424B3 1 tm214718-15_424b3.htm 424B3 tm214718-15_424b3 - none - 113.8911385s
 Filed Pursuant to Rule 424(b)(3)
 Registration No. 333-252829
May 10, 2021
Dear Shareholder:
The board of directors (the “MDC Board”) of MDC Partners Inc. (“MDC” or “MDC Canada”) cordially invites you to attend a special meeting (the “Meeting”) of its shareholders (the “MDC Canada Shareholders”) to be held virtually at 12:00 p.m. ET on June 22, 2021, or at any adjournment or postponement thereof.
As previously announced, on December 21, 2020, following the unanimous recommendation of a special committee of independent members of the MDC Board (the “MDC Special Committee”) and the subsequent approval by the MDC Board (other than Mark Penn, Charlene Barshefsky and Bradley Gross (collectively, the “Interested Directors”), who abstained from voting on, or participating in any deliberations with respect to, the Proposed Transactions), MDC Canada and Stagwell Media LP (“Stagwell”) entered into a transaction agreement (the “Transaction Agreement”), providing for, among other things, the redomiciliation (the “Redomiciliation”) of MDC Canada from the federal jurisdiction of Canada to the State of Delaware (from and after the Redomiciliation, “MDC Delaware”) and the subsequent combination (the “Business Combination”) of MDC’s business with the business of the subsidiaries of Stagwell that own and operate a portfolio of marketing services companies (the “Stagwell Subject Entities”). The Redomiciliation, the Business Combination, and a series of related transactions are referred to herein as the “Proposed Transactions”, and following the Business Combination, the combined company shall be referred to herein as the “Combined Company”.
On a pro forma basis (and (i) without giving effect to any conversion of MDC’s outstanding preference shares and (ii) including unvested restricted stock and restricted stock units of MDC), following completion of the Proposed Transactions, it is anticipated that the existing holders of class A subordinate voting shares of MDC Canada (the “MDC Canada Class A Common Shares”) and class B multiple voting shares of MDC Canada (the “MDC Canada Class B Common Shares”, and together with the MDC Canada Class A Common Shares, the “MDC Canada Common Shares”) (including Stagwell) will own approximately 26% of the common equity of the Combined Company, and Stagwell would be issued an amount of shares of Class C common stock of the Combined Company equivalent to approximately 74% of the voting rights of the Combined Company (with the percentage of the equity interests in the Combined Company owned by Stagwell being adjusted downwards if certain restructuring transactions are not completed prior to the consummation of the Proposed Transactions) and exchangeable, together with the Stagwell OpCo Units (as defined below), for shares of Class A common stock of the Combined Company on a one-for-one basis at Stagwell’s election following a six-month holding period, in each case subject to certain adjustments described in the accompanying proxy statement/prospectus.
The Combined Company will be poised to deliver meaningful shareholder value creation, accelerated growth and enhanced services to clients. In contrast to MDC Canada continuing as a standalone company, the highly compelling combination creates a leading marketing services company, with enhanced global scale and broadened capabilities:

Enhanced Shareholder Value. The Combined Company will accelerate growth and enhance shareholder value. The Combined Company will offer a comprehensive suite of complementary marketing and communications services to clients, significantly expanding in the areas of high-growth digital services and expertise as well as substantial new capabilities across several disciplines and geographies, as compared to MDC as a standalone entity.

Estimated Cost Synergies. Due to certain synergies described in the accompanying proxy statement/prospectus under “The Proposed Transactions — Estimated Cost Synergies,” the Combined Company is expected to achieve certain cost synergies and incur run-rate savings of approximately $30 million over time, with approximately 90% of such savings expected to be realized within twenty-four months following the consummation of the Proposed Transactions.

Lower Pro Forma Leverage. The Combined Company will have an improved credit profile, decreasing its consolidated net leverage ratio from 4.4x to 3.5x, after giving full effect to the expected run-rate operational synergies.

Enhanced Scale. The Combined Company will be a top ten global integrated marketing services company. The Combined Company will have an expanded global scale, operating in 23 countries, and expanded media and data operations, managing $4.4 billion in media spend.

Enhanced Growth Opportunities. The Combined Company will have a target of 5%+ annual organic growth, driven by 10 – 15% digital marketing growth and complementary capabilities, and a target of 9%+ total annual revenue growth including new products and acquisitions. The Combined Company will more than triple its concentration of high-growth digital offerings, with 32% of its business anticipated to be in the digital services sector. It is anticipated that the Combined Company will generate over $200 million of pro forma cash in 2021. The Combined Company will target growth

to $3 billion+ in revenue in 2025, including acquisitions, organic growth and new products. In addition, the Combined Company will seek to develop new revenue streams by expanding its combined digital and technology products portfolios.
The Transaction Agreement also includes several minority protection rights and corporate governance protections, including:

Three Continuing Independent Directors. Three individuals who currently serve as independent directors of MDC (the “Continuing Independent Directors”) will serve as directors on the board of directors of the Combined Company (the “Combined Company Board”) and the Combined Company has agreed to cause such directors to be nominated at the Combined Company’s next two annual meetings following completion of the Proposed Transactions. Mr. Penn will continue as a director and Stagwell has the right, pursuant to the Transaction Agreement, to nominate four directors (and Stagwell has informed MDC that it expects to nominate at least two independent directors) and an affiliate of Goldman Sachs & Co. LLC will have the right to nominate one director to serve on the Combined Company Board.

Continuing Independent Directors will Comprise Audit Committee. The Combined Company’s audit committee will be comprised exclusively of the Continuing Independent Directors.

Restrictions on Related Party Transactions. During the period following the Proposed Transactions for so long as (i) Stagwell beneficially owns more than 10% of the then-issued and outstanding voting securities of the Combined Company, (ii) Stagwell has nominated directors constituting a majority of the Combined Company Board, or (iii) Stagwell has the contractual right to appoint a majority of the Combined Company Board (the “Restricted Period”), the Transaction Agreement generally will prohibit the Combined Company from entering into certain related party transactions without the approval of a majority of the independent directors serving on the Combined Company Board.

“Majority of the Minority” Voting Rights. During the Restricted Period, the Transaction Agreement will further generally prohibit the Combined Company from entering into any proposed business combinations involving Stagwell or its affiliates without (A) the approval of the Combined Company stockholders representing a “majority of the minority” of the voting power of the Combined Company and (B) the creation of a special committee of independent directors with authority similar to that of the MDC Special Committee.
At the Meeting, you will be asked to consider and approve six proposals (the “Proposals”):

Proposal 1: the approval of the Redomiciliation (the “Redomiciliation Proposal”);

Proposal 2: the approval of each of the Proposed Transactions, other than the Redomiciliation (the “Business Combination Proposal”), including the following:
The MDC Reorganization.   Following the Redomiciliation, MDC Delaware will merge with one of its indirect wholly-owned subsidiaries (the “MDC Merger”), with MDC Delaware (from and after the MDC Merger, “OpCo”) surviving as a direct subsidiary of a newly-formed, NASDAQ-listed Delaware Corporation (“New MDC”). Following the MDC Merger, OpCo will convert into a limited liability company (together with the MDC Merger, the “MDC Reorganization”) that will hold MDC’s operating assets.
The Contributions.   At the closing of the Proposed Transactions, Stagwell will contribute (i) the issued and outstanding equity interest of Stagwell Marketing Group Holdings LLC, the direct or indirect owner of the Stagwell Subject Entities other than SMGH, to OpCo in exchange for 216,250,000 common membership interests of OpCo (the “Stagwell OpCo Units”), and (ii) an aggregate amount of cash equal to $100 in to New MDC in exchange for 216,250,000 shares of a new Class C series of voting-only common stock of New MDC (the “Stagwell Issuance”).

Proposal 3: the granting of the proxy in relation to the common shares of MDC Delaware (the “MDC Delaware Common Shares”) and Series 6 convertible preference shares of MDC Delaware (the “MDC Delaware Series 6 Shares”) to be held by such MDC Canada Shareholder immediately following the consummation of the Redomiciliation, as applicable to each of MDC and The Stagwell Group LLC (each in such capacity, a “Proxyholder”) whereby each Proxyholder, acting singly, with respect to and on behalf of the holders of MDC Delaware Common Shares and the MDC Delaware Series 6 Shares that voted in favor of this proposal, may vote in favor of, or consent to, the approval and adoption of the Transaction Agreement and the Proposed Transactions, including the MDC Reorganization (collectively, the “MDC Delaware Consent”), which MDC Delaware Proxy (A) shall survive until the earlier of (1) the termination of the Transaction Agreement in accordance with its terms and (2) the effectiveness of the MDC Delaware Consent and (B) with respect to MDC, shall be granted conditional on MDC, in its capacity as Proxyholder, irrevocably committing to vote such MDC Delaware Common Shares and MDC Delaware Series 6 Shares to approve and adopt the Transaction Agreement and the Proposed Transactions, including the MDC Reorganization (the “MDC Delaware Proxy Proposal”);

Proposal 4: in accordance with NASDAQ Listing Rule 5635, the approval of the issuance of the MDC Delaware Series 6 Shares, as described in Proposal 3 (the “Series 6 Supervoting Proposal”);

Proposal 5: in accordance with NASDAQ Listing Rule 5635, the Stagwell Issuance, as described in Proposal 2 (the “Stagwell Issuance Proposal”); and


Proposal 6: the non-binding advisory approval of the compensation that may be paid or become payable to MDC’s named executive officers in connection with the Proposed Transactions (the “Compensation Proposal”).
The Redomiciliation Proposal and the Business Combination Proposal are subject to approval by both (i) at least two-thirds of the total votes cast on such Proposals, and (ii) at least a “majority of the minority” of the votes cast on such Proposals, voting together as a single class (i.e., a majority, excluding the votes of interested shareholders required to be excluded by applicable securities laws), and the consummation of each of the Proposals other than the Compensation Proposal (all such Proposals, collectively, the “Transaction Proposals”) is conditioned on the approval by the requisite MDC Canada Shareholder threshold of the other Transaction Proposals, such that MDC will only effect the Proposed Transactions if the MDC Canada Shareholders approve each of the Transaction Proposals by the required threshold.
Acting upon the unanimous recommendation of the MDC Special Committee, the MDC Board (with the Interested Directors abstaining) unanimously recommends that the MDC Canada Shareholders vote “FOR” each of the Transaction Proposals. Additionally, the MDC Board (with the Interested Directors abstaining) unanimously recommends the MDC Canada Shareholders vote “FOR” the Compensation Proposal.
You are encouraged to read the accompanying document carefully. In particular, you should read the “Risk Factors” section beginning on page 51 of the accompanying proxy statement/prospectus for a discussion of the risks you should consider in evaluating the Proposed Transactions and how they will affect you.
Your vote is very important regardless of the number of MDC Canada Common Shares or preference shares of MDC Canada (collectively, the “MDC Canada Shares”) that you own.   Whether or not you expect to attend virtually, you should authorize a proxyholder to vote your MDC Canada Shares as promptly as possible so that your MDC Canada Shares may be represented and voted at the Meeting. Enclosed with this letter is the Notice of Special Meeting and Proxy Statement/Prospectus and a form of proxy or voting instruction form.
Due to the continuing public health impact of the novel coronavirus pandemic (COVID-19) and to support the health and well-being of our employees and shareholders, MDC Canada has decided that the Meeting will be held solely by means of remote communication as a virtual meeting. A virtual Meeting enables registered holders of MDC Canada Common Shares and duly appointed proxyholders to listen to the Meeting, ask questions and receive answers online, and vote online at https://web.lumiagm.com/401933402 by clicking “I have a control number” and then entering your unique 13-digit control number located on your form of proxy and the password “mdc2021” ​(case-sensitive). Registered holders of MDC Canada Common Shares and duly appointed proxyholders will have the ability to submit questions during the Meeting via the Meeting website. The vast majority of our shareholders vote in advance of the annual meeting by proxy using the various available voting channels, and these voting channels will continue to be available. We encourage shareholders to continue to vote in advance of the annual meeting by proxy.
Please submit your vote online, by phone, mail or fax by 12:00 p.m. ET on June 18, 2021, to ensure your representation at the Meeting.
If you require assistance with voting your MDC Canada Shares, please contact MDC Canada’s strategic shareholder advisor and proxy solicitation agent, Kingsdale Advisors, as follows:
130 King Street West, Suite 2950, P.O. Box 361
Toronto, Ontario M5X 1E2
Call Toll-Free (within North America):
1-877-659-1821
Call Collect (outside North America):
1-416-867-2272
E-Mail:
contactus@kingsdaleadvisors.com

On behalf of MDC Canada, I would like to thank you for your continuing support.
Sincerely,
Irwin D. Simon
Irwin D. Simon
Lead Independent Director (Presiding Director) of MDC Partners Inc.

 
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that a special meeting (the “Meeting”) of MDC Partners Inc. (“MDC Canada”) of (i) the holders (the “MDC Canada Common Shareholders”) of Class A subordinate voting shares of MDC Canada (the “MDC Canada Class A Common Shares”) and Class B multiple voting shares of MDC Canada (the “MDC Canada Class B Common Shares” and, together with the MDC Canada Class A Common Shares, the “MDC Canada Common Shares”) and (ii) the holders (the “MDC Canada Preferred Shareholders”, and together with the MDC Canada Common Shareholders, the “MDC Canada Shareholders”) of MDC Canada Series 4 convertible preference shares (the “MDC Canada Series 4 Shares”) and MDC Canada Series 6 convertible preference shares (the “MDC Canada Series 6 Shares” and, together with the MDC Canada Series 4 Shares, the “MDC Canada Preferred Shares” and the MDC Canada Common Shares together with the MDC Canada Preferred Shares, the “MDC Canada Shares”) will be held virtually at 12:00 p.m. ET on June 22, 2021, or at any adjournment or postponement thereof, for the purpose of:
(a)
considering and approving the following six proposals (the “Proposals”) relating to a series of steps and transactions contemplated by the transaction agreement, dated as of December 21, 2020, by and among MDC Canada, Stagwell Media LP (“Stagwell”) and certain subsidiaries of MDC Canada (the “Transaction Agreement”):
i.
Proposal 1:   the approval of the redomiciliation (the “Redomiciliation”) of MDC Canada from the federal jurisdiction of Canada to the State of Delaware (from and after the Redomiciliation, “MDC Delaware”) (the “Redomiciliation Proposal”),
ii.
Proposal 2:   the approval of each of the Proposed Transactions (as defined below), other than the Redomiciliation (the “Business Combination Proposal”), including the following:
i.
The MDC Reorganization.   Following the Redomiciliation, MDC Delaware will merge with one of its indirect wholly-owned subsidiaries (the “MDC Merger”), with MDC Delaware (from and after the MDC Merger, “OpCo”) surviving as a direct subsidiary of a newly-formed, NASDAQ-listed Delaware corporation (“New MDC”). Following the MDC Merger, OpCo will convert into a limited liability company (together with the MDC Merger, the “MDC Reorganization”) that will hold MDC’s operating assets.
ii.
The Contributions.   At the closing of the Proposed Transactions, Stagwell will contribute (i) the issued and outstanding equity interest of Stagwell Marketing Group Holdings LLC (“SMGH”), the direct or indirect owner of the subsidiaries of Stagwell that own and operate a portfolio of marketing services companies (together with SMGH, the “Stagwell Subject Entities”), to OpCo in exchange for 216,250,000 common membership interests of OpCo (the “Stagwell OpCo Units”), and (ii) an aggregate amount of cash equal to $100 in to New MDC in exchange for 216,250,000 shares of a new Class C series of voting-only common stock of New MDC (the “Stagwell Issuance”) (the “Business Combination);
iii.
Proposal 3:   the granting of a proxy in relation to the common shares of MDC Delaware (the “MDC Delaware Common Shares”) and Series 6 convertible preference shares of MDC Delaware (the “MDC Delaware Series 6 Shares”) to be held by such MDC Canada Shareholder immediately following the consummation of the Redomiciliation, as applicable to each of MDC and The Stagwell Group LLC (each in such capacity, a “Proxyholder”) whereby each Proxyholder, acting singly, with respect to and on behalf of the holders of MDC Delaware Common Shares and the MDC Delaware Series 6 Shares that voted in favor of this proposal, may vote in favor of, or consent to, the approval and adoption of the Transaction Agreement and the Proposed Transactions, including the MDC Reorganization (collectively, the “MDC Delaware Consent”), which MDC Delaware Proxy (A) shall survive until the earlier of (1) the termination of the Transaction Agreement in accordance with its terms and (2) the effectiveness of the MDC Delaware Consent and (B) with respect to MDC, shall be granted conditional on MDC, in its capacity as Proxyholder, irrevocably committing to vote such MDC Delaware Common Shares and MDC Delaware Series 6 Shares to approve and adopt the Transaction Agreement and the Proposed Transactions, including the MDC Reorganization (the “MDC Delaware Proxy Proposal”);
 

 
iv.
Proposal 4:   in accordance with NASDAQ Listing Rule 5635, the approval of the issuance of the MDC Delaware Series 6 Shares, as described in Proposal 3 (the “Series 6 Supervoting Proposal”);
v.
Proposal 5:   in accordance with NASDAQ Listing Rule 5635, the Stagwell Issuance, as described in Proposal 2 (the “Stagwell Issuance Proposal”); and
vi.
Proposal 6:   the non-binding advisory approval of the compensation that may be paid or become payable to MDC’s named executive officers in connection with the Proposed Transactions (the “Compensation Proposal”).
The Redomiciliation, the Business Combination, and a series of related transactions are referred to herein as the “Proposed Transactions,” and the combined company shall be referred to herein as the “Combined Company”. The Redomiciliation Proposal, the MDC Delaware Proxy Proposal, the Business Combination Proposal, the Series 6 Supervoting Proposal, and the Stagwell Issuance Proposal are collectively referred to herein as the “Transaction Proposals.” The consummation of each Transaction Proposal is -conditioned on the approval by the requisite MDC Canada Shareholder threshold of the other Transaction Proposals, such that MDC Canada will only effect a particular Transaction Proposal if the MDC Canada Shareholders approve all of the other Transaction Proposals. For the avoidance of doubt, the Transaction Proposals are not conditioned on approval of the Compensation Proposal.
This notice of special meeting of MDC Canada Shareholders (the “Notice of Special Meeting”) and the accompanying proxy statement/prospectus (the “Proxy Statement/Prospectus”) are available on MDC Canada’s website at www.mdc-partners.com, on SEDAR at www.sedar.com and on the SEC’s website at www.sec.gov.
The special resolutions approving the Redomiciliation and the Business Combination must each be approved by the affirmative vote of (i) at least two-thirds of the votes cast on the Redomiciliation Proposal and the Business Combination Proposal, respectively, virtually or by proxy by the MDC Canada Shareholders, voting together as a single class, and (ii) at least a majority of the votes cast on the Redomiciliation Proposal and the Business Combination Proposal, respectively, virtually or by proxy by the MDC Canada Shareholders, excluding the votes attached to MDC Canada Shares held by persons described in items (a) through (d) of Section 8.1(2) of Multilateral Instrument 61-101, Protection of Minority Security Holders in Special Transactions, with each class of MDC Canada Shares voting together as a single class. The affirmative vote of MDC Canada Shareholders who will own a majority of the voting power of the outstanding shares of MDC Delaware Common Shares and MDC Delaware Series 6 Shares, voting together as a single class, following the Redomiciliation is required to approve the MDC Delaware Proxy Proposal. The affirmative vote of a majority of the votes cast on the Series 6 Supervoting Proposal, the Stagwell Issuance Proposal and the Compensation Proposal by the holders of MDC Canada Common Shares, voting together as a single class, is required to approve the Series 6 Supervoting Proposal, the Stagwell Issuance Proposal and the Compensation Proposal, respectively.
The board of directors of MDC Canada (the “MDC Board”) unanimously (other than Mark Penn, Charlene Barshefsky and Bradley Gross, who abstained from voting on or participating in any deliberations with respect to the Proposed Transactions) recommends that MDC Canada Shareholders vote FOR each of the Transaction Proposals and the Compensation Proposal.
The MDC Board has fixed the close of business on May 10, 2021 as the record date for determining MDC Canada Shareholders who are entitled to attend and vote at the Meeting (the “Record Date”). Only MDC Canada Shareholders whose names have been entered in the applicable registers of MDC Canada Shareholders, as of the close of business on the Record Date are entitled to receive notice of and vote at the Meeting.
MDC Canada Shareholders are encouraged to complete, sign and return the enclosed form of proxy. To be valid, proxies must be received by the MDC Canada’s transfer agent, AST Trust Company (Canada), Attn: Proxy Department, P.O. Box 721, Agincourt, Ontario M1S 0A1, by fax 1-866-781-3111 (toll-free North America) or 416-368-2502, by e-mail at proxyvote@astfinancial.com, by internet voting at www.astvotemyproxy.com, or by telephone voting at 1-888-489-5760 no later than 12:00 p.m. ET on June 18, 2021 or, if the Meeting is adjourned or postponed, by no later than 48 hours (excluding Saturday, Sunday
 

 
and statutory holidays in Canada and the U.S.) before the time of the adjourned or postponed Meeting. Notwithstanding the foregoing, the Chairman of the Meeting has the discretion to accept proxies received after such deadline and the time limit for deposit of proxies may be waived or extended by the Chairman of the Meeting at his or her discretion, without notice.
If you are a beneficial (non-registered) holder of MDC Canada Shares and receive these materials through a broker, bank, trust company or other intermediary or nominee, you must provide your voting instructions or complete, sign and return the voting instruction form in accordance with the instructions provided by your broker, bank, trust company or other intermediary or nominee.
MDC Canada Shareholders who are planning to return the form of proxy or voting instruction form are encouraged to review the Proxy Statement/Prospectus carefully before submitting such form.
Due to the continuing public health impact of the novel coronavirus pandemic (COVID-19) and to support the health and well-being of our employees and shareholders, MDC Canada has decided that the Meeting will be held solely by means of remote communication as a virtual meeting. A virtual Meeting enables registered MDC Canada Common Shareholders and duly appointed proxyholders to join us online, listen to the Meeting, ask questions online, and vote online at https://web.lumiagm.com/401933402 by clicking “I have a control number” and then entering your unique 13-digit control number located on your form of proxy and the password “mdc2021” ​(case-sensitive). MDC Canada Common Shareholders and duly appointed proxyholders will have the ability to submit questions during the Meeting via the Meeting website.
Registered MDC Canada Shareholders who wish to dissent must strictly comply with the dissent procedures prescribed by the Canada Business Corporations Act (the “CBCA”). An MDC Canada Shareholder’s right to dissent is more particularly described in the Proxy Statement/Prospectus under the heading “Dissenters’ and Appraisal Rights — Dissenters’ Rights”. A copy of the text of Section 190 of the CBCA is set forth in Annex O to the Proxy Statement/Prospectus. It is strongly suggested that any MDC Canada Shareholder wishing to dissent seek independent legal advice, as the failure to strictly comply with the requirements set forth in Section 190(1) of the CBCA, may result in the loss of any right of dissent.
Persons who are beneficial owners of MDC Canada Shares registered in the name of a broker, bank, trust company or other intermediary or nominee who wish to dissent should be aware that only registered MDC Canada Shareholders are entitled to dissent. Accordingly, a beneficial owner of MDC Canada Shares desiring to exercise this right must make arrangements for the MDC Canada Shares beneficially owned by such MDC Canada Shareholder to be registered in the MDC Canada Shareholder’s name prior to the time the dissent notice is required to be received by MDC Canada, or, alternatively, make arrangements for the registered holder of such MDC Canada Shares to dissent on the MDC Canada Shareholder’s behalf. MDC Canada Shareholders that vote in favor of the Transaction Proposals will not be entitled to dissent rights but the failure of an MDC Canada Shareholder to vote against the Transaction Proposals will not constitute a waiver of such MDC Canada Shareholder’s dissent rights and a vote against the Transaction Proposals will not be deemed to satisfy notice requirements under the CBCA with respect to dissent rights.
If you have any questions about the information contained in this Notice of Special Meeting and the accompanying Proxy Statement/Prospectus or require assistance in voting your MDC Canada Shares, please contact MDC Canada’s strategic shareholder advisor and proxy solicitation agent, Kingsdale Advisors, as follows:
 

 
130 King Street West, Suite 2950, P.O. Box 361
Toronto, Ontario M5X 1E2
Call Toll-Free (within North America):
1-877-659-1821
Call Collect (outside North America):
1-416-867-2272
E-Mail:
contactus@kingsdaleadvisors.com
DATED at May 10, 2021
On behalf of MDC Canada, I would like to thank you for your continuing support.
Sincerely,
Irwin D. Simon
Irwin D. Simon
Lead Independent Director (Presiding Director) of MDC Partners Inc.
 

 
ADDITIONAL INFORMATION
The Company files annual, quarterly and current reports, proxy statements and other business and financial information with the U.S. Securities and Exchange Commission (the “SEC”) on the SEC’s Electronic Document Gathering and Retrieval System and with the applicable members of the Canadian Securities Administrators on the System for Electronic Document Analysis and Retrieval (“SEDAR”). Financial information about the Company is provided in its annual consolidated financial statements as of December 31, 2020 and 2019 and for the three years ended December 31, 2020 and accompanying management’s discussion and analysis (“MD&A”) for the year ended December 31, 2020. The Company files reports and other business and financial information with the SEC electronically, and the SEC maintains a website located at www.sec.gov containing this information. Such information is also available under the Company’s profile on SEDAR at www.sedar.com. You can also obtain these documents, free of charge, from the Company at www.mdc-partners.com/investors. The information contained on, or that may be accessed through, the Company’s website is not incorporated by reference into, and is not a part of, the Proxy Statement/Prospectus.
In addition to the information set forth in the Proxy Statement/Prospectus, SEC rules and Canadian securities laws allow MDC to “incorporate by reference” information into the Proxy Statement/Prospectus, which means that MDC can disclose important information to you by referring you to another document filed separately with the SEC and the Canadian Securities Administrators. You may read and copy the documents incorporated by reference at the websites mentioned above. Statements contained in the Proxy Statement/Prospectus as to the contents of any contract or other documents referred to in the Proxy Statement/Prospectus are not necessarily complete. In each case, you should refer to the copy of the applicable agreement or other document incorporated herein by reference or attached hereto as an exhibit.
This Proxy Statement/Prospectus incorporates important business and financial information about the Company from documents that are not attached to this Proxy Statement/Prospectus. This information is available to you without charge upon your request. You can obtain the documents incorporated by reference into this Proxy Statement, including copies of financial statements and MD&A, free of charge by requesting them in writing or by telephone from the Company or from its strategic shareholder advisor and proxy solicitation agent at the following addresses and telephone numbers:
130 King Street West, Suite 2950, P.O. Box 361
Toronto, Ontario M5X 1E2
Call Toll-Free (within North America):
1-877-659-1821
Call Collect (outside North America):
1-416-867-2272
E-Mail:
contactus@kingsdaleadvisors.com
For a more detailed description of the information incorporated by reference into the Proxy Statement/Prospectus and how you may obtain it, see “Where You Can Find More Information”.
 
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INFORMATION CONTAINED IN PROXY STATEMENT/PROSPECTUS
This Proxy Statement/Prospectus, which forms part of a registration statement on Form S-4 filed with the SEC, constitutes a prospectus under the U.S. Securities Act with respect to the shares of the Company. This Proxy Statement/Prospectus also constitutes a notice of meeting with respect to the Meeting.
You should rely only on the information contained in, or incorporated by reference into, this Proxy Statement/Prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this Proxy Statement/Prospectus. This Proxy Statement/Prospectus is dated May 10, 2021, and you should assume that the information contained in this Proxy Statement/Prospectus is accurate only as of such date. You should also assume that the information incorporated by reference into this Proxy Statement/Prospectus is only accurate as of the date of such information.
This Proxy Statement/Prospectus does not constitute an offer to sell, buy or exchange or a solicitation of an offer to sell, buy or exchange any securities, or the solicitation of any vote, proxy or approval, by any person in any jurisdiction in which such an offer or solicitation is not authorized or in which the person making such an offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such an offer or solicitation.
Management is soliciting proxies of all MDC Canada Shareholders primarily by mail and electronic means, supplemented by telephone or other contact by employees of the Company (who will receive no additional compensation), and all such costs will be borne by the Company. The Company has also retained (i) Kingsdale Advisors as its strategic shareholder advisor and proxy solicitation agent (“Kingsdale”) to assist in the solicitation of proxies and (ii) Spotlight Advisors, LLC (“Spotlight”) to assist in engaging with Company Shareholders. The Company will reimburse brokers, banks and other nominees for their expenses in sending proxy solicitation materials to the beneficial owners of MDC Canada Shares and obtaining their proxies.
This Proxy Statement/Prospectus and proxy-related materials are being sent to all MDC Canada Shareholders. The Company does not send proxy-related materials directly to beneficial (non-registered) MDC Canada Shareholders and is not relying on the notice-and-access provisions of applicable securities laws for delivery of proxy-related materials to MDC Canada Shareholders. The Company will deliver proxy-related materials to nominees, custodians and fiduciaries, and they will be asked to promptly forward them to the beneficial (non-registered) MDC Canada Shareholders. The Company will reimburse such nominees, custodians and fiduciaries for their expenses in sending proxy-related materials to the beneficial (non-registered) MDC Canada Shareholders and obtaining their proxies. If you are a beneficial (non-registered) MDC Canada Shareholder, your nominee should send you a voting instruction form or form of proxy with this Proxy Statement/Prospectus. The Company has also elected to pay for the delivery of our proxy-related materials to objecting beneficial (non-registered) MDC Canada Shareholders.
MDC Canada Shareholders should not construe the contents of this Proxy Statement/Prospectus as legal, tax or financial advice and should consult with their own legal, tax, financial and other professional advisors.
If you have any questions about the information contained in this Proxy Statement/Prospectus or require assistance in voting your MDC Canada Shares, please contact Kingsdale Advisors by telephone at 1-877-659-1821 (toll-free in North America) or at 1-416-867-2272 (collect outside North America) or by e-mail at contactus@kingsdaleadvisors.com.
Except where the context otherwise requires or where otherwise indicated, references to “MDC”, “MDC Canada”, the “Company” “we”, “us” and “our” in this Proxy Statement/Prospectus refer to MDC Partners Inc. and its consolidated subsidiaries.
Notice Regarding Tax Consequences of Redomiciliation
MDC Canada Shareholders should be aware that the Redomiciliation, and the holding and disposition of Combined Company Shares, may have tax consequences in Canada, the U.S. and/or in the jurisdictions in which the MDC Canada Shareholders are resident which may not be described fully herein. The tax consequences to
 
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such MDC Canada Shareholders of the Redomiciliation and of holding and disposing of Combined Company Shares is dependent on their individual circumstances, including (but not limited to) their jurisdiction of residence. It is recommended that MDC Canada Shareholders consult their own tax advisors in this regard.
Except where otherwise indicated, references to “dollars”, “US$”, or “$” are to U.S. dollars, and any references to “C$” are to Canadian dollars.
Currency and Exchange Rates
The following table shows, for the periods and dates indicated, certain information regarding the Canadian dollar-to-U.S. dollar exchange rate. The information is based on the Bank of Canada’s closing Canadian dollar-to-U.S. dollar exchange rate. Such exchange rate on April 29, 2021 was US$1.00 = C$1.2292.
Year ended December 31, (C$ per US$)
Period End
Average(1)
Low
High
2020
1.2732 1.3415 1.2718 1.4496
2019
1.2988 1.3269 1.2988 1.3600
2018
1.3642 1.2957 1.2128 1.3642
Note:
(1)
The average of the daily exchange rates during the relevant period, as published by the Bank of Canada each business day by 4:30 ET.
Except as otherwise stated, in this Proxy Statement/Prospectus, all dollar amounts are expressed in United States dollars.
Defined Terms
This Proxy Statement/Prospectus contains defined terms. For a glossary of defined terms used herein, see “Glossary”.
 
