EXHIBIT 9.2
ImagicTV OPERATING AGREEMENT
AMONG ALL OF THE
VOTING SHAREHOLDERS
OF
ImagicTV Inc.
DATED AS OF DECEMBER 17, 1999
ImagicTV OPERATING AGREEMENT
----------------------------
THIS AGREEMENT made as of the 17th day of December, 1999
A M O N G:
ImagicTV Inc.
(hereinafter called the "Corporation")
- and -
NB TEL INC. (hereinafter called "NBTel")
- and -
NEWBRIDGE NETWORKS CORPORATION (hereinafter called "Newbridge")
- and -
506048 N.B. LTD. (hereinafter called "Celtic")
- and -
WHITECASTLE INVESTMENTS LIMITED (hereinafter called "Castleco")
and those individual investors executing Schedule A-1 hereof (
who, together with Castleco, are hereinafter called the "Castleco
Group")
WHEREAS the parties hereto are parties with certain employees,
optionholders and investors of the Corporation to a Unanimous Shareholders'
Agreement dated the date hereof governing the operation of the Corporation and
certain matters respecting certain Shares held by employees, consultants,
optionholders and investors of the Corporation (the "Unanimous Shareholders'
Agreement");
AND WHEREAS all of the Voting Shareholders and the Corporation wish to
enter into this ImagicTV Operating Agreement so as to provide for certain
matters relating to the conduct of the Business and dealings with the Voting
Shares (both as hereinafter defined);
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual
covenants and promises herein contained and other good and valuable
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consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby covenant and agree as follows:
ARTICLE 1.00
DEFINITIONS
-----------
1.1 Definitions
-----------
In this Agreement and in all amendments hereto the following words shall
have the following meanings:
"Accountants" means the accountants or auditors of the Corporation.
"Act" means the Canada Business Corporations Act, as the same may be amended
from time to time.
"Affiliated Person" means:
(a) in respect of each of NBTel, Newbridge and Celtic, a corporation
Controlled, directly or indirectly by such Shareholder, or a
corporation that Controls, directly or indirectly, a Shareholder or a
corporation under common Control, directly or indirectly, with such
Shareholder provided that Newbridge and Celtic shall not be considered
"Affiliated Persons" for the purposes of this Agreement;
(b) in respect of Castleco:
(i) each Diamond Entity;
(ii) a corporation Controlled directly or indirectly by any Diamond
Entity; and
(iii) Centara Investments Inc., Michael Shulman, management and
employees of Castleco (and corporations Controlled by them) who
have signed a Voting Trust Agreement in favour of Castleco at
the date hereof (provided that, in respect of Section 3.6, such
persons shall not be deemed to be Affiliated Persons of
Castleco); and
(c) in respect of each Shareholder who is an individual:
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(i) a corporation Controlled directly or indirectly by that
Shareholder;
(ii) a trustee holding Shares for the benefit of that Shareholder
under a registered retirement savings plan, provided that such
Shareholder retains control and direction over the voting and
transfer of such Shares so as to permit such Shareholder to
fulfil all of his or her obligations under this Agreement; and
(iii) in the event of the death of the Shareholder, a Member of the
Immediate Family of the Shareholder.
"Agreement" means this agreement and any agreement supplementary or ancillary
hereto and any counterpart hereof.
"Business" means the business of the Corporation consisting of the development,
production, marketing, delivery and distribution of an operational suite of
software and hardware products to enable the delivery of various services
solutions, including broadcast television, over any high speed Internet Protocol
network infrastructure including digital subscriber line technologies.
"Business Day" means any day which is not:
(a) a Saturday or Sunday; or
(b) a day which is a statutory holiday under the laws of Canada or the
Provinces of New Brunswick or Ontario.
"Castleco Parties" means Castleco and the Affiliated Persons of Castleco, each a
"Castleco Party".
"Control" or "Controls" means:
(a) the right to exercise, directly or indirectly, a majority of the votes
which may be voted at a general meeting of shareholders of the
applicable corporation;
(b) the right to elect or appoint, directly or indirectly, a majority of
the directors of the applicable corporation or other persons who have
the right to manage or supervise the management of the affairs and
business of the applicable corporations;
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(c) the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policy of a person; or
(d) control in fact of any person;
and the words "Controlling" and "Controlled" have the corresponding meanings.
"Diamond Entity" means:
(a) any one or more of A. Ephraim Diamond, his wife and his sons
(collectively, the "Diamond Family");
(b) a trust or trusts substantially all of the interest in which is held
for the benefit of any one or more members of the Diamond Family and
their issue (collectively, the "Diamond Trusts");
(c) a corporation or corporations all of the voting securities of which is
controlled by any one or more members of the Diamond Family or any one
or more of the Diamond Trusts, (collectively, the "Diamond
Corporations"); and
(d) any combination of any one or more members of the Diamond Family, any
one or more of the Diamond Trusts and any one or more of the Diamond
Corporations.
"ESOP" means the employee stock option plan established by the board of
directors of the Corporation for its eligible employees, managers, directors and
consultants of the Corporation pursuant to which such persons may be granted
options from time to time to purchase Class C Non-Voting Shares in such numbers
and on such terms as are provided for therein and in any option agreement
entered into pursuant thereto.
"Fair Value" means with respect to a Share, the highest price, expressed in
terms of money or money's worth, at which such Share would change hands between
a willing buyer and a willing seller, acting at arms length, neither of whom is
under any compulsion to buy or sell, and both of whom have reasonable knowledge
of the relevant factors, determined in accordance with Section 3.7.
"Members of the Immediate Family" means the husband or wife of an individual and
the individual's grandparents, parents, children, grandchildren, siblings,
nieces, nephews and cousins.
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"Non-Voting Shares" means Class B Non-Voting and Class C Non-Voting shares in
the capital of the Corporation.
"Non-Voting Shareholder" means each person who holds Non-Voting Shares for so
long as such person holds such shares but excluding a Voting Shareholder in
respect of any Non-Voting Shares held by it or its Affiliated Persons.
"person" includes an individual, a sole proprietorship, a firm, a corporation, a
syndicate, a partnership, a trust, an association, a joint venture, an
incorporated or unincorporated association, syndicate or organization, or a body
corporate.
"Public Offering" means a transaction whereby the securities of the Corporation
become freely tradeable (subject to applicable hold periods) in accordance with
applicable securities laws and listed and posted for trading on a Recognized
Exchange, including without limitation an initial public offering or the
qualification for trading of the securities of the Corporation by way of a
prospectus or registration statement of the Corporation filed with securities
regulatory authorities in Canada, the United Kingdom or the United States.
"Recognized Exchange" means any of The Toronto Stock Exchange, the New York
Stock Exchange, the London Stock Exchange or NASDAQ, and any combination
thereof.
"Respective Shareholder Cap" has the meaning given to such term in Section 3.10
hereof.
"security" shall have the meaning set forth in section 2.(1) of the Act.
"Shareholder" means each Voting Shareholder and Non-Voting Shareholder for so
long as such person is a holder of Shares, each person to whom a Shareholder
transfers Shares or to whom the Corporation issues Shares in accordance with
this Agreement, for so long as such transferee or recipient is a holder of
Shares.
"Shares" means Voting Shares and Non-Voting Shares in the capital of the
Corporation, singularly called a "Share".
"Sharing Ratio" means, with respect to any right or entitlement to purchase
Shares under this Agreement by Voting Shareholders, that number of Shares owned
or controlled by a Voting Shareholder (including Shares held by its Affiliated
Persons) at such time, divided by the total number of Shares owned or controlled
by all Voting Shareholders at such time.
"Subsidiary" means a corporation which is under the Control of the Corporation.
"Unanimous Shareholders Agreement" has the meaning given thereto in the recitals
hereto.
