EXHIBIT 1
TO THE COMBINATION AGREEMENT
DATED THE 15th DAY OF MAY, 1998
BETWEEN APPLIED CELLULAR TECHNOLOGY, INC.
AND
COMMSTAR LTD.
PLAN OF ARRANGEMENT UNDER SECTION 182
OF THE BUSINESS CORPORATIONS ACT (ONTARIO)
ARTICLE ONE
DEFINITIONS AND INTERPRETATION
Section 1.01 Definitions:
In this Plan of Arrangement, unless there is something in the subject
matter or context inconsistent therewith, the following capitalized words and
terms shall have the following meanings:
(a) "Applied" means Applied Cellular Technology, Inc.;
(b) "Applied Common Stock" means the common stock which Applied is
authorized to issue, as the same are constituted on the date hereof;
(c) "Arrangement" means the combination by way of arrangement of Applied
and Commstar pursuant to Section 182 of the OBCA on the terms and
conditions set forth in this Plan of Arrangement;
(d) "Combination Agreement" means the combination agreement dated the 15th
day of May, 1998 among Applied and Commstar to which this Plan of
Arrangement is attached as Exhibit 1;
(e) "Commstar" means Commstar Ltd.;
(f) "Commstar Common Shares" means the common shares which Commstar is
authorized to issue, as the same are constituted on the date hereof;
(g) "Court" means the Ontario Court of Justice (General Division):
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(h) "Depositary" means The Montreal Trust Company of Canada;
(i) "Effective Date" means the date set forth in the certificate of
arrangement issued by the Director to Commstar under the provisions of
the OBCA giving effect to the Arrangement;
(j) "Exchangeable Shares" means the exchangeable non-voting shares which
Commstar is authorized to issue from and after the Effective Date and
having the rights and privileges ascribed thereto as set forth in
Appendix "A" hereto;
(k) "Long Term Debt" at any particular time means long term debt of
Commstar as at such time, determined in accordance with Canadian
generally accepted accounting principles applied on a basis consistent
with the determination of long term debt for the purposes of preparing
the audited balance sheet of Commstar as at June 30, 1997, adjusted as
provided in clause 1.01(q);
(l) "New Common Shares" means the common shares which Commstar will be
authorized to issue from and after the Effective Date and having the
rights and privileges ascribed thereto as set forth in Appendix "A"
hereto;
(m) "NASDAQ" means the National Market of the National Association of
Securities Dealers Automated Quotation System;
(n) "OBCA" means the Business Corporations Act (Ontario), as amended;
(o) "Preferred Shares" means the preferred shares, issuable in series,
which Commstar will be authorized to issue from and after the
Effective Date and having the rights and privileges ascribed thereto
as set forth in Appendix "A" hereto;
(p) "Series A Preferred Share" means the one preferred share, series A
which Commstar will be authorized to issue from and after the
Effective Date and having the rights and privileges ascribed thereto
as set forth in Appendix "A" hereto; and
(q) "Working Capital" at any particular time means the current assets of
Commstar less the current liabilities of Commstar as at such time, all
determined in accordance with Canadian generally accepted accounting
principles applied on a basis consistent with the determination of
current assets and current liabilities for the purposes of preparing
the audited balance sheet of Commstar as at June 30, 1997; provided
that for such purposes all debenture receivables from Xxxxxx (U.S.)
and ECI Industries shall be classified as current assets, the current
portion of any Long Term Debt shall be classified as long term debt
and not as current debt and any and all expenses incurred in
connection with the Arrangement shall be excluded from the
determination of Working Capital.
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Section 1.02 Interpretation Not Affected by Headings:
The division of this Plan of Arrangement into articles, sections,
subsections, paragraphs and subparagraphs and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation of this Plan of Arrangement. Unless otherwise specifically
indicated, the terms "this Plan of Arrangement", "hereof", "herein", "hereunder"
and similar expressions refer to this Plan of Arrangement as a whole and not to
any particular article, section, subsection, paragraph or subparagraph and
include any agreement or instrument supplementary or ancillary hereto.
Section 1.03 Number and Gender:
Unless the context otherwise requires, words importing the singular number only
shall include the plural and vice versa, words importing the use of either
gender shall include both genders and neuter and words importing persons shall
include firms and corporations.
Section 1.04 Meaning:
Words and phrases used herein and defined in the OBCA shall have the same
meaning herein as in the OBCA unless the context otherwise requires.
Words and phrases used herein and defined in the Exchangeable Share Provisions
attached as Appendix "A" hereto shall have the same meaning herein as in the
Exchangeable Share Provisions unless the context otherwise requires.
ARTICLE TWO
COMBINATION AGREEMENT
Section 2.01 Combination Agreement:
This Plan of Arrangement is made pursuant and subject to the provisions of
the Combination Agreement.
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ARTICLE THREE
AUTHORIZED CAPITAL
Section 3.01 Authorized Capital:
On and after the Effective Date Commstar shall be authorized to issue an
unlimited number of New Common Shares, an unlimited number of Exchangeable
Shares and Preferred Shares, issuable in series, including one Series A
Preferred Share. The attributes, rights and obligations of such shares are set
out in Appendix "A" hereto.
Section 3.02 Applied Liquidation Call Right
(a) Applied shall have the overriding right (the "Liquidation Call Right"), in
the event of and notwithstanding the proposed liquidation, dissolution or
winding-up of Commstar, to purchase from all but not less than all of the
holders (other than Applied) of Exchangeable Shares on the Liquidation Date
all but not less than all of the Exchangeable Shares held by each such
holder on payment by Applied of an amount, for each Exchangeable Share
held, equal to the Current Market Price of a share of Applied Common Stock
on the last Business Day prior to the Liquidation Date multiplied by the
Current Applied Common Stock Equivalent. The payment shall be satisfied in
full by causing to be delivered to such holder (a) such whole number of
shares of Applied Common Stock (rounded down to the nearest whole number)
as is equal to the amount obtained by multiplying the number of such
Exchangeable Shares to be transferred by the Current Applied Common Stock
Equivalent, plus (b) an additional amount in cash equivalent to the full
amount of all dividends declared and unpaid on such Exchangeable Shares
(collectively the "Liquidation Call Purchase Price") without interest. In
the event of the exercise of the Liquidation Call Right by Applied, each
holder of Exchangeable Shares shall be obligated to sell all the
Exchangeable Shares held by such holder to Applied on the Liquidation Date
on payment by Applied to such holder of the Liquidation Call Purchase
Price.
