MEMBERSHIP INTEREST PURCHASE AGREEMENT
Execution
Copy
This
Membership
Interest Purchase Agreement (this
“Agreement”)
dated
October 18, 2007 (this “Agreement”),
is
made by and among MDC/KBP Acquisition Inc., a Delaware corporation
(“MDC/KBP”
or
the
“Class
A Member”),
KBP
Management Partners LLC, a Delaware limited liability company (“Management
LLC”
or
the
“Class
B Member”;
the
Class
B Member together with the Class A Member collectively referred to as the
“Members”
and
individually a “Member”),
MDC
Corporate (US) Inc., a Delaware corporation (“MDC
Corporate”),
and
KBP Holdings LLC, a Delaware limited liability company (the “Company”).
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to such terms in the LLC Agreement.
WITNESSETH
:
WHEREAS,
Management LLC desires to sell, and MDC Corporate desires to purchase, all
of
Management LLC's Class B Units (the “Purchased
Interests”)
in the
Company, representing a 40% equity interest in the Company, pursuant to the
provisions of this Agreement; and
WHEREAS,
Management LLC and MDC/KBP are parties to that certain Limited Liability Company
Agreement of the Company dated January 28, 2004 (as amended, the “LLC
Agreement”),
which
sets forth, among other things, the terms and conditions relating to transfer
and ownership of the Class B Units upon exercise of a put or call option;
NOW,
THEREFORE,
in
consideration of the mutual covenants and agreements set forth in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties do hereby agree as
follows:
1. Purchase
and Sale; Closing.
(a) Management
LLC hereby sells, assigns and transfers to MDC Corporate, and MDC Corporate
hereby purchases from Management LLC, the Purchased Interests.
The
Purchased Interests carry with it the right to share in the Profits and Losses
of the Company (as such terms are defined in LLC Agreement) and the other
economic attributes thereof (including distributions of Cash Flow) accruing
from
and after October 18, 2007, and 100% of Management LLC's Capital
Account/Adjusted Capital Account (as such terms are defined the LLC Agreement)
as in existence on October 18, 2007.
(b) The
closing of the transaction contemplated by this Agreement (the “Closing”)
is
taking place simultaneously with the execution and delivery of this Agreement
(the “Closing
Date”),
at
the offices of MDC Partners Inc., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
or
by the exchange of documents and instruments by mail, courier, telecopy and
wire
transfer to the extent mutually acceptable to the parties hereto.
(c)Effective
as of October 18, 2007, MDC/KBP and MDC Corporate shall cause the Company
to
close its books for income tax purposes, and there will be no allocation
of
gains or losses to Management LLC following the Closing Date. In accordance
with
the LLC Agreement, the parties have agreed to elect to adopt the closing
of the
books method under Section 706 of the Code for allocating Management LLC’s
varying interests in the Company during the taxable year that includes the
Closing Date.
2. Purchase
Price.
(a)
In full
consideration for the purchase by MDC Corporate of the Purchased Interests,
MDC
Corporate agrees to pay Management LLC an amount equal to the “Put/Call
Purchase Price”,
calculated and determined as follows:
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(i)
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At
the Closing, an amount equal to $747,600 as the “Estimated
TNW Payment”
as of September 30, 2007, which amount represents a good faith estimate
of
the Applicable TNW (as defined in the LLC Agreement) multiplied by
40% as
the Applicable Percentage..
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(ii)
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In
accordance with Section 10.4(a)(ii) of the LLC Agreement, within
5
Business Days following the determination of the audited Applicable
TNW
(but not later than sixty (60) days after the Closing), an amount
equal to
the audited Applicable TNW less the Estimated TNW Payment ($747,600),
subject to adjustment as provided in Section 10.4(a)(vi) of the LLC
Agreement.
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(iii)
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At
the Closing, a “First
Payment”
in amount equal to $11,700,000, of which an amount equal to $8,775,000
shall be paid in cash or immediately available funds and an amount
equal
to $2,925,000 shall be paid in the form of MDC Stock in accordance
with
Secion 2(a)(viii) of this Agreement. For purposes of this Agreement
and
determining the amount of the Put/Call Purchase Price payable at
the
Closing, (A) “YP”
is deemed to be 2008; and (B) “PBT”
for “YP-1” (2007) was estimated and deemed to be equal to $13.5 million.
