Exhibit 10.6
EXCHANGE RIGHT AGREEMENT
This Agreement is made as of the __ day of February, 2003,
AMONG:
UGOMEDIA INTERACTIVE CORPORATION, a corporation incorporated under the
laws of the State of Nevada (hereinafter referred to as "UGOMEDIA"),
- and -
SCIAX TECHNOLOGY INC., an company incorporated under the laws of
Canada (hereinafter referred to as "SCIAX"),
- and -
4137639 CANADA INC., a company incorporated under the laws of Canada
(hereinafter referred to as "SUB"),
- and -
KEN SMART, a resident of the Province of Ontario (hereinafter referred
to as the "SHAREHOLDER").
RECITALS
A. Concurrently with the execution of this Agreement, Sciax has issued
exchangeable shares in the capital of Sciax (the "EXCHANGEABLE SHARES") and
Ugomedia has issued preferred shares in the capital of Ugomedia ("PREFERRED
SHARES") to the Shareholder in connection with a common stock purchase agreement
dated January 8, 2003, as amended, (the "PURCHASE AGREEMENT") among Sub,
Ugomedia and Sciax, as amended by a shareholder purchase agreement between
Sciax, Ugomedia and Sub dated of even date herewith.
B. Sub is a wholly-owned subsidiary of Ugomedia.
C. The articles of incorporation, as amended by articles of amendment, of Sciax
set forth the rights, privileges, restrictions and conditions attaching to the
Exchangeable Shares (collectively, the "EXCHANGEABLE SHARE PROVISIONS").
NOW THEREFORE IN CONSIDERATION of the premises and the mutual covenants and
agreements hereinafter contained and for other good and valuable consideration
(the receipt and sufficiency of which are hereby acknowledged), the parties
hereto agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS. In this Agreement, the following terms shall have the following
meanings:
"AFFILIATE" has the meaning ascribed thereto in the Canada Business Corporations
Act.
"AUTOMATIC EXCHANGE RIGHT" means the benefit of the obligations of Ugomedia to
effect the automatic exchange of Ugomedia Common Stock for Exchangeable Shares
pursuant to Section 2.10.
"BUSINESS DAY" means any day on which commercial banks are generally open for
business in Toronto, Ontario and New York, New York.
"EXCHANGE RIGHT" has the meaning ascribed thereto in Section 2.1.
"EXCHANGEABLE SHARES" has the meaning ascribed thereto in Recital A and shall
include exchangeable shares in the capital of any successor to Sciax which carry
substantially similar rights, privileges, restrictions and conditions as those
contained in the existing Exchangeable Share Provisions.
"EXCHANGEABLE SHARE PROVISIONS" has the meaning ascribed hereto in Recital C.
"EXCHANGEABLE SHAREHOLDERS" means the holders of Exchangeable Shares shown from
time to time in the register maintained by or on behalf of Sciax in respect of
the Exchangeable Shares.
"INSOLVENCY EVENT" means the institution by Sciax of any proceeding to be
adjudicated a bankrupt or insolvent or to be liquidated, dissolved or wound up,
or the consent of Sciax to the institution of bankruptcy, insolvency,
liquidation, dissolution or winding up proceedings against it, or the filing of
a petition, answer or consent seeking liquidation, dissolution or winding up
under any bankruptcy, insolvency or analogous laws, including without limitation
the Companies Creditors' Arrangement Act (Canada) and the Bankruptcy and
Insolvency Act (Canada), and the failure by Sciax to contest in good faith any
such proceedings commenced in respect of Sciax within 15 days of becoming aware
thereof, or the consent by Sciax to the filing of any such petition or to the
appointment of a receiver, or the making by Sciax of a general assignment for
the benefit of creditors, or the admission in writing by Sciax of its inability
to pay its debts generally as they become due, or Sciax not being permitted,
pursuant to solvency requirements of applicable law, to purchase any Retracted
Shares pursuant to the Exchangeable Share Provisions.
"LIQUIDATION CALL PURCHASE PRICE" has the meaning provided in Subsection
2.11(a).
"LIQUIDATION CALL RIGHT" has the meaning provided in Subsection 2.11(a).
"LIQUIDATION DATE " has the meaning provided in Subsection 2.11(a).
"LIQUIDATION EVENT" has the meaning ascribed thereto in Subsection 2.10(a).