(b) To exercise the Liquidation Call Right, Applied must notify the Transfer
Agent in writing, as agent for the holders of Exchangeable Shares, and the
Corporation of Applied's intention to exercise such right at least 55 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 Transfer Agent will
notify the holders of Exchangeable Shares as to whether or not Applied has
exercised the Liquidation Call Right forthwith after the expiry of the date
by which the same may be exercised by Applied. If Applied exercises the
Liquidation Call Right, on the Liquidation Date Applied will purchase and
the holders will sell all of the Exchangeable Shares then outstanding
(other than shares held by Applied) for a price equal to the Liquidation
Call Purchase Price.
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(c) For the purposes of completing the purchase of the Exchangeable Shares
pursuant to the Liquidation Call Right, Applied shall deposit with the
Transfer Agent, on or before the Liquidation Date, certificates
representing the aggregate number of shares of Applied Common Stock
deliverable by Applied (which shares shall be duly issued as fully paid and
non-assessable and shall be free and clear of any lien, claim, encumbrance,
security interest or adverse claim) in payment of the total Liquidation
Call Purchase Price for all outstanding Exchangeable Shares and a cheque or
cheques in the amount of the remaining portion, if any, of the total
Liquidation Call Purchase Price for all outstanding Exchangeable Shares
without interest. Provided that the total Liquidation Call Purchase Price
for all outstanding Exchangeable Shares has been so deposited with the
Transfer Agent, on and after the Liquidation Date the rights of each holder
of Exchangeable Shares will be limited to receiving such holder's
proportionate part of the total Liquidation Call Purchase Price payable for
all outstanding Exchangeable Shares (other than shares held by Applied) by
Applied without interest upon presentation and surrender by the holder of
certificates representing all of 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 Applied Common Stock to
be delivered to it. Upon surrender to the Transfer Agent 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 OBCA and the by-laws of the Corporation and
such additional documents and instruments as the Transfer Agent may
reasonably require, the holder of such surrendered certificate or
certificates shall be entitled to receive in exchange therefor, and the
Transfer Agent on behalf of Applied shall deliver to such holder,
certificates representing the Applied Common Stock to which the holder is
entitled and a cheque or cheques of Applied payable at par and in Canadian
dollars at any branch of the bankers of Applied or of the Corporation in
Canada in payment of the remaining portion, if any, of the total
Liquidation Call Purchase Price for such holder's Exchangeable Shares. If
Applied 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
price otherwise payable by the Corporation in connection with the
liquidation, dissolution or winding-up of the Corporation pursuant to
Article 4 of the Exchangeable Share Provisions.
Section 3.03 Applied Redemption Call Right
(a) Applied shall have the overriding right (the "Redemption Call Right"),
notwithstanding the proposed redemption of the Exchangeable Shares by the
Corporation pursuant to Article 6 of the Exchangeable Share Provisions, to
purchase from all but not less than all of the holders (other than Applied)
of Exchangeable Shares on the Automatic Redemption Date all but not less
than all of the Exchangeable Shares held by each such holder on payment by
Applied to the holder of an amount, for each Exchangeable Share held, equal
to the Current Market Price of a share of Applied Common Stock on the last
Business Day prior to the Automatic Redemption Date multiplied by the
Current Applied Common Stock Equivalent. The payment shall be satisfied in
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full by causing to be delivered to such holder (a)such whole number of
shares of Applied Common Stock (rounded down to the nearest whole number)
as is equal to the amount obtained by multiplying the number of such
Exchangeable Shares to be redeemed by the Current Applied Common Stock
Equivalent, plus (b) an additional amount in cash equivalent to the full
amount of all dividends declared and unpaid on such Exchangeable Shares
(collectively the "Redemption Call Purchase Price") without interest. In
the event of the exercise of the Redemption Call Right by Applied, each
holder of Exchangeable Shares shall be obligated to sell all the
Exchangeable Shares held by such holder to Applied on the Automatic
Redemption Date on payment by Applied to the holder of the Redemption Call
Purchase Price.
(b) To exercise the Redemption Call Right, Applied must notify the Transfer
Agent in writing, as agent for the holders of Exchangeable Shares, and the
Corporation of Applied's intention to exercise such right at least 125 days
before the Automatic Redemption Date. The Transfer Agent will notify the
holders of the Exchangeable Shares as to whether or not Applied has
exercised the Redemption Call Right forthwith after the date by which the
same may be exercised by Applied. If Applied exercises the Redemption Call
Right, on the Automatic Redemption Date Applied will purchase and the
holders will sell all of the Exchangeable Shares then outstanding (other
than shares held by Applied) for the Redemption Call Purchase Price.
(c) For the purposes of completing the purchase of the Exchangeable Shares
pursuant to the Redemption Call Right, Applied shall deposit with the
Transfer Agent, on or before the Automatic Redemption Date, certificates
representing the aggregate number of shares of Applied Common Stock
deliverable by Applied (which shares shall be duly issued as fully paid and
non-assessable and shall be free and clear of any liens) in payment of the
total Redemption Call Purchase Price for all outstanding Exchangeable
Shares and a cheque or cheques in the amount of the remaining portion, if
any, of the total Redemption Call Purchase Price for all outstanding
Exchangeable Shares. Provided that the total Redemption Call Purchase Price
for all outstanding Exchangeable Shares has been so deposited with the
Transfer Agent, on and after the Automatic Redemption Date the rights of
each holder of Exchangeable Shares will be limited to receiving such
holder's proportionate part of the total Redemption Call Purchase Price for
all outstanding Exchangeable Shares (other than shares held by Applied)
payable by Applied 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 Automatic Redemption Date be considered
and deemed for all purposes to be the holder of the Applied Common Stock to
be delivered to such holder without interest. Upon surrender to the
Transfer Agent 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 OBCA and the
by-laws of the Corporation and such additional documents and instruments as
the Transfer Agent may reasonably require, the holder of such surrendered
certificate or certificates shall be entitled to receive in exchange
therefor, and the Transfer Agent on behalf of Applied shall deliver to such
holder, certificates representing the shares of Applied Common Stock to
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which the holder is entitled and a cheque or cheques of Applied payable at
par and in Canadian dollars at any branch of the bankers of Applied or of
the Corporation in payment of the remaining portion, if any, of the total
Redemption Call Purchase Price for such holders Exchangeable Shares. If
Applied 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 the Exchangeable Shares pursuant to Article 6 of the
Exchangeable Share Provisions.
