AXR AMREP Corp

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

 

Date of Report (Date of earliest event reported):            February 9, 2015              

 

 

AMREP CORPORATION

(Exact name of Registrant as specified in its charter)

 

Oklahoma	1-4702	59-0936128
(State or other jurisdiction of	(Commission File	(IRS Employer
incorporation)	Number)	Identification No.)

 

300 Alexander Park, Suite 204, Princeton, New Jersey	08540
(Address of principal executive offices)	(Zip Code)

 

Registrant's telephone number, including area code:  (609) 716-8200

 

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions (see General Instruction A.2. below):

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

  

Item 1.01 Entry into a Material Definitive Agreement.

 

On February 9, 2015, American Investment Republic Co. (“Seller”), a subsidiary of AMREP Corporation (“AMREP”), entered into a stock purchase agreement (the “Stock Purchase Agreement”) with DFI Holdings, LLC (“Distribution Buyer”) and KPS Holdco, LLC (“Products Buyer”, and together with Distribution Buyer, the “Buyers”), where each Buyer is controlled by Michael P. Duloc. The closing of the transactions contemplated by the Stock Purchase Agreement occurred on February 9, 2015 (the “Closing Date”).

 

Prior to the Closing Date, Mr. Duloc was the chief executive officer and president of the Company Group (defined below) and certain other subsidiaries of AMREP and was a principal executive officer of AMREP. In connection with the closing of the transactions contemplated by the Stock Purchase Agreement, effective on February 9, 2015, Mr. Duloc was removed as an officer of each direct and indirect subsidiary of AMREP and ceased to be a principal executive officer of AMREP. Mr. Duloc is the son-in-law of Nicholas G. Karabots, a significant shareholder of AMREP. Mr. Duloc’s spouse, who is Mr. Karabots’ daughter, is an officer of one of Mr. Karabots’ companies to which the Company Group and another subsidiary of AMREP provide services.

 

Stock Purchase Agreement. Pursuant to the Stock Purchase Agreement, Products Buyer acquired, through the purchase from Kable Media Services, Inc. (“KMS”) of all of the capital stock of Kable Product Services, Inc., AMREP’s Product Packaging and Fulfillment Services business. Immediately following such acquisition, pursuant to the Stock Purchase Agreement, Distribution Buyer acquired, through the purchase from Seller of all of the capital stock of KMS, AMREP’s Newsstand Distribution Services business operated by KMS’s direct and indirect subsidiaries, namely Kable Distribution Services, Inc., Kable News Company, Inc., Kable News International, Inc. and Kable Distribution Services of Canada, Ltd. (KMS and each of the other entities acquired by Buyers are collectively referred to as the “Company Group”).

 

Consideration for Buyers acquiring the Company Group included the following: (a) Buyers paid Seller $2.0 million, which consisted of $400,000 of cash paid by Buyers on the Closing Date and $1.6 million paid by execution by Buyers of a secured promissory note, dated as of the Closing Date (the “Buyer Promissory Note”), (b) Seller provided limited representations, warranties, covenants and indemnities to Buyers, (c) Buyers agreed to indemnify Seller and its affiliates for claims relating to the Company Group or the operations of the Company Group, subject to certain limited exceptions, and (d) Buyers, Mr. Duloc and the Company Group provided Seller and its affiliates with the benefits and rights contained in the Stock Purchase Agreement and the agreements entered into in connection with the Stock Purchase Agreement. The consideration described in the preceding sentence was the result of negotiations between Seller, Buyers and other parties. Seller’s negotiation of such consideration was informed by evaluating the assets, liabilities, prospects, market conditions and trends, historical performance and financial forecast of the Company Group, discussions with other parties regarding a potential purchase involving all or part of the Company Group and the allocation of risks contained in the Stock Purchase Agreement and the agreements entered into in connection with the Stock Purchase Agreement.

 

As a result of the transaction, other than (i) the elimination of substantially all of the intercompany amounts of the Company Group due to or from AMREP and its direct and indirect subsidiaries (not including the Company Group) through offset and capital contribution and (ii) certain other limited items identified in the Stock Purchase Agreement and the agreements entered into in connection with the Stock Purchase Agreement, the Company Group will retain all of its pre-closing assets, liabilities, rights and obligations, including the negative working capital of the Newsstand Distribution Services business, which totaled $12,672,000 at October 31, 2014. AMREP expects to recognize a pre-tax gain on its financial statements as a result of the transaction in the fourth quarter of fiscal year 2015 which it estimates will range from approximately $8 million to $10 million. The final gain related to the transaction is expected to be included in the footnotes that accompany the financial statements of AMREP’s 10-Q for the quarter ended January 31, 2015.

 

 

The following agreements, each dated as of the Closing Date, were entered into in connection with the Stock Purchase Agreement:

 

·

Buyer Promissory Note. Buyers entered into the Buyer Promissory Note, which requires Buyers to pay Seller $1.6 million in 24 equal monthly instalments, commencing on February 1, 2016, with interest due and payable monthly commencing on March 1, 2015. Interest accrues at a rate per annum determined on the first business day of each month equal to three percent plus the “prime rate,” as published in The Wall Street Journal. The Buyer Promissory Note contains customary events of default and representations, warranties and covenants provided by Buyers to Seller, and is secured by a pledge of substantially all of the personal property of Buyers and the Company Group, pari passu with other secured obligations owed by Buyers and the Company Group to Seller under the Stock Purchase Agreement and the agreements entered into in connection with the Stock Purchase Agreement.

 

·

Transition Services Agreement. Seller and Buyers entered into a transition services agreement (the “Transition Services Agreement”) pursuant to which certain transition services will be provided for a limited time by Buyers to Seller and its affiliates and by Seller to the Company Group.

 

·

Releases. (a) Seller entered into a release agreement in favor of the Company Group and its affiliates and (b) the Company Group, Buyers and Mr. Duloc entered into release agreements in favor of Seller and its affiliates. Subject to certain limited exceptions, each of the release agreements releases all claims that the releasing party may have against the parties being released.

 

·

Line of Credit. Seller provided the Company Group with a secured revolving line of credit pursuant to a line of credit promissory note (the “Line of Credit”). The Line of Credit permits the Company Group to borrow from Seller up to a maximum principal amount of $2.0 million from the Closing Date until May 11, 2015, $1.5 million from May 12, 2015 until August 5, 2016 and $1.0 million from August 6, 2016 until February 9, 2017, with interest due and payable monthly commencing on March 1, 2015.

 

The principal amount permitted to be borrowed under the Line of Credit is subject to the following borrowing base: (a) from the Closing Date until May 11, 2015, (i) 50% of eligible accounts receivable of the Company Group and (ii) 45% of eligible unbilled receivables of Kable Distribution Services, Inc. and from May 12, 2015 until February 9, 2017, (i) 50% of eligible accounts receivable of the Company Group and (ii) 30% of eligible unbilled receivables of Kable Distribution Services, Inc.

 

Amounts outstanding under the Line of Credit accrue interest at a rate per annum as determined on the first business day of each month equal to three percent plus the “prime rate,” as published in The Wall Street Journal. Amounts available but not advanced under the Line of Credit accrue “unused” fees at a rate of 1.0% per annum, payable on the first day of each month. The Line of Credit contains customary events of default and representations, warranties and covenants provided by the Company Group to Seller, and is secured by a pledge of substantially all of the personal property of Buyers and the Company Group, pari passu with other secured obligations owed by Buyers and the Company Group to Seller under the Stock Purchase Agreement and the agreements entered into in connection with the Stock Purchase Agreement.

 

 

·

Guaranty of Company Group. Buyers, the Company Group and Seller entered into a guaranty agreement (the “Guaranty”) pursuant to which Buyers and the Company Group guaranteed the full and prompt payment and performance of all agreements, covenants and obligations of Buyers or any member of the Company Group, including under the Stock Purchase Agreement, the Line of Credit, the Buyer Promissory Note and the other agreements entered into in connection with the Stock Purchase Agreement.

 

·

Security Agreement. Buyers, the Company Group and Seller entered into a security agreement (the “Security Agreement”) pursuant to which Buyers and the Company Group pledged and granted a security interest in substantially all of their personal property to Seller in order to secure the obligations of each Buyer and each member of the Company Group, including under the Stock Purchase Agreement, the Line of Credit, the Buyer Promissory Note and the other agreements entered into in connection with the Stock Purchase Agreement.

 

PNC Credit Facility. In addition, on February 9, 2015, AMREP’s Media Services businesses entered into the fifth amendment (the “Fifth Amendment”) to the Revolving Credit and Security Agreement, dated as of May 13, 2010 (the “PNC Credit Facility”), with PNC Bank, National Association (“PNC”), as agent and lender. The Fifth Amendment provided PNC’s consent to the Stock Purchase Agreement (and the related agreements and transactions), removed each member of the Company Group that is a party to the PNC Credit Facility as a borrower under the PNC Credit Facility, released the collateral of such member that was pledged as security for the obligations under the PNC Credit Facility and reduced the maximum loan amount available under the PNC Credit Facility from $15 million to $7.5 million. No other material terms of the PNC Credit Facility changed in connection with the Fifth Amendment.

 

Kable Staffing Resources LLC (“KSR”). Prior to the Closing Date, KMS made a dividend of all of the membership interests of KSR to Seller. This resulted in KSR not being included in the Company Group or as part of the acquisition by Buyers.

 

Other. AMREP and its remaining direct and indirect subsidiaries retained their obligations under AMREP’s defined benefit retirement plan, without any expected funding acceleration of any obligations thereunder as a result of the sale of the Company Group. In addition, a subsidiary of AMREP retained its ownership of a warehouse used by Kable Product Services, Inc. in its operations, which remains subject to a market rate lease with Kable Product Services, Inc. with a term that expires in November 2018 and remains subject to an approximately $4.1 million mortgage note payable to a third party lender with a maturity date of February 2018.

 

The foregoing description of the Stock Purchase Agreement, Buyer Promissory Note, Transition Services Agreement, release agreements of Seller, Company Group and Buyers and Mr. Duloc, Line of Credit, Guaranty, Security Agreement and Fifth Amendment are summaries only and are qualified in all respects by the provisions of the such documents, copies of which are attached hereto as Exhibits 10.1 through 10.10 and are incorporated herein by reference.

 

Item 2.01 Completion of Acquisition or Disposition of Assets.

 

The information in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.01.

 

 

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

The information in Item 1.01 of this Current Report on Form 8-K regarding the Fifth Amendment to the PNC Credit Facility is incorporated by reference into this Item 2.03.

 

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

Prior to the Closing Date, Mr. Duloc was the chief executive officer and president of the Company Group and certain other subsidiaries of AMREP and was a principal executive officer of AMREP. In connection with the closing of the transactions contemplated by the Stock Purchase Agreement, effective on February 9, 2015, Mr. Duloc was removed as an officer of each direct and indirect subsidiary of AMREP and ceased to be a principal executive officer of AMREP.

 

Item 8.01 Other Events.

 

On February 9, 2015, the Company issued a press release announcing the Stock Purchase Agreement. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

 

Item 9.01  Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit Number	Description
10.1	Stock Purchase Agreement, dated as of February 9, 2015, between DFI Holdings, LLC, KPS Holdco, LLC and American Investment Republic Co.
10.2	Promissory Note, dated as of February 9, 2015, made by DFI Holdings, LLC and KPS Holdco, LLC in favor of American Investment Republic Co.
10.3	Transition Services Agreement, dated as of February 9, 2015, between DFI Holdings, LLC, KPS Holdco, LLC and American Investment Republic Co.
10.4	Release Agreement, dated as of February 9, 2015, by American Investment Republic Co. in favor of Kable Media Services, Inc., Kable Distribution Services, Inc., Kable News Company, Inc., Kable News International, Inc., Kable Distribution Services of Canada, Ltd. and Kable Product Services, Inc.
10.5	Release Agreement, dated as of February 9, 2015, by Kable Media Services, Inc., Kable Distribution Services, Inc., Kable News Company, Inc., Kable News International, Inc., Kable Distribution Services of Canada, Ltd. and Kable Product Services, Inc. in favor of American Investment Republic Co.
10.6	Release Agreement, dated as of February 9, 2015, by DFI Holdings, LLC, KPS Holdco, LLC and Michael P. Duloc in favor of American Investment Republic Co.
10.7	Line of Credit Promissory Note, dated as of February 9, 2015, made by Kable Media Services, Inc., Kable Distribution Services, Inc., Kable News Company, Inc., Kable News International, Inc., Kable Distribution Services of Canada, Ltd. and Kable Product Services, Inc. in favor of American Investment Republic Co.
10.8	Guaranty Agreement, dated as of February 9, 2015, by Kable Media Services, Inc., Kable Distribution Services, Inc., Kable News Company, Inc., Kable News International, Inc., Kable Distribution Services of Canada, Ltd., Kable Product Services, Inc., DFI Holdings, LLC and KPS Holdco, LLC in favor of American Investment Republic Co.
10.9	Security Agreement, dated as of February 9, 2015, by Kable Media Services, Inc., Kable Distribution Services, Inc., Kable News Company, Inc., Kable News International, Inc., Kable Distribution Services of Canada, Ltd., Kable Product Services, Inc., DFI Holdings, LLC and KPS Holdco, LLC in favor of American Investment Republic Co.
10.10	Fifth Amendment, dated as of February 9, 2015, to the Revolving Credit and Security Agreement, dated as of May 13, 2010, among Kable Media Services, Inc., et al and PNC Bank, National Association, as agent and lender.
99.1	Press Release, dated February 9, 2015, issued by AMREP Corporation.

  

  

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

				AMREP Corporation
Date: February 9, 2015				By:		/s/ Christopher V. Vitale
						Name: Christopher V. Vitale
						Title: Executive Vice President

  

  

EXHIBIT INDEX 

 

Exhibit Number	Description
10.1	Stock Purchase Agreement, dated as of February 9, 2015, between DFI Holdings, LLC, KPS Holdco, LLC and American Investment Republic Co.
10.2	Promissory Note, dated as of February 9, 2015, made by DFI Holdings, LLC and KPS Holdco, LLC in favor of American Investment Republic Co.
10.3	Transition Services Agreement, dated as of February 9, 2015, between DFI Holdings, LLC, KPS Holdco, LLC and American Investment Republic Co.
10.4	Release Agreement, dated as of February 9, 2015, by American Investment Republic Co. in favor of Kable Media Services, Inc., Kable Distribution Services, Inc., Kable News Company, Inc., Kable News International, Inc., Kable Distribution Services of Canada, Ltd. and Kable Product Services, Inc.
10.5	Release Agreement, dated as of February 9, 2015, by Kable Media Services, Inc., Kable Distribution Services, Inc., Kable News Company, Inc., Kable News International, Inc., Kable Distribution Services of Canada, Ltd. and Kable Product Services, Inc. in favor of American Investment Republic Co.
10.6	Release Agreement, dated as of February 9, 2015, by DFI Holdings, LLC, KPS Holdco, LLC and Michael P. Duloc in favor of American Investment Republic Co.
10.7	Line of Credit Promissory Note, dated as of February 9, 2015, made by Kable Media Services, Inc., Kable Distribution Services, Inc., Kable News Company, Inc., Kable News International, Inc., Kable Distribution Services of Canada, Ltd. and Kable Product Services, Inc. in favor of American Investment Republic Co.
10.8	Guaranty Agreement, dated as of February 9, 2015, by Kable Media Services, Inc., Kable Distribution Services, Inc., Kable News Company, Inc., Kable News International, Inc., Kable Distribution Services of Canada, Ltd., Kable Product Services, Inc., DFI Holdings, LLC and KPS Holdco, LLC in favor of American Investment Republic Co.
10.9	Security Agreement, dated as of February 9, 2015, by Kable Media Services, Inc., Kable Distribution Services, Inc., Kable News Company, Inc., Kable News International, Inc., Kable Distribution Services of Canada, Ltd., Kable Product Services, Inc., DFI Holdings, LLC and KPS Holdco, LLC in favor of American Investment Republic Co.
10.10	Fifth Amendment, dated as of February 9, 2015, to the Revolving Credit and Security Agreement, dated as of May 13, 2010, among Kable Media Services, Inc., et al and PNC Bank, National Association, as agent and lender.
99.1	Press Release, dated February 9, 2015, issued by AMREP Corporation.

 

 

Exhibit 10.1

  

Execution Copy

 

 

 

 

 

 

 

STOCK PURCHASE AGREEMENT

 

 

 

made and entered into as of

 

 

 

February 9, 2015

 

 

 

between

 

 

 

DFI Holdings, LLC, KPS HOLDCO, LLC

 

 

 

And

 

 

 

AMERICAN REPUBLIC INVESTMENT CO.

 

 

 

TABLE OF CONTENTS

 

Page

 

Article 1 SALE AND PURCHASE OF SHARES	2
Section 1.1   Sale of Shares.	2
Section 1.2   Consideration.	2
Article 2 CLOSING	2
Section 2.1   Closing.	2
Section 2.2   Closing Deliverables.	2
Article 3 REPRESENTATIONS AND WARRANTIES OF SELLER	4
Section 3.1   Capitalization.	4
Section 3.2   Authority and Due Execution with respect to Transaction Agreements.	4
Section 3.3   Due Execution of Intercompany Amount Agreement..	4
Article 4 REPRESENTATIONS AND WARRANTIES OF BUYERS	4
Section 4.1   Organization; Authority; Due Execution.	5
Section 4.2   Consents; No Violation.	5
Section 4.3   Litigation.	5
Section 4.4   Compliance with Law.	6
Section 4.5   Brokers and Finders.	6
Section 4.6   Purchase for Investment.	6
Section 4.7   Resources Needed for Company Group.	6
Section 4.8   Diligence.	6
Section 4.9   Purchase or Sale of AMREP Securities	7
Section 4.10   Acknowledgements Regarding the Condition of Company Group.	7
Section 4.11   No Knowledge of Misrepresentations or Omissions.	8
Article 5 COVENANTS	9
Section 5.1   Benefit Plans.	9
Section 5.2   Benefit Plans.	9
Section 5.3   WARN Act.	9
Section 5.4   Support Services.	9
Section 5.5   Tax Matters.	9
Section 5.6   Insurance.	11
Section 5.7   Reserved.	12
Section 5.8   Restrictive Covenants.	12

 

 

Article 6 INDEMNIFICATION	13
Section 6.1   Indemnification by Seller.	13
Section 6.2   Indemnification by Buyers.	16
Section 6.3   Indemnification Procedure for Third Party Claims.	18
Section 6.4   Indemnification Procedures for Non-Third Party Claims.	19
Section 6.5   Payment of Losses.	19
Section 6.6   Characterization of Indemnification Payments.	20
Article 7 DEFINITIONS	20
Section 7.1   Definitions.	20
Article 8 MISCELLANEOUS	25
Section 8.1   Waiver.	25
Section 8.2   Notices.	25
Section 8.3   Governing Law; Consent to Jurisdiction and Waiver of Jury Trial.	25
Section 8.4   Counterparts.	26
Section 8.5   Headings.	26
Section 8.6   Entire Agreement.	26
Section 8.7   Amendment.	26
Section 8.8   Binding Effect; Benefits.	26
Section 8.9   Joint Drafting.	26
Section 8.10   Severability.	26
Section 8.11   Interpretation.	27
Section 8.12   Assignability.	27
Section 8.13   Specific Performance.	27
Section 8.14   Expenses.	27
Section 8.15   Disclosure.	27
Section 8.16   Independent Counsel..	27

  

 

STOCK PURCHASE AGREEMENT

 

This STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of February 9, 2015, is between American Republic Investment Co., a Delaware corporation (“Seller”), DFI Holdings, LLC, a Pennsylvania limited liability company (“Distribution Buyer”), KPS Holdco, LLC, a Pennsylvania limited liability company (“Products Buyer” and together with Distribution Buyer, each a “Buyer” and collectively, “Buyers”), and, with respect only to Section 5.8 hereof, Michael P. Duloc. Capitalized terms used in this Agreement without definition shall have the meanings ascribed to such terms in Article 7.

 

WITNESSETH:

 

WHEREAS, Seller owns all of the issued and outstanding shares of capital stock of Kable Media Services, Inc., a Delaware corporation (“KMS”);

 

WHEREAS, KMS owns all of the issued and outstanding shares of capital stock of Kable Distribution Services, Inc., a Delaware corporation (“KDS”), Kable News Company, Inc., an Illinois corporation (“KNC”), and Kable Product Services, Inc., a Delaware corporation (“KPS”);

 

WHEREAS, KDS owns all of the issued and outstanding shares of capital stock of Kable News International, Inc., a Delaware corporation (“KNI”), and KNC owns all of the issued and outstanding shares of capital stock of Kable Distribution Services of Canada, Ltd., a Canadian corporation incorporated in Ontario, Canada (“KDSC” together with KMS, KDS, KNI, KNC and KPS, the “Company Group” and each a “Member of the Company Group”);

 

WHEREAS, KMS had made a dividend of the membership interests of Kable Staffing Resources LLC, a Delaware limited liability company, prior to the Closing;

 

WHEREAS, in connection with the Closing, each Member of the Company Group will be released from its obligations to PNC Bank under the Revolving Credit and Security Agreement, dated May 13, 2010, with PNC Bank, National Association;

 

WHEREAS, Buyers and their Affiliates are sophisticated investors and understand the risks and challenges associated with the Company Group;

 

WHEREAS, Seller wishes to cause KMS to sell to Products Buyer, and Products Buyer wishes to purchase, all of the issued and outstanding shares of capital stock of KPS (the “KPS Shares”) upon the terms of this Agreement; and

 

WHEREAS, Seller wishes to sell to Distribution Buyer, and Distribution Buyer wishes to purchase, all of the issued and outstanding shares of capital stock of KMS (the “KMS Shares”) upon the terms of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties herein contained, and upon the terms and subject to the conditions hereinafter set forth, the Parties hereto hereby agree as follows:

 

 

Article 1

 

SALE AND PURCHASE OF SHARES

 

Section 1.1 Sale of Shares. Effective as of the Closing Date, Seller will first, (i) cause KMS to sell, assign, and transfer to Products Buyer, and Products Buyer will purchase and acquire, all of the KPS Shares; and immediately thereafter, (ii) sell, assign, and transfer to Distribution Buyer, and Distribution Buyer will purchase and acquire, all of the KMS Shares.

 

Section 1.2 Consideration.(a) The purchase price for the Shares to be paid by Buyers to Seller at Closing is Two Million Dollars ($2,000,000) (the “Purchase Price”). The Parties have negotiated this Agreement and the allocation of risks contained herein to provide limited representations, warranties, covenants and indemnities by Seller to Buyers. In consideration for purchasing the Shares, the Parties have agreed on such limited representations, warranties, covenants and indemnities by Seller to Buyers, the Parties have agreed to provide the rights and obligations of the Parties under the Transaction Agreements and for Buyers to pay Seller the Purchase Price. The Purchase Price shall be paid as follows: $400,000 of the Purchase Price (the “Cash Purchase Price”) is to be paid by Buyers to Seller at Closing in immediately available funds by wire transfer to an account of Seller designated in writing by Seller to Buyers, and $1.6 million of the Purchase Price is to be paid to Seller at Closing by execution of the Buyer Promissory Note by each of the Buyers.

 

Article 2

 

CLOSING

 

Section 2.1 Closing. The closing of the transactions provided for herein (the “Closing”) will take place on the date of this Agreement (such date, the “Closing Date”) at the offices of Duane Morris LLP, 1540 Broadway, New York, NY or by electronic exchange of documents, as agreed to by the Parties. All proceedings to be taken at the Closing and the Closing Deliverables required to be delivered pursuant to Section 2.2 hereof shall be deemed to have been taken, executed and delivered simultaneously and no proceedings shall be deemed taken nor any documents executed or delivered until all have been taken, executed and delivered. Closing shall be deemed effective as of 11:59 p.m. New York time on the date of this Agreement.

 

Section 2.2 Closing Deliverables.

 

(a) At the Closing (unless otherwise noted below), Seller will deliver to Buyers:

 

(i) A fully executed copy of the Intercompany Amount Agreement (the “Intercompany Amount Agreement”), dated as of February 8, 2015, between AMREP Corporation and all of its direct and indirect subsidiaries;

 

(ii) the Transaction Agreements to which Seller or any of its Affiliates are a signatory, executed by Seller or its Affiliates, as applicable;

 

(iii) when made available to Seller by PNC, stock certificates, in form suitable for transfer, registered in the name of KMS, evidencing the KPS Shares to be sold to Products Buyer, endorsed in blank or with an executed blank stock transfer power attached;

 

 

(iv) when made available to Seller by PNC, stock certificates, in form suitable for transfer, registered in the name of Seller, evidencing the KMS Shares to be sold to Distribution Buyer, endorsed in blank or with an executed blank stock transfer power attached;

 

(v) certified copies of the resolutions duly adopted by the board of directors of Seller authorizing the execution, delivery and performance of each Transaction Agreement to which it is a signatory and the consummation of all transactions contemplated thereby;

 

(vi) a certificate of the secretary or other appropriate officer of Seller certifying as to the incumbency of the officer(s) of Seller executing the Transaction Agreements to which it is a signatory, including specimen signatures;

 

(vii) the minute books, stock certificate books and stock ledgers and similar corporate records of the Company Group, wherever located;

 

(viii) a certificate of good standing of Seller and each Member of the Company Group certified as of a recent date by the Secretary of State of the jurisdiction of Seller’s incorporation;

 

(ix) at Buyers’ sole cost and expense, which amounts shall be paid in advance to Palm Coast Data, LLC, commence packaging and shipment of the backup AS 400 server located at the facilities of Palm Coast Data, LLC in Palm Coast, Florida used exclusively for JD Edwards software and Order Power software by certain members of the Company Group, except to the extent that the Parties shall agree to the later delivery of any such property; and

 

(x) evidence that the Company Group is no longer party to the Revolving Credit and Security Agreement, dated May 13, 2010, with PNC Bank, National Association (“PNC”) and that the security interest in favor of PNC in connection therewith has been released.

 

(b) At the Closing, Buyers will deliver to Seller:

 

(i) the Cash Purchase Price in immediately available funds by wire transfer to an account of Seller designated in writing by Seller to Buyers;

 

(ii) the Transaction Agreements to which Buyers or any of their Affiliates are a signatory, executed by Buyers or their Affiliates, as applicable;

 

(iii) certified copies of the resolutions duly adopted by the board of managers, manager, or managing member, as the case may be (and as is required for due authorization under its limited liability company operating agreement), of each Buyer authorizing the execution, delivery and performance of the Transaction Agreements to which each Buyer is a signatory and the consummation of all transactions contemplated hereby and thereby;

 

(iv) a certificate of the secretary, manager, or managing member, as the case may be, of each Buyer, attaching, verifying and attesting to its (i) certificate of formation, (ii) limited liability company operating agreement, (iii) resolutions or written consent, as the case may be, of the manager, board of managers, or managing member, as the case may be, authorizing its execution, delivery and performance of this Agreement and the other Transaction Agreements to which each Buyer is a signatory, and (iv) the incumbency of authorized individuals executing this Agreement and the other Transaction Agreements to which each Buyer is a signatory; and

 

 

(v) a certificate of good standing of each Buyer certified as of a recent date by the Secretary of State of the jurisdiction of each Buyer’s formation.

 

Article 3

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller represents and warrants to Buyers that each statement contained in this Article 3 is true and correct as of the date hereof.

 

Section 3.1 Capitalization. As of the date hereof immediately prior to the Closing, (a) the outstanding capital stock of KMS is owned entirely by Seller, the outstanding capital stock of KDS, KNC and KPS is owned entirely by KMS, the outstanding capital stock of KNI is owned entirely by KDS and the outstanding capital stock of KDSC is owned entirely by KNC, in each case free and clear of all liens, pledges, mortgages, deeds of trust, security interests, charges, claims, easements, encroachments or other similar encumbrances; (b) there are no outstanding or authorized options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the capital stock of any of the entities included in the Company Group or obligating Seller or any of its Affiliates to issue or sell any shares of capital stock of, or any other interest in, the Company Group; (c) none of the entities included in the Company Group have outstanding or authorized any stock appreciation, phantom stock, profit participation or similar rights; and (d) except for KDS, KNC, KPS, KNI and KDSC, the Seller has no actual knowledge that KMS owns, or has any interest in any shares or have an ownership interest in, any other Person.

 

Section 3.2 Authority and Due Execution with respect to Transaction Agreements. Seller has all requisite corporate power and authority to enter into the Transaction Agreements to which it is a signatory, to perform its obligations thereunder and to consummate the transactions contemplated thereby. The execution, delivery and performance by Seller of the Transaction Agreements to which it is a signatory and the consummation by Seller of the transactions contemplated by the Transaction Agreements to which it is a signatory have been duly and validly adopted and approved by the board of directors of Seller and no other corporate proceedings on the part of Seller are necessary with respect to any such matter. The Transaction Agreements to which it is a signatory have been duly executed and delivered by Seller and constitute the valid, binding and enforceable obligation of Seller, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar Laws relating to or affecting creditors’ rights generally and the availability of injunctive relief and other equitable remedies.

 

Section 3.3 Due Execution of Intercompany Amount Agreement. The Intercompany Amount Agreement has been duly executed and delivered by Seller and its respective Affiliates and constitutes the valid, binding and enforceable obligation of Seller and each of its Affiliates in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar Laws relating to or affecting creditors’ rights generally and the availability of injunctive relief and other equitable remedies.

 

Article 4

 

REPRESENTATIONS AND WARRANTIES OF BUYERS

 

Each Buyer represents and warrants to Seller that each statement contained in this Article 4 is true and correct as of the date hereof as to itself and the other Buyer.

 

 

Section 4.1 Organization; Authority; Due Execution.

 

(a) Buyer is a limited liability company duly formed and organized, validly existing and in good standing under the laws of its jurisdiction of formation and has all requisite limited liability company power and authority to own and operate its properties and assets and to carry on its business as presently conducted and is qualified to do business and is in good standing as a foreign limited liability company in each jurisdiction where the ownership or operation of its properties or conduct of its business requires such qualification, except where the failure to be so qualified or in good standing, when taken together with all other such failures, will not prevent, materially delay or materially impair Buyer’s ability to consummate the transactions contemplated by this Agreement.

 

(b) Buyer has all requisite limited liability company power and authority to enter into the Transaction Agreements to which it is a signatory, to perform its obligations thereunder and to consummate the transactions contemplated thereby. The execution, delivery and performance by Buyer of the Transaction Agreements to which it is a signatory and the consummation by Buyer of the transactions contemplated by the Transaction Agreements to which it is a signatory, have been duly and validly adopted and approved by the members and managers of Buyer and no other limited liability company proceedings on the part of Buyer or its members are necessary with respect to any such matter. The Transaction Agreements to which Buyer is a signatory have been duly executed and delivered by Buyer and constitute the valid, binding and enforceable obligation of Buyer, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general principles of equity.

 

Section 4.2 Consents; No Violation.

 

(a) No notices, reports or other filings are required to be made with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by Buyer from any Governmental Entity or any other Person in connection with the execution and delivery of the Transaction Agreements to which it is a signatory and the consummation by Buyer of the transactions contemplated thereby except those that the failure to make or obtain will not, individually or in the aggregate, prevent, materially delay or materially impair Buyer’s ability to consummate the transactions contemplated by any Transaction Agreement.

 

(b) The execution, delivery and performance of the Transaction Agreements to which it is a signatory do not, and the consummation of the transactions contemplated thereby will not, constitute or result in: (i) (with or without notice, lapse of time or both) a breach or violation of, or a default under, Buyer’s certificate of formation or operating agreement or other governing documents, or (ii) (with or without notice, lapse of time or both) a breach or violation or a conflict with, or a default under, or the termination of, or the acceleration under, any contract, debt, obligation, governmental or non-governmental permit or license to which Buyer is a party or to or by which it is subject or bound; except, in the case of clause (ii) of this Section 4.2(b), for any violation, default or acceleration, that, individually or in the aggregate, will not prevent, materially delay or materially impair Buyer’s ability to consummate the transactions contemplated by the Transaction Agreements to which it is a signatory.

 

Section 4.3 Litigation. There is no civil, criminal or administrative suit, action, proceeding, investigation, review or inquiry pending or, to Buyer’s knowledge, threatened against or affecting Buyer, its Affiliates or any of its or their respective properties or rights, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against or affecting Buyer, its Affiliates or any of its or their respective properties or rights, except such that will not, individually or in the aggregate, prevent, materially delay or materially impair Buyer’s ability to consummate the transactions contemplated by this Agreement.

 

 

Section 4.4 Compliance with Law. Buyer is not in violation of any Law, except for violations or possible violations that, individually or in the aggregate, are not expected to prevent, materially delay or materially impair Buyer’s ability to consummate the transactions contemplated by this Agreement.

 

Section 4.5 Brokers and Finders. Buyer has not employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders’ fees in connection with the transactions contemplated by this Agreement.

 

Section 4.6 Purchase for Investment. The KPS Shares purchased by Products Buyer and the KMS Shares purchased by Distribution Buyer pursuant to this Agreement are being acquired for investment only and not with a view to any public distribution thereof, and the respective Buyer shall not offer to sell or otherwise dispose of, or sell or otherwise dispose of, the KPS Shares or the KMS Shares, as the case may be, so acquired by it in violation of any of the registration requirements of the Securities Act of 1933.

 

Section 4.7 Resources Needed for Company Group. Buyer understands and acknowledges that additional financial resources will be immediately needed by the Company Group in order for the Company Group to meet its financial obligations. Buyer has the financial wherewithal, including cash available or existing borrowing facilities inclusive of the Line of Credit Note, which it believes to be sufficient to enable Buyer to address the liquidity needs of the Company Group and to satisfy the liabilities of the Company Group as they become due, assuming, however, that the business does not further decline; provided, however, nothing in the foregoing shall be deemed a requirement or commitment by Buyer that it make any capital available to the Company Group, and the provision of any such capital shall be in Buyer’s sole discretion.

 

Section 4.8 Diligence.

 

(a) By reason of its or its management’s business or financial experience, Buyer has the capacity to protect its own interests in connection with the transactions contemplated in this Agreement. Buyer acknowledges that its purchase of the KPS Shares and the KMS Shares, as the case may be, is highly speculative and entails a substantial degree of risk. Buyer acknowledges that Buyer has received any information requested by Buyer for Buyer to make a decision to purchase the Shares. Buyer has had an opportunity to discuss the business, management and financial affairs of the Company Group with Seller, the Company Group and their respective representatives and has had the opportunity to review the operations, assets and liabilities, and facilities of the Company Group. Buyer has also had the opportunity to ask questions of and receive answers from Seller and the Company Group and its management regarding the operations, business, prospects and condition (financial or otherwise) of the Company Group.

 

(b) Buyer has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the transactions contemplated by this Agreement, and is consummating this Agreement and the actions contemplated hereby with a full understanding of all of the terms, conditions and risks and willingly accepts, adopts and assumes those terms, conditions and risks subject to the terms of this Agreement and the other Transaction Agreements.

 

(c) Buyer has made its own decision to consummate the transaction based on its own independent review and consultations with such investment, legal, tax, accounting and other advisers as it deemed necessary and upon the terms of this Agreement and the other Transaction Agreements. Buyer has made its own decision concerning the transaction without reliance on any representation or warranty of, or advice from, Seller except as set forth in this Agreement and in the other Transaction Agreements.

 

 

(d) Buyer acknowledges and understands that Seller, its Affiliates and officers, directors, employees, agents or advisors of Seller or its Affiliates possess material non-public information not known to Buyer that may impact the value of the Shares (the “Information”) that Seller may not have disclosed to Buyer. Buyer understands, based on its experience, the disadvantage to which Buyer is subject due to the disparity of information between Buyer and Seller. Notwithstanding this, Buyer has deemed it appropriate to engage in the transaction contemplated by this Agreement.

 

(e) Buyer agrees that none of Seller, its Affiliates, any officers, directors, employees, agents or advisors of Seller or its Affiliates or any other person shall have any liability to Buyer, its Affiliates (including Michael P. Duloc and following the Closing Date, the Company Group) or any third party whatsoever due to or in connection with the use or non-disclosure of the Information, and Buyer hereby irrevocably waives any claim that it might have based on the failure of Seller, its Affiliates or officers, directors, employees, agents or advisors of Seller or its Affiliates to disclose the Information.

 

(f) Buyer acknowledges and agrees that Seller is relying on Buyer’s representations, warranties and agreements herein as a condition to proceeding with the transactions contemplated by this Agreement. Without such representations, warranties and agreements, Seller would not engage in the transactions contemplated by this Agreement.

 

Section 4.9 Purchase or Sale of AMREP Securities. None of Buyer or Michael P. Duloc or his wife or any entities or trusts controlled by any of the foregoing have purchased or sold any securities of AMREP Corporation since September 1, 2014.

 

Section 4.10 Acknowledgements Regarding the Condition of Company Group. Buyer understands and acknowledges the following:

 

(a) Buyer has reviewed the information, documents and materials furnished or made available to Buyer by Seller or its representatives in certain “data rooms”, management discussions or presentations or any other form in contemplation of the transactions contemplated by this Agreement;

 

(b) Buyer has reviewed the filings made by AMREP Corporation with the Securities and Exchange Commission for the past three years (including any risk factors contained therein), which contain information regarding the Company Group;

 

(c) the Company Group distributes physical publications in the United States of America, Canada and in other countries and the industry in which the Company Group operates is highly competitive and financially challenged, with severe and consistent declines in the volume of print media being distributed resulting in significant decreases in revenue year over year;

 

(d) the Company Group has substantial liabilities in excess of its assets, including a substantial amount of negative working capital (negative working capital represents the net payment obligation of the Company Group due to publisher clients and other third parties, which amount will vary from period to period based on the level of magazine distribution);

 

(e) cash flow of the Company Group may vary dramatically, and may be negative, during any particular period of time, thereby requiring the availability of financing sources other than cash flow from operations to meet its payment obligations;

 

 

(f) the Company Group regularly has cash expenditures in excess of cash collections;

 

(g) revenues of the Company Group are derived from sales made on a fully returnable basis and an error in estimating expected returns could cause a misstatement of revenues for the period affected;

 

(h) the Company Group is party to litigation, which could have a material adverse effect on the Company Group;

 

(i) the financial statements of the Company Group had intercompany amounts allocated from, billed to or charged to Seller and its Affiliates (some of which are legal liabilities or assets and some of which are allocated amounts not representing legal liabilities or assets) and such amounts have been transferred, offset and contributed in accordance with the Intercompany Amount Agreement prior to the Closing;

 

(j) the Company Group could experience increased costs and business disruption if any wholesaler on which the Company Group relies to distribute publications were to cease operations or fail to pay amounts owed to the Company Group, which has happened frequently over the past few years;

 

(k) the Company Group relies on a small number of large publishing clients, including an Affiliate of Seller, and in the event of a loss of one or more of these large publishing clients, or if revenues from any of these largest clients decline, the Company Group could be materially adversely affected;

 

(l) publisher clients of the Company Group face business pressures from reduced advertising revenues and increased costs for paper, printing and postal rates, which could have a negative effect on their operating income, and this in turn could negatively affect the operations of the Company Group;

 

(m) the Company Group and Seller and its Affiliates have certain shared services and assets, including insurance, information technology, employee benefit plans, leased real estate, line of credit and letters of credit, all of which will cease to be available to the Company Group as of the date of this Agreement and all of which the Company Group and Buyer will need to address following Closing, other than as may be provided in the Lease, this Agreement or any of the other Transaction Agreements including without limitation the Transition Services Agreement or the Line of Credit Note;

 

(n) certain agreements to which the Company Group is a party may contain provisions requiring the consent of the counterparty in connection with the sale of the KPS Shares or the KMS Shares, as the case may be, to Buyer, and the absence of such consent may be a default under such agreements allowing the counterparty to terminate their agreement with the Company Group; and

 

(o) the employees of the Company Group, including its management team, are integral to the operation of the business of the Company Group, and such employees are not subject to any non-solicitation or non-competition agreements in favor of the Company Group.

 

Section 4.11 No Knowledge of Misrepresentations or Omissions. Buyer does not have any knowledge that any of the representations and warranties of Seller made in this Agreement are not true and correct.

 

 

Article 5

 

CERTAIN COVENANTS

 

Section 5.1 Benefit Plans. As of the Closing Date, (a) the Company Group shall cease to be participating employers under the Benefit Plans and the Retirement Plan and (b) the Affected Employees shall cease to be active participants under the Benefit Plans and the Retirement Plan. Following the Closing Date, the Company Group shall be solely responsible for all obligations and liabilities under the benefit plans provided to Affected Employees for the period after the Closing Date (and none of Seller or its Affiliates shall have any obligations or liabilities with respect thereto).

 

Section 5.2 Benefit Plans. Buyers shall assume, honor and become solely responsible for payment of all liabilities (including all premiums and administrative costs) and performance of all other obligations of Seller and its Affiliates (including the Company Group) under the Benefit Plans in respect of all medical, dental, life insurance and other welfare benefit claims (including short-term and long-term disability benefits) incurred on or prior to the date of this Agreement by or for Affected Employees and former employees of the Company Group and their eligible dependents. In addition, Buyers shall be, or shall cause the Company Group to be, solely responsible for all medical, dental, life insurance and other welfare benefit claims incurred on or after the date of this Agreement by Affected Employees and their eligible dependents (including short-term and long-term disability benefits in respect of individuals who became disabled on or prior to the date of this Agreement). Effective as of the Closing Date, Buyers shall assume all liabilities and obligations of Seller and its Affiliates to Affected Employees and former employees of the Company Group, and their eligible dependents, in respect of health insurance under the Consolidated Omnibus Budget Reconciliation Act of 1985, the Health Insurance Portability and Accountability Act of 1996 and applicable state law (“COBRA”).

 

Section 5.3 WARN Act. Buyers shall be liable for any liabilities under the Worker Adjustment and Retraining Notification Act of 1988 (WARN Act) or any other Law respecting reductions in force or the impact on employees of plant closings or sales of businesses for any actions taken by the Company Group, or Buyers or any of their Affiliates, in each case, prior to, on or after the Closing Date. Seller shall take no action that would be attributable to any Member of the Company Group for purposes of determining whether a “plant closing” or a “mass layoff” has occurred.