"LIQUIDATION EVENT EFFECTIVE DATE" has the meaning ascribed thereto in
Subsection 2.10(b).
"LIQUIDATION EVENT PURCHASE PRICE" has the meaning ascribed thereto in
Subsection 2.10(b).
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"PREFERRED SHARES" means the shares of preferred stock of Ugomedia at a par
value of US$0.001 per share and any other shares into which such shares may be
changed.
"PURCHASE AGREEMENT" has the meaning ascribed thereto in Recital A.
"REDEMPTION CALL RIGHT" has the meaning ascribed thereto in Subsection 2.12(a).
"REDEMPTION CALL PURCHASE PRICE" has the meaning ascribed thereto in Subsection
2.12(a).
"RETRACTED SHARES" has the meaning ascribed thereto in Section 2.7.
"SHAREHOLDER PURCHASE AGREEMENT" means the shareholder purchase agreement of
even date hereof between Ugomedia, Sciax, Sub and all the shareholders of Sciax.
"SUPPORT AGREEMENT" means a support agreement of even date herewith among
Ugomedia, Sub and Sciax.
"UGOMEDIA COMMON STOCK" means the shares of common stock of Ugomedia and any
other shares into which such shares may be changed.
"UGOMEDIA SUCCESSOR" has the meaning ascribed thereto in Section 3.1.
1.2 OTHER DEFINITIONS. 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.
1.3 HEADINGS; ARTICLE AND SECTION REFERENCES. The division of this Agreement
into Articles, Sections, Subsections and other portions and the insertion of
headings are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement. Unless otherwise indicated,
all references to an "Article", "Section" or "Subsection" followed by a number
and/or a letter refer to the specified Article, Section or Subsection of this
Agreement. The terms "this Agreement", "hereof", "herein" and "hereunder" and
similar expressions refer to this Agreement and not to any particular Article,
Section, Subsection or other portion hereof and include any agreement or
instrument supplementary or ancillary hereto.
1.4 NUMBER AND GENDER. Unless the context requires otherwise, words importing
the singular shall include the plural and vice versa and words importing gender
shall include all genders.
1.5 BUSINESS DAYS. If any action is required to be taken under this Agreement on
a day which is not a Business Day, then such action shall be taken on the next
Business Day.
ARTICLE 2
GRANT
2.1 GRANT OF THE EXCHANGE RIGHT AND AUTOMATIC EXCHANGE RIGHTS. Ugomedia hereby
grants to each of the Exchangeable Shareholders: (i) the right (the "EXCHANGE
RIGHT"), upon the occurrence and during the continuance of (A) an Insolvency
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Event or (B) the failure of Sciax or Sub, as the case may be, by reason other
than an Insolvency Event to purchase the Retracted Shares pursuant to a duly
completed and delivered Retraction Request, to require Ugomedia to purchase from
such Exchangeable Shareholder all or any part of the Exchangeable Shares held by
such Exchangeable Shareholder; and (ii) the Automatic Exchange Rights, all in
accordance with the provisions of this Agreement and the Exchangeable Share
Provisions, as the case may be.
2.2 RESERVATION OF SHARES OF UGOMEDIA COMMON STOCK. Ugomedia hereby confirms
that pursuant to the Support Agreement, Ugomedia has reserved for issuance and
covenanted to, 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 Ugomedia Common Stock (or other shares or
securities into which Ugomedia Common Stock may be reclassified or changed as
contemplated by the Support Agreement) 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 Stock, 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 LEGENDED SHARE CERTIFICATES. Sciax will cause each certificate representing
Exchangeable Shares to bear an appropriate legend notifying the Exchangeable
Shareholders of:
(a) their right to exercise the Exchange Right in respect of the
Exchangeable Shares; and
(b) the Automatic Exchange Rights.
2.4 PURCHASE PRICE. The purchase price payable by Ugomedia for each Exchangeable
Share to be purchased by Ugomedia under the Exchange Right shall be equal to the
Exchangeable Share Price. In connection with each exercise of the Exchange
Rights, Ugomedia will provide to the Exchangeable Shareholders exercising such
rights a certificate of one of its senior officers setting forth the calculation
of the purchase price for each Exchangeable Share. The purchase price for each
Exchangeable Share so purchased may only be satisfied by Ugomedia delivering or
causing to be delivered to an Exchangeable Shareholder the Exchangeable Share
Consideration subject to any applicable withholding taxes and for greater
certainty any Withholding Obligations.
