Exhibit 10.5
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT is entered into as of February__, 2003, between
Ugomedia Interactive Corporation a corporation existing under the laws of the
State of Nevada ("UGOMEDIA"), Sciax Technology Inc., a corporation incorporated
under the laws of Canada ("SCIAX"), and 4137639 Canada Inc., a corporation
incorporated under the laws of Canada ("SUB").
WHEREAS, pursuant to a common stock purchase agreement dated as of January
8, 2003, between Sciax, Ugomedia and Sub (such agreement as it may be amended or
restated is hereinafter referred to as the "PURCHASE AGREEMENT") the parties
agreed that on the closing of the transactions contemplated under the Purchase
Agreement, Ugomedia, Sciax and Sub would execute and deliver a Support Agreement
containing the terms and conditions set forth in the Purchase Agreement together
with such other terms and conditions as may be agreed to by the parties to the
Purchase Agreement acting reasonably;
AND WHEREAS, pursuant to a reorganization of the capital structure of Sciax
(the "REORGANIZATION") contemplated in the Purchase Agreement, Sciax issued
certain exchangeable shares (the "EXCHANGEABLE SHARES") having attached thereto
certain rights, privileges, restrictions and conditions (collectively, the
"EXCHANGEABLE SHARE PROVISIONS");
AND WHEREAS, the parties hereto desire to make appropriate provision and to
establish a procedure whereby UgoMedia and Sub will take certain actions and
make certain payments and deliveries necessary to ensure that Sciax will be able
to make certain payments and to deliver or cause to be delivered UgoMedia Common
Shares in satisfaction of the obligations of Sciax under the Exchangeable Share
Provisions with respect to the payment and satisfaction of dividends,
Liquidation Amounts, Retraction Prices and Redemption Prices, all in accordance
with the Exchangeable Share Provisions.
NOW, THEREFORE, in consideration of the respective covenants and agreements
provided in this Agreement and for other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties agree as
follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINED TERMS. Each term denoted herein by initial capital letters and not
otherwise defined herein shall have the meaning attributed thereto in the
Exchangeable Share Provisions, unless the context requires otherwise.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC. The division of this Agreement
into articles, sections and paragraphs and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
1.3 NUMBER, GENDER, ETC. Words importing the singular number only shall include
the plural and vice versa. Words importing the use of any 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.
ARTICLE 2
COVENANTS OF UGOMEDIA AND SUB
2.1 COVENANTS OF UGOMEDIA AND SUB REGARDING EXCHANGEABLE SHARES. So long as any
Exchangeable Shares are outstanding, UgoMedia and Sub shall:
(a) ensure that, in the event of any dividend is declared on UgoMedia
Common Shares, (A) Sciax will have sufficient assets, funds and other
property available to enable the due declaration and the due and
punctual payment in accordance with applicable law of an equivalent
dividend on the Exchangeable Shares and (B) Subsection 2.1(b) shall be
complied with in connection with such dividend;
(b) cause Sciax to declare simultaneously with the declaration of any
dividend on UgoMedia Common Shares an equivalent dividend on the
Exchangeable Shares and, when such dividend is paid on UgoMedia Common
Shares, cause Sciax to pay simultaneously therewith such equivalent
dividend on the Exchangeable Shares, in each case in accordance with
the Exchangeable Share Provisions;
(c) advise Sciax sufficiently in advance of the declaration by UgoMedia of
any dividend on UgoMedia Common Shares and take all such other actions
as are necessary, in cooperation with Sciax, to ensure that the
respective declaration date, record date and payment date for a
dividend on the Exchangeable Shares shall be the same as the record
date, declaration date and payment date for the corresponding dividend
on UgoMedia Common Shares;
(d) take all such actions and do all such things as are necessary or
desirable to enable and permit Sciax, in accordance with applicable