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"Voting Shares" means Class A Voting shares in the capital of the Corporation.
"Voting Shareholder" means each of NBTel, Newbridge, Celtic, and each member of
the Castleco Group and, in all cases, their respective Affiliated Persons for
so long as such person is a holder of Voting Shares, and each person to whom a
Shareholder transfers Voting Shares or to whom the Corporation issues Voting
Shares in accordance with this Agreement, for so long as such transferee or
recipient is a holder of Voting Shares.
"Voting Trust Agreement" means an agreement between a Shareholder or proposed
Shareholder and an individual authorized to act as trustee or who shall
otherwise have voting control or direction over the Shares subject to such
agreement, in substantially the form of the agreement attached as Schedule E to
the Unanimous Shareholders Agreement.
1.2 Schedules
---------
The following are the Schedules annexed hereto and incorporated by
reference and deemed to be part hereof:
Schedule A - Shareholder Parties to the Agreement;
Schedule A-1- Castleco Group Parties to the Agreement; and
Schedule B - Names and Addresses of Shareholders.
1.3 Notices to Castleco Group
-------------------------
Notwithstanding any other provision in this Agreement to the contrary,
where any notice or report is required to be delivered to any Shareholder or
Voting Shareholder pursuant to the terms of this Agreement, the party delivering
such notice or report shall be deemed to have complied with the applicable
delivery requirements of this Agreement with respect to the members of the
Castleco Group where the notice or report has been delivered to Castleco and to
Centara Investments Inc.
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ARTICLE 2.00
MANAGEMENT OF THE CORPORATION
-----------------------------
2.1 Compliance with Unanimous Shareholders Agreement
------------------------------------------------
The parties covenant and agree to conduct the affairs of the Corporation in
compliance with the provisions of the Unanimous Shareholders Agreement
including, without limitation, the provisions of Article 2 thereof.
2.2 Shareholder Financial Information
---------------------------------
The Corporation shall, on a monthly basis, provide to each Voting
Shareholder, a financial reporting package for the Corporation which, at a
minimum, includes a balance sheet, income statement, budget and variance
analysis prepared by management of the Corporation for the relevant period.
Such monthly reports shall be provided within 10 days of the end of each month.
In addition, the Corporation shall provide its audited consolidated annual
financial statements to each Voting Shareholder within 30 days of year end.
ARTICLE 3.00
SHARE OWNERSHIP
---------------
3.1 Share Ownership/Options
-----------------------
The following persons or groups beneficially own that number of Shares or
hold options to acquire that number of Shares set out below:
Number of Number of Number of Number and
--------- --------- --------- ----------
Class A Class B Class C Class of
------- ------- ------- --------
Shareholder Shares Held Shares Held Shares Held Options Held
----------- ----------- ----------- ----------- ------------
NBTEL 5,877,234
Newbridge 1,750,000 1,500,000
Celtic 2,001,000
Castleco Group 3,272,728
Others (not 499,547 1,660,500
parties hereto)
- ---------------
Totals: 12,900,962 1,500,000 499,547 1,660,500
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3.2 General Prohibitions
--------------------
(a) Save and except as hereinafter provided in Sections 3.2(c), 3.4, 3.5 and
3.6, at any time prior to the termination of this Agreement pursuant to
Section 5.15, no Shareholder shall directly or indirectly sell, transfer,
mortgage, charge, pledge, encumber or otherwise alienate or dispose of any
of the Shares or options to acquire Shares. Each Shareholder who holds
Shares as of the date hereof hereby represents and warrants to each other
Shareholder and to the Corporation as of the date hereof:
(i) The Shares held by the Shareholder are directly or beneficially
owned by the Shareholder and its Affiliated Persons;
(ii) The Shareholder has all of the requisite power and authority
over such Shares so as to permit the Shares to be governed by
this Agreement in accordance with its terms and to fulfil all
of his obligations under this Agreement; and
(iii) The Shares held by the Shareholder are not subject to any
mortgage, charge, pledge or other encumbrance as of the date
hereof.
For greater certainty, the entry by a Shareholder into a Voting Trust
Agreement shall not represent a breach of this Section 3.2(a). For greater
certainty, each party hereto agrees that the provisions of this Agreement
shall apply to any Shares issued or issuable after the date hereof pursuant
to the exercise of stock options currently outstanding or which may be
granted in future under the ESOP.
(b) Control of any Shareholder which is a corporation may not be changed,
directly or indirectly, whether by operation of law or otherwise, save and
except as hereinafter provided. The parties agree that the foregoing
restriction shall not apply (i) to any Shareholder which is a corporation
whose shares are listed and posted for trading on a Canadian or U.S. stock
exchange or (ii) to a change of Control of a Shareholder to an Affiliated
Person provided that the Corporation shall have first received an agreement
executed by such Shareholder in favour of the other persons who are parties
to this Agreement at such time, in which such Shareholder acknowledges and
confirms that such Affiliated Person meets the definition of "Affiliation
Person" in this "Agreement" and that such Shareholder will at all times
remain an Affiliated Person of such Affiliated Person. In addition, the
Shareholder shall cause all such Affiliated Persons to become a party to,
and comply with the terms of, this Agreement. Notwithstanding the
foregoing, the parties hereto agree that no change of Control of Castleco
or any of its Affiliated Persons which is a Shareholder shall be deemed to
have occurred so long as any one or more Diamond Entities Controls Castleco
and
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any of its Affiliated Persons which is then a Shareholder, directly or
through one or more Controlled corporations.
(c) Notwithstanding the provisions of Section 3.2(a), each of the Shareholders
shall have the right to transfer all or, from time to time, any of such
person's Shares to an Affiliated Person of such Shareholder provided that
the other parties to this Agreement shall have first received:
(i) an agreement in which the transferee agrees to be bound by this
Agreement in the same manner as if such person had been an
original party hereto and to the same extent as the transferor;
and
(ii) an agreement executed by the transferor in favour of the
other persons who are parties to this Agreement at such time, in
which the transferor acknowledges and confirms that the
Affiliated Person meets the definition of "Affiliated Person" in
this Agreement and that the transferor will at all times remain
an Affiliated Person of such transferee.
For greater certainty, such transferee shall have all the rights, powers
and privileges of a Shareholder hereunder in the same manner as if such
party had been an original party hereto and to the same extent as the
transferor but not exceeding the rights of the original parties named in
this Agreement. If such transfer is by way of testamentary disposition or
otherwise arises as a consequence of the death of any Shareholder or by
operation of law, such transfer shall only be effective if the transferee
meets the definition of "Affiliated Person" in this Agreement ( and
represents and warrants as such to the Corporation) and otherwise complies
with the requirements of Section 3.2(c) other than clause (ii).
(d) No Shares of any class or series shall be issued by the Corporation to any
person who is not then a Shareholder, whether pursuant to any presently
outstanding agreements, calls, commitments, options, subscriptions,
warrants or other rights or privileges to acquire any of the Shares or
otherwise, without the allottee first entering into an agreement agreeing
to be bound by this Agreement in the same manner as if such person had been
an original party hereto and the parties hereto do hereby appoint the
Corporation as their trustee with respect to the foregoing.
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3.3 Pre-Emptive Right
-----------------
(a) Except as otherwise provided in Section 3.3(d), no additional Shares shall
be allotted or issued unless and until the Voting Shareholders are first
granted the right by notice in writing, and exercisable for a period of not
less than thirty-five (35) days from the date of receipt or deemed receipt
of such notice, to subscribe for and purchase the Shares to be allotted and
issued in the Sharing Ratio. Payment of the subscription price shall be
made by cash or certified cheque no later than the first business day after
the expiration of the thirty-five (35) day option period.
