unless this Warrant has been fully exercised or has
expired, a new Warrant representing the Class B Units with respect to
which this Warrant shall not then have been exercised shall be issued
to Holder as soon as practicable after each exercise of this Warrant,
and in any event within thirty (30) days after the surrender of this
Warrant. Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the date on
which items (a) and (b) above have been satisfied, and the person
entitled to receive the Class B Units issuable upon such exercise shall
be treated for all purposes as the holder of such Class B Units of
record as of the close of business on such date.
Certain Agreements
Upon surrender of this Warrant pursuant to Section 1:
a. The Partnership will cause the General Partner to immediately
execute and deliver to Holder the Partnership Amendment executed and
delivered by Holder pursuant to Section 1(c) above; and
b. The Partnership will (and the Partnership will cause the General
Partner to) immediately execute and deliver to Holder the Put/Call
Agreement executed and delivered by Holder pursuant to Section 1(d)
above.
Covenant of Non-Impairment
The Partnership will not, by amendment of the Partnership Agreement
or through reorganization, consolidation, merger, dissolution, issue or
sale of Partnership Interests or other securities, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times
in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order
to protect the rights of Holder against dilution or other impairment.
Adjustment of Percentage Interest
At the end of each of the 2010, 2011, 2012, 2013 and 2014 fiscal
years of the Partnership, the Warrant Percentage Amount shall be
subject to adjustment as follows:
a. If the Daily Mail's percentage share of the Combined Circulation
for the most-recently ended 12-month audit period exceeds the Daily
Mail's percentage share for the immediately preceding 12-month audit
period by more than one (1) percentage point, then the Warrant
Percentage Amount will increase one (1) percentage point.
b. If the Daily Mail's percentage share of the Combined Circulation
for the most-recently ended 12-month audit period is more than one (1)
percentage point lower than the Daily Mail's percentage share for the
immediately preceding 12-month audit period, then the Warrant
Percentage Amount will decrease one (1) percentage point.
For purposes of determining adjustments to be made pursuant to this
Section 3, the terms set forth below shall have the meanings assigned
to them below:
``Daily Mail'': The Charleston Daily Mail.
``Charleston Gazette'': The Charleston Gazette.
``Daily Print Circulation'': The average weekday paid print
circulation of a newspaper as stated in the most recent 12-month audit
conducted by the Audit Bureau of Circulations or other reputable third
party media auditor.
``Combined Circulation'': The sum of the Daily Print Circulation of
the Daily Mail and the Charleston Gazette.
[[Page 11720]]
Term; Termination
This Warrant may be exercised in whole or in part at any time and
from time to time, on or after [insert date] and shall terminate three
(3) years thereafter. Notwithstanding the foregoing, this Warrant shall
terminate immediately upon the cessation of the publication of The
Charleston Daily Mail.
No Partner Rights
Holder shall not, solely by virtue hereof, be entitled to any
rights of a partner of the Partnership prior to any exercise of this
Warrant, and nothing contained in this Warrant shall be construed as
imposing any obligation on Holder to purchase any Partnership Interest
or as imposing any liabilities on Holder as a partner of the
Partnership (prior to any exercise of this Warrant), whether such
obligation or liabilities are asserted by the Partnership or by
creditors of the Partnership.
Transfer
This Warrant may not be sold, assigned, disposed, hypothecated,
pledged or otherwise transferred in whole or in part; provided,
however, (x) Holder may assign this Warrant to any of Holder's
Affiliates, provided that such Affiliate agrees to be bound by the
provisions of this Warrant and (y) Holder may assign its rights under
this Warrant as collateral security to persons or entities extending
financing to Holder or any of its Affiliates (and such persons or
entities may at any time foreclose on such security interest). The term
``Holder'' as used herein shall include any transferee to whom this
Warrant has been transferred in accordance with this Section 7. Any
transfer or attempted transfer in violation of this Section 7 shall be
null and void. The term ``Affiliate'' as used herein shall mean, with
respect to any person or entity, any other person or entity directly or
indirectly controlling or controlled by such person or entity or under
direct or indirect common control with such person or entity.
Securities Act of 1933
In addition to (and not in limitation of) the restrictions set
forth in Section 6 above, Holder, by acceptance hereof, agrees that,
absent an effective registration statement under the Securities Act of
1933, as amended (the ``Securities Act''), covering the disposition of
the Warrant or Class B Units issued or issuable upon exercise hereof,
Holder will not sell or transfer any or all of such Warrant or Class B
Units unless such sale or transfer will be exempt from the registration
and prospectus delivery requirements of the Securities Act and an
opinion of counsel reasonably satisfactory to the Partnership regarding
such exemption is delivered to the Partnership. Holder consents to the
Partnership's making a notation on its records in order to implement
such restriction on transferability. Holder represents that it is an
``accredited investor'' within the meaning of Rule 501 under the
Securities Act.
Remedies
The Partnership stipulates that the remedies at law of Holder, in
the event of any default or threatened default by the Partnership in
the performance of or compliance with any of the terms of this Warrant,
are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree
for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
Loss or Mutilation
Upon receipt by the Partnership of evidence satisfactory to it (in
the exercise of reasonable discretion) of the ownership of and the
loss, theft, destruction or mutilation of this Warrant and (in the case
of loss, theft, or destruction) of indemnity satisfactory to it (in the
exercise of reasonable discretion), and (in the case of mutilation)
upon surrender and cancellation thereof, the Partnership will execute
and deliver in lieu hereof a new Warrant of like tenor.
Successors
All the covenants and provisions of this Warrant shall bind and
inure to the benefit of Holder and the Partnership and their respective
successors and permitted assigns.
Notices
All notices and other communications given pursuant to this Warrant
shall be in writing and shall be deemed to have been given when
personally delivered or when mailed by prepaid registered, certified or
express mail, return receipt requested. Notices should be addressed as
follows:
a. If to Holder, then to:
Affiliated Media, Inc., 101 W. Colfax Avenue, Suite 1100, Denver, CO
80202. Attention: Joseph J. Lodovic, IV, President.
With a copy (which shall not constitute notice) to:
Hughes Hubbard & Reed LLP, One Battery Park Plaza, New York, New York
10004. Attention: James Modlin.
b. If to the Partnership, then to:
Daily Gazette Company, 1001 Virginia Street, East, Charleston, WV
25301. Attention: Elizabeth E. Chilton, President and Norman Watts
Shumate III.