law, to pay and otherwise perform its obligations with respect to the
satisfaction of the Exchangeable Share Consideration representing the
Liquidation Amount (less applicable taxes) in respect of each issued
and outstanding Exchangeable Share upon the liquidation, dissolution
or winding-up of Sciax or any other distribution of the assets of
Sciax for the purpose of winding up its affairs, including without
limitation all such actions and all such things as are necessary or
desirable to enable and permit Sciax to cause to be delivered UgoMedia
Common Shares to the holders of Exchangeable Shares in accordance with
the provisions of Article 5 of the Exchangeable Share Provisions;
(e) take all such actions and do all such things as are necessary or
desirable to enable and permit Sciax, in accordance with applicable
law, to pay and otherwise perform its obligations with respect to the
satisfaction of the Exchangeable Share Consideration representing the
Retraction Price (less applicable taxes) and the Redemption Price,
including without limitation all such actions and all such things as
are necessary or desirable to enable and permit Sciax to cause to be
delivered UgoMedia Common Shares to the holders of Exchangeable
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Shares, upon the retraction or redemption of the Exchangeable Shares
in accordance with the provisions of Article 6 or Article 7 of the
Exchangeable Share Provisions, as the case may be; and
(f) not exercise its vote as a shareholder to initiate the voluntary
liquidation, dissolution or winding-up of Sciax nor take any action or
omit to take any action that is designed to result in the liquidation,
dissolution or winding-up of Sciax.
2.2 RESERVATION OF UGOMEDIA COMMON SHARES. Ugomedia hereby represents, warrants
and covenants in favour of Sciax and Sub that Ugomedia has reserved for issuance
and will, at all times while any Exchangeable Shares (other than Exchangeable
Shares held by UgoMedia or its Affiliates) are outstanding, keep available, free
from pre-emptive and other rights, out of its authorized and unissued capital
stock such number of shares of UgoMedia Common Shares (or other shares or
securities into which shares of UgoMedia Common Shares may be reclassified or
changed as contemplated by Section 2.5) as is equal to the sum of (i) the number
of Exchangeable Shares issued and outstanding from time to time and (ii) the
number of Exchangeable Shares issuable upon the exercise of all rights to
acquire Exchangeable Shares outstanding from time to time and under any other
security or commitment pursuant to which UgoMedia may now or hereafter be
required to issue Ugomedia Common Shares, to enable and permit it and Sub to
meet their obligations under each of the Liquidation Call Right, the Retraction
Call Right and the Redemption Call Right and to enable and permit Sciax to meet
its respective obligations hereunder and under the Exchangeable Share
Provisions.
2.3 NOTIFICATION OF CERTAIN EVENTS. In order to assist UgoMedia and Sub to
comply with its obligations hereunder, Sciax will give UgoMedia and Sub written
notice of each of the following events at the time set forth below:
(a) in the event of any determination by the Board of Directors of Sciax
to institute voluntary liquidation, dissolution or winding-up
proceedings with respect to Sciax or to effect any other distribution
of the assets of Sciax among its shareholders for the purpose of
winding-up its affairs, at least 30 days prior to the proposed
effective date of such liquidation, dissolution, winding-up or other
distribution;
(b) immediately, upon the earlier of (i) receipt by Sciax of notice of,
and (ii) Sciax 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 Sciax or to
effect any other distribution of the assets of Sciax among its
shareholders for the purpose of winding-up its affairs;
(c) immediately, upon receipt by Sciax of a Retraction Request;
(d) at least 30 days prior to any accelerated Automatic Redemption Date
determined by the Board of Directors of Sciax in accordance with the
Exchangeable Share Provisions; and
(e) as soon as practicable upon the issuance by Sciax of any Exchangeable
Shares or rights to acquire Exchangeable Shares other than an issuance
pursuant to the Purchase Agreement.
