Execution Copy

 

AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT

 

AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT (this “Agreement”) dated as
of May 6, 2013 (the “Effective Date”) by and between MDC PARTNERS INC. (the
“Company”), NADAL MANAGEMENT LIMITED, (formerly Stallion Investments Limited) a
corporation in which Miles Nadal is the sole shareholder (“NML”), NADAL
FINANCIAL CORPORATION, a corporation in which Miles Nadal is the sole
shareholder (“NFC”) and MILES NADAL (the “Executive”).

 

WITNESSETH:

 

WHEREAS, the Company, NML, NFC and the Executive are parties to a Management
Services Agreement dated April 27, 2007 (as amended, the “Prior Agreement”),
pursuant to which Executive serves as the Chairman and Chief Executive Officer
of the Company;

 

WHEREAS, the Company wishes to assure itself of the services of NML, NFC and the
Executive, and NML, NFC and the Executive desire to provide such services on the
terms and conditions set forth below; and

 

WHEREAS, the parties now wish to terminate the Prior Agreement on the Effective
Date and enter into this amended and restated Agreement on the terms and
conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:

 

1.          Term of Agreement

 

Subject to the termination provisions of Sections 7 and 8 hereof, the term of
this Agreement shall commence on the Effective Date and shall expire on the
fifth anniversary thereof; provided, however, the term of this Agreement shall
continue for additional one-year periods thereafter unless and until either the
Company or NML shall give to the other 60 days advance written notice prior to
any expiration date of its intention not to renew the term. The initial term
plus any renewal period thereafter, as may be earlier terminated as provided
herein, is collectively referred to herein as the “Term.” The date on which this
Agreement terminates, regardless of the reason therefor, is referred to in this
Agreement as the “Date of Termination.”

 

2.          Retention of NML and NFC

 

The Company hereby agrees to retain NML and NFC as consultants to render
management services to the Company, subject to and in accordance with the terms
and provisions hereof. NML and NFC agree to provide the Company with the
services of the Executive upon the terms and conditions hereinafter set forth.

 

 

 

 

3.          Services of Executive Provided by NML and NFC

 

(a)            Position and Authority. During the Term, NML and NFC shall
provide the services of the Executive, who shall have the position of Chief
Executive Officer and President of the Company and, if elected by the Board of
Directors of the Company (the “Board”), Chairman of the Board. The Executive
shall report directly to the Board. The Executive shall have all the powers,
authority, duties and responsibilities incident to the position and office of
Chief Executive Officer of the Company, including effective supervision and
control over, and responsibility for, the day-to-day leadership and management
of the business and affairs of the Company.

 

(b)            Responsibilities of Executive. The Executive agrees to devote his
business time, attention, skills and efforts to promote with his best efforts
the interests of the Company and to the due performance of his duties and
responsibilities under this Agreement, consistent with Section 3(a) hereof.
Notwithstanding the foregoing, the Executive shall be permitted, upon prior
written consent of the Board, to serve on the board of directors of up to three
companies or income trusts unaffiliated with the Company, provided that any such
company does not engage in a Competing Business (as defined in Section 9(a)
hereof) and does not transact business for which it is paid by the Company,
except as may be approved in advance upon the prior written consent of the
Board. In addition, the Executive shall be permitted to engage in charitable and
civic activities and manage his personal passive investments, provided that such
passive investments are not in a Competing Business and are not in a company
that transacts business for which it is paid by the Company (except for an
interest in a publicly held corporation of less than 2% of its outstanding
shares); provided, however, that for the avoidance of doubt, the Company has
determined that the current activities of the Executive with respect to his
investments (listed on Exhibit A) are permitted hereunder, subject to periodic
review and approval by the Board, in the event of any material change in the
role or time commitment of Executive with such companies and provided that such
activities do not in the reasonable judgment of the Board conflict with a
full-time commitment as Chief Executive Officer of the Company. The Executive’s
participation in activities outside of his duties to the Company as described
above are further subject to the requirement that such activities do not
interfere with the performance of his duties or responsibilities to the Company
under this Agreement in a substantial manner taking into account all of the
circumstances.

 

4.          Retainer Fee and Other Payments

 

(a)          Annual Retainer Fee. As compensation for the services hereunder
provided by NML and NFC during the Term, the Company shall pay, in aggregate, to
NML and NFC, on a monthly basis in arrears, an annual retainer fee (the “Annual
Retainer Fee”) as follows:

 

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(i) for the calendar year 2013, at the rate of $1,750,000 per annum (the “2013
Fee Rate”);

 

(ii) for the calendar year 2014, at the rate of (x) the 2013 Fee Rate if the
Company achieves EBITDA growth of less than 5% in 2013 compared to 2012, or (y)
$1,850,000 per annum if the Company achieves EBITDA growth of at least 5% in
2013 compared to 2012; and

 

(iii) for the calendar year 2015 and for any continuing period of the Term
thereafter, at the rate of $2,000,000 per annum, provided that the Company
achieves EBITDA growth of not less than 5% in 2014 compared to 2013, or
cumulative EBITDA growth of 10% or more in 2013 and 2014 compared to 2012 (and
if such EBITDA growth is not achieved, then the Annual Retainer Fee for 2015 and
thereafter shall remain at the rate actually paid for 2014); or such greater
amount as may be approved by the Human Resources & Compensation Committee of the
Board any (the “Compensation Committee”).

 

(b)          Annual Incentive. During the Term, with respect to each fiscal
year, NML shall be eligible to receive an annual fee as an incentive payment
from the Company (the “Annual Incentive”), which Annual Incentive will be
comprised collectively of the potential to receive a “Regular Annual Incentive
Payment” and an “EFP Payment”, each as defined below:

 

(i) Regular Annual Payment. The “Regular Annual Incentive Payment” shall mean a
right to receive an incentive opportunity under the Annual Incentive of up to
250% (assuming maximum performance) of the then current Annual Retainer Fee,
based upon criteria determined by the Compensation Committee, following
discussion with the Executive. Such criteria shall include the Executive’s
performance, the overall financial performance of the Company and such other
factors as the Compensation Committee shall deem reasonable and appropriate.
Payment of the Regular Annual Incentive Payment component of the Annual
Incentive (if any) shall be made at such time and in accordance with such
procedures and forms of payment as may be approved by the Compensation
Committee, and in any event shall be paid no later than 2½ months after the end
of the fiscal year in respect of which it is earned.