With a copy (which shall not constitute notice) to:
Edmondson + Blumenthal PLLC, 12 Cadillac Drive, Suite 210, Brentwood,
TN 37027. Attention: Steven E. Blumenthal.
Such addresses for notices may be changed by any party by written
notice to the other party pursuant to this Section 12.
Amendment
This Warrant may be amended only by an agreement in writing signed
by the Partnership and Holder.
Construction of Warrant
Captions contained in this Warrant are inserted as a matter of
convenience and in no way define the scope of this Warrant or the
intent of any provision hereof. None of the provisions of this Warrant
shall be for the benefit of or be enforceable by any creditor of the
Partnership, any Partner or Holder. This Warrant, together with the
exhibits attached hereto and the Partnership Agreement and the JOA,
constitute the entire agreement between the parties hereto pertaining
to the subject matter hereof and supersedes all prior agreements (oral
or written) and understandings pertaining thereto. In the event of any
conflict between this Warrant and any other agreement, this Warrant
shall control. The invalidity of any article, section, subsection,
clause or provision of this Warrant shall not affect the validity of
the remaining articles, sections, subsections, clauses or provisions
hereof.
Governing Law
This Warrant and the rights and obligations of the parties hereto
shall be governed by and construed in accordance with the laws of the
State of Delaware, without regard to its conflicts of law principles.
Dated as of [insert date]
Charleston Newspapers Holdings, L.P.
By: Daily Gazette Company, General Partner
By:--------------------------------------------------------------------
Elizabeth E. Chilton,
President.
Exhibit A
Methodology for Determining Price per Class B Limited Partner Unit
The Warrant Price will be the appraised value of a Class B Limited
[[Page 11721]]
Partner Unit as of the date of this Warrant, as determined promptly
following the execution and delivery of this Warrant by a nationally-
recognized appraiser with experience in the newspaper industry that is
reasonably acceptable to both Daily Gazette Company and the Holder.
Each of the following appraisers are hereby deemed to be ``reasonably
acceptable'' to both Daily Gazette Company and the Holder:
Dirks, Van Essen & Murray
In determining the price per Class B Limited Partner Unit, the
appraiser will use the following methodology:
The appraiser shall determine the fair market value of the
Partnership based on the going concern value of the Partnership as of
the relevant date, with the following adjustments. In determining the
Partnership's going concern value, the appraiser (i) shall assume that
the value of any business is the cash price at which the assets of such
business as a going concern would change hands between a willing buyer
and a willing seller (neither acting under compulsion) in an arms-
length transaction, on terms and subject to conditions and costs
applicable in the newspaper publishing industry, (ii) shall assume that
all assets used in the operation of the business of the Partnership and
its Subsidiaries, whether owned by or licensed to the Partnership or
any of its Subsidiaries (and all other assets of any Affiliate of the
Partnership that are used by the Partnership or any of its
Subsidiaries), were entirely owned directly by the Partnership, and
(iii) shall not take into account expenditures in respect of any
management agreements entered into by the Joint Venture. The Warrant
Price with respect to any Class B Limited Partner Unit shall be an
amount equal to (x) the fair market value of the Partnership as of the
date of this Warrant (as determined in accordance with the preceding
sentence) multiplied by (y) the Percentage Interest in the Partnership
represented by such Class B Limited Partner Unit as of the date of
exercise of the Warrant.
Exhibit B
Form of Class B Units Put/Call Agreement
[Attached]
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
CHARLESTON DIVISION
UNITED STATES OF AMERICA, Plaintiff, v. DAILY GAZETTE COMPANY, and
MEDIANEWS GROUP, INC., Defendants.
Civil Action No. 2:07-0329
Judge Copenhaver
Magistrate Judge Stanley
Filed: January 20, 2010
Competitive Impact Statement
Plaintiff United States of America (``United States''), pursuant to
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or
``Tunney Act''), 15 U.S.C. 16(b)-(h), files this Competitive Impact
Statement relating to the proposed Final Judgment submitted for entry
in this civil antitrust proceeding.
I. Nature and Purpose of the Proceeding
The United States brought this lawsuit against Daily Gazette
Company (``Gazette Company'') and MediaNews Group, Inc. (``MediaNews'')
on May 22, 2007, challenging a series of agreements entered into by the
defendants on May 7, 2004 (the ``May 2004 transactions''). The
Complaint alleges that these transactions violated Section 7 of the
Clayton Act, 15 U.S.C. 18, and Sections 1 and 2 of the Sherman Act, 15
U.S.C. 1 & 2, by consolidating ownership and control of the only two
local daily newspapers in Charleston, West Virginia, under Gazette
Company and eliminating competition between them.
On January 20, 2010, the United States filed a proposed Final
Judgment, which is described in more detail below. The United States
and Defendants have stipulated that the proposed Final Judgment may be
entered after compliance with the APPA, unless the United States
withdraws its consent. Entry of the proposed Final Judgment would
terminate this action, except that this Court would retain jurisdiction
to construe, modify, and enforce the proposed Final Judgment and to
punish violations thereof.
II. Description of the Events Giving Rise to the Alleged Violation
A. The Defendants
Defendant Gazette Company is a privately-held corporation based in
Charleston, West Virginia. It has for many years owned and operated the
Charleston Gazette (``Gazette''), a local daily newspaper founded in
1873 and circulated throughout a large portion of the State of West
Virginia. MediaNews, now known as Affiliated Media, Inc., is a
privately-held corporation with its principal place of business in
Denver, Colorado. It owns and publishes over 50 daily newspapers in
various markets throughout the United States. In 1998, MediaNews
acquired the Charleston Daily Mail (``Daily Mail''), a local daily
newspaper in Charleston, West Virginia, founded in 1880.
