Draft of February 7, 2000
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VOTING AND EXCHANGE AGREEMENT
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THIS AGREEMENT is made as of the day of ,
A M O N G:
MAGNA INTERNATIONAL INC.
a corporation existing under the laws of the Province
of Ontario ("Magna")
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MAGNA ENTERTAINMENT CORP.
a corporation existing under the laws of the State of
Delaware ("MEC")
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MEC HOLDINGS (CANADA) INC.
a corporation existing under the laws of the Province
of Ontario ("Exchangeco")
WHEREAS by Articles of Amendment dated December 30, 1999 Exchangeco is
authorized to issue Exchangeable Shares in its capital, each such share
exchangeable for one share of MEC in accordance with the rights, privileges,
restrictions and conditions attaching to the Exchangeable Shares (the "Share
Provisions");
AND WHEREAS MEC is the holder of all of the issued and outstanding common
shares of Exchangeco;
AND WHEREAS Magna is the holder of approximately % of the equity of MEC,
and all of the Exchangeable Shares;
AND WHEREAS Magna has determined to distribute approximately 20% of the
equity of MEC held by it to the holders of Magna's Class A Subordinate Voting
Shares and Class B Shares by way of a dividend-in-kind, and to satisfy the
payment of such dividend to certain Canadian residents by the transfer to them
of Exchangeable Shares;
AND WHEREAS this Agreement evidences certain obligations of MEC to
Exchangeco to ensure that Exchangeco will at all times be able to satisfy its
obligations to the holders of Exchangeable Shares under the Share Provisions;
AND WHEREAS this Agreement evidences certain obligations of Magna to the
holders from time to time of the Exchangeable Shares in respect of the voting of
certain shares of MEC held by Magna;
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NOW THEREFORE for good and valuable consideration, the receipt and adequacy
of which is hereby mutually acknowledged, the parties hereto covenant and agree
as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Definitions.
In this Agreement, the following terms shall have the following meanings:
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by, or under control with, that Person. For the purposes
of this definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), 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 Right" means the benefit of the obligation of MEC to effect
the automatic exchange of MEC Class A Shares for Exchangeable Shares pursuant to
section 3.11(c).
"Exchange Right" has the meaning ascribed thereto in section 3.1.
"Holder" means a Person who is the registered holder of an Exchangeable Share,
but does not include Magna, MEC or any subsidiary of MEC.
"Exchangeco Insolvency Event" means the institution by Exchangeco of any
proceeding to be adjudicated a bankrupt or insolvent or to be wound up, or the
consent of Exchangeco 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 Exchangeco to
contest in good faith any such proceedings commenced in respect of Exchangeco
within 30 days of becoming aware thereof, or the consent by Exchangeco to the
filing of any such petition or to the appointment of a receiver, or the making
by Exchangeco of a general assignment for the benefit of creditors, or the
admission in writing by Exchangeco of its inability to pay its debts generally
as they become due, or Exchangeco 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 Event" has the meaning ascribed thereto in section 3.11(a).
"Liquidation Event Effective Date" has the meaning ascribed thereto in section
3.11(c).
"List" has the meaning ascribed thereto in section 2.9.
"MEC Class A Shares" means the shares of Class A Subordinate Voting Stock of
MEC.
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"MEC Class B Shares" means the shares of Class B Stock of MEC.
"MEC Class Vote" means a matter to be considered by holders of shares of MEC
Class A Shares as a separate class, whether at an MEC Meeting or in connection
with an MEC Consent.
"MEC Consent" means a written consent sought by MEC from its shareholders
including the holders of MEC Class A Shares.
"MEC Meeting" means a meeting of shareholders of MEC at which holders of MEC
Class A Shares are entitled to vote.
"MEC Shares" means the MEC Class A Shares and the MEC Class B Shares,
collectively.
"MEC Successor" has the meaning ascribed thereto in section 5.1(a).
"MEC Votes" means the voting rights attaching to the MEC Shares held by Magna,
either as exercised by Magna in accordance with Voting Instructions or as
exercised by or on behalf of a Holder in person or by proxy.
"Record Date" means the record date established by MEC or by applicable law for
purposes of determining shareholders entitled to vote at an MEC Meeting or to
provide consent for the purposes of an MEC Consent.
"Retracted Shares" has the meaning ascribed thereto in section 3.6.
"Share Provisions" has the meaning set forth in the first recital to this
Agreement.
"Voting Instructions" means the instructions provided by a Holder to Magna with
respect to the exercise of the Voting Rights.
"Voting Rights" has the meaning ascribed thereto in section 2.1.
Other capitalized terms which are not defined in this Agreement have the meaning
ascribed to such terms in the Share Provisions.
