EXHIBIT 10.2
SCHEDULE "B"
EXCHANGE AND VOTING AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 15th day of September 1999.
AMONG:
SINO-CITY, GAS, INC, a corporation subsisting under the laws of the
State of Delaware (hereinafter referred to as the "Parent")
AND:
592337 B.C. LTD., a corporation incorporated under the laws of British
Columbia (hereinafter referred to as the "Purchaser"),
AND:
STOCKTRANS, INC., having a business address at 0 Xxxx Xxxxxxxxx Xxx.
Xxxxxxx, Xxxxxxxxxxxx 00000-0000
(hereinafter referred to as the "Trustee").
AND:
EACH OF THOSE PERSONS holding shares of the Purchaser, as listed in
Appendix "A" hereto
(hereinafter referred to as the "Shareholders")
W H E R E A S:
A. The Purchaser is the wholly owned subsidiary of the Parent;
B. Pursuant to a share exchange and share purchase agreement dated as of
September l5th, 1999 (the "Purchase Agreement") by and among the Parent,
the Purchaser, Presto Communications Corp. ("Presto Corp.") and, the
Shareholders, the Purchaser acquired 278 of the 600 issued and outstanding
common shares of Presto Corp. from the Shareholders in consideration of
among other things: (i) the Purchaser issuing to the Shareholders 5,101,000
Exchangeable Non-Voting Shares (as herein defined), and (ii) the Parent,
granting to each Shareholder Voting Rights (as herein defined) in the
Parent on the basis of each Shareholder having an equivalent number of
votes in the Parent as the number of Exchangeable Non-Voting Shares held by
such Shareholder;
C. As security for the Parent's covenant to issue common shares in its capital
stock in exchange for Exchangeable Non-Voting Shares, the Parent agreed to
issue 5,101,000 common shares (as herein defined as the "Parent Common
Shares") to the Trustee; and
D. In accordance with the Purchase .Agreement, this Agreement stipulates the
means by which: (i) the Shareholders have voting rights in the Parent; (ii)
the Trustee holds the Parent Common Shares for the Shareholders; and (iii)
the Shareholders exercise their rights of conversion of the Exchangeable
Non-Voting Shares,
NOW THEREFORE in consideration of the respective covenants and agreements
provided in this Agreement and for other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties agree as
follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
DEFINITIONS. In this Agreement, the following terms shall have the following
meanings:
"AFFILIATE" of any person means any other person directly or indirectly
controlled by, or under common control of, that person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control of'), as applied to any person, means
the possession by another person, directly or indirectly, of the power to direct
or cause the direction of the management and policies of that first mentioned
person, whether through the ownership of voting securities, by contract or
otherwise.
"AUTOMATIC EXCHANGE RIGHTS" means the benefit of the obligation of Parent to
effect the automatic exchange of Exchangeable Non-Voting Shares for Parent
Common Shares pursuant to Section 4.12 hereof.
"BOARD OF DIRECTORS" means the Board of Directors of the Purchaser.
"BUSINESS DAY" means a day other than a Saturday, Sunday or a day when banks are
not open for business in British Columbia;
"CANADIAN DOLLAR EQUIVALENT" means in respect of an amount expressed in a
foreign currency (the "Foreign Currency Amount") at any date the product
obtained by multiplying (a) the Foreign Currency Amount by (b) the exchange rate
on such date for such foreign currency expressed in Canadian dollars as reported
in The Wall Street Journal under "Currency Trading; Exchange Rates" or, in the
event such exchange rate is not available, such exchange rate on such date for
such foreign currency expressed in Canadian dollars as may be deemed by the
Board of Directors to be appropriate for such purpose.
"CURRENT MARKET PRICE" means, in respect of a Parent Common Share on any date,
the Canadian Dollar Equivalent of closing price of Parent Common Shares on the
day before such date, on such stock exchange or automated quotation system on
which the Parent Common Shares are listed or quoted, as the case may be, as may
be selected by the Board of Directors for such purpose; provided, however, that
if there is no public distribution or trading activity of Parent Common Shares
during such period, then the Current Market Price of a Parent Common Share shall
be determined by the Board of Directors based upon the advice of such qualified
independent financial advisors as the Board of Directors may deem to be
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appropriate, and provided further that any such selection, opinion or
determination by the Board of Directors shall be conclusive and binding.
"EXCHANGEABLE NON-VOTING SHARES" means the Class "A" exchangeable, non-voting,
participating common shares without par value in the capital stock of the
Purchaser, including the 5,101,000 shares issuable under the Purchase Agreement.
"EXCHANGEABLE SHARE PROVISIONS" means the rights, privileges, restrictions and
conditions attached to the Exchangeable Non-Voting Shares as set forth in
Schedule "G" to the Purchase Agreement.
"INSOLVENCY EVENT" means the institution by the Purchaser of any proceeding to
be adjudicated bankrupt or insolvent or to be dissolved or wound up, or the
consent of the Purchaser to the institution of bankruptcy, insolvency,
dissolution or winding up proceedings against it, or the filing of a petition,
answer or consent seeking dissolution or winding up under any bankruptcy,
insolvency or analogous laws, including without limitation the Companies
Creditors' Arrangement Act (Canada) and the Bankruptcy and Insolvency Act
(Canada), and the failure by the Purchaser to contest in good faith any such
proceedings commenced in respect of the Purchaser within fifteen (15) days of
becoming aware thereof, or the consent by the Purchaser to the filing of any
such petition or to the appointment of a receiver, or the making by the
Purchaser of a general assignment for the benefit of creditors, or the admission
in writing by the Purchaser of its inability to pay its debts generally as they
become due, or the Purchaser not being permitted, pursuant to solvency
requirements of applicable law, to redeem any Retracted Shares pursuant to
section 27.6 (e) of the Exchangeable Share Provisions.
"INSOLVENCY EXCHANGE RIGHT" has the meaning ascribed thereto in Section 4.1.
"LIQUIDATION EVENT" has the meaning ascribed thereto in Section 4.12.
"LIQUIDATION EVENT EFFECTIVE DATE" has the meaning ascribed thereto in Section
4.12(c).
"LIST" has the meaning ascribed thereto in Section 3.5.
"OFFICER'S CERTIFICATE" means, with respect to the Parent or the Purchaser, as
the case may be, a certificate signed by any one of the Chairman of the Board,
the Vice-Chairman of the Board, the President, any Vice-President or any other
officer of the Parent or the Purchaser, as the case may be.
"PARENT COMMON SHARES" means the shares of common stock of the Parent, without
par value, having voting rights of one vote per share, and any other securities
into which such shares may be changed.
"PARENT CONSENT" has the meaning ascribed thereto in Section 3.2.
"PARENT MEETING" has the meaning ascribed in Section 3.2.
"PARENT SUCCESSOR" has the meaning ascribed thereto in Section 11.1(a).
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"PURCHASE AGREEMENT" means the Purchase Agreement between the Parent, the
Purchaser, Presto Corp., and the Shareholders named therein, dated as of the
same date hereof.
"PERSON" includes an individual, partnership, corporation, company,
unincorporated syndicate or organization, trust, trustee, executor,
administrator and other legal representative.
"RETRACTED SHARES" has the meaning ascribed thereto in Section 4.7.
"SHAREHOLDERS" means the registered holders from time to time of Exchangeable
Non-Voting Shares, other than the Parent and its Affiliates, as listed in
Appendix "A" hereto.
"SHAREHOLDER VOTES" has the meaning ascribed thereto in Section 3.2.
"SUPPORT AGREEMENT" means that certain support agreement made as of the same
date hereof between the Purchaser and the Parent, which agreement is attached as
Schedule "I" to the Purchase Agreement.
"TRUST" means the trust created by this Agreement.
"TRUST ESTATE" means the Trust Shares and any other securities, money or other
property which may be held by the Trustee from time to time pursuant to this
Agreement.
"TRUST SHARES" has the meaning ascribed thereto in Section 2.2.
"TRUSTEE" means Stocktrans, Inc., and subject to the provisions of Article 9,
includes any successor trustee.
"VOTING RIGHTS" has the meaning ascribed thereto in Section 3.1.
INTERPRETATION NOT AFFECTED BY HEADINGS, ETC. The division of this Agreement
into articles, sections and paragraphs and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
NUMBER, GENDER, ETC. Words importing the singular number only shall include the
plural and vice versa. Words importing the use of any gender shall include all
genders.
DATE FOR ANY ACTION. If any date on which any action is required to be taken
under this Agreement is not a Business Day, such action shall be required to be
taken on the next succeeding Business Day.