 

Section 5.4 Support Services. Buyers agree that as of the Closing Date, neither Seller nor any of its Affiliates shall have any obligation to provide any support (except as may expressly be set forth in the Line of Credit Note) or other services to the Company Group (including any of the services for which allocations were previously paid by the Company Group) other than those services expressly required to be provided pursuant to the Transition Services Agreement.

 

Section 5.5 Tax Matters.

 

(a) Preparation and Filing of Tax Returns.

 

(i) Seller shall prepare or cause to be prepared and file or cause to be filed all Tax Returns of the Company Group and any Member of the Company Group for all Tax periods which begin before the Closing Date and end on or prior to the Closing Date. For all Tax periods, if the applicable Tax Return (consolidated, unitary or otherwise) does not include Buyers or any Member of the Company Group, Seller shall prepare or cause to be prepared and file or cause to be filed all Tax Returns of Kable Staffing Resources LLC; provided that, Buyers or any Member of the Company Group shall execute such Tax Returns to the extent required by applicable Law.

 

 

(ii) Buyers shall prepare or cause to be prepared and file or cause to be filed all Tax Returns of the Company Group, any Member of the Company Group and Kable Staffing Resources LLC (to the extent not a responsibility of Seller pursuant to Section 5.5(a)(i)) for all Tax periods which (1) begin before the Closing Date and end after the Closing Date, or (2) begin after the Closing Date. All such Tax Returns referenced in Section 5.5(a)(ii)(1) shall be prepared in a manner consistent with all prior Tax Returns of the Company Group or any Member of the Company Group. If Kable Staffing Resources LLC (or any attributes, decisions or determinations regarding Kable Staffing Resources LLC) is included in any Tax Return pursuant to this Section 5.5(a)(ii), Buyers and the Company Group shall obtain Seller’s written consent prior to filing such Tax Return.

 

(b) Seller will be responsible for (i) all U.S. federal income Taxes of each Member of the Company Group with respect to all Tax periods ending on or prior to the Closing Date, regardless of when due and payable; and (ii) all Taxes due and payable by KMS for all Tax periods in connection with its ownership of Kable Staffing Resources LLC (including Taxes in connection with the dividending of the membership interests of Kable Staffing Resources LLC), regardless of when due and payable, solely to the extent that (A) all attributes, decisions and determinations regarding Kable Staffing Resources LLC have solely been made by Seller regarding such Taxes and the Tax Returns with respect to such Taxes and (B) if the Tax Returns with respect to such Taxes is the responsibility of Buyers pursuant to Section 5.5(a)(ii), Seller has provided its prior written consent to the filing of such Tax Return.

 

(c) Buyers will be responsible for (i) all U.S. federal income Taxes of each Member of the Company Group, regardless of when due and payable, with respect to all Tax periods beginning after the Closing Date and (ii) except as provided for in Section 5.5(b)(ii), for all state income Taxes or any other Taxes of each Member of the Company Group (which shall be allocated among the entities included in a consolidated or unitary Tax Return pro rata based on income contributed by each entity included in such consolidated or unitary Tax Return), regardless of when due and payable, with respect to all Tax periods (A) beginning before the Closing Date and ending before the Closing Date, (B) beginning before the Closing Date and ending after the Closing Date and (C) beginning after the Closing Date.

 

(d) The following refunds of Taxes will be for the account of Buyers: refunds of Taxes solely with respect to any Member of the Company Group and that are the responsibility of the Buyers pursuant to Section 5.5(c). Seller shall pay over to Buyers any such refunds that Seller may receive immediately upon receipt of such request.

 

(e) All refunds of Taxes not contemplated by Section 5.5(d) will be for the account of Seller. Buyers shall pay over to Seller any such refunds that Buyers or any Member of the Company Group may receive immediately upon receipt of such request.

 

(f) Each Party will promptly notify the other in writing upon receipt by such Party (or in the case of Buyers, of any Member of the Company Group) of notice of any pending or threatened Tax liabilities of any Member of the Company Group for any (i) Tax period ending on or before the Closing Date or (ii) Tax period ending after the Closing Date but which includes the Closing Date. Seller will have the sole right, at its option, (A) to represent the interests of any Member of the Company Group in any proceeding related to Taxes for (1) Tax periods ending on or before the Closing Date or (2) Tax periods ending after the Closing Date but which includes the Closing Date and (B) to employ counsel of its choice. Buyers and Seller agree to reasonably cooperate in the defense of any claim in such proceedings contemplated by the prior sentence. Seller will have the right to participate at its expense in representing the interests of any Member of the Company Group in any proceeding relating to Taxes for any Tax period ending after the Closing Date, if and to the extent that such period includes any Tax period before the Closing Date, and to employ counsel of its choice and at its expense.

 

 

(g) Cooperation in Filing Tax Returns; Copies of all Tax Returns. Buyers and Seller shall, and shall each cause its Subsidiaries and Affiliates to, provide to the other such cooperation and information, as and to the extent reasonably requested, in connection with the filing of any Tax Return, amended Tax Return or claim for refund, determining liability for Taxes or a right to refund of Taxes in accordance with the provisions of this Agreement, or in conducting any audit, litigation or other proceeding with respect to Taxes. Following the Closing, if requested by a Party prior to April 30, 2016, the other Party shall provide a copy of any Tax Return and any supporting documentation, work papers and related documentation of any Member of the Company Group for any period after April 30, 2008.

 

(h) Payment of Transfer Taxes and Fees. Buyers shall pay all Transfer Taxes arising out of or in connection with the transactions effected pursuant to this Agreement, and shall indemnify and defend each Seller Indemnified Person, and hold each Seller Indemnified Person harmless, with respect to such Transfer Taxes. Buyers shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes.

 

(i) Carrybacks. Seller shall not be required to file amended returns for any Pre-Closing Period to permit a carryback of any tax items relating to any Member of the Company Group. “Pre-Closing Period” means any taxable period or portion thereof that is not a Post-Closing Period. “Post-Closing Period” means any taxable period or portion thereof beginning after the Closing Date. If a taxable period begins on or before the Closing Date and ends after the Closing Date, then the portion of the taxable period that begins on the day following the Closing Date shall constitute a Post-Closing Period.

 

(j) Allocation. Seller shall prepare an allocation of the Purchase Price (including any other amounts treated as sales consideration for federal income tax purposes) among the KMS Shares and the KPS Shares in accordance with Seller’s reasonable determination of the relative fair market values of the KMS Shares and the KPS Shares, which allocation (the “Allocation”) shall be binding upon Seller and Buyers. Seller shall deliver the Allocation to Buyers within one year after the Closing. Seller and Buyers shall report, act and file Tax Returns in all respects and for all purposes consistent with the Allocation. Buyers shall timely and properly prepare, execute, file and deliver all such documents, forms and other information as Seller may reasonably request to prepare the Allocation. Neither Seller nor any Buyer will voluntarily take any position inconsistent with the Allocation upon examination of their respective federal tax return, in any claim, in any litigation or otherwise with respect to such tax return.

 

Section 5.6 Insurance.

 

(a) Effective 11:59 p.m. on the Closing Date, the Company Group shall cease to be insured by Seller’s or any of its Affiliates’ insurance policies. With respect to events or circumstances covered by insurance coverage written on an “occurrence basis”, Seller and its Affiliates will have no liability for occurrences or Losses that take place on or after 11:59 p.m. on the Closing Date; provided that with respect to insurance coverage written on an “occurrence basis” and for which any of the Company Group was an insured under such policies, then (i) for the first 90 days following the day after the Closing Date, the Company Group shall continue to have rights under such insurance policies to the extent the events giving rise to a claim under such policies occurred prior to 11:59 p.m. on the Closing Date, and (ii) Seller agrees to cooperate with the Company Group for the first 90 days following the Closing Date in making claims under Seller’s or its Affiliates’ insurance policies in connection with insurable events that occurred prior to 11:59 p.m. on the Closing Date and shall promptly (or to the soonest of its commercially reasonable efforts or ability) remit any recoveries that Seller receives with respect thereto to the applicable Company Group Member. Buyers acknowledge and agree that Seller and its Affiliates shall have no liability with respect to any failure by any carrier under such insurance policies to make payment with respect to any such claim. Furthermore, Buyers acknowledge and agree that neither Seller nor any of its Affiliates shall have any liability to Buyers or any of the Company Group with respect to deductibles and the failure of any claim to be covered as a result of such deductibles under any insurance coverage with respect to any of the Company Group. With respect to events or circumstances covered by insurance coverage written on a “claims made basis”, Seller and its Affiliates will have no liability for claims made on or after 11:59 p.m. on the Closing Date.

 

 

(b) Notwithstanding the provisions of Section 5.6(a), from and after the date of this Agreement, neither Seller nor any of its Affiliates shall have any liability for workers’ compensation claims (whether insured or self-insured) with respect to employees of any of the Company Group in existence on the date of this Agreement or arising from any event or circumstance taking place or existing prior to, on or subsequent to the date of this Agreement, all of which shall be assumed by Buyers on the date of this Agreement. Buyers shall take all steps necessary under any applicable Law to assume the liability for workers’ compensation claims pursuant to this Section 5.6 and shall fully indemnify Seller and its Affiliates with respect to any Losses arising out of or relating to any workers’ compensation claim obligations assumed by Buyers hereunder. Buyers shall cooperate with Seller and its Affiliates in order to obtain the return or release of bonds or securities or indemnifications given by Seller or any of its Affiliates to any state in connection with workers’ compensation claims with respect to the date of this Agreement; and, in order to effectuate such return or release, Buyers shall, to the extent required by any state, post their own bonds, letters of credit, indemnifications or other securities in substitution therefor.

 

Section 5.7 Reserved.

 

Section 5.8 Restrictive Covenants.

 

(a) Neither Buyers nor Michael P. Duloc shall, and Buyers and Michael P. Duloc shall cause (A) Michael P. Duloc, each Buyer and each member of the Company Group, (B) the most senior executive at each Buyer and (C) the most senior executive at each Member of the Company Group not to, directly or indirectly, whether as principal, agent, officer, director, partner, employee, independent contractor, consultant, stockholder, licensor or otherwise, alone or in association with any other Person:

 

(i) For a period from the Closing Date until two years after the Closing Date, (A) circumvent, interfere with, or assist any other party in circumventing, or interfering with the Subscription Fulfillment Business of Seller or any of its Affiliates; (B) own, manage, operate, finance, conduct business, engage, directly or indirectly, alone or as greater than a 2% shareholder, partner, officer, director, employee, consultant or advisor, or otherwise in any way participate in or become associated with, any other business that directly competes with the Subscription Fulfillment Business; (C) divert business from or otherwise interfere with the relationship of Seller or any of its Affiliates in the Subscription Fulfillment Business with any person; and (D) employ or solicit for employment any employee of Seller or any of its Affiliates, induce any employee of Seller or any of its Affiliates to terminate such employee’s employment with Seller or any of its Affiliates or offer employment to anyone Seller or any of its Affiliates hires (other than through or as a result of the placement or sponsorship of a general advertisement for employment not specifically targeted at any employees of Seller or any of its Affiliates); and

 

 

(ii) at any time (1) knowingly disparage, or knowingly do or say anything that would harm the business or reputation of, Seller or any of its Affiliates, any customers, stockholders, members, employees, directors, officers or agents of Seller or any of its Affiliates currently, in the past, or in the future or any other people or organizations associated with Seller or any of its Affiliates currently, in the past, or in the future and (2) hold itself or themselves out to any customers or any other third parties as a representative or employee of Seller or any of its Affiliates.

 

(b) Breach by Michael P. Duloc. Seller’s and any Seller Indemnified Party’s sole remedy permitted to be obtained from Michael P. Duloc in connection with any breach or threatened breach by Michael P. Duloc of any his covenants and agreements under Section 5.8(a) shall be specific performance pursuant to Section 8.13 of this Agreement, and Michael P. Duloc shall not be liable to Seller or any Seller Indemnified Person for monetary damages (other than, where Seller or any other Seller Indemnified Party shall be the prevailing party in an action to obtain the remedy of specific performance, the reasonable fees and expenses of counsel incident to obtaining such remedy of specific performance, Losses incurred in investigating such breach or threatened breach by Michael P. Duloc of any his covenants and agreements under Section 5.8(a), or other Losses directly incurred in enforcing this Section 5.8(b)) for any breach or threatened breach of Section 5.8(a).

 

Article 6

 

INDEMNIFICATION

 

Section 6.1 Indemnification by Seller.

 

(a) Subject to the limits set forth in this Article 6, Seller agrees to indemnify and defend Buyers, and hold Buyers harmless, from Indemnified Representation Liability. Subject to the limits set forth in this Article 6, Seller agrees to indemnify and defend each Buyer Indemnified Person, and hold each Buyer Indemnified Person harmless, from Losses that may be incurred or suffered arising out of or by reason of or in connection with a breach of any representation or warranty of Seller contained in Section 3.3.

 

(b) Subject to the limits set forth in this Article 6, Seller agrees to indemnify and defend each Buyer Indemnified Person, and hold each Buyer Indemnified Person harmless, from Indemnified Pension Liability, Indemnified Tax Liability and Indemnified Seller Group Liability.

 

(c) Subject to the limits set forth in this Article 6, Seller agrees to indemnify and defend each Buyer Indemnified Person, and hold each Buyer Indemnified Person harmless, from Losses to the extent caused by the failure of Seller to perform any of the covenants or agreements of Seller set forth in this Agreement or any other Transaction Agreement.

 

(d) Subject to the limits set forth in this Article 6, Seller agrees to indemnify and defend the members, managers, officers and employees of Buyers who are individuals, and hold harmless the members, managers, officers and employees of Buyers who are individuals, from Indemnified Environmental Liability; provided that (i) a Notice of Claim with respect thereto was delivered to Seller on or prior to one (1) year after the date of this Agreement and (ii) Buyer Indemnified Persons shall not be entitled to recover any Losses under this Section 6.1(d) in an aggregate amount in excess of One Hundred Thousand Dollars ($100,000).

 

(e) Buyer Indemnified Persons shall not be entitled to recover pursuant to Section 6.1 for any Losses except to the extent that the aggregate amount of any such Losses indemnifiable hereunder exceeds the Basket, at which point, Seller will be obligated to indemnify Buyer Indemnified Persons for all such Losses in excess of the Basket, subject to the other clauses of this Section 6.1; provided, however, that this Section 6.1(e) shall not apply to any breach of Section 6.1(c).

 

 

(f) Notwithstanding anything to the contrary in this Agreement or any other Transaction Agreement:

 

(i) (I) IN NO EVENT SHALL SELLER, ITS AFFILIATES (WHICH, FOLLOWING THE CLOSING DATE, SHALL NOT INCLUDE THE COMPANY GROUP), ANY OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR ADVISORS OF SELLER OR ITS AFFILIATES OR ANY OTHER PERSON BE LIABLE UNDER THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION AGREEMENTS OR OTHERWISE TO BUYERS, THEIR AFFILIATES (INCLUDING MICHAEL P. DULOC AND, FOLLOWING THE CLOSING DATE, THE COMPANY GROUP), ANY OTHER BUYER INDEMNIFIED PERSON OR ANY THIRD PARTY FOR (A) ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, STATUTORY, EXEMPLARY, SPECIAL OR PUNITIVE DAMAGES, INCLUDING ANY DAMAGES FOR BUSINESS INTERRUPTION, DIMINUTION IN VALUE OR LOSS OF USE, DATA, REVENUE OR PROFIT, WHETHER ARISING OUT OF BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, OR (B) ANY INDEMNIFICATION CLAIM THAT ARISES (DIRECTLY OR INDIRECTLY) FROM ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, STATUTORY, EXEMPLARY, SPECIAL OR PUNITIVE DAMAGES, INCLUDING ANY DAMAGES FOR BUSINESS INTERRUPTION, DIMINUTION IN VALUE OR LOSS OF USE, DATA, REVENUE OR PROFIT, WHETHER ARISING OUT OF BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, IN EACH CASE OF CLAUSE (A) AND CLAUSE (B) REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE AND WHETHER OR NOT SELLER, ITS AFFILIATES, ANY OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR ADVISORS OF SELLER OR ITS AFFILIATES OR ANY OTHER PERSON HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND NOTWITHSTANDING THE FAILURE OF ANY AGREED OR OTHER REMEDY OF ITS ESSENTIAL PURPOSE OR (II) THE LIABILITY OF SELLER, ITS AFFILIATES (WHICH, FOLLOWING THE CLOSING DATE, SHALL NOT INCLUDE THE COMPANY GROUP), ANY OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR ADVISORS OF SELLER OR ITS AFFILIATES OR ANY OTHER PERSON ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION AGREEMENTS OR OTHERWISE TO BUYERS, THEIR AFFILIATES (INCLUDING MICHAEL P. DULOC AND, FOLLOWING THE CLOSING DATE, THE COMPANY GROUP), ANY OTHER BUYER INDEMNIFIED PERSON OR ANY THIRD PARTY, WHETHER ARISING OUT OF OR RELATED TO BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE SHALL BE LIMITED TO DIRECT PROVABLE DAMAGES ONLY.

 

(ii) BUYERS ACKNOWLEDGE THAT, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN ANY OF THE OTHER TRANSACTION AGREEMENTS, NO BUYER INDEMNIFIED PERSON MAKES ANY COVENANTS, AGREEMENTS, REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING (I) WITH RESPECT TO ANY MEMBER OF THE COMPANY GROUP, THEIR RESPECTIVE OPERATIONS, ASSETS AND LIABILITIES, THE TRANSACTIONS CONTEMPLATED HEREBY OR THE SHARES OR (II) AS TO THE ACCURACY OR COMPLETENESS OF ANY INFORMATION REGARDING ANY MEMBER OF THE COMPANY GROUP FURNISHED OR MADE AVAILABLE TO BUYERS AND THEIR REPRESENTATIVES. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BUYERS ACKNOWLEDGE THAT THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. None of Seller, its Affiliates, the Company Group, any officers, directors, employees, agents or advisors of Seller, its Affiliates or the Company Group or any other Person shall have or be subject to any liability to Buyers or any other Person with respect to the accuracy or completeness of any information, documents or materials furnished or made available to Buyers or any other Person by Seller, its Affiliates, the Company Group or any officers, directors, employees, agents or advisors of Seller, its Affiliates or the Company Group in certain “data rooms”, management discussions or presentations, filings of AMREP Corporation with the Securities and Exchange Commission, communications with Buyers or their counsel or other advisors or any other form in contemplation of the transactions contemplated by this Agreement.

 

 

(iii) The amount which Seller is required to pay to, for or on behalf of any Buyer Indemnified Person pursuant to this Section 6.1 shall be adjusted (including, retroactively) by any insurance proceeds and any indemnity, contribution or other similar payment actually recovered by or on behalf of such Buyer Indemnified Person in reduction of the related indemnifiable Loss. Each Buyer Indemnified Person agrees to use its commercially reasonable efforts to pursue and collect on any recovery with respect to any indemnifiable Loss available under any insurance policies. If a Buyer Indemnified Person shall have received from Seller or Seller shall have had paid on its behalf a payment in respect of a Loss indemnified under this Section 6.1 and such Buyer Indemnified Person shall subsequently receive insurance proceeds or other payment in respect of such Loss, then such Buyer Indemnified Person shall pay to Seller the amount of such insurance proceeds or other payment or, if lesser, the amount of the original payment made by Seller to or on behalf of Buyer Indemnified Person in respect of such Loss. To the extent that any Buyer Indemnified Person is entitled to indemnification pursuant to this Section 6.1, Seller shall be entitled to exercise, and shall be subrogated to, any rights and remedies (including rights of indemnity, rights of contribution and other rights of recovery) that any Buyer Indemnified Person may have to insurance policies or similar contracts with respect to which such Buyer Indemnified Person is a beneficiary. Each Buyer Indemnified Person shall take such actions as Seller may reasonably request for the purpose of enabling Seller to perfect or exercise the right of subrogation of Buyer Indemnified Person under this Section 6.1(f)(iii).

 

(iv) The amount of any indemnity provided in Section 6.1 shall be reduced (but not below zero) by the amount of any actual net reduction in cash payments for Taxes realized by any Buyer Indemnified Person as a result of the Losses giving rise to such indemnity claim. If the indemnity amount is paid prior to any Buyer Indemnified Person realizing any actual reduction in cash payments for Taxes in connection with the Losses giving rise to such payment, and such Buyer Indemnified Person subsequently realizes such actual reduction in cash payments for Taxes, then such Buyer Indemnified Person shall pay the amount of such actual reduction in cash payments for Taxes (but not in excess of the indemnification payment or payments paid by Seller with respect to such Losses) to Seller.

 

(v) Each Buyer acknowledges and agrees that its sole and exclusive rights and remedies with respect to any and all matters arising out of, relating to or connected with this Agreement, any other Transaction Agreement, any of the Company Group or their respective assets and liabilities, any of the Seller or any of its Affiliates or their respective assets and liabilities, the Shares or the transactions contemplated by any Transaction Agreement shall be pursuant to the indemnification provisions set forth in this Article 6, except as provided for in Section 8.13. In furtherance of the foregoing, each Buyer (on behalf of itself and its Affiliates (including Michael P. Duloc and, following the Closing Date, the Company Group)) hereby waives, from and after the Closing Date, any and all rights, remedies, claims and causes of action with respect to the foregoing except pursuant to the indemnification provisions set forth in this Article 6 and except as provided for in Section 8.13.

 

 

(vi) No fact, event, misrepresentation or occurrence that, in the absence of this Section 6.1(f)(iv), would constitute a liability to be indemnified pursuant to Section 6.1(a) or Section 6.1(d) shall be deemed to constitute a liability to be indemnified pursuant to Section 6.1(a) or Section 6.1(d) for which any Buyer Indemnified Person would be entitled to be indemnified pursuant to Section 6.1(a) or Section 6.1(d) if any Buyer Indemnified Person has actual knowledge of such fact, event, misrepresentation or occurrence on or prior to the Closing Date.

 

(vii) Each Buyer agrees that, for so long as such Buyer has any right of indemnification under Section 6.1, it will not, and agrees to use its commercially reasonable efforts to ensure that its Affiliates (including Michael P. Duloc and, following the Closing Date, the Company Group)) do not, voluntarily or by discretionary action (including conducting any invasive sampling or testing), accelerate the timing, or increase the cost, of any obligation of Seller under Section 6.1 (any such voluntary or discretionary action, a “Prohibited Action”); provided, however that the “Prohibited Action” shall not be deemed to include any action which in the written opinion of Buyer’s legal counsel is required to be taken in order to be in compliance with applicable Law. Notwithstanding anything to the contrary in this Agreement, Seller shall not be obligated to indemnify any Buyer Indemnified Person for any Loss arising out of or by reason of or in connection with or due to any Prohibited Action.

 

(viii) No Losses of any Buyer Indemnified Person shall be determined or increased based on any multiple of any financial measure (including earnings, sales or other benchmarks) that might have been used by Buyers in the valuation of the Company Group or their respective business and operations.

 

Section 6.2 Indemnification by Buyers.

 

(a) Subject to the limits set forth in this Section 6.2, each Buyer agrees to indemnify and defend each Seller Indemnified Person, and hold each Seller Indemnified Person harmless, from and in respect of any and all Losses that they may incur or suffer arising out of or by reason of or in connection with or due to (i) any breach of any representation or warranty of any Buyer Indemnified Person set forth in this Agreement or any other Transaction Agreement, (ii) the extent caused by the failure to perform any of the covenants or agreements of any Buyer Indemnified Person set forth in this Agreement or any other Transaction Agreement, and (iii) any Buyer Indemnified Person or any of the business or operations of any Buyer Indemnified Person (except as specifically enumerated in Section 6.1 as an item for which Seller will indemnify Buyer Indemnified Persons).

 

(b) Subject to the limits set forth in this Section 6.2, and provided that the Seller Indemnified Party seeking indemnification under this Section 6.2(b) has not voluntarily or by discretionary action, accelerated the timing, or increased the cost, of such Incremental Losses under this Section 6.2(b), each Buyer agrees to indemnify and defend each Seller Indemnified Person, and hold each Seller Indemnified Person harmless, from and in respect of any and all Incremental Losses that they may incur or suffer arising out of or by reason of or in connection with or due to the Structure Change resulting in, causing or giving rise to:

 

(i) any Seller Indemnified Party being requested or required to surrender or return any amount of the Purchase Price to any Person for any reason relating to the Structure Change, including as a result of any claim by any creditor, bankruptcy estate or trustee or Governmental Entity; provided that, a Notice of Claim with respect thereto was delivered to Buyers on or prior to the three (3) year anniversary of the date of this Agreement with respect to claims for fraudulent conveyance or an improper or unlawful dividend and fifteen (15) months after the date of this Agreement with respect to all other claims;

 

 

(ii) any Incremental Losses with respect to or involving any Affected Employee or former employees of any Member of the Company Group; provided that, a Notice of Claim with respect thereto was delivered to Buyers on or prior to the one (1) year anniversary of the date of this Agreement;

 

(iii) any audit, litigation or other legal proceeding;

 

(iv) any increase in Taxes to any Seller Indemnified Party;

 

(v) any Incremental Losses with respect to or involving any violation of Law, or relating to the Structure Change being prohibited by or invalid under any Law;

 

(vi) any Incremental Losses of which any Buyer Indemnified Person has knowledge on or prior to the Closing; or

 

(vii) (with or without notice, lapse of time or both) a breach or violation or a conflict with, or a default under, or the termination of, or the acceleration under, any contract, debt, obligation with or to any customer or vendor of any Member of the Company Group; provided that, a Notice of Claim with respect thereto was delivered to Buyers on or prior to the one (1) year anniversary of the date of this Agreement.

 

Except where a period of time is specified for the delivery of a Notice of Claim, Buyers shall have no liability under this Section 6.2(b) for any Incremental Losses as to which a Notice of Claim was not delivered to Buyers prior to the two (2) year anniversary of the date of this Agreement, other than for Incremental Losses with respect to (x) any audit, litigation or legal proceeding under Section 6.2(b)(iii) relating to Taxes and (y) under Section 6.2(b)(iv), in either case as to which a Notice of Claim was not delivered to Buyers on or prior to the expiration of the applicable statute of limitations.

 

(c) Notwithstanding anything to the contrary in this Agreement or in any other Transaction Agreement:

 

(i) EXCEPT WITH RESPECT TO SECTION 5.8, (i) IN NO EVENT SHALL BUYERS, THEIR AFFILIATES INCLUDING MICHAEL P. DULOC (WHICH FOLLOWING THE CLOSING DATE, SHALL ALSO INCLUDE THE COMPANY GROUP), ANY OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR ADVISORS OF BUYERS OR ITS AFFILIATES OR ANY OTHER PERSON BE LIABLE UNDER THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION AGREEMENTS OR OTHERWISE TO SELLER OR ANY SELLER INDEMNIFIED PERSON OR THEIR RESPECTIVE AFFILIATES OR ANY THIRD PARTY FOR (A) ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, STATUTORY, EXEMPLARY, SPECIAL OR PUNITIVE DAMAGES, INCLUDING ANY DAMAGES FOR BUSINESS INTERRUPTION, DIMINUTION IN VALUE OR LOSS OF USE, DATA, REVENUE OR PROFIT, WHETHER ARISING OUT OF BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, OR (B) ANY INDEMNIFICATION CLAIM THAT ARISES (DIRECTLY OR INDIRECTLY) FROM ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, STATUTORY, EXEMPLARY, SPECIAL OR PUNITIVE DAMAGES, INCLUDING ANY DAMAGES FOR BUSINESS INTERRUPTION, DIMINUTION IN VALUE OR LOSS OF USE, DATA, REVENUE OR PROFIT, WHETHER ARISING OUT OF BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, IN EACH CASE OF CLAUSE (A) AND CLAUSE (B) REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE AND WHETHER OR NOT BUYERS, THEIR AFFILIATES INCLUDING WITHOUT LIMITATION MICHAEL P. DULOC, ANY OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR ADVISORS OF BUYERS OR THEIR AFFILIATES OR ANY OTHER PERSON HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND NOTWITHSTANDING THE FAILURE OF ANY AGREED OR OTHER REMEDY OF ITS ESSENTIAL PURPOSE OR (ii) THE LIABILITY OF BUYERS, THEIR AFFILIATES INCLUDING MICHAEL P. DULOC (WHICH, FOLLOWING THE CLOSING DATE, SHALL ALSO INCLUDE THE COMPANY GROUP), ANY OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR ADVISORS OF BUYERS OR THEIR AFFILIATES OR ANY OTHER PERSON ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION AGREEMENTS OR OTHERWISE TO SELLER, ANY SELLER INDEMNIFIED PERSON OR ANY OF THEIR RESPECTIVE AFFILIATES OR ANY THIRD PARTY, WHETHER ARISING OUT OF OR RELATED TO BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE SHALL BE LIMITED TO DIRECT PROVABLE DAMAGES ONLY; AND

 

 

(ii) SELLER ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN ANY OF THE OTHER TRANSACTION AGREEMENTS, NO BUYER INDEMNIFIED PERSONS MAKES ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, NOR ANY COVENANT OR AGREEMENT.

 

Section 6.3 Indemnification Procedure for Third Party Claims.

 

(a) In the event that any claim or demand, or other circumstance or state of facts which could give rise to any claim or demand, for which an Indemnifying Party may be liable to an Indemnified Party hereunder is asserted or sought to be collected by a third party (“Third Party Claim”), the Indemnified Party shall as soon as practicable notify the Indemnifying Party in writing of such Third Party Claim (“Notice of Claim”). The Notice of Claim shall (i) state that the Indemnified Party has paid or properly accrued Losses or anticipates that it will incur liability for Losses for which such Indemnified Party is entitled to indemnification pursuant to this Agreement, and (ii) specify in reasonable detail each individual item of Loss included in the amount so stated, the date such item was paid or properly accrued, the basis for any anticipated liability and the nature of the indemnified claim to which each such item is related and the computation of the amount to which such Indemnified Party claims to be entitled hereunder. The Indemnified Party shall enclose with the Notice of Claim a copy of all papers served with respect to such Third Party Claim, if any, and any other documents evidencing such Third Party Claim.

 

(b) The Indemnifying Party will have 30 days from the date on which the Indemnifying Party received the Notice of Claim to notify the Indemnified Party that the Indemnifying Party desires to assume the defense or prosecution of such Third Party Claim and any litigation resulting therefrom with counsel of its choice and at its sole cost and expense (a “Third Party Defense”). If the Indemnifying Party assumes the Third Party Defense in accordance herewith, (i) the Indemnified Party may retain separate co-counsel at the Indemnified Party’s sole cost and expense and participate in the defense of the Third Party Claim but the Indemnifying Party shall control the investigation, defense and settlement thereof, (ii) the Indemnified Party will not file any papers or consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party and (iii) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim to the extent such judgment or settlement provides for equitable relief without the prior written consent of the Indemnified Party. The Indemnified Party will use commercially reasonable efforts to minimize Losses from Third Party Claims and will act in good faith in responding to, defending against, settling or otherwise dealing with such claims. The Indemnified Party and the Indemnifying Party will also cooperate in any such defense and give each other reasonable access to all information relevant thereto. Whether or not the Indemnifying Party has assumed the Third Party Defense, such Indemnifying Party will not be obligated to indemnify the Indemnified Party hereunder for any settlement entered into or any judgment that was consented to without the Indemnifying Party’s prior written consent.

 

 

(c) If the Indemnifying Party does not assume the Third Party Defense within 30 days of receipt of the Notice of Claim, the Indemnified Party will be entitled to assume the Third Party Defense, at the Indemnified Party’s sole cost and expense (or, if the Indemnified Party incurs a Loss with respect to the matter in question for which the Indemnified Party is entitled to indemnification pursuant to Sections 6.1 or 6.2, as applicable, at the expense of the Indemnifying Party) upon delivery of notice to such effect to the Indemnifying Party; provided that the (i) Indemnifying Party shall have the right to participate in the Third Party Defense at its sole cost and expense, but the Indemnified Party shall control the investigation, defense and settlement thereof; (ii) the Indemnifying Party may at any time thereafter assume the Third Party Defense, in which event the Indemnifying Party shall bear the reasonable fees, costs and expenses of the Indemnified Party’s counsel incurred prior to the assumption by the Indemnifying Party of the Third Party Defense, and (iii) the Indemnifying Party will not be obligated to indemnify the Indemnified Party hereunder for any settlement entered into or any judgment that was consented to without the Indemnifying Party’s prior written consent (which consent shall not be unreasonably withheld or delayed).

 

Section 6.4 Indemnification Procedures for Non-Third Party Claims. The Indemnified Party will notify the Indemnifying Party in writing promptly of its discovery of any matter subject to indemnification under this Article 6 that does not involve a Third Party Claim, such notice to contain the information set forth in the following sentence. The Notice of Claim shall (i) state that the Indemnified Party has paid or properly accrued Losses or anticipates that it will incur liability for Losses for which such Indemnified Party is entitled to indemnification pursuant to this Agreement, and (ii) specify in reasonable detail each individual item of Loss included in the amount so stated, the date such item was paid or properly accrued, the basis for any anticipated liability and, in the case of Buyer Indemnified Parties, the nature of the indemnified claim to which each such item is related and the computation of the amount to which such Indemnified Party claims to be entitled hereunder. If the Indemnifying Party does not acknowledge in writing its obligation to indemnify the Indemnified Party with respect to such Losses within 30 days after its receipt of the Notice of Claim, the Indemnifying Party will be deemed to have rejected such claim, in which event the Indemnified Party will be free to pursue such remedies as may be available to it under this Agreement. The Indemnified Party will use commercially reasonable efforts to minimize Losses from such claims and will act in good faith in responding to or otherwise dealing with such claims. The Indemnified Party will reasonably cooperate and assist the Indemnifying Party in determining the validity of any claim for indemnity by the Indemnified Party and in otherwise resolving such matters. Such assistance and cooperation will include providing reasonable access to and copies of information, records and documents relating to such matters, furnishing employees to assist in the investigation, defense and resolution of such matters and providing legal and business assistance with respect to such matters.

 

Section 6.5 Payment of Losses. The obligations of an Indemnifying Party in this Agreement to indemnify, defend and hold harmless shall include without limitation the obligation of the Indemnifying Party to pay and reimburse the Indemnified Party for Losses (in each case, subject to the restrictions, limitations and agreements in this Agreement) for which the Indemnified Party shall be indemnified, defended and held harmless. Once a Loss is agreed to by the Indemnifying Party or finally adjudicated to be payable pursuant to this Article 6, the Indemnifying Party shall satisfy its obligation within ten (10) days by wire transfer of immediately available funds. If an Indemnifying Party shall not make full payment of any such obligation within such ten (10) day period,  any amount not paid shall accrue interest from and including the date such payment was due until the date such payment is made, at a rate per annum equal to twelve percent (12%).

 

 

Section 6.6 Characterization of Indemnification Payments. Except as otherwise required by applicable Law, the Parties shall treat any indemnification payment made hereunder as an adjustment to the Purchase Price.

 

Article 7

 

DEFINITIONS

 

Section 7.1 Definitions. For purposes of this Agreement, the following terms used in this Agreement shall have the meanings ascribed to them below:

 

“Affected Employee” means each individual who is employed by any of the Company Group on the date of this Agreement, including any such individuals on approved leave of absence (including maternity and paternity leave, vacation, sick leave, short-term or long-term disability, military leave, jury duty and death leave).

 

“Affiliate” of any Person means another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person. For the avoidance of doubt, it is stated that Nicholas G. Karabots and Persons controlled by him are not Affiliates of any Party or any of their respective Affiliates, members, managers, officers and employees.

 

“Agreement” has the meaning ascribed to such term in the Preamble.

 

“Allocation” has the meaning ascribed to such term in Section 5.5(j).

 

“Basket” means $40,000.

 

“Benefit Plans” means benefit plans maintained or contributed to by Seller or any of its Affiliates (other than solely by the Company Group but including all benefit plans to which the Company Group contributes as a participating employer) for the benefit of any present or former directors, officers or employees of the Company Group; provided, however, that the Retirement Plan is not included in the term “Benefit Plans”.

 

“Business Day” means any day other than a Saturday, a Sunday or a day on which commercial banking institutions in New York, New York are authorized or obligated by law or executive order to be closed.

 

“Buyer” and “Buyers” have the meanings ascribed to such terms in the Preamble.

 

“Buyer Indemnified Persons” means Buyers, their Affiliates (including each Member of the Company Group) and their respective Affiliates, members, managers, directors, officers, employees, agents and representatives.

 

“Buyer Promissory Note” means a promissory note made by Buyers in favor of Seller providing for the payment to Seller of $1.6 million, in form and substance satisfactory to Seller.

 

“Cash Purchase Price” has the meaning ascribed to such term in Section 1.2.

 

“Closing” has the meaning ascribed to such term in Section 2.1.

 

“Closing Date” has the meaning ascribed to such term in Section 2.1.

 

 

“Company Group” has the meaning ascribed to such term in the Preamble.

 

“Distribution Buyer” has the meaning ascribed to such term in the Preamble.

 

“Governmental Entity” means (i) any supranational, federal, state, local, municipal, foreign or other government; (ii) any governmental or quasi-governmental entity of any nature (including any governmental agency, branch, department, official or entity and any court or other tribunal); or (iii) any body, authority or agency exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority, including any arbitral tribunal.

 

“Incremental Losses” mean Losses arising out of or by reason of or in connection with or due to the Structure Change which would not have been incurred if the Parties had agreed to the One Buyer Structure rather than having agreed to the Two Buyer Structure. Incremental Losses shall not include Losses to the extent they would have been otherwise incurred if the Parties had agreed to the One Buyer Structure.

 

“Indemnified Environmental Liability” means Losses (i) incurred by any member, manager, officer or employee of either Buyer who is an individual, (ii) in connection with any Member of the Company Group not being in material compliance prior to the date of this Agreement with all applicable Laws relating to protection of the environment with respect to real property owned or leased by any Member of the Company Group, (iii) for which the Company Group is unable to pay such Losses, (iv) resulting from a claim asserted by a third party that is not instigated or encouraged by any Buyer Indemnified Person, (iv) solely to the extent such Loss is incurred to comply with applicable Laws relating to protection of the environment with respect to real property owned or leased by any Member of the Company Group using reasonable and recognized remediation protocols and techniques that are economically reasonable in relation to other reasonable and recognized remediation protocols and techniques; provided, however, that Indemnified Environmental Liability shall not include liability for any Loss to the extent that any Buyer Indemnified Person or any other Person after the Closing Date contributed to the condition or circumstance forming the basis of such Loss.

 

“Indemnified Party” means any Person that is seeking indemnification from an Indemnifying Party pursuant to the provisions of this Agreement.

 

“Indemnified Pension Liability” means any and all Losses that may be incurred or suffered arising out of or by reason of or in connection with or due to the Retirement Plan.

 

“Indemnified Representation Liability” means any and all Losses that may be incurred or suffered arising out of or by reason of or in connection with or due to any representation or warranty of Seller contained in Section 3.1 or Section 3.2.

 

“Indemnified Seller Group Liability” means any and all Losses that may be incurred or suffered arising out of or by reason of or in connection with or due to any Seller Indemnified Person or the business or operations of any Seller Indemnified Person, except as specifically enumerated in Section 6.2(a)(i) or Section 6.2(a)(ii) as an item for which Buyers will indemnify Seller Indemnified Persons.

 

“Indemnified Tax Liability” means any and all Losses that may be incurred or suffered arising out of or by reason of or in connection with or due to Taxes that are required to be paid by Seller pursuant to Section 5.5(b).

 

“Indemnifying Party” means any Party from which any Indemnified Party is seeking indemnification pursuant to the provisions of this Agreement.

 

 

“Information” has the meaning ascribed to such term in Section 4.8(d).

 

“Intercompany Amount Agreement” has the meaning ascribed to such term in Section 2.2(a)(i).

 

“KMS”, “KDS”, “KNC”, “KNI”, “KDSC”, and “KPS” each have the meaning ascribed to such term in the Preamble, and each a Member of the Company Group.

 

“KMS Shares” has the meaning ascribed to such term in the Preamble.

 

“KPS Shares” has the meaning ascribed to such term in the Preamble.

 

“Law” means any statute, law, ordinance, rule or regulation of any Governmental Entity.

 

“Line of Credit Note” means a promissory note made by the Company Group in favor of Seller in the face amount of $2.0 million, pursuant to which Seller will provide a working capital line of credit to the Company Group on terms and conditions set forth in the Line of Credit Note, which shall be in form and substance satisfactory to Seller.

 

“Losses” means any and all actions, causes of action, suits, losses, liabilities, rights, debts, dues, sums of money, accounts, reckonings, obligations, costs, expenses, liens, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims, demands and reasonable expenses (including reasonable fees and expenses of counsel incident to any of the foregoing, or incurred in investigating or attempting to avoid the same or to oppose the imposition thereof, or in enforcing any of the obligations of any Indemnifying Party) of every kind and nature whatsoever, whether now known or unknown, foreseen or unforeseen, matured or unmatured, suspected or unsuspected, in law, admiralty or equity.

 

“Member of the Company Group” has the meaning ascribed to such term in the Preamble.

 

“Notice of Claim” has the meaning ascribed to such term in Section 6.3(a) or Section 6.4, as the case may be.

 

“One Buyer Structure” has the meaning ascribed to such term in definition of “Structure Change”.

 

“Parties” means Buyers and Seller, and “Party” means any one of them.

 

“Person” means an individual, corporation, partnership, limited liability company, trust or unincorporated organization or a Governmental Entity, or any other entity.

 

“PNC” has the meaning ascribed to such term in Section 2.2(a).

 

“Post-Closing Period” has the meaning ascribed to such term in Section 5.5(i).

 

“Pre-Closing Period” has the meaning ascribed to such term in Section 5.5(i).

