Exhibit 10.19
SHAREHOLDERS AGREEMENT MADE AND ENTERED INTO IN XXX XXXX XXX
XXXXXXXX XX XXXXXXXX, XX THE 2ND DAY OF MAY, 1997
BY AND AMONG: H POWER CORP., a Delaware corporation, having its head office
and principal place of business in the City of Belleville,
State of New Jersey,
(hereinafter referred to as "H Power")
PARTY OF THE FIRST PART
AND: SOCIETE INNOVATECH DU GRAND MONTREAL, a body politic duly
constituted according to An Act respecting Societe Innovatech
du Grand Montreal, R.S.Q., ch. S-17.2, having its head office
and principal place of business in the City of Montreal,
Province of Quebec,
(hereinafter referred to as "Innovatech")
PARTY OF THE SECOND PART
AND: SOFINOV SOCIETE FINANCIERE D'INNOVATION INC., a body politic
and corporate, duly incorporated according to the Companies
Act (Quebec), having its head office and principal place of
business in the City of Montreal, Province of Quebec,
(hereinafter referred to as "Sofinov")
PARTY OF THE THIRD PART
AND: 0000-0000 XXXXXX INC., a body politic, duly incorporated
according to the Companies Act (Quebec), having its head
office and principal place of business in the City of
Montreal, Province of Quebec,
(hereinafter referred to as "9042-0175")
PARTY OF THE FOURTH PART
-2-
AND: 3362469 CANADA INC., a body politic and corporate, duly
incorporated according to the Canada Business Corporations
Act, having its head office and principal place of business in
the City of Montreal, Province of Quebec,
(hereinafter referred to as the "Corporation")
PARTY OF THE FIFTH PART
SECTION 1 - PREAMBLE
1.1 WHEREAS the Corporation was incorporated pursuant to the CBCA by Certificate
and Articles of Incorporation dated April 4, 1997 in order to (i) carry on
scientific research and experimental development activities in respect of the
Technology and (ii) manufacture and commercialize stationary fuel-cell-power
systems of 2kW or more based on the Technology and all improvements thereon
throughout the Territory;
1.2 WHEREAS the Corporation will be based in the Montreal area;
1.3 WHEREAS the Corporation's activities will be conducted in the Montreal area;
1.4 WHEREAS pursuant to the Subscription Agreement and the H Power Subscription
Agreement, each of the Shareholders holds the following number and class of
Shares as of the date hereof:
Shareholder Number and Class
----------- ----------------
H Power 333,333 Class B Common Shares
Innovatech 133,333 Class A Common Shares
Sofinov 166,667 Class A Common Shares
9042-0175 33,333 Class A Common Shares
1.5 WHEREAS the parties hereto wish to determine their respective rights, duties
and obligations in and to the Corporation and towards one another.
-3-
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
SECTION 2 - INTERPRETATION
2.1 Definitions. In this Agreement:
2.1.1 "Accepting Investor" has the meaning ascribed thereto at subsection
11.3;
2.1.2 "Accepting Investors" has the meaning ascribed thereto at subsection
11.4;
2.1.3 "Accepting Offeree Shareholders" has the meaning ascribed thereto at
subsection 13.3.2;
2.1.4 "Additional Offer" has the meaning ascribed thereto at subsection
13.3.2;
2.1.5 "Additional Shares" has the meaning ascribed thereto at subsection
11.1;
2.1.6 "Affiliate" or "Affiliated" has the meaning ascribed thereto in the
CBCA;
2.1.7 "Agreement" shall mean this Shareholders Agreement and all
instruments supplemental hereto or in amendment or confirmation
hereof; "herein", "hereof", "hereto", "hereunder" and similar
expressions mean and refer to this Agreement and not to any
particular Section, subsection or other subdivision; "Section",
"subsection" or other subdivision of this Agreement means and refers
to the specified Section, subsection or other subdivision of this
Agreement;
2.1.8 "Arm's Length" shall mean, in respect of any Person, a relationship
between such Person and any particular Person which would be an
arm's length relationship between such Person and the particular
Person within the meaning of the Income Tax Act (Canada);
2.1.9 "Auditors" shall mean Price Waterhouse;
2.1.10 "Board" shall mean the Board of Directors of the Corporation;
2.1.11 "Business Day" shall mean any day, other than a Saturday or Sunday
or a day on which the principal commercial banks in the Province of
Quebec are not open for business during normal banking hours;
2.1.12 "CBCA" shall mean the Canada Business Corporations Act;
-4-
2.1.13 "Class A Common Shares" shall have the meaning ascribed thereto in
the Articles of Incorporation of the Corporation;
2.1.14 "Class B Common Shares" shall have the meaning ascribed thereto in
the Articles of Incorporation of the Corporation;
2.1.15 "Closing" shall mean the sale of the Offered Shares by the Offering
Shareholder pursuant to subsection 13.4;
2.1.16 "Closing Date" shall mean, pursuant to subsections 13.1 and 15.2,
the date which is sixty (60) days after the expiry of the last offer
period described therein in which the Purchaser agrees to purchase
the Offered Shares; provided, however, that if on the Closing Date
all Governmental Body and third party approvals, consents,
notifications and assurances (including, without limitation,
approvals under the Investment Canada Act) necessary to permit the
consummation of the transactions contemplated by the Closing have
been applied for but not yet received by the Purchaser, then the
Closing Date shall be postponed to the thirtieth (30th) day after
the receipt by the Purchaser of the last of the aforesaid approvals,
consents, notifications and assurances; notwithstanding the
foregoing, the Closing shall not be extended more than one hundred
and eighty (180) days after the date which was supposed to have been
the original Closing Date herein;
2.1.17 "Confidential Information" shall mean all information howsoever
received or obtained by the Shareholder from or through the
Corporation before or after the date hereof which the Corporation
identifies in writing as being confidential or proprietary at the
time of disclosure or within ten (10) days thereafter; provided,
however, that the phrase "Confidential Information" shall not
include information which:
2.1.17.1 is in the public domain through no fault of the Shareholder
or any of its former or current directors, officers or employees,
2.1.17.2 is properly within the legitimate possession of the
Shareholder prior to its disclosure hereunder and without any
obligation of confidence,
2.1.17.3 after disclosure, is lawfully received by the Shareholder
from another Person who is lawfully in possession of such
Confidential Information and such other Person was not restricted
from disclosing the information to the Shareholder,
2.1.17.4 is independently developed by the Shareholder through
Persons who have not had access to, or knowledge of, the
Confidential Information, or
-5-
2.1.17.5 is approved by the Corporation in writing for disclosure
prior to its disclosure;
2.1.18 "Contesting Notice" has the meaning ascribed thereto at subsection
15.2;
2.1.19 "Declining Investors" has the meaning ascribed thereto at subsection
11.3;
2.1.20 "Declining Investor" has the meaning ascribed thereto at subsection
11.4;
2.1.21 "Declining Investors' Shares" has the meaning ascribed thereto at
subsection 11.3;
2.1.22 "Declining Investor's Shares" has the meaning ascribed thereto at
subsection 11.4;
2.1.23 "Dispute" shall mean any dispute or controversy between the
Corporation and any Shareholder relating to any matter arising out
of or connected with the rights and obligations of any Shareholders
vis-a-vis the Corporation or the Corporation vis-a-vis any
Shareholder under any Material Agreement;
2.1.24 "Equipment" has the meaning ascribed thereto in the License
Agreement;
2.1.25 "Final Accepting Investor" has the meaning ascribed thereto at
subsection 11.4;
2.1.26 "Final Declining Investor" has the meaning ascribed thereto at
subsection 11.4;
2.1.27 "Final Declining Investor's Shares" has the meaning ascribed thereto
at subsection 11.4;
2.1.28 "First Offer" has the meaning ascribed thereto at subsection 13.3.1;
2.1.29 "Governmental Body" shall mean (i) any domestic or foreign national,
federal, provincial, state, municipal or other government or body,
(ii) any multinational, multilateral or international body, (iii)
any subdivision, agent, commission, board, instrumentality or
authority of any of the foregoing governments or bodies, (iv) any
quasi-governmental or private body exercising any regulatory,
expropriation or taxing authority under or for the account of any of
the foregoing governments or bodies, or (v) any domestic, foreign,
international, multilateral or multinational judicial,
quasi-judicial, arbitration or administrative court, tribunal,
commission, board or panel;
2.1.30 "H Offer" has the meaning ascribed thereto at subsection 13.2;
-6-
2.1.31 "H Power Subscription Agreement" shall mean the subscription
agreement dated the date hereof between the Corporation and H Power
setting forth inter alia the rights and obligations of H Power with
respect to its subscription for Class B Common Shares;
2.1.32 "Investors" shall mean Innovatech, Sofinov and 9042-0175, and all
transferees of Shares of Innovatech, Sofinov or 9042-0175 and all
transferees of Shares of such transferees, collectively, and
"Investor" shall mean any one of them;
2.1.33 "Involved Party" shall mean the Shareholder(s) involved in a
Dispute;
2.1.34 "License Agreement" shall mean the license agreement entered into
between H Power and the Corporation on the date hereof by which H
Power licenses and/or sub-licenses to the Corporation the Technology
for the production and commercialization of Products throughout the
Territory;
2.1.35 "Material Agreement" shall mean any agreement, other than this
Agreement, creating obligations between the Corporation and any
Shareholder;
2.1.36 "Neutral Party" shall mean the Shareholder(s) who is/are not
involved in a Dispute;
2.1.37 "New Meeting" has the meaning ascribed thereto at subsection 6.4;
2.1.38 "I Offer" has the meaning ascribed thereto at subsection 13.1;
2.1.39 "Offer" shall mean for purposes of (i) subsection 13.1, each of the
offers made by an Investor; and (ii) 13.2, each of the offers made
by H Power;
2.1.40 "Offered Shares" has the meaning, ascribed thereto at subsections
13.1.1 and 13.2;
2.1.41 "Offeree Shareholders" has the meaning ascribed thereto at
subsection 13.3;
2.1.42 "Offering Investor" has the meaning ascribed thereto at subsection
13.1;
2.1.43 "Offering Shareholder" has the meaning ascribed thereto at
subsection 13.3;
2.1.44 "Other Investors" has the meaning ascribed thereto at subsection
13.1.1;
2.1.45 "Other Shareholders" has the meaning ascribed thereto at subsections
13.1.4 and 13.2.1;
-7-
2.1.46 "Partner" shall mean either the Investors collectively (the
Investors acting together and being considered as one party) or H
Power, and "Partners" shall mean both of them;
2.1.47 "Permitted Transferee" shall, in respect of a Shareholder, mean a
corporation, all of the shares of which are owned by such
Shareholder, both as registered owner and as beneficial owner;
2.1.48 "Person" shall mean an individual, corporation, company,
cooperative, partnership, trust, unincorporated association, entity
with judicial personality, Governmental Body; and pronouns when they
refer to a Person have a similarly extended meaning;
2.1.49 "Prime Rate" means the interest rate quoted publicly by the
Corporation's regular bankers as the reference rate of interest for
commercial demand loans made in Canadian dollars and commonly known
as such bank's prime rate, as adjusted from time to time, on the
basis of the Prime Rate in effect on the first day of each month;
2.1.50 "Prior Offers" has the meaning ascribed thereto at subsection
13.3.2;
2.1.51 "Products" has the meaning ascribed thereto in the License
Agreement;
2.1.52 "Proportion" shall mean a fraction, the numerator of which shall be
the number of Class A Common Shares or Class B Common Shares owned
by the particular Shareholder to whom reference is made and the
denominator of which shall be the total of the Class A Common Shares
