MDC Partners Inc Annual Report 2010

FY2010 Annual Report · MDC Partners Inc
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                                                  “WHERE GREAT TALENT LIVES” 

2010 ANNUAL REPORT 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dear Fellow Shareholders: 

What a transformative 2010 for MDC Partners. 

We continued to build a business unlike any other in the marketing communications 
industry. 

We bolstered our market leadership in numerous high growth areas through the 
investment in several new partner firms. 

We added talent and leadership that make our roster of professionals the envy of the 
industry. 

We added clients to our already strong portfolio. 

We made certain that our entire network not only understands how consumers consume 
influence in a digital economy, but in a mobile and social one as well. 

And likely most important to you, we delivered industry leading financial results and 
significant shareholder value. 

But what led to all of these accomplishments?  Let me provide some detail. 

The marketing role has changed and continues to change dramatically. MDC is right in 
the thick of that change, and is truly a thought-leader, having developed a set of very 
unique core competencies, some of which have forced marketers to rethink their 
traditional way of doing business, and others that are defining the future of this industry.  

What is perhaps surprising to many of you, however, is that we're not leading this change 
solely as the creator of cool and effective advertising campaigns, though we certainly do 
that exceedingly well. What we're doing is focusing on transformation of the way our 
clients and their brands interact with consumers to deliver tangible, measurable financial 
performance, not just making brands famous.  

As important and unlike our peers, MDC has never operated as a clumsy conglomerate. 
Rather, we are a nimble and adaptive network of partners. We are now, more than ever, 
insurgents who offer a trustworthy and valuable alternative to the old holding company 
model.  Our focus on transparency and accountability, at the corporate, partner, and client 
levels, informs our marketing capabilities and platforms. We meet the needs of 
increasingly skeptical and demanding consumers and by extension, serve our clients and 
their shareholders. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
But we can’t rest on our laurels.  We need to continue to evolve and grow at a faster pace 
than the other existing and emerging industry participants out there.   

Eighteen months ago, we took a contrarian point of view to aggressively grow the 
business through acquisition.  We decided to move forward with this strategy at a time 
when everyone was scared to make any bold moves, or really, any moves at all.  Not us.  
Since the beginning of 2010 alone, we invested upwards of $27 million in thought 
leadership and talent, adding to the network 14 highly entrepreneurial partners, including 
Anomaly, 72andSunny, Relevent, Team Enterprises, Kwittken & Co, kenna, Capital C, 
Allison & Partners, and Sloane & Company.  Most were quite modest in size, but all 
were businesses that immediately helped us achieve scale in the critical growth areas, and 
helped us win new business immediately.   

In 2008, we communicated to you a goal of driving our interactive and digital business to 
at least 40% of revenues. We wanted to do this by the end of 2011.  We moved quickly 
and strategically, pulling together a group of people who truly understood, and continue 
to understand, what technology and social media means for the future of marketing.  As 
of the first quarter of 2010, we blew through our 40% goal and by the fourth quarter of 
2010, digital and technology development services comprised 50% of our business, well 
in excess of our competitors.  MDC is now in the best position among its peers for where 
the media landscape is going, not where it came from. Our partners are on the leading 
edge of creating award-winning mobile applications, interactive experiences and social 
marketing platforms for clients.  There is no doubt in my mind that 2010 was our most 
innovative year ever. 

All of this meant that we had an extraordinary year in terms of our financial success.  As 
the economy recovered, our business accelerated.  Organic revenues grew 7.1% for the 
year, exceeding our peers despite MDC’s materially more difficult comparisons given our 
outperformance during the economic downturn in 2008 and 2009.  Overall revenue grew 
28% and EBITDA grew 21%. Our Strategic Marketing Services Group maintained 
double digit organic revenue growth for the year and our Performance Marketing 
Services Group saw organic revenue growth turn positive in Q4 of 2010, which we 
expect to continue in the coming year. 

We have also become a significant generator of free cash flow.  Including the $74 million 
of total free cash flow generated in 2010, MDC has generated over $170 million of cash 
over the last three years.  This has enabled us to not only fund our successful acquisition 
program, but also pay out a meaningful and growing dividend to you.  Over the course of 
the year, we increased the dividend by 30% and we have pledged to continue to increase 
it as free cash flow grows. 

Very importantly, we were able to retain the majority of our key clients, and further 
secured $77.6 million worth of new business, net of client losses. This represents an 
astounding 227% increase from 2009 levels and gives us tremendous visibility and 
momentum heading into 2011. 

2

 
 
 
 
 
 
 
After a year like we just had, others may stop to take a breath. We won’t.   

We are now entering the next five year growth phase of our business.  We will leverage 
the impressive capital we have built with our brand, our extraordinary talent base and 
now our solid economic profile.  We expect to continue to capture more share of wallet 
and more share of market from clients of all sizes.  All of the building blocks have now 
been placed to have an even better year in 2011 than we did in 2010.  

We will focus on areas of the business that will help clients drive incremental gains on 
marketing investment. No longer is it acceptable to say, ‘I know that half my advertising 
doesn't work, I just don't know which half’. We have begun to crack the code on that, and 
are really differentiating ourselves as an organization that can bring tangible, measurable, 
transformational return on marketing investment for clients. This means that we will 
accelerate our investment in analytics, data mining, database marketing, and consumer 
insights, in addition to technology, social media, and experiential marketing.  

Given the success of our recent acquisition strategy, as well as our continued ability to 
generate substantial excess free cash flow, we're going to continue to uncover the right 
strategic tuck-under opportunities.  We also plan on leveraging our growing presence 
overseas to capitalize on some very unique opportunities abroad. 

We’re going to  maintain a very disciplined approach with our acquisitions in 2011. We 
will do nothing unless it makes sense, both strategically, operationally and financially. 
Like we are asserting to our clients, investment capital is a precious, scarce resource and 
it should be treated that way. We expect that all investment spending will drive returns to 
shareholders for many, many years to come. 

The opportunity to drive shareholder value is greater today than ever before. But we are 
nowhere near done.  We’re so excited about what the future holds for our business.  If we 
continue to execute on our business plan, we believe there is significant incremental 
opportunity for shareholder value creation. 

In closing, I would like to thank our management team, our dedicated group of 6,000 plus 
talented employees and partners, our Board of Directors, and you, our shareholders. Your 
continued confidence and investment in our business is truly invaluable. With your 
partnership, I look forward to another strong year in 2011. 

Best Regards, 

Miles S. Nadal 
Founder, Chairman, & Chief Executive Officer 

 
 
 
 
 
 
  
 
 
 
 
 
 
Comparison of 5 Years’ Cumulative Total Return among MDC Partners,
the S&P 500 Index and Peer Group

Set forth below is a line graph comparing the yearly percentage change in the company’s cumulative total
shareholder return for the last ﬁve years to that of the Standard & Poor’s 500 Stock Index and a peer group of
publicly held corporate communications and marketing holding companies. The peer group consists of The
Interpublic Group of Companies, Inc., Omnicom Group, Inc. and WPP Group plc. The graph below shows the
value at the end of each year (December 31st) of each $100 invested in our common stock, the S&P 500
Index and the peer group. The graph assumes the reinvestment of dividends. Total shareholder return for the
peer group is weighted according to market capitalization at the beginning of each annual period.

MDC Partners Inc.
Comparison of 5-Year Cumulative Total Return

$300

$250

$200

$150

$100

$50

$0

MDC Partners
S&P 500
Peer Group

2005

2006

2007

2008

2009

2010

MDC Partners . . . . . . . . . . . . . . . . .
S&P 500 Index. . . . . . . . . . . . . . . . .
Peer Group . . . . . . . . . . . . . . . . . . .

2005
100.00
100.00
100.00

2006
115.18
115.79
125.82

2007
152.27
122.16
114.18

2008
47.56
76.96
75.07

2009
130.36
97.33
94.96

2010
278.08
111.99
121.10

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2010
Commission File Number 001-13178
MDC PARTNERS INC.

(Exact Name of Registrant as Speciﬁed in Its Charter)

Canada
(State or Other Jurisdiction of
Incorporation or Organization)

98-0364441
(I.R.S. Employer
Identiﬁcation Number)

950 Third Avenue,
New York, NY, 10022
(646) 429-1800
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange on Which Registered

Class A Subordinate Voting Shares, no par value

NASDAQ; Toronto Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as deﬁned in Rule 405 of the Securities

Act. Yes (cid:2) No (cid:3)

Indicate by check mark if the registrant is not required to ﬁle reports pursuant to Section 13 or Section 15(d) of the

Act. Yes (cid:2) No (cid:3)

Indicate by check mark whether the Registrant (1) has ﬁled all reports required to be ﬁled by Section 13 or 15(d) of

the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was
required to ﬁle such reports), and (2) has been subject to such ﬁling requirements for the past 90 days. Yes (cid:3) No (cid:2)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if
any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and
post such ﬁles). Yes □ No □

Indicate by check mark if disclosure of delinquent ﬁlers pursuant to Item 405 of Regulation S-K is not contained

herein, and will not be contained, to the best of registrant’s knowledge, in deﬁnitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. □

Indicate by check mark whether the registrant is a large accelerated ﬁler, an accelerated ﬁler, a non-accelerated ﬁler

or a smaller reporting company. (Check one):

Large Accelerated Filer □ Accelerated Filer (cid:3) Non-Accelerated □ Smaller reporting company □

Indicate by check mark whether the registrant is a shell company (as deﬁned in Rule 12b-2 of the Act).

Yes (cid:2) No (cid:3)

The aggregate market value of the shares of all classes of voting and non-voting common stock of the registrant held

by non-affiliates as of June 30, 2010 was approximately $260.7 million, computed upon the basis of the closing sales
price ($10.48/share) of the Class A subordinate voting shares on that date.

As of March 1, 2011, there were 29,536,114 outstanding shares of Class A subordinate voting shares without par

value, and 2,503 outstanding shares of Class B multiple voting shares without par value, of the registrant.

MDC PARTNERS INC.

TABLE OF CONTENTS

PART I

Item 1.

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1A.

Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1B. Unresolved Staff Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 2.

Item 3.

Item 4.

Item 5.

Item 6.

Item 7.

Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reserved. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

Market for Registrant’s Common Equity and Related Stockholder Matters . . . . . . . . . .

Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 7A. Quantitative and Qualitative Disclosures About Market Risk. . . . . . . . . . . . . . . . . . . .

Item 8.

Item 9.

Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9A.

Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Item 10.

Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . .

Item 11.

Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 12.

Security Ownership of Certain Beneﬁcial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 13.

Certain Relationships and Related Transactions, and Director Independence . . . . . . . . .

Item 14.

Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 15.

Exhibits and Financial Statements Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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i

References in this Annual Report on Form 10-K to ‘‘MDC Partners’’, ‘‘MDC’’, the ‘‘Company,’’ ‘‘we,’’

‘‘us’’ and ‘‘our’’ refer to MDC Partners Inc. and, unless the context otherwise requires or otherwise is
expressly stated, its subsidiaries.

All dollar amounts are stated in US dollars unless otherwise stated.

DOCUMENTS INCORPORATED BY REFERENCE

The following sections of the Proxy Statement for the Annual Meeting of Stockholders to be held on

June 1, 2011, are incorporated by reference in Parts I and III: ‘‘Election of Directors,’’ ‘‘Section 16(a)
Beneﬁcial Ownership Reporting Compliance,’’ ‘‘Executive Compensation,’’ ‘‘Report of the Human Resources
& Compensation Committee on Executive Compensation,’’ ‘‘Outstanding Shares,’’ ‘‘Appointment of
Auditors,’’ and ‘‘Certain Relationships and Related Transactions’’.

AVAILABLE INFORMATION

Information regarding the Company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and any amendments to these reports, will be made available, free of charge, at
the Company’s website at http://www.mdc-partners.com, as soon as reasonably practicable after the Company
electronically ﬁles such reports with or furnishes them to the Securities and Exchange Commission (‘‘SEC’’).
The information found on, or otherwise accessible through, the Company’s website is not incorporated into,
and does not form a part of, this Annual Report or Form 10-K. Any document that the Company ﬁles with the
SEC may also be read and copied at the SEC’s public reference room located at 100 F. Street, N.E.,
Washington, DC 20549. Please call the SEC at 1 (800) SEC-0330 for further information on the public
reference room. The Company’s ﬁlings are also available to the public from the SEC’s website at
http://www.sec.gov.

The Company’s Code of Conduct, Whistleblower Policy, and each of the charters for the Audit

Committee, Human Resources & Compensation Committee and the Nominating and Corporate Governance
Committee, are available free of charge on the Company’s website at http://www.mdc-partners.com or by
writing to MDC Partners Inc., 950 Third Avenue, New York, NY 10022, Attention: Investor Relations.

ii

FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements. The Company’s representatives may also make
forward-looking statements orally from time to time. Statements in this document that are not historical facts,
including statements about the Company’s beliefs and expectations, recent business and economic trends,
potential acquisitions, estimates of amounts for deferred acquisition consideration and ‘‘put’’ option rights,
constitute forward-looking statements. These statements are based on current plans, estimates and projections,
and are subject to change based on a number of factors, including those outlined in this section.
Forward-looking statements speak only as of the date they are made, and the Company undertakes no
obligation to update publicly any of them in light of new information or future events, if any.

Forward-looking statements involve inherent risks and uncertainties. A number of important factors could

cause actual results to differ materially from those contained in any forward-looking statements. Such risk
factors include, but are not limited to, the following:

•

•

•

•

•

•

•

risks associated with severe effects of national and regional economic conditions;

the Company’s ability to attract new clients and retain existing clients;

the ﬁnancial success of the Company’s clients;

the Company’s ability to retain and attract key employees;

the Company’s ability to remain in compliance with its debt agreements and the Company’s ability
to ﬁnance its contingent payment obligations when due and payable, including but not limited to
those relating to ‘‘put’’ options rights and deferred acquisition consideration;

the successful completion and integration of acquisitions which complement and expand the
Company’s business capabilities; and

foreign currency ﬂuctuations;

The Company’s business strategy includes ongoing efforts to engage in material acquisitions of ownership

interests in entities in the marketing communications services industry. The Company intends to ﬁnance these
acquisitions by using available cash from operations, from borrowings under its WF Credit Facility and
through incurrence of bridge or other debt ﬁnancing, any of which may increase the Company’s leverage
ratios, or by issuing equity, which may have a dilutive impact on existing shareholders proportionate
ownership. At any given time, the Company may be engaged in a number of discussions that may result in
one or more material acquisitions. These opportunities require conﬁdentiality and may involve negotiations
that require quick responses by the Company. Although there is uncertainty that any of these discussions will
result in deﬁnitive agreements or the completion of any transactions, the announcement of any such
transaction may lead to increased volatility in the trading price of the Company’s securities.

Investors should carefully consider these risk factors and the additional risk factors outlined in more
detail in this Annual Report on Form 10-K under the caption ‘‘Risk Factors’’ and in the Company’s other SEC
ﬁlings.

SUPPLEMENTARY FINANCIAL INFORMATION

The Company reports its ﬁnancial results in accordance with generally accepted accounting principles
(‘‘GAAP’’) of the United States of America (‘‘US GAAP’’). However, the Company has included certain non-
US GAAP ﬁnancial measures and ratios, which it believes, provide useful information to both management
and readers of this report in measuring the ﬁnancial performance and ﬁnancial condition of the Company.
These measures do not have a standardized meaning prescribed by US GAAP and, therefore, may not be
comparable to similarly titled measures presented by other publicly traded companies, nor should they be
construed as an alternative to other titled measures determined in accordance with US GAAP.

iii

[This page intentionally left blank.] 

Item 1. Business

MDC PARTNERS INC.

PART I

BUSINESS

MDC was formed by Certiﬁcate of Amalgamation effective December 19, 1986, pursuant to the Business

Corporations Act (Ontario). Effective December 19, 1986, MDC amalgamated with Branbury Explorations
Limited, and thereby became a public company operating under the name of MDC Corporation. On May 28,
1996, MDC changed its name to MDC Communications Corporation and, on May 29, 1999, it changed its
name to MDC Corporation Inc. On July 31, 2003, MDC acquired the remaining 26% of Maxxcom Inc.
(‘‘Maxxcom’’) that it did not already own, privatizing the now wholly-owned subsidiary and merging
Maxxcom’s corporate functions with MDC’s existing corporate functions. On January 1, 2004, MDC changed
its name to its current name, MDC Partners Inc., and on June 28, 2004, MDC was continued under
Section 187 of the Canada Business Corporations Act. MDC’s registered and head office address is located at
45 Hazelton Avenue, Toronto, Ontario, M5R 2E3.

MDC is a leading provider of marketing communications services to customers globally. MDC has

operating units in the United States, Canada, Europe, and the Caribbean.

MDC’s subsidiaries provide a comprehensive range of marketing communications and consulting
services, including advertising, interactive and mobile marketing, direct marketing, database and customer
relationship management, sales promotion, corporate communications, market research, corporate identity,
design and branding and other related services.

Part I — Business

MDC’s strategy is to build, grow and acquire market-leading businesses that deliver innovative, value-
added marketing communications and strategic consulting services to their clients. MDC Partners strives to be
a partnership of marketing communications and consulting companies (or Partners) whose strategic, creative
and innovative solutions are media-agnostic, challenge the status quo and achieve measurable superior results
for clients and stakeholders.

MDC’s Corporate Group ensures that MDC is the most Partner-responsive marketing services network
through its strategic mandate to help Partner ﬁrms ﬁnd clients, talent and tuck under acquisitions, as well as
cross-sell services and enhance their culture for innovation and growth. MDC’s Corporate Group also works
directly with Partner ﬁrms to expand their offerings through new strategic services, as well as leverage the
collective expertise and scale of the group as a whole. The Corporate Group uses this leverage to provide
various shared services to help reduce costs across the group.

The MDC model is driven by three key elements:

Perpetual Partnership. The perpetual partnership creates ongoing alignment of interests to drive

performance. The perpetual partnership model functions by (1) identifying the ‘right’ Partners with a
sustainable differentiated position in the marketplace; (2) creating the ‘right’ Partnership structure generally by
taking a majority ownership position and leaving a substantial noncontrolling equity or economic ownership
position in the hands of operating management to incentivize long-term growth; (3) providing access to more
resources and leveraging the network’s scale; and (4) focusing on delivering ﬁnancial results.

Entrepreneurialism. Entrepreneurial spirit is optimized by creating customized solutions to support and

grow our businesses.

Human and Financial Capital. The model balances accountability with ﬁnancial ﬂexibility to support

growth.

MDC operates through ‘‘Partner’’ companies within the following reportable segments:

Strategic Marketing Services

The Strategic Marketing Services segment generally consists of ﬁrms that offer a full suite of integrated

marketing communication and consulting services, including advertising and media, interactive marketing,

1

direct marketing, public relations, corporate communications, market research, corporate identity and branding,
and sales promotion to national and global clients. The Strategic Marketing Services segment is comprised of
the following agencies: 72andSunny; Allison & Partners; Attention, Bruce Mau Design; Capital C Partners;
Colle + McVoy; Company C; Crispin Porter + Bogusky; Crispin Porter + Bogusky Canada; Hello Design;
henderson bas; HL Group Partners; kirshenbaum bond senecal + partners; Kbs+p Canada; Kwittken; Mono
Advertising; Redscout; Skinny NYC; Sloane & Company; Veritas Communications; VitroRobertson;
Yamamoto Moss MacKenzie; and Zyman Group.

Performance Marketing Services

The Performance Marketing Services segment includes ﬁrms that provide consumer insights to satisfy the

growing need for targetable, measurable solutions or cost effective means of driving return on marketing
investment and growth for regional, national and global clients. The Performance Marketing Services segment
is comprised of the following agencies: 6degrees Communications; Accent; Bryan Mills Iradesso; Communifx
Partners; Computer Composition; Hudson and Sunset Media; Kenna Communications; Northstar Research
Partners; Onbrand; Relevent; Source Marketing; TargetCom; and Team.

Ownership Information

The following table includes certain information about MDC’s operating subsidiaries as of December 31,

2010. The ‘‘Put and Call Options’’ information represents existing contractual rights. Owners of interests in
certain subsidiaries have the right in certain circumstances to require MDC to acquire additional ownership
interests held by them. The owners’ ability to exercise any such ‘‘put’’ option right is subject to the
satisfaction of certain conditions, including conditions requiring notice in advance of exercise. In addition,
these rights cannot be exercised prior to speciﬁed staggered exercise dates. The exercise of these rights at their
earliest contractual date would result in obligations of MDC to fund the related amounts during the periods
described in the accompanying notes. It is not determinable, at this time, if or when the owners of these rights
will exercise all or a portion of these rights. The amount payable by MDC in the event such rights are
exercised is dependent on deﬁned valuation formulas and on future events, such as the average earnings of the
relevant subsidiary through the date of exercise, the growth rate of the earnings of the relevant subsidiary
during that period, and, in some cases, the currency exchange rate at the date of payment. See also
‘‘Management’s Discussion and Analysis — Other-Balance Sheet Commitments — Put Rights of Subsidiaries’
Noncontrolling Shareholders’’ for further discussion.

Put options represent puts of ownership interests by other interest holders to MDC with reciprocal call
rights held by MDC for the same ownership interests with similar terms. The percentages shown represent the
potential ownership interest MDC could achieve in each company assuming that the remaining equity
holder(s) were to fully exercise their put option rights at the earliest opportunity.

2

MDC PARTNERS INC.

SCHEDULE OF CURRENT AND POTENTIAL MARKETING
COMMUNICATIONS COMPANY OWNERSHIP

Company

Consolidated:

Strategic Marketing Services

72andSunny Partners LLC . . . . . . . . . . . . . . . .
Allison & Partners LLC . . . . . . . . . . . . . . . . . .
Attention Partners LLC . . . . . . . . . . . . . . . . . . .
Bruce Mau Design Inc. . . . . . . . . . . . . . . . . . . .
Capital C Partners LP . . . . . . . . . . . . . . . . . . . .
Colle & McVoy, LLC . . . . . . . . . . . . . . . . . . . .
Crispin Porter & Bogusky, LLC . . . . . . . . . . . . .
Crispin Porter + Bogusky Canada Inc. (f.k.a. Zig

Inc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Company C Communications LLC . . . . . . . . . . .
Hello Design, LLC . . . . . . . . . . . . . . . . . . . . .
henderson bas partnership . . . . . . . . . . . . . . . . .
HL Group Partners, LLC . . . . . . . . . . . . . . . . .
kirshenbaum bond senecal & partners, LLC . . . . .
Kbs+p Atlanta (f.k.a. Fletcher Martin, LLC)
. . . .
Kbs+p Canada, Inc. (f.k.a. Allard Johnson

Communications Inc.) . . . . . . . . . . . . . . . . . .
Kwittken PR LLC . . . . . . . . . . . . . . . . . . . . . .
Mono Advertising, LLC . . . . . . . . . . . . . . . . . .
Redscout, LLC . . . . . . . . . . . . . . . . . . . . . . . .
Sloane & Company LLC . . . . . . . . . . . . . . . . .
Skinny NYC, LLC . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
Veritas Communications Inc.
Vitro Robertson, LLC . . . . . . . . . . . . . . . . . . . .
Yamamoto Moss Mackenzie, Inc. . . . . . . . . . . . .
Zyman Group, LLC . . . . . . . . . . . . . . . . . . . . .

Performance Marketing Services

Accent Marketing Services, LLC . . . . . . . . . . . .
6degrees Integrated Communications Inc. (f.k.a.

Accumark Communications Inc.)

. . . . . . . . . .
Bryan Mills Iradesso Corp.
. . . . . . . . . . . . . . . .
Communifx Partners, LLC . . . . . . . . . . . . . . . .
Computer Composition of Canada Inc.
. . . . . . . .
Integrated Media Solutions Partners LLC . . . . . .
Kenna Communications LP . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
Northstar Research Partners Inc.
656712 Ontario Limited (d.b.a. Onbrand)
. . . . . .
Relevent Partners LLC . . . . . . . . . . . . . . . . . . .
Hudson and Sunset Media LLC (f.k.a. Shout

Media LLC)

. . . . . . . . . . . . . . . . . . . . . . . .
Source Marketing, LLC . . . . . . . . . . . . . . . . . .
TargetCom, LLC . . . . . . . . . . . . . . . . . . . . . . .
The Arsenal LLC (f.k.a. Team Holdings LLC) . . .
Equity Accounted:
Adrenalina, LLC . . . . . . . . . . . . . . . . . . . . . . .

% Owned at
12/31/10

Year of
Initial
Investment

Put/Call Options

2011

Thereafter

(See Notes)

—
—
—
—
—
—
—

—
—
—
100.0%
—
—
—

—
—
60.0%
—

—
81.5%
95.0%
—
—

—

68.3%
88.2%
—
—
—

—
—
—

—
87.1%
—
—

Note 1
Note 2
Note 3

Note 4
Note 5

Note 6
Note 7

Note 8

Note 9
Note 10
Note 11
Note 12
Note 13
Note 14
Note 15
Note 16

Note 17

Note 18
Note 19
Note 20

Note 21
Note 22
Note 23

Note 24
Note 25
Note 26

—

Note 27

2010
2010
2009
2004
2010
1999
2001

2004
2000
2004
2004
2007
2004
1999

1992
2010
2004
2007
2010
2008
1993
2004
2000
2005

1999

1993
1989
2010
1988
2010
2010
1998
1992
2010

2010
1998
2000
2010

2007

51.0%
51.0%
51.0%
75.0%
80.0%
95.0%
100.0%

100.0%
100.0%
49.0%
65.0%
65.9%
100.0%
100.0%

100.0%
60.0%
49.9%
60.0%
70.0%
50.1%
64.1%
77.0%
100.0%
96.0%

100.0%

55.0%
62.8%
69.7%
100.0%
75.0%
80.0%
70.0%
89.0%
60.0%

51.0%
83.0%
100.0%
60.0%

49.9%

3

Notes

(1) MDC has the right to increase its ownership interest in 72 and Sunny through acquisition of an

incremental interest of up to 100% in 2016.

(2) MDC has the right to increase its ownership interest in Allison & Partners LLC through acquisition of an
incremental interest, and other holders have the right to put only upon termination to MDC the same
incremental interest up to 100% of this entity in 2015.

(3) Attention Partners LLC is owned by HL Group Partners, LLC. HL Group Partners, LLC has the right to

increase its ownership in Attention Partners, LLC through acquisitions of incremental interests, and the
other interest holders has the right to put to HL Group Partners, LLC the same incremental interests up to
100% only upon termination.

(4) MDC has the right to increase its ownership interest in Capital C Partners LP through acquisition of an

incremental interest, up to 90% in 2015, and up to 100% in 2017.

(5) MDC has the right to increase its economic ownership in Colle & McVoy, LLC through acquisition of an
incremental interest, and the other interest holder has the right to put to MDC the same incremental
interest, up to 100% of this entity in 2012.

(6) During 2010, MDC has increased its ownership in Crispin Porter + Bogusky Canada Inc. 100% through

acquisitions of incremental interests.

(7) During 2010, MDC increased its economic ownership in Company C Communications, LLC through

acquisition of an incremental interest. Effective October 1, 2008, Company C is operated as a division of
kirshenbaum bond senecal & partners, LLC.

(8) MDC has the right to increase its ownership in HL Group Partners, LLC through acquisitions of

incremental interests, and the other interest holders have the right to put to MDC the same incremental
interests, up to 72.4% of this entity in 2012, up to 82.62% in 2013 and up to 93.73% in 2014. Effective
January 25, 2010, MDC acquired an additional 1% membership interest in HL Group Partners, LLC.

(9) During 2010, MDC has increased its ownership in Kbs+p Canada Inc. to 100% through acquisitions of

incremental interest.

(10) MDC has the right to increase its ownership in Kwittken PR LLC through acquisitions of incremental

interests, up to 100% of this entity in 2015.

(11) MDC has the right to increase its ownership in Mono Advertising, LLC through acquisitions of

incremental interests, and the other interest holders have the right to put to MDC the same incremental
interests, up to 54.9% of this entity in 2010, up to 60.0% in 2011, up to 65.0% in 2012, up to 70.0% in
2013 and up to 75.0% in 2014.

(12) MDC has the right to increase its ownership in Redscout, LLC through acquisition of an incremental
interest, and the other interest holder has the right to put to MDC the same incremental interest, up to
80% of this entity in 2012.

(13) MDC has the right to increase its ownership interest in Sloane & Company LLC through acquisition of
incremental interests, and other interest holders have the right to put to MDC the same incremental
interests up to 100% in 2015.

(14) MDC has the right to increase its ownership in Skinny NYC, LLC through acquisition of incremental

interests, and the other interest holders have the right to put to MDC the same incremental interest, up to
60.1% of this entity in 2014, up to 70.1% of this entity in 2015 and up to 80.1% of this entity in 2016.

(15) MDC has the right to increase its ownership in Veritas Communications Inc. through acquisitions of

incremental interests, and the other interest holders have the right to put to MDC the same incremental
interests, up to 81.5% of this entity in 2011, up to 95.1% in 2012 and up to 100% in 2013.

4

(16) MDC has the right to increase its ownership in Vitro Robertson, LLC through acquisition of an

incremental interest, and the other interest holder has the right to put to MDC the same incremental
interest, up to 95% of this entity in 2011, up to 97.5% in 2012 and up to 100% in 2013.

(17) In January 2009, Zyman Group, LLC has become an operating division of kirshenbaum bond senecal &

partners, LLC.

(18) MDC has the right to increase its ownership in 6degrees Integrated Communications Inc. through

acquisitions of incremental interests, and the other interest holders have the right to put to MDC the same
incremental interests up to 68.3% of this entity in 2011 and up to 75.0% in 2012. MDC’s current
economic interest is 42%.

(19) MDC has the right to increase its ownership in Bryan Mills Iradesso, Corp. through acquisition of an
incremental interest, and the other interest holders have the right to put to MDC the same incremental
interest, up to 100% of this entity in 2012.

(20) MDC has the right to increase its ownership in Communifx Partners, LLC through acquisitions of

incremental interests, and the other interest holders have the right to put to MDC the same incremental
interests, up to 100% of this entity in 2013.

(21) MDC has the right to increase its ownership interest in Integrated Media Solutions Partners LLC through

acquisitions of incremental interests, up to 100% of this entity in 2015.

(22) MDC has the right to increase its ownership interest in Kenna Communications LP through acquisition of

an incremental interest, up to 100% in 2015.

(23) MDC has the right to increase its ownership in Northstar Research Partners Inc. through acquisitions of
incremental interests, and the other holders have the right to put to MDC the same incremental interests,
up to 100% of this entity in 2013.

(24) MDC has the right to increase its ownership in Source Marketing, LLC through acquisitions of

incremental interests, and the other interest holders have the right to put to MDC the same incremental
interests up 87.1% of this entity in 2011 and 91.3% in 2012 and 100% in 2013.

(25) Effective January 1, 2009, Targetcom LLC is operating as a division of Accent Marketing Services, LLC.

(26) MDC has the right to increase its ownership in The Arsenal, LLC, through acquisition of an incremental

interest, up to 100% of this entity in 2013.

(27) Effective September 1, 2010, MDC has written off the value of its investment in Adrenalina, LLC.

5

Financial Information Relating to Business Segments and Geographic Regions

For ﬁnancial information relating to the Company’s Marketing Communications Businesses and the
geographic regions the businesses operate within, refer to Note 16 (Segmented Information) of the notes to the
consolidated ﬁnancial statements included in this Annual Report and to ‘‘Item 7. Management’s Discussion
and Analysis’’ for further discussion.

Competition

In the competitive, highly fragmented marketing and communications industry, the Company’s operating

companies compete for business with the operating subsidiaries of large global holding companies such as
Omnicom Group Inc., Interpublic Group of Companies, Inc., WPP Group plc, Publicis Group SA and Havas
Advertising. These global holding companies generally have greater resources than those available to MDC
and its subsidiaries, and such resources may enable them to aggressively compete with the Company’s
marketing communications businesses. Each of MDC’s operating companies also faces competition from
numerous independent agencies that operate in multiple markets. MDC’s operating companies must compete
with these other companies to maintain existing client relationships and to obtain new clients and assignments.
MDC’s operating companies compete at this level by providing clients with marketing ideas and strategies that
are focused on increasing clients’ revenues and proﬁts. These existing and potential clients include
multinational corporations and national companies with mid-to-large sized marketing budgets. MDC also
beneﬁts from cooperation among the operating companies through referrals and the sharing of both services
and expertise, which enables MDC to service clients’ varied marketing needs.

A partner agency’s ability to compete for new clients is affected in some instances by the policy, which
many advertisers and marketers impose, of not permitting their agencies to represent competitive accounts in
the same market. In the vast majority of cases, however, MDC’s consistent maintenance of separate,
independent operating companies has enabled MDC to represent competing clients across its network.

Industry Trends

Historically, advertising has been the primary service provided by the marketing communications
industry. However, as clients aim to establish one-to-one relationships with customers, and more accurately
measure the effectiveness of their marketing expenditures, specialized and digital communications services and
database marketing and analytics are consuming a growing portion of marketing dollars. The Company
believes this is increasing the demand for a broader range of non-advertising marketing communications
services (i.e., direct marketing, sales promotion, interactive, etc). The notion of a mass market audience is
giving way to life-style segments, social events/networks, and online/mobile communities, each segment
requiring a different message and/or different, often non-traditional, channels of communication. Global
marketers now seek innovative ideas wherever they can ﬁnd them, providing new opportunities for small to
mid-sized communications companies.

Clients

The Company serves clients in virtually every industry, and in many cases, the same clients in various
locations. Representation of a client rarely means that MDC handles marketing communications for all brands
or product lines of the client in every geographical location. MDC’s agencies have written contracts with
many of their clients. As is customary in the industry, these contracts provide for termination by either party
on relatively short notice. See ‘‘Management’s Discussion and Analysis — Executive Overview’’ for a further
discussion of MDC’s arrangements with its clients.

During 2010, 2009 and 2008, the Company’s largest client, Sprint, accounted for approximately 8%, 16%

and 19% of revenues, respectively. In addition, MDC’s ten largest clients (measured by revenue generated)
accounted for 37%, 49% and 45% of 2010, 2009 and 2008 revenues, respectively.

6

Employees

As of December 31, 2010, MDC and its subsidiaries had the following number of employees within its

reportable segments:

Segment
Strategic Marketing Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance Marketing Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total

Total
2,559
3,323
38
5,920

See Management’s Discussion and Analysis for a discussion of the effect of cost of services sold on

MDC’s historical results of operations. Because of the personal service character of the marketing
communications businesses, the quality of personnel is of crucial importance to MDC’s continuing success.
MDC considers its relations with employees to be satisfactory.

Effect of Environmental Laws

MDC believes it is substantially in compliance with all regulations concerning the discharge of materials

into the environment, and such regulations have not had a material effect on the capital expenditures or
operations of MDC.

7

Item 1A. Risk Factors

The following factors could adversely affect the Company’s revenues, results of operations or ﬁnancial

condition. See also ‘‘Statement Regarding Forward-Looking Disclosure.’’

Future economic and ﬁnancial conditions could adversely impact our ﬁnancial condition and results.

Economic and ﬁnancial conditions deteriorated sharply in the latter part of 2008, and these deteriorating

conditions continued in 2009 and 2010. The pace of the global economic recovery is uneven and a future
economic downturn could renew reductions in client spending levels and adversely affect our results of
operations and ﬁnancial position in 2011.

a. As a marketing services company, our revenues are highly susceptible to declines as a result of

unfavorable economic conditions.

The recent economic downturn affected the advertising and marketing services industry more severely

than other industries. In the past, some clients have responded to weakening economic conditions with
reductions to their marketing budgets, which include discretionary components that are easier to reduce in the
short term than other operating expenses. This pattern may recur in the future. Further decreases in our
revenue would negatively affect our ﬁnancial results, including a reduction of our estimates of free cash ﬂow
from operations.

b. If our clients experience ﬁnancial distress, their weakened ﬁnancial position could negatively affect our

own ﬁnancial position and results.

We have a diverse client base, and at any given time, one or more of our clients may experience ﬁnancial

difficulty, ﬁle for bankruptcy protection or go out of business. The recent unfavorable economic and ﬁnancial
conditions that have impacted many sectors of the economy could result in an increase in client ﬁnancial
difficulties that affect us. The direct impact on us could include reduced revenues and write-offs of accounts
receivable. If these effects were severe, the indirect impact could include impairments of goodwill, credit
agreement covenant violations or reduced liquidity. Our 10 largest clients (measured by revenue generated)
accounted for 37% of revenue in 2010.

c. Conditions in the credit markets could adversely impact our results of operations and ﬁnancial

position.

Turmoil in the credit markets or a contraction in the availability of credit would make it more difficult
for businesses to meet their capital requirements and could lead clients to change their ﬁnancial relationship
with their vendors, including us. If that were to occur, it could materially adversely impact our results of
operations and ﬁnancial position.

MDC competes for clients in highly competitive industries.

The Company operates in a highly competitive environment in an industry characterized by numerous
ﬁrms of varying sizes, with no single ﬁrm or group of ﬁrms having a dominant position in the marketplace.
MDC is, however, smaller than several of its larger industry competitors. Competitive factors include creative
reputation, management, personal relationships, quality and reliability of service and expertise in particular
niche areas of the marketplace. In addition, because a ﬁrm’s principal asset is its people, barriers to entry are
minimal, and relatively small ﬁrms are, on occasion, able to take all or some portion of a client’s business
from a larger competitor.

While many of MDC’s client relationships are long-standing, companies put their advertising and
marketing services businesses up for competitive review from time to time, including at times when clients
enter into strategic transactions. From year to year, the identities of MDC’s 10 largest customers may change,
as a result of client losses and additions and other factors; however, the proportion of MDC’s business derived
from its 10 largest clients does not vary signiﬁcantly from year to year. To the extent that the Company fails
to maintain existing clients or attract new clients, MDC’s business, ﬁnancial condition and operating results
may be affected in a materially adverse manner.

8

The loss of lines of credit under our WF Credit Facility, and compliance with the covenants in the
indenture governing our 11% notes, could adversely affect MDC’s liquidity and our ability to implement
MDC’s acquisition strategy and fund any put options if exercised.

MDC uses amounts available under the WF Credit Facility, together with cash ﬂow from operations, to

fund its working capital needs, to fund the exercise of put option obligations and to fund our strategy of
making selective acquisitions of ownership interests in entities in the marketing communications services
industry.

The Company is currently in compliance with all of the terms and conditions of the WF Credit Facility.

If, however, events were to occur, which result in MDC losing all or a substantial portion of its available
credit under the WF Credit Facility, MDC could be required to seek other sources of liquidity. In addition, if
MDC were unable to replace this source of liquidity, then MDC’s ability to fund its working capital needs and
any contingent obligations with respect to put options would be materially adversely affected.

MDC may not realize the beneﬁts it expects from past acquisitions or acquisitions MDC may make in the
future.

MDC’s business strategy includes ongoing efforts to engage in material acquisitions of ownership

interests in entities in the marketing communications services industry. MDC intends to ﬁnance these
acquisitions by using available cash from operations and through incurrence of debt or bridge ﬁnancing, either
of which may increase its leverage ratios, or by issuing equity, which may have a dilutive impact on its
existing shareholders. At any given time MDC may be engaged in a number of discussions that may result in
one or more material acquisitions. These opportunities require conﬁdentiality and may involve negotiations
that require quick responses by MDC. Although there is uncertainty that any of these discussions will result in
deﬁnitive agreements or the completion of any transactions, the announcement of any such transaction may
lead to increased volatility in the trading price of its securities.

The success of acquisitions or strategic investments depends on the effective integration of newly
acquired businesses into MDC’s current operations. Such integration is subject to risks and uncertainties,
including realization of anticipated synergies and cost savings, the ability to retain and attract personnel and
clients, the diversion of management’s attention from other business concerns, and undisclosed or potential
legal liabilities of the acquired company. MDC may not realize the strategic and ﬁnancial beneﬁts that it
expects from any of its past acquisitions, or any future acquisitions.

MDC’s business could be adversely affected if it loses key clients.

