MEMBERSHIP UNIT PURCHASE AGREEMENT by and among MF + P ACQUISITION CO., INTEGRATED MEDIA SOLUTIONS, LLC ROBERT INGRAM, DESIREE DU MONT and RON CORVINO
Exhibit 10.3.1
by
and among
MF
+ P ACQUISITION CO.,
INTEGRATED
MEDIA SOLUTIONS, LLC
▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇▇▇
DU MONT
and
▇▇▇ ▇▇▇▇▇▇▇
Dated May
6, 2010 and effective as of April 30, 2010
MEMBERSHIP UNIT PURCHASE AGREEMENT
(this "Agreement") dated May 6, 2010
and effective as of the close of business on April 30, 2010 (the "Effective Date") , by and
among MF + P ACQUISITION
CO., a Delaware corporation (the "Purchaser"), INTEGRATED MEDIA SOLUTIONS,
LLC, a New York limited liability company ("IMS Holdco"), ▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), ▇▇▇▇▇▇▇ DU MONT ("▇▇▇▇▇▇▇"), ▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇"; and together with ▇▇▇▇▇▇
and ▇▇▇▇▇▇▇, individually a "Principal" and collectively,
the "Principals"), and
solely for purposes of Sections 7.6.6 and
8.19, MDC
Partners Inc., a corporation existing under the laws of Canada ("MDC Partners").
WITNESSETH:
WHEREAS, IMS Holdco formed
Integrated Media Solutions Partners LLC, a Delaware limited liability company
(the "Company"), with
IMS Holdco as its initial member owning 100% of the issued and outstanding
membership units in the Company (the "Membership
Units");
WHEREAS, prior to the
execution and delivery of this Agreement, IMS Holdco contributed substantially
all of its assets, subject to certain disclosed liabilities, and its ongoing
business, to the Company pursuant to a General Assignment, ▇▇▇▇ of Sale and
Assumption Agreement attached hereto as Exhibit A (the "Conveyance
Document");
WHEREAS, IMS Holdco desires to
sell, and the Purchaser desires to purchase, 75% of the Membership Units to be
designated as "Class A Units" (the "Purchased Units"), pursuant to
the provisions of this Agreement such that after giving effect to such purchase,
the Membership Units will be owned as follows: the Purchaser – 75%; IMS Holdco –
25%;
WHEREAS, simultaneously with
the execution and delivery of this Agreement, the Purchaser, IMS Holdco and the
Company are executing and delivering an Amended and Restated Limited Liability
Company Agreement of the Company (the "Operating Agreement"),
attached hereto as Exhibit
B;
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:
ARTICLE
I
SALE OF THE PURCHASED
UNITS
Section
1.1 Sale of
the Purchased Units. Subject to the terms and conditions
herein stated, IMS Holdco agrees to sell, assign, transfer and deliver to the
Purchaser as of the Effective Date (as defined in Section 2.2), and the
Purchaser agrees to purchase from IMS Holdco as of the Effective Date, the
Purchased Units.
ARTICLE
II
PURCHASE PRICE AND
CLOSING
Section
2.1 Purchase
Price; Working Capital Adjustment.
2.1.1 Purchase
Price. In full consideration for the purchase by the Purchaser
of the Purchased Units, the purchase price (the "Purchase Price"), shall be
calculated and paid by the Purchaser to IMS Holdco, as set forth below
(capitalized terms used in this Article II and not otherwise defined, shall have
the meaning ascribed to such terms in Sections
2.1.2 below):
(a) Closing
Payment. At the Closing, the Purchaser shall pay to IMS Holdco
an amount equal to $20,000,000 ("CP").
(b) Working Capital
Payment. If the Effective Date Working Capital, as finally
determined pursuant to the procedures set forth in Section 2.1.3, is
less than the Target Working Capital (such difference being referred to herein
as the "Working Capital
Shortfall"), then within five business days after the Special
Determination (as defined in Section 2.1.3(i)
below) and any adjustments thereto shall have become binding on the parties
pursuant to the procedures set forth in Section 2.1.3, (A)
IMS Holdco shall pay to the Purchaser 75% of the Working Capital Shortfall and
(B) immediately thereafter, IMS Holdco and the Purchaser shall contribute to the
capital of the Company as a contribution to capital, 25% and 75%, respectively,
of the Working Capital Shortfall. If IMS Holdco fails to make all or
any portion of the payment referred to in (A) above or the contribution referred
to in (B) above, in addition to any other legal remedies available to it, the
Purchaser shall have the right to offset any remaining unpaid amount against any
future Purchase Price payments to IMS Holdco, which in the case of (B) above
shall then be contributed by the Purchaser to the capital of the Company in
respect of IMS Holdco's obligation under (B) above. If the Effective
Date Working Capital, as finally determined pursuant to the procedures set forth
in Section 2.1.3, is greater than Target Working Capital, within five days after
the Special Determination and any adjustments thereto shall have become binding
on the parties pursuant to the procedures set forth in Section 2.1.3, the
Company shall make a distribution to IMS Holdco in the amount of the difference
between Target Working Capital and the Effective Date Working Capital. Any
amount paid pursuant to this Section 2.1.1(b)
shall be referred to as the "Working Capital Payment."
(c) Top-Up Payments. The
Purchaser shall pay to IMS Holdco the following top-up payments (the "Top-Up
Payments"):
(i)
On
or prior to the first anniversary of the Closing, the Purchaser shall pay to IMS
Holdco an amount equal to $3,333,333 (the "Initial Top-Up Amount"), plus
interest thereon accruing at a rate of 6% per annum from the Closing through the
date of such payment; provided, however, in the event
that on or before December 31, 2010 changes in United States federal long-term
capital gains tax rates are enacted, which will result in an increase in 2011
federal long-term capital gains rates over 2010 federal long-term capital gains
rates (the difference between such rates being referred to herein as the "LTG Rate Increase"), then, at
the election of IMS Holdco (which election must be made by IMS Holdco in writing
and received by the Purchaser no later than December 20, 2010), such payment
shall be made on or prior to December 31, 2010, provided that the Initial Top-Up
Amount shall be reduced by an amount equal to the product of (x) the Initial
Top-Up Amount times (y) ½ of the LTG Rate Increase. By way of
example, if 2011 federal long-term capital gains rates are increased from 15% to
25%, then the LTG Rate Increase shall be equal to 10%, and, if a payment prior
to December 31, 2010 is elected by IMS Holdco, the Initial Top-Up Amount shall
be reduced by 5%;
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(ii)
on
or prior to the second anniversary of the Closing, an amount equal to
$3,333,333, plus interest thereon accruing at a rate of 6% per annum from the
Closing through the date of such payment; and
(iii)
on
or prior to the third anniversary of the Closing, an amount equal to $3,333,334,
plus interest thereon accruing at a rate of 6% per annum from the Closing
through the date of such payment.
(d) First Additional
Payment. Subject to clause (m) below, within five business days after the
determination of Adjusted GAAP PBT for calendar year 2010 and any adjustments
thereto shall have become binding on the parties in accordance with the
Operating Agreement, the Purchaser shall pay to IMS Holdco the First Additional
Payment ("FAP"),
calculated as follows:
FAP = Applicable Percentage x 22.5% x
2010 Adjusted GAAP PBT
; provided, however, in the event
that 2010 Adjusted GAAP PBT were less than $5,333,333, then FAP shall equal (A)
the excess, if any, of (i) 2010 Adjusted GAAP PBT over (ii) $4,000,000,
multiplied by (B) 90%, multiplied by (C) the Applicable Percentage.
(e) Second Additional
Payment. Subject to clause (m) below, within five business days after the
determination of Adjusted GAAP PBT for calendar year 2011 and any adjustments
thereto shall have become binding on the parties in accordance with the
Operating Agreement, the Purchaser shall pay to IMS Holdco the Second Additional
Payment ("SAP"),
calculated as follows:
SAP =
Applicable Percentage x 22.5% x 2011 Adjusted GAAP PBT
; provided, however, in the event
that 2011 Adjusted GAAP PBT were less than $8,000,000, then SAP shall equal (A)
the excess, if any, of (i) 2011 Adjusted GAAP PBT over (ii) $6,000,000,
multiplied by (B) 90%, multiplied by (C) the Applicable Percentage;
; provided further, however, in the event
that 2010 Adjusted GAAP PBT were less than $4,000,000 then for purposes of the
calculations of SAP above, 2011 Adjusted GAAP PBT shall be reduced by the amount
of such shortfall.
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(f) Third Additional
Payment. Subject to clause (m) below, within five business days after the
determination of Adjusted GAAP PBT for calendar year 2012 and any adjustments
thereto shall have become binding on the parties in accordance with the
Operating Agreement, the Purchaser shall pay to IMS Holdco the Third Additional
Payment ("TAP"),
calculated as follows:
TAP =
Applicable Percentage x 22.5% x 2012 Adjusted GAAP PBT
; provided, however, in the event
that 2012 Adjusted GAAP PBT were less than $8,000,000, then TAP shall equal (A)
the excess, if any, of (i) 2012 Adjusted GAAP PBT over (ii) $6,000,000,
multiplied by (B) 90%, multiplied by (C) the Applicable Percentage;
; provided further, however, in the event
that (x) the sum of 2010 Adjusted GAAP PBT and 2011 Adjusted GAAP PBT minus (y)
(i) the sum of (A) FAP divided by the Applicable Percentage applicable to FAP
and (B) SAP divided by the Applicable Percentage applicable to SAP divided by
(ii) 90% minus (z) the 2010 Growth Payment (as defined in Section 2.1.1(i)(ii)
herein), were less than $10,000,000, then for purposes of the calculations of
TAP above, 2012 Adjusted GAAP PBT shall be reduced by the amount of such
shortfall.
(g) Fourth Additional
Payment. Subject to clause (m) below, within five business days after the
determination of Adjusted GAAP PBT for calendar year 2013 and any adjustments
thereto shall have become binding on the parties in accordance with the
Operating Agreement, the Purchaser shall pay to IMS Holdco the Fourth Additional
Payment ("FOAP"),
calculated as follows:
FOAP =
Applicable Percentage x 22.5% x 2013 Adjusted GAAP PBT
; provided, however, in the event
that 2013 Adjusted GAAP PBT were less than $8,000,000, then FOAP shall equal (A)
the excess, if any, of (i) 2013 Adjusted GAAP PBT over (ii) $6,000,000,
multiplied by (B) 90%, multiplied by (C) the Applicable Percentage;
; provided further, however, in the event
that (x) the sum of 2010 Adjusted GAAP PBT, 2011 Adjusted GAAP PBT and 2012
Adjusted GAAP PBT minus (y) (i) the sum of (A) FAP divided by the Applicable
Percentage applicable to FAP, (B) SAP divided by the Applicable Percentage
applicable to SAP and (C) TAP divided by the Applicable Percentage applicable to
TAP divided by (ii) 90% minus (z) the 2010 Growth Payment, were less than
$16,000,000, then for purposes of the calculations of FOAP above, 2013 Adjusted
GAAP PBT shall be reduced by the amount of such shortfall.
(h) Final Additional
Payment. Subject to clause (m) below, within five business
days after the determination of Adjusted GAAP PBT for calendar year 2014 and any
adjustments thereto shall have become binding on the parties in accordance with
the Operating Agreement, the Purchaser shall pay to IMS Holdco the Final
Additional Payment ("FIAP"), calculated as
follows:
FIAP =
Applicable Percentage x 22.5% x 2014 Adjusted GAAP PBT
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; provided, however, in the event
that 2014 Adjusted GAAP PBT were less than $8,000,000, then FIAP shall equal (A)
the excess, if any, of (i) 2014 Adjusted GAAP PBT over (ii) $6,000,000,
multiplied by (B) 90%, multiplied by (C) the Applicable Percentage;
; provided further, however, in the event
that (x) the sum of 2010 Adjusted GAAP PBT, 2011 Adjusted GAAP PBT, 2012
Adjusted GAAP PBT and 2013 Adjusted GAAP PBT minus (y) (i) the sum of (A) FAP
divided by the Applicable Percentage applicable to FAP, (B) SAP divided by the
Applicable Percentage applicable to SAP, (C) TAP divided by the Applicable
Percentage applicable to TAP and (D) FOAP divided by the Applicable Percentage
applicable to FOAP divided by (ii) 90% minus (z) the 2010 Growth Payment, were
less than $22,000,000, then for purposes of the calculations of FIAP above, 2014
Adjusted GAAP PBT shall be reduced by the amount of such shortfall.
(i) Extra Payment; 2010 Growth
Payment.
(i)
(A)
The Purchaser shall pay to IMS Holdco an amount equal to $666,666 in respect of
the calendar year associated with FAP, such payment to be made in 3 equal
installments of $222,222 on the last day of each calendar quarter of the
calendar year associated with FAP, commencing with the last day of the second
calendar quarter of such calendar year and (B) the Purchaser shall pay to IMS
Holdco an amount equal to $1,000,000 in respect of the calendar years associated
with SAP or TAP, as the case may be, such payments to be made in 4 equal
installments of $250,000 on the last day of each calendar quarter of the
calendar years associated with SAP or TAP, as the case may be (each payment
under (A) and (B), an "Extra
Payment", and collectively, the "Extra Payments"); provided, however, IMS Holdco
shall not be entitled to receive the applicable Extra Payment in the event that
Adjusted GAAP PBT for the applicable calendar quarter is less than
$250,000.
(ii) Simultaneously
with the payment of FAP, on the date FAP is paid to IMS Holdco, the Purchaser
shall pay to IMS Holdco an amount equal to: (x) 50% times (y) the excess,
if any, of (A) 2010 Adjusted GAAP PBT over (B) $5,906,849 (the "2010 Growth
Payment").
(j) Limitations. As
of any date during the period commencing on the Effective Date and ending on
December 31, 2014, in the event the amount equal to (A) aggregate Adjusted GAAP
PBT through such date less (B) the sum of
the fractions, the numerators of which are each Additional Payment paid or
payable through such date, and the denominators of which are the Applicable
Percentage applicable to such Additional Payment divided by 90%, less (C) the 2010
Growth Payment, less (D) the
aggregate amount of Extra Payments, results in an amount equal to or in excess
of $30,000,000, then thereafter each of the provisos set forth in Sections 2.1.1(d)
through (h)
shall no longer be applicable.
(k) No Negative Payments.
Notwithstanding the potential reduction of Adjusted GAAP PBT as set forth in
Sections
2.1.1(e) through (h) above, in the
event that the calculation of FAP, SAP, TAP, FOAP or FIAP, as the case may be,
results in an amount which is less than zero, such Purchase Price component
shall be deemed to be zero.
5
(l) Payment of the Purchase
Price. Payment of each
component of the Purchase Price and any payment that is required to be made
under this Section
2.1 shall be made in United States dollars by the Purchaser by direct
wire transfer to the account of IMS Holdco, as set forth on Schedule 2.1.1 (or to such
other account as IMS Holdco may notify the Purchaser in
writing). Each of FAP, SAP, TAP, FOAP or FIAP, the Extra Payments and
the 2010 Growth Payment, as the case may be, shall be deemed to include imputed
interest, to the extent required by the Internal Revenue Code of 1986, as
amended (the "Code").
(m) Termination of Additional
Payments. Upon the exercise of a Call under Section 10.2(a) of
the Operating Agreement, the delivery of a Sale Request Acceptance Notice or the
consummation of a sale to a Prospective Purchaser (as such terms are defined in
the Operating Agreement), as the case may be, pursuant to Section 10.2 of the
Operating Agreement (each a "Sale Event"), IMS Holdco's
right to receive any Additional Payments based upon Adjusted GAAP PBT for, or
otherwise in respect of, the calendar year in which the applicable Sale Event
occurred or for any calendar year(s) thereafter, shall cease, and the obligation
of the Purchaser to pay to IMS Holdco any such Additional Payments shall
terminate, contemporaneously with the applicable Sale Event.
2.1.2 Definitions.
(i)
"Additional Payments" shall
mean the aggregate amount of the payments made in Sections 2.1.1(d)
through (h).
(ii) "Adjusted GAAP PBT" with respect to any
year, shall mean Adjusted GAAP PBT (as defined and calculated pursuant to the
Operating Agreement) for such year; provided, however, solely with
respect to calendar year 2010, 2010 Adjusted GAAP PBT shall be calculated for
the period commencing on May 1, 2010 and ending on December 31,
2010.
(iii) "Applicable Percentage" shall
mean, with respect to any Additional Payment, a percentage equal to the result
of (A)(x) the average number of Class B Units of the Company owned by IMS Holdco
during the calendar year for which Adjusted GAAP PBT is used to calculate such
Additional Payment (such average being determined as the quotient of (1) the sum
of the products of the varying numbers of Class B Units so owned by IMS Holdco
by the number of days in such year each such number was owned by IMS Holdco, and
(2) 365 or 366 days, as applicable for such year), divided by (y) the average
total number of outstanding Class A Units and Class B Units for such year
(calculated on the same basis as provided in the parenthetical under (A)(x)
above), divided by (B) 25%.
(iv) "Effective Date Working
Capital" means the current assets of the Company and its subsidiaries, if
any, less the
current liabilities of the Company and the subsidiaries, if any, as of the close
of business as of the Effective Date in accordance with GAAP; provided, however, an amount
equal to $366,273 identified on Schedule 3.23(iv) shall not be
treated as a current liability solely for purposes of determining the Effective
Date Working Capital.
6
(v) "GAAP" shall mean United States
generally accepted accounting principles consistently applied.
(vi) "Target Working Capital" means
an amount equal to $1.00.