 

“Products Buyer” has the meaning ascribed to such term in the Preamble.

 

“Prohibited Action” has the meaning ascribed to such term in Section 6.1(l).

 

“Purchase Price” has the meaning ascribed to such term in Section 1.2.

 

“Retirement Plan” means the Retirement Plan for Employees of AMREP Corporation.

 

 

“Seller Indemnified Persons” means Seller, its Affiliates (other than the Company Group) and the members, managers, directors, officers, employees, agents and representatives of Seller or its Affiliates (other than the Company Group).

 

“Seller” has the meaning ascribed to such term in the Preamble.

 

“Shares” means the KPS Shares and the KMS Shares.

 

“Structure Change” means the change in acquisition structure from (i) the acquisition of the Company Group by Distribution Buyer purchasing and acquiring the KMS Shares from Seller (without Products Buyer purchasing and acquiring the KPS Shares from KMS) (clause (i), the “One Buyer Structure”) to (ii) the acquisition of the Company Group by (a) Products Buyer first purchasing and acquiring the KPS Shares from KMS followed by (b) Distribution Buyer purchasing and acquiring the KMS Shares from Seller (clause (ii), the “Two Buyer Structure”).

 

“Subscription Fulfillment Business” means the consumer magazine subscription and membership fulfillment services currently being provided by the Seller or any of its Affiliates. Notwithstanding the foregoing, “Subscription Fulfillment Business” shall not include product packaging activities, product fulfillment activities, call center/contact center services or database marketing services relating to compilation of various sources of data subsequently used for target marketing activities.

 

“Tax” or “Taxes” means any and all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, withholding, payroll, employment, excise, property, deed, stamp, alternative or add-on minimum, profits, transaction, service, occupation, unemployment, social security, workers’ compensation and capital taxes, assessments, customs, duties, fees, levies or governmental charges.

 

“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.

 

“Third Party Claim” has the meaning ascribed to such term in Section 8.3(a).

 

“Third Party Defense” has the meaning ascribed to such term in Section 8.3(b).

 

“Transaction Agreements” means

 

(a) this Agreement;

 

(b) the Buyer Promissory Note;

 

(c) the Line of Credit Note;

 

(d) a guaranty agreement by Buyers and each Member of the Company Group with respect to obligations owing to Seller and its Affiliates under this Agreement, the Buyer Promissory Note, the Line of Credit Note and related agreements, in favor of Seller, in form and substance satisfactory to Seller;

 

(e) a security agreement by Buyers and each Member of the Company Group, with respect to obligations of Buyers and the Company Group owing to Seller and its Affiliates under this Agreement, that certain related guaranty, and related agreements, in favor of Seller, in form and substance satisfactory to Seller;

 

 

(f) deposit account control agreement(s) for deposit accounts maintained by one or more Members of the Company Group, including financing statements for each Members of the Company Group, and such other documents, instruments and agreements as Seller may require, each in form and substance satisfactory to Seller;

 

(g) general releases releasing Seller and its Affiliates (other than with respect to this Agreement and any other Transaction Agreement and such other matters are as provided for therein) executed by Buyers and certain of their Affiliates (on behalf of themselves and their respective Affiliates) in form and substance satisfactory to Seller;

 

(h) general releases releasing Seller and its Affiliates (other than with respect to this Agreement and any other Transaction Agreement and such other matters are as provided for therein) executed by the Company Group in form and substance satisfactory to Seller;

 

(i) general releases releasing the Company Group (other than with respect to this Agreement and any other Transaction Agreement and such other matters are as provided for therein) executed by Seller in form and substance satisfactory to Seller;

 

(j) the Transition Services Agreement;

 

(k) software assignment agreement, by Media Data Resources, LLC in favor of KNC, with respect to certain software owned or licensed by Media Data Resources, LLC used in the Company Group’s operations, in form and substance satisfactory to Media Data Resources, LLC;

 

(l) software assignment agreement, by Palm Coast Data LLC in favor of KPS, with respect to certain software licensed by Palm Coast Data LLC used in the Company Group’s operations, in form and substance satisfactory to Palm Coast Data LLC;

 

(m) acknowledgment and agreement of consideration, by Buyers, the Company Group and Seller, in form and substance satisfactory to Seller;

 

(n) an assignment agreement pursuant to which KMS will assign the KPS Shares to Products Buyer;

 

(o) such other documents, agreements, certificates and instruments required or executed in connection with the foregoing; and

 

(p) any amendments or modifications of the foregoing agreed to in writing by Seller.

 

“Transfer Taxes” means sales, use, transfer, real property transfer, recording, documentary, stamp, registration and stock transfer taxes and fees.

 

“Transition Services Agreement” means the transition services agreement, dated as of the date hereof, between Buyers and Seller, in form and substance satisfactory to Seller.

 

“Two Buyer Structure” has the meaning ascribed to such term in definition of “Structure Change”.

 

“$” means United States dollars.

 

 

Article 8

 

MISCELLANEOUS

 

Section 8.1 Waiver. Any failure of Seller to comply with any of its obligations or agreements herein contained may be waived only in writing by Buyers. Any failure of Buyers to comply with any of its obligations or agreements herein contained may be waived only in writing by Seller. No waiver granted hereunder shall be deemed a waiver of any subsequent breach or default of the same or similar nature. No failure or delay by any Party in exercising any right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

 

Section 8.2 Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective Parties at the addresses set forth below (or to such other address that may be designated by a party from time to time in accordance with this Section):

 

Buyers:	DFI Holdings, LLC KPS Holdco, LLC 3179 Deer Creek Road Collegeville, PA 19426 Attention: Michael Duloc Fax: 815-734-5233	with a required copy to (which shall not constitute notice): Fox Rothschild LLP 2700 Kelly Road, Suite 300 Warrington, PA 18976 Attention: Jeffrey H. Nicholas Fax: 215-345-7507
Seller:	c/o AMREP Corporation 300 Alexander Park, Suite 204 Princeton, New Jersey 08540 Attention: General Counsel Fax: 609-716-8255	with a required copy to (which shall not constitute notice): Duane Morris LLP 222 Delaware Avenue Suite 1600 Wilmington, DE 19801 Attention: Christopher Winter Fax: 302-397-2455

Section 8.3 Governing Law; Consent to Jurisdiction and Waiver of Jury Trial.

 

(a) This Agreement shall be governed by and construed in accordance with the internal substantive Laws of the State of New York, without giving effect to any choice of Law or conflict of Laws rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of New York.

 

(b) Each Party irrevocably submits to the exclusive jurisdiction of the federal courts of the Southern District of New York or the courts of the State of New York located in the City of New York for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each Party further agrees that service of any process, summons, notice or document by U.S. registered mail to such Party’s respective address set forth in the “Notices” section hereof shall be effective service of process for any action, suit or proceeding with respect to any matters to which it has submitted to jurisdiction in this Section. Each Party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in federal courts of the Southern District of New York or the courts of the State of New York located in the City of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

 

 

Section 8.4 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Execution and delivery of this Agreement by delivery of a facsimile or electronically recorded copy in .pdf file format bearing a copy of the signature of a Party shall constitute a valid and binding execution and delivery of this Agreement by such Party. Such copies shall constitute enforceable original documents.

 

Section 8.5 Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

Section 8.6 Entire Agreement. The Transaction Agreements embody the entire agreement and understanding of the Parties hereto in respect of the subject matter contained herein. The Transaction Agreements supersede all prior agreements and understandings between the Parties with respect to the subject matter thereof.

 

Section 8.7 Amendment. Any provision of this Agreement may be amended if, and only if, such amendment is in writing and is signed by each Party to this Agreement.

 

Section 8.8 Binding Effect; Benefits. This Agreement shall inure to the benefit of and be binding upon the Parties hereto and their respective successors and permitted assigns; nothing in this Agreement, express or implied, is intended to confer on any Person other than the Parties and their respective successors and permitted assigns (and, to the extent provided in Article 6, the other Buyer Indemnified Parties and Seller Indemnified Parties) any rights, remedies, obligations or liabilities under or by reason of this Agreement.

 

Section 8.9 Joint Drafting. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the 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.

 

Section 8.10 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law. If any provision of this Agreement is held to be prohibited by or invalid under applicable Law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible to the fullest extent permitted by applicable Law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

 

Section 8.11 Interpretation. When a reference is made in this Agreement to an Article or Section, such reference will be to an Article or Section of this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they will be deemed to be followed by the words “without limitation.” The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement will refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless the context expressly provides otherwise, any approval, determination, election or authorization required to be obtained from a Party shall be at such Party’s sole discretion. The word “or” is not exclusive. All terms used herein with initial capital letters have the meanings ascribed to them herein and all terms defined in this Agreement will have such defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Unless otherwise indicated, any agreement, instrument or statute defined or referred to herein, or in any agreement or instrument that is referred to herein, means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns.

 

Section 8.12 Assignability. This Agreement shall not be assignable by any Party hereto without the prior written consent of the other Party.

 

Section 8.13 Specific Performance. Buyers and Seller each agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by them in accordance with the terms hereof and that each Party shall be entitled to specific performance of the terms hereof (without the need to post bond or any other security), in addition to any other remedy, subject to Article 6, at law or equity.

 

Section 8.14 Expenses. Each Party shall bear its own costs and expenses in connection with this Agreement and the transactions contemplated hereby, including all legal, accounting, financial advisory, consulting and all other fees and expenses of third parties, except where specifically provided to the contrary.

 

Section 8.15 Disclosure. Buyers consent to Seller or its Affiliates publicly disclosing this Agreement and the other Transaction Agreements, including by filing such documents with the Securities and Exchange Commission or the New York Stock Exchange. Nothing in this Agreement or in any other Transaction Agreement shall be deemed to limit Buyers’ right to publicly disclose this Agreement and any of the other Transaction Agreements.

 

Section 8.16 Independent Counsel. Each Party certifies that it has read the terms of this Agreement, that it understands the terms of this Agreement, and that it is entering into this Agreement of its own volition. Each Party warrants and represents that it has (a) been represented by an attorney of its choice in connection with the Transaction and received independent legal advice from its attorney regarding its decision with respect to the advisability of making and entering into this Agreement, or (b) had sufficient time, opportunity and means to engage an attorney of its choice in order to be represented by such attorney in connection with the Transaction and to receive independent legal advice from such attorney regarding its decision with respect to the advisability of making and entering into this Agreement, and has made a knowing and voluntary decision not to do so.

 

 

 

 

[Remainder of Page Intentionally Left Blank; Signature page follows]

 

 

IN WITNESS WHEREOF, the Parties have caused this Stock Purchase Agreement to be duly executed and delivered as of the date first written above.

 

 

	DFI HOLDINGS, LLC
	By:	/s/ Michael P. Duloc
		Name:	Michael P. Duloc
		Title:	Manager
	KPS HOLDCO, LLC
	By:	/s/ Michael P. Duloc
		Name:	Michael P. Duloc
		Title:	Manager
	American republic investment co.
	By:	/s/ Peter M. Pizza
		Name:	Peter M. Pizza
		Title:	Vice President

 

 

 

 

 

AGREED AND ACCEPTED with respect to Section 5.8 of this Stock Purchase Agreement as of the date first written above.

 

	/s/ Michael P. Duloc
	MICHAEL P. DULOC

 

 

 

 

 

 

 

 

 

Signature Page to Stock Purchase Agreement

(1/1)

 

 

 

 

Exhibit 10.2

 

Execution Copy

 

PROMISSORY NOTE

 

$1.6 Million

February 9, 2015

 

FOR VALUE RECEIVED, and intending to be legally bound hereby, each of DFI Holdings, LLC, a Pennsylvania limited liability company, and KPS Holdco, LLC, a Pennsylvania limited liability company (collectively, the “Borrowers” and each, a “Borrower”), hereby jointly and severally unconditionally promises to pay to the order of American Republic Investment Co., a Delaware corporation (hereinafter “Lender” and together with the Borrowers, the “Parties”), the principal amount of ONE MILLION SIX HUNDRED THOUSAND AND 00/100 DOLLARS ($1,600,000.00), together with accrued, unpaid interest thereon and any unpaid costs and expenses payable to the Lender hereunder.

 

1.

Definitions. The definitions set forth on Annex A hereto are incorporated herein by reference. Capitalized terms used but not defined herein, shall have the meaning set forth in the Stock Purchase Agreement, dated as of the date hereof (the “SPA”), by and between, the Lender, as seller, and Borrowers, as buyers.

 

2.

Guaranty and Security. This Note is made pursuant to the terms of the SPA, and evidences payment of a portion of the purchase price of the assets sold thereunder. The payments and obligations of Borrowers, as makers, under this Note are secured by Borrowers pursuant to the terms and conditions of the Security Agreement, and guaranteed and secured by the Company Group, pursuant to the terms and conditions of the Guaranty and the Security Agreement.

 

3.

Terms of Note.

 

a.

Interest.

 

(i)

Interest Rate: Interest shall accrue on all principal, interest and any other Obligations outstanding under this Note at an annual rate equal at all times to the Interest Rate.

 

(ii)

Default Rate. Upon the occurrence of an Event of Default, interest will be assessed at a rate equal to the Interest Rate plus six percent (6%) (the “Default Rate”). Such Default Rate of interest shall also be charged on any amounts owed by the Borrowers to the Lender pursuant to any judgment entered in favor of Lender with respect to this Note.

 

b.

Computation of Interest; Place of Payment. Interest charged hereunder shall be computed daily on the basis of a 360-day year for the actual number of days elapsed. All payments hereunder shall be made in lawful currency of the United States of America and in immediately available funds. All payments made hereunder shall be made to the Lender at its offices set forth in the Notice section of this Note or at such other address or in accordance with such instructions as Lender shall provide in writing to Borrowers from time to time.

 

 

c.

Payment and Prepayment.

 

(i)

Borrowers shall pay the principal amount of the Note in 24 equal monthly instalments, commencing on February 1, 2016, and continuing on the first day of each month thereafter until the Maturity Date, on which date all outstanding principal and accrued interest and any other Obligations under this Note shall be due and payable in full. In addition, interest shall be paid monthly in arrears commencing on March 1, 2015, and, if principal is to be paid for such month, shall be paid to Lender with such monthly instalment of principal.

 

(ii)

Borrowers may make prepayments of principal amounts due hereunder in whole or in part at any time and from time to time without penalty or premium upon notification to the Lender not later than 2:00 p.m. New York time, on the date prior to the proposed prepayment. All payments or prepayments made under this Note, whether or not accompanied by instructions as to their application, shall be applied to expenses and costs, interest and principal in such order as the Lender, in its sole discretion, shall determine.

 

d.

Late Charge. If any payment under this Note is not paid in full when the same is due, the Borrowers shall pay the Lender a fee on such unpaid amount equal to six percent (6%) of such amount.

 

e.

Maturity. This Note shall mature and all then outstanding Obligations under this Note shall be due and owing as of January 1, 2018 (the “Maturity Date”).

 

4.

Representations and Warranties. Each Borrower represents and warrants to the Lender that:

 

a.

Existence; Compliance With Law.

 

(i)

Each Borrower is duly formed and organized, validly existing and in good standing as a limited liability company under the Laws of the state of its formation and is qualified to do business in each jurisdiction where its ownership of property or conduct of business requires such qualification;

 

(ii)

Each Borrower has the limited liability company power and authority and the legal right to own and operate its property and to conduct business in the manner in which it does and proposes so to do; and

 

(iii)

Each Borrower is in compliance with all requirements of Law and contractual obligations.

 

  

b.

Power; Authorization; Enforceable Obligations. Each Borrower has the limited liability company power and authority and the legal right to execute, deliver and perform the Transaction Agreements to which it is a signatory, including the Note, and has taken all necessary limited liability company action to authorize the execution, delivery and performance of the Transaction Agreements to which it is a signatory. The Transaction Agreements to which it is a signatory have been duly executed and delivered by each Borrower and constitute legal, valid and binding obligations of each Borrower enforceable against each Borrower in accordance with their respective terms.

 

c.

No Legal Bar. The execution, delivery and performance of the Transaction Agreements, the borrowing hereunder and the use of the proceeds thereof, will not violate any contractual obligation of any Borrower or any requirement of Law.

 

d.

Consents. No consent, approval, authorization of, or registration, declaration or filing with, any governmental authority is required on the part of any Borrower in connection with the execution and delivery of the Transaction Agreements or the performance of or compliance with the terms, provisions and conditions hereof or thereof.

 

e.

Suits and Defaults. There are no actions, suits, proceedings, or claims pending or threatened against any Borrower or any of its property that could reasonably be expected to have a material adverse effect on any Borrower’s ability to perform their obligations hereunder. No Borrower is in default under any agreement to which such Borrower is a party or by which such Borrower or any of its property is bound, or under any instrument evidencing any indebtedness of any Borrower. Each Borrower’s execution of or performance under the Transaction Agreements will not create a default or any Lien under any such agreement or instrument other than a Lien in favor of the Lender or that would not reasonably be expected to have a material adverse effect on any Borrower’s ability to perform their obligations hereunder.

 

f.

Compliance With Laws and Other Agreements. Each Borrower is in compliance in all material respects with all Laws, rules, regulations, judgments, decrees, orders, agreements and requirements and has not received, and has no knowledge of, any order or notice of any governmental investigation or of any violation or claim of violation of any Law, regulation, judgment, decree, order, agreement, or other governmental requirement, except as would not reasonably be expected to have a material adverse effect on any Borrower’s ability to perform their obligations hereunder.

 

5.

Affirmative Covenants. Each Borrower covenants and agrees that so long as there are any outstanding Obligations, each Borrower shall:

 

a.

Tax Returns. Prepare and timely file all Tax Returns required to be filed by the Borrower and shall submit to the Lender a copy of its federal Tax Return immediately after filing same with the Internal Revenue Service.

 

  

b.

Notice of Certain Events. Promptly give written notice to the Lender of (i) the occurrence of any event which alone or with notice, the passage of time, or both, would constitute an Event of Default; (ii) the commencement of any proceeding or litigation; and (iii) the formation of any subsidiary of the Borrower or any of its direct or indirect subsidiaries after the date of this Note, which notice shall be accompanied by the resolution of the board of directors or other governing body of such subsidiary authorizing such subsidiary to execute a guaranty of the Obligations, satisfactory in form and substance to the Lender, together with such guaranty duly executed by such subsidiary.

 

c.

Maintenance of Existence and Properties. Maintain its limited liability company existence and obtain and maintain all rights, privileges, licenses, approvals, franchises, properties and assets necessary or desirable in the normal conduct of its business, and comply in all material respects with all contractual obligations and requirements of applicable Law.

 

d.

Preservation of Property; Insurance. Keep and maintain, and require its subsidiaries to keep and maintain, all of its and their property and assets in good order and repair, maintain extended coverage, general liability, business interruption, hazard, property and other insurance in amounts deemed sufficient by the Lender and as is customary for businesses similar to the Borrower’s business, and deliver to the Lender certificates of all such insurance in effect; and cause all such policies covering any collateral given by any Borrower or any of their subsidiaries to secure the Obligations and business interruption to contain loss payee endorsements in favor of the Lender and to be subject to cancellation or reduction in coverage only upon thirty (30) days prior written notice thereof to the Lender at its address set forth in the Notice section hereof.

 

e.

Costs and Expenses. Pay all reasonable out-of-pocket costs and expenses (including reasonable fees and disbursements of legal counsel) of the Lender in connection with the preparation and documentation of this Note and the Line of Credit Note (collectively, the “Note Documentation Costs”). The Note Documentation Costs are capped at Twenty Five Thousand Dollars ($25,000.00) in the aggregate and shall be paid by Borrowers in six (6) equal monthly installments, the first installment due to be paid on or before March 1, 2015 and each succeeding installment to be paid on the first Business Day of each month thereafter.

 

f.

Compliance. Comply with and observe all terms and conditions of this Note and the other Transaction Agreements.

 

g.

Taxes. Pay and discharge, and require its subsidiaries or Affiliates to pay and discharge, when due, all Taxes imposed on them or any of their respective properties, unless the same are currently being contested in good faith by appropriate proceedings and adequate reserves are maintained therefore.

 

  

h.

Further Actions. Cooperate and join with the Lender, at the Borrower’s own expense, in taking all such further actions as the Lender, in its sole judgment, shall deem necessary to effectuate the provisions of this Note and the other Transaction Agreements and to perfect or continue the perfected status of all Liens granted to the Lender pursuant to the Transaction Agreements, including the execution, delivery and filing of financing statements, amendments thereto and continuation statements, the delivery and filing of financing statements, amendments thereto and continuation statements, the delivery of chattel paper, documents or instruments to the Lender and the notation of Liens in favour of the Lender on certificates of title.

 

6.

Negative Covenants. So long as any Obligations are outstanding, no Borrower and no Member of the Company Group shall, without the prior written consent of the Lender:

 

a.

Payment of Dividends; Redemption of Stock. Pay any dividends, make any withdrawal from its capital, make any other distributions or repurchase, redeem or otherwise acquire or set aside reserves to acquire, any of its outstanding stock, partnership or other equity interests, other than distributions for the payment of taxes imposed as a result of ownership of equity interests in such Person.

 

b.

Guaranty Obligations. Become a guarantor, surety, borrower or otherwise become directly, indirectly or contingently liable for the debts or obligations of others, except for the benefit of the Lender or its Affiliates, and except as an endorser of checks or drafts negotiated in the ordinary course of business.

 

c.

Other Liens and Encumbrances. Create, incur, assume or suffer to exist, any Lien on or with respect to any real or personal property of any character (including accounts) whether now owned or hereafter acquired by any Borrower or any Member of the Company Group, or sign or file or suffer to exist, under the Uniform Commercial Code of any jurisdiction, a financing statement that names any Borrower or any Member of the Company Group as debtor, or sign or suffer to exist, any security agreement authorizing any secured party thereunder to file such financing statement, or assign any accounts or other right to receive income, excluding, however, Liens created in favor of the Lender or equipment Liens not to exceed $10,000 on financed equipment other than equipment Liens solely with respect to KPS which shall not exceed $100,000.

 

d.

Consolidation and Merger; Change of Business. Liquidate or dissolve or enter into any consolidation, merger, share exchange, division, conversion, reclassification, recapitalization, reorganization, partnership, joint venture, syndicate or other combination, sell or transfer ten percent (10%) or more of any of its capital stock, change its name or make any material change in the nature of its business as presently conducted; provided, however, that one or more of the Borrowers and the Members of the Company Group may effect a reorganization so long as, after giving effect to such reorganization, the Borrowers remain at all times a majority owner, directly or indirectly, of each Member of the Company Group, with voting control over the capital stock of each Member of the Company Group and with the right to receive 51% of the income or losses on distribution and liquidation of each Member of the Company Group, and Michael P. Duloc remains at all times a majority owner, directly or indirectly, of each Borrower, with voting control of each Borrower and with the right to receive 51% of the income or losses on distribution and liquidation of each Borrower.

 

 

e.

Dispose of Assets. Sell, transfer, lease or otherwise dispose of any assets, product line or process outside the ordinary course of business.

 

f.

Affiliate Transactions. Without the prior written consent of Lender, (i) enter into any transaction with any Affiliate of Lender or Borrower that is not a Member of the Company Group, except as expressly contemplated by the Transaction Agreements, or (ii) create, incur, assume or otherwise become or remain directly or indirectly liable for any intercompany amounts or indebtedness owing to or for any Affiliate of Lender or Borrower that is not a Member of the Company Group.

 

7.

Events of Default. The occurrence of any one of the following shall constitute an event of default (“Event of Default”) under this Note:

 

a.

Breach. A breach by any Borrower or any Member of the Company Group of any term, obligation, provision, covenant, representation or warranty arising under (i) any Transaction Agreement, (ii) any present or future agreement with or in favor of the Lender or any of its Affiliates, including the failure to make any payment when due or (iii) any present or future agreement or instrument for borrowed money or other financial accommodations with any person or entity, in each case which is not cured within five (5) days, if a monetary breach, and fifteen (15) days following written notice from Lender if a non-monetary breach.

 

b.

Bankruptcy; Insolvency. (i) Any Borrower or any Member of the Company Group commences any bankruptcy, reorganization, debt arrangement, or other case or proceeding under the United States Bankruptcy Code or under any similar foreign, federal, state, or local statute, or any dissolution or liquidation proceeding, or makes a general assignment for the benefit of creditors, or takes any action for the purpose of effecting any of the foregoing; (ii) any bankruptcy, reorganization, debt arrangement, or other case or proceeding under the United States Bankruptcy Code or under any similar foreign, federal, state or local statute, or any dissolution or liquidation proceeding, is involuntarily commenced against or in respect of any Borrower or any Member of the Company Group or an order for relief is entered in any such proceeding and such proceeding is not dismissed within 60 days of being commenced; (iii) the appointment, or the filing of a petition seeking the appointment, of a custodian, receiver, trustee, or liquidator for any Borrower, any Member of the Company Group or any of their respective property, or the taking of possession of any part of the property of any Borrower or any Member of the Company Group at the instance of any governmental authority, which is not dismissed within 60 days; or (iv) any Borrower or any Member of the Company Group becomes insolvent (however defined), is generally not paying its debts as they become due, or has suspended transaction of its usual business.

 

  

c.

Reorganization. The dissolution, merger, consolidation or reorganization of any Borrower or any Member of the Company Group without the prior written consent of the Lender; provided, however, that a reorganization of one or more of the Borrowers and the Members of the Company Group that is permitted under Section 6(d) hereof shall not be an Event of Default.

 

d.

Material Misstatement. Any written statement, representation or warranty made in or pursuant to this Note or any other Transaction Agreement or to induce the Lender to enter into this Note or any other Transaction Agreement shall prove to be untrue or misleading in any material respect.

 

e.

Debt, Liens, Loans, Lease Payments. Any Borrower or any Member of the Company Group (i) incurs or assumes additional debt other than debt to the Lender, (ii) makes any loans or advances to officers, directors, shareholders, principals, partners or Affiliates of any Borrower or any Member of the Company Group, (iii) creates, permits or grants any lien or security interest in any of its property on which the Lender has a lien or security interest or (iv) incurs, creates or assumes any commitment, either directly or indirectly, for rent, service fees or charges or finance charges under any lease, rental, sale-lease back or other agreement for use of the property of any person or entity other than any Borrower or any Member of the Company Group, except with the prior written consent of the Lender, which shall not be unreasonably withheld.

 

f.

Entry of Judgment. (i) The filing, entry, or issuance of any judgment, execution, garnishment, attachment, distraint or lien against any Borrower, any Member of the Company Group or any of their respective property in excess of $25,000.00 or (ii) the entry of any order enjoining or restraining any Borrower or any Member of the Company Group or restraining or seizing any property of any Borrower or any Member of the Company Group in excess of $25,000.00, in each case which is not dismissed within 60 days.

 

g.

Transfer of Assets. Any Borrower or any Member of the Company Group transfers or sells all or substantially all of its assets, without the prior written consent of the Lender.

 

h.

Agreements Invalid. The validity, binding nature of, or enforceability of any material term or provision of this Note or any other Transaction Agreement is disputed by, on behalf of, or in the right or name of any Borrower or any Member of the Company Group or any material term or provision of any such Transaction Agreement is found or declared to be invalid, avoidable, or non-enforceable by any court of competent jurisdiction.

 

  

8.

Remedies.

 

a.

Acceleration of Obligations; Rights of Lender. Upon the occurrence of an Event of Default, the Obligations shall immediately and automatically become due and payable in full, all without protest, presentment, demand or further notice of any kind to any Borrower or any Member of the Company Group, all of which are expressly waived. Upon the occurrence of an Event of Default, the Lender, at its option, may exercise any and all rights and remedies it has under this Note, any other Transaction Agreement and under applicable Law, including the right to charge and collect interest on the Obligations at the Default Rate, which rate shall, at the Lender’s option, apply upon the occurrence of and after an Event of Default, maturity, whether by acceleration or otherwise, or the entry of judgment with respect to any or all of the Obligations. Upon the occurrence of an Event of Default, the Lender may proceed to protect and enforce the Lender’s rights under any Transaction Agreement or under applicable Law by action at law, in equity or other appropriate proceeding, including an action for specific performance to enforce or aid in the enforcement of any provision contained herein or in any other Transaction Agreement. Upon the occurrence of any Event of Default, Lender may exercise any and all rights and remedies provided for herein, under any other Transaction Agreement, under the Uniform Commercial Code or at law or equity generally, including the right to foreclose the security interests granted herein and to realize upon any Collateral by any available judicial procedure or to take possession of and sell any or all of the Collateral with or without judicial process.

 

b.

Remedies Cumulative; No Waiver. The rights, powers and remedies hereunder or under any other Transaction Agreement are cumulative and concurrent, and are not exclusive of any other rights, powers or remedies available to the Lender. No failure or delay on the part of the Lender in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or remedy preclude any other or further exercise thereof, or the exercise of any other right, power or remedy.

 

c.

Continuing Enforcement. If, after receipt of any payment of all or any part of the Obligations, the Lender is compelled or agrees, for settlement purposes, to surrender such payment to any person or entity for any reason, then this Note and the other Transaction Agreements shall continue in full force and effect or be reinstated, as the case may be. The provisions of this paragraph shall survive the termination of this Note and the other Transaction Agreements and shall be and remain effective notwithstanding the payment of the Obligations, the cancellation of the Note, the release of any security interest, lien or encumbrance securing the Obligations or any other action which the Lender may have taken in reliance upon its receipt of such payment.

 

 

9.

Miscellaneous.

 

a.

Waiver. Each Borrower (i) waives demand, presentment, protest, notice of protest and notice of dishonor of this Note; (ii) consents to any and all waivers or modifications that may be granted by the Lender with respect to the payment or other provisions of this Note; and (iii) agrees that makers, endorsers, guarantors and sureties for the indebtedness evidenced hereby may be added or released without notice to any Borrower and without affecting any Borrower’s liability hereunder. The liability of each Borrower hereunder shall be absolute and unconditional.

 

b.

Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the Borrowers or Lender at the addresses set forth below (or to such other address that may be designated by a party from time to time in accordance with this Section):

 

Borrowers:	KPS Holdco, LLC DFI Holdings, LLC 3179 Deer Creek Road Collegeville, PA 19426 Attention: Michael P. Duloc Fax: 815-734-5233	with a required copy to (which shall not constitute notice): Fox Rothschild LLP 2700 Kelly Road, Suite 300 Warrington, PA 18976 Attention: Jeffrey H. Nicholas Fax: 215-345-7507
Lender:	c/o AMREP Corporation 300 Alexander Park, Suite 204 Princeton, New Jersey 08540 Attention: General Counsel Fax: 609-716-8255	with a required copy to (which shall not constitute notice): Duane Morris LLP 222 Delaware Avenue Suite 1600 Wilmington, DE 19801 Attention: Christopher Winter Fax: 302-397-2455

 

c.

Costs and Expenses. The Borrowers shall promptly pay (or reimburse, as the Lender may elect) all costs and expenses which the Lender has incurred or may hereafter incur in connection with the reproduction, interpretation, perfection and protection of Collateral, administration and enforcement of this Note and the Line of Credit Note, the collection of all amounts due under this Note or the Line of Credit Note, and all amendments, modifications, consents or waivers, if any, to this Note and the Line of Credit Note. The Borrowers’ reimbursement obligations under this paragraph shall survive any termination of this Note and the Line of Credit Note. The obligations of Borrowers described in Section 5(e) above are in addition to Borrowers’ obligations under this Section.

 

 

d.

Payment Due on a Day Other than a Business Day. If any payment due or action to be taken under this Note or any other Transaction Agreement falls due or is required to be taken on a day other than a Business Day, such payment or action shall be made or taken on the next succeeding Business Day and such extended time shall be included in the computation of interest.

 

e.

Governing Law. This Note shall be governed by and construed in accordance with the internal substantive Laws of the State of New York, without giving effect to any choice of Law or conflict of Laws rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of New York.

 

f.

Consent to Jurisdiction and Waiver of Jury Trial. Each Party irrevocably submits to the exclusive jurisdiction of the federal courts of the Southern District of New York or the courts of the State of New York located in the City of New York for the purposes of any suit, action or other proceeding arising out of this Note or any transaction contemplated hereby. Each Party further agrees that service of any process, summons, notice or document by U.S. registered mail to such Party’s respective address set forth in the “Notices” section hereof shall be effective service of process for any action, suit or proceeding with respect to any matters to which it has submitted to jurisdiction in this Section. Each Party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Note or the transactions contemplated hereby in federal courts of the Southern District of New York or the courts of the State of New York located in the City of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS NOTE OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

 

g.

Integration. This Note embodies the entire agreement and understanding of the Parties hereto in respect of the subject matter contained herein. This Note supersedes all prior agreements and understandings between the Parties with respect to the subject matter thereof.

 

h.

Amendment. Any provision of this Note may be amended if, and only if, such amendment is in writing and is signed by each Party to this Note.

 

 

i.

Successors and Assigns. This Note (i) shall be binding upon each Borrower and the Lender and, where applicable, their successors and permitted assigns, and (ii) shall inure to the benefit of each Borrower and the Lender and, where applicable, their successors and permitted assigns; provided, however, that no Borrower may assign its rights or obligations hereunder or any interest herein without the prior written consent of the Lender, and any such assignment or attempted assignment by any Borrower shall be void and of no effect with respect to the Lender. The Lender may from time to time sell or assign, in whole or in part, or grant participations in the Credit Facility, the Note or the Obligations evidenced thereby. The Borrowers authorize the Lender to provide information concerning the Borrowers to any prospective purchaser, assignee or participant; provided that the recipient signs a customary non-disclosure agreement.

 

j.

Severability. Whenever possible, each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable Law. If any provision of this Note is held to be prohibited by or invalid under applicable Law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Note so as to effect the original intent of the Parties as closely as possible to the fullest extent permitted by applicable Law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

k.

Savings. This Note is subject to the express condition that, at no time shall any Borrower be obligated or required to pay interest at a rate that could subject Lender to either civil or criminal liability as a result of such interest rate exceeding the maximum rate (the “Highest Lawful Rate”) that such Borrower is permitted by applicable Law to contract to agree to pay. If the rate of interest at any time exceeds the Highest Lawful Rate, the outstanding amount of the Obligations shall bear interest at the Highest Lawful Rate until the total amount of interest due hereunder equals the amount of interest which would have been due hereunder if the stated rates of interest set forth in this Note had at all times been in effect. In addition, if when the Obligations are repaid in full the total interest due hereunder (taking into account the increase provided for above) is less than the total amount of interest which would have been due hereunder if the stated rates of interest set forth in this Note had at all times been in effect, then to the extent permitted by applicable Law, each applicable Borrower shall pay to Lender an amount equal to the difference between the amount of interest paid and the amount of interest which would have been paid if the Highest Lawful Rate had at all times been in effect. Notwithstanding the foregoing, it is the intention of Lender and Borrowers to conform strictly to any applicable usury Laws. Accordingly, if Lender contracts for, charges, or receives any consideration which constitutes interest in excess of the Highest Lawful Rate, then any such excess shall be cancelled automatically and, if previously paid, shall at such Lender’s option be applied to the Obligations or be refunded to Borrowers.

 

 

l.

Joint and Several Liability. Each Borrower is jointly and severally liable for the Obligations under the Note.

 

m.

Joint Drafting.

 

n.

The Parties have participated jointly in the negotiation and drafting of this Note. In the event an ambiguity or question of intent or interpretation arises, this Note shall be construed as if drafted jointly by the 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 Note.

 

o.

Survival of Covenants. This Note and all covenants, agreements, representations and warranties made herein and in any certificates delivered pursuant hereto shall survive the execution and delivery of the Note, and shall continue in full force and effect until all of the Obligations have been fully paid, performed, satisfied and discharged.

 

p.

Counterparts.

 

q.

This Note may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Execution and delivery of this Note by delivery of a facsimile or electronically recorded copy in .pdf file format bearing a copy of the signature of a Party shall constitute a valid and binding execution and delivery of this Note by such Party. Such copies shall constitute enforceable original documents.

 

r.

Headings. The section headings contained in this Note are for reference purposes only and shall not affect in any way the meaning or interpretation of this Note.

 

s.

Interpretation.

 

t.

When a reference is made in this Note to an Article, Section or Exhibit, such reference will be to an Article or Section of, or an Exhibit to, this Note unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Note, they will be deemed to be followed by the words “without limitation.” The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Note will refer to this Note as a whole and not to any particular provision of this Note. Unless the context expressly provides otherwise, any approval, determination, election or authorization required to be obtained from a Party shall be at such Party’s sole discretion. The word “or” is not exclusive. All terms used herein with initial capital letters have the meanings ascribed to them herein and all terms defined in this Note will have such defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Note are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Unless otherwise indicated, any agreement, instrument or statute defined or referred to herein, or in any agreement or instrument that is referred to herein, means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns.

 

  

u.

Disclosure. Borrowers consent to Lender or its Affiliates publicly disclosing this Note and the other Transaction Agreements, including by filing such documents with the Securities and Exchange Commission or the New York Stock Exchange.

 

v.

Independent Counsel. Each Party certifies that it has read the terms of this Note, that it understands the terms of this Note, and that it is entering into this Note of its own volition. Each Party warrants and represents that it has (a) been represented by an attorney of its choice in connection with the Note and received independent legal advice from its attorney regarding its decision with respect to the advisability of making and entering into this Note, or (b) had sufficient time, opportunity and means to engage an attorney of its choice in order to be represented by such attorney in connection with the Note and to receive independent legal advice from such attorney regarding its decision with respect to the advisability of making and entering into this Note, and has made a knowing and voluntary decision not to do so.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 

 

 

IN WITNESS WHEREOF, the Parties have caused this Note to be duly executed and delivered as of the date first written above.

  

	DFI HOLDINGS, LLC
	By:	/s/ Michael P. Duloc
		Name: Michael P. Duloc
		Title:  Manager

 

	KPS HOLDCO, LLC
	By:	/s/ Michael P. Duloc
		Name: Michael P. Duloc
		Title:  Manager

 

		AMERICAN REPUBLIC INVESTMENT CO.
	By:	/s/ Peter M. Pizza
		Name: Peter M. Pizza
		Title:  Vice President

 

Signature Page to Buyer Promissory Note

(1/1)

 

 

ANNEX A

 

 

a.

Closing Date. The term “Closing Date” shall mean February 9, 2015.

 

b.

Company Group. The term “Company Group” shall mean Kable Media Services, Inc., a Delaware corporation, Kable Distribution Services, Inc., a Delaware corporation, Kable News Company, Inc., an Illinois corporation, Kable News International, Inc., a Delaware corporation, Kable Distribution Services of Canada, Ltd., a Canadian corporation incorporated in Ontario, Canada, and Kable Product Services, Inc., a Delaware corporation.

 

c.

Guaranty. The term “Guaranty” shall mean the Guaranty Agreement, dated as of the date hereof, by each of the Borrowers and the Company Group, as guarantors, in favor of the Lender, entered into in connection with the SPA, this Note and certain other documents and agreements.

 

d.

Interest Rate. The term “Interest Rate” shall mean an interest rate per annum as determined on the first Business Day of each month as the rate that is equal to three percent (3%) plus the Prime Rate, or, if applicable hereunder, the Default Rate. For each month between the Closing Date until Obligations are satisfied in full, the Interest Rate for such month (as determined on the first Business Day of such month) shall be determined in accordance with the definition of “Interest Rate” without notice to any Borrower.

 

e.

Lien. The term “Lien” shall mean any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property.

 

f.

Note. The term “Note” shall mean this Promissory Note together with all attachments hereto and all amendments and modifications hereto in effect from time to time.

 

g.

Obligations. The term “Obligations” shall mean any and all agreements, covenants, indebtedness, liabilities and obligations of every kind and description of any one or more of the Borrowers or the Members of the Company Group (a) under the Purchase Agreement, the Guaranty, any of the other Transaction Agreements (including the Note and the Line of Credit Note, together with all attachments and amendments in effect from time to time), each of the documents, agreements, certificates and instruments executed in connection with any Transaction Agreement or the Lease Agreement, dated November 7, 2008, between El Dorado Utilities, Inc. and KPS (as successor-in-interest to Kable Specialty Packaging Services LLC) or (b) owing to the Lender or to any Affiliate of the Lender, whether or not under the Transaction Agreements, and, in each case of clause (a) or clause (b), whether such agreements, covenants, indebtedness, liabilities and obligations are primary or secondary, direct or indirect, absolute or contingent, sole, joint or several, secured or unsecured, due or to become due, contractual or tortious, arising by operation of law, by overdraft or otherwise, or now or hereafter existing, including advances, principal, interest, fees, late fees, expenses, reasonable attorneys’ fees and costs or allocated fees and costs of Lender’s in-house legal counsel, that have been or may hereafter be contracted or incurred. Notwithstanding the foregoing, and for the avoidance of doubt, the term Obligations shall include Note Documentation Costs, which are subject to the cap set forth in Section 5(e), and no other attorneys’ fees or costs of Lender or any Affiliates of Lender relating to negotiation and documentation of the Transaction Agreements on or prior to the Closing Date.

 

 

h.

Prime Rate. The term “Prime Rate” means for any day a per annum rate of interest equal to the “prime rate,” as published in the “Money Rates” column of The Wall Street Journal, from time to time, or if for any reason such rate is no longer available, the rate reasonably established by Lender as the prevailing prime rate.

 

i.

Security Agreement. The term “Security Agreement” shall mean the Security Agreement, dated as of the date hereof, by each Borrower and each Member of the Company Group, as grantors, in favor of the Lender, entered into in connection with the SPA, this Note and certain other documents and agreements.

 

 

 

 

 

Exhibit 10.3

 

Execution Copy

 

TRANSITION SERVICES AGREEMENT

 

This TRANSITION SERVICES AGREEMENT (“Agreement”), dated as of February 9, 2015 (the “Effective Date”), is between DFI Holdings, LLC, a Pennsylvania limited liability company, and KPS Holdco, LLC, a Pennsylvania limited liability company (collectively, “Buyers”), and American Republic Investment Co., a Delaware corporation (“Seller”, and together with Seller, the “Parties”, and each, a “Party”). Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Stock Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”), between Seller and Buyers.