MDC’s strategy has been to acquire ownership stakes in diverse marketing communications businesses to

minimize the effects that might arise from the loss of any one client or executive. The loss of one or more
clients could materially affect the results of the individual operating companies and the Company as a whole.
Management succession at our operating units is very important to the ongoing results of the Company
because, as in any service business, the success of a particular agency is dependent upon the leadership of key
executives and management personnel. If key executives were to leave our operating units, the relationships
that MDC has with its clients could be adversely affected.

MDC’s ability to generate new business from new and existing clients may be limited.

To increase its revenues, MDC needs to obtain additional clients or generate demand for additional
services from existing clients. MDC’s ability to generate initial demand for its services from new clients and
additional demand from existing clients is subject to such clients’ and potential clients’ requirements,
pre-existing vendor relationships, ﬁnancial condition, strategic plans and internal resources, as well as the
quality of MDC’s employees, services and reputation and the breadth of its services. To the extent MDC
cannot generate new business from new and existing clients due to these limitations. MDC’s ability to grow
its business and to increase its revenues will be limited.

MDC’s business could be adversely affected if it loses or fails to attract key employees.

Employees, including creative, research, media, account and practice group specialists, and their skills

and relationships with clients, are among MDC’s most important assets. An important aspect of MDC’s
competitiveness is its ability to retain key employee and management personnel. Compensation for these key

9

employees is an essential factor in attracting and retaining them, and MDC may not offer a level of
compensation sufficient to attract and retain these key employees. If MDC fails to hire and retain a sufficient
number of these key employees, it may not be able to compete effectively. If key executives were to leave our
operating units, the relationships that MDC has with its clients could be adversely affected.

MDC is exposed to the risk of client defaults.

MDC’s agencies often incurs expenses on behalf of its clients for productions and in order to secure a
variety of media time and space, in exchange for which it receives a fee. The difference between the gross
cost of the production and media and the net revenue earned by us can be signiﬁcant. While MDC takes
precautions against default on payment for these services (such as credit analysis and advance billing of
clients) and has historically had a very low incidence of default, MDC is still exposed to the risk of
signiﬁcant uncollectible receivables from our clients.

MDC’s results of operations are subject to currency ﬂuctuation risks.

Although MDC’s ﬁnancial results are reported in U.S. dollars, a portion of its revenues and operating
costs are denominated in currencies other than the US dollar. As a result, ﬂuctuations in the exchange rate
between the U.S. dollar and other currencies, particularly the Canadian dollar, may affect MDC’s ﬁnancial
results and competitive position.

Goodwill and intangible assets may become impaired.

We have recorded a signiﬁcant amount of goodwill and intangible assets in our consolidated ﬁnancial

statements in accordance with U.S. GAAP resulting from our acquisition activities, which principally
represents the specialized know-how of the workforce at the agencies we have acquired. We test, at least
annually, the carrying value of goodwill for impairment, as discussed in Note 2 to our consolidated ﬁnancial
statements. The estimates and assumptions about future results of operations and cash ﬂows made in
connection with the impairment testing could differ from future actual results of operations and cash ﬂows
made in connection with the impairment testing could differ from future actual results of operations and cash
ﬂows. While we have concluded, for each year presented in our ﬁnancial statements, that our goodwill
relating to continuing operations is not impaired, future events could cause us to conclude that the asset values
associated with a given operation may become impaired. Any resulting impairment loss could materially
adversely affect our results of operations and ﬁnancial condition.

MDC is subject to regulations that could restrict its activities or negatively impact its revenues.

Advertising and marketing communications businesses are subject to government regulation, both

domestic and foreign. There has been an increasing tendency in the United States on the part of advertisers to
resort to litigation and self-regulatory bodies to challenge comparative advertising on the grounds that the
advertising is false and deceptive. Moreover, there has recently been an expansion of speciﬁc rules,
prohibitions, media restrictions, labeling disclosures, and warning requirements with respect to advertising for
certain products and usage of personally identiﬁable information. Representatives within government bodies,
both domestic and foreign, continue to initiate proposals to ban the advertising of speciﬁc products and to
impose taxes on or deny deductions for advertising which, if successful, may have an adverse effect on
advertising expenditures and consequently MDC’s revenues.

In addition, laws and regulations related to user privacy, use of personal information and internet tracking
technologies have been proposed or enacted in the United States and certain international markets. These laws
and regulations could affect the acceptance of the internet as an advertising medium. These actions could
affect our business and reduce demand for certain of our services, which could have a material adverse effect
on our results of operations and ﬁnancial position.

The indenture governing the 11% Notes and the WF Credit Facility governing our secured line of credit
contain various covenants that limit our discretion in the operation of our business.

The indenture governing the 11% Notes and the WF Credit Facility governing our lines of credit contain

various provisions that limit our discretion in the operation of our business by restricting our ability to:

•

sell assets;

10

•

•

•

•

•

•

•

•

•

pay dividends and make other distributions;

redeem or repurchase our capital stock;

incur additional debt and issue capital stock;

create liens;

consolidate, merge or sell substantially all of our assets;

undergo a change in control;

enter into certain transactions with our affiliates;

engage in new lines of business; and

enter into sale and leaseback transactions.

These restrictions on our ability to operate our business in our discretion could seriously harm our
business by, among other things, limiting our ability to take advantage of ﬁnancing, merger and acquisition
and other corporate opportunities. The WF Credit Facility is subject to various additional covenants, including
senior and total leverage ratios, a ﬁxed charges ratio, a minimum Earning before interest, taxes, depreciation,
and amortization level, and a minimum accounts receivable level. Events beyond our control could affect our
ability to meet these ﬁnancial tests, and we cannot assure you that we will meet them.

Our substantial indebtedness could adversely affect our cash ﬂow and prevent us from fulﬁlling our
obligations, including the 11% Notes.

As of December 31, 2010, MDC had $286.2 million net of original issue discount of indebtedness. In
addition, we have and expect to continue to make additional drawings under the WF Credit Facility from time
to time. Our ability to pay principal and interest on our indebtedness is dependent on the generation of cash
ﬂow by our subsidiaries. Our subsidiaries’ business may not generate sufficient cash ﬂow from operations to
meet MDC’s debt service and other obligations. If we are unable to meet our expenses and debt service
obligations, we may need to obtain additional debt, reﬁnance all or a portion of our indebtedness on or before
maturity, sell assets or raise equity. We may not be able to obtain additional debt, reﬁnance any of our
indebtedness, sell assets or raise equity on commercially reasonable terms or at all, which could cause us to
default on our obligations and impair our liquidity. Our inability to generate sufficient cash ﬂow to satisfy our
debt obligations, to obtain additional debt or to reﬁnance our obligations on commercially reasonable terms
would have a material adverse effect on our business, ﬁnancial condition and results of operations.

If we cannot make scheduled payments on our debt, we will be in default and, as a result, our debt
holders could declare all outstanding principal and interest to be due and payable; the lenders under the WF
Credit Facility could terminate their commitments to loan us money and foreclose against the assets securing
our borrowings; and we could be forced into bankruptcy or liquidation. Our level of indebtedness could have
important consequences. For example it could:

•

•

•

•

•

make it more difficult for us to satisfy our obligations with respect to the 11% Notes;

increase our vulnerability to general adverse economic and industry conditions;

require us to dedicate a substantial portion of our cash ﬂow from operations to payments on our
indebtedness, thereby reducing the availability of our cash ﬂow to fund working capital and other
activities;

limit our ﬂexibility in planning for, or reacting to, changes in our business and the advertising
industry, which may place us at a competitive disadvantage compared to our competitors that have
less debt; and

limit, particularly in concert with the ﬁnancial and other restrictive covenants in our indebtedness,
our ability to borrow additional funds or take other actions.

11

Despite our current debt levels, we may be able to incur substantially more indebtedness, which could
further increase the risks associated with our leverage.

We may incur substantial additional indebtedness in the future. The terms of our Credit Agreement and
the indenture governing the11% Notes permit us and our subsidiaries to incur additional indebtedness subject
to certain limitations. If we or our subsidiaries incur additional indebtedness, the related risks that we face
could increase.

We are a holding company dependent on our subsidiaries for our ability to service our debt and pay
dividends.

MDC is a holding company with no operations of our own. Consequently, our ability to service our debt

and to pay cash dividends on our common stock is dependent upon the earnings from the businesses
conducted by our subsidiaries. Our subsidiaries are separate and distinct legal entities and have no obligation
to provide us with funds for our payment obligations, whether by dividends, distributions, loans or other
payments. Although our operating subsidiaries have generally agreed to allow us to consolidate and ‘‘sweep’’
cash, subject to the timing of payments due to minority holders, any distribution of earnings to us from our
subsidiaries is contingent upon the subsidiaries’ earnings and various other business considerations. Also, our
right to receive any assets of any of our subsidiaries upon their liquidation or reorganization, and therefore the
right of the holders of common stock to participate in those assets, will be structurally subordinated to the
claims of that subsidiary’s creditors. In addition, even if we were a creditor of any of our subsidiaries, our
rights as a creditor would be subordinate to any security interest in the assets of our subsidiaries and any
indebtedness of our subsidiaries senior to that held by us.

We could change our existing dividend practice in the future.

The declaration and payment of dividends on our common stock is at the discretion of MDC’s board of

directors and will depend upon limitations contained in our Credit Agreement and the indenture governing the
11% Notes, future earnings, capital requirements, our general ﬁnancial condition and general business
conditions. MDC’s practice is to pay dividends only out of excess free cash ﬂow from operations, and in the
event that worsening economic conditions, disruptions in the credit markets or other factors have a signiﬁcant
effect on our liquidity, MDC’s board of directors could decide to reduce or suspend dividend payments in the
future.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

See the notes to the Company’s consolidated ﬁnancial statements included in this Annual Report for a
discussion of the Company’s lease commitments and the ‘‘Management’s Discussion and Analysis’’ for the
impact of occupancy costs on the Company’s operating expenses.

The Company maintains office space in many cities in the United States, Canada, Europe, and the

Caribbean. This space is primarily used for office and administrative purposes by the Company’s employees in
performing professional services. This office space is in suitable and well-maintained condition for MDC’s
current operations. All of the Company’s materially important office space is leased from third parties with
varying expiration dates. Certain of these leases are subject to rent reviews or contain various escalation
clauses and certain of our leases require our payment of various operating expenses, which may also be
subject to escalation. In addition, leases related to the Company’s non-US businesses are denominated in other
than US dollars and are therefore subject to changes in foreign exchange rates.

Item 3. Legal Proceedings

MDC’s operating entities are involved in legal proceedings of various types. While any litigation contains
an element of uncertainty, MDC has no reason to believe that the outcome of such proceedings or claims will
have a material adverse effect on the ﬁnancial condition or results of operations of MDC.

Item 4. Reserved

12

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

Market Information and Holders of Class A Subordinate Voting Shares

The principal United States market on which the Company’s Class A subordinate voting shares are traded

is the NASDAQ National Market (‘‘NASDAQ’’) (symbol: ‘‘MDCA’’), and the principal market in Canada is
the Toronto Stock Exchange (symbol: ‘‘MDZ.A’’). As of March 1, 2011, the approximate number of holders
of our Class A subordinate voting shares, including those whose shares are held in nominee name, was 2,800.
Quarterly high and low sales prices per share of the Company’s Class A subordinate voting shares, as reported
on NASDAQ and The Toronto Stock Exchange, respectively, for each quarter in the years ended
December 31, 2010 and 2009, are as follows:

Quarter Ended

Nasdaq

High

Low

($ per Share)

March 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.87
6.00
8.10
9.00
11.20
13.19
13.59
17.47

2.50
3.24
5.44
6.88
8.29
10.30
10.07
13.19

The Toronto Stock Exchange

Quarter Ended

High

Low

(C$ per Share)

March 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.75
6.85
8.74
9.98
11.30
13.51
13.78
17.37

3.22
4.00
6.27
7.50
8.54
10.46
10.11
13.39

As of March 1, 2011, the last reported sale price of the Class A subordinate voting shares was $16.84 on

NASDAQ and C$16.45 on the Toronto Stock Exchange.

Dividend Practice

In 2010, MDC’s board of directors declared the following dividends: a $0.10 per share quarterly dividend

to all shareholders of record as of the close of business on February 12, 2010; an $0.11 per share quarterly
dividend to all shareholders of record as of the close of business on August 13, 2010; and a $0.13 per share
quarterly dividend to all shareholders of record as of the close of business on November 12, 2010. MDC’s
practice is to pay dividends only out of excess free cash ﬂow from operations. MDC is further limited in the
extent to which we are able to pay dividends under our Credit Agreement and the indenture governing the
11% Notes. The payment of any future dividends will be at the discretion of MDC’s board of directors and
will depend upon limitations contained in our Credit Agreement and the indenture governing the 11% Notes,
future earnings, capital requirements, our general ﬁnancial condition and general business conditions.

13

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information regarding securities issued under our equity compensation

plans as of December 31, 2010.

Number of Securities
to Be Issued Upon
Exercise of
Outstanding
Options and Rights
(a)

Weighted Average
Exercise Price of
Outstanding
Options and Rights
(b)

Number of Securities
Remaining Available for
Future Issuance
(Excluding Column (a))
(c)

Equity Compensation Plans:
Approved by stockholders:

Share options
. . . . . . . . . . . . . . . .
Stock appreciation rights . . . . . . . . .

216,200
2,597,808(1)

Not approved by stockholders:

None . . . . . . . . . . . . . . . . . . . . . .

—

$9.41
$3.78

—

1,668,919
940,626

—

(1) Based on December 31, 2010 closing Class A subordinate voting share price on NASDAQ of $17.27.

On May 26, 2005, the Company’s shareholders’ approved the 2005 Stock Incentive Plan, which provides

for the issuance of two million Class A shares. On June 2, 2009 and June 1, 2007, the Company’s
shareholders approved amendments to the 2005 Stock Incentive Plan, which increased the number of shares
available for issuance to 4.5 million Class A shares. In addition, the plan was amended to allow shares under
this plan to be used to satisfy share obligations under the Stock Appreciation Rights Plan. On May 30, 2008,
the Company’s shareholders approved the 2008 Key Partner Incentive Plan, which provides for the issuance of
600,000 Class A shares.

See also Note 13 of the notes to the consolidated ﬁnancial statements included herein.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

None.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

Issuer Purchases of Equity Securities:

Shares — Class A subordinate voting shares

For the twelve months ended December 31, 2010, the Company made no open market purchases of its
Class A shares or its Class B shares. Pursuant to its Credit Agreement, the Company is currently restricted
from repurchasing its shares in the open market.

During 2010, the Company’s employees surrendered 282,954 Class A shares valued at approximately
$3.5 million in connection with the required tax withholding resulting from the vesting of restricted stock.
These Class A shares were subsequently retired and no longer remain outstanding as of December 31, 2010.

Transfer Agent and Registrar for Common Stock

The transfer agent and registrar for the Company’s common stock is CIBC Mellon Trust Company. CIBC

Mellon Trust Company operates a telephone information inquiry line that can be reached by dialing toll-free
1-800-387-0825 or 416-643-5500.

Correspondence may be addressed to:
MDC Partners Inc.
C/o CIBC Mellon Trust Company Corporate Trust Services
P.O. Box 7010 Adelaide Street
Postal Station Toronto, Ontario M5G 2M7

14

Item 6. Selected Financial Data

The following selected ﬁnancial data should be read in connection with Item 7 — ‘‘Management’s

Discussion and Analysis of Financial Condition and Results of Operations’’ and the consolidated ﬁnancial
statements and notes that are included in this annual report on Form 10-K.

Operating Data
Revenues . . . . . . . . . . . . . .
. . . . . . . . .
Operating proﬁt
Income (loss) from

2010

Years Ended December 31,
2008
2009
(Dollars in Thousands, Except per Share Data)

2007

2006

$697,825
$ 28,929

$545,141
$ 21,096

$583,271
$ 20,698

$532,947
$ 23,561

$403,030
$ 23,491

continuing operations . . . .

$ (2,872)

$ (11,239)

$ 18,638

$

2,467

$

8,471

Stock-based compensation
included in income from
continuing operations . . . .

Earnings (Loss) per Share
Basic
Continuing operations
attributable to MDC
Partners Inc.

. . . . . . . . . .

Diluted
Continuing operations
attributable to MDC
Partners Inc. common
shareholders . . . . . . . . . .

Cash dividends declared per

share . . . . . . . . . . . . . . .

Financial Position Data
Total assets
Total debt
Redeemable noncontrolling

. . . . . . . . . . . .
. . . . . . . . . . . . .

$ 16,507

$ 15,444

$ 14,437

$ 10,217

$

8,361

$

(0.46)

$

(0.61)

$

0.39

$

(0.72)

$

(0.35)

$

$

(0.46)

0.34

$

$

(0.61)

—

$914,348
$286,216

$604,519
$217,946

$

$

0.38

—

$529,239
$181,498

$

$

(0.72)

—

$

$

(0.35)

—

$520,698
$164,754

$493,501
$ 95,454

interest . . . . . . . . . . . . . .

$ 77,560

$ 33,728

$ 21,751

$ 24,187

$ 45,682

Deferred acquisition

consideration . . . . . . . . . .
Fixed charge coverage ratio .
Fixed charge deﬁciency . . . .

$107,991
N/A
3,265

$

$ 30,645
N/A
2,497

$

$

5,538
2.03
N/A

$

2,511
1.44
N/A

$

2,721
2.04
N/A

Several signiﬁcant factors that should be considered when comparing the annual results shown above are

as follows:

Year Ended December 31, 2010

During 2010, the Company completed a signiﬁcant number of acquisitions. Please see Note 4 of the

notes to the consolidated ﬁnancial statements included herein for a summary of these acquisitions.

On May 14, 2010, the Company and its wholly-owned subsidiaries, as guarantors issued and sold $65
million aggregate principal amount of 11% Senior Notes due 2016. The additional notes were issued under the
Indenture governing the 11% notes and treated as a single series with the original 11% notes. The additional
notes were sold in a private placement in reliance on exceptions from registration under the Securities Act of
1933, as amended. The Company received net proceeds before expenses of $67.2 million, which included an
original issue premium of $2.6 million, and underwriter fees of $0.4 million. The Company used the net
proceeds of the offering to repay the outstanding balance under the Company’s revolving Credit Facility
described elsewhere herein, and for general corporate purposes, including acquisitions.

15

Effective September 30, 2010, the Company ceased Zig (USA) LLC operations. All periods have been

restated to reﬂect these discontinued operations. See Note 10 of the notes to the consolidated ﬁnancial
statements included herein.

Year Ended December 31, 2009

On October 23, 2009, the Company and its wholly-owned subsidiaries, as guarantors, issued and sold
$225 million aggregate principal amount of 11% Senior Notes due 2016 (the ‘‘11% Notes’’). The 11% Notes
bear interest at a rate of 11% per annum, accruing from October 23, 2009. Interest is payable semiannually in
arrears in cash on May 1 and November 1 of each year, beginning on May 1, 2010. The 11% Notes will
mature on November 1, 2016, unless earlier redeemed or repurchased. In addition, the Company entered into a
$75 million Revolving Credit Facility, expiring in October 2014. The Company used the net proceeds of this
offering to repay the outstanding balance and terminate its prior Fortress Financing Agreement, and redeemed
its outstanding 8% C$45 million convertible debentures. As a result, the Company incurred $4.5 million of
early termination fees and wrote off of the remaining deferred ﬁnancing costs relating to its prior Financing
Agreement and convertible debentures.

Year Ended December 31, 2008

During the year ended December 31, 2008, MDC recognized $13.3 million of primarily non-cash,
unrealized, foreign exchange gains due primarily to the strengthening of the US dollar as compared to the
Canadian dollar on its intercompany balances that are denominated in the US dollar.

Effective December 31, 2008, three of the Company’s operating subsidiaries, Clifford/Bratskeir Public

Relations LLC, Ito Partners, LLC and Mobium Creative Group (a division of Colle + McVoy) have been
deemed discontinued operations. All periods have been restated to reﬂect these discontinued operations. See
Note 10 of the notes to the consolidated ﬁnancial statements included herein.

Year Ended December 31, 2007

In March 2007, due to continued operating and client losses, the Company ceased Margeotes Fertitta
Powell, LLC (‘‘MFP’’) current operations and spun off a new operating business and as a result incurred a
goodwill impairment charge of $4.5 million in 2007. The Company also recorded an impairment charge
relating to MFP of $6.3 million in 2006. After reviewing the 2008 projections of the new operating business
the Company decided to cease the operations of the new operating business as well. As a result, the Company
has classiﬁed these operations as discontinued. In addition, an additional intangible relating to an employment
contract of $0.6 million was deemed impaired and written off.

In December 2007, due to continued operating losses and the lack of new business wins the Company
ceased Banjo Strategic Entertainment, LLC (‘‘Banjo’’) operations. All periods have been restated to reﬂect
these discontinued operations. See Note 10 of the notes to the consolidated ﬁnancial statements
included herein.

Year Ended December 31, 2006

On November 14, 2006, MDC sold its Secure Products International Products division, and all periods

have been restated to reﬂect these discontinued operations.

16

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless otherwise indicated, references to the ‘‘Company’’ mean MDC Partners Inc. and its subsidiaries,
and references to a ﬁscal year means the Company’s year commencing on January 1 of that year and ending
December 31 of that year (e.g., ﬁscal 2010 means the period beginning January 1, 2010, and ending
December 31, 2010).

The Company reports its ﬁnancial results in accordance with generally accepted accounting principles
(‘‘GAAP’’) of the United States of America (‘‘US GAAP’’). However, the Company has included certain non-
US GAAP ﬁnancial measures and ratios, which it believes provide useful information to both management
and readers of this report in measuring the ﬁnancial performance and ﬁnancial condition of the Company. One
such term is ‘‘organic revenue’’, which means growth in revenues from sources other than acquisitions or
foreign exchange impacts. These measures do not have a standardized meaning prescribed by US GAAP and,
therefore, may not be comparable to similarly titled measures presented by other publicly traded companies,
nor should they be construed as an alternative to other titled measures determined in accordance with
US GAAP.

Executive Summary

The Company’s objective is to create shareholder value by building market-leading subsidiaries and
affiliates that deliver innovative, value-added marketing communications and strategic consulting to their
clients. Management believes that shareholder value is maximized with an operating philosophy of ‘‘Perpetual
Partnership’’ with proven committed industry leaders in marketing communications.

MDC manages the business by monitoring several ﬁnancial and non-ﬁnancial performance indicators.

The key indicators that we review focus on the areas of revenues and operating expenses and capital
expenditures. Revenue growth is analyzed by reviewing the components and mix of the growth, including:
growth by major geographic location; existing growth by major reportable segment (organic); growth from
currency changes; and growth from acquisitions.

MDC conducts its businesses through the Marketing Communications Group. Within the Marketing

Communications Group, there are two reportable operating segments: Strategic Marketing Services and
Performance Marketing Services. In addition, MDC has a ‘‘Corporate Group’’ which provides certain
administrative, accounting, ﬁnancial and legal functions.

Marketing Communications Businesses

Through its operating ‘‘partners’’, MDC provides advertising, consulting, customer relationship

management, and specialized communication services to clients throughout the United States, Canada, Europe,
and the Caribbean.

The operating companies earn revenue from agency arrangements in the form of retainer fees or
commissions; from short-term project arrangements in the form of ﬁxed fees or per diem fees for services;
and from incentives or bonuses. Additional information about revenue recognition appears in Note 2 of the
notes to the consolidated ﬁnancial statements.

MDC measures operating expenses in two distinct cost categories: cost of services sold, and office and
general expenses. Cost of services sold is primarily comprised of employee compensation related costs and
direct costs related primarily to providing services. Office and general expenses are primarily comprised of
rent and occupancy costs and administrative service costs including related employee compensation costs.
Also included in operating expenses is depreciation and amortization.

Because we are a service business, we monitor these costs on a percentage of revenue basis. Cost of
services sold tend to ﬂuctuate in conjunction with changes in revenues, whereas office and general expenses
and depreciation and amortization, which are not directly related to servicing clients, tend to decrease as a
percentage of revenue as revenues increase because a signiﬁcant portion of these expenses are relatively ﬁxed
in nature.

We measure capital expenditures as either maintenance or investment related. Maintenance capital

expenditures are primarily composed of general upkeep of our office facilities and equipment that are required

17

to continue to operate our businesses. Investment capital expenditures include expansion costs, the build out of
new capabilities, technology or call centers, or other growth initiatives not related to the day to day upkeep of
the existing operations. Growth capital expenditures are measured and approved based on the expected return
of the invested capital.

Certain Factors Affecting Our Business

Overall Factors Affecting our Business and Results of Operations. The most signiﬁcant factors include

national, regional and local economic conditions, our clients’ proﬁtability, mergers and acquisitions of our
clients, changes in top management of our clients and our ability to retain and attract key employees. New
business wins and client loses occur for of a variety of factors. The two most signiﬁcant factors are; clients’
desire to change marketing communication ﬁrms, and the creative product our ﬁrms are offering. A client may
choose to change marketing communication ﬁrms for any number of reasons, such as a change in top
management and the new management wants to go retain an agency that it may have previously worked with.
In addition, if the client is merged or acquired by another company, the marketing communication ﬁrm is
often changed. Further, global clients are trending to consolidate the use of numerous marketing
communication ﬁrms to just one or two. Another factor in a client changing ﬁrms is the agency’s campaign or
work product is not providing results and they feel a change is in order to generate additional revenues.

Clients will generally reduce or increase their spending or outsourcing needs based on their current
business trends and proﬁtability. These types of changes impact the Performance Marketing Services Group
more than the Strategic Marketing Services Group due to the Performance Marketing Services Group having
clients who require project-based work as opposed to the Strategic Marketing Services Group who primarily
have retainer-based relationships.

Acquisitions and Dispositions. Our strategy includes acquiring ownership stakes in well-managed
businesses with strong reputations in the industry. We engaged in a number of acquisition and disposal
transactions during the 2008 to 2010 period, which affected revenues, expenses, operating income and net
income. Additional information regarding material acquisitions is provided in Note 4 ‘‘Acquisitions’’ and
information on dispositions is provided in Note 10 ‘‘Discontinued Operations’’ in the notes to the consolidated
ﬁnancial statements.

Foreign Exchange Fluctuations. Our ﬁnancial results and competitive position are affected by ﬂuctuations

in the exchange rate between the US dollar and non-US dollars, primarily the Canadian dollar. See also
‘‘Quantitative and Qualitative Disclosures About Market Risk — Foreign Exchange.’’

Seasonality. Historically, with some exceptions, we generate the highest quarterly revenues during the
fourth quarter in each year. The fourth quarter has historically been the period in the year in which the highest
volumes of media placements and retail related consumer marketing occur.

Fourth Quarter Results. Revenues for the fourth quarter of 2010 increased to $213.4 million, compared

to the 2009 fourth quarter revenues of $149.5 million. The increase consisted of organic growth of $20.8
million acquisition revenue of $41.9 million and a $1.3 million increase due to foreign currency ﬂuctuations.
The Strategic Marketing Services segment had revenue growth of $24.4 million, of which $13.5 million is
organic and $10.1 million is acquisition. The Performance Marketing Services segment had increased revenue
of $39.5 million in 2010 of which $7.3 million was organic and $31.8 million was acquisition. Operating
results for the fourth quarter of 2010 resulted in income of $21.8 million compared to a loss of $0.7 million in
2009. The increase in operating proﬁts was primarily related to the increase in revenue. Income (loss) from
continuing operations for the fourth quarter of 2010 was income $17.4 million compared to a loss of $15.9
million in 2009. The 2009 fourth quarter loss is attributable to a loss in operating income of $0.7 million
compared to income of $21.8 million in 2010. Interest expense was higher in 2009 by $1.6 million, income
tax expense was also higher by $6.4 million and equity in earning of affiliates was a loss in 2009 of $0.3
million compared to income in 2010 of $2.5 million. The increase in operating income of $22.5 million in
2010 over 2009 was primarily due to the increased revenue in 2010. Interest expense increased due to the
Company’s reﬁnancing of its outstanding debt. Income tax expense was higher primarily due to additional
valuation allowance reserves and non-deductible stock-based compensation in 2009. The 2010 income in
equity affiliates relates to distributions in excess of the Company’s carrying value of one of its equity
method investments.

18

Year Ended December 31, 2010

Summary of Key Transactions

The Company completed several key acquisitions in 2010. These acquisitions included the acquisition of

60% of the equity interests in The Arsenal LLC (‘‘Team’’); 75% of the equity interest in Integrated Media
Solutions, LLC; 51% of the equity interests in Allison & Partners LLC; 70% of the equity interests in Sloane
& Company LLC; 60% of the equity interests of Relevent Partners LLC; 80% of the total outstanding equity
interests in each of Kenna Communications LP and Capital C Partners LP; and 51% of the equity interests in
72andSunny Partners LLC.

The total aggregate purchase price for these 2010 transactions was $182.1 million, which included
closing cash payments equal to $92.4 million and additional estimated contingent purchase payments in future
years of approximately $89.7 million. See Note 4 of the notes to the consolidated ﬁnancial statements
included herein for additional information on these and other acquisitions.

On May 14, 2010, the Company and its wholly-owned subsidiaries (as guarantors) issued and sold an

additional $65 million aggregate principal amount of 11% Senior Notes due 2016. The additional notes were
issued under the Indenture governing the 11% notes and treated as a single series with the original 11% notes.
The additional notes were sold in a private placement in reliance on exemptions from registration under the
Securities Act of 1933, as amended. The Company used the net proceeds of the offering to repay the
outstanding balance under the Company’s revolving WF Credit Facility, and for acquisitions and other general
corporate purposes.

Year Ended December 31, 2009

New Financing

On October 23, 2009, the Company completed a $300 million reﬁnancing of its existing debt
arrangements. The Company issued $225 million of 11% senior notes and obtained a new $75 million
revolving WF Credit Facility. The proceeds were used to pay off the existing Fortress Facility, consisting of
the $130 million term loan, and the C$45 million convertible debentures. The proceeds were also used for the
early payment of $46.0 million of deferred acquisition consideration relating to kirshenbaum bond senecal &
partners LLC (‘‘KBSP’’) and Crispin Porter & Bogusky LLC (‘‘CPB’’). In connection with the repayment of
its prior indebtedness, the Company incurred termination fees and expenses of $2.0 million and wrote off
deferred ﬁnancing costs of $2.5 million.

Effective October 5, 2009, MDC acquired the remaining 6% equity interest in CPB from the minority
holder. In accordance with the terms of the underlying limited liability company agreement, the estimated
contingent purchase price of $8.5 million will be paid in future periods beginning in April 2011. Following
the closing of this transaction, MDC’s ownership in CPB is 100%.

Year Ended December 31, 2008

Step-Up Acquisitions of Key Partners

On November 10, 2008, the Company acquired an additional 17% equity interest in CPB from certain
noncontrolling holders. The purchase price consisted of a cash payment equal to $6.4 million plus the issuance
of 105,000 newly-issued Class A shares of the Company, plus an additional contingent purchase price payment
due in April 2010 based on 2007, 2008 and 2009 performance. Following the closing of this transaction, the
Company’s ownership in CPB was 94%.

On December 31, 2008, the Company acquired the remaining 6.3% of Accent Marketing Services
(‘‘Accent’’). The aggregate purchase price was equal to $4.8 million and was satisﬁed as follows: on closing,
the extinguishment of $1.8 million of outstanding loans, and payment of $1.0 million in cash and an
additional payment of $2.0 million paid in 2009.

Discontinued Operations

Effective December 3, 2008, Colle & McVoy, LLC completed the sale of certain assets of its Mobium

division. The purchase price consisted of minimal cash received at closing plus additional potential payments
to be received through 2010. As of December 31, 2008, Mobium is treated as a discontinued operation.

19

In December 2008, the Company entered into negotiations with the management of Clifford/Bratskeir

Public Relations LLC (‘‘Bratskeir’’) to sell certain remaining assets to management. This transaction was
completed in April 2009. As of December 31, 2008, Bratskeir has been treated as a discontinued operation.

Results of Operations for the Years Ended December 31, 2010, 2009 and 2008:

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of services sold . . . . . . . . . . . . . . . . . . . .
Office and general expenses
. . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . .
Operating Proﬁt (Loss) . . . . . . . . . . . . . . . . . . .
Other Income (Expense):
Other income, net
. . . . . . . . . . . . . . . . . . . . . .
Foreign exchange gain . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . .
Loss from continuing operations before income
taxes, equity in affiliates and noncontrolling
interest

. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax recovery . . . . . . . . . . . . . . . . . . . . .
Loss from continuing operations before equity in

affiliates and noncontrolling interests . . . . . . . .
Equity in earnings of affiliates . . . . . . . . . . . . . .
. . . . . . . . . . . .
Loss from continuing operations
Loss from discontinued operations attributable to

MDC Partners Inc., net of taxes . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests
Net loss attributable to MDC Partners Inc. . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . .

For the Year Ended December 31, 2010

Strategic
Marketing
Services
$438,941
289,409
90,622
17,917
40,993

Performance
Marketing
Services
$258,884
188,082
44,011
16,196
10,595

Corporate
—
$
—
22,291
368
(22,659)

(7,211)

(2,863)

—

$

7,282

$

1,992

$ 7,233

Total
$697,825
477,491
156,924
34,481
28,929

381
69
(33,282)

(3,903)
165

(3,738)
866
(2,872)

(2,494)
(5,366)
(10,074)
$ (15,440)
$ 16,507

20

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of services sold . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
Office and general expenses
Depreciation and amortization . . . . . . . . . . . . . .
Operating Proﬁt (Loss) . . . . . . . . . . . . . . . . . . .
Other Income (Expense):
Other expense, net . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange loss
. . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . .
Loss from continuing operations before income
taxes, equity in affiliates and noncontrolling
interest

. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . .
Loss from continuing operations before equity in

affiliates and noncontrolling interests . . . . . . . .
Equity loss in earnings of affiliates . . . . . . . . . . .
Loss from continuing operations
. . . . . . . . . . . .
Loss from discontinued operations attributable to

MDC Partners Inc., net of taxes . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests
Net loss attributable to MDC Partners Inc. . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . .

For the Year Ended December 31, 2009

Strategic
Marketing
Services
$370,615
220,714
87,633
25,518
36,750

Performance
Marketing
Services
$174,526
132,297
30,898
8,466
2,865

Corporate
—
$
—
18,091
428
(18,519)

(4,851)

(715)

—

$

8,742

$

868

$ 5,834

Total
$545,141
353,011
136,622
34,412
21,096

(91)
(1,956)
(21,744)

(2,695)
(8,536)

(11,231)
(8)
(11,239)

(1,519)
(12,758)
(5,566)
$ (18,324)
$ 15,444

21

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of services sold . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
Office and general expenses
Depreciation and amortization . . . . . . . . . . . . . .
Operating Proﬁt (Loss) . . . . . . . . . . . . . . . . . . .
Other Income (Expense):
Other expense, net . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange gain . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations before income
taxes and equity in affiliates . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations before equity

in affiliates and noncontrolling interests . . . . . .
Equity in earnings of affiliates . . . . . . . . . . . . . .
Income from continuing operations . . . . . . . . . . .
Loss from discontinued operations attributable to

MDC Partners Inc., net of taxes . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to the noncontrolling

interests

. . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to MDC Partners Inc.
. . .
Stock-based compensation . . . . . . . . . . . . . . . . .

For the Year Ended December 31, 2008

Strategic
Marketing
Services
$362,203
225,569
84,071
24,550
28,013

Performance
Marketing
Services
$221,068
165,446
35,725
9,189
10,708

Corporate
—
$
—
17,622
401
(18,023)

(5,466)

(2,834)

—

$

6,162

$

3,697

$ 4,578

Total
$583,271
391,015
137,418
34,140
20,698

(14)
13,257
(13,255)

20,686
(2,397)

18,289
349
18,638

(10,205)
8,433

(8,300)
$
133
$ 14,437

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

Revenue was $697.8 million for the year ended 2010, representing an increase of $152.7 million, or
28.1%, compared to revenue of $545.1 million for the year ended 2009. This increase relates primarily to
acquisition growth of $105.8 million and an increase in organic revenue of $38.5 million. In addition, a
weakening of the US Dollar, primarily versus the Canadian dollar during the year ended December 31, 2010,
resulted in an increase of $8.4 million.

Operating proﬁt for the year ended 2010 was $28.9 million compared to $21.1 million in 2009. Operating

proﬁt increased by $4.2 million in the Strategic Marketing Services, and by $7.7 million within the
Performance Marketing Services segment. Corporate operating expenses increased by $4.1 million in 2010.

Income (loss) from continuing operations was a loss of $2.9 million in 2010, compared to a loss of $11.2
million in 2009. This increase in income of $8.3 million was primarily attributable to the increase in operating
proﬁt, offset by an increase in net interest expense equal to $11.5 million. This increase in net interest expense
was primarily due to the Company’s outstanding 11% senior notes. These amounts were impacted by a
decrease in foreign exchange losses from a loss of $2.0 million in 2009 to income of $0.1 million in 2010,
and an increase in other income, net of $0.5 million from a loss of $0.1 million in 2009 to income of $0.4
million in 2010. In addition, income tax expense decreased $8.7 million, from $8.5 million in 2009 to a
beneﬁt of $0.2 million in 2010. Equity in earnings of non-consolidated affiliates increased by $0.9 million due
to distributions in excess of the Company’s carrying value of one equity method investment of $2.6 million,
offset by the write-off of another equity method investment due to continued losses.

22

Marketing Communications Group

Revenues attributable to the Marketing Communications Group, which consists of two reportable
segments — Strategic Marketing Services and Performance Marketing Services, were $697.8 million in the
aggregate in 2010, compared to $545.1 million in 2009, representing a year-over-year increase of 28%.

The components of the revenue for 2010 are shown in the following table:

Year ended December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Organic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . .

Revenue

$000’s
$545,141
105,851
38,477
8,356
$697,825

%
—
19.4%
7.1%
1.5%
28.0%

The geographic mix in revenues was relatively consistent between 2010 and 2009 and is demonstrated in

the following table:

US . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe and other

2010
84%
14%
2%

2009
83%
15%
2%

The operating proﬁt of the Marketing Communications Group increased by approximately 30.2% to $51.6
million in 2010, from $39.6 million in 2009. Operating margins increased to 7.4% for 2010 compared to 7.3%
for 2009. The increase in operating margin is primarily attributable to increased revenues and a reduction in
total staff costs as a percentage of revenues from 60.2% in 2009, to 55.3% in 2010. Direct costs (excluding
staff costs) offset this increase as these costs increased as a percentage of revenues from 14.0% of revenue in
2009 to 20.6% of revenue in 2010 due to an increase in reimbursed client related direct costs. This increase in
direct costs is due to the requirement that certain costs be included in both revenue and direct costs due to the
Company acting as principle versus agent for certain client contracts. Office and general expenses as a
percentage of revenue decreased from 21.7% in 2009, to 19.3% in 2010. This decrease was primarily a result
of increased revenues on relatively ﬁxed costs, offset by acquisition related costs and estimated deferred
acquisition consideration adjustments of 0.3% in 2010 compared to minimal impact in 2009. Depreciation and
amortization expenses decreased as a percentage of revenue from 6.2% in 2009, to 4.9% in 2010, due to these
expenses being relatively ﬂat at $34.0 million.

Marketing Communications Businesses

Strategic Marketing Services

Revenues attributable to Strategic Marketing Services in 2010 were $438.9 million, compared to $370.6
million in 2009. The year-over-year increase of $68.3 million, or 18.4%, was attributable primarily to organic
growth of $43.2 million or 11.7%; acquisition growth of $20.2 million or 5.4%; and a foreign exchange
conversion of $4.9 million due to the weakening of the US dollar compared to the Canadian dollar. This
organic revenue growth was driven by net new business wins.

The operating proﬁt of Strategic Marketing Services increased by approximately 11.5% to $41.0 million
in 2010, from $36.8 million in 2009, while operating margins decreased to 9.3% in 2010 from 9.9% in 2009.
The increase in operating proﬁt was primarily due to the increased revenue. The decrease in operating margin
was primarily related to an increase in direct costs (excluding staff costs) as a percentage of revenues from
11.0% of revenue in 2009, to 16.8% of revenue in 2010. In addition, margins were negatively impacted by
acquisition related costs and estimated deferred acquisition consideration adjustments of 0.6% in 2010
compared to minimal impact in 2009. Total staff costs as a percentage of revenue decreased from 58.3% in
2009 to 55.8% in 2010, helping to offset increase in direct costs as a percentage of revenue despite the
Company’s investment in talent. Depreciation and amortization decreased as a percentage of revenue from
6.9% during 2009 to 4.1% during 2010.