1.2 Interpretation Not Affected by Headings, etc.
The division of this Agreement into Articles, sections and other portions and
the insertion of headings are for convenience of reference only and should not
affect the construction or interpretation of this agreement. Unless otherwise
indicated, all references to an "Article" or "section" refer to the specified
Article or section of this Agreement. The terms "this Agreement", "hereof",
"herein" and "hereunder" and similar expressions refer to this Agreement and not
to any particular Article, section or other portion hereof and include any
agreement or instrument supplementary or ancillary hereto.
1.3 Number, Gender, etc.
Words importing the singular number only shall include the plural and vice
versa. Words importing any gender shall include all genders.
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1.4 Date for any Action.
If any date on which any action is required to be taken under this Agreement is
not a Business Day, such action shall be required to be taken on the next
succeeding Business Day.
ARTICLE 2
VOTING RIGHTS OF HOLDERS IN SHARES OF MEC
2.1 Grant of Voting Rights.
Magna hereby grants each Holder of Exchangeable Shares the right (the "Voting
Rights") to cast and exercise, in person or by proxy, one vote attaching to an
MEC Share held by Magna in respect of each Exchangeable Share held by the Holder
on the Record Date, on any matters, questions, proposals or propositions
whatsoever that may properly come before the shareholders of MEC at an MEC
Meeting or in connection with an MEC Consent. Magna may satisfy this obligation
by exercising voting rights attaching to MEC Class A Shares or MEC Class B
Shares held by and registered in the name of Magna, except in the case of a
Class Vote in which case Magna shall satisfy this obligation by exercising votes
attaching to MEC Class A Shares held by and registered in the name of Magna.
2.2 Magna to Hold Sufficient Shares.
Until the termination of this Agreement, Magna covenants and agrees that it
shall retain ownership of, and hold registered in its name, a sufficient number
of MEC Shares to comply with its obligations pursuant to section 2.1 hereof. In
the event of a Class Vote, Magna shall convert MEC Class B Shares held by it
into MEC Class A Shares, if and to the extent necessary to enable Magna to cast
one vote attaching to an MEC Class A Share for each Exchangeable Share in
respect of which it has received Voting Instructions, or to deliver a proxy in
respect of an MEC Class A Share to each Holder who has validly requested one.
2.3 Magna Not to Exercise Voting Rights Independently.
In respect of each MEC Meeting or MEC Consent, Magna will determine the number
of Exchangeable Shares outstanding on the Record Date in respect of which no
Voting Instructions were validly and timely provided to Magna and in respect of
which no proxies were delivered to Holders (the "Unvoted Exchangeable Shares").
Magna will forebear from casting that number of votes attaching to the MEC
Shares held by it as is equal to the number of Unvoted Exchangeable Shares. For
greater certainty, other than the MEC Shares voted in accordance with Voting
Instructions received from holders of Exchangeable Shares, and other than the
MEC Shares which Magna forebears from voting in respect of Unvoted Exchangeable
Shares, Magna shall have the right to cast all other voting rights attaching to
the MEC Shares owned by it, or under its direction and control, at its sole
discretion.
2.4 Minority Approval Requirements.
Magna will use its best efforts to secure any regulatory approvals necessary or
desirable from any securities regulatory authority, stock exchange or other
regulatory body having jurisdiction so that all votes cast by Magna at an MEC
Meeting, and all MEC Consents given by Magna
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pursuant to Voting Instructions received from holders of Exchangeable Shares,
may be treated as votes cast by the Holder of such Exchangeable Shares, and not
as votes cast by Magna, for the purposes of determining the satisfaction of any
applicable minority shareholder approval requirements.
2.5 Legended Share Certificates.
Exchangeco will cause each certificate representing Exchangeable Shares to bear
an appropriate legend notifying the holder of its right to instruct Magna with
respect to the exercise of voting rights attaching to MEC Shares.