B. The Pre-2004 Joint Operating Arrangement
For many years after their founding, the Gazette and Daily Mail
operated completely independently. In 1958, the then-owners of the two
newspapers entered into a joint operating agreement. The agreement
created a partnership, which for most of its existence went by the name
Charleston Newspapers. Charleston Newspapers was responsible for
printing, distribution, and advertising and subscription sales for both
newspapers. Each newspaper owner held a 50% interest in the venture and
all profits, losses, and capital costs were shared equally. At no time,
however, did the owners combine their news operations, which continued
to operate independently. In addition, each newspaper remained
separately owned outside the joint venture. Each owner retained
exclusive rights to the use of the names of their respective
newspapers, and all goodwill, subscriber lists, subscriber
relationships, and other intangible assets associated with their
newspapers.
The two owners of Charleston Newspapers had an equal say in the
management of the venture, and they jointly appointed a general manager
who was responsible to both owners. Each owner appointed half of the
representatives to a management committee that approved all significant
decisions, including annual budgets and advertising and subscription
rates. Each owner separately hired and supervised a publisher for its
respective newspaper. The publishers oversaw the day-to-day business
and news operations of each newspaper and reported directly to their
respective newspaper's owner. The publishers exerted a substantial
amount of control over the general manager and other employees of
Charleston Newspapers and had the ability to block Charleston
Newspapers from taking actions of which they disapproved.
In 1970, Congress enacted the Newspaper Preservation Act (``NPA''),
15 U.S.C. 1801, et seq., which provided qualifying joint operating
arrangements then in effect with limited antitrust immunity for certain
specified business activities, as long as they continued to meet the
requirements set forth in the NPA. Among these requirements was that
the newspapers in a joint operating arrangement remain separately owned
or controlled, that they maintain separate newsroom staffs, and that
their editorial policies be ``independently
[[Page 11722]]
determined.'' 15 U.S.C. 1802(2). Since 1970, Charleston Newspapers has
held itself out as a qualifying newspaper joint operating arrangement
and has claimed the antitrust immunity conferred by the NPA.
Despite the formation of Charleston Newspapers, the two newspapers
remained vigorous competitors for readers. Each newspaper sought to
capture readers by breaking stories first, finding stories that the
other newspaper did not have, covering local news with greater depth
and accuracy, and offering the most attractive mix of news, features,
editorials, and other content. The Gazette and the Daily Mail sought to
make their products more appealing by introducing new features,
increasing the quantity of coverage, redesigning the appearance of
their newspapers, competing to hire the best newsroom talent available,
and taking numerous other steps to gain a competitive edge. Reporters
and editors from each newspaper monitored the other on a daily basis
and reacted directly to news coverage appearing in the competing
newspaper.
Although the two newspaper owners were in a business partnership,
they retained independent economic incentives. Each owner had the
incentive to maximize the value of its own newspaper assets, which at
all times remained under separate ownership outside the joint operating
arrangement. This incentive existed for several reasons. First, each
owner had an interest in preserving the value of its newspaper assets
in case it wished to sell them in the future (either during the term of
the joint operating arrangement or after its expiration). If an owner
allowed its newspaper's circulation numbers and product quality to
deteriorate, the effect would be to shorten that newspaper's life span,
damage the value of its franchise, and deter potential buyers. Second,
each owner wanted its respective newspaper to contribute to the success
of Charleston Newspapers in order to maintain a strong bargaining
position when the joint operating contract was renegotiated.
Renegotiations of newspaper joint operating contracts occur on a
regular basis, often driven by capital investments or other major
strategic decisions, and frequently involve changes to the distribution
of profit shares or other key contract terms. Owning a declining paper
might result in a reduced share of the profits or other unfavorable
terms for that owner. Third, the owners had conflicting interests
regarding the termination or renewal of the joint operating
arrangement. The Daily Mail, as the smaller-circulation newspaper in
the afternoon position, wanted to maintain a high enough share of
circulation credibly to threaten to continue competing when the joint
operating arrangement ended, and to justify extending the termination
date of the agreement so that it could continue to share in the profits
of the venture. The Gazette, as the larger-circulation newspaper in the
morning position, had the incentive to increase its circulation share
to accelerate the demise of the Daily Mail and become the sole survivor
in the market as soon as possible. Finally, if the joint operating
arrangement were to terminate, the governing contract specified that
the jointly-owned property would be divided to allow the owners to
resume their status as independent competitors. The possibility that
such competition could resume provided each owner with an incentive to
keep its newspaper strong and maximize the value of its intellectual
property.
The newspaper owners acted on these incentives in their management
of Charleston Newspapers. For example, each owner actively sought to
protect and increase the circulation of its respective newspaper rather
than seeking solely to achieve the most profitable combined
circulation. Each owner insisted that Charleston Newspapers treat both
newspapers equally with respect to circulation sales and promotion
efforts and regularly monitored Charleston Newspapers to ensure that
managers were not favoring one paper over the other. Each owner pushed
to expand home delivery routes into new areas and to increase the level
of discounting to boost circulation for its respective newspaper. Each
owner insisted that any new discount or promotional incentive launched
for the other's newspaper be applied to its newspaper as well. This
quest for additional circulation, and the policy of treating the two
newspapers equally in circulation sales efforts, led to newspaper
subscribers receiving higher levels of discounts than they would likely
have received had Charleston Newspapers been controlled by one owner.
In addition, each owner sought to maintain a large news staff, a
substantial newsroom budget, and generous newshole (the amount of
newspaper space devoted to news content as opposed to advertising) to
allow it to better compete with the other newspaper for readership.
Each owner also insisted on retaining the power to set its newsroom's
staffing and compensation levels. This competitive drive led the owners
to spend far more on the newsrooms in Charleston than newspaper owners
in comparably-sized newspaper markets typically do.