and Class B Common Shares owned by all the Shareholders;
2.1.53 "Proportionate Share" shall mean, for purposes of subsection 13.3,
the amount of the Offered Shares determined by multiplying the
number of Shares offered times a fraction, the numerator of which is
the number of Class A Common Shares or Class B Common Shares held by
a particular Offeree Shareholder or Accepting Offeree Shareholder,
as the case may be, entitled to accept an offer and the denominator
of which is the total number of Class A Common Shares, and Class B
Common Shares held by all Offeree Shareholders or all Accepting
Offeree Shareholders, as the case may be, entitled to accept the
same offer;
2.1.54 "Purchaser" has the meaning ascribed thereto at subsection 13.4.6.1;
2.1.55 "Related" shall mean related as that term is used in the Income Tax
Act (Canada);
2.1.56 "Remaining Offered Shares" has the meaning ascribed thereto at
subsection 13.3.2;
-8-
2.1.57 "Share(s)" shall mean any share(s) of any class, series or category
in the capital stock of the Corporation;
2.1.58 "Shareholder" shall mean any of the Shareholders;
2.1.59 "Shareholders" shall initially mean H Power, Innovatech, Sofinov and
9042-0175, and the definition shall be deemed to be modified from
time to time to (i) delete Persons who cease to hold Shares in
accordance with the terms of this Agreement, and (ii) add all
Persons who, from time to time, become holders of Shares and who
undertake in writing to be bound by the provisions of this
Agreement;
2.1.60 "Stock Exchange Agreement" shall mean the stock exchange agreement
dated the date hereof among the Investors and H Power, providing
inter alia for the exchange by the Investors of the Shares held by
them for shares in the capital stock of H Power;
2.1.61 "Subscription Agreement" shall mean the subscription agreement dated
the date hereof among the Corporation and the Investors setting
forth inter alia the rights and obligations of each of the Investors
with respect to its subscription for Class A Common Shares;
2.1.62 "TP Offer" has the meaning ascribed thereto at subsection 13.1 or
13.2, as the case may be;
2.1.63 "TP Offeror" has the meaning ascribed thereto at subsection 13.1 or
13.2, as the case may be;
2.1.64 "Third Party" has the meaning ascribed thereto at subsection 13.1.4
or 13.2.3, as the case may be;
2.1.65 "Technology" has the meaning ascribed thereto in the License
Agreement;
2.1.66 "Territory" has the meaning ascribed thereto in the License
Agreement;
2.1.67 "Trade Marks" has the meaning ascribed thereto in the License
Agreement;
2.1.68 "Unaccepted Additional Shares" has the meaning ascribed thereto at
subsection 11.5;
2.1.69 "Unaccepted offered Shares" has the meaning ascribed thereto at
subsection 13.1.2;
2.1.70 "Unusual Event" has the meaning ascribed thereto at subsection 15.
1;
-9-
2.1.71 "Voting Shares" shall mean Shares to which are attached votes that
may be cast to elect directors of the Corporation, consisting of
Class A Common Shares and Class B Common Shares.
2.2 Gender. Any reference in this Agreement to any gender shall include both
genders and the neutral, and words used herein importing the singular number
only shall include the plural and vice versa.
2.3 Headings. The division of this Agreement into Sections, subsections and
other subdivisions, and the insertion of headings are for convenience of
reference only and shall not affect or be utilized in the construction or
interpretation of this Agreement.
2.4 Severability. Any Section, subsection or other subdivision of this Agreement
or any other provision of this Agreement which is, or becomes, illegal, invalid
or unenforceable shall be severed therefrom and shall be ineffective to the
extent of such illegality, invalidity or unenforceability and shall not affect
or impair the remaining provisions hereof, which provisions shall be severed
from an illegal or unenforceable Section, subsection or other subdivision of
this Agreement or any other provisions of this Agreement.
2.5 Entire Agreement. This Agreement together with any other instruments to be
delivered pursuant hereto, constitute the entire agreement among the parties
pertaining to the subject matter hereof and supersede all prior agreements,
understandings, negotiations, and discussions, whether oral or written, among
any or all of the parties.
2.6 Amendments. No amendment of this Agreement shall be binding unless otherwise
expressly provided in an instrument duly executed by the Shareholders and the
Corporation.
2.7 Waiver. Except as otherwise provided in this Agreement, no waiver of any of
the provisions of this Agreement shall be deemed to constitute a waiver of any
other provisions (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided in an instrument duly
executed by the parties.
2.8 Delays. When calculating the period of time within which or following which
any act is to be done or step taken pursuant to this Agreement, the day which is
the reference day in calculating such period shall be excluded. If the day on
which such delay expires is not a Business Day, then the delay shall be extended
to the next succeeding Business Day.
2.9 Conflict. This Agreement shall override the Schedules annexed hereto to the
extent of any inconsistency. If any conflict should appear between this
Agreement and the Articles, by-laws or resolutions of the Corporation, then the
provisions of this Agreement shall prevail.
2.10 Preamble. The preamble hereof shall form an integral part of this
Agreement.
-10-
2.11 Governing Law. This Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the Province of Quebec and the laws of
Canada applicable therein.
2.12 Language. This Agreement is executed by all the parties hereto in French
and only by the Corporation in English. The parties hereto expressly agree that
in the event of any misunderstanding, dispute or controversy (collectively, a
"Controversy") amongst them with respect to any of the provisions of this
Agreement, the French version of this Agreement will have precedence and be the
only version to apply and be used for the resolution of such Controversy. As an
exception only, and recognizing the principle that the French version shall have
precedence, if a Controversy arises between any of the parties hereto in
connection with the interpretation of given to any provision of this Agreement,
any court or arbitrator before which any such Controversy is referred for
resolution will be permitted to refer to the English version of this Agreement
in order to determine the intention of the parties at the time the provisions of
this Agreement were drafted.
SECTION 3 - COMMISSIONS, FEES, ETC.
3.1 Commissions. Except as provided in subsection 3.2 hereof, no fee, rebate,
commission or gain of whatsoever nature shall be earned by any of the
Shareholders as a result of that Shareholder obtaining financing for or on
behalf of the Corporation.
3.2 Commitment Fee. The parties hereto acknowledge and confirm that,
concurrently with the execution hereof, the Corporation shall pay to Sofinov a
commitment fee in the amount of $75,000.
SECTION 4 - OPERATIONS OF THE CORPORATION
4.1 Business of the Corporation. The Corporation shall not carry on any business
other than:
4.1.1 using the Technology that is relevant and necessary to conduct
research and development activities in connection with the design,
development and production of Products,
4.1.2 using the Equipment and Technology that is relevant and necessary
for the manufacture, integration, incorporation and assembly of all
the components of the Products, and
4.1.3 using the Technology and the Trade Marks that are relevant and
necessary for the marketing, promotion, advertising, sale,
servicing, distribution and merchandising of the Products,
all within the Territory and not elsewhere.
-11-
SECTION 5 - BOOKS OF ACCOUNT
5.1 Books of account. Proper and correct books of account and such other books
as may be necessary for the business of the Corporation shall be kept, in which
shall be entered all such transactions as are usually entered and written in
books of account kept by persons engaged in businesses of a similar nature, and
the Shareholders or a chartered accountant appointed by any of them shall have
free access at all reasonable times upon reasonable prior notice to inspect,
examine and copy same.
SECTION 6 - DIRECTORS
6.1 Board and Quorum. So long as each Partner owns fifty percent (50%) of the
aggregate of the issued and outstanding Class A Common Shares and Class B Common
Shares, the Shareholders agree to vote their Shares each and every year at the
annual meetings of Shareholders or at any other meeting of Shareholders at which
directors shall be elected or appointed so as to cause six (6) directors to be
elected to the Board, three (3) of which shall be nominees of H Power and three
(3) of which shall be nominees of the Investors. Two (2) of the nominees of the
Investors shall be appointed by Sofinov and one (1) of such nominees shall be
appointed by Innovatech. In such circumstances, a quorum of a meeting of
directors shall be a majority of the elected directors provided that two (2)
directors appointed by H Power and two (2) directors appointed by the Investors
form part of such quorum and all decisions of the Board shall require the
unanimous approval of all the directors present at a meeting of the Board at
which a quorum was present and all decisions having the object or purposes set
forth in Section 3 of the By-Law referred to in Section 8 hereof shall be
submitted to the Shareholders pursuant to Section 3 of the By-Law referred to in
Section 8 hereof. In the event that the Board is unable to reach a unanimous
decision on any matter, such matter shall be submitted to the Shareholders.
6.2 Changes in the Board and Quorum. At such time as a Partner ceases to own at
least fifty percent (50%) of the aggregate of the issued and outstanding Class A
Common Shares and Class B Common Shares but both Partners own at least ten
percent (10%) of the aggregate of the issued and outstanding Class A Common
Shares and Class B Common Shares, the Shareholders agree to vote their Shares at
a special meeting of the Shareholders duly convened and to continue to do so
each and every year at the annual meetings of Shareholders or at any other
meeting of Shareholders at which directors shall be elected or appointed so as
to cause six (6) directors to be elected to the Board, with each Partner being
entitled to appoint, as nearly as practicable, a pro rata number of nominees to
the Board. In the event that the Investors are entitled to appoint three (3)
nominees to the Board, two (2) of such nominees shall be appointed by Sofinov
and one (1) of such nominees shall be appointed by Innovatech. In the event that
the Investors are entitled to appoint two (2) nominees to the Board, each of
Sofinov and Innovatech shall be entitled to appoint one (1) of such nominees. In
the event that the Investors are entitled to appoint one (1) nominee to the
Board, such nominee shall be appointed by Sofinov. In such circumstances, a
quorum of a meeting of directors shall be a majority of the elected directors
provided that one (1) director appointed by H
-12-
Power and one (1) director appointed by the Investors form part of such quorum
and all decisions of the Board shall require the approval of a majority of the
directors present at a meeting of the Board at which a quorum was present. So
long as both Partners own at least forty percent (40%) of the aggregate of the
issued and outstanding Class A Common Shares and Class B Common Shares, all
decisions having the object or purposes set forth in Section 3 of the By-Law
referred to in Section 8 hereof shall be submitted to the Shareholders pursuant
to Section 3 of the By-Law referred to in Section 8 hereof. At such time as one
Partner ceases to own at least ten percent (10%) of the aggregate of the issued
and outstanding Class A Common Shares and Class B Common Shares, such Partner
shall cease to be entitled to the election of any of its nominee to the Board.