2.1.3 Accounting
Procedures.
(i)
The Purchaser shall, or shall cause BDO ▇▇▇▇▇▇▇ LLP, or
another independent accounting firm chosen by the Purchaser (the "Accountants"), at the
Purchaser's expense, as soon as practicable after the Closing, to prepare in
accordance with GAAP and deliver to the Representative, a report containing a
consolidated balance sheet of the Company and its subsidiaries, if any, as of
the close of business as of the Effective Date immediately after the
consummation of the transactions effected by the Conveyance Document (the "Closing Balance Sheet"),
together with a statement of the Accountants based upon such report which sets
forth the Effective Date Working Capital (the "Special
Determination"). The Purchaser shall have the option, in its
sole discretion (and at its sole expense) to instruct the Accountants to audit
or perform agreed upon procedures on the Closing Balance Sheet and to determine
the scope of such audit or procedures. If the Representative does not
agree that the Special Determination correctly states the Effective Date Working
Capital, the Representative shall promptly (but not later than 30 days after the
delivery to him of the Special Determination) give written notice to the
Purchaser of any exceptions thereto (in reasonable detail describing the nature
of the disagreement asserted). If the Representative and the
Purchaser reconcile their differences, the Effective Date Working Capital
calculation shall be adjusted accordingly and shall thereupon become binding,
final and conclusive upon all of the parties hereto and enforceable in a court
of law. If the dispute relates to an accounting issue and if the
Representative and the Purchaser are unable to reconcile their differences in
writing within 20 days after written notice of exceptions is delivered to the
Purchaser (the "Reconciliation
Period"), the accounting items in dispute shall be submitted to a
mutually acceptable accounting firm (other than the Accountants) (the "Independent Auditors") for
final determination. The Effective Date Working Capital calculation
shall be deemed adjusted in accordance with the determination of the Independent
Auditors and shall become binding, final and conclusive upon all of the parties
hereto and enforceable in a court of law. The Independent Auditors
shall consider only the accounting items in dispute and shall be instructed to
act within 20 days (or such longer period as the Representative and the
Purchaser may agree) to resolve all accounting items in dispute. If
the dispute involves a non-accounting issue and such dispute cannot be
reconciled within the Reconciliation Period, the dispute shall be settled by a
court of competent jurisdiction. If the Representative does not give
written notice of any exception within 30 days after the delivery to him of the
Special Determination or if the Representative gives written notification of his
acceptance of the Effective Date Working Capital prior to the end of such 30 day
period, the Effective Date Working Capital set forth in the Special
Determination shall thereupon become binding, final and conclusive upon all the
parties hereto and enforceable in a court of law.
7
(ii) In
the event the Independent Auditors are for any reason unable or unwilling to
perform the services required of it under this Section 2.1.3, then
the Purchaser and the Representative agree to select another accounting firm
(other than the Accountants) to perform the services to be performed under this
Section 2.1.3
by the Independent Auditors. If the Purchaser and the Representative
fail to select the Independent Auditors as required by Section 2.1.3(i)
above within seven days after the expiration of the Reconciliation Period or
fail to select another accounting firm within seven days after it is determined
that the Independent Auditors will not perform the services required, either the
Purchaser or the Representative may request the Judicial Arbitration and
Mediation Services, Inc. ("JAMS") located in New York,
New York, or if JAMS is not so located, in the jurisdiction of closest proximity
to New York, New York to appoint an independent firm of certified public
accountants to perform the services required under this Section 2.1.3 by the
Independent Auditors. The fees of JAMS shall be shared equally by the
Purchaser and IMS Holdco. For purposes of this Section 2.1.3 the
term "Independent Auditors" shall include such other accounting firm chosen in
accordance with this Section
2.1.3(ii).
(iii) The
Independent Auditors shall determine the party (i.e., the Purchaser or the
Representative) whose asserted position as to the calculation of the Effective
Date Working Capital is furthest from the determination of the Effective Date
Working Capital by the Independent Auditors, which non-prevailing party shall
pay the fees and expenses of the Independent Auditors and shall reimburse the
prevailing party for the portion of the fees of JAMS previously paid by
it.
2.1.4 Examination of Books and
Records. The books and records of IMS Holdco (with respect to
periods prior to the Closing Date) and the Company and its subsidiaries (if any)
shall be made available during normal business hours upon reasonable advance
notice at the principal office of the Company, to the parties hereto, the
Accountants and the Independent Auditors to the extent required to determine the
calculations required under Section
2.1. The Principals, on the one hand, and the Purchaser, on
the other hand, shall make available to the other party and their
representatives (including auditors) any back-up materials generated by them in
making any determinations hereunder or to support a position that is contrary to
the position taken by the other party.
Section
2.2 Closing. The
closing of the transactions contemplated by this Agreement (the "Closing") shall take place
simultaneously with the execution and delivery of this Agreement effective as of
the Effective Date, at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or by the exchange of documents and instruments by
mail, courier, telecopy and wire transfer to the extent mutually acceptable to
the parties hereto (the date of closing is referred to as the "Closing Date"). The
transactions contemplated by this Agreement shall be effective as of the
Effective Date and the Assets (as defined in the Conveyance Document)
transferred to the Company shall be those owned by the Company as of the
Effective Date, subject to transactions in the ordinary course of business
between the Effective Date and the Closing Date. After the Effective
Date and through the Closing Date, the operations of IMS Holdco will be for the
account of the Company, and any gain or loss during such period shall inure to
the Company’s detriment or benefit.
8
Section
2.3 Third
Party Consents. Anything in this Agreement to the contrary
notwithstanding, in the event an assignment or purported assignment to the
Company of any of the agreements, contracts or commitments of IMS Holdco
pursuant to the Conveyance Document or any claim, right or benefit arising
thereunder or resulting therefrom, without the consent of other parties thereto,
would constitute a breach thereof or would not result in the Company receiving
all of the rights of IMS Holdco thereunder, such agreement, contract or
commitment shall be deemed not to have been assigned to the
Company. In those circumstances, if reasonably requested by the
Purchaser, after the Closing, IMS Holdco and the Principals will use their best
efforts to obtain any such consent (excluding the payment of any
fees). If such consent is not obtained and is required to effectively
assign any agreement, contract or commitment to the Company, the Principals and
IMS Holdco will reasonably cooperate with the Company to provide the Company
with the full claims, rights and benefits thereunder, including enforcement at
the cost and for the benefit of the Company of any and all rights of IMS Holdco,
against a third party thereto arising out of the breach or cancellation by such
third party or otherwise, and any amount received by IMS Holdco in respect
thereof shall be held for and paid over to the Company.
Section
2.4 Further
Assurance; Post Closing Cooperation. IMS Holdco will, from time to time,
at the request of the Purchaser, whether at or after the Closing Date, execute
and deliver such other and further instruments of conveyance, assignment,
transfer and consent necessary for the conveyance, assignment and transfer of
the Assets (as defined in the Conveyance Document) pursuant to the Conveyance
Document. Following the Closing, upon reasonable advance notice, each
party will afford the other party, its counsel and its accountants, during
normal business hours, reasonable access to the books, records and other data
relating to IMS Holdco or the Company and its subsidiaries, if any, in its
possession with respect to periods prior to the Closing and the right to make
copies and extracts therefrom, to the extent that such access may be reasonably
required by the requesting party in connection with (i) the preparation of tax
returns, (ii) the determination or enforcement of rights and obligations under
this Agreement, (iii) compliance with the requirements of any Governmental or
Regulatory Authority (as defined in Section 3.1.2), (iv)
the determination or enforcement of the rights and obligations of any party
entitled to indemnification under Article VII, (v) any actual or threatened
action or proceeding, and (vi) the verification of the Assets and Assumed
Liabilities (as defined in the Conveyance Document).
ARTICLE
III
REPRESENTATIONS OF IMS
HOLDCO AND THE PRINCIPALS
A. Each
of the Principals severally represents and warrants to and with the Purchaser,
as follows:
Section
3.1 Execution
and Validity of Agreements; Restrictive Documents.
3.1.1 Execution and
Validity. The Principal has the full legal right and capacity
to enter into this Agreement and to perform his or her respective obligations
hereunder. This Agreement has been duly and validly executed and
delivered by such Principal and, assuming due authorization, execution and
delivery by the Purchaser, IMS Holdco and each other Principal a party hereto,
constitutes a legal, valid and binding obligation of such Principal, enforceable
against such Principal in accordance with its terms.
9
3.1.2 No
Restrictions. There is no suit, action, claim, investigation
or inquiry by any court, tribunal, arbitrator, authority, agency, commission,
official or other instrumentality of the United States, any foreign country or
any domestic or foreign state, county, city or other political subdivision
("Governmental or Regulatory
Authority"), and no legal, administrative or arbitration proceeding is
pending or, to such Principal's knowledge, threatened against the Principal with
respect to the execution, delivery and performance of this Agreement or the
transactions contemplated hereby or any other agreement entered into by such
Principal in connection with the transactions contemplated hereby.
3.1.3 Non-Contravention. The
execution, delivery and performance by the Principal of his or her obligations
hereunder and the consummation of the transactions contemplated hereby, will not
as of the Closing Date (a) result in the violation by such Principal of any
statute, law, rule, regulation or ordinance (collectively, "Laws"), or any judgment,
decree, order, writ, permit or license (collectively, "Orders"), of any Governmental
or Regulatory Authority, applicable to such Principal, or (b) conflict with,
result in a violation or breach of, constitute (with or without notice or lapse
of time or both) a default under, or require such Principal to obtain any
consent, approval or action of, make any filing with or give any notice to, or
result in or give to any Person any right of payment or reimbursement,
termination, cancellation, modification or acceleration of, or result in the
creation or imposition of any Lien upon any of the assets or properties of such
Principal, under any of the terms, conditions or provisions of any agreement,
commitment, lease, license, evidence of indebtedness, letter of credit,
mortgage, indenture, security agreement, instrument, note, bond, franchise,
permit, concession, or other instrument, obligation or agreement of any kind,
written or oral (collectively, "Contracts"), to which such
Principal is a party or by which such Principal or any of his or her assets or
properties are bound.
3.1.4 Approvals and
Consents. No consent, approval or action of, filing with or
notice to any Governmental or Regulatory Authority or Person is necessary or
required under any of the terms, conditions or provisions of any Law or Order of
any Governmental or Regulatory Authority or any Contract to which the Principal
is a party for the execution and delivery of this Agreement by such Principal,
the performance by such Principal of his or her obligations hereunder or the
consummation of the transactions contemplated hereby.
B. IMS
Holdco and the Principals, jointly and severally, represent and warrant to and
with the Purchaser, as follows:
Section
3.2 Existence
and Good Standing. IMS Holdco has the full limited liability
company power and authority to enter into this Agreement and the Conveyance
Document and to perform its obligations hereunder and thereunder. The
Company has the full limited liability company power and authority to enter into
the Conveyance Document and to perform its obligations thereunder. The execution
and delivery of this Agreement and the Conveyance Document by IMS Holdco and the
Conveyance Document by the Company, and the consummation by such parties of the
transactions contemplated hereby and thereby have been duly authorized by all
required company action on behalf of such parties. This Agreement and
the Conveyance Document have been duly and validly executed and delivered by IMS
Holdco and constitute a legal, valid and binding obligation of IMS Holdco,
enforceable against it in accordance with their terms. The Conveyance
Document has been duly and validly executed and delivered by the Company, and
constitutes the legal, valid and binding obligation of the Company, enforceable
against it in accordance with its terms. The Company and IMS Holdco
are each duly organized and are each validly existing and in good standing
(including tax status) under the laws of the State of Delaware and the State of
New York, respectively, with the full power and authority to own their
respective properties and to carry on their respective businesses (the business
operated by the Company hereinafter referred to as the "Business") all as and in the
places where such properties are now owned or operated or such businesses are
now being conducted except where such failure to qualify would not have a
material adverse effect on the respective businesses. The Company and
IMS Holdco are each duly qualified, licensed or admitted to do business and each
of them is in good company and tax standing in the jurisdictions set forth on
Schedule 3.2, which are
the only jurisdictions in which the ownership, use or leasing of their
respective assets and properties, or the conduct or nature of their respective
businesses, makes such qualification, licensing or admission
necessary.
10
Section
3.3 Membership
Interests; Equity Ownership; No Options or Restrictions; Subsidiaries and
Investments. The Principals own of record and beneficially
have valid title to 100% of the membership interests of IMS
Holdco. IMS Holdco owns of record and beneficially has valid title to
100% of the Membership Units of the Company, including the Purchased Units, and
such ownership is free and clear or all Liens. Except as set forth on
Schedule 3.3, there are
no outstanding subscriptions, options, warrants, rights (including "phantom
stock rights"), calls, commitments, understandings, conversion rights, rights of
exchange, plans or other agreements of any kind providing for the purchase,
issuance or sale of any equity or ownership or proprietary interest of the
Company, or which grants any Person other than IMS Holdco the right to share in
the earnings of the Company. Except as set forth on Schedule 3.3, the Company does
not, directly or indirectly, own any equity interest in or have any voting
rights with respect to any Person. There are no outstanding
subscriptions, options, rights, warrants, calls, commitments or arrangements of
any kind to acquire any of the Purchased Units and there are no agreements or
understandings with respect to the sale or transfer of any of the Purchased
Units other than this Agreement. There is no suit, action, claim, investigation
or inquiry by any Governmental or Regulatory Authority, and no legal,
administrative or arbitration proceeding pending or, to the knowledge of the
Principals, threatened, against any Principal or the Company or any of the
Purchased Units, with respect to the execution, delivery and performance of this
Agreement or the Conveyance Document or the transactions contemplated hereby or
thereby or any other agreement entered into by the Principals or IMS Holdco in
connection with the transactions contemplated hereby or thereby.
Section
3.4 Financial
Statements and No Material Changes. Schedule 3.4(A) sets forth (a)
the unaudited balance sheets of IMS Holdco as at December 31, 2008 and December
31, 2009 and the related unaudited statements of operations for the fiscal years
then ended, and (b) the unaudited balance sheets of IMS Holdco as at March 31,
2010 (the "Balance
Sheet") and the related unaudited statements of operations for the three
months then ended. Such financial statements have been prepared in
accordance with GAAP throughout the periods indicated except as set forth on
Schedule
3.4(B). Each balance sheet fairly presents the financial
condition of the entity or entities included within such balance sheet, at the
respective date thereof, and reflects all claims against and all debts and
liabilities of such entities, fixed or contingent, as at the respective date
thereof, required to be shown thereon under GAAP and the related statements of
operations fairly present the results of operations for the respective period
indicated. Except for the transactions consummated pursuant to the
Conveyance Document, since March 31, 2010 (the "Balance Sheet Date"), there
has been no material adverse change in the assets or liabilities, or in the
business or condition, financial or otherwise, or in the results of operations
or prospects of IMS Holdco or the Company.
11
Section
3.5 Books and
Records. IMS Holdco did not have and the Company does not have
any of its records, systems, controls, data or information recorded, stored,
maintained, operated or otherwise wholly or partly dependent on or held by any
means (including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and therefrom)
were not prior to the Effective Date under the exclusive ownership and
possession of IMS Holdco and which are not now under the exclusive ownership and
possession of the Company. IMS Holdco or the Principals have
delivered to the Purchaser complete and correct copies of the Certificate of
Formation and the limited liability company agreement of the Company in effect
immediately prior to the execution of this Agreement.
Section
3.6 Title to
Properties; Encumbrances; No Prior Activities.
3.6.1 Title to Properties;
Encumbrances. Except for the Excluded Assets listed in the
Conveyance Document, IMS Holdco had and the Company now has good and valid title
to, or enforceable leasehold interests in or valid rights under contract to use,
all the properties and assets owned or used by IMS Holdco (real, personal,
tangible and intangible), including, without limitation (a) all the properties
and assets reflected in the Balance Sheet, (b) all the properties and assets
purchased or otherwise contracted for by IMS Holdco since the Balance Sheet Date
(except for properties and assets reflected in the Balance Sheet or acquired or
otherwise contracted for since the Balance Sheet Date that have been sold or
otherwise disposed of in the ordinary course of business) and (c) all monies
received from clients of the Company (including, without limitation, all monies
received in connection with the Company's media purchase obligations on behalf
of its clients), in each case free and clear of all Liens, except for Liens set
forth on Schedule 3.6. The property,
plant and equipment conveyed by IMS Holdco to the Company, whether owned or
otherwise contracted for, is in a state of good maintenance and repair (ordinary
wear and tear excepted) and is adequate and suitable for the purposes for which
they are presently being used, including the Business.
3.6.2 No Prior
Activities. The Company was created solely for the purpose of
engaging in the transactions contemplated by the Conveyance Document and this
Agreement. The Company has not engaged in any activities other than
in connection with its formation, the negotiation, execution and delivery of
this Agreement, the Conveyance Document and the Operating Agreement, and the
consummation of the transactions contemplated hereby and
thereby. Except for liabilities incurred in connection with its
formation and the consummation of the transactions contemplated by this
Agreement, the Conveyance Document and the Operating Agreement, the Company has
not incurred any liabilities or entered into any agreements or arrangements with
any Person. As of the Closing Date, (x) neither Media Time Sales LLC
nor Performance Fuel Network LLC (collectively, the "Retained Subsidiaries") are
engaged in any operational or business activities and (y) the Retained
Subsidiaries do not have any liabilities whatsoever or any obligations with
respect to any agreements or arrangements with any Person.
12
Section
3.7 Real
Property.