2.5 EXERCISE INSTRUCTIONS. Subject to the terms and conditions herein set forth,
an Exchangeable Shareholder shall be entitled, upon the occurrence and during
the continuance of an event as provided by Subsection 2.1(i)(A) or (B), to
exercise the Exchange Right with respect to all or any part of the Exchangeable
Shares registered in the name of such Exchangeable Shareholder on the books of
Sciax. To exercise the Exchange Right, the Exchangeable Shareholder shall
deliver to Ugomedia, in person or by certified or registered mail, at its
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principal corporate office or at such other place as Ugomedia may from time to
time designate by written notice to the Exchangeable Shareholders, the
certificates representing the Exchangeable Shares which such Exchangeable
Shareholder desires Ugomedia to purchase, duly endorsed in blank, and
accompanied by such other documents and instruments as may be required to effect
a transfer of Exchangeable Shares under applicable law and the by-laws of Sciax
and such additional documents and instruments as Ugomedia may reasonably require
together with (a) a duly completed form of notice of exercise of the Exchange
Right stating: (i) that the Exchangeable Shareholder thereby exercises the
Exchange Right so as to require Ugomedia to purchase from such Exchangeable
Shareholder the number of Exchangeable Shares specified therein; (ii) that such
Exchangeable Shareholder has good title to and owns all such Exchangeable Shares
to be acquired by Ugomedia free and clear of all liens, claims and encumbrances;
(iii) the names in which the certificates representing Ugomedia Common Stock
issuable in connection with the exercise of the Exchange Right are to be issued;
and (iv) the names and addresses of the persons to whom such new certificates
should be delivered, and (b) payment (or evidence of payment satisfactory to
Sciax and Ugomedia) of the taxes, if any, payable as contemplated by Section
2.8. If only a part of the Exchangeable Shares represented by any certificate or
certificates delivered to Ugomedia are to be purchased by Ugomedia under the
Exchange Right, then a new certificate for the balance of such Exchangeable
Shares shall be issued to such Exchangeable Shareholder at the expense of Sciax
and Ugomedia.
2.6 DELIVERY OF UGOMEDIA COMMON STOCK; EFFECT OF EXERCISE. Promptly after
receipt of the certificates representing the Exchangeable Shares which the
Exchangeable Shareholder desires Ugomedia to purchase under the Exchange Right,
together with such documents and instruments of transfer and a duly completed
form of notice of exercise of the Exchange Right and appropriate certificates or
other assurances in respect of any applicable taxes related to the transaction,
duly endorsed for transfer to Ugomedia, subject to Withholding Obligations,
Ugomedia shall deliver or cause to be delivered to the holder of such
Exchangeable Shares (or to such other persons, if any, properly designated by
such Exchangeable Shareholder), the certificates for the number of Ugomedia
Common Stock issuable in connection with the exercise of the Exchange Right,
which shares shall be duly issued as fully paid and non-assessable and shall be
free and clear of any lien, claim or encumbrance, and cheques for the balance,
if any, of the total purchase price therefor (less any amounts withheld on
account of tax required to be deducted and withheld therefrom and for greater
certainty subject to any Withholding Obligations); provided, however, that no
such delivery shall be made unless and until the Exchangeable Shareholder
requesting the same shall have paid (or provided evidence of payment thereof
satisfactory to Sciax and Ugomedia) the taxes, if any, payable as contemplated
by Section 2.8. Immediately upon the giving of notice by the Exchangeable
Shareholder to Ugomedia of the exercise of the Exchange Right, as provided in
this Section, the closing of the transaction of purchase and sale contemplated
by the Exchange Right shall be deemed to have occurred, and the holder of such
Exchangeable Shares shall be deemed to have transferred to Ugomedia all of its
right, title and interest in and to such Exchangeable Shares and the Exchange
Right and the Automatic Exchange Rights attaching thereto and shall cease to be
a holder of such Exchangeable Shares and shall not be entitled to exercise any
of the rights of a holder in respect thereof, other than the right to receive
his proportionate part of the total purchase price therefor, unless the
requisite number of Ugomedia Common Stock (together with a cheque for the
balance, if any, of the total purchase price therefor (less any amounts withheld
on account of tax required to be deducted and withheld therefrom and for greater
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certainty subject to any Withholding Obligations)) is not allotted, issued and
delivered by Ugomedia to such Exchangeable Shareholder (or to such other
persons, if any, properly designated by such Exchangeable Shareholder), within
five (5) Business Days of the date of the giving of such notice by such
Exchangeable Shareholder, in which case the rights of the Exchangeable
Shareholder shall remain unaffected until such Ugomedia Common Stock are so
allotted, issued and delivered by Ugomedia and any such cheque is so delivered
and paid. Concurrently with such Exchangeable Shareholder ceasing to be a holder
of Exchangeable Shares, such Exchangeable Shareholder shall be considered and
deemed for all purposes to be the holder of Ugomedia Common Stock delivered to
it pursuant to the Exchange Right.