Section 3.04 Applied Retraction Call Right
(a) Applied shall have the overriding right (the "Retraction Call Right")
notwithstanding the proposed redemption of Retracted Shares by the
Corporation on the Retraction Date, to purchase from the holder of the
Retracted Shares on the Retraction Date all of the Retracted Shares upon
payment by Applied to the holder of a Retracted Share an amount for each
Retracted Share, equal to the Current Market Price multiplied by the
Current Applied Common Stock Equivalent, in each case determined on the
Retraction Date. The payment shall be satisfied in full in respect to such
Retracted Shares by causing to be delivered to the holder (a) such whole
number of shares of Applied Common Stock (rounded down to the nearest whole
number) as is equal to the amount obtained by multiplying the number of
Retracted Shares by the Current Applied Common Stock Equivalent, plus (b)
an additional amount in cash equivalent to the full amount of all dividends
declared and unpaid on such Retracted Shares (collectively, the "Retraction
Call Purchase Price") without interest. In the event of the exercise of the
Retraction Call Right by Applied, the holder of the Retracted Shares shall
be obligated to sell to Applied, and Applied shall be obligated to
purchase, the Retracted Shares on the Retraction Date upon payment by
Applied to such holder of the Retraction Call Purchase Price.
(b) In order to exercise the Retraction Call Right, Applied shall advise the
Transfer Agent in writing of its determination to do so (the "Applied Call
Notice") on or prior to the expiry of the fifth Business Day after the
receipt by the Transfer Agent of the Retraction Request. If Applied does
not so notify the Transfer Agent, the Transfer Agent will notify the holder
as soon as possible thereafter that Applied has waived the Retraction Call
Right. If Applied delivers the Applied Call Notice before the expiry of
such five Business Day period, the Retraction Request shall thereupon be
deemed only to be an offer by the holder to sell the Retracted Shares to
Applied. In such event, the Corporation shall not redeem the Retracted
Shares and Applied shall purchase from such holder and such holder shall
sell to Applied on the Retraction Date all of the Retracted Shares for the
Retraction Call Purchase Price.
(c) For the purposes of completing a purchase of the Retracted Shares pursuant
to the Retraction Call Right, Applied shall deposit with the Transfer
Agent, on or before the Retraction Date, certificates representing the
shares of Applied Common Stock to be delivered to each holder of the
Retracted Shares in payment of the total Retraction Call Purchase Price for
all of the Retracted Shares(or the portion thereof payable in Applied
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Common Stock, as the case may be) and a cheque in the amount of the
remaining portion, if any, of the total Retraction Call Purchase Price (or,
if any portion of the Retraction Call Purchase Price consists of dividends
payable in property, such property or property that is the same as or
economically equivalent to such property). Provided that such total
Retraction Call Purchase Price for all of the Retracted Shares has been so
deposited with the Transfer Agent, the closing of the purchase and sale of
the Retracted Shares pursuant to the Retraction Call Right shall be deemed
to have occurred as of the close of business on the Retraction Date and,
for greater certainty, no redemption by the Corporation of such Retracted
Shares shall take place on the Retraction Date. Applied shall cause the
Transfer Agent to deliver to the holder of the Retracted Shares, at the
address of such 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
office of the Transfer Agent to which the Retraction Request was delivered,
in payment of such total Retraction Purchase Price for all of the Retracted
Shares, certificates representing the shares of Applied Common Stock to be
delivered in respect of such payment (which shares shall be duly issued as
fully paid and non-assessable and shall be free and clear of any liens)
registered in the name of the holder or in such other name as the holder
may request in payment of such and, if applicable, a cheque of Applied
payable at par and in Canadian dollars at any branch of the bankers of
Applied or the Corporation in Canada (or, if any part of the Retraction
Call Purchase Price consists of dividends payable in property, such
property or property that is the same as or economically equivalent to such
property), and such delivery of such certificates and cheque (and property,
if any) to the holder on behalf of Applied by the Transfer Agent shall be
deemed to be payment of and shall satisfy and discharge all liability for
the total Retraction Call Purchase Price for all of the Retracted Shares to
the extent that the same is represented by such share certificates and
cheque (and property, if any), unless such cheque is not paid on due
presentation. On and after the close of business 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 of
a holder in respect thereof, other than the right to receive the Retraction
Call Purchase Price, unless upon presentation and surrender of certificates
in accordance with the foregoing provisions, payment of the total
Retraction Call Price shall not be made, in which case the rights of such
holder shall remain unaffected until the total Retraction Call Purchase
Price has been paid in the manner hereinbefore provided. On and after the
close of business on the Retraction Date, provided that presentation and
surrender of certificates and payment of the total Retraction Call Purchase
Price has been made in accordance with the foregoing provisions, the holder
of the Retracted Shares so purchased by Applied shall thereafter be
considered and deemed for all purposes to be a holder of the Applied Common
Stock delivered to such holder.
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ARTICLE FOUR
MANNER OF EXCHANGE OF SECURITIES
Section 4.01 Issue of Securities:
Contemporaneously on the Effective Date, the following transactions shall occur
or be deemed to have occurred:
(a) Commstar shall issue to Applied one Series A Preferred Share upon
payment of $0.01 therefor and Applied's name shall be added to the
list of holders of Series A Preferred Shares;
(b) Each issued and outstanding Commstar Common Share immediately prior to
the Effective Date shall be exchanged for Exchangeable Shares based on
the following formula:
A = B x C
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D x E
Where:
A = the number of Exchangeable Shares to which a holder of
Commstar Common Shares is entitled;
B = the number of Commstar Common Shares held by such holder;
C = $13,500,000 plus the amount, if any, by which $6,400,000
exceeds the Long Term Debt of Commstar as at May 31,
1998, less the amount, if any, by which $300,000 exceeds
the Working Capital of Commstar as at May 31, 1998.