ARTICLE 2
TRUST SHARES
2.1 ESTABLISHMENT OF TRUST. One purpose of this Agreement is to create the
Trust for the benefit of the Shareholders, as herein provided. The Trustee will
hold the Parent Common Shares acquired pursuant to the requirements of the
Purchase Agreement, Exchangeable Share Provisions and Support Agreement both to
support the Parent's and the Purchaser's obligations thereunder in the event of
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default and, only if required by applicable law, to provide a mechanism for
Shareholders of each Exchangeable Non-Voting Share to direct the voting of a
corresponding Parent Common Share held by the Trustee.
2.2 ISSUE AND OWNERSHIP OF THE PARENT COMMON SHARES. Upon execution of this
Agreement, the Parent shall transfer to the Trustee a number of Parent Common
Shares equal to the number of Exchangeable Non-Voting Shares issued to
Shareholders under the Purchase Agreement, such shares to be hereafter held of
record by the Trustee as trustee for and on behalf of, and for the use and
benefit of, the Shareholders and in accordance with the provisions of this
Agreement. From time to time, the Parent shall transfer additional shares of
Parent Common Shares to the Trustee as required under the Purchase Agreement,
Exchangeable Share Provisions and Support Agreement, also to be held of record
by the Trustee as trustee for and on behalf of, and for the use and benefit of,
the Shareholders and in accordance with the provisions of this Agreement. All
Parent Common Shares so transferred by the Parent to the Trustee pursuant to
this Section 3.1 shall hereafter be referred to as the "Trust Shares". The
Parent hereby acknowledges receipt from the Trustee as trustee for and on behalf
of the Shareholders of good and valuable consideration (and the adequacy
thereof) for the issuance of the Trust Shares by the Parent to the Trustee.
During the term of the Trust and subject to the terms and conditions of this
Agreement, the Trustee shall possess and be vested with full legal ownership of
the Trust Shares and, subject to the terms hereof, shall be entitled to exercise
all of the rights and powers of an owner with respect to the Trust Shares,
provided that the Trustee shall:
(a) hold the Trust Shares and the rights associated therewith as conveyed by
this Agreement as trustee solely for the use and benefit of the
Shareholders in accordance with the provisions of this Agreement; and
(b) except as specifically authorized by this Agreement, have no power or
authority to sell, transfer, vote or otherwise deal in or with the Trust
Shares and the Trust Shares shall not be used or disposed of by the Trustee
for any purpose other than the purposes for which this Trust is created
pursuant to this Agreement.
ARTICLE 3
VOTING
3.1 VOTING RIGHTS. The Parent will grant to the Shareholders, by requisite
shareholder or director resolutions, the right for each Shareholder to receive
notice and attend each Parent Meeting and to consent to or to vote in person or
by proxy, on any matter, question or proposition whatsoever that may properly
come before the stockholders of the Parent at a Parent Meeting or in connection
with a Parent Consent (in each case, as hereinafter defined) (the "Voting
Rights") on the basis of one Voting Right for every one Exchangeable Non-Voting
Share held by a Shareholder, as if and to the same extent and effect as if the
Shareholder held an equivalent number of Parent Common Shares. The Voting,
Rights shall be and remain vested in and exercised by the Shareholders.
3.2 NUMBER OF VOTES. With respect to all meetings of stockholders of the
Parent at which holders of shares of Parent Common Shares are entitled to vote
(a "Parent Meeting") and with respect to all written consents sought by the
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Parent from its stockholders including the holders of shares of Parent Common
Shares (a "Parent Consent"), each Shareholder shall be entitled to cast and
exercise, in the manner instructed, the Voting Rights ordinarily attributable to
one Parent Common Share for each Exchangeable Non-Voting Share owned of record
by such Shareholder on the record date established by the Parent or by
applicable law for such Parent Meeting or Parent Consent, as the case may be
(the "Shareholder Votes") in respect of each matter, question or proposition to
be voted on at such Parent Meeting or to be consented to in connection with such
Parent Consent.
3.3 LEGENDED SHARES CERTIFICATES. The Purchaser will cause each certificate
representing Exchangeable Non-Voting Shares to bear an appropriate legend
notifying the Shareholders of their right to a number of votes in the Parent as
is equal to the number of shares represented by the Exchangeable Non-Voting
Share certificates.
3.4 SAFEKEEPING OF CERTIFICATES. The certificate(s) representing the Trust
Shares shall at all times be held in safe keeping by the Trustee or its agent.
3.5 MAILINGS TO SHAREHOLDERS OF EXCHANGEABLE NON-VOTING SHARES. With
respect to each Parent Meeting and Parent Consent, the Parent will mail or cause
to be mailed (or otherwise communicate in the same manner as the Parent utilizes
in communications to holders of Parent Common Shares, to each of the
Shareholders named in the List (as defined below) on the same day as the initial
mailing or notice (or other communication) with respect thereto is given by the
Parent to its stockholders:
(a) a copy of such notice, together with any proxy or information statement and
related materials to be provided to stockholders of the Parent;
(b) a statement that such Shareholder is entitled to the exercise of the
Shareholder Votes with respect to such Parent Meeting or Parent Consent, as
the case may be, and to attend such Parent Meeting and to exercise
personally the Shareholder Votes thereat;
(c) a statement as to the manner in which to give a proxy to a designated agent
or other representative of the management of the Parent to exercise such
Shareholder Votes; and
(d) a statement of (i) the time and date by which such must be received by the
Parent in order to be binding upon it, which in the case of a Parent
Meeting shall not be earlier than the close of business on the second
Business Day prior to such meeting, and (ii) the method for revoking or
amending such proxies.
For the purpose of determining Shareholder Votes to which a Shareholder is
entitled in respect of any such Parent Meeting or Parent Consent, the number of
Exchangeable Non-Voting Shares owned of record by the Shareholder shall, be
determined at the close of business on the record date established by the Parent
or by applicable law for purposes of determining stockholders entitled to vote
at such Parent Meeting or to give written consent in connection with such Parent
Consent.
3.6 COPIES OF STOCKHOLDER INFORMATION. The Parent will deliver to the
Shareholders copies of all proxy materials (including notices of Parent
Meetings), information statements, reports (including without limitation all
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interim and annual financial statements) and other written communications that
are to be distributed from time to time to holders of Parent Common Shares.
3.7 OTHER MATERIALS. Immediately after receipt by the Parent or any
stockholder of the Parent of any material sent or given generally to the holders
of Parent Common Shares by or on behalf of a third party, including without
limitation dissident proxy and information circulars (and related information
and material) and tender and exchange offer circulars (and related information
and material), the Parent shall use its best efforts to obtain and deliver
copies thereof to each Shareholder as soon as possible thereafter.
3.8 LIST OF PERSONS ENTITLED TO VOTE. The Purchaser shall (a) prior to each
annual, general and special Parent Meeting, or the seeking of any Parent
Consents and (b) forthwith upon each request made at any time by the Trustee or
the Parent in writing, prepare or cause to be prepared a list (a "List") of the
names and addresses of the Shareholders arranged in alphabetical order and
showing the number of Exchangeable Non-Voting Shares held of record by each such
Shareholder, in each case at the close of business on the date specified by the
Trustee in such request or, in the case of a List prepared in connection with a
Parent Meeting or a Parent Consent, at the close of business on the record date
established by the Parent or pursuant to applicable law for determining the
holders of Parent Common Shares entitled to receive notice of and/or to vote at
such Parent Meeting or to give consent in connection with such Parent Consent.
Each such List shall be delivered to the Parent promptly after receipt by the
Purchaser of such request or the record date for such meeting or seeking of
consent, as the case may be, and in any event within sufficient time as to
enable the Parent to perform its obligations under this Agreement. The Parent
agrees to give the Purchaser written notice (with a copy to the Trustee) of the
calling of any Parent Meeting or the seeking of any Parent Consent, together
with the record dates therefor, sufficiently prior to the date of the calling of
such meeting or seeking of such consent so as to enable the Purchaser to perform
its obligations under this Section 3.5.
3.9 DISTRIBUTION OF WRITTEN MATERIALS. Any written materials to be
distributed by the Parent to the Shareholders pursuant to this Agreement shall
be delivered or sent by mail (or otherwise communicated in the same manner as
the Parent utilizes in communications to holders of Parent Common Shares) to
each Shareholder at its address as shown on the books of the Purchaser. The
Purchaser shall provide or cause to be provided to the Parent for this purpose,
on a timely basis and without charge or other expense current lists of the
Shareholders.
3.10 TERMINATION OF VOTING RIGHTS. All of the rights of a Shareholder with
respect to the Shareholder Vote exercisable in respect of each Exchangeable
Non-Voting Share held by such Shareholder shall be deemed to be surrendered by
the Shareholder to the Parent and such Shareholder Votes and the Voting Rights
represented thereby shall cease immediately upon the exchange, retraction or
redemption of the Exchangeable Non-Voting Shares by or from the Shareholder.