Notwithstanding such estimation of PBT for 2007, in calculating the
amount
of the “Second
Payment”
and “Final
Payment”
of the Put/Call Purchase Price payable to Management LLC, (1) PBT
for YP-1
(2007), YP (2008) and YP+1 (2009) shall be the actual amount of PBT
for
such calendar years, as determined and calculated in accordance with
Section 10.4(b)(x) of the Agreement, and (2) the calculation of PBT
in
2007, 2008 and 2009 shall exclude any compensation expense relating
to the
grants of Additional MDC Shares referenced in Section 2(a)(vii) of
this
Agreement.
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2
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(iv)
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In
accordance with Section 10.4(a)(iv) of the LLC Agreement, within
5
Business Days following the determination of PBT for 2008, an amount
equal
to the Second Payment.
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(v)
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In
accordance with Section 10.4(a)(v) of the LLC Agreement, within 5
Business
Days following the determination of PBT for 2009, an amount equal
to the
Final Payment.
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(vi)
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At
the Closing, an additional payment in an amount equal to
$2,711,000.
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(vii)
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As
soon as practicable but not later than 30 days after the date hereof,
MDC
Partners Inc. will deliver Restricted Stock Grant Agreements,
substantially in the form of Exhibit A hereto, for the issuance restricted
shares of MDC Stock to employees of Xxxxxxxxxxx Bond & Partners LLC
(as designated in writing on or prior to the Closing Date by Management
LLC), having an aggregate Market Value equal to $250,000 (“Additional
MDC Shares”),
measured as of the 20 consecutive trading days ending five Business
Days
immediately prior to the Closing Date; provided,
however,
that the closing prices per share of MDC Stock shall be as reported
in
U.S. dollars on NASDAQ. All of the Additional MDC Shares will be
issued
pursuant to MDC Partners Inc.’s 2005 Stock Incentive Plan, and shall vest
on the third anniversary of the date of grant, provided that the
individual recipient of such Additional MDC Shares remains an employee
of
the Company or any of its affiliates as of the applicable vesting
date.
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(viii)
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In
accordance with Section 10.4(e) of the LLC Agreement relating to
the
payment of the Put/Call Purchase Price, an amount equal to 25% of
the
First Payment, Second Payment and Final Payment shall be made in
shares of
MDC Stock
having a Market Value measured as of the 20 consecutive trading days
ending five Business Days immediately prior to the date of the applicable
payment (for purposes of the determining Market Value for the First
Payment, the Closing Date shall be deemed the applicable payment
date);
provided,
however,
that the closing prices per share of MDC Stock shall be as reported
in
U.S. dollars on NASDAQ. The certificate representing the shares of
MDC
Stock to be issued as part of the First Payment shall be dated the
date
hereof and shall be delivered to Management LLC not later than ten
(10)
business days after the Closing Date. Notwithstanding the terms of
clause
G of the form of the “Investment Representation Certificate” required
pursuant to Section 10.4(e) of the LLC Agreement, there shall be
no
contractual holding period for the shares of MDC Stock issued as
part of
the First Payment, the Second Payment or the Final
Payment.
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3
(b)
The
parties hereto acknowledge and agree that the Put/Call Purchase Price to be
paid
by MDC Corporate pursuant to the terms and conditions set forth in Section
2(a)
above, will satisfy in
full
all
payment obligations of the Class A Member, the Company and/or MDC Partners
Inc. (“MDC
Partners”)
as set
forth in the LLC Agreement. Except as otherwise expressly provided herein,
all of the terms of the LLC Agreement relating to the Put/Call Purchase Price
shall continue to apply and govern the payments to be made pursuant to this
Agreement, including without limitation the “Accounting Procedures” set forth in
Section 10.4 of the LLC Agreement. In
addition, in the event that there exists any conflict regarding the
language contained in this Agreement and the language contained in the LLC
Agreement, the language contained in this Agreement shall govern.