 

(ii) EFP Payment. During the Term, with respect to each fiscal year, NML will
also be eligible to receive an “EFP Payment” which shall represent a potential
incentive payment under the Company’s Exceptional Financial Performance
Incentive Pool (the “EFP Pool”). The EFP Pool will be calculated each fiscal
year for exceptional financial performance by the Company as reflected by
achieving reported EBITDA for such fiscal year in an amount representing not
less than 7% growth in the Company’s reported EBITDA, as compared to the
immediately preceding fiscal year’s reported EBITDA performance (such minimum
amount necessary to achieve 7% growth, the “7% EBIDTA Hurdle Amount”). With
respect to each fiscal year, the EFP Pool shall be no less than 25% of the
excess of actual Company EBITDA for such fiscal year over the 7% EBITDA Hurdle
Amount applicable to such fiscal year. Notwithstanding the foregoing, the
Compensation Committee (on behalf of the Company) shall retain sole and absolute
discretion in determining the amount of the EFP Pool and any allocations and
payments under the EFP Pool to NML and other executive officer, provided that
NML may not be allocated more than 60% of the EFP Pool in any applicable year.
Each award to NML under the EFP Pool (if any) will be subject to an appropriate
retention agreement to be signed by NML and the Executive. Payment to NML of any
award under the EFP Pool shall be paid at the same time as any earned portion of
the Regular Annual Payment.

 

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(c)          Outstanding Loans. Effective as of the date hereof, the parties
acknowledge and agree that the Executive has repaid the Company and satisfied in
full all previously outstanding loans that the Company made to the Executive in
an aggregate principal amount equal to $9,820,078, pursuant to Promissory Notes
dated September 22, 1999, March 22, 2000 and September 30, 2004, and a loan to
NFC under the 1997 services agreement.

 

(d)          Harmonized Sales Tax. The Parties acknowledge that certain services
may be provided in Canada and to the extent these services are provided in
Canada, they will be paid to NFC. To the extent that the services to be provided
hereunder are rendered in Canada, the Company shall pay to NFC harmonized sales
tax (“HST”) in connection with all payments received by NFC hereunder for such
services and shall be responsible for the payment to the applicable taxing
authority in Canada, any tax imposed on an employer to the extent of such
services. In the event that the Company is required to pay to NFC taxes other
than HST pursuant to this Section 4(d), NFC shall indemnify the Company for the
amount of such other taxes to the extent that the Company would not be obliged
to pay such other taxes if the services provided by NFC pursuant to this
Agreement were provided to the Company by an employee of the Company who is paid
a salary equal to the relevant amounts paid to NFC hereunder and to the extent
that the Company is not entitled to an input tax credit arising therefrom.

 

(e)           Additional Management Incentive Payment Opportunity. The Company
shall provide to NML (or, at the option of NML, the Executive or NML’s
successor) a management incentive payment in an amount equal to Cdn $10 million
upon the first to occur of (i) the average market price per share of MDC
Partners’ Class A Subordinate Voting shares exceeding Cdn $30 per share during
any twenty consecutive trading days (measured as of the close of trading on each
applicable date); or (ii) a Change of Control (as defined in Section 7 of this
Agreement). Notwithstanding the foregoing, such incentive payment shall only be
provided if one of the foregoing occurs either (i) during the Term or (ii)
within three years following the expiration or other termination of the Term for
any reason, whether by death, retirement, resignation or termination by the
Company.

 

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5.          Long-Term Incentives

 

NML shall be eligible to receive awards of stock options, stock appreciation
rights, restricted stock, stock units and/or other awards of equity incentives
with respect to shares of the Company’s common stock (or an equivalent amount in
cash) as determined by the Compensation Committee, pursuant to the terms of the
Company’s equity incentive plans as in effect from time to time (“Long-Term
Incentives”). For each calendar year during the Term, NML may receive an annual
grant of Long-Term Incentives with a targeted grant-date value of up to 300% of
the then-current Annual Retainer Fee, in the discretion of the Compensation
Committee. The determination of the grant-date value for this purposes shall be
based upon such reasonable valuation assumptions adopted by the Compensation
Committee consistent with the then-applicable standards utilized by the Company
under FAS 123, or any successor accounting standard for stock-based
compensation. The particular types of Long-Term Incentives to be awarded and the
terms and conditions thereof shall be determined by the Compensation Committee
in its discretion. In general, it is intended that the Equity Incentive would
become vested and/or exercisable based approximately one-third (1/3) on the
continued service of NML and the Executive, and approximately two-thirds (2/3)
on the continued service of NML and the Executive and the achievement of
corporate performance goals to be established by the Compensation Committee,
provided, however, that the Compensation Committee shall have the discretion to
pay all or a portion of the Long-Term Incentives in cash.

 

6.          Benefits and Expenses

 

(a)          Benefit Payments. For each calendar year during the Term, the
Company shall pay to NML the amount of $500,000 in respect of all employee
benefits and perquisites to be provided by NML to the Executive, which amount
represents the costs of the Company in respect of pension benefits, welfare
benefits (including medical, life and disability insurance) and other fringe
benefits and perquisites (including automobile allowance and club memberships)
which shall be provided to the Executive by NML. Such amount shall be paid by
the Company on a quarterly basis in arrears, and shall be prorated for any
partial calendar year period during the Term. The Executive shall not be
entitled to participation or coverage under any employee pension, welfare or
fringe benefit plan or insurance benefit provided by the Company to its
employees and all such coverage shall be provided to the Executive by NML.

 

(b)          Business Expenses. The Company agrees to pay or to reimburse NML
for all reasonable, ordinary, necessary and documented business expenses
incurred during the Term in the performance of its services hereunder in
accordance with the policy of the Company as from time to time in effect. NML
shall provide to the Company any and all statements, bills or receipts
evidencing the travel or out-of-pocket expenses for which it seeks payment or
reimbursement, and any other information or materials, as the Company may from
time to time reasonably require. Such reimbursement shall be made within 30 days
after submission of such information.

