MEMBERSHIP INTEREST PURCHASE AGREEMENT
among
AURELIUS MEDIA HOLDINGS INC.
as Seller,
RIDGELINE PUBLISHING ACQUISITION CORP.
as Buyer,
and, solely for purposes of Sections 8.6, 12.1, 13.1, and Article XIII,
AURELIUS GLOBAL MEDIA GROUP PLC
as the Parent Guarantor,
and, solely for purposes of Sections 5.4, 12.1, 13.2, 13.3, and Article XIII,
PINNACLE RIDGE CAPITAL PARTNERS FUND IV, L.P.
as the Sponsor
Re: Sale and Purchase of 100% of the Membership Interests in MERIDIAN PRESS HOLDINGS LLC a Delaware limited liability company
Dated as of July 19, 2024
TABLE OF CONTENTS
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EXHIBITS
DISCLOSURE SCHEDULES
DEFINED TERMS INDEX — All defined terms appear in Section 1.1 or as otherwise cross-referenced therein.
RECITALS
WHEREAS, Aurelius Media Holdings Inc., a Delaware corporation (Secretary of State file no. 5987324) ("Seller"), is the sole member and record and beneficial owner of one hundred percent (100%) of the membership interests (the "Membership Interests") of Meridian Press Holdings LLC, a Delaware limited liability company (Secretary of State file no. 4521889) (the "Company");
WHEREAS, the Company, together with its direct and indirect subsidiaries — Meridian Distribution Services Inc., a Delaware corporation (Secretary of State file no. 4736201) ("MDS"), Bellweather Academic Press Inc., a Delaware corporation (Secretary of State file no. 4801133) ("Bellweather"), Foxglove Media LLC, a New York limited liability company ("Foxglove"), and Meridian Press Canada ULC, a British Columbia unlimited liability company ("Meridian Canada," and collectively with MDS, Bellweather, and Foxglove, the "Subsidiaries") — operates the legacy publishing division of Aurelius Global Media Group PLC, comprising book publishing, periodical publishing, and educational content licensing businesses under the Meridian Press Holdings brand (the "Business");
WHEREAS, Ridgeline Publishing Acquisition Corp., a Delaware corporation (Secretary of State file no. 6501982) incorporated on October 2, 2024 ("Buyer"), is a newly formed acquisition vehicle organized for the purpose of effectuating the transactions contemplated hereby;
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell to Buyer, all of the Membership Interests, on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, Aurelius Global Media Group PLC, a public limited company organized under the laws of England and Wales (Companies House registration number 08431276) (the "Parent Guarantor"), is the indirect parent of Seller and is joining this Agreement solely for purposes of certain covenants, representations, the non-competition provisions set forth in the Non-Competition and Non-Solicitation Agreement, and its guarantee obligations under Article XIII;
WHEREAS, Pinnacle Ridge Capital Partners Fund IV, L.P., a Delaware limited partnership (Secretary of State file no. 6234577) (the "Sponsor"), is the indirect parent entity of Buyer and is joining this Agreement solely for purposes of certain guaranty, equity commitment, and related provisions set forth in Article XIII and as otherwise expressly specified herein;
WHEREAS, concurrently with the execution and delivery of this Agreement, the parties hereto are entering into: (a) a Transition Services Agreement (the "Transition Services Agreement" or "TSA"), (b) an Escrow Agreement (the "Escrow Agreement"), (c) a Trademark License Agreement (the "Trademark License Agreement"), (d) a Non-Competition and Non-Solicitation Agreement (the "Non-Competition and Non-Solicitation Agreement"), and (e) a Section 338(h)(10) Election Agreement (the "Section 338(h)(10) Election Agreement") (collectively, the "Ancillary Agreements"); and
WHEREAS, in connection with the transactions contemplated hereby, Buyer has obtained a representations and warranties insurance policy from Kelvantis Omnivrel Insurance Company (Policy No. RWI-2024-MPH-00417) (the "R&W Insurance Policy").
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I — DEFINITIONS AND INTERPRETATION
Section 1.1 — Definitions.
As used in this Agreement, the following terms shall have the meanings set forth below:
"Accounting Firm" means Kensington Forensic Advisors LLP, 90 Park Avenue, New York, New York 10016, or such other nationally recognized independent accounting firm as may be mutually agreed in writing by Buyer and Seller; provided, that in no event shall Pemberton Graves LLP or Whitecliff & Harding LLP serve as the Accounting Firm.
"Actual Closing Date" means the date on which the Closing actually occurs in accordance with Section 3.1.
"Adjusted EBITDA" means, with respect to the Company and its Subsidiaries for any given period, earnings before interest, Taxes, depreciation, and amortization, as adjusted for non-recurring, extraordinary, or unusual items (including restructuring charges, acquisition-related expenses, non-cash stock-based compensation charges, and one-time litigation costs or settlements), in each case as determined in accordance with GAAP, consistently applied, and as set forth in the Company's carve-out financial statements. For reference purposes, FY2023 Adjusted EBITDA was $96,000,000.
"Affiliate" means, with respect to any specified Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such specified Person. For purposes of this definition, "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, 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.