2.6 Mailings to Shareholders.
With respect to each MEC Meeting and MEC Consent, MEC shall use its reasonable
efforts to mail or cause to be mailed (or otherwise communicate in the same
manner as MEC utilizes in communications to holders of MEC Class A Shares) to
each of the Holders, such mailing or communication to commence on the same day
as the mailing or notice (or other communication) with respect thereto is
commenced by MEC to its shareholders:
(a) a copy of such notice, together with any related materials to be
provided to shareholders of MEC;
(b) a statement that such Holder is entitled to instruct Magna as to the
exercise of the MEC Votes with respect to such MEC Meeting or MEC Consent
or to attend such MEC Meeting and to exercise personally the MEC Votes
thereat;
(c) a statement as to the manner in which such instructions may be given
to Magna, including an express indication that instructions may be given to
Magna to give:
(i) a proxy to such Holder or his designee to exercise personally the
MEC Votes; or
(ii) a proxy to a designated agent or other representative of the
management of MEC to exercise such MEC Votes;
(d) a statement that if no such instructions are received from the Holder,
the MEC Votes to which such Holder is entitled will not be exercised by
Magna;
(e) a form of direction whereby the Holder may so direct and instruct
Magna as contemplated herein; and
(f) a statement of the time and date by which such instructions must be
received by Magna in order to be binding upon it, which in the case of an
MEC 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 MEC Votes to which a Holder is entitled in
respect of any MEC Meeting or MEC Consent, the number of Exchangeable Shares
owned of record by the Holder
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shall be determined at the close of business on the Record Date. MEC will notify
Magna of any decision of the Board of Directors of MEC with respect to the
calling of any MEC Meeting and shall provide all necessary information and
materials to Magna in each case promptly and in any event in sufficient time to
enable Magna to perform its obligations contemplated by this Agreement.
2.7 Copies of Shareholder Information.
MEC will send to Holders all proxy materials (including notices of MEC Meetings,
but excluding proxies to vote MEC Class A Shares), information statements,
reports (including without limitation, all interim and annual financial
statements) and other written communications that, in each case, are to be
distributed from time to time to holders of MEC Class A Shares at the same time
as such materials are first sent to holders of MEC Class A Shares.
2.8 Other Materials.
As soon as reasonably practicable after receipt by MEC or shareholders of MEC
(if such receipt is known by MEC) of any material sent or given by or on behalf
of a third party to holders of MEC Class A Shares generally, including without
limitation, dissident proxy and information circulars (and related information
and material) and tender and exchange offer circulars (and related information
and material), MEC shall use its reasonable efforts to obtain and deliver to
each Holder such material as soon as possible thereafter (unless the same has
been provided directly to Holders by such third party).
2.9 List of Persons Entitled to Vote.
Exchangeco shall: (a) prior to each annual, general and special MEC Meeting or
the seeking of any MEC Consent; and (b) forthwith upon each request made at any
time by MEC or Magna in writing, prepare or cause to be prepared a list (a
"List") of the names and addresses of the Holders arranged in alphabetical order
and showing the number of Exchangeable Shares held of record by each such
Holder, in each case at the close of business on the date specified by Magna or
MEC in such request or, in the case of a List prepared in connection with an MEC
Meeting or an MEC Consent, at the close of business on the record date
established by MEC or pursuant to applicable law for determining the holders of
MEC Class A Shares entitled to receive notice of and/or to vote at such MEC
Meeting or to give consent in connection with such MEC Consent. Each such List
shall be delivered to Magna promptly after receipt by Exchangeco of such request
or the record date for such meeting or seeking of consent, as the case may be.
MEC agrees to give Exchangeco and Magna written notice of the calling of any MEC
Meeting or the seeking of any MEC 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 Exchangeco to perform its obligations
under this section 2.9.
2.10 Entitlement to Direct Votes.
Any Holder named in a List prepared in connection with any MEC Meeting or MEC
Consent will be entitled: (a) to instruct Magna in the manner described in
section 2.6 with respect to the exercise of the MEC Votes to which such Holder
is entitled; or (b) to attend such meeting and
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personally exercise thereat, as the proxy of Magna, the MEC Votes to which such
Holder is entitled.
2.11 Voting by Magna, and Attendance of Magna Representative at Meeting.
(a) In connection with each MEC Meeting and MEC Consent, Magna shall
exercise, either in person or by proxy, in accordance with the instructions
received from a Holder pursuant to section 2.6, the MEC Votes as to which such
Holder 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 Magna from the Holder prior to the time and date
fixed by Magna for receipt of such instructions in the notice given by Magna to
the Holder pursuant to section 2.6.
(b) Magna shall cause a representative who is empowered by it to sign and
deliver, on behalf of Magna, proxies for Voting Rights to attend each MEC
Meeting. Upon submission by a Holder (or its designee) of identification
satisfactory to Magna's representative, and at the Holder's request, such
representative shall sign and deliver to such Holder (or its designee) a proxy
to exercise personally the MEC Votes as to which such Holder is otherwise
entitled hereunder to direct the vote, if such Holder either: (i) has not
previously given Magna instructions pursuant to section 2.6 in respect of such
meeting; or (ii) submits to such representative written revocation of any such
previous instructions. At such meeting, the Holder exercising such MEC Votes
shall have the same rights as Magna to speak at the meeting in favour of any
matter, question, proposal or proposition, to vote by way of ballot at the
meeting in respect of any matter, question, proposal or proposition, and to vote
at such meeting by way of a show of hands in respect of any matter, question or
proposition.
