Privileged & Confidential
MEMBERSHIP INTEREST PURCHASE AGREEMENT
by and among
AURELIUS MEDIA HOLDINGS INC., as Seller,
RIDGELINE PUBLISHING ACQUISITION CORP., as Buyer,
and, solely for purposes of Sections 6.9, 6.10, and 10.13,
AURELIUS GLOBAL MEDIA GROUP PLC
and
PINNACLE RIDGE CAPITAL PARTNERS FUND IV, L.P.
**Dated as of **
TABLE OF CONTENTS
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ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Acquisition Vehicle" means Ridgeline Publishing Acquisition Corp., a Delaware corporation (file no. 6501982), formed for the purpose of effecting the transactions contemplated by this Agreement.
"Action" means any claim, action, suit, complaint, arbitration, proceeding, hearing, inquiry, or investigation by or before any Governmental Authority or arbitral body.
"Adjusted EBITDA" means, for any period, the net income of the Business for such period, determined in accordance with GAAP applied on a basis consistent with the preparation of the Financial Statements, adjusted to exclude the effects of (a) interest expense, (b) income tax expense, (c) depreciation and amortization, (d) stock-based compensation expense, (e) restructuring and integration charges, (f) non-recurring transaction-related costs, and (g) other items as set forth on Schedule 1.1(a). For purposes of the implied valuation reflected in the Enterprise Value, Adjusted EBITDA for the twelve months ended December 31, 2023 was $96,000,000.
"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 "control" (including the terms "controlling," "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" or "MIPA" means this Membership Interest Purchase Agreement, including all Exhibits and Schedules hereto, as the same may be amended, supplemented, or modified from time to time in accordance with Section 10.3.
"Alternative Transaction" means any merger, consolidation, business combination, sale of all or substantially all assets, sale of membership interests or other equity interests, recapitalization, joint venture, or other similar transaction involving the Company or any of its Subsidiaries, other than the transactions contemplated by this Agreement.
"Basket" has the meaning set forth in Section 8.4(b).
"Bellweather" means Bellweather Academic Press Inc., a Delaware corporation (file no. 4801133), a wholly owned Subsidiary of the Company.
"Business" means the book publishing, periodical, and educational content businesses historically operated under the Meridian Press Holdings brand, including all operations of the Company and its Subsidiaries, encompassing trade publishing, academic publishing (through Bellweather), specialty media (through Foxglove), distribution services (through MDS), and Canadian operations (through the Canadian Subsidiary), but excluding the Digital Media & Streaming and E-Commerce & Marketplace segments retained by Seller Parent and its Affiliates (other than the Company and its Subsidiaries).
"Business Day" means any day other than a Saturday, a Sunday, or a day on which banks in New York, New York or London, England are authorized or required by Law to be closed.
"Buyer" means Ridgeline Publishing Acquisition Corp., a Delaware corporation (file no. 6501982).
"Buyer Indemnified Parties" means Buyer and its Affiliates (including, from and after the Closing, the Company and its Subsidiaries) and their respective officers, directors, employees, agents, successors, and assigns.
"Buyer Parent" means Pinnacle Ridge Capital Partners Fund IV, L.P., a Delaware limited partnership (file no. 6234577).
"Canadian Subsidiary" means Meridian Press Canada ULC, an unlimited liability company organized under the laws of the Province of British Columbia, Canada, a wholly owned Subsidiary of the Company.
"Closing" has the meaning set forth in Section 2.3.
"Closing Cash" means all cash and cash equivalents of the Company and its Subsidiaries as of 12:01 a.m. Eastern Time on the Closing Date, determined in accordance with GAAP applied on a basis consistent with the preparation of the Financial Statements and the accounting principles, methodologies, policies, practices, and procedures set forth on Schedule 1.1(a). For illustrative purposes only, Closing Cash is estimated at $8,200,000 as of the date of this Agreement.
"Closing Date" has the meaning set forth in Section 2.3.
"Closing Indebtedness" means all Indebtedness of the Company and its Subsidiaries as of 12:01 a.m. Eastern Time on the Closing Date, determined in accordance with GAAP applied on a basis consistent with the preparation of the Financial Statements and the accounting principles, methodologies, policies, practices, and procedures set forth on Schedule 1.1(a), including (a) capital lease obligations (estimated at $12,500,000) (b) the Intercompany Note in the principal amount of $50,000,000 (which is addressed separately in Section 2.6(b)), but excluding any Indebtedness reflected as a component of Net Working Capital. For illustrative purposes only, Closing Indebtedness (inclusive of the Intercompany Note) is estimated at $62,500,000 as of the date of this Agreement.
"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 (file no. 4521889).
"Confidentiality Agreement" means the Confidentiality Agreement dated March 18, 2024, by and between Aurelius Media Holdings Inc. and Pinnacle Ridge Capital Management LLC (on behalf of itself and its managed funds and Affiliates, including Buyer and Buyer Parent).
"Debt Commitment Letter" has the meaning set forth in Section 4.4.
"Disclosure Schedules" means the disclosure schedules delivered by Seller to Buyer concurrently with the execution and delivery of this Agreement.
"Employee Benefit Plan" means any "employee benefit plan" (as defined in Section 3(3) of ERISA), and any other equity incentive plan, bonus plan, deferred compensation plan, change in control plan, retention agreement, severance plan, employment agreement, consulting agreement, fringe benefit plan, vacation policy, or other similar plan, program, agreement, or arrangement maintained, contributed to, or required to be maintained or contributed to by the Company or any of its Subsidiaries for the benefit of any current or former employee, officer, director, or independent contractor of the Company or any of its Subsidiaries.
