Exhibit 10.1.3
CUSTOM DIRECT INCOME FUND
- and -
CUSTOM DIRECT CANADA INC.
- and -
CUSTOM DIRECT USA INC.
- and -
CUSTOM DIRECT ULC
- and -
CUSTOM DIRECT, INC.
- and -
MDC CORPORATION INC.
- and -
XXXXXX-XXXXXX CANADA INC.
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ACQUISITION AGREEMENT
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May 15, 2003
[GRAPHIC OMITTED]
X X X X X XXX
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Xxx Xxxx Xxxxxxx
TABLE OF CONTENTS
ARTICLE 1
INTERPRETATION...........................................................................................3
1.1 Definitions......................................................................................3
1.2 Schedules.......................................................................................11
1.3 Headings........................................................................................11
1.4 Gender and Number...............................................................................11
1.5 Currency........................................................................................11
1.6 Day Not a Business Day..........................................................................11
1.7 Accounting Principles...........................................................................11
1.8 Waiver, Amendment...............................................................................12
ARTICLE 2
FUND'S SUBSCRIPTION FOR NOTES OF CUSTOM DIRECT ULC......................................................12
2.1 Purchase and Sale; Subscription Price...........................................................12
2.2 Payment of Fund Note Subscription Price and Delivery of the Certificates........................12
ARTICLE 3
FUND'S SUBSCRIPTION FOR COMMON SHARES OF CUSTOM DIRECT CANADA...........................................12
3.1 Purchase and Sale; Subscription Price...........................................................12
3.2 Payment of Fund Common Share Subscription Price and Delivery of the Certificates................12
ARTICLE 4
CUSTOM DIRECT CANADA SUBSCRIPTION FOR
COMMON SHARES OF CUSTOM DIRECT USA......................................................................13
4.1 Purchase and Sale; Subscription Price...........................................................13
4.2 Payment of Custom Direct Canada Subscription Price and Delivery of the Certificates.............13
ARTICLE 5
CUSTOM DIRECT USA'S SUBSCRIPTION FOR
COMMON SHARES OF CUSTOM DIRECT ULC......................................................................13
5.1 Purchase and Sale; Purchase Price...............................................................13
5.2 Payment of Custom Direct USA Subscription Price and Delivery of the Certificates................13
ARTICLE 6
CUSTOM DIRECT ULC'S SUBSCRIPTION FOR
PREFERRED SHARES OF CUSTOM DIRECT USA...................................................................14
6.1 Purchase and Sale; Subscription Price...........................................................14
6.2 Payment of Custom Direct ULC Subscription Price and Delivery of the Certificates................14
ARTICLE 7
THE MERGER OF CUSTOM DIRECT AND CUSTOM DIRECT USA.......................................................14
7.1 The Merger......................................................................................14
7.2 Certificate of Incorporation and Bylaws.........................................................15
7.3 Directors and Officers..........................................................................15
7.4 Effect of Merger................................................................................15
ARTICLE 8
CUSTOM DIRECT'S PARTIAL REPAYMENT OF CDI NOTES..........................................................16
8.1 Partial Repayment of CDI Notes..................................................................16
8.2 Payment.........................................................................................16
ARTICLE 9
ASSUMPTION OF CDI NOTES.................................................................................17
9.1 Assumption......................................................................................17
9.2 Issuance of Custom Direct Series A Preferred Shares.............................................17
ARTICLE 10
EXCHANGE OF CDI NOTES FOR CUSTOM DIRECT ULC NOTES.......................................................17
10.1 Exchange and Purchase...........................................................................17
10.2 Delivery of MDC Notes, Xxxxxx-Xxxxxx Notes and CDI Notes........................................17
10.3 Cancellation of CDI Notes.......................................................................17
ARTICLE 11
REPRESENTATIONS AND WARRANTIES..........................................................................18
11.1 Representations and Warranties Relating to MDC and Custom Direct................................18
11.2 No Finders' Fee.................................................................................25
11.3 Survival of Representations and Warranties......................................................25
ARTICLE 12
CLOSING CONDITIONS......................................................................................26
12.1 Conditions Precedent to Closing.................................................................26
ARTICLE 13
COVENANTS OF THE PARTIES................................................................................31
13.1 Covenant Regarding Representations, Warranties and Conditions...................................31
13.2 Conduct of Business Prior to Closing............................................................31
13.3 Reorganization..................................................................................31
13.4 Transfer of the Securities......................................................................31
13.5 Filings and Authorizations......................................................................33
13.6 Names...........................................................................................33
13.7 Cooperation.....................................................................................33
13.8 Delivery of Documents...........................................................................34
ARTICLE 14
INDEMNIFICATION.........................................................................................34
14.1 Indemnification Provided by Custom Direct Canada in Favour of MDC...............................34
14.2 Indemnification Provided by MDC in Favour of Custom Direct Canada,
Custom Direct USA and the Fund..................................................................34
14.3 Limitation of Liability of MDC..................................................................34
14.4 Notice of Claim.................................................................................35
14.5 Procedure for Indemnification...................................................................35
14.6 Additional Rules................................................................................37
ARTICLE 15
TERMINATION.............................................................................................38
15.1 Termination by the Fund and Custom Direct Canada................................................38
15.2 Termination by Custom Direct and MDC............................................................38
15.3 Other Termination Rights........................................................................38
15.4 Effect of Termination...........................................................................39
ARTICLE 16
CLOSING.................................................................................................39
16.1 Location and Time of the Closings...............................................................39
16.2 Closing Procedures..............................................................................39
ARTICLE 17
ARBITRATION.............................................................................................39
17.1 Best Efforts to Settle Disputes.................................................................39
17.2 Arbitration.....................................................................................39
ARTICLE 18
GENERAL MATTERS.........................................................................................41
18.1 Severability....................................................................................41
18.2 Enurement.......................................................................................41
18.3 Assignment......................................................................................41
18.4 Expenses........................................................................................42
18.5 Notices.........................................................................................42
18.6 Non-Merger......................................................................................43
18.7 Governing Law...................................................................................43
18.8 Attornment......................................................................................44
18.9 Time of Essence.................................................................................44
18.10 Entire Agreement................................................................................44
18.11 Contractual Liability of the Fund...............................................................44
18.12 Counterparts....................................................................................44
18.13 Further Assurances..............................................................................45
ACQUISITION AGREEMENT
THIS AGREEMENT is made as of the 15th day of May, 2003
BETWEEN:
CUSTOM DIRECT INCOME FUND, a trust formed under the laws of
the Province of Ontario,
(the "Fund"),
- and -
CUSTOM DIRECT CANADA INC., a corporation existing under the
laws of the Province of Ontario,
("Custom Direct Canada"),
- and -
CUSTOM DIRECT USA INC., a corporation existing under the
laws of the State of Delaware,
("Custom Direct USA"),
- and -
CUSTOM DIRECT ULC, an unlimited liability corporation
existing under the laws of the Province of Nova Scotia,
("Custom Direct ULC"),
- and -
CUSTOM DIRECT, INC., a corporation existing under the laws
of the State of Delaware,
("Custom Direct"),
- and -
MDC CORPORATION INC., a corporation existing under the laws
of the Province of Ontario,
("MDC"),
- and -
XXXXXX-XXXXXX CANADA INC., a corporation existing under the
laws of the Province of Ontario,
("Xxxxxx-Xxxxxx").
RECITALS:
A. The Fund intends to complete an offering of its trust units (the
"Units") to the public under a prospectus filed with the securities
regulatory authorities in each of the provinces and territories of
Canada (the "Offering");
B. Custom Direct will be reorganized to form one continuing company
having the name, Custom Direct, Inc. with the subsidiaries Custom
Direct LLC and Unique Checks, Inc., as set forth in Schedule "H";
C. The Fund will apply 75% of the estimated net proceeds that it
receives from the Offering to subscribe for Custom Direct ULC Notes;
D. The Fund will apply the remaining 25% of the estimated proceeds that
it receives from the Offering to subscribe for additional Custom
Direct Canada Common Shares;
E. Custom Direct Canada will use the subscription proceeds that it
receives from the Fund to subscribe for additional Custom Direct USA
Common Shares;
F. Custom Direct USA will use a portion of the proceeds it receives from
Custom Direct Canada to subscribe for additional Custom Direct ULC
Common Shares;
G. Custom Direct ULC will use the proceeds that it receives from the
sale of the Custom Direct ULC Notes to the Fund to subscribe for the
Custom Direct USA Preferred Shares;
H. Custom Direct LLC will borrow $37,500,000 million from the term
portion of the Proposed Credit Facility;
I. Custom Direct USA will merge into Custom Direct so that Custom Direct
is the surviving entity in the merger;
J. On the merger, (a) Custom Direct Canada will receive 10.9999976
Custom Direct Class A Common Shares, (b) Custom Direct ULC will
receive 10.9999998 Custom Direct Series A Preferred Shares, (c)
Xxxxxx-Xxxxxx will receive $4,964,890.70 (funded by the Offering and
term portion of the Proposed Credit Facility), 0.39034499 Custom
Direct Series B Preferred Shares and 0.851724791 Custom Direct Class
B Common Shares and (d) MDC will receive $44,684,016.30 (funded by
the Offering and term portion of the Proposed Credit Facility),
3.513104894 Custom Direct Series B Preferred Shares and 7.665523117
Custom Direct Class B Common Shares;
K. Immediately following the Effective Time, MDC and Xxxxxx-Xxxxxx will
receive payment for their aggregate CDI Notes of $83,500,000 from
Custom Direct as follows: (a) Custom Direct will pay MDC an aggregate
of $54,359,025.30 and Custom Direct will pay Xxxxxx-Xxxxxx an
aggregate of $6,039,891.70; (b) Custom Direct will issue Custom
Direct Series A Preferred Shares to Custom Direct ULC in exchange for
Custom Direct ULC assuming the remainder of the CDI Notes; (c) Custom
Direct ULC will issue Custom Direct ULC Notes in the principal amount
of $20,790,974.70 to MDC in exchange for $20,790,974.70 principal
amount of CDI Notes and Custom Direct ULC will issue Custom Direct
ULC Notes in the principal amount of $2,310,108.30 to Xxxxxx-Xxxxxx
in exchange for $2,310,108.30 principal amount of CDI Notes; and (d)
MDC and Xxxxxx-Xxxxxx will effectively exchange a portion of their
Custom Direct Class B Common Shares and their Custom Direct ULC Notes
for 4,613,804 Units pursuant to the Exchange Agreement.
L. Immediately following the completion of the Offering and the
transactions contemplated by this Agreement and after the Deemed MDC
Exchange Time (as such term is defined in the Exchange Agreement),
(a) the Fund will hold all of the Custom Direct ULC Notes and will
indirectly through Custom Direct Canada hold 80% of the outstanding
Custom Direct Common Shares and Custom Direct ULC will hold 80% of
the Custom Direct Preferred Shares and (b) MDC will hold, directly or
indirectly, 20% of the outstanding Custom Direct Common Shares, 20%
of the outstanding Custom Direct Preferred Shares and 29.55% of the
outstanding Units;
M. MDC and Xxxxxx-Xxxxxx and such other persons who from time to time
hold or will be entitled to acquire Custom Direct Common Shares and
Custom Direct Preferred Shares have, pursuant to the Exchange
Agreement, the ability to exchange those Custom Direct Common Shares
and Custom Direct Preferred Shares for Units; and N. The underwriting
agreement dated May 15, 2003 between MDC, Xxxxxx-Xxxxxx, the Fund and
the Underwriters provides that, as a condition to the completion of
the Offering, the Fund, Custom Direct Canada, Custom Direct USA,
Custom Direct ULC, Custom Direct, Xxxxxx-Xxxxxx and MDC enter into
this Acquisition Agreement.
NOW THEREFORE in consideration of the mutual covenants and agreements
contained in this Agreement and other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged by each of the
parties), the parties hereto agree as follows:
ARTICLE 1
INTERPRETATION
1.1 Definitions
In this Agreement,
"affiliate" has the meaning attributed to such term in the Business
Corporations Act (Ontario);
"Agreement", "hereto", "herein", "hereby", "hereunder", "hereof", and
similar expressions refer to this Acquisition Agreement and not to
any particular Article, Section, subsection, clause, subdivision or
other portion hereof and include any and every instrument
supplemental or ancillary hereto;
"Ancillary Agreements" means the Non-Competition Agreement,
Securityholders Agreement, Exchange Agreement and Note Indenture;
"Arbitration Act" has the meaning attributed to such term in Section
17.2;
"Xxxxxx-Xxxxxx" means Xxxxxx-Xxxxxx Canada Inc., a corporation
existing under the laws of the Province of Ontario;
"Xxxxxx-Xxxxxx Notes" has the meaning attributed to such term in
Section 10.1;
"Business" means the cheque business carried on by Custom Direct and
its subsidiaries as described in the Prospectus;
"Business Day" means any day except Saturdays, Sundays and statutory
holidays in the Province of Ontario and in the States of Delaware and
Maryland;
"CDI Notes" means the notes of Custom Direct with the aggregate
principal amount of $83,500,000 held by MDC and Xxxxxx-Xxxxxx
following the Reorganization;
"Claim", "Original Claim" and "Third Party Claim" have the meanings
attributed to such terms respectively in Section 14.4;
"Closing" means the completion of all of the transactions
contemplated in Sections 2.1 to 7.4 in this Agreement;
"Closing Time" means 8:00 a.m. (Toronto time) on the Date of Closing
or such other time on such date as may be agreed upon in writing by
the parties;
"Custom Direct" means (a) immediately prior to the Reorganization,
Custom Direct, Inc. (b) following the Reorganization (but immediately
prior to the Effective Time), Custom Direct, Inc., a corporation
established under the laws of the State of Delaware as the surviving
corporation resulting from the merger of Custom Direct, Inc. with and
into CDI Newco Inc., which shall be renamed Custom Direct, Inc. and
(c) following the Effective Time, Custom Direct, Inc., a corporation
established under the laws of the State of Delaware, as the surviving
corporation resulting from the merger of Custom Direct USA with and
into Custom Direct, Inc. in accordance with Article 7.1 of this
Agreement;
"Custom Direct Canada" means Custom Direct Canada Inc., a corporation
existing under the laws of the Province of Ontario;
"Custom Direct Canada Common Shares" means the common shares in the
capital of Custom Direct Canada, as such shares were constituted on
the date of this Agreement or as subsequently consolidated or
subdivided, or any other shares or securities resulting from a
reclassification, change or conversion of such shares;
"Custom Direct Canada Subscription Price" has the meaning attributed
to such term in Section 4.1;
"Custom Direct Class A Common Shares" means the shares of Class A
common stock, par value $0.001, in the capital of Custom Direct, as
the surviving corporation resulting from the merger of Custom Direct
USA with and into Custom Direct in accordance with Article 7.1 of
this Agreement, as such shares will be constituted following the
Effective Time or as subsequently consolidated or subdivided, or any
other shares or securities resulting from a reclassification, change
or conversion of such shares;
"Custom Direct Class B Common Shares" means the Class B common stock,
par value $0.001, in the capital of Custom Direct, as the surviving
corporation resulting from the merger of Custom Direct USA with and
into Custom Direct in accordance with Article 7.1 of this Agreement,
as such shares will be constituted following the Effective Time or as
subsequently consolidated or subdivided, or any other shares or
securities resulting from a reclassification, change or conversion of
such shares;
"Custom Direct Common Shares" means the shares of common stock, par
value $0.001, in the capital of Custom Direct, as such shares were
constituted on the date of this Agreement or as subsequently
consolidated or subdivided, or any other shares or securities
resulting from a reclassification, change or conversion of such
shares, including, for greater certainty, the common shares of Custom
Direct, as the surviving corporation resulting from the merger of
Custom Direct USA with and into Custom Direct, Inc.;
"Custom Direct LLC" means Custom Direct LLC, a limited liability
corporation existing under the laws of the State of Delaware;
"Custom Direct Preferred Shares" means the shares of preferred stock,
par value $0.001, in the capital of Custom Direct, as the surviving
corporation resulting from the merger of Custom Direct USA with and
into Custom Direct in accordance with Article 7.1 of this Agreement,
as such shares will be constituted following the Effective Time or as
subsequently consolidated or subdivided, or any other shares or
securities resulting from a reclassification, change or conversion of
such shares;
"Custom Direct Series A Preferred Shares" means the shares of Series
A preferred stock, par value $0.001, in the capital of Custom Direct,
as the surviving corporation resulting from the merger of Custom
Direct USA with and into Custom Direct in accordance with Article 7.1
of this Agreement, as such shares will be constituted following the
Effective Time or as subsequently consolidated or subdivided, or any
other shares or securities resulting from a reclassification, change
or conversion of such shares;
"Custom Direct Series B Preferred Shares" means the shares of Series
B preferred stock, par value $0.001, in the capital of Custom Direct,
as the surviving corporation resulting from the merger of Custom
Direct USA with and into Custom Direct in accordance with Article 7.1
of this Agreement, as such shares will be constituted following the
Effective Time or as subsequently consolidated or subdivided, or any
other shares or securities resulting from a reclassification, change
or conversion of such shares;
"Custom Direct ULC" means Custom Direct ULC, an unlimited liability
corporation existing under the laws of the Province of Nova Scotia;
"Custom Direct ULC Common Shares" means the common shares in the
capital of Custom Direct ULC, as such shares were constituted on the
date of this Agreement or as subsequently consolidated or subdivided,
or any other shares or securities resulting from a reclassification,
change or conversion or such shares;
"Custom Direct ULC Notes" means the notes of Custom Direct ULC issued
pursuant to the Note Indenture;
"Custom Direct ULC Subscription Price" has the meaning attributed to
such term in Section 6.1;
"Custom Direct USA" means Custom Direct USA Inc., a corporation
established under the laws of the State of Delaware;
"Custom Direct USA Common Shares" means the shares of common stock,
par value $0.001, in the capital of Custom Direct USA, as such shares
were constituted on the date of this Agreement or as subsequently
consolidated or subdivided, or any other shares or securities
resulting from a reclassification, change or conversion of such
shares;
"Custom Direct USA Preferred Shares" means the shares of Series A
preferred stock, par value $0.001, in the capital of Custom Direct
USA as such shares were constituted on the date of this Agreement or
as subsequently consolidated or subdivided, or any other shares or
securities resulting from a reclassification, change or conversion of
such shares;
"Custom Direct USA Subscription Price" has the meaning attributed to
such term in Section 5.1;
"Damages" means any loss, claim, damage (including incidental and
consequential damage), expense (whether or not involving a
third-party claim), including legal expenses, or liability (joint or
several) to which a party or parties hereto may become subject under
the Securities Laws, or other federal, state or provincial statutory
law or regulation, at common law or otherwise (collectively,
"Damages");
"Date of Closing" means the date on which the completion of the issue
of Units to the public pursuant to the Offering occurs;
"Declaration of Trust" means the declaration of trust of the Fund
made on March 18, 2003 as the same may be amended and restated from
time to time;
"Delaware Law" shall mean the General Corporation Law of the State of
Delaware;
"Dispute" has the meaning attributed to such term in Section 17.1;
"Effective Time" has the meaning attributed to such term in Section
7.1.2;
"Environmental Laws" means any U.S. federal, state, municipal or
local law, statute, by-law, ordinance, regulation, rule, order,
decree, permit, agreement, judicial or administrative decision,
injunction or legally binding requirement of any Governmental Entity
which relates to or otherwise imposes liability or standards of
conduct concerning discharges, spills, releases or threatened
releases of noises, odours or any Substances into, or the presence of
noises, odours or any Substances in, ambient air, ground or surface
water or land, municipal or other works (including sewers and storm
drains) or otherwise relating to the manufacture, processing,
generation, distribution, use, treatment, storage, discharge,
release, disposal, clean-up, transport or handling of Substances, as
now or at any time hereafter in effect;
"Exchange Agreement" means the exchange agreement to be dated the
Date of Closing between the Fund, Custom Direct Canada, Custom Direct
ULC, Custom Direct, MDC and Xxxxxx-Xxxxxx and such other persons who
from time to time execute the exchange agreement or are deemed to be
a party thereto, substantially in the form attached as Schedule "C";
"Fund" means the Custom Direct Income Fund, an unincorporated,
open-ended, limited purpose trust established under the laws of the
Province of Ontario pursuant to the Declaration of Trust;
"Fund Common Share Subscription Price" has the meaning attributed to
such term in Section 3.1;
"Fund Note Subscription Price" has the meaning attributed to such
term in Section 2.1;
"Governmental Charges" means all taxes, duties, levies, assessments,
reassessments and other charges together with all related penalties,
interest and fines, payable in respect of periods ending on or before
the Date of Closing to any domestic or foreign government (federal,
provincial, state, municipal or otherwise) or to any regulatory
authority, agency, commission or board of any domestic or foreign
government, or imposed by any court or any other law, regulation or
rule-making entity having jurisdiction in the relevant circumstances;
"Governmental Entity" means any (i) multinational, federal,
provincial, state, municipal, local or other governmental or public
department, central bank, court, commission, board, bureau, agency or
instrumentality, domestic or foreign; (ii) any subdivision or
authority of any of the foregoing; or (iii) any quasi-governmental,
self-regulatory organization or private body exercising any
regulatory, expropriation or taxing authority under or for the
account of its members or any of the above;
"Indemnified Party" and "Indemnifying Party" have the meanings
attributed to such terms respectively in Section 14.4;
"Intellectual Property" means intellectual property of whatever
nature and kind used by Custom Direct and/or its subsidiaries in
connection with the Business, including all domestic and foreign
trademarks, business names, trade names, domain names, internet
sites, trading styles, patents, trade secrets, software, industrial
designs and copyrights, whether registered or unregistered and all
applications for registrations thereof, and inventions, formulae,
processes and processing methods, technology and techniques, know-how
and manuals;
"Interim Period" means the period between the close of business on
the date of this agreement and the Closing;
"Laws" means any and all applicable laws, domestic or foreign,
including all common law relating to environmental nuisance and
employment obligations, all statutes, codes, ordinances, decrees,
rules, directives, regulations, municipal by-laws and judicial,
arbitral, administrative, ministerial, departmental or regulatory
judgments, orders, decisions, rulings or awards, binding on or
affecting the Person referred to in the context in which the term was
used;
"Lien" mean any mortgage, charge, pledge, hypothecation, security
interest, assignment, lien (statutory or otherwise), encumbrance,
title retention agreement or arrangement, restrictive covenant,
adverse claim or other encumbrance of any nature, or any other
arrangement or condition which, in substance, secures payment or
performance of an obligation;
"Litigation" means an action, suit, claim, proceeding or
investigation, at law or in equity, by any Person, including
arbitration, administrative or other proceeding by or before any
Governmental Entity;
"Material Adverse Effect" or "Material Adverse Change" means any
effect or change on the Business taken as a whole that is or is
reasonably likely to be materially adverse to the results of
operations, financial condition, assets, properties, liabilities,
cash flow, income or business operations of the Business, taken as a
whole, after giving effect to this Agreement and the transactions
contemplated hereby;
"MDC" means MDC Corporation Inc., a corporation existing under the
laws of the Province of Ontario;
"MDC Merger Consideration" has the meaning attributed to such term in
Section 7.4.1;
"MDC Notes" has the meaning attributed to such term in Section 10.1;
"Merger" means the merger of Custom Direct USA with and into Custom
Direct, Inc., such that Custom Direct, Inc. is, following the
Effective Time, the surviving entity under Delaware Law;
"Misrepresentation" means (i) an untrue statement of a material fact
or (ii) an omission to state a material fact that is required to be
stated or that is necessary to make a statement not misleading in
light of the circumstances in which it was made;
"Note Indenture" means the note indenture to be dated as of the Date
of Closing between Custom Direct ULC and CIBC Mellon Trust Company,
substantially in the form attached as Schedule "A";
"Non-Competition Agreement" means the non-competition,
non-solicitation and confidentiality agreement made as of the Date of
Closing by and among MDC, Custom Direct, Custom Direct Canada, Custom
Direct LLC and the Fund in the form attached as Schedule "B";
"Notice of Arbitration" has the meaning attributed to such term in
Section 17.2;
"Occupational Safety and Health Law" means any U.S. federal, state,
municipal or local statute, law, by-law, ordinance, code, rule,
regulation, order or decree regulating, relating to or imposing
liability or standards of conduct concerning employee health and/or
safety;
"Offering" means the initial public offering of Units pursuant to the
Prospectus;
"Ordinary Course" means, with respect to an action taken by a Person,
that such action is consistent in all material respects with past
practices of the Person and is taken in the ordinary course of the
normal day-to-day operations of the Person;
"Person" means any individual, partnership, limited partnership,
limited liability company, joint venture, syndicate, sole
proprietorship, company or corporation with or without share capital,
unincorporated association, trust, trustee, executor, administrator
or other legal personal representative or Governmental Entity;
"Proceeding" has the meaning attributed to such term in Section
14.5.3;
"Proposed Credit Facility" means the senior secured credit facility
to be established pursuant to a credit agreement between Custom
Direct LLC and certain financial institutions;
"Prospectus" means the final prospectus of the Fund dated the date
hereof filed with the securities commissions or other regulatory
authorities in Qualifying Jurisdictions in connection with the
Offering;
"Purchasing Indemnified Persons" has the meaning attributed to such
term in Section 14.2;
"Purchasing Indemnifying Party" has the meaning attributed to such
term in Section 14.1;
"Qualifying Jurisdictions" means, collectively, each of the provinces
and territories of Canada;
"Required Consents" means the consents as set forth in Schedule "I",
and of certain suppliers or other trade creditors of Custom Direct
and its subsidiaries required in order to consummate the transactions
contemplated by this Agreement;
"Reorganization" means the transactions set forth in Schedule "H";
"Securities Commission" means the applicable securities commission or
other regulatory authority in each of the Qualifying Jurisdictions;
"Securities Laws" means, collectively, the applicable securities laws
of each of the Qualifying Jurisdictions and the respective
regulations and rules made under those securities laws, together with
all applicable policy statements, blanket orders and rulings of the
Securities Commissions and all discretionary orders or rulings, if
any, of the Securities Commissions made in connection with the
transactions contemplated by the Underwriting Agreement and the
securities legislation and policies of each other relevant
jurisdiction;
"Securityholders Agreement" means the securityholders agreement to be
made as of the Date of Closing by and among Custom Direct Canada,
Custom Direct ULC, Custom Direct, MDC and Xxxxxx-Xxxxxx,
substantially in the form attached as Schedule "D";
"Selling Indemnified Party" has the meaning attributed to such term
in Section 14.1;
"subsidiaries" has the meaning attributed to such term in the
Business Corporations Act (Ontario) as the same may be amended from
time to time and any successor legislation thereto;
"Substance" means any substance or material which under any
Environmental Law is defined to be "hazardous", "toxic",
"deleterious", "caustic", "dangerous", a "contaminant", a
"pollutant", a "dangerous good", a "waste", a "special waste", a
"source of contamination" or a "source of a pollutant" and any
substance or material the concentration of which in soil, sediment,
ground water or surface water are regulated under any Environmental
Law;
"Tax Reassessment Period" means the period ending on the first date
on which no assessment, reassessment or other document assessing
liability for tax, interest or penalties may be issued to Custom
Direct in respect of any taxation year or other reporting period
ending prior to the Closing Date pursuant to any applicable tax
legislation; "Terminating Party" has the meaning attributed to such
term in Section 15.2;
"Underwriters" means the underwriters of the Offering;
"Underwriting Agreement" means the underwriting agreement entered
into concurrently herewith between the Fund, MDC and the Underwriters
in connection with the Offering; and
"Units" means trust units of the Fund authorized and issued in
accordance with the Declaration of Trust and for the time being
outstanding and entitled to the benefits thereof.
1.2 Schedules
The following are the schedules attached to this Agreement:
Schedule "A" - Form of Note Indenture
Schedule "B" - Form of Non-Competition Agreement
Schedule "C" - Form of Exchange Agreement
Schedule "D" - Form of Securityholders Agreement
Schedule "E" - Certificate of Incorporation and Bylaws of Custom
Direct
Schedule "F" - Capital of Custom Direct (Pre-Effective Time)
Schedule "G" - Capital of Custom Direct (Effective Time)
Schedule "H" - Reorganization of Custom Direct
Schedule "I" - Consents
Schedule "J" - ERISA
Schedule "K" - Delivery of Documents
1.3 Headings
The division of this Agreement into Articles and Sections and the
insertion of headings are for the convenience of reference only and shall not
affect the construction or interpretation of this Agreement. Unless something
in the subject matter or context is inconsistent therewith, references herein
to Articles or Sections are to Articles or Sections of this Agreement.
1.4 Gender and Number
In this Agreement, words importing the singular number only shall
include the plural and vice versa, words importing the masculine gender shall
include the feminine and neuter genders and vice versa.
1.5 Currency
Except where otherwise expressly provided, all payments contemplated
herein shall be paid in U.S. funds, and all references herein to dollar
amounts are references to dollars in the lawful currency of the United States.
1.6 Day Not a Business Day
In the event that any day on or before which any action is required
to be taken hereunder is not a Business Day, then such action shall be
required to be taken on or before the requisite time on the next succeeding
day that is a Business Day.
1.7 Accounting Principles
In this Agreement, except as otherwise expressly provided, references
to "generally accepted accounting principles" means, for all principles stated
in the Handbook of the Canadian Institute of Chartered Accountants, such
principles so stated.
1.8 Waiver, Amendment
Except as expressly provided in this Agreement, no amendment or
waiver of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any provision of this Agreement shall
constitute a waiver of any other provision nor shall any waiver of any
provision of this Agreement constitute a continuing waiver unless otherwise
expressly provided.
ARTICLE 2
FUND'S SUBSCRIPTION FOR NOTES OF CUSTOM DIRECT ULC
2.1 Purchase and Sale; Subscription Price
Subject to the terms and conditions of this Agreement, at the
Closing, Custom Direct ULC will issue and sell to the Fund and the Fund will
purchase from Custom Direct ULC the Canadian equivalent of $55,076,493.00
principal amount Custom Direct ULC Notes (being Cdn $76,776,631.24) at a price
of 100% of the principal amount for an aggregate subscription price of
$55,076,493.00 (the "Fund Note Subscription Price").
2.2 Payment of Fund Note Subscription Price and Delivery of the
Certificates
The Fund Note Subscription Price shall be paid at the Closing Time
by, or on behalf of, the Fund by delivery of a bank draft or a certified
cheque payable to, or to the order of, Custom Direct ULC, or as may be
otherwise directed by Custom Direct ULC in writing, against delivery by Custom
Direct ULC of the $55,076,493.00 principal amount Custom Direct ULC Notes
registered in the name of the Fund.
ARTICLE 3
FUND'S SUBSCRIPTION FOR COMMON SHARES OF CUSTOM DIRECT CANADA
3.1 Purchase and Sale; Subscription Price
Subject to the terms and conditions of this Agreement, at the Closing
and after the transaction in Section 2.1, Custom Direct Canada will issue and
sell to the Fund and the Fund will purchase from Custom Direct Canada,
10.9999976 Custom Direct Canada Common Shares at a price of $1,668,985.00 per
Custom Direct Canada Common Share for an aggregate subscription price of
$18,358,831.00 (the "Fund Common Share Subscription Price").
3.2 Payment of Fund Common Share Subscription Price and Delivery of the
Certificates
The Fund Common Share Subscription Price shall be paid at the Closing
Time by, or on behalf of, the Fund by delivery of a bank draft or a certified
cheque payable to, or to the order of, Custom Direct Canada, or as may be
otherwise directed by Custom Direct Canada in writing, against delivery by
Custom Direct Canada of a share certificate representing 10.9999976 Custom
Direct Canada Common Shares registered in the name of the Fund.
ARTICLE 4
CUSTOM DIRECT CANADA SUBSCRIPTION FOR
COMMON SHARES OF CUSTOM DIRECT USA
4.1 Purchase and Sale; Subscription Price
Subject to the terms and conditions of this Agreement, at the Closing
and after the transaction in Section 3.1, Custom Direct USA will issue and
sell to Custom Direct Canada and Custom Direct Canada will purchase from
Custom Direct USA, one Custom Direct USA Common Share at a price of
$$18,358,831.00 per Custom Direct USA Common Share for an aggregate
subscription price of $18,358,831.00 (the "Custom Direct Canada Subscription
Price").
4.2 Payment of Custom Direct Canada Subscription Price and Delivery of
the Certificates
The Custom Direct Canada Subscription Price shall be paid at the
Closing Time by, or on behalf of, Custom Direct Canada by delivery of a bank
draft or a certified cheque payable to, or to the order of, Custom Direct USA,
or as may be otherwise directed by Custom Direct USA in writing, against
delivery by Custom Direct USA of a share certificate representing one Custom
Direct USA Common Share registered in the name of Custom Direct Canada.
ARTICLE 5
CUSTOM DIRECT USA'S SUBSCRIPTION FOR
COMMON SHARES OF CUSTOM DIRECT ULC
5.1 Purchase and Sale; Purchase Price
Subject to the terms and conditions of this Agreement, at the Closing
and after the transaction in Section 4.1, Custom Direct ULC will issue and
sell to Custom Direct USA and Custom Direct USA will purchase from Custom
Direct ULC, one Custom Direct ULC Common Share at a price of $250,000.00 per
Custom Direct ULC Common Share for an aggregate subscription price of
$250,000.00 (the "Custom Direct USA Subscription Price").
5.2 Payment of Custom Direct USA Subscription Price and Delivery of the
Certificates
The Custom Direct USA Subscription Price shall be paid at the Closing
Time by, or on behalf of, Custom Direct USA by delivery of a bank draft or a
certified cheque payable to, or to the order of, Custom Direct ULC, or as may
be otherwise directed by Custom Direct ULC in writing, against delivery by
Custom Direct ULC of a share certificate representing one Custom Direct ULC
Common Share registered in the name of Custom Direct USA.
ARTICLE 6
CUSTOM DIRECT ULC'S SUBSCRIPTION FOR
PREFERRED SHARES OF CUSTOM DIRECT USA
6.1 Purchase and Sale; Subscription Price
Subject to the terms and conditions of this Agreement, at the Closing
and after the transaction in Section 5.1, Custom Direct USA will issue and
sell to Custom Direct ULC and Custom Direct ULC will purchase from Custom
Direct USA 10.9999998 Custom Direct USA Preferred Shares at a price of
$5,006,954.00 per Custom Direct USA Preferred Share for an aggregate
subscription price of $55,076,493.00 (the "Custom Direct ULC Subscription
Price").
6.2 Payment of Custom Direct ULC Subscription Price and Delivery of the
Certificates
The Custom Direct ULC Subscription Price shall be paid at the Closing
Time by, or on behalf of, Custom Direct ULC by delivery of a bank draft or a
certified cheque payable to, or to the order of, Custom Direct USA, or as may
be otherwise directed by Custom Direct USA in writing, against delivery by
Custom Direct USA of a share certificate representing 10.9999998 Custom Direct
USA Preferred Shares registered in the name of Custom Direct ULC.
ARTICLE 7
THE MERGER OF CUSTOM DIRECT AND CUSTOM DIRECT USA
7.1 The Merger
7.1.1 Subject to the terms and conditions of this Agreement at the Closing
and after the transactions in Articles 2.1 to 6.1, Custom Direct USA
shall be merged with and into Custom Direct, Inc. in accordance with
Delaware Law at the Effective Time (defined below), whereupon the
separate existence of Custom Direct USA shall cease, and Custom
Direct, Inc. shall survive and continue to exist as a Delaware
corporation.
7.1.2 At the Closing Time immediately following the transactions set forth
in Sections 2.1 to 6.2, Custom Direct, Inc. and Custom Direct USA
will prepare, execute and cause to be filed a certificate of merger
in such form as is required by Delaware Law with the Secretary of
State of the State of Delaware and make all other filings or
recordings required by Delaware Law in connection with the merger.
The merger shall become effective at such time as the certificate of
merger is duly filed with the Secretary of State of the State of
Delaware or at such later time as is specified in the certificate of
merger (the "Effective Time").
7.1.3 The merger shall have the effect prescribed by Delaware Law. Without
limiting the generality of the foregoing, and subject thereto, from
and after the Effective Time, Custom Direct shall possess all the
assets (except for the consideration which the shareholders of Custom
Direct and Custom Direct USA are entitled to receive pursuant to
Section 7.4), rights, privileges, powers and franchises and be
subject to all of the liabilities, restrictions, disabilities and
duties of Custom Direct, Inc. and Custom Direct USA, all as provided
under Delaware Law.
7.2 Certificate of Incorporation and Bylaws
At the Effective Time, the certificate of incorporation and bylaws of
Custom Direct will be amended to read in their entirety as set forth on
Schedule "E", and, as so amended, shall be the certificate of incorporation
and bylaws of Custom Direct, as the surviving corporation.
7.3 Directors and Officers
The directors of Custom Direct, as the surviving corporation, at the
Effective Time will be: Xxxx X. Xxxxxxxx, Xxxxxxx X. Xxxxxx, Xxxxxxx X.
Xxxxxx, Xxxxx X. Xxxx and Xxxxx X. Xxxxxx, until the earlier of their
resignation or removal or until their respective successors are duly elected
and qualified, as the case may be. The officers of Custom Direct, as the
surviving corporation, at the Effective Time will be: Xxxx X. Xxxxxxxx as
President and Chief Executive Officer, Xxxxx X. Xxxxxx as Vice President -
Finance, Chief Financial Officer and Corporate Secretary, Xxxx X. Xxxxxxxxx as
Vice-President - Operations, Xxx X. Xxxxxxxxxxx as Vice-President - Marketing,
Xxxxxx X. Xxxxxxxx as Vice President - Systems & Technology and Xxxxxxx X.
Xxxxxxx as Vice-President - Customer Development, until the earlier of their
resignation or removal or until their respective successors are appointed.
7.4 Effect of Merger
Subject to the terms and conditions of this Agreement, at the
Effective Time, automatically by virtue of the merger and without any action
on the part of any party or shareholder:
7.4.1 MDC and Xxxxxx-Xxxxxx shall receive an aggregate amount equal to
$83,408,460.00 (the "MDC Merger Consideration") from Custom Direct
for the 11 Custom Direct Common Shares held by MDC and Xxxxxx-Xxxxxx
immediately prior to the Effective Time (being all of the outstanding
Custom Direct Common Shares at such time) payable by delivery of (a)
7.665523117 fully paid and non-assessable Custom Direct Class B
Common Shares to MDC, (b) 0.851724791 fully paid and non-assessable
Custom Direct Class B Common Shares to Xxxxxx-Xxxxxx, (c) 3.513104894
fully paid and non-assessable Custom Direct Series B Preferred Shares
to MDC, (d) 0.39034499 fully paid and non-assessable Custom Direct
Series B Preferred Shares to Xxxxxx-Xxxxxx, (e) a certified cheque or
bank draft in the amount of $44,684,016.30 payable to or to the order
of MDC, or as may be otherwise directed by MDC and (f) a certified
cheque or bank draft in the amount of $4,964,890.70 payable to or to
the order of Xxxxxx-Xxxxxx, or as may be otherwise directed by
Xxxxxx-Xxxxxx;
7.4.2 Each Custom Direct USA Common Share outstanding immediately prior to
the Effective Time shall be converted into and become 5.4999988
fully-paid and non-assessable Custom Direct Class A Common Shares;
and
7.4.3 Each Custom Direct USA Preferred Share outstanding immediately prior
to the Effective Time shall be converted into and become one fully
paid and non-assessable Custom Direct Series A Preferred Share.
ARTICLE 8
CUSTOM DIRECT'S PARTIAL REPAYMENT OF CDI NOTES
8.1 Partial Repayment of CDI Notes
Subject to the terms and conditions of this Agreement, at the Closing
and immediately after the transactions in Article 7.1, Custom Direct will
repay $60,398,917.00 of the aggregate principal amount of the CDI Notes owing
to MDC and Xxxxxx-Xxxxxx (the "CDI Note Partial Repayment").
8.2 Payment
The CDI Note Partial Repayment shall be paid at the Closing Time by,
or on behalf of, Custom Direct By delivery of a bank draft or a certified
cheque payable to, or to the order of, MDC as to $54,359,025.30 and
Xxxxxx-Xxxxxx as to $6,039,891.70, or as may be otherwise directed by MDC or
Xxxxxx-Xxxxxx, as the case may be, in writing.
ARTICLE 9
ASSUMPTION OF CDI NOTES
9.1 Assumption
Subject to the terms and conditions of this Agreement, at the Closing
and immediately after the transaction in Section 8.1, Custom Direct ULC will
assume, and shall observe all of Custom Direct's obligations under the CDI
Notes which are to be observed or performed thereunder and Custom Direct will
issue 4.61379973 Custom Direct Series A Preferred Shares in consideration for
such assumption by Custom Direct ULC.
9.2 Issuance of Custom Direct Series A Preferred Shares
The 4.61379973 Custom Direct Series A Preferred Shares registered in
the name of Custom Direct ULC shall be delivered to Custom Direct ULC at the
Closing Time.
ARTICLE 10
EXCHANGE OF CDI NOTES FOR CUSTOM DIRECT ULC NOTES
10.1 Exchange and Purchase
Subject to the terms and conditions of this Agreement, at the Closing
and immediately after the transaction in Section 9.1, Custom Direct ULC will
issue to (a) MDC the Canadian equivalent of $20,790,974.70 principal amount
Custom Direct ULC Notes (being Cdn $28,982,618.7318) (the "MDC Notes") in
exchange for $20,790,974.70 principal amount of CDI Notes held by MDC and (b)
Xxxxxx-Xxxxxx the Canadian equivalent of $2,310,108.30 principal amount Custom
Direct ULC Notes (being Cdn $3,220,290.9702) (the "Xxxxxx-Xxxxxx Notes") in
exchange for $2,310,108.30 principal amount CDI Notes held by Xxxxxx-Xxxxxx.
10.2 Delivery of MDC Notes, Xxxxxx-Xxxxxx Notes and CDI Notes
The MDC Notes registered in the name of MDC and the Xxxxxx-Xxxxxx
Notes registered in the name of Xxxxxx-Xxxxxx shall be delivered by Custom
Direct ULC to MDC and Xxxxxx-Xxxxxx, as the case may be, against delivery by
MDC and Xxxxxx-Xxxxxx of $23,101,083.00 aggregate principal amount of CDI
Notes.
10.3 Cancellation of CDI Notes
Upon completion of the transaction in Section 10.2, the CDI Notes
shall be cancelled.
ARTICLE 11
REPRESENTATIONS AND WARRANTIES
11.1 Representations and Warranties Relating to MDC and Custom Direct
MDC represents and warrants to Custom Direct Canada, Custom Direct
USA and the Fund as follows and acknowledges that each of Custom Direct
Canada, Custom Direct USA and the Fund is relying upon the following
representations and warranties in completing the transactions contemplated
hereby:
11.1.1 Organization and Status. Each of MDC, Xxxxxx-Xxxxxx, Custom Direct
and each of Custom Direct's subsidiaries is duly incorporated or
organized and existing under the laws of its jurisdiction of
incorporation or organization, duly qualified to carry on its
business in each jurisdiction in which the conduct of its business or
the ownership, leasing or operation of its property and assets
requires such qualification, except to the extent that the failure to
be so qualified would not have a Material Adverse Effect.
11.1.2 Power and Due Authorization. Each of MDC, Xxxxxx-Xxxxxx, Custom
Direct ULC and Custom Direct has the power and authority to enter
into and perform its obligations under this Agreement and the
Ancillary Agreements as to which it is a party and to carry out the
transactions contemplated in the Prospectus. Each of this Agreement
and the Ancillary Agreements as to which each is a party has been, or
will at the Closing Time be, duly authorized, executed and delivered
by each of MDC, Custom Direct ULC, Xxxxxx-Xxxxxx and Custom Direct
and is, or will at the Closing Time be, a legal, valid and binding
obligation of each of MDC, Custom Direct ULC, Xxxxxx-Xxxxxx and
Custom Direct, enforceable against it in accordance with its terms,
subject to the usual exceptions as to bankruptcy and the availability
of equitable remedies.
11.1.3 Title to Custom Direct Common Shares. At the Closing Time immediately
after the Reorganization and prior to the Effective Time, MDC will
own, directly and indirectly through Xxxxxx-Xxxxxx, all of the Custom
Direct Common Shares, free and clear of all Liens, as the sole
beneficial owner and there are no restrictions on the ability of MDC
or Xxxxxx-Xxxxxx to sell, assign or vote such Custom Direct Common
Shares.
11.1.4 Capital of Custom Direct. The authorized and issued capital of Custom
Direct at the date of this Agreement and after giving effect to all
transactions contemplated at or immediately prior to the Closing
(including the Reorganization), is and will be, as applicable, as set
forth in Schedule "F" and Schedule "G", respectively. As at the Time
of Closing, all Custom Direct Common Shares issued and outstanding at
the Date of Closing and prior to the Effective Time will be duly
authorized, validly issued and outstanding, fully-paid and
non-assessable and free and clear of all Liens. All Custom Direct
Class A Common Shares, Custom Direct Class B Common Shares, Custom
Direct Series A Preferred Shares and Custom Direct Series B Preferred
Shares issuable on completion of the Merger will, at the Time of
Closing, upon payment of the consideration set forth in Section 7.4,
be duly authorized, validly issued and outstanding, fully-paid and
non-assessable, free and clear of all Liens, other than pursuant to
the Ancillary Agreements and the Proposed Credit Facility. None of
the Custom Direct Common Shares, Custom Direct Class A Common Shares,
Custom Direct Class B Common Shares, Custom Direct Series A Preferred
Shares or Custom Direct Series B Preferred Shares, other than
pursuant to the Ancillary Agreements, are or will be at the Time of
Closing, subject to pre-emptive rights or rights of first refusal
created by statute, or any agreement to which Custom Direct is a
party or by which it is bound; and, other than the Securityholders
Agreement, there are no shareholder agreements, pooling agreements,
voting trusts or other agreements with respect to the voting of any
of such shares.
11.1.5 Subsidiaries. Immediately after the Effective Time, except as
disclosed in the Prospectus, there will be no subsidiaries of Custom
Direct and Custom Direct will not own an interest in any Person,
other than Unique Checks, Inc., Custom Direct ULC and Custom Direct
LLC.
11.1.6 No Obligations to Issue Securities. Except as contemplated by this
Agreement, the Ancillary Agreements, the Proposed Credit Facility or
as disclosed in the Prospectus, there are no agreements, options,
warrants, pre-emptive rights, rights of conversion or other rights
pursuant to which any of Custom Direct, Custom Direct LLC, Unique
Checks, Inc. or Custom Direct ULC is, or may become, obligated to
issue any securities.
11.1.7 No Approvals. No consent, approval, authorization or order of, and no
filing, registration or recording with, any Governmental Entity or
under any contract or agreement material to the Business except for
the Required Consents is required in connection with the
Reorganization, the execution and delivery of this Agreement and the
Ancillary Agreements as to which any of MDC, Xxxxxx-Xxxxxx, Custom
Direct ULC, Custom Direct LLC, Unique Checks, Inc. or Custom Direct
is a party or the performance by each of MDC, Xxxxxx-Xxxxxx, Custom
Direct ULC and Custom Direct of its obligations hereunder and
thereunder and the consummation by each of MDC, Xxxxxx-Xxxxxx, Custom
Direct ULC and Custom Direct of the transactions contemplated herein
and therein.
11.1.8 Liabilities and Guarantees. Immediately after the Effective Time,
except as disclosed in the Prospectus or as contemplated by this
Agreement, the Ancillary Agreements or the Proposed Credit Facility,
Custom Direct, Custom Direct LLC, Unique Checks, Inc. and Custom
Direct ULC will have no outstanding liabilities, contingent or
otherwise, other than liabilities in respect of trade or business
obligations incurred after December 31, 2002 in the Ordinary Course
of the Business, none of which has had a Material Adverse Effect or
constituted a Material Adverse Change, and, for greater certainty,
will have no outstanding indebtedness to MDC.
11.1.9 No Contravention. The Reorganization and the execution and delivery
by each of MDC, Xxxxxx-Xxxxxx, Custom Direct ULC, Custom Direct LLC
and Custom Direct of this Agreement and the Ancillary Agreements as
to which it is a party, the performance by each of MDC,
Xxxxxx-Xxxxxx, Custom Direct ULC, Custom Direct LLC and Custom Direct
of any of its respective obligations hereunder and thereunder and
compliance with the provisions hereof and thereof does not and will
not contravene, breach or result in any default under its
organizational documents or under any mortgage, indenture, lease,
agreement, other legally binding instrument, licence, permit,
statute, regulation, order, judgment, decree or law to which any of
MDC, Xxxxxx-Xxxxxx, Custom Direct ULC, Custom Direct LLC and Custom
Direct is a party or by which it is bound except for breaches and
defaults that would not have a Material Adverse Effect.
11.1.10 Capital Expenditures. Since December 31, 2002, Custom Direct and its
subsidiaries have not made, individually or collectively, any capital
expenditures in excess of $2,000,000.
11.1.11 Non-Arm's Length Transactions.
11.1.11.1 Custom Direct has not made any payment or loan to, or
borrowed any monies from, nor is Custom Direct otherwise indebted to,
any officer, director, employee, shareholder or any other Person with
whom Custom Direct is not dealing at arm's length or any affiliate of
any of the foregoing, except as disclosed in the Prospectus and
except for transactions contemplated by the Reorganization, this
Agreement, the Ancillary Agreements and the Proposed Credit Facility
and for usual compensation paid in the Ordinary Course of the
Business.
11.1.11.2 Except as disclosed in the Prospectus and except for
transactions contemplated by the Reorganization, this Agreement and
the Ancillary Agreements and the Proposed Credit Facility and except
for contracts or agreements made solely between Custom Direct and any
subsidiaries or between any of the subsidiaries of Custom Direct and
except for contracts of employment, Custom Direct is not a party and
has not been a party since December 31, 2002 to any contract or
agreement with any officer, director, employee, shareholder or any
other Person with whom Custom Direct is not dealing at arm's length
or any affiliate of any of the foregoing.
11.1.12 Corporate Records. The corporate records and minute books of Custom
Direct contain complete and accurate minutes of all meetings and
consents of its shareholders, directors and committees thereof held
since January 1998.
11.1.13 Employment Matters. None of Custom Direct, Custom Direct LLC or
Unique Checks, Inc. is a party to or is bound by any contract with or
commitment to any trade union, council of trade unions, employee
bargaining agent or affiliated bargaining agent, nor to the knowledge
of Custom Direct or MDC, is any person currently threatening to
organize or establish any trade union or employee association with
respect to Custom Direct, Custom Direct LLC or Unique Checks, Inc.
and Custom Direct has not conducted negotiations with respect to any
such future contracts or commitments.
11.1.14 ERISA. Except as disclosed in the Prospectus and in Schedule "J",
there are no employees' benefit plans (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended) or
bonus plans maintained by any of Custom Direct, Custom Direct LLC or
Unique Checks, Inc.
11.1.15 Permits, Registrations and Elections. Each of Custom Direct, Custom
Direct LLC and Unique Checks, Inc. holds all permits, licenses,
approvals, consents, authorizations, registrations, certificates and
franchises which it requires, or is required to have, to own its
properties and assets and to carry on the Business as presently
conducted by Custom Direct, Custom Direct LLC and Unique Checks, Inc.
(collectively, the "Permits") except where the absence of a Permit
would not have a Material Adverse Effect.
11.1.16 Residence of MDC and Xxxxxx-Xxxxxx. Neither MDC nor Xxxxxx-Xxxxxx is
a non-resident of Canada within the meaning of the Income Tax Act
(Canada).
11.1.17 No Other Agreements to Purchase. Other than as contemplated by the
Reorganization, this Agreement and the Ancillary Agreements, no
Person has any written or oral agreement, understanding, option or
warrant or any right or privilege (whether by Law, pre-emptive or
contractual) capable of becoming such for the purchase or acquisition
from MDC or Xxxxxx-Xxxxxx of any of the Custom Direct Common Shares.
11.1.18 Prospectus Disclosure. As of the date of filing with the Securities
Commissions and as of the Closing Time, the Prospectus will contain
full, true and plain disclosure of all material facts relating to the
Business in the context of the Offering and the Prospectus will not
contain any Misrepresentation with respect to the Business in the
context of the Offering, including the description of the Business
and all other information with respect to the Business.
11.1.19 Financial Statements. Except as disclosed in the Prospectus, the
combined financial statements of Custom Direct contained in the
Prospectus, including the footnotes thereto, have been prepared in
accordance with generally accepted accounting principles,
consistently applied and present fairly, in all material respects,
the assets, liabilities and financial position of Custom Direct as at
December 31, 2002, 2001 and 2000, as applicable, and the condensed
combined results of its operations and its cash flows for the years
ended December 31, 2002, 2001, 2000 and 1999.
11.1.20 Environmental and Occupational Safety and Health Matters.
11.1.20.1 Each property, operation and facility comprising part of
Custom Direct's or its subsidiaries' assets:
(a) complies, and the Business is operated in compliance, in all
respects with (i) all applicable Environmental Laws and (ii)
all applicable Occupational Safety and Health Laws, except
where such noncompliance would not have a Material Adverse
Effect; and
(b) is not subject to any judicial, administrative or other
proceeding alleging the violation of any Environmental Law
or Occupational Safety and Health Law, except where such
proceeding would not have a Material Adverse Effect.
11.1.20.2 In connection with the Business or its operation,
neither Custom Direct nor its subsidiaries:
(c) has received any written notice (i) alleging that it or any
of its subsidiaries may be in violation of any Environmental
Law or Occupational Safety and Health Law, or (ii)
threatening the commencement of any material proceeding
relating to alleged non-compliance with any Environmental
Law or any Occupational Safety and Health Law, or (iii)
alleging that it or any of its subsidiaries is or may be
responsible for any response, clean-up, or corrective
action, including any remedial investigation/feasibility
study, under any Environmental Law or Occupational Safety
and Health Law;
(d) has received any written notice that it or any of its
subsidiaries is the subject of an investigation of a
Governmental Entity to evaluate whether any investigation,
remedial action or other response is needed to respond to
(i) a spillage, disposal or release or threatened release
into the environment of any Substance, or (ii) any alleged
violation of any Occupational Safety and Health Law;
(e) has filed any written notice under or relating to any
Environmental Law or Occupational Safety and Health Law
indicating or reporting (i) any past or present spillage,
disposal or release (other than permitted releases) into the
environment of, or treatment, storage or disposal of (other
than permitted releases), any Substance in excess of
quantities requiring notification under any Environmental
Law, or (ii) any violation of any Occupational Safety and
Health Law;
(f) to its knowledge, has a material contingent liability in
connection with (i) any actual or potential spillage,
disposal or release into the environment of, or otherwise
with respect to any Substance or (ii) any unsafe or
unhealthful condition; and
(g) to its knowledge , has any Substances on, in or under any
property or facilities, owned, operated or controlled by
Custom Direct or its subsidiaries in connection with the
Business or comprising part of Custom Direct's or its
subsidiaries' assets (except Substances used in the ordinary
course of the business of the Business and which, to its
knowledge, have been used, stored, handled, treated and
disposed of in all material respects in accordance with all
applicable Environmental Laws and Occupational Safety and
Health Laws) that, under applicable Environmental Laws or
Occupational Safety and Health Laws (i) impose a liability
for removal, remediation, or other clean-up or damage to
natural resources, in an amount equal to or greater than
$300,000; or (ii) would have a Material Adverse Effect.
11.1.21 Conduct of Business in Ordinary Course. Except as disclosed in the
Prospectus, since December 31, 2002, the Business has been carried on
in the Ordinary Course.
11.1.22 No Material Adverse Change. Except as disclosed in the Prospectus,
since December 31, 2002, there has not been any Material Adverse
Change.
11.1.23 Litigation. There is no Litigation pending, or, to the knowledge of
Custom Direct, threatened against or affecting Custom Direct, its
subsidiaries, or any of their respective properties, or rights or any
assets which constitute a Material Adverse Effect.
11.1.24 Compliance With Laws. Each of Custom Direct and its subsidiaries has
conducted and is conducting the Business in compliance with all
applicable Laws in each jurisdiction in which the Business is carried
on, other than acts of non-compliance which would not have a Material
Adverse Effect.
11.1.25 Tax, etc. Matters. Custom Direct has paid or will pay or have made or
will make arrangements for the payment of all Governmental Charges in
respect of the Business, as well as all professional fees incurred in
connection with such Governmental Charges. There are no proceedings
either in progress, pending or, to the knowledge of Custom Direct,
threatened in connection with any Governmental Charges in respect of
the Business. Custom Direct has withheld or collected and remitted
all material amounts required to be withheld or collected and
remitted by it in respect of any Governmental Charges.
11.1.26 Intellectual Property. Custom Direct is the beneficial owner of, or
has the right to use, pursuant to a licence agreement or otherwise,
the Intellectual Property. The Business is not in, and Custom Direct
has not received any written notice of any, default under any such
license agreements which would have a Material Adverse Effect, nor
has Custom Direct received any written notice of an infringement of
any third party's intellectual property rights, or written notice of
any pending or threatened Litigation relating to the Intellectual
Property. Custom Direct is not aware of any breach by a third party
of Custom Direct's rights to its Intellectual Property which would
have a Material Adverse Effect.
11.2 No Finders' Fee
Each of the parties hereto represents and warrants to the other
parties that it has not taken, and agrees that it will not take, any action
that would cause such other parties to become liable to any claim or demand
for a brokerage commission, finder's fee or other similar payment in
connection with the transactions contemplated hereby, other than with respect
to any Underwriter's fees as described in the Prospectus.
11.3 Survival of Representations and Warranties
The representations and warranties, and to the extent that they have
not fully performed at or prior to the Time of Closing, the covenants, of each
party contained in this Agreement and in all certificates and documents
delivered pursuant to or contemplated by this Agreement shall survive the
Closing and continue in full force and effect for a period of two years from
the date which the Underwriters notify the Securities Commissions in
accordance with Securities Laws of the completion of the distribution of Units
under the Prospectus, except that:
11.3.1 the representations and warranties set out in Sections 11.1.1,
11.1.2, 11.1.3 and 11.1.9 which shall survive and continue in full
force and effect without limitation of time;
11.3.2 the representations and warranties contained in Section 11.1.18,
which shall survive the Closing and continue in full force and effect
for a period equal to the period for which the Fund is liable for
Misrepresentations under the Prospectus pursuant to the Securities
Act (Ontario); and
11.3.3 the representations and warranties contained in Section 11.1.25,
which shall survive for 90 days after the end of the Tax Reassessment
Period;
and no claim for breach of representation or warranty (other than those
referenced in Section 11.3.1 or a claim based on fraud) shall be valid unless
the party against whom such claim is made has been given notice thereof before
the expiry of such period.
ARTICLE 12
CLOSING CONDITIONS
12.1 Conditions Precedent to Closing
The obligation of each of the parties to complete the transactions
contemplated in this Agreement at the Date of Closing is subject to the
satisfaction of, or compliance with, at or prior to the Closing Time, each of
the following conditions:
12.1.1 Truth of Representations and Warranties. The representations and
warranties of each of the parties, as the case may be, made in or
pursuant to this Agreement or in any Ancillary Agreement as to which
it is a party, shall have been true and correct in all material
respects as of the date of this Agreement and shall be true and
correct in all material respects as of the Closing Time (except in
each case, for those representations and warranties that are subject
to a materiality qualification, which shall be true and correct in
all respects) with the same force and effect as if such
representations and warranties had been made on and as of the Closing
Time, and each party shall have executed and delivered a certificate
of a senior officer (without personal liability), to that effect with
respect to the representations and warranties of such party which are
contained in this Agreement or in any Ancillary Agreement. Neither
the receipt of such certificate nor the Closing shall constitute a
waiver by the party receiving such certificate of any of the
representations and warranties of such party providing such
certificate which are contained in this Agreement. Upon the delivery
of such certificates, the representations and warranties of the
parties in Article 11.1, as applicable, shall be deemed to have been
made on and as of the Date of Closing with the same force and effect
as if made on and as of such date.
12.1.2 Compliance with and Performance of Covenants. Each party shall have
fulfilled or complied with in all material respects, all covenants
contained in this Agreement and in any Ancillary Agreements as to
which it is a party, to be fulfilled or complied with by it at or
prior to the Closing and each party shall have executed and delivered
a certificate of a senior officer (without personal liability) to
that effect. Neither the receipt of such certificate nor the Closing
shall constitute a waiver by the party receiving such certificate of
any of the covenants of such party on whose behalf a certificate is
given to fulfill all covenants which are contained in this Agreement
and in any Ancillary Agreements as to which it is a party.
12.1.3 Cash on Hand. MDC shall ensure that at the Time of Closing, the bank
accounts of Custom Direct shall contain a cash balance of $4,150,000
plus an amount sufficient to cover all cheques outstanding but not
cleared by Custom Direct's banks as at the Time of Closing, after
giving credit for all deposits that have been made to the Time of
Closing but for which Custom Direct has not been given value.
12.1.4 Reorganization. The Reorganization shall have been completed prior to
the Date of Closing.
12.1.5 Required Consents. All Required Consents shall have been obtained on
terms acceptable to Custom Direct Canada or the Fund, as the case may
be, acting reasonably.
12.1.6 Offering. The Fund shall have completed the sale of Units pursuant to
the Offering on terms satisfactory to the Fund, acting reasonably.
12.1.7 Financing. Custom Direct LLC shall have entered into the Proposed
Credit Facility as contemplated by the Prospectus, on terms and
conditions satisfactory to Custom Direct and MDC, acting reasonably,
and the credit facilities to be provided for under the Proposed
Credit Facility shall be available to be drawn down by Custom Direct
LLC.
12.1.8 Deliveries. All documents relating to the due authorization and
completion of the transactions contemplated hereby, all actions and
proceedings taken at or prior to the Closing Time on the Date of
Closing in connection with the performance by each party of its
respective obligations under this Agreement, and all other documents
and materials of any kind relating to this Agreement and carrying out
the terms hereof, shall be satisfied as follows:
12.1.8.1 Custom Direct ULC shall deliver or cause to be delivered to
the Fund the Custom Direct ULC Notes in the principal amount of the
Canadian equivalent of $55,076,493.00 (being Cd $76,776,631.24)
together with evidence satisfactory to the Fund that the Fund or its
nominee has been entered upon the books of Custom Direct ULC as the
holder of such Custom Direct ULC Notes;
12.1.8.2 Custom Direct Canada shall deliver or cause to be delivered
to the Fund share certificates representing 10.9999976 Custom Direct
Canada Common Shares, together with evidence satisfactory to the Fund
that the Fund or its nominee has been entered upon the books of
Custom Direct Canada as the holder of such Custom Direct Canada
Common Shares;
12.1.8.3 Custom Direct USA shall deliver or cause to be delivered to
Custom Direct Canada share certificates representing 10.9999976
Custom Direct USA Common Shares, together with evidence satisfactory
to Custom Direct Canada that Custom Direct Canada or its nominee has
been entered upon the books of Custom Direct USA as the holder of
such Custom Direct USA Common Shares;
12.1.8.4 Custom Direct ULC shall deliver or cause to be delivered to
Custom Direct USA share certificates representing one Custom Direct
ULC Common Share, together with evidence satisfactory to Custom
Direct USA that Custom Direct USA or its nominee has been entered
upon the books of Custom Direct ULC as the holder of such Custom
Direct ULC Common Shares;
12.1.8.5 Custom Direct USA shall deliver or cause to be delivered to
Custom Direct ULC share certificates representing 10.9999998 Custom
Direct USA Preferred Shares, together with evidence satisfactory to
Custom Direct ULC that Custom Direct ULC or its nominee has been
entered upon the books of Custom Direct USA as the holder of such
Custom Direct USA Preferred Shares;
12.1.8.6 Custom Direct, as the surviving corporation of the merger
set forth in Article 7.1, shall deliver or cause to be delivered to
MDC and Xxxxxx-Xxxxxx share certificates representing all of the
Custom Direct Class B Common Shares and all of the Custom Direct
Series B Preferred Shares and cause to be delivered to MDC and
Xxxxxx-Xxxxxx in the aggregate $49,648,907.00, together with evidence
satisfactory to MDC and Xxxxxx-Xxxxxx that MDC and Xxxxxx-Xxxxxx or
their nominees have been entered upon the books of Custom Direct as
the holder of such Custom Direct Class B Common Shares and Custom
Direct Series B Preferred Shares;
12.1.8.7 Custom Direct, as the surviving corporation of the merger
set forth in Article 7.1, shall deliver or cause to be delivered to
Custom Direct ULC share certificates representing all of the Custom
Direct Series A Preferred Shares together with evidence satisfactory
to Custom Direct ULC that Custom Direct ULC or its nominee has been
entered on the books of Custom Direct as the holder of such Custom
Direct Series A Preferred Shares;
12.1.8.8 Custom Direct, as surviving corporation of the merger set
forth in Article 7.1, shall deliver or cause to be delivered to
Custom Direct Canada share certificates representing all of the
Custom Direct Class A Common Shares together with evidence
satisfactory to Custom Direct Canada that Custom Direct Canada or its
nominee has been entered on the books of Custom Direct as the holder
of such Custom Direct Class A Common Shares;
12.1.8.9 Custom Direct ULC shall deliver or cause to be delivered to
MDC the MDC Notes and Custom Direct ULC shall deliver or cause to be
delivered to Xxxxxx-Xxxxxx the Xxxxxx-Xxxxxx Notes together with
evidence satisfactory to MDC and Xxxxxx-Xxxxxx that MDC and
Xxxxxx-Xxxxxx have been entered upon the books of Custom Direct ULC
as the holder of such Custom Direct ULC Notes;
12.1.8.10 MDC and Xxxxxx-Xxxxxx shall deliver or cause to be
delivered to Custom Direct ULC $23,101,083.00 aggregate principal
amount of CDI Notes;
12.1.8.11 MDC shall cause to be delivered all minutes books of Custom
Direct, releases and discharges of Liens, deeds, documents of title,
conveyances, bills of sale, transfers, assignments, indentures and
instruments, duly executed, appropriate to effectively vest good and
marketable title to the Custom Direct Common Shares free and clear of
all Liens and immediately registrable in all places where
registration of such instruments is necessary or desirable; and
12.1.8.12 each party shall deliver or cause to be delivered the
certificates referred to in Sections 12.1.1 and 12.1.2.
12.1.9 Proceedings. All corporate, partnership, trust or similar proceedings
to be taken in connection with the transactions contemplated in this
Agreement shall have been completed in a reasonably satisfactory
manner and the parties, as applicable, shall deliver or cause to be
delivered and each party shall have received copies of all
instruments and other evidence as it may reasonably request in order
to establish the consummation of such transactions and the taking of
all necessary corporate or similar proceedings in connection
therewith.
12.1.10 Execution of Other Agreements. The Ancillary Agreements shall have
been executed and delivered by all parties thereto and the other
transactions contemplated by the Prospectus to be completed prior to
the Date of Closing shall have been completed to the satisfaction of
the Fund, acting reasonably.
12.1.11 No Adverse Legislation. There shall not be any statute, rule or
regulation of any Governmental Entity which makes it illegal for any
of the parties to consummate the transactions contemplated hereby or
any order, decree or judgment of any Governmental Entity enjoining
any party to this Agreement from consummating any of the transactions
contemplated hereby.
12.1.12 No Legal Action. No action or proceeding shall be pending or
threatened by any Person (other than Custom Direct Canada, Custom
Direct USA, Custom Direct ULC, Custom Direct, Custom Direct LLC,
Xxxxxx-Xxxxxx, Unique Checks, Inc. and MDC) in any jurisdiction, to
enjoin, restrict or prohibit any of the transactions contemplated by
this Agreement or the right of Custom Direct Canada, Custom Direct
ULC, Custom Direct, Custom Direct LLC and Unique Checks, Inc. to
conduct the Business after Closing on substantially the same basis as
heretofore operated or to seek damages in connection with this
Agreement.
ARTICLE 13
COVENANTS OF THE PARTIES
13.1 Covenant Regarding Representations, Warranties and Conditions
Except as expressly provided in this Agreement or except with the
prior written consent of the other parties hereto, prior to the Closing Time
each of the parties shall do or refrain from doing all acts and things in
order to ensure that the respective representations and warranties of such
party in Article 11.1 remain true and correct at the Closing Time as if such
representations and warranties were made at and as of such date and to satisfy
or cause to be satisfied the conditions in Article 12.1 which are within such
party's control.
13.2 Conduct of Business Prior to Closing
During the Interim Period, Custom Direct agrees that it will use its
reasonable commercial efforts to conduct the Business only in the Ordinary
Course.
13.3 Reorganization
MDC and Custom Direct will take all necessary steps to complete the
Reorganization as set forth in Schedule "H" prior to the Closing Time.
13.4 Transfer of the Securities
13.4.1 Custom Direct ULC shall take all necessary steps and corporate
proceedings to cause (a) the Custom Direct ULC Notes issued by Custom
Direct ULC to be duly and validly created, issued and delivered to
the Fund at the Closing on the Date of Closing, free and clear of all
Liens other than Liens, if any, granted by the Fund and (b) the
Custom Direct ULC Notes issued by Custom Direct ULC to be duly and
validly created, issued and delivered to MDC and Xxxxxx-Xxxxxx at the
Closing on the Date of Closing, free and clear of all Liens other
than Liens, if any granted by MDC or Xxxxxx-Xxxxxx, as the case may
be.
13.4.2 Custom Direct Canada shall take all necessary steps and corporate
proceedings to cause the Custom Direct Canada Common Shares issued by
Custom Direct Canada to be duly and validly created, issued as fully
paid and non-assessable and delivered to the Fund at the Closing on
the Date of Closing, free and clear of all Liens other than (i) the
restrictions on transfer, if any, contained in the articles of Custom
Direct Canada and (ii) Liens, if any, granted by the Fund.
13.4.3 Custom Direct USA shall take all necessary steps and corporate
proceedings to cause the Custom Direct USA Common Shares issued by
Custom Direct USA to be duly and validly created, issued as fully
paid and non-assessable and delivered to Custom Direct Canada at the
Closing on the Date of Closing, free and clear of all Liens other
than (i) the restrictions on transfer, if any, contained in the
articles of Custom Direct USA and (ii) Liens, if any, granted by
Custom Direct Canada.
13.4.4 Custom Direct ULC shall take all necessary steps and corporate
proceedings to cause the Custom Direct ULC Common Shares issued by
Custom Direct ULC to be duly and validly created, issued as fully
paid and non-assessable and delivered to Custom Direct USA at the
Closing on the Date of Closing, free and clear of all Liens other
than (i) the restrictions on transfer, if any, contained in the
articles of Custom Direct ULC and (ii) Liens, if any, granted by
Custom Direct USA.
13.4.5 Custom Direct USA shall take all necessary steps and corporate
proceedings to cause the Custom Direct USA Preferred Shares issued by
Custom Direct USA to be duly and validly created, issued as fully
paid and non-assessable and delivered to Custom Direct ULC at the
Closing on the Date of Closing free and clear of all Liens other than
(i) the restrictions on transfer, if any, contained in the articles
of Custom Direct USA and (ii) Liens, if any, granted by Custom Direct
ULC.
13.4.6 Custom Direct, as surviving corporation of the merger set forth in
Article 7.1, shall take all necessary steps and corporate proceedings
to cause the Custom Direct Class B Common Shares and the Custom
Direct Series B Preferred Shares issued by Custom Direct to be duly
and validly created, issued as fully paid and non-assessable and
delivered to MDC at the Closing on the Date of Closing, free and
clear of all Liens other than (i) the restrictions on transfer, if
any, contained in the articles of Custom Direct and (ii) Liens, if
any, granted by MDC.
13.4.7 Custom Direct, as surviving corporation of the merger set forth in
Article 7.1, shall take all necessary steps and corporate proceedings
to cause the Custom Direct Class A Common Shares issued by Custom
Direct to be duly and validly created, issued as fully paid and
non-assessable and delivered to Custom Direct Canada at the Closing
on the Date of Closing, free and clear of all Liens other than (i)
the restrictions on transfer, if any, contained in the articles of
Custom Direct and (ii) Liens, if any, granted by Custom Direct
Canada.
13.4.8 Custom Direct, as surviving corporation of the merger set forth in
Article 7.1, shall take all necessary steps and corporate proceedings
to cause the Custom Direct Series A Preferred Shares issued by Custom
Direct to be duly and validly created, issued as fully paid and
non-assessable and delivered to Custom Direct ULC at the Closing on
the Date of Closing, free and clear of all Liens other than (i) the
restrictions on transfer, if any, contained in the articles of Custom
Direct and (ii) Liens, if any, granted by Custom Direct ULC.
13.5 Filings and Authorizations
Each of the parties, as promptly as practicable either before or
after the execution of this Agreement, will (i) make, or cause to be made, all
such filings and submissions under all Laws applicable to it, as may be
required for it to complete the transactions contemplated in this Agreement,
and (ii) use its reasonable commercial efforts to take, or cause to be taken,
all other actions necessary in order for it to fulfill its obligations under
this Agreement. Each of the parties will co-ordinate and cooperate with one
another in exchanging such information and supplying such assistance as may be
reasonably requested by each in connection with the foregoing including,
without limitation, providing each other with all notices and information
supplied or filed with any Governmental Entity and all notices and
correspondence received from any Governmental Entity.
13.6 Names
Custom Direct agrees not to carry on a business with the name
"Xxxxxx-Xxxxxx", "Ashton", "Potter", or any similar words or derivatives
thereof. Following the Date of Closing, each of MDC and Xxxxxx-Xxxxxx agree
not to carry on a business with the name "Custom Direct", "Custom", "Direct",
"CDI" or similar words or any derivatives thereof.
13.7 Cooperation
The parties shall cooperate fully in good faith with each other and
their respective legal advisors, accountants and other representatives in
connection with any steps required to be taken as part of their respective
obligations under this Agreement. From time to time after the Date of Closing,
each party shall, at the request of any other party, execute and deliver such
additional conveyances, transfers and other assurances as may be reasonably
required to effectively complete the transactions contemplated herein and to
carry out the intent of this Agreement.
13.8 Delivery of Documents
Following the Date of Closing, MDC agrees to make reasonable efforts
to deliver to Custom Direct within 60 days from the Date of Closing the
documents listed in Schedule K.
ARTICLE 14
INDEMNIFICATION
14.1 Indemnification Provided by Custom Direct Canada in Favour of MDC
If the Closing occurs, Custom Direct Canada (the "Purchasing
Indemnifying Party") shall indemnify and save MDC (the "Selling Indemnified
Party") harmless of and from any Damages suffered by, imposed upon or asserted
against the Selling Indemnified Party as a result of, in respect of, connected
with, or arising out of, under, or pursuant to any failure of the Purchasing
Indemnifying Party to perform or fulfill any of its covenants under this
Agreement.
14.2 Indemnification Provided by MDC in Favour of Custom Direct Canada,
Custom Direct USA and the Fund
If the Closing occurs, subject to Section 14.3, the Selling
Indemnifying Party shall save Custom Direct Canada, the Fund and Custom Direct
as the surviving corporation resulting from the merger of Custom Direct USA
with and into Custom Direct, Inc. in accordance with Article 7.1 of this
Agreement (collectively referred to as the "Purchasing Indemnified Persons")
harmless of and from any Damages suffered by, imposed upon or asserted against
any of the Purchasing Indemnified Persons as a result of, in respect of,
connected with, or arising out of, under, or pursuant to:
14.2.1 any failure of the Selling Indemnifying Party to perform or fulfil
any of its covenants under this Agreement; or
14.2.2 any breach or inaccuracy of any representation or warranty given by
the Selling Indemnifying Party contained in this Agreement.
14.3 Limitation of Liability of MDC
The obligation of MDC under Section 14.2 shall be limited to an
amount equal to the MDC Merger Consideration.
14.4 Notice of Claim
If a party (the "Indemnified Party") wishes to make a claim for
indemnification (a "Claim") pursuant to this Article 14.1 against the other
party (the "Indemnifying Party"), the Indemnified Party shall promptly give
notice to the Indemnifying Party of the Claim. Such notice shall specify
whether the Claim originates with the Indemnified Party (an "Original Claim")
or with a Person other than the Indemnified Party (a "Third Party Claim"), and
shall also specify with reasonable particularity (to the extent that the
information is available):
14.4.1 the factual basis for the Claim; and
14.4.2 the amount of the Claim, or, if an amount is not then determinable,
an approximate and reasonable estimate of the potential amount of the
Claim.
14.5 Procedure for Indemnification
14.5.1 Following receipt of Notice of a Claim from an Indemnified Party, the
Indemnifying Party shall have 30 Business Days to make such
investigation of the Claim as the Indemnifying Party considers
necessary or desirable. For the purpose of such investigation, the
Indemnified Party shall make available to the Indemnifying Party and
its authorized representatives the information relied upon by the
Indemnified Party to substantiate the Claim. If the Indemnified Party
and the Indemnifying Party agree at or prior to the expiration of
such 30 Business Day period (or any mutually agreed upon extension
thereof) to the validity and amount of the Claim, the Indemnifying
Party shall immediately pay to the Indemnified Party the full agreed
upon amount of the Claim.
14.5.2 Promptly after receipt by an Indemnified Party of a notice of the
commencement of any proceeding against it, the Indemnified Party
will, if a claim is to be made against an Indemnifying Party
hereunder, give notice to the Indemnifying Party of the commencement
of such claim. The failure to notify the Indemnifying Party will not
relieve the Indemnifying Party of any liability that it may have to
any Indemnified Party, except, if and to the extent that the
Indemnifying Party demonstrates that the defence of such action is
prejudiced by the Indemnified Party's failure to give such notice.
14.5.3 If any proceeding referred to in Section 14.5.2 above (a
"Proceeding") is brought against an Indemnified Party and it gives
notice to the Indemnifying Party of the commencement of the
Proceeding, the Indemnifying Party will be entitled to participate in
the Proceeding. Subject to the next following sentence, to the extent
that the Indemnifying Party wishes to assume the defence of the
Proceeding with counsel satisfactory to the Indemnified Party, acting
reasonably, it may do so provided it reimburses the Indemnified Party
for all of its out-of-pocket expenses arising prior to or in
connection with such assumption. The Indemnifying Party may not
assume defence of the Proceeding if the Indemnifying Party is also a
party to the Proceeding and the Indemnified Party determines in good
faith that joint representation would be inappropriate. After notice
from the Indemnifying Party to the Indemnified Party of its election
to assume the defence of the Proceeding, the Indemnifying Party will
not, as long as it diligently conducts such defence, be liable to the
Indemnified Party under this Section 14.5.3 for any fees of other
counsel or any other expenses with respect to the defence of the
Proceeding, in each case subsequently incurred by the Indemnified
Party in connection with the defence of the Proceeding, other than
reasonable costs of investigation. If the Indemnifying Party assumes
the defence of a Proceeding, (i) no compromise or settlement of such
claims may be made by the Indemnifying Party without the Indemnified
Party's consent (which may not be unreasonably withheld) unless (A)
there is no finding or admission of any violation of Laws or any
violation of the rights of any Person and no effect on any other
claims that may be made against the Indemnified Party, and (B) the
sole relief provided is monetary damages that are paid in full by the
Indemnifying Party, and (ii) the Indemnified Party will have no
liability with respect to any compromise or settlement of such claims
effected without its consent not to be unreasonably withheld. If
notice is given to an Indemnifying Party of the commencement of any
Proceeding and the Indemnifying Party does not, within ten Business
Days after receipt of such notice, give notice to the Indemnified
Party of its election to assume the defence of the Proceeding, the
Indemnifying Party will not be entitled to assume the defence, unless
the Indemnifying Party determines in good faith that the Indemnified
Party has failed to vigorously defend itself in such defence.
14.5.4 Notwithstanding Section 14.5.3, if an Indemnified Party determines in
good faith that there is a reasonable probability that a Proceeding
may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification
under this Agreement, the Indemnified Party may, by notice to the
Indemnifying Party, assume the exclusive right to defend, compromise,
or settle the Proceeding. In such case, the Indemnifying Party need
not advance the out-of-pocket expenses incurred by the Indemnified
Party in such Proceeding and will not be bound by any determination
of a Proceeding so defended or any compromise or settlement effected
without its consent (which may not be unreasonably withheld).
14.5.5 Where the defence of a Proceeding is being undertaken and controlled
by the Indemnifying Party, the Indemnified Party will use all
reasonable efforts to make available to the Indemnifying Party those
employees whose assistance, testimony or presence is necessary to
assist the Indemnifying Party in evaluating and defending any such
claims. However, the Indemnifying Party shall be responsible for the
reasonable out of pocket expense associated with any employees made
available by the Indemnified Party to the Indemnifying Party pursuant
to this Section 14.5.5).
14.5.6 With respect to any Proceeding, the Indemnified Party shall make
available to the Indemnifying Party or its representatives on a
timely basis all documents, records and other materials in the
possession of the Indemnified Party, at the expense of the
Indemnifying Party, reasonably required by the Indemnifying Party for
its use in defending any such claim and shall otherwise co-operate on
a timely basis with the Indemnifying Party in the defence of such
claim.
14.6 Additional Rules
The obligation of the parties to indemnify each other pursuant to
this Article 14.1 shall only apply to the extent that the Claims, in the
aggregate, exceed Cdn$200,000 and any Claim arising as a result of a breach of
a representation or warranty contained in Article 11.1 shall be made not later
than the date on which, pursuant to Section 11.3, such representation or
warranty terminated, provided, however, that the obligation of the Selling
Indemnifying Party to indemnify the Purchasing Indemnified Persons pursuant to
this Article 14.1 shall only apply to the extent that the Claims, in the
aggregate, exceed Cdn$500,000 for any breach or inaccuracy of any
representation or warranty given by the Selling Indemnified Party relating to
Custom Direct, Custom Direct LLC, or their subsidiaries or the Business.
ARTICLE 15
TERMINATION
15.1 Termination by the Fund and Custom Direct Canada
If any of the conditions set forth in Article 12.1 have not been
fulfilled or waived at or prior to Closing or any obligation or covenant to be
performed at or prior to Closing has not been observed or performed by Custom
Direct or MDC by Closing, either of the Fund or Custom Direct Canada may
terminate this Agreement by giving notice in writing to the other and to each
of Custom Direct and MDC. Upon giving the requisite notice, each of the
parties hereto shall be released from all obligations hereunder, save and
except for the obligations under Section 18.4 which shall survive. Each of
Custom Direct and MDC shall only be released from its respective obligations
if the condition or conditions for the non-performance of which this Agreement
has been terminated by the Fund or Custom Direct Canada are not reasonably
capable of being performed or caused to be performed by Custom Direct or MDC,
as the case may be. If the Fund or Custom Direct Canada waives compliance with
any of the conditions, obligations or covenants contained in this Agreement,
the waiver will be without prejudice to any of its rights of termination or
otherwise in the event of non-fulfillment, non-observance or non-performance
of any other condition, obligation or covenant in whole or in part.
15.2 Termination by Custom Direct and MDC
If any of the conditions set forth in Article 12.1 have not been
fulfilled or waived at or prior to Closing or any obligation or covenant of
the Fund and Custom Direct Canada to be performed at or prior to Closing has
not been observed or performed by Closing, each of Custom Direct and MDC may
terminate this Agreement by giving notice in writing to the other party and to
each of the Fund and Custom Direct Canada. Upon giving the requisite notice,
the party that wishes to terminate this Agreement (the "Terminating Party")
shall be released from all obligations hereunder, save for the obligations of
MDC under Section 18.4 which shall survive. Each of the Fund and Custom Direct
Canada shall only be released from its respective obligations if the condition
or conditions for the non-performance of which the Terminating Party has
terminated this Agreement are not reasonably capable of being performed or
caused to be performed by the Fund or Custom Direct Canada. If the Terminating
Party waives compliance with any of the conditions, obligations or covenants
contained in this Agreement, the waiver will be without prejudice to any of
its rights of termination or otherwise in the event of non-fulfillment,
non-observance or non-performance of any other condition, obligation or
covenant in whole or in part.
15.3 Other Termination Rights
This Agreement may, by notice in writing by any party given prior to
or on the Date of Closing, be terminated:
(a) by mutual consent of all the parties; or
(b) if the Closing has not been completed prior to June 15, 2003;
and, in such event, each party shall be released from all obligations under
this Agreement.
15.4 Effect of Termination
Each party's right of termination under this Article 15.1 is in
addition to any other rights it may have under this Agreement or otherwise,
and the exercise of a right of termination will not be an election of
remedies. Nothing in Article 15.1 shall limit or affect any other rights or
causes of action any of the parties may have with respect to the
representations, warranties, covenants and indemnities in its favour contained
in this Agreement.
ARTICLE 16
CLOSING
16.1 Location and Time of the Closings
The Closing shall take place at the Closing Time on the Date of
Closing at the offices of Torys LLP in Xxxxxxx, Xxxxxxx, Xxxxxx, or at such
other place, on such other date and at such other time as may be agreed upon
in writing by the parties.
16.2 Closing Procedures
Subject to satisfaction or waiver by the relevant parties of the
conditions of Closing, at the Closing Time the deliveries and payments
contemplated by Articles 2.1 through 10.1 (inclusive) of this Agreement, shall
be completed as provided herein.
ARTICLE 17
ARBITRATION
17.1 Best Efforts to Settle Disputes
In the event any dispute, claim, question or difference (a "Dispute")
arises out of or with respect to this Agreement or its performance,
enforcement, breach, termination or validity, the parties shall use their
commercially reasonable efforts to settle the Dispute. To this end, they shall
consult and negotiate with each other, in good faith and understanding of
their mutual interests, to reach a just and equitable solution satisfactory to
both parties.
17.2 Arbitration
Except as is expressly provided in this Agreement, if the parties do
not reach a solution pursuant to Section 17.1 within a period of 30 Business
Days following the first notice of the Dispute by any party to the others,
then upon written notice by any party to the others (a "Notice of
Arbitration"), the Dispute shall be finally settled by arbitration in
accordance with the provisions of the Arbitration Act, 1991 S.O. 1991, Chap.
17 (the "Arbitration Act"), subject to the following:
17.2.1 the arbitration tribunal shall consist of one arbitrator appointed by
mutual agreement of the parties, or in the event of failure to agree
within 10 Business Days following delivery of the written Notice of
Arbitration, any party may apply to a judge of the Ontario Superior
Court of Justice to appoint an arbitrator. The arbitrator shall be
qualified by education, training and industry experience to rule upon
the particular matter to be decided;
17.2.2 the arbitrator shall be instructed that time is of the essence in the
arbitration proceeding and, in any event, the arbitration award must
be made within 90 days of the submission of the Dispute to
arbitration and within 15 days of the conclusion of any hearing, or,
if none, written submissions;
17.2.3 after written notice is given to refer any Dispute to arbitration,
the parties will meet within 10 Business Days of delivery of the
notice and will negotiate in good faith any changes in these
arbitration provisions or the rules of arbitration which are herein
adopted, in an effort to expedite the process and otherwise ensure
that the process is appropriate given the nature of the Dispute and
the values at risk;
17.2.4 the arbitration shall take place in Toronto, Ontario and shall be
conducted in the English language;
17.2.5 the application of Section 7(2) of the Arbitration Act is expressly
excluded;
17.2.6 despite Section 28(1) of the Arbitration Act, an arbitrator shall
not, without the written consent of all parties to the arbitration,
retain any experts;
17.2.7 the arbitration award shall be given in writing and shall be final
and binding on the parties, and there shall be no appeal therefrom
(including on a question of law). The award shall give reasons and
shall deal with the question of costs of arbitration and all related
matters;
17.2.8 judgment upon any award may be entered in any court having
jurisdiction or application may be made to the court for a judicial
recognition of the award or an order of enforcement, as the case may
be;
17.2.9 all Disputes referred to arbitration (including the scope of the
agreement to arbitrate, any statute of limitations, set-off claims,
conflict of laws rules, tort claims and interest claims) shall be
governed by the substantive law of Ontario; and
17.2.10 the parties agree that the arbitration shall be kept confidential and
that the existence of the proceeding and any element of it (including
any pleadings, briefs or other documents submitted or exchanged, any
testimony or other oral submissions and any awards) shall not be
disclosed beyond the arbitrator, the parties, their counsel and any
Person necessary to the conduct of the proceeding, except as may be
required by law or as may lawfully be required in judicial
proceedings relating to the arbitration or otherwise.
ARTICLE 18
GENERAL MATTERS
18.1 Severability
If any term or other provision of this Agreement is invalid, illegal
or incapable of being enforced by any rule or law, or public policy, all other
conditions and provisions of this Agreement will nevertheless remain in full
force and effect so long as the economic or legal substance of the
transactions contemplated by this Agreement is not affected in any manner
materially adverse to any party. Upon any determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties to
this Agreement will negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated by this
Agreement are fulfilled to the fullest extent possible.
18.2 Enurement
This Agreement will be binding upon and enure to the benefit of the
parties to this Agreement and their respective successors and permitted
assigns from time to time.
18.3 Assignment
This Agreement may be assigned in whole or in part by MDC or
Xxxxxx-Xxxxxx (upon notice to Custom Direct Canada and the Fund) to any
transferee of Custom Direct Common Shares and Custom Direct Preferred Shares;
and, upon the transferee executing an instrument in writing agreeing to be
bound by this Agreement, the transferee shall be entitled to its benefit and
be bound by all of its terms as if it were an original signatory hereto,
provided that MDC shall continue to be bound by all of its obligations
hereunder as if such assignment had not occurred. This Agreement may not be
assigned by Custom Direct Canada or the Fund without the written consent of
MDC, provided that Custom Direct Canada or the Fund may assign the benefits of
this Agreement, directly or indirectly, to a financial institution providing
loans to it or an affiliate and no such assignment to such a financial
institution will give rise to any liability on the part of such financial
institution.
18.4 Expenses
Except for costs and expenses paid for from the proceeds of the
Offering or as otherwise expressly provided in this Agreement, all costs and
expenses (including the fees and disbursements of legal counsel, investment
advisers and accountants) incurred (including after the Closing Date) in
connection with this Agreement, the Ancillary Agreements, the Reorganization
and the transactions contemplated herein and therein, shall be paid by MDC.
18.5 Notices
All notices and other communications to the Fund, Custom Direct
Canada, Custom Direct, Custom Direct ULC, MDC and Xxxxxx-Xxxxxx under this
Agreement shall be in writing and shall be deemed to have been given if
delivered personally or by confirmed telecopy to the parties at the following
addresses (or at any other address for the party as is specified in like
notice):
(a) if to the Fund:
00 Xxxxxxxxxx Xxxxxx West
Suite 0000
Xxxxxxx-Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: The Trustees, c/o Karrin Powys-Lybbe
Fax: 000-000-0000
with a copy to Custom Direct (at the address provided herein);
(b) if to Custom Direct Canada:
00 Xxxxxxxxxx Xxxxxx West
Suite 0000
Xxxxxxx-Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Chief Executive Officer, c/o Karrin Powys-Lybbe
Fax: 000-000-0000
with a copy to the Fund, Custom Direct ULC and Custom Direct
(at the address provided herein);
(c) if to Custom Direct ULC:
c/o Custom Direct, Inc.
0000 Xxxxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
XXX
Attention: Chief Financial Officer
Fax: 000-000-0000
(d) if to Custom Direct:
0000 Xxxxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
XXX
Attention: Chief Financial Officer
Fax: 000-000-0000
(e) if to MDC or Xxxxxx-Xxxxxx:
00 Xxxxxxxx Xxx.
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Executive Vice President and Chief Financial Officer
Fax: 000-000-0000
Any notice given as aforesaid shall be deemed to have been given at
the time delivered or faxed (provided complete transmission is confirmed) if
delivered or faxed to the recipient on a Business Day (in the city in which
the addressee is located) and before 4:30 p.m. (local time in the city in
which the addressee is located) on such Business Day, and otherwise shall be
deemed to be given at 9:00 a.m. (local time in the city in which the addressee
is located) on the next following Business Day (in the city in which the
addressee is located). Any party may change its address for notice by notice
to the other parties hereto given in the manner herein provided.
18.6 Non-Merger
Except as otherwise expressly provided in this Agreement, the
covenants, representations and warranties shall not merge on and shall survive
the Closing and, notwithstanding such Closing and any investigation made by or
on behalf of any party, shall continue in full force and effect. Closing shall
not prejudice any right of one party against any other party in respect of
anything done or omitted under this Agreement or in respect of any right to
damages or other remedies.
18.7 Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario and the federal laws of Canada applicable
therein, except that Article 7.1 of this Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware and the federal
laws of the United States applicable therein.
18.8 Attornment
Each of the parties agrees that any action or proceeding arising out
of or relating to this Agreement may be instituted in the courts of Ontario,
waives any objection which it may have now or later to the venue of that
action or proceeding, irrevocably submits to the jurisdiction of those courts
in that action or proceeding, agrees to be bound by any judgment of those
courts and agrees not to seek, and hereby waives, any review of the merits of
any judgment by the court of any other jurisdiction and hereby appoints Custom
Direct Canada at its principal office in the Province of Ontario as attorney
for service of process.
18.9 Time of Essence
Time is of the essence of this Agreement.
18.10 Entire Agreement
This Agreement and the other agreements contemplated hereby
constitute the entire agreement between the parties pertaining to the subject
matter hereof. There are no warranties, conditions, or representations
(including any that may be implied by statute) and there are no agreements in
connection with such subject matter except as specifically set forth or
referred to in this Agreement or as otherwise set out in writing and delivered
at Closing. No reliance is placed on any warranty, representation, opinion,
advice or assertion of fact made by any party hereto or its directors,
officers, employees or agents, to any other party hereto or its directors,
officers, employees or agents, except to the extent that the same has been
reduced to writing and included as a term of this Agreement. Accordingly,
there shall be no liability, either in tort or in contract, assessed in
relation to any such warranty, representation, opinion, advice or assertion of
fact, except to the extent aforesaid.
18.11 Contractual Liability of the Fund
The parties hereto acknowledge that the trustees of the Fund are
entering into this agreement solely in their capacity as trustees on behalf of
the Fund and the obligations of the Fund hereunder shall not be personally
binding upon the trustees, or any of the unitholders of the Fund or any
annuitants and any recourse against the Fund, the trustees of the Fund, or any
unitholder of the Fund or annuitant in any manner in respect of any
indebtedness, obligation or liability of the Fund arising hereunder or arising
in connection herewith or from the matters to which this Agreement relates, if
any, including, without limitation, claims based on negligence or otherwise
tortious behaviour, shall be limited to and satisfied only out of, the Trust
Assets as defined in the Declaration of Trust.
18.12 Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which taken together shall
be deemed to constitute one and the same instrument. Counterparts may be
executed either in original or faxed form and the parties adopt any signatures
received by a receiving fax machine as original signatures of the parties;
provided, however, that any party providing its signature in such manner shall
promptly forward to the other parties an original of the signed copy of this
Agreement which was so faxed.
18.13 Further Assurances
Each of the parties hereto shall promptly do, make, execute or
deliver, or cause to be done, made, executed or delivered, all such further
acts, documents and things as the other party hereto may reasonably require
from time to time for the purpose of giving effect to this Agreement and shall
use reasonable efforts and take all such steps as may be reasonably within its
power to implement to their full extent the provisions of this Agreement.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
CUSTOM DIRECT INCOME FUND, by its
attorney, Custom Direct Canada Inc.
By:
-------------------------------------
Name:
Title:
CUSTOM DIRECT CANADA INC.
By:
-------------------------------------
Name:
Title:
CUSTOM DIRECT USA INC.
By:
-------------------------------------
Name:
Title:
CUSTOM DIRECT, INC.
By:
-------------------------------------
Name:
Title:
CUSTOM DIRECT ULC
By:
-------------------------------------
Name:
Title:
MDC CORPORATION INC.
By:
-------------------------------------
Name:
Title:
XXXXXX-XXXXXX CANADA INC.
By:
-------------------------------------
Name:
Title:
SCHEDULE "A"
Form of Note Indenture
SCHEDULE "B"
Form of Non-Competition Agreement
SCHEDULE "C"
Form of Exchange Agreement
SCHEDULE "D"
Form of Securityholders Agreement
SCHEDULE "E"
Certificate of Incorporation and Bylaws of Custom Direct
SCHEDULE "F"
Capital of Custom Direct (Pre-Effective Time)
Authorized Share Capital
1,000 Common Stock
Issued Share Capital
9.9 Shares of common stock held by MDC
1.1 Shares of common stock held by Xxxxxx-Xxxxxx
SCHEDULE "G"
Capital of Custom Direct (Effective Time)
Authorized Share Capital
100 Shares of Class A Common Stock par value $0.001
100 Shares of Class B Common Stock par value $0.001
100 Series A Preferred Shares par value $0.001
100 Series B Preferred Shares par value $0.001
Issued Share Capital
15.61379641 Shares of Class A Common Stock held by Custom Direct Canada
3.513104188 Shares of Class B Common Stock held by MDC
0.39034491 Shares of Class B Common Stock held by Xxxxxx-Xxxxxx
15.61379953 Series A Preferred Shares held by Custom Direct ULC
3.513104894 Series B Preferred Shares held by MDC
0.39034499 Series B Preferred Shares held by Xxxxxx-Xxxxxx
SCHEDULE "H"
Reorganization of Custom Direct
(a) MDC U.S. Finance, Inc. ("MDC U.S. Finance") will be merged into MDC
Communications Corporation of America ("MDC CCA") with MDC CCA being
the "surviving entity";
(b) Artistics Greetings Incorporated, Check Gallery Inc., Image Checks,
Inc. and Xxxxxxxxx Custom, Inc. will be merged into Custom Direct,
Inc. with Custom Direct, Inc. being the "surviving entity";
(c) Custom Direct, Inc. will be merged into MDC CCA with MDC CCA being
the "surviving entity"; the surviving entity will be renamed "Custom
Direct, Inc." ("CDI").
(d) CDI will transfer a small portion of its cheque printing business to
Xxxxxx-Xxxxxx (USA) Ltd. ("Xxxxxx-Xxxxxx USA") in exchange for common
shares of Xxxxxx-Xxxxxx USA; Xxxxxx-Xxxxxx USA will be renamed Unique
Checks, Inc. ("Unique");
(e) Unique will dispose its stamp printing assets (either directly or
indirectly through a single member LLC) to a newly created
wholly-owned U.S. subsidiary of MDC; similarly, CDI will transfer the
redundant subsidiaries which do not form part of the CDI business to
that new subsidiary of MDC;
(f) MDC will assume $83.5M of debt owed by a New York partnership ("MDC
Partners") (to bondholders) and in consideration for such assumption
MDC will receive two notes payable from MDC Partners, one in the
amount of $75.15 million and the other in the amount of $8.35 million
(the "CP Notes");
(g) MDC will transfer the $8.35 million note from MDC Partners to
Xxxxxx-Xxxxxx in exchange for additional common shares of Xxxxxx
Xxxxxx;
(h) MDC Nova Scotia Corp., a Nova Scotia unlimited liability corporation
owned by MDC Partners ("Nova Scotia ULC"), will return $83.5 million
in capital to MDC Partners. The return of capital will be satisfied
by issuing two notes to MDC Partners, one in the amount of $75.15
million and other in the amount of $8.35 million (the "NS Notes");
(i) the partners of MDC Partners, being MDC and Xxxxxx-Xxxxxx, will agree
that, following the liquidation of MDC Partners, Xxxxxx-Xxxxxx will
sell the property it receives on the liquidation (its portion of the
shares of Nova Scotia ULC and NS Notes to MDC for fair market value
consideration; MDC Partners will then be liquidated, each of MDC and
Xxxxxx-Xxxxxx will receive an undivided interest of 90% and 10%,
respectively, in the shares of Nova Scotia ULC and each will receive
the $75.15 million and the $8.35 million NS Notes, respectively, to
satisfy MDC Partners' obligations to MDC and Xxxxxx-Xxxxxx under the
CP Notes;
(j) following the liquidation of MDC Partners, Xxxxxx-Xxxxxx will (as
previously agreed in step (g) above) sell its 10% undivided interest
in the shares of Nova Scotia ULC to MDC for cash consideration equal
to the fair market value of that interest (estimated to be $18M);
(k) MDC will agree that, following the wind-up of Nova Scotia ULC, it
will sell 10% of the shares of CDI (that it will receive on the
wind-up) to Xxxxxx-Xxxxxx for fair market value in consideration for
the issuance of shares of Xxxxxx-Xxxxxx; Nova Scotia ULC will then be
wound up and MDC will receive all of the shares of CDI on the wind-up
and the NS Notes will be cancelled;
(l) following the wind-up of Nova Scotia ULC, MDC will (as previously
agreed in step (i) above) sell 10% of the shares of CDI to
Xxxxxx-Xxxxxx for fair market value in consideration for the issuance
of common shares of Xxxxxx-Xxxxxx to MDC; the sale will occur on a
tax-deferred or rollover basis pursuant to the provisions of section
85 of the Income Tax Act (Canada);
(m) MDC will incorporate a new wholly-owned U.S. subsidiary corporation
("U.S. Newco"); MDC will transfer its 90% shares of CDI to U.S. Newco
for fair market value consideration consisting of a note payable by
U.S. Newco to MDC (in an amount equal to 90% of $83.5M) and common
shares of U.S. Newco;
(n) Xxxxxx-Xxxxxx will similarly sell its 10% shares of CDI to U.S. Newco
for fair market value consisting of a note payable by U.S. Newco to
Xxxxxx-Xxxxxx (in an amount equal to 10% of $83.5M) and common shares
of U.S. Newco; after giving effect to these steps, MDC will own 90%
of the debt and common shares of U.S. Newco, Xxxxxx-Xxxxxx will own
10% of the debt and common shares of US Newco, U.S. Newco will in
turn own 100% of CDI and CDI will own 100% of Unique;
(o) immediately following the transaction in Section 6.1 of the
Acquisition Agreement, CDI will be merged into U.S. Newco with U.S.
Newco surviving. The merged entity will continue to be called CDI;
and
(p) immediately following the transaction in step (m) above, CDI will
form Custom Direct LLC ("CDI LLC") and CDI will transfer all of its
business and its shares of Unique to CDI LLC in return for a
combination of debt and membership interests in CDI LLC.
SCHEDULE "I"
Consents
1. License agreement between National Geographic Society and
Message!Products, Inc. dated January 1, 2000.
2. License agreement between Nation Parks Conservation Association and
Message!Products, Inc. dated January 1, 2001.
3. License agreement between Jordan Outdoor Enterprises and Custom
Direct, Inc. dated April 26, 2002.
4. License agreement between United Feature Syndicate, Inc. and Custom
Direct, Inc. dated May 10, 2002.
5. Trademark license agreement between American Airlines, Inc. and
Custom Direct, Inc. dated January 1, 2000.
6. Merchandise license agreement between Art Impressions, Inc. and
Custom Direct, Inc., dba Image Check dated April 5, 2000.
7. License agreement between Simon & Xxxxxxxx, Inc. and Custom Direct,
Inc. dated June 4, 2001.
8. License agreement between Southwest Airlines Co. and Identity Check
Printers, Inc. dated September 1, 1997.
9. License agreement between Custom Direct, Inc. and Spiderwebart dated
June 24, 2002.
10. License agreement between Universal Studios Licensing, Inc. and
Custom Direct, Inc. dated June 11, 2001.
11. Trademark license agreement between Humane Society of the United
States and the Check Gallery dated November 22, 1999.
12. License agreement between Xxxxxxx Company and Custom Direct, Inc.
dated August 1, 2000.
13. License agreement between Xxxxx Xxxxxxx d.b.a. Sanctuary Studio and
The Check Gallery Inc. dated March 1, 2000.
14. License agreement between Custom Direct, Inc. and The Xxx Xxxxxx
Company, Inc. dated July 23, 2001.
15. License agreement between Xxxxxxxx Art Ltd. and Custom Direct, Inc.
dated January 1, 2001.
16. License agreement between The Copyrights Group Limited and Custom
Direct, Inc. dated January 16, 2002.
17. Agreement between Xxxxxxxxx Xxxxx and Company Inc. and Custom Direct,
Inc. dated January 7, 2002.
18. License agreement between Cast Art Industries, Inc. and The Check
Gallery dated January 1, 2000.
19. Trademark license agreement between Chevrolet Motor Division, General
Motors Corporation and Custom Direct Inc. f/k/a The Check Gallery
Inc. dated July 19, 2000.
20. License agreement between Ducks Unlimited, Inc. and Custom Direct,
Inc. dated September 1, 2001.
21. License agreement between National Audubon Society, Inc. and
Message!Products, Inc. dated April 15, 2001.
22. License agreement between General Xxxxx, Inc. and Custom Direct, Inc.
dated May 1, 2002.
23. License agreement between Art Impressions, Inc. and Custom Direct,
Inc. dated April 5, 2000.
SCHEDULE "J"
ERISA
1. MDC of America Inc. 401(k) Plan
2. Flexible Benefit Plan covering health, vision, dental, short-term
disability, and flexible spending account offerings.
3. Fringe and Welfare Plan covering life insurance (group and voluntary)
and long-term disability.
4. Workers Compensation Insurance Policy - The Hartford
5. Custom Direct, Inc. Employee Assistance Plan
6. Custom Direct, Inc. Tuition Assistance Plan
SCHEDULE "K"
Delivery of Documents
For all current entities and predecessor companies included in the current
transaction and November 2002 reorganizations:
1. Corporate records, including incorporation documents, filings, tax id
#'s and wind-up documents.
2. Acquisition documents.
3. Legal documents including correspondence from related counsel.
4. Financial statements, audited and internally prepared, including
related records and documentation.
5. Material agreements.
6. Tax opinions and other correspondence from tax advisors or tax
counsel, including support for existing "repo" debt structure.
7. Tax returns for all prior periods.
8. Copies of insurance policies covering any of the above organizations
just prior to closing.
9. Items/documents presented to underwriters and financial institutions
to secure $42.5 million financing agreement.
10. Supporting documents for any management fees and/or corporate
charges/allocations to any of the entities below, including interest
rates charged.
11. Corporate seals.
Covered entities would include:
Custom Direct, Inc.
Xxxxx & Xxxxxxxxx US Holdings, Inc.
Xxxxxx-Xxxxxx (USA) Ltd.
MDC Communications Corporation of America, Inc.
MDC US Finance Company (Xxxxx)
MDC Capital Partners
Artistic Greetings, Inc.
Artistic Checks, Inc.
Custom Checks, Inc.
Check Gallery, Inc.
Image Checks, Inc.
The Styles Check Company
Custom Xxxxxxxxx, Inc.
Xxxxxx-Xxxxxx International Ltd.
Custom Direct Canada Inc.
Custom Direct Income Fund
Custom Direct ULC