court file no.: cv-17-587226-00cl ontario (commercial … · 2018-06-26 · court file no.:...
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Court File No.: CV-17-587226-00CL
ONTARIOSUPERIOR COURT OF JUSTICE(COMMERCIAL LIST)
THE HONOURABLE MR.
JUSTICE HAINEY
TUESDAY, THE 19th
DAY OF JUNE 2018
IN THE MATTER OF AN APPLICATION UNDER SECTION 182 OF THE BUSINESSCORPORATIONS ACT, R.S.O. 1990, c. B.16, AS AMENDED, AND RULES 14.05(2) AND14.05(3) OF THE RULES OF CIVIL PROCEDURE, O.REG 194.
AND IN THE MATTER OF A PROPOSED ARRANGEMENT INVOLVINGNEXTBLOCK GLOBAL LIMITED, ITS SHAREHOLDERS AND ITS HOLDERS OFDEBENTURES_os T (ii a
t NEXTBLOCK GLOBAL LIMITED
00
N.-,74/Alt it FINAL ORDER
Applicant
THIS APPLICATION made by the Applicant, NextBlock Global Limited ("NextBlock"
or the "Corporation") pursuant to section 182 of the Business Corporations Act, R.S.O. 1990, c.
B-16, as amended, (the "OBCA") was heard this day at 330 University Avenue, Toronto,
Ontario.
ON READING the Notice of Application issued on May 16, 2018, the affidavit of Paul
J. Gibney sworn May 16, 2018, the affidavit of Alex Tapscott sworn May 16, 2018, including the
management information circular at Exhibit "J" thereto (the "Circular"), the supplementary
affidavit of Alex Tapscott sworn May 22, 2018, the supplementary affidavit of Paul J. Gibney
sworn May 22, 2018, the affidavit of Ryan Roebuck sworn May 22, 2018, the affidavit of Alex
Tapscott sworn June 12, 2018, the affidavit of David Danziger affirmed June 13, 2018 (the
"Danziger Affidavit"), and the affidavit of Dennis Bennie affirmed June 13, 2018 and the
exhibits thereto, the Monitor's Third Report dated June 18, 2018, the Monitor's Second
Confidential Report dated June 18, 2018, and the Interim Order of the Honourable Justice
McEwen dated May 23, 2018, and
ON HEARING the submissions of counsel for NextBlock, counsel for the Debenture
Holders and counsel for Albert Gelman Inc. in its capacity as Monitor of NextBlock, no-one
appearing for any other person, including any Shareholder or Debenture Holder of NextBlock
although properly served as appears from the affidavit of service filed, and having determined
that the Arrangement, as described in the Plan of Arrangement attached as Schedule "A" to this
order, fulfills the statutory requirements for an arrangement for the purposes of section 182 of the
OBCA and is fair and reasonable in accordance with the requirements of that section,
1. THIS COURT ORDERS that the Arrangement, as described in the Plan of Arrangement
attached as Schedule "A" to this order, be and is hereby approved.
2. THIS COURT ORDERS that capitalized terms not otherwise defined herein shall have
the meanings attributed thereto in the Plan of Arrangement.
3. THIS COURT ORDERS AND DECLARES that:
a) The Board of Directors of NextBlock is authorized to make Distributions to
Debenture Holders that have delivered a Letter of Transmittal and
Acknowledgment, in such amounts and at such times as may be determined by the
Board of Directors of NextBlock. Without limiting the generality of the
foregoing, NextBlock is hereby authorized to pay the next Distribution to each
Debenture Holder that has delivered a Letter of Transmittal and
Acknowledgment, up to the cumulative sum of $19,935,000 for all Debenture
Holders (the "Next Distribution").
b) In connection with such Distributions, including the Prior Distribution (all of
which, pursuant to the terms of the Plan of Arrangement and the
Acknowledgment referred to therein, shall constitute Limited Recourse
NextBlock Loans), NextBlock shall maintain at its offices in Toronto, Ontario a
register (the "Register") for the recordation of all Limited Recourse NextBlock
Loans advanced by it and owing to, each Debenture Holder from time to time,
which Register shall provide, without limitation, (1) the name and address of each
Debenture Holder receiving Limited Recourse NextBlock Loans, (2) the date and
amount of each Limited Recourse NextBlock Loan advanced by NextBlock to
each Debenture Holder from time to time, (3) the outstanding principal amount of
all Limited Recourse NextBlock Loans owing to each Debenture Holder at any
time (after taking into account any repayment thereof), and (4) a description of the
Limited Recourse Pledged Collateral securing such Limited Recourse NextBlock
Loans; the entries in the Register shall be conclusive, absent manifest error, and
NextBlock and the Debenture Holders may treat each person whose name is
recorded in the Register as a holder of Limited Recourse NextBlock Loans for all
purposes, notwithstanding notice to the contrary; the Register shall be available
for inspection by any Debenture Holder, at any reasonable time and from time to
time upon reasonable prior notice to NextBlock.
4. THIS COURT ORDERS that the audit requirement in paragraph 3 of this Court's
March 16, 2018 Order is hereby varied to instead order NextBlock to proceed with the Specified
Procedures Audit included at paragraph 5 of the Danziger Affidavit (the "Specified Procedures
Audit"), beginning with the six month period ending April 30, 2018, and every quarter
thereafter, until the period in which all of NextBlock's non-cash assets have been sold.
5. THIS COURT ORDERS that the Corporation shall provide to the Monitor on or before
June 29, 2018:
a) a list of all Debenture Holders, who, as at June 25, 2018, have delivered a signed
Letter of Transmittal and Acknowledgment to the Corporation, along with a list of
the corresponding amounts that each Debenture Holder is entitled to receive in
respect of the Next Distribution, referenced in paragraph 3(a) herein; and,
b) evidence of payment of the amount or amounts to which each of the Debenture
Holders referenced in (a) above is entitled, either via certified cheque, bank drafts
or wire payment.