2.7 EXERCISE OF EXCHANGE RIGHT SUBSEQUENT TO RETRACTION. In the event that an
Exchangeable Shareholder has exercised its right under the Exchangeable Share
Provisions to require Sciax to retract any or all of the Exchangeable Shares
held by such Exchangeable Shareholder (the "RETRACTED SHARES") and is notified
by Sciax pursuant to the Exchangeable Share Provisions that Sciax will not be
permitted as a result of solvency requirements of applicable law to purchase all
such Retracted Shares, and provided that Sub shall not have exercised the
Retraction Call Right with respect to the Retracted Shares and that the
Exchangeable Shareholder has not revoked the retraction request delivered by the
Exchangeable Shareholder to Sciax pursuant to the Exchangeable Share Provisions,
the retraction request will constitute and will be deemed to constitute notice
from the Exchangeable Shareholder to Ugomedia to exercise the Exchange Right
with respect to those Retracted Shares which Sciax is unable to purchase.
2.8 STAMP OR OTHER TRANSFER TAXES. Upon any sale of Exchangeable Shares to
Ugomedia pursuant to the Exchange Right or the Automatic Exchange Rights, the
share certificate or certificates representing Ugomedia Common Stock to be
delivered in connection with the payment of the total purchase price therefor
shall be issued in the name of the Exchangeable Shareholder of the Exchangeable
Shares so sold or in such names as such Exchangeable Shareholder may otherwise
direct in writing without charge to the Exchangeable Shareholder of the
Exchangeable Shares so sold; provided, however, that any delivery of Ugomedia
Common Stock shall be subject to Withholding Obligations and such Exchangeable
Shareholder: (a) shall pay (and neither Ugomedia nor Sciax shall be required to
pay) any documentary, stamp, transfer, withholding or other taxes that may be
payable in respect of any transfer, issuance or delivery of such shares to a
person other than such Exchangeable Shareholder; or (b) shall have established,
to the satisfaction of Ugomedia and Sciax, that such taxes, if any, have been
paid. The Shareholder agrees that Ugomedia, Sub and Sciax shall be entitled to
rights of withholding in respect of applicable taxes triggered upon the payment
of a dividend or consideration otherwise payable to any holder of Exchangeable
Shares, as more particularly set forth in the Exchangeable Share Provisions.
2.9 NOTICE OF INSOLVENCY EVENT. Immediately upon the occurrence of an Insolvency
Event or any event which with the giving of notice or the passage of time or
both would be an Insolvency Event, Sciax, Sub and Ugomedia shall give written
notice thereof to each Exchangeable Shareholder, at the expense of Ugomedia,
which notice shall contain a brief statement of the right of the Exchangeable
Shareholders with respect to the Exchange Right.
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2.10 AUTOMATIC EXCHANGE ON LIQUIDATION OF UGOMEDIA.
(a) Ugomedia will give each Exchangeable Shareholder written notice of
each of the following events (each a "LIQUIDATION EVENT") at the time
set forth below:
(i) in the event of any determination by the board of directors of
Ugomedia to institute voluntary liquidation, dissolution or
winding-up proceedings with respect to Ugomedia or to effect any
other distribution of assets of Ugomedia among its stockholders
for the purpose of winding up it affairs, at least 60 days prior
to the proposed effective date of such liquidation, dissolution,
winding-up or other distribution; and
(ii) immediately, upon the earlier of:
(A) receipt by Ugomedia of notice of; and
(B) Ugomedia's 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 Ugomedia or to
effect any other distribution of assets of Ugomedia among
its stockholders for the propose of winding up its affairs.