 

WITNESSETH:

 

WHEREAS, upon consummation of the transactions contemplated by the Purchase Agreement, each of Seller and Buyers will provide to the other certain services during a transitional period on the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the premises set forth above and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

1.           Services.

 

(a)          As used herein, (i) the term “Provider” means Seller or Buyers, as the case may be, when such Party or any of its Affiliates is providing Services (as defined below) pursuant to the terms of this Agreement, and (ii) the term “Recipient” means Seller or Buyers, as the case may be, when such Party or any of its Affiliates is receiving Services pursuant to the terms of this Agreement.

 

(b)          Seller shall provide, or cause one or more of its Affiliates to provide, to the Company Group the services set forth on Annex A hereto (the “Seller Services”).

 

(c)          Buyers shall provide, or cause one or more of their Affiliates (including, after the consummation of the transactions contemplated by the Purchase Agreement, the Company Group) to provide, to Seller the services set forth on Annex B hereto (the “Buyer Services” and together with the Seller Services, the “Services”).

 

(d)          The Parties have set forth on Annex A and Annex B the time period during which the Services will be provided (if different from the Term as set forth in Section 4(a)), a description of the Service to be provided and any other terms applicable thereto.

 

(e)          Each Provider shall provide, or cause one or more of its Affiliates to provide, the Services with the same degree of skill, attention and care as it exercises in performing the same or similar services for itself and its Affiliates and in the manner and at a level of service generally consistent with that provided by Provider or its Affiliates to the Recipient and its Affiliates immediately preceding the date of this Agreement. Except as set forth in this Section 1(e), neither Party makes any warranties, express or implied, with respect to the Services to be provided by such Party pursuant to this Agreement.

 

(f)          Nothing in this Agreement shall preclude a Recipient from obtaining, in whole or in part, services of any nature that may be obtainable from the Provider, from its own employees or from providers other than the Provider.

 

  

(g)          Unless expressly provided otherwise on Annex A or Annex B, as the case may be, the Provider shall not be required to (i) expand its facilities, incur new long-term capital expenses or employ additional personnel in order to provide the Services to the Recipient or (ii) provide Services hereunder that are greater in nature and scope than the comparable services provided prior to the Effective Date.

 

(h)          In providing the Services, the Provider, as it deems necessary or appropriate in its reasonable judgment, may (a) use the personnel of the Provider or its Affiliates and (b) employ the services of third parties to the extent such third party services are routinely utilized to provide similar services to other businesses of the Provider or are reasonably necessary for the efficient performance of any of such Services; provided that any Services that were not provided by a third party prior to the Effective Date shall be provided by a third party after the Effective Date only with the prior written consent of the Recipient, which consent shall not be unreasonably withheld. The Provider will only employ the services of third parties who have entered into non-disclosure agreements that obligate such third parties to maintain the confidentiality of the Recipient’s confidential information and that prohibit the third party from using such confidential information for any purpose other than in connection with providing the Services. The Recipient may retain at its own expense its own providers, consultants and other professional advisers.

 

(i)          All employees and representatives of the Provider and its Affiliates shall be deemed for purposes of all compensation and employee benefits matters to be employees or representatives, as the case may be, of such Provider and its Affiliates and in no event shall be deemed employees or representatives of the Recipient. In performing the Services, such employees and representatives shall be under the direction, control and supervision of the Provider (and not the Recipient) and the Provider shall have the sole right to exercise all authority with respect to the employment (including termination of employment), assignment and compensation of such employees and representatives. Whenever the Provider or its Affiliates utilize third-party providers to perform Services pursuant to this Agreement, such third-party providers shall at all times remain subject to the direction and control of Provider or such Affiliate. Recipient and its Affiliates shall have no liability to any employees or representatives of Provider or third-party providers for any welfare, salaries, fringe benefits, legally-required employer contributions and tax obligations by virtue of the provision of Services or as a result of the relationships established under this Agreement. No equipment or facility of Provider used in performing Services for Recipient and its Affiliates shall be deemed to be transferred, assigned, conveyed or leased by such performance or use. Provider shall maintain appropriate security, maintenance and insurance coverage on such equipment and facilities.

 

(j)          If there is an unavoidable conflict between the immediate needs of the Provider and those of the Recipient as to the use of or access to a particular Service to be provided by the Provider, the Provider shall have the right, in its sole discretion, to establish reasonable priorities, at particular times and under particular circumstances, as between the Provider and the Recipient. In any such situation, the Provider shall provide notice to the Recipient of the establishment of such priorities at the earliest practicable time.

 

2.           Cooperation. The Recipient shall, in a timely manner, take all such actions as may be reasonably necessary or desirable in order to enable or assist the Provider in the Provider’s provision of Services, including providing necessary information and specific written authorizations and consents, and the Provider shall be relieved of its obligations hereunder to the extent that the Recipient’s failure to take any such action renders performance by the Provider of such obligations unlawful or impracticable.

 

3.           Compensation. The Parties agree that the provision of the Services is included as part of the consideration exchanged between the Parties in connection with the Closing and no additional amounts are to be paid by the Recipient to the Provider for the provision of Services under this Agreement.

 

  

4.           Term; Termination.

 

(a)          Subject to the further provisions of this Section 4 and except as expressly provided with respect to a specific Service in Annex A or Annex B, this Agreement shall commence on the Effective Date and, unless this Agreement is terminated earlier pursuant to any of its express provisions, shall end on the date one year following the Effective Date (the “Termination Date”); provided that if a Party desires and the other Party agrees to continue Services after the Termination Date, the Parties shall negotiate in good faith to determine an agreed-upon extension period which shall only be effective if memorialized in a writing signed by both Parties.

 

(b)          Notwithstanding anything to the contrary contained herein or in Annex A or Annex B, the Recipient may terminate any individual Service on a Service-by-Service basis (and/or location-by-location basis where an individual Service is provided at multiple locations of Recipient) upon prior written notice to the Provider identifying the particular Service (or location) to be terminated and the effective date of termination, which date shall be not less than thirty days after receipt of such notice.

 

(c)           This Agreement may be terminated as to all or any portion of the Services prior to the expiration of the term of this Agreement as set forth in Section 4(a), upon written notice as set forth below:

 

(i)          by either Party, if the other Party commits a material breach of any provision of this Agreement and such material breach continues for a period of 30 days following a written request to cure such breach; or

 

(ii)         by either Party, upon written notice to the other Party, in the event that the other Party hereto shall (1) file a petition in bankruptcy, (2) become or be declared insolvent, or become the subject of any proceedings (not dismissed within sixty (60) days) related to its liquidation, insolvency or the appointment of a receiver, (3) make an assignment on behalf of all or substantially all of its creditors, or (4) take any corporate action for its winding up or dissolution.

 

(d)          Following any termination of this Agreement, each Provider shall cooperate in good faith with the Recipient to transfer records and take all other actions reasonably requested by the Recipient to enable the Recipient to make alternative arrangements for the provision of services substantially consistent with the Services provided pursuant to this Agreement.

 

(e)          Each Recipient specifically agrees and acknowledges that all obligations of the Provider to provide each Service for which the Provider is responsible hereunder shall immediately cease upon the termination of this Agreement. Upon the cessation of the Provider’s obligation to provide any Service, the Recipient shall immediately cease using, directly or indirectly, such Service (including any and all software of the Provider or third party software provided through the Provider, telecommunications services or equipment, or computer systems or equipment).

 

(f)          Upon termination of a Service with respect to which the Provider holds books, records or files, including current or archived copies of computer files, owned by the Recipient and used by the Provider in connection with the provision of a Service to the Recipient, the Provider will return all such books, records or files as soon as reasonably practicable; provided, however, that the Provider may make a copy, at its expense, of such books, records or files for archival purposes only.

 

  

5.           Accounting Records and Documents.

 

(a)          Each Party shall be responsible for maintaining full and accurate accounts and records of all Services rendered by such Party pursuant to this Services Agreement and shall provide such additional information as the other Party may reasonably request for purposes of its internal bookkeeping, accounting, operations and management. Each Party shall maintain its accounts and records in accordance with past practice.

 

(b)          At any time during the Term of this Agreement, and for a period of one (1) year after termination or expiration of this Agreement, each Party, its Affiliates, or an authorized independent auditor or counsel of such Party or such Affiliates, shall have the right to inspect the other Party’s books and records relating to the Services upon five (5) Business Days prior written notice during regular business hours and without undue disruption of the normal operations of the other Party.

 

(c)          All information to which a Party, its Affiliates, or either of their representatives gain access pursuant to this Section 5 shall be subject to the terms of the confidentiality provisions set forth in Section 7 of this Agreement.

 

6.           Liability and Indemnity.

 

(a)          The Provider hereby agrees to indemnify and hold the Recipient and its respective officers, directors, agents, employees and Affiliates harmless from and against any and all liabilities, losses, damages, expenses, fines and penalties of any kind, including reasonable attorneys’ fees and disbursements incurred by the Recipient, resulting from any demand, claim, lawsuit, action or proceeding arising out of or resulting from the gross negligence or willful misconduct of the Provider or its Affiliates (or any third party that provides a Service to the Recipient on behalf of Provider) in connection with the provision of Services (or failure to provide Services). The Provider’s liability under this Section 6(a) shall be subject to the provisions of Section 6(b).

 

(b)          Notwithstanding anything in this Agreement to the contrary, neither the Provider nor the Recipient shall be liable for any special, incidental or consequential damages of any kind whatsoever, including loss of profits, business interruptions and claims of customers.

 

(c)          The procedures and limitations for indemnification set forth in Article 6 of the Purchase Agreement shall be deemed incorporated into and made a part of this Agreement.

 

7.           Proprietary Information. Each Party agrees to maintain the confidentiality of all non-public information relating to the other Party, its Affiliates or any third party that may be disclosed by a Party to the other Party in connection with the performance of the Services hereunder and to use such information solely for the purposes of providing or receiving the Services hereunder. Each Party shall retain the entire right, interest and title to its proprietary information. No license under any patent, copyright, trademark, other intellectual property right or any application therefor, is hereby granted or implied by the provision of Services to the Recipient.

 

8.           Tax Liability. Each Party shall be responsible for all sales or use taxes imposed or assessed as a result of the provision of Services by such Party.

 

  

9.           Assignment. Neither this Agreement nor any of the rights and obligations of the Parties hereunder may be assigned by either of the Parties without the prior written consent of the other Party hereto, except that (a) each Party, in its capacity as a Provider, may assign any of its rights and obligations hereunder to (i) any of its Affiliates or (ii) third parties to the extent such third parties are routinely used to provide such Services to affiliates and businesses of the Provider, in either case, without the prior written consent of the Recipient and (b) an assignment by operation of law in connection with a merger or consolidation shall not require the consent of the other Party hereto. Notwithstanding the foregoing, each of Seller and Buyers shall remain liable for all of their respective obligations under this Agreement. Subject to the first sentence of this Section 10, this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns and no other person shall have any right, obligation or benefit hereunder. Any attempted assignment or transfer in violation of this Section 10 shall be void.

 

10.         Third Party Beneficiaries. No provision of this Agreement is intended to confer upon any person other than the Parties any rights or remedies hereunder, except for Affiliates of Seller who are to receive Services hereunder. Such Affiliates of Seller may enforce this Agreement in connection with Services to be provided to them hereunder.

 

11.         Force Majeure.

 

(a)          The Provider shall not be in default hereunder by reason of any failure or delay in the performance of its obligations hereunder where such failure or delay is due to any cause beyond its reasonable control, including strikes, labor disputes, civil disturbances, riot, rebellion, invasion, epidemic, hostilities, war, embargo, natural disaster, acts of God, acts of terrorism, flood, fire, sabotage, accident, delay in transportation, loss and destruction of property, intervention by governmental entities, change in laws, regulations or orders, other events or any other circumstances or causes beyond the Provider’s reasonable control.

 

(b)          Upon learning of the occurrence of such event of force majeure, the Provider shall promptly notify the Recipient, either orally or in writing. In the event of any failure or delay in performance of the Services, the Provider shall use its reasonable commercial efforts to restore the Services as soon as may be reasonably possible in accordance with its existing contingency plans for such services.

 

12.         Specific Performance. The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by them in accordance with the terms hereof and that each Party shall be entitled to specific performance of the terms hereof (without the need to post bond or any other security), in addition to any other remedy at law or equity.

 

13.         Independent Contractor. Nothing contained in this Agreement shall be deemed or construed to create a partnership or joint venture, to create the relationships of employee/employer or principal/agent, or otherwise create any liability whatsoever of either Party with respect to the indebtedness, liabilities, obligations or actions of the other or any of their respective officers, directors, employees, stockholders, agents or representatives, or any other person or entity.

 

14.         Survival. The provisions of Sections 3 through 20 shall survive the expiration or earlier termination of this Agreement for any reason whatsoever.

 

15.         Waiver. Any failure of Seller to comply with any of its obligations or agreements herein contained may be waived only in writing by Buyers. Any failure of Buyers to comply with any of its obligations or agreements herein contained may be waived only in writing by Seller. No waiver granted hereunder shall be deemed a waiver of any subsequent breach or default of the same or similar nature. No failure or delay by any Party in exercising any right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

 

  

16.         Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective Parties at the addresses set forth below (or to such other address that may be designated by a Party from time to time in accordance with this Section):

 

Buyers:	c/o DFI Holdings, LLC	with a required copy to (which shall not constitute notice):
	KPS Holdco, LLC	Fox Rothschild LLP
	3179 Deer Creek Road	2700 Kelly Road, Suite 300
	Collegeville, PA 19426	Warrington, PA 18976
	Attention: Michael P. Duloc	Attention: Jeffrey H. Nicholas
	Fax: 815-734-5233	Fax: 215-345-7507
Seller:	c/o AMREP Corporation	with a required copy to (which shall not constitute notice):
	300 Alexander Park, Suite 204	Duane Morris LLP
	Princeton, New Jersey 08540	222 Delaware Avenue
	Attention: General Counsel	Suite 1600
	Fax: 609-716-8255	Wilmington, DE 19801
		Attention: Christopher Winter
		Fax: 302-397-2455

 

17.         Governing Law; Consent to Jurisdiction and Waiver of Jury Trial.

 

(a)          This Agreement shall be governed by and construed in accordance with the internal substantive Laws of the State of New York, without giving effect to any choice of Law or conflict of Laws rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of New York.

 

(b)          Each Party irrevocably submits to the exclusive jurisdiction of the federal courts of the Southern District of New York or the courts of the State of New York located in the City of New York for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each Party further agrees that service of any process, summons, notice or document by U.S. registered mail to such Party’s respective address set forth in the “Notices” section hereof shall be effective service of process for any action, suit or proceeding with respect to any matters to which it has submitted to jurisdiction in this Section. Each Party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in federal courts of the Southern District of New York or the courts of the State of New York located in the City of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

 

 

18.         Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Execution and delivery of this Agreement by delivery of a facsimile or electronically recorded copy in .pdf file format bearing a copy of the signature of a Party shall constitute a valid and binding execution and delivery of this Agreement by such Party. Such copies shall constitute enforceable original documents.

 

19.         Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

20.         Entire Agreement. This Agreement embodies the entire agreement and understanding of the Parties hereto in respect of the subject matter herein. This Agreement supersedes all prior agreements and understandings between the Parties with respect to the subject matter thereof.

 

21.         Amendment. Any provision of this Agreement may be amended if, and only if, such amendment is in writing and is signed by each Party to this Agreement.

 

22.         Binding Effect; Benefits. This Agreement shall inure to the benefit of and be binding upon the Parties hereto and their respective successors and permitted assigns; nothing in this Agreement, express or implied, is intended to confer on any Person, other than the Parties and their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

 

23.         Joint Drafting. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the 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.

 

24.         Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law. If any provision of this Agreement is held to be prohibited by or invalid under applicable Law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible to the fullest extent permitted by applicable Law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

25.         Interpretation. When a reference is made in this Agreement to an Article, Section or Exhibit, such reference will be to an Article or Section of, or an Exhibit to, this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they will be deemed to be followed by the words “without limitation.” The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement will refer to this Agreement as a whole and not to any particular provision of this Agreement. All capitalized terms used and defined in this Agreement shall have the meanings ascribed to them herein. All capitalized terms used but not otherwise defined in this Agreement shall have the meanings ascribed to them in the Purchase Agreement. Unless the context expressly provides otherwise, any approval, determination, election or authorization required to be obtained from a Party shall be at such Party’s sole discretion. The word “or” is not exclusive. All terms defined in this Agreement will have such defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Unless otherwise indicated, any agreement, instrument or statute defined or referred to herein, or in any agreement or instrument that is referred to herein, means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns.

 

  

26.         Assignability. This Agreement shall not be assignable by any Party hereto without the prior written consent of the other Party.

 

27.         Specific Performance. Buyers and Seller each agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by them in accordance with the terms hereof and that each Party shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity.

 

28.         Expenses. Each Party shall bear its own costs and expenses in connection with this Agreement and the transactions contemplated hereby, including all legal, accounting, financial advisory, consulting and all other fees and expenses of third parties, except where specifically provided to the contrary.

 

29.         Disclosure. Buyers consent to Seller or its Affiliates publicly disclosing this Agreement, including by filing such documents with the Securities and Exchange Commission or the New York Stock Exchange.

 

30.         Independent Counsel. Each Party certifies that it has read the terms of this Agreement, that it understands the terms of this Agreement, and that it is entering into this Agreement of its own volition. Each Party warrants and represents that it has (a) been represented by an attorney of its choice in connection with the Transaction and received independent legal advice from its attorney regarding its decision with respect to the advisability of making and entering into this Agreement, or (b) had sufficient time, opportunity and means to engage an attorney of its choice in order to be represented by such attorney in connection with the Transaction and to receive independent legal advice from such attorney regarding its decision with respect to the advisability of making and entering into this Agreement, and has made a knowing and voluntary decision not to do so.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

IN WITNESS WHEREOF, the Parties have caused this Transition Services Agreement to be duly executed and delivered as of the date first written above.

 

DFI HOLDINGS, LLC
By:	/s/ Michael P. Duloc
	Name:		Michael P. Duloc
	Title:	President & Chief Executive Officer
KPS HOLDco, LLC
By:	/s/ Michael P. Duloc
	Name:		Michael P. Duloc
	Title:	President & Chief Executive Officer

AMERICAN REPUBLIC INVESTMENT CO.
By:	/s/ Peter M. Pizza
	Name:		Peter M. Pizza
	Title:	Vice President

Signature Page to Transition Services Agreement

(1/1)

  

 

ANNEX A

 

Schedule of Seller Services

 

1.          Information Technology

 

Service Description: Seller or its Affiliates (or any third party that provides the Service to the Company Group on behalf of Seller) will provide the Company Group with information technology support for the following services to the extent previously provided to the Company Group prior to the Effective Date (but which shall not include (i) providing access to any software or hardware licensed or leased from third parties if to do so would cause a breach or default thereunder or (ii) assisting or expending time, amounts or resources in the transition, disconnection or reconnection of any such Services):

 

a.

Helpdesk

 

b.

Network Support and all ancillary services required to support the KDS and KPS information technology networks, including but not limited to firewalls, security services, etc.

 

c.

Exchange (e-mail) support and all ancillary services required to support the KDS and KPS email servers, including but not limited to firewalls, spam filters, etc.

 

d.

Security, including audit compliance and PCI certification

 

e.

Saftx use and support

 

f.

AS400 programming and technical support

 

g.

Use of the credit card repository

 

h.

Irista hardware and software support and usage

 

i.

Support for AS400 backup hardware currently housed at PCD

 

Term of Service:           Six months following the Effective Date unless terminated earlier by Buyers.

 

2.          Payroll Processing

 

Service Description:    If the Company Group timely (A) provides Seller or its Affiliates (or any third party that provides the Service to the Company Group on behalf of Seller) specific instructions for each pay period during the Term of Service regarding (1) the amount to be paid to each employee of the Company Group during such pay period, (2) the number of vacation or paid-time-off days used by each employee of the Company Group during such pay period, (3) changes to payroll deductions for such employee of the Company Group during such pay period and (4) any other information requested by Seller or its Affiliates (or any third party that provides the Service to the Company Group on behalf of Seller) and (B) funds the full amount to be paid to all employees of the Company Group by transmitting such funds to Seller or its Affiliates (or any third party that provides the Service to the Company Group on behalf of Seller), Seller or its Affiliates (or any third party that will provide the Service to the Company Group on behalf of Seller) will process the payroll for employees of the Company Group to the extent previously provided prior to the Closing, except that all deductions relating to Benefit Plans (including deductions for health benefits and 401K) from employees’ pay will cease as of the Closing.

 

Term of Service:           Four months following the Effective Date unless terminated earlier by Buyers.

 

If any of the Seller Services require travel to Buyers’ facilities, Buyers shall pay the customary and reasonable costs of travel, hotel accommodations and meals for such individuals.

  

 

ANNEX B

 

Schedule of Buyer Services

 

1.          Assets of Affiliates of the Company Group

 

Service Description:    Buyers and the Company Group will promptly assign, transfer and deliver to Seller and its Affiliates, at the sole cost and expense of the Company Group, the books, records and assets (including JD Edwards accounting information including all account detail, information technology network files, websites (including amrepcorp.com and related web pages), web addresses and email accounts) of each Affiliate of the Company Group (including Kable Staffing Resources LLC, Palm Coast Data LLC, FulCircle Media, LLC, Media Data Resources, LLC, El Dorado Utilities, Inc., Two Commerce LLC and AMREP Corporation) that are in the possession or under the control of Buyers or any Member of the Company Group, in native format (unless otherwise requested by Seller).

 

Term of Service:         No later than the date that it is three months following the Effective Date.

 

2.          Information Technology

 

Service Description:    Buyers and the Company Group (or any third party that provides the Service to Seller or its Affiliates on behalf of the Company Group) will provide Seller and its Affiliates information technology support, including access to software and hardware, to the extent previously provided to Seller and its Affiliates prior to the Effective Date, and training on the WRSS customer solution to the extent requested by Seller or any of its Affiliates, for the following:

 

a.

WRSS – Term of Service: Six months following the Effective Date unless terminated earlier by Seller.

 

b.

AMREP Corporate – management and transition to Palm Coast Data LLC of amrepcorp.com and related web pages. Term of Service: Six months following the Effective Date unless terminated earlier by Seller.

 

3.          Mt. Morris Office Building

 

Service Description:    Buyers and the Company Group will provide Seller and its Affiliates with continued access as a tenant to the building at 16 South Wesley Ave., Mount Morris, IL 61054 to the extent previously provided to Seller and its Affiliates prior to the Effective Date, including providing Seller and its Affiliates continued access to software systems, electricity, telephone systems, information technology and network access, parking and employee time keeping services.

 

Term of Service:           Six months following the Effective Date unless terminated earlier by Seller.

 

4.          Administration of Benefit Plans and Retirement Plan

 

Service Description:     Buyers and the Company Group will provide Seller and its Affiliates with continued administration of the Benefit Plans and the Retirement Plan for Employees of AMREP Corporation to the extent previously provided to Seller and its Affiliates prior to the Effective Date. Buyers and the Company Group will promptly (and in any event within the Term of Service) assign, transfer and deliver to Seller and its Affiliates, at the sole cost and expense of the Company Group, the books and records of the Retirement Plan for Employees of AMREP Corporation that are in the possession or under the control of Buyers or any Member of the Company Group, in native format (unless otherwise requested by Seller).

 

  

Term of Service:           Six months following the Effective Date unless terminated earlier by Seller.

 

5.          Treasury Function

 

Service Description:     Buyers and the Company Group will provide Seller and its Affiliates, subject to the specific direction and oversight of Seller and its Affiliates, with continued administration of cash management and treasury functions with respect to bank accounts of Seller and its Affiliates to the extent previously provided to Seller and its Affiliates prior to the Effective Date.

 

Term of Service:          Three months following the Effective Date unless terminated earlier by Seller.

 

6.          Financial Statements and Audits

 

Service Description:    Buyers and the Company Group will provide Seller and its Affiliates, subject to the specific direction and oversight of Seller and its Affiliates, with continued assistance and support in the preparation of financial statements for Seller and its Affiliates to the extent previously provided to Seller and its Affiliates prior to the Effective Date, including providing information requested by Seller and its Affiliates or their internal and external auditors.

 

Term of Service:          One year following the Effective Date unless terminated earlier by Seller.

 

If any of the Buyer Services require travel to Seller’s facilities, Seller shall pay the customary and reasonable costs of travel, hotel accommodations and meals for such individuals.

 

 

 

 

 

Exhibit 10.4

 

Execution Copy

 

RELEASE AGREEMENT

 

This Release Agreement, dated as of February 9, 2015 (the “Release Agreement”), is made by American Republic Investment Co., a Delaware corporation (“Seller”) in favor of Kable Media Services, Inc., a Delaware corporation (“KMS”), Kable Distribution Services, Inc., a Delaware corporation (“KDS”), Kable News Company, Inc., an Illinois corporation (“KNC”), Kable News International, Inc., a Delaware corporation (“KNI”), Kable Distribution Services of Canada, Ltd., a Canadian corporation incorporated in Ontario, Canada (“KDSC”), and Kable Product Services, Inc., a Delaware corporation (“KPS” and together with KMS, KDS, KNC, KNI and KDSC, the “Company Group” and together with Seller, the “Parties”, and each, a “Party”).

 

WITNESSETH:

 

WHEREAS, Seller owns all of the issued and outstanding shares of capital stock of KMS;

 

WHEREAS, KMS owns all of the issued and outstanding shares of capital stock of KDS, KNC and KPS;

 

WHEREAS, KDS owns all of the issued and outstanding shares of capital stock of KNI, and KNC owns all of the issued and outstanding shares of capital stock of KDSC;

 

WHEREAS, Seller, KPS Holdco, LLC, a Pennsylvania limited liability company (“Products Buyer”), and DFI Holdings, LLC, a Pennsylvania limited liability company (“Distribution Buyer” and together with Products Buyer, collectively, “Buyers”), are entering into a Stock Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”), pursuant to which Products Buyer shall acquire all of the issued and outstanding shares of capital stock of KPS and Distribution Buyer shall acquire all of the issued and outstanding shares of capital stock of KMS, and will thereby become the direct or indirect owners of the Company Group (the “Transaction”);

 

WHEREAS, all capitalized terms used but not otherwise defined in this Release Agreement have the meanings ascribed to them in the Purchase Agreement;

 

WHEREAS, as part of the Transaction, Seller and its Affiliates are releasing the Company Group from any Intercompany Agreements and Intercompany Accounts (as such terms are hereinafter defined);

 

WHEREAS, in connection with the Transaction, Seller, Buyers, Michael P. Duloc and the Company Group are entering into the Transaction Agreements to which they are a respective signatory, as set forth therein; and

 

WHEREAS, as a material part of and as a condition to the Transaction, the Parties are required to enter into and deliver this Release Agreement.

 

  

NOW, THEREFORE, in consideration of the premises set forth above and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

1.           Release of the Company Group and its Affiliates.

 

(a)          Effective as of the Closing, Seller, for itself and on behalf of (A) its parent AMREP Corporation and the direct and indirect subsidiaries of AMREP Corporation, including Kable Staffing Resources LLC, Palm Coast Data Holdco, Inc., Palm Coast Data LLC and FulCircle Media LLC and (B) each officer, director, successor or assign of, respectively, Seller, its parent AMREP Corporation and the direct and indirect subsidiaries of AMREP Corporation, including Kable Staffing Resources LLC, Palm Coast Data Holdco, Inc., Palm Coast Data LLC and FulCircle Media LLC (collectively, “Releasors”), hereby irrevocably and unconditionally releases, waives and forever discharges the Company Group, each Member of the Company Group, their respective Affiliates and the direct and indirect subsidiaries, Affiliates, employees, officers, directors, stockholders, members, agents, representatives, successors and assigns of the Company Group and their respective Affiliates (collectively, “Releasees”) (provided, however, that the term “Releasees” shall not include any Buyer or Michael P. Duloc except in his capacity as an employee, officer and director of the Company Group) of and from any and all actions, causes of action, suits, losses, liabilities, rights, debts, dues, sums of money, accounts, reckonings, obligations, costs, expenses, liens, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, executions, claims, and demands, of every kind and nature whatsoever, whether now known or unknown, foreseen or unforeseen, matured or unmatured, suspected or unsuspected, unanticipated as well as anticipated, that now exist or may hereafter accrue based on matters now unknown as well as known, in law, admiralty or equity (collectively, “Claims”), which any of such Releasors ever had, now have or hereafter can, shall or may have against any of such Releasees for, upon or by reason of any matter, cause, conduct, event, occurrence, omission or thing whatsoever, existing or occurring before the Closing.

 

(b)          Notwithstanding the provisions of Section 1(a), the term “Claims” shall not include

 

(i)         any obligations of any Releasee under the Lease Agreement, dated November 7, 2008, between El Dorado Utilities, Inc. and KPS (as successor-in-interest to Kable Specialty Packaging Services LLC) or the Offset Claim Agreement, dated as of the date hereof, between Palm Coast Data LLC and Kable Distribution Services, Inc.;

 

(ii)        any obligations of any Releasee under the Transaction Agreements;

 

(iii)       any statutory obligations of any Releasee under the Retirement Plan or any Benefit Plan;

 

(iv) any obligations of any Releasee to any Releasor solely in the Releasor’s capacity as a holder of securities of any Releasee; and

 

 

 

(v)        any statutory obligations of any Releasee under applicable Law to defend, indemnify and for advancement of expenses of any Releasor who is or was a director, officer or employee of Releasee.

 

(c)          Seller, on behalf of itself and each other Releasor, hereby irrevocably agrees to refrain from directly or indirectly asserting any claim or demand or commencing (or causing to be commenced) any suit, action, or proceeding of any kind, in any court or before any tribunal, against any Releasee based upon any Claim. It is understood and agreed by each Party that the release in this Section 1 is a general release of each Releasee, and it is to be construed in the broadest possible manner consistent with applicable law.

 

(d)          Seller, on behalf of itself and each other Releasor, represents and warrants that it or another Releasor is the exclusive owner of the Claims and that, as of the date hereof, no Releasor has assigned, sold, transferred or otherwise conveyed any Claim to any other person or entity. Seller, on behalf of itself and each other Releasor, represents and warrants that, as of the date of the date hereof, no Releasor has filed with any court, tribunal or alternative dispute resolution organization any claim, demand, action, joinder or cause of action against any Releasee. If this warranty and representation should later be found to be untrue, then, in addition to any other relief or damages to which a Releasee may be entitled, Seller shall, at no cost or expense to any Releasee, immediately file all documents and take all action necessary to have the claim, action or cause of action dismissed or discontinued with prejudice.

 

(e)          Seller, on behalf of itself and each other Releasor, understands that it may later discover Claims or facts that may be different than, or in addition to, those that any Releasor now knows or believes to exist regarding the subject matter of the release contained in this Section 1, and which, if known at the time of signing this Release Agreement, may have materially affected this Release Agreement and such Party’s decision to enter into it and grant the release contained in this Section 1. Nevertheless, Seller, on behalf of itself and each other Releasor, intends to fully, finally and forever settle and release all Claims that now exist, may exist or previously existed, as set forth in the release contained in this Section 1, whether known or unknown, foreseen or unforeseen, or suspected or unsuspected, and the release given herein is and will remain in effect as a complete release, notwithstanding the discovery or existence of such additional or different facts. Seller, on behalf of itself and each other Releasor, hereby waives any right or Claim that might arise as a result of such different or additional Claims or facts.

 

(f)           For the avoidance of doubt, pursuant to the release set forth in Section 1(a) hereof but subject to Section 1(b) hereof, all Intercompany Agreements shall be deemed terminated, void and of no further force and effect, and no Member of the Company Group, on the one hand, or Seller or any of its Affiliates (other than any Member of the Company Group), on the other hand, shall have any liabilities or obligations under the Intercompany Agreements whatsoever to each other. For purposes of this Release Agreement, “Intercompany Agreements” means any liabilities, debts, obligations or amounts owing under any current and prior agreements, contracts, tax sharing agreements, licenses, leases, commitments, arrangements or understandings, written or oral, by, between or among any Member of the Company Group, on the one hand, and one or more of Seller or any of its Affiliates (other than any Member of the Company Group), on the other hand; provided, however, that the term “Intercompany Agreements” shall not include the Intercompany Amount Agreement or any of the agreements specified in Section 1(b) hereof.

 

 

(g)         For the avoidance of doubt, pursuant to the release set forth in Section 1(a) hereof, all Intercompany Amounts (as hereinafter defined) owing from any Member of the Company Group, on the one hand, to Seller or any of its Affiliates (other than the Members of the Company Group), on the other hand, shall be deemed terminated, extinguished, forgiven, void and of no further force and effect, and no Member of the Company Group shall have any liabilities or obligations with respect to the Intercompany Amounts whatsoever. For purposes of this Release Agreement, “Intercompany Amounts” means the liabilities, debts, obligations or amounts owing (including cash advances, federal and state taxes payable and receivable, intercorporate expense allocations, and other corporate charges or transactions in goods or services) for, upon or by reason of any matter, cause, conduct, event, occurrence, omission or thing whatsoever, existing or occurring before the Closing (whether or not reflected in the books and records of Seller or its Affiliates or any Member of the Company Group) from any Member of the Company Group to Seller or any of its Affiliates (other than any Member of the Company Group); provided that, the term “Intercompany Amounts” shall include the liabilities, debts, obligations or amounts owing by any Releasee to any Releasor only to the extent that any such liabilities, debts, obligations, or amounts owing were not previously transferred, setoff, extinguished or otherwise eliminated under the Intercompany Amount Agreement.

 

2.           Representations and Warranties. Each Party hereby represents and warrants to the other Party that:

 

(a)         It has the full right, corporate power and authority to enter into this Release Agreement, to grant the release contained herein and to perform its obligations hereunder.

 

(b)         The execution of this Release Agreement by the individual whose signature is set forth at the end of this Release Agreement on behalf of such Party, and the delivery of this Release Agreement by such Party, have been duly authorized by all necessary corporate action on the part of such Party.

 

(c)         This Release Agreement has been executed and delivered by such Party and (assuming due authorization, execution and delivery by the other Party hereto) constitutes the legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, except as may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws and equitable principles related to or affecting creditors’ rights generally or the effect of general principles of equity.

 

EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES OF THE PARTIES IN THE TRANSACTION AGREEMENTS, (A) NEITHER PARTY HERETO NOR ANY PERSON ON SUCH PARTY’S BEHALF HAS MADE OR MAKES ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WHATSOEVER, EITHER ORAL OR WRITTEN, WHETHER ARISING BY LAW, COURSE OF DEALING, COURSE OF PERFORMANCE, USAGE OF TRADE OR OTHERWISE, ALL OF WHICH ARE EXPRESSLY DISCLAIMED, AND (B) EACH PARTY HERETO ACKNOWLEDGES THAT, IN ENTERING INTO THIS RELEASE AGREEMENT, IT HAS NOT RELIED UPON ANY REPRESENTATION OR WARRANTY MADE BY THE OTHER PARTY, OR ANY OTHER PERSON ON SUCH OTHER PARTY’S BEHALF.

 

 

3.           Miscellaneous.

 

(a)          Waiver. Any failure of a Releasor to comply with any of its obligations or agreements herein contained may be waived only in writing by Seller. Any failure of Seller to comply with any of its obligations or agreements herein contained may be waived only in writing by the Releasors who are Parties. No waiver granted hereunder shall be deemed a waiver of any subsequent breach or default of the same or similar nature. No failure or delay by any Party in exercising any right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

 

(b)          Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective Parties at the addresses set forth below (or to such other address that may be designated by a party from time to time in accordance with this Section):

 

Company Group:	c/o DFI Holdings, LLC 3179 Deer Creek Road, Collegeville, PA 19426 Attention: Michael P. Duloc Fax: 815-734-5233	with a required copy to (which shall not constitute notice): Fox Rothschild LLP 2700 Kelly Road, Suite 300 Warrington, PA 18976 Attention: Jeffrey H. Nicholas Fax: 215-345-7507
Seller:	c/o AMREP Corporation 300 Alexander Park, Suite 204 Princeton, New Jersey 08540 Attention: General Counsel Fax: 609-716-8255	with a required copy to (which shall not constitute notice): Duane Morris LLP 222 Delaware Avenue Suite 1600 Wilmington, DE 19801 Attention: Christopher Winter Fax: 302-397-2455

 

(c)          Governing Law; Consent to Jurisdiction and Waiver of Jury Trial.

 

(i)          This Release Agreement shall be governed by and construed in accordance with the internal substantive Laws of the State of New York, without giving effect to any choice of Law or conflict of Laws rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of New York.

 

  

(ii)        Each Party irrevocably submits to the exclusive jurisdiction of the federal courts of the Southern District of New York or the courts of the State of New York located in the City of New York for the purposes of any suit, action or other proceeding arising out of this Release Agreement or any transaction contemplated hereby. Each Party further agrees that service of any process, summons, notice or document by U.S. registered mail to such Party’s respective address set forth in the “Notices” section hereof shall be effective service of process for any action, suit or proceeding with respect to any matters to which it has submitted to jurisdiction in this Section. Each Party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Release Agreement or the transactions contemplated hereby in federal courts of the Southern District of New York or the courts of the State of New York located in the City of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS RELEASE AGREEMENT OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

 

(d)         Counterparts. This Release Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Execution and delivery of this Release Agreement by delivery of a facsimile or electronically recorded copy in .pdf file format bearing a copy of the signature of a Party shall constitute a valid and binding execution and delivery of this Release Agreement by such Party. Such copies shall constitute enforceable original documents.

 

(e)         Headings. The section headings contained in this Release Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Release Agreement.

 

(f)         Entire Agreement. This Release Agreement embodies the entire agreement and understanding of the Parties hereto in respect of the subject matter herein. This Release Agreement supersedes all prior agreements and understandings between the Parties with respect to the subject matter thereof.

 

(g)         Amendment. Any provision of this Release Agreement may be amended if, and only if, such amendment is in writing and is signed by each Party to this Release Agreement.

 

(h)         Binding Effect; Benefits. This Release Agreement shall inure to the benefit of and be binding upon the Parties hereto and their respective successors and permitted assigns; nothing in this Release Agreement, express or implied, is intended to confer on any Person, other than the Parties and their respective successors and permitted assigns, the Releasors and the Releasees, any rights, remedies, obligations or liabilities under or by reason of this Release Agreement. The Parties hereby designate all Releasees as third-party beneficiaries of Section 1 having the right to enforce this Release Agreement.

 

  

(i)          Joint Drafting. The Parties have participated jointly in the negotiation and drafting of this Release Agreement. In the event an ambiguity or question of intent or interpretation arises, this Release Agreement shall be construed as if drafted jointly by the 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 Release Agreement.

 

(j)          Severability. Whenever possible, each provision of this Release Agreement shall be interpreted in such manner as to be effective and valid under applicable Law. If any provision of this Release Agreement is held to be prohibited by or invalid under applicable Law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Release Agreement. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Release Agreement so as to effect the original intent of the Parties as closely as possible to the fullest extent permitted by applicable Law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

(k)         Interpretation. When a reference is made in this Release Agreement to an Article, Section or Exhibit, such reference will be to an Article or Section of, or an Exhibit to, this Release Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Release Agreement, they will be deemed to be followed by the words “without limitation.” The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Release Agreement will refer to this Release Agreement as a whole and not to any particular provision of this Release Agreement. Unless the context expressly provides otherwise, any approval, determination, election or authorization required to be obtained from a Party shall be at such Party’s sole discretion. The word “or” is not exclusive. All capitalized terms used and defined in this Release Agreement shall have the meanings ascribed to them herein. All capitalized terms used but not otherwise defined in this Release Agreement shall have the meanings ascribed to them in the Purchase Agreement. All terms defined in this Release Agreement will have such defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Release Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Unless otherwise indicated, any agreement, instrument or statute defined or referred to herein, or in any agreement or instrument that is referred to herein, means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns.

 

(l)          Assignability. This Release Agreement shall not be assignable by any Party hereto without the prior written consent of the other Party.

 

 

(m)        Specific Performance. Each Party agrees that irreparable damage would occur in the event that any of the provisions of this Release Agreement were not performed by them in accordance with the terms hereof and that each Party shall be entitled to specific performance of the terms hereof (without the need to post bond or any other security), in addition to any other remedy at law or equity.

 

(n)         Expenses. Each Party shall bear its own costs and expenses in connection with this Release Agreement and the transactions contemplated hereby, including all legal, accounting, financial advisory, consulting and all other fees and expenses of third parties, except where specifically provided to the contrary.

 

(o)         Disclosure. Company Group consents to Seller or its Affiliates publicly disclosing this Release Agreement, including by filing such documents with the Securities and Exchange Commission or the New York Stock Exchange.

 

(p)         Independent Counsel. Each Party certifies that it has read the terms of this Release Agreement, that it understands the terms of this Release Agreement, and that it is entering into this Release Agreement of its own volition. Each Party warrants and represents that it has (a) been represented by an attorney of its choice in connection with the Transaction and received independent legal advice from such attorney regarding its decision with respect to the advisability of making and entering into this Release Agreement, or (b) had sufficient time, opportunity and means to engage an attorney of its choice in order to be represented by such attorney in connection with the Transaction and to receive independent legal advice from such attorney regarding its decision with respect to the advisability of making and entering into this Release Agreement, and has made a knowing and voluntary decision not to do so.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

  

IN WITNESS WHEREOF, the Parties have caused this Release Agreement to be duly executed and delivered as of the date first written above.

