MEMBERSHIP INTEREST PURCHASE AGREEMENT
Execution
Copy
This
MEMBERSHIP
INTEREST PURCHASE AGREEMENT, dated
November 1, 2007 (this “Agreement”),
is
made by and among MDC
Acquisition Inc.,
a
Delaware corporation (“MDC
Sub”);
CPB
Acquisition Inc.,
a
Delaware Corporation (“Acquisition
Co.”);
MDC
Partners Inc.,
a
Canadian corporation (“MDC
Partners”);
Crispin
& Xxxxxx Advertising, Inc.
(d/b/a
Xxxxxxx Xxxxxx & Bogusky), a Florida corporation (“CPB
Inc.”);
Xxxxxxx
Xxxxxx (“Xxxxxx”),
Xxxx Xxxxxxx (“Bogusky”),
Xxxx Xxxxx (“Xxxxx”),
and
Xxxx
Xxxxxxxxx (“Xxxxxxxxx”;
together with Xxxxxx, Bogusky and Xxxxx collectively referred to as the
“Employee
Members”
and
individually as an “Employee Member”);
MDC
Sub,
together with the Acquisition Co., Employee Members and CPB Inc., collectively
referred to as the “Members”
and
individually a “Member”); and
XXXXXXX
XXXXXX & BOGUSKY 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 Company’s Amended and Restated Limited Liability
Company Agreement dated as of January 8, 2001 (as subsequently amended, the
“LLC
Agreement”).
WITNESSETH
:
WHEREAS,
CPB
Inc., the Employee Members and Acquisition Co. are parties to that certain
LLC
Agreement of the Company, which sets forth, among other things, the terms and
conditions relating to transfer and ownership of the Membership Interests upon
exercise of a put or call option;
WHEREAS,
pursuant
to the LLC Agreement, Acquisition Co. has the right to exercise (i) the “First
Call” option with respect to the purchase of an additional 11% of Membership
Interests from CPB Inc., and (ii) the “Second Call” option with respect to the
purchase of an additional 17% of Membership Interests from CPB Inc., and has
assigned such rights to exercise the First Call and the Second Call to MDC
Sub;
WHEREAS,
the
Employee Members and CPB Inc. (collectively, the “Sellers”)
now
desire to sell, and MDC Sub desires to purchase, an aggregate amount equal
to
28% of the issued and outstanding Membership Interests in the Company (the
“Purchased
Interests”),
from
the Sellers in the following applicable percentage amounts: CPB
Inc. - 27%; Xxxxxx - 0.36%; Bogusky - 0.27%; Xxxxx - 0.27%; Xxxxxxxxx -
0.10%);
WHEREAS,
immediately following the execution and delivery of this Agreement, the parties
hereto are entering into a further amendment to the LLC Agreement to reflect
the
transactions contemplated by this Agreement, including the transfer of the
Purchased Interests to MDC Sub and the reallocation of Membership Interests
such
that following the Closing of the transactions contemplated by this Agreement,
the Membership Interests in the Company will be owned as follows: MDC
Sub - 28%; Acquisition Co. - 49% ; CPB Inc. - 23%.;
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) Sellers
hereby sell, assign, transfer and deliver to MDC Sub, and MDC Sub hereby
purchases from Sellers, 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 November 1, 2007 in respect of the Purchased Interests transferred
hereby, and an initial Capital Account in the hands of MDC Sub equal to the
product of (A) the CAP with respect to this purchase and (B) Seller's total
Capital Account balance (all as such terms are defined the LLC Agreement) as
of
November 1, 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 November 1, 2007, MDC Sub, Acquisition Co. and CPB Inc. shall cause the
Company to close its books for income tax purposes, and there will be no
allocation of gains or losses to Sellers with respect to the Purchased Interests
following the Closing Date. All distributions of Profits payable as of October
31, 2007 in respect of the Membership Interests (including the Purchased
Interests) shall be distributed and paid by the Company in the ordinary course
following the Closing. 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 CPB Inc.’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 Sub of the Purchased Interests, and in
full satisfaction of any and all amounts due and owing by Acquisition Co. with
respect to the Period One Formula Amount and the Period Two Formula Amount
(as
such terms are defined in the LLC Agreement), MDC Sub agrees to pay to Sellers
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, a “Closing
Payment”
in an aggregate amount equal to $27,701,072, of which Closing Payment
(x)
an amount equal to $22,560,858 shall be paid in cash or immediately
available funds (the “Cash
Payment”)
as allocated in accordance with Section 2(a)(ii) below, and (y) an
amount
equal to $5,140,214 shall be paid in the form of 514,025 shares of
MDC
Stock (the “Stock
Payment”),
as allocated in accordance with Section 2(a)(iii) below. “MDC Stock” shall
mean MDC Partners’ Class A subordinate voting
shares.