6. THIS COURT ORDERS that, forthwith after
(a) the Corporation has obtained the Specified Procedures Audit for the six month
period ending April 30, 2018 as described at paragraph 5 of the Danziger
Affidavit from an accounting firm and provided same to the Monitor; and
(b) the Corporation has complied with paragraph 5 hereof,
the Monitor shall, subject to the next sentence, file with the Court the certificate at
Schedule "B" hereof confirming that the Corporation has complied with its obligations
set out in this paragraph 6. In the event that the Specified Procedures Audit opinion
discloses any material issues or a material scope limitation, the Monitor is at liberty to
report on that to the Court within 10 business days of receipt of the auditor's report.
7. THIS COURT ORDERS that upon filing the certificate described in paragraph 6
above, the Monitor shall be discharged as Monitor of and from its responsibilities to this Court
under the Winding-Up Order, provided that Albert Gelman Inc. ("AGI") shall continue to have
the benefit of the provisions of all Orders made in this proceeding, including all approvals,
protections and stays of proceedings in favour of AGI in its capacity as Monitor.
8. THIS COURT ORDERS AND DECLARES that upon the filing of the certificate
referred to in paragraph 6 above and subject to paragraph 9 below, AGI shall hereby be released
and discharged from any and all liability that AGI has at the moment or may thereafter have by
reason of, or in any way arising out of, the acts or omissions of AGI while acting in its capacity
as Monitor herein, save and except for any gross negligence or wilful misconduct on the
Monitor's part. Without limiting the generality of the foregoing, AGI is hereby forever released
and discharged from any and all liability relating to matters that were raised, or which could have
been raised, in the within proceeding, save and except for any gross negligence or wilful
misconduct on the Monitor's part.
9. THIS COURT ORDERS that effective May 1, 2018 the Monitor shall no longer be
required to comply with or perform the duties set out at paragraphs 29 and 32 of this Court's
Order of December 4, 2017.
10. THIS COURT ORDERS that effective May 1, 2018 the Corporation and its officers and
directors are no longer required to comply with paragraph 30 of this Court's Order of December
4, 2017.
1 1. THIS COURT ORDERS that the actions taken by the Monitor described in the Second
Report, Third Report and the Second Confidential Report are hereby approved and affirmed.
12. THIS COURT ORDERS that the fees and disbursements of the Monitor and its counsel
as set out in the Fee Affidavits contained in the Third Report are hereby approved and affirmed.
13. THIS COURT ORDERS that the Monitor shall not be required to return to Court for
approval of its fees and activities hereafter, unless counsel for the Debenture Holders or counsel
for the Corporation advise in writing within 30 days of the date of the Monitor delivering its final
accounts that either one objects to any of the Monitor's fees or activities.
14. THIS COURT ORDERS that the Monitor's Second Confidential Report shall be sealed
and not form part of the public record herein.
15. THIS COURT ORDERS that the applicant shall be at liberty to seek leave to vary this
order upon such terms upon giving such notice as this Court may direct, and to seek the advice
and directions of this Court as to the implementation of this order, and to apply for such further
order or orders as may be appropriate.
ENTERED AT / INSCRIT A TORONTO
ON / BOOK NO:LE / DANS LE REGISTRE NO:
JUN 2 0 2018
PER / PAR: 101\
SCHEDULE A
PLAN OF ARRANGEMENT
UNDER SECTION 182 OF THE
BUSINESS CORPORATIONS ACT (ONTARIO)
ARTICLE 1DEFINITIONS AND INTERPRETATION
Section 1.1 Definitions
In this Plan of Arrangement, unless there is something in the subject matter or context
inconsistent therewith, the following terms shall have the respective meanings set out below and
grammatical variations of such terms shall have corresponding meanings:
"Acknowledgement" means a form of acknowledgement (which may form part of the
Letter of Transmittal) setting forth a Debenture Holder's confirmation and agreement that
all Distributions received by it shall constitute Limited Recourse NextBlock Loans and
that the Debenture Holder has granted to the Company the NextBlock Debenture Pledge
as security for the obligations of the Debenture Holder under the Limited Recourse
NextBlock Loans;
"Aggregate Debenture Principal Amount" means the aggregate of the Debenture
Principal Amount in respect of all of the Debentures;
"Amalco" means the corporation continuing under the OBCA from the amalgamation of
the Company and Newco under the name "NextBlock Inc.";
"Arrangement" means the arrangement under Section 182 of the OBCA on the terms
and subject to the conditions set out in this Plan of Arrangement, subject to any
amendments or variations to this Plan of Arrangement made in accordance with Section
4.1 of this Plan of Arrangement or made at the direction of the Court in the Final Order
with the prior written consent of the Company;
"Arrangement Resolution" means the resolution to be considered and voted on by the
Common Shareholders and Debenture Holders at the Company Meeting to approve the
Arrangement as provided for in the Interim Order, to be in substantially the form attached
as Schedule B to the Circular;
"Articles of Arrangement" means the articles of arrangement of the Company in respect
of the Arrangement, required by the OBCA to be sent to the Director after the Final
Order is made and the Liquidation is complete, which shall include this Plan ofArrangement and otherwise be in a form and content satisfactory to the Company;
"Board" means the board of directors of the Company as constituted from time to time;
"Business Day" means any day of the year, other than a Saturday, Sunday or any day on
which major banks are closed for business in Toronto, Ontario;
"Certificate of Arrangement" means the certificate of arrangement to be issued by the
Director pursuant to Subsection 183(2) of the OBCA in respect of the Articles of
Arrangement;
"Common Shareholders" means the registered holders of Common Shares as they
appear from time to time on the register of Common Shares maintained by the Company;
"Common Shares" means common shares in the capital of the Company;
"Company" means NextBlock Global Limited, a corporation incorporated under the
OBCA;
"Company Circular" means the notice of the Company Meeting and accompanying
management information circular, including all schedules, appendices and exhibits to,
and information incorporated by reference in, such management information circular, to
be sent to the Common Shareholders and Debenture Holders in connection with the
Company Meeting, as amended, supplemented or otherwise modified from time to time
in accordance with the terms of this Plan of Arrangement;
"Company Meeting" means the special meeting of the Common Shareholders and
Debenture Holders, including any adjournment or postponement of such special meeting
in accordance with the terms of this Plan of Arrangement, to be called and held in