3.11 ALTERNATIVE VOTING RIGHTS. In the event it is alleged or determined by
any chairman at a shareholders' meeting, the board of directors of the Parent, a
shareholder, or by any corporate or third party action or securities or judicial
authority having jurisdiction that the Shareholders are not properly entitled to
vote the Shareholder Votes or the Voting Rights, for whatever reason, then at
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the sole discretion and judgment of a Shareholder, such Shareholder may elect to
suspend such Shareholder's exercise of the Shareholder Votes or the Voting
Rights and direct the Trustee, as the holder of record of the Trust Shares, to
be entitled to all of the Voting Rights attributable to such Trust Shares. The
Trustee shall exercise the Voting Rights only on the basis of instructions
received pursuant to this section 3.11 from Shareholders entitled to instruct
the Trustee as to the voting thereof at the time at which the Parent Consent is
sought or the Parent Meeting is held. To the extent that no instructions are
received from a Shareholder with respect to the Voting Rights to which such
Shareholder is entitled, the Trustee shall not exercise or permit the exercise
of such Shareholder's Voting Rights.
Any Shareholder named in a List prepared in connection with any Parent Meeting
or any Parent Consent will be entitled (a) to instruct the Trustee with respect
to the exercise of the Shareholder Votes to which such Shareholder is entitled
or (b) to attend such meeting and personally to exercise thereat (or to exercise
with respect to any written consent), as the proxy of the Trustee, the
Shareholder Votes to which such Shareholder is entitled except, in each case, to
the extent that such Shareholder has transferred the ownership of any
Exchangeable Non-Voting Shares in respect of which such Shareholder is entitled
to Shareholder Votes after the close of business on the record date for such
meeting or seeking of consent.
In connection with each Parent Meeting and Parent Consent, the Trustee shall
exercise, either in person or by proxy, in accordance with the instructions
received from a Shareholder , the Shareholder Votes as to which such Shareholder
is entitled to direct the Voting Rights (or any lesser number thereof as may be
set forth in the instructions); provided, however, that such written
instructions are received by the Trustee from the Shareholder prior to the time
and date fixed by it for receipt of such instructions in the notice given by the
Trustee to the Shareholder.
The Trustee shall cause such representatives as are empowered by it to sign and
deliver, on behalf of the Trustee, proxies for Voting Rights to attend each
Parent Meeting. Upon submission by a Shareholder (or its designee) of
identification satisfactory to the Trustee's representatives, and at the
Shareholder's request, such representatives shall sign and deliver to such
Shareholder (or its designee) a proxy to exercise personally the Shareholder
Votes as to which such Shareholder is otherwise entitled hereunder to direct the
vote, if such Shareholder either (i) has not previously given the Trustee
instructions in respect of such meeting, or (ii) submits to the Trustee's
representatives written revocation of any such previous instructions. At such
meeting, the Shareholder exercising such Shareholder Votes shall have the same
rights as the Trustee to speak at the meeting in respect of any matter, question
or proposition, to vote by way of ballot at the meeting in respect of any
matter, question or proposition and to vote at such meeting by way of a show of
hands in respect of any matter, question or proposition.
ARTICLE 4
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
4.1 GRANT AND OWNERSHIP OF THE EXCHANGE RIGHT. The Parent hereby grants to
the Shareholders the right, upon the occurrence and during the continuance of an
Insolvency Event, to require the Parent to purchase from each or any Shareholder
all or any part of the Exchangeable Non-Voting Shares held by the Shareholder in
accordance with the provisions of this Agreement (the "Insolvency Exchange
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Right"). The Parent hereby acknowledges receipt from the Shareholders of good
and valuable consideration (and the adequacy thereof) for the issuance of the
Insolvency Exchange Right to them.
4.2 LEGENDED SHARE CERTIFICATES. The Purchaser will cause each certificate
representing Exchangeable Non-Voting Shares to bear an appropriate legend
notifying the Shareholders of:
(a) their right with respect to the exercise of the Insolvency Exchange Right
in respect of the Exchangeable Non-Voting Shares held by a Shareholder; and
(b) the Automatic Exchange Rights.
4.3 PURCHASE PRICE. The purchase price payable by the Parent for each
Exchangeable Non-Voting Share to be purchased by the Parent under the Insolvency
Exchange Right shall be an amount per share equal to (a) the Current Market
Price of a Parent Common Share on the last Business Day prior to the day of
closing of the purchase and sale of such Exchangeable Non-Voting Share under the
Insolvency Exchange Right plus (b) an additional amount equivalent to the full
amount of all dividends declared and unpaid on each such Exchangeable Non-Voting
Share and all dividends declared on Parent Common Shares which have not been
declared on such Exchangeable Non-Voting Shares in accordance with section 27.3
of the Exchangeable Share Provisions (provided that if the record date for any
such declared and unpaid dividends occurs on or after the day of closing of such
purchase and sale the purchase price shall not include such additional amount
equivalent to such declared and unpaid dividends). In connection with each
exercise of the Insolvency Exchange Right, the Parent will provide to the
Shareholders an Officer's Certificate setting forth the calculation of the
purchase price for each Exchangeable Non-Voting Share. The purchase price for
each such Exchangeable Non-Voting Share so purchased may be satisfied only by
delivering or causing to be delivered to the relevant Shareholder, one Parent
Common Share and a check for the balance, if any, of the purchase price without
interest.
4.4 EXERCISE INSTRUCTIONS. Subject to the terms and conditions set forth
herein, a Shareholder shall be entitled, upon the occurrence and during the
continuance of an Insolvency Event, to exercise the Insolvency Exchange Right
with respect to all or any part of the Exchangeable Non-Voting Shares registered
in the name of such Shareholder on the books of the Purchaser. To cause the
exercise of the Insolvency Exchange Right, the Shareholder shall deliver to the
Parent, in person or by certified or registered mail the certificates
representing the Exchangeable Non-Voting Shares which such Shareholder desires
the Parent to purchase, duly endorsed in blank, and accompanied by such other
documents and instruments as may be required to effect a transfer of
Exchangeable Non-Voting Shares under the Company Act (British Columbia), and the
articles of the Purchaser and such additional documents and instruments as the
Parent may reasonably require together with (a) a duly completed form of notice
of exercise of the Insolvency Exchange Right, contained on the reverse of or
attached to the Exchangeable Non-Voting Share certificates, stating (i) that the
Shareholder elects to exercise the Insolvency Exchange Right so as to require
the Parent to purchase from the Shareholder the number of Exchangeable
Non-Voting Shares specified therein, (ii) that such Shareholder has good title
to and owns all such Exchangeable Non-Voting Shares to be acquired by Parent
free and clear of all liens, claims and encumbrances, (iii) the name in which
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the certificates representing Parent Common Shares deliverable in connection
with the exercise of the Insolvency Exchange Right are to be issued and (iv) the
names and addresses of the persons to whom such new certificates should be
delivered, and (b) payment (or evidence satisfactory to the Purchaser and the
Parent of payment) of the taxes (if any) payable as contemplated by Section 4.7
of this Agreement. If only a part of the Exchangeable Non-Voting Shares
represented by any certificate or certificates delivered to the Trustee are to
be purchased by the Parent under the Insolvency Exchange Right, a new
certificate for the balance of such Exchangeable Non-Voting Shares shall be
issued to the Shareholder at the expense of the Purchaser.
4.5 DELIVERY OF PARENT COMMON SHARES; EFFECT OF EXERCISE. Promptly, and as
soon as reasonably practicable after receipt of the certificates representing
the Exchangeable Non-Voting Shares which the Shareholder desires the Parent to
purchase under the Insolvency Exchange Right, together with such documents and
instruments of transfer and a duly completed form of notice of exercise of the
Insolvency Exchange Right (and payment of taxes, if any, or evidence thereof),
duly endorsed for transfer to the Parent, the Parent shall immediately
thereafter upon receipt of such notice deliver or cause to be delivered to the
Shareholder of such Exchangeable Non-Voting Shares (or to such other persons, if
any, properly designated by such Shareholder), the certificates for the number
of Parent Common Shares deliverable in connection with the exercise of the
Insolvency Exchange Right, which shares shall be duly issued as fully paid and
non-assessable and shall be free and clear of any lien, claim or encumbrance,
and checks for the balance, if any, of the total purchase price therefor. The
Parent may instruct the Trustee to use the Trust Shares it holds for delivery to
the Shareholder under the previous sentence. The Parent shall, immediately upon
receipt of such certificates representing the Exchangeable Non-Voting Shares
from the Shareholder, deliver the certificates to the registered office of the
Purchaser for cancellation. Immediately upon the giving of notice by the
Shareholder to the Parent of the exercise of the Insolvency Exchange Right, as
provided in this Section 4.5, the closing of the transaction of purchase and
sale contemplated by the Insolvency Exchange Right shall be deemed to have
occurred, and the Shareholder of such Exchangeable Non-Voting Shares shall be
deemed to have transferred to the Parent its right, title and interest in and to
such Exchangeable Non-Voting Shares and shall cease to be a Shareholder of such
Exchangeable Non-Voting Shares and shall not be entitled to exercise any of the
rights of a Shareholder in respect thereof, other than the right to receive his
proportionate part of the total purchase price therefor, unless the requisite
number of Parent Common Shares (together with a check for the balance, if any,
of the total purchase price therefor) is not allotted, issued and delivered by
the Parent to such Shareholder (or to such other persons, if any, properly
designated by such Shareholder), within five (5) Business Days of the date of
the giving of such notice by the Shareholder, in which case the rights of the
Shareholder shall remain unaffected until such Parent Common Shares are so
allotted, issued and delivered by the Parent and any such check is so delivered
and paid. Concurrently with such Shareholder ceasing to be a Shareholder of
Exchangeable Non-Voting Shares, the Shareholder shall be considered and deemed
for all purposes to be the holder of Parent Common Shares delivered to it
pursuant to the Insolvency Exchange Right.