"Enterprise Value" means $480,000,000.
"Environmental Claim" means any Action, demand, order, directive, or notice of violation by any Governmental Authority or any other Person alleging liability or potential liability (including liability for investigatory costs, cleanup costs, governmental response costs, natural resource damages, property damages, personal injuries, or penalties) arising out of, based on, or resulting from (a) the presence, release, or threatened release of any Hazardous Substance at any location, whether or not owned or operated by the Company or any of its Subsidiaries, or (b) any violation of or non-compliance with any Environmental Law.
"Environmental Law" means any Law relating to pollution, the protection of the environment, or the generation, handling, storage, treatment, transportation, disposal, or release of Hazardous Substances, including the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, and their state and local counterparts.
"Equity Commitment" has the meaning set forth in Section 4.4.
"Equity Purchase Price" means the amount calculated in accordance with Section 2.2, as finally determined pursuant to Section 2.5.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Escrow Account" means the escrow account to be established with the Escrow Agent pursuant to the Escrow Agreement, designated as account reference GT-ESC-2024-11150048.
"Escrow Agent" means Granite Trust Company, N.A., a national banking association, acting in its capacity as escrow agent under the Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement to be entered into at Closing among Seller, Buyer, and the Escrow Agent, substantially in the form of Exhibit A attached hereto.
"Escrow Amount" means of the Enterprise Value.
"Estimated Closing Statement" has the meaning set forth in Section 2.4.
"Estimated Equity Purchase Price" has the meaning set forth in Section 2.4.
"Exclusivity Period" has the meaning set forth in Section 5.3.
"Final Closing Statement" has the meaning set forth in Section 2.5(a).
"Final Equity Purchase Price" means the Equity Purchase Price as finally determined in accordance with Section 2.5.
"Foxglove" means Foxglove Media LLC, a New York limited liability company, a wholly owned Subsidiary of the Company.
"Fundamental Representations" means the representations and warranties of Seller set forth in Section 3.1 (Organization and Good Standing), Section 3.2 (Authority; Binding Effect), Section 3.3 (Capitalization), Section 3.12 (Tax Matters), and Section 3.22 (Brokers).
"GAAP" means United States generally accepted accounting principles as in effect from time to time, applied on a consistent basis.
"Governmental Authority" means any federal, state, provincial, local, municipal, or foreign government or any instrumentality, subdivision, court, arbitral body, administrative agency, commission, authority, or other body exercising executive, legislative, judicial, taxing, regulatory, or administrative governmental powers or functions.
"Hazardous Substance" means any substance, material, or waste that is listed, classified, regulated, characterized, or otherwise defined as "hazardous," "toxic," "radioactive," "a contaminant," "a pollutant," or words of similar import under any Environmental Law, including petroleum and petroleum products, asbestos-containing materials, polychlorinated biphenyls, and per- and polyfluoroalkyl substances (PFAS).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"Indebtedness" means, with respect to any Person, without duplication, (a) all indebtedness of such Person for borrowed money (including the principal amount thereof and any accrued and unpaid interest thereon), (b) all obligations of such Person evidenced by notes, bonds, debentures, or other similar instruments, (c) all obligations of such Person under capital leases (as determined in accordance with GAAP), (d) all obligations of such Person for the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business), (e) all obligations of such Person under interest rate, currency, or commodity swap, hedge, or similar arrangements (valued at the termination value thereof), (f) all obligations of such Person in respect of letters of credit, bank guarantees, surety bonds, or similar instruments (to the extent drawn), (g) all obligations of such Person guaranteeing any Indebtedness of any other Person described in clauses (a) through (f), (h) all intercompany payables owed by such Person to Seller or any Affiliate of Seller (other than the Company and its Subsidiaries), including the Intercompany Note, (i) all accrued and unpaid interest, premiums, penalties, breakage costs, make-whole amounts, and other fees and expenses payable in connection with any of the foregoing, and (j) all declared but unpaid dividends or distributions.
"Indemnification Cap" has the meaning set forth in Section 8.4(a).
"Intercompany Note" means that certain intercompany promissory note in the principal amount of $50,000,000 issued by the Company to Seller, dated as of September 15, 2021, as amended from time to time, bearing interest at a rate of SOFR plus 200 basis points per annum.
"Knowledge of Seller" or "Seller's Knowledge" means the actual knowledge of each of the following individuals: (a) Jonathan Kessler, President and Chief Executive Officer, Meridian Press Holdings LLC; (b) Angela Moretti, Chief Financial Officer, Meridian Press Holdings LLC; (c) Claudia Restrepo, General Counsel, Aurelius Global Media Group PLC; and (d) Thomas Whitfield, Senior Vice President, Corporate Development, Aurelius Global Media Group PLC.
"Law" means any federal, state, provincial, local, municipal, foreign, international, or multinational statute, law, ordinance, regulation, rule, code, treaty, convention, executive order, Order, or requirement enacted, promulgated, issued, entered, or applied by any Governmental Authority.
"Lien" means any mortgage, pledge, lien, charge, security interest, encumbrance, option, right of first refusal, right of first offer, easement, restriction, covenant, condition, or other similar restriction or encumbrance of any kind or nature.
"Losses" means any and all losses, damages, liabilities, claims, demands, judgments, settlements, fines, penalties, costs, and expenses (including reasonable attorneys' fees and expenses and other costs of defense or investigation), whether or not involving a third-party claim.