 

7.          Termination

 

(a)            Termination for Cause. The Company, by direction of the Board,
shall be entitled to terminate the services of NML and NFC and the Executive
hereunder and the Term hereof for “Cause” upon the giving of written notice to
NML and the Executive. For purposes of this Agreement, the term “Cause” shall
mean:

 

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(i)          the material failure by NML or NFC to cause the services of the
Executive to be provided in accordance with Section 2 hereof;

 

(ii)         the Executive's willful failure or refusal to materially perform
his duties and responsibilities to the Company as set forth in Section 3 hereof
(other than as a result of a Disability pursuant to Section 7(d) hereof), or to
abide by the reasonable directives of the Board, in each case if such failure or
refusal is not cured (if curable) within 15 days after written notice thereof by
the Company;

 

(iii)         the willful fraud or material dishonesty of the Executive in
connection with his position or the performance of duties to the Company
(including any misappropriation of the funds or property of the Company), or the
willful misconduct of the Executive in connection with his position or the
performance his performance of duties to the Company;

 

(iv)         the conviction of Executive in a court of law of, or entering by
the Executive of a plea of guilty or no contest to, any felony or any crime
involving material dishonesty or theft;

 

(v)         willful failure by the Executive to cooperate as directed by the
Board with a bona fide Company internal investigation or an investigation of the
Company by governmental, regulatory or law enforcement authorities, if such
breach is not cured (if curable) within 15 days after written notice thereof to
the Executive by the Company;

 

(vi)        the resignation or other termination of the Executive as the Chief
Executive Officer of the Company if at the request or instruction of any
governmental, regulatory or law enforcement authority; and

 

(vii)        any material breach by NML or the Executive of Section 9 hereof, if
such breach is not cured (if curable) within 15 days after written notice
thereof to the Executive by the Company.

 

Any notice required to be given by the Company pursuant to this Section 7(a)
shall specify the nature of the circumstance alleged to constitute Cause and the
provisions of this Agreement relied upon, and shall specify the Date of
Termination, which shall not be less than 30 days following the date of such
notice. Any termination for Cause shall be effected by a resolution of the 2/3
of the members of the Board, excluding Executive. Prior to the effectiveness of
any such termination, Executive shall be afforded an opportunity to meet with
the Board, upon reasonable notice under the circumstances, and explain and
defend any action or omission alleged to constitute grounds for a termination
for Cause; provided that, the Board may suspend Executive from his duties
hereunder prior to such opportunity and such suspension shall not constitute a
breach of this Agreement by the Company or otherwise form the basis for a
termination for Good Reason.

 

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(b)            Termination for Good Reason. Provided that a Cause event has not
occurred, NML shall be entitled to terminate the services of NML and the
Executive hereunder and the Term hereof for “Good Reason” effective upon the
giving of written notice to the Company within 180 days following the occurrence
of the event constituting Good Reason. For purposes of this Agreement, “Good
Reason” shall mean the occurrence of one of the following, without the prior
written consent of the Executive:

 

(i) a material diminution of the Executive’s position or authority as set forth
in Section 3 hereof, which breach remains uncured (if curable) for a period of
15 days after written notice of such breach to the Company;

 

(ii) the Company’s material breach of the compensation and benefits provisions
of Sections 4, 5 or 6 hereof, which breach remains uncured (if curable) for a
period of 15 days after written notice of such breach to the Company;

 

(iii) a notice of non-renewal of this Agreement given by the Company pursuant to
Section 1 hereof; and

 

(iv) following a Change in Control (as defined below), the Executive not holding
the position of chief executive officer of the ultimate parent corporation or
other controlling entity resulting from the Change in Control transaction.

 

Any notice required to be given by the Executive pursuant to this Section 7(b)
shall specify the nature of the circumstance alleged to constitute Good Reason
and the provisions of this Agreement relied upon, and shall specify the Date of
Termination, which shall not be less than 30 days following the date of such
notice.

 

For the purposes of this Agreement, a “Change of Control” shall have the meaning
provided in Section 2(b) of the Company’s 2011 Stock Incentive Plan, as in
effect on the Effective Date.

 

(c)            Termination by Company without Cause. The Company, by direction
of the Board, shall have the right at any time during the Term to terminate the
services of NML and the Executive hereunder and the Term hereof without Cause by
giving 60-days advance written notice to NML and the Executive, subject to the
provisions of Section 8 hereof.

 

(d)          Termination by NML without Good Reason. NML shall have the right at
any time during the Term to terminate the services of NML and the Executive
hereunder and the Term hereof without Good Reason by giving 60-days advance
written notice to the Company.

 

(e)          Termination for Death or Disability. The services of NML and the
Executive hereunder and the Term hereof shall automatically terminate in the
event of the Executive's death of “Disability.” For purposes hereof, the term
“Disability” shall mean that the Executive shall be unable to perform his duties
hereunder by virtue of illness or physical or mental incapacity or disability
(from any cause or causes whatsoever) for periods aggregating 180 days, whether
or not continuous, in any continuous period of 360 days. The Company shall have
the right to terminate the Agreement hereunder as at the end of any calendar
month during the continuance of such Disability upon at least 30 days' prior
written notice to NML and the Executive.

 

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8.          Termination Payments and Benefits

 

(a)         Termination for Cause; without Good Reason; Death or Disability. In
the event of the termination of the Term hereof (1) by the Company for Cause
pursuant to Section 7(a) hereof; (2) by NML without Good Reason pursuant to
Section 7(d) hereof; or (3) by reason of death or Disability of the Executive
pursuant to Section 7(e) hereof, then NML shall be entitled to the following
(together, the “Accrued Rights”):

 

(i)          unpaid Annual Retainer Fee through the Date of Termination, and any
unpaid reimbursable expenses outstanding as of, the Date of Termination; and

 

(ii)         all Long-Term Incentives in accordance with the terms of the
applicable plans and award agreements to which the awards are subject.

 

In the event of termination of the Agreement in the circumstances described in
this Section 8(a), except as expressly provided in this Section, the Company
shall have no further liability to NML, the Executive or the Executive's heirs,
beneficiaries or estate for damages, compensation, benefits, severance or other
amounts of whatever nature, directly or indirectly, arising out of or otherwise
related to this Agreement, other than any indemnification obligations under the
Company’s by-laws.