Each owner took affirmative steps to preserve its competitive
position and the long-term value of its assets. Each regularly blocked
certain proposals that would have saved money for Charleston Newspapers
because one owner believed that the proposal would provide the rival
newspaper with a competitive advantage. Moreover, although each owner
had the power to make cuts to its own newspaper's staff, newshole,
budget, subscription discounts, or circulation area without obtaining
the approval of the other owner, neither owner did so--even when such
cuts clearly would have increased the profits of the venture--out of
concern over being at a competitive disadvantage to the other
newspaper. Neither owner was willing to sacrifice the value of its
assets unless the other owner did the same. These actions taken by the
owners in pursuit of their separate economic interests prevented
Charleston Newspaper from achieving monopoly levels of output or
profits.
In short, the competition between the Gazette and the Daily Mail
benefitted readers by giving them a choice between two high-quality
local newspapers with unique content at lower prices than would have
prevailed if there had been one newspaper owner in this market.
Advertisers likewise benefitted by having access to two unique sets of
readers at prices that were lower than in comparable single-owner
markets.
C. The May 2004 Transactions
At the end of 2003, MediaNews arranged to sell the Daily Mail and
its 50% interest in Charleston Newspapers to an experienced newspaper
operator for $55 million. At the time, Charleston Newspapers was
earning substantial profits, and the Daily Mail was financially healthy
and stable. The joint operating arrangement between MediaNews and
Gazette Company allowed each partner the right of first refusal to
match any third-party offer to buy one of the newspapers. Rather than
allow the new buyer to take over the Daily Mail and continue the
competition that had prevailed for decades, Gazette Company decided to
exercise its right of first refusal and gain control of both
newspapers.
Several months earlier, anticipating that the opportunity to
exercise its right of first refusal might arise, Gazette Company began
contacting lenders to secure the necessary financing. As the Complaint
alleges, during this time Gazette Company developed a plan to shut down
the Daily Mail and become the publisher of the sole remaining
[[Page 11723]]
newspaper in Charleston. Gazette Company created a series of business
plans, financial projections, and other documents showing that it would
cease publishing the Daily Mail by no later than the end of 2007. The
plans called for the rapid reduction of the Daily Mail's circulation
and its newsroom staff and budget until, in 2007, the newspaper would
no longer be economically viable. At that point, Gazette Company
believed it would be able to justify the closure of the Daily Mail
under the NPA to the Department of Justice. In short, Gazette Company
planned to deliberately transform a financially healthy and stable
Daily Mail into a failing newspaper and close it far earlier than the
market would otherwise have dictated. According to its internal
projections, Gazette Company calculated that it would be better off
financially by closing the Daily Mail as soon as possible. By switching
a critical mass of Daily Mail readers to the Gazette, advertising
revenues would hold steady and the savings from disbanding the Daily
Mail would allow Gazette Company to increase its profit margins
substantially. These planning documents were provided to lenders and
were the foundation upon which Gazette Company secured financing for
the May 2004 transactions. None of Gazette Company's pre-transaction
business plans contemplated the continued publication of the Daily Mail
beyond 2007.
On May 7, 2004, Gazette Company and MediaNews entered into a series
of transactions that merged their economic interests and gave Gazette
Company ownership and control over both newspapers. In exchange for
approximately $55 million, MediaNews transferred ownership of the Daily
Mail assets and its 50% interest in Charleston Newspapers to
subsidiaries of the Gazette Company. Under this new arrangement,
Gazette Company retained 100% of the profits generated by both
newspapers. MediaNews no longer shared in the profits or losses of the
business and had no further obligation to contribute to capital costs.
MediaNews had no representatives on the management committee of the
venture and no right to vote on any matter. Gazette Company was given
sole discretion to manage Charleston Newspapers. It had the unilateral
authority to establish the annual budgets, determine the staffing
levels, and approve all the hiring and firing decisions for both
newspapers. The 2004 agreements also gave Gazette Company the express
right to terminate publication of the Daily Mail without the approval
of MediaNews (a right that Gazette Company had specifically bargained
for in negotiations). The Defendants attempted to satisfy the NPA's
requirement of separately-controlled newsrooms by arranging to pay
MediaNews a flat fee of $200,000 per year to provide ``management and
supervision'' services to the newsroom of the Daily Mail. May 7, 2004
Joint Operating Agreement Sec. V (J)(4). The fee was adjusted annually
for inflation but did not vary based on how well or how poorly the
newspaper performed. Despite the payment of the fee, however, MediaNews
employees did not exercise management control over the Daily Mail after
May 2004. In reality, the Complaint alleges that Gazette Company
controlled both newspapers.
D. Post-Transaction Conduct
Almost immediately after the transactions closed, Gazette Company
began to take steps to implement its plans to close the Daily Mail. As
alleged in the Complaint, Gazette Company stopped soliciting new
subscribers for the Daily Mail, stopped offering promotions and
discounts to new Daily Mail subscribers, cut dozens of Daily Mail home
delivery and single copy routes (and refused to accept new
subscriptions on many routes that remained), attempted to convert
numerous Daily Mail readers to the Gazette, and took other steps with
the goal of reducing the Daily Mail's circulation.
At the same time, Gazette Company took several other actions that
damaged the quantity and quality of content available to Daily Mail
readers: It allowed almost half of the Daily Mail newsroom staff to
leave during 2004 and forbade the editor from hiring replacements; it
cut the Daily Mail's budget substantially in both 2004 and 2005 (while
increasing the Gazette's); it ended the Daily Mail's Saturday edition;
and it transferred several of the best Daily Mail reporters to the
Gazette. Gazette Company also directed the Daily Mail to end its second
daily edition, which contained late-breaking news and was viewed by the
newspaper's staff as important to maintaining the quality and
competitiveness of the paper. As a result of these actions, the
quantity and quality of original local content created by the Daily
Mail staff fell steadily through the end of 2004. Original local
content is considered by both Defendants to be the most important and
valuable content produced by these newspapers. Due to the loss of
staff, the remaining Daily Mail reporters were required to take on
extra coverage areas, other coverage areas were dropped, several
sections per week were cut from the paper, and more work was farmed out
to stringers who were not full-time journalists. The Daily Mail staff
was forced to fill space by doing things that they considered to be
departures from the paper's prior standards of quality, such as
reprinting stories verbatim from the Gazette without doing any new
reporting, and running more non-local wire service stories.