Notwithstanding anything contained in this Agreement, the Investors shall be
entitled to nominate at least one (1) director to the Board (which nominee shall
be appointed by Sofinov) for so long as the Investors collectively own at least
2.5% of the issued and outstanding shares of Common Stock (on a fully-converted
basis) in the capital stock of H Power.
6.3 Designation of Nominees. Each of the Partners shall advise the other Partner
and the Corporation in writing of the names of the individuals such Partner has
designated as its nominee to the Board as soon as practicable before each
meeting of Shareholders. In the event that any of the nominees to the Board of
an Investor is not an employee of such Investor or that any nominees to the
Board of H Power is not an employee of H Power or the Corporation, the
Corporation shall pay to such nominee a fee and traveling costs for his
attendance at each meeting of the Board. The fees payable to such nominees shall
be determined by the Board. In addition, the Corporation shall reimburse each
nominee to the Board that is an employee of H Power or an employee of an
Investor his reasonable out-of-pocket expenses (including traveling costs)
incurred in connection with his attendance at each meeting of the Board.
6.4 Absence of Quorum. In the event that a meeting of the Board cannot be held
because quorum was not obtained on two successive occasions, a third board
meeting may be convened for the same purposes (the "New Meeting"), upon notice
of at least seven (7) Business Days. The quorum at the New Meeting shall still
be the majority of the elected directors but there shall be no requirement that
any directors appointed by any Shareholder be present at the New Meeting. This
exception shall, however, only be valid for the New Meeting.
6.5 Replacement of a Director. In the event that a director(s) nominated by a
Shareholder dies or resigns or a Shareholder wishes to replace its nominee
director(s) on the Board, the Shareholders agree to vote their Shares at a
special meeting of Shareholders duly convened, or to sign any written
resolution, to remove and/or elect such new nominee director(s) as is(are)
designated by the Shareholder whose nominee died, resigned or was replaced. Such
Shareholder shall advise the other Shareholders and the Corporation in writing
of the name(s) of the individual(s) such Shareholder has designated as its new
nominee(s) to the Board as soon as practicable before the meeting of
Shareholders called for such purpose.
-13-
6.6 Voting by Nominees. Each Shareholder shall at all times carry out and use
its best efforts to cause the Corporation and its nominees on the Board to carry
out the provisions of this Agreement, subject to the fiduciary obligations of
the directors. Each Shareholder shall duly and punctually do, or cause to be
done, all such things, including, without limitation, voting or causing to be
voted all the Shares held by the Shareholder as shall be necessary or desirable
to give effect to this Agreement. In the event any of the directors does not
vote at meetings of the Board in a manner consistent with this Agreement, all of
the Shareholders shall cause a meeting of Shareholders to be held and agree to
vote their Shares either to remove and/or replace such directors or take such
other actions as shall be necessary or desirable to give effect to this
Agreement.
6.7 Directors and Officers Insurance. The Corporation shall as soon as
reasonably practicable but not later than thirty (30) days from the date hereof
take out and thereafter maintain in full force at all times insurance covering
directors and officers liability.
6.8 Meeting of the Board. The parties hereto acknowledge and confirm that there
shall be a minimum of: (i) one (1) telephone, conference-call meeting of the
Board per month and (ii) four (4) physical meetings of the Board in each fiscal
year of the Corporation, to be held in Montreal, Quebec or such other place as
the Board may determine.
6.9 Executive Committee. The Board shall create, within 30 days after execution
of this Agreement, an executive committee consisting of the Chairman of the
Board and the President. The members of the executive committee will advise the
Board on the matters determined by the Board from time to time. Members of the
executive committee shall be entitled to the reimbursement of their reasonable
travel expenses related thereto.
6.10 Fiscal Year. The fiscal year of the Corporation shall terminate on May 31
or such other date as H Power may determine.
6.11 Proceeding Instituted Against the Corporation. In the event that a
Shareholder institutes an action against the Corporation in connection with a
Dispute, the Neutral Party shall be entitled to cause the Corporation to respond
to and defend such action which it alone, without the Involved Party, determines
is appropriate, and such determination by the Neutral Party will be valid and
binding upon the Corporation notwithstanding any provision herein to the
contrary.
6.12 Conflict of Interest. Notwithstanding any provision of this Agreement, any
decision, action or resolution of the Board relating to any decision related to
the consequences of a material breach of a Material Agreement in respect of a
Dispute between a Shareholder and the Corporation including, without limitation,
the sending of a default notice or a letter of demand, the referral of the
matter to a fairness committee, mediation or arbitration or the early
termination of such Material Agreement or relating to any decision not to renew
a Material Agreement shall be taken by the nominees on the Board appointed by
the Neutral Party. A quorum at a meeting of the Board called for such purpose
shall be a majority of the directors of the Board entitled to vote on such
decision,
-14-
action or resolution as aforesaid and any such decision, action or resolution of
the Board shall be valid provided that it is approved by a majority of the
directors present at such a meeting at which a quorum was present. Without
limiting the generality of the foregoing, for purposes of clarity only, in no
circumstances and notwithstanding any provision hereof, no such decision, action
or resolution shall be made by the Shareholders or be subject to ratification or
approval of the Shareholders.
SECTION 7 - OFFICERS
7.1 Officers. The initial officers of the Corporation shall include H. Xxxxx
Xxxxxxx, as President, and Xxxxxx Xxxxxxxx, as Chairman of the Board and
Secretary, and such other officers as the Board may determine from time to time.
The President of the Corporation shall be its chief executive officer and shall
be responsible for the day-to-day management and operations of the Corporation
in a manner consistent with this Agreement, the Articles of Incorporation of the
Corporation, the by-laws of the Corporation and the operating and capital
budgets, subject, however, to overall supervision of the Board. As long as H
Power owns at least thirty-three and one-third percent (33 1/3 %) of the
aggregate of the issued and outstanding Class A Common Shares and Class B Common
Shares, the President shall be a nominee of H Power. The Board shall also
appoint a Chairman. As long as the Investors collectively own at least
thirty-three and one-third percent (33 1/3%) of the aggregate of the issued and
outstanding Class A Common Shares and Class B Common Shares, the Chairman of the
Board shall be a nominee of the Investors which nominee shall be determined
among the Investors.
SECTION 8 - ADOPTION OF BY-LAWS
8.1 Adoption of By-law. The Shareholders undertake to take whatever steps that
may be necessary to adopt a by-law of the Corporation in the form attached as
Schedule 8 hereto and they furthermore undertake that, as long as each Partner
owns at least forty percent (40%) of the aggregate of the issued and outstanding
Class A Common Shares and Class B Common Shares, they will not vote their Shares
or exercise any voting rights or otherwise make any decision or take any action
in any manner or capacity whatsoever, for the purpose of amending or repealing
such by-law, once adopted, unless they do so unanimously. This by-law, once
adopted, shall override, supersede and amend all previous by-laws, resolutions,
decisions or acts of the Corporation inconsistent therewith.
SECTION 9 - BANKERS AND BANKING ARRANGEMENTS
9.1 Bankers. The bankers of the Corporation shall be such bank or banks as may
be agreed upon from time to time by the Board.
9.2 Signatories. All drafts, cheques and bills of exchange for or on behalf of
the Corporation's bank accounts shall require the signatures of such individuals
as may be agreed upon from time to time by the Board.
-15-
SECTION 10 - AUDITORS OF THE CORPORATION
10.1 Auditors. The auditors of the Corporation shall be the Auditors.
SECTION 11 - PREEMPTIVE RIGHT
11.1 Issuance of Class B Common Shares. Should the Board decide that the
Corporation requires additional funds and is unable to obtain such funds from
its bankers on commercially reasonable terms, then the Shareholders hereby agree
to cause the Corporation to raise such funds by issuing Class B Common Shares
from treasury in accordance with this Section 11. Each Shareholder shall have
preemptive rights with respect to the issue of such additional Class B Common
Shares (the "Additional Shares"), such that the Corporation shall not issue any
Additional Shares without offering to each Shareholder the right to subscribe
for its Proportion of the Additional Shares to be issued by the Corporation.
11.2 Notice to Shareholders. If the Corporation decides to issue any Additional
Shares, then the Corporation shall give detailed notice thereof to each
Shareholder. Each Investor may assign to the other Investors all or a portion of
its right to subscribe for its Proportion of the Additional Shares. Each
Shareholder shall have forty-five (45) days from the receipt of such notice
within which to notify the Corporation of its intent to exercise its right under
subsections 11.1 and 11.2 in connection with such issue of Additional Shares. If
a Shareholder fails to so notify the Corporation within the prescribed delay,
then such Shareholder shall be conclusively deemed to have waived its preemptive
right in connection with such issue of Additional Shares. If all of the
Shareholders waive or are deemed to have waived their preemptive rights in
connection with such issue of Additional Shares, then the Corporation shall be
free for a period of sixty (60) days thereafter to sell such Additional Shares
to any Person not Affiliated or Related to any Shareholder, on terms not more
favourable than those provided in the original offer of the Corporation to issue
Additional Shares, provided, however, that it is a condition precedent to such
sale that such Person has executed a counterpart of this Agreement in accordance
with subsection 20.6 and has agreed to be bound by the terms and conditions of
this Agreement and any other agreement executed by the parties in connection
with this Agreement.
11.3 Declining Investors. If only one of the Investors has agreed to exercise
its right under subsections 11.1 and. 11.2 hereof to subscribe for its
Proportion of the Additional Shares (the "Accepting Investor") and the other
Investors have, or are deemed to have, declined to exercise such preemptive
right (the "Declining Investors"), the Corporation shall, within seven (7) days
of the end of the above forty-five (45) day period, be required to offer by
written notice to the Accepting Investor all of the Additional Shares which
could have been subscribed for by the Declining Investors (the "Declining
Investors' Shares") before H Power is offered pursuant to subsection 11.5 its
pro rata share of such Declining Investors' Shares. The Accepting Investor shall
have thirty (30) days from the receipt of the notice mentioned above to notify
the Corporation of its intent to exercise its right to subscribe for the
Declining Investors' Shares, failing which the
-16-
Accepting Investor shall be deemed to have waived its preemptive right in
connection with the issue of the Declining Investors' Shares.