(b) If one or more of the Voting Shareholders is prepared to subscribe for his
pro rata proportion of the additional Shares (the "Accepting Shareholder"
in this Section 3.3) but one or more of the other Voting Shareholders is
not prepared to do so (the "Declining Shareholder" in this Section 3.3),
then each of the Accepting Shareholders shall be advised in writing (the
"Follow-up Offer" in this Section 3.3) by the Corporation within five (5)
days of the expiration of the thirty-five (35) day option period and each
of the Accepting Shareholders shall (in addition to the Shares which the
Accepting Shareholder has agreed to subscribe for under Subsection 3.3(a))
have the first right and option to subscribe for such portion of the
additional Shares as had not been subscribed for by the Declining
Shareholders as is determined by the fraction having, as it numerator, the
number of Shares then held by such Accepting Shareholder (including Shares
held by an Affiliated Person) and, as its denominator, the number of Shares
then held by all of the Accepting Shareholders (including Shares held by an
Affiliated Person) who accept the Follow-up Offer or in such other
proportions as may be agreed to by all the Accepting Shareholders. Each of
the Accepting Shareholders shall have a period of five (5) days following
delivery of the Follow-up Offer to give written notice to the Corporation
of his acceptance of the Follow-up Offer, failing which the Accepting
Shareholders shall be deemed to have refused the Follow-up Offer. Payment
of the subscription price for Shares subscribed pursuant to the Follow-up
Offer shall be made by cash or certified cheque no later than the first
business day after the expiration of the five (5) day option period.
(c) Any Shares which have not been acquired by the Voting Shareholders pursuant
to this Section 3.3 may, at the discretion of the board of directors of the
Corporation, be issued to a subscriber other than a Voting Shareholder,
acceptable to the board of directors, within five (5) days after the
expiration of the thirty-five (35) day option period referred to in
Subsection 3.3(a) or, if there is a Follow-up Offer, within five (5) days
after the delivery of the Follow-up Offer, at the same price and on the
same terms that the Shares were offered to the Voting Shareholders and so
on from time to time. Additionally, no Shares of any class or series shall
be issued by the Corporation to any person who is not then a Shareholder,
whether pursuant to any presently outstanding agreements, calls,
commitments, options, subscriptions,
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warrants or other rights or privileges to acquire any of the Shares or
otherwise, without the allottee first entering into an agreement agreeing
to be bound (i) if the applicable Shares are Voting Shares, by this
Agreement and the Unanimous Shareholders Agreement or (ii) if the
applicable Shares are Non-Voting Shares, by the Unanimous Shareholders
Agreement, in either case in the same manner as if such person had been an
original party hereto or thereto.
(d) The provisions of this Section 3.3 shall apply, mutatis mutandis, to any
issue of debt or other securities which are convertible into Shares or
which carries with it an option, warrant or other right or privilege to
acquire any Shares. Notwithstanding anything to the contrary in this
Section 3.3, the provisions of this Section 3.3 shall not apply to:
(i) the issuance of options or Shares pursuant to the exercise of
options, in both cases issued under the ESOP;
(ii) the issuance of Shares in connection with the closing of a
Public Offering;
(iii) a conventional debt financing by the Corporation with an
institutional lender; and
(iv) any financing with any level of government or based upon
research and development tax credits where such financing has
been duly approved by the board of directors of the
Corporation.
In any event, without in any way limiting Castleco's rights under this
Agreement, Castleco shall not, as an individual Shareholder, thwart
reasonable and duly authorized efforts of the Corporation to raise
additional capital or attract additional shareholders pursuant to this
Section 3.3.
(e) The right of each of NBTel, Newbridge and Celtic to acquire any Shares
pursuant to this Section 3.3 is subject to limitations on the acquisition
of Shares imposed on each such Shareholder by the Respective Shareholder
Cap.
3.4 Third Party Offer for Shares Held by a Voting Shareholder
---------------------------------------------------------
(a) Except in respect of Share transfers made pursuant to Section 3.2(c) and
notwithstanding Section 3.2(a), a Voting Shareholder (the "Offeror" in this
Section 3.4) shall be entitled to sell all or, from time to time, any
Shares of the Corporation beneficially owned by the Offeror (including all
Shares held by an
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Affiliated Person of the Offeror) (the "Offered Shares" in this Section
3.4) provided that:
(i) the Offeror has received a bona fide written offer to purchase the
---- ----
Offered Shares (the "Third Party Offer" in this Section 3.4) which the
Offeror desires to accept from a third party dealing at arm's length
(as such term is construed under the Income Tax Act (Canada)) with the
Offeror (the "Third Party" in this Section 3.4) and has first made an
offer in writing to each of the other Voting Shareholders (the
"Offerees" in this Section 3.4) to sell the Offered Shares to the
Offerees ratably in the manner hereinafter set out; and
(ii) if the Offeror is any of NBTel, Newbridge or Celtic (or any Affiliated
Person of any of them which is then a Shareholder) (each, with its
Affiliated Persons, an "Investor"), the Third Party has also
concurrently made a separate bona fide written offer to each other
---- ----
Investor and the Castleco Parties (if they have not received a Third
Party Offer) (in each case a "Piggy Back Offer"), in each case, open
for acceptance by any of them until forty-eight (48) hours to the time
of closing of the transactions contemplated by the Third Party Offer,
to purchase from each Investor and the Castleco Parties, the same
proportionate number of Shares offered to be purchased from the
Offeror (including Shares held by any Affiliated Person) at the same
price per Share and on the same terms and conditions offered to the
Offeror, which transactions shall be completed on the date of closing
of the Third Party Offer.
In the event that any Investor or Castleco Party accepts:
(1) the Second Offer pursuant to Subsection 3.4(c); and
(2) if there is a Follow-up Offer pursuant to Subsection 3.4(e), such
Follow-up Offer, as well,
its respective Piggy Back Offer shall automatically terminate.
(b) Each Investor and Castleco Party may (unless it accepts the offer contained
in the Second Offer pursuant to Subsection 3.4(c) and, if there is a
Follow-up Offer pursuant to Subsection 3.4(e), such Follow-up Offer, as
well) accept its respective Piggy Back Offer at any time within forty-eight
(48) hours before the closing of the Third Party Offer by notice in writing
to the Offeror and the Third Party. Upon the giving of such notice by an
Investor or Castleco Party, such Investor or Castleco Party, as applicable,
shall, for the purposes of this Section 3.4, immediately cease to be an
Offeree or an Accepting Offeree (as defined in Section 3.4(e)), as the case
may be.
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(c) The Offeror shall give to each of the Offerees within five (5) days from the
receipt of the Third Party Offer, a written notice that the Offeror intends
to accept such Third Party Offer, which shall be accompanied by a true copy
of the Third Party Offer and, if applicable, the Piggy Back Offers. In
addition, the said Offeror's notice shall contain an offer by the Offeror
(the "Second Offer" in this Section 3.4) to each of the Offerees to sell
such portion to the Offeree of the Offered Shares as is determined by the
fraction having, as its numerator, the number of Shares held by such Offeree
and, as its denominator, the number of Shares held by all of the Offerees or
in such other proportion as may be agreed to by all the Voting Shareholders
who accept the Second Offer, at the same price per Share and upon the same
terms and conditions as contained in the Third Party Offer. In the event
that the Piggy Back Offers have been delivered, the Second Offer shall, if
it does not, be deemed to stipulate that, if any Piggy Back Offers shall be
accepted pursuant to Subsection 3.4(b), those Offerees who do accept the
Second Offer shall be required to complete the transactions contemplated by
the Piggy Back Offers so accepted as though the Shares subject to the Piggy
Back Offers so accepted were Offered Shares under the Second Offer, in the
proportion as is determined by the fraction having, as its numerator, the
number of Shares held by each Offeree who accepts the Second Offer and, as
its denominator, the number of Shares held by all of the Offerees who accept
the Second Offer, or in such other proportion as may be agreed to by all the
Voting Shareholders who accept the Second Offer, at the same price and upon
the same terms and conditions as contained in the Piggy Back Offers so
accepted.