4.6 EXERCISE OF INSOLVENCY EXCHANGE RIGHT SUBSEQUENT TO RETRACTION. In the
event that a Shareholder has exercised its right under Article 27.6 of the
Exchangeable Share Provisions to require the Purchaser to redeem any or all of
the Exchangeable Non-Voting Shares held by the Shareholder (the "Retracted
Shares") and is notified by the Purchaser pursuant to section 27.6 (a) of the
Exchangeable Share Provisions that the Purchaser will not be permitted as a
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result of solvency requirements of applicable law to redeem all such Retracted
Shares, and the Shareholder has not revoked the retraction request delivered by
the Shareholder to the Purchaser pursuant to section 27.6 (a) of the
Exchangeable Share Provisions, the retraction request will constitute and will
be deemed to constitute notice from the Shareholder to the Parent to exercise
the Insolvency Exchange Right with respect to those Retracted Shares which the
Purchaser is unable to redeem. In any such event, the Purchaser hereby agrees
with the Shareholder immediately to notify the Parent of such prohibition
against the Purchaser redeeming all of the Retracted Shares and immediately to
forward or cause to be forwarded to the Parent all relevant materials delivered
by the Shareholder to the Purchaser of the Exchangeable Non-Voting Shares
(including without limitation a copy of the retraction request delivered
pursuant to section 27.6 (a) of the Exchangeable Share Provisions) in connection
with such proposed redemption of the Retracted Shares and the Parent will
thereupon exercise the Insolvency Exchange Right with respect to the Retracted
Shares that the Purchaser is not permitted to redeem and will purchase such
shares in accordance with the provisions of this Article 4.
4.7 STAMP OR OTHER TRANSFER TAXES. Upon any sale of Exchangeable Non-Voting
Shares to the Parent pursuant to the Insolvency Exchange Right or the Automatic
Exchange Rights, the share certificate or certificates representing Parent
Common Shares to be delivered in connection with the payment of the total
purchase price therefor shall be issued in the name of the Shareholder of the
Exchangeable Non-Voting Shares so sold without charge to the Shareholder of the
Exchangeable Non-Voting Shares so sold; provided, however that such Shareholder
(a) shall pay (and neither the Parent, the Purchaser nor the Trustee shall be
required to pay) any documentary, stamp, transfer, withholding or other taxes
that may be payable in respect of any transfer involved in the issuance or
delivery of such shares to a person other than such Shareholder, or (b) shall
have established to the satisfaction of the Trustee, the Parent and the
Purchaser that such taxes, if any, have been paid.
4.8 NOTICE OF INSOLVENCY EVENT. Immediately upon the occurrence of an
Insolvency Event or any event which with the giving of notice or the passage of
time or both would be an Insolvency Event, the Purchaser and the Parent shall
give written notice thereof to the Trustee and the Shareholders, which notice
shall contain a brief statement of the right of the Shareholders with respect to
the Insolvency Exchange Right.
4.9 QUALIFICATION OF PARENT COMMON SHARES. The Parent represents and
warrants that it has taken all actions and done all things as are necessary
under any United States or Canadian federal, provincial or state law or
regulation or pursuant to the rules and regulations of any regulatory authority
or the fulfilment of any other legal requirement (collectively, the "Applicable
Laws") as they exist on the date hereof and will in good faith expeditiously
take all such actions and do all such things as are necessary under Applicable
Laws as they may exist in the future to cause the Parent Common Shares to be
issued and delivered pursuant to the Exchangeable Share Provisions, the
Insolvency Exchange Right or the Automatic Exchange Rights; provided that all
Parent Common Shares will be subject to such resale restrictions as imposed by
applicable securities legislation.
4.10 RESERVATION OF PARENT COMMON SHARES. The Parent hereby represents,
warrants and covenants that it has irrevocably reserved for issuance and will at
all times keep available, free from preemptive and other rights, out of its
authorized and unissued capital stock such number of Parent Common Shares (a) as
Page 11
is equal to the sum of (i) the number of Exchangeable Non-Voting Shares issued
and outstanding from time to time and (ii) the number of Exchangeable Non-Voting
Shares issuable upon the exercise of all rights to acquire Exchangeable
Non-Voting Shares outstanding from time to time and (b) as are now and may
hereafter be required to enable and permit the Purchaser and the Parent to meet
their respective obligations hereunder, under the Support Agreement, under the
Exchangeable Share Provisions and under any other security or commitment
pursuant to which the Parent may now or hereafter be required to issue Parent
Common Shares. To the extent permitted under Article 5 hereof, the Trust Shares
may be used to satisfy the Parent's obligations under this Section 4.10.
4.11 AUTOMATIC EXCHANGE ON LIQUIDATION OF THE PARENT
(a) The Parent will give the Trustee and the Shareholders notice of each of the
following events (each a "Liquidation Event") at the time set forth below:
(i) in the event of any determination by the board of directors of
the Parent to institute voluntary liquidation, dissolution or
winding-up proceedings with respect to the Parent or to effect
any other distribution of assets of the Parent among its
shareholders for the purpose of winding up its affairs, at least
sixty (60) days prior to the proposed effective date of such
liquidation, dissolution, winding-up or other distribution; or
(ii) immediately, upon the earlier of (A) receipt by the Parent of
notice of or (B) the Parent otherwise becoming aware of any
threatened or instituted claim, suit, petition or other
proceedings with respect to the involuntary liquidation,
dissolution or winding-up of the Parent or to effect any other
distribution of assets of the Parent notifying its shareholders
for the purpose of winding up its affairs.
(b) Such notice shall include a brief description of the automatic exchange of
Exchangeable Non-Voting Shares for Parent Common Shares provided for in
Section 4.12(c) and the ability of a Shareholder not to participate in such
automatic exchange.
(c) In order that the Shareholders will be able to participate on a pro rata
basis with the holders of Parent Common Shares in the distribution of
assets of the Parent in connection with a Liquidation Event, on the fifth
Business Day prior to the effective date of a Liquidation Event (the
"Liquidation Event Effective Date") all of the then outstanding
Exchangeable Non-Voting Shares shall be automatically exchanged for Parent
Common Shares in the absence of an affirmative written election from a
Shareholder not to participate in the automatic exchange received by the
Parent before the fifth Business Day before the Liquidation Event Effective
Date. To effect such automatic exchange the Parent shall purchase each
Exchangeable Non-Voting Share outstanding on the fifth Business Day prior
to the Liquidation Event Effective Date and held by Shareholders, and each
Shareholder shall sell the Exchangeable Non-Voting Shares held by it at
such time, for a purchase price per share equal to (a) the Current Market
Price of one (1) Parent Common Share on the fifth Business Day prior to the
Liquidation Event Effective Date, which shall be satisfied in full by the
Parent delivering or causing to be delivered to the Shareholder one Parent
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Common Share, plus (b) an additional amount equivalent to the full amount
of all dividends declared and unpaid on each such Exchangeable Non-Voting
Share and all dividends declared on Parent Common Shares which have not
been declared on such Exchangeable Non-Voting Shares in accordance with
section 27.3 of the Exchangeable Share Provisions (provided that if the
-------- ---
record date for any such declared and unpaid dividends occurs on or after
the day of closing of such purchase and sale the purchase price shall not
include such additional amount equivalent to such declared and unpaid
dividends). In connection with such automatic exchange, the Parent will
provide to the Shareholders an Officer's Certificate setting forth the
calculation of the purchase price for each Exchangeable Non-Voting Share,
together with a notice of the anticipated Liquidation Event Effective Date.