"Agreement" means this Membership Interest Purchase Agreement, including all Exhibits and Schedules attached hereto, as the same may be amended, supplemented, or modified from time to time in accordance with Section 12.6.
"Ancillary Agreements" means, collectively, the Transition Services Agreement, the Escrow Agreement, the Trademark License Agreement, the Non-Competition and Non-Solicitation Agreement, and the Section 338(h)(10) Election Agreement.
"Basket Amount" means $4,800,000 (representing one percent (1%) of the Enterprise Value).
"Bellweather" means Bellweather Academic Press Inc., a Delaware corporation (Secretary of State file no. 4801133).
"Business" means the business of book publishing, periodical publishing, and educational content licensing conducted by the Company and its Subsidiaries as of the date of this Agreement and as conducted during the twelve (12) months preceding the date of this Agreement, including all activities and operations related thereto.
"Business Day" means any day other than a Saturday, a Sunday, or a day on which banking institutions in New York, New York or London, England are authorized or obligated by applicable Law to close.
"Buyer" means Ridgeline Publishing Acquisition Corp., a Delaware corporation (Secretary of State file no. 6501982).
"Buyer Indemnified Parties" has the meaning set forth in Section 10.2.
"Buyer's Accountant" means Whitecliff & Harding LLP.
"Canadian Competition Act Clearance" means (a) the issuance of an advance ruling certificate under Section 102 of the Competition Act (Canada) in respect of the transactions contemplated hereby, or (b) the applicable waiting period under Part IX of the Competition Act (Canada) having expired or been terminated, or the obligation to provide a pre-merger notification having been waived by the Commissioner of Competition, in each case without the Commissioner having issued a supplementary information request under subsection 114(2) of the Competition Act (Canada) or, if such a request has been issued, the applicable waiting period following compliance therewith having expired or been terminated.
"Cap" means $72,000,000 (representing fifteen percent (15%) of the Enterprise Value).
"Closing" has the meaning set forth in Section 3.1.
"Closing Cash" has the meaning set forth in Section 2.4(a).
"Closing Date" has the meaning set forth in Section 3.1.
"Closing Indebtedness" has the meaning set forth in Section 2.4(a).
"Code" means the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder.
"Company" means Meridian Press Holdings LLC, a Delaware limited liability company (Secretary of State file no. 4521889).
"Company intellectual Property" means all intellectual Property owned or purported to be owned by the Company or any Subsidiary, including (a) the "Meridian Press," "Bellweather Academic," and "Foxglove" trademarks and associated logos (including all United States and Canadian registrations and applications therefor), (b) all ISBN prefix assignments held by the Company and its Subsidiaries, (c) all copyrights in published works, (d) all domain names, (e) all trade secrets and proprietary know-how, and (f) all other intellectual property rights used in or necessary for the conduct of the Business.
"Confidentiality Agreement" means the Mutual Confidentiality and Non-Disclosure Agreement dated March 18, 2024 between Seller and Pinnacle Ridge Capital Management LLC.
"Consent" means any consent, approval, authorization, waiver, order, permit, license, or notice required from, or filing or registration with, any Person (including any Governmental Authority).
"De Minimis Amount" means $250,000.
"Debt Commitment Letter" means the commitment letter dated July 19, 2024 from Clearwater National Bank, N.A. (as Administrative Agent, Lead Arranger, and Bookrunner) and Trident Capital Finance LLC (as Co-Lender) to Buyer, together with all exhibits, schedules, annexes, and fee letters attached thereto, as the same may be amended, supplemented, or modified in accordance with Section 7.1.
"Disclosure Schedules" means the disclosure schedules delivered by Seller to Buyer concurrently with the execution and delivery of this Agreement, as the same may be supplemented or updated in accordance with this Agreement.
"Enterprise Value" means $480,000,000.
"Equity Purchase Price" has the meaning set forth in Section 2.3.
"Escrow Account" means the escrow account designated as Account No. GT-ESC-2024-11150048 established at Granite Trust Company, N.A. in accordance with the Escrow Agreement.
"Escrow Agent" means Granite Trust Company, N.A., 100 Federal Street, Boston, Massachusetts 02110.
"Escrow Agreement" means the Escrow Agreement, dated as of the Closing Date, among Seller, Buyer, and Granite Trust Company, N.A., substantially in the form attached hereto as Exhibit C.
"Escrow Amount" means $72,000,000 (representing fifteen percent (15%) of the Enterprise Value).
"Estimated Closing Cash" means Seller's good faith estimate of Closing Cash, as set forth in the Estimated Closing Statement delivered pursuant to Section 2.4(b).
"Estimated Closing Indebtedness" means Seller's good faith estimate of Closing Indebtedness, as set forth in the Estimated Closing Statement delivered pursuant to Section 2.4(b).
"Estimated Closing Statement" has the meaning set forth in Section 2.4(b).
"Estimated Equity Purchase Price" has the meaning set forth in Section 2.3.
"Estimated Net Working Capital" means Seller's good faith estimate of Net Working Capital as of the Closing, as set forth in the Estimated Closing Statement delivered pursuant to Section 2.4(b).