"Material Adverse Effect" means any change, event, occurrence, effect, condition, circumstance, or development that, individually or in the aggregate with all other changes, events, occurrences, effects, conditions, circumstances, or developments, has had or would reasonably be expected to have a material adverse effect on the business, financial condition, assets, liabilities, or results of operations of the Business, taken as a whole; provided, however, that none of the following, either alone or in combination, 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, currency, capital, or securities market conditions (including changes in interest rates or exchange rates); (ii) changes affecting the book publishing, periodical publishing, or educational content industries generally; (iii) changes in applicable Law, regulations, or GAAP (or authoritative interpretations thereof); (iv) natural disasters, epidemics, pandemics, public health emergencies (including COVID-19 and its variants), or governmental actions taken in response thereto; (v) acts of war (whether or not declared), sabotage, terrorism, civil unrest, cyberattacks, or the escalation or worsening thereof; any failure by the Business to meet any internal or published projections, budgets, forecasts, or estimates of revenue, earnings, or other financial metrics for any period (it being understood that the underlying giving rise to any such failure may be taken into account in determining whether a Material Adverse Effect has occurred); provided, further, that, in the case of clauses (i) through (v), such changes, events, occurrences, effects, conditions, circumstances, or developments shall be taken into account in determining whether a Material Adverse Effect has occurred to the extent that they have a disproportionate adverse effect on the Business, taken as a whole, relative to other participants in the industries and geographic markets in which the Business operates.
"Material Contract" means any Contract that is required to be listed on Schedule 3.8 in accordance with the terms of Section 3.8.
"MDS" means Meridian Distribution Services Inc., a Delaware corporation (file no. 4736201), a wholly owned Subsidiary of the Company.
"Membership Interests" means one hundred percent (100%) of the issued and outstanding membership interests of the Company, as more particularly described in the Company's amended and restated limited liability company agreement.
"Net Working Capital" or "NWC" means, as of 12:01 a.m. Eastern Time on the Closing Date, (a) the current assets of the Company and its Subsidiaries (excluding Closing Cash), minus (b) the current liabilities of the Company and its Subsidiaries (excluding (i) the current portion of any Closing Indebtedness and (ii) Transaction Expenses), in each case calculated in accordance with GAAP applied on a basis consistent with the preparation of the Financial Statements, and in accordance with the specific accounting principles, methodologies, policies, practices, categorizations, classifications, judgments, and procedures set forth on Schedule 1.1(a). Net Working Capital shall include only the categories and line items set forth on Schedule 1.1(a), and the determination thereof shall not give effect to any purchase accounting adjustments or other changes in accounting principles, methodologies, or practices arising from or relating to the transactions contemplated by this Agreement.
"Neutral Accountant" means Kensington Forensic Advisors LLP, or such other nationally recognized independent accounting firm as may be mutually agreed by Seller and Buyer; provided that neither Pemberton Graves LLP (the auditor of the Financial Statements) nor Whitecliff & Harding LLP (Buyer's accounting advisor) shall serve in such capacity.
"Non-Competition Agreement" means the Non-Competition and Non-Solicitation Agreement to be entered into at Closing by Seller, Seller Parent, and Buyer, substantially in the form of Exhibit B attached hereto.
"NWC Adjustment" has the meaning set forth in Section 2.2.
"NWC Target" means $145,000,000.
"Order" means any order, writ, judgment, injunction, decree, stipulation, ruling, determination, or award entered by or with any Governmental Authority.
"Outside Date" has the meaning set forth in Section 9.1(b).
"Owned Real Property" means the real property owned by the Company or any of its Subsidiaries, as listed on Schedule 3.9(a).
"Permitted Liens" means (a) Liens for Taxes, assessments, and other governmental charges not yet due and payable, or being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP, (b) mechanics', carriers', workmen's, repairmen's, or other like Liens arising or incurred in the ordinary course of business, (c) pledges or deposits to secure the performance of bids, trade contracts, leases, statutory obligations, or surety or appeal bonds, or to secure indemnity, performance, or other similar bonds in the ordinary course of business, (d) easements, covenants, rights-of-way, restrictions, and other similar encumbrances of record that do not, individually or in the aggregate, materially interfere with the use or operation of the properties or assets of the Company and its Subsidiaries, (e) zoning, building code, and land use laws, ordinances, and regulations of any Governmental Authority, and (f) Liens arising under applicable securities laws.
"Person" means any individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, Governmental Authority, or other entity.
"Pre-Closing Tax Period" means any taxable period (or portion thereof) ending on or before the Closing Date.
"Post-Closing Tax Period" means any taxable period (or portion thereof) beginning after the Closing Date.
"R&W Insurance Policy" means the buy-side representations and warranties insurance policy to be obtained by Buyer in accordance with Section 6.7.
"Section 338(h)(10) Election" has the meaning set forth in Section 6.9(a).
"Section 338(h)(10) Election Agreement" means the Section 338(h)(10) Election Agreement to be entered into at Closing by Seller and Buyer, substantially in the form of Exhibit E attached hereto.
"Seller" means Aurelius Media Holdings Inc., a Delaware corporation (file no. 5987324).
"Seller Indemnified Parties" means Seller, Seller Parent, and their respective Affiliates and their respective officers, directors, employees, agents, successors, and assigns.
"Seller Parent" means Aurelius Global Media Group PLC, a public limited company organized under the laws of England and Wales (Companies House No. 08431276), the indirect parent of Seller, whose ordinary shares are listed on the London Stock Exchange (ticker: AUR) and whose American depositary receipts are listed on the Nasdaq Global Select Market (ticker: AURMF).
"Straddle Period" means any taxable period that begins on or before and ends after the Closing Date.
"Subsidiaries" means, collectively, MDS, Bellweather, Foxglove, and the Canadian Subsidiary, and "Subsidiary" means any one of them.
"Target Closing Date" means November 8, 2024.
