VOTING AND EXCHANGE AGENCY AGREEMENT
This VOTING AND EXCHANGE AGENCY AGREEMENT is made as of the 14th day of
November, 2003
BETWEEN:
MEDINEX SYSTEMS, INC., a corporation incorporated under the laws of
Delaware
("Parent")
- and -
MAXUS HOLDINGS INC., a corporation incorporated under the laws of the
Province of Ontario,
("Exchangeco")
- and -
MEDALLION CAPITAL CORPORATION, a company incorporated under the laws of
the Province of Ontario,
(the "Agent")
WHEREAS:
1. Pursuant to a Share Exchange Agreement dated as of the 14th day of
November, 2003 the "Share Exchange Agreement"), entered into between
Parent, Maxus (Nova Scotia) Company, a Nova Scotia unlimited liability
company ("NovaScotiaco"), Exchangeco and 901133 Alberta Ltd. (the
"Company") and the shareholders of the Company (collectively the
"Parties"), the Parties have agreed to the acquisition of control of
the Company by Parent.
2. Pursuant to the Share Exchange Agreement, shareholders of the Company
will exchange their common shares in the capital of the Company
("Common Shares"), for either (i) common shares in the capital of
Parent ("Parent Common Shares") or (ii) exchangeable shares in the
capital of Exchangeco (the "Exchangeable Shares").
3. In accordance with the Share Exchange Agreement, Parent and Exchangeco
have agreed to enter into a voting and exchange agency agreement with
an Agent appointed by the holders of such Exchangeable Shares
substantially in the form of this Agreement.
4. Any statements of fact contained in this Agreement are made by Parent
and Exchangeco and not by the Agent.
2
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 hereto
covenant and agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this Agreement, the following terms shall have the following meanings:
"Affiliate" of any person means any other person directly or indirectly
controlled by, or under control of, that person. For the purposes of
this definition, "control" (including, with correlative meanings, the
terms "controlled by" and "under common control of"), as applied to any
person, means the possession by another person, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of that first mentioned person, whether through the ownership
of voting securities, by contract or otherwise.
"Agent" means Medallion Capital Corporation and, subject to the
provisions of Article 10, includes any successor Agent.
"Automatic Exchange Rights" means the benefit of the obligation of
Parent to effect the automatic exchange of Exchangeable Shares for
Parent Common Shares pursuant to section 5.12.
"Beneficiaries" means the registered holders from time to time of
Exchangeable Shares, other than Parent, its Affiliates and the Agent.
"Beneficiary Votes" has the meaning ascribed thereto in section 4.2.
"Board of Directors" means the board of directors of Exchangeco.
"Business Day" means any day on which commercial banks are open for
business in ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, other than a Saturday, a Sunday or a day
observed as a holiday in Toronto, Ontario under the laws of the
Province of Ontario or the federal laws of Canada.
"Canadian Dollar Equivalent" means, in respect of an amount expressed
in a currency other than Canadian dollars (the "Foreign Currency
Amount") at any date, the product obtained by multiplying (a) the
Foreign Currency Amount by (b) the noon spot exchange rate on such date
for such foreign currency expressed in Canadian dollars 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
expressed in Canadian dollars as may be deemed by the Board of
Directors to be appropriate for such purpose.
3
"Current Market Price" means, in respect of a Parent Common Share on
any date, the Canadian Dollar Equivalent of the average of the closing
bid and ask prices of Parent Common Shares during a period of 20
consecutive trading days ending not more than three trading days before
such date on such stock exchange or automated quotation system on which
Parent Common Shares are listed or quoted, as the case may be, as may
be selected by the Board of Directors for such purpose; provided
however, that if in the opinion of the Board of Directors the public
distribution or trading activity of Parent Common Shares during such
period does not create a market which reflects the fair market value of
a Parent Common Share, then the Current Market Price of a Parent Common
Share shall be determined by the Board of Directors, in good faith and
in its sole discretion, and provided further that any such selection,
opinion or determination by the Board of Directors shall be conclusive
and binding.
"Exchange Right" has the meaning ascribed thereto in section 5.1.
"Exchangeable Shares" means the non-voting exchangeable shares in the
capital of Exchangeco.
"Insolvency Event" means the institution by Exchangeco of any
proceeding to be adjudicated a bankrupt or insolvent or to be wound up,
or the consent of Exchangeco to the institution of bankruptcy,
insolvency 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 Company Creditors' Arrangement Act (Canada) and the Bankruptcy and
Insolvency Act (Canada), and the failure by Exchangeco to contest in
good faith any such proceedings commenced in respect of Exchangeco
within 30 days of becoming aware thereof, or the consent by Exchangeco
to the filing of any such petition or to the appointment of a receiver,
or the making by Exchangeco of a general assignment for the benefit of
creditors, or the admission in writing by Exchangeco of its inability
to pay its debts generally as they become due, or Exchangeco not being
permitted, pursuant to solvency requirements of applicable law, to
redeem any Retracted Shares pursuant to section 7 of the Share
Provisions.
"Liquidation Call Right" has the meaning ascribed thereto in section
8.1 of the Share Provisions.
"Liquidation Event" has the meaning ascribed thereto in section
5.12(b).
"Liquidation Event Effective Date" has the meaning ascribed thereto in
section 5.12(c).
"List" has the meaning ascribed thereto in section 4.6.
"Officer's Certificate" means, with respect to Parent or Exchangeco, as
the case may be, a certificate signed by any one of Chief Executive
Officer, President or Chief Financial Officer of Parent or Exchangeco,
as the case may be.
"Parent Common Share" means a share of common stock, par value U.S.
$0.0001, in the capital of Parent.
4
"Parent Consent" has the meaning ascribed thereto in section 4.2.
"Parent Meeting" has the meaning ascribed thereto in section 4.2.
"Parent Successor" has the meaning ascribed thereto in section 11.1(a).
"Person" includes an individual, partnership, corporation, company,
unincorporated syndicate or person organization, trust, Agent,
executor, administrator and other legal representative.
"Share Provisions" means the rights, privileges, restrictions and
conditions attaching to the Exchangeable Shares.
"Special Voting Share" means the one share of Special Voting Stock of
Parent, par value U.S.$0.000l, which entitles the holder of record to a
number of votes at meetings of holders of Parent Common Shares equal to
the number of Exchangeable Shares outstanding from time to time (other
than Exchangeable Shares held by Parent and Parent Affiliates), which
share is to be issued to, deposited with, and voted by, the Agent as
described herein.
"Support Agreement" means that certain exchangeable share support
agreement made as of even date herewith between Parent, NovaScotiaco,
Exchangeco and the Agent.
"Voting Rights" means the voting rights attached to the Special Voting
Share.
1.2 Interpretation Not Affected by Headings, etc.
The division of this Agreement into Articles, sections and other portions and
the insertion of headings are for convenience of reference only and should not
affect the construction or interpretation of this Agreement. Unless otherwise
indicated, all references to an "Article" or "section" followed by a number
and/or a letter refer to the specified Article or section of this Agreement. The
terms "this Agreement", "hereof" "herein", and "hereunder" and similar
expressions refer to this Agreement and not to any particular Article, section
or other portion hereof and include any agreement or instrument supplementary or
ancillary hereto.
1.3 Number, Gender, etc.
Words in the singular number only shall include the plural and vice versa. Words
in one gender shall include all genders.
1.4 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.
5
ARTICLE 2
PURPOSE OF AGREEMENT
2.1 Establishment of Agency
The Agent will hold the Special Voting Share and the benefit of the Support
Agreement in order to enable the Agent to execute the Voting Rights and will
hold the Exchange Right and the Automatic Exchange Rights in order to enable the
Agent to exercise such rights, in each case as Agent for and on behalf of the
Beneficiaries as provided in this Agreement.
