Document:

Exhibit
10.40

 

EXECUTION
COPY

 

 

 

ASSET
PURCHASE AGREEMENT

 

between:

 

Discovery
Partners International, INC.,

a
Delaware corporation;

 

and

 

IRORI
DISCOVERY, INC.,

a
California corporation

 

 

Effective
as of October 7, 2005

 

 

 

 

 

	
  TABLE OF CONTENTS

  
	
   

  
	
   

  	
  PAGE

  
	
   

  
	
  1.

  	
  SALE
  OF ASSETS; RELATED TRANSACTIONS

  	
   

  	
  1

  
	
   

  	
  1.1

  	
  Sale
  of Assets

  	
   

  	
  1

  
	
   

  	
  1.2

  	
  Purchase
  Price

  	
   

  	
  1

  
	
   

  	
  1.3

  	
  Purchase
  Price Adjustment

  	
   

  	
  2

  
	
   

  	
  1.4

  	
  Sales
  Taxes

  	
   

  	
  3

  
	
   

  	
  1.5

  	
  Allocation

  	
   

  	
  3

  
	
   

  	
  1.6

  	
  Closing

  	
   

  	
  4

  
	
  2.

  	
  REPRESENTATIONS
  AND WARRANTIES OF THE SELLER

  	
   

  	
  4

  
	
   

  	
  2.1

  	
  Due
  Organization

  	
   

  	
  4

  
	
   

  	
  2.2

  	
  Title
  to Assets

  	
   

  	
  5

  
	
   

  	
  2.3

  	
  Receivables

  	
   

  	
  5

  
	
   

  	
  2.4

  	
  Employee
  And Labor Matters

  	
   

  	
  5

  
	
   

  	
  2.5

  	
  Authority;
  Binding Nature of Agreements

  	
   

  	
  5

  
	
   

  	
  2.6

  	
  Non-Contravention;
  Consents

  	
   

  	
  5

  
	
   

  	
  2.7

  	
  Disclaimer
  of Representations and Warranties

  	
   

  	
  6

  
	
   

  	
  2.8

  	
  Brokers

  	
   

  	
  6

  
	
   

  	
  2.9

  	
  Intellectual
  Property

  	
   

  	
  6

  
	
   

  	
  2.10

  	
  Litigation

  	
   

  	
  9

  
	
   

  	
  2.11

  	
  Taking
  of Necessary Action; Further Action

  	
   

  	
  9

  
	
   

  	
  2.12

  	
  Authority;
  Binding Nature of Agreements

  	
   

  	
  9

  
	
   

  	
  2.13

  	
  Financial
  Statements

  	
   

  	
  10

  
	
  3.

  	
  REPRESENTATIONS
  AND WARRANTIES OF THE PURCHASER

  	
   

  	
  10

  
	
   

  	
  3.1

  	
  Due
  Organization

  	
   

  	
  10

  
	
   

  	
  3.2

  	
  Authority;
  Binding Nature of Agreements

  	
   

  	
  10

  
	
   

  	
  3.3

  	
  Non-Contravention;
  Consents

  	
   

  	
  10

  
	
   

  	
  3.4

  	
  Certain
  Proceedings

  	
   

  	
  11

  
	
   

  	
  3.5

  	
  Brokers

  	
   

  	
  11

  
	
  4.

  	
  CERTAIN
  POST-CLOSING COVENANTS

  	
   

  	
  11

  
	
   

  	
  4.1

  	
  Further
  Actions

  	
   

  	
  11

  
	
   

  	
  4.2

  	
  Employee
  Matters

  	
   

  	
  11

  
	
   

  
	
   

  
	
   

  
																					

 

i

 

 

	
  TABLE OF CONTENTS

  
	
  (CONTINUED)

  
	
   

  	
  PAGE

  
	
   

  
	
   

  	
  4.3

  	
  Regulatory
  Matters and Bulk Sales Laws

  	
   

  	
  11

  
	
   

  	
  4.4

  	
  ARCS
  Technology

  	
   

  	
  12

  
	
   

  	
  4.5

  	
  Kan-Service
  Business

  	
   

  	
  12

  
	
   

  	
  4.6

  	
  License

  	
   

  	
  13

  
	
   

  	
  4.7

  	
  NIH
  Universal Store

  	
   

  	
  14

  
	
   

  	
  4.8

  	
  Compound
  Storage Business

  	
   

  	
  14

  
	
   

  	
  4.9

  	
  Non-Competition
  and Non-Solicitation Agreement

  	
   

  	
  14

  
	
   

  	
  4.10

  	
  Novation
  of Assumed Contracts

  	
   

  	
  15

  
	
   

  	
  4.11

  	
  Publicity

  	
   

  	
  16

  
	
   

  	
  4.12

  	
  Business
  Information

  	
   

  	
  16

  
	
   

  	
  4.13

  	
  Seller's
  Permit

  	
   

  	
  16

  
	
   

  	
  4.14

  	
  Additional
  Covenants

  	
   

  	
  16

  
	
  5.

  	
  MISCELLANEOUS
  PROVISIONS

  	
   

  	
  16

  
	
   

  	
  5.1

  	
  Further
  Assurances

  	
   

  	
  16

  
	
   

  	
  5.2

  	
  Fees
  and Expenses

  	
   

  	
  16

  
	
   

  	
  5.3

  	
  Attorneys'
  Fees

  	
   

  	
  16

  
	
   

  	
  5.4

  	
  Notices

  	
   

  	
  16

  
	
   

  	
  5.5

  	
  Captions

  	
   

  	
  17

  
	
   

  	
  5.6

  	
  Counterparts

  	
   

  	
  17

  
	
   

  	
  5.7

  	
  Governing
  Law

  	
   

  	
  18

  
	
   

  	
  5.8

  	
  Successors
  And Assigns

  	
   

  	
  18

  
	
   

  	
  5.9

  	
  Waiver

  	
   

  	
  18

  
	
   

  	
  5.10

  	
  Amendments

  	
   

  	
  18

  
	
   

  	
  5.11

  	
  Severability

  	
   

  	
  18

  
	
   

  	
  5.12

  	
  Entire
  Agreement

  	
   

  	
  18

  
	
   

  	
  5.13

  	
  Construction

  	
   

  	
  19

  
	
   

  	
  5.14

  	
  Arbitration

  	
   

  	
  19

  
	
   

  	
  5.15

  	
  Limitation
  of Liability

  	
   

  	
  20

  
	
   

  
	
   

  
	
   

  
																					

 

ii

 

ASSET
PURCHASE AGREEMENT

 

                This
Asset Purchase Agreement is entered into as of October 7, 2005 (the
“Effective Date”), by and between: DISCOVERY PARTNERS
INTERNATIONAL, INC., a Delaware corporation (the  “Seller”), and IRORI
DISCOVERY, INC., a California corporation (the “Purchaser”).  Certain capitalized terms used in this
Agreement are defined in Exhibit A.

 

Recitals

 

                The
Seller wishes to provide for the sale of certain of the Seller's assets
relating to the Seller's Discovery Systems Division (the “Business”) to the
Purchaser on the terms set forth in this Agreement.

 

AGREEMENT

 

                The
parties to this Agreement, intending to be legally bound, agree as follows:

 

1.             SALE OF ASSETS; RELATED TRANSACTIONS.

 

                1.1          Sale of Assets. The Seller shall cause to be sold,
assigned, transferred, conveyed and delivered to the Purchaser, at the Closing
(as defined below), good and valid title to the Assets (as defined below), free
of any Encumbrances, on the terms and subject to the conditions set forth in
this Agreement. For purposes of this Agreement, “Assets” shall mean and include
those assets related to the Business identified on Exhibit B; provided,
however, that to the extent that any assets owned by the Seller on the
Effective Date are necessary for the operation of the Business as currently
operated by the Seller are not included on Exhibit B (the “Omitted
Assets” and each an “Omitted Asset” ), the Seller will transfer, or if such
transfer is not practicable, the parties will make good faith efforts to
license or otherwise make generally available to the Purchaser all of such
Omitted Assets, without any payment or other obligations imposed upon the
Purchaser if such payment or other obligation is de minimis.  Notwithstanding the foregoing: (i) the Omitted
Assets shall not include any cash or licenses to commercially available
software unless such software is expressly listed on Exhibit B or is
located on any computer or other equipment transferred to the Purchaser as an
Asset and (ii) the Omitted Assets shall not include any asset of the Seller not
otherwise listed on Exhibit B if such transfer, license or availability
of such Omitted Asset would impair the operations of the Seller.

 

                1.2          Purchase Price.

 

                                (a)           As
consideration for the sale of the Assets to the Purchaser:

 

                                                                                (i)            at the
Closing, the Purchaser shall pay to the Seller, in cash, a total of $1,500,000
(the “Closing Purchase Price”), which amount shall be subject to adjustment
pursuant to Section 1.3; and

 

                                                                                (ii)           at the
Closing, the Purchaser shall assume the Assumed Liabilities by delivering to
the Seller an Assignment and Assumption Agreement in substantially the

 

 

1

 

form of Exhibit C
(the “Assumption Agreement”).  Purchaser
shall not assume any liabilities of Seller pursuant hereto, other than the
Assumed Liabilities.

 

                (b)           For purposes of this Agreement
“Assumed Liabilities” shall mean only the following liabilities of the Seller
(and specifically excluding the liabilities set forth on Schedule
1.2(b)):

 

                                (i)            all accounts payable and
accrued liabilities of the Seller relating to the Business arising after August
31, 2005;

 

                                (ii)           all obligations, duties and
liabilities of the Seller continuing after the Closing under the Contracts
identified on Exhibit D to this Agreement (the “Assumed Contracts”),
which become due and payable or are required to be performed after the Closing
Date, except to the extent arising from any breach or default occurring prior
to the Closing Date;

 

                                (iii)         all liabilities expressly listed or
described on Schedule 1.2(b)(iii);

 

                                (iv)          all
liabilities related to the Assets to the extent arising from or related to any
facts or circumstances occurring after the Closing Date;

 

                                (v)            the
obligations of the Seller for existing and future field service and warranty
expenses and liabilities for all Business products set forth on Schedule 1.2(b)(v) (the “Business Products”), including the Universal Stores sold to the Seller
and Sanofi-Aventis;

 

                                (vi)          the
obligations of the Seller for non-salary marketing of Business Products,
customer sales and support expenses for the Business that relate directly to
the Assets, including, but not limited to, commitments for trade shows;

 

                                (vii)         the obligations of the Seller set forth on Schedule 1.2(b)(vii) for non-salary research and development
expenses for Business Products, including, but not limited to, commitments for
parts and materials, license fees, and consulting services to be used in the
Business that relate directly to the Assets.

 

                1.3          Purchase Price
Adjustment.

 

                                (a)           Within 60
days after the Closing, the Seller shall prepare and deliver to the Purchaser
(i) a balance sheet for the Business as of June 30, 2005, August 31, 2005, and
the Closing Date, (ii) a cash flow statement for the Business for the period
from September 1, 2005 through the Closing Date (collectively, the “Business
Financial Information”), and (iii) a calculation of the Adjusted Purchase
Price.  In the event that the Adjusted
Purchase Price is greater than the Closing Purchase Price, the amount of such
difference shall be paid by Purchaser to Seller.  In the event that the Closing Purchase Price
is greater than the Adjusted Purchase Price, the amount of such difference
shall be paid by the Seller to Purchaser.

 

 

2

 

                                (b)           If within
15 days following delivery of the Business Financial Information and
calculation of Adjusted Purchase Price, the Purchaser has not given the Seller
written notice of its objection to the calculation of Adjusted Purchase Price
(which notice shall state the basis of the Purchaser's objection, such notice
being referred to herein as the “Dispute Notice”), then the calculation of
Adjusted Purchase Price shall be final and binding on the parties, and the
Purchaser or Seller, as the case may be, shall make the payment to the other
party contemplated in Section 1.3(a).

 

                                (c)           If the
Purchaser delivers to the Seller the Dispute Notice, the Purchaser and the
Seller shall attempt to resolve in good faith any disputed items during the
15-day period subsequent to the Seller's receipt of the Dispute Notice.  If, after such 15-day period, the Seller and
the Purchaser cannot resolve such dispute, the unresolved disputed items will
be referred to a nationally-recognized firm of certified public accountants as
the Seller and the Purchaser may designate (the “Accounting Firm”).  Such referral shall be in the form of written
statements of position by the Seller and the Purchaser to the Accounting Firm,
with each party having the opportunity to respond to such written statements
and any requests for statements or information that may be made by the
Accounting Firm.  The Accounting Firm
shall as promptly as practicable (and in any event within 30 days) make a final
determination of the Business Financial Information, which determination shall
be made on the same basis and applying the same accounting principles, policies
and practices that were used in preparing the Financial Statements (as defined
in Section 2.14 below), and calculation of the Adjusted Purchase Price which
shall be final and binding on the parties. 
Each of the Seller and the Purchaser shall provide the Accounting Firm
with all information and documentation that the Accounting Firm reasonably
requests in connection with its review of the disputed items.  The fees and expenses incurred by the
Accounting Firm in conducting the audit of the Business Financial Information
shall be borne (i) by the Purchaser, in the event that the Purchase Price
calculated using the Final Statement is greater than
the Purchase Price as determined using the original Business Financial
Information (the “Original Purchase Price”) by an amount equal to or greater
than five percent (5%) of the Original Purchase Price, (ii) by the Seller, in
the event that the Purchase Price calculated using the Final Statement is less than the Original Purchase Price by an amount equal to
or greater than five percent (5%) of the Original Purchase Price, or (iii) in
all other circumstances, fifty percent (50%) by the Seller and fifty percent
(50%) by the Purchaser.

 

                                (d)           All payments
required to be made in accordance with this Section 1.3 shall be made within
ten days after the calculation of the Adjusted Purchase Price becomes final and
binding on the parties pursuant to this Section 1.3.

 

                1.4          Sales Taxes.  Any
sales taxes, use taxes, transfer taxes, documentary charges, recording fees or similar
taxes, charges, fees or expenses that may become payable in connection with the
sale of the Assets to the Purchaser or in connection with any of the other
Transactions shall be borne by the Purchaser.

 

                1.5          Allocation.  The
parties hereto intend that the purchase of the Assets be treated as a taxable
transaction for federal and state income tax purposes.  Within 60 days of the Closing, the Seller
shall deliver a proposed allocation of the consideration referred to in Section
1.2, as adjusted pursuant to Section 1.3, among the Assets (the “Allocation”), which
Allocation shall be

 

 

3

 

 

reasonably acceptable to the Purchaser and determined in a manner
consistent with Section 1060 of the Internal Revenue Code and the Treasury
Regulations thereunder.  The Allocation
shall be conclusive and binding upon the Purchaser and the Seller for all purposes,
and the Purchaser and the Seller agree that all returns and reports (including
Internal Revenue Service (“IRS”) Form 8594) and all financial statements shall
be prepared in a manner consistent with (and the parties shall not otherwise
take a position on a Tax Return that is inconsistent with) the Allocation
unless required by the IRS or any other applicable taxing authority.