23

Performance Marketing Services

Performance Marketing Services generated revenues of $258.9 million for 2010, an increase of $84.4

million, or 48.3%, compared to revenues of $174.5 million in 2009. The year-over-year increase was
attributable primarily to acquisition growth of $85.7 million and a foreign translation of $3.4 million; offset by
an organic revenue decline of $4.8 million. Revenues declined due to customers reducing their outsourcing
needs and reduced client project spending in 2010.

The operating proﬁt of Performance Marketing Services increased by $7.7 million to $10.6 million in

2010, from an operating proﬁt of $2.9 million in 2009. Operating margins improved from 1.6% in 2009
compared to 4.1% in 2010. The increase in operating proﬁt dollars is primarily due to increased revenue. The
increase in operating margin in 2010 was due primarily to a decrease in total staff costs as a percentage of
revenue from 64.1% in 2009; to 54.5% in 2010. Offsetting this decrease was an increase in direct costs
(excluding staff costs) as a percentage of revenue from 20.6% in 2009 to 27.0%. Office and general expenses
as a percentage of revenue decreased from 17.7% in 2009 to 17.0% in 2010 due to relatively ﬁxed costs
compared to the increase in revenue. Depreciation and amortization increased due to amortization of acquired
intangibles from 2010 acquisitions.

Corporate

Operating costs related to the Company’s Corporate operations increased by $4.1 million to $22.7 million

in 2010, compared to $18.5 million in 2009. This increase of $4.1 million was primarily related to increased
compensation and related costs of $1.9 million ($1.4 million of which consisted of non-cash stock based
compensation), travel, promotional and related costs of $2.0 million and professional and other costs of
$0.2 million.

Other Expense, Net

Other expense, net, increased $0.5 million in 2010 to income of $0.4 million from an expense of $0.1

million in 2009.

Foreign Exchange

The foreign exchange gain was $0.1 million for 2010, compared to a loss of $0.1 million recorded

in 2009.

During 2010, the Company settled certain intercompany accounts to reduce its exposure to the continued
foreign exchange ﬂuctuations between the US dollar and Canadian dollar. As a result, the Company recorded a
net minimal foreign exchange gain in 2010 compared to the loss incurred in 2009. In 2009, the Company
recorded an unrealized loss that was offset by a $1.3 million realized gain on foreign exchange transactions.

Net Interest Expense

Net interest expense for 2010 was $33.3 million, an increase of $11.5 million over the $21.7 million net
interest expense incurred during 2009. Interest expense increased $11.4 million in 2010 due to the reﬁnancing
completed in October 2009 and the additional $65 million 11% senior notes issued in May 2010. Interest
expense also increased due to the higher debt outstanding and higher interest rates on the reﬁnanced debt.
Interest income was $0.2 million for 2010, as compared to $0.4 million in 2009.

Income Taxes

Income tax beneﬁt in 2010 was $0.2 million compared to expense of $8.5 million for 2009. In 2010, the

Company’s effective tax rate was substantially lower than the statutory tax rate due to a decrease in the
Company’s valuation allowance, and noncontrolling interest charges. These amounts were offset in part by
non-deductible stock based compensation and a reserve established for potential tax positions. The Company’s
effective tax rate was substantially higher than the statutory rate in 2010 due to non-deductible stock-based
compensation and an increase in the Company’s valuation allowance, offset in part by noncontrolling
interest charges.

The Company’s US operating units are generally structured as limited liability companies, which are

treated as partnerships for tax purposes. The Company is only taxed on its share of proﬁts, while
noncontrolling holders are responsible for taxes on their share of the proﬁts.

24

Equity in Affiliates

Equity in affiliates represents the income loss attributable to equity-accounted affiliate operations. In
2010, the Company incurred income of $0.9 million due to distributions in excess of the Company’s carrying
value of one equity method investment of $2.6 million offset by the write-off of another equity method
investment due to continued losses.

Noncontrolling Interests

Noncontrolling interest expense was $10.1 million for 2010, an increase of $4.5 million from the $5.6

million of noncontrolling interest expense incurred during 2009. The increase was primarily due to increased
proﬁtability of subsidiaries within both operating segments, which are not 100% owned.

Discontinued Operations

The loss net of taxes from discontinued operations for 2010 was $2.5 million and is comprised of the

operating results of Zig (US) LLC (‘‘Zig US’’), Redscout’s 007 venture; discontinued operations of Fearless
Progression LLC in 2010; and Margeotes Fertitta Powell, LLC (‘‘MFP’’) discontinued in 2007.

The loss net of taxes from discontinued operations for 2009 was $1.5 million and is comprised of the

operating results of Zig US, Clifford/Bratskeir Public Relations LLC discontinued in 2009 and MFP.

Net Income

As a result of the foregoing, the net loss recorded for 2010 was $15.4 million or loss of $0.55 per diluted

share, compared to a net loss of $18.3 million or $0.67 per diluted share reported for 2009.

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Revenue was $545.1 million for the year ended 2009, representing a decrease of $38.2 million, or 6.5%,
compared to revenue of $583.3 million for the year ended 2008. This decrease relates primarily to a decrease
in organic revenue of $31.6 million. In addition, a weakening of the US Dollar, primarily versus the Canadian
dollar during the year ended December 31, 2009, resulted in a further reduction of revenues of $6.5 million.

Operating proﬁt for the year ended 2009 was $21.1 million compared to $20.7 million in 2008. Operating

proﬁt increased $8.7 million in the Strategic Marketing Services, which was offset by a decrease of $7.8
million, within the Performance Marketing Services segment. Corporate operating expenses increased by
$0.5 million.

Income (loss) from continuing operations was a loss of $11.2 million in 2009, compared to income of
$18.6 million in 2008. This decrease in income of $29.8 million was primarily attributed to the result of an
unrealized foreign exchange loss of $3.2 million, offset by a realized foreign exchange gain of $1.3 million in
2009, compared to an unrealized foreign exchange gain of $13.3 million in 2008 and net interest expense
increased by $8.5 million primarily due to the termination fees and expenses, write-off of the remaining
deferred ﬁnancing costs and increased interest expense resulting from the reﬁnancing of existing debt. Income
tax expense increased $6.1 million from $2.4 million in 2008 to $8.5 million in 2009. Equity in earnings of
non-consolidated affiliates decreased by $0.4 million.

Marketing Communications Group

Revenues in 2009 attributable to the Marketing Communications Group, which consists of two reportable

segments — Strategic Marketing Services and Performance Marketing Services, were $545.1 million
compared to $583.3 million in 2008, representing a year-over-year decrease of 6.5%.

25

The components of the revenue for 2009 are shown in the following table:

Year ended December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . .
Organic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . .

Revenue

$000’s
$583,271
(31,590)
(6,540)
$545,141

%
—
(5.4)%
(1.1)%
(6.5)%

The geographic mix in revenues was relatively consistent between 2009 and 2008 and is demonstrated in

the following table:

US . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe and other

2009
83%
15%
2%

2008
83%
15%
2%

The operating proﬁt of the Marketing Communications Group increased by approximately 2.3% to $39.6

million from $38.7 million. Operating margins increased to 7.3% for 2009 compared to 6.6% for 2008. The
increase in operating margin is primarily attributable to a decrease in direct costs (excluding staff costs) as a
percentage of revenues from 14.6% of revenue in 2008 to 14.0% of revenue in 2009 due to an increase in
reimbursed client related direct costs. Total staff costs as a percentage of revenues was 60.2% in both 2008
and 2009 despite a reduction of staff cost dollars of $23.2 million. Depreciation and amortization expenses
increased as a percentage of revenue from 5.8% in 2008 to 6.3% in 2009 despite being relatively ﬂat at
$34.0 million.

Marketing Communications Businesses

Strategic Marketing Services

Revenues attributable to Strategic Marketing Services in 2009 were $370.6 million compared to $362.2
million in 2008. The year-over-year increase of $8.4 million, or 2.3%, was attributable primarily to organic
growth of $11.6 million or 3.2%. This organic growth was driven by net new business wins, offset by foreign
exchange conversation of $3.2 million due to the weakening of the US dollar compared to the
Canadian dollar.

The operating proﬁt of Strategic Marketing Services increased by approximately 31.2% to $36.8 million
in 2009, from $28.0 million in 2008, while operating margins increased to 9.9% in 2009 from 7.7% in 2008.
The increase in operating proﬁt and margin is primarily related to a decreased in direct costs (excluding staff
costs) as a percentage of revenues from 11.7% of revenue in 2008 to 11.0% of revenue in 2009, primarily due
to a decrease in reimbursed client related direct costs. Total staff costs as a percentage of revenue decreased
from 58.7% in 2008 to 58.3% in 2009. Depreciation and amortization represented 6.9% and 6.8% or revenues
during 2009 and 2008, respectively.

Performance Marketing Services

Performance Marketing Services generated revenues of $174.5 million for 2009, which was a decrease of

$46.5 million, or 21.1%, compared to revenues of $221.1 million in 2008. The year-over-year increase was
attributable primarily to organic revenue declines of $43.2 million. Revenue declines were also attributable to
a weakening of the US dollar versus the Canadian dollar and British pound in 2009 compared to 2008
resulted in a $3.4 million decrease in revenues from the division’s Canadian and UK-based operations.
Revenues declined due to customers reducing their outsourcing needs and reducing client project spending.

The operating proﬁt of Performance Marketing Services decreased by $7.8 million to $2.9 million in
2009, from an operating proﬁt of $10.7 million in 2008, with operating margins of 1.6% in 2009 compared to
4.8% in 2008. The decrease in operating margin in 2009 was due primarily to an increase in total staff costs
as a percentage of revenues from 62.7% in 2008 to 64.1% in 2009. Direct costs (excluding staff costs) as a
percentage of revenue increased from 19.4% in 2008 to 20.6% in 2009. This increase is a result of the timing

26

of when expected clients’ projects were expected to begin, while maintaining the appropriate staffing levels to
properly service those projects; however, staff costs did decrease by $26.9 million. Margins were also
impacted by an increase in office and general expenses as a percent of revenue, which increased from 16.2%
in 2008 to 17.7% in 2009 and an increase in depreciation and amortization from 4.2% in 2008 to 4.9% in
2009. Office and general expenses costs decreased $4.8 million; however, due to their relatively ﬁxed nature,
the decrease in revenue outpaced this decrease in costs.

Corporate

Operating costs related to the Company’s Corporate operations increased by $0.5 million to $18.5 million

in 2009 compared to $18.0 million in 2008. Stock based compensation expense increased $1.3 million, while
cash staff costs decreased by $0.5 million and other administrative costs decreased by $0.03 million.

Other Expense, Net

Other expense, net increased to $0.1 million in 2009 from almost nil in 2008.

Foreign Exchange

The foreign exchange loss was $2.0 million for 2009 compared to a gain of $13.3 million recorded in
2008, and was due primarily to an unrealized loss due to a weakening in the US dollar during 2009 compared
to the Canadian dollar primarily on its US dollar denominated intercompany balances with its Canadian
subsidiaries. During 2009, the Company recorded a $1.3 million realized gain on foreign exchange
transactions, which reduced the unrealized loss. At December 31, 2009, the exchange rate was 1.05 Canadian
dollars to one US dollar, compared to 1.22 at the end of 2008 and 0.99 at the end of 2007.

Net Interest Expense

Net interest expense for 2009 was $21.7 million, an increase of $8.4 million over the $13.3 million net

interest expense incurred during 2008. Interest expense increased $7.1 million in 2009 due to termination fees
and expenses and the write-off of deferred ﬁnancing costs of $4.5 million as a result of the $300 million
reﬁnancing completed in October 2009. Interest expense also increased due to the higher debt outstanding and
higher interest rates on the reﬁnanced debt. Interest income was $0.4 million for 2009, as compared to $1.7
million in 2008. This decrease was primarily due to the interest income recognized from the notes related to
the sale of SPI, which was received in full in May 2009.

Income Taxes

Income tax expense in 2009 was $8.5 million compared to $2.4 million for 2008. The Company’s
effective tax rate was substantially higher than the statutory rate in 2009 due to non-deductible stock-based
compensation and an increase in the Company’s valuation allowance, offset in part by noncontrolling interest
charges. In 2008, the Company’s effective tax rate was substantially lower than the statutory tax rate due to a
decrease in the Company’s valuation allowance, a reversal of withholding taxes due to a change in the tax
law, and noncontrolling interest charges. These amounts were offset in part by non-deductible stock based
compensation.

The Company’s US operating units are generally structured as limited liability companies, which are

treated as partnerships for tax purposes. The Company is only taxed on its share of proﬁts, while
noncontrolling holders are responsible for taxes on their share of the proﬁts.

Equity in Affiliates

Equity in affiliates represents the income attributable to equity-accounted affiliate operations. For 2009

and 2008, a loss of almost nil and income of $0.3 million was recorded, respectively.

Noncontrolling Interests

Noncontrolling interest expense was $5.6 million for 2009, down $2.7 million from the $8.3 million of

noncontrolling interest expense incurred during 2008. The decrease was primarily due to a decrease in
proﬁtability of subsidiaries within the Performance Marketing Service operating segment, which are not
100% owned.

27

Discontinued Operations

The loss net of taxes from discontinued operations for 2009 was $1.5 million and is comprised of the
operating results of Zig (US) LLC (‘‘Zig US’’), discontinued in 2010, Clifford/Bratskeir Public Relations LLC
(‘‘Bratskeir’’), discontinued in 2008 and Margeotes Fertitta Powell, LLC (‘‘MFP’’) discontinued in 2007.

The loss net of taxes from discontinued operations for 2008 was $10.2 million and is comprised of the
operating results of Zig US, discontinued in 2010, Mobium, a division of Colle & McVoy, LLC (‘‘Colle’’),
Bratskeir, The Ito Partnership (‘‘Ito’’) and MFP. MFP was previously discontinued in 2007; the other entities
were discontinued in 2008.

Effective December 3, 2008, Colle completed the sale of certain assets of its Mobium division. The

Company recorded a loss on sale of $1.2 million ($0.8 million net of taxes) and an operating loss of $3.4
million ($2.3 million net of taxes).

In December 2008, the Company entered into negotiations to sell certain remaining assets in Bratskeir to

management. This transaction was completed in April 2009. As a result of this expected transaction, the
Company recorded an impairment charge of $1.9 million ($1.3 million net of taxes). In addition, Bratskeir
recorded an operating loss of $3.8 million ($2.5 million net of taxes) in 2008.

Effective June 30, 2008, the Company completed the sale of its interests in Ito. The sale resulted in a loss

of $0.8 million ($0.5 million net of taxes.)

As a result, the Company has classiﬁed the MFP, Mobium, Bratskeir and Ito operations as discontinued.

Net Income

As a result of the foregoing, the net loss recorded for 2009 was $18.3 million or loss of $0.67 per diluted

share, compared to net income of $0.1 million or $0.01 per diluted share reported for 2008.

Liquidity and Capital Resources

The following table provides information about the Company’s liquidity position:

Liquidity

. . . . . . . . . . . . . . . . .
Cash and cash equivalents
Working capital (deﬁcit) . . . . . . . . . . . . . . . . . . .
Cash from operations . . . . . . . . . . . . . . . . . . . . .
Cash from investing . . . . . . . . . . . . . . . . . . . . . .
Cash from ﬁnancing . . . . . . . . . . . . . . . . . . . . .
Ratio of long-term debt to shareholders’ equity . . .

2010

2008

2009
(In Thousands, Except for Long-Term
Debt to Shareholders’ Equity Ratio)
$ 51,926
$(40,152)
$ 67,687
$(66,199)
$ 12,253
2.31

$ 10,949
$(102,547)
$ 37,297
$(130,253)
$ 52,401
3.11

$ 41,331
$(12,091)
$ 69,095
$(50,186)
$ 11,861
1.42

As at December 31, 2010, 2009 and 2008, $5.2 million, $14.1 million and $8.4 million, respectively, of
the Company’s consolidated cash position was held by subsidiaries. Although this amount is available for the
subsidiaries’ use, it does not represent cash that is distributable as earnings to MDC for use to reduce its
indebtedness. It is the Company’s intent through its cash management system to reduce outstanding
borrowings under the WF Credit Facility by using available cash.

Working Capital

At December 31, 2010, the Company had a working capital deﬁcit of $102.5 million, compared to a

deﬁcit of $40.2 million at December 31, 2009. Working capital deﬁcit increased by $62.4 million of which
$4.3 million related to operations and an accrued working capital deﬁciency of $58.1 million. The decrease in
working capital was primarily due to accelerated timing in the amounts collected from clients, and paid to
suppliers, primarily media outlets. The Company includes amounts due to noncontrolling interest holders, for
their share of proﬁts, in accrued and other liabilities. During 2010, 2009 and 2008, the Company made
distributions to these noncontrolling interest holders of $7.7 million, $7.8 million and $11.6 million,
respectively. At December 31, 2010, $8.6 million remains outstanding to be distributed to noncontrolling
interest holders over the next twelve months.

28

The Company expects that available borrowings under its Credit Agreement, together with cash ﬂows
from operations, will be sufficient over the next twelve months to adequately fund working capital deﬁcits
should there be a need to do so from time to time, as well as all of the Company’s obligations including put
options and capital expenditures.

Operating Activities

Cash ﬂow provided by continuing operations for 2010 was $39.8 million. This was attributable primarily

to a loss from continuing operations of $2.9 million, plus non-cash stock based compensation of $16.5
million, depreciation and amortization of $36.6 million, a decrease in expenditures billable to clients of $23.7
million, and an increase in advance billings of $2.4 million. This was partially offset by increases in accounts
receivable of $31.3 million, deferred income taxes of $5.4 million, other non-current assets and liabilities of
$0.5 million, and a decrease in accounts payable, accruals and other liabilities of $0.1 million. Discontinued
operations used cash of $2.5 million.

Cash ﬂow provided by continuing operations for 2009 was $69.3 million. This was attributable primarily

to a loss from continuing operations of $11.2 million, plus non-cash stock based compensation of $15.4
million, depreciation and amortization of $38.5 million, deferred income taxes of $7.0 million, an increase in
accounts payable, accruals and other liabilities of $11.0 million, non current assets and liabilities of $3.1
million, an increase in advance billings of $15.8 million and foreign exchange translation of $6.6 million. This
was partially offset by increases in accounts receivable of $11.4 million and expenditures billable to clients of
$7.1 million. Discontinued operations used cash of $1.6 million.

Cash ﬂow provided by continuing operations for 2008 was $72.8 million. This was attributable primarily

to income from continuing operations of $18.6 million, plus non-cash stock based compensation of $14.4
million, depreciation and amortization of $35.5 million, a decrease in accounts receivable and expenditures
billable to clients of $26.6 million and a decrease in prepaid expenses and other current assets of $1.4 million.
This was partially offset by foreign exchange gains of $14.6 million, deferred taxes of $1.0 million, changes
in other non-current assets and liabilities of $1.9 million and decreases in accounts payable, accruals and other
current liabilities of $8.4 million. Discontinued operations used cash of $3.7 million.

Investing Activities

Cash ﬂows used in investing activities were $130.3 million for 2010, compared with $66.2 million for

2009, and $50.2 million in 2008.

Cash used in acquisitions during 2010 was $117.1 million, of which $27.3 million related to earnout and

deferred acquisition payments, $78.3 million related to acquisition payments and $11.5 million related to
acquisition of additional equity interests pursuant to put/call option exercises.

Expenditures for capital assets in 2010 were equal to $12.5 million. Of this amount, $6.5 million was

incurred by the Strategic Marketing Services segment, $5.4 million was incurred by the Performance
Marketing Services segment. These expenditures consisted primarily of computer equipment, leasehold
improvements, furniture and ﬁxtures, and $0.6 million related to the purchase of Corporate assets.

Cash used in acquisitions during 2009 was $60.0 million, of which $54.0 million related to earnout and

deferred acquisition payments, $3.4 million related to acquisition payments and $2.6 million related to
acquisition of additional equity interests pursuant to put/call option exercises.

Expenditures for capital assets in 2009 were equal to $6.2 million. Of this amount, $3.6 million was

incurred by the Strategic Marketing Services segment, $2.4 million was incurred by the Performance
Marketing Services segment, and $0.2 million related to the purchase of Corporate assets. These expenditures
consisted primarily of computer equipment, leasehold improvements and furniture and ﬁxtures.

Cash used in acquisitions during 2008 was $35.6 million. Of this amount, $18.9 million was paid in the

acquisition of equity interests in Crispin Porter & Bogusky, Texture Media, Clifford PR, Core Strategy Group,
DMG Inc., Skinny NY, Source Marketing, Allard Johnson, and Accent Marketing. In addition, the Company
paid $16.7 million as contingent deferred payments from prior acquisitions.

Expenditures for capital assets in 2008 were $14.4 million. Of this amount, $9.2 million was incurred by

the Strategic Marketing Services segment, $5.1 million was incurred by the Performance Marketing Services

29

segment, and $0.1 million related to the purchase of corporate assets. These expenditures consisted primarily
of computer equipment, leasehold improvements and furniture and ﬁxtures.

The cash used in investing activities of $0.2 million from dispositions in 2008 primarily relate to

proceeds received from the sale of capital assets.

Proﬁt distributions received from affiliates amounted to $0.6 million in 2010, $0.2 million in 2009, and

$0.4 million for 2008.

Discontinued operations used cash of $0.7 million, nil, and $0.8 million in 2010, 2009 and 2008,

respectively, relating to expenditures for capital assets, and in 2010 such payments also related to acquisitions
and earnout payments.

Financing Activities

During the year ended December 31, 2010, cash ﬂows provided by ﬁnancing activities amounted to $52.4

million and primarily consisted of $67.6 million of proceeds from the additional 11% senior notes issuance,
proceeds from bank overdrafts of $9.0 million, offset by $2.1 million of deferred ﬁnancing costs relating to
the senior notes and new revolving WF Credit Facility. The proceeds of the 11% senior notes issuance were
partially offset by dividends paid and payable of $9.7 million, distributions to noncontrolling shareholders of
$7.7 million, purchase of treasury shares of $3.5 million and repayment of long-term debt of $1.5 million.

During the year ended December 31, 2009, cash ﬂows provided by ﬁnancing activities amounted to $12.3
million and primarily consisted of $225 million of proceeds from the 11% senior notes issuance, offset by the
original issue discount of $10.5 million and $10.1 million of deferred ﬁnancing costs relating to the senior
notes and new revolving WF Credit Facility. The proceeds were offset by repayments of $130.0 million term
loans, $42.5 million convertible notes, $9.7 million relating to the old credit facility, and $7.8 million for
distributions to noncontrolling interests.

During the year ended December 31, 2008, cash ﬂows provided by ﬁnancing activities amounted to $11.9
million, and primarily consisted of $26.3 million of proceeds from borrowings under the Company’s previous
Financing Agreement. These proceeds were partially offset by $1.9 million of net repayments of long-term
debt, $0.9 million relating to the repurchase of treasury shares for income tax withholding requirements, and
$11.6 million for distributions to noncontrolling interests.

Total Debt

11% Senior Notes Due 2016

On October 23, 2009, the Company and its wholly-owned subsidiaries, as guarantors, issued and sold
$225 million aggregate principal amount of 11% Senior Notes due 2016 (the ‘‘11% Notes’’). The 11% Notes
bear interest at a rate of 11% per annum, accruing from October 23, 2009. Interest is payable semiannually in
arrears in cash on May 1 and November 1 of each year, beginning on May 1, 2010. The 11% Notes will
mature on November 1, 2016, unless earlier redeemed or repurchased. The Company received net proceeds
before expenses of $209 million which included an original issue discount of approximately 4.7% or $10.5
million and underwriter fees of $5.5 million. The 11% Notes were sold in a private placement in reliance on
exemptions from registration under the Securities Act of 1933, as amended. The Company used the net
proceeds of this offering to repay the outstanding balance and terminate its prior Fortress Financing
Agreement consisting of repayments of $130 million term loans, a $70 million delayed draw term loan, and
$9.7 outstanding on the $55 million revolving credit facility. The Company also used the net proceeds to
redeem its outstanding 8% C$45 million convertible debentures.

On May 14, 2010, the Company and its wholly-owned subsidiaries, as guarantors, issued and sold $65
million aggregate principal amount of 11% Senior Notes due 2016. The additional notes were issued under the
Indenture governing the 11% Notes and treated as a single series with the original 11% Notes. The additional
notes were sold in a private placement in reliance on exceptions from registration under the Securities Act of
1933, as amended. The Company received net proceeds before expenses of $67.2 million, which included an
original issue premium of $2.6 million, and underwriter fees of $0.4 million. The Company used the net
proceeds of the offering to repay the outstanding balance under the Company’s revolving credit facility
described elsewhere herein, and for general corporate purposes, including acquisitions.

30

The Company may, at its option, redeem the 11% Notes in whole at any time or in part from time to
time, on and after November 1, 2013 at a redemption price of 105.5% of the principal amount thereof. If
redeemed during the twelve-month period beginning on November 1, 2014, the Company must pay a
redemption price of 102.75% of the principal amount thereof. If redeemed during the twelve-month period
beginning on November 1, 2015, the Company must pay a redemption price of 100% of the principal amount
thereof. Prior to November 1, 2013, the Company may, at its option, redeem some or all of the 11% Notes at
a price equal to 100% of the principal amount of the Notes plus a ‘‘make whole’’ premium and accrued and
unpaid interest. The Company may also redeem, at its option, prior to November 1, 2012, up to 35% of the
11% Notes with the proceeds from one or more equity offerings at a redemption price of 111% of the
principal amount thereof. If the Company experiences certain kinds of changes of control (as deﬁned in the
Indenture), holders of the 11% Notes may require the Company to repurchase any 11% Notes held by them at
a price equal to 101% of the principal amount of the 11% Notes plus accrued and unpaid interest. The
indenture governing the 11% Notes contains various covenants restricting our operations in certain respects.
See ‘‘Risk Factors.’’

Credit Agreement

On October 23, 2009, the Company and its subsidiaries entered into a $75 million ﬁve year senior
secured revolving WF Credit Facility (the ‘‘WF Credit Facility’’) with Wells Fargo Foothill, LLC, as agent,
and the lenders from time to time party thereto. On November 22, 2010, the Company amended its facility to
increase availability to $100 million. The WF Credit Facility replaced the Company’s existing $185 million
senior secured ﬁnancing agreement with Fortress Credit Corp., as collateral agent, Wells Fargo Foothill, Inc.,
as administrative agent. Advances under the WF Credit Facility will bear interest as follows: (a)(i) LIBOR
Rate Loans bear interest at the LIBOR Rate and (ii) Base Rate Loans bear interest at the Base Rate, plus
(b) an applicable margin. The initial applicable margin for borrowing is 3.00% in the case of Base Rate Loans
and 3.25% in the case of LIBOR Rate Loans. The applicable margin may be reduced subject to the Company
achieving certain trailing twelve month earning levels, as deﬁned. In addition to paying interest on outstanding
principal under the WF Credit Facility, the Company is required to pay an unused revolver fee to lender under
the WF Credit Facility in respect of unused commitments thereunder.

The WF Credit Facility is guaranteed by all of the Company’s present and future subsidiaries, other than

immaterial subsidiaries as deﬁned and is secured by all the assets of the Company. The WF Credit Facility
includes covenants that, among other things, restrict the Company’s ability and the ability of its subsidiaries to
incur or guarantee additional indebtedness; pay dividends on or redeem or repurchase the capital stock of
MDC; make certain types of investments; pay dividends or other amounts from the Company’s subsidiaries;
incur certain liens, sell or otherwise dispose of certain assets; enter into transactions with affiliates; enter into
sale and leaseback transactions; and consolidate or merge with or into, or sell substantially all of the
Company’s assets to, another person. These covenants are subject to a number of important limitations and
exceptions. The WF Credit Facility also contains ﬁnancial covenants, including a senior leverage ratio, total
leverage ratio, a ﬁxed charge coverage ratio and a minimum earnings level, as deﬁned.

Debt as of December 31, 2010 was $286.2 million, which includes $6.8 million for an original issue

discount. Exclusive of the original issue discount, 2010 debt was $293.0, an increase of $64.8 million
compared with the $228.2 million outstanding at December 31, 2009, primarily as a result of proceeds from
the May 2010 bond issuance of $65 million to fund seasonal working capital requirements, earnout
obligations, and acquisitions. At December 31, 2010, $94 million is available under the WF Credit Facility to
fund working capital requirements.

The Company is currently in compliance with all of the terms and conditions of its WF Credit Facility,
and management believes, based on its current ﬁnancial projections, that the Company will be in compliance
with covenants over the next twelve months.

If the Company loses all or a substantial portion of its lines of credit under the WF Credit Facility, it

may be required to seek other sources of liquidity. If the Company were unable to ﬁnd these sources of
liquidity, for example through an equity offering or access to the capital markets, the Company’s ability to
fund its working capital needs and any contingent obligations with respect to put options would be adversely
affected.

31

Pursuant to the Credit Agreement, the Company must comply with certain ﬁnancial covenants including,

among other things, covenants for (i) senior leverage ratio (ii) total leverage ratio, (iii) ﬁxed charges ratio,
(iv) minimum earnings before interest, taxes and depreciation and amortization and (v) minimum accounts
receivable level, in each case as such term is speciﬁcally deﬁned in the WF Credit Facility. For the period
ended December 31, 2010, the Company’s calculation of certain of these covenants, and the speciﬁc
requirements under the Credit Agreement, respectively, were as follows:

Senior leverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum per covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31, 2010
0.07
2.0

Fixed charges ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum per covenant

2.16
1.25

Total leverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum per covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings before interest, taxes, depreciation and amortization . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum per covenant

3.19
3.50*
$91.7 million
$87.8 million

*

Effective as of the twelve month period ending March 31, 2011, the maximum total leverage ratio will be
4.0x, and will then be 3.75x for the twelve month period ending on the last day of each calendar
quarter thereafter.

These ratios are not based on generally accepted accounting principles and are not presented as

alternative measures of operating performance or liquidity. They are presented here to demonstrate compliance
with the covenants in the Company’s WF Credit Facility, as non-compliance with such covenants could have a
material adverse effect on the Company.

Disclosure of Contractual Obligations and Other Commercial Commitments

The following table provides a payment schedule of present and future obligations. Management
anticipates that the obligations outstanding at December 31, 2010 will be repaid with new ﬁnancing, equity
offerings and/or cash ﬂow from operations (in thousands):

Payments Due by Period

After
5 Years

3 – 5 Years
$

— $290,000
24
25,459
31,900
3,706
—
—
$351,089

161
26,593
63,813
23,392
—
—
$113,959

Contractual Obligations
Indebtedness . . . . . . . . . . . . . . . . .
Capital lease obligations . . . . . . . . .
. . . . . . . . . . . . . .
Operating leases
. . . . . . . . . . . . . . .
Interest on debt
Deferred acquisition consideration . .
Management services agreement
. . .
Other . . . . . . . . . . . . . . . . . . . . . .
. . . . . .
Total contractual obligations

Total
$291,400
1,659
114,642
191,601
107,991
1,500
2,200
$710,993

Less than
1 Year

$

800
867
22,860
32,023
30,887
1,500
800
$89,737

1 – 3 Years
600
$
607
39,730
63,865
50,006
—
1,400
$156,208

32

The following table provides a summary of other commercial commitments (in thousands) at

December 31, 2009:

Other Commercial Commitments
Lines of credit . . . . . . . . . . . . . . . . . . .
Letters of credit . . . . . . . . . . . . . . . . . .
Total Other Commercial Commitments . .

Total
$ —
$6,018
$6,018

Payments Due by Period

Less than
1 Year
$ —
$6,018
$6,018

1 – 3 Years
$—
—
$—

3 – 5 Years
$—
—
$—

After
5 Years
$—
—
$—

For further detail on MDC’s long-term debt principal and interest payments, see Note 12 and Note 18 of
the Company’s consolidated ﬁnancial statements included in this Form 10-K. See also ‘‘Deferred Acquisition
and Contingent Consideration (Earnouts)’’ and ‘‘Other-Balance Sheet Commitments” below.

Capital Resources

At December 31, 2010, the Company had only utilized the Credit Agreement in the form of undrawn

letters of credit of $6.0 million. Cash and undrawn available bank credit facilities to support the Company’s
future cash requirements at December 31, 2010 was approximately $94 million.

The Company expects to incur approximately $17 million of capital expenditures in 2011. Such capital

expenditures are expected to include leasehold improvements, furniture and ﬁxtures, and computer equipment
at certain of the Company’s operating subsidiaries. The Company intends to maintain and expand its business
using cash from operating activities, together with funds available under the Credit Agreement. Management
believes that the Company’s cash ﬂow from operations and funds available under the Credit Agreement will
be sufficient to meet its ongoing working capital, capital expenditures and other cash needs over the next
eighteen months. If the Company continues to spend capital on future acquisitions, management expects that
the Company may need to obtain additional ﬁnancing in the form of debt and/or equity ﬁnancing.

Deferred Acquisition and Contingent Consideration (Earnouts)

Acquisitions of businesses by the Company may include commitments to contingent deferred purchase
consideration payable to the seller. These contingent purchase obligations are generally payable within a one
to ﬁve-year period following the acquisition date, and are based on achievement of certain thresholds of future
earnings and, in certain cases, also based on the rate of growth of those earnings.

Contingent purchase price obligations for acquisitions completed prior to January 1, 2009 are accrued
when the contingency is resolved and payment is certain. Contingent purchase price obligations related to
acquisitions completed subsequent to December 31, 2008 are recorded as liabilities at estimated value and are
remeasured at each reporting period and changes in estimated value are recorded in results of operations. At
December 31, 2010, there was $108.0 million of deferred consideration included in the Company’s balance
sheet.

Other-Balance Sheet Commitments

Put Rights of Subsidiaries’ Noncontrolling Shareholders

Owners of interests in certain of the Company’s subsidiaries have the right in certain circumstances to
require the Company to acquire either a portion of or all of the remaining ownership interests held by them.
The owners’ ability to exercise any such ‘‘put option’’ right is subject to the satisfaction of certain conditions,
including conditions requiring notice in advance of exercise. In addition, these rights cannot be exercised prior
to speciﬁed staggered exercise dates. The exercise of these rights at their earliest contractual date would result
in obligations of the Company to fund the related amounts during the period 2011 to 2018. It is not
determinable, at this time, if or when the owners of these rights will exercise all or a portion of these rights.

The amount payable by the Company in the event such put option rights are exercised is dependent on

various valuation formulas and on future events, such as the average earnings of the relevant subsidiary
through that date of exercise, the growth rate of the earnings of the relevant subsidiary during that period,
and, in some cases, the currency exchange rate at the date of payment.

33

Management estimates, assuming that the subsidiaries owned by the Company at December 31, 2010,
perform over the relevant future periods at their 2010 earnings levels, that these rights, if all exercised, could
require the Company, in future periods, to pay an aggregate amount of approximately $33.0 million to the
owners of such rights to acquire such ownership interests in the relevant subsidiaries. Of this amount, the
Company is entitled, at its option, to fund approximately $3.1 million by the issuance of the Company’s Class
A subordinate voting shares. In addition, the Company is obligated under similar put option rights to pay an
aggregate amount of approximately $48.8 million only upon termination of such owner’s employment with the
applicable subsidiary or death. The Company intends to ﬁnance the cash portion of these contingent payment
obligations using available cash from operations, borrowings under the WF Credit Facility (and reﬁnancings
thereof) and, if necessary, through incurrence of additional debt. The ultimate amount payable and the
incremental operating income in the future relating to these transactions will vary because it is dependent on
the future results of operations of the subject businesses and the timing of when these rights are exercised.
Approximately $2.9 million of the estimated $33.0 million that the Company would be required to pay
subsidiaries noncontrolling shareholders’ upon the exercise of outstanding ‘‘put’’ rights, relates to rights
exercisable within the next twelve months. Upon the settlement of the total amount of such put options, the
Company estimates that it would receive incremental operating income before depreciation and amortization
of $10.0 million that would be attributable to MDC Partners Inc.

The following table summarizes the potential timing of the consideration and incremental operating

income before depreciation and amortization based on assumptions as described above.

Consideration(4)

2011

2012

2013

2014

2015 &
Thereafter

Total

Cash . . . . . . . . . . . . . . . . . . . . . . .
Shares . . . . . . . . . . . . . . . . . . . . . .

Operating income before depreciation
and amortization to be received(2)
Cumulative operating income before
depreciation and amortization(3)

. . .

. .

($ Millions)

$2.3
0.6
$2.9

$12.6
0.7
$13.3

$3.7
1.0
$4.7

$4.0
0.5
$4.5

$ 7.3
0.3
$ 7.6

$ 29.9
3.1
$33.0(1)

$2.9

$ 1.9

$2.4

$0.8

$ 2.0

$ 10.0

$2.9

$ 4.8

$7.2

$8.0

10.0

(5)

(1) This amount in addition to put options only exercisable upon termination or death of $48.8 million have

been recognized in Redeemable Noncontrolling Interests on the Company balance sheet in conjunction
with the adoption of a new accounting pronouncement.

(2) This ﬁnancial measure is presented because it is the basis of the calculation used in the underlying
agreements relating to the put rights and is based on actual 2010 operating results. This amount
represents additional amounts to be attributable to MDC Partners Inc., commencing in the year the put
is exercised.

(3) Cumulative operating income before depreciation and amortization represents the cumulative amounts to

be received by the company.

(4) The timing of consideration to be paid varies by contract and does not necessarily correspond to the date

of the exercise of the put.

(5) Amounts are not presented as they would not be meaningful due to multiple periods included.

Guarantees

In connection with certain dispositions of assets and/or businesses in 2001 and 2003, as well as the 2006

sale of SPI, the Company has provided customary representations and warranties whose terms range in
duration and may not be explicitly deﬁned. The Company has also retained certain liabilities for events
occurring prior to sale, relating to tax, environmental, litigation and other matters. Generally, the Company has
indemniﬁed the purchasers in the event that a third party asserts a claim against the purchaser that relates to a
liability retained by the Company. These types of indemniﬁcation guarantees typically extend for
several years.

34

Historically, the Company has not made any signiﬁcant indemniﬁcation payments under such agreements
and no provision has been accrued in the accompanying consolidated ﬁnancial statements with respect to these
indemniﬁcation guarantees. The Company continues to monitor the conditions that are subject to guarantees
and indemniﬁcations to identify whether it is probable that a loss has occurred, and would recognize any such
losses under any guarantees or indemniﬁcations in the period when those losses are probable and estimable.

For guarantees and indemnities entered into after January 1, 2003, in connection with the sale of the
Company’s investment in CDI and the sale of SPI, the Company has estimated the fair value of its liability to
be insigniﬁcant.

Transactions With Related Parties

CEO Services Agreement

On April 27, 2007, the Company entered into a Management Services Agreement (the ‘‘Services
Agreement’’) with Miles Nadal and with Nadal Management, Inc. to set forth the terms and conditions on
which Mr. Nadal would continue to provide services to the Company as its Chief Executive Officer. The
Services Agreement renewed on April 27, 2010, in accordance with its terms and conditions. In addition,
effective April 27, 2010, the annual retainer amount under the Services Agreement was increased to
$1,500,000. During both 2009 and 2010 and in accordance with this new Services Agreement, Mr. Nadal
repaid an amount equal to $0.1 million of loans due to the Company. At December 31, 2010, outstanding
loans due from Nadal Management to the Company, with no stated maturity date, amounted to C$6.1 million
($6.1 million), which have been reserved for in the Company’s accounts.

Trapeze Media

In 2000, the Company purchased 1,600,000 shares in Trapeze Media Limited (‘‘Trapeze’’) for $0.2
million. At the same time, the Company’s CEO purchased 4,280,000 shares of Trapeze for $0.6 million, the
Company’s former Chief Financial Officer and a Managing Director of the Company each purchased 50,000
Trapeze shares for $7,000 and a Board Member of the Company purchased 75,000 shares of Trapeze for
$10,000. In 2001, the Company purchased an additional 1,250,000 shares for $0.2 million, and the Company’s
CEO purchased 500,000 shares for $0.1 million. In 2002, the Company’s CEO purchased 3,691,930 shares of
Trapeze for $0.5 million. All of these purchases were made at identical prices (C$0.20/unit).

