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EXHIBIT 10.21
VOTING AND EXCHANGE TRUST AGREEMENT
MEMORANDUM OF AGREEMENT made as of the -- day of November, 1996.
B E T W E E N:
SOURCE MEDIA, INC.,
a corporation subsisting under the
laws of the State of Delaware,
(hereinafter referred to as "Source"),
OF THE FIRST PART,
- and -
CABLESHARE INC.,
a corporation subsisting under the laws
of the Province of Ontario,
(hereinafter referred to as "Cableshare"),
OF THE SECOND PART,
- and -
-- TRUST COMPANY,
a trust company incorporated under the
laws of --,
(hereinafter referred to as the "Trustee"),
OF THE THIRD PART.
WHEREAS pursuant to an arrangement agreement (the "Arrangement Agreement")
dated as of November 13, 1996 between Source and Cableshare, the parties agreed
that Source and Cableshare would execute and deliver a voting and exchange trust
agreement forthwith following the filing of articles of arrangement to give
effect to the arrangement referred to therein, such voting and exchange trust
agreement to contain the terms and conditions set forth in Exhibit 6 to the
Arrangement Agreement together with such other terms and conditions as may be
customary for agreements of a similar nature and as may be agreed to by the
parties to the Arrangement Agreement, acting reasonably;
AND WHEREAS pursuant to an arrangement (the "Arrangement") effected by
articles of arrangement dated -- , 1996 filed pursuant to the Business
Corporations Act (Ontario), each shareholder of Cableshare who properly elected
to do so received Exchangeable Non-Voting Shares in the capital of Cableshare
("Exchangeable Shares") for the issued and outstanding Class A Subordinate
Voting Shares in the capital of Cableshare ("Class A Shares") and the issued and
outstanding Class B Multiple Voting Shares in the capital of Cableshare ("Class
B Shares") held by such shareholder, in a ratio determined pursuant to the
Arrangement Agreement;
AND WHEREAS pursuant to the Arrangement, each other shareholder of
Cableshare (other than those who properly exercised dissent rights and will
become entitled to be paid the fair value of the Cableshare shares held by them
and other than IT Network, Inc. and 997758 Ontario Inc. (the "Source
Affiliates")), received issued and outstanding shares of the Common Stock of
Source ("Source Common Shares"), in a
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ratio determined pursuant to the Arrangement Agreement in exchange for the
issued and outstanding Class A Shares and Class B Shares held by such
shareholder;
AND WHEREAS pursuant to the Arrangement and immediately following the
above-mentioned exchanges and conversions of shares, each issued and outstanding
Class A Share and Class B Share was converted into one common share in the
capital of Cableshare (a "Cableshare New Common Share");
AND WHEREAS pursuant to the Arrangement and the exchanges and conversions
of shares referred to above, Source holds all of the issued and outstanding
shares of Cableshare other than the issued and outstanding Exchangeable Shares;
AND WHEREAS the above-mentioned articles of arrangement set forth the
rights, privileges, restrictions and conditions (collectively the "Share
Provisions") attaching to the Exchangeable Shares;
AND WHEREAS Source is to provide voting rights in Source to each holder
(other than Source, its subsidiaries and Affiliates) from time to time of
Exchangeable Shares, such voting rights per Exchangeable Share to be equivalent
to the voting rights per Source Common Share;
AND WHEREAS Source is to grant to and in favour of the holders (other than
Source, its subsidiaries and Affiliates) from time to time of Exchangeable
Shares the right, in the circumstances set forth herein, to require Source to
purchase from each such holder all but not less than all the Exchangeable Shares
held by the holder;
AND WHEREAS the parties hereto desire to make appropriate provisions and to
establish a procedure whereby votes at Source Meetings shall be exercisable by
holders (other than Source, its subsidiaries and Affiliates) from time to time
of Exchangeable Shares by and through the Trustee, which will hold legal title
to the Source Special Voting Share to which voting rights attach for the benefit
of such holders, and whereby the right to require Source to purchase
Exchangeable Shares from the holders thereof (other than Source, its
subsidiaries and Affiliates) shall be exercisable by such holders from time to
time of Exchangeable Shares by and through the Trustee, which will hold legal
title to such right for the benefit of such holders;
AND WHEREAS these recitals and any statements of fact in this trust
agreement are made by Source and Cableshare and not by the Trustee;
NOW THEREFORE in consideration of the respective covenants and agreements
provided in this agreement and for other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties agree as
follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS. In this trust agreement, the following terms shall have the
following meanings:
"AFFILIATE" of any person means any other person directly or indirectly
controlled by, or under control of, that person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control of"), as applied to any person,
means the possession by another person, directly or indirectly, of the
power to direct or cause the direction of the management and policies of
that first mentioned person, whether through the ownership of voting
securities, by contract or otherwise.
"AUTOMATIC EXCHANGE RIGHTS" means the benefit of the obligation of Source
to effect the automatic exchange of Source Common Shares for Exchangeable
Shares pursuant to section 5.12.
"BENEFICIARIES" means the registered holders from time to time of
Exchangeable Shares, other than Source, its subsidiaries and Affiliates.
"BENEFICIARY VOTES" has the meaning ascribed thereto in section 4.2.
"BOARD OF DIRECTORS" means the Board of Directors of Cableshare.
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"BUSINESS DAY" means a day other than a Saturday, a Sunday or a statutory
holiday in the City of Toronto, Ontario or the City of Dallas, Texas.
"CANADIAN DOLLAR EQUIVALENT" means in respect of an amount expressed in a
foreign currency (the "Foreign Currency Amount") at any date the product
obtained by multiplying (a) the Foreign Currency Amount by (b) the noon
spot exchange rate on such date for such foreign currency expressed in
Canadian dollars as reported by the Bank of Canada or, in the event such
spot exchange rate is not available, such exchange rate on such date for
such foreign currency expressed in Canadian dollars as may be deemed by
the Board of Directors to be appropriate for such purpose.
"CURRENT MARKET PRICE" means, in respect of a Source Common Share on any
date, the Canadian Dollar Equivalent of the average of the closing bid and
asked prices of Source Common Shares during a period of 20 consecutive
trading days ending not more than five trading days before date on the
National Market System of the National Association of Securities Dealers
Automated Quotation System, or, if Source Common Shares are not then
quoted on the National Market System of the National Association of
Securities Dealers Automated Quotation System, on such other stock
exchange or automated quotation system on which Source Common Shares are
listed or quoted, as the case may be, as may be selected by the Board of
Directors for such purpose; provided, however, that if in the opinion of
the Board of Directors the public distribution or trading activity of
Source Common Shares during such period does not create a market which
reflects the fair market value of a Source Common Share, then the Current
Market Price of a Source Common Share shall be determined by the Board of
Directors based upon the advice of such qualified independent financial
advisors as the Board of Directors of Source may deem to be appropriate,
and provided further that any such selection, opinion or determination by
the Board of Directors shall be conclusive and binding.
"EXCHANGE RIGHT" has the meaning ascribed thereto in section 5.1.
"INSOLVENCY EVENT" means the institution by Cableshare of any proceeding
to be adjudicated a bankrupt or insolvent or to be wound up, or the
consent of Cableshare to the institution of bankruptcy, insolvency or
winding-up proceedings against it, or the filing of a petition, answer or
consent seeking dissolution or winding-up under any bankruptcy, insolvency
or analogous laws, including without limitation the Companies Creditors'
Arrangement Act (Canada) and the Bankruptcy and Insolvency Act (Canada),
and the failure by Cableshare to contest in good faith any such
proceedings commenced in respect of Cableshare within 15 days of becoming
aware thereof, or the consent by Cableshare to the filing of any such
petition or to the appointment of a receiver, or the making by Cableshare
of a general assignment for the benefit of creditors, or the admission in
writing by Cableshare of its inability to pay its debts generally as they
become due, or Cableshare not being permitted, pursuant to solvency
requirements of applicable law, to redeem any Retracted Shares pursuant to
Section 6.6 of the Share Provisions.
"LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in the Plan of
Arrangement.
"LIQUIDATION EVENT" has the meaning ascribed thereto in section 5.12(b).
"LIQUIDATION EVENT EFFECTIVE DATE" has the meaning ascribed thereto in
section 5.12(c).
"LIST" has the meaning ascribed thereto in section 4.6.
"OFFICER'S CERTIFICATE" means, with respect to Source or Cableshare, as
the case may be, a certificate signed by any one of the Chairman of the
Board, the Vice-Chairman of the Board, the President, any Vice-President
or any other senior officer of Source or Cableshare, as the case may be.
"PERSON" includes an individual, partnership, corporation, company,
unincorporated syndicate or organization, trust, trustee, executor,
administrator and other legal representative.
"PLAN OF ARRANGEMENT" means the plan of arrangement of Cableshare
providing for the Arrangement.
"REDEMPTION CALL RIGHT" has the meaning ascribed thereto in the Share
Provisions.
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"RETRACTED SHARES" has the meaning ascribed thereto in section 5.7.
"RETRACTION CALL RIGHT" has the meaning ascribed thereto in the Share
Provisions.