(d) On the fifth Business Day prior to the Liquidation Event Effective Date,
the closing of the transaction of purchase and sale contemplated by the
automatic exchange of Exchangeable Non-Voting Shares for Parent Common
Shares shall be deemed to have occurred, and each Shareholder shall be
deemed to have transferred to the Parent all of the Shareholder's right,
title and interest in and to its Exchangeable Non-Voting Shares and shall
cease to be a Shareholder of such Exchangeable Non-Voting Shares and the
Parent shall deliver or cause to be delivered to the Shareholder Parent
Common Shares deliverable upon the automatic exchange of Exchangeable
Non-Voting Shares for Parent Common Shares and shall deliver to the
Shareholder a check for the balance, if any, of the total purchase price
for such Exchangeable Non-Voting Shares. Concurrently with such Shareholder
ceasing to be a Shareholder, the Shareholder shall be considered and deemed
for all purposes to be the holder of Parent Common Shares issued to it
pursuant to the automatic exchange of Exchangeable Non-Voting Shares for
Parent Common Shares and the certificates held by the Shareholder
previously representing the Exchangeable Non-Voting Shares exchanged by the
Shareholder with the Parent pursuant to such automatic exchange shall
thereafter be deemed to represent Parent Common Shares delivered to the
Shareholder by the Parent pursuant to such automatic exchange prior to the
surrender by the Shareholder of the Exchangeable Non-Voting Share
certificates. Upon the request of a Shareholder and the surrender by the
Shareholder of Exchangeable Non-Voting Share certificates deemed to
represent Parent Common Shares, duly endorsed in blank and accompanied by
such instruments of transfer as the Parent may reasonably require, the
Parent shall deliver or cause to be delivered to the Shareholder
certificates representing Parent Common Shares of which the Shareholder is
the holder.
4.12 WITHHOLDING RIGHTS. The Parent will retain tax counsel to advise the
Parent and the Trustee on all income tax and withholding obligations of the
Parent, the Trust and the Trustee. The Parent and the Trustee shall be entitled
to deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any Shareholder such amounts as the Parent or the Trustee is
required or permitted to deduct and withhold with respect to the making of such
payment under the United States Internal Revenue Code of 1986 as amended (the
"Code"), the Income Tar Act (Canada) or any provision of state, local,
provincial or foreign tax law. To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the Shareholder of the shares in respect of which such deduction
and withholding was made, provided that such withheld amounts are actually
Page 13
remitted to the appropriate taxing authority. To the extent that the amount so
required or permitted to be deducted or withheld from any payment to a
Shareholder exceeds the cash portion of the consideration otherwise payable to
the Shareholder, the Parent or the Trustee is hereby authorized to sell or
otherwise dispose of at fair market value such portion of the consideration as
is necessary to provide sufficient funds to the Parent or the Trustee, as the
case may be, in order to enable it to comply with such deduction or withholding
requirement and shall account to the relevant Shareholder for any balance of
such sale proceeds.
ARTICLE 5
DIVIDENDS
5.1 The holders of Exchangeable Non-Voting Shares will be entitled to
participate in all dividends declared by the Purchaser, in accordance with the
provisions of the Exchangeable Share Provisions and the Support Agreement.
5.2 The Trustee hereby expressly waives, for and on its own behalf and on
behalf of all Shareholders, all rights to receive dividends of every nature as
may be payable to it as holder of the Trust Shares, and the parties acknowledge
that the Parent need not include the Trust Shares in its calculations for
purposes of determining the payment of dividends, and need not pay or distribute
any dividends (either in cash, shares or otherwise) to the Trustee as holder of
the Trust Shares, provided however that such waiver may be rescinded by the
Trustee upon receipt of notice from a Shareholder that the Purchaser has omitted
to pay any dividends otherwise payable or that either the Parent or the
Purchaser contests the right of the holders of Exchangeable Non-Voting Shares to
receive dividends, or the right to receive dividends on the Exchangeable
Non-Voting Shares that are otherwise in doubt whereupon the Parent will pay and
the Trustee shall collect all dividends paid on the Trust Shares from time to
time until the Trustee receives an Officer's Certificate from the Purchaser
certifying that the Purchaser is in compliance with its obligations to pay
dividends in accordance with the Exchangeable Share Provisions. Any dividends
received by the Trustee on the Trust Shares shall be paid to the Shareholders in
the same manner as dividends would have been paid by the Purchaser to the
holders of Exchangeable Non-Voting Shares.
5.3 For clarity, the Voting Rights and exchange rights ranted by the Parent
to the Shareholders hereunder do not in any manner confer any additional rights
to the Shareholders, including, but subject to the provisions of the Support
Agreement, any rights to receive or participate in dividends declared or paid by
the Parent.
ARTICLE 6
SUPPORT PROVISIONS
6.1 Use of Trust Shares in Connection with Support Agreement. Pursuant to
section 2.1l of the Support Agreement, the Trust Shares provide additional
security for the Parent's and the Purchaser's obligations under the Purchase
Agreement, the Exchangeable Share Provisions and the Support Agreement. In the
event that the Purchaser and the Parent both default on their obligations to
acquire the Exchangeable Non-Voting Shares pursuant to the Exchangeable Share
Page 14
Provisions, the Support Agreement, or Article 4 of this Agreement, a Shareholder
may provide written notice to the Parent, the Purchaser and the Trustee of such
default. If such default is not cured within ten (10) Business Days, the
Shareholder may provide written notice to the Trustee of such failure to cure.
The Trustee shall then use the Trust Shares to satisfy the Parent's obligation
to acquire the Exchangeable Non-Voting Shares as if the Parent had instructed
the Trustee to use the Trust Shares for such purpose pursuant to section 4.5
hereof. The Exchangeable Non-Voting Shares acquired by the Trustee in such
transaction shall be distributed to the Parent. In the event that the Trustee
uses the Trust Shares to so acquire Exchangeable Non-Voting Shares, and if the
Parent is obligated to pay any declared but unpaid dividends (or dividends
declared on Parent Common Shares which have not been declared on such
Exchangeable Non-Voting Shares in accordance with section 27.3 of the
Exchangeable Share Provisions), the Parent shall remain obligated to pay such
amount to the Shareholder.
6.2 APPLICATION OF TRUST SHARES. At such time as either the Purchaser or
the Parent acquires Exchangeable Non-Voting Shares from a Shareholder, it shall
provide the Trustee with an Officer's Certificate specifying (i) the former
Shareholder, (ii) the number of Exchangeable Non-Voting Shares acquired, (iii)
the form of the acquisition, designated by the provision of the applicable
agreement (Exchangeable Share Provisions, Support Agreement or this Agreement)
and (iv) the date of such acquisition. If such certification is made, the
Trustee shall distribute to the Parent a number of Trust Shares equal to the
number of Exchangeable Non-Voting Shares so acquired by the Parent (or, if so
requested by the Parent, distributed such Parent Common Shares to the former
Shareholder on behalf of the Parent).
ARTICLE 7
CONCERNING THE TRUSTEE
7.1 POWERS AND DUTIES OF THE TRUSTEE. The rights, powers and authorities of
the Trustee under this Agreement, in its capacity as trustee of the Trust, shall
include:
(a) receiving and depositing the Trust Shares From the Parent as trustee for
and on behalf of the Shareholders in accordance with the provisions of this
Agreement;
(b) distributing materials to Shareholders as provided in this Agreement;
(c) holding title to the Trust Estate;
(d) investing any moneys forming, from time to time, a part of the Trust Estate
as provided in this Agreement; and
(e) taking such other actions and doing such other thins as are specifically
provided in this Agreement.
In the exercise of such rights, powers and authorities the Trustee shall have
(and is granted) such incidental and additional rights, powers and authority not
in conflict with any of the provisions of this Agreement as the Trustee, acting
in good faith and in the reasonable exercise of its discretion, may deem
necessary or appropriate to effect the purpose of the Trust. Any exercise of
such discretionary rights, powers and authorities by the Trustee shall be final,
Page 15
conclusive and binding upon all persons. Notwithstanding anything to the
contrary herein, the Trustee shall have no obligation to exercise any discretion
in the performance of its obligations hereunder and shall only be required to
act upon the express written instructions of the Parent, the Purchaser or the
Shareholders. For greater certainty, the Trustee shall have only those duties as
are set out specifically in this Agreement.