D = the aggregate number of Commstar Common Shares outstanding
on the Effective Date; and
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E = the Canadian dollar equivalent of the weighted average
trading price of the Applied Common Shares for the 20
consecutive trading days on which NASDAQ is open for
business ending two days prior to the Effective Date.
For the purposes of this calculation, the Canadian dollar
equivalent is the product obtained by multiplying (a)
the U.S. dollar amount by (b) the noon spot exchange rate
on the Effective Date for U.S. dollars expressed in
Canadian dollars as reported by the Bank of Canada.
and the name of each holder shall be added to the register of holders of
Exchangeable Shares; and
(c) The Series A Preferred Share issued to Applied shall be converted into one
New Common Share and Applied's name shall be added to the list of holders
of New Common Shares.
Section 4.02 Stated Capital:
The stated capital attributable to the Exchangeable Shares shall be the lesser
of (a) the fair market value of the Exchangeable Shares as determined by the
Board of Directors of the Corporation; (b) the paid up capital of the Commstar
Common Shares for the purposes of the Income Tax Act (Canada) immediately prior
to the Effective Date. The stated capital attributable to the New Common Shares
will be equal to $0.01.
Section 4.03 Amendment to Exchange Formula
If there shall have been a material adverse change in Long-Term Debt or
Working Capital (defined as a change of $50,000 or more) as at the Effective
Date from that on May 31, 1998, without the prior consent of Applied or without
Applied agreeing to an amendment to the Exchange Formula, Applied shall have an
option to terminate the Arrangement or amend the Exchange Formula based on the
Long-Term Debt and Working Capital as at the Effective Date.
ARTICLE FIVE
SECURITY CERTIFICATES
Section 5.01 Security Certificates:
Following the Effective Date, certificates for the appropriate number of
Exchangeable Shares (rounded up or down to the nearest whole number) will be
issued to former holders of Commstar
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Common Shares in accordance with the provisions of Section 4.01 hereof
against surrender of the certificates representing the Commstar Common Shares to
the Depositary.
ARTICLE SIX
ARRANGEMENT AND EFFECT OF ARRANGEMENT
Section 6.01 Arrangement:
Applied and Commstar hereby agree to combine by way of Arrangement as of the
Effective Date pursuant to Section 182 of the OBCA on the terms set forth in
this Plan of Arrangement. The articles of Commstar shall be amended as of the
Effective Date to include the provisions of Appendix A hereto in order to set
forth the rights, privileges and conditions attaching to the classes of shares
of Commstar authorized pursuant to Article Three hereof.
Section 6.02 Effect of Arrangement:
As at and from 12:01 am. on the Effective Date the articles of arrangement shall
be deemed to be an amendment to the articles of incorporation of Commstar and
the certificate of arrangement shall be deemed to be a certificate of amendment
of the Corporation.
ARTICLE EIGHT
RIGHTS OF DISSENT
Section 7.01 Rights of Dissent:
Holders of Commstar Common Shares may exercise rights of dissent pursuant to and
in the manner set forth in Section 185 of the OBCA, a summary of which is
contained in the Management Information Circular of Commstar dated May 18, 1998.
APPENDIX "A"
COMMSTAR LTD.
SHARE PROVISIONS
PROVISIONS ATTACHING TO THE EXCHANGEABLE SHARES
The Exchangeable Shares in the capital of Commstar Ltd. shall have the
following rights, privileges, restrictions and conditions.
ARTICLE 1
INTERPRETATION
1.1 For the purposes of these share provisions:
"Affiliate" of any person means any other person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first-mentioned person; including, without
limitation, any partnership or joint venture in which the Corporation or
Applied, as the case may be, (either alone, or through or together with any
other subsidiary) has, directly or indirectly, an equity interest of 10 percent
or more;
"Applied" means Applied Cellular Technology, Inc., a corporation organized and
existing under the laws of the State of Missouri, and any successor corporation.
"Applied Call Notice" has the meaning ascribed thereto in the Plan of
Arrangement.
"Applied Common Stock Reorganization" has the meaning ascribed thereto in the
definition of "Current Applied Common Stock Equivalent" in Section 1.1 of these
share provisions.
"Applied Common Stock" means the common stock of Applied, with a par value of
U.S.$.001 per share and having one vote per share, and any other securities into
which such shares may be changed.
"Applied Dividend Declaration Date" means the date on which the Board of
Directors of Applied declares any dividend on the Applied Common Stock.
"Applied Special Share" means the one share of the Special Voting Preferred
Stock of Applied with a par value of U.S.$10.00 and having voting rights at
meetings of holders of shares of Applied Common Stock equal to the number of
Exchangeable Shares outstanding from time to time (other than Exchangeable
Shares held by Applied) to be issued to, and voted by, the Trustee pursuant to
the Voting and Exchange Trust Agreement.
"Automatic Redemption Date" means the date for the automatic redemption by the
Corporation of Exchangeable Shares pursuant to Article 6 of these share
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provisions, which date shall be the first to occur of (a) the 3rd anniversary of
the Effective Date of the Arrangement, (b) the date selected by the Board of
Directors at any time when less than 5% of the Exchangeable Shares issued on the
Effective Date are outstanding (other than Exchangeable Shares held by Applied
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 issuance or
distribution of rights to acquire Exchangeable Shares or securities exchangeable
for or convertible into or carrying rights to acquire Exchangeable Shares, any
issue or distribution of other securities or rights or evidences of indebtedness
or assets, or any other capital reorganization or other transactions involving
or affecting the Exchangeable Shares outstanding, (c) the Business Day prior to
the record date for any meeting or vote of the shareholders of the Corporation
to consider any matter on which the holders of Exchangeable Shares would be
entitled to vote as shareholders of the Corporation, but excluding any meeting
or vote as described in clause (d) below or (d) the Business Day following the
day on which the holders of Exchangeable Shares fail to take the necessary
action at a meeting or other vote of holders of Exchangeable Shares, if and to
the extent such action is required, to approve or disapprove, as applicable, any
change to, or in the rights of the holders of, Exchangeable Shares, if the
approval or disapproval, as applicable, of such change would be required to
maintain the economic and legal equivalence of the Exchangeable Shares and the
Applied Common Stock.