 

1.6          Closing.

 

(a)           The
closing of the sale of the Assets to the Purchaser (the “Closing”) shall take
place at the offices of Cooley Godward LLP in San Diego, California, at 10:00
a.m. on the Effective Date.  For purposes
of this Agreement, “Closing Date” shall mean the time and date as of which the
Closing takes place.

 

(b)           At
the Closing:

 

(i)            the Seller shall execute and deliver
to the Purchaser such bills of sale, endorsements, assignments and other
documents as the Purchaser may reasonably request to assign, convey, transfer
and deliver to the Purchaser good and valid title to the Assets free of any
Encumbrances;

 

(ii)           the Purchaser shall pay to the Seller
the Purchaser Price in cash as contemplated by Section 1.2(a)(i);

 

(iii)          the Purchaser shall execute and deliver
to the Seller the Assumption Agreement; and 

 

(iv)          the Chief Executive Officer of the
Seller shall execute and deliver to the Purchaser a certificate to the effect
that each of the representations and warranties specified in Section 2 are true
as of the Effective Date in all respects; and

 

(v)           the Purchaser and the Seller shall
execute and deliver to the other party a Transition Services Agreement in the
form of Exhibit E (the “Transition Services Agreement”).

 

2.                                      REPRESENTATIONS AND WARRANTIES OF
THE SELLER.

 

The Seller represents and warrants, to and for the
benefit of the Purchaser, as follows:

 

2.1          Due Organization.  The Seller is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware.  The
Seller is in good standing as a foreign corporation in the State of California
and is duly authorized to conduct business and is in good standing under the
laws of each other jurisdiction where such qualification is required and in
which the failure to so qualify would have a Material Adverse Effect on the
Seller.

 

 

4

 

2.2          Title to Assets.  The Seller
owns, and has good and valid title to, all of the Assets.  Except as set forth in Part 2.2 of the
Disclosure Schedule, all of the Assets are owned by the Seller free and clear
of any Encumbrances.  Part 2.2 of the
Disclosure Schedule identifies all of the Assets that are being leased or licensed
to the Seller.

 

2.3          Receivables.  Schedule B.4 to Exhibit B provides a breakdown and aging
of all accounts receivable, notes receivable and other receivables of the
Seller that are related to the Business that have arisen after August 31, 2005.

 

2.4          Employee And Labor Matters.  Part 2.4 of
the Disclosure Schedule accurately sets forth, with respect to each of the
employees identified on Exhibit F (each a “Transferred Employee” and
collectively referred to herein as the “Transferred Employees”):

 

(a)           the
name and title of such Transferred Employee and the date as of which such
Transferred Employee was originally hired by the Seller;

 

(b)           such
Transferred Employee's annualized compensation as of the date of this
Agreement; and

 

(c)           each
Seller Employee Plan in which such Transferred Employee participates or is
eligible to participate.

 

2.5          Authority; Binding Nature of Agreements. 
The Seller has the right, power and authority to enter into and to
perform its obligations under each of the Transactional Agreements to which it
is or may become a party; and the execution, delivery and performance by the
Seller of the Transactional Agreements to which it is or may become a party
have been duly authorized by all necessary action on the part of the Seller,
its board of directors and its officers. 
This Agreement constitutes the legal, valid and binding obligation of
the Seller, enforceable against the Seller in accordance with its terms.  Upon the execution of each of the other
Transactional Agreements at the Closing, each of such other Transactional
Agreements to which the Seller is a party will constitute the legal, valid and
binding obligation of the Seller and will be enforceable against the Seller in
accordance with its terms, except as such enforceability may be limited by
principles of public policy and subject to the laws of general application
relating to bankruptcy, insolvency and the relief of debtors and the rules of
law governing specific performance, injunctive relief or other equitable
remedies.

 

2.6          Non-Contravention; Consents.  Except as set
forth in Part 2.6 of the Disclosure Schedule, neither the execution and
delivery of any of the Transactional Agreements by the Seller, nor the consummation
or performance of any of the Transactions by the Seller, will directly or
indirectly (with or without notice or lapse of time):

 

(a)           conflict
with any provision of the Seller's charter documents;

 

(b)           conflict
with any resolution adopted by the board of directors or the shareholders of
the Seller;

 

 

5

 

(c)           contravene,
conflict with or result in a violation of, or give any Governmental Body or
other Person the right to challenge any of the Transactions or to exercise any
remedy or obtain any relief under, any Legal Requirement or any Order to which
the Seller, or any of the Assets, is subject; or

 

(d)           contravene,
conflict with or result in a violation or breach of, or result in a default
under, any provision of any material contract or agreement to which the Seller
is a party.

 

Except as set forth in Part 2.6 of the Disclosure Schedule, the Seller
is not required to make any filing with or give any notice to, or to obtain any
Consent from, any Person in connection with the execution and delivery of any
of the Transactional Agreements or the consummation or performance of any of the
Transactions.

 

2.7          Disclaimer of Representations and Warranties. 
EXCEPT WITH RESPECT TO THE EXPRESS REPRESENTATIONS AND WARRANTIES
SPECIFICALLY SET FORTH HEREIN, THE SELLER MAKES NO, AND EXPRESSLY DISCLAIMS
ANY, REPRESENTATION OR WARRANTY OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, ORAL
OR WRITTEN, WHETHER OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR QUALITY OF THE ASSETS, OR ANY PART THEREOF, OR AS TO THE
CONDITION, WORKMANSHIP OR VALUE THEREOF OR THE ABSENCE OF ANY DEFECTS THEREIN,
WHETHER LATENT OR PATENT.  IT IS
UNDERSTOOD BY THE PARTIES THAT THE ASSETS ARE TO BE CONVEYED HEREUNDER “AS-IS”
AND “WHERE-IS” ON THE CLOSING DATE AND IN THEIR THEN PRESENT CONDITION, AND THE
PURCHASER SHALL RELY SOLELY UPON ITS OWN INVESTIGATION AND EXAMINATION THEREOF.

 

2.8          Brokers.  Except for any
fees due to B.Riley & Co., the Seller has not agreed or become obligated to
pay, or has taken any action that might result in any Person claiming to be
entitled to receive, any brokerage commission, finder's fee or similar
commission or fee in connection with any of the Transactions.  Seller shall be solely responsible for any
such fees or other amounts due and shall indemnify and hold harmless Purchaser
from any fees or claims associated therewith.

 

2.9          Intellectual Property.

 

(a)           Schedule B.3 to Exhibit B lists all
Transferred Intellectual Property owned by, filed in the name of, or applied
for, by the Seller and lists any proceedings or actions before any court or
tribunal (including the United States Patent and Trademark Office (the “PTO”)
or equivalent authority anywhere in the world) related to any Transferred
Intellectual Property.

 

(b)           To the Seller's knowledge, each item
of Transferred Intellectual Property is valid and subsisting, and all necessary
registration, maintenance and renewal fees in connection with such Transferred
Intellectual Property have been paid and all necessary documents and
certificates in connection with such Transferred Intellectual Property have
been filed with the relevant patent, copyright, trademark or other authorities
in the United States or foreign jurisdictions, as the case may be, for the purposes
of maintaining such Transferred

 

 

6

 

Intellectual Property.  To the
Seller's knowledge, in each case in which the Seller has acquired any
Transferred Intellectual Property from any Person, the Seller has recorded the assignment
of such Transferred Intellectual Property with the relevant Governmental Body,
including the PTO, the U.S. Copyright Office, or their respective equivalents
in any relevant foreign jurisdiction, as the case may be.  Except as set forth on Part 2.9(b) of the
Disclosure Schedule, to the Seller's knowledge, the Seller has not claimed a
particular status, including “Small Business Status,” in the application for any
Transferred Intellectual Property, which claim of status was at the time made,
or which has since become, inaccurate or false or that will no longer be true
and accurate as a result of the Closing.

 

(c)           The
Seller has no knowledge of any facts or circumstances that would render any
Transferred Intellectual Property invalid or unenforceable.  The Seller has no knowledge of any
misrepresentation or failure to disclose, any fact or circumstances in any
application for any Transferred Intellectual Property that would constitute
fraud or a misrepresentation with respect to such application or that would
otherwise affect the validity or enforceability of any Transferred Intellectual
Property.

 

(d)           Each
item of Transferred Intellectual Property is free and clear of any Encumbrances
(1) except as set forth in Part 2.2 of the Disclosure Schedule and (2) except
for non-exclusive licenses granted to end-user customers in the ordinary course
of business.  Except as set forth in Part
2.2 of the Disclosure Schedule, the Seller is the exclusive owner or exclusive
licensee of all Transferred Intellectual Property.  Without limiting the foregoing, to the
Seller's knowledge: (i)  the Seller is
the exclusive owner of all Trademarks included in the Transferred Intellectual
Property; and (ii) the Seller owns exclusively, and has good title to, all
Copyrights that are included in the Transferred Intellectual Property.

 

(e)           Except
as set forth in Part 2.9(e) of the Disclosure Schedule, to the knowledge of
Seller, all Transferred Intellectual Property will be fully transferable,
alienable or licensable by Purchaser without restriction.

 

(f)            To
the extent that any Technology associated with the Transferred Intellectual
Property has been developed or created by a third party for the Seller, the
Seller has, to its knowledge, a written agreement with such third party with
respect thereto and the Seller thereby either (i) has obtained ownership of,
and is the exclusive owner of, or (ii) has obtained a license (sufficient for
the conduct of the Business as currently conducted) to all such third party's
Intellectual Property Rights in such Technology by operation of law or by valid
assignment.

 

(g)           With
exception of “shrink-wrap” or similar widely-available commercial end-user
licenses, to the Seller's knowledge all Technology claimed or covered by the
Transferred Intellectual Property or otherwise included in the Assets was
written and created solely by either (i) employees of the Seller acting within
the scope of their employment or (ii) by third parties who have validly and
irrevocably assigned all of their rights, including Intellectual Property
Rights therein, to the Seller.

 

(h)           The
Seller has taken all commercially reasonable steps to protect the Seller's
rights in confidential information and trade secrets of Seller or provided by
any other Person to the Seller.  Without
limiting the foregoing, the Seller has, and enforces, a policy

 

 

7

 

requiring each employee and consultant of the Seller involved in the
Business to execute a proprietary information, confidentiality and assignment
of inventions agreement in favor of the Seller substantially in the form(s)
attached hereto as Exhibit G.

 

(i)            Except
as set forth in Part 2.9(i) of the Disclosure Schedule, the Seller has, to its
knowledge, not transferred ownership of, or granted any exclusive license of or
right to use, or authorized the retention of any exclusive rights to use or
joint ownership of, any Technology or Intellectual Property Right that is
Transferred Intellectual Property, to any other Person.

 

(j)            To
the Seller's knowledge, Part 2.9(j) of the Disclosure Schedule lists all
contracts, licenses and agreements to which the Seller is a party with respect
to any Transferred Intellectual Property and any Intellectual Property Rights relating
to the Business.  Except as set forth in
Part 2.9(j) of the Disclosure Schedule, the Seller, to its knowledge, is not in
breach of nor has the Seller failed to perform under, any of the foregoing
contracts, licenses or agreements and, to the Seller's knowledge, no other
party to any such contract, license or agreement is in breach thereof or has
failed to perform thereunder.

 

(k)           Except
as set forth in Part 2.9(k) of the Disclosure Schedule, to the knowledge of the
Seller, there are no contracts, licenses or agreements between the Seller and
any other person with respect to Transferred Intellectual Property under which
there is any dispute regarding the scope of such agreement, or performance
under such agreement, including with respect to any payments to be made or received
by the Seller thereunder.

 

(l)            To
the Seller's knowledge, the operation of the Business, including but not
limited to the design, development, use, import, branding, advertising,
promotion, marketing, manufacture and sale of the products, technology or
services (including products, technology or services currently under
development) of Seller does not infringe or misappropriate any Intellectual
Property Right of any Person, violate any right of any Person (including any
right to privacy or publicity) or constitute unfair competition or trade
practices under the laws of any jurisdiction, and Seller has not received
notice from any Person claiming that such operation or any act, product,
technology or service (including products, technology or services currently
under development) of the Seller infringes or misappropriates any Intellectual
Property Right of any Person or constitutes unfair competition or trade
practices under the laws of any jurisdiction (nor does the Seller have
knowledge of any basis therefor).

 

(m)          To
the Seller's knowledge, no Person is infringing or misappropriating any
Transferred Intellectual Property.

 

(n)           To
the Seller's knowledge, no Transferred Intellectual Property is subject to any
proceeding or outstanding decree, order, judgment or settlement agreement or
stipulation that restricts in any manner the use, transfer or licensing thereof
by the Seller or may affect the validity, use or enforceability of such
Transferred Intellectual Property.

 

(o)           Except
as set forth in Part 2.9(o) of the Disclosure Schedule, to the Seller's
knowledge there are no royalties, fees, honoraria or other payments payable by
the Seller to any Person by reason of the ownership, development, use, license,
sale or disposition of

 

 

8

 

 

Transferred Intellectual Property, other than salaries and sales
commissions paid to employees and sales agents in the ordinary course of
business.

 

2.10        Litigation.  Part 2.10 of
the Disclosure Schedule sets forth each instance in which the Seller (or any of
the Assets) (i) is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) is or has been, or, to the knowledge of the
Seller, is threatened to be made a party, to any action, suit, proceeding,
hearing, arbitration, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator.

 

2.11        Taking of Necessary Action; Further Action. 
From time to time after the Closing, at the request of either party
hereto and at the expense of such party, the parties hereto shall execute and
deliver such other instruments of sale, transfer, conveyance, assignment and
confirmation and take such action as each such party may reasonably determine
is necessary to evidence the Transactions and to transfer, convey and assign to
Purchaser, and to confirm Purchaser's title to or interest in the Assets, to
put Purchaser in actual possession and operating control thereof and to assist Purchaser
in exercising all rights with respect thereto (including, without limitation,
cooperating as Purchaser may reasonably request to obtain valid and enforceable
assignments with respect to the Transferred Intellectual Property from any inventor
or other Person from whom the Seller acquired any of the Transferred
Intellectual Property).  Subject to the
limitations of authority described herein, the Seller hereby constitutes and
appoints the Purchaser and its successors and assigns as its true and lawful
attorney in fact in connection with the Transactions, with full power of
substitution, in the name and stead of the Seller but on behalf of and for the
benefit of the Purchaser and its successors and assigns, to demand and receive
any and all of the Assets, and to give receipt and release for and in respect
of the same and any part thereof, and from time to time to institute and
prosecute, in the name of the Seller or otherwise, for the benefit of the
Purchaser or its successors and assigns, proceedings at law, in equity, or
otherwise, which the Purchaser or its successors or assigns reasonably deem
proper in order to collect or reduce to possession or endorse any of the
Assets.  The power of attorney referred
to in the preceding sentence will be effective ten (10) business days following
the Purchaser's request pursuant to this Section 2.11 if the Seller
unreasonably refuses to comply with or fails to respond to such request.

