SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): APRIL 5, 2000
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SOFTQUAD SOFTWARE, LTD.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-26327 65-0877744
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(State or other jurisdiction (Commission File Number) (IRS
Employer
of incorporation)
Identification No.)
161 EGLINTON AVENUE EAST, SUITE 400, TORONTO, ONTARIO, CANADA M4P 1J5
- - -------------------------------------------------------------------- -------
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: 416-544-9000
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THE AMERICAN SPORTS MACHINE, INC.
222 LAKEVIEW AVENUE, SUITE 160-146, WEST PALM BEACH, FLORIDA 33401
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(Former name or former address, if changed since last report.)
<PAGE>
Item 2. Acquisition or Disposition of Assets
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On April 5, 2000, the Registrant completed its acquisition (the
"Acquisition") of all of the outstanding securities of SoftQuad Software Inc.
("SoftQuad Canada"), an Ontario (Canada) corporation, which develops and sells
XML enabling technologies and commerce solutions for e-business. XML, which
stands for eXtensible Markup Language, is a data format for structured document
and data interchange on the World Wide Web.
The Acquisition was made pursuant to separate share purchase
agreements and/or option exchange agreements with each of the securityholders of
SoftQuad Canada (the "Acquisition Agreements"), the forms of which are attached
hereto as Exhibits 2.1 and 2.2. Under the Acquisition Agreements, (i) two
holders of common shares of SoftQuad Canada (holding, in the aggregate,
3,435,590 SoftQuad Canada common shares) agreed to exchange (on a one-for-one
basis) their common shares of SoftQuad Canada for shares of common stock of the
Registrant, par value $.001 per share ("Common Stock"), (ii) the remaining
holders of common shares of SoftQuad Canada (holding, in the aggregate,
5,773,605 SoftQuad Canada common shares) agreed to exchange (on a one-for-one
basis) their common shares of SoftQuad Canada for Exchangeable Shares of the
Registrant's wholly-owned subsidiary, SoftQuad Acquisition Corporation ("SAC"),
an Ontario (Canada) corporation, each of which is exchangeable for one share of
Common Stock and (iii) each holder of an option to acquire common shares of
SoftQuad Canada agreed to exchange such option for an option issued by the
Registrant (an "Option") with equivalent terms.
The aggregate number of shares of Common Stock (i) issued in the
Acquisition in exchange for common shares of SoftQuad Canada, (ii) exchangeable
for Exchangeable Shares of SAC issued in the Acquisition, and (iii) issuable
upon exercise of the Options issuable in the Acquisition was 11,051,195 shares.
After giving effect to the Acquisition, the aggregate number of shares of Common
Stock outstanding on April 5, 2000, on a fully diluted basis, was 22,083,394
(excluding 3,400,000 shares of Common Stock submitted for cancellation
contemporaneously with the closing of the Acquisition, which cancellation is
subject to the execution of appropriate documentation).
Item 5. Other Events
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On April 11, 2000, the Registrant issued a press release, a copy of which
is attached hereto as Exhibit 99.1 and incorporated herein by reference, to
report the consummation of the transactions described in the Registrant's
Definitive Information Statement on Schedule 14C, filed with the Commission on
March 21, 2000.
Item 7. Financial Statements, Pro Forma Financial Information and
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Exhibits
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(a) Financial Statements of Businesses Acquired.
Not filed herewith. Pursuant to Item 7(a)(4) of Form 8-K, the
Registrant hereby undertakes to file such information by amendment to this
report as soon as it is available and in any event by June 19, 2000.
(b) Pro Forma Financial Information.
Not filed herewith. Pursuant to Item 7(a)(4) of Form 8-K, the
Registrant hereby undertakes to file such information by amendment to this
report as soon as it is available and in any event by June 19, 2000.
(c) Exhibits.
2.1 Form of Share Purchase Agreement.
2.2 Form of Option Exchange Agreement.
4.1 Voting and Exchange Trust Agreement.
4.2 Support Agreement.
99.1 Press Release of the Registrant, dated April 11, 2000.
<PAGE>
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SOFTQUAD SOFTWARE, LTD.
(the Registrant)
Dated: April 20, 2000 By: /s/ Roberto Drassinower
-------------------------
Roberto Drassinower
President and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
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Exhibit Number Description
- - --------------- -----------
2.1 Form of Share Purchase Agreement.
2.2 Form of Option Exchange Agreement.
4.1 Voting and Exchange Trust Agreement.
4.2 Support Agreement.
99.1 Press Release of the Registrant, dated April 11, 2000.
<PAGE>
NYK 632161-1.057553.0010
SHARE PURCHASE AGREEMENT
------------------------
THIS AGREEMENT is made as of the th day of , 2000.
B E T W E E N:
SOFTQUAD ACQUISITION CORP.
("SAC")
OF THE FIRST PART
- - - and -
SOFTQUAD SOFTWARE LTD.
("Softquad USA")
OF THE SECOND PART
- - - and -
A
(the "Selling Shareholder")
OF THE THIRD PART
WHEREAS the parties hereto are parties to a shareholder lock-up agreement
(the "Lock-Up Agreement") dated as of December 10, 1999, pursuant to which the
Selling Shareholder agreed to sell all of its common shares in the capital of
Softquad Software Inc. ("Softquad Canada") under a Qualifying Offer made by
Softquad USA and/or SAC on the terms as set forth in the Lock-Up Agreement;
AND WHEREAS the Selling Shareholder owns B common shares (the "Softquad Canada
Shares") the capital of Softquad Canada;
AND WHEREAS the Selling Shareholder has agreed that the consideration for the
Softquad Canada Shares to be sold hereunder shall be comprised of an equivalent
number of C (the "Consideration Shares");
AND WHEREAS capitalized terms used herein and not otherwise defined shall have
the meanings ascribed thereto in the Lock-Up Agreement;
AND WHEREAS the parties and Thomson Kernaghan & Co. Ltd. (the "Escrow Holder")
are parties to an escrow agreement dated as of December 16, 1999 (the "Escrow
Agreement");
NOW THEREFORE, this agreement witnesses that, in consideration of the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
1. PURCHASE AND SALE OF SOFTQUAD CANADA SHARES.
The Selling Shareholder hereby agrees to sell, and SAC hereby agrees to
purchase, on and subject to the terms hereof, all of the Softquad Canada Shares
in consideration of the Consideration Shares. If the Consideration Shares are
exchangeable shares in the capital of SAC, the parties agree to execute and file
such forms as are required under section 85 of the Income Tax Act (Canada) to
ensure that the exchange contemplated hereby is effected on a tax-deferred
rollover basis.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDER
The Selling Shareholder hereby represents to Softquad USA and SAC, and
acknowledges and confirms that Softquad USA and SAC are entitled to rely upon
such representations and warranties in connection with the transactions
contemplated hereby, as follows:
(a) the Softquad Canada Shares are now, and at the time of Closing (as
defined below) will be, owned by the Selling Shareholder as the sole beneficial
owner of record with good and marketable title thereto, free and clear of any
mortgages, liens, charges, restrictions, security interests, adverse claims,
pledges, encumbrances or demands whatsoever, and are issued and outstanding as
fully paid and non-assessable shares;
(b) no person, firm or corporation has, or will at the time of closing have,
any agreement or option, or any right or privilege (whether by law, pre-emptive
or contractual) capable of becoming an agreement or option for the purchase,
acquisition or transfer from the Selling Shareholder of any of the Softquad
Canada Shares or any interest therein or right thereto, except SAC and Softquad
USA pursuant to the Lock-Up Agreement;
(c) the Selling Shareholder does not act as nominee, agent, trustee,
executor, administrator or other legal representative on behalf of any other
person, firm or corporation in respect of the Softquad Canada Shares;
(d) if the Selling Shareholder is a corporation, the Selling Shareholder is
a validly subsisting corporation under the laws of its jurisdiction of
organization and the Selling Shareholder has all necessary corporate power and
authority to execute and deliver this agreement and to sell the Softquad Canada
Shares to Softquad USA and/or SAC and to perform its obligations hereunder;
(e) this agreement has been duly executed and delivered by and on behalf of
the Selling Shareholder and constitutes a legal, valid and binding obligation of
the Selling Shareholder enforceable against the Selling Shareholder in
accordance with its terms;
(f) the execution and delivery of this agreement and the completion of the
transactions contemplated hereby will not conflict with, result in a default
under, or accelerate or permit the acceleration of the performance required by,
any agreement or instrument to which the Selling Shareholder is a party or by
which it is bound;
(g) neither the Selling Shareholder nor any affiliate or associate thereof
is a party to, or is aware of, any agreement, commitment or understanding
between or among shareholders of Softquad Canada with respect to the exercise of
any voting rights attaching to any securities of Softquad Canada beneficially
owned by such shareholders or any voting trust agreement or other shareholders'
agreement relating to the securities of Softquad Canada;
(h) if the Selling Shareholder is a U.S. person:
(i) it is acquiring each of the Consideration Shares for investment and
solely for its own account and not with a view towards reselling or distributing
such shares in any transaction that would constitute a distribution within the
meaning of the Securities Act of 1933, as amended (the "Act");
(ii) it is financially able to bear the economic risk of an investment in
the issuer thereof and has no need for liquidity of this investment;
(iii) it has such knowledge, experience and skill in financial and business
matters in general and with respect to investments of a nature similar to an
investment in Consideration Shares so as to be capable of a evaluating the
merits and risks of, and making an informed business decision with regard to,
this investment, and acknowledges and understands that the receipt of the
Consideration Shares involves an investment in a new business that has limited
operating experience as an independent entity and therefore is a speculative
investment with no assurance of success;
(iv) the Selling Shareholder has received all information that it deems
necessary to evaluate the merits and risks of, and to make an informed decision
with respect to, an investment in Consideration Shares, has had an unrestricted
opportunity to make such investigation, and has had the opportunity to ask
questions of representatives of the issuer concerning the securities;
(v) it acknowledges that it must bear the economic risk of an investment for
a potentially indefinite period of time because the Consideration Shares have
not been registered under the Securities Act and such shares may not be sold,
transferred, pledged or otherwise disposed of except in accordance with the
provisions of the Act; and
(vi) if an individual, he or she either as of the date hereof has net worth
(or joint net worth, together with his or her spouse) in excess of U.S.$1
million or annual income in each of their calendar years 1998 and 1999 in excess
of U.S.$200,000 (or joint income together with his or her spouse of
U.S.$300,000, and if a corporation, has total assets in excess of U.S.
$5,000,000; and
(i) the Selling Shareholder D resident in Canada within the meaning of the
Income Tax Act (Canada) (the "ITA").
3. REPRESENTATIONS AND WARRANTIES OF SAC AND SOFTQUAD USA
SAC and Softquad USA each represents and warrants, and acknowledges and
confirms that the Selling Shareholder is relying upon such representations and
warranties in connection with the sale by it of the Softquad Canada Shares, as
follows:
(a) the issuer of the Consideration Shares is a validly subsisting
corporation under the laws of its jurisdiction of organization;
(b) it has all necessary corporate power and authority to execute and
deliver this agreement and to perform its obligations hereunder;
(c) this agreement has been duly executed and delivered by and on behalf of
it and constitutes a legal, valid and binding obligation of it enforceable
against it in accordance with its terms;
(d) if the Selling Shareholder is not a resident of Canada within the
meaning of the ITA, a certificate under Section 116 of the ITA;
(e) the execution and delivery of this agreement and the completion of the
transactions contemplated hereby will not conflict with, result in a default
under, or accelerate or permit the acceleration of the performance required by,
any agreement or instrument to which it is a party; and
(f) the Consideration Shares have been duly authorized and, when issued to
the Selling Shareholder in accordance with the terms of this agreement, will be
duly issued as fully paid and non-assessable shares.
4. MUTUAL COVENANTS
The parties mutually covenant and agree that each party shall take all
action prior to closing of the transaction contemplated hereby may be necessary
to ensure that the representations and warranties made by it in this agreement
continue to be true and correct from the date hereof to and including the time
of Closing, and to take all such further acts and do all such further things as
are necessary or advisable in order to give effect to the said transaction of
purchase and sale.
5. CONDITIONS OF CLOSING IN FAVOUR OF SAC/SOFTQUAD CANADA
The obligation of Softquad USA or SAC to purchase the Softquad Canada
Shares shall be subject to the following conditions for their exclusive benefit
to be fulfilled and/or performed at any time:
(a) receipt, upon written request therefor having been made prior to the
execution of this agreement, of an opinion of counsel to the Selling
Shareholder, which counsel shall be reasonably satisfactory to SAC and Softquad
USA, in form and terms reasonably satisfactory to counsel of SAC and Softquad
USA, to the effect that this agreement has been duly executed and delivered by,
and constitutes a legal, valid and binding obligation of, the Selling
Shareholder enforceable against the Selling Shareholder in accordance with its
terms, subject to customary qualifications;
(b) no action or proceeding shall be pending or threatened by any person,
company, firm governmental authority, regulatory body or agency to enjoin or
prohibit the purchase and sale of Softquad Canada Shares contemplated hereby or
the right of SAC and/or Softquad USA to own the Softquad Canada Shares or to
suspend or stop trading in securities of Softquad Canada;
(c) the representations and warranties of the Selling Shareholder contained
in this agreement shall be true and correct on and as of the time of Closing of
the transactions contemplated hereby;
(d) the Selling Shareholder shall have complied with all covenants and
agreements herein agreed to be performed or caused to be performed by it; and
(e) SAC and Softquad USA shall have received at the time of closing a
certificate dated the closing date, in form reasonably satisfactory to SAC and
Softquad USA, executed by the Selling Shareholder to the effect that the
representations and warranties of the Selling Shareholder are true and correct
as at that time and that the covenants to be performed by it have been complied
with.
In case any of the foregoing conditions have not been fulfilled and/or performed
at or before the time of Closing to the satisfaction of SAC and/or Softquad USA,
SAC and/or Softquad USA may rescind this agreement by notice in writing to the
Selling Shareholder and in such event, SAC and/or Softquad USA shall be released
from all obligations hereunder, provided that any of the conditions may be
waived in whole or in part by SAC and/or Softquad USA without prejudice to its
rights of rescission in the event of the non-fulfilment of any other condition
or conditions.
6. CONDITIONS OF CLOSING IN FAVOUR OF SELLING SHAREHOLDER
The obligation of Selling Shareholder to sell the Softquad Canada Shares
shall be subject to the following conditions for their exclusive benefit to be
fulfilled and/or performed at any time:
(a) no action or proceeding shall be pending or threatened by any person,
company, firm governmental authority, regulatory body or agency to enjoin or
prohibit the purchase and sale of Softquad Canada shares contemplated hereby or
the right of SAC and/or Softquad USA to own the Softquad Canada Shares or to
suspend or stop trading in securities of Softquad Canada;
(b) the representations and warranties of Softquad USA and SAC contained in
this agreement shall be true and correct on and as of the date of closing; and
(c) Softquad USA and SAC shall have complied with all covenants and
agreements herein and agree to be performed or cause to be performed by them.
In case any of the foregoing conditions have not been fulfilled and/or performed
at or before the time of closing to the satisfaction of the Selling Shareholder,
the Selling Shareholder may rescind this agreement by notice to the other
parties and in such event, the Selling Shareholder shall be released from all
obligations hereunder, provided that any of such conditions may be waived in
whole or in part by the selling shareholder without prejudice to its rights of
rescission in the event of the non-fulfilment of any other condition or
conditions.
7. CLOSING
The closing ("Closing") of the purchase and sale transaction contemplated
hereby shall take place at 10:00 a.m. on January 20, 2000 at the offices of
Goodman Phillips & Vineberg, 250 Yonge Street, Suite 2400, Toronto, Ontario, or
at such later time and date on or prior to January 31, 2000 as SAC may
determine. At the Closing, upon satisfaction of all of the conditions set out
in sections 5 and 6 hereof which have not been waived by the party in whose
favour such conditions are expressed, the Selling Shareholder shall deliver or
cause to be delivered to SAC certificates representing the Softquad Canada
Shares, duly endorsed for transfer or accompanied by a duly endorsed form of
transfer whereupon, and, subject to all the other terms and conditions hereof
having been complied with, SAC shall deliver certificates representing the
Consideration Shares to the Escrow Holder to be held in accordance with the
terms of the Escrow Agreement, provided that such Consideration Shares shall be
duly and validly recorded in the books of the issuer thereof in the name of the
Selling Shareholder or his, her or its designated nominees.
8. CLOSING ESCROW
Notwithstanding any other provision hereof, the parties acknowledge and
agree that:
(a) the Closing shall be completed in escrow, pending:
(i) receipt of all necessary regulatory relief from provincial securities
regulatory authorities in the provinces of Ontario, New Brunswick and British
Columbia with respect to certain trades or potential trades relating to the
issuance by SAC of exchangeable shares;
(ii) execution and delivery of a purchase/exchange agreement by each
security holder of Softquad Canada; and
(iii) execution, delivery and (where applicable) filing of such other
documents as are necessary to give effect to the acquisition by SAC of all of
the issued and outstanding securities of Softquad Canada under the Qualifying
Offer and satisfaction of all conditions herein; and
(b) until the release of such closing escrow, the Selling Shareholder shall
not receive certificates representing the Consideration Shares.
