EXHIBIT 10.2
VOTING AND EXCHANGE TRUST AGREEMENT
THIS VOTING AND EXCHANGE TRUST AGREEMENT (this "AGREEMENT"), dated
December 22, 2000, is entered into by and among IMAGE PROCESSING SYSTEMS INC., a
corporation existing under the laws of Ontario ("COMPANY"), PHOTON DYNAMICS,
INC., a California corporation ("PARENT"), PHOTON DYNAMICS NOVA SCOTIA COMPANY
("CANCO") and MONTREAL TRUST COMPANY OF CANADA, a trust company incorporated
under the laws of Canada ("TRUSTEE");
WHEREAS pursuant to an Acquisition Agreement for Plan of Arrangement
(the "ACQUISITION AGREEMENT") dated as of September 27, 2000, between Parent,
CanCo and Company, all of the existing common shares of Company will be
recapitalised and exchanged for Exchangeable Shares;
AND WHEREAS pursuant to the Acquisition Agreement, Parent, CanCo and
Company have agreed to execute an exchange agreement substantially in the form
of this Agreement;
AND WHEREAS the foregoing recitals are made as representations and
statements of fact by Parent, Company and CanCo and not by the Trustee;
NOW THEREFORE in consideration of the respective covenants and
agreements provided in this Agreement and for other valuable consideration (the
receipt and sufficiency of which are acknowledged), the parties agree as
follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Agreement, the following terms shall have the following
meanings:
"AFFILIATE" has the meaning ascribed thereto in the Exchangeable Share
Provisions;
"AUTOMATIC EXCHANGE RIGHTS" means the benefit of the obligation of
Parent to effect the automatic exchange of Parent Common Shares for
Exchangeable Shares pursuant to section 2.12;
"BENEFICIARIES" means the persons (other than Parent, CanCo, Company or
their respective Affiliates) who are the registered holders of
Exchangeable Shares from time to time (and at the time the definition
is being applied);
"BENEFICIARY VOTES" has the meaning ascribed thereto in section 4.5
hereof;
"BOARD OF DIRECTORS" means, with respect to Parent or Company, as the
case may be, the board of directors of Parent or Company, as the case
may be;
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
when banks are not open for business in any or all of Xxx Xxxx,
Xxxxxxxxxx xxx Xxxxxxx, Xxxxxxx;
"COVENANTS" means the covenant of Company contained in section 5.1
hereof and the covenants of Parent contained in sections 2.11, 2.12 and
5.2 hereof;
"CURRENT MARKET PRICE" has the meaning ascribed thereto in the
Exchangeable Share Provisions;
"EXCHANGE RIGHT" has the meaning ascribed thereto in section 2.1;
"EXCHANGEABLE SHARE PROVISIONS" means the rights, privileges,
restrictions and conditions attaching to the Exchangeable Shares as set
out in Appendix "A" to this Agreement;
"EXCHANGEABLE SHARES" means the non-voting exchangeable shares in the
capital of Company as currently constituted;
"INSOLVENCY EVENT" shall mean:
(1) the insolvency or bankruptcy of Company or the making by
Company of an assignment for the benefit of creditors or the
making by Company of a proposal pursuant to any bankruptcy or
debtor relief legislation for the benefit of its creditors or
the filing by Company of a notice of intention to file a
proposal or the making or authorization by Company of any
bankruptcy proceeding, petition or application to any tribunal
for the appointment of a receiver or trustee for its or for
any substantial part of its property or the failure by the
Company to contest in good faith any such proceeding in
respect of the Company within 30 days of the date thereof or
the admission in writing of the Company of its inability to
pay its debts generally as they become due or the Company not
being permitted, pursuant to the solvency requirements of
applicable law, to redeem any Retracted Shares; or
(2) the insolvency or bankruptcy of Parent or the making by Parent
of an assignment for the benefit of creditors or the making by
Parent of a proposal pursuant to any
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bankruptcy or debtor relief legislation for the benefit of its
creditors or the filing by Parent of a notice of intention to
file a proposal or the making of authorization by Parent of
any bankruptcy proceeding, petition or application to any
tribunal for the appointment of a receiver or trustee for its
or for any substantial part of its property or the failure by
Parent to contest in good faith any such proceeding in respect
of Parent within 30 days of the date thereof or the admission
in writing of Parent of its inability to pay its debts
generally as they become due;
"LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in the
Exchangeable Share Provisions;
"LIQUIDATION DATE" means the effective date of the liquidation,
dissolution or winding-up of the Company pursuant to Article 5 of the
Exchangeable Share Provisions;
"LIQUIDATION EVENT" has the meaning ascribed thereto in section
2.12(a);
"LIQUIDATION EVENT EFFECTIVE DATE" has the meaning ascribed thereto in
section 2.12(c);
"LIST" has the meaning ascribed thereto in section 4.9;
"NASDAQ" means the Nasdaq National Market;
"OFFICER'S CERTIFICATE" means, with respect to Parent or Company, as
the case may be, a certificate signed by any one of the Chairman of the
Board, a Vice-Chairman of the Board, the President, any Vice-President
or any other senior officer of Parent or Company, as the case may be;
"PARENT AFFILIATES" means Affiliates of Parent;
"PARENT COMMON SHARE" means a share of common stock, without par value,
in the capital of Parent as currently constituted;
"PARENT CONSENT" has the meaning ascribed thereto in section 4.5
hereof;
"PARENT MEETING" has the meaning ascribed thereto in section 4.5
hereof;
"PARENT SUCCESSOR" has the meaning ascribed thereto in section 10.1;
"PERSON" includes an individual, partnership, corporation, company,
unincorporated syndicate or organization, trust, trustee, executor,
administrator, other legal representative, and other entity, whether or
not having legal status;
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"REDEMPTION CALL RIGHT" has the meaning ascribed thereto in the
Exchangeable Share Provisions;
"RETRACTED SHARES" has the meaning ascribed thereto in section 2.7;
"RETRACTION CALL RIGHT" has the meaning ascribed thereto in the
Exchangeable Share Provisions;
"SUPPORT AGREEMENT" means that certain exchangeable share support
agreement made as of even date herewith between Company, CanCo and
Parent;
"TRUST" means the trust created by this Agreement;
"TRUST ESTATE" means the Voting Share, the Voting Rights, the Exchange
Right, the Automatic Exchange Rights, the Covenants and any other
securities and any money or other property which may be held by the
Trustee from time to time pursuant to this Agreement;
"TRUSTEE" means Montreal Trust Company of Canada and, subject to the
provisions of Article 8 hereof, includes any successor trustee;
"VOTING RIGHTS" means the voting rights attached to the Voting Share;
and
"VOTING SHARE" means the one share of Series A1 Special Voting
Preferred Stock of the Parent, issued by Parent to and deposited with
the Trustee, which entitles the holder of record to a number of votes
at meetings of holders of Parent Common Shares or upon any matters in
respect of which a Parent Consent is sought equal to that number of
votes that holders of the Exchangeable Shares outstanding from time to
time other than Exchangeable Shares held by Parent, its subsidiaries
and Affiliates would be entitled to if such Exchangeable Shares were
exchanged for Parent Common Shares.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.
The division of this Agreement into Articles, sections and other
portions and the insertion of headings are for convenience of reference only and
shall not affect the construction or interpretation of this Agreement. Unless
otherwise indicated, all references to an "Article" or "section" followed by a
number and/or a letter refer to the specified Article or section of this
Agreement. The terms "this Agreement", "hereof", "herein" and "hereunder" and
similar expressions refer to this Agreement and not to any particular Article,
section or other portion hereof and include any agreement or instrument
supplementary or ancillary hereto.
1.3 NUMBER, GENDER, ETC.
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Words importing the singular number only shall include the plural and
VICE VERSA. Words importing any gender shall include all genders.
1.4 DATE FOR ANY ACTION
If any date on which any action is required to be taken under this
Agreement is not a Business Day, such action shall be required to be taken on
the next succeeding Business Day.
ARTICLE 2
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
2.1 GRANT OF THE EXCHANGE RIGHTS
Parent hereby grants to the Trustee as trustee for and on behalf of,
and for the use and benefit of, the Beneficiaries (i) the right (the "EXCHANGE
RIGHT"), upon the occurrence and during the continuance of an Insolvency Event,
to require Parent to purchase from each or any Beneficiary all or any part of
the Exchangeable Shares held by the Beneficiary, and (ii) the Automatic Exchange
Rights, all in accordance with the provisions of this Agreement and the
Exchangeable Share Provisions, as the case may be. Parent hereby acknowledges
receipt from the Trustee as trustee for and on behalf of the Beneficiaries of
valuable consideration (and the adequacy thereof) for the grant of the Exchange
Right and the Automatic Exchange Rights by 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 Exchange
Right and the Automatic Exchange Rights and shall be entitled to exercise all of
the rights and powers of an owner with respect to the Exchange Right and the
Automatic Exchange Rights, provided that the Trustee shall:
(1) hold the Exchange Right and the Automatic Exchange Rights and
the legal title thereto as trustee solely for the use and
benefit of the Beneficiaries in accordance with the provisions
of this Agreement; and
(2) except as specifically authorized by this Agreement, have no
power or authority to exercise or otherwise deal in or with
the Exchange Right or the Automatic Exchange Rights, and the
Trustee shall not exercise any such rights for any purpose
other than the purposes for which this Trust is created
pursuant to this Agreement.
The Exchange Right and the Automatic Exchange Rights shall terminate on the
fifth anniversary of the date hereof, or such earlier date as there are no
holders of Exchangeable Shares other than Parent, CanCo, Company or their
respective Affiliates.
2.2 GENERAL EXERCISE OF EXCHANGE RIGHT
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The Exchange Right shall be and remain vested in and exercisable by the
Trustee. Subject to section 6.17, the Trustee shall exercise the Exchange Right
only:
(1) on the basis of instructions received pursuant to this Article
2 from Beneficiaries entitled to instruct the Trustee as to
the exercise thereof; and
(2) to the extent that no such instructions are received from a
Beneficiary with respect to the Exchange Right, the Trustee
shall not exercise or permit the exercise of the Exchange
Right.
2.3 LEGENDED SHARE CERTIFICATES
Company will cause each certificate representing Exchangeable Shares to
bear an appropriate legend notifying the Beneficiaries of:
(1) their right to instruct the Trustee with respect to the
exercise of the Exchange Right in respect of the Exchangeable
Shares held by a Beneficiary;
(2) the Automatic Exchange Rights, if applicable;
(3) their right to instruct the Trustee with respect to the
exercise of the Beneficiary Votes; and
(4) a legend to the effect that:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH
SECURITIES MAY NOT BE TRANSFERRED, SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED UNLESS (i) A REGISTRATION STATEMENT
UNDER THE ACT IS IN EFFECT WITH RESPECT TO THE SECURITIES OR
(ii) THERE IS AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER
THAT SUCH REGISTRATION IS NOT REQUIRED OR (iii) THERE IS AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH
TRANSFER MAY BE MADE PURSUANT TO RULE 144 OR RULE 144A OF THE
ACT."; and
(5) any other legend required by the Commissioner of Corporations
of the State of California or such as are required or as may
be reasonably necessary having regard to the provisions of any
state, provincial, local or foreign law governing such
securities.
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The Trustee shall have no duty under this Agreement to monitor or enforce
compliance by the Company with the aforesaid legending requirements.
2.4 PURCHASE PRICE
The purchase price payable by Parent for each Exchangeable Share to be
purchased by Parent under the Exchange Right shall be an amount per share equal
to:
(1) 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 Share under the Exchange Right,
which shall be satisfied in full by Parent causing to be sent
to such holder one Parent Common Share (subject to adjustment
in accordance with Section 11.1 of the Exchangeable Share
Provisions), plus
(2) to the extent not paid by Company, an additional amount
equivalent to:
(1) the full amount of all declared and unpaid dividends
on each such Exchangeable Share held by such holder
on any dividend record date which occurred prior to
the closing of the purchase and sale plus
(2) the full amount of all dividends declared on Parent
Common Shares which have not been declared on
Exchangeable Shares in accordance with Section 3.1 of
the Exchangeable Share Provisions (provided that if
the 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).
The purchase price for each such Exchangeable Share so purchased may be
satisfied only by Parent issuing and delivering or causing to be delivered to
the Trustee, on behalf of the relevant Beneficiary, one Parent Common Share
(subject to adjustment in accordance with Section 11.1 of the Exchangeable Share
Provisions) and on the applicable payment date a cheque for the balance, if any,
of the purchase price without interest (but less any amounts withheld pursuant
to section 2.13). Upon payment by Parent of such purchase price, the relevant
Beneficiary shall cease to have any right to be paid any amount in respect to
declared and unpaid dividends on each such Exchangeable Share by Company or
Parent.
2.5 EXERCISE INSTRUCTIONS
Subject to the terms and conditions herein set forth, a Beneficiary
shall be entitled, upon the occurrence and during the continuance of an
Insolvency Event, to exercise the Exchange Right with respect to all or any part
of the Exchangeable Shares registered in the name of such Beneficiary on
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the register of holders of Exchangeable Shares maintained by the registrar or
transfer agent of the Exchangeable Shares. To cause the exercise of the Exchange
Right by the Trustee, the Beneficiary shall deliver to the Trustee, in person or
by certified or registered mail, at its principal stock transfer office in the
City of Toronto, Ontario or at such other places in Canada as the Trustee may
from time to time designate by written notice to the Beneficiaries, the
certificates representing the Exchangeable Shares which such Beneficiary desires
Parent to purchase, duly endorsed in blank for transfer, and accompanied by such
other documents and instruments as may reasonably be requested by Parent or the
Trustee and as may otherwise be required to effect a transfer of Exchangeable
Shares under the BUSINESS CORPORATIONS ACT (Ontario) (or such other corporate
statute under which Company is subject) and the by-laws of Company together
with:
(1) a duly completed form of notice of exercise of the Exchange
Right contained on the reverse of or attached to the
Exchangeable Share certificates, stating
(1) that the Beneficiary thereby instructs the Trustee to
exercise the Exchange Right so as to require Parent
to purchase from the Beneficiary the number of
Exchangeable Shares specified therein,
(2) that such Beneficiary has good title to and owns all
such Exchangeable Shares to be acquired by Parent
free and clear of all liens, claims and encumbrances,
(3) the names in which the certificates representing
Parent Common Shares issuable in connection with the
exercise of the Exchange Right are to be issued and
the addresses of record (including postal codes) for
such holders; and
(4) the address to which the new certificates or cheques,
as the case may be, should be delivered if different
from the address specified in section 2.5(a)(iii)
above; and
(2) payment (or evidence satisfactory to Company and Parent of
payment) of the taxes (if any) payable as contemplated by
section 2.9 or 2.13 of this Agreement.
If only a part of the Exchangeable Shares represented by any
certificate or certificates delivered to Parent are to be purchased by Parent
under the Exchange Right, a new certificate for the balance of such Exchangeable
Shares shall be issued to the holder at the expense of Company.
2.6 DELIVERY OF PARENT COMMON SHARES AND CHEQUES; EFFECT OF EXERCISE
Promptly after receipt of the certificates representing the
Exchangeable Shares which the Beneficiary desires Parent to purchase under the
Exchange Right, together with such documents and instruments of transfer and a
duly completed form of notice of exercise of the Exchange Right (and payment of
taxes, if any, payable as contemplated by section 2.9 or 2.13 or evidence
thereof), duly
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endorsed for transfer to Parent, the Trustee shall notify Parent and Company of
its receipt of the same, which notice to Parent and Company shall constitute
exercise of the Exchange Right by the Trustee on behalf of the holder of such
Exchangeable Shares, and Parent shall immediately thereafter deliver or cause to
be delivered to the Trustee, for delivery to the Beneficiary of such
Exchangeable Shares (or to such other persons, if any, properly designated by
such Beneficiary), the number of Parent Common Shares issuable in connection
with the exercise of the Exchange Right, and on the applicable payment date
cheques for the balance, if any, of the total purchase price therefor without
interest (but less, in each case, any amounts withheld pursuant to section
2.13); provided, however, that no such delivery shall be made unless and until
the Beneficiary shall have paid (or provided evidence satisfactory to Company
and Parent of the payment of) the taxes (if any) payable as contemplated by
section 2.9 or 2.13 of this Agreement. Immediately upon the giving of notice by
the Trustee to Parent and Company of the exercise of the Exchange Right, as
provided in this section 2.6, the closing of the transaction of purchase and
sale contemplated by the Exchange Right shall be deemed to have occurred, and
the Beneficiary of such Exchangeable Shares shall be deemed to have transferred
to Parent all of its right, title and interest in and to such Exchangeable
Shares and in the related interest in the Trust Estate and shall cease to be a
holder of such Exchangeable Shares and shall not be entitled to exercise any of
the rights of a holder in respect thereof, other than the right to receive such
Beneficiary's proportionate part of the total purchase price therefor, unless
the requisite number of Parent Common Shares (together with a cheque for the
balance, if any, of the total purchase price therefor) is not allotted, issued
and delivered by Parent to the Trustee, for delivery to such Beneficiary (or to
such other persons, if any, properly designated by such Beneficiary), within
five Business Days of the date of the giving of such notice by the Trustee, in
which case the rights of the Beneficiary shall remain unaffected until such
Parent Common Shares are so allotted, issued and delivered by Parent and any
such cheque is so delivered and paid. Concurrently with such Beneficiary ceasing
to be a holder of Exchangeable Shares, the Beneficiary (or such other persons,
if any, properly designated by such Beneficiary) shall be considered and deemed
for all purposes to be the holder of the Parent Common Shares to be delivered to
it or them pursuant to the Exchange Right.
2.7 EXERCISE OF EXCHANGE RIGHT SUBSEQUENT TO RETRACTION
In the event that a Beneficiary has exercised its right under Article 6
of the Exchangeable Share Provisions to require Company to redeem any or all of
the Exchangeable Shares held by the Beneficiary (the "RETRACTED SHARES") and is
notified by Company pursuant to section 6.6 of the Exchangeable Share Provisions
that Company will not be permitted as a result of solvency requirements of
applicable law to redeem all such Retracted Shares, and provided that CanCo
shall not have exercised the Retraction Call Right with respect to the Retracted
Shares and that the Beneficiary has not revoked the retraction request delivered
by the Beneficiary to Company pursuant to section 6.7 of the Exchangeable Share
Provisions, the retraction request will constitute and will be deemed to
constitute notice from the Beneficiary to the Trustee instructing the Trustee to
exercise the Exchange Right with respect to those Retracted Shares which Company
states that it is unable to redeem. In any such event, Company hereby agrees
with the Trustee and in favour of the
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Beneficiary immediately to notify the Trustee of such prohibition against
Company redeeming all of the Retracted Shares (indicating specifically the
extent and impact of such prohibition) and immediately to forward or cause to be
forwarded to the Trustee all relevant materials delivered by the Beneficiary to
Company or to the transfer agent of the Exchangeable Shares (including without
limitation a copy of the retraction request delivered pursuant to section 6.1 of
the Exchangeable Share Provisions) in connection with such proposed redemption
of the Retracted Shares and the Trustee will thereupon exercise the Exchange
Right with respect to the Retracted Shares that Company has stated that it is
not permitted to redeem and will require the Parent to purchase such shares in
accordance with the provisions of this Article 2.