"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 one or both in Toronto, Ontario and St.
Louis, Missouri.
"Canadian Dollar Equivalent" means in respect of an amount expressed in a
foreign currency (the "Foreign Currency Amount") at any date the product
obtained by multiplying (a) the Foreign Currency Amount by (b) the noon spot
exchange rate on such date for such foreign currency expressed in Canadian
dollars as reported by the Bank of Canada or, in the event 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.
"Capital Reorganization" has the meaning ascribed thereto in Section 10.2 of
these share provisions.
"Common Shares" means the common shares of the Corporation having the rights,
privileges, restrictions and conditions set forth herein.
"Corporation" means Commstar Ltd., a corporation incorporated under the OBCA.
"Current Applied Common Stock Equivalent" means, on any date, the equivalent as
at such date of one share of Applied Common Stock as at the Effective Date,
expressed to four decimal places, (the Current Applied Common Stock Equivalent
as of the Effective Date being 1.0000 subject to adjustment in accordance with
the Combination Agreement) determined by applying on a cumulative basis the
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following adjustments, to the extent applicable by reason of any transactions
occurring in respect of Applied Common Stock between the Effective Date and such
date:
(a) if Applied shall (A) subdivide, redivide, convert or otherwise amend its
then outstanding shares of Applied Common Stock into a greater number of shares
of Applied Common Stock, unless the Corporation is permitted under applicable
law without a vote of its shareholders to make, and shall simultaneously make,
the same or an economically equivalent change to the rights of the holders of
Exchangeable Shares, (B) combine, consolidate, convert or otherwise amend its
then outstanding shares of Applied Common Stock into a lesser number of shares
of Applied Common Stock, unless the Corporation is permitted under applicable
law without a vote of its shareholders to make, and shall simultaneously make,
the same or an economically equivalent change to the rights of the holders of
Exchangeable Shares, or (C) issue shares of Applied Common Stock (or securities
exchangeable or convertible into Applied Common Stock, but excluding any
securities issued in a Rights Offering or in a Special Distribution) to the
holders of all or substantially all of its then outstanding shares of Applied
Common Stock by way of stock dividend or other distribution (other than to
holders of Applied Common Stock who exercise an option to receive stock
dividends in lieu of receiving cash dividends), unless the Corporation is
permitted under applicable law without a vote of its shareholders to issue or
distribute, and shall simultaneously issue and distribute, equivalent numbers of
shares of Applied Common Stock or other securities (adjusted if necessary in
accordance with the Current Applied Common Stock Equivalent), or the economic
equivalent on a per share basis, to the holders of the Exchangeable Shares (any
of such events being herein called the "Applied Common Stock Reorganization"),
the Current Applied Common Stock Equivalent shall be adjusted effective
immediately after the record date at which the holders of Applied Common Stock
are determined for the purpose of the Applied Common Stock Reorganization by
multiplying the Current Applied Common Stock Equivalent in effect on such record
date by the quotient obtained when:
(A) the number of shares of Applied Common Stock outstanding after the
completion of such Applied Common Stock Reorganization (but before giving
effect to the issue or cancellation of any shares of Applied Common Stock
issued or cancelled after such record date otherwise than as part of such
Applied Common Stock Reorganization) including, in the case where
securities exchangeable or convertible into Applied Common Stock are
distributed, the number shares of Applied Common Stock that would have been
outstanding had such securities been exchanged for or converted into
Applied Common Stock on such record date,
is divided by
(B) the number of shares of Applied Common Stock outstanding on a fully diluted
basis on such record date before giving effect to the Applied Common Stock
Reorganization;
(i) if at any time Applied shall fix a record date for the issuance of rights,
options or warrants to the holders of all or substantially all of the shares of
Applied Common Stock entitling them to subscribe for or to purchase shares of
Applied Common Stock (or securities of Applied convertible into shares of
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Applied Common Stock) at a price per share of Applied Common Stock (or having a
conversion price per Applied Common Stock) of less than the Current Market Price
on such record date, unless the Corporation is permitted under applicable law
without a vote of its shareholders to issue, and shall simultaneously issue,
equivalent numbers of such rights, option or warrants, adjusted if necessary in
accordance with the Current Applied Common Stock Equivalent at such record date,
or the economic equivalent thereof on a per share basis, to the holders of
Exchangeable Shares (any such event being herein referred to as a "Rights
Offering"), then the Current Applied Common Stock Equivalent then in effect
shall be adjusted immediately after such record date by multiplying the Current
Applied Common Stock Equivalent in effect on such record date by the quotient
obtained when:
(A) the sum of the number of shares of Applied Common Stock outstanding on a
fully diluted basis on such record date and the number of additional shares
of Applied Common Stock offered for subscription or purchase under the
Rights Offering (or the number of shares of Applied Common Stock into which
the securities so offered are convertible)
is divided by
(B) the sum of the number of shares of Applied Common Stock outstanding on a
fully diluted basis on such record date and the number determined by
dividing the aggregate price of the total number of additional shares of
Applied Common Stock offered for subscription or purchase under the Rights
Offering (or the aggregate conversion price of the convertible securities
so offered) by the Current Market Price on such record date.