accordance with the Interim Order to consider the Arrangement Resolution and for any
other purpose as may be set out in the Company Circular;
"Contingency Holdback" means the cash amount of $4,400,000 held back by NewCo
from the Share Consideration and in respect of which Newco shall issue Contingent
Payment Rights;
"Contingent Payment Due Date" means the date that is three years after the Effective
Date;
"Contingent Payment Right" of a Debenture Holder means a contractual right of the
Debenture Holder enforceable against Newco (or Amalco) to receive from Newco (or
Amalco) on the Contingent Payment Due Date (or earlier as provided below) payment of
the amount calculated as the product of the Debenture Ratio in respect of the Debenture
Holder's Debenture and the Contingent Right Balance, less any applicable amounts
withheld and remitted in accordance with Section 3.3, subject to the following terms:
1. Prepayment: Newco (or Amalco) shall have the right to pay the Contingent Right
Balance or any amount or amounts which in aggregate equal the Contingent Right
Balance at such time or times as Newco shall determine at its sole discretion on or
before the Contingent Payment Due Date;
2. Non-Transferability: The holder of a Contingent Payment Right may not sell,
assign, pledge, give, transfer or otherwise dispose of the Contingent Payment
Right, or any interest therein, or make any offer or attempt to do any of the
foregoing; and Newco (or Amalco) shall not be required to give effect to any
purported transfer of the Contingent Payment Right;
3. Termination: Upon payment to the Debenture Holders of the Contingent Right
Balance in full, Newco (or Amalco) shall have no further obligations to the
Debenture Holders in respect of the Contingent Payment Rights and each
Contingent Payment Right shall thereupon expire and terminate; and
4. Uncertificated: The Contingent Payment Rights shall be uncertificated.
"Contingent Payment Rights Register" means the register of Contingent Payment
Rights maintained by Newco (or Amalco) and the entry of a Debenture Holder on such
register shall evidence such Debenture Holder's right to enforce the Contingent Payment
Right;
"Contingent Right Balance" means the amount equal to the amount of the Contingency
Holdback minus 88% of the amount of the Wind-Down Costs paid, accrued or provided
for on or before the Contingent Payment Due Date;
"Court" means the Ontario Superior Court of Justice (Commercial List);
"Debenture Holders" means the registered holders of the Debentures as they appear
from time to time on the Debenture Register;
"Debenture Principal Amount" in respect of a Debenture shall mean the sum of (i) the
Face Amount of the Debenture, and (ii) the product of the Debenture Ratio in respect of
such Debenture multiplied by 91% of the Net Gains, all as determined in the sole
discretion of the Board acting in good faith.
"Debenture Ratio", in respect of a Debenture, means a fraction, the numerator of which
is the Face Amount of the Debenture and the denominator of which is the sum of the
Face Amounts of all of the Debentures;
"Debenture Register" means the register of Debentures maintained by or on behalf of
the Company in respect of the holders of Debentures;
"Debentures" means the 8.0% Convertible Unsecured Subordinated Debentures Series A
issued by the Company on or about July 26, 2017 and amended in accordance with the
terms of this Plan of Arrangement and "Debenture" means any of them;
"Director" means the Director appointed under section 278 of the OBCA;
"Distribution Holdback" means the amount held back and not distributed or paid to a
Debenture Holder by the Company due to the failure of the Debenture Holder to deliver
an Acknowledgement to the Company;
"Distributions" means, without duplication, all distributions and amounts paid by
NextBlock to the Debenture Holders, including without limitation the Prior Distribution
and all Distribution Holdbacks;
"Effective Date" means the date shown on the Certificate of Arrangement giving effectto the Arrangement;
"Effective Time" means 12:01 a.m. (Eastern Time) on the Effective Date;
"Face Amount" of a Debenture means the dollar amount appearing on the front page ofsuch Debenture to the right of and opposite the certificate number;
"Final Order" means the final order of the Court in a form acceptable to the Company,approving the Arrangement, as such order may be amended by the Court (with theconsent of the Company) at any time prior to the Effective Date or, if appealed, then,unless such appeal is withdrawn or denied, as affirmed or as amended (provided that anysuch amendment is acceptable to the Company) on appeal;
"Governmental Entity" means (i) any international, multinational, national, federal,provincial, territorial, state, regional, municipal, local or other government, governmentalor public department, central bank, court, tribunal, arbitral body, commission, board,bureau, ministry, agency or instrumentality, domestic or foreign, (ii) any subdivision orauthority of any of the above, or (iii) any quasi-governmental or private body exercisingany regulatory, expropriation, taxing or other authority under or for the account of any ofthe foregoing;
"HST" means the tax imposed under Part IX of the Excise Tax Act (Canada);
"Interim Order" means the interim order of the Court issued on May 23, 2018,providing for, among other things, the calling and holding of the Company Meeting, assuch order may be amended by the Court with the consent of the Company;
"Letter of Transmittal" means the letter of transmittal forwarded by the Company toDebenture Holders together with the Company Circular;
"Liens" means any mortgage, charge, pledge, hypothec, security interest, prior claim,encroachments, option, right of first refusal or first offer, occupancy right, covenant,assignment, lien (statutory or otherwise), defect of title, or restriction or adverse right orclaim, or other third party interest or encumbrance of any kind, in each case, whethercontingent or absolute;
"Limited Recourse NextBlock Loans" means secured, non-interest bearing loanspayable on demand after completion of the Liquidation advanced by the Company to theDebenture Holders by way of the Distributions;
"Limited Recourse Pledged Collateral" means the Debentures, all payments owingthereunder, together with all renewals, substitutions and replacements therefor, allincreases, additions and accretions thereto, interest thereon, changes, classifications,reclassifications, subdivisions and conversions thereof and all proceeds thereof (including
for certainty, proceeds in the form of the NextBlock Preferred Shares resulting from theDebenture Conversion in accordance with the terms of this Plan of Arrangement);
"Liquidation" means the sale of all of the Company's assets on such terms and at such
times as the Board shall determine at its discretion including all sales completed by theCompany prior to the date hereof;
"Liquidation Proceeds" means the proceeds received by the Company from theLiquidation;
"Loans Register" means the register of Limited Recourse NextBlock Loans maintainedby the Company.