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2.4 DELIVERY OF UGOMEDIA COMMON SHARES. In furtherance of its obligations
hereunder, upon notice of any event which requires the delivery of UgoMedia
Common Shares to any holder of Exchangeable Shares, Ugomedia shall cause its
transfer agent and registrar to effect the transfer and forthwith deliver the
requisite UgoMedia Common Shares to or to the order of the former holder of the
surrendered Exchangeable Shares, as Sciax shall direct. All such UgoMedia Common
Shares shall be duly issued as fully paid and non-assessable and shall be free
and clear of any lien, claim, encumbrance, security interest or adverse claim or
interest.
2.5 EQUIVALENCE. So long as any Exchangeable Shares not owned by UgoMedia or its
Affiliates are outstanding:
(a) Ugomedia will not without prior approval of Sciax and the prior
approval of the holders of the Exchangeable Shares given in accordance
with Section 9.2 of the Exchangeable Share Provisions:
(i) issue or distribute Ugomedia Common Shares (or securities
exchangeable for or convertible into or carrying rights to
acquire shares of UgoMedia Common Shares) to the holders of all
or substantially all of the then outstanding Ugomedia Common
Shares by way of stock dividend or other distribution; or
(ii) issue or distribute rights, options or warrants to the holders of
all or substantially all of the then outstanding Ugomedia Common
Shares entitling them to subscribe for or to purchase Ugomedia
Common Shares (or securities exchangeable for or convertible into
or carrying rights to acquire Ugomedia Common Shares); or
(iii)issue or distribute to the holders of all or substantially all
of the then outstanding Ugomedia Common Shares (A) shares or
securities of UgoMedia of any class other than Ugomedia Common
Shares (other than shares convertible into or exchangeable for or
carrying rights to acquire Ugomedia Common Shares), (B) rights,
options or warrants other than those referred to in Paragraph
2.5(a)(ii) above, (C) evidences of indebtedness of UgoMedia or
(D) assets of UgoMedia,
unless the economic equivalent on a per share basis of such rights,
options, securities, shares, evidences of indebtedness or other assets
is issued or distributed simultaneously, in accordance with all
applicable laws, to holders of the Exchangeable Shares; provided that,
for greater certainty, the above restrictions shall not apply to any
securities issued or distributed by UgoMedia in order to give effect
to and to consummate the transactions contemplated by, and in
accordance with, the Purchase Agreement.
(b) Ugomedia will not without the prior approval of Sciax and the prior
approval of the holders of the Exchangeable Shares given in accordance
with Section 9.2 of the Exchangeable Share Provisions:
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(i) subdivide, redivide or change the then outstanding Ugomedia
Common Shares into a greater number of Ugomedia Common Shares; or
(ii) reduce, combine, consolidate or change the then outstanding
Ugomedia Common Shares into a lesser number of Ugomedia Common
Shares; or
(iii)reclassify or otherwise change Ugomedia Common Shares or effect
an amalgamation, merger, reorganization or other similar
transaction affecting Ugomedia Common Shares,
unless the same or an economically equivalent change as effected in
respect of the UgoMedia Common Shares shall, in accordance with
applicable laws, simultaneously be made to, or in the rights of the
holders of, the Exchangeable Shares.