"SOURCE AFFILIATES" means Affiliates of Source.
"SOURCE COMMON SHARE" means one share of Source Common Stock, U.S.$0.001
par value.
"SOURCE CONSENT" has the meaning ascribed thereto in section 4.2.
"SOURCE MEETING" has the meaning ascribed thereto in section 4.2.
"SOURCE SPECIAL VOTING SHARE" means the one share of Special Voting Stock
of Source, which entitles the holder of record to a number of votes at
meetings of holders of Source Common Shares equal to the number of
Exchangeable Shares outstanding from time to time (other than Exchangeable
Shares held by Source and its Affiliates), which share is to be issued to,
deposited with, and voted by, the Trustee as described herein.
"SOURCE SUCCESSOR" has the meaning ascribed thereto in section 11.1(a).
"SUPPORT AGREEMENT" means that certain support agreement made as of even
date hereto between Cableshare and Source.
"TRUST" means the trust created by this agreement.
"TRUST ESTATE" means the Source Special Voting Share, any other
securities, the Exchange Right, the Automatic Exchange Rights and any
money or other property which may be held by the Trustee from time to time
pursuant to this trust agreement.
"TRUSTEE" means -- Trust Company and, subject to the provisions of
Article 10, includes any successor trustee.
"VOTING RIGHTS" means the voting rights attached to the Source Special
Voting Share.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC. The division of this trust
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 trust 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 trust agreement is not a Business Day, such action shall be
required to be taken on the next succeeding Business Day.
ARTICLE 2
PURPOSE OF AGREEMENT
2.1 ESTABLISHMENT OF TRUST. The purpose of this trust agreement is to create
the Trust for the benefit of the Beneficiaries, as herein provided. The Trustee
will hold the Source Special Voting Share in order to enable the Trustee to
exercise the Voting Rights and will hold the Exchange Right and the Automatic
Exchange Rights in order to enable the Trustee to exercise such rights, in each
case as trustee for and on behalf of the Beneficiaries as provided in this trust
agreement.
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ARTICLE 3
SOURCE SPECIAL VOTING SHARE
3.1 ISSUE AND OWNERSHIP OF THE SOURCE SPECIAL VOTING SHARE. Source hereby
issues to and deposits with the Trustee the Source Special Voting Share to be
hereafter held of record by the Trustee as trustee for and on behalf of, and for
the use and benefit of, the Beneficiaries and in accordance with the provisions
of this trust agreement. Source hereby acknowledges receipt from the Trustee as
trustee for and on behalf of the Beneficiaries of good and valuable
consideration (and the adequacy thereof) for the issuance of the Source Special
Voting Share by Source to the Trustee. During the term of the Trust and subject
to the terms and conditions of this trust agreement, the Trustee shall possess
and be vested with full legal ownership of the Source Special Voting Share and
shall be entitled to exercise all of the rights and powers of an owner with
respect to the Source Special Voting Share provided that the Trustee shall:
(a) hold the Source Special Voting Share and the legal title thereto as
trustee solely for the use and benefit of the Beneficiaries in
accordance with the provisions of this trust agreement; and
(b) except as specifically authorized by this trust agreement, have no
power or authority to sell, transfer, vote or otherwise deal in or
with the Source Special Voting Share and the Source Special Voting
Share shall not be used or disposed of by the Trustee for any purpose
other than the purposes for which this Trust is created pursuant to
this trust agreement.
3.2 LEGENDED SHARE CERTIFICATES. Cableshare will cause each certificate
representing Exchangeable Shares to bear an appropriate legend notifying the
Beneficiaries of their right to instruct the Trustee with respect to the
exercise of the Voting Rights with respect to the Exchangeable Shares held by
the Beneficiary.
3.3 SAFE KEEPING OF CERTIFICATE. The certificate representing the Source
Special Voting Share shall at all times be held in safe keeping by the Trustee.
ARTICLE 4
EXERCISE OF VOTING RIGHTS
4.1 VOTING RIGHTS. The Trustee, as the holder of record of the Source Special
Voting Share, shall be entitled to all of the Voting Rights, including the right
to consent to or to vote in person or by proxy the Source Special Voting Share
on any matter, question or proposition whatsoever that may properly come before
the shareholders of Source at a Source Meeting or in connection with a Source
Consent (in each case, as hereinafter defined). The Voting Rights shall be and
remain vested in and exercised by the Trustee. Subject to section 7.15 hereof,
the Trustee shall exercise the Voting Rights only:
(a) on the basis of instructions received pursuant to this Article 4 from
Beneficiaries entitled to instruct the Trustee as to the voting
thereof at the time at which Source Consent is effective or Source
Meeting is held; or
(b) to the extent that no instructions are received from a Beneficiary
with respect to the Voting Rights to which such Beneficiary is
entitled, the Trustee shall not exercise or permit the exercise of
such Voting Rights.
4.2 NUMBER OF VOTES. With respect to all meetings of shareholders of Source
at which holders of Source Common Shares are entitled to vote (a "Source
Meeting") and with respect to all written consents sought by Source from its
shareholders including the holders of Source Common Shares (a "Source Consent"),
each Beneficiary shall be entitled to instruct the Trustee to cast and exercise
one of the votes comprised in the Voting Rights for each Exchangeable Share
owned of record by such Beneficiary on the record date established by Source or
by applicable law for such Source Meeting or Source Consent, as the case may be
(the "Beneficiary Votes") in respect of each matter, question or proposition to
be voted on at such Source Meeting or to be consented to in connection with such
Source Consent.
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4.3 MAILINGS TO SHAREHOLDERS. With respect to each Source Meeting and Source
Consent, the Trustee will mail or cause to be mailed (or otherwise communicate
in the same manner as Source utilizes in communications to holders of Source
Common Shares) to each of the Beneficiaries named in the List referred to in
section 4.6 on the same day as the initial mailing or notice (or other
communication) with respect thereto is given by Source to its shareholders:
(a) a copy of such notice, together with any related materials to be
provided to shareholders of Source;
(b) a statement that such Beneficiary is entitled to instruct the Trustee
as to the exercise of the Beneficiary Votes with respect to such
Source Meeting or Source Consent, as the case may be, or, pursuant to
section 4.7, to attend such Source Meeting and to exercise personally
the Beneficiary Votes thereat;
(c) a statement as to the manner in which such instructions may be given
to the Trustee, including an express indication that instructions may
be given to the Trustee to give:
(i) a proxy to such Beneficiary or his designee to exercise
personally the Beneficiary Votes; or
(ii) a proxy to a designated agent or other representative of the
management of Source to exercise such Beneficiary Votes;
(d) a statement that if no such instructions are received from the
Beneficiary, the Beneficiary Votes to which such Beneficiary is
entitled will not be exercised;
(e) a form of direction whereby the Beneficiary may so direct and
instruct the Trustee as contemplated herein; and
(f) a statement of the time and date by which such instructions must be
received by the Trustee in order to be binding upon it, which in the
case of a Source Meeting shall not be earlier than the close of
business on the second Business Day prior to such meeting, and of the
method for revoking or amending such instructions.
For the purpose of determining Beneficiary Votes to which a Beneficiary is
entitled in respect of any such Source Meeting or Source Consent, the number of
Exchangeable Shares owned of record by the Beneficiary shall be determined at
the close of business on the record date established by Source or by applicable
law for purposes of determining shareholders entitled to vote at such Source
Meeting or to give written consent in connection with such Source Consent.
Source will notify the Trustee of any decision of the Board of Directors of
Source with respect to the calling of any such Source Meeting or the seeking of
any such Source Consent and shall provide all necessary information and
materials to the Trustee in each case promptly and in any event in sufficient
time to enable the Trustee to perform its obligations contemplated by this
section 4.3.
4.4 COPIES OF SHAREHOLDER INFORMATION. Source will deliver to the Trustee
copies of all proxy materials (including notices of Source Meetings but
excluding proxies to vote Source Common Shares), information statements, reports
(including without limitation, all interim and annual financial statements) and
other written communications that are to be distributed from time to time to
holders of Source Common Shares in sufficient quantities and in sufficient time
so as to enable the Trustee to send those materials to each Beneficiary at the
same time as such materials are first sent to holders of Source Common Shares.
The Trustee will mail or otherwise send to each Beneficiary, at the expense of
Source, copies of all such materials (and all materials specifically directed to
the Beneficiaries or to the Trustee for the benefit of the Beneficiaries by
Source) received by the Trustee from Source at the same time as such materials
are first sent to holders of Source Common Shares. The Trustee will also make
available for inspection by any Beneficiary at the Trustee's principal corporate
trust office in the City of Toronto all proxy materials, information statements,
reports and other written communications that are:
(a) received by the Trustee as the registered holder of the Source
Special Voting Share and made available by Source to the holders of
Source Common Shares; or
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(b) specifically directed to the Beneficiaries or to the Trustee for the
benefit of the Beneficiaries by Source.
