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Execution Copy
MEMBERSHIP INTEREST PURCHASE AGREEMENT
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 & Porter Advertising, Inc. (d/b/a
Crispin Porter & Bogusky), a Florida corporation
(“
CPB Inc. ”);
Charles Porter (“
Porter ”),
Alex Bogusky (“
Bogusky ”),
Jeff Hicks
(“
H
icks ”),
and
Jeff Steinhour (“
S
teinhour ”;
together with Porter, Bogusky and Hicks collectively referred to as
the “
Employee Members ”
and individually as an “
Employee
Member ”);
MDC S ub,
together with the Acquisition Co., Employee Members and CPB Inc.,
collectively referred to as the “
Members ”
and individually a “
Member ”);
and
CRISPIN PORTER & 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 ”).
W
I
T
N
E
S
S
E
T
H
:
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%; Porter - 0.36%; Bogusky - 0.27%; Hicks - 0.27%;
Steinhour - 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., 950 Third Avenue, New York,
New York 10022 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 Porter; $217,551 paid to Bogusky; $217,551 paid to
Hicks; and $80,574 paid to Steinhour.
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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
Porter; 4,958 shares of MDC Stock to Bogusky; 4,958 shares of MDC
Stock to Hicks; and 1,837 shares of MDC Stock to
Steinhour.
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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.
(
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 deliv
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