"Tax" or "Taxes" means (a) any and all federal, state, provincial, local, foreign, or other taxes, duties, imposts, levies, assessments, fees, or charges of any kind whatsoever, including income, gross receipts, profits, windfall profits, capital gains, franchise, license, occupation, alternative or add-on minimum, estimated, excise, sales, use, goods and services, harmonized sales, value-added, transfer, real property, personal property (tangible and intangible), stamp, documentary, registration, social security (or similar), unemployment, disability, payroll, employment, withholding, environmental, and any other taxes, duties, or charges, together with (b) all interest, penalties, and additions to tax imposed with respect thereto, and (c) any liability in respect of the foregoing as a result of transferee or successor liability, by contract, assumption, or operation of Law.
"Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
"Transaction Documents" means this Agreement, the Escrow Agreement, the TSA, the Trademark License Agreement, the Non-Competition Agreement, the Section 338(h)(10) Election Agreement, the Assignment of Membership Interests, and each other agreement, document, certificate, or instrument executed and delivered in connection with the transactions contemplated hereby.
"Transaction Expenses" means all fees, costs, and expenses incurred by or on behalf of the Company or any of its Subsidiaries (or that are payable by the Company or any of its Subsidiaries) in connection with the negotiation, execution, and consummation of the transactions contemplated by this Agreement, including (a) fees and expenses of legal counsel, financial advisors, accountants, and other advisors and consultants, (b) , (c) any filing fees payable by or allocated to the Company or its Subsidiaries, and (d) all other out-of-pocket costs and expenses. For illustrative purposes only, Transaction Expenses are estimated at $4,700,000 as of the date of this Agreement.
"Trademark License Agreement" means the Trademark License Agreement to be entered into at Closing between Buyer (as licensor) and Seller (as licensee), substantially in the form of Exhibit C attached hereto.
"Transfer Taxes" has the meaning set forth in Section 6.9(c).
"TSA" or "Transition Services Agreement" means the Transition Services Agreement to be entered into at Closing between Seller (or an Affiliate of Seller) and Buyer (or an Affiliate of Buyer), substantially in the form of Exhibit D attached hereto.
Section 1.2 — Interpretation
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," and "Exhibit" refer to the specified Article, Section, Schedule, or Exhibit of or to this Agreement, unless otherwise specified; (e) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation," unless otherwise specified; (f) the word "or" shall not be exclusive; (g) references to agreements and other documents shall be deemed to include all subsequent amendments, restatements, supplements, and other modifications thereto; (h) references to statutes shall include all regulations promulgated thereunder and references to statutes or regulations shall be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing, or interpreting the statute or regulation; (i) the headings and captions used in this Agreement, in any table of contents of this Agreement, and in any Exhibit or Schedule are for convenience of reference only and shall not affect the construction or interpretation of this Agreement; (j) in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including," the words "to" and "until" each mean "to but excluding," and the word "through" means "to and including"; (k) 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; (l) all references to the laws of the State of Delaware shall be deemed to refer to the Delaware Limited Liability Company Act, the Delaware General Corporation Law, and other applicable Delaware laws, as the context requires; (m) all monetary amounts set forth herein are expressed in United States Dollars unless otherwise stated; and (n) the parties have participated jointly in the negotiation and drafting of this Agreement, and in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by all parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.
ARTICLE II — PURCHASE AND SALE; CLOSING
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, acquire, and accept from Seller, all of Seller's right, title, and interest in and to one hundred percent (100%) of the Membership Interests in Meridian Press Holdings LLC, free and clear of all Liens (other than Permitted Liens and restrictions on transfer arising under applicable federal and state securities laws and the organizational documents of the Company). In consideration for the sale, assignment, transfer, conveyance, and delivery of the Membership Interests, Buyer shall pay to Seller (and to the Escrow Agent on behalf of Seller) the Estimated Equity Purchase Price, as adjusted following the Closing pursuant to Section 2.5.
Section 2.2 — Enterprise Value and Equity Purchase Price Calculation
The Enterprise Value is fixed at $480,000,000, which reflects an implied multiple of 5.0x the Adjusted EBITDA of the Business for the twelve months ended December 31, 2023. The Equity Purchase Price shall be calculated as follows:
Equity Purchase Price = Enterprise Value minus Closing Indebtedness plus Closing Cash minus Transaction Expenses plus or minus the NWC Adjustment.
The "NWC Adjustment" shall be calculated as follows: (a) if the Net Working Capital as finally determined exceeds the NWC Target, then the amount of such excess shall be added to the Equity Purchase Price; and (b) if the Net Working Capital as finally determined is less than the NWC Target, then the amount of such shortfall shall be subtracted from the Equity Purchase Price.
For illustrative purposes only, and without limiting or modifying the foregoing, the following sets forth the estimated calculation of the Equity Purchase Price based on management's good faith estimates as of the date of this Agreement:
The foregoing illustrative calculation is set forth solely for the convenience of the parties and shall not be deemed to establish or limit the amounts used in the Estimated Closing Statement or the Final Closing Statement, each of which shall be prepared in accordance with the terms and procedures set forth in Sections 2.4 and 2.5, respectively.
Section 2.3 — Closing
The closing of the transactions contemplated by this Agreement (the "Closing") shall take place remotely by electronic exchange of documents and signatures through counsel for the parties on the Target Closing Date (November 8, 2024), or on such other date as Seller and Buyer may mutually agree in writing, subject to the satisfaction or waiver (to the extent permitted by applicable Law) of each of the conditions set forth in Article VII (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions at such time). The date on which the Closing actually occurs is referred to herein as the "Closing Date." At the Closing, all proceedings to be taken and all documents to be executed and delivered by all parties shall be deemed to have been taken, executed, and delivered simultaneously, and no proceeding shall be deemed taken nor any document executed or delivered until all have been taken, executed, and delivered.