2.8 FRACTIONAL SHARES; OFFICER'S CERTIFICATE
In connection with any purchase or exchange of Exchangeable Shares
pursuant to this Agreement (including, without limitation, an automatic
exchange), (a) no certificates representing fractional Parent Common Shares
shall be delivered to holders of Exchangeable Shares, and (b) Parent shall
provide to the Trustee an Officer's Certificate setting forth the calculation of
the purchase price for each Exchangeable Share purchased or exchanged (or a
formula for determining the purchase price for each such Exchangeable Share
purchased or exchanged).
2.9 STAMP OR OTHER TRANSFER TAXES
Upon any sale of Exchangeable Shares to Parent pursuant to the Exchange
Right or the Automatic Exchange Rights, the share certificate or certificates
representing Parent Common Shares, and the cheque, if any, to be delivered in
connection with the payment of the total purchase price therefor shall be issued
in the name of the Beneficiary of the Exchangeable Shares so sold or in such
names as such Beneficiary may otherwise direct in writing without charge to the
holder of the Exchangeable Shares so sold; provided, however, that such
Beneficiary:
(1) shall pay (and neither Parent nor Company nor Trustee shall be
required to pay) any documentary, stamp, transfer or other
taxes that may be payable in respect of any transfer,
including those involved in the issuance or delivery of such
shares to a person other than such Beneficiary; and
(2) shall have evidenced to the satisfaction of Parent and Company
that such taxes, if any, have been paid.
2.10 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, Company and/or Parent, as the case may be, shall give written
notice thereof to the Trustee. As soon as practicable after receiving notice
from Company and/or Parent, as the case may be, or from any other person of the
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occurrence of an Insolvency Event (and after providing immediate notice to the
Company and Parent if the Trustee receives a notice of an Insolvency Event from
a third party), the Trustee will mail to each Beneficiary, at the expense of
Company and/or Parent, a notice of such Insolvency Event, which notice shall
contain a brief statement of the right of the Beneficiaries with respect to the
Exchange Right.
2.11 PARENT COMMON SHARES
Parent shall cause a Registration Statement on Form S-3 covering the
resale to the public of Parent Common Stock to be issued pursuant to the rights
associated with the Exchangeable Shares to remain effective for a period of five
years following the date hereof. Parent hereby represents, warrants and
covenants that it has irrevocably reserved for issuance such number of Parent
Common Shares as is equal to the number of Exchangeable Shares outstanding at
the date hereof and that it will at all times keep available free from
pre-emptive and other rights, out of its authorized and unissued capital stock,
such number of Parent Common Shares (or other shares or securities into which
Parent Common Shares may be reclassified or changed) as is necessary to enable
Parent and Company to perform their respective obligations pursuant to this
Agreement, the Exchangeable Share Provisions and the Support Agreement. Parent
hereby further represents, warrants and covenants that Parent Common Shares
issuable as described herein will be duly authorized and validly issued as fully
paid and non-assessable.
2.12 AUTOMATIC EXCHANGE ON LIQUIDATION OF PARENT
(1) Parent will give the Trustee notice of each of the following
events (each, a "LIQUIDATION EVENT") at the time set forth
below:
(1) in the event of any determination by the Board of
Directors of Parent to institute voluntary
liquidation, dissolution or winding-up proceedings
with respect to Parent or to effect any other
distribution of assets of Parent among its
shareholders for the purpose of winding-up its
affairs, at least 60 days prior to the proposed
effective date of such liquidation, dissolution,
winding-up or other distribution; and
(2) as soon as practicable following the earlier of
receipt by Parent of notice of, and 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 Parent or to effect any other
distribution of assets of Parent among its
shareholders for the purpose of winding up its
affairs, in each case where Parent has failed to
contest in good faith any such proceeding commenced
in respect of Parent within 30 days of becoming aware
thereof.
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Such notice shall include a brief description of the automatic
exchange of Exchangeable Shares for Parent Common Shares
provided for in section 2.12(c).
(2) Immediately following receipt by the Trustee from Parent of
notice of any Liquidation Event contemplated by section
2.12(a)(i) or 2.12(a)(ii) above, the Trustee will give notice
thereof to the Beneficiaries. Such notice shall include a
brief description of the automatic exchange of Exchangeable
Shares for Parent Common Shares provided for in section
2.12(c).
(3) In order that the Beneficiaries will be able to participate on
a PRO RATA basis with the holders of Parent Common Shares in
the distribution of assets of Parent in connection with a
Liquidation Event, on the fifth Business Day prior to the
effective date (the "LIQUIDATION EVENT EFFECTIVE DATE") of a
Liquidation Event all of the then outstanding Exchangeable
Shares held by Beneficiaries shall be automatically exchanged
for Parent Common Shares. To effect such automatic exchange,
Parent shall purchase, and shall be deemed to have purchased,
on the fifth Business Day prior to the Liquidation Event
Effective Date each Exchangeable Share then outstanding and
held by Beneficiaries, and each Beneficiary shall sell, and
shall be deemed to have sold, the Exchangeable Shares held by
it at such time, for a purchase price per share equal to the
aggregate of:
(1) the Current Market Price of a Parent Common Share on
the fifth Business Day prior to the Liquidation Event
Effective Date, which shall be satisfied in full by
Parent issuing to the Beneficiary one Parent Common
Share (subject to adjustment in accordance with
Section 11.1 of the Exchangeable Share Provisions),
plus
(2) to the extent not paid by Company, an additional
amount equivalent to the full amount of all declared
and unpaid dividends on each such Exchangeable Share
held by such holder on any dividend record date which
occurred prior to the date of the exchange, plus
(3) the full amount of all dividends declared on Parent
Common Shares which have not been declared on
Exchangeable Shares in accordance with Section 3.1 of
the Exchangeable Share Provisions (provided that if
the 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).
(4) On the fifth Business Day prior to the Liquidation Event
Effective Date, the closing of the transaction of purchase and
sale contemplated by the automatic exchange of Exchangeable
Shares for Parent Common Shares shall be deemed to have
occurred,
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and each Beneficiary shall be deemed to have transferred to
Parent all of such Beneficiary's right, title and interest in
and to such Beneficiary's Exchangeable Shares and in the
related interest in the Trust Estate and shall cease to be a
holder of such Exchangeable Shares and Parent shall issue to
the Beneficiary Parent Common Shares issuable upon the
automatic exchange of Exchangeable Shares for Parent Common
Shares and on the applicable payment date shall deliver to the
Beneficiary a cheque for the balance, if any, of the total
purchase price for such Exchangeable Shares without interest
but less any amounts withheld pursuant to section 2.13.
Concurrently with such Beneficiary ceasing to be a holder of
Exchangeable Shares, the Beneficiary shall be considered and
deemed for all purposes to be the holder of Parent Common
Shares issued pursuant to the automatic exchange of
Exchangeable Shares for Parent Common Shares and the
certificates held by the Beneficiary previously representing
the Exchangeable Shares exchanged by the Beneficiary with
Parent pursuant to such automatic exchange shall thereafter be
deemed to represent Parent Common Shares issued to the
Beneficiary by Parent pursuant to such automatic exchange.
Upon the request of a Beneficiary and the surrender by the
Beneficiary of Exchangeable Share certificates deemed to
represent Parent Common Shares, duly endorsed in blank and
accompanied by such instruments of transfer as Parent may
reasonably require, Parent shall deliver or cause to be
delivered to the Beneficiary certificates representing Parent
Common Shares of which the Beneficiary is the holder.
2.13 WITHHOLDING RIGHTS
Parent, Company and the Trustee shall be entitled to deduct and
withhold from any consideration otherwise payable under this Agreement to any
holder of Exchangeable Shares or Parent Common Shares such amounts as Parent,
Company or the Trustee are required to deduct and withhold with respect to such
payment under the INCOME TAX ACT (Canada), the UNITED STATES INTERNAL REVENUE
CODE OF 1986 or any provision of provincial, state, local or foreign tax law, in
each case as amended or succeeded. To the extent that amounts are so withheld,
such withheld amounts shall be treated for all purposes as having been paid to
the holder of the shares in respect of which such deduction and withholding was
made, provided that such withheld amounts are actually remitted to the
appropriate taxing authority. To the extent that the amount so required to be
deducted or withheld from any payment to a holder exceeds the cash portion of
the consideration otherwise payable to the holder, and the holder has not
provided Parent, Company or the Trustee, as the case may be, with such amount in
cash or certified funds, Parent, Company and the Trustee are hereby authorized
to sell or otherwise dispose of such portion of the consideration as is
necessary to provide sufficient funds to Parent, Company or the Trustee, as the
case may be, net of expenses, to enable it to comply with such deduction or
withholding requirement and Parent, Company or the Trustee shall notify the
holder thereof and remit to such holder any unapplied balance of the net
proceeds of such sale. Prior to making any distribution to holders of
Exchangeable Shares or Parent Common Shares, Parent, Company or the Trustee
(subject to Section 2.14 below), as the case may be, shall
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ensure that it retains sufficient funds to enable it to comply with any
applicable withholding taxes in connection with such consideration. Parent
represents and warrants that, based upon facts currently known to it, it has,
unless otherwise required by law, no current intention, as of the date of this
Agreement, to deduct or withhold from any dividend paid to holders of
Exchangeable Shares any amounts under the UNITED STATES INTERNAL REVENUE CODE OF
1986.
2.14 TRUSTEE'S WITHHOLDING PROCEDURES
Any other provision of this Agreement notwithstanding, the Trustee
shall not be responsible for determining and shall have no duty to determine or
verify whether any taxes are payable, or if any taxes are payable, what sum
should be deducted and remitted to any taxing authority in any jurisdiction, in
respect of any consideration otherwise payable under this Agreement to any
person (including Parent or any holder of Exchangeable Shares or Parent Common
Shares) at any time. The Trustee shall not be responsible for determining the
adequacy of or otherwise examining any evidence of the payment of any taxes
which any Beneficiary or other party may at any time submit to the Trustee. The
making of such determinations is the responsibility solely of Parent and Company
and the Trustee shall be entitled to rely and act upon any written instructions
which it may receive from either Parent or Company or their respective counsel
with regard to the withholding and remittance of tax and/or the retention of
sufficient funds by the Trustee to enable it to comply with any applicable
withholding taxes. If no written instructions to withhold have been received by
the Trustee from Parent or Company or their counsel by the date when the Trustee
is required to make or forward payment to a given party, the Trustee may proceed
to make or forward such payment to any Beneficiary (or its designee to become a
holder of Parent Common Shares) whose registered address is in Canada without
deduction or withholding or retention of funds on account of taxes on the
assumption that no deduction or withholding or retention of funds on account of
taxes is required; provided, however, the Trustee shall withhold from any
Beneficiary (or its designee) who does not have a registered address in Canada,
33 1/3%of the consideration otherwise payable to such Beneficiary (or designee)
pursuant to the terms of this Agreement. For purposes of this Section 2.14, the
"registered address" of a Beneficiary shall mean the address of such Beneficiary
on the List, except in the event of the exercise of the Exchange Right, in which
case the "registered address" of a Beneficiary (or its designee to become holder
of Parent Common Shares) shall be the address listed by such Beneficiary on the
"Notice of Exercise of Exchange Right Upon Insolvency Event" provided by such
Beneficiary to the Trustee, but shall be the Beneficiary's registered address if
no different address is listed on said Notice. The Trustee's notification to
Parent and Company at any time of receipt by the Trustee of evidence of payment
of taxes shall not be construed as any representation, statement or warranty by
the Trustee that such evidence is satisfactory. Prior to the making of any
distribution to holders or former holders of Exchangeable Shares, Parent or
Company, as the case may be, shall ensure that the Trustee has access to
sufficient funds (by directly providing, if necessary, such funds to the
Trustee) to enable the Trustee to comply with any applicable withholding taxes
in connection with such distribution. Any amounts withheld by the Trustee under
this Section 2.14 shall, in the absence of written instructions from Parent or
Company, be remitted by the Trustee to the Canada Customs and Revenue Agency.
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ARTICLE 3
INTENTIONALLY DELETED.
ARTICLE 4
ESTABLISHMENT OF TRUST, VOTING SHARE
AND EXERCISE OF VOTING RIGHTS
4.1 ESTABLISHMENT OF TRUST
The purpose of this Agreement is to create the Trust for the benefit of
the Beneficiaries, as herein provided. The Trustee will hold the Voting Share in
order to enable the Trustee to exercise the Voting Rights and will hold the
Exchange Right and the Automatic Exchange Rights and the other rights with
respect to matters relating to the Voting Share granted in or resulting from the
Trustee being a party to this Agreement in order to enable the Trustee to
exercise or enforce such rights, in each case as trustee for and on behalf of
the Beneficiaries as provided in this Agreement. The Trustee will hold the
Covenants and will hold the other rights with respect to matters relating to the
Covenants granted in or resulting from the Trustee being a party to this
Agreement in order to enable the Trustee to exercise or enforce such rights, in
each case as trustee for and on behalf of the Beneficiaries as provided in this
Agreement.
4.2 ISSUE AND OWNERSHIP OF THE VOTING SHARE
Parent hereby issues to and deposits with the Trustee the Voting Share
to be hereafter held of record by the Trustee as trustee for and on behalf of,
and for the use and benefit of, the Beneficiaries and in accordance with the
provisions of this Agreement. Parent hereby acknowledges receipt from the
Trustee as trustee for and on behalf of the Beneficiaries of good and valuable
consideration (and the sufficiency thereof) for the issuance of the Voting Share
by 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 Voting Share and shall be entitled to exercise all
of the rights and powers of an owner with respect to the Voting Share, provided
that the Trustee shall:
(1) hold the Voting Share and the legal title thereto as trustee
solely for the use and benefit of the Beneficiaries in
accordance with the provisions of this Agreement; and
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(2) except as specifically authorized by this Agreement, have no
power or authority to sell, transfer, vote or otherwise deal
in or with the Voting Share and the Voting Share 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.
4.3 SAFE KEEPING OF CERTIFICATE
The certificate representing the Voting Share shall at all times be
held in safekeeping by the Trustee.
4.4 VOTING RIGHTS
The Trustee, as the holder of record of the Voting Share, shall be
entitled to all of the Voting Rights, including the right to consent to or to
vote the Voting Share in person or by proxy, on any matter, question or
proposition whatsoever that may properly come before the shareholders of Parent
at a Parent Meeting or in connection with a Parent Consent (in each case, as
hereinafter defined). The Voting Rights shall be and remain vested in and
exercised by the Trustee. Subject to section 6.17 hereof, the Trustee shall
exercise the Voting Rights only:
(1) on the basis of instructions received pursuant to this Article
4 from Beneficiaries entitled to instruct the Trustee as to
the voting thereof at the time at which Parent Consent is
sought or Parent Meeting is held; and
(2) to the extent that no such instructions are received from a
Beneficiary with respect to the Voting Rights to which such
Beneficiary is entitled, the Trustee shall not exercise or
permit the exercise of such Voting Rights.
4.5 NUMBER OF VOTES
With respect to all meetings of shareholders of Parent at which holders
of Parent Common Shares are entitled to vote (a "PARENT MEETING") and with
respect to all written consents sought by Parent from its shareholders including
the holders of Parent Common Shares (a "PARENT CONSENT"), each Beneficiary shall
be entitled to instruct the Trustee to cast and exercise, in the manner
instructed, one of the votes comprised in the Voting Rights for each
Exchangeable Share owned of record by such Beneficiary on the record date
established by Parent or by applicable law for such Parent Meeting or Parent
Consent, as the case may be (the "BENEFICIARY 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.
4.6 MAILINGS TO BENEFICIARIES
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With respect to each Parent Meeting and Parent Consent, the Trustee
will mail or cause to be mailed (or otherwise communicate in the same manner as
Parent utilizes in communications to holders of Parent Common Shares, subject to
the Trustee being advised in writing of such method and its ability to provide
this method of communication) to each of the Beneficiaries named in the List (as
hereinafter defined) at the Beneficiary's address as set forth on the List on
the same day as the initial mailing or notice (or other communication) with
respect thereto is given by Parent to its shareholders:
(1) a copy of such notice, together with any related materials
including, without limitation, any information statement, to
be provided to shareholders of Parent (but excluding proxies
to vote Parent Common Shares);
(2) a clear and concise statement explaining the reason for the
mailed material being solely in relation to Parent and not in
relation to the Company, such statement to include a reference
to the economic equivalency between the Exchangeable Shares
and the Parent Common Shares;
(3) a statement that such Beneficiary is entitled, subject to the
provisions of section 4.10, to instruct the Trustee as to the
exercise of the Beneficiary Votes with respect to such Parent
Meeting or Parent Consent, as the case may be, or, pursuant
and subject to section 4.10, to attend such Parent Meeting and
to exercise personally the Beneficiary Votes thereat;
(4) a statement as to the manner in which such instructions may be
given to the Trustee, including an express indication that
instructions may be given to the Trustee to give:
(1) a proxy to such Beneficiary or his designee to
exercise personally such Beneficiary's Beneficiary
Votes; or
(2) a proxy to a designated agent or other representative
of the management of Parent to exercise such
Beneficiary's Beneficiary Votes;
(5) a statement that if no such instructions are received from the
Beneficiary, the Beneficiary Votes to which such Beneficiary
is entitled will not be exercised;
(6) a form of direction whereby the Beneficiary may so direct and
instruct the Trustee as contemplated herein; and
(7) a statement of the time and date by which such instructions
must be received by the Trustee 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 of the method for revoking or amending such
instructions.
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The materials referred to in this Section 4.6 are to be provided by
Parent to the Trustee. The Trustee shall have the right, but not the obligation
to review and comment on such materials. Parent shall ensure that the materials
to be provided to the Trustee are provided in sufficient time to permit the
Trustee to comment as aforesaid and to send all materials to each Beneficiary at
the same time such materials are first sent to holders of Parent Common Shares.
Parent agrees not to communicate with holders of Parent Common Shares otherwise
than by mail unless such method of communication is also reasonably available to
perform its obligations contemplated by this Section 4.6. For the purpose of
determining the Beneficiary Votes to which a Beneficiary is entitled in respect
of any such Parent Meeting or Parent Consent, the number of Exchangeable Shares
owned of record by the Beneficiary shall be determined at the close of business
on the record date established by Parent or by applicable law for purposes of
determining shareholders entitled to vote at such Parent Meeting or to give
written consent in connection with such Parent Consent. The Parent will notify
the Trustee in writing of any decision of the Board of Directors of Parent with
respect to the calling of any such Parent Meeting or the seeking of any such
Parent Consent and shall provide all necessary information and materials to the
Trustee in each case promptly and in any event in sufficient time to enable the
Trustee to perform its obligations contemplated by this section 4.6.
4.7 COPIES OF SHAREHOLDER INFORMATION
Parent will deliver to the Trustee copies of all proxy materials
(including notices of Parent Meetings but excluding proxies to vote Parent
Common Shares), information statements, reports (including without limitation
all interim and annual financial statements) and other written communications
that are to be distributed from time to time to holders of Parent Common Shares
in sufficient quantities and in sufficient time so as to enable the Trustee to
send or cause to be sent those materials to each Beneficiary at the same time as
such materials are first sent to holders of Parent Common Shares. The Trustee
will mail or otherwise send to each Beneficiary, at the expense of Parent,
copies of all such materials (and all materials specifically directed to the
Beneficiaries or to the Trustee for the benefit of the Beneficiaries by Parent)
received by the Trustee from Parent at the same time as such materials are first
sent to holders of Parent Common Shares. The Trustee will also make available
for inspection by any Beneficiary at the Trustee's principal corporate trust
office in the City of Toronto, Ontario all proxy materials, information
statements, reports and other written communications that are:
(1) received by the Trustee as the registered holder of the Voting
Share and made available by Parent to the holders of Parent
Common Shares; or
(2) specifically directed to the Beneficiaries or to the Trustee
for the benefit of the Beneficiaries by Parent.