 

2.12        Authority; Binding Nature of Agreements. 
The Seller has all necessary power and authority to enter into and
perform its obligations under this Agreement, and the execution and delivery of
this Agreement by the Seller have been duly authorized by all necessary action
on the part of the Seller and its board of directors and, if applicable,
shareholders.  The Seller has the
absolute and unrestricted right, power and authority to enter into and perform
its obligations under the Transactional Agreements to which it is or may become
a party, and the execution, delivery and performance of the Transactional
Agreements to which it is or may become a party by the Seller have been duly
authorized by all necessary action on the part of the Seller and its board of
directors and, if applicable, shareholders. 
This Agreement constitutes the legal, valid and binding obligation of
the Seller, enforceable against it in accordance with its terms.  Upon the execution and delivery of the
Transactional Agreements to which it is or may become a party at the Closing,
such Transactional Agreements will constitute the legal, valid and binding
obligations of the Seller, enforceable against the Seller in accordance with
their terms, except as

 

 

9

 

such enforceability may be limited by
principles of public policy and subject to the laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.

 

                2.13        Financial Statements.  The Seller has delivered to the Purchaser the
financial statements referenced in clause “(a)” below and will deliver,
promptly following the Closing, the financial statements referenced in clause “(b)”
below (collectively, the “Financial Statements”): (a) a balance sheet for the
Business as of June 30, 2005 and August 31, 2005; and (b) an estimated cash
flow statement for the Business for the period from September 1, 2005 through
September 30, 2005. The Financial Statements fairly and accurately present the
contents thereof and were prepared on a consistent basis.

 

3.             REPRESENTATIONS AND wARRANTIES
OF THE pURCHASER.

 

                The Purchaser represents and warrants, to
and for the benefit of the Seller, as follows:

 

                3.1          Due Organization.  The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and is duly authorized to conduct business and is in good standing
under the laws of each other jurisdiction where such qualification is required
and in which the failure to so qualify would have a Material Adverse Effect on
the Purchaser.

 

                3.2          Authority; Binding
Nature of Agreements.  The
Purchaser has all necessary power and authority to enter into and perform its
obligations under this Agreement, and the execution and delivery of this
Agreement by the Purchaser have been duly authorized by all necessary action on
the part of the Purchaser and its board of directors and, if applicable,
shareholders.  The Purchaser has the
absolute and unrestricted right, power and authority to enter into and perform
its obligations under the Transactional Agreements to which it is or may become
a party, and the execution, delivery and performance of the Transactional
Agreements to which it is or may become a party by the Purchaser have been duly
authorized by all necessary action on the part of the Purchaser and its board
of directors and, if applicable, shareholders. 
This Agreement constitutes the legal, valid and binding obligation of
the Purchaser, enforceable against it in accordance with its terms.  Upon the execution and delivery of the
Transactional Agreements to which it is or may become a party at the Closing,
such Transactional Agreements will constitute the legal, valid and binding
obligations of the Purchaser, enforceable against the Purchaser in accordance
with their terms, except as such enforceability may be limited by principles of
public policy and subject to the laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.

 

                3.3          Non-Contravention; Consents. 
Neither the execution and delivery of any of the Transactional
Agreements by the Purchaser nor the consummation or performance of any of the
Transactions by the Purchaser will directly or indirectly (with or without
notice or lapse of time):

 

                                (a)           conflict with any provision of the
Purchaser's charter documents;

 

 

10

 

                                (b)           conflict with any resolution adopted
by the board of directors or, if applicable, the shareholders of the Purchaser;
or

 

                                (c)           contravene, conflict with or result
in a violation or breach of, or result in a default under, any provision of any
Contract to which the Purchaser is a party or by which the Purchaser is bound.

 

The Purchaser is not and will not be required
to obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or any of the other Transactional Agreements or the
consummation or performance of any of the Transactions.

 

                3.4          Certain Proceedings.  There is no Proceeding that has been
commenced against the Purchaser and that challenges, or may have the effect of
preventing, delaying, making illegal or otherwise interfering with, any of the
Transactions.  To the Purchaser's
knowledge, no such Proceeding has been threatened.

 

                3.5          Brokers.  The
Purchaser has not become obligated to pay, and has not taken any action that
might result in any Person claiming to be entitled to receive, any brokerage
commission, finder's fee or similar commission or fee in connection with any of
the Transactions.

 

4.             CERTAIN POST-CLOSING COVENANTS.

 

                4.1          Further Actions.  From and after the Closing Date, the Seller shall
cooperate with the Purchaser and the Purchaser's Representatives, and shall
execute and deliver such documents and take such other actions as the Purchaser
may reasonably request, for the purpose of evidencing the Transactions and putting
the Purchaser in possession and control of all of the Assets.  Without limiting the generality of the foregoing,
from and after the Closing Date, except to the extent such receipt of funds is
already included in the Adjusted Purchase Price, the Seller shall promptly
remit to the Purchaser any funds that are received by the Seller and that are
included in, or that represent payment of receivables included in, the Assets.

 

                4.2          Employee Matters.  Prior to or in conjunction with the Closing,
the Purchaser shall in good faith offer employment to the Transferred
Employees, such employment to begin promptly immediately following the Closing.  Such offers of employment shall provide for
compensation and benefits to be provided to such Transferred Employees which,
in the aggregate, are at least comparable to the compensation and benefits
presently being received by such Transferred Employees from the Seller, provided, however, that the Purchaser shall not be required
to offer any compensation or benefits comparable to the Seller's equity
incentive or stock purchase plans.  The
benefits shall include severance payments for any Transferred Employee
terminated within six months of the Closing Date in amounts equivalent to the
amounts of severance payments customarily offered by the Seller.  In the event any such Transferred Employee
accepts the Purchaser's offer of employment either before or after the Closing,
the Purchaser shall be responsible for all liabilities (including but not
limited to salaries and benefits, including the maintenance of appropriate
levels of workers' compensation insurance) arising out of any such employment
subsequent to the initial date of  such
employment.

 

 

11

 

                4.3          Regulatory Matters
and Bulk Sales Laws.  The
Purchaser acknowledges that it will be responsible for obtaining and
maintaining the federal and state permits and licenses required in order for
the Purchaser to carry on the Business or use the Assets, and except for any
obligation set forth in this Agreement, that the Seller will not have duties or
obligations to the Purchaser with respect to any such matters.  The Purchaser agrees to waive compliance by
the Seller with the provision of any “bulk sales” laws and similar applicable laws,
as such laws relate to the transfer of the Assets.

 

                4.4          ARCS Technology.  The
Purchaser may explore any application or enhancement to the ARCS
Technology.  The Seller will negotiate
with the Purchaser in good faith regarding a possible license or co-marketing
agreement between the parties hereto relating to the ARCS Technology.

 

                4.5          Kan-Service Business.  All of the X-Kan and Nano-Kan
system assets, as set forth in Section 4.5 of the Disclosure Schedule (the “Kan
Assets”), all related non-synthesis (sorting, washing and cleaving) service
contracts (including without limitation the contract with Kalypsys, Inc.), and
the future use of the Kan Assets to provide non-synthesis services to future customers
(the “Kan Services”) shall be included in the Assets.  The Purchaser shall grant the Seller a
license to sell the Kan Services, as set forth in the license agreement set
forth in Section 4.6 below, whether or not such Kan Services are bundled with
other services provided by the Seller. 
The Purchaser shall permit an employee or officer of the Seller to use
the Kan Assets, on an as available and “AS IS” basis (in no event to exceed,
without agreement of Purchaser, 40% of the monthly usage capacity of the Kan
Assets during normal business hours), at no charge to the Seller upon the
reasonable request of the Seller, or, if the Seller requests and Purchaser
agrees, the Purchaser shall provide the Kan Services to the Seller for an
amount equal to cost plus 15%; provided, however, that Seller shall purchase
consumables used in such services from Purchaser at Purchaser's then-current
list price (or the price paid by a customer of the Purchaser, if more
favorable), whether or not such services are conducted by Seller or
Purchaser.  The rights and privileges
granted to the Seller under this Section 4.5 shall not be transferable or
sublicenseable without the Purchaser's prior written consent, except that
Seller may assign such rights and privileges to a third party that acquires all
or substantially all of the Seller's assets, whether by merger or
otherwise.  The Seller shall be
responsible for, and shall indemnify, defend, and hold the Purchaser harmless
with respect to, (i) all obligations to, and claims by, the Seller's customers
in connection with the Kan Services offered by the Seller to such customers,
and (ii) all actions of the Seller's employees or agents in connection with
their use of the Kan Assets, including without limitation any damage to such
Kan Assets.  The Purchaser represents and
warrants that, with respect to Kan Services provided to Seller by Purchaser
hereunder, Purchaser shall conduct such services in a professional and
workmanlike manner comparable to the level used by Purchaser in providing such
services to its other customers purchasing Kan Services.  For a period of four years following the
Closing Date, so long as the Purchaser continues to offer Kan Services to
Persons other than the Seller, the Purchaser shall be obligated to maintain the
Kan Assets in working order.  The
foregoing shall not be construed to prohibit the Purchaser from selling the Kan
Assets and/or from discontinuing the business of providing the Kan Services
during such period; provided, however, that (i) if the Purchaser sells the Kan
Assets prior to the expiration of such four-year period, the Purchaser shall pay
to the Seller an amount equal to 400,000, less 1/48th of such amount
for each month by which the effective date

 

 

12

 

of such sale follows the Closing Date (the “Liquidated Amount”), and
(ii) if the Purchaser elects to discontinue the business of providing Kan
Services during such four-year period, other than by sale of the Kan Assets as
described in item (i) above, it shall notify the Seller of such election (the “Kan
Notice”) at least 30 days prior to such discontinuance and, if the Seller
delivers written notice to the Purchaser within 30 days of the Kan Notice, the
Purchaser shall assign all of its right, title and interest in the Kan Assets
(such assets to be transferred “AS-IS”) to the Seller (the “Option”).  If the Seller does not exercise its Option
hereunder, the Purchaser shall pay the Seller 50% of the Liquidated Amount,
such amount to be determined as of the date of the delivery of the Kan Notice
to the Seller (the “Notice Date”); provided, however,
if the Purchaser sells the Kan Assets within 6 months of the Notice Date, the
Purchaser must pay the Seller 100% of the Liquidated Amount determined as of
the date of such sale less any portion previously paid by the Purchaser to the
Seller.

 

                4.6          License.  The Purchaser hereby grants to the Seller an
irrevocable, perpetual, worldwide, fully-paid, royalty-free, non-exclusive, under
the Patent Rights solely for the purpose of providing or performing services
using the inventions claimed or disclosed in such Patent Rights for the benefit
of the Seller, any affiliate of the Seller and any licensee, strategic partner
or customer of the Seller (the “License”). 
For clarity, the License does not convey any right to make, or to sell
or otherwise transfer to any party, devices, equipment, software, or other
products intended for use in the performance of such services.  The Purchaser shall have the right, upon
receipt of the Seller's prior written consent (which consent shall not be
unreasonably withheld), to publicize, in a factually accurate manner, that the
Seller is using systems of the Purchaser or intellectual property of the
Purchaser which the Purchaser has available for sale or license, and to
identify in such statements the systems and/or intellectual property the Seller
is using.  The License shall not be
transferable or sublicenseable without the Purchaser's prior written consent,
except that the Seller may assign such license to a third party that acquires
all or substantially all of the Seller's assets, whether by merger or otherwise,
upon the condition that the Purchaser shall have the right, upon receipt of
such third party's prior written consent (which consent shall not be
unreasonably withheld), to publicize such third party's use of the Purchaser's
systems and/or intellectual property to the same extent as is set forth with
respect to the Seller in the preceding sentence.  The Purchaser makes no representations or
warranties regarding the licensed Patent Rights, and expressly disclaims all
warranties of merchantability, fitness for a particular purpose, or warranties
of non-infringement.  The Purchaser shall
have no obligation to the Seller hereunder to maintain or enforce the Patent
Rights.  If for any reason the Purchaser
intends to abandon any Patent Rights, Purchaser will use reasonable efforts to
notify Seller in advance and to provide Seller the opportunity, in Seller's discretion
and at Seller's expense, to take over prosecution and maintenance of any such
Patent Rights on Purchaser's behalf.  Notwithstanding
the provisions of this Section 4.6, the Seller may not use the Patent Rights in
the development, manufacture, or sale of any Prohibited Products (as defined in
Section 4.9).  The Seller hereby agrees to
save, defend and hold the Purchaser and its agents and employees harmless from
and against any and all third party suits, claims, actions and demands, and any
resulting liabilities, expenses and/or losses, including reasonable legal
expense and attorneys' fees, other than claims for infringement of a patent or other
proprietary right of a third party (collectively, “Claims”) resulting directly
or indirectly from the practice of the Patent Rights by the Seller, its
affiliates, agents or sublicensees.  The Seller's
agreement to indemnify, defend, and hold the Purchaser and its agents and
employees harmless is conditioned upon the indemnified

 

 

13

 

Person:  (a) providing written
notice to the Seller of any Claims arising out of the indemnified activities
within thirty (30) days after the indemnified Person has knowledge of such
Claims; (b) permitting the Seller to assume full responsibility and authority
to investigate, prepare for, and defend against any such claim or demand; and
(c) assisting the Seller, at the Seller's reasonable expense, in the
investigation of, preparation for and defense of any such Claims.  If the Seller assumes the defense of a Claim,
the Seller will not be subject to any liability for any settlement of such
claim made by the indemnified Person without the Seller's consent (but such
consent will not be unreasonably withheld or delayed).

 

                4.7          NIH Universal Store.  Pursuant to the specifications attached
hereto as Schedule 4.7, the Purchaser will build
and install prior to December 31, 2005 (or such later date as agreed to by the
Purchaser and the Seller) and the Seller shall purchase for a purchase price of
$1,162,500 (the “NIH Purchase Price”) the “NIH Working Store” for the purposes
of servicing the small molecule repository for the NIH (the “Repository”).  The Seller shall pay to the Purchaser the NIH
Purchase Price as follows: (i) $ 375,000 shall be paid following installation
of the basic storage chamber associated with the NIH Working Store; (ii)
$375,000 shall be paid following installation of the “cherry picking” and “I/O
defrost” modules; and (iii) $412,500 shall be paid following acceptance by the
Seller of the “NIH Working Store”.  The
Purchaser's warranty of the Repository and the terms for any future service
contract between the Purchaser and the Seller that relates to the “NIH Working
Store” will be in substantially the same form as the warranty and those terms
included in that certain proposed warranty agreement submitted to NIH
(including any implied warranties not expressly disclaimed therein) on or about
the time of the purchase order of the “NIH Working Store” by NIH.