(c) MDC
Partners
shall cause sufficient capital and/or MDC Stock, as the case may be, to be
available to MDC Corporate to meet its obligations to pay the Put/Call Purchase
Price under Section 2 of this Agreement. If
MDC
Corporate fails to meet its payment obligations under Section 2 hereof, then
MDC
Partners shall satisfy such payment obligations to the extent that MDC Corporate
failed to do so.
3. Representations
and Warranties by Management LLC.
Management LLC hereby represents and warrants to MDC Corporate as
follows:
(a) Management
LLC is a limited liability company duly organized, validly existing and in
good
standing under the laws of the State of Delaware with full corporate power
and
authority to own its property and to carry on its business all as and in the
places where such properties are now owned or operated or such business is
now
being conducted.
(b)
Management
LLC has the full authority to make, execute, deliver and perform this Agreement
and the transactions contemplated hereby. The execution and delivery of this
Agreement by Management LLC and the consummation by Management LLC of the
transactions contemplated hereby have been duly authorized by all required
action on behalf of Management LLC and its members. This Agreement has been
duly
and validly executed and delivered by Management LLC and, assuming due
authorization, execution and delivery by MDC Corporate, constitutes a legal,
valid and binding obligation of Management LLC, enforceable against it in
accordance with its terms.
(c)
Management
LLC is the owner of the Purchased Interests, free and clear of all mortgages,
liens, security interests, encumbrances, claims, charges and restrictions of
any
kind or character (“Liens”)
other
than the LLC Agreement. No person or entity has or will have any claim against
the Company, MDC Corporate or any of their affiliates related to any share
or
future distribution from the Company or to the proceeds from the sale of the
Purchased Interests.
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(d) Except
with respect to the individual allocations described in Schedule A hereto
relating to pre-existing agreements to provide specified individuals with a
percentage equity interest in Management LLC, (i) Management LLC hereby
represents and warrants that it has not agreed or made any written or verbal
commitment to give any employee of the Company any bonus, gift, award or any
similar type of remuneration and (ii) Management LLC agrees that, from and
after
the date hereof, no portion or proceeds of the Purchase Price shall be used
to
compensate or give any employee of the Company a bonus, gift, award or similar
type of remuneration.
4. Representations
and Warranties by MDC Corporate.
MDC
Corporate and MDC Partners, as the case may be, hereby represent and warrant
to
Management LLC as follows:
(a) MDC
Corporate is a corporation duly organized, validly existing and in good standing
under the laws of Delaware with full corporate power and authority to own its
property and to carry on its business all as and in the places where such
properties are now owned or operated or such business is now being conducted.
(b) MDC
Corporate has the full corporate power and authority to make, execute, deliver
and perform this Agreement and the transactions contemplated hereby. The
execution and delivery of this Agreement by MDC Corporate and the consummation
of the transactions contemplated hereby have been duly authorized by all
required corporate action on behalf of MDC Corporate. This Agreement has been
duly and validly executed and delivered by MDC Corporate and, assuming due
authorization, execution and delivery by Management LLC, constitutes legal,
valid and binding obligations of MDC Corporate, enforceable against each of
them
in accordance with its terms.
(c) MDC
Partners is a corporation duly organized, validly existing and in good standing
under the laws of Canada, with full corporate power and authority to own its
property and to carry on its business all as and in the places where such
properties are now owned or operated or such business is now being
conducted.
(d) MDC
Partners has the full corporate power and authority to make, execute, deliver
and perform this Agreement and the transactions contemplated hereby. The
execution and delivery of this Agreement by MDC Partners and the consummation
of
the transactions contemplated hereby have been duly authorized by all required
corporate action on behalf of MDC Partners. This Agreement has been duly and
validly executed and delivered by MDC Partners and, assuming due authorization,
execution and delivery by Management LLC, constitutes legal, valid and binding
obligations of MDC Partners, enforceable against each of them in accordance
with
its terms.