4.5 OTHER MATERIALS. Immediately after receipt by Source or any shareholder
of Source of any material sent or given to the holder of Source Common Shares by
or on behalf of a third party, including without limitation, dissident proxy and
information circulars (and related information and material) and tender and
exchange offer circulars (and related information and material), Source shall
use its best efforts to obtain and deliver to the Trustee copies thereof in
sufficient quantities so as to enable the Trustee to forward such material
(unless the same has been provided directly to Beneficiaries by such third
party) to each Beneficiary as soon as possible thereafter. Immediately upon
receipt thereof, the Trustee will mail or otherwise send to each Beneficiary, at
the expense of Source, copies of all such materials received by the Trustee from
Source. The Trustee will also make available for inspection by any Beneficiary
at the Trustee's principal corporate trust office in the City of Toronto copies
of all such materials.
4.6 LIST OF PERSONS ENTITLED TO VOTE. Cableshare shall, (a) prior to each
annual, general and special Source Meeting or the seeking of any Source Consent
and (b) forthwith upon each request made at any time by the Trustee in writing,
prepare or cause to be prepared a list (a "List") of the names and addresses of
the Beneficiaries arranged in alphabetical order and showing the number of
Exchangeable Shares held of record by each such Beneficiary, in each case at the
close of business on the date specified by the Trustee in such request or, in
the case of a List prepared in connection with a Source Meeting or a Source
Consent, at the close of business on the date specified by the Trustee in such
request or, in the case of a List prepared in connection with a Source Meeting
or a Source Consent, at the close of business on the record date established by
Source or pursuant to applicable law for determining the holders of Source
Common Shares entitled to receive notice of and/or to vote at such Source
Meeting or to give consent in connection with such Source Consent. Each such
List shall be delivered to the Trustee promptly after receipt by Cableshare of
such request or the record date for such meeting or seeking of consent, as the
case may be. Source agrees to give Cableshare notice (with a copy to the
Trustee) of the calling of any Source Meeting or the seeking of any Source
Consent, together with the record dates therefor, sufficiently prior to the date
of the calling of such meeting or seeking of such consent so as to enable
Cableshare to perform its obligations under this section 4.6.
4.7 ENTITLEMENT TO DIRECT VOTES. Any Beneficiary named in a List prepared in
connection with any Source Meeting or any Source Consent will be entitled (a) to
instruct the Trustee in the manner described in section 4.3 with respect to the
exercise of the Beneficiary Votes to which such Beneficiary is entitled or (b)
to attend such meeting and personally to exercise thereat (or to exercise with
respect to any written consent), as the proxy of the Trustee, the Beneficiary
Votes to which such Beneficiary is entitled except, in each case, to the extent
that such Beneficiary has transferred the ownership of any Exchangeable Shares
in respect of which such Beneficiary is entitled to Beneficiary Votes after the
close of business on the record date for such meeting or seeking of consent.
4.8 VOTING BY TRUSTEE, AND ATTENDANCE OF TRUSTEE REPRESENTATIVE AT MEETING.
(a) In connection with each Source Meeting and Source Consent, the
Trustee shall exercise, either in person or by proxy, in accordance
with the instructions received from a Beneficiary pursuant to section
4.3, the Beneficiary Votes as to which such Beneficiary is entitled to
direct the vote (or any lesser number thereof as may be set forth in
the instructions); provided, however, that such written instructions
are received by the Trustee from the Beneficiary prior to the time and
date fixed by it for receipt of such instructions in the notice given
by the Trustee to the Beneficiary pursuant to section 4.3.
(b) The Trustee shall cause a representative who is empowered by it to
sign and deliver, on behalf of the Trustee, proxies for Voting Rights
to attend each Source Meeting. upon submission by a Beneficiary (or
its designee) of identification satisfactory to the Trustee's
representative, and at the Beneficiary's request, such representative
shall sign and deliver to such Beneficiary (or its designee) a proxy
to exercise personally the Beneficiary Votes as to which such
Beneficiary is otherwise entitled hereunder to direct the vote, if
such Beneficiary either (i) has not previously given the Trustee
instructions pursuant to section 4.3 in respect of such meeting, or
(ii) submits
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to such representative written revocation of any such previous
instructions. At such meeting, the Beneficiary exercising such
Beneficiary Votes shall have the same rights as the Trustee to speak
at the meeting in favour of any matter, question or proposition, to
vote by way of ballot at the meeting in respect of any matter,
question or proposition, to vote by way of ballot at the meeting in
respect of any matter, question or proposition and to vote at such
meeting by way of a show of hands in respect of any matter, question
or proposition.
4.9 DISTRIBUTION OF WRITTEN MATERIALS. Any written materials distributed by
the Trustee pursuant to this trust agreement shall be delivered in person or
sent by mail (or otherwise communicated in the same manner as Source utilizes in
communications to holders of Source Common Shares) to each Beneficiary at its
address as shown on the books of Cableshare. Cableshare shall provide or cause
to be provided to the Trustee for this purpose, on a timely basis and without
charge or other expense:
(a) current lists of the registered holders of Exchangeable Shares; and
(b) upon the request of the Trustee, mailing labels to enable the Trustee
to carry out its duties under this trust agreement.
4.10 TERMINATION OF VOTING RIGHTS. All of the rights of a Beneficiary with
respect to the Beneficiary Votes exercisable in respect of the Exchangeable
Shares held by such Beneficiary, including the right to instruct the Trustee as
to the voting of or to vote personally such Beneficiary Votes, shall be deemed
to be surrendered by the Beneficiary to Source and such Beneficiary Votes and
the Voting Rights represented thereby shall cease immediately upon the delivery
by such holder to the Trustee of the certificates representing such Exchangeable
Shares in connection with the exercise by the Beneficiary of the Exchange Right
or the occurrence of the automatic exchange of Exchangeable Shares for Source
Common Shares, as specified in Article 5 hereof (unless in either case Source
shall not have delivered the requisite Source Common Shares issuable in exchange
therefor to the Trustee for delivery to the Beneficiaries), or upon the
redemption of Exchangeable Shares pursuant to Article 6 or 7 of the Share
Provisions, or upon the effective date of the liquidation, dissolution or
winding-up of Cableshare pursuant to Article 5 of the Share Provisions, or upon
the purchase of Exchangeable Shares from the holder thereof by Source pursuant
to the exercise by Source of the Retraction Call Right, the Redemption Call
Right or the Liquidation Call Right.
ARTICLE 5
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
5.1 GRANT AND OWNERSHIP OF THE EXCHANGE RIGHT. Source hereby grants to the
Trustee as trustee for and on behalf of, and for the use and benefit of, the
Beneficiaries the right (the "Exchange Right"), upon the occurrence and during
the continuance of an Insolvency Event, to require Source to purchase from each
or any Beneficiary all or any part of the Exchangeable Shares held by the
Beneficiary and the Automatic Exchange Rights, all in accordance with the
provisions of this agreement. Source hereby acknowledges receipt from Trustee as
trustee for and on behalf of the Beneficiaries of good and valuable
consideration (and the adequacy thereof) for the grant of the Exchange Right and
the Automatic Exchange Rights by Source to the Trustee. During the term of the
Trust and subject to the terms and conditions of this trust agreement, the
Trustee shall possess and be vested with full legal ownership of the Exchange
Right and the Automatic Exchange Rights and shall be entitled to exercise all of
the rights and powers of an owner with respect to the Exchange Right and the
Automatic Exchange Rights, provided that the Trustee shall:
(a) hold the Exchange Right and the Automatic Exchange Rights and the
legal title thereto as trustee solely for the use and benefit of the
Beneficiaries in accordance with the provisions of this trust
agreement; and
(b) except as specifically authorized by this trust agreement, have no
power or authority to exercise or otherwise deal in or with the
Exchange Right or the Automatic Exchange Rights, and the Trustee shall
not exercise any such rights for any purpose other than the purposes
for which this Trust is created pursuant to this trust agreement.
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5.2 LEGENDED SHARE CERTIFICATES. Cableshare will cause each certificate
representing Exchangeable Shares to bear an appropriate legend notifying the
Beneficiaries of:
(a) their right to instruct the Trustee with respect to the exercise of
the Exchange Right in respect of the Exchangeable Shares held by a
Beneficiary; and
(b) the Automatic Exchange Rights.
5.3 GENERAL EXERCISE OF EXCHANGE RIGHT. The Exchange Right shall be and
remain vested in and exercised by the Trustee. Subject to section 7.15, the
Trustee shall exercise the Exchange Right only on the basis of instructions
received pursuant to this Article 5 from Beneficiaries entitled to instruct the
Trustee as to the exercise thereof. To the extent that no instructions are
received from a Beneficiary with respect to the Exchange Right, the Trustee
shall not exercise or permit the exercise of the Exchange Right.