(c) The Board of Directors of Sciax shall determine, in good faith and in
its sole discretion with the assistance of reputable advisers as
required, economic equivalence for the purposes of any event referred
to in Subsection 2.5(a) or (b) and each such determination shall be
conclusive and binding on UgoMedia. In making each such determination,
the following factors shall, without excluding other factors
determined by the Board of Directors of Sciax to be relevant, be
considered by the Board of Directors of Sciax:
(i) in the case of any stock dividend or other distribution payable
in Ugomedia Common Shares, the number of such shares issued in
proportion to the number of Ugomedia Common Shares previously
outstanding;
(ii) in the case of the issuance or distribution of any rights,
options or warrants to subscribe for or purchase Ugomedia Common
Shares (or securities exchangeable for or convertible into or
carrying rights to acquire Ugomedia Common Shares), the
relationship between the exercise price of each such right,
option or warrant and the Current Market Price;
(iii)in the case of the issuance or distribution of any other form of
property (including without limitation any shares or securities
of UgoMedia of any class other than Ugomedia Common Shares, any
rights, options or warrants other than those referred to in
Paragraph 2.5(c)(ii) above, any evidences of indebtedness of
UgoMedia or any assets of UgoMedia), the relationship between the
fair market value (as determined by the Board of Directors of
Sciax in the manner above contemplated) of such property to be
issued or distributed with respect to each outstanding UgoMedia
Common Share and the Current Market Price;
(iv) in the case of any subdivision, redivision or change of the then
outstanding Ugomedia Common Shares into a greater number of
Ugomedia Common Shares or the reduction, combination,
consolidation or change of the then outstanding Ugomedia Common
Shares into a lesser number of Ugomedia Common Shares or any
amalgamation, merger, reorganization or other similar transaction
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affecting Ugomedia Common Shares, the effect thereof upon the
then outstanding Ugomedia Common Shares; and
(v) in all cases, the general taxation consequences of the relevant
event to holders of Exchangeable Shares to the extent that those
consequences may differ from the taxation consequences to holders
of UgoMedia Common Shares as a result of differences between
taxation laws of Canada and the United States (except for any
differing consequences arising as a result of differing marginal
taxation rates and without regard to the individual circumstances
of holders of Exchangeable Shares).
(d) Sciax agrees that, to the extent required, upon due notice from
UgoMedia, Sciax will use its best efforts to take or cause to be taken
such steps as may be necessary for the purposes of ensuring that
appropriate dividends are paid or other distributions are made by
Sciax, or subdivisions, redivisions or changes are made to the
Exchangeable Shares, in order to implement the required economic
equivalent with respect to the Ugomedia Common Shares and Exchangeable
Shares as provided for in this Section 2.5.
2.6 TENDER OFFERS, ETC. In the event that a tender offer, share exchange offer,
issuer bid, take-over bid or similar transaction with respect to UgoMedia Common
Shares (an "OFFER") is proposed by UgoMedia or is proposed to UgoMedia or its
shareholders and is recommended by the Board of Directors of UgoMedia, or is
otherwise effected or to be effected with the consent or approval of the Board
of Directors of UgoMedia, UgoMedia shall, in good faith, take all such actions
and do all such things as are necessary or desirable to enable and permit
holders of Exchangeable Shares to participate in such Offer to the same extent
and on an equivalent basis as the holders of UgoMedia Common Shares, without
discrimination.
2.7 DUE PERFORMANCE. On and after the Effective Date, UgoMedia and Sub shall
duly and timely perform all of their obligations under the Purchase Agreement
and related agreements in respect of the Reorganization, including any
obligations that may arise under the Exchangeable Share Provisions.
ARTICLE 3
GENERAL
3.1 TERM. This Agreement shall come into force and be effective as of the date
hereof and shall terminate and be of no further force and effect at such time as
no Exchangeable Shares (or securities or rights convertible into or exchangeable
for or carrying rights to acquire Exchangeable Shares) are held by any party
other than UgoMedia and any of its Affiliates.
3.2 CHANGES IN CAPITAL OF UGOMEDIA AND SCIAX. Notwithstanding the provisions of
section 3.4 hereof, at all times after the occurrence of any event effected
pursuant to Section 2.5 or 2.6 hereof, as a result of which either UgoMedia
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, mutatis mutandis, to all new securities
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into which UgoMedia Common Shares or the Exchangeable Shares or both are so
changed, and the parties hereto shall execute and deliver an agreement in
writing giving effect to and evidencing such necessary amendments and
modifications.
3.3 SEVERABILITY. If any provision of this Agreement is held to be invalid,
illegal or unenforceable, the validity, legality or enforceability of the
remainder of this Agreement shall not in any way be affected or impaired thereby
and this Agreement shall be carried out as nearly as possible in accordance with
its original terms and conditions.