During 2010, 2009 and 2008, Trapeze provided services to certain partner ﬁrms of MDC, and the total
amount of such services provided was $0.1 million, $0.1 million, and $0.4 million, respectively. In addition, in
2010, 2009 and 2008, an MDC Partner ﬁrm provided services to Trapeze in exchange for fees equal to $0.3
million, $0.3 million and $0.1 million, respectively.

The Company’s Board of Directors, through its Audit Committee, has reviewed and approved

these transactions.

Critical Accounting Policies

The following summary of accounting policies has been prepared to assist in better understanding the
Company’s consolidated ﬁnancial statements and the related management discussion and analysis. Readers are
encouraged to consider this information together with the Company’s consolidated ﬁnancial statements and the
related notes to the consolidated ﬁnancial statements as included herein for a more complete understanding of
accounting policies discussed below.

Estimates. The preparation of the Company’s ﬁnancial statements in conformity with generally accepted
accounting principles in the United States of America, or ‘‘GAAP’’, requires management to make estimates
and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities
including goodwill, intangible assets, redeemable noncontrolling interests, and deferred acquisition
consideration, valuation allowances for receivables and deferred income tax assets and stock based
compensation. The statements are evaluated on an ongoing basis and estimates are based on historical
experience, current conditions and various other assumptions believed to be reasonable under the
circumstances. Actual results can differ from those estimates, and it is possible that the differences could
be material.

35

Revenue Recognition. The Company’s revenue recognition policies are as required by the Revenue

Recognition topics of the FASB Accounting Standards Codiﬁcation, and accordingly, revenue is generally
recognized when services are provided or upon delivery of the products when ownership and risk of loss has
transferred to the customer, the selling price is ﬁxed or determinable and collection of the resulting receivable
is reasonably assured.

The Company earns revenue from agency arrangements in the form of retainer fees or commissions; from

short-term project arrangements in the form of ﬁxed fees or per diem fees for services; and from incentives
or bonuses.

Non-refundable retainer fees are generally recognized on a straight-line basis over the term of the speciﬁc
customer arrangement. Commission revenue is earned and recognized upon the placement of advertisements in
various media when the Company has no further performance obligations. Fixed fees for services are
recognized upon completion of the earnings process and acceptance by the client. Per diem fees are
recognized upon the performance of the Company’s services. In addition, for certain service transactions,
which require delivery of a number of service acts, the Company uses the Proportional Performance model,
which generally results in revenue being recognized based on the straight-line method due to the acts being
non-similar and there being insufficient evidence of fair value for each service provided.

Fees billed to clients in excess of fees recognized as revenue are classiﬁed as advance billings.

A small portion of the Company’s contractual arrangements with clients includes performance incentive

provisions, which allow the Company to earn additional revenues as a result of its performance relative to
both quantitative and qualitative goals. The Company recognizes the incentive portion of revenue under these
arrangements when speciﬁc quantitative goals are assured, or when the Company’s clients determine
performance against qualitative goals has been achieved. In all circumstances, revenue is only recognized
when collection is reasonably assured.

The Company follows Reporting Revenue Gross as a Principal versus Net as an Agent topic of the FASB
Accounting Standards Codiﬁcation. This topic provides a summary on when revenue should be recorded at the
gross amount billed because revenue has been earned from the sale of goods or services, or the net amount
retained because a fee or commission has been earned. The Company’s business at times acts as an agent and
records revenue equal to the net amount retained, when the fee or commission is earned. The Company also
follows the reimbursements received for out-of-pocket expenses. This topic of the FASB Accounting Standards
Codiﬁcation requires that reimbursements received for out-of-pocket expenses incurred should be characterized
in the income statement as revenue. Accordingly, the Company has included in revenue such
reimbursed expenses.

Acquisitions, Goodwill and Other Intangibles. A fair value approach is used in testing goodwill for
impairment to determine if an other than temporary impairment has occurred. One approach utilized to
determine fair values is a discounted cash ﬂow methodology. When available and as appropriate, comparative
market multiples are used. Numerous estimates and assumptions necessarily have to be made when
completing a discounted cash ﬂow valuation, including estimates and assumptions regarding interest rates,
appropriate discount rates and capital structure. Additionally, estimates must be made regarding revenue
growth, operating margins, tax rates, working capital requirements and capital expenditures. Estimates and
assumptions also need to be made when determining the appropriate comparative market multiples to be used.
Actual results of operations, cash ﬂows and other factors used in a discounted cash ﬂow valuation will likely
differ from the estimates used and it is possible that differences and changes could be material. As of
December 31, 2010, there were no reporting units at risk of failing step one of the Company’s annual
goodwill impairment test.

The Company has historically made and expects to continue to make selective acquisitions of marketing
communications businesses. In making acquisitions, the price paid is determined by various factors, including
service offerings, competitive position, reputation and geographic coverage, as well as prior experience and
judgment. Due to the nature of advertising, marketing and corporate communications services companies; the
companies acquired frequently have signiﬁcant identiﬁable intangible assets, which primarily consist of

36

customer relationships. The Company has determined that certain intangibles (trademarks) have an indeﬁnite
life, as there are no legal, regulatory, contractual, or economic factors that limit the useful life.

Business Combinations. Valuation of acquired companies are based on a number of factors, including
specialized know-how, reputation, competitive position and service offerings. Our acquisition strategy has been
to focus on acquiring the expertise of an assembled workforce in order to continue building upon the core
capabilities of our various strategic business platforms to better serve our clients. Consistent with our
acquisition strategy and past practice of acquiring a majority ownership position, most acquisitions completed
in 2010 and 2009 include an initial payment at the time of closing and provide for future additional contingent
purchase price payments. Contingent payments for these transactions, as well as certain acquisitions completed
in prior years, are derived using the performance of the acquired entity and are based on pre-determined
formulas. Contingent purchase price obligations for acquisitions completed prior to January 1, 2009 are
accrued when the contingency is resolved and payment is certain. Contingent purchase price obligations
related to acquisitions completed subsequent to December 31, 2008 are recorded as liabilities at estimated
value and are remeasured at each reporting period. Changes in estimated value are recorded in results of
operations. For the year ended December 31, 2010 and 2009, $778 and nil, respectively, related to changes in
estimated value have been recorded as operating income. In addition, certain acquisitions also include put/call
obligations for additional equity ownership interests. The estimated value of these interests are recorded as
redeemable noncontrolling interests. As of January 1, 2009, the Company expenses acquisition related costs in
accordance with the Accounting Standard’s Codiﬁcation’s new guidance on acquisition accounting. The year
ended December 31, 2010 and 2009, included $2,940 and $416 of acquisition related costs, respectively.

For each of our acquisitions, we undertake a detailed review to identify other intangible assets and a

valuation is performed for all such identiﬁed assets. We use several market participant measurements to
determine estimated value. This approach includes consideration of similar and recent transactions, as well as
utilizing discounted expected cash ﬂow methodologies. Like most service businesses, a substantial portion of
the intangible asset value that we acquire is the specialized know-how of the workforce, which is treated as
part of goodwill and is not required to be valued separately. The majority of the value of the identiﬁable
intangible assets that we acquire is derived from customer relationships, including the related customer
contracts, as well as trade names. In executing our acquisition strategy, one of the primary drivers in
identifying and executing a speciﬁc transaction is the existence of, or the ability to, expand our existing client
relationships. The expected beneﬁts of our acquisitions are typically shared across multiple agencies
and regions.

Redeemable Noncontrolling Interest. The minority interest shareholders of certain subsidiaries have the

right to require the Company to acquire their ownership interest under certain circumstances pursuant to a
contractual arrangement and the Company has similar call options under the same contractual terms. The
amount of consideration under the put and call rights is not a ﬁxed amount, but rather is dependent upon
various valuation formulas and on future events, such as the average earnings of the relevant subsidiary
through the date of exercise, the growth rate of the earnings of the relevant subsidiary through the date of
exercise, etc. as described in Note 18.

Allowance for Doubtful Accounts. Trade receivables are stated less allowance for doubtful accounts. The

allowance represents estimated uncollectible receivables usually due to customers’ potential insolvency. The
allowance includes amounts for certain customers where risk of default has been speciﬁcally identiﬁed.

Income Tax Valuation Allowance. The Company records a valuation allowance against deferred income

tax assets when management believes it is more likely than not that some portion or all of the deferred
income tax assets will not be realized. Management considers factors such as the reversal of deferred income
tax liabilities, projected future taxable income, the character of the income tax asset, tax planning strategies,
changes in tax laws and other factors. A change to any of these factors could impact the estimated valuation
allowance and income tax expense.

Interest Expense. Interest expense primarily consists of the cost of borrowing on the revolving WF Credit

Facility and the 11% Senior Notes. The Company uses the effective interest method to amortize the original
issue discount and original issue premium on the 11% Senior Notes. At December 31, 2010 and 2009, $848
and $204 was amortized, respectively, net of amortized premium of $197 and nil, respectively. The Company

37

amortizes deferred ﬁnancing costs using the effective interest method over the life of the 11% Senior Notes
and straight line over the life of the revolving WF Credit Facility. The total net deferred ﬁnancing costs,
included in Other Assets on the balance sheet, as of December 30, 2010 and 2009 were $10,605 and $9,790,
respectively, net of accumulated amortization of $1,583 and $295, respectively. During 2010, the Company
recorded $2,103 of deferred ﬁnancing costs primarily relating to the 2010 additional debt issuance.

Stock-based Compensation. The fair value method is applied to all awards granted, modiﬁed or settled.

Under the fair value method, compensation cost is measured at fair value at the date of grant and is expensed
over the service period, that is the award’s vesting period. When awards are exercised, share capital is credited
by the sum of the consideration paid together with the related portion previously credited to additional paid-in
capital when compensation costs were charged against income or acquisition consideration. Stock-based
awards that are settled in cash or may be settled in cash at the option of employees are recorded as liabilities.
The measurement of the liability and compensation cost for these awards is based on the fair value of the
award, and is recorded into operating income over the service period, that is the vesting period of the award.
Changes in the Company’s payment obligation are revalued each period and recorded as compensation cost
over the service period in operating income.

The Company treats beneﬁts paid by shareholders to employees as a stock based compensation charge

with a corresponding credit to additional paid-in capital.

New Accounting Pronouncements

In April 2010, the FASB issues ASU 2010-17, ‘‘Revenue Recognition — Milestone Method.’’ ASU 2010-

17 provides guidance on the criteria that should be met for determining whether the milestone method of
revenue recognition is appropriate. A vendor can recognize consideration that is contingent upon achievement
of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone
meets all criteria to be considered substantive. The amendments in ASU 2010-17 are effective on a
prospective basis for milestones achieved in ﬁscal years, and interim periods within those years, beginning on
or after June 15, 2010. The adoption will not have an impact on our ﬁnancial statements.

In April 2010, the FASB issued ASU 2010-13, ‘‘Compensation — Stock Compensation Effect of
Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which
the Underlying Equity Security Trades.’’ ASU 2010-13 provides amendments to clarify that an employee
share-based payment award with an exercise price denominated in the currency of a market in which a
substantial portion of the entity’s equity securities trades should not be considered to contain a condition that
is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a
liability if it otherwise qualiﬁes as equity. The amendments in ASU 2010-13 are effective for ﬁscal years, and
interim periods within those ﬁscal years, beginning on or after December 15, 2010. The adoption of this
standard will not have an effect on our ﬁnancial statements.

In February 2010, The FASB issued an additional Accounting Standards Update on Subsequent Events to

clarify the updated guidance issued in May 2009. This Guidance clariﬁes that SEC ﬁlers must evaluate
subsequent events through the date the ﬁnancial statements are issued. However, an SEC ﬁler is not required
to disclose the date through which subsequent events have been evaluated. The amendment is effective
June 15, 2010. The adoption did not have an impact on our ﬁnancial statements.

In January 2010, the FASB issued an Accounts Standards Update on Consolidation — Accounting and
Reporting for Decreases in Ownership of a Subsidiary — A Scope Clariﬁcation. This Guidance clariﬁes the
scope of the decrease in ownership provisions and expands the disclosure requirements about deconsolidation
of a subsidiary or de-recognition of a group of assets. It is effective beginning in the ﬁrst interim annual
reporting period ending on or after December 15, 2009. The adoption did not have an impact on our
ﬁnancial statements.

In January 2010, the FASB issued Fair Value Measurements and Disclosures — Improving Disclosures

about Fair Value Measurements. This Guidance requires new disclosures and clariﬁes certain existing
disclosure requirements about fair value measurements. It requires a reporting entity to disclose signiﬁcant
transfers in and out of Level 1 and Level 2 fair value measurements, to describe the reasons for the transfers
and to present separately information about purchases, sales, issuances and settlements for fair value

38

measurements using signiﬁcant unobservable inputs. This Guidance is effective for interim and annual
reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales,
issuances and settlements in the roll forward of activity in Level 3 fair value measurements, which is effective
for interim and annual reporting periods beginning after December 15, 2010; early adoption is permitted. The
adoption did not have a material effect on our ﬁnancial statements.

In October 2009, the FASB issued revised guidance on the topic of Multiple — Deliverable Revenue
Arrangements. The revised guidance amends certain accounting for revenue with multiple deliverables. In
particular when vendor speciﬁc objective evidence or third party evidence for deliverables in an arrangement
cannot be determined, the revised guidance allows use of a best estimate of the selling price to allocate the
arrangement consideration among them. This guidance is effective for the ﬁrst quarter of 2011, with early
adoption permitted. The Company is currently evaluating the impact on our ﬁnancial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk related to interest rates and foreign currencies.

Debt Instruments: At December 31, 2010, the Company’s debt obligations consisted of amounts

outstanding under its WF Credit Facility and the 11% notes. This facility bears interest at variable rates based
upon the Eurodollar rate, US bank prime rate and, US base rate, at the Company’s option. The 11% notes bear
interest at a ﬁxed rate. The Company’s ability to obtain the required bank syndication commitments depends
in part on conditions in the bank market at the time of syndication. As of December 31, 2010, the Company
had a zero balance on the revolving WF Credit Facility.

Foreign Exchange: The Company conducts business in ﬁve currencies, the US dollar, the Canadian
dollar, Jamaican dollar, the British Pound and the Swedish Krona. Our results of operations are subject to risk
from the translation to the US dollar of the revenue and expenses of our non-US operations. The effects of
currency exchange rate ﬂuctuations on the translation of our results of operations are discussed in the
‘‘Management’s Discussion and Analysis of Financial Condition and Result of Operations’’ and in Note 2 of
our consolidated ﬁnancial statements. For the most part, our revenues and expenses incurred related to our
non-US operations are denominated in their functional currency. This minimizes the impact that ﬂuctuations in
exchange rates will have on proﬁt margins. Intercompany debt which is not intended to be repaid is included
in cumulative translation adjustments. Translation of intercompany debt, which is not intended to be repaid, is
included in cumulative translation adjustments. Translation of current intercompany balances are included in
net earnings. The Company generally does not enter into foreign currency forward exchange contracts or other
derivative ﬁnancial instruments to hedge the effects of adverse ﬂuctuations in foreign currency exchange rates.

The Company is exposed to foreign currency ﬂuctuations relating to its intercompany balances between
the US and Canada. For every one cent change in the foreign exchange rate between the US and Canada, the
Company will not incur a material impact to its ﬁnancial statements.

39

Item 8. Financial Statements and Supplementary Data

MDC PARTNERS INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Statements:

Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Operations for the Three Years Ended December 31, 2010 . . . . . . . . . .

Consolidated Balance Sheets as of December 31, 2010 and 2009 . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2010 . . . . . . . . .

Consolidated Statements of Shareholders’ Equity for the Three Years Ended December 31, 2010 . . .

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial Statement Schedules:

Page

41

42

43

44

46

49

Schedule II — Valuation and Qualifying Accounts for the Three Years Ended December 31, 2010 . .

97

40

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
MDC Partners Inc.
New York, New York
Toronto, Canada

We have audited the accompanying consolidated balance sheets of MDC Partners Inc. as of December 31,
2010 and 2009 and the related consolidated statements of operations, shareholders’ equity, and cash ﬂows for
each of the three years in the period ended December 31, 2010. These ﬁnancial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these ﬁnancial
statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the ﬁnancial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the ﬁnancial statements,
assessing the accounting principles used and signiﬁcant estimates made by management, as well as evaluating
the overall ﬁnancial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated ﬁnancial statements referred to above present fairly, in all material respects,
the ﬁnancial position of MDC Partners Inc. at December 31, 2010 and 2009, and the results of its operations
and its cash ﬂows for each of the three years in the period ended December 31, 2010, in conformity with
accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), MDC Partners Inc. and subsidiaries’ internal control over ﬁnancial reporting as of
December 31, 2010, based on criteria established in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated
March 14, 2011 expressed an unqualiﬁed opinion thereon.

/s/ BDO USA, LLP

New York, New York
March 14, 2011

41

MDC PARTNERS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of United States Dollars, Except Share and per Share Amounts)

Revenue:

Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

697,825

$

545,141

$

583,271

Years Ended December 31,
2009

2008

2010

Operating Expenses:

Cost of services sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
Office and general expenses
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . .

Operating Proﬁt

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other Income (Expenses)

Gain (loss) on sale of assets and other
. . . . . . . . . . . . . . . . . .
Foreign exchange gain (loss) . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense and ﬁnance charges
. . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from continuing operations before income taxes and

equity in affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (recovery)
. . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations before equity in affiliates . .
Equity in earnings (loss) of non-consolidated affiliates . . . . . . . . . .
Income (loss) from continuing operations . . . . . . . . . . . . . . . . . .
Loss from discontinued operations attributable to MDC Partners Inc.,

net of taxes
Net income (loss)
Net income attributable to the non-controlling interests
Net income (loss) attributable to MDC Partners Inc.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
. . . . . . . . . . .

Income (loss) Per Common Share:
Basic

Income (loss) from continuing operations attributable to MDC

Partners Inc. common shareholders . . . . . . . . . . . . . . . . . . .
Discontinued operations attributable to MDC Partners Inc. common
shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net Income (loss) attributable to MDC Partners Inc. common

$

$

477,491
156,924
34,481
668,896
28,929

381
69
(33,487)
205
(32,832)

(3,903)
(165)
(3,738)
866
(2,872)

(2,494)
(5,366)
(10,074)
(15,440)

353,011
136,622
34,412
524,045
21,096

(91)
(1,956)
(22,098)
354
(23,791)

(2,695)
8,536
(11,231)
(8)
(11,239)

(1,519)
(12,758)
(5,566)
(18,324)

$

(0.46)

$

(0.61)

(0.09)

(0.06)

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

(0.55)

$

(0.67)

Income (loss) Per Common Share:
Diluted

Income (loss) from continuing operations attributable to MDC

Partners Inc. common shareholders . . . . . . . . . . . . . . . . . . .
Discontinued operations attributable to MDC Partners Inc. common
shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income (loss) attributable to MDC Partners Inc. common

$

(0.46)

$

(0.61)

(0.09)

(0.06)

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

(0.55)

$

(0.67)

391,015
137,418
34,140
562,573
20,698

(14)
13,257
(14,998)
1,743
(12)

20,686
2,397
18,289
349
18,638

(10,205)
8,433
(8,300)
133

0.39

(0.38)

0.01

0.38

(0.37)

0.01

$

$

$

$

$

Weighted Average Number of Common Shares Outstanding:

Basic
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

28,161,144
28,161,144

27,396,463
27,396,463

26,765,839
27,430,162

Non cash stock based compensation expense is included in the following line items above:

Cost of services sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office and general expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total

$ 4,427
12,080
$16,507

$ 4,919
10,525
$15,444

$ 7,494
6,943
$14,437

The accompanying notes to the consolidated ﬁnancial statements are an integral part of these statements.

42

MDC PARTNERS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Thousands of United States Dollars)

Current Assets:

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, less allowance for doubtful accounts of $1,990 and

$2,034 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenditures billable to clients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed assets, net
Investment in affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Other intangible assets, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets
LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advance billings, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt
Deferred acquisition consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term portion of deferred acquisition consideration . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redeemable Noncontrolling Interests
Commitments, Contingencies and Guarantees (Note 18)
Shareholders’ Equity:

Preferred shares, unlimited authorized, none issued . . . . . . . . . . . . . . . . . .
Class A Shares, no par value, unlimited authorized, 28,758,734 and

December 31,

2010

2009

$ 10,949

$ 51,926

195,306
30,414
13,455
250,124
41,053
—
514,488
67,133
21,603
19,947
$ 914,348

$ 131,074
64,050
124,993
1,667
30,887
352,671
284,549
77,104
10,956
19,642
744,922
77,560

118,211
24,003
8,105
202,245
35,375
1,547
301,632
34,715
12,542
16,463
$ 604,519

$ 77,450
66,967
65,879
1,456
30,645
242,397
216,490
—
8,707
9,051
476,645
33,728

—

—

27,566,815 shares issued and outstanding in 2010 and 2009, respectively . .

226,752

218,532

Class B Shares, no par value, unlimited authorized, 2,503 issued and

outstanding in 2010 and 2009, respectively, convertible into one Class A
share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
Charges in excess of capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deﬁcit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock subscription receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . .
MDC Partners Inc. Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Liabilities, Redeemable Noncontrolling Interests and Equity . . . . . . . . . .

1
—
(16,809)
(146,600)
(135)
(4,148)
59,061
32,805
91,866
$ 914,348

1
9,174
—
(131,160)
(341)
(5,880)
90,326
3,820
94,146
$ 604,519

The accompanying notes to the consolidated ﬁnancial statements are an integral part of these statements.

43

MDC PARTNERS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of United States Dollars)

Cash ﬂows from operating activities:

Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations . . . . . . . . . . . . . . . . . .
Adjustments to reconcile loss from continuing operations to cash

provided by operating activities:
Non-cash stock-based compensation . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization primarily from intangibles . . . . . . . . . . . . . . . . .
. . . . .
Amortization of deferred ﬁnance charges and debt discount
Adjustment to deferred acquisition consideration . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on disposition of assets . . . . . . . . . . . . . . . . . . . .
Loss (earnings) of non consolidated affiliates . . . . . . . . . . . . . .
Other non-current assets and liabilities . . . . . . . . . . . . . . . . . .
Foreign exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Increase/decrease in operating assets and liabilities

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenditures billable to clients . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . .
Accounts payable, accruals and other current liabilities . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advance billings
Cash ﬂows provided by continuing operating activities . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . .

Cash ﬂows from investing activities:

Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of assets
Acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . .
Proﬁt distributions from affiliates
. . . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash ﬂows used in continuing investing activities . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities
. . . . . . . . . . . . . . . . . . . . . .
Cash ﬂows from ﬁnancing activities:

Proceeds from issuance of 11% Senior Note
. . . . . . . . . . . . . .
Repayments of revolving credit facility . . . . . . . . . . . . . . . . . .
Proceeds (repayment of) term loans . . . . . . . . . . . . . . . . . . . .
Repayment of convertible debt . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from revolving credit facility . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Proceeds from bank overdraft
Distributions to noncontrolling interests
. . . . . . . . . . . . . . . . .
Proceeds from exercise of options . . . . . . . . . . . . . . . . . . . . .
Payments of dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . .
Deferred ﬁnancing costs . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from stock subscription receivable . . . . . . . . . . . . . . .
Purchase of treasury shares . . . . . . . . . . . . . . . . . . . . . . . . .
Cash ﬂows provided by continuing ﬁnancing activities . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by ﬁnancing activities . . . . . . . . . . . . . . .

Years Ended December 31,
2009

2008

2010

$ (5,366)
(2,494)
(2,872)

$ (12,758)
(1,519)
(11,239)

$ 8,433
(10,205)
18,638

16,507
16,764
17,717
2,136
142
(5,373)
(17)
(866)
(509)
538

(31,289)
23,681
952
(119)
2,430
39,822
(2,525)
37,297

(12,500)
96
(117,060)
638
(717)
(129,543)
(710)
(130,253)

67,600
—
—
—
—
9,026
(7,685)
60
(9,727)
(1,496)
(2,103)
206
(3,480)
52,401
—
52,401

15,444
16,275
18,137
4,041
—
6,972
53
8
3,101
6,557

(11,420)
(7,054)
1,546
11,023
15,843
69,287
(1,600)
67,687

(6,209)
20
(60,042)
198
(163)
(66,196)
(3)
(66,199)

214,506
(9,701)
(130,000)
(42,470)
—
—
(7,784)
370
—
(2,000)
(10,085)
13
(596)
12,253
—
12,253

14,437
16,746
17,394
1,348
—
(960)
142
(349)
(1,891)
(14,567)

26,555
2,154
1,426
(8,368)
98
72,803
(3,708)
69,095

(14,384)
242
(35,641)
440
(85)
(49,428)
(758)
(50,186)

—
—
18,500
—
7,800
—
(11,649)
—
—
(1,884)
—
—
(906)
11,861
—
11,861

The accompanying notes to the consolidated ﬁnancial statements are an integral part of these statements.

44

MDC PARTNERS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS — (continued)
(Thousands of United States Dollars)

Increase (decrease) in cash and cash equivalents

Effect of exchange rate changes on cash and cash equivalents . . . . . . .
. . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of year
. . . . . . . . . . . . . . . . . . .
Supplemental disclosures:

Years Ended December 31,
2009
(3,146)
10,595
41,331
$51,926

2008

151
30,921
10,410
$41,331

2010

(422)
(40,977)
51,926
$ 10,949

Cash income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,128
$ 29,581

Non-cash transactions:

Share capital issued on acquisitions . . . . . . . . . . . . . . . . . . . .
Capital leases
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note receivable exchanged for shares of subsidiary . . . . . . . . . .

$
$
$

—
656
840

$
384
$14,243

$ —
$
340
$ —

$ 1,037
$13,196

$ 1,889
$
349
$ 1,872

The accompanying notes to the consolidated ﬁnancial statements are an integral part of these statements.

45

MDC PARTNERS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Thousands of United States Dollars Except Share and per Share Amounts)

2010

2009

2008

Number
of Shares

Amount

Number
of Shares

Amount

Number
of Shares

Amount

Class A Shares
Balance at beginning of

year

. . . . . . . . . . . . . . 27,566,815

$218,532

26,987,017

$213,533

26,235,932

$207,958

Stock appreciation rights

exercised . . . . . . . . . . .
Share options exercised . . .
Shares acquired and

cancelled . . . . . . . . . . .
Shares issued as acquisition
consideration . . . . . . . .

Shares issued as deferred

acquisition
consideration . . . . . . . .

Issuance of restricted

101,107
6,495

239
60

68,261
47,625

202
370

—
—

—
—

(282,954)

(3,480)

(156,481)

(596)

(124,492)

(1,009)

—

—

—

—

—

—

306,922

1,889

27,545

214

stock . . . . . . . . . . . . .

1,367,271
. . . 28,758,734

Balance at end of year
Class B Shares
Balance at beginning of

year

. . . . . . . . . . . . . .

2,503

—
2,503

Shares converted to Class

B shares . . . . . . . . . . .
. . .

Balance at end of year
Share Capital to Be

Issued

Balance at beginning of

year

. . . . . . . . . . . . . .

Shares to be issued as
deferred acquisition
consideration . . . . . . . .

Shares issued as deferred

acquisition
consideration . . . . . . . .
. . .

Balance at end of year
Additional Paid-In

Capital

Balance at beginning of

year

. . . . . . . . . . . . . .

Stock-based

compensation . . . . . . . .

Reclassiﬁcation related to

redeemable
noncontrolling interests
(Note 2)

. . . . . . . . . . .

Changes in redemption
value of redeemable
noncontrolling interests. .

11,401
$226,752

620,393
27,566,815

5,023
$218,532

541,110
26,987,017

4,481
$213,533

$

$

$

1

—
1

—

—

—
—

2,503

—
2,503

$

$

$

1

—
1

—

—

—
—

$ 9,174

14,954

$ 33,470

13,720

—

(31,653)

(11,500)

(58)

2,503

—
2,503

$

$

1

—
1

$

214

—

(214)
—

$

$ 26,743

10,129

—

—

The accompanying notes to the consolidated ﬁnancial statements are an integral part of these statements.

46

MDC PARTNERS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Thousands of United States Dollars Except Share and per Share Amounts)

2010

2009

2008

Number
of Shares

Amount

Number
of Shares

Amount

Number
of Shares

Amount

Acquisition of noncontrolling

interests

. . . . . . . . . . . . . . . . . .

Disposition of noncontrolling

interests

. . . . . . . . . . . . . . . . . .
Dividends paid and to be paid . . . . .
Acquisition purchase price

consideration . . . . . . . . . . . . . . .
Issuance of restricted stock . . . . . . .
Share appreciation rights exercised . .
Other . . . . . . . . . . . . . . . . . . . . . .
Transfer to charges in

excess of capital . . . . . . . . . . . . .
. . . . . . . . . .

Balance at end of year

Changes in Excess of Capital
Balance at beginning of year . . . . . .
Transfer from additional paid in

capital . . . . . . . . . . . . . . . . . .
. . . . . . . . . .

Balance at end of year

Accumulated Deﬁcit
Balance at beginning of year . . . . . .
. . . . . . .
Income (Loss) for the year
. . . . . . . . . .
Balance at end of year

Stock Subscription Receivable
Balance at beginning of year . . . . . .
Receipts . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . .
Balance at end of year

Accumulated Other Comprehensive

Income (Loss)

Balance at beginning of year . . . . . .
Foreign currency translation

adjustments . . . . . . . . . . . . . . . .
. . . . . . . . . .

Balance at end of year

MDC Partners Inc. Shareholders’

Equity . . . . . . . . . . . . . . . . . . . .

(7,761)

158
(10,194)

—
(11,401)
(239)
—

16,809
—

—

$

$

(16,809)
$ (16,809)

$(131,160)
(15,440)
$(146,600)

$

$

(341)
206
(135)

$

(5,880)

1,732
(4,148)

(923)

—
—

—
(5,023)
(203)
—

(156)
9,174

—

—
—

$

$

$

$(112,836)
(18,324)
$(131,160)

$

$

(354)
13
(341)

(6,633)

753
(5,880)

—

—
—

1,001
(4,481)
—
—

78
$ 33,470

$

$

—

—
—

$(112,969)
133
$(112,836)

$

$

(357)
3
(354)

$

6,343

(12,976)
(6,633)

$ 59,061

$ 90,326

$ 127,181

The accompanying notes to the consolidated ﬁnancial statements are an integral part of these statements.

47

MDC PARTNERS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Thousands of United States Dollars Except Share and per Share Amounts)

2010

2009

2008

Number
of Shares

Amount

Number
of Shares

Amount

Number
of Shares

Amount

Noncontrolling interests
Balance at beginning of

year . . . . . . . . . . . . . . . . .

Acquisitions of

. . . .

noncontrolling interest
Decrease in noncontrolling
interests from business
combinations

. . . . . . . . . .

Increase in noncontrolling
interests from business
combinations
Foreign currency

. . . . . . . . . .

translation . . . . . . . . . . . .
Balance at end of year . . . . . .
Total Equity . . . . . . . . . . . .

$ 3,820

28,990

(127)

118

4
$32,805
$91,866

$

871

3,039

(106)

—

16
$ 3,820
$94,146

$

731

178

—

—

(38)
871
$
$128,052

The accompanying notes to the consolidated ﬁnancial statements are an integral part of these statements.

48

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

1. Basis of Presentation

MDC Partners Inc. (the ‘‘Company’’) has prepared the consolidated ﬁnancial statements included herein
pursuant to the rules and regulations of the United States Securities and Exchange Commission (the ‘‘SEC’’)
and in accordance with generally accepted accounting principles (‘‘GAAP’’) of the United States of America
(‘‘US GAAP’’).

Effective September 2010, one of the Companies’s operating subsidiaries, Zig (USA) LLC has been

deemed a discontinued operation. All periods have been restated to reﬂect the discontinued operation.

Certain reclassiﬁcations have been made to prior period amounts to conform to the current period
ﬁnancial statement presentation. These reclassiﬁcations did not have any effect on the prior year net loss.

Nature of Operations

MDC Partners Inc., formerly MDC Corporation Inc., is incorporated under the laws of Canada. The
Company commenced using the name MDC Partners Inc. on November 1, 2003 and legally changed its name
through amalgamation with a wholly-owned subsidiary on January 1, 2004. The Company’s operations are in
primarily one business group — Marketing Communications. The business group operates primarily in the
United States (‘‘US’’), Canada, Europe, and in the United Kingdom. See Note 16, ‘‘Segment Information’’, for
further description of the one business group and MDC’s reportable segments.

2. Signiﬁcant Accounting Policies

The Company’s signiﬁcant accounting policies are summarized as follows:

Principles of Consolidation. The accompanying consolidated ﬁnancial statements include the accounts

of MDC Partners Inc. its domestic and international controlled subsidiaries. Intercompany balances and
transactions have been eliminated on consolidation.

Use of Estimate. The preparation of ﬁnancial statements in conformity with US GAAP requires

management to make estimates and assumptions. These estimates and assumptions affect the reported amounts
of assets and liabilities including goodwill, intangible assets, valuation allowances for receivables and deferred
tax assets and the reported amounts of revenue and expenses during the reporting period. The estimates are
evaluated on an ongoing basis and estimates are based on historical experience, current conditions and various
other assumptions believed to be reasonable under the circumstances. Actual results could differ from those
estimates.

Fair Value. The Company applies the fair value measurement guidance of Codiﬁcation Topic 820, Fair
Value Measurements and Disclosure for ﬁnancial assets and liabilities that are required to be measured at fair
value and for nonﬁnancial assets and liabilities that are not required to be measured at fair value on a
recurring basis, including goodwill and other identiﬁable intangible assets. The measurement of fair value
requires the use of techniques based on observable and unobservable inputs. Observable inputs reﬂect market
data obtained from independent sources, while unobservable inputs reﬂect our market assumptions. The inputs
create the following fair value hierarchy:

•

•

•

Level 1 — Quoted prices for identical instruments in active markets.

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or
similar instruments in markets that are not active; and model-derived valuations where inputs are
observable or where signiﬁcant value drivers are observable.

Level 3 — Instruments where signiﬁcant value drivers are unobservable to third parties.

When available, quoted market prices are used to determine the fair value of our ﬁnancial instruments
and classify such items in Level 1. In some cases, quoted market prices are used for similar instruments in
active markets and classify such items in Level 2.

49

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

2. Signiﬁcant Accounting Policies − (continued)

Concentration of Credit Risk. The Company provides marketing communications services to clients who

operate in most industry sectors. Credit is granted to qualiﬁed clients in the ordinary course of business. Due
to the diversiﬁed nature of the Company’s client base, the Company does not believe that it is exposed to a
concentration of credit risk; however, no client accounted for more than 10% of the Company’s consolidated
accounts receivable as of December 31, 2010 and 2009. No clients accounted for 10% of revenue in the year
ended December 31, 2010, and one client accounted for 16% and 19% of revenue for the years ended
December 31, 2010, 2009 and 2008, respectively.

Cash and Cash Equivalents. The Company’s cash equivalents are primarily comprised of investments in

overnight interest-bearing deposits, commercial paper and money market instruments and other short-term
investments with original maturity dates of three months or less at the time of purchase. The Company has a
concentration of credit risk in that there are cash deposits in excess of federally insured amounts. Included in
cash and cash equivalents at December 31, 2010 and 2009 is $64 and $67, respectively, of cash restricted as
to withdrawal pursuant to a collateral agreement and a customer’s contractual requirement.

Allowance for Doubtful Accounts. Trade receivables are stated at invoiced amounts less allowances for

doubtful accounts. The allowances represent estimated uncollectible receivables associated with potential
customer defaults usually due to customers’ potential insolvency. The allowances include amounts for certain
customers where a risk of default has been speciﬁcally identiﬁed. The assessment of the likelihood of
customer defaults is based on various factors, including the length of time the receivables are past due,
historical experience and existing economic conditions.

Expenditures Billable to Clients. Expenditures billable to clients consist principally of outside vendors

costs incurred on behalf of clients when providing advertising, marketing and corporate communications
services to clients that have not been invoiced. Such amounts are invoiced to clients at various times over the
course of the production process.

Fixed Assets. Fixed assets are stated at cost, net of accumulated depreciation. Buildings are depreciated

on a declining balance basis over the estimated useful lives of 20 to 25 years. Computers, furniture and
ﬁxtures are depreciated on a straight-line basis over periods of 3 to 7 years. Machinery and equipment are
depreciated on a straight-line basis over periods of 3 to 10 years. Leasehold improvements are depreciated on
a straight-line basis over the lesser of the term of the related lease or the estimated useful life of the asset.
Repairs and maintenance costs are expensed as incurred.

Impairment of Long-lived Assets.

In accordance with the FASB Accounting Standards Codiﬁcation

topic, Accounting for the Impairment or Disposal of Long-lived Assets, a long-lived asset or asset group is
tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may
not be recoverable. When such events occur, the Company compares the sum of the undiscounted cash ﬂows
expected to result from the use and eventual disposition of the asset or asset group to the carrying amount of
the long-lived asset or asset group. If this comparison indicates that there is an impairment, the amount of the
impairment is typically calculated using discounted expected future cash ﬂows where observable fair values
are not readily determinable. The discount rate applied to these cash ﬂows is based on the Company’s
weighted average cost of capital, risk adjusted where appropriate.

Equity Method Investments. The equity method is used to account for investments in entities in which

the Company has an ownership interest of less than 50% and has signiﬁcant inﬂuence, or joint control by
contractual arrangement with all parties having an equity interest, over the operating and ﬁnancial policies of
the affiliate or has an ownership interest of greater than 50% however the substantive participating rights of
the noncontrolling interest shareholders preclude the Company from exercising unilateral control over the
operating and ﬁnancial policies of the affiliate. The Company’s investments accounted for using the equity
method includes Adrenalina, 49.9% owned by the Company, and a 50% undivided interest in a real estate
joint venture. In 2010, the Company recorded a distribution of $3,519 from this real estate joint venture, of

50

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

2. Signiﬁcant Accounting Policies − (continued)

which $2,601 was in excess of the Company’s carrying amount and has been recorded as a gain in equity in
earnings of non-consolidated affiliates. The Company’s management periodically evaluates these investments
to determine if there has been a decline in value that is other than temporary. As of December 31, 2010, the
Company has wrote off the amount of its investment in Adrenalina of $1,636 representing advances previously
made.

Cost Method Investments. The Company’s cost-based investments at December 31, 2010 were primarily

comprised of various interests in limited partnerships and companies where the Company does not exercise
signiﬁcant inﬂuence over the operating and ﬁnancial policies of the investee. The total net cost basis of these
investments, which are included in Other Assets on the balance sheet, as of December 31, 2010 and 2009 was
$4,650 and $3,888, respectively. These investments are periodically evaluated to determine if there have been
any other than temporary declines below book value. A variety of factors are considered when determining if
a decline in fair value below book value is other than temporary, including, among others, the ﬁnancial
condition and prospects of the investee, as well as the Company’s investment intent.

Goodwill and Indeﬁnite Lived Intangible. In accordance with the FASB Accounting Standards
Codiﬁcation topic, Goodwill and Other Intangible Assets, goodwill and indeﬁnite life intangible assets
(trademarks) acquired as a result of a business combination which are not subject to amortization are tested
for impairment annually, and more frequently if events and circumstances indicate that the asset might be
impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair
value. For goodwill, this determination is made at the reporting unit level and consists of two steps. First, the
Company determines the fair value of a reporting unit and compares it to its carrying amount. Fair value is
determined based on earnings multiples of each subsidiary. Second, if the carrying amount of a reporting unit
exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting
unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined
by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation, in
accordance with the FASB Accounting Standards Codiﬁcation topic, Business Combinations. The residual fair
value after this allocation is the implied fair value of the reporting unit goodwill.

The fair value of a reporting unit was estimated using a combination of the income approach, which

incorporates the use of the discounted cash ﬂow method.