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QUESTIONS AND ANSWERS ABOUT THE PROPOSED TRANSACTIONS AND THE MEETING
The following questions and answers are intended to briefly address some commonly asked questions regarding the Proposed Transactions and the Meeting. These questions and answers may not address all questions that may be important to you. To better understand these matters, and for a description of the legal terms governing the Proposed Transactions, you should carefully read this entire Proxy Statement/Prospectus, including the attached annexes, as well as the documents that have been incorporated by reference into this Proxy Statement/Prospectus. For more information, see the section entitled “Information Contained in Proxy Statement/Prospectus”. Capitalized terms used but not otherwise defined in the questions and answers set forth below have the meanings set forth under the heading “Glossary”.
Q:
What are the Proposed Transactions?
A:
On December 21, 2020, the Company and Stagwell Media LP (“Stagwell Media” or “Stagwell”) entered into a transaction agreement (the “Transaction Agreement”), providing for among other things, the combination (the “Business Combination”) of the Company with the subsidiaries of Stagwell that own and operate a portfolio of marketing services companies (the “Stagwell Subject Entities”). Through a series of steps and transactions (collectively, the “Proposed Transactions”), including the transactions contemplated by the Second Goldman Letter Agreement, the redomiciliation (the “Redomiciliation”) of MDC to a Delaware corporation (from and after the domestication, “MDC Delaware”) and the merger of MDC Delaware with one of its indirect wholly owned subsidiaries (the “MDC Merger”), MDC Delaware will become a direct subsidiary (from and after the merger, “OpCo”) of a newly-formed, Delaware-organized, NASDAQ-listed corporation (“New MDC”). Following the MDC Merger, OpCo will convert into a limited liability company (together with the MDC Merger, the “MDC Reorganization”) that will hold MDC’s operating assets. Following the MDC Reorganization, Stagwell will contribute (i) the issued and outstanding equity interest of Stagwell Marketing Group Holdings LLC (“SMGH”), the direct or indirect owner of the Stagwell Subject Entities other than SMGH (the “Stagwell OpCo Contribution”), to OpCo in exchange for 216,250,000 common membership interests of OpCo (the “Stagwell OpCo Units”), and (ii) an aggregate amount of cash equal to $100 (the “Stagwell New MDC Contribution” and, together with the Stagwell OpCo Contribution, the “Stagwell Contributions”) to New MDC in exchange for shares of a new Class C series of voting-only common stock of New MDC equal in number to the Stagwell OpCo Units (the “Stagwell Class C Shares”). From and after the Stagwell Contributions, New MDC shall be referred to herein as the “Combined Company”.
Following the completion of the Proposed Transactions, the Combined Company will be a Delaware incorporated corporation organized in an umbrella partnership-C corporation (or “Up-C”) structure, in which all of the assets and business of MDC and assets and businesses contributed by Stagwell in the Stagwell OpCo Contribution will be held by OpCo, an entity treated as a partnership, or “passthrough” entity, for U.S. federal income tax purposes, and will be operated through OpCo and its subsidiaries. The Combined Company’s sole material asset will be the common units and preferred units of OpCo.
On a pro forma basis (and (i) without giving effect to the conversion of any Combined Company Preferred Shares and (ii) including unvested restricted stock and restricted stock units of MDC), following the completion of the Proposed Transactions, it is anticipated that the existing holders of MDC Canada Class A Common Shares (including Stagwell) and MDC Canada Class B Common Shares will receive Combined Company Class A Common Shares and Combined Company Class B Common Shares equal to approximately 26% of the common equity of the Combined Company and Stagwell would be issued an amount of Combined Company Class C Common Shares equivalent to approximately 74% of the voting rights of the Combined Company and exchangeable, together with Stagwell OpCo Units, for Combined Company Class A Common Shares on a one-for-one basis at Stagwell’s election following a six-month holding period. However, the number of Stagwell OpCo Units, the number of Stagwell Class C Shares and the percentage of the Combined Company that Stagwell will hold following the consummation of the Proposed Transactions will each be reduced, and the percentage of the Combined Company that existing MDC Canada Shareholders will hold will be proportionally increased, if Stagwell is unable to effect certain restructuring transactions consisting of (i) the acquisition of certain outstanding equity interests of non-wholly owned Stagwell Subject Entities (the “Stagwell Minority
 
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Interests”) and (ii) the termination of certain equity-based or equity-related awards issued pursuant to Stagwell Subject Entity incentive plans (the “Stagwell Incentive Awards”) (collectively, the “Stagwell Restructuring”) prior to the Closing.
As of the close of business on the Record Date, May 10, 2021, Stagwell held approximately 18.3% of the MDC Canada Class A Common Shares. Thus, in the aggregate (i.e., including the MDC Canada Class A Common Shares that Stagwell beneficially held as of May 10, 2021 as well as the Stagwell OpCo Units and Stagwell Class C Shares), following the completion of the Proposed Transactions, Stagwell will hold approximately 78.22% of the common equity of the Combined Company, and it is anticipated that holders of MDC Canada Class A Common Shares and MDC Canada Class B Common Shares as of May 10, 2021, excluding Stagwell, will receive Combined Company Class A Common Shares and Class B Common Shares equal to approximately 21.78% of the common equity of the Combined Company.
Each of the Proposed Transactions is described in more detail below.
Redomiciliation
As part of the Proposed Transactions, the Company is proposing to change its jurisdiction of incorporation from the federal jurisdiction of Canada to the State of Delaware pursuant to a “continuance” effected in accordance with Section 188 of the CBCA and a concurrent “domestication” effected in accordance with Section 388 of the DGCL.
Following the Redomiciliation, each MDC Canada Class A Common Share, each MDC Canada Class B Common Share, each MDC Canada Series 4 Share and each MDC Canada Series 6 Share, in each case held by a non-dissenting holder, will remain outstanding as a MDC Delaware Class A Common Share, a MDC Delaware Class B Common Share, a MDC Delaware Series 4 Share or an MDC Delaware Series 6 Share, respectively. Each registered MDC Canada Shareholder who dissents will have the right to be paid fair value by the Company for all, but not less than all, of the MDC Canada Shares beneficially owned by such holder in accordance with the CBCA, provided that the holder strictly complies with the dissent procedures with respect to the Transaction Proposals and the Proposed Transactions become effective. See “Dissenters’ and Appraisal Rights”.
In addition, the certificate of incorporation of MDC Delaware (the “MDC Delaware Certificate of Incorporation”) shall authorize a new class of common stock: the Class C common stock, no par value.
New MDC Corporate Conversion and MDC Merger
At least two business days following the completion of the Redomiciliation, New MDC while it is a wholly-owned subsidiary of MDC Delaware will convert into a Delaware corporation (the “New MDC Corporate Conversion”) pursuant to a certificate of conversion. In connection with the New MDC Corporate Conversion, New MDC shall adopt the Combined Company Certificate of Incorporation and Combined Company Bylaws, in the forms attached as Annexes A and B, respectively, of this Proxy Statement/Prospectus.
Immediately following the New MDC Corporate Conversion, the Company proposes that MDC Merger Sub 1 LLC (“Merger Sub”), a wholly owned subsidiary of New MDC that was formed solely for the purpose of consummating the Proposed Transactions and that does not have any assets or operations, shall merge with and into MDC Delaware, with MDC Delaware continuing as the surviving corporation (the “Surviving Corporation”), which will then immediately convert into a Delaware limited liability company as described below. The Surviving Corporation will be a direct wholly owned subsidiary of New MDC. Following the MDC Merger, New MDC will replace MDC Delaware as the publicly-traded company in which MDC Canada Shareholders will own their interests.
Following the New MDC Corporate Conversion and MDC Merger, each MDC Delaware Class A Common Share, each MDC Delaware Class B Common Share, each MDC Delaware Series 4 Share and each MDC Delaware Series 6 Share, in each case held by a non-dissenting holder, will be converted into the right to receive a New MDC Class A Common Share, a New MDC Class B Common Share, a New MDC Series 4 Share or New MDC Series 6 Share, respectively.
 
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MDC Delaware LLC Conversion
In order to effect the Stagwell Contributions and facilitate the Combined Company’s “Up-C” structure, as part of the MDC Reorganization, once it is a wholly-owned subsidiary of New MDC, the Surviving Corporation will convert into a Delaware limited liability company (the “MDC Delaware LLC Conversion”, and the Surviving Corporation, from and after the conversion, “OpCo”) by filing a certificate of conversion with the Secretary of State of Delaware. Pursuant to the MDC Delaware LLC Conversion, all of the outstanding shares of the Surviving Corporation (then owned by New MDC) shall be converted into membership interests of OpCo comprised of (i) a number of Series 4 convertible preferred membership interests of OpCo (the “OpCo Series 4 Preferred Units”) corresponding to the number of outstanding New MDC Series 4 Shares, (ii) a number of Series 6 convertible preferred membership interests of OpCo (the “OpCo Series 6 Preferred Units” and, together with the OpCo Series 4 Preferred Units, the “OpCo Preferred Units”) corresponding to the number of outstanding New MDC Series 6 Shares, and (iii) a number of common membership interests of OpCo (the “OpCo Common Units” and, together with the OpCo Preferred Units, the “OpCo Units”) corresponding to the number of outstanding New MDC Common Shares, each at the time of the MDC Delaware LLC Conversion (and for the avoidance of doubt, excluding any Combined Company Class C Common Shares to be issued in exchange for the Stagwell New MDC Contribution).
Stagwell Contributions
At least one business day following the MDC Reorganization, at the closing of the Proposed Transactions (the “Closing”), Stagwell will make the (i) Stagwell OpCo Contribution in exchange for the Stagwell OpCo Units, and (ii) the Stagwell New MDC Contribution in exchange for the Stagwell Class C Shares. In addition to the MDC Canada Class A Common Shares and MDC Canada Series 6 Shares that Stagwell currently owns, the Stagwell OpCo Units will represent Stagwell’s economic investment in the Combined Company. The Stagwell Class C Shares will not represent any economic interest in the Combined Company and will solely represent voting interests in the Combined Company. Each Stagwell Class C Share will be entitled to one vote. As further described and subject to certain limitations as described herein under “Certain Agreements Related to the Business Combination — A&R OpCo LLC Agreement,” each Stagwell OpCo Unit, together with a Combined Company Class C Common Share, will be convertible into a Combined Company Class A Common Share.
Following the Proposed Transactions, the Combined Company will be organized in an Up-C structure, in which all of the assets and business of MDC and assets and businesses contributed by Stagwell in the Stagwell OpCo Contribution will be held by OpCo, an entity treated as a partnership, or “passthrough” entity, for U.S. federal income tax purposes, and will be operated through OpCo and its subsidiaries. The Combined Company’s sole material asset will be common units and preferred units of OpCo.
Additionally, prior to, in connection with, and in some cases following the Proposed Transactions, New MDC, MDC and OpCo, respectively, intend to engage in certain restructuring transactions to, among other things, facilitate changes to the group’s internal financing structure, and create a holding company structure under OpCo, whereby all of the subsidiaries of the Combined Company that are treated as corporations for U.S. tax purposes would be held through a single corporate holding company.
Q:   What is Stagwell?
Stagwell Media was founded in 2015 by Mark Penn. Mr. Penn is a limited partner and has served as managing partner of Stagwell since its inception. Stagwell Marketing Group LLC (“Stagwell Marketing”) is a Delaware limited liability company that was formed on March 9, 2017 and was formed to hold the previously existing interests of Stagwell Media in its portfolio of marketing services companies. Stagwell Marketing is governed by the terms and conditions of a limited liability agreement effective as of the same date. Stagwell Media owns all of the equity interests of Stagwell Marketing through SMGH.
Stagwell Media is the direct or indirect owner of Stagwell Marketing and the Stagwell subsidiaries that own and operate a portfolio of marketing services companies representing the assets and businesses
 
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that will be contributed by Stagwell in the Proposed Transactions pursuant to the Stagwell OpCo Contribution, which are referred to in this Proxy Statement/Prospectus as the “Stagwell Subject Entities”.
Stagwell is an independent, full-service, technology-driven marketing and communications group at the crossroads of the art and science of creativity. Stagwell excels at offering clients simplicity and speed of execution. The Stagwell companies have over 3,700 employees operating in more than 20 countries across North America, Asia, Europe and South America.
The Stagwell Group LLC (the “GP” or the “Stagwell Group”) is the general partner of Stagwell Media. Stagwell Media owns (i) 100% of SMGH, the direct or indirect owner of the Stagwell Subject Entities other than SMGH, and (ii) 14,285,714 MDC Canada Class A Common Shares and all of the 50,000 outstanding MDC Canada Series 6 Shares indirectly through its 100% ownership of Stagwell Agency Holdings LLC (“Stagwell Holdings” and the shares, the “SAH MDC Interests”). The GP is the manager of SMGH and Stagwell Holdings.
All current employees of the GP and/or Stagwell Media (other than any necessary to carry out activities solely related to the management of Stagwell Media) (the “Stagwell Corporate Employees”) are expected to become employees of the Combined Company. Certain of the Stagwell Corporate Employees may become executive officers of the Combined Company upon the completion of the Proposed Transactions. Following the Proposed Transaction, none of the Stagwell Corporate Employees will receive any compensation or other entitlement in connection with their employment with the GP and/or Stagwell Media other than in respect of previously issued “carried interests”, which entitle the holders to a certain share of distributions from Stagwell Media under certain circumstances.
Mark Penn is President and Managing Partner (the “Manager”) of the GP and owns an approximately 3% interest in Stagwell Media. Mr. Penn is also Chairman and Chief Executive Officer of MDC. In connection with the Proposed Transactions, Mr. Penn is expected to (i) remain Chairman and Chief Executive Officer of the Combined Company, (ii) remain the Manager and (iii) in respect of his MDC Incentive Awards, have certain entitlements as described in “The Proposed Transactions — Interests of MDC’s Directors and Executive Officers in the Proposed Transactions — Treatment of MDC Incentive Awards”. Mr. Penn may also, through his ownership interest in Stagwell Media, receive a portion of (a) the Stagwell Distribution, which is not expected to exceed $1 million, as described in “The Proposed Transactions — Interests of MDC’s Directors and Executive Officers in the Proposed Transactions — Stagwell Distribution”, and (b) the payments to be made by the Combined Company to Stagwell under the Tax Receivables Agreement, as described in “The Proposed Transactions — Interests of MDC’s Directors and Executive Officers in the Proposed Transactions — Tax Receivables Agreement Payments”.
For more information about Stagwell and the Stagwell Subject Entities, please see the sections entitled, “Risk Factors — Risks Related to Stagwell,” “Stagwell Business,” “Management’s Discussion of Financial Condition and Results of Operations of the Stagwell Subject Entities,” and “Quantitative and Qualitative Disclosures about Market Risk of Stagwell.”
Q:
What will MDC Canada Shareholders own following the Proposed Transactions?
A:
If you are a current, non-dissenting holder of MDC Canada Common Shares or MDC Canada Preferred Shares, in connection with the Proposed Transactions you will receive:

for each MDC Canada Class A Common Share, one Combined Company Class A Common Share,

for each MDC Canada Class B Common Share, one Combined Company Class B Common Share,

for each MDC Canada Series 4 Share, one Combined Company Series 4 Share, and

for each MDC Canada Series 6 Share, one Combined Company Series 6 Share.
As a result of differences between Delaware law and the CBCA, there will be differences between your rights as a stockholder of the Combined Company under Delaware law and your current rights as a
 
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shareholder of MDC Canada under the CBCA. In addition, there are differences between the organizational documents of MDC Canada and the Combined Company. These differences are discussed in detail under “Comparison of Stockholder Rights”. Also refer to “Description of MDC Delaware and the Combined Company Capital Stock” for a description of the Combined Company Shares. The Combined Company Certificate of Incorporation and Combined Company Bylaws, in the form substantially as they will be in effect upon completion of the Proposed Transactions, are attached as Annexes A and B, respectively, of this Proxy Statement/Prospectus.
The MDC Delaware Class A Common Shares will be listed on NASDAQ from and after the MDC Merger.
On a pro forma basis (and (i) without giving effect to the conversion of any Combined Company Preferred Shares and (ii) including unvested restricted stock and restricted stock units of MDC), following the completion of the Proposed Transactions, it is anticipated that the existing holders of MDC Canada Class A Common Shares (including Stagwell) and MDC Canada Class B Common Shares will receive Combined Company Class A Common Shares and Combined Company Class B Common Shares equal to approximately 26% of the common equity of the Combined Company and Stagwell would be issued an amount of Combined Company Class C Common Shares equivalent to approximately 74% of the voting rights of the Combined Company and exchangeable, together with Stagwell OpCo Units, for Combined Company Class A Common Shares on a one-for-one basis at Stagwell’s election following a six-month holding period. However, the number of Stagwell OpCo Units, the number of Stagwell Class C Shares and the percentage of the Combined Company that Stagwell will hold following the consummation of the Proposed Transactions, will be reduced, and the percentage of the Combined Company that existing MDC Canada Shareholders will hold will be proportionally increased, if Stagwell is unable to effect the Stagwell Restructuring prior to the Closing.
As of the close of business on the Record Date, May 10, 2021, Stagwell held approximately 18.3% of the MDC Canada Class A Common Shares. Thus, in the aggregate (i.e., including the MDC Canada Class A Common Shares that Stagwell beneficially held as of May 10, 2021 as well as the Stagwell OpCo Units and Stagwell Class C Shares), following the completion of the Proposed Transactions, Stagwell will hold approximately 78.22% of the common equity of the Combined Company, and is anticipated that holders of MDC Canada Class A Common Shares and MDC Canada Class B Common Shares as of May 10, 2021, excluding Stagwell, will receive Combined Company Class A Common Shares and Class B Common Shares equal to approximately 21.78% of the common equity of the Combined Company.
Q:
What is the Combined Company?
A:
The Combined Company was formed as a Delaware limited liability company and a wholly owned subsidiary of MDC in order to effect the Proposed Transactions. Following the Redomiciliation, New MDC will convert into a Delaware corporation, and following the MDC Merger will be the successor public company registrant to MDC Delaware. Following the Closing, the Combined Company will be the manager and own approximately 26% of the common units of OpCo, which in turn will own the operating subsidiaries of MDC and Stagwell. However, the number of Stagwell OpCo Units, the number of Stagwell Class C Shares and the percentage of the Combined Company that Stagwell will hold following the consummation of the Proposed Transactions will each be reduced, and the percentage of the Combined Company that existing MDC Canada Shareholders will hold will be proportionally increased, if Stagwell is unable to effect the Stagwell Restructuring prior to the Closing.
Q:
Why is MDC proposing to enter into the Proposed Transactions?
A:
MDC Canada believes that the Proposed Transactions will provide a number of significant strategic benefits and opportunities that will be in the best interests of MDC and the MDC Canada Shareholders. To review the reasons for the Proposed Transactions in greater detail, see “The Proposed Transactions — MDC’s Reasons for the Proposed Transactions; Recommendation of the MDC Special Committee and the MDC Board” beginning on page 162.
 
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Q:
Who will be the directors and executive officers of the Company following the Proposed Transactions?
A:
Following the completion of the Proposed Transactions, the Combined Company Board of Directors (the “Combined Company Board”) will consist of nine members, including Mr. Mark Penn. Three individuals currently serving as independent directors of MDC will serve as directors on the Combined Company Board and the Combined Company has agreed to cause such directors to be nominated at the Combined Company’s next two annual meetings following completion of the Proposed Transactions; Mr. Penn will continue as a director as well as the Combined Company’s Chief Executive Officer. Stagwell will be entitled to designate four directors and has informed MDC that it expects to nominate at least two independent directors. An affiliate of Goldman Sachs will be entitled to designate one director to serve on the Combined Company Board. The directors and officers of the Combined Company will be identified prior to the Closing. See “Governance and Management of the Combined Company Following the Proposed Transactions — Structure of the Board of Directors”.
Q:
Why am I receiving this Notice of Special Meeting and Proxy Statement/Prospectus?
A:
You are receiving this Notice of Special Meeting and Proxy Statement/Prospectus because you are a MDC Canada Shareholder as of the Record Date. You are entitled to vote for the Transaction Proposals at the Meeting to be held virtually on June 22, 2021, or at any adjournment or postponement thereof.
This Proxy Statement/Prospectus, which you should read carefully, contains important information about the Proposed Transactions and how to vote at the Meeting.
Q:
When and where will the Meeting be held?
A:
The Meeting will be held virtually at 12:00 p.m. ET on June 22, 2021, or at any adjournment or postponement thereof.
Due to the continuing public health impact of the coronavirus outbreak (COVID-19) and to support the health and well-being of our employees and shareholders, the Company has decided that the Meeting will be held solely by means of remote communication as a virtual meeting.
Q:
How do I ask questions at the Meeting?
A:
A virtual Meeting enables registered MDC Canada Common Shareholders and duly appointed proxyholders to join us online, listen to the Meeting, ask questions and receive answers online, and vote online at https://web.lumiagm.com/401933402 by clicking “I have a control number” and then entering your unique 13-digit control number located on your form of proxy and the password “mdc2021” (case-sensitive). MDC Canada Common Shareholders and duly appointed proxyholders will have the ability to submit questions during the Meeting via the Meeting website.
Q:
What am I being asked to vote on?
A:
In connection with the Proposed Transactions, MDC Canada Shareholders are being asked to vote on six proposals (the “Proposals”):

Proposal 1: the consummation of the Redomiciliation (the “Redomiciliation Proposal”);

Proposal 2: the consummation of each of the Proposed Transactions, other than the Redomiciliation (the “Business Combination Proposal”);

Proposal 3: the granting of the MDC Delaware Proxy (the “MDC Delaware Proxy Proposal”);

Proposal 4: in accordance with NASDAQ Listing Rule 5635, the approval of the issuance of the MDC Delaware Series 6 Shares (the “Series 6 Supervoting Proposal”);

Proposal 5: in accordance with NASDAQ Listing Rule 5635, the Stagwell Issuance (the “Stagwell Issuance Proposal”); and

Proposal 6: the non-binding advisory approval of the compensation that may be paid or become payable to MDC’s named executive officers in connection with the Proposed Transactions (the “Compensation Proposal”).
 
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The Redomiciliation Proposal, the MDC Delaware Proxy Proposal, the Business Combination Proposal, the Series 6 Supervoting Proposal, and the Stagwell Issuance Proposal are collectively referred to as the “Transaction Proposals”. The consummation of each Transaction Proposal is conditioned on the approval by the requisite MDC Canada Shareholder threshold of the other Transaction Proposals, such that MDC will only effect a particular Transaction Proposal if the MDC Canada Shareholders approve all of the other Transaction Proposals. For the avoidance of doubt, the Transaction Proposals are not conditioned on approval of the Compensation Proposal.
Q:
Why am I being asked to approve the MDC Delaware Proxy Proposal and the Series 6 Supervoting Proposal?
A:
Upon the Redomiciliation, MDC will become a Delaware corporation. To effect the adoption of the Transaction Agreement under Delaware law, the board of directors of MDC Delaware (as a Delaware corporation) must approve and declare advisable the Transaction Agreement and recommend the adoption of the Transaction Agreement by the MDC Delaware stockholders. The stockholders of MDC Delaware, representing at least a majority of the voting power of the outstanding stock entitled to vote thereon, must then adopt the Transaction Agreement. Because the Company is unable to guarantee that, as of the date of this Proxy Statement/Prospectus, a majority of the voting power of the outstanding stock of MDC Canada entitled to vote will be sufficient to adopt the Transaction Agreement (at such time, as stockholders of MDC Delaware), the Company is asking that (i) the MDC Canada Common Shareholders and Company Series 6 Shareholders grant the MDC Delaware Proxy and (ii) the MDC Canada Common Shareholders approve the issuance of the MDC Delaware Series 6 Shares. If both such Proposals are approved, it ensures that either Proxyholder, acting singly, may adopt the Transaction Agreement by executing a written consent voting the MDC Delaware Common Shares and MDC Delaware Series 6 Shares subject to the MDC Delaware Proxy in favor of the adoption of the Transaction Agreement.
For the avoidance of doubt, these rights are being granted so that the holders of the Series 6 shares can approve the steps necessary to complete the Business Combination Proposal and, upon consummation of the MDC Reorganization, the New MDC Series 6 Shares shall not be entitled to any voting rights, except as required by the DGCL.
Q:
What stockholder approvals are required in connection with the Proposed Transactions?
A:
The following stockholder approvals are required:

The Redomiciliation Proposal: The affirmative vote of (i) at least two-thirds of the votes cast on the Redomiciliation Proposal, virtually or by proxy by the MDC Canada Shareholders, voting together as a single class, and (ii) at least a majority of the votes cast on the Redomiciliation Proposal, virtually or by proxy by the MDC Canada Shareholders, excluding the votes attached to MDC Canada Shares held by persons described in items (a) through (d) of Section 8.1(2) of MI 61-101, with holders of MDC Canada Shares voting together as a single class, are required to approve the Redomiciliation Proposal (both of such voting thresholds in (i) and (ii) above are the “Special Approval Thresholds”).

The Business Combination Proposal: The affirmative vote of MDC Canada Shareholders meeting or exceeding the Special Approval Thresholds is required to approve the Business Combination Proposal.

The MDC Delaware Proxy Proposal: The affirmative vote of MDC Canada Shareholders who will own a majority of the voting power of the outstanding shares of MDC Delaware Common Shares and MDC Delaware Series 6 Shares, voting together as a single class, following the Redomiciliation are required to approve the MDC Delaware Proxy Proposal.

The Series 6 Supervoting Proposal: The affirmative vote of a majority of the votes cast on the Series 6 Supervoting Proposal by the holders of MDC Canada Class A Common Shares and MDC Canada Class B Common Shares, voting together as a single class, is required to approve the Series 6 Supervoting Proposal.
 
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The Stagwell Issuance Proposal: The affirmative vote of a majority of the votes cast on the Stagwell Issuance Proposal by the holders of MDC Canada Class A Common Shares and MDC Canada Class B Common Shares, voting together as a single class, is required to approve the Stagwell Issuance Proposal.

The Compensation Proposal: The affirmative vote of a majority of the votes cast on the Compensation Proposal by the holders of MDC Canada Class A Common Shares and MDC Canada Class B Common Shares, voting together as a single class, is required to approve the Compensation Proposal.
The approvals of the Redomiciliation Proposal, the MDC Delaware Proxy Proposal, the Business Combination Proposal, the Series 6 Supervoting Proposal, and the Stagwell Issuance Proposal are referred to as the “Required Shareholder Approvals”.
Q:
Will the Company consummate the Proposed Transactions if some, but not all, of the Transaction Proposals are approved?
A:
No. The consummation of each Transaction Proposal is conditioned on the approval by the requisite MDC Canada Shareholder threshold of the other Transaction Proposals, such that MDC will only effect a particular Transaction Proposal if the MDC Canada Shareholders approve all of the other Transaction Proposals. For the avoidance of doubt, the Transaction Proposals are not conditioned on approval of the Compensation Proposal.
Q:
What were the MDC Special Committee’s reasons for recommending that the MDC Board approve the Transaction Agreement and the Proposed Transactions?
A:
In evaluating the Proposed Transactions, the Transaction Agreement and the Ancillary Agreements, and in reaching its determinations and making its recommendations, the MDC Special Committee consulted with the Disinterested Senior Executives and its legal and financial advisors, and gave careful consideration to the current and expected future financial position of MDC and all terms of the Transaction Agreement and the Ancillary Agreements.
The MDC Special Committee considered a number of factors including, among others, the following:

Moelis Opinion. The MDC Special Committee retained Moelis as its financial advisor in respect of, among other things, the Proposed Transactions, including with respect to the negotiation of a potential transaction with Stagwell. Moelis delivered an oral opinion (which was subsequently confirmed in writing) to the MDC Special Committee that, as of December 21, 2020, and based upon and subject to the assumptions made, procedures followed, matters considered and other limitations set forth in the Moelis Opinion, the Post-Transaction Ownership Percentage of the Combined Company to be held by the holders of MDC Canada Common Shares upon completion of the Proposed Transactions was fair, from a financial point of view, to the holders of MDC Canada Common Shares (other than the Interested Shareholders).

Canaccord Genuity Opinion and Formal Valuation. The MDC Special Committee received an independent formal valuation required to be obtained in connection with the Proposed Transactions pursuant to MI 61-101, along with a fairness opinion that, as of December 21, 2020 and based upon and subject to the qualifications, limitations and assumptions set forth therein and such other matters as Canaccord Genuity considered relevant, (i) the consideration to be paid by MDC for the Stagwell Subject Entities pursuant to the Transaction Agreement was fair, from a financial point of view, to the holders of MDC Canada Class A Common Shares (other than Mark Penn, Stagwell, Goldman Sachs and their affiliates), with such opinion assuming, among other items, the conversion of the MDC Canada Class B Common Shares into MDC Canada Class A Common Shares; (ii) the fair market value of the MDC Canada Class A Common Shares (assuming the conversion of the MDC Canada Class B Common Shares into MDC Canada Class A Common Shares) ranged from $4.70 to $7.40 per MDC Canada Class A Common Share; and (iii) the fair market value of the Stagwell Subject Entities ranged from $1.2 billion to $1.5 billion.

Transaction Agreement. The MDC Special Committee reviewed and negotiated the proposed Transaction Agreement and Ancillary Agreements and considered the independent legal advice of
 
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DLA Piper and such other matters as the MDC Special Committee deemed necessary or advisable in order to provide a recommendation to the MDC Board in respect of the Transaction Agreement and the Proposed Transactions.

Prior MDC Strategic Review and Public Nature of the Stagwell Proposal. The MDC Special Committee considered the fact that prior to receipt of the Stagwell Proposal, the Company had recently conducted a robust and comprehensive strategic review process that took place over approximately seven months and involved outreach by the Company’s financial advisors at the time to not less than 34 third parties, which process resulted in no final or binding offers for an acquisition of, or investment in, the Company from any party other than Stagwell. Relatedly, the MDC Special Committee also considered the fact that following Stagwell’s public announcement of its proposal on June 26, 2020, putting other potential third-party bidders on notice of a possible transaction, no third-party had come forward during the approximately six-month period after publication of the Stagwell Proposal and prior to entry into the Transaction Agreement on December 21, 2020 to make a competing offer, and that as a result, it was unlikely that a competing proposal was likely to be made on terms as attractive as those negotiated with Stagwell.

Previous Stagwell Strategic Review and Stagwell’s Communicated Position to Not Support Alternative Transaction. In connection with Stagwell’s exploration of strategic alternatives in 2019 (the “Stagwell 2019 Sale Process”), only one participant had expressed an interest in a transaction involving MDC and the 2019 Special Committee determined not to proceed to negotiations with such participant. The lack of interested bidders in these prior exchanges led the MDC Special Committee to conclude that it was unlikely that a competing proposal was likely to be made on terms as attractive as those negotiated with Stagwell. The MDC Special Committee also noted Stagwell’s statement in the Stagwell Proposal that Stagwell, in its capacity as an existing holder of MDC Canada Shares, was not prepared to support, consent to or vote in favor of an alternative transaction by the Company, including an alternative business combination or sale transaction.
For further discussion of the Moelis Opinion and the Canaccord Genuity Opinion and Formal Valuation, see “The Proposed Transactions — Opinion of Moelis” and “The Proposed Transactions — Canaccord Genuity Opinion and Formal Valuation,” respectively.
In addition to the deliberations and review noted above, the MDC Special Committee discussed certain matters with the Disinterested Senior Executives and other members of the MDC Board, as well as its financial and legal advisors, and considered a number of factors (not in any relative order of importance) that supported the MDC Special Committee’s determination and recommendation in favor of the Proposed Transactions, including:

Shareholder Approval and Protection of Minority Interest: The Proposed Transactions are conditioned on receipt of the Required Shareholder Approvals. The Required Shareholder Approvals are protective of the rights of the MDC Canada Shareholders. The Redomiciliation Proposal and Business Combination Proposal require the affirmative vote of (i) at least two-thirds of the votes cast on such proposals, virtually or by proxy by the MDC Canada Shareholders, voting together as a single class, and (ii) at least a majority of the votes cast on such proposals, virtually or by proxy by the MDC Canada Shareholders, excluding the votes attached to MDC Canada Shares held by persons described in items (a) through (d) of Section 8.1(2) of MI 61-101, with holders of MDC Canada Shares voting together as a single class.

Corporate Governance Protections. The Transaction Agreement contains various corporate governance provisions that provided protections for the MDC Canada Shareholders, including:

The Continuing Independent Directors will serve as directors on the Combined Company Board and the Combined Company has agreed to cause such directors to be nominated at the Combined Company’s next two annual meetings following completion of the Proposed Transactions.

The Combined Company’s audit committee will be comprised exclusively of the Continuing Independent Directors.
 
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During the Restricted Period, the Transaction Agreement generally will prohibit the Combined Company from entering into (i) certain related party transactions without the approval of a majority of the independent directors serving on the Combined Company Board and (ii) any proposed business combinations involving Stagwell or its affiliates without (A) the approval of Combined Company Shareholders representing a “majority of the minority” of the voting power of the Combined Company and (B) the creation of a special committee of independent directors with authority similar to that of the MDC Special Committee.

Alternative Proposal. The Transaction Agreement does not prevent a third party from making an unsolicited Alternative Proposal, and subject to compliance with the terms of the Transaction Agreement, at any time prior to receipt of the Required Shareholder Approvals, each of the MDC Special Committee and the MDC Board is not precluded from considering and responding to an unsolicited Alternative Proposal that the MDC Special Committee or the MDC Board, as applicable, determines in its good faith judgment, after consultation with its financial advisor and outside legal counsel, is or is reasonably likely to lead to a Superior Proposal, as further described under “The Transaction Agreement.”