4.8 OTHER MATERIALS
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Immediately after receipt by Parent or any shareholder of 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), Parent shall
use its best efforts to obtain and deliver to the Trustee copies thereof in
sufficient quantities so as to enable the Trustee to forward such material
(unless the same has been provided or sent directly to Beneficiaries by or on
behalf of such third party) to each Beneficiary as soon as possible thereafter.
As soon as practicable after receipt thereof, the Trustee will mail or otherwise
send, or cause to be mailed or otherwise sent, to each Beneficiary, at the
expense of Parent, copies of all such materials received by the Trustee from
Parent. The Trustee will also make available for inspection by any Beneficiary
at the Trustee's principal corporate trust office in the City of Toronto,
Ontario copies of all such materials.
4.9 LIST OF PERSONS ENTITLED TO VOTE
Company shall, (a) prior to each annual, general and special Parent
Meeting or the seeking of any Parent Consent and (b) forthwith upon each request
made at any time by the Trustee in writing, prepare or cause to be prepared a
list (a "LIST") of the names and addresses of the Beneficiaries arranged in
alphabetical order and showing the number of Exchangeable Shares held of record
by each such Beneficiary, 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 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 Trustee promptly after
receipt by Company 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 Trustee to perform its obligations under this Agreement. Parent
agrees to give Company 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 Company to perform its obligations under
this section 4.9.
4.10 ENTITLEMENT TO DIRECT VOTES
Any Beneficiary named in a List prepared in connection with any Parent
Meeting or any Parent Consent will be entitled (a) to instruct the Trustee in
the manner described in section 4.6 with respect to the exercise of the
Beneficiary Votes to which such Beneficiary 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 Beneficiary Votes to which
such Beneficiary is entitled pursuant to the procedures set forth in Section
4.11.
4.11 VOTING BY TRUSTEE, AND ATTENDANCE OF TRUSTEE REPRESENTATIVE, AT PARENT
MEETINGS
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(1) 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 Beneficiary
pursuant to section 4.6, the Beneficiary Votes as to which
such Beneficiary is entitled to direct the vote (or any lesser
number thereof as may be set forth in the instructions);
provided, however, that such written instructions are received
by the Trustee from the Beneficiary prior to the time and date
fixed by it for receipt of such instructions in the notice
given by the Trustee to the Beneficiary pursuant to section
4.6. Notwithstanding the foregoing, the Trustee will exercise
the Beneficiary Votes by proxy unless the Trustee, acting
reasonably and on the advice of counsel, determines that its
attendance at such meeting in person is necessary.
(2) Subject to the last sentence in subsection 4.11(a), 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 Beneficiary (or its designee) of identification
satisfactory to the Trustee's representatives, and at the
Beneficiary's request, such representatives shall sign and
deliver to such Beneficiary (or its designee) a proxy to
exercise personally the Beneficiary Votes as to which such
Beneficiary is otherwise entitled hereunder to direct the
vote, if such Beneficiary either (i) has not previously given
the Trustee instructions pursuant to section 4.6 in respect of
such meeting, or (ii) submits to the Trustee's representatives
written revocation of any such previous instructions. At such
meeting, the Beneficiary (or its designee) exercising such
Beneficiary 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.
4.12 DISTRIBUTION OF WRITTEN MATERIALS
Any written materials to be distributed by the Trustee to Beneficiaries
pursuant to this Agreement shall be delivered or sent by mail (or otherwise
communicated in the same manner as Parent utilizes in communications to holders
of Parent Common Shares, subject to the Trustee being advised in writing of such
method and its ability to provide this method of communication) to each
Beneficiary at its address as shown on the register of holders of Exchangeable
Shares maintained by the registrar and transfer agent of the Exchangeable
Shares. Company shall provide or cause to be provided to the Trustee for this
purpose, on a timely basis and without charge or other expense:
(1) a current List; and
(2) upon the request of the Trustee, mailing labels to enable the
Trustee to carry out its duties under this Agreement.
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4.13 TERMINATION OF VOTING RIGHTS
All of the rights of a Beneficiary with respect to the Beneficiary
Votes exercisable in respect of the Exchangeable Shares held by such
Beneficiary, including the right to instruct the Trustee as to the voting of or
to vote personally such Beneficiary Votes, shall be deemed to be surrendered by
the Beneficiary to Parent and such Beneficiary Votes and the Voting Rights
represented thereby shall cease immediately upon the delivery by such holder to
the Trustee of the certificates representing such Exchangeable Shares in
connection with the exercise by the Beneficiary of the Exchange Right or the
occurrence of the Automatic Exchange Rights, as specified in Article 2 hereof
(unless such exchange of Exchangeable Shares for Parent Common Shares occurs
after the close of business on the record date for a Parent Meeting or the
seeking of a Parent Consent but prior to such Parent Meeting or the effective
date of such Parent Consent), or upon the retraction or redemption of
Exchangeable Shares pursuant to Article 6 or Article 7 of the Exchangeable Share
Provisions, respectively, or upon the Liquidation Date, or upon the purchase of
Exchangeable Shares from the holder thereof by CanCo pursuant to the exercise by
CanCo of the Retraction Call Right, the Redemption Call Right or the Liquidation
Call Right (unless CanCo shall not have delivered the requisite Parent Common
Shares and cheque, if any, deliverable in exchange thereof to the Trustee for
delivery to the Beneficiaries and such redemption, retraction or purchase occurs
after the close of business on the record date for a Parent Meeting or the
seeking of a Parent Consent but prior to such Parent Meeting or the effective
date of such Parent Consent).
ARTICLE 5
COVENANTS
5.1 COMPANY COVENANT
Company covenants with the Trustee for and on behalf of the
Beneficiaries that it will well and truly perform and carry out all the acts or
things to be done by Company as provided in this Agreement and in the
Exchangeable Share Provisions.
5.2 PARENT COVENANT
Parent covenants with the Trustee for and on behalf of the
Beneficiaries that it will well and truly perform and carry out all the acts or
things to be done by Parent as provided in this Agreement.
5.3 TRUST
Company makes the covenant contained in section 5.1 hereof and Parent
makes the covenants contained in sections 2.11, 2.12 and 5.2 hereof, to and in
favour of the Trustee for the
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benefit of the Beneficiaries and acknowledges that the Trustee shall hold the
Covenants as trustee for and on behalf of the Beneficiaries and in accordance
with the provisions of this Agreement. Each of Company and Parent hereby
acknowledges receipt from the Trustee as trustee for and on behalf of such
Beneficiaries of good and valuable consideration (and the sufficiency thereof)
for the making of such covenants to the Trustee.
ARTICLE 6
CONCERNING THE TRUSTEE
6.1 POWERS AND DUTIES OF THE TRUSTEE
The rights, powers, duties and authorities of the Trustee under this
Agreement, in its capacity as trustee of the Trust, shall include:
(1) receipt and deposit of the Voting Share from Parent as trustee
for and on behalf of the Beneficiaries in accordance with the
provisions of this Agreement;
(2) granting proxies and distributing materials to Beneficiaries
as provided in this Agreement;
(3) voting the Beneficiary Votes in accordance with the provisions
of this Agreement;
(4) receiving the grant of the Exchange Right and the Automatic
Exchange Rights from Parent as trustee for and on behalf of
the Beneficiaries in accordance with the provisions of this
Agreement;
(5) receiving the Covenants from Parent and Company for and on
behalf of the Beneficiaries in accordance with the provisions
of this Agreement;
(6) exercising the Exchange Right and enforcing the benefit of the
Automatic Exchange Rights, in each case in accordance with the
provisions of this Agreement, and in connection therewith
receiving from Beneficiaries Exchangeable Shares and other
requisite documents and distributing to such Beneficiaries the
Parent Common Shares and cheques, if any, to which such
Beneficiaries are entitled upon the exercise of the Exchange
Right or pursuant to the Automatic Exchange Rights, as the
case may be;
(7) holding title to the Trust Estate;
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(8) investing any moneys forming, from time to time, a part of the
Trust Estate as provided in this Agreement;
(9) taking action on its own initiative or at the direction of a
Beneficiary or Beneficiaries to enforce the obligations of
Parent and/or Company under this Agreement; and
(10) taking such other actions and doing such other things as are
specifically provided in this Agreement.
In the exercise of such rights, powers and authorities and the
fulfilment of its duties, 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, appropriate or
desirable to effect the purpose of the Trust. Any exercise of such discretionary
rights, powers and authorities by the Trustee shall be final, conclusive and
binding upon all persons affected thereunder, including the parties hereto and
the Beneficiaries. For greater certainty, and anything else herein
notwithstanding, 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 with a view to the best interests
of the Beneficiaries and shall exercise the care, diligence and skill that a
reasonably prudent trustee would exercise in comparable circumstances.
6.2 NO CONFLICT OF INTEREST
The Trustee represents to Company and Parent that at the date of
execution and delivery of this Agreement there exists no 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 90 days after it becomes aware
that such a conflict of interest exists (and if such conflict of interest is
material and would reasonably be expected to interfere with its duties and
obligations hereunder), either eliminate such conflict of interest or resign in
the manner and with the effect specified in Article 9. If, notwithstanding the
foregoing provisions of this section 6.2, the Trustee has such a conflict of
interest, the validity and enforceability of this Agreement shall not be
affected in any manner whatsoever by reason only of the existence of such
conflict of interest. If the Trustee contravenes the foregoing provisions of
this section 6.2, any party hereto or Beneficiary may apply to Ontario's
Superior Court of Justice (Ontario)(Commercial List) for an order that the
Trustee be replaced as trustee hereunder.
6.3 DEALINGS WITH TRANSFER AGENTS, REGISTRARS, ETC.
Company and Parent irrevocably authorize the Trustee, from time to
time, to:
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(1) consult, communicate and otherwise deal with the respective
registrars and transfer agents, and with any such subsequent
registrar or transfer agent, of the Exchangeable Shares and
Parent Common Shares; and
(2) requisition, from time to time, (i) from any such registrar or
transfer agent 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 transfer agent of
Parent Common Shares, and any subsequent transfer agent of
such shares, the share certificates issuable upon the exercise
from time to time of the Exchange Rights and pursuant to the
Automatic Exchange Rights.
Company and Parent irrevocably authorize their respective registrars
and transfer agents to comply with all such requests. Parent covenants that it
will supply its transfer agent with duly executed share certificates for the
purpose of completing the exercise from time to time of the Exchange Right and
the Automatic Exchange Rights.
6.4 BOOKS AND RECORDS
The Trustee shall keep available for inspection by Parent and Company,
at the Trustee's principal corporate trust office in the City of Toronto,
Ontario correct and complete books and records of account relating to the
Trustee's actions under this Agreement, including without limitation all
information relating to mailings and instructions to and from Beneficiaries and
all transactions pursuant to the Exchange Right and Automatic Exchange Rights,
for the term of this Agreement. On or before January 15, 2002 and on or before
January 15 in every year thereafter, so long as the Voting Share is on deposit
with the Trustee, the Trustee shall transmit to Parent and Company a brief
report, dated as of the preceding December 31, with respect to:
(10 the property and funds comprising the Trust Estate as of that
date;
(20 the number of exercises of the Exchange Right, if any, and the
aggregate number of Exchangeable Shares received by the
Trustee on behalf of Beneficiaries in consideration of
delivery by Parent of Parent Common Shares and any other
consideration in connection with the Exchange Right, during
the calendar year ended on such date; and
(30 all other actions taken by the Trustee in the performance of
its duties under this Agreement which it had not previously
reported.
6.5 INCOME TAX RETURNS AND REPORTS
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The Trustee shall, if so requested or directed by Company or Parent,
prepare and file on behalf of the Trust appropriate United States and Canadian
income tax returns and any other returns or reports as may be required by
applicable law or pursuant to the rules and regulations of any securities
exchange or other trading system, if any, through which Parent Common Shares or
Exchangeable Shares are traded and, in connection therewith and without limiting
the generality of section 6.10 hereof, may obtain the advice and assistance of
such experts as the Trustee may consider necessary or advisable. If requested by
the Trustee, Parent and Company shall retain qualified experts or advisors for
the purpose of providing such advice or assistance. Except to the extent the
Trustee may be advised otherwise in writing (with specifics) by Parent or
Company or their respective counsel, the Trustee shall be entitled to assume
that no United States or Canadian income tax returns or any other returns or
reports are required by applicable law or pursuant to the rules or regulations
of any securities exchange or other trading system, if any, through which Parent
Common Shares or the Exchangeable Shares are traded.
6.6 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 Beneficiary upon such Beneficiary 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, provided that no
Beneficiary shall be obligated to furnish to the Trustee any such funding,
security or indemnity in connection with the exercise by the Trustee of any of
its rights, duties, powers and authorities with respect to the Voting Share
pursuant to Article 4 hereof, subject to section 6.17 hereof and, with respect
to the Exchange Right pursuant to Article 2 subject to Section 6.17 hereof, and
with respect to the Automatic Exchange Rights pursuant to Article 2.
None of the provisions contained in this Agreement shall require the
Trustee to expend or risk its own funds or otherwise incur financial liability
in the exercise of any of its rights, powers, duties or authorities.
6.7 ACTIONS BY BENEFICIARIES
No Beneficiary shall have the right to institute any action, suit or
proceeding or to exercise any other remedy authorized by this Agreement for the
purpose of enforcing any of its rights or for the execution of any trust or
power hereunder unless the Beneficiary has requested the Trustee to take or
institute such action, suit or proceeding and furnished the Trustee with the
funding, security and indemnity referred to in section 6.6 and the Trustee shall
have failed to act within a reasonable time thereafter. In such case, but not
otherwise, the Beneficiary shall be entitled to take proceedings in any court of
competent jurisdiction such as the Trustee might have taken; it being understood
and intended that no one or more Beneficiaries shall have any right in any
manner whatsoever to affect, disturb or prejudice the rights hereby created by
any such action, or to enforce any right hereunder or under the Voting Rights,
the Exchange Rights or the Automatic Exchange Rights, except subject
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to the conditions and in the manner herein provided, and that all powers and
trusts hereunder shall be exercised and all proceedings at law shall be
instituted, had and maintained by the Trustee, except only as herein provided,
and in any event for the equal benefit of all Beneficiaries.
6.8 RELIANCE BY TRUSTEE
The Trustee shall not be considered to be in contravention of any of
its rights, powers, duties and authorities hereunder if it acts and relies in
good faith upon lists (including, without limitation, any List), mailing labels,
notices, statutory declarations, certificates (including, without limitation,
share certificates and Officer's 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 if such lists, mailing labels, notices, statutory
declarations, certificates, opinions, reports or other papers or documents
comply, or prima facie appear to comply, with the provisions of section 6.9
hereof, if applicable, and with any other applicable provisions of this
Agreement. Any other provision of this Agreement notwithstanding, the Trustee
shall have no obligation under this Agreement to ensure or verify compliance
with any applicable laws or regulatory requirements or by-laws of Company or
Parent on the issue or transfer of any Exchangeable Shares or Parent Common
Shares, as applicable, occurring in connection with any actual or deemed
transfer of Exchangeable Shares to Parent upon any exercise of an Exchange Right
or Automatic Exchange Rights. The Trustee shall be entitled to process (or
forward for processing, if the Trustee is not for the time being the registrar
or transfer agent for the Exchangeable Shares) all transfers of Exchangeable
Shares related to the exercise of Exchange Rights or Automatic Exchange Rights
upon the presumption that such transfers are permissible pursuant to all
applicable laws and regulatory and securities exchange requirements and the
by-laws of the Company and Parent and the terms of this Agreement and the
Exchangeable Share Provisions. The Trustee may assume for all purposes of this
Agreement that the address of any Beneficiary as shown on the register of
holders of Exchangeable Shares maintained by the registrar or transfer agent of
the Exchangeable Shares is the Beneficiary s actual address for the time being
and that the address of any person to whom Parent Common Shares issuable upon
the exercise of Exchange Rights or Automatic Exchange Rights are to be
registered, as shown on the transfer document, is the person's actual address
and is determinative of that person's residency. And, without limitation, the
Trustee shall be further entitled to treat every List provided to it pursuant to
this Agreement as complete and accurate in all particulars and as recording the
names and addresses of all Beneficiaries as they appear for the time being on
the register of holders of Exchangeable Shares maintained by the registrar or
transfer agent of the Exchangeable Shares without verifying same with such
registrar or transfer agent. Any other provision of this Agreement
notwithstanding, the Trustee shall not be responsible for verifying or
determining at any time (a) whether an Insolvency Event or any event which, with
the giving of notice or the passage of time or both would be an Insolvency
Event, has in fact occurred; (b) whether the solvency requirements of any
applicable law will or will not permit the Company to redeem all Retracted
Shares or, if less than all, how many, (and shall be entitled to rely on any
notification given by the Company in this regard); (c) whether applicable law
establishes a record date for any Parent Meeting or Parent Consent, or, if
applicable law does establish any such record date, what the date so established
is and the Trustee shall be entitled to accept as valid and
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lawful for all purposes any record date established or stated by Parent for any
Parent Meeting or Parent Consent.
6.9 EVIDENCE AND AUTHORITY TO TRUSTEE
Company and/or 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 Company and/or Parent or the
Trustee under this Agreement or as a result of any obligation imposed under this
Agreement, including, without limitation, in respect of the Voting Rights, the
Exchange Rights 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
Company and/or Parent forthwith if and when:
(10 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 6.9; or
(20 the Trustee, in the exercise of its rights, powers, duties and
authorities under this Agreement, gives Company and/or Parent
written notice requiring it to furnish such evidence in
relation to any particular action or obligation or matter
specified in such notice.
Such evidence shall consist of an Officer's Certificate of Company
and/or Parent or 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 Exchange Rights 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 Company and/or Parent it shall be in the form
of an Officer's Certificate or a statutory declaration.
Each statutory declaration, certificate, opinion or report 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:
(10 declaring that he has read and understands the provisions of
this Agreement relating to the condition in question;
(20 describing the nature and scope of the examination or
investigation upon which he based the statutory declaration,
certificate, statement or opinion; and
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(30 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.
6.10 EXPERTS, ADVISERS AND AGENTS
The Trustee may:
(10 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 Company and/or Parent or
otherwise, and may employ such assistants as, in its
reasonable opinion, may be necessary to the proper discharge
of its powers and duties and determination of its rights or
duties hereunder and may pay proper and reasonable
compensation for all such legal and other advice or assistance
as aforesaid; and
(20 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 or
in connection with the discharge of its duties hereunder and
in the management of the Trust.
6.11 INVESTMENT OF MONEYS HELD BY TRUSTEE
Unless otherwise provided in this Agreement, any moneys held by or on
behalf of the Trustee which under the terms of this Agreement may or ought to be
invested or which may be on deposit with the Trustee or which may be in the
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 Province of
Ontario, trustees are authorized to invest trust moneys, provided that such
securities are stated to mature within ninety (90) days after their purchase by
the Trustee, and the Trustee shall so invest such moneys only on the written
direction of Company. Pending the investment of any moneys as hereinbefore
provided, such moneys may be deposited in the name of the Trustee at a chartered
bank in Canada or, with the consent of the Company, in the deposit department of
the Trustee or any other loan or trust corporation authorized to accept deposits
under the laws of Canada or any province thereof at the rate of interest then
current on similar deposits.