9. ACKNOWLEDGEMENT OF CALL RIGHTS
The Selling Shareholder hereby confirms, acknowledges and agrees to be
bound by the Liquidation Call Right, the Redemption Call Right and the
Retraction Call Right (as such terms are defined in the constating documents of
SAC).
10. ENTIRE AGREEMENT
This agreement constitutes the entire agreement and understanding between
the parties with respect to the subject matter hereof and shall supersede any
prior agreement, representation or understanding with respect hereto.
11. TIME IS OF THE ESSENCE
Time shall be of the essence hereof.
12. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES
The respective covenants, representations and warranties of the parties
contained shall survive the closing of the purchase and sale of the Softquad
Canada Shares herein provided for and, notwithstanding such closing, or any
investigation made by or on behalf of any party, shall continue in full force
and effect for the benefit of the party to whom the covenant, representation or
warranty was made.
13. GOVERNING LAW
This agreement shall be construed and enforced in accordance with, and the
respective rights and obligations of the parties shall be governed by, the laws
of the province of Ontario and the federal laws of Canada applicable therein,
and the parties hereby irrevocably attorn to the jurisdiction of the courts of
the province of Ontario,
14. ASSIGNMENT
Neither party may assign any of its rights or obligations hereunder to any
other person, firm or corporation without the prior written consent of the other
party, except that SAC and/or Softquad USA may assign this agreement and the
respective rights and obligations hereunder in whole or in part between
themselves or to one or more corporations all of the shares of which are
beneficially owned by one of them. This agreement shall enure to the benefit of
and by binding upon the parties hereto and the respective successor and
permitted assigns.
15. NOTICE
Any notice, direction or other instrument required or permitted to be given
to either party hereto shall be in writing and shall be made by delivering or
telecopying the same to:
If to Softquad USA or SAC:
Softquad Software Ltd./Softquad Acquisition Corp.
161 Eglinton Avenue East
Suite 400
Toronto, Ontario
M4P 1J5
Attention: Roberto Drassinower
Facsimile No. (416) 544-0300
If to the Selling Shareholder:
16. COUNTERPARTS
This agreement may be signed in counterpart.
IN WITNESS WHEREOF, this agreement has been executed as of the date first
above written.
SOFTQUAD ACQUISITION CORP.
Per:
Name:
Title
-----
SOFTQUAD SOFTWARE LTD.
Per:
Name:
Title
-----
Witness Signature of Selling Shareholder or Authorized Signatory
- - ------- --------------------------------------------------------------
(Print Name)
G24\MAYN\3259619
<PAGE>
NYK 632161-1.057553.0010
OPTION EXCHANGE AGREEMENT
-------------------------
THIS AGREEMENT is made as of the th day of , 2000.
B E T W E E N:
SOFTQUAD SOFTWARE LTD.
("Softquad USA")
OF THE FIRST PART
- - - and -
COMPANY
(the "Exchanging Optionholder")
OF THE SECOND PART
WHEREAS the parties hereto are parties (with Softquad Acquisition
Corporation ("SAC")) to an optionholder lock-up agreement (the "Lock-Up
Agreement") dated as of December 10, 1999;
AND WHEREAS the Exchanging Optionholder agreed to exchange all of its options
(the "Existing Options") to acquire common shares in the capital of Softquad
Software Inc. ("Softquad Canada") in exchange for economically equivalent
options (the "New Options") to be issued by Softquad USA on the terms as set
forth in the Lock-Up Agreement;
AND WHEREAS the Exchanging Optionholder holds Country Existing Options;
AND WHEREAS capitalized terms used herein and not otherwise defined shall have
the meanings ascribed thereto in the Lock-Up Agreement;
AND WHEREAS the parties and Thomson Kernaghan & Co. Ltd. (the "Escrow Holder")
are parties to an escrow agreement dated as of December 16, 1999 (the "Escrow
Agreement");
NOW THEREFORE, this agreement witnesses that, in consideration of the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
1. EXCHANGE OF OPTIONS.
The Exchanging Optionholder hereby agrees on and subject to the terms
hereof, to waive its rights under the Existing Options (which Existing Options
shall thereupon be cancelled), in exchange for the agreement of Softquad USA to
issue an equivalent number of New Options which are economically equivalent to
the Existing Options for which they are exchanged pursuant hereto forthwith
after the adoption by Softquad USA of an option plan (the "New Option Plan"),
provided that if the New Option Plan is not adopted on or before March 31, 2000,
Softquad USA shall nevertheless issue the New Options at such time. For
purposes of this provision, "economic equivalence" shall refer to vesting,
exercise price (converted from Canadian to U.S. currency on Closing of the
Option Exchange at the noon spot exchange rate on that date as published by the
Bank of Canada) and expiration; for greater certainty, "economic equivalence"
shall not refer to the equivalency of the underlying security or, on an ongoing
basis, to the equivalency of the exercise prices as expressed in different
currencies.
2. REPRESENTATIONS AND WARRANTIES OF THE EXCHANGING OPTIONHOLDER
The Exchanging Optionholder hereby represents to Softquad USA, and
acknowledges and confirms that Softquad USA is entitled to rely upon such
representations and warranties in connection with the transactions contemplated
hereby, as follows:
(a) the Existing Options are now, and at the time of Closing (as defined
below) will be, owned by the Exchanging Optionholder as the sole beneficial
owner of record with good and marketable title thereto, free and clear of any
mortgages, liens, charges, restrictions, security interests, adverse claims,
pledges, encumbrances or demands whatsoever, and are issued and outstanding as
fully paid and non-assessable shares;
(b) no person, firm or corporation has, or will at the time of closing have,
any agreement or option, or any right or privilege (whether by law, pre-emptive
or contractual) capable of becoming an agreement or option for the purchase,
acquisition or transfer from the Exchanging Optionholder of any of the Existing
Options or any interest therein or right thereto, except SAC and Softquad USA
pursuant to the Lock-Up Agreement;
(c) the Exchanging Optionholder does not act as nominee, agent, trustee,
executor, administrator or other legal representative on behalf of any other
person, firm or corporation in respect of the Existing Options;
(d) this agreement has been duly executed and delivered by and on behalf of
the Exchanging Optionholder and constitutes a legal, valid and binding
obligation of the Exchanging Optionholder enforceable against the Exchanging
Optionholder in accordance with its terms;
(e) the execution and delivery of this agreement and the completion of the
transactions contemplated hereby will not conflict with, result in a default
under, or accelerate or permit the acceleration of the performance required by,
any agreement or instrument to which the Exchanging Optionholder is a party or
by which it is bound;
(f) neither the Exchanging Optionholder nor any affiliate or associate
thereof is a party to, or is aware of, any agreement, commitment or
understanding between or among shareholders of Softquad Canada with respect to
the exercise of any voting rights attaching to any securities of Softquad Canada
beneficially owned by such shareholders or any voting trust agreement or other
shareholders' agreement relating to the securities of Softquad Canada; and
(g) the Exchanging Optionholder is resident in Canada within the meaning of
the Income Tax Act (Canada).
3. REPRESENTATIONS AND WARRANTIES OF SOFTQUAD USA
Softquad USA represents and warrants, and acknowledges and confirms that
the Exchanging Optionholder is relying upon such representations and warranties
in connection with the exchange of options contemplated hereby, as follows:
(a) it is a validly subsisting corporation under the laws of its
jurisdiction of organization;
(b) it has all necessary corporate power and authority to execute and
deliver this agreement and to perform its obligations hereunder;
(c) this agreement has been duly executed and delivered by and on behalf of
it and constitutes a legal, valid and binding obligation of it enforceable
against it in accordance with its terms; and
(d) the execution and delivery of this agreement and the completion of the
transactions contemplated hereby will not conflict with, result in a default
under, or accelerate or permit the acceleration of the performance required by,
any agreement or instrument to which it is a party.
4. MUTUAL COVENANTS
The parties mutually covenant and agree that each party shall take all
action prior to closing of the transaction contemplated hereby may be necessary
to ensure that the representations and warranties made by it in this agreement
continue to be true and correct from the date hereof to and including the time
of Closing, and to take all such further acts and do all such further things as
are necessary or advisable in order to give effect to the said transaction of
purchase and sale.
5. CONDITIONS OF CLOSING IN FAVOUR OF SOFTQUAD CANADA
The obligation of Softquad USA to issue New Options in consideration of the
termination of the Existing Options shall be subject to the following conditions
for its exclusive benefit to be fulfilled and/or performed at any time:
(a) receipt, upon written request therefor having been made prior to the
execution of this agreement, of an opinion of counsel to the Exchanging
Optionholder, which counsel shall be reasonably satisfactory to Softquad USA, in
form and terms reasonably satisfactory to counsel of Softquad USA, to the effect
that this agreement has been duly executed and delivered by, and constitutes a
legal, valid and binding obligation of, the Exchanging Optionholder enforceable
against the Exchanging Optionholder in accordance with its terms, subject to
customary qualifications;
(b) no action or proceeding shall be pending or threatened by any person,
company, firm governmental authority, regulatory body or agency to enjoin or
prohibit the exchange of options contemplated hereby;
(c) the representations and warranties of the Exchanging Optionholder
contained in this agreement shall be true and correct on and as of the time of
Closing of the transactions contemplated hereby;
(d) the Exchanging Optionholder shall have complied with all covenants and
agreements herein agreed to be performed or caused to be performed by it; and
(e) Softquad USA shall have received at the time of closing a certificate
dated the closing date, in form reasonably satisfactory to Softquad USA,
executed by the Exchanging Optionholder to the effect that the representations
and warranties of the Exchanging Optionholder are true and correct as at that
time and that the covenants to be performed by it have been complied with.
In case any of the foregoing conditions have not been fulfilled and/or performed
at or before the time of Closing to the satisfaction of Softquad USA, Softquad
USA may rescind this agreement by notice in writing to the Exchanging
Optionholder and in such event, Softquad USA shall be released from all
obligations hereunder, provided that any of the conditions may be waived in
whole or in part by Softquad USA without prejudice to its rights of rescission
in the event of the non-fulfilment of any other condition or conditions.
6. CONDITIONS OF CLOSING IN FAVOUR OF EXCHANGING OPTIONHOLDER
The obligation of Exchanging Optionholder to exchange its options shall be
subject to the following conditions for their exclusive benefit to be fulfilled
and/or performed at any time:
(a) no action or proceeding shall be pending or threatened by any person,
company, firm governmental authority, regulatory body or agency to enjoin or
prohibit the exchange of options contemplated hereby;
(b) the representations and warranties of Softquad USA contained in this
agreement shall be true and correct on and as of the date of closing; and
(c) Softquad USA shall have complied with all covenants and agreements
herein and agree to be performed or cause to be performed by them.
In case any of the foregoing conditions have not been fulfilled and/or performed
at or before the time of closing to the satisfaction of the Exchanging
Optionholder, the Exchanging Optionholder may rescind this agreement by notice
to the other parties and in such event, the Exchanging Optionholder shall be
released from all obligations hereunder, provided that any of such conditions
may be waived in whole or in part by the Exchanging Optionholder without
prejudice to its rights of rescission in the event of the non-fulfilment of any
other condition or conditions.
7. CLOSING
The closing ("Closing") of the exchange transaction contemplated hereby
shall take place at 10:00 a.m. on January 20, 2000 at the offices of Goodman
Phillips & Vineberg, 250 Yonge Street, Suite 2400, Toronto, Ontario, or at such
later time and date (on or before January 31, 2000) as Softquad USA may
determine. At the Closing, upon satisfaction of all of the conditions set out
in sections 5 and 6 hereof which have not been waived by the party in whose
favour such conditions are expressed, the Exchanging Optionholder shall deliver
or cause to be delivered to Softquad USA a form of waiver in the form attached
to this Agreement as Schedule "A". On the earlier of the adoption by Softquad
USA of the New Option Plan and March 31, 2000, Softquad USA shall execute and
deliver to the Exchanging Optionholder at the address set forth in Section 13
below a certificate, agreement and/or other documentation reflecting and
contractually binding Softquad USA with respect to the New Options, together
with, if applicable, a copy of the New Option Plan.
8. ENTIRE AGREEMENT
This agreement constitutes the entire agreement and understanding between
the parties with respect to the subject matter hereof and shall supersede any
prior agreement, representation or understanding with respect hereto.
9. TIME IS OF THE ESSENCE
Time shall be of the essence hereof.
10. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES
The respective covenants, representations and warranties of the parties
contained shall survive the Closing and, notwithstanding such Closing, or any
investigation made by or on behalf of any party, shall continue in full force
and effect for the benefit of the party to whom the covenant, representation or
warranty was made.
11. GOVERNING LAW
This agreement shall be construed and enforced in accordance with, and the
respective rights and obligations of the parties shall be governed by, the laws
of the province of Ontario and the federal laws of Canada applicable therein,
and the parties hereby irrevocably attorn to the jurisdiction of the courts of
the province of Ontario,
12. ASSIGNMENT
Neither party may assign any of its rights or obligations hereunder to any
other person, firm or corporation without the prior written consent of the other
party, except that Softquad USA may assign this agreement and rights and
obligations hereunder in whole or in part to one or more corporations all of the
shares of which are beneficially owned by it. This agreement shall enure to the
benefit of and by binding upon the parties hereto and the respective successor
and permitted assigns.
13. NOTICE
Any notice, direction or other instrument required or permitted to be given
to either party hereto shall be in writing and shall be made by delivering or
telecopying the same to:
If to Softquad USA:
Softquad Software Ltd.
161 Eglinton Avenue East
Suite 400
Toronto, Ontario
M4P 1J5
Attention: Roberto Drassinower
Facsimile No. (416) 544-0300
If to the Exchanging Optionholder:
14. COUNTERPARTS
This agreement may be signed in counterpart.
IN WITNESS WHEREOF, this agreement has been executed as of the date first
above written.
SOFTQUAD SOFTWARE LTD.
Per:
Name:
Title
-----
Witness Signature of Exchanging Optionholder
- - ------- ---------------------------------------
(Print Name)
G24\MAYN\3259690
<PAGE>
NYK 632161-1.057553.0010
SCHEDULE "A"
WAIVER
TO: Softquad Software Inc.
AND TO: Softquad Software Ltd.
RE: Option Exchange Agreement dated as of January , 2000 (the
"Option Exchange Agreement")
In consideration of the rights and benefits accruing to the undersigned
pursuant to the terms of the Option Exchange Agreement, the undersigned hereby
waives all of its rights and entitlements with respect to the Existing Options.
All capitalized terms used herein and not otherwise defined shall have the
meanings ascribed thereto in the Option Exchange Agreement.
DATED as of the day of January, 2000.
Signature of Optionholder
G24\MAYN\3259690
<PAGE>
NYK 632161-1.057553.0010
VOTING AND EXCHANGE TRUST AGREEMENT
-----------------------------------
MEMORANDUM OF AGREEMENT made as of the ____ day of March, 2000.