The Trustee in exercising its rights, powers, duties and authorities hereunder
shall act honestly and in good faith and in accordance with its fiduciary duties
to the Shareholders and shall exercise the care, diligence and skill that a
reasonably prudent trustee would exercise in comparable circumstances. The
Trustee shall not be required to take any notice of, or to do or to take any
act, action or proceeding as a result of any default or breach of any provision
hereunder, unless and until notified in writing of such default or breach, which
notice shall distinctly specify the default or breach desired to be brought to
the attention of the Trustee and, in the absence of such notice, the Trustee may
for all purposes of this Agreement conclusively assume that no default or breach
has been made in the observance or performance of any of the representations,
warranties, covenants, agreements or conditions contained herein.
7.2 NO CONFLICT OF INTEREST. The Trustee represents to the Purchaser and
the Parent that at the date of execution and delivery of this Agreement there
exists no material conflict of interest in the role of the Trustee as a
fiduciary hereunder and the role of the Trustee in any other capacity. The
Trustee shall, within ninety (90) days after it becomes aware that such a
material conflict of interest exists, either eliminate such material conflict of
interest or resign in the manner and with the effect specified in Article 9.
7.3 DEALINGS WITH THIRD PARTIES. The Purchaser and the Parent irrevocably
authorize the Trustee, from time to time, to:
(a) consult, communicate and otherwise deal with any respective registrars,
transfer agents, payment agents or any other person or entity appointed
from time to time by the Parent in connection with any matter relating to
the Exchangeable Non-Voting Shares and Parent Common Shares; and
(b) requisition, from time to time, (i) from any such registrar, transfer agent
payment agent or other person or entity, appointed from time to time by the
Parent, as applicable, any information readily available from the records
maintained by it which the Trustee may reasonably require for the discharge
of its duties and responsibilities under this Agreement; and (ii) from the
Purchaser, the holder of Parent Common Shares, and any subsequent holder or
agent of such shares, the share certificates issuable upon the exercise
from time to time of the Insolvency Exchange Right and pursuant to the
Automatic Exchange Rights in the manner specified in Article 4 hereof. The
Purchaser and the Parent irrevocably authorize their respective payment
agent, or any other authorized agent appointed from time to time by the
Parent to comply with all such requests.
7.4 BOOKS AND RECORDS. The Trustee shall keep available for inspection,
during normal business hours, by the Parent and the Purchaser, at the Trustee's
principal office in Pennsylvania, correct and complete books and records of
account relating to the Trustee's actions under this Agreement, including
Page 16
without limitation all information relating to mailings and instructions to and
from Shareholders.
7.5 INCOME TAX RETURNS AND REPORTS. The Trustee will allocate and
distribute all income and losses of the Trust to the Shareholders in each year
such that the Trust is not in a position to pay any tar or file any tax returns.
Shareholders will be individually and personally responsible for all income and
losses incurred by the Trust. In this regard, the Parent will retain tax counsel
on behalf of the Trust, and agrees to prepare and distribute to each Shareholder
all necessary tax forms for them to complete their United States and Canadian
tax returns. The Shareholders may obtain the advice and assistance of such
experts as they may consider necessary or advisable.
7.6 INDEMNIFICATION PRIOR TO CERTAIN ACTIONS BY TRUSTEE. The Trustee shall
exercise any or all of the rights, duties, powers or authorities vested in it by
this Agreement at the request, order or direction of any Shareholder upon such
Shareholder furnishing to the Trustee reasonable funding, security and indemnity
against the costs, expenses and liabilities which may be incurred by the Trustee
therein or thereby.
The Trustee shall not be required to expend any of its Own funds or other-,vise
incur any financial liability in the exercise of any of its rights, powers,
duties or authorities, but instead shall be entitled to be fully funded, given
security and indemnity in advance as aforesaid.
7.7 ACTIONS BY SHAREHOLDERS. Shareholders shall be entitled to take
proceedings in any court of competent jurisdiction to enforce any of their
rights hereunder as against the Purchaser and the Parent.
7.8 RELIANCE UPON DECLARATIONS. The Trustee shall not be considered to be
in contravention of any of its rights, powers, duties and authorities hereunder
if, when required, it acts and relies in good faith upon lists, mailing labels,
notices, statutory declarations, certificates, opinions, reports or other papers
or documents furnished pursuant to the provisions hereof or required by the
Trustee to be furnished to it in the exercise of its rights, powers, duties and
authorities hereunder.
7.9 EVIDENCE AND AUTHORITY TO THE TRUSTEE. The Purchaser and the Parent
shall furnish to the Trustee evidence of compliance with the conditions provided
for in this Agreement relating to any action or step required or permitted to be
taken by the Purchaser and/or the Parent for the Trustee under this Agreement or
as a result of any obligation imposed under this Agreement including, without
limitation, in respect of the Insolvency Exchange Right or the Automatic
Exchange Rights and the taking of any other action to be taken by the Trustee at
the request of or on the application of the Purchaser and the Parent forthwith
if and when:
(a) such evidence is required by any other section of this Agreement to be
furnished to the Trustee in accordance with the terms of this Section 7.9;
or
(b) the Trustee, in the exercise of its rights, powers, duties and authorities
under this Agreement, gives the Purchaser and/or the Parent written notice
requiring it to furnish such evidence in relation to any particular action
or obligation specified in such notice.
Page 17
Such evidence shall consist of an Officer's Certificate of the Purchaser and/or
the Parent, a statutory declaration or a certificate made by persons entitled to
sign an Officer's Certificate stating that any such condition has been complied
with in accordance with the terms of this Agreement.
Whenever such evidence relates to a matter other than the Voting Rights, the
Insolvency Exchange Right or the Automatic Exchange Rights and, except as
otherwise specifically provided herein, such evidence may consist of a report or
opinion of any solicitor, auditor, accountant, appraiser, valuer, engineer or
other expert or any other person whose qualifications give authority to a
statement made by him, provided that if such report or opinion is furnished by a
director, officer or employee of the Purchaser and/or the Parent shall be in the
form of an Officer's Certificate or a statutory declaration.
Each statutory declaration, certificate, opinion, report or other paper or
document furnished to the Trustee as evidence of compliance with a condition
provided for in this Agreement shall include a statement by the person giving
the evidence:
(a) declaring that he has read and understands the provisions of this
Agreement relating to the condition in question;
(b) describing the nature and scope of the examination or investigation
upon which he based the statutory declaration, certificate, statement
or opinion; and
(c) declaring that he has made such examination or investigation as he
believes is necessary to enable him to make the statements or give the
opinions contained or expressed therein.
7.10 EXPERTS, ADVISORS AND AGENTS. The Trustee may:
(a) in relation to these presents, act and rely on the opinion or advice of or
information obtained from any solicitor, auditor, accountant, appraiser,
valuer, engineer or other expert, whether retained by the Trustee or by the
Purchaser and/or the Parent or otherwise, and may employ such assistants as
may be necessary to the proper discharge of its powers and duties and
determination of its rights hereunder and may pay proper and reasonable
compensation for all such legal and other advice or assistance as aforesaid
without taxation for costs and fees; and
(b) employ such agents and other assistants as it may reasonably require for
the proper discharge of its powers and duties hereunder, and may pay
reasonable remuneration for all services performed for it, (and shall be
entitled to receive reasonable remuneration for all services performed by
it) in the discharge of the trusts hereof and compensation for all
disbursements, costs and expenses made or incurred by it in the discharge
of its duties hereunder and in the management of the Trust without taxation
for costs and fees, which compensation reimbursement may be requested to be
received in advance prior to undertaking any actions hereunder.
7.11 INVESTMENT OF MONEYS HELD BAY THE TRUSTEE. Unless otherwise provided
in this Agreement, any moneys held by or on behalf of the Trustee which tinder
the terms of this Agreement may or ought to be invested or which may be on
Page 18
deposit with the Trustee or which may be in tile hands of the Trustee may be
invested and reinvested in the name or under the control of the Trustee in
securities in which, under the laws of the State of Pennsylvania, trustees are
authorized to invest trust moneys, provided that such securities are stated to
mature within two (2) years after their purchase by the Trustee, and the Trusted
shall so invest such moneys on the written direction of the Purchaser. Pending
the investment of any moneys as hereinbefore provided, such moneys may be
deposited in the name of the Trustee in any bank, loan or trust company
authorized to accept deposits under the laws of the United States, Canada or any
state or province thereof, at the rate of interest then current on similar
deposits.
7.12 TRUSTEE NOT REQUIRED TO GIVE SECURITY. The Trustee shall not be
required to give any bond or security in respect of the execution of the trusts,
rights, duties, powers and authorities of this Agreement or otherwise in respect
of the premises.
7.13 TRUSTEE NOT BOUND TO ACT ON CORPORATION'S REQUEST. Except as in this
Agreement or otherwise specifically provided, the Trustee shall not be bound to
act in accordance with any direction or request of the Purchaser and/or the
Parent or the directors thereof until a duly authenticated copy of the
instrument or resolution containing such direction or request shall have been
delivered to the Trustee and the Trustee shall be empowered to act and rely upon
any such copy purporting to be authenticated and believed by the Trustee to be
genuine.