 

American republic investment co.
By:	/s/ Peter M. Pizza
	Name: Peter M. Pizza
	Title: Vice President

 

KABLE MEDIA SERVICES, INC.			KABLE DISTRIBUTION SERVICES OF CANADA, LTD.
By:	/s/ Michael P. Duloc		By:	/s/ Michael P. Duloc
	Name: Michael P. Duloc			Name: Michael P. Duloc
	Title: President & Chief Executive Officer			Title: President & Chief Executive Officer

 

KABLE DISTRIBUTION SERVICES, INC.			KABLE PRODUCT SERVICES, INC.
By:	/s/ Michael P. Duloc		By:	/s/ Michael P. Duloc
	Name: Michael P. Duloc			Name: Michael P. Duloc
	Title: President & Chief Executive Officer			Title: President & Chief Executive Officer

 

KABLE NEWS COMPANY, INC.			KABLE NEWS INTERNATIONAL, INC.
By:	/s/ Michael P. Duloc		By:	/s/ Michael P. Duloc
	Name: Michael P. Duloc			Name: Michael P. Duloc
	Title: President & Chief Executive Officer			Title: President & Chief Executive Officer

 

Signature Page to Seller Release

(1/1)

 

 

 

 

Exhibit 10.5 

 

 

 

 

Execution Copy

 

 

RELEASE AGREEMENT

 

This Release Agreement, dated as of February 9, 2015 (the “Release Agreement”), is made by Kable Media Services, Inc., a Delaware corporation (“KMS”), Kable Distribution Services, Inc., a Delaware corporation (“KDS”), Kable News Company, Inc., an Illinois corporation (“KNC”), Kable News International, Inc., a Delaware corporation (“KNI”), Kable Distribution Services of Canada, Ltd., a Canadian corporation incorporated in Ontario, Canada (“KDSC”), and Kable Product Services, Inc., a Delaware corporation (“KPS” and together with KMS, KDS, KNC, KNI and KDSC, the “Company Group”), in favor of American Republic Investment Co., a Delaware corporation (“Seller” and together with the Company Group, the “Parties”, and each, a “Party”), and the other Releasees (defined below), and acknowledged and accepted by KPS Holdco, LLC, a Pennsylvania limited liability company (“Products Buyer”), and DFI Holdings, LLC, a Pennsylvania limited liability company (“Distribution Buyer” and together with Products Buyer, collectively, “Buyers”).

 

WITNESSETH:

 

WHEREAS, Seller owns all of the issued and outstanding shares of capital stock of KMS;

 

WHEREAS, KMS owns all of the issued and outstanding shares of capital stock of KDS, KNC and KPS;

 

WHEREAS, KDS owns all of the issued and outstanding shares of capital stock of KNI, and KNC owns all of the issued and outstanding shares of capital stock of KDSC;

 

WHEREAS, Seller and Buyers are entering into a Stock Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”), pursuant to which Products Buyer shall acquire all of the issued and outstanding shares of capital stock of KPS and Distribution Buyer shall acquire all of the issued and outstanding shares of capital stock of KMS, and will thereby become the direct or indirect owners of the Company Group (the “Transaction”);

 

WHEREAS, all capitalized terms used but not otherwise defined in this Release Agreement have the meanings ascribed to them in the Purchase Agreement;

 

WHEREAS, in connection with the Transaction, Seller, Buyers, Michael P. Duloc and the Company Group are entering into the Transaction Agreements to which they are a respective signatory, as set forth therein;

 

WHEREAS, as part of the Transaction, Seller is assuming material pension liabilities of the Company Group, assigning valuable software and software licenses held by an Affiliate of Seller to the Company Group, and extending a $2.0 million working capital line of credit to the Company Group pursuant to the Line of Credit Note;

 

WHEREAS, as part of the Transaction, Company Group and the other Releasors (as defined herein) are releasing the Seller and its Affiliates and the other Releasees (as defined herein) from any Intercompany Agreements and Intercompany Accounts (each term as defined herein); and

 

 

WHEREAS, as a material part of and as a condition to the Transaction, the Parties are required to enter into and deliver this Release Agreement.

 

NOW, THEREFORE, in consideration of the premises set forth above and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

1.            Release of the Company Group and its Affiliates.

 

(a)            Effective as of the Closing, each Member of the Company Group, for itself and on behalf of (A) each Affiliate of a Member of the Company Group and (B) each officer, director, stockholder, member, successor or assign of (i) a Member of the Company Group or (ii) an Affiliate of a Member of the Company Group (collectively, “Releasors”) hereby irrevocably and unconditionally releases, waives and forever discharges Seller, its Affiliates and the direct and indirect subsidiaries, Affiliates, employees, officers, directors, stockholders, members, agents, representatives, successors and assigns of Seller and its Affiliates (collectively, “Releasees”) of and from any and all actions, causes of action, suits, losses, liabilities, rights, debts, dues, sums of money, accounts, reckonings, obligations, costs, expenses, liens, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, executions, claims, and demands, of every kind and nature whatsoever, whether now known or unknown, foreseen or unforeseen, matured or unmatured, suspected or unsuspected, unanticipated as well as anticipated, that now exist or may hereafter accrue based on matters now unknown as well as known, in law, admiralty or equity (collectively, “Claims”), which any of such Releasors ever had, now have or hereafter can, shall or may have against any of such Releasees for, upon or by reason of any matter, cause, conduct, event, occurrence, omission or thing whatsoever, existing or occurring before the Closing.

 

(b)          Notwithstanding the provisions of Section 1(a), the term “Claims” shall not include:

 

(i)            any obligations of any Releasee under the Lease Agreement, dated November 7, 2008, between El Dorado Utilities, Inc. and KPS (as successor-in-interest to Kable Specialty Packaging Services LLC);

(ii)            any obligations of any Releasee under the Transaction Agreements;

 

(iii)            any statutory obligations of any Releasee under the Retirement Plan or any Benefit Plan;

 

(iv)            any obligations of any Releasee to any Releasor solely in the Releasor’s capacity as a holder of securities of any Releasee; and

 

  

(v)            any statutory obligations of any Releasee under applicable Law to defend, indemnify and for advancement of expenses of any Releasor who is or was a director, officer or employee of Releasee.

 

(c)           Each Member of the Company Group, on behalf of itself and each other Releasor, hereby irrevocably agrees to refrain from directly or indirectly asserting any claim or demand or commencing (or causing to be commenced) any suit, action, or proceeding of any kind, in any court or before any tribunal, against any Releasee based upon any Claim. It is understood and agreed by each Party that the release in this Section 1 is a general release of each Releasee, and it is to be construed in the broadest possible manner consistent with applicable law.

 

(d)           Each Member of the Company Group, on behalf of itself and each other Releasor, represents and warrants that it or another Releasor is the exclusive owner of the Claims and that, as of the date hereof, no Releasor has assigned, sold, transferred or otherwise conveyed any Claim to any other person or entity. Each Member of the Company Group, on behalf of itself and each other Releasor, represents and warrants that, as of the date of the date hereof, no Releasor has filed with any court, tribunal or alternative dispute resolution organization any claim, demand, action, joinder or cause of action against any Releasee. If this warranty and representation should later be found to be untrue, then, in addition to any other relief or damages to which a Releasee may be entitled, each Member of the Company Group shall, at no cost or expense to any Releasee, immediately file all documents and take all action necessary to have the claim, action or cause of action dismissed or discontinued with prejudice.

 

(e)           Each Member of the Company Group, on behalf of itself and each other Releasor, understands that it may later discover Claims or facts that may be different than, or in addition to, those that any Releasor now knows or believes to exist regarding the subject matter of the release contained in this Section 1, and which, if known at the time of signing this Release Agreement, may have materially affected this Release Agreement and such Party’s decision to enter into it and grant the release contained in this Section 1. Nevertheless, each Member of the Company Group, on behalf of itself and each other Releasor, intends to fully, finally and forever settle and release all Claims that now exist, may exist or previously existed, as set forth in the release contained in this Section 1, whether known or unknown, foreseen or unforeseen, or suspected or unsuspected, and the release given herein is and will remain in effect as a complete release, notwithstanding the discovery or existence of such additional or different facts. Each Member of the Company Group, on behalf of itself and each other Releasor, hereby waives any right or Claim that might arise as a result of such different or additional Claims or facts.

 

(f)           For the avoidance of doubt, pursuant to the release set forth in Section 1(a) hereof but subject to Section 1(b) hereof, all Intercompany Agreements shall be deemed terminated, void and of no further force and effect, and no Member of the Company Group, on the one hand, or Seller or any of its Affiliates (other than any Member of the Company Group), on the other hand, shall have any liabilities or obligations under the Intercompany Agreements whatsoever to each other. For purposes of this Release Agreement, “Intercompany Agreements” means any liabilities, debts, obligations or amounts owing under any current and prior agreements, contracts, tax sharing agreements, licenses, leases, commitments, arrangements or understandings, written or oral, by, between or among one or more Members of the Company Group, on the one hand, and one or more of Seller or any of its Affiliates (other than any Member of the Company Group), on the other hand; provided, however, that the term “Intercompany Agreements” shall not include the Intercompany Amount Agreement, any of the agreements specified in Section 1(b) or the Offset Claim Agreement, dated as of the date hereof, between Palm Coast Data LLC and Kable Distribution Services, Inc.

 

  

(g)           For the avoidance of doubt, pursuant to the release set forth in Section 1(a) hereof, all Intercompany Amounts (as hereinafter defined) owing from any of Seller or any of its Affiliates (other than the members of the Company Group), on the one hand, to any Member of the Company Group, on the other hand, shall be deemed terminated, extinguished, forgiven, void and of no further force and effect, and none of Seller or any of its Affiliates (other than the members of the Company Group), shall have any liabilities or obligations with respect to the Intercompany Amounts whatsoever. For purposes of this Release Agreement, “Intercompany Amounts” means the liabilities, debts, obligations or amounts owing (including cash advances, federal and state taxes payable and receivable, intercorporate expense allocations, and other corporate charges or transactions in goods or services) for, upon or by reason of any matter, cause, conduct, event, occurrence, omission or thing whatsoever, existing or occurring before the Closing (whether or not reflected in the books and records of Seller or its Affiliates or any Member of the Company Group) from any of Seller or any of its Affiliates (other than the members of the Company Group), on the one hand, to any Member of the Company Group, on the other hand; provided that, the term “Intercompany Amounts” shall include the liabilities, debts, obligations or amounts owing by any Releasee to any Releasor only to the extent that any such liabilities, debts, obligations, or amounts owing were not previously transferred, setoff, extinguished or otherwise eliminated under the Intercompany Amount Agreement.

 

2.           Representations and Warranties. Each Member of the Company Group hereby represents and warrants that:

 

(a)           It has the full right, corporate power and authority to enter into this Release Agreement, to grant the release contained herein and to perform its obligations hereunder.

 

(b)           The execution of this Release Agreement by the individual whose signature is set forth at the end of this Release Agreement on behalf of such Company Group member, and the delivery of this Release Agreement by such Party, have been duly authorized by all necessary corporate action on the part of such Party, and such individual is an authorized signatory of such Party.

 

(c)           This Release Agreement has been executed and delivered by such Company Group member and (assuming due authorization, execution and delivery by the other Parties hereto) constitutes the legal, valid and binding obligation of such Company Group member, enforceable against it in accordance with its terms, except as may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws and equitable principles related to or affecting creditors’ rights generally or the effect of general principles of equity.

 

 

EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES OF THE PARTIES IN THE TRANSACTION AGREEMENTS, (A) NEITHER PARTY HERETO NOR ANY PERSON ON SUCH PARTY’S BEHALF HAS MADE OR MAKES ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WHATSOEVER, EITHER ORAL OR WRITTEN, WHETHER ARISING BY LAW, COURSE OF DEALING, COURSE OF PERFORMANCE, USAGE OF TRADE OR OTHERWISE, ALL OF WHICH ARE EXPRESSLY DISCLAIMED, AND (B) EACH PARTY HERETO ACKNOWLEDGES THAT, IN ENTERING INTO THIS RELEASE AGREEMENT, IT HAS NOT RELIED UPON ANY REPRESENTATION OR WARRANTY MADE BY THE OTHER PARTY, OR ANY OTHER PERSON ON SUCH OTHER PARTY’S BEHALF.

 

3.            Miscellaneous.

 

(a)           Waiver. Any failure of a Releasor to comply with any of its obligations or agreements herein contained may be waived only in writing by Seller. Any failure of Seller to comply with any of its obligations or agreements herein contained may be waived only in writing by the Releasors who are Parties. No waiver granted hereunder shall be deemed a waiver of any subsequent breach or default of the same or similar nature. No failure or delay by any Party in exercising any right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

 

(b)           Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective Parties at the addresses set forth below (or to such other address that may be designated by a party from time to time in accordance with this Section):

 

Company Group:	c/o DFI Holdings, LLC 3179 Deer Creek Road, Collegeville, PA 19426 Attention: Michael P. Duloc Fax: 815-734-5233	with a required copy to (which shall not constitute notice): Fox Rothschild LLP 2700 Kelly Road, Suite 300 Warrington, PA 18976 Attention: Jeffrey H. Nicholas Fax: 215-345-7507
Seller:	c/o AMREP Corporation 300 Alexander Park, Suite 204 Princeton, New Jersey 08540 Attention: General Counsel Fax: 609-716-8255	with a required copy to (which shall not constitute notice): Duane Morris LLP 222 Delaware Avenue Suite 1600 Wilmington, DE 19801 Attention: Christopher Winter Fax: 302-397-2455

 

 

(c)           Governing Law; Consent to Jurisdiction and Waiver of Jury Trial.

 

(i)            This Release Agreement shall be governed by and construed in accordance with the internal substantive Laws of the State of New York, without giving effect to any choice of Law or conflict of Laws rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of New York.

 

(ii)            Each Party irrevocably submits to the exclusive jurisdiction of the federal courts of the Southern District of New York or the courts of the State of New York located in the City of New York for the purposes of any suit, action or other proceeding arising out of this Release Agreement or any transaction contemplated hereby. Each Party further agrees that service of any process, summons, notice or document by U.S. registered mail to such Party’s respective address set forth in the “Notices” section hereof shall be effective service of process for any action, suit or proceeding with respect to any matters to which it has submitted to jurisdiction in this Section. Each Party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Release Agreement or the transactions contemplated hereby in federal courts of the Southern District of New York or the courts of the State of New York located in the City of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS RELEASE AGREEMENT OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

 

(d)          Counterparts. This Release Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Execution and delivery of this Release Agreement by delivery of a facsimile or electronically recorded copy in .pdf file format bearing a copy of the signature of a Party shall constitute a valid and binding execution and delivery of this Release Agreement by such Party. Such copies shall constitute enforceable original documents.

 

(e)          Headings. The section headings contained in this Release Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Release Agreement.

 

(f)           Entire Agreement. This Release Agreement embodies the entire agreement and understanding of the Parties hereto in respect of the subject matter herein. This Release Agreement supersedes all prior agreements and understandings between the Parties with respect to the subject matter thereof.

 

(g)          Amendment. Any provision of this Release Agreement may be amended if, and only if, such amendment is in writing and is signed by each Party to this Release Agreement.

 

 

(h)          Binding Effect; Benefits. This Release Agreement shall inure to the benefit of and be binding upon the Parties hereto and their respective successors and permitted assigns; nothing in this Release Agreement, express or implied, is intended to confer on any Person, other than the Parties and their respective successors and permitted assigns, the Releasors and the Releasees, any rights, remedies, obligations or liabilities under or by reason of this Release Agreement. The Parties hereby designate all Releasees as third-party beneficiaries of Section 1 having the right to enforce this Release Agreement.

 

(i)           Joint Drafting. The Parties have participated jointly in the negotiation and drafting of this Release Agreement. In the event an ambiguity or question of intent or interpretation arises, this Release Agreement shall be construed as if drafted jointly by the 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 Release Agreement.

 

(j)           Severability. Whenever possible, each provision of this Release Agreement shall be interpreted in such manner as to be effective and valid under applicable Law. If any provision of this Release Agreement is held to be prohibited by or invalid under applicable Law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Release Agreement. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Release Agreement so as to effect the original intent of the Parties as closely as possible to the fullest extent permitted by applicable Law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

(k)          Interpretation. When a reference is made in this Release Agreement to an Article, Section or Exhibit, such reference will be to an Article or Section of, or an Exhibit to, this Release Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Release Agreement, they will be deemed to be followed by the words “without limitation.” The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Release Agreement will refer to this Release Agreement as a whole and not to any particular provision of this Release Agreement. Unless the context expressly provides otherwise, any approval, determination, election or authorization required to be obtained from a Party shall be at such Party’s sole discretion. The word “or” is not exclusive. All capitalized terms used and defined in this Release Agreement shall have the meanings ascribed to them herein. All capitalized terms used but not otherwise defined in this Release Agreement shall have the meanings ascribed to them in the Purchase Agreement. All terms defined in this Release Agreement will have such defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Release Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Unless otherwise indicated, any agreement, instrument or statute defined or referred to herein, or in any agreement or instrument that is referred to herein, means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns.

 

 

(l)           Assignability. This Release Agreement shall not be assignable by any Party hereto without the prior written consent of the other Party.

 

(m)         Specific Performance. Each Party agrees that irreparable damage would occur in the event that any of the provisions of this Release Agreement were not performed by them in accordance with the terms hereof and that each Party shall be entitled to specific performance of the terms hereof (without the need to post bond or any other security), in addition to any other remedy at law or equity.

 

(n)          Expenses. Each Party shall bear its own costs and expenses in connection with this Release Agreement and the transactions contemplated hereby, including all legal, accounting, financial advisory, consulting and all other fees and expenses of third parties, except where specifically provided to the contrary.

 

(o)          Disclosure. Each Member of the Company Group consents to Seller or its Affiliates publicly disclosing this Release Agreement, including by filing such documents with the Securities and Exchange Commission or the New York Stock Exchange.

 

(p)          Independent Counsel. Each Party certifies that it has read the terms of this Release Agreement, that it understands the terms of this Release Agreement, and that it is entering into this Release Agreement of its own volition. Each Party warrants and represents that it has (a) been represented by an attorney of its choice in connection with the Transaction and received independent legal advice from such attorney regarding its decision with respect to the advisability of making and entering into this Release Agreement, or (b) had sufficient time, opportunity and means to engage an attorney of its choice in order to be represented by such attorney in connection with the Transaction and to receive independent legal advice from such attorney regarding its decision with respect to the advisability of making and entering into this Release Agreement, and has made a knowing and voluntary decision not to do so.

 

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IN WITNESS WHEREOF, the Parties have caused this Release Agreement to be duly executed and delivered as of the date first written above.

 

KABLE MEDIA SERVICES, INC.			KABLE NEWS INTERNATIONAL, INC.
By:	/s/ Michael P. Duloc		By:	/s/ Michael P. Duloc
	Name: Michael P. Duloc			Name: Michael P. Duloc
	Title: President & Chief Executive Officer			Title: President & Chief Executive Officer

 

KABLE DISTRIBUTION SERVICES, INC.			KABLE DISTRIBUTION SERVICES OF CANADA, LTD.
By:	/s/ Michael P. Duloc		By:	/s/ Michael P. Duloc
	Name: Michael P. Duloc			Name: Michael P. Duloc
	Title: President & Chief Executive Officer			Title: President & Chief Executive Officer

 

KABLE NEWS COMPANY, INC.			KABLE PRODUCT SERVICES, INC.
By:	/s/ Michael P. Duloc		By:	/s/ Michael P. Duloc
	Name: Michael P. Duloc			Name: Michael P. Duloc
	Title: President & Chief Executive Officer			Title: President & Chief Executive Officer

 

	American republic investment co.
	By:	/s/ Peter M. Pizza
		Name: Peter M. Pizza
		Title: Vice President

 

ACKNOWLEDGED AND ACCEPTED, by due execution and delivery of this Release Agreement as of the date first written above.

 

DFI HOLDINGS, LLC			KPS HOLDCO, LLC
By:	/s/ Michael P. Duloc		By:	/s/ Michael P. Duloc
	Name: Michael P. Duloc			Name: Michael P. Duloc
	Title: Manager			Title: Manager

 

Signature Page to Company Group Release 

(1/1)

 

 

 

 

Exhibit 10.6

 

Execution Copy

 

 

RELEASE AGREEMENT

 

This Release Agreement, dated as of February 9, 2015 (the “Release Agreement”), is made by KPS Holdco, LLC, a Pennsylvania limited liability company (“Products Buyer”), DFI Holdings, LLC, a Pennsylvania limited liability company (“Distribution Buyer” and together with Products Buyer, collectively, “Buyers”), and Michael P. Duloc in favor of American Republic Investment Co., a Delaware corporation (“Seller” and together with Buyers and Michael P. Duloc, the “Parties”, and each, a “Party”) and the other Releasees (defined below).

 

WITNESSETH:

 

WHEREAS, Seller owns all of the issued and outstanding shares of capital stock of Kable Media Services, Inc., a Delaware corporation (“KMS”);

 

WHEREAS, KMS owns all of the issued and outstanding shares of capital stock of Kable Distribution Services, Inc., a Delaware corporation (“KDS”), Kable News Company, Inc., an Illinois corporation (“KNC”), and Kable Product Services, Inc., a Delaware corporation (“KPS”);

 

WHEREAS, KDS owns all of the issued and outstanding shares of capital stock of Kable News International, Inc., a Delaware corporation (“KNI”), and KNC owns all of the issued and outstanding shares of capital stock of Kable Distribution Services of Canada, Ltd., a Canadian corporation incorporated in Ontario, Canada (“KDSC” together with KMS, KDS, KNC, KNI and KPS, the “Company Group”);

 

WHEREAS, Buyers and Seller are entering into a Stock Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”), pursuant to which Products Buyer shall acquire all of the issued and outstanding shares of capital stock of KPS and Distribution Buyer shall acquire all of the issued and outstanding shares of capital stock of KMS, and will thereby become the direct or indirect owners of the Company Group (the “Transaction”);

 

WHEREAS, all capitalized terms used but not otherwise defined in this Release Agreement have the meanings ascribed to them in the Purchase Agreement;

 

WHEREAS, in connection with the Transaction, Seller, Buyers, Michael P. Duloc and the Company Group are entering into the Transaction Agreements to which they are a respective signatory, as set forth therein; and

 

WHEREAS, as a material part of and as a condition to the Transaction, the Parties are required to enter into and deliver this Release Agreement.

 

NOW, THEREFORE, in consideration of the premises set forth above and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

  

1.           Release of Seller and its Affiliates.

 

(a)          Effective as of the Closing, each of the Buyers and Michael P. Duloc, for themselves and on behalf of (A) each Affiliate of any Buyer or Michael P. Duloc, and (B) each officer, director, stockholder, member, successor or assign of (i) any Buyer or Michael P. Duloc or (ii) an Affiliate of Buyers or Michael P. Duloc (collectively, “Releasors”) hereby irrevocably and unconditionally releases, waives and forever discharges Seller, its Affiliates and the direct and indirect subsidiaries, Affiliates, employees, officers, directors, stockholders, members, agents, representatives, successors and assigns of Seller and its Affiliates (collectively, “Releasees”) of and from any and all actions, causes of action, suits, losses, liabilities, rights, debts, dues, sums of money, accounts, reckonings, obligations, costs, expenses, liens, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, executions, claims, and demands, of every kind and nature whatsoever, whether now known or unknown, foreseen or unforeseen, matured or unmatured, suspected or unsuspected, unanticipated as well as anticipated, that now exist or may hereafter accrue based on matters now unknown as well as known, in law, admiralty or equity (collectively, “Claims”), which any of such Releasors ever had, now have or hereafter can, shall or may have against any of such Releasees for, upon or by reason of any matter, cause, conduct, event, occurrence, omission or thing whatsoever, existing or occurring before the Closing.

 

(b)          Notwithstanding the provisions of Section 1(a), the term “Claims” shall not include:

 

(i)          any obligations of any Releasee under the Lease Agreement, dated November 7, 2008, between El Dorado Utilities, Inc. and KPS (as successor-in-interest to Kable Specialty Packaging Services LLC);

 

(ii)         any obligations of any Releasee under the Transaction Agreements;

 

(iii)        any statutory obligations of any Releasee under the Retirement Plan or any Benefit Plan;

 

(iv)        any obligations of any Releasee to any Releasor solely in the Releasor’s capacity as a holder of securities of any Releasee; and

 

(v)         any statutory obligations of any Releasee under applicable Law to defend, indemnify and for advancement of expenses of any Releasor who is or was a director, officer or employee of Releasee.

 

(c)          Each of the Buyers and Michael P. Duloc, for themselves and on behalf of each other Releasor, hereby irrevocably agrees to refrain from directly or indirectly asserting any claim or demand or commencing (or causing to be commenced) any suit, action, or proceeding of any kind, in any court or before any tribunal, against any Releasee based upon any Claim. It is understood and agreed by each Party that the release in this Section 1 is a general release of each Releasee, and it is to be construed in the broadest possible manner consistent with applicable law.

 

  

(d)          Each of the Buyers and Michael P. Duloc, for themselves and on behalf of each other Releasor, represents and warrants that it or another Releasor is the exclusive owner of the Claims and that, as of the date hereof, no Releasor has assigned, sold, transferred or otherwise conveyed any Claim to any other person or entity. Each of the Buyers and Michael P. Duloc, for themselves and on behalf of each other Releasor, represents and warrants that, as of the date of the date hereof, no Releasor has filed with any court, tribunal or alternative dispute resolution organization any claim, demand, action, joinder or cause of action against any Releasee. If this warranty and representation should later be found to be untrue, then, in addition to any other relief or damages to which a Releasee may be entitled, Buyers and Michael P. Duloc shall, at no cost or expense to any Releasee, immediately file all documents and take all action necessary to have the claim, action or cause of action dismissed or discontinued with prejudice.

 

(e)          Each of the Buyers and Michael P. Duloc, for themselves and on behalf of each other Releasor, understands that it may later discover Claims or facts that may be different than, or in addition to, those that any Releasor now knows or believes to exist regarding the subject matter of the release contained in this Section 1, and which, if known at the time of signing this Release Agreement, may have materially affected this Release Agreement and such Party’s decision to enter into it and grant the release contained in this Section 1. Nevertheless, each of Buyer and Michael P. Duloc, for themselves and on behalf of each other Releasor, intends to fully, finally and forever settle and release all Claims that now exist, may exist or previously existed, as set forth in the release contained in this Section 1, whether known or unknown, foreseen or unforeseen, or suspected or unsuspected, and the release given herein is and will remain in effect as a complete release, notwithstanding the discovery or existence of such additional or different facts. Each of the Buyers and Michael P. Duloc, for themselves and on behalf of each other Releasor, hereby waives any right or Claim that might arise as a result of such different or additional Claims or facts.

 

2.           Representations and Warranties. Each of the Buyers and Michael P. Duloc hereby represents and warrants that:

 

(a)          Each of the Buyers and Michael P. Duloc has the full right and limited liability company power and authority, as applicable, to enter into this Release Agreement, to grant the release contained herein and to perform its obligations hereunder.

 

(b)          The execution of this Release Agreement by the individual whose signature is set forth at the end of this Release Agreement on behalf of each of the Buyers and Michael P. Duloc, and the delivery of this Release Agreement by each such Party, have been duly authorized by all necessary corporate or limited liability company, as applicable, action on the part of each such Party, and such individual is an authorized signatory of each such Party.

 

(c)          This Release Agreement has been executed and delivered by each of the Buyers and Michael P. Duloc and constitutes the legal, valid and binding obligation of each of the Buyers and Michael P. Duloc, enforceable against each of the Buyers and Michael P. Duloc in accordance with its terms, except as may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws and equitable principles related to or affecting creditors’ rights generally or the effect of general principles of equity.

 

  

EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES OF THE PARTIES IN THE TRANSACTION AGREEMENTS, (A) NEITHER PARTY HERETO NOR ANY PERSON ON SUCH PARTY’S BEHALF HAS MADE OR MAKES ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WHATSOEVER, EITHER ORAL OR WRITTEN, WHETHER ARISING BY LAW, COURSE OF DEALING, COURSE OF PERFORMANCE, USAGE OF TRADE OR OTHERWISE, ALL OF WHICH ARE EXPRESSLY DISCLAIMED, AND (B) EACH PARTY HERETO ACKNOWLEDGES THAT, IN ENTERING INTO THIS RELEASE AGREEMENT, IT HAS NOT RELIED UPON ANY REPRESENTATION OR WARRANTY MADE BY THE OTHER PARTY, OR ANY OTHER PERSON ON SUCH OTHER PARTY’S BEHALF.

 

3.           Miscellaneous.

 

(a)          Waiver. Any failure of a Releasor to comply with any of its obligations or agreements herein contained may be waived only in writing by Seller. Any failure of Seller to comply with any of its obligations or agreements herein contained may be waived only in writing by the Releasors who are Parties. No waiver granted hereunder shall be deemed a waiver of any subsequent breach or default of the same or similar nature. No failure or delay by any Party in exercising any right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

 

(b)          Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective Parties at the addresses set forth below (or to such other address that may be designated by a party from time to time in accordance with this Section):

 

Buyers and Michael P. Duloc:	c/o DFI Holdings, LLC 3179 Deer Creek Road,	with a required copy to (which shall not constitute notice):
	Collegeville, PA 19426	Fox Rothschild LLP
	Attention: Michael P. Duloc	2700 Kelly Road, Suite 300
	Fax: 815-734-5233	Warrington, PA 18976
		Attention: Jeffrey H. Nicholas
		Fax: 215-345-7507
Seller:	c/o AMREP Corporation 300 Alexander Park, Suite	with a required copy to (which shall not constitute notice):
	204	Duane Morris LLP
	Princeton, New Jersey 08540	222 Delaware Avenue
	Attention: General Counsel	Suite 1600
	Fax: 609-716-8255	Wilmington, DE 19801
		Attention: Christopher Winter
		Fax: 302-397-2455

 

  

(c)          Governing Law; Consent to Jurisdiction and Waiver of Jury Trial.

 

(i)          This Release Agreement shall be governed by and construed in accordance with the internal substantive Laws of the State of New York, without giving effect to any choice of Law or conflict of Laws rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of New York.

 

(ii)         Each Party irrevocably submits to the exclusive jurisdiction of the federal courts of the Southern District of New York or the courts of the State of New York located in the City of New York for the purposes of any suit, action or other proceeding arising out of this Release Agreement or any transaction contemplated hereby. Each Party further agrees that service of any process, summons, notice or document by U.S. registered mail to such Party’s respective address set forth in the “Notices” section hereof shall be effective service of process for any action, suit or proceeding with respect to any matters to which it has submitted to jurisdiction in this Section. Each Party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Release Agreement or the transactions contemplated hereby in federal courts of the Southern District of New York or the courts of the State of New York located in the City of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS RELEASE AGREEMENT OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

 

(d)          Counterparts. This Release Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Execution and delivery of this Release Agreement by delivery of a facsimile or electronically recorded copy in .pdf file format bearing a copy of the signature of a Party shall constitute a valid and binding execution and delivery of this Release Agreement by such Party. Such copies shall constitute enforceable original documents.

 

(e)          Headings. The section headings contained in this Release Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Release Agreement.

 

(f)          Entire Agreement. This Release Agreement embodies the entire agreement and understanding of the Parties hereto in respect of the subject matter herein. This Release Agreement supersedes all prior agreements and understandings between the Parties with respect to the subject matter thereof.

 

  

(g)          Amendment. Any provision of this Release Agreement may be amended if, and only if, such amendment is in writing and is signed by each Party to this Release Agreement.

 

(h)          Binding Effect; Benefits. This Release Agreement shall inure to the benefit of and be binding upon the Parties hereto and their respective successors and permitted assigns; nothing in this Release Agreement, express or implied, is intended to confer on any Person, other than the Parties and their respective successors and permitted assigns, the Releasors and the Releasees, any rights, remedies, obligations or liabilities under or by reason of this Release Agreement. The Parties hereby designate all Releasees as third-party beneficiaries of Section 1 having the right to enforce this Release Agreement.

 

(i)          Joint Drafting. The Parties have participated jointly in the negotiation and drafting of this Release Agreement. In the event an ambiguity or question of intent or interpretation arises, this Release Agreement shall be construed as if drafted jointly by the 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 Release Agreement.

 

(j)          Severability. Whenever possible, each provision of this Release Agreement shall be interpreted in such manner as to be effective and valid under applicable Law. If any provision of this Release Agreement is held to be prohibited by or invalid under applicable Law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Release Agreement. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Release Agreement so as to effect the original intent of the Parties as closely as possible to the fullest extent permitted by applicable Law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

(k)          Interpretation. When a reference is made in this Release Agreement to an Article, Section or Exhibit, such reference will be to an Article or Section of, or an Exhibit to, this Release Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Release Agreement, they will be deemed to be followed by the words “without limitation.” The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Release Agreement will refer to this Release Agreement as a whole and not to any particular provision of this Release Agreement. Unless the context expressly provides otherwise, any approval, determination, election or authorization required to be obtained from a Party shall be at such Party’s sole discretion. The word “or” is not exclusive. All capitalized terms used and defined in this Release Agreement shall have the meanings ascribed to them herein. All capitalized terms used but not otherwise defined in this Release Agreement shall have the meanings ascribed to them in the Purchase Agreement. All terms defined in this Release Agreement will have such defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Release Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Unless otherwise indicated, any agreement, instrument or statute defined or referred to herein, or in any agreement or instrument that is referred to herein, means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns.

 

  

(l)          Assignability. This Release Agreement shall not be assignable by any Party hereto without the prior written consent of the other Party.

 

(m)          Specific Performance. Each Party agrees that irreparable damage would occur in the event that any of the provisions of this Release Agreement were not performed by them in accordance with the terms hereof and that each Party shall be entitled to specific performance of the terms hereof (without the need to post bond or any other security), in addition to any other remedy at law or equity.

 

(n)          Expenses. Each Party shall bear its own costs and expenses in connection with this Release Agreement and the transactions contemplated hereby, including all legal, accounting, financial advisory, consulting and all other fees and expenses of third parties, except where specifically provided to the contrary.

 

(o)          Disclosure. Each Buyer and Michael P. Duloc consents to Seller or its Affiliates publicly disclosing this Release Agreement, including by filing such documents with the Securities and Exchange Commission or the New York Stock Exchange.

 

(p)          Independent Counsel. Each Party certifies that it has read the terms of this Release Agreement, that it understands the terms of this Release Agreement, and that it is entering into this Release Agreement of its own volition. Each Party warrants and represents that it has (a) been represented by an attorney of its choice in connection with the Transaction and received independent legal advice from such attorney regarding its decision with respect to the advisability of making and entering into this Release Agreement, or (b) had sufficient time, opportunity and means to engage an attorney of its choice in order to be represented by such attorney in connection with the Transaction and to receive independent legal advice from such attorney regarding its decision with respect to the advisability of making and entering into this Release Agreement, and has made a knowing and voluntary decision not to do so.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

  

 

IN WITNESS WHEREOF, the Parties have caused this Release Agreement to be duly executed and delivered as of the date first written above.

 

	DFI HOLDINGS, LLC
	By:	/s/ Michael P. Duloc
		Name: Michael P. Duloc
		Title: Manager
	KPS HOLDCO, LLC
	By:	/s/ Michael P. Duloc
		Name: Michael P. Duloc
		Title: Manager

 

	/s/ Michael P. Duloc
	MICHAEL P. DULOC

 

	American republic investment co.
	By:	/s/ Peter M. Pizza
		Name: Peter M. Pizza
		Title: Vice President

 

Signature Page to Buyer Release

(1/1)

  

 

 

 

Exhibit 10.7

 

Execution Copy

 

LINE OF CREDIT PROMISSORY NOTE

 

$2.0 Million

February 9, 2015

 

FOR VALUE RECEIVED, and intending to be legally bound hereby, each of Kable Media Services, Inc., a Delaware corporation (“KMS”), Kable Distribution Services, Inc., a Delaware corporation (“KDS”), Kable News Company, Inc., an Illinois corporation (“KNC”), Kable News International, Inc., a Delaware corporation (“KNI”), Kable Distribution Services of Canada, Ltd., a Canadian corporation incorporated in Ontario, Canada (“KDSC”), and Kable Product Services, Inc., a Delaware corporation (“KPS” and together with KMS, KDS, KNI, KNC and KDSC, the “Borrowers” and each, a “Borrower”), hereby jointly and severally unconditionally promises to pay to the order of American Republic Investment Co., a Delaware corporation (hereinafter “Lender” and together with the Borrowers, the “Parties”), the Maximum Principal Amount (as defined in Annex A hereto), together with accrued, unpaid interest thereon and any unpaid costs and expenses payable to the Lender hereunder. DFI Holdings, LLC, a Pennsylvania limited liability company (“Distribution Buyer”), and KPS Holdco, LLC, a Pennsylvania limited liability company (“Products Buyer” and together with Distribution Buyer, collectively, “Buyers”), acknowledge and accept this Note.

 

1.

Definitions. The definitions set forth on Annex A hereto are incorporated herein by reference. Capitalized terms used but not defined herein, shall have the meaning set forth in the Stock Purchase Agreement, dated as of the date hereof (the “SPA”), by and between, the Lender, as seller, and Buyers.

 

2.

Terms of Note.

 

a.

Credit Facility. The credit facility made available to the Borrowers on the terms and conditions set forth herein and made pursuant to and evidenced by this Note shall be referred to herein as the “Credit Facility.” The Credit Facility may be borrowed, repaid and reborrowed by the Borrowers in accordance with the terms and conditions hereof during the Term.

 

b.

Advances.

 

(i)

Procedure for Advances. Borrowing Agent on behalf of any Borrower shall notify Lender in writing prior to 2:00 p.m. New York time on a Business Day of a Borrower’s request to incur an Advance hereunder. Provided that no Event of Default shall have occurred and be continuing and that the requested Advance amount would not cause total Obligations under this Note to exceed the Maximum Advance Amount, then Lender shall within two (2) Business Days of receiving an Advance Request, provide the requested Advance to Borrowing Agent or the specified Borrower (provided that Lender will use commercially reasonable efforts to provide the requested Advance sooner than two (2) Business Days).

 

  

(ii)

Maximum Advances. Aggregate Obligations under this Note shall not at any time exceed the Maximum Advance Amount.

 

c.

Interest and Fee.

 

(i)

Interest Rate: Interest shall accrue on all principal, interest, fees and any other Obligations outstanding under this Note at an annual rate equal at all times to the Interest Rate.

 

(ii)

Default Rate. Upon the occurrence of an Event of Default, interest will be assessed at a rate equal to the Interest Rate plus six percent (6%) (the “Default Rate”). Such Default Rate of interest shall also be charged on any amounts owed by the Borrowers to the Lender pursuant to any judgment entered in favor of Lender with respect to this Note.

 

(iii)

Unused Line Fee. On the first day of each month and upon Maturity, the Borrower agrees to pay to the Lender an unused line fee (the “Unused Line Fee”) equal to 1.0% multiplied by the amount by which the Maximum Advance Amount exceeded the sum of the average daily outstanding amount of outstanding Advances under this Note. The Unused Line Fee shall be computed on the basis of a 360-day year for the actual number of days elapsed.

 

d.

Computation of Interest; Place of Payment. Interest charged hereunder shall be computed daily on the basis of a 360-day year for the actual number of days elapsed. All payments hereunder shall be made in lawful currency of the United States of America and in immediately available funds. All payments made hereunder shall be made to the Lender at its offices set forth in the Notice section of this Note or at such other address or in accordance with such instructions as Lender shall provide in writing to Borrowing Agent from time to time.

 

e.

Payment and Prepayment.

 

(i)

Interest and the Unused Line Fee shall be due and payable commencing on March 1, 2015, and continuing on the first day of each month thereafter until the Maturity Date, on which date all outstanding principal, accrued interest, Unused Line Fees and any other Obligations under this Note shall be due and payable in full.

 

(ii)

The Borrowers may make prepayments of principal amounts due hereunder in whole or in part at any time and from time to time without penalty or premium upon notification to the Lender not later than 2:00 p.m. New York time, on the date prior to the proposed prepayment. All payments or prepayments made under this Note, whether or not accompanied by instructions as to their application, shall be applied to expenses and costs, fees, interest and principal in such order as the Lender, in its sole discretion, shall determine.

 

  

(iii)

If at any time, Obligations under this Note exceed the Maximum Advance Amount, Borrowers shall within two (2) Business Days of receiving notice thereof make a payment to Lender that is sufficient to reduce Obligations under this Note to an amount that is less than the Maximum Advance Amount.

 

f.

Late Charge. If any payment under this Note is not paid in full when the same is due, the Borrowers shall pay the Lender a fee on such unpaid amount equal to six percent (6%) of such amount.

 

g.

Maturity. In addition to the right of the Lender to terminate the Credit Facility following the occurrence of any Event of Default, the Credit Facility shall mature by its terms and all then outstanding Obligations under this Note shall be due and owing as of February 6, 2017 (the “Maturity Date”).

 

3.

Documents Required for Lending. The obligation of the Lender to make amounts available to the Borrowers under the Credit Facility is subject to the payment of all fees and expenses due to the Lender under this Note and to the Lender’s receipt of the following documents in form and substance satisfactory to the Lender:

 

a.

this Note;

 

b.

an Advance Request, including evidence from Borrowers satisfactory to Lender that the aggregate amount of Eligible Receivables and Eligible Unbilled KDS Receivables is sufficient in value and amount to support any Advances being requested in the amount requested by Borrowers;

 

c.

certified resolutions of the Board of Directors of each Borrower, or other such authorizations as may be required for each Borrower to lawfully borrow funds from the Lender, authorizing such Borrower to borrow under the Credit Facility and to execute, deliver and perform its obligations under this Note. Such resolutions shall contain such other provisions as shall be required by the Lender;

 

d.

for each Borrower, a certificate of the secretary or other appropriate officer of Borrower certifying as to the incumbency of the officer(s) of Borrower executing the Note and other Transaction Agreements to which it is a signatory, including specimen signatures;

 

e.

security, subordination, or guaranty documents, and related instruments necessary to perfect any interest in any collateral given by any Borrower to secure the Obligations (the “Collateral”) or as otherwise required by Lender pursuant to the Transaction Agreements, including: (a) the Security Agreement; (b) deposit account control agreements with respect to all depository accounts of Borrowers held in the United States of America, and any agreements required under Sections 6 and 7 of the Security Agreement; and (c) such Uniform Commercial Code financing statements and other security documents as shall be required by the Lender; and

 

f.

such other documents as the Lender may reasonably require, including proof of insurance.