(e) Each
share of MDC Stock to be issued pursuant to the terms of this Agreement will
be
duly and validly authorized for issuance by MDC Partners, and upon consummation
of the transactions contemplated hereby, will be duly and validly issued, fully
paid and nonassessable, and not issued in violation of the preemptive rights
of
any past or present shareholder. All of the shares of MDC Stock (including
the
Additional MDC Shares) to be issued pursuant to this Agreement will be (a)
issued in transactions exempted under all applicable Canadian securities laws
and in compliance with the rules and regulations of the Toronto Stock Exchange,
and assuming the accuracy and truthfulness of the applicable Investment
Representation Certificates delivered by the recipients of such MDC Stock,
United States federal and state securities laws and (b) conditionally approved
for listing on The NASDAQ National Market and the Toronto Stock Exchange,
subject to official notice of issuance and/or the filing of customary documents
and payment of listing fees.
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5. Other
Agreements.
(a) As
an
inducement for MDC Corporate to consummate the transactions contemplated by
this
Agreement, each of Xxxxxxx Xxxxxxxxxxx (“RK”)
and
Xxxxxxxx Xxxx (“JB”)
hereby
acknowledges and reaffirms his respective obligations under the provisions
of
the separate Non-Solicitation/Non-Servicing Agreement dated January 28, 2004
(each as thereafter amended on September 22, 2004, the “Non-Solicit
Agreements”),
running to the benefit of the Company and MDC Corporate. It is understood that
for purposes of the agreement referenced in the preceding sentence, RK and
JB
shall be deemed to be employed by the Company for any period that he is either
a
full-time or part-time employee of the Company.
(b) MDC
Partners Inc. acknowledges the rights of RK and JB pursuant to Section 3(c)
of
the Non-Solicit Agreements.
6. [intentionally
omitted].
7. Indemnity.
(a) Management
LLC hereby agrees to indemnify each member of the MDC Group against, and to
protect, save and hold harmless each member of the MDC Group from, and to pay
on
behalf of or reimburse the respective member of the MDC Group as and when
incurred for, any and all liabilities, obligations, losses, damages, penalties,
demands, claims, actions, suits, judgments, settlements, penalties, interest,
out-of-pocket costs, expenses and disbursements (including reasonable costs
of
investigation, and reasonable attorneys’, accountants’ and expert witnesses’
fees) of whatever kind and nature (collectively, “Losses”),
that
may be imposed on or incurred by any member of the MDC Group arising out of
or
in any way related to (i) any breach of any warranty or representation contained
in Section 3 hereof or (ii) any action, demand, proceeding, investigation or
claim by any third party against or affecting any member of the MDC Group which
may give rise to or evidence the existence of or relate to a misrepresentation
or breach of any of the representations and warranties contained in Section
3
hereof.
(b) MDC
Corporate hereby agrees to indemnify Management LLC against, and to protect,
save and hold harmless Management LLC from, and to pay on behalf of or reimburse
Management LLC as and when incurred for, any and all Losses that may be imposed
on or incurred by Management LLC arising out of or in any way related to (i)
any
breach of any warranty or representation of MDC Corporate contained in Section
4
hereof or (ii) any action, demand, proceeding, investigation or claim by any
third party against or affecting Management LLC which may give rise to or
evidence the existence of or relate to a misrepresentation or breach of any
of
the representations and warranties contained in Section 4 hereof.
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8. Miscellaneous.
(a)
Each of
MDC Corporate and MDC Partners, on the one hand, and Management LLC and RK/JB,
on the other hand, shall pay its or his own expenses relating to the
transactions contemplated by this Agreement, including, without limitation,
the
fees and expenses of their respective counsel and financial
advisors.
(b) The
interpretation and construction of this Agreement, and all matters relating
hereto (including, without limitation, the validity or enforcement of this
Agreement), shall be governed by the laws of the State of New York without
regard to any conflicts or choice of laws provisions of the State of New York
that would result in the application of the law of any other
jurisdiction.