11.4 Declining Investor. If two of the Investors have agreed to exercise their
right under subsections 11.1 and 11.2 hereof to subscribe for their respective
Proportion of the Additional Shares (the "Accepting Investors") and the other
Investor has, or is deemed to have, declined to exercise such preemptive right
(the "Declining Investor"), the Corporation shall, within seven (7) days of the
end of the above forty-five (45) day period, be required to offer by written
notice to the Accepting Investors all of the Additional Shares which could have
been subscribed for by the Declining Investor (the "Declining Investor's
Shares") before H Power is offered pursuant to subsection 11.5 its pro rata
share of such Declining Investor's Shares. The Accepting Investors shall, unless
otherwise agreed to between themselves, be entitled to subscribe for that
proportion of the Declining Investor's Shares which is equal to the number of
Class A Common Shares held by each of the Accepting Investors in relation to the
total number of Class A Common Shares held by both Accepting Investors. Each of
the Accepting Investors shall have thirty (30) days from the receipt of the
notice mentioned above to notify the Corporation of its intent to exercise its
right to subscribe for the Declining Investor's Shares, failing which it shall
be deemed to have waived its preemptive right in connection with the issue of
its proportion of the Declining Investor's Shares. If only one of the Accepting
Investors (the "Final Accepting Investor") agrees to subscribe for its
proportion of the Declining Investor's Shares in accordance with this subsection
11.4 and the other Accepting Investor (the, "Final Declining Investor") has
declined or is deemed to have declined its right to subscribe for its proportion
of the Declining Investor's Shares (the "Final Declining Investor's Shares") in
accordance with this subsection 11.4, then the Corporation shall, within seven
(7) days of the end of the above seven (7) day period, be required to offer by
written notice to the Final Accepting Investor all of the Final Declining
Investor's Shares before H Power is offered pursuant to subsection 11.5 its pro
rata share of such Final Declining Investor's Shares. The Final Accepting
Investor shall have thirty (30) days from the receipt of the notice mentioned
above to notify the Corporation of its intent to exercise its right to subscribe
for the Final Declining Investor's Shares, failing which the Final Accepting
Investor shall be deemed to have waived its preemptive right in connection with
the issue of the Final Declining Investor's Shares.
11.5 Shareholders Rights. If (i) one (1) or more Shareholders has or is deemed
to have declined its right to subscribe for its Proportion of the Additional
Shares, and, (a) in the event such Additional Shares were offered to the
Accepting Investor pursuant to subsection 11.3 and the Accepting Investor has or
is deemed to have declined to exercise its right to acquire all of the Declining
Investors' Shares, or (b) in the event such Additional Shares were offered to
the Accepting Investors pursuant to subsection 11.4 and the Accepting Investors
have or are deemed to have declined to exercise their rights to acquire all of
the Declining Investor's Shares or the Final Accepting Investor has or is deemed
to have declined to exercise its right to acquire all of the Final Declining
Investor's Shares, or (ii) if one (1) or more Shareholders has or is deemed to
have declined its right to subscribe for its Proportion of the Additional Shares
and subsections 11.3 and 11.4 are not applicable, then the Corporation, within
five (5) days of the end of the above forty-five (45) day
-17-
period provided for in subsection 11.2 or within seven (7) days of the end of
the last seven (7) day period provided for in subsection 11.3 or 11.4, as the
case may be, shall be required to offer by written notice to the Shareholder(s)
who agreed to exercise its or their right under subsections 11.1 and 11. 2 in
connection with the initial issue of Additional Shares, to issue to such
Shareholder(s), in addition to any Additional Shares such Shareholder(s) agreed
to subscribe for, its or their pro rata share of the Additional Shares for which
any other Shareholder(s) has, or is deemed to have, waived its or their
preemptive right hereunder (collectively the "Unaccepted Additional Shares").
For the purposes of the preceding, each such Shareholder's pro rata share of the
Unaccepted Additional Shares shall, unless otherwise agreed to among themselves,
be equal to the proportion that the number of Class A Common Shares or Class B
Common Shares held by such Shareholder is to the aggregate of all the Class A
Common Shares and Class B Common Shares held by all Shareholders who agreed to
exercise their right under subsections 11. 1 and 11. 2 and shall take into
account the Additional Shares subscribed for pursuant to subsections 11.2, 11.3
and 11.4.
11.6 Notice for Unaccepted Additional Shares. Each Shareholder who has been
offered to subscribe for Unaccepted Additional Shares by the Corporation
pursuant to subsection 11.5 shall have thirty (30) days from the receipt of the
notice mentioned therein to notify the Corporation of its intent to exercise its
right to subscribe for its pro rata share of such Unaccepted Additional Shares,
failing which such Shareholder shall be deemed to have waived its preemptive
right in connection with the issue of such Unaccepted Additional Shares.
11.7 Sale to Any Person. The procedures set forth in subsections 11.5 and 11.6
shall be repeated, mutatis mutandis, with respect to any Unaccepted Additional
Shares which have not been subscribed for by a Shareholder until (i) all
Shareholders who have been made the most recent additional offer shall have or
be deemed to have declined it, or (ii) all Additional Shares (including
Unaccepted Additional Shares) which have been offered by the Corporation
pursuant to this Section 11 shall have been subscribed for by some or all of the
Shareholders. If upon completion of the above procedures some or all of the
Additional Shares which the Corporation intended to issue will not be purchased
by the Shareholders pursuant to the exercise of their preemptive rights, the
Corporation shall be free for a period of sixty (60) days thereafter to sell
such Additional Shares, which will not be purchased by a Shareholder, to any
Person not Affiliated or Related to any Shareholder, on terms not more
favourable than those provided in the original offer of the Corporation to issue
Additional Shares; provided, however, that it shall be a condition precedent to
such sale that such Person has executed a counterpart of this Agreement in
accordance with subsection 20.6 and has agreed to be bound by the terms and
conditions of this Agreement. The purchase of Additional Shares (including
Unaccepted Additional Shares) by one (1) or more Shareholders, shall be
suspended until the day of the sale by the Corporation to such Person of the
Additional Shares (including Unaccepted Additional Shares) which have not been
subscribed for by a Shareholder. If the Corporation is unable to sell such
Additional Shares which have not been subscribed for by a Shareholder to a
Person as provided for in this subsection 11.7, then the Corporation shall
forthwith advise the Shareholders of same in writing and any Shareholder who has
agreed to subscribe for Additional Shares (including Unaccepted Additional
Shares) shall have the
-18-
right to decide not to purchase such Additional Shares by notifying the
Corporation in writing thereof within five (5) days of having been advised by
the Corporation that the Corporation was unable to sell such Additional Shares
to such Person.
11.8 Closing. Subject to subsection 11.7, the closing in connection with the
issuance of Additional Shares to any Shareholder or Person pursuant to
subsections 11.1 to 11.7 shall be held at the principal offices of the
Corporation at 10:00 a.m. on the date which is thirty (30) days after the expiry
of the applicable period under subsections 11.2 to 11.7, as the case may be, or
at such other place, at such other time or on such other date as the parties
thereto may agree. Payment for the Additional Shares being issued shall be made
in full at such closing. All payments shall be made by way of bank draft or
electronic fund transfer to the Corporation's account.
11.9 Percentage Held by Sofinov. If Sofinov would, pursuant to the exercise of
its rights under this Section 11, hold more than thirty percent (30%) of the
outstanding Voting Shares after such exercise, Sofinov shall be entitled to
designate a third party who may purchase the Additional Shares to which Sofinov
would otherwise be entitled (but such third party may only purchase that number
of Additional Shares which would result in Sofinov holding more than 30% of the
outstanding Voting Shares), provided that:
11.9.1 the third party is a Governmental Body of or controlled by the
Province of Quebec;
11.9.2 the third party complies with all applicable laws, including
securities laws of the relevant jurisdiction; and
11.9.3 the third party, prior to issuance of any Shares thereto, executes
and delivers an agreement in form and on terms satisfactory to the
directors of the Corporation, where such third party agrees to be
bound by the provisions of this Agreement as if it were an original
party to this Agreement and such third party shall thereupon have
the same rights, and shall be subject to the same obligations and
restrictions, of the Shareholders hereunder.
11.10 Rights Attached to the Additional Shares. All Additional Shares issued to
an Investor pursuant to the provisions of this Section 11 shall form part of the
shares entitled to be exchanged pursuant to the Stock Exchange Agreement at the
exchange rate provided in the Stock Exchange Agreement.
SECTION 12 - ALIENATION OF SHARES
12.1 Alienation Prohibited. Unless otherwise provided for in accordance with the
terms hereof or the Stock Exchange Agreement, no Shareholder shall transfer,
assign, cede, pledge, mortgage, hypothecate, charge or otherwise encumber,
alienate or dispose of in any manner
-19-
whatsoever the whole or any part of its Shares without first obtaining the
written consent of the other Shareholders.
12.2 Transfers between Investors and to Permitted Transferee. Notwithstanding
any provision of this Agreement, any of the Investors may transfer all or part
of its Shares to the other Investor(s), to a Permitted Transferee or to any
Governmental Body of or controlled by the Government of Quebec, at any time and
from time to time without being subject to the other terms and conditions in
this Section 12 or in Section 13; provided however, none of the Investors shall
be permitted to transfer its Shares to a Permitted Transferee or any
Governmental Body of or controlled by the Government of Quebec unless such
Permitted Transferee or Governmental Body shall have first (i) executed a
counterpart of this Agreement in accordance with subsection 20.6, and (ii) have
agreed, in form and terms satisfactory to the legal counsel of the Corporation,
acting reasonably, that as long as it shall hold such Shares it shall be bound
by the terms and conditions of this Agreement, as if the Permitted Transferee or
the Governmental Body had been an original party to this Agreement as a
Shareholder and an Investor. In addition, 9042-0175 may transfer all or part of
its Shares to any Person, at any time and from time to time without being
subject to the other terms and conditions in this Section 12 or in Section 13;
provided however, 9042-0175 shall not be permitted to transfer its Shares to
such Person unless (i) H Power and the other Investors shall have each approved
in writing of such transfer within thirty (30) days of their receipt from
9042-0175 of a notice in connection therewith, it being understood that any
party so failing to respond to such notice within the said thirty (30) day
period shall be deemed to have approved of such transfer, (ii) such Person shall
have first executed a counterpart of this Agreement in accordance with
subsection 20.6, and (iii) such Person shall have agreed, in form and terms
satisfactory to the legal counsel of the Corporation, acting reasonably, that as
long as it shall hold such Shares it shall be bound by the terms and conditions
of this Agreement, as if such Person had been an original party to this
Agreement as a Shareholder and an Investor. The parties hereto hereby further
acknowledge and agree that the sole shareholder of 9042-0175 shall be entitled
to transfer all (and only all) of the shares held by such shareholder in the
share capital of 9042-0175 to any Person, at any time, provided that H Power and
the other Investors shall have each approved in writing of such transfer within
thirty (30) days of their receipt from the sole shareholder of 9042-0175 of a
notice in connection therewith, it being understood that any party so failing to
respond to such notice within the said thirty (30) day period shall be deemed to
have approved of such transfer.