 

                4.8          Compound Storage
Business.  Upon the Seller's
request, the Purchaser shall provide the Seller with a written quotation and
terms relating to the Purchaser's compound storage product offerings, provided that, the terms shall, for sales to Seller during
the period of 3 years following the Closing Date, be at least as favorable as
any terms regularly offered to the Purchaser's other customers and shall, at a
minimum, reflect a discount of 25% off of the Purchaser's then-current listed
rate.  Furthermore, prior to purchasing
compound storage product offerings from a third party, the Seller shall first
allow the Purchaser to match the rate quoted by such third party, and if the
Purchaser matches such third party's rate and agrees to provide the compound
storage product offerings on the terms and conditions offered to the Seller by
such third party the Seller shall purchase such services from the Purchaser
(the “Right of First Refusal”).  The Right
of First Refusal shall expire on the date that is three years following the
Closing Date.

 

                4.9          Non-Competition and
Non-Solicitation Agreement.  For
a period of two years after the Closing Date:

 

                                (a)           except for any activities of officers
and/or directors of the Seller not within the scope of such individual's duties
to the Seller, the Seller and Seller Affiliates shall not, in any Restricted
Territory, engage or be involved in the Restricted Territory in the sale of
Products used in (such Products being referred to herein as the “Prohibited
Products”):

 

 

14

 

                                                (i)            compound synthesizing (except for
the chemical synthesis technology developed by ChemRX and known as “synfini”);

 

                                                (ii)           compound storage and/or management
(except for the compound storage technology developed by DPI AG and known as
“dot foil”); or

 

                                                (iii)          protein crystallization.

 

                                (b)           the Purchaser and Purchaser Affiliates shall not, in any
Restricted Territory, engage or be involved in the performance of the following
Services (provided however, that the provisions of this Section 4.9(b) shall
not apply to officers and/or directors of Purchaser to the extent that such
individuals are engaged in activities not within the scope of such individual’s
duties to Purchaser):

 

                                                (i)            compound synthesizing (provided this
shall not be construed to preclude the Purchaser from conducting the Kan
Services in connection with synthesis by the Purchaser’s customers);

 

                                                (ii)           compound storage and/or management (provided that this
shall not be construed to prevent or restrict the Purchaser’s sale of equipment
of products to third parties for use in connection with compound storage and/or
management);

 

                                                (iii)          protein crystallization;

 

                                                (iv)          drug discovery services currently provided by the Seller;
or

 

                                                (v)           screening services currently provided by the Seller.

 

                                (c)           the Purchaser shall not, directly or indirectly hire, retain
or attempt to hire or retain any employee or independent contractor of the
Seller or in any way interfere with the relationship between the Seller and any
of its employees or independent contractors, except that
this paragraph (c) shall not apply to any Transferred Employee or any employee
of the Seller if such employee responds to an advertisement for employment that
is posted on the Purchaser’s website or circulated in other media that is made
generally available to the public.  Notwithstanding
the foregoing, the Purchaser may hire or attempt to hire Mick McPherson and
Robert Preston (together, the “Permitted Hires”) to assist the Purchaser in the
transition of its IT services after the Closing Date, provided
that such assistance does not interfere with the Permitted Hires’
employment with the Seller.

 

For purposes of this Section 4.9, “Products” shall mean,
individually and collectively, any and all instrumentation, hardware, software,
consumables, reagents, and kits, and “Services” shall mean, individually and
collectively, any and all services that are performed on a commercial basis,
excluding service contracts related to maintenance, testing, repair and
upgrading of instrumentation, hardware and software.

 

                4.10        Novation of Assumed
Contracts.  Promptly following
the Closing, the Purchaser shall submit in writing to each counterparty to an
Assumed Contract a request for such

 

 

15

 

counterparty to:  (i) recognize the Purchaser as the successor
in interest to such Assumed Contract; and (ii) enter into a novation agreement
in substantially the form attached hereto as Exhibit H.  The Purchaser shall use reasonable commercial
efforts to take all actions necessary to execute and consummate such novation
agreements.

 

                4.11        Publicity.  Neither the Purchaser nor the Seller shall
make any disparaging statements about the other party or the other party’s
products and/or services.

 

                4.12        Business Information.  Upon the Purchaser’s reasonable request, the Seller
will permit the Purchaser, at its expense, to duplicate any and all written or
recorded information owned and reasonably available to the Seller concerning
the Business (the “Business Information”). 
The Seller will preserve all Business Information for a period for at
least three (3) years from the Closing Date, and thereafter, the Seller will
not dispose of or destroy any such Business Information without giving ten (10)
days prior written notice to the Purchaser to permit the Purchaser, at its
expense, to duplicate or take possession of any such Business Information
reasonably requested by the Purchaser. 
The Seller will make all Business Information reasonably available to
the Purchaser.  Notwithstanding the
foregoing, the Seller will be entitled to redact any information included in
the Business Information that does not relate to the Business.

 

                4.13        Seller’s Permit.  The Purchaser will, promptly after the
Closing, use commercially reasonable efforts to secure a seller’s permit and,
upon securing such permit, execute and deliver to the Seller a Resale
Certificate relating to the Purchaser’s acquisition of certain items of
inventory from the Seller.

 

                4.14        Additional Covenants.  To facilitate the transition of the Business
and certain agreements related thereto to the Purchaser, the Purchaser and the Seller
agree to the provisions attached hereto as Exhibit I.

 

5.             MISCELLANEOUS PROVISIONS.

 

                5.1          Further Assurances.  Each party hereto shall execute and/or cause
to be delivered to each other party hereto such instruments and other
documents, and shall take such other actions, as such other party may
reasonably request (prior to, at or after the Closing) for the purpose of
carrying out or evidencing any of the Transactions.

 

                5.2          Fees and Expenses.  The Purchaser shall be liable for all fees
and expenses related to the relocation of the Assets after the Closing.

 

                5.3          Attorneys’ Fees.  If any legal action or other legal proceeding
relating to any of the Transactional Agreements or the enforcement of any
provision of any of the Transactional Agreements is brought against any party
to this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys’ fees, cost and disbursements (in addition to any other relief to
which the prevailing party may be entitled).

 

                5.4          Notices.  Any notice or other communication required or
permitted to be delivered to any party under this Agreement shall be in writing
and shall be deemed properly

 

 

16

 

delivered, given and received when delivered
(by hand, by registered mail, by courier or express delivery service or by
facsimile) to the address or facsimile telephone number set forth beneath the name
of such party below (or to such other address of facsimile telephone number as
such party shall have specified in a written notice given to  the other parties hereto):

 

                                if
to the Seller:

 

 

                                                                Discovery
Partners International, Inc.

                                                                Attn:
President and Chief Executive Officer

                                                                9640
Towne Center Drive

                                                                San
Diego, CA 92121

                                                                Facsimile:
(858) 455-8088

 

                                with
a copy to:

 

 

                                                                Cooley
Godward LLP

                                                                Attn:
Kay Chandler

                                                                4401
Eastgate Mall

                                                                San
Diego, CA 92121

                                                                Facsimile:
(858) 550-6420

 

 

                                if
to the Purchaser:

 

 

                                                                Irori
Discovery, Inc.

                                                                Attn:
President and Chief Executive Officer

                                                                12140
Community Road

                                                                Poway,
CA 92064

 

                                with
a copy to:

 

 

                                                                Wilson
Sonsini Goodrich & Rosati

                                                                Attn:
Martin J. Waters

                                                                12235
El Camino Real, Suite 200

                                                                San
Diego, CA 92130

                                                                Facsimile:
(858) 350-2399

 

                5.5          Captions.  All section titles or captions contained in
this Agreement and the table of contents hereof are for convenience of
reference only, shall not be deemed to be part of this Agreement and shall not
be referred to in connection with the construction or interpretation of this
Agreement.

 

                5.6          Counterparts.  This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.

 

 

17

 

                5.7          Governing Law.  This Agreement shall be construed in
accordance with, and governed in all respects by, the internal laws of the
State of California (without giving effect to principles of conflicts of laws).

 

                5.8          Successors and
Assigns.  This Agreement shall
be binding upon the Seller and its successors and assigns (if any) and the
Purchaser and its successors and assigns (if any).  This Agreement shall inure to the benefit of
the Seller, the Purchaser and the respective successors and assigns (if any) of
the foregoing.

 

                5.9          Waiver.

 

                                (a)           No failure on the part of any Person to
exercise any power, right, privilege or remedy under this Agreement, and no
delay on the part of any Person in exercising any power, right, privilege or
remedy under this Agreement, shall operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any power, right,
privilege or remedy shall preclude any other or further exercise thereof or of
any other power, right, privilege or remedy.

 

                                (b)           No Person shall be deemed to have
waived any claim arising out of this Agreement, or any power, right, privilege
or remedy under this Agreement, unless the waiver of such claim, power, right,
privilege or remedy is expressly set forth in a written instrument duly
executed and delivered on behalf of such Person; and any such waiver shall not
be applicable or have any effect except in the specific instance in which it is
given.

 

                5.10        Amendments.  This Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of the Purchaser and Seller.

 

                5.11        Severability.  Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.  If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties hereto agree that the court making such determination
shall have the power to limit the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified.  In the event such court does not exercise the
power granted to it in the prior sentence, the parties hereto agree to replace
such invalid or unenforceable term or provision with a valid and enforceable
term or provision that will achieve, to the extent possible, the economic,
business and other purposes of such unenforceable term.

 

                5.12        Entire Agreement.  The Transactional Agreements set forth the
entire understanding of the parties relating to the subject matter thereof and
supersede all prior agreements and understandings among or between any of the
parties relating to the subject matter thereof.

 

 

18

 

                5.13        Construction.

 

                                (a)           For purposes of this Agreement,
whenever the context requires:  the
singular number shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; the feminine gender shall include
the masculine and neuter genders; and the neuter gender include the masculine
and feminine genders.

 

                                (b)           The parties hereto agree that any
rule of construction to the effect that ambiguities are to be resolved against
the drafting party shall not be applied in the construction or interpretation
of this Agreement.

 

                                (c)           As used in this Agreement, the word
“include” and “including,” and variations thereof, shall not be deemed to be
terms of limitations, but rather shall be deemed to be followed by the words
“without limitation.”

 

                                (d)           Except as otherwise indicated, all
references in this Agreement to “Sections” and “Exhibits” are intended to refer
to Sections of this Agreement and Exhibits to this Agreement.

 

                5.14        Arbitration.

 

                                (a)           Except for any disputes to be
resolved pursuant to Section 1.3 of this Agreement, disputes of every kind
relating to or arising out of this Agreement shall be submitted to
arbitration.  In the event that within 30
days after submission of any dispute to arbitration, the Seller and the
Purchaser cannot mutually agree on one arbitrator, the matter shall be settled
by arbitration conducted by three arbitrators consisting of one arbitrator
selected by the Seller, one arbitrator selected by the Purchaser, and one arbitrator
selected by the two arbitrators so selected by the Seller and the
Purchaser.  If the two arbitrators are
unable to select a third arbitrator, a third arbitrator shall be appointed by
the commercial panel of the American Arbitration Association.  The arbitrator or arbitrators, as the case
may be, shall set a limited time period and establish procedures designed to
reduce the cost and time for discovery while allowing the parties an
opportunity, adequate in the sole judgment of the arbitrator or majority of the
three arbitrators, as the case may be, to discover relevant information from
the opposing parties about the subject matter of the dispute.  The arbitrator or a majority of the three
arbitrators, as the case may be, shall rule upon motions to compel or limit
discovery and shall have the authority to impose sanctions, including
attorneys’ fees and costs, to the extent as a competent court of law or equity,
should the arbitrators or a majority of the three arbitrators, as the case may
be, determine that discovery was sought without substantial justification or
that discovery was refused or objected 
to without substantial justification. 
The arbitrator(s) shall not have the power to award damages in
connection with any dispute in excess of actual compensatory damages and shall
not multiply actual damages or award consequential or punitive damages.  The decision of the arbitrator or a majority
of the three arbitrators, as the case may be, as to the validity and amount of
any judgment or award shall be binding and conclusive upon the parties to this
Agreement.  Such decision shall be
written and shall be supported by written findings of fact and conclusions,
which shall set forth the award, judgment, decree or order awarded by the
arbitrator(s).

 

 

19

 

                                (b)           Judgment upon any award rendered by
the arbitrator(s) may be entered in any court having jurisdiction.  Any such arbitration shall be held in the
County of San Diego, under the rules then in effect of the American Arbitration
Association.  The arbitrator(s) shall
determine how all expenses relating to the arbitration shall be paid, including
without limitation, the respective expenses of each party, the fees of each
arbitrator and the administrative fee of the American Arbitration Association.

 

                5.15        Limitation of
Liability.  The maximum
aggregate amount of claims, demands, damages, losses, liabilities, costs and
expenses suffered or incurred by the Purchaser relating to the representations
made in Sections 2.9(b),2.9(c), 2.9(e), 2.9(f), 2.9(i), 2.9(j), 2.9(k), 2.9(l),
and 2.9(n) of this Agreement and for which the Seller may be liable to a
Damaged Party under any theory of recovery shall not exceed $150,000.

 

                                (a)           Knowledge.  For purposes of this Agreement, the Seller
shall be deemed to have “knowledge” of a particular fact or other matter if
Craig Kussman, Riccardo Pigliucci, Daniel Harvey, Douglas Livingston, Richard
Neale, Urs Regenass, or Michael Venuti is actually aware of such fact or other
matter, and the Purchaser shall be deemed to have “knowledge” of a particular
fact or other matter if any Transferred Employee is actually aware of such fact
or other matter.

 

 

20

 

                The
parties to this Agreement have caused this Agreement to be executed and
delivered as of the Effective Date.

 

	
   

  	
  DISCOVERY PARTNERS INTERNATIONAL,
  INC.,

  
	
   

  	
    a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Craig Kussman

  	
   

  
	
   

  	
   

  	
  Craig Kussman, Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  IRORI DISCOVERY,INC.

  
	
   

  	
    a California corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ John Lillig

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   CEO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
						

 

 

21

 

EXHIBIT
A

 

CERTAIN
DEFINITIONS

 

                For
purposes of this Agreement (including this Exhibit A):

 

                Adjusted Purchase Price.  “Adjusted Purchase Price” shall be the dollar
amount equal to the Closing Purchase Price (i) reduced by the amounts of each
of any Asset Reduction and Excess Net Cash Flow based on the Business Financial
Information and (ii) increased by the amounts of each of any Excess Assets and
Net Cash Flow Reduction.