ARTICLE 3
SPECIAL VOTING SHARE
3.1 Issue and Ownership of the Special Voting Share
Parent hereby issues to and deposits with the Agent, the Special Voting Share to
be hereafter held of record by the Agent as Agent for and on behalf of, and for
the use and benefit of, the Beneficiaries and in accordance with the provisions
of this Agreement. Parent hereby acknowledges receipt from the Agent as Agent
for and on behalf of the Beneficiaries of good and valuable consideration (and
the adequacy thereof) for the issuance of the Special Voting Share by Parent to
the Agent. During the term of this Agreement and subject to the terms and
conditions of this Agreement, the Agent shall possess and be vested with full
legal ownership of the Special Voting Share and shall be entitled to exercise
all of the rights and powers of an owner with respect to the Special Voting
Share provided that the Agent shall:
(a) hold the Special Voting Share and the legal title thereto as
Agent solely for the use and benefit of the Beneficiaries in
accordance with the provisions of this Agreement; and
(b) except as specifically authorized by this Agreement, have no
power or authority to sell, transfer, vote or otherwise deal
in or with the Special Voting Share and the Special Voting
Share shall not be used or disposed of by the Agent for any
purpose other than the purposes set out in this Agreement.
3.2 Legended Share Certificates
Exchangeco shall cause each certificate representing Exchangeable Shares to bear
an appropriate legend notifying the Beneficiaries of their right to instruct the
Agent with respect to the exercise of the Voting Rights in respect of the
Exchangeable Shares of the Beneficiaries.
3.3 Safe Keeping of Certificate
The certificate representing the Special Voting Share shall at all times be held
in safe keeping by the Agent.
6
ARTICLE 4
EXERCISE OF VOTING RIGHTS
4.1 Voting Rights
The Agent, as the holder of record of the Special Voting Share, shall be
entitled to all of the Voting Rights, including the right to vote in person or
by proxy the Special Voting Share on any matters, questions, proposals or
propositions whatsoever that may properly come before the shareholders of 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 Agent. Subject to section
7.14:
(a) the Agent shall exercise the Voting Rights only on the basis
of instructions received pursuant to this Article 4 from
Beneficiaries entitled to instruct the Agent as to the voting
thereof at the time at which the Parent Meeting is held; and
(b) to the extent that no instructions are received from a
Beneficiary with respect to the Voting Rights to which such
Beneficiary is entitled, the Agent shall not exercise or
permit the exercise of such Voting Rights.
4.2 Number of Votes
With respect to all meetings of shareholders of Parent at which holders of
Parent Common Shares are entitled to vote (each, a "Parent Meeting") and with
respect to all written consents sought by Parent from its shareholders including
the holders of Parent Common Shares (each, a "Parent Consent"), each Beneficiary
shall be entitled to instruct the Agent to cast and exercise one of the votes
comprised in the Voting Rights for each Exchangeable Share owned of record by
such Beneficiary on the record date established by Parent or by applicable law
for such Parent Meeting or Parent Consent, as the case may be (the "Beneficiary
Votes"), in respect of each matter, question, proposal or proposition to be
voted on at such Parent Meeting or in connection with such Parent Consent.
4.3 Mailings to Beneficiaries
With respect to each Parent Meeting and Parent Consent, the Agent will mail or
cause to be mailed (or otherwise communicate in the same manner as Parent
utilizes in communications to holders of Parent Common Shares, subject to the
Agent being advised in writing of such method of communication and its ability
to provide such method) to each of the Beneficiaries named in the List referred
to in section 4.6, such mailing or communication to commence on the same day as
the mailing or notice (or other communication) with respect thereto is commenced
by Parent to its shareholders:
(a) a copy of such notice, together with any related materials to
be provided to shareholders of Parent;
(b) a statement that such Beneficiary is entitled to instruct the
Agent as to the exercise of the Beneficiary Votes with respect
7
to such Parent Meeting or Parent Consent or, pursuant to
section 4.7, to attend such Parent Meeting and to exercise
personally the Beneficiary Votes thereat;
(c) a statement as to the manner in which such instructions may be
given to the Agent, including an express indication that
instructions may be given to the Agent to give:
(i) a proxy to such Beneficiary or his designee to
exercise personally the Beneficiary Votes; or
(ii) a proxy to a designated agent or other representative
of the management of Parent to exercise such
Beneficiary Votes;
(d) a statement that if no such instructions are received from the
Beneficiary, the Beneficiary Votes to which such Beneficiary
is entitled will not be exercised;
(e) a form of direction whereby the Beneficiary may so direct and
instruct the Agent as contemplated herein; and
(f) a statement of the time and date by which such instructions
must be received by the Agent in order to be binding upon it,
which in the case of a Parent Meeting shall not be earlier
than the close of business on the second Business Day prior to
such meeting, and of the method for revoking or amending such
instructions.
The materials referred to in sections 4.3(a) through 4.3(f) inclusive shall be
provided by Parent to the Agent.
For the purpose of determining Beneficiary Votes to which a Beneficiary is
entitled in respect of any Parent Meeting or Parent Consent, the number of
Exchangeable Shares owned of record by the Beneficiary shall be determined at
the close of business on the record date established by Parent or by applicable
law for purposes of determining shareholders entitled to vote at such Parent
Meeting or to execute a Parent Consent. Parent will notify the Agent of any
decision of the Board of Directors of Parent with respect to the calling of any
Parent Meeting or the seeking of a Parent Consent and shall provide all
necessary information and materials to the Agent in each case promptly and in
any event in sufficient time to enable the Agent to perform its obligations
contemplated by this section 4.3.
4.4 Copies of Shareholder Information
Parent will deliver to the Agent copies of all proxy materials (including
notices of Parent Meetings but excluding proxies to vote Parent Common Shares),
information statements, reports (including without limitation, all interim and
annual financial statements) and other written communications that, in each
case, are to be distributed from time to time to holders of Parent Common Shares
in sufficient quantities and in sufficient time so as to enable the Agent to
send those materials to each Beneficiary at the same time as such materials are
first sent to holders of Parent Common Shares. The Agent will mail or otherwise
send to each Beneficiary, at the expense of Parent, copies of all such materials
(and all materials specifically directed to the Beneficiaries or to the Agent
for the benefit of the Beneficiaries by Parent) received by the Agent from
8
Parent contemporaneously with the sending of such materials to holders of Parent
Common Shares. The Agent will also make available for inspection by any
Beneficiary at the Agent's principal corporate office in the City of Toronto all
proxy materials, information statements, reports and other written
communications that are:
(a) received by the Agent as the registered holder of the Special
Voting Share and made available by Parent generally to the
holders of Parent Common Shares; or
(b) specifically directed to the Beneficiaries or to the Agent for
the benefit of the Beneficiaries by Parent.
4.5 Other Materials
As soon as reasonably practicable after receipt by Parent or shareholders of
Parent (if such receipt is known by Parent) of any material sent or given by or
on behalf of a third party to holders of Parent Common Shares generally,
including without limitation, dissident proxy and information circulars (and
related information and material) and tender and exchange offer circulars (and
related information and material), Parent shall use its reasonable efforts to
obtain and deliver to the Agent copies thereof in sufficient quantities so as to
enable the Agent to forward such material (unless the same has been provided
directly to Beneficiaries by such third party) to each Beneficiary as soon as
possible thereafter. As soon as practicable following receipt thereof, the Agent
will mail or otherwise send to each Beneficiary, at the expense of Parent,
copies of all such materials received by the Agent from Parent. The Agent will
also make available for inspection by any Beneficiary at the Agent's principal
corporate office in the City of Toronto copies of all such materials.