SECTION 13 - RIGHTS OF FIRST REFUSAL AND PIGGY BACK
13.1 Alienation by Investors. Notwithstanding the prohibition, in accordance
with subsection 12.1, against any Shareholder transferring, assigning, ceding,
pledging, mortgaging, hypothecating, charging or otherwise encumbering,
alienating or disposing of in any manner whatsoever the whole or any part of its
Shares without first obtaining the written consent of the other Shareholders,
if, at any time after the date hereof, (i) one or more Investors (the "Offering
Investor") receives an irrevocable offer (the "TP Offer") from a Person acting
at Arm's Length to the Offering Investor (the "TP Offeror") to purchase for cash
(all of which is payable at closing)
-20-
all (but not less than all) of the Shares held by the Offering Investor, which
TP Offer the Offering Investor wishes to accept, in accordance with the
procedures set forth hereinafter, or (ii) the Offering Investor wishes to sell
all (but not less than all) of the Shares held by the Offering Investor, the
Offering Investor shall make an irrevocable offer (the "I Offer") in accordance
with the procedures set forth hereinafter (the TP Offer and I Offer are
hereinafter referred to as the "Investor Offer"):
13.1.1 The Offering Investor shall first offer to the other Investors (the
"Other Investors") options to purchase such Shares (the "Offered
Shares") in accordance with subsection 13.3. Should one or more of
the Other Investors exercise such option so as to purchase all of
the Offered Shares, the Offering Investor shall sell to each of such
Other Investors the Offered Shares, for which it has delivered
notice(s) of exercise, in accordance with this Agreement and the
terms and conditions of the Investor Offer.
13.1.2 Unless one or more the Other Investors elects within the time
required to exercise the option pursuant to subsection 13.1.1 such
that all of the Offered Shares shall be purchased by the Other
Investors, then the Offering Investor shall offer the Offered Shares
which were unaccepted by the Other Investors (the "Unaccepted
Offered Shares") to H Power in accordance with the procedures set
forth in subsection 13.3.
13.1.3 Should H Power exercise its option pursuant to subsection 13.1.2 so
as to purchase all of the Unaccepted Offered Shares, the Offering
Investor shall sell to the Other Investors the Offered Shares for
which they have delivered notice of exercise and to H Power the
Unaccepted Offered Shares for which it has delivered notice of
exercise, in accordance with this Agreement and the terms and
conditions of the TP Offer, or the I Offer, as the case may be.
13.1.4 Unless the Other Investors and/or H Power (the "Other Shareholders")
have elected within the time required to exercise their options
pursuant to subsections 13.1.1 and/or 13.1.2 such that all of the
Offered Shares shall be purchased by the Other Shareholders, the
option of the Other Shareholders shall expire, none of the Other
Shareholders shall be eligible to purchase the Offered Shares, and
the Offering Investor shall be free for a period of ninety (90) days
from the end of the expiration of the last offer period to sell all
(but not less than all) of the Offered Shares to either (i) the TP
Offeror on the terms and conditions provided in the TP Offer, or
(ii) in the event of an I Offer, to a Person acting at Arm's Length
to the Offering Investor (the "Third Party") on the terms and
conditions provided in the I Offer; provided, however, that, in both
cases, it shall be a condition precedent to the right of the
Offering Investor to sell the Offered Shares that the TP Offeror or
Third Party has executed a counterpart of this Agreement in
accordance with subsection 20.6 and has agreed to be bound by the
terms and conditions of this Agreement, as if the TP Offeror or the
Third Party had been an original party to such agreement in place of
-21-
the Offering Investor. If no sale takes place within the ninety (90)
day period referred to in this subsection, then the Offering
Investor shall not transfer the Offered Shares without again
following and being subject to this Section 13.
13.2 Alienation by H Power. Notwithstanding the prohibition, in accordance with
subsection 12.1, against any Shareholder transferring, assigning, ceding,
pledging, mortgaging, hypothecating, charging or otherwise encumbering,
alienating or disposing of in any manner whatsoever the whole or any part of its
Shares without first obtaining the written consent of the other Shareholders,
if, at any time on or after the date hereof, (i) H Power receives an irrevocable
offer (the "TP Offer") from a Person acting at Arm's Length to H Power (the "TP
Offeror") to purchase for cash (all of which is payable at closing) all (but not
less than all) of the Shares held by H Power (the "Offered Shares"), which H
Power wishes to accept, in accordance with the procedures set forth hereinafter,
or (ii) H Power wishes to sell all (but not less than all) of the Shares held by
H Power, H Power shall make an irrevocable offer (the "H Offer") in accordance
with the procedures set forth hereinafter (the TP Offer and H Offer are
hereinafter referred to as the "H Power Offer"):
13.2.1 H Power shall offer the Offered Shares to the Investors (together
the "Other Shareholders") in accordance with the procedures set
forth in subsection 13.3.
13.2.2 Should one or more of the Other Shareholders exercise options
pursuant to subsection 13.2.1 so as to purchase all of the Offered
Shares, H Power shall sell to each such Other Shareholder the
Offered Shares for which it has delivered notice(s) of exercise, in
accordance with this Agreement and the terms and conditions of the H
Power Offer.
13.2.3 Unless one or more of the Other Shareholders elects within the time
required to exercise its options pursuant to subsection 13.2.1 such
that all of the Offered Shares shall be purchased by the Other
Shareholders, the option of the Other Shareholders shall expire,
none of the Other Shareholders shall be eligible to purchase the
Offered Shares, and H Power shall be free for a period of ninety
(90) days from the end of the expiration of the last offer period,
to sell all (but not less than all) of the Offered Shares to either
(i) the TP Offeror on the terms and conditions provided in the TP
Offer, or (ii), in the event of a H Offer, to a Person acting at
Arm's Length to H Power (the "Third Party") on the terms and
conditions provided in the H Offer, provided, however, that, in both
cases, it sha1l be a condition precedent to the right of H Power to
sell the Offered Shares that the TP Offeror or Third Party has
executed a counterpart of this Agreement in accordance with
subsection 20.6 and has agreed to be bound by the terms and
conditions of this Agreement, as if the TP Offeror or Third Party
had been an original party to such agreement in place of H Power. If
no sale takes place within the ninety (90) day period referred to in
this subsection, then H Power shall not transfer the Offered Shares
without again following and being subject to this Section 15.
-22-
13.2.4 In the event of a sale by H Power of its Offered Shares pursuant to
this subsection 13.2, H Power shall remain bound by the Stock
Exchange Agreement.
13.3 Procedure for Offers. Offers by the Offering Investor (pursuant to
subsection 13. 1) or H Power (pursuant to subsection 13.2) (the "Offering
Shareholder") to the Other Investors (pursuant to subsection 13. 1. 1), H Power
(pursuant to subsection 13.1.2) or the Other Shareholders (pursuant to
subsection 13.2. 1) (the "Offeree Shareholders") shall be conducted in
accordance with the following procedures:
13.3.1 The Offering Shareholder shall deliver a notice of its desire to
sell the Offered Shares in accordance with the terms of the Offer to
the Offeree Shareholders, and then each of the Offeree Shareholders
shall have an option to acquire its Proportionate Share of the
Offered Shares or, if subsection 13.1.2 applies, the Unaccepted
Offered Shares (the "First Offer"). Each of the Offeree Shareholders
who elects to exercise its option under this subsection shall
deliver a notice to the Offering Shareholder, each other Offeree
Shareholder and the Corporation indicating its exercise of the
option, such notice to be sent no later than thirty (30) days after
the date on which the notice is received, after which time the
option hereby granted to the Offeree Shareholders shall expire.
13.3.2 If after the First Offer or any Additional Offer made pursuant to
this subsection 13.3.2 (the "Prior Offers"), there remains Offered
Shares that the Offeree Shareholders have not accepted in the Prior
Offers (the "Remaining Offered Shares"), the Offering Shareholder
shall deliver a notice to the Offeree Shareholders that accepted the
last such offer (the "Accepting Offeree Shareholders"), of each such
Accepting Offeree Shareholder's option to purchase its Proportionate
Share of the Remaining Offered Shares (an "Additional Offer"). Each
Accepting Offeree Shareholders who elects to exercise its option
under this subsection shall deliver a notice to the Offering
Shareholder, each other Accepting Offeree Shareholder and the
Corporation indicating its exercise of the option, such notice to be
sent no later than ten (10) days after the date on which the notice
of the Additional Offer is received, after which time the option
hereby granted to the Accepting Offeree Shareholders shall expire.
The Offering Shareholder shall continue to make offers pursuant to
this subsection 13.3.2 until there is no Accepting Offeree
Shareholders or no Remaining Offered Shares.