3.7.1 Owned Real
Property. The Company does not own
any real property (including ground leases) or hold a freehold interest in any
real property or any option or right of first refusal or first offer to acquire
any real property.
3.7.2 Leased Real
Property. Schedule 3.7.2 contains an
accurate and complete list of all real property leases, subleases, real property
licenses and other occupancy agreements, including without limitation, any
modification, amendment or supplement thereto and any other related document or
agreement executed or entered into by the Company, or by IMS Holdco and assigned
to the Company pursuant to the Conveyance Document, to which the Company is a
party (as lessee, sublessee, lessor, sublessor, licensor or licensee) (each
individually, a "Real Property
Lease" and collectively, the "Real Property
Leases"). Each Real Property Lease set forth on Schedule 3.7.2 (or required to be set
forth on Schedule 3.7.2) is valid, binding and
in full force and effect; all rents and additional rents and other sums,
expenses and charges due thereunder to date on each such Real Property Lease
have been paid; and the lessee has been in peaceable possession since the
commencement of the original term of such Real Property Lease and no waiver,
indulgence or postponement of the lessee's obligations thereunder has been
granted by the lessor. There exists no default or event of default by
IMS Holdco or the Company or to the knowledge of the Principals by any other
party to any Real Property Lease; and there exists no occurrence, condition or
act (including the purchase of the Purchased Units hereunder) which, with the
giving of notice, the lapse of time or the happening of any further event or
condition, would become a default or event of default by IMS Holdco or the
Company under any Real Property Lease, and there are no outstanding claims of
breach or indemnification or notice of default or termination of any Real
Property Lease. IMS Holdco held and the Company now holds the
leasehold estate on all the Real Property Leases free and clear of all Liens
except as set forth on Schedule
3.7.2. The real property leased by IMS Holdco and/or the
Company is in a state of good maintenance and repair (ordinary wear and tear
excepted), adequate and suitable for the purposes for which it is presently
being used, and there are no material repair or restoration works likely to be
required in connection with any of the leased real properties. IMS
Holdco was, and the Company now is, in physical possession and actual and
exclusive occupation of the whole of each of its leased
properties. No environmental claim has been made against IMS Holdco
or the Company with respect to any Real Property Lease. Neither IMS
Holdco nor the Company owes any brokerage commission with respect to any of the
Real Property Leases.
13
Section
3.8 Contracts. Schedule 3.8 hereto contains an
accurate and complete list of the following Contracts (whether written or oral,
but indicating which Contracts are oral) to which the Company is currently a
party or IMS Holdco was a party immediately prior to the assignment of the same
to the Company pursuant to the Conveyance Document (and Schedule 3.8 indicates if a
listed item has not been assigned to
and assumed by the Company pursuant to the Conveyance Document): (a) all Plans
(as such term is defined in Section 3.19), (b)
any personal property lease with a fixed annual rental of $10,000 or more, (c)
any Contract relating to capital expenditures which involves payments of $25,000
or more in any single transaction or series of related transactions,
(d) any Contract relating to the making of a loan or advance to or
investment in, any other Person, (e) any agreement, instrument or
arrangement evidencing or relating in any way to indebtedness for money borrowed
or to be borrowed, whether directly or indirectly, by way of loan, purchase
money obligation, guarantee (other than the endorsement of negotiable
instruments for collection in the ordinary course of business), conditional
sale, purchase or otherwise, (f) any management service, employment,
consulting or similar type of Contract which is not cancelable by the Company or
IMS Holdco without penalty or other financial obligation within 30 days,
(g) any Contract limiting the Company's freedom to engage in any line of
business or to compete with any other Person, including, without limitation, any
agreement limiting the ability of the Company or IMS Holdco or any of their
respective affiliates to take on competitive accounts during or after the term
thereof, (h) any collective bargaining or union agreement, (i) any
Contract between the Company, on the one hand, and any officer or director
thereof, on the other hand, not covered by subsection (f) above (including
indemnification agreements), (j) any secrecy or confidentiality agreement
(other than standard confidentiality agreements in computer software license
agreements or agreements with clients entered into in the ordinary course of
business), (k) any agreement with respect to any Intellectual Property (as
defined in Section
3.14) other than "shrink-wrap" and similar end-user licenses,
(l) any agreement with a client required to be listed on Schedule 3.16, (m) any
agreement, indenture or other instrument which restricts the ability of the
Company or any of its subsidiaries to make distributions in respect of its
equity, (n) any joint venture agreement involving a sharing of profits not
covered by clauses (a) through (m) above, (o) any Contract (not
covered by another subsection of this Section 3.8) which
involves $25,000 or more over the unexpired term thereof and is not cancelable
by the Company, without penalty or other financial obligation within 30 days;
provided, however, Contracts of a similar nature which individually do not
involve $25,000 but in the aggregate involve $25,000 or more over the unexpired
terms shall also be set forth on Schedule 3.8, (p) any Contract
with a media buying service; provided, however, commitments to purchase media in
the ordinary course of business do not have to be set forth on Schedule 3.8, and (q) any
agreement (not covered by another subsection of this Section 3.8) between
the Company, on the one hand, and any member of the Company, on the other hand.
Notwithstanding anything to the contrary contained above, (x) commitments to
media and production expenses which are fully reimbursable from clients, and
(y) estimates or purchase orders given in the ordinary course of business
relating to the execution of projects, do not have to be set forth on Schedule 3.8. Each Contract which has
been assigned to and assumed by the Company pursuant to the Conveyance Document,
including without limitation, those required to be set forth on Schedule 3.8, is in full force and
effect, and there exists no default or event of default by the Company or IMS
Holdco or, to the knowledge of the Principals, by any other party, or
occurrence, condition, or act (including the purchase of the Purchased Units
hereunder) which, with the giving of notice, the lapse of time or the happening
of any other event or condition, would become a default or event of default
thereunder by the Company, and there are no outstanding claims of breach or
indemnification or notice of default or termination of any such
Contract. Summaries of all oral Contracts contained on Schedule 3.8 are complete and
accurate in all material respects.
14
Section
3.9 Non-Contravention;
Approvals and Consents. The execution, delivery and
performance by the Principals, the Company and IMS Holdco of their respective
obligations under this Agreement and the Conveyance Document and the
consummation of the transactions contemplated hereby and thereby, will not (a)
violate, conflict with or result in the breach of any provision of the
certificate of formation and limited liability company agreement (or other
comparable documents) of the Company or IMS Holdco; (b) result in the violation
by the Company or IMS Holdco of any Laws or Orders of any Governmental or
Regulatory Authority, or (c) if the consents and notices set forth in Schedule 3.9 are obtained,
conflict with, result in a violation or breach of, constitute (with or without
notice or lapse of time or both) a default under, or require the Company or IMS
Holdco to obtain any consent, approval or action of, make any filing with or
give any notice to, or result in or give to any Person any right of payment or
reimbursement, termination, cancellation, modification or acceleration of, or
result in the creation or imposition of any Lien upon any of their respective
assets or properties, or under any of the terms, conditions or provisions of any
Contract to which the Company or IMS Holdco is a party or by which the Company
or IMS Holdco or any of their respective assets or properties are or were
bound. Except as set forth in Schedule 3.9, no consent,
approval or action of, filing with or notice to any Governmental or Regulatory
Authority or other Person is necessary or required under any of the terms,
conditions or provisions of any Law or Order of any Governmental or Regulatory
Authority or any Contract to which the Company or IMS Holdco is a party, or by
which their respective assets or properties were or are bound, for the execution
and delivery of this Agreement or the Conveyance Document, the performance by
the Company or IMS Holdco of their respective obligations hereunder or
thereunder or the consummation of the transactions contemplated hereby or
thereby.
Section
3.10 Litigation. Except
as set forth on Schedule
3.10, there is no action, suit, proceeding at law or in equity by any
Person, or any arbitration or any administrative or other proceeding by or
before (or to the knowledge of the Principals, any investigation by) any
Governmental or Regulatory Authority, pending or, to the knowledge of the
Principals, threatened, against the Company or IMS Holdco with respect to this
Agreement or the transactions contemplated hereby or by the Conveyance Document,
or any other agreement entered into by the Company or IMS Holdco in connection
with the transactions contemplated hereby, or against or affecting the Business
or the assets transferred to the Company pursuant to the Conveyance Document;
and no acts, facts, circumstances, events or conditions occurred or exist which
are a basis for any such action, proceeding or investigation. Neither
the Company nor IMS Holdco is subject to any Order entered in any lawsuit or
proceeding. Schedule
3.10 also sets forth with respect to each pending or, to the knowledge of
the Principals, threatened action, suit or proceeding listed thereon, the amount
of costs, expenses or damages the Company or IMS Holdco has incurred to date and
reasonably expects to incur through the conclusion thereof.
15
Section
3.11 Taxes. Each
of IMS Holdco and the Company have timely completed and filed, or caused to be
filed, taking into account any valid extensions of due dates, completely and
accurately, all federal, state, local and foreign (if any) tax or information
returns (including estimated tax returns) required under the statutes, rules or
regulations of such jurisdictions to be filed by each of them. The
term "Taxes" means
taxes, duties, charges or levies of any nature imposed by any taxing or other
Governmental or Regulatory Authority, including without limitation income,
gains, capital gains, surtax, capital, franchise, capital stock, value-added
taxes, taxes required to be deducted from payments made by the payor and
accounted for to any tax authority, employees' income withholding, back-up
withholding, withholding on payments to foreign Persons, social security,
national insurance, unemployment, worker's compensation, payroll, disability,
real property, personal property, sales, use, goods and services or other
commodity taxes, business, occupancy, excise, customs and import duties,
transfer, stamp, and other taxes (including interest, penalties or additions to
tax in respect of the foregoing), and includes all taxes payable by IMS Holdco
or the Company pursuant to Treasury Regulations §1.1502-6 or any similar
provision of state, local or foreign law. All Taxes shown on said
returns to be due and all other Taxes due and owing (whether or not shown on any
Tax return) have been paid and all additional assessments received prior to the
Closing Date have been paid or are being contested in good faith, in which case,
such contested assessments are set forth on Schedule 3.11. Each
of IMS Holdco and the Company has collected all sales, use, goods and services
or other commodity Taxes required to be collected and remitted or will remit the
same to the appropriate taxing authority within the prescribed time
periods. Each of IMS Holdco and the Company have withheld all amounts
required to be withheld on account of Taxes from amounts paid to employees,
former employees, directors, officers, members, residents and non-residents and
remitted or will remit the same to the appropriate taxing authorities within the
prescribed time periods. The amount set up as an accrual for Taxes
(aside from any reserved for deferred Taxes established to reflect timing
differences between book and Tax accrual) on the Balance Sheet (as opposed to
the notes thereto) is sufficient for the payment of all unpaid Taxes of IMS
Holdco, whether or not disputed, for all periods ended on and prior to the date
thereof. Since the Balance Sheet Date, IMS Holdco has not incurred
any liabilities for Taxes other than in the ordinary course of the business of
IMS Holdco consistent with past custom and practice. To the knowledge of the
Principals, no member, manager, director or officer (or employee responsible for
Tax matters) of IMS Holdco or the Company has any reason to believe that any
authorities may assess any additional Taxes for any period for which Tax returns
have been filed. The Principals have delivered to the Purchaser
correct and complete copies of all federal, state and local income tax returns
filed with respect to IMS Holdco and the Company that were requested by the
Purchaser. Except as set forth on Schedule 3.11, none of the
federal, state or local income tax returns of either IMS Holdco or the Company
have ever been audited by the Internal Revenue Service or any other Governmental
or Regulatory Authority. No examination of any return of IMS Holdco
or the Company is currently in progress, and neither IMS Holdco nor the Company
has received notice of any proposed audit or examination. No
deficiency in the payment of Taxes by IMS Holdco or the Company for any period
has been asserted in writing by any taxing authority and remains unsettled at
the date of this Agreement. Neither IMS Holdco nor the Company has
made any agreement, waiver or other arrangement providing for an extension of
time with respect to the assessment or collection of any Taxes against
it. Neither IMS Holdco nor the Company has been a member of an
affiliated group filing consolidated federal income tax returns nor has it been
included in any combined, consolidated or unitary state or local income tax
return. Neither IMS Holdco nor the Company will be required as a
result of a change in accounting method for any period ending on or before the
Closing Date to include any adjustment under Section 481 of the Code (or any
similar provision of state, local or foreign income tax law) in income for any
period ending after the Closing Date, or as a result of a change for any period
that may be required by law in connection with this
transaction. Neither IMS Holdco nor the Company is obligated to make
any payments or is a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under Section
280G of the Code. Neither IMS Holdco nor the Company is or has been a
U.S. real property holding corporation within the meaning or Section 897 of the
Code and none of the Principals or IMS Holdco are nonresident alien individuals
within the meaning of Section 871(b)(1) of the Code. Neither IMS
Holdco nor the Company has entered into any Tax sharing or indemnification
agreement with any party. The Company will not be required to include
any item of income in, or exclude any item of deduction from, taxable income for
any taxable period (or portion thereof) ending after the Closing Date as a
result of any: (i) "closing agreement" as described in Code Section 7121 (or any
corresponding or similar provision of state, local, or foreign income tax law);
(ii) installment sale or open transaction disposition made on or prior to the
Closing Date; or (iii) prepaid amount received on or prior to the Closing
Date. Since its inception, IMS Holdco has been treated as a
partnership for federal, state, local and foreign income tax purposes and will
continue to be treated as a partnership through the Closing Date. Since its
formation, the Company has been treated as disregarded entity within the meaning
of Treasury Regulation Section 301.7701-3 for federal, state and local income
tax purposes.
16
Section
3.12 Liabilities. Except
for the Assumed Liabilities (as defined in the Conveyance Document) set forth in
the Conveyance Document, or as set forth on Schedule 3.12, neither the
Company nor IMS Holdco has any outstanding claims, liabilities or indebtedness
of any nature whatsoever as to which the Company is or may become responsible
(collectively in this Section 3.12, "Liabilities"), whether
accrued, absolute or contingent, determined or undetermined, asserted or
unasserted, and whether due or to become due, other than (i) Liabilities
specifically disclosed in any Schedule hereto; (ii) Liabilities under Contracts
of the type required to be disclosed by IMS Holdco, the Company and the
Principals on any Schedule and so disclosed or which because of the dollar
amount or other qualifications are not required to be listed on such Schedule;
and (iii) Liabilities incurred since the Balance Sheet Date in the ordinary
course of business and consistent with past practice of IMS Holdco or the
Company, as the case may be.
Section
3.13 Insurance. Schedule 3.13 contains a true
and complete list (including the names and addresses of the insurers, the names
of the Persons to whom such insurance policies have been issued, the expiration
dates thereof, the annual premiums and payment terms thereof, whether it is a
"claims made" or an "occurrence" policy and a brief description of the interests
insured thereby) of all liability, property, workers' compensation and other
insurance policies currently in effect that insure the property, assets,
Business and employees of the Company, including but not limited to the
property, assets, business and employees of IMS Holdco that were transferred to
the Company pursuant to the Conveyance Document (other than self-obtained
insurance policies by such employees). Each such insurance policy is valid and
binding and in full force and effect, all premiums due thereunder have been paid
and neither IMS Holdco nor the Company has received any notice of cancellation
or termination in respect of any such policy or default
thereunder. To the knowledge of the Principals, such insurance
policies are placed with financially sound and reputable insurers, and are in
amounts and have coverage that are reasonable and customary for Persons engaged
in the operation of the Business. Neither IMS Holdco nor the Company,
or to the knowledge of the Principals, the Person to whom such policy has been
issued has received notice that any insurer under any policy referred to in this
Section 3.13 is
denying liability with respect to a claim thereunder or defending under a
reservation of rights clause. Within the last two years neither IMS
Holdco nor the Company has filed for any claims exceeding $25,000 against any of
its insurance policies, exclusive of automobile and health insurance policies.
None of such policies shall lapse or terminate by reason of the transactions
contemplated by this Agreement or the Conveyance Document and all such policies
shall continue in effect after the Closing Date for the benefit of the
Company. Neither IMS Holdco nor the Company has received any notice
of cancellation of any such policy. Neither IMS Holdco nor the
Company has received written notice from any of its insurance carriers that any
premiums will be materially increased in the future or that any insurance
coverage listed on Schedule
3.13 will not be available in the future on substantially the same terms
now in effect. Neither IMS Holdco nor the Company has been refused any insurance
or required to pay higher than normal or customary premiums, nor has its
coverage been limited by any insurance carrier to which it has applied for
insurance during the last three years.
17
Section
3.14 Intellectual
Properties.
3.14.1 Definitions. For
purposes of this Agreement, the following terms have the following
definitions:
"Intellectual Property" shall
include, without limitation, any or all of the following and all rights
associated therewith: (a) all domestic and foreign patents, and applications
therefor, and all reissues, reexaminations, divisions, renewals, extensions,
continuations and continuations-in-part thereof; (b) all inventions (whether
patentable or not), invention disclosures, improvements; (c) trade secrets,
confidential and proprietary information, know how, technology, technical data
and customer lists, financial and marketing data, pricing and cost information,
business and marketing plans, databases and compilations of data, rights of
privacy and publicity, and all documentation relating to any of the foregoing;
(d) all copyrights, copyright registrations and applications therefor,
unregistered copyrights, the content of all World Wide Web sites of a Person and
all other rights corresponding thereto throughout the world; (e) all mask works,
mask work registrations and applications therefor; (f) all industrial designs
and any registrations and applications therefor; (g) all trade names, corporate
names, logos, trade dress, common law trademarks and service marks, trademark
and service ▇▇▇▇ registrations and applications therefor and all goodwill
associated therewith; (h) any and all Internet domain names and Web sites
(including all software and applications, and all components and/or modules
thereof), used in connection therewith; and (i) all computer software including
all source code, object code, firmware, development tools, files, records and
data, all media on which any of the foregoing is recorded, and all documentation
related to any of the foregoing.
