MEMBERSHIP INTEREST AND ASSET PURCHASE AGREEMENTLLC Membership Agreement |
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MEMBERSHIP INTEREST AND ASSET PURCHASE AGREEMENT
Among
VARSITY GROUP INC.,
CAMPUS OUTFITTERS, LLC,
CAMPUS TEXTBOOKS, LLC
and
THE SELLERS listed on the signature page hereof
Dated as of May 26, 2005
_______________________________________________
TABLE OF CONTENTS
Page
1. DEFINITIONS 1
1.1 Definitions 1
1.2 Interpretation 10
2. PURCHASE
AND SALE; CLOSING. 11
2.1 Purchase
and Sale of Campus Outfitters Assets 11
2.2 Purchase
and Sale of Textbooks Membership Interests 12
2.3 Purchase
Price 13
2.4 Closing
Date 16
2.5 Deliveries 16
2.6 Allocation 17
2.7 Expense
Reimbursement 17
3. ASSUMPTION
OF LIABILITIES. 17
3.1 Assumed
Campus Outfitters Liabilities 17
3.2 Excluded
Liabilities 17
4. SELLERS'
REPRESENTATIONS AND WARRANTIES 18
4.1 Organization
and Validity 18
4.2 Governmental
Consents 20
4.3 Financial
Statements, etc. 20
4.4 Change
in Condition Since December 31, 2004 20
4.5 Litigation 22
4.6 Licenses;
Compliance With Legal Requirements and Regulations 23
4.7 Title
to and Condition of Assets; Sufficiency of Assets 23
4.8 Taxes 23
4.9 Certain
Contracts 24
4.10 Intellectual
Property 26
4.11 Environmental
Matters 26
4.12 Employees 27
4.13 Warranties 27
4.14 Personal
and Real Property 27
4.15 Employee
Benefits 28
4.16 Purchase
Entirely for Own Account 29
4.17 Disclosure
of Information 29
4.18 Restricted
Securities 29
4.19 Legends 29
4.20 Removal
of Legend Upon Transfer 30
4.21 Receipt
of Quarterly Statement 30
4.22 Brokers 30
5. REPRESENTATIONS
AND WARRANTIES WITH RESPECT TO PURCHASER 30
5.1 Corporate
Matters 30
5.2 Financial
Condition 31
5.3 Litigation 31
5.4 Brokers 31
5.5 SEC
Reports and Financial Statements 31
6. CONDITIONS
TO CLOSING 32
6.1 Conditions
Precedent to Obligations of Purchaser 32
6.2 Conditions
Precedent to Obligations of Sellers 33
7. CERTAIN
COVENANTS 34
7.1 Liability
for Transfer Taxes 34
7.2 Access
to Information 34
7.3 Operation
of the Acquired Business Prior to Closing 35
7.4 Consents 37
7.5 No
Solicitation 37
7.6 Books
and Records 38
7.7 Covenant
Not to Compete; Non-Solicitation 38
7.8 Non-Solicitation 39
7.9 Employees 39
8. MUTUAL
COVENANTS 41
8.1 Further
Assurances 41
8.2 Further
Actions Regarding Purchased Assets 41
8.3 Access
to Information and Personnel 41
8.4 Taxes 42
8.5 Collection
of Accounts Receivable and Payment to Sellers 43
8.6 Assignment
of Fidelity Note 43
9. TERMINATION 43
9.1 Termination 43
9.2 Effect
of Termination 44
9.3 Closing
Deadline 44
10. SURVIVAL;
INDEMNIFICATION 44
10.1 Survival 44
10.2 Indemnification
by Purchaser 44
10.3 Indemnification
by the Sellers 45
10.4 Indemnification
Process 45
10.5 Limitation
on Indemnification 48
10.6 Tax
Treatment 48
11. GENERAL
PROVISIONS 48
11.1 Governing
Law; Jurisdiction 48
11.2 Notices 49
11.3 Exhibits 50
11.4 Entire
Agreement, Binding Effect 50
11.5 Headings 50
11.6 Expenses;
Expense Reimbursement 50
11.7 Amendment 50
11.8 Waiver 50
11.9 Time of
the Essence 51
11.10 Assignment 51
11.11 Specific
Performance 51
11.12 No Third Party
Beneficiary 51
11.13 Severability 51
11.14 Counterparts;
Signatures 51
11.15 Schedules 51
MEMBERSHIP INTEREST AND ASSET
PURCHASE AGREEMENT
THIS MEMBERSHIP INTEREST AND ASSET PURCHASE AGREEMENT (this "Agreement") is dated as of May 26, 2005, among Varsity Group Inc., a Delaware corporate (the "Purchaser"), Campus Outfitters, LLC, a Maryland limited liability company ("Campus Outfitters"), Campus Textbooks, LLC, a Maryland limited liability company ("Campus Textbooks") and the individuals listed on the signature pages hereto.