"Murthly Fee" means a fee payable by the Company to Murthly Holdings Ltd., a
corporation controlled by Charles Morris, on such terms as the Board shall determine, in
respect of services rendered in connection with the Liquidation and calculated as 3% of
the amount equal to: (i) the Liquidation Proceeds less (ii) the sum of the Face Amounts of
all Debentures, less (iii) all costs and expenses incurred by the Company before the
Effective Time and all fees, charges, penalties, fines and other payments to Governmental
Entities, but excluding any amount on account of Taxes of the Company;
"Net Gains" means the Liquidation Proceeds after payment of, or accrual for, all other
costs, expenses, debts and liabilities incurred or unpaid by the Company before theEffective Date including without limitation the Murthly Fee and all other costs, expenses,
debts and liabilities incurred in connection with and in the course of the Liquidation and
this Plan of Arrangement, all fees, charges, penalties, fines and other payments to
Governmental Entities all Taxes and a provision for Taxes (including Taxes arising from
the Liquidation) in an amount which shall be determined by the Board acting in good
faith on advice from tax counsel to NextBlock, and less the sum of the Face Amounts ofall of the Debentures;
"Newco" means a corporation to be incorporated under the OBCA prior to the Effective
Time and initially to be wholly-owned by Ryan Roebuck;
"Newco Note" means a non-interest bearing, demand promissory note issued by Newcoin a principal amount equal to the Aggregate Debenture Principal Amount;
"Newco Note Cash Amount" means the amount determined by subtracting the Total
Limited Recourse NextBlock Loan Principal Amount from the Aggregate DebenturePrincipal Amount;
"NextBlock Debenture Pledge" has the meaning given to such term in Section
2.2(a)(ii)(A).
"NextBlock Preferred Shares" means non-voting, redeemable preferred shares in thecapital of the Company;
"OBCA" means the Business Corporations Act (Ontario);
"Person" includes any individual, partnership, association, body corporate, organization,trust, estate, trustee, executor, administrator, legal representative, government (includingGovernmental Entity), syndicate or other entity, whether or not having legal status;
"Prior Distribution" means the sum of $19,935,000 paid to Debenture Holders pro ratain January 2018 pursuant to the Windup Order;
"Sales Taxes" means all applicable value-added, sales, use, consumption, multi-staged,personal property, customs, excise, stamp, transfer or similar taxes, duties or charges,including all applicable HST;
"Share Consideration" has the meaning ascribed thereto in Section 2.2(f);
"Shareholders" means registered holders of Common Shares and NextBlock PreferredShares;
"Tax Act" means the Income Tax Act (Canada) and the regulations thereunder, asamended from time to time;
"Taxes" means all taxes, surtaxes, duties, levies, imposts, fees, assessments,withholdings, dues and other charges of any nature, including interest, additions to taxand penalties applicable thereto, imposed or collected by any Governmental Entity,whether disputed or not, including Canadian federal, provincial, territorial, municipal andlocal, foreign and other income, franchise, gross receipts, capital, capital gains, realproperty, personal property, withholding, payroll, health, transfer, Sales Taxes, landtransfer, ad valorem, anti-dumping, countervail, net worth, stamp, registration, franchise,payroll, employment, education, business, school, local improvement, development andoccupation taxes;
"Total Limited Recourse NextBlock Loan Principal Amount" means the aggregateprincipal amount of all Limited Recourse NextBlock Loans advanced by the Company toall Debenture Holders or otherwise constituted as Limited Recourse NextBlock Loanspursuant to Section 2.2(a)(i);
"Wind-Down Costs" means all costs, expenses, liabilities, obligations, indebtedness, andcommitments (whether accrued, absolute, contingent or otherwise) and Taxes of theCompany (or its successor) that are unpaid as of the Effective Date and/or incurred afterthe Effective Time up to the Contingent Payment Due Date, other than Taxes which areincluded or provided for in the determination of Net Gains, and including withoutlimitation any amounts payable as fees, charges, fines, costs or penalties to anyGovernmental Entity, and all costs and expenses incurred by the Company including feesand expenses of professional advisors, auditors and accountants; and
"Windup Order" means the order of the Ontario Superior Court of Justice dated
December 4, 2017 authorizing the winding up of the Company.
Section 1.2 Number and Gender
In this Plan of Arrangement, unless the context otherwise requires, words importing the singular
number include the plural and vice versa, and words importing any gender include all genders.
Section 1.3 Interpretation Not Affected by Headings, etc.
The division of this Plan of Arrangement into Articles, Sections, Subsections and other parts and
the insertion of headings are for convenience only and shall not affect the construction or
interpretation of this Plan of Arrangement.
Section 1.4 Date For Any Action
In the event that any date on or by which any action is required or permitted to be taken
hereunder is not a Business Day, such action shall be required or permitted to be taken on or by
the next succeeding day which is a Business Day.
Section 1.5 Time
All times expressed herein or in any Letters of Transmittal are local time in Toronto, Ontario
unless otherwise stipulated herein or therein.
Section 1.6 Currency
All references to currency in this Plan of Arrangement are to Canadian dollars.
Section 1.7 Statutory References
Unless otherwise expressly provided herein, any reference in this Plan of Arrangement to a
statute includes all regulations made thereunder, all amendments to such statute or regulations in
force from time to time, and any statute or regulation that supplements or supersedes such statute
or regulations.
Section 1.8 Certain Phrases, etc.