A M O N G:
THE AMERICAN SPORTS MACHINE, INC., a corporation incorporated under the laws of
the State of Florida
(hereinafter referred to as the "Parent")
OF THE FIRST PART
SOFTQUAD ACQUISITION CORP., a corporation incorporated under the laws of the
Province of Ontario
(hereinafter referred to as the "Corporation")
OF THE SECOND PART
MONTREAL TRUST COMPANY OF CANADA, a trust company existing under the laws of
Canada
(hereinafter referred to as the "Trustee'')
OF THE THIRD PART
WHEREAS pursuant to an acquisition agreement (the "Acquisition Agreement")
dated December 16, 1999 among the Parent, the Corporation and SoftQuad Software
Inc. ("SoftQuad Canada"), the parties agreed that, in order to facilitate
completion of the Qualifying Offer (as defined in the Acquisition Agreement),
the parties would execute a voting trust and exchange agreement;
AND WHEREAS the Corporation has entered into agreements with each of the
shareholders of SoftQuad Canada pursuant to which the Corporation will purchase,
and each of the said shareholders will sell, all of the outstanding SoftQuad
Canada common shares in exchange for, at the option of the shareholder, one
share of common stock of the Parent (collectively, "Parent Common Stock") or one
exchangeable share (collectively, "Exchangeable Shares") in the capital of the
Corporation for each SoftQuad Canada common share;
AND WHEREAS in accordance with its obligations under the Acquisition Agreement,
the Corporation has amended its articles to include the Exchangeable Shares;
AND WHEREAS the rights, privileges, restrictions and conditions (collectively,
the "Exchangeable Share Provisions") attaching to the Exchangeable Shares are as
set forth in Schedule "A" hereto;
AND WHEREAS the Parent agreed to provide voting rights in the Parent to each
holder (other than the Parent and its Subsidiaries) from time to time of
Exchangeable Shares, such voting rights per Exchangeable Share to be equivalent
to the voting rights per share of Parent Common Stock;
AND WHEREAS the Parent has also agreed to grant to and in favour of the holders
(other than the Parent and its Subsidiaries) from time to time of Exchangeable
Shares the right, in the circumstances set forth herein, to require the Parent
to purchase from each such holder all or any part of the Exchangeable Shares
held by the holder;
AND WHEREAS the parties desire to make appropriate provision and to establish a
procedure whereby voting rights in the Parent shall be exercisable by holders
(other than the Parent and its Subsidiaries) from time to time of Exchangeable
Shares by and through the Trustee, which will hold legal title to the Voting
Share (as hereinafter defined) to which voting rights attach for the benefit of
such holders and whereby the rights to require the Parent to purchase
Exchangeable Shares from the holders thereof (other than the Parent and its
Subsidiaries) shall be exercisable by such holders from time to time of
Exchangeable Shares by and through the Trustee, which will hold legal title to
such rights for the benefit of such holders;
AND WHEREAS these recitals and any statements of fact in this Agreement are made
by the Parent and the Corporation and not by the Trustee;
NOW THEREFORE in consideration of the respective covenants and agreements
provided in this Agreement and for other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties agree as
follows:
1. DEFINITIONS AND INTERPRETATION
(a) Definitions. In this Agreement, the following terms shall have the
-----------
following meanings:
"ACQUISITION AGREEMENT" has the meaning attributed thereto in the recitals
hereof.
"AGGREGATE EQUIVALENT VOTE AMOUNT" means, with respect to any matter,
proposition or question on which holders of Parent Common Stock are entitled to
vote, consent or otherwise act, the product of (i) the number of Exchangeable
Shares issued and outstanding and held by Holders multiplied by (ii) the
Equivalent Vote Amount.
"AUTOMATIC EXCHANGE RIGHTS" means the benefit of the obligation of the Parent to
effect the automatic exchange of shares of Parent Common Stock for Exchangeable
Shares pursuant to subsection 5(k) hereof.
"BOARD OF DIRECTORS" means the board of directors of the Corporation.
"BUSINESS DAY" means any day other than a Saturday, Sunday or day when banks are
not open for business in Toronto, Ontario.
"CANADIAN DOLLAR EQUIVALENT" means in respect of an amount expressed in a
foreign currency (the "Foreign Currency Amount") at any date, the product
obtained by multiplying (a) the Foreign Currency Amount by (b) the official noon
spot exchange rate on such date for such foreign currency as reported by the
Bank of Canada or, in the event such spot exchange rate is not available, such
exchange rate on such date for such foreign currency as may be deemed by the
Board of Directors to be appropriate for such purpose.
"CANCO" means an entity to be organized under the laws of Canada or a province
thereof in the Parent's discretion, all of the issued and outstanding shares of
which will be held by Parent;
"CURRENT MARKET PRICE" means, in respect of a share of Parent Common Stock on
any date, the Canadian Dollar Equivalent of the average closing sales price of
shares of Parent Common Stock trading during a period of twenty (20) consecutive
trading days ending not more than five (5) days before such date on the stock
exchange or quotation system on which the greatest volume of shares of Parent
Common Stock traded during such period, or, if the shares of Parent Common Stock
are not then listed on a stock exchange or quoted on any quotation system, then
the current market price of a share of Parent Common Stock shall be determined
by the Board of Directors based upon the advice of such qualified independent
financial advisors as the Board of Directors may deem to be appropriate, and
provided further that any such opinion or determination by the Board of
Directors shall be conclusive and binding.
"DIVIDEND AMOUNT" as the meaning attributed thereto in Section 1.1 of the
Exchangeable Share Provisions.
"EQUIVALENT VOTE AMOUNT" means, with respect to any matter, proposition or
question on which holders of Parent Common Stock are entitled to vote, consent
or otherwise act, the number of votes to which a holder of one share of Parent
Common Stock is entitled with respect to such matter, proposition or question.
"EXCHANGE RIGHT" has the meaning attributed thereto in subsection 5(a) hereof.
"EXCHANGEABLE SHARE CONSIDERATION" has the meaning attributed thereto in Section
1.1 of the Exchangeable Share Provisions.
"EXCHANGEABLE SHARE PROVISIONS" has the meaning attributed thereto in the
recitals hereto.
"EXCHANGEABLE SHARES" has the meaning attributed thereto in the recitals hereto.
"HOLDER VOTES" has the meaning attributed thereto in subsection 4(b) hereof.
"HOLDERS" means the registered holders from time to time of Exchangeable Shares,
other than the Parent and its Subsidiaries.
"INSOLVENCY EVENT" means the institution by the Corporation of any proceeding to
be adjudicated a bankrupt or insolvent or to be dissolved or wound-up, or the
consent of the Corporation to the institution of bankruptcy, insolvency,
dissolution or winding-up proceedings against it, or the filing of a petition,
answer or consent seeking dissolution or winding-up under any bankruptcy,
insolvency or analogous laws, including without limitation the Companies'
Creditors' Arrangement Act (Canada) and the Bankruptcy and Insolvency Act
(Canada), and the failure by the Corporation to contest in good faith any such
proceedings commenced in respect of the Corporation within 15 days of becoming
aware thereof, or the consent by the Corporation to the filing of any such
petition or to the appointment of a receiver, or the making by the Corporation
of a general assignment for the benefit of creditors, or the admission in
writing by the Corporation of its inability to pay its debts generally as they
become due, or the Corporation not being permitted, pursuant to liquidity or
solvency requirements of applicable law, to redeem any Retracted Shares pursuant
to Section 6 of the Exchangeable Share Provisions.
"LIQUIDATION CALL RIGHT" has the meaning attributed thereto in Section 1.1 of
the Exchangeable Share Provisions.
"LIQUIDATION EVENT" has the meaning attributed thereto in subsection 5(k)(ii)
hereof.
"LIQUIDATION EVENT EFFECTIVE DATE" has the meaning attributed thereto in
subsection 5(k)(iii) hereof.
"LIST" has the meaning attributed thereto in subsection 4(f) hereof.
"OFFICERS' CERTIFICATE" means, with respect to the Parent or the Corporation, as
the case may be, a certificate signed by any two of the Chairman of the Board,
the Vice-Chairman of the Board, the President, any Vice-President or any other
senior officer of the Parent or the Corporation, as the case may be.
"PARENT COMMON STOCK" has the meaning attributed thereto in the recitals hereto.
"PARENT CONSENT" has the meaning attributed thereto in subsection 4(b) hereof.
"PARENT MEETING" has the meaning attributed thereto in subsection 4(b) hereof.
"PARENT SUCCESSOR" has the meaning attributed thereto in subsection 11(a)
hereof.
"PERSON" includes an individual, partnership, corporation, company,
unincorporated syndicate or organization, trust, trustee, executor,
administrator and other legal representative.
"REDEMPTION CALL RIGHT" has the meaning attributed thereto in Section 1.1 of the
Exchangeable Share Provisions.
"RETRACTED SHARES" has the meaning attributed thereto in subsection 5(g) hereof.
"RETRACTION CALL RIGHT" has the meaning attributed thereto in Section 1.1 the
Exchangeable Share Provisions.
"SUBSIDIARY" means, in respect of a corporation, any corporation more than 50%
of the outstanding stock of which, by vote or by value, is owned, directly or
indirectly, by the first-named corporation, by one or more other subsidiaries of
the first-named corporation or by the first-named corporation and one or more of
the subsidiaries of the first-named corporation.
"SUPPORT AGREEMENT" means that certain support agreement made as of even date
hereof between the Corporation and the Parent.
"TRUST" means the trust created by this Agreement.
"TRUST ESTATE" means the Voting Share, any other securities, the Exchange Right,
the Automatic Exchange Rights and any money or other property which may be held
by the Trustee from time to time pursuant to this Agreement.
"TRUSTEE" means Montreal Trust Company of Canada and, subject to the provisions
of Section 10 hereof, includes any successor trustee or permitted assigns.
"VOTING RIGHTS" means the voting rights attached to the Voting Share.
"VOTING SHARE" means the one (1) share of Special Voting Stock, U.S. $1.00 par
value, in the capital of the Parent, issued by the Parent to and deposited with
the Trustee, which entitles the holder of record to a number of votes at
meetings of holders of Parent Common Stock equal to the Aggregate Equivalent
Vote Amount.
(b) Interpretation Not Affected by Headings, etc. The division of this
-------------------------------------------------
Agreement into articles, sections and paragraphs and the insertion of headings
are for convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
(c) Number, Gender, etc. In this Agreement, words importing the singular
----------------------
number only shall include the plural and vice versa and words importing any
gender shall include all genders.
(d) Date for any Action. If any date on which any action is required to be
---------------------
taken under this Agreement is not a Business Day, such action shall be required
to be taken on the next succeeding Business Day.
2. ESTABLISHMENT OF TRUST
The purpose of this Agreement is to create the Trust for the benefit of the
Holders, as herein provided. The Trustee will hold the Voting Share in order to
enable the Trustee to exercise the Voting Rights and will hold the Exchange
Right, the Automatic Exchange Rights and other rights granted in or resulting
from the Trustee being a party to this Agreement in order to enable the Trustee
to exercise such rights, in each case as Trustee for and on behalf of the
Holders as provided in this Agreement. The Trust is hereby constituted on the
date hereof by the issuance to the Trustee of the Voting Share and the granting
of the Exchange Rights and Automatic Exchange Rights to the Trustee.
3. VOTING SHARE
(a) Issuance and Ownership of the Voting Share. Simultaneously with the
-----------------------------------------------
execution and delivery of this Agreement, the Parent shall issue to and deposit
with the Trustee the Voting Share to be hereafter held of record by the Trustee
as trustee for and on behalf of, and for the use and benefit of, the Holders, in
accordance with the provisions of this Agreement. The Parent hereby
acknowledges receipt from the Trustee, as trustee for and on behalf of the
Holders of good and valuable consideration for the issuance of the Voting Share
by the Parent to the Trustee. During the term of the Trust and subject to the
terms and conditions of this Agreement, the Trustee shall possess and be vested
with full legal ownership of the Voting Share and shall be entitled to exercise
all of the rights and powers of an owner with respect to the Voting Share,
provided that the Trustee shall:
(i) hold the Voting Share and the legal title thereto as trustee solely for
the use and benefit of the Holders in accordance with the provisions of this
Agreement; and
(ii) except as specifically authorized by this Agreement, have no power or
authority to sell, transfer, vote or otherwise deal in or with the Voting Share
and the Voting Share shall not be used or disposed of by the Trustee for any
purpose other than the purposes for which this Trust is created pursuant to this
Agreement.
(b) Legended Share Certificates. The Corporation will cause each
------------------------------
certificate representing Exchangeable Shares to bear an appropriate legend
--
notifying the Holders of their right to instruct the Trustee with respect to the
exercise of the Voting Rights with respect to the Exchangeable Shares held by a
Holder.
(c) Safe Keeping of Certificate. The certificate representing the Voting
-------------------------------
Share shall at all times be held in safe keeping by the Trustee or its agent.
4. EXERCISE OF VOTING RIGHTS
(a) Voting Rights. The Trustee, as the holder of record of the Voting
--------------
Share, shall be entitled to all of the Voting Rights, including the right to
consent to or to vote in person or by proxy the Voting Share, on any matter,
question or proposition whatsoever that may properly come before the
stockholders of the Parent at a Parent Meeting or in connection with a Parent
Consent. The Voting Rights shall be and remain vested in and exercised by the
Trustee. Subject to subsection 7(n) hereof, the Trustee shall exercise the
Voting Rights only on the basis of instructions received pursuant to this
Section 4 from Holders entitled to instruct the Trustee as to the voting thereof
at the time at which a Parent Consent is sought or a Parent Meeting is held. To
the extent that no instructions are received from a Holder with respect to the
Voting Rights to which such Holder is entitled, the Trustee shall not exercise
or permit the exercise of the Voting Rights relating to such Holder's
Exchangeable Share(s).
(b) Number of Votes. With respect to all meetings of stockholders of the
-----------------
Parent at which holders of shares of Parent Common Stock are entitled to vote (a
"Parent Meeting") and with respect to all written consents sought by the Parent
from the holders of shares of Parent Common Stock (a "Parent Consent"), each
Holder shall be entitled to instruct the Trustee to cast and exercise, in the
manner instructed, a number of votes equal to the Equivalent Vote Amount for
each Exchangeable Share owned of record by such Holder on the record date
established by the Parent or by applicable law for such Parent Meeting or Parent
Consent, as the case may be, (the "Holder Votes" ) in respect of each matter,
question or proposition to be voted on at such Parent Meeting or to be consented
to in connection with such Parent Consent.
(c) Mailings to Shareholders. With respect to each Parent Meeting and
--------------------------
Parent Consent, the Trustee will mail or cause to be mailed (or otherwise
communicate in the same manner as the Parent utilizes in communications to
holders of Parent Common Stock, subject to the Trustee's ability to provide this
method of communication and upon being advised in writing of such method) to
each of the Holders named in the List on the same day as the initial mailing or
notice (or other communication) with respect thereto is given by the Parent to
its stockholders:
(i) a copy of such notice, together with any proxy or information statement
and related materials to be provided to stockholders of the Parent;
(ii) a statement that such Holder is entitled, subject to subsection 4(g),
to instruct the Trustee as to the exercise of the Holder Votes with respect to
such Parent Meeting or Parent Consent, as the case may be, or, pursuant and
subject to subsection 4(g) hereof, to attend such Parent Meeting and to exercise
personally the Holder Votes thereat;
(iii) a statement as to the manner in which such instructions may be given
to the Trustee, including an express indication that instructions may be given
to the Trustee to give:
(A) a proxy to such Holder or its designee to exercise personally such
Holder's Votes; or
(B) a proxy to a designated agent or other representative of the management
of the Parent to exercise such Holder Votes;
(iv) a statement that if no such instructions are received from the Holder,
the Holder Votes to which such Holder is entitled will not be exercised;
(v) a form of direction whereby the Holder may so direct and instruct the
Trustee as contemplated herein; and
(vi) a statement of (A) the time and date by which such instructions must be
received by the Trustee in order to be binding upon it, which in the case of a
Parent Meeting shall not be later than the close of business on the second
Business Day prior to such meeting, and (B) the method for revoking or amending
such instructions.
The materials referred to above are to be provided by the Parent to the
Trustee, but shall be subject to review and comment by the Trustee.
For the purpose of determining Holder Votes to which a Holder is entitled in
respect of any such Parent Meeting or Parent Consent, the number of Exchangeable
Shares owned of record by the Holder shall be determined at the close of
business on the record date established by the Parent or by applicable law for
purposes of determining stockholders entitled to vote at such Parent Meeting or
to give written consent in connection with such Parent Consent. The Parent will
notify the Trustee in writing of any decision of its board of directors with
respect to the calling of any such Parent Meeting or the seeking of any such
Parent Consent and shall provide all necessary information and materials to the
Trustee in each case promptly and in any event in sufficient time to enable the
Trustee to perform its obligations contemplated by this subsection 4(c).
(d) Copies of Stockholder Information. The Parent will deliver to the
-------------------------------------
Trustee copies of all proxy materials (including notices of Parent Meetings but
excluding proxies to vote shares of Parent Common Stock), information
statements, reports (including without limitation all interim and annual
financial statements) and other written communications that are to be
distributed from time to time to holders of Parent Common Stock in sufficient
quantities and in sufficient time so as to enable the Trustee to send those
materials to each Holder at the same time as such materials are first sent to
holders of Parent Common Stock. The Trustee will mail or otherwise send to each
Holder, at the expense of the Parent, copies of all such materials (and all
materials specifically directed to the Holders or to the Trustee for the benefit
of the Holders by the Parent ) received by the Trustee from the Parent at the
same time as such materials are first sent to holders of Parent Common Stock.
The Trustee will make copies of all such materials available for inspection by
any Holder or his or her or its duly authorized agent(s) at the principal office
of the Trustee in the City of Toronto, during the regular business hours of the
Trustee.
(e) Other Materials. Immediately after receipt by the Parent or any
-----------------
stockholder of the Parent of any material sent or given generally to the holders
of Parent Common Stock by or on behalf of a third party, including without
limitation dissident proxy and information circulars (and related information
and material) and tender and exchange offer circulars (and related information
and material), the Parent shall use its commercially reasonable efforts to
obtain and deliver to the Trustee copies thereof in sufficient quantities so as
to enable the Trustee to forward such material (unless the same has been
provided directly to Holders by such third party) to each Holder as soon as
practicable thereafter. As soon as practicable after receipt thereof, the
Trustee will mail or otherwise send to each Holder, at the expense of the
Parent, copies of all such materials received by the Trustee from the Parent.