4.6 List of Persons Entitled to Vote
Exchangeco shall, (a) prior to each annual, general and special Parent Meeting
or the seeking of any Parent Consent and (b) forthwith upon each request made at
any time by the Agent in writing, prepare or cause to be prepared a list (a
"List") of the names and addresses of the Beneficiaries arranged in alphabetical
order and showing the number of Exchangeable Shares held of record by each such
Beneficiary, in each case at the close of business on the date specified by the
Agent 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 Parent or pursuant to applicable law for determining the holders
of Parent Common Shares 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 Agent promptly after receipt by Exchangeco
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 to permit the Agent to
perform its obligations under this Agreement. Parent agrees to give Exchangeco
notice (with a copy to the Agent) of the calling of any Parent Meeting or the
seeking of any Parent Consent, together with the record dates therefor,
sufficiently prior to the record date in connection with such meeting or seeking
of such consent so as to enable Exchangeco to perform its obligations under this
section 4.6.
9
4.7 Entitlement to Direct Votes
Any Beneficiary named in a List prepared in connection with any Parent Meeting
or Parent Consent will be entitled to (a) instruct the Agent in the manner
described in section 4.3 with respect to the exercise of the Beneficiary Votes
to which such Beneficiary is entitled or (b) attend such meeting and personally
exercise thereat, as the proxy of the Agent, the Beneficiary Votes to which such
Beneficiary is entitled.
4.8 Voting by Agent and Attendance of Agent Representative at Meeting
(a) In connection with each Parent Meeting and Parent Consent, the
Agent shall exercise, either in person or by proxy, in
accordance with the instructions received from a Beneficiary
pursuant to section 4.3, the Beneficiary Votes to which such
Beneficiary 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 Agent from the Beneficiary prior to the time and date
fixed by the Agent for receipt of such instructions in the
notice given by the Agent to the Beneficiary pursuant to
section 4.3.
(b) The Agent shall cause a representative who is empowered by it
to sign and deliver, on behalf of the Agent, proxies for
Voting Rights to attend each Parent Meeting. Upon submission
by a Beneficiary (or its designee) of identification
satisfactory to the Agent's representative, and at the
Beneficiary's request, such representative shall sign and
deliver to such Beneficiary (or its designee) a proxy to
exercise personally the Beneficiary Votes as to which such
Beneficiary is otherwise entitled hereunder to direct the
vote, if such Beneficiary either (i) has not previously given
the Agent instructions pursuant to section 4.3 in respect of
such meeting or (ii) submits to such representative written
revocation of any such previous instructions. At such meeting,
the Beneficiary exercising such Beneficiary Votes shall have
the same rights as the Agent to speak at the meeting in
respect of any matter, question, proposal or proposition, to
vote by way of ballot at the meeting in respect of any matter,
question, proposal or proposition, and to vote at such meeting
by way of a show of hands in respect of any matter, question
or proposition. Parent shall reimburse the Agent for any
reasonable expenses incurred in the course of attending or
causing a representative to attend each Parent Meeting.
4.9 Distribution of Written Materials
Any written materials distributed by the Agent pursuant to this Agreement shall
be sent by mail (or otherwise communicated in the same manner as Parent utilizes
in communications to holders of Parent Common Shares subject to the Agent being
advised in writing of such method of communication and its ability to provide
such method) to each Beneficiary at its address as shown on the books of
Exchangeco. Exchangeco shall provide or cause to be provided to the Agent for
this purpose, on a timely basis and without charge or other expense:
(a) a current List; and
10
(b) upon the request of the Agent, mailing labels to enable the
Agent to carry out its duties under this Agreement.
4.10 Termination of Voting Rights
All of the rights of a Beneficiary with respect to the Beneficiary Votes
exercisable in respect of the Exchangeable Shares held by such Beneficiary,
including the right to instruct the Agent as to the voting of or to vote
personally such Beneficiary Votes, shall be deemed to be surrendered by the
Beneficiary to Parent, and such Beneficiary Votes and the Voting Rights
represented thereby shall cease immediately upon the redemption of Exchangeable
Shares pursuant to section 6 or 7 of the Share Provisions, or upon the effective
date of the liquidation, dissolution or winding-up of Exchangeco pursuant to
section 5 of the Share Provisions or upon the purchase of the Exchangeable
Shares by NovaScotiaco pursuant to the exercise by NovaScotiaco of the
Liquidation Call Right, Redemption Call Right or Retraction Call Right.
ARTICLE 5
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
5.1 Grant and Ownership of the Exchange Right; Automatic Exchange Rights
Parent hereby grants to the Agent as Agent for and on behalf of, and for the use
and benefit of, the Beneficiaries: (i) the right (the "Exchange Right"), upon
the occurrence and during the continuance of an Insolvency Event, to require
Parent to purchase from each or any Beneficiary all or any part of the
Exchangeable Shares held by the Beneficiary; and (ii) the Automatic Exchange
Rights, all in accordance with the provisions of this Agreement. Parent hereby
acknowledges receipt from the Agent as Agent for and on behalf of the
Beneficiaries of good and valuable consideration (and the adequacy thereof) for
the grant of the Exchange Right and the Automatic Exchange Rights by Parent to
the Agent. During the term of this Agreement and subject to the terms and
conditions of this Agreement, the Agent 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 Agent shall:
(a) hold the Exchange Right and the Automatic Exchange Rights and
the legal title thereto as Agent solely for the use and
benefit of the Beneficiaries in accordance with the provisions
of this Agreement; and
(b) 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
Agent shall not exercise any such rights for any purpose other
than the purposes set out in this Agreement.
5.2 Legended Share Certificates
Exchangeco will cause each certificate representing Exchangeable Shares to bear
an appropriate legend notifying the Beneficiaries of:
11
(a) their right to instruct the Agent with respect to the exercise
of the Exchange Right in respect of the Exchangeable Shares
held by a Beneficiary; and
(b) the Automatic Exchange Rights.
5.3 General Exercise of Exchange Right
The Exchange Right shall be and remain vested in and exercisable by the Agent.
Subject to section 7.14, the Agent shall exercise the Exchange Right only on the
basis of instructions received pursuant to this Article 5 from Beneficiaries
entitled to instruct the Agent as to the exercise thereof. To the extent that no
instructions are received from a Beneficiary with respect to the Exchange Right,
the Agent shall not exercise or permit the exercise of the Exchange Right.
5.4 Purchase Price
The purchase price payable by Parent for each Exchangeable Share to be purchased
by Parent under the Exchange Right shall be an amount per share equal to (a) the
Current Market Price of a Parent Common Share on the last Business Day prior to
the day of closing of the purchase and sale of such Exchangeable Share under the
Exchange Right, which shall be satisfied in full by Parent causing to be sent to
such holder one Parent Common Share, plus (b) to the extent not paid by
Exchangeco, an additional amount equivalent to the full amount of all declared
and unpaid dividends on each such Exchangeable Share held by such holder on any
dividend record date which occurred prior to the closing of the purchase and
sale. The purchase price for each such Exchangeable Share so purchased may be
satisfied only by Parent issuing and delivering or causing to be delivered to
the Agent, on behalf of the relevant Beneficiary, one Parent Common Share and on
the applicable payment date a cheque for the balance, if any, of the purchase
price without interest (but less any amounts withheld pursuant to section 5.13).