2.12 Distribution of Written Materials.
Any written materials distributed by MEC pursuant to this Agreement shall be
sent by mail (or otherwise communicated in the same manner as MEC utilizes in
communications to holders of MEC Class A Shares) to each Holder at its address
as shown on the books of Exchangeco. Exchangeco shall provide or cause to be
provided to MEC for this purpose, on a timely basis, a current List and, upon
the request of MEC, mailing labels.
2.13 Termination of Voting Rights.
All of the rights of a Holder with respect to the MEC Votes exercisable in
respect of the Exchangeable Shares held by such Holder, including the right to
instruct Magna as to the voting of or to vote personally such MEC Votes, shall
be deemed to be surrendered by the Holder, and such MEC Votes and the Voting
Rights represented thereby shall cease immediately upon the delivery by such
holder to Exchangeco or MEC of the certificates representing such Exchangeable
Shares in connection with the exercise by the Holder of the Exchange Right or
the automatic exchange of Exchangeable Shares for MEC Class A Shares (unless, in
either case, MEC shall not have delivered the requisite MEC Class A Shares
issuable in exchange therefor to the Holders), 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 Exchangeco
pursuant to Article 5 of the Share Provisions, or upon the purchase of
Exchangeable
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Shares from the holder thereof by MEC pursuant to the exercise by MEC of the
Retraction Call Right, the Redemption Call Right or the Liquidation Call Right.
ARTICLE 3
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
3.1 Grant and Ownership of the Exchange Right.
MEC hereby grants to the Holders the right (the "Exchange Right"), upon the
occurrence and during the continuance of an Exchangeco Insolvency Event, to
require MEC to purchase from each or any Holder all or any part of the
Exchangeable Shares held by the Holder and the Automatic Exchange Rights, all in
accordance with the provisions of this Agreement. MEC hereby acknowledges
receipt of good and valuable consideration (and the adequacy thereof) for the
grant of the Exchange Right and the Automatic Exchange Rights by MEC to the
Holders.
3.2 Legended Share Certificates.
Exchangeco will cause each certificate representing Exchangeable Shares to bear
an appropriate legend notifying the Holders of the Exchange Rights and the
Automatic Exchange Rights.
3.3 Purchase Price.
The total purchase price payable by MEC for each Exchangeable Share to be
purchased by MEC under the Exchange Right shall be an amount per share equal to:
(a) the Current Market Price of an MEC Class A 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, which shall be satisfied in full by MEC causing to be
sent to such holder one MEC Class A Share; plus (b) to the extent not paid by
Exchangeco, an additional amount equivalent to the full amount of all declared
and unpaid dividends on each such Exchangeable Share held by such holder on any
dividend record date which occurred prior to the closing of the purchase and
sale. The total purchase price for each such Exchangeable Share so purchased may
be satisfied only by MEC issuing and delivering or causing to be delivered, to
the relevant Holder, one MEC Class A Share and on the applicable payment date a
cheque for the balance, if any, of the purchase price without interest (but less
any amounts withheld pursuant to section 3.12).
3.4 Exercise Instructions.
Subject to the terms and conditions herein set forth, a Holder shall be
entitled, upon the occurrence and during the continuance of an Exchangeco
Insolvency Event, to exercise the Exchange Right with respect to all or any part
of the Exchangeable Shares registered in the name of such Holder on the books of
Exchangeco. To exercise the Exchange Right, the Holder shall deliver to MEC, in
person or by mail, [at its principal office in Toronto, Ontario] or at such
other place or places in Canada or the United States as MEC may from time to
time designate by written notice to the Holders, the certificates representing
the Exchangeable Shares which such Holder desires MEC to purchase, duly endorsed
in blank for transfer, and accompanied by such other documents and instruments
as may be required to effect a transfer of Exchangeable Shares under the OBCA
and the by-laws of Exchangeco and such additional documents and instruments as
MEC or Exchangeco may reasonably require together with: (a) a duly completed
form of
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notice of exercise of the Exchange Right, contained on the reverse of or
attached to the Exchangeable Share certificates, stating: (i) that the Holder
thereby exercises the Exchange Right so as to require MEC to purchase from the
Holder the number of Exchangeable Shares specified therein; (ii) that such
Holder has good title to and owns all such Exchangeable Shares to be acquired by
MEC free and clear of all liens, claims, security interests, adverse claims and
encumbrances; (iii) the names in which the certificates representing MEC Class A
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
Exchangeco and MEC of payment) of the taxes (if any) payable as contemplated by
section 3.7 of this Agreement. If only a part of the Exchangeable Shares
represented by any certificate or certificates delivered to Magna are to be
purchased by MEC under the Exchange Right, a new certificate for the balance of
such Exchangeable Shares shall be issued to the holder at the expense of
Exchangeco.