 

  

4.

Representations and Warranties. Each Borrower represents and warrants to the Lender that:

 

a.

Existence; Compliance With Law.

 

(i)

Each Borrower is duly organized, validly existing and in good standing as a corporation under the Laws of the state of its incorporation and is qualified to do business in each jurisdiction where its ownership of property or conduct of business requires such qualification;

 

(ii)

Each Borrower has the corporate power and authority and the legal right to own and operate its property and to conduct business in the manner in which it does and proposes so to do; and

 

(iii)

Each Borrower is in compliance in all material respects with all requirements of Law and contractual obligations.

 

b.

Power; Authorization; Enforceable Obligations. Each Borrower has the corporate power and authority and the legal right to execute, deliver and perform the Transaction Agreements to which it is a signatory, including the Note, and has taken all necessary corporate action to authorize the execution, delivery and performance of the Transaction Agreements to which it is a signatory. The Transaction Agreements to which it is a signatory have been duly executed and delivered by each Borrower and constitute legal, valid and binding obligations of each Borrower enforceable against each Borrower in accordance with their respective terms.

 

c.

No Legal Bar. The execution, delivery and performance of the Transaction Agreements, the borrowing hereunder and the use of the proceeds thereof, will not violate any contractual obligation of any Borrower or any requirement of Law.

 

d.

Assets. Each Borrower has good and marketable title to all property and assets owned by such Borrower. The Borrower does not have any outstanding Liens on any of its properties or assets other than Liens in favor of the Lender.

 

e.

Use of Proceeds. The proceeds of the Advances will be used only for working capital purposes.

 

f.

Consents. No consent, approval, authorization of, or registration, declaration or filing with, any governmental authority is required on the part of any Borrower in connection with the execution and delivery of the Transaction Agreements or the performance of or compliance with the terms, provisions and conditions hereof or thereof.

 

g.

Suits and Defaults. There are no actions, suits, proceedings, or claims pending or threatened against any Borrower or any of its property that could reasonably be expected to have a material adverse effect on any Borrower’s ability to perform their obligations hereunder. No Borrower is in default under any agreement to which such Borrower is a party or by which such Borrower or any of its property is bound, or under any instrument evidencing any indebtedness of such Borrower. Each Borrower’s execution of or performance under the Transaction Agreements will not create a default or any Lien under any such agreement or instrument other than a Lien in favor of the Lender or that would not reasonably be expected to have a material adverse effect on any Borrower’s ability to perform their obligations hereunder.

 

  

h.

Compliance With Laws and Other Agreements. Each Borrower is in compliance in all material respects with all Laws, rules, regulations, judgments, decrees, orders, agreements and requirements and has not received, and has no knowledge of, any order or notice of any governmental investigation or of any violation or claim of violation of any Law, regulation, judgment, decree, order, agreement, or other governmental requirement, except as would not reasonably be expected to have a material adverse effect on any Borrower’s ability to perform their obligations hereunder..

 

i.

Nature of Receivables. Each of the Receivables shall be a bona fide and valid account representing a bona fide indebtedness incurred by the Customer therein named, for a fixed sum as set forth in the invoice or settlement statement relating thereto with respect to an absolute sale or lease and delivery of goods upon stated terms of a Borrower, or work, labor or services theretofore rendered by a Borrower as of the date each Receivable is created. Same shall be due and owing in accordance with the applicable Borrower’s standard terms of sale without dispute, setoff or counterclaim.

 

j.

Solvency of Customers. To Borrowers’ knowledge, each Customer as of the date each Receivable is created, is solvent and able to pay all Receivables on which the Customer is obligated in full when due or with respect to such Customers of any Borrower who are not solvent such Borrower has set up on its books and in its financial records bad debt reserves adequate to cover such Receivables.

 

5.

Affirmative Covenants. Each Borrower covenants and agrees that so long as there are any outstanding Obligations, each Borrower shall:

 

a.

Disclosure of Material Matters. Promptly upon learning thereof, report to Lender all matters materially adversely affecting the value, enforceability or collectibility of any portion of the Collateral, including any Borrower’s reclamation or repossession of, or the return to any Borrower of, a material amount of goods or claims or disputes asserted by any Customer or other obligor.

 

b.

Financial Information.

 

(i)

Keep and maintain complete and accurate books and records; permit representatives or agents of the Lender, upon reasonable advance notice, full and complete access to any or all of the Borrower’s properties and financial records, to make extracts from or audit the Borrower’s books, records and financial information and to inspect the Borrower’s facilities and properties.

 

  

(ii)

Deliver to Lender (i) on or before the fifteenth (15th) day of each month as and for the prior month (a) net accounts receivable ageings inclusive of reconciliations to the general ledger, (b) net accounts payable schedules inclusive of reconciliations to the general ledger, (c) Inventory reports and (ii) on or before Tuesday of each week as and for the prior week a Borrowing Base Certificate (which shall be calculated as of the last day of the prior week and which shall not be binding upon Lender or restrictive of Lender’s rights under this Note and which shall include a weekly Receivables roll forward). In addition, each Borrower will deliver to Lender as Lender may require: (i) confirmatory assignment schedules; (ii) copies of Customer’s invoices; (iii) evidence of shipment or delivery; and (iv) such further schedules, documents or information as Lender may require including trial balances and test verifications. Lender shall have the right to confirm and verify all Receivables by any manner and through any medium it considers advisable and do whatever it may deem reasonably necessary to protect its interests hereunder. The items to be provided under this Section are to be in form and substance satisfactory to Lender and executed by each Borrower and delivered to Lender. Any Borrower’s failure to deliver any of such items to Lender shall not affect, terminate, modify or otherwise limit Lender’s Lien with respect to the Collateral.

 

c.

Tax Returns. Prepare and timely file all Tax Returns required to be filed by the Borrower and shall submit to the Lender a copy of its federal Tax Return immediately after filing same with the Internal Revenue Service.

 

d.

Notice of Certain Events. Promptly give written notice to the Lender of (i) the occurrence of any event which alone or with notice, the passage of time, or both, would constitute an Event of Default; (ii) the commencement of any proceeding or litigation; and (iii) the formation of any subsidiary of the Borrower or any of its direct or indirect subsidiaries after the date of this Note, which notice shall be accompanied by the resolution of the board of directors or other governing body of such subsidiary authorizing such subsidiary to execute a guaranty of the Obligations, satisfactory in form and substance to the Lender, together with such guaranty duly executed by such subsidiary.

 

e.

Maintenance of Existence and Properties. Maintain its corporate existence and obtain and maintain all rights, privileges, licenses, approvals, franchises, properties and assets necessary or desirable in the normal conduct of its business, and comply in all material respects with all contractual obligations and requirements of applicable Law.

 

f.

Preservation of Property; Insurance. Keep and maintain, and require its subsidiaries to keep and maintain, all of its and their material property and assets in good order and repair, maintain extended coverage, general liability, business interruption, hazard, property and other insurance in amounts customary for businesses similar to the Borrower’s business, and deliver to the Lender certificates of all such insurance in effect; and cause all such policies covering any Collateral for the Obligations and business interruption to contain loss payee endorsements in favor of the Lender and to be subject to cancellation or reduction in coverage only upon thirty (30) days prior written notice thereof to the Lender at its address set forth in the Notice section hereof.

 

  

g.

Lockbox and Account Covenants. The Borrowers shall establish “Lockbox Accounts” and “Controlled Accounts” in accordance with the Security Agreement and otherwise fully comply with each and every requirement of Sections 6 and 7 of the Security Agreement.

 

h.

Inspection of Property; Books and Records; Audits.

 

(i)

Keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all requirements of Law in all material respects shall be made of all dealings and transactions in relation to its business and activities; and

 

(ii)

Permit representatives of the Lender to (a) visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time upon reasonable advance notice and as often as may reasonably be desired by the Lender, and (b) discuss the business, operation, properties and financial and other condition of the Borrower with officers and employees of the Borrower, and with the independent certified public accountants of the Borrower.

 

i.

Costs and Expenses. Pay all reasonable out-of-pocket costs and expenses (including reasonable fees and disbursements of legal counsel) of the Lender in connection with the preparation and documentation of this Note and the Buyer Promissory Note (collectively, the “Note Documentation Costs”). The Note Documentation Costs are capped at $25,000.00 in the aggregate and shall be paid by Buyers in six (6) equal monthly installments, the first installment due to be paid on or before March 1, 2015 and each succeeding installment to be paid on the first Business Day of each month thereafter.

 

j.

Compliance. Comply with and observe all terms and conditions of this Note and the other Transaction Agreements.

 

k.

Taxes. Pay and discharge, and require its subsidiaries or Affiliates to pay and discharge, when due, all Taxes imposed on them or any of their respective properties, unless the same are currently being contested in good faith by appropriate proceedings and adequate reserves are maintained therefore.

 

  

l.

Environmental Liens; Removal of Hazardous Substances. In the event that there shall be filed a Lien against any property of the Borrower by any jurisdiction, political subdivision, agency or instrumentality thereof resulting in the discharging of hazardous substances or wastes into the atmosphere or waters, or onto lands, then, within thirty (30) days from the date that the Borrower is given notice that the Lien has been placed against such property, or within such shorter period of time in the event that such jurisdiction, political subdivision, agency or instrumentality thereof has commenced steps to cause such property to be sold pursuant to the Lien, the Borrower shall either (i) pay the claim and remove the Lien from the applicable property or (ii) furnish to such jurisdiction, political subdivision, agency or instrumentality thereof that imposed the Lien one of the following: (a) a bond satisfactory to such jurisdiction, political subdivision, agency or instrumentality thereof in the amount of the claim out of which the Lien arises; (b) a cash deposit in the amount of the claim out of which the Lien arises; or (c) other security reasonably satisfactory to such jurisdiction, political subdivision, agency or instrumentality thereof in an amount sufficient to discharge the claim out of which the Lien arises. Should the Borrower cause or permit any intentional or unintentional act or omission resulting in the discharging of hazardous substances or wastes into the atmosphere or waters, or onto lands resulting in damage to the natural resources without having obtained a permit issued by the appropriate governmental authorities, the Borrower shall promptly clean up same in accordance with all applicable Laws.

 

m.

Further Actions. Cooperate and join with the Lender, at the Borrower’s own expense, in taking all such further actions as the Lender, in its sole judgment, shall deem necessary to effectuate the provisions of this Note and the other Transaction Agreements and to perfect or continue the perfected status of all Liens granted to the Lender pursuant to the Transaction Agreements, including the execution, delivery and filing of financing statements, amendments thereto and continuation statements, the delivery and filing of financing statements, amendments thereto and continuation statements, the delivery of chattel paper, documents or instruments to the Lender and the notation of Liens in favour of the Lender on certificates of title.

 

6.

Negative Covenants. So long as any Obligations are outstanding, no Borrower shall, without the prior written consent of the Lender:

 

a.

Payment of Dividends; Redemption of Stock. Pay any dividends, make any withdrawal from its capital, make any other distributions or repurchase, redeem or otherwise acquire or set aside reserves to acquire, any of its outstanding stock, partnership or other equity interests, other than distributions for the payment of taxes imposed as a result of ownership of equity interests in such Borrower.

 

b.

Guaranty Obligations. Become a guarantor, surety, borrower or otherwise become directly, indirectly or contingently liable for the debts or obligations of others, except for the benefit of the Lender or its Affiliates, and except as an endorser of checks or drafts negotiated in the Ordinary Course of Business.

 

c.

Other Liens and Encumbrances. Create, incur, assume or suffer to exist, any Lien on or with respect to any of the Borrower’s real or personal property of any character (including accounts) whether now owned or hereafter acquired, or sign or file or suffer to exist, under the Uniform Commercial Code of any jurisdiction, a financing statement that names the Borrower as debtor, or sign or suffer to exist, any security agreement authorizing any secured party thereunder to file such financing statement, or assign any accounts or other right to receive income, excluding, however, Liens created in favor of the Lender or equipment Liens not to exceed $10,000 on financed equipment other than equipment Liens solely with respect to KPS which shall not exceed $100,000.

 

  

d.

Consolidation and Merger; Change of Business. Liquidate or dissolve or enter into any consolidation, merger, share exchange, division, conversion, reclassification, recapitalization, reorganization, partnership, joint venture, syndicate or other combination, sell or transfer ten percent (10%) or more of any of its capital stock, change its name or make any material change in the nature of its business as presently conducted; provided, however, that one or more of the Buyers and the Borrowers may effect a reorganization so long as, after giving effect to such reorganization, the Borrowers remain at all times a majority owner, directly or indirectly, of each Borrower, with voting control over the capital stock of each Borrower and with the right to receive 51% of the income or losses on distribution and liquidation of each Borrower, and Michael P. Duloc remains at all times a majority owner, directly or indirectly, of each Borrower, with voting control over the capital stock of each Borrower and with the right to receive 51% of the income or losses on distribution and liquidation of each Borrower.

 

e.

Dispose of Assets. Sell, transfer, lease or otherwise dispose of any assets, product line or process outside the ordinary course of business.

 

f.

Affiliate Transactions. Without the prior written consent of Lender, (i) enter into any transaction with any Affiliate of Lender or Borrower that is not a Member of the Company Group, except as expressly contemplated by the Transaction Agreements, or (ii) create, incur, assume or otherwise become or remain directly or indirectly liable for any intercompany amounts or indebtedness owing to or for any Affiliate of Lender or Borrower that is not a Member of the Company Group.

 

7.

Events of Default. The occurrence of any one of the following shall constitute an event of default (“Event of Default”) under this Note:

 

a.

Breach. A breach by any Buyer or any Borrower of any term, obligation, provision, covenant, representation or warranty arising under (i) any Transaction Agreement, (ii) any present or future agreement with or in favor of the Lender or any of its Affiliates, including the failure to make any payment when due or (iii) any present or future agreement or instrument for borrowed money or other financial accommodations with any person or entity, in each case which is not cured within five (5) days, if a monetary breach, and fifteen (15) days following written notice from Lender if a non-monetary breach.

 

b.

Bankruptcy; Insolvency. (i) Any Buyer or any Borrower commences any bankruptcy, reorganization, debt arrangement, or other case or proceeding under the United States Bankruptcy Code or under any similar foreign, federal, state, or local statute, or any dissolution or liquidation proceeding, or makes a general assignment for the benefit of creditors, or takes any action for the purpose of effecting any of the foregoing; (ii) any bankruptcy, reorganization, debt arrangement, or other case or proceeding under the United States Bankruptcy Code or under any similar foreign, federal, state or local statute, or any dissolution or liquidation proceeding, is involuntarily commenced against or in respect of any Buyer or any Borrower or an order for relief is entered in any such proceeding and such proceeding is not dismissed within 60 days of being commenced; (iii) the appointment, or the filing of a petition seeking the appointment, of a custodian, receiver, trustee, or liquidator for any Buyer or any Borrower, or any of their respective property, or the taking of possession of any part of the property of any Buyer or any Borrower at the instance of any governmental authority, which is not dismissed within 60 days; or (iv) any Buyer or any Borrower becomes insolvent (however defined), is generally not paying its debts as they become due, or has suspended transaction of its usual business.

 

  

c.

Reorganization. The dissolution, merger, consolidation or reorganization of any Borrower or any Member of the Company Group without the prior written consent of the Lender; provided, however, that a reorganization of one or more of the Borrowers that is permitted under Section 6(d) hereof shall not be an Event of Default.

 

d.

Material Misstatement. Any written statement, representation or warranty made in or pursuant to this Note or any other Transaction Agreement or to induce the Lender to enter into this Note or any other Transaction Agreement shall prove to be untrue or misleading in any material respect.

 

e.

Debt, Liens, Loans, Lease Payments. Any Buyer or any Borrower (i) incurs or assumes additional debt other than debt to the Lender or trade debt of Borrowers in the Ordinary Course of Business, (ii) makes any loans or advances to officers, directors, shareholders, principals, partners or Affiliates of any Borrower or any Member of the Company Group, (iii) creates, permits or grants any lien or security interest in any of its property on which the Lender has a lien or security interest or (iv) incurs, creates or assumes any commitment, either directly or indirectly, for rent, service fees or charges or finance charges under any lease, rental, sale-lease back or other agreement for use of the property of any person or entity other than any Borrower, except with the prior written consent of the Lender, which shall not be unreasonably withheld.

 

f.

Entry of Judgment. (i) The filing, entry, or issuance of any judgment, execution, garnishment, attachment, distraint or lien against any Buyer or any Borrower or any of their respective property in excess of $25,000.00 or (ii) the entry of any order enjoining or restraining any Borrower or restraining or seizing any property of any Buyer or any Borrower in excess of $25,000.00, in each case which is not dismissed within 60 days.

 

g.

Transfer of Assets. Any Buyer or any Borrower transfers or sells all or substantially all of its assets, without the prior written consent of the Lender.

 

h.

Agreements Invalid. The validity, binding nature of, or enforceability of any material term or provision of this Note or any other Transaction Agreement is disputed by, on behalf of, or in the right or name of any Buyer or any Borrower or any material term or provision of any such Transaction Agreement is found or declared to be invalid, avoidable, or non-enforceable by any court of competent jurisdiction.

 

  

8.

Remedies.

 

a.

Acceleration of Obligations; Rights of Lender. Upon the occurrence of an Event of Default, the Lender’s commitment, if any, to make any further Advances or loans to the Borrowers hereunder or under any Transaction Agreement, shall terminate, and the Obligations shall immediately and automatically become due and payable in full, all without protest, presentment, demand or further notice of any kind to any Buyer or any Borrower, all of which are expressly waived. Upon the occurrence of an Event of Default, the Lender, at its option, may exercise any and all rights and remedies it has under this Note, any other Transaction Agreement and under applicable Law, including the right to charge and collect interest on the Obligations at the Default Rate, which rate shall, at the Lender’s option, apply upon the occurrence of and after an Event of Default, maturity, whether by acceleration or otherwise, or the entry of judgment with respect to any or all of the Obligations. Upon the occurrence of an Event of Default, the Lender may proceed to protect and enforce the Lender’s rights under any Transaction Agreement or under applicable Law by action at law, in equity or other appropriate proceeding, including an action for specific performance to enforce or aid in the enforcement of any provision contained herein or in any other Transaction Agreement. Upon the occurrence of any Event of Default, Lender may exercise any and all rights and remedies provided for herein, under any other Transaction Agreement, under the Uniform Commercial Code or at law or equity generally, including the right to foreclose the security interests granted herein and to realize upon any Collateral by any available judicial procedure or to take possession of and sell any or all of the Collateral with or without judicial process.

 

b.

Remedies Cumulative; No Waiver. The rights, powers and remedies hereunder or under any other Transaction Agreement are cumulative and concurrent, and are not exclusive of any other rights, powers or remedies available to the Lender. No failure or delay on the part of the Lender in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or remedy preclude any other or further exercise thereof, or the exercise of any other right, power or remedy.

 

c.

Continuing Enforcement. If, after receipt of any payment of all or any part of the Obligations, the Lender is compelled or agrees, for settlement purposes, to surrender such payment to any person or entity for any reason, then this Note and the other Transaction Agreements shall continue in full force and effect or be reinstated, as the case may be. The provisions of this paragraph shall survive the termination of this Note and the other Transaction Agreements and shall be and remain effective notwithstanding the payment of the Obligations, the cancellation of the Note, the release of any security interest, lien or encumbrance securing the Obligations or any other action which the Lender may have taken in reliance upon its receipt of such payment.

 

  

9.

Miscellaneous.

 

a.

Waiver. Each Borrower (i) waives demand, presentment, protest, notice of protest and notice of dishonor of this Note; (ii) consents to any and all waivers or modifications that may be granted by the Lender with respect to the payment or other provisions of this Note; and (iii) agrees that makers, endorsers, guarantors and sureties for the indebtedness evidenced hereby may be added or released without notice to any Borrower and without affecting any Borrower’s liability hereunder. The liability of each Borrower hereunder shall be absolute and unconditional.

 

b.

Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the Borrowers or Lender at the addresses set forth below (or to such other address that may be designated by a party from time to time in accordance with this Section):

 

Borrowers:	c/o DFI Holdings, LLC	with a required copy to (which shall not constitute notice):
	3179 Deer Creek Road	Fox Rothschild LLP
	Collegeville, PA 19426	2700 Kelly Road, Suite 300
	Attention: Michael P. Duloc	Warrington, PA 18976
	Fax: 815-734-5233	Attention: Jeffrey H. Nicholas
		Fax: 215-345-7507
Lender:	c/o AMREP Corporation	with a required copy to (which shall not constitute notice):
	300 Alexander Park, Suite 204	Duane Morris LLP
	Princeton, New Jersey 08540	222 Delaware Avenue
	Attention: General Counsel	Suite 1600
	Fax: 609-716-8255	Wilmington, DE 19801
		Attention: Christopher Winter
		Fax: 302-397-2455

Each Borrower agrees that notice under this section to the Borrowing Agent shall be notice to each Borrower for all purposes.

 

c.

Costs and Expenses. The Borrowers shall promptly pay (or reimburse, as the Lender may elect) all costs and expenses which the Lender has incurred or may hereafter incur in connection with the reproduction, interpretation, perfection and protection of Collateral, administration and enforcement of this Note and the Buyer Promissory Note, the collection of all amounts due under this Note or the Buyer Promissory Note, and all amendments, modifications, consents or waivers, if any, to this Note and the Buyer Promissory Note. The Borrowers’ reimbursement obligations under this paragraph shall survive any termination of this Note or the Buyer Promissory Note. The obligations of Borrowers described in Section 5(i) above are in addition to Borrowers’ obligations under this Section.

 

  

d.

Payment Due on a Day Other than a Business Day. If any payment due or action to be taken under this Note or any other Transaction Agreement falls due or is required to be taken on a day other than a Business Day, such payment or action shall be made or taken on the next succeeding Business Day and such extended time shall be included in the computation of interest.

 

e.

Governing Law. This Note shall be governed by and construed in accordance with the internal substantive Laws of the State of New York, without giving effect to any choice of Law or conflict of Laws rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of New York.

 

f.

Consent to Jurisdiction and Waiver of Jury Trial. Each Party irrevocably submits to the exclusive jurisdiction of the federal courts of the Southern District of New York or the courts of the State of New York located in the City of New York for the purposes of any suit, action or other proceeding arising out of this Note or any transaction contemplated hereby. Each Party further agrees that service of any process, summons, notice or document by U.S. registered mail to such Party’s respective address set forth in the “Notices” section hereof shall be effective service of process for any action, suit or proceeding with respect to any matters to which it has submitted to jurisdiction in this Section. Each Party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Note or the transactions contemplated hereby in federal courts of the Southern District of New York or the courts of the State of New York located in the City of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS NOTE OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

 

g.

Integration. This Note embodies the entire agreement and understanding of the Parties hereto in respect of the subject matter contained herein. This Note supersedes all prior agreements and understandings between the Parties with respect to the subject matter thereof.

 

h.

Amendment. Any provision of this Note may be amended if, and only if, such amendment is in writing and is signed by each Party to this Note.

 

  

i.

Successors and Assigns. This Note (i) shall be binding upon each Borrower and the Lender and, where applicable, their successors and permitted assigns, and (ii) shall inure to the benefit of each Borrower and the Lender and, where applicable, their successors and permitted assigns; provided, however, that no Borrower may assign its rights or obligations hereunder or any interest herein without the prior written consent of the Lender, and any such assignment or attempted assignment by any Borrower shall be void and of no effect with respect to the Lender. The Lender may from time to time sell or assign, in whole or in part, or grant participations in the Credit Facility, the Note or the Obligations evidenced thereby. The Borrowers authorize the Lender to provide information concerning the Borrowers to any prospective purchaser, assignee or participant; provided that the recipient signs a customary non-disclosure agreement.

 

j.

Severability. Whenever possible, each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable Law. If any provision of this Note is held to be prohibited by or invalid under applicable Law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Note so as to effect the original intent of the Parties as closely as possible to the fullest extent permitted by applicable Law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

k.

Savings. This Note is subject to the express condition that, at no time shall any Borrower be obligated or required to pay interest at a rate that could subject Lender to either civil or criminal liability as a result of such interest rate exceeding the maximum rate (the “Highest Lawful Rate”) that such Borrower is permitted by applicable Law to contract to agree to pay. If the rate of interest at any time exceeds the Highest Lawful Rate, the outstanding amount of the Obligations shall bear interest at the Highest Lawful Rate until the total amount of interest due hereunder equals the amount of interest which would have been due hereunder if the stated rates of interest set forth in this Note had at all times been in effect. In addition, if when the Obligations are repaid in full the total interest due hereunder (taking into account the increase provided for above) is less than the total amount of interest which would have been due hereunder if the stated rates of interest set forth in this Note had at all times been in effect, then to the extent permitted by applicable Law, each applicable Borrower shall pay to Lender an amount equal to the difference between the amount of interest paid and the amount of interest which would have been paid if the Highest Lawful Rate had at all times been in effect. Notwithstanding the foregoing, it is the intention of Lender and Borrowers to conform strictly to any applicable usury Laws. Accordingly, if Lender contracts for, charges, or receives any consideration which constitutes interest in excess of the Highest Lawful Rate, then any such excess shall be cancelled automatically and, if previously paid, shall at such Lender’s option be applied to the Obligations or be refunded to Borrowers.

 

l.

Joint and Several Liability. Each Borrower is jointly and severally liable for the Obligations under the Note.

 

  

m.

Joint Drafting. The Parties have participated jointly in the negotiation and drafting of this Note. In the event an ambiguity or question of intent or interpretation arises, this Note shall be construed as if drafted jointly by the 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 Note.

 

o.

Survival of Covenants. This Note and all covenants, agreements, representations and warranties made herein and in any certificates delivered pursuant hereto shall survive the making of the Advances and the execution and delivery of the Note, and shall continue in full force and effect until all of the Obligations have been fully paid, performed, satisfied and discharged.

 

p.

Counterparts. This Note may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Execution and delivery of this Note by delivery of a facsimile or electronically recorded copy in .pdf file format bearing a copy of the signature of a Party shall constitute a valid and binding execution and delivery of this Note by such Party. Such copies shall constitute enforceable original documents.

 

r.

Headings. The section headings contained in this Note are for reference purposes only and shall not affect in any way the meaning or interpretation of this Note.

 

s.

Interpretation. When a reference is made in this Note to an Article, Section or Exhibit, such reference will be to an Article or Section of, or an Exhibit to, this Note unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Note, they will be deemed to be followed by the words “without limitation.” The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Note will refer to this Note as a whole and not to any particular provision of this Note. Unless the context expressly provides otherwise, any approval, determination, election or authorization required to be obtained from a Party shall be at such Party’s sole discretion. The word “or” is not exclusive. All terms used herein with initial capital letters have the meanings ascribed to them herein and all terms defined in this Note will have such defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Note are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Unless otherwise indicated, any agreement, instrument or statute defined or referred to herein, or in any agreement or instrument that is referred to herein, means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns.

 

  

u.

Disclosure. Borrowers consent to Lender or its Affiliates publicly disclosing this Note and the other Transaction Agreements, including by filing such documents with the Securities and Exchange Commission or the New York Stock Exchange.

  

v.

Independent Counsel. Each Party certifies that it has read the terms of this Note, that it understands the terms of this Note, and that it is entering into this Note of its own volition. Each Party warrants and represents that it has (a) been represented by an attorney of its choice in connection with the Note and received independent legal advice from its attorney regarding its decision with respect to the advisability of making and entering into this Note, or (b) had sufficient time, opportunity and means to engage an attorney of its choice in order to be represented by such attorney in connection with the Note and to receive independent legal advice from such attorney regarding its decision with respect to the advisability of making and entering into this Note, and has made a knowing and voluntary decision not to do so.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

IN WITNESS WHEREOF, the Parties have caused this Note to be duly executed and delivered as of the date first written above.

 

KABLE MEDIA SERVICES, INC.			KABLE NEWS INTERNATIONAL, INC.
By:	/s/ Michael P. Duloc		By:	/s/ Michael P. Duloc
	Name: Michael P. Duloc			Name: Michael P. Duloc
	Title: President & Chief Executive Officer			Title: President & Chief Executive Officer
KABLE DISTRIBUTION SERVICES, INC.			KABLE DISTRIBUTION SERVICES OF CANADA, LTD.
By:	/s/ Michael P. Duloc		By:	/s/ Michael P. Duloc
	Name: Michael P. Duloc			Name: Michael P. Duloc
	Title: President & Chief Executive Officer			Title: President & Chief Executive Officer
KABLE NEWS COMPANY, INC.			KABLE PRODUCT SERVICES, INC.
By:	/s/ Michael P. Duloc		By:	/s/ Michael P. Duloc
	Name: Michael P. Duloc			Name: Michael P. Duloc
	Title: President & Chief Executive Officer			Title: President & Chief Executive Officer
			American republic investment co.
			By:	/s/ Peter M. Pizza
				Name: Peter M. Pizza
				Title: Vice President

 

AGREED AND ACCEPTED with respect to Section 5(i) of this Note and otherwise ACKNOWLEDGED AND ACCEPTED, by due execution and delivery of this Note as of the date first written above.

 

DFI HOLDINGS, LLC			KPS HOLDCO, LLC
By:	/s/ Michael P. Duloc		By:	/s/ Michael P. Duloc
	Name: Michael P. Duloc			Name: Michael P. Duloc
	Title: Manager			Title: Manager

 

Signature Page to Line of Credit Note

(1/1)

  

 

ANNEX A

 

a.

Advance. The term “Advance” shall mean any advance of funds by Lender to a Borrower under this Note.

 

b.

Advance Request. The term “Advance Request” shall mean a notice from Borrower Agent to Lender requesting an Advance under this Note, which notice shall be in form and substance satisfactory to Lender and accompanied by a Borrowing Base Certificate.

 

c.

Borrowing Agent. The term “Borrowing Agent” shall mean KDS.

 

d.

Borrowing Base Certificate. The term “Borrowing Base Certificate” shall mean a certificate in substantially the same form as the “Borrowing Base Certificate” required under Borrower’s prior credit facility, i.e., that certain Revolving Credit and Security Agreement, dated as of May 13, 2010 and amended from time to time thereafter, by, among others, PNC Bank, N.A., as agent and lender.

 

e.

Closing Date. The term “Closing Date” shall mean February 9, 2015.

 

f.

Customer. The term “Customer” shall mean and include the account debtor with respect to any Receivable or the prospective purchaser of goods, services or both with respect to any contract or contract right, or any party who enters into or proposes to enter into any contract or other arrangement with any Borrower, pursuant to which such Borrower is to deliver any personal property or perform any services.

 

g.

Eligible Receivables. The term “Eligible Receivables” shall mean and include with respect to each Borrower, each Receivable of such Borrower arising in the Ordinary Course of Business and which Lender, in its reasonable discretion, shall deem to be an Eligible Receivable, based on such considerations as Lender may from time to time deem appropriate.  A Receivable shall not be deemed eligible unless such Receivable is subject to Lender’s first priority perfected security interest and no other Lien, and is evidenced by an invoice or other documentary evidence reasonably satisfactory to Lender.  In addition, no Receivable shall be an Eligible Receivable if:

 

i.

it arises out of a sale made by any Borrower to an Affiliate of any Borrower or to a Person controlled by an Affiliate of any Borrower;

 

ii.

it is due or unpaid more than sixty (60) days after the original invoice date;

 

iii.

any covenant, representation or warranty contained in this Note with respect to such Receivable has been breached;

 

iv.

the Customer shall (A) apply for, suffer, or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (B) admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business, (C) make a general assignment for the benefit of creditors, (D) commence a voluntary case or proceeding under any state or federal bankruptcy Laws (as now or hereafter in effect), (E) be adjudicated a bankrupt or insolvent, (F) file a petition seeking to take advantage of any other Law providing for the relief of debtors, (G) acquiesce to, or fail to have dismissed, any petition which is filed against it in any involuntary case under such bankruptcy Laws or (H) take any action for the purpose of effecting any of the foregoing;

 

  

v.

the sale is to a Customer outside the continental United States of America;

 

vi.

the sale to the Customer is on a bill-and-hold, guaranteed sale, sale on approval, consignment or any other repurchase or return basis which has not been disclosed to Lender or is evidenced by chattel paper;

 

vii.

Lender believes, in its reasonable credit judgment, that collection of such Receivable is insecure or that such Receivable may not be paid by reason of the Customer’s financial inability to pay;

 

viii.

(A) the Customer is the United States of America or any department, agency or instrumentality thereof (including the branches of the United States military); or (B) the Customer is any state, county, city or other governmental body, or any department, agency or instrumentality thereof;

 

ix.

the goods giving rise to such Receivable have not been delivered to or accepted by the Customer or the services giving rise to such Receivable have not been performed by the applicable Borrower and accepted by the Customer or the Receivable otherwise does not represent a final sale;

 

x.

the Receivables of the Customer exceed a credit limit determined by Lender, in its commercially reasonable credit judgment exercised in good faith, to the extent such Receivable exceeds such limit;

 

xi.

the Receivable is subject to any offset, deduction, defense, dispute, or counterclaim or the Customer is also a creditor or supplier of a Borrower (but in each case, only to the extent of any offset, deduction, defense or counterclaim);

 

xii.

the applicable Borrower has made any agreement with any Customer for any deduction therefrom, except (A) for discounts or allowances made in the Ordinary Course of Business and (B) all of which discounts or allowances are reflected in the calculation of the face value of each respective invoice related thereto;

 

xiii.

any return, rejection or repossession of the merchandise has occurred or the rendition of services has been disputed;

 

xiv.

such Receivable is not payable to a Borrower; or

 

xv.

such Receivable is not otherwise satisfactory to Lender as determined in good faith by Lender in the exercise of its discretion in a reasonable manner.

 

h.

Eligible Unbilled KDS Receivables.  The term “Eligible Unbilled KDS Receivables” shall mean and include each Receivable of KDS arising in the Ordinary Course of Business that would qualify as an Eligible Receivable except that the Receivable has not been billed and is not subject to a written invoice; provided however that, with respect to such Receivable, (i) such Receivable is billed no later than the fifteenth (15th) day of the month immediately following the month in which such Receivable was created, (ii) the return rate assumed for such Receivable is no less than the average of the monthly return rate for the prior 3 months related to the publication or other goods that generated such Receivable and (iii) the return rate assumed for such Receivable is no less than eighty percent (80%); and provided, further, that Borrowers provide documentation relating to the Receivable, Customer or goods or services provided in form and substance similar to that provided by the Borrowers to its third party lender prior to the Closing and in form and substance satisfactory to the Lender in its reasonable discretion

 

  

i.

GAAP. The term “GAAP” shall mean generally accepted accounting principles in effect from time to time in the United States of America.

 

j.

Guaranty. The term “Guaranty” shall mean the Guaranty Agreement, dated as of the date hereof, by each Buyer and each Borrower, as guarantors, in favor of the Lender, entered into in connection with the SPA.

 

k.

Interest Rate. The term “Interest Rate” shall mean an interest rate per annum as determined on the first Business Day of each month as the rate that is equal to three percent (3%) plus the Prime Rate, or, if applicable hereunder, the Default Rate. For each month between the Closing Date until Obligations are satisfied in full, the Interest Rate for such month (as determined on the first Business Day of such month) shall be determined in accordance with the definition of “Interest Rate” without notice to any Borrower.

 

l.

Inventory. The term “Inventory” shall mean and include as to each Borrower all of such Borrower’s now owned or hereafter acquired goods, merchandise and other personal property, wherever located, to be furnished under any consignment arrangement, contract of service or held for sale or lease, all raw materials, work in process, finished goods and materials and supplies of any kind, nature or description which are or might be used or consumed in such Borrower’s business or used in selling or furnishing such goods, merchandise and other personal property, and all documents of title or other documents representing them.

 

m.

Lien. The term “Lien” shall mean any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property.

 

n.

Maximum Advance Amount. The term “Maximum Advance Amount” shall mean

 

(i)

for the period from the Closing Date through and including May 11, 2015, the lesser of (A) the amount equal to (1) fifty percent (50%) of Eligible Receivables plus (2) forty five percent (45%) of Eligible Unbilled KDS Receivables and (B) $2,000,000, and

 

(ii)

for the period from May 12, 2015 through and including February 9, 2017, the lesser of (A) the amount equal to (1) fifty percent (50%) of Eligible Receivables plus (2) thirty percent (30%) of Eligible Unbilled KDS Receivables and (B) the applicable Maximum Principal Amount.

 

o.

Maximum Principal Amount. The term “Maximum Principal Amount” shall mean (i) TWO MILLION AND 00/100 DOLLARS ($2,000,000.00) for the period from the Closing Date through and including May 11, 2015, (ii) ONE MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($1,500,000.00) for the period from May 12, 2015 through and including August 5, 2016, and (iii) ONE MILLION AND 00/100 DOLLARS ($1,000,000.00) for the period from August 6, 2016 through and including February 9, 2017.

 

  

p.

Note. The term “Note” shall mean this Line of Credit Promissory Note together with all attachments hereto and all amendments and modifications hereto in effect from time to time.

 

q.

Obligations. The term “Obligations” shall mean any and all agreements, covenants, indebtedness, liabilities and obligations of every kind and description of any one or more of the Borrowers or the Buyers (a) under the Purchase Agreement, the Guaranty, any of the other Transaction Agreements (including the Note and the Buyer Promissory Note, together with all attachments and amendments in effect from time to time), each of the documents, agreements, certificates and instruments executed in connection with any Transaction Agreement or the Lease Agreement, dated November 7, 2008, between El Dorado Utilities, Inc. and KPS (as successor-in-interest to Kable Specialty Packaging Services LLC) or (b) owing to the Lender or to any Affiliate of the Lender, whether or not under the Transaction Agreements, and, in each case of clause (a) or clause (b), whether such agreements, covenants, indebtedness, liabilities and obligations are primary or secondary, direct or indirect, absolute or contingent, sole, joint or several, secured or unsecured, due or to become due, contractual or tortious, arising by operation of law, by overdraft or otherwise, or now or hereafter existing, including advances, principal, interest, fees, late fees, expenses, reasonable attorneys’ fees and costs or allocated fees and costs of Lender’s in-house legal counsel, that have been or may hereafter be contracted or incurred. Notwithstanding the foregoing, and for the avoidance of doubt, the term Obligations shall include Note Documentation Costs, which are subject to the cap set forth in Section 5(i), and no other attorneys’ fees or costs of Lender or any Affiliates of Lender relating to negotiation and documentation of the Transaction Agreements on or prior to the Closing Date.

 

r.

Ordinary Course of Business. The term “Ordinary Course of Business” shall mean with respect to any Borrower, the routine, ordinary course of business of such Borrower as conducted on the Closing Date and in the year prior to the Closing Date, as such course of business is continued from and after the Closing Date.

 

s.

Prime Rate. The term “Prime Rate” means for any day a per annum rate of interest equal to the “prime rate,” as published in the “Money Rates” column of The Wall Street Journal, from time to time, or if for any reason such rate is no longer available, the rate reasonably established by Lender as the prevailing prime rate.

 

t.

Receivables. The term “Receivables” shall mean and include, as to each Borrower, all of such Borrower’s accounts, contract rights, instruments (including those evidencing indebtedness owed to such Borrower by its Affiliates), documents, chattel paper (including electronic chattel paper), general intangibles relating to accounts, drafts and acceptances, credit card receivables and all other forms of obligations owing to such Borrower arising out of or in connection with the sale or lease of Inventory or the rendition of services, all supporting obligations, guarantees and other security therefor, whether secured or unsecured, now existing or hereafter created, and whether or not specifically sold or assigned to Lender hereunder.

 

  

u.

Security Agreement. The term “Security Agreement” shall mean the Security Agreement, dated as of the date hereof, by each Buyer and each Borrower, as grantors, in favor of the Lender, entered into in connection with the SPA, this Note and certain other documents and agreements.

 

v.

Term. The term “Term” shall mean the period beginning on the date of this Note and ending 45 day prior to the Maturity Date.

 

 

 

Exhibit 10.8

 

Execution Copy

GUARANTY

 

THIS GUARANTY AGREEMENT (“Guaranty”), dated as of February 9, 2015 (the “Effective Date”), is made by Kable Media Services, Inc., a Delaware corporation (“KMS”), Kable Distribution Services, Inc., a Delaware corporation (“KDS”), Kable News Company, Inc., an Illinois corporation (“KNC”), Kable News International, Inc., a Delaware corporation (“KNI”), Kable Distribution Services of Canada, Ltd., a Canadian corporation incorporated in Ontario, Canada (“KDSC”), Kable Product Services, Inc., a Delaware corporation (“KPS” and together with KMS, KDS, KNI, KNC and KDSC, the “Company Group”), DFI Holdings, LLC, a Pennsylvania limited liability company (“Distribution Buyer”), and KPS Holdco, LLC, a Pennsylvania limited liability company (“Products Buyer”; together with Distribution Buyer, the “Buyers”; and collectively with Distribution Buyer and the Company Group, the “Guarantors”), for the benefit of American Republic Investment Co., a Delaware corporation (“Seller” and collectively with the Guarantors, the “Parties” and each a “Party”).

 

WITNESSETH:

 

WHEREAS, Seller owns all of the issued and outstanding shares of capital stock of KMS;

 

WHEREAS, KMS owns all of the issued and outstanding shares of capital stock of KDS, KNC and KPS;

 

WHEREAS, KDS owns all of the issued and outstanding shares of capital stock of KNI, and KNC owns all of the issued and outstanding shares of capital stock of KDSC;

 

WHEREAS, Seller and Buyers will enter into a Stock Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”), pursuant to which Products Buyer is acquiring all of the issued and outstanding shares of KPS and Distribution Buyer is acquiring all of the issued and outstanding shares of KMS, and will thereby become the direct or indirect owners of the Company Group (the “Transaction”);

 

WHEREAS, all capitalized terms used but not otherwise defined in this Guaranty have the meanings ascribed to them in the Purchase Agreement;

 

WHEREAS, in connection with the Transaction, Seller, Buyers, Michael P. Duloc and the Company Group are entering into the Transaction Agreements to which they are a signatory;

 

WHEREAS, as part of the Transaction, among other things, Seller is assuming material pension liabilities of the Company Group, assigning valuable software and software licenses held by Affiliates of Seller to the Company Group, and extending a $2.0 million working capital line of credit to the Company Group pursuant to the Line of Credit Note;

 

WHEREAS, as a material part of and as a condition to the Transaction, the Guarantors are required to execute and deliver this Guaranty; and

 

WHEREAS, Distribution Buyer, Products Buyer and the Company Group are required to execute and deliver this Guaranty under section 2.2(b) of the Purchase Agreement.