"Intellectual Property of the
Company" shall mean any Intellectual Property that is owned by the
Company (including Intellectual Property transferred by IMS Holdco to the
Company pursuant to the Conveyance Document), including Registered IP and
Unregistered IP.
"Licensed Intellectual
Property" means any Intellectual Property owned by another Person that is
used by the Company in the operation of the Business, including Off-the-Shelf
Software (as defined below), but excluding rights in or to materials created for
clients, to the extent to which such (x) client is the first owner of copyright
in such materials or (y) the materials are subject to a written assignment of
copyright in favor of clients of the Company.
18
3.14.2 Representations. Except
as set forth on Schedule
3.14.2, all of the Intellectual Property of IMS Holdco was transferred to
the Company pursuant to the Conveyance Document. Schedule 3.14.2 hereto
contains an accurate and complete list of all (a) patents, patent applications,
registered trademarks, applications for registered trademarks, registered
service marks, domain names, applications for registered service marks, logos,
registered copyrights and applications for registered copyrights which are owned
by the Company (the "Registered
IP"), (b) all unregistered trademarks, unregistered service marks and
material unregistered copyrights which are owned by the Company (the "Unregistered IP") and (c) all
Licensed Intellectual Property that is material to the operation of the
Business, other than widely distributed off-the-shelf applications subject to
shrink-wrap and similar non-negotiated end-user license agreements ("Off-the-Shelf Software").
Except as set forth on Schedule
3.14.2, the registrations and applications of the Registered IP listed on
Schedule 3.14.2 are in
the name of IMS Holdco, and are valid, in proper form, enforceable and
subsisting, all necessary registration and renewal fees in connection with such
registrations have been made and all necessary documents and certificates in
connection with such registrations have been filed with the relevant patent and
Internet domain names, copyrights and trademark authorities in the United States
or other jurisdictions where the Business is conducted for the purposes of
maintaining such Intellectual Property registrations, and applications therefor,
and no actions (including filing of documents or payments of fees) are due
within ninety (90) days after the Closing. No registration, or
application therefor, for any of the Registered IP has lapsed, expired, or been
abandoned, and no such registrations, or applications therefor, are the subject
of any opposition, interference, cancellation, or other legal, quasi-legal, or
governmental proceeding pending before any governmental, registration, or other
authority in any jurisdiction. Except as set forth on Schedule 3.14.2, (i) the
Company is the sole and exclusive owner of all rights, title and interest in and
to the Intellectual Property of the Company, free and clear of all Liens, (ii)
no Person has any rights to use any of the Intellectual Property of the Company,
(iii) neither IMS Holdco nor the Company has granted to any Person, or
authorized any Person to retain, any ownership in the Intellectual Property of
the Company, and (iv) all Licensed Intellectual Property in the Company's
possession or used in the operation of the Business has been properly licensed
from the owner of such Intellectual Property, and the Company possesses all
license agreements, certificates or documentation sufficient to substantiate
such rights, and the Company is in compliance with, and IMS Holdco has not in
the past violated, such license agreements. Except as set forth on
Schedule 3.14.2, the consummation of the
transactions contemplated hereby will not result in any loss or impairment of
the Company's rights to own or use any Intellectual Property, nor will such
consummation require the consent of any third party in respect of any
Intellectual Property. The operation of the Business and use of all Intellectual
Property therein does not infringe the Intellectual Property of any other
Person. There are no proceedings pending or, to the knowledge of the Principals,
threatened against IMS Holdco or the Company with respect to the Intellectual
Property, or with respect to any other Intellectual Property, alleging the
infringement or misappropriation by IMS Holdco or the Company of any
Intellectual Property of any Person, and neither IMS Holdco nor the Company has
received notice from any Person that the operation of the Business infringes the
Intellectual Property of any Person. There are no claims pending or,
to the knowledge of the Principals, threatened challenging the validity of any
Intellectual Property of the Company or any Intellectual Property used by the
Company in the conduct of the Business. Neither IMS Holdco nor the Company has
entered into or is otherwise bound by any consent, forbearance or any settlement
agreement which limits the rights of the Company to use the Intellectual
Property of the Company. To the knowledge of the Principals, no Person is
infringing or misappropriating any of the Intellectual Property of the Company.
All Intellectual Property of the Company was either developed (a) by employees
of IMS Holdco within the scope of such employee's employment duties; or (b) by
independent contractors or other third parties who have assigned all of their
rights therein to IMS Holdco pursuant to a written agreement, and all such
employees, independent contractors, and other third parties have waived,
pursuant to a written agreement, their moral rights in all such Intellectual
Property in favor of the Company or IMS Holdco. Except as set forth
on Schedule 3.14.2, the
Intellectual Property of the Company does not contain any software licensed
under terms which require, as a condition of the use, modification, or
distribution of such software, that other software incorporated into, derived
from, or distributed with such software: (x) be disclosed or distributed in
source code form; (y) be licensed under terms that permit making derivative
works; or (z) be redistributable at no charge to subsequent
licensees.
19
3.14.3 Privacy and
Security. All information or data of any kind possessed by the
Company, including but not limited to, personally identifiable information
collected from consumers ("PII"), aggregate or anonymous
information collected from consumers ("Non-PII") and employee data
(collectively, "Data"),
has been collected, by IMS Holdco or the Company, or any other Person, and is
being maintained, stored, processed and used by the Company, in compliance with
all Laws and Orders. IMS Holdco or the Company has at all times
presented a privacy policy ("Privacy Policy") to consumers
prior to the collection of any PII or Non-PII online. The Privacy
Policy, and any other representations, marketing materials and advertisements
that address privacy issues and the treatment of PII and Non-PII, accurately and
completely describe IMS Holdco's and the Company's respective information
collection and use practices, and no such notices or disclosures have been
inaccurate, misleading or deceptive. Neither IMS Holdco nor the
Company has collected or received any PII from children under the age of 13
without verifiable parental consent or directed any of its websites to children
under the age of 13 through which such PII could be obtained. IMS
Holdco and the Company have stored and maintained all Data in a secure manner,
using commercially reasonable technical measures, to assure the integrity and
security of the Data and to prevent loss, alteration, corruption, misuse and
unauthorized access to such Data. There has been no unauthorized use,
access to or disclosure of any Data. Neither IMS Holdco nor the
Company has received any claims, notices or complaints regarding its information
practices or use of Data. The consummation of the transactions
contemplated hereby will not result in any loss or impairment of the rights to
own and use any Data, nor will such consummation require the consent of any
third party in respect of any Data.
Section
3.15 Compliance
with Laws. The Company is, and the Business (including the
business conducted by IMS Holdco) has been conducted, in compliance with all
applicable Laws and Orders, except in each case (other than with respect to
compliance with environmental Laws and Orders relating to the regulation or
protection of the environment ("Environmental Laws and
Orders")) where the failure to so comply would not reasonably be expected
to have a Material Adverse Effect (as defined below), including without
limitation: (a) all Laws and Orders promulgated by the Federal Trade Commission
or any other Governmental or Regulatory Authority; (b) all Environmental Laws
and Orders; and (c) all Laws and Orders relating to labor, civil rights, and
occupational safety and health laws, worker's compensation, employment and
wages, hours and vacations, or pay equity. Neither IMS Holdco nor the Company
has been charged with, or, to the knowledge of the Principals, threatened with
or under any investigation with respect to, any charge concerning any violation
of any Laws or Orders. The term "Material Adverse Effect" as it
applies to IMS Holdco or the Company, shall mean a material adverse effect on
its operations, business, prospects, assets or financial condition. The Company
has all permits, licenses, and other government certificates, authorizations and
approvals ("Required
Permits") required by any Governmental or Regulatory Authority for the
operation of the Business, except where the failure to have such Required
Permits would not reasonably be expected to have a Material Adverse
Effect. All of the Required Permits are in full force and effect and
no action or claim is pending, nor to the knowledge of the Principals,
threatened, to revoke or terminate any such Required Permit or declare any such
Required Permit invalid in any respect.
20
Section
3.16 Client
Relations. Schedule 3.16 sets forth (a) the 20
largest clients of IMS Holdco (measured by revenues), and the revenues from each
such client and from all clients (in the aggregate) for the calendar year ended
December 31, 2009 and (b) the clients projected to be the 20 largest clients
(measured by revenues) of the Company based on its current profit plan for the
twelve months ending December 31, 2010, together with the estimated revenues
from each such client and all clients (in the aggregate) for such
period. IMS Holdco and the Principals represent that the estimated
revenues set forth on Schedule
3.16 were made in good faith and on a reasonable basis. Except
as set forth on Schedule
3.16, no client of IMS Holdco or the Company has advised IMS Holdco, the
Company or any Principal in writing that it is (x) terminating or considering
terminating the handling of its business by IMS Holdco or the Company or in
respect of any particular product, project or service or (y) planning to reduce
its future spending with IMS Holdco or the Company in any material manner; and
no client has orally advised the Company, IMS Holdco or any Principal of any of
the foregoing events.
Section
3.17 Accounts
Receivable; Work-in-Process; Accounts Payable. The amount of
all work-in-process, accounts receivable, unbilled invoices (including without
limitation unbilled invoices for services and out-of-pocket expenses) and other
debts due or recorded in the records and books of account of IMS Holdco and
which were transferred to the Company pursuant to the Conveyance Document, as
being due to the Company and reflected on the Balance Sheet and the Closing
Balance Sheet represent or will represent valid obligations arising from sales
actually made or services actually performed in the ordinary course of business
and will be good and collectible in full (less the amount of any provision,
reserve or similar adjustment therefor reflected on the Balance Sheet and the
Closing Balance Sheet) in the ordinary course of business, and none of the
accounts receivable or other debts (or accounts receivable arising from any such
work-in-process or unbilled invoices) is or will be subject to any counterclaim
or set-off except to the extent of any such provision, reserve or
adjustment. The accounts payable set forth on the Balance Sheet, and
the accounts payable incurred since the Balance Sheet Date through the Closing
Date, represent trade payables resulting from bona fide transactions incurred in
the ordinary course of business. There has been no change since the Balance
Sheet Date in the amount or aging of the work-in-process, accounts receivable,
unbilled invoices, or other debts due to the Company, or the reserves with
respect thereto, or accounts payable of the Company which would have a Material
Adverse Effect.
Section
3.18 Employment
Relations. (a) No unfair labor practice complaint against IMS
Holdco or the Company is pending before any Governmental or Regulatory
Authority; (b) there is no organized labor strike, dispute, slowdown or stoppage
pending or to the knowledge of the Principals, threatened against or involving
the Business; (c) there are no labor unions representing or, to the knowledge of
the Principals, attempting to represent the employees of IMS Holdco who became
employees of the Company; (d) no claim or grievance nor any arbitration
proceeding arising out of or under any collective bargaining agreement is
pending against any of the Company, IMS Holdco or the Principals and to the
knowledge of the Principals, no such claim or grievance has been threatened; (e)
no collective bargaining agreement is currently being negotiated by IMS Holdco
or the Company; and (f) IMS Holdco did not experience any work stoppage or
similar organized labor dispute during the last three years. Except
as set forth on Schedule
3.10, there is no legal action, suit, proceeding or claim pending or, to
the knowledge of the Principals, threatened between the Company or IMS Holdco
and any employees or former employees of the Company or IMS Holdco, agents or
former agents of the Company or IMS Holdco, job applicants or any association or
group of any employees of the Company or IMS Holdco, in each case prior to the
transfer of the Business to the Company.
21
Section
3.19 Employee
Benefit Matters.
3.19.1 List of
Plans. Schedule 3.8 to this Agreement lists
all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus,
incentive, deferred compensation, stock option, restricted stock, stock
appreciation rights, phantom stock rights, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, individual retirement
programs or arrangements, and all termination, severance or other Contracts,
whether covering one Person or more than one Person, and whether or not subject
to any of the provisions of ERISA, which are or have been maintained,
contributed to or sponsored by IMS Holdco or the Company or any ERISA Affiliate
(as defined in Section
3.19.3) for the benefit of any employee of IMS Holdco or the Company
(each item listed on Schedule 3.8 being referred to herein
individually, as a "Plan" and collectively, as the
"Plans"). For
purposes of this Agreement, "foreign benefit plan" means each material plan,
program or agreement contributed to, sponsored or maintained by either IMS
Holdco, the Company or any ERISA Affiliate that is maintained outside of the
United States, or that covers primarily employees residing or working outside of
the United States, and which would be treated as a Plan had it been a material
United States plan, program or agreement. IMS Holdco has delivered to
the Purchaser, to the extent applicable, a complete and accurate copy of: (a)
each written Plan and descriptions of any unwritten Plan (including all
amendments thereto whether or not such amendments are currently effective); (b)
each summary plan description and all summaries of subsequent material
modifications relating to a Plan; (c) each current trust agreement or other
funding arrangement with respect to each Plan, including insurance contracts;
(d) the most recently filed IRS Form 5500 relating to each Plan, if any; (e) the
most recently received IRS opinion, advisory or determination letter for each
Plan, if any; and (f) the three most recently prepared actuarial reports (if
applicable) and financial statements, if any, in connection with each
Plan. None of the Principals, IMS Holdco or the Company has made any
commitment, (i) to create or cause to exist any Plan not set forth on Schedule 3.8 or (ii) to
modify, change or terminate any Plan.
3.19.2 Severance. None
of the Plans, nor, except as set forth on Schedule 3.19.2, any
employment agreement or other Contract to which IMS Holdco or the Company is a
party or bound, (a) provides for the payment of or obligates IMS Holdco or the
Company to pay separation, severance, termination or similar-type benefits to
any Person; or (b) obligates IMS Holdco or the Company to pay separation,
severance, termination or similar-type benefits as a result of any transaction
contemplated by this Agreement or as a result of a "change in control," within
the meaning of such term under Section 280G of the Code, either alone or in
conjunction with any subsequent occurrence.
22
3.19.3 Multi-Employer
Plans. None of IMS Holdco, the Company or any ERISA Affiliate
has maintained, contributed to or participated within the preceding three years
in a multi-employer plan (within the meaning of Section 3(37) or 4001(a)(3) of
ERISA) or a multiple employer plan subject to Sections 4063 and 4064 of ERISA,
nor has any obligations or liabilities, including withdrawal, reorganization or
successor liabilities, regarding any such plan. As used herein, the term "ERISA Affiliate" means any
Person that is or has been a member of a controlled group of organizations
(within the meaning of Sections 414(b), (c), (m) or (o) of the Code) of which
IMS Holdco or the Company is a member.
3.19.4 Welfare Benefit
Plans. Each of IMS Holdco and the Company has expressly
reserved the right, in all Plan documents relating to welfare benefits provided
to employees, former employees, officers, directors and other participants and
beneficiaries, to amend, modify or terminate at any time the Plans which provide
for welfare benefits, and neither IMS Holdco nor any Principal is aware of any
fact, event or condition that could reasonably be expected to restrict or impair
such right. Except as required under Section 601 of ERISA, none of IMS Holdco,
the Company or any ERISA Affiliate has made any promises or commitments to
provide, and is not obligated to provide (i) medical benefits (including without
limitation through insurance) to retirees or former employees of IMS Holdco, the
Company or any ERISA Affiliate or their respective dependants, or (ii) life
insurance or other death benefits to retired employees or former employees of
IMS Holdco, the Company or any ERISA Affiliate or their respective
dependants.
3.19.5 Administrative
Compliance. Each Plan is now and has been operated in all
material respects in accordance with the requirements of its terms and with all
applicable Laws, including, without limitation, ERISA, the Health Insurance
Portability and Accountability Act of 1996 (as amended by the Health Information
Technology for Economic and Clinical Health Act) and the Code, including,
without limitation, all nondiscrimination and minimum coverage requirements of
Sections 401(a) and 410(b) thereof, the Age Discrimination in Employment Act,
Family and Medical Leave Act, the Americans with Disabilities Act, the Equal Pay
Act, Title VII of the Civil Rights Act of 1964, and the health care continuation
coverage provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985, and the regulations and authorities published thereunder. Each
of IMS Holdco and the Company has performed all obligations required to be
performed by it under, is not in any respect in default under or in violation
of, and the Principals have no knowledge of any default or violation by any
Person under, any Plan. Except as set forth on Schedule 3.9, no legal action,
suit, audit, investigation or claim is pending or threatened with respect to any
Plan (other than claims for benefits in the ordinary course), and no fact, event
or condition exists that would be reasonably likely to provide a legal basis for
any such action, suit, audit, investigation or claim. All reports,
disclosures, notices and filings with respect to such Plans required to be made
to employees, participants, beneficiaries, alternate payees and any Governmental
or Regulatory Authority have been timely made or an extension has been timely
obtained. With respect to any insurance policy providing funding for benefits or
an investment alternative under any Plan, (i) no liability or loss shall be
incurred by the Company or any such Plan in the nature of a retroactive rate
adjustment, loss sharing arrangement or other liability or loss, and (ii) no
insurance company issuing any such policy is in receivership, conservatorship,
liquidation or similar proceeding and, to the knowledge of the Principals, no
such proceedings with respect to any insurer are imminent.