3.5 Delivery of MEC Class A Shares; Effect of Exercise.
Promptly after receipt of the certificates representing the Exchangeable Shares
which the Holder desires MEC 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, payable as
contemplated by section 3.7 or evidence thereof), duly endorsed for transfer to
MEC, MEC shall promptly thereafter deliver or cause to be delivered to the
Holder of such Exchangeable Shares (or to such other persons, if any, properly
designated by such Holder) the number of MEC Class A Shares issuable in
connection with the exercise of the Exchange Right, and on the applicable
payment date cheques for the balance, if any, of the total purchase price
therefor without interest (but less any amounts withheld pursuant to section
3.12); provided, however, that no such delivery shall be made unless and until
the Holder requesting the same shall have paid (or provided evidence
satisfactory to Exchangeco and MEC of the payment of) the taxes (if any) payable
as contemplated by section 3.7 of this Agreement. Immediately upon the issuance
by MEC of the MEC Class A Shares that are issuable upon the exercise of the
Exchange Right as provided in this section 3.5, the closing of the transaction
of purchase and sale contemplated by the Exchange Right shall be deemed to have
occurred and the holder of such Exchangeable Shares shall be deemed to have
transferred to MEC all of such holder's right, title and interest in and to such
Exchangeable Shares 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 (together with a cheque for the balance, if any, of the
total purchase price therefor without interest), unless the requisite number of
MEC Class A Shares is not allotted, issued and delivered by MEC to Magna within
five Business Days of the date of the giving of such notice by Magna, in which
case the rights of the Holder shall remain unaffected until such MEC Class A
Shares are so allotted, issued and delivered by MEC and any such cheque is
delivered and paid. Concurrently with a Holder ceasing to be a holder of
Exchangeable Shares, the Holder shall be considered and deemed for all purposes
to be the holder of the MEC Class A Shares delivered to it pursuant to the
Exchange Right.
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3.6 Exercise of Exchange Right Subsequent to Retraction.
In the event that a Holder has exercised its right under Article 6 of the Share
Provisions to require Exchangeco to redeem any or all of the Exchangeable Shares
held by the Holder (the "Retracted Shares") and is notified by Exchangeco
pursuant to section 6.6 of the Share Provisions that Exchangeco will not be
permitted as a result of solvency requirements of applicable law to redeem all
such Retracted Shares, and provided that MEC shall not have exercised the
Retraction Call Right with respect to the Retracted Shares and that the Holder
has not revoked the retraction request delivered by the Holder to Exchangeco
pursuant to section 6.1 of the Share Provisions, the retraction request will
constitute and will be deemed to constitute notice from the Holder exercising
the Exchange Right with respect to those Retracted Shares that Exchangeco is
unable to redeem. In any such event, Exchangeco hereby agrees with MEC and in
favour of the Holder to immediately notify MEC of such prohibition against
Exchangeco redeeming all of the Retracted Shares and promptly to forward or
cause to be forwarded to MEC all relevant materials delivered by the Holder to
Exchangeco 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 MEC will thereupon purchase, pursuant to the
Exchange Right in accordance with the provisions of this Article 5, the
Retracted Shares that Exchangeco is not permitted to redeem.
3.7 Stamp or Other Transfer Taxes.
Upon any sale of Exchangeable Shares to MEC pursuant to the Exchange Right or
the Automatic Exchange Rights, the share certificate or certificates
representing MEC Class A Shares to be delivered in connection with the payment
of the total purchase price therefor shall be issued in the name of the Holder
of the Exchangeable Shares so sold or in such names as such Holder may otherwise
direct in writing without charge to the holder of the Exchangeable Shares so
sold; provided, however, that such Holder: (a) shall pay (and none of MEC,
Exchangeco or Magna 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 Holder; or (b)
shall have evidenced to the satisfaction of MEC and Exchangeco that such taxes,
if any, have been paid.
3.8 Notice of Insolvency Event.
As soon as practicable following the occurrence of an Exchangeco Insolvency
Event, or any event that with the giving of notice or the passage of time or
both would be an Exchangeco Insolvency Event, Exchangeco shall give written
notice thereof to Magna and MEC. As soon as practicable following the
occurrence of an Exchangeco Insolvency Event, MEC will mail to each Holder, at
the expense of MEC, a notice of such Exchangeco Insolvency Event, which notice
shall contain a brief statement of the rights of the Holders with respect to the
Exchange Right.