"Estimated Transaction Expenses" means Seller's good faith estimate of Transaction Expenses as of the Closing, as set forth in the Estimated Closing Statement delivered pursuant to Section 2.4(b).
"Final Closing Statement" has the meaning set forth in Section 2.4(c).
"Final Equity Purchase Price" has the meaning set forth in Section 2.5.
"Foxglove" means Foxglove Media LLC, a New York limited liability company.
"Fraud" means, with respect to any party, an actual and intentional misrepresentation of a material fact made by such party in connection with the representations and warranties set forth in Article IV or Article V (as applicable) of this Agreement, made with the knowledge that such representation was false when made, with the intention of inducing the other party to enter into this Agreement, and upon which the other party actually and justifiably relied to its detriment.
"Fundamental Representations" means the representations and warranties of Seller set forth in Section 4.1 (Organization and Good Standing), Section 4.2 (Authority; Enforceability), Section 4.3 (Capitalization), Section 4.14 (Tax Matters), and Section 4.18 (Brokers).
"GAAP" means United States generally accepted accounting principles as in effect from time to time, consistently applied.
"Governmental Authority" means any federal, state, provincial, local, municipal, foreign, or other governmental or quasi-governmental authority, agency, board, bureau, commission, department, instrumentality, or body, or any court, tribunal, arbitral body, or self-regulatory organization.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"HSR Clearance" means the expiration or early termination of the applicable waiting period (and any extension thereof) under the HSR Act in connection with the transactions contemplated hereby.
"Indemnified Party" has the meaning set forth in Section 10.6(a).
"Indemnifying Party" has the meaning set forth in Section 10.6(a).
"intellectual Property" means all intellectual property and proprietary rights of any kind, including (a) patents, patent applications, and patent disclosures, (b) trademarks, service marks, trade names, trade dress, logos, and domain names (and all goodwill associated therewith), and registrations and applications for registration thereof, (c) copyrights, copyrightable works, and registrations and applications for registration thereof, (d) trade secrets, know-how, inventions, processes, techniques, and confidential business information, and (e) all other intellectual property rights.
"Intercompany Note" means the intercompany promissory note in the aggregate principal amount of $50,000,000, dated as of January 15, 2020, issued by the Company to Seller, together with all accrued and unpaid interest thereon.
"Key Employees" means the twelve (12) senior managers of the Company and its Subsidiaries identified on Schedule 6.11.
"Knowledge of Seller" or any similar phrase means the actual knowledge of the following individuals, after reasonable inquiry of their direct reports and review of their files and records: (a) Claudia Restrepo, General Counsel of Aurelius Global Media Group PLC, (b) Thomas Whitfield, Senior Vice President, Corporate Development of Aurelius Global Media Group PLC, (c) Jonathan Kessler, President of Meridian Press Holdings LLC, and (d) Angela Moretti, Senior Vice President, Finance of Meridian Press Holdings LLC.
"Law" means any federal, state, provincial, local, municipal, foreign, or other law, statute, constitution, treaty, convention, ordinance, code, rule, regulation, directive, order, judgment, decree, injunction, or other requirement enacted, adopted, promulgated, applied, or entered by any Governmental Authority.
"Leased Real Property" means the real property leased, subleased, or otherwise occupied by the Company or any Subsidiary, as set forth on Schedule 4.10(b), consisting of eight (8) leased warehouse and office locations in the United States and two (2) leased locations in Canada (Toronto, Ontario and Vancouver, British Columbia).
"Lien" means any mortgage, pledge, lien, security interest, encumbrance, charge, claim, restriction, easement, option, right of first refusal, right of first offer, preemptive right, title defect, or other similar restriction or limitation of any kind.
"Loss" or "Losses" means any and all losses, damages, liabilities, obligations, claims, demands, judgments, penalties, fines, costs, and expenses (including reasonable attorneys' fees and expenses, experts' fees and expenses, and costs of investigation, enforcement, and collection), but excluding punitive, speculative, or exemplary damages except to the extent such damages are actually awarded to a third party in a third-party claim.
"Material Adverse Effect" has the meaning set forth in Section 1.2.
"Material Contracts" has the meaning set forth in Section 4.11.
"MDS" means Meridian Distribution Services Inc., a Delaware corporation (Secretary of State file no. 4736201).
"Membership Interests" means one hundred percent (100%) of the membership interests of the Company, as set forth in the Company's limited liability company agreement, representing all of the outstanding equity interests of the Company.
"Meridian Canada" means Meridian Press Canada ULC, a British Columbia unlimited liability company.
"Net Working Capital" has the meaning set forth in Section 2.4(a).
"Net Working Capital Target" or "NWC Target" means $145,000,000.
"NWC Methodology" means the accounting principles, methodologies, policies, procedures, and line-item definitions set forth on Exhibit A attached hereto, which shall be applied consistently with GAAP as historically applied by the Company.
"Oakbridge Distribution Alliance Agreement" means the Distribution Alliance Agreement, dated as of March 1, 2018, between Meridian Distribution Services Inc. and Oakbridge Literary Group, Inc., as amended.