 

                Agreement.  “Agreement”
shall mean the Asset Purchase Agreement to which this Exhibit A is
attached (including the Disclosure Schedule), as it may be amended from time to
time.

 

                ARCS Technology.  “ARCS
Technology” shall mean [the high throughput screening technology that the
Seller has licensed exclusively from Abbott Laboratories.]

 

                Asset Reduction.  “Asset
Reduction” shall mean the dollar amount, if any, by which (x) the Inventory as
of June 30, 2005 as set forth in the Business Financial Information, exceeds
(y) the Inventory as of August 31, 2005 as set forth in the Business Financial Information.

 

                Breach.  There shall
be deemed to be a “Breach” of a representation, warranty, covenant, obligation
or other provision if there is or has been (a) any inaccuracy in or breach
(including any inadvertent or innocent breach) of, or any failure (including any
inadvertent failure) to comply with or perform, such representation, warranty,
covenant, obligation or other provision, or (b) any claim (by any Person) or
other circumstance that is inconsistent with such representation, warranty,
covenant, obligation or other provision; and the term “Breach” shall be deemed
to refer to any such inaccuracy, breach, failure, claim or circumstance.

 

                Code.  “Code” shall
mean the Internal Revenue Code of 1986, as amended.

 

                Consent.  “Consent”
shall mean any approval, consent, ratification, permission, waiver or
authorization (including any Governmental Authorization).

 

                Contract.  “Contract” shall mean any written agreement,
contract, understanding, arrangement, instrument, note, guaranty, indemnity,
representation, warranty, deed, assignment, power of attorney, certificate,
purchase order, work order, insurance policy, benefit plan, commitment,
covenant, assurance or undertaking of any nature.

 

                Damaged Party.  “Damaged
Party” shall mean (i) the Purchaser, (ii) any current or future Purchaser
Affiliates, (iii) the respective Representatives of the Persons referred to in
clauses “(i)” and “(ii)” above, or (iv) the respective successors and assigns
of the Persons referred to in clauses “(i)”, “(ii)” and “(iii)” above.

 

 

A-1

 

 

                Disclosure
Schedule.  “Disclosure
Schedule” shall mean the schedule (dated as of the date of this Agreement)
delivered to the Purchaser on behalf of the Seller, a copy of which is attached
to this Agreement and incorporated in this Agreement by reference.

 

                Discovery Systems Division.  “Discovery Systems Division” shall mean the
Seller’s business involving the development, manufacture and sale of
instruments and consumables for making and storing libraries of chemical
compounds and related services under the registered trademark and service mark
“IRORI” including the X-Kan and NanoKan high throughput chemistry system, the
Auto Sort automated and manual chemistry systems, the Crystal Farm crystallization
and imaging system, and the vial, tube and microplate storage and retrieval
system.

 

                Encumbrance.  “Encumbrance”
shall mean any lien, pledge, hypothecation, charge, mortgage, security
interest, equitable interest, claim, preference, right of possession,
encroachment, covenant, infringement, interference, Order, proxy, option, right
of first refusal, preemptive right, community property interest, legend,
defect, impediment, exception, reservation, limitation, impairment,
imperfection of title or similar restriction.

 

                Entity.  “Entity”
shall mean any corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, cooperative, foundation, society, political party, union,
company (including any limited liability company or joint stock company), firm
or other enterprise, association, organization or entity.

 

                ERISA.  “ERISA” shall
mean the Employee Retirement Income Security Act of 1974, as amended.

 

                Excess Assets.  “Excess
Assets” shall mean the dollar amount, if any, by which (x) the Inventory as of
August 31, 2005 as set forth in the Business Financial Information, exceeds (y)
the Inventory as of June 30, 2005 as set forth in the Business Financial
Information.

 

                Excess Net Cash Flow.  “Excess Net Cash Flow” shall mean the dollar
amount, if any, by which the Net Cash Flow is greater than zero.

 

                GAAP.  “GAAP” shall
mean generally accepted accounting principles.

 

                Governmental Authorization.  “Governmental Authorization” shall mean any:
(a) permit, license, certificate, franchise, concession, approval, consent,
ratification, permission, clearance, confirmation, endorsement, waiver,
certification, designation, rating, registration, qualification or authorization
issued, granted, given or otherwise made available by or under the authority of
any Governmental Body or pursuant to any Legal Requirement; or (b) right under
any Contract with any Governmental Body.

 

                Governmental Body.  “Governmental
Body” shall mean any: (a) nation, principality, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government; (c)
governmental or quasi-governmental authority of any nature (including any
governmental division, subdivision, department, agency, bureau, branch, office,
commission, council, board, instrumentality, officer,

 

 

A-2

 

 

official, representative, organization, unit,
body or Entity and any court or other tribunal); (d) multi-national
organization or body; or (e) individual, Entity or body exercising, or entitled
to exercise, any executive, legislative, judicial, administrative, regulatory,
police, military or taxing authority or power of any nature.

 

                Intellectual Property Rights.  “Intellectual Property Rights” shall mean any
or all rights in, arising out of, or associated therewith: (i) (A) any patent,
utility model, design registration, certificate of invention, patent of
addition or substitution, or other governmental grant for the protection of
inventions or industrial designs anywhere in the world, including any reissue,
renewal, re-examination or extension thereof; and (B) any application for any
item in subsection “(A)”, including any international, provisional, divisional,
continuation, continuation-in-part, or continued prosecution application
(“Patents”); (ii) all trade secrets and other rights in know-how and
confidential or proprietary information; (iii) all copyrights, copyright
registrations, or any application therefor, or any other right corresponding
thereto throughout the world, including moral rights (“Copyrights”); (iv) all
rights in World Wide Web addresses and domain names and applications and
registrations therefor; and (vii) all trade names, brand names, logos, common
law trademarks and service marks, trademark and service mark registrations and
applications therefor and all goodwill associated therewith throughout the
world (“Trademarks”).

 

                Inventory.  “Inventory”
shall mean the total value of the Business raw materials, work in process and
finished goods inventory, net of reserves, as calculated in accordance with
GAAP, excluding any work-in process associated with the “NIH Long-Term” Universal
Store.

 

                Legal Requirement.  “Legal
Requirement” shall mean any federal, state, local, municipal, foreign or other
law, statute, legislation, constitution, principle of common law, resolution,
ordinance, code, edict, decree, proclamation, treaty, convention, rule,
regulation, ruling, directive, pronouncement, requirement, specification,
determination, decision, opinion or interpretation issued, enacted, adopted,
passed, approved, promulgated, made, implemented or otherwise put into effect
by or under the authority of any Governmental Body.

 

                Liability.  “Liability”
shall mean any debt, obligation, duty or liability of any nature (including any
unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect,
conditional, implied, vicarious, derivative, joint, several or secondary
liability), regardless of whether such debt, obligation, duty or liability
would be required to be disclosed on a balance sheet prepared in accordance
with generally accepted accounting principles and regardless of whether such
debt, obligation, duty or liability is immediately due and payable.

 

                Material Adverse Effect.  “Material Adverse Effect” shall mean any
adverse effect on the business, operations, assets (including intangible
assets), liabilities (contingent or otherwise), results of operations or
financial performance, or condition (financial or otherwise) of Purchaser or
any of its subsidiaries or Seller or any of its subsidiaries, as the case may
be, which is or would be material to Purchaser and its subsidiaries, taken as a
whole, or Seller and its subsidiaries, taken as a whole, as the case may be.

 

                Net Cash Flow.  “Net
Cash Flow” shall mean the positive or negative dollar amount equal to (i) the
aggregate amount of cash received from any account receivable of the Business

 

 

A-3

 

 

invoiced subsequent to August 31, 2005 less
(ii) the aggregate amount of cash paid for any account payable of the Business
posted subsequent to August 31, 2005 and the aggregate amount of any of the
following expenses related to the Business which arise subsequent to August 31,
2005: payroll and employee benefits costs, travel and entertainment expenses
(except for any such expenses relating to the installation of a systems sale in
August 2005 to a customer in Korea), and the allocated share of rent and other
facilities costs for the Business.

 

                Net Cash Flow Reduction.  “Net Cash Flow Reduction” shall mean the
dollar amount, if any, by which the Net Cash Flow is less than zero.

 

                Order.  “Order” shall
mean any: (a) order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, verdict, sentence, subpoena,
writ or award issued, made, entered, rendered or otherwise put into effect by
or under the authority of any court, administrative agency or other
Governmental Body or any arbitrator or arbitration panel; or (b) Contract with
any Governmental Body entered into in connection with any Proceeding.

 

                Patent Rights.  “Patent
Rights” shall mean all patents and patent applications, including, without
limitation, any continuations, continuations-in-part, provisionals, divisions,
substitutions, re-issues, re-examinations, renewals, confirmations, extensions
(including supplemental protection and certificates) and term restorations
thereof, which are part of the Assets.

 

                Person.  “Person” shall
mean any individual, Entity or Governmental Body.

 

                Proceeding.  “Proceeding”
shall mean any action, suit, litigation, arbitration, proceeding (including any
civil, criminal, administrative, investigative or appellate proceeding and any
informal proceeding), prosecution, contest, hearing, inquiry, inquest, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any Governmental Body or any arbitrator or
arbitration panel.

 

                Purchaser Affiliate.  “Purchaser
Affiliate” shall mean any Person under common control with the Purchaser within
the meaning of Sections 414(b), (c), (m) and (o) of the Code, and the regulations
issued thereunder.

 

                Representatives.  “Representatives”
shall mean officers, directors, employees, agents, attorneys, accountants,
advisors and representatives.

 

                Restricted Territory.  “Restricted Territory” shall mean each county
or similar political subdivision of each State of the United States of America
(including each of the counties in the State of California), and each State,
territory or possession of the United States of America, Canada, Mexico,
Europe, Australia, Asia and Central and South America.

 

                Seller Affiliate.  “Seller
Affiliate” shall mean any Person under common control with the Seller within
the meaning of Sections 414(b), (c), (m) and (o) of the Code, and the
regulations issued thereunder.

 

                Seller Employee Plan.  “Seller Employee Plan” shall mean any plan,
program, policy, practice, Contract or other arrangement providing for
compensation, severance, termination pay,

 

 

A-4

 

 

deferred compensation, performance awards,
stock or stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether written, unwritten or otherwise, funded or
unfunded, including each “employee benefit plan,” within the meaning of Section
3(3) of ERISA (whether or not ERISA is applicable to such plan), that is or has
been maintained, contributed to, or required to be contributed to, by the
Seller or any Seller Affiliate for the benefit of any Transferred Employee, or
with respect to which the Seller or any Seller Affiliate has or may have any
liability or obligation.

 

                Tax.  “Tax” shall mean
any tax (including any income tax, franchise tax, capital gains tax, estimated
tax, gross receipts tax, value-added tax, surtax, excise tax, ad valorem tax,
transfer tax, stamp tax, sales tax, use tax, property tax, business tax,
occupation tax, inventory tax, occupancy tax, withholding tax or payroll tax),
levy, assessment, tariff, impost, imposition, toll, duty (including any customs
duty), deficiency or fee, and any related charge or amount (including any fine,
penalty or interest), that is, has been or may in the future be (a) imposed,
assessed or collected by or under the authority of any Governmental Body, or (b)
payable pursuant to any tax-sharing agreement or similar Contract.

 

                Technology.  “Technology”
shall mean any or all of the following: (i) works of authorship including,
without limitation, computer programs, source code and executable code, whether
embodied in software, firmware or otherwise, documentation, designs, files, net
lists, records, data and mask works; (ii) inventions (whether or not
patentable), improvements, and technology; (iii) proprietary and confidential
information, including technical data and customer and supplier lists, trade
secrets, discoveries, processes, formulas, and know how; (iv) databases, data
compilations and collections and technical data; (v) logos, trade names, trade
dress, trademarks, service marks; (vi) World Wide Web addresses, domain names
and sites; (vii) tools, methods and processes; and (viii) all instantiations of
the foregoing in any form and embodied in any media.

 

                Transactional Agreements.  “Transactional Agreements” shall mean: (a)
this Agreement; (b) the Assumption Agreement; and (c) the Transition Services
Agreement.

 

                Transactions.  “Transactions”
shall mean (a) the execution and delivery of the respective Transactional Agreements,
and (b) all of the transactions contemplated by the respective Transactional
Agreements, including: (i) the sale of the Assets by the Seller to the Purchaser
in accordance with this Agreement; (ii) the assumption of the Assumed
Liabilities by the Purchaser pursuant to the Assumption Agreement; and (iii)
the performance by the Seller and the Purchaser of their respective obligations
under the Transactional Agreements, and the exercise by the Seller and the
Purchaser of their respective rights under the Transactional Agreements.

 

 

A-5Exhibit 10.5

 

Execution Copy

 

EMPLOYMENT
AGREEMENT

 

AGREEMENT dated as of
December 26, 2005 (this “Agreement”) by
and between MDC PARTNERS INC., a
corporation existing under the laws of Canada (the “Company”), and GRAHAM
LAWRENCE ROSENBERG (the “Executive”).

 

W I T N E
S S E T H:

 

WHEREAS, the Company
and the Executive are parties to an employment agreement between the Executive
and the Company dated October 1, 2002 (the “Original Employment Agreement”), pursuant to which Executive
most recently served as a “Managing Director” of the Company;

 

WHEREAS, the parties
wish to amend and restate the Original Employment Agreement on the terms and
conditions hereinafter set forth;

 

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

 

1.                                      Employment

 

The Company agrees to continue to employ the
Executive during the Term specified in paragraph 2, and the Executive agrees to
accept such continued employment, upon the terms and conditions hereinafter set
forth.

 

2.                                      Term

 

Subject to the provisions contained in
paragraphs 6 and 7, the Executive’s employment by the Company shall continue
for a term commencing effective July 1, 2005 and expiring on the close of
business on June 30, 2007 (the “Initial Term”);
provided, however, the term of the Executive’s employment by the Company shall
continue for additional one-year periods thereafter unless and until either
party shall give to the other 30 days advance written notice of expiration of
the term (a “Notice of Termination”)
(the Initial Term and the period, if any, thereafter, during which the
Executive’s employment shall continue are collectively referred to as the “Term”). Any Notice of Termination given
under this paragraph 2 shall specify the date of termination. The Company shall
have the right at any time during such 30 day notice period, to relieve the
Executive of his offices, duties and responsibilities and to place him on a
paid leave-of-absence status, provided that during such notice period the
Executive shall remain a full-time employee of the Company and shall continue
to receive his then current salary compensation, bonus and other benefits as
provided in this Agreement. The date on which the Executive ceases to be
employed by the Company, regardless of the reason therefor, is referred to in
this Agreement as the “Date of Termination.”

 

 

3.                                      Duties
and Responsibilities

 

(a)                                  Title.
During the Term, the Executive shall have the position of Managing Director of
the Company.