Due to these actions by Gazette Company, the circulation of the
Daily Mail fell from 35,076 in February 2004 to 23,985 in January 2005.
Moreover, the Daily Mail became a less vigorous competitor to the
Gazette and its readers got less for their money. Had the Department of
Justice investigation not interrupted Gazette Company's plans in late
2004, the situation would likely have continued to deteriorate as more
resources were shifted away from the Daily Mail in preparation for its
closure in 2007.
E. The Competitive Effects of the Alleged Violation
The Complaint alleges that the relevant product market is local
daily newspapers and the relevant geographic market is Kanawha and
Putnam counties in West Virginia. The local daily newspaper market is
two-sided: Publishers sell newspapers to readers and simultaneously
sell access to those readers to advertisers. With respect to readers,
the two Charleston daily newspapers are a relevant market because,
among other reasons, Charleston Newspapers has the ability to impose
small but significant, non-transitory price increases on readers
without losing so much business to other media as to make the increases
unprofitable, and these newspapers have unique attributes (such as
original, in-depth local news, local editorials and opinion, local
display and classified advertising, and other features) that are not
replicated by other local media. With respect to advertisers, the two
Charleston daily newspapers are a relevant market because, among other
reasons, Charleston Newspapers has the ability to impose small but
significant, non-transitory price increases on its advertisers without
losing so much business to other media as to make the increases
unprofitable, and advertising in these newspapers has unique
characteristics and a unique audience that cannot be replicated by
other local media in Charleston.
The Complaint alleged that the May 2004 transactions extinguished
the independent competitive incentives that existed under the prior
joint operating arrangement. As a result of the
[[Page 11724]]
transactions and the conduct described above, readers were harmed by a
reduction in the amount and quality of original content generated by
the Daily Mail, the lessening of competition between the Daily Mail and
the Gazette, the elimination of the discounts that had been available
prior to May 2004, and the reduction in the distribution area of the
Daily Mail, meaning that many readers no longer had access to their
preferred newspaper. Had the Gazette Company succeeded in its plan to
close the Daily Mail, readers would have been deprived of a choice of
local daily newspapers and would likely have paid higher prices for a
newspaper with less content and lower quality. Likewise, advertisers
were harmed because the circulation and household penetration of the
Daily Mail fell as prices rose, rendering the newspaper a less
effective means of advertising in the Charleston area.
III. Explanation of the Proposed Final Judgment
The Final Judgment requires the Defendants to enter into a new
contractual relationship that will supersede the existing arrangement
that the United States challenged. The Defendants' new arrangement
consists of five contracts: a Limited Partnership Agreement, a Joint
Operating Agreement, a revised Operating Agreement of Daily Gazette
Holding Company, a Put/Call Agreement, and a Warrant Agreement, all of
which are attached to and made a part of the Final Judgment. The Final
Judgment prohibits the Defendants from amending or terminating these
contracts, or entering into any subsequent contracts relating to the
publication of newspapers in Charleston, without the consent of the
United States.
The new contracts address the competitive concerns resulting from
the May 2004 transactions by, among other things, implementing several
important changes to the governance provisions of the Defendants'
arrangement. MediaNews will be given the right to appoint two of the
five seats on the Board of Managers overseeing the Limited Partnership.
Currently, MediaNews does not have the right to name any board members.
MediaNews' board representatives will have the right to vote on all
matters coming before the board. Most matters will be subject to
approval by a majority vote; however, the annual newsroom budgets for
the Daily Mail and the Gazette must each be approved by a super-
majority of four votes. This requirement will provide MediaNews with
the ability to protect the Daily Mail's budget and negotiate for the
resources it needs to compete effectively with the Gazette. Under the
2004 arrangement, the Daily Mail budget was unilaterally determined by
Gazette Company and its appointed manager at Charleston Newspapers, and
could be changed at any time.
The Final Judgment guarantees that the content of the Daily Mail
will be independently determined solely by MediaNews and the staff of
the Daily Mail. Likewise, the content of the Gazette must be
independently determined by the Gazette Company and Gazette staff. The
Final Judgment forbids either Defendant from taking any action to
influence the content of the other's newspaper. It also prohibits the
Defendants from entering into any agreement that would limit the
editorial independence of the two newspapers.
Currently, the Gazette Company (through its control of Charleston
Newspapers) determines the size of the Daily Mail newsroom and must
approve any hiring and firing decisions. To further re-establish the
independence of the Daily Mail, the revised contracts provide that
MediaNews will have sole authority to determine the identity of the
Daily Mail newsroom employees and how much they are paid. The Daily
Mail will have no fewer than 32 newsroom positions in the first year of
the agreement, and thereafter MediaNews will set the size of the
newsroom at whatever level it sees fit, provided that if total employee
expense exceeds the annual budgeted amount set by the Limited
Partnership board, MediaNews must pay the excess cost. These changes to
the contracts are designed to prevent the recurrence of the events of
2004, described above.
The Final Judgment also prohibits the Defendants from
discriminating against the Daily Mail in performing any activities
related to circulation sales or advertising sales. Among other things,
this provision would prohibit the type of conduct alleged in the
Complaint, whereby Charleston Newspapers discontinued efforts to
solicit new Daily Mail subscribers and ceased offering discounts to new
Daily Mail subscribers, while continuing these activities for the
Gazette. The revised contracts contain several other protections for
the Daily Mail, including that (1) the amount of space devoted to news
content (newshole) and the availability of color will be budgeted at
the same level for both newspapers; (2) the press deadlines, delivery
targets, number of editions and days of publication for the Daily Mail
will not be changed without the approval of MediaNews; and (3) the
primary circulation area of the Daily Mail as of August 1, 2009 will
not be reduced without the approval of MediaNews. Under the 2004
arrangement, Gazette Company had the unilateral power to make changes
in any of these areas.