Section 2.4 — Estimated Closing Statement
Not later than 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: (a) Closing Cash; (b) Closing Indebtedness (itemized to separately identify the principal amount and accrued interest on the Intercompany Note, capital lease obligations, and any other components); (c) Transaction Expenses (itemized by payee and amount); (d) Net Working Capital; and (e) the resulting Estimated Equity Purchase Price (the "Estimated Equity Purchase Price"), each calculated in accordance with the definitions set forth in Section 1.1 and the accounting principles, methodologies, policies, practices, and procedures set forth on Schedule 1.1(a). The Estimated Closing Statement shall be prepared in accordance with GAAP applied on a basis consistent with the preparation of the Financial Statements and the accounting principles set forth on Schedule 1.1(a), and shall include reasonable supporting detail for each line item. Seller shall provide Buyer and its advisors (including Whitecliff & Harding LLP) with reasonable access to the working papers and supporting documentation used in the preparation of the Estimated Closing Statement, and Buyer shall have a reasonable opportunity to review the Estimated Closing Statement and to provide comments thereon prior to the Closing Date, which Seller shall consider in good faith; provided, however, that the Estimated Closing Statement as delivered by Seller shall be used for purposes of determining the Estimated Equity Purchase Price to be paid at Closing, and any disagreements between the parties regarding the Estimated Closing Statement shall be resolved through the post-closing adjustment process set forth in Section 2.5.
Section 2.5 — Post-Closing Adjustment
Section 2.5(a) — Buyer's Closing Statement
Within calendar days after the Closing Date , Buyer shall prepare and deliver to Seller a written statement (the "Final Closing Statement") setting forth Buyer's determination of (i) Closing Cash, (ii) Closing Indebtedness, (iii) Transaction Expenses, (iv) Net Working Capital, and (v) the resulting Equity Purchase Price (the "Final Equity Purchase Price"), each calculated in accordance with the definitions set forth in Section 1.1 and the accounting principles, methodologies, policies, practices, and procedures set forth on Schedule 1.1(a), and in accordance with GAAP applied on a basis consistent with the preparation of the Financial Statements. Buyer shall provide Seller and its advisors with reasonable access to the working papers and supporting documentation used in the preparation of the Final Closing Statement.
Section 2.5(b) — Dispute Period
Seller shall have calendar days after receipt of the Final Closing Statement (the "Dispute Period") to review the Final Closing Statement. If Seller disagrees with any item or amount set forth in the Final Closing Statement, Seller shall, prior to the expiration of the Dispute Period, deliver to Buyer a written notice of disagreement (the "Dispute Notice"), which shall specify in reasonable detail each item and amount in dispute, the basis for such disagreement, and the amounts that Seller asserts are correct. Any item or amount set forth in the Final Closing Statement that is not specifically disputed in the Dispute Notice shall be deemed accepted by Seller and shall be final and binding on the parties for all purposes under this Agreement. If Seller does not deliver a Dispute Notice within the Dispute Period, the Final Closing Statement as delivered by Buyer shall be deemed accepted by Seller and shall be final and binding on the parties.
Section 2.5(c) — Resolution of Disputes
If a Dispute Notice is timely delivered, Seller and Buyer shall, during the thirty (30) calendar day period following the delivery of the Dispute Notice (the "Resolution Period"), attempt in good faith to resolve each of the items and amounts in dispute. If Seller and Buyer are unable to resolve all disputed items within the Resolution Period, then either party may, by written notice to the other party delivered within ten (10) Business Days after the expiration of the Resolution Period, refer all remaining disputed items (and only such items) to the Neutral Accountant (Kensington Forensic Advisors LLP). The Neutral Accountant shall act as an expert and not as an arbitrator and shall consider only those items and amounts that remain in dispute and that were properly included in the Dispute Notice. The Neutral Accountant shall make its determination in accordance with the definitions set forth in Section 1.1 and the accounting principles, methodologies, policies, practices, and procedures set forth on Schedule 1.1(a) and shall resolve each disputed item within the range of values proposed by Seller, on the one hand, and Buyer, on the other hand (i.e., the Neutral Accountant may not assign a value for any disputed item that is greater than the higher value proposed by either party or less than the lower value proposed by either party). Each of Seller and Buyer shall be entitled to make one written submission to the Neutral Accountant setting forth its position with respect to the disputed items, together with supporting documentation, within fifteen (15) calendar days after the engagement of the Neutral Accountant. The Neutral Accountant shall deliver its final and binding written determination to each of Seller and Buyer within thirty (30) calendar days after its engagement. The determination of the Neutral Accountant shall be final and binding on the parties and shall not be subject to appeal or review. The fees and expenses of the Neutral Accountant shall be allocated between Seller and Buyer based on the relative success of each party, such that the party whose aggregate positions on the disputed items are further from the Neutral Accountant's determination shall bear a proportionately greater share of such fees and expenses. Specifically, the fees and expenses shall be allocated such that Buyer shall bear a fraction equal to (A) the absolute value of the aggregate difference between the Neutral Accountant's determination and Buyer's position on all disputed items, divided by (B) the absolute value of the aggregate difference between Seller's position and Buyer's position on all disputed items, and Seller shall bear the remainder.