"Order" means any order, writ, injunction, decree, judgment, award, ruling, stipulation, assessment, or determination entered by or with any Governmental Authority.
"Outside Date" means November 8, 2024, as the same may be extended in accordance with Section 11.1(b).
"Owned Real Property" means the real property owned in fee by the Company or any Subsidiary, as set forth on Schedule 4.10(a), consisting of distribution center facilities located at (a) 45 Fieldcrest Avenue, Edison, New Jersey 08837, (b) 2200 Westbelt Drive, Columbus, Ohio 43228, (c) 8700 Freeport Parkway, Dallas, Texas 75063, and (d) 1400 Scheels Drive, Reno, Nevada 89502.
"Parent Guarantor" means Aurelius Global Media Group PLC, a public limited company organized under the laws of England and Wales (Companies House registration number 08431276).
"Permitted Liens" means (a) Liens for Taxes not yet due and payable or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (b) mechanics', materialmen's, carriers', workers', repairers', and similar statutory Liens arising or incurred in the ordinary course of business for amounts that are not yet due and payable or are being contested in good faith, (c) zoning, building codes, entitlement, and other land use Laws imposed by any Governmental Authority having jurisdiction over such real property that are not violated by the current use or occupancy of such real property, (d) easements, covenants, conditions, restrictions, and other similar matters of record affecting title to real property that do not materially impair the use, occupancy, or value of such real property, (e) Liens arising under workers' compensation, unemployment insurance, social security, or similar legislation, and (f) Liens set forth on Schedule 4.3 or Schedule 4.10(a).
"Person" means any individual, corporation, limited liability company, partnership, joint venture, association, trust, unincorporated organization, Governmental Authority, or other entity.
"R&W Insurance Policy" means the representations and warranties insurance policy issued by Kelvantis Omnivrel Insurance Company (Policy No. RWI-2024-MPH-00417) with a coverage limit of $72,000,000, a retention of $4,800,000, and a thirty-six (36) month policy period, as bound on July 22, 2024.
"Representative" means, with respect to any Person, such Person's directors, officers, managers, employees, agents, attorneys, accountants, financial advisors, consultants, and other authorized representatives.
"Retained Business" means the Digital Media & Streaming segment and the E-Commerce & Marketplace segment of Aurelius Global Media Group PLC and its Affiliates (other than the Company and its Subsidiaries), as conducted as of the date of this Agreement.
"Section 338(h)(10) Election" has the meaning set forth in Section 8.5.
"Section 338(h)(10) Election Agreement" means the Section 338(h)(10) Election Agreement, dated as of the date hereof, between Buyer and Seller, substantially in the form attached hereto as Exhibit G.
"Seller" means Aurelius Media Holdings Inc., a Delaware corporation (Secretary of State file no. 5987324).
"Seller Indemnified Parties" has the meaning set forth in Section 10.3.
"Seller's Auditor" means Pemberton Graves LLP.
"Solvent" means, with respect to any Person as of any date of determination, that (a) the fair saleable value of the assets of such Person and its subsidiaries, on a consolidated basis, exceeds the total amount of the liabilities (including contingent and unliquidated liabilities) of such Person and its subsidiaries, on a consolidated basis, as of such date, (b) such Person and its subsidiaries, on a consolidated basis, are able to pay their respective debts and other liabilities, contingent obligations, and other commitments as they mature in the normal course of business, and (c) such Person and its subsidiaries, on a consolidated basis, do not have unreasonably small capital for the conduct of their respective businesses as presently conducted and as planned to be conducted following the Closing.
"Sponsor" means Pinnacle Ridge Capital Partners Fund IV, L.P., a Delaware limited partnership (Secretary of State file no. 6234577).
"Subsidiaries" means, collectively, MDS, Bellweather, Foxglove, and Meridian Canada.
"Target Closing Date" means November 8, 2024.
"Tax" or "Taxes" means all federal, state, provincial, local, municipal, and foreign taxes, charges, fees, assessments, levies, imposts, duties, or other governmental charges of any kind (including income, franchise, profits, capital gains, capital stock, gross receipts, value added, goods and services, harmonized sales, surtax, estimated, excise, use, transfer, registration, stamp, premium, alternative or add-on minimum, environmental, customs duties, real property, personal property (tangible and intangible), sales, occupation, severance, windfall profits, social security, unemployment, disability, payroll, license, and withholding taxes), together with all interest, penalties, fines, and additions to tax imposed with respect thereto.
"Tax Return" means any return, declaration, report, claim for refund, information return, statement, or other document relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
"Trademark License Agreement" means the Trademark License Agreement, dated as of the Closing Date, between Buyer (as Licensor) and Seller (as Licensee) with respect to the "Meridian" name, substantially in the form attached hereto as Exhibit E, providing for a three (3) year, royalty-free, non-exclusive license-back of the "Meridian" name to Seller for certain limited transition purposes.
"Transaction Documents" means this Agreement and each of the Ancillary Agreements.