6.12 TRUSTEE NOT REQUIRED TO GIVE SECURITY
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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 its obligations hereunder.
6.13 TRUSTEE NOT BOUND TO ACT ON COMPANY'S REQUEST
Except as in this Agreement otherwise specifically provided, the
Trustee shall not be bound to act in accordance with any direction or request of
Company and/or Parent or of their respective Boards of Directors 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.
6.14 NOTICE TO TRUSTEE
The Trustee shall not be bound to give any notice or do or take any
act, action or proceeding by virtue of the powers, rights or authorities
conferred on it hereby unless and until it shall have been required to do so
under the terms of this Agreement; nor shall the Trustee be required to take
notice of, or be deemed to have actual or constructive notice or knowledge of,
any matter under this Agreement (including, without limitation, any notice of
any Parent Meeting or the seeking of any Parent Consent or of any prohibition
against Company redeeming any Retracted Shares or of any Insolvency Event or any
Liquidation Event (collectively, a "NOTICE EVENT")) OR BE REQUIRED TO TAKE ANY
ACTION IN CONNECTION WITH ANY NOTICE EVENT, UNLESS AND UNTIL NOTIFIED in writing
of such Notice Event in accordance with terms of this Agreement, which notice
shall distinctly specify the Notice Event desired to be brought to the attention
of the Trustee and in the absence of any such notice the Trustee may for all
purposes of this Agreement conclusively assume that no such Notice Event has
occurred. Notwithstanding any other provision of this Agreement, nothing in this
Agreement shall deem the Trustee to have knowledge of the laws or regulations of
a jurisdiction other than the Province of Ontario, Canada, and the those of
Canada applicable therein.
6.15 INCUMBENCY CERTIFICATES
Each of Company, Parent and CanCo shall file with the Trustee a
certificate of incumbency setting forth the names and titles of the individuals
authorized to give instructions, directions or other instruments (including,
without limitation, Officer's Certificates) to the Trustee ("AUTHORIZED
PERSONS"), together with specimen signatures of such persons, and the Trustee
shall be entitled to rely on the latest certificate of incumbency filed with it
unless it receives notice, in accordance with this Agreement of a change in
Authorized Persons with updated specimen signatures.
6.16 AUTHORITY TO CARRY ON BUSINESS
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The Trustee represents to Company and Parent that at the date of
execution and delivery by it of this Agreement it is authorized to carry on the
business of a trust company in the Province of Ontario but if, notwithstanding
the provisions of this section 6.16, it ceases to be so authorized to carry on
business, the validity and enforceability of this Agreement and the Voting
Rights, the Exchange Rights and the Automatic Exchange Rights shall not be
affected in any manner whatsoever by reason only of such event but the Trustee
shall, within 90 days after ceasing to be authorized to carry on the business of
a trust company in the Province of Ontario, either become so authorized or
resign in the manner and with the effect specified in Article 9.
6.17 CONFLICTING CLAIMS
If conflicting claims or demands are made or asserted with respect to
any interest of any Beneficiary in any Exchangeable Shares, including any
disagreement between the heirs, representatives, successors or assigns
succeeding to all or any part of the interest of any Beneficiary in any
Exchangeable 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 Voting Rights,
Exchange Rights 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:
(10 the rights of all adverse claimants with respect to the Voting
Rights, Exchange Rights or Automatic Exchange Rights subject
to such conflicting claims or demands have been adjudicated by
a final judgment of a court of competent jurisdiction; or
(20 all differences with respect to the Voting Rights, Exchange
Rights or Automatic Exchange Rights subject to such
conflicting claims or demands have been conclusively settled
by a valid written agreement binding on such adverse
claimants, and the Trustee shall have been furnished with an
executed copy of such agreement certified to be in full force
and effect.
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.
6.18 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
herein set forth and to hold all rights,
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privileges and benefits conferred hereby and by law in trust for the various
persons who shall from time to time be Beneficiaries, subject to all the terms
and conditions herein set forth.
ARTICLE 7
COMPENSATION
7.1 FEES AND EXPENSES OF THE TRUSTEE
Parent and Company 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 (including
taxes), disbursements and advances incurred or made by the Trustee in the
administration of the trusts created hereby, including the cost and expense of
any suit or litigation of any character and any proceedings before any
governmental agency and the compensation and disbursements of counsel and all
other assistants, experts or advisors not regularly in the Trustee's employ and
fees and expenses for attendance at any Parent Meeting (provided that the
Trustee's attendance at such meeting in person is necessary as determined in
accordance with subsection 4.11(a) reasonably incurred by the Trustee in
connection with its rights and duties under this Agreement; provided that Parent
and Company 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 in bad faith or with
negligence or wilful misconduct. Any amount owing under this Section or
otherwise under this Agreement and unpaid thirty (30) days after request for
such payment, will bear interest from the expiration of such thirty (30) day
period at a rate per annum equal to the then current rate charged by the
Trustee, payable on demand. The obligation in this Section shall survive the
resignation or removal of the Trustee and the termination of the trusts created
by this Agreement.
ARTICLE 8
INDEMNIFICATION AND LIMITATION OF LIABILITY
8.1 INDEMNIFICATION OF THE TRUSTEE
Parent and Company jointly and severally agree to indemnify and hold
harmless the Trustee and each of its directors, officers, 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, negligence, wilful misconduct or bad 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 or intended
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compliance with its duties set forth in this Agreement, or any written or oral
instructions delivered to the Trustee by Parent or Company pursuant hereto. In
no case shall Parent or Company be liable under this indemnity for any claim
against any of the Indemnified Parties unless Parent and Company shall be
notified by the Trustee of the written assertion of a claim or of any action
commenced against the Indemnified Parties, promptly after any of the Indemnified
Parties shall have received any such written assertion of a claim or shall have
been served with a summons or other first legal process giving information as to
the nature and basis of the claim. Subject to clauses (ii) and (iii) below,
Parent and Company shall be entitled to participate at their own expense in the
defence and, if Parent or Company 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. 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 Parent or Company; (ii) the named parties
to any such suit include both the Trustee and Parent or Company and the Trustee
shall have been advised by counsel acceptable to Parent or Company that there
may be one or more legal defences available to the Trustee which are different
from or in addition to those available to Parent or Company; or (iii) neither
Parent nor Company are named as parties to any such suit (in which case (i.e.
(ii) or (iii)) Parent and Company 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). The indemnities contained in this
Section 8.1 shall survive the resignation or removal of the Trustee and the
termination of the trusts hereby created.
8.2 LIMITATION OF LIABILITY
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, negligence, wilful
misconduct or bad faith on the part of the Trustee.
ARTICLE 9
CHANGE OF TRUSTEE
9.1 RESIGNATION
The Trustee, or any trustee hereafter appointed, may at any time resign
by giving written notice of such resignation to Parent and Company specifying
the date on which it desires to resign, provided that such notice shall never be
given less than 60 days before such desired resignation date unless Parent and
Company otherwise agree and provided further that such resignation shall not in
any event 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, Parent and
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Company 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. Failing acceptance by a successor trustee, a
successor trustee may be appointed by an order of an Ontario court of competent
jurisdiction upon application of one or more of the parties hereto at the
expense of Parent and Company.
9.2 REMOVAL
The Trustee, or any trustee hereafter appointed, may be removed at any
time on 60 days' prior notice by written instrument executed by Parent and
Company, in duplicate, one copy of which shall be delivered to the trustee so
removed and one copy to the successor trustee provided that such removal shall
not take effect until the date of the appointment of a successor trustee and the
acceptance of such appointment by the successor trustee.
9.3 SUCCESSOR TRUSTEE
Any successor trustee appointed as provided under this Agreement shall
execute, acknowledge and deliver to Parent and Company 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 under this
Agreement, with like effect as if originally named as trustee in this Agreement.
However, on the written request of Parent and Company 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 the rights and powers of
the trustee so ceasing to act. Upon the request of any such successor trustee,
Parent and Company 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.
9.4 NOTICE OF SUCCESSOR TRUSTEE
Upon acceptance of appointment by a successor trustee as provided
herein (other than pursuant to Section 9.5), Parent and Company shall cause to
be mailed notice of the succession of such trustee hereunder to each Beneficiary
specified in a List. If Parent or Company shall fail to cause such notice to be
mailed within 10 days after acceptance of appointment by the successor trustee,
the successor trustee shall cause such notice to be mailed at the expense of
Parent and Company.
9.5 COMPUTERSHARE
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Any corporation into or with which the Trustee may be merged or
consolidated or amalgamated, or any corporation resulting therefrom to which the
Trustee may be a party, or any corporation succeeding to the trust business to
the Trustee shall be the successor to the Trustee under this Agreement without
any further act on its part or any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor trustee under the
provisions of this Agreement. Without limitation, the parties hereto acknowledge
and agree, and the Beneficiaries are hereby deemed to have acknowledged and
agreed:
(a) that effective June 30, 2000, Computershare Investor Services
Inc. ("COMPUTERSHARE") purchased the Corporate Trust business
of the Trustee; and
(b) that, any other provision of this Agreement notwithstanding,
the Trustee may, without the consent of any other party,
assign all of its rights, powers. authorities, duties and
obligations under this Agreement, and under any ancillary
agreements executed in connection herewith, to such federal
trust company as may result from Computershare being continued
as a trust company pursuant to the terms of the TRUST AND LOAN
COMPANIES ACT (such federal trust company hereafter referred
to as "COMPUTERSHARE TRUST"). Any such assignment shall be
effective, and Computershare Trust shall become vested with
all the rights, powers, authorities, duties and obligations of
the Trustee under this Agreement and any ancillary agreements,
without the need for any further notice or advice to, or
approval of, any of the parties hereto or the Beneficiaries
and without any further act, deed, conveyance or formality
whatsoever, with like effect as if originally named as trustee
in this Agreement.
ARTICLE 10
PARENT SUCCESSORS
10.1 CERTAIN REQUIREMENTS IN RESPECT OF REORGANIZATIONS, ETC.
Parent shall not consummate any transaction (whether by way of
reconstruction, reorganization, consolidation, merger, transfer, sale, lease or
otherwise) whereby all or substantially all of its undertaking, property and
assets would become the property of any other person or, in the case of a
merger, of the continuing corporation resulting therefrom, unless:
(10 such other person or continuing corporation (herein called the
"PARENT SUCCESSOR"), by operation of law, becomes, without
further action, bound by the terms and provisions of this
Agreement or, if not so bound, executes, prior to or
contemporaneously with the consummation of such transaction, a
trust agreement supplemental hereto and such other instruments
(if any) as are satisfactory to the
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Trustee, acting reasonably, on the advice of counsel, to
evidence the assumption by Parent Successor of liability for
all moneys payable and property deliverable hereunder and the
covenant of such Parent Successor to pay and deliver or cause
to be delivered the same and its agreement to observe and
perform all the covenants and obligations of Parent under this
Agreement; and
(20 such transaction shall, to the satisfaction of the Trustee,
acting reasonably, on the advice of counsel, be upon such
terms and conditions which substantially preserve and do not
impair in any material respect any of the rights, duties,
powers and authorities of the Beneficiaries hereunder.
10.2 VESTING OF POWERS IN SUCCESSOR
Whenever the conditions of section 10.1 have been duly observed and
performed and if requested by Parent or Parent Successor, Parent Successor,
Company and the Trustee shall execute and deliver, for their own benefit and for
the benefit of the Beneficiaries, the supplemental agreement provided for in
Article 11 and thereupon Parent Successor shall possess and from time to time
may exercise each and every right and power of Parent under this Agreement in
the name of Parent or otherwise and any act or proceeding by any provision of
this Agreement required to be done or performed by the Board of Directors of
Parent or any officers of Parent may be done and performed with like force and
effect by the directors or officers of such Parent Successor.
10.3 WHOLLY-OWNED SUBSIDIARIES
Nothing herein shall be construed as preventing the amalgamation or
merger of any wholly-owned direct or indirect subsidiary of Parent with or into
Parent or the winding-up, liquidation or dissolution of any wholly-owned
subsidiary of Parent provided that all of the assets of such subsidiary are
transferred to Parent or another wholly-owned direct or indirect subsidiary of
Parent and any such transactions are expressly permitted by this Article 10.
ARTICLE 11
AMENDMENTS AND SUPPLEMENTAL AGREEMENTS
11.1 AMENDMENTS, MODIFICATIONS, ETC.
Subject to sections 11.2, 11.4 and 11.5 hereof, this Agreement may not
be amended, modified, terminated or waived except by an agreement in writing
executed by Parent, CanCo, Company and the Trustee, which agreement has been:
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(10 approved of by Beneficiaries holding at least 50% of the
Exchangeable Shares at the time outstanding (other than
Exchangeable Shares held by Parent, CanCo, Company or their
respective Affiliates), or
(20 voted in favour of by holders from time to time of the
Exchangeable Shares at meetings held in accordance with
Article 10 of the Exchangeable Share Provisions (other than
Exchangeable Shares held by Parent, CanCo, Company or their
respective Affiliates).
11.2 MINISTERIAL AMENDMENTS
Notwithstanding the provisions of section 11.1 hereof, the parties to
this Agreement may in writing, at any time and from time to time, without the
approval of the Beneficiaries, amend or modify this Agreement for the purposes
of:
(10 adding to the covenants of any or all parties hereto for the
protection of the Beneficiaries hereunder provided that the
Board of Directors of each of Company and Parent shall be of
the good faith opinion (so certified in writing by each to the
Trustee) that such additions will not be prejudicial to the
rights or interests of the Beneficiaries as a whole;
(20 making such amendments or modifications, in the opinion of
counsel, not inconsistent with this Agreement, as may be
necessary or desirable with respect to matters or questions
which, in the good faith opinion of the Board of Directors of
each of Parent and Company (so certified in writing by each to
the Trustee) and in the opinion of the Trustee on the advice
of counsel, having in mind the best interests of the
Beneficiaries as a whole, it may be expedient to make,
provided that such Boards of Directors, and the Trustee on the
advice of counsel, shall be of the opinion that such
amendments and modifications will not be prejudicial to the
interests of the Beneficiaries as a whole, the opinions of
such Boards of Directors in this regard having been certified
in writing to the Trustee; or
(30 making such changes or corrections which, on the advice of
counsel to Parent, Company and the Trustee, are required for
the purpose of curing or correcting any ambiguity or defect or
inconsistent provision or clerical omission or mistake or
manifest error; provided that the Trustee relying on the
opinion of counsel and the Board of Directors of each of
Parent and Company shall be of the opinion (which opinions of
such Boards of Directors shall be certified in writing to the
Trustee) that such changes or corrections will not be
prejudicial to the rights and interests of the Beneficiaries;
or
(d) pursuant to the provisions of Section 11.5.
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11.3 MEETING TO CONSIDER AMENDMENTS
Company, at the request of Parent, shall call a meeting or meetings of
the Beneficiaries 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 Company, the
Exchangeable Share Provisions and all applicable laws.
11.4 CHANGES IN CAPITAL OF PARENT AND COMPANY
At all times after the occurrence of any event contemplated pursuant to
sections 2.5 or 2.6 of the Support Agreement or otherwise, as a result of which
either Parent Common Shares or the Exchangeable Shares or both are in any way
changed, this Agreement shall forthwith be deemed to 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 Common Shares or the
Exchangeable Shares or both are so changed and Parent and Company shall execute
and deliver a supplemental agreement giving effect to and evidencing such
necessary amendments and modifications, whereupon this Agreement shall,
notwithstanding the provisions of section 11.1, be amended as contemplated
therein. Parent and/or Company, as the case may be, will give the Trustee prompt
written notice of the occurrence or proposed occurrence of any event
contemplated pursuant to sections 2.5 or 2.6 of the Support Agreement or
otherwise, as a result of which either Parent Common Shares or the Exchangeable
Shares or both are in any way changed or to be changed, which notice will
contain sufficient detail to allow the Trustee (with such assistance from
counsel as the Trustee may deem advisable) to determine the effect of such
change or proposed change on the terms of this Agreement, if any.
11.5 EXECUTION OF SUPPLEMENTAL AGREEMENTS
Except as contemplated herein, no amendment to or modification or
waiver of any of the provisions of this Agreement otherwise permitted hereunder
shall be effective unless made in writing and signed by all of the parties
hereto. From time to time Company (when authorized by a resolution of its Board
of Directors), Parent (when authorized by a resolution of its Board of
Directors) and the Trustee 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:
(10 evidencing the succession of Parent Successors and the
covenants of and obligations assumed by each such Parent
Successor in accordance with the provisions of Article 10 and
the successors of any successor trustee in accordance with the
provisions of Article 9;
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(20 making any additions to, deletions from or alterations of the
provisions of this Agreement, the Exchange Right or the
Automatic Exchange Rights which in the opinion of the Trustee
relying on the opinion of counsel will not be prejudicial to
the interests of the Beneficiaries or are, in the opinion of
the Trustee, Parent and Company as they are advised by
counsel, necessary or advisable in order to incorporate,
reflect or comply with any legislation the provisions of which
apply to Parent, Company, the Trustee or this Agreement; and
(30 for any other purposes, in the opinion of counsel, 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 Trustee relying on the
opinion of counsel, the rights of the Beneficiaries as a whole
will not be prejudiced thereby.
ARTICLE 12
GENERAL
12.1 TERM
This Agreement shall come into force and be effective as of the date
hereof and shall terminate and be of no further force and effect at such time as
no Exchangeable Shares are held by any person or entity other than Parent,
CanCo, Company or their respective Affiliates unless earlier terminated in
accordance with the provisions of Section 11.1.
12.2 SEVERABILITY
If any provision of this Agreement is held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remainder of this
Agreement shall not in any way be affected or impaired thereby and this
Agreement shall be carried out as nearly as possible in accordance with its
original terms and conditions; and to this end the provisions of this Agreement
are intended to be and shall be deemed severable; provided, however, that if the
provision or provisions so held to be invalid, in the reasonable judgment of the
parties hereto, is or are so fundamental to the intent of the parties hereto and
the operation of this Agreement that the enforcement of the other provisions
hereof, in the absence of such invalid provision or provisions, would damage
irreparably the intent of the parties in entering into this Agreement, the
parties hereto shall agree to amend or otherwise modify this Agreement so as to
lawfully carry out the intent and purposes hereof and the transactions
contemplated hereby.
12.3 ENUREMENT
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This Agreement shall be binding upon and enure to the benefit of the
parties hereto and their respective successors and permitted assigns and to the
benefit of the Beneficiaries. For certainty, CanCo may assign some or all of its
rights and obligations hereunder to any other direct or indirect wholly-owned
subsidiary of Parent as is designated in writing by CanCo from time to time (for
all purposes or for the purposes of specified circumstances as contemplated
herein).
12.4 NOTICE TO COMPANY, CANCO, PARENT AND THE TRUSTEE
Any notice or other communication required or permitted to be delivered
to any party under this Agreement shall be in writing and shall be deemed
properly delivered, given and received when delivered (by hand, by registered
mail, by courier or express delivery service or by facsimile) to the address or
facsimile telephone number set forth beneath the name of such party below (or to
such other address or facsimile telephone number as such party shall have
specified in a written notice given to the other parties hereto):
IF TO PARENT, CANCO OR COMPANY:
Photon Dynamics, Inc.