Goldman Letter Agreement. On December 21, 2020, MDC and BSPI entered into an initial letter agreement (the “Initial Goldman Letter Agreement”), pursuant to which, among other things, BSPI consented to the Proposed Transactions and agreed to vote its MDC Canada Series 4 Shares in favor of the Transaction Proposals, subject to entry with MDC into a definitive agreement. On April 21, 2021, MDC and BSPI entered into a second letter agreement (the “Second Goldman Letter Agreement”) setting forth the definitive agreement contemplated by the Initial Goldman Letter Agreement. Please see the section entitled “Voting Agreements — Goldman Letter Agreement” for more information with respect to the Second Goldman Letter Agreement, and the Second Goldman Letter Agreement is attached hereto as Annex E

Consent by Holders of Senior Notes: On December 21, 2020, MDC entered into separate consent and support agreements with holders of more than 50% of the aggregate principal amount of the Senior Notes.

Limited conditions and requirements for completion of the Proposed Transactions. The obligation of Stagwell to complete the Proposed Transactions is subject to a limited number of conditions, which the MDC Special Committee believes are reasonable under the circumstances.

Dissent Rights. Registered MDC Canada Shareholders who do not vote in favor of the Redomiciliation Proposal will have the right to exercise Dissent Rights and be paid fair value by MDC for all, but not less than all, of the MDC Canada Shares beneficially owned by each such registered MDC Canada Shareholder pursuant to the proper exercise of Dissent Rights in accordance with the CBCA. See “Dissenters’ and Appraisal Rights — Dissenters’ Rights.”

Appraisal Rights. Appraisal rights will be available to holders of MDC Canada Class B Common Shares and MDC Canada Preferred Shares in connection with the MDC Merger only under the circumstances set forth in Section 262 of the DGCL and subject to their compliance with the requirements of Section 262. See “Dissenters’ and Appraisal Rights — Appraisal Rights.”

Additional Factors: The MDC Special Committee also considered the following additional factors (i) the Stagwell 2019 Sale Process and the MDC Board and MDC Special Committee’s broader consideration of strategic alternatives in 2018 and 2019, (ii) the historical stock prices of MDC and the business outlook, (iii) the extensive due diligence review of the businesses of the Stagwell Subject Entities, (iv) the negotiated increase in the pro forma ownership of the pre-transaction MDC Canada Shareholders from the initial terms of the Stagwell Proposal, (v) the consideration adjustment mechanisms relating to the Stagwell Restructuring and (vi) the negotiation of a lock-up period on Stagwell’s ability to effect a Paired Interest Exchange.
 
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Q:
Does the MDC Board recommend that I vote FOR the Transaction Proposals and the Compensation Proposal?
A:
Yes. The MDC Board (other than Mark Penn (who abstained because he controls and has an ownership interest in Stagwell), Charlene Barshefsky (who abstained because she was initially nominated to the MDC Board by Stagwell) and Bradley Gross (who abstained because he is a Managing Director of Goldman Sachs) who abstained from voting on or participating in any deliberations with respect to the Proposed Transactions) unanimously, at its meeting on December 21, 2020, acting upon the unanimous recommendation of the MDC Special Committee, (i) determined that it is in the best interests of MDC and the MDC Canada Shareholders (other than Mark Penn, Stagwell, Goldman Sachs and their respective affiliates (other than MDC and its subsidiaries) (the “Interested Shareholders”)) to enter into the Transaction Agreement and consummate the Proposed Transactions, (ii) approved the execution, delivery and performance by MDC of the Transaction Agreement and the A&R OpCo Operating Agreement, the Registration Rights Agreement, the Tax Receivables Agreement, the Information Rights Letter Agreement, (the “Related Agreements”) the Initial Goldman Letter Agreement, and the Stagwell Letter Agreement (together with the Related Agreements, the “Ancillary Agreements”) and the consummation of the Proposed Transactions and (iii) resolved to recommend that the MDC Canada Shareholders vote for the Proposals.
Acting upon the unanimous recommendation of the MDC Special Committee, the MDC Board (other than Mark Penn, Charlene Barshefsky and Bradley Gross (collectively, the “Interested Directors”), who each abstained from voting on, or participating in any deliberations of the MDC Board with respect to the Proposed Transactions) recommends that the MDC Canada Shareholders vote their MDC Canada Shares:

FOR the Redomiciliation Proposal;

FOR the Business Combination Proposal;

FOR the MDC Delaware Proxy Proposal;

FOR the Series 6 Supervoting Proposal;

FOR the Stagwell Issuance Proposal; and
Additionally, the MDC Board (with the Interested Directors abstaining) recommends the MDC Canada Shareholders vote their MDC Canada Shares:

FOR the Compensation Proposal.
Q:
Are there conditions to the consummation of the Proposed Transactions?
A:
Yes. Consummation of the Proposed Transactions is subject to a number of conditions, including:

The receipt of the Required Shareholder Approvals;

The expiration or termination of any waiting period applicable to the Proposed Transactions under applicable antitrust or competition laws in the United States;

The satisfaction or deemed satisfaction of the Minister of Canadian Heritage under the Investment Canada Act that the Proposed Transactions are likely to be of “net benefit to Canada” for purposes of the Investment Canada Act;

The approval for listing on NASDAQ of the Combined Company Class A Common Shares;

The termination of the MDC Credit Agreement;

The consents and waivers set forth in the Second Goldman Letter Agreement and the Stagwell Letter Agreement (each as defined below) not having been rescinded or modified and remaining in full force and effect;

the absence since the date of the Transaction Agreement of any fact, circumstance, occurrence, event, development, change or condition that, individually or in the aggregate, have had or would
 
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reasonably be expected to have a material adverse effect (as defined under “The Transaction Agreement — Representations and Warranties”) on MDC or Stagwell; and

other customary conditions.
For a description of the material conditions precedent to the Proposed Transactions, see “The Transaction Agreement — Description of the Transaction Agreement — Conditions to Completion of the Proposed Transactions.
Q:
When will the Proposed Transactions be consummated?
A:
The Company currently expects that the Proposed Transactions will be consummated in the first half of 2021, subject to the conditions described above and the other conditions set out in the Transaction Agreement. The Company cannot predict, however, the actual dates on which the Proposed Transactions will be consummated, or whether they will be consummated, because the Proposed Transactions are subject to factors beyond the Company’s and Stagwell’s control, including whether or when the required regulatory approvals will be received. See “The Transaction Agreement — Description of the Transaction Agreement — Completion of the Proposed Transactions.”
Q:
What happens if the Proposed Transactions are not consummated?
A:
If the Proposed Transactions are not consummated, the Redomiciliation will not occur, the Stagwell Contributions will not occur and the MDC Canada Shareholders will not receive any Combined Company Shares. Instead, MDC and Stagwell will remain independent companies and the MDC Canada Class A Common Shares will continue to be listed and traded on NASDAQ. Under specified circumstances, MDC may be required to pay to Stagwell a fee with respect to the termination of the Transaction Agreement, as described under “The Transaction Agreement — Termination of the Transaction Agreement; Termination Fee.”
Q:
How will the directors and executive officers of the Company vote?
A:
The directors and executive officers of the Company are in favor of the Proposed Transactions and are expected to vote FOR the Transaction Proposals and the Compensation Proposal. The MDC Canada Shares held by Mark Penn and Bradley Gross, each a director of the Company, will be excluded from the “majority of the minority” ​(disinterested MDC Canada Shareholders) votes of MDC Canada Share required under MI 61-101 to approve the Redomiciliation Proposal and the Business Combination Proposal.
As of the record date, May 10, 2021, the directors and executive officers of the Company had the right to vote approximately (i) 15,858,591 MDC Canada Class A Common Shares, representing approximately 20.2% of the MDC Canada Class A Common Shares then issued and outstanding and entitled to vote at the Meeting, (ii) 0 MDC Canada Class B Common Shares, representing 0% of the MDC Canada Class B Common Shares then issued and outstanding and entitled to vote at the Meeting, (iii) 0 MDC Canada Series 4 Shares, representing 0% of the MDC Canada Series 4 Shares then issued and outstanding and entitled to vote at the Meeting, and (iv) 50,000 MDC Canada Series 6 Shares, representing 100% of the MDC Canada Series 6 Shares then issued and outstanding and entitled to vote at the Meeting.
Mark Penn directly holds 574,051 MDC Canada Class A Common Shares, of which 549,051 are shares of unvested restricted stock that are not scheduled to vest until December 31, 2022 subject to continued employment. The Stagwell Group directly holds 115,000 MDC Canada Class A Common Shares. Stagwell Agency Holdings LLC (“Stagwell Holdings”) directly holds 14,285,714 MDC Canada Class A Common Shares. The Stagwell Group is the manager of Stagwell Holdings, and Mark Penn controls and has an ownership interest in The Stagwell Group; thus, without taking into account any conversion of SARs or the MDC Canada Series 6 Shares, Mark Penn is deemed to control an aggregate of the votes attached to 14,974,765 MDC Canada Class A Common Shares representing approximately 19.0% of the MDC Canada Class A Common Shares then issued and outstanding and entitled to vote at the Meeting. In addition, Stagwell Holdings holds all of the 50,000 issued and outstanding MDC
 
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Canada Series 6 Shares. The aggregate liquidation preference of the MDC Canada Series 6 Shares at December 31, 2020 was $57,651,257, subject to an 8% accretion, compounded quarterly until March 14, 2024. The current conversion price is $5.00 per MDC Canada Series 6 Share, subject to customary anti-dilution protection, and therefore, the MDC Canada Series 6 Shares held by Stagwell Holdings would be convertible into 11,530,251 MDC Canada Class A Common Shares. However, MDC Canada Series 6 Shares are not convertible into MDC Canada Class A Common Shares to the extent that, upon conversion into MDC Canada Class A Common Shares, the holder thereof and its affiliates will beneficially hold more than 19.9% of the Company’s outstanding common shares or voting power, unless such conversion is in connection with and subject to completion of (A) a public sale of the Company Class A Common Shares to be issued upon such conversion, if following consummation of such public sale such holder will not beneficially own in excess of 19.9% of the then outstanding Company Class A Common Shares or (B) a bona fide third party tender offer for the MDC Canada Class A Common Shares issuable thereupon.
Bradley Gross is a Managing Director of Goldman Sachs & Co. LLC (“Goldman Sachs”), which exercises the authority of Broad Street Principal Investments, L.L.C. (“BSPI”). BSPI holds all of the 95,000 issued and outstanding MDC Canada Series 4 Shares. The aggregate liquidation preference of the MDC Canada Series 4 Shares at December 31, 2020 was $128,539,399, subject to an 8% accretion, compounded quarterly until March 7, 2022. The current conversion price is $7.42 per MDC Canada Series 4 Share, subject to customary anti-dilution protection, and therefore, the MDC Canada Series 4 Shares held by BSPI would be convertible into 17,323,369 MDC Canada Class A Common Shares. However, MDC Canada Series 4 Shares are not convertible into MDC Canada Class A Common Shares to the extent that, upon conversion into MDC Canada Class A Common Shares, the holder thereof and its affiliates will beneficially hold more than 19.9% of the Company’s outstanding common shares or voting power, unless such conversion is in connection with and subject to completion of (A) a public sale of the Company Class A Common Shares to be issued upon such conversion, if following consummation of such public sale such holder will not beneficially own in excess of 19.9% of the then outstanding Company Class A Common Shares or (B) a bona fide third party tender offer for the Common Class A Common Shares issuable thereupon.
Following the Closing, it is anticipated that the Combined Company Series 4 Shares will be cancelled and replaced on a one-to-one basis with Series 8 preferred shares of the Combined Company (the “Combined Company Series 8 Shares”). The terms of the Combined Company Series 8 Shares are expected to be the same as those of the Combined Company Series 4 Shares, except that (i) the conversion price will be reduced to $5.00, (ii) the accretion rate will be 8.00% and from and after March 7, 2022 through March 14, 2024, the accretion rate will be 6.00%, and from and after March 15, 2024, the accretion rate will be 0% per annum and the base liquidation preference per convertible preference share will not increase during any period subsequent to March 14, 2024, and (iii) the holders of a majority of the Combined Company Series 8 Shares must approve (A) an increase or decrease in the number of authorized shares of a class or series having rights or privileged equal or superior to the Combined Company Series 8 Shares, (B) an exchange, replacement, reclassification or cancellation of all or part of the Combined Company Series 8 Shares, (C) an amendment, alteration, change, or repeal of any of the rights or privileges of the Combined Company Series 8 Shares or any series or shares having rights or privileges equal or superior to the Combined Company Series 8 Shares, (D) the creation or authorization of a new class or series of shares having rights or privileges equal to or superior to the Combined Company Series 8 Shares, (E) any constraint on the issuance, transferability, or ownership of the Combined Company Series 8 Shares, or (F) any of the foregoing with respect to the Series 8 preferred units of OpCo.
Q:
Will the Combined Company Class A Common Shares be listed on an exchange?
A:
Yes. The Combined Company Class A Common Shares will be listed on NASDAQ.
 
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Q:
Who is the transfer agent for MDC Canada Common Shares and the exchange agent for the Proposed Transactions?
A:
AST Trust Company (Canada) (“AST Canada”) is the transfer agent for MDC Canada Common Shares. American Stock Transfer & Trust Company, LLC (“AST US”) will be the exchange agent for the Proposed Transactions.
Q:
If the Proposed Transactions are approved, do I have to take any action to receive MDC Delaware Shares?
A:
No. Each MDC Canada Class A Common Share, MDC Canada Class B Common Share, MDC Canada Series 4 Share and MDC Canada Series 6 Share issued and outstanding immediately prior to the Redomiciliation Effective Date will for all purposes be deemed to be one issued and outstanding, fully paid and nonassessable MDC Delaware Class A Common Share, MDC Delaware Class B Common Share, MDC Delaware Series 4 Share and MDC Delaware Series 6 Share, respectively, without any action required on the part of the Company or the holders thereof. Any stock certificate that, immediately prior to the Effective Date, represented a MDC Canada Class A Common Share, MDC Canada Class B Common Share, MDC Canada Series 4 Share or MDC Canada Series 6 Share, will, from and after the Redomiciliation, automatically and without the necessity of presenting the same for exchange, represent one MDC Delaware Class A Common Share, MDC Delaware Class B Common Share, MDC Delaware Series 4 Share and MDC Delaware Series 6 Share, respectively.
Q:
If the Proposed Transactions are approved, do I have to take any action to receive New MDC Shares?
A:
Following the Redomiciliation, upon effectiveness of the MDC Reorganization, your MDC Delaware Shares will be converted into the right to receive New MDC Shares that will be issued to you in uncertificated book-entry form. MDC Canada and MDC Delaware share certificates, if any, outstanding immediately prior to the effective time of the MDC Reorganization will no longer be evidence of title of MDC Canada Shares or MDC Delaware Shares represented by such certificates, and following the MDC Reorganization, will only represent the right to receive a corresponding number of uncertificated book-entry shares of New MDC. Our transfer agent, AST US, will request that you return such stock certificates, if any, for cancellation, together with a properly completed and executed letter of transmittal, in exchange for shares of New MDC following completion of the MDC Reorganization.
   
The form of the letter of transmittal, which you will be requested to return, is attached to this Proxy Statement/Prospectus as Annex C. Your letter of transmittal will be mailed to you following the Closing, and you will be requested to return it to:
   
American Stock Transfer & Trust Company, LLC 6201 15th Avenue, Attn: Reorganization Department Brooklyn, New York 11219
   
MDC Canada Shares or MDC Delaware Shares held in “street name” through a bank, broker, custodian or other nominee will be automatically exchanged for uncertificated book-entry shares of New MDC without any action required on the part of the beneficial holder of such ordinary shares.
Q:
What is the effect of the Proposed Transactions on the Company Debt?
A:
In connection with the Proposed Transactions, the Company will (i) terminate the MDC Credit Agreement at or prior to the Closing and (ii) either (A) the amendments and waivers to the Debt Indenture contemplated by the Consent Solicitation will be operative or (B) the Senior Notes will have been refinanced with the proceeds of further notes, debt instruments or any other sources of funding that is sufficient to refinance in full, satisfy, discharge or otherwise retire, the Senior Notes (the “Senior Note Refinancing”). At the Closing, it is anticipated that OpCo shall accede to the Stagwell Credit Agreements.
 
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Q:
How will the Proposed Transactions affect the public disclosure the Company provides to its shareholders?
A:
Upon completion of the Proposed Transactions, the Combined Company will be subject to the same reporting requirements of the SEC, the mandates of the Sarbanes-Oxley Act and the applicable corporate governance rules of NASDAQ as the Company was before the Proposed Transactions. The Combined Company will be required to file periodic reports with the SEC on Forms 10-K, 10-Q and 8-K and comply with the proxy rules applicable to domestic issuers, as currently required of the Company. The Combined Company will also continue to be a reporting issuer in each of the provinces of Canada where the Company is currently a reporting issuer. In accordance with applicable Canadian securities laws, and consistent with current practice of the Company, following the Proposed Transactions the Combined Company will continue to file with the relevant Canadian securities regulatory authorities copies of its documents filed with the SEC under the U.S. Exchange Act in order to meet its Canadian continuous disclosure obligations and will continue to comply with all other applicable Canadian provincial securities laws. As a result, of Stagwell and its affiliates controlling a majority of the voting power of the Combined Company’s outstanding voting capital stock following the completion of the Proposed Transactions, the Combined Company will be a “controlled company” under NASDAQ rules. As a controlled company, the Combined Company will be exempt from certain NASDAQ corporate governance requirements. While the Company does not expect the Combined Company to rely on any of these exemptions, the Combined Company will be entitled to do so for as long as it will be considered a “controlled company.” See “Risk Factors — Risks Relating to the Combined Company after Completion of the Proposed Transactions — Following the completion of the Proposed Transactions, the Combined Company will be a “controlled company” under NASDAQ rules.”
Q:
What happens to outstanding MDC Incentive Awards in connection with the Proposed Transactions?
A:
Following the completion of the Proposed Transactions, each holder of MDC Incentive Awards will hold the same number of MDC Incentive Awards as the number of MDC Incentive Awards such holder held immediately prior to the Redomiciliation Effective Time, except that the security referenced under or issuable upon exercise or settlement of each such Combined Company Incentive Award will be Combined Company Common Shares (or, as applicable, the cash equivalent) rather than MDC Canada Common Shares (or, as applicable, the cash equivalent). Except for the foregoing, following the completion of the Proposed Transactions, each MDC Incentive Award will continue to be governed by the same terms and conditions as were applicable to such MDC Incentive Award immediately prior to the Redomiciliation Effective Time.
For a more complete description of the treatment of the MDC Incentive Awards held by MDC’s directors and executive officers in connection with the Proposed Transactions, see “The Proposed Transactions — Interests of MDC’s Directors and Executive Officers in the Proposed Transactions” beginning on page 200 of this Proxy Statement/Prospectus.
Q:
Are there risks associated with the Proposed Transactions?
A:
Yes. The material risks and uncertainties associated with the Proposed Transactions are discussed in the section entitled “Risk Factors” beginning on page 51 and the section entitled “Cautionary Statement Concerning Forward-Looking Statements” beginning on page 78. Those risks include, among others, the possibility that the Proposed Transactions may not be completed, the possibility that MDC may fail to realize the anticipated benefits of the Proposed Transactions, the risk that the Redomiciliation may give rise to significant Canadian corporate tax, the uncertainty that MDC will be able to integrate Stagwell successfully and the risk that the Combined Company will be required to make substantial payments pursuant to the Tax Receivables Agreement and such payments may make the Combined Company a less attractive target to potential acquirers due to the amounts that would be payable to Stagwell in change of control transactions pursuant to the Tax Receivables Agreement.
 
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Q:
What are the material income tax consequences of the Proposed Transactions to MDC Canada Shareholders?
A:
The following are the material income tax consequences:
Canadian Federal Income Tax Considerations for MDC Canada Shareholders
MDC Canada does not anticipate that the Proposed Transactions should result in tax, for Canadian federal income tax purposes, to MDC Canada Common Shareholders (other than those who exercise Dissent Rights or elect to recognize a gain on the MDC Merger), as further described under the heading “Material Canadian Federal Income Tax Considerations For MDC Canada Shareholders.
Resident Holders are strongly urged to review the section below entitled “Material Canadian Federal Income Tax Considerations For MDC Canada Shareholders” and to consult with their own tax advisors regarding the Canadian income tax treatment of the Proposed Transactions to them in their particular circumstances, as well as the tax consequences to them of the ownership and disposition of Combined Company Shares following completion of the Proposed Transactions.
U.S. Federal Income Tax Considerations for MDC Canada Shareholders
The Proposed Transactions, and specifically, the Redomiciliation, may trigger U.S. federal income tax for U.S. Holders (as defined in “Material U.S. Federal Income Tax Considerations for MDC Canada Shareholders”). In general, subject to the potential application of the PFIC rules (as described in “Material U.S. Federal Income Tax Considerations for MDC Canada Shareholders — U.S. Tax Consequences of the Redomiciliation to U.S. Holders — Passive Foreign Investment Company Status”), U.S. Holders who own MDC Canada Shares with a fair market value of at least $50,000 at the time of the Redomiciliation will be taxed on the built-in gain (if any) in their MDC Canada Shares (unless they elect to include the “all earnings and profits amount”). See “Material U.S. Federal Income Tax Considerations for MDC Canada Shareholders” below for more information regarding certain U.S. federal income tax considerations relevant to such U.S. Holders and the election described above. Notwithstanding the above, special rules apply to 10% U.S. Shareholders (as defined in “Material U.S. Federal Income Tax Considerations for MDC Canada Shareholders”). 10% U.S. Shareholders should consult their own tax advisors regarding the U.S. federal and other applicable tax consequences of the Proposed Transactions to them in light of their particular circumstances.
Non-U.S. Holders (as defined in “Material U.S. Federal Income Tax Considerations for MDC Canada Shareholders”) generally should not be subject to U.S. federal income tax in respect of the Proposed Transactions, unless they have certain connections to the United States (see “Material U.S. Federal Income Tax Considerations for MDC Canada Shareholders” below for more information). However, depending on their particular circumstances (including their jurisdiction of fiscal residence), Non-U.S. Holders may be subject to non-U.S. taxes in respect of the Proposed Transactions.
The brief U.S. tax summary provided above is qualified in its entirety by the section “Material U.S. Federal Income Tax Considerations for MDC Canada Shareholders” below, which provides a summary of the principal U.S. federal income tax considerations generally relevant to (a) U.S. Holders and Non-U.S. Holders participating in the Proposed Transactions, and (b) the ownership and disposition of Combined Company Shares received pursuant to the Proposed Transactions. MDC Canada Shareholders are urged to consult with and rely on their own tax advisors to determine the particular tax consequences to them of the Proposed Transactions as well as the tax consequences of the ownership and disposition of Combined Company Shares received pursuant to the Proposed Transactions.
Q:
What are the corporate tax consequences of the Proposed Transactions?
A:
The following are the corporate tax consequences:
Canadian Federal Income Tax Considerations
The Redomiciliation will cause the Company to cease to be resident in Canada for purposes of the Canadian Tax Act and as a result the Company’s taxation year will be deemed to have ended immediately
 
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prior to the Redomiciliation. Immediately prior to this deemed year end, the Company will be deemed to have disposed of each of its properties for proceeds of disposition equal to the fair market value of such properties at that time and will be deemed to have reacquired such properties at a cost amount equal to that fair market value. The Company will be subject to income tax under Part I of the Canadian Tax Act on any income and net taxable capital gains which arise as a result of this deemed disposition (after the utilization of any available capital losses or non-capital losses).
The Company will also be subject to an additional “emigration tax” under Part XIV of the Canadian Tax Act on the amount, if any, by which the fair market value (immediately before the Company’s deemed year end resulting from the Redomiciliation), of all of its properties, exceeds the total amount of certain of its liabilities and the paid-up capital (determined for purposes of the emigration tax), of all the issued and outstanding shares of MDC Canada immediately before the deemed year end. This additional tax is generally payable at the rate of 25% but is expected to be reduced to 5% under the Canada-United States Tax Convention.
The quantum of Canadian federal income tax payable by the Company as a result of the Redomiciliation will depend upon a number of considerations including the fair market value of its properties, the amount of its liabilities, the Canada-U.S. dollar exchange rate, its shareholder composition, as well as certain Canadian tax attributes, accounts and balances of the Company, each as of the Redomiciliation Effective Time. Prior to the Redomiciliation Effective Time, there is no certainty that the fair market value of the properties of the Company will not increase, and there is no certainty that the estimated fair market value of the properties of the Company or the amounts of its relevant tax attributes will be accepted by Canadian federal tax authorities, which may result in additional taxes payable as a result of the Redomiciliation. Additionally, it is possible that valuations and implied valuations of the Company’s property are made available which may be relevant in assessing the potential Canadian tax costs of the Redomiciliation. As a result, the quantum of Canadian tax payable by the Company in connection with the Redomiciliation may significantly exceed the Company’s estimates that are reflected in the pro forma financial statements, i.e., approximately $21 million. For more information regarding the Company’s estimates of the Canadian tax payable and the underlying assumptions related thereto, see the section entitled “Unaudited Pro Forma Condensed Consolidated Financial Information”.
U.S. Federal Income Tax Considerations
The Redomiciliation should qualify as a “reorganization” under section 368(a) of the Internal Revenue Code. Specifically, the Redomiciliation should be treated, for U.S. federal income tax purposes, as if MDC Canada (i) transferred all of its assets and liabilities to a new U.S. corporation (MDC Delaware) in exchange for all of the outstanding stock of MDC Delaware and (ii) then distributed the stock of MDC Delaware that MDC Canada received in the transaction to the MDC Canada Shareholders in liquidation of MDC Canada. Additionally, the Company expects the Business Combination and formation of the Up-C structure to be treated as a deemed transfer by New MDC of its assets to OpCo and an assumption of New MDC’s liabilities by OpCo in a transaction intended to qualify as a contribution to OpCo in exchange for OpCo Common Units and OpCo Preferred Units under section 721 of the Code, and that Stagwell’s contributions of its businesses to OpCo is similarly intended to be subject to section 721 of the Code. U.S. tax rules relating to the formation and operation of partnerships are complex, and Certain elements of the partnership structure can be expected to give rise to corporate taxable income for the Combined Company if, for example, OpCo were to assume certain liabilities of the Combined Company that are unrelated to business operations and such assumption is treated for U.S. tax purposes as part of a sale transaction that includes the Proposed Transactions.
There can be no assurances that material additional adverse U.S. tax consequences will not result from the Proposed Transactions, and there can be no assurance that the Internal Revenue Service will agree with or not otherwise challenge the Company’s position on the tax treatment of the Proposed Transactions or of internal restructuring transactions or financing transactions undertaken prior to, after, or in connection with the Proposed Transactions, which could result in higher U.S. federal tax costs for the Combined Company than currently anticipated, including a reduction in the net operating loss carryforwards of Maxxcom Inc. (the direct or indirect owner of substantially all of MDC’s U.S. businesses).
 
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The Company has not applied for a ruling related to the Proposed Transactions and does not intend to do so.
Q:
Who is entitled to vote at the Meeting?
A:
Only MDC Canada Shareholders of record at the close of business on May 10, 2021 (the “Record Date”), are entitled to notice of the Meeting and to vote thereat or at any adjournment or postponement thereof. As of the close of business on the Record Date, May 10, 2021, 78,601,838 MDC Canada Class A Common Shares, 3,743 MDC Canada Class B Common Shares, 95,000 MDC Canada Series 4 Shares and 50,000 MDC Canada Series 6 Shares were issued and outstanding.
Each (i) issued and outstanding MDC Canada Class A Common Share, MDC Canada Series 4 Share and MDC Canada Series 6 Share on the Record Date is entitled to one vote and (ii) each issued and outstanding MDC Canada Class B Common Share on the Record Date is entitled to twenty votes on the Special Approval Proposals.
Each (i) issued and outstanding MDC Canada Class A Common Share on the Record Date is entitled to one vote and (ii) each issued and outstanding MDC Canada Class B Common Share on the Record Date is entitled to twenty votes on the Ordinary Proposals.
Your vote is very important, regardless of the number of MDC Canada Shares that you own. Whether or not you expect to attend virtually, you should authorize a proxyholder to vote your MDC Canada Shares as promptly as possible so that your MDC Canada Shares may be represented and voted at the Meeting.
Q:
Are any MDC Canada Shareholders already committed to vote in favor of the Transaction Proposals?
A:
Yes. Stagwell Holdings, which held 100% of the MDC Canada Series 6 Shares as of May 10, 2021, entered into an agreement with MDC (the “Stagwell Letter Agreement”), pursuant to which, among other things, Stagwell Holdings has agreed to vote all of its MDC Canada Series 6 Shares in favor of the Transaction Proposals. The Stagwell Letter Agreement is attached as Annex D to this Proxy Statement/Prospectus.
BSPI, which held 100% of the MDC Canada Series 4 Shares as of May 10, 2021, entered into the Second Goldman Letter Agreement, pursuant to which, among other things, BSPI has agreed to vote all of its MDC Canada Series 4 Shares in favor of the Transaction Proposals. The Second Goldman Letter Agreement is attached as Annex E to this Proxy Statement/Prospectus.
Q:
What is the quorum for the Meeting?
A:
In order for business to be conducted at the Meeting, a quorum must be present. A quorum for the transaction of business at the Meeting is not less than (i) 33 1/3% of the MDC Canada Common Shares, MDC Canada Series 4 Shares and MDC Canada Series 6 Shares, together as a single class, and (ii) a majority of the MDC Canada Series 4 Shares and MDC Canada Series 6 Shares, as separate classes, entitled to vote at the Meeting, represented either virtually or by proxy. If you submit a properly executed form of proxy, attached hereto as Annex F or vote by telephone or the Internet, you will be considered part of the quorum.
Q:
How do I vote my MDC Canada Shares?
A:
MDC Canada Common Shareholders whose MDC Canada Shares are registered in their names may vote in the following ways:

Internet: Visit www.astvotemyproxy.com and follow the instructions. You will need your 13-digit control number on the back of the proxy form.

Telephone: Call 1-888-489-5760 from a touch-tone phone and follow the voice instructions. You will need your 13-digit control number on the back of the proxy form. You cannot appoint a proxyholder via the telephone voting system.
 
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Email: proxyvote@astfinancial.com.

Mail: Complete, sign and date your proxy form and return it in the business-reply envelope included in your package.

Fax: Complete, sign and date your proxy form and fax both sides of the proxy form to 1-866-781-3111 (toll free in North America) or 1-416-368-2502 (outside of North America).

Virtually: Attend the Meeting and vote virtually at https://web.lumiagm.com/401933402 by clicking “I have a control number” and then entering your unique 13-digit control number located on your form of proxy and the password “mdc2021” ​(case-sensitive).
If your MDC Canada Shares are not registered in your name, but are held in the name of a nominee (usually a broker, bank, trust company or other intermediary), you should have received a package of materials from your nominee and you should follow the instructions therein. In addition, beneficial MDC Canada Shareholders may be contacted by Kingsdale to conveniently vote directly over the telephone using Broadridge’s QuickVoteTM service. Beneficial MDC Canada Shareholders who wish to attend the Meeting virtually and indirectly vote their MDC Canada Shares may only do so as proxyholder for the registered MDC Canada Shareholder.
Due to the continuing public health impact of the coronavirus outbreak (COVID-19) and to support the health and well-being of our employees and shareholders, the Company has decided that the Meeting will be held solely by means of remote communication as a virtual meeting. A virtual Meeting enables registered MDC Canada Common Shareholders and duly appointed proxyholders to join us online, listen to the Meeting, ask questions and receive answers online, and vote online at https://web.lumiagm.com/401933402 by clicking “I have a control number” and then entering your unique 13-digit control number located on your form of proxy and the password “mdc2021” ​(case-sensitive). MDC Canada Common Shareholders and duly appointed proxyholders will have the ability to submit questions during the Meeting via the Meeting website.
Q:
What is a proxy?
A:
A proxy is your legal designation of another person, referred to as a “proxyholder”, to vote your MDC Canada Shares. The document used to designate a proxyholder to vote your MDC Canada Shares is called a “form of proxy.” The “form of proxy” for the Transaction Proposals and the Compensation Proposal is attached hereto as Annex F. The form of the MDC Delaware Proxy is attached hereto as Annex G.
Q:
Can I appoint someone other than the person(s) designated by management of the Company to vote my MDC Canada Shares?
A:
Yes. If you are appointing a proxyholder other than the representatives of management of the Company whose names are on the proxy, YOU MUST return your proxy to AST Trust Company (Canada) (“AST Canada”) AND register your proxyholder by contacting AST Canada at 1-866-751-6315 (within North America) or 212-235-5754 (outside North America), and provide AST Canada with the required information for your proxyholder before proxy cut-off so that AST Canada may provide the proxyholder with a Control Number. This Control Number will allow your proxyholder to log in to and vote at the Meeting online. WITHOUT A CONTROL NUMBER, YOUR PROXYHOLDER WILL NOT BE ABLE TO VOTE OR ASK QUESTIONS AT THE MEETING. THEY WILL ONLY BE ABLE TO ATTEND THE MEETING ONLINE AS A GUEST.
Registered MDC Canada Shareholders must also provide AST Trust Company (Canada) with their duly completed legal proxy if they wish to vote at the meeting or appoint a third party as their proxyholder. Legal proxies should be returned to AST Trust Company (Canada), Attention: Proxy Department, P.O. Box 721, Agincourt, Ontario M1S 0A1 or e-mail to proxyvote@astfinancial.com and must be labeled “Legal Proxy”. In addition, YOU MUST contact AST Canada by phone at 1-866-751-6315 (within North America) or 212-235-5754 (outside North America) before proxy cut-off so that AST Canada may provide the proxyholder with a control number. This control number will
 
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allow you to log in and vote at the meeting. Without a control number you will only be able to log in to the meeting as a guest and will not be able to vote.
Q:
If I am not going to attend the Meeting, should I return my form of proxy or otherwise vote my MDC Canada Shares?
A:
Yes. Completing, signing, dating and returning the form of proxy by mail or fax, submitting a proxy by calling the toll-free number shown on the form of proxy or submitting a proxy by visiting the website shown on the form of proxy ensures that your MDC Canada Shares will be represented and voted at the Meeting, even if you otherwise do not attend.
Q:
What is the deadline to provide my proxy?
A:
To be valid your proxy must be received by our transfer agent, AST Trust Company (Canada) (“AST Canada”), Attn: Proxy Department, P.O. Box 721, Agincourt, Ontario, M1S 0A1, by fax 1-866-781-3111 (toll-free North America) or 416-368-2502, by e-mail at proxyvote@astfinancial.com, by internet voting at www.astvotemyproxy.com, or by telephone voting at 1-888-489-5760 no later than 12:00 p.m. ET on June 18, 2021 or, if the Meeting is adjourned or postponed, at least 48 hours (excluding Saturdays, Sundays and statutory holidays in Canada and the U.S.) before the time of the adjourned or postponed Meeting.
The Company reserves the right to accept late proxies and to waive the proxy deadline, with or without notice, but is under no obligation to accept or reject any particular late proxy.
Q:
Can I change or revoke my vote?
A:
Yes. If your MDC Canada Shares are registered in your name, you can change or revoke a previously delivered vote in the following ways:

by written instrument executed by the shareholder or by his or her attorney authorized in writing or, if the shareholder is a body corporate, by an officer or attorney thereof duly authorized, and deposited at AST Canada, Attention: Proxy Department, P.O. Box 721, Agincourt,Ontario M1S 0A1, not later than 12:00 p.m. ET on June 18, 2021 (or, if the Meeting is adjourned or postponed, at least 48 hours (excluding Saturdays, Sundays and statutory holidays in Canada and the U.S.) before the adjourned or postponed Meeting) or with the Chairman of the Meeting on the day of the Meeting or any adjournment or postponement thereof.