(d) Any one or more of the Offerees may accept the offer contained in the Second
Offer, within thirty-five (35) days after receipt of the Second Offer, by
notice in writing to the Offeror, at which time, subject to Section 3.4(e),
the Second Offer shall become a binding agreement of purchase and sale
between the Offeror and such Offerees and the completion of such purchase
and sale shall take place within five (5) days after acceptance by the last
Offeree of the Second Offer. If no acceptance is received from any of the
Offerees within such thirty-five (35) day period, the Second Offer to the
Offerees shall be deemed to have been refused. If none of the Offerees
accepts the Second Offer, then the Offeror may, subject to Subsection
3.4(g), then sell all but not less than all of the Offered Shares to the
Third Party at the price and on the terms and conditions contained in the
Third Party Offer, but not otherwise, and each Investor or Castleco Party,
as applicable, may sell all but not less than all of the Shares in
accordance with their respective Piggy Back Offers (including Shares held by
Affiliated Persons) to the Third Party at the price and on the terms and
conditions contained therein, but not otherwise.
(e) If one or more of the Offerees is prepared to purchase his pro rata portion
of the Offered Shares (the "Accepting Offeree" in this Section 3.4) but the
other Offeree or
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Offerees are not prepared to do so (the "Declining Offeree" in this Section
3.4), then each of the Accepting Offerees shall be advised in writing (the
"Follow-up Offer" in this Section 3.4), within forty(45) days after receipt
of the Second Offer, by the Offeror of the response by the Declining
Offerees to the Second Offer, and the Accepting Offerees shall have the
option to purchase such portion of the Offered Shares as is determined by
the fraction having, as its numerator, the number of Shares held by such
Accepting Offeree and, as its denominator, the number of Shares held by all
of the Accepting Offerees who accept the Follow-up Offer or in such other
proportion as may be agreed to by all the Accepting Offerees who accept the
Follow-up Offer. Once again, in the event that the Piggy Back Offers have
been delivered, the Follow-up Offer shall, if it does not, be deemed to
stipulate that, if any Piggy Back Offers shall be accepted pursuant to
Subsection 3.4(b), the Accepting Offerees who do accept the Follow-up Offer
shall be required to complete the transactions contemplated by the Piggy
Back Offers so accepted as though the Shares subject to the Piggy Back
Offers so accepted were Offered Shares under the Follow-up Offer, in the
proportion as is determined by the fraction having, as its numerator, the
number of Shares held by such Accepting Offeree and, as its denominator, the
number of Shares held by all of the Accepting Offerees who accept the
Follow-up Offer or in such other proportions as may be agreed to by all the
Accepting Offerees who accept the Follow-up Offer, at the same price and
upon the same terms and conditions as contained in the Piggy Back Offers so
accepted. The Accepting Offerees shall have a period of five (5) days
following delivery of the Follow-up Offer to accept by notice in writing
delivered to the Offeror. If all the Offered Shares are accepted pursuant to
the Follow-up Offer, the Follow-up Offer shall become a binding agreement of
purchase and sale between the Offeror and such Accepting Offerees and the
completion of such purchase and sale shall take place within five (5) days
after acceptance by the last Accepting Offeree of the Follow-up Offer. If
notice in writing is not received by the Offeror within the time period
specified for, in the aggregate, one hundred (100%) percent of the Offered
Shares, then the Second Offer and the Follow-up Offer shall be deemed to
have been refused and the Offeror may, subject to Subsection 3.4(g), then
sell all but not less than all of the Offered Shares to the Third Party at
the price and on the terms and conditions contained in the Third Party
Offer, without any modification whatsoever, but not otherwise, and each
Investor or Castleco Party, as applicable, may sell all but not less than
all of the Shares in accordance with their respective Piggy Back Offers
(including Shares held by Affiliated Persons) to the Third Party at the
price and on the terms and conditions contained therein, without any
modification whatsoever, but not otherwise.
(f) If no such sale is completed by the Offeror to the Third Party within forty-
five (45) days following the expiration of the thirty-five (35) day period
referred to in Subsection 3.4(d), then the Offeror shall thereafter again be
required, before selling, transferring and assigning any of the Offeror's
Shares, to offer such Shares to the
15
Offerees in the manner hereinbefore provided and such process shall be
repeated so often as any Voting Shareholder desires to sell any of his
Shares to a Third Party. Moreover, the provisions of Subsection 3.4(a)
relating to the Piggy Back Offers shall once again apply in such an
instance.
(g) In no event shall the Offeror complete the sale of the Offered Shares if any
Piggy Back Offer is accepted and if the purchaser(s) fail(s) to complete
such transaction or transactions contemplated by the Piggy Back Offers so
accepted.
(h) If any Shares are purchased under the provisions of this Section 3.4 by any
person who is not a party to this Agreement, it shall be a condition
precedent to the registration of the transfer of such Shares into the name
of the transferee on the books of the Corporation, that the transferee
execute and deliver an agreement, in form and terms satisfactory to the
directors of the Corporation, whereby such transferee agrees, in effect, to
be bound by the provisions hereof as if he were an original party hereto and
such transferee shall thereupon have the same rights, and shall be subject
to the same restrictions, as the Offeror.
(i) For greater certainty, this Section 3.4:
(i) applies to a Third Party Offer made for Non-Voting Shares held by a
Voting Shareholder; and
(ii) does not apply to a Third Party Offer made for Non-Voting Shares held
by a Non-Voting Shareholder who is not also a Voting Shareholder.
(j) The right of each of NBTel, Newbridge and Celtic to acquire any Shares
pursuant to this Section 3.4 is subject to limitations on the acquisition of
Shares imposed on each such Shareholder by the Respective Shareholder Cap.
3.5 Offer for All of the Shares
---------------------------
(a) In the event that a person makes a bona fide written offer to the Voting
---- ----
Shareholders to purchase all of the Shares (the "Subject Offer" in this
Section 3.5) and the Subject Offer contains no conditions other than those
which are customary (which for greater certainty does not exclude, by such
reason alone, any offer because any part of the purchase price is to be paid
by the issue of debt or a promise to pay) for a transaction of such nature
including, without limitation, conditions requiring delivery of the
certificates representing the Shares duly endorsed in blank for transfer and
a warranty by the transferors that they are the beneficial owners of the
Shares free and clear of all mortgages, charges, liens and other security
interests, and provided that the Subject Offer does not contain any terms
which are intentionally adversely prejudicial
16
to the interests of one Shareholder or a group of Shareholders, then the
Corporation shall give to the Voting Shareholders within five (5) days from
the receipt of the Subject Offer, a true copy of the Subject Offer.