To enhance the competitiveness of the Daily Mail and remedy past
practices, the Final Judgment contains a remedial provision that calls
for the Defendants to offer subscriptions to the Daily Mail at no less
than 50% off the regular price. This offer must be available for a
period of at least six months and must be made available only to Daily
Mail subscribers. Thereafter, Charleston Newspapers must make the same
promotional offers available for potential subscribers of both
newspapers, unless MediaNews approves a deviation. The purpose of the
special offer is to remedy, to the extent possible, the effects of
Gazette Company's actions that the Complaint alleged were intended to
undermine the circulation of the Daily Mail.
The Final Judgment contains several provisions to prevent the
unjustified termination of publication of the Daily Mail. The 2004
contracts gave Gazette Company the unilateral authority to cease
publishing the Daily Mail. The Final Judgment provides that the Daily
Mail must continue publishing as a daily newspaper (defined in the
Final Judgment as a print publication which is published no fewer than
five days per week) unless it is determined to be a failing firm under
antitrust law, as applied to newspaper joint operating agreements, and
the United States has given its prior written approval. The Defendants
may not deliberately hasten the failure of the Daily Mail: Under the
Final Judgment, the Defendants may not take any action with the intent
to cause the Daily Mail to become a failing newspaper. Unless it
receives approval from the United States, the Defendants may not
establish a termination date for the Daily Mail.
In the event that Charleston Newspapers is permitted to cease
publication of the Daily Mail, the Final Judgment requires that
ownership of all of the intellectual property associated with that
newspaper (such as its masthead, copyrights, trademarks, subscriber and
advertiser lists, Internet URL, and archives) must, after satisfaction
of any current, outstanding creditors, be transferred back to MediaNews
at no cost to MediaNews and free of any liens or other encumbrances.
This transfer requirement would also be triggered if the Defendants end
their Limited Partnership or Joint Operating agreements. Prior to the
closure of the Daily Mail, Gazette Company must obtain an appraisal of
the fair market
[[Page 11725]]
value of the newspaper's intellectual property. To the extent the
appraisal determines that the assets may be freely disposed of by
Gazette Company under the terms of Section 7.8 of the credit agreement
with United Bank (or the equivalent provision of any future credit
agreement), Gazette Company must transfer the intellectual property to
MediaNews.\(1)\ If the transfer cannot be accomplished due to any
outstanding security interest or lien, Gazette Company must use its
good faith efforts to obtain a release of the assets by the creditors.
Once the intellectual property has been transferred, it may not be
reacquired by Gazette Company. These portions of the Final Judgment are
intended to prevent Gazette Company from retaining ownership of the
Daily Mail intellectual property in the event that MediaNews wishes to
continue publishing the newspaper independently of Charleston
Newspapers, or if a third-party wishes to acquire these assets from
MediaNews in order to compete against Gazette Company. Under the 2004
contracts, Gazette Company could retain the Daily Mail intellectual
property upon the termination of the Joint Operating Agreement or the
Limited Partnership Agreement unless MediaNews paid Gazette Company to
get it back and assumed certain associated liabilities. If MediaNews
did not want to buy back the intellectual property, it would remain
under the permanent ownership of Gazette Company. If MediaNews did
elect to buy back the intellectual property, Gazette Company held a
right of first refusal to purchase it from MediaNews for 10 years after
the end of the Joint Operating Agreement or the Limited Partnership
Agreement, which limited the ability of third-parties to acquire the
intellectual property to compete against Gazette Company. These
provisions of the 2004 contracts have been removed from the new
contractual arrangement.
The Defendants' revised contracts will put in place several new
financial incentives that are intended to spur them to compete for
readers and enhance the quality of their newspapers. First, as
discussed above, if the Daily Mail ceases publishing, the Limited
Partnership ends, or the Joint Operating Agreement ends, the Daily Mail
intellectual property will, subject to satisfaction of current security
interests, transfer to MediaNews at no cost. MediaNews would then be
free to use or sell these assets as it sees fit. The 2004 contracts
imposed several conditions that substantially decreased the likelihood
that MediaNews would ever own the Daily Mail intellectual property
again. Under the revised contracts, the increased likelihood that
MediaNews will receive these assets provides MediaNews with an ongoing
incentive to increase their value. Second, concurrently with the
settlement, MediaNews will receive a warrant entitling it to purchase
Class B shares representing 20% of the equity in Charleston Newspapers
Holdings Limited Partnership. Depending upon the future performance of
the Daily Mail, the amount of equity MediaNews is eligible to purchase
may be adjusted up or down. For each annual gain of 1% or more in Daily
Mail circulation market share vis-a-vis the Gazette, MediaNews would be
entitled to purchase an additional 1% of equity. Conversely, for each
annual decline of 1% or more, the amount of equity MediaNews is
entitled to purchase would decrease by 1%. The exercise price is the
appraised value of a Class B share as of the date of the warrant's
issuance. The warrant can be exercised during a three-year window
starting on the fifth anniversary of its issuance. MediaNews will be
allowed to purchase any amount of equity it desires, up to the maximum
permitted by the warrant. Thereafter, it is permitted to sell its
shares to third parties (except for a publisher of a competing
newspaper in Charleston with a circulation market share above 5%).
Class B shareholders are eligible to receive dividends that may be
distributed by the Limited Partnership. The warrant will once again
provide MediaNews a financial stake in the success of both the Daily
Mail and the newspapers' joint venture.
Should the Daily Mail cease publishing at any time after the
conversion of the warrant, Gazette Company must repurchase all of the
outstanding Class B shares. This mandatory repurchase requirement is
necessary to avoid providing the owner(s) of the Class B shares a
financial incentive to terminate publication of the Daily Mail.
Third, the revised Limited Partnership Agreement creates a further
financial incentive by basing the size of the annual Daily Mail
management fee paid to MediaNews on the performance of the paper. Under
the 2004 arrangement, MediaNews received a fixed management fee that
did not vary based on the performance of the Daily Mail. The new
Limited Partnership Agreement provides for a variable fee that can
adjust upwards or downwards by as much as $25,000 depending on the
annual changes in the Daily Mail's circulation. The adjustment in the
fee is subject to a floor of $225,000 per year.