 

  

NOW, THEREFORE, in consideration of the foregoing and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Guarantors hereby covenant and agree as follows:

 

1.          Guaranty of Obligations. Each Guarantor hereby irrevocably, absolutely and unconditionally guarantees the full and prompt payment and performance when due of the Obligations.

 

(a)          The term “Notes” as used herein means the Line of Credit Note and the Buyer Promissory Note, together with all attachments and amendments in effect from time to time.

 

(b)          The term “Obligations” as used herein means any and all agreements, covenants, indebtedness, liabilities and obligations of every kind and description of any one or more of the Guarantors (a) under the Purchase Agreement, any of the other Transaction Agreements (including the Notes), each of the documents, agreements, certificates and instruments executed in connection with any Transaction Agreement or the Lease Agreement, dated November 7, 2008, between El Dorado Utilities, Inc. and KPS (as successor-in-interest to Kable Specialty Packaging Services LLC) or (b) owing to the Seller or to any Affiliate of the Seller, whether or not under the Transaction Agreements, and, in each case of clause (a) or clause (b), whether such agreements, covenants, indebtedness, liabilities and obligations are primary or secondary, direct or indirect, absolute or contingent, sole, joint or several, secured or unsecured, due or to become due, contractual or tortious, arising by operation of law, by overdraft or otherwise, or now or hereafter existing, including advances, principal, interest, fees, late fees, expenses, reasonable attorneys’ fees and costs or allocated fees and costs of Seller’s in-house legal counsel, that have been or may hereafter be contracted or incurred. Notwithstanding the foregoing, and for the avoidance of doubt, the term Obligations shall include Note Documentation Costs (as defined in each of the Notes) and no other attorneys’ fees or costs of Seller or any Affiliate of Seller relating to negotiation and documentation of the Transaction Agreements on or prior to the Closing Date. Notwithstanding the foregoing (or any other provision hereof), each Guarantor hereby provides in favor of Seller an irrevocable, absolute and unconditional guaranty, but only with respect to Obligations for which such Guarantor is not a primary obligor. This Guaranty shall be effective as of the Effective Date and shall remain in full force and effect until the earlier of (A) the date on which all of the Obligations are indefeasibly paid in full, satisfied and have expired by their terms or (B) an express release and termination is given in writing by Seller.

 

2.          General Conditions.

 

(a)          This Guaranty shall be a continuing and irrevocable guaranty, shall be a guaranty of performance and not of collection, and the liability of the Guarantors hereunder shall remain in full force and effect and shall in no way be affected, modified, or diminished by reason of (i) any modification or waiver of, or change in, any of the terms or conditions of the Transaction Agreements in accordance with the terms and conditions thereof; (ii) any bankruptcy, insolvency, reorganization, liquidation, arrangement, assignment for the benefit of creditors, receivership, trusteeship or similar proceeding (a “Bankruptcy Event”) affecting a primary obligor, whether or not notice thereof is given to the Guarantors; or (iii) any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Guarantors hereunder. For the avoidance of doubt, nothing contained herein shall be deemed to limit the rights of, or defenses available to, Seller under any of the Transaction Agreements.

 

  

(b)          The Guarantors hereby unconditionally waive promptness, diligence, notice of acceptance of this Guaranty and any other notice with respect to this Guaranty.

 

(c)          The Guarantors agree to pay Seller on demand all reasonable fees and costs, including reasonable attorneys’ fees, incurred by or on behalf of Seller in enforcing the obligations of the Guarantors under this Guaranty.

 

(d)          This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time payment of any amount made by any Guarantor to Seller is rescinded, avoided or rendered void as a preferential transfer, impermissible set-off, fraudulent conveyance or must otherwise be returned by Seller upon the occurrence of a Bankruptcy Event affecting any Guarantor or primary obligor, all as though such payment had not been made.

 

(e)          The rights of Seller under this Guaranty are not conditional or contingent upon any requirement of, or attempt by, Seller to exercise any of its rights under the Purchase Agreement or any of the other Transaction Agreements.

 

(f)          Each Guarantor irrevocably waives any present or future right to which a Guarantor is or becomes entitled to be subrogated to Seller’s rights against a primary obligor or to seek contribution, reimbursement, indemnification, subrogation or the like from a primary obligor on account of this Guaranty, or to assert any other claim or right of action against a primary obligor on account of, or arising under, or relating to this Guaranty.

 

3.          Priority and Subordination. Each Guarantor agrees that the Obligations of a Guarantor to Seller, whether now existing or hereafter created, shall be superior to any claim that any Guarantor may now have or hereafter acquire against any other Guarantor, whether or not such other Guarantor becomes insolvent. Each Guarantor with a claim against another Guarantor at any time (the Guarantor with such a claim, a “Creditor Guarantor”, and the Guarantor owing obligations to such Creditor Guarantor, a “Debtor Guarantor”) hereby expressly subordinates each and every claim it may have against any Debtor Guarantor, upon any account whatsoever, to any claim that Seller may now or hereafter have against such Debtor Guarantor. In the event of insolvency and consequent liquidation of the assets of a Debtor Guarantor, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of the Debtor Guarantor applicable to the payment of claims of both Seller and one or more Creditor Guarantors shall be paid to Seller first until all of the Obligations are indefeasibly satisfied. Each Guarantor does hereby assign to Seller all claims which it may have or acquire against another Guarantor or against any assignee or trustee of a Guarantor in the bankruptcy of a Guarantor; provided however, that such assignment shall be effective only for the purpose of assuring to Seller full payment in legal tender of the Obligations. If Seller so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations between Guarantors shall be marked with a legend that the same are subject to this Guaranty and a copy shall be delivered to Seller. Each Guarantor agrees, and Seller is hereby authorized, in the name of each Guarantor from time to time to execute and file financing statements and continuation statements and to execute such other documents and to take such other action as Seller deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty.

 

  

4.          No Impairment. No Guarantor’s obligations to make payment in accordance with the terms of this Guaranty shall be impaired, modified, changed, released or limited in any manner whatsoever by: (a) any impairment, modification, change, release or limitation of the Obligations or any primary obligor’s estate in bankruptcy or reorganization resulting from the operation of any present or future provision of the Federal Bankruptcy Act or other statute or from the decision of any court; (b) any insolvency, reorganization, arrangement, readjustment, composition, liquidation or similar proceeding relating to a primary obligor’s or its properties or creditors; (c) any presently existing or hereinafter enacted or made law, ordinance, regulation, judicial decision or administrative decision of any type or nature, including any law, ordinance, regulation, judicial decision or administrative decision which or otherwise impairs a primary obligor’s ability to perform its Obligations pursuant to the Purchase Agreement and any other Transaction Agreements; (d) the fact that any of the Obligations may become due or payable in or, in connection with, or by reason of, any agreement or transaction which may be invalid, irregular or unenforceable for any reason, or if a primary obligor is a partnership, by the addition, withdrawal or death of any partner or any other change therein; or (e) by reason of any action whatsoever taken by Seller (including a sale, lease, disposition, liquidation or other realization), which may be negligent, willful or otherwise in respect to any security in which Seller may at any time have any interest or against any other party liable for all or any part of the Obligations of a primary obligor.

 

5.          Representations and Warranties.

 

(a)          Each Guarantor is a corporation or limited liability company, duly incorporated or organized, validly existing and in good standing under the laws of its jurisdiction of organization and has all requisite corporate or limited liability company power and authority to own and operate its properties and assets and to carry on its business as presently conducted and is qualified to do business and is in good standing as a corporation in each jurisdiction where the ownership or operation of its properties or conduct of its business requires such qualification, except where the failure to be so qualified or in good standing, when taken together with all other such failures, will not prevent, materially delay or materially impair Guarantor’s ability to consummate the transactions contemplated by this Guaranty.

 

(b)          Each Guarantor has all requisite corporate or limited liability company power and authority to enter into this Guaranty, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by each Guarantor and the consummation by each Guarantor of this Guaranty, have been duly and validly adopted and approved by such Guarantor’s board of directors or managers and no other corporate proceedings on the part of Guarantor or its stockholders are necessary with respect to any such matter. This Guaranty has been duly executed and delivered by each Guarantor and constitutes the valid, binding and enforceable obligations of each such Guarantor, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general principles of equity.

 

  

(c)          Each Guarantor hereby represents and warrants to Seller, which representations and warranties shall survive the execution and delivery of this Guaranty, that (a) this Guaranty has been duly authorized, executed and delivered by the Guarantor and such execution and delivery and the performance by the Guarantor of the Guarantor’s obligations hereunder will not violate, in any material respects, any applicable provision of law or judgment, order or regulation of any court or of any public or governmental agency or authority nor conflict with or constitute a breach of or a default under the organizational documents of the Guarantor or any agreement or instrument to which Guarantor is a party or by which Guarantor or any of its property is bound, and (b) this Guaranty is a legal, valid and binding obligation of Guarantor enforceable in accordance with its terms.

 

EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES OF THE PARTIES IN THE TRANSACTION AGREEMENTS, (A) NEITHER PARTY HERETO NOR ANY PERSON ON SUCH PARTY’S BEHALF HAS MADE OR MAKES ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WHATSOEVER, EITHER ORAL OR WRITTEN, WHETHER ARISING BY LAW, COURSE OF DEALING, COURSE OF PERFORMANCE, USAGE OF TRADE OR OTHERWISE, ALL OF WHICH ARE EXPRESSLY DISCLAIMED, AND (B) EACH PARTY HERETO ACKNOWLEDGES THAT, IN ENTERING INTO THIS GUARANTY, IT HAS NOT RELIED UPON ANY REPRESENTATION OR WARRANTY MADE BY THE OTHER PARTY, OR ANY OTHER PERSON ON SUCH OTHER PARTY’S BEHALF.

 

6.          Miscellaneous.

 

(a)          Waiver. The failure of any Guarantor to comply with any of its obligations or agreements herein contained may be waived only in writing by Seller. No waiver granted hereunder shall be deemed a waiver of any subsequent breach or default of the same or similar nature. No failure or delay by any Party in exercising any right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

 

(b)          Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective Parties at the addresses set forth below (or to such other address that may be designated by a party from time to time in accordance with this Section):

 

Guarantors:

c/o DFI Holdings, LLC 3179 Deer Creek Road, Collegeville, PA 19426 Attention: Michael P. Duloc Fax: 815-734-5233

with a required copy to (which shall not constitute notice): Fox Rothschild LLP 2700 Kelly Road, Suite 300 Warrington, PA 18976 Attention: Jeffrey H. Nicholas Fax: 215-345-7507

 

  

Seller:

c/o AMREP Corporation 300 Alexander Park, Suite 204 Princeton, New Jersey 08540 Attention: General Counsel Fax: 609-716-8255

with a required copy to (which shall not constitute notice): Duane Morris LLP 222 Delaware Avenue Suite 1600 Wilmington, DE 19801 Attention: Christopher Winter Fax: 302-397-2455

 

(c)          Governing Law; Consent to Jurisdiction and Waiver of Jury Trial.

 

(i)          This Guaranty shall be governed by and construed in accordance with the internal substantive Laws of the State of New York, without giving effect to any choice of Law or conflict of Laws rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of New York.

 

(ii)         Each Party irrevocably submits to the exclusive jurisdiction of the federal courts of the Southern District of New York or the courts of the State of New York located in the City of New York for the purposes of any suit, action or other proceeding arising out of this Guaranty or any transaction contemplated hereby. Each Party further agrees that service of any process, summons, notice or document by U.S. registered mail to such Party’s respective address set forth in the “Notices” section hereof shall be effective service of process for any action, suit or proceeding with respect to any matters to which it has submitted to jurisdiction in this Section. Each Party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Guaranty or the transactions contemplated hereby in federal courts of the Southern District of New York or the courts of the State of New York located in the City of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

 

(d)          Counterparts. This Guaranty may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Execution and delivery of this Guaranty by delivery of a facsimile or electronically recorded copy in .pdf file format bearing a copy of the signature of a Party shall constitute a valid and binding execution and delivery of this Guaranty by such Party. Such copies shall constitute enforceable original documents.

 

  

(e)          Headings.    The section headings contained in this Guaranty are for reference purposes only and shall not affect in any way the meaning or interpretation of this Guaranty.

 

(f)          Entire Agreement.    The Guaranty embodies the entire agreement and understanding of the Parties hereto in respect of the subject matter herein. The Guaranty supersedes all prior agreements and understandings between the Parties with respect to the subject matter thereof.

 

(g)          Amendment.    Any provision of this Guaranty may be amended if, and only if, such amendment is in writing and is signed by each Party to this Guaranty.

 

(h)          Binding Effect; Benefits.    This Guaranty shall inure to the benefit of and be binding upon the Parties hereto and their respective successors and permitted assigns; nothing in this Guaranty, express or implied, is intended to confer on any Person, other than the Parties and their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Guaranty.

 

(i)          Joint Drafting.    The Parties have participated jointly in the negotiation and drafting of this Guaranty. In the event an ambiguity or question of intent or interpretation arises, this Guaranty shall be construed as if drafted jointly by the 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 Guaranty.

 

(j)          Severability.    Whenever possible, each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable Law. If any provision of this Guaranty is held to be prohibited by or invalid under applicable Law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Guaranty. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Guaranty so as to effect the original intent of the Parties as closely as possible to the fullest extent permitted by applicable Law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

(k)          Interpretation.    When a reference is made in this Guaranty to an Article, Section or Exhibit, such reference will be to an Article or Section of, or an Exhibit to, this Guaranty unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Guaranty, they will be deemed to be followed by the words “without limitation.” The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Guaranty will refer to this Guaranty as a whole and not to any particular provision of this Guaranty. Unless the context expressly provides otherwise, any approval, determination, election or authorization required to be obtained from a Party shall be at such Party’s sole discretion. The word “or” is not exclusive. All capitalized terms used and defined in this Guaranty shall have the meanings ascribed to them herein. All capitalized terms used but not otherwise defined in this Guaranty shall have the meanings ascribed to them in the Purchase Agreement. All terms defined in this Guaranty will have such defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Guaranty are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Unless otherwise indicated, any agreement, instrument or statute defined or referred to herein, or in any agreement or instrument that is referred to herein, means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns.

 

  

(l)          Assignability.    This Guaranty shall not be assignable by any Party hereto without the prior written consent of the other Party.

 

(m)          Specific Performance.    Each Party agrees that irreparable damage would occur in the event that any of the provisions of this Guaranty were not performed by them in accordance with the terms hereof and that each Party shall be entitled to specific performance of the terms hereof (without the need to post bond or any other security), in addition to any other remedy at law or equity.

 

(n)          Expenses.    Each Party shall bear its own costs and expenses in connection with this Guaranty and the transactions contemplated hereby, including all legal, accounting, financial advisory, consulting and all other fees and expenses of third parties, except where specifically provided to the contrary.

 

(o)          Disclosure.    Each Guarantor consents to Seller or its Affiliates publicly disclosing this Guaranty, including by filing such documents with the Securities and Exchange Commission or the New York Stock Exchange.

 

(p)          Independent Counsel .     Each Party certifies that it has read the terms of this Guaranty, that it understands the terms of this Guaranty, and that it is entering into this Guaranty of its own volition. Each Party warrants and represents that it has (a) been represented by an attorney of its choice in connection with the Transaction and received independent legal advice from its attorney regarding its decision with respect to the advisability of making and entering into this Guaranty, or (b) had sufficient time, opportunity and means to engage an attorney of its choice in order to be represented by such attorney in connection with the Transaction and to receive independent legal advice from its attorney regarding its decision with respect to the advisability of making and entering into this Guaranty, and has made a knowing and voluntary decision not to do so.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

  

 IN WITNESS WHEREOF, the Parties have caused this Guaranty to be duly executed and delivered as of the date first written above.

 

DFI HOLDINGS, LLC				KPS HOLDCO, LLC
By:	/s/ Michael P. Duloc			By:	/s/ Michael P. Duloc
	Name: Michael P. Duloc				Name: Michael P. Duloc
	Title: Manager				Title: Manager
KABLE MEDIA SERVICES, INC.				KABLE NEWS INTERNATIONAL, INC.
By:	/s/ Michael P. Duloc			By:	/s/ Michael P. Duloc
	Name: Michael P. Duloc				Name: Michael P. Duloc
	Title: President & Chief Executive Officer				Title: President & Chief Executive Officer
KABLE DISTRIBUTION SERVICES, INC.				KABLE DISTRIBUTION SERVICES OF CANADA, LTD.
By:	/s/ Michael P. Duloc			By:	/s/ Michael P. Duloc
	Name: Michael P. Duloc				Name: Michael P. Duloc
	Title: President & Chief Executive Officer				Title: President & Chief Executive Officer
KABLE NEWS COMPANY, INC.				KABLE PRODUCT SERVICES, INC.
By:	/s/ Michael P. Duloc			By:	/s/ Michael P. Duloc
	Name: Michael P. Duloc				Name: Michael P. Duloc
	Title: President & Chief Executive Officer				Title: President & Chief Executive Officer
American republic investment co.
By:	/s/ Peter M. Pizza
	Name: Peter M. Pizza
	Title: Vice President

 

Signature Page to Guaranty

(1/1)

 

 

 

 

 

Exhibit 10.9

 

Execution Copy

 

Security Agreement

 

This SECURITY AGREEMENT (this “Security Agreement”), dated as of February 9, 2015, is made by DFI Holdings, LLC, a Pennsylvania limited liability company (“Distribution Buyer”), KPS Holdco, LLC, a Pennsylvania limited liability company (“Products Buyer” and together with Distribution Buyer, the “Buyers”), Kable Media Services, Inc., a Delaware corporation (“KMS”), Kable Distribution Services, Inc., a Delaware corporation (“KDS”), Kable News Company, Inc., an Illinois corporation (“KNC”), Kable News International, Inc., a Delaware corporation (“KNI”), Kable Distribution Services of Canada, Ltd., a Canadian corporation incorporated in Ontario, Canada (“KDSC”), and Kable Product Services, Inc., a Delaware corporation (“KPS” and together with KMS, KDS, KNI, KNC and KDSC, the “Company Group”, and the Company Group collectively with Distribution Buyer and Products Buyer, the “Debtors”), in favor of American Republic Investment Co., a Delaware corporation (“Secured Party” and together with the Debtors, the “Parties”).

 

WITNESSETH:

 

WHEREAS, the Secured Party owns all of the issued and outstanding shares of capital stock of KMS;

 

WHEREAS, KMS owns all of the issued and outstanding shares of capital stock of KDS, KNC and KPS;

 

WHEREAS, KDS owns all of the issued and outstanding shares of capital stock of KNI, and KNC owns all of the issued and outstanding shares of capital stock of KDSC;

 

WHEREAS, the Secured Party and the Buyers will enter into a Stock Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”), pursuant to which Products Buyer is acquiring all of the issued and outstanding shares of KPS and Distribution Buyer is acquiring all of the issued and outstanding shares of KMS, and will thereby become the direct or indirect owners of the Company Group (the “Transaction”);

 

WHEREAS, all capitalized terms used but not otherwise defined in this Security Agreement shall have the meanings ascribed to them in the Purchase Agreement unless otherwise noted, and unless otherwise defined herein, terms used herein that are defined in the UCC shall have the meanings assigned to them in the UCC. The terms “Receivables” and “Inventory” have the respective meanings set forth in the Line of Credit Note;

 

WHEREAS, in connection with the Transaction, the Secured Party, Buyers, Michael P. Duloc and the Company Group are entering into the Transaction Agreements to which they are a signatory;

 

WHEREAS, as a material part of and as a condition to the Transaction, Buyers and the Company Group are entering into that certain Guaranty Agreement, dated as of the date hereof (the “Guaranty”), pursuant to which Buyers and the Company Group irrevocably, absolutely and unconditionally guarantee the full and prompt payment and performance when due of the obligations under the Purchase Agreement and the other Transaction Agreements (as more fully set forth in the Guaranty);

 

 

WHEREAS, as part of the Transaction, among other things, the Secured Party is assuming material pension liabilities of the Company Group, assigning valuable software and software licenses held by Affiliates of the Secured Party to the Company Group, and extending a $2.0 million working capital line of credit to the Company Group pursuant to the Line of Credit Note; and

 

WHEREAS, Buyers and Company Group are required to execute and deliver this Security Agreement under section 2.2(b) of the Purchase Agreement in order to secure their obligations under the Guaranty and the other Transaction Agreements.

 

NOW, THEREFORE, in consideration of the foregoing and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Debtors hereby covenant and agree as follows:

 

1.          Grant of Security Interest. As security for the prompt and complete payment and performance when due by each Debtor of all of its Obligations (as defined herein), each Debtor hereby pledges, assigns, collaterally assigns, mortgages, hypothecates, conveys, transfers and grants to the Secured Party a first-priority security interest in and to the following properties, assets and rights of such Debtor, if any, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof (all of the same being hereinafter collectively referred to as the “Collateral”): all personal and fixture property of every kind and nature including all goods (including Inventory, equipment and any accessions thereto), instruments (including promissory notes), documents, Receivables, accounts, chattel paper (whether tangible or electronic), deposit accounts, letter-of-credit rights (whether or not the letter of credit is evidenced by a writing), commercial tort claims, securities and all other investment property, supporting obligations, any other contract rights or rights to the payment of money, insurance claims and proceeds, tort claims, and all general intangibles, including to the extent a security interest may be granted by the Debtor therein, all payment intangibles, patents, patent applications, trademarks, trademark applications, trade names, copyrights, copyright applications, software, engineering drawings, service marks, customer lists, goodwill, and, to the extent a security interest may be granted by the Debtor therein, all licenses, permits, agreements of any kind or nature pursuant to which the Debtor possesses, uses, or has authority to possess or use property (whether tangible or intangible) of others or pursuant to which others possess, use or have authority to possess or use property (whether tangible or intangible) of the Debtor, and all recorded data of any kind or nature, regardless of the medium of recording including all software, writings, plans, specifications and schematics.

 

The Collateral shall further include the following:

 

(a)          Substitutions. All substitutions, accessions, additions and replacements to any of the foregoing; and

 

(b)          Products and Proceeds. All products and proceeds of any of the foregoing, including each Debtor’s rights, title and interests, if any, in and to insurance proceeds, proceeds of any voluntary or involuntary disposition or diminution in value of any of the foregoing, and any claim respecting any thereof (pursuant to judgment or otherwise) and all goods (including Inventory), Receivables, accounts, general intangibles, chattel paper, instruments, documents, consumer goods, equipment and inventory, wherever located, acquired with the proceeds of any of the foregoing or proceeds thereof. The term “proceeds” shall have the meaning assigned and ascribed to such term as set forth in the UCC.

 

  

The term “Notes” as used herein means the Line of Credit Note and the Buyer Promissory Note, together with all attachments and amendments in effect from time to time.

 

The term “Obligations” as used herein means any and all agreements, covenants, indebtedness, liabilities and obligations of every kind and description of any one or more of the Debtors (a) under the Purchase Agreement, the Guaranty, any of the other Transaction Agreements (including the Notes), each of the documents, agreements, certificates and instruments executed in connection with any Transaction Agreement or the Lease Agreement, dated November 7, 2008, between El Dorado Utilities, Inc. and KPS (as successor-in-interest to Kable Specialty Packaging Services LLC) or (b) owing to the Secured Party or to any Affiliate of the Secured Party, whether or not under the Transaction Agreements, and, in each case of clause (a) or clause (b), whether such agreements, covenants, indebtedness, liabilities and obligations are primary or secondary, direct or indirect, absolute or contingent, sole, joint or several, secured or unsecured, due or to become due, contractual or tortious, arising by operation of law, by overdraft or otherwise, or now or hereafter existing, including advances, principal, interest, fees, late fees, expenses, reasonable attorneys’ fees and costs or allocated fees and costs of Secured Party’s in-house legal counsel, that have been or may hereafter be contracted or incurred. Notwithstanding the foregoing, and for the avoidance of doubt, the term Obligations shall include Note Documentation Costs (as defined in each of the Notes) and no other attorneys’ fees or costs of Secured Party or any Affiliate of Secured Party relating to negotiation and documentation of the Transaction Agreements on or prior to the Closing Date.

 

2.           Priority. The security interest granted herein shall be a first-priority security interest in all of the Collateral.

 

3.           Representations and Warranties. Each Debtor hereby represents and warrants to the Secured Party, which representations and warranties shall survive the execution and delivery of this Security Agreement, that:

 

(a)          The Debtor owns, or with respect to property hereafter acquired will own, all of the Collateral free and clear of all liens, charges, encumbrances, financing statements and adverse claims of any kind or nature whatsoever with respect to the Debtor’s interest therein, in favor of any entity other than the Secured Party.

 

(b)          The Debtor owns, or with respect to property hereafter acquired will own, and is, or will be, entitled to collect, without right of counterclaim or set-off, all of its respective portion of the accounts presently held and those arising in the future, free and clear of all liens, charges, encumbrances, financing statements and adverse claims of any nature whatsoever, other than those in favor of the Secured Party.

 

  

(c)          All financing statements, agreements, instruments and other documents necessary to perfect the security interest granted by it to the Secured Party in respect of the Collateral have been delivered to the Secured Party in completed and, to the extent necessary or appropriate, duly executed form for filing in each governmental, municipal or other office. Each Debtor agrees that at its sole cost and expense, such Debtor will maintain the security interest created by this Security Agreement in the Collateral as a perfected first priority security interest.

 

(d)         As of the date hereof, (i) the Debtor has not opened and does not maintain any deposit accounts other than the accounts listed in Schedule 3 hereto (collectively, the “Deposit Accounts”) and (ii) the Secured Party has a perfected first priority security interest in each Deposit Account held in the United States of America which security interest is perfected by control pursuant to those certain deposit account control agreement(s) entered into by the Debtor, the applicable depository bank(s) and the Secured Party contemporaneously herewith.

 

(e)          The Collateral of the Debtor is not used or bought primarily for personal, family or household purposes of the Debtor.

 

(f)          The grant of Collateral in this Security Agreement covers, and is intended to cover, all assets of the Debtor.

 

(g)          Debtor is a corporation or limited liability company, duly incorporated or formed, validly existing and in good standing under the Laws of its jurisdiction of organization and has all requisite corporate or limited liability company power and authority to own and operate its properties and assets and to carry on its business as presently conducted and is qualified to do business and is in good standing as a corporation or limited liability company in each jurisdiction where the ownership or operation of its properties or conduct of its business requires such qualification, except where the failure to be so qualified or in good standing, when taken together with all other such failures, will not prevent, materially delay or materially impair Debtor’s ability to consummate the transactions contemplated by this Security Agreement.

 

(h)          Each Debtor has all requisite corporate or limited liability company power and authority to enter into this Security Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by each Debtor and the consummation by each Debtor of this Security Agreement, have been duly and validly adopted and approved by the board of directors or managers of each Debtor and no other corporate proceedings on the part of each Debtor or its stockholders are necessary with respect to any such matter. This Agreement has been duly authorized, executed and delivered by the Debtor and such execution and delivery and the performance by the Debtor of the Debtor’s obligations hereunder will not violate any applicable provision of law or judgment, order or regulation of any court or of any public or governmental agency or authority nor conflict with or constitute a breach of or a default under the organizational documents of the Debtor or any agreement or instrument to which Debtor is a party or by which Debtor or any of its property is bound. This Agreement is a legal, valid and binding obligation of Debtor enforceable in accordance with its terms.

 

  

EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES OF THE PARTIES IN THE TRANSACTION AGREEMENTS, (A) NEITHER PARTY HERETO NOR ANY PERSON ON SUCH PARTY’S BEHALF HAS MADE OR MAKES ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WHATSOEVER, EITHER ORAL OR WRITTEN, WHETHER ARISING BY LAW, COURSE OF DEALING, COURSE OF PERFORMANCE, USAGE OF TRADE OR OTHERWISE, ALL OF WHICH ARE EXPRESSLY DISCLAIMED, AND (B) EACH PARTY HERETO ACKNOWLEDGES THAT, IN ENTERING INTO THIS SECURITY AGREEMENT, IT HAS NOT RELIED UPON ANY REPRESENTATION OR WARRANTY MADE BY THE OTHER PARTY, OR ANY OTHER PERSON ON SUCH OTHER PARTY’S BEHALF.

 

4.           Change of Name, Jurisdiction or Residence. No Debtor shall change its name, jurisdiction of incorporation, or the state of its principal place of business unless it has given the Secured Party at least thirty (30) days prior written notice thereof and has authorized, at the request of the Secured Party, such additional financing statements with respect to the Collateral to be filed in such jurisdictions as the Secured Party may deem necessary or desirable in its sole discretion.

 

5.           Covenants. Each Debtor hereby covenants and agrees that:

 

(a)          The Debtor shall pay immediately upon demand all expenses, including reasonable attorneys’ fees, legal expenses and costs, together with interest from the date of such expenditure (at a rate per annum equal to six percent (6%)), incurred by the Secured Party in enforcing the Obligations and this Security Agreement. Payment of such expenses and interest shall be secured by this Security Agreement.

 

(b)          The Debtor shall maintain complete and accurate financial information concerning the Collateral. The Secured Party (a) shall have complete access to all of Debtor’s premises during normal business hours and after notice to Debtor, or at any time and without notice to Debtor if an Event of Default exists or has occurred and is continuing, for the purposes of inspecting, verifying and auditing the Receivables and other Collateral and all of Debtor’s books and records, and (b) Debtor shall promptly furnish to Secured Party such copies of such books and records, including invoices and all documentation relating to Receivables and other Collateral, or extracts therefrom as Secured Party may reasonably request, and (c) Secured Party or its designee may use during normal business hours such of Debtor’s personnel, equipment, supplies and premises as may be reasonably necessary for the foregoing and if an Event of Default exists or has occurred and is continuing for the collection of Receivables and realization of other Collateral; provided that Secured Party does not unreasonably interfere with Debtor’s ability to conduct its business in the ordinary course.

 

(c)          The Debtor shall promptly notify the Secured Party of all claims and demands made against any portion of the Collateral of which the Debtor becomes aware and any information received by the Debtor that may materially adversely affect the value of any Collateral or the rights and remedies of the Secured Party relating thereto (including any liens, encumbrances or security interests purporting to affect the title to the Collateral). In the event of any such claim or demand, the Debtor shall promptly take such action as may be reasonably necessary to protect the value of the Collateral.

 

(d)          The Debtor shall pay or cause to be paid, prior to the assessment of any penalty for delinquency, all taxes, assessments or similar obligations affecting the Collateral.

 

  

(e)          The Debtor shall keep the Collateral free from any lien, charge, encumbrance, financing statement or adverse claim in favor of any entity other than the Secured Party, without the prior written consent of the Secured Party. The Debtor shall protect and defend the Collateral against all claims thereto (other than claims arising from the Secured Party’s gross negligence or willful misconduct) and hereby indemnifies and agrees to defend and save the Secured Party harmless against and with respect to any liability or claim in connection therewith. Except for the replacement of Collateral in the ordinary course of business or the removal of obsolete Collateral not required for the operation of the Debtor’s business, the Debtor shall not sell, dispose of, or grant a security interest or other encumbrance in any portion of the Collateral or execute any financing statement covering any portion of the Collateral in favor of any person other than the Secured Party, without the prior written consent of the Secured Party. The Debtor may, however, sell or otherwise dispose of Collateral in the ordinary course of business if the Debtor promptly replaces such Collateral sold with substitute Collateral of substantially similar quality and utility and of equal or greater value to the extent same is necessary for the operation of the Debtor’s business.

 

(f)          The Debtor shall do all acts reasonably necessary to maintain, preserve, protect and keep the Collateral in good condition and repair, ordinary wear and tear excepted, shall not permit any waste or unusual or unreasonable depreciation of Collateral to occur and shall not commit any act for which any portion of the Collateral might be confiscated by any governmental or private entity.

 

(g)         The Debtor shall not hereafter establish and maintain any deposit account other than the accounts listed on Schedule 3 hereto unless (a) the applicable Debtor shall have given the Secured Party thirty (30) days prior written notice of its intention to establish such new deposit account with a depository bank, (2) the depository bank shall be acceptable to the Secured Party and (3) the Debtor shall otherwise be in full compliance with Sections 6, 7 and 8 hereof at all times with respect to all of its deposit accounts.

 

(h)          The Debtor shall keep and maintain, and require its subsidiaries to keep and maintain, all of its and their property and assets in good order and repair, maintain extended coverage, general liability, business interruption, hazard, property and other insurance in amounts deemed sufficient by the Secured Party and as is customary for businesses similar to the Debtor’s business, and deliver to the Secured Party certificates of all such insurance in effect; and cause all such policies covering any Collateral for the Obligations and business interruption to contain loss payee endorsements in favor of the Secured Party and to be subject to cancellation or reduction in coverage only upon thirty (30) days prior written notice thereof to the Secured Party at its address set forth in the Notice section hereof.

 

  

6.          Lockbox Covenants. Each of KDS and KPS (each, a “Lockbox Debtor”) hereby covenants and agrees that it shall establish and maintain at all times a lockbox account (“Lockbox Account”) with PNC Bank, or such other depository bank as is acceptable to Secured Party in its sole discretion (the “Bank”), for the deposit of all cash, revenue and amounts received, including remittances from its account debtors and any other proceeds of Receivables or proceeds of other Collateral; and shall sign all agreements with Bank (and, as applicable, the Secured Party) reasonably necessary to establish the Lockbox Account and pay all fees and charges of the Bank associated therewith. No Lockbox Debtor shall have any right of access to, or withdrawal from a Lockbox Account. Any and all cash, revenue and amounts received, including remittances from account debtors and any other proceeds of Receivables or proceeds of other Collateral, received at any time by (or for) a Lockbox Debtor shall be received in trust for the Secured Party and such Lockbox Debtor (or Person receiving any such amounts on behalf of a Lockbox Debtor) shall promptly deposit all such amounts into the Lockbox Account. Notwithstanding any other provision of this Security Agreement or any Transaction Agreement, the requirements of the foregoing sentence and each other requirement of this Section 6 shall have no cure period and failure to comply with the requirements hereof shall result in an immediate Event of Default. On a daily basis, the available balance in the Lockbox Accounts shall be transferred to a designated account of the Secured Party (the “Designated Account”). On a weekly basis, the Secured Party shall make a determination of (a) the amount of outstanding Obligations due and payable and (b) amounts reasonably anticipated to become Obligations due and payable (collectively, the “Determined Amount”) and shall retain such Determined Amount in the Designated Account for application to the outstanding and anticipated Obligations in such order and at such time as the Secured Party shall determine in its sole discretion. The Determined Amount shall be determined in the sole discretion of the Secured Party. The Secured Party may remove the Determined Amount from the Designated Account at any time. Any amounts in the Designated Account (that were transferred into the Designated Account from the Lockbox Account during the week preceding the Secured Party’s determination of the Determined Amount) in excess of the Determined Amount shall be transferred to the designated account of the Lockbox Debtors (the “Debtor Funding Account”) for use by such Lockbox Debtors in their discretion in the ordinary course of their business, subject to Section 8 below. Each Lockbox Debtor shall enter into a Deposit Account Control Agreement with the Secured Party and Bank, in form and substance satisfactory to Secured Party, that provides, among other things, that the Lockbox Debtor shall not have any right of access to, or withdrawal from the Lockbox Account, that the Bank shall only comply with instructions of the Secured Party, and that funds in the Lockbox Account shall be transferred only in accordance with the Secured Party’s instructions. Each Lockbox Debtor shall be required to strictly comply with the requirements of this Section 6 at all times that any Obligations under the Notes remain outstanding or the Secured Party retains any obligation to make loans or advance credit under the Line of Credit Note.

 

7.          Deposit Account Control Covenants. Each Debtor hereby covenants and agrees that, to the extent that the Debtor maintains cash (other than cash required to be maintained in a Lockbox Account under Section 6 above) it shall be deposited into a lockbox, deposit, disbursement or similar account (“Controlled Accounts” and together with the Lockbox Accounts, the “Blocked Accounts”) established at a bank or banks (each such bank, a “Controlled Account Bank”), which Controlled Accounts shall be subject to a “springing” or “with activation” cash dominion control agreement in form and substance satisfactory to Secured Party (each such control agreement, a “Control Agreement”). For the avoidance of doubt, each Debtor Funding Account shall be subject to a Control Agreement. Upon the occurrence of an Event of Default, Secured Party shall have the right to immediately give notice to each Controlled Account Bank that it is exercising its right of control over the Controlled Accounts under the applicable Control Agreement, and after the date of such notice, (y) no Debtor shall be permitted to withdraw or direct the withdrawal of proceeds from such Controlled Accounts or give any instructions whatsoever concerning disposition of the proceeds in the Controlled Accounts and (z) any funds in Controlled Accounts shall be transferred to Secured Party for application to the Obligations. Secured Party does not assume any responsibility for such Controlled Account arrangement, including any claim of accord and satisfaction or release with respect to deposits accepted by any Controlled Account Bank thereunder.

 

  

8.           Reporting. The Debtors hereby covenant and agree that they shall:

 

(a)          Annual Financial Statements. Furnish Secured Party within sixty (60) days after the end of each fiscal year of Debtor, including (a) statements of income on a consolidating basis (on a business segment basis) and consolidated basis and (b) stockholders’ equity and cash flow from the beginning of the current fiscal year to the end of such fiscal year and the balance sheet as at the end of such fiscal year in each case on a consolidating basis (on a business segment basis) and consolidated basis, all prepared in accordance with U.S. generally accepted account principles (“GAAP”) and complete and correct in all material respects, and in reasonable detail and reported upon on a consolidated basis without qualification by an independent certified public accounting firm selected by Debtors and reasonably satisfactory to Secured Party.

 

(b)          Quarterly Financial Statements. Furnish Secured Party within thirty (30) days after the end of each fiscal quarter, an unaudited balance sheet, stockholder’s equity and cash flow of Debtors on a consolidating basis (on a business segment basis) and consolidated basis and an unaudited statements of operations on a consolidating basis (on a business segment basis) and consolidated basis reflecting results of operations from the beginning of the fiscal year to the end of such quarter and for such quarter, prepared in accordance with GAAP and complete and correct in all material respects, subject to the absence of footnotes and normal and recurring year-end adjustments that individually and in the aggregate are not material to Debtors’ business.

 

(c)          Monthly Financial Statements and 13-Week Cash Budget. Furnish Secured Party within twenty (20) days after the end of each month: (a) (other than for the months of April, July, October and January, which shall be delivered in accordance with the foregoing paragraph), an unaudited balance sheet, stockholder’s equity and cash flow of Debtors on a consolidating basis (on a business segment basis) and consolidated basis and an unaudited statements of operations on a consolidating basis (on a business segment basis) and consolidated basis reflecting results of operations from the beginning of the fiscal year to the end of such month and for such month, prepared in accordance with GAAP and complete and correct in all material respects, subject to the absence of footnotes and normal and recurring year-end adjustments that individually and in the aggregate are not material to Debtors’ business, and (b) a 13-week rolling cash flow projection, which shall include all forecast cash receipts, operating expenses, payroll and any other cash disbursements.

 

(d)          Other Reports. Furnish Secured Party as soon as available, but in any event within ten (10) days after the issuance thereof, with copies of such financial statements, reports and returns as each Debtor shall send to its stockholders.

 

  

(e)          Additional Information. Furnish Secured Party with such additional information as Secured Party shall reasonably request in order to enable Secured Party to determine whether the terms, covenants, provisions and conditions of this Agreement, the Notes and the other Transaction Agreements have been complied with by Debtors including, without the necessity of any request by Secured Party, (a) copies of all environmental audits and reviews, (b) at least thirty (30) days prior thereto, notice of any Debtor’s opening of any new office or place of business or any Debtor’s closing of any existing office or place of business, and (c) promptly upon any Debtor’s learning thereof, notice of any labor dispute to which any Debtor may become a party, any strikes or walkouts relating to any of its plants or other facilities, and the expiration of any labor contract to which any Debtor is a party or by which any Debtor is bound.

 

(f)          Projected Operating Budget. Furnish Secured Party, no earlier than thirty (30) days prior to and not later than twenty (20) days after the beginning of each fiscal year of Debtors commencing with the fiscal year beginning May 1, 2015, a month by month projected operating budget and cash flow of Debtors on a consolidated basis for such fiscal year (including an income statement for each month and a balance sheet as at the end of the last month in each fiscal quarter), such projections to be accompanied by a certificate signed by the President or Chief Financial Officer of each Debtor to the effect that such budget and projections are based on good faith estimates and assumptions believed by the Debtors to be reasonable as of the date of the applicable projections or assumptions.

 

(g)          Variances From Operating Budget. Furnish Secured Party, concurrently with the delivery of the financial statements and reports referred to in Sections 8(a), (b) and (c), a written report summarizing all material variances from budgets submitted by Debtors pursuant to Section 8(f) and the 13-week rolling cash flow projection submitted by Debtors pursuant to Section 8(c), in each case with a discussion and analysis by management with respect to such variances.

 

9.           Further Assurances. At the request of Secured Party at any time and from time to time, each Debtor shall, at its expense, duly execute and deliver, or cause to be duly executed and delivered, such further agreements, documents and instruments, and do or cause to be done such further acts as may be necessary or proper, to create, evidence, perfect, maintain, maintain the priority of, and enforce the security interests and the priority thereof in the Collateral and to otherwise effectuate the provisions or purposes of this Agreement.