7.14 CONFLICTING CLAIMS. If conflicting claims or demands are made or asserted
with respect to any interest of any Shareholder in any Exchangeable Non-Voting
Shares, including any disagreement between the heirs, representatives,
successors or assigns succeeding to all or any part of the interest of any
Shareholder in any Exchangeable Non-Voting Shares resulting in conflicting
claims or demands being, made in connection with such interest, then the Trustee
shall be entitled, at its sole discretion, to refuse to recognize or to comply
with any such claim or demand. In so refusing, the Trustee may elect not to
exercise any Insolvency Exchange Right or Automatic Exchange Rights subject to
such conflicting claims or demands and in so doing, the Trustee shall not be or
become liable to any person on account of such election or its failure or
refusal to comply with any such conflicting claims or demands. The Trustee shall
be entitled to continue to refrain from acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to the Insolvency Exchange
Right or Automatic Exchange Rights subject to such conflicting claims or
demands have been adjudicated by a final judgment of a court of competent
jurisdiction; or
(b) all differences with respect to the Insolvency Exchange Right or Automatic
Exchange Rights subject to such conflicting claims or demands have been
conclusively settled by a valid written agreement binding on all such
adverse claimants, and the Trustee shall have been furnished with an
executed copy of such agreement. If the Trustee elects to recognize: any
claim or comply with any demand made by any such adverse claimant, it may
in its discretion require such claimant to furnish such surety bond or
other security satisfactory to the Trustee as it shall deem appropriate
fully to indemnify it as between all conflicting claims or demands.
Page 19
7.15 ACCEPTANCE OF TRUST. The Trustee hereby accepts the Trust created and
provided for by and in this Agreement and agrees to perform the same upon the
terms and conditions set forth herein and to hold all rights, privileges and
benefits conferred hereby and by law in trust for the various persons who shall
from time to time be Shareholders, subject to all the terms and conditions set
forth herein.
7.16 VALIDITY OF CERTIFICATES. If at any time in the performance of its duties
under this Agreement, it shall be necessary for the Trustee to receive, accept,
act or rely upon any certificate, notice, request, waiver, consent, receipt,
direction, affidavit or other paper, writing or document furnished to it and
purporting to have been executed or issued by the Purchaser, the Parent or the
Shareholders or their authorized officers or attorneys, the Trustee shall be
entitled to rely and act upon the genuineness and authenticity of any such
writing submitted to it. It shall not be necessary for the Trustee to ascertain
whether or not the persons who have executed, signed or otherwise issued,
authenticated or receipted such papers, writings or documents have authority to
do so or that they are the same persons named therein or otherwise to pass upon
any requirement of such papers, writing or documents that may be essential for
their validity or effectiveness or upon the truth and acceptability of any
information contained therein which the Trustee in good faith believes to be
genuine
ARTICLE 8
COMPENSATION
8.1 FEES AND EXPENSES OF THE TRUSTEE. The Parent, Purchaser and the
Shareholders jointly and severally agree to pay to the Trustee reasonable
compensation for all of the services rendered by it under this Agreement and
will reimburse the Trustee for all reasonable expenses and disbursements,
including, without limitation, legal fees and expenses and the reasonable
compensation and disbursements of all other advisors, agents and assistants not
regularly in its employ and the cost and expense of any suit or litigation of
any character and any proceedings before any governmental agency reasonably
incurred by the Trustee in connection with its rights and duties under this
Agreement; provided that the Parent and the Purchaser shall have no obligation
to reimburse the Trustee for any expenses or disbursements paid, incurred or
suffered by the Trustee in any suit or litigation in which the Trustee is
determined to have acted fraudulently or in bad faith or with gross negligence
or willful misconduct. The Trustee shall be obliged to provide only one account
or invoice to the Parent from time to time during this Agreement in connection
with any services rendered by it under this Agreement on behalf of any of the
parties.
ARTICLE 9
INDEMNIFICATION AND LIMITATION OF LIABILITY
9.1 INDEMNIFICATION OF THE TRUSTEE. The Parent, Purchaser and the
Shareholders jointly and severally agree to indemnify and hold harmless the
Trustee and each of its directors, officers, partners, employees and agents
appointed and acting in accordance with this Agreement (collectively, the
"Indemnified Parties") against all claims, losses, damages, costs, penalties,
fines and reasonable expenses (including reasonable expenses of the Trustee's
legal counsel) which, without fraud, gross negligence, willful misconduct or bad
Page 20
faith on the part of such Indemnified Party, may be paid, incurred or suffered
by the Indemnified Party by reason of or as a result of the Trustee's acceptance
or administration of the Trust, its compliance with its duties set forth in this
Agreement, or any written or oral instructions delivered to the Trustee by the
Parent or the Purchaser pursuant hereto. Subject to (ii), below, the Parent and
the Purchaser shall be entitled to participate at their own expense in the
defence and, if the Parent and the Purchaser so elect at any time after receipt
of such notice, either of them may assume the defence of any suit brought to
enforce any such claim. In the event the Parent and/or the Purchaser assume the
defence of the Trustee, no settlement of any claim shall be entered into without
the prior approval of the Trustee; and the Trustee shall have the right to
re-assume the defence of any suit if the Parent or Purchaser fail to actively
continue such defence so assumed. The Trustee shall have the right to employ
separate counsel in any such suit and participate in the defence thereof but the
fees and expenses of such counsel shall be at the expense of the Trustee unless:
(i) the employment of such counsel has been authorized by the Parent or the
Purchaser; or (ii) the named parties to any such suit include both the Trustee
and the Parent; or (iii) the Purchaser and the Trustee shall have been advised
by counsel acceptable to the Parent or the Purchaser that there may be. one or
more legal defences available to the Trustee which are different from or in
addition to those available to the Parent or the Purchaser (in which case the
Purchaser shall not have the right to assume the defence of such suit on behalf
of the Trustee but shall be liable to pay the reasonable fees and expenses of
counsel for the Trustee).
9.2 LIMITATION OF LIABILITY. The Trustee shall not be liable for any actor
omission by it except where such actor omission occurs as a result of the
Trustee's gross negligence or willful misconduct. The Trustee shall not be
liable for any losses or damages due to the acts or omissions of third parties,
including without limitation, the failure by the Parent and/or the Purchaser to
comply with its obligations under this Agreement, as the case may be. Under no
circumstances shall the Trustee be liable for any special, indirect or
consequential losses or damages (including without limitation loss of profits
and penalties) whether caused by the Trustee's negligence or that of its
employees, agents or otherwise. The Trustee shall not be held liable for any
loss which may occur by reason of depreciation of the value of any part of the
Trust Estate or any loss incurred on any investment of funds pursuant to this
Agreement except to the extent that such loss is attributable to the fraud,
gross negligence, willful misconduct or bad faith on the part of the Trustee.
ARTICLE 10
CHANGE OF TRUSTEE
10.1 RESIGNATION. The Trustee, or any trustee hereafter appointed, may at
any time resin by giving written notice of such resignation to the Parent and
the Purchaser specifying the date on which it desires to resign, provided that
such notice shall never be given less than thirty (30) days before such desired
resignation date unless the Parent and the Purchaser otherwise agree and
provided further that such resignation shall not take effect until the date of
the appointment of a successor trustee and the acceptance of such appointment by
the successor trustee. Upon receiving such notice of resignation, the Parent and
the Purchaser shall promptly appoint a successor trustee by written instrument
in duplicate, one copy of which shall be delivered to the resigning trustee and
one copy to the successor trustee.
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10.2 REMOVAL. The Trustee, or any trustee hereafter appointed at any time on
thirty (30) days' prior notice by written instrument executed by the Parent and
the Purchaser, in duplicate, one copy of which shall be delivered to the trustee
so removed and one copy to the successor trustee. Any successor trustee to be
appointed upon the removal of the Trustee shall be appointed in accordance with
the provisions as provided under Section 10.3 of this Agreement.
10.3 SUCCESSOR TRUSTEE. Any successor trustee appointed as provided under this
Agreement shall execute, acknowledge and deliver to the Parent and the Purchaser
and to its predecessor trustee an instrument accepting such appointment.
Thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor tinder this Agreement with like effect as if
originally named as trustee in this Agreement. However, on the written request
of the Parent and the Purchaser or of the successor trustee, the trustee ceasing
to act shall, upon payment of any amounts then due it pursuant to the provisions
of this Agreement, execute and deliver an instrument transferring to such
successor trustee all of the rights and powers of the trustee so ceasing to act.