Section 2.5(d) — Post-Closing Payment
Promptly upon the final determination of the Final Equity Purchase Price (whether by Seller's acceptance or deemed acceptance of the Final Closing Statement, by the agreement of the parties, or by the determination of the Neutral Accountant), the following adjustment payments shall be made:
(a) If the Final Equity Purchase Price exceeds the Estimated Equity Purchase Price, Buyer shall pay to Seller an amount equal to such excess, by wire transfer of immediately available funds to an account designated by Seller, within five (5) Business Days after such final determination. Such payment shall bear simple interest from the Closing Date to the date of payment at a rate equal to the in effect on the Closing Date.
(b) If the Final Equity Purchase Price is less than the Estimated Equity Purchase Price, Seller shall pay to Buyer an amount equal to such shortfall within five (5) Business Days after such final determination, by wire transfer of immediately available funds to an account designated by Buyer. Such payment shall be satisfied first from the Escrow Account in accordance with the terms of the Escrow Agreement, and, to the extent the balance in the Escrow Account is insufficient to satisfy such payment in full, Seller shall pay the remaining amount directly to Buyer by wire transfer of immediately available funds. Such payment shall bear simple interest from the Closing Date to the date of payment at a rate equal to the in effect on the Closing Date.
Section 2.6 — Payment at Closing
Section 2.6(a) — Payment of Estimated Equity Purchase Price
At the Closing, Buyer shall pay or cause to be paid the following amounts:
(i) To Seller, an amount equal to the Estimated Equity Purchase Price minus the Escrow Amount (which net cash payment to Seller is estimated at based on the illustrative calculation set forth in Section 2.2, calculated as $418,000,000 minus ), by wire transfer of immediately available funds to an account or accounts designated by Seller in a written notice to Buyer delivered not later than two (2) Business Days prior to the Closing Date.
(ii) To the Escrow Agent, an amount equal to the Escrow Amount ( ), by wire transfer of immediately available funds to the Escrow Account, to be held, invested, and disbursed by the Escrow Agent in accordance with the terms and conditions of the Escrow Agreement.
Section 2.6(b) — Repayment of Intercompany Note
At or prior to the Closing, the Intercompany Note (in the principal amount of $50,000,000, together with all accrued and unpaid interest thereon) shall be repaid in full and cancelled, and all Liens related thereto shall be released and discharged. Seller shall deliver to Buyer at the Closing a payoff letter and lien release, in form and substance reasonably satisfactory to Buyer , evidencing the repayment and cancellation of the Intercompany Note and the release of all related Liens. The repayment of the Intercompany Note shall be reflected as a component of Closing Indebtedness for purposes of the calculation of the Equity Purchase Price.
Section 2.6(c) — Payment of Transaction Expenses
At the Closing, the Transaction Expenses (estimated at $4,700,000) shall be paid by the Company (or by Buyer on behalf of the Company) to the payees and in the amounts set forth on the Estimated Closing Statement. Seller shall deliver to Buyer, together with the Estimated Closing Statement, wire transfer instructions and payoff letters (to the extent applicable) for each payee of Transaction Expenses.
Section 2.7 — Withholding
Buyer, the Company, and the Escrow Agent shall be entitled to deduct and withhold from the amounts otherwise payable to any Person pursuant to this Agreement such amounts as are required to be deducted and withheld with respect to the making of such payment under the Code, or any applicable provision of federal, state, local, or foreign Tax Law. To the extent that amounts are so deducted or withheld and timely remitted to the applicable Governmental Authority, such 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 anticipated withholding (other than withholding with respect to compensation payments) and shall cooperate with Seller in good faith to minimize or eliminate any such withholding to the extent permitted by applicable Law.
ARTICLE III — REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the corresponding section of the Disclosure Schedules (it being agreed that disclosure of any item in any section or subsection of the Disclosure Schedules shall be deemed disclosure with respect to any other section or subsection of this Article III to which the relevance of such item is reasonably apparent on the face of such disclosure), Seller hereby represents and warrants to Buyer as of the date hereof and as of the Closing Date as follows:
Section 3.1 — Organization and Good Standing
(a) The Company is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware (Secretary of State file no. 4521889). The Company has all requisite limited liability company power and authority to own, lease, and operate its properties and to carry on the Business as presently conducted. The Company is duly qualified or licensed to do business and is in good standing (or its equivalent) in each jurisdiction in which the nature of the Business as presently conducted or the character or location of the properties owned, leased, or operated by it requires such qualification or licensing, except where the failure to be so qualified, licensed, or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Schedule 3.1(a) lists each jurisdiction in which the Company is qualified or licensed to do business.
(b) Each Subsidiary is duly organized, validly existing, and in good standing (or its equivalent, where applicable) under the laws of its jurisdiction of organization, as follows:
(i) Meridian Distribution Services Inc. — a corporation organized under the laws of the State of Delaware (Secretary of State file no. 4736201);
(ii) Bellweather Academic Press Inc. — a corporation organized under the laws of the State of Delaware (Secretary of State file no. 4801133);
(iii) Foxglove Media LLC — a limited liability company organized under the laws of the State of New York; and
(iv) Meridian Press Canada ULC — an unlimited liability company organized under the laws of the Province of British Columbia, Canada.
Each Subsidiary has all requisite organizational power and authority to own, lease, and operate its properties and to carry on its business as presently conducted. Each Subsidiary is duly qualified or licensed to do business and is in good standing (or its equivalent) in each jurisdiction in which the nature of its business or the character or location of its properties requires such qualification or licensing, except where the failure to be so qualified, licensed, or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Schedule 3.1(b) lists each jurisdiction in which each Subsidiary is qualified or licensed to do business.
(c) Seller has made available to Buyer true and complete copies of the certificate of formation, limited liability company agreement, certificate of incorporation, bylaws, articles of organization, operating agreement, and other applicable organizational documents of the Company and each Subsidiary, each as in effect as of the date hereof, and none of the Company or any Subsidiary is in violation of any provision of its organizational documents.