13.4 Validity of Offer and Closing Provisions. Each offer made pursuant to
subsections 13.1 and 13.2 shall be in a writing signed by the Offering
Shareholder and addressed to the Offeree Shareholders and shall:
13.4.1 identify the subsection pursuant to which it is delivered and
identify and provide particulars of the Offered Shares;
-23-
13.4.2 require that the sale of the Offered Shares be on the same terms and
conditions as the TP Offer (this provision shall not apply in the
event of an I Offer or a H Offer);
13.4.3 provide sufficient evidence that the TP Offeror is financially
capable to purchase the Offered Shares (this provision shall not
apply in the event of an I Offer or a H Offer);
13.4.4 state the purchase price per Offered Share, which purchase price
shall be payable in full, in cash, at Closing;
13.4.5 state the name and address of the TP Offeror to whom it proposes to
sell the Offered Shares, and include a copy of the TP Offer (this
provision shall not apply in the event of an I Offer or a H Offer);
13.4.6 provide that the Closing shall be held at the principal offices of
the Corporation at 10:00 a.m. on the Closing Date, or at such other
place, at such other time or on such other date as the parties
thereto may agree, in accordance with the following terms and
conditions:
13.4.6.1 at Closing, the Offering Shareholder shall deliver to the
Offeree Shareholders who have accepted an Offer (the "Purchaser")
certificates representing the Offered Shares being transferred,
which certificates shall be accompanied by a duly executed
assignment of the Offered Shares to the Purchaser;
13.4.6.2 payment for the Offered Shares being transferred shall be
made in full at Closing. All payments shall be made by way of bank
draft or electronic fund transfer to the Offering Shareholder's
account in Canada (in the United States if the Offering Shareholder
is H Power);
13.4.6.3 at Closing, the Offering Shareholder shall deliver to the
Purchaser a written warranty that:
13.4.6.3.1 there are no contractual or other restrictions on the
transfer of the Offered Shares being transferred (other
than the restrictions set out in the Articles of
Incorporation of the Corporation and in this Agreement);
13.4.6.3.2 the Offering Shareholder is the registered and
beneficial owner of the Offered Shares being transferred
with fall right, title and authority to transfer such
Offered Shares to the Purchaser, free and clear of all
claims, liens and other encumbrances whatsoever;
-24-
13.4.6.4 if there is more than one Purchaser, then the obligations
of each Purchaser in connection with the purchase of the Offered
Shares shall be independent of the obligations of the other
Purchaser in that regard. If, however, at the Closing one of the
Purchasers fails to pay for its Offered Shares but the other
Purchasers pay for their Offered Shares, then the Offering
Shareholder shall not be obliged to proceed with the Closing with
the other Purchasers;
13.4.6.5 at Closing, all necessary and proper corporate proceedings
required by counsel for the Purchaser, acting reasonably, shall be
taken for the transfer of the Offered Shares;
13.4.6.6 if the Purchaser fails at the Closing to pay for its
Offered Shares, provided that the Offering Shareholder has fulfilled
all of its obligations hereunder, then without prejudice to the
other rights of the Offering Shareholder, the purchase price for the
Offered Shares shall bear interest from the date of Closing until
paid in full at a rate of interest per annum equal to the Prime Rate
plus three percent (3%). Such interest shall be payable on demand;
13.4.6.7 at Closing, the Offering Shareholder shall deliver to the
Corporation signed resignations of all of its nominees as directors,
officers and employees of the Corporation unless waived by the
Corporation;
13.4.6.8 if the Offering Shareholder is bound by a guarantee whereby
such Offering Shareholder has guaranteed the payment of any debt or
liability of the Corporation or if the Offering Shareholder has
granted any advance to the Corporation, then the Purchaser shall use
all reasonable efforts to cause such guarantee to be released and
cancelled at Closing and/or such advance to be reimbursed at
Closing, failing which the Purchaser shall agree to indemnify and
hold the Offering Shareholder harmless from all claims, costs,
demands and actions suffered or incurred after the Closing resulting
from, arising out of, or relating to such guarantee or such
advances;
13.4.6.9 if any of the conditions set forth in this subsection
13.4.6 made for the exclusive benefit of the Purchaser are not
satisfied at the Closing, then the Purchaser may, at its option,
either:
13.4.6.9.1 refuse to proceed with the Closing, or
13.4.6.9.2 proceed with the Closing,
in either case without prejudice to its remedies and recourses
against the Offering Shareholder as a result of such condition not
being satisfied;
-25-
13.4.6.10 however, if at Closing the Offered Shares being
transferred are not free and clear of all claims, liens and other
encumbrances whatsoever, the Purchaser may, without prejudice to any
other rights which it may have, purchase such Offered Shares subject
to such claims, liens and other encumbrances. In that event, the
Purchaser shall at the Closing assume all obligations and
liabilities with respect to such claims, liens and encumbrances and
the purchase price payable by the Purchaser for such Offered Shares
shall be satisfied, in whole or in part, as the case may be, by such
assumption. The amount so assumed shall reduce the purchase price
payable at Closing;
13.4.6.11 if the Offering Shareholder fails to complete the
transaction, then the amount which the Purchaser would otherwise be
required to pay to the Offering Shareholder at Closing may be
deposited by the Purchaser into an interest-bearing trust account in
the name of the Offering Shareholder at the bank branch used by the
Corporation. Upon making such deposit and giving the Offering
Shareholder notice thereof, the purchase of the Offering
Shareholder's Offered Shares by that Purchaser shall be deemed to
have been fully completed and all right, title, benefit and interest
in and to the Offered Shares be deemed to have been transferred and
assigned to and vested in the Purchaser. The Offering Shareholder
shall be entitled to receive the amount deposited in the trust
account upon satisfying the Offering Shareholder's obligations
pursuant to subsection 13.1;
13.4.6.12 the Offering Shareholder hereby irrevocably nominates,
constitutes and appoints each Purchaser as its true and lawful
mandatary and agent for, in the name of and on behalf of the
Offering Shareholder to execute and deliver in the name of the
Offering Shareholder all such instruments as may be necessary to
effectively transfer the Offered Shares being sold to the Purchaser.
The Offering Shareholder hereby ratifies and confirms, and agrees to
ratify and confirm, all that Purchaser may lawfully do or cause to
be done by virtue of such appointment and power of attorney;
13.4.6.13 it is recognized that serious and irreparable damage for
which monetary damages would not be an adequate remedy would result
to the Purchaser from the violation of the provisions of this
Section 13. Each party agrees that, in addition to any and all
remedies available to the Purchaser in the event of a violation of
such covenants, such Purchaser shall have the immediate remedy of
injunction or such other relief as may be decreed or issued by any
court of competent jurisdiction to enforce this Section 13.
13.5 Piggy Back - Investors. Provided that H Power owns more than 50% of the
issued and outstanding Shares, if H Power receives a TP Offer or makes a H Offer
pursuant to subsection 13.2, each Investor shall have the right, at such
Investor's option, in lieu of exercising options to purchase Offered Shares, to
require that all of the Shares held by such Investor be included in any
-26-
sale to the TP Offeror or Third Party, together with the Offered Shares, on
terms and conditions which are identical to those offered by the TP Offeror to H
Power pursuant to the TP Offer or to those made pursuant to the H Offer, as the
case may be, and it shall be a condition precedent of the right of H Power to
sell any Offered Shares that the TP Offeror or Third Party purchase all the
Shares held by an Investor exercising the right granted in this subsection 13.5.
If an Investor wishes to exercise the right granted in this subsection 13.5,
then it shall do so by giving written notice thereof to H Power at any time
prior to the end of the expiration of the last offer period of H Power to sell
Offered Shares to the Investors. For greater certainty, the provisions of this
subsection 13.5 shall only apply if all of the Offered Shares are not purchased
by one or more of the Investors under subsection 13.2 and are sold to the TP
Offeror or the Third Party by H Power.
13.6 Piggy Back - Other Investors and H Power. Provided that Offering Investor
owns more than 50% of the issued and outstanding Shares, if the Offering
Investor receives a TP Offer or makes a I Offer pursuant to subsection 13.1,
each of the Other Investors and H Power shall have the right, at its option, in
lieu of exercising its option to purchase Offered Shares, to require that all of
the Shares held by it be included in any sale to the TP Offeror or Third Party,
together with the Offered Shares, on terms and conditions which are identical to
those offered by the TP Offeror to the Offering Investor pursuant to the TP
Offer or to those made pursuant to the I Offer, as the case may be, and it shall
be a condition precedent of the right of the Offering Investor to sell any
Offered Shares that the TP Offeror or Third Party purchase all the Shares held
by each of the Other Investors and H Power exercising the right granted in this
subsection 13.6. If any of the Other Investors or H Power wishes to exercise the
right granted in this subsection 13.6, then it shall do so by giving written
notice thereof to the Offering Investor at any time prior to the end of the
expiration of the offer period of the Offering Investor to sell Offered Shares
to each of the Other Investors and H Power. For greater certainty, the
provisions of this subsection 13.6 shall only apply if all of the Offered Shares
are not purchased by the Other Investors and/or H Power under subsection 13. 1
and are sold to the TP Offeror or the Third Party by the Offering Investor.
13.7 Corporation's Obligation. The Corporation shall record each transfer of
Shares; provided, however, that the Corporation shall refuse to record a
transfer of Shares made in contravention of this Agreement.
13.8 Offers Irrevocable. All Offers and TP Offers are irrevocable for the period
of time during which they are open for acceptance.
13.9 Share Certificates. The Corporation shall cause, and the Shareholders shall
vote their Shares to cause the Corporation to cause, all certificates for Shares
to be endorsed with the following inscription:
-27-
"Ownership, alienation and encumbrance of the Shares represented by
this certificate are subject to the terms of the Unanimous
Shareholders Agreement of 3362469 Canada Inc. dated May 2, 1997, a
copy of which is on file at the registered office of 3362469 Canada
Inc."
13.10 Percentage held by Sofinov. The provisions of subsection 11.9 of this
Agreement shall apply mutatis mutandis in the event of the purchase by Sofinov
of any Offered Securities pursuant to subsections 13.1 and 13.2 hereof.
SECTION 14 - EXCHANGE RIGHTS
14.1 H Power hereby confirm that any Shares held at any time by an Investor
pursuant to this Agreement shall form part of the shares entitled to be
exchanged pursuant to the Stock Exchange Agreement at the exchange rate provided
in the Stock Exchange Agreement. Furthermore, in the event of a transfer by an
Investor of any of its Shares in conformity with this Agreement, H Power hereby
confirms that the transferee of such Shares shall benefit from those exchange
rights contemplated in the Stock Exchange Agreement at the exchange rate
provided in the Stock Exchange Agreement provided that such exchange rights
subsist at the time of the transfer.
SECTION 15 - FORCED LIQUIDATION
15.1 Unusual Event. The occurrence of any of the following events shall
constitute an unusual event (each an "Unusual Event"):
15.1.1 the institution of any proceeding for the liquidation, dissolution,
winding-up or other distribution of assets of H Power;
15.1.2 should either of H Power or the Corporation: (i) commit an act of
bankruptcy or become insolvent, (ii) make an assignment for the
benefit for its creditors, (iii) file or consent to the filing of a
petition in bankruptcy, a proposal, a notice of intention or
proceeding under the Bankruptcy and Insolvency Act (Canada) or the
United States Bankruptcy Code or otherwise take advantage of, or
consent to the filing of any proceeding under, any insolvency or
bankruptcy law, (iv) commence any proceeding relating to it or its
rights, assets or properties under any reorganization, arrangement,
readjustment, composition or liquidation law of any jurisdiction; or
should any proceeding of any type be instituted in any jurisdiction
in respect of the alleged insolvency or bankruptcy of either of
them;
15.1.3 should either of the Corporation or H Power cease to carry on its
business for a period of three (3) consecutive months;
-28-
15.1.4 any event having a materially adverse impact upon the business of
the Corporation or H Power; and
15.1.5 any event having a materially adverse impact upon the ability of the
Corporation or H Power to carry on business in the ordinary course
including, without limitation, any event having a materially adverse
impact upon the Technology licensed pursuant to the License
Agreement which is necessary for the business of the Corporation.