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(ii)
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At
Closing, the Cash Payment shall be paid and allocated among the Sellers
in
the following amounts: $21,755,114 paid to CPB Inc.; $290,068 paid
to
Xxxxxx; $217,551 paid to Bogusky; $217,551 paid to Xxxxx; and $80,574
paid
to Xxxxxxxxx.
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(iii)
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Shares
of MDC Stock representing the Stock Payment shall be issued and allocated
among the Sellers in the following amounts: 495,662 shares of MDC
Stock to
CPB Inc.; 6,610 shares of MDC Stock to Xxxxxx; 4,958 shares of MDC
Stock
to Bogusky; 4,958 shares of MDC Stock to Xxxxx; and 1,837 shares
of MDC
Stock to Xxxxxxxxx.
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(iv)
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The
certificate representing the shares of MDC Stock to be issued as
part of
the Closing Payment shall be dated the date hereof and shall be delivered
to the Sellers not later than ten (10) business days after the Closing
Date. There shall be no contractual holding period for the shares
of MDC
Stock issued as part of the Stock
Payment.
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(b)
The
parties hereto acknowledge and agree that the Put/Call Purchase Price to be
paid
by MDC Sub pursuant to the terms and conditions set forth in this Agreement,
together with any amounts paid in respect of the Capital Account Amount, will
satisfy in
full
all
payment obligations of MDC Sub, Acquisition Co., the Company and/or MDC
Partners Inc. (“MDC
Partners”)
in
connection with the Purchased Interests, the First Call, the First Put, the
Second Call, and the Second Put, including without limitation satisfaction
in
full of any amount due in respect of the Capital Account Amount relating to
the
Purchased Interests, all as set forth in 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.
3.
Representations
and Warranties by CPB Inc.
Sellers
hereby represent and warrant to MDC Sub as follows:
(a) CPB
Inc.
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of Florida, 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.
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(b)
Each
of
the Sellers 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 CPB Inc. and the consummation by CPB Inc. of the
transactions contemplated hereby have been duly authorized by all required
corporate action on behalf of CPB Inc. and its shareholders. This Agreement
has
been duly and validly executed and delivered by each of the Sellers and,
assuming due authorization, execution and delivery by MDC Sub, constitutes
a
legal, valid and binding obligation of each of the Sellers, enforceable against
each of Sellers in accordance with its terms.
(c)
Each
of
the Sellers is the owner of the applicable amount of the Purchased Interests
being sold and transferred pursuant to this Agreement, 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 Sub 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.
(d) Each
of
the Sellers hereby represent and warrant that none of the Sellers has 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, except as reflected
in
employment agreements or plans previously disclosed in writing to MDC or MDC
Sub. Each of the Sellers agree that, from and after the date hereof, no portion
or proceeds of the Put/Call Purchase Price shall be used to compensate or give
any employee of the Company a bonus, gift, award or similar type of
remuneration.
(e) The
Employee Members’ obligation to indemnify pursuant to Section 6 below based
upon breaches of representations and warranties set forth in this Section 3
shall be limited to the amount received by each such Employee Member for their
respective Membership Interests purchased hereby.
4.
Representations
and Warranties by MDC Sub.