The Company has determined that each partner ﬁrm that has reported goodwill will be tested separately

as each partner ﬁrm qualiﬁes as a reporting unit under the Accounting Standards Codiﬁcation guidance.

Impairment losses, where applicable, will be charged to operating proﬁt. The Company identiﬁes certain

intangible assets (trademarks) as indeﬁnite life if there are no legal, regulatory, contractual or economic factors
that limit the useful life. If the carrying amount of an indeﬁnite life intangible exceeds its fair value, an
impairment loss is recognized for the excess. As of December 31, 2010, there was no impairment of goodwill
and no reporting units were at risk of failing step one of annual test.

Deﬁnite Lived Intangible Assets.

In accordance with the FASB Accounting Standards Codiﬁcation,

acquired intangibles, are subject to amortization over their useful lives. The method of amortization selected
reﬂects the pattern in which the economic beneﬁts of the speciﬁc intangible asset is consumed or otherwise
used up. If that pattern cannot be reliably determined, a straight-line amortization method is used over the
estimated useful life. Intangible assets that are subject to amortization are reviewed for potential impairment at
least annually or whenever events or circumstances indicate that carrying amounts may not be recoverable.
See also Note 8.

Deferred Taxes. The Company uses the asset and liability method of accounting for income taxes.
Deferred income taxes are provided for the temporary difference between the ﬁnancial reporting basis and tax
basis of the Company’s assets and liabilities. Deferred tax beneﬁts result principally from certain tax carryover
beneﬁts and from recording certain expenses in the ﬁnancial statements that are not currently deductible for

51

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

2. Signiﬁcant Accounting Policies − (continued)

tax purposes and from differences between the tax and book basis of assets and liabilities recorded in
connection with acquisitions. Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Deferred tax liabilities result principally from deductions recorded for tax purposes in excess of that recorded
in the ﬁnancial statements or income for ﬁnancial statement purposes in excess of the amount for tax
purposes. The effect of changes in tax rates is recognized in the period the rate change is enacted.

Business Combinations. Valuation of acquired companies are based on a number of factors, including

specialized know-how, reputation, competitive position and service offerings. The Company’s acquisition
strategy has been focused on acquiring the expertise of an assembled workforce in order to continue to build
upon the core capabilities of its various strategic business platforms to better serve the Company’s clients.
Consistent with the acquisition strategy and past practice of acquiring a majority ownership position, most
acquisitions completed in 2010 included an initial payment at the time of closing and provide for future
additional contingent purchase price payments. Contingent payments for these transactions, as well as certain
acquisitions completed in prior years, are derived using the performance of the acquired entity and are based
on pre-determined formulas. Contingent purchase price obligations for acquisitions completed prior to
January 1, 2009 are accrued when the contingency is resolved and payment is certain. Contingent purchase
price obligations related to acquisitions completed subsequent to December 31, 2008 are recorded as liabilities
at estimated value and are remeasured at each reporting period and changes in estimated value are recorded in
results of operations. For the year ended December 31, 2010 and 2009, income of $778 and nil, respectively,
related to changes in estimated value have been charged to operating income. In addition, certain acquisitions
also include put/call obligations for additional equity ownership interests. The estimated value of these
interests are recorded as Redeemable Noncontrolling Interests. As of January 1, 2009, the Company expenses
acquisition related costs in accordance with the Accounting Standard’s Codiﬁcation’s new guidance on
acquisition accounting. For the year ended December 31, 2010 and 2009, $2,940 and $416 of acquisition
related costs were charged to operations.

For each of the Company’s acquisitions, we undertake a detailed review to identify other intangible assets
and a valuation is performed for all such identiﬁed assets. We use several market participant measurements to
determine estimated value. This approach includes consideration of similar and recent transactions, as well as
utilizing discounted expected cash ﬂow methodologies. Like most service businesses, a substantial portion of
the intangible asset value that we acquire is the specialized know-how of the workforce, which is treated as
part of goodwill and is not required to be valued separately. The majority of the value of the identiﬁable
intangible assets acquired is derived from customer relationships, including the related customer contracts, as
well as trade names. In executing the Company’s acquisition strategy, one of the primary drivers in identifying
and executing a speciﬁc transaction is the existence of, or the ability to, expand existing client relationships.
The expected beneﬁts of the Company’s acquisitions are typically shared across multiple agencies and regions.

Redeemable Noncontrolling Interest. The minority interest shareholders of certain subsidiaries have the

right to require the Company to acquire their ownership interest under certain circumstances pursuant to a
contractual arrangement and the Company has similar call options under the same contractual terms. The
amount of consideration under the put and call rights is not a ﬁxed amount, but rather is dependent upon
various valuation formulas and on future events, such as the average earnings of the relevant subsidiary
through the date of exercise, the growth rate of the earnings of the relevant subsidiary through the date of
exercise, etc. as described in Note 18.

The Company has recorded its put options as mezzanine equity at their current estimated redemption
amounts. The Company accrues changes in the redemption amounts over the period from the date of issuance
to the earliest redemption date of the put options. The Company accounts for the put options with a charge to
noncontrolling interests to reﬂect the excess, if any, of the estimated exercise price over the estimated fair
value of the noncontrolling interest shares at the date of the option being exercised. For the three years ended

52

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

2. Signiﬁcant Accounting Policies − (continued)

December 31, 2010, 2009 and 2008, there has been no charges to noncontrolling interests. Changes in the
estimated redemption amounts of the put options are adjusted at each reporting period with a corresponding
adjustment to equity. These adjustments will not impact the calculation of earnings per share.

The following table presents changes in Redeemable Noncontrolling Interests.

Beginning Balance as of January 1, . . . . .
Reclassiﬁcation related to Redeemable

Noncontrolling Interests . . . . . . . . .
Redemptions
. . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . .
Changes in redemption value . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Other
Currency Translation Adjustments . . . .
. . . .

Ending Balance as of December 31,

2010
$33,728

—
(7,987)
40,567
10,075
—
1,177
$77,560

Years Ended December 31,
2009
$ 21,751

31,653
(28,242)
6,441
58
107
1,960
$ 33,728

2008
$24,187

—
(2,296)
—
—
156
(296)
$21,751

Guarantees. Guarantees issued or modiﬁed by the Company to third parties after January 1, 2003 are
generally recognized, at the inception or modiﬁcation of a guarantee, as a liability for the obligations it has
undertaken in issuing the guarantee, including its ongoing obligation to stand ready to perform over the term
of the guarantee in the event that the speciﬁed triggering events or conditions occur. The initial measurement
of that liability is the fair value of the guarantee. The recognition of the liability is required even if it is not
probable that payments will be required under the guarantee. The Company’s liability associated with
guarantees is not signiﬁcant. (See Note 18.)

Revenue Recognition. The Company’s revenue recognition policies are as required by the Revenue
Recognition topics of the FASB Accounting Standards Codiﬁcation, and accordingly, revenue is generally
recognized as services are provided or upon delivery of the products when ownership and risk of loss has
transferred to the customer, the selling price is ﬁxed or determinable and collection of the resulting receivable
is reasonably assured. The Company follows the Revenue Arrangements with Multiple Deliverables topic of
the FASB Accounting Standards Codiﬁcation issued. This topic addresses certain aspects of the accounting by
a vendor for arrangements under which it will perform multiple revenue-generating activities and how to
determine whether an arrangement involving multiple deliverables contains more than one unit of accounting.
The Company recognizes revenue based on the contracted value of each multiple deliverable when delivered.
The Company also follows the topic of the FASB Accounting Standards Codiﬁcation. Reporting Revenue
Gross as a Principal versus Net as an Agent. This Issue summarized the EITF’s views on when revenue
should be recorded at the gross amount billed because it has earned revenue from the sale of goods or
services, or the net amount retained because it has earned a fee or commission. The Company also follows
Income Statement Characterization of Reimbursements Received for Out-of-Pocket Expenses Incurred, for
reimbursements received for out-of-pocket expenses. This issue summarized the EITF’s views that
reimbursements received for out-of-pocket expenses incurred should be characterized in the income statement
as revenue. Accordingly, the Company has included in revenue such reimbursed expenses.

The Company earns revenue from agency arrangements in the form of retainer fees or commissions; from
short-term project arrangements in the form of ﬁxed fees or per diem fees for services; and from incentives or
bonuses.

Non refundable retainer fees are generally recognized on a straight line basis over the term of the speciﬁc
customer arrangement. Commission revenue is earned and recognized upon the placement of advertisements in
various media when the Company has no further performance obligations. Fixed fees for services are

53

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

2. Signiﬁcant Accounting Policies − (continued)

recognized upon completion of the earnings process and acceptance by the client. Per diem fees are
recognized upon the performance of the Company’s services. In addition, for certain service transactions,
which require delivery of a number of service acts, the Company uses the Proportional Performance model,
which generally results in revenue being recognized based on the straight-line method due to the acts being
non-similar and there being insufficient evidence of fair value for each service provided.

Fees billed to clients in excess of fees recognized as revenue are classiﬁed as Advanced Billings.

A small portion of the Company’s contractual arrangements with customers includes performance
incentive provisions, which allows the Company to earn additional revenues as a result of its performance
relative to both quantitative and qualitative goals. The Company recognizes the incentive portion of revenue
under these arrangements when speciﬁc quantitative goals are assured, or when the company’s clients
determine performance against qualitative goals has been achieved. In all circumstances, revenue is only
recognized when collection is reasonably assured. The Company records revenue net of sales and other taxes
due to be collected and remitted to governmental authorities.

Cost of Services Sold. Costs of services sold do not include depreciation charges for ﬁxed assets.

Interest Expense.

Interest expense primarily consists of the cost of borrowing on the revolving

WF Credit Facility and the 11% Senior Notes. The Company uses the effective interest method to amortize
the original issue discount on the 11% Senior Notes. At December 31, 2010 and 2009, $848 and $204 was
amortized, respectively, net of amortized premium of $197 and nil, respectively. The Company amortizes
deferred ﬁnancing costs using the effective interest method over the life of the 11% senior notes and
straightline over the life of the revolving WF Credit Facility. The total net deferred ﬁnancing costs, included
in Other Assets on the balance sheet, as of December 31, 2010 and 2009 was $10,605, and $9,790, net of
accumulated amortization of $1,583 and $295, respectively. During 2010, the Company recorded $2,103 of
deferred ﬁnancing costs primarily relating to the 2010 additional debt issuance.

Stock-Based Compensation. Under the fair value method, compensation cost is measured at fair value at
the date of grant and is expensed over the service period, that is the award’s vesting period. When awards are
exercised, share capital is credited by the sum of the consideration paid together with the related portion
previously credited to additional paid-in capital when compensation costs were charged against income or
acquisition consideration.

The Company uses its historical volatility derived over the expected term of the award, to determine the
volatility factor used in determining the fair value of the award. The Company uses the ‘‘simpliﬁed’’ method
to determine the term of the award due to the fact that historical share option exercise experience does not
provide a reasonable basis upon which to estimate the expected term.

Stock-based awards that are settled in cash or may be settled in cash at the option of employees are
recorded as liabilities. The measurement of the liability and compensation cost for these awards is based on
the fair value of the award, and is recorded into operating income over the service period, that is the vesting
period of the award. Changes in the Company’s payment obligation prior to the settlement date are recorded
as compensation cost in operating proﬁt in the period of the change. The ﬁnal payment amount for such
awards is established on the date of the exercise of the award by the employee.

Stock-based awards that are settled in cash or equity at the option of the Company are recorded at fair

value on the date of grant and recorded as additional paid-in capital. The fair value measurement of the
compensation cost for these awards is based on using the Black-Scholes option pricing-model and is recorded
in operating income over the service period, that is the vesting period of the award.

The fair value of the stock options and similar awards at the grant date were estimated using the Black-

Scholes option-pricing model with the following weighted average assumptions for each of the following
years:

54

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

2. Signiﬁcant Accounting Policies − (continued)

Expected dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected option life in years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average fair value of options granted . . . . . . . . . . . . . . . . . . . . . .

Year Ended
December 31, 2009
$0
39.8% – 44.5%
1.76% – 2.49%
4
$1.18

For the years ended December 31, 2010 and 2008, the Company did not issue any stock options or

similar awards.

It is the Company’s policy for issuing shares upon the exercise of an equity incentive award to verify the
amount of shares to be issued, as well as the amount of proceeds to be collected (if any) and delivery of new
shares to the exercising party.

The Company has adopted the straight-line attribution method for determining the compensation cost to

be recorded during each accounting period. However, awards based on performance conditions are recorded as
compensation expense when the performance conditions are expected to be met. The fair value at the grant
date for performance based awards granted in 2010 and 2008 was $6,649 and $6,547, respectively. There were
no performance based awards granted during 2009.

The Company treats beneﬁts paid by shareholders to employees as a stock based compensation charge

with a corresponding credit to additional paid-in capital.

Pension Costs. Several of the Company’s US and Canadian subsidiaries offer employees access to
certain deﬁned contribution pension programs. Under the deﬁned contribution plans, these subsidiaries, in
some cases, make annual contributions to participants’ accounts which are subject to vesting. The Company’s
contribution expense pursuant to these plans was $1,655, $1,026 and $2,736 for the years ended December 31,
2010, 2009 and 2008, respectively.

Earnings per Common Share. Basic earnings per share is based upon the weighted average number of
common shares outstanding during each period, including the ‘‘Share capital to be issued’’ as reﬂected in the
Shareholders’ Equity on the balance sheet. Diluted earnings per share is based on the above, plus, if dilutive,
common share equivalents, which include outstanding options, warrants, stock appreciation rights, restricted
stock units and convertible notes.

Subsidiary and Affıliate Stock Transactions.

In accordance with Accounting Standards Codiﬁcation

Topic on Business combinations, effective January 1, 2009, transactions involving purchases, sales or
issuances of stock of a subsidiary where control is maintained are recorded as an increase or decrease in
additional paid-in capital. In transactions involving subsidiary stock where control is lost, gains and losses are
recorded in results of operations. Gains and losses from transactions involving stock of an affiliate are
recorded in results of operations until control is achieved.

Foreign Currency Translation. The Company’s ﬁnancial statements were prepared in accordance with
the requirements of the Foreign Currency Translation topic of the FASB Accounting Standards Codiﬁcation.
The functional currency of the Company is the Canadian dollar and it has decided to use US dollars as its
reporting currency for consolidated reporting purposes. All of the Company’s subsidiaries use their local
currency as their functional currency. Accordingly, the currency impacts of the translation of the balance
sheets of the Company’s non-US dollar based subsidiaries to US dollar statements are included as cumulative
translation adjustments in accumulated other comprehensive income. Translation of intercompany debt, which
is not intended to be repaid, is included in cumulative translation adjustments. Cumulative translation
adjustments are not included in net earnings unless they are actually realized through a sale or upon complete
or substantially complete liquidation of the Company’s net investment in the foreign operation. Translation of

55

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

2. Signiﬁcant Accounting Policies − (continued)

current intercompany balances are included in net earnings. The balance sheets of non-US dollar based
subsidiaries are translated at the period end rate. The income statements of non-US dollar based subsidiaries
are translated at average exchange rates for the period.

Gains and losses arising from the Company’s foreign currency transactions are reﬂected in net earnings.

Unrealized gains or losses arising on the translation of certain intercompany foreign currency transactions that
are of a long-term nature (that is settlement is not planned or anticipated in the future) are included as
cumulative translation adjustments in accumulated other comprehensive income.

Derivative Financial Instruments. The Company follows Accounting for Derivative Instruments and
Hedging Activities. Topic of the FASB Accounting Standards Codiﬁcation establishes accounting and reporting
standards requiring that every derivative instrument (including certain derivative instruments embedded in
other contracts and debt instruments) be recorded in the balance sheet as either an asset or liability measured
at its fair value. The accounting for the change in fair value of the derivative depends on whether the
instrument qualiﬁes for and has been designated as a hedging relationship and on the type of hedging
relationship. There are three types of hedging relationships: a cash ﬂow hedge, a fair value hedge and a hedge
of foreign currency exposure of a net investment in a foreign operation. The designation is based upon the
exposure being hedged. Derivatives that are not hedges, or become ineffective hedges, must be adjusted to fair
value through earnings.

3. Income (Loss) per Common Share

The following table sets forth the computation of basic and diluted income (loss) per common share from

continuing operations for the years ended December 31:

Numerator
Numerator for diluted income (loss) per common share − income

(loss) from continuing operations . . . . . . . . . . . . . . . . . . . . . $

Net income attributable to the noncontrolling interests . . . . . . . . .
Income (loss) attributable to MDC Partners Inc. common

shareholders from continuing operations

. . . . . . . . . . . . . . . .
Effect of dilutive securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Numerator for diluted income per common share − income (loss)
attributable to MDC Partners Inc. common shareholders from
continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Denominator
Denominator for basic income (loss) per common

2010

2009

2008

(2,872) $
(10,074)

(11,239) $
(5,566)

18,638
(8,300)

(12,946)
—

(16,805)
—

10,338
—

(12,946) $

(16,805) $

10,338

share − weighted average common shares . . . . . . . . . . . . . . . .

28,161,144

27,396,463

26,765,839

Effect of dilutive securities:
Employee stock options, warrants, and stock appreciation rights . .
Employee restricted stock units . . . . . . . . . . . . . . . . . . . . . . . .
Dilutive potential common shares
. . . . . . . . . . . . . . . . . . . . .
Denominator for diluted income (loss) per common share –

adjusted weighted shares and assumed conversions . . . . . . . . .
Basic income (loss) per common share from continuing operations
Diluted income (loss) per common share from continuing

—
—
—

—
—
—

1,710
662,613
664,323

28,161,144
$

(0.46) $

27,396,463

27,430,162
0.39

(0.61) $

operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

(0.46) $

(0.61) $

0.38

56

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

3. Income (Loss) per Common Share − (continued)

At December 31, 2010, 2009 and 2008 convertible notes, warrants, options and other rights to purchase,

4,665,293, 5,240,879 and 4,547,390 shares of common stock, respectively, were not included in the
computation of diluted income (loss) per common share because doing so would have had an antidilutive
effect.

4. Acquisitions

2010 Acquisitions

Fourth Quarter 2010 Acquisitions

Effective November 30, 2010, the Company, through a wholly-owned subsidiary, purchased 80% of the

total outstanding equity interests in each of Kenna Communications LP, an Ontario limited partnership
(‘‘Kenna’’), and Capital C Partners LP, an Ontario limited partnership (‘‘Capital C’’). Capital C is a
full-service marketing agency providing services such as business strategy and consumer insights, shopper
monitoring, and product innovation. Kenna delivers sales and marketing solutions to make organizations more
efficient, more productive and more effective. The aggregate purchase price was equal to $26,300 and
additional deferred acquisition consideration, the current estimated present value of which is $12,360 that are
based upon actual results from 2010 to 2015 with ﬁnal payments due in 2016. In addition, performance
payments of up to $5,000 may be paid in the future based on these results. The Company recorded $12,898 as
the present value of redeemable noncontrolling interest in relation to the Kenna and Capital C put option
rights triggered upon such owner’s termination without cause, disability or death. Beginning in 2016, the
Company has a call for the remaining 20% of each of Kenna and Capital C. If the Company does not exercise
this call, the operating results of Kenna and Capital C will be allocated to the Company on a basis less than
the Company’s ownership basis as deﬁned. In December 2010, the company recorded a present value
adjustment of $167 to deferred acquisition consideration. An initial estimated allocation of the excess purchase
consideration of this acquisition to the fair value of the net assets acquired resulted in identiﬁable intangibles
of $10,441 (consisting of primarily customer lists and a covenant not to compete) and goodwill of $40,103
representing the value of assembled workforce. The identiﬁed intangible assets will be amortized from a ﬁve
to eight year period in a manner represented by the pattern in which the economic beneﬁts of the customer
contracts/relationships are realized. The intangibles and goodwill are not tax deductible. Accordingly, the
Company recorded a deferred tax liability of $3,188 representing the future beneﬁts relating to the
amortization of the identiﬁed intangibles.

The actual adjustments that the Company will ultimately make in analyzing the allocation of purchase

price to fair value of the net assets acquired, will depend on a number of factors, including additional
information such as changes in the unaudited ﬁnancial statements.

During the quarter ended December 31, 2010, the Company also completed a number of other
acquistions. The Company purchased a 51% interest in 72andSunny Partners LLC (‘‘72andSunny’’).
72andSunny is full service agency that conceives and executes fully integrated campaigns across all media for
top global brands. The Company also increased its ownership of Allard Johnson Communications Inc. (now
known as Kbs+p Canada, Inc.,) (‘‘Kbs+p Canada’’) to 100%, and Company C LLC (‘‘Company C’’) to 100%.
The aggregate purchase price paid for these other acquisitions was equal to $35,859, and consisted of total
closing cash payments of $12,937, net of $790 repayment of loans; a $271 working capital adjustment; and
additional contingent deferred acquisition consideration, that are based on actual ﬁnancial results of the
underlying business from 2010 to 2015 with ﬁnal payments due in 2016 with a current estimated present
value of $21,861. In December, the Company recorded a present value adjustment of $163 to deferred
acquisition consideration. An allocation of the excess purchase consideration of this acquisition to the fair
value of the net assets acquired resulted in identiﬁable intangibles of $5,690, consisting primarily of customer
lists and covenants not to compete, and goodwill of $35,370 representing the value of assembled workforce.
The identiﬁed intangibles will be amortized ranging from a ﬁve to seven-year period in a manner represented
by the pattern in which the economic beneﬁts of the customer contracts/relationships are realized. In addition,

57

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

4. Acquisitions − (continued)

the Company has recorded $13,722, the present value of redeemable noncontrolling interest in relation to
72andSunny. 72andSunny has put option rights only upon such owner’s termination without cause, disability
or death. The Company also recorded an entry to reduce redeemable noncontrolling interests by $3,802 and
additional paid-in-capital of $3,123 in relation to the Kbs+p Canada step up. The amounts paid and to be paid
will be tax deductibe in relation to the 72andSunny acquisition. However, it will not be tax deductible in
relation to the Kbs+p Canada transaction.

The actual adjustments that the Company will ultimately make in analyzing the allocation of purchase

price to fair value of the net assets acquired, will depend on a number of factors, including additional
information such as changes in the unaudited ﬁnancial statements.

Third Quarter 2010 Acquisitions

During the quarter ended September 30, 2010, the Company completed a number of acquisitions. The
Company purchased a 60% equity interest in Relevent Group, LLC (‘‘Relevent’’), a 60% equity interest in
Kwittken & Company, LLC (‘‘Kwittken’’), and certain assets and liabilities of Think 360 Inc. (‘‘Think 360’’).
Relevent is a full service marketing, special events, production and promotions company that builds brands
with consumers through experiential lifestyle, entertainment and relationship marketing programs. Kwittken is
a full service public relations and marketing agency. Think 360 is an integrated marketing agency. The
aggregate purchase price paid for these acquisitions consisted of total closing cash payments of $15,085, plus
additional contingent deferred acquisition consideration, that are based on the actual ﬁnancial results of the
underlying businesses from 2010 to 2014, with ﬁnal payments due in 2015 with a current estimated present
value of $14,898. An allocation of the excess purchase consideration of these acquisitions to the fair value of
the net assets acquired resulted in identiﬁable intangibles of $4,974, consisting primarily of customer lists and
covenants not to compete, and goodwill of $28,910 representing the value of the assembled workforce. The
identiﬁed intangibles will be amortized ranging from a two to seven-year period in a manner represented by
the pattern in which the economic beneﬁts of the customer contracts/relationships are realized. The present
value of the redeemable noncontrolling interest not acquired at the acquisition date was $5,513. Relevent and
Kwittken have put option rights upon an employee-owner’s termination without cause, disability or death. The
amounts paid and to be paid will be tax deductible.

The actual adjustments that the Company will ultimately make in analyzing the allocation of purchase

price to the fair value of the net assets acquired, will depend on a number of factors, including additional
information such as changes in the unaudited ﬁnancial statements.

The Company has also increased ownership to 100% of Zig Inc. (now known as Crispin Porter +
Bogusky Canada Inc. (‘‘CPB Canada’’)) and purchased an additional 25% of Bruce Mau Design Inc.,
increasing the Company’s ownership to 75% The aggregate purchase price paid for these step-ups consisted of
total closing cash payments of $3,115, plus additional deferred acquisition consideration of $626. During the
fourth quarter of 2010, the Company made payments of $47 and recorded adjustments of $33 to increase the
deferred acquisition consideration. In relation to these step-ups, the Company recorded an entry to reduce
redeemable noncontrolling interests by $1,365 and an entry to reduce noncontrolling interests by $144. The
Company recorded a reduction of additional paid-in-capital of $2,296 representing the difference between the
fair value of the interest and the value of the redeemable noncontrolling interests. The amounts paid and to be
paid will not be tax deductible.

Second Quarter 2010 Acquisitions

Effective May 6, 2010, the Company, through a wholly-owned subsidiary, purchased 75% of the total

outstanding membership interests in Integrated Media Solutions, LLC (‘‘IMS’’), which expands the
Company’s direct response marketing capabilities. At closing, the Company paid cash of $20,000 plus
additional contingent deferred acquisition consideration, based on actual results from 2010 to 2015 with ﬁnal
payments due in 2016, with a current estimated present value of $19,658 at the date of acquisition which

58

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

4. Acquisitions − (continued)

includes ﬁxed payments of $2,216. During 2010, the Company made payments of $666 and recorded
adjustments of $1,329 to reduce the deferred acquisition consideration. An initial estimated allocation of the
excess purchase consideration of this acquisition to the fair value of the net assets acquired resulted in
identiﬁable intangibles of $9,081 (consisting of primarily customer lists and a covenant not to compete) and
goodwill of $44,678 representing the value of the assembled workforce. The fair value of the noncontrolling
interest not acquired at the acquisition date was $13,219 based in the Company’s evaluation of the Company
being acquired and the purchase price paid by the Company. The identiﬁed intangibles will be amortized
ranging from a ﬁve to seven-year period in a manner represented by the pattern in which the economic
beneﬁts of the customer contracts/relationships are realized. The intangibles and goodwill are tax deductible.

The actual adjustments that the Company will ultimately make in ﬁnalizing the allocation of the purchase

price of IMS to the fair value of the net assets acquired at May 6, 2010 will depend on a number of factors,
including additional information such as changes in the unaudited consolidated ﬁnancial statements.

During the quarter ended June 30, 2010, the Company completed a number of acquisitions. The
Company purchased a 51% equity interest in Allison & Partners LLC (‘‘Allison’’), a 75% equity interest in
Sloane & Company LLC (‘‘Sloane’’), and certain assets and liabilities of CSC – ADPLUS, LLC (d.b.a.
Infolure) (‘‘Infolure’’). Allison is a full service public relations and corporate communications agency. Sloane
is a communication ﬁrm focused on corporate positioning and communications, ﬁnancial public relations and
investor relations, and crisis and transactions communications. Infolure is a direct marketing ﬁrm. The
purchase price paid for these acquisitions consisted of aggregate cash payments of $17,632 plus additional
contingent deferred acquisition consideration, that are based on actual results from 2010 to 2015 with ﬁnal
payments due in 2016 with a current estimated present value of $15,797 which includes ﬁxed payments of
$3,805. During 2010, the Company made payments of $2,020 and recorded adjustment of $2,198 to increase
deferred acquisition consideration. An allocation of the excess purchase consideration of these acquisitions to
the fair value of the net assets acquired resulted in identiﬁable intangibles of $9,431 consisting primarily of
customer lists and covenants not to compete, and goodwill of $27,697 representing the value of the assembled
workforce. The identiﬁed intangibles will be amortized ranging from a ﬁve to seven-year period in a manner
represented by the pattern in which the economic beneﬁts of the customer contracts/relationships are realized.
In addition, the Company has recorded $6,024, the present value of redeemable noncontrolling interests in
relation to Allison and Sloane. The Allison acquisition has put option rights upon termination of an employee-
owner’s employment by reason of death. The Sloane acquisition has put rights that could increase the
Company’s ownership to 100% in 2015. The amounts paid and to be paid will be tax deductible.

The actual adjustments that the Company will ultimately make in analyzing the allocation of purchase

price to the fair value of the net assets acquired, will depend on a number of factors, including additional
information such as changes in the unaudited ﬁnancial statements.

First Quarter 2010 Acquisitions

Effective March 1, 2010, the Company, through a wholly-owned subsidiary, purchased 60% of the total

outstanding membership interests in Team Holdings LLC (‘‘Team’’), which expands the Company’s
experiential marketing capabilities. At closing, the Company paid cash of $11,000 plus additional contingent
deferred acquisition consideration, based on actual results from 2010 to 2012 with ﬁnal payments in 2013,
with a current estimated present value of $12,656, and the Company paid a working capital true-up estimated
at an additional $569. During 2010, the Company recorded adjustments of $1,711 to reduce the value of the
deferred acquisition consideration. An initial estimated allocation of the excess purchase consideration of this
acquisition to the fair value of the net assets acquired resulted in identiﬁable intangibles of $5,220 (consisting
of primarily customer lists and a covenant not to compete) and goodwill of $32,993 representing the value of
the assembled workforce. The fair value of the noncontrolling interest not acquired at the acquisition date was
$15,771 based in the Company’s evaluation of the Company being acquired and the purchase price paid by
the Company. The identiﬁed intangibles will be amortized up to a seven-year period in a manner represented

59

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

4. Acquisitions − (continued)

by the pattern in which the economic beneﬁts of the customer contracts/relationships are realized. During the
second quarter of 2010, the Company amended the purchase agreement to include additional deferred
acquisition consideration, with a current present value of $3,071, with ﬁnal payments due in 2012. During
2010, the Company made payments of $986 and recorded adjustments to increase the deferred acquisition
consideration by $304. The additional deferred acquisition consideration resulted in additional intangibles of
$3,071. The intangibles and goodwill are tax deductible.

The actual adjustments that the Company will ultimately make in analyzing the allocation of purchase

price to the fair value of the net assets acquired, will depend on a number of factors, including additional
information such as changes in the unaudited ﬁnancial statements.

During the three months ended March 31, 2010, the Company completed a number of other acquisitions

and step-ups in ownership. The Company purchased a 76% equity interest in Communifx Partners LLC
(‘‘Communifx’’), substantially all of the assets of Plaid Inc. (‘‘Plaid’’), an additional 15% equity interest in
Fletcher Martin, LLC (‘‘Fletcher Martin’’), an additional 49% equity interest in Trend Core, LLC (‘‘Trend
Core’’), and an additional 1% equity interest in HL Group Partners, LLC (‘‘HL Group’’). Communifx builds
and manages large-scale customer database solutions to enable the planning, execution, and measurement of
multi-channel marketing and advertising programs. Plaid is a marketing services business with a concentration
in the digital communication and social media arena. The Company purchased the additional equity interests
in Fletcher Martin and HL Group pursuant to the exercise of outstanding puts. The purchase price paid for
these acquisitions and step-ups consisted of aggregate cash payments of $4,921 plus additional contingent
payments of $576 that are based on actual results from 2010 to 2015 with ﬁnal payments due in 2016. An
allocation of the excess purchase consideration of these acquisitions to the fair value of the net assets acquired
resulted in identiﬁable intangibles of $1,851 consisting primarily of customer lists and a covenant not to
compete, and goodwill of $2,426 representing the value of the assembled workforce. The identiﬁed intangibles
will be amortized up to a seven-year period in a manner represented by the pattern in which the economic
beneﬁts of the customer contracts/relationships are realized. In addition, the Company has recorded $710, the
present value of redeemable noncontrolling interests in relation to Communifx. The Communifx acquisition
has put/call rights that could increase the Company’s ownership to 100% in 2013. In relation to the step up
acquisitions, the Company recorded an entry to reduce Redeemable Noncontrolling Interests by $1,116. The
amount paid to the employee over fair value, $608, was recorded as a stock-based compensation charge. The
Company recorded a reduction of additional paid-in capital of $1,623 representing the difference between the
fair value of the shares and the value of the Redeemable Noncontrolling Interests. The amounts paid and to be
paid will be tax deductible.

The actual adjustments that the Company will ultimately make in analyzing the allocation of purchase

price to the fair value of the net assets acquired, will depend on a number of factors, including additional
information such as changes in the unaudited ﬁnancial statements.

2009 Acquisitions

In December 2009, the Company paid an additional $38,974 pursuant to the CPB purchase agreement

originally entered into in November 2008 with the founders of Crispin Porter & Bogusky LLC (‘‘CPB’’). In
connection with this transaction, the Company recorded $14,067 as deferred acquisition consideration, $1,450
was paid in January 2010, $433 was reversed as an adjustment and the balance was paid in April 2010. This
purchase price payment was pursuant to an accelerated exercise of a call option that was exercised by the
Company in November 2008 (the Company increased its ownership from 77% to 94%). Because CPB was
originally consolidated as a VIE, the Company reduced Redeemable Noncontrolling Interests by $17,809. The
Company recorded additional goodwill of $31,253 and identiﬁable intangible backlog of $3,979. The amount
recorded related to the 17% step up from November 2008. The backlog was amortized over one month. In
addition, the Company recorded a stock-based charge of $3,074 for amounts paid by the former shareholder to
CPB employees. The Goodwill will be tax deductible.

60

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

4. Acquisitions − (continued)

On December 31, 2009, the Company acquired an additional 3% interest in VitroRobertson increasing its
holdings from 79% to 82%. The purchase price totaled $845 and was paid in cash. The Company recorded an
entry to reduce Redeemable Noncontrolling Interests by $266. The amount paid over fair value, $370, was
recorded as a stock-based compensation charge. The Company recorded a reduction of additional paid-in
capital of $209 representing the difference between the fair value of the shares and the value of the
Redeemable Noncontrolling Interests. As this purchase was pursuant to the exercise of an existing put/call
option, no additional intangibles have been recorded. The Goodwill will be tax deductible.

On December 1, 2009, the Company agreed to make an early payment to KBP Management Partners

LLC originally due in March 2010 pursuant to the purchase agreement entered into in November 2007. The
additional payment totaled $14,870, of which $10,140 was paid in cash in December 2009 and $4,215 was
paid in March 2010 with the balance potentially due in March 2011, recorded as deferred acquisition
consideration. This additional payment was accounted for as additional goodwill. In addition, pursuant to an
existing phantom stock arrangement, a stock-based compensation charge of $3,028 has been recorded for
amounts paid by KBP Management Partners to phantom equity holders. The Goodwill will be tax deductible.

On October 5, 2009, the Company purchased the remaining 6% outstanding interest in CPB for an
estimated ﬁxed and contingent purchase price. The estimated purchase price of $9,818 is included in deferred
acquisition consideration and includes $518 of ﬁxed payments to be paid in 2013. The Company recorded a
reduction of $8,596 to Redeemable Noncontrolling Interests and $704 to additional paid in capital. The ﬁxed
payments of $518 are allocated to identiﬁable intangibles and will be amortized over 3 years.

On August 31, 2009, the Company, through HL Group Partners LLC (‘‘HL Group’’), acquired a 51%
interest in Attention Partners LLC (‘‘Attention’’), a social media agency that further expands HL Group’s
business capabilities. At closing, the HL Group paid $1,000 and made a capital contribution of $400 to
Attention. In addition, HL Group recorded estimated contingent payments totaling $1,313 due in 2010 and
2011 as deferred acquisition consideration. During 2010, the Company paid $1,022 and recorded adjustments
of $113 to increase the deferred acquisition consideration to $404 with the balance potentially due in
March 2011. The allocation of the excess purchase consideration of this acquisition to the fair value of the net
assets acquired resulted in identiﬁable intangibles of $544 (consisting of primarily of customer lists and a
covenant not to compete) and goodwill of $3,057 representing the value of the assembled workforce. The fair
value of the noncontrolling interests not acquired at the acquisition date was $2,431 based on the Company’s
evaluation of the Company being acquired, the purchase paid by the Company. The identiﬁed intangibles will
be amortized up to a three-year period in a manner represented by the pattern in which the economic beneﬁts
of the customer contracts/relationships are realized. The intangibles and goodwill are tax deductible.

On July 1, 2009, the Company, through Crispin Porter & Bogusky LLC (‘‘CPB’’), acquired 100% of the
preferred shares and 52% of the common shares of Crispin Porter & Bogusky Europe AB (formerly known as
‘‘daddy’’), a digital agency based in Sweden that has created a foothold in Europe for CPB. At closing, CPB
paid $3,052 plus an additional $50 deferred payment. Also in December 2009, CPB called an additional 24%
and made a payment of 80% of the purchase price of $188. An additional amount of $50 is recorded as
deferred acquisition consideration. The Company has additional calls and the noncontrolling owners have
reciprocal puts on the remaining 24% of the common shares, which are exercisable beginning January 2012.
The current estimated cost of these puts and calls is approximately $6,600 and has been recorded as
Redeemable Noncontrolling Interests. The allocation of the excess purchase consideration of this acquisition to
the fair value of the net assets acquired resulted in identiﬁable intangibles of $650 (consisting primarily of
customer lists and a covenant not to compete) and goodwill of $8,533 representing the value of the assembled
workforce. The identiﬁed intangibles will be amortized up to a three-year period in a manner represented by
the pattern in which the economic beneﬁts of the customer contracts/relationships are realized. The intangibles
and goodwill are not tax deductible. Accordingly, CPB recorded a deferred tax liability of $221 representing
the future tax beneﬁts relating to the amortization of the identiﬁed intangibles.

61

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

4. Acquisitions − (continued)

Effective January 22, 2009, the Company acquired an additional 8.9% of equity interests in HL Group,

thereby increasing MDC’s ownership to 64.9%. The purchase price totaled $1,100 and was paid in cash at
closing. The Company recorded an entry to reduce Redeemable Noncontrolling Interests, as this purchase was
pursuant to the early exercise of an existing put/call option. Accordingly, no additional intangibles have been
recorded. However, the amount of the purchase price will be tax deductible.

2008 Acquisitions

Effective December 31, 2008, the Company acquired an additional 6.3% of equity interests in Accent

Marketing LLC, increasing the Company’s ownership to 100%. The aggregate purchase price totaled $4,830
and was paid in cash of $995 at closing and repayment of outstanding loans of $1,830. The balance aggregate
of $2,005 was paid in 2009. In addition, an additional contingent performance payment of $96 was paid in
December 2009 based on Accent’s 2009 ﬁnancial results. The allocation of the excess purchase consideration
of these step acquisitions to the fair value of the net assets acquired resulted in identiﬁable intangibles of
$1,900 (consisting of customer lists), goodwill of $365 and a stock based compensation charge of $2,285,
relating to the amount paid in excess of the fair value of the equity purchase. The identiﬁed intangibles will
be amortized over a seven year period in a manner represented by the pattern in which the economic beneﬁts
of the customer contracts/relationships are realized. This payment was also classiﬁed as a stock-based
compensation charge. The intangibles, goodwill and stock based compensation charge are tax deductible.

Effective December 1, 2008, the Company acquired an additional 3% of equity interests in Source

Marketing LLC, increasing the Company’s ownership to 83%. The purchase price totaled $1,286 and was paid
in cash less $42 of outstanding loans. The allocation of the excess purchase consideration of this step
acquisition to the fair value of the net assets acquired resulted in identiﬁable intangibles of $300 (consisting of
customer lists), goodwill of $504 and a stock based compensation charge of $524, relating to the amount paid
in excess of the fair value of the equity purchase. The identiﬁed intangibles will be amortized over a ﬁve year
period in a manner represented by the pattern in which the economic beneﬁts of the customer
contracts/relationships are realized. The intangibles, goodwill and stock based compensation charge are tax
deductible.

On November 24, 2008, the Company agreed to make an early payment to KBP Management Partners

LLC of the contingent payment originally due in 2009 pursuant to the purchase agreement entered into in
November 2007. The additional payment totaled $16,005, of which $14,124 was paid in cash in
November 2008 and $1,881 was paid in 2009. This additional payment was accounted for as additional
goodwill. In addition, pursuant to an existing phantom stock arrangement a 2008 stock based compensation
charge of $3,548 has been recorded for amounts paid to the phantom equity holders. In December 2009, the
Company determined the ﬁnal earnout payment to be $14,870 of which $10,140 was paid in December 2009
and the balance will be paid in 2010. This ﬁnal amount was accounted for as additional goodwill. In addition,
pursuant to an existing phantom stock arrangement, a 2009 stock based compensation charge of $3,028 has
been recorded for amounts paid to the phantom equity holders. The goodwill is tax deductible.

