STOCK PURCHASE AGREEMENT by and among SECURED PRODUCTS (CAYMAN), INC., and dated as of November 3, 2006
EXHIBIT
10.3
by
and
among
SECURED
PRODUCTS (CAYMAN), INC.,
H.I.G.
CAPITAL MANAGEMENT, INC.
and
dated
as
of
November
3, 2006
Stock
Purchase Agreement, dated as of November 3, 2006, by and among Secured
Products (Cayman), Inc., a
Cayman
Islands exempted company (“Purchaser”),
and
MDC
Partners Inc.,
a
Canadian corporation (“Seller”)
and
the holder of all the capital stock of 2114744 Ontario Inc., a newly-formed
Ontario corporation that will conduct its business as Mercury
Graphics (“Mercury”);
Metaca
Corporation,
a
Canadian corporation (“Metaca”);
MDC
USA Holdings Inc. (“MDC
Holdco”),
a
Delaware corporation that owns all of the capital stock of ▇▇▇▇▇▇-▇▇▇▇▇▇
[USA] Ltd.,
a
Delaware corporation (“AP”)(Mercury,
Metaca and MDC Holdco are referred to as the “Base
Companies”,
and
collectively with AP and Placard
Pty Ltd. (“Placard”),
an
Australian corporation that is wholly-owned by Metaca, the “Companies”),
and
H.I.G.
Capital Management, Inc.,
a
Delaware corporation (“HIG”)
(for
purposes of Sections 1.2(b)(i), 2.1(b)(iv) and 7 only). Certain capitalized
terms used in this Agreement have the meanings assigned to them in Article
IX.
WHEREAS
each of the boards of directors of Purchaser and Seller has unanimously
approved, and deems it advisable and in the best interests of its respective
stockholders to consummate, the acquisition by Purchaser (or its designated
Subsidiaries) from Seller, and the sale by Seller to Purchaser (or its
designated Subsidiaries), of all the outstanding capital stock of the Base
Companies upon the terms and subject to the conditions set forth
herein;
NOW,
THEREFORE, in consideration of the foregoing and the mutual representations,
warranties, covenants and agreements set forth herein, intending to be legally
bound hereby, the parties hereto agree as follows:
ARTICLE
I
PURCHASE
AND SALE OF SHARES
1.1. Sale
and Transfer of Shares.
Subject
to the terms and conditions of this Agreement, at the Closing, Seller shall
sell, convey, assign, transfer and deliver to Purchaser (or its designated
Subsidiaries) all the issued and outstanding Shares, free and clear of all
Encumbrances, except for any Encumbrance arising under the Securities Act or
any
applicable state or provincial securities laws, and Purchaser (or its designated
Subsidiaries) shall purchase, acquire and accept the Shares from
Seller.
1.2. Consideration;
Purchase Price.
(a) Subject
to the terms and conditions of this Agreement, in consideration of the aforesaid
sale, conveyance, assignment, transfer and delivery to Purchaser (or its
designated Subsidiaries) of the Shares, Purchaser (or its designated
Subsidiaries) shall (i)
pay to
Seller an amount of cash equal to $20 million (the “Base
Purchase Price”),
as
adjusted pursuant to clause (c) (as so adjusted, the “Purchase
Price”)
and
(ii) issue or deliver to Seller to Seller an amount equal to 7.5% of the
issued ordinary shares, par value US$1.00, in Purchaser (the “MDC
Shares”).
(b) The
Purchase Price shall be paid by Purchaser to Seller as follows:
(i) Simultaneously
with the execution of this Agreement, HIG shall deliver to the Escrow Agent,
a
wire transfer in immediately available federal funds in an amount equal to
$1
million (the “Contract
Deposit”),
to be
held by the Escrow Agent in accordance with the Deposit Escrow Agreement among
the Escrow Agent, HIG, Purchaser and Seller of even date herewith (the
“Deposit
Escrow Agreement”).
The
Contract Deposit shall be non-refundable except as expressly provided in Article
VII hereof;
(ii) At
the
Closing, an amount equal to $1 million of the Purchase Price (the “Escrow
Amount”)
shall
be placed in escrow for
a
period of up to one (1)
year
following the Closing Date
pursuant
to the terms of the Escrow Agreement, as
security for the purchase price adjustments described in Section 2.2, if any,
and the indemnification obligations, if any, of Seller as set forth in Section
8
hereof; and
(iii) At
the
Closing, (A) Purchaser shall pay to Seller an amount equal to the balance of
the
Estimated Purchase Price (i.e., the balance of the Estimated Purchase Price
less
the Escrow Amount) and (B) (x) the Escrow Agent shall pay the Contract Deposit
to HIG (together will all accrued interest thereon) or, (y) if the Contract
Deposit has been released prior to the Closing pursuant to Section 7.2, Seller
shall refund the Contract Deposit and the Second Contract Deposit to HIG by
wire
transfer of immediately available federal funds.
(c) The
Base
Purchase Price shall be (i) increased by the amount, if any, by which the
Closing Working Capital exceeds $13 million or decreased by the amount, if
any,
by which the Closing Working Capital is less than $13 million; (ii) decreased
by
the aggregate amount of Indebtedness (excluding the Mercury Lease) of the
Companies as of the Closing; and (iii) decreased by the aggregate amount of
any
professional fees and expenses (including, without limitation, accounting,
broker and legal expenses and fees) that have been incurred by the Companies
in
connection with the transactions contemplated hereby and that have not been
paid
by the Seller as of the Closing (the “Transaction
Expenses”).
(d) For
purposes of determining the amount of cash to be paid as the Estimated Purchase
Price by Purchaser to Seller at the Closing, Seller shall in good faith prepare
an estimated calculation of the Closing Working Capital (such amount, the
“Estimated
Closing Working Capital”)
on the
basis described in the first sentence of Section 2.2(b). Seller shall deliver
the calculation of Estimated Closing Working Capital to Purchaser not less
than
two Business Days before the Closing Date along with a certificate executed
by
an officer of the Seller certifying that such statement of Estimated Closing
Working Capital was prepared on the basis described in
Section 2.2(b).
(e) As
used
in this Agreement, the “Estimated
Purchase Price”
shall
mean the amount equal to the Base Purchase Price (i) increased by the
amount, if any, by which the Estimated Closing Working Capital exceeds $13
million or (ii) decreased by the amount, if any, by which the Estimated
Closing Working Capital is less than $13 million, and as the same may be
adjusted pursuant to Section 1.2(c)(ii) and (iii) of this
Agreement.
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ARTICLE
II
THE
CLOSING
2.1. The
Closing.
(a) The
sale and transfer of the Shares by Seller to Purchaser (or its designated
Subsidiaries) shall take place at the offices of Seller at 10:00 am (New York
City time) on November 15, 2006 (the “Closing
Date”),
unless another date or place is agreed in writing by each of the parties
hereto.
(b) At
the
Closing:
(i) Seller
shall deliver to Purchaser (or its designated Subsidiaries) one or more
certificates representing all the issued and outstanding Shares, each such
certificate to be duly and validly endorsed in favor of Purchaser (or its
designated Subsidiaries) or accompanied by a separate stock power duly and
validly executed by Seller and otherwise sufficient to vest in Purchaser (or
its
designated Subsidiaries) legal and beneficial ownership of such
Shares;
(ii) Purchaser
(or its designated Subsidiaries) shall transfer the Estimated Purchase Price,
less the Escrow Amount, to an account designated by Seller prior to the Closing
by wire transfer of immediately available U.S. Dollar funds; and
(iii) Purchaser
(or its designated Subsidiaries) shall transfer the Escrow Amount to the account
designated by Escrow Agent prior to the Closing by wire transfer of immediately
available U.S. Dollar funds.
(iv) HIG
and
Seller shall cause the Escrow Agent to release and pay the amount of the
Contract Deposit to HIG (by joint written instruction), unless the Contract
Deposit has been released to Seller prior to the Closing in connection with
an
Extension Election pursuant to Article 7, in which case Seller shall return
to
HIG the Contract Deposit and the Second Contract Deposit to HIG by wire transfer
of immediately available federal funds at the Closing;
(v) Purchaser
and Seller shall enter into a Transition Services Agreement substantially in
the
form of Exhibit A hereto (the “Transition
Services Agreement”).
(vi) Purchaser
and Seller shall enter into a Shareholders’ Agreement with respect to the MDC
Shares substantially in the form of Exhibit B hereto.
(vii) Purchaser,
Seller and the Escrow Agent shall enter into the Escrow Agreement substantially
in the form of Exhibit C hereto (the “Escrow
Agreement”).
(viii) All
of
the MDC Partner-designated directors and officers of the Companies listed on
Schedule 2.1(b)(viii) shall have tendered resignations of their positions with
the Companies.
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(ix) Seller
shall prepare and deliver to the Purchaser a certificate (the “Certificate
of Indebtedness”)
representing and certifying as to (A) the amount of Indebtedness of each Company
outstanding on the Closing Date, and specifying the amount owed to each creditor
listed thereon and (B) the amount of Transaction Expenses of each Company
outstanding on the Closing Date, and specifying the amount owed to each party
listed thereon.
(x) Seller
shall deliver to Purchaser pay-off letters and lien discharges (or agreements
therefor) reasonably satisfactory to the Purchaser from each creditor listed
on
Schedule 2.1(b)(ix)
hereto.
Seller
shall have evidenced the discharge of all Intercompany Arrangements between
Placard and Metaca required to be discharged pursuant to Section 5.5 (in a
manner reasonably satisfactory to the Purchaser).
(xi) Seller
shall deliver the written consents, in form and substance reasonably
satisfactory to Purchaser and Purchaser’s counsel, to the consummation of the
transactions contemplated by this Agreement (including the Mercury Contribution)
referenced on Schedule 2.1(b)(xi)
hereto.
(xii) Seller
shall have evidenced the completion of the Mercury Contribution pursuant to
the
Asset Purchase Rollover Agreement substantially in the form attached as Exhibit
E hereto.
2.2. Post-Closing
Adjustment. (a) Seller
has prepared the attached Schedule
2.2
which
lists certain current asset and current liability accounts and certain
accounting principles, methodologies and policies to be used to determine the
Closing Working Capital. The Purchase Price shall be adjusted after the Closing
in accordance with this Section 2.2 based upon the actual Closing Working
Capital of the accounts shown on Schedule
2.2.
For
purposes hereof, the statement of the Closing Working Capital, together with
the
calculation of the Purchase Price that results from the determination of such
amount, shall be referred to as the “Closing
Statement.”
(b) The
Closing Statement shall be prepared on the basis of, and using the same
accounting principles, methodologies and policies, as specified in Schedule
2.2
and, to
the extent not specified therein, as used in preparing the Financial Statements.
If the Purchase Price as finally determined in accordance with this Section
2.2
(i) is less than the Estimated Purchase Price, Seller shall pay to
Purchaser the amount by which the Purchase Price falls short of the Estimated
Purchase Price, or (ii) exceeds the Estimated Purchase Price, Purchaser
shall pay to Seller the amount by which the Estimated Purchase Price falls
short
of the Purchase Price. Any such payment shall be made by wire transfer of
immediately available U.S. Dollar funds to an account designated by the party
receiving payment within three Business Days after the final determination
of
the Purchase Price. The amount of any such payment not made when due shall
bear
interest at a rate per annum equal to the rate announced by Citibank, N.A.
from
time to time as its “Base Rate”
plus
two percent (2%) from the third Business Day after the final determination
of
the Purchase Price. Any
amount owed by Seller to Purchaser pursuant to clause (b) may, at the
Purchaser’s option, be satisfied from the Escrowed Amount pursuant to the Escrow
Agreement.
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(c) As
promptly as practicable (and, in any event, within 120 days after the Closing),
Purchaser shall prepare and deliver to Seller the Closing Statement prepared
in
accordance with this Section
2.2.
If
Seller disagrees with the determination of the Closing Statement, Seller shall
notify Purchaser of such disagreement within 60 days after delivery of the
Closing Statement, which notice shall set forth any such disagreement in
reasonable detail. If Seller fails to deliver this notice by the end of such
60
days, Seller shall be deemed to have accepted the Closing Statement delivered
by
Purchaser. Matters included in the calculations in the Closing Statement that
are not objected to by Seller in such notice shall be deemed accepted by Seller
and shall not be subject to further dispute or review. During the 60-day period
of Seller’s review of the Closing Statement and the resolution of any disputes
that may arise under this Section 2.2, Purchaser will, upon reasonable notice
and during regular business hours, provide Seller and its accountants access
to
the books and records and personnel of the Companies and all documents,
schedules and workpapers used by Purchaser in the preparation of the Closing
Statement. Purchaser and Seller shall negotiate in good faith to resolve any
such disagreement, and any resolution agreed to in writing by Purchaser and
Seller shall be final and binding upon the parties.
(d) If
Purchaser and Seller are unable to resolve any disagreement as contemplated
by
Section 2.2(c) within 30 days after delivery by Seller of written notice of
such
disagreement, Purchaser and Seller shall jointly select a partner at a mutually
acceptable accounting firm to resolve such disagreement (the person so selected
shall be referred to herein as the “Accounting
Arbitrator”).
The
parties shall instruct the Accounting Arbitrator to consider only those items
and amounts set forth in the Closing Statement as to which Purchaser and Seller
have not resolved their disagreement. Purchaser and Seller shall use reasonable
best efforts to cause the Accounting Arbitrator to deliver to the parties,
as
promptly as practicable, a written report setting forth the resolution of any
such disagreement determined in accordance with the terms of this Agreement.
Such report shall be final and binding upon the parties. The fees, costs and
expenses of the Accounting Arbitrator shall be borne one-half by Purchaser
and
one-half by Seller; provided that if the Accounting Arbitrator determines that
one party’s position is completely correct, then such party shall pay none of
the fees, costs and expenses of the Accounting Arbitrator and the other party
shall pay all such fees, costs and expenses.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF SELLER
Except
as
set forth in the Disclosure Schedule delivered by Seller to Purchaser
simultaneously with the execution hereof, Seller represents and warrants to
Purchaser that all of the statements contained in this Article III are true
as
of the date of this Agreement (or, if made as of a specified date, as of such
date) and as of the Closing Date. For purposes of the representations and
warranties of Seller contained herein, disclosure in any section of the
Disclosure Schedule of any facts or circumstances shall be deemed to be adequate
response and disclosure of such facts or circumstances with respect to another
representation or warranty by Seller calling for disclosure of such information
if (a) a specific cross-reference is made to or from the appropriate Disclosure
Schedule for such other representation or warranty or (b) the disclosure is
described in sufficient detail such that its qualification of the other
representation or warranty is reasonably apparent. Except as set forth in the
Disclosure Schedule, Seller represents and warrants to Purchaser as of the
date
hereof (or, if the representation or warranty is made as of a specified date,
as
of such date), and as of the Closing Date, as follows:
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3.1. Organization.
Seller
and each of the Companies (a) is a corporation or other legal entity duly
organized, validly existing and, if applicable, in good standing under the
laws
of its jurisdiction of organization; (b) has all requisite corporate or other
legal entity power and authority to carry on its business as it is now being
conducted and to own the properties and assets it now owns; and (c) is duly
qualified or licensed to do business in every jurisdiction in which such
qualification is required. No meeting has been convened, resolution proposed,
petition presented or order made for the winding up of any Company. Seller
has
heretofore delivered to Purchaser, or made available for review by Purchaser,
complete and correct copies of the certificate of incorporation and by-laws
of
each Company, and all amendments thereto, as presently in effect.
3.2. Authorization.
Seller
has the requisite corporate power and authority and full legal right to execute,
deliver and perform this Agreement and to consummate the Closing and the Mercury
Contribution. The execution, delivery and performance by Seller of this
Agreement and the consummation by Seller of the Closing and the Mercury
Contribution have been duly authorized by the board of directors of Seller,
and
no other corporate action on the part of Seller or any Company is necessary
to
authorize the execution, delivery and performance by Seller of this Agreement
or
the consummation by Seller of the Closing and the Mercury
Contribution.
3.3. Execution;
Validity of Agreement.
This
Agreement has been duly executed and delivered by Seller, and, assuming due
and
valid authorization, execution and delivery hereof by Purchaser, is a valid
and
binding obligation of Seller, enforceable against Seller in accordance with
its
terms.
3.4. Consents
and Approvals; No Violations.