RECITALS
WHEREAS, certain of the individuals listed on the signature pages hereto (the "Campus Textbooks Sellers") together own beneficially and of record all of the limited liability company membership interests of Campus Textbooks (the "Campus Textbooks Membership Interests");
WHEREAS, certain of the individuals listed on the signature pages hereto (the "Campus Outfitters Sellers", and, together with the Campus Textbooks Sellers, the "Sellers") together hold own all of the limited liability company membership interests of Campus Outfitters;
WHEREAS, Campus Outfitters owns all of the Campus Outfitters Assets;
WHEREAS, the Sellers wish to sell to Purchaser, and Purchaser wishes to purchase from the Sellers the Campus Textbooks Membership Interests upon the terms and subject to the conditions set forth herein; and
WHEREAS, the Sellers wish to cause Campus Outfitters sell to Purchaser, and Purchaser wishes to purchase from Campus Outfitters the Campus Outfitters Assets, and in connection therewith Purchaser is willing to assume the Assumed Campus Outfitters Liabilities, all upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual promises herein made, and in consideration of the representations, warranties and covenants herein contained, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows:
.
. For purposes of this Agreement, the following definitions shall apply:
. shall have the meaning specified in Section 4.3(a)(i) of this Agreement.
. shall have the meaning specified in Section 4.3(a)(ii) of this Agreement.
. shall have the meaning specified in Section 2.5(a)(iii) of this Agreement.
. shall mean the Acquired Campus Outfitters Business and the Acquired Campus Textbooks Business.
Acquired Campus
Outfitters Assets
. shall have the meaning specified in Section 2.1 of this Agreement.
Acquired Campus
Outfitters Assets Purchase Price Allocation
. shall have the meaning specified in Section 2.6 of this Agreement, and shall be as set forth on Schedule 2.6 to this Agreement.
Acquired Campus
Outfitters Business
. shall mean the business of marketing, distributing, servicing and selling school uniforms and related accessories, products and equipment operated by Campus Outfitters, and involving the Acquired Campus Outfitters Assets, prior to the Closing Date.
Acquired Campus
Textbooks Business
. shall mean the business of marketing and distributing, Textbooks or other educational accessories and equipment operated by Campus Textbooks prior to the Closing Date.
. shall have the meaning specified in Section 7.5 of this Agreement.
Action
. shall mean any claim, action, cause of action, litigation or suit (in contract, tort or otherwise), inquiry, proceeding, notice of noncompliance, demand letter, audit or investigation by or before any Governmental Authority, arbitrator or similar Person.
. shall mean, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.
. shall mean this Membership Interest and Asset Purchase Agreement.
. shall have the meaning specified in Section 2.6 of this Agreement.
. shall have the meaning specified in Section 11.10 of this Agreement.
Assumed Campus Outfitters Liabilities
. shall have the meaning specified in Section 3.1 of the Agreement.
. shall have the meaning specified in Section 4.15(a) of this Agreement.
. shall have the meaning specified in Section 2.5(a)(iii) of this Agreement.
. shall have the meaning specified in Section 2.1(b)(iii) of this Agreement.