Such notice shall include a brief description of the automatic
exchange of Exchangeable Shares for Ugomedia Common Stock provided for
in Subsection 2.10(b).
(b) In order for the Exchangeable Shareholders to be able to participate
on a pro rata basis with the holders of Ugomedia Common Stock in the
distribution of assets of Ugomedia in connection with a Liquidation
Event, immediately prior to the earlier of (i) the 5th Business Day
prior to the effective date of a Liquidation Event, and (ii) the
record date of such distribution of assets (the "LIQUIDATION EVENT
EFFECTIVE DATE") each of the then outstanding Exchangeable Shares
shall be automatically exchanged for one share of Ugomedia Common
Stock. To effect such automatic exchange, Ugomedia shall purchase each
Exchangeable Share outstanding on the Liquidation Event Effective Date
held by Exchangeable Shareholders, and each Exchangeable Shareholder
shall sell the Exchangeable Shares held by it at such time to
Ugomedia, for an amount per share equal to the Exchangeable Share
Price applicable on the last Business Day prior to the Liquidation
Event Effective Date (the "LIQUIDATION EVENT PURCHASE PRICE"). In
connection with each exercise of the Automatic Exchange Rights,
Ugomedia will provide to the Exchangeable Shareholders exercising such
rights a certificate of one of its senior officers setting forth the
calculation of the Liquidation Event Purchase Price. The Liquidation
Event Purchase Price may only be satisfied by Ugomedia delivering or
causing to be delivered to an Exchangeable Shareholder the
Exchangeable Share Consideration, subject to any applicable
withholding taxes and for greater certainty any Withholding
Obligation.
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(c) On the Liquidation Event Effective Date the closing of the transaction
of purchase and sale contemplated by the automatic exchange of
Exchangeable Shares for Ugomedia Common Stock shall be deemed to have
occurred, and each Exchangeable Shareholder of Exchangeable Shares
shall be deemed to have transferred to Ugomedia all of such
Exchangeable Shareholder's right, title and interest in and to such
Exchangeable Shares and the Exchange Right and the Automatic Exchange
Rights attaching thereto, except that each Exchangeable Shareholder
shall have the right to receive such holder's proportionate part of
the total Liquidation Event Purchase Price payable to such
Exchangeable Shareholder by Ugomedia, subject to any applicable
withholding taxes and for greater certainty any Withholding
Obligations, upon presentation and surrender by such Exchangeable
Shareholder of Exchangeable Share certificates deemed to represent
Ugomedia Common Stock, duly endorsed in blank and accompanied by such
instruments of transfer as Ugomedia may reasonably require.
Concurrently with such Exchangeable Shareholders ceasing to be a
holder of Exchangeable Shares, such Exchangeable Shareholders shall be
considered and deemed for all purposes to be the holders of Ugomedia
Common Stock issued to them pursuant to the automatic exchange of
Exchangeable Shares for Ugomedia Common Stock and the certificates
held by the Exchangeable Shareholders previously representing the
Exchangeable Shares exchanged by the Exchangeable Shareholder with
Ugomedia pursuant to such automatic exchange shall thereafter be
deemed to represent the Ugomedia Common Stock issued to the
Exchangeable Shareholder by Ugomedia pursuant to such automatic
exchange.
2.11 UGOMEDIA LIQUIDATION CALL RIGHT
(a) Ugomedia and Sub shall have the overriding right (the "LIQUIDATION
CALL RIGHT"), in the event of and notwithstanding the liquidation,
dissolution or winding-up of Sciax or any other distribution of the
assets of Sciax among its shareholders for the purpose of winding-up
its affairs set forth in Section 5.1 of the Exchangeable Share
Provisions (the "LIQUIDATION DATE"), to purchase from all but not less
than all, of the holders of Exchangeable Shares on the Liquidation
Date (other than Ugomedia or any Affiliate thereof) all but not less
than all of the Exchangeable Shares held by each such holder on
payment by Ugomedia or Sub to each holder of the Exchangeable Share
Price applicable on the last Business Day prior to the Liquidation
Date (the "LIQUIDATION CALL PURCHASE PRICE"), which as provided in
this section 2.11, shall be fully paid and satisfied by the delivery
by or on behalf of Ugomedia or Sub, as the case may be, of the
Exchangeable Share Consideration representing the Liquidation Call
Purchase Price, subject to any applicable withholding taxes and for
greater certainty any Withholding Obligations. In the event of the
exercise of the Liquidation Call Right by Ugomedia or Sub, each holder
shall be obligated to sell all the Exchangeable Shares held by the
holder to Ugomedia or Sub on the Liquidation Event Effective Date on
payment by Ugomedia or Sub to the holder of the Exchange Share
Consideration representing the Liquidation Call Purchase Price for
each such share, subject to any applicable withholding taxes and for
greater certainty any Withholding Obligations.