Except
for (i) the filing of reports by Seller under the Exchange Act and in accordance
with NASDAQ National Market and Toronto Stock Exchange rules and requirements
and (ii) filings, permits, authorizations, consents and approvals as may be
required under the HSR Act and applicable non-U.S. laws with respect to foreign
investment and competition, and other applicable requirements of state or
provincial securities or blue sky laws, none of the execution, delivery or
performance of this Agreement by Seller or the consummation by Seller of the
Closing or the Mercury Contribution will (a) conflict with or result in any
breach of any provision of the certificate of incorporation or by-laws of Seller
or any of the Companies, (b) require any filing with, or permit, authorization,
consent or approval of, any Governmental Entity, (c) result in a violation
or
breach of, or constitute (with or without notice or lapse of time or both)
a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any contract, agreement,
insurance policy, loan, lease, license, guarantee or commitment by which the
Companies or any of their respective assets or properties are bound, (d) violate
any statute, law, constitutional provision, code, regulation, ordinance, rule,
ruling, judgment, decision, order, writ, injunction, decree, permit, concession,
grant, franchise, license, agreement, directive, binding guideline or policy,
or
rule of common law, requirement of or other governmental restriction of or
determination by any Government Entity or any interpretation of any of the
foregoing by any Governmental Entity (“Law”)
applicable to Seller, any of the Companies or any of their properties or assets,
or (e) result in the creation or imposition of any Encumbrance (other than
a Permitted Encumbrance) on any properties or assets of the Companies, excluding
from the foregoing clauses (b), (c) and (d) such violations, breaches and
defaults which would become applicable as a result of the business or activities
in which Purchaser is or proposes to be engaged (to the extent different from
the businesses engaged in by the Companies) or as a result of any acts or
omissions by, or the status of any facts pertaining specifically to, Purchaser
or any of its Affiliates (other than the Companies).
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3.5. Ownership
and Possession of Shares.
As of
the Closing, Seller is the registered and beneficial owner of all the issued
and
outstanding Shares, free and clear of all Encumbrances whatsoever, except for
any Encumbrances created by this Agreement and Encumbrances arising under the
Securities Act or any applicable state or provincial securities
laws.
3.6. Capitalization.
The
issued and outstanding capital stock of each Base Company consists exclusively
of the Shares. Metaca is the registered holder and beneficial owner of all
of
the shares issued in the capital of Placard. MDC Holdco is the registered holder
and beneficial owner of all of the shares issued in the capital of AP. Seller
is
the registered holder and beneficial owner of all of the shares issued in the
capital of Mercury. All the Shares are duly authorized, validly issued, fully
paid and non-assessable. There are no options, rights or agreements to which
any
of Seller, any Company or any of their respective Subsidiaries is a party or
by
which any of them is bound obligating any of them (a) to issue, deliver or
sell,
or refrain from issuing, delivering or selling, any shares of capital stock
of
any Company or any Subsidiary, or to grant, extend or enter into any such
option, right or agreement, (b) to repurchase, redeem or otherwise acquire,
or
to refrain from repurchasing, redeeming or otherwise acquiring, any shares
of
capital stock of any Company or any Subsidiary, or to grant, extend or enter
into any such option, right or agreement or (c) to vote, or to refrain from
voting, any shares of capital stock of any Company or any
Subsidiary.
3.7. Subsidiaries
and Affiliates.
Schedule 3.7 of the Disclosure Schedule sets forth, as of the date hereof,
a
complete list of each Subsidiary of each Company, and each Subsidiary is
wholly-owned by such Company. Except as set forth on the Disclosure Schedule,
none of the Companies has any Subsidiaries and none of the Companies otherwise
owns, any shares in the capital of or any interest in, or control, directly
or
indirectly, any corporation, partnership, association, joint venture, business
trust, or other business entity.
3.8. Financial
Statements.
True
and complete copies of the Financial Statements are included in the Disclosure
Schedule. The Financial Statements have been prepared in accordance with
applicable GAAP (subject, in the case of the Interim Financials, to the absence
of notes and to normal recurring year-end adjustments) and present, in all
material respects, the financial position and the results of operations of
each
Company as of the dates and for the periods referred to therein. Each of the
balance sheets included in the Financial Statements fairly and accurately
presents, in all material respects, the financial condition of each Company
as
of its respective date. Each of the statements of income, retained earnings
and
cash flows, if any, included in the Financial Statements fairly and accurately
present, in all material respects, the results of operations of each Company
for
the periods covered thereby.
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3.9. Absence
of Certain Changes.
(a) Since
the
Balance Sheet Date, (i) no event, change or circumstance that would have a
Company Material Adverse Effect has occurred, and (ii) except as set forth
in Section 3.9 of the Disclosure Schedule, each Company has carried on its
business only in the ordinary course, and there has not been (A) any change
in
the assets, liabilities, sales, income or business of such Company or in the
relationships with suppliers, customers or lessors, other than changes which
were both in the ordinary course of business and have not been, either in any
case or in the aggregate, materially adverse; (B) any damage, destruction or
loss, whether or not covered by insurance, materially and adversely affecting,
either in any case or in the aggregate, the property or business of such
Company; (C) any forgiveness or cancellation of any debt or claim by such
Company or any waiver of any right of material value other than compromises
of
accounts receivable in the ordinary course of business; (D) any entry by such
Company into any transaction other than in the ordinary course of business;
or
(D) any discharge or satisfaction by such Company of any lien or encumbrance
or
payment by such Company of any obligation or liability (fixed or contingent)
other than (x) current liabilities included in the Year-End Balance Sheet or
the
Closing Statement and (y) current liabilities incurred since the date of the
Year-End Balance Sheet in the ordinary course of business.
(b) Except
as
set forth on Schedule 3.9 or as contemplated in connection with the transactions
set forth in this Agreement, since the Balance Sheet Date, no Company
has:
(i) (x)
amended its certificate of incorporation or by-laws or similar organizational
documents or (y) (A) issued, sold, transferred, pledged, disposed of or
encumbered any shares of any class or series of its capital stock, or securities
convertible into or exchangeable for, or options, warrants, calls, commitments
or rights of any kind to acquire, any shares of any class or series of its
capital stock, (B) declared, set aside or paid any non-cash dividend or any
other distribution payable in stock or property (other than cash and cash
equivalents) with respect to any shares of any class or series of its capital
stock, (C) split, combined or reclassified any shares of any class or series
of
its stock or (D) redeemed, purchased or otherwise acquired directly or
indirectly any shares of any class or series of its capital stock, or any
instrument or security which consists of or includes a right to acquired such
shares;
(ii) made
any
change in the compensation, pension or other benefits payable or to become
payable to any of its employees (other than normal recurring increases in the
ordinary course of business or pursuant to plans, programs or agreements
existing on the date hereof);
(iii) adopted
a
plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other corporate reorganization of such
Company;
(iv) changed
in any material respect any of the accounting methods used by it unless required
by applicable GAAP and disclosed to Purchaser in writing;
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(v) become
legally committed to any new capital expenditure requiring expenditures after
the Closing in excess of $50,000, except for expenditures pursuant to projects
for which work has already been commenced or committed;
(vi) except
in
the ordinary course of business, sold, leased, licensed, mortgaged or created
an
Encumbrance upon (other than Permitted Encumbrances) any of its respective
assets or properties at a price in excess of $50,000 in the aggregate or in
a
transaction that is not arms-length;
(vii) made
any
loans or advances to any Person such that the amount of principal owed by such
Person to any Company shall be in excess of $10,000; and
(viii)
entered
into any agreement, contract or commitment to do any of the
foregoing.
3.10. Property
and Assets.
(a)
Each of the Companies has good and marketable title to, or a valid lease,
license or right to use, all assets, properties and rights used by it. Those
real and other tangible properties purported to be owned by each of the
Companies are held free and clear of all Encumbrances other than (i)
Encumbrances for Taxes not yet due and payable, (ii) mechanics’, materialmen’s,
carriers’, workers’, repairers’, landlords’ and similar Encumbrances arising or
incurred in the ordinary course of business, (iii) zoning, entitlement, building
and other land use regulations that are not violated by current occupancy or
use
and (iv) customary covenants, conditions, restrictions, easements and similar
restrictions of record affecting title that do not impair current occupancy
or
use (clauses (i) through (iv) being “Permitted
Encumbrances”).
All
tangible assets owned or leased by each Company are in satisfactory operating
condition for the uses to which they are being put, subject to ordinary wear
and
tear and ordinary maintenance requirements. Section 3.10(a)(i) of the
Disclosure Schedule sets forth a complete list of all Real Property and
specifies which Real Property is owned and which is leased. Section 3.10(a)(ii)
of the Disclosure Schedule sets forth a complete and correct list of all capital
assets of each of the Companies having a book or fair market value in excess
of
$25,000. There are no material defects in any such capital assets (subject
to
ordinary wear and tear and ordinary maintenance requirements) or Real Property,
as to title or condition, not described in Section 3.10(a)(i)
or
3.10(a)(ii)
of the
Disclosure Schedule. Neither Seller nor any of the Companies has received any
notice that either the whole or any portion of the Real Property is to be
condemned, expropriated, requisitioned or otherwise taken by any public
authority. Neither Seller nor any of the Companies has any knowledge of any
public improvements that may result in special assessments against any of the
Real Property. Section 3.10(a)(i) of the Disclosure Schedule sets forth (i)
a
complete and correct description of all leases of Real Property to which any
of
the Companies is a party and (ii) a complete and accurate list of the street
addresses of all real property leased by any of the Companies. Complete and
correct copies of all such leases have been delivered or made available to
Purchaser. Each such lease is valid and subsisting, and no action has been
taken
or omitted by any Company or the Seller and, to the Knowledge of the Seller,
no
other event or condition exists, which constitutes, or after notice or lapse
of
time or both would constitute, a default under any such lease. The leasehold
interests of each Company are subject to no lien or other encumbrance, and
such
Company is in quiet possession of the properties covered by such leases.
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(b) Except
as
set forth in Section 3.10(b) of the Disclosure Schedules, the property and
assets transferred to Mercury in accordance with the Mercury Contribution,
when
utilized with a labor force substantially similar to that employed by the
Company immediately prior to the Mercury Contribution, are adequate and
sufficient to conduct the business of Mercury as conducted by the Seller
immediately prior to the Mercury Contribution. Such properties and assets,
taken
as a whole, constitute all of the properties and assets used primarily or held
primarily for use in connection with the business conducted by
Mercury.
3.11. Leases,
Contracts and Commitments.
(a) Section
3.11 of the Disclosure Schedule sets forth, as of the date hereof, a complete
list of every binding contract, agreement, loan, lease, license, joint venture
agreement, tax sharing agreement, guarantee or commitment to which each Company
and each Subsidiary of such Company is a party and that (i) provides for future
payments, or pursuant to which payments were received or made during the one
(1)
year period ending on the date hereof, by a Company or any Subsidiary of that
Company, or to a Company or any Subsidiary of that Company, of more than $50,000
per annum (excluding contracts terminable on 30 days notice or less without
penalty, and purchase orders and invoices entered into or incurred in the
ordinary course of business); (ii) is a collective bargaining or similar
agreement; or (iii) materially restricts a Company from engaging in any business
activity anywhere in the world. Except as expressly set forth in Section 3.11
of
the Disclosure Schedule, no Company is a party to or subject to any contract
with any officer, director or Affiliate of Seller or any of the
Companies.
(b) There
is
not and, to the Knowledge of Seller, there has not been claimed or alleged
by
any Person, with respect to any contract listed in Section 3.11 of the
Disclosure Schedule, any existing default or event that, with notice or lapse
of
time or both, would constitute a default or event of default on the part of
any
Company or, to the Knowledge of Seller, on the part of any other party thereto.
Each Company has in all material respects performed all obligations required
to
be performed by it to date under each such material contract. Subject to
obtaining any necessary consents by the other party or parties to any such
material contract (the requirement of any such consent being reflected in
Section 3.4 of the Disclosure Schedule), no such material contract includes
any
provision the effect of which may be to enlarge or accelerate any obligations
of
any Company upon or after the Closing or give additional rights to any other
party thereto or will in any other way be affected by, or terminate or lapse
by
reason of, the transactions contemplated by this Agreement.
3.12. Insurance.
Section
3.12 of the Disclosure Schedule lists all insurance policies in effect as of
the
date hereof that are owned or held by each Company or that provide coverage
with
respect to the business or assets of each of the Companies. All such insurance
policies are valid and currently effective insurance policies with financially
sound and reputable companies funds and underwriters in such types and amounts
as are consistent with customary practices and standards of companies engaged
in
business and operations similar to those of such Company. All such policies
(a)
are in full force and effect, (b) are and have been sufficient for compliance
in
all material respects by each of the Companies with all requirements of law
and
all agreements to which such Company is a party, and (c) provide that they
will
remain in full force and effect, and all related premiums have been paid,
through the respective dates set forth in Section 3.12 of the Disclosure
Schedule. The Companies shall have access to recovery of claims under such
insurance policies owned or held by each Company until such expiration dates.
Neither Seller nor any of the Companies is in default in any material respect
with respect to its obligations under any of such insurance policies and has
not
received any notification of cancellation of any such insurance policies. No
insurance carrier has denied coverage for any claim asserted by any of the
Companies since January 1, 2000, nor has any insurance carrier declined to
provide any coverage to any of the Companies since January 1, 2000. As of the
Closing Date, no applicable limits under any such policies have been exhausted
or significantly diminished. Except as set forth in Section 3.12 of the
Disclosure Schedules, since January 1, 2001, there has been no lapse in coverage
in respect of any area of liability or loss addressed by the insurance policies
listed in Section 3.12 of the Disclosure Schedules.
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10 -
3.13. Litigation.
Except
as set forth in Section 3.13 of the Disclosure Schedule, none of the Companies
is a party to, or, to the Knowledge of Seller, threatened to be made a party
to,
any actions, suits, proceedings, grievances, hearings or investigations. Seller
is not a party to or, to the Knowledge of the Seller, threatened to be made
a
party to any actions, suits, proceedings, hearings or investigations of, in
or
before any Governmental Entity that challenges the validity of this Agreement
or
any action taken or to be taken by Seller pursuant to this
Agreement.
3.14. Environmental
Matters.
Except
as set forth in Section 3.14 of the Disclosure Schedule, (i) neither the
Companies nor any of their respective Subsidiaries are in violation or, to
the
Knowledge of Seller, alleged violation of any Environmental Laws and (ii) none
of the Real Property or, to the Knowledge of Seller any real property formerly
owned, leased or used by the Companies or any of their respective Subsidiaries
(the “Former
Real Property”)
are in
violation or alleged violation of any Environmental Laws.
(a) None
of
the Companies or any of their respective Subsidiaries has received any notice
from any third party, including, without limitation, any Governmental Entity,
that (i) any of the Companies or any of their Subsidiaries has been identified
by the United States Environmental Protection Agency (“EPA”)
as a
potentially responsible party under CERCLA with respect to a site listed on
the
National Priorities List, 40 C.F.R. Part ▇▇▇ ▇▇▇▇▇▇▇▇ ▇ (1986); (ii) any
Hazardous Substances which any of the Companies, any of their Subsidiaries
or
any of their respective predecessors-in-interest has generated, transported
or
disposed of has been found at any site at which a Governmental Entity or other
third party has conducted or has ordered that any of the Companies, any of
their
Subsidiaries or any of their respective predecessors-in-interest conduct a
remedial investigation, removal or other response action pursuant to any
Environmental Law; (iii) any of the Companies, any of their Subsidiaries or
any
of their respective predecessors-in-interest is, shall or may be a named party
to any claim, action, cause of action, complaint, (contingent or otherwise)
legal or administrative proceeding arising out of any third party’s incurrence
of costs, expenses, losses or damages of any kind whatsoever in connection
with
the presence or release of Hazardous Substances; (iv) alleges any past or
present violations or gives notice of an investigation regarding possible past
or present violations of any Environmental Laws by any of the Companies or
any
of their Subsidiaries; or (v) alleges any event, condition, circumstance,
activity, practice, incident, action or plan which is reasonably likely to
interfere with or prevent continued compliance with or which would give rise
to
any common law or statutory liability, or otherwise form the basis of any claim,
action, suit or proceeding, against any of the Companies or any of their
Subsidiaries based on or resulting from the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling, or
the
emission, discharge or release of any Hazardous Substance. The Seller has no
Knowledge of any matter that would require notification to any Governmental
Entity or could entitle any Governmental Entity to require monitoring, closure,
clean up or remediation under any Environmental Law.
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11 -
(b) (i)
To
the
Knowledge of Seller,
no
portion of any of the Real Property or the Former Real Property has been used
for the handling, manufacturing, processing, storage or disposal of Hazardous
Substances, and no underground tank or other underground storage receptacle
for
Hazardous Substances is located on such properties; (ii) in the course of any
activities conducted by any of the Companies, any of their Subsidiaries or,
to
the Knowledge of Seller, any of their respective predecessors-in-interest on
any
of the Real Property or, the Former Real Property, no Hazardous Substances
have
been generated, imported, transported, used, handled, processed, stored or
disposed of except in accordance with applicable Environmental Laws; (iii)
to
the Knowledge of Seller, the Real Property does not contain any Hazardous
Substances, other than Hazardous Substances the presence and condition of which
comply with applicable Environmental Laws; (iv) there have been no releases
or,
to the Knowledge of Seller, threats of releases of Hazardous Substances on,
upon, or into or from the vicinity of any of the Real Property or Former Real
Property; and (v) any Hazardous Substances that have been generated at any
of
the Real Property or Former Real Property or by any of the Companies or their
Subsidiaries have been transported offsite only by carriers having
identification numbers issued by the EPA or otherwise in compliance in all
material respects with applicable law, and have been treated or disposed of
only
by treatment or disposal facilities maintaining valid permits as required under
applicable Environmental Laws.