15.2 Right to Liquidate. Upon the occurrence of an Unusual Event referred to in
paragraphs 15.1.1, 15.1.2 or 15.1.3, the Investors will be entitled, upon
written notice to H Power, to forthwith proceed with the winding-up, dissolution
or liquidation of the Corporation, the whole in accordance with Section 2 of the
Articles of Incorporation of the Corporation. Upon the occurrence of an Unusual
Event referred to in paragraphs 15.1.4 or 15.1.5, the Investors shall give
notice of such Unusual Event to H Power, setting forth in reasonable detail the
nature of such Unusual Event. H Power will have thirty (30) days from the date
of its receipt of the said notice to give the Investors notice (the "Contesting
Notice") that it contests the occurrence of such Unusual Event, in which event
the matter shall be definitively settled by arbitration in accordance with
subsection 19.1 hereof. In the event that (i) the arbitrator rules in favour of
the Investors or (ii) H Power fails to send the Contesting Notice to the
Investors within the said thirty (30) day period, then the Investors will be
entitled to forthwith proceed with the winding-up, dissolution or liquidation of
the Corporation, the whole in accordance with Section 2 of the Articles of
Incorporation of the Corporation. Upon such winding-up, dissolution or
liquidation of the Corporation, the License Agreement shall be terminated.
15.3 Deemed Consent. In the event of the winding-up, dissolution or liquidation
of the Corporation by the Investors in accordance with subsection 15.2 and
Section 2 of the Articles Incorporation of the Corporation, H Power, as the
holder of the Class B Common Shares (as well as any transferee of H Power), is
hereby deemed to have consented to such winding-up, dissolution or liquidation
of the Corporation and hereby irrevocably nominates, constitutes and appoints
each Investor as its true and lawful mandatary and agent for, in the name of and
on behalf of H Power (as well as any transferee of H Power) to execute and
deliver in the name of H Power (as well as any transferee of H Power) all such
instruments and resolutions as may be necessary to effectively wind-up, dissolve
or liquidate the Corporation. H Power (as well as any transferee of H Power)
hereby ratifies and confirms, and agrees to ratify and confirm, if required, all
that such Investor may lawfully do or cause to be done by virtue of such
appointment and power of attorney.
SECTION 16 - CONFIDENTIALITY
16.1 Confidentiality. Each of the Shareholders agrees to use, and to use its
best efforts to ensure that its authorized representatives use, the same degree
of care as such Shareholder uses to protect its own confidential information, to
keep confidential and not to make use of any Confidential Information in its
possession. Such Shareholder may disclose Confidential Information
-29-
(i) to any shareholder, subsidiary or parent of such Shareholder for the purpose
of reporting on the activities of, or evaluating its investment in the
Corporation provided that prior to disclosure such shareholder, subsidiary or
parent agrees to be bound by the confidentiality provisions of this Section 16
and such other confidentiality provisions as may be requested by the Corporation
in its sole discretion; or (ii) to any TP Offeror, Third Party, Permitted
Transferee or Governmental Body for purposes related to the purchase or transfer
of such Shareholder's Shares pursuant to the provisions of Sections 12 or 13
hereof, provided that prior to disclosure such TP Offeror, Third Party,
Permitted Transferee or Governmental Body agrees to be bound by the
confidentiality provisions of this Section 16 and such other confidentiality
provisions as may be requested by the Corporation in its sole discretion.
16.2 Disclosure Required. Anything to the contrary herein notwithstanding,
disclosure of Confidential Information shall not be precluded if such disclosure
is in response to a valid order of a Governmental Body or is otherwise required
by law; provided, however, that the said Shareholders shall, if reasonably
possible, first have given notice thereof to the Corporation and shall have, as
appropriate:
16.2.1 fully cooperated in the Corporation's attempt, if any, to obtain a
"protective order" from the appropriate Governmental Body; or
16.2.2 attempted to classify such documents to prevent access by the
public, in accordance with the provisions of any law pertaining to
freedom of information.
16.3 Reasonableness of Covenants. The covenants set forth in subsections 16.1
and 16.2 are reasonable and valid in all respects and each Shareholder hereby
irrevocably agrees to waive (and irrevocably agrees not to raise) as a defense
any issue of reasonableness in any proceeding to enforce any such covenant.
SECTION 17 - FINANCIAL INFORMATION AND COVENANTS OF THE CORPORATION
17.1 Financial Information. The Corporation, at its costs, undertakes toward the
Shareholders to remit to the latter the following documents:
17.1.1 within one hundred and twenty (120) days after the end of each
fiscal year, a copy of the balance sheet of the Corporation as at
the end of such year, together with statements of earnings,
shareholders' equity, statement of changes in financial position and
cash flow of the Corporation for such year, setting forth in each
case in comparative form the corresponding figures for the preceding
fiscal year, all in reasonable detail and duly certified by the
Auditors. These financial statements shall be prepared in accordance
with Canadian generally accepted accounting principles applied on a
consistent basis;
-30-
17.1.2 within thirty (30) days after the end of each of the first three (3)
fiscal quarters during each fiscal year, a balance sheet of the
Corporation as of the end of such fiscal quarter and statements of
earnings, shareholders' equity, statement of changes in financial
position and cash flow for such quarter and for the period from the
beginning of the then current fiscal year to the end of such
quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding
fiscal year, all in reasonable detail. The financial statements
delivered pursuant to this subsection need not be audited;
17.1.3 within thirty (30) days following the end of each month, complete
unaudited monthly financial statements, including the balance sheet,
the income statement and the statement of changes in financial
position as well as a comparison with the budgets established for
the same period, containing a detailed explanation of any
variations;
17.1.4 at or prior to the commencement of a fiscal year, an annual
operating budget, pro forma cash flow and pro forma income statement
for the Corporation;
17.1.5 promptly following the receipt thereof, any written report,
"management letter" and any other communication submitted to the
Corporation by its independent chartered accountants relating to the
business, prospects or financial condition of the Corporation;
17.1.6 within ninety (90) days of the end of each fiscal year of the
Corporation, a report prepared by the Auditors describing all
transactions between the Corporation and Persons not dealing at
Arm's Length with the Corporation during the preceding fiscal year;
17.1.7 within one hundred and eighty (180) days of the end of each fiscal
year of the Corporation, a copy of any tax return filed for such
fiscal year;
17.1.8 within thirty (30) days of the end of each month, a report prepared
by the controller of the Corporation detailing any payments due by
the Corporation to tax authorities for sales taxes, deduction at
source or for any other taxes;
17.1.9 within twenty (20) days of each Board or Shareholders meeting, a
copy of the minutes of such meeting; and
17.1.10 within a reasonable delay, any other reasonable information required
by a Shareholders.
17.2 Inspection by Shareholders. The Corporation shall permit each Shareholder,
at such Shareholder's expense, to visit and inspect the Corporation's
properties, to examine its books of
-31-
accounts and records and to discuss the Corporation's affairs, finances and
accounts with its officers, all at such reasonable times as may be requested by
the Shareholder.
17.3 Compliance by Corporation. The Corporation hereby agrees to take all
necessary action in order to comply with this Agreement and to comply with all
applicable laws and regulations in respect of its corporate existence and the
conduct of its business including, without limitation, those laws and
regulations dealing with the protection of the environment, and further agrees
to obtain all permits, licenses and authorizations necessary for the conduct of
its business and the ownership of its properties.
17.4 Insurance. The Corporation hereby agrees to use its best efforts to
maintain in full force at all times adequate property insurance, business
interruption insurance and civil liability insurance, which insurance policies
shall be subject to the reasonable approval of the Board, and further agrees to
advise each of the Shareholders in writing of any loss or claim under such
insurance policies, immediately upon the occurrence of any loss or claim and
further agrees to advise each of the Shareholders in writing of any renewal of
such insurance with a copy of such renewed policy or non-renewal, as the case
may be.
SECTION 18 - NOTICES
18.1 Notices. All notices, requests, demands and other communications hereunder
shall be given in writing and shall be given by telecopier, or delivered by
hand, to the other party at the following addresses:
if to H Power: H POWER CORP.
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx
00000, X.X.X.
Attention: the President
Telecopier: (000) 000-0000
-32-
if to Sofinov: SOFINOV SOCIETE FINANCIERE D'INNOVATION INC.
0000 XxXxxx Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: the President
Telecopier: (000) 000-0000
if to Innovatech: SOCIETE INNOVATECH DU GRAND MONTREAL
0000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: the President
Telecopier: (000) 000-0000
if to 9042-0175: 0000-0000 XXXXXX INC.
x/x Xxxxxxxx Xxxxxxxxxx
0000 Xxxx-Xxxxxxxx Blvd. West
Suite 1400
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Xxxxxx Xxxxxxxx
Telecopier: (000) 000-0000
-33-
if to the Corporation: 3362469 CANADA INC.
x/x Xxxxxxxx Xxxxxxxxxx
0000 Xxxx-Xxxxxxxx Blvd. West
Suite 1400
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Xxxxxx Xxxxxxxx
Telecopier: (000) 000-0000
with a copy in all XXXXX XXXXXXXXXXXX ET AL
cases to: 000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX
00000
Attention: Xxxxx Xxxxxxx
Telecopier: (000) 000-0000
with a copy in all XXXXXXXX XXXXXXXXXX
cases to: 0000 Xxxx-Xxxxxxxx Xxxx. Xxxx
Xxxxx 0000
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Xxxxxx Xxxxxxxx
Telecopier: (000) 000-0000
or at such other address as the parties may have previously indicated to the
other parties in writing in conformity with the foregoing. Any such notice,
request, demand or other communication shall be deemed to have been received on
the date of delivery if delivered by hand, or the next Business Day immediately
following the date of transmission if sent by telecopier. The original copy of
any notice sent by telecopier shall be forwarded to the other party by
registered mail, receipt return requested.
-34-
SECTION 19 - ARBITRATION
19.1 Arbitration. All disputes or controversies between the parties in respect
of the validity, interpretation or performance of the provisions of this
Agreement shall be definitively dealt with using the rules of conciliation and
arbitration of the International Chamber of Commerce, by one or more arbitrators
appointed in accordance with said rules, and to the exclusion of any courts
except for any provisional remedy including injunctive relief and seizure before
judgment which may be obtained from any court or tribunal, the whole in
accordance with said rules in force at the time of execution of this Agreement.