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(b) To exercise the Liquidation Call Right, Ugomedia or Sub, as the case
may be, must notify the holders of Exchangeable Shares, and Sciax of
its intention to exercise such right at least 60 days before the
Liquidation Date in the case of a voluntary liquidation, dissolution
or winding-up of Sciax and at least five Business Days before the
Liquidation Date in the case of an involuntary liquidation,
dissolution or winding-up of Sciax. If Ugomedia or Sub exercises the
Liquidation Call Right, on the Liquidation Date, Ugomedia or Sub, as
the case may be, will purchase and the holders will sell all of the
Exchangeable Shares then outstanding for the Exchangeable Share
Consideration representing the total Liquidation Call Purchase Price,
subject to any applicable withholding taxes and for greater certainty
any Withholding Obligations.
(c) Provided that Ugomedia or Sub exercise the Liquidation Call Right in
the manner described above, the right of each holder of Exchangeable
Shares will be limited to receiving such holder's proportionate share
of the Exchangeable Share Consideration representing the total
Liquidation Call Purchase Price payable by Ugomedia or Sub without
interest (subject to applicable withholding taxes and for greater
certainty any Withholding Obligations) upon presentation and surrender
by the holder of certificates representing the Exchangeable Shares
held by such holder and the holder shall on and after the Liquidation
Date be considered and deemed for all purposes to be the holder of the
Ugomedia Common Stock delivered to it. Upon surrender to Ugomedia or
Sub of a certificate or certificates representing the Exchangeable
Shares, together with such other documents and instruments as may be
required to effect a transfer of Exchangeable Shares under the Act and
the by-laws of Sciax and such additional documents and instruments as
Ugomedia or Sub may reasonably require, the holder of such surrendered
certificate or certificates shall be entitled to receive in exchange
therefor, and Ugomedia or Sub shall transfer to such holder, the
Exchangeable Share Consideration to which the holder is entitled,
subject to any applicable withholding taxes and for greater certainty
any Withholding Obligations. If Ugomedia or Sub does not exercise the
Liquidation Call Right in the manner described above, on the
Liquidation Date the holders of the Exchangeable Shares will be
entitled to receive in exchange therefor the Exchangeable Share
Consideration representing the Liquidation Amount otherwise payable by
Sciax in connection with the liquidation, dissolution or winding-up of
Sciax pursuant to Article 5 of the Exchangeable Share Provisions,
subject to any applicable withholding taxes and for greater certainty
any Withholding Obligations.
2.12 UGOMEDIA REDEMPTION CALL RIGHT.
(a) Ugomedia and Sub shall have the overriding right (the "REDEMPTION CALL
RIGHT"), notwithstanding the proposed redemption of the Exchangeable
Shares by Sciax pursuant to Article 7 of the Exchangeable Share
Provisions, to purchase from all, but not less than all, of the
holders of Exchangeable Shares on the Automatic Redemption Date (other
than Ugomedia or any Affiliate thereof) all but not less than all of
the Exchangeable Shares held by each such holder on payment by
Ugomedia or Sub to the holder of the Exchangeable Share Price
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applicable on the last Business Day prior to the Automatic Redemption
Date (the "REDEMPTION CALL PURCHASE PRICE"), which as provided in this
section 2.12, shall be fully paid and satisfied by the transfer of the
Exchangeable Share Consideration representing the Redemption Call
Purchase Price to the holders of Exchangeable Shares, subject to any
applicable withholding taxes and for greater certainty any Withholding
Obligations. In the event of the exercise of the Redemption Call Right
by Ugomedia or Sub, each holder shall be obligated to sell all the
Exchangeable Shares held by the holder to Ugomedia or Sub on the
Automatic Redemption Date on payment by Ugomedia or Sub to the holder
of the Exchangeable Share Consideration representing the Redemption
Call Purchase Price for each such share, subject to any applicable
withholding taxes and for greater certainty any Withholding
Obligations.
