Exhibit 4
August 22, 2001
Xxxxxx Xxxxxxxx
00 Xxxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Xxxxxxx Xxxxxxxxx
000 Xx. Xxxxxxxx Xxx.
Xxxxxxx, Xxxxxxx
X0X 0X0
Dear Sirs:
RE: XXXXXX LCW LIMITED ("KLL")
This letter will confirm our agreement relating to your investment in Class B
common shares of KLL.
1. AUTHORIZED CAPITAL: KLL has three classes of shares as follows:
- Unlimited Class A common shares
- Unlimited Class B common shares
- 2,163,700 non-voting preference shares (the "preferred shares") which
are redeemable and retractable for an aggregate redemption price of
$21,637,000 plus any accrued unpaid dividends; entitled to fixed
cumulative dividends at a rate of 3% per annum; and entitled to
liquidation priority to the extent of the redemption price.
2. PURPOSE: KLL is the owner of a warrant to acquire 4,400,000 common shares
of Lafarge Corporation at a price of US $29 per share (the "Warrant"). KLL
acquired the Warrant in exchange for redeemable preference shares on a tax-
deferred basis under subsection 85(1) of the Income Tax Act (Canada). KLL's
business is restricted to acquiring and holding the Warrant for investment
purposes.
3. SHARE SUBSCRIPTIONS: Xxxxxx Van Nostrand Co. Limited ("KVN") will subscribe
for 60 Class A common shares of KLL for $600, Xxxxxx Xxxxxxxx will
subscribe for 20 Class B common shares of KLL for $200, and Xxxxxxx
Xxxxxxxxx will subscribe for 20 Class B common shares of KLL for $200.
4. ISSUANCE OF SHARES: No new shares of KLL will be issued without the
unanimous consent of all shareholders.
5. TRANSFER OF SHARES: No transfer of shares of KLL will be permitted without
the unanimous consent of all shareholders.
6. DISTRIBUTION POLICY: KLL's distribution policy will be to distribute the
after-tax proceeds from the sale of all or part of the Warrant or the
Lafarge Corporation shares acquired on the exercise of the Warrant within
10 days following the receipt of such proceeds in accordance with the
following:
(a) the preferred shares will be redeemed for their redemption price
(including accrued and unpaid dividends);
(b) a dividend will be declared and paid on the Class A common shares
equal to 90% of KLL's Net Sale Proceeds (as defined below) from the
sale less the aggregate of (i) $1,000,000 and (ii) the portion of the
redemption price of the preferred shares that is attributable to
accrued and unpaid dividends; and
(c) the remainder of the after-tax proceeds from the sale will be paid as
a dividend on the Class B common shares.
We believe that it is reasonable for you to expect that the dividends that
will be declared and paid on your Class B common shares will be
approximately equal to 10% of KLL's Net Sale Proceeds.
Schedule 1 attached hereto sets out two examples of the application of this
dividend policy.
7. DEFINITIONS:
Net Sale Proceeds is defined as Total Proceeds (as defined below) less the
Net Cost of the Warrant (as defined below) and any taxes paid or payable by
KLL as a result of the sale of the Warrant or the Lafarge Corporation
shares acquired on the exercise of the Warrant.
Net Cost of the Warrant is defined as $20,637,000 representing the original
Warrant cost of $21,637,000 less $1,000,000 representing notional interest
on the deferred original Warrant cost of $21,637,000 for one year.
Total Proceeds is defined as any of the following as the case may be:
(a) total proceeds from the sale of the Warrant, or
(b) total proceeds from the sale of the Lafarge Corporation shares
acquired on the exercise of the Warrant less the total exercise price
of acquiring the shares, or
(c) total proceeds from the sale of the Lafarge Corporation shares
delivered to KLL pursuant to a Cashless Exercise as defined in the
Warrant (i.e. no exercise price required to be paid),
2
minus, in each case,
(d) any reasonable costs and expenses incurred by KLL in connection with
the sale.
8. TAX MATTERS: In determining the amount of taxes paid or payable by KLL as a
consequence of the sale of the Warrant or the Lafarge Corporation shares
acquired on the exercise of the Warrant, the amount of any refundable tax
to which KLL will become entitled as a consequence of the payment of
dividends in accordance with its dividend policy shall not be considered to
be a tax paid or payable by KLL as a consequence of the sale of the Warrant
or the Lafarge Corporation shares.
To the extent that amounts are added to KLL's capital dividend account, as
defined by the Income Tax Act (Canada), such amounts will be allocated and
paid as to 90% to the holders of the Class A common shares and as to 10% to
the holders of the Class B common shares.
9. CURRENCY: All dollar amounts in this agreement are Canadian dollars, unless
specified otherwise.
If the foregoing is satisfactory to you, please sign and date this letter where
indicated below and return it to me. Duplicate copies of this letter and its
attachment are enclosed for you.
XXXXXX XXX XXXXXXXX CO. LIMITED
PER: /s/ Xxxxxxxx X. Xxxxxxxxx
--------------------------------
Xxxxxxxx X. Xxxxxxxxx
We acknowledge and agree to the terms set out herein.
/s/ Xxxxxxx Xxxxxxxxx DATE: AUGUST 22, 2001
-------------------------------------
Xxxxxxx Xxxxxxxxx
/s/ Xxxxxx Xxxxxxxx DATE: AUGUST 22, 2001
-------------------------------------
Xxxxxx Xxxxxxxx
3
SCHEDULE 1
WARRANT PROCEEDS PARTICIPATION SCHEDULE
(PRE-TAX)
F
C Excess of G H I J
A B US $ D E Exercise Price Excess of Exercise Net Cost Net Allocation
# of US $ Strike Total Exercise Total Strike Over Strike Price Over Strike of Warrant Proceeds to to Class B
Warrants Price Price Price in US $ Price in US $ Price in US $ Price in Cdn. $ Cdn. $ be Shared Shares
--------- ----- ------- -------------- ------------- -------------- ------------------- ---------- ----------- ----------
(A X B) (A X C) (D-6) (F X 1.52) (note 1) (note 2) (G - H) (1 X 10%)
4,400,000 $35 $29 154,000,000 127,600,000 26,400,000 40,128,000 20,637,000 19,491,000 1,949,100
4,400,000 $38 $29 167,200,000 127,600,000 39,600,000 60,192,000 20,637,000 39,555,000 3,955,100
(1) Any costs and expenses of the disposition would also be deducted, but this
schedule assumes there would be no such costs and expenses.
(2) $21,637,000 less assumed interest earned of $1,000,000 for the period
December 29,2000 to December 31,2001 (time of payment for warrant).