MDC Sub
and MDC Partners, as the case may be, hereby represent and warrant to Sellers
as
follows:
(a) MDC
Sub
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. MDC Sub is an
indirect, wholly-owned subsidiary of MDC Partners. MDC Partners
shall cause sufficient capital and/or MDC Stock, as the case may be, to be
available to MDC Sub to meet its obligations to pay the Put/Call Purchase Price
under Section 2 of this Agreement. If
MDC
Sub fails to meet its payment obligations under Section 2 hereof, then MDC
Partners shall satisfy such payment obligations to the extent that MDC Sub
failed to do so.
(b) MDC
Sub
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 Sub and the consummation of the transactions
contemplated hereby have been duly authorized by all required corporate action
on behalf of MDC Sub. This Agreement has been duly and validly executed and
delivered by MDC Sub and, assuming due authorization, execution and delivery
by
CPB Inc., constitutes legal, valid and binding obligations of MDC Sub,
enforceable against each of them in accordance with its terms.
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(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 CPB Inc., 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 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 an applicable Investment Representation Certificates to be
delivered at Closing 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.
5.
Other
Agreements.
(a) As
an
inducement for MDC Sub to consummate the transactions contemplated by this
Agreement and in consideration of the payment by MDC Sub of the Put/Call
Purchase Price, each of the Employee Members hereby acknowledges and reaffirms
his respective obligations under the provisions of the separate
Non-Solicitation/Non-Servicing Agreement dated January 8, 2001 (each as
thereafter amended on September 22, 2004, and as further amended in connection
with this Agreement, the “Non-Solicit
Agreements”),
running to the benefit of the Company, Acquisition Co. and MDC Sub. It is
understood that for purposes of the agreement referenced in the preceding
sentence, each of the Employee Members 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.
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(b) Each
of
the parties hereto ratifies and acknowledges the rights of the Employee Members
pursuant to the Non-Solicit Agreements.
6.
Indemnity.
(a) CPB
Inc.
hereby agrees to indemnify MDC Partners, MDC Sub and Acquisition Co. and their
respective directors and officers (collectively “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
Sub
and MDC Partners hereby agree to indemnify CPB Inc. against, and to protect,
save and hold harmless CPB Inc. from, and to pay on behalf of or reimburse
CPB
Inc. as and when incurred for, any and all Losses that may be imposed on or
incurred by CPB Inc. arising out of or in any way related to (i) any breach
of
any warranty or representation of MDC Sub or MDC Partners contained in Section
4
hereof or (ii) any action, demand, proceeding, investigation or claim by any
third party against or affecting CPB Inc. 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.
7. Miscellaneous.
(a)
Each of
MDC Sub and MDC Partners, on the one hand, and CPB Inc. and the Employee
Members, 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 Sub and CPB Inc. 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.
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(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
Sub or MDC Partners, addressed to:
00
Xxxxxxxx Xxxxxx
Xxxxxxx,
Xxxxxxx
Xxxxxx
X0X 0X0
Attention:
Xxxxxx Xxxxxxx
Fax:
(000) 000-0000
with
a
copy to:
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxxx Xxxxxx, General Counsel
Fax:
(000) 000-0000
If
to CPB
Inc., addressed to:
CPB
Inc.
0000
Xxxx
Xxxxxx, Xxxxx 000
Xxxxx,
Xxxxxxx 00000
Attention:
Chief Financial Officer
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.
(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.
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(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.
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MDC
ACQUISITION INC.
By:
_____________________________________
Name:
Title:
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CPB
ACQUISITION INC.
By:
_____________________________________
Name:
Title:
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By:
_____________________________________
Name:
Title:
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CRISPIN & XXXXXX ADVERTISING,
INC
By:
_____________________________________
Name:
Title:
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Employee Members:
By:
_____________________________________
Name:
Title:
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By:_____________________
Xxxxxxx
Xxxxxx
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By:_____________________
Xxxx
Xxxxxxx
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By:_____________________
Xxxx
Xxxxx
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By:_____________________
Xxxx
Xxxxxxxxx
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