23
3.19.6 Tax-Qualification. Each
Plan which is intended to be qualified under Sections 401(a) or 408(k) of the
Code is qualified under Sections 401(a) and 408(k) of the Code (and, if
applicable, complies with the requirements of Section 401(k) of the Code), and
has received a favorable opinion, advisory or determination letter from the IRS
that it is so qualified or is covered by a determination letter issued for
master or prototype plans. Each trust established in connection with
any Plan which is intended to be exempt from federal income taxation under
Section 501(a) of the Code is exempt under Section 501(a) of the Code; and no
fact or event has occurred or condition exists since the date of such opinion,
advisory or determination letter from the IRS which would be reasonably likely
to adversely affect the qualified status of any such Plan or the exempt status
of any such trust. Each Plan that is a foreign benefit plan which is intended to
be qualified with the appropriate Governmental or Regulatory Authority in the
relevant country has received a favorable determination that it is so qualified,
and each trust established in connection with such foreign benefit plan that is
intended to be exempt from taxation has received a favorable determination that
it is so exempt.
3.19.7 Funding; Excise
Taxes. There has been no prohibited transaction (within the
meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any
Plan subject to ERISA. None of IMS Holdco, the Company or any ERISA
Affiliate has incurred any liability for any excise tax arising under Sections
4971, 4972, 4973, 4974, 4975, 4976, 4977, 4978, 4978B, 4979, 4979A, 4980, 4980B,
4980D or 4980E of the Code or any civil penalty arising under Sections 409,
502(i) or 502(l) of ERISA, and no fact, event or condition exists which could
give rise to any such liability. None of IMS Holdco, the Company or
any ERISA Affiliate has incurred any liability under, arising out of or by
operation of Section 302(c)(11) or Title IV of ERISA (other than liability for
premiums to the Pension Benefit Guaranty Corporation ("PBGC") arising in the ordinary
course), including, without limitation, any liability in connection with the
termination of any employee benefit plan subject to Title IV of ERISA (a "Title IV Plan"); and, no fact,
event or condition exists which could give rise to any such
liability. No complete or partial termination has occurred within the
five years preceding the Closing Date with respect to any Plan maintained by IMS
Holdco, the Company or any ERISA Affiliate, and no reportable event (within the
meaning of Section 4043 of ERISA), notice of which has not been waived by the
PBGC, has occurred or is expected to occur with respect to any Plan maintained
by IMS Holdco, the Company or any ERISA Affiliate. The transactions contemplated
by this Agreement and the Conveyance Document will not result in liability to
IMS Holdco, the Company or the Purchaser under Section 4069 of
ERISA. No Title IV Plan or Plan subject to Section 302 of ERISA
maintained by IMS Holdco, the Company or any ERISA Affiliate had an accumulated
funding deficiency (within the meaning of Section 302 of ERISA or Section 412 of
the Code), whether or not waived, as of the most recently ended plan year of
such Plan. None of the assets of IMS Holdco, the Company or any ERISA
Affiliate is the subject of any Lien arising under Section 302(f) of ERISA or
Section 412(n) of the Code; none of IMS Holdco, the Company or any ERISA
Affiliate has been required to post any security under Section 307 of ERISA or
Section 401(a) (29) of the Code relating to any Plan; and no fact or event
exists which could give rise to any such Lien or requirement to post any such
security. As of the Closing Date, no Plan which is a Title IV Plan
will have an "unfunded benefit liability" (within the meaning of Section
4001(a)(18) of ERISA) and no Plan which is subject to Section 302 of ERISA will
have in "accumulated funding deficiency" (within the meaning of Section
302(a)(2) of ERISA).
24
3.19.8 Tax
Deductions. All contributions, premiums or payments (including
all employer contributions and, if applicable, employee salary reduction
contributions) required to be made, paid or accrued with respect to any Plan
have been made, paid or accrued on or before their due dates, including
extensions thereof. All such contributions have been fully deducted
(to the extent deductible by the Company) or in the case of the current year
will be deducted (to the extent deductible by the Company) for income tax
purposes and no such deduction has been challenged or disallowed by any
Governmental or Regulatory Authority, and no fact or event exists which could
give rise to any such challenge or disallowance.
3.19.9 409A. With
respect to each Plan (and any other arrangement involving the Company) that is a
nonqualified deferred compensation plan, within the meaning of Section 409A of
the Code (a "409A
Plan"), no event has occurred and no condition exists, that could subject
anyone, including any Person, to any tax, fine, penalty or other liability under
Section 409A of the Code ("409A
Liability"). None of the transactions contemplated by
this Agreement could, directly or indirectly, subject anyone or any Person to
any 409A Liability. Each 409A Plan is and has been operated and
administered in good faith compliance with 409A of the Code, Treasury Notice
2005-1, the Final Treasury Reg. Sections 1.409A-1 through 1.409A-6, and any
subsequent guidance issued thereunder.
Section
3.20 Interests
in Customers, Suppliers, Etc. Except as set forth on Schedule 3.20, neither the Principals
nor to the knowledge of the Principals (without making any inquiry of any member
of the Related Group, as hereinafter defined), any officer, director, or
employee of IMS Holdco or the Company immediately prior to the Closing Date, any
parent, brother, sister, child or spouse of any such officer, director, key
executive or employee of the Company, IMS Holdco or the Principals
(collectively, the "Related
Group"), or any Person controlled by anyone in the Related
Group:
(i)
owns,
directly or indirectly, any interest in (excepting for ownership, directly or
indirectly, of less than 1/4 of 1% of the issued and outstanding shares of any
class of securities of a publicly held and traded company), or received or has
any right to receive payments from, or is an officer, director, employee, agent
or consultant of, any Person which is, or is engaged in business as, a
competitor, lessor, lessee, supplier, distributor, sales agent, customer or
client of IMS Holdco or the Company;
(ii) owns,
directly or indirectly (other than through the ownership of Membership Units),
in whole or in part, any tangible or intangible property (including, but not
limited to Intellectual Property), that the Company used in the conduct of the
Business, other than immaterial personal items owned and used by employees at
their work stations; or
(iii) has any
cause of action or other claim whatsoever against, or owes any amount to, IMS
Holdco or the Company, except for claims in the ordinary course of business such
as for accrued vacation pay, accrued benefits under employee benefit plans, and
similar matters and agreements existing as of the Closing
Date.
25
Section
3.21 Bank
Accounts and Powers of Attorney. Set forth in Schedule 3.21 is an accurate and
complete list showing (a) the name and address of, and account information for,
each bank in which IMS Holdco had immediately prior to the transfer of the
Business to the Company, or the Company has, an account, credit line or safe
deposit box and the names of all Persons authorized to draw thereon or to have
access thereto, and (b) the names of all Persons, if any, holding powers of
attorney from IMS Holdco or the Company and a summary statement of the terms
thereof.
Section
3.22 Compensation
of Employees.
(a) Schedule 3.22 is an accurate and
complete list showing: (a) the names and positions of all employees and
exclusive consultants of the Company, or IMS Holdco immediately prior to the
transfer of the Business by IMS Holdco to the Company, who are, or were being,
compensated at an annualized rate of $50,000 or more, together with a statement
of the current annual salary, and the annual salary, bonus and incentive
compensation paid or payable with respect to calendar years 2008 and 2009, and a
statement of the projected annual salary, bonus and incentive compensation
payable with respect to the calendar year ended December 31, 2010, and the
material fringe benefits of such employees and exclusive consultants not
generally available to all employees of IMS Holdco or the Company; (b) all bonus
and incentive compensation paid or payable (whether by agreement, custom or
understanding) to any employee of IMS Holdco or the Company not listed in clause
(a) above for services rendered or to be rendered during calendar years 2008 and
2009; (c) the names of all retired employees, if any, of IMS Holdco or the
Company who are receiving or entitled to receive any healthcare or life
insurance benefits or any payments from IMS Holdco or the Company not covered by
any pension plan to which IMS Holdco or the Company is a party, their ages and
current unfunded pension rate, if any; and (d) a description of the current
severance and vacation policy of IMS Holdco and the Company. Neither
IMS Holdco nor the Company has, because of past practices or previous
commitments with respect to its employees, established any rights on the part of
any of its employees to additional compensation with respect to any period after
the Effective Date (other than wage increases in the ordinary course of
business). Each of IMS Holdco and the Company has properly classified
and compensated all employees and consultants in accordance with all applicable
Laws and Orders of any Governmental and Regulatory Authority.
(b) Except
as set forth on Schedule
3.3, the Principals have not agreed or made any written or verbal
commitment to give any employee of IMS Holdco or the Company (or any family
member or any affiliate of the employee of IMS Holdco or the Company) any
portion or share of the Purchase Price in the form of a bonus, gift, award, or
any similar type of remuneration. The Principals agree that, from and
after the Effective Date, no portion or proceeds of the Purchase Price shall be
used to compensate or give to any employee of IMS Holdco or the Company (or any
family member of any employee of IMS Holdco or the Company) a bonus, gift,
award, or any similar type of remuneration.
26
Section
3.23 No
Changes Since the Balance Sheet Date. From the Balance Sheet
Date through the Closing Date, except as specifically stated on Schedule 3.23, neither IMS Holdco nor
the Company (i) incurred any liability or obligation of any nature (whether
accrued, absolute, contingent or otherwise), except in the ordinary course of
business, (ii) permitted any of its assets to be subjected to any Lien,
(iii) sold, transferred or otherwise disposed of any assets except in the
ordinary course of business, (iv) made any capital expenditure or
commitment therefor which individually or in the aggregate exceeded $25,000; (v)
made any distributions or dividend payments on any shares of its capital stock
or equity participation rights, or redeemed, purchased or otherwise acquired any
units of Membership Interest, or any option, warrant or other right to purchase
or acquire any units of Membership Interest or equity participation rights of
IMS Holdco or the Company, (vi) made any bonus or profit sharing
distribution, (vii) increased or prepaid its indebtedness for borrowed
money, except current borrowings under credit lines listed on Schedule 3.8, or made any loan to any
Person other than to any employee for normal travel and expense advances, (viii)
wrote down the value of any work-in-process, or wrote off as uncollectible any
notes or accounts receivable, except write-downs and write-offs in the ordinary
course of business, none of which individually or in the aggregate, were
material to IMS Holdco or the Company, (ix) granted any increase in the rate of
wages, salaries, bonuses or other remuneration of any employee who, whether as a
result of such increase or prior thereto, received aggregate compensation from
IMS Holdco or the Company at an annual rate of $100,000 or more, or except in
the ordinary course of business to any other employees, (x) entered into any
employment or exclusive consulting agreement which is not cancelable by IMS
Holdco or the Company (and will not be cancelable by the Company) without
penalty or other financial obligation within 30 days, (xi) canceled or waived
any claims or rights of material value, (xii) made any change in any method of
accounting procedures, (xiii) otherwise conducted IMS Holdco's business or
the Business or entered into any transaction, except in the usual and ordinary
manner and in the ordinary course of its business, (xiv) amended or terminated
any agreement which is material to their businesses, (xv) renewed, extended or
modified any lease of real property or any lease of personal property, except in
the ordinary course of business, or (xvi) agreed, whether or not in
writing, to do any of the actions set forth in any of the above
clauses.
Section
3.24 Corporate
Controls. To the knowledge of the Principals, no officer,
authorized agent, employee, consultant or any other Person while acting on
behalf of IMS Holdco or the Company, has, directly or indirectly: used any
corporate fund for unlawful contributions, gifts, or other unlawful expenses
relating to political activity; made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds; established or maintained any unlawful or
unrecorded fund of corporate monies or other assets; made any false or
fictitious entry on its books or records; participated in any racketeering
activity; or made any bribe, rebate, payoff, influence payment, kickback, or
other unlawful payment, or other payment of a similar or comparable nature, to
any Person, private or public, regardless of form, whether in money, property,
or services, to obtain favorable treatment in securing business or to obtain
special concessions, or to pay for favorable treatment for business secured or
for special concessions already obtained, and neither IMS Holdco nor the Company
have participated in any illegal boycott or other similar illegal practices
affecting any of its actual or potential customers.
Section
3.25 Brokers. Except
as set forth on Schedule 3.25, no broker, finder, agent
or similar intermediary has acted on behalf of the Principals, IMS Holdco or the
Company in connection with this Agreement or the transactions contemplated
hereby, and no brokerage commissions, finder's fees, consulting fees or similar
fees or commissions are payable by IMS Holdco, the Company or the Principals in
connection therewith based on any agreement, arrangement or understanding with
any of them.
27
Section
3.26 Repayment
of Loans. All (i) intercompany indebtedness and (ii)
indebtedness of the Principals to IMS Holdco or the Company has been repaid in
full, other than routine travel expense advances in the ordinary course of
business and consistent in amount with past practice.
Section
3.27 Copies of
Documents. The Principals have caused to be made available for
inspection and copying by the Purchaser and its advisers, true, complete and
correct copies of all documents referred to in this Article III or in any
Schedule. Summaries of all oral contracts contained on Schedule 3.8 are complete and accurate
in all material respects.
ARTICLE
IV
REPRESENTATIONS OF THE
PURCHASER
The Purchaser represents, warrants and
agrees to and with IMS Holdco and the Principals as follows:
Section
4.1 Existence
and Good Standing. The Purchaser is a corporation 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.
Section
4.2 Execution
and Validity of Agreement. The Purchaser 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 the Purchaser and the consummation of the
transactions contemplated hereby have been duly authorized by all required
corporate action on behalf of the Purchaser. This Agreement has been
duly and validly executed and delivered by the Purchaser and, assuming due
authorization, execution and delivery by IMS Holdco and the Principals,
constitutes the legal, valid and binding obligation of the Purchaser,
enforceable against it in accordance with its terms.
Section
4.3 Litigation. There
is no action, suit, proceeding at law or in equity by any Person, or any
arbitration or any administrative or other proceeding by or before (or to the
knowledge of the Purchaser, any investigation by), any Governmental or
Regulatory Authority pending or, to the knowledge of the Purchaser, threatened
against the Purchaser or any of their respective properties or rights with
respect to this Agreement. The Purchaser is not subject to any Order
entered in any lawsuit or proceeding with respect to this Agreement or the
transactions contemplated hereby.
28
Section
4.4 Non-Contravention;
Approvals and Consents. The execution, delivery and
performance by the Purchaser of its obligations hereunder and the consummation
of the transactions contemplated hereby will not (a) violate, conflict with or
result in the breach of any provision of the certificate of incorporation and
bylaws of the Purchaser, (b) result in the violation by the Purchaser of any
Laws or Orders of any Governmental or Regulatory Authority applicable to the
Purchaser or any of its assets or properties, or (c) result in a violation or
breach of, constitute (with or without notice or lapse of time or both) a
default under, or require the Purchaser to obtain any consent, approval or
action of, make any filing with or give any notice to, or result in or give to
any Person any right of payment or reimbursement, termination, cancellation,
modification or acceleration of, or, except for such Liens as may be created in
connection with an MDC Financing (as defined in Section 6.1 hereof),
result in the creation or imposition of any Lien upon any of the respective
assets or properties of the Purchaser, under any of the terms, conditions or
provisions of any Contract to which the Purchaser is a party or by which the
Purchaser or any of its assets or properties are bound. No consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority or
other Person is necessary or required under any of the terms, conditions or
provisions of any Law or Order of any Governmental or Regulatory Authority or
any Contract to which the Purchaser is a party or by which the Purchaser or any
of its assets or properties are bound for the execution and delivery of this
Agreement by the Purchaser, the performance by the Purchaser of its obligations
hereunder or the consummation by the Purchaser of the transactions contemplated
hereby
Section
4.5 Brokers. No
broker, finder, agent or similar intermediary has acted on behalf of the
Purchaser in connection with this Agreement or the transactions contemplated
hereby, and no brokerage commissions, finder's fees or similar fees or
commissions are payable by the Purchaser in connection therewith based on any
agreement, arrangement or understanding with either of them.
ARTICLE
V
ACTIONS AT
CLOSING
Simultaneously
herewith:
Section 5.1 Certified
Resolutions. Each of IMS Holdco and the Company shall have
delivered to the Purchaser a copy of the resolutions of its Members and Board of
Managers, respectively, authorizing the execution, delivery and performance of
this Agreement, the Operating Agreement and the Conveyance Document and the
transactions contemplated hereby and thereby, as applicable, certified by one of
its officers.
Section 5.2 Required
Approvals and Consents. The Company and the Principals shall
have obtained or given, at no expense to the Purchaser or MDC Partners, and
there shall not have been withdrawn or modified, any consents or approvals or
other actions listed on Schedule 3.9 hereof (including
without limitation, obtaining all such consents, approvals and/or waivers
required under the Contracts listed on Schedule 3.8). Each such
consent or approval shall be in form reasonably satisfactory to counsel for the
Purchaser.
Section
5.3 Operating
Agreement. The Company and IMS Holdco shall have entered into
the Operating Agreement, together with the Purchaser.
Section 5.4 Employment
Agreements. The Principals shall have entered into Employment Agreements
with the Company substantially in the form and to the effect of Exhibit C
hereto.
29
Section
5.5 Non-Competition/Non-Solicitation/Non-Servicing
Agreements. The Principals and ▇▇▇▇ Du Mont shall have entered
into Non-Competition/Non-Solicitation/Non-Servicing Agreements with the
Purchaser and the Company in the form and to the effect of Exhibits D-1 and D-2 hereto.
Section
5.6 Conveyance
Document. IMS Holdco and the
Company shall have entered into the Conveyance Document.