Any shares of Applied Common Stock owned by or held for the
account of Applied shall be deemed not to be outstanding for the
purpose of any such computation. If such rights, option or warrants
are not so issued or if, at the date of expiry of the rights, options
or warrants subject to the Rights Offering, less than all the rights,
options or warrants have been exercised, then the Current Applied
Common Stock Equivalent shall be readjusted effective immediately
after the date of expiry (or determination by the Board of Directors
of Applied that the issue will not take place) to the Current Applied
Common Stock Equivalent which would have been in effect if such record
date had not been fixed or to the Current Applied Common Stock
Equivalent which would then be in effect on the date of expiry if the
only rights, options or warrants issued had been those that were
exercised, as the case may be;
(ii) if Applied shall fix a record date for the making of a distribution
(including a distribution by way of stock dividend) to the holders of all or
substantially all its outstanding shares of Applied Common Stock of
(A) shares of Applied of any class other than Applied Common Stock (excluding
shares convertible into Applied Common Stock referred to in (i) (C) above),
(B) rights, option or warrants (excluding a Rights Offering),
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(C) evidences of its indebtedness (excluding indebtedness convertible into
Applied Common Stock referred to in (i) (C) above) or
(D) any other assets (other than any of the distributions referred to in (A),
(B) or (C), dividends paid in the ordinary course, a Rights Offering or a
Applied Common Stock Reorganization)
unless the Corporation is permitted under applicable law
without a vote of its shareholders to distribute, and shall
simultaneously distribute, the same number of shares, rights,
options or warrants, evidences of indebtedness or other assets,
as the case may be, adjusted if necessary in accordance with the
Current Applied Common Stock Equivalent, as at such record date,
or the economic equivalent thereof on a per share basis, to the
holders of Exchangeable Shares (any such event being herein
referred to as a "Special Distribution") then, in each such case,
the Current Applied Common Stock Equivalent shall be adjusted
effective immediately after the record date at which the holders
of Applied Common Stock are determined for the purposes of the
Special Distribution by multiplying the Current Applied Common
Stock Equivalent in effect on such record date by the quotient
obtained when:
(I) the product obtained when the number of shares of Applied Common Stock
outstanding on a fully diluted basis on the record date is multiplied by
the Current Market Price on such date,
is divided by
(II) the difference obtained when the amount by which the aggregate fair market
value (as determined by the Board of Directors, which determination shall
be conclusive) of the shares, rights, options, warrants, evidences of
indebtedness or assets, as the case may be, distributed in the Special
Distribution exceeds the fair market value (as determined by the Board of
Directors, which determination shall be conclusive) of the consideration,
if any, received therefore by Applied, is subtracted from the product
obtained when the number of shares of Applied Common Stock outstanding on
the record date is multiplied by the Current Market Price on such date,
provided that no such adjustment shall be made if the result of such
adjustment would be to decrease the Current Applied Common Stock Equivalent
in effect immediately before such record date. Any share of Applied Common
Stock owned by or held for the account of Applied shall be deemed not
to be outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed. To the
extent that such distribution is not so made, the Current Applied Common
Stock Equivalent shall be readjusted effective immediately to the Current
Applied Common Stock Equivalent which would then be in effect based
upon such shares or rights, options or warrants or evidences of
indebtedness or assets actually distributed.
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Notwithstanding any of the foregoing definition of "Current Applied Common Stock
Equivalent", in no event may any one distribution, issuance of securities or
other event be deemed to be more than one of a Applied Common Stock
Reorganization, Rights Offering or Special Distribution.
"Current Market Price" means, in respect of a share of Applied Common Stock on
any date the Canadian Dollar Equivalent of the closing sale price of a share of
Applied Common Stock on such date (or, if no trades of any Applied Common Stock
occurred on such date, on the last trading day prior thereto on which such
trades occurred) reported on Nasdaq, or, if shares of Applied Common Stock are
not then quoted on Nasdaq, on such other stock exchange or automated quotation
system on which shares of Applied Common Stock 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 Applied Common Stock during such period does
not create a market that reflects the fair market value of Applied Common Stock,
then the Current Market Price of a share of Applied Common Stock shall be
determined by the Board of Directors based upon the advice of such qualified
independent financial advisors as the Board of Directors may deem to be
appropriate, and provided further that any such selection, opinion or
determination by the Board of Directors shall be conclusive and binding.
"Effective Date" has the meaning ascribed thereto in the Plan of Arrangement.
"Exchangeable Shares" means the Exchangeable Non-Voting Shares of the
Corporation having the rights, privileges, restrictions and conditions set forth
herein.
"Liquidation Amount" has the meaning ascribed thereto in Section 4.1 of these
share provisions.
"Liquidation Call Right" has the meaning ascribed thereto in the Plan of
Arrangement.
"Liquidation Date" has the meaning ascribed thereto in Section 4.1 of these
share provisions.
"Nasdaq" means the National Market of the National Association of
Securities Dealers Automated Quotation System.
"OBCA" means the Business Corporations Act, (Ontario) as amended from time to
time.
"Plan of Arrangement" means the plan of arrangement relating to the arrangement
of the Corporation under section 182 of the OBCA, to which plan these share
provisions are attached.
"Redemption Call Right" has the meaning ascribed thereto in the Plan of
Arrangement.
"Redemption Price" has the meaning ascribed thereto in section 6.1 of these
share provisions.
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"Retracted Shares" has the meaning ascribed thereto in section 5.1 of these
share provisions.
"Retraction Call Right" has the meaning ascribed thereto in the Plan of
Arrangement.
"Retraction Date" has the meaning ascribed thereto in section 5.2 of these share
provisions.
"Retraction Period" means the period (and including the beginning and ending
dates) from the Effective Date until the date which is June 29, 2001.
"Retraction Price" has the meaning ascribed thereto in section 5.1 of these
share provisions.
"Retraction Request" has the meaning ascribed thereto in section 5.1 of these
share provisions.
"Rights Offering" has the meaning ascribed thereto in the definition of "Current
Applied Common Stock Equivalent" in Section 1.1 of these share provisions.
"Special Distribution" has the meaning ascribed thereto in the definition of
"Current Applied Common Stock Equivalent" in Section 1.1 of these share
provisions.
"Support Agreement" means the Support Agreement between Applied and the
Corporation, made as of June 30, 1998.
"Transfer Agent" means Montreal Trust Company of Canada or such other person as
may from time to time be the registrar and transfer agent for the Exchangeable
Shares.