5.5 Exercise Instructions
Subject to the terms and conditions herein set forth, a Beneficiary shall be
entitled , upon the occurrence and during the continuance of an Insolvency
Event, to instruct the Agent to exercise the Exchange Right with respect to all
or any part of the Exchangeable Shares registered in the name of such
Beneficiary on the books of Exchangeco. To cause the exercise of the Exchange
Right by the Agent, the Beneficiary shall deliver to the Agent, in person or by
certified or registered mail, at its principal corporate office in Toronto,
Ontario or at such other places in Canada as the Agent may from time to time
designate by written notice to the Beneficiaries, the certificates representing
the Exchangeable Shares which such Beneficiary desires Parent to purchase, duly
endorsed in blank for transfer, and accompanied by such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
the Business Corporations Act (Ontario)and the articles and by-laws of
Exchangeco and such additional documents and instruments as the Agent may
reasonably require together with (a) 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 (i) that the Beneficiary thereby
instructs the Agent to exercise the Exchange Right so as to require Parent to
purchase from the Beneficiary the number of Exchangeable Shares specified
therein, (ii) that such Beneficiary has good title to and owns all such
Exchangeable Shares to be acquired by Parent free and clear of all liens, claims
12
and encumbrances, (iii) the names in which the certificates representing Parent
Common Shares issuable in connection with the exercise of the Exchange Right are
to be issued, (iv) the names and addresses of the persons to whom such Parent
Common Share certificates should be delivered, and (v) payment (or evidence
satisfactory to the Agent, Exchangeco and Parent of payment) of the taxes (if
any) payable as contemplated by section 5.8 of this Agreement. If only a portion
of the Exchangeable Shares represented by any certificate or certificates
delivered to the Agent are to be purchased by 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 Exchangeco.
5.6 Delivery of Parent Common Shares; Effect of Exercise
Promptly after receipt of the certificates representing the Exchangeable Shares
which the Beneficiary desires 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 (and payment of taxes, if any,
payable as contemplated by section 5.8 or evidence thereof), duly endorsed for
transfer to Parent, the Agent shall notify Parent and Exchangeco of its receipt
of the same, which notice to Parent and Exchangeco shall constitute exercise of
the Exchange Right by the Agent on behalf of the holder of such Exchangeable
Shares, and Parent shall promptly thereafter deliver or cause to be delivered to
the Agent, for delivery to the Beneficiary of such Exchangeable Shares (or to
such other persons, if any, properly designated by such Beneficiary) the number
of Parent Common Shares issuable in connection with the exercise of the Exchange
Right, and on the applicable payment date cheques for the balance, if any, of
the total purchase price therefor without interest (but less any amounts
withheld pursuant to section 5.13); provided, however, that no such delivery
shall be made unless and until the Beneficiary requesting the same shall have
paid the taxes (or provided evidence satisfactory to the Agent, Exchangeco and
Parent of the payment of the taxes, if any, payable) as contemplated by section
5.8 of this Agreement. Immediately upon the giving of notice by the Agent to
Parent and Exchangeco of the exercise of the Exchange Right as provided in this
section 5.6, 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 Parent all of such
holder's right, title and interest in and to such Exchangeable Shares and the
related interest in the Special Voting Share and the benefit of the Support
Agreement 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 Parent Common Shares is not
allotted, issued and delivered by Parent to the Agent within five Business Days
of the date of the giving of such notice by the Agent, in which case the rights
of the Beneficiary shall remain unaffected until such Parent Common Shares are
so allotted, issued and delivered by Parent. Upon delivery by Parent to the
Agent of such Parent Common Shares, the Agent shall deliver such Parent Common
Shares to such Beneficiary (or to such other persons, if any, properly
designated by such Beneficiary). Concurrently with such Beneficiary ceasing to
be a holder of Exchangeable Shares, the Beneficiary shall be considered and
deemed for all purposes to be the holder of Parent Common Shares delivered to it
pursuant to the Exchange Right.
13
5.7 Exercise of Exchange Right Subsequent to Retraction
In the event that a Beneficiary has exercised its right under section 6 of the
Share Provisions to require Exchangeco to redeem any or all of the Exchangeable
Shares held by the Beneficiary (the "Retracted Shares") and is notified by
Exchangeco pursuant to section 6.6 of the Share Provisions that Exchangeco will
not be permitted as a result of solvency requirements of applicable law to
redeem all such Retracted Shares, and provided that NovaScotiaco shall not have
exercised the Retraction Call Right with respect to the Retracted Shares and
that the Beneficiary has not revoked the retraction request delivered by the
Beneficiary to Exchangeco pursuant to section 6.7 of the Share Provisions, the
retraction request will constitute and will be deemed to constitute notice from
the Beneficiary to the Agent instructing the Agent to exercise the Exchange
Right with respect to those Retracted Shares that Exchangeco is unable to
redeem. In any such event, Exchangeco hereby agrees with the Agent and in favour
of the Beneficiary promptly to forward or cause to be forwarded to the Agent all
relevant materials delivered by the Beneficiary to Exchangeco or to the transfer
agent of the Exchangeable Shares (including without limitation, a copy of the
retraction request delivered pursuant to section 6.1 of the Share Provisions) in
connection with such proposed redemption of the Retracted Shares and the Agent
will thereupon exercise the Exchange Right with respect to the Retracted Shares
that Exchangeco is not permitted to redeem and will require Parent to purchase
such shares in accordance with the provisions of this Article 5.
5.8 Stamp or Other Transfer Taxes
Upon any sale of Exchangeable Shares to Parent pursuant to the Exchange Right or
the Automatic Exchange Rights, the share certificate or certificates
representing Parent Common Shares to be delivered in connection with the payment
of the total purchase price therefor shall be issued in the name of the
Beneficiary of the Exchangeable Shares so sold or in such names as such
Beneficiary may otherwise direct in writing without charge to the holder of the
Exchangeable Shares so sold; provided, however, that such Beneficiary (a) shall
pay (and none of Parent, Exchangeco or the Agent shall be required to pay) any
documentary, stamp, transfer or other 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 Beneficiary or (b) shall have evidenced to the satisfaction of
the Agent, Parent and Exchangeco that such taxes, if any, have been paid.
5.9 Notice of Insolvency Event
As soon as practicable following the occurrence of an Insolvency Event or any
event that with the giving of notice or the passage of time or both would be an
Insolvency Event, Exchangeco and Parent shall give written notice thereof to the
Agent. As soon as practicable following the receipt of notice from Exchangeco
and Parent of the occurrence of an Insolvency Event, or upon the Agent becoming
aware of an Insolvency Event, the Agent will mail to each Beneficiary, at the
expense of Parent, a notice of such Insolvency Event, which notice shall contain
a brief statement of the rights of the Beneficiaries with respect to the
Exchange Right.
14
5.10 Qualification of Parent Common Shares
Parent covenants that if any Parent Common Shares to be issued and delivered
pursuant to the Exchange Right or the Automatic Exchange Rights require
registration or qualification with or approval of or the filing of any document,
including any prospectus 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 Canadian or United States federal, provincial or
state law or regulation or pursuant to the rules and regulations of any
regulatory authority or the fulfillment of any other Canadian or United States
federal, provincial or state legal requirement before such shares may be issued
and delivered by Parent to the initial holder thereof or in order that such
shares may be freely traded thereafter (other than any restrictions under Rule
144 or of general application on transfer by reason of a holder being a "control
person" of Parent for purposes of Canadian provincial securities law or an
"affiliate" of Parent for purposes of United States federal or state securities
law), 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 Shares to
be and remain duly registered, qualified or approved. 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 Shares to be delivered
pursuant to the Exchange Right or the Automatic Exchange Rights to be listed,
quoted or posted for trading on all stock exchanges and quotation systems on
which outstanding Parent Common Shares have been listed by Parent and remain
listed and are quoted or posted for trading at such time.