(b) If the holders of at least fifty-one percent (51%) of the Voting Shares (the
"Accepting Shareholders" in this Section 3.5) give notice in writing to the
Corporation within thirty-five (35) days after their receipt of the Subject
Offer that they wish to accept the Subject Offer and if the Accepting
Shareholders hold less than one hundred (100%) percent of all of the Voting
Shares (each of the Voting Shareholders who are not Accepting Shareholders
being referred to as the "Declining Shareholders" in this Section 3.5), then
the following provisions shall apply:
(i) where the Subject Offer is made on or prior to the first anniversary
date of this Agreement, the Declining Shareholders shall be advised in
writing (the "Second Offer" in this Section 3.5) by the Corporation
within forty-five (45) days of the Corporation's receipt of the
Subject Offer of the response of the Accepting Shareholders to the
Subject Offer and each of the Declining Shareholders shall have the
option to purchase all but not less than all of the issued and
outstanding Shares held by (i) the Accepting Shareholders (including
Shares held by Affiliated Persons) and (ii) the Non-Voting
Shareholders (including Shares held by Affiliated Persons), at the
same price per Share and on the same terms and conditions as are
contained in the Subject Offer on a pro rata basis determined in
accordance with the fraction having, as its numerator, the number of
Shares held by such Declining Shareholder (including Shares held by
Affiliated Persons) and, as its denominator, the number of Shares held
by all of the Declining Shareholders (including Shares held by
Affiliated Persons) who accept the Second Offer, or in such other
proportion as may be agreed to by all the Declining Shareholders who
accept the Second Offer. The Declining Shareholders shall have a
period of ten (10) days following delivery of the Second Offer to
accept by notice in writing delivered to the Corporation. If all the
Shares subject to the Second Offer are accepted, the Second Offer
shall become a binding agreement of purchase and sale and the
completion of such purchase and sale shall take place within five (5)
days after acceptance by the last Declining Offeree of the Second
Offer. If notice in writing is not received by the Corporation from
Declining Shareholders indicating their intention to purchase all of
the issued and outstanding Shares not then held by the Declining
Shareholders and their Affiliated Persons within the time period
specified, then the Second Offer shall be deemed to have been refused
and the Declining Shareholders shall be deemed to have accepted the
Subject Offer, (provided that no Declining Shareholder shall be
subject to any non-competition clause contained in the terms and
conditions of the Subject Offer (or ancillary thereto) to the extent
17
that compliance with such clause would be adversely prejudicial to any
business interest of the Declining Shareholder which existed as at the
date of the closing of the Subject Offer) and the transaction shall
close at the offices of the Corporation's solicitors in accordance
with the Subject Offer; or
(ii) where the Subject Offer is made after to the first anniversary date of
this Agreement, then, with no further action on the part of any
Shareholder or the Corporation, the Declining Shareholders shall be
deemed to have accepted the Subject Offer, (provided that no Declining
Shareholder shall be subject to any non-competition clause contained
in the terms and conditions of the Subject Offer (or ancillary
thereto) to the extent that compliance with such clause would be
adversely prejudicial to any business interest of the Declining
Shareholder which existed as at the date of the closing of the Subject
Offer) and the transaction shall close at the offices of the
Corporation's solicitors in accordance with the Subject Offer.
(c) The parties agree that this Section 3.5 shall, unless otherwise determined
by the Board, be applied to all currently outstanding options to purchase
Shares and all options issued under the ESOP in accordance with the terms
thereof. The Board may, in its sole discretion, deal with the options
issued under the ESOP in the manner it deems fair and reasonable in light
of the circumstances of the Offer. Without limiting the generality of the
foregoing, in connection with the closing of a sale pursuant to an Offer,
the Board may, without any action or consent required on the part of any
Optionholder, (i) deem any or all options (vested or unvested) under the
ESOP to have been exercised and the underlying Shares to have been tendered
to the Offer and apply a portion of the Optionholder's proceeds from the
closing of the Offer to the exercise price payable by that Optionholder for
the exercise of his or her options, (ii) cancel the options and pay to an
Optionholder the amount that the Optionholder would have received, after
deducting the exercise price of the options, had the options been exercised
and the underlying Shares sold pursuant to the Offer, (iii) exchange
unvested options, or any portion of them, for options to purchase shares in
the capital of the acquiror or any corporation which results from an
amalgamation, merger or similar transaction involving the Corporation made
in connection with the closing of a sale pursuant to the Offer or (iv) take
such other actions, and combinations of the foregoing actions, as it deems
fair and reasonable under the circumstances.
(d) For clarity, limitations on the acquisition of Shares imposed by the
Respective Shareholder Cap shall not apply to any acquisition of Shares by
---
NBTel, Newbridge or Celtic pursuant to this Section 3.5.
18
3.6 Improper Transfer
-----------------
(a) (i) Upon the happening of a sale, transfer, mortgage, charge, pledge,
encumbrance, assignment, or disposition of any Shares or any option to
acquire Shares of the Corporation; or
(ii) Upon a change of Control of any Voting Shareholder which is a
corporation;
other than in compliance with this Agreement (hereinafter referred to as an
"Event of Default") which has not been cured or remedied within fifteen
(15) days after the date that the Voting Shareholder becomes aware of the
occurrence of the Event of Default (provided that such opportunity to cure
or remedy an Event of Default shall be available only once in respect of
any Voting Shareholder and its Affiliated Persons and further provided that
such cure period shall be reasonably extended if such Event of Default has
arisen by operation of law or reasons beyond the control of such Voting
Shareholder and its Affiliated Persons and such Voting Shareholder and its
Affiliated Person are vigorously proceeding to cure such Event of Default
with some reasonable prospect of success), the remaining Voting
Shareholders (other than Shareholders who are Affiliated Persons of the
Shareholder in respect of whom the Event of Default has occurred) (such
remaining Voting Shareholders being referred to as the "Remaining
Shareholders" in this Section 3.6 and the Shareholder and Affiliated
Persons in respect of whom the Event of Default has occurred being referred
to collectively as the "Vendor" in this Section 3.6) shall have the option,
exercisable, subject to Section 3.7(d), by the giving of written notice to
the Vendor (the "Notice" in this Section 3.6) to require the Vendor to sell
all of the Shares subject to the Event of Default, or all of the Shares of
the Shareholder Control of which has so changed, (the "Purchased Shares" in
this Section 3.6) to the Remaining Shareholders upon and subject to the
terms and conditions hereinafter set forth.
(b) Each of the Remaining Shareholders shall be entitled to purchase such
portion of the Purchased Shares as is determined by the fraction having, as
its numerator, the number of Shares held by such Remaining Shareholder and,
as its denominator, the number of Shares held by all of the Remaining
Shareholders.
(c) If one or more of the Remaining Shareholders is prepared to purchase his
pro rata portion of the Purchased Shares (the "Accepting Shareholder" in
this Section 3.6) but the other Remaining Shareholder or Shareholders are
not prepared to do so (the "Declining Shareholders" in this Section 3.6),
then each of the Accepting Shareholders shall have the first right and
option to purchase such portion of the Purchased Shares as is determined by
the fraction having, as its numerator, the number of Shares held by such
Accepting Shareholder and, as its denominator, the
19
number of Shares held by all of the Accepting Shareholders or in such other
proportion as may be agreed to by the Accepting Shareholders.
(d) The purchase price payable for the Purchased Shares shall be an amount equal
to eighty percent (80%) of the Fair Value of the Purchased Shares as at the
last day of the month in which the Notice was received by the Vendor.
(e) The Fair Value of the Purchased Shares shall be determined forthwith upon
receipt of Notice of the exercise of the option by the Remaining
Shareholders.
(f) The date of closing (the "Date of Closing" in this Section 3.6) of the
transaction of purchase and sale as herein contemplated shall be the later
of:
(i) the date which is forty-five (45) days after the receipt of the Notice
by the Vendor; and
(ii) the date which is fifteen (15) days after the Fair Value of the
Purchased Shares has been determined.
(g) The purchase price for the Purchased Shares shall be paid as follows:
(i) an amount equal to ten percent (10%) of the Purchase Price for the
Purchased Shares shall be paid by cash or certified cheque on the Date
of Closing; and
(ii) the balance of the Purchase Price for the Purchased Shares shall be
payable by cash or certified cheque in two (2) equal annual
instalments on the first and second anniversaries of the Date of
Closing, together with interest thereon at a rate per annum equal to
the prime interest rate from time to time charged by the Corporation's
banker to its largest and best risk commercial borrowers, such rate to
be determined on the bank business day immediately preceding the Date
of Closing and payable at the same times as payments of principal.