The words (i) "including", "includes" and "include" mean "including (or includes or include)
without limitation," (ii) "the aggregate of", "the total of', "the sum of', or a phrase of similar
meaning means "the aggregate (or total or sum), without duplication, of," and (iii) unless stated
otherwise, "Article", "Section", and "Schedule" followed by a number or letter mean and refer to
the specified Article or Section of or Schedule to this Plan of Arrangement.
ARTICLE 2THE ARRANGEMENT
Section 2.1 Binding Effect /Integrated Transaction
(a)
(b)
Section 2.2
Commencingminutes apartformality:
(a)
This Plan of Arrangement and the Arrangement will become effective at, and be
binding at and after, the times referred to in Section 2.2 on all Persons including:
(i) the Company, (ii) the Shareholders, (iii) Newco, (iv) all Debenture Holders
and all beneficial holders of the Debentures, without any further act or formality
required on the part of any Person.
No portion of this Plan of Arrangement will take effect with respect to any Person
until the Effective Time. Further, each of the events listed in Sub-Sections 2.2(a)-
(i) will be, without affecting the timing set out in any subsection in Section 2.2,
mutually conditional, such that no event described in any of Sub-Sections 2.2(a)-
(i) may occur without all of such steps occurring.
Arrangement
at the Effective Time, the following shall occur and shall be deemed to occur two
and consecutively in the following order without any further authorization, act or
Each Distribution Holdback, if any, shall be credited as a Distribution to the
Debenture Holder in respect of which the corresponding Distribution was not
previously made, and payment to each such Debenture Holder shall be made,
pursuant to arrangements satisfactory to the Board, and, concurrently therewith:
(i) all Distributions shall be deemed to constitute Limited Recourse
NextBlock Loans, and, in connection therewith, the Company shall
maintain at its offices in Toronto, Ontario the Loans Register, and
(ii) the Limited Recourse NextBlock Loans shall be secured, and otherwise
subject to the following terms:
(A) As general and continuing collateral security for the
repayment of its Limited Recourse NextBlock Loans, each Debenture
Holder shall be deemed to have mortgaged, assigned, transferred,
hypothecated and have pledged to, and deposited with, the Company, and
have granted to the Company a security interest in its Limited Recourse
Pledged Collateral (herein referred to as the "NextBlock Debenture
Pledge").
(B) Each Debenture Holder shall be deemed to have agreed that
the Company has given value and that the NextBlock Debenture Pledge is
intended to attach (a) with respect to the Limited Recourse Pledged
Collateral that is now in existence, at the Effective Time, and (b) with
respect to Limited Recourse Pledged Collateral that comes into existence
in the future, upon the Debenture Holder acquiring rights in the Limited
Recourse Pledged Collateral or the power to transfer rights in the Limited
Recourse Pledged Collateral to the Company; in each case, each of the
Company and the Debenture Holder do not intend to postpone the
attachment of the NextBlock Debenture Pledge.
(C) The liability of the Debenture Holders to the Company to
repay the Limited Recourse NextBlock Loans shall be limited to the extent
that such liability is required to permit the Company to realize upon theLimited Recourse Pledged Collateral and the sole recourse of theCompany against the Debenture Holders with respect to non-payment of
the Limited Recourse NextBlock Loans shall be limited to the NextBlockDebenture Pledge granted to the Company in the Limited Recourse
Pledged Collateral, including cancelling, terminating and setting off the
Debentures held by the Debenture Holders without any approval orconsent of, notice to or any other act or conduct on the part of the
Debenture Holders and the Company shall have no right, recourse or
resort, under any circumstance, to payment from the Debenture Holders or
against any of their respective other property or assets, nor to judgment
issued or other process levied for enforcement or collection of any such
claim or right against the Debenture Holders in respect of non-payment ofthe Limited Recourse NextBlock Loans, except to the extent required torealize upon the Limited Recourse Pledged Collateral.
(b) The terms of each Debenture shall be amended (and for greater certainty, the
following amendments are not intended to result in a novation of the Debenture)as follows:
(i) All of the obligations of the Company to pay interest to the Debenture
Holders are deleted in their entirety;
(ii) The words, "8.0% Convertible Unsecured Subordinated Debenture
Series A", wherever they appear in the form of each Debenture, shall be
replaced with the words, "Convertible Unsecured Subordinated Debenture
Series A";
(iii) The two paragraphs that appear on the first page of the form of Debenture
after the debenture number and dollar figure indicating the Face Amount
shall be amended as follows:
(A) the following words shall be deleted from the first paragraph: "theearliest of: (i) the closing date of a Liquidity Event (as defined inthe Terms and Conditions); or (ii)", and "together with all accruedbut unpaid interest, which amount shall be payable through the
issuance of common shares of the Company";
(B) the second paragraph shall be deleted in its entirety;
(iv) Section 1.1 — Defined Terms shall be amended by:
(A) deleting therefrom the following defined terms and their respectivedefinitions set forth therein: a) Adjusted Book Value; b) Business
Day; c) Company; d) Capital Reorganization; e) Change of Control
Conversion; f) Change of Control Notice; g) ConcurrentFinancing; h) Conversion Price; i) Current Market Price; j) Date of
Conversion; k) Debenture Share; 1) Governmental Entity; m)Increased Value; n) Interest Rate; o) Liquidity Event; p) LiquidityEvent Conversion; q) Offer; r) Offer Price; s) OptionalConversion; t) Ordinary Resolution; u) Per Share Cost; v) Person;w) Rights Offering; x) Rights Period; y) Share Reorganization; z)Special Distribution; aa) Successor Entity; bb) Tax Act; cc) Taxes;and dd) Time of Expiry
(B) and, by adding thereto:
a. the following terms and their respective definitions as setforth in Section 1.1 — Definitions hereof: 1) Business Day;2) Company; 3) Debenture Holders; 4) Debenture Ratio; 5)Debenture Share; 6) Director; 7) Face Amount; 8)Governmental Entity; 9) HST; 10) NextBlock PreferredShares; 11) OBCA; 12) Person; 13) Sales Taxes; 14)Shareholders; 15) Tax Act; and 16) Taxes;
b. and the following terms and their respective definitions:
"Conversion Notice" has the meaning attributed to suchterm in Section 3.1(i);
"Debenture Conversion" has the meaning attributed tosuch term in Section 3.1;
"Debenture Principal Amount" has the meaning ascribedthereto in Section 2.3 hereof;
"Debentures" means the Convertible UnsecuredSubordinated Debentures Series A issued by the Companyon or about July 26, 2017 as amended;
"Debenture Share" means a NextBlock Preferred Shareissuable upon conversion of a Debenture in accordancewith the terms set forth herein;
"Successor Entity" has the meaning attributed to such termin Section 7.1(i);"
(v) Section 2.3 — Terms of Debentures of the form of each Debenture shall bedeleted in its entirety and replaced with the following:
"Section 2.3 — Principal Amount
The principal amount of this Debenture shall be equal to the sum of (i) theFace Amount of this Debenture and (ii) the product of the Debenture Ratiomultiplied by 91% of the Net Gains (the "Debenture PrincipalAmount"). The Debenture Principal Amount shall be determined in thesole discretion of the Board of Directors of the Company acting in goodfaith."