Upon the request of any such successor trustee, the Parent and the Purchaser and
such predecessor trustee shall execute any and all instruments in writing for
more fully and certainly vesting in and confirming to such successor trustee all
such rights and powers.
10.4 NOTICE OF SUCCESSOR TRUSTEE. Upon acceptance of appointment by a successor
trustee as provided herein the Parent and the Purchaser shall cause to be mailed
notice of the succession of such trustee hereunder to each Shareholder at the
address of such Shareholder shown on the register of Shareholders of
Exchangeable Non-Voting Shares. If the Parent or the Purchaser shall fail to
cause such notice to be mailed within ten (10) days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Parent and the Purchaser.
ARTICLE 11
AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS
11.1 AMENDMENTS, MODIFICATIONS, ETC. This Agreement may not be amended or
modified except by an agreement in writing executed by the Purchaser, the
Trustee, the Parent and the Shareholders in accordance with section 27.10 of the
Exchangeable Share Provisions.
11.2 MEETING TO CONSIDER AMENDMENTS. The Purchaser, at the request of the Parent
shall call a meeting or meetings of the Shareholders for the purpose of
considering any proposed amendment or modification requiring approval pursuant
hereto. Any such meeting or meetings shall be called and held in accordance with
the by-laws of the Purchaser, the Exchangeable Share Provisions and all
applicable laws.
11.3 CHANGES IN CAPITAL OF PARENT OR THE PURCHASER. At all times after the
occurrence of any event effected pursuant to section 2.7 or 2.8 of the Support
Agreement, as a result of which either Parent Common Shares or the Exchangeable
Non-Voting Shares or both are in any way changed, this Agreement shall forthwith
be amended and modified as necessary in order that it shall apply with full
force and effect, mutatis mutandis, to all new securities into which Parent
Page 22
Common Shares or the Exchangeable Non-Voting Shares or both are so changed and
the parties hereto shall execute and deliver a supplemental Agreement giving
effect to and evidencing such necessary amendments and modifications.
11.4 EXECUTION OF SUPPLEMENTAL AGREEMENTS. No amendment to or modification or
waiver of any of the provisions of this Agreement otherwise than as permitted
hereunder shall be effective unless made in writing and signed by all of the
parties hereto. From time to time the parties may, subject to the provisions of
these presents, and they shall, when so directed by these presents, execute and
deliver by their proper officers, Agreements or other instruments supplemental
hereto, which thereafter shall form part hereof, for any one or more of the
following purposes:
(a) evidencing the succession of Parent Successors to the Parent and the
covenants of and obligations assumed by each such Parent Successor in
accordance with the provisions of Article 11 and the successor of any
successor trustee in accordance with the provisions of Article 10;
(b) making any additions to, deletions from or alterations of the provisions of
this Agreement or the Insolvency Exchange Right or the Automatic Exchange
Rights which, in the opinion of the Parent and its counsel, will not be
prejudicial to the interests of the Shareholders as a whole or are in the
opinion of counsel to the Parent necessary or advisable in order to
incorporate, reflect or comply with any legislation the provisions of which
apply to the parties or this Agreement; and
(c) for any other purposes not inconsistent with the provisions of this
Agreement, including without limitation to make or evidence any amendment
or modification to this Agreement as contemplated hereby, provided that, in
the opinion of the Parent and its counsel, the rights of the Trustee and
the Shareholders as a whole will not be prejudiced thereby.
ARTICLE 12
TERMINATION
12.1 TERM. The Trust created by this Agreement shall continue until the earliest
to occur of the following events:
(a) no outstanding Exchangeable Non-Voting Shares are held by any Shareholder;
(b) each of the Purchaser and the Parent acts in writing to terminate the Trust
and such termination is approved by the Shareholders of the Exchangeable
Non-Voting Shares in accordance with section 27.10 of the Exchangeable
Share Provisions; and
(c) December 31, 2098.
12.2 SURVIVAL OF AGREEMENT. Subject to the provisions of Section 111(b) hereof,
this Agreement shall survive any termination of the Trust and shall continue
until there are no Exchangeable Non-Voting Shares outstanding held by any
Shareholder; and for clarity, that tile provisions of Articles 8 and 9 shall
survive any such termination of the Trust or this Agreement.
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ARTICLE 13
GENERAL
13.1 SEVERABILITY. If any provision of this Agreement is held to be invalid,
illegal or unenforceable, the validity, legality or enforceability of the
remainder of this Agreement shall not in any way be affected or impaired thereby
and the agreement shall be carried out as nearly as possible in accordance with
its original terms and conditions.
13.2 INUREMENT. This Agreement shall be binding upon and endure to the benefit
of the parties hereto and their respective successors and permitted assigns and
to the benefit of the Shareholders.
13.3 NOTICES TO PARTIES. All notices and other communications between the
parties hereunder shall be in writing and shall be deemed to have been given if
delivered personally or by confirmed facsimile to the parties at the following
addresses (or at such other address for such xxxxx as shall be specified in like
notice):
If to the Purchaser
or Parent: 000-000 Xxxx Xxxxxx
Xxxxxx Xxxxxxxxx, XX
X0X 1 H2
If to the Trustee: 0 Xxxx Xxxxxxxxx Xxx.
Xxxxxxx, Xxxxxxxxxxxx 00000-0000
If to a Shareholder: 0000-000 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxx, X.X.
X0X 0XX
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of receipt thereof unless
such day is not a Business Day in which case it shall be deemed to have been
given and received upon the immediately following Business Day.
13.4 NOTICE OF SHAREHOLDERS. Any and all notices to be given and any documents
to be sent to any Shareholders may be given or sent to the address of such
Shareholder shown on the register of Shareholders in any manner permitted by the
by-laws of the Purchaser from time to time in force in respect of notices to
shareholders and shall be deemed to be received (if given or sent in such
manner) at the time specified in such by-laws, the provisions of which by-laws
shall apply mutatis mutandis to notices or documents as aforesaid sent to such
Shareholders.
13.5 RISK OF PAYMENTS BY MAIL. Whenever payments are to be made or documents are
to be sent to any Shareholder by the Trustee or by the Purchaser, or by such
Shareholder to the Trustee or to the Parent or the Purchaser, the making of such
payment or sending of such document sent through the mail shall be at the risk
of the Purchaser, in the case of payments made or documents sent by the Trustee
or the Purchaser, and the Shareholder, in the case of payments made or documents
sent by the Shareholder.
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13.6 COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute
one and the same instrument.
13.7 JURISDICTION. This Agreement shall be construed and enforced in accordance
with the laws of the State of Pennsylvania and the laws of the United States
applicable therein, except insofar as it relates to internal governance of the
Purchaser, which is to be construed and enforced in accordance with the laws of
the Province of British Columbia and the laws of Canada applicable therein.
13.8 ATTORNMENT. The Parent and the Purchaser each agree that any action or
proceeding arising out of or relating to this Agreement may be instituted in the
courts of the State of Delaware, each waives any objection which it may have now
or hereafter to the venue of any such action or proceeding, irrevocably submits
to the non-exclusive jurisdiction of the said courts in any such action or
proceeding, agrees to be bound by any judgment of the said courts and not to
seek, and hereby waives, any review of the merits of any such judgment by the
courts of any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
SINO-CITY, GAS, INC.
Per:
------------------------------
(Authorized Signatory)
592337 B.C. LTD.
Per:
------------------------------
(Authorized Signatory)
STOCKTRANS, INC.
Per:
------------------------------
(Authorized Signatory)
Page 25
SIGNED, SEALED AND DELIVERED
BY XXXXXXX XXXX in the presence of:
------------------------------
XXXXXXX XXXX
------------------------------
Signature of Witness
------------------------------
Name of Witness
------------------------------
Address of Witness
------------------------------
Address of Witness
------------------------------
SIGNED, SEALED AND DELIVERED
BY XXXXX XXXXX in the presence of:
------------------------------
XXXXX XXXXX
------------------------------
Signature of Witness
------------------------------
Name of Witness
------------------------------
Address of Witness
------------------------------
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SIGNED, SEALED AND DELIVERED
BY XXXXXX XXX-XXXXX XXX. in the presence of:
------------------------------
XXXXXX XXX-XXXXX XXX.
------------------------------
Signature of Witness
------------------------------
Name of Witness
------------------------------
Address of Witness
------------------------------
Page 27
APPENDIX "A"
NAMES OF SHAREHOLDERS .AND THEIR SHAREHOLDINGS IN THE PURCHASER
NAME NO. OF EXCHANGEABLE SHARES
Xxxxx Xxxxx 1,733,667
Xxxxxx Xxx-xxxxx XXX 767,333
Xxxxxxx Xxxx 2,600,000
TOTAL 5,101,000
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SCHEDULE "C"
CORPORATION'S FINANCIALS
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