(h) The option granted the Remaining Shareholders pursuant to this Section 3.6,
or its exercise, shall be without limitation to any other rights the
Remaining Shareholders or the Corporation has at law or otherwise.
(i) The right of each of NBTel, Newbridge and Celtic to acquire any Shares
pursuant to this Section 3.6 is subject to limitations on the acquisition of
Shares imposed on each such Shareholder by the Respective Shareholder Cap,
provided that if Castleco becomes a Vendor under the provisions of this
Section 3.6, NBTel, Newbridge and Celtic may acquire additional Shares under
the provisions hereof and the Respective Shareholder Cap for each of NBTel,
Newbridge and Celtic as set out in Section 3.10
20
shall be deemed to have changed to the aggregate percentage of equity in
the capital of the Corporation after completion of the acquisition of the
additional Shares.
3.7 Calculation of Fair Value
-------------------------
(a) Upon the exercise by the Remaining Shareholders of their option pursuant to
Section 3.6(a), (i) the Remaining Shareholders, on the one hand, and (ii)
the Vendor (as defined in Section 3.6(a)), on the other hand, shall each,
within thirty (30) days of the giving of written notice of the exercise of
the said option, appoint an independent certified business valuator
("Valuator") to determine the Fair Value of the Purchased Shares as at the
date of the exercise of such option if they have not already agreed to such
Fair Value. If only one Valuator is appointed, or either party fails to
appoint a Valuator within such 30 day period, the Valuator appointed shall
be the sole Valuator. The Valuator shall take into account such factors as
it determines appropriate in arriving at Fair Value, including, without
limitation, whether the Purchased Shares comprise a control bloc in the
Corporation.
(b) If the two Valuators determine a Fair Value where the higher Fair Value, if
the Fair Values are not the same, is no more than 110% of the lower Fair
Value, the Fair Value for purpose of this Section 3.7 shall be deemed to be
the average of the two Fair Values so determined.
(c) If the higher Fair Value is more than 110% of the lower Fair Value
determined, the two Valuators shall as soon as reasonably possible and, in
any event, within thirty (30) days after the latter of the two
determinations of Fair Value has been made, choose a third Valuator. Such
third Valuator shall determine the Fair Value of the Purchased Shares as at
the date of the exercise of such option which shall be deemed to be the
Fair Value of the Purchased Shares for the purpose of this Section 3.7.
(d) The determination of the Valuator or Valuators as provided above shall be
final and binding upon the parties; provided that, notwithstanding anything
to the contrary provided in this Agreement, if the Corporation or the
Remaining Shareholders, as the case may be, is/are not satisfied with the
amount determined by the Valuator(s) as the Fair Value of the Purchased
Shares, the Corporation or the Remaining Shareholders, as the case may be,
may, in its/their sole discretion, by written notice to the Vendor,
determine that it/they will not complete the subject transaction of
purchase and sale, without incurring any liability of any kind whatsoever
and the Corporation or the Remaining Shareholders, as the case may be,
shall be deemed not to have elected to exercise its/their option and the
parties shall be returned, in all respects, to the positions they were in
prior to the purported exercise of such option.
21
(e) For purposes hereof, any Valuator appointed pursuant to this Section 3.7
shall be chosen from one of the following accounting firms: Arthur
Andersen; Price WaterhouseCoopers; Ernst & Young; KPMG Peat Marwick; Grant
Thornton and Deloitte and Touche; or their respective successor firms, or
from any of the following Investment Banks: Scotia Capital Inc.; CIBC World
Markets Inc. or RBC Dominion Securities Inc. Additionally, each Valuator
shall deliver a report to the Corporation, the Remaining Shareholders, as
the case may be, the Vendor and each other setting out its determination
and explaining in detail the reasons, calculation and basis for such
determination. All determinations must be completed within forty-five (45)
days after appointment of the Valuator in question.
(f) The cost of the foregoing determinations shall be divided equally between
the Vendor and the Corporation or the Remaining Shareholders, as the case
may be, unless the Corporation or the Remaining Shareholders, as the case
may be, have declined to complete the purchase of the Purchased Shares in
accordance with Section 3.7(d), in which case all the costs of the
foregoing determination shall be borne by the Corporation or the Remaining
Shareholders, as the case may be.
3.8 Rights of Castleco Group
------------------------
Notwithstanding any other provision hereof, it is agreed that where Castleco or
any of its Affiliated Persons has a right to purchase Shares pursuant to any of
Sections 3.3, 3.4, 3.5 and 3.6 of this Agreement, and Sections 3.2 and 3.4 of
the Unanimous Shareholders Agreement, on a pro rata basis, and declines to
purchase any such Shares, any of its Affiliated Persons who is then a
Shareholder shall have the first right to purchase any such Shares so declined
and, if there is more than one such Affiliated Person who is interested in
exercising such right, on a pro rata basis or such other basis as is agreed
amongst them.
3.9 IPO Rights
----------
All of the Voting Shareholders agree, subject to market conditions, to use their
reasonable commercial efforts to proceed with a Public Offering within 18 months
of the date hereof. Each of the Voting Shareholders hereby agrees and covenants
that, prior to the closing of a Public Offering of the Corporation's Shares, it
will approve amendments to the ESOP and any outstanding options thereunder to
provide for the issuance to holders of such options, Voting Shares upon the
exercise thereof, it being understood that these agreements and covenants are
being made so as to give the Non-Voting Shareholders the benefit of any market
for Shares of the Corporation created by the Public Offering (subject to
applicable securities law requirements, including applicable hold periods). All
Shareholders agree to waive their rights under Sections 3.3 and 3.4 hereof in
respect of a Public Offering of the Shares of the Corporation.
22
3.10 Respective Shareholder Cap
--------------------------
(a) Notwithstanding anything in this Agreement or the Unanimous Shareholders
Agreement to the contrary, this Section 3.10 shall apply to limit the
rights of each of NBTel, Newbridge and Celtic (each a "Subject
Shareholder" in this Section 3.l0) to acquire Shares pursuant to the
provisions of Sections 3.3, 3.4 and 3.6 of this Agreement and Sections 3.3
and 3.4 of the Unanimous Shareholders Agreement (together, the "Applicable
Provisions"). Each Subject Shareholder acknowledges that its aggregate
percentage of equity in the capital of the Corporation (being the
percentage represented by that number of issued and outstanding Shares
owned or controlled by each (including Shares held by Affiliated Persons),
divided by the total number of issued and outstanding Shares owned or
controlled by all Shareholders) as at the date hereof, is set out next to
its name below (in each case, the "Maximum Percentage"):
NBTel - 38.96%
Newbridge - 21.55%; and
Celtic - 13.27%.
Each Subject Shareholder hereby agrees that, notwithstanding the extent of
its entitlement to purchase Shares pursuant to the Sharing Ratio or the
Applicable Provisions, its entitlement shall be determined in accordance
with the restrictions set out in clause (b) below and under no
circumstances (other than as set out in Section 3.6(i)) shall it be
permitted to acquire Shares pursuant to the Applicable Provisions if such
acquisition would increase its aggregate percentage of equity in the
capital of the Corporation to an amount higher than the Maximum Percentage
(such restriction for each such Subject Shareholder being referred to in
this Agreement as the "Respective Shareholder Cap").