 

(b)                                 Duties.
The Executive shall report directly to the Company’s President or such other
person with the role and responsibilities of such executive (the “MDC Executive”), at such times and in such
detail as the MDC Executive shall reasonably require. The Executive shall perform such
duties consistent with his position as designated in paragraph 3(a) and as
may be assigned to him from time to time by the MDC Executive, including
the following:

 

(i)                                  Working
with the CEO and/or MDC Executive in determining the Company’s ongoing strategic
plan;

(ii)                               Corporate
development matters, including completing M&A and divestiture initiatives
for the Company and its subsidiaries, as may be identified by the MDC
Executive;

(iii)                            Operational
oversight of individual business units identified by the MDC Executive (which
units may be modified from time to time), which shall include providing
partner firms with strategic, human resource, operational and financial support;
and

(iv)                           Corporate
finance matters, including completing capital raisings for the Company and its
subsidiaries, as may be directed by the MDC Executive.

 

(c)                                  Scope
of Employment. The Executive’s employment by the Company as described
herein shall be full-time and exclusive, and during the Term, the Executive
agrees that he will (i) devote all of his business time and attention, his
reasonable best efforts, and all his skill and ability to promote the interests
of the Company; and (ii) carry out his duties in a competent manner and
serve the Company faithfully and diligently under the direction of the MDC
Executive. Notwithstanding the foregoing, the Executive shall be permitted to (A) upon
prior written consent of the MDC Executive, serve on the board of directors of
two companies unaffiliated with the Company; provided that such companies are
not engaged in any activity which is competitive with the Company or its
subsidiaries and affiliates (collectively, the “MDC Group”), and (B) engage in charitable and civic
activities and manage his personal passive investments, provided that such
passive investments are not in a company which transacts business with the
Company or its affiliates or engages in business competitive with that
conducted by the Company (or, if such company does transact business with the
Company, or does engage in a competitive business, it is a publicly held
corporation and the Executive’s participation is limited to owning less than 1%
of its outstanding shares), and further provided that such activities
(individually or collectively) do not materially interfere with the performance
of his duties or responsibilities under this Agreement.

 

(d)                                 Office
Location. During the Term, the Executive’s services hereunder shall be
performed at the offices of the Company, which shall be within a twenty five
(25) mile radius of Toronto, Ontario, subject to necessary travel requirements
to the Company’s offices in 

 

2

 

New York City and other MDC Group company locations in order to carry
out his duties in connection with his position hereunder.

 

4.                                      Compensation

 

(a)                                  Base
Salary. As compensation for his services hereunder, during the Term, the
Company shall pay the Executive in accordance with its normal payroll
practices, an annualized base salary of Cdn $400,000, subject to periodic
review by the Human Resources & Compensation Committee of the Board of
Directors of the Company (the “Compensation
Committee”) to determine appropriate increases, if any, in
accordance with the Company’s practices and policies for other senior
executives (“Base Salary”).

 

(b)                                 Annual
Discretionary Cash Bonus. During the Term, in respect of all calendar years
beginning January 1, 2005, the Executive shall be eligible to receive an
annual discretionary cash bonus in an amount equal to up to 100% of the then
current Base Salary, based upon criteria determined by the MDC Executive and
the Compensation Committee, which criteria shall include the Executive’s
performance, the overall financial performance of the Company and such other
factors as the MDC Executive and the Compensation Committee shall deem
reasonable and appropriate (the “Annual
Discretionary Cash Bonus”). The MDC Executive shall communicate the
criteria for the Annual Discretionary Cash Bonus to the Executive within a
reasonable period of time after such criteria have been established. The Annual
Discretionary Cash Bonus will be paid in accordance with the Company’s normal
bonus payment procedures.

 

(c)                                  MDC
Stock Appreciation Rights. As of the date of this Agreement, the parties
acknowledge that the Executive has been awarded 78,333 Stock Appreciation
Rights (the “Existing SARs”) pursuant to the Company’s Stock Appreciation Rights
Plan (as amended from time to time, the “SAR
Plan”) in accordance with and subject to the terms and conditions of
separate SARs agreements entered into between the Company and the Executive
(the “Existing  SAR Agreements”).

 

(d)                                 MDC
Stock Options. As of the date of this Agreement, the parties acknowledge
that the Executive has been granted options to acquire up to 117,388 Class A
subordinate voting shares of the Company (the “Existing Stock  Options”) pursuant to the Company’s Stock Option Plan (as
amended from time to time, the “Stock Option
Plan”) (of which 30,763 of such Stock Options have been exercised)
in accordance with and subject to the terms and conditions of separate Stock
Option agreements entered into between the Company and the Executive (the “Existing  Stock Option
Agreements”).

 

(e)                                  Participation
in Equity Incentive Programs. The Executive shall also be eligible to
ongoing participation in all current and future equity incentive plans of the
Company, including but not limited to potential awards of stock options, stock
appreciation rights and/or awards of restricted shares of the Company.

 

3

 

5.                                      Expenses; Fringe Benefits

 

(a)                                  Expenses.
The Company agrees to pay or to reimburse the Executive for all reasonable,
ordinary, necessary and documented business or entertainment expenses incurred
during the Term in the performance of his services hereunder in accordance with
the policy of the Company as from time to time in effect. The Executive, as a
condition precedent to obtaining such payment or reimbursement, shall provide
to the Company any and all statements, bills or receipts evidencing the travel
or out-of-pocket expenses for which the Executive seeks payment or
reimbursement, and any other information or materials, as the Company may from
time to time reasonably require.

 

(b)                                 Benefit
Plans. During the Term, the Executive and, to the extent eligible, his
dependents, shall be eligible to participate in and receive all benefits under
any group health plans, welfare benefit plans and programs (including without
limitation, disability, group life (including accidental death and
dismemberment) and business travel insurance plans and programs) provided by
the Company to its senior executives and, without duplication, its employees
generally, subject, however, to the generally applicable eligibility and other
provisions of the various plans and programs in effect from time to time.

 

(c)                                  Retirement Plans.
During the Term, the Executive shall be eligible to participate in all
retirement plans and programs (including without limitation any profit sharing
plan) provided by the Company to its senior executives generally and, without
duplication, its employees generally, subject, however, to the generally
applicable eligibility and other provisions of the various plans and programs
in effect from time to time. In addition, during the Term, the Executive shall
be eligible to receive fringe benefits and perquisites in accordance with the
plans, practices, programs and policies of the Company from time to time in
effect which are made available to the senior executives of the Company
generally and, without duplication, to its employees generally.

 

(d)                                 Vacation. The
Executive shall be entitled to four weeks vacation in accordance with the
Company’s policies, with no right of carry over, to be taken at such times as
shall not materially interfere with the Executive’s fulfillment of his duties
hereunder, and shall be entitled to as many holidays, sick days and personal
days as are in accordance with the Company’s policy then in effect generally
for its employees.

 

(e)                                  Car Allowance and
other Perquisites. During the Term, the Company will provide the Executive
with an annual allowance in an aggregate amount equal to Cdn $20,000 per annum
(the “Perquisite Allowance”), to
cover the costs of leasing, insuring and maintaining an automobile for use in
the business of the Company, as well as other perquisites (including club
dues), to be paid in accordance with the Company’s normal payroll practices.

 

6.                                      Termination

 

(a)                                  Termination
for Cause. The Company, by direction of the Compensation Committee, the
Board of Directors or the MDC Executive, shall be entitled to terminate the 

 

4

 

Term and to discharge the Executive for “Cause”
effective upon the giving of written notice to the Executive. For purposes of
this Agreement, the term “Cause” shall mean:

 

(i)                                     the Executive’s
failure or refusal to materially perform his duties and responsibilities
as set forth in paragraph 3 hereof (other than as a result of a Disability (as defined
in paragraph 6(d) hereof), provided that the Executive or a representative
on his behalf has provided notice to the Company not more than 20 days
following the onset of Executive’s illness or physical or mental incapacity or
disability) or abide by the reasonable directives of the MDC Executive, or the
failure of the Executive to devote all of his business time and attention
exclusively to the business and affairs of the Company in accordance with the
terms hereof, in each case if such failure or refusal is not cured (if curable)
within 20 days after written notice thereof to the Executive by the Company;

 

(ii)                                  the willful and
unauthorized misappropriation of the funds or property of the Company;

 

(iii)                               the use of alcohol or
illegal drugs, interfering with the performance of the Executive’s obligations
under this Agreement, continuing after written warning;

 

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

 

(v)                                 the material
nonconformance with the Company’s policies against racial or sexual
discrimination or harassment, which nonconformance is not cured (if curable)
within 10 days after written notice to the Executive by the Company;

 

(vi)                              the commission in bad
faith by the Executive of any act which materially injures or could reasonably
be expected to materially injure the reputation, business or business
relationships of the Company;

 

(vii)                           the resignation by the
Executive on his own initiative (other than pursuant to a termination by the
Executive for “Good Reason” (as defined in paragraph 6(b) hereof);

 

(viii)                        any breach
(not covered by any of the clauses (i) through (vii) above) of
paragraphs 8, 9, 11 and 24, if such breach is not cured (if curable) within 20
days after written notice thereof to the Executive by the Company.

 

Any notice required to be given by the Company pursuant to clause (i), (v) or
(viii) above shall specify the nature of the claimed breach and the manner
in which the Company requires such breach to be cured (if curable). In the
event that the Executive is purportedly terminated for Cause and the arbitrator
appointed pursuant to paragraph 18 determines that Cause as defined herein was
not present, then such purported termination for Cause shall be deemed a
termination 

 

5

 

without Cause pursuant to paragraph 6(c) and the Executive’s
rights and remedies will be governed by paragraph 7(b), in full satisfaction
and in lieu of any and all other or further remedies the Executive may have
under this Agreement.

 

(b)                                 Termination
for Good Reason. Provided that a Cause event has not occurred and has not
been cured (if curable), the Executive shall be entitled to terminate this
Agreement and the Term hereunder for Good Reason (as defined below) at any time
during the Term by written notice to the Company not more than 20 days after
the occurrence of the event constituting such Good Reason. For purposes of this
Agreement, “Good Reason” shall be
limited to (i) a breach by the Company of a material provision of this
Agreement, which breach remains uncured (if curable) for a period of 20 days
after written notice of such breach from the Executive to the Company (such
notice to specify the nature of the claimed breach and the manner in which the
Executive requires such breach to be cured), (ii) the Company’s failure to
pay any compensation or benefits, as set forth in paragraphs 4 or 5, which
action is not reversed within 10 days after written notice of the breach from
the Executive to the Company, (iii) a material diminution of the Executive’s
duties and responsibilities as set forth in paragraph 3, without his prior
written consent, which breach remains uncured (if curable) for a period of 20
days after written notice of such breach from the Executive to the Company
(such notice to specify the nature of the claimed breach and the manner in
which the Executive requires such breach to be cured). In the event that the
Executive purportedly terminates his employment for Good Reason and the
arbitrator appointed pursuant to paragraph 18 determines that Good Reason as
defined herein was not present, then such purported termination for Good Reason
shall be deemed a termination for Cause pursuant to paragraph 6(a)(vii) and
the Executive’s rights and remedies will be governed by paragraph 7(a), in full
satisfaction and in lieu of any and all other or further remedies the Executive
may have under this Agreement.

 

(c)                                  Termination
without Cause. The Company, by direction of the Board or the MDC Executive,
shall have the right at any time during the Term to terminate the employment of
the Executive without Cause by giving written notice to the Executive setting
forth a Date of Termination.

 

(d)                                 Termination
for Death or Disability. In the event of the Executive’s death, the Date of
Termination shall be the date of the Executive’s death. In the event 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) in substantially the manner and to the extent required
hereunder prior to the commencement of such disability and the Executive shall
fail to perform such duties for periods aggregating 120 days, whether or
not continuous, in any continuous period of 360 days (such causes being herein
referred to as “Disability”), the Company shall have the right to terminate
the Executive’s employment hereunder as at the end of any calendar month during
the continuance of such Disability upon at least 30 days’ prior written notice
to him.

 

7.                                      Effect
of Termination of Employment.

 

(a)                                  Termination
by the Company for Cause; by the Executive without Good Reason; by Death or
Disability; or pursuant to a Notice of Termination delivered by the

 

6

 

Executive pursuant to paragraph 2 above.
In the event of the termination of the employment of the Executive (1) by
the Company for Cause; (2) by the Executive without Good Reason; (3) by
reason of death or Disability pursuant to paragraph 6(d); or (4) pursuant
to a Notice of Termination delivered by the Executive pursuant to paragraph 2
above, the Executive shall be entitled to the following, subject to any
appropriate offsets, as permitted by applicable law, for debts or money due and
payable by the Executive to the Company or an affiliate thereof (collectively, “Offsets”):

 

(i)                                     unpaid Base Salary
and Perquisite Allowance through, and any unpaid reimbursable expenses
outstanding as of, the Date of Termination;

 

(ii)                                  all
benefits, if any, that had accrued to the Executive through the Date of
Termination under the plans and programs described in paragraphs 5(b) and (c) above,
or any other applicable plans and programs in which he participated as an
employee of the Company, in the manner and in accordance with the terms of such
plans and programs; it being understood
that any and all rights that the Executive may have to severance payments
by the Company shall be determined and solely based on the terms and conditions
of this Agreement and not based on the Company’s severance policy then in
effect, if any; and

 

(iii)                               notwithstanding
anything to the contrary in any of the Existing SAR Agreements or Existing
Stock Option Agreements, the Executive will be entitled to exercise all
Existing Stock Options and Existing SARs which are vested as at the time of the
Date of Termination under this section 7(a) for a period ending on a
date which is the earlier of: (i) three (3) months from the Date of
Termination and (ii) the expiration of such Existing Stock Options or
Existing SARs.

 

In the event of termination of the employment of Executive in the
circumstances described in this paragraph 7(a), except as expressly provided in
this paragraph, the Company shall have no further liability to 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 and the
Executive’s employment or cessation of employment with the Company, provided
that the foregoing shall not apply to any outstanding indemnification
obligations of the Company in respect of the Executive’s good faith actions in
his capacity as a member, director or officer thereof arising on or prior to
the Date of Termination (“Outstanding
Indemnification Obligations”).

 

(b)                                 Termination
by the Company without Cause; by the Company pursuant to a Notice of
Termination delivered pursuant to paragraph 2 above; or by the Executive for
Good Reason. In the event of a termination (1) by the Company without
Cause; (2) by the Executive for Good Reason; or (3) by the Company
pursuant to a Notice of Termination delivered pursuant to paragraph 2 above,
the Executive shall be entitled to the following payments and benefits, subject
to any Offsets:

 

7

 

(i)                                     a
severance payment (the “ Severance Amount”)  in an amount equal to the product of 1.5
multiplied by the Executive’s “Total Remuneration”. For purposes of this
Agreement, “Total Remuneration” shall mean the
sum of (1) the Executive’s current Base Salary, (2) the Executive’s
Perquisite Allowance, plus (3) the highest Annual Discretionary Cash Bonus
earned by the Executive in the three (3) years ending December 31 of
the year immediately preceding the Date of Termination (which, for the purpose
of this calculation, shall include any guaranteed and non-guaranteed bonuses
and shall exclude any LTIP payments paid to the Executive during such period
pursuant to the Original Employment Agreement). The Severance Amount described
in this Section 7(b)(i), less applicable withholding of any tax
amounts,  shall be paid by the Company to
the Executive not later than 10 business days after the applicable Date of
Termination.