. shall mean books, records, documents, lists, manuals, plans, files, data and other materials (in any form or medium) relating to the Acquired Business and the Purchased Assets, including, without limitation, advertising materials, drawings, catalogues, price lists, correspondence, mailing lists, lists of customers, distribution lists, price lists, photographs, production data, sales and promotional materials and records, purchasing materials, records and databases, personnel records, quality control records and procedures, blueprints, research and development files and media materials and plates, copies of accounting records, all original property Tax Returns relating to the Purchased Assets; copies of all other Tax Returns of each of Campus Textbooks and Campus Outfitters filed since each of their organization, and copies of current litigation files.
Business
. shall mean the businesses of Campus Textbooks and, with respect to the Acquired Campus Outfitters Assets, Campus Outfitters as such business is currently conducted and as proposed to be conducted.
. means any day, other than (i) a Saturday or Sunday, or (ii) any other day on which commercial banking institutions are permitted or required to be closed in the State of New York.
. shall have the meaning specified in Section 7.2 to this Agreement.
Campus Outfitters
. shall have the meaning specified in the Preamble to this Agreement.
Campus Outfitters Retained Assets
. shall have the meaning specified in Section 2.1(b) to this Agreement.
Campus Outfitters Sellers
. shall have the meaning specified in the Recitals to this Agreement.
Campus Textbooks
. shall have the meaning specified in the Preamble to this Agreement.
Campus Textbooks Membership Interests
. shall have the meaning specified in the Recitals to this Agreement.
Campus Textbooks Membership
Interests Allocation
. shall have the meaning specified in Section 2.6 of this Agreement, and shall be as set forth on Schedule 2.6 to this Agreement.
Campus Textbooks Sellers
. shall have the meaning specified in the Recitals to this Agreement.
Cash Payment
. shall have the meaning specified in Section 2.3(a)(i) of this Agreement.
Change of Control
. shall mean, with respect to Purchaser the occurrence of a merger, consolidation, share exchange, recapitalization, business combination, tender offer or exchange offer or other similar transaction involving a majority of the outstanding shares of Varsity Common Stock or a sale of all or substantially all of the assets of Purchaser to a third party.
. shall have the meaning specified in Section 2.3(c)(iii) of this Agreement.
. shall have the meaning specified in Section 2.3(c)(iii) of this Agreement.
. shall have the meaning specified in Section 10.4(a) of this Agreement.
. shall have the meaning specified in Section 10.4(a) of this Agreement.
. shall mean the closing of the transactions contemplated by this Agreement.
. shall mean the date specified in Section 2.4 of this Agreement.
. shall mean the date specified in Section 9.3 of this Agreement.
. shall mean the Internal Revenue Code of 1986, as amended.
. shall mean, together, Campus Textbooks and Campus Outfitters.
. shall have the meaning set forth in Section 7.7(b) of this Agreement.
Confidentiality Agreement
. shall mean that certain Confidentiality Agreement, dated as of April 29, 2005, and entered into by and among Varsity Group Inc., Campus Textbooks and Campus Outfitters.
. shall mean any consent, approval, authorization, waiver, permit, grant, franchise, concession, agreement, license, exemption or order of, registration, certificate, declaration or filing with, or report or notice to, any Person, including but not limited to any Governmental Authority.
. shall mean, with respect to any Person, any and all contracts or agreements, whether oral or written, including, but not limited to, customer contracts, development or developer agreements, work-for-hire agreements, franchise agreements, covenants not to compete, commitments, alliance agreements, purchase and sales orders, arrangements, employment agreements, subcontracting agreements, consulting agreements, leases, licenses, indentures, notes, bonds, deeds (or other evidence of indebtedness) and other agreements or contracts to which or by which such Person is legally bound.
. shall have the meaning specified in Section 10.2 of this Agreement.
Debt
. shall mean all obligations of a Person (i) for borrowed money including capitalized leases, (ii) evidenced by notes, bonds, debentures, letters of credit or similar instruments, (iii) under conditional sale, title retention or similar agreements or arrangements with respect to the deferred purchase price of property, and (iv) in the nature of guarantees of obligations of the type described in clauses (i), (ii) and (iii) above of any other Person.
. shall have the meaning specified in Section 10.4(a) of this Agreement.