(b) For greater clarity, (i) where a Subject Shareholder's aggregate
percentage of equity in the capital of the Corporation is equal to its
Maximum Percentage before giving effect to any acquisition by any person
(including the Subject Shareholder) of Shares pursuant to the Applicable
Provisions (whether from treasury or otherwise) (each a "Subject
Acquisition"), such Subject Shareholder shall be precluded from
participating in such a Subject Acquisition and is, without any further
action, consent or notice on the part of the Subject Shareholder, deemed
to have declined the relevant offer for the purposes of the relevant
Applicable Provisions, and (ii) where a Subject Shareholder's aggregate
percentage of equity in the capital of the Corporation is less than its
Maximum Percentage before giving effect to any Subject Acquisition, such
Subject Shareholder shall be permitted to participate in such Subject
Acquisition, but only to the extent that its aggregate percentage of
equity in the capital of the
23
Corporation before giving effect to the Subject Acquisition does not
exceed its Maximum Percentage and such permitted portion is deemed to be
such Subject Shareholder's proportionate interest in such Subject
Acquisition for the purposes of the relevant Applicable Provisions and,
where relevant, the Subject Shareholder is deemed to have rejected any
follow on offers under the relevant Applicable Provisions.
3.11 Strategic Investor
------------------
The Voting Shareholders (other than the Castleco Parties) acknowledge and agree
that it is their intention to seek a strategic US investor in the Corporation.
Castleco hereby undertakes to use its reasonable commercial efforts to introduce
the Corporation to potential US investors with the experience and ability to
make a significant investment in the capital of the Corporation.
ARTICLE 4.00
GENERAL SALE PROVISIONS
-----------------------
4.1 Application
-----------
Except as may be otherwise provided in this Agreement, or as may be consented to
in writing by all of the parties hereto, the provisions of this Article 4.00
shall apply to any sale of the Shares pursuant to Article 3.00. Notwithstanding
the foregoing, the provisions of this Article 4.00 shall not apply to any
transfer of Shares to an Affiliated Person in accordance with Subsection 3.2(c).
4.2 Definitions
-----------
The term "Vendor" as used in this Article shall refer to the Shareholder or
Shareholders (including any Affiliated Person) selling Shares pursuant to
Article 3.00 and the term "Purchaser" shall refer to the Corporation or to the
remaining Shareholder(s), as the case may be, purchasing Shares pursuant to
Article 3.00.
24
4.3 Title to Purchased Shares
-------------------------
The parties covenant and agree that, at the time of closing of any transaction
of purchase and sale contemplated in this Agreement, the Vendor of the said
Shares shall be the owner thereof and shall have good and marketable title
thereto, free of any lien, charge or encumbrance of any kind whatsoever and
shall have the exclusive right and full power to sell, transfer and assign the
Shares free and clear of all liens, charges and encumbrances whatsoever;
provided that, in the event that at the time of closing of any such transaction,
the said Shares are not free and clear of all liens, charges and encumbrances
whatsoever, the Purchaser of the Shares shall be entitled, at his sole option,
to purchase the Shares subject to such lien, charge or encumbrance and to deduct
the amount of, or cost of removing, such lien, charge or encumbrance from the
purchase price payable by the Purchaser for the Shares.
4.4 Deliveries
----------
On the date set for closing, the Purchaser shall pay the required amount of the
purchase price payable on closing, by cash or certified cheque drawn on a
chartered bank, and the Vendor shall:
(a) sell, assign and transfer to the Purchaser the Shares being sold to him
free of all liens, charges and encumbrances, subject to the right of the
Purchaser to purchase the Shares subject to such lien, charge or
encumbrance, and to deduct the amount of, or cost of removing, such lien,
charge or encumbrance from the purchase price, and shall deliver the
required share certificates duly endorsed for transfer into the Purchaser's
name;
(b) to the extent that after the closing the Vendor does not own any Shares,
deliver to the Corporation, if requested by the Corporation, signed
resignations of the Vendor and/or the Vendor's nominees, if any, from their
position(s) on the board of directors of the Corporation and from any
offices and employments with the Corporation; and
(c) execute a consent as director to the transfer of his Shares.
4.5 Releases
--------
On the date of closing, the Vendor and the respective nominees of the Vendor, if
any, shall, to the extent that after the closing the Vendor does not own any
Shares, in addition to the foregoing, deliver to the Corporation, if requested
by the Corporation, a release of all claims against the Corporation, in respect
of loss of office as director and/or officer, and the Purchaser and the
Corporation shall similarly release the Vendor.
25
4.6 Refusal of the Vendor to Complete the Sale
------------------------------------------
If the Vendor refuses or neglects to complete the sale for any reason, the
Purchaser shall have the right, upon payment of the purchase price to the
credit of the Vendor at any Canadian chartered bank for and on behalf of the
Vendor or his nominee, to execute and deliver such transfers, resignations and
other documents as may be necessary or desirable in order to complete the
transaction, and to that end the Vendor irrevocably appoints the Purchaser (or,
if the Purchaser declines to act, the Chief Executive Officer of the
Corporation) his true and lawful attorney to complete the transaction and
execute on behalf of the Vendor every document necessary or desirable in that
behalf.
4.7 Vendor's Indebtedness to the Corporation
----------------------------------------
In the event that at the time of such sale, the Vendor shall be indebted to the
Corporation in an amount recorded in the books of the Corporation and verified
by the Accountants, whose verification shall be final and binding upon the
parties hereto, to the extent that after the closing the Vendor does not own any
Shares, the Purchaser shall have the exclusive right and option, out of the
purchase price, to pay, satisfy and discharge all or any portion of such
indebtedness and to receive and take credit against such purchase price for the
amount or amounts so paid on account of the indebtedness, or to require the
Vendor, on or before the date of closing to fully repay and discharge such
indebtedness.
4.8 Release of Vendor's Guarantees
------------------------------
In the event that at the time of such sale, the Vendor or any person, firm or
corporation, for or on behalf of the Vendor, shall have any personal guarantees,
securities or covenants lodged with any person or bank to secure any
indebtedness, liability or obligation of the Corporation, then the Purchaser
shall, as a condition to closing of the transaction of purchase and sale,
deliver up or cause to be delivered up to the Vendor and cancel or cause to be
canceled such guarantees, securities and/or covenants upon the closing of the
transaction of purchase and sale; and failing such delivery or cancellation of
guarantees, securities or covenants or to the extent of such failure the
Purchaser shall indemnify the Vendor, to the satisfaction of the Vendor, acting
reasonably, against any and all claims thereafter arising thereunder.
4.9 Prepayment of Purchase Price
----------------------------
Whenever the Purchaser shall not be in default in respect of any payment of
principal or interest on any deferred portion of the purchase price herein
referred to, the Purchaser shall have the privilege of prepaying all or any part
of the principal balance outstanding at any time or times without notice or
bonus.
26
4.10 Acceleration of Indebtedness
----------------------------
In the event that the Purchaser shall default in any payment of principal or
interest due on any deferred portion of the purchase price herein referred to
and shall continue in such default for a period of ten (10) Business Days after
written notice of such default shall be given to the Purchaser, then, without
prejudice to any other rights which the Vendor may have, the whole unpaid
balance of the purchase price herein shall, at the option of the Vendor,
immediately be accelerated and become due and payable in full.
4.11 Promissory Note
---------------
If there is any unpaid balance of the purchase price owing to a Vendor by a
Purchaser pursuant to any transaction contemplated by this Agreement, the
Purchaser shall, in addition to any security required pursuant to the terms
contemplated by this Agreement applicable to such transaction, deliver a
promissory note for such unpaid balance to the Vendor on the date of closing as
evidence of such unpaid balance and the terms of payment thereof.
ARTICLE 5.00
GENERAL CONTRACT PROVISIONS
---------------------------
5.1 Time of the Essence
-------------------
Time shall be of the essence of this Agreement and of every part hereof.
5.2 Endorsement of Share Certificates
---------------------------------
All Share certificates of the Corporation shall have the endorsement required to
be placed upon them pursuant to the terms of the Unanimous Shareholders
Agreement.
5.3 Notices
-------
(a) Any notice, demand or other communication required or permitted to be
given to any party hereunder shall be in writing and shall be personally
delivered to such party; or, except during a period of strike, lockout or
other postal disruption, sent by registered mail, postage prepaid; or sent
by telex, telegraph, telecopier or other form of recorded communication,
charges prepaid, confirmed by prepaid registered mail. Address for notice
is as follows:
27
In the case of the Corporation:
ImagicTV Inc.