Section
5.7 Proceedings.
All proceedings to be taken in connection with the transactions contemplated by
this Agreement, the Conveyance Document and all documents incident thereto must
be reasonably satisfactory in form and substance to the Purchaser and its
counsel, and the Purchaser shall have received copies of all such documents and
other evidences as it or its counsel reasonably requested in order to establish
the consummation of such transactions and the taking of all proceedings in
connection therewith.
ARTICLE
VI
OTHER
AGREEMENTS
Section
6.1 Management
of the Company.
6.1.1 MDC
Financing. Notwithstanding anything to the contrary contained
in this Agreement, in consideration for the payment of the Purchase Price under
Section 2.1
hereof and for other good and valuable consideration, the parties hereto hereby
(i) agree that MDC Partners and/or one or more of its affiliates, in connection
with its or any of its affiliates' current or future credit facilities, debt
offerings (including, without limitation, senior, subordinated or mezzanine debt
issued in a public offering or a Regulation S or Rule 144A private placement) or
any other debt agreements, shall be entitled to: (w) pledge or grant a security
interest in or otherwise have a lien placed upon the Purchaser's Membership
Units; (x) pledge or grant a security interest in or to otherwise have a lien
placed upon the assets and properties of the Company and/or its subsidiaries;
(y) assign all of its rights, benefit, title and interest in the Company and
distributions therefrom, including, without limitation, all rights and claims
pursuant to and under the Call and/or Sale Request (as such terms are defined in
the Operating Agreement) to or to an agent or representative on behalf of, its
bank or lender or group of banks or group of lenders from time to time (as
applicable and collectively, the "Lender"); and (z) have the
Company provide guarantees and such other ancillary security and related
documentation as reasonably required by the Lender from time to time (the items
in (w), (x), (y) and (z) being collectively referred to as an "MDC Financing"); and (ii)
consent unconditionally to (x) the granting of all security and the execution of
all documents required in connection with an MDC Financing and the enforcement
thereof, where applicable, by the Lender; and (y) any transaction by which the
Lender becomes the absolute legal and beneficial owner of any Membership Units
which have been pledged or assigned to it.
30
6.1.2 Effect of Events During
Period Membership Units Are Outstanding. The parties hereto
understand and agree that under the terms of the Employment Agreements referred
to in Section
5.4, the Principals may be terminated for "cause" or "without cause" (as
such terms are defined in such Employment Agreements). In the event a
Principal ceases to be employed by the Company, regardless of the reason
therefor, such event shall not affect IMS Holdco's right to receive the Purchase
Price under this Agreement. Each of the parties hereto agrees that if
(a) a Principal ceases to be an employee of the Company during the period
commencing as of Effective Date through the end of the last year included in the
Measuring Period (as defined in the Operating Agreement) with respect to the
exercise of a Call or Sale Request resulting in IMS Holdco no longer owing any
Class B Units, regardless of the reason therefor, or (b) there are changes in
the composition of the Board of Managers of the Company or any of its
subsidiaries, if any, no party to this Agreement or any Person claiming a right
through such party shall have the right to make a claim that such cessation of
employment or change in the composition of the Board of Managers of the Company
or any subsidiary, if any (x) constitutes a breach by the Purchaser or any of
its affiliates of this Agreement, (y) resulted in an adverse effect on the
Purchase Price hereunder forming the basis for a claim against the Purchaser or
any of its affiliates, or (z) constitutes an event forming the basis for such
party to dispute any calculation required to be made pursuant to the accounting
procedures set forth in Section 2.1.3
hereof.
Section
6.2 Tax
Matters.
6.2.1 Allocation. The
Principals, IMS Holdco and the Purchaser agree (i) to report for federal, state
and local income tax purposes, the transactions contemplated by this Agreement
in accordance with Situation 1 of Revenue Ruling 99-5, 1999-1 C.B. 434, and (ii)
shall not take, or permit any of its Affiliates to take, a position inconsistent
with such treatment unless otherwise required by Law. The Purchaser
shall prepare an allocation of the Purchase Price (and of other capitalized
costs) among the assets of the Company. The Company, the Purchaser,
each member of the Company and the Principals shall report, act and file all Tax
returns (including, but not limited to, Internal Revenue Service form 8594) in
all respects and for all purposes consistent with such allocation prepared by
the Purchaser and agreed to by IMS Holdco. IMS Holdco and/or the
Principals shall timely and properly prepare, execute, file and deliver all such
documents, forms and other information as the Purchaser may reasonably request
to prepare such allocation. None of the Company, any member of the
Company, or the Principals shall take any position (whether in audits, tax
returns, or otherwise) that is inconsistent with such allocation unless required
to do so by applicable law.
6.2.2 Tax
Returns. The parties hereto acknowledge and agree that the
Company shall prepare or cause to be prepared and file or cause to be filed all
Tax returns for the Company except as otherwise specifically provided herein or
in the Operating Agreement. The Company shall permit the Purchaser to
review and comment on each such Tax return described in the preceding sentence
prior to filing.
31
6.2.3 Tax
Cooperation. The Purchaser, IMS Holdco and the Principals
shall cooperate fully, and each shall cause the Company to cooperate fully, as
and to the extent reasonably requested by the other party, in connection with
the filing of Tax returns pursuant to Section 6.2.2 or any
other Tax returns relating to the operations of IMS Holdco or the Company, and
any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include IMS Holdco's retention and (upon the other party's
request) the provision of records and information which are reasonably relevant
to any such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder. The Purchaser, the Principals and
IMS Holdco agree to, and each agree to cause the Company to, (A) retain all
books and records with respect to Tax matters pertinent to IMS Holdco and
Company relating to any taxable period beginning before the Effective Date until
the expiration of the statute of limitations (and, to the extent notified by the
Purchaser, any extensions thereof) of the respective taxable periods, and to
abide by all record retention agreements entered into with any taxing authority,
and (B) give the other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other party so
requests, IMS Holdco or the Purchaser, as the case may be, shall allow the other
party to take possession of such books and records.
6.2.4 Tax
Liability. To the extent that any of the transactions
contemplated by the Conveyance Document give rise to sales and/or use tax
liability or other transfer, purchase, stamp or recordation documentary tax and
fees (collectively, "Sales
Taxes"), the Purchaser shall promptly pay such Sales Taxes to the
appropriate tax authorities. IMS Holdco shall cause the Company to
deliver to the Purchaser completed returns in respect of any Sales Taxes
required to be filed with respect to the transactions contemplated herein
(regardless of whether such returns are informational or show liability for
Sales Taxes) for filing with the appropriate taxing authority. The
Purchaser and IMS Holdco hereby waive compliance with the bulk sales laws of any
applicable jurisdiction, and IMS Holdco and the Principals hereby agree to
indemnify and hold harmless the Purchaser and its Affiliates from and against
any claims arising out of or due to the failure to comply with such bulk sales
laws.
Section
6.3 Equity
Securities of IMS Holdco.
(a) As
long as IMS Holdco beneficially owns any equity interests in the Company, no
Principal shall sell or in any other way transfer, assign, distribute, pledge,
encumber or otherwise dispose of (a "Transfer") any IMS Holdco
Interests (as defined below) without the prior written consent of the Purchaser,
except with respect to a Transfer of IMS Holdco Interests pursuant to Section
10.2(c) of the Operating Agreement; provided, however, in the event
a Principal desires to Transfer, for estate planning purposes, IMS Holdco
Interests to a Family Member (as hereinafter defined) of such Principal, the
prior written consent of the Purchaser shall not be unreasonably delayed or
withheld. As used herein, the term "Family Member" of any
Principal shall mean (i) the spouse and lineal descendants of such Principal,
(ii) the spouses of any such descendants, (ii) the legal representatives of any
Person that falls within clause (i) or (ii) hereof, and (iii) the trustee of any
trust of which any of the Persons falling with clause (i) or (ii) shall be the
only beneficiaries entitled to the income or principal.
32
(b) From
and after the Closing, IMS Holdco covenants and agrees that it shall not,
directly or indirectly (i) authorize, create, issue, amend or modify any equity
interests (whether common or preferred), subscriptions, options, warrants,
rights (including "phantom equity rights"), calls, commitments, understandings,
conversion rights, rights of exchange, plans or other agreements of any kind,
providing for the purchase, issuance or sale of any membership interests,
profits interests, capital interests or equity interests of any kind in IMS
Holdco (the "IMS Holdco
Interests"); or (ii) provide compensation to any employee of the Company
or any subsidiary, if any, except to the extent such employee was entitled or
eligible to receive such compensation at the time of, and as a result of, the
Closing. IMS Holdco further covenants and agrees that it shall not,
directly or indirectly modify or amend IMS Holdco's Second Amended and Restated
Operating Agreement (as amended through the Effective Date) dated February 2007,
a copy of which is attached hereto as Exhibit E (the "IMS Holdco Operating
Agreement"). Notwithstanding anything contained in this Section 6.3(b) to the
contrary, the Principals shall be entitled to amend the IMS Holdco Operating
Agreement and such amendment shall not be deemed to be in violation of this
Section 6.3(b),
so long as such amendment only results in a modification with respect to the IMS
Holdco Interests owned by the Principals, and does not result in the issuance of
any IMS Holdco Interests to any Person other than the Principals.
Section
6.4 Change of
Name; Post-Closing Dissolutions. At the Closing or a soon as
practicable after the Closing Date, IMS Holdco shall execute appropriate
documents to change its name to a name dissimilar to "Integrated Media Solutions",
and promptly thereafter shall file any necessary documents to reflect the name
change with the New York Secretary of State and the appropriate authorities in
the other states in which it is qualified to do business. As soon as
practicable after the Closing Date, IMS Holdco shall execute appropriate
documents to dissolve each of the Retained Subsidiaries, and promptly thereafter
shall file any necessary documents to reflect such dissolutions with the New
York Secretary of State and the appropriate authorities in the other states in
which the Retained Subsidiaries are qualified to do business.
ARTICLE
VII
SURVIVAL;
INDEMNITY
Section
7.1 Survival. Notwithstanding
any right of any party hereto fully to investigate the affairs of any other
party, and notwithstanding any knowledge of facts determined or determinable
pursuant to such investigation or right of investigation, each party hereto
shall have the right to rely fully upon the representations, warranties,
covenants and agreements of the other parties contained in this Agreement and
the Schedules, if any, furnished by any other party pursuant to this Agreement,
or in any certificate or document delivered at the Closing by any other
party. Subject to the limitations set forth in Section 7.6, the
respective representations, warranties, covenants and agreements of IMS Holdco,
the Principals and the Purchaser contained in this Agreement shall survive the
Closing.
33
Section
7.2 Obligation
of IMS Holdco and the Principals to Indemnify.
7.2.1 General
Indemnity. Subject to the limitations contained in Sections 7.6.1 and
7.6.2, IMS
Holdco and the Principals hereby agree, jointly and severally, to indemnify the
Purchaser and its affiliates, stockholders, officers, directors, employees,
agents, representatives and successors, permitted assignees of the Purchaser and
their affiliates (individually, a "Purchaser Indemnified Party"
and collectively, the "Purchaser Indemnified
Parties") against, and to protect, save and keep harmless the Purchaser
Indemnified Parties from, and to pay on behalf of or reimburse the Purchaser
Indemnified Parties as and when incurred for, any and all liabilities (including
liabilities for Taxes), 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 Purchaser Indemnified Party as a consequence of, in
connection with, incident to, resulting from or arising out of or in any way
related to or by virtue of: (a) any misrepresentation, inaccuracy or breach of
any warranty or representation contained in Article III.B hereof or in any
certificate delivered by IMS Holdco or the Principals at the Closing or
otherwise in connection herewith; (b) any action, demand, proceeding,
investigation or claim by any third party (including any Governmental or
Regulatory Authority) against or affecting any Purchaser Indemnified Party which
may give rise to or evidence the existence of or relate to a misrepresentation
or breach of any of the representations and warranties of IMS Holdco and the
Principals contained in Article III.B hereof or in any certificate delivered by
IMS Holdco and the Principals at the Closing or otherwise in connection
herewith; (c) any breach or failure by IMS Holdco or any Principal to comply
with, perform or discharge any obligation, agreement or covenant by IMS Holdco
and the Principals contained in this Agreement; (d) any liability or obligation
or any assertion against any Purchaser Indemnified Party, arising out of or
relating, directly or indirectly, to any Excluded Asset or any Retained
Liability (as such terms are defined in the Conveyance Document) or other
liability arising, in whole or in part, out of the conduct of the business of
IMS Holdco, the Company or any of its subsidiaries, if any, prior to the Closing
except for the Assumed Liabilities (as such term is defined in the Conveyance
Document); (e) any litigation or claim disclosed on Schedule 3.10 to this
Agreement; (f) any liability or obligation arising out of or relating, directly
or indirectly, to the classification of any individual performing services for
IMS Holdco (i) as an independent contractor, (ii) as a freelancer, (iii) as a
consultant or (iv) in any other capacity other than as an employee; (g) any
liability or obligation arising out of or relating, directly or indirectly, to
any violation by IMS Holdco, on or prior to the Closing, of the Fair Labor
Standards Act or any similar state or local wage and hour Law, Order,
ordinance or regulation; and (h) any liability or obligation in connection
with that certain Consulting Agreement by and among the Principals, ▇▇▇▇ Du Mont
and IMS Holdco dated March 23, 2009.
7.2.2 Special
Indemnity. Subject to the limitations contained in Sections 7.6.1 and
7.6.2, each of
the Principals hereby severally agrees to indemnify the Purchaser Indemnified
Parties against, and to protect, save and keep harmless the Purchaser
Indemnified Parties from, and to assume liability for, the payment of all Losses
that may be imposed on or incurred by any Purchaser Indemnified Party as a
consequence of or in connection with, incident to, resulting from or arising out
of or in any way related to or by virtue of: (a) any misrepresentation,
inaccuracy or breach of a representation or warranty by such Principal contained
in Article III.A hereof; or (b) any action, demand, proceeding, investigation or
claim by any third party (including any Governmental or Regulatory Authority)
against or affecting the Purchaser Indemnified Party which may give rise to or
evidence the existence of or relate to a misrepresentation or breach of any of
the representations and warranties of such Principal contained in Article III.A
hereof or in any certificate delivered by such Principal at the Closing or
otherwise in connection herewith. Any claim for indemnity made under
this Section
7.2.2 shall not be construed as a claim under Section 7.2.1 hereof
even if the Purchaser Indemnified Party could have made a claim under Section 7.2.1 hereof
in respect of the same matters.
7.2.3 "Losses". The
term "Losses" as used in
this Article VII is not limited to matters asserted by third parties against any
Purchaser Indemnified Party but includes Losses incurred or sustained by a
Purchaser Indemnified Party in the absence of Third Party Claims (as defined in
Section 7.4.2
hereof).
34
Section
7.3 Obligation
of the Purchaser to Indemnify. Subject to the
limitations set forth in Section 7.6.3 hereof,
the Purchaser hereby agrees to indemnify IMS Holdco and the Principals
(individually an "IMS Holdco
Indemnified Party" and collectively, the "IMS Holdco Indemnified
Parties") against, and to protect,
save and keep harmless the IMS Holdco Indemnified Parties from, and to pay on
behalf of or reimburse the IMS Holdco Indemnified Parties as and when incurred
for, any and all Losses that may be imposed on or incurred by the IMS Holdco
Indemnified Parties as a consequence of, in connection with, incident to,
resulting from or arising out of or in any way related to or by virtue of: (a)
any misrepresentation, inaccuracy or breach of any warranty or representation of
the Purchaser contained in Article IV hereof or in any certificate delivered by
the Purchaser at the Closing; or (b) any action, demand, proceeding,
investigation or claim by any third party (including any Governmental or
Regulatory Authority) against or affecting any IMS Holdco Indemnified Party
which may give rise to or evidence the existence of or relate to a
misrepresentation or breach of any of the representations and warranties of the
Purchaser contained in Article IV hereof or in any certificate delivered by the
Purchaser at the Closing; or (c) any breach or failure by the Purchaser to
comply with, perform or discharge any obligation, agreement or covenant by the
Purchaser contained in this Agreement.
Section 7.4 Indemnification
Procedures.
7.4.1 Non-Third Party
Claims.
(a) In
the event that any Person entitled to indemnification under this Agreement (an
"Indemnified Party")
asserts a claim for indemnification which does not involve a Third Party Claim
(as defined in Section
7.4.2) (a "Non-Third
Party Claim"), against which a Person is required to provide
indemnification under this Agreement (an "Indemnifying Party"), the
Indemnified Party shall give written notice to the Indemnifying Party (the
"Non-Third Party Claim
Notice"), which Non-Third Party Claim Notice shall (i) describe the claim
in reasonable detail, and (ii) indicate the amount (estimated, if necessary, and
to the extent feasible) of the Losses that have been or may be suffered by the
Indemnified Party.