5.11 Parent Common Shares
Parent hereby represents, warrants and covenants that the Parent Common Shares
issuable as described herein will be duly authorized and validly issued as fully
paid and non-assessable and shall be free and clear of any lien, claim or
encumbrance.
5.12 Automatic Exchange on Liquidation of Parent
(a) Parent will give the Agent written 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 Parent to institute voluntary
liquidation, dissolution or winding-up proceedings
with respect to Parent or to effect any other
distribution of assets of Parent 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; and
(ii) as soon as practicable following the earlier of (A)
receipt by Parent of notice of, and (B) 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 Parent or to effect any
other distribution of assets of Parent among its
shareholders for the purpose of winding up its
affairs, in each case where Parent has failed to
contest in good faith any such proceeding commenced
in respect of Parent within 30 days of becoming aware
thereof.
15
(b) As soon as practicable following receipt by the Agent from
Parent of notice of any event (a "Liquidation Event")
contemplated by section 5.12(a)(i) or 5.12(a)(ii) above, the
Agent will give notice thereof to the Beneficiaries. Such
notice will be provided by Parent to the Agent and shall
include a brief description of the automatic exchange of
Exchangeable Shares for Parent Common Shares provided for in
section 5.12(c).
(c) In order that the Beneficiaries will be able to participate on
a pro rata basis with the holders of Parent Common Shares in
the distribution of assets of Parent in connection with a
Liquidation Event, on the fifth Business Day prior to the
effective date (the "Liquidation Event Effective Date") of a
Liquidation Event all of the then outstanding Exchangeable
Shares shall be automatically exchanged for Parent Common
Shares. To effect such automatic exchange, Parent shall
purchase on the fifth Business Day prior to the Liquidation
Event Effective Date each Exchangeable Share then outstanding
and held by Beneficiaries, and each Beneficiary shall sell the
Exchangeable Shares held by it at such time, for a purchase
price per share equal to (a) the Current Market Price of a
Parent Common Share on the fifth Business Day prior to the
Liquidation Event Effective Date, which shall be satisfied in
full by Parent issuing to the Beneficiary one Parent Common
Share, and (b) to the extent not paid by Exchangeco, an
additional amount equivalent to the full amount of all
declared and unpaid dividends on each such Exchangeable Share
held by such holder on any dividend record date which occurred
prior to the date of the exchange.
(d) On the fifth Business Day prior to the Liquidation Event
Effective Date, the closing of the transaction of purchase and
sale contemplated by the automatic exchange of Exchangeable
Shares for Parent Common Shares shall be deemed to have
occurred, and each Beneficiary shall be deemed to have
transferred to Parent all of the Beneficiary's right, title
and interest in and to such Beneficiary's Exchangeable Shares
and the related interest in the Special Voting Share and the
benefit of the Support Agreement and shall cease to be a
holder of such Exchangeable Shares and Parent shall issue to
the Beneficiary the Parent Common Shares issuable upon the
automatic exchange of Exchangeable Shares for Parent Common
Shares and on the applicable payment date shall deliver to the
Agent for delivery to the Beneficiary a cheque for the
balance, if any, of the total purchase price for such
Exchangeable Shares without interest but less any amounts
withheld pursuant to section 5.13. Concurrently with such
Beneficiary ceasing to be a holder of Exchangeable Shares, the
Beneficiary shall be considered and deemed for all purposes to
be the holder of Parent Common Shares issued pursuant to the
automatic exchange of Exchangeable Shares for Parent Common
Shares and the certificates held by the Beneficiary previously
representing the Exchangeable Shares exchanged by the
Beneficiary with Parent pursuant to such automatic exchange
16
shall thereafter be deemed to represent Parent Common Shares
issued to the Beneficiary by Parent pursuant to such automatic
exchange. Upon the request of a Beneficiary and the surrender
by the Beneficiary of Exchangeable Share certificates deemed
to represent Parent Common Shares, duly endorsed in blank and
accompanied by such instruments of transfer as Parent may
reasonably require, Parent shall deliver or cause to be
delivered to the Beneficiary certificates representing Parent
Common Shares of which the Beneficiary is the holder.
5.13 Withholding Rights
Parent and Exchangeco shall be entitled to deduct and withhold from any
consideration otherwise payable under this Agreement to any holder of
Exchangeable Shares or Parent Common Shares such amounts as Parent or Exchangeco
is required or permitted to deduct and withhold with respect to such payment
under the Income Tax Act (Canada), the United States Internal Revenue Code of
1986 or any provision of provincial, state, local or foreign tax law, in each
case as amended or succeeded. To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes as having been paid to the
holder of the shares in respect of which such deduction and withholding was
made, provided that such withheld amounts are actually remitted to the
appropriate taxing authority. To the extent that the amount so required or
permitted to be deducted or withheld from any payment to a holder exceeds the
cash portion of the consideration otherwise payable to the holder, Parent and
Exchangeco are hereby authorized to sell or otherwise dispose of such portion of
the consideration as is necessary to provide sufficient funds to Parent or
Exchangeco, as the case may be, to enable it to comply with such deduction or
withholding requirement and Parent or Exchangeco shall notify the holder thereof
and remit to such holder any unapplied balance of the net proceeds of such sale.
Parent represents and warrants that, based upon facts currently known to it, it
has no current intention, as at the date of this Agreement, to deduct or
withhold from any dividend paid to holders of Exchangeable Shares any amounts
under the United States Internal Revenue Code of 1986.
ARTICLE 6
RESTRICTIONS ON ISSUE OF SPECIAL VOTING SHARE
6.1 Issue of Additional Shares
During the term of this Agreement, Parent shall not, without the consent of the
holders at the relevant time of Exchangeable Shares, given in accordance with
section 11.2 of the Share Provisions, issue any Special Voting Shares in
addition to the Special Voting Share.
ARTICLE 7
CONCERNING THE AGENT
7.1 Powers and Duties of the Agent
The rights, powers, duties and authorities of the Agent under this Agreement, in
its capacity as Agent, shall include:
17
(a) receipt and deposit of the Special Voting Share from Parent as
Agent for and on behalf of the Beneficiaries in accordance
with the provisions of this Agreement;
(b) granting proxies and distributing materials to Beneficiaries
as provided in this Agreement;
(c) voting the Beneficiary Votes in accordance with the provisions
of this Agreement;
(d) receiving the grant of the Exchange Right and the Automatic
Exchange Rights from Parent as Agent for and on behalf of the
Beneficiaries in accordance with the provisions of this
Agreement;
(e) 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 Beneficiaries Exchangeable Shares and other
requisite documents and distributing to such Beneficiaries
Parent Common Shares and cheques, if any, to which such
Beneficiaries are entitled upon the exercise of the Exchange
Right or pursuant to the Automatic Exchange Rights, as the
case may be;
(f) receiving the benefit of the Support Agreement from Parent as
Agent for and on behalf of the Beneficiaries in accordance
with the provisions thereof and of this Agreement;
(g) enforcing the benefit of the Support Agreement in accordance
with the provisions thereof and of this Agreement;
(h) holding title to the Special Voting Share and the benefit of
the Support Agreement;
(i) taking action on its own initiative or at the direction of a
Beneficiary or Beneficiaries to enforce the obligations of
Parent and Exchangeco under this Agreement and the Support
Agreement; and
(j) taking such other actions and doing such other things as are
specifically provided in this Agreement.