 

(b)            Termination without Cause; for Good Reason. In the event of a
termination of the Term hereof (1) by the Company without Cause pursuant to
Section 7(c) hereof; or (2) by NML for Good Reason pursuant to Section 7(b)
hereof, then NML shall be entitled to the following payments and benefits:

 

(i)the Accrued Rights as provided in Section 8(a) hereof;

 

(ii)the Annual Incentive with respect to any completed calendar year prior to
the Date of Termination, when otherwise payable to the Company’s senior
executives generally, but only to the extent earned in accordance with the terms
of the Annual Incentive and approved by the Compensation Committee but not
already paid (the “Accrued Incentive”);

 

(iii)a pro-rata portion of the Annual Incentive with respect to the calendar
year in which the Date of Termination occurs, with such pro-rata amount to be
equal to the product of (A) the average of the Annual Incentive amounts paid to
the Executive pursuant to Section 4(b) hereof for the three (3) calendar years
ending immediately preceding the Date of Termination (the “Average Incentive
Amount”), times (B) a fraction, (x) the numerator of which is the number of
calendar days from January 1 until the Date of Termination, and (y) the
denominator of which is 365;

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(iv)a severance payment in an amount equal to the product of 3.0 multiplied by
the sum of (A) the amount of then-current Annual Retainer Fee, plus (B) the
Average Incentive Amount (the “Termination Payment”). The Termination Payment
(less applicable withholding taxes), shall be paid to NML in a cash lump-sum not
later than 60 days following the Date of Termination, subject to the
requirements of Section 8(d) hereof (provided that if such 60 day period
straddles two calendar years, then the Termination Payment shall be made during
the portion of such 60 day period that is within the second calendar year);

 

(v)an additional lump-sum cash payment of $1,500,000, which represents the
product of 3.0 multiplied by the benefit payment amount under Section 6(a)
hereof; and

 

(vi)any Long-Term Incentives granted to NML on or following the date of the
Prior Agreement shall continue to vest and become exercisable and payable (as
applicable) until the third anniversary of the Date of Termination on the same
basis as if the Term of this Agreement had remained in effect until such
anniversary date, notwithstanding the cessation of the Executive’s service with
the Company, including any requirements for performance-based vesting relating
to Company business or financial performance (but not individual performance
following the date of the Prior Agreement).

 

In the event of termination of this Agreement in the circumstances described in
this Section 8(b), except as expressly provided in this Section, the Company
shall have no further liability to NML, the Executive or the Executive’s heirs,
beneficiaries or estate for damages, compensation, benefits, severance or other
amounts of whatever nature, directly or indirectly, arising out of or otherwise
related to this Agreement, other than any indemnification obligations under the
Company’s by-laws.

 

(c)            Termination by Reason of Death or Disability. In the event of a
termination of the Term hereof by reason of death or Disability pursuant to
Section 7(e) hereof, then (i) NML shall be entitled to payment of the Accrued
Rights and the Accrued Incentive, and (ii) the Executive shall be entitled to
any insurance benefits pursuant to the life and disability insurance coverages
provided by NML pursuant to Section 6(a) hereof.

 

(d)          Conditions to Payments; No Mitigation. The termination payments and
benefits provided under this Section 8(b) shall be conditioned upon NML and the
Executive signing and not revoking the mutual waiver and release substantially
in the form attached hereto as Exhibit B within 45 days following the Date of
Termination, subject to the Company signing such mutual waiver and release. In
the event of a breach by the Executive or NML of the restrictive covenants of
Section 9 of this Agreement, in addition to any other remedies at law or in
equity available to it, the Company may cease making any further payments and
providing the other benefits provided for in Section 8(b) hereof, without
affecting its rights under this Agreement. NML and the Executive shall be under
no duty to mitigate any termination payments or benefits provided under this
Section 8(b).

 

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9.          Restrictive Covenants

 

(a)          General.         The parties hereto agree that the covenants given
in this Section 9 are being given incident to the agreements and transactions
described herein, and that such covenants are being given for the benefit of the
Company. During the Term, the Executive has and will continue to develop a
personal relationship with the clients of the Company and a knowledge of those
clients' affairs and requirements, and the relationship of the Company with its
established clientele will therefore be placed in the Executive's hands in
confidence and trust. The Executive consequently agrees that it is a legitimate
interest of the Company, and reasonable and necessary for the protection of the
Confidential Information, goodwill and business of the Company, which is
valuable to the Company, the Executive makes the covenants contained herein and
that the Company would not have entered into this Agreement unless the covenants
set forth in this Section 9 were contained in this Agreement. As used in this
Section 9, the term "Company" shall include any subsidiaries, affiliates, and
agencies of the Company, and the term "client" shall mean anyone who is a
present client of the Company, or an identified prospective client with whom the
Company has taken substantial steps to establish a relationship, as of the Date
of Termination or at any time during the one year period immediately preceding
the Date of Termination. As used in this Section 9, the term “Executive” shall
refer to the Executive and NML, collectively.

 

(b)          Non-Competition. The Executive agrees that, during the Term and
continuing for two (2) years after the Date of Termination pursuant to a
termination of the Term for any reason (the “Restricted Period”), the Executive
shall not, directly or indirectly, as an individual, employee, officer,
consultant, independent contractor, or partner, in association with any other
person, business or enterprise, except on behalf of the Company, directly or
indirectly, engage in or participate in any business that is competitive with
any business that the Company is substantially engaged in during the Term while
employing NML and the Executive, relating to advertising, public relations, or
any other marketing communications or marketing consulting services, unless as
of the Date of Termination the Company has disposed of or has ceased to be
actively engaged in any such business (together, a “Competing Business”), nor
shall the Executive make any investments in any Competing Business (except for
interests in a publicly held corporation of less than 2% of its outstanding
shares). Notwithstanding the foregoing, the Executive shall not be prohibited
from engaging in any business in a separate division or subsidiary that is
affiliated with a Competing Business, provided that Executive has no
responsibilities with respect thereto.

 

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(c)          Non-Solicitation of Employees and Clients. The Executive agrees
that, during the Restricted Period, the Executive shall not, as an individual,
employee, officer consultant, independent contractor, partner, shareholder, or
in association with any other person, business or enterprise, except on behalf
of the Company, directly or indirectly, and regardless of the reason for the
cessation of the Term: (i) attempt in any manner to persuade any client to cease
to do business or to reduce the amount of business which any such client has
customarily done or is reasonably expected to do with the Company, whether or
not the relationship between the Company and such client was originally
established in whole or in part through the Executive’s efforts; or (ii) employ
as an employee or retain as a consultant any person, firm or entity who is then
or at any time during the preceding twelve months was an employee of or
exclusive consultant to the Company, or persuade or attempt to persuade any
employee of or exclusive consultant to the Company to leave the employ of the
Company or to become employed as an employee or retained as a consultant by any
person, firm or entity other than the Company, other than his personal assistant
or secretary.