"Transaction Expenses" means all unpaid fees, costs, and expenses of the Company and its Subsidiaries incurred in connection with the negotiation, preparation, and consummation of the transactions contemplated by this Agreement and the Ancillary Agreements (including fees and expenses of legal counsel, financial advisors, accountants, and other consultants, and any change-of-control payments, success fees, transaction-related bonuses, or similar payments triggered by the consummation of the transactions contemplated hereby), in each case to the extent unpaid as of the Closing and to the extent constituting an obligation of the Company or any Subsidiary (and not an obligation of Seller or its Affiliates other than the Company and the Subsidiaries).
"Transfer Taxes" has the meaning set forth in Section 8.3.
"Transition Services Agreement" or "TSA" means the Transition Services Agreement, dated as of the Closing Date, between Seller (as Service Provider) and Buyer (as Service Recipient), substantially in the form attached hereto as Exhibit D.
"True-Up Deadline" means the date that is ninety (90) calendar days following the Closing Date.
Section 1.2 — Material Adverse Effect Definition.
"Material Adverse Effect" means any change, event, occurrence, effect, circumstance, condition, state of facts, or development (each, an "Effect") that, individually or in the aggregate with all other Effects, has had or would reasonably be expected to have a material adverse effect on (a) the business, financial condition, assets, liabilities, or results of operations of the Business, taken as a whole, or (b) the ability of Seller to consummate the transactions contemplated by this Agreement and the Ancillary Agreements in accordance with their respective terms; provided, however, that no Effect (whether alone or in combination with any other Effect) resulting from, arising out of, or attributable to any of the following shall be deemed to constitute, or shall be taken into account in determining whether there has been, a Material Adverse Effect:
(i) changes in general economic, financial, credit, debt, capital, or securities market conditions (including changes in interest rates, exchange rates, stock, bond, and/or debt prices, or any disruption of such markets);
(ii) changes generally affecting the publishing, media, educational content, or related industries in which the Business operates;
(iii) changes in applicable Law or GAAP (or authoritative interpretation thereof) after the date hereof;
(iv) earthquakes, hurricanes, floods, tornadoes, or other natural disasters or acts of God;
(v) pandemics, epidemics, disease outbreaks, or other public health emergencies (including COVID-19 and any mutation or variation thereof);
(vi) acts of war, armed hostilities, sabotage, terrorism, cyberattacks, military action, or any escalation or worsening thereof;
(vii) any Effects arising from the announcement or pendency of the transactions contemplated by this Agreement, including any impact on relationships with customers, suppliers, distributors, employees, labor organizations, or Governmental Authorities;
(viii) any action taken by, or at the express written request of, Buyer or its Affiliates, or the failure to take any action that Seller was prohibited from taking under the terms of this Agreement; or
(ix) any failure, in and of itself, by the Company or its Subsidiaries to meet any internal or published projections, estimates, budgets, or forecasts of revenue, earnings, or other financial performance measures for any period (it being understood that the underlying cause of any such failure may, if not otherwise excluded by clauses (i) through (viii) above, be taken into account in determining whether a Material Adverse Effect has occurred);
provided, further, that the exceptions set forth in clauses (i), (ii), (iii), (iv), (v), and (vi) above shall not apply to the extent that such Effects disproportionately and adversely affect the Business, taken as a whole, relative to other participants operating in the industries in which the Business operates.
Section 1.3 — Rules of Construction.
Unless the context of this Agreement otherwise requires: (a) words of any gender include each other gender; (b) words using the singular or plural number also include the plural or singular number, respectively; (c) the terms "hereof," "herein," "hereby," "hereto," and derivative or similar words refer to this entire Agreement; (d) the terms "Article," "Section," "Schedule," "Exhibit," and "Annex" refer to the specified Article, Section, Schedule, Exhibit, or Annex of or to this Agreement, unless otherwise specified; (e) the word "including" means "including without limitation" and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it; (f) the word "or" is not exclusive; (g) all references to "$" or "Dollars" are to United States Dollars; (h) references to a Person are also to its permitted successors and assigns; (i) references to any statute or regulation refer to such statute or regulation as amended or supplemented from time to time (and, in the case of a statute, to any rules and regulations promulgated thereunder); (j) a reference to any contract or agreement (including this Agreement) is to such contract or agreement as amended, restated, supplemented, or modified from time to time in accordance with its terms; (k) the headings and captions contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement, and shall not be referred to in connection with the construction or interpretation of this Agreement; (l) whenever this Agreement requires that Seller "cause" the Company or any Subsidiary to take or refrain from taking any action, such requirement shall be deemed to include the obligation of Seller to exercise its rights as the sole member of the Company to effect such action or omission; and (m) if any action under this Agreement is required to be done or taken on a day that is not a Business Day, then such action shall be required to be done or taken not on such day but on the first succeeding Business Day thereafter.
ARTICLE II — PURCHASE AND SALE; PURCHASE PRICE
Section 2.1 — Purchase and Sale of Membership Interests.
Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Seller shall sell, assign, transfer, convey, and deliver to Buyer, and Buyer shall purchase and accept from Seller, all of the Membership Interests, free and clear of all Liens (other than Permitted Liens and restrictions on transfer arising under applicable federal and state securities Laws). Upon consummation of the Closing, Buyer shall own one hundred percent (100%) of the Membership Interests and shall be the sole member of the Company.