3.4 AMENDMENTS, MODIFICATIONS, ETC. This Agreement may not be amended or
modified except by an Agreement in writing executed by Sciax, Sub and Ugomedia
and approved by the holders of the Exchangeable Shares in accordance with
Section 9.2 of the Exchangeable Share Provisions.
3.5 MINISTERIAL AMENDMENTS. Notwithstanding the provisions of Section 3.4
hereof, the parties to this Agreement may in writing, at any time and from time
to time, without the approval of the holders of the Exchangeable Shares, amend
or modify this Agreement for the purposes of:
(a) adding to the covenants of either or both parties for the protection
of the holders of the Exchangeable Shares;
(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 opinion of the board of directors of each of
Sciax, Sub and UgoMedia, it may be expedient to make, provided that
each such board of directors shall be of the opinion that such
amendments or modifications will not be prejudicial to the interests
of the holders of the Exchangeable Shares; or
(c) making such changes or corrections which, on the advice of counsel to
Sciax, Sub and Ugomedia are required for the purpose of curing or
correcting any ambiguity or defect or inconsistent provision or
clerical omission or mistake or manifest error; provided that the
boards of directors of each of Sciax, Sub and Ugomedia shall be of the
opinion that such changes or corrections will not be prejudicial to
the interests of the holders of the Exchangeable Shares.
3.6 MEETING TO CONSIDER AMENDMENTS. Sciax, at the request of UgoMedia or Sub,
shall call a meeting or meetings of the holders of the Exchangeable Shares for
the purpose of considering any proposed amendment or modification requiring
approval of such shareholders. Any such meeting or meetings shall be called and
held in accordance with the by-laws of Sciax, the Exchangeable Share Provisions
and all applicable laws.
3.7 AMENDMENTS ONLY IN WRITING. No amendment to or modification or waiver of any
of the provisions of this Agreement otherwise permitted hereunder shall be
effective unless made in writing and signed by each of the parties hereto.
3.8 ENUREMENT. This Agreement shall be binding upon and enure to the benefit of
the parties hereto and the holders, from time to time, of Exchangeable Shares
and each of their respective heirs, successors and assigns.
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3.9 NOTICES TO PARTIES. All notices and other communications between the parties
shall be in writing and shall be deemed to have been given if delivered
personally or by confirmed telecopy to the parties at the following addresses
(or at such other address for either such party as shall be specified in like
notice):
IF TO UGOMEDIA, SUB OR SCIAX:
233 Carlaw Ave., Suite 401
Toronto, Ontario M4M 3N6
Attention: President
Facsimile: (416) 778-8775
Any notice or other communication given personally shall be deemed to have
been given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of confirmed receipt thereof,
unless such day is not a Business Day, in which case it shall be deemed to have
been given and received upon the immediately following Business Day.
3.10 COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be deemed an original, and all of which taken together shall constitute
one and the same instrument.
3.11 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.
3.12 ATTORNMENT. The parties agree that any action or proceeding arising out of
or relating to this Agreement may be instituted in the courts of Ontario, waive
any objection which they may have now or hereafter to the venue of any such
action or proceeding, irrevocably submit to the jurisdiction of such courts in
any such action or proceeding, agree to be bound by any judgment of such courts
and not to seek, and hereby waive, any review of the merits of any such judgment
by the courts of any other jurisdiction.
IN WITNESS WHEREOF, UgoMedia, Sub and Sciax have caused this Agreement to
be signed by their respective officers thereunder duly authorized, all as of the
date first written above.
UGOMEDIA INTERACTIVE CORPORATION
Per:
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Name: Aldo Rotondi
Title: President
4137639 CANADA INC.
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Per:
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Name: Aldo Rotondi
Title: President
SCIAX TECHNOLOGY INC.
Per:
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Name: Ken Smart
Title: Chief Executive Officer
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