 

(d)          Confidential Information. During the Term, the Executive will
acquire and have access to confidential or proprietary information about the
Company and/or its clients, including but not limited to, trade secrets,
methods, models, passwords, access to computer files, financial information and
records, computer software programs, agreements and/or contracts between the
Company and its clients, client contacts, client preferences, creative policies
and ideas, advertising campaigns, creative and media materials, graphic design
materials, sales promotions and campaigns, sales presentation materials,
budgets, practices, concepts, strategies, methods of operation, financial or
business projections of the Company and information about or received from
clients and other companies with which the Company does business. The foregoing
shall be collectively referred to as "Confidential Information". The Executive
is aware that the Confidential Information is not readily available to the
public and accordingly, the Executive also agrees that he will not at any time
(whether during the Term or after termination of this Agreement), disclose to
anyone (other than counsel in the course of a dispute arising from the alleged
disclosure of Confidential Information or as required by law) any Confidential
Information, or utilize such Confidential Information for Executive’s own
benefit, or for the benefit of third parties. The term "Confidential
Information" does not include information which (i) is or becomes generally
available to the public other than by breach of this provision or (ii) the
Executive learns from a third party who is not under an obligation of confidence
to the Company or a client of the Company. In the event that the Executive
becomes legally required to disclose any Confidential Information, the Executive
will use reasonable efforts to provide the Company with prompt notice thereof so
that the Company may seek a protective order or other appropriate remedy and/or
waive compliance with the provisions of this Section 9(c) to permit a particular
disclosure. The Executive further agrees that all memoranda, disks, files,
notes, records or other documents, whether in electronic form or hard copy
(collectively, the "Material") compiled by or made available to Executive during
the Term (whether or not the Material constitutes or contains Confidential
Information), and in connection with the performance of Executive’s duties
hereunder, shall be the property of the Company and shall be delivered to the
Company on the termination of the Agreement or at any other time upon request.
Except in connection with Executive’s obligations under the Agreement, the
Executive agrees not to make or retain copies or excerpts of any such Material.
Anything to the contrary notwithstanding, nothing in this Section 9(c) shall
prevent the Executive from retaining a home computer and security system, papers
and other materials of a personal nature, including personal diaries, calendars
and Rolodexes, information relating to the Executive’s compensation or relating
to reimbursement of expenses, information that the Executive reasonably believe
may be needed for tax purposes, and copies of plans, programs and agreements
relating to the Executive’s employment.

 

11

 

 

(e)          Intellectual Property. During the Term, the Executive will disclose
to the Company all ideas, inventions and business plans developed by him during
such period which relate directly or indirectly to the business of the Company,
including without limitation, any design, logo, slogan, advertising campaign or
any process, operation, product or improvement which may be patentable or
copyrightable. The Executive agrees that all patents, licenses, copyrights,
tradenames, trademarks, service marks, planning, marketing and/or creative
policies and ideas, advertising campaigns, promotional campaigns, media
campaigns, budgets, practices, concepts, strategies, methods of operation,
financial or business projections, designs, logos, slogans and business plans
developed or created by the Executive during the Term, either individually or in
collaboration with others, will be deemed works for hire and the sole and
absolute property of the Company. The Executive agrees, that at the Company's
request and expense, the Executive will take all steps necessary to secure the
rights thereto to the Company by patent, copyright or otherwise.

 

(f)          Remedies. If the Executive commits a breach of any of the
provisions of this Sections 9, the Company shall have the right to have the
provisions of this Agreement specifically enforced by any court having
jurisdiction without being required to post bond or other security and without
having to prove the inadequacy of the available remedies at law, it being
acknowledged and agreed that any such breach or threatened breach will cause
irreparable injury to the Company and that money damages will not provide an
adequate remedy to the Company. In addition, the Company may take all such other
actions and remedies available to it under law or in equity and shall be
entitled to such actual damages as it can show it has sustained by reason of
such breach.

 

(g)          Acknowledgements. The parties acknowledge that the type and periods
of restriction imposed in the provisions of this Section 9 are fair and
reasonable and are reasonably required in order to protect and maintain the
proprietary interests of the Company described above, other legitimate business
interests and the goodwill associated with the business of the Company. If any
of the covenants contained in this Section 9, or any part thereof, is held to be
unenforceable by reason of it extending for too great a period of time or over
too great a geographic area or by reason of it being too extensive in any other
respect, the parties agree (x) such covenant shall be interpreted to extend only
over the maximum period of time for which it may be enforceable and/or over the
maximum geographic areas as to which it may be enforceable and/or over the
maximum extent in all other respects as to which it may be enforceable, all as
determined by the court or arbitration panel making such determination and (y)
in its reduced form, such covenant shall then be enforceable, but such reduced
form of covenant shall only apply with respect to the operation of such covenant
in the particular jurisdiction in or for which such adjudication is made. Each
of the covenants and agreements contained in this Section 9 (collectively, the
"Restrictive Covenants") is separate, distinct and severable. The existence of
any claim, demand, action or cause of action of the Executive against the
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of each Restrictive Covenant. The
unenforceability of any Restrictive Covenant shall not affect the validity or
enforceability of any other Restrictive Covenant or any other provision or
provisions of this Agreement. The temporal duration of the Restrictive Covenants
set forth in this Agreement shall not expire, and shall be tolled, during any
period in which the Executive is in violation of any of the Restrictive
Covenants set forth herein, and all restrictions shall automatically be extended
by the period of the Executive's violation of any such restrictions.

 

12

 

 

10.         Enforceability

 

The failure of any party at any time to require performance by another party of
any provision hereunder shall in no way affect the right of that party
thereafter to enforce the same, nor shall it affect any other party's right to
enforce the same, or to enforce any of the other provisions in this Agreement;
nor shall the waiver by any party of the breach of any provision hereof be taken
or held to be a waiver of any subsequent breach of such provision or as a waiver
of the provision itself.

 

11.         Assignment

 

The Company, NML and the Executive agree that the Company shall have the right
to assign this Agreement in connection with any asset assignment of all or
substantially all of the Company’s assets, stock sale, merger, consolidation or
other corporate reorganization involving the Company and, accordingly, this
Agreement shall inure to the benefit of, be binding upon and may be enforced by,
any and all successors and such assigns of the Company. The Company, NML and
Executive agree that NML shall have the right to delegate all or a portion of
its right and obligation to provide Executive’s services to the Company
hereunder to another company controlled by Executive, with the prior consent of
the Company (which consent shall not be unreasonably withheld), provided that
the Executive continues to provide the services required under Section 3 hereof,
and provided further that the Executive shall not have the right to assign or
otherwise transfer his rights or obligations under this Agreement, and any
purported assignment or transfer shall be void and ineffective. The rights and
obligations of the Company and of NML hereunder shall be binding upon and run in
favor of the successors and permitted assigns of the Company and NML,
respectively.