Section 2.2 — Enterprise Value.
The parties agree that the enterprise value attributable to the Business and the Membership Interests is Four Hundred Eighty Million Dollars ($480,000,000) (the "Enterprise Value"), subject to adjustment as set forth in this Article II.
Section 2.3 — Equity Purchase Price.
The aggregate consideration to be paid by Buyer to Seller for the Membership Interests (the "Equity Purchase Price") shall be an amount equal to:
(a) the Enterprise Value ($480,000,000);
(b) minus the Closing Indebtedness;
(c) plus the Closing Cash;
(d) minus the Transaction Expenses; and
(e) plus (if positive) or minus (if negative) the Net Working Capital Adjustment (which is the amount, if any, by which the Closing Net Working Capital exceeds, or falls below, the NWC Target of $145,000,000).
At the Closing, the Equity Purchase Price shall be estimated based on the Estimated Closing Statement delivered pursuant to Section 2.4(b) (the resulting amount, the "Estimated Equity Purchase Price"), and shall be subject to post-Closing adjustment as set forth in Section 2.4(c). The Equity Purchase Price as finally determined pursuant to Section 2.4(c) shall be the "Final Equity Purchase Price."
Section 2.4 — Estimated Closing Statement; Post-Closing Adjustment.
(a) Definitions of Adjustment Components. As used in this Agreement:
(i) "Closing Indebtedness" means the aggregate amount of all outstanding indebtedness of the Company and its Subsidiaries as of 11:59 p.m. Eastern Time on the day immediately preceding the Closing Date (the "Measurement Time"), including (A) the Intercompany Note (in the aggregate principal amount of $50,000,000, together with all accrued and unpaid interest thereon), (B) all capital lease obligations of the Company and its Subsidiaries (in the aggregate amount of approximately $12,500,000 as of the date hereof), (C) all borrowed money (including drawn amounts under any line of credit), (D) all obligations evidenced by bonds, debentures, notes, or other similar instruments, (E) all obligations issued or assumed as the deferred purchase price of property (other than trade payables incurred in the ordinary course of business consistent with past practice), (F) all guarantees of the foregoing types of obligations by or of the Company or any Subsidiary, and (G) all accrued but unpaid interest, premiums, penalties, fees, expenses, and other monetary obligations in respect of any of the foregoing; provided, however, that Closing Indebtedness shall not include any obligations under the senior secured credit facilities incurred by Buyer or its Affiliates (other than the Company and its Subsidiaries) in connection with the financing of the transactions contemplated hereby.
(ii) "Closing Cash" means all unrestricted cash and cash equivalents of the Company and its Subsidiaries as of the Measurement Time, including checks and drafts deposited for the account of the Company or any Subsidiary that have cleared as of the Measurement Time, but excluding any restricted cash, escrowed funds, or cash deposits held as security or collateral for obligations of the Company or any Subsidiary.
(iii) "Transaction Expenses" means all unpaid fees, costs, and expenses incurred by or on behalf of the Company or any Subsidiary in connection with the negotiation, preparation, execution, and consummation of the transactions contemplated by this Agreement and the Ancillary Agreements, including (A) fees and expenses of legal counsel, investment bankers, financial advisors, accountants, and other consultants and advisors to the Company or any Subsidiary, (B) any change-of-control payments, transaction bonuses, success fees, retention payments, or similar payments payable by the Company or any Subsidiary as a result of, or in connection with, the consummation of the transactions contemplated hereby (including the employer portion of any payroll, employment, or similar Taxes imposed with respect thereto), and (C) any other fees or expenses of the Company or any Subsidiary that would not have been incurred but for the transactions contemplated hereby, in each case to the extent unpaid as of the Closing and to the extent constituting an obligation of the Company or any Subsidiary.
(iv) "Net Working Capital" means, as of the Measurement Time, (A) the current assets of the Company and its Subsidiaries (excluding Closing Cash and any current assets that constitute Transaction Expenses), minus (B) the current liabilities of the Company and its Subsidiaries (excluding any portion of Closing Indebtedness and Transaction Expenses reflected in current liabilities), in each case determined in accordance with the NWC Methodology set forth on Exhibit A, consistently applied in accordance with GAAP as historically applied by the Company in the preparation of the Financial Statements.
(v) "NWC Target" means $145,000,000.
(b) Estimated Closing Statement. Not fewer than three (3) Business Days prior to the Closing Date, Seller shall prepare and deliver to Buyer a written statement (the "Estimated Closing Statement") setting forth Seller's good faith estimates of:
(i) Closing Indebtedness (estimated as of the date hereof: $62,500,000);
(ii) Closing Cash (estimated as of the date hereof: $8,200,000);
(iii) Transaction Expenses (estimated as of the date hereof: $4,700,000);
(iv) Net Working Capital (estimated as of the date hereof: $142,000,000); and
(v) the resulting Estimated Equity Purchase Price, which as of the date hereof is estimated at $418,000,000, calculated as follows:
Enterprise Value: $480,000,000
Less: Estimated Closing Indebtedness: ($62,500,000)
Plus: Estimated Closing Cash: $8,200,000
Less: Estimated Transaction Expenses: ($4,700,000)
Less: NWC Shortfall ($142,000,000 – $145,000,000): ($3,000,000)
Estimated Equity Purchase Price: $418,000,000
The Estimated Closing Statement shall be prepared in accordance with the NWC Methodology and GAAP as historically applied by the Company, and shall include reasonable supporting detail for each component. Buyer shall have the right to review and comment on the Estimated Closing Statement, and Seller shall consider in good faith any comments from Buyer with respect thereto; provided, however, that any dispute regarding the Estimated Closing Statement shall not delay or otherwise affect the Closing.