Effective November 10, 2008, the Company acquired an additional 17% of equity interests in Crispin
Porter & Bogusky LLC (‘‘CPB’’), increasing the Company’s ownership to 94%. The purchase price totaled
$6,823 plus a contingent payment in April of 2010 based on the ﬁnancial performance of 2009. This
contingent payment will be calculated in accordance with CPB’s existing limited liability company agreement.
The consideration was paid in cash of $6,430 and the issuance of 105,000 newly-issued shares of the
Company’s Class A subordinated voting stock valued at $393. For accounting purposes, the value of the
Company’s Class A shares issued as consideration was calculated based on the price of the Company’s Class
A shares over a period of two days before and after the November 10, 2008 announcement date. This
acquisition represented an accelerated exercise of the Company’s existing call option that was otherwise
exercisable in April 2010. The allocation of the excess purchase consideration of this acquisition to the fair

62

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

4. Acquisitions − (continued)

value of the net assets acquired resulted in $5,008 being allocated to identiﬁable intangibles, existing backlog.
This intangible will be amortized over 14.5 month period. This intangible is tax deductible.

Effective October 10, 2008, MDC acquired an additional 8.56% of Zig Inc and an additional 13.17% of

an affiliate of Zig Inc for cash of $1,320. These transactions increased the Company’s equity ownership in Zig
Inc to 74.07%. The allocation of the excess purchase consideration of these step acquisitions to the fair value
of the net assets acquired resulted in identiﬁable intangibles of $176 (consisting of customer lists and existing
backlog) and goodwill of $1,196. The identiﬁed intangibles will be amortized over 30 months in a manner
represented by the pattern in which the economic beneﬁts of the customer contracts/relationships are realized.
The tax deductible portion of these transactions amounts to $253.

On June 16, 2008, CPB, acquired certain assets and assumed certain liabilities of Texture Media, Inc.
Texture Media is a digital agency specializing in website development, and is based in Boulder, Colorado with
approximately 50 employees. The purchase price consisted of $2,500 in cash and a non-contingent cash
payment of $940 in one year, which $400 is included in deferred acquisition consideration. The allocation of
the excess purchase consideration of this acquisition to the fair value of the net assets acquired resulted in
identiﬁable intangibles of $150 (consisting of customer lists and covenants not to compete) and goodwill of
$3,111. The identiﬁed intangibles will be amortized up to a two year period in a manner represented by the
pattern in which the economic beneﬁts of the customer contracts/relationship are realized. The intangibles and
goodwill are tax deductible.

On February 12, 2008, the Company’s Bratskeir subsidiary purchased the net assets of Clifford PR for

$2,050 in cash and the issuance of 30,444 newly issued shares of the Company’s Class A stock valued at
$249, plus a 10% membership interest in Clifford/Bratskeir. For accounting purposes, the value of the
Company’s Class A shares issued as consideration was calculated based on the price of the Company’s Class
A shares on the date of the acquisition. The accounting value of the 10% membership interest in
Clifford/Bratskeir was valued at $400. The allocation of the excess purchase consideration of this acquisition
to the fair value of the net assets acquired resulted in identiﬁable intangibles of $1,031 (consisting of customer
lists, backlog and covenants not to compete) and goodwill of $1,432. The identiﬁed intangibles will be
amortized over a period of up to ﬁve years in a manner represented by the pattern in which the economic
beneﬁts of the customer contracts/relationship are realized. Effective December 31, 2008, the Company
transferred the ownership of the Clifford PR assets to HL Group Partners, LLC. As part of this transfer, the
Company issued 45,000 Class A Shares valued at $137 which have been recorded as stock based
compensation expense. In connection with that transaction, the Company purchased the 10% membership
interest in Clifford/Bratskeir for $400 less an adjustment for working capital of $88. This net amount will be
paid over a three-year period and is included in deferred acquisition consideration. The intangibles and
goodwill are tax deductible.

In January 2008, the Company’s 62% owned subsidiary at such time, Zyman Group, purchased certain
assets of Core Strategy Group and DMG Inc. The aggregate purchase price paid at closing consisted at such
time of $1,000 paid in cash and the issuance of 126,478 newly issued shares of the Company’s Class A stock
valued at $1,110. In addition, the principals of Core Strategy Group and DMG received 1,000,000
newly-issued Restricted Class C units of Zyman Group, which will entitle them to a proﬁt interest of 15% of
Zyman Group’s pre-tax income in excess of a speciﬁed threshold amount. For accounting purposes, the value
of the Company’s Class A shares issued as consideration was calculated based on the price of the Company’s
Class A share on the date of the acquisitions. The accounting value of the Restricted Class C units of Zyman
Group was determined based on a Black-Scholes value of $1,001. The allocation of the excess purchase
consideration of these acquisitions to the fair value of the net assets acquired resulted in identiﬁable
intangibles of $497 (consisting of customer lists and covenants not to compete) and goodwill of $2,626. The

63

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

4. Acquisitions − (continued)

identiﬁed intangibles will be amortized up to a ﬁve year period in a manner represented by the pattern in
which the economic beneﬁts of the customer contracts/relationship are realized. The intangibles and goodwill
are tax deductible.

Throughout 2008, the Company completed 16 equity acquisitions with various shareholders of Allard
Johnson Communications Inc. (‘‘Allard’’). The aggregate purchase price for the 16 transactions was cash equal
to $3,442. These transactions increased the Company’s equity ownership in Allard to 75.06%, an increase of
14.8%. The allocation of the excess purchase consideration of these step acquisitions to the fair value of the
net assets acquired resulted in identiﬁable intangibles of $247 (consisting of customer lists and existing
backlog), goodwill of $2,752 and a stock based compensation charge of $467, relating to amounts paid in
excess of the fair value of the equity purchased. The identiﬁed intangibles will be amortized over a ﬁve year
period in a manner represented by the pattern in which the economic beneﬁts of the customer
contracts/relationship are realized. The intangible and goodwill are not tax deductible.

Proforma Information

The following unaudited pro forma results of operations of the Company for the years ended

December 31, 2010 and 2009 and 2008 assume that the acquisition of the operating assets of the signiﬁcant
businesses acquired during 2010 and 2008 had occurred on January 1st of the respective year in which the
business was acquired and for the comparable period only (i.e., 2010 acquisitions are reﬂected in 2009).
Acquisitions made in 2010 included below are Team, IMS, Kenna, Capital C, Sloane, Relevent and Think
360. During 2009, there were no signiﬁcant businesses acquired. These unaudited pro forma results are not
necessarily indicative of either the actual results of operations that would have been achieved had the
companies been combined during these periods, or are they necessarily indicative of future results of
operations.

Liquidity
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to MDC Partners Inc.
. . . . . . . . .
Income (loss) per common share:
Basic − net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted − net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended
December 31,
2010
$781,822
$ (10,963)

Year Ended
December 31,
2009
$708,540
$ (17,880)

Year Ended
December 31,
2008
$584,648
1,097
$

$
$

(0.39)
(0.39)

$
$

(0.65)
(0.65)

$
$

0.04
0.04

Noncontrolling Interests

Changes in the Company’s ownership interests in our less than 100% owned subsidiaries during the three

years ended December 31, 2010 were as follows:

Net Income Attributable to MDC Partners Inc. and
Transfers (to) from the Noncontrolling Interest

Liquidity
Net Loss attributable to MDC Partners Inc.
Transfers (to) from the noncontrolling interest

. . . . . . . .

Decrease in MDC Partners Inc. paid-in capital for

purchase of equity interests in excess of
Redeemable Noncontrolling Interests

Net transfers (to) from noncontrolling interest

. . . . . . . . .
. . . . .

Year Ended
December 31,
2010
$(15,440)

Year Ended
December 31,
2009
$(18,324)

Year Ended
December 31,
2008
$133

(7,761)
(7,761)

(913)
(913)

—
—

Change from net income attributable to MDC Partners

Inc. and transfers (to) from noncontrolling interest . .

$(23,201)

$(19,237)

$133

64

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

5. Fixed Assets

The following is a summary of the ﬁxed assets as of December 31:

2010
Accumulated
Depreciation

Cost

Net Book
Value

Cost

2009
Accumulated
Depreciation

Net Book
Value

Computers, furniture

and ﬁxtures . . . . . . $ 94,268

$(68,540)

$25,728

$ 79,036

$(60,090)

$18,946

Leasehold

improvements

. . . .

41,217
$135,485

(25,892)
$(94,432)

15,325
$41,053

39,091
$118,127

(22,662)
$(82,752)

16,429
$35,375

Included in ﬁxed assets are assets under capital lease obligations with a cost of $4,323, (2009 — $3,383)

and accumulated depreciation of $2,421 2009 — $2,018). Depreciation expense for the years ended
December 31, 2010, 2009 and 2008 was $16,764, $16,275 and $16,747, respectively.

6. Accrued and Other Liabilities

At December 31, 2010 and 2009, accrued and other liabilities included amounts due to noncontrolling
interest holders, for their share of proﬁts, which will be distributed within the next twelve months of $8,577
and $4,058, respectively.

Changes in noncontrolling interest amounts included in accrued and other liabilities for the three years

ended December 31, 2010 were as follows:

Balance, December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . .
Distributions made . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . .
Distributions made . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . .
Distributions made . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Noncontrolling
Interests
$ 7,916
8,300
(11,649)
289
$ 4,856
5,566
(7,784)
1,420
$ 4,058
10,074
(7,685)
2,130
$ 8,577

(1) Other consists primarily of an adjustment of stock based compensation charges to additional paid-in

capital relating to obligations assumed by the non-controlling shareholders and cumulative translation
adjustments.

(2) Other consists primarily of an adjustment to record distributions to be made as a result of an acquired

company and cumulative translation adjustments.

7. Financial Instruments

Financial assets, which include cash and cash equivalents and accounts receivable, have carrying values

which approximate fair value due to the short-term nature of these assets. Financial liabilities with carrying
values approximating fair value due to short-term maturities include accounts payable, accrued and other
liabilities, advance billings, and deferred acquisition consideration. Bank debt and long-term debt are variable

65

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

7. Financial Instruments − (continued)

rate debt, the carrying value of which approximates fair value. The Company’s note payable is a ﬁxed rate
debt instrument, the carrying values of which approximates fair value. The fair value of ﬁnancial
commitments, guarantees and letters of credit, are based on the stated value of the underlying instruments.
Guarantees have been issued in conjunction with the disposition of businesses in 2001 and 2003 and letters of
credit have been issued in the normal course of business. The fair value for the 11% senior notes was
approximately $323,700 as of December 31, 2010.

8. Goodwill and Intangible Assets

As of December 31, the gross and net amounts of acquired intangible assets were as follows:

Goodwill
Balance of December 31, 2008 . . . . . . . . . . . . . . . . .
Acquired goodwill . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . .
Balance as of December 31, 2009 . . . . . . . . . . . . . . .
Acquired goodwill . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . .
Balance as of December 31, 2010 . . . . . . . . . . . . . . .

Strategic
Marketing
Services
$186,053
59,053
—
3,008
$248,114
78,147
(942)
1,658
$326,977

Performance
Marketing
Services
$ 52,161
—
—
1,357
$ 53,518
132,497
—
1,496
$187,511

Total
$238,214
59,053
—
4,365
$301,632
210,644
(942)
3,154
$514,488

For the Year Ended
December 31, 2010

2010

2009

Intangibles:

Trademarks (indeﬁnite life) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships − gross
. . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships − net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangibles − gross
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangibles − net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total intangible assets − net

$ 17,780
$ 68,603
(26,517)
$ 42,086
$ 16,926
(9,659)
$ 7,267
$103,309
(36,176)
$ 67,133

$ 17,780
$ 48,125
(35,843)
$ 12,282
$ 19,352
(14,699)
$ 4,653
$ 85,257
(50,542)
$ 34,715

See Note 4 for Accounting for Business Combinations.

During 2010, the Company recorded a goodwill impairment charge of $710 relating to Fearless and $232

relating to Zig US. Fearless was a start up company that the company discontinued in June 2010. Zig US’s
business operations have been treated as discontinued as of September 30, 2010.

During 2008, the Company recorded a goodwill impairment charge of $1,590 relating to

Clifford/Bratskeir Public Relations LLC (‘‘Bratskeir’’). Bratskeir’s business operations have been treated as
discontinued as of December 31, 2008. In addition, the Company completed the sale of certain assets of its
Mobium division resulting in a $1,137 reduction of goodwill.

66

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

8. Goodwill and Intangible Assets − (continued)

The weighted average amortization periods for customer relationships are 5 years and other intangible

assets are 5 years. In total, the weighted average amortization period is 5 years. The amortization expense of
amortizable intangible assets for the year ended December 31, 2010, was $17,631 (2009 — $17,968;
2008 — $17,264) the estimated amortization expense for the ﬁve succeeding years is:

Year
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortization
$17,281
$10,907
$ 6,766
$ 4,990
$ 2,468

9. Income Taxes

The components of the Company’s income (loss) from continuing operations before income taxes, equity

in affiliates and noncontrolling interests by taxing jurisdiction for the years ended December 31, were:

Income (loss):
US . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-US . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2010

2009

2008

$(5,162)
1,259
$(3,903)

$ 2,254
(4,949)
$(2,695)

$13,779
6,907
$20,686

The provision (beneﬁt) for income taxes by taxing jurisdiction for the years ended December 31, were:

Current tax provision

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
US federal
US state and local . . . . . . . . . . . . . . . . . . . . . . . .
Non-US . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax provision (beneﬁt):

US federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
US state and local . . . . . . . . . . . . . . . . . . . . . . . .
Non-US . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income tax provision . . . . . . . . . . . . . . . . . . . . . . .

2010

2009

2008

$ —
368
4,840
5,208

428
501
(6,302)
(5,373)
$ (165)

$ —
1,246
318
1,564

8,681
2,347
(4,056)
6,972
$ 8,536

$ 4,948
328
(1,919)
3,357

(5,057)
189
3,908
(960)
$ 2,397

67

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

9. Income Taxes − (continued)

A reconciliation of income tax expense using the statutory Canadian federal and provincial income tax

rate compared with actual income tax expense for the years ended December 31, is as follows:

Income (loss) from continuing operations before

income taxes, equity in affiliates and noncontrolling
interest

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statutory income tax rate . . . . . . . . . . . . . . . . . . . . .
Tax expense using statutory income tax rate . . . . . . . .
State and foreign taxes . . . . . . . . . . . . . . . . . . . . . .
Non-deductible stock-based compensation . . . . . . . . .
Other non-deductible expense . . . . . . . . . . . . . . . . . .
Change to valuation allowance on items affecting

taxable income . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional tax reserve . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . .
Other, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . .
Effective income tax rate . . . . . . . . . . . . . . . . . . . . .

2010

2009

2008

$(3,903)
31.0%
(1,210)
1,909
4,941
890

(7,986)
4,100
(3,123)
314
$ (165)
4.2%

$(2,695)
33.0%
(889)
3,045
5,160
732

2,656
—
(1,767)
(401)
$ 8,536

$20,686

33.5%

6,930
(960)
2,796
876

(4,149)
—
(2,726)
(370)
$ 2,397

316.7%

11.6%

(1)

Included in the change in valuation allowance is $3,188 relating to the reversal of the valuation
allowance as a result of a non-taxable acquisition.

See Note 10 for income taxes for discontinued operations.

The 2010 effective income tax rate was signiﬁcantly lower than the statutory rate due primarily to an
additional tax reserve of $4,100, non-deductible stock-based compensation of $4,941, state and foreign income
taxes of $1,909 offset by a decrease in the Company’s valuation allowance of $7,986.

The 2009 effective income tax rate was signiﬁcantly higher than the statutory rate due primarily from the
increase in the Company’s valuation allowance of $2,656, non-deductible stock-based compensation of $5,160
and State and foreign income taxes of $1,564.

The 2008 effective income tax rate was signiﬁcantly lower than the statutory rate due primarily from the

reversal of Canadian withholding taxes due to a change in Canadian tax law of $2,088 (included in other
taxes above) and a decrease in the Company’s valuation allowance of $4,149, primarily due to utilization of
net operating loss carry forwards.

Income taxes receivable were $712 and $622 at December 31, 2010 and 2009, respectively, and were

included in accounts receivable on the balance sheet. Income taxes payable were $4,969 and $1,215 at
December 31, 2010 and 2009, respectively, and were included in accrued and other liabilities on the balance
sheet. It is the Company’s policy to classify interest and penalties arising in connection with the under
payment of income taxes as a component of income tax expense. For the year ended 2010, $1,093 is included
in the current provision of income tax expense relating to interest and penalties as a result of an identiﬁed
uncertain tax position. For the years ended 2010, 2009 and 2008, income tax expense does not include any
amounts for interest and penalties.

68

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

9. Income Taxes − (continued)

The tax effects of signiﬁcant temporary differences representing deferred tax assets and liabilities at

December 31, were as follows:

Deferred tax assets:
Capital assets and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carry forwards . . . . . . . . . . . . . . . . . . . . . . . . .
Interest deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized foreign exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital loss carry forwards
Accounting reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross deferred tax asset
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
Deferred ﬁnance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax asset

Disclosed as:
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2010

2009

$ 7,292
41,313
7,053
896
268
17,289
6,118
80,229
(55,311)
24,918

(526)
(300)
(18,816)
(19,642)
$ 5,276

$ 5,296
45,292
5,743
970
227
17,417
2,751
77,696
(65,896)
11,800

(530)
—
(8,521)
(9,051)
$ 2,749

$ 24,966
(19,690)
$ 5,276

14,950
(12,201)
$ 2,749

Included in accrued and other liabilities at December 31, 2010 and 2009 is a deferred tax liability of $48

and $3,150, respectively. Included in other current assets at December 31, 2010 and 2009 is a deferred tax
asset of $3,363 and $2,408, respectively.

The Company has US federal net operating loss carry forwards of $41,892 and non-US net operating loss

carry forwards of $61,153, these carry forwards expire in years 2015 through 2030. The Company also has
total indeﬁnite loss carry forwards of $131,661. These indeﬁnite loss carry forwards consist of $20,116
relating to the US and $111,545 which are related to capital losses from the Canadian operations. In addition,
the Company has net operating loss carry forwards for various state taxing jurisdictions of approximately
$150,366.

The Company records a valuation allowance against deferred income tax assets when management
believes it is more likely than not that some portion or all of the deferred income tax assets will not be
realized. Management considers factors such as the reversal of deferred income tax liabilities, projected future
taxable income, the character of the income tax asset; tax planning strategies, changes in tax laws and other
factors. A change to these factors could impact the estimated valuation allowance and income tax expense.

The valuation allowance has been recorded to reduce our deferred tax asset to an amount that is more

likely than not to be realized, and is based upon the uncertainty of the realization of certain US, non-US and
state deferred tax assets. The increase in the Company’s valuation allowance charged to the statement of
operations for each of the years ended December 31, 2009 and 2008 was $2,656 and $6,870, respectively. In
2010 and 2008, the Company reduced its valuation and recorded a beneﬁt in the statement of operations of
$7,986 and $4,149, respectively.

69

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

9. Income Taxes − (continued)

Deferred taxes are not provided for temporary differences representing earnings of subsidiaries that are

intended to be permanently reinvested. The potential deferred tax liability associated with these undistributed
earnings is not material.

As of December 31, 2010, the Company recorded a liability for unrecognized tax beneﬁts as well as
applicable penalties and interest in the amount of $4,717. The Company identiﬁed an uncertainty relating to
the future tax deductability of certain intercompany interest and fees, to the extent that such future beneﬁt will
be established, the resolution of this position will have no effect with respect to the ﬁnancial statements.

Changes in the Company’s reserve is as follows:
Balance December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charges to income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charges to income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charges to income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 617
—
617
—
617
3,007
$3,624

We do not expect our unrecognized tax beneﬁts to change signiﬁcantly over the next 12 months.

The Company has completed US federal tax audits through 2006 and has completed a non-US tax audit

through 2004.

10. Discontinued Operations

In December 2010, the Company discontinued a start-up division of Redscout, LLC called 007. As a

result, the Company has classiﬁed this entity’s results of operations as a loss of $722 as discontinued
operations.

Effective September 30, 2010, the Company ceased Zig US current operations and as a result incurred a
goodwill impairment charge of $232. Including the impairment charge Zig US’s results of operations, net of
income tax beneﬁts, for the year ended 2010, there was a loss of $1,046.

In June 2010, the Company discontinued a start up called Fearless Progression LLC (‘‘Fearless’’). As a
result, the Company wrote off its investment in Fearless of $710. Including the impairment charge, Fearless’s
results of operations net of income tax beneﬁts for the year ended 2010, was a loss of $743. The Company
has classiﬁed this entity’s results as discontinued operations.

In December 2010, the Company recorded net adjustments of $21 to reduce a previously recorded

liability relating to prior discontinued operations.

The loss net of taxes from discontinued operations for 2009 was $1.5 million and is comprised of the
operating results of Clifford/Bratskeir Public Relations LLC (‘‘Bratskeir’’) of $361 and Margeotes Fertitta
Powell, LLC (‘‘MFP’’) of $515 and Zig US of $643, relates to an adjustment to a previously recorded
liability.

In December 2008, the Company entered into negotiations to sell certain remaining assets in Bratskeir to

management. This transaction was completed in April 2009. As a result of this expected transaction, the
Company recorded a goodwill and intangibles impairment charge of $1,945. Including the impairment charge
Bratskeir’s results of operations, net of income tax beneﬁts, for the years ended 2008 and 2007 were losses of
$3,815 and $1,217, respectively.

Effective December 3, 2008, Colle & McVoy, LLC (‘‘Colle’’), completed the sale of certain assets of its
Mobium division. The Company recorded a loss on sale of $1,159 ($765 net of taxes). Including the loss on

70

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

10. Discontinued Operations − (continued)

sale, Mobium’s results of operations, net of income tax beneﬁts for the year ended 2008 was a loss of $3,022.
The results of operations net of income taxes for Mobium for the year ended 2007 was income of $283.

Effective June 30, 2008, the Company sold its 60% interest in The Ito Partnership (‘‘Ito’’), a start-up
operation formed in 2006. The sale resulted in a loss of $877, ($579 net of taxes). Including the loss on sale,
Ito’s results of operations, net of income tax beneﬁts for the year ended 2008 was a loss of $533.

In December 2008, the Company ceased MFP current operations. As a result, the Company has classiﬁed

these operations as discontinued. In addition, an additional intangible relating to an employment contract of
$629 was deemed impaired and written off. In 2008, the Company recorded a loss of $2,645 net of income
taxes resulting primarily from the accrual of lease abandonment costs and severance.

In December 2007, due to continued operating losses and the lack of new business wins the Company
ceased Banjo Strategic Entertainment, LLC (‘‘Banjo’’) operations. The results of operations of Banjo, net of
income tax beneﬁts, was a loss of $154 in 2007. MFP and Banjo had been previously included in the
Company’s Specialized Communication Service segment.

Included in discontinued operations in the Company’s consolidated statements of operations for the years

ended December 31 were the following:

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charge . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .

Operating loss

$

487
(942)
(2,883)

2010

Years Ended December 31,
2009
$ 1,264
—
(2,000)

2008
$ 7,077
(1,945)
(12,164)

Other expense
. . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax recovery . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interest expense recovery . . . . . . . .
. . . . . . . . . .
Net loss from discontinued operations

(56)
343
102
$(2,494)

(10)
270
221
$(1,519)

(3,364)
5,159
164
$(10,205)

Included in other expense is a loss on sale of assets of $2,036 in 2008.

At December 31, 2008, $408, $323 and $2,139 was included in current assets, other assets and accrual

and other liabilities, respectively, which represent assets held for sale and related liabilities.

11. Comprehensive Income (Loss)

Total comprehensive income (loss) and its components for the years ended December 31, were:

. . . . . . . . . . . . . . . . .

Net income (loss) for the year
Other comprehensive income, net of tax:
Foreign currency cumulative translation adjustment
. . .
Comprehensive loss for the year . . . . . . . . . . . . . . . .
Comprehensive loss attributable to the noncontrolling

interest

Comprehensive loss attributable to MDC Partners Inc.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.

2010
$ (5,366)

2009
$(12,758)

2008
$ 8,433

1,736
(3,630)

769
(11,989)

(12,938)
(4,505)

(10,078)
$(13,708)

(5,582)
$(17,571)

(8,338)
$(12,843)

71

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

12. Bank Debt, Long-Term Debt and Convertible Notes

At December 31, the Company’s indebtedness was comprised as follows:

Revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11% senior notes due 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Original issue discount

Note payable and other bank loans . . . . . . . . . . . . . . . . . . . . . . . .

Obligations under capital leases . . . . . . . . . . . . . . . . . . . . . . . . . .

Less:
Current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2010

$
—
290,000
(6,843)

1,400
284,557
1,659
286,216

2009

$
—
225,000
(10,291)

1,800
216,509
1,437
217,946

1,667
$284,549

1,456
$216,490

Interest expense related to long-term debt for the years ended December 31, 2010, 2009 and 2008 was

$30,429, $18,057 and $13,650, respectively. For the year ended December 31, 2010 and 2009, interest
expense included $848 and $204 amortization of the original issue discount, respectively and $922 and nil of
present value adjustments for ﬁxed deferred acquisition payments, respectively.

The amortization and write off of deferred ﬁnance costs included in interest expense were $1,288, $3,837

and $1,348 for the years ended December 31, 2010, 2009, and 2008 respectively.

Issuance of 11% Senior Notes

On October 23, 2009, the Company and its wholly-owned subsidiaries, as guarantors, issued and sold
$225,000 aggregate principal amount of 11% Senior Notes due 2016 (the ‘‘11% Notes’’). The 11% Notes bear
interest at a rate of 11% per annum, accruing from October 23, 2009. Interest is payable semiannually in
arrears in cash on May 1 and November 1 of each year, beginning on May 1, 2010. The 11% Notes will
mature on November 1, 2016, unless earlier redeemed or repurchased. The Company received net proceeds
before expenses of $208,881, which included an original issue discount of approximately 4.7% or $10,494,
and underwriter fees of $5,624. The 11% Notes were sold in a private placement in reliance on exemptions
from registration under the Securities Act of 1933, as amended. The Company used the net proceeds of this
offering to repay the outstanding balance and terminate its prior Fortress Financing Agreement, and redeemed
its outstanding 8% C$45,000 convertible debentures on November 26, 2009.

The Company may, at its option, redeem the 11% Notes in whole at any time or in part from time to

time, on and after November 1, 2013 at a redemption price of 105.500% of the principal amount thereof. If
redeemed during the twelve-month period beginning on November 1, 2014, at a redemption price of
102.750% of the principal amount thereof if redeemed during the twelve-month period beginning on or after
November 1, 2015 and equal to redemption price of 100% of the principal amount thereof. (Prior to
November 1, 2013, the Company may, at its option, redeem some or all of the 11% Notes at a price equal to
100% of the principal amount of the Notes plus a ‘‘make whole’’ premium and accrued and unpaid interest.)
The Company may also redeem, at its option, prior to November 1, 2012, up to 35% of the 11% Notes with
the proceeds from one or more equity offerings at a redemption price of 11% of the principal amount thereof.
If the Company experiences certain kinds of changes of control (as deﬁned in the Indenture), holders of the
11% Notes may require the Company to repurchase any 11% Notes held by them at a price equal to 101% of
the principal amount of the 11% Notes plus accrued and unpaid interest.

In connection with these transactions, the Company wrote-off $323 of deferred ﬁnancing costs relating to

its prior convertible debentures.

72

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

12. Bank Debt, Long-Term Debt and Convertible Notes − (continued)

On May 14, 2010, the Company and its wholly-owned subsidiaries, as guarantors, issued and sold
$65,000 aggregate principal amount of 11% Senior Notes due 2016. The additional notes were issued under
the Indenture governing the 11% notes and treated as a single series with the original 11% notes. The
additional notes were sold in a private placement in reliance on exemptions from registration under the
Securities Act of 1933, as amended. The Company received net proceeds before expenses of $67,208, which
included an original issue premium of $2,600, and underwriter fees of $392. The Company used the net
proceeds of the offering to repay the outstanding balance under the Company’s revolving WF Credit Facility
described elsewhere herein, and for general corporate purposes, including acquisitions.

At December 31, 2010, the Company had issued $6,018 of undrawn outstanding Letters of Credit.

At December 31, 2010, accounts payable included $9,026 of outstanding checks.

The fair value for the 11% Senior Notes was $323,700 as of December 31, 2010.

WF Credit Facility

On October 23, 2009, the Company and its subsidiaries entered into a $75,000 ﬁve year senior secured
revolving WF Credit Facility (the ‘‘WF Credit Facility’’) with Wells Fargo Foothill, LLC, as agent, and the
lenders from time to time party thereto. On November 22, 2010, this agreement was amended to increase the
availability under the facility to $100,000. The WF Credit Facility replaced the Company’s existing $185,000
senior secured ﬁnancing agreement with Fortress Credit Corp., as collateral agent, Wells Fargo Foothill, Inc.,
as administrative agent. Advances under the WF Credit Facility will bear interest as follows: (a)(i) LIBOR
Rate Loans bear interest at the LIBOR Rate and (ii) Base Rate Loans bear interest at the Base Rate, plus (b)
an applicable margin. The initial applicable margin for borrowing is 3.00% in the case of Base Rate Loans
and 3.25% in the case of LIBOR Rate Loans. The applicable margin may be reduced subject to the Company
achieving certain trailing twelve month earning levels, as deﬁned. In addition to paying interest on outstanding
principal under the WF Credit Facility, the Company is required to pay an unused revolver fee to lenders
under the WF Credit Facility in respect of unused commitments thereunder.

The WF Credit Facility is guaranteed by all of the Company’s present and future subsidiaries, other than

immaterial subsidiaries (as deﬁned) and is secured by substantially all the assets of the Company. The WF
Credit Facility includes covenants that, among other things, restrict the Company’s ability and the ability of its
subsidiaries to incur or guarantee additional indebtedness; pay dividends on or redeem or repurchase the
capital stock of MDC; make certain types of investments; pay dividends; incur certain liens, sell or otherwise
dispose of certain assets; enter into transactions with affiliates; enter into sale and leaseback transactions; and
consolidate or merge with or into, or sell substantially all of the Company’s assets to, another person. These
covenants are subject to a number of important limitations and exceptions. The WF Credit Facility also
contains ﬁnancial covenants, including a senior leverage ratio, a total leverage ratio, a ﬁxed charge coverage
ratio and a minimum earnings level, as deﬁned.

In connection with these transactions, the Company incurred a termination fee of $1,850 and wrote-off

$2,240 of deferred ﬁnancing costs relating to its prior Fortress Financing Agreement.

The Company is currently in compliance with all of the terms and conditions of its WF Credit Facility,
and management believes, based on its current ﬁnancial projections, that the Company will be in compliance
with covenants over the next twelve months.

Prior Financing Agreement

The Prior Fortress Financing Agreement consisted of a $55,000 revolving WF Credit Facility, a $60,000

term loan and a $70,000 delayed draw term loan. Interest payable under the Financing Agreement was as
follows: (a) LIBOR Rate Loans bear interest at applicable interbank rates and Reference Rate Loans bear

73

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

12. Bank Debt, Long-Term Debt and Convertible Notes − (continued)

interest at the rate of interest publicly announced by the Reference Bank in New York, New York, plus (b) a
percentage spread ranging from 0% to a maximum of 4.75% depending on the type of loan and the
Company’s Senior Leverage Ratio.

Effective October 23, 2009, the Company repaid all outstanding amounts under the Fortress Financing

Agreement.

8% Convertible Unsecured Subordinated Debentures

On June 28, 2005, the Company completed an offering in Canada of convertible unsecured subordinated

debentures amounting to $36,723 (C$45,000) (the ‘‘Debentures’’). The Debentures required interest at an
annual rate of 8.00% payable semi-annually, in arrears, on June 30 and December 31 of each year.

The Company repaid the Debentures on November 26, 2009.

Future principal repayments, including capital lease obligations, for the years ended December 31, and in

aggregate are as follows:

Period
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 and beyond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount
$ 1,667
1,020
187
103
58
290,024
$293,059

Capital Leases

Future minimum capital lease payments for the years ended December 31 and in aggregate are as

follows:

Period
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: imputed interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount
$ 935
453
203
112
62
24
1,789
(130)
1,659
(867)
$ 792

74

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

13. Share Capital

The authorized share capital of the Company is as follows:

(a) Authorized Share Capital

Class A Shares

An unlimited number, subordinate voting shares, carrying one vote each, entitled to dividends equal to or

greater than Class B shares, convertible at the option of the holder into one Class B share for each Class A
share after the occurrence of certain events related to an offer to purchase all Class B shares.

Class B Shares

An unlimited number, carrying 20 votes each, convertible at any time at the option of the holder into one

Class A share for each Class B share.

Preferred A Shares

An unlimited number, non-voting, issuable in series.

The Company has not paid dividends on any class of shares during the three years ended December 31,

2009.

(b) 2010 Share Capital Transactions

During the year ended December 31, 2010, Class A share capital increased by $8,220. The Company

issued 1,367,271 relating to vested restricted stock, 6,495 shares related to the exercise of outstanding stock
options and 101,107 shares related to the exercise of outstanding stock appreciation rights, increasing share
capital by $11,699.

During 2010, the Company’s employees surrendered 282,954 Class A shares valued at $3,479 in
connection with the required tax withholding from the vesting of various equity awards. These shares were
subsequently retired and no longer remain outstanding as of December 31, 2010.

Additional paid-in capital decreased by $9,174, of which $11,640 related to the vesting of restricted stock
and stock appreciation rights, $7,603 relating to transactions with noncontrolling interests, dividends paid and
to be paid of $10,194, changes in the redemption value of redeemable noncontrolling interests of $11,500.
These decreases were offset by $14,954 relating to an increase from stock-based compensation and $16,809
transferred to charges in excess of capital.

(c) 2009 Share Capital Transactions

During the year ended December 31, 2009, Class A share capital increased by $4,999. The Company

issued 620,393 shares related to vested restricted stock, 47,625 shares related to the exercise of outstanding
stock options and 68,261 shares related to the exercise of outstanding stock appreciation rights, increasing
share capital by $5,595.

During 2009, the Company’s employees surrendered 156,481 Class A shares valued at $596 in connection

with the required tax withholding resulting from the vesting of various equity awards. These shares were
subsequently retired and no longer remain outstanding as of December 31, 2009.

Additional paid-in capital decreased by $24,296, of which $31,653 related to the recording of existing put
options (Note 2), $5,226 related to the vesting of restricted stock and stock appreciation rights, $923 related to
acquisitions, and other charges of $214. These decreases were offset by $13,720 relating to increase from
stock-based compensation.

(c) 2008 Share Capital Transactions

During the year ended December 31, 2008, Class A share capital increased by $5,575. The Company
issued 334,467 shares related to business acquisitions and 541,110 shares related to vested restricted stock
increasing share capital by 6,584.

75

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

13. Share Capital − (continued)

During 2008, the Company’s employees surrendered 112,146 Class A shares valued at $909 in connection

with the required tax withholding resulting from the vesting of restricted stock. In addition, during 2008, the
Company received 12,346 Class A shares valued at $100 in connection with a partial repayment of a note
receivable. These 124,492 Class A shares were subsequently retired and no longer remain outstanding as of
December 31, 2008.

Additional paid-in capital increased $6,727, of which $10,129 related to an increase from stock-based

compensation that was expensed during 2008 and $1,001 related to acquisition purchase price consideration
and other changes of $78 partially offset by $4,481 related to the vested restricted stock.

(e) Employee Stock Incentive Plan

On May 26, 2005, the Company’s shareholders approved the Company’s 2005 Stock Incentive Plan (the

‘‘2005 Incentive Plan’’). The 2005 Incentive Plan authorizes the issuance of awards to employees, officers,
directors and consultants of the Company with respect to 2,000,000 shares of MDC Partners’ Class A
Subordinate Voting Shares or any other security in to which such shares shall be exchanged. On June 1, 2007
and on June 2, 2009, the Company’s shareholders approved a total additional authorized Class A Shares of
2,500,000 to be added to the 2005 Incentive Plan for a total of 4,500,000 authorized Class A Shares. On
May 30, 2008, the Company’s shareholders approved the 2008 Key Partner Incentive Plan, which provides for
the issuance of 600,000 Class A Shares. As of December 31, 2010, the Company has granted 200,000 Director
options (of which 100,000 were forfeited), which option grants were for a ten-year term and vests over ﬁve
(5) years from the grant date under the 2005 Incentive Plan.

The following table summarizes information about time based and ﬁnancial performance-based restricted
stock and restricted stock unit awards granted under the 2005 Incentive Plan and 2008 Key Partner Incentive
Plan:

Balance at December 31, 2007

Granted . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . .
Balance at December 31, 2008 .
Granted . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . .

Balance at December 31, 2009

Granted . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . .

Balance at December 31, 2010

Performance Based Awards
Weighted
Average Grant
Date Fair Value
$8.10
8.17
8.30
8.13
$8.05
—
7.95
7.88
$8.17
8.83
8.37
8.88
$8.83

Shares
913,729
801,345
(531,610)
(45,601)
1,137,863
—
(545,747)
(34,158)
557,958
753,209
(804,300)
(4,944)
501,923

Time Based Awards

Shares
482,149
369,882
(9,500)
(13,000)
829,531
179,927
(74,646)
(10,652)
924,160
258,223
(562,971)
(3,345)
616,067

Weighted
Average Grant
Date Fair Value
$ 9.78
4.78
9.26
8.85
$ 7.57
7.15
9.19
10.04
$ 7.33
10.28
8.60
8.13
$ 7.40

The total fair value of restricted stock and restricted stock unit awards, which vested during the year
ended December 31, 2010, 2009 and 2008 was $14,976, $5,022 and $4,499, respectively. In connection with
the vesting of these awards, the Company realized a tax deduction of $3,431, $414 and $430 in 2010, 2009
and 2008, respectively. At December 31, 2010, the weighted average remaining contractual life for
performance based awards is 2.2 years and for time based awards is 1.5 years. At December 31 2010, the fair
value of all restricted stock and restricted stock unit awards is $19,308. The term of these awards is three

76

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

13. Share Capital − (continued)

years with vesting up to three years. At December 31, 2010, the unrecognized compensation expense for these
awards was $6,085 and will be recognized through 2013. At December 31, 2010, there are 1,669 awards
available to grant.

The Company’s Board of Directors adopted the 2005 Incentive Plan as a replacement for MDC Partners’
Amended and Restated Stock Option Incentive Plan (the ‘‘Prior 2003 Plan’’). Following approval of the 2005
Incentive Plan, the Company ceased making awards under the Prior 2003 Plan.

Prior to adoption of the 2005 Incentive Plan, the Company’s Prior 2003 Plan provided for grants of up to

1,890,786 options to employees, officers, directors and consultants of the Company. All the options granted
were for a term of ﬁve years from the date of the grant and vest 20% on the date of grant and a further 20%
on each anniversary date. In addition, the Company granted 534,960 options, on the privatization of
Maxxcom, with a term of no more than 10 years from initial date of grant by Maxxcom and vest 20% in each
of the ﬁrst two years with the balance vesting on the third anniversary of the initial grant.

Information related to share option transactions grant under all plans over the past three years is

summarized as follows:

Options Outstanding

Options Exercisable

Number
Outstanding

Weighted
Average
Price per
Share

Number
Outstanding

Weighted
Average
Price per
Share

Balance, December 31,

2007 . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . .
Exercised . . . . . . . . . . . .
Expired and cancelled . . .
Balance, December 31,

2008 . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . .
Exercised . . . . . . . . . . . .
Expired and cancelled . . .
Balance, December 31,

2009 . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . .
Exercised . . . . . . . . . . . .
Expired and cancelled . . .
Balance, December 31,

975,028
—
—
—
(516,193)

458,835
—
—
(47,625)
(171,218)

239,992
—
—
(6,495)
(17,297)

$11.14
—
—
—
8.85

$ 9.49
—
—
8.76
12.22

$ 9.55
—
—
9.19
17.08

851,216

$11.31

—
—

393,835

$ 9.69

194,992

$ 9.64

Non Vested
Options

123,812
(53,812)

(5,000)

65,000
(20,000)
—
—
—

45,000
(20,000)
—
—
—

2010 . . . . . . . . . . . . .