(c) None
of
the Real Property is or shall be subject to any applicable environmental cleanup
responsibility law or environmental restrictive transfer law or regulation,
by
virtue of the transactions set forth herein and contemplated
hereby.
3.15. Compliance
with Laws.
(a)
Except
as set forth in Section 3.15 of the Disclosure Schedule, each Company is in
possession of all material franchises, grants, authorizations, licenses,
permits, easements, variances, exceptions, consents, certificates, approvals
and
orders of any Governmental Entity that is necessary for it to carry on its
business as it is now being conducted and no suspension or cancellation of
any
of the foregoing is pending or, to the Knowledge of Seller, threatened. Each
of
the Companies has and maintains the permits listed in Section 3.15 of the
Disclosure Schedules (collectively, the “Permits”)
and
such Permits include all material licenses, permits and other authorizations
from all Governmental Entities as are required under Environmental Laws or
are
otherwise necessary for the conduct of the business or operations of the
Companies and each of their respective Subsidiaries, and the Companies and
each
of their Subsidiaries are in material compliance with all of the Permits. Except
as expressly designated in Section 3.15 of the Disclosure Schedule, the
Companies and their respective Subsidiaries have complied in all material
respects with all Laws applicable to their businesses, assets and employees.
None of the Companies nor any of their respective Subsidiaries have received
notice of any contravention or allegation of any contravention of any such
applicable Law.
-
12 -
(b) Except
as
set forth in Schedule 3.15(b), Placard has complied in
all
material respects at all times with all Privacy
Laws,
and has
collected, used and disclosed such personal information in accordance with
applicable privacy policies, notices, guidelines and statements made available
to its customers
(or
required by its customers),
employees or other individuals or to the public from time to time. The execution
of this Agreement and the consummation of the transactions contemplated hereby
will not result in a breach of such Privacy
Laws,
policies, notices, guidelines or statements.
No
Person has claimed,
and, to
the Knowledge of Seller, no grounds exist for a Person to claim, compensation
from Placard for a breach of any such Privacy Laws, policies, notices,
guidelines or statements.
(c) Except
as
set forth in Schedule 3.15(b), Seller and each of the Companies has complied
in
all material respects at all times with all applicable laws respecting the
collection, use and disclosure of personal information, and has collected,
used
and disclosed such personal information in accordance with applicable privacy
policies, notices, guidelines and statements made available to its customers
(or
requested by its customers), employees or other individuals or to the public
from time to time. The execution of this Agreement and the consummation of
the
transactions contemplated hereby will not result in a breach of such laws,
policies, notices, guidelines or statements.
(d) All
consents required to be obtained in connection with the disclosure to Purchaser
by Seller and the Companies of any personal information in connection with
Purchaser’s evaluation of, or for the completion and consummation of, the
transactions contemplated by this Agreement and all such consents as are
necessary to permit Purchaser to use such personal information following the
Closing have been obtained. Seller and each of the Companies have disclosed
to
Purchaser the purposes for which such personal information was
collected.
3.16. Employee
Benefit Plans.
(a)
Section 3.16 of the Disclosure Schedule contains a true and complete list of
all
Plans. Seller has heretofore made available to Purchaser a true and complete
copy of each written Plan (or, with respect to any Plan which is not written,
a
summary thereof), and with respect to each such Plan, true and complete copies
of any amendments thereto, any associated trust, custodial, insurance or service
agreements and any material written policies or procedures used in Plan
administration, any annual report, any material actuarial report, or material
disclosure materials including, without limitation, any summary plan description
submitted to any governmental agency or distributed to participants or
beneficiaries thereunder in the current or preceding calendar year, each
agreement creating or modifying any related trust or other funding vehicle,
and
the most recently received IRS determination letters and any governmental
advisory opinions, rulings, orders compliance statements, closing agreements
or
similar materials specific to such Plan.
(b) No
liability under Title IV or Section 302 of ERISA has been incurred by any
Company or any ERISA Affiliate that has not been satisfied in full.
(c) The
PBGC
has not instituted proceedings to terminate any Title IV Plan and no condition
exists that presents a material risk that such proceedings will be
instituted.
-
13 -
(d) No
Title
IV Plan is a “multi-employer pension plan,” as defined in Section 3(37) of
ERISA, nor is any Title IV Plan a plan described in Section 4063(a) of ERISA.
Except as set out in Section 3.16 of the Disclosure Schedule, no Plan that
is a
“registered pension plan” as that term is defined in subsection 248(1) of the
Income Tax Act (Canada) (hereinafter an “RPP”) is a multi-employer pension plan
as defined under the provisions of applicable Law.
(e) Each
Plan
is and has heretofore been established, registered, qualified, funded, invested
and administered in all material respects in accordance with its terms and
in
all material respects with the requirements of applicable Law, including ERISA,
the Code and the Income Tax Act (Canada) and in accordance with all
understandings, written or oral, between the Seller or any Company and employees
or former employees of any Company.
(f) All
liabilities of the Companies (whether accrued, absolute, contingent or
otherwise) related to all Plans have been fully and accurately disclosed in
accordance with GAAP in the Financial Statements and will be fully and
accurately disclosed in the Closing Statement in all material
respects.
(g) No
improvements to any Plan have been promised and no amendments or improvements
to
any Plan will be made or promised by any Company or the Seller prior to
Closing.
(h) Each
Plan
intended to be “qualified” within the meaning of Section 401(a) of the Code has
been determined to be so qualified by the Internal Revenue Service (or, where
there is no determination letter but a qualified plan is based upon a master
and
prototype or volume submitter form, the sponsor of such form has received an
advisory opinion as to the form upon which any Company is entitled to rely
under
applicable Internal Revenue Service procedures) and, to the Knowledge of Seller,
no event or circumstance exists that has or is likely to result in the
revocation of such qualification or which requires or could require action
under
the compliance resolution programs of the IRS to preserve such
qualification.
(i) To
the
Knowledge of Seller, there is no pending or threatened legal action, legal
or
regulatory proceeding or investigation, other than routine or immaterial claims
for benefits, concerning any Plan or, to the Knowledge of the Seller, any
fiduciary or service provider thereof and to the Knowledge of the Seller, there
is no basis for any such legal action, proceeding or investigation. No event
has
occurred with respect to any RPP which would entitle any Person to cause the
wind-up or termination of such RPP in whole or in part.
(j) Except
with respect to those Plans identified on Section 3.16 of the Disclosure
Schedule, no Plan provides benefits subsequent to termination of employment
to
employees or their beneficiaries (except as required by applicable state
insurance laws and Title I, Part 6 of ERISA).
(k) With
respect to each Plan for which a separate fund of assets is or is required
to be
maintained, full payment has been made of all amounts that Seller is required,
under the terms of each such Plan, applicable Law or any collective bargaining
agreement, to have paid as contributions to that Plan as of the Closing Date
and
each such Plan is fully funded or fully insured on an ongoing, solvency and
wind-up basis.
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14 -
(l) The
execution of this Agreement and the consummation of the transactions
contemplated hereby (including the Mercury Contribution) will not, by itself
or
in combination with any other event, result in any payment (whether of severance
pay or otherwise) becoming due from any Plan to any current or former director,
officer, consultant or employee of the Seller or result in the vesting,
acceleration of payment or increases in the amount of any benefit payable to
or
in respect of any such current or former director, officer, consultant or
employee.
(m) Each
Plan
subject to the laws of any jurisdiction outside of the United States (i) if
intended to qualify for special tax treatment meets all requirements for such
treatment, (ii) is fully funded and has been fully accrued for on the applicable
Company’s financial statements, and (iii) if required to be registered, has been
registered with the appropriate authorities and has been maintained in good
standing with the appropriate regulatory authorities.
(n) Placard
has complied with its obligations under the governing rules of the relevant
Plan, including making all contributions required to be made under those rules
and any agreement with any present employees of Placard.
(p) Placard
is not an employer sponsor in an Australian Superannuation Arrangement. Placard
contributes to an Australian Superannuation Arrangement and does not have any
other obligation, liability or duty to make any payment to any person, in
respect of any Australian Superannuation Arrangements.
(q) Placard
is not required to make superannuation contributions to an Australian
Superannuation Arrangement that provides defined benefits (whether or not that
Australian Superannuation Arrangement also provides accumulation style
benefits).
(r) A
change
of control in Placard will not change the existing participation / contribution
arrangements with an Australian Superannuation Arrangement that it currently
contributes to.
(s) Placard
has complied with all of its superannuation obligations, duties and liabilities
in respect of its employees under all laws and regulations.
(t) Except
in
the case of Ganesh Ganeshalingham, Placard contributes superannuation on behalf
of each employee at a rate not exceeding 9%.
(u) In
respect of all its employees, Placard has paid an amount not less than the
minimum superannuation contributions on the correct earnings base so as to
not
incur liability under the Superannuation Guarantee (Administration) ▇▇▇ ▇▇▇▇
or
the Superannuation Guarantee Charge ▇▇▇ ▇▇▇▇.
(v) There
is
no matching of superannuation contribution arrangement in place.
(w) Prior
to
and as at the Closing Date, no superannuation contributions were or are required
to be made by Placard in respect of any contractors.
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15 -
3.17. Tax
Matters.
(a) Each
of
the Companies has timely filed (or has been appropriately included in) any
Tax
Returns required to be filed by or with respect to it. All such Tax Returns
are
true, correct and complete in all material respects. All Taxes payable by each
Company or any of its Subsidiaries (whether or not showing on any Tax Return)
have been timely paid. Except for an extension granted until September 15,
2006,
for MDC Holdco and its Subsidiaries to file its 2005 consolidated tax return,
none of the Companies nor any of their Subsidiaries currently is the beneficiary
of any extension of time within which to file any Tax Return. No written claim
has ever been made by any taxing authority in a jurisdiction in which a Company
or Subsidiary does not file Tax Returns that such Company or Subsidiary, as
the
case may be, is or may be subject to taxation in that jurisdiction.
(b) There
are
no Encumbrances for Taxes upon any property or assets of the Companies, except
for Encumbrances for Taxes not yet due and payable. Each Company and each of
its
Subsidiaries has withheld and paid or remitted to the appropriate Governmental
Entity all Taxes required to have been withheld and paid or remitted in
connection with any amounts paid or owing to any present or former employee,
independent contractor, creditor, stockholder, non-resident (or deemed
non-resident) or other third party. Each Company and its Subsidiaries has
charged, collected and remitted, on a timely basis, all Taxes as required under
applicable Law on any sale or delivery whatsoever, made by such
entity.
(c) No
federal, state, provincial, local or foreign audits, examinations,
investigations or other administrative proceedings (such audits, examinations,
investigations and other administrative proceedings referred to collectively
as
“Audits”)
or
court proceedings are presently pending or, to the Knowledge of Seller,
threatened with regard to any Taxes or Tax Returns filed by or on behalf of
any
Company or any of its Subsidiaries, and none of the Companies nor any of their
Subsidiaries has received a written notice from any taxing authority of any
intention to open such an Audit, a request for information related to Tax
matters, or a notice of deficiency or proposed adjustment or reassessment or
a
notice of reassessment that is outstanding for any amount of Tax proposed
asserted or assessed against any Company or any of its Subsidiaries. There
are
no outstanding requests, agreements, consents or waivers to extend the statutory
period of limitations applicable to the assessment or reassessment of any Taxes
or deficiencies against any Company or any Subsidiary of a Company.
(d) None
of
the Companies nor any of their Subsidiaries is a party to any material tax
sharing, tax indemnity or other agreement or arrangement with any Person. No
Company nor any Subsidiary of the Companies is a party to any agreement,
contract, arrangement or plan that has resulted or could result, separately
or
in the aggregate, in the payment of any “excess parachute payment” within the
meaning of section 280G of the Code, or any amount that would not be fully
deductible as a result of the application of Section 162(m) of the Code (or,
in
each case, any corresponding provision of state, local or foreign law). None
of
the Companies nor any of their Subsidiaries has been a United States real
property holding corporation within the meaning of section 897(c)(2) of the
Code
during the applicable period specified in section 897(c)(1)(A)(ii). None of
the
Companies nor any of their Subsidiaries has been a member of an affiliated
group
filing a consolidated return within the meaning of section 1502 of the Code
and
the Treasury Regulations promulgated thereunder, other than such a group the
common parent of which was such Company, and none of the Companies nor any
of
their Subsidiaries has any liability for the Taxes of any other Person pursuant
to Treasury Regulation section 1.1502-6 (or any corresponding provision of
state, local, or foreign law), as a transferee or successor, by contract or
otherwise.
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16 -
(e) The
unpaid Taxes of the Companies and their Subsidiaries did not, as of the most
recent fiscal month end, exceed the accrual for Tax liability (rather than
any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the Financial Statements as of
the
Balance Sheet Date, and will not exceed that accrual as adjusted for the passage
of time through the Closing Date in accordance with the past practice and custom
of the Companies and their Subsidiaries in filing their Tax Returns. Since
the
Balance Sheet Date, none of the Companies nor any of their Subsidiaries has
incurred any liability for Taxes arising from extraordinary gains or losses,
as
that term is defined for purposes of GAAP, other than in the ordinary course
of
business consistent with past custom and practice.
(f) None
of
the Companies nor any of their Subsidiaries
will 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 (1) a change in method of accounting for a
taxable period (or portion thereof) ending on or before the Closing Date, (2)
any “closing agreement” as described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign Law), (3) any “intercompany
transaction” or “excess loss account” within the meaning of the Treasury
Regulations (or any corresponding provision of state, local or foreign Law),
(4)
any installment sale or open transaction made on or prior to the Closing Date,
or (5) as a result of any prepaid amount received on or prior to the Closing
Date.
(g) None
of
the Companies nor any of their Subsidiaries has distributed stock of another
Person, or had its stock distributed by another Person, in a transaction that
was purported or intended to be governed in whole or in part by section 355
or
section 361 of the Code. None of the Companies nor any of their
Subsidiaries
has
participated, within the meaning of Treasury Regulation Section 1.6011-4(c),
in
(A) any “reportable transaction” within the meaning of Section 6011 of the Code,
and the Treasury Regulations thereunder, (B) any “confidential corporate tax
shelter” within the meaning of Section 6111 of the Code and the Treasury
Regulations thereunder, or (C) any “potentially abusive tax shelter” within the
meaning of Section 6112 of the Code and the Treasury Regulations
thereunder.
(h) Each
plan, program,
arrangement or agreement that constitutes in any part a nonqualified deferred
compensation plan within the meaning of Section 409A of the Code is identified
as such on Section 3.17(h) of the Disclosure Schedule. Since December 31, 2004,
each plan, program, arrangement or agreement identified or required to be
identified on Schedule
3.17(h)
has been
operated and maintained in all material respects in accordance with the
requirements of IRS Notice 2005-1 and a good faith, reasonable interpretation
of
Section 409A of the Code and its purpose with respect to amounts deferred
(within the meaning of Section 409A of the Code) after December 31,
2004.
-
17 -
(i) None
of
the Companies nor any of their Subsidiaries have participated, directly or
through a partnership, in a transaction or series of transactions contemplated
in subsection 247(2) of the Tax Act or any comparable Law of any province
or territory in Canada.
No
items
of income or expense will be reallocated under Section 482 of the Code or any
similar provision under applicable state or local Law for any taxable
period (or portion thereof) ending after the Closing Date with respect to
any material transactions or arrangements between or among any of a Company,
its
Subsidiaries, or any of its or their Affiliates.
(j) None
of
the Companies nor any of their Subsidiaries will be required to include in
a
taxable period ending after the Closing Date any amount of net taxable income
(after taking into account deductions claimed for such a period that relate
to a
prior period) attributable to income that accrued in a prior taxable period
but
that was not included in taxable income for that or another prior taxable
period. Without limiting the generality of the foregoing, there are no
circumstances existing which could result in the application to a Company or
any
of its Subsidiaries of sections 78, 80, 80.01, 80.02, 80.03, 80.04 or 160 of
the
Tax Act or any analogous provision of any comparable Law of any province or
territory of Canada.
(k) Seller
is
not a non-resident of Canada for purposes of section 116 of the Tax
Act.
(l) Solely
with respect to Tax matters relating to Placard:
(i) No
asset
of Placard has been the subject of a claim for rollover relief under Part IIIA
of the ITAA 1936 or Subdivision 126-B of the ITAA 1997 in circumstances where
there might be an application of either section 160ZZOA of the ITAA 1936 or
Subdivision
104-J of the ITAA 1997.
(ii) Placard:
| (A) |
is
registered for GST under the GST Law, if required by the GST
Law;
|
| (B) |
has
complied in all respects with the GST Law;
and
|
| (C) |
is
not in default of any obligation to make any payment or return (including
any Business Activity Statement) or notification under the GST
Law.
|
(m)
Solely
with respect to Placard, no third-party debt forgiveness has occurred prior
to
the Closing Date.
3.18. Intellectual
Property.
Section
3.18 of the Disclosure Schedule sets forth a complete and accurate list of
(a)
all patents, trademarks, trade names, industrial designs and domain names and
all copyright registered in the name of any of the Companies by any of the
Companies, all applications therefor, and all licenses (as licensee or licensor)
and other material agreements relating thereto other than licenses relating
to
off-the-shelf software, and (b) all written agreements relating to any other
Intellectual Property and any other technology, know-how and processes which
any
Company is licensed or authorized by others to use or which any Company has
licensed or authorized for use by others other than licenses relating to
off-the-shelf software. Each of the Companies owns, or is licensed to use or
otherwise possesses legally enforceable rights in, its Company Intellectual
Property. Immediately after the Closing, each Company will continue to have
the
right to use or otherwise exploit the Company Intellectual Property in the
same
manner as such Company Intellectual Property is used or otherwise exploited
by
such Company prior to the Closing. To the Knowledge of Seller, there are no
oppositions, cancellations, invalidity proceedings, interferences or
re-examination proceedings pending with respect to any Company Intellectual
Property. To the Knowledge of Seller, the use by each Company of its Company
Intellectual Property does not infringe any Intellectual Property rights of
any
third party. Neither Seller nor any of the Companies has received any written
notice from any third party challenging the right of any Company to use any
of
the Company Intellectual Property. To the Knowledge of the Seller, there has
never been any instance of confusion between the Company and any entity with
the
element "Mercury Graphics" in its name nor, except as disclosed in the
Disclosure Schedule, any communication from or to any third party regarding
an allegation of a likelihood of confusion between the Company and such
entity.
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18 -
3.19. Labor
Matters.
Except
as set forth in Section 3.19 of the Disclosure Schedule, there is no labor
strike, dispute, slowdown, stoppage, lockout or other form of industrial labor
action currently in effect, pending, or to the Knowledge of Seller, threatened
against any Company.
(a) Except
as
set forth in Section 3.19 of the Disclosure Schedule, none
of the
Companies is a party to or bound by any collective bargaining
agreement
(which
includes, with respect to Placard, any registered or unregistered collective
agreement),
labor
contract, letter of understanding, letter of intent of voluntary recognition
agreement with any labor, union, trade or employee organization.
Except
as set forth in Section 3.19 of the Disclosure Schedule, Placard is not bound
by
any state or federal award, or any Notional Agreement Preserving State Awards
or
Preserved State Agreement (as defined in the Australia Workplace
Relations Act 1996)
derived
from a state award or agreement, with respect to its employees.
(b) No
labor union
has been
certified as bargaining agent for any of the employees of any
Company,
and,
with respect to Placard, no trade union other than the Australian Manufacturing
Workers' Union is involved in the business of Placard. None of the Companies
is
a party to or bound by any collective bargaining agreement, labour contract,
letter of understanding, letter of intent, or voluntary recognition agreement
with any labour union, trade union, or employee organization.
(c) There
is
no unfair labor practice charge or complaint pending or threatened against
any
Company nor are the employees of any Company currently subject to any union
organization effort.
(d) Since
the
enactment of the WARN Act, none of the Companies has effectuated a “plant
closing”
(as
defined in the WARN Act) affecting any site of employment or one or more
facilities or operating units within any site of employment or facility of
the
Companies, and there has not occurred a “mass
layoff”
(as
defined in the WARN Act) or any mass termination under other applicable laws
affecting any site of employment or facility of the Companies.
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(e) There
are
no outstanding orders or, to the Knowledge of Seller, investigations made under
applicable occupational health and safety legislation related to any Company.
There are no current, pending or, to the Knowledge of Seller, threatened charges
against any Company under occupational health and safety laws. There have been
no fatal or critical accidents which have occurred in the course of the
operation of the businesses which might lead to charges under such laws. To
the
Knowledge of Seller, there are no materials present in the operation of any
Company which may result in an occupational disease.
(f) Placard
has complied in all material respects with all awards, collective agreements
and
other form of agreements made or taken to exist under an Australian industrial
or labor statute.
3.20. Indebtedness.
Except
as set forth in Section 3.20 of the Disclosure Schedules, the Companies have
no
outstanding Indebtedness other than (i) Indebtedness outstanding between Seller
or its affiliates (“Intercompany
Indebtedness”)
and
(ii) trade or business obligations incurred in the ordinary course of business.
Except as set forth in Section 5.5 of the Disclosure Schedule, all Intercompany
Indebtedness will be paid in full or otherwise satisfied on or prior to the
Closing Date.
3.21. Compensation
of and Contracts With Employees.
Section
3.21 of the Disclosure Schedule sets forth a complete and accurate list of,
with
respect to each Company, (a) each employee of such Company and the rate,
character and amount of compensation paid to each such employee for the fiscal
year ended December 31, 2005, and (b) the rate, character and amount of
compensation paid to each such employee through July 31, 2006. There have been
no changes in such compensation since such date outside the ordinary course
of
business. Except
as
set forth in Section 3.21 of the Disclosure Schedule
and with
the exception of Placard,
no
Company has any employment agreement, written or oral, with any currently active
employee, including any agreement to provide any severance,
bonus
or
benefit to any such employee.
Except
as set forth in Section 3.21 of the Disclosure Schedule, the employment of
each
employee of Placard can be terminated lawfully by Placard giving the employee
not more than 5 weeks' notice and Placard has no agreement with any of its
employees to provide any bonus or benefit to any such employee. No policies
or
procedures of Placard are binding contractually on it and each policy or
procedure can be varied lawfully at Placard's sole discretion at any time and,
except as set forth in Section 3.21 of the Disclosure Schedule, no contractors
are engaged within Placard's business and the engagement of any contractors
engaged within Placard's business can be terminated on not more than 1 month's
notice. No Company has any severance or redundancy policy which provides for
any
entitlements beyond that required by applicable Law.
Except
as set forth in Section 3.21 of the Disclosure Schedule, since December 31,
2005, no Company has made any pension, bonus or other payment, other than base
salary, or become obligated to make any such payment, to any of its employees,
other than as contemplated by the terms of the agreements described on Schedule
3.21. Except as set forth in Section 3.21 of the Disclosure Schedule, no Company
has any outstanding loans or advances to any employee. No Company has paid,
nor
will it be required to pay, any bonus, fee, incentive
payment, distribution,
remuneration or other compensation to any Person (other than salaries, wages
or
bonuses paid or payable to employees in the ordinary course of business) as
a
result of the transactions contemplated by this Agreement.
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20 -
3.22. Potential
Conflicts of Interest.
Except
as set forth in Section 3.22 of the Disclosure Schedule, no officer or director
of Seller or any of the Companies (a) owns, directly or indirectly, any interest
in (excepting not more than 3% stock holdings for investment purposes in
securities of publicly held and traded companies) or is an officer, director,
employee or consultant of any Person which is a competitor, lessor, lessee,
customer or supplier of any the Companies; (b) owns, directly or indirectly,
in
whole or in part, any tangible or intangible property which any of the Companies
is using or the use of which is necessary for the business of the Companies;
or
(c) has any cause of action or other claim whatsoever against, or owes any
amount to, any Company, except for claims in the ordinary course of business,
such as for accrued vacation pay, accrued benefits under the Plans and similar
matters and agreements.
3.23. Suppliers
and Customers.
Section
3.23 of the Disclosure Schedule sets forth the ten (10) largest suppliers and
ten (10) largest customers of each Company for the twelve (12) month period
ending on July 31, 2006. No supplier or customer of material importance to
any
of the Companies has canceled or otherwise terminated, or to the Knowledge
of
Seller, threatened to cancel or otherwise to terminate, its relationship with
any of the Companies or has during the last twelve (12) months decreased
materially, or to the Knowledge of Seller, threatened to decrease or limit
materially, its services, supplies or materials for use by any of the Companies
or its usage or purchase of the services or products of any of the Companies
except for normal cyclical changes related to customers’ businesses. To the
Knowledge of Seller, no such supplier or customer intends to cancel or otherwise
substantially modify its relationship with any Company, or to decrease
materially or limit its services, supplies or materials to any Company, solely
as a result of the transactions contemplated by this Agreement.
3.24. Accounts
Receivable.
All
accounts and notes receivable reflected on the Interim Financial Statements,
and
all accounts and notes receivable arising subsequent to July 31, 2006, have
arisen in the ordinary course of business, represent valid obligations owing
to
the applicable Company and have been collected or, to the Knowledge of the
Seller, are collectible in the aggregate recorded amounts thereof in accordance
with their terms, net of the reserve for uncollected accounts to be set forth
on
the Closing Statement.
3.25. No
Undisclosed Liabilities.
Except
to the extent (a) reflected or reserved against in the Interim Financial
Statements or the Closing Statement, (b) incurred in the ordinary course of
business after July 31, 2006, or (c) described on any Disclosure Schedule,
none
of the Companies nor any of their Subsidiaries has any liabilities or
obligations of any nature, whether accrued, absolute, contingent or otherwise
(including without limitation as guarantor or otherwise with respect to
obligations of others), which liabilities or obligations required to be recorded
or reflected on a balance sheet by GAAP were not so recorded or reflected in
the
Year End Balance Sheet, the Interim Financial Statements or the Closing
Statement.
3.26. Inventory.
The
inventory and supplies of each Company are adequate for such Company’s present
needs in all material respects, and are in usable and salable condition in
the
ordinary course of its business.
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21 -
3.27. Minutes
Books.
Complete copies of all minute books, certificates of registration, statutory
books and registers of each Company have been provided or made available to
the
Purchaser, and such documents do not contain material inaccuracies or
discrepancies of any kind and accurately record therein all actions taken by
the
Board of Directors and shareholders of such Company.
3.28. Warranty
Claims; Product Liability.
Except
as set forth in Section 3.28 of the Disclosure Schedule, to the Knowledge of
Seller the Companies have no actual or alleged liability for death, injury
or
damage to person or property as a result of any actual or alleged defect in
any
product sold, designed, built or manufactured by any of the Companies on or
prior to the Closing Date in any amount which is not reserved against on the
Closing Statement or fully covered by the Companies’ insurance policies, and
there are no contractual product warranty claims arising out of defects in
any
product sold, designed, built or manufactured by any of the Companies on or
prior to the Closing Date in amounts which are not either
reserved against on the Closing Statement
or
fully
covered by the Companies’ insurance policies.
3.29. Brokers
or Finders.
No
agent, broker, investment banker, financial advisor or other firm or Person
is
or will be entitled to any brokers’ or finder’s fee or other commission or
similar fee in connection with the transactions contemplated by this Agreement
except for Jefferies & Co., Inc., TD Securities and ▇▇▇▇▇▇▇▇ Capital
Advisors, whose fees and expenses will be paid by Seller in accordance with
Seller’s agreement with such firm.
Purchaser
acknowledges that, except for the representations and warranties contained
in
this Article III, neither Seller nor any other Person acting on behalf of
Seller, makes any representation or warranty, express or implied.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
Purchaser
represents and warrants to Seller, as of the date hereof and as of the Closing
Date, that:
4.1. Organization.
Purchaser (a) is a corporation or other legal entity duly organized, validly
existing and, if applicable, in good standing under the laws of its jurisdiction
of organization, (b) has all requisite corporate or other legal entity power
and
authority to carry on its business as it is now being conducted and to own
the
properties and assets it now owns and (c) is duly qualified or licensed to
do
business in every jurisdiction in which such qualification is
required.
4.2. Authorization;
Validity of Agreement.
Purchaser has the requisite corporate or other legal entity power and authority
and full legal right to execute, deliver and perform this Agreement and to
consummate the Closing. The execution, delivery and performance by Purchaser
of
this Agreement and the consummation by Purchaser of the Closing have been duly
authorized by the board of directors of Purchaser, and no other corporate action
on the part of Purchaser is necessary to authorize the execution, delivery
and
performance by Purchaser of this Agreement or the consummation by Purchaser
of
the Closing. This Agreement has been duly executed and delivered by Purchaser,
and, assuming due and valid authorization, execution and delivery hereof by
Seller, is a valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms.
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4.3. Consents
and Approvals; No Violations.
Except
for the filings, permits, authorizations, consents and approvals as may be
required under the HSR Act and applicable non-U.S. laws with respect to foreign
investment and competition, and other applicable requirements of state or
provincial securities or blue sky laws, none of the execution, delivery or
performance of this Agreement by Purchaser or the consummation by Purchaser
of
the Closing will (a) conflict with or result in any breach of any provision
of
the certificate of incorporation or by-laws or similar organizational document
of Purchaser, (b) require any filing with, or permit, authorization, consent
or
approval of, any Governmental Entity, (c) result in a violation or breach of,
or
constitute (with or without notice or lapse of time or both) a default (or
give
rise to any right of termination, cancellation or acceleration) under, any
of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
Purchaser or any of its Subsidiaries is a party or by which any of them or
any
of their respective properties or assets may be bound or (d) violate any Law
applicable to Purchaser, any of its Subsidiaries or any of their respective
properties or assets, excluding from the foregoing clauses (b), (c) and (d)
such
violations, breaches or defaults which would not, individually or in the
aggregate, either (i) have an adverse effect on Purchaser’s ability to
consummate the Closing or perform its obligations under this Agreement or
(ii) impede in any respect or delay the consummation of the
Closing.
4.4. Acquisition
of Shares for Investment; Ability to Evaluate and Bear Risk.
(a) Purchaser
is acquiring the Shares for investment and not with a view toward, or for sale
in connection with, any distribution thereof, nor with any present intention
of
distributing or selling the Shares. Purchaser agrees that the Shares may not
be
sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed
of without registration under the Securities Act and qualification under any
applicable state or provincial securities laws, except pursuant to an exemption
from such registration under such Act and qualification under such
laws.
(b) Purchaser
is able to bear the economic risk of holding the Shares for an indefinite
period, and has knowledge and experience in financial and business matters
such
that it is capable of evaluating the risks of the investment in
Shares.
4.5. Availability
of Funds.
Purchaser has access to sufficient immediately available funds in cash or cash
equivalents, and will at the Closing have sufficient immediately available
U.S.
Dollar funds in cash, to pay the Purchase Price and to pay all other amounts
payable in connection with this Agreement and effect the Closing.
4.6. Litigation.
Each of
Purchaser and its Subsidiaries (a) is not subject to any outstanding
injunctions, judgments, orders or decrees and (b) is not a party or, to the
knowledge of Purchaser, threatened to be made a party, to any actions, suits,
proceedings, hearings or investigations of, in, or before any Governmental
Entity, in the case of clauses (a) and (b), that are related to this Agreement
or the transactions contemplated hereby or that would, individually or in the
aggregate, either (i) have an adverse effect on the ability of Purchaser to
consummate the Closing or perform its obligations under this Agreement or
(ii) impede in any respect or delay the consummation of the
Closing.
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4.7. Investigation
by Purchaser; Seller’s Liability.
For
purposes of the Purchaser’s rights to indemnification pursuant to Article VIII
of this Agreement, Purchaser acknowledges that in entering into this Agreement
(a) it has relied solely on (i) the specific representations and warranties
of
Seller set forth in Article III and schedules thereto and (ii) its own
independent investigation, review and analysis of the business, operations,
assets, liabilities, results of operations, financial condition, software,
technology and prospects of the Companies (and not on any factual
representations or opinions of Seller or Seller’s representatives except the
specific representations and warranties of Seller set forth in Article III
and
schedules thereto) and (b) that neither Seller nor the Companies or any of
their
respective directors, officers, shareholders, employees, Affiliates, controlling
persons, agents, advisors or representatives makes or has made any oral or
written representation or warranty, either express or implied, as to the
accuracy or completeness of any of the information (including in the descriptive
memorandum relating to the Companies provided to Purchaser, in materials
furnished in the Company’s data room, in presentations by the Company’s
management or otherwise) provided or made available to Purchaser or its
directors, officers, employees, shareholders, Affiliates, controlling persons,
agents, advisors or representatives (except the specific representations and
warranties of Seller set forth in Article III and schedules thereto). The
foregoing acknowledgment shall not be deemed to apply to or limit in any way
any
rights or claims by Purchaser against Seller in respect of fraud or intentional
breach.
4.8. Brokers
or Finders.
Neither
Purchaser nor any of its Subsidiaries or its Affiliates has entered into any
agreement or arrangement entitling any agent, broker, investment banker,
financial advisor or other firm or Person to any broker’s or finder’s fee or any
other commission or similar fee in connection with any of the transactions
contemplated by this Agreement.
Seller
acknowledges that, except for the representations and warranties contained
in
this Article IV, neither Purchaser nor any other Person acting on behalf of
Purchaser, makes any representation or warranty, express or
implied.
ARTICLE
V
ADDITIONAL
COVENANTS OF THE PARTIES
5.1. Tax
Matters.
(a) Apportionment
of Taxes.
With
respect to all jurisdictions in which Tax Returns are filed:
(i) In
order
appropriately to apportion any Taxes relating to a period that includes the
Closing Date, the parties hereto will, to the extent permitted by applicable
Law, elect with the relevant taxing authority to treat for all purposes the
Closing Date as the last day of a taxable period of the Company (a “Short
Period”),
and
such period shall be treated as a Short Period and a period ending on the
Closing Date for purposes of this Agreement. Accordingly, to the
extent permitted or required by applicable Law: (i) the taxable period of the
Company and its Subsidiaries that began on January 1 of the calendar year that
includes the Closing Date shall be treated as closing as of the close of
business on the Closing Date; and (ii) no election shall be made under Treasury
Regulation Section 1.1502-76(b)(2)(ii) or Treasury Regulation Section
1.1502-76(b)(2)(iii) for the month that includes the Closing Date.
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(ii) For
purposes of this Agreement, the method of apportioning any Tax with respect
to a
taxable period that begins before, and ends after, the Closing Date (a “Straddle
Period”), between the portion of such Straddle Period up to and including the
Closing Date and the portion of such Straddle Period beginning after the Closing
Date, shall be (i) in the case of a Tax that is not an income Tax or any
Tax based on gross income, sales, gross receipts or specific transactions
(including real property taxes), the total amount of such Tax for the Straddle
Period in question multiplied by a fraction, the numerator of which is the
number of days in the Straddle Period through and including the Closing Date,
and the denominator of which is the total number of days in such Straddle
Period, and (ii) in the case of an income Tax and any Tax that is based on
any
of gross income, sales, gross receipts or specific transactions, the Tax that
would be due with respect to the portion of the Straddle Period through and
including the Closing Date, if such portion of the Straddle Period were a
separate taxable period, except that exemptions, allowances, deductions or
credits that are calculated on an annual basis (such as the deduction for
depreciation or capital allowances) shall be apportioned on a per diem
basis.
(b) Transfer
Taxes and Other Closing Expenses.
Seller
shall timely pay when due, or shall reimburse Purchaser promptly upon demand
and
delivery of proof of payment of, all excise, sales, transfer, documentary,
filing, recordation and other similar taxes, levies, fees and charges, if any
(including all real estate transfer taxes and conveyance and recording fees,
if
any), that may be imposed upon, or payable or collectible or incurred in
connection with, this Agreement and the transactions contemplated hereby (such
Taxes, “Transfer
Taxes”).
Purchaser shall cooperate with Seller and, subject to the other terms of this
Agreement, take any action reasonably requested by Seller which does not cause
Purchaser to incur any cost or material inconvenience in order to minimize
Transfer Taxes. Notwithstanding the provisions of Section 5.1(c), which shall
not apply to Tax Returns relating to Transfer Taxes, any Tax Returns that must
be filed in connection with Transfer Taxes shall be prepared and filed when
due
by the party primarily or customarily responsible under the applicable local
law
for filing such Tax Returns, and such party will use its reasonable efforts
to
provide such Tax Returns to the other party at least 10 Business Days prior
to
the due date for such Tax Returns. All other expenses of Closing will be paid
by
the party incurring such expense.
(c) Tax
Returns.
(i) Seller
shall be responsible for the timely filing (taking into account any extensions
received from the relevant tax authorities) of all Tax Returns required by
law
to be filed by (or that include) each Company or its Subsidiaries in respect
of
any period ending on or prior to the Closing Date. Such Tax Returns shall be
prepared in accordance with the past practice and custom of each Company and
its
Subsidiaries in filing its or their Tax Returns, shall be true, correct and
in
all material respects complete and shall be prepared in accordance with
applicable federal, state, provincial, local or foreign Tax laws, regulations
or
rules. Seller shall cause the Companies to timely pay all Taxes shown as due
on
such Tax Returns. Seller shall be entitled to any and all tax refunds during
the
periods for which Seller is responsible for the timely filing of all Tax Returns
in accordance with this Section 5.1(c)(i). Purchaser shall promptly transfer
such refunds received by the Purchaser to the Seller when obtained from a taxing
authority within 45 days.
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(ii) Purchaser
shall be responsible for the timely filing (taking into account any extensions
received from the relevant tax authorities) of all Tax Returns required by
law
to be filed by (or include) each Company or its Subsidiaries in respect of
any
period ending after the Closing Date (other than income Tax Returns with respect
to periods for which a consolidated, combined or unitary Tax Return of Seller
will include the operations of such Company and its Subsidiaries), and, subject
to the allocation of Taxes discussed in Section 5.1(a) hereof and this
subparagraph (ii), shall be responsible for all
Taxes
shown as due on such Tax Returns. Any such Tax Returns that relate in whole
or
in part to a Straddle Period shall be prepared on a basis consistent with those
prepared for prior taxable periods unless a different treatment of any item
is
required by an intervening change in law. Seller shall be responsible for,
and
shall pay promptly upon request by Purchaser, and in any event within no more
than three days’ prior to the filing deadline for such Tax Return, all Taxes
shown as due on such Tax Returns, to the extent such Taxes are allocable under
the principles of Section 5.1(a) above to a taxable period ending on or before
the Closing Date or to the portion of a Straddle Period ending on the Closing
Date.
(iii) Purchaser
shall be entitled to review and comment on any Tax Returns for each Company
for
any taxable period that ends on or prior to the Closing Date. Seller shall
submit a draft of any such Tax Return (with copies of any relevant schedules,
work papers and other documentation then available) to Purchaser at least 30
days before the date such Tax Return is required to be filed with the relevant
tax authority for its review and comment, and Seller shall make such changes
to
such Tax Returns as are reasonably requested by Purchaser, insofar as such
changes relate to or affect amounts for which Purchaser would be responsible
under the provisions of this Section 5.4, such changes are consistent with
the
past practice of each Company and its Subsidiaries in filing its or their Tax
Returns, and such changes are consistent with applicable Law.
(d) Certain
Post-Closing Actions which Affect Seller’s Liability for Taxes.
With
respect to each Company:
(i) Purchaser
shall not permit such Company to take any action that reasonably could be
expected to increase Seller’s liability for Taxes for a taxable period (or
portion thereof) ending on or prior to the Closing Date, without Seller’s
written consent.
(ii) None
of
Purchaser or any Affiliate of Purchaser shall (or shall cause or permit such
Company to) amend, refile or otherwise modify any Tax Return relating in whole
or in part to any Company with respect to any taxable year or period ending
on
or before the Closing Date (or with respect to any Straddle Period, to the
extent the changes made to such Tax Return affect the portion of such Straddle
Period ending on the Closing Date), if such amendment, refiling or other
modification would have the result of increasing the liability of the Seller
for
Taxes under this Agreement, without the prior written consent of
Seller.
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(iii) None
of
Purchaser or any Affiliate of Purchaser shall (or shall cause or permit such
Company to) carryback for federal, state, provincial, local or foreign tax
purposes to any taxable period, or portion thereof, of such Company or Seller
or
any Affiliate of Seller ending before, or which includes, the Closing Date
any
operating losses, net operating losses, capital losses, tax credits or similar
items arising in, resulting from or generated in connection with a taxable
year
of Purchaser or any Affiliate of Purchaser, or portion thereof, ending on or
after the Closing Date except to the extent Seller provides its specific
authorization for such a carryback, which authorization will not be unreasonably
withheld, conditioned or delayed.
(iv) If
an
examination of any federal, state, local or other Tax Return of Seller or the
Company for any taxable period (or portion thereof) ending on or before the
Closing Date shall result (by settlement or otherwise) in any adjustment which
permits Purchaser, the Company to increase deductions, losses or tax credits
or
decrease the amount of reportable income, gains or recapture of tax credits
(including by way of any increase in basis) for one or more periods ending
after
the Closing Date, Seller shall notify Purchaser and provide it with adequate
information so that Purchaser can reflect on its or the Company’s Tax Returns
such increases in deductions, losses or tax credits or decreases in income,
gains or recapture of tax credits.
(e) Termination
of Existing Tax Sharing Agreements.
Any and
all existing Tax sharing agreements or arrangements, written or oral, between
Seller and any Company or any Subsidiary, shall terminate as of the Closing,
and
after the Closing Date, neither any Company, any Subsidiary, the Purchaser,
nor
any Affiliate of any of them, shall have any liability thereunder after the
Closing Date.
(f) Cooperation.
Purchaser and Seller shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of any Tax Returns
and any audit, litigation or other proceeding with respect to Taxes of or
related to the Companies or any Subsidiary. Such cooperation shall include
the
retention and (upon the other party's request) the provision of records and
information reasonably relevant to any such Tax Return, 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. Each of Seller and Purchaser agrees to (i) retain or cause to be
retained all books and records in its possession on the Closing Date relating
to
Tax matters of or pertaining to a Company or any Subsidiary for any taxable
period beginning before the Closing Date until expiration of the statute of
limitations (including any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with
any
taxing authority and (ii) give each other party reasonable written notice prior
to transferring, destroying or discarding any such books and records and, if
the
other party so requests, allow the requesting party to take possession of such
books and records.
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(g) Allocation
of Purchase Price.
The
Purchase Price shall be allocated among the Shares of each Base Company in
the
manner specified in Schedule 5.1, and such schedule shall be revised from time
to time to reflect any post-closing adjustment to the Purchase Price. Purchaser
and Seller shall follow the allocations set out in Schedule 5.1 in determining
and reporting their liabilities for any Taxes and, without limitation, shall
file all of their respective Tax Returns in accordance and in a manner
consistent with such allocations.
(h) Seller
Tax Covenants.
Seller
agrees to notify Purchaser of any proposed action to occur on or prior to the
Closing Date affecting the Taxes of any of the Companies, including making
or
changing any material Tax election, settling or compromising any claim for
refund, consenting to any extension or waiver of the limitation period
applicable to any Tax claim or assessment, and taking any other similar action
in respect of Taxes; provided, however, that none of the Companies shall take
such action if Purchaser determines that such action will have an adverse impact
on any of the Companies in a post-Closing taxable period.
(i) Tax
Elections.
Seller
shall be responsible for filing all Tax elections as provided for in the Asset
Purchase Rollover Agreement entered into between Seller and Mercury pursuant
to
the Mercury Contribution, and Seller shall indemnify and save harmless Mercury
from any interest, penalties or other Tax liability, or any Losses, arising
in
connection with such Tax elections, other than any Tax liability arising solely
as a consequence of an agreed amount (for purposes of such Tax elections) in
respect of a property being less than the fair market value of such property
as
at the closing date (as defined in the Asset Purchase Rollover
Agreement).
5.2. Publicity.
The
initial press release with respect to the execution of this Agreement shall
be a
joint press release acceptable to Purchaser and Seller. Each of Purchaser and
Seller shall, and shall cause each of its Affiliates to, not issue or cause
the
publication of any press release or disclosure with respect to this Agreement
or
the transactions contemplated hereby without prior consultation with the other
party, except as may be required by Law or by any listing agreement with a
national securities exchange or trading market. This Section 5.2 shall not
limit
the applicability of the Confidentiality Agreement.
5.3. Employees;
Employee Benefits.
(a) With
respect to each employee benefit plan, practice or policy of Purchaser or any
of
its Affiliates, Purchaser shall make reasonable efforts to ensure that each
Retained Employee shall be given credit under such plan for all service prior
to
the Closing Date with the applicable Company or any predecessor employer (to
the
extent such credit was given by Seller, the applicable Company or any
predecessor employer under a comparable Plan), for purposes of determining
eligibility and vesting and for all other purposes for which such service is
either taken into account or recognized; provided,
however,
such
service need not be credited to the extent it would result in a duplication
of
benefits, including benefit accrual under defined benefit plans. Purchaser
shall
make reasonable efforts to ensure that such service also shall apply for
purposes of satisfying any welfare benefit plan waiting periods, evidence of
insurability requirements, or the application of any preexisting condition
limitations. Purchaser shall make reasonable efforts to ensure that Retained
Employees shall be given credit for amounts paid under a corresponding employee
benefit plan during the same period for purposes of applying deductibles,
copayments and out-of-pocket maximums as though such amounts had been paid
in
accordance with the terms and conditions of the comparable employee benefit
plan
of Purchaser. The obligations of Purchaser under this Section 5.3(a) shall
apply
only to the extent that the Retained Employees commence participation under
an
employee benefit plan, practice or policy of the Purchaser or one of its
Affiliates (other than the Companies) on or promptly after the
Closing.
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(b) If
any
Retained Employee is discharged by the Company as of or after the Closing,
then
Purchaser shall be responsible for any and all severance costs for such Retained
Employee, including payments owing under those agreements, plans or arrangements
listed in the Disclosure Schedule. Purchaser shall be responsible and assume
all
liability for all notices or payments due to any Retained Employees, and all
notices, payments, fines or assessments due to any Governmental Entity, pursuant
to any applicable foreign, federal, state or local law, common law, statute,
rule or regulation with respect to the employment, discharge or layoff of
employees by the Company after the Closing, including the WARN Act and Section
4980B of the Code and any rules or regulations as have been issued in connection
with the foregoing.
(c) From
and
after the Closing, Purchaser shall be responsible for, and shall indemnify
and
hold harmless Seller and its Affiliates and their officers, directors,
employees, Affiliates and agents and the fiduciaries (including plan
administrators) of the Plans from and against, any and all claims, losses,
damages, costs and expenses (including attorneys’ fees and expenses) and other
liabilities and obligations relating to or arising out of (i) all salaries,
wages, commissions, employee incentive or other compensation, severance,
holiday, vacation, or retirement benefits earned but unpaid as of the Closing
and post-Closing bonuses due to any Retained Employee (other than bonuses that
become payable as a result of the transactions contemplated by this Agreement,
all of which shall be satisfied by the Seller prior to the Closing), (ii) the
liabilities assumed by Purchaser under this Section 5.3 or any failure by
Purchaser to comply with the provisions of this Section 5.3, and (iii) any
claims of, or damages or penalties sought by, any Retained Employees, or any
Governmental Entity on behalf of or concerning any Retained Employees, with
respect to any act or failure to act by Purchaser to the extent arising from
the
employment, discharge, layoff or termination of any Retained
Employee.
(d) Purchaser
shall provide short-term disability coverage for all Retained Employees eligible
to receive short-term disability benefits under policies of the Companies as
of
the Closing on substantially the same terms and conditions as in effect
immediately prior to the Closing, so that such Retained Employees receive
short-term disability benefits for a total of six months from the original
date
of disability.
(e) Effective
as of the Closing, Purchaser shall (i) assume liability for all active workers’
compensation cases attributable to Retained Employees as of the Closing; (ii)
provide Retained Employees with coverage for all required workers’ compensation
benefits and (iii) from and after the Closing be responsible for all required
workers’ compensation claims filed by Retained Employees regardless of whether
the underlying event for such claims occurred prior to the Closing.
5.4. Transition
Services.
Except
as with respect to the services to be provided pursuant to the Transition
Services Agreement to be entered into as of the date hereof between Seller
and
Purchaser, all data processing, cash management, accounting, insurance, banking,
personnel, legal, communications and other products and services provided to
the
Companies by Seller or any Affiliate of Seller (other than the Companies),
including any agreements or understandings (written or oral) with respect
thereto, shall terminate simultaneously with the Closing without any further
action or liability on the part of the parties thereto.
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5.5. Intercompany
Arrangements.
Except
with respect to the Intercompany Accounts listed on Section 5.5 of the
Disclosure Schedules, Seller shall arrange for all Intercompany Accounts between
a Company, on the one hand, and Seller and its Affiliates (excluding the
Companies), on the other hand, to be entirely settled effective as of the
Closing. In addition, except as otherwise expressly contemplated by this
Agreement, all agreements and commitments, whether written, oral or otherwise,
which are solely between a Company, on the one hand, and Seller and its
Affiliates (excluding the Companies), on the other hand, shall be terminated
and
of no further effect, simultaneously with the Closing without any further action
or liability on the part of the parties thereto, except to the extent they
relate to arms-length commercial matters between the Subsidiaries of Seller
(other than the Company), on the one hand, and the Company, on the other
hand.
5.6. Maintenance
of Books and Records.
After
the Closing, each of the parties hereto shall preserve, until at least the
eighth anniversary of the Closing Date, all pre-Closing Date records possessed
or to be possessed by such party relating to the Company. After the Closing
Date
and up until at least the eighth anniversary of the Closing Date, upon any
reasonable request from a party hereto or its representatives, the party holding
such records shall (a) provide to the requesting party or its representatives
reasonable access to such records during normal business hours and (b) permit
the requesting party or its representatives to make copies of such records,
in
each case at no cost to the requesting party or its representatives (other
than
for reasonable out-of-pocket expenses); provided,
however,
that
nothing herein shall require either party to disclose any information to the
other if such disclosure would jeopardize any attorney-client or other legal
privilege or contravene any applicable law. Such records may be sought under
this Section for any reasonable purpose, including to the extent reasonably
required in connection with the audit, accounting, tax, litigation, securities
law disclosure or other similar needs of the party seeking such records.
Notwithstanding the foregoing, any and all such records may be destroyed by
a
party if such destroying party sends to the other party hereto written notice
of
its intent to destroy such records, specifying in reasonable detail the contents
of the records to be destroyed; such records may then be destroyed after the
60th
day
following such notice unless the other party hereto notifies the destroying
party that such other party desires to obtain possession of such records, in
which event the destroying party shall transfer the records to such requesting
party and such requesting party shall pay all reasonable expenses of the
destroying party in connection therewith.
5.7. Seller’s
Trademarks.
Notwithstanding anything to the contrary contained in this Agreement, it is
expressly agreed that (a) Purchaser is not purchasing, acquiring or otherwise
obtaining, and the Companies will not be entitled to retain following the
Closing Date, any right, title or interest in any Trademarks employing Seller’s
name or any part or variation of such name or anything confusingly similar
thereto (including any reference to “MDC”) and (b) the Companies, Purchaser or
their Affiliates shall not make any use of Seller’s Trademarks from and after
the Closing. Effective as of the Closing, Seller shall assign and convey to
AP
all of its rights and interests in and to the name “Secured Products
International” or any similar name and shall not use of any such names for any
commercial purpose thereafter.
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5.8. Insurance
Policies.
(a)
Seller and its Affiliates (other than the Companies) shall retain all right,
title and interest in and to their respective insurance policies (other than
those insurance policies that have been transferred by Seller to Mercury in
connection with the Mercury Contribution), including those insurance policies
listed on Schedule 5.8 (the “MDC
Insurance Policies”).
Seller shall continue to maintain (but shall have no obligation to renew) the
MDC Insurance Policies under their current terms for purposes of preserving
the
Companies’ rights, if any, to recovery with respect to such Companies’ losses,
damages and claims arising out of events occurring prior to the Closing
(“Pre-Closing
Company Claims”)
for
which premiums securing coverage for such claims have been paid in full as
of
the Closing Date (and shall not take any affirmative action to terminate
coverage for such Pre-Closing Company Claims).
(b) At
any
time after the Closing, each Company shall have the right to tender all
Pre-Closing Company Claims to the Seller’s applicable insurance provider and the
Seller shall provide reasonable cooperation and assistance in connection
therewith (including, if required, making any such claim to an insurer on behalf
of any Company). All proceeds paid out under MDC Insurance Policies after the
Closing solely with respect to Pre-Closing Company Claims tendered by any
Company shall be for the benefit of the applicable Company.
(c) After
the
Closing, upon the reasonable request of the Purchaser, the Seller shall provide
to the Purchaser updated loss information regarding pre-closing occurrences
related to the Companies (including, without limitation, information regarding
the current value of any pre-Closing losses).
5.9. Unclaimed
Property Audit.
Purchaser agrees to cooperate and agrees to cause the Companies to cooperate
with Seller and any of its employees, directors, representatives and other
agents in Seller’s preparation for and response to any unclaimed property audit
by any state or province including, but not limited to, promptly providing
copies of all reasonably requested documents and making any Company employees
available to respond to inquiries of Seller in connection with any such audit.
The obligations of Purchaser under this Section 5.9 shall survive until the
expiration of the applicable state or provincial statutes of limitation.
5.10. Bank
Accounts.
Seller
shall provide Purchaser with a complete list of each of the bank accounts of
the
Companies and the authorized signatories for each such account as soon as
practicable before the Closing Date. The parties shall cooperate in connection
with the replacement or supplementation of such signatories effective as of
the
Closing.
5.11. Further
Assurances.
(a) From
and after the Closing, each of Seller and Purchaser shall furnish or cause
to be
furnished to the other party and its employees, counsel, auditors and other
representatives such information and assistance relating to the Companies (to
the extent within the control of such other party) as is reasonably necessary
for financial reporting and accounting matters of the other party, including
the
furnishing of such documentation and information relating to the Companies
as
may be reasonably requested in connection with the preparation of reports,
accounts and other documents and materials to be filed with or submitted to
the
SEC, Canadian securities regulatory authorities, or any stock exchange or in
connection with any proposed capital markets offering that would be exempt
from
the registration requirements of the Securities Act or Canadian provincial
securities laws.
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(b) At
any
time and from time to time, each party to this Agreement agrees, subject to
the
terms and conditions of this Agreement, to take such commercially reasonable
actions and to execute and deliver such documents as may be necessary to
effectuate the purposes of this Agreement and the Mercury Contribution at the
earliest practicable time (including, without limitation, the conveyance to
Mercury of any assets of the Mercury Graphics division of the Seller, except
as
set forth in Section 3.10(b) of the Disclosure Schedules) that for any reason
continue to be owned or held by the Seller, any such conveyance to be made
by
deeds, bills of sale, certificates of title and other instruments of assignment
and transfer effective in each case to vest in Mercury good and valid record
and
marketable title to such assets, free and clear of all Encumbrances other than
Permitted Encumbrances.
5.12. Collection
of Receivables.
If,
after the Closing Date, Seller or any of its Affiliates receives any payment
or
remittance with respect to any account receivable of any of the Companies,
Seller shall, or shall cause its Affiliate to, deliver promptly to the
applicable Company all cash, checks or other property received with respect
to
such receivables.
5.13. Interim
Operations of the Companies.
Except
as contemplated by this Agreement, and except as may be consented to in writing
by Purchaser, Seller covenants and agrees that, after the date hereof and prior
to the Closing Date the business of each Company shall be conducted in a
substantially similar manner as heretofore conducted and only in the ordinary
course. No Company shall take any action that would cause any of the
representations or warranties in Section 3.9(b) to be untrue in any material
respect as of the Closing. Subject to the Confidentiality Agreement, Seller
shall afford to Purchaser and its authorized representatives reasonable access
during normal business hours to all properties, books, records, contracts and
documents of the Companies and a full opportunity to make such reasonable
investigations as it shall desire to make of Companies, and Seller shall furnish
or cause to be furnished to Purchaser and its authorized representatives all
such information with respect to the affairs and businesses of the Companies
as
Purchaser may reasonably request. Seller will promptly advise Purchaser in
writing of any Company Material Adverse Effect. Seller shall use reasonable
commercial efforts to continue to obtain all third party consents listed on
Schedule 3.4 and that have not already been obtained prior to the execution
of
this Agreement, except as set forth on Schedule 3.4.
ARTICLE
VI
CONDITION
TO CLOSING
6.1. Conditions
to Each Party’s Obligation to Effect the Closing.
The
obligation of each party to consummate the Closing shall be subject to the
satisfaction or waiver on or prior to the Closing Date of the following
condition: no Law shall have been enacted or promulgated by any Governmental
Entity which expressly prohibits the consummation of the Closing; and there
shall be no order or injunction of a court of competent jurisdiction in effect
expressly prohibiting consummation of the Closing.
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6.2. Condition
to Obligation of Purchaser to Effect the Closing.
The
obligation of Purchaser to consummate the Closing shall be subject to the
satisfaction or waiver on or prior to the Closing Date of each of the following
conditions:
(a) No
Company Material Adverse Effect.
Since
the date of this Agreement, (i) no event has occurred which results in, or
would
reasonably be expected to result in, a Company Material Adverse Change, and
(ii)
no fact or circumstance has become known to Seller that has resulted in, or
would reasonably be expected to result in, a Company Material Adverse Change;
provided,
however,
that
the foregoing clauses (i) and (ii) shall not constitute a condition to the
obligation of Purchaser to consummate the Closing if the Extension Election
has
been exercised by Purchaser and HIG pursuant to Section 7.1(ii).
(b) Seller’s
Certificate.
The
Seller shall have delivered to Purchaser in writing, at and as of the Closing,
a
certificate duly executed by Seller, in form and substance reasonably
satisfactory to Purchaser and Purchaser’s counsel, certifying that the
conditions in Section 6.2(a) have been satisfied; provided,
however,
that
foregoing shall not constitute a condition to the obligation of Purchaser to
consummate the Closing if the Extension Election has been exercised by Purchaser
and HIG pursuant to Section 7.1(ii).
(c) Closing
Proceedings.
Seller
shall have taken all actions required by it under, and shall have complied
in
all material respects with all of its obligations set forth in, the provisions
of Sections 2.1(b)(i),(v),(vi), (vii), (ix), (x) and (xii).
6.3. Conditions
to Obligations of Seller to Effect the Closing.
The
obligations of Seller to consummate the Closing shall be subject to the
satisfaction or waiver on or prior to the Closing Date of each of the following
conditions:
(a) Closing
Proceedings.
The
Purchaser shall have taken all actions required by, and shall have complied
with
all of its obligations set forth in, the provisions of Section
1.2(b).
ARTICLE
VII
TERMINATION
OF AGREEMENT
7.1. Termination.
The
transactions contemplated hereby may be terminated or abandoned at any time
prior to the Closing Date:
(i) By
the
mutual written consent of Purchaser and Seller.
(ii) By
Seller
if the Closing shall not have occurred on or prior to November 15, 2006, unless
(A) the conditions precedent to the obligation of Purchaser to consummate the
Closing set forth in Section 6.1 and 6.2 have not been satisfied as of such
date
or (B) Purchaser has notified Seller of its election to extend such date to
December 1, 2006 and HIG has, prior to 5:00 p.m. eastern time on November 15,
2006 (an “Extension
Election”),
(x)
delivered a written instruction to the Escrow Agent to release the Contract
Deposit to Seller in accordance with the Escrow Agreement and (y) paid to
Seller, by wire transfer in immediately available federal funds, an additional
deposit amount equal to $1 million (the “Second Contract Deposit”).
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(iii) By
Seller
if the Extension Election has been exercised by Purchaser and HIG pursuant
to
Section 7.1(ii) and the Closing shall not have occurred on or prior to December
1, 2006, unless the conditions precedent to the obligation of Purchaser to
consummate the Closing set forth in Section 6.1 and 6.2 have not been satisfied
as of such date.
(iv) By
Purchaser if the Closing shall not have occurred on or prior to November 15,
2006 (unless the conditions precedent to the obligation of Seller to consummate
the Closing set forth in Section 6.1 and 6.3 have not been satisfied as of
such
date).
(v) By
either
Party if the Closing has not occurred on or prior to December 31,
2006.
7.2. Effect
of Termination.
In the
event of the termination of this Agreement in accordance with Section 7.1,
(a) this Agreement shall become null and void and of no further force or effect
except for Section 5.2, this Article VII and Article X and (b) such termination
shall relieve each party from all violations of this Agreement that occurred
prior to such termination other than violations of Articles I or II and willful
breaches; provided,
however,
that
(A) in the event that Seller terminates this Agreement pursuant to Section
7.1(ii), Seller may thereafter provide notice of such termination to the Escrow
Agent, whereupon the Escrow Agent shall release and pay the Contract Deposit
to
Seller pursuant to the Deposit Escrow Agreement or (B) in the event that Seller
terminates this Agreement pursuant to Section 7.1(iii), Seller may retain the
Contract Deposit and the Second Contract Deposit. The Contract Deposit and
the
Second Contract Deposit (if applicable) shall constitute liquidated damages
in
full satisfaction of any claims, liabilities, damages or other losses of Seller
related to the termination of this Agreement under Section 7.1(ii) or (iii).
In
the
case of any termination other than a termination by Seller pursuant to Section
7.1(ii) or 7.1(iii), then (x) Purchaser may thereafter provide notice of such
termination to the Escrow Agent, whereupon the Escrow Agent shall release and
return the Contract Deposit to Purchaser pursuant to the Deposit Escrow
Agreement or (y) if the Extension Election has been made, Seller shall, not
later than one (1) business day after such termination, return the Contract
Deposit and the Second Contract Deposit to HIG by wire transfer of immediately
available federal funds. The amount of such payment required by subpart (y)
of
the immediately preceding sentence not made when due shall bear interest at
a
rate per annum equal to the Base Rate plus two percent (2%).
ARTICLE
VIII
INDEMNIFICATION
8.1. Indemnification;
Remedies.
(a) From
and after the Closing, Seller shall indemnify, defend and hold harmless
Purchaser from and against all Losses incurred by Purchaser, its Subsidiaries
and the respective directors, officers and employees (“Purchaser
Indemnified Persons”)
that
arise out of:
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(i) any
breach by Seller of any of Seller’s representations and warranties contained in
this Agreement or any other certificate delivered pursuant hereto (including,
without limitation, the Certificate of Indebtedness);
(ii) any
breach or failure to perform by Seller of its covenants, obligations or
undertaking contained in this Agreement;
(iii) (A)
all
Taxes (or the non-payment thereof) of the Companies and their Subsidiaries
for
all taxable periods (or portions thereof) ending on or before the Closing Date
(including the portion of any Straddle Period ending on the Closing Date),
determined under the principles of Section 5.4(a) hereof, (B) all Taxes of
any
member of a consolidated, unitary or combined group for which any Company or
its
Subsidiaries or any Purchaser Indemnified Persons may be held liable, whether
by
virtue of the application of Treasury Regulation section 1.1502-6 (or any
corresponding provision of state, local or foreign Law) or otherwise, and (C)
all Taxes of any Person for which any Company or its Subsidiaries or any
Purchaser Indemnified Persons may be held liable as a transferee or successor,
by contract, or pursuant to any applicable Law which Taxes relate to an event
or
transaction relating to the Companies or the Subsidiaries prior to the Closing
Date; provided,
that in
the case of clauses (A), (B) and (C) above, Sellers shall be liable for any
Taxes only to the extent that such Taxes exceed the accrual, if any, in respect
thereof on the Closing Statement;
(iv) any
liability of AP arising out of the potential litigation matter disclosed in
Section 3.13 of the AP Disclosure Schedule, and any liability of Metaca arising
out of the potential litigation matter disclosed in Section 3.13 of the Metaca
Disclosure Schedule;
(v) any
liability of Mercury arising out of the counterclaim litigation matter disclosed
in Section 3.13 of the Mercury Disclosure Schedule to the extent such Losses
exceed amounts that have been recovered by Mercury, if any, in connection with
its Statement of Claim related thereto as of the time such Losses are
incurred;
(vi) any
liability of Placard arising solely out of the claim against Placard by the
Australian Manufacturer’s Worker Union described in Section 3.13 of the Placard
Disclosure Schedule;
(vii) any
claim
by an executive officer or director of any of the Companies for indemnification,
based solely on any conduct or event that occurred prior to the Closing Date
and
related solely to the operations or business of any of the Companies; provided,
however, that the foregoing indemnity shall not apply to any such claim that
would not have been covered by Seller’s D&O indemnity policies in effect on
the Closing Date and described on Schedule 3.12;
(viii) solely
to
the
extent relating to or arising out of the fact that the Companies were Affiliates
of the Seller, (A)
the
presence or release of or exposure to Hazardous Substances, (B) the
transportation, disposal or recycling of any Hazardous Substances, and (C)
any
violation or alleged violation of Environmental Laws, in each case relating
solely to properties owned or occupied by the Seller or its Affiliates but
not
owned or occupied by any of the Companies;
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35 -
(ix) solely
to
the
extent arising out of or related to the Companies being or having been
Affiliates of the Seller, any liabilities of the Companies under Plans of the
Seller or its Affiliates (other than the Companies); and
(x) in
connection with the failure of AP to maintain liability insurance coverage
from
the period beginning on January 1, 2005 and ending on July 8, 2005 (the
“Gap
Period”)
on the
same terms as the general liability insurance policy identified as Item (g)
on
Schedule 3.12 of the AP Disclosure Schedule with Peerless Insurance Company
(Policy No. CBP9915578), any Losses that would have been covered under such
policy had it been in place during such Gap Period.
(b) Seller’s
indemnification obligation under Section 8.1(a) shall be subject to each of
the
following limitations:
(i) With
respect to indemnification for Losses arising out of or relating to any breaches
of any representation or warranty by Seller in this Agreement other than
Sections 3.1, 3.2, 3.5, 3.6, 3.14, 3.16 3.17 or 3.20 (collectively,
“Representation
and Warranty Losses”),
such
obligation to indemnify shall terminate on March 31, 2008, unless before such
date Purchaser has provided Seller with an applicable Claim Notice;
(ii) With
respect to indemnification for Losses arising out of or relating to any breaches
of any representation or warranty by Seller in Sections 3.1, 3.2, 3.5, 3.6,
3.14, 3.16, 3.17 or 3.20, such obligation to indemnify shall terminate on the
date of the applicable statute of limitations, unless before such date Purchaser
has provided Seller with an applicable Claim Notice;
(iii) With
respect to Representation and Warranty Losses, there shall be no obligation
to
indemnify under Section 8.1(a) unless the aggregate of all Representation and
Warranty Losses for which Seller, but for this clause (iii), would be liable
under Section 8.1(a) exceeds on a cumulative basis an amount equal to $350,000
(the “Indemnity
Threshold”),
and
then only to the extent of such excess;
(iv) With
respect to Representation and Warranty Losses, there shall be no obligation
to
indemnify under Section 8.1(a) for any item where the Losses for the claim
or
series of related claims relating thereto are less than $15,000 (it being
understood that such items shall not be aggregated for purposes of the
immediately preceding clause (iii));
(v) With
respect to Losses arising under clauses (iv) and (v) of Section 8.1(a), there
shall be no obligation to indemnify unless the aggregate of all such Losses
exceeds on a cumulative basis an amount equal to $50,000, and then only to
the
extent of such excess;
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36 -
(vi) With
respect to Losses arising out of any breach of the representations or warranties
in Section 3.16 (“ERISA
Losses”),
(A)
there shall be no obligation to indemnify under Section 8.1(a) unless the
aggregate of all ERISA Losses for which Seller, but for this clause (vi), would
be liable under Section 8.1(a) exceeds on a cumulative basis an amount equal
to
$250,000, whereupon the Seller will be obligated to indemnify for the entire
amount of all ERISA Losses and (B) the aggregate amount payable for all ERISA
Losses shall not exceed an amount equal to $5 million;
(vii) With
respect to Representation and Warranty Losses, there shall be no obligation
to
indemnify under Section 8.1(a) for any amount, in the aggregate, in excess
of an
amount equal to 20% of the Purchase Price;
(viii) The
aggregate amount payable for all Losses (including Representation and Warranty
Losses) shall not exceed an amount equal to the Purchase Price;
(ix) With
respect to indemnification for Losses pursuant to Section 8.1(a)(vi), (A) such
obligation to indemnify shall apply only to Losses incurred prior to the earlier
of (x) the completion of a new labor agreement with the Australian
Manufacturer’s Worker Union and (y) March 31, 2008, unless a Proceeding has been
filed or initiated with respect thereto, and Purchaser has issued a Claim Notice
with respect to such Proceeding, prior to such date and (B) the aggregate amount
payable for all such Losses shall not exceed an amount equal to $175,000;
and
(x) Each
Loss
shall be reduced by (A) the amount of any insurance proceeds actually paid
to
Purchaser or any Purchaser Indemnified Person with respect to such Loss, or
(B)
any indemnity, contribution or other similar payment actually paid to Purchaser
or any Purchaser Indemnified Person by any third party with respect to such
Loss, subject to Section 8.5 below.
(c) From
and
after the Closing, Purchaser shall indemnify, defend and hold harmless Seller
from and against all Losses incurred by Seller, its Subsidiaries and the
respective directors and officers of Seller and its Subsidiaries (the
“Seller
Indemnified Parties”)
that
arise out of (i) any breach by Purchaser of any of Purchaser’s representations
and warranties contained in this Agreement and (ii) any breach by Purchaser
of
its covenants contained in this Agreement.
(d) For
purposes of determining breaches by
Seller
of
its
representations and warranties which will be subject to indemnification under
Section 8.1(a),
and for
determining Losses arising from such breaches,
Purchaser and Seller have agreed to use predictable dollar thresholds as
provided in Section 8.1(b) of this Agreement. Accordingly, Purchaser and Seller
agree that with respect to any representation or warranty referred to in Section
8.1, if such representation or warranty contains a materiality qualification
(including “material,” “materially,” “in all material respects,” or “Material
Adverse Change”), then such materiality qualification shall be disregarded and
only the dollar thresholds stated in Section 8.1(b) will apply; provided,
however,
that
the foregoing provision to disregard materiality shall not apply for
purposes of determining breaches of
Seller’s
representations and warranties set forth in Sections 3.8 or 3.9 of this
Agreement
(but
will apply for purposes of determining Losses arising from such
breaches).
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37 -
8.2. Notice
of Claim; Defense.
(a) If
(i) any third-party institutes or asserts any claim, demand, investigation,
audit in respect of any Tax liability, action or proceeding (each of the
foregoing, a “Proceeding”)
that
may give rise to Losses for which a party (an “Indemnifying
Party”)
may be
liable for indemnification under this Article VIII (a “Third-party
Claim”)
or
(ii) any Person entitled to indemnification under this Agreement (an
“Indemnified
Party”)
shall
have a claim to be indemnified by an Indemnifying Party that does not involve
a
Third-party Claim (a “Direct
Claim”),
then,
in case of clause (i) or (ii), the Indemnified Party shall promptly send to
the
Indemnifying Party a written notice specifying the nature of such claim and
the
amount of all related Liabilities (a “Claim
Notice”),
provided that the Indemnifying Party shall be relieved of its indemnification
obligations under this Article VIII only to the extent that it is prejudiced
by
the failure of the Indemnified Parties to provide a timely and adequate Claim
Notice. With respect to liquidated Losses finally determined to be due and
payable, if within thirty (30) days the Indemnifying Party has not contested
the
Claim Notice in writing, then the Indemnified Party will pay the full amount
of
such liquidated Losses within ten (10) days after the expiration of such
thirty-day period. Any liquidated amount owed by an Indemnifying Party hereunder
with respect to any Losses may be set-off by the Indemnified Party against
any
amounts owed by the Indemnified Party to the Indemnifying Party. Any
amount finally determined to be due and owed by Seller to Purchaser pursuant
to
this Article VIII may, at the Purchaser’s option, be satisfied from the Escrowed
Amount pursuant to the Escrow Agreement. The
unpaid balance of any Losses shall bear interest at a rate per annum equal
to
the rate announced by Citibank, N.A. from time to time as its “Base Rate”
plus
two percent (2%) from the date notice thereof is given by the Indemnified Party
to the Indemnifying Party.
(b) In
the
event of a Third-party Claim, the Indemnifying Party may elect to retain counsel
of its choice to represent such Indemnified Parties in connection with such
Proceeding and shall pay the fees, charges and disbursements of such counsel.
The Indemnified Parties may participate, at their own expense and through legal
counsel of their choice, in any such Proceeding, provided that (i) the
Indemnifying Party may elect to control the defense of the Indemnified Parties
in connection with such Proceeding and (ii) the Indemnified Parties and
their counsel shall cooperate with the Indemnifying Party and its counsel in
connection with such Proceeding. The Indemnifying Party shall not settle any
such Proceeding without the relevant Indemnified Parties’ prior written consent
(which shall not be unreasonably withheld), unless the terms of such settlement
provide for no relief other than the payment of monetary damages.
Notwithstanding the foregoing, (A) if the Indemnifying Party elects not to
retain counsel and assume control of such defense or if both the Indemnifying
Party and any Indemnified Party are parties to or subjects of such Proceeding
and conflicts of interests exist between the Indemnifying Party and such
Indemnified Party such that, in the Indemnified Parties’ reasonable discretion,
separate representation by the Indemnified Parties’ counsel is advisable, and
(B) with respect to any Proceedings relating to the matters described in
Sections 8.1(a)(iv), (v) and (vi), the Indemnified Parties shall retain counsel
reasonably acceptable to the Indemnifying Party in connection with such
Proceeding and assume control of the defense in connection with such Proceeding,
and the fees, charges and disbursements of no more than one such counsel per
jurisdiction selected by the Indemnified Parties shall be reimbursed by the
Indemnifying Party (and in the case of the matter described in Section
8.1(a)(vi), Purchaser shall use reasonable commercial efforts to keep Seller
apprised of the status of such matter and any negotiations with the claimant
related thereto). Under no circumstances will the Indemnifying Party have any
liability in connection with any settlement of any Proceeding that is entered
into without its prior written consent (which shall not be unreasonably
withheld).
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38 -
(c) From
and
after the delivery of a Claim Notice, at the reasonable request of the
Indemnifying Party, each Indemnified Party shall grant the Indemnifying Party
and its counsel, experts and representatives full access, during normal business
hours, to the books, records, personnel and properties of the Indemnified Party
to the extent reasonably related to the Claim Notice at no cost to the
Indemnifying Party (other than for reasonable out-of-pocket expenses of the
Indemnified Parties).
8.3. Tax
Effect of Indemnification Payments.
All
indemnity payments made pursuant to this Article VIII shall be treated for
all
Tax purposes as adjustments to the consideration paid with respect to the
Shares.
8.4. No
Duplication; Exclusive Remedy.
(a) Any
liability for indemnification hereunder shall be determined without duplication
of recovery by reason of the state of facts giving rise to such liability
constituting a breach of more than one representation, warranty, covenant or
agreement.
(b) From
and
after the Closing, the exclusive remedy of each party in connection with this
Agreement and the transactions contemplated hereby (whether under this contract
or arising under common law or any other Law) shall be as provided in this
Article VIII, except as otherwise specified in Sections 2.2 and 7.2 and except
in the case of claims for fraud or intentional breach.
8.5. Mitigation.
Purchaser and Seller shall cooperate with each other with respect to resolving
any claim or liability with respect to which one party is obligated to indemnify
the other party including by making commercially reasonable efforts to mitigate,
whether by seeking claims against a third party, an insurer or otherwise, and
to
resolve any such claim or liability. If a Loss is covered by insurance or
subject to third party recoveries, but proceeds have not been received, the
Indemnified Party shall use reasonable efforts to recover the amount of such
insurance or recoverable from the insurer or third party, and, if applicable,
will reimburse the Indemnifying Party for any Losses already paid hereunder
(net
of costs incurred to recover such amounts).
ARTICLE
IX
DEFINITIONS
AND INTERPRETATION
9.1. Definitions.
For all
purposes of this Agreement, except as otherwise expressly provided or unless
the
context clearly requires otherwise:
“401(k)
Plan Participants”
shall
have the meaning set forth in Section 5.6(b).
“Accounting
Arbitrator”
has
the
meaning set forth in Section 2.2.
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39 -
“Affiliate”
shall
have the meaning set forth in Rule 12b-2 of the Exchange Act.
“Agreement”
or
“this
Agreement”
shall
mean this Stock Purchase Agreement, together with the Exhibits, Appendices
and
Schedules hereto and the Disclosure Schedule.
“AP”
shall
have the meaning set forth in the opening paragraph.
“Audits”
shall
have the meaning set forth in Section 3.17.
“Australian
Superannuation Arrangement”
means
any fund,
plan, scheme, agreement or arrangement under which superannuation benefits,
retirement benefits, pensions, annuities or other allowances of a similar nature
are or may be provided to or in respect of any present or former employees
of
Placard or any Subsidiary of Placard or their respective
dependants.
“Balance
Sheet Date”
shall
mean July 31, 2006, the date of the most recent balance sheet included in the
Financial Statements.
“Base
Purchase Price”
shall
have the meaning set forth in Section 1.2.
“Business
Day”
shall
mean a day other than Saturday, Sunday or any day on which the principal
commercial banks located in the State of New York are authorized or obligated
to
close under the laws of such state.
“Certificate
of Indebtedness”
shall
have the meaning set forth in Section 2.1(b)(ix).
“Claim
Notice”
shall
have the meaning set forth in Section 8.2(a).
“Closing”
shall
mean the closing referred to in Section 2.1.
“Closing
Date”
shall
mean the date on which the Closing occurs.
“Closing
Statement”
shall
have the meaning set forth in Section 2.2.
“Closing
Working Capital”
shall
mean, as of the close of business on the date immediately preceding the Closing
Date, the excess of (i) current assets of the Companies (including cash and
cash
equivalents and excluding non-trade
intercompany receivables) over (ii) current liabilities of the Companies
(excluding non-trade
intercompany payables), determined in accordance with Schedule 2.2.
“Code”
shall
mean the Internal Revenue Code of 1986, as amended.
“Company”
shall
have the meaning set forth in the opening paragraph. In the case of Mercury,
the
term “Company” shall also include the Mercury Graphics division of the Seller as
operated by the Seller prior to the Mercury Contribution; provided, however,
that no other assets, liabilities or operations of Seller shall be deemed
included as part of the term “Company.”
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40 -
“Company
Intellectual Property”
shall
mean all Intellectual Property that is used in the business of the
Companies.
“Company
Material Adverse Effect”
shall
mean any material adverse effect on the business, financial condition or results
of operations of the Companies, taken as a whole; provided,
however,
that
the effects of events, changes and circumstances relating to (a) the industries
and markets in which the Companies operate, (b) macroeconomic factors, interest
rates, general financial market conditions, war, terrorism or hostilities,
(c)
changes in Law, generally accepted accounting principles or official
interpretations of the foregoing, (d) compliance with this Agreement, or (e)
the
transactions contemplated hereby or the public announcement of this Agreement,
shall not be considered when determining if a Company Material Adverse Effect
has occurred.
“Computer
Software”
shall
mean computer software programs, databases and all documentation related
thereto.
“Confidentiality
Agreement”
shall
mean the letter agreement dated March 21, 2006 between Seller and
Purchaser.
“Copyrights”
shall
mean U.S. and foreign registered and unregistered copyrights (including those
in
Computer Software and databases), rights of publicity and all registrations
and
applications to register the same.
“Designs”
means
designs defined under the Australia Designs
▇▇▇ ▇▇▇▇
(Cth)
and any similar rights capable of protection under the laws of any foreign
jurisdictions.
“Direct
Claim”
shall
have the meaning set forth in Section 8.2(a).
“Disclosure
Schedule”
shall
mean the disclosure schedules of even date herewith delivered by Seller to
Purchaser simultaneously with the execution hereof.
“Due
Date”
shall
mean, with respect to any Tax Return, the date such return is due to be filed
(taking into account any valid extensions).
“Encumbrances”
shall
mean any and all liens, charges, security interests, options, claims, mortgages,
pledges, proxies, voting trusts or agreements, obligations, understandings,
adverse claims or arrangements or other restrictions on title or transfer of
any
nature whatsoever.
“Environmental
Law”
shall
mean all federal, provincial, state, county, regional, municipal, local or
foreign laws, statutes, regulations, codes, plans, orders, decrees, judgments,
notices, Permits, rules, ordinances, by-laws or demand letters relating to
environmental matters, Hazardous Substances, natural resources, pollution or
protection of human health, safety or the environment, including, without
limitation, laws relating to emissions, discharges, releases or threatened
releases of Hazardous Substances into ambient air, surface water, groundwater,
or land or otherwise relating to the manufacture, processing, distribution,
use,
presence, production, treatment, storage, disposal, transport, or handling
of
Hazardous Substances, including, but not limited to, the Federal Water Pollution
Control Act (33 U.S.C. §1251 et seq.), Resource Conservation and Recovery Act
(42 ▇.▇.▇. §▇▇▇▇ et seq.), Safe Drinking Water Act (42 U.S.C. §3000(f) et seq.),
Toxic Substances Control Act (15 ▇.▇.▇. §▇▇▇▇ et seq.), Clean Air Act (42 ▇.▇.▇.
§▇▇▇▇ et seq.), Comprehensive Environmental Response, Compensation and Liability
Act (42 ▇.▇.▇. §▇▇▇▇ et seq.) (“CERCLA”),
Canadian Environmental Protection Act (S.C. 1999, c. 33), Fisheries Act (R.S.C.,
1985, c. F-14), Environmental Protection Act (R.S.O. 1990, c. E.19), Ontario
Water Resources Act (R.S.O. 1990, c. O.40), and other similar state, provincial,
regional, municipal and local statutes, and any regulations promulgated
thereto.
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41 -
“ERISA”
shall
mean the Employee Retirement Income Security Act of 1974, as
amended.
“ERISA
Affiliate”
shall
mean any trade or business, whether or not incorporated, that together with
the
applicable Company would be deemed a “single
employer”
within
the meaning of Section 4001(b) of ERISA.
“Escrow
Agent”
shall
mean JPMorgan Chase Bank, N.A..
“Escrow
Agreement”
has
the
meaning set forth in Section 2.1(b)(iii).
“Escrow
Amount”
has
the
meaning set forth in Section 1.2(a).
“Estimated
Closing Working Capital”
shall
have the meaning set forth in Section 1.2.
“Estimated
Purchase Price”
shall
have the meaning set forth in Section 1.2.
“Evaluation
Material”
shall
have the meaning assigned to such term in the Confidentiality
Agreement.
“Exchange
Act”
shall
mean the Securities Exchange Act of 1934, as amended.
“Financial
Statements”
shall
mean (a) the audited balance sheets of AP, Metaca, Placard and Mercury
(represented by the Mercury Graphics division of the Seller as conducted prior
to the Mercury Contribution) at December 31, 2005 and 2004 together with the
audited statements of income and statements of cash flows for the years ended
December 31, 2005 and 2004 and (b) the Interim Financial
Statements.
“GAAP”
shall
mean, for any jurisdiction, generally accepted accounting principles for such
jurisdiction, consistently applied.
“Governmental
Entity”
means
any country, any national body (including the European Union), any state,
province, municipality, or subdivision of any of the foregoing, any agency,
governmental department, court, entity, commission, board, ministry, bureau,
locality or authority of any of the foregoing, or any quasi-governmental or
private body exercising any regulatory, taxing, importing, exporting, or other
governmental or quasi-governmental function.
“HSR
Act”
shall
mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended.
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42 -
“Hazardous
Substances”
means
any hazardous substance as defined in 42 U.S.C. § 9601(14), any hazardous
waste as defined by 42 U.S.C. §6903(5), any pollutant or contaminant as defined
by 42 U.S.C. §9601(33) or any toxic substance, pollutant, contaminant, waste,
oil or hazardous material or other chemical or substance (including, without
limitation, asbestos in any form, urea formaldehyde, perchlorate or
polychlorinated biphenyls) regulated by or forming the basis of liability under
any Environmental Laws.
“Indebtedness”
shall
mean, without double counting, (a) the indebtedness of any of the Companies
for
borrowed money owed to third parties, (b) accrued interest payable by any
Company on the indebtedness under clause (a), and (c) the obligations of
any Company under their capitalized leases (which leases shall, for greater
certainty, exclude those operating leases described on Schedule 3.11A of the
Disclosure Schedules); provided
that in
no event shall Indebtedness include any amount that is included in the Closing
Working Capital.
“Indemnified
Party”
shall
have the meaning set forth in Section 8.2(a).
“Indemnifying
Party”
shall
have the meaning set forth in Section 8.2(a).
“Indemnity
Threshold”
shall
have the meaning set forth in Section 8.1(b)(ii).
“Insurance
Policy”
shall
mean any insurance policy maintained by Seller or any of its Affiliates (other
than the Companies).
“Intellectual
Property”
shall
mean all of the following: Trademarks, Patents, Copyrights, Trade Secrets and
Licenses.
“Intercompany
Accounts”
shall
mean all balances related to indebtedness, including any intercompany
indebtedness, loan, guaranty, receivable, payable or other account (other than
trade payables and receivables) between Seller and its Subsidiaries (other
than
the Companies) on the one hand, and any Company, on the other hand.
“Interim
Financial Statements”
the
unaudited balance sheets of AP, Metaca, Placard and Mercury (represented by
the
Mercury Graphics division of the Seller as conducted prior to the Mercury
Contribution) as of July 31, 2006 together with the related statements of income
for the for the seven (7) month period then ended.
“Interim
Period”
shall
have the meaning set forth in Section 5.4(a)(ii).
“IRS”
shall
mean the United States Internal Revenue Service.
“Knowledge
of Seller”
shall
mean the actual knowledge, including knowledge that a reasonable senior
executive would have under the circumstances following reasonable inquiry,
of
▇▇▇▇▇ ▇▇▇▇▇▇▇, Gord Bayda, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
“Law”
shall
have the meaning set forth in Section 3.4.
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43 -
“Licenses”
shall
mean all licenses and agreements pursuant to which any Company has acquired
rights in or to any Trademarks, Patents or Copyrights, or licenses and
agreements pursuant to which any Company has licensed or transferred the right
to use any of the foregoing.
“Losses”
shall
mean any and all actual losses, liabilities, damages, judgments, settlements
and
expenses (including interest and penalties recovered by a third party with
respect thereto and reasonable attorney and other professional fees and
expenses).
“Mercury”
shall
have the meaning set forth in the opening paragraph.
“Mercury
Contribution”
shall
mean the series of transactions completed by the Seller on or prior to the
date
hereof pursuant to which the assets and liabilities of the Mercury division
of
the Seller have been contributed into Mercury.
“Mercury
Lease”
means
that certain lease between Mercury Graphic Corporation, as lessee, and
Saskatchewan Economic Development Corporation, as lessor, dated September 21,
1990, as amended.
“Metaca”
shall
have the meaning set forth in the opening paragraph.
“Patents”
shall
mean issued U.S. and foreign patents and pending patent applications, patent
disclosures, and any and all divisions, continuations, continuations-in-part,
reissues, reexaminations, and extensions thereof, any counterparts claiming
priority therefrom, utility models, patents of importation/confirmation,
certificates of invention and similar statutory rights.
“PBGC”
shall
mean the Pension Benefit Guaranty Corporation.
“Permitted
Encumbrances”
shall
have the meaning set forth in Section 3.10.
“Person”
shall
mean a natural person, partnership, corporation, limited liability company,
business trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Entity or other entity or organization.
“Placard”
shall
have the meaning set forth in the opening paragraph.
“Plan”
shall
mean each deferred compensation and each incentive compensation, stock purchase,
stock option and other equity compensation plan, program, agreement or
arrangement; each severance or termination pay, medical, surgical,
hospitalization, life insurance and other “welfare”
plan,
fund or program (within the meaning of Section 3(1) of ERISA); each
profit-sharing, stock bonus or other “pension”
plan,
fund or program (within the meaning of Section 3(2) of ERISA); each employment,
termination or severance agreement; and each other employee benefit plan,
pension, retirement savings or retirement income plan, fund, program, agreement
or arrangement, in each case, that is sponsored, maintained or contributed
to or
required to be contributed to by any Company or by any ERISA Affiliate, or
to
which any Company or an ERISA Affiliate is party or has any outstanding
liability to or in respect of or obligation under, whether formal or informal,
written or oral, for the benefit of any director, officer, consultant, or
employee, whether active or terminated, of any Company excluding any government
sponsored plans requiring mandatory contributions by employers and/or
employees.
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44 -
“Privacy
Law”
shall
mean (a) the Australia Privacy ▇▇▇ ▇▇▇▇ (Cth); and (b) the National Privacy
Principles contained in Schedule 3 to the Australia Privacy ▇▇▇ ▇▇▇▇ (Cth)
or an
approved privacy code (as defined in the Australia Privacy ▇▇▇ ▇▇▇▇ (Cth))
that
applies to a Company.
“Proceeding”
shall
have the meaning set forth in Section 8.2(a).
“Purchase
Price”
shall
have the meaning set forth in Section 1.2.
“Purchaser”
shall
have the meaning set forth in the opening paragraph.
“Purchaser
Indemnified Persons”
shall
have meaning set forth in Section 8.1(a).
“Real
Property”
shall
mean all material real property that is owned, leased or used by the Companies
or any of their respective Subsidiaries.
“Retained
Employee”
shall
mean each person who was an active or inactive employee (including but not
limited to any such employee who is on any leave of absence, whether paid or
unpaid, including, but not limited to, “short-term
disability leave”,
“long-term
disability leave”
or
“workers’
compensation leave”
as
such
term is defined in a Plan) of any Company immediately prior to the Closing
Date.
“Securities
Act”
shall
mean the Securities Act of 1933, as amended.
“SEC”
shall
mean the United States Securities and Exchange Commission.
“Seller”
shall
have the meaning set forth in the opening paragraph.
“Shares”
shall
mean the outstanding shares of common stock issued by the Base
Companies.
“Short
Period”
shall
have the meaning set forth in Section 5.4(a)(i).
“Straddle
Period”
shall
mean a taxable year or period beginning on or before, and ending on or after,
the Closing Date.
“Subsidiary”
shall
mean, with respect to any Person, any corporation or other organization, whether
incorporated or unincorporated, of which (a) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly
or
indirectly owned or controlled by such Person or by any one or more of its
Subsidiaries, or by such Person and one or more of its Subsidiaries or (b)
such
Person or any other Subsidiary of such Person is a general partner (excluding
any such partnership where such Person or any Subsidiary of such Person does
not
have a majority of the voting interest in such partnership).
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45 -
“Tax
Act”
shall
mean the Income
Tax Act
(Canada)
and the regulations thereunder, as amended.
“Taxes”
shall
mean all taxes, however denominated, including any interest or penalties that
may become payable in respect thereof, imposed by any federal, state,
provincial, local or foreign government or any agency or political subdivision
of any such government, which taxes shall include, without limiting the
generality of the foregoing, all income taxes (including, but not limited to,
United States and Canadian federal income taxes and state or provincial income
taxes), payroll and employee withholding taxes, unemployment insurance and
employment insurance payments, social security, Canada Pension Plan and
provincial pension plan contributions, value-added, sales and use taxes, excise
taxes, goods and services taxes, harmonized sales taxes, environmental,
franchise taxes, gross receipts taxes, occupation taxes, real and personal
property taxes, stamp taxes, severance taxes, capital stock taxes, capital
taxes, alternative or add-on minimum taxes, estimated taxes, transfer taxes,
withholding taxes, workers’ compensation, and other obligations of the same or
of a similar nature, whether arising before, on or after the Closing Date and
whether disputed or not.
“Tax
Return”
means
a
report, return, declaration, election, agreement, claim for refund, or other
information return or statement (including any schedule or attachment thereto
and including any amendment thereof) required to be supplied to or filed with
a
Governmental Entity with respect to Taxes including, where permitted or
required, combined or consolidated returns for any group of entities that
includes the Company.
“Third-party
Claim”
shall
have the meaning set forth in Section 8.2(a).
“Title
IV Plan”
shall
mean a Plan that is subject to Section 302 or Title IV of ERISA or Section
412
of the Code.
“Trademarks”
shall
mean U.S. and foreign registered and unregistered trademarks, trade dress,
service marks, logos, trade names, corporate names, business names and all
registrations and applications to register the same.
“Trade
Secrets”
shall
mean all categories of trade secrets as defined in the Uniform Trade Secrets
Act, including business information and any trade secrets capable of protection
in any applicable non-U.S. jurisdiction.
“Transfer
Taxes”
shall
have the meaning set forth in Section 5.4(a)(iii).
“U.S.”
shall
mean the United States of America.
“U.S.
Dollar”
or
“$”
means
the lawful currency of the United States of America.
“WARN
Act”
shall
mean the Worker Adjustment and Retraining Notification Act.
“Year
End Balance Sheet”
means
the audited balance sheet of the Companies at December 31, 2005.
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46 -
9.2. Interpretation.
(a) The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this
Agreement.
(b) Whenever
the words “include”,
“includes”
or
“including”
are
used in this Agreement they shall be deemed to be followed by the words
“without
limitation.”
(c) The
words
“hereof”,
“herein”
and
“herewith”
and
words of similar import shall, unless otherwise stated, be construed to refer
to
this Agreement as a whole and not to any particular provision of this Agreement,
and article, section, paragraph, exhibit and schedule references are to the
articles, sections, paragraphs, exhibits and schedules of this Agreement unless
otherwise specified.
(d) The
meaning assigned to each term defined herein shall be equally applicable to
both
the singular and the plural forms of such term, and words denoting any gender
shall include all genders. Where a word or phrase is defined herein, each of
its
other grammatical forms shall have a corresponding meaning.
(e) A
reference to any party to this Agreement or any other agreement or document
shall include such party’s successors and permitted assigns.
(f) A
reference to any legislation or to any provision of any legislation shall
include any amendment to, and any modification or re-enactment thereof, any
legislative provision substituted therefor and all regulations and statutory
instruments issued thereunder or pursuant thereto.
(g) The
parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties,
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any provisions of this
Agreement.
(h) All
payments and adjustments under this Agreement shall be made in U.S.
Dollars.
ARTICLE
X
MISCELLANEOUS
10.1. Fees
and Expenses.
All
costs and expenses incurred in connection with this Agreement and the
consummation of the Closing shall be paid by the party incurring such expenses,
except as specifically provided to the contrary in this Agreement.
10.2. Amendment
and Modification.
This
Agreement may be amended, modified and supplemented in any and all respects,
but
only by a written instrument signed by all of the parties hereto expressly
stating that such instrument is intended to amend, modify or supplement this
Agreement.
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47 -
10.3. Notices.
All
notices and other communications hereunder shall be in writing and shall be
deemed given if mailed, delivered personally, telecopied (which is confirmed)
or
sent by an overnight courier service, such as Federal Express, to the parties
at
the following addresses (or at such other address for a party as shall be
specified by like notice):
|
if
to Purchaser and/or HIG, to:
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c/o
H.I.G. Capital Management, Inc.
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▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
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▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
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Attention:
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ NolanTelephone: 617-262-8455
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Telecopy:
▇▇▇-▇▇▇-▇▇▇▇
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with
a copy to:
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▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ LLP
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▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇
▇▇▇▇, ▇▇ 10022Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
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Telephone:
▇▇▇-▇▇▇-▇▇▇▇
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Telecopy:
▇▇▇-▇▇▇-▇▇▇▇
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and
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if
to Seller, to:
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▇▇▇▇▇▇
▇▇▇▇▇, President and CFO
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▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇
▇▇▇▇, ▇.▇. ▇▇▇▇▇
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Telephone:
▇▇▇-▇▇▇-▇▇▇▇
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Telecopy:
▇▇▇-▇▇▇-▇▇▇▇
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With
a copy to:
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▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, General Counsel
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▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇
▇▇▇▇, ▇.▇. ▇▇▇▇▇
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Telephone:
▇▇▇-▇▇▇-▇▇▇▇
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Telecopy:
▇▇▇-▇▇▇-▇▇▇▇
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10.4. Counterparts.
This
Agreement may be executed in two or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when two or
more counterparts have been signed by each of the parties and delivered to
the
other parties.
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10.5. Entire
Agreement; No Third Party Beneficiaries.
This
Agreement and the Confidentiality Agreement (a) constitute the entire agreement
and supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof and thereof and
(b) are not intended to confer upon any Person other than the parties hereto
and
thereto and, solely with respect to Section 8, the other Purchaser Indemnified
Parties and Seller Indemnified Parties.
10.6. Severability.
Any
term or provision of this Agreement that is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability
of
the remaining terms and provisions hereof or the validity or enforceability
of
the offending term or provision in any other situation or in any other
jurisdiction. If the final judgment of a court of competent jurisdiction or
other authority declares that any term or provision hereof is invalid, void
or
unenforceable, the parties agree that the court making such determination shall
have the power to reduce the scope, duration, area or applicability of the
term
or provision, to delete specific words or phrases, or to replace any invalid,
void or unenforceable term or provision with a term or provision that is valid
and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision.
10.7. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York without giving effect to the principles of conflicts of law
thereof.
10.8. Jurisdiction.
To the
fullest extent permitted by applicable Law, each party hereto (i) agrees that
any claim, action or proceeding by such party seeking any relief whatsoever
arising out of, or in connection with, this Agreement or the transactions
contemplated hereby shall be brought only in the United States District Court
for the Southern District of New York or any New York State court, in each
case,
located in the Borough of Manhattan and not in any other State or Federal court
in the United States of America or any court in any other country, (ii) agrees
to submit to the exclusive jurisdiction of such courts located in the Borough
of
Manhattan for purposes of all legal proceedings arising out of, or in connection
with, this Agreement or the transactions contemplated hereby, (iii) waives
and
agrees not to assert any objection that it may now or hereafter have to the
laying of the venue of any such proceeding brought in such a court or any claim
that any such proceeding brought in such a court has been brought in an
inconvenient forum, (iv) agrees that mailing of process or other papers in
connection with any such action or proceeding in the manner provided in Section
10.3 (Notices) or any other manner as may be permitted by Law shall be valid
and
sufficient service thereof and (v) agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
applicable Law. The preceding sentence shall not limit the jurisdiction of
the
Accounting Arbitrator as set forth in Section 2.2, although claims may be
asserted in such courts described in the preceding sentence for purposes of
enforcing the jurisdiction of the Accounting Arbitrator.
10.9. Time
of Essence.
Each of
the parties hereto hereby agrees that, with regard to all dates and time periods
set forth or referred to in this Agreement, time is of the essence.
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49 -
10.10. Extension;
Waiver.
At any
time prior to the Closing Date, either party hereto may extend the time for
the
performance of any of the obligations or other acts of the other party. Any
agreement on the part of a party to any such extension shall be valid only
if
set forth in an instrument in writing signed by or on behalf of such party.
The
failure of either party to this Agreement to assert any of its rights under
this
Agreement or otherwise shall not constitute a waiver of those
rights.
10.11. Assignment.
Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be transferred by either party (whether by operation of law or otherwise)
without the prior written consent of the other party. Any transfer of any
rights, interests or obligations hereunder in violation of this Section shall
be
null and void. Notwithstanding the foregoing, the Purchaser shall be permitted
to assign or delegate all or part of its rights or obligations hereunder (a)
to
one or more of its Subsidiaries (provided that such assignment or delegation
shall not relieve the Purchaser of its obligations and responsibilities
hereunder) and (b) by way of collateral assignment to any bank or financing
institution providing financing to the Purchaser.
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IN
WITNESS WHEREOF, Purchaser, Seller and HIG have executed this Agreement or
caused this Agreement to be executed by their respective officers thereunto
duly
authorized as of the date first written above.
| SECURED PRODUCTS (CAYMAN), INC. | ||
| |
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| By | ||
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Name: |
||
| Title: | ||
| MDC PARTNERS INC. | ||
| |
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| By | ||
|
Name: |
||
| Title: | ||
| H.I.G. CAPITAL MANAGEMENT, INC. | ||
| |
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| By | ||
|
Name: |
||
| Title: | ||
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