5.4 PURCHASE PRICE. The purchase price payable by Source for each
Exchangeable Share to be purchased by Source under the Exchange Right shall be
an amount per share equal to (a) the Current Market Price of a Source Common
Share on the last Business Day prior to the day of closing of the purchase and
sale of such Exchangeable Share under the Exchange Right plus (b) an additional
amount equivalent to the full amount of all dividends declared and unpaid on
each such Exchangeable Share (provided that if the record date for any such
declared and unpaid dividends occurs on or after the day of closing of such
purchase and sale the purchase price shall not include such additional amount
equivalent to the declared and unpaid dividends). The purchase price for each
such Exchangeable Share so purchased may be satisfied only by Source issuing and
delivering or causing to be delivered to the Trustee, on behalf of the relevant
Beneficiary, one Source Common Share and a cheque for the balance, if any, of
the purchase price without interest (but less any amounts withheld pursuant to
section 5.13 hereof).
5.5 EXERCISE INSTRUCTIONS. Subject to the terms and conditions herein set
forth, a Beneficiary shall be entitled, upon the occurrence and during the
continuance of an Insolvency Event, to instruct the Trustee to exercise the
Exchange Right with respect to all or any part of the Exchangeable Shares
registered in the name of such Beneficiary on the books of Cableshare. To cause
the exercise of the Exchange Right by the Trustee, the Beneficiary shall deliver
to the Trustee, in person or by certified or registered mail, at its principal
corporate trust office in Toronto, Ontario or at such other places in Canada as
the Trustee may from time to time designate by written notice to the
Beneficiaries, the certificates representing the Exchangeable Shares which such
Beneficiary desires Source 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 the Business Corporations Act (Ontario) and the
by-laws of Cableshare and such additional documents and instruments as the
Trustee may reasonably require together with (a) a duly completed form of notice
of exercise of the Exchange Right, contained on the reverse of or attached to
the Exchangeable Share certificates, stating (i) that the Beneficiary thereby
instructs the Trustee to exercise the Exchange Right so as to require Source to
purchase from the Beneficiary the number of Exchangeable Shares specified
therein, (ii) that such Beneficiary has good title to and owns all such
Exchangeable Shares to be acquired by Source free and clear of all liens, claims
and encumbrances, (iii) the names in which the certificates representing Source
Common Shares 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 satisfactory to
the Trustee, Cableshare and Source of payment) of the taxes (if any) payable as
contemplated by section 5.8 of this trust agreement. If only a part of the
Exchangeable Shares represented by any certificate or certificates delivered to
the Trustee are to be purchased by Source under the Exchange Right, a new
certificate for the balance of such Exchangeable Shares shall be issued to the
holder at the expense of Cableshare.
5.6 DELIVERY OF SOURCE COMMON SHARES: EFFECT OF EXERCISE. Promptly after
receipt of the certificates representing the Exchangeable Shares which the
Beneficiary desires Source to purchase under the Exchange Right together with
such documents and instruments of transfer and a duly completed form of notice
of exercise of the Exchange Right (and payment of taxes, if any, or evidence
thereof), duly endorsed for the transfer to Source, the Trustee shall notify
Source and Cableshare of its receipt of the same, which notice to Source and
Cableshare shall constitute exercise of the Exchange Right by the Trustee on
behalf of the holder
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of such Exchangeable Shares, and Source shall immediately thereafter deliver or
cause to be delivered to the Trustee, for delivery to the Beneficiary of such
Exchangeable Shares (or to such other persons, if any, properly designated by
such Beneficiary) the number of Source Common Shares issuable in connection with
the exercise of the Exchange Right, and cheques for the balance, if any, of the
total purchase price therefor without interest (but less any amounts withheld
pursuant to section 5.13 hereof); provided, however, that no such delivery shall
be made unless and until the Beneficiary requesting the same shall have paid (or
provided evidence satisfactory to the Trustee, Cableshare and Source of the
payment of) the taxes (if any) payable as contemplated by section 5.8 of this
trust agreement. Immediately upon the giving of notice by the Trustee to Source
and Cableshare of the exercise of the Exchange Right, as provided in this
section 5.6, the closing of the transaction of purchase and sale contemplated by
the Exchange Right shall be deemed to have transferred to Source all of its
right, title and interest in and to such Exchangeable Shares and in the related
interest in the Trust Estate and shall cease to be a holder of such Exchangeable
Shares and shall not be entitled to exercise any of the rights of a holder in
respect thereof, other than the right to receive his proportionate part of the
total purchase price therefor, unless the requisite number of Source Common
Shares (together with a cheque for the balance, if any, of the total purchase
price therefor without interest (but less any amount withheld pursuant to
section 5.13 hereof) is not allotted, issued and delivered by Source to the
Trustee, for delivery to such Beneficiary (or to such other persons, if any,
properly designated by such Beneficiary), within five Business Days of the date
of the giving of such notice by the Trustee, in which case the rights of the
Beneficiary shall remain unaffected until such Source Common Shares are so
allotted, issued and delivered by Source and any such cheque is so delivered and
paid. Concurrently with such Beneficiary ceasing to be a holder of Exchangeable
Shares, the Beneficiary shall be considered and deemed for all purposes to be
the holder of Source Common Shares delivered to it pursuant to the Exchange
Right.
5.7 EXERCISE OF EXCHANGE RIGHT SUBSEQUENT TO RETRACTION. In the event that a
Beneficiary has exercised its right under Article 6 of the Share Provisions to
require Cableshare to redeem any or all of the Exchangeable Shares held by the
Beneficiary (the "Retracted Shares") and is notified by Cableshare pursuant to
Section 6.6 of the Share Provisions that Cableshare will not be permitted as a
result of solvency requirements of applicable law to redeem all such Retracted
Shares, and provided that Source shall not have exercised the Retraction Call
Right with respect to the Retracted Shares and that the Beneficiary has not
revoked the retraction request delivered by the Beneficiary to Cableshare
pursuant to Section 6.1 of the Share Provision, the retraction request will
constitute and will be deemed to constitute notice from the Beneficiary to the
Trustee instructing the Trustee to exercise the Exchange Right with respect to
those Retracted Shares which Cableshare is unable to redeem. In any such event,
Cableshare hereby agrees with the Trustee and in favour of the Beneficiary
immediately to notify the Trustee of such prohibition against Cableshare
redeeming all of the Retracted Shares and immediately to forward or cause to be
forwarded to the Trustee all relevant materials delivered by the Beneficiary to
Cableshare or to the transfer agent of the Exchangeable Shares (including
without limitation, a copy of the retraction request delivered pursuant to
Section 6.1 of the Share Provisions) in connection with such proposed redemption
of the Retracted Shares and the Trustee will thereupon exercise the Exchange
Right with respect to the Retracted Shares that Cableshare is not permitted to
redeem and will require Source to purchase such shares in accordance with the
provisions of this Article 5.
5.8 STAMP OR OTHER TRANSFER TAXES. Upon any sale of Exchangeable Shares to
Source pursuant to the Exchange Right or the Automatic Exchange Rights, the
share certificate or certificates representing Source Common Shares to be
delivered in connection with the payment of the total purchase price therefor
shall be issued in the name of the Beneficiary of the Exchangeable Shares so
sold or in such names as such Beneficiary may otherwise direct in writing
without charge to the holder of the Exchangeable Shares so sold; provided,
however, that such Beneficiary (a) shall pay (and neither Source, Cableshare nor
the Trustee shall be required to pay) any documentary, stamp, transfer or other
taxes that may be payable in respect of any transfer involved in the issuance or
delivery of such shares to a person other than such Beneficiary or (b) shall
have evidenced to the satisfaction of the Trustee, Source and Cableshare that
such taxes, if any, have been paid.
5.9 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, Cableshare and
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Source shall give written notice thereof to the Trustee. Immediately upon
receiving notice from Cableshare and Source of the occurrence of an Insolvency
Event, or upon the Trustee becoming aware of an Insolvency Event, the Trustee
will mail promptly to each Beneficiary, at the expense of Source, a notice of
such Insolvency Event, which notice shall contain a brief statement of the right
of the Beneficiaries with respect to the Exchange Right.
5.10 QUALIFICATION OF SOURCE COMMON SHARES. Source covenants that if any
Source Common Shares to be issued and delivered pursuant to the Exchange Right
or the Automatic Exchange Rights require registration or qualification with or
approval of or the filing of any document, including any prospectus or similar
document or the taking of any proceeding with or the obtaining of any order,
ruling or consent from any governmental or regulatory authority under any
Canadian or United States federal, provincial or state law or regulation or
pursuant to the rules and regulations of any regulatory authority or the
fulfilment of any other legal requirement before such shares may be issued and
delivered by Source to the initial holder thereof or in order that such shares
may be freely traded thereafter (other than any restrictions on transfer by
reason of a holder being a "control person" of Source for purposes of Canadian
federal or provincial securities law or an "affiliate" of Source for purposes of
United States federal or state securities law), Source will in good faith
expeditiously take all such actions and do all such things as are necessary or
desirable to cause such Source Common Shares to be and remain duly registered,
qualified or approved. Source will in good faith expeditiously take all such
actions and do all such things as are necessary or desirable to cause all Source
Common Shares to be delivered pursuant to the Exchange Right or the Automatic
Exchange Rights to be listed, quoted or posted for trading on all stock
exchanges and quotation systems on which outstanding Source Common Shares are
listed, quoted or posted for trading at such time.