(c) Post-Closing Adjustment Process.
(i) Buyer's Closing Statement. Within ninety (90) calendar days after the Closing Date (i.e., by the True-Up Deadline, estimated to be February 13, 2025), Buyer shall prepare and deliver to Seller a written statement (the "Final Closing Statement") setting forth Buyer's calculation of the actual amounts of Closing Indebtedness, Closing Cash, Transaction Expenses, and Net Working Capital as of the Measurement Time, together with reasonable supporting detail and work papers used in the preparation thereof. The Final Closing Statement shall be prepared in accordance with the NWC Methodology and GAAP as historically applied by the Company.
(ii) Seller Review Period. Seller shall have thirty (30) calendar days following receipt of the Final Closing Statement (the "Review Period") to review the Final Closing Statement. During the Review Period, Buyer shall, and shall cause the Company and its Subsidiaries to, provide Seller and its Representatives with reasonable access during normal business hours to the books, records, work papers, and personnel of the Company and its Subsidiaries as reasonably requested by Seller in connection with its review of the Final Closing Statement. If Seller disagrees with any item or amount set forth in the Final Closing Statement, Seller shall, on or before the last day of the Review Period, deliver to Buyer a written notice of disagreement (the "Dispute Notice") specifying in reasonable detail (A) each item that Seller disputes, (B) the amount of such disputed item as calculated by Seller, (C) the basis for Seller's disagreement with Buyer's calculation, and (D) Seller's calculation of each of Closing Indebtedness, Closing Cash, Transaction Expenses, and Net Working Capital. If Seller does not deliver a Dispute Notice within the Review Period, Seller shall be deemed to have accepted the Final Closing Statement, and the Final Closing Statement as delivered by Buyer shall become final and binding on the parties.
(iii) Negotiation Period. If Seller timely delivers a Dispute Notice, Buyer and Seller shall attempt in good faith to resolve the disputed items within thirty (30) calendar days after Buyer's receipt of the Dispute Notice (the "Negotiation Period"). Any items resolved by mutual written agreement of Buyer and Seller during the Negotiation Period shall be final and binding on the parties.
(iv) Neutral Accountant Resolution. If Buyer and Seller are unable to resolve all disputed items during the Negotiation Period, then any remaining unresolved items (and only such unresolved items) shall be promptly submitted to the Accounting Firm (Kensington Forensic Advisors LLP) for resolution. The Accounting Firm shall act as an expert and not as an arbitrator, and shall consider only those items and amounts that remain in dispute. Each of Buyer and Seller shall submit to the Accounting Firm, within fifteen (15) calendar days after the submission to the Accounting Firm, a written statement setting forth its position with respect to each disputed item. The Accounting Firm shall render its determination with respect to each disputed item within thirty (30) calendar days of receipt of such submissions (or such longer period as the Accounting Firm may reasonably require), and such determination shall be (A) in writing, (B) based solely on the written submissions of Buyer and Seller, (C) in accordance with the terms of this Agreement and the NWC Methodology, and (D) within the range of values asserted by Buyer and Seller with respect to each disputed item. The determination of the Accounting Firm shall be final, binding, and conclusive on the parties and shall not be subject to appeal or review by any court or arbitral body, absent manifest error. The fees, costs, and expenses of the Accounting Firm shall be allocated between Buyer and Seller based on the proportion of the aggregate disputed amounts that are resolved in favor of the other party (i.e., the party whose positions are less successful overall shall bear a proportionately greater share of such fees and expenses).
(v) Payment of Adjustment. Within five (5) Business Days after the final determination of the Final Equity Purchase Price (whether by acceptance, mutual agreement, or determination by the Accounting Firm):
(A) if the Final Equity Purchase Price exceeds the Estimated Equity Purchase Price, Buyer shall pay to Seller the amount of such excess, by wire transfer of immediately available funds to an account designated in writing by Seller; or
(B) if the Estimated Equity Purchase Price exceeds the Final Equity Purchase Price, Seller shall pay to Buyer the amount of such excess, first from amounts held in the Escrow Account (by joint written instruction of Buyer and Seller to the Escrow Agent) and, to the extent the remaining Escrow Amount is insufficient, by wire transfer of immediately available funds from Seller directly to an account designated in writing by Buyer.
Any payment made pursuant to this Section 2.4(c)(v) shall bear interest from the Closing Date to the date of payment at a rate equal to the prime rate as published by The Wall Street Journal on the Closing Date, calculated on the basis of the actual number of days elapsed and a 365-day year.
Section 2.5 — Payment at Closing.