3.9 Qualification of MEC Class A Shares.
MEC covenants that if any MEC Class A Shares to be issued and delivered pursuant
to the Exchange Right or the Automatic Exchange Right require registration or
qualification with or
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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 Canadian or United States federal, provincial or state
legal requirement before such shares may be issued and delivered by MEC to the
initial holder thereof or in order that such shares may be freely traded
thereafter (other than any restrictions of general application on transfer by
reason of a holder being a "control person" of MEC for purposes of Canadian
provincial securities law or an "affiliate" of MEC for purposes of United States
federal or state securities law), MEC will in good faith expeditiously take all
such actions and do all such things as are necessary or desirable to cause such
MEC Class A Shares to be and remain duly registered, qualified or approved. MEC
will in good faith expeditiously take all such actions and do all such things as
are reasonably necessary or desirable to cause all MEC Class A 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 MEC Class A Shares have been listed by MEC and
remain listed and are quoted or posted for trading at such time.
3.10 MEC Class A Shares.
MEC hereby represents, warrants and covenants that the MEC Class A Shares
issuable as described herein will be duly authorized and validly issued as fully
paid and non-assessable and shall be free and clear of any lien, claim or
encumbrance.
3.11 Automatic Exchange on Liquidation of MEC.
(a) MEC will give Holders written notice of each of the following
events (each, a "Liquidation Event") at the time set forth below:
(i) in the event of any determination by the Board of Directors
of MEC to institute voluntary liquidation, dissolution or winding-up
proceedings with respect to MEC or to effect any other distribution of
assets of MEC 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) as soon as practicable following the earlier of (A) receipt
by MEC of notice of, and (B) MEC 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 MEC
or to effect any other distribution of assets of MEC among its
shareholders for the purpose of winding up its affairs, in each case where
MEC has failed to contest in good faith any such proceeding commenced in
respect of MEC within 30 days of becoming aware thereof.
(b) The notice to Holders delivered upon the occurrence of a
Liquidation Event shall include a brief description of the automatic exchange of
Exchangeable Shares for MEC Class A Shares provided for in section 3.11(c).
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(c) In order that the Holders will be able to participate on a pro rata
basis with the holders of MEC Class A Shares in the distribution of assets of
MEC 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 MEC Class A Shares. To effect such automatic exchange, MEC shall
purchase on the fifth Business Day prior to the Liquidation Event Effective Date
each Exchangeable Share then outstanding and held by Holders, and each Holder
shall sell the Exchangeable Shares held by it at such time, for a total purchase
price per share equal to: (a) the Current Market Price of an MEC Class A Share
on the fifth Business Day prior to the Liquidation Event Effective Date, which
shall be satisfied in full by MEC issuing to the Holder one MEC Class A Share,
and (b) to the extent not paid by Exchangeco, an additional amount equivalent to
the full amount of all declared and unpaid dividends on each such Exchangeable
Share held by such holder on any dividend record date which occurred prior to
the date of the exchange.
(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 MEC Class A Shares shall be deemed
to have occurred, and each Holder shall be deemed to have transferred to MEC all
of the Holder's right, title and interest in and to such Holder's Exchangeable
Shares and shall cease to be a holder of such Exchangeable Shares, and MEC shall
issue to the Holder the MEC Class A Shares issuable upon the automatic exchange
of Exchangeable Shares for MEC Class A Shares and on the applicable payment date
shall deliver to the Holder 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. Concurrently with such Holder ceasing
to be a holder of Exchangeable Shares, the Holder shall be considered and deemed
for all purposes to be the holder of the MEC Class A Shares issued pursuant to
the automatic exchange of Exchangeable Shares for MEC Class A Shares and the
certificates held by the Holder previously representing the Exchangeable Shares
exchanged by the Holder with MEC pursuant to such automatic exchange shall
thereafter be deemed to represent MEC Class A Shares issued to the Holder by MEC
pursuant to such automatic exchange. Upon the request of a Holder and the
surrender by the Holder of Exchangeable Share certificates deemed to represent
MEC Class A Shares, MEC shall deliver or cause to be delivered to the Holder
certificates representing MEC Class A Shares of which the Holder is the holder.
3.12 Withholding Rights.
MEC shall be entitled to deduct and withhold from any consideration otherwise
payable under this Agreement to any Holder such amounts as MEC 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 or succeeded. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes 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 amounts 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, MEC is hereby authorized to
sell or otherwise dispose of such portion of the consideration as is necessary
to provide sufficient funds
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to MEC to enable it to comply with such deduction or withholding requirements
and MEC shall notify the holder thereof and remit to such holder any unapplied
balance of the net proceeds of such sale. MEC represents and warrants that,
based upon facts currently known to it, it has no current intention, as at the
date of this Agreement, to deduct or withhold from any dividend paid to holders
of Exchangeable Shares any amounts under the United States Internal Revenue Code
of 1986.