216,200

$ 9.41

191,200

$ 9.41

25,000

At December 31, 2010, the intrinsic value of vested options and the intrinsic value of all options was

$1,700. For options exercised during 2010 and 2009, the Company received cash proceeds of $60 and $370,
respectively. The Company did not receive any windfall tax beneﬁts. The intrinsic value of options exercised
during 2010 and 2009 was $20 and $16, respectively. At December 31, 2010, the weighted average remaining
contractual life of all outstanding options was 1.0 years and for all vested options was 0.8 years. At
December 31, 2010, the unrecognized compensation expense of all options was $68 and will be recognized
through 2012.

77

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

13. Share Capital − (continued)

Share options outstanding as of December 31, 2010 are summarized as follows:

Options Outstanding
Weighted
Average
Contractual
Life
1.55
1.06
0.34

Weighted
Average
Price per
Share
$ 6.91
$ 9.08
$13.32

Outstanding
Number
8,326
186,679
21,195

Options Exercisable
Weighted
Average
Price per
Share
$ 6.91
$ 9.02
$13.32

Weighted
Average
Contractual
Life
1.55
0.78
0.34

Exercisable
Number
8,326
161,679
21,195

Range of Exercise Prices
$5.28 − $7.91 . . . . . . .
$7.92 − $9.85 . . . . . . .
$9.86 − $13.32 . . . . . .

(f) Stock Appreciation Rights

During 2003, the Compensation Committee of the Board of Directors approved a stock appreciation

rights (‘‘SAR’s’’) compensation program for senior officers and directors of the Company. SARS’s granted
prior to 2006 have a term of four years, for SAR’s granted in 2006 and after they have a term of up to 10
years and all awards vest one-third on each anniversary date.

SAR’s granted and outstanding are as follows:

SAR’s Outstanding

SAR’s Exercisable

Weighted
Average
Number
Outstanding

Weighted
Average
Price per
Share

Number
Outstanding

Price per
Share

Non Vested
SAR’s

Balance at December 31,

2007 . . . . . . . . . . . . .
Vested . . . . . . . . . . . .
Granted . . . . . . . . . . .
Exercised . . . . . . . . . .
Expired and cancelled . .

Balance at December 31,

2008 . . . . . . . . . . . . .
Vested . . . . . . . . . . . .
Granted . . . . . . . . . . .
Exercised . . . . . . . . . .
Expired and cancelled . .

Balance at December 31,

2009 . . . . . . . . . . . . .
Vested . . . . . . . . . . . .
Granted . . . . . . . . . . .
Exercised . . . . . . . . . .
Expired and cancelled . .

Balance at December 31,

615,000
—
—
—
(370,000)

245,000
—
3,744,686
(172,759)
(298,158)

3,518,769
—
—
(187,666)
—

511,666

$11.72

238,334

$ 9.80

$11.33
—
—
—
12.00

$ 9.74
—
3.76
3.72
8.22

$ 3.80

30,000

$ 8.18

$ 4.19

103,334
(96,668)
—
—
—

6,666
(6,666)
3,744,686
(172,759)
(83,158)

3,488,769
(1,747,034)
—
(187,666)
—

2010 . . . . . . . . . . . . .

3,331,103

$ 3.78

1,777,034

$ 3.77

1,554,069

At December 31, 2010, the aggregate amount of shares to be issued on vested SAR’s was 1,388,866
shares with an intrinsic value of $23,808 and for all outstanding SAR’s, the aggregate amount of shares to be
issued was 2,597,808 with an intrinsic value of $44,947. During 2010 and 2009, the aggregate value of SAR’s
exercised was $1,147 and $407, respectively. During 2010, the Company received a tax deduction of $180. At
December 31, 2010, the weighted average remaining contractual life of all outstanding SAR’s was 3.2 years
and for all vested SAR’s was 3.2 years. At December 31, 2010, the unrecognized compensation expense of all
SAR’s was $541 and will be recognized through 2012.

78

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

13. Share Capital − (continued)

SAR’s Outstanding
Weighted
Average
Contractual
Life
3.17
5.63

Outstanding
Number
3,311,103
20,000

Weighted
Average
Price per
Share
$3.75
$8.38

SAR’s Exercisable
Weighted
Average
Price per
Share
$3.72
$8.38

Weighted
Average
Contractual
Life
3.17
5.63

Exercisable
Number
1,757,034
20,000

Range of Exercise Prices
$3.72 − $6.60 . . . . . . .
$6.61 − $8.95 . . . . . . .

(h) Warrants

The Company measures the fair value of warrants using the Black-Scholes option pricing model on the

date of grant.

There were no warrants outstanding as at December 31, 2010.

Information related to warrant transactions over the past three years is summarized as follows:

Warrants Outstanding

Warrants Exercisable

Balance, December 31,

2007 . . . . . . . . . . . . .
Vested . . . . . . . . . . . .
Granted . . . . . . . . . . .
Expired and cancelled . .

Balance, December 31,

2008 . . . . . . . . . . . . .
Vested . . . . . . . . . . . .
Granted . . . . . . . . . . .
Expired and cancelled . .

Balance, December 31,

Number
Outstanding

728,907
—
—
(250,000)

478,907
—
—
(478,907)

—
12.70

$14.02
—
—
$14.02

2009 . . . . . . . . . . . . .

—

—

Weighted
Average
Price per
Share

Number
Outstanding

Weighted
Average
Price per
Share

$16.67

680,873

$16.61

478,907

$14.02

—
—

—

$ —

—

Non Vested
Warrants

48,034
(48,034)

—

—
—

—

—

The Company has reserved a total of 1,345,927 Class A shares in order to meet its obligations under

various conversion rights, warrants and employee share related plans. At December 31, 2010 there were
1,668,919 shares available for future option and similar grants.

14. Fair Value Measurements

Effective January 1, 2008, the Company adopted guidance regarding accounting for Fair Value

Measurements. This guidance deﬁnes fair value, establishes a framework for measuring fair value and expands
the related disclosure requirements. The statement indicates, among other things, that a fair value
measurement assumes a transaction to sell an asset or transfer a liability occurs in the principal market for the
asset or liability or, in the absence of a principal market, the most advantageous market for the asset or
liability.

In order to increase consistency and comparability in fair value measurements, the guidance establishes a
hierarchy for observable and unobservable inputs used to measure fair value into three broad levels, which are
described below:

•

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date
for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

79

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

14. Fair Value Measurements − (continued)

•

•

Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated
by market data.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value
hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable

inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty
credit risk in its assessment of fair value.

On a nonrecurring basis, the Company uses fair value measures when analyzing asset impairment. Long-
lived assets and certain identiﬁable intangible assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined such
indicators are present and the review indicates that the assets will not be fully recoverable, based on
undiscounted estimated cash ﬂows over the remaining amortization periods, their carrying values are reduced
to estimated fair value. Measurements based on undiscounted cash ﬂows are considered to be level 3 inputs.
During the fourth quarter of each year, the Company evaluates goodwill and indeﬁnite-lived intangibles for
impairment at the reporting unit level. For each acquisition, the Company performed a detailed review to
identify intangible assets and a valuation is performed for all such identiﬁed assets. The Company used
several market participant measurements to determine estimated value. This approach includes consideration
of similar and recent transactions, as well as utilizing discounted expected cash ﬂow methodologies. The
amounts allocated to assets acquired and liabilities assumed in the acquisitions were determined using level
three inputs. Fair value for property and equipment was based on other observable transactions for similar
property and equipment. Accounts receivable represents the best estimate of balances that will ultimately be
collected, which is based in part on allowance for doubtful accounts reserve criteria and an evaluation of the
speciﬁc receivable balances.

The following tables present certain information for our ﬁnancial assets that is measured of fair value on

a recurring basis at December 31, 2010 and 2009:

Level 1 2010

Level 1 2009

Carrying
Amount

Fair Value

Carrying
Amount

Fair Value

Liabilities:

Long term debt . . . . . . . . . . . . . . . .

$283.2

$323.7

$214.7

$230.6

Our long term debt includes ﬁxed rate debt. The fair value of this instrument is based on quoted market

prices.

The following table presents changes in Deferred Acquisition Consideration.

Beginning Balance of contingent payments . . . . . . . . . . . . . . . . . . . . . . . . .

Fair Value Measurements Using
Signiﬁcant Unobservable Inputs
(Level 3)

2010
$ 29,928

2009
$ 3,986

Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redemption value adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign translation adjustment

(25,305)
97,930
(1,292)
561

(3,986)
29,928
—
—

Ending Balance of contingent payments

. . . . . . . . . . . . . . . . . . . . . . . . . . .

$101,822

$29,928

80

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

14. Fair Value Measurements − (continued)

In addition to the above amounts, there are ﬁxed payments of $6,169 and $717 for total deferred

acquisition consideration of $107,991 and $30,645, which reconciles to the consolidating ﬁnancial statements
at December 31, 2010 and 2009, respectively.

Level 3 payments relate to payments made for deferred acquisition consideration. Level 3 grants relate to

contingent purchase price obligations related to acquisitions. The Company records the initial liability of the
estimated present value. The estimated liability is determined in accordance with various contractual valuation
formulas that may be dependent on future events, such as the growth rate of the earning of the relevant
subsidiary during the contractual period, and, in some cases, the currency exchange rate of the date of
payment. Level 3 redemption value adjustments relate to the remeasurement and change in these various
contractual valuation formulas as well as adjustments of present value.

15. Gain on Sale of Assets and Other

The gain on sale of assets and other for the years ended December 31 were as follows:

Other income (expense) . . . . . . . . . . . . . . . . . . . . . .
Gain (loss) on disposition of assets . . . . . . . . . . . . . .

2010
$364
17
$381

2009
$(38)
(53)
$(91)

2008
$ 128
(142)
$ (14)

16. Segmented Information

The Company’s segment reporting is consistent with the current manner of how the Chief Operating

Decision Maker (‘‘CODM’’) and the Board of Directors view the business. The Company is focused on
expanding its capabilities in database marketing and data analytics in order to position the Company for future
business development efforts and revenue growth.

In order to position this strategic focus along the lines of how the CODM and management will base
their business decisions, the Company report two segments. Decisions regarding allocation of resources are
made and will be made based not only on the individual operating results of the subsidiaries but also on the
overall performance of the reportable segments. These reportable segments are the aggregation of various
reporting segments.

The Company reports in two segments plus corporate. The segments are as follows:

•

•

The Strategic Marketing Services segment includes Crispin Porter & Bogusky and kirshenbaum
bond senecal + partners among others. This segment consists of integrated marketing consulting
services ﬁrms that offer a full complement of marketing consulting services including advertising
and media, marketing communications including direct marketing, public relations, corporate
communications, market research, corporate identity and branding, interactive marketing and sales
promotion. Each of the entities within the Strategic Marketing Services Group share similar
economic characteristics, speciﬁcally related to the nature of their respective services, the manner in
which the services are provided and the similarity of their respective customers. Due to the
similarities in these businesses, they exhibit similar long term ﬁnancial performance and have been
aggregated together.

The Performance Marketing Services segment includes our ﬁrms that provide consumer insights to
satisfy the growing need for targetable, measurable solutions or cost effective means of driving
return on marketing investment. These services interface directly with the consumer of a client’s
product or service. Such services include the design, development, research and implementation of
consumer service and direct marketing initiatives. Each of the entities within the Performance
Marketing Services Group share similar economic characteristics speciﬁcally related to the nature of

81

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

16. Segmented Information − (continued)

their respective services, the manner in which the services are provided, and the similarity of their
respective customers. Due to the similarities in these businesses, the services provided to the
customer and they exhibit similar long term ﬁnancial performance and have been aggregated
together.

The signiﬁcant accounting polices of these segments are the same as those described in the summary of

signiﬁcant accounting policies included in the notes to the consolidated ﬁnancial statements. The Company
continues to evaluate its Corporate Group and the services provided by the Corporate Group to the operating
segments. The Company has determined that additional amounts should be allocated to the operating segments
based on additional services provided in 2009. The Company will continue to evaluate the services and
amount of time spent directly on the operating segments business operations, and adjust accordingly.

For the Year Ended December 31, 2010

Strategic
Marketing
Services
$438,941
289,409
90,622
17,917
40,993

Performance
Marketing
Services
$258,884
188,082
44,011
16,196
10,595

Corporate
—
$
—
22,291
368
(22,659)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of services sold . . . . . . . . . . . . . . . .
Office and general expenses
. . . . . . . . . . .
Depreciation and amortization . . . . . . . . . .
Operating proﬁt (Loss) . . . . . . . . . . . . . . .
Other income (Expense):
Other income, net
. . . . . . . . . . . . . . . . . .
Foreign exchange gain . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . .
Loss from continuing operations before
income taxes, equity in affiliates and
noncontrolling interest . . . . . . . . . . . . . .
Income tax recovery . . . . . . . . . . . . . . . . .
Loss from continuing operations before
equity in affiliates and noncontrolling
interests

. . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates . . . . . . . . . .
Loss from continuing operations
. . . . . . . .
Loss from discontinued operations

attributable to MDC Partners Inc., net of
taxes

. . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling

interests

. . . . . . . . . . . . . . . . . . . . . . .

(7,211)

(2,863)

—

Net (loss) attributable to MDC Partners Inc.
Stock-based compensation . . . . . . . . . . . . .
Capital expenditures from continuing

operations . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
Goodwill and intangibles
Total assets . . . . . . . . . . . . . . . . . . . . . . .

$ 7,282

$

1,992

$ 7,233

$ 6,476
$367,856
$552,383

$
5,414
$213,765
$322,520

$
610
—
$
$ 39,445

82

Total
$697,825
477,491
156,924
34,481
28,929

381
69
(33,282)

(3,903)
165

(3,738)
866
(2,872)

(2,494)
(5,366)

(10,074)
$ (15,440)
$ 16,507

$ 12,500
$581,621
$914,348

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

16. Segmented Information − (continued)

For the Year Ended December 31, 2009

Strategic
Marketing
Services
$370,615
220,714
87,633
25,518
36,750

Performance
Marketing
Services
$174,526
132,297
30,898
8,466
2,865

Corporate
—
$
—
18,091
428
(18,519)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of services sold . . . . . . . . . . . . . . . .
. . . . . . . . . . .
Office and general expenses
Depreciation and amortization . . . . . . . . . .
Operating Proﬁt (Loss) . . . . . . . . . . . . . . .
Other Income (Expense):
Other expense, net . . . . . . . . . . . . . . . . . .
Foreign exchange loss
. . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . .
Loss from continuing operations before
income taxes, equity in affiliates and
noncontrolling interest . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . .
Loss from continuing operations before
equity in affiliates and noncontrolling
interests

. . . . . . . . . . . . . . . . . . . . . . .
Equity loss in earnings of affiliates . . . . . . .
Loss from continuing operations
. . . . . . . .
Loss from discontinued operations

attributable to MDC Partners Inc., net of
taxes

. . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling

interests

. . . . . . . . . . . . . . . . . . . . . . .

(4,851)

(715)

—

Net (loss) attributable to MDC Partners Inc.
Stock-based compensation . . . . . . . . . . . . .
Capital expenditures from continuing

operations . . . . . . . . . . . . . . . . . . . . . .
Goodwill and intangibles
. . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . .

$ 8,742

$

868

$ 5,834

$ 3,617
$277,992
$430,959

2,353
$
$ 58,355
$112,780

239
$
$
—
$ 60,780

Total
$545,141
353,011
136,622
34,412
21,096

(91)
(1,956)
(21,744)

(2,695)
(8,536)

(11,231)
(8)
(11,239)

(1,519)
(12,758)

(5,566)
$ (18,324)
$ 15,444

6,209
$
$336,347
$604,519

83

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

16. Segmented Information − (continued)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of services sold . . . . . . . . . . . . . . . .
. . . . . . . . . . .
Office and general expenses
Depreciation and amortization . . . . . . . . . .
Operating Proﬁt (Loss) . . . . . . . . . . . . . . .
Other Income (Expense):
Other expense, net . . . . . . . . . . . . . . . . . .
Foreign exchange gain . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . .
Income from continuing operations before
income taxes and equity in affiliates

. . . .
Income tax expense . . . . . . . . . . . . . . . . .
Income from continuing operations before
equity in affiliates and noncontrolling
interests

. . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates . . . . . . . . . .
Income from continuing operations . . . . . . .
Loss from discontinued operations

attributable to MDC Partners Inc., net of
taxes

. . . . . . . . . . . . . . . . . . . . . . . . .
Net Income . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to the
non-controlling interests

. . . . . . . . . . . .

Net income attributable to MDC Partners

Inc.

. . . . . . . . . . . . . . . . . . . . . . . . . .

Stock-based compensation from continuing

For the Year Ended December 31, 2008

Strategic
Marketing
Services
$362,203
225,569
84,071
24,550
28,013

Performance
Marketing
Services
$221,068
165,446
35,725
9,189
10,708

Corporate
—
$
—
17,622
401
(18,023)

Total
$583,271
391,015
137,418
34,140
20,698

(14)
13,257
(13,255)

20,686
(2,397)

18,289
349
18,638

(10,205)
8,433

(5,466)

(2,834)

—

(8,300)

$

133

operations . . . . . . . . . . . . . . . . . . . . . .

$ 6,162

$

3,697

$ 4,578

$ 14,437

Capital expenditures from continuing

operations . . . . . . . . . . . . . . . . . . . . . .
Goodwill and intangibles
. . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . .

$ 9,181
$224,793
$358,834

$
5,094
$ 60,273
$132,609

109
$
$
—
$ 37,796

$ 14,384
$285,066
$529,239

A summary of the Company’s long-lived assets, comprised of ﬁxed assets, goodwill and intangibles, net,

as at December 31, is set forth in the following table.

United States

Canada

Other

Total

Long-lived Assets

2010 . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . .

$ 32,354
$ 30,322

Goodwill and Intangible Assets

2010 . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . .

$495,133
$303,290

$ 7,606
$ 3,788

$86,488
$33,057

$1,093
$1,265

$ —
$ —

$ 41,053
$ 35,375

$581,621
$336,347

84

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

16. Segmented Information − (continued)

A summary of the Company’s revenue as at December 31 is set forth in the following table.

United States

Canada

Other

Total

Revenue:

2010 . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . .

$582,722
$455,976
$481,745

$97,452
$80,124
$89,230

$17,651
$ 9,041
$12,296

$697,825
$545,141
$583,271

17. Related Party Transactions

(a) The Company incurred fees and paid cash incentive awards totaling $1,343, $3,945 and $3,413 in 2010,
2009 and 2008, respectively, relating to companies controlled by the Chairman and Chief Executive
Officer (‘‘CEO’’) of the Company in respect of services rendered pursuant to a management services
agreement and incentive plans.

On April 27, 2007, the Company entered into a new Management Services Agreement (the ‘‘Services
Agreement’’) with Miles Nadal and with Nadal Management, Inc. to set forth the terms and conditions
on which Mr. Nadal continues to provide services to the Company as its Chief Executive Officer. The
Services Agreement has a three-year term with automatic one-year extensions. Pursuant to the Services
Agreement, the annual base compensation for Mr. Nadal’s services was increased to $1,500, effective
April 27, 2010. The Services Agreement also provides for an annual bonus with a targeted payout of up
to 250% of the base compensation. The Company also makes an annual cash payment of $500 in respect
of retirement beneﬁts, employee health beneﬁts and perquisites. In addition, in the discretion of the
Compensation Committee, the Company may grant long term equity incentives with a grant-date value of
up to 300% of the then current base retainer. In addition during 2010, 2009 and 2008, in accordance with
the Services Agreement, Mr. Nadal repaid to the Company an additional $95, $95 and $83, respectively,
of loans due to the Company.

(b) Pursuant to the amended Services Agreement, the Company agreed to provide to its CEO, Miles S. Nadal
a special bonus of C$10,000 ($10,088) upon the ﬁrst to occur of (i) the average market price of the
Company’s Class A subordinate voting shares is C$30 ($30) per share or more for more than 20
consecutive trading days (measured as of the close of trading on each applicable date) or (ii) a change of
control of the Company. This bonus is payable until the date that is three years after the date on which
Mr. Nadal is no longer employed by the Company for any reason. The after-tax proceeds of such bonus
are to be applied ﬁrst as repayment of any outstanding loans due to the Company from this officer and
his related companies in the amount of C$6,053 (US$6,086), as at December 31, 2010, which has been
reserved for in the Company’s accounts. These loans have no stated maturity date.

(c)

In 2000, the Company purchased 1,600,000 shares in Trapeze Media Limited (‘‘Trapeze’’) for $215. At
the same time, the Company’s CEO purchased 4,280,000 shares of Trapeze for $576, the Company’s
former Chief Financial Officer and a Managing Director of the Company each purchased 50,000 Trapeze
shares for $7 and a Board Member of the Company purchased 75,000 shares of Trapeze for $10. In
2001, the Company purchased an additional 1,250,000 shares for $161, and the Company’s CEO
purchased 500,000 shares for $64. In 2002, the Company’s CEO purchased 3,691,930 shares of Trapeze
for $470. All of these purchases were made at identical prices (C$.20/share). In 2003, the Company and
the CEO exchanged their units in Trapeze for non-voting shares and entered into a voting trust
agreement.

During 2010, 2009 and 2008, Trapeze provided services to certain subsidiaries, the total amount of such

services provided were $70, $105 and $371, respectively. In addition, in 2010, 2009 and 2008, a subsidiary
provided Trapeze with $300, $304 and $144 of services, respectively.

85

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

18. Commitments, Contingencies and Guarantees

Deferred Acquisition Consideration.

In addition to the consideration paid by the Company in respect of

certain of its acquisitions at closing, additional consideration may be payable, or may be potentially payable
based on the achievement of certain threshold levels of earnings. See Note 2 and Note 4.

Put Options. Owners of interests in certain subsidiaries have the right in certain circumstances to
require the Company to acquire either a portion of or all of the remaining ownership interests held by them.
The owners’ ability to exercise any such ‘‘put option’’ right is subject to the satisfaction of certain conditions,
including conditions requiring notice in advance of exercise. In addition, these rights cannot be exercised prior
to speciﬁed staggered exercise dates. The exercise of these rights at their earliest contractual date would result
in obligations of the Company to fund the related amounts during the period 2010 to 2018. It is not
determinable, at this time, if or when the owners of these rights will exercise all or a portion of these rights.

The amount payable by the Company in the event such rights are exercised is dependent on various
valuation formulas and on future events, such as the average earnings of the relevant subsidiary through the
date of exercise, the growth rate of the earnings of the relevant subsidiary during that period, and, in some
cases, the currency exchange rate at the date of payment.

Management estimates, assuming that the subsidiaries owned by the Company at December 31, 2010,
perform over the relevant future periods at their 2010 earnings levels, that these rights, if all exercised, could
require the Company, in future periods, to pay an aggregate amount of approximately $32,985 to the owners
of such rights to acquire such ownership interests in the relevant subsidiaries. Of this amount, the Company is
entitled, at its option, to fund approximately $3,136 by the issuance of share capital. In addition, the Company
is obligated under similar put option rights to pay an aggregate amount of approximately $48,836 only upon
termination of such owner’s employment with the applicable subsidiary or death. The ultimate amount payable
relating to these transactions will vary because it is dependent on the future results of operations of the subject
businesses and the timing of when and if these rights are exercised. The aggregate amount of these options is
$81,821, of which $77,560 has been recorded on the balance sheet at December 31, 2010 and is included in
Redeemable Noncontrolling Interests.

Natural Disasters. Certain of the Company’s operations are located in regions of the United States and

Caribbean which typically are subject to hurricanes. During the year ended December 31, 2010, 2009 and
2008, these operations did not incur any costs related to damages resulting from hurricanes.

Guarantees. In connection with certain dispositions of assets and/or businesses in 2001 and 2003, the
Company has provided customary representations and warranties whose terms range in duration and may not
be explicitly deﬁned. The Company has also retained certain liabilities for events occurring prior to sale,
relating to tax, environmental, litigation and other matters. Generally, the Company has indemniﬁed the
purchasers in the event that a third party asserts a claim against the purchaser that relates to a liability retained
by the Company. These types of indemniﬁcation guarantees typically extend for a number of years.

In connection with the sale of the Company’s investment in CDI, the amounts of indemniﬁcation
guarantees were limited to the total sale price of approximately $84,000. For the remainder, the Company’s
potential liability for these indemniﬁcations are not subject to a limit as the underlying agreements do not
always specify a maximum amount and the amounts are dependent upon the outcome of future contingent
events.

Historically, the Company has not made any signiﬁcant indemniﬁcation payments under such agreements
and no amount has been accrued in the accompanying consolidated ﬁnancial statements with respect to these
indemniﬁcation guarantees. The Company continues to monitor the conditions that are subject to guarantees
and indemniﬁcations to identify whether it is probable that a loss has occurred, and would recognize any such
losses under any guarantees or indemniﬁcations in the period when those losses are probable and estimable.

86

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

18. Commitments, Contingencies and Guarantees − (continued)

For guarantees and indemniﬁcations entered into after January 1, 2003, in connection with the sale of the

Company’s investment in CDI, the Company has estimated the fair value of its liability, which was
insigniﬁcant.

Legal Proceedings. The Company’s operating entities are involved in legal proceedings of various
types. While any litigation contains an element of uncertainty, the Company has no reason to believe that the
outcome of such proceedings or claims will have a material adverse effect on the ﬁnancial condition or results
of operations of the Company.

Commitments. At December 31, 2010, the Company has $6,018 of undrawn outstanding letters of

credit. In addition, the Company has commitments to fund investments in an aggregate amount of $2,200.

Leases. The Company and its subsidiaries lease certain facilities and equipment. Gross premises rental

expense amounted to $18,334 for 2010, $16,004 for 2009 and $16,684 for 2008, which was reduced by
sublease income of $277 in 2010, $59 in 2009 and $31 in 2008. Where leases contain escalation clauses or
other concessions, the impact of such adjustments is recognized on a straight-line basis over the minimum
lease period.

Minimum rental commitments for the rental of office and production premises and equipment under non-

cancellable leases net of sublease income, some of which provide for rental adjustments due to increased
property taxes and operating costs for 2010 and thereafter, are as follows:

Period
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount
$ 22,860
21,695
18,035
14,160
12,434
25,459
$114,643

At December 31, 2010, the total future cash to be received on sublease income is $877.

19. New Accounting Pronouncements

In April 2010, the FASB issues ASU 2010-17, ‘‘Revenue Recognition-Milestone Method.’’ ASU 2010-17
provides guidance on the criteria that should be met for determining whether the milestone method of revenue
recognition is appropriate. A vendor can recognize consideration that is contingent upon achievement of a
milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone
meets all criteria to be considered substantive. The amendments in ASU 2010-17 are effective on a
prospective basis for milestones achieved in ﬁscal years, and interim periods within those years, beginning on
or after June 15, 2010. The adoption will not have an impact on our ﬁnancial statements.

In April 2010, the FASB issued ASU 2010-13, ‘‘Compensation — Stock Compensation Effect of
Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which
the Underlying Equity Security Trades.’’ ASU 2010-13 provides amendments to clarify that an employee
share-based payment award with an exercise price denominated in the currency of a market in which a
substantial portion of the entity’s equity securities trades should not be considered to contain a condition that
is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a
liability if it otherwise qualiﬁes as equity. The amendments in ASU 2010-13 are effective for ﬁscal years, and
interim periods within those ﬁscal years, beginning on or after December 15, 2010. The adoption of this
standard will not have an effect on our ﬁnancial statements.

87

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

19. New Accounting Pronouncements − (continued)

In February 2010, The FASB issued an additional Accounting Standards Update on Subsequent Events to

clarify the updated guidance issued in May 2009. This Guidance clariﬁes that SEC ﬁlers must evaluate
subsequent events through the date the ﬁnancial statements are issued. However, an SEC ﬁler is not required
to disclose the date through which subsequent events have been evaluated. The amendment is effective
June 15, 2010. The adoption did not have an impact on our ﬁnancial statements.

In January 2010, the FASB issued an Accounts Standards Update on Consolidation — Accounting and
Reporting for Decreases in Ownership of a Subsidiary — A Scope Clariﬁcation. This Guidance clariﬁes the
scope of the decrease in ownership provisions and expands the disclosure requirements about deconsolidation
of a subsidiary or de-recognition of a group of assets. It is effective beginning in the ﬁrst interim annual
reporting period ending on or after December 15, 2009. The adoption did not have an impact on our ﬁnancial
statements.

In January 2010, the FASB issued Fair Value Measurements and Disclosures — Improving Disclosures

about Fair Value Measurements. This Guidance requires new disclosures and clariﬁes certain existing
disclosure requirements about fair value measurements. It requires a reporting entity to disclose signiﬁcant
transfers in and out of Level 1 and Level 2 fair value measurements, to describe the reasons for the transfers
and to present separately information about purchases, sales, issuances and settlements for fair value
measurements using signiﬁcant unobservable inputs. This Guidance is effective for interim and annual
reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales,
issuances and settlements in the roll forward of activity in Level 3 fair value measurements, which is effective
for interim and annual reporting periods beginning after December 15, 2010; early adoption is permitted. The
adoption did not have a material effect on our ﬁnancial statements.

In October 2009, the FASB issued revised guidance on the topic of Multiple — Deliverable Revenue
Arrangements. The revised guidance amends certain accounting for revenue with multiple deliverables. In
particular when vendor speciﬁc objective evidence or third party evidence for deliverables in an arrangement
cannot be determined, the revised guidance allows use of a best estimate of the selling price to allocate the
arrangement consideration among them. This guidance is effective for the ﬁrst quarter of 2011, with early
adoption permitted. The Company is currently evaluating the impact on our ﬁnancial statements.

88

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

20. Quarterly Results of Operations (Unaudited) (Restated for Discontinued Operations)

The following table sets forth a summary of the Company’s consolidated unaudited quarterly results of

operations for the years ended December 31, 2010 and 2009, in thousands of dollars, except per share
amounts.

First

Second

Third

Fourth

Quarters

Revenue:

2010 . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . .

$135,915
$126,516

Cost of services sold:

2010 . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . .

$ 96,571
$ 85,494

$169,890
$134,669

$116,364
$ 87,910

$178,597
$134,421

$122,721
$ 85,228

$213,423
$149,534

$141,835
$ 94,379

Income from continuing

operations:
2010 . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . .

Net income (loss) attributable to

MDC Partners Inc.:
2010 . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . .

Income (loss) per common share:
Basic
Continuing operations:

2010 . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . .

Net income (loss):

2010 . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . .
Continuing operations:

2010 . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . .

Net income (loss):

2010 . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . .

$ (8,858)
913
$

$ (2,669)
1,360
$

$ (8,733)
2,434
$

$ 17,387
$ (15,945)

$ (10,186)
29
$

$ (5,805)
79
$

$ (10,918)
36
$

$ 11,469
$ (18,468)

$
$

$
$

$
$

$
$

(0.36)
0.02

(0.37)
0.00

(0.36)
0.02

(0.37)
0.00

$
$

$
$

$
$

$
$

(0.17)
0.01

(0.21)
0.01

(0.17)
0.01

(0.21)
0.01

$
$

$
$

$
$

$
$

(0.36)
0.01

(0.38)
0.00

(0.36)
0.01

(0.38)
0.00

$
$

$
$

$
$

$
$

0.41
(0.65)

0.40
(0.67)

0.37
(0.65)

0.36
(0.67)

The above revenue, cost of services sold, and income (loss) from continuing operations have primarily

been affected by acquisitions, divestitures and discontinued operations.

Historically, with some exceptions, the Company’s fourth quarter generates the highest quarterly revenues

in a year. The fourth quarter has historically been the period in the year in which the highest volumes of
media placements and retail related consumer marketing occur.

Income (loss) from continuing operations and net loss have been affected as follows:

•

•

The fourth quarter of 2010 includes non-cash stock based compensation charges of $3,203.

The fourth quarter of 2009 includes non-cash stock based compensation charges of $6,472 and
additional amortization of $3,979 relating to acquisitions. See Note 4.

89

MDC PARTNERS INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of United States Dollars, Unless Otherwise Stated Except Share and per Share Amounts)

20. Quarterly Results of Operations (Unaudited) (Restated for Discontinued Operations) − (continued)

•

•

The third quarter of 2009 includes an unrealized foreign exchange loss of $3,079.

The fourth quarter of 2009 interest expense includes termination fees of $1,850 and the write off of
$2,564 deferred ﬁnancing fees relating to the termination of the old ﬁnancing agreement, and $4,870
of interest expense relating to the 11% Notes.

90

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures

Not Applicable.

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be
included in our SEC reports is recorded, processed, summarized and reported within the applicable time
periods speciﬁed by the SEC’s rules and forms, and that such information is accumulated and communicated
to our management, including our Chief Executive Officer (CEO) and our Chief Financial Officer (CFO), who
is our principal ﬁnancial officer, as appropriate, to allow timely decisions regarding required disclosures. There
are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the
possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly,
even effective disclosure controls and procedures can only provide reasonable assurance of achieving their
control objectives.

We conducted an evaluation, under the supervision and with the participation of our management,

including our CEO, our CFO and our management Disclosure Committee, of the effectiveness of our
disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-
15(b) of the Exchange Act. Based on that evaluation, the Company has concluded that its disclosure controls
and procedures were effective.

(b) Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over ﬁnancial
reporting (as deﬁned in Rules 13a-15(f) under the Exchange Act). Because of its inherent limitations, internal
control over ﬁnancial reporting may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We evaluated the effectiveness of our internal control over ﬁnancial reporting as of December 31, 2010.
In making this assessment, we used the criteria set forth in Internal Control — Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management’s
assessment of and conclusion on the effectiveness of internal control over ﬁnancial reporting did not include
the internal controls of acquisitions made after the ﬁrst quarter (1Q) 2010, which are included in the
consolidated balance sheets of the Company, and the related consolidated statements of income, stockholders’
equity, and cash ﬂows for the year then ended. Post 1Q acquisitions constituted 13% of total assets, as of
December 31, 2010, and 10% of revenues for the year then ended. Management did not assess the
effectiveness of internal control over ﬁnancial reporting of the post 1Q acquisitions, because of the timing of
the acquisitions.

Based on our assessment, we believe that, as of December 31, 2010, we maintained effective internal

control over ﬁnancial reporting based on these criteria.

The effectiveness of our internal control over ﬁnancial reporting as of December 31, 2010, has been
independently audited by BDO USA LLP, an independent registered public accounting ﬁrm, as stated in their
report which is included herein.

(c) Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over ﬁnancial reporting during the ﬁscal quarter
ended December 31, 2010, that has materially affected, or is reasonably likely to materially affect, our internal
control over ﬁnancial reporting.

91

(d) Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
MDC Partners Inc.
New York, New York
Toronto, Canada

We have audited MDC Partners Inc. and subsidiaries’ internal control over ﬁnancial reporting as of
December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). MDC Partners Inc.
and subsidiaries’ management is responsible for maintaining effective internal control over ﬁnancial reporting
and for its assessment of the effectiveness of internal control over ﬁnancial reporting, included in the
accompanying Item 9A, ‘‘Management’s Report on Internal Control Over Financial Reporting’’. Our
responsibility is to express an opinion on the company’s internal control over ﬁnancial reporting based on our
audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over ﬁnancial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over ﬁnancial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audit also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over ﬁnancial reporting is a process designed to provide reasonable assurance
regarding the reliability of ﬁnancial reporting and the preparation of ﬁnancial statements for external purposes
in accordance with generally accepted accounting principles. A company’s internal control over ﬁnancial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reﬂect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of ﬁnancial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the ﬁnancial
statements.

Because of its inherent limitations, internal control over ﬁnancial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

As indicated in the accompanying Item 9A, Management’s Report on Internal Control Over Financial
Reporting, management’s assessment of and conclusion on the effectiveness of internal control over ﬁnancial
reporting did not include the internal controls of acquisitions made after March 31, 2010, which are included
in the consolidated balance sheets of the Company, and the related consolidated statements of operations,
shareholders’ equity, and cash ﬂows for the year then ended. Post March 31, 2010 acquisitions constituted
13% of total assets, as of December 31, 2010, and 10% of revenues for the year then ended. Management did
not assess the effectiveness of internal control over ﬁnancial reporting of the post March 31, 2010 acquisitions
because of the timing of the acquisitions. Our audit of internal control over ﬁnancial reporting of MDC
Partners Inc. and subsidiaries did not include an evaluation of the internal control over ﬁnancial reporting of
the post March 31, 2010 acquisitions.

In our opinion, MDC Partners Inc. and subsidiaries maintained, in all material respects, effective internal
control over ﬁnancial reporting as of December 31, 2010, based on the COSO criteria.

92

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of MDC Partners Inc. and subsidiaries as of December 31,
2010 and 2009, and the related consolidated statements of operations, shareholders’ equity, and cash ﬂows for
each of the three years in the period ended December 31, 2010 and our report dated March 14, 2011
expressed an unqualiﬁed opinion thereon.

/s/ BDO USA, LLP

New York, New York
March 14, 2011

Item 9B. Other Information

On March 7, 2011, the Company and each of its subsidiaries party thereto entered into an amendment

(the ‘‘Amendment’’) to the WF Credit Facility. The Amendment provides, among other things, that the
Company’s total leverage ratio (as deﬁned), measured on a quarter-end basis, must be no greater than (i) 4.0x,
for the twelve month period ending March 31, 2011, and (ii) 3.75x, for the twelve month period ending on the
last day of each calendar quarter thereafter. In addition, the Amendment provides greater ﬂexibility for the
Company to make restricted junior payments (as deﬁned), including dividends.

The foregoing summary description of the Amendment is qualiﬁed in its entirety by reference to the full
text of the Amendment and the WF Credit Facility, each of which are ﬁled as exhibits to this Annual Report
on Form 10-K.

93

PART III

Item 10. Directors and Executive Officers of the Registrant

Reference is made to the sections captioned ‘‘Nomination of Directors,’’ ‘‘Information Concerning
Nominees for Election as Directors,’’ ‘‘Information Concerning Executive Officers’’, ‘‘Audit Committee’’,
‘‘Ethical Conduct’’ and ‘‘Compliance with Section 16(a) of the Exchange Act’’ in our Proxy Statement for the
2010 Annual General Meeting of Stockholders, which will be ﬁled with the Commission within 120 days of
the close of our ﬁscal year ended December 31, 2010, which sections are incorporated herein by reference.

Executive Officers of MDC Partners

The executive officers of MDC Partners as of March 1, 2011 are:

Name
Miles S. Nadal(1)
Stephen Pustil(1)
David B. Doft
Robert E. Dickson
Mitchell S. Gendel
Michael C. Sabatino
Gavin Swartzman

(1) Also a director

Age

53
67
39
52
45
46
46

Office

Chairman of the Board, Chief Executive Officer and President
Vice Chairman
Chief Financial Officer
Managing Director
General Counsel & Corporate Secretary
Senior Vice President, Chief Accounting Officer
Managing Director

There is no family relationship among any of the executive officers.

Mr. Nadal is the founder of MDC and has held the positions of Chairman of the Board and Chief
Executive Officer of MDC since 1986, and the position of President since 2007. Mr. Nadal is also the founder
and a partner of Peerage Capital, a Canadian private equity ﬁrm, Peerage Realty Partners, and Artemis
Investment Management. Mr. Nadal is active in supporting various business and community organizations
including Mount Sinai Hospital, Junior Achievement of Canada, The Young Presidents Association and the
Schulich School of Business.

Mr. Pustil has been a director of MDC since 1992, and its Vice Chairman since 1992. Mr. Pustil is also a

Managing Partner at Peerage Capital, President of Peerage Realty Partners, and Chairman of Artemis
Investment Management. Mr. Pustil is a chartered accountant and serves on the Board of Mount Sinai
Hospital.

Mr. Doft joined MDC Partners in August 2007 as Chief Financial Officer. Prior to joining MDC Partners,

he oversaw media and Internet investments at Cobalt Capital Management Inc. from July 2005 to July 2007.
Prior thereto, he worked at Level Global Investors from October 2003 to March 2005 investing in media and
Internet companies. Before that, Mr. Doft was a sell side analyst for ten years predominately researching the
advertising and marketing services sector for CIBC World Markets where he served as Executive Director and
ABN AMRO/ING Barings Furman Selz where he was Managing Director.