The Trustee will also make copies of all such materials available for inspection
by any Holder or his or her or its duly authorized agent(s) at the principal
office of the Trustee in the City of Toronto, during the regular business hours
of the Trustee.
(f) List of Persons Entitled to Vote. The Corporation shall, (i) prior to
-----------------------------------
each annual, general and special Parent Meeting or the seeking of any Parent
Consent and (ii) forthwith upon each request made at any time by the Trustee in
writing, prepare or cause to be prepared a list (a "List") of the names and
addresses of the Holders arranged in alphabetical order and showing the number
of Exchangeable Shares held of record by each such Holder, in each case at the
close of business on the date specified by the Trustee in such request or, in
the case of a List prepared in connection with a Parent Meeting or a Parent
Consent, at the close of business on the record date established by the Parent
or pursuant to applicable law for determining the holders of Parent Common Stock
entitled to receive notice of and/or to vote at such Parent Meeting or to give
consent in connection with such Parent Consent. Each such List shall be
delivered to the Trustee promptly after receipt by the Corporation of such
request or the record date for such meeting or seeking of consent, as the case
may be, and in any event within sufficient time as to enable the Trustee to
perform its obligations under this Agreement. The Parent agrees to give the
Corporation written notice (with a copy to the Trustee) of the calling of any
Parent Meeting or the seeking of any Parent Consent together with the record
dates therefor, sufficiently prior to the date of the calling of such meeting or
seeking of such consent so as to enable the Corporation to perform its
obligations under this subsection 4(f).
(g) Entitlement to Direct Votes. Any Holder named in a List prepared in
-------------------------------
connection with any Parent Meeting or any Parent Consent will be entitled (i) to
instruct the Trustee in the manner described in subsection 4(c) hereof with
respect to the exercise of the Holder Votes to which such Holder is entitled or
(ii) to attend such meeting and personally to exercise thereat (or to exercise
with respect to any written consent), as the proxy of the Trustee, the Holder
Votes to which such Holder is entitled except, in each case, to the extent that
such Holder has transferred the ownership of any Exchangeable Share in respect
of which such Holder is entitled to Holder Votes after the close of business on
the record date for such meeting or seeking of consent.
(h) Stockholder Proposals. The Trustee shall forthwith submit to the Parent
----------------------
any stockholder proposal (within the meaning of the United States Securities
Exchange Act of 1934) received by the Trustee from a Holder. Such stockholder
proposal may be considered at any meeting of the Parent at which the holders of
Parent Common Stock are entitled to submit stockholder proposals. The Parent
agrees to accept all stockholder proposals submitted by the Trustee that are
received by the Parent within the applicable time limitation under the United
States Securities Exchange Act of 1934, provided that not more than one proposal
is submitted on behalf of any one Holder.
(i) Voting by Trustee, and Attendance of Trustee Representative, at Meeting.
-----------------------------------------------------------------------
(i) In connection with each Parent Meeting and Parent Consent, the Trustee
shall exercise, either in person or by proxy, in accordance with the
instructions received from a Holder pursuant to subsection 4(c) hereof, the
Holder Votes as to which such Holder is entitled to direct the vote (or any
lesser number thereof as may be set forth in the instructions); provided,
however, that such written instructions are received by the Trustee from the
Holder prior to the time and date fixed by it for receipt of such instructions
in the notice given by the Trustee to the Holder pursuant to subsection 4(c)
hereof.
(ii) Subject to section 4(c)(vi) and any notice to the contrary, the Trustee
shall cause such representatives as are empowered by it to sign and deliver, on
behalf of the Trustee, proxies for Voting Rights to attend each Parent Meeting
at the expense of the Parent. Upon submission by a Holder (or its designee) of
identification satisfactory to the Trustee's representatives, and at the
Holder's request, such representatives shall sign and deliver to such Holder (or
its designee) a proxy to exercise personally the Holder Votes as to which such
Holder is otherwise entitled hereunder to direct the vote, if such Holder either
(A) has not previously given the Trustee instructions pursuant to subsection
4(c) hereof in respect of such meeting, or (B) submits to the Trustee's
representatives written revocation of any such previous instructions. At such
meeting, the Holder exercising such Holder Votes shall have the same rights as
the Trustee to speak at the meeting in respect of any matter, question or
proposition, to vote by way of ballot at the meeting in respect of any matter,
question or proposition and to vote at such meeting by way of a show of hands in
respect of any matter, question or proposition.
(j) Distribution of Written Materials. Any written materials to be
-------------------------------------
distributed by the Trustee to the Holders pursuant to this Agreement shall be
-
delivered or sent by mail (or otherwise communicated in the same manner as the
Parent utilizes in communications to holders of Parent Common Stock) to each
Holder at its address as shown on the books of the Corporation. The Corporation
shall provide or cause to be provided to the Trustee for this purpose, on a
timely basis and without charge or other expense:
(i) current lists of the Holders; and
(ii) upon the request of the Trustee, mailing labels to enable the Trustee
to carry out its duties under this Agreement.
The materials referred to above are to be provided by the Parent to the Trustee,
but shall be subject to review and comment by the Trustee.
(k) Termination of Voting Right. Except as otherwise provided herein or in
-----------------------------
the Exchangeable Share Provisions, all of the rights of a Holder with respect to
the Holder Votes exercisable in respect of the Exchangeable Shares held by such
Holder, including the right to instruct the Trustee as to the voting of or to
vote personally such Holder Votes shall be deemed to be surrendered by the
Holder to the Parent and such Holder Votes and the Voting Rights represented
thereby shall cease immediately upon the delivery by such Holder to the Trustee
of the certificates representing such Exchangeable Shares in connection with the
exercise by the Holder of the Exchange Right or the occurrence of the automatic
exchange of Exchangeable Shares for shares of Parent Common Stock, as specified
in subsection 5(k) hereof, or upon the redemption of Exchangeable Shares
pursuant to Sections 6 or 7 of the Exchangeable Share Provisions, or upon the
effective date of the liquidation, dissolution or winding-up of the Corporation
pursuant to Section 5 of the Exchangeable Share Provisions, or upon the purchase
of Exchangeable Shares from the holder thereof by the Parent pursuant to the
exercise by the Parent of the Retraction Call Right, the Redemption Call Right
or the Liquidation Call Right (unless in any case the Parent or the Corporation
shall not have delivered the Exchangeable Share Consideration to be delivered in
exchange therefor or in connection therewith to the Trustee for delivery to the
Holders).
5. EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
(a) Grant and Ownership of the Exchange Right. The Parent hereby grants to
-------------------------------------------
the Trustee as trustee for and on behalf of, and for the use and benefit of, the
Holders (i) the right (the "Exchange Right"), upon the occurrence and during the
continuance of an Insolvency Event, to require the Parent to purchase from each
or any Holder all or any part of the Exchangeable Shares held by such Holder,
and (ii) the Automatic Exchange Rights, in each case in accordance with the
provisions of this Agreement. The Parent hereby acknowledges receipt from the
Trustee, as trustee for and on behalf of the Holders, of good and valuable
consideration (and the adequacy thereof) for the grant of the Exchange Right and
the Automatic Exchange Rights by the Parent to the Trustee. During the term of
the Trust and subject to the terms and conditions of this Agreement, the Trustee
shall possess and be vested with full legal ownership of the Exchange Right and
the Automatic Exchange Rights and shall be entitled to exercise all of the
rights and powers of an owner with respect to the Exchange Right and the
Automatic Exchange Rights, provided that the Trustee shall:
(i) hold the Exchange Right and the Automatic Exchange Rights and the legal
title thereto as trustee solely for the use and benefit of the Holders in
accordance with the provisions of this Agreement; and
(ii) except as specifically authorized by this Agreement, have no power or
authority to exercise or otherwise deal in or with the Exchange Right or the
Automatic Exchange Rights, and the Trustee shall not exercise any such rights
for any purpose other than the purposes for which this Trust is created pursuant
to this Agreement.
(b) Legended Share Certificates. The Corporation will cause each
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certificate representing Exchangeable Shares to bear an appropriate legend
--
notifying the Holders of:
(i) their right to instruct the Trustee with respect to the exercise of the
Exchange Right in respect of the Exchangeable Shares held by a Holder; and
(ii) the Automatic Exchange Rights.
(c) General Exercise of Exchange Right. The Exchange Right shall be and
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remain vested in and exercised by the Trustee. Subject to subsection 7(o)hereof,
the Trustee shall exercise the Exchange Right only on the basis of instructions
received pursuant to this Section 5 from Holders entitled to instruct the
Trustee as to the exercise thereof. To the extent that no instructions are
received from a Holder with respect to the Exchange Right, the Trustee shall not
exercise or permit the exercise of the Exchange Right.
(d) Purchase Price. The purchase price payable by the Parent for each
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Exchangeable Share to be purchased by the Parent under the Exchange Right shall
be an amount equal to (A) the Current Market Price of a share of Parent Common
Stock on the last Business Day prior to the day of closing of the purchase and
sale of such Exchangeable Share under the Exchange Right, plus (B) the Dividend
Amount, if any. In connection with each exercise of the Exchange Right, the
Parent will provide to the Trustee an Officer's Certificate setting forth the
calculation of the purchase price for each Exchangeable Share. The purchase
price for each such Exchangeable Share so purchased may be satisfied only by the
Parent issuing and delivering or causing to be delivered to the Trustee, on
behalf of the relevant Holder, a share of Parent Common Stock and a cheque for
the balance, if any, of the purchase price.
(e) Exercise Instructions. Subject to the terms and conditions herein set
-----------------------
forth, a Holder shall be entitled, upon the occurrence and during the
continuance of an Insolvency Event, to instruct the Trustee to exercise the
Exchange Right with respect to all or any part of the Exchangeable Shares
registered in the name of such Holder. To cause the exercise of the Exchange
Right by the Trustee, the Holder shall deliver to the Trustee, in person or by
certified or registered mail, at its principal office in the City of Toronto, or
at such other places in Canada as the Trustee may from time to time designate by
written notice to the Holders, the certificates representing the Exchangeable
Shares which such Holder desires the Parent to purchase, duly endorsed in blank,
and accompanied by such other documents and instruments as may be required to
effect a transfer of Exchangeable Shares under applicable law and the bylaws of
the Corporation and such additional documents and instruments as the Trustee may
reasonably require together with (i) a duly completed form of notice of exercise
of the Exchange Right, contained on the reverse of or attached to the
Exchangeable Share certificates, stating (A) that the Holder thereby instructs
the Trustee to exercise the Exchange Right so as to require the Parent to
purchase from the Holder the number of Exchangeable Shares specified therein,
(B) that such Holder has good title to and owns all such Exchangeable Shares to
be acquired by the Parent free and clear of all liens, claims and encumbrances,
(C) the names in which the certificates representing Parent Common Stock
issuable in connection with the exercise of the Exchange Right are to be issued
and (D) the names and addresses of the persons to whom such new certificates
should be delivered and (ii) payment (or evidence satisfactory to the Trustee,
the Corporation and the Parent of payment) of the taxes (if any) payable as
contemplated by subsection 5(h) of this Agreement. If only a part of the
Exchangeable Shares represented by any certificate or certificates delivered to
the Trustee are to be purchased by the Parent under the Exchange Right, a new
certificate for the balance of such Exchangeable Shares shall be issued to the
Holder at the expense of the Corporation.
(f) Delivery of Parent Common Stock; Effect of Exercise. Promptly after
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receipt of the certificates representing the Exchangeable Shares which the
Holder desires the Parent to purchase under the Exchange Right (together with
such documents and instruments of transfer and a duly completed form of notice
of exercise of the Exchange Right), duly endorsed for transfer to the Parent,
the Trustee shall notify the Parent and the Corporation of its receipt of the
same, which notice to the Parent and the Corporation shall constitute exercise
of the Exchange Right by the Trustee on behalf of the Holder of such
Exchangeable Shares, and the Parent shall immediately thereafter deliver or
cause to be delivered to the Trustee, for delivery to the Holder of such
Exchangeable Shares (or to such other persons, if any, properly designated by
such Holder), a certificate for the number of shares of Parent Common Stock
deliverable in connection with the exercise of the Exchange Right (which shares
shall be issued as fully paid and non-assessable and shall be free and clear of
any lien, encumbrance, security interest or adverse claim) and a cheque for the
balance, if any, of the purchase price therefor; provided, however, that no such
delivery shall be made unless and until the Holder requesting the same shall
have paid (or provided evidence satisfactory to the Trustee, the Corporation and
the Parent of the payment of) the taxes (if any) payable as contemplated by
subsection 5(h) of this Agreement. Immediately upon the giving of notice by the
Trustee to the Parent and the Corporation of the exercise of the Exchange Right,
as provided in this subsection 5(f), the closing of the transaction of purchase
and sale contemplated by the Exchange Right shall be deemed to have occurred,
and the Holder of such Exchangeable Shares shall be deemed to have transferred
to the Parent all of its right, title and interest in and to such Exchangeable
Shares and in the related interest in the Trust Estate and shall cease to be a
holder of such Exchangeable Shares and shall not be entitled to exercise any of
the rights of a Holder in respect thereof, other than the right to receive his
proportionate part of the total purchase price therefor, unless the requisite
number of shares of Parent Common Stock (together with a cheque for the balance,
if any, of the total purchase price therefor) is not delivered by the Parent to
the Trustee, for delivery to such Holder (or to such other persons, if any,
properly designated by such Holder), within five Business Days of the date of
the giving of such notice by the Trustee, in which case the rights of the Holder
shall remain unaffected until such Exchangeable Share Consideration is delivered
by the Parent and any cheque included therein is paid. Concurrently with such
Holder ceasing to be a holder of Exchangeable Shares, the Holder shall be
considered and deemed for all purposes to be the holder of the shares of Parent
Common Stock delivered to it pursuant to the Exchange Right.
(g) Exercise of Exchange Right Subsequent to Retraction. In the event that a
----------------------------------------------------
Holder has exercised its right under Section 6.1 of the Exchangeable Share
Provisions to require the Corporation to redeem any or all of the Exchangeable
Shares held by the Holder (the "Retracted Shares") and is notified by the
Corporation pursuant to Section 6.3 of the Exchangeable Share Provisions that
the Corporation will not be permitted as a result of liquidity or solvency
requirements of applicable law to redeem all such Retracted Shares, subject to
receipt by the Trustee of written notice to that effect from the Corporation and
provided that the Parent shall not have exercised the Retraction Call Right with
respect to the Retracted Shares and that the Holder has not revoked the
retraction request delivered by the Holder to the Corporation pursuant to
Section 6.4 of the Exchangeable Share Provisions, the retraction request will
constitute and will be deemed to constitute notice from the Holder to the
Trustee instructing the Trustee to exercise the Exchange Right with respect to
those Retracted Shares which the Corporation is unable to redeem. In any such
event, the Corporation hereby agrees with the Trustee and in favour of the
Holder immediately to notify the Trustee of such prohibition against the
Corporation redeeming all of the Retracted Shares and immediately to forward or
cause to be forwarded to the Trustee all relevant materials delivered by the
Holder to the Corporation (including without limitation a copy of the retraction
request delivered pursuant to Section 6.1 of the Exchangeable Share Provisions)
in connection with such proposed redemption of the Retracted Shares and the
Trustee will thereupon exercise the Exchange Right with respect to the Retracted
Shares that the Corporation is not permitted to redeem and will require the
Parent to purchase such shares in accordance with the provisions of this Section
5.
(h) Stamp or Other Transfer Taxes. Upon any sale of Exchangeable Shares to
--------------------------------
the Parent pursuant to the Exchange Right or the Automatic Exchange Rights, the
share certificate or certificates representing Parent Common Stock to be
delivered in connection with the payment of the total purchase price therefor
shall be issued in the name of the Holder of the Exchangeable Shares so sold or
in such names as such Holder may otherwise direct in writing without charge to
the holder of the Exchangeable Shares so sold, provided, however, that such
Holder (i) shall pay (and neither the Parent, the Corporation nor the Trustee
shall be required to pay) any documentary, stamp, transfer or other similar
taxes that may be payable in respect of any transfer involved in the issuance or
delivery of such shares to a person other than such Holder or (ii) shall have
established to the satisfaction of the Trustee, the Parent and the Corporation
that such taxes, if any, have been paid.
(i) Notice of Insolvency Event. Immediately upon the occurrence of an
------------------------------
Insolvency Event or any event which with the giving of notice or the passage of
time or both would be an Insolvency Event, the Corporation shall give written
notice thereof to the Trustee. As soon as practicable after receiving notice
from the Corporation or the Parent or from any other Person of the occurrence of
an Insolvency Event, the Trustee will mail to each Holder, at the expense of the
Parent, a notice of such Insolvency Event in the form provided by the Parent,
which notice shall contain a brief statement of the right of the Holders with
respect to the Exchange Right.