A fourth financial incentive consists of cash bonuses paid to the
Circulation Director of Charleston Newspapers and the publisher of the
Daily Mail for increases in Daily Mail circulation in a given six-month
period.
IV. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorneys' fees. Entry of the proposed Final Judgment will neither
impair nor assist the bringing of any private antitrust damage action.
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C.
16(a), the proposed Final Judgment has no prima facie effect in any
subsequent private lawsuit that may be brought against Defendants.
V. Procedures Available for Modification of the Proposed Final Judgment
The United States and Defendants have stipulated that the proposed
Final Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the United States has not
withdrawn its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to the United States written comments regarding the
proposed Final Judgment. Any person who wishes to comment should do so
within sixty (60) days of the date of publication of this Competitive
Impact Statement in the Federal Register, or the last date of
publication in a newspaper of the summary of this Competitive Impact
Statement, whichever is later. All comments received during this period
will be considered by the United States Department of Justice, which
remains free to withdraw its consent to the proposed Final Judgment at
any time prior to the Court's entry of judgment. The comments and the
response of the United States will be filed with the Court and
published in the Federal Register.
Written comments should be submitted to: John R. Read, Chief,
Litigation III Section, Antitrust Division, United States Department of
Justice, 450 Fifth Street, NW., Suite 4000, Washington, DC 20530.
[[Page 11726]]
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. Alternatives to the Proposed Final Judgment
At several points during the litigation, the United States received
from Defendants proposals or suggestions that would have provided less
relief than is contained in the proposed Final Judgment. These
proposals and suggestions were rejected.
The United States considered, as an alternative to the proposed
Final Judgment, proceeding with the full trial on the merits against
Defendants that was scheduled to commence on April 20, 2010. The United
States is satisfied, however, that the prohibitions and requirements
contained in the proposed Final Judgment will adequately address the
competitive concerns regarding the unique local daily newspaper market
in Charleston, and will avoid the delay, risks, and costs of further
litigation.
VII. Standard of Review Under the APPA for the Proposed Final Judgment
The Clayton Act, as amended by the APPA, requires that proposed
consent judgments in antitrust cases brought by the United States be
subject to a sixty-day comment period, after which the court shall
determine whether entry of the proposed Final Judgment ``is in the
public interest.'' 15 U.S.C. 16(e)(1). In making that determination,
the court, in accordance with the statute as amended in 2004, is
required to consider:
A. The competitive impact of such judgment, including termination
of alleged violations, provisions for enforcement and modification,
duration of relief sought, anticipated effects of alternative remedies
actually considered, whether its terms are ambiguous, and any other
competitive considerations bearing upon the adequacy of such judgment
that the court deems necessary to a determination of whether the
consent judgment is in the public interest; and
B. the impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and individuals
alleging specific injury from the violations set forth in the complaint
including consideration of the public benefit, if any, to be derived
from a determination of the issues at trial.
15 U.S.C. 16(e)(1)(A) & (B). In considering these statutory factors,
the court's inquiry is necessarily a limited one as the United States
is entitled to ``broad discretion to settle with the defendant within
the reaches of the public interest.'' United States v. Microsoft Corp.,
56 F.3d 1448, 1461 (DC Cir. 1995); see generally United States v. SBC
Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) (assessing public
interest standard under the Tunney Act).\(2)\
As the United States Court of Appeals for the District of Columbia
Circuit has held, under the APPA a court considers, among other things,
the relationship between the remedy secured and the specific
allegations set forth in the United States' complaint, whether the
decree is sufficiently clear, whether enforcement mechanisms are
sufficient, and whether the decree may positively harm third parties.
See Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the
relief secured by the decree, a court may not ``engage in an
unrestricted evaluation of what relief would best serve the public.''
United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988) (citing
United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see
also Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152
F. Supp. 2d 37, 40 (D.D.C. 2001). Courts have held that:
[t]he balancing of competing social and political interests
affected by a proposed antitrust consent decree must be left, in the
first instance, to the discretion of the Attorney General. The court's
role in protecting the public interest is one of insuring that the
government has not breached its duty to the public in consenting to the
decree. The court is required to determine not whether a particular
decree is the one that will best serve society, but whether the
settlement is ``within the reaches of the public interest.'' More
elaborate requirements might undermine the effectiveness of antitrust
enforcement by consent decree.
Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\(3)\
In determining whether a proposed settlement is in the public interest,
a district court ``must accord deference to the government's
predictions about the efficacy of its remedies, and may not require
that the remedies perfectly match the alleged violations.'' SBC
Commc'ns, 489 F. Supp. 2d at 17; see also Microsoft, 56 F.3d at 1461
(noting the need for courts to be ``deferential to the government's
predictions as to the effect of the proposed remedies''); United States
v. Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003)
(noting that the court should grant due respect to the United States'
prediction as to the effect of proposed remedies, its perception of the
market structure, and its views of the nature of the case).
Courts have greater flexibility in approving proposed consent
decrees than in crafting their own decrees following a finding of
liability in a litigated matter. ``[A] proposed decree must be approved
even if it falls short of the remedy the court would impose on its own,
as long as it falls within the range of acceptability or is `within the
reaches of public interest.' '' United States v. Am. Tel. & Tel. Co.,
552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United
States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also
United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky.