0000 Xxx Xxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Xx.
Chief Executive Officer
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxx Godward LLP
5 Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
and to:
-00-
Xxxx & Xxxxxx
XXX Xxxxx
Xxxxx 0000, Box 754
000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx X0X 279
Attention: Xxx X. Xxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
IF TO THE TRUSTEE:
Montreal Trust Company of Canada
c/o Computershare Investor Services Inc.
000 Xxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Manager, Corporate Trust Department
Facsimile No.: (000) 000-0000
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of confirmed receipt thereof,
provided such notice or other communication is received prior to 5:00 p.m.
(local time) on a Business Day, and otherwise it shall be deemed to have been
given and received upon the immediately following Business Day.
12.5 NOTICE TO BENEFICIARIES
Any and all notices to be given and any documents to be sent to any
Beneficiaries by Parent, Company or CanCo may be given or sent to the address of
such Beneficiary shown on the register of holders of Exchangeable Shares in any
manner permitted by the by-laws of Company or the Exchangeable Share Provisions
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 or Exchangeable Share Provisions, the provisions of which by-laws
or Exchangeable Share Provisions shall apply MUTATIS MUTANDIS to notices or
documents as aforesaid sent to such Beneficiaries by Parent, Company or Canco.
Any and all notices to be given and any documents to be sent to any
Beneficiaries by the Trustee may be given or sent to the address of such
Beneficiary shown on the register of holders of Exchangeable Shares maintained
by the registrar or transfer agent of the Exchangeable Shares and shall be
delivered or sent by mail (or otherwise communicated in the same manner as
Parent utilizes in communications to holders of Parent Common Shares, subject to
the Trustee being advised in writing of such method and its ability to provide
this method of communication). Any notice or other communication given
personally shall be deemed to have been
-40-
given and received upon delivery thereof and, if mailed, on the fifth Business
Day following the date of mailing of such notice, and if given by telecopy, on
the date of confirmed receipt thereof, provided such notice or other
communication is received prior to 5:00 p.m. (local time) on a Business Day, and
otherwise it shall be deemed to have been given and received upon the
immediately following Business Day.
-41-
12.6 COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be
deemed an original, and all of which taken together shall constitute one and the
same instrument.
12.7 GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with,
the laws of the Province of Ontario, and the laws of Canada applicable therein,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof. In any action or proceeding between the parties
arising out of or relating to this Agreement or any of the transactions
contemplated by this Agreement, each of the parties irrevocably and
unconditionally consents and submits to the non-exclusive jurisdiction and venue
of the courts located in the province of Ontario and each of the parties
irrevocably consents to service of process by first class certified mail, return
receipt requested, postage prepaid, to the address at which such party is to
receive notice in accordance with Section 12.4. Parent hereby irrevocably
appoints the Company as its registered office in the Province of Ontario as
Parent's attorney for service of process.
12.8 LANGUAGE
The parties hereto confirm that it is their wish that this Agreement,
as well as all other documents related hereto, including legal notices, have
been and shall be drawn up in the English language only. LES PARTIES CONFIRMENT
LEUR XXXXX QUE CET ACCORD AINSI QUE TOUS LES DOCUMENTS, Y COMPRIS TOUS XXX XXXX
QUI S'Y RATTACHENT, SOIENT REDIGES EN LANGUE ANGLAISE.
12.9 RULES OF CONSTRUCTION
The parties hereto agree that they (other than the Trustee) have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
{THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK}
-42-
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
PHOTON DYNAMICS, INC.
By: /s/ XXXXXXX X. XXXXXX c/s
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chief Financial Officer and
Secretary
Authorized Signing Officer
PHOTON DYNAMICS NOVA SCOTIA COMPANY
By: /s/ XXXXXXX X. XXXXXX c/s
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chief Financial Officer and
Secretary
Authorized Signing Officer
IMAGE PROCESSING SYSTEMS INC.
By: /s/ XXXXXXX WAWREW c/s
-------------------------------------
Name: Xxxxxxx Wawrew
Title: President
Authorized Signing Officer
MONTREAL TRUST COMPANY OF CANADA
By: /s/ XXXX VITAL c/s
-------------------------------------
Name: Xxxx Vital
Title: Trust Officer
Authorized Signing Officer
By: /s/ XXXXXX XXXXXXXX c/s
-------------------------------------
Name: Xxxxxx XxXxxxxx
Title: Trust Officer
Authorized Signing Officer
[SIGNATURE PAGE TO VOTING AND EXCHANGE TRUST AGREEMENT]
-43-
APPENDIX "A"
EXCHANGEABLE SHARE PROVISIONS
PROVISIONS ATTACHING TO EXCHANGEABLE SHARES
ARTICLE 1
INTERPRETATION
1.1 FOR THE PURPOSES OF THESE SHARE PROVISIONS:
"ACT" means the BUSINESS CORPORATIONS ACT (Ontario), as now in effect
and as it may be amended from time to time, including the regulations made
thereunder, or such other corporate statute which the Corporation exists under
from time to time.
"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.
"AGREEMENT" means the Acquisition Agreement for Plan of Arrangement
dated as of September 27, 2000, between Parent, Photon Dynamics Nova Scotia
Company and the Corporation.
"ARRANGEMENT" means an arrangement under Section 182 of the Act on the
terms and subject to the conditions set out in the Agreement, subject to any
amendments or variations thereto made in accordance with the provisions of the
Agreement or made at the direction of the Court in the Final Order.
"AUTOMATIC REDEMPTION" has the meaning ascribed thereto in section 7.1
of these share provisions.
"AUTOMATIC REDEMPTION DATE" means the date, if any, established by the
Board of Directors for the redemption by the Corporation of all but not less
than all of the outstanding Exchangeable Shares pursuant to Article 7 of these
share provisions, which date shall be no earlier than five years from the
Effective Date unless:
(a) there are fewer than 10% of the original number of
Exchangeable Shares issued as a result of the Arrangement
outstanding (other than Exchangeable Shares held by Parent and
its Affiliates and as such number of shares may be adjusted as
deemed
appropriate by the Board of Directors to give effect to any
subdivision or consolidation of or stock dividend on the
Exchangeable Shares, any issue or distribution of rights to
acquire Exchangeable Shares or securities exchangeable for or
convertible into Exchangeable Shares, any issue or
distribution of other securities or rights or evidences of
indebtedness or assets, or any other capital reorganization or
other transaction affecting the Exchangeable Shares), in which
case the Board of Directors may accelerate such redemption
date to such date prior to the fifth anniversary of the
Effective Date as they may determine, upon at least 30 days'
prior written notice to the registered holders of the
Exchangeable Shares;
(b) a Parent Control Transaction occurs, in which case, provided
that the Board of Directors determines, in good faith and in
its sole discretion, that it is not reasonably practicable to
substantially replicate the terms and conditions of the
Exchangeable Shares in connection with such Parent Control
Transaction and that the redemption of all but not less than
all of the outstanding Exchangeable Shares is necessary to
enable the completion of such Parent Control Transaction in
accordance with its terms, the Board of Directors may
accelerate such redemption date to such date prior to the
fifth anniversary of the Effective Date as they may determine,
upon such number of days' prior written notice to the
registered holders of the Exchangeable Shares as the Board of
Directors may determine to be reasonably practicable in such
circumstances;
(c) an Exchangeable Share Voting Event is proposed, in which case,
provided that the Board of Directors has determined, in good
faith and in its sole discretion, that it is not reasonably
practicable to accomplish the business purpose intended by the
Exchangeable Share Voting Event, which business purpose must
be bona fide and not for the primary purpose of causing the
occurrence of a Redemption Date, in any other commercially
reasonable manner that does not result in an Exchangeable
Share Voting Event, the redemption date shall be the Business
Day prior to the record date for any meeting or vote of the
holders of the Exchangeable Shares to consider the
Exchangeable Share Voting Event and the Board of Directors
shall give such number of days' prior written notice of such
redemption to the registered holders of the Exchangeable
Shares as the Board of Directors may determine to be
reasonably practicable in such circumstances; or
(d) an Exempt Exchangeable Share Voting Event is proposed and the
holders of the Exchangeable Shares fail to take the necessary
action at a meeting or other vote of holders of Exchangeable
Shares, to approve or disapprove, as applicable, the
Exchangeable Share Voting Event, in which case the redemption
date shall be the Business Day following the day on which the
holders of the Exchangeable Shares failed to take such action
and the Board of Directors shall give such number of days'
prior notice of such redemption to the registered holder of
the Exchangeable Shares
-2-
as the Board of Directors may determine to be reasonably
practicable in such circumstances;
provided, however, that the accidental failure or omission to give any such
notice of redemption, extension or acceleration to less than 10% of such holders
of Exchangeable Shares shall not affect the validity of such actions.
"BOARD OF DIRECTORS" means the Board of Directors of the Corporation.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
when banks are not open for business in any or all of Xxx Xxxx, Xxxxxxxxxx xxx
Xxxxxxx, Xxxxxxx.
"CANADIAN DOLLAR EQUIVALENT" means in respect of an amount expressed in
a currency other than Canadian dollars (the "FOREIGN CURRENCY AMOUNT") at any
date the product obtained by multiplying:
(a) the Foreign Currency Amount
by
(b) the noon spot exchange rate on such date for such foreign
currency expressed in Canadian dollars as reported by the Bank
of Canada or, if such spot 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.
"CANCO" means Photon Dynamics Nova Scotia Company, being a direct or
indirect wholly-owned subsidiary of Parent or such other direct or indirect
wholly-owned subsidiary of Parent as is designated in writing from time to time
(for all purposes or for the purposes of specified circumstances as contemplated
herein) as being the corporation which is to exercise the rights and be subject
to the privileges of the CanCo as contemplated herein and to which Photon
Dynamics Nova Scotia Company assigns its rights and obligations (as contemplated
hereunder and in the Support Agreement and the Exchange Agreement) (for all
purposes or for the purposes of specified circumstances as contemplated herein);
"CANCO CALL NOTICE" has the meaning ascribed thereto in Section 6.3 of
these share provisions.
"COMMON SHARES" means the common shares in the capital of the
Corporation.
"COURT" means the Superior Court of Justice (Commercial List)
(Ontario).
"CURRENT MARKET PRICE" means, in respect of a Parent Common Share on
any date, the closing price of Parent Common Shares on the last trading date
prior to such date on Nasdaq, or, if
-3-
Parent Common Shares are not then quoted on Nasdaq, on such other stock exchange
or automated quotation system on which 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 in the opinion of the Board of
Directors the public distribution or trading activity of Parent Common Shares
during such period does not create a market which reflects the fair market value
of a Parent Common Share, then the Current Market Price of a Parent Common Share
shall be determined by the Board of Directors, in good faith and in its sole
discretion upon the advice of such qualified independent financial advisors
and/or other experts as the Board of Director's may deem appropriate, and
provided further that any such selection, opinion or determination by the Board
of Directors shall be conclusive and binding.
"DEPOSITORY" means Montreal Trust Company of Canada, the registrar and
transfer agent of the Exchangeable Shares.
"DIRECTOR" means the director appointed pursuant to Act.
"DIVIDEND AMOUNT" has the meaning ascribed thereto in Section 6.3 of
these Share Provisions.
"EFFECTIVE DATE" means the date shown on the certificate of arrangement
to be issued by the Director under the Act giving effect to the Arrangement.
"EXCHANGE AGREEMENT" means the Voting and Exchange Trust Agreement
between Parent, CanCo, the Corporation and the Trustee made as of the Effective
Date.
"EXCHANGE RIGHT" has the meaning ascribed thereto in the Exchange
Agreement.
"EXCHANGEABLE SHARE PROVISIONS" means the rights, privileges,
restrictions and conditions attaching to the Exchangeable Shares as set forth
herein.
"EXCHANGEABLE SHARE VOTING EVENT" means any matter in respect of which
holders of Exchangeable Shares are entitled to vote as shareholders of the
Corporation, other than an Exempt Exchangeable Share Voting Event, and, for
greater certainty, excluding any matter in respect of which holders of
Exchangeable Shares are entitled to vote (or instruct the Trustee to vote) in
their capacity as Beneficiaries under (and as that term is defined in) the
Exchange Agreement.
"EXCHANGEABLE SHARES" means the exchangeable non-voting shares without
nominal or par value in the capital of the Corporation as currently constituted.
"EXEMPT EXCHANGEABLE SHARE VOTING EVENT" means any matter in respect of
which holders of Exchangeable Shares are entitled to vote as shareholders of the
Corporation in order to approve or disapprove, as applicable, any change to, or
in the rights of the holders of, the Exchangeable
-4-
Shares, where the approval or disapproval, as applicable, of such change would
be required to maintain the equivalence of the Exchangeable Shares and the
Parent Common Shares.
"FINAL ORDER" means the final order of the Court approving the
Arrangement as such order may be amended at any time prior to the Effective Date
or, if appealed, then, unless such appeal is withdrawn or denied, such order as
affirmed.
"GOVERNMENTAL BODY" means any: (a) nation, state, provincial,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, provincial, provincial, local,
municipal, foreign or other government; or (c) governmental, quasi-governmental
or regulatory authority of any nature (including any governmental division,
department, agency, commission, instrumentality, official, ministry, fund,
foundation, center, organization, unit, body or other person and any court or
other tribunal).
"LIQUIDATION AMOUNT" has the meaning ascribed thereto in Section 5.1 of
these share provisions.
"LIQUIDATION CALL PURCHASE PRICE" has the meaning ascribed thereto in
Section 5.4 of these share provisions.
"LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in Section
5.4 of these share provisions.
"LIQUIDATION DATE" has the meaning ascribed thereto in Section 5.1 of
these share provisions.
"NASDAQ" means the Nasdaq National Market.
"PARENT" means Photon Dynamics, Inc., a body corporate subsisting under
the laws of the State of California.
"PARENT COMMON SHARES" means the shares of common stock, without par
value, in the share capital of Parent and any other securities into which share
shares may be changed, including shares in to which Parent Common Shares may be
changed consequent upon an amalgamation, merger, reorganization or other
transaction affecting the Parent Common Shares.
"PARENT CONTROL TRANSACTION" means any merger, amalgamation tender
offer, material sale of shares or rights or interests therein or thereto or
similar transactions involving Parent (including, without limitation, a sale of
all or substantially all of the Parent's assets), or any proposal to do so.
-5-
"PARENT DIVIDEND DECLARATION DATE" means the date on which the board of
directors of Parent declares any dividend on the Parent Common Shares.
"PERSON" means and includes any individual, corporation (including any
non-profit corporation), general partnership, limited partnership, limited
liability partnership, joint venture, estate, trust, company (including any
company limited by shares, limited liability company or joint stock company),
firm, society or other enterprise, association, organization, or Governmental
Body.
"PREFERRED SHARES" means the convertible, voting shares without nominal
or par value in the capital of the Corporation as currently constituted.
"PURCHASE PRICE" has the meaning ascribed thereto in Section 6.3 of
these share provisions.
"REDEMPTION CALL RIGHT" has the meaning ascribed thereto in Section 7.3
of these share provisions.
"REDEMPTION CALL PURCHASE PRICE" has the meaning ascribed thereto in
Section 7.3 of these share provisions.
"REDEMPTION PRICE" has the meaning ascribed thereto in Section 7.1 of
these share provisions.
"RETRACTED SHARES" has the meaning ascribed thereto in Section 6.1(c)
of these share provisions.
"RETRACTION CALL RIGHT" has the meaning ascribed thereto in Section
6.1(e) of these share provisions.
"RETRACTION DATE" has the meaning ascribed thereto in Section 6.1(d) of
these share provisions.
"RETRACTION PRICE" has the meaning ascribed thereto in Section 6.1 of
these share provisions.
"RETRACTION REQUEST" has the meaning ascribed thereto in Section 6.1 of
these share provisions.
"SUPPORT AGREEMENT" means the Support Agreement between Parent, CanCo
and the Corporation, made as of the Effective Date.
"TRANSFER" for the purposes of Section 6.1 includes, in respect of
securities, the making of any sale, exchange, assignment, hypothecation, gift,
security interest, pledge or other encumbrance, or any contract therefor, any
voting trust or other agreement or arrangement with respect to the
-6-
transfer of voting rights or any other beneficial interest in such securities,
the creation of any other claim thereto or any other transfer or disposition
whatsoever, whether voluntary or involuntary, affecting the right. title,
interest or possession in or to such securities.
"TRANSFER/DISSENT ATTEMPT" has the meaning ascribed thereto in Section
6.1 of these share provisions.
"TRANSFERRED/DISSENTED SHARES" has the meaning ascribed thereto in
Section 6.1(f) of these share provisions.
"TRUSTEE" means Montreal Trust Company of Canada in its capacity as
trustee under the Exchange Agreement, or such other person who is appointed as
the trustee thereunder in accordance with its terms.
ARTICLE 2
RANKING OF EXCHANGEABLE SHARES
2.1 The Exchangeable Shares shall be entitled to a preference over the
Preferred Shares, the Common Shares and any other shares ranking junior to the
Exchangeable Shares with respect to the payment of dividends and distribution of
assets in the event of the liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, or any other distribution of the
assets of the Corporation among its shareholders for the purpose of winding up
its affairs.
ARTICLE 3
DIVIDENDS
3.1 Subject to the provisions of this section 3.1 and subject to the prior
rights of the holders of any other class of shares ranking senior to the
Exchangeable Shares with respect to priority in the payment of dividends, a
holder of an Exchangeable Share shall be entitled to receive and the Board of
Directors shall, subject to applicable law, on each Parent Dividend Declaration
Date, declare a dividend on each Exchangeable Share:
(a) in the case of a cash dividend declared on the Parent Common
Shares, in an amount in cash for each Exchangeable Share in
U.S. dollars (or, at the option of the Board of Directors, in
an amount in cash equal to the Canadian Dollar Equivalent
thereof), on the Parent Dividend Declaration Date, in each
case, corresponding to the cash dividend declared on each
Parent Common Share, or
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(b) in the case of a stock dividend declared on the Parent Common
Shares to be paid in Parent Common Shares, in such number of
Exchangeable Shares for each Exchangeable Share as is equal to
the number of Parent Common Shares to be paid on each Parent
Common Share, or
(c) in the case of a dividend declared on the Parent Common Shares
in property other than cash or Parent Common Shares, in such
type and amount of property for each Exchangeable Share as is
the same as or economically equivalent to (to be determined by
the Board of Directors as contemplated by Section 3.5) the
type and amount of property declared as a dividend on each
Parent Common Share.
Such dividends shall be paid out of money, assets or property of the Corporation
properly applicable to the payment of dividends, or out of authorized but
unissued shares of the Corporation, as applicable. Any dividend which should
have been declared on the Exchangeable Shares pursuant to this Section 3.1 but
was not so declared due to the provisions of applicable law shall be declared
and paid by the Corporation as soon as payment of such dividend is permitted by
such law on a subsequent date or dates determined by the Board of Directors.
Notwithstanding the foregoing, in the case of a stock dividend declared on the
Parent Common Shares to be paid in Parent Common Shares, in lieu of declaring
the stock dividend contemplated by section 3.1(b) on the Exchangeable Shares,
the Board of Directors may, in its discretion and subject to applicable law,
pass a resolution to subdivide, redivide or change (the "subdivision") each
issued and unissued Exchangeable Share on the basis that each Exchangeable Share
before the subdivision becomes a number of Exchangeable Shares as is equal to
the sum of (i) a Parent Common Share and (ii) the number of Parent Common Shares
to be paid as a stock dividend on each Parent Common Share. In such instance,
and notwithstanding any other provision hereof, such subdivision shall become
effective on the effective date specified in section 3.4 hereof without any
further act or formality on the part of the Board of Directors or of the holders
of Exchangeable Shares. For greater certainty, no approval of the holders of
Exchangeable Shares to an amendment to the articles of the Corporation shall be
required to give effect to such subdivision.