 

(ii)                                  his
Annual Discretionary Cash Bonus with respect to the calendar year prior to the
Date of Termination, when otherwise payable, but only to the extent not already
paid;

 

(iii)                            eligibility
for a pro-rata portion of his Annual Discretionary Cash Bonus with respect to
the calendar year in which the Date of Termination occurs, when otherwise
payable, (such pro-rata amount to be equal to the product of (A) the
amount of the Annual Discretionary Cash Bonus for such calendar year, times (B) a
fraction,  (x) the numerator of which
shall be the number of calendar days commencing January 1 of such year and
ending on the Date of Termination, and (y) the denominator of which shall equal
365;

 

(iv)                              unpaid
Base Salary and Perquisite Allowance through, and any unpaid reimbursable
expenses outstanding as of, the Date of Termination;

 

(v)                                 all
benefits, if any, that had accrued to the Executive through the Date of
Termination under the plans and programs described in paragraphs 5(b) and (c) above,
or any other applicable benefit plans and programs in which the Executive
participated as an employee of the Company, in the manner and in accordance
with the terms of such plans and programs; it being understood that any and all
rights that the Executive may have to severance payments by the Company
shall be determined and solely based on the terms and conditions of this
Agreement (without duplication) and not based on the Company’s severance policy
then in effect, if any;

 

(vi)                              continued
participation on the same basis in the plans and programs set forth in
paragraph 5(b) and to the extent permitted under applicable law, paragraph
5(c) (such benefits collectively called the “Continued 

 

8

 

Plans”)
in which the Executive was participating on the Date of Termination (as such
Continued Plans are from time to time in effect at the Company) for a period to
end on the earlier of (A) the one-year anniversary of the Date of
Termination and (B) the date on which the Executive is eligible to receive
coverage and benefits under the same type of plan of a subsequent employer;
provided, however, if the Executive is precluded from continuing his
participation in any Continued Plan, then the Company will be obligated to pay
him the economic equivalent of the benefits provided under the Continued Plan
in which he is unable to participate, for the period specified above, it being
understood that the economic equivalent of a benefit foregone shall be deemed
the lowest cost in the Province of Ontario that would be incurred by the
Executive in obtaining such benefit himself on an individual basis;

 

(vii)                           notwithstanding
anything to the contrary in any of the Existing Stock Option Agreements or
Existing SAR Agreements, if the Executive is terminated pursuant to this
paragraph 7(b), any and all unvested Existing Stock Options and Existing SARS
shall be deemed to have vested immediately prior to the Date of Termination;
and

 

(viii)                        notwithstanding
anything to the contrary in any of the Existing Stock Option Agreements or
Existing SAR Agreements, the Executive will be entitled to exercise all
Existing Stock Options and Existing SARs which are vested (or deemed to be
vested pursuant to paragraph 7(b)(vii)) as at the time of the Date of
Termination under this section 7(b) for a period ending on a date
which is the earlier of: (i) three (3) months from the Date of
Termination and (ii) the expiration of such Existing Stock Options and
Existing SARs.

 

In the event of termination of this Agreement in the circumstances
described in this paragraph 7(b), except as expressly provided in this
paragraph, the Company shall have no further liability to 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 and the Executive’s employment or
cessation of employment with the Company, provided that the foregoing shall not
apply to any Outstanding Indemnification Obligations.

 

The Executive shall be under no duty to mitigate damages hereunder. The
making of any severance payments and providing the other benefits as provided
in this paragraph 7(b) is conditioned upon the Executive signing and not
revoking a separation agreement in the form attached hereto as Exhibit A (the “Separation Agreement”). In the event the
Executive breaches any provisions of the Separation Agreement or the provisions
of paragraph 8 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 this paragraph 7(b),
without affecting its rights under this Agreement or the Separation Agreement.

 

9

 

(c)                                  Termination
by the Company without Cause; by the Executive for Good Reason; or by the
Company pursuant to a Notice of Termination delivered pursuant to paragraph 2
above, following a Change of Control. If within one (1) year after the
closing date of any Change of Control transaction, the Executive’s employment
is terminated: (1) by the Company without Cause; (2) by the Executive
for Good Reason; or (3) by the Company pursuant to a Notice of Termination
delivered pursuant to paragraph 2 above, the Executive shall be entitled to the
following payments and benefits, subject to any Offsets:

 

(i)                                    a
severance payment (the “Change in Control Severance
Amount”)  in an amount equal
to the product of two (2) multiplied by the Executive’s Total Remuneration.
The Change in Control Severance Amount described in this Section 7(c)(i),
less applicable withholding of any tax amounts, 
shall be paid by the Company to the Executive not later than 10 business
days after the applicable Date of Termination.

 

(ii)                                  his
Annual Discretionary Cash Bonus with respect to the calendar year prior to the
Date of Termination, when otherwise payable, but only to the extent not already
paid;

 

(iii)                            eligibility
for a pro-rata portion of his Annual Discretionary Cash Bonus with respect to
the calendar year in which the Date of Termination occurs, when otherwise
payable, (such pro-rata amount to be equal to the product of (A) the
amount of the Annual Discretionary Cash Bonus for such calendar year, times (B) a
fraction,  (x) the numerator of which
shall be the number of calendar days commencing January 1 of such year and
ending on the Date of Termination, and (y) the denominator of which shall equal
365;

 

(iv)                              unpaid
Base Salary and Perquisite Allowance through, and any unpaid reimbursable
expenses outstanding as of, the Date of Termination;

 

(v)                                 all
benefits, if any, that had accrued to the Executive through the Date of
Termination under the plans and programs described in paragraphs 5(b) and (c) above,
or any other applicable benefit plans and programs in which the Executive
participated as an employee of the Company, in the manner and in accordance
with the terms of such plans and programs; it being understood that any and all
rights that the Executive may have to severance payments by the Company
shall be determined and solely based on the terms and conditions of this
Agreement (without duplication) and not based on the Company’s severance policy
then in effect, if any;

 

(vi)                              continued
participation on the same basis in the Continued Plans in which the Executive
was participating on the Date of Termination (as 

 

10

 

such Continued Plans are from time to time in
effect at the Company) for a period to end on the earlier of (A) the
one-year anniversary of the Date of Termination and (B) the date on which
the Executive is eligible to receive coverage and benefits under the same type
of plan of a subsequent employer; provided, however, if the Executive is
precluded from continuing his participation in any Continued Plan, then the
Company will be obligated to pay him the economic equivalent of the benefits
provided under the Continued Plan in which he is unable to participate, for the
period specified above, it being understood that the economic equivalent of a
benefit foregone shall be deemed the lowest cost in the Province of Ontario
that would be incurred by the Executive in obtaining such benefit himself on an
individual basis;

 

(vii)                          notwithstanding
anything to the contrary in any of the Existing Stock Option Agreements or
Existing SAR Agreements, if the Executive is terminated pursuant to this
paragraph 7(c), any and all unvested Existing Stock Options and Existing SARS
shall be deemed to have vested immediately prior to the Date of Termination;
and

 

(viii)                       notwithstanding
anything to the contrary in any of the Existing Stock Option Agreements or
Existing SAR Agreements, the Executive will be entitled to exercise all
Existing Stock Options and Existing SARs which are vested (or deemed to be
vested pursuant to paragraph 7(c)(vii)) as at the time of the Date of Termination
under this section 7(c) for a period ending on a date which is the
earlier of: (i) three (3) months from the Date of Termination and (ii) the
expiration of such Existing Stock Options and Existing SARs.

 

For the purposes of this Agreement, a “Change of Control” shall be limited to the
closing of a transaction which results in (i) any person(s) or
company(ies) acting jointly or in concert owning, directly or indirectly,
equity of the Company representing greater than 50% of the voting power of the
Company’s outstanding securities, or (ii) the Company selling all or
substantially all of its assets (in each instance other than any transfer by
the Company or any of its affiliates of their respective interest in the
Company to another wholly-owned subsidiary of another MDC Group company).

 

In the event of termination of this Agreement
in the circumstances described in this paragraph 7(c), except as expressly
provided in this paragraph, the Company shall have no further liability to 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 and the
Executive’s employment or cessation of employment with the Company, provided
that the foregoing shall not apply to any Outstanding Indemnification
Obligations.

 

11

 

The Executive shall be under no duty to
mitigate damages hereunder. The making of any severance payments and providing
the other benefits as provided in this paragraph 7(c) is conditioned upon
the Executive signing and not revoking a Separation Agreement. In the event the
Executive breaches any provisions of the Separation Agreement or the provisions
of paragraph 8 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 this paragraph 7(c),
without affecting its rights under this Agreement or the Separation Agreement.

 

The Company represents and warrants to the
Executive that the provisions set forth in Sections 7(a)(iii), 7(b)(vii),
7(b)(viii), 7(c)(vii) and 7(c)(viii) of this Agreement, have been
approved by the Company’s Compensation Committee.

 

8.                                      Non-Solicitation/Non-Servicing
Agreement and Protection of Confidential Information

 

(a)                                  Non-Solicitation/Non-Servicing. The
parties hereto agree that the covenants given in this paragraph 8 are being
given incident to the agreements and transactions described herein, and that
such covenants are being given for the benefit of the Company. Accordingly, the
Executive acknowledges (i) that the business and the industry in which the
Company competes is highly competitive; (ii) that as a key executive of
the Company he has participated in and will continue to participate in the
servicing of current clients and/or the solicitation of prospective clients,
through which, among other things, the Executive has obtained and will continue
to obtain knowledge of the “know-how” and business practices of the Company, in
which matters the Company has a substantial proprietary interest; (iii) that
his employment hereunder requires the performance of services which are
special, unique, extraordinary and intellectual in character, and his position
with the Company places and placed him in a position of confidence and trust
with the clients and employees of the Company; and (iv) that his rendering
of services to the clients of the Company necessarily required and will
continue to require the disclosure to the Executive of confidential information
(as defined in paragraph 8(b) hereof) of the Company. In the course of the
Executive’s employment with the Company, 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, that the Executive make the
covenants contained herein and that the Company would not have entered into
this Agreement unless the covenants set forth in this paragraph 8 were
contained in this Agreement. Accordingly, the Executive agrees that during the
period that he is employed by the Company and for a period of eighteen (18)
months thereafter (such period being referred to as the “Restricted
Period”), he shall not, as an individual, employee, 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 his ceasing to be employed by the
Company:

 

12

 

(i)                                     attempt
in any manner to solicit or accept from any client business of the type
performed by the Company or 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; or

 

(iii)                               render
to or for any client any services of the type which are rendered by the
Company.

 

As used in this paragraph 8, the term “Company”
shall include any subsidiaries of the Company and the term “client” shall mean (1) anyone who is a client of the
Company on the Date of Termination, or if the Executive’s employment shall not
have terminated, at the time of the alleged prohibited conduct (any such
applicable date being called the “Determination Date”);
(2) anyone who was a client of the Company at any time during the one year
period immediately preceding the Determination Date; (3) any prospective
client to whom the Company had made a new business presentation (or similar
offering of services) at any time during the one year period immediately
preceding the Date of Termination; and (4) any prospective client to whom
the Company made a new business presentation (or similar offering of services)
at any time within six months after the Date of Termination (but only if
initial discussions between the Company and such prospective client relating to
the rendering of services occurred prior to the Date of Termination, and only
if the Executive participated in or supervised such discussions). For purposes
of this clause, it is agreed that a general mailing or an incidental contact
shall not be deemed a “new business presentation or similar offering of
services” or a “discussion”. In addition, “client” shall also include any
clients of other companies operating within the MDC group of companies to whom
the Executive rendered services (including supervisory services) at any time
during the six-month period prior to the Determination Date. In addition, if
the client is part of a group of companies which conducts business through
more than one entity, division or operating unit, whether or not separately
incorporated (a “Client Group”), the term “client”
as used herein shall also include each entity, division and operating unit of
the Client Group where the same management group of the Client Group has the
decision making authority or significant influence with respect to contracting
for services of the type rendered by the Company.

 

(b)                                 Confidential
Information. In the course of the Executive’s employment with the Company
(and its predecessor), he has acquired and will continue to 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, 

 

13

 

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 his 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 his own benefit, or for the benefit of third parties. The
Executive agrees that the foregoing restrictions shall apply whether or not any
such information is marked “confidential” and regardless of the form of
the information. 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, he will 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
paragraph 8(b) to permit a particular disclosure. In the event that such
protective order or other remedy is not obtained, or that the Company waives
compliance with the provisions of this paragraph 8(b) to permit a
particular disclosure, the Executive will furnish only that portion of the
confidential information which he is legally required to disclose and, at the
Company’s expense, will cooperate with the efforts of the Company to obtain a
protective order or other reliable assurance that confidential treatment will
be accorded the confidential information. 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 him or made available to him during his employment with the Company
(whether or not the material constitutes or contains confidential information),
and in connection with the performance of his duties hereunder, shall be the
property of the Company and shall be delivered to the Company on the
termination of the Executive’s employment with the Company or at any other time
upon request. Except in connection with the Executive’s employment with the
Company, the Executive agrees that he will not make or retain copies or
excerpts of the material; provided that the Executive shall be entitled to
retain his personal files.

 

(c)                                  Remedies.
If the Executive commits or threatens to commit a breach of any of the
provisions of paragraphs 8(a) or (b), the Company shall have the right to
have the provisions of this Agreement specifically enforced by the arbitrator
appointed under paragraph 18 or 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
damages as it can show it has sustained by reason of such breach.

 

14

 

(d)                                 Acknowledgements.
The parties acknowledge that (i) the type and periods of restriction
imposed in the provisions of paragraphs 8(a) and (b) 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; (ii) the
time, scope and other provisions of this paragraph 8 have been specifically
negotiated by sophisticated commercial parties, represented by legal counsel,
and are given as an integral part of the transactions contemplated by this
Agreement; and (iii) because of the nature of the business engaged in by
the Company and the fact that clients can be and are serviced by the Company
wherever they are located, it is impractical and unreasonable to place a
geographic limitation on the agreements made by the Executive herein. The
Executive specifically acknowledges that his being restricted from soliciting
and servicing clients and prospective clients as contemplated by this Agreement
will not prevent him from being employed or earning a livelihood in the type of
business conducted by the Company. If any of the covenants contained in
paragraphs 8(a) or (b), 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 paragraph 8 (collectively, the “Protective
Covenants”) is separate, distinct and severable. All rights, remedies
and benefits expressly provided for in this Agreement are cumulative and are
not exclusive of any rights, remedies or benefits provided for by law or in
this Agreement, and the exercise of any remedy by a party hereto shall not be
deemed an election to the exclusion of any other remedy (any such claim by the
other party being hereby waived). 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 Protective Covenant. The unenforceability of any
Protective Covenant shall not affect the validity or enforceability of any
other Protective Covenant or any other provision or provisions of this
Agreement.