(vi) Section 2.9 — Ownership of Debentures of the form of each Debenture willbe deleted in its entirety and replaced with the following:
"Section 2.9 Ownership of Debentures
(1) The Holder of a Debenture shall be deemed to be the owner thereof
for all purposes and payment of or on account of the principal of aDebenture shall be made only to or upon the order in writing of the Holderthereof and such payment shall be a complete discharge to the Companyand any paying agent for the amounts so paid.
(2) The Holder for the time being of any Debenture shall be entitled tothe Debenture Principal Amount evidenced by such Debenture, free fromall equities or rights of set-off or counterclaim between the Company onthe one hand and the original or any intermediate Holder thereof on theother hand (except any equities of which the Company is required to takenotice by statute or by order of a court of competent jurisdiction) and allPersons may act accordingly and a transferee of a Debenture shall, afterthe Transfer Form is lodged with the Company and upon compliance withall other conditions contained in such Debenture or by law, be entitled tobe entered on the register as the owner of such Debenture free from all
equities or rights of set-off or counterclaim between the Company on theone hand and the transferor or any previous Holder thereof on the otherhand (except any equities of which the Company is required to take noticeby statute or by order of a court of competent jurisdiction)."
(vii) Sections 2.5, 2.12, 2.13, 3.1 to 3.10 and Section 3.13 of the form of eachDebenture are deleted and the sections of Articles 2 and 3 shall berenumbered consecutively;
(viii) The words, "and interest" and "and all other amounts owing in respect ofthe Debentures" are deleted from Sub-section 4.1(i) from the form of eachDebenture; and Sub-sections 4.1(ii) to (v) and Section 4.3 are deleted fromthe form of each Debenture;
(ix) Sub-section 4.2(ii) is amended by deleting the words, "Common Shares"
and replacing them with the words, "NextBlock Preferred Shares":
(x) The words, "or interest", are deleted from Sub-section 5.1(i) from the form
of each Debenture; and Sub-sections 5.1(ii) to (vi) and Section 5.8 are
deleted from the form of each Debenture;
(xi) Article 7 and all of the Sections and Sub-sections thereunder are deleted
from the form of each Debenture;
(xii) Exhibit "2" — Form of Election of Conversion Privilege is amended asfollows:
(A) The words, "Common Shares", wherever they appear in Exhibit
"2" shall be deleted and replaced with the words, "NextBlockPreferred Shares"; and
(B) The words, "at the Conversion Price", shall be deleted from the
first paragraph.
(xiii) A new Section 3.1 shall be inserted pursuant to which each Debenture
shall be convertible into NextBlock Preferred Shares at the demand of the
holder of the Debenture on the basis of one NextBlock Preferred Share for
each whole $1.00 of Debenture Principal Amount thereunder as
determined pursuant to Section 2.2(b)(v) ("Debenture Conversion") on
the following terms and conditions:
(A) a Debenture Holder may give written notice to the Company (the
"Conversion Notice") to exercise its right to convert its
Debentures into NextBlock Preferred Shares;
(B) one NextBlock Preferred Share shall be issued as a fully paid non-
voting preferred share in the capital of NextBlock for each one
dollar of the Debenture Principal Amount of each Debenture in
respect of which a Conversion Notice is given;
(C) each Debenture that is the subject of a Conversion Notice shall be
deemed to be surrendered for such Debenture Conversion on the
date of receipt of the Conversion Notice by the Company and shall
be considered repaid and of no further force and effect, and the
Company shall have no further liability or obligation thereunder;
and
(D) in the event that the Debenture Principal Amount of a particular
Debenture is not evenly divisible by $1.00, the Company will issue
the appropriate fraction of a NextBlock Preferred Share upon theDebenture Conversion;
(c) All of the Debenture Holders shall be deemed to have delivered Conversion
Notices to the Company in respect of all of their respective Debentures.