(b) The
Indemnifying Party may acknowledge and agree by written notice (the "Non-Third Party Acknowledgement of
Liability") to the Indemnified Party to satisfy the Non-Third Party Claim
within 30 days of receipt of the Non-Third Party Claim Notice. In the
event that the Indemnifying Party disputes the Non-Third Party Claim, the
Indemnifying Party shall provide written notice of such dispute (the "Non-Third Party Dispute
Notice") to the Indemnified Party within 30 days of receipt of the
Non-Third Party Claim Notice (the "Non-Third Party Dispute
Period"), setting forth a reasonable basis of such dispute. In
the event that the Indemnifying Party shall fail to deliver the Non-Third Party
Acknowledgement of Liability or Non-Third Party Dispute Notice within the
Non-Third Party Dispute Period, the Indemnifying Party shall be deemed to have
acknowledged and agreed to pay the Non-Third Party Claim in full and to have
waived any right to dispute the Non-Third Party Claim. Once the
Indemnifying Party has acknowledged and agreed to pay any Non-Third Party Claim
pursuant to this Section 7.4.1, or
once any dispute under this Section 7.4.1 has
been finally resolved in favor of indemnification by a court or other tribunal
of competent jurisdiction, subject to the provisions of Section 7.6.1, the
Indemnifying Party shall pay the amount of such Non-Third Party Claim to the
Indemnified Party within 10 days of the date of acknowledgement or resolution,
as the case may be, to such account and in such manner as is designated in
writing by the Indemnified Party.
35
7.4.2 Third-Party
Claims.
(a) In
the event that any Indemnified Party asserts a claim for indemnification or
receives notice of the assertion of any claim or of the commencement of any
action or proceeding by any Person who is not a party to this Agreement or an
affiliate of a party to this Agreement in respect of which such Indemnified
Party is entitled to indemnification by an Indemnifying Party under this
Agreement (a "Third Party
Claim"), the Indemnified Party shall give written notice to the
Indemnifying Party (the "Third
Party Claims Notice") within 20 days after asserting or learning of such
Third Party Claim (or within such shorter time as may be necessary to give the
Indemnifying Party a reasonable opportunity to respond to such claim), together
with a statement specifying the basis of such Third Party Claim. The
Third Party Claim Notice shall (i) describe the claim in reasonable detail, and
(ii) indicate the amount (estimated, if necessary, and to the extent feasible)
of the Losses that have been or may be suffered by the Indemnified Party. The
Indemnifying Party must provide written notice to the Indemnified Party that it
is either (i) assuming responsibility for the Third Party Claim or (ii)
disputing the claim for indemnification against it (the "Indemnification
Notice"). The Indemnification Notice must be provided by the
Indemnifying Party to the Indemnified Party within 15 days after receipt of the
Third Party Claims Notice or within such shorter time as may be necessary to
give the Indemnified Party a reasonable opportunity to respond to such Third
Party Claim (the "Indemnification Notice
Period").
(b) If
the Indemnifying Party provides an Indemnification Notice to the Indemnified
Party within the Indemnification Notice Period that it assumes responsibility
for the Third Party Claim (the "Defense Notice"), the
Indemnifying Party shall conduct at its expense the defense against such Third
Party Claim in its own name, or if necessary in the name of the Indemnified
Party. The Defense Notice shall specify the counsel the Indemnifying
Party will appoint to defend such claim ("Defense Counsel"); provided, however, that the
Indemnified Party shall have the right to approve the Defense Counsel, which
approval shall not be unreasonably withheld or delayed. In the event
that the Indemnifying Party fails to give the Indemnification Notice within the
Indemnification Notice Period, the Indemnified Party shall have the right to
conduct the defense and to compromise and settle such Third Party Claim without
the prior consent of the Indemnifying Party and subject to the provisions of
Section 7.6.1,
the Indemnifying Party will be liable for all costs, expenses, settlement
amounts or other Losses paid or incurred in connection therewith.
(c) In
the event that the Indemnifying Party provides in the Indemnification Notice
that it disputes the claim for indemnification against it, the Indemnified Party
shall have the right to conduct the defense and to compromise and settle such
Third Party Claim, without the prior consent of the Indemnifying Party. Once
such dispute has been finally resolved in favor of indemnification by a court or
other tribunal of competent jurisdiction or by mutual agreement of the
Indemnified Party and Indemnifying Party, subject to the provisions of Section 7.6.1, the
Indemnifying Party shall within 10 days of the date of such resolution or
agreement, pay to the Indemnified Party all Losses paid or incurred by the
Indemnified Party in connection therewith.
36
(d) In
the event that the Indemnifying Party delivers an Indemnification Notice
pursuant to which it elects to conduct the defense of the Third Party Claim, the
Indemnifying Party shall be entitled to have the exclusive control over the
defense of the Third Party Claim and the Indemnified Party will cooperate in
good faith with and make available to the Indemnifying Party such assistance and
materials as it may reasonably request, all at the expense of the Indemnifying
Party. The Indemnified Party shall have the right at its expense to
participate in the defense assisted by counsel of its own
choosing. The Indemnifying Party will not settle the Third Party
Claim or cease to defend against any Third Party Claim as to which it has
delivered an Indemnification Notice (as to which it has assumed responsibility
for the Third Party Claim), without the prior written consent of the Indemnified
Party, which consent will not be unreasonably withheld or delayed; provided, however, such consent
may be withheld if, among other reasons, as a result of such settlement or
cessation of defense, (i) injunctive relief or specific performance would be
imposed against the Indemnified Party, or (ii) such settlement or cessation
would lead to liability or create any financial or other obligation on the part
of the Indemnified Party for which the Indemnified Party is not entitled to
indemnification hereunder.
(e) If
an Indemnified Party refuses to consent to a bona fide offer of settlement which
the Indemnifying Party wishes to accept, which provides for a full release of
the Indemnified Party and its affiliates relating to the Third Party Claims
underlying the offer of settlement and solely for a monetary payment, the
Indemnified Party may continue to pursue such matter, free of any participation
by the Indemnifying Party, at the sole expense of the Indemnified Party. In such
an event, the obligation of the Indemnifying Party shall be limited to the
amount of the offer of settlement which the Indemnified Party refused to accept
plus the reasonable costs and expenses of the Indemnified Party incurred prior
to the date the Indemnifying Party notified the Indemnified Party of the offer
of settlement.
(f) Notwithstanding
clause (d) above, the Indemnifying Party shall not be entitled to control, but
may participate in, and the Indemnified Party shall be entitled to have sole
control over, the defense or settlement of (x) that part of any Third Party
Claim that (i) seeks a temporary restraining order, a preliminary or permanent
injunction or specific performance against the Indemnified Party, (ii) involves
criminal allegations against the Indemnified Party or (iii) may lead to
liability or create any financial or other obligation on the part of the
Indemnified Party for which the Indemnified Party is not entitled to
indemnification hereunder and (y) the entire Third Party Claim if such Third
Party Claim would impose liability on the part of the Indemnified Party in an
amount which is greater than the amount as to which the Indemnified Party is
entitled to indemnification under this Agreement.
(g) A
failure by an Indemnified Party to give timely, complete or accurate notice as
provided in this Section 7.4 will not
affect the rights or obligations of any party hereunder except and only to the
extent that, as a result of such failure, any party entitled to receive such
notice was deprived of its right to recover any payment under its applicable
insurance coverage or was otherwise directly and materially damaged as a result
of such failure to give timely notice.
37
Section
7.5 Right of
Offset. Without limiting any other rights or remedies
available to it, the Purchaser shall be entitled, subject to the limitations in
Section 7.6, to
offset any claim for indemnity made pursuant to Section 7.2 and in
accordance with Section 7.4, against
any payment of the Purchase Price due under Section 2.1; provided, however, the
Purchaser may only exercise such right of offset in respect of claims relating
to Losses actually incurred by a Purchaser Indemnified Party (in which case the
amount of such offset shall be the amount of such actual Loss) or claims
actually asserted by a third party (in which case the amount of the offset shall
not exceed the Purchaser's good faith estimate of the amount of indemnifiable
Losses that will ultimately be payable to a Purchaser Indemnified Party in
respect of such claims). If any such claims for indemnity are
resolved in favor of IMS Holdco and the Principals by mutual agreement or
otherwise, or if the amount withheld exceeds the amount ultimately payable to a
Purchaser Indemnified Party in respect of such claim, the Purchaser shall pay to
IMS Holdco the excess amount withheld with respect to such claim, together with
interest thereon for the period such amount has been withheld at a rate equal to
the published prime rate of interest of ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇ in New York, in effect
from time to time during the relevant period.
Section
7.6 Limitations
On and Other Matters Regarding Indemnification.
7.6.1 Indemnity Cushion and
Cap. Subject to Section 7.6.5,
neither IMS Holdco nor the Principals shall have any liability to any Purchaser
Indemnified Party with respect to Losses arising out of any of the matters
referred to in Section
7.2 until such time as the amount of such liability shall exceed $50,000
in the aggregate (in which case IMS Holdco and the Principals shall be liable
for all Losses in excess of $50,000. Notwithstanding anything to the
contrary herein, subject to Section 7.6.5 below,
the maximum aggregate liability of IMS Holdco and the Principals for indemnity
payments under Section
7.2.1 and Section 7.2.2 shall
be an amount equal to $30,000,000.
7.6.2 Termination of
Indemnification Obligations of IMS Holdco and the
Principals. Subject to Section 7.6.5, the
obligation of IMS Holdco and the Principals to indemnify under Section 7.2 hereof
shall terminate on June 30, 2012, except as to matters as to which the Purchaser
Indemnified Party has made a claim for indemnification on or prior to such date,
in which case the right to indemnification with respect thereto shall survive
the expiration of such period until such claim for indemnification is finally
resolved and any obligations with respect thereto are fully
satisfied.
7.6.3 Termination of
Indemnification Obligations of the Purchaser. The obligation
of the Purchaser to indemnify under Section 7.3 hereof
shall terminate on June 30, 2012, except as to matters as to which IMS Holdco or
the Principals have made a claim for indemnification on or prior to such date,
in which case the right to indemnification with respect thereto for such party
shall survive the expiration of such period until such claim for indemnification
is finally resolved and any obligations with respect thereto are fully
satisfied.
7.6.4 Treatment. Any
indemnity payments by an Indemnifying Party to an Indemnified Party under this
Article VIII shall be treated by the parties as an adjustment to the Purchase
Price.
38
7.6.5 Exceptions. Each
of the limitations set forth above in this Section 7.6 shall in
no event (a) apply to any Losses incurred by a Purchaser Indemnified Party which
relate, directly or indirectly, to (i) any fraudulent acts committed by IMS
Holdco or the Principals; (ii) any breach of a representation or warranty
contained in Sections
3.1, 3.2, 3.3, 3.6, 3.11, 3.19, 3.25 or any other
provision hereof relating to Taxes, (iii) any indemnification obligation under
Sections
7.2.1(c), 7.2.1(d), 7.2.1(e), 7.2.1(f), 7.2.1(g) or 7.2.1(h); and (iv)
the obligations of IMS Holdco and the Principals set forth in Section 8.1 to pay
certain expenses; or (b) apply to any Losses incurred by an IMS Holdco
Indemnified Party which relate, directly or indirectly, to (i) any fraudulent
acts committed by the Purchaser; (ii) any indemnification obligation under Section 7.3(c); and
(iii) the Purchaser's obligations set forth in Section 8.1 to pay
certain expenses.
7.6.6 Control by MDC
Partners. All decisions and determinations to be made by the
Purchaser and/or a Purchaser Indemnified Party under this Article VII shall be
made by MDC Partners in the name of and on behalf of the Purchaser and/or such
other Purchaser Indemnified Party.
7.6.7 Tax and Insurance
Effects. An indemnity payment due and payable by an
Indemnifying Party under this Article VII shall be decreased to the extent of
any net reduction in Taxes payable by the Indemnified
Party resulting from the Losses, taking into account the tax
consequences to the Indemnified Party of the receipt of any indemnity payment
due and payable by the Indemnifying Party under this Article VII. In
both cases the tax consequences shall be
determined by using an assumed marginal tax rate equal to the
highest marginal tax rate then in effect for corporate or individual taxpayers,
as applicable, in the relevant jurisdiction. In addition, any amounts
otherwise required to be paid by an Indemnifying Party under this Article VII
shall be net of any insurance proceeds received by the Indemnified
Party.
ARTICLE
VIII
MISCELLANEOUS
Section
8.1 Expenses. Except
as otherwise provided in this Agreement, the Purchaser, on the one hand, and the
Principals and IMS Holdco, on the other hand, shall pay its, her or his own
expenses relating to the transactions contemplated by this Agreement, including,
without limitation, the fees and expenses of their respective counsel, financial
advisors and accountants.
Section
8.2 Governing
Law; Service of Process and Consent to Jurisdiction. 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. Each of the parties
hereto agrees that delivery of process, summons, notice or document in
accordance with Section 8.2 shall be
effective service of process for any action, suit or proceeding arising out of
this Agreement. Each party hereby irrevocably submits to the
exclusive jurisdiction of the United States District Court for the Southern
District of New York or any court of the State of New York located in New York
County in any action, suit or proceeding arising out of or relating to this
Agreement or any of the transactions contemplated hereby, and agrees that any
such action, suit or proceeding shall be brought only in such
court. Each party hereby irrevocably waives, to the fullest extent
permitted by law, any objection that it may now or hereafter have to the laying
of the venue of any such action, suit or proceeding brought in such a court and
any claim that any such action, suit or proceeding brought in such a court has
been brought in an inconvenient forum. THE PARTIES HEREBY WAIVE ANY
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY, WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE. THE PARTIES AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS
PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND
BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE TRIAL BY JURY AND
THAT ANY ACTION OR PROCEEDING WHATSOEVER BETWEEN THEM RELATING TO THIS AGREEMENT
OR ANY TRANSACTION CONTEMPLATED HEREBY SHALL INSTEAD BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
39
Section
8.3 "Person"
Defined. "Person" shall mean and include
an individual, a company, a joint venture, a corporation (including any
non-profit corporation), an estate, an association, a trust, a general or
limited partnership, a limited liability company, a limited liability
partnership, an unincorporated organization and a government or other department
or agency thereof.
Section
8.4 "Knowledge" Defined. Where
any representation and warranty contained in this Agreement is expressly
specified by reference to the knowledge of the Principals, such term shall be
limited to the actual knowledge of any executive officer of IMS Holdco or any
Principal, and unless otherwise stated, such knowledge that would have been
discovered by any of them after reasonable inquiry. Where any
representation and warranty contained in this Agreement is expressly specified
by reference to the knowledge of the Purchaser, as the case may be, such term
shall be limited to the actual knowledge of the executive officers of such
entity and unless otherwise stated, such knowledge that would have been
discovered by such executive officers after reasonable inquiry.
Section
8.5 "Affiliate"
Defined. As used in this Agreement, an "affiliate" of any Person,
shall mean any Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with
such Person.
Section
8.6 Captions. The
Article and Section captions used herein are for reference purposes only, and
shall not in any way affect the meaning or interpretation of this
Agreement.
Section
8.7 Publicity. Subject
to the provisions of the next sentence, no party to this Agreement shall, and
the Principals shall use their reasonable efforts to ensure that no
representative of IMS Holdco or the Company 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 the
Purchaser and the Representative. Notwithstanding the foregoing, the
foregoing provision shall not apply to the extent that MDC Partners is required
to make any announcement 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 other rules of the NASDAQ Stock Market,
Toronto Stock Exchange or the United States Securities and Exchange Commission
or any announcement by any party or the Company pursuant to applicable law or
regulations.
40
Section
8.8 Notices. Unless
otherwise provided herein, 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 (a) upon personal delivery, if delivered by hand or
courier, (b) three days after the date of deposit in the mails, postage prepaid,
or (c) the next business day if sent by a prepaid overnight courier service, and
in each case at the respective addresses set forth below or such other address
as such party may have fixed by notice:
If to the Purchaser, addressed
to:
c/o MDC
Partners Inc.
▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention:
with a copy
to:
c/o MDC
Partners Inc.
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General
Counsel
and (which shall not
constitute notice)
▇▇▇▇▇
& ▇▇▇▇▇▇▇ LLP
▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇▇▇, Esq.
If to IMS Holdco or the Principals,
to:
▇/▇ ▇▇▇ Company, LLC
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to (which shall
not constitute notice):
Moses
& Singer LLP
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Esq.
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.
41
Section
8.9 Parties
in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. Any purported such transfer, assignment, pledge, or
hypothecation (other than by operation of law) shall be void and
ineffective. 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.
Section
8.10 Severability. 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.
Section
8.11 Counterparts. This
Agreement may be executed in two or more counterparts or by facsimile
transmission, all of which taken together shall constitute one
instrument.
Section
8.12 Entire
Agreement. This Agreement, together with the Schedules
and Exhibits hereto, constitutes the sole, exclusive and only agreements of the
parties hereto pertaining to the subject matter hereof, contains all of the
covenants, conditions and agreements between the parties, express or implied,
whether by statute or otherwise, and sets forth the respective rights, duties
and obligations of each party to the other party as of the Closing Date. No oral
understandings, oral statements, oral promises or oral inducements
exist.
Section
8.13 Amendments. This
Agreement may not be amended, supplemented or modified orally, but only by an
agreement in writing signed by each of the parties hereto.
Section
8.14 Third
Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto and their respective
successors and assigns as permitted under Section 8.9, except
the Purchaser Indemnified Parties as provided in Article VII
hereof.
Section
8.15 Use of
Terms. Whenever the context so requires or permits, all
references to the masculine herein shall include the feminine and neuter, all
references to the neuter herein shall include the masculine and feminine, all
references to the plural shall include the singular and all references to the
singular shall include the plural. Whenever used in this Agreement,
the terms "Dollars" and "$" shall mean United Stated Dollars.
Section
8.16 "Liens"
Defined. With respect to any asset, a "Lien" shall mean (a) any
mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or
security interest in, on or of such asset, (b) the interest of a vendor or a
lessor under any conditional sale agreement, capital lease or title retention
agreement (other than an operating lease) (or any financial lease having
substantially the same economic effect as any of the foregoing) relating to such
asset and (c) in the case of securities, any purchase option, call or similar
right of a third party with respect to such securities.