3.2 Cheques of the Corporation or any dividend paying agent appointed by
the Corporation, payable at par at any branch of the bankers of the Corporation,
shall be issued in respect of any cash dividends contemplated by Section 3.1(a)
hereof and the sending of such a cheque to each holder of an Exchangeable Share
shall satisfy the cash dividend represented thereby unless the cheque is not
paid on presentation. Subject to applicable law, certificates registered in the
name of the registered holder of Exchangeable Shares shall be issued or
transferred in respect of any stock dividends contemplated by Section 3.1(b)
hereof and the sending of such a certificate to each holder of an Exchangeable
Share shall satisfy the stock dividend represented thereby. Such other type and
amount of property in respect of any dividends contemplated by Section 3.1(c)
hereof shall be issued, distributed or transferred by the Corporation in such
manner as it shall determine and the issuance, distribution or transfer thereof
by the Corporation to each holder of an Exchangeable Share shall satisfy the
dividend represented thereby. No holder of an Exchangeable Share shall be
entitled to
-8-
recover by action or other legal process against the Corporation any dividend
that is represented by a cheque that has not been duly presented to the
Corporation's bankers for payment or that otherwise remains unclaimed for a
period of six years from the date on which such dividend was payable.
3.3 The record date for the determination of the holders of Exchangeable
Shares entitled to receive payment of, and the payment date for, any dividend
declared on the Exchangeable Shares under Section 3.1 hereof shall be the same
dates as the record date and payment date, respectively, for the corresponding
dividend declared on the Parent Common Shares. The record date for the
determination of the holders of Exchangeable Shares entitled to receive
Exchangeable Shares in connection with any subdivision of Exchangeable Shares
under section 3.1 hereof and the effective date of such subdivision shall be the
same dates as the record date and payment date, respectively, for the
corresponding stock dividend declared on Parent Common Shares.
3.4 If on any payment date for any dividends declared on the Exchangeable
Shares under Section 3.1 hereof the dividends are not paid in full on all of the
Exchangeable Shares then outstanding, any such dividends that remain unpaid
shall be paid on a subsequent date or dates determined by the Board of Directors
on which the Corporation shall have sufficient moneys, assets or property
properly applicable to the payment of such dividends.
3.5 The Board of Directors shall determine, in good faith and in its sole
discretion, economic equivalence for the purposes of Section 3.1 hereof, and
each such determination shall be conclusive and binding on the Corporation and
its shareholders. In making each such determination, the following factors
shall, without excluding other factors determined by the Board of Directors to
be relevant, be considered by the Board of Directors:
(a) in the case of any stock dividend or other distribution
payable in Parent Common Shares, the number of such shares
issued in proportion to the number of Parent Common Shares
previously outstanding;
(b) in the case of the issuance or distribution of any rights,
options or warrants to subscribe for or purchase Parent Common
Shares (or securities exchangeable for or convertible into or
carrying rights to acquire Parent Common Shares), the
relationship between the exercise price of each such right,
option or warrant and the current market value (as determined
by the Board of Directors in the manner above contemplated of
a Parent Common Share;
(c) in the case of the issuance or distribution of any other form
of property (including without limitation any shares or
securities of Parent of any class other than Parent Common
shares, any rights, options or warrants other than those
referred to in section 3.6(b) above, any evidences of
indebtedness of Parent or any assets of Parent), the
relationship between the fair market value (as determined by
the Board of Directors in the manner above contemplated) of
such property to be issued or distributed with
-9-
respect to each outstanding Parent Common Share and the
current market value (as determined by the Board of Directors
in the manner above contemplated) of a Parent Common Share;
and
(d) in all such cases, the general taxation consequences of the
relevant event to holders Exchangeable Shares to the extent
that such consequences may differ from the taxation
consequences to holders of Parent Common Shares as a result of
differences between taxation laws of Canada and the United
States (except for any differing consequences arising as a
result of differing marginal taxation rates and without regard
to the individual circumstances of holders of Exchangeable
Shares).
For the purposes of the foregoing determinations, the current market value of
any security listed and traded or quoted on a securities exchange shall be the
average of the closing prices of such security during a period of not less than
20 consecutive trading days ending not more than three trading days before the
date of determination on the principal securities exchange on which such
securities are listed and traded or quoted; provided, however, that if in the
opinion of the Board of Directors the public distribution or trading activity of
such securities during such period does not create a market which reflects the
fair market value of such securities, then the current market value thereof
shall be determined by the Board of Directors, in good faith and in its sole
discretion, and provided further than any such determination by the Board of
Directors shall be conclusive and binding on the Corporation and its
shareholders.
ARTICLE 4
CERTAIN RESTRICTIONS
4.1 So long as any of the Exchangeable Shares are outstanding, the
Corporation shall not at any time without, but may at any time with, the
approval of the holders of the Exchangeable Shares given as specified in Section
10.2. hereof:
(a) pay any dividends on the Common Shares or any other shares
ranking junior to the Exchangeable Shares, other than stock
dividends payable in Common Shares or any such other shares
ranking junior to the Exchangeable Shares, as the case may be;
(b) redeem, retract or purchase or make any capital distribution
in respect of Common Shares, the Preferred Shares or any other
shares ranking junior to the Exchangeable Shares;
(c) redeem, retract or purchase or make any capital distribution
in respect of any other shares of the Corporation ranking
equally with the Exchangeable Shares with respect
-10-
to the payment of dividends, or to receive the remaining
property of the Corporation on any liquidation, distribution
or winding-up;
(d) issue any shares of the Corporation ranking equally with or
superior to the Exchangeable Shares respect to the payment of
dividends or on any liquidation, distribution or winding-up
other than by way of stock dividends to the holders of such
Exchangeable Shares or as contemplated by the Support
Agreement; or
(e) issue any Exchangeable Shares other than (i) pursuant to any
shareholder rights plan adopted by the Corporation, (ii) by
way of stock dividend to the holders of such Exchangeable
Shares contemplated by Section 3.1 hereof or (iii) by way of
subdivision of Exchangeable Shares contemplated by Section 3.1
hereof.
The restrictions in Sections 4.1(a), 4.1(b), 4.1(c) and 4.1(d) above shall not
apply if all dividends on the outstanding Exchangeable Shares corresponding to
dividends declared following the initial date of issue of Exchangeable Shares on
the Parent Common Shares shall have been declared on the Exchangeable Shares and
paid in full.
ARTICLE 5
DISTRIBUTION ON LIQUIDATION
5.1 In the event of the liquidation, dissolution or winding-up of the
Corporation or any other distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs, subject to the exercise
by CanCo of the Liquidation Call Right, a holder of Exchangeable Shares shall be
entitled, subject to applicable law to receive from the assets of the
Corporation in respect of each Exchangeable Share held by such holder on the
effective date (the "LIQUIDATION DATE") of such liquidation, dissolution or
winding-up, before any distribution of any part of the assets of the Corporation
among the holders of the Preferred Shares, the Common Shares or any other shares
ranking junior to the Exchangeable Shares, an amount per share equal to:
(a) the Current Market Price of a Parent Common Share on the last
Business Day prior to the Liquidation Date, which shall be
satisfied in full by the Corporation causing to be delivered
to such holder one Parent Common Share (subject to adjustment
as provided for in Section 11.1), plus
(b) an additional amount equivalent to the full amount of all
declared and unpaid dividends on each such Exchangeable Share
and all dividends declared on Parent Common Shares which have
not been declared on such Exchangeable Shares in accordance
with Section 3.1 hereof
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(collectively the "LIQUIDATION AMOUNT", provided that if the record date for any
such declared and unpaid dividends occurs after the Liquidation Date, the
Liquidation Amount shall not include such additional amount equivalent to such
dividends).
5.2 On or promptly after the Liquidation Date, the Corporation shall cause
to be delivered to the holders of the Exchangeable Shares the Liquidation Amount
for each such Exchangeable Share upon presentation and surrender of the
certificates representing such Exchangeable Shares together with such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Act and the By-laws of the Corporation and such
additional documents and instruments as the Corporation may reasonably require,
at the registered office of the Corporation or at such other address as may be
specified by the Corporation by notice to the holders of the Exchangeable
Shares. Payment of the total Liquidation Amount for such Exchangeable Shares
shall be made by delivery to each holder, at the address of the holder recorded
in the securities register of the Corporation for the Exchangeable Shares or by
holding for pick up by the holder at the registered office of the Corporation,
or at such other address as may be specified by the Corporation by notice to the
holders of the Exchangeable Shares, certificates representing Parent Common
Shares (which shares shall be duly issued as fully paid and non-assessable and
shall be free and clear of any lien, claim or encumbrance) registered in the
name of the holder and a cheque of the Corporation payable at par at any branch
of the bankers of the Corporation in respect of the remaining portion of the
total Liquidation Amount, if any. On and after the Liquidation Date, the holders
of the Exchangeable Shares shall cease to be holders of such Exchangeable Shares
and shall not be entitled to exercise any of the rights of holders in respect
thereof, other than the right to receive their proportionate part of the total
Liquidation Amount, unless payment of the total Liquidation Amount for such
Exchangeable Shares shall not be made upon presentation and surrender of share
certificates in accordance with the foregoing provisions, in which case the
rights of the holders shall remain unaffected until the total Liquidation Amount
has been paid in the manner hereinbefore provided. The Corporation shall have
the right at any time after the Liquidation Date to deposit or cause to be
deposited the total Liquidation Amount in respect of the Exchangeable Shares
represented by certificates that have not at the Liquidation Date been
surrendered by the holders thereof in a custodial account with any chartered
bank or trust Corporation in Canada. Upon such deposit being made, the rights of
the holders of Exchangeable Shares after such deposit shall be limited to
receiving their proportionate part of the total Liquidation Amount for such
Exchangeable Shares so deposited, against presentation and surrender of the said
certificates held by them, respectively, in accordance with the foregoing
provisions. Upon such payment or deposit of the total Liquidation Amount, the
holders of the Exchangeable Shares shall thereafter be considered and deemed for
all purposes to be holders of the Parent Common Shares delivered to them or the
custodian on their behalf.
5.3 After the Corporation has satisfied its obligations to pay the holders
of the Exchangeable Shares the Liquidation Amount per Exchangeable Share
pursuant to Section 5.1 of these Exchangeable Share Provisions, such holders
shall not be entitled to share in any further distribution of the assets of the
Corporation.
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5.4 CanCo shall have the overriding right (the "LIQUIDATION CALL RIGHT"),
in the event of and notwithstanding the proposed liquidation, dissolution or
winding-up of the Corporation pursuant to this Article 5, to purchase from all
but not less than all of the holders of Exchangeable Shares (other than any
holder of Exchangeable Shares which is an Affiliate of Parent) on the
Liquidation Date all but not less than all of the Exchangeable Shares held by
each of such holders on payment by CanCo of an amount per share equal to:
(a) the Current Market Price of a Parent Common Share on the last
Business Day prior to the Liquidation Date, which shall be
satisfied in full by causing to be delivered to such holder
one Parent Common Share (subject to adjustment as provided for
in Section 11.1), plus
(b) an additional amount equivalent to the full amount of all
dividends declared and unpaid on such Exchangeable Share and
all dividends declared on Parent Common Shares which have not
been declared on such Exchangeable Shares in accordance with
Section 3.1 hereof
(collectively the "LIQUIDATION CALL PURCHASE PRICE", provided that if the record
date for any such declared and unpaid dividends occurs after the Liquidation
Date, the Liquidation Call Purchase Price shall not include such additional
amount equivalent to such dividends). In the event of the exercise of the
Liquidation Call Right by CanCo, each holder shall be obligated to sell all the
Exchangeable Shares held by the holder to CanCo on the Liquidation Date on
payment by CanCo to the holder of the Liquidation Call Purchase Price for each
such share.
5.5 To exercise the Liquidation Call Right, CanCo must notify the holders
of Exchangeable Shares, the Trustee and the Corporation of CanCo's intention to
exercise such right at least 30 days before the Liquidation Date in the case of
a voluntary liquidation, dissolution or winding-up of the Corporation and at
least five Business Days before the Liquidation Date in the case of an
involuntary liquidation, dissolution or winding-up of the Corporation. The
Corporation shall notify the holders of Exchangeable Shares as to whether or not
CanCo has exercised the Liquidation Call Right forthwith after the expiry of the
period during which same may be exercised by CanCo. If CanCo exercises the
Liquidation Call Right, on the Liquidation Date, CanCo will purchase and the
holders will sell all of the Exchangeable Shares then outstanding for a price
per share equal to the Liquidation Call Purchase Price.
5.6 For the purposes of completing the purchase of the Exchangeable Shares
pursuant to the Liquidation Call Right, CanCo shall deposit with the Corporation
or the Depository, on or before the Liquidation Date, certificates representing
the aggregate number of Parent Common Shares deliverable by CanCo in payment of
the total Liquidation Call Purchase Price and a cheque or cheques in the amount
of the remaining portion, if any, of the total Liquidation Call Purchase Price.
Provided that the total Liquidation Call Purchase Price has been so deposited
with the Corporation or the Depository, on and after the Liquidation Date the
rights of each holder of Exchangeable Shares
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will be limited to receiving such holder's proportionate part of the total
Liquidation Call Purchase Price payable by CanCo upon presentation and surrender
by the holder of certificates representing the Exchangeable Shares held by such
holder and the holder shall on and after the Liquidation Date be considered and
deemed for all purposes to be the holder of the Parent Common Shares delivered
to it. Upon surrender to the Corporation of a certificate or certificates
representing Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
the Act and the By-laws of the Corporation and such additional documents and
instruments as the Corporation may reasonably require, the holder of such
surrendered certificate or certificates shall be entitled to receive in exchange
therefor, and the Corporation on behalf of CanCo shall deliver to such holder,
certificates representing the Parent Common Shares to which the holder is
entitled and a cheque or cheques of CanCo payable at par and in Canadian dollars
at any branch of the bankers of CanCo or of the Corporation in Canada in payment
of the remaining portion, if any, of the total Liquidation Call Purchase Price.
If CanCo does not exercise the Liquidation Call Right in the manner described
above, on the Liquidation Date the holders of the Exchangeable Shares will be
entitled to receive in exchange therefor the Liquidation Amount otherwise
payable by the Corporation in connection with the liquidation, dissolution or
winding-up of the Corporation pursuant to this Article 5.
ARTICLE 6
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
6.1 A holder of Exchangeable Shares shall be entitled at any time, subject
to applicable law and the exercise by CanCo of the Retraction Call Right (as
defined in subsection (c) below) and otherwise upon compliance with the
provisions of this Article 6, to require the Corporation to redeem any or all of
the Exchangeable Shares registered in the name of such holder for an amount per
share equal to:
(a) the Current Market Price of a Parent Common Share on the last
Business Day prior to the Retraction Date, which shall be
satisfied in full by the Corporation causing to be delivered
to such holder one Parent Common Share (subject to adjustment
as provided for in Section 11.1) for each Exchangeable Share
presented and surrendered by the holder, plus
(b) an additional amount in cash equal to the full amount of all
dividends declared and unpaid thereon and all dividends
declared on Parent Common Shares which have not been declared
on such Exchangeable Shares in accordance with Section 3.1
hereof.
(collectively the "RETRACTION PRICE", provided that if the record date for any
such declared and unpaid dividends occurs after the Retraction Date the
Retraction Price shall not include such additional amount equivalent to such
dividends).
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To effect such redemption, the holder shall present and surrender at the
registered office of the Corporation or at such other address as may be
specified by the Corporation by notice to the holders of the Exchangeable
Shares, the certificate or certificates representing the Exchangeable Shares
which the holder desires to have the Corporation redeem, together with such
other documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Act and the By-laws of the Corporation and such
additional documents and instruments as the Corporation may reasonably require,
and together with a duly executed statement (the "RETRACTION REQUEST") in the
form of Schedule "A" hereto or in such other form as may be acceptable to the
Corporation:
(c) specifying that the holder desires to have all or any number
specified therein of the Exchangeable Shares represented by
such certificate or certificates (the "RETRACTED SHARES")
redeemed by the Corporation;
(d) stating the Business Day on which the holder desires to have
the Corporation redeem the Retracted Shares (the "RETRACTION
DATE"), provided that the Retraction Date shall be not less
than five Business Days (or such shorter period as may be
permitted by the Corporation) nor more than ten Business Days
after the date on which the Retraction Request is received by
the Corporation and further provided that, in the event that
no such Business Day is specified by the holder in the
Retraction Request, the Retraction Date shall be deemed to be
the tenth Business Day after the date on which the Retraction
Request is received by the Corporation; and
(e) acknowledging the overriding right (the "RETRACTION CALL
RIGHT") of CanCo to purchase all but not less than all the
Retracted Shares directly from the holder and that the
Retraction Request shall be deemed to be a revocable offer by
the holder to sell the Retracted Shares to CanCo in accordance
with the Retraction Call Right on the terms and conditions set
out in Section 6.3 below.
No Exchangeable Shares may be transferred to any person other than Parent or
CanCo without the prior approval of the Corporation. In the event that, on or
prior to the Automatic Redemption Date, any holder of Exchangeable Shares
notifies the Corporation that such holder desires to:
(f) transfer or otherwise attempts to transfer any such shares to
any other person or entity; or
(g) vote against or dissent from, or not send in a proxy (if the
failure to send in such proxy results in a failure to
establish a quorum for such meeting) in respect of any
resolution proposed in respect of, any matter in accordance
with the provisions of the Act or any corresponding provisions
of any other corporate legislation under which the Corporation
exists from time to time other than a matter which would
result in an adverse affect on the attributes of the
Exchangeable Shares unless such matter is
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required to maintain the equivalence of the Exchangeable
Shares and the Parent Common Shares;
(any such notification or attempt, a "TRANSFER/DISSENT ATTEMPT"), then such
holder shall, by such action, be deemed to have made a Retraction Request on the
following terms and conditions:
(h) the Exchangeable Shares which are the subject of such
Transfer/Dissent Attempt (the "TRANSFERRED/DISSENTED SHARES"
shall be considered to be Retracted Shares for the purposes of
such deemed Retraction Request;
(i) the Retraction Date shall be one Business Day after the date
of receipt by the Corporation of notice of the
Transfer/Dissent Attempt (or such lesser period as the
Corporation may permit);
(j) the holder shall be deemed to have acknowledged the overriding
Redemption Call Right and the Retraction Call Right.
In accordance with the deemed Retraction Request, no certificates shall be
issued by the Corporation representing the Transferred/Dissented Shares in the
name of the transferee, and the sole right of the transferee in respect of the
Transferred/Dissented Shares shall be to receive the Parent Common Shares to
which such person is entitled as a result of the Retraction Request.
6.2 Subject to the exercise by CanCo of the Retraction Call Right, upon
receipt by the Corporation in the manner specified in Section 6.1 hereof of a
certificate or certificates representing the number of Exchangeable Shares which
the holder desires to have the Corporation redeem, together with a Retraction
Request, and provided that the Retraction Request is not revoked by the holder
in the manner specified in Section 6.7 hereof, the Corporation shall redeem the
Retracted Shares effective at as at 3:59 p.m. on the Retraction Date and shall
cause to be delivered to such holder the total Retraction Price with respect to
such shares. If only a part of the Exchangeable Shares represented by any
certificate are redeemed (or purchased by CanCo pursuant to the Retraction Call
Right), a new certificate for the balance of such Exchangeable Shares shall be
issued to the holder at the expense of the Corporation.