. shall have the meaning set forth in Section 4 of this Agreement.
. shall have the meaning set forth in Section 7.9(b) of this Agreement.
. shall have the meaning set forth in Section 4.15(a) of this Agreement.
. shall mean the employees of Campus Textbooks and Campus Outfitters.
. shall mean all accusations, allegations, notices of violation, liens, claims, demands, suits, or causes of action for any damage, including, without limitation, personal injury or property damage, arising out of or related to Environmental Liabilities or Materials of Environmental Concern or pursuant to applicable Environmental Laws.
. shall mean all federal, state, local or foreign laws, regulations, ordinances or codes, without limitation, relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata), including, without limitation, Legal Requirements relating to emissions, discharges, releases or threatened releases of Materials of Environmental Concern, or to the generation, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern.
. shall mean any losses, damages, costs, expenses, liabilities, obligations and claims of any kind arising out of, based on, resulting from or relating to: (a) acts, omissions occurrences and circumstances forming the basis for any violation or alleged violation of Environmental Laws; (b) the presence, release, spill, emission, leaking, injection, deposit, disposal, dispersal, leaching or migration into the ambient air, surface water, ground water, land surface of subsurface strata of any Materials of Environmental Concern; or (c) the presence of any Materials of Environmental Concern at any property currently, or previously, owned or leased by any of the Companies which pose a threat to human health or the environment.
. shall have the meaning specified in Section 4.11(a) of this Agreement.
. of any Person shall mean (i) shares of capital stock, partnership or limited liability company interests or other equity securities of or interests in such Person, (ii) subscriptions, calls, warrants, options or commitments of any kind or character relating to, or entitling any Person to purchase or otherwise acquire, any such shares of capital stock, partnership or limited liability company interests or other equity securities of or interests in such Person, (iii) securities convertible into or exercisable or exchangeable for shares of capital stock, partnership or limited liability company interests or other equity securities of or interests in such Person, and (iv) stock options, equity equivalents, interests in the ownership or earnings of, or stock appreciation, phantom stock or other similar rights of, or with respect to, such Person.
. shall mean the Employee Retirement Income Security Act of 1974, as amended, and the regulations issued thereunder.
. shall have the meaning specified in Section 4.15(a) of this Agreement.
Excluded Campus Outfitters Liabilities
. shall have the meaning specified in Section 3.2 of this Agreement.
. shall mean the Securities Exchange Act of 1934, as amended, and the related rules and regulations promulgated thereunder by the SEC.
. shall have the meaning specified in Section 2.7 of this Agreement.
. shall have the meaning specified in Section 2.3(d) of this Agreement.
Financial Statements
. shall have the meaning specified in Section 4.3(a)(i) of this Agreement.
. shall mean United States generally accepted accounting principles as in effect from time to time.
. shall have the meaning specified in Section 4.1(a) of this Agreement.
. shall mean any federal, state or local or any foreign government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal or judicial body.
. shall have the meaning specified in Section 10.4 of this Agreement.
. shall have the meaning specified in Section 10.4 of this Agreement.
. shall mean any and all patents,
registered and unregistered copyrights, registered and unregistered trademarks
and service marks, trade names, all applications or registrations for any of
the foregoing, and trade names, brand marks, brand names, trade dress, logos,
Internet domain names and trade secrets.
. shall mean rights in and to the following: (i) registered and unregistered copyrights and derivative works thereof; (ii) pending and issued patents (including all provisionals, reissues, reexaminations, divisionals, continuations and continuations in-part); (iii) registered and unregistered trademarks (including pending applications); (iv) mask works, trade secrets; (v) design; (vi) moral and author rights; and (vii) all other Intellectual Property of any kind or nature.
Inventory
. shall mean all inventories of textbooks or uniforms or related equipment for sale in opened or unopened containers.
. shall mean the United States Internal Revenue Service.
. (and terms of similar import) shall mean the actual knowledge of Eric Kuhn and Jack Benson after reasonable inquiry.
. (and terms of similar import) shall mean the actual knowledge of Adam Hanin, Elliott Hanin and Adam Isaacson after reasonable inquiry.