Submit a later-dated, new proxy card, which must be received by 12:00 p.m. ET on June 18, 2021 (or, if the Meeting is adjourned or postponed, at least 48 hours (excluding Saturdays, Sundays and statutory holidays in Canada and the U.S.) before the adjourned or postponed Meeting), in which case only the later-dated proxy is counted and the earlier proxy is revoked.

Submit a proxy via the Internet or by telephone at a later date, which must be received by 12:00 p.m. ET on June 18, 2021 (or, if the Meeting is adjourned or postponed, at least 48 hours (excluding Saturdays, Sundays and statutory holidays in Canada and the U.S.) before the adjourned or postponed Meeting), in which case only the later-dated proxy is counted and the earlier proxy is revoked.

Attend the Meeting and vote virtually; attendance at the Meeting will not, however, in and of itself, constitute a vote or revocation of a prior proxy.
Beneficial owners of MDC Canada Shares may change their voting instruction by submitting new voting instructions to the brokers, banks or other nominees that hold their shares of record or by requesting a proxy issued in their own name from such broker, bank or other nominee and voting virtually at the Meeting.
Q:
If my MDC Canada Shares are held in “street name” by my broker, bank or other nominee, will my broker, bank or other nominee automatically vote my shares for me?
A:
No. If your MDC Canada Shares are held in the name of a broker, bank or other nominee, you will receive separate instructions from your broker, bank or other nominee describing how to vote your
 
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shares. Please check with your broker, bank or other nominee and follow the voting procedures provided by your broker, bank or other nominee on your voting instruction form.
You should instruct your broker, bank or other nominee how to vote your MDC Canada Shares. Under the rules applicable to broker-dealers, your broker, bank or other nominee does not have discretionary authority to vote your shares in respect of the Transaction Proposals. A so-called “broker non-vote” results when banks, brokers and other nominees return a valid proxy voting upon a matter or matters for which the applicable rules provide discretionary authority but do not vote on a particular proposal because they do not have discretionary authority to vote on the matter and have not received specific voting instructions from the beneficial owner of such shares. The Company does not expect any broker non-votes at the Meeting because the rules applicable to banks, brokers and other nominees only provide brokers with discretionary authority to vote on proposals that are considered routine, whereas the Transaction Proposals are considered non-routine. As a result, no broker will be permitted to vote your MDC Canada Shares at the Meeting with respect to the Transaction Proposals without receiving instructions.
Q:
What is householding and how does it affect me?
A:
The SEC permits companies to send a single set of proxy materials to any household at which two or more stockholders reside, unless contrary instructions have been received, but only if the applicable company provides advance notice and follows certain procedures. In such cases, each stockholder continues to receive a separate notice of the meeting and proxy card.
If you hold your MDC Canada Shares in “street name,” your bank, broker or other nominee may have instituted householding. If your household has multiple accounts holding MDC Canada Shares, you may have already received householding notification from your bank, broker or other nominee. Please contact your bank, broker or other nominee directly if you have any questions or require additional copies of this Proxy Statement/Prospectus. The broker will arrange for delivery of a separate copy of this Proxy Statement/Prospectus promptly upon your written or oral request. You may decide at any time to revoke your decision to household, and thereby receive multiple copies. Not all banks, brokers or other nominees may offer the opportunity to permit beneficial owners to participate in householding. If you want to participate in householding and eliminate duplicate mailings in the future, you must contact your bank, broker or other nominee directly.
Q:
Who is making and paying for this proxy solicitation?
A:
The Company is making this proxy solicitation and will pay for all of the costs of soliciting these proxies. Its directors and certain of its employees may solicit proxies virtually, in person or by telephone, fax or email. The Company will pay these employees and directors no additional compensation for these services. The Company has retained the services of (i) Kingsdale Advisors as its strategic shareholder advisor and proxy solicitation agent to solicit proxies in Canada and the United States and (ii) Spotlight to assist in engaging with MDC Shareholders. The Company will deliver proxy-related materials to nominees, custodians and fiduciaries, and they will be asked to promptly forward them to the beneficial (non-registered) MDC Canada Shareholders. The Company will also reimburse such nominees, custodians and fiduciaries for their expenses in sending proxy-related materials to the beneficial (non-registered) MDC Canada Shareholders and obtaining their proxies.
Q:
Are MDC Canada Shareholders entitled to Dissent Rights?
A:
Dissent rights will be available to MDC Canada Shareholders only in connection with the Redomiciliation Proposal in accordance with the provisions under the CBCA. Registered holders of MDC Canada Shares are entitled to Dissent Rights only if they strictly follow the procedures specified in the CBCA. Persons who are beneficial owners of MDC Canada Shares registered in the name of an intermediary who wish to dissent should be aware that only registered MDC Canada Shareholders are entitled to Dissent Rights. Accordingly, a beneficial owner of MDC Canada Shares desiring to exercise this right must make arrangements for the MDC Canada Shares beneficially owned by such MDC Canada Shareholder to be registered in the MDC Canada Shareholder’s name prior to the time the Dissent Notice is required to be received by the Company, or, alternatively, make arrangements for the registered
 
23

 
holder of such MDC Canada Shares to dissent on the MDC Canada Shareholder’s behalf. Registered MDC Canada Shareholders who dissent will have the right to be paid fair value by the Company for all, but not less than all, of the MDC Canada Shares beneficially owned by such holder in accordance with the CBCA, provided that the holder strictly complies with the dissent procedures with respect to the Redomiciliation Proposal and the Redomiciliation becomes effective. See “Dissenters’ and Appraisal Rights”.
If you wish to exercise Dissent Rights, you should review the requirements summarized in this Proxy Statement/Prospectus carefully and consult with your legal advisor. See “Dissenters’ and Appraisal Rights — Dissenters’ Rights”.
Q:
Are MDC Canada Shareholders entitled to appraisal rights?
A:
Appraisal rights will be available to holders of MDC Canada Class B Common Shares and MDC Canada Preferred Shares in connection with the MDC Merger only under the circumstances set forth in Section 262 of the DGCL and subject to their compliance with the requirements of Section 262. In order to preserve any appraisal rights that a MDC Canada Shareholder may have, in addition to otherwise complying with the applicable provisions of the DGCL, such MDC Canada Shareholder must not vote in favor of, or consent to, the MDC Delaware Proxy Proposal and must submit a written demand for appraisal in a timely manner in accordance with the applicable provisions of the DGCL.
To the extent appraisal rights are available under Delaware law, a MDC Canada Shareholder who properly seeks appraisal and strictly complies with the applicable requirements of the DGCL (a “Dissenting Delaware Stockholder”) will be entitled to receive a cash payment equal to the fair value of his, her or its MDC Delaware Class B Common Shares or MDC Delaware Preferred Shares in connection with the MDC Merger in lieu of the transaction consideration. The “fair value” of MDC Delaware Shares as determined by the Delaware Court of Chancery (the “Court”) could be more or less than, or the same as, the value of the consideration that a Dissenting Delaware Stockholder would otherwise be entitled to receive under the terms of the Transaction Agreement. To seek appraisal, an MDC Canada Shareholder must comply strictly with all of the procedures required under the DGCL, including delivering a written demand for appraisal to the Company in a timely manner, not voting in favor of, or consenting to, the MDC Merger Proposal and continuing to hold his, her or its shares through the Closing. Failure to comply strictly with all of the procedures required under the DGCL will result in the loss of appraisal rights.
For a further description of the appraisal rights available to MDC Canada Shareholders and the procedures required to exercise such appraisal rights, see “Appraisal Rights” and the provisions of Section 262 of the DGCL that grant appraisal rights and govern such procedures, which are attached as Annex H to this Proxy Statement/Prospectus. If an MDC Canada Shareholder holds shares through a broker, bank or other nominee and the MDC Canada Shareholder wishes to exercise appraisal rights, such stockholder should consult with such stockholder’s broker, bank or other nominee sufficiently in advance of the Meeting to permit such nominee to exercise appraisal rights on such stockholder’s behalf. In view of the complexity of Delaware law, MDC Canada Shareholders who may wish to pursue appraisal rights should promptly consult their legal and financial advisors.
Q:
Who can answer my questions?
A:
If you have any questions about the information contained in this Proxy Statement/Prospectus or require assistance in completing your form of proxy or voting instruction form, please contact: Kingsdale Advisors by telephone at 1-877-659-1821 (toll-free in North America) or at 1-416-867-2272 (collect outside North America) or by e-mail at contactus@kingsdaleadvisors.com.
 
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SUMMARY
The following is a summary of certain information contained elsewhere in this Proxy Statement/Prospectus. This summary is qualified in its entirety by the more detailed information appearing elsewhere in this Proxy Statement/Prospectus, including the annexes hereto and the documents incorporated by reference herein. It is recommended that MDC Canada Shareholders read this Proxy Statement/Prospectus and consult with their own legal, tax, financial and other professional advisors with respect to the matters to be acted on at the Meeting. Capitalized terms used but not otherwise defined in this summary have the meanings set forth under the heading “Glossary”.
The Proposed Transactions
The terms and conditions of the Proposed Transactions are contained in the Transaction Agreement, which is attached to this Proxy Statement/Prospectus as Annex I. You should read the Transaction Agreement carefully as it is the legal document that governs the Proposed Transactions.
Overview
Through a series of steps and transactions, including the Redomiciliation and MDC Merger, OpCo will become a direct subsidiary of New MDC. Stagwell will make the Stagwell OpCo Contribution in exchange for the Stagwell OpCo Units and the Stagwell New MDC Contribution in exchange for the Stagwell Class C Shares. On a pro forma basis (and (i) without giving effect to the conversion of any Combined Company Preferred Shares and (ii) including unvested restricted stock and restricted stock units of MDC), following the completion of the Proposed Transactions, it is anticipated that the existing holders of MDC Canada Class A Common Shares (including Stagwell) and MDC Canada Class B Common Shares will receive Combined Company Class A Common Shares and Combined Company Class B Common Shares equal to approximately 26% of the common equity of the Combined Company and Stagwell would be issued an amount of Combined Company Class C Common Shares equivalent to approximately 74% of the voting rights of the Combined Company and exchangeable, together with Stagwell OpCo Units, for Combined Company Class A Common Shares on a one-for-one basis at Stagwell’s election following a six-month holding period. However, the number of Stagwell OpCo Units, the number of Stagwell Class C Shares and the percentage of the Combined Company that Stagwell will hold following the consummation of the Proposed Transactions will each be reduced, and the percentage of the Combined Company that existing MDC Canada Shareholders will hold will be proportionally increased, if Stagwell is unable to effect the Stagwell Restructuring prior to the Closing.
Following the completion of the Proposed Transactions, the Combined Company will be a Delaware corporation organized in an Up-C structure, in which all of the assets and business of MDC and assets and businesses contributed by Stagwell in the Stagwell OpCo Contribution will be held by OpCo, an entity treated as a partnership, or “passthrough” entity, for U.S. federal income tax purposes, and will be operated through OpCo and its subsidiaries. The Combined Company’s sole material asset will be the common units and preferred units of OpCo.
Transaction Steps
Below is a step-by-step list illustrating the material steps involved in the Proposed Transactions. Each of these events, as well as any conditions to their consummation, is discussed in more detail elsewhere in this Proxy Statement/Prospectus.

Step 1: Redomiciliation: The Company shall change its jurisdiction of incorporation from the federal jurisdiction of Canada to the State of Delaware. The Company, following such Redomiciliation, is referred to herein as MDC Delaware. See “Questions and Answers about the Proposed Transactions and the Meeting — What are the Proposed Transactions? — Redomiciliation”.

Step 2: New MDC Corporate Conversion: New MDC, a wholly-owned subsidiary of MDC Delaware, shall convert into a Delaware corporation. See “Questions and Answers about the Proposed Transactions and the Meeting — What are the Proposed Transactions? — New MDC Corporate Conversion and MDC Merger”.
 
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Step 3: MDC Merger: Merger Sub, a wholly owned subsidiary of New MDC, shall merge with and into MDC Delaware with MDC Delaware surviving the merger (and being referred to herein as the Surviving Corporation after the merger) and New MDC becoming the new publicly listed parent company. See “Questions and Answers about the Proposed Transactions and the Meeting — What are the Proposed Transactions? — New MDC Corporate Conversion and MDC Merger”.

Step 4: MDC Delaware LLC Conversion: The Surviving Corporation, a wholly-owned subsidiary of New MDC, shall convert into a Delaware limited liability company referred to herein as OpCo. See “Questions and Answers about the Proposed Transactions and the Meeting — What are the Proposed Transactions? — MDC Delaware LLC Conversion”.

Step 5: Stagwell Contributions: Stagwell shall make the Stagwell OpCo Contribution and the Stagwell New MDC Contribution in exchange for the Stagwell OpCo Units and the Stagwell Class C Shares, respectively. New MDC, following the Stagwell Contributions, is referred to herein as the Combined Company. See “Questions and Answers about the Proposed Transactions and the Meeting — What are the Proposed Transactions? — Stagwell Contributions”.
Additionally, prior to, in connection with, and in some cases following the Proposed Transactions, New MDC, MDC and OpCo, respectively, intend to engage in certain restructuring transactions to, among other things, facilitate changes to the group’s internal financing structure and create a holding company structure under OpCo, whereby all of the subsidiaries of the Combined Company that are treated as corporations for U.S. tax purposes would be held through a single corporate holding company.
Structure Chart
MDC’s simplified corporate structure as of December 20, 2020 is reflected in the below diagram:
(1)
As of January 31, 2021. Includes 115,000 shares held directly by Stagwell Group LLC and 25,000 shares held directly by Mark Penn.
 
26

 
Following the completion of the Proposed Transactions, the Combined Company’s corporate structure would be as set forth in the below diagram:
(1)
As of January 31, 2021. Includes 115,000 shares held directly by Stagwell Group LLC and 25,000 shares held directly by Mark Penn.
(2)
Pursuant to the Second Goldman Letter Agreement, shortly after the completion of the Proposed Transactions, a portion of the Combined Company Series 4 Shares are expected to be redeemed for the Goldman Note, and the remainder are expected to be converted into new Combined Company Series 8 Shares.
(3)
Immediately following the Closing, and in connection with the Stagwell FAF Unit Issuance, Stagwell will transfer to Stagwell FAF a number of the Stagwell OpCo Units, together with an equivalent number of Combined Company Class C Common Shares, equal in number to the number of Stagwell FAF Units issued pursuant to the Stagwell FAF Unit Issuance. It is currently anticipated that 19,644,435 Stagwell FAF Units will be issued pursuant to the Stagwell FAF Unit Issuance. See “The Proposed Transactions  —  Consideration to be Received by MDC Canada Shareholders and Consequences of the Proposed Transactions”.
 
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The Parties to the Business Combination: MDC
MDC Partners Inc.
MDC Partners Inc.
One World Trade Center, Floor 65
New York, NY 10007
Telephone: (646) 429-1800
The Company is a leading global marketing and communications network, providing marketing and business solutions that realize the potential of combining data and creativity. Through its network of agencies, the Company delivers a broad range of client services, including global advertising and marketing, data analytics and insights, mobile and technology experiences, media buying, planning and optimization, direct marketing, database and customer relationship management, business consulting, sales promotion, corporate communications, market research, corporate identity, design and branding services, social media strategy and communications, product and service innovation, and e-commerce management.
New MDC LLC
New MDC LLC
One World Trade Center, Floor 65
New York, NY 10007
Telephone: (646) 429-1800
New MDC LLC, a Delaware limited liability company, is a newly formed, direct wholly owned subsidiary of the Company that was organized specifically for the purpose of completing the Proposed Transactions. New MDC has engaged in no business activities to date and has no material assets or liabilities of any kind, other than those incident to its formation in connection with the Proposed Transactions. Prior to the Closing, New MDC will convert into a Delaware corporation and following the MDC Merger, New MDC will become the publicly listed parent company, successor to MDC Canada.
Midas Merger Sub 1 LLC
Midas Merger Sub 1 LLC
One World Trade Center, Floor 65
New York, NY 10007
Telephone: (646) 429-1800
Midas Merger Sub 1 LLC, a Delaware limited liability company, is a newly formed, direct wholly owned subsidiary of the New MDC that was organized specifically for the purpose of completing the Proposed Transactions. Merger Sub has engaged in no business activities to date and has no material assets or liabilities of any kind, other than those incident to its formation in connection with the Proposed Transactions. Prior to the Closing, Midas Merger Sub 1 LLC will merge with and into MDC Delaware with MDC Delaware surviving the merger.
The Parties to the Business Combination: Stagwell
Stagwell Media was founded in 2015 by Mark Penn. Mr. Penn is a limited partner and has served as managing partner of Stagwell since its inception. Stagwell Marketing Group LLC (“Stagwell Marketing”) is a Delaware limited liability company that was formed on March 9, 2017 and was formed to hold the previously existing interests of Stagwell Media in its portfolio of marketing services companies. Stagwell Marketing is governed by the terms and conditions of a limited liability agreement effective as of the same date. Stagwell Media owns all of the equity interests of Stagwell Marketing through Stagwell Marketing Group Holdings LLC.
The Stagwell Subject Entities comprise Stagwell Marketing, and its direct and indirect subsidiaries that own and operate a portfolio of marketing services companies representing the assets and businesses that will be contributed by Stagwell in the Potential Transactions pursuant to the Stagwell Contribution.
 
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Stagwell is an independent, full-service, technology-driven marketing and communications group at the crossroads of the art and science of creativity. Stagwell excels at offering clients simplicity and speed of execution. The Stagwell companies have over 3,700 employees operating in more than 20 countries across North America, Asia, Europe and South America.
In 2019, Stagwell made a $100 million investment in MDC Partners, pursuant to which Mr. Penn was appointed CEO and Chairman of MDC Partners.
For more information about Stagwell and the Stagwell Subject Entities, please see the sections entitled, “Risk Factors — Risks Related to Stagwell,” “Stagwell Business,” “Management’s Discussion of Financial Condition and Results of Operations of the Stagwell Subject Entities,” and “Quantitative and Qualitative Disclosures about Market Risk of Stagwell.”
Treatment of Existing MDC Equity Awards in the Proposed Transactions
Following the completion of the Proposed Transactions, each holder of MDC Incentive Awards will hold the same number of MDC Incentive Awards as the number of MDC Incentive Awards such holder held immediately prior to the Redomiciliation Effective Time, except that the security referenced under or issuable upon exercise or settlement of each such Combined Company Incentive Award will be Combined Company Common Shares (or, as applicable, the cash equivalent) rather than MDC Canada Common Shares (or, as applicable, the cash equivalent). Except for the foregoing, following the completion of the Proposed Transactions, each MDC Incentive Award will continue to be governed by the same terms and conditions as were applicable to such MDC Incentive Award immediately prior to the Redomiciliation Effective Time.
For a more complete description of the treatment of the MDC Incentive Awards held by MDC’s directors and executive officers in connection with the Proposed Transactions, see “The Proposed Transactions — Interests of MDC’s Directors and Executive Officers in the Proposed Transactions” beginning on page 200 of this Proxy Statement/Prospectus.
Treatment of Existing MDC Debt in the Proposed Transactions
Prior to the Closing, the MDC Credit Agreement is expected to be terminated in full.
In addition, prior to the Proposed Transactions, either (A) certain amendments to and waivers of the terms of the Debt Indenture are expected to be made effective and operative or (B) the Senior Note Refinancing is expected to be effected. The Consent Solicitation was launched on January 21, 2021 and expired on February 5, 2021. The requisite consents of the Senior Note holders was received, and MDC entered into a supplemental indenture to make such amendments and waiver effective (but not operative) on February 8, 2021. As a result of such amendments, when operative, among other matters, the guarantors in respect of the Debt Indenture would cease to be determined by reference to the terms of the Credit Agreement and would, following the consummation of the Proposed Transactions, be determined by reference to the terms of the Stagwell Credit Agreements. Such amendments and waivers will become operative on MDC making of an announcement to that effect.
Pursuant to the terms of the Consent Solicitation, MDC has agreed to make certain payments to the Senior Note holders as at a record date of 5 p.m. New York City time on January 20, 2021 (such holders, the “Payment Holders”). First, MDC paid $17,405,120 (or $20 in respect of each $1,000 principal amount of Senior Notes outstanding) on February 8, 2021 when the proposed amendment and waivers were effective. Second, if the amendments and waivers become operative, MDC will, at the closing of the Proposed Transactions, make a further payment to the Payment Holders of $8,702,560 (or $10 in respect of each $1,000 principal amount of Senior Notes outstanding) (collectively, the “Consent Solicitation Consideration”). Such second payment will not be made in the event that the proposed amendments and waivers do not become operative, the Proposed Transactions are not consummated, or the Senior Notes have been redeemed (or an irrevocable notice of redemption delivered), defeased or discharged prior to the time at which the proposed amendments and waivers might otherwise become operative. If the amendments and waivers are made operative and the second consent payment is made, the aggregate amount of the Consent Solicitation Consideration will be $26,107,680.
 
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The Stagwell Credit Agreements will require guarantees and security interests of each domestic material subsidiary of the Company, other than any domestic subsidiary of the Company with no material assets other than capital stock (and debt securities, if any) or one or more foreign subsidiaries that are controlled foreign corporations (“CFCs”), and, accordingly, each non-domestic guarantor of the Debt Indenture will cease to be required to, and will cease to, provide any guarantees in respect of the Debt Indenture.
Board of Directors and Management of the Combined Company Following the Proposed Transactions
Following the Proposed Transactions, the Combined Company Board will consist of nine members, including Mr. Mark Penn. Three individuals who currently serve as independent directors of MDC will serve as directors on the Combined Company Board and the Combined Company has agreed to cause such directors to be nominated at the Combined Company’s next two annual meetings following completion of the Proposed Transactions; Mr. Penn will continue as a director as well as the Combined Company’s Chief Executive Officer. Stagwell will be entitled to designate four directors and has informed MDC that it expects to nominate at least two independent directors. An affiliate of Goldman Sachs will be entitled to designate one director to serve on the Combined Company Board. The directors and officers of the Combined Company will be identified prior to the Closing. See “Governance and Management of the Combined Company Following the Proposed Transactions  —  Structure of the Board of Directors”.
Reasons for the Proposed Transactions
In evaluating the Proposed Transactions, the Transaction Agreement and the Ancillary Agreements, and in reaching its determinations and making its recommendations, the MDC Special Committee consulted with the Disinterested Senior Executives and its legal and financial advisors, and gave careful consideration to the current and expected future financial position of MDC and all terms of the Transaction Agreement and the Ancillary Agreements.
The MDC Special Committee considered a number of factors including, among others, the following:

Moelis Opinion. The MDC Special Committee retained Moelis as its financial advisor in respect of, among other things, the Proposed Transactions, including with respect to the negotiation of a potential transaction with Stagwell. Moelis delivered an oral opinion (which was subsequently confirmed in writing) to the MDC Special Committee that, as of December 21, 2020, and based upon and subject to the assumptions made, procedures followed, matters considered and other limitations set forth in the Moelis Opinion, the Post-Transaction Ownership Percentage of the Combined Company to be held by the holders of MDC Canada Common Shares upon completion of the Proposed Transactions was fair, from a financial point of view, to the holders of MDC Canada Common Shares (other than the Interested Shareholders).

Canaccord Genuity Opinion and Formal Valuation. The MDC Special Committee received an independent formal valuation required to be obtained in connection with the Proposed Transactions pursuant to MI 61-101, along with a fairness opinion that, as of December 21, 2020 and based upon and subject to the qualifications, limitations and assumptions set forth therein and such other matters as Canaccord Genuity considered relevant, (i) the consideration to be paid by MDC for the Stagwell Subject Entities pursuant to the Transaction Agreement was fair, from a financial point of view, to the holders of MDC Canada Class A Common Shares (other than Mark Penn, Stagwell, Goldman Sachs and their affiliates), with such opinion assuming, among other items, the conversion of the MDC Canada Class B Common Shares into MDC Canada Class A Common Shares; (ii) the fair market value of the MDC Canada Class A Common Shares (assuming the conversion of the MDC Canada Class B Common Shares into MDC Canada Class A Common Shares) ranged from $4.70 to $7.40 per MDC Canada Class A Common Share; and (iii) the fair market value of the Stagwell Subject Entities ranged from $1.2 billion to $1.5 billion.

Transaction Agreement. The MDC Special Committee reviewed and negotiated the proposed Transaction Agreement and Ancillary Agreements and considered the independent legal advice of DLA Piper and such other matters as the MDC Special Committee deemed necessary or advisable in order to provide a recommendation to the MDC Board in respect of the Transaction Agreement and the Proposed Transactions.
 
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Prior MDC Strategic Review and Public Nature of the Stagwell Proposal. The MDC Special Committee considered the fact that prior to receipt of the Stagwell Proposal, the Company had recently conducted a robust and comprehensive strategic review process that took place over approximately seven months and involved outreach by the Company’s financial advisors at the time to not less than 34 third parties, which process resulted in no final or binding offers for an acquisition of, or investment in, the Company from any party other than Stagwell. Relatedly, the MDC Special Committee also considered the fact that following Stagwell’s public announcement of its proposal on June 26, 2020, putting other potential third-party bidders on notice of a possible transaction, no third-party had come forward during the approximately six-month period after publication of the Stagwell Proposal and prior to entry into the Transaction Agreement on December 21, 2020 to make a competing offer, and that as a result, it was unlikely that a competing proposal was likely to be made on terms as attractive as those negotiated with Stagwell.

Previous Stagwell Strategic Review and Stagwell’s Communicated Position to Not Support Alternative Transaction. In connection with the Stagwell 2019 Sale Process, Stagwell indicated that only one participant had expressed an interest in a transaction involving MDC and the 2019 Special Committee determined not to proceed to negotiations with such participant. The communicated lack of interested bidders in these prior exchanges led the MDC Special Committee to conclude that it was unlikely that a competing proposal was likely to be made on terms as attractive as those negotiated with Stagwell. The MDC Special Committee also noted Stagwell’s statement in the Stagwell Proposal that Stagwell, in its capacity as an existing holder of MDC Canada Shares, was not prepared to support, consent to or vote in favor of an alternative transaction by the Company, including an alternative business combination or sale transaction.
For further discussion of the Moelis Opinion and the Canaccord Genuity Opinion and Formal Valuation, see “The Proposed Transactions — Opinion of Moelis” and “The Proposed Transactions − Canaccord Genuity Opinion and Formal Valuation,” respectively.
In addition to the deliberations and review noted above, the MDC Special Committee discussed certain matters with the Disinterested Senior Executives and other members of the MDC Board, as well as its financial and legal advisors, and considered a number of factors (not in any relative order of importance) that supported the MDC Special Committee’s determination and recommendation in favor of the Proposed Transactions, including:

Shareholder Approval and Protection of Minority Interest: The Proposed Transactions are conditioned on receipt of the Required Shareholder Approvals. The Required Shareholder Approvals are protective of the rights of the MDC Canada Shareholders. The Redomiciliation Proposal and Business Combination Proposal require the affirmative vote of (i) at least two-thirds of the votes cast on such proposals, virtually or by proxy by the MDC Canada Shareholders, voting together as a single class, and (ii) at least a majority of the votes cast on such proposals, virtually or by proxy by the MDC Canada Shareholders, excluding the votes attached to MDC Canada Shares held by persons described in items (a) through (d) of Section 8.1(2) of MI 61-101, with holders of MDC Canada Shares voting together as a single class.

Alternative Proposal. The Transaction Agreement does not prevent a third party from making an unsolicited Alternative Proposal, and subject to compliance with the terms of the Transaction Agreement, at any time prior to receipt of the Required Shareholder Approvals, each of the MDC Special Committee and the MDC Board is not precluded from considering and responding to an unsolicited Alternative Proposal that the MDC Special Committee or the MDC Board, as applicable, determines in its good faith judgment, after consultation with its financial advisor and outside legal counsel, is or is reasonably likely to lead to a Superior Proposal, as further described under “The Transaction Agreement.”

Goldman Letter Agreement. On December 21, 2020, MDC and BSPI entered into the Initial Goldman Letter Agreement, pursuant to which, among other things, BSPI consented to the Proposed Transactions and agreed to vote its MDC Canada Series 4 Shares in favor of the Transaction Proposals, subject to entry with MDC into a definitive agreement. On April 21, 2021, MDC and BSPI entered into the Second Goldman Letter Agreement setting forth the definitive agreement
 
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contemplated by the Initial Goldman Letter Agreement. Please see the section entitled “Voting Agreements — Goldman Letter Agreement” for more information with respect to the Second Goldman Letter Agreement, and the Second Goldman Letter Agreement is attached hereto as Annex E.

Consent by Holders of Senior Notes: On December 21, 2020, MDC entered into separate consent and support agreements with holders of more than 50% of the aggregate principal amount of the Senior Notes.

Limited conditions and requirements for completion of the Proposed Transactions. The obligation of Stagwell to complete the Proposed Transactions is subject to a limited number of conditions, which the MDC Special Committee believes are reasonable under the circumstances.

Dissent Rights. Registered MDC Canada Shareholders who do not vote in favor of the Redomiciliation Proposal will have the right to exercise Dissent Rights and be paid fair value by MDC for all, but not less than all, of the MDC Canada Shares beneficially owned by each such registered MDC Canada Shareholder pursuant to the proper exercise of Dissent Rights in accordance with the CBCA. See “Dissenters’ and Appraisal Rights — Dissenters’ Rights.”

Appraisal Rights. Appraisal rights will be available to holders of MDC Canada Class B Common Shares and MDC Canada Preferred Shares in connection with the MDC Merger only under the circumstances set forth in Section 262 of the DGCL and subject to their compliance with the requirements of Section 262. See “Dissenters’ and Appraisal Rights — Appraisal Rights.”

Additional Factors: The MDC Special Committee also considered the following additional factors (i) the Stagwell 2019 Sale Process and the MDC Board and MDC Special Committee’s broader consideration of strategic alternatives in 2018 and 2019, (ii) the historical stock prices of MDC and the business outlook, (iii) the extensive due diligence review of the businesses of the Stagwell Subject Entities, (iv) the negotiated increase in the pro forma ownership of the pre-transaction MDC Canada Shareholders from the initial terms of the Stagwell Proposal, (v) the consideration adjustment mechanisms relating to the Stagwell Restructuring and (vi) the negotiation of a lock-up period on Stagwell’s ability to effect a Paired Interest Exchange.
Recommendation of the MDC Special Committee and MDC Board Related to the Proposed Transactions
MDC Special Committee
The MDC Special Committee, at its meeting on December 21, 2020, after consultation with the Disinterested Senior Executives, its financial and legal advisors and MDC’s financial and legal advisors, and after having taken into account the Moelis Opinion and the Canaccord Genuity Opinion and Formal Valuation and such other matters as it considered relevant, including the factors set out below under the heading “MDC’s Reasons for the Proposed Transactions,” unanimously determined to recommend to the MDC Board that it approve and authorize the Company to enter into the Transaction Agreement and recommend to MDC Canada Shareholders that they vote FOR the Transaction Proposals.
Recommendation of the MDC Board
The MDC Board, after consultation with the Disinterested Senior Executives, its legal advisors and having taken into account the unanimous recommendation of the MDC Special Committee and the MDC Special Committee’s receipt of both the Moelis Opinion, and the Canaccord Genuity Opinion and Formal Valuation unanimously (with the Interested Directors abstaining) (i) determined that it is in the best interests of MDC and the MDC Canada Shareholders (other than the Interested Shareholders) to enter into the Transaction Agreement and consummate the Proposed Transactions, (ii) approved the execution, delivery and performance by MDC of the Transaction Agreement and the Ancillary Agreements and the consummation of the Proposed Transactions and (iii) resolved to recommend that the MDC Canada Shareholders vote for the Proposals. Accordingly, the MDC Board (with the Interested Directors abstaining) unanimously recommends that MDC Canada Shareholders vote FOR each of the Transaction Proposals. Additionally, the MDC Board (with the Interested Directors abstaining) unanimously recommends that MDC Canada Shareholders vote FOR the Compensation Proposal.
 
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For further discussion of the factors considered by the MDC Special Committee and the MDC Board in their determination to recommend the adoption of the Transaction Agreement and the approval of the Proposed Transactions, see “The Proposed Transactions — MDC’s Reasons for the Proposed Transactions; Recommendation of the MDC Special Committee; and Recommendation of the MDC Board.”
Opinion of Moelis
The MDC Special Committee retained Moelis to act as its financial advisor in connection with the Proposed Transactions. At the meeting of the MDC Special Committee on December 21, 2020 to evaluate and consider whether to approve the Transaction Agreement and the Proposed Transactions, Moelis delivered an oral opinion to the MDC Special Committee, which was subsequently confirmed by delivery of a written opinion dated December 21, 2020, that, from a financial point of view, as of the date of the opinion and based upon and subject to the assumptions made, procedures followed, matters considered and other limitations set forth in the opinion, the Post-Transaction Ownership Percentage of the Combined Company to be held by the holders of MDC Canada Common Shares upon completion of the Proposed Transactions was fair to the holders of MDC Canada Common Shares (other than the Interested Shareholders). The Moelis Opinion was limited solely to the fairness to the holders of MDC Canada Common Shares (other than the Interested Shareholders), from a financial point of view, of the Post-Transaction Ownership Percentage of the Combined Company to be held by the holders of MDC Canada Common Shares upon completion of the Proposed Transactions, and does not address MDC’s underlying business decision to effect the Proposed Transactions or the relative merits of the Proposed Transactions as compared to any alternative business strategies or transactions that might be available to MDC. The full text of Moelis’ written opinion, dated December 21, 2020, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, attached as Annex J to this Proxy Statement/Prospectus. The Moelis Opinion was provided for the use and benefit of the MDC Special Committee (solely in its capacity as such) in its evaluation of the Proposed Transactions. Moelis’ opinion does not constitute a recommendation as to how any holder of securities of MDC should vote or act with respect to the Proposed Transactions or any other matter.
For a further discussion of Moelis’ opinion, see “The Proposed Transactions — Opinion of Moelis” beginning on page 170 of this Proxy Statement/Prospectus.
Canaccord Genuity Opinion and Formal Valuation
Canaccord Genuity was engaged to provide the Canaccord Genuity Opinion and Formal Valuation to the MDC Special Committee pursuant to the Canaccord Genuity Engagement Agreement.
Subject to the scope of review, assumptions, qualifications and limitations set out in the Canaccord Genuity Opinion and such other matters as Canaccord Genuity considered relevant, Canaccord Genuity provided an opinion that, as of December 21, 2020, the consideration to be paid by MDC for the Stagwell Subject Entities pursuant to the Transaction Agreement was fair, from a financial point of view, to the holders of MDC Canada Class A Common Shares (other than Mark Penn, Stagwell, Goldman Sachs and their affiliates). Such opinion assumed, among other items, the conversion of the MDC Canada Class B Common Shares into MDC Canada Class A Common Shares.
Canaccord Genuity also provided the MDC Special Committee with the Formal Valuation dated December 21, 2020. In the Formal Valuation, Canaccord Genuity determined that as of December 21, 2020, and subject to the scope of review, assumptions and limitations contained therein, the fair market value of: (i) the MDC Canada Class A Common Shares (assuming the conversion of the MDC Canada Class B Common Shares into MDC Canada Class A Common Shares) ranged from $4.70 to $7.40 per MDC Canada Class A Common Share; and (ii) the Stagwell Subject Entities ranged from $1.2 billion to $1.5 billion.
The summary of the Canaccord Genuity Opinion and Formal Valuation in this Proxy Statement/Prospectus is qualified in its entirety by, and should be read in conjunction with, the full text of the Canaccord Genuity Opinion and Formal Valuation attached to this Proxy Statement/Prospectus as Annex K. The full text of the Canaccord Genuity Opinion and Formal Valuation describes, among other things, the assumptions made, matters considered and limitations and qualifications on the review undertaken in
 
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connection with the Canaccord Genuity Opinion and Formal Valuation. The Canaccord Genuity Opinion and Formal Valuation is not intended to be, and does not constitute, a recommendation as to how any MDC Canada Shareholder should vote with respect to the Proposed Transactions or any other matter. MDC Canada Shareholders are encouraged to read the Canaccord Genuity Opinion and Formal Valuation carefully in its entirety. See “Proposed Transactions — Canaccord Genuity Opinion and Formal Valuation”.
Other Considerations
The Combined Company will be poised to deliver meaningful shareholder value creation, accelerated growth and enhanced services to clients. In contrast to MDC Canada continuing as a standalone company, the Combined Company will be well-positioned to become a leading marketing services company, with enhanced global scale and broadened capabilities:

Enhanced Shareholder Value. The Combined Company will accelerate growth and enhance shareholder value. The Combined Company will offer a comprehensive suite of complementary marketing and communications services to clients, significantly expanding in the areas of high-growth digital services and expertise as well as substantial new capabilities across several disciplines and geographies, as compared to MDC as a standalone entity.

Estimated Cost Synergies. Due to certain synergies described in “The Proposed Transactions —  Estimated Cost Synergies,” the Combined Company is expected to achieve run-rate savings of approximately $30 million over time, with approximately 90% of such savings expected to be realized within twenty-four months following the consummation of the Proposed Transactions.

Lower Pro Forma Leverage. The Combined Company will also have an improved credit profile, decreasing its consolidated net leverage ratio from 4.4x to 3.5x, after giving full effect to the expected run-rate operational synergies.

Enhanced Scale. The Combined Company will be a top ten global integrated marketing services company. The Combined Company will have an expanded global scale, operating in 23 countries, and expanded media and data operations, managing $4.4 billion in media spend.

Enhanced Growth Opportunities. The Combined Company will have a target of 5%+ annual organic growth, driven by 10-15% digital marketing growth and complementary capabilities, and a target of 9%+ total annual revenue growth including new products and acquisitions. The Combined Company will more than triple its concentration of high-growth digital offerings, with 32% of its business anticipated to be in the digital services sector. It is anticipated that the Combined Company will generate over $200 million of pro forma cash in 2021. The Combined Company will target growth to $3 billion+ in revenue in 2025, including acquisitions, organic growth and new products. In addition, the Combined Company will seek to develop new revenue streams by expanding its combined digital and technology products portfolios.
Key Terms of the Transaction Agreement
Conditions to the Completion of the Proposed Transactions
As more fully described in this Proxy Statement/Prospectus and in the Transaction Agreement, the respective obligations of each party to effect the Proposed Transactions will be subject to the satisfaction on or prior to the date of the Closing (the “Closing Date”) of each of the following conditions, any and all of which may be waived in whole or in part by Stagwell, MDC, New MDC and Merger Sub, as the case may be, to the extent permitted by applicable law:

receipt of the Required Shareholder Approvals in accordance with applicable law, the articles of amalgamation, as amended, and bylaws of MDC, and the rules and requirements of NASDAQ, as applicable;

the absence of any law enacted or promulgated by, or order, judgment, decree, ruling or injunction issued or granted by, a governmental entity of competent jurisdiction, in each case which has the effect of enjoining or otherwise prohibiting the completion of the Proposed Transactions;
 
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receipt of certain regulatory (including Hart-Scott-Rodino and Investment Canada Act) and NASDAQ approvals;

completion of each of the Stagwell revolver financing and the Stagwell term loan financing, and termination of the MDC Credit Agreement;

continuing consents from Goldman Sachs and Stagwell, as holders of MDC Canada Preferred Shares, to the Proposed Transactions;

the absence since the date of the Transaction Agreement of any fact, circumstance, occurrence, event, development, change or condition that, individually or in the aggregate, have had or would reasonably be expected to have a material adverse effect (as defined under “The Transaction Agreement — Representations and Warranties”) on MDC or Stagwell; and

receipt of consent of Senior Note holders (which consent has been received as of the date hereof).
The obligations of Stagwell to effect the Proposed Transactions are also subject to the following conditions, each of which may be waived (to the extent permitted by applicable law) in whole or in part by Stagwell:

the accuracy of the representations and warranties made in the Transaction Agreement by MDC as of the date of the Transaction Agreement and as of the Closing Date, subject to certain materiality thresholds set out in the Transaction Agreement;

performance in all material respects by MDC of the obligations, covenants and agreements required to be performed by it at or prior to the Closing;

the receipt by Stagwell of each of the agreements, instruments, certificates and other documents required to be delivered by MDC at or prior to the Closing pursuant to the Transaction Agreement; and

the absence since the date of the Transaction Agreement of any fact, circumstance, occurrence, event, development, change or condition that, individually or in the aggregate, have had or would reasonably be expected to have a material adverse effect (as defined under “The Transaction Agreement — Representations and Warranties”) on MDC.
The obligations of MDC to effect the Proposed Transactions are also subject to the following conditions, each of which may be waived (to the extent permitted by applicable law) in whole or in part by MDC:

the accuracy of the representations and warranties made in the Transaction Agreement by Stagwell as of the date of the Transaction Agreement and as of the Closing Date, subject to certain materiality thresholds set out in the Transaction Agreement;

performance in all material respects by Stagwell of the obligations, covenants and agreements required to be performed by it at or prior to the Closing;

the receipt by MDC of each of the agreements, instruments, certificates and other documents required to be delivered by Stagwell at or prior to the Closing pursuant to the Transaction Agreement;

the absence since the date of the Transaction Agreement of any fact, circumstance, occurrence, event, development, change or condition that, individually or in the aggregate, have had or would reasonably be expected to have a material adverse effect (as defined under “The Transaction Agreement — Representations and Warranties”) on Stagwell; and

the receipt by MDC of either (i) copies of legal documentation reasonably satisfactory to MDC evidencing the completion of the Stagwell Restructuring on the terms set forth in the corresponding schedule to the Transaction Agreement, or (ii) in the event the Stagwell Restructuring has not been completed on the terms set forth in such schedule, written notice of Stagwell’s agreement that the number of Stagwell OpCo Units and the Stagwell Class C Shares be reduced for all purposes under the Transaction Agreement in accordance with the proviso to the definition of “Stagwell Contribution Consideration”.
 
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No Solicitation of Alternative Proposals
As more fully described in this Proxy Statement/Prospectus and as set forth in the Transaction Agreement, MDC is subject to certain restrictions (including notice requirements to Stagwell) concerning proposals or offers from a third party or a group of third parties pursuant to which such party or group would own 20% or more of the voting power of MDC or 20% or more of the assets or businesses of MDC and its subsidiaries (an “Alternative Proposal”) unless, subject to certain limitations therein, the MDC Special Committee or the MDC Board concludes in good faith, after consultation with its respective outside legal counsel, that a failure to take certain actions with respect to an Alternative Proposal would be inconsistent with its fiduciary duties under applicable law.
No Change in Recommendation
MDC has agreed to include the recommendation of the MDC Board (upon the recommendation of the MDC Special Committee), in this Proxy Statement/Prospectus, that MDC Canada Shareholders vote in favor of the adoption of the Transaction Agreement and approval of the Transaction Proposals upon the terms and subject to the conditions set forth in the Transaction Agreement, and subject to the fulfillment of the fiduciary duties of the directors on the MDC Board and the MDC Special Committee under applicable law.
Notwithstanding the foregoing, prior to obtaining the Required Shareholder Approvals, (a) MDC is permitted to disclose to MDC Canada Shareholders a position contemplated by Rule 14e-2(f) under the Exchange Act and make any communication to MDC Canada Shareholders contemplated by Rule 14d-9 under the Exchange Act; and (b) the MDC Special Committee or the MDC Board may change or withdraw its recommendation in connection with a Superior Proposal or Intervening Event, but, in each case, provided such change or withdrawal is required for the members of the MDC Special Committee or the MDC Board to carry out their fiduciary duties under applicable law and subject to the notice, information and matching rights of Stagwell. See Section entitled “The Transaction Agreement — No Change in Recommendation” for further information.
Termination of the Transaction Agreement
The Transaction Agreement allows the parties thereto to terminate the Transaction Agreement at any time prior to the Closing, whether before or after the Required Shareholder Approvals have been obtained, by mutual written consent of Stagwell and MDC. Additionally, each party thereto may terminate the Transaction Agreement upon written notice to the other if certain conditions described in the Transaction Agreement are satisfied, including, among others, the Closing not occurring by 5:00 p.m. (New York City time) on the date that is nine months after the date of the Transaction Agreement, subject to extension to twelve months after the date of the Transaction Agreement if certain regulatory approvals have not been obtained. MDC may terminate the Transaction Agreement at any time prior to Closing upon, among other things, entry into an Acquisition Agreement for a Superior Proposal, subject to the payment of a termination fee under certain circumstances more fully described below and in the Transaction Agreement. Stagwell may terminate the Transaction Agreement at any time prior to the Closing, if, among other things, there is (i) a Change in Recommendation (whether in respect of a Superior Proposal or an Intervening Event), or (ii) a tender or exchange offer that constitutes an Alternative Proposal has been commenced and MDC shall not have communicated to MDC Canada Shareholders, within ten Business Days, a statement that the MDC Board or the MDC Special Committee recommends rejection of such tender or exchange offer.
Effect of Termination; Termination Fee
The Transaction Agreement requires MDC to pay to Stagwell a termination fee in an amount equal to $5,855,000, if the Transaction Agreement is terminated under certain circumstances more fully described in this Proxy Statement/Prospectus in the section entitled “The Transaction Agreement — Effect of Termination; Termination Fee” and as set forth in the Transaction Agreement, including, among other things, entry into an Acquisition Agreement in connection with a Superior Proposal, the occurrence of a Change in Recommendation, willful and material breach by MDC of its non-solicitation obligations or certain of its other obligations set out in the Transaction Agreement (including but not limited to obligations
 
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in respect of the MDC Board Recommendation, the Required Shareholder Approvals, and the MDC Merger Approval), or entry into a definitive agreement with respect to, or consummation of, an Alternative Proposal within the 12-month period following termination of the Transaction Agreement due to the failure to obtain the Required Shareholder Approvals at the Meeting.
Listing of the Combined Company Class A Common Shares; Reporting Requirements
The Combined Company Class A Common Shares will be listed on NASDAQ. See “The Business Combination — Listing”.
In addition, upon completion of the Proposed Transactions, the Combined Company will be subject to the same reporting requirements of the SEC, the mandates of the Sarbanes-Oxley Act and the applicable corporate governance rules of NASDAQ as the Company was before the Proposed Transactions. The Combined Company will be required to file periodic reports with the SEC on Forms 10-K, 10-Q and 8-K and comply with the proxy rules applicable to domestic issuers, as currently required of the Company. The Combined Company will also continue to be a reporting issuer in each of the provinces of Canada where the Company is currently a reporting issuer. In accordance with applicable Canadian securities laws, and consistent with current practice of the Company, following the Proposed Transactions the Combined Company will continue to file with the relevant Canadian securities regulatory authorities copies of its documents filed with the SEC under the U.S. Exchange Act in order to meet its Canadian continuous disclosure obligations and will continue to comply with all other applicable Canadian provincial securities laws.
As a result of Stagwell and its affiliates controlling a majority of the voting power of the Combined Company’s outstanding voting capital stock following the completion of the Proposed Transactions, the Combined Company will be a “controlled company” under NASDAQ rules. As a controlled company, the Combined Company will be exempt from certain NASDAQ corporate governance requirements. While the Company does not expect the Combined Company to rely on any of these exemptions, the Combined Company will be entitled to do so for as long as it will be considered a “controlled company,” See “Risk Factors  — Risks Relating to the Combined Company after Completion of the Proposed Transactions —  Following the completion of the Proposed Transactions, the Combined Company will be a “controlled company” under NASDAQ rules.”
Delisting and Reregistration of the MDC Canada Class A Common Shares
Following the Redomiciliation, the MDC Delaware Class A Common Shares will be listed on the NASDAQ in place of the MDC Canada Class A Common Shares. Following the MDC Reorganization, the New MDC Class A Common Shares will be listed on the NASDAQ in place of the MDC Delaware Class A Common Shares, and the MDC Delaware Class A Common Shares will cease to exist and will be delisted from NASDAQ, deregistered under the Exchange Act and cease to be publicly traded.
Following completion of the Proposed Transactions, the Combined Company Class A Common Shares will be listed on NASDAQ and registered under the Exchange Act and the Combined Company will be the publicly listed parent company, successor to MDC Canada.
Voting Agreements
Goldman Letter Agreement
On December 21, 2020, MDC and BSPI entered into the Initial Goldman Letter Agreement, pursuant to which BSPI consented to the Proposed Transactions and agreed to vote its MDC Canada Series 4 Shares in favor of the Transaction Proposals, subject to entry with MDC into a definitive agreement reflecting revised terms of MDC’s issued and outstanding Series 4 convertible preference shares. On April 21, 2021, MDC and BSPI entered into the Second Goldman Letter Agreement in order to effect the terms of the Initial Goldman Letter Agreement, except that the revised terms of the MDC Canada Series 4 Shares as contemplated by the Initial Goldman Letter Agreement will be set forth in new Series 8 convertible preferred shares of the Combined Company (the “Combined Company Series 8 Shares”). In particular, pursuant to the Second Goldman Letter Agreement, subject to Closing, (A) the Combined Company will redeem from BSPI $30 million of BSPI's Series 4 Shares (which at the time of the redemption will be Combined Company
 
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Series 4 Shares) (the “Series 4 Redemption”) in exchange for either (i) $25 million in cash or (ii) a $25 million subordinated loan with a 3-year maturity (i.e., exchange at an approximately 17% discount to face value) (the “Goldman Loan”) and (B) the remainder of the Combined Company Series 4 Shares will be converted into Combined Company Series 8 Shares. The Combined Company Series 8 Shares will have (i) a reduced conversion price of $5.00 compared to $7.42 under the MDC Canada Series 4 Shares, (ii) an extended accretion for approximately two years at a reduced rate of 6% and (iii) include certain rights the MDC Canada Series 4 Shares have under the CBCA. The $25 million Goldman Loan would accrue interest at 8.0% per annum and would be pre-payable at any time at par without penalty. The Second Goldman Letter Agreement is attached hereto as Annex E.
Stagwell Letter Agreement
On December 21, 2020, MDC and Stagwell entered into the Stagwell Letter Agreement, pursuant to which, among other things, Stagwell agreed to vote its MDC Canada Series 6 Shares in favor of the Transaction Proposals. The Stagwell Letter Agreement is attached as Annex D to this Proxy Statement/Prospectus.
A&R OpCo LLC Agreement
In connection with the Transaction Agreement, at least one day prior to the Closing, OpCo will convert into a Delaware limited liability company, pursuant to the Delaware Limited Liability Company Act (“DLLCA”) and the DGCL, and with New MDC as the then-sole member of OpCo, OpCo will adopt and thereafter be governed by an amended and restated limited liability company agreement of OpCo (the “A&R OpCo LLC Agreement”), by and among OpCo, New MDC, as a member and in its capacity as the initial manager of OpCo (the “OpCo Manager”), Stagwell Media LP, a Stagwell affiliate and each person who is or at any time becomes a member of OpCo (each, an “OpCo Member”) in accordance with the terms of the A&R OpCo LLC Agreement and the DLLCA. See “Certain Agreements Related to the Business Combination — A&R OpCo LLC Agreement.”
The form of the A&R OpCo LLC Agreement is attached as Annex L to this Proxy Statement/Prospectus.
Tax Receivables Agreement
The Combined Company and OpCo will enter into the Tax Receivables Agreement with Stagwell, which will provide for the payment by the Combined Company to Stagwell of 85% of the amount of U.S. federal, state and local income tax savings, if any, that the Combined Company actually realizes (or in some circumstances is deemed to realize) as a result of (i) increases in the tax basis of OpCo’s assets resulting from redemptions or exchanges by OpCo Members (other than the Combined Company or subsidiaries of the Combined Company) of OpCo Units for Combined Company Class A Common Shares or for cash, as applicable, and (ii) certain other tax benefits related to the Combined Company making payments under the Tax Receivables Agreement. See “Certain Agreements Related to the Business Combination — Tax Receivables Agreement.”
The form of the Tax Receivables Agreement is attached as Annex M to this Proxy Statement/Prospectus.
Registration Rights Agreement
At the Closing, MDC, Stagwell, and certain Stagwell affiliates (the “Stagwell RRA Parties”) will enter into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which, among other things and subject to certain restrictions, the Combined Company will be required to file with the SEC a registration statement registering for resale the Combined Company Class A Common Shares that (i) result, in connection with the Proposed Transactions, from the conversion of the MDC Canada Class A Common Shares Stagwell holds today, (ii) are issuable upon conversion of Stagwell’s Combined Company Series 6 Shares, and (iii) are issuable upon exchange of the Stagwell OpCo Units (in combination with the Stagwell Class C Shares), and to conduct certain underwritten offerings upon the request of holders of registrable securities, including direct and indirect transferees of the Stagwell RRA Parties. The Registration
 
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Rights Agreement provides that no shares will be sold thereunder prior to the date that is 91 days after the Closing. The Registration Rights Agreement also provides holders of registrable securities with certain customary piggyback registration rights.
The form of the Registration Rights Agreement is attached as Annex N hereto.
Information Rights Letter Agreement
At the Closing, MDC, Stagwell, and certain Stagwell affiliates (the “Stagwell Parties”) will enter into an information rights letter agreement (the “Information Rights Letter Agreement”). The Information Rights Letter Agreement will provide the Stagwell Parties (as defined in the Information Rights Letter Agreement) with rights to receive the Combined Company’s annual and quarterly financial statements. The Information Rights Letter Agreement also provides the Stagwell Parties the right to access the Combined Company’s records and premises and to receive additional financial and operating data reasonably requested by the Stagwell Parties. The Information Rights Letter Agreement terminates when the Stagwell Parties no longer beneficially own more than 10% of the then issued and outstanding voting securities of the Combined Company.
The form of the Information Rights Letter Agreement is attached as Annex O hereto.
Accounting Treatment
The Proposed Transactions will be accounted for as a reverse acquisition using the acquisition method of accounting, with MDC treated as the legal acquirer and Stagwell treated as the accounting acquirer for financial reporting purposes. See the section entitled “The Proposed Transactions — Accounting Treatment” beginning on page 209.
Material U.S. Federal Income Tax Consequences of the Proposed Transactions
The Proposed Transactions, and specifically, the Redomiciliation, may trigger U.S. federal income tax for U.S. Holders (as defined in “Material U.S. Federal Income Tax Considerations for MDC Canada Shareholders”). In general, subject to the potential application of the PFIC rules (as described in “Material U.S. Federal Income Tax Considerations for MDC Canada Shareholders — U.S. Tax Consequences of the Redomiciliation to U.S. Holders — Passive Foreign Investment Company Status”), U.S. Holders who own MDC Canada Shares with a fair market value of at least $50,000 at the time of the Redomiciliation will be taxed on the built-in gain (if any) in their MDC Canada Shares (unless they elect to include the “all earnings and profits amount”). See “Material U.S. Federal Income Tax Considerations for MDC Canada Shareholders” below for more information regarding certain U.S. federal income tax considerations relevant to such U.S. Holders and the election described above. Notwithstanding the above, special rules apply to 10% U.S. Shareholders (as defined in “Material U.S. Federal Income Tax Considerations for MDC Canada Shareholders”). 10% U.S. Shareholders should consult their own tax advisors regarding the U.S. federal and other applicable tax consequences of the Proposed Transactions to them in light of their particular circumstances.
U.S. Holders are strongly urged to consult their own tax advisors regarding the U.S. federal income tax consequences of the Proposed Transactions to them in their particular circumstances, including whether they would be considered 10% U.S. Shareholders, whether to make the “all earnings and profits” election where applicable, and the appropriate filing requirements with respect to this election.
Non-U.S. Holders (as defined in “Material U.S. Federal Income Tax Considerations for MDC Canada Shareholders”) generally should not be subject to U.S. federal income tax in respect of the Proposed Transactions, unless they have certain connections to the United States (see “Material U.S. Federal Income Tax Considerations for MDC Canada Shareholders” below for more information). However, depending on their particular circumstances (including their jurisdiction of fiscal residence), Non-U.S. Holders may be subject to non-U.S. taxes in respect of the Proposed Transactions.
The brief U.S. tax summary provided above is qualified in its entirety by the section “Material U.S. Federal Income Tax Considerations for MDC Canada Shareholders” below, which provides a summary of the principal U.S. federal income tax considerations generally relevant to (a) U.S. Holders and Non-U.S.
 
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Holders participating in the Proposed Transactions, and (b) the ownership and disposition of Combined Company Shares received pursuant to the Proposed Transactions. MDC Canada Shareholders are urged to consult with and rely on their own tax advisors to determine the particular tax consequences to them of the Proposed Transactions as well as the tax consequences of the ownership and disposition of Combined Company Shares received pursuant to the Proposed Transactions.
Material Canadian Federal Income Tax Considerations of the Proposed Transactions
MDC Canada does not anticipate that the Proposed Transactions should result in tax, for Canadian federal income tax purposes, to MDC Canada Common Shareholders (other than those who exercise Dissent Rights or elect to recognize a gain on the MDC Merger). If a Resident Holder sells or otherwise disposes of Combined Company Shares following the Proposed Transactions, such Resident Holder will realize a capital gain (or a capital loss) equal to the amount by which the proceeds of disposition, net of any reasonable costs of disposition, exceed (or are less than) the adjusted cost base to the Resident Holder of such Combined Company Shares immediately prior to the disposition. If a Non-Resident Holder sells or otherwise disposes of its Combined Company Shares following the Proposed Transactions, such sale or disposition will generally not result in tax under the Canadian Tax Act.
The brief Canadian tax summary provided above is qualified in its entirety by the section “Material Canadian Federal Income Tax Considerations For MDC Canada Shareholders” below. Resident Holders and Non-Resident Holders are urged to consult with and rely on their own tax advisors to determine the particular tax consequences to them of the Proposed Transactions as well as the tax consequences of the ownership and disposition of Combined Company Shares received pursuant to the Proposed Transactions.
Transaction Structure
Following the Proposed Transactions, the Combined Company will be organized in an Up-C structure, in which all of the assets and business of MDC and assets and businesses contributed by Stagwell in the Stagwell OpCo Contribution will be held by OpCo, an entity treated as a partnership, or “passthrough” entity, for U.S. federal income tax purposes, and will be operated through OpCo and its subsidiaries. The Combined Company’s sole material asset will be the OpCo Common Units and OpCo Preferred Units. Following the Business Combination, after a 6-month lockup period, Stagwell’s membership interests in OpCo and those of other members of OpCo besides the Combined Company and its subsidiaries will be exchangeable (in combination with Combined Company Class C Common Shares), at the election of the applicable member, for an equivalent number of Combined Company Class A Common Shares, or at OpCo’s election, cash, subject to certain limitations. It is expected that, as a result of such exchanges, the Combined Company would obtain a step-up in the tax basis in the portion of OpCo’s assets treated as attributable to the exchanged or redeemed Common Units of OpCo. This step-up in tax basis will provide the Combined Company with certain tax benefits, such as future depreciation and amortization deductions that can reduce the taxable income allocable from OpCo’s operations. As described above, 85% of the value of these benefits will be payable to Stagwell under the Tax Receivables Agreement, and the Combined Company would retain the remaining 15%.
Interests of MDC’s Directors and Executive Officers in the Proposed Transactions
In considering the recommendation of the MDC Board (with the Interested Directors abstaining), acting on the unanimous recommendation of the MDC Special Committee, that MDC Canada Shareholders vote for the Transaction Proposals, you should be aware that certain of MDC’s directors and executive officers have interests in the Proposed Transactions that may be different from, or in addition to, the interests of MDC Canada Shareholders generally. Interests of directors and officers that may be different from or in addition to the interests of MDC Canada Shareholders include, but are not limited to:

Mark Penn, MDC’s CEO and Chairman, controls and has an ownership interest in Stagwell Media.

In connection with the consummation of the Proposed Transactions, Stagwell Media will be permitted to cause Stagwell Marketing to make a one-time draw under the Stagwell Revolving Credit Agreement in an amount equal to the difference between (i) $260 million, and (ii) the aggregate amount of net debt of the Stagwell Subject Entities as of the Closing, which amount Stagwell may
 
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cause to be paid as a distribution to Stagwell (such distribution, the “Stagwell Distribution”). The amount of the Stagwell Distribution is currently anticipated to be approximately $150 million. Following the payment of the Stagwell Distribution, Stagwell Media will be further entitled, in its sole discretion, to distribute any such amounts to its limited partners pursuant to the terms of its limited partnership agreement. Mark Penn is a limited partner of Stagwell Media and, through such ownership interest in Stagwell Media, is expected to receive a portion of the Stagwell Distribution, which is not expected to exceed $1 million. The portion of the Stagwell Distribution that Mr. Penn will be entitled to receive is dependent on the amount of the Stagwell Distribution and the terms of the limited partnership agreement of Stagwell governing distributions.

Stagwell may be entitled to significant payments from the Combined Company under the Tax Receivables Agreement. Assuming (i) that all of the OpCo Units subject to the Tax Receivables Agreement are redeemed or exchanged immediately after the completion of the Proposed Transactions, (ii) no material changes in relevant tax law, and (iii) that the Combined Company earns sufficient taxable income in each year to realize on a current basis all tax benefits that are subject to the Tax Receivables Agreement, based on the price of Combined Company Class A Common Shares of $2.51 as of December  31, 2020, the Combined Company expects that over the 15-year period from the assumed date of such redemption or exchange, the Combined Company would be required to pay Stagwell approximately $28 million. Mark Penn will be entitled to, and Jay Leveton may be entitled to, a portion of such payments. The portion of such payments that Mr. Penn will be entitled to, and Mr. Leveton may be entitled to, receive is dependent on the amount of such payments and the terms of the limited partnership agreement of Stagwell governing distributions.

In connection with the Proposed Transactions, all outstanding MDC Incentive Awards will convert into corresponding incentive awards of the Combined Company. See “Summary — Treatment of Existing MDC Equity Awards in the Proposed Transactions” beginning on page 29 of this Proxy Statement/Prospectus.

The Business Combination will constitute a change in control for purposes of certain outstanding MDC cash and equity incentive awards, as well as certain executive severance benefits with the consequences described below. See “The Proposed Transactions  —  Interests of MDC’s Directors and Executive Officers in the Proposed Transactions” beginning on page 202 of this Proxy Statement/Prospectus for further detail.

The vesting of certain outstanding MDC Incentive Awards may accelerate upon the consummation of the Business Combination in accordance with their existing terms and conditions.

The existing terms and conditions of the long-term cash incentive awards held by MDC’s executive officers provide for full acceleration and payout in connection with the Proposed Transactions.

The employment agreements of certain of MDC’s executive officers provide for severance benefits in the event of certain qualifying terminations of employment in connection with or within one year following a change in control of the Company such as the Business Combination.

All of MDC’s current executive officers are expected to continue as employees of the Combined Company.

Each of our non-employee directors (other than Mr. Gross) currently holds an unvested equity award with respect to 23,256 MDC Canada Common Shares (either in the form of restricted shares or restricted stock units). Regardless of whether or not the Proposed Transactions are consummated, those unvested equity awards are expected to become fully vested in the ordinary course on the date on which MDC holds its 2021 Annual Meeting of Shareholders, subject to the applicable non-employee director’s continued service on the MDC Board through such date. In connection with the Proposed Transactions, certain directors of MDC will continue as directors of the Combined Company and certain directors of MDC will not continue as directors of the Combined Company. In the event a non-employee director of MDC ceases to serve on the MDC Board in connection with the Proposed Transactions prior to the date of the 2021 Annual Meeting of Shareholders, the 23,256 unvested equity awards held by such non-employee director (if any) shall vest in full as of the date of such cessation of services. Those directors who will not continue as directors of the Combined Company in connection with the Proposed Transactions have not yet been identified. In addition, Ms. Rogers holds an
 
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additional 9,990 shares of restricted stock which were granted to her in 2018 and are scheduled to vest in full in the ordinary course in accordance with their terms on April 26, 2021 and Mr. Simon holds an additional 10,999 shares of restricted stock which were granted to him in 2018 and vested in full in the ordinary course in accordance with their terms on January 22, 2021.

MDC’s directors and executive officers are entitled to continued indemnification coverage and director and officer liability insurance pursuant to the Transaction Agreement.

Bradley Gross is a Managing Director of Goldman Sachs, which exercises the authority of BSPI. BSPI holds all of the 95,000 issued and outstanding MDC Canada Series 4 Shares, and, following the completion of the Proposed Transactions, is expected to hold all of the Combined Company Series 8 Shares.
These interests are discussed in more detail in the section entitled “The Proposed Transactions — Interests of MDC’s Directors and Executive Officers in the Proposed Transactions” beginning on page 200 of this Proxy Statement/Prospectus. The members of the MDC Board were aware of the different or additional interests set forth herein and considered these interests, among other matters, during their deliberations on the merits of the Proposed Transactions and in deciding to recommend that MDC Canada Shareholders approve the Transaction Proposals.
Dissenters’ Rights
Registered MDC Canada Shareholders are entitled to Dissent Rights in connection with the Redomiciliation, but only if they follow the procedures specified in the CBCA. Each Dissenting Shareholder is entitled to be paid the fair value of all, but not less than all, of the holder’s MDC Canada Shares, provided that the holder strictly complies with the dissent procedures with respect to the Redomiciliation Proposal and the Redomiciliation becomes effective. Fair value is determined as of the close of business on the day before the Proposed Transactions are approved by MDC Canada Shareholders.
To exercise Dissent Rights, a MDC Canada Shareholder must dissent with respect to all of its MDC Canada Shares. A registered MDC Canada Shareholder who wishes to dissent must deliver the written objection to the Redomiciliation Proposals (a “Dissent Notice”) to MDC Canada at 121 Bloor Street East, Suite 300, Toronto, ON M4W 3M5 at or before the Meeting and such Dissent Notice must strictly comply with the requirements of Section 190 of the CBCA. Any failure by MDC Canada Shareholder to fully comply with the provisions of the CBCA may result in the loss of that holder’s Dissent Rights. Beneficial MDC Canada Shareholders who wish to exercise Dissent Rights must cause the registered MDC Canada Shareholder holding their MDC Canada Shares to deliver the Dissent Notice or instruct the registered holder to re-register the shares in the name of the beneficial MDC Canada Shareholder. MDC Canada Shareholders that vote in favor of the Transaction Proposals will not be entitled to Dissent Rights but an MDC Canada Shareholder’s failure to vote against the Transaction Proposals will not constitute a waiver of such shareholder’s Dissent Rights and a vote against the Transaction Proposals will not be deemed to satisfy notice requirements under the CBCA with respect to Dissent Rights.
Persons who are beneficial owners of MDC Canada Shares registered in the name of a broker, investment dealer or other intermediary who wish to dissent should be aware that only registered MDC Canada Shareholders are entitled to Dissent Rights. Accordingly, a beneficial owner of MDC Canada Shares desiring to exercise this right, must make arrangements for the MDC Canada Shares beneficially owned by such MDC Canada Shareholder to be registered in the MDC Canada Shareholder’s name prior to the time the Dissent Notice is required to be received by the Company, or, alternatively, make arrangements for the registered holder of such MDC Canada Shares to dissent on the MDC Canada Shareholder’s behalf.
If you wish to exercise Dissent Rights, you should review the requirements summarized in this Proxy Statement/Prospectus carefully and consult with your legal advisor. See “Dissenters’ and Appraisal Rights — Dissenters’ Rights” and Annex P of this Proxy Statement/Prospectus.
Appraisal Rights
Appraisal rights will be available to holders of MDC Canada Class B Common Shares and MDC Canada Preferred Shares in connection with the MDC Merger only under the circumstances set forth in
 
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Section 262 of the DGCL and subject to their compliance with the requirements of Section 262. In order to preserve any appraisal rights that a MDC Canada Shareholder may have, in addition to otherwise complying with the applicable provisions of the DGCL, such MDC Canada Shareholder must not vote in favor of, or consent to, the MDC Merger Proposal and must submit a written demand for appraisal in a timely manner in accordance with the applicable provisions of the DGCL.
To the extent appraisal rights are available under Delaware law, a Dissenting Delaware Stockholder will be entitled to receive a cash payment equal to the fair value of his, her or its MDC Delaware Class B Common Shares or MDC Delaware Preferred Shares in connection with the MDC Merger in lieu of the transaction consideration. The “fair value” of shares of MDC Delaware as determined by the Court could be more or less than, or the same as, the value of the consideration that a Dissenting. Delaware Stockholder would otherwise be entitled to receive under the terms of the Transaction Agreement.
To seek appraisal, an MDC Canada Shareholder must comply strictly with all of the procedures required under the DGCL, including delivering a written demand for appraisal to the Company in a timely manner, not voting in favor of, or consenting to, the MDC Merger Proposal and continuing to hold his, her or its shares through the Closing. Failure to comply strictly with all of the procedures required under the DGCL will result in the loss of appraisal rights.
For a further description of the appraisal rights available to MDC Canada Shareholders and the procedures required to exercise such appraisal rights, see “Appraisal Rights” and the provisions of Section 262 of the DGCL that grant appraisal rights and govern such procedures, which are attached as Annex H to this Proxy Statement/Prospectus. If an MDC Canada Shareholder holds shares through a broker, bank or other nominee and the MDC Canada Shareholder wishes to exercise appraisal rights, such stockholder should consult with such stockholder’s broker, bank or other nominee sufficiently in advance of the Meeting to permit such nominee to exercise appraisal rights on such stockholder’s behalf. In view of the complexity of Delaware law, MDC Canada Shareholders who may wish to pursue appraisal rights should promptly consult their legal and financial advisors.
Comparison of Shareholder Rights
There are differences between what a shareholder’s rights will be under Delaware law and what they currently are under the CBCA. In addition, there are differences between MDC Canada’s existing articles of amalgamation and by-laws and the Combined Company Certificate of Incorporation and Combined Company Bylaws as they will be in effect upon the completion of the Proposed Transactions. These differences are discussed under “Comparison of Stockholder Rights”. In addition, see “Description of MDC Delaware and the Combined Company Capital Stock” for a summary of the Combined Company’s authorized capital stock and the rights and preferences thereof. MDC Canada Shareholders should also review the forms of the Combined Company Certificate of Incorporation and the Combined Company Bylaws, as they will be in effect upon completion of the Proposed Transactions, which are attached as Annexes A and B, respectively, hereto.
The MDC Special Meeting
Date, Time and Place
The Meeting will be held virtually at 12:00 p.m. ET on June 22, 2021, subject to any adjournment or postponement thereof. Due to the continuing public health impact of the coronavirus outbreak (COVID-19) and to support the health and well-being of our employees and shareholders, the Company has decided that the Meeting will be held solely by means of remote communication as a virtual meeting. A virtual Meeting enables registered MDC Canada Common Shareholders and duly appointed proxyholders to join us online, listen to the Meeting, ask questions and receive answers online, and vote online at https://web.lumiagm.com/401933402 by clicking “I have a control number” and then entering your unique 13-digit control number located on your form of proxy and the password “mdc2021” ​(case-sensitive). MDC Canada Common Shareholders and duly appointed proxyholders will have the ability to submit questions during the Meeting via the Meeting website.
 
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Meeting Record Date and MDC Canada Shareholders Entitled to Vote
Only MDC Canada Shareholders as at the close of business on the Record Date are entitled to notice of the Meeting and to vote thereat or at any adjournment or postponement thereof. As of the close of business on the Record Date, May 10, 2021, 78,601,838 MDC Canada Class A Common Shares, 3,743 MDC Canada Class B Common Shares, 95,000 MDC Canada Series 4 Shares and 50,000 MDC Canada Series 6 Shares were issued and outstanding. Each issued and outstanding MDC Canada Class A Common Share and MDC Canada Class B Common Share is entitled to one vote and twenty votes, respectively, on the Transaction Proposals. Each issued and outstanding MDC Canada Series 4 Share and MDC Canada Series 6 Share is entitled to one vote on the Transaction Proposals.
Your vote is very important, regardless of the number of MDC Canada Shares that you own. Whether or not you expect to attend virtually, you should authorize a proxyholder to vote your MDC Canada Shares as promptly as possible so that your MDC Canada Shares may be represented and voted at the Meeting.
Quorum
In order for business to be conducted at the Meeting, a quorum must be present. A quorum for the transaction of business at the Meeting is not less than (i) 33 1/3% of the MDC Canada Common Shares, MDC Canada Series 4 Shares and MDC Canada Series 6 Shares, together as a single class, and (ii) a majority of the MDC Canada Series 4 Shares and MDC Canada Series 6 Shares, as separate classes, entitled to vote at the Meeting, represented either virtually or by proxy. If you submit a properly executed form of proxy, attached hereto as Annex F or vote by telephone or the Internet, you will be considered part of the quorum.
Purpose of the Meeting
The purpose of the Meeting is for MDC Canada Shareholders to consider and, if thought advisable, to approve the Transaction Proposals with respect to the Proposed Transactions.
Approvals Required by MDC Canada Shareholders to Approve the Proposed Transactions
Special Approval Proposals
In order to be effective, the affirmative vote of MDC Canada Shareholders meeting or exceeding the Special Approval Thresholds is required to approve the Redomiciliation Proposal and the Business Combination Proposal (the “Special Approval Proposals”).
Ordinary Proposals
The affirmative vote of a majority of the votes cast by the holders of MDC Canada Class A Common Shares and MDC Canada Class B Common Shares, voting together as a single class, is required to approve the Series 6 Supervoting Proposal, the Stagwell Issuance Proposal, and the Compensation Proposal (the “Ordinary Proposals”).
MDC Delaware Proxy Proposal
The MDC Delaware Proxy Proposal requires the affirmative vote of holders of a majority of the voting power of the outstanding MDC Canada Class A Common Shares, MDC Canada Class B Common Shares, and MDC Canada Series 6 Shares, voting together as a single class.
The MDC Board unanimously recommends (with the Interested Directors abstaining) that MDC Canada Shareholders vote FOR the Transaction Proposals and the Compensation Proposal.
Ownership of the Combined Company after the Proposed Transactions
On a pro forma basis and (i) without giving effect to the conversion of any SARs or Combined Company Preferred Shares and (ii) including unvested restricted stock and restricted stock units of MDC), following the completion of the Proposed Transactions, it is anticipated that the existing holders of MDC
 
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Canada Class A Common Shares (including Stagwell) and MDC Canada Class B Common Shares will receive Combined Company Class A Common Shares and Combined Company Class B Common Shares equal to approximately 26% of the common equity of the Combined Company and Stagwell would be issued an amount of Combined Company Class C Common Shares equivalent to approximately 74% of the voting rights of the Combined Company and exchangeable, together with Stagwell OpCo Units, for Combined Company Class A Common Shares on a one-for-one basis at Stagwell’s election following a six-month holding period. However, the number of Stagwell OpCo Units, the number of Stagwell Class C Shares and the percentage of the Combined Company that Stagwell will hold following the consummation of the Proposed Transactions will each be reduced, and the percentage of the Combined Company that existing MDC Canada Shareholders will hold will be proportionally increased, if Stagwell is unable to effect the Stagwell Restructuring prior to the Closing.
As of the close of business on the Record Date, May 10, 2021, Stagwell held approximately 18.3% of the MDC Canada Class A Common Shares. Thus, in the aggregate (i.e., including the MDC Canada Class A Common Shares that Stagwell beneficially held as of May 10, 2021 as well as the Stagwell OpCo Units and Stagwell Class C Shares), following the completion of the Proposed Transactions, Stagwell will hold approximately 78.22% of the common equity of the Combined Company, and it is anticipated that holders of MDC Canada Class A Common Shares and MDC Canada Class B Common Shares as of May 10, 2021, excluding Stagwell, will receive Combined Company Class A Common Shares and Class B Common Shares equal to approximately 21.78% of the common equity of the Combined Company.
In connection with the Stagwell Restructuring, Stagwell has formed a wholly-owned Delaware limited liability company (“Stagwell FAF”), managed solely by Stagwell. Immediately following the Closing, (i) Stagwell will cause Stagwell FAF to issue membership units in Stagwell FAF (“Stagwell FAF Units”) (or, in certain instances, rights to Stagwell FAF Units, subject to vesting conditions based on continued employment with the Stagwell Subject Entities) to certain managers of the Stagwell Subject Entities (none of whom is expected to serve as an executive officer of the Combined Company) (A) in exchange for such managers’ Stagwell Minority Interests (“Stagwell Minority Interest Acquisitions”), (B) in exchange for such managers’ Stagwell Incentive Awards (“Stagwell Incentive Award Exchanges”), or (C) in recognition of such managers’ contributions to the Stagwell Subject Entities (“Stagwell FAF Unit Recognition Awards”) (collectively, the “Stagwell FAF Unit Issuance”), and (ii) Stagwell will transfer to Stagwell FAF a number of the Stagwell OpCo Units, together with an equivalent number of Combined Company Class C Common Shares, equal in number to the number of Stagwell FAF Units issued pursuant to the Stagwell FAF Unit Issuance. It is currently anticipated that 19,644,435 Stagwell FAF Units will be issued pursuant to the Stagwell FAF Unit Issuance, of which (i) 11,703,771 Stagwell FAF Units will be issued in connection with Stagwell Incentive Award Exchanges or Stagwell FAF Unit Recognition Awards and (ii) 7,940,664 Stagwell FAF Units will be issued in connection with Stagwell Minority Interest Acquisitions. Each holder of Stagwell FAF Units will be entitled to exchange with Stagwell FAF, at any time beginning six months after the Closing, from time to time,all or a portion of such holder’s Stagwell FAF Units for an equivalent number (subject to adjustment) of the Combined Company Class A Common Shares or, in certain circumstances, cash. The Combined Company Class A Common Shares (or, if applicable, cash) will be delivered to each such holder by Stagwell FAF following an exchange by Stagwell FAF of Stagwell OpCo Units (together with the transfer and surrender to the Combined Company of an equal number of Combined Company Class C Common Shares) for an equivalent number (subject to adjustment) of the Combined Company Class A Common Shares or cash pursuant to the A&R OpCo LLC Agreement (as described in “Certain Other Agreements Related to the Proposed Transactions — A&R OpCo LLC Agreement — Exchange Right of OpCo Members”).
Regulatory Approvals
Pursuant to the Transaction Agreement, each of MDC and Stagwell agreed to use its reasonable best efforts to take promptly, or to cause to be taken, all actions, and to do promptly, or to cause to be done, and to assist and to cooperate with the other parties in doing, all things necessary, proper or advisable under applicable laws to consummate and make effective the Proposed Transactions, including (i) the obtaining of all necessary actions or nonactions, waivers, authorizations, expirations or terminations of waiting periods, advance rulings, no-action letters, clearances, consents and approvals the making of all necessary registrations and filings and the taking of all steps as may be necessary, including undertaking to Her Majesty the Queen in right of Canada to carry out specific agreed upon reasonable undertakings as a condition of the
 
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allowance of the Proposed Transactions by the Minister of Canadian Heritage under the Investment Canada Act, to obtain an approval, allowance or waiver from, or to avoid an action or proceeding by, any governmental entity, (ii) the obtaining of all necessary consents, approvals or waivers from third parties, (iii) the defending of any proceedings, whether judicial or administrative, challenging the Transaction Agreement or the consummation of the Proposed Transactions and (iv) the execution and delivery of any additional instruments reasonably necessary to consummate the Proposed Transactions.
Investment Canada Act
The Proposed Transactions are subject to review by the Minister of Canadian Heritage under the Investment Canada Act (the “Minister”). The Minister must be satisfied that the investment is likely to be of net benefit to Canada. The determination by the Minister of whether a proposed investment is of net benefit to Canada includes consideration of specific factors in the Investment Canada Act and policies of the Canadian federal government. Such a determination may be accompanied by requests that the non-Canadian provide undertakings. Stagwell submitted an application for approval under the Investment Canada Act on January 6, 2021. On February 1, 2021, Stagwell received confirmation that its application for approval under the Investment Canada Act was certified on January 25, 2021, following a request of supplementary information. On April 1, 2021, the Minister approved the Proposed Transactions under the Investment Canada Act.
HSR Act
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and related rules, certain transactions, including the Proposed Transactions, may not be completed until notifications have been given and information is provided to the Antitrust Division of the U.S. Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) and all statutory waiting period requirements have been satisfied. Completion of the Proposed Transactions is subject to the expiration or termination of the applicable waiting period under the HSR Act. On January 6, 2021, the Company and Stagwell caused the submissions required under the HSR Act in connection with the Proposed Transactions to be made to the FTC and the Antitrust Division of the DOJ. The statutory waiting period under the HSR Act expired on February 5, 2021 at 11:59 p.m., Eastern time.
At any time after the expiration of the statutory waiting period under the HSR Act, the Antitrust Division of the DOJ and the FTC may take action under the antitrust laws, including seeking to enjoin the completion of the Proposed Transactions, to rescind the Proposed Transactions or to conditionally permit completion of the Proposed Transactions subject to regulatory conditions or other remedies. In addition, non-U.S. regulatory bodies and U.S. state attorneys general could take action under other applicable regulatory laws as they deem necessary or desirable in the public interest, including, without limitation, seeking to enjoin or otherwise prevent the completion of the Proposed Transactions or permitting completion subject to regulatory conditions. Private parties may also seek to take legal action under regulatory laws under some circumstances. There can be no assurance that a challenge to the Proposed Transactions on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful. The Company and Stagwell are not aware of any other regulatory approvals in the United States required for the consummation of the Proposed Transactions.
Summary of Risk Factors
Both MDC and Stagwell are subject to various risks associated with their businesses and their industries. Some of the risks related to Stagwell’s business and industry include, but are not limited to, the following risks:

Future economic and financial conditions could adversely impact Stagwell’s financial condition and results;

As a marketing services company, Stagwell’s revenues are highly susceptible to declines as a result of unfavorable economic conditions.

If Stagwell’s clients experience financial distress, their weakened financial position could negatively affect Stagwell’s financial position and results.
 
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Stagwell’s financial condition and results of operations for fiscal 2021 may be adversely affected by the COVID-19 outbreak.

Stagwell competes for clients in highly competitive industries.

Stagwell may not realize the benefits it expects from past acquisitions or acquisitions or other strategic transactions Stagwell may make in the future.

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

Stagwell is subject to regulations and litigation risk that could restrict its activities or negatively impact its revenues.

Stagwell relies extensively on information technology systems and cybersecurity incidents could adversely affect Stagwell.

The Stagwell Credit Agreements contain various covenants that limit Stagwell’s discretion in the operation of its business.

Stagwell’s indebtedness could adversely affect Stagwell’s cash flow and prevent Stagwell from fulfilling its obligations, including those under the Stagwell Credit Agreements.

Stagwell has identified material weaknesses in Stagwell’s internal control over financial reporting. If Stagwell’s remediation of such material weaknesses is not effective, or if Stagwell fails to develop and maintain a proper and effective internal control over financial reporting, Stagwell’s ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.
In addition, the Proposed Transactions, including the possibility that the Proposed Transactions may not be completed, pose a number of risks to the Company and the MDC Canada Shareholders, including the following risks:

Investors holding MDC Canada Shares prior to the completion of the Proposed Transactions will, in the aggregate, have a significantly reduced ownership and voting interest in the Combined Company after the Proposed Transactions and will exercise less influence over management.

The integration of the Stagwell and MDC businesses may present significant challenges, and the Combined Company may not realize anticipated synergies and other benefits of the Proposed Transactions.

The Redomiciliation may give rise to significant Canadian corporate tax.

The Company will allocate time and resources to effecting the Proposed Transactions and incur non-recurring costs related to the Proposed Transactions.

The Proposed Transactions may give rise to taxable income in the United States for the Company and its subsidiaries.

If the IRS does not agree with the Company’s determination of the “all earnings and profits amount” attributable to the MDC Canada Shares, certain U.S. Holders may owe a higher than anticipated amount of U.S. federal income taxes as a result of the Proposed Transactions (and specifically, the Redomiciliation).

The Proposed Transactions may not be completed on the terms or timeline currently contemplated, or at all.

The calculation of the number of Stagwell OpCo Units and the Stagwell Class C Shares to be issued will not be adjusted if there is a change in the value of Stagwell or its assets or the value of MDC before the Proposed Transactions are completed.

The unaudited pro forma financial information included in this Proxy Statement/Prospectus is presented for illustrative purposes only and may not be indicative of the results of operations or financial condition of the Combined Company following the Proposed Transactions.

Completion of the Proposed Transactions may trigger certain provisions in agreements to which the Company or a Stagwell Subject Entity is a party.
 
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Some of MDC’s directors and executive officers have interests in seeing the Proposed Transactions completed that may be different from, or in addition to, those of other MDC Canada Shareholders.

The Tax Receivables Agreement with Stagwell requires the Combined Company to make cash payments to Stagwell in respect of certain tax benefits to which the Combined Company may become entitled, and the Combined Company expects that the payments it will be required to make will be substantial and may make the Combined Company a less attractive target to potential acquirers due to the amounts that would be payable to Stagwell in change of control transactions.

The COVID-19 pandemic triggered an economic crisis which may delay or prevent the consummation of the Proposed Transactions.
Further, following the completion of the Proposed Transactions, the Combined Company will be subject to risks, including:

The Up-C structure will place significant limitations on the Combined Company’s cash flow.

The Combined Company’s organizational structure, including the Tax Receivables Agreement, confers certain benefits upon Stagwell that will not benefit Combined Company Class A Common Shareholders (other than Stagwell) to the same extent as it will benefit Stagwell.

The effective tax rate of the Combined Company’s group may change in the future, including as a result of the Redomiciliation and recent tax legislation.

If completed, the expected benefits of the Proposed Transactions may not be realized.

Sales of Combined Company Class A Common Shares after the Proposed Transactions may negatively affect the market price of Combined Company Class A Common Shares.

Following the completion of the Proposed Transactions, the Combined Company will be a “controlled company” under NASDAQ rules.

If the Combined Company fails to maintain an effective system of internal control over financial reporting, the Combined Company may not be able to accurately report its financial results or prevent fraud.

The Combined Company is required to abide by potentially significant restrictions which could limit the Combined Company’s ability to undertake certain corporate actions (such as related party transactions and certain business combinations) that otherwise could be advantageous to the Combined Company.

The Combined Company, will, on a consolidated basis, assume and be responsible for all of the Stagwell Subject Entities’ liabilities following the closing of the Proposed Transactions, notwithstanding any breach of any representation or warranty of the Transaction Agreement.

The rights of stockholders under Delaware law may differ from the rights of shareholders under the CBCA.

U.S. governed companies incur greater risk of class action shareholder litigation as compared to Canadian governed companies.
The Company is also subject to risks, as set forth under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2020 under Item 1A, which is filed with the SEC and incorporated by reference in this Proxy Statement/Prospectus.
These risks and other risks are discussed in greater detail under the section titled “Risk Factors” beginning on page 51 of this Proxy Statement/Prospectus. MDC Canada Shareholders are encouraged to read and consider all of these risks carefully.
 
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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF MDC
The following table sets forth summary historical consolidated financial data that has been derived from MDC’s audited consolidated financial statements as of and for the years ended December 31, 2020, 2019, and 2018, and the related notes thereto. The information set forth below is only a summary and is not necessarily indicative of the results of future operations of the Company, and the following information should be read in conjunction with, and is qualified in its entirety by, the Company’s consolidated financial statements, the related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which are incorporated by reference into this Proxy Statement/Prospectus. The summary financial position data as of December 31, 2018 have been derived from the Company’s audited consolidated financial statements for such years, which have not been included or incorporated by reference into this Proxy Statement/Prospectus. For more information, see “Where You Can Find More Information.”
Years Ended December 31,
2020
2019
2018
(Dollars in Thousands, Except per Share Data)
Operating Data
Revenues
$ 1,199,011 $ 1,415,803 1,475,088
Operating income (loss)
$ (45,757) $ 79,460 1,434
Net income (loss)
$ (207,197) $ 10,903 (118,222)
Stock-based compensation
$ 14,179 $ 31,040 18,416
Loss per Common Share
Basic
Net loss attributable to MDC Partners Inc. common shareholders
$ (3.34) $ (0.25) $ (2.42)
Diluted
Net loss attributable to MDC Partners Inc. common shareholders
(3.34) (0.25) (2.42)
Cash dividends declared per share
Effective January 1, 2019, the Company adopted FASB Accounting Standards Codification (or “ASC”), Topic 842 Leases (“ASC 842”). As a result, comparative prior periods have not been adjusted and continue to be reported under FASB ASC Topic 840, Leases. See Note 10 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for further information regarding the adoption of ASC 842.
 
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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF STAGWELL
The Stagwell Subject Entities comprise Stagwell Marketing and its direct and indirect subsidiaries. In this section, the Stagwell Subject Entities are referred to as “Stagwell”.
The following Summary Historical consolidated financial data of Stagwell as of and for the years ended December 31, 2020, 2019 and 2018 have been derived from Stagwell Marketing’s audited consolidated financial statements as of and for the years ended December 31, 2020, 2019 and 2018 and the related notes thereto.
The information set forth below is only a summary and is not necessarily indicative of Stagwell Marketing’s results of future operations, and should be read in conjunction with, and is qualified in its entirety by, Stagwell Marketing’s consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Stagwell”, which are included elsewhere in this Proxy Statement/Prospectus.
Year Ended December 31,
2020
2019
2018
($ thousands)
Operating Data
Revenue
$ 888,032 $ 628,666 $ 426,432
Operating income
$ 83,740 $ 40,695 $ 15,962
Net income
$ 71,461 $ 20,730 $ 18,424
Balance Sheet Data
Total assets
$ 1,013,855 $ 950,789 $ 703,094
Total debt
$ 199,018 $ 159,454 $ 139,717
Redeemable non-controlling Interests
$ 604 $ 3,602 $ 1,947
Deferred acquisition consideration
$ 17,847 $ 64,845 $ 49,694
 
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RISK FACTORS
In addition to the other information included and incorporated by reference into this Proxy Statement/Prospectus, including the matters addressed in “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 78, you should carefully consider the following risks before deciding how to vote. In addition, you should read and consider the risks associated with the business of the Company because these risks will also affect the Combined Company following completion of the Proposed Transactions. These risks can be found under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2020 under Item 1A, which is filed with the SEC and incorporated by reference in this Proxy Statement/Prospectus. You should also read and consider the other information contained in and incorporated by reference into this Proxy Statement/Prospectus and the other documents incorporated by reference into this Proxy Statement/Prospectus. For information, see the section entitled “Where You Can Find More Information.”
Any of the following risks could materially and adversely affect the business, financial condition and results of operations of MDC, Stagwell or the Combined Company and the actual outcome of matters as to which forward-looking statements are made in this prospectus. In such case, the trading price for the Combined Company Class A Common Shares could decline, and you could lose all or part of your investment. The risks described below are not the only risks that MDC and Stagwell currently face or that the Combined Company will face after the consummation of the Proposed Transactions. Additional risks and uncertainties not currently known or that are currently expected to be immaterial may also materially and adversely affect the Combined Company’s business, financial condition and results of operations or the price of Combined Company Class A Common Shares in the future. Past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.
Risks Relating to the Proposed Transactions
The Proposed Transactions may give rise to taxable income in the United States for the Company and its subsidiaries, and there can be no assurances that material adverse tax consequences will not result from the Proposed Transactions or related transactions in Canada, the U.S., or other jurisdictions. Any such adverse tax consequences could adversely affect the Combined Company or its share price, following completion of the Proposed Transactions.
The Redomiciliation should qualify as a “reorganization” under section 368(a) of the Internal Revenue Code. Specifically, the Redomiciliation should be treated, for U.S. federal income tax purposes, as if MDC Canada (i) transferred all of its assets and liabilities to a new U.S. corporation (MDC Delaware) in exchange for all of the outstanding stock of MDC Delaware and (ii) then distributed the stock of MDC Delaware that MDC Canada received in the transaction to the MDC Canada Shareholders in liquidation of MDC Canada. Additionally, the Company expects the Business Combination to be treated as a deemed transfer by New MDC of its assets to OpCo and an assumption of New MDC’s liabilities by OpCo in a transaction intended to qualify as a contribution to OpCo in exchange for OpCo Common Units or OpCo Preferred Units under section 721 of the Code, and that Stagwell’s contributions of its businesses to OpCo is similarly intended to be subject to section 721 of the Code. Certain elements of the structure can be expected to give rise to corporate taxable income for the Combined Company. Additionally, because setting up the Up-C structure in the Business Combination involves a contribution by New MDC of its assets to OpCo, and an assumption by OpCo of New MDC’s liabilities, the flexibility of MDC Canada, MDC Delaware, New MDC and OpCo to incur certain liabilities or fund certain expenses outside of the ordinary course of their businesses prior to effecting the Proposed Transactions will be significantly limited, including certain liabilities incurred in connection with implementing the Proposed Transactions, as such liabilities could trigger unanticipated tax costs for New MDC in connection with the implementation of the Proposed Transactions. To the extent that liabilities assumed by OpCo as part of the Proposed Transactions are viewed as non-ordinary course liabilities, such assumption may give rise to U.S. corporate taxable income for New MDC resulting from the assumption. Additionally, to the extent OpCo is treated as assuming such a liability, under relevant U.S. tax rules a portion of OpCo’s other liabilities may also be recharacterized and give rise to additional corporate taxable income for New MDC.
There can be no assurances that material additional adverse U.S. tax consequences will not result from the Proposed Transactions, and there can be no assurance that the Internal Revenue Service will agree with
 
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or not otherwise challenge the Company’s position on the tax treatment of the Proposed Transactions or of internal restructuring transactions undertaken prior to, after, or in connection with the Proposed Transactions, which could result in higher U.S. federal tax costs for the Combined Company than currently anticipated, including a reduction in the net operating loss carryforwards of Maxxcom Inc. (which will become tax attributes of the Combined Company as a result of the Proposed Transactions).
The Company has not applied for a ruling related to the Proposed Transactions and does not intend to do so. Any adverse tax consequences resulting from the Proposed Transactions or the operations of the Combined Company after the Proposed Transactions could adversely affect the Combined Company or its share price following the completion of the Proposed Transactions. Moreover, U.S. tax laws significantly limit the Combined Company’s ability to redomicile outside of the U.S. once the Proposed Transactions are complete.
The Redomiciliation may give rise to significant Canadian corporate tax.
As a result of the Redomiciliation, the Company expects to incur Canadian corporate tax liability in the amount of approximately $21 million. However, such amount is only an estimate and the actual amount of Canadian corporate tax liability may be significantly higher than the Company’s estimate.
For purposes of the Canadian Tax Act, MDC Canada’s taxation year will be deemed to have ended immediately prior to it ceasing to be a resident of Canada as a result of the Redomiciliation. Immediately prior to the time of this deemed year end, MDC Canada will be deemed to have disposed of each of its properties for proceeds of disposition equal to the fair market value of such properties at that time and will be deemed to have reacquired such properties for a cost amount equal to that fair market value. MDC Canada will be subject to income tax under Part I of the Canadian Tax Act on any income and net taxable capital gains which arise as a result of this deemed disposition (after the utilization of any available capital losses or non-capital losses). MDC Canada will also be subject to “emigration tax” under Part XIV of the Canadian Tax Act on the amount by which the fair market value, immediately before MDC Canada’s deemed year end, of all of its properties exceeds the total of certain of its liabilities and the paid-up capital, determined for purposes of that emigration tax, of all the issued and outstanding shares of MDC Canada immediately before such deemed year end.
The quantum of Canadian federal income tax payable by MDC Canada as a result of the Redomiciliation will depend upon a number of considerations including the fair market value of its properties, the amount of its liabilities, the Canada-U.S. dollar exchange rate, its shareholder composition, as well as certain Canadian tax attributes, accounts and balances of the Company, each as of the Redomiciliation Effective Time. Prior to the Redomiciliation Effective Time, there is no certainty that the fair market value of the properties of the Company will not increase, and there is no certainty that the estimated fair market value of the properties of the Company or the amounts of its relevant tax attributes will be accepted by Canadian federal tax authorities, which may result in additional taxes payable as a result of the Redomiciliation. The Company has not applied to the Canadian federal tax authorities for an advance tax ruling relating to the Redomiciliation and does not intend to do so. Additionally, it is possible that valuations and implied valuations of the Company’s property are made available which may be relevant in assessing the potential Canadian tax costs of the Redomiciliation. As a result, the quantum of Canadian tax payable by the Company may significantly exceed the Company’s estimates that are reflected in the pro forma financial statements (i.e., approximately $21 million). Any such adverse tax consequences could adversely affect the Combined Company and its share price.
If the IRS does not agree with the Company’s determination of the “all earnings and profits amount” attributable to the MDC Canada Shares, certain U.S. Holders may owe a higher than anticipated amount of U.S. federal income taxes as a result of the Proposed Transactions (and specifically, the Redomiciliation).
As described in greater detail under the heading “Material U.S. Federal Income Tax Considerations for MDC Canada Shareholders,” and subject to the potential application of the PFIC rules (as described in “Material U.S. Federal Income Tax Considerations for MDC Canada Shareholders — U.S. Tax Consequences of the Redomiciliation to U.S. Holders — Passive Foreign Investment Company Status”), certain U.S. Holders that, at the time of the Redomiciliation, (i) own MDC Canada Shares with a fair market value of $50,000 or more and (ii) would otherwise recognize taxable gain for U.S. federal income tax purposes with
 
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respect to their MDC Canada Shares in connection with the Proposed Transactions (and specifically, the Redomiciliation), may make the “all earnings and profits” election with respect to their MDC Canada Shares in lieu of recognizing such taxable gain. A U.S. Holder that validly makes such “all earnings and profits” election will be required to include in income, as a deemed dividend, the “all earnings and profits amount” (as defined under applicable Treasury Regulations) that is attributable, under U.S. tax principles, to such U.S. Holder’s MDC Canada Shares. Additionally, 10% U.S. Shareholders may be subject to special rules which depend on the Company’s calculation of its earnings and profits.
The Company is currently in the process of determining its historical earnings and profits and also expects to determine its earnings and profits for the taxable year of the Redomiciliation ending with the Redomiciliation Effective Date. Although the Company will not complete this determination until after completion of the Proposed Transactions, the Company currently expects to have a significant amount of earnings and profits for the taxable year of the Redomiciliation. The calculation of “all earnings and profits” depends on the applicable shareholder’s period of ownership and the outcome may differ based on the particular shareholder. At this stage, there can be no assurances regarding the “all earnings and profits amount.” In general, the “all earnings and profits amount” attributable to the MDC Canada Shares held by a particular U.S. Holder should depend on the Company’s accumulated earnings and profits from the date that the MDC Canada Shares were acquired by such U.S. Holder through the Redomiciliation Effective Date. The determination of the Company’s earnings and profits is a complex determination and may be impacted by numerous factors. Accordingly, there can be no assurance that the IRS will agree with the Company’s determination of such earnings and profits.
If the IRS does not agree with the Company’s determination of the amount, timing or source of its earnings and profits, the earnings and profits of the Company may be greater than anticipated, and the effect of such earnings and profits on shareholder taxation may be greater than anticipated. In such case, a U.S. Holder that makes an “all earnings and profits” election or a 10% U.S. Shareholder could have a greater than anticipated “all earnings and profits amount” in respect of such U.S. Holder’s MDC Canada Shares and thereby recognize greater taxable income. In addition, MDC Canada Shareholders who receive “all earnings and profits” data from the Company may bring suit against the Company if such data is successfully disputed by the IRS.
U.S. Holders are strongly urged to consult their own tax advisors regarding the U.S. federal income tax consequences of the Proposed Transactions to them in their particular circumstances, including whether they would be considered 10% U.S. Shareholders, whether to make the “all earnings and profits” election where applicable, and the appropriate filing requirements with respect to this election. For additional information on the U.S. federal income tax consequences of the Proposed Transactions, see “Material U.S. Federal Income Tax Considerations for MDC Canada Shareholders.
Additionally, special rules apply to 10% U.S. Shareholders (as defined in “Material U.S. Federal Income Tax Considerations for MDC Canada Shareholders”). 10% U.S. Shareholders should consult their own tax advisors regarding the U.S. federal and other applicable tax consequences of the Proposed Transactions to them in light of their particular circumstances.
Completion of the Proposed Transactions may affect the timing of audit or reassessments by tax authorities.
The determination of income and other tax liabilities of the Company and its subsidiaries requires interpretation of complex domestic and foreign laws and regulations that are subject to change. The Company’s interpretation of taxation law may differ from the interpretation of the tax authorities. There are tax matters under review for which the timing of resolution is uncertain. While the Company believes that the provision for income taxes is adequate, completion of the Proposed Transactions may affect the timing of audit and reassessment of taxes by certain tax authorities, which reassessments may be without technical merit and possibly material.
The Company will allocate time and resources to effecting the Proposed Transactions and incur non-recurring costs related to the Proposed Transactions.
The Company and its management have allocated and will continue to be required to allocate time and resources to effecting the completion of the Proposed Transactions and related and incidental activities,
 
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including preparing the “all earnings and profits amount” attributable to the MDC Canada Shares, which data certain U.S. Holders may request. There is a risk that the challenges associated with managing these various initiatives as described in this Proxy Statement/Prospectus may have a business impact and that consequently the underlying businesses will not perform in line with expectations. This could have an adverse effect on the reputation, business, financial condition or results of operations of the Combined Company.
In addition, the Company expects to incur a number of non-recurring costs associated with the Proposed Transactions, including taxes, legal fees, advisor fees, proxy solicitor fees, filing fees, mailing expenses, financial printing expenses and fees associated with the Consent Solicitation, in particular the Consent Solicitation Consideration, the Senior Note Refinancing, if effected, and/or the Series 4 Redemption, in particular the Goldman Note. There can be no assurance that the actual costs will not exceed those estimated and the actual completion of the Proposed Transactions may result in additional and unforeseen expenses. Many of these costs will be payable whether or not the Proposed Transactions are completed. While it is expected that benefits of the Proposed Transactions achieved by the Combined Company will offset these transaction costs over time, this net benefit may not be achieved in the short-term or at all, particularly if the Proposed Transactions are delayed or do not happen at all. These combined factors could adversely affect the business, results of operations or financial condition of the Combined Company.
The calculation of the number of Stagwell OpCo Units and the Stagwell Class C Shares to be issued will not be adjusted if there is a change in the value of Stagwell or its assets or the value of MDC before the Proposed Transactions are completed.
The calculation of the number of the Stagwell OpCo Units and the Stagwell Class C Shares to be issued to Stagwell in the Proposed Transactions will not be adjusted (i) if the value of the business or assets of Stagwell increases prior to the consummation of the Proposed Transactions or the value of MDC decreases prior to the Proposed Transactions, or (ii) if the value of the business or assets of Stagwell declines prior to the consummation of the Proposed Transactions or the value of MDC increases prior to the Proposed Transactions. MDC may not be permitted to terminate the Transaction Agreement because of changes in the value of Stagwell’s assets.
The Proposed Transactions may not be completed on the terms or timeline currently contemplated, or at all, as MDC and Stagwell may be unable to satisfy the conditions or obtain the approvals required to complete the Proposed Transactions or such approvals may contain material restrictions or conditions.
Completion of the Proposed Transactions is subject to numerous conditions, as described in this Proxy Statement/Prospectus, including the occurrence of, among other things, receipt of approvals and the satisfaction of other conditions, including (i) the receipt of the Required Shareholder Approvals, and (ii) with respect to the Redomiciliation, authorization of the Director under the CBCA. Although the Company is diligently applying its efforts to take, or cause to be taken, all actions to do, or cause to be done, all things necessary, proper or advisable to obtain the requisite approvals, there can be no assurance that these conditions will be fulfilled or that the Proposed Transactions will be completed on the terms or timeline currently contemplated, or at all. MDC has and will continue to expend time and resources and incur expenses related to the Proposed Transactions. Many of these expenses must be paid regardless of whether the Proposed Transactions are consummated. Governmental agencies may not approve the Proposed Transactions, may impose conditions to the approval of the Proposed Transactions or require changes to the terms of the Proposed Transactions. Any such conditions or changes could have the effect of delaying completion of the Proposed Transactions, imposing costs on or limiting the revenues of the Combined Company following the Proposed Transactions or otherwise reducing the anticipated benefits of the Proposed Transactions.
The unaudited pro forma financial information included in this Proxy Statement/Prospectus is presented for illustrative purposes only and may not be indicative of the results of operations or financial condition of the Combined Company following the Proposed Transactions.
The unaudited pro forma financial information included in this Proxy Statement/Prospectus is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have been achieved if the Proposed Transactions had been completed on the dates or for the periods presented, nor does it purport to project the results of operations or financial position of the
 
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Company for any future period or as of any future date. In addition, the unaudited pro forma financial information included in this Proxy Statement/Prospectus is based in part on certain assumptions regarding the Proposed Transactions. These assumptions may not prove to be accurate, and other factors may affect the Combined Company’s results of operations or financial condition following the Proposed Transactions. Further, the unaudited pro forma financial information does not reflect all of the costs that are expected to be incurred by the Company in connection with the Proposed Transactions. For more information, see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information”.
Completion of the Proposed Transactions may trigger certain provisions in agreements to which the Company or a Stagwell Subject Entity is a party.
The completion of the Proposed Transactions may trigger certain change in control, right of first offer, notice, consent, assignment or other provisions in agreements to which the Company or its subsidiaries are a party. In addition, while the Proposed Transactions will not result in an effective change of control of any Stagwell Subject Entity, the completion of the Proposed Transactions may trigger certain technical provisions in agreements to which a Stagwell Subject Entity is a party. If such Stagwell Subject Entity is unable to assert that such provisions should not apply, or the Company or such Stagwell Subject Entity are unable to comply with or negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, including potentially terminating such agreements or seeking monetary damages. Even if the Company or the applicable Stagwell Subject Entity is able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to the Combined Company.
Failure to complete the Proposed Transactions could adversely affect the market price of the MDC Canada Class A Common Shares as well as its business, financial condition and results of operations.
If the Proposed Transactions are not completed for any reason, the price of the MDC Canada Class A Common Shares may decline, or MDC’s business, financial condition and results of operations may be impacted to the extent that the market price of MDC Canada Common Shares reflects positive market assumptions that the Proposed Transactions will be completed and the related expected benefits will be realized; based on significant expenses, such as legal, advisory and financial services which generally must be paid regardless of whether the Proposed Transactions are completed; based on potential disruption of the business of MDC and distraction of its workforce and management team; and the requirement in the Transaction Agreement that, under certain limited circumstances, MDC must pay Stagwell a termination fee of $5,855,000.
Investors holding MDC Canada Shares prior to the completion of the Proposed Transactions will, in the aggregate, have a significantly reduced ownership and voting interest in the Combined Company after the Proposed Transactions and will exercise less influence over management.
Investors holding MDC Canada Shares prior to the completion of the Proposed Transactions will, in the aggregate, own a significantly smaller percentage of the Combined Company after the completion of the Proposed Transactions. On a pro forma basis (and (i) without giving effect to the conversion of any Combined Company Preferred Shares and (ii) including unvested restricted stock and restricted stock units of MDC), following the completion of the Proposed Transactions, it is anticipated that the existing holders of MDC Canada Class A Common Shares (including Stagwell) and MDC Canada Class B Common Shares will receive Combined Company Class A Common Shares and Combined Company Class B Common Shares equal to approximately 26% of the common equity of the Combined Company and Stagwell would be issued an amount of Combined Company Class C Common Shares equivalent to approximately 74% of the voting rights of the Combined Company and exchangeable, together with Stagwell OpCo Units, for Combined Company Class A Common Shares on a one-for-one basis at Stagwell’s election following a six-month holding period. Consequently, MDC Canada Shareholders, collectively, will be able to exercise less influence over the management and policies of the Combined Company than they will be able to exercise over MDC’s management and policies prior to the completion of the Proposed Transactions. However, the number of Stagwell OpCo Units, the number of Stagwell Class C Shares and the percentage of the Combined Company that Stagwell will hold following the consummation of the Proposed Transactions will each be
 
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reduced, and the percentage of the Combined Company that existing MDC Canada Shareholders will hold will be proportionally increased, if Stagwell is unable to effect the Stagwell Restructuring prior to the Closing.
As of the close of business on the Record Date, May 10, 2021, Stagwell held approximately 18.3% of the MDC Canada Class A Common Shares. Thus, in the aggregate (i.e., including the MDC Canada Class A Common Shares that Stagwell beneficially held as of May 10, 2021 as well as the Stagwell OpCo Units and Stagwell Class C Shares), following the completion of the Proposed Transactions, Stagwell will hold approximately 78.22% of the common equity of the Combined Company, and it is anticipated that holders of MDC Canada Class A Common Shares and MDC Canada Class B Common Shares as of May 10, 2021, excluding Stagwell, will receive Combined Company Class A Common Shares and Class B Common Shares equal to approximately 21.78% of the common equity of the Combined Company.
The Combined Company does not intend to pay dividends on the Combined Company Shares and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of the Combined Company Shares.
The Combined Company does not intend to declare and pay dividends on the Combined Company Shares for the foreseeable future. The Combined Company currently intends to invest future earnings, if any, to fund growth, to develop business, for working capital needs and for general corporate purposes. Therefore, you are not likely to receive any dividends on your Combined Company Shares for the foreseeable future and the success of an investment in the Combined Company Shares will depend upon any future appreciation in their value. There is no guarantee that the Combined Company Shares will appreciate in value or even maintain the value of shares received in connection with the Proposed Transactions. In addition, Delaware law or the agreements governing the Combined Company’s indebtedness may impose requirements that may restrict its ability to pay dividends to Combined Company Shareholders.
The announcement and pendency of the Proposed Transactions could have an adverse effect on the stock price of the MDC Canada Class A Common Shares as well as the business, financial condition, results of operations or business prospects of MDC and Stagwell.
The announcement and pendency of the Proposed Transactions could disrupt MDC’s and Stagwell’s businesses in negative ways. For example, customers and other third-party business partners of MDC or Stagwell may seek to terminate and/or renegotiate their relationships with MDC or Stagwell as a result of the Proposed Transactions, whether pursuant to the terms of their existing agreements with MDC and/or Stagwell or otherwise. In addition, current and prospective employees of MDC and Stagwell may experience uncertainty regarding their future roles with the Combined Company, which might adversely affect MDC’s and Stagwell’s ability to retain, recruit and motivate key personnel. Should they occur, any of these events could adversely affect the stock price of the MDC Canada Class A Common Shares, or harm the financial condition, results of operations or business prospects of, MDC or Stagwell.
The Canaccord Genuity Opinion and Formal Valuation and Moelis Opinion obtained by the MDC Special Committee will not reflect changes, circumstances, developments or events that may have occurred or may occur after the date of such opinions.
On December 21, 2020, Canaccord Genuity rendered to the MDC Special Committee an oral formal valuation and fairness opinion, which was subsequently confirmed in writing by delivery of a separate written formal valuation and fairness opinion, that, as of December 21, 2020, and based upon and subject to the scope of review, assumptions, qualifications and limitations set out therein and such other matters as Canaccord Genuity considered relevant (i) the consideration to be paid by MDC for the Stagwell Subject Entities pursuant to the Transaction Agreement was fair, from a financial point of view, to the holders of MDC Canada Class A Common Shares (other than Mark Penn, Stagwell, Goldman Sachs and their affiliates), with such opinion assuming, among other items, the conversion of the MDC Canada Class B Common Shares into MDC Canada Class A Common Shares; (ii) the fair market value of the MDC Canada Class A Common Shares (assuming the conversion of the MDC Canada Class B Common Shares into MDC Canada Class A Common Shares) ranged from $4.70 to $7.40 per MDC Canada Class A Common Share; and (iii) the fair market value of the Stagwell Subject Entities ranged from $1.2 billion to $1.5 billion.
 
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On December 21, 2020, Moelis rendered to the MDC Special Committee an oral opinion, which was subsequently confirmed in writing, that, from a financial point of view, as of December 21, 2020 and based upon and subject to the assumptions made, procedures followed, matters considered and other limitations set forth in the opinion, the Post-Transaction Ownership Percentage of the Combined Company to be held by the holders of MDC Canada Common Shares upon completion of the Proposed Transactions was fair to the holders of MDC Canada Common Shares (other than the Interested Shareholders).
The MDC Special Committee has not obtained an updated formal valuation and/or fairness opinion as of the date of this Proxy Statement/Prospectus from Canaccord Genuity and/or Moelis, as applicable, and the MDC Special Committee does not expect to receive an updated formal valuation and/or fairness opinion prior to the completion of the Proposed Transactions.
Each of the Canaccord Genuity Opinion and Formal Valuation and Moelis Opinion were necessarily based on financial, economic, market and other conditions as they existed on, and on the information made available to Canaccord Genuity and Moelis, respectively, as of December 21, 2020. Neither the Canaccord Genuity Opinion and Formal Valuation nor the Moelis Opinion speak as of the time the Proposed Transactions will be completed or as of any date other than the date of such opinions. Although subsequent developments may affect their respective opinions, neither Canaccord Genuity nor Moelis has any obligation to update, revise or reaffirm its opinions. These developments may include, among other things, changes to the operations and prospects of MDC’s or Stagwell’s businesses, regulatory or legal changes, general industry, market and economic conditions and other factors that may be beyond the control of MDC or Stagwell, and on which such opinions were based, and that may alter the value of Stagwell or the prices of securities of MDC at the effective time of the Proposed Transactions.
For a more complete description of the Canaccord Genuity Opinion and Formal Valuation and Moelis Opinion delivered to the MDC Special Committee and a summary of the material financial analyses performed by Canaccord Genuity and Moelis and reviewed by the MDC Special Committee in connection with their opinions, please refer to the section “The Proposed Transactions — Opinion of Moelis” and “The Proposed Transactions — Canaccord Genuity Opinion and Formal Valuation” and to the full text of the Canaccord Genuity Opinion and Formal Valuation and Moelis Opinion included as Annexes K and J to this Proxy Statement/Prospectus.
Some of MDC’s directors and executive officers have interests in seeing the Proposed Transactions completed that may be different from, or in addition to, those of other MDC Canada Shareholders.
Certain of MDC’s directors and executive officers have interests in the Proposed Transactions that may differ from, or be in addition to, those of MDC Canada Shareholders generally. These interests may present such executive officers and directors with actual or potential conflicts of interest. These interests include, but are not limited to, the continued service of certain directors of MDC as directors of the Combined Company following the Proposed Transactions, the continued employment of all of MDC’s current executive officers by the Combined Company following the Proposed Transactions, the treatment in the Proposed Transactions of equity awards, and with respect to Mr. Penn, potential receipt of distributions as a result of the Proposed Transactions and the ownership of interests in Stagwell. The members of the MDC Special Committee and the MDC Board (with the Interested Directors abstaining) were aware of these interests and considered them, among others, in their approval and adoption of the Transaction Agreement and the Proposed Transactions and their recommendation that MDC Canada Shareholders adopt the Transaction Agreement and approve the Proposed Transactions. See “The Proposed Transactions — Interests of MDC’s Directors and Officers in the Proposed Transactions” for further discussion of these matters.
MDC and Stagwell may have difficulty attracting, motivating and retaining executives and other employees in light of the Proposed Transactions.
MDC and Stagwell may have difficulty attracting, motivating and retaining executives and other employees in light of the Proposed Transactions. Uncertainty about the effect of the Proposed Transactions on the employees of MDC and Stagwell may have an adverse effect on MDC and Stagwell. This uncertainty may impair MDC’s and Stagwell’s ability to attract, retain and motivate personnel until the Proposed Transactions are completed. Employee retention may be particularly challenging during the pendency of the Proposed Transactions, as employees may feel uncertain about their future roles with MDC or Stagwell
 
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after their combination. If employees of MDC or Stagwell depart because of issues relating to the uncertainty or perceived difficulties of integration or a desire not to become employees of MDC after the Proposed Transactions are consummated, MDC’s ability to realize the anticipated benefits of the Proposed Transactions could be reduced.
MDC may waive one or more of the conditions to the consummation of the Proposed Transactions without re-soliciting shareholder approval.
MDC may determine to waive, in whole or in part, one or more of the conditions to its obligations to consummate the Proposed Transactions, to the extent permitted by applicable law. If MDC waives the satisfaction of a material condition to the consummation of the Proposed Transactions, MDC will evaluate the appropriate facts and circumstances at that time and re-solicit shareholder approvals of the Transaction Proposals if required to do so by applicable law or the rules of the NASDAQ. In some cases, if the MDC Board determines that such waiver or its effect on the MDC Canada Shareholders does not rise to the level of materiality that would require re-solicitation of proxies pursuant to applicable law or the rules of the NASDAQ, MDC would complete the Proposed Transactions without seeking further shareholder approval. Any determination whether to waive any condition to the Proposed Transactions or as to re-soliciting MDC shareholder approval or amending this Proxy Statement/Prospectus as a result of a waiver will be made by the MDC Board at the time of such waiver based on the facts and circumstances as they exist at that time.
Litigation relating to the Proposed Transaction, if any, could result in an injunction preventing the completion of the transactions and/or substantial costs to MDC.
Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into acquisition, merger or other business combination agreements like the Transaction Agreement. Even if such a lawsuit is without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on MDC's liquidity and financial condition. Lawsuits that may be brought against MDC or its directors could also seek, among other things, injunctive relief or other equitable relief, including a request to rescind parts of the Transaction Agreement already implemented and to otherwise enjoin the parties from consummating the Proposed Transactions. One of the conditions to the closing of the Proposed Transaction is that no injunction by any governmental entity having jurisdiction over MDC has been entered and continues to be in effect and no law has been adopted, in either case that prohibits the closing of the Proposed Transactions. Consequently, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Proposed Transactions, that injunction may delay or prevent the mergers from being completed within the expected time frame or at all, which may adversely affect MDC's business, financial position and results of operations.
There can be no assurance that any of the defendants will be successful in the outcome of any potential future lawsuits. The defense or settlement of any lawsuit or claim that remains unresolved at the time the mergers are completed may adversely affect MDC's business, financial condition, results of operations and cash flows.
The COVID-19 pandemic triggered an economic crisis which may delay or prevent the consummation of the Proposed Transactions.
In March 2020, the World Health Organization declared the COVID 19 coronavirus outbreak a pandemic. The coronavirus has spread throughout the world and has resulted in unprecedented restrictions and limitations on operations of many businesses, educational institutions and governmental entities, including in the United States and Canada. Given the ongoing and dynamic nature of the COVID-19 crisis, it is difficult to predict the impact on the business of MDC and Stagwell, and there is no guarantee that efforts by MDC and Stagwell to address any adverse impact of COVID-19 will be effective. If MDC or Stagwell is unable to recover from a business disruption on a timely basis, the Proposed Transactions and the Combined Company’s business and financial conditions and results of operations following the completion of the Proposed Transactions would be adversely affected. The Proposed Transactions may also be delayed and adversely affected by the coronavirus outbreak, and become more costly. Each of MDC and Stagwell may
 
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also incur additional costs to remedy damages caused by such disruptions, which could adversely affect its financial condition and results of operations.
Risks Relating to the Combined Company after Completion of the Proposed Transactions
Stagwell is subject to similar business risks as MDC.
Stagwell concentrates its business activities and services that are similar or adjacent to MDC’s and therefore is affected by many of the same economic conditions and similar risk that MDC faces in its business operations. See “Risk Factors — Risks Related to Stagwell”. The Combined Company will be subject to the risks that MDC and Stagwell currently face and in some cases those risks may be increased by the operations of the Combined Company.
The Up-C structure will place significant limitations on the Combined Company’s cash flow, because the Combined Company’s principal asset after the completion of the Proposed Transactions will be its interest in OpCo, and, accordingly, the Combined Company will depend on distributions from OpCo to pay its taxes and expenses, including payments under the Tax Receivables Agreement.
After the Proposed Transactions, as part of the Up-C structure, the Combined Company will be a holding company and its principal asset will be its ownership of OpCo Common Units and OpCo Preferred Units. Moreover, the Combined Company will have liabilities on its own balance sheet (including under the Goldman Note). This structure enables the Combined Company to obtain certain tax benefits relating to the Combined Company’s acquisitions of OpCo Common Units in connection with future taxable redemptions or exchanges of such OpCo Common Units for Combined Company Class A Common Shares or cash, and 85% of such tax benefits are payable to Stagwell under the Tax Receivables Agreement. However, the Combined Company will have no independent means of generating revenue or cash flow, and its ability to pay taxes and operating expenses, and to service its liabilities, including the Goldman Note and liabilities under the Tax Receivables Agreement, will be dependent upon the financial results and cash flows of OpCo and its subsidiaries, along with the distributions the Combined Company receives from OpCo. OpCo intends to make payments to the Combined Company solely out of its profits, and subject to limitations imposed under the Stagwell Credit Agreements and the Senior Notes, and there can be no assurance that OpCo and its subsidiaries will generate sufficient cash flow to distribute funds to the Combined Company or that applicable state law and contractual restrictions will permit such distributions. Moreover, because of the Up-C structure, this financing arrangement can give rise to U.S. corporate income tax liabilities for the Combined Company in respect of the formation of OpCo, and subsequently as OpCo makes cash distributions to the Combined Company, which will need to be taken into account. In such an event, the Combined Company would depend on further cash distributions from OpCo in order to enable it to pay such tax liabilities.
The Combined Company will also incur expenses related to its operations, including payments under the Goldman Note and the Tax Receivables Agreement, which the Combined Company expects could be significant. See “Certain Other Agreements Related to the Proposed Transactions — Tax Receivables Agreement.” The Combined Company intends, as its sole manager, to cause OpCo to make cash distributions to the owners of OpCo membership interests so that the Combined Company receives (i) an amount sufficient to allow it to fund all of its tax obligations in respect of taxable income allocated to it, including payments under the Goldman Note and the Tax Receivables Agreement and (ii) distributions to cover its operating expenses. When OpCo makes distributions in respect of the Combined Company’s tax liabilities, Stagwell and the other members of OpCo besides the Combined Company (or any subsidiary of the Combined Company) will be entitled to receive proportionate distributions based on their economic interests in OpCo Common Units at the time of such distributions. OpCo’s ability to make such distributions may be subject to various limitations and restrictions, such as restrictions on distributions that would either violate any contract or agreement to which OpCo is then a party, or any applicable law, or that would have the effect of rendering OpCo insolvent or exceed the amounts that OpCo is permitted to distribute under the Senior Notes. If the Combined Company does not have sufficient funds to pay tax or other liabilities, including under the Goldman Note, or to fund its operations, it may have to borrow funds, which could materially adversely affect its liquidity and financial condition and subject it to various restrictions imposed by any such indebtedness. To the extent that the Combined Company is unable to make payments under the Tax
 
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Receivables Agreement for any reason, such payments generally will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivables Agreement and therefore accelerate payments due under the Tax Receivables Agreement. See “Certain Other Agreements Related to the Proposed Transactions — Tax Receivables Agreement” and “Certain Other Agreements Related to the Proposed Transactions — A&R OpCo LLC Agreement.”
In certain circumstances, OpCo will be required to make distributions to the Combined Company and the other holders of OpCo Common Units, and the distributions that OpCo makes may exceed, or in some cases be lower than, the Combined Company’s tax liabilities and obligations under the Tax Receivables Agreement. To the extent the Combined Company does not have expenditures for which it can use such excess cash, Stagwell and other owners of OpCo Common Units besides the Combined Company would benefit from any value attributable to such cash balances as a result of their ownership of Combined Company Class A Common Shares following an exchange of their OpCo Common Units.
OpCo is intended to be treated as a partnership for U.S. federal income tax purposes and, as such, will not be subject to any entity-level U.S. federal income tax. Instead, taxable income of OpCo will be allocated to holders of OpCo Common Units and OpCo Preferred Units, including the Combined Company. Accordingly, the Combined Company will incur income taxes on its allocable share of any net taxable income of OpCo. Under the A&R OpCo LLC Agreement, OpCo will generally be required from time to time to make distributions in cash to the Combined Company in respect of the OpCo Common Units and OpCo Preferred Units in amounts that are intended to be sufficient to cover the taxes on its allocable share of the taxable income of OpCo, and OpCo will also be required to make pro rata distributions at such time to the other holders of OpCo Common Units. The Combined Company expects that these tax distributions may at some times exceed its tax liabilities and obligations to make payments under the Tax Receivables Agreement, although in certain cases (including if it incurs taxable income that is not the result of OpCo’s operations, as a result of limitations in the Stagwell Credit Agreements or Senior Notes, or due to circumstances where payments may be due to Stagwell under the Tax Receivables Agreement before the Combined Company realizes cash tax benefits relating to its acquisitions of OpCo Common Units in connection with future taxable redemptions or exchanges of such Opco Common Units for Combined Company Class A Common Shares or cash , these tax distributions may be lower than the Combined Company’s combined liabilities for taxes and the Tax Receivables Agreement. In the event of a shortfall in distributions, the Combined Company can defer payments under the Tax Receivables Agreement, subject to an interest charge. In the event excess cash is distributed, the Combined Company board of directors will determine the appropriate uses for any excess cash so accumulated, which may include, among other uses, the payment obligations under the Tax Receivables Agreement and the payment of other expenses. The Combined Company will have no obligation to distribute such cash (or other available cash other than any declared dividend) to its stockholders. No adjustments to the redemption or exchange ratio of OpCo Common Units for Combined Company Class A Common Shares or cash, as applicable, will be made as a result of either any cash distribution the Combined Company receives from OpCo or any cash that it retains and does not distribute to its stockholders. To the extent that the Combined Company does not utilize any excess cash to fund its other expenditures, the other members of OpCo would benefit from any value attributable to such cash balances as a result of their ownership of Combined Company Class A Common Shares following a redemption or exchange of their OpCo Units. Additionally, no adjustments to the redemption or exchange ratio of OpCo Common Units for Combined Company Class A Common Shares or cash will be made in the event that the Combined Company incur liabilities or expenses but does not receive cash distributions from OpCo in sufficient amount to fund such liabilities or expenses.
The Tax Receivables Agreement with Stagwell requires the Combined Company to make cash payments to them in respect of certain tax benefits to which the Combined Company may become entitled, and the Combined Company expects that the payments it will be required to make will be substantial and may make the Combined Company a less attractive target to potential acquirers.
Upon the closing of the Proposed Transactions, the Combined Company will be a party to the Tax Receivables Agreement with OpCo and Stagwell. Under the Tax Receivables Agreement, the Combined Company will be required to make cash payments to Stagwell equal to 85% of the U.S. federal, state and local income tax savings, if any, that the Combined Company actually realizes, or in certain circumstances is
 
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deemed to realize, as a result of (i) increases in the tax basis of OpCo’s assets resulting from redemptions or exchanges by OpCo’s Common Unit holders (other than the Combined Company or one of its subsidiaries) for Combined Company Class A Common Shares or for cash, as applicable, as described under “Certain Other Agreements Related to the Proposed Transactions — Tax Receivables Agreement,” and (ii) certain other tax benefits related to the Combined Company making payments under the Tax Receivables Agreement. The Combined Company expects that the amount of the cash payments that it will be required to make under the Tax Receivables Agreement will be significant, and will be solely for Stagwell’s benefit. Any payments made by the Combined Company to Stagwell under the Tax Receivables Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to the Combined Company. Furthermore, the Combined Company’s future obligation to make payments under the Tax Receivables Agreement, and an acceleration of such obligations resulting from a change of control, could make it a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that are the subject of the Tax Receivables Agreement. For more information, see “Certain Other Agreements Related to the Proposed Transactions — Tax Receivables Agreement.”
The actual increase in tax basis, as well as the amount and timing of any payments under the Tax Receivables Agreement, will vary depending on a number of factors, including, but not limited to, the timing of any future redemptions or exchanges of the OpCo Common Units held by other OpCo members, the price of Combined Company Class A Common Shares at the time of the redemption or exchange, the extent to which redemptions or exchanges are taxable, the amount and timing of the taxable income that the Combined Company generates in the future, the timing and amount of any earlier payments it makes under the Tax Receivables Agreement itself, the tax rates then applicable and the portion of its payments under the Tax Receivables Agreement constituting imputed interest. The Combined Company expects that, as a result of the increases in the tax basis of the tangible and intangible assets of OpCo attributable to the redeemed or exchanged Opco Common Units, the payments that it may make to Stagwell could be substantial. For example, assuming (i) that all of the OpCo Units subject to the Tax Receivables Agreement are redeemed or exchanged immediately after the completion of the Proposed Transactions, (ii) no material changes in relevant tax law, and (iii) that the Combined Company earns sufficient taxable income in each year to realize on a current basis all tax benefits that are subject to the Tax Receivables Agreement, based on the price of Combined Company Class A Common Shares of $2.51 as of December 31, 2020, the Combined Company expects that the tax savings it would be deemed to realize would aggregate approximately $33 million over the 15-year period from the assumed date of such redemption or exchange, and over such period it would be required to pay Stagwell 85% of such amount, or approximately $28 million. The actual amounts the Combined Company may be required to pay under the Tax Receivables Agreement may materially differ from these hypothetical amounts, as potential future tax savings it will be deemed to realize, and Tax Receivables Agreement payments by it, will be calculated based in part on the market value of the Combined Company Class A Common Shares at the time of redemption or exchange and the prevailing federal tax rates applicable to the Combined Company over the life of the Tax Receivables Agreement (as well as the assumed combined state and local tax rate), and will generally be dependent on the Combined Company generating sufficient future taxable income to realize all of these tax savings (subject to the exceptions described under “Certain Other Agreements Related to the Proposed Transactions — Tax Receivables Agreement”). Payments under the Tax Receivables Agreement are not conditioned on Stagwell’s continued ownership of OpCo Common Units or Combined Company Class A Common Shares after the consummation of the Proposed Transactions. There may be a material negative effect on the Combined Company’s liquidity if, as described below, the payments under the Tax Receivables Agreement exceed the actual benefits it receives in respect of the tax attributes subject to the Tax Receivables Agreement and/or distributions to the Combined Company by OpCo are not sufficient to permit it to make payments under the Tax Receivables Agreement.
The Combined Company’s organizational structure, including the Tax Receivables Agreement, confers certain benefits upon Stagwell that will not benefit Combined Company Class A Common Shareholders (other than Stagwell) to the same extent as it will benefit Stagwell.
The Combined Company’s organizational structure, including the Tax Receivables Agreement, confers certain benefits upon Stagwell that will not benefit the holders of Combined Company Class A Common Shares to the same extent as it will benefit Stagwell. The Combined Company will enter into the Tax Receivables Agreement with OpCo and Stagwell and it will provide for the payment by the Combined
 
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Company to Stagwell of 85% of the tax benefits, if any, that the Combined Company actually realizes, or in certain circumstances is deemed to realize, as a result of (i) increases in the tax basis of OpCo’s assets resulting from redemptions or exchanges of OpCo Common Units for Combined Company Class A Common Shares or for cash, as applicable, as described under “Certain Agreements Related to the Business Combination — A&R OpCo LLC Agreement,” and (ii) certain other tax benefits related to the Combined Company making payments under the Tax Receivables Agreement. Although the Combined Company will retain 15% of the amount of such tax benefits, this and other aspects of its organizational structure may adversely impact the future trading market for the Combined Company Class A Common Shares. Moreover, as a result of this structure, the Combined Company’s flexibility to incur liabilities and expenses prior to the Redomiciliation Effective Time, and its ability to fund expenses of the Combined Company with cash from OpCo’s operations, is significantly limited, and could give rise to significant corporate tax costs which need to be funded from OpCo’s cash.
In certain cases, payments under the Tax Receivables Agreement to Stagwell may be accelerated or significantly exceed the actual benefits the Combined Company realizes in respect of the tax attributes subject to the Tax Receivables Agreement.
The Tax Receivables Agreement provides that upon certain changes of control or if, at any time, the Combined Company elects an early termination of the Tax Receivables Agreement, then its obligations, or its successor’s obligations, under the Tax Receivables Agreement to make payments thereunder would be accelerated and calculated based on certain assumptions, including an assumption that the Combined Company would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivables Agreement. As a result of the foregoing, (i) the Combined Company could be required to make payments under the Tax Receivables Agreement that are greater than the specified percentage of the actual benefits it ultimately realizes in respect of the tax benefits that are subject to the Tax Receivables Agreement (for example, if it does not end up having any income in the relevant period) and (ii) the Combined Company would be required to make an immediate cash payment equal to the present value of the anticipated future tax benefits that are the subject of the Tax Receivables Agreement, which payment may be made significantly in advance of the actual realization, if any, of such future tax benefits. In these situations, the Combined Company’s obligations under the Tax Receivables Agreement could have a substantial negative impact on its liquidity and could have the effect of delaying, deferring or preventing certain change of control transactions. There can be no assurance that the Combined Company will be able to fund or finance its obligations under the Tax Receivables Agreement. Moreover, because of the size of Stagwell’s ownership interest in both OpCo and the Combined Company, Stagwell itself has the ability to control the Combined Company’s decision about whether to engage in a transaction that could trigger a change of control, and consequently an acceleration event under the Tax Receivables Agreement which would trigger an immediate cash payment to Stagwell.
Payments under the Tax Receivables Agreement will be based on the tax reporting positions that the Combined Company determines, and the Internal Revenue Service or another tax authority may challenge all or part of the tax basis increases, as well as other related tax positions it takes, and a court could sustain such challenge. Under the Tax Receivables Agreement, Stagwell will reimburse the Combined Company for any payments previously made if such tax benefits are subsequently disallowed, and to the extent a reimbursement payment has not been made, excess payments made to Stagwell will first be netted against payments otherwise to be made, if any, after the determination of such excess. However, the Combined Company might not determine that it has effectively made an excess cash payment to Stagwell for a number of years following the initial time of such payment and, if any of its tax reporting positions are challenged by a taxing authority, it will not be permitted to reduce any future cash payments under the Tax Receivables Agreement until any such challenge is finally settled or determined. As a result, payments could be made under the Tax Receivables Agreement in excess of the tax savings that the Combined Company realizes in respect of the tax attributes with respect to Stagwell that are the subject of the Tax Receivables Agreement.
The effective tax rate of the Combined Company’s group may change in the future, including as a result of the Redomiciliation and recent tax legislation.
Following the Proposed Transactions, the Combined Company will be organized in an Up-C structure, in which all of the assets and business of MDC and assets and businesses contributed by Stagwell in the
 
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Stagwell OpCo Contribution will be held by OpCo, an entity treated as a partnership, or “passthrough” entity, for U.S. federal income tax purposes, and will be operated through OpCo and its subsidiaries. The Combined Company’s sole material asset will be the OpCo Common Units and OpCo Preferred Units.
Following the Proposed Transactions, the Combined Company will be allocated its distributive share of taxable income earned by OpCo and OpCo’s operations. Although a significant portion of OpCo’s assets will be held through subsidiaries that are treated as pass-through entities for U.S. tax purposes, a U.S. corporate subsidiary of OpCo (“Midas Corporate Holdco”) will be the U.S. owner of non-U.S. corporate subsidiaries currently owned by MDC, as well as non-U.S. corporate subsidiaries contributed by Stagwell in the Stagwell Contributions, in each case that are treated as controlled foreign corporations for U.S. tax purposes, as well as certain other corporate entities received by OpCo pursuant to the Stagwell Contributions. This entity will not be included with the Combined Company in a consolidated group, and will file U.S. tax returns on a separate basis. Under U.S. CFC rules, a “United States shareholder” of a CFC generally must include annually as ordinary income its pro rata share of its CFC’s “subpart F income” and “global intangible low-taxed income” and, to the extent an exemption is not available, amounts attributable to investments by the CFC in “United States property,” even if no distributions are made by the foreign subsidiaries to the shareholder. It is possible for such income to be offset by foreign tax credits, to the extent available. Additionally, dividend distributions from and other transactions between Midas Corporate Holdco and OpCo and its other subsidiaries can be expected to result in taxable income for OpCo which is allocated under U.S. partnership tax rules to OpCo’s members, including the Combined Company.
In addition, U.S. tax legislation enacted in 2017 significantly changed the U.S. federal income taxation of U.S. corporations, including by reducing the U.S. corporate income tax rate, limiting interest deductions and certain deductions for executive compensation, permitting immediate expensing of certain capital expenditures, adopting elements of a territorial tax system, revising the rules governing net operating losses, and introducing new anti-base erosion provisions. The legislation remains unclear in many respects and continues to be subject to potential amendments and technical corrections (including corrections and other modifications enacted in 2020 in connection with the CARES Act (described below)). Treasury and the IRS have issued significant guidance since the legislation was enacted, interpreting the legislation and clarifying some of the uncertainties, and are continuing to issue new guidance. There are still significant aspects of the legislation for which further guidance is expected, and both the timing and contents of any such future guidance are uncertain.
Further, changes to the U.S. federal income tax laws are proposed regularly and there can be no assurance that, if enacted, any such changes would not have an adverse impact on the Combined Company. For example, President Biden has suggested the reversal or modification of some portions of the 2017 U.S. tax legislation and certain of these proposals, if enacted, could result in a higher U.S. corporate income tax rate than is currently in effect and thereby increase the effective tax rate of the Combined Company and its subsidiaries following Proposed Transactions compared to current expectations. There can be no assurance that any such proposed changes will be introduced as legislation, or if they are introduced that they would be enacted, and if enacted what form they would take.
Moreover, the Combined Company and its subsidiaries could become subject to income tax in one or more countries, including the United States, as a result of activities performed by it (through its investment in OpCo), adverse developments or changes in law, contrary conclusions by the relevant tax authorities or other causes. The imposition of any of these income taxes could materially reduce the Combined Company’s after-tax returns.
Finally, in 2020, in response to significant market volatility and disruptions to business operations resulting from the global spread of COVID-19, legislatures and taxing authorities in many jurisdictions in which the Company operates have proposed or enacted changes to their tax rules (including, in the United States, the CARES Act). These changes include modifications that have temporary effect, and more permanent changes. Although the Company does not expect significant adverse changes to its tax profile resulting from the new rules, the long-term impact of these new rules, and future regulations and interpretations which have not yet been issued, is subject to change.
In light of these factors, the Company cannot assure you that the Combined Company’s effective income tax rate will not change in future periods, including as a result of and following the Proposed
 
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Transactions. Moreover, U.S. tax laws significantly limit the Combined Company’s ability to redomicile outside of the U.S. once the Proposed Transactions are complete. Accordingly, if the Combined Company’s effective tax rate were to increase as a result of the Proposed Transactions, the Combined Company’s business could be adversely affected.
If completed, the expected benefits of the Proposed Transactions may not be realized.
There can be no assurance that all or any of the anticipated benefits of the Proposed Transactions will be achievable, particularly as the achievement of the benefits are in many important respects subject to factors that the Company does not and cannot control, including the reaction of third parties with whom the Company enters into contracts and do business and the reactions of investors.
After the Proposed Transactions, the Combined Company will have significantly more revenue, expenses, assets and employees than MDC had prior to the Proposed Transactions. In the Proposed Transactions, the Combined Company will also be assuming certain liabilities of Stagwell and taking on other obligations. The Combined Company may not successfully or cost-effectively integrate Stagwell’s business and operations into MDC’s existing business and operations. Even if the Combined Company is able to integrate the combined businesses and operations successfully, this integration may not result in the realization of the full benefits of the growth and other opportunities that MDC currently expects from the Proposed Transactions within the anticipated time frame, or at all.
The integration of the Stagwell and MDC businesses may present significant challenges, and the Combined Company may not realize anticipated synergies and other benefits of the Proposed Transactions.
The combination of independent businesses is complex, costly and time-consuming, and combining the businesses of MDC and the Stagwell Subject Entities may divert significant management attention and resources and disrupt the Combined Company’s business. The failure to meet the challenges involved in integrating the businesses and to realize the anticipated benefits of the transaction could cause an interruption of, or a loss of momentum in, the Combined Company’s business activities and could adversely affect its results of operations. The overall combination of MDC and the Stagwell Subject Entities may also result in material unanticipated problems, expenses, liabilities, competitive responses, and loss of customer and other business relationships. The risks and difficulties of integration include, among others:

the diversion of management attention to integration matters;

integrating operations and systems, including intellectual property and communications systems, administrative and information technology infrastructure and financial reporting and internal control systems, some of which may prove to be incompatible;

conforming standards, controls, procedures and accounting and other policies, business cultures and compensation structures between the businesses;

retaining existing, and obtaining new customers;

managing the expanded operations of a significantly larger company; and

potential unknown liabilities, adverse consequences and unforeseen increased expenses associated with the Proposed Transactions.
In addition, even if the operations of MDC’s business and the Stagwell Subject Entities’ business are integrated successfully, the full benefits of the transaction may not be realized, including, among others, the synergies, cost savings or sales or growth opportunities that are expected. These benefits may not be achieved within the anticipated time frame or at all. Further, additional unanticipated costs may be incurred in the integration of the MDC and Stagwell businesses. All of these factors could cause dilution to the earnings per share of the Combined Company, decrease or delay any accretive effect of the Proposed Transactions, and negatively impact the price of Combined Company Class A Common Shares following the Proposed Transactions.
 
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Payments in connection with the exercise of Dissent Rights or appraisal rights may impair the Company’s financial resources.
Registered holders of MDC Canada Shares have the right to exercise certain Dissent Rights in cash in connection with the Proposed Transactions in accordance with the CBCA.
Registered holders of MDC Canada Class B Common Shares have the right to exercise appraisal rights, and demand payment of the fair value of their MDC Canada Shares, as the case may be, in cash in connection with the MDC Merger in accordance with DGCL 262.
If there are significant numbers of Dissenting Shareholders or MDC Canada Shareholders that exercise their appraisal rights, a substantial cash payment may be required to be made to such shareholders that could have an adverse effect on the Company’s financial condition and cash resources if the Proposed Transactions are completed.
The market price for the Combined Company Class A Common Shares following the closing of the Proposed Transactions may be affected by factors different from those that historically have affected or currently affect MDC Canada Class A Common Shares.
Upon consummation of the Proposed Transactions, holders of MDC Canada Class A Common Shares shall receive Combined Company Class A Common Shares. MDC’s businesses differ from those of Stagwell in certain respects, and vice versa, and accordingly the results of operations of the Combined Company will be affected by some factors that are different from those currently affecting the results of operations of MDC and those currently affecting the results of operations of Stagwell. Similarly, certain factors and risks related to results of operations of the Combined Company may be exacerbated or more important than for MDC’s business alone. The results of operations of the Combined Company may also be affected by factors different from those currently affecting MDC and Stagwell. For a discussion of the businesses of MDC and of some important factors to consider in connection with those businesses, see the documents incorporated by reference in this Proxy Statement/Prospectus and referred to under “Where You Can Find More Information.”
Sales of Combined Company Class A Common Shares after the Proposed Transactions may negatively affect the market price of Combined Company Class A Common Shares.
Stagwell will receive Combined Company Class C Common Shares in the Proposed Transactions, which, together with its OpCo Units can be exchanged into Combined Company Class A Common Shares after the end of a six-month restriction on exchange and will generally be eligible for immediate resale upon exchange. Furthermore, Stagwell, without taking into account any conversion of the MDC Canada Series 6 Shares, owns 18.3% of the outstanding MDC Canada Class A Common Shares and may, in certain circumstances, convert its MDC Canada Series 6 Preferred Shares into MDC Canada Class A Common Shares. MDC Canada Class A Common Shares owned by Stagwell are generally eligible for immediate resale subject to securities laws restrictions on sales by affiliates.
At the Closing, MDC and the Stagwell RRA Parties will enter into the Registration Rights Agreement pursuant to which, among other things and subject to certain restrictions, the Combined Company will be required to file with the SEC a registration statement registering for resale the Combined Company Class A Common Shares that (i) result, in connection with the Proposed Transactions, from the conversion of the MDC Canada Class A Common Shares Stagwell holds today, (ii) are issuable upon conversion of Stagwell’s Combined Company Series 6 Shares, and (iii) are issuable upon exchange of the Stagwell OpCo Units (in combination with the Stagwell Class C Shares), and to conduct certain underwritten offerings upon the request of holders of registrable securities, including direct and indirect transferees of the Stagwell RRA Parties. The Registration Rights Agreement provides that no shares will be sold thereunder prior to the date that is 91 days after the Closing.
The market price of Combined Company Class A Common Shares could decline as a result of sales of a large number of shares of Combined Company Class A Common Shares in the market after the consummation of the Proposed Transactions or even the perception that these sales could occur.
 
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If securities analysts do not publish research or reports about the Combined Company’s business or if they publish negative evaluations of the Combined Company Class A Common Shares, the price of the Combined Company Class A Common Shares could decline.
The trading market for the Combined Company’s Class A Common Shares will rely, in part, on the research and reports that industry or financial analysts publish about the Combined Company or the Combined Company’s business. Equity research analysts may elect not to provide research coverage of the Combined Company’s Class A Common Shares after the completion of the Proposed Transactions, and such lack of research coverage may adversely affect the market price of the Combined Company Class A Common Shares. In the event it does have equity research analyst coverage, the Combined Company will not have any control over the analysts or the content and opinions included in their reports. The price of the Combined Company’s Class A Common Shares could decline if one or more equity research analysts downgrade its shares or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of the Combined Company or fails to publish reports on it regularly, demand for the Combined Company Class A Common Shares could decrease, which in turn could cause its stock price or trading volume to decline.
The Proposed Transactions will result in changes to the Combined Company Board that may affect the Combined Company’s business strategy and operations.
The composition of the Combined Company’s board of directors will change, as described in more detail in the section titled “Governance and Management of the Combined Company Following the Proposed Transactions” of this Proxy Statement/Prospectus. The newly comprised Combined Company Board may affect business strategies and operating decisions with respect to the Combined Company that may have an adverse impact on the Combined Company’s business, financial condition and results of operations following the completion of the transaction.
Following the completion of the Proposed Transactions, the Combined Company will be a “controlled company” under NASDAQ rules.
Following the completion of the Proposed Transactions, Stagwell and its affiliates will control a majority of the voting power of the Combined Company’s outstanding capital stock. As a result, the Combined Company will be a “controlled company” under NASDAQ rules. As a controlled company, the Combined Company will be exempt from certain NASDAQ corporate governance requirements, including those that would otherwise require the board of the Combined Company to have a majority of independent directors and require that the Combined Company establish a compensation committee comprised entirely of independent directors, or otherwise ensure that the compensation of its executive officers and nominees for directors are determined or recommended to the board of directors by the independent members of the board of directors. While the Company does not expect the Combined Company to rely on any of these exemptions, the Combined Company will be entitled to do so for as long as it will be considered a “controlled company,” and to the extent the Combined Company relies on one or more of these exemptions, holders of the Combined Company capital stock will not have the same protections afforded to stockholders of companies that are subject to all of the NASDAQ corporate governance requirements.
If the Combined Company fails to maintain an effective system of internal control over financial reporting, the Combined Company may not be able to accurately report its financial results or prevent fraud. As a result, stockholders could lose confidence in the Combined Company’s financial and other public reporting, which would harm its business and the trading price of the Combined Company Class A Common Shares.
Effective internal control over financial reporting is necessary for the Combined Company to provide reliable financial reports and, together with adequate disclosure controls and procedures, is designed to prevent fraud. In connection with the preparation of Stagwell’s consolidated financial statements as of December 31, 2020, 2019 and 2018 and for the years then ended, Stagwell identified material weaknesses in its internal controls over financial reporting including not designing or maintaining an effective control environment that meets Stagwell’s accounting and reporting requirements. Specifically, Stagwell did not maintain a sufficient complement of personnel with an appropriate degree of internal controls and accounting
 
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knowledge, experience, and training commensurate with its accounting and reporting requirements. This material weakness contributed to the following additional material weaknesses:

Stagwell did not establish effective controls in response to the risks of material misstatement, including designing and maintaining formal accounting policies, procedures, and controls over journal entries, significant accounts and disclosures, in order to achieve complete and accurate financial accounting, reporting and disclosures;

Stagwell did not design and maintain effective controls over information technology (“IT”) general controls for information systems that are relevant to the preparation of its financial statements. Specifically, Stagwell did not design and maintain: (i) program change management controls for the financial systems to ensure that information technology program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately; (ii) appropriate user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs and data to appropriate Stagwell personnel; (iii) computer operations controls to ensure critical data interfaces between systems are appropriately identified and monitored, and data backups are authorized and restorations monitored; and (iv) testing and approval controls for program development to ensure that new software development is aligned with business and IT requirements; and

Stagwell has not established a sufficient risk assessment process to identify risks of material misstatement due to fraud and/or error and implement controls against such risks.
These material weaknesses have not been rectified as of the date of this Proxy Statement/Prospectus. Any failure to remediate such material weaknesses, to implement required new or improved controls, or difficulties encountered in their implementation, could cause the Combined Company to fail to meet its reporting obligations. In addition, any testing by the Combined Company, as and when required, conducted in connection with Section 404 of the Sarbanes-Oxley Act, or Section 404, or any subsequent testing by the Combined Company’s independent registered public accounting firm, as and when required, may reveal deficiencies in MDC’s internal control over financial reporting that are deemed to be significant deficiencies or material weaknesses or that may require prospective or retroactive changes to its financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in the Combined Company’s reported financial information, which could have a negative effect on the trading price of the Combined Company Class A Common Shares.
Following the Proposed Transactions, a downgrade of the Combined Company’s credit ratings could increase its cost of capital and limit its access to capital, suppliers or counterparties.
The Company anticipates that following the Proposed Transactions, the Combined Company’s long-term debt rating will be higher than MDC’s current ratings as the Combined Company and its subsidiaries will carry on both the business currently carried on by MDC and its subsidiaries and by SMGH and its subsidiaries, which will effect a change in the underlying financial condition of the Combined Company, and in particular the Combined Company is expected to have a lower debt-to-EBITDA ratio than MDC does today. However, there is no guarantee, and there is a risk that the ratings of the Combined Company’s long-term debt could be lower than MDC’s ratings. The credit ratings are based upon operating performance, liquidity and leverage ratios, overall financial position, and other factors viewed by the credit rating agencies as relevant to the Combined Company’s economic outlook. Because the Combined Company expects to rely in part on debt financing for ongoing operations, a downgrade in its credit rating, if any, may increase the Combined Company’s cost of borrowing, limit access to private and public markets to raise short-term and long-term debt, and negatively impact the Combined Company’s cost of capital.
The business of the Combined Company will be highly dependent on the services of Mark Penn, our Chief Executive Officer.
The Combined Company will depend on the continued services and performance of our key personnel, including our Chairman and CEO, Mark Penn. Although we have entered into an employment agreement with Mr. Penn, the agreement has no specific duration and constitutes at-will employment. The loss of key personnel, including Mr. Penn, could disrupt our operations and have an adverse effect on our business.
 
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The Combined Company is required to abide by potentially significant restrictions which could limit the Combined Company’s ability to undertake certain corporate actions (such as related party transactions and certain business combinations) that otherwise could be advantageous to the Combined Company.
During the period following the Proposed Transactions when (x) Stagwell beneficially owns more than 10% of the then-issued and outstanding voting securities of the Combined Company, (y) Stagwell has nominated directors constituting a majority of the Combined Company Board, or (z) Stagwell has the contractual right to appoint a majority of the Combined Company Board, the Transaction Agreement generally will prohibit the Combined Company from (i) entering into certain related party transactions without the approval of a majority of the independent directors serving on the Combined Company Board and (ii) entering into any proposed business combinations involving Stagwell or its affiliates without (A) the approval of shareholders of the Combined Company representing a “majority of the minority” ​(disinterested MDC Canada Shareholders) of the voting power of the Combined Company and (B) the creation of a special committee of independent directors with authority similar to that of the MDC Special Committee. These restrictions may limit the Combined Company’s ability to pursue certain strategic transactions or engage in other transactions, including using Combined Company Common Shares to make acquisitions and in connection with equity capital market transactions or disposing of certain businesses that might increase the value of the Combined Company’s business.
The Combined Company, will, on a consolidated basis, assume and be responsible for all of the Stagwell Subject Entities’ liabilities following the closing of the Proposed Transactions, notwithstanding any breach of any representation or warranty of the Transaction Agreement.
While the Transaction Agreement contains certain representations and warranties about the Stagwell Subject Entities, the Transaction Agreement provides that all representations and warranties of the parties contained therein shall not survive the completion of the Proposed Transactions. Accordingly, there are no remedies available to the parties with respect to any breach of representations of the parties to the Transaction Agreement, except for any rights MDC may have under applicable law to bring a claim relating to or arising from fraud with respect to any representation or warranty made in the Transaction Agreement.
As such, notwithstanding whether any Stagwell liability is related to a breach of a representation or warranty in the Transaction Agreement, the Stagwell Subject Entities, and by virtue of the Proposed Transactions, the Combined Company, will bear full responsibility for any and all Stagwell liabilities following the closing of the Proposed Transactions. To the extent any such Stagwell liabilities are larger than anticipated, they could have an adverse impact on the business, results of operation and financial condition of the Combined Company.
The rights of stockholders under Delaware law may differ from the rights of shareholders under the CBCA.
If the Proposed Transactions are completed, MDC Canada Shareholders will become stockholders of a Delaware corporation. There are differences between the CBCA and the DGCL. For example, under the CBCA, many significant corporate actions such as amending a corporation’s articles of incorporation or consummating a merger require the approval of at least two-thirds of the votes cast by shareholders, whereas under the DGCL, in most cases, such actions require the approval of a majority of the voting power of outstanding stock entitled to vote on the matter. Furthermore, shareholders under the CBCA are entitled to dissent rights under a number of extraordinary corporate actions, including an amalgamation with another unrelated corporation, certain amendments to a corporation’s articles of incorporation or the sale of all or substantially all of a corporation’s assets, whereas under the DGCL, stockholders are only entitled to appraisal rights in connection with certain mergers, consolidations and similar transactions. As shown by the foregoing examples, if the Proposed Transactions are completed, in certain circumstances, holders of Combined Company Shares will be afforded different protections under the DGCL than MDC Canada Shareholders had under the CBCA. See “Comparison of Stockholders’ Rights” for further details.
Provisions in the Combined Company Certificate of Incorporation and the Combined Company Bylaws could impact change in control transactions.
In addition to protections afforded under the DGCL, the Combined Company Certificate of Incorporation and Combined Company Bylaws will contain provisions that could have the effect of
 
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delaying or preventing changes in control or changes in management or the Combined Company Board. These provisions include:

no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; and

the ability of the Combined Company Board to issue shares of preferred stock in one or more series and, with respect to each such series, to fix the number of shares constituting such series and the designations, powers, preferences, rights, qualifications, limitations and restrictions in respect of the shares of such series, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer.
The Combined Company Certificate of Incorporation will designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by stockholders and will designate the United States federal district courts as the exclusive forum for resolving any complaint asserting a cause of action arising under the U.S. Securities Act, which could limit stockholders’ ability to obtain a favorable judicial forum for disputes with the Combined Company or its directors or officers or other matters pertaining to the Combined Company’s internal affairs.
The Combined Company Certificate of Incorporation will provide that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be the exclusive forum for:

any derivative action or proceeding brought on behalf of the Combined Company;

any action or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or other employee or stockholder of the Combined Company to the Combined Company or the Combined Company Shareholders;

any action or proceeding asserting a claim arising pursuant to any provision of the DGCL (or any successor provision thereto) or as to which the DGCL (or any successor provision thereto) confers jurisdiction on the Court of Chancery of the State of Delaware;

any action or proceeding asserting a claim against the Company or any current or former director, officer or other employee of the Company arising pursuant to any provision of the DGCL, the Combined Company Certificate of Incorporation, or the Combined Company Bylaws (as each may be amended form time to time);

any action asserting a claim governed by the internal affairs doctrine; or

any other action asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL.
The Combined Company Certificate of Incorporation will further provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the U.S. Securities Act.
These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Combined Company or its directors, officers or other matters pertaining to the Combined Company’s internal affairs or matters arising under the U.S. Securities Act, and may discourage lawsuits with respect to such claims. Alternatively, if a court were to find these provisions of the Combined Company Certificate of Incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, the Combined Company may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect its business, results of operations or financial condition.
Under the Combined Company Certificate of Incorporation, non-employee directors will generally have no obligation to offer the Combined Company corporate opportunities.
Directors of the Combined Company who are not also employees of the Combined Company will not have any duty to refrain from (i) engaging directly or indirectly in the same or similar business activities or lines of business that the Combined Company does, (ii) doing business with any potential or actual customer
 
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or supplier of the Combined Company, or (iii) employing or otherwise engaging any officer or employee of the Combined Company. In the event that any such director acquires knowledge of a potential transaction or matter which may be a corporate opportunity for him or herself or another person and the Combined Company, the Combined Company will not have any expectancy in the corporate opportunity, and no director will have any duty to communicate or offer the corporate opportunity to us and may pursue or acquire such corporate opportunity for him or herself or direct such opportunity to another person.
MDC Canada Shareholders might have difficulty enforcing civil liabilities against the Combined Company in Canada.
The enforcement by investors of civil liabilities under Canadian securities laws may be affected adversely by the fact that the Combined Company will be incorporated outside of Canada and that some or all of the officers and directors will be residents of a foreign country. As a result, it may be difficult or impossible for MDC Canada Shareholders in Canada to effect service of process within Canada upon the Combined Company, most of its subsidiaries and their officers and directors, or to realize, against them, upon judgments of courts of Canada predicated upon civil liabilities under Canadian securities laws. In addition, MDC Canada Shareholders in Canada should not assume that the courts of the U.S.: (a) would enforce judgments of Canadian courts obtained in actions against such persons predicated upon civil liabilities under Canadian securities laws; or (b) would enforce, in original actions, liabilities against such persons predicated upon civil liabilities under Canadian securities laws. In addition, awards of punitive damages in actions brought in Canada or elsewhere may be unenforceable in the U.S.
U.S. governed companies incur greater risk of class action shareholder litigation as compared to Canadian governed companies.
Following the Redomiciliation, MDC Delaware will be, and following the completion of the Proposed Transactions, the Combined Company will be domiciled in the state of Delaware. Historically, U.S. governed companies have been exposed to a greater risk of class action shareholder litigation as compared to Canadian governed companies.
Risks Relating to MDC’s Business
You should read and consider the risk factors specific to the Company’s business that will continue to affect the Combined Company after completion of the Proposed Transactions. These risks are described in the sections entitled “Item 1A. Risk Factors” in the Annual Report on Form 10-K of the Company for the year ended December 31, 2020, which is incorporated by reference into this Proxy Statement/Prospectus, and in other documents that are incorporated by reference into this Proxy Statement/Prospectus.
Risks Relating to Stagwell
In this section, the Stagwell Subject Entities are referred to as “Stagwell”, “the Company,” “we,” “our,” or “us”.
Future economic and financial conditions could adversely impact our financial condition and results.
Advertising, marketing and communications expenditures are sensitive to global, national and regional macroeconomic conditions, as well as specific budgeting levels and buying patterns. Adverse developments including heightened economic uncertainty could reduce the demand for our services, which could have a material adverse effect on our revenue, results of operations, cash flows and financial position.
As a marketing services company, our revenues are highly susceptible to declines as a result of unfavorable economic conditions.
Global economic conditions could affect the 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. Decreases in our revenue would negatively affect our financial results, including a reduction of our estimates of free cash flow from operations.
 
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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. Unfavorable economic and financial conditions in the global economy could increase client financial difficulties resulting in reduced demand for our services, reduced revenues, delayed payments by clients, and increased write offs of accounts receivable.
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.
Seasonal fluctuations in marketing, research, communications and advertising activity could have a negative impact on our revenue, cash flow and operating results.
Our revenue, cash flow, operating results and other key operating and performance metrics may vary from quarter to quarter due to the seasonal nature of our clients’ spending on the services we provide. For example, clients tend to devote more of their advertising budgets to the fourth calendar quarter to coincide with consumer holiday spending. Political advertising and related activity could also cause our revenue to increase during election cycles, which is most pronounced in even years, and decrease during other periods. If our growth rate declines or seasonal spending becomes more pronounced, seasonality could have a more significant impact on our revenue, cash flow and operating results from period to period.
Our financial condition and results of operations for fiscal 2020 and in the future may be adversely affected by the recent coronavirus outbreak.
Beginning in December 2019, an outbreak of coronavirus (“COVID-19”) emerged in China and has spread to other parts of the world, including locations where the Company conducts business. On March 11, 2020, the World Health Organization announced COVID-19 had been declared a pandemic, and on March 13, 2020 the U.S. President announced a national emergency relating to the disease. The spread of COVID-19 has caused significant volatility in the United States and international markets and, in many industries, including some in which our clients operate, business activity has virtually shut down entirely. The COVID-19 pandemic has negatively impacted the Company’s results of operations, statement of financial position and cash flows due to its impact on certain of our brands, particularly those that serve the travel and entertainment industries. In particular, the travel vertical in our Digital Content segment, which primarily delivers content in airports, on airplanes and in hotels, was severely impacted, as marketers who regularly advertise in such spaces canceled orders or deferred placements. In addition, multiple airline partners ceased their airline publications, and airport concessionaires closed due to lack of passenger traffic. These developments resulted in a negative Adjusted EBITDA impact on the Digital Content segment in 2020 of $24 million relative to budget. Additionally, our Research segment’s Entertainment and Technology sector, which specializes in entertainment testing and forecasting, was negatively impacted by theatrical movie delays and theater closings. Adjustments and suspensions by clients to their subscriptions to the Research segment’s syndicated box office forecasting offering resulted in a $9 million decline in revenue (which was partially offset by a $6 million increase in custom work related to streaming offers) and a $3 million decline in Adjusted EBITDA for calendar year 2020. Termination by airlines of any of their contracts with us could also have a material negative impact on certain of our brands. While it is difficult to predict the full scale of the impact of the COVID-19 pandemic, the effect of the pandemic on us and our clients could materially imp