6.3 Upon receipt by the Corporation of a Retraction Request, the
Corporation shall immediately notify CanCo thereof. In order to exercise the
Retraction Call Right, CanCo must notify the Corporation in writing of CanCo's
determination to do so (the "CANCO CALL NOTICE") within four Business Days of
notification to CanCo by the Corporation of the receipt by the Corporation of
the Retraction Request. If CanCo does not so notify the Corporation within such
four Business Day period, the Corporation will notify the holder as soon as
possible thereafter that CanCo will not exercise the Retraction Call Right. If
CanCo delivers the CanCo Call Notice within such four Business Day time period,
and provided that the Retraction Request is not revoked by the holder in the
manner specified in Section 6.7, the Retraction Request shall thereupon be
considered only to
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be an offer by the holder to sell the Retracted Shares to CanCo in accordance
with the Retraction Call Right. In such event, the Corporation shall not redeem
the Retracted Shares and CanCo shall purchase from such holder and such holder
shall sell to CanCo on the Retraction Date, the Retracted Shares for a purchase
price (the "PURCHASE PRICE") per share equal to the Retraction Price per share
plus, on the designated payment date therefor, to the extent not paid by the
Corporation on the designated payment date therefor, an additional amount
equivalent to the full amount of all declared and unpaid dividends on those
Retracted Shares held by such holder on any dividend record date which occurred
prior to the Retraction Date and all dividends declared on Parent Common Shares
which have not been declared on such Exchangeable Shares in accordance with
Section 3.1 hereof (the "DIVIDEND AMOUNT"). For the purposes of completing a
purchase pursuant to the Retraction Call Right, CanCo shall deposit with the
Corporation or the Depository, on or before the Retraction Date, certificates
representing Parent Common Shares and a cheque or cheques of CanCo representing
the aggregate Dividend Amount and the remaining portion, if any, of the total
Purchase Price. Provided that the total Purchase Price has been so deposited
with the Corporation or the Depository, the closing of the purchase and sale of
the Retracted Shares pursuant to the Retraction Call Right shall be deemed to
have occurred as at 3:59 p.m. on the Retraction Date and, for greater certainty,
no redemption by the Corporation of such Retracted Shares shall take place on
the Retraction Date. In the event that CanCo does not deliver a CanCo Call
Notice within such four Business Day period, and provided that the Retraction
Request is not revoked by the holder in the manner specified in Section 6.7, the
Corporation shall redeem the Retracted Shares on the Retraction Date in the
manner otherwise contemplated in this Article 6.
6.4 The Corporation or CanCo, as the case may be, shall, within twenty (20)
days, deliver to the relevant holder, at the address of the holder recorded in
the securities register of the Corporation for the Exchangeable Shares or at the
address specified in the holder's Retraction Request or by holding for pick up
by the holder at the registered office of the Corporation or at such other
address as may be specified by the Corporation by notice to the holders of the
Exchangeable Shares, certificates representing the Parent Common Shares (which
shares shall be duly issued as fully paid and non-assessable and shall be free
and clear of any lien, claim or encumbrance) registered in the name of the
holder or in such other name as the holder may request and, if applicable, a
cheque of the Corporation payable at par at any branch of the bankers of the
Corporation, or CanCo, as applicable, in payment of the remaining portion, if
any, of the total Retraction Price or a cheque of CanCo payable at par and in
Canadian dollars at any branch of the bankers of CanCo or of the Corporation in
Canada in payment of the remaining portion, if any, of the total Purchase Price,
as the case may be, and such delivery of such certificates and cheque on behalf
of the Corporation or by CanCo, as the case may be shall be deemed to be payment
of and shall satisfy and discharge all liability for the total Retraction Price
or total Purchase Price, as the case may be, to the extent that the same is
represented by such share certificates and cheques, unless such cheques are not
paid on due presentation.
6.5 On and after as at 3:59 p.m.on the Retraction Date, the holder of the
Retracted Shares shall cease to be a holder of such Retracted Shares and shall
not be entitled to exercise any of the rights
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of a holder in respect thereof, other than the right to receive his
proportionate part of the total Retraction Price or total Purchase Price, as the
case may be, unless upon presentation and surrender of certificates in
accordance with the foregoing provisions, payment of the total Retraction Price
or the total Purchase Price, as the case may be, shall not be made within the
time period as provided in section 6.4, in which case the rights of such holder
shall be reinstated until the total Retraction Price or the total Purchase
Price, as the case may be, has been paid in the manner hereinbefore provided. On
and after as at 3:59 p.m. on the Retraction Date, provided that presentation and
surrender of certificates and payment of the total Retraction Price or the total
Purchase Price, as the case may be, has been made in accordance with the
foregoing provisions, the holder of the Retracted Shares so redeemed by the
Corporation or purchased by CanCo shall thereafter be considered and deemed for
all purposes to be a holder of the Parent Common Shares.
6.6 Notwithstanding any other provision of this Article 6, the Corporation
shall not be obligated to redeem Retracted Shares specified by a holder in a
Retraction Request to the extent that such redemption of Retracted Shares would
be contrary to solvency requirements or other provisions of applicable law. If
the Corporation believes that on any Retraction Date it would not be permitted
by any of such provisions to redeem the Retracted Shares tendered for redemption
on such date, and provided that CanCo shall not have exercised the Retraction
Call Right with respect to the Retracted Shares, the Corporation shall only be
obligated to redeem Retracted Shares specified by a holder in a Retraction
Request to the extent of the maximum number that may be so redeemed (rounded
down to a whole number of shares) as would not be contrary to such provisions
and shall notify the holder at least two Business Days prior to the Retraction
Date as to the number of Retracted Shares which will not be redeemed by the
Corporation. In any case in which the redemption by the Corporation of Retracted
Shares would be contrary to solvency requirements or other provisions of
applicable law, the Corporation shall redeem Retracted Shares in accordance with
Section 6.2 hereof on a pro rata basis and shall issue to each holder of
Retracted Shares a new certificate, at the expense of the Corporation,
representing the Retracted Shares not redeemed by the Corporation pursuant to
Section 6.2 hereof. Provided that the Retraction Request is not revoked by the
holder in the manner specified in Section 6.7 hereof, the holder of any such
Retracted Shares not redeemed by the Corporation pursuant to Section 6.2 hereof
as a result of solvency requirements or other provisions of applicable law shall
be deemed by giving the Retraction Request to require Parent to purchase such
Retracted Shares from such holder on the Retraction Date or as soon as
practicable thereafter on payment by Parent to such holder of the Purchase Price
for each such Retracted Share, as more specifically provided in the Exchange
Agreement.
6.7 A holder of Retracted Shares may, by notice in writing given by the
holder to the Corporation before as at 3:59 p.m. on the Business Day immediately
preceding the Retraction Date, withdraw its Retraction Request in which event
such Retraction Request shall be null and void and, for greater certainty, the
revocable offer constituted by the Retraction Request to sell the Retracted
Shares to CanCo shall be deemed to have been revoked.
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6.8 Notwithstanding any other provision of this section 6, the Corporation
shall not be required to redeem the Retracted Shares unless such holder has
provided to the Corporation or the Depository either (i) a duly completed
Retraction Request which indicates that such holder is not a non-resident of
Canada for the purposes of the Income Tax Act (Canada) and the applicable
provisions of any provincial legislation or (ii) a certificate issued by the
Minister of National Revenue under section 116 of the INCOME TAX ACT (Canada)
(or any successor provision) and any provincial equivalent if required, with a
certificate limit not less than the fair market value of the Retracted Shares.
ARTICLE 7
REDEMPTION OF EXCHANGEABLE SHARES BY CORPORATION
7.1 Subject to applicable law and subject to the exercise by CanCo of the
Redemption Call Right, the Corporation shall on the Automatic Redemption Date
redeem (the "AUTOMATIC REDEMPTION") all of the then outstanding Exchangeable
Shares for an amount per share equal to:
(i) the Current Market Price of a Parent Common Share on the last
Business Day prior to the Automatic Redemption Date, which
shall be satisfied in full by the Corporation causing to be
delivered to each holder of Exchangeable Shares one Parent
Common Share (subject to adjustment as provided for in Section
11.1) for each Exchangeable Share held by such holder, plus
(ii) an additional amount in cash equal to the full amount of all
declared and unpaid dividends thereon and all dividends
declared on Parent Common Shares which have not been declared
on such Exchangeable Shares in accordance with Section 3.1
hereof.
(collectively the "REDEMPTION PRICE", provided that if the record date for any
such declared and unpaid dividends occurs after the Automatic Redemption Date,
the Redemption Price shall not include such additional amount equivalent to such
dividends). If any Exchangeable Shares are issued after the Automatic Redemption
Date, the Corporation may immediately redeem such Exchangeable Shares as if they
were issued and outstanding on the Automatic Redemption Date.
7.2 In any case of a redemption of Exchangeable Shares under this Article
7, the Corporation shall, at least 30 days before the date on which the
Exchangeable Shares are to be redeemed (the "REDEMPTION DATE") (other than a
redemption as a result of an Automatic Redemption Date established in connection
with a Parent Control Transaction or an Exchangeable Share Voting Event, in
which case the notice shall not be less than three days) send or cause to be
sent to each holder of Exchangeable Shares to be redeemed a notice in writing of
the redemption by the Corporation or the purchase by CanCo under the Redemption
Call Right, as the case may be, of the Exchangeable
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Shares held by such holder. In the case of a Redemption Date established in
connection with a Parent Control Transaction or an Exchangeable Share Voting
Event, the written notice of redemption by the Corporation shall be sent on or
before the Redemption Date, on as many days prior written notice as may be
determined by the Board of Directors to be reasonably practicable in the
circumstances. Such notice shall set out the formula for determining the
Redemption Price or the Redemption Call Purchase Price, as the case may be, the
Automatic Redemption Date and, if applicable, particulars of the Redemption Call
Right. On or after the Automatic Redemption Date and subject to the exercise by
CanCo of the Redemption Call Right, the Corporation shall cause to be delivered
to the holders of the Exchangeable Shares to be redeemed the Redemption Price
for each such Exchangeable Share, upon presentation and surrender at the
registered office of the Corporation or at such other address as may be
specified by the Corporation by notice to the holders of the Exchangeable
Shares, of the certificates representing such Exchangeable Shares, together with
such other documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Act and the By-laws of the Corporation and such
additional documents and instruments as the Corporation may reasonably require.
Payment of the total Redemption Price for such Exchangeable Shares shall be made
by delivery to each holder, at the address of the holder recorded in the
securities register of the Corporation or by holding for pick up by the holder
at the registered office of the Corporation or at such other address as may be
specified by the Corporation by notice to the holders of the Exchangeable
Shares, of certificates representing Parent Common Shares (which shares shall be
duly issued as fully paid and non-assessable and shall be free and clear of any
lien, claim or encumbrance) registered in the name of the holder and, if
applicable, a cheque of the Corporation payable at par at any branch of the
bankers of the Corporation in respect of the additional amount equivalent to the
full amount of all declared and unpaid dividends and all dividends declared on
Parent Common Shares which have not been declared on such Exchangeable Shares in
accordance with Section 3.1 hereof comprising part of the total Redemption
Price. On and after the Automatic Redemption Date, the holders of the
Exchangeable Shares called for redemption shall cease to be holders of such
Exchangeable Shares and shall not be entitled to exercise any of the rights of
holders in respect thereof, other than the right to receive their proportionate
part of the total Redemption Price, unless payment of the total Redemption Price
for such Exchangeable Shares shall not be made upon presentation and surrender
of certificates in accordance with the foregoing provisions, in which case the
rights of the holders shall remain unaffected until the total Redemption Price
has been paid in the manner hereinbefore provided. The Corporation shall have
the right at any time after the sending of notice of its intention to redeem
Exchangeable Shares as aforesaid to deposit or cause to be deposited the total
Redemption Price of the Exchangeable Shares so called for redemption, or of such
of the said Exchangeable Shares represented by certificates that have not at the
date of such deposit been surrendered by the holders thereof in connection with
such redemption, in a custodial account with any chartered bank or trust
corporation in Canada named in such notice. Upon the later of such deposit being
made and the Automatic Redemption Date, the Exchangeable Shares in respect
whereof such deposit shall have been made shall be redeemed and the rights of
the holders thereof after such deposit or Automatic Redemption Date, as the case
may be, shall be limited to receiving their proportionate part of the total
Redemption Price for such Exchangeable Shares so deposited, against presentation
and surrender of the said certificates held by them,
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respectively, in accordance with the foregoing provisions. Upon such payment or
deposit of the total Redemption Price, the holders of the Exchangeable Shares
shall thereafter be considered and deemed for all purposes to be holders of the
Parent Common Shares delivered to them or the custodian on their behalf.
7.3 CanCo shall have the overriding right (the "REDEMPTION CALL RIGHT"),
notwithstanding the proposed redemption of Exchangeable Shares by the
Corporation pursuant to this Article 7 hereof, to purchase from all but not less
than all of the holders of Exchangeable Shares (other than any holder of
Exchangeable Shares which is an Affiliate of Parent) to be redeemed on the
Automatic Redemption Date, all but not less than all of the Exchangeable Shares
held by each such holder on payment by CanCo to the holder of an amount per
share equal to:
(a) the Current Market Price of a Parent Common Share on the last
Business Day prior to the Automatic Redemption Date which
shall be satisfied in full by causing to be delivered to such
holder one Parent Common Share (subject to adjustment as
provided for in Section 11.1), plus
(b) an additional amount in cash equal to the full amount of all
dividends declared and unpaid on such Exchangeable Share and
all dividends declared on Parent Common Shares which have not
been declared on such Exchangeable Shares in accordance with
Section 3.1 of these share provisions
(collectively the "REDEMPTION CALL PURCHASE PRICE", provided that if the record
date for any such declared and unpaid dividends occurs after the Automatic
Redemption Date, the Redemption Call Purchase Price shall not include such
additional amount equivalent to such dividends). In the event of the exercise of
the Redemption Call Right by CanCo, each holder shall be obligated to sell all
the Exchangeable Shares held by the holder and otherwise to be redeemed to CanCo
on the Automatic Redemption Date on payment by CanCo to the holder of the
Redemption Call Purchase Price for each such share.
7.4 To exercise the Redemption Call Right, CanCo must notify the holders of
Exchangeable Shares, and the Corporation of CanCo's intention to exercise such
right at least two days before the Automatic Redemption Date (or, in the case of
a Redemption Date established in connection with a Parent Control Transaction or
an Exchangeable Share Voting Event, at least that number of days which is one
day less than that number of days established by the Board of Directors of the
Corporation as being the number of days prior notice as may be applicable for
such redemption). The Corporation will notify the holders of the Exchangeable
Shares as to whether or not CanCo has exercised the Redemption Call Right
forthwith after the expiry of the period during which the same may be exercised
by CanCo. If CanCo exercises the Redemption Call Right, on the Automatic
Redemption Date, CanCo will purchase and the holders will sell all of the
Exchangeable Shares to be redeemed for a price per share equal to the Redemption
Call Purchase Price.
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7.5 For the purposes of completing the purchase of Exchangeable Shares
pursuant to the Redemption Call Right, CanCo shall deposit with the Corporation
or the Depository, on or before the Automatic Redemption Date, certificates
representing the aggregate number of Parent Common Shares deliverable by CanCo
in payment of the total Redemption Call Purchase Price and a cheque or cheques
in the amount of the remaining portion, if any, of the total Redemption Call
Purchase Price. Provided that the total Redemption Call Purchase Price has been
so deposited with the Corporation or the Depository, on and after the Automatic
Redemption Date the rights of each holder of Exchangeable Shares so purchased
will be limited to receiving such holder's proportionate part of the total
Redemption Call Purchase Price payable by CanCo upon presentation and surrender
by the holder of certificates representing the Exchangeable Shares purchased by
CanCo from such holder and the holder shall on and after the Automatic
Redemption Date be considered and deemed for all purposes (including for
purposes of dividend entitlement, if any) to be the holder of the Parent Common
Shares delivered to such holder. Upon surrender to the Corporation of a
certificate or certificates representing Exchangeable Shares, together with such
other documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Act and the By-laws of the Corporation and such
additional documents and instruments as the Corporation may reasonably require,
the holder of such surrendered certificate or certificates shall be entitled to
receive in exchange therefor, and the Corporation on behalf of CanCo shall
deliver to such holder, certificates representing the Parent Common Shares to
which the holder is entitled and a cheque or cheques of CanCo payable at par and
in Canadian dollars at any branch of the bankers of CanCo or of the Corporation
in Canada in payment of the remaining portion, if any, of the total Redemption
Call Purchase Price. If CanCo does not exercise the Redemption Call Right in the
manner described above, on the Automatic Redemption Date the holders of the
Exchangeable Shares will be entitled to receive in exchange therefor the
redemption price otherwise payable by the Corporation in connection with the
redemption of Exchangeable Shares pursuant to this Article 7.
ARTICLE 8
PURCHASE FOR CANCELLATION
8.1 Subject to applicable law and the articles of the Corporation, the
Corporation may at any time and from time to time purchase for cancellation all
or any part of the outstanding Exchangeable Shares at any price by private
agreement with one or more holders of Exchangeable Shares or by tender to all
the holders of record of Exchangeable Shares then outstanding, at any price per
share together with an amount equal to all declared and unpaid dividends
thereon. If in response to an invitation for tenders under the provisions of
this Section 8.1, more Exchangeable Shares are tendered at a price or prices
acceptable to the Corporation than the Corporation is prepared to purchase, the
Exchangeable Shares to be purchased by the Corporation shall be purchased as
nearly as may be pro rata according to the number of shares tendered by each
holder who submits a tender to the Corporation, provided that when shares are
tendered at different prices, the pro rating shall be effected (disregarding
fractions) only with respect to the shares tendered at the price at which more
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shares were tendered than the Corporation is prepared to purchase after the
Corporation has purchased all the shares tendered at lower prices. If only part
of the Exchangeable Shares represented by any certificate shall be purchased, a
new certificate for the balance of such shares shall be issued at the expense of
the Corporation. Notwithstanding the foregoing, the Corporation may at any time
and from time to time purchase Exchangeable Shares held by any of its Affiliates
(including CanCo) in exchange for Common Shares without making a similar offer
to all the holders of record of Exchangeable Shares then outstanding.
ARTICLE 9
VOTING RIGHTS
9.1 Except as required by applicable law and the provisions of Article10,
section 11.1 and section 12.2 hereof, the holders of the Exchangeable Shares
shall not be entitled as such to receive notice of or to attend any meeting of
the shareholders of the Corporation or to vote at any such meeting. For greater
certainty, the holders of the Exchangeable Shares shall not have the right to
vote separately as a class upon an amendment to the Articles of Incorporation of
the Corporation or the By-laws of the Corporation to:
(a) increase or decrease any maximum number of authorized shares
of such class, or increase any maximum number of authorized
shares of a class or series having rights or privileges equal
or superior to the Exchangeable Shares;
(b) effect a reclassification of the Exchangeable Shares; or
(c) create a new class or series of shares equal or superior to
the Exchangeable Shares, except in the case of a series under
section 25 of the Act.