. shall have the meaning specified in Section 2.3(e) of this Agreement.
. shall mean the Personalty Leases and the Real Property Leases.
. shall mean any federal, state, foreign or local statute, ordinance, code, rule or regulation, guidance, or any Governmental Order, or any license, franchise, consent, approval, permit or similar right granted under any of the foregoing.
Lien
. means any claim, lien, pledge, option, right of first refusal, easement, security interest, deed of trust, mortgage, right-of-way, encroachment, building or use, restrictive covenant or other encumbrance (including an option to purchase, right of first refusal or first offer), whether voluntarily incurred or arising by operation of law, and includes, without limitation, any agreement to give any of the foregoing in the future, and any contingent or conditional sale agreement or other title retention agreement or lease in the nature thereof.
Materials of Environmental Concern
. shall mean any substance or material that is on the Closing Date prohibited, regulated or defined as hazardous by any Governmental Authority under any Environmental Law including, without limitation, chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum, petroleum derivatives or other hydrocarbons, petroleum products, asbestos, PCBs, VOCs, SVOCs, dangerous substances, designated substances, controlled products or subject waste, all as defined in or pursuant to any Environmental Law.
. shall have the meaning specified in Section 6.1(g) of this Agreement.
. shall have the meaning specified in Section 7.7(a) of this Agreement.
. shall have the meaning specified in Section 7.7(a) of this Agreement.
. shall have the meaning specified in Section 2.3(e) of this Agreement.
Ordinary Course of Business
. shall mean the ordinary course of the business, consistent with past practices, of Campus Textbooks and Campus Outfitters, as the case may be.
. shall have the meaning specified in Section 7.7(b) of this Agreement.
. shall have the meaning specified in Section 4.15(a) of this Agreement.
. shall have the meaning specified in Section 2.3(a)(ii) of this Agreement.
. means (i) mechanic's, materialmen's and similar Liens with respect to any amounts not yet due and payable or which are being contested in good faith through appropriate proceedings and for which adequate reserves have been established in accordance with GAAP, (ii) Liens for Taxes not yet due and payable, (iii) Liens securing rental payments under capital lease agreements, (iv) Liens securing lease payments under leases or licenses for Leased Real Property, (v) Liens arising in favor of the United States government as a result of progress payment clauses contained in any Contract, and (vi) in the case of Real Property, (A) any matters, restrictions, covenants, conditions, limitations, rights, rights of way, encumbrances, encroachments, agreements and other matters of fact or record, (B) such state of fact or exceptions that an accurate survey or inspection of the Real Property would show, (C) present or future laws applicable to the Real Property, including the use or improvement thereof, and (D) matters affecting Real Property created by or with the written consent of Purchaser.
. shall mean a natural person, corporation, trust, partnership, limited liability company, governmental entity, agency or branch or department thereof, or any other legal entity.
Personalty Leases
. shall have the meaning specified in Section
4.14(a).
. shall have the meaning specified in Section 4.15(a).
. means any taxable year or period that begins after the Closing Date and, with respect to any Straddle Period, the portion of such Straddle Period beginning after the Closing Date.
. means any taxable year or period that ends on or
before the Closing Date and, with respect to any Straddle Period, the portion
of such Straddle Period ending on the Closing Date.
. shall have the meaning set forth in Section 8.4(c) of this Agreement.
Purchased Assets
. shall mean the Acquired Campus Outfitters Assets and all of the limited liability company membership interests of Campus Textbooks.
. shall have the meaning set forth in the Preamble to this Agreement.
. shall have the meaning specified in Section 10.3 of this Agreement.
. shall have the meaning specified in Section 5.5 of this Agreement.
. shall have the meaning specified in Section 4.14(c).
. shall have the meaning specified in Section 2.3(c)(i).
. means any officer, director, member, shareholder, partner, principal, attorney, agent, employee, banker, accountant, consultant or other representative.
. shall have the meaning specified in Section 2.3(e) of this Agreement.
. means the Securities and Exchange Commission.
. shall mean the Securities Act of 1933, as amended, and the related rules and regulations promulgated thereunder by the SEC.