One Brunswick Square, 14/th/ Floor
P.O.Box 303
Saint John, NB E2L 3Y2
Telephone: 506-631-3000
Telecopier: 506-631-3001
Attention: President
In the case of NBTel:
NBTel Inc.
One Brunswick Square
Saint John NB E2L 4Y4
Telephone: 506-694-2102
Telecopier: 506-694-2722
Attention: General Counsel
In the case of Newbridge:
Newbridge Networks Corporation
600 March Road
Kanata ON K2K 2E6
Telephone: [_]
Telecopier: 613-599-3672
Attention: Legal Department
28
In the case of Celtic:
506048 N.B. ltd.
c/o Celtic House International Corporation
555 Legget Drive, Suite 211
Kanata ON K2K 3X3
Telephone: [_]
Telecopier: 613-271-2025
Attention: Tomas Valis, General Partner
In the case of Castleco:
Whitecastle Investments Limited
22 St. Clair Avenue East
Suite 1010
Toronto, Ontario
M4T 2S3
Telephone: (416) 961-5355
Telecopier: (416) 961-3232
Attention: Carey Diamond (if to Castleco) and /or Joseph
Catalfamo
In the case of Centara Investments Inc.:
Centara Investments Inc.
Suite 2620
1 Lombard Place
Winnipeg, Manitoba
R3B 0X5
Telephone: 204-982-6977
Telecopier: 204-982-6970
Attention: David Graves
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In the case of the other Voting Shareholders:
To the address set out below the name of each in Schedule B hereto
(b) Any notices given pursuant to Section 5.3(a) shall be sent to the parties at
their respective addresses as set out in Section 5.3(a) or Schedule B hereto
or such other address as the party to whom such notice is to be given shall
have last notified to the party giving the same in the manner provided in
this section.
(c) Any notice given by personal delivery shall be deemed to be given and
received on the date of delivery if delivered during normal business hours
provided that if such day is not a Business Day, or such notice is delivered
after normal business hours on such day, then the notice shall be deemed to
have been given and received on the Business Day next following such day.
Any notice given by mail as aforesaid shall be deemed to have been given and
received on the third (3rd) Business Day next following the date of its
mailing provided no postal strike is then in effect or comes into effect
within three (3) Business Days after such mailing. Any notice transmitted
by telex, telegraph, telecopier or other form of recorded communication
shall be deemed given and received on the day of its transmission if such
day is a Business Day and if delivered during normal business hours on such
day, and, if not, on the next following Business Day.
5.4 Further Assurances
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The parties hereto shall sign such further and other papers, cause such meetings
to be held, resolutions passed and by-laws enacted, exercise their vote and
influence, do and perform and cause to be done and performed such further and
other acts and things as may be necessary or desirable in order to give full
effect to this Agreement and every part hereof including, without limitation,
cause each Subsidiary to make an unanimous shareholders declaration, as
described in the Act, in order to give effect to this Agreement.
5.5 Application of Agreement
------------------------
The provisions of this Agreement shall apply mutatis mutandis to any Shares into
which the Shares of the Corporation may hereafter be converted or changed, or to
any Shares resulting from a reclassification, subdivision or consolidation of
any Shares of the Corporation, or to any shares or other securities of the
Corporation or of a successor company, which are received by the Shareholders on
a reorganization of the Corporation, and also to any Shares of the Corporation
which are received by the holders of Shares as a stock dividend or to any Shares
or other securities of the Corporation on an amalgamation, reorganization or
reconstruction of the Corporation.
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5.6 Conflict
--------
If any conflict shall appear between the by-laws or the Articles of
Incorporation or any Articles of Amendment of the Corporation and the provisions
of this Agreement, the provisions of this Agreement shall, to the greatest
extent permitted by law, govern and any such conflict shall be resolved by
appropriate amendment to such Articles, by-laws and/or resolutions as the case
may be. In the event of any conflict between the provisions of this Agreement
and those of the Unanimous Shareholders Agreement, then to the extent permitted
by law, this Agreement shall govern the parties hereto as to the subject matters
hereof and each party hereto agrees to waive any right to seek to enforce any
provision of the Unanimous Shareholders Agreement which conflicts with any
provision hereof in respect of the subject matter hereof.
5.7 No Waiver
---------
No waiver by any of the parties hereto of any breach of any condition, covenant
or agreement hereof shall constitute a waiver of such condition, covenant or
agreement except in respect of the particular breach giving rise to such waiver.
5.8 Severability
------------
If any of the terms or provisions of this Agreement are determined to be invalid
or unenforceable by any Court, it shall not invalidate the rest of the Agreement
which shall remain in full force and effect as if such terms and provisions had
not been made a part of the Agreement.
5.9 Entire Agreement
----------------
This Agreement contains the entire agreement between the parties hereto relating
to the subject matter hereof and there are no collateral or precedent
representations, agreements, or conditions relating to the subject matter hereof
not specifically set forth herein.
5.10 Corporate Cooperation
---------------------
The Corporation hereby acknowledges notice of the terms of this Agreement and
hereby agrees to promptly cause its proper officers, accountants, and auditors
at any time and from time to time to do such things and take such steps as may
be necessary to effectually carry out the terms and intent thereof.
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5.11 Governing Law
-------------
This Agreement shall be deemed to be made in and construed in accordance with
the laws of the Province of New Brunswick and the laws of Canada applicable
therein. The parties agree to attorn to the non-exclusive jurisdiction of the
courts of the Province of New Brunswick.
5.12 Extended Meaning
----------------
In construing this Agreement, words in the singular shall include the plural and
vice versa, and words importing the masculine shall include the feminine and the
neuter and vice versa, and words importing persons shall include corporations
and vice versa. Words such as "hereunder", "hereto", "hereof" and "herein", and
all other words commencing with "here" shall, unless the context clearly
indicates the contrary, refer to the whole of this Agreement and not to any
particular section or part thereof.
5.13 Enurement
---------
This Agreement shall enure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators, successors and
permitted assigns.
5.14 Amendment
---------
This Agreement may only be amended, altered or qualified with the prior written
consent of Voting Shareholders holding not less than 90% of the issued and
outstanding Voting Shares as at the time of such writing.
5.15 Term of the Agreement
---------------------
This Agreement shall terminate on the earlier of:
(a) the date upon which the Agreement is terminated by written agreement of
Voting Shareholders holding not less than 90% of the issued and
outstanding Voting Shares at such time; and
(b) the closing of a Public Offering.
5.16 Counterparts
------------
This Agreement may be executed in one or more counterparts (delivered by
facsimile transmission or otherwise), all of which shall be read and construed
as one document and any facsimile signature hereto shall be deemed to be an
original signature.
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5.17 Independent Legal Advice
------------------------
By signing this Agreement, each of the parties hereto acknowledges that:
(a) such party has either obtained independent legal advice with respect to
the terms of this Agreement or that such party has, despite having been
given the opportunity to do so and being encouraged to do so, declined to
seek independent legal advice with respect to the terms of this Agreement;
and
(b) such party understands the terms of, and such party's rights and
obligations under, this Agreement.
5.18 Language
--------
The parties hereby acknowledge that they have required that this Agreement and
all related documentation be drawn up in the English language. Les parties
reconnaissent avoir demande que la presente convention ainsi que tous les
documents qui s'y rattachent soient rediges en langue anglaise.
IN WITNESS WHEREOF the parties have duly executed this Agreement as of
the date first above written.
ImagicTV Inc.
Per:_____________________________________
Authorized Signing Officer
Per:_____________________________________
Authorized Signing Officer
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