Mr. Dickson has been a Managing Director of the Company since September 2003. Mr. Dickson joined

Maxxcom Inc., a subsidiary of MDC Partners, in November 2000 as Executive Vice President, Corporate
Development. He is responsible for corporate development for MDC and its operating companies. Prior to
joining Maxxcom, Mr. Dickson was a partner of Fraser Milner Casgrain, a Canadian business law ﬁrm, where
he practiced law for 17 years. Mr. Dickson is a trustee of H&R Real Estate Investment Trust.

Mr. Gendel joined MDC Partners in November 2004, as General Counsel and Corporate Secretary. Prior
to joining MDC Partners, he served as Vice President and Assistant General Counsel at The Interpublic Group
of Companies, Inc. from December 1999 until September 2004.

Mr. Sabatino joined MDC Partners in April 2005 as Senior Vice President and Chief Accounting Officer.

Prior to joining MDC Partners, he was an audit partner with the accounting ﬁrm of Eisner LLP from
April 2004. Prior to that, from December 2001 to March 2004, he was the Co-CFO/Senior Vice President

94

Finance of JAKKs Paciﬁc, Inc., a publicly-held toy company. Before that, Mr. Sabatino was an audit partner
at BDO Seidman, LLP, a public accounting ﬁrm.

Mr. Swartzman has been a Managing Director of the Company since October 2004. He is responsible for

corporate development and real estate for MDC and its operating companies. Mr. Swartzman served as an
officer in a similar capacity for the Company from September 2002 until February 2003. Prior thereto, Mr.
Swartzman joined Amadeus Capital Corporation in 2000 as Senior Vice President where he was responsible
for various corporate development activities of that company and its affiliates, including serving as the Vice
President, Corporate Development from February 2003 to October 2004 for First Asset Management Inc., a
Toronto based asset management company. Prior thereto, he was Executive Vice President of Pet Valu
International Inc., a retail chain.

Additional information about our directors and executive officers appears under the captions ‘‘Election of

Directors’’ and ‘‘Executive Compensation’’ in our Proxy Statement.

Code of Conduct

The Company has adopted a Code of Conduct, which applies to all directors, officers (including the
Company’s Chief Executive Officer and Chief Financial Officer) and employees of the Company and its
subsidiaries. The Company’s policy is to not permit any waiver of the Code of Conduct for any director or
executive officer, except in extremely limited circumstances. Any waiver of this Code of Conduct for directors
or officers of the Company must be approved by the Company’s Board of Directors. Amendments to and
waivers of the Code of Conduct will be publicly disclosed as required by applicable laws, rules and
regulations. The Code of Conduct is available free of charge on the Company’s website at
http://www.mdc-partners.com, or by writing to MDC Partners Inc., 950 Third Avenue, New York, NY, 10022,
Attention: Investor Relations.

Item 11. Executive Compensation

Reference is made to the sections captioned ‘‘Compensation of Directors’’ and ‘‘Executive

Compensation’’ in our next Proxy Statement, which are incorporated herein by reference.

Item 12. Security Ownership of Certain Beneﬁcial Owners and Management and Related Stockholder
Matters

Reference is made to Part II — Item 5 of this Form 10-K and to the sections captioned ‘‘Section 16 (a)

Beneﬁcial Ownership Reporting Compliance’’ in the Company’s next Proxy Statement, which are incorporated
herein by reference.

Item 13. Certain Relationships and Related Transactions

Reference is made to the section captioned ‘‘Certain Relationships and Related Transactions’’ in our next

Proxy Statement, which is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

Reference is made to the section captioned ‘‘Appointment of Auditors’’ in our next Proxy Statement,

which is incorporated herein by reference.

95

Item 15. Exhibits and Financial Statements Schedules

PART IV

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
MDC Partners Inc.
New York, New York
Toronto, Canada

The audits referred to in our report dated March 14, 2011 relating to the consolidated ﬁnancial statements of
MDC Partners Inc. and subsidiaries, which is contained in Item 8 of this Form 10-K also included the audit of
the ﬁnancial statement Schedule II for years ended 2010, 2009 and 2008. This ﬁnancial statement schedule is
the responsibility of the Company’s management. Our responsibility is to express an opinion on the ﬁnancial
statement schedule based on our audits.

In our opinion such ﬁnancial statement Schedule II, when considered in relation to the basic consolidated
ﬁnancial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/s/ BDO USA, LLP

New York, New York

March 14, 2011

96

(a) Financial Statements and Schedules

The Financial Statements and schedules listed in the accompanying index to Consolidated Financial

Statements in Item 8 are ﬁled as part of this report. Schedules not included in the index have been omitted
because they are not applicable.

Schedule II — 1 of 2

MDC PARTNERS INC. & SUBSIDIARIES

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
For the Three Years Ended December 31, 2010
(Dollars in Thousands)

Column A

Column B

Column C

Column D

Balance at
Beginning of
Period

Charged to
Costs and
Expenses

Removal of
Uncollectable
Receivables

Column E
Translation
Adjustments
Increase
(Decrease)

Column F

Balance at the
End of Period

Description
Valuation accounts deducted
from assets to which they
apply – allowance for
doubtful accounts:

December 31, 2010 . . . . . . .
December 31, 2009 . . . . . . .
December 31, 2008 . . . . . . .

$2,034
$2,179
$1,357

$ 765
$ 946
$1,891

$ (824)
$(1,154)
$ (962)

$ 15
$ 63
$(107)

$1,990
$2,034
$2,179

Schedule II — 2 of 2

MDC PARTNERS INC. & SUBSIDIARIES

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
For the Three Years Ended December 31, 2010
(Dollars in Thousands)

Column A

Column B

Column C

Column D

Balance at
Beginning of
Period

Charged to
Costs and
Expenses

Other

Description
Valuation accounts deducted
from assets to which they
apply – valuation
allowance for deferred
income taxes:

Column E
Translation
Adjustments
Increase
(Decrease)

Column F

Balance at the
End of Period

December 31, 2010 . . . . . . .
December 31, 2009 . . . . . . .
December 31, 2008 . . . . . . .

$65,896
$59,781
$86,125

$(7,986)
$ 2,656
$(4,149)

$(3,908)(1)
$(2,705)(1)
$(8,250)(1)

$ 1,309
$ 6,164
$(13,945)

$55,311
$65,896
$59,781

(1) Adjustment to reconcile actual net operating loss carry forwards to prior year tax accrued, utilization of
net operating loss carry forwards, which were fully reserved and adjustment for net operating loss
relating to sale of business.

(b) Exhibits

The exhibits listed on the accompanying Exhibits Index are ﬁled as a part of this report.

97

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the

registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

Date: March 14, 2011

MDC PARTNERS INC.

By: /s/ Miles S. Nadal

Name: Miles S. Nadal
Title: Chairman, Chief Executive Officer and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below

by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Miles S. Nadal
Miles S. Nadal

/s/ Robert Kamerschen
Robert Kamerschen

/s/ Clare Copeland
Clare Copeland

/s/ Thomas N. Davidson
Thomas N. Davidson

/s/ Scott Kauffman
Scott Kauffman

/s/ Michael J. Kirby
Michael J. Kirby

/s/ Stephen M. Pustil
Stephen M. Pustil

/s/ David Doft
David Doft

/s/ Michael Sabatino
Michael Sabatino

Chairman, Chief Executive Officer and President

March 14, 2011

Presiding Director

Director

Director

Director

Director

Director, Vice Chairman

Chief Financial Officer

March 14, 2011

March 14, 2011

March 14, 2011

March 14, 2011

March 14, 2011

March 14, 2011

March 14, 2011

Senior Vice President and Chief Accounting Officer

March 14, 2011

98

Exhibit No.

EXHIBIT INDEX

Description

3.1

3.1.1

3.1.2

3.2

4.1

4.1.1

4.1.2

10.1

10.1.1

10.1.2

10.1.3

10.2

10.2.1

10.2.2

Articles of Amalgamation, dated January 1, 2004 (incorporated by reference to Exhibit 3.1 to the
Company’s Form 10-Q ﬁled on May 10, 2004);
Articles of Continuance, dated June 28, 2004 (incorporated by reference to Exhibit 3.3 to the
Company’s Form 10-Q ﬁled on August 4, 2004);
Articles of Amalgamation, dated July 1, 2010 (incorporated by reference to Exhibit 3.1 to the
Company’s Form 10-Q ﬁled on July 30, 2010);
General By-law No. 1, as amended on April 29, 2005 (incorporated by reference to Exhibit 3.2
to the Company’s Form 10-K ﬁled on March 16, 2007);
Indenture, dated as of October 23, 2009, by and between the Company, the Note Guarantors, and
The Bank of New York Mellon, as trustee, relating to the issuance of the Company’s 11% Senior
Notes due 2016 (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K ﬁled on
October 26, 2009);
First Supplemental Indenture, dated as of May 14, 2010, to the Indenture, dated as of
October 23, 2009, among the Company, the Note Guarantors and The Bank of New York
Mellon, as trustee, including the form of 11% Senior Notes due 2016 (incorporated by reference
to Exhibit 4.1 to the Company’s Form 8-K ﬁled on May 14, 2010);
Second Supplemental Indenture, dated as of October 23, 2010, to the Indenture, dated as of
October 23, 2009, among the Company, the Note Guarantors and The Bank of New York
Mellon, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Form 10-Q ﬁled
on October 29, 2010);
Purchase Agreement, dated October 20, 2009, by and among the Company and Goldman, Sachs
& Co., as representative of the initial purchasers, relating to the issuance of the Company’s 11%
Senior Notes due 2016 (incorporated by reference to Exhibit 1.1 to the Company’s Form 8-K
ﬁled on October 26, 2009);
Exchange and Registration Rights Agreement, dated as of October 23, 2009, by and among the
Company, and Goldman, Sachs & Co., as representative of the initial purchasers, relating to the
issuance of the Company’s 11% Senior Notes due 2016 (incorporated by reference to Exhibit
10.1 to the Company’s Form 8-K ﬁled on October 26, 2009);
Purchase Agreement, dated as of May 11, 2010, among the Company, the Note Guarantors and
Goldman, Sachs & Co., as representative of the initial purchasers named therein (incorporated by
reference to Exhibit 1.1 to the Company’s Form 8-K ﬁled on May 14, 2010);
Exchange and Registration Rights Agreement, dated as of May 14, 2010, among the Company,
the Note Guarantors and Goldman, Sachs & Co., as representative of the initial purchasers
named therein (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K ﬁled on
May 14, 2010);
Credit Agreement, dated as of October 23, 2009 by and among the Company, Maxxcom Inc., a
Delaware corporation, each of their subsidiaries party thereto, Wells Fargo Foothill, LLC, as
agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s
Form 8-K ﬁled on October 26, 2009);
First Amendment, dated March 19, 2010, to Credit Agreement, dated as of October 23, 2009 by
and among the Company, Maxxcom Inc., a Delaware corporation, each of their subsidiaries party
thereto, Wells Fargo Foothill, LLC (now Wells Fargo Capital Finance, LLC), as agent, and the
lenders party thereto (incorporated by reference to Exhibit 10.1.1 to the Company’s Form 10-Q
ﬁled on May 7, 2010);
Consent and Second Amendment, dated May 6, 2010, to Credit Agreement, dated as of
October 23, 2009 by and among the Company, Maxxcom Inc., a Delaware corporation, each of
their subsidiaries party thereto, Wells Fargo Foothill, LLC (now Wells Fargo Capital Finance,
LLC), as agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1.2 to the
Company’s Form 10-Q ﬁled on May 7, 2010);

99

Exhibit No.

10.2.3

10.2.4

10.3

10.3.1

10.3.2

10.3.3

10.4

10.4.1

10.5

10.6

10.7

10.7.1

10.8

10.9

10.10

10.11

10.11.1

10.12

Description

Third Amendment, dated November 22, 2010, to Credit Agreement, dated as of October 23, 2009
by and among the Company, Maxxcom Inc., a Delaware corporation, each of their subsidiaries
party thereto, Wells Fargo Capital Finance, LLC (formerly Wells Fargo Foothill, LLC), as agent,
and the lenders party thereto*;
Fourth Amendment, dated March 7, 2011, to Credit Agreement, dated as of October 23, 2009 by
and among the Company, Maxxcom Inc., a Delaware corporation, each of their subsidiaries party
thereto, Wells Fargo Capital Finance, LLC (formerly Wells Fargo Foothill, LLC), as agent, and
the lenders party thereto*;
Management Services Agreement relating to the employment of Miles Nadal as Chief Executive
Officer, dated April 27, 2007 (incorporated by reference to Exhibit 10.2 to the Company’s Form
10-Q ﬁled on May 8, 2007);
Letter Agreement between the Company and Miles Nadal dated April 11, 2005 (incorporated by
reference to Exhibit 10.6.1 to the Company’s Form 10-K ﬁled on April 18, 2005);
Letter Agreement between the Company and Miles Nadal dated April 1, 2008 (incorporated by
reference to Exhibit 10.3.2 to the Company’s Form 10-K ﬁled on March 9, 2009);
Amendment to Management Services Agreement relating to the employment of Miles Nadal as
Chief Executive Officer, dated July 30, 2010 (incorporated by reference to Exhibit 10.1 to the
Company’s Form 10-Q ﬁled on July 30, 2010);
Employment Agreement between the Company and Stephen M. Pustil, dated as of August 20,
2007 (incorporated by reference to Exhibit 10.1 to the Company’s 10-Q ﬁled on November 8,
2007);
Amendment No. 1 dated August 5, 2010, to the Employment Agreement made as of August 20,
2007, by and between MDC Partners Inc. and Stephen Pustil (incorporated by reference to
Exhibit 10.1 to the Company’s Form 10-Q ﬁled on October 29, 2010);
Employment Agreement between the Company and David Doft, dated as of July 19, 2007
(effective August 10, 2007) (incorporated by reference to Exhibit 10.7 to the Company’s Form
10-Q ﬁled on August 7, 2007);
Employment Agreement between the Company and Gavin Swartzman, dated as of September 5,
2007 (incorporated by reference to Exhibit 10.2 to the Company’s 10-Q ﬁled on November 8,
2007);
Employment Agreement between the Company and Robert Dickson, dated July 26, 2002
(incorporated by reference to Exhibit 10.5 to the Company’s Form 10-Q ﬁled on May 10, 2004);
Amendment to Employment Agreement between the Company and Robert Dickson, dated
November 20, 2007 (incorporated by reference to Exhibit 10.8.1 to the Company’s Form 10-K
ﬁled on March 10, 2008);
Amended and Restated Employment Agreement between the Company and Mitchell Gendel,
dated as of July 6, 2007 (incorporated by reference to Exhibit 10.5 to the Company’s Form 10-Q
ﬁled on August 7, 2007);
Amended and Restated Employment Agreement between the Company and Michael Sabatino,
dated as of July 6, 2007 (incorporated by reference to Exhibit 10.6 to the Company’s Form 10-Q
ﬁled on August 7, 2007);
Agreement of Separation and Release between the Company and Graham Rosenberg, dated
August 31, 2009 (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-K ﬁled
on November 2, 2009);
Amended and Restated Stock Appreciation Rights Plan, as adopted by the shareholders of the
Company at the 2009 Annual and Special Meeting of Shareholders on June 2, 2009 (incorporated
by reference to Exhibit 10.2 to the Company’s Form 8-K ﬁled on June 5, 2009);
Form of Stock Appreciation Rights Agreement (incorporated by reference to Exhibit 10.2 to the
Company’s 10-Q ﬁled on May 5, 2006);
Amended 2005 Stock Incentive Plan of the Company, as approved and adopted by the
shareholders of the Company at the 2009 Annual and Special Meeting of Shareholders on June 2,
2009 (incorporated by reference to Exhibit 10.1 to the Company’s 8-K ﬁled on June 5, 2009);

100

Exhibit No.

10.12.1

10.12.2

10.12.3

10.12.4

10.12.5

10.12.6

10.12.7

10.12.8

10.12.9
10.12.10
10.13

10.14

10.14.1

10.14.2

10.15.1

10.15.2

10.15.3

10.15.4

Description

Form of Stock Option Agreement (incorporated by reference to Exhibit 10.2 to the Company’s
Form 10-Q ﬁled on November 9, 2005);
Form of Financial Performance-Based Restricted Stock Grant Agreement (incorporated by
reference to Exhibit 10.1 to the Company’s Form 8-K ﬁled on March 2, 2006);
Form of Financial Performance-Based Restricted Stock Unit Grant Agreement (incorporated by
reference to Exhibit 10.2 to the Company’s Form 8-K ﬁled on March 2, 2006);
Form of Service-Based and Financial Performance-Based Restricted Stock Unit Agreement
(incorporated by reference to Exhibit 10.4 of the Company’s Form 10-Q ﬁled on November 8,
2007);
Form of Restricted Stock Grant Agreement (2010) (incorporated by reference to Exhibit 10.12.5
to the Company’s Form 10-K ﬁled on March 10, 2010);
Form of Restricted Stock Unit (RSU) Grant Agreement (2010) (incorporated by reference to
Exhibit 10.12.6 to the Company’s Form 10-K ﬁled on March 10, 2010);
Form of EVAR Grant Agreement (incorporated by reference to Exhibit 10.1 to the Company’s
Form 8-K ﬁled on January 27, 2011);
Form of EVAR Letter Agreement (incorporated by reference to Exhibit 10.2 to the Company’s
Form 8-K ﬁled on January 27, 2011);
Form of Restricted Stock Grant Agreement (2011)*;
Form of Restricted Stock Unit (RSU) Grant Agreement (2011)*;
2008 Key Partner Incentive Plan, as approved and adopted by the shareholders of the Company
at the 2008 Annual and Special Meeting of Shareholders on May 30, 2008 (incorporated by
reference to Exhibit 10.1 to the Company’s Form 10-Q ﬁled on July 31, 2008);
Membership Interest Purchase Agreement (17%) dated November 10, 2008, among the Company,
CPB Acquisition Inc., MDC Acquisition Inc., and Crispin Porter & Bogusky LLC (‘‘CPB’’),
Crispin & Porter Advertising Inc., and certain employees of CPB (incorporated by reference to
Exhibit 10.15 of the Company’s Form 10-K ﬁled on March 9, 2009);
Amendment No. 1, dated October 5, 2009, to Membership Interest Purchase Agreement dated
November 10, 2008 (incorporated by reference to Exhibit 10.14.1 to the Company’s Form 10-K
ﬁled on March 10, 2010);
Amendment No. 2, dated December 1, 2009, to Membership Interest Purchase Agreement dated
November 10, 2008 (incorporated by reference to Exhibit 10.14.2 to the Company’s Form 10-K
ﬁled on March 10, 2010);
Membership Interest Purchase Agreement by and among MDC Acquisition Inc., WWG, LLC, a
Florida limited liability company, Todd Graham, Kevin Berg, Vincent Parinello, Daniel K.
Gregory, Stephen Groth, and Sean M. O’Toole, dated as of March 1, 2010 (incorporated by
reference to Exhibit 10.2.1 to the Company’s Form 10-Q ﬁled on May 7, 2010);
Amended and Restated Limited Liability Company Agreement of The Arsenal LLC (f/k/a Team
Holdings LLC) by and among MDC Acquisition Inc., WWG, LLC, and WWG2, LLC, dated as
of March 1, 2010 (incorporated by reference to Exhibit 10.2.2 to the Company’s Form 10-Q ﬁled
on May 7, 2010);
Amendment No. 1, dated July 29, 2010, to the Membership Interest Purchase Agreement dated
as of March 1, 2010 by and among MDC Acquisition Inc., WWG, LLC, Todd Graham, Kevin
Berg, Vincent Parinello, Daniel K. Gregory, Stephen Groth and Sean M. O’Toole (incorporated
by reference to Exhibit 10.2.1 to the Company’s Form 10-Q ﬁled on July 30, 2010);
Amendment No. 1, dated July 29, 2010, to the Amended and Restated Limited Liability
Company Agreement of The Arsenal LLC (f/k/a Team Holdings LLC) dated as of March 1, 2010
by and among The Arsenal LLC, MDC Acquisition Inc., WWG, LLC and WWG2, LLC
(incorporated by reference to Exhibit 10.2.2 to the Company’s Form 10-Q ﬁled on July 30,
2010);

101

Exhibit No.

10.16.1

10.16.2

10.16.3

10.17.1

10.17.2

10.18.1

10.18.2

12
14

14.1

21
23
31.1

31.2

32.1

32.2

Description

Membership Unit Purchase Agreement by and among MF+P Acquisition Co., Integrated Media
Solutions, LLC, a New York limited liability company, Robert Ingram, Desiree Du Mont and
Ron Corvino, dated as of April 30, 2010 (incorporated by reference to Exhibit 10.3.1 to the
Company’s Form 10-Q ﬁled on May 7, 2010);
Amended and Restated Limited Liability Company Agreement of Integrated Media Solutions
Partners LLC by and among MF+P Acquisition Co. and Integrated Media Solutions, LLC, dated
as of April 30, 2010 (incorporated by reference to Exhibit 10.3.2 to the Company’s Form 10-Q
ﬁled on May 7, 2010);
Amendment No. 1, dated July 29, 2010, to the Membership Unit Purchase Agreement dated as of
April 30, 2010 by and among MF+P Acquisition Co., Integrated Media Solutions, LLC, Robert
Ingram, Desiree DuMont and Ron Corvino (incorporated by reference to Exhibit 10.3 to the
Company’s Form 10-Q ﬁled on July 30, 2010);
Limited Partnership Unit Purchase Agreement dated as of November 30, 2010, by and among
MDC Partners Inc., a Canadian corporation, Newport Partners Holdings LP, an Ontario limited
partnership, Cap C LP Holdco Inc., an Ontario corporation, 2265174 Ontario Limited, an Ontario
corporation, Glenn Chilton and Paul Quigley*;
Limited Partnership Unit Purchase Agreement dated as of November 30, 2010, by and among
MDC Partners Inc., a Canadian corporation, 2265174 Ontario Limited, Glenn Chilton and Paul
Quigley*;
Limited Partnership Unit Purchase Agreement dated as of November 30, 2010, by and among
MDC Partners Inc., a Canadian corporation, Newport Partners Holdings LP, an Ontario limited
partnership, Cap C LP Holdco Inc., an Ontario corporation, 2265178 Ontario Limited, an Ontario
corporation, Tony Chapman and Victoria Calverley*;
Limited Partnership Unit Purchase Agreement dated as of November 30, 2010, by and among
MDC Partners Inc., a Canadian corporation, 2265178 Ontario Limited, and Tony Chapman,
Victoria Calverley, Bennett Klein and Tom Clune*;
Statement of computation of ratio of earnings to ﬁxed charges*;
Code of Conduct of MDC Partners Inc. (incorporated by reference to Exhibit 14 to the
Company’s Form 10-K ﬁled on March 10, 2008);
MDC Partners’ Corporate Governance Guidelines, amended in May 2009 (incorporated by
reference to Exhibit 14.1 to the Company’s Form 10-K ﬁled on March 10, 2010);
Subsidiaries of Registrant*;
Consent of Independent Registered Public Accounting Firm BDO Seidman LLP*;
Certiﬁcation by Chief Executive Officer pursuant to Rules 13a 14(a) and 15d 14(a) under the
Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002*;
Certiﬁcation by Chief Financial Officer pursuant to Rules 13a 14(a) and 15d 14(a) under the
Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002*;
Certiﬁcation by Chief Executive Officer pursuant to 18 USC. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002*;
Certiﬁcation by Chief Financial Officer pursuant to 18 USC. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002*.

*

Filed electronically herewith.

102

MDC Partners Inc. – Directory 

Toronto Office 
45 Hazelton Avenue 
Toronto, Ontario  
M5R 2E3 
Tel: 416-960-9000 
www.mdc-partners.com 
Chairman & CEO 
Miles S. Nadal 

New York Office 
950 Third Avenue, 
5th Floor 
New York, New York 
10022 
Tel: 646-429-1800 
Chief Financial Officer: 
David B. Doft 

6 Degrees Integrated 
Communications 
1210 Sheppard Ave. East 
Suite 700 
Toronto, ON  M2K 1E3 
Tel: 416-446-7758 
www.6deg.ca 
President:  
Tom Green 

BOOM! Marketing 
a division of 6 Degrees 
Tel: 416-446-7758 
www.boommarketing.ca 
President:  
Nicole Gallucci 

72andSunny 
6300 Arizona Circle 
Los Angeles, CA 90045 
Tel: 310-215-9009 
www.72andsunny.com 
CEO: 
John Boiler 

Netherlands 
Westerhuís -1st Fl 
Westerstraat 187 
1015 MA Amsterdam 
Netherlands 
Tel: +31 (0)20 521 04 70 

ACCENT 
400 Missouri Avenue 
Suite 100 
Jeffersonville, Indiana 
47130 
Tel: 812-206-6200 
www.accentonline.com 
CEO: 
Tim Searcy 

Allison & Partners 
(Headquarters )  
505 Sansome St. 7th Floor 
San Francisco, CA 94111 
Tel: 415-217-7500 
www.allisonpr.com 
President & CEO: 
Scott Allison  

Santa Monica 
2001 Wilshire Blvd 
Suite 501 
Santa Monica, CA 90403 
Tel: 310-452-7540 
Contact: Dawn Wilcox 

New York 
116 E 27th Street,  
4th Fl 
New York, NY 10016 
Tel: 212.302.5460 
Contact: Anne Colaiacovo 

Washington D.C. 
1025 Connecticut Avenue, 
NW 
Suite 220 
Washington, DC 20036 
Tel: 202.223.9260 
Contacts: Brian Feldman & 
Sonia Taylor 

San Diego 
8880 Rio San Diego Drive, 
Suite 1090 
San Diego, CA 92108 
Tel: 619.533.7978 
Contact: Tim Wheatcroft 

Phoenix 
410 N 44th Street 
Suite 1100 
Phoenix, AZ 85008 
Tel: 480.966.0100 
Contact: Cathy Planchard 

Seattle 
84 Union Street 
Ste 208 
Seattle, WA 98101 
Tel: 206.414.8599 
Contact: Tom Biro 

Atlanta  
1708 Peachtree St 
Suite 100 
Atlanta, GA 30309 
Tel: 404-885-9596 
Contact: Brian Feldman 

Anomaly 
536 Broadway 
11th Floor 
New York, NY 10012 
Tel: 917-595-2200 
www.anomaly.com 
CEO: Carl Johnson 

London 
3-7 Herbal Hill 
London, EC1R 5EJ 
Tel: +44 207 843 0600 

Attention Partners  
160 Varick Street, 5th Floor 
New York, New York 10013 
Tel. 917-621-4400 
www.attentionusa.com 
Founder & CEO: 
Curtis Hougland 

Bruce Mau Design 
469C King Street West 
Toronto, Ontario  
M5V 3M4 
Tel: 416-306-6401 
www.brucemaudesign.com 
President & CEO: 
Hunter Tura 

Bryan Mills Iradesso 
1129 Leslie Street 
Toronto, Ontario  
M3C 2K5 
Tel: 416-447-4740 
www.bmir.com 
Chairman & CEO: 
Nancy Ladenheim 

Calgary 
Sun Life Plaza, North Tower 
Suite 2240, 140-4th Ave. SW 
Calgary, Alberta  
T2P 3N3 
Tel: 403-503-0144 
President: 
Peter Knapp 

Capital C 
340 King St. East, Suite 500 
Toronto, Ontario 
M5A 1K8  
Tel: 416-777-1124 
www.capitalc.ca 
President & CEO:  
Tony Chapman 

Colle + McVoy, Inc 
400 First Avenue N. 
Suite 700 
Minneapolis, Minnesota 
55401-1954 
Tel: 612-305-6000 
www.collemcvoy.com 
CEO: 
Christine Fruechte 

Exponent Public Relations 
400 First Avenue N. 
Suite 600 
Minneapolis, Minnesota 
55401-1954 
Tel: 612-305-6003 
www.exponentpr.com 
Managing Director: Tom Lindell 

Communefx Partners 
1253 Freedom Road 
Suite 500 
Cranberry Township 
Pennsylvania  16066 
Tel: 724-935-8655 
www.communefx.com 
CEO: 
Chris McDonald 

Phoenix 
1705 W Parkside Lane 
Phoenix, AZ  85027 
Tel: 602.308.6700 

Computer Composition of Canada 
Inc. 
12 Stanley Court 
Whitby, Ontario  
L1N 8P9 
Tel: 905-430-3400 
www.comptercomposition.ca 
President: 
Linda Rowe 

Crispin Porter + Bogusky 
CP+B Miami 
3390 Mary Street 
Office 300 
Coconut Grove, FL 33133 
Tel: 305-859-2070 
www.cpbgroup.com 
CEO:  
Andrew Keller 

CP+B Boulder 
6450 Gunpark Drive 
Boulder, CO 80301 
Tel: 303-628-5100 

CB+P Sweden  
Östra  Hamngatan 26-28 
SE-411 09 Gothenburg, 
Sweden  
Tel: 001 46 31 339 6060 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Northstar Research 
Partners Inc. 
18 King Street East 
Suite 1500 
Toronto, Ontario   
M5C 1C4 
Tel: 416-907-7100 
www.nsresearch.com 
Chairman: 
Steve Tile 

New York 
One Penn Plaza, Suite 1630 
New York, NY 10119 
Tel: 212-986-4077 
www.nsreasearch-usa.com 
President: 
Jim Neuwirth 

London 
Studio D 
22 Ebury Street 
London,  SW1W OLU 
England, U.K.  
Tel: 44.20.7824.9870 
Fax:  
Managing Director: 
Matthew Sell 

Los Angeles 
12437 Lewis Street 
Ste. 206 
Garden Grove, CA 92840 
Tel: 714.643.9430 

Boston 
183 State Street 
Ste 4A 
Boston, MA 02109 
Tel: 617.854.8995 

Onbrand 
469C King St. West 
Toronto, Ontario 
M5V 3M4 
Tel: 416-583-5710 
www.onbranddesign.com 
General Manager: 
Jeannette Williams 

CP+B Santa Monica 
515 Boccaccio Avenue 
Santa Monica 
CA 90291 
Tel: 310-822-3063 

CP+B London 
The Smokery, 2Greenhill Rents 
London 
EC1M 6BN 
Tel: 44.020.73248184 

CP+B Canada 
(Formerly Zig) 
296 Richmond St. West 
Suite 600 
Toronto, Ontario 
M5V 1X2 
Tel: 416-598-4944 
CEO: 
Shelley Brown 

Hello Design, LLC 
8684 Washington Blvd. 
Culver City, CA 90232 
Tel: 310-839-4885 
www.hellodesign.com 
CEO/Creative Director: 
David Lai 

henderson bas  
479 Wellington St. West 
Main Floor 
Toronto, ON  M5V 1E7 
Tel: 416-977-6660 
www.theniceagency.com 
President: 
Dawna Henderson 

HL Group Partners LLC 
853 Broadway Ave. 
18th Floor 
New York, NY 10003 
Tel: 212-529-5533 
www.hlgrp.com 
Founding Partners: 
Hamilton South 
Lynn Tesoro 

Los Angeles 
1800 N. Highland Ave 
Suite 100 
Los Angeles, CA 90028 
Tel: 323-966-4600 

hud:sun Media  
6565 Sunset Blvd,  
Suite 501 
Los Angeles, CA 90028 
Tel: 323-410-7410 
www.hudsunmedia.com 
CEO: 
Michael Rourke  

Integrated Media Solutions  
650 5th Avenue, 35th Floor  
New York, NY 10019 
Tel: 212-373-9500 
www.imediasolutions.com 
CEO: 
Bob Ingram  

Los Angeles 
 350 South Beverly Drive  
Suite 300  
Beverly Hills, CA  90212 
Tel: 310-407-5200 
President: 
Ron Corvino 

Kenna 
1000-90 Burnhamthorpe Road 
W. 
Mississauga, Ontario 
L5B 3C3 
Tel: 905-277-2900 
www.kenna.ca 
President & CEO: 
Glenn Chilton 

Winnipeg 
200-214 McDermot Ave 
Winnipeg, MB R3B OS3 
Tel: 204-982-3535 

kirshenbaum bond senecal 
+ partners LLC 
160 Varick Street 
New York, NY 10013 
www.kbsp.com  
Tel: 212-633-0080 
President & CEO: 
Lori Senecal 

company c 
160 Varick Street 
New York, NY 10013 
Tel: 212.633.0080 
www.companycmarketing.com 

Dotglu 
President:  
Steve Thibodeau 

LIME Public Relations & 
Promotions 
President:  
Claudia Strauss 

Kwittken & Co. 
360 Lexington Avenue 
15th Floor 
New York, NY 10017 
Tel: 646.277.7111 
www.kwitco.com 
President & Partner: 
Aaron Kwittken 

The Media Kitchen 
CEO:  
Barry Lowenthal 

Media Kitchen Atlanta / Trend 
Influence 
303 Peachtree Center Ave. 
Suite 625 
Atlanta, GA 30303 
Tel: 404-221-1188 
President: Jill Meiser   

Ramona 
160 Varick Street 
New York, NY 10013 
Tel: 212.633.0080 

kbs+p Canada Inc. (Toronto) 
(Formerly Allard Johnson) 
2 Bloor Street East 
26th Floor 
Toronto, Ontario 
M4W 3J4 
Tel: 416-260-7000 
Chairman: 
Terry Johnson 

kbs+p Canada Inc. (Montreal) 
555 Boul René-Lévesque West 
17th Floor 
Montreal, Quebec 
H2Z 1B1 
Tel: 514.875.7400 
President: 
Mario Daigle 

Varick Media Management 
160 Varick Street 
New York, NY 10013 
Tel: 212-337-4565 
www.varickmm.com 
President: Neeraj Kochhar 

Mono Advertising LLC 
3036 Hennepin Avenue 
Minneapolis, Minnesota 55408 
Tel: 612-454-4900 
www.mono-1.com 
Partner: 
James Scott 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Redscout 
28 West 25th Street, 10th Floor 
New York, NY 10010 
Tel: 646-336-6028 
www.redscout.com 
Founding Partner & CEO: 
Jonah Disend   

San Francisco 
99 Osgood Place,2nd Floor 
San Francisco, CA 94133 
Tel: 415-644-5278 

Relevent 
27 West 24th Street 
Suite 202 
New York, NY 10010 
Tel: 212-206-0600 
www.relevent.net 
CEO:  
Tony H. Berger 

SKINNY 
160 Varick Street 
New York, NY 10013 
Tel: 212-633-0800 
www.skinnynyc.com 
Founders & Managing 
Directors: 
Jonas Hallberg 
Liron Reznik 

Sloane & Company, LLC 
7 Times Square Tower 
17th Floor 
New York, New York 10036 
Tel:212-486-9500 
www.sloanepr.com 
CEO: 
Elliot Sloane 

Source Marketing, LLC 
761 Main Avenue 
Norwalk, Connecticut  06851 
Tel: 203-291-4000 
www.source-marketing.com 
CEO:  
Derek Correia 

Humongo 
155 Main Street 
4th Floor 
Danbury, CT, 06810 
Tel: 203.730.6300 
www.humongoagency.com 
President:  
Darryl Ohrt 

TargetCom, LLC 
444 North Michigan Avenue 
Suite 3300 
Chicago, IL 60611 
Tel: 312-822-1100 
www.targetcom.com 
President:  
Nora Ligurotis 

TEAM Enterprises 
110 E. Broward Blvd., 
Suite 2450 
Fort Lauderdale, Florida 33301 
Tel: 954-862-2400 
www.teament.com 
CEO: 
Dan Gregory 

Veritas Communications Inc. 
370 King Street West 
Suite 800, Box 46 
Toronto, ON  M5V 1J9 
Tel: 416-482-2248 
Toll Free:  
1-888-513-8733 
www.veritascanada.com 
President: 
Beverley Hammond 

Vitro 
625 Broadway, 4th Floor 
San Diego, CA  
 92101-5403 
Tel: 619-234-0408 
www.vitroagency.com 
President: 
Tom Sullivan 

Yamamoto Moss Mackenzie  
252 First Avenue North 
Minneapolis, MN 55401 
Tel: 612-375-0180 
www.ymm.com 
President: 
Shelly Regan 

Zyman Group, LLC 
303 Peachtree Center Ave 
Suite 625 
Atlanta, GA 30303 
Tel: 404-682-5400 
Chief Consulting Officer: 
Craig Binkley 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Board of Directors and Corporate Officers 

Chairman 

Directors 

Corporate Officers 

Miles S. Nadal 
Chairman, Chief Executive Officer, 
& President, 
MDC Partners Inc. 

Clare R. Copeland (1) (2) 
Corporate Director 
Chief Executive Officer, 
Falls Management Company 
Chairman, Toronto Hydro Corporation 
Chairman, Chief Executive Officer, 
OSF Inc. 
Chief Executive Officer,  
People’s Jewelers Corporation 

Thomas N. Davidson (1) (2) (3) 
Corporate Director 
Chairman, NuTech Precision Metals, Inc. 
Chairman, Quarry Hill Group 
Director, Occulogix Inc. (TearLab) 

Robert J. Kamerschen (2) (3) 
Presiding Director 
Chairman, Survey Sampling Inc. (Ret.) 
Chairman, Chief Executive Officer, 
ADVO, Inc. (Ret.) 

Scott L. Kauffman (2) (3) 
Corporate Director 
Chairman, Tune-Up Media 
Chairman, MetaChannels 
Chairman, Lotame, 
Chairman, Mintbox 
Director, LookSmart Ltd. 
Former President, Chief Executive Officer, GeekNet 

Hon. Michael J.L. Kirby (1) (2) (3) 
Corporate Director 
The Senate of Canada (Ret.) 
Director, Bank of Nova Scotia 
Director, Extendicare 
Director, Just Energy Income Fund Director, 
Indigo Books & Music Inc. 
Director, ImmunoVaccine Technologies, Inc. 

Stephen M. Pustil 
Vice Chairman 
President, Peerage Realty Partners 
Chairman, Artemis Investment Management Inc. 

Miles S. Nadal 
Chairman, Chief Executive Officer, 
and President 

Rob Dickson 
Managing Director 

David B. Doft 
Chief Financial Officer 

Mitchell Gendel 
General Counsel & 
Corporate Secretary 

Charles Porter 
Chief Strategist 

Michael Sabatino 
Senior Vice President & 
Chief Accounting Officer 

Gavin Swartzman 
Managing Director 

Barbara Creagh 
Executive Vice President, Talent  

Glenn Gibson 
Chief Financial Officer, 
Canadian Marketing Communications 

Donna Granato 
Senior Vice President, Corporate 
Development 

Robert Kantor 
Chief Marketing Officer 

Katie Kempner 
Senior Vice President, Corporate 
Communications 

Amie Miller 
Senior Vice President, Director of Talent 
Development 

David Porzio 
Chief of Staff 

David C. Ross 
Associate General Counsel 

(1) Audit Committee 

(2) Human Resources & Compensation Committee 
(3) Nominating and Corporate Governance Committee 

  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Transfer Agent 

Investor Relations 

Notice of Shareholders’ Meeting 

CIBC Mellon Trust Company 

CIBC Mellon operates a telephone 
information inquiry line available by dialing: 
(toll-free) 1-800-387-0825; or 416-643-5500. 

For Investor Relations information, please 
call David B. Doft, Chief Financial 
Officer, at: 646-429-1818. 

The annual meeting of shareholders will be 
held at The Core Club, 66 E. 55th Street, 
New York, N.Y. on Wednesday, June 1, 
2011 at 10:00 a.m. E.D.T. 

Correspondence may be addressed to: 
MDC Partners Inc. 
c/o CIBC Mellon Trust Company 
Corporate Trust Services 
P.O. Box 7010 
Adelaide Street Postal Station 
Toronto M5G 2M7 
Ontario, Canada 

Stock Exchange Listing 

The Class A shares of the Company are 
listed in Canada on The Toronto Stock 
Exchange under trading symbol “MDZ.A”, 
and in the U.S. on the NASDAQ National 
Market under trading symbol “MDCA”.