"Trustee" means Montreal Trust Company of Canada, a corporation organized and
existing under the laws of Canada and any successor trustee appointed under the
Voting and Exchange Trust Agreement.
"Voting and Exchange Trust Agreement" means the Voting and Exchange Trust
Agreement between the Corporation, Applied and the Trustee, made as of June 30,
1998.
1.2 All amounts required to be paid, deposited or delivered hereunder shall
be paid, deposited or delivered after deduction of any amount required by
applicable law to be deducted or withheld on account of tax and the deduction of
such amounts and remittance to the applicable tax authorities shall, to the
extent thereof, satisfy such requirement to pay, deposit or deliver hereunder.
ARTICLE 2
RANKING OF EXCHANGEABLE SHARES
2.1 The Exchangeable Shares shall rank senior to the Common Shares and any other
shares ranking junior to the Exchangeable Shares, with respect to the payment of
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dividends and the 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 A holder of an Exchangeable Share shall be entitled to receive and the Board
of Directors shall, subject to applicable law, declare a dividend on each
Exchangeable Share (a) in the case of a cash dividend declared on the Applied
Common Stock, in an amount in cash for each Exchangeable Share equal to the
Canadian Dollar Equivalent on the Applied Dividend Declaration Date of the cash
dividend declared on such number of shares of Applied Common Stock as is equal
to the Current Applied Common Stock Equivalent on the Applied Dividend
Declaration Date or (b) in the case of a stock dividend declared on the Applied
Common Stock to be paid in shares of Applied Common Stock, in such whole number
of Exchangeable Shares for the Exchangeable Shares held by each holder as is
equal to the number of whole shares of Applied Common Stock to be paid as a
dividend on the equivalent number of shares of Applied Common Stock divided by
the Current Applied Common Stock Equivalent on the Applied Dividend Declaration
Date or (c) in the case of a dividend declared on the shares of Applied Common
Stock to be paid in property other than cash or Applied Common Stock (including
without limitation other securities of Applied), in such type and amount of
property for each Exchangeable Share as is the same as or economically
equivalent (as determined by the Board of Directors in accordance with section
10.1) to the type and amount of property, to be paid as a dividend on such
number of shares of Applied Common Stock as is equal to the Current Applied
Common Stock Equivalent on the Applied Dividend Declaration Date. 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
Exchangeable Shares. To the extent that the Corporation complies with this
section 3.1, any Applied dividend contemplated by this section 3.1 shall in no
event be deemed to be a Applied Common Stock Reorganization, Rights Offering or
Special Distribution.
3.2 Cheques of 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
subsection 3.1(a) hereof or in respect of any cash amount payable in lieu of a
fractional Exchangeable Share in connection with any stock dividends
contemplated by subsection 3.1(b) 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. 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 subsection 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 subsection 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
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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 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 shares of Applied Common Stock.
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 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 9.2 of these
share provisions:
(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 or purchase or make any capital distribution in respect of Common
Shares or any other shares ranking junior to the Exchangeable Shares;
(c) redeem or purchase any other shares of the Corporation ranking equally with
the Exchangeable Shares with respect to the payment of dividends or on any
liquidation distribution;
(d) issue any Exchangeable Shares other than (i) by way of stock dividends to
the holders of such Exchangeable Shares, (ii) otherwise pro rata to the
holders of Exchangeable Shares, (iii) as contemplated by the Support
Agreement or (iv) pursuant to any agreements or rights in existence at the
Effective Date; or
(e) issue any other shares of the Corporation ranking equally with or senior to
the Exchangeable Shares;
provided that the restrictions in subsections 3.5(a), 3.5(b) and 3.5(c) shall
not apply if all dividends on the outstanding Exchangeable Shares corresponding
to dividends declared to date on the Applied Common Stock shall have been
declared on the Exchangeable Shares and, if paid to holders of Applied Common
Stock, paid in full.
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ARTICLE 4
DISTRIBUTION ON LIQUIDATION
4.1 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, 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 Common Shares or any other shares ranking junior to the
Exchangeable Shares, an amount per share equal to (a) the Current Market Price
multiplied by the Current Applied Common Stock Equivalent, in each case
determined on the Liquidation Date, which shall be satisfied in full by the
Corporation causing to be delivered to such holder such number of shares of
Applied Common Stock as is equal to the Current Applied Common Stock Equivalent,
plus (b) an additional amount equal to the aggregate of all declared and unpaid
dividends on each such Exchangeable Share up to the Liquidation Date
(collectively the "Liquidation Amount") without interest.
4.2 On or promptly after the Liquidation Date, and subject to the exercise by
Applied of the Liquidation Call Right, 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 OBCA and the by-laws of the Corporation and such additional documents and
instruments as the Transfer Agent may reasonably require, at the registered
office of the Corporation or at any office of the Transfer Agent as may be
specified by the Corporation by notice to the holders of the Exchangeable
Shares. Payment of the total Liquidation Amount for all of the Exchangeable
Shares held by a holder thereof shall be made by delivery to each such holder,
at the address of the holder recorded in the securities register of the
Corporation of the Exchangeable Shares or by holding for pick-up by the holder
at the registered office of the Corporation or at any office of the Transfer
Agent as may be specified by the Corporation by notice to the holders of
Exchangeable Shares, on behalf of the Corporation of certificates representing
the shares of Applied Common Stock to be delivered in payment thereof (which
shares shall be duly issued as fully paid and non-assessable and shall be free
and clear of any liens) and a cheque of the Corporation payable at any branch of
the bankers of the Corporation in respect of all declared and unpaid dividends
comprising part of the total Liquidation Amount for all outstanding Exchangeable
Shares without interest. 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 the total Liquidation Amount in respect
of their Exchangeable Shares, 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
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Amount for their Exchangeable Shares has been paid in the manner hereinbefore
provided. The Corporation shall have the right at any time on or 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 company in Canada. Upon such
deposit being made, the rights of the holders of such Exchangeable Shares after
such deposit shall be limited to receiving the total Liquidation Amount (without
interest) for such Exchangeable Shares so deposited, against presentation and
surrender of the said certificates held by them, respectively, in accordance
with the foregoing provisions.