(d) The Debenture Conversions in respect of all of the Debentures shall become
effective, the NextBlock Preferred Shares shall be issued to the Debenture
Holders pursuant to the Debenture Conversions and the Debenture Holders shall
be recorded as the registered holders of the NextBlock Preferred Shares, which
NextBlock Preferred Shares shall continue to remain subject to the NextBlock
Debenture Pledge; all Debentures shall be deemed to be surrendered for such
Debenture Conversion and all Debenture Holders shall cease to be holders of
Debentures and to have any rights as holders of Debentures; the names of the
Debenture Holders shall be removed from the applicable registers of Debentures;
and the Debentures shall be considered repaid and of no further force and effect,
and the Company shall have no further liability or obligation thereunder;
(e) The Company shall convey, assign and transfer all of its right, title and interest in,
to and under the Limited Recourse NextBlock Loans and the NextBlock
Debenture Pledges to Newco together with an amount of cash equal to the Newco
Note Cash Amount and, in consideration therefor, Newco shall issue to the
Company the Newco Note in a principal amount equal to the Aggregate
Debenture Principal Amount;
Newco shall purchase and acquire from the Debenture Holders, and the Debenture
Holders shall sell and transfer to Newco, the NextBlock Preferred Shares held by
the Debenture Holders for an aggregate purchase price equal to the sum of the
Total Limited Recourse NextBlock Loan Principal Amount and the Newco Note
Cash Amount, and the aggregate purchase price (the "Share Consideration"),
less any applicable amounts withheld and remitted in accordance with Section
3.3, shall concurrently therewith be satisfied as follows:
(i) the Limited Recourse NextBlock Loans and the Share Consideration shall
be offset to the extent of the Limited Recourse NextBlock Loans, and the
Limited Recourse NextBlock Loans shall be deemed repaid in full,
satisfied, discharged and cancelled and the Debenture Holders shall be
released from all of their obligations thereunder and the Company shall
record the repayment in full of the Limited Recourse NextBlock Loans in
the Loans Register;
(ii) Newco shall be deemed to have released the NextBlock Preferred Shares
from the NextBlock Debenture Pledge, which NextBlock Debenture
Pledge shall be considered discharged and terminated and of no further
force and effect and the Debenture Holders shall be released from all of
their obligations thereunder;
(iii) Newco shall issue to each Debenture Holder its Contingent Payment Right
having regard to the Debenture Ratio of the Debenture Holder's Debentureand the Company shall maintain the Contingent Payment Rights Register;
(iv) Newco shall pay to the Debenture Holders pro rata the Newco Note Cash
Amount less the amount of the Contingency Holdback;
(g) (i) All of the NextBlock Preferred Shares held by the Debenture Holders shallbe transferred to Newco (free and clear of any Liens) in exchange for the
Share Consideration, less any applicable amounts withheld and remitted inaccordance with Section 3.3;
(ii) the Debenture Holders shall cease to be holders of the NextBlockPreferred Shares transferred pursuant to Section 2.2(g)(i) and to have any
rights as holders of such NextBlock Preferred Shares other than the right
to be paid the Share Consideration per NextBlock Preferred Share inaccordance with Section 2.2(f), and the names of the Debenture Holders
shall be removed from the applicable registers of Shareholders in respectof such NextBlock Preferred Shares, and Newco shall be recorded as theregistered holder of the NextBlock Preferred Shares so acquired and shall
be deemed to be the legal and beneficial owner thereof;
(h) The Company and Newco shall amalgamate and continue as Amalco under the
OBCA in accordance with the following:
(i) Name. The name of Amalco shall be "NextBlock Inc.";
(ii) Registered Office. The registered office of Amalco shall be located in the
regional municipality of Toronto. The address of the registered office of
Amalco shall be #3400, Bay Adelaide Centre, East Tower, 22 Adelaide
Street West, Toronto, ON, Canada M5H 4E3;
(iii) Restrictions on Business. There shall be no restrictions on the business
which Amalco is authorized to carry on;
(iv) Authorized and Outstanding Capital. Amalco shall have authorized
capital of an unlimited number of common shares;
(v) Issued Shares. Each issued Common Share and each issued common
share in the capital of Newco shall be converted into one fully paid
common share in the capital of Amalco;
(vi) Cancellation of Shares. The issued and outstanding Preferred Shares in
the capital of the Company shall be cancelled without any repayment of
the capital in respect thereof;
(vii) Restrictions on Transfer. Shares issued by Amalco shall not be
transferred without the consent of either (x) the directors evidenced by a
resolution passed or signed by them and recorded in the books of Amalco;
or (y) the holders of a majority in number of the outstanding voting shares
of Amalco;
(viii) Number of Directors. Amalco shall have a minimum of one director and
a maximum of ten directors, until changed in accordance with the OBCA.
Until changed by the shareholders of Amalco, or by the directors of
Amalco if authorized by the shareholders of Amalco, the number of
directors of Amalco shall be two;
(ix) First Directors. The first directors of Amalco shall be Dennis Bennie and
Ryan Roebuck. The first directors of Amalco shall hold office until the
first annual meeting of shareholders of Amalco (or the signing of a written
resolution in lieu thereof) or until their successors are elected or
appointed;
(x) By-laws. The by-laws of Amalco shall be the same as those of the
Company;
(xi) Effect of Amalgamation. The provisions of subsections 179(a) to (e) of
the OBCA shall apply to the amalgamation with the result that:
(A) the amalgamation of the Company and Newco and their
continuance as one corporation become effective;
(B) the property of each of the Company and Newco continues to be
the property of the Amalco;
(C) Amalco continues to be liable for the obligations of Newco and the
Company;
(D) an existing cause of action, claim or liability to prosecution is
unaffected;
(E) a civil, criminal or administrative action or proceeding pending by
or against either Newco or the Company may be continued to be
prosecuted by or against Amalco;
(F) a conviction against, or ruling, order or judgment in favour of or
against, Newco or the Company may be enforced by or againstAmalco; and
(G) the articles of amalgamation are deemed to be the articles ofincorporation of the Company and the certificate of amalgamation
is deemed to be the certificate of incorporation of the Company.
(i) The Murthly Fee less $150,000 shall be paid to Murthly Holdings Ltd. to the
extent that it has not been previously paid.
ARTICLE 3LETTER OF TRANSMITTAL AND WITHHOLDING RIGHTS
Section 3.1 Letter of Transmittal and Other Instructions
At the time of mailing the Company Circular or as soon as practicable thereafter, the Company
shall forward, or cause to be forwarded, to each registered Debenture Holder at the address of
such person as it appears on the Debenture Register.