ARTICLE 10
AMENDMENT AND APPROVAL
10.1 The rights, privileges, restrictions and conditions attaching to the
Exchangeable Shares may be added to, changed or removed but only with the
approval of the holders of the Exchangeable Shares given as hereinafter
specified. No such changes or removals may be made without the approval of the
holders of a majority of the Common Shares at the time outstanding given in
accordance with applicable law subject to a minimum requirement that such
approval be evidenced by resolution passed by not less than 66 2/3% of the votes
cast on such resolution at a meeting of holders of Common Shares duly called.
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10.2 Any approval given by the holders of the Exchangeable Shares to add to,
change or remove any right, privilege, restriction or condition attaching to the
Exchangeable Shares or any other matter requiring the approval or consent of the
holders of the Exchangeable Shares shall be deemed to have been sufficiently
given if it shall have been given in accordance with applicable law subject to a
minimum requirement that such approval be evidenced by resolution passed by not
less than 66 2/3% of the votes cast on such resolution at a meeting of holders
of Exchangeable Shares (other than Exchangeable Shares held by the Corporation,
Parent, CanCo or any of their respective Affiliates) duly called and held at
which the holders of at least 25% of the outstanding Exchangeable Shares at that
time are present or represented by proxy; provided that if at any such meeting
the holders of at least 25% of the outstanding Exchangeable Shares at that time
are not present or represented by proxy within one-half hour after the time
appointed for such meeting then the meeting shall be adjourned to such date not
less than five days thereafter and to such time and place as may be designated
by the Chairman of such meeting. At such adjourned meeting the holders of
Exchangeable Shares present or represented by proxy thereat may transact the
business for which the meeting was originally called and a resolution passed
thereat by the affirmative vote of not less than two-thirds of the votes cast on
such resolution at such meeting (other than by the Corporation, Parent, CanCo or
any of their respective Affiliates) shall constitute the approval or consent of
holders of Exchangeable Shares.
ARTICLE 11
RECIPROCAL CHANGES, ETC. IN RESPECT OF PARENT COMMON SHARES
11.1 Each holder of an Exchangeable Share acknowledges that the Support
Agreement provides, in part, that Parent will not without the prior approval of
the Corporation and the prior approval of the holders of the Exchangeable Shares
given in accordance with section 10.2 hereof:
(a) issue or distribute Parent Common Shares (or
securities exchangeable for or convertible into or
carrying rights to acquire Parent Common Shares) to
the holders of all or substantially all of the then
outstanding Parent Common Shares by way of stock
dividend or other distribution, other than an issue
of Parent Common Shares (or securities exchangeable
for or convertible into or carrying rights to acquire
Parent Common Shares) to holders of Parent Common
Shares who exercise an option to receive dividends in
Parent Common Shares (or securities exchangeable for
or convertible into or carrying rights to acquire
Parent Common Shares) in lieu of receiving cash
dividends; or
(b) issue or distribute rights, options or warrants to
the holders of all or substantially all of the then
outstanding Parent Common Shares entitling
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them to subscribe for or to purchase Parent Common
Shares (or securities exchangeable for or convertible
into or carrying rights to acquire Parent Common
Shares); or
(c) issue or distribute to the holders of all or
substantially all of the then outstanding Parent
Common Shares (A) shares or securities of Parent of
any class other than Parent Common Shares (other than
shares convertible into or exchangeable for or
carrying rights to acquire Parent Common Shares), (B)
rights, options or warrants other than those referred
to in Section 11.1(a)(ii) above, (C) evidences of
indebtedness of Parent or (D) assets of Parent;
unless the economic equivalent on a per share basis of such rights,
options, securities, shares, evidences of indebtedness or other assets
is issued or distributed simultaneously to holders of the Exchangeable
Shares.
11.2 Each holder of an Exchangeable Share acknowledges that the Support
Agreement further provides, in part, that Parent will not without the prior
approval of the Corporation and the prior approval of the holders of the
Exchangeable Shares given in accordance with section 10.2 hereof:
(a) subdivide, redivide or change the then outstanding
Parent Common Shares into a greater number of Parent
Common Shares; or
(b) reduce, combine or consolidate or change the then
outstanding Parent Common Shares into a lesser number
of Parent Common Shares; or
(c) reclassify or otherwise change the Parent Common
Shares or effect an amalgamation, merger,
reorganization or other transaction affecting the
Parent Common Shares;
unless the same or an economically equivalent change shall
simultaneously be made to, or in, the rights of the holders of the
Exchangeable Shares. The Support Agreement further provides, in part,
that the aforesaid provisions of the Support Agreement shall not be
changed without the approval of the holders of the Exchangeable Shares
given in accordance with section 10.2 hereof.
11.3 Pursuant to the Exchange Agreement, the holders of Exchangeable Shares
(other than Parent and its Affiliates) are given certain rights to exchange
their Exchangeable Shares for Parent Common Shares.
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ARTICLE 12
ACTIONS BY THE CORPORATION UNDER SUPPORT AGREEMENT
AND UNDER EXCHANGE AGREEMENT
12.1 The Corporation will take all such actions and do all such things as
shall be necessary or advisable to perform and comply with and to ensure
performance and compliance by Parent, CanCo and the Corporation with all
provisions of the Support Agreement and the Exchange Agreement applicable to
Parent, CanCo and the Corporation, respectively, in accordance with the
respective terms thereof including, without limitation, taking all such actions
and doing all such things as shall be necessary or advisable to enforce to the
fullest extent possible for the direct benefit of the Corporation and the
holders of Exchangeable Shares all rights and benefits in favour of the
Corporation and such holders under or pursuant to such agreements.
12.2 The Corporation shall not propose, agree to or otherwise give effect to
any amendment to, or waiver or forgiveness of its rights or obligations under,
the Support Agreement and the Exchange Agreement (except as contemplated
therein) without the approval of the holders of Exchangeable Shares given (i) at
a meeting convened in accordance with Section 10.2 hereof or (ii) by way of
written consent by each of the holders of Exchangeable Shares, other than such
amendments, waivers and/or forgiveness as may be necessary or advisable for the
purposes of:
(a) adding to the covenants of the other party or parties to such
agreement for the protection of the Corporation or the holders
of Exchangeable Shares thereunder; or
(b) making such provisions or modifications not inconsistent with
the spirit and intent of such agreement as may be necessary or
desirable with respect to matters or questions arising
thereunder which, in the opinion of the Board of Directors, it
may be expedient to make, provided that the Board of Directors
shall be of the opinion, after consultation with counsel, that
such provisions and modifications will not be prejudicial to
the interests of the holders of the Exchangeable Shares; or
(c) making such changes in or corrections to such agreement which,
on the advice of counsel to the Corporation, are required for
the purpose of curing or correcting any ambiguity or defect or
inconsistent provision or clerical omission or mistake or
manifest error contained therein, provided that the Board of
Directors shall be of the good faith opinion, after
consultation with counsel, that such changes or corrections
will not be prejudicial to the interests of the holders of the
Exchangeable Shares.
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ARTICLE 13
LEGEND; CALL RIGHTS
13.1 The certificates evidencing the Exchangeable Shares shall contain or
have affixed thereto a legend, in form and on terms approved by the Board of
Directors, with respect to the Support Agreement, the deemed delivery of a
Retraction Request as contemplated in Section 6.1 of these share provisions, the
provisions relating to the Liquidation Call Right, the Redemption Call Right and
the Retraction Call Right, and the Exchange Agreement (including the provisions
with respect to the Exchange Right and automatic exchange thereunder).
13.2 Each holder of an Exchangeable Share, whether of record or beneficial,
by virtue of becoming and being such a holder shall be deemed to acknowledge
each of the Liquidation Call Right, the Retraction Call Right and the Redemption
Call Right, in each case, in favour of CanCo, and the overriding nature thereof
in connection with the liquidation, dissolution or winding-up of the Corporation
or the retraction or redemption of Exchangeable Shares, as the case may be, and
to be bound thereby in favour of the Corporation as therein provided.
ARTICLE 14
NOTICES
14.1 Any notice or other communication required or permitted to be delivered
to the Corporation shall be in writing and shall be valid and effective when
delivered (by hand, by registered mail, by courier or express delivery service)
to the registered office of the Corporation and addressed to the attention of
the President. Any such notice, request or other communication shall only be
deemed to have been given and received upon actual receipt thereof by the
Corporation.
14.2 Any presentation and surrender by a holder of Exchangeable Shares to
the Corporation of certificates representing Exchangeable Shares in connection
with the liquidation, dissolution or winding up of the Corporation or the
retraction or redemption of Exchangeable Shares shall be made by registered mail
(postage prepaid) or by delivery to the registered office of the Corporation or
at such other address as may be specified by the Corporation by notice to the
holders of the Exchangeable Shares, in each case addressed to the attention of
the President of the Corporation. Any such presentation and surrender of
certificates shall only be deemed to have been made and to be effective upon
actual receipt thereof by the Corporation. Any such presentation and surrender
of certificates made by registered mail shall be at the sole risk of the holder
mailing the same.
14.3 Any and all notices to be given and any documents to be sent to any
holders of Exchangeable Shares may be given or sent to the address of such
holder shown on the register of holders of Exchangeable Shares in any manner
permitted by the By-laws of the Corporation from time to time
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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. Any such notice, request or other communication, if given by mail,
shall be deemed to have been given and received on the fifth Business Day
following the date of mailing and, if given by delivery, shall be deemed to have
been given and received on the date of delivery. Accidental failure or omission
to give any notice, request or other communication to one or more holders of
Exchangeable Shares shall not invalidate or otherwise alter or affect any action
or proceeding to be taken by the Corporation pursuant thereto.
14.4 If the Corporation determines that mail service is or is threatened to
be interrupted at the time when the Corporation is required or elects to give
any notice to the holders of Exchangeable Shares hereunder, the Corporation
shall, notwithstanding the provisions hereof, give such notice by means of
publication in THE GLOBE AND MAIL, national edition, or any other English
language daily newspaper or newspapers of general circulation in Canada and in a
French language daily newspaper of general circulation in the Province of
Quebec, once in each of two successive weeks, and notice so published shall be
deemed to have been given on the latest date on which the first publication has
taken place. If, by any reason of any actual or threatened interruption of mail
service due to strike, lock-out or otherwise, any notice to be given to the
Corporation would be unlikely to reach its destination in a timely manner, such
notice shall be valid and effective only if delivered personally to the
Corporation in accordance with section 14.1 or 14.2, as the case may be.
ARTICLE 15
GENERAL
15.1 WITHHOLDING RIGHTS
The Corporation and CanCo shall be entitled to deduct and withhold from any
dividends paid on the Exchangeable Shares and any consideration otherwise
payable to any holder of Exchangeable Shares such amounts as the Corporation and
CanCo determine they are required to deduct and withhold with respect to the
making of such payment under the UNITED STATES INTERNAL REVENUE CODE OF 1986, as
amended, the INCOME TAX 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 hereof as having been paid to
the holder of the Exchangeable Shares in respect of which such deduction and
withholding was made, provided that such withheld amounts are actually remitted
to the appropriate taxing authority. To the extent that the amount so required
to be deducted or withheld from any payment to a holder exceeds the cash portion
of the consideration otherwise payable to the holder, and the holder has not
provided the Corporation or the CanCo, as the case may be, with such amount in
cash or certified funds, the Corporation and CanCo are hereby authorized to sell
or otherwise dispose of at fair market value such portion of such consideration
as is necessary to provide sufficient funds to the Corporation and CanCo (after
deducting expenses) in order to enable them to comply with such deduction or
withholding requirement and the Corporation and CanCo
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shall give an accounting to the holder with respect thereto and any balance of
such proceeds of sale. The Corporation shall be entitled to withhold all of the
consideration to which such non-resident shareholder would otherwise be entitled
until such time as the holder provides to the Corporation an appropriate
certificate issued under section 116 of the INCOME TAX ACT (Canada) or an amount
in cash or certified funds equal to the amount the Corporation would be required
to remit to the Canada Customs and Revenue Agency on behalf of the non-resident
shareholder if such a certificate was not provided, together with interest
thereon in an amount sufficient to indemnify the Corporation, on an after-tax
basis, for its costs in connection with the foregoing.
15.2 SPECIFIED AMOUNT
For the purposes of subsection 191(4) of the INCOME TAX ACT (Canada),
the specified amount in respect of an Exchangeable Share is $30.305.
15.3 COMPLIANCE
The Corporation, CanCo and Parent may waive strict compliance by a
holder of Exchangeable Shares with any provision of the Exchangeable Share
Provisions.
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SCHEDULE "A"
NOTICE OF RETRACTION
TO: IMAGE PROCESSING SYSTEMS INC. ("THE CORPORATION") and PHOTON DYNAMICS
NOVA SCOTIA COMPANY (or its permitted assigns) ("CanCo"), MONTREAL
TRUST COMPANY OF CANADA (the "DEPOSITORY") and PHOTON DYNAMICS, INC.
("PARENT")
This notice is given pursuant to Article 6 of the provisions
(the "SHARE PROVISIONS") attaching to the Exchangeable Shares of the Corporation
represented by this certificate and all capitalized words and expressions used
in this notice that are defined in the Share Provisions have the meanings
ascribed to such words and expressions in such Share Provisions.
The undersigned hereby notifies the Corporation that, subject
to the Retraction Call Right referred to below, the undersigned desires to have
the Corporation redeem in accordance with Article 6 of the Share Provisions the
following share(s) (the "RETRACTED SHARES"):
/ / all share(s) represented by this certificate; or
/ / __________________ share(s) only.
The undersigned hereby notifies the Corporation that the
Retraction Date shall be ____ ____________.
Note: The Retraction Date must be a Business Day and must not be less than
five Business Days nor more than ten Business Days after the date upon
which this notice is received by the Depository. If no such Business
Day is specified above, the Retraction Date shall be deemed to be the
tenth Business Day after the date on which this notice is received by
the Depository.
The undersigned acknowledges the overriding Retraction Call
Right of CanCo to purchase all but not less than all the Retracted Shares from
the undersigned and that this notice is and shall be deemed to be a revocable
offer by the undersigned to sell the Retracted Shares to CanCo in accordance
with the Retraction Call Right on the Retraction Date for the Purchase Price and
on the other terms and conditions set out in section 6.3 of the Share
Provisions. The undersigned further acknowledges that CanCo has agreed to
exercise the Retraction Call Right and purchase any and all Retracted Shares.
This notice of retraction, and this offer to sell the Retracted Shares to CanCo,
may be revoked and withdrawn by the undersigned only by notice in writing given
to the Depository at any time before the close of business on the Business Day
immediately preceding the Retraction Date.
The undersigned acknowledges that if, as a result of solvency
provisions of applicable law, the Corporation is unable to redeem all Retracted
Shares, the undersigned will be deemed to have exercised the Exchange Right so
as to require Parent to purchase the unredeemed Retracted Shares.
The undersigned hereby represents and warrants to the
Corporation and CanCo that the undersigned:
1. / / is
(select one)
/ / is not
the beneficial owner of the Retracted Shares;
NOTE: IF THE BENEFICIAL OWNER, PROCEED TO ITEM 2 BELOW; IF NOT THE BENEFICIAL
OWNER, PROCEED TO ITEM 3 BELOW.
2. If the undersigned is the beneficial owner of the Retracted Shares, the
undersigned further represents and warrants that the undersigned:
/ / is
(select one)
/ / is not
a non-resident of Canada for purposes of the INCOME TAX ACT (Canada). THE
UNDERSIGNED ACKNOWLEDGES THAT, UNLESS THE EXCHANGEABLE SHARES ARE THEN LISTED ON
A PRESCRIBED STOCK EXCHANGE, IN THE ABSENCE OF AN INDICATION THAT THE
UNDERSIGNED IS NOT A NON-RESIDENT OF CANADA OR A CERTIFICATE ISSUED BY THE
MINISTER OF NATIONAL REVENUE UNDER SECTION 116 OF THE INCOME TAX ACT (CANADA) OR
ANY SUCCESSOR PROVISION AND ANY PROVINCIAL EQUIVALENT IF REQUIRED, WITH A TAX
CLEARANCE CERTIFICATE LIMIT NOT LESS THAN THE FAIR MARKET VALUE OF THE RETRACTED
SHARES, THE CORPORATION IS NOT OBLIGATED TO EFFECT THE RETRACTION.
3. If the undersigned is not the beneficial owner of the Retracted Shares
then the undersigned further represents and warrants that the beneficial owner
of the Retracted Shares:
/ / is
(select one)
/ / is not
a non-resident of Canada for purposes of the INCOME TAX ACT (Canada). THE
UNDERSIGNED ACKNOWLEDGES THAT, UNLESS THE EXCHANGEABLE SHARES ARE THEN LISTED ON
A PRESCRIBED STOCK
EXCHANGE, IN THE ABSENCE OF AN INDICATION THAT THE BENEFICIAL OWNER IS NOT A
NON-RESIDENT OF CANADA OR A CERTIFICATE ISSUED BY THE MINISTER OF NATIONAL
REVENUE UNDER SECTION 116 OF THE INCOME TAX ACT (CANADA) OR ANY SUCCESSOR
PROVISION AND ANY PROVINCIAL EQUIVALENT IF REQUIRED, WITH A TAX CLEARANCE
CERTIFICATE LIMIT NOT LESS THAN THE FAIR MARKET VALUE OF THE RETRACTED SHARES,
THE CORPORATION IS NOT OBLIGATED TO EFFECT THE RETRACTION.
The undersigned hereby represents and warrants that the
undersigned has good title to, and owns, the share(s) represented by this
certificate to be acquired by Parent, CanCo or the Corporation, as the case may
be, free and clear of all liens, claims and encumbrances.
---------------------- ----------------------------- --------------------------
(Date) (Signature of Shareholder) (Guarantee of Signature)
/ / Please check box if the securities and any cheque(s) resulting from the
retraction or purchase of the Retracted Shares are to be held for
pick-up by the shareholder at the office of the Depository set out
below, failing which the securities and any cheque(s) will be mailed to
the last address of the shareholder as it appears on the register
unless the form appearing below is duly completed.
Note: This panel must be completed and this certificate, together with such
additional documents as the Corporation may require, must be deposited
with the Depository at its office in Toronto. The securities and any
cheque(s) resulting from the retraction or purchase of the Retracted
Shares will be issued and registered in, and made payable to,
respectively, the name of the shareholder as it appears on the register
of the Corporation and the securities and any cheque(s) resulting from
such retraction or purchase will be delivered to such shareholder as
indicated above, unless the form appearing immediately below is duly
completed.
Date: _____________________________
Name of Person in Whose Name Securities or Cheque(s)
are to be Registered, Issued or Delivered (please print): ______________________
Street Address or P.O. Box: ____________________________________________________
Signature of Shareholder: ______________________________________________________
City, Province and Postal Code: ________________________________________________
Signature Guaranteed by: _______________________________________________________
A - 3
Taxpayer Identification Number/
Social Insurance Number _____________________________________________________
Note: If this notice of retraction is for less than all of the shares
represented by this certificate, a certificate representing the
remaining share(s) of the Corporation represented by this certificate
will be issued and registered in the name of the shareholder as it
appears on the register of the Corporation.
To effect a retraction, this duly completed retraction notice, together with
such additional documents as the Corporation may require, must be deposited with
the Depository at:
Montreal Trust Company of Canada
Stock Transfer Services
9th Floor (by hand)
11th Floor (by mail or courier)
000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
A - 4