ARTICLE 4
GENERAL
4.1 Action of Holders.
No Holder shall have the right to institute any action, suit or proceeding or to
exercise any other remedy authorized by this Agreement for the purpose of
enforcing any of its rights hereunder against MEC or Exchangeco unless the
Holder has requested MEC, in the case of the enforcement of a right against
Exchangeco, or Exchangeco, in the case of enforcement of a right against MEC, to
take or institute such action, suit or proceeding and such other party shall
have failed to act within a reasonable time thereafter. In such case, but not
otherwise, the Holder shall be entitled to take proceedings in any court of
competent jurisdiction such as such other party might have taken; it being
understood and intended that no one or more Holders 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 the Voting Rights, the
Exchange Rights or the Automatic Exchange Rights, except subject to the
conditions and in the manner herein provided.
4.2 Conflicting Claims.
If conflicting claims or demands are made or asserted with respect to any
interest of any Holder 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 Holder in any Exchangeable Shares, resulting in
conflicting claims or demands being made in connection with such interest, then
MEC, Magna and Exchangeco shall each be entitled, at its sole discretion, to
refuse to recognize or to comply with any such claims or demands. In so
refusing, MEC, Magna or Exchangeco may elect not to exercise any MEC Votes,
Exchange Rights or Automatic Exchange Rights subject to such conflicting claims
or demands and, in so doing, it shall not be or become liable to any Person on
account of such election or its failure or refusal to comply with any such
conflicting claims or demands. MEC, Magna and Exchangeco 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 MEC Votes,
Exchange Rights or Automatic Exchange Rights subject to such conflicting claims
or demands have been adjudicated by a final judgment of a court of competent
jurisdiction and all rights of appeal have expired; or
(b) all differences with respect to the MEC Votes, Exchange Rights or
Automatic Exchange Rights subject to such conflicting claims or demands have
been conclusively settled by a valid written agreement binding on all such
adverse claimants, and Magna shall have been furnished with an executed copy of
such agreement certified to be in full force and effect.
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If MEC, Magna or Exchangeco elects to recognize 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 it as it
shall deem appropriate to fully indemnify it as between all conflicting claims
or demands.
ARTICLE 5
MEC SUCCESSORS
5.1 Certain Requirements in Respect of Combination, etc.
MEC shall not consummate 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 (herein called the "MEC
Successor"), by operation of law, becomes, without more, bound by the terms and
provisions of this Agreement or, if not so bound, executes, prior to or
contemporaneously with the consummation of such transaction, an Agreement
supplemental hereto and such other instruments (if any) as are reasonably
necessary or advisable to evidence the assumption by the MEC Successor of
liability for all moneys payable and property deliverable hereunder and the
covenant of such MEC 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 MEC under this Agreement; and
(b) such transaction shall preserve and not impair in any material respect
any of the rights, duties, powers and authorities of the Holders hereunder.
5.2 Wholly-Owned Subsidiaries.
Nothing herein shall be construed as preventing the amalgamation or merger of
any wholly-owned direct or indirect subsidiary of MEC with or into MEC or the
winding-up, liquidation or dissolution of any wholly-owned subsidiary of MEC
provided that all of the assets of such subsidiary are transferred to MEC or
another wholly-owned direct or indirect subsidiary of MEC, and any such
transactions are expressly permitted by this Article 5.
ARTICLE 6
AMENDMENTS
6.1 Amendments, Modifications, etc.
This Agreement may not be amended or modified except by an agreement in writing
executed by MEC, Exchangeco and Magna and approved by the Holders in accordance
with section 10.2 of the Share Provisions.
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6.2 Ministerial Amendments.
Notwithstanding the provisions of section 6.1, the parties to this Agreement may
in writing, at any time and from time to time, without the approval of the
Holders, amend or modify this Agreement for the purposes of:
(a) adding to the covenants of any or all parties hereto for the protection
of the Holders hereunder provided that the Board of Directors of each of
Exchangeco and MEC shall be of the good faith opinion that such additions will
not be prejudicial to the rights or interests of the Holders;
(b) making such amendments or modifications not inconsistent with this
Agreement as may be necessary or desirable with respect to matters or questions
which, in the good faith opinion of the Board of Directors of each of MEC and
Exchangeco and in the opinion of counsel to Magna, having in mind the best
interests of the Holders, it may be expedient to make, provided that such Boards
of Directors shall be of the opinion that such amendments and modifications will
not be prejudicial to the interests of the Holders; or
(c) making such changes or corrections which, on the advice of counsel to
MEC, Exchangeco and Magna, 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 Board of Directors of each of MEC
and Exchangeco shall be of the opinion that such changes or corrections will not
be prejudicial to the rights and interests of the Holders.