1985) (approving the consent decree even though the court would have
imposed a greater remedy). To meet this standard, the United States
``need only provide a factual basis for concluding that the settlements
are reasonably adequate remedies for the alleged harms.'' SBC Commc'ns,
489 F. Supp. 2d at 17.
Moreover, the court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its Complaint, and does not authorize the court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459. Because the ``court's
authority to review the decree depends entirely on the government's
exercising its prosecutorial discretion by bringing a case in the first
place,'' it follows that ``the court is only authorized to review the
decree itself,'' and not to ``effectively redraft the complaint'' to
inquire into other matters that the United States did not pursue. Id.
at 1459-60. As the United States District Court for the District of
Columbia recently confirmed in SBC Communications, courts ``cannot look
beyond the complaint in making the public interest determination unless
the complaint is drafted so narrowly as to make a mockery of judicial
power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
In its 2004 amendments, Congress made clear its intent to preserve
the practical benefits of utilizing consent decrees in antitrust
enforcement, adding the unambiguous instruction that ``[n]othing in
this section shall be construed to require the court to conduct an
evidentiary hearing or to require the court to permit anyone to
intervene.'' 15 U.S.C. 16(e)(2). This language effectuates what
Congress intended when it enacted the Tunney Act in 1974, as Senator
Tunney explained: ``[t]he court is nowhere
[[Page 11727]]
compelled to go to trial or to engage in extended proceedings which
might have the effect of vitiating the benefits of prompt and less
costly settlement through the consent decree process.'' 119 Cong. Rec.
24,598 (1973) (statement of Senator Tunney). Rather, the procedure for
the public interest determination is left to the discretion of the
court, with the recognition that the court's ``scope of review remains
sharply proscribed by precedent and the nature of Tunney Act
proceedings.'' SBC Commc'ns, 489 F. Supp. 2d at 11.
VIII. Determinative Documents
Other than the contracts that are attached as Exhibit A to the
Final Judgment and incorporated therein, there are no determinative
materials or documents within the meaning of the APPA that were
considered by the United States in formulating the proposed Final
Judgment.
Respectfully submitted,
Charles T. Miller,
,United States Attorney.
s/Stephen M. Horn
Assistant United States.
Attorney.
Attorney for the United States (WVSB 1788), P.O. Box 1713,
Charleston, WV 25326. Telephone: 304-345-2200, Fax: 304-347-5443, E-
mail: [email protected].
s/Bennett J. Matelson
Bennett J. Matelson,
William H. Jones II,
Matthew J. Bester,
Deborah Roy,
Attorneys for the United States, U.S. Department of Justice,
Antitrust Division, 450 Fifth Street, NW., Suite 4000, Washington,
DC 20530. Telephone: (202) 616-5871, Fax: (202) 514-7308, E-mail:
[email protected].
Dated: January 20, 2010.
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF WEST VIRGINIA
CHARLESTON DIVISION
UNITED STATES OF AMERICA, Plaintiff, v. DAILY GAZETTE COMPANY, and
MEDIANEWS GROUP, INC., Defendants.
Civil Action No. 2:07-0329
Judge Copenhaver
Magistrate Judge Stanley
Filed: January 20, 2010
Certificate of Service
I hereby certify that on January 20, 2010, I electronically filed
the foregoing document with the Clerk of the Court using the CM/ECF
system, which will send notification of such filing to the following
CM/ECF participants:
Lee H. Simowitz, Ronald F. Wick, Baker & Hostetler LLP, Washington
Square, Suite 1100, 1050 Connecticut Avenue, NW., Washington, DC 20036.
Benjamin L. Bailey, Brian A. Glasser, Bailey & Glasser LLP, 227 Capitol
Street, Charleston, WV 25301.
Alan L. Marx, Stephen C. Douse, King & Ballow, 1100 Union Street Plaza,
315 Union Street, Nashville, TN 37201.
Michael T. Chaney John R. Hoblitzel, Kay Casto & Chaney, P.O. Box 2031,
Charleston, WV 25327-2031,
/s/ William H. Jones, II
William H. Jones, II.
Footnotes
1. Section 7.8 of the United Bank agreement provides:
Sale of Stock and Assets. No Credit Party shall sell, transfer,
convey, assign or otherwise dispose of any of its properties or other
assets, including the Stock of any of its Subsidiaries (whether in a
public or a private offering or otherwise) or any of its Accounts,
other than (a) the sale of Inventory in the ordinary course of
business; (b) the sale or other disposition by a Credit Party of
property that is obsolete or no longer used or useful in such Credit
Party's business and having a book value, not exceeding $100,000 in the
aggregate in any Fiscal Year; and (c) the sale or other disposition of
other property having a book value not exceeding $100,000 in the
aggregate in any Fiscal Year.
2. The 2004 amendments substituted ``shall'' for ``may'' in
directing relevant factors for court to consider and amended the list
of factors to focus on competitive considerations and to address
potentially ambiguous judgment terms. Compare 15 U.S.C. 16(e) (2004),
with 15 U.S.C. 16(e)(1) (2006); see also SBC Commc'ns, 489 F. Supp. 2d
at 11 (concluding that the 2004 amendments ``effected minimal changes''
to Tunney Act review).
3. Cf. BNS, 858 F.2d at 464 (holding that the court's ``ultimate
authority under the [APPA] is limited to approving or disapproving the
consent decree''); United States v. Gillette Co., 406 F. Supp. 713, 716
(D. Mass. 1975) (noting that, in this way, the court is constrained to
``look at the overall picture not hypercritically, nor with a
microscope, but with an artist's reducing glass''). See generally
Microsoft, 56 F.3d at 1461 (discussing whether ``the remedies [obtained
in the decree are] so inconsonant with the allegations charged as to
fall outside of the `reaches of the public interest' '').
4. See United States v. Enova Corp., 107 F. Supp. 2d 10, 17 (D.D.C.
2000) (noting that the ``Tunney Act expressly allows the court to make
its public interest determination on the basis of the competitive
impact statement and response to comments alone''); United States v.
Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ] 61,508, at 71,980
(W.D. Mo. 1977) (``Absent a showing of corrupt failure of the
government to discharge its duty, the Court, in making its public
interest finding, should * * * carefully consider the explanations of
the government in the competitive impact statement and its responses to
comments in order to determine whether those explanations are
reasonable under the circumstances.''); S. Rep. No. 93-298, 93d Cong.,
1st Sess., at 6 (1973) (``Where the public interest can be meaningfully
evaluated simply on the basis of briefs and oral arguments, that is the
approach that should be utilized.'').
[FR Doc. 2010-5095 Filed 3-10-10; 8:45 am]
BILLING CODE 4410-11-P