5.11 SOURCE COMMON SHARES. Source hereby represents, warrants and covenants
that the Source Common Shares issuable as described herein will be duly issued
as fully paid and non-assessable and shall be free and clear of any lien, claim
or encumbrance.
5.12 AUTOMATIC EXCHANGE ON LIQUIDATION OF SOURCE.
(a) Source will give the Trustee notice of each of the following events
at the time set forth below:
(i) in the event of any determination by the Board of Directors of
Source to institute voluntary liquidation, dissolution or
winding-up proceedings with respect to Source or to effect any
other distribution of assets of Source among its shareholders
for the purpose of winding up its affairs, at least 60 days
prior to the proposed effective date of such liquidation,
dissolution, winding-up or other distribution; and
(ii) immediately, upon the earlier of (A) receipt by Source of notice
of and (B) Source 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 Source or to effect any other distribution or winding-up
of Source or to effect any other distribution of assets of
Source among its shareholders for the purpose of winding up
its affairs.
(b) Immediately following receipt by the Trustee from Source of notice of
any event (a "Liquidation Event") contemplated by section 5.12(a)(i)
or 5.12(a)(ii) above, the Trustee will give notice thereof to the
Beneficiaries. Such notice shall include a brief description of the
automatic exchange of Exchangeable Shares for Source Common Shares
provided for in section 5.12(c).
(c) In order that the Beneficiaries will be able to participate on a pro
rata basis with the holders of Source Common Shares in the
distribution of assets of Source in connection with a Liquidation
Event, on the fifth Business Day prior to the effective date (the
"Liquidation Event Effective Date") of a Liquidation Event all of the
then outstanding Exchangeable Shares shall be automatically exchanged
for Source Common Shares. To effect such automatic exchange, Source
shall purchase each Exchangeable Share outstanding on the Liquidation
Event Effective Date and held by Beneficiaries, and each Beneficiary
shall sell the Exchangeable Shares held by
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it at such time, for a purchase price per share equal to (a) the
Current Market Price of a Source Common Share on the last Business Day
prior to the Liquidation Event Effective Date, which shall be
satisfied in full by Source issuing to the Beneficiary one Source
Common Share, and (b) an additional amount equivalent to the full
amount of all dividends declared and unpaid thereon.
(d) On the fifth Business Day prior to the Liquidation Event Effective
Date, the closing of the transaction of purchase and sale contemplated
by the automatic exchange of Exchangeable Shares for Source Common
Shares shall be deemed to have occurred, and each Beneficiary of
Exchangeable Shares shall be deemed to have transferred to Source all
of the Beneficiary's right, title and interest in and to such
Exchangeable Shares and the related interest in the Trust Estate and
shall cease to be a holder of such Exchangeable Shares and Source
shall issue to the Beneficiary the Source Common Shares issuable upon
the automatic exchange of Exchangeable Shares for Source Common Shares
and shall deliver to the Trustee for delivery to the Beneficiary a
cheque for the balance, if any, of the total purchase price for such
Exchangeable Shares without interest but less any amounts withheld
pursuant to section 5.13 hereof. Concurrently with such Beneficiary
ceasing to be a holder of Exchangeable Shares, the Beneficiary shall
be considered and deemed for all purposes to be the holder of the
Source Common Shares issued to it pursuant to the automatic exchange
of Exchangeable Shares for Source Common Shares and the certificates
held by the Beneficiary previously representing the Exchangeable
Shares exchanged by the Beneficiary with Source pursuant to such
automatic exchange shall thereafter be deemed to represent Source
Common Shares issued to the Beneficiary by Source pursuant to such
automatic exchange. Upon the request of a Beneficiary and the
surrender by the Beneficiary of Exchangeable Share certificates deemed
to represent Source Common Shares, duly endorsed in blank and
accompanied by such instruments of transfer as Source may reasonably
require, Source shall deliver or cause to be delivered to the
Beneficiary certificates representing Source Common Shares of which
the Beneficiary is the holder.
5.13 WITHHOLDING RIGHTS. Source and the Trustee shall be entitled to deduct
and withhold from any consideration otherwise payable under this trust agreement
to any holder of Exchangeable Shares such amounts as Source or the Trustee is
required or permitted to deduct and withhold with respect to such payment under
the Income Tax Act (Canada), the United States Internal Revenue Code of 1986 or
any provision of provincial, state, local or foreign tax law, in each case as
amended. To the extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes hereof as having been paid to the holder of the
shares in respect of which such deduction and withholding was made, provided
that such withheld amounts are actually remitted to the appropriate taxing
authority. To the extent that the amount so required or permitted to be deducted
or withheld from any payment to a holder exceeds the cash portion of the
consideration otherwise payable to the holder, Source and the Trustee are hereby
authorized to sell or otherwise dispose of such portion of the consideration as
is necessary to provide sufficient funds to Source or the Trustee, as the case
may be, to enable it to comply with such deduction or withholding requirement
and Source or the Trustee shall notify the holder thereof and remit any
unapplied balance of the net proceeds of such sale.
ARTICLE 6
RESTRICTIONS ON ISSUE OF SOURCE SPECIAL VOTING STOCK
6.1 ISSUE OF ADDITIONAL SHARES. During the term of this trust agreement,
Source will not without the consent of the holders at the relevant time of
Exchangeable Shares, given in accordance with the share provisions attaching to
such shares, issue any shares of its Special Voting Stock in addition to the
Source Special Voting Share.
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ARTICLE 7
CONCERNING THE TRUSTEE
7.1 POWERS AND DUTIES OF THE TRUSTEE. The rights, powers, duties and
authorities of the Trustee under this trust agreement, in its capacity as
trustee of the Trust, shall include:
(a) receipt and deposit of the Source Special Voting Share from Source as
trustee for and on behalf of the Beneficiaries in accordance with the
provisions of this agreement;
(b) granting proxies and distributing materials to Beneficiaries as
provided in this trust agreement;
(c) voting the Beneficiary Votes in accordance with the provisions of
this trust agreement;
(d) receiving the grant of the Exchange Right and the Automatic Exchange
Rights from Source as trustee for and on behalf of the Beneficiaries
in accordance with the provisions of this trust agreement;
(e) exercising the Exchange Right and enforcing the benefit of the
Automatic Exchange Rights, in each case in accordance with the
provisions of this trust agreement, and in connection therewith
receiving from Beneficiaries Exchangeable Shares and other requisite
documents and distribution to such Beneficiaries of Source Common
Shares and cheques, if any, to which such Beneficiaries are entitled
upon the exercise of the Exchange Right or pursuant to the Automatic
Exchange Rights, as the case may be;
(f) holding title to the Trust Estate;
(g) investing any moneys forming, from time to time, a part of the Trust
Estate as provided in this trust agreement;
(h) taking action on its own initiative or at the direction of a
Beneficiary or Beneficiaries to enforce the obligations of Source
under this trust agreement; and
(i) taking such other actions and doing such other things as are
specifically provided in this trust agreement.
In the exercise of such rights, powers, duties and authorities the Trustee
shall have (and is granted) such incidental and additional rights, powers,
duties and authority not in conflict with any of the provisions of this trust
agreement as the Trustee, acting in good faith and in the reasonable exercise of
its discretion, may deem necessary, appropriate or desirable to effect the
purpose of the Trust. Any exercise of such discretionary rights, powers, duties
and authorities by the Trustee shall be final, conclusive and binding upon all
persons.
The Trustee in exercising its rights, powers, duties and authorities
hereunder shall act honestly and in good faith and with a view to the best
interests of the Beneficiaries and shall exercise care, diligence and skill that
a reasonably prudent trustee would exercise in comparable circumstances.
7.2 NO CONFLICT OF INTEREST. The Trustee represents to Cableshare and Source
that at the date of execution and delivery of this trust agreement there exists
no material conflict of interest in the role of the Trustee as a fiduciary
hereunder and the role of the Trustee in any other capacity. The Trustee shall,
within 90 days after it becomes aware that such a material conflict of interest
exists, either eliminate such material conflict of interest or resign in the
manner and with the effect specified in Article 10. If, notwithstanding the
foregoing provisions of this section 7.2, the Trustee has such a material
conflict of interest, the validity and enforceability of this trust agreement
shall not be affected in any manner whatsoever by reason only of the existence
of such material conflict of interest. If the Trustee contravenes the foregoing
provisions of this section 7.2, any interested party may apply to the Ontario
Court of Justice for an order that the Trustee be replaced as trustee hereunder.
7.3 DEALINGS WITH TRANSFER AGENTS, REGISTRARS, ETC. Cableshare and Source
irrevocably authorize the Trustee, from time to time, to:
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(a) consult, communicate and otherwise deal with the respective
registrars and transfer agents, and with any such subsequent registrar
or transfer agent, of the Exchangeable Shares and Source Common
Shares; and
(b) requisition, from time to time, (i) from any such registrar or
transfer agent any information readily available from the records
maintained by it which the Trustee may reasonably require for the
discharge of its duties and responsibilities under this trust
agreement and (ii) from the transfer agent of Source Common Shares,
and any subsequent transfer agent of such shares, the share
certificates issuable upon the exercise from time to time of the
Exchange Right and pursuant to the automatic exchange of Exchangeable
Shares for Source Common Shares in the manner specified in Article 5
hereof.