In the exercise of such rights, powers, duties and authorities, the Agent shall
have (and is granted) such incidental and additional rights, powers, duties and
authority not in conflict with any of the provisions of this Agreement as the
Agent, acting in good faith and in the reasonable exercise of its discretion,
may deem necessary, appropriate or desirable to effect the purpose of this
Agreement. Any exercise of such discretionary rights, powers, duties, and
authorities by the Agent shall be final, conclusive and binding upon all
persons.
The Agent in exercising its rights, powers, duties and authorities hereunder
shall act honestly and in good faith and with a view to the best interests of
the Beneficiaries and shall exercise the care, diligence and skill that a
reasonably prudent Agent would exercise in comparable circumstances.
18
7.2 No Conflict of Interest
The Agent represents to Parent and Exchangeco that at the date of execution and
delivery of this Agreement there exists no material conflict of interest in the
role of the Agent as a fiduciary hereunder and the role of the Agent in any
other capacity. The Agent shall, within 90 days after it becomes aware that such
material conflict of interest exists, either eliminate such material conflict of
interest or resign in the manner and with the effect specified in Article 10
herein. If, notwithstanding the foregoing provisions of this section 7.2, the
Agent 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 Agent contravenes
the foregoing provisions of this section 7.2, any interested party may apply to
the Ontario Court of Justice (General Division) for an order that the Agent be
replaced as Agent hereunder.
7.3 Dealings with Transfer Agents, Registrars, etc.
Parent and Exchangeco irrevocably authorize the Agent, from time to time, to:
(a) consult, communicate and otherwise deal with the respective
registrars and transfer agents, and with any such subsequent
registrar or transfer agent, of the Exchangeable Shares and
Parent Common Shares; and
(b) requisition from time to time, (i) from any such registrar or
transfer agent any information readily available from the
records maintained by it which the Agent may reasonably
require for the discharge of its duties and responsibilities
under this Agreement and (ii) from the transfer agent of
Parent Common Shares, and any subsequent transfer agent of
such shares, the share certificates issuable upon the exercise
from time to time of the Exchange Right and pursuant to the
Automatic Exchange Rights.
Parent and Exchangeco irrevocably authorize their respective registrars and
transfer agents to comply with all such requests. 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.
7.4 Books and Records
The Agent shall keep available for inspection by Parent and Exchangeco at the
Agent's principal corporate office in Toronto, Ontario correct and complete
books and records of account relating to the agency created by this Agreement,
including without limitation, all relevant data relating to mailings and
instructions to and from Beneficiaries. On or before March 31, 2002, and on or
before March 31 in every year thereafter, so long as the Special Voting Share is
on deposit with the Agent, the Agent shall transmit to Parent and Exchangeco a
brief report, dated as of the preceding December 31st, with respect to:
(a) the number of exercises of the Exchange Right, if any, and the
aggregate number of Exchangeable Shares received by the Agent
on behalf of the Beneficiaries in consideration of the
issuance by Parent of Parent Common Shares in connection with
the Exchange Right, during the calendar year ended on such
December 31st; and
19
(b) any action taken by the Agent in the performance of its duties
under this Agreement which it had not previously reported and
which, in the Agent's opinion, materially affects the Special
Voting Share and the benefit of the Support Agreement.
7.5 Indemnification Prior to Certain Actions by Agent
The Agent 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
Beneficiary upon such Beneficiary furnishing to the Agent reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred by
the Agent therein or thereby, provided that no Beneficiary shall be obligated to
furnish to the Agent any such security or indemnity in connection with the
exercise by the Agent of any of its rights, duties, powers and authorities with
respect to the Special Voting Share pursuant to Article 4, subject to section
7.14.
None of the provisions contained in this Agreement shall require the Agent 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 funded,
given security and indemnified as aforesaid.
7.6 Action of Beneficiaries
No Beneficiary 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 hereunder or in connection with the Exchangeable
Shares or for the execution of any trust or power hereunder unless the
Beneficiary has requested the Agent to take or institute such action, suit or
proceeding and furnished the Agent with the security or indemnity referred to in
section 7.5 and the Agent shall have failed to act within a reasonable time
thereafter. In such case, but not otherwise, the Beneficiary shall be entitled
to take proceedings in any court of competent jurisdiction such as the Agent
might have taken; it being understood and intended that no one or more
Beneficiaries 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 the Voting Rights, except subject to the conditions and in
the manner herein provided, and that all powers hereunder shall be exercised and
all proceedings at law shall be instituted, had and maintained by the Agent,
except only as herein provided, and in any event for the equal benefit of all
Beneficiaries.
7.7 Reliance Upon Declarations
The Agent shall not be considered to be in contravention of any its rights,
powers, duties and authorities hereunder if, when required, it acts and relies
in good faith upon statutory declarations, certificates, opinions or reports
furnished pursuant to the provisions hereof or required by the Agent to be
furnished to it in the exercise of its rights, powers, duties and authorities
hereunder if such statutory declarations, certificates, opinions or reports
comply with the provisions of section 7.8, if applicable, and with any other
applicable provisions of this Agreement.
20
7.8 Evidence and Authority to Agent
Parent and/or Exchangeco shall furnish to the Agent evidence of compliance with
the conditions provided for in this Agreement relating to any action or step
required or permitted to be taken by Parent and/or Exchangeco or the Agent 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 Agent at the request of or on the application of Parent and/or
Exchangeco promptly if and when:
(a) such evidence is required by any other section of this
Agreement to be furnished to the Agent in accordance with the
terms of this section 7.8; or
(b) the Agent, in the exercise of its rights, powers, duties and
authorities under this Agreement, gives Parent and/or
Exchangeco 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 Officer's Certificate of Parent and/or
Exchangeco 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 or the taking of any other
action to be taken by the Agent at the request or on the application of Parent
and/or Exchangeco, and except as otherwise specifically provided herein, such
evidence may consist of a report or opinion of any solicitor, attorney, 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 Parent
and/or Exchangeco it shall be in the form of an officer's certificate or a
statutory declaration.
Each statutory declaration, officer's certificate, opinion or report furnished
to the Agent as evidence of compliance with a condition provided for in this
Agreement shall include a statement by the person giving the evidence:
(a) declaring that he has read and understands the provisions of
this Agreement relating to the condition in question;
(b) describing the nature and scope of the examination or
investigation upon which he based the statutory declaration,
certificate, statement or opinion; and
(c) 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.
21
7.9 Experts, Advisers and Agents
The Agent may:
(a) in relation to these presents act and rely on the opinion or
advice of or information obtained from any solicitor,
attorney, auditor, accountant, appraiser, valuer, engineer or
other expert, whether retained by the Agent or by Parent
and/or Exchangeco or otherwise, and may employ such assistants
as may be necessary to the proper 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
(b) employ such agents and other assistants as it may reasonably
require for the proper 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) and
compensation for all disbursements, costs and expenses made or
incurred by it in the discharge of its duties hereunder.
7.10 Investment of Moneys Held by Agent
Unless otherwise provided in this Agreement, any moneys held by or on behalf of
the Agent which under the terms of this Agreement may or ought to be invested or
which may be in the hands of the Agent may be deposited in the name of the Agent
in any 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.
7.11 Agent Not Required to Give Security
The Agent shall not be required to give any bond or security in respect of the
execution of the rights, duties, powers and authorities of this Agreement or
otherwise in respect of the premises.