At the Closing, subject to the terms and conditions of this Agreement, Buyer shall pay the Estimated Equity Purchase Price as follows:
(a) Escrow Deposit. Seventy-Two Million Dollars ($72,000,000) (the "Escrow Amount," equal to fifteen percent (15%) of the Enterprise Value) shall be deposited by Buyer by wire transfer of immediately available funds with Granite Trust Company, N.A. (the "Escrow Agent") into Escrow Account No. GT-ESC-2024-11150048, to be held and disbursed in accordance with the terms and conditions of the Escrow Agreement. The Escrow Amount shall secure Seller's indemnification obligations under Article X and any post-closing purchase price adjustment obligations of Seller under Section 2.4(c).
(b) Cash to Seller. The balance of the Estimated Equity Purchase Price after deduction of the Escrow Amount (estimated as of the date hereof: $418,000,000 minus $72,000,000 = $346,000,000) shall be paid by Buyer to Seller (or to such Persons as Seller may designate in the Funds Flow Memorandum), by wire transfer of immediately available funds to such account or accounts as Seller shall designate in writing to Buyer not fewer than two (2) Business Days prior to the Closing Date.
All payments under this Section 2.5 shall be in United States Dollars. The parties shall cooperate in good faith to prepare and agree upon a Funds Flow Memorandum (substantially in the form of Exhibit M) not fewer than two (2) Business Days prior to the Closing Date, which shall set forth the wire transfer instructions and amounts for all payments to be made at the Closing.
Section 2.6 — Intercompany Note Payoff.
At or immediately prior to the Closing, the Intercompany Note (in the aggregate principal amount of $50,000,000, together with all accrued and unpaid interest thereon) shall be repaid in full and shall be cancelled and deemed satisfied in all respects, and all Liens securing such Intercompany Note shall be unconditionally and irrevocably released and discharged. At the Closing, Seller shall deliver to Buyer (a) a payoff letter from the holder of the Intercompany Note confirming the aggregate payoff amount and providing that, upon receipt of such payoff amount, the Intercompany Note shall be deemed repaid, satisfied, cancelled, and of no further force or effect, and (b) all UCC termination statements, mortgage releases, and other instruments necessary to release and discharge all Liens securing the Intercompany Note.
Section 2.7 — Withholding.
Buyer (and any other applicable withholding agent) shall be entitled to deduct and withhold from any amounts payable pursuant to this Agreement such amounts as are required to be deducted and withheld under the Code, or any provision of any applicable federal, state, local, provincial, or foreign Tax Law. To the extent that amounts are so withheld and timely remitted to the applicable Governmental Authority, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made. Buyer shall provide Seller with reasonable advance notice of any intended withholding (other than any withholding required due to Seller's failure to deliver the FIRPTA Certificate pursuant to Section 3.2(g)), and shall cooperate with Seller to reduce or eliminate any such withholding to the extent permitted by applicable Law.
ARTICLE III — CLOSING
Section 3.1 — Closing Date and Location.
The closing of the transactions contemplated by this Agreement (the "Closing") shall take place remotely via the electronic exchange of documents and signatures at 10:00 a.m. Eastern Time on the date (the "Closing Date") that is the third (3rd) Business Day following the satisfaction or valid waiver of all of the conditions set forth in Article IX (other than those conditions that, by their nature, are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions at the Closing), or on such other date as Buyer and Seller may mutually agree in writing. The Target Closing Date is November 8, 2024. All proceedings at the Closing shall be deemed to have taken place simultaneously and no delivery or payment shall be deemed to have been made until all deliveries and payments required to be made at the Closing shall have been completed.
Section 3.2 — Seller Closing Deliverables.
At the Closing, Seller shall deliver, or cause to be delivered, to Buyer (or, with respect to the Escrow Agreement, to the Escrow Agent) each of the following:
(a) an Assignment of Membership Interests, substantially in the form of Exhibit B, duly executed by Seller, evidencing the transfer of one hundred percent (100%) of the Membership Interests from Seller to Buyer;
(b) counterpart signature pages to each of the Ancillary Agreements (the Transition Services Agreement, the Escrow Agreement, the Trademark License Agreement, the Non-Competition and Non-Solicitation Agreement, and the Section 338(h)(10) Election Agreement), duly executed by Seller and/or Parent Guarantor, as applicable;
(c) a Closing Certificate, substantially in the form of Exhibit I, duly executed by an authorized officer of Seller, certifying the accuracy of the bring-down of the representations and warranties of Seller contained in Article IV as of the Closing Date;
(d) an Officer's Certificate, substantially in the form of Exhibit H, duly executed by an authorized officer of Seller, certifying the satisfaction by Seller of the conditions set forth in Section 9.2;
(e) a Secretary's Certificate, substantially in the form of Exhibit K, duly executed by the Secretary or an Assistant Secretary of Seller, certifying (i) the certificate of incorporation and bylaws of Seller, (ii) the resolutions of the board of directors of Seller authorizing the execution, delivery, and performance of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby, and (iii) the incumbency and specimen signatures of the officers of Seller executing this Agreement and the Ancillary Agreements;