4.3 After the Corporation has satisfied its obligations to pay the holders of
the Exchangeable Shares the Liquidation Amount per Exchangeable Share pursuant
to section 4.1 of these share provisions, such holders shall not be entitled to
share in any further distribution of the assets of the Corporation or have any
other rights as holders of Exchangeable Shares.
ARTICLE 5
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
5.1 A holder of Exchangeable Shares shall be entitled during any Retraction
Period, subject to the exercise by Applied of the Retraction Call Right and
otherwise upon compliance with the provisions of this Article 5, to require the
Corporation to redeem any or all of the Exchangeable Shares registered in the
name of such holder (the "Retracted Shares") for an amount for each Retracted
Share equal to (a) the Current Market Price multiplied by the Current Applied
Common Stock Equivalent, in each case determined on the Retraction Date, which
shall be satisfied in full in respect of a Retracted Share by the Corporation
causing to be delivered to such holder such number of shares of Applied Common
Stock as is equal to the Current Applied Common Stock Equivalent, plus (b) the
aggregate of all dividends declared and unpaid on each Retracted Share up to the
Retraction Date (collectively the "Retraction Price", provided that if the
record date for any such declared and unpaid dividend occurs on or after the
Retraction Date the Retraction Price shall not include such declared and unpaid
dividends) without interest. To effect such redemption, the holder shall present
and surrender at any office of the Transfer Agent 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 OBCA
and the by-laws of the Corporation and such additional documents and instruments
as the Transfer Agent 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 (in their sole discretion) to the Transfer Agent
and Applied:
(a) specifying that the holder desires to have the Retracted Shares represented
by such certificate or certificates redeemed by the Corporation; and
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(b) acknowledging the Retraction Call Right of Applied 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 an irrevocable offer by the holder
to sell the retracted Shares to Applied in accordance with the Retraction
Call Right.
5.2 Subject to the exercise by Applied of the Retraction Call Right, upon
receipt by the Transfer Agent in the manner specified in section 5.1 hereof of a
certificate or certificates representing the number of Exchangeable Shares which
the holder desires to have the Corporation redeem, together with such other
documents and instruments as may be required pursuant to section 5.1 and a
Retraction Request, the Corporation shall redeem the Retracted Shares effective
at the close of business on the sixth Business Day after the Retraction Request
is received (the "Retraction Date") and shall cause to be delivered to such
holder the total Retraction Price with respect of all such Retracted Shares. If
only a part of the Exchangeable Shares represented by any certificate are
redeemed (or purchased by Applied 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.
5.3 Upon receipt by the Transfer Agent of a Retraction Request, the Transfer
Agent shall forthwith notify Applied thereof. In order to exercise the
Retraction Call Right, Applied must deliver a Applied Call Notice to the
Transfer Agent prior to the expiry of the fifth Business Day after the receipt
by the Transfer Agent of the Retraction Request. If Applied does not so notify
the Transfer Agent, the Transfer Agent will notify the holder as soon as
possible thereafter that Applied will not exercise the Retraction Call Right. If
Applied delivers the Applied Call Notice before the end of such five Business
Day period, the Retraction Request shall thereupon be considered only to be an
offer by the holder to sell the Retracted Shares to Applied in accordance with
the Retraction Call Right. In such event, the Corporation shall not redeem the
Retracted Shares and Applied shall purchase from such holder and such holder
shall sell to Applied on the Retraction Date the Retracted Shares for a purchase
price (the "Purchase Price") per share equal to the Retraction Price.
5.4 If a Retraction Request is received by the Transfer Agent pursuant to
section 5.1 and Applied has not exercised the Retraction Call Right, the
Corporation shall cause the Transfer Agent to deliver to the holder of the
Retracted Shares, 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 office of the Transfer Agent to which the Retraction Request was
delivered, certificates representing the shares of Applied Common Stock to be
delivered to the holder in payment of the total Retraction Price or Purchase
Price for all of the Retracted Shares (or the portion thereof payable in Applied
Common Stock, as the case may be) (which shares shall be duly issued as fully
paid and non assessable and shall be free and clear of any liens) registered in
the name of the holder or in such other name as the holder may request and a
cheque of the Corporation payable at par at any branch of the bankers of the
Corporation in payment of the remaining portion, if any, of the total Retraction
Price or Purchase Price (or, if any part of the Retraction Price or Purchase
Price consists of dividends payable in property, such property or property that
is the same as or economically equivalent to such property), and such delivery
of such certificates and cheque (and property, if any) on behalf of the
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Corporation by the Transfer Agent shall be deemed to be payment of and shall
satisfy and discharge all liability for the total Retraction Price or Purchase
Price for all of the Retracted Shares, to the extent that the same is
represented by such share certificates and cheque (and property, if any), unless
such cheque is not paid on due presentation.
5.5 On and after the close of business 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 of a holder in respect thereof,
other than the right to receive the total Retraction Price or total Purchase
Price for all of the Retracted Shares, unless upon presentation and surrender of
certificates in accordance with the foregoing provisions, payment of the total
Retraction Price or total Purchase Price for all of the Retracted Shares shall
not be made, in which case the rights of such holders shall remain unaffected
until the total Retraction Price or total Purchase Price has been paid in the
manner hereinbefore provided. On and after the close of business on the
Retraction Date, provided that presentation and surrender of certificates and
payment of the total Retraction Price or total Purchase Price for all of the
Retracted Shares has been made in accordance with the foregoing provisions, the
holder of the Retracted Shares so redeemed by the Corporation shall thereafter
be considered and deemed for all purposes to be a holder of the shares of
Applied Common Stock delivered to it.
5.6 Notwithstanding any other provision of this Article 5, 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 Applied shall not have exercised the Retraction
Call Right with respect to the Retracted Shares, the Corporation shall be
obligated to redeem Retracted Shares specified by holders in Retraction Requests
only 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 on a
pro rata basis and shall notify the relevant holders at least five Business Days
prior to the Retraction Date as to the number of Retracted Shares which will not
be redeemed by the Corporation and the Corporation 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 5.2 hereof