7.12 Agent Not Bound to Act on Request
Except as in this Agreement otherwise specifically provided, the Agent shall not
be bound to act in accordance with any direction or request of Parent and/or
Exchangeco 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 Agent, and the Agent shall be empowered to act upon any such
copy purporting to be authenticated and believed by the Agent to be genuine.
7.13 Authority to Carry on Business
The Agent represents to Parent and Exchangeco that at the date of execution and
delivery by it of this Agreement it is authorized to carry on business in each
of the Provinces of Canada but if, notwithstanding the provisions of this
section 7.13, 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 Agent shall, within 90 days after ceasing
22
to be authorized to carry on business in any Province of Canada, either become
so authorized or resign in the manner and with the effect specified in Article
10.
7.14 Conflicting Claims
If conflicting claims or demands are made or asserted with respect to any
interest of any Beneficiary 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 Beneficiary in any
Exchangeable Shares, resulting in conflicting claims or demands being made in
connection with such interest, then the Agent shall be entitled, at its sole
discretion, to refuse to recognize or to comply with any such claims or demands.
In so refusing, the Agent may elect not to exercise any Voting Rights, Exchange
Rights or Automatic Exchange Rights subject to such conflicting claims or
demands and, in so doing, the Agent 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 Agent shall be entitled to continue to
refrain from acting and to refuse to act until:
(a) 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
(b) all differences with respect to the Voting Rights, Exchange
Right or Automatic Exchange Rights subject to such conflicting
claims or demands have been conclusively settled by a valid
written agreement binding on all such adverse claimants, and
the Agent shall have been furnished with an executed copy of
such agreement certified to be in full force and effect.
If the Agent 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 Agent as it shall deem appropriate to fully
indemnify it as between all conflicting claims or demands.
7.15 Acceptance of Appointment
The Agent hereby accepts its appointment as Agent pursuant to this Agreement and
agrees to perform the same upon the terms and conditions herein set forth,
subject to all the terms and conditions herein set forth.
7.16 Liability of Agent
The Agent shall incur no liability with respect to the delivery or non-delivery
of any certificate or certificates whether delivered by hand, mail or any other
means.
The Agent in its personal or any other capacity, may buy, lend upon and deal in
securities of Parent or Exchangeco and generally may contract and enter into
financial transactions with Parent or Exchangeco or any of their Affiliates
without being liable to account for any profit made thereby.
23
The Agent 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
Agent be required to take any notice of, or to do so 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 notice
shall distinctly specify the default or breach desired to be brought to the
attention of the Agent and in the absence of such notice the Agent may for all
purposes of this agreement to 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 Agent shall not be obligated to disburse any funds beyond those which have
been provided to it for forwarding to Beneficiaries.
The Agent shall not be responsible for the validity or quantity of shares or
securities that it receives as a result of exchange.
ARTICLE 8
COMPENSATION
8.1 Fees and Expenses of the Agent
Parent and Exchangeco jointly and severally agree to pay the Agent compensation
for all of the services rendered by it under this Agreement as set out in
Schedule "A" and will reimburse the Agent for all reasonable expenses (including
taxes other than taxes based on the net income of the Agent) and disbursements,
including the fees and expenses of experts, advisers and agents retained
pursuant to section 7.9, and including the cost and expense of any suit or
litigation of any character and any proceedings before any governmental agency
reasonably incurred by the Agent in connection with its duties under this
Agreement; provided that Parent and Exchangeco shall have no obligation to
reimburse the Agent for any expenses or disbursements paid, incurred or suffered
by the Agent in any suit or litigation in which the Agent is determined to have
acted in bad faith or with negligence, recklessness or willful misconduct.
ARTICLE 9
INDEMNIFICATION AND LIMITATION OF LIABILITY
9.1 Indemnification of the Agent
Parent and Exchangeco jointly and severally agree to indemnify and hold harmless
the Agent and each of its directors, officers and agents appointed and acting in
accordance with this Agreement (collectively, the "Indemnified Parties") against
all claims, losses, damages, reasonable costs, penalties, fines and reasonable
expenses (including reasonable expenses of the Agent's legal counsel) which,
without fraud, negligence, recklessness, willful misconduct or bad faith on the
part of such Indemnified Party, may be paid, incurred or suffered by the
Indemnified Party by reason or as a result of the Agent's acceptance its
appointment as Agent, its compliance with its duties set forth in this
Agreement, or any written or oral instruction delivered to the Agent by Parent
or Exchangeco pursuant hereto.
24
In no case shall Parent or Exchangeco be liable under this indemnity for any
claim against any of the Indemnified Parties unless Parent and Exchangeco shall
be notified by the Agent 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, Parent and Exchangeco
shall be entitled to participate at their own expense in the defence and, if
Parent and Exchangeco so elect at any time after receipt of such notice, either
of them may assume the defence of any suit brought to enforce any such claim.
The Agent shall have the right to employ separate counsel in any such suit and
participate in the defence thereof but the fees and expenses of such counsel
shall be at the expense of the Agent unless: (i) the employment of such counsel
has been authorized by Parent or Exchangeco, such authorization not to be
unreasonably withheld; (ii) the named parties to any such suit include both the
Agent and Parent or Exchangeco and the Agent shall have been advised by counsel
acceptable to Parent or Exchangeco that there may be one or more legal defences
available to the Agent that are different from or in addition to those available
to Parent or Exchangeco and that, in the judgment of such counsel, would present
a conflict of interest were a joint representation to be undertaken (in which
case Parent and Exchangeco shall not have the right to assume the defence of
such suit on behalf of the Agent but shall be liable to pay the reasonable fees
and expenses of counsel for the Agent); or (iii) Parent and/or Exchangeco shall
not have retained legal counsel on behalf of the Agent within a reasonable
amount of time after it has given them notice of a written assertion of a claim
or action against any indemnified party. Such indemnification shall survive the
resignation and removal of the Agent and termination of this agreement.
9.2 Limitation of Liability
The Agent shall not be held liable for any loss which may occur by reason of
depreciation of the value of any part of the Special Voting Share and the
benefit of the Support Agreement 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, negligence, recklessness, willful misconduct or bad faith on the
part of the Agent.
ARTICLE 10
CHANGE OF AGENT
10.1 Resignation
The Agent, or any Agent hereafter appointed, may at any time resign by giving
written notice of such resignation to Parent and Exchangeco 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 Parent and Exchangeco
otherwise agree and provided further that such resignation shall not take effect
until the date of the appointment of a successor Agent and the acceptance of
such appointment by the successor Agent. Upon receiving such notice of
resignation, Parent and Exchangeco shall, with the approval of a majority of the
holders of Exchangeable Shares in accordance with section 11.2 of the Share
Provisions, promptly appoint a successor Agent by written instrument in
25
duplicate, one copy of which shall be delivered to the resigning Agent and one
copy to the successor Agent. Failing acceptance by a successor Agent, a
successor Agent may be appointed by an order of the Superior Court of Justice of
Ontario upon application of one or more of the Parties hereto.
10.2 Removal
The Agent, or any Agent hereafter appointed, may (provided a successor Agent is
appointed) be removed at any time on not less than 30 days' prior written notice
by affirmative vote of a majority of holders of Exchangeable Shares in
accordance with section 11.2 of the Share Provisions.
10.3 Successor Agent
Any successor Agent appointed as provided under this Agreement shall execute,
acknowledge and deliver to Parent and Exchangeco and to its predecessor Agent an
instrument accepting such appointment. Thereupon the resignation or removal of
the predecessor Agent shall become effective and such successor Agent, 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 the
like effect as if originally named as Agent in this Agreement. However, on the
written request of Parent and Exchangeco or of the successor Agent, the Agent
ceasing to act shall, upon payment of any amounts then due it pursuant to the
provisions of this Agreement, execute and deliver an instrument transferring to
such successor Agent all the rights and powers of the Agent so ceasing to act.