Any arbitration proceeding required pursuant to the terms thereof shall take
place in New York, New York and shall be conducted in both the English and
French language.
SECTION 20 - MISCELLANEOUS PROVISIONS
20.1 Press Release. Any press release or any public announcement, statement or
publicity with respect to the transaction contemplated in this Agreement shall
be made only with the prior consent of the Shareholders unless such release,
announcement, statement or publicity is required by law, in which case the
Shareholder required to make such release, announcement, statement or publicity
shall use its best efforts to obtain the approval of the other Shareholders to
the form, nature and extent of such disclosure, which approval shall not be
unreasonably withheld.
20.2 Further Documents. Each party upon the request of the others, shall do,
execute, acknowledge and deliver or cause to be done, executed, acknowledged or
delivered all such further acts, deeds, documents, assignments, transfers,
conveyances, powers of attorney and assurances as may be reasonably necessary or
desirable to effect complete consummation of the transactions contemplated by
this Agreement.
20.3 Successors and Assigns. This Agreement and the provisions hereof shall
enure to the benefit of and be binding upon the parties and their respective
successors and permitted assigns.
20.4 Transfer Contrary to this Agreement. Any purported transfer of Shares
contrary to the terms of this Agreement shall be null and void and have no legal
effect.
20.5 Time of the Essence. Time shall be of the essence of this Agreement.
20.6 Counterpart. No Person shall become a holder of any Shares without first
having executed a counterpart of this Agreement in accordance with Schedule
"20.6" annexed hereto. Each such counterpart so executed shall be deemed to be
an original and such counterparts together shall constitute one and the same
instrument.
-35-
20.7 Originals. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same document.
20.8 Termination of Agreement. This Agreement shall remain in effect until
terminated by any party hereto by written notice upon the occurrence of any of
the following eventualities:
20.8.1 the bankruptcy or dissolution (whether voluntary or involuntary) of
the Corporation;
20.8.2 either Partner holds less than 2.5% of the issued and outstanding
Shares;
20.8.3 all issued and outstanding Shares are held by one Person only; or
20.8.4 by written agreement of all of the Shareholders.
20.9 Language. The parties hereto state their express wish that this version of
this Agreement as well as all documentation contemplated hereby or pertaining
hereto or to be executed in connection herewith be also drawn up in English; les
parties expriment leur xxxxx explicite a l'effet que cette version de cette
convention de meme que tous documents envisages par les presentes ou y ayant
trait ou qui seront signes relativement aux presentes soient aussi rediges en
anglais.
IN WITNESS WHEREOF, the parties have signed at the place and on the
date first hereinabove mentioned.
H POWER CORP. SOFINOV SOCIETE FINANCIERE
D'INNOVATION INC.
Per: /s/ H. Xxxxx Xxxxxxx Per: /s/ Xxxxxx Xxxxxxxx
------------------------------- ------------------------------------
H. Xxxxx Xxxxxxx Xxxxxx Xxxxxxxx
Per: /s/ Xxxxx Xxxxxx
------------------------------------
Xxxxx Xxxxxx
-36-
SOCIETE INNOVATECH DU GRAND 9042-0175 QUEBEC INC.
MONTREAL
Per: /s/ Xxxxxxx Xxxxxx Per: /s/ Xxxxxx Xxxxxxxx
------------------------------- ------------------------------------
Xxxxxxx Xxxxxx Xxxxxx Xxxxxxxx
3362469 CANADA INC.
Per: /s/ H. Xxxxx Xxxxxxx
-------------------------------
H. Xxxxx Xxxxxxx
Shareholders Agreement
3362469 Canada Inc.
SCHEDULE "8"
BY-LAW 1997-1
1. Casting Vote. At no time and at no meeting whatsoever shall the Chairman or
President of the Corporation have any additional vote or any vote whatsoever in
addition to his ordinary vote as shareholder or as director, as the case may be,
and, more particularly, neither the Chairman nor President shall have a casting
vote in case of a tie.
2. Unanimous Shareholders Approval. As long as each Partner owns fifty percent
(50%) of the aggregate of the issued and outstanding Class A Common Shares and
Class B Common Shares of the Corporation, all resolutions and decisions of the
shareholders of the Corporation shall require unanimity. For the purposes
hereof, "Partner" means either: (i) the Sofinov Societe Financiere D'Innovation
Inc., Societe Innovatech Du Grand Montreal and 0000-0000 Xxxxxx Inc.,
collectively (said parties being considered as one party) or (ii) H Power Corp.,
and "Partners" means both of them.
3. Matters Requiring Unanimous Shareholders Approval. Without limiting the
generality of the foregoing, as long as each Partner owns at least thirty-three
and one-third percent (33 1/3%) of the aggregate of the issued and outstanding
Class A Common Shares and Class B Common Shares of the Corporation, there shall
be no by-law , resolution or act of the shareholders of the Corporation, the
Board of Directors or officers of the Corporation having any of the following
objects or purposes unless favourably voted upon by all the shareholders of the
Corporation:
3.1 an increase or decrease in the number of directors of the
Corporation, except as provided for in the Shareholders Agreement
(the "Shareholders Agreement") dated May 2, 1997 among the Partners
and the Corporation;
3.2 the filing of Articles of Amendment by the Corporation for any
purpose including, without limitation, an increase or decrease or
alteration in the share capital of the Corporation or by the filing
of Articles of Amalgamation by the Corporation;
3.3 granting or repayment of any loan of a material amount to any
person, including, without limitation, shareholders, directors or
officers of the Corporation or persons Related (as defined in the
Income Tax Act (Canada)) or Affiliated (as defined in the Canada
Business Corporations Act) to shareholders, directors or officers or
the Corporation or investing any material amount in any such person;
3.4 guaranteeing any material obligations of any person in excess of
$1,000,000, including, without limitation, of shareholders,
directors or officers of the Corporation
-2- Schedule 19.1
or persons Related or Affiliated to shareholders, directors or
officers of the Corporation;
3.5 the sale, issue or allotment of shares from the treasury of the
Corporation, or the granting of options allowing for the
subscription thereof, except as provided in the Shareholders
Agreement;
3.6 the purchase or sale of any material immoveable property for a price
in excess of $500,000 or any material intellectual property on
behalf of the Corporation;
3.7 an assignment under the Bankruptcy and Insolvency Act or a proposal
made thereunder, or recourse to any other measure designed for the
protection of insolvent debtors pursuant to any other legislation in
connection with insolvency or the judicial or voluntary winding-up
of the Corporation or the liquidation of the business or assets of
the Corporation, except as provided in Section 15 of the
Shareholders Agreement;
3.8 the entering into of any material loan agreement on behalf of the
Corporation, or the granting of any security in an amount in excess
of $250,000 by the Corporation on any of its movable or immovable
property;
3.9 the sale of the whole or a substantial part of the assets of the
Corporation or the granting of an option for same or the merger or
consolidation of the Corporation with or into another entity;
3.10 the conclusion of any material partnership or joint venture
agreement or the creation of a material subsidiary or acquisition of
all or any part of another business;
3.11 the declaration of dividends on any class of shares by the
Corporation;
3.12 the adoption, amendment, repeal or abrogation of any by-law of the
Corporation;
3.13 the change in the powers of the directors in general or any one of
them in particular;
3.14 the approval of the annual research and development budget of the
Corporation, the annual operating budget of the Corporation and the
annual capital budget of the Corporation, and any amendments
thereto. Should the shareholders of the Corporation refuse to
approve the operating budget or the capital budget for a given
fiscal year, the Corporation must conduct its business in conformity
with the budgets of the preceding fiscal year and the Corporation
may not incur capital expenses for the fiscal year then in progress
unless the above-mentioned budgets have been approved in accordance
with the present provisions;
-3- Schedule 19.1
3.15 the removal or nomination of the auditors of the Corporation.
4. Decisions Requiring the Majority of Shareholders. Without limiting the
generality of the foregoing, in the event that a Partner owns less than
thirty-three and one-third percent (33 1/3%) of the aggregate of the issued and
outstanding Class A Common Shares and Class B Common Shares of the Corporation,
all resolutions and decisions of the shareholders of the Corporation shall only
require the approval of the shareholders representing more than fifty percent
(50%) of the aggregate of the issued and outstanding Class A Common Shares and
Class B Common Shares of the Corporation.
5. Transfer of Principal Office of the Corporation. So long as Societe
Innovatech Du Grand Montreal is a shareholder of the Corporation, any by-law,
resolution or act of the shareholders, directors or officers of the Corporation
having as an object or purpose the change or transfer of the principal office of
the Corporation outside the island of Montreal or the transfer of all or any
part of the business of the Corporation outside of the island of Montreal shall
only be valid if favourably voted upon at a meeting of the Board of Directors of
the Corporation, and ratified and confirmed by a resolution of the holders of
all the issued and outstanding Class A Common Shares and Class B Common Shares
of the Corporation.
6. Board or Shareholders Unable to Arrive at a Decision. If the Board of
Directors or the shareholders of the Corporation are unable to arrive at a
decision within their respective areas of competence or relating to the annual
marketing plan, the Corporation shall continue to conduct its business and
affairs in accordance with the most recent (i) resolutions of the Board of
Directors and the shareholders of the Corporation, (ii) approved annual budget
and (iii),the prior year's annual marketing plan shall be renewed mutatis
mutandis.
*** *** ***
Shareholders Agreement
3362469 Canada Inc.
SCHEDULE "20.6"
THIS INSTRUMENT forms part of the Shareholders Agreement (the "Agreement")
made as of May 2, 1997 by and among H Power Corp., Sofinov Societe Financiere
D'Innovation Inc., Societe Innovatech du Grand Montreal, 9042-0175 Quebec Inc.
and 3362469 Canada Inc. which Agreement permits execution by counterpart. The
undersigned hereby acknowledges having received a copy of the said Agreement
(which is annexed hereto as Schedule "1") and, having read the said Agreement in
its entirety, hereby agrees that the terms and conditions of the said Agreement
shall be binding upon the undersigned (including, without limitation, the
obligations of confidentiality) as if the undersigned had been an original party
to the Agreement as a Shareholder (as such terms are defined in the Agreement)
and such terms and conditions shall enure to the benefit of and be binding upon
the undersigned, its successors and assigns.
IN WITNESS WHEREOF the undersigned has executed this instrument this _____
day of ______ [year]
[Shareholder]
per:_________________________________________