Section 3.2 — Authority; Binding Effect
(a) Seller has full corporate power and authority to execute and deliver this Agreement and each Transaction Document to which Seller is a party, to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Seller of this Agreement and each Transaction Document to which Seller is a party, and the performance by Seller of its obligations hereunder and thereunder, have been duly and validly authorized by all necessary corporate action on the part of Seller, including the approval of the Board of Directors of Aurelius Media Holdings Inc. by unanimous written consent dated May 22, 2024. No other corporate proceedings on the part of Seller are necessary to authorize the execution, delivery, and performance of this Agreement and the other Transaction Documents to which Seller is a party or to consummate the transactions contemplated hereby and thereby.
(b) This Agreement has been duly and validly executed and delivered by Seller and, assuming the due authorization, execution, and delivery hereof by Buyer and the other parties hereto, constitutes a legal, valid, and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and similar Laws affecting creditors' rights and remedies generally and to general principles of equity (whether applied in a proceeding at law or in equity) (the "Enforceability Exceptions").
Section 3.3 — Capitalization
(a) The Membership Interests constitute one hundred percent (100%) of the issued and outstanding equity interests of the Company. All of the Membership Interests have been duly authorized and validly issued in accordance with the organizational documents of the Company and applicable Law and are fully paid and non-assessable (to the extent applicable under the Delaware Limited Liability Company Act).
(b) Seller is the sole member of the Company and the record and beneficial owner of one hundred percent (100%) of the Membership Interests, free and clear of all Liens, other than (i) Permitted Liens, (ii) restrictions on transfer set forth in the Company's amended and restated limited liability company agreement, and (iii) restrictions on transfer arising under applicable federal and state securities laws. Upon consummation of the transactions contemplated hereby, Buyer will acquire good and valid title to the Membership Interests, free and clear of all Liens other than Permitted Liens and restrictions arising under applicable securities laws.
(c) The Company owns, directly or indirectly, one hundred percent (100%) of the issued and outstanding equity interests of each Subsidiary, free and clear of all Liens other than Permitted Liens and restrictions arising under applicable securities laws. There are no other direct or indirect Subsidiaries of the Company.
(d) There are no outstanding options, warrants, rights, calls, commitments, conversion rights, rights of exchange, plans, or other agreements of any character providing for the purchase, issuance, or sale of any equity interests of the Company or any Subsidiary. There are no outstanding phantom equity, profit interests, stock appreciation rights, equity-based compensation rights, or similar rights or arrangements with respect to the Company or any Subsidiary. There are no voting trusts, member agreements, proxies, or other agreements or understandings in effect with respect to the voting or transfer of any equity interests of the Company or any Subsidiary.
Section 3.4 — No Conflicts; Consents
(a) Except as set forth on Schedule 3.4, the execution, delivery, and performance by Seller of this Agreement and each Transaction Document to which Seller is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (i) violate, conflict with, or result in a breach of any provision of the organizational documents of Seller, the Company, or any Subsidiary; (ii) violate, conflict with, or result in a breach of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination or cancellation of, or the creation of any Lien on any of the properties or assets of the Company or any Subsidiary under, or give rise to any right of termination, acceleration, or cancellation under, any Material Contract or any material permit, license, or authorization to which the Company or any Subsidiary is a party or by which any of their respective properties or assets is bound; or (iii) violate any Law or Order applicable to the Company or any Subsidiary or their respective properties or assets.
(b) Except as set forth on Schedule 3.4, no consent, approval, authorization, license, Order, filing, registration, or notification is required to be obtained by Seller, the Company, or any Subsidiary from, or made with, any Governmental Authority or any other Person in connection with the execution, delivery, and performance of this Agreement and the Transaction Documents or the consummation of the transactions contemplated hereby and thereby, other than: (i) the filing of a notification and report form under the HSR Act and the expiration or early termination of the applicable waiting period thereunder; (ii) notification to the Commissioner of Competition under the Competition Act (Canada) and receipt of clearance thereunder; (iii) the third-party consents identified on Schedule 3.4, including (A) consent of Oakbridge Holdings Ltd. under the Oakbridge Distribution Alliance Agreement, (B) consents under five (5) major author and content license agreements, and (C) consents of landlords under four (4) of the ten (10) Leased Real Property leases; and (iv) such other filings, registrations, or notifications as may be required under applicable state or provincial securities or "blue sky" laws.
Section 3.5 — Financial Statements
(a) Seller has made available to Buyer true and complete copies of: (i) the audited carve-out financial statements of the Business (consisting of the combined balance sheets and the related combined statements of income, comprehensive income, changes in parent's net investment, and cash flows, together with the notes thereto) for each of the fiscal years ended December 31, 2021, December 31, 2022, and December 31, 2023 (the "Audited Financial Statements"), audited by Pemberton Graves LLP, with the audit engagement led by partner Robert Ainsley; and (ii) the unaudited interim carve-out financial statements of the Business (consisting of the combined balance sheet as of March 31, 2024 and the related combined statements of income and cash flows) for the three months ended March 31, 2024 (the "Interim Financial Statements" and, together with the Audited Financial Statements, the "Financial Statements").
(b) The Financial Statements (i) were prepared in accordance with GAAP (subject to, in the case of the Interim Financial Statements, normal year-end adjustments, which are not material, individually or in the aggregate, and the absence of footnotes), applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto), and (ii) fairly present the financial condition, results of operations, and cash flows of the Business as of the dates and for the periods indicated therein. The carve-out financial statements were prepared in accordance with the carve-out methodology described in the notes thereto, which methodology is consistent with the guidance set forth in SEC Staff Accounting Bulletin Topic 1.B and applicable GAAP guidance.
(c) For the fiscal year ended December 31, 2023, the Business generated revenue of approximately $1,140,000,000 and Adjusted EBITDA of approximately $96,000,000, representing an Adjusted EBITDA margin of approximately 8.4%.
(d) The Company and its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, and (iii) access to assets is permitted only in accordance with management's general or specific authorization.
Section 3.6 — Absence of Undisclosed Liabilities
Neither the Company nor any of its Subsidiaries has any liabilities or obligations of the type required to be reflected on, reserved against, or otherwise described in a balance sheet prepared in accordance with GAAP, except for (a) liabilities and obligations reflected, reserved against, or disclosed in the Financial Statements (including the notes thereto), (b) liabilities and obligations incurred since March 31, 2024 in the ordinary course of business consistent with past practice ( ), (c) liabilities and obligations arising under or in connection with this Agreement and the transactions contemplated hereby, and (d) liabilities and obligations set forth on Schedule 3.6.
Section 3.7 — Absence of Certain Changes
(a) Since December 31, 2023 through , (i) the Business has been conducted in the ordinary course consistent with past practice in all material respects, and (ii) there has not been any event, occurrence, development, or state of circumstances that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(b) Without limiting the generality of the foregoing, since December 31, 2023 through , except as set forth on Schedule 3.7 or as otherwise expressly contemplated by this Agreement, neither the Company nor any of its Subsidiaries has:
(i) acquired any business or Person (whether by merger, consolidation, purchase of assets or equity, or otherwise) in any transaction or series of related transactions with a value in excess of $2,500,000;
(ii) sold, transferred, assigned, leased, licensed, or otherwise disposed of any material assets or properties, other than in the ordinary course of business consistent with past practice;
(iii) made or committed to make any capital expenditure or capital expenditures in excess of $5,000,000 in the aggregate outside the approved capital budget made available to Buyer;
(iv) incurred any Indebtedness in excess of $2,500,000 individually or $5,000,000 in the aggregate;
(v) made any material change in any method of accounting or accounting practice, policy, or procedure used by the Company or any Subsidiary, except as required by GAAP or applicable Law;
(vi) amended or otherwise modified any Employee Benefit Plan or materially increased the compensation or benefits payable to any employee, officer, or director of the Company or any Subsidiary, except as required by existing agreements, plans, or arrangements or in the ordinary course of business consistent with past practice;
(vii) declared, set aside, or paid any dividend or distribution on, or made any redemption, purchase, or other acquisition of, any equity interests of the Company, other than tax distributions made in the ordinary course of business consistent with past practice;
(viii) amended or modified the organizational documents of the Company or any Subsidiary;
(ix) made, changed, or revoked any material Tax election, filed any amended Tax Return, entered into any closing agreement with a Governmental Authority regarding Taxes, settled or compromised any material Tax claim, assessment, or liability, or surrendered any right to claim a material Tax refund;
(x) entered into, amended, modified, extended, or terminated any Material Contract, other than in the ordinary course of business consistent with past practice;
(xi) settled any litigation, claim, or proceeding in excess of $1,000,000 individually or involving any injunctive or non-monetary relief;
(xii) issued, sold, pledged, or otherwise encumbered any equity interests of the Company or any Subsidiary;
(xiii) experienced any material damage, destruction, or casualty loss to any material asset, whether or not covered by insurance; or
(xiv) agreed, authorized, committed, or entered into any binding agreement to do any of the foregoing.
Section 3.8 — Material Contracts
(a) Schedule 3.8 sets forth a true and complete list of each of the following Contracts to which the Company or any Subsidiary is a party or by which any of their respective properties or assets is bound, as of the date hereof (each, a "Material Contract"):
(i) any Contract for the purchase or sale of goods or services involving annual payments or receipts in excess of ;
(ii) any Contract relating to Indebtedness (including the Intercompany Note);
(iii) any lease, sublease, or occupancy agreement for real property (other than Owned Real Property);
(iv) any partnership, joint venture, strategic alliance, or similar agreement, including the Oakbridge Distribution Alliance Agreement;
(v) any Contract containing non-competition, exclusivity, or most-favored-nation provisions that materially restrict the Business;
(vi) any Contract with a Governmental Authority;
(vii) any Contract involving the acquisition or disposition of any business or Person (or any material portion of the assets thereof) since January 1, 2021;
(viii) any collective bargaining agreement or other Contract with a labor union;
(ix) any Contract with any author, editor, or content provider involving minimum guarantee or advance payments in excess of $1,000,000;
(x) any material intellectual property license agreement (other than non-exclusive licenses granted in the ordinary course of business);
(xi) any other Contract that is material to the Business, taken as a whole
(b) Each Material Contract is a valid and binding obligation of the Company or the applicable Subsidiary that is a party thereto and, to Seller's Knowledge, of each other party thereto, and is in full force and effect. Neither the Company nor any Subsidiary that is a party to any Material Contract, nor, to Seller's Knowledge, any other party thereto, is in material breach or default under any Material Contract, and no event has occurred that, with notice or lapse of time or both, would constitute a material breach or default under any Material Contract.
(c) Seller has made available to Buyer true and complete copies of each Material Contract (including all amendments, supplements, and modifications thereto).
Section 3.9 — Real Property
Section 3.9(a) — Owned Real Property
Schedule 3.9(a) sets forth a true and complete list and description of all real property owned by the Company or any of its Subsidiaries (collectively, the "Owned Real Property"), including the following distribution center locations: