LIMITED PARTNERSHIP UNITPURCHASE AGREEMENT (13%)

  

LIMITED PARTNERSHIP UNIT PURCHASE AGREEMENT (this “Agreement”) dated as of November 30, 2010, by and among MDC PARTNERS INC., a Canadian corporation (the “Purchaser”), 2265174 Ontario Limited (“Kenna Holdco”), GLENN CHILTON and PAUL QUIGLEY (collectively, the “Kenna Principals” and each, a "Kenna Principal").

WITNESSETH:

WHEREAS, Newport Holdco Partners Holding LP (“Newport”) and the Kenna Principals formed Kenna Communications LP ("Kenna LP") for the purpose of demerging the businesses of Capital C Communications LP ("Cap C LP"), which consisted of the Kenna business (the "Kenna Business") and the Cap C business (see reorganization chart attached as Exhibit A to the Newport Purchase Agreement (the "Reorganization");

AND WHEREAS immediately prior to the execution and delivery of this Agreement, Newport, Cap C LP, the Kenna Principals and the Cap C principals consummated the transactions contemplated by the Reorganization.  In connection with such Reorganization, Newport and the Kenna Principals caused Cap C LP to transfer all of the assets utilized as the Kenna Business and certain disclosed liabilities and obligations and the Kenna Business to Kenna LP, pursuant to an Assignment and Assumption Agreement (the "Conveyance Documents");

AND WHEREAS, immediately following the Reorganization, Newport held 67.13% of the partnership units of Kenna LP (the “67% Purchased Units”), and Purchaser purchased such 67% Purchased Units from Newport pursuant to a Limited Partnership Purchase Agreement dated the date hereof (the “Newport Purchase Agreement”), such that after giving effect to such purchase, Purchaser owned 67.13% of Kenna LP, Kenna Holdco owned 20% of Kenna LP and ###-###-#### Ontario Limited, a wholly owned subsidiary of Kenna Holdco (“2265176”) owned 12.86% of the partnership units of Kenna LP (the “13% Units”);

AND WHEREAS, the issued capital of ###-###-#### consists of 101 common shares (the “Purchased Shares”), all of which are legally and beneficially owned by Kenna Holdco;

AND WHEREAS, Kenna Holdco now desires to sell, and Purchaser desires to purchase, the Purchased Shares such that after giving effect to such purchase, Purchaser will own 67.13% of Kenna LP directly, 12.87% of Kenna LP through ownership of ###-###-#### which owns the 13% Units, beneficially and of record, aggregating a 80.0% ownership interest in Kenna LP and Kenna Holdco will own 20% of Kenna LP;

AND WHEREAS simultaneous with the execution and delivery of this Agreement, the Purchaser, Kenna Holdco, the Kenna Principals and Kenna LP are executing and delivering an amended and restated limited partnership agreement in respect of Kenna LP (the “Kenna LP Agreement”);

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:

 

Section 1.1        Sale of the Purchased Shares.  Subject to the terms and conditions herein stated, Kenna Holdco agrees to sell, assign, transfer and deliver to the Purchaser on the Closing Date (as defined in Section 2.2), and the Purchaser agrees to purchase from Kenna Holdco on the Closing Date, the Purchased Shares.

Section 2.1        Purchase Price; Contingent Payments.  In full consideration for the purchase by the Purchaser of the Purchased Shares, the purchase price (the "Purchase Price") shall be calculated and paid by the Purchaser to Kenna Holdco, as set forth in this Section 2.1 below.

(a)        First Contingent Payment. Subject to clauses (i) and (j) below, within five business days after the Annual Determination for calendar year 2010 and any adjustments thereto shall have become binding on the parties in accordance with the Kenna LP Agreement, the Purchaser shall pay to Kenna Holdco the First Contingent Payment ("FAP"), calculated as follows:

FAP = 36% x 2010 PBT

; provided, however, that for purposes of calculating the FAP, “2010 PBT” shall be calculated for the period commencing on the Closing Date and ending on December 31, 2010.

(b)        Second Contingent Payment. Subject to clauses (i) and (j) below, within five business days after the Annual Determination for calendar year 2011 and any adjustments thereto shall have become binding on the parties in accordance with the Kenna LP Agreement, the Purchaser shall pay to Kenna Holdco the Second Contingent Payment ("SAP"), calculated as follows:

SAP = Applicable Percentage x 36% x 2011 PBT

  

 

 

(c)        Third Contingent Payment. Subject to clauses (i) and (j) below, within five business days after the Annual Determination for calendar year 2012 and any adjustments thereto shall have become binding on the parties in accordance with the Kenna LP Agreement, the Purchaser shall pay to Kenna Holdco the Third Contingent Payment ("TAP"), calculated as follows:

TAP = Applicable Percentage x 36% x 2012 PBT

; provided, however, in the event that 2012 PBT were less than the sum of (i) $4,000,000 plus (ii) 33% of the aggregate Top-Up Payments made as of such determination, then TAP shall equal (A) the excess, if any, of (i) 2012 PBT over (ii) 2,400,000 plus (20% of aggregate Top-Up Payments), multiplied by (B) 90%, multiplied by (C) the Applicable Percentage;

provided further, however, in the event that (x) 2011 PBT minus (y) (i) SAP divided by the Applicable Percentage applicable to SAP divided by (ii) 90%, were less than $2,400,000 plus (20% of aggregate Top-Up Payments), then for purposes of the calculations of TAP above, 2012 PBT shall be reduced by the amount of such shortfall;

(d)        Fourth Contingent Payment. Subject to clauses (i) and (j) below, within five business days after the Annual Determination for calendar year 2013 and any adjustments thereto shall have become binding on the parties in accordance with the Kenna LP Agreement, the Purchaser shall pay to Kenna Holdco the Fourth Contingent Payment ("FOAP"), calculated as follows:

FOAP = Applicable Percentage x 36% x 2013 PBT

; provided, however, in the event that 2013 PBT were less than the sum of (i) $4,000,000 plus (ii) 33% of the aggregate Top-Up Payments made as of such determination, then FOAP shall equal (A) the excess, if any, of (i) 2013 PBT over (ii) 2,400,000 plus (20% of aggregate Top-Up Payments), multiplied by (B) 90%, multiplied by (C) the Applicable Percentage;

provided further, however, in the event that (x) the sum of 2011 PBT and 2012 PBT minus (y) (i) the sum of (A) SAP divided by the Applicable Percentage applicable to SAP and (B) TAP divided by the Applicable Percentage applicable to TAP divided by (ii) 90%, were less than $4,800,000 plus (20% of aggregate Top-Up Payments), then for purposes of the calculations of FOAP above, 2013 PBT shall be reduced by the amount of such shortfall;

(e)        Fifth Contingent Payment.  Subject to clauses (i) and (j) below, within five business days after the Annual Determination for calendar year 2014 and any adjustments thereto shall have become binding on the parties in accordance with the Kenna LP Agreement, the Purchaser shall pay to Kenna Holdco the Fifth Contingent Payment ("FIAP"), calculated as follows:

                       

; provided, however, in the event that 2014 PBT were less than the sum of (i) 4,000,000 plus (ii) 33% of the aggregate Top-Up Payments made as of such determination, then FIAP shall equal (A) the excess, if any, of (i) 2014 PBT over (ii) $2,400,000 plus (20% of aggregate Top-Up Payments), multiplied by (B) 90%, multiplied by (C) the Applicable Percentage;

; provided further, however, in the event that (x) the sum of 2011 PBT, 2012 PBT and 2013 PBT minus (y) (i) the sum of (A) SAP divided by the Applicable Percentage applicable to SAP, (B) TAP divided by the Applicable Percentage applicable to TAP and (C) FOAP divided by the Applicable Percentage applicable to FOAP divided by (ii) 90%, were less than $7,200,000 plus (20% of aggregate Top-Up Payments), then for purposes of the calculations of FIAP above, 2014 PBT shall be reduced by the amount of such shortfall.

(f)           Last Contingent Payment.  Subject to clauses (i) and (j) below, within five business days after the Annual Determination for calendar year 2015 and any adjustments thereto shall have become binding on the parties in accordance with the Kenna LP Agreement, the Purchaser shall pay to Kenna Holdco the Last Contingent Payment ("LAP"), calculated as follows:

LAP = Applicable Percentage x 36% x 2015 PBT

; provided, however, in the event that 2015 PBT were less than the sum of (i) $4,000,000 plus (ii) 33% of the aggregate Top-Up Payments made as of such determination, then LAP shall equal (A) the excess, if any, of (i) 2015 PBT over (ii) $2,400,000 plus (20% of aggregate Top-Up Payments), multiplied by (B) 90%, multiplied by (C) the Applicable Percentage;

; provided further, however, in the event that (x) the sum of 2011 PBT, 2012 PBT, 2013 PBT and 2014 PBT minus (y) (i) the sum of (A) SAP divided by the Applicable Percentage applicable to SAP, (B) TAP divided by the Applicable Percentage applicable to TAP, (C) FOAP divided by the Applicable Percentage applicable to FOAP and (D) FIAP divided by the Applicable Percentage applicable to FIAP, divided by (ii) 90%, were less than $9,600,000 plus (20% of aggregate Top-Up Payments), then for purposes of the calculations of LAP above, 2015 PBT shall be reduced by the amount of such shortfall.

(g)        No Negative Payments.  In the event that the calculation of FAP, SAP, TAP, FOAP, FIAP or LAP, as the case may be, results in an amount which is less than zero, such Purchase Price component shall be deemed to be zero.

(h)        Additional Top-Up Payments. Kenna shall also be eligible to receive the following potential top-up payments (the “Top-Up Payments”):

 

 

2.

If  average PBT for calendar years 2010 and 2011 is equal to or greater than $5,000,001 but less than $5,500,000, then the Company will be eligible to receive a First Top-Up Payment equal to $1,500,000;

3.

If  average PBT for calendar years 2010 and 2011 is equal to or greater than $5,500,001 but less than $5,800,000, then the Company will be eligible to receive a First Top-Up Payment equal to $2,000,000; or

4.

If average PBT for calendar years 2010 and 2011 is equal to or greater than $5,800,000, then the Company will be eligible to receive a First Top-Up Payment equal to $2,500,000.

1.

If  average PBT for calendar years 2010, 2011 and 2012 is greater than $4,500,000 but less than $5,000,001, then the Company will be eligible to receive a Second Top-Up Payment equal to $2,500,000 minus the amount of the First Top-Up Payment;

2.

If  average PBT for calendar years 2010, 2011 and 2012 is equal to or greater than $5,000,001 but less than $5,500,000, then the Company will be eligible to receive a Second Top-Up Payment equal to $3,000,000 minus the amount of the First Top-Up Payment;

3.

If  average PBT for calendar years 2010, 2011 and 2012 is equal to or greater than $5,500,001 but less than $5,800,000, then the Company will be eligible to receive a Second Top-Up Payment equal to $4,000,000 minus the amount of the First Top-Up Payment; or

4.

If  average PBT for calendar years 2010, 2011 and 2012 is equal to or greater than $5,800,000, then the Company will be eligible to receive a Second Top-Up Payment equal to $5,000,000 minus the amount of the First Top-Up Payment.

(i)          Payment of the Purchase Price; Limitations and Conditions Precedent to Contingent Payments and Top-Up Payments. Payment of each component of the Purchase Price and any Contingent Payment or Top-Up Payment that is required to be made under this Section 2.1 shall be made in Canadian dollars by the Purchaser by direct wire transfer to the account of Kenna Holdco, as set forth on Schedule 2.1 (or to such other account as Kenna Holdco may notify the Purchaser in writing).  Notwithstanding the foregoing provisions in this Section 2.1, the Purchaser shall not be obligated to pay any Contingent Payments or Top-Up Payments to Kenna Holdco unless and until (i) Kenna LP has Working Capital of at least the Working Capital Target for a continuous period of at least 6 months, (ii) Kenna LP has paid Kenna Holdco the Pre-Closing Undistributed Profit Amount in accordance with the Kenna LP Agreement and (iii) Kenna LP has sufficient cash on-hand to pay distributions due in accordance with the Kenna LP Agreement.

(j)          Termination of Contingent Payments.  Upon the exercise and closing of a Call option or the consummation of a sale to a Prospective Purchaser (as such terms are defined in the Kenna LP Agreement) pursuant to the Kenna LP Agreement (collectively, a "Sale Event"), Kenna Holdco’s right to receive any Contingent Payments based upon PBT for the calendar year in which the applicable Sale Event occurred or for any calendar year(s) thereafter, shall cease, and the obligation of the Purchaser to pay to Kenna Holdco any such Contingent Payments shall terminate, contemporaneously with the applicable Sale Event.

 

2.2

Definitions.

(i)

"Contingent Payments" shall mean the aggregate amount of the payments made in Sections 2.1(a) through (f).

(ii)

“Annual Determination” shall have the meaning ascribed to such term in the Kenna LP Agreement.

(iii)

"Applicable Percentage" shall mean, with respect to any Contingent Payment, a percentage equal to the result of (A) the quotient of (x) the average number of LP Units of Kenna LP owned by Kenna Holdco during the calendar year for which PBT is used to calculate such Contingent Payment (such average being determined as the quotient of (1) the sum of the products of the varying numbers of LP Units so owned by Kenna Holdco by the number of days in such year each such number was owned by Kenna Holdco, and (2) 365 or 366 days, as applicable for such year), divided by (y) the average total number of outstanding Class A Units and LP Units for such year (calculated on the same basis as provided in the parenthetical under (A)(x) above), divided by (B) 20%.

(iv)

"GAAP" shall mean United States generally accepted accounting principles consistently applied.

(v)

“Pre-Closing Undistributed Profit Amount” shall mean the amount of undistributed profits owed to the Kenna Principals from Cap C LP immediately prior to the consummation of the Reorganization, which amount shall be determined as of the Closing Date in accordance with the Kenna LP Agreement and which amount is estimated at Closing to be equal to $648,000.

(vi)

"PBT" with respect to any year, shall mean the consolidated net income (loss) of Kenna LP before provision for any income taxes for such year, determined in accordance with GAAP; provided, however, that for purposes of calculating PBT for 2010, PBT shall be deemed to include the PBT of the Kenna Business for the period from January 1, 2010 until the Closing Date, plus the PBT of Kenna LP for the period from the Closing Date through December 31, 2010.

(vii)

“Working Capital” shall mean current assets minus current liabilities as determined in accordance with GAAP.

(viii)

“Working Capital Target” shall mean the sum of (x) $1,500,000 plus (b) the Pre-Closing Undistributed Profit Amount (to the extent not yet distributed in accordance with the Kenna LP Agreement).

 

Section 2.3        Closing.  The closing of the transactions contemplated by this Agreement (the "Closing") shall take place simultaneously with the execution and delivery of this Agreement on the date hereof, at the offices of MDC Partners Inc., 45 Hazelton Avenue, Toronto, Ontario, M5R 2E3, or by the exchange of documents and instruments by mail, courier, telecopy and wire transfer to the extent mutually acceptable to the parties hereto (such date is herein referred to as the "Closing Date").

  

Section 3.1         Execution and Validity of Agreements.

3.1.1        Execution and Validity.  Kenna Holdco has the full legal right and capacity to enter into this Agreement and to perform its obligations hereunder.  This Agreement has been duly and validly executed and delivered by Kenna Holdco and, assuming due authorization, execution and delivery by the Purchaser, constitutes a legal, valid and binding obligation of Kenna Holdco, enforceable against Kenna Holdco in accordance with its terms.

3.1.2        No Restrictions.  There is no suit, action, claim, investigation or inquiry by any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of Canada, any foreign country or any domestic or foreign state, county, city or other political subdivision ("Governmental or Regulatory Authority"), and no legal, administrative or arbitration proceeding is pending or, to the Kenna Principal's knowledge, threatened against Kenna Holdco with respect to the execution, delivery and performance of this Agreement or the transactions contemplated hereby or any other agreement entered into by Kenna Holdco in connection with the transactions contemplated hereby.

 

3.1.3        Non-Contravention; Approvals and Consents.  The execution, delivery and performance by the Kenna Principals and Kenna Holdco of their respective obligations under this Agreement and the Conveyance Documents and the consummation of the transactions contemplated hereby and thereby, will not (a) violate, conflict with or result in the breach of any provision of the declaration and limited partnership agreement (or other comparable documents) of Kenna LP or Kenna Holdco; (b) result in the violation by Kenna LP or Kenna Holdco of any Laws or Orders of any Governmental or Regulatory Authority, or (c) conflict with, result in a violation or breach of, constitute (with or without notice or lapse of time or both) a default under, or require Kenna LP or Kenna Holdco to obtain any consent, approval or action of, make any filing with or give any notice to, or result in or give to any Person any right of payment or reimbursement, termination, cancellation, modification or acceleration of, or result in the creation or imposition of any Lien upon any of their respective assets or properties, or under any of the terms, conditions or provisions of any Contract to which Kenna LP or Kenna Holdco is a party or by which Kenna LP or Kenna Holdco or any of their respective assets or properties are or were bound.  Except as set forth in Schedule 3.2.10, no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority or other Person is necessary or required under any of the terms, conditions or provisions of any Law or Order of any Governmental or Regulatory Authority or any contract to which Kenna LP or Kenna Holdco is a party, or by which their respective assets or properties were or are bound, for the execution and delivery of this Agreement or the Conveyance Documents, the performance by Kenna LP or Kenna Holdco of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby.

3.2          Proceeds of Purchase Price.  Kenna Holdco has not agreed or made any written or verbal commitment to give any employee of Kenna LP (or any family member or any affiliate of the employee of Kenna LP) any portion or share of the Purchase Price in the form of a bonus, gift, award, or any similar type of remuneration.  The Kenna Principals agree that, from and after the date hereof, no portion or proceeds of the Purchase Price shall be used to compensate or give to any employee of Kenna LP (or any family member of any employee of Kenna LP) a bonus, gift, award, or any similar type of remuneration.

3.3          Limited Partnership Units and Purchased Shares Free and Clear of All Liens; No Options or Restrictions; Subsidiaries and Investments.  Immediately prior to the consummation of the transactions contemplated by this Agreement, (a) Kenna Holdco owns of record and beneficially has valid title to the Purchased Shares, and (b) 2265176 owns of record and beneficially has valid title to 13% Units of Kenna LP and such ownership, in each case, is free and clear or all Liens. There are no outstanding subscriptions, options, warrants, rights (including "phantom stock rights"), calls, commitments, understandings, conversion rights, rights of exchange, plans or other agreements of any kind providing for the purchase, issuance or sale of any equity or ownership or proprietary interest of ###-###-#### or the 13% Units , or which grants any Person (other than ###-###-#### or the Kenna Principals) the right to share in the earnings of Kenna LP.   ###-###-#### does not, directly or indirectly, own any equity interest in or have any voting rights with respect to any Person other than the 13% Units.  There are no outstanding subscriptions, options, rights, warrants, calls, commitments or arrangements of any kind to acquire any of the Purchased Shares or 13% Units and there are no agreements or understandings with respect to the sale or transfer of any of the Purchased Shares or 13% Units other than this Agreement. There is no suit, action, claim, investigation or inquiry by any Governmental or Regulatory Authority, and no legal, administrative or arbitration proceeding pending or, to the knowledge of Kenna Holdco or the Kenna Principals, threatened, against Kenna Holdco, 2265176 or Kenna LP or any of the Purchased Shares or any of the 13% Units, with respect to the execution, delivery and performance of this Agreement or the Conveyance Documents or the transactions contemplated hereby or thereby or any other agreement entered into by Kenna Holdco in connection with the transactions contemplated hereby or thereby.

 

Section 3.4        Brokers.  No broker, finder, agent or similar intermediary has acted on behalf of Kenna Holdco in connection with this Agreement or the transactions contemplated hereby, and no brokerage commissions, finder's fees or similar fees or commissions are payable by the Kenna Holdco or the Kenna Principals in connection therewith based on any agreement, arrangement or understanding with either of them.

Section 3.5  Reaffirmation of Representations and Warranties.  Kenna Holdco and the Kenna Principals hereby reaffirm and restate, to Purchaser, each of their respective representations and warranties set forth in Article III.C. of the Newport Purchase Agreement, which representations and warranties shall be true and correct as of the Closing Date.

The Purchaser represents, warrants and agrees to and with Kenna Holdco as follows:

Section 4.1        Existence and Good Standing.  The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the Province of Ontario with full corporate power and authority to own its property and to carry on its business all as and in the places where such properties are now owned or operated or such business is now being conducted.

Section 4.2        Execution and Validity of Agreement.  The Purchaser has the full corporate power and authority to make, execute, deliver and perform this Agreement and the transactions contemplated hereby.  The execution and delivery of this Agreement by the Purchaser and the consummation of the transactions contemplated hereby have been duly authorized by all required corporate action on behalf of the Purchaser.  This Agreement has been duly and validly executed and delivered by the Purchaser and, assuming due authorization, execution and delivery by Kenna Holdco and the Kenna Principals, constitutes the legal, valid and binding obligation of the Purchaser, enforceable against it in accordance with its terms.

 

  

Section 4.4        Non-Contravention; Approvals and Consents.  The execution, delivery and performance by the Purchaser of its obligations hereunder and the consummation of the transactions contemplated hereby will not (a) violate, conflict with or result in the breach of any provision of the certificate of incorporation and bylaws of the Purchaser, (b) result in the violation by the Purchaser of any Laws or Orders of any Governmental or Regulatory Authority applicable to the Purchaser or any of its assets or properties, or (c) result in a violation or breach of, constitute (with or without notice or lapse of time or both) a default under, or require the Purchaser to obtain any consent, approval or action of, make any filing with or give any notice to, or result in or give to any Person any right of payment or reimbursement, termination, cancellation, modification or acceleration of, or, except for such Liens as may be created in connection with an MDC Financing (as defined in Section 6.1 hereof), result in the creation or imposition of any Lien upon any of the respective assets or properties of the Purchaser, under any of the terms, conditions or provisions of any Contract to which the Purchaser is a party or by which the Purchaser or any of its assets or properties are bound. No consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority or other Person is necessary or required under any of the terms, conditions or provisions of any Law or Order of any Governmental or Regulatory Authority or any Contract to which the Purchaser is a party or by which the Purchaser or any of its assets or properties are bound for the execution and delivery of this Agreement by the Purchaser, the performance by the Purchaser of its obligations hereunder or the consummation by the Purchaser of the transactions contemplated hereby

Section 4.5        Brokers.  No broker, finder, agent or similar intermediary has acted on behalf of the Purchaser in connection with this Agreement or the transactions contemplated hereby, and no brokerage commissions, finder's fees or similar fees or commissions are payable by the Purchaser in connection therewith based on any agreement, arrangement or understanding with either of them.

Simultaneously herewith:

  

Section 5.1        Tax Restructuring Proceedings. All proceedings to be taken in connection with the transactions contemplated by this Agreement, including, without limitation, the pre-closing transactions constituting the Reorganization, the Conveyance Documents and all documents incident thereto must be reasonably satisfactory in form and substance to the Purchaser and its counsel, and the Purchaser shall have received copies of all such documents and other evidences as it or its counsel reasonably requested in order to establish the consummation of such transactions and the taking of all proceedings in connection therewith.

   

      

    

  

Section 6.1         MDC Financing.  Notwithstanding anything to the contrary contained in this Agreement, in consideration for the payment of the Purchase Price under Section 2.1 hereof and for other good and valuable consideration, the parties hereto hereby (i) agree that MDC Partners and/or one or more of its affiliates, in connection with its or any of its affiliates' current or future credit facilities, debt offerings (including, without limitation, senior, subordinated or mezzanine debt issued in a public offering or a Regulation S or Rule 144A private placement) or any other debt agreements, shall be entitled to: (w) pledge or grant a security interest in or otherwise have a lien placed upon the Purchaser's Limited Partnership Units; (x) pledge or grant a security interest in or to otherwise have a lien placed upon the assets and properties of Kenna LP, and/or their respective subsidiaries; (y) assign all of its rights, benefit, title and interest in Kenna LP and distributions therefrom, including, without limitation, all rights and claims pursuant to and under the Call and/or Sale Request (as such terms are defined in the applicable Limited Partnership Agreement) to or to an agent or representative on behalf of, its bank or lender or group of banks or group of lenders from time to time (as applicable and collectively, the "Lender"); and (z) have Kenna LP provide guarantees and such other ancillary security and related documentation as reasonably required by the Lender from time to time (the items in (w), (x), (y) and (z) being collectively referred to as an "MDC Financing"); and (ii) consent unconditionally to (x) the granting of all security and the execution of all documents required in connection with an MDC Financing and the enforcement thereof, where applicable, by the Lender; and (y) any transaction by which the Lender becomes the absolute legal and beneficial owner of any limited partnership Units which have been pledged or assigned to it.

(a)           As long as Kenna Holdco beneficially owns any equity interests in Kenna LP, no Kenna Principal shall sell or in any other way transfer, assign, distribute, pledge, encumber or otherwise dispose of any of the equity securities of Kenna Holdco or permit Kenna Holdco to issue any additional equity securities.

  

  

Section 7.1        Survival.  Notwithstanding any right of any party hereto fully to investigate the affairs of any other party, and notwithstanding any knowledge of facts determined or determinable pursuant to such investigation or right of investigation, each party hereto shall have the right to rely fully upon the representations, warranties, covenants and agreements of the other parties contained in this Agreement and the Schedules, if any, furnished by any other party pursuant to this Agreement, or in any certificate or document delivered at the Closing by any other party.  Subject to the limitations set forth in Section 7.6, the respective representations, warranties, covenants and agreements of Kenna Holdco, the Kenna Principals and the Purchaser contained in this Agreement shall survive the Closing.

Section 7.2         Obligation of Kenna Holdco and the Kenna Principals to Indemnify.

 

7.2.1        General Indemnity.  Subject to the limitations contained in Sections 7.6.1 and 7.6.2, Kenna Holdco and the Kenna Principals hereby agree, jointly and severally, to indemnify the Purchaser and its affiliates, stockholders, officers, directors, employees, agents, representatives and successors, permitted assignees of the Purchaser and their affiliates (individually, a "Purchaser Indemnified Party" and collectively, the "Purchaser Indemnified Parties") against, and to protect, save and keep harmless the Purchaser Indemnified Parties from, and to pay on behalf of or reimburse the Purchaser Indemnified Parties as and when incurred for, any and all liabilities (including liabilities for Taxes), obligations, losses, damages, penalties, demands, claims, actions, suits, judgments, settlements, penalties, interest, out-of-pocket costs, expenses and disbursements (including reasonable costs of investigation, and reasonable attorneys', accountants' and expert witnesses' fees) of whatever kind and nature (collectively, "Losses"), that may be imposed on or incurred by any Purchaser Indemnified Party as a consequence of, in connection with, incident to, resulting from or arising out of or in any way related to or by virtue of: (a) any misrepresentation, inaccuracy or breach of any warranty or representation contained in Article III hereof or in any certificate delivered by Kenna Holdco or the Kenna Principals at the Closing or otherwise in connection herewith; (b) any action, demand, proceeding, investigation or claim by any third party (including any Governmental or Regulatory Authority) against or affecting any Purchaser Indemnified Party which may give rise to or evidence the existence of or relate to a misrepresentation or breach of any of the representations and warranties of Kenna Holdco or the applicable Kenna Principals contained in Article III hereof or in any certificate delivered by Kenna Holdco or the applicable Kenna Principals at the Closing or otherwise in connection herewith; (c) any breach or failure by Kenna Holdco or the applicable Kenna Principals to comply with, perform or discharge any obligation, agreement or covenant by Kenna Holdco or the Kenna Principals contained in this Agreement; or (d) any liability or obligation or any assertion against any Purchaser Indemnified Party, arising out of or relating, directly or indirectly, to any Excluded Asset or any Retained Liability (as such terms are defined in the Conveyance Documents) or other liability arising, in whole or in part, out of the conduct of the business of Cap C LP or any of its subsidiaries or successors, if any, prior to the Closing except for the Assumed Liabilities (as such term is defined in the Conveyance Documents).

 

7.2.2        Losses.  The term "Losses" as used in this Article VII is not limited to matters asserted by third parties against any Purchaser Indemnified Party but includes Losses incurred or sustained by a Purchaser Indemnified Party in the absence of Third Party Claims (as defined in Section 7.4.2 hereof).

Section 7.3         Obligation of the Purchaser to Indemnify.  Subject to the limitations set forth in Section 7.6.3 hereof, the Purchaser hereby agrees to indemnify Kenna Holdco, Kenna and the Kenna Principals (individually a "Company Indemnified Party" and collectively, the "Company Indemnified Parties") against, and to protect, save and keep harmless the Company Indemnified Parties from, and to pay on behalf of or reimburse the Company Indemnified Parties as and when incurred for, any and all Losses that may be imposed on or incurred by the Company Indemnified Parties as a consequence of, in connection with, incident to, resulting from or arising out of or in any way related to or by virtue of: (a) any misrepresentation, inaccuracy or breach of any warranty or representation of the Purchaser contained in Article IV hereof or in any certificate delivered by the Purchaser at the Closing; or (b) any action, demand, proceeding, investigation or claim by any third party (including any Governmental or Regulatory Authority) against or affecting any Company Indemnified Party which may give rise to or evidence the existence of or relate to a misrepresentation or breach of any of the representations and warranties of the Purchaser contained in Article IV hereof or in any certificate delivered by the Purchaser at the Closing; or (c) any breach or failure by the Purchaser to comply with, perform or discharge any obligation, agreement or covenant by the Purchaser contained in this Agreement.

Section 7.4         Indemnification Procedures.

7.4.1        Non-Third Party Claims.

(a)           In the event that any Person entitled to indemnification under this Agreement (an "Indemnified Party") asserts a claim for indemnification which does not involve a Third Party Claim (as defined in Section 7.4.2) (a "Non-Third Party Claim"), against which a Person is required to provide indemnification under this Agreement (an "Indemnifying Party"), the Indemnified Party shall give written notice to the Indemnifying Party (the "Non-Third Party Claim Notice"), which Non-Third Party Claim Notice shall (i) describe the claim in reasonable detail, and (ii) indicate the amount (estimated, if necessary, and to the extent feasible) of the Losses that have been or may be suffered by the Indemnified Party.

 

(b)           The Indemnifying Party may acknowledge and agree by written notice (the "Non-Third Party Acknowledgement of Liability") to the Indemnified Party to satisfy the Non-Third Party Claim within 30 days of receipt of the Non-Third Party Claim Notice.  In the event that the Indemnifying Party disputes the Non-Third Party Claim, the Indemnifying Party shall provide written notice of such dispute (the "Non-Third Party Dispute Notice") to the Indemnified Party within 30 days of receipt of the Non-Third Party Claim Notice (the "Non-Third Party Dispute Period"), setting forth a reasonable basis of such dispute.  In the event that the Indemnifying Party shall fail to deliver the Non-Third Party Acknowledgement of Liability or Non-Third Party Dispute Notice within the Non-Third Party Dispute Period, the Indemnifying Party shall be deemed to have acknowledged and agreed to pay the Non-Third Party Claim in full and to have waived any right to dispute the Non-Third Party Claim.  Once the Indemnifying Party has acknowledged and agreed to pay any Non-Third Party Claim pursuant to this Section 7.4.1, or once any dispute under this Section 7.4.1 has been finally resolved in favor of indemnification by a court or other tribunal of competent jurisdiction, subject to the provisions of Section 7.6.1, the Indemnifying Party shall pay the amount of such Non-Third Party Claim to the Indemnified Party within 10 days of the date of acknowledgement or resolution, as the case may be, to such account and in such manner as is designated in writing by the Indemnified Party.

7.4.2        Third-Party Claims.

(a)           In the event that any Indemnified Party asserts a claim for indemnification or receives notice of the assertion of any claim or of the commencement of any action or proceeding by any Person who is not a party to this Agreement or an affiliate of a party to this Agreement in respect of which such Indemnified Party is entitled to indemnification by an Indemnifying Party under this Agreement (a "Third Party Claim"), the Indemnified Party shall give written notice to the Indemnifying Party (the "Third Party Claims Notice") within 20 days after asserting or learning of such Third Party Claim (or within such shorter time as may be necessary to give the Indemnifying Party a reasonable opportunity to respond to such claim), together with a statement specifying the basis of such Third Party Claim.  The Third Party Claim Notice shall (i) describe the claim in reasonable detail, and (ii) indicate the amount (estimated, if necessary, and to the extent feasible) of the Losses that have been or may be suffered by the Indemnified Party. The Indemnifying Party must provide written notice to the Indemnified Party that it is either (i) assuming responsibility for the Third Party Claim or (ii) disputing the claim for indemnification against it (the "Indemnification Notice")  The Indemnification Notice must be provided by the Indemnifying Party to the Indemnified Party within 15 days after receipt of the Third Party Claims Notice or within such shorter time as may be necessary to give the Indemnified Party a reasonable opportunity to respond to such Third Party Claim (the "Indemnification Notice Period").

(b)           If the Indemnifying Party provides an Indemnification Notice to the Indemnified Party within the Indemnification Notice Period that it assumes responsibility for the Third Party Claim (the "Defense Notice"), the Indemnifying Party shall conduct at its expense the defense against such Third Party Claim in its own name, or if necessary in the name of the Indemnified Party.  The Defense Notice shall specify the counsel the Indemnifying Party will appoint to defend such claim ("Defense Counsel"); provided, however, that the Indemnified Party shall have the right to approve the Defense Counsel, which approval shall not be unreasonably withheld or delayed, except that such approval may be withheld if the defense is to be in the name of the Indemnified Party.  In the event that the Indemnifying Party fails to give the Indemnification Notice within the Indemnification Notice Period, the Indemnified Party shall have the right to conduct the defense and to compromise and settle such Third Party Claim without the prior consent of the Indemnifying Party and subject to the provisions of Section 7.6.1, the Indemnifying Party will be liable for all costs, expenses, settlement amounts or other Losses paid or incurred in connection therewith.

  

(c)           In the event that the Indemnifying Party provides in the Indemnification Notice that it disputes the claim for indemnification against it, the Indemnified Party shall have the right to conduct the defense and to compromise and settle such Third Party Claim, without the prior consent of the Indemnifying Party. Once such dispute has been finally resolved in favor of indemnification by a court or other tribunal of competent jurisdiction or by mutual agreement of the Indemnified Party and Indemnifying Party, subject to the provisions of Section 7.6.1, the Indemnifying Party shall within 10 days of the date of such resolution or agreement, pay to the Indemnified Party all Losses paid or incurred by the Indemnified Party in connection therewith.

 

(d)           In the event that the Indemnifying Party delivers an Indemnification Notice pursuant to which it elects to conduct the defense of the Third Party Claim, the Indemnifying Party shall be entitled to have the exclusive control over the defense of the Third Party Claim and the Indemnified Party will cooperate in good faith with and make available to the Indemnifying Party such assistance and materials as it may reasonably request, all at the expense of the Indemnifying Party.  The Indemnified Party shall have the right at its expense to participate in the defense assisted by counsel of its own choosing.  The Indemnifying Party will not settle the Third Party Claim or cease to defend against any Third Party Claim as to which it has delivered an Indemnification Notice (as to which it has assumed responsibility for the Third Party Claim), without the prior written consent of the Indemnified Party, which consent will not be unreasonably withheld or delayed; provided, however, such consent may be withheld if, among other reasons, as a result of such settlement or cessation of defense, (i) injunctive relief or specific performance would be imposed against the Indemnified Party, or (ii) such settlement or cessation would lead to liability or create any financial or other obligation on the part of the Indemnified Party for which the Indemnified Party is not entitled to indemnification hereunder.

  

(e)           If an Indemnified Party refuses to consent to a bona fide offer of settlement which the Indemnifying Party wishes to accept, which provides for a full release of the Indemnified Party and its affiliates relating to the Third Party Claims underlying the offer of settlement and solely for a monetary payment, the Indemnified Party may continue to pursue such matter, free of any participation by the Indemnifying Party, at the sole expense of the Indemnified Party. In such an event, the obligation of the Indemnifying Party shall be limited to the amount of the offer of settlement which the Indemnified Party refused to accept plus the reasonable costs and expenses of the Indemnified Party incurred prior to the date the Indemnifying Party notified the Indemnified Party of the offer of settlement.

 

(f)           Notwithstanding clause (d) above, the Indemnifying Party shall not be entitled to control, but may participate in, and the Indemnified Party shall be entitled to have sole control over, the defense or settlement of (x) that part of any Third Party Claim that (i) seeks a temporary restraining order, a preliminary or permanent injunction or specific performance against the Indemnified Party, (ii) involves criminal allegations against the Indemnified Party or (iii) may lead to liability or create any financial or other obligation on the part of the Indemnified Party for which the Indemnified Party is not entitled to indemnification hereunder and (y) the entire Third Party Claim if such Third Party Claim would impose liability on the part of the Indemnified Party in an amount which is greater than the amount as to which the Indemnified Party is entitled to indemnification under this Agreement.

  

(g)           A failure by an Indemnified Party to give timely, complete or accurate notice as provided in this Section 7.4 will not affect the rights or obligations of any party hereunder except and only to the extent that, as a result of such failure, any party entitled to receive such notice was deprived of its right to recover any payment under its applicable insurance coverage or was otherwise directly and materially damaged as a result of such failure to give timely notice.

Section 7.5         Right of Offset.  Without limiting any other rights or remedies available to it, the Purchaser shall be entitled to offset any claim for indemnity made pursuant to Section 7.2 and in accordance with Section 7.4, against any Contingent Payment or Top-Up Payment due to Kenna Holdco, subject to an aggregate limit of $3,000,000; provided, however, the Purchaser may only exercise such right of offset in respect of claims relating to Losses actually incurred by a Purchaser Indemnified Party (in which case the amount of such offset shall be the amount of such actual Loss) or claims actually asserted by a third party (in which case the amount of the offset shall not exceed the Purchaser's good faith estimate of the amount of indemnifiable Losses that will ultimately be payable to a Purchaser Indemnified Party in respect of such claims).

Section 7.6         Limitations On and Other Matters Regarding Indemnification

7.6.1        Indemnity Cushion and Cap.  Subject to Section 7.6.5, neither Kenna Holdco nor any of the Kenna Principals shall have any liability to any Purchaser Indemnified Party with respect to Losses arising out of any of the matters referred to in Section 7.2 until such time as the amount of such liability shall exceed $100,000 in the aggregate (in which case Kenna Holdco and the Kenna Principals shall be liable for all Losses).  Notwithstanding anything to the contrary herein, subject to Section 7.6.5 below, the maximum aggregate liability of Kenna Holdco and the Kenna Principals for indemnity payments under Section 7.2.1 shall be an aggregate amount equal to the sum of (A) $750,000 plus (B) $3,000,000 of the Contingent Payments and the Top-Up Payments paid or payable pursuant to this Agreement.

7.6.2        Termination of Indemnification Obligations of Kenna Holdco and the Kenna Principals.  Subject to Section 7.6.5, the obligation of Kenna Holdco and the Kenna Principals to indemnify under Section 7.2 hereof shall terminate on March 31, 2012, except as to matters as to which the Purchaser Indemnified Party has made a claim for indemnification on or prior to such date, in which case the right to indemnification with respect thereto shall survive the expiration of such period until such claim for indemnification is finally resolved and any obligations with respect thereto are fully satisfied.

   

 

7.6.4        Treatment.  Any indemnity payments by an Indemnifying Party to an Indemnified Party under this Article VIII shall be treated by the parties as an adjustment to the Purchase Price.

7.6.5        Exceptions.  Each of the limitations set forth above in this Section 7.6 shall in no event (a) apply to any Losses incurred by a Purchaser Indemnified Party which relate, directly or indirectly, to (i) any fraudulent acts committed by Kenna Holdco or the Principal; (ii) any breach of a representation or warranty contained in Sections 3.1 or 3.3 or any other provision hereof relating to Taxes, (iii) any indemnification obligation under Sections 7.2.1(c) or 7.2.1(d)  and (iv) the obligations of Kenna Holdco and the Kenna Principals set forth in Section 8.1 to pay certain expenses; or (b) apply to any Losses incurred by a Company Indemnified Party which relate, directly or indirectly, to (i) any fraudulent acts committed by the Purchaser; (ii) any indemnification obligation under Section 7.3(c); and (iii) the Purchaser's obligations set forth in Section 8.1 to pay certain expenses.

7.6.6        Control by MDC Partners. All decisions and determinations to be made by the Purchaser and/or a Purchaser Indemnified Party under this Article VII shall be made by MDC Partners in the name of and on behalf of the Purchaser and/or such other Purchaser Indemnified Party.

 

Section 8.1         Expenses.  Except as otherwise provided in this Agreement, the Purchaser, on the one hand, and the Kenna Principals and Cap C LP, on the other hand, shall pay its or his own expenses relating to the transactions contemplated by this Agreement, including, without limitation, the fees and expenses of their respective counsel, financial advisors and accountants.

 

Section 8.2         Governing Law; Service of Process and Consent to Jurisdiction. The interpretation and construction of this Agreement, and all matters relating hereto (including, without limitation, the validity or enforcement of this Agreement), shall be governed by the laws of the Province of Ontario and the laws of Canada applicable therein.

             

Section 8.3         "Person" Defined.  "Person" shall mean and include an individual, a company, a joint venture, a corporation (including any non-profit corporation), an estate, an association, a trust, a general or limited partnership, a limited liability company, a limited liability partnership, an unincorporated organization and a government or other department or agency thereof.

                     

                   

Section 8.8         Notices.  Unless otherwise provided herein, any notice, request, instruction or other document to be given hereunder by any party to any other party shall be in writing and shall be deemed to have been given (a) upon personal delivery, if delivered by hand or courier, (b) three days after the date of deposit in the mails, postage prepaid, or (c) the next business day if sent by a prepaid overnight courier service, and in each case at the respective addresses set forth below or such other address as such party may have fixed by notice:

If to the Purchaser, addressed to:

c/o MDC Partners Inc.

45 Hazelton Avenue

Toronto, Ontario

Canada M5R 2E3

Attention:  Gavin Swartzman

with a copy to:

c/o MDC Partners Inc.

   

If to Kenna Holdco, to:

c/o Paul Quigley

898 Wildrush Place

Newmarket, Ontario  L3X 1L7

    

Attention:          Paul Quigley

 

 

Lipman, Zener & Waxman LLP

1220 Eglinton Avenue West

Toronto, Ontario  M6C 2E3

Attention:        Bradley J. Miller

Facsimile:        ###-###-####

  

If to the Kenna Principals, to:

 

Paul Quigley

898 Wildrush Place

Newmarket, Ontario  L3X 1L7

 

and

 

Glenn Chilton

161 Coldstream Avenue

Toronto, Ontario  M5N 1X7

 

 

Lipman, Zener & Waxman LLP

1220 Eglinton Avenue West

Toronto, Ontario  M6C 2E3

 

Attention:        Bradley J. Miller

Facsimile:        ###-###-####

                   

Any party may change the address to which notices are to be sent by giving notice of such change of address to the other parties in the manner herein provided for giving notice.

                             

                  

Section 8.10      Severability.  In the event any provision of this Agreement is found to be void and unenforceable by a court of competent jurisdiction, the remaining provisions of this Agreement shall nevertheless be binding upon the parties with the same effect as though the void or unenforceable part had been severed and deleted.

Section 8.11      Counterparts.  This Agreement may be executed in two or more counterparts or by facsimile transmission, all of which taken together shall constitute one instrument.

Section 8.12      Entire Agreement.  This Agreement, together with the Schedules and Exhibits hereto, constitutes the sole, exclusive and only agreements of the parties hereto pertaining to the subject matter hereof, contains all of the covenants, conditions and agreements between the parties, express or implied, whether by statute or otherwise, and sets forth the respective rights, duties and obligations of each party to the other party as of the date hereof. No oral understandings, oral statements, oral promises or oral inducements exist.

Section 8.13      Amendments.  This Agreement may not be amended, supplemented or modified orally, but only by an agreement in writing signed by each of the parties hereto.

Section 8.14      Third Party Beneficiaries.  Each party hereto intends that this Agreement shall not benefit or create any right or cause of action in or on behalf of any Person other than the parties hereto and their respective successors and assigns as permitted under Section 8.9, except the Purchaser Indemnified Parties as provided in Article VII hereof and with respect to the provisions of Section 7.6.6, MDC Partners.

Section 8.15      Use of Terms.  Whenever the context so requires or permits, all references to the masculine herein shall include the feminine and neuter, all references to the neuter herein shall include the masculine and feminine, all references to the plural shall include the singular and all references to the singular shall include the plural.  Whenever used in this Agreement, the terms "Dollars" and "$" shall mean Canadian Dollars.

Section 8.16      "Liens" Defined.  With respect to any asset, a "Lien" shall mean (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (other than an operating lease) (or any financial lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Limited Partnership Unit Purchase Agreement, on the day and year first above written.