(b) To exercise the Redemption Call Right, Ugomedia or Sub must notify the
Shareholder and Sciax of its intention to exercise such right at least
60 days before the Automatic Redemption Date. If Ugomedia or Sub
exercises the Redemption Call Right, on the Automatic Redemption Date,
Ugomedia or Sub will purchase and the Shareholder will sell all of the
Exchangeable Shares then outstanding for the Exchangeable Share
Consideration representing the total Redemption Call Purchase Price,
subject to any applicable withholding taxes and for greater certainty
any Withholding Obligations.
(c) Provided that Ugomedia or Sub exercise the Redemption Call Right in
the manner described below, on and after the Automatic Redemption Date
the rights of each holder of Exchangeable Shares will be limited to
receiving such holder's proportionate share of the Exchangeable Share
Consideration representing the total Redemption Call Purchase Price
payable by Ugomedia or Sub (subject to applicable withholding taxes
and for greater certainty any Withholding Obligations) upon
presentation and surrender by the holder of certificates representing
the Exchangeable Shares held by such holder and the holder shall on
and after the Automatic Redemption Date be considered and deemed for
all purposes to be the holder of the Exchangeable Share Consideration
delivered to such holder. Upon surrender to Ugomedia or Sub of a
certificate or certificates representing Exchangeable Shares, together
with such other documents and instruments as may be required to effect
a transfer of Exchangeable Shares under the Act and the by-laws of
Sciax and Ugomedia and such additional documents and instruments as
Ugomedia or Sub may reasonably require, the holder of such surrendered
certificate or certificates shall be entitled to receive in exchange
therefor, the Exchangeable Share Consideration to which the holder is
entitled, subject to any applicable withholding taxes and for greater
certainty any Withholding Obligations. If Ugomedia or Sub does not
exercise the Redemption Call Right in the manner described above, on
the Automatic Redemption Date the holders of the Exchangeable Shares
will be entitled to receive in exchange therefor the Exchangeable
Share Consideration representing the Redemption Price otherwise
payable by Sciax in connection with the redemption of the Exchangeable
Shares pursuant to Article 7 of the Exchangeable Share Provisions,
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subject to any applicable withholding taxes and for greater certainty
any Withholding Obligations.
2.13 REDEMPTION OF PREFERRED SHARES. Upon the exchange, purchase or redemption
of the Exchangeable Shares pursuant to any of the provisions of Article 2 hereof
or pursuant to the Exchangeable Share Provisions, the holders of the
Exchangeable Shares shall offer for redemption by Ugomedia 0.25 of a Preferred
Share for every Exchangeable Share to be exchanged, purchased or redeemed in
accordance thereof, and Ugomedia hereby agrees to redeem such Preferred Shares,
without any additional consideration for such redemption paid to the holder of
the Preferred Shares. The holders of the Exchangeable Shares shall surrender to
Ugomedia or Sub a certificate or certificates representing the Preferred Shares
to be redeemed, together with such other documents and instruments as may be
required to effect a redemption of Preferred Shares under the Act and the
by-laws of Ugomedia and such additional documents and instruments as Ugomedia or
Sub may reasonably require.
2.14 WARRANTY OF UGOMEDIA. Ugomedia hereby represents, warrants and covenants
that it has reserved for issuance and will at all times keep available, free
from pre-emptive and other rights, out of its authorized and unissued capital
stock such number of shares of Ugomedia Common Stock as are now and may
hereafter be required to enable and permit Sciax to meet its obligations
hereunder, under the Support Agreement, under the Exchangeable Share Provisions
and under any other security or commitment pursuant to which Ugomedia may now or
hereafter be required to issue shares of Ugomedia Common Stock.