42
Section
8.17 No Strict
Construction; Representation by Counsel. 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. The provisions of this Agreement shall be construed according
to their fair meaning and neither for nor against any party hereto irrespective
of which party caused such provisions to be drafted. Each of the
parties acknowledges that it has been represented by an attorney in connection
with the preparation and execution of this Agreement.
Section
8.18 Representative. Each
of the Principals and IMS Holdco hereby appoints ▇▇▇▇▇▇ as his, her or its
exclusive agent and attorney-in-fact (the "Representative") (i) to give
and receive notices and communications with respect to the provisions of this
Agreement, (ii) to amend the terms of this Agreement, (iii) to agree to,
negotiate, enter into settlements or compromises of matters arising under the
provisions of this Agreement, and (iv) to take any and all actions necessary or
appropriate in the judgment of the Representative to be taken on behalf of the
Principals and IMS Holdco under such provisions of this
Agreement. Such agency and that of any successor representative is
irrevocable and coupled with an interest; provided, however, the
Representative shall have no authority to act on behalf of any Principal or IMS
Holdco with respect to an indemnity claim under Section
7.2.2. In the event the Representative refuses to, or is no
longer capable of, serving as the Representative hereunder, the other Principals
shall promptly appoint a successor Representative who shall thereafter be the
successor Representative hereunder and the Representative shall serve until such
successor is duly appointed and qualified to act hereunder. The
Principals and IMS Holdco hereby agree that the Representative shall not have
any liability to the Company or any of its subsidiaries, if any, for any action
he takes or omits to take hereunder (or under any agreement or instrument
referred to herein) in his capacity as Representative, unless such action or
omission constitutes bad faith or willful misconduct by the
Representative. Notices or communications to or from the
Representative shall constitute notice to or from the Principals and/or IMS
Holdco in respect of matters relating to this Agreement. Any
decision, act, consent or instruction of the Representative shall constitute a
decision of all of the Principals and IMS Holdco, and shall be final, binding
and conclusive upon each Principal and IMS Holdco, and the Purchaser may rely
upon any decision, act, consent or instruction of the Representative as being
the decision, act, consent or instruction of IMS Holdco and each and every
Principal.
Section
8.19 Guaranty. MDC
Partners hereby agrees to pay, or cause the Purchaser to pay, when due, each
payment of Purchase Price required pursuant to Article II above and
any indemnification obligations of the Purchaser pursuant to Article VII
above.
43
IN WITNESS WHEREOF, the
parties hereto have executed this Membership Unit Purchase Agreement, on the day
and year first above written.
|
MF
+ P ACQUISITION CO.
|
||
|
By:
|
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ | |
|
Name:
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
|
||
|
Title:
Vice President and
Secretary
|
||
|
INTEGRATED
MEDIA SOLUTIONS, LLC
|
||
|
By:
|
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ | |
|
Name:
▇▇▇▇▇▇ ▇▇▇▇▇▇
|
||
|
Title:
Chief Executive
Officer
|
||
| /s/ | ||
|
▇▇▇▇▇▇
▇▇▇▇▇▇
|
||
| /s/ | ||
|
▇▇▇▇▇▇▇
Du Mont
|
||
| /s/ | ||
|
▇▇▇
▇▇▇▇▇▇▇
|
||
|
MDC PARTNERS INC.
(solely with respect to Sections 7.6.6 and 8.19)
|
||
|
By:
|
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ | |
|
Name:
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
|
||
|
Title:
General Counsel and Corporate
Secretary
|
||
44
TABLE
OF CONTENTS
|
ARTICLE
I
|
|
|
SALE
OF THE PURCHASED UNITS
|
|
|
Section
1.1 Sale of the Purchased Units
|
1
|
|
ARTICLE
II
|
|
|
PURCHASE
PRICE AND CLOSING
|
|
|
Section
2.1 Purchase Price; Working Capital Adjustment
|
2
|
|
2.1.1 Purchase
Price
|
2
|
|
2.1.2 Definitions
|
6
|
|
2.1.2 Other
Definitions
|
6
|
|
2.1.3 Accounting
Procedures
|
7
|
|
2.1.4 Examination
of Books and Records
|
8
|
|
Section
2.2 Closing
|
8
|
|
Section
2.3 Third Party Consents
|
9
|
|
Section
2.4 Further Assurance; Post Closing Cooperation
|
9
|
|
ARTICLE
III
|
|
|
REPRESENTATIONS
OF IMS HOLDCO AND THE PRINCIPALS
|
|
|
Section
3.1 Execution and Validity of Agreements; Restrictive
Documents
|
9
|
|
3.1.1 Execution
and Validity
|
9
|
|
3.1.2 No
Restrictions
|
10
|
|
3.1.3 Non-Contravention
|
10
|
|
3.1.4 Approvals
and Consents
|
10
|
|
Section
3.2 Existence and Good Standing
|
10
|
|
Section
3.3 Capital Stock; Equity Ownership; No Options or
Restrictions; Subsidiaries and Investments
|
11
|
|
Section
3.4 Financial Statements and No Material
Changes
|
11
|
|
Section
3.5 Books and Records
|
12
|
|
Section
3.6 Title to Properties; Encumbrances; No Prior
Activities
|
12
|
|
3.6.1 Title
to Properties; Encumbrances
|
12
|
|
3.6.2 No
Prior Activities
|
12
|
|
Section
3.7 Real Property
|
13
|
|
3.7.1 Owned
Real Property
|
13
|
|
3.7.2 Leased
Real Property
|
13
|
|
Section
3.8 Contracts
|
14
|
|
Section
3.9 Non-Contravention; Approvals and Consents
|
15
|
|
Section
3.10 Litigation
|
15
|
|
Section
3.11 Taxes
|
16
|
|
Section
3.12 Liabilities
|
17
|
45
|
Section
3.13 Insurance
|
17
|
|
Section
3.14 Intellectual Properties
|
18
|
|
3.14.1 Definitions
|
18
|
|
3.14.2 Representations
|
19
|
|
3.14.3 Privacy
and Security
|
20
|
|
Section
3.15 Compliance with Laws
|
20
|
|
Section
3.16 Client Relations
|
21
|
|
Section
3.17 Accounts Receivable; Work-in-Process; Accounts
Payable
|
21
|
|
Section
3.18 Employment Relations
|
21
|
|
Section
3.19 Employee Benefit Matters
|
22
|
|
3.19.1 List
of Plans
|
22
|
|
3.19.2 Severance
|
22
|
|
3.19.3 Multi-Employer
Plans
|
23
|
|
3.19.4 Welfare
Benefit Plans
|
23
|
|
3.19.5 Administrative
Compliance
|
23
|
|
3.19.6 Tax-Qualification
|
24
|
|
3.19.7 Funding;
Excise Taxes
|
24
|
|
3.19.8 Tax
Deductions
|
25
|
|
3.19.9 409A
|
25
|
|
Section
3.20 Interests in Customers, Suppliers, Etc.
|
25
|
|
Section
3.21 Bank Accounts and Powers of Attorney
|
26
|
|
Section
3.22 Compensation of Employoees
|
26
|
|
Section
3.23 No Changes Since the Balance Sheet Date
|
27
|
|
Section
3.24 Corporate Controls
|
27
|
|
Section
3.25 Brokers
|
27
|
|
Section
3.26 Repayment of Loans
|
28
|
|
Section
3.27 Copies of Documents
|
28
|
|
ARTICLE
IV
|
|
|
REPRESENTATIONS
OF THE PURCHASER
|
|
|
Section
4.1 Existence and Good Standing
|
28
|
|
Section
4.2 Execution and Validity of Agreement
|
28
|
|
Section
4.3 Litigation
|
28
|
|
Section
4.4 Non Contravention; Approvals and Consents
|
29
|
|
Section
4.5 Brokers
|
29
|
|
ARTICLE
V
|
|
|
ACTIONS
AT CLOSING
|
|
|
Section
5.1 Certified Resolutions
|
29
|
|
Section
5.2 Required Approvals and Consents
|
29
|
|
Section
5.3 Operating Agreement
|
29
|
|
Section
5.4 Employment Agreements
|
29
|
|
Section
5.5 Non-Competition/Non-Solicitation/Non-Servicing
Agreements
|
30
|
|
Section
5.6 Conveyance Document
|
30
|
46
|
Section
5.7 Proceedings
|
30
|
|
ARTICLE
VI
|
|
|
OTHER
AGREEMENTS
|
|
|
Section
6.1 Management of the Company
|
30
|
|
6.1.1 MDC
Financing
|
30
|
|
6.1.2 Effect
of Events During Period Membership Units Are Outstanding
|
31
|
|
Section
6.2 Tax Matters
|
31
|
|
6.2.1 Allocation
|
31
|
|
6.2.2 Tax
Returns
|
31
|
|
6.2.3 Tax
Cooperation
|
32
|
|
6.2.4 Tax
Liability
|
32
|
|
Section
6.3 Equity Securities of IMS Holdco
|
32
|
|
Section
6.4 Change of Name
|
33
|
|
ARTICLE
VII
|
|
|
SURVIVAL;
INDEMNITY
|
|
|
Section
7.1 Survival
|
33
|
|
Section
7.2 Obligation of IMS Holdco and the Principals to
Indemnify
|
34
|
|
7.2.1 General
Indemnity
|
34
|
|
7.2.2 Special
Indemnity
|
34
|
|
7.2.3 Losses
|
34
|
|
Section
7.3 Obligation of the Purchaser to Indemnify
|
35
|
|
Section
7.4 Indemnification Procedures
|
35
|
|
7.4.1 Non-Third
Party Claims
|
35
|
|
7.4.2 Third-Party
Claims
|
36
|
|
Section
7.5 Right of Offset
|
38
|
|
Section
7.6 Limitations On and Other Matters Regarding
Indemnification
|
38
|
|
7.6.1 Indemnity
Cushion and Cap
|
38
|
|
7.6.2 Termination
of Indemnification Obligations of IMS Holdco and the
Principals
|
38
|
|
7.6.3 Termination
of Indemnification Obligations of the Purchaser
|
38
|
|
7.6.4 Treatment
|
38
|
|
7.6.5 Exceptions
|
39
|
|
7.6.6 Control
by MDC Partners
|
39
|
|
7.6.7 Tax
and Insurance Effects
|
39
|
|
ARTICLE
VIII
|
|
|
MISCELLANEOUS
|
|
|
Section
8.1 Expenses
|
39
|
|
Section
8.2 Governing Law; Service of Process and Consent to
Jurisdiction
|
39
|
|
Section
8.3 "Person" Defined
|
40
|
|
Section
8.4 "Knowledge" Defined
|
40
|
|
Section
8.5 "Affiliate" Defined
|
40
|
47
|
Section
8.6 Captions
|
40
|
|
Section
8.7 Publicity
|
40
|
|
Section
8.8 Notices
|
41
|
|
Section
8.9 Parties in Interest
|
42
|
|
Section
8.10 Severability
|
42
|
|
Section
8.11 Counterparts
|
42
|
|
Section
8.12 Entire Agreement
|
42
|
|
Section
8.13 Amendments
|
42
|
|
Section
8.14 Third Party Beneficiaries
|
42
|
|
Section
8.15 Use of Terms
|
42
|
|
Section
8.16 "Liens" Defined
|
42
|
|
Section
8.17 No Strict Construction; Representation by
Counsel
|
43
|
|
Section
8.18 Representative
|
43
|
|
Section
8.19 Guaranty
|
43
|
48
INDEX
OF DEFINED TERMS
|
2010
Growth Payment
|
5
|
|
409A
Liability
|
26
|
|
409A
Plan
|
26
|
|
Accountants
|
7
|
|
Additional
Payments
|
6
|
|
Adjusted
GAAP PBT
|
6
|
|
affiliate
|
42
|
|
Agreement
|
1
|
|
Applicable
Percentage
|
6
|
|
Balance
Sheet
|
12
|
|
Balance
Sheet Date
|
12
|
|
Business
|
11
|
|
Closing
|
8
|
|
Closing
Balance Sheet
|
7
|
|
Closing
Date
|
9
|
|
Closing
Date Working Capital
|
7
|
|
Code
|
6
|
|
Company
|
1
|
|
Company
Indemnified Parties
|
36
|
|
Company
Indemnified Party
|
36
|
|
Contracts
|
10
|
|
Conveyance
Document
|
1
|
|
Data
|
20
|
|
Defense
Counsel
|
38
|
|
Defense
Notice
|
38
|
|
▇▇▇▇▇▇▇
|
1
|
|
Environmental
Laws and Orders
|
21
|
|
ERISA
|
23
|
|
ERISA
Affiliate
|
23
|
|
Extra
Payment
|
5
|
|
Family
Member
|
34
|
|
FAP
|
3
|
|
FIAP
|
5
|
|
FOAP
|
4
|
|
GAAP
|
7
|
|
Governmental
or Regulatory Authority
|
10
|
|
IMS
|
1
|
|
IMS
Interests
|
33
|
|
Indemnification
Notice
|
38
|
|
Indemnification
Notice Period
|
38
|
|
Indemnified
Party
|
37
|
|
Indemnifying
Party
|
37
|
|
Independent
Auditors
|
7
|
|
▇▇▇▇▇▇
|
1
|
|
Initial
Top-Up Amount
|
3
|
|
Intellectual
Property
|
18
|
|
Intellectual
Property of the Company
|
19
|
|
JAMS
|
8
|
|
Laws
|
10
|
|
Lender
|
32
|
|
Liabilities
|
17
|
|
Licensed
Intellectual Property
|
19
|
|
Lien
|
44
|
|
Losses
|
35
|
|
LTG
Rate Increase
|
3
|
|
Material
Adverse Effect
|
21
|
|
MDC
Financing
|
32
|
|
MDC
Partners
|
1
|
|
Membership
Units
|
1
|
|
Non
PII
|
20
|
|
Non-Third
Party Acknowledgement of Liability
|
37
|
|
Non-Third
Party Claim
|
37
|
|
Non-Third
Party Claim Notice
|
37
|
|
Non-Third
Party Dispute Notice
|
37
|
|
Non-Third
Party Dispute Period
|
37
|
|
Off-the-Shelf
Software
|
19
|
|
Operating
Agreement
|
1
|
|
Operative
Documents
|
44
|
|
Orders
|
10
|
|
PBGC
|
25
|
|
Person
|
42
|
|
PII
|
20
|
|
Plan
|
23
|
|
Plans
|
23
|
|
Principal
|
1
|
|
Principals
|
1
|
|
Privacy
Policy
|
20
|
|
Purchase
Price
|
2
|
|
Purchased
Units
|
1
|
|
Purchaser
|
1
|
|
Purchaser
Indemnified Parties
|
35
|
|
Purchaser
Indemnified Party
|
35
|
|
Real
Property Lease
|
13
|
|
Real
Property Leases
|
13
|
|
Reconciliation
Period
|
7
|
|
Registered
IP
|
19
|
|
Related
Group
|
26
|
|
Representative
|
45
|
|
Required
Permits
|
21
|
|
Retained
Subsidiaries
|
13
|
|
▇▇▇
|
1
|
|
Sale
Event
|
6
|
|
Sales
Taxes
|
33
|
|
SAP
|
3
|
|
Special
Determination
|
7
|
|
TAP
|
4
|
|
Target
Working Capital
|
7
|
|
Taxes
|
16
|
|
Third
Party Claim
|
37
|
|
Third
Party Claims Notice
|
37
|
|
Title
IV Plan
|
25
|
|
Top-Up
Payments
|
2
|
|
Transfer
|
33
|
|
Unregistered
IP
|
19
|
|
Working
Capital Payment
|
2
|
|
Working
Capital Shortfall
|
2
|
EXHIBITS
|
Exhibit
A
|
Conveyance
Document
|
|
Exhibit
B
|
Operating
Agreement
|
|
Exhibit
C
|
Employment
Agreements
|
|
Exhibit
D-1
|
Principals
Non-Competition/Non-Solicitation/Non-Servicing
Agreements
|
|
Exhibit
D-2
|
▇▇▇▇
Du Mont Non-Competition/Non-Solicitation/Non-Servicing
Agreements
|
|
Exhibit
E
|
IMS
Holdco's Second Agreement and Restated Operating
Agreement
|
SCHEDULES
|
Schedule
2.1.1
|
Payment
of the Purchase Price
|
|
Schedule
3.2
|
Good
Standing
|
|
Schedule
3.3
|
No
Options or Restrictions
|
|
Schedule
3.4(A)
|
Financial
Statements
|
|
Schedule
3.4(B)
|
GAAP
Exceptions
|
|
Schedule
3.6
|
Liens
|
|
Schedule
3.7.2
|
Real
Property Leases
|
|
Schedule
3.8
|
Contracts
|
|
Schedule
3.9
|
Approvals
and Consents
|
|
Schedule
3.10
|
Litigation
|
|
Schedule
3.11
|
Taxes
|
|
Schedule
3.12
|
Liabilities
|
|
Schedule
3.13
|
Insurance
|
|
Schedule
3.14.2
|
Intellectual
Property
|
|
Schedule
3.16
|
Client
Relations
|
|
Schedule
3.19.2
|
Severance
|
|
Schedule
3.20
|
Interests
in Customers, Suppliers, Etc.
|
|
Schedule
3.21
|
Bank
Accounts and Powers of Attorney
|
|
Schedule
3.22
|
Compensation
of Employees
|
|
Schedule
3.23
|
No
Changes Since the Balance Sheet Date
|
|
Schedule
3.25
|
Brokers
|