 

10.          Secured Party’s Actions. Upon the occurrence of a failure to perform any of the Obligations (including the failure to perform any covenant under this Agreement) when due and if such failure is not cured within any applicable cure period (such an occurrence, an “Event of Default”), the Secured Party shall have the right, but shall not be obligated, to discharge taxes, liens, security interests or other encumbrances at any time levied or placed on the Collateral, pay for insurance on the Collateral, pay for the maintenance and preservation of the Collateral, sign and endorse any checks, notes, drafts, money orders, acceptances or other forms of remittance payable to one or more Debtors and any invoice, freight or express bill, bill of lading, or other documents relating to the Collateral, demand, bring suit, collect or give acquittance for any monies due on accounts or compromise, prosecute or defend any action, claim or proceeding arising from the Collateral. The Secured Party shall have the right to do any or all of the foregoing in the name of any one or more of the Debtors or otherwise. Should a Debtor fail or refuse to perform any Obligation, the Secured Party shall have the right to, at the Secured Party’s sole discretion, without further notice to or demand upon the Debtor with respect to such Event of Default and without releasing the Debtor from any obligation, covenant or condition hereof, make, perform, observe, take or do the same in such manner and to such extent as the Secured Party may, during any period of time that the Debtor is in default hereunder, deem necessary to protect the Collateral and the security provided by this Security Agreement. The Debtors agree to reimburse the Secured Party on demand for any reasonable payment made, or any reasonable expense incurred, including reasonable attorneys’ fees, by the Secured Party in connection with the foregoing, together with interest thereon from the date incurred (at a rate per annum equal to six percent (6%)).

 

  

11.         Default; Remedies. Upon the occurrence of an Event of Default, the Secured Party shall have the right at its option and without notice or demand, to declare all Obligations secured hereby immediately due and payable, and to do one or more of the following:

 

(a)          Foreclose or otherwise enforce the Secured Party’s security interest in any manner permitted by the UCC or other applicable Laws, or any other applicable agreement.

 

(b)          With respect to accounts, at any time (including prior to an Event of Default) give notice of assignment to any and all obligors or account debtors under the accounts. Each Debtor hereby covenants and agrees that the Debtor will cooperate fully with the Secured Party, and its employees and agents, and will provide any and all documents deemed by the Secured Party to be necessary or desirable to collect the accounts.

 

(c) Collect the accounts, take possession of the Collateral, or both. Secured Party shall have the sole and exclusive right to collect the accounts following an Event of Default. The Secured Party’s actual reasonable collection expenses, including stationery and postage, telephone and telegraph, secretarial and clerical expenses, may be charged to Debtors and added to the Obligations.

 

(d)          Receive, endorse, assign or deliver in the name of the Secured Party or any Debtor any and all checks, drafts and other instruments for the payment of money relating to the accounts, and each Borrower hereby waives notice of presentment, protest and non-payment of any instrument so endorsed. Each Debtor hereby irrevocably appoints and designates the Secured Party or its designee as such Debtor’s attorney with power (i) at any time: (A) to endorse such Debtor’s name upon any notes, acceptances, checks, drafts, money orders or other evidences of payment or Collateral; (B) to sign such Debtor’s name on any invoice or bill of lading relating to any of the accounts, drafts against account debtors, assignments and verifications of accounts; (C) to send verifications of accounts to any account debtor; (D) to sign such Debtor’s name on all financing statements or any other documents or instruments deemed necessary or appropriate by the Secured Party to preserve, protect, or perfect the Secured Party’s interest in the Collateral and to file same; and (E) to receive, open and dispose of all mail addressed to any Debtor; and (ii) at any time following the occurrence and during the continuance of an Event of Default: (A) to demand payment of the accounts; (B) to enforce payment of the accounts by legal proceedings or otherwise; (C) to exercise all of such Debtor’s rights and remedies with respect to the collection of the accounts and any other Collateral; (D) to settle, adjust, compromise, extend or renew the accounts; (E) to settle, adjust or compromise any legal proceedings brought to collect accounts; (F) to prepare, file and sign such Debtor’s name on a proof of claim in bankruptcy or similar document against any account debtor; (G) to prepare, file and sign such Debtor’s name on any notice of lien, assignment or satisfaction of lien or similar document in connection with the accounts; and (H) to do all other acts and things necessary to carry out this Security Agreement and any and all rights of the Secured Party. All acts of said attorney or designee are hereby ratified and approved, and said attorney or designee shall not be liable for any acts of omission or commission nor for any error of judgment or mistake of fact or of law, unless done maliciously or with gross (not mere) negligence (as determined by a court of competent jurisdiction in a final non-appealable judgment); this power being coupled with an interest is irrevocable while any of the Obligations remain unpaid. The Secured Party shall have the right at any time to change the address for delivery of mail addressed to any Debtor.

 

  

(e)          Sell, lease or otherwise dispose of any Collateral at one or more public or private sales, whether or not such Collateral is present at the place of sale, for cash or credit or future delivery, on such terms and in such manner as the Secured Party may determine. In the event of a sale, lease or other disposition of the Collateral or of collection of the accounts:

 

(1)         Any person, including any Debtor and the Secured Party, may purchase at the sale.

 

(2)         (A)         In connection with any sale or other dispositions of the Collateral, the Parties agree that without limiting any other commercially reasonable conduct as may be followed by the Secured Party, the following procedures shall be deemed to comprise and constitute a commercially reasonable sale (hereinafter referred to as the “sale”):

 

(i)   The Secured Party shall mail to the applicable Debtors written notice of the sale not less than ten (10) days prior to such sale.

 

(ii)   In the event of a public sale, as often as (but no more than) required under the UCC immediately preceding the sale, the Secured Party will publish notice of the sale in an appropriate publication that the Secured Party selects. The notice will advise prospective purchasers as to where they may obtain information with respect to the Collateral.

 

(iii) Upon receipt of any written request to do so, the Secured Party will make available to any bona fide prospective purchaser for inspection, within five (5) Business Days following receipt of such request and during reasonable business hours, such information (including records and documents with respect to the accounts) as shall be necessary to enable a prospective purchaser to prepare a bid.

 

  

(B)         Notwithstanding paragraph (A) hereof to the contrary, in the event the Secured Party offers to sell all or any part of the Collateral, the Secured Party will be under no obligation to consummate a sale if, in its reasonable business judgment, none of the offers received by them reasonably approximates the fair value of such Collateral.

 

(3)         The Secured Party shall apply the proceeds of any sale, collection, or disposition hereunder to payment of the following: (A) the expenses of such sale or disposition, including the costs of publishing, recording, mailing and posting notice; (B) the cost of any search and other evidence of title procured in connection therewith and any transfer tax on any deed or conveyance or bill of sale; (C) all sums expended under the terms hereof, not then repaid, with accrued interest at the “prime rate” (as determined by reference to the Wall Street Journal for applicable periods) plus 800 basis points; (D) all sums required to satisfy the Obligations; and (E) the remainder, if any, to the person or persons legally entitled thereto.

 

(4)         The Secured Party may require a Debtor to make the Collateral available to the Secured Party at the Debtor’s place of business.

 

(f)          Recover from the Debtors all reasonable costs and expenses, including reasonable attorneys’ fees, incurred or paid by the Secured Party in exercising any right, power or remedy provided by this Security Agreement or by Law.

 

12.         Power of Attorney. Each Debtor hereby irrevocably designates and appoints Secured Party (and all persons designated by Secured Party) as Debtor’s true and lawful attorney-in-fact, and authorizes Secured Party, in Debtor’s or Secured Party’s name, to: (a) at any time an Event of Default exists or has occurred and is continuing (i) demand payment on Receivables or other Collateral, (ii) enforce payment of Receivables by legal proceedings or otherwise, (iii) exercise all of Debtor’s rights and remedies to collect any Receivable or other Collateral, (iv) sell or assign any Receivable upon such terms, for such amount and at such time or times as the Secured Party deems advisable, (v) settle, adjust, compromise, extend or renew an Account, (vi) discharge and release any Receivable, (vii) prepare, file and sign Debtor’s name on any proof of claim in bankruptcy or other similar document against an account debtor or other obligor in respect of any Receivables or other Collateral, (viii) notify the post office authorities to change the address for delivery of remittances from account debtors or other obligors in respect of Receivables or other proceeds of Collateral to an address designated by Secured Party, and open and dispose of all mail addressed to Debtor and handle and store all mail relating to the Collateral; and (ix) do all acts and things which are necessary, in Secured Party’s determination, to fulfill Debtor’s obligations under this Agreement and the other Transaction Agreements and (b) at any time to (i) take control in any manner of any item of payment in respect of Receivables or constituting Collateral or otherwise received in or for deposit in the Blocked Accounts or otherwise received by Secured Party, (ii) have access to any lockbox or postal box into which remittances from account debtors or other obligors in respect of Receivables or other proceeds of Collateral are sent or received, (iii) endorse Debtor’s name upon any items of payment in respect of Receivables or constituting Collateral or otherwise received by Secured Party and deposit the same in Secured Party’s account for application to the Obligations, (iv) endorse Debtor’s name upon any chattel paper, document, instrument, invoice, or similar document or agreement relating to any Receivable or any goods pertaining thereto or any other Collateral, including any warehouse or other receipts, or bills of lading and other negotiable or non-negotiable documents, and (v) sign Debtor’s name on any verification of Receivables and notices thereof to account debtors or any secondary obligors or other obligors in respect thereof. Debtor hereby releases Secured Party, its Affiliates (other than the Company Group) and the members, managers, directors, officers, employees, agents, designees and representatives of Secured Party or its Affiliates from any liabilities arising from any act or acts under this power of attorney and in furtherance thereof, whether of omission or commission, except as a result of Secured Party’s own gross negligence or wilful misconduct as determined pursuant to a final non-appealable order of a court of competent jurisdiction.

 

  

13.         Exercise of Remedies; No Waiver. All remedies conferred upon the Secured Party shall be deemed cumulative with, and not exclusive of, any other remedy conferred by any Transaction Agreement or by law or equity. The exercise of any one remedy shall not preclude the exercise of any other. Failure of the Secured Party to exercise any rights it may have upon any Debtor’s default shall not be deemed to be a waiver of the Secured Party’s rights thereupon or to be a release of any Debtor from its Obligations. The acceptance by the Secured Party of any sum or performance after the same is due shall not constitute a waiver of the right either to require prompt payment or performance, when due, of all other sums and obligations hereby secured or to declare a default as herein provided. The acceptance by the Secured Party of any sum in an amount less than the sum then due shall not constitute a waiver of the obligation of any Debtor to pay the entire sum then due. The waiver by the Secured Party of any default hereunder shall not be deemed to constitute a waiver of any succeeding default. Each Debtor waives any right to require the Secured Party to proceed against any person or to exhaust any Collateral or to pursue any remedy in the Secured Party’s power.

 

14.         Authorization to File Financing Statements. Each Debtor hereby specifically and irrevocably authorizes the Secured Party, at any time and from time to time, to file in any UCC jurisdiction any initial financing statements and amendments thereto that (i) indicate that the Collateral consists of all assets of the Debtor or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC, or is of an equal or lesser scope or with greater detail and (ii) contain any other information required by part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including (a) whether the Debtor is an organization, the type of organization of the Debtor, and any organizational identification number issued to the Debtor, and (b) in the case of a financing statement filed as a fixture filing or indicating Collateral as as-extracted collateral or timber to be cut, a sufficient description of real property to which the Collateral relates. Each Debtor hereby covenants and agrees to furnish any such information to the Secured Party promptly upon request.

 

15.         Term. This Security Agreement shall remain in full force and effect until the Obligations shall have been indefeasibly paid in full and satisfied or until an express release and termination is given in writing by the Secured Party. No party to this Security Agreement or otherwise liable for the Obligations shall be discharged by any extension of time, additional advances, renewals and extensions of the underlying agreements and Obligations, the taking of further security, releases of a part or all of the Collateral, or any other acts.

 

  

16.         Waiver. The failure of any Debtor to comply with any of its obligations or agreements herein contained may be waived only in writing by the Secured Party. No waiver granted hereunder shall be deemed a waiver of any subsequent breach or default of the same or similar nature. No failure or delay by any Party in exercising any right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

 

17.         Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective Parties at the addresses set forth below (or to such other address that may be designated by a party from time to time in accordance with this Section).

 

Debtors:	c/o DFI Holdings, LLC	with a required copy to (which shall not constitute notice):
	3179 Deer Creek Road,	Fox Rothschild LLP
	Collegeville, PA 19426	2700 Kelly Road, Suite 300
	Attention: Michael P. Duloc	Warrington, PA 18976
	Fax: 815-734-5233	Attention: Jeffrey H. Nicholas
		Fax: 215-345-7507
Secured	c/o AMREP Corporation	with a required copy to (which shall not constitute notice):
Party:	300 Alexander Park, Suite 204	Duane Morris LLP
	Princeton, New Jersey 08540	222 Delaware Avenue
	Attention: General Counsel	Suite 1600
	Fax: 609-716-8255	Wilmington, DE 19801
		Attention: Christopher Winter
		Fax: 302-397-2455

 

18.         Governing Law; Consent to Jurisdiction and Waiver of Jury Trial.

 

(i)          This Security Agreement shall be governed by and construed in accordance with the internal substantive Laws of the State of New York, without giving effect to any choice of Law or conflict of Laws rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of New York. The term “UCC” as used herein means the Uniform Commercial Code as currently in effect in the State of New York.

 

 

 

(ii)         Each Party irrevocably submits to the exclusive jurisdiction of the federal courts of the Southern District of New York or the courts of the State of New York located in the City of New York for the purposes of any suit, action or other proceeding arising out of this Security Agreement or any transaction contemplated hereby. Each Party further agrees that service of any process, summons, notice or document by U.S. registered mail to such Party’s respective address set forth in the “Notices” section hereof shall be effective service of process for any action, suit or proceeding with respect to any matters to which it has submitted to jurisdiction in this Section. Each Party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Security Agreement or the transactions contemplated hereby in federal courts of the Southern District of New York or the courts of the State of New York located in the City of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

 

19.         Counterparts. This Security Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Execution and delivery of this Security Agreement by delivery of a facsimile or electronically recorded copy in .pdf file format bearing a copy of the signature of a Party shall constitute a valid and binding execution and delivery of this Security Agreement by such Party. Such copies shall constitute enforceable original documents.

 

20.         Headings. The section headings contained in this Security Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Security Agreement.

 

21.         Entire Agreement. This Security Agreement embodies the entire agreement and understanding of the Parties hereto in respect of the subject matter herein. This Security Agreement supersedes all prior agreements and understandings between the Parties with respect to the subject matter thereof.

 

22.         Amendment. Any provision of this Security Agreement may be amended if, and only if, such amendment is in writing and is signed by each Party to this Security Agreement.

 

23.         Binding Effect; Benefits. This Security Agreement shall inure to the benefit of and be binding upon the Parties hereto and their respective successors and permitted assigns; nothing in this Security Agreement, express or implied, is intended to confer on any Person other than the Parties and their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Security Agreement.

 

24.         Joint Drafting. The Parties have participated jointly in the negotiation and drafting of this Security Agreement. In the event an ambiguity or question of intent or interpretation arises, this Security Agreement shall be construed as if drafted jointly by the 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 Security Agreement.

 

  

25.         Severability. Whenever possible, each provision of this Security Agreement shall be interpreted in such manner as to be effective and valid under applicable Law. If any provision of this Security Agreement is held to be prohibited by or invalid under applicable Law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Security Agreement. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Security Agreement so as to effect the original intent of the Parties as closely as possible to the fullest extent permitted by applicable Law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

26.         Interpretation. When a reference is made in this Security Agreement to an Article, Section or Exhibit, such reference will be to an Article or Section of, or an Exhibit to, this Security Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Security Agreement, they will be deemed to be followed by the words “without limitation.” The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Security Agreement will refer to this Security Agreement as a whole and not to any particular provision of this Security Agreement. Unless the context expressly provides otherwise, any approval, determination, election or authorization required to be obtained from a Party shall be at such Party’s sole discretion. The word “or” is not exclusive. All capitalized terms used and defined in this Security Agreement shall have the meanings ascribed to them herein. All capitalized terms used but not otherwise defined in this Security Agreement shall have the meanings ascribed to them in the Purchase Agreement. All terms defined in this Security Agreement will have such defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Security Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Unless otherwise indicated, any agreement, instrument or statute defined or referred to herein, or in any agreement or instrument that is referred to herein, means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns.

 

27.         Assignability. This Security Agreement shall not be assignable by any Party hereto without the prior written consent of the other Party.

 

28.         Specific Performance. Each Party agrees that irreparable damage would occur in the event that any of the provisions of this Security Agreement were not performed by them in accordance with the terms hereof and that each Party shall be entitled to specific performance of the terms hereof (without the need to post bond or any other security), in addition to any other remedy at law or equity.

 

29.         Expenses. Each Party shall bear its own costs and expenses in connection with this Security Agreement and the transactions contemplated hereby, including all legal, accounting, financial advisory, consulting and all other fees and expenses of third parties, except where specifically provided to the contrary.

 

  

30.         Disclosure. Each Debtor consents to the Secured Party or its Affiliates publicly disclosing this Security Agreement, including by filing such documents with the Securities and Exchange Commission or the New York Stock Exchange.

 

31.         Independent Counsel. Each Party certifies that it has read the terms of this Security Agreement, that it understands the terms of this Security Agreement, and that it is entering into this Security Agreement of its own volition. Each Party warrants and represents that it has (a) been represented by an attorney of its choice in connection with the Transaction and received independent legal advice from its attorney regarding its decision with respect to the advisability of making and entering into this Security Agreement, or (b) had sufficient time, opportunity and means to engage an attorney of its choice in order to be represented by such attorney in connection with the Transaction and to receive independent legal advice from its attorney regarding its decision with respect to the advisability of making and entering into this Security Agreement, and has made a knowing and voluntary decision not to do so.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

  

IN WITNESS WHEREOF, the Parties have caused this Security Agreement to be duly executed and delivered as of the date first written above.

 

DFI HOLDINGS, LLC			KPS HOLDCO, LLC
By:	/s/ Michael P. Duloc		By:	/s/ Michael P. Duloc
	Name: Michael P. Duloc			Name: Michael P. Duloc
	Title: Manager			Title: Manager
KABLE MEDIA SERVICES, INC.			KABLE NEWS INTERNATIONAL, INC.
By:	/s/ Michael P. Duloc		By:	/s/ Michael P. Duloc
	Name: Michael P. Duloc			Name: Michael P. Duloc
	Title: President & Chief Executive Officer			Title: President & Chief Executive Officer
KABLE DISTRIBUTION SERVICES, INC.			KABLE DISTRIBUTION SERVICES OF CANADA, LTD.
By:	/s/ Michael P. Duloc		By:	/s/ Michael P. Duloc
	Name: Michael P. Duloc			Name: Michael P. Duloc
	Title: President & Chief Executive Officer			Title: President & Chief Executive Officer
KABLE NEWS COMPANY, INC.			KABLE PRODUCT SERVICES, INC.
By:	/s/ Michael P. Duloc		By:	/s/ Michael P. Duloc
	Name: Michael P. Duloc			Name: Michael P. Duloc
	Title: President & Chief Executive Officer			Title: President & Chief Executive Officer
American republic investment co.
By:	/s/ Peter M. Pizza
	Name: Peter M. Pizza
	Title: Vice President

 

Signature Page to Security Agreement

(1/1)

 

 

 

 

Exhibit 10.10

 

FIFTH AMENDMENT TO

REVOLVING CREDIT AND SECURITY AGREEMENT

 

This Fifth Amendment to Revolving Credit and Security Agreement (the “Amendment”) is made as of this 9^th day of February, 2015 by and among Kable Media Services, Inc., a corporation organized under the laws of the State of Delaware (“Kable”), Kable Distribution Services, Inc., a corporation organized under the laws of the State of Delaware (“Kable Distribution”), Kable Product Services, Inc., a corporation organized under the laws of the State of Delaware (“Kable Product”), Kable News Company, Inc., a corporation organized under the laws of the State of Illinois (“Kable News”), Palm Coast Data Holdco, Inc., a corporation organized under the laws of the State of Delaware (“Palm Holding”), Kable Staffing Resources LLC, a limited liability company organized under the laws of the State of Delaware (“Kable Staffing”), Kable News International, Inc., a corporation organized under the laws of the State of Delaware (“Kable International”), Palm Coast Data LLC, a limited liability company organized under the laws of the State of Delaware (“Palm Coast”), Fulcircle Media, LLC, a Delaware limited liability company (“FulCircle” and, together with Palm Coast, Kable International, Kable Staffing, Palm Holding, Kable News, Kable Product, Kable Distribution, Kable, and any other Person joined as a borrower to the Loan Agreement (as defined below) from time to time, collectively, the “Borrowers”, and each a “Borrower”), the financial institutions which are now or which hereafter become a party to the Loan Agreement (collectively, the “Lenders” and each individually a “Lender”) and PNC BANK, NATIONAL ASSOCIATION (“PNC”), as agent for Lenders (PNC, in such capacity, the “Agent”) and as a Lender.

 

BACKGROUND

 

A. On May 13, 2010, Borrowers and PNC as a Lender and Agent entered into that certain Revolving Credit and Security Agreement (as same has been or may be amended, restated, modified, renewed, extended, replaced or substituted from time to time, including, without limitation, as amended by certain modifications and/or waivers contained in that certain (i) Consent Letter dated September 27, 2010, (ii) Consent Letter dated December 29, 2011, (iii) Waiver and Amendment dated July 18, 2012, (iv) First Amendment to Revolving Credit and Security Agreement dated as of October 1, 2012, (v) Second Amendment and Joinder to Revolving Credit and Security Agreement dated as of December 31, 2012, (vi) Third Amendment to Revolving Credit and Security Agreement dated as of March 29, 2013, and (v) fourth Amendment to Revolving Credit and Security Agreement dated as of June 11, 2014, the “Loan Agreement”) to reflect certain financing arrangements between the parties thereto. The Loan Agreement and all other documents executed in connection therewith to the date hereof are collectively referred to as the “Existing Financing Agreements.” All capitalized terms not otherwise defined herein shall have the meaning ascribed thereto in the Loan Agreement.

 

B. Borrowers have informed Agent and Lenders that Borrowers intend to enter into a Stock Purchase Agreement dated as of even date herewith (the “Purchase Agreement”) with DFI Holdings, LLC, as a buyer (“Distribution Buyer”) and KPS Holdco, LLC, as a buyer (“Products Buyer” and collectively with Distribution Buyer, “Buyers”) and American Republic Investment Co., a Delaware corporation (“ARIC”), as the seller, in which Products Buyer will acquire all of Kable’s rights, title, and interest in and to Kable Product and Distribution Buyer will acquire all of ARIC’s right, title, and interest in and to Kable, Kable Distribution, Kable International, and Kable News, (Kable Product, Kable, Kable Distribution, Kable International, and Kable News, collectively, the “Sold Entities”) and certain affiliated entities (the transactions contemplated by the Purchase Agreement and agreements to be entered into in connection with the Purchase Agreement, the “Kable Sale”) for consideration that includes a purchase price equal to $2,000,000 on the closing date, $400,000 of which shall be in cash, with the remaining balance in the form of a note payable to ARIC. In connection therewith, ARIC will cause to be formed Staffing Holdco, Inc., a Delaware corporation (“Staffing Holdco”), which will be a wholly owned Subsidiary of ARIC. Kable will then transfer 100% of its ownership interest in Kable Staffing to ARIC, and in turn ARIC will transfer such ownership interest in Kable Staffing to Staffing Holdco (the “Kable Transfer”).

 

 

C. Borrowers have requested that Agent and Lenders (i) consent to the Kable Sale, (ii) consent to the Kable Transfer, (iii) remove the Sold Entities as Borrowers under the Loan Agreement and other Existing Financing Agreements, and (iv) modify certain definitions, terms and conditions in the Loan Agreement, and Agent and Lenders are willing to do so on the terms and conditions hereafter set forth.

 

NOW THEREFORE, with the foregoing background hereinafter deemed incorporated by reference herein and made part hereof, the parties hereto, intending to be legally bound, promise and agree as follows:

 

Section 1 Consent.

 

(a) In reliance upon the documentation and information provided to Agent in connection with the Kable Sale, and notwithstanding anything to the contrary contained in the Loan Agreement, including without limitation Sections 4.3, 7.1, or 10.15 of the Loan Agreement, or any other Existing Financing Agreement, upon the Effective Date, Agent and Lenders hereby consent to the Kable Sale and Kable Transfer. Upon the effectiveness of this Amendment, each Sold Entity shall be removed as a Borrower under the Loan Agreement and other Existing Financing Agreements, and Palm Coast, Palm Holding, FulCircle and Kable Staffing shall remain as Borrowers under the Loan Agreement and other Existing Financing Agreements.

 

(b) This consent shall be effective only as to the items set forth in the preceding paragraph. This consent shall not be deemed to constitute a consent to the breach by Borrowers of any covenants or agreements contained in any Existing Financing Agreement with respect to any other transaction or matter. Borrowers agree that the consent set forth in the preceding paragraph (a) shall be limited to the precise meaning of the words as written therein and shall not be deemed (i) to be a consent to, or any waiver or modification of, any other term or condition of any Existing Financing Agreement, or (ii) to prejudice any right or remedy that Agent or Lenders may now have or may in the future have under or in connection with any Existing Financing Agreement other than with respect to the matters for which the consent in the preceding paragraph (a) has been provided. Other than as described in this Amendment, the consent described in the preceding paragraph (a) shall not alter, affect, release or prejudice in any way any Obligations under the Existing Financing Agreements. This consent shall not be construed as establishing a course of conduct on the part of Agent or Lenders upon which the Borrowers may rely at any time in the future. Borrowers expressly waive any right to assert any claim to such effect at any time.

 

 

Section 2 Amendments to Loan Agreement

 

(a) Definitions. On the Effective Date, the following defined terms contained in Section 1.2 of the Loan Agreement shall be amended and restated in their entirety as follows:

 

“Advance Rates” shall mean the Receivables Advance Rate.

 

“Borrowing Agent” shall mean Palm Holding.

 

“Letter of Credit Sublimit” shall mean $1,500,000

 

“Maximum Loan Amount” shall mean $7,500,000.

 

“Maximum Revolving Advance Amount” shall mean $7,500,000.

 

(b) New Definition. On the Effective Date, the following new definition shall be added to Section 1.2 of the Loan Agreement:

 

“Staffing Holdco” shall mean Staffing Holdco, Inc., a Delaware corporation.

 

(c) Revolving Advances. On the Effective Date, Section 2.1 of the Loan Agreement shall be amended and restated in its entirety as follows:

 

2.1 Revolving Advances

 

(a) Amount of Revolving Advances. Subject to the terms and conditions set forth in this Agreement including Sections 2.1(b), (c), (d), (e), and (f), each Lender, severally and not jointly, will make Revolving Advances to Borrowers in aggregate amounts outstanding at any time equal to such Lender’s Commitment Percentage of the least of: (x) the Maximum Revolving Advance Amount less the aggregate Maximum Undrawn Amount of all outstanding Letters of Credit; (y) 85% of Cash Collections, or (z) an amount equal to the sum of:

 

(i) up to 75%, subject to the provisions of Section 2.1(d) hereof (“Receivables Advance Rate”), of Eligible Receivables, minus

 

(ii) the aggregate Maximum Undrawn Amount of all outstanding Letters of Credit, minus

 

(iii) the Florida Reserve, minus

 

(iv) such reserves as Agent may reasonably deem proper and necessary from time to time after the Closing Date; provided that Agent shall provide Borrowers with no less than three (3) Business Days prior written notice of such reserve and the reason therefor; provided, further, that (i) all reserves (including the amount of such reserve) established hereunder shall bear a reasonable relationship to the events, conditions or circumstances that are the basis for such reserve and (ii) the amount of any reserve shall not be duplicative of (a) the amount of any other reserve with respect to the same events, conditions or circumstances or (b) any exclusionary criteria or limitations set forth in the definitions of Eligible Receivable.

 

 

The amount derived from Section 2.1(a)(z)(i) minus the amount derived from Sections 2.1 (a)(z)(ii), (iii) and (iv) at any time and from time to time shall be referred to as the “Formula Amount”. The Revolving Advances shall be evidenced by one or more secured promissory notes (collectively, the “Revolving Credit Note”) substantially in the form attached hereto as Exhibit 2.1(a).

 

(b) Reserved.

 

(c) Reserved.

 

(d) Discretionary Rights. The Advance Rates may be increased or decreased by Agent at any time and from time to time in the exercise of its reasonable discretion based on Agent’s review of updated field examinations or other Collateral evaluations, it being understood that the amount of any reduction in Advance Rates shall have a reasonable relationship to the event, condition or other matter which is the basis for such reduction. Each Borrower consents to any such increases or decreases and acknowledges that decreasing the Advance Rates or increasing or imposing reserves may limit or restrict Advances requested by Borrowing Agent. The rights of Agent under this subsection are subject to the provisions of Section 16.2(b).

 

(e) Reserved.

 

(f) Reserved.

 

(d) Loans. On the Effective Date, Section 7.5 of the Loan Agreement shall be amended and restated in its entirety as follows:

 

7.5 Loans. Make advances, loans or extensions of credit to any Person, including any Parent, Subsidiary or Affiliate except with respect to the extension of commercial trade credit in the Ordinary Course of Business.

 

(e) Business of Staffing Holdco. On the Effective Date, Article VII of the Loan Agreement shall be amended by adding the following Section 7.22:

 

7.22 Business of Staffing Holdco. Permit Staffing Holdco to (a) engage in any business other than (i) ownership of Kable Staffing, (ii) performance of its obligations under this Agreement and the Other Documents to which it is a party, and any obligations incidental to any of the foregoing, and (iii) activities and contractual rights incidental to the maintenance of its corporate existence and to the matters referred to in the preceding clauses (i) and (ii), or (b) incur any liabilities or indebtedness other than the any Obligations under this Agreement and the Other Documents to which it is a party.

  

 

Section 3 Notice Address. On the Effective Date, the notice address for the Borrowing Agent and any Borrower contained in Section 16.6(C) of the Loan Agreement shall be amended and restated in its entirety as follows: Palm Coast Data LLC, 11 Commerce Boulevard, Palm Coast, FL 32164, Attention: Neil Gordon, Controller, Telephone: (386) 447-6431, Facsimile: (386) 447-6437.

 

Section 4 Representations, Warranties and Covenants of Borrowers. Each Borrower hereby represents and warrants to and covenants with the Agent and the Lenders that:

 

(a) such Borrower reaffirms all representations and warranties made to Agent and Lenders under the Loan Agreement and all of the other Existing Financing Agreements and confirms that after giving effect to this Amendment all are true and correct in all material respects as of the date hereof (except to the extent any such representations and warranties specifically relate to a specific date, in which case such representations and warranties were true and correct in all material respects on and as of such other specific date);

 

(b) from and after the Effective Date, such Borrower reaffirms all of the covenants contained in the Loan Agreement (as amended hereby), covenants to abide thereby until all Advances, Obligations and other liabilities of Borrowers to Agent and Lenders under the Loan Agreement of whatever nature and whenever incurred, are satisfied and/or released by Agent and Lenders;

 

(c) no Default or Event of Default has occurred and is continuing under any of the Existing Financing Agreements;

 

(d) such Borrower has the authority and legal right to execute, deliver and carry out the terms of this Amendment and the A&R Note, that such actions were duly authorized by all necessary limited liability company or corporate action, as applicable, and that the officer executing this Amendment on its behalf was similarly authorized and empowered, and that this Amendment does not contravene any provisions of its certificate of incorporation or formation, operating agreement, bylaws, or other formation documents, as applicable, or of any material contract or agreement to which it is a party or by which any of its properties are bound; and

 

(e) this Amendment and the A&R Note, and all assignments, instruments, documents, and agreements executed and delivered in connection herewith, are valid, binding and enforceable in accordance with their respective terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, moratorium or similar laws affecting creditors’ rights generally; and

 

(f) all intercompany balances in favor of any Sold Entity have been offset, released, or paid in full, and all Advances relating to any Sold Entity, have been paid in full.

 

Section 5 Conditions Precedent/Effectiveness Conditions. This Amendment shall be effective upon the date of satisfaction of all of the following conditions precedent (the “Effective Date”) (all documents to be in form and substance reasonably satisfactory to Agent and Agent’s counsel):

 

 

(a) Agent shall have received this Amendment fully executed by the Borrowers;

 

(b) Agent shall have received an Amended and Restated Revolving Credit Note in the original principal amount of $7,500,000, executed by Palm Coast, FulCircle, Palm Holding, and Kable Staffing in favor of PNC (the “A&R Note”);

 

(c) Agent shall have received a Collateral Pledge Agreement executed by Staffing Holdco pledging 100% of its ownership interest in Kable Staffing;

 

(d) Agent shall have received Letter of Credit cash collateral in the amount of $105,601.98 with respect to the Letter of Credit issued to Kable Distribution;

 

(e) Borrowers shall have provided evidence satisfactory to Agent that all intercompany balances in favor of any Sold Entity have been offset, released, or paid in full, and all Advances relating to any Sold Entity, have been paid in full;

 

(f) Agent shall have received updated insurance certificates evidencing that adequate property and liability insurance is in full force and effect, including each of Palm Coast, FulCircle, Palm Holding, and Kable Staffing as a named insured;

 

(g) Agent shall have received a copy of Staffing Holdco’s (i) organization documents, certified as of a recent date by Staffing Holdco’s secretary (or other appropriate officer) and (ii) bylaws certified as of a recent date by Staffing Holdco’s secretary (or other appropriate officer), together with a certificate of good standing, existence or fact in the State of Delaware and in each jurisdiction in which Staffing Holdco is qualified to do business, each dated within thirty (30) days from the date of this Amendment;

 

(h) Agent shall have received a certified copy of resolutions or written consents of Staffing Holdco’s board of directors authorizing the execution, delivery and performance of the Collateral Pledge Agreement, for the benefit of Lenders, as security for the Obligations, and designating the appropriate officers to execute and deliver the Collateral Pledge Agreement and any other agreements to which Staffing Holdco is a party;

 

(i) Agent shall have received a certificate of Staffing Holdco’s secretary (or other appropriate officer) as to the incumbency and signatures of officers of Staffing Holdco signing the Collateral Pledge Agreement and any other agreements to which Staffing Holdco is a party;

 

(j) Payment by Borrowers to Agent, in immediately available funds of an amendment fee in an amount equal to $5,000, which amendment fee shall be fully earned by Agent and non-refundable upon the effectiveness of this Amendment;

 

(k) Agent shall have received fully executed copies of the Purchase Agreement and related documents, instruments, and agreements;

 

(l) All documents, instruments and information required to be delivered hereunder shall be in form and substance reasonably satisfactory to Agent and Agent’s counsel;

 

(m) Agent shall have received such other documents as Agent or counsel to Agent may reasonably request; and

 

 

(n) No Default or Event of Default shall have occurred and be continuing, both prior and after giving effect to the terms of this Amendment.

 

 

Section 6 Post Closing. On or before the date which is thirty (30) days following the date of this Amendment, Borrowers shall deliver to Agent amended and restated schedules to the Loan Agreement, which shall be in form and substance satisfactory to Agent.

 

Section 7 Further Assurances. Each Borrower hereby agrees to take all such actions and to execute and/or deliver to Agent and Lenders all such documents, assignments, financing statements and other documents, as Agent and Lenders may reasonably require from time to time, to effectuate and implement the purposes of this Amendment.

 

Section 8 Payment of Expenses. Borrowers shall pay or reimburse Agent and Lenders for their reasonable attorneys’ fees and expenses in connection with the preparation, negotiation and execution of this Amendment and the documents provided for herein or related hereto.

 

Section 9 Reaffirmation of Loan Agreement. Except as modified by the terms hereof, all of the terms and conditions of the Loan Agreement, as amended, and all other Existing Financing Agreements are hereby reaffirmed and shall continue in full force and effect as therein written.

 

Section 10 Reaffirmation of Subordination Agreement. By execution of this Amendment, ARIC hereby acknowledges the terms of this Amendment and confirms that the terms and conditions of the Amended and Restated Subordination Agreement dated as of October 1, 2012, as amended, restated, supplemented, or modified from time to time, are hereby reaffirmed and shall continue in full force and effect as therein written.

 

Section 11 Security Interest. As security for the payment and performance of the Obligations, and satisfaction by the Borrowers of all covenants and undertakings contained in the Loan Agreement and the other Existing Financing Agreements, each of Palm Coast, FulCircle, Palm Holding, and Kable Staffing reconfirms the prior grant of the security interest in and first priority, perfected lien in favor of Agent for its benefit and the ratable benefit of each Lender, upon and to, all of its right, title and interest in and to the Collateral, whether now owned or hereafter acquired, created or arising and wherever located.

 

Section 12 Confirmation of Indebtedness. Borrowers confirm and acknowledge that as of February 9, 2015, Borrowers were indebted to Lenders for the Advances under the Loan Agreement without any deduction, defense, setoff, claim or counterclaim, of any nature, in the aggregate principal amount of $0 due on account of Revolving Advances, and $100,573.32 on account of undrawn Letters of Credit, plus all fees, costs and expenses incurred to date in connection with the Loan Agreement and the Other Documents.

 

Section 13 Miscellaneous

 

(a) Third Party Rights. No rights are intended to be created hereunder for the benefit of any third party donee, creditor, or incidental beneficiary.

 

(b) Headings. The headings of any paragraph of this Amendment are for convenience only and shall not be used to interpret any provision hereof.

 

 

(c) Modifications. No modification hereof or any agreement referred to herein shall be binding or enforceable unless in writing and signed on behalf of the party against whom enforcement is sought.

 

(d) Governing Law. The terms and conditions of this Amendment shall be governed by the laws of the Commonwealth of Pennsylvania without regard to provisions of conflicts of law.

 

(e) Counterparts. This Amendment may be executed in any number of and by different parties hereto on separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any signature delivered by a party by facsimile or pdf transmission shall be deemed to be an original signature hereto.

 

 

IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and delivered by their duly authorized officers as of the date first above written.

 

KABLE MEDIA SERVICES, INC.

KABLE DISTRIBUTION SERVICES, INC.

KABLE PRODUCT SERVICES, INC.

KABLE NEWS COMPANY, INC.

KABLE NEWS INTERNATIONAL, INC.

 

 

By: /s/ Michael P. Duloc

Name: Michael P. Duloc

Title: Chief Executive Officer

 

 

PALM COAST DATA HOLDCO, INC.

PALM COAST DATA LLC

FULCIRCLE MEDIA, LLC

KABLE STAFFING RESOURCES LLC

  

 

By: /s/ Peter M. Pizza

Name: Peter M. Pizza

Title: Vice President

 

 

 

SUBORDINATED LENDER:

 

American Republic Investment Co.

 

By: /s/ Peter M. Pizza

Name: Peter M. Pizza

Title: Vice President

 

 

 

 

 

 

 

 

 

[SIGNATURE PAGE TO FIFTH AMENDMENT TO REVOLVING CREDIT AND SECURITY AGREEMENT]

S-1

 

 

 

PNC BANK, NATIONAL ASSOCIATION, as Lender and as Agent   By: /s/ Jacqueline MacKenzie                  Name: Jacqueline MacKenzie Title: Vice President

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[SIGNATURE PAGE TO FIFTH AMENDMENT TO REVOLVING CREDIT AND SECURITY AGREEMENT]

S-2

 

 

Exhibit 99.1

 

FOR:	AMREP Corporation
	300 Alexander Park, Suite 204
	Princeton, NJ  08540
CONTACT:	Peter M. Pizza
	Vice President and Chief Financial Officer
	(609) 716-8210

 

AMREP SELLS ITS NEWSSTAND DISTRIBUTION SERVICES BUSINESS AND ITS
PRODUCT PACKAGING AND FULFILLMENT SERVICES BUSINESS

 

Princeton, New Jersey, February 9, 2015 - AMREP Corporation (NYSE:AXR) today reported that it has sold its Newsstand Distribution Services business and its Product Packaging and Fulfillment Services business pursuant to the sale of capital stock to entities controlled by Michael P. Duloc. The closing of the sale occurred on February 9, 2015.

 

The buyers paid an aggregate purchase price of $2.0 million, which consisted of $400,000 of cash paid on the closing and $1.6 million paid by execution of a secured promissory note. The Newsstand Distribution Services business and the Product Packaging and Fulfillment Services business will retain all of their third party pre-closing assets, liabilities, rights and obligations, including the negative working capital of the Newsstand Distribution Services business, which totaled $12,672,000 at October 31, 2014. AMREP expects to recognize a pre-tax gain on its financial statements as a result of the transaction in the fourth quarter of fiscal year 2015 which it estimates will range from approximately $8 million to $10 million.

 

Prior to the closing, Mr. Duloc was the chief executive officer and president of AMREP’s Newsstand Distribution Services business and Product Packaging and Fulfillment Services business and certain other subsidiaries of AMREP.

 

“After many years in the magazine distribution and product fulfillment businesses, we are pleased that this transaction will allow AMREP to focus primarily on its real estate and subscription fulfillment services businesses to drive shareholder value,” said Edward B. Cloues, II, Chairman of AMREP. “This disposition will sharpen our focus and strengthen AMREP’s balance sheet by eliminating the negative working capital overhang.”

 

Additional details on the sale transaction are provided in AMREP’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 9, 2015.

 

About AMREP – AMREP Corporation’s Palm Coast Data subsidiary provides subscription related services to publishers, membership organizations and others, its Kable Staffing subsidiary provides temporary staffing services and its AMREP Southwest subsidiary is a major holder of real estate in New Mexico.

 

Forward-Looking Statements – This press release may contain certain forward-looking statements, including statements with regard to the expected gain, if any, to be recognized as a result of the transaction and the expected focus of AMREP in the future. Words such as “believes,” “expects,” “projects,” and “future” or similar expressions are intended to identify forward-looking statements.  These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions.  Certain factors could cause actual results to differ materially from those projected in these forward-looking statements, and some of these factors are discussed in the filings AMREP makes with the Securities and Exchange Commission.  AMREP undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

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