ARTICLE 3
UGOMEDIA SUCCESSORS
3.1 UGOMEDIA REORGANIZATIONS. Ugomedia shall not enter into any transaction
(whether by way of reconstruction, reorganization, consolidation, merger,
transfer, sale, lease or otherwise) whereby all or substantially all of its
undertaking, property and assets would become the property of any other person
or, in the case of a merger, of the continuing corporation resulting therefrom
unless (i) such other person or continuing corporation, (the "UGOMEDIA
SUCCESSOR"), by operation of law becomes, without an additional act on its part,
bound by the terms and provisions of this Agreement or, if not so bound,
executes, prior to or contemporaneously with the consummation of such
transaction an agreement supplemental hereto and such other instruments, if any,
as are necessary or advisable to evidence the assumption by the Ugomedia
Successor of all obligations of Ugomedia under this Agreement and (ii) such
transactions shall be upon such terms as substantially to preserve and not to
impair in any material respect any of the rights, duties, powers and authorities
of the Exchangeable Shareholders hereunder.
3.2 VESTING OF POWERS IN SUCCESSOR. Whenever the conditions of Section 3.1 have
been duly observed and performed, the Ugomedia Successor, Sub and Sciax shall
execute the necessary supplemental agreement, if any is required by Section 3.1
(and give notice thereof to the Exchangeable Shareholders) and thereupon the
Ugomedia Successor shall possess and from time to time may exercise each and
every right and power of Ugomedia under this Agreement in the name of Ugomedia
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or otherwise and any act or proceeding by any provision of this Agreement
required to be done or performed by the board of directors of Ugomedia or any
officers of Ugomedia may be done and performed with like force and effect by the
directors or officers of such Ugomedia Successor.
3.3 WHOLLY-OWNED SUBSIDIARIES. Nothing herein shall be construed as preventing
the amalgamation or merger of any wholly-owned subsidiary of Ugomedia with or
into Ugomedia or the winding up, liquidation or dissolution of any wholly-owned
subsidiary of Ugomedia provided that all the assets of such subsidiary are
transferred to Ugomedia or another wholly-owned subsidiary of Ugomedia and
provided that such event is not in any way prejudicial to the rights or
interests of the holders of Exchangeable Shares and provided that any such
transactions are expressly permitted by this Article 3.
ARTICLE 4
GENERAL
4.1 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 person
other than Ugomedia and any of its Affiliates.
4.2 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.
4.3 AMENDMENTS, MODIFICATIONS. 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 Article 9
of the Exchangeable Share Provisions. At all times after the occurrence of a
permitted event as a result of which either the shares of Ugomedia Common Stock
or the Exchangeable Shares or both are in any way changed, this Agreement shall
forthwith be amended and modified as necessary in order that it will apply with
full force and effect, mutatis mutandis, to all new securities into which
Ugomedia Common Stock or Exchangeable Shares or both are so changed.
4.4 MINISTERIAL AMENDMENTS. Notwithstanding the provisions of Section 4.3, 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 any or all 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 good faith 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 good faith
opinion that such amendments or modifications will not be prejudicial
to the rights or interests of the holders of the Exchangeable Shares;
or
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(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
good faith opinion that such changes or corrections will not be
prejudicial to the rights or interests of the holders of the
Exchangeable Shares.
4.5 MEETING TO CONSIDER AMENDMENTS. Sciax, at the request of Ugomedia, 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
pursuant to Section 4.3 hereof. 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.
4.6 ENUREMENT. This Agreement shall be binding upon and enure to the benefit of
the parties hereto and their respective heirs, representatives, heirs,
representatives, successors and permitted assigns.
4.7 NOTICES TO PARTIES. All notices and other communications between the parties
to this Agreement shall be in writing and shall be deemed to have been given if
delivered personally or by confirmed telecopy at the following addresses (or at
such other address for any such party as shall be specified in like notice):
(i) to Ugomedia, Sub and Sciax:
233 Carlaw Ave., Suite 401
Toronto, Ontario M4M 3N6
Attention: Ken Smart
Facsimile: (416) 778-8775
(ii) to the Shareholder, to the address set forth in the
Shareholder Purchase Agreement executed by the parties on the
date hereof.
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.
4.8 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.
4.9 GOVERNING LAWS. This Agreement shall be governed in accordance with the laws
of the Province of Ontario and the federal laws applicable therein.
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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
UGOMEDIA INTERACTIVE
CORPORATION
Per:
-------------------------------------
Name:
Title:
SCIAX TECHNOLOGY INC.
Per:
-------------------------------------
Name:
Title:
4137639 CANADA INC.,
Per:
-------------------------------------
Name:
Title:
- ------------------------------- -----------------------------------
WITNESS KEN SMART
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