Cableshare and Source irrevocably authorize their respective registrars and
transfer agents to comply with all such requests. Source covenants that it will
supply its transfer agent with duly executed share certificates for the purpose
of completing the exercise from time to time of the Exchange Right and the
automatic exchange of Exchangeable Shares for Source Common Shares, in each case
pursuant to Article 5 hereof.
7.4 BOOKS AND RECORDS. The Trustee shall keep available for inspection by
Source and Cableshare, at the Trustee's principal corporate trust office in
Toronto, Ontario, correct and complete books and records of account relating to
the Trust created by this trust agreement, including without limitation, all
data relating to mailings and instructions to and from Beneficiaries and all
transactions pursuant to the Exchange Right and the Automatic Exchange Rights.
On or before March 31, 1997, and on or before March 31 in every year thereafter,
so long as the Source Special Voting Share is on deposit with the Trustee, the
Trustee shall transmit to Source and Cableshare a brief report, dated as of the
preceding December 31, with respect to:
(a) the property and funds comprising the Trust Estate as of that date;
(b) the number of exercises of the Exchange Right, if any, and the
aggregate number of Exchangeable Shares received by the Trustee on
behalf of Beneficiaries in consideration of the issuance by Source of
Source Common Shares in connection with the Exchange Right, during the
calendar year ended on such date; and
(c) any action taken by the Trustee in the performance of its duties
under this trust agreement which it had not previously reported and
which, in the Trustee's opinion, materially affects the Trust Estate.
7.5 INCOME TAX RETURNS AND REPORTS. The Trustee shall, to the extent
necessary, prepare and file on behalf of the Trust appropriate United States and
Canadian income tax returns and any other returns or reports as may be required
by applicable law or pursuant to the rules and regulations of any securities
exchange or other trading system through which the Exchangeable Shares are
traded.
7.6 INDEMNIFICATION PRIOR TO CERTAIN ACTIONS BY TRUSTEE. The Trustee shall
exercise any or all of the rights, duties, powers or authorities vested in it by
this trust agreement at the request, order or direction of any Beneficiary upon
such Beneficiary furnishing to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred by the Trustee
therein or thereby, provided that no Beneficiary shall be obligated to furnish
to the Trustee any such security or indemnity in connection with the exercise by
the Trustee of any of its rights, duties, powers and authorities with respect to
the Source Special Voting Share pursuant to Article 4 hereof, subject to section
7.15, and with respect to the Exchange Right pursuant to Article 5 hereof,
subject to section 7.15, and with respect to the Automatic Exchange Rights
pursuant to Article 5 hereof.
None of the provisions contained in this trust agreement shall require the
Trustee to expend or risk its own funds or otherwise incur financial liability
in the exercise of any of its rights, powers, duties, or authorities unless
funded, given security and indemnified as aforesaid.
7.7 ACTION OF BENEFICIARIES. No Beneficiary shall have the right to institute
any action, suit or proceeding or to exercise any other remedy authorized by
this trust agreement for the purpose of enforcing any of its rights or for the
execution of any trust or power hereunder unless the Beneficiary has requested
the Trustee to take or
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institute such action, suit or proceeding and furnished and Trustee with the
security or indemnity referred to in section 7.6 and the Trustee shall have
failed to act within a reasonable time thereafter. In such case, but not
otherwise, the Beneficiary shall be entitled to take proceedings in any court of
competent jurisdiction such as the Trustee might have taken; it being understood
and intended that no one or more Beneficiaries shall have any right in any
manner whatsoever to affect, disturb or prejudice the rights hereby created by
any such action, or to enforce any right hereunder or under the Voting Rights,
the Exchange Rights or the Automatic Exchange Rights except subject to the
conditions and in the manner herein provided, and that all powers and trusts
hereunder shall be exercised and all proceedings at law shall be instituted, had
and maintained by the Trustee, except only as herein provided, and in any event
for the equal benefit of all Beneficiaries.
7.8 RELIANCE UPON DECLARATIONS. The Trustee shall not be considered to be in
contravention of any of its rights, powers, duties and authorities hereunder if,
when required, it acts and relies in good faith upon statutory declarations,
certificates, opinions or reports furnished pursuant to the provisions hereof or
required by the Trustee to be furnished to it in the exercise of its rights,
power, duties and authorities hereunder if such statutory declarations,
certificates, opinions or reports comply with the provisions of section 7.9
hereof, if applicable, and with any other applicable provisions of this trust
agreement.
7.9 EVIDENCE AND AUTHORITY TO TRUSTEE. Cableshare and/or Source shall furnish
to the Trustee evidence of compliance with the conditions provided for in this
trust agreement relating to any action or step required or permitted to be taken
by Cableshare and/or Source or the Trustee under this trust agreement or as a
result of any obligation imposed under this trust agreement, including, without
limitation, in respect of the Voting Rights or the Exchange Right or the
Automatic Exchange Rights and the taking of any other action to be taken by the
Trustee as the request of or on the application of Cableshare and/or Source
forthwith if and when:
(a) such evidence is required by any other section of this trust
agreement to be furnished to the Trustee in accordance with the terms
of this section 7.9; or
(b) the Trustee, in the exercise of its rights, powers, duties and
authorities under this trust agreement, gives Cableshare and/or Source
written notice requiring it to furnish such evidence in relation to
any particular action or obligation specified in such notice.
Such evidence shall consist of an Officer's Certificate of Cableshare
and/or Source or a statutory declaration or a certificate made by persons
entitled to sign an Officer's Certificate stating that any such condition has
been complied with in accordance with the terms of this trust agreement.
Whenever such evidence relates to a matter other than the Voting Rights or
the Exchange Right or the Automatic Exchange Rights or the taking of any other
action to be taken by the Trustee at the request or on the application of
Cableshare and/or Source, and except as otherwise specifically provided herein,
such evidence may consist of a report or opinion of any solicitor, auditor,
accountant, appraiser, valuer, engineer or other expert or any other person
whose qualifications give authority to a statement made by him, provided that if
such report or opinion is furnished by a director, officer or employee of
Cableshare and/or Source it shall be in the form of an Officer's Certificate or
a statutory declaration.
Each statutory declaration, certificate, opinion or report furnished to
the Trustee as evidence of compliance with a condition provided for in this
trust agreement shall include a statement by the person giving the evidence:
(a) declaring that he has read and understands the provisions of this
trust agreement relating to the condition in question;
(b) describing the nature and scope of the examination or investigation
upon which he based the statutory declaration, certificate, statement
or opinion; and
(c) declaring that he has made such examination or investigation as he
believes is necessary to enable him to make the statements or give the
opinions contained or expressed herein.
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7.10 EXPERTS, ADVISERS AND AGENTS. The Trustee may:
(a) in relation to these presents act and rely on the opinion or advice
of or information obtained from any solicitor, auditor, accountant,
appraiser, valuer, engineer or other expert, whether retained by the
Trustee or by Cableshare and/or Source or otherwise, and may employ
such assistants as may be necessary to the proper discharge of its
powers and duties and determination of its rights hereunder and may
pay proper and reasonable compensation for all such legal and other
advice or assistance as aforesaid; and
(b) employ such agents and other assistants as it may reasonably require
for the proper discharge of its powers and duties hereunder, and may
pay reasonable remuneration for all services performed for it (and
shall be entitled to receive reasonable remuneration for all services
performed by it) in the discharge of the trusts hereof and
compensation for all disbursements, costs and expenses made or
incurred by it in the discharge of its duties hereunder and in the
management of the Trust.
7.11 INVESTMENT OF MONEYS HELD BY TRUSTEE. Unless otherwise provided in this
trust agreement, any moneys held by or on behalf of the Trustee which under the
terms of this trust agreement may or ought to be invested or which may be on
deposit with the Trustee or which may be in the hands of the Trustee may be
invested and reinvested in the name or under the control of the Trustee in
securities in which, under the laws of the Province of Ontario, trustees are
authorized to invest trust moneys, provided that such securities are stated to
mature within two years after their purchase by the Trustee, and the Trustee
shall so invest such moneys on the written direction of Cableshare. Pending the
investment of any moneys as hereinbefore provided, such moneys may be deposited
in the name of the Trustee in any chartered bank of Canada or, with the consent
of Cableshare, in the deposit department of the Trustee or any other loan or
trust company authorized to accept deposits under the laws of Canada or any
provide thereof at the rate of interest then current on similar deposits.
7.12 TRUSTEE NOT REQUIRED TO GIVE SECURITY. The Trustee shall not be required
to give any bond or security in respect of the execution of the trusts, rights,
duties, powers and authorities of this trust agreement or otherwise in respect
of the premises.
7.13 TRUSTEE NOT BOUND TO ACT ON CABLESHARE'S REQUEST. Except as in this trust
agreement otherwise specifically provided, the Trustee shall not be bound to act
in accordance with any direction or request of Cableshare and/or Source or of
the directors thereof until a duly authenticated copy of the instrument or
resolution containing such direction or request shall have been delivered to the
Trustee, and the Trustee shall be empowered to act upon any such copy purporting
to be authenticated and believed by the Trustee to be genuine.
7.14 AUTHORITY TO CARRY ON BUSINESS. The Trustee represents to Cableshare and
Source that at the date of execution and delivery by it of this trust agreement
it is authorized to carry on the business of a trust company in the Province of
Ontario but if, notwithstanding the provisions of this section 7.14, it ceases
to be so authorized to carry on business, the validity and enforceability of
this trust agreement and the Voting Rights, the Exchange Right and the Automatic
Exchange Rights shall not be affected in any manner whatsoever by reason only of
such event but the Trustee shall, within 90 days after ceasing to be authorized
to carry on the business of a trust company in the Province of Ontario, either
become so authorized or resign in the manner and with the effect specified in
Article 10.
7.15 CONFLICTING CLAIMS. If conflicting claims or demands are made or asserted
with respect to any interest of any Beneficiary in any Exchangeable Shares,
including any disagreement between the heirs, representatives, successors or
assigns succeeding to all or any part of the interest of any Beneficiary in any
Exchangeable Shares resulting in conflicting claims or demands being made in
connection with such interest, then the Trustee shall be entitled, at its sole
discretion, to refuse to reorganize or to comply with any such claims or demand.
In so refusing, the Trustee may elect not to exercise any Voting Rights,
Exchange Right or Automatic Exchange Rights subject to such conflicting claims
or demands and, in so doing, the Trustee shall not be or become liable to any
person on account of such election or its failure or refusal to comply with any
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such conflicting claims or demands. The Trustee shall be entitled to continue to
refrain from acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to the Voting
Rights, Exchange Right or Automatic Exchange Rights subject to such
conflicting claims or demands have been adjudicated by a final
judgment of a court of competent jurisdiction; or
(b) all differences with respect to the Voting Rights, Exchange Right or
Automatic Exchange Rights subject to such conflicting claims or
demands have conclusively settled by a valid written agreement binding
on all such adverse claimants, and the Trustee shall have been
furnished with an executed copy of such agreement.
If the Trustee elects to reorganize any claim or comply with any demand made by
any such adverse claimant, it may in its discretion require such claimant to
furnish such surety bond or other security satisfactory to the Trustee as it
shall deem appropriate fully to indemnity it as between all conflicting claims
or demands.
7.16 ACCEPTANCE OF TRUST. The Trustee hereby accepts the Trust created and
provided for by and in this trust agreement and agrees to perform the same upon
the terms and conditions herein set forth and to hold all rights, privileges and
benefits conferred hereby and by law in trust for the various persons who shall
from time to time be Beneficiaries, subject to all the terms and conditions
herein set forth.
ARTICLE 8
COMPENSATION
8.1 FEES AND EXPENSES OF THE TRUSTEE. Source and Cableshare jointly and
severally agree to pay to the Trustee reasonable compensation for all of the
services rendered by it under this trust agreement and will reimburse the
Trustee for all reasonable expenses (including taxes) and disbursements,
including the cost and expense of any suit or litigation of any character and
any proceedings before any governmental agency reasonably incurred by the
Trustee in connection with its duties under this trust agreement; provided that
Source and Cableshare shall have no obligation to reimburse the Trustee for any
expenses or disbursements paid, incurred or suffered by the Trustee in any suit
or litigation in which the Trustee is determined to have acted in bad faith or
with negligence or wilful misconduct.
ARTICLE 9
INDEMNIFICATION AND LIMITATION OF LIABILITY
9.1 INDEMNIFICATION OF THE TRUSTEE. Source and Cableshare jointly and
severally agree to indemnify and hold harmless the Trustee and each of its
directors, officers and agents appointed and acting in accordance with this
trust agreement (collectively, the "Indemnified Parties") against all claims,
losses, damages, costs, penalties, fines and reasonable expenses (including
reasonable expenses of the Trustee's legal counsel) which, without fraud,
negligence, wilful misconduct or bad faith on the part of such Indemnified
Party, may be paid, incurred or suffered by the Indemnified Party by reason of
or as a result of the Trustee's acceptance or administration of the Trust, its
compliance with its duties set forth in this trust agreement, or any written or
oral instructions delivered to the Trustee by Source or Cableshare pursuant
hereto.
In no case shall Source or Cableshare be liable under this indemnity for
any claim against any of the Indemnified Parties unless Source and Cableshare
shall be notified by the Trustee of the written assertion of a claim or of any
action commenced against the Indemnified Parties, promptly after any of the
Indemnified Parties shall have received any such written assertion of a claim or
shall have been served with a summons or other first legal process giving
information as to the nature and basis of the claim. Subject to (ii), below,
Source and Cableshare shall be entitled to participate at their own expense in
the defence and, if Source or Cableshare so elect at any time after receipt of
such notice, either of them may assume the defence of any suit brought to
enforce any such claim. The Trustee shall have the right to employ separate
counsel in any such suit and participate in the defence thereof but the fees and
expenses of such counsel shall be at the expense of
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the Trustee unless: (i) the employment of such counsel has been authorized by
Source or Cableshare; or (ii) the named parties to any such suit include both
the Trustee and Source or Cableshare and the Trustee shall have been advised by
counsel acceptable to Source or Cableshare that there may be one or more legal
defences available to the Trustee which are different from or in addition to
those available to Source or Cableshare (in which case Source and Cableshare
shall not have the right to assume the defence of such suit on behalf of the
Trustee but shall be liable to pay the reasonable fees and expenses of counsel
for the Trustee).
9.2 LIMITATION OF LIABILITY. The Trustee shall not be held liable for any
loss which may occur by reason of depreciation of the value of any part of the
Trust Estate or any loss incurred on any investment of funds pursuant to this
trust agreement, except to the extent that such loss is attributable to the
fraud, negligence, wilful misconduct or bad faith on the part of the Trustee.
ARTICLE 10
CHANGE OF TRUSTEE
10.1 RESIGNATION. The Trustee, or any trustee hereafter appointed, may at any
time resign by giving written notice of such resignation to Source and
Cableshare specifying the date on which it desires to resign, provided that such
notice shall never be given less than one month before such desired resignation
date unless Source and Cableshare otherwise agree and provided further that such
resignation shall not take effect until the date of the appointment of a
successor trustee and the acceptance of such appointment by the successor
trustee. Upon receiving such notice of resignation, Source and Cableshare shall
promptly appoint a successor trustee by written instrument in duplicate, one
copy of which shall be delivered to the resigning trustee and one copy to the
successor trustee.
10.2 REMOVAL. The Trustee, or any trustee hereafter appointed, may be removed
at any time on 30 days' prior notice by written instrument executed by Source
and Cableshare, in duplicate, one copy of which shall be delivered to the
trustee so removed and one copy to the successor trustee.
10.3 SUCCESSOR TRUSTEE. Any successor trustee appointed as provided under
this trust agreement shall execute, acknowledge and deliver to Source and
Cableshare and to its predecessor trustee an instrument accepting such
appointment. Thereupon the resignation or removal of the predecessor trustee
shall become effective and such successor trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor under this trust agreement, with the like effect
as if originally named as trustee in this trust agreement. However, on the
written request of Source and Cableshare or of the successor trustee, the
trustee ceasing to act shall, upon payment of any amounts then due it pursuant
to the provisions of this trust agreement, execute and deliver an instrument
transferring to such successor trustee all the rights and powers of the trustee
so ceasing to act. Upon the request of any such successor trustee, Source,
Cableshare and such predecessor trustee shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such successor
trustee all such rights and powers.
10.4 NOTICE OF SUCCESSOR TRUSTEE. Upon acceptance of appointment by a
successor trustee as provided herein, Source and Cableshare shall cause to be
mailed notice of the succession of such trustee hereunder to each Beneficiary
specified in a List. If Source or Cableshare shall fail to cause such notice to
be mailed within 10 days after acceptance of appointment by the successor
trustee, the successor trustee shall cause such notice to be mailed at the
expense of Source and Cableshare.
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ARTICLE 11
SOURCE SUCCESSORS
11.1 CERTAIN REQUIREMENTS IN RESPECT OF COMBINATION, ETC. Source 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, but may do so if:
(a) such other person or continuing corporation is a corporation (herein
called the "Source Successor") incorporated under the laws of any
state of the United States or the laws of Canada or any province
thereof;
(b) Source Successor, by operation of law, becomes, without more, bound
by the terms and provisions of this trust agreement or, if not so
bound, executes, prior to or contemporaneously with the consummation
of such transaction a trust agreement supplemental hereto and such
other instruments (if any) as are satisfactory to the Trustee and in
the opinion of legal counsel to the Trustee are necessary or advisable
to evidence the assumption by Source Successor of liability for all
moneys payable and property deliverable hereunder and the covenant of
such Source Successor to pay and deliver or cause to be delivered the
same and its agreement to observe and perform all the covenants and
obligations of Source under this trust agreement; and
(c) such transaction shall, to the satisfaction of the Trustee and in the
opinion of legal counsel to the Trustee, be upon such terms and
substantially to preserve and not to impair in any material respect
any of the rights, duties, powers and authorities of the Trustee or of
the Beneficiaries hereunder.
11.2 VESTING OF POWERS IN SUCCESSOR. Whenever the conditions of section 11.1
hereof have been duly observed and performed, the Trustee, if required, by
section 11.1 hereof, Source Successor and Cableshare shall execute and deliver
the supplemental trust agreement provided for in Article 12 and thereupon Source
Successor shall possess and from time to time may exercise each and every right
and power of Source under this trust agreement in the name of Source or
otherwise and any act or proceeding by any provision of this trust agreement
required to be done or performed by the Board of Directors of Source or any
officers of Source may be done and performed with like force and effect by the
directors or officers of such Source Successor.
11.3 WHOLLY-OWNED SUBSIDIARIES. Nothing herein shall be construed as
preventing the amalgamation or merger of any wholly-owned subsidiary of Source
with or into Source or the winding-up, liquidation or dissolution of any
wholly-owned subsidiary of Source provided that all of the assets of such
subsidiary are transferred to Source or another wholly-owned subsidiary of
Source and any such transactions are expressly permitted by this Article 11.
ARTICLE 12
AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS
12.1 AMENDMENTS, MODIFICATIONS, ETC. This trust agreement may not be amended
or modified except by an agreement in writing executed by Cableshare, Source and
the Trustee and approved by the Beneficiaries in accordance with Section 10.2 of
the Share Provisions.
12.2 MINISTERIAL AMENDMENTS. Notwithstanding the provisions of section 12.1
hereof, the parties to this trust agreement may in writing, at any time and from
time to time, without the approval of the Beneficiaries, amend or modify this
trust agreement for the purposes of:
(a) adding to the covenants of either or both parties hereto for the
protection of the Beneficiaries hereunder;
(b) making such amendments or modifications not inconsistent with this
trust agreement as may be necessary or desirable with respect to
matters or questions which, in the opinion of the Board of
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Directors of each of Source and Cableshare and in the opinion of the
Trustee, having in mind the best interests of the Beneficiaries, it
may be expedient to make, provided that such boards of directors and
the Trustee shall be of the opinion that such amendments and
modifications will not be prejudicial to the interests of the
Beneficiaries; or
(c) making such changes or corrections which, on the advice of counsel to
Cableshare, Source and the Trustee, are required for the purpose of
curing or correcting any ambiguity or defect or inconsistent provision
or clerical omission or mistake or manifest error, provided that the
Trustee and the Board of Directors of each of Cableshare and Source
shall be of the opinion that such changes or corrections will not be
prejudicial to the interests of the Beneficiaries.
12.3 MEETING TO CONSIDER AMENDMENTS. Cableshare, at the request of Source,
shall call a meeting or meetings of the Beneficiaries for the purpose of
considering any proposed amendment or modification requiring approval pursuant
hereto. Any such meeting or meetings shall be called and held in accordance with
the by-laws of Cableshare, the Share Provisions and all applicable laws.
12.4 CHANGES IN CAPITAL OF SOURCE AND CABLESHARE. At all times after the
occurrence of any event effected pursuant to section 2.7 or 2.8 of the Support
Agreement, as a result of which either Source Common Shares of the Exchangeable
Shares or both are in any way changed, this trust agreement shall forthwith be
amended and modified as necessary in order that it shall apply with full force
and effect, mutatis mutandis, to all new securities into which Source Common
Shares or the Exchangeable Shares or both are so changed and the parties hereto
shall execute and deliver a supplemental trust agreement giving effect to and
evidencing such necessary amendments and modifications.
12.5 EXECUTION OF SUPPLEMENTAL TRUST AGREEMENTS. No amendment to or
modification or waiver of any of the provisions of this trust agreement
otherwise permitted hereunder shall be effective unless made in writing and
signed by all of the parties hereto. From time to time Cableshare (when
authorized by a resolution of the Board of Directors), Source (when authorized
by a resolution of its Board of Directors) and the Trustee may, subject to the
provisions of these presents, and they shall, when so directed by these
presents, execute and deliver by their proper officers, trust agreements or
other instruments supplemental hereto, which thereafter shall form part hereof,
for any one or more of the following purposes:
(a) evidencing the succession of Source Successors to Source and the
covenants of and obligations assumed by each such Source Successor in
accordance with the provisions of Article 11 and the successor of any
successor trustee in accordance with the provisions of Article 10;
(b) making any additions to, deletions from or alterations of the
provisions of this trust agreement or the Voting Rights, the Exchange
Right or the Automatic Exchange Rights which, in the opinion of the
Trustee, will not be prejudicial to the interests of the Beneficiaries
or are in the opinion of counsel to the Trustee necessary or advisable
in order to incorporate, reflect or comply with any legislation the
provisions of which apply to Source, Cableshare, the Trustee or this
trust agreement; and
(c) for any other purposes not inconsistent with the provisions of this
trust agreement, including without limitation, to make or evidence any
amendment or modification to this agreement as contemplated hereby,
provided that, in the opinion of the Trustee, the rights of the
Trustee and the Beneficiaries will not be prejudiced thereby.
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ARTICLE 13
TERMINATION
13.1 TERM. The Trust created by this trust agreement shall continue until the
earliest to occur of the following events:
(a) no outstanding Exchangeable Shares are held by a Beneficiary;
(b) each of Cableshare and Source elects in writing to terminate the
Trust and such termination is approved by the Beneficiaries of the
Exchangeable Shares in accordance with Section 10.2 of the Share
Provisions; and
(c) 21 years after the death of the last survivor of the descendants of
His Majesty King Xxxxxx VI of Canada and of the United Kingdom of
Great Britain and Northern Ireland living on the date of the creation
of the Trust.
13.2 SURVIVAL OF AGREEMENT. This trust agreement shall survive any termination
of the Trust and shall continue until there are no Exchangeable Shares
outstanding held by a Beneficiary; provided, however, that the provisions of
Articles 9 and 10 shall survive any such termination of this trust agreement.
ARTICLE 14
GENERAL
14.1 SEVERABILITY. If any provision of this trust agreement is held to be
invalid, illegal or unenforceable, the validity, legality or enforceability of
the remainder of this trust agreement shall not in any way be affected or
impaired thereby and the agreement shall be carried out as nearly as possible in
accordance with its original terms and conditions.
14.2 ENUREMENT. This trust agreement shall be binding upon and enure to the
benefit of the parties hereto and their respective successors and permitted
assigns and to the benefit of the Beneficiaries.
14.3 NOTICES TO PARTIES. All notices and other communications between the
parties hereunder shall be in writing and shall be deemed to have been given if
delivered personally or by confirmed telecopy to the parties at the following
addresses (or at such other address for such party as shall be specified in like
notice):
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(a) if to Source at:
Source Media, Inc.
0000 Xxxxxx Xxxx Xxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
U.S.A.
Attention: Chairman and CEO
Telecopier: (000) 000-0000
(b) if to Cableshare at:
Cableshare Inc.
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Attention: President
Telecopier: (000) 000-0000
(c) if to the Trustee at:
--
Attention: --
Telecopy: --
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of receipt thereof unless
such day is not a Business Day in which case it shall be deemed to have been
given and received upon the immediately following Business Day.
14.4 NOTICE OF BENEFICIARIES. Any and all notices to be given and any
documents to be sent to any Beneficiaries may be given or sent to the address of
such holder shown on the register of holders of Exchangeable Shares in any
manner permitted by the by-laws of Cableshare from time to time in force in
respect of notices to shareholders and shall be deemed to be received (if given
or sent in such manner) at the time specified in such by-laws, the provisions of
which by-laws shall apply mutatis mutandis to notices or documents as aforesaid
sent to such holders.
14.5 RISK OF PAYMENTS BY POST. Whenever payments are to be made or documents
are to be sent to any Beneficiary by the Trustee or by Cableshare, or by such
Beneficiary to the Trustee or to Source or Cableshare, the making of such
payment or sending of such document sent through the post shall be at the risk
of the party paying or sending the same.
14.6 COUNTERPARTS. This trust agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
14.7 JURISDICTION. This trust agreement shall be construed and enforced in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
14.8 ATTORNMENT. Source agrees that any action or proceeding arising out of or
relating to this trust agreement may be instituted in the courts of Ontario,
waives any objection which it may have now hereafter to the venue of any such
action or proceeding, irrevocably submits to the jurisdiction of the said courts
in any such action or proceeding, agrees to be bound by any judgment of the said
courts and not to seek, and hereby waives, any review of the merits of any such
judgment by the courts of any other jurisdiction and hereby appoints Cableshare
at its registered office in the Province of Ontario as Source's attorney for
service of process.
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IN WITNESS WHEREOF, the parties hereto have caused this trust agreement to
be duly executed as of the date first above written.
SOURCE MEDIA, INC.
by
---------------------------------
C.S.
--------------------------------
CABLESHARE INC.
by
---------------------------------
C.S.
--------------------------------
-- TRUST COMPANY
by
---------------------------------
-----------------------------------
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