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EXHIBIT 10.20
SUPPORT 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.
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 support agreement
forthwith following the filing of articles of arrangement to give effect to the
arrangement referred to therein, such support agreement to contain the terms and
conditions set forth in Exhibit 5 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 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;
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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 the parties hereto desire to make appropriate provisions and to
establish a procedure whereby Source will take certain actions and make certain
payments and deliveries necessary to ensure that Cableshare will be able to make
certain payments and to deliver or cause to be delivered Source Common Shares in
satisfaction of the obligations of Cableshare under the Share Provisions with
respect to the payment and satisfaction of dividends, Liquidation Amounts,
Retraction Prices and Redemption Prices (as such terms are defined in the Share
Provisions), all in accordance with the Share Provisions;
NOW THEREFORE in consideration of the respective covenants and agreements
provided in this agreement and for other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties agree as
follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINED TERMS. Each term denoted herein by initial capital letters and
not otherwise defined herein shall have the meaning ascribed thereto in the
Share Provisions, unless the context requires otherwise.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC. The division of this
agreement into articles, sections and paragraphs and the insertion of headings
are for convenience of reference only and shall not affect the construction or
interpretation of this agreement.
1.3 NUMBER, GENDER, ETC. Words importing the singular number only shall
include the plural and vice versa. Words importing the use of any gender shall
include all genders.
1.4 DATE FOR ANY ACTION. If any date on which any action is required to be
taken under this agreement is not a Business Day, such action shall be required
to be taken on the next succeeding Business Day. For the purposes of this
agreement, a "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.
ARTICLE 2
COVENANTS OF SOURCE AND CABLESHARE
2.1 FUNDING OF CABLESHARE. So long as any Exchangeable Shares are
outstanding, Source will:
(a) not declare or pay any dividend on Source Common Shares unless
Cableshare shall simultaneously declare or pay, as the case may be, an
equivalent dividend on the Exchangeable Shares;
(b) cause Cableshare to declare simultaneously with the declaration of
any dividend on Source Common Shares an equivalent dividend on the
Exchangeable Shares and, when such dividend is paid on Source Common
Shares, cause Cableshare to pay simultaneously therewith such
equivalent dividend on the Exchangeable Shares, in each case in
accordance with the Share Provisions;
(c) advise Cableshare sufficiently in advance of the declaration by
Source of any dividend on Source Common Shares and take all such other
actions as are necessary, in cooperation with Cableshare, to ensure
that the respective declaration date, record date and payment date for
a dividend on the Exchangeable Share shall be the same as the record
date, declaration date and payment date for the corresponding dividend
on Source Common Shares;
(d) ensure that the record date for any dividend declared on Source
Common Shares is not less than 10 Business Days after the declaration
date for such dividend;
(e) provide or cause to be provided to Cableshare, by any means which
Source deems appropriate from time to time, such assets, funds and
other property as may be necessary in order that
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Cableshare will have sufficient assets, funds and other property
available to enable the due declaration and the due and punctual
payment, in accordance with applicable law, of all dividends on the
Exchangeable Shares in accordance with the Share Provisions;
(f) take all such actions and do all such things as are necessary or
desirable to enable and permit Cableshare, in accordance with
applicable law, to pay and otherwise perform its obligations with
respect to the satisfaction of the Liquidation Amount in respect of
each issued and outstanding Exchangeable Share upon the liquidation,
dissolution or winding-up of Cableshare, including without limitation,
all such actions and all such things as are necessary or desirable to
enable and permit Cableshare to cause to be delivered Source Common
Shares to the holders of Exchangeable Shares in accordance with the
provisions of Article 5 of the Share Provisions; and
(g) take all such actions and do all such things as are necessary or
desirable to enable and permit Cableshare, in accordance with
applicable law, to pay and otherwise perform its obligations with
respect to the satisfaction of the Retraction Price and the Redemption
Price, including without limitation, all such actions and all such
things as are necessary or desirable to enable and permit Cableshare
to cause to be delivered Source Common Shares to the holders of
Exchangeable Shares, upon the redemption of the Exchangeable Shares in
accordance with the provisions of Article 6 or 7 of the Share
Provisions, as the case may be.
2.2 SEGREGATION OF FUNDS. Upon Source providing or causing to be provided to
Cableshare any funds, assets or other property in accordance with section 2.1,
Cableshare will deposit such funds in a separate account and segregate such
assets and other property, and will use such funds, assets and other property
exclusively for the payment of dividends and the payment or other satisfaction
of the Liquidation Amount, the Retraction Price or the Redemption Price, as
applicable.
2.3 RESERVATION OF SOURCE COMMON SHARES. Source hereby represents, warrants
and covenants that it has irrevocably 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 Source Common Shares (or
other shares or securities into which Source Common Shares may be reclassified
or changed as contemplated by section 2.7 hereof) (a) 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 (b) as
are now and may hereafter be required to enable and permit Cableshare to meet
its obligations hereunder, under the Voting and Exchange Trust Agreement, under
the Share Provisions and under any other security or commitment pursuant to
which Source may now or hereafter be required to issue Source Common Shares.
2.4 NOTIFICATION OF CERTAIN EVENTS. In order to assist Source to comply with
its obligations hereunder, Cableshare will give Source notice of each of the
following events at the time set forth below:
(a) in the event of any determination by the Board of Directors of
Cableshare to institute voluntary liquidation, dissolution or
winding-up proceedings with respect to Cableshare or to effect any
other distribution of the assets of Cableshare 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;
(b) immediately, upon the earlier of receipt by Cableshare of notice of
and Cableshare 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 Cableshare
or to effect any other distribution of the assets of Cableshare among
its shareholders for the purpose of winding up its affairs;
(c) immediately, upon receipt by Cableshare of a Retraction Request;
(d) at least 130 days prior to any accelerated Automatic Redemption Date
determined by the Board of Directors of Cableshare in accordance with
the Share Provisions; and
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(e) as soon as practicable upon the issuance by Cableshare of any
Exchangeable Shares or rights to acquire Exchangeable Shares (other
than the issuance of Exchangeable Shares upon the conversion of
outstanding Class A Shares or Class B Shares pursuant to the
Arrangement).
2.5 DELIVERY OF SOURCE COMMON SHARES. In furtherance of its obligations under
sections 2.1(f) and (g) hereof, upon notice from Cableshare of any event which
requires Cableshare to cause to be delivered Source Common Shares to any holder
of Exchangeable Shares, Source shall forthwith issue and deliver the requisite
Source Common Shares to or to the order of the former holder of the surrendered
Exchangeable Shares, as Cableshare shall direct. All such Source Common Shares
shall be duly issued as fully paid and non-assessable and shall be free and
clear of any lien, claim or encumbrance. In consideration of the issuance of
each such Source Common Share by Source, Cableshare shall issue to Source or as
Source shall direct, Cableshare New Common Shares having equivalent value.
2.6 QUALIFICATION OF SOURCE COMMON SHARES. If any Source Shares (or other
shares or securities into which Source Common Shares may be reclassified or
changed as contemplated by section 2.7 hereof) to be issued and delivered
hereunder 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 (or such other shares or securities) may be
issued and delivered by Source at the direction of Cableshare to the initial
holder thereof or in order that such shares (or such other shares or securities)
may be freely traded thereafter (other than any restrictions on transfer by
reason of a holder being a "control person" or 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 (or such other shares or
securities) 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 (or such other shares
or securities) to be delivered hereunder to be listed, quoted or posted for
trading on all stock exchanges and quotation systems on which outstanding Source
Common Shares (or such other shares or securities) are listed, quoted or posted
for trading at such time.
2.7 ECONOMIC EQUIVALENCE.
(a) Source will not without prior approval of Cableshare and the prior
approval of the holders of the Exchangeable Shares given in accordance
with Section 10.2 of the Share Provisions:
(i) issue or distribute Source Common Shares (or securities
exchangeable for or convertible into or carrying rights to
acquire Source Common Shares) to the holders of all or
substantially all of the then outstanding Source Common Shares
by way of stock dividend or other distribution, other than an
issue of Source Common Shares (or securities exchangeable for or
convertible into or carrying rights to acquire Source Common
Shares) to holders of Source Common Shares who exercise an
option to receive dividends in Source Common Shares (or
securities exchangeable for or convertible into or carrying
rights to acquire Source Common Shares) in lieu of receiving
cash dividends; or
(ii) issue or distribute rights, options or warrants to the holders
of all or substantially all of the then outstanding Source
Common Shares entitling them to subscribe for or to purchase
Source Common Shares (or securities exchangeable for other
convertible into or carrying rights to acquire Source Common
Shares); or
(iii) issue or distribute to the holders of all or substantially all
of the then outstanding Source Common Shares (A) shares or
securities of Source of any class other than Source Common
Shares (other than shares convertible into or exchangeable for
or carrying rights to acquire Source Common Shares), (B) rights,
options or warrants other than those referred to in section
2.7(a)(ii) above, (C) evidences of indebtedness of Source or (D)
assets of Source;
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unless the economic equivalent on a per share basis of such rights,
options, securities, shares, evidences of indebtedness or other assets
is issued or distributed simultaneously to holders of the Exchangeable
Shares, provided that, for greater certainty, the above restrictions
shall not apply to any securities issued or distributed by Source in
order to give effect to and to consummate the transactions
contemplated by, and in accordance with, the Arrangement Agreement.
(b) Source will not without the prior approval of Cableshare and the
prior approval of the holders of the Exchangeable Shares given in
accordance with Section 10.2 of the Share Provisions:
(i) subdivide, redivide or change the then outstanding Source Common
Shares into a greater number of Source Common Shares; or
(ii) reduce, combine or consolidate or change the then outstanding
Source Common Shares into a lesser number of Source Common
Shares; or
(iii) reclassify or otherwise change Source Common Shares or effect an
amalgamation, merger, reorganization or other transaction
affecting Source Common Shares;
unless the same or an economically equivalent change shall
simultaneously be made to, or in the rights of the holders of, the
Exchangeable Shares.
(c) Source will ensure that the record date for any event referred to in
section 2.7(a) or (b) above, or (if no record date is applicable for
such event) the effective date for any such event, is not less than 20
Business Days after the date on which such event is declared or
announced by Source (with simultaneous notice thereof to be given by
Source to Cableshare).
(d) The Board of Directors of Cableshare shall determine, in good faith
and in its sole discretion (with the assistance of such reputable and
qualified independent financial advisors and/or other experts as the
Board may require), economic equivalence for the purposes of any event
referred to in section 2.7(a) or (b) above and each such determination
shall be conclusive and binding on Source. In making each such
determination, the following factors shall, without excluding other
factors determined by the Board to be relevant, be considered by the
Board of Directors of Cableshare:
(i) in the case of any stock dividend or other distribution payable
in Source Common Shares, the number of such shares issued in
proportion to the number of Source Common Shares previously
outstanding;
(ii) in the case of the issuance or distribution of any rights,
options or warrants to subscribe for or purchase Source Common
Shares (or securities exchangeable for or convertible into or
carrying rights to acquire Source Common Shares), the
relationship between the exercise price of each such right,
option or warrant and the current market value (as determined by
the Board of Directors of Cableshare in the manner above
contemplated) of a Source Common Share;
(iii) in the case of the issuance or distribution of any other form of
property (including without limitation) any shares or securities
of Source of any class other than Source Common Shares, any
rights, options or warrants other than those referred to in
section 2.7(d)(ii) above, any evidences of indebtedness of
Source or any assets of Source), the relationship between the
fair market value (as determined by the Board of Directors of
Cableshare in the manner above contemplated) of such property to
be issued or distributed with respect to each outstanding Source
Common Share and the current market value (as determined by the
Board of Directors of Cableshare in the manner above
contemplated) of a Source Common Share;
(iv) in the case of any subdivision, redivision or change of the then
outstanding Source Common Shares into a greater number of Source
Common Shares or the reduction, combination or consolidation or
change of the then outstanding Source Common Shares
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into a lesser number of Source Common Shares or any amalgamation,
merger, reorganization or other transaction affecting Source
Common Shares, the effect thereof upon the then outstanding
Source Common Shares; and
(v) in all such cases, the general taxation consequences of the
relevant event to holders of Exchangeable Shares to the extent
that such consequences may differ from the taxation consequences
to holders of Source Common Shares as a result of differences
between taxation laws of Canada and the United States (except for
any differing consequences arising as a result of differing
marginal taxation rates and without regard to the individual
circumstances of holders of Exchangeable Shares).
For purposes of the foregoing determinations, the current market value
of any security listed and traded or quoted on a securities exchange
shall be the weighted average of the daily trading prices of such
security during a period of not less than 20 consecutive trading days
ending not more than five trading days before the date of
determination on the principal securities exchange on which such
securities are listed and traded or quoted; provided, however, that if
in the opinion of the Board of Directors of Cableshare the public
distribution or trading activity of such securities during such period
does not create a market which reflects the fair market value of such
securities, then the current market value thereof shall be determined
by the Board of Directors of Cableshare, in good faith and in its sole
discretion (with the assistance of such reputable and qualified
independent financial advisors and/or other experts as the Board may
require), and provided further that any such determination by the
Board shall be conclusive and binding on Source.
2.8 TENDER OFFERS, ETC. In the event that a tender offer, share exchange
offer, issuer bid, take-over bid or similar transaction with respect to Source
Common Shares (an "Offer") is proposed by Source or is proposed to Source or its
shareholders and is recommended by the Board of Directors of Source, or is
otherwise effected or to be effected with the consent or approval of the Board
of Directors of Source, Source will use its reasonable efforts expeditiously and
in good faith to take all such actions and do all such things as are necessary
or desirable to enable and permit holders of Exchangeable Shares to participate
in such Offer to the same extent and on an economically equivalent basis as the
holders of Source Common Shares, without discrimination. Without limiting the
generality of the foregoing, Source will use its reasonable efforts
expeditiously and in good faith to ensure that holders of Exchangeable Shares
may participate in all such Offers without being required to retract
Exchangeable Shares as against Cableshare (or, if so required, to ensure that
any such retraction shall be effective only upon, and shall be conditional upon,
the closing of the Offer and only to the extent necessary to tender or deposit
to the Offer).
2.9 OWNERSHIP OF OUTSTANDING SHARES. Without the prior approval of Cableshare
and the prior approval of the holders of the Exchangeable Shares given in
accordance with Section 10.2 of the Share Provisions, Source covenants and
agrees in favour of Cableshare that, as long as any outstanding Exchangeable
Shares are owned by any person or entity other than Source or any of its
Affiliates, Source will be and remain the direct or indirect beneficial owner of
all issued and outstanding common shares in the capital of Cableshare.
2.10 SOURCE NOT TO VOTE EXCHANGEABLE SHARES. Source covenants and agrees that
it will appoint and cause to be appointed proxyholders with respect to all
Exchangeable Shares held by Source and its Affiliates for the sole purpose of
attending each meeting of holders of Exchangeable Shares in order to be counted
as part of the quorum for each such meeting. Source further covenants and agrees
that it will not, and will cause its Affiliates not to, exercise any voting
rights which may be exercisable by holders of Exchangeable Shares from time to
time pursuant to the Share Provisions or pursuant to the provisions of the
Business Corporations Act (Ontario) (or any successor or other corporate statute
by which Cableshare may in the future be governed) with respect to any
Exchangeable Shares held by it or by its Affiliates in respect of any matter
considered at any meeting of holders of Exchangeable Shares.
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ARTICLE 3
GENERAL
3.1 TERM. This agreement shall come into force and be effective as of the
date hereof and shall terminate and be of no further force and effect at such
time as no Exchangeable Shares (or securities or rights convertible into or
exchangeable for or carrying rights to acquire Exchangeable Shares) are held by
any party other than Source and any of its Affiliates.
3.2 CHANGES IN CAPITAL OF SOURCE AND CABLESHARE. At all times after the
occurrence of any event effected pursuant to sections 2.7 and 2.8 hereof, as a
result of which either Source Common Shares or the Exchangeable Shares or both
are in any way changed, this agreement shall forthwith be amended and modified
as necessary in order that it shall apply with full force and effect, mutatis
mutandis, to all new securities into which Source Common Shares or the
Exchangeable Shares or both are so changed and the parties hereto shall execute
and deliver an agreement in writing giving effect to and evidencing such
necessary amendments and modifications.
3.3 SEVERABILITY. If any provision of this agreement is held to be invalid,
illegal or unenforceable, the validity, legality or enforceability of the
remainder of this agreement shall not in any way be affected or impaired thereby
and this agreement shall be carried out as nearly as possible in accordance with
its original terms and conditions.
3.4 AMENDMENTS, MODIFICATIONS, ETC. This agreement may not be amended or
modified except by an agreement in writing executed by Cableshare and Source and
approved by the holders of the Exchangeable Shares in accordance with Section
10.2 of the Share Provisions.
3.5 MINISTERIAL AMENDMENTS. Notwithstanding the provisions of section 3.4,
the parties to this agreement may in writing, at any time and from time to time,
without the approval of the holders of the Exchangeable Shares, amend or modify
this agreement for the purposes of:
(a) adding to the covenants of either or both parties for the protection
of the holders of the Exchangeable Shares;
(b) making such amendments or modifications not inconsistent with this
agreement as may be necessary or desirable with respect to matters or
questions which, in the opinion of the Board of Directors of each of
Cableshare and Source, it may be expedient to make, provided that each
such Board of Directors shall be of the opinion that such amendments
or modifications will not be prejudicial to the interests of the
holders of the Exchangeable Shares; or
(c) making such changes or corrections which, on the advice of counsel to
Cableshare and Source, 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 Cableshare and Source shall be of the
opinion that such changes or corrections will not be prejudicial to
the interests of the holders of the Exchangeable Shares.
3.6 MEETING TO CONSIDER AMENDMENTS. Cableshare, at the request of Source,
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 3.4 hereof. 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.
3.7 AMENDMENTS ONLY IN WRITING. No amendment to or modification or waiver of
any of the provisions of this agreement otherwise permitted hereunder shall be
effective unless made in writing and signed by both of the parties hereto.
3.8 ENUREMENT. This agreement shall be binding upon and enure to the benefit
of the parties hereto and their respective successors and assigns.
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3.9 NOTICES TO PARTIES. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if delivered
personally or by confirmed telecopy to the parties at the following addresses
(or at such other address for either such party as shall be specified in like
notice):
(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
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of confirmed receipt thereof
unless such day is not a Business Day in which case it shall be deemed to have
been given and received upon the immediately following Business Day.
3.10 COUNTERPARTS. This agreement may be executed in counterparts, each of
which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
3.11 JURISDICTION. This agreement shall be construed and enforced in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
3.12 ATTORNMENT. Source agrees that any action or proceeding arising out of or
relating to this agreement may be instituted in the courts of Ontario, waives
any objection which it may have now or hereafter to the venue of any such action
or proceeding, irrevocably submits to the jurisdiction of the said courts in any
such action or proceeding, agrees to be bound by any 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 agreement to be
duly executed as of the date first above written.
SOURCE MEDIA, INC.
by
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CABLESHARE INC.
by
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