Section 3.2 Lost Certificates
In the event any certificate which immediately prior to the Effective Time represented one or
more outstanding Debentures that were converted pursuant to Section 2.2 shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Debenture Holder
claiming such certificate to be lost, stolen or destroyed, the Company will issue in exchange for
such lost, stolen or destroyed certificate, NextBlock Preferred Shares deliverable in accordancewith Section 2.2 and such Debenture Holder's Letter of Transmittal. When authorizing such
issuance of NextBlock Preferred Shares in exchange for any lost, stolen or destroyed certificate,
the Debenture Holders to whom NextBlock Preferred Shares are to be issued shall, as a condition
precedent to the issuance thereof, give a bond satisfactory to the Company in such sum as the
Company may direct, or otherwise indemnify the Company and Newco in a manner satisfactory
to the Company against any claim that may be made against the Company with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 3.3 Withholding Rights
The Company and Newco shall be entitled to deduct and withhold from any consideration
otherwise payable to any Debenture Holder such amounts as the Company or Newco is required
or permitted to deduct and withhold with respect to such payment under the Tax Act, the United
States Internal Revenue Code of 1986, or any provision of federal, 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
Debentures or NextBlock Preferred Shares in respect of which such deduction and withholding
was made, provided that such withheld amounts are actually remitted to the appropriate
Governmental Entity.
ARTICLE 4AMENDMENT
Section 4.1 Amendment
(a) The Company may amend, modify and/or supplement this Plan of Arrangement atany time and from time to time prior to the Effective Time, provided that any such
amendment, modification or supplement must be approved by the NextBlockBoard by resolution duly passed and certified by the Secretary of NextBlock in a
written document which is filed with the Court and, if made following the
Company Meeting, approved by the Court and communicated to DebentureHolders in the manner required by the Court (if so required).
(b) Any amendment, modification or supplement to this Plan of Arrangement whichis directed by the Court following the Company Meeting shall be effective only if
(i) it is consented to in writing by the NextBlock Board, acting reasonably, and(ii) if required by the Court, it is consented to by the Debenture Holders in the
manner directed by the Court.
(c) Any amendment, modification or supplement to this Plan of Arrangement may be
proposed by the Company at any time prior to the Company Meeting (provided
that the NextBlock Board shall have consented thereto) with or without any other
prior notice or communication, and if so proposed and accepted by the Persons
voting at the Company Meeting (other than as may be required under the InterimOrder), shall become part of this Plan of Arrangement for all purposes.
(d) This Plan of Arrangement may be withdrawn by the Company with due
authorization of the NextBlock Board prior to the occurrence of any of the events
in Section 2.2.
(e) Any amendment, modification or supplement to this Plan of Arrangement may be
made following the Effective Date unilaterally by the Company, provided that it
concerns a matter which, in the reasonable opinion of the Company, is of an
administrative nature required to better give effect to the implementation of this
Plan of Arrangement and is not adverse to the economic interest of any former
Debenture Holder.
ARTICLE 5GENERAL
Section 5.1 Paramountcy
From and after the Effective Time: (i) this Plan of Arrangement shall take precedence and
priority over any and all Debentures and NextBlock Preferred Shares issued prior to the Effective
Time, and (ii) the rights and obligations of the holders of Debentures and NextBlock Preferred
Shares and the Company and Newco and any other Person having any right, title or interest in or
to the Debentures and NextBlock Preferred Shares shall be solely as provided for in this Plan of
Arrangement.
Section 5.2 Other Documents and Instruments
Notwithstanding that the transactions or events set out herein shall occur and shall be deemed to
occur in the order set out in this Plan of Arrangement without any further authorization, act or
formality, the Company shall make, do and execute, or cause to be made, done and executed, all
such further acts, deeds, agreements, transfers, assurances, instruments or documents as may
reasonably be required by either of them in order further to document or evidence any of the
transactions or events set out herein including any resolutions of directors authorizing the issue,
exchange, transfer, purchase for cancellation or donation of shares and any share transfer powers
evidencing the transfer of shares and any receipts therefor.
TOR01: 7441206: V12
SCHEDULE "B"
MONITOR'S CERTIFICATE
Court File No. CV-17-587226-00CL
ONTARIOSUPERIOR COURT OF JUSTICE(COMMERCIAL LIST)
IN THE MATTER OF THE WINDING-UP OFNEXTBLOCK GLOBAL LIMITED
APPLICATION UNDER SECTION 207 OF THEBUSINESS CORPORATIONS ACT, R.S.O. 1990, c. B.16, AS AMENDED
MONITOR'S CERTIFICATE
A. Pursuant to an Order of the Honourable Justice Conway of the Ontario Superior Court of
Justice (the "Court") dated December 4, 2017, Albert Gelman Inc. was appointed
monitor ("Monitor") of NextBlock Global Inc. ("NextBlock") herein;
B. Pursuant to the Order of the Honourable Justice Hainey, dated June 19, 2018 ("Plan
Approval Order"), upon the performance of certain tasks by NextBlock, as set out in
paragraph 6 of the said Order, the Monitor was obliged to file a certificate with the Court;
NOW THEREFORE, the Monitor hereby certifies that NextBlock has performed the tasks and
complied with the requirements set out in paragraph 6 of the Plan Approval Order.
Albert Gelman Inc., in its capacity as Court-Appointed Monitor of NextBlock GlobalLimited
Name: Joe AlbertTitle: Director
Court File No.: CV-17-587226-00CL
IN THE MATTER OF THE WINDING-UP OF NEXTBLOCK GLOBAL LTD.
APPLICATION UNDER SECTION 207 OF THE
BUSINESS CORPORATIONS ACT, R.S.O. 1990, c. B.16, A
S AMENDED
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
PROCEEDINGS COMMENCED AT TORONTO
FINAL ORDER
BORDEN LADNER GERVAIS LLP
Barristers and Solicitors
Bay Adelaide Centre, East T
ower
22 Adelaide Street W
est
Toronto, O
N M5H 4E3
Fax: 416.367.6749
Aaron Blumenfeld (LSUC # 366260)
Tel: 416.367.6070
Email: A
Blumenfeld@b1g.com
Veronica Sjolin (
LSUC # 733520)
Tel: 416.367.6654
Email: VSjolin@b1g.com
Lawyers for NextBlock Global Ltd.
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