6.3 Meeting to Consider Amendments.
Exchangeco, at the request of MEC, shall call a meeting or meetings of the
Holders 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 Exchangeco, the Share Provisions and
all applicable laws.
6.4 Changes in Capital of MEC and Exchangeco.
At all times after the occurrence of any event contemplated pursuant to section
2.7 or 2.8 of the Exchangeable Share Support Agreement or otherwise, as a result
of which either MEC Class A 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 MEC Class A Shares or the Exchangeable Shares or
both are so changed and the parties hereto shall execute and deliver a
supplemental Agreement giving effect to and evidencing such necessary amendments
and modifications.
6.5 Execution of Amendments.
No amendment to or modification or waiver of any of the provisions of this
Agreement otherwise permitted hereunder shall be effective unless made in
writing and signed by each of Magna, MEC and Exchangeco. From time to time
Exchangeco, MEC and Magna may, subject to the provisions of these presents, and
they shall, when so directed by these presents, execute and
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deliver by their proper officers, 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 MEC Successors and the covenants of and
obligations assumed by each such MEC Successor;
(b) making any additions to, deletions from or alterations of the
provisions of this Agreement or the Voting Rights, the Exchange Right or the
Automatic Exchange Rights which, in the opinion of Magna relying on the advice
of counsel, will not be prejudicial to the interests of the Holders or are, in
the opinion of counsel to Magna, necessary or advisable in order to incorporate,
reflect or comply with any legislation the provisions of which apply to MEC,
Exchangeco, Magna or this Agreement; and
(c) for any other purposes not inconsistent with the provisions of this
Agreement, including without limitation, to make or evidence any amendment or
modification to this Agreement as contemplated hereby, provided that, in the
opinion of MEC and Exchangeco, relying on the advice of counsel, the rights of
Holders will not be prejudiced thereby.
ARTICLE 7
TERMINATION
7.1 Term.
This Agreement shall continue to be in force and effect until the earliest to
occur of the following events, but not thereafter:
(a) at any time following the distribution of Exchangeable Shares to
Holders, no outstanding Exchangeable Shares continue to be held by any Holder;
(b) each of MEC and Exchangeco elects in writing to terminate this
Agreement and such termination is approved by the Holders in accordance with
section 10.2 of the Share Provisions; and
(c) 21 years from the date of this Agreement.
7.2 Survival of Agreement.
This Agreement shall continue until there are no Exchangeable Shares outstanding
held by a Holder.
ARTICLE 8
GENERAL
8.1 Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule or law, or public policy, all other
conditions and provisions of this Agreement shall
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nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the fullest
extent possible.
8.2 Enurement.
This 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 Holders. The Holders shall be intended third-party beneficiaries of this
Agreement.
8.3 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):
(a) if to Exchangeco:
000 Xxxxx Xxxxx
Xxxxxx, Xxxxxxx
X0X 0X0
Attention: President
Telecopier No.: (000) 000-0000
(b) if to MEC:
000 Xxxx Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx
00000
Attention: President
Telecopier No.: (000) 000-0000
(c) if to Magna:
000 Xxxxx Xxxxx
Xxxxxx, Xxxxxxx
X0X 0X0
Attention: Executive Vice-President, Special Projects and Secretary
Telecopier No.: (000) 000-0000
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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.
8.4 Notice to Holders.
Any and all notices to be given and any documents to be sent to any Holders 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 Exchangeco 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.
8.5 Counterparts.
This 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.
8.6 Jurisdiction.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York without regard to the conflict of laws principles thereof.
8.7 Attornment.
Each of MEC, Exchangeco and Xxxxxx agree that any action or proceeding arising
out of or relating to this Agreement may be instituted in the courts of the
State of New York, 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 agrees not to seek, and hereby
waives, any review of the merits of any such judgment by the court of any other
jurisdiction and hereby appoints at its registered office in as its attorney
for service of process.
IN WITNESS OF WHICH, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
MAGNA INTERNATIONAL INC.
By:
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Name:
Title:
By:
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Name:
Title:
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MAGNA ENTERTAINMENT CORP.
By:
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Name:
Title:
By:
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Name:
Title:
MEC HOLDINGS (CANADA) INC.
By:
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Name:
Title:
By:
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Name:
Title:
