GCI New Gannett Co Inc

On May 9, 2018, Gannett Co., Inc., a Delaware corporation (“Gannett”), Orca Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Gannett (“Merger Sub”), WordStream, Inc., a Delaware corporation (“WordStream”), and Shareholder Representative Services LLC, a Colorado limited liability company (the “Equityholder Representative”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which, among other things and subject to the satisfaction or waiver of specified conditions, Merger Sub will merge with and into WordStream (the “Merger”), with WordStream surviving the Merger as a wholly owned subsidiary of Gannett.

The respective boards of directors of Gannett, Merger Sub and WordStream have approved the Merger Agreement and the consummation of the Merger and the other transactions contemplated by the Merger Agreement.

At the effective time of the Merger (the “Effective Time”), each outstanding share of common stock of WordStream, par value $0.001 per share (“WordStream Common Stock”), other than WordStream Common Stock held by Gannett, Merger Sub, WordStream or any of their respective subsidiaries or held by stockholders who have validly exercised their dissenters’ rights in accordance with Delaware law, will be converted into the right to receive the per-share portion of the Aggregate Closing Consideration and the per-share portion of any Additional Consideration, in each case in accordance with the Merger Agreement. The “Aggregate Closing Consideration” is $130,000,000, plus (i) any net working capital in excess of the target, plus (ii) cash on hand at closing, plus (iii) the aggregate stock and warrant exercise price amounts, minus (iv) any net working capital shortfall, minus (v) outstanding indebtedness, minus (vi) unpaid transaction expenses, minus (vii) escrow holdbacks totaling $6,300,000, and minus (viii) a holdback of $100,000 for the Equityholder Representative’s expenses. The “Additional Consideration” includes up to an additional $20,000,000 in potential earn-out payments based on WordStream meeting certain revenue targets and any additional amounts that become payable under the Merger Agreement, including any release of the escrow holdbacks or the Equityholder Representative’s expense holdback.

Pursuant to the Merger Agreement, each option to purchase WordStream Common Stock (“Stock Option”) that is outstanding, unexercised and vested as of immediately prior to the Effective Time will be cancelled and the holder will be entitled to receive an amount equal to the per-share portion of the Aggregate Closing Consideration, less the exercise price for such Stock Option, and the per-share portion of any Additional Consideration. Unvested Stock Options will be terminated as of the Effective Time, with no consideration due from Gannett to the holders of such Stock Options. Each warrant to purchase capital stock of WordStream (“Warrant”) that is outstanding and exercisable as of immediately prior to the Effective Time will be cancelled and the holder will be entitled to receive an amount equal to the per-share portion of the Aggregate Closing Consideration, less the exercise price for such Warrant, and the per-share portion of any Additional Consideration.

The Merger Agreement contains customary representations and warranties. In addition, WordStream has agreed to various covenants and agreements, including, among others, (i) to operate its business in the ordinary course of business and in accordance with past practice before the closing and to comply with certain other pre-closing operating covenants and (ii) not to solicit alternative transactions to the Merger. The parties agree to use commercially reasonable efforts to satisfy the conditions to closing.

The closing of the Merger is subject to customary closing conditions, including, among other things, expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. WordStream has delivered the required consent of its stockholders to the Merger, and the closing of the Merger is not subject to any financing condition or a vote of Gannett’s stockholders.

Each of Gannett and WordStream is permitted to terminate the Merger Agreement in certain circumstances, including if the closing has not taken place on or before July 31, 2018.

The WordStream stockholders, optionholders and warrantholders agree to indemnify Gannett for breaches of representations or warranties made by WordStream, failure of WordStream or the Equityholder Representative to perform its covenants, pre-closing tax liabilities and certain other specified matters, subject to certain exceptions and limitations. In addition, Gannett is obtaining a representation and warranty insurance policy that will provide coverage for certain representations and warranties of WordStream contained in the Merger Agreement, subject to a retention amount, exclusions, policy limits and certain other terms and conditions.

The Merger Agreement has been included to provide investors with information regarding its terms. It is not intended to provide any other factual information with respect to Gannett, Merger Sub or WordStream. There are representations and warranties contained in the Merger Agreement which were made by the parties to each other as of specific dates. The assertions embodied in these representations and warranties were made solely for purposes of the Merger Agreement and may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating its terms. Moreover, certain representations and warranties may not be accurate or complete as of any specified date because they are subject to a contractual standard of materiality that is different from certain standards generally applicable to stockholders or were used for the purpose of allocating risk between the parties rather than establishing matters as facts. In light of the foregoing, investors should not rely on the representations and warranties contained in the Merger Agreement as statements of factual information. In addition, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be reflected in Gannett’s public disclosures. Investors should read the Merger Agreement together with the other information concerning Gannett that Gannett publicly files in reports and statements with the U.S. Securities and Exchange Commission (the “SEC”).

The foregoing description of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, a copy of which is filed herewith as Exhibit 2.1 and is incorporated herein by reference.