(j) Reservation of Shares of Parent Common Stock. The Parent hereby
---------------------------------------------------
represents, warrants and covenants that it has irrevocably reserved for issuance
and will at all times keep available, free from pre-emptive and other rights,
out of its authorized and unissued capital stock such number of shares of Parent
Common Stock (i) as is equal to the sum of (A) the number of Exchangeable Shares
issued and outstanding from time to time and (B) the number of Exchangeable
Shares issuable upon the exercise of all rights to acquire Exchangeable Shares
outstanding from time to time and (ii) as are now and may hereafter be required
to enable and permit the Corporation and the Parent to meet their respective
obligations hereunder, under the Support Agreement, under the Exchangeable Share
Provisions and under any other security or commitment pursuant to the
Acquisition Agreement with respect to which the Parent may now or hereafter be
required to issue shares of Parent Common Stock.
(k) Automatic Exchange on Liquidation of the Parent.
-----------------------------------------------------
(i) The Parent will give the Trustee written notice of each of the following
events at the time set forth below:
(A) in the event of any determination by the board of directors of the
Parent to institute voluntary liquidation, dissolution or winding-up proceedings
with respect to the Parent or to effect any other distribution of assets of the
Parent among its stockholders for the purpose of winding-up its affairs, at
least 60 days prior to the proposed effective date of such liquidation,
dissolution, winding-up or other distribution; and
(B) immediately, upon the earlier of (I) receipt by the Parent of notice of
and (II) the Parent otherwise becoming aware of any threatened or instituted
claim, suit, petition or other proceedings with respect to the involuntary
liquidation, dissolution or winding-up of the Parent or to effect any other
distribution of assets of the Parent among its stockholders for the purpose of
winding-up its affairs.
(ii) Immediately following receipt by the Trustee from the Parent of notice
of any event (a "Liquidation Event") contemplated by subsection 5(k)(i) above,
the Trustee will give notice thereof to the Holders. Such notice will be
provided by the Parent to the Trustee and shall include a brief description of
the automatic exchange of Exchangeable Shares for shares of Parent Common Stock
provided for in subsection 5(k) below.
(iii) In order that the Holders will be able to participate on a pro rata
basis with the holders of Parent Common Stock in the distribution of assets of
the Parent in connection with a Liquidation Event, on the fifth Business Day
prior to the effective time (the "Liquidation Event Effective Time") of a
Liquidation Event all of the then outstanding Exchangeable Shares shall be
automatically exchanged for shares of Parent Common Stock. To effect such
automatic exchange, the Parent shall be deemed to have purchased each
Exchangeable Share outstanding immediately prior to the Liquidation Event
Effective Time and held by Holders, and each Holder shall be deemed to have sold
the Exchangeable Shares held by it at such time, for a purchase price per share
equal to the Current Market Price applicable at the time of purchase (which
shall be satisfied in full by the Parent delivering to such Holder one share of
Parent Common Stock), plus the Dividend Amount, if any. In connection with such
automatic exchange, the Parent shall provide to the Trustee an Officers'
Certificate setting forth the calculation of the purchase price for each
Exchangeable Share.
(iv) The closing of the transaction of purchase and sale contemplated by
subsection 5(k)(iii) above shall be deemed to have occurred immediately prior to
the Liquidation Event Effective Time, and each Holder of Exchangeable Shares
shall be deemed to have transferred to the Parent all of the Holder's right,
title and interest in and to such Exchangeable Shares and the related interest
in the Trust Estate and shall cease to be a holder of such Exchangeable Shares
and the Parent shall deliver to each Holder the certificates for the number of
shares of Parent Common Stock deliverable upon the automatic exchange of
Exchangeable Shares for Parent Common Stock (which shares shall be issued as
fully paid and non-assessable and shall be free of any lien, encumbrance,
security interest or adverse claim) and a cheque for the balance, if any, of the
purchase price. Concurrently with such Holder ceasing to be a holder of
Exchangeable Shares, the Holder shall be considered and deemed for all purposes
to be the holder of the shares of Parent Common Stock issued to it pursuant to
the automatic exchange of Exchangeable Shares for Parent Common Stock and the
certificates held by the Holder previously representing the Exchangeable Shares
exchanged by the Holder with the Parent pursuant to such automatic exchange
shall thereafter be deemed to represent the shares of Parent Common Stock issued
to the Holder by the Parent pursuant to such automatic exchange. Upon the
request of a Holder and the surrender by the Holder of Exchangeable Share
certificates deemed to represent shares of Parent Common Stock, duly endorsed in
blank and accompanied by such instruments of transfer as the Parent may
reasonably require, the Parent shall deliver or cause to be delivered to the
Holder certificates representing the shares of Parent Common Stock of which the
Holder is the holder.
(l) Parent Support. Notwithstanding any other provision of this Agreement,
---------------
so long as any Exchangeable Shares are outstanding, the Corporation shall be a
wholly-owned subsidiary of the Parent, and the Parent shall directly or
indirectly own all of the common shares outstanding in the capital of the
Corporation, and the Parent shall take all actions and do all things as are
necessary or desirable to enable and permit the Corporation to cause to be
delivered Parent Common Stock to the holders of Exchangeable Shares in
accordance with the Acquisition Agreement and the Exchangeable Share Provisions.
In furtherance of the foregoing obligations, upon notice of any event which
requires the Corporation to cause to be delivered shares of Parent Common Stock
to any holder of Exchangeable Shares, the Parent shall, in any manner deemed
appropriate by it, provide such shares or cause such shares to be provided to
the Corporation, which shall forthwith deliver the requisite shares of Parent
Common Stock to or to the order of the former holder of the surrendered
Exchangeable Shares. All such shares of Parent Common Stock shall be duly
issued as fully paid, non-assessable, free of pre-emptive rights and shall be
free of any lien, encumbrance, security interest or adverse claim.
(m) Call Rights. The Liquidation Call Right, the Redemption Call Right, the
-----------
Retraction Call Right and the Automatic Exchange Rights are hereby agreed,
acknowledged and confirmed, and it is agreed and acknowledged that such rights
are granted in part in consideration of the obligation of the Parent under this
Agreement and under the Support Agreement. The Parent acknowledges and agrees
that the Liquidation Call Right, the Redemption Call Right and the Retraction
Call Right are not transferrable.
(n) Documents to be Filed. Each of the Parent and the Corporation shall
------------------------
file with the Trustee a certificate of incumbency setting forth the names of the
individuals authorized to give instructions, directions or other instruments to
the Trustee, together with specimen signatures of such persons, and the Trustee
shall be entitled to rely on the latest certificate of incumbency filed with it
unless it receives notice, in accordance with section 14 of this Agreement, of a
change in such persons with updated specimen signatures.
6. RESTRICTIONS ON ISSUANCE OF PARENT SPECIAL VOTING STOCK
During the term of this Agreement, the Parent will not issue any shares of
the Parent Special Voting Stock in addition to the Voting Share.
7. CONCERNING THE TRUSTEE
(a) Powers and Duties of the Trustee. The rights, powers and authorities of
----------------------------------
the Trustee under this Agreement, in its capacity as trustee of the Trust, shall
include:
(i) receipt and deposit of the Voting Share from the Parent as trustee for
and on behalf of the Holders in accordance with the provisions of this
Agreement;
(ii) granting proxies and distributing materials to Holders as provided in
this Agreement;
(iii) voting the Holder Votes in accordance with the provisions of this
Agreement;
(iv) receiving the grant of the Exchange Right and the Automatic Exchange
Rights from the Parent as trustee for and on behalf of the Holders in accordance
with the provisions of this Agreement;
(v) exercising the Exchange Right and enforcing the benefit of the Automatic
Exchange Rights, in each case in accordance with the provisions of this
Agreement, and in connection therewith receiving from Holders Exchangeable
Shares and other requisite documents and distributing to such Holders the shares
of Parent Common Stock and cheques, if any, to which such Holders are entitled
upon the exercise of the Exchange Right or pursuant to the Automatic Exchange
Rights, as the case may be;
(vi) holding title to the Trust Estate;
(vii) investing any monies forming, from time to time, a part of the Trust
Estate as provided in this Agreement;
(viii) taking action at the direction of a Holder or Holders to enforce the
obligations of the Parent under this Agreement; and
(ix) taking such other actions and doing such other things as are
specifically provided in this Agreement.
In the exercise of such rights, powers and authorities the Trustee shall
have (and is granted) such incidental and additional rights, powers and
authority not in conflict with any of the provisions of this Agreement as the
Trustee, acting in good faith and in the reasonable exercise of its discretion,
may deem necessary, appropriate or desirable to effect the purpose of the Trust.
Any exercise of such discretionary rights, powers and authorities by the Trustee
shall be final, conclusive and binding upon all Persons. For greater certainty,
the Trustee shall have only those duties as are set out specifically in this
Agreement. The Trustee, in exercising its rights, powers, duties and
authorities hereunder shall act honestly and in good faith with a view to the
best interests of the Holders and shall exercise the care, diligence and skill
that a reasonably prudent trustee would exercise in comparable circumstances.
The Trustee shall not be bound to give any notice or do or take any act, action
or proceeding by virtue of the powers conferred on it hereby unless and until it
shall be specifically required to do so under the terms hereof; nor shall the
Trustee be required to take any notice of, or to do or to take any act, action
or proceeding as a result of any default or breach of any provision hereunder,
unless and until notified in writing of such default or breach, which notices
shall distinctly specify the default or breach desired to be brought to the
attention of the Trustee and in the absence of such notice the Trustee may for
all purposes of this Agreement conclusively assume that no default or breach has
been made in the observance or performance of any of the representations,
warranties, covenants, agreements or conditions contained herein.
The duties and obligations of the Trustee shall be determined solely by the
provisions hereof and, accordingly, the Trustee shall only be responsible for
the performance of such duties and obligations as it has undertaken herein. The
Trustee shall retain the right not to act and shall not be held liable for
refusing to act unless it has received clear and reasonable documentation which
complies with the terms of this Agreement. Such documentation must not require
exercise of any discretion or independent judgment on the part of the Trustee.
(b) No Conflict of Interest. The Trustee hereby represents to the Parent
--------------------------
and the Corporation that at the date of execution and delivery of this Agreement
there exists no material conflict of interest in the role of the Trustee as a
fiduciary hereunder and the role of the Trustee in any other capacity. The
Trustee shall, within ninety (90) days after it becomes aware that such a
material conflict of interest exists, either eliminate such material conflict of
interest or resign in the manner and with the effect specified in Section 10 of
this Agreement. If, notwithstanding the foregoing provisions of this subsection
7(b), the Trustee has such a material conflict of interest, the validity and
enforceability of this Agreement shall not be affected in any manner whatsoever
by reason only of the existence of such material conflict of interest. If the
Trustee contravenes the foregoing provisions of this subsection, any interested
party may apply to a court of competent jurisdiction for an award that the
Trustee be replaced as trustee hereunder.
(c) Dealings with Transfer Agents, Registrars, etc. The Parent irrevocably
-----------------------------------------------
authorizes the Trustee, from time to time, to:
(i) consult, communicate and otherwise deal with the respective registrars
and transfer agents, and with any such subsequent registrar or transfer agent,
if any, of Parent Common Stock; and
(ii) requisition, from time to time, (A) from any such registrar or transfer
agent any information readily available from the records maintained by it which
the Trustee may reasonably require for the discharge of its duties and
responsibilities under this Agreement and (B) from the transfer agent of Parent
Common Stock, and any subsequent transfer agent of such shares, if any, or from
the Parent, the share certificates issuable upon the exercise from time to time
of the Exchange Right and pursuant to the Automatic Exchange Rights in the
manner specified in Section 5 hereof.
The Parent irrevocably authorizes and agree to direct its registrars and
transfer agents to comply with all such requests. The Parent covenants that it
will supply its transfer agent with duly executed share certificates for the
purpose of completing the exercise from time to time of the Exchange Right and
the Automatic Exchange Rights, in each case pursuant to Section 5 hereof.
(d) Books and Records. The Trustee shall keep available for inspection by
--------------------
the Parent and the Corporation, at the Trustee's principal office in the City of
Toronto, correct and complete books and records of account relating to the
Trustee's actions under this Agreement, including without limitation all
information relating to mailings and instructions to and from Holders and all
transactions pursuant to the Voting Rights, the Exchange Right and the Automatic
Exchange Rights for the term of this Agreement. On or before August 31, 2000,
and on or before August 31 in every year, so long as the Voting Share is on
deposit with the Trustee, the Trustee shall transmit to the Parent and the
Corporation a brief report with respect to:
(i) the property and funds comprising the Trust Estate as of that date;
(ii) the number of exercises of the Exchange Right, if any, and the
aggregate number of Exchangeable Shares received by the Trustee on behalf of
Holders in consideration of the issue and delivery by the Parent of shares of
Parent Common Stock in connection with the Exchange Right, during the calendar
year ended on such date; and
(iii) all other actions taken by the Trustee in the performance of its
duties at the expense of the Parent under this Agreement which it had not
previously reported.
(e) Income Tax Returns and Reports. The Trustee shall, to the extent
-----------------------------------
necessary, prepare and file or cause to be prepared and filed on behalf of the
Trust appropriate United States and Canadian income tax returns and any other
returns or reports as may be required by applicable law, and may obtain the
advice and assistance of such experts as the Trustee may consider necessary or
advisable in connection therewith and may add any related costs of same to its
fees and expenses as outlined in Article 8 of this Agreement. If requested by
the Trustee, the Parent shall retain such experts for purposes of providing such
advice and assistance.
(f) Indemnification Prior to Certain Actions by Trustee. The Trustee shall
----------------------------------------------------
exercise any or all of the rights, duties, powers or authorities vested in it by
this Agreement at the request, order or direction of any Holder upon such Holder
furnishing to the Trustee reasonable funding, security and indemnity
satisfactory to the Trustee against the costs, expenses and liabilities that may
be incurred by the Trustee therein or thereby, provided that no Holder shall be
obligated to furnish to the Trustee any such funding, security or indemnity in
connection with the exercise by the Trustee of any of its rights, duties, powers
and authorities with respect to the Voting Share, with respect to the Exchange
Right, and with respect to the Automatic Exchange Rights, subject to the
provisions of subsection 7(o) hereunder. None of the provisions contained in
this Agreement shall require the Trustee to expend or risk its own funds or
otherwise incur financial liability in the exercise of any of its rights,
powers, duties or authorities unless given funds, security and indemnified as
aforesaid by the relevant Holder(s) or the Parent or the Corporation.
(g) Actions by Holders. No Holder shall have the right to institute any
---------------------
action, suit or proceeding or to exercise any other remedy authorized by this
Agreement for the purpose of enforcing any of its rights or for the execution of
any trust or power hereunder unless the Holder has requested the Trustee to take
or institute such action, suit or proceeding and furnished the Trustee with the
funding, security and indemnity referred to in subsection 7(f) hereof and the
Trustee shall have failed to act within a reasonable time thereafter. In such
case, but not otherwise, the Holder shall be entitled to take proceedings in any
court of competent jurisdiction such as the Trustee might have taken; it being
understood and intended that no one or more Holders shall have any right in any
manner whatsoever to affect, disturb or prejudice the rights hereby created by
any such action, or to enforce any right hereunder or under the Voting Rights,
the Exchange Right or the Automatic Exchange Rights, except subject to the
conditions and in the manner herein provided, and that all powers and trusts
hereunder shall be exercised and all proceedings at law shall be instituted, had
and maintained by the Trustee, except only as herein provided, and in any event
for the equal benefit of all Holders.
(h) Reliance upon Declarations. The Trustee shall not be considered to be
-----------------------------
in contravention of any of its rights, powers, duties and authorities hereunder
if, when required, it acts and relies in good faith upon lists, mailing labels,
notices, statutory declarations, certificates, opinions, reports or other papers
or documents furnished pursuant to the provisions hereof or required by the
Trustee to be furnished to it in the exercise of its rights, powers, duties and
authorities hereunder and such lists, mailing labels, notices, statutory
declarations, certificates, opinions, reports or other papers or documents
comply with the provisions of subsection 7(i) hereof, if applicable, and with
any other applicable provisions of this Agreement.
(i) Evidence and Authority to Trustee. The Corporation and/or the Parent
------------------------------------
shall furnish to the Trustee evidence of compliance with the conditions provided
for in this Agreement relating to any action or step required or permitted to be
taken by the Corporation and/or the Parent or the Trustee under this Agreement
or as a result of any obligation imposed under this Agreement, including,
without limitation, in respect of the Voting Rights or the Exchange Right or the
Automatic Exchange Rights and the taking of any other action to be taken by the
Trustee at the request of or on the application of the Corporation and/or the
Parent forthwith if and when:
(i) such evidence is required by any other section of this Agreement to be
furnished to the Trustee in accordance with the terms of this subsection 7(i);
or
(ii) the Trustee, in the exercise of its rights, powers, duties and
authorities under this Agreement, gives the Corporation and/or the Parent
written notice requiring it to furnish such evidence in relation to any
particular action or obligation specified in such notice.
Such evidence shall consist of an Officers' Certificate of the Corporation
and/or the Parent or a statutory declaration or a certificate made by persons
entitled to sign an Officer's Certificate stating that any such condition has
been complied with in accordance with the terms of this Agreement.
Whenever such evidence relates to a matter other than the Voting Rights or the
Exchange Right or the Automatic Exchange Rights, and except as otherwise
specifically provided herein, such evidence may consist of a report or opinion
of any solicitor, auditor, accountant, appraiser, valuer, engineer or other
expert or any other person whose qualifications give authority to a statement
made by him provided that if such report or opinion is furnished by a director,
officer or employee of the Corporation and/or the Parent it shall be in the form
of an Officers' Certificate or a statutory declaration.
Each statutory declaration, certificate, opinion or report furnished to the
Trustee as evidence of compliance with a condition provided for in this
Agreement shall include a statement by the person giving the evidence:
(iii) declaring that he has read and understands the provisions of this
Agreement relating to the condition in question;
(iv) describing the nature and scope of the examination or investigation
upon which he based the statutory declaration, certificate, statement or
opinion; and
(v) declaring that he has made such examination or investigation as he
believes is necessary to enable him to make the statements or give the opinions
contained or expressed therein.
(j) Experts, Advisors and Agents. The Trustee may:
(i) in relation to these presents act and rely on the opinion or advice of
or information obtained from or prepared by any solicitor, auditor, accountant,
appraiser, valuer, engineer or other expert, whether retained by the Trustee or
by the Corporation and/or the Parent or otherwise, and may employ such
assistants as may be necessary to the proper determination and discharge of its
powers and duties and determination of its rights hereunder and may pay proper
and reasonable compensation for all such legal and other advice or assistance as
aforesaid; and
(ii) employ such agents and other assistants as it may reasonably require
for the proper determination and discharge of its powers and duties hereunder,
and may pay reasonable remuneration for all services performed for it (and shall
be entitled to receive reasonable remuneration for all services performed by it)
in the discharge of the trusts hereof and compensation for all disbursements,
costs and expenses made or incurred by it in the determination and discharge of
its duties hereunder and in the management of the Trust.
(k) Investment of Monies Held by Trustee. Unless otherwise provided in this
-------------------------------------
Agreement, any monies held by or on behalf of the Trustee which under the terms
of this Agreement may or ought to be invested or which may be on deposit with
the Trustee or which may be in the hands of the Trustee may be invested and
reinvested in the name or under the control of the Trustee in securities in
which, under the laws of the Province of Ontario, trustees are authorized to
invest trust unit monies, provided that such securities are stated to mature
within two years after their purchase by the Trustee, and the Trustee shall so
invest such monies on the written direction of the Corporation. Pending the
investment of any monies as hereinbefore provided, such monies may be deposited
in the name of the Trustee in any chartered bank in Canada or, with the consent
of the Corporation, in the deposit department of the Trustee or any other loan
or trust company authorized to accept deposits under the laws of Canada or any
province thereof at the rate of interest then current on similar deposits.
(l) Trustee Not Required to Give Security. The Trustee shall not be
-------------------------------------------
required to give any bond or security in respect of the execution of the trusts,
rights, duties, powers and authorities of this Agreement or otherwise in respect
of the premises.
(m) Trustee Not Bound to Act on Request. Except as in this Agreement
------------------------------------------
otherwise specifically provided, the Trustee shall not be bound to act in
accordance with any direction or request of the Corporation and/or the Parent or
of the directors thereof until a duly authenticated copy of the instrument or
resolution containing such direction or request shall have been delivered to the
Trustee, and the Trustee shall be empowered to act and rely upon any such copy
purporting to be authenticated and believed by the Trustee to be genuine.
(n) Authority to Carry on Business. The Trustee represents to the
-----------------------------------
Corporation and the Parent that at the date of execution and delivery by it of
-
this Agreement it is authorized to carry on the business of a trust company in
each of the provinces of Canada but if, notwithstanding the provisions of this
subsection 7(n), it ceases to be so authorized to carry on business, the
validity and enforceability of this Agreement and the Voting Rights, the
Exchange Right and the Automatic Exchange Rights shall not be affected in any
manner whatsoever by reason only of such event but the Trustee shall, within 90
days after ceasing to be authorized to carry on the business of a trust company
in any Province of Canada, either become so authorized or resign in the manner
and with the effect specified in Section 10.
(o) Conflicting Claims. If conflicting claims or demands are made or
--------------------
asserted with respect to any interest of any Holder in any Exchangeable Shares,
including any disagreement between the heirs, representatives, successors or
assigns succeeding to all or any part of the interest of any Holder in any
Exchangeable Shares resulting in conflicting claims or demands being made in
connection with such interest, then the Trustee shall be entitled, at its sole
discretion, to refuse to recognize or to comply with any such claim or demand.
In so refusing, the Trustee may elect not to exercise any Voting Rights,
Exchange Right or Automatic Exchange Rights subject to such conflicting claims
or demands and, in so doing, the Trustee shall not be or become liable to any
person on account of such election or its failure or refusal to comply with any
such conflicting claims or demands. The Trustee shall be entitled to continue to
refrain from acting and to refuse to act until:
(i) the rights of all adverse claimants with respect to the Voting Rights,
Exchange Right or Automatic Exchange Rights subject to such conflicting claims
or demands have been adjudicated by a final judgment of a court of competent
jurisdiction; or
(ii) all differences with respect to the Voting Rights, Exchange Right or
Automatic Exchange Right subject to such conflicting claims or demands have been
conclusively settled by a valid written agreement binding on all such adverse
claimants, and the Trustee shall have been furnished with an executed copy of
such agreement.
If the Trustee elects to recognize any claim or comply with any demand made
by any such adverse claimant, it may in its discretion require such claimant to
furnish such surety bond or other security satisfactory to the Trustee as it
shall deem appropriate to fully indemnify it as between all conflicting claims
or demands.
(p) Acceptance of Trust. The Trustee hereby accepts the Trust created and
----------------------
provided for by and in this Agreement and agrees to perform the same upon the
terms and conditions herein set forth and to hold all rights, privileges and
benefits conferred hereby and by law in trust for the various Persons who shall
from time to time be Holders, subject to all the terms and conditions herein set
forth.
(q) Merger or Consolidation of Trustee. Any corporation into or with which
-----------------------------------
the Trustee may be merged or consolidated or amalgamated, or any corporation
resulting therefrom, or any corporation succeeding to the trust business of the
Trustee shall be the successor to the Trustee under this trust agreement without
any further act on its part or any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor trustee under the
provisions of this Agreement.
8. COMPENSATION
The Parent and the Corporation jointly and severally agree to pay to the
Trustee reasonable compensation for all of the services rendered by it under
this Agreement and will reimburse the Trustee for all reasonable expenses
(including but not limited to taxes, compensation paid to experts, agents and
advisors and travel expenses) and disbursements, including the cost and expense
of any suit or litigation of any character and any proceedings before any
governmental agency reasonably incurred by the Trustee in connection with its
rights and duties under this Agreement; provided that the Parent and the
Corporation shall have no obligation to reimburse the Trustee for any expenses
or disbursements paid, incurred or suffered by the Trustee in any suit or
litigation in which the Trustee is legally determined to have acted in bad faith
or with negligence or willful misconduct. Invoices for services rendered by the
Trustee shall be provided to the Parent on behalf of the Parent and the
Corporation at the address set forth in section 14 of this Agreement. Any
amount owing and unpaid after 30 days from the invoice date will bear interest
at a rate per annum, from the expiration of such 30 day period, equal to the
then current rate charged by the Trustee and shall be payable on demand. The
obligations of the Corporation and the Parent under this section 8 shall survive
the resignation or removal of the Trustee. The Parent agrees that it will
reimburse the Corporation for its portion of the expenses provided for in this
section within 30 days of receipt of the invoice therefor from the Corporation.
9. INDEMNIFICATION AND LIMITATION OF LIABILITY
(a) Indemnification of the Trustee. The Parent and the Corporation jointly
-------------------------------
and severally agree to indemnify and hold harmless the Trustee, its directors,
officers, partners, employees, agents, successors and assigns (collectively, the
"Indemnified Parties") against all claims, losses, damages, costs, penalties,
fines and reasonable expenses (including reasonable expenses of the legal
counsel on a solicitor and his own client basis) which, without fraud,
negligence, willful misconduct or bad faith on the part of such Indemnified
Party, may be paid, incurred or suffered by the Indemnified Party by reason of
or as a result of the Trustee's acceptance or administration of the Trust, its
compliance with its duties set forth in this Agreement, or any written or oral
instructions delivered to the Trustee by the Parent or the Corporation pursuant
hereto. In no case shall the Parent or the Corporation be liable under this
indemnity for any claim against any of the Indemnified Parties unless the Parent
and the Corporation shall be notified by the Trustee of the written assertion of
a claim or of any action commenced against the Indemnified Parties promptly
after any of the Indemnified Parties shall have received any such written
assertion of a claim or shall have been served with a summons or other first
legal process giving information as to the nature and basis of the claim.
Subject to (ii) below, the Parent and the Corporation shall be entitled to
participate at their own expense in the defense and, if the Parent or the
Corporation so elect at any time after receipt of such notice, either of them
may assume the defense of any suit brought to enforce any such claim. The
Trustee shall have the right to employ separate counsel in any such suit and
participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of the Trustee unless: (i) the employment of such
counsel has been authorized by the Parent or the Corporation, such authorization
not to be unreasonably withheld; or (ii) the named parties to any such suit
include both the Trustee and the Parent or the Corporation and the Trustee shall
have been advised by counsel acceptable to the Parent or the Corporation that
there may be one or more legal defenses available to the Trustee that are
different from or in addition to those available to the Parent or the
Corporation and that an actual or potential conflict exists (in which case the
Parent and the Corporation shall not have the right to assume the defense of
such suit on behalf of the Trustee but shall be liable to pay the reasonable
fees and expenses of counsel for the Trustee).
(b) Limitation of Liability. The Trustee shall not be held liable for any
--------------------------
loss which may occur by reason of depreciation of the value of any part of the
Trust Estate or any loss incurred on any investment of funds pursuant to this
Agreement except to the extent that such loss is attributable to the fraud,
willful misconduct or bad faith on the part of the Trustee.
(c) Survival. This indemnity provided for in this section 9 will survive
---------
the resignation or removal of the Trustee and the termination of the trust.
10. CHANGE OF TRUSTEE
(a) Resignation. The Trustee, or any trustee hereafter appointed, may at
------------
any time resign by giving written notice of such resignation to the Parent and
the Corporation specifying the date on which it desires to resign, provided that
such notice shall not be given less than one month before such desired
resignation date unless the Parent and the Corporation otherwise agree. Upon
receiving such notice of resignation, the Parent and the Corporation shall
promptly appoint a successor trustee by written instrument in duplicate, one
copy of which shall be delivered to the resigning trustee and one copy to the
successor trustee. Failing acceptance by a successor trustee of such
appointment, a successor trustee may be appointed by an order of the Ontario
Superior Court upon application of one or more of the parties hereto, at the
expense of the Parent and the Corporation. Upon the failure of the parties to
appoint a successor trustee or the failure of a successor trustee to accept
appointment, the resigning trustee shall cease its functions at the expiration
of the period specified in its written notice of resignation and may retain any
and all property in its possession hereunder on a safekeeping basis, at a
reasonable fee to be determined by the resigning trustee.
(b) Removal. The Trustee, or any trustee hereafter appointed, may be
--------
removed with or without cause, at any time on sixty (60) days' prior notice by
written instrument executed by the Parent and the Corporation, in duplicate, one
copy of which shall be delivered to the trustee so removed and one copy to the
successor trustee, provided that, in connection with such removal, provision is
made for a replacement trustee similar to that contemplated in subsection 10(a).
(c) Successor Trustee. Any successor trustee appointed as provided under
-------------------
this Agreement shall execute, acknowledge and deliver to the Parent and the
Corporation and to its predecessor trustee an instrument accepting such
appointment. Thereupon the resignation or removal of the predecessor trustee
shall become effective and such successor trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor under this Agreement, with like effect as if
originally named as trustee in this Agreement. However, on the written request
of the Parent and the Corporation or of the successor trustee, the trustee
ceasing to act shall, upon payment of any amounts then due to it pursuant to the
provisions of this Agreement, execute and deliver an instrument transferring to
such successor trustee all the rights and powers of the trustee so ceasing to
act. Upon the request of any such successor trustee, the Parent, the Corporation
and such predecessor trustee shall execute any and all instruments in writing
for more fully and certainly vesting in and confirming to such successor trustee
all such rights and powers.
(d) Notice of Successor Trustee. Upon acceptance of appointment by a
-------------------------------
successor trustee as provided herein, the Parent and the Corporation shall cause
to be mailed notice of the succession of such trustee hereunder to each Holder
specified in a List. If the Parent or the Corporation shall fail to cause such
notice to be mailed within 10 days after acceptance of appointment by the
successor trustee, the successor trustee shall cause such notice to be mailed at
the expense of the Parent and the Corporation.
11. SUCCESSORS
(a) Certain Requirements in Respect of Combination, etc. The Parent shall
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not enter into any transaction (whether by way of reconstruction,
reorganization, consolidation, merger, transfer, sale, lease or otherwise)
whereby all or substantially all of its undertaking, property and assets would
become the property of any other Person or, in the case of a merger, of the
continuing corporation resulting therefrom unless:
(i) such other Person or continuing corporation (the "Parent Successor"), by
operation of law, becomes, without further action, bound by the terms and
provisions of this Agreement or, if not so bound, executes, prior to or
contemporaneously with the consummation of such transaction an agreement
supplemental hereto and such other instruments (if any) as are satisfactory to
the Trustee and in the opinion of legal counsel to the Trustee are necessary or
advisable to evidence the assumption by the Parent Successor of liability for
all monies payable and property deliverable hereunder and the covenant of such
Parent Successor to pay and deliver or cause to be delivered the same and its
agreement to observe and perform all the covenants and obligations of the Parent
under this Agreement; and
(ii) such transaction shall, to the satisfaction of the Trustee and in the
opinion of legal counsel to the Trustee, be upon such terms as substantially to
preserve and not to impair in any material respect any of the rights, duties,
powers and authorities of the Trustee or of the Holders hereunder.
(b) Vesting of Powers in Successor. Whenever the conditions of subsection
---------------------------------
11(a) hereof have been duly observed and performed, the Trustee, if required by
subsection 11(a) hereof, the Parent Successor and the Corporation shall execute
and deliver the supplemental agreement provided for in Section 12 hereof and
thereupon the Parent Successor shall possess and from time to time may exercise
each and every right and power of the Parent under this Agreement in the name of
the Parent or otherwise and any act or proceeding by any provision of this
Agreement required to be done or performed by the board of directors of the
Parent or any officers of the Parent may be done and performed with like force
and effect by the directors or officers of such Parent Successor.
(c) Wholly-Owned Subsidiaries. Nothing herein shall be construed as
---------------------------
preventing the amalgamation or merger of any wholly-owned subsidiary of the
Parent with or into the Parent or the winding-up, liquidation or dissolution of
any wholly-owned subsidiary of the Parent provided that all of the assets of
such subsidiary are transferred to the Parent or another wholly-owned subsidiary
of the Parent, and any such transactions are expressly permitted by this Section
11.
12. AMENDMENTS AND SUPPLEMENTAL AGREEMENTS
(a) Amendments, Modifications, etc. This Agreement may not be amended or
---------------------------------
modified except by an agreement in writing executed by the Corporation, the
Parent and the Trustee and approved by the Holders in accordance with Section
9.2 of the Exchangeable Share Provisions.
(b) Ministerial Amendments. Notwithstanding the provisions of subsection
------------------------
12(a) hereof, the parties to that agreement may in writing, at any time and from
time to time, without the approval of the Holders, amend or modify this
Agreement for the purposes of:
(i) adding to the covenants of any or all of the parties hereto for the
protection of the Holders hereunder;
(ii) making such amendments or modifications not inconsistent with this
Agreement as may be necessary or desirable with respect to matters or questions
which, in the opinion of the board of directors of each of the Parent and the
Corporation and in the opinion of the Trustee and its counsel having in mind the
best interests of the Holders as a whole, it may be expedient to make, provided
that such boards of directors and the Trustee and its counsel shall be of the
opinion that such amendments and modifications will not be prejudicial to the
interests of the Holders as a whole; or
(iii) making such changes or corrections which, on the advice of counsel to
the Corporation, the Parent and the Trustee, are required for the purpose of
curing or correcting any ambiguity or defect or inconsistent provision or
clerical omission or mistake or manifest error, provided that the Trustee and
its counsel and the board of directors of each of the Corporation and the Parent
shall be of the opinion that such changes or corrections will not be prejudicial
to the interests of the Holders as a whole.