 

12.         Modification

 

This Agreement may not be orally canceled, changed, modified or amended, and no
cancellation, change, modification or amendment shall be effective or binding,
unless in writing and signed by the parties to this Agreement, and approved in
writing by the Board.

 

13.         Severability; Survival

 

In the event any provision or portion of this Agreement is determined to be
invalid or unenforceable for any reason, in whole or in part, the remaining
provisions of this Agreement shall nevertheless be binding upon the parties with
the same effect as though the invalid or unenforceable part had been severed and
deleted or reformed to be enforceable. The respective rights and obligations of
the parties hereunder shall survive the termination of this Agreement to the
extent necessary to the intended preservation of such rights and obligations,
specifically Sections 8 through 25 hereof.

 

13

 

 

14.         Notice

 

Any notice, request, instruction or other document to be given hereunder by any
party hereto to another party shall be in writing and shall be deemed effective
(a) upon personal delivery, if delivered by hand, or (b) three days after the
date of deposit in the mails, postage prepaid if mailed by certified or
registered mail, or (c) on the next business day, if sent by prepaid overnight
courier service or facsimile transmission (if electronically confirmed), and in
each case, addressed as follows:

 

If to NML or NFC:

 

c/o Aird & Berlis

181 Bay Street, Suite 1800

Toronto, ON M5J2T9

Canada

(attn: Jack Bernstein)

 

If to the Executive:

Miles S. Nadal

PO Box N-1991, Paradise Island

Nassau, Bahamas

 

If to the Company:

 

c/o MDC Partners Inc.

745 Fifth Avenue

New York, NY 10151

Attention: General Counsel

Fax: (212) 937-4365

 

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

 

15.         Applicable Law

 

This Agreement shall be governed by, enforced under, and construed in accordance
with the laws of the state of New York and the federal laws of the United States
applicable therein.

 

16.         No Conflict

 

NML and the Executive represents and warrants that neither is subject to any
agreement, instrument, order, judgment or decree of any kind, or any other
restrictive agreement of any character, which would prevent either such party
from entering into this Agreement or which would be breached by either such
party upon the performance of their duties pursuant to this Agreement.

 

14

 

 

17.         Entire Agreement

 

This Agreement represents the entire agreement between the Company, NML, NFC and
the Executive with respect to the provision of services of NML, NFC and the
Executive to the Company, and all prior agreements with respect thereto,
including, without limitation, the Prior Agreement, shall be nullified and
superseded hereby except to the extent provided for herein.

 

18.         Arbitration

 

Any controversy, dispute, or claim arising out of, in connection with, or in
relation to, the interpretation, performance or breach of this Agreement,
including, without limitation, the validity, scope, and enforceability of this
section, may at the election of any party, be solely and finally settled by
arbitration conducted in the City of New York, New York, by and in accordance
with the with the Expedited Procedures of the Commercial Arbitration Rules of
the American Arbitration Association, or any successor organization, then in
effect (collectively, the "Rules"). Each of the parties hereto agrees that such
arbitration shall be conducted by a single arbitrator selected in accordance
with the Rules; provided that such arbitrator shall be experienced in deciding
cases concerning the matter which is the subject of the dispute. Any of the
parties may demand arbitration by written notice to the other and to the
Arbitrator set forth in this Section 19(b) ("Demand for Arbitration"). Each of
the parties agrees that if possible, the award shall be made in writing no more
than 30 days following the end of the proceeding. Any award rendered by the
arbitrator(s) shall be final and binding and judgment may be entered on it in
any court of competent jurisdiction. Each of the parties hereto agrees to treat
as confidential the results of any arbitration (including, without limitation,
any findings of fact and/or law made by the arbitrator) and not to disclose such
results to any unauthorized person. The parties intend that this agreement to
arbitrate be valid, enforceable and irrevocable. In the event of any arbitration
with regard to this Agreement, each party shall pay its own legal fees and
expenses, provided, however, that the parties agree to share the cost of the
Arbitrator’s fees. If NML or the Executive substantially prevails in any such
arbitration, then the Company shall pay all legal fees incurred by NML and the
Executive to arbitrate the dispute, and all arbitration fees.

 

19.         Headings

 

The headings contained in this Agreement are for reference purposes only, and
shall not affect the meaning or interpretation of this Agreement.

 

20.         Tax Withholding and Reporting; Currency

 

With respect to any rights, payments or benefits to or on behalf of NML of the
Executive under this Agreement, the Company shall comply with applicable tax
reporting and tax withholding obligations as it deems appropriate, and shall
have the right to withhold or deduct from any such amounts hereunder such
federal, state or local taxes as it shall determine are required to be withheld
pursuant to any applicable law or regulation, including the laws of the United
States and Canada and their respective subdivisions. Except as otherwise
provided herein, all dollar amounts referred to in this Agreement are
denominated in United States currency.

 

15

 

 

21.         409A Compliance

 

This Agreement is intended to comply, to the extent applicable, with Section
409A of the Internal Revenue Code of 1986, as amended (the “Code”) and will be
so interpreted. For purposes of this Agreement, a termination of Executive’s,
NML’s and NFC’s services on the Date of Termination shall be determined in a
manner consistent with the rules relating to “separation from service” within
the meaning of Section 409A of the Code and the regulations thereunder.
Notwithstanding anything herein to the contrary, (i) if on the Date of
Termination Executive is a “specified employee” as defined in Section 409A of
the Code, and the deferral of the commencement of any payments or benefits
otherwise payable hereunder as a result of such termination the Agreement is
necessary in order to prevent the imposition of any accelerated or additional
tax under Section 409A of the Code, then the Company will (A) defer the
commencement of the payment of any such payments or benefits hereunder (without
any reduction in such payments or benefits ultimately paid or provided to
Executive) until the date that is six months following the Date of Termination
(or the earliest date as is permitted under Section 409A of the Code), and (B)
add to such payment or benefit an interest payment for the six-month period
calculated using the short-term Applicable Federal Rate (monthly compounded) as
in effect on the date of termination under Section 1274(d) of the Internal
Revenue Code and (ii) if any other payments of money or other benefits due to
NML or the Executive hereunder could cause the application of an accelerated or
additional tax under Section 409A of the Code, the parties agree to restructure
the payments or benefits to comply with Section 409A of the Code in a manner
which does not diminish the value of such payments and benefits to NML or the
Executive. To the extent any reimbursements or in-kind benefits due to NML or
the Executive under this Agreement constitute “deferred compensation” under
Section 409A of the Code, any such reimbursements or in-kind benefits shall be
paid in a manner consistent with Treas. Reg. Section 1.409A-3(i)(1)(iv). If
under this Agreement, an amount is paid in two or more installments, each
installment shall be treated as a “separate payment” within the meaning of 409A
of the Code.

 

22.         Section 280G Provision. NML and the Executive shall be entitled to
the rights provided under Exhibit C of this Agreement.

 

23.         Counterparts

 

This Agreement may be executed in two counterparts or by facsimile transmission,
both of which taken together shall constitute one instrument.

 

24.         No Strict Construction

 

The language used in this Agreement will be deemed to be the language chosen by
the Company, NML, NFC and the Executive to express their mutual intent, and no
rule of law or contract interpretation that provides that in the case of
ambiguity or uncertainty a provision should be construed against the draftsman
will be applied against any party hereto.

 

*                      *                      *                      *                      *

 

16

 

 

IN WITNESS WHEREOF, the parties have executed this Management Services Agreement
as of the day and year first above written.

 

  MDC Partners Inc.             By:         Name:       Title:             Nadal
Management Limited             By:         Name:       Title:             Miles
Nadal                       Miles Nadal             Nadal Financial Corporation
    (solely for purposes of Sections 2, 3(a), 4(d) and 17 hereof)           By:
        Name:       Title:  

  

17

 

 

Exhibit A to Management Services Agreement

 

LIST OF COMPANIES

 

The Companies for which Executive currently is an investor in, as of the
Effective Date, are as follows:

 

Peerage Capital Fund – Founder – limited partner

Peerage Capital Group – Founder – general partner

Trapeze – Media Inc. – founding investor and shareholder

Peerage Realty and related entities

Artemis Investment Management Limited and all related entities

  

18

 

 

Exhibit B to Management Services Agreement

 

MUTUAL RELEASE OF CLAIMS AND COVENANT NOT TO SUE

 

This MUTUAL RELEASE OF CLAIMS AND COVENANT NOT TO SUE is executed and delivered
(A) by MILES NADAL (“Executive”), Nadal MANAGEMENT Limited (“NML”) and NADAL
FINANCIAL CORPORATION (“NFC”) (NML and NFC referred to collectively herein as
“NML/NFC”) to MDC PARTNERS INC. (the “Company”), and (B) by the COMPANY to
EXECUTIVE and NML/NFC.

 

In consideration of mutual payments, rights and benefits provided under the
Management Services Agreement between Executive, NML/NFC and the Company, dated
___, 2013 (the “Management Services Agreement”), Executive, NML/NFC and the
Company hereby agree as follows:

 

Section 1. Severance Benefit. Executive and NML/NFC specifically acknowledge and
agrees that all payments and benefits pursuant to Section 8 of the Management
Services Agreement are in full satisfaction of all amounts due to Executive and
NML/NFC as severance pay or benefits from the Company or its affiliates. Without
limiting the generality of Section 2 below, Executive and NML/NFC voluntarily
release and waive any and all rights that Executive or NML/NFC may have or may
have had under the Management Services Agreement or to any other severance pay
or benefits from the Company or any of its affiliates.

 

Section 2. Release and Covenant by the Executive and NML/NFC. NML/NFC and
Executive each voluntarily release and forever discharges the Company and its
affiliates, their respective officers, employees, agents, stockholders,
successors and assigns (both individually and in their official capacities with
the Company and its affiliates) (together, “Releasees”) from, and covenants not
to sue or proceed against any of the foregoing on the basis of, any and all past
or present causes of action, suits, agreements or other claims which Executive,
NML/NFC, and their respective dependents, relatives, heirs, executors,
administrators, successors and assigns has or have against Releasees on their
behalf upon or by reason of any matter arising out of the Management Services
Agreement, and including, but not limited to, any alleged violation of the Civil
Rights Acts of 1964 and 1991, the Equal Pay Act of 1963, the Age Discrimination
in Employment Act of 1967, the Rehabilitation Act of 1973, the Older Workers
Benefit Protection Act of 1990, the Americans with Disabilities Act of 1990, the
Family and Medical Leave Act of 1993, and any other federal or state law,
regulation or ordinance, or public policy, contract or tort law, having any
bearing whatsoever on the terms and conditions or cessation of the Management
Services Agreement. Except as expressly stated herein, this release shall not,
however, constitute a waiver of any of NML/NFC’s rights under the Management
Services Agreement (including without limitation, any right to indemnification).

 

19

 

 

Section 3. Release and Covenant by the Company. In exchange for NML/NFC and
Executive’s promises in this Mutual Release, Company agrees to make the all
payments and benefits pursuant to Section 8 of the Management Services Agreement
on the terms and conditions described therein. In consideration of NML/NFC and
Executive's agreements and covenants in this Mutual Release, the Company, on
behalf of the Releasees, forever releases and waives any and all claims, counts,
causes of action and demands of any kind or nature for money or anything else,
whether such claims are known or unknown, against NML/NFC and Executive, that
arose prior to NML/NFC and Executive’s signing of this Mutual Release or that
relate in any way to the Management Services Agreement or the Executive’s
performance thereunder, except for claims, demands, actions or causes of actions
arising out of or relating to (i) the Loans (as defined in the Management
Service Agreement) or any other debt or credit obligations of NML/NFC or the
Executive or their respective affiliates to the Releasees, (ii) acts or
omissions that only become known to the Company after the date of this Mutual
Release and that involve intentional gross misconduct with respect to the
Company, (iii) any claims arising out of actions taken by NML/NFC or the
Executive after the date of this Mutual Release or (iv) any of the Company’s
rights under the Management Services Agreement.

 

Section 4. Due Care. NML/NFC and Executive acknowledge that NML/NFC and
Executive have received a copy of this Mutual Release prior to its execution and
has been advised hereby of their opportunity to review and consider this Release
for [21 or 45 days - as applicable under ADEA] prior to its execution. NML/NFC
and Executive are hereby advised and acknowledges that they have been advised to
consult with an attorney prior to executing this Mutual Release. NML/NFC and
Executive enter into this Mutual Release having freely and knowingly elected,
after due consideration, to execute this Release and to fulfill the promises set
forth herein. This Mutual Release shall be revocable by NML/NFC and Executive
during the 7-day period following its execution, and shall not become effective
or enforceable until the expiration of such 7-day period.

 

Section 5. Reliance by Executive, NML/NFC and Company. NML/NFC and Executive
acknowledge that, in NML/NFC and Executive’s decision to enter into this Mutual
Release, NML/NFC and Executive have not relied on any representations, promises
or agreements of any kind, including oral statements by representatives of the
Company, except as set forth in this Mutual Release. The Company acknowledges
that, in its decision to enter into this Mutual Release, the Company had not
relied on any representations, promises or agreements of any kind, including
oral statements by the Executive, except as set forth in this Mutual Release.

 

20

 

 

This MUTUAL RELEASE OF CLAIMS AND COVENANT NOT TO SUE is executed by Executive,
NML/NFC and the Company on _________________.

 

  MDC Partners Inc.             By:         Name:       Title:             Nadal
Management Limited             By:         Name:       Title:             Nadal
Financial Corporation             By:         Name:       Title:  

 

21

 

 

Exhibit C to Management Services Agreement

 

EXCISE TAX GROSS UP

 

A.           Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any Payment
would be subject to the Excise Tax, then NML shall be entitled to receive an
additional payment (the “Gross-Up Payment”) in an amount such that, after
payment by NML of all taxes (and any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, NML retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions
of this Section A of Exhibit C, if it shall be determined that NML is entitled
to the Gross-Up Payment, but that the Parachute Value of all Payments does not
exceed 110% of the Safe Harbor Amount, then no Gross-Up Payment shall be made to
NML and the amounts payable under this Agreement shall be reduced so that the
Parachute Value of all Payments, in the aggregate, equals the Safe Harbor
Amount. The reduction of the amounts payable hereunder, if applicable, shall be
made by first reducing the payments under Section 8(b), unless (to the extent
permissible under Section 21 of the Agreement) an alternative method of
reduction is elected by NML, and in any event shall be made in such a manner as
to maximize the Value of all Payments actually made to NML. For purposes of
reducing the Payments to the Safe Harbor Amount, only amounts payable under this
Agreement (and no other Payments) shall be reduced. If the reduction of the
amount payable under this Agreement would not result in a reduction of the
Parachute Value of all Payments to the Safe Harbor Amount, no amounts payable
under the Agreement shall be reduced pursuant to this Section A of Exhibit C.

 

B.           Subject to the provisions of Section C of Exhibit C, all
determinations required to be made under this Exhibit C, including whether and
when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by a
nationally recognized certified public accounting firm to be designated jointly
by the Company and NML (the “Accounting Firm”). The Accounting Firm shall
provide detailed supporting calculations to the Company and NML within 15
business days of the receipt of notice from NML that there has been a Payment or
such earlier time as is requested by the Company. All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Exhibit C, shall be paid by the Company to NML
within 5 days of the receipt of the Accounting Firm’s determination. Any
determination by the Accounting Firm shall be binding upon the Company, NML and
the Executive. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments that will not have been made by
the Company should have been made (the “Underpayment”), consistent with the
calculations required to be made hereunder. In the event the Company exhausts
its remedies pursuant to Section C of Exhibit C and NML thereafter is required
to make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of NML .

 

22

 

 

C.           NML shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable, but no later than 10 business days after NML is informed in writing
of such claim. NML shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. NML shall not pay such claim
prior to the expiration of the 30-day period following the date on which NML
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
NML in writing prior to the expiration of such period that the Company desires
to contest such claim, NML shall:

 

a.           give the Company any information reasonably requested by the
Company relating to such claim,

 

b.           take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,

 

c.           cooperate with the Company in good faith in order effectively to
contest such claim, and

 

d.           permit the Company to participate in any proceedings relating to
such claim;

 

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold NML harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest and penalties)
imposed as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section C of Exhibit C,
the Company shall control all proceedings taken in connection with such contest,
and, at its sole discretion, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the applicable taxing
authority in respect of such claim and may, at its sole discretion, either pay
the tax claimed to the appropriate taxing authority on behalf of NML and direct
NML to sue for a refund or contest the claim in any permissible manner, and NML
agrees to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that, if the Company
pays such claim and directs NML to sue for a refund, the Company shall indemnify
and hold NML harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties) imposed with respect to such payment or with
respect to any imputed income in connection with such payment; and provided,
further, that any extension of the statute of limitations relating to payment of
taxes for the taxable year of NML with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Company’s control of the contest shall be limited to issues with respect to
which the Gross-Up Payment would be payable hereunder, and NML shall be entitled
to settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.

 

23

 

 

D.           If, after the receipt by NML of a Gross-Up Payment or payment by
the Company of an amount on NML’s behalf pursuant to Section C of Exhibit C, NML
becomes entitled to receive any refund with respect to the Excise Tax to which
such Gross-Up Payment relates or with respect to such claim, NML shall (subject
to the Company’s complying with the requirements of Section C of Exhibit C, if
applicable) promptly pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable thereto). If, after
payment by the Company of an amount on NML’s behalf pursuant to Section C of
Exhibit C, a determination is made that NML shall not be entitled to any refund
with respect to such claim and the Company does not notify NML in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then the amount of such payment shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.

 

E.           Notwithstanding any other provision of this Exhibit C, the Company
may, in its sole discretion, withhold and pay over to the Internal Revenue
Service or any other applicable taxing authority, for the benefit of NML, all or
any portion of any Gross-Up Payment, and NML hereby consents to such
withholding.

 

F.           Definitions. The following terms shall have the following meanings
for purposes of this Exhibit C.

 

(i)          “Excise Tax” shall mean the excise tax imposed by Section 4999 of
the Code, together with any interest or penalties imposed with respect to such
excise tax.

 

(ii)          “Parachute Value” of a Payment shall mean the present value as of
the date of the change of control for purposes of Section 280G of the Code of
the portion of such Payment that constitutes a “parachute payment” under Section
280G(b)(2), as determined by the Accounting Firm for purposes of determining
whether and to what extent the Excise Tax will apply to such Payment.

 

(iii)        A “Payment” shall mean any payment or distribution in the nature of
compensation (within the meaning of Section 280G(b)(2) of the Code) to or for
the benefit of NML, whether paid or payable pursuant to this Agreement or
otherwise.

 

(iv)         The “Safe Harbor Amount” means 2.99 times the “base amount,” within
the meaning of Section 280G(b)(3) of the Code.

 

(v)          “Value” of a Payment shall mean the economic present value of a
Payment as of the date of the change of control for purposes of Section 280G of
the Code, as determined by the Accounting Firm using the discount rate required
by Section 280G(d)(4) of the Code.

 

24