. shall have the meaning set forth in the Recitals to this Agreement.
. shall have the meaning specified in Section 10.2 of this Agreement.
. shall have the meaning specified in Section 10.3 of this Agreement.
. shall have the meaning specified in Section 2.3(a)(ii) of this Agreement.
. means any taxable year or tax period that includes (but does not end on) the Closing Date.
. shall mean with respect to any Person, all taxes of any kind, levies or other like assessments, customs, duties, imposts or charges, including without limitation, income, gross receipts, ad valorem, value-added, excise, real or personal property, asset, sales, use, license, payroll, transaction, capital, net worth, franchise (if not based on income), estimated taxes, withholding, employment, social security, workers' compensation, utility, severance, production, unemployment compensation, occupation, premium, windfall profits, transfer and gains taxes or other governmental taxes imposed or payable to the United States, or any state, county, local or foreign government or subdivision or agency thereof, and in each instance such term shall include any interest, penalties or additions to tax attributable to any such Tax, whether disputed or not, for which such Person may be liable (including any such Tax related to any other Person for which such Person is liable pursuant to Treasury Regulation 1.1502-6 or any analogous state or local Tax provision, or as a successor, transferee, by contract or otherwise).
. shall mean all returns, declarations, reports, claims for refund and information returns and statements of any Person required to be filed or sent by or with respect to, or in respect of, any Taxes, including any schedule or attachment thereto and any amendment thereof.
. shall have the meaning specified in Section 7.5 of this Agreement.
. shall have the meaning specified in Section 10.4(a) of this Agreement.
. shall have the meaning specified in Section 2.3(a) of this Agreement.
. shall have the meaning specified in Section 7.1 of this Agreement.
. shall have the meaning specified in Section 7.9 of this Agreement.
. shall have the meaning specified in 2.3(c)(ii) of this Agreement.
Two Year Anniversary
Trading Price
. shall have the meaning specified in 2.3(c)(ii) of this Agreement.
Varsity Common Stock
. shall have the meaning specified in Section 2.3(a)(ii) of this Agreement.
Varsity Stock Recipient
. shall have the meaning specified in Section 2.3(b) of this Agreement.
. shall have the meaning specified in Section 4.15(a) of this Agreement.
. In this Agreement, unless the contrary intention appears:
- a reference to a Section, Schedule or Exhibit is a reference to a Section of, or Schedule or Exhibit to, this Agreement and references to this Agreement include any recital in, or Exhibit or Schedule to, this Agreement;
- any agreement referred to herein shall mean such agreement as amended, supplemented and modified as of the Closing Date to the extent permitted by the applicable provisions thereof, and shall include all exhibits, schedules, and other documents or agreements attached thereto;
- the singular includes the plural and vice versa; and
- whenever the words "include," "includes" or "including" are used in this Agreement, they are deemed to be followed by the words "without limitation."
- Each of Purchaser and Sellers and their respective counsel have reviewed and revised (or requested revisions of) this Agreement and have participated in the preparation of this Agreement, and therefore any usual rules of construction requiring that ambiguities are to be resolved against a particular party shall not be applicable in the construction and interpretation of this Agreement and any schedules and exhibits hereto.
- PURCHASE AND sale; CLOSING.
.
- Purchased Campus Outfitters Assets. Subject to and upon the terms and conditions set forth in this Agreement, and except as provided in Section 2.1(b) hereof, the Campus Outfitters Sellers shall, at the Closing, in accordance with all applicable Legal Requirements, cause Campus Outfitters to sell, transfer, assign, convey and deliver to Purchaser free and clear of all Liens (other than Permitted Liens) and Purchaser shall accept and acquire from the Campus Outfitters Sellers, all right, title and interest of Campus Outfitters in the properties, assets, and rights of every nature, kind and description, tangible and intangible (including goodwill), whether real, personal or mixed, whether accrued, contingent or otherwise and whether now existing or hereinafter acquired related to or used or held for use in connection with the Acquired Campus Outfitters Business, including, without limitation, all following categories of assets (collectively, the "Acquired Campus Outfitters Assets"):