(c) Subject
to the provisions of the next sentence, no party to this Agreement shall issue
any press release or other public document or make any public statement relating
to this Agreement or the matters contained herein without obtaining the prior
approval of MDC Corporate and Management LLC. Notwithstanding the foregoing,
the
foregoing provision shall not apply to the extent that MDC Partners is required
to make any announcement or public disclosure relating to or arising out of
this
Agreement by virtue of the securities laws of the United States or Canada,
or
the rules and regulations promulgated thereunder, or the rules of the any stock
exchange on which shares of MDC Partners are listed, or any announcement by
any
party or the companies pursuant to applicable law or regulations.
(d) Any
notice, request, instruction or other document to be given hereunder by any
party to any other party shall be in writing and shall be deemed to have been
given (i) upon personal delivery, if delivered by hand or courier, (ii) three
days after the date of deposit in the mails, postage prepaid, or (iii) the
next
business day if sent by facsimile transmission (if receipt is electronically
confirmed) or by a prepaid overnight courier service, and in each case at the
respective addresses or numbers set forth below or such other address or number
as such party may have fixed by notice:
If
to MDC
Corporate or MDC Partners, addressed to:
00
Xxxxxxxx Xxxxxx
Xxxxxxx,
Xxxxxxx
Xxxxxx
X0X 0X0
Attention:
Xxxxxx Xxxxxxx
Fax:
(000) 000-0000
7
with
a
copy to:
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxxx Xxxxxx, General Counsel
Fax:
(000) 000-0000
If
to
Management LLC, addressed to:
c/o
Kirshenbaum Bond & Partners
000
Xxxxxx Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Chief Financial Officer
Fax
(000)
000-0000
with
a
copy to:
Xxxxxxx
Xxxxxxxxxxx
c/x
Xxxxxxxxxxx Bond & Partners
000
Xxxxxx Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Fax
(000)
000-0000
and
Xxxxxxxx
Xxxx
c/o
Kirshenbaum Bond & Partners
000
Xxxxxx Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Fax
(000)
000-0000
and
Moses
& Singer, LLP
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxx X. Xxxxxxxx, Esq.
Fax:
(000) 000-0000
Any
party
may change the address to which notices are to be sent by giving notice of
such
change of address to the other parties in the manner herein provided for giving
notice.
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(e) This
Agreement may not be transferred, assigned, pledged or hypothecated by any
party
hereto, other than by operation of law. This Agreement shall be binding upon
and
shall inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and permitted assigns, as the case may
be.
(f) In
the
event any provision of this Agreement is found to be void and unenforceable
by a
court of competent jurisdiction, the remaining provisions of this Agreement
shall nevertheless be binding upon the parties with the same effect as though
the void or unenforceable part had been severed and deleted.
(g) This
Agreement, including the other documents referred to herein, contains the entire
understanding of the parties hereto with respect to the subject matter contained
herein and therein.
(h) This
Agreement may not be amended, supplemented or modified orally, but only by
an
agreement in writing signed by the all of the parties hereto.
(i) The
language used in this Agreement will be deemed to be the language chosen by
the
parties hereto to express their mutual intent, and no rule of law or contract
interpretation that provides that in the case of ambiguity or uncertainty a
provision should be construed against the draftsman will be applied against
any
party hereto.
(j) This
Agreement may be executed in one or more counterparts, and each such counterpart
shall be deemed an original instrument, but all such counterparts taken together
shall constitute but one agreement. Facsimile signatures shall constitute an
original.
* * * *
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IN
WITNESS WHEREOF,
the
parties hereto have executed this Membership Interest Purchase Agreement, on
the
day and year first above written.
| MDC/KBP ACQUISITION INC. | ||
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| By: | ||
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Name: |
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| Title: | ||
| MDC CORPORATE (US) INC. | ||
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| By: | ||
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Name: |
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| Title: | ||
| MDC PARTNERS INC. | ||
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| By: | ||
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Name: |
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| Title: | ||
| KBP MANAGEMENT PARTNERS LLC | ||
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| By: | ||
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Name: |
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| Title: | ||
| KBP HOLDINGS LLC | ||
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| By: | ||
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Name: |
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| Title: | ||
Acknowledged
and Agreed:
| By: | |||
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Xxxxxxx Xxxxxxxxxxx |
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| By: | |||
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Xxxxxxxx Xxxx |
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