Upon the request of any such successor Agent, Parent, Exchangeco and such
predecessor Agent shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor Agent all such
rights and powers.
10.4 Notice of Successor Agent
Upon acceptance of appointment by a successor Agent as provided herein, Parent
and Exchangeco shall cause to be mailed notice of the succession of such Agent
hereunder to each Beneficiary specified in a List. If Parent or Exchangeco shall
fail to cause such notice to be mailed within 10 days after acceptance of
appointment by the successor Agent, the successor Agent shall cause such notice
to be mailed at the expense of Parent and Exchangeco.
ARTICLE 11
PARENT SUCCESSORS
11.1 Certain Requirements in Respect of Combination, etc.
Parent and Exchangeco shall not consummate 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, but may do so
if:
(a) such other person or continuing corporation (herein called the
"Parent Successor"), by operation of law, becomes, without
more, bound by the terms and provisions of this Agreement or,
26
if not so bound, executes, prior to or contemporaneously with
the consummation of such transaction, a Agreement supplemental
hereto and such other instruments (if any) as are satisfactory
to the Agent, acting reasonably, and in the opinion of legal
counsel to the Agent are reasonably necessary or advisable to
evidence the assumption by the Parent Successor of liability
for all moneys 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 Parent under
this Agreement; and
(b) such transaction shall, to the satisfaction of the Agent,
acting reasonably, and in the opinion of legal counsel to the
Agent, be upon such terms and conditions as substantially to
preserve and not to impair in any material respect any of the
rights, duties, powers and authorities of the Agent or of the
Beneficiaries hereunder.
11.2 Vesting of Powers in Successor
Whenever the conditions of section 11.1 have been duly observed and performed,
the Agent and, if required by section 11.1, Parent Successor and Exchangeco or
Parent, as the case may be, shall execute and deliver the supplemental Agreement
provided for in Article 12 and thereupon Parent Successor shall possess and from
time to time may exercise each and every right and power of Exchangeco or
Parent, as the case may be, under this Agreement in the name of Parent or
otherwise any act or proceeding by any provision of this Agreement required to
be done or performed by the Board of Directors of Parent or any officers of
Parent may be done and performed with like force and effect by the directors or
officers of such Parent Successor.
11.3 Wholly-Owned Subsidiaries
Nothing herein shall be construed as preventing the amalgamation or merger of
any wholly-owned direct or indirect subsidiary of Parent, except Exchangeco,
with or into Parent or the winding-up, liquidation or dissolution of any
wholly-owned subsidiary of Parent, other than Exchangeco, provided that all of
the assets of such subsidiary are transferred to Parent or another wholly-owned
direct or indirect subsidiary of Parent, except Exchangeco, and any such
transactions are expressly permitted by this Article 11.
ARTICLE 12
AMENDMENTS AND SUPPLEMENTAL AGREEMENTS
12.1 Amendments, Modifications, etc.
This Agreement may not be amended or modified except by an agreement in writing
executed by Parent, Exchangeco and the Agent and approved by the Beneficiaries
in accordance with subsection 11.2 of the Share Provisions.
27
12.2 Ministerial Amendments
Notwithstanding the provisions of section 12.1, the Parties may in writing, at
any time and from time to time, without the approval of the Beneficiaries, amend
or modify this Agreement for the purposes of:
(a) adding to the covenants of any or all parties hereto for the
protection of the Beneficiaries hereunder provided that the
Board of Directors of each of Exchangeco and Parent and the
Agent and its counsel shall be of the good faith opinion that
such additions will not be prejudicial to the rights or
interests of the Beneficiaries;
(b) 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 good faith opinion of
the Board of Directors of each of Parent and Exchangeco and in
the opinion of the Agent and its counsel, having in mind the
best interests of the Beneficiaries it may be expedient to
make, provided that such Boards of Directors and the Agent
shall be of the opinion that such amendments and modifications
will not be prejudicial to the interests of the Beneficiaries;
or
(c) making such changes or corrections which, on the advice of
counsel to Parent, Exchangeco and the Agent and its counsel,
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 Agent
and the Board of Directors of each of Parent and Exchangeco
shall be of the opinion that such changes or corrections will
not be prejudicial to the rights and interests of the
Beneficiaries.
12.3 Meeting to Consider Amendments
Exchangeco, at the request of Parent, shall call a meeting or meetings of the
Beneficiaries 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 articles and by-laws of
Exchangeco, the Share Provisions and all applicable laws.
12.4 Changes in Capital of Parent and Exchangeco
At all times after the occurrence of any event contemplated pursuant to section
2.7 or 2.8 of the Support Agreement or otherwise, as a result of which either
Parent Common Shares 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, with appropriate changes to all
new securities into which Parent Common Shares 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.
28
12.5 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 Exchangeco
(when authorized by a resolution of its Board of Directors), Parent (when
authorized by a resolution of its board of directors) and the Agent 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:
(a) evidencing the succession of Parent Successors and the
covenants of and obligations assumed by each such Parent
Successor in accordance with the provisions of Article 11 and
the successors of any successor Agent in accordance with the
provisions of Article 10;
(b) 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 Agent and its counsel, will not be prejudicial
to the interests of the Beneficiaries or are, in the opinion
of counsel to the Agent, necessary or advisable in order to
incorporate, reflect or comply with any legislation the
provisions of which apply to Parent, Exchangeco, the Agent or
this Agreement; and
(c) 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
Agent and its counsel, the rights of the Agent and
Beneficiaries will not be prejudiced thereby.
ARTICLE 13
TERMINATION
13.1 Term
This Agreement shall continue until the earliest to occur of the following
events:
(a) no outstanding Exchangeable Shares are held by a Beneficiary;
and
(b) each of Parent and Exchangeco elects in writing to terminate
this Agreement and such termination is approved by the
Beneficiaries in accordance with subsection 11.2 of the Share
Provisions.
13.2 Survival
The provisions of Articles 8 and 9 shall survive any termination of this
Agreement.
29
ARTICLE 14
GENERAL
14.1 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.
14.2 Enurement
This Agreement shall be binding upon and enure to the benefit of the Parties and
their respective successors and permitted assigns and to the benefit of the
Beneficiaries.
14.3 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
such party as shall be specified in like notice):
if to Parent or Exchangeco:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Agent:
Medallion Capital Corporation
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
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.
30
14.4 Notice to Beneficiaries
Any and all notices to be given and any documents to be sent to any
Beneficiaries may be given or sent to the address of such Beneficiary shown on
the register of holders of Exchangeable Shares in any manner permitted by the
articles and by-laws of Exchangeco from time to time in force in respect of
notices to shareholders and shall be deemed to be received (if given or sent in
such manner) at the time specified in such by-laws, the provisions of which
by-laws shall apply mutatis mutandis to notices or documents as aforesaid sent
to such Beneficiaries.
14.5 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.
14.6 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.
14.7 Attornment
Each of the Agent and Parent and Exchangeco 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 final 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 Exchangeco at its registered office in the
Province of Ontario as attorney for service of process.
31
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
MEDINEX SYSTEMS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
Title: President
------------------------------
MAXUS HOLDINGS INC.
By: /s/ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇. ▇▇▇▇▇▇
-------------------------------
Title: President
------------------------------
MEDALLION CAPITAL CORPORATION
By: /s/ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇. ▇▇▇▇▇▇
-------------------------------
Title: President
------------------------------