(c) Meeting to Consider Amendments. The Corporation, at the request of the
--------------------------------
Parent, shall call a meeting or meetings of the Holders for the purpose of
considering any proposed amendment or modification requiring approval pursuant
hereto. Any such meeting or meetings shall be called and held in accordance with
the bylaws of the Corporation, the Exchangeable Share Provisions and all
applicable laws.
(d) Changes in Capital of the Parent and the Corporation. At all times
----------------------------------------------------------
after the occurrence of any event effected pursuant to subsections 2(g) or (h)
of the Support Agreement, as a result of which either Parent Common Stock or the
Exchangeable Shares or both are in any way changed, this Agreement shall
forthwith be amended and modified as necessary in order that it shall apply with
full force and effect, mutatis mutandis, to all new securities into which Parent
Common Stock or the Exchangeable Shares or both are so changed and the parties
hereto shall execute and deliver a supplemental agreement giving effect to and
evidencing such necessary amendments and modifications.
(e) Execution of Supplemental Agreements. No amendment to or modification or
-------------------------------------
waiver of any of the provisions of this Agreement otherwise permitted hereunder
shall be effective unless made in writing and signed by all of the parties
hereto. From time to time the Corporation (when authorized by a resolution of
its Board of Directors), the Parent (when authorized by a resolution of its
board of directors) and the Trustee may, subject to the provisions of these
presents, and they shall, when so directed by these presents, execute and
deliver by their proper officers, agreements or other instruments supplemental
hereto, which thereafter shall form part hereof, for any one or more of the
following purposes:
(i) evidencing the succession of any the Parent Successors to the Parent and
the covenants of and obligations assumed by each such Parent Successors in
accordance with the provisions of Section 11, and the successor of any successor
trustee in accordance with the provisions of Section 10;
(ii) making any additions to, deletions from or alterations of the
provisions of this Agreement or the Voting Rights, the Exchange Right or the
Automatic Exchange Rights which, in the opinion of the Trustee and its counsel,
will not be prejudicial to the interests of the Holders as a whole or are in the
opinion of counsel to the Trustee necessary or advisable in order to
incorporate, reflect or comply with any legislation the provisions of which
apply to the Parent, the Corporation, the Trustee or this Agreement; and
(iii) for any other purposes not inconsistent with the provisions of this
Agreement, including without limitation to make or evidence any amendment or
modification to this Agreement as contemplated hereby, provided that, in the
opinion of the Trustee and its counsel, the rights of the Trustee and the
Holders as a whole will not be prejudiced thereby.
13. TERMINATION
(a) Term. The Trust created by this Agreement shall continue until the
----
earliest to occur of the following events:
(i) no outstanding Exchangeable Shares are held by a Holder;
(ii) each of the Corporation and the Parent elects in writing to terminate
the Trust and such termination is approved by the Holders of the Exchangeable
Shares in accordance with Section 9.2 of the Exchangeable Share Provisions; and
(iii) twenty-one (21) years after the death of the last survivor of the
descendants of His Majesty King George VI of the United Kingdom of Great Britain
and Northern Ireland living on the date of the creation of the Trust.
(b) Survival of Agreement. This Agreement shall survive any termination of
-----------------------
the Trust and shall continue until there are no Exchangeable Shares outstanding
held by a Holder, provided, however, that the provisions of Sections 8 and 9
hereof shall survive any such termination of this Agreement.
14. GENERAL
(a) Severability. If any provision of this Agreement is held to be invalid,
------------
illegal or unenforceable, the validity, legality or enforceability of the
remainder of this Agreement shall not in any way be affected or impaired thereby
and the agreement shall be carried out as nearly as possible in accordance with
its original terms and conditions.
(b) Enurement. This Agreement shall be binding upon and enure to the benefit
---------
of the parties hereto and their respective successors and permitted assigns and
to the benefit of the Holders.
(c) Notices to Parties. All notices and other communications between the
--------------------
parties hereunder shall be in writing and shall be deemed to have been given if
delivered personally or by confirmed telecopy to the parties at the following
addresses (or at such other address for such party as shall be specified in like
notice):
(i) if to the Parent at:
c/o SoftQuad Software Inc.
161 Eglinton Avenue East
Suite 400
Toronto, Ontario
M4P 1J5
Attention: President
Fax: (416) 544-0300
(ii) if to the Corporation at:
c/o SoftQuad Software Inc.
161 Eglinton Avenue East
Suite 400
Toronto, Ontario
M4P 1J5
Attention: President
Fax: (416) 544-0300
(iii) if to the Trustee at:
Montreal Trust Company of Canada
Suite 605-151 Front Street West
Toronto, Ontario
M4Y 2V6
Attention: Manager, Corporate Trust Department
Fax: (416) 981-9777
Any notice or other communication given personally shall be deemed to have
been given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of receipt thereof unless
such day is not a Business Day in which case it shall be deemed to have been
given and received upon the immediately following Business Day.
(d) Notice to Holders. Any and all notices to be given and any documents to
-----------------
be sent to any Holders may be given or sent to the address of such Holder shown
on the register of Holders of Exchangeable Shares in any manner permitted by the
Exchangeable Share Provisions and shall be deemed to be received (if given or
sent in such manner) at the time specified in such Exchangeable Share
Provisions, the provisions of which the Exchangeable Share Provisions shall
apply mutatis mutandis to notices or documents as aforesaid sent to such
Holders.
(e) Risk of Payments by Post. Whenever payments are to be made or documents
------------------------
are to be sent to any Holder by the Trustee, by the Corporation or by the Parent
or by such Holder to the Trustee or to the Parent or the Corporation, the making
of such payment or sending of such document sent through the post shall be at
the risk of the Corporation or the Parent, in the case of payments made or
documents sent by the Trustee or the Corporation or the Parent, and the Holder,
in the case of payments made or documents sent by the Holder.
(f) Counterparts. This Agreement may be executed in counterparts, each of
-------------
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
(g) Jurisdiction. This Agreement shall be construed and enforced in
------------
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein;
(h) Attornment. The Parent agrees that any action or proceeding arising out
-----------
of or relating to this Agreement may be instituted in the courts of Ontario,
waives any objection which it may have now or hereafter to the venue of any such
action or proceeding, irrevocably submits to the jurisdiction of the said courts
in any such action or proceeding, agrees to be bound by any judgment of the said
courts and agrees not to seek, and hereby waives, any review of the merits of
any such judgment by the courts of any other jurisdiction and hereby appoints
the Corporation at its registered office in the Province of Ontario as its
attorney for service of process.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
duly executed as of the date first above written.
THE AMERICAN SPORTS MACHINE, INC.
Per:
SOFTQUAD ACQUISITION CORP.
Per:
MONTREAL TRUST COMPANY OF CANADA
Per:
Per:
G24\MAYN\3258562.5
<PAGE>
NYK 632161-1.057553.0010
SCHEDULE "A"
EXCHANGEABLE SHARE PROVISIONS
-----------------------------
(attached)
G24\MAYN\3258562.5
<PAGE>
NYK 632161-1.057553.0010
SUPPORT AGREEMENT
-----------------
MEMORANDUM OF AGREEMENT made as of the _______ day of March, 2000.
BETWEEN:
THE AMERICAN SPORTS MACHINE, INC., a corporation incorporated under the laws of
the State of Florida
(hereinafter referred to as the "Parent")
OF THE FIRST PART
SOFTQUAD ACQUISITION CORP., a corporation incorporated under the laws of the
Province of Ontario
(hereinafter referred to as the "Corporation")
OF THE SECOND PART
WHEREAS pursuant to an acquisition agreement (the "Acquisition Agreement")
dated December 16, 1999 among the Parent, the Corporation and Softquad Software
Inc., the parties agreed that, in order to facilitate completion of the
Qualifying Offer (as defined in the said agreement), the parties would execute a
support agreement;
AND WHEREAS the Corporation has entered into agreements with each of the
shareholders of Softquad Software Inc. pursuant to which the Corporation will
purchase, and each of the said shareholders will sell, all of the outstanding
common shares in the capital of Softquad Software Inc. in exchange for, at the
option of the shareholder, one share of common stock in the capital of the
Parent or one exchangeable share in the capital of the Corporation for each
common share in the capital Softquad Software Inc.;
AND WHEREAS the parties hereto wish to provide for and establish a procedure
whereby the Parent will take certain actions and make certain payments and
deliveries necessary to ensure that the Corporation will be able to make certain
payments and to deliver or cause to be delivered shares of Parent Common Stock
in satisfaction of the obligations of the Corporation under (i) the terms of the
voting and exchange trust agreement (the "Voting and Exchange Trust Agreement")
dated of even date herewith among the Parent, the Corporation and the Trustee
(as defined therein) and (ii) the rights, privileges, restrictions and
conditions attaching to the Exchangeable Shares (as defined below);
NOW THEREFORE in consideration of the respective covenants and agreements
provided in this Agreement and for other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties agree as
follows:
1. DEFINITIONS AND INTERPRETATION
(a) Defined Terms. Each term denoted herein by initial capital letters
--------------
and not otherwise defined herein shall have the meaning attributed thereto in
the Exchangeable Share Provisions, unless the context requires otherwise.
(b) Interpretation Not Affected by Headings, etc. The division of this
--------------------------------------------------
Agreement into articles, sections and paragraphs and the insertion of headings
are for convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
(c) Number, Gender, etc. Words importing the singular number only shall
----------------------
include the plural and vice versa and words importing any gender shall include
all genders.
(d) Date for any Action. If any date on which any action is required to be
--------------------
taken under this Agreement is not a Business Day, such action shall be required
to be taken on the next succeeding Business Day.
2. COVENANTS, REPRESENTATIONS AND WARRANTIES
(a) Covenants of the Parent Regarding Exchangeable Shares. The Parent
------------------------------------------------------
covenants and agrees that so long as any Exchangeable Shares are outstanding, it
will:
(i) not declare or pay any dividend on Parent Common Stock unless the
Corporation (A) will have sufficient assets, funds and other property available
to enable the due declaration and the due and punctual payment in accordance
with applicable law of an equivalent dividend on the Exchangeable Shares and (B)
shall simultaneously declare or pay, as the case may be, an equivalent dividend
on the Exchangeable Shares, in each case in accordance with the Exchangeable
Share Provisions;
(ii) advise the Corporation sufficiently in advance of the declaration by
the Parent of any dividend on Parent Common Stock and take all such other
actions as are necessary, in cooperation with the Corporation, to ensure that
the respective declaration date, record date and payment date for a dividend on
the Exchangeable Shares shall be the same as the declaration date, record date
and payment date for the corresponding dividend on Parent Common Stock;
(iii) ensure that the record date for any dividend declared on Parent Common
Stock is not less than ten (10) Business Days after the declaration date for
such dividend (or such shorter period within which applicable laws may be
complied with);
(iv) take all such actions and do all such things as are necessary or
desirable to enable and permit the Corporation, in accordance with applicable
law, to pay and otherwise perform its obligations with respect to the
satisfaction of the Liquidation Amount in respect of each issued and outstanding
Exchangeable Share upon the liquidation, dissolution or winding-up of the
Corporation, including without limitation all such actions and all such things
as are necessary or desirable to enable and permit the Corporation to cause to
be delivered shares of Parent Common Stock to the holders of Exchangeable Shares
(other than Canco) in accordance with the provisions of Sections 5 of the
Exchangeable Share Provisions;
(v) take all such actions and do all such things as are necessary or
desirable to enable and permit the Corporation, in accordance with applicable
law, to pay and otherwise perform its obligations with respect to the
satisfaction of the Retraction Price and the Redemption Price, including without
limitation all such actions and all such things as are necessary or desirable to
enable and permit the Corporation to cause to be delivered shares of Parent
Common Stock to the holders of Exchangeable Shares (other than Canco), upon the
retraction or redemption of the Exchangeable Shares in accordance with the
provisions of Sections 6 or 7 of the Exchangeable Share Provisions, as the case
may be; and
(vi) not exercise its vote as a direct or indirect shareholder to initiate
the voluntary liquidation, dissolution or winding-up of the Corporation nor take
any action or omit to take any action that is designed to result in the
liquidation, dissolution or winding-up of the Corporation.
(b) Reservation of Shares of Parent Common Stock. The Parent hereby
-----------------------------------------------
represents, warrants and covenants that it has irrevocably reserved for issuance
and will at all times keep available, free from preemptive and other rights, out
of its authorized and unissued capital stock such number of shares of Parent
Common Stock (or other shares or securities into which Parent Common Stock may
be reclassified or changed as contemplated by subsection 2(g) hereof) (i) as is
equal to the sum of (A) the number of Exchangeable Shares issued and outstanding
from time to time and (B) the number of Exchangeable Shares issuable upon the
exercise of all rights to acquire Exchangeable Shares outstanding from time to
time and (ii) as are now and may hereafter be required to enable and permit the
Corporation to meet its obligations hereunder, under the Voting and Exchange
Trust Agreement, under the Exchangeable Share Provisions and under any other
security or commitment with respect to which the Parent may now or hereafter be
required to issue shares of Parent Common Stock.
(c) Segregation of Funds. The Parent with cause the Corporation to deposit
---------------------
a sufficient amount of funds in a separate account and segregate a sufficient
amount of such other assets as is necessary to enable the Corporation to pay or
otherwise satisfy the applicable dividends, Liquidation Amount, Retraction Price
or Redemption Price, in each case for the benefit of holders from time to time
of Exchangeable Shares (other than Canco), and to use such funds and other
assets so segregated exclusively for the payment of dividends and the payment or
other satisfaction of the Liquidation Amount, the Retraction Price or the
Redemption Price, as applicable.
(d) Notification of Certain Events. In order to assist the Parent to comply
-------------------------------
with its obligations hereunder, the Corporation covenants and agrees to give the
Parent notice of each of the following events at the time set forth below:
(i) in the event of any determination by the Board of Directors of the
Corporation to institute voluntary liquidation, dissolution or winding-up
proceedings with respect to the Corporation or to effect any other distribution
of the assets of the Corporation among its shareholders for the purpose of
winding-up its affairs, at least 60 days prior to the proposed effective date of
such liquidation, dissolution, winding-up or other distribution;
(ii) immediately, upon the earlier of (A) receipt by the Corporation of
notice of, or (B) the Corporation otherwise becoming aware of, any threatened or
instituted claim, suit, petition or other proceedings with respect to the
involuntary liquidation, dissolution or winding-up of the Corporation or to
effect any other distribution of the assets of the Corporation among its
shareholders for the purpose of winding-up its affairs;
(iii) immediately, upon receipt by the Corporation of a Retraction Request;
(iv) on the same date on which notice of redemption is given to the holders
of Exchangeable Shares, upon the determination of the Redemption Date in
accordance with the Share Provisions; and
(v) as soon as practicable upon the issuance by the Corporation of any
Exchangeable Shares or rights to acquire Exchangeable Shares.
(e) Delivery of Shares of Parent Common Stock. In furtherance of its
--------------------------------------------
obligations hereunder, upon notice of any event which requires the Corporation
to cause to be delivered shares of Parent Common Stock to any holder of
Exchangeable Shares (other than Canco), the Parent shall and covenants and
agrees to forthwith issue and deliver the requisite shares of Parent Common
Stock to or to the order of the former holder of the surrendered Exchangeable
Shares, as the Corporation shall direct. All such shares of Parent Common Stock
shall be duly issued as fully paid and non-assessable and shall be free and
clear of any lien, encumbrance, security interest or adverse claim.
(f) Qualification of Parent Common Stock. If any Parent Common Stock (or
----------------------------------------
other shares or securities into which Parent Common Stock may be reclassified or
changed as contemplated by section 2(g) hereof) to be issued and delivered
hereunder require registration or qualification with or approval of or the
filing of any document, including any registration statement or similar document
or the taking of any proceeding with or the obtaining of any order, ruling or
consent from any governmental or regulatory authority under any United States
federal or state securities or other law or regulation or pursuant to the rules
and regulations of any securities or other regulatory authority or the
fulfillment of any other United States legal requirement before such shares (or
such other shares or securities) may be issued by the Parent and delivered by
the Parent at the direction of the Corporation, if applicable, to the holder of
surrendered Exchangeable Shares or in order that such shares (or such other
shares or securities) may be freely traded thereafter (other than any
restrictions of general application on transfer by reason of a holder being an
"affiliate" of the Parent for purposes of United States federal or state
securities law), the Parent will in good faith expeditiously take all such
actions and do all such things as are necessary or desirable to cause such
Parent Common Stock (or such other shares or securities) to be and remain duly
registered, qualified or approved under United States law. The Parent will in
good faith expeditiously take all such actions and do all such things as are
reasonably necessary or desirable to cause all Parent Common Stock (or such
other shares or securities) to be delivered hereunder to be listed, quoted or
posted for trading on all stock exchanges and quotation systems on which
outstanding Parent Common Stock (or such other shares or securities) has been
listed by the Parent and remain listed and are quoted or posted for trading at
such time.
(g) Economic Equivalence.
---------------------
(i) The Parent covenants and agrees that it will not, without the prior
approval of the Corporation and the prior approval of the holders of the
Exchangeable Shares given in accordance with Section 9.2 of the Exchangeable
Share Provisions:
(A) issue or distribute shares of Parent Common Stock (or securities
exchangeable for or convertible into or carrying rights to acquire shares of
Parent Common Stock) to the holders of all or substantially all of the then
outstanding Parent Common Stock by way of stock dividend or other distribution;
or
(B) issue or distribute rights, options or warrants to the holders of all or
substantially all of the then outstanding shares of Parent Common Stock
entitling them to subscribe for or to purchase shares of Parent Common Stock (or
securities exchangeable for or convertible into or carrying rights to acquire
shares of Parent Common Stock); or
(C) issue or distribute to the holders of all or substantially all of the
then outstanding shares of Parent Common Stock (I) shares or securities of the
Parent of any class other than Parent Common Stock (other than shares
convertible into or exchangeable for or carrying rights to acquire shares of
Parent Common Stock), (II) rights, options or warrants other than those referred
to in subsection 2(g)(i)(B) above, (III) evidences of indebtedness of the Parent
or (IV) assets of the Parent;
unless
(D) the Corporation is permitted under applicable law to issue or distribute
the economic equivalent on a per share basis of such rights, options,
securities, shares, evidences of indebtedness or other assets to holders of the
Exchangeable Shares; and
(E) the Corporation shall issue or distribute the economic equivalent on a
per share basis of such rights, options, securities, shares, evidences of
indebtedness or other assets simultaneously to holders of the Exchangeable
Shares.
(ii) The Parent will not, without the prior approval of the Corporation and
the prior approval of the holders of the Exchangeable Shares given in accordance
with Section 9.2 of the Exchangeable Share Provisions:
(A) subdivide, divide or change the then outstanding shares of Parent Common
Stock into a greater number of shares of Parent Common Stock; or
(B) reduce, combine or consolidate or change the then outstanding shares of
Parent Common Stock into a lesser number of shares of Parent Common Stock; or
(C) reclassify or otherwise change the shares of Parent Common Stock or
effect an amalgamation, merger, reorganization or other transaction affecting
the shares of Parent Common Stock;
unless
(D) the Corporation is permitted under applicable law to simultaneously make
the same or an equivalent change to, or in the rights of holders of, the
Exchangeable Shares; and
(E) the same or an equivalent change is made to, or in the rights of the
holders of, the Exchangeable Shares.
(iii) The Parent will ensure that the record date for any event referred to
in subsection 2(g)(i) or 2(g)(ii) above, or (if no record date is applicable for
such event) the effective date for any such event, is not less than ten (10)
Business Days after the date on which such event is declared or announced by the
Parent (with simultaneous notice thereof to be given by the Parent to the
Corporation).
(iv) The Board of Directors shall determine, in good faith and in its sole
discretion (with the assistance of such reputable and qualified independent
financial advisors and/or other experts as the board may require), economic
equivalence (including a consideration of general taxation consequences) for the
purpose of any event referred to in subsection 2(g) and each such determination
shall be conclusive and binding on the Parent.
(h) Tender Offers, etc. In the event that a tender offer, share
--------------------
exchange offer, issuer bid, take-over bid or similar transaction with respect to
Parent Common Stock (an "Offer") is proposed by the Parent or is proposed to the
Parent or its shareholders and is recommended by the board of directors of the
Parent, or is otherwise effected or to be effected with the consent or approval
of the board of directors of the Parent, the Parent shall take all such actions
and do all such things as are necessary or desirable to enable and permit
holders of Exchangeable Shares to participate in such Offer to the same extent
and on an equivalent basis as the holders of shares of Parent Common Stock,
without discrimination, including, without limiting the generality of the
foregoing, the Parent will use its good faith efforts expeditiously to (and
shall, in the case of a transaction proposed by the Parent or where the Parent
is a participant in the negotiation thereof) ensure that holders of Exchangeable
Shares may participate in all such Offers without being required to retract
Exchangeable Shares as against the Corporation (or, if so required, to ensure
that any such retraction shall be effective only upon, and shall be conditional
upon, the closing of the Offer and only to the extent necessary to tender or
deposit to the Offer).
(i) Ownership of Outstanding Shares. Without the prior approval of the
----------------------------------
Corporation and the prior approval of the holders of the Exchangeable Shares
given in accordance with Section 9.2 of the Exchangeable Share Provisions, the
Parent covenants and agrees in favour of the Corporation that, as long as any
outstanding Exchangeable Shares are owned by any person or entity other than the
Parent or any of its Subsidiaries, the Parent will be and remain the direct or
indirect beneficial owner of all issued and outstanding shares in the capital of
the Corporation and all outstanding securities of the Corporation carrying or
otherwise entitled to voting rights in any circumstances, in each case other
than the Exchangeable Shares.
(j) Parent Not to Vote Exchangeable Shares. The Parent covenants and agrees
--------------------------------------
that it will appoint and cause to be appointed proxyholders with respect to all
Exchangeable Shares held by the Parent and its Subsidiaries for the sole purpose
of attending each meeting of holders of Exchangeable Shares in order to be
counted as part of the quorum for each such meeting. The Parent further
covenants and agrees that it will not, and will cause its Subsidiaries not to,
exercise any voting rights which may be exercisable by holders of Exchangeable
Shares from time to time pursuant to the Exchangeable Share Provisions or
pursuant to the provisions of any corporate statute by which the Corporation may
be governed with respect to any Exchangeable Shares held by it or by its
Subsidiaries in respect of any matter considered at any meeting of holders of
Exchangeable Shares.
(k) Due Performance. On and after the date hereof, the Parent shall duly
----------------
and timely perform all of its obligations provided for under the Acquisition
Agreement, this agreement and all of the agreements to which it is a party in
connection with the transactions contemplated under the Acquisition Agreement
including any obligations that may arise upon the exercise of the Corporation's
obligations under the Exchangeable Share Provisions.
3. SUCCESSORS
(a) Certain Requirements in Respect of Combination, etc. The Parent
-------------------------------------------------------
shall not enter into any transaction (whether by way of reconstruction,
reorganization, consolidation, merger, transfer, sale, lease or otherwise)
whereby all or substantially all of its undertaking, property and assets would
become the property of any other Person or, in the case of a merger, of the
continuing corporation resulting therefrom unless:
(i) such other Person or continuing corporation (the "Parent Successor"), by
operation of law, becomes, without further action, bound by the terms and
provisions of this Agreement or, if not so bound, executes, prior to or
contemporaneously with the consummation of such transaction an agreement
supplemental hereto and such other instruments (if any) as are satisfactory to
the Trustee and in the opinion of legal counsel to the Trustee are necessary or
advisable to evidence the assumption by the Parent Successor of liability for
all monies payable and property deliverable hereunder and the covenant of such
Parent Successor to pay and deliver or cause to be delivered the same and its
agreement to observe and perform all the covenants and obligations of the Parent
under this Agreement; and
(ii) such transaction shall, to the satisfaction of the Trustee and in the
opinion of legal counsel to the Trustee, be upon such terms as substantially to
preserve and not to impair in any material respect any of the rights, duties,
powers and authorities of the Trustee or of the Holders hereunder.
(b) Vesting of Powers in Successor. Whenever the conditions of
-----------------------------------
subsection 3(a) hereof have been duly observed and performed, the Trustee, if
required by subsection 3(a) hereof, the Parent Successor and the Corporation
shall execute and deliver a supplemental agreement and thereupon the Parent
Successor shall possess and from time to time may exercise each and every right
and power of the Parent under this Agreement in the name of the Parent or
otherwise and any act or proceeding by any provision of this Agreement required
to be done or performed by the board of directors of the Parent or any officers
of the Parent may be done and performed with like force and effect by the
directors or officers of such Parent Successor.
(c) Wholly-Owned Subsidiaries. Nothing herein shall be construed as
---------------------------
preventing the amalgamation or merger of any wholly-owned subsidiary of the
Parent with or into the Parent or the winding-up, liquidation or dissolution of
any wholly-owned subsidiary of the Parent provided that all of the assets of
such subsidiary are transferred to the Parent or another wholly-owned subsidiary
of the Parent, and any such transactions are expressly permitted by this Section
3.
4. GENERAL
(a) Term. This Agreement shall come into force and be effective as of
----
the date hereof and shall terminate and be of no further force and effect at
such time as no Exchangeable Shares (or securities or rights convertible into or
exchangeable for or carrying rights to acquire securities Exchangeable Shares)
are held by any party other than the Parent and any of its Subsidiaries, subject
to earlier termination upon the written agreement of each of the Corporation and
the Parent to terminate this Agreement and the approval of such termination by
the Holders of the Exchangeable Shares in accordance with Section 9.2 of the
Exchangeable Share Provisions.
(b) Changes in Capital of the Parent and the Corporation. Notwithstanding
-------------------------------------------------------
the provisions of subsection 4(d) hereof, at all times after the occurrence of
any event effected pursuant to subsection 2(g) or 2(h) hereof, as a result of
which either Parent Common Stock or the Exchangeable Shares or both are in any
way changed, this Agreement shall forthwith be amended and modified as necessary
in order that it shall apply with full force and effect, mutatis mutandis, to
all new securities into which Parent Common Stock or the Exchangeable Shares or
both are so changed and the parties hereto shall execute and deliver an
agreement in writing giving effect to and evidencing such necessary amendments
and modifications.
(c) Severability. If any provision of this Agreement is held to be invalid,
------------
illegal or unenforceable, the validity, legality or enforceability of the
remainder of this Agreement shall not in any way be affected or impaired thereby
and this Agreement shall be carried out as nearly as possible in accordance with
its original terms and conditions.
(d) Amendments, Modifications, etc. This Agreement may not be amended or
--------------------------------
modified except by an agreement in writing executed by the Corporation and the
Parent and approved by the holders of the Exchangeable Shares in accordance with
Section 9.2 of the Exchangeable Share Provisions.
(e) Ministerial Amendments. Notwithstanding the provisions of subsection
-----------------------
4(d), the parties to this Agreement may in writing, at any time and from time to
time, without the approval of the holders of the Exchangeable Shares, amend or
modify this Agreement for the purposes of.
(i) adding to the covenants of either or both parties for the protection of
the holders of the Exchangeable Shares;
(ii) making such amendments or modifications not inconsistent with this
Agreement as may be necessary or desirable with respect to matters or questions
which, in the opinion of the board of directors of each of the Corporation and
the Parent, it may be expedient to make, provided that each such boards of
directors shall be of the opinion that such amendments or modifications will not
be prejudicial to the interests of the holders of the Exchangeable Shares; or
(iii) making such changes or corrections which, on the advice of counsel to
the Corporation and the Parent, are required for the purpose of curing or
correcting any ambiguity or defect or inconsistent provision or clerical
omission or mistake or manifest error, provided that the boards of directors of
each of the Corporation and the Parent shall be of the opinion that such changes
or corrections will not be prejudicial to the interests of the holders of the
Exchangeable Shares.
(f) Meeting to Consider Amendments. The Corporation, at the request of
------------------------------
the Parent, shall call a meeting or meetings of the holders of the Exchangeable
Shares for the purpose of considering any proposed amendment or modification
requiring approval of such shareholders. Any such meeting or meetings shall be
called and held in accordance with the by-laws of the Corporation, the
Exchangeable Share Provisions and all applicable laws.
(g) Amendments Only in Writing. No amendment to or modification or waiver
----------------------------
of any of the provisions of this Agreement otherwise permitted hereunder shall
be effective unless made in writing and signed by both of the parties hereto.
(h) Enurement. This Agreement shall be binding upon and enure to the benefit
---------
of the parties hereto and the holders, from time to time, of Exchangeable Shares
and each of their respective heirs, successors and assigns.
(i) Notices to Parties. All notices and other communications between the
--------------------
parties shall be in writing and shall be deemed to have been given if delivered
personally or by confirmed telecopy to the parties at the following addresses
(or at such other address for either such party as shall be specified in like
notice):
(i) if to the Parent at:
c/o Softquad Software Inc.
161 Eglinton Avenue East
Suite 400
Toronto, Ontario
M4P 1J5
Attention: President
Fax: (416) 544-0300
(ii) if to the Corporation at:
161 Eglinton Avenue East
Suite 400
Toronto, Ontario
M4P 1J5
Attention: President
Fax: (416) 544-0300
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of confirmed receipt thereof
unless such day is not a Business Day in which case it shall be deemed to have
been given and received upon the immediately following Business Day.
(j) Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
(k) Jurisdiction. This Agreement shall be construed and enforced in
------------
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
(l) Attornment. The Parent agrees that any action or proceeding arising out
----------
of or relating to this Agreement may be instituted in the courts of Ontario,
waives any objection which it may have now or hereafter to the venue of any such
action or proceeding, irrevocably submits to the jurisdiction of the said courts
in any such action or proceeding, agrees to be bound by any judgment of the said
courts and not to seek, and hereby waives, any review of the merits of any such
judgment by the courts of any other jurisdiction and hereby appoints the
Corporation at its registered office in the Province of Ontario as the Parent's
attorney for service of process.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
THE AMERICAN SPORTS MACHINE, INC.
Per:
SOFTQUAD ACQUISITION CORP.
Per:
G24\MAYN\3258623.5
<PAGE>
NYK 632161-1.057553.0010
NYK 629511-4.057553.0010
NEWS RELEASE
American Sports Machine, Inc.
Changes Name to SoftQuad Software, Ltd.
ASM REDOMICILES TO DELAWARE CORPORATION WITH NEW TRADING SYMBOL: SXML
TORONTO, ON -- APRIL 11, 2000 -- The American Sports Machine, Inc. (OTC BB:
AMRR) today announced that it has redomiciled to Delaware through a merger with
and into SoftQuad Software, Ltd. (SoftQuad), a Delaware corporation. The
post-merger company will continue under SoftQuad's name, and its shares of
common stock began trading today on the OTC Bulletin Board under the ticker
symbol SXML.
Pursuant to the merger, each share of stock of ASM was exchanged for one
equivalent share of stock of SoftQuad, and each option and warrant of ASM was
exchanged for one equivalent option or warrant of SoftQuad, respectively.
ABOUT SOFTQUAD
SoftQuad Software, Ltd. (OTC BB: SXML), through its subsidiary SoftQuad Software
Inc., is a leading developer of XML enabling technologies and commerce solutions
for e-business. SoftQuad's XMetaL, the world's first advanced, yet easy-to-use,
XML content creation solution, has already become the premier enabling
technology for XML-based content applications in e-publishing, e-commerce and
knowledge management. Leveraging its technological and market leadership,
SoftQuad is targeting the growing business-to-business (B2B) marketplace with
Global OnRamp, a supply-side content solution that allows companies to
effectively join and compete in B2B e-markets.
Headquartered in Toronto, Canada, and with European operations based in London,
England, SoftQuad is a founding member of, and active participant in, the World
Wide Web Consortium (W3C), the Organization for the Advancement of Structured
Information Standards (OASIS) and XML.org.
For more information, visit SoftQuad's website at http://www.softquad.com
Caution Concerning Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Words such as
"anticipates", "estimates", "expects", "will", "should", "projects", "intends",
"plans", "believes" and words and terms of similar substance used in connection
with any discussion of future operating or financial performance identify such
forward-looking statements. Those forward-looking statements are management's
present expectations of future events. As with any projection or forecast, they
are inherently susceptible to uncertainty and changes in circumstances.
SoftQuad is an early-stage growth company that operates in a highly competitive
and rapidly changing environment, and its business results are dependent on
numerous factors, including demand for its products and services, its ability to
manage costs and generate revenues, technological developments, protection of
its intellectual property rights, its ability to attract and retain key
personnel, the resolution of issues concerning commercial activities via the
Internet, including security, reliability, cost, ease of use and access,
government regulation, risks related to international sales and potential
foreign currency exchange fluctuations, economic, political and social
conditions in the countries in which it operates and other risks detailed from
time to time in periodic reports filed by SoftQuad and its predecessor The
American Sports Machine, Inc. with the U.S. Securities and Exchange Commission
and other regulatory authorities. SoftQuad's actual results could differ
materially from management's expectations because of changes in such factors.
For further information, contact:
Roberto Drassinower David Adams
President and CEO CFO and COO
SoftQuad Software Inc. SoftQuad Software Inc.
(416) 544-9000 (416) 544-9000