 

(e)                                  Notification of
Restrictive Covenants. Prior to accepting employment with any person, firm
or entity during the Restricted Period, the Executive shall notify the
prospective employer in writing of his obligations pursuant to this paragraph 8
and shall simultaneously provide a copy of such notice to the Company (it being
agreed by the Company that such notification required under this paragraph 8(e) shall
not be deemed a breach of the confidentiality provisions of this Agreement).

 

(f)                                    Tolling. The temporal duration of the non-solicitation/non-servicing
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
non-solicitation/non-servicing covenants set forth herein, and all restrictions
shall automatically be extended by the period of the Executive’s violation of
any such restrictions.

 

15

 

9.                                      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 in the course of his employment hereunder,
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, he will take all steps necessary to
secure the rights thereto to the Company by patent, copyright or otherwise.

 

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 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 and Executive agree that Executive’s rights
and obligations under this Agreement are personal to the Executive, and 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, provided that the rights of the Executive to
receive certain benefits upon death as expressly set forth under paragraph 7(a) of
this Agreement shall inure to the Executive’s estate and heirs. The rights and
obligations of the Company hereunder shall be binding upon and run in favor of
the successors and assigns of the Company.

 

12.                               Modification

 

This Agreement may not be orally canceled,
changed, modified or amended, and

 

16

 

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 MDC Executive.

 

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 the Executive’s employment to the extent
necessary to the intended preservation of such rights and obligations,
specifically paragraphs 7, 8, 9, 10, 11, 12, 13, 14, 15, 18, 23 and 24.

 

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 the Executive:

 

Mr. Graham L. Rosenberg

c/o Goodmans LLP

250 Yonge Street

Suite 2400

Toronto, ON

M5B 2M6

 

Attention: 
Avi Greenspoon

Fax: (416) 979-1234

 

If to the Company:

 

c/o MDC Partners Inc.

950 Third Avenue

New York, NY 
10022

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.

 

17

 

15.                               Applicable
Law

 

This Agreement shall be
governed by, enforced under, and construed in accordance with the laws of the
Province of Ontario and the federal laws of Canada applicable therein.

 

16.                               No
Conflict

 

The Executive represents and warrants that he
is not subject to any agreement, instrument, order, judgment or decree of any
kind, or any other restrictive agreement of any character, which would prevent
him from entering into this Agreement or which would be breached by the
Executive upon his performance of his duties pursuant to this Agreement.

 

17.                               Entire
Agreement

 

This Agreement and the documents referenced herein
represent the entire agreement between the Company and the Executive with
respect to the employment of the Executive by the Company, and all prior
agreements (including, without limitation, the Original Employment Agreement),
plans and arrangements relating to the employment of the Executive by the
Company are nullified and superseded hereby.

 

18.                               Arbitration

 

(a)                                  The
parties hereto agree that any dispute, controversy or claim arising out of,
relating to, or in connection with this Agreement (including, without
limitation, any claim regarding or related to the interpretation, scope,
effect, enforcement, termination, extension, breach, legality, remedies and
other aspects of this Agreement or the conduct and communications of the
parties regarding this Agreement and the subject matter of this Agreement)
shall be settled in private by arbitration pursuant to the Arbitrations Act (Ontario) in Toronto,
Ontario by a single arbitrator selected by the parties or, if the parties
cannot agree, by a single arbitrator appointed by the Ontario Superior Court of
Justice. The arbitrator may grant
injunctions or other relief in such dispute or controversy. All awards
of the arbitrator shall be binding and non-appealable. Judgment upon the award
of the arbitrator may be entered in any court having jurisdiction. The
arbitrator shall apply Ontario law to the merits of any dispute or claims,
without reference to the rules of conflicts of law applicable therein. Suits
to compel or enjoin arbitration or to determine the applicability or legality
of arbitration shall be brought in the Ontario Superior Court of Justice in the
City of Toronto. Notwithstanding the foregoing, no party to this Agreement
shall be precluded from applying to a proper court for injunctive relief by reason
of the prior or subsequent commencement of an arbitration proceeding as herein
provided. No party or arbitrator shall disclose in whole or in part to any
other person, firm or entity any confidential information submitted in
connection with the arbitration proceedings, except to the extent reasonably
necessary to assist counsel in the arbitration or preparation for arbitration
of the dispute. Confidential Information may be disclosed to (i) attorneys,
(ii) parties, and (iii) outside experts requested by either party’s
counsel to furnish technical or expert services or to give testimony at the
arbitration proceedings, subject, in the case of such experts, to execution of
a legally binding written statement that such expert is fully familiar with the
terms 

 

18

 

of this provision, agree to comply with the confidentiality terms of
this provision, and will not use any confidential information disclosed to such
expert for personal or business advantage.

 

(b)                                 The
Executive has read and understands this paragraph 18. The Executive understands
that by signing this Agreement, the Executive agrees to submit any claims
arising out of, relating to, or in connection with this Agreement, or the
interpretation, validity, construction, performance, breach or termination
thereof, or his employment or the termination thereof, to binding arbitration,
and that this arbitration provision constitutes a waiver of the Executive’s
right to a jury trial and relates to the resolution of all disputes relating to
all aspects of the employer/employee relationship.

 

(c)                                  To
the extent that any part of this paragraph 18 is found to be legally
unenforceable for any reason, that part shall be modified or deleted in
such a manner as to render this paragraph 18 (or the remainder of this
paragraph 18) legally enforceable and as to ensure that except as otherwise
provided in clause (a) of this paragraph 18, all conflicts between the
Company and the Executive shall be resolved by neutral, binding arbitration. The
remainder of this paragraph 18 shall not be affected by any such modification
or deletion but shall be construed as severable and independent. If a court
finds that the arbitration procedures of this paragraph 18 are not absolutely
binding, then the parties hereto intend any arbitration decision to be fully
admissible in evidence, given great weight by any finder of fact, and treated
as determinative to the maximum extent permitted by law.

 

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.                               Withholdings

 

The Company may withhold from any
amounts payable under this Agreement such federal, state or local taxes as
shall be required to be withheld pursuant to any applicable law or regulation.

 

21.                               Counterparts

 

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

 

22.                               No
Strict Construction

 

The language used in this Agreement will be deemed to
be the language chosen by the Company 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.

 

19

 

23.                               Publicity

 

Subject to the provisions of the next sentence, no
party to this Agreement shall issue any press release or other public document
or make any public statement relating to this Agreement or the matters
contained herein without obtaining the prior approval of the Company and the
Executive. Notwithstanding the foregoing, the foregoing provision shall not
apply to the extent that the Company is required to make any announcement
relating to or arising out of this Agreement by virtue of applicable securities
laws or other stock exchange rules, or any announcement by any party pursuant
to applicable law or regulations.

 

24.                               Non-
Disparagement

 

Following the date hereof, the Executive and
the Company shall each use their reasonable best efforts not to disparage,
criticize or make statements to the detriment of the other.

 

*                                                                                         *                                                                                         *                                                                                         *                                                                                         *

 

20

 

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

 

 

	
   

  	
  MDC PARTNERS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Graham L. Rosenberg

  

 

21

 

Exhibit A to Employment Agreement

 

 

                  [Insert
Date]

 

Graham Rosenberg

 

Re:                             Separation
Agreement and General Release

 

Dear                         :

 

1.                                      Your
employment with MDC Partners Inc. (the “Company”)
pursuant to the Employment Agreement between the Company and you dated December 26
, 2005 (the “Employment Agreement”), or
otherwise, shall terminate effective on 
the close of business on (the “Termination Date”).
You hereby confirm your removal as of the Termination Date from any position you
held as an employee, officer, Director or Manager of the Company or any Company
operating within the MDC Group of companies (the “Group”).

 

2.                                      The Company
agrees to pay you severance compensation and benefits in accordance with the
applicable clause of paragraph 7 of the Employment Agreement.

 

3.                                      You
shall submit to the Company your reimbursement request in accordance with
Company policy for any unpaid business or entertainment expenses incurred by
you through the Termination Date in respect of which you are entitled to be
reimbursed under Company policy.

 

4.                                      From and after
the Termination Date, except for such rights under this Agreement or the
Employment Agreement, you shall no longer be entitled to receive any further
payments, compensation or other monies (including severance compensation) from
the Company or any of its affiliates or to receive any of the benefits or
participate in any benefit plan or program of the Company or any of its
affiliates, including without limitation, any salary payment, bonus payment,
severance payment, salary continuation payment, accrued vacation or unused
personal days and expense reimbursements or other benefits referred to in the
Employment Agreement.

 

5.                                      You
hereby acknowledge and affirm your obligations under the provisions of
paragraph 8 of the Employment Agreement.

 

6.                                      Notwithstanding
your termination of employment as provided in this Agreement, the parties
hereto agree that the provisions of paragraphs 8 through 24 of the Employment
Agreement shall survive such termination to the extent necessary to the
intended preservation of the rights and obligations set forth in such
paragraphs.

 

22

 

7.                                      (a)                                  You,
for yourself, your heirs, executors, administrators, agents, representatives,
successors and assigns, hereby irrevocably and unconditionally release the
Company and its affiliates, and each of their respective employees,
shareholders, agents, officers, directors, attorneys, representatives,
successors and assigns of the Company and its affiliates (collectively, the “Releasees”), from any and all charges, complaints, claims,
liabilities, obligations, promises, agreements, causes of action, rights,
costs, losses, debts and expenses of any nature whatsoever, known or unknown,
(collectively, the “Claims”), which
you, your heirs, executors, administrators, representatives, successors and
assigns ever had, now have or hereafter may have (either directly or
indirectly, derivatively or in any other representative capacity) by reason of
any matter, fact or cause whatsoever from the beginning of time to the date of
this Agreement, including without limitation, any and all claims based upon or
arising out of your Employment Agreement, your employment with the Company or
your termination of employment with the Company; provided, however, the
foregoing shall not apply to or release any of your rights under the terms of
this agreement, or any existing rights which by their express terms survive the
termination of the Employment Agreement (collectively, the “Outstanding Rights”).

 

(b)                                 You represent that you
have not filed or permitted to be filed against the Company (or the other
Releasees), individually or collectively, any lawsuits and you covenant and
agree that you will not do so at any time hereafter with respect to the subject
matter of this Agreement and claims released pursuant to this Agreement
(including, without limitation, any claims relating to the termination of your
employment), except as may be necessary to enforce this Agreement or any
of the Outstanding Rights, to obtain benefits described in or granted under
this Agreement or any of the Outstanding Rights, or to seek a determination of
the validity of the waiver of your rights under applicable law.

 

(c)                                  You agree to
cooperate on a reasonable basis with the Company and its counsel in connection
with any investigations, administrative proceedings or litigation relating to
any matter in which you were involved or of which you had knowledge as a result
of your employment with the Company.

 

(d)                                 You agree that you
will not encourage or voluntarily cooperate with any other current or former
employee of the Company (or their affiliates) or any other potential plaintiff,
to commence any legal action or make any claim against the Company (or any
affiliate) in respect of such person’s employment or termination of employment
with or by the Company (or any affiliate thereof) or otherwise.

 

(e)                                  You agree that on and
after the Termination Date you will not apply or seek employment with the
Company or any of its affiliates at any location or facility, and you hereby
waive and release any right to be considered for such employment.

 

(f)                                    This Agreement does
not constitute an admission by the Company of any violation of any federal,
state, or local law or any contractual or other obligations, or of any wrongdoing
whatsoever.

 

8.                                      For good and
valuable consideration, the Company, on its behalf and on behalf of each of its
affiliates and their respective successors and assigns, hereby irrevocably and 

 

23

 

unconditionally release you from any and all Claims which any of them
ever had, now have or hereafter may have (either directly or indirectly,
derivatively or in any other representative capacity) by reason of any matter,
fact or cause from the beginning of time to the date of this Agreement arising
out of your performance of duties as an employee or officer of the Company or
another member of the Group or your termination of employment with the Company,
except if a Claim arises out of your fraudulent conduct, your misappropriation
or embezzlement of funds, or any other unlawful conduct; provided, however, the
foregoing release shall not apply to or release any rights of the Company under
the terms of this Agreement.

 

9.                                      You
agree to keep secret and strictly confidential the existence of this Agreement
and further agree not to disclose, make known, discuss or relay any information
concerning this Agreement, or any of the discussions regarding the terms of
this Agreement, leading up to the execution of it, to anyone other than your
tax advisor, accountant, attorney, spouse or members of your immediate family,
provided that any such party to whom you make such disclosure agrees to keep
such information confidential and not disclose it to others. The foregoing
shall also not prohibit disclosure (i) as may be ordered by any
regulatory agency or court or as required by other lawful process, or (ii) as
may be necessary for the prosecution of claims relating to the performance
or enforcement of this Agreement or (iii) as may become generally
available to the public other than by breach of this provision or (iv) you
learn from a third party who is not under an obligation of confidence to the
Company.

 

10.                               In
the event of a breach of the terms of this Agreement by any party, the
non-breaching party shall be entitled to all damages allowed under applicable
law.

 

11.                               (a)                                  As
used in this Agreement (i) “affiliate” of
any Person (as defined below) shall mean any Person that directly, or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with such Person, and (ii) a “Person” shall mean or include an individual, a company, a
limited liability company, a corporation or any other form of business
entity.

 

(b)                                 All prior negotiations
and discussions between the parties with respect to the subject matter hereof
are merged into this Agreement. No representations by or on behalf of any party
were made or relied upon except as set forth herein. This Agreement may not
be changed, amended or modified, except by a writing signed by the party
affected by such change, amendment or modification.

 

(c)                                  In the event any
provision of this Agreement is found to be void and unenforceable by a court or
other tribunal of competent jurisdiction, the remaining provisions of this
Agreement shall nevertheless be binding upon the parties hereto with the same
effect as though the void or unenforceable part had been severed and
deleted or reformed to be enforceable.

 

(d)                                 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. This Agreement shall be binding upon, and inure to the 

 

24

 

benefit of, you and your heirs, executors, administrators, successors
and assignors, and MDC Partners, the Company and their respective successors and
assignors.

 

IN WITNESS WHEREOF,
the parties hereto have set their hands as of the date first above set forth.

 

 

	
   

  	
  MDC Partners Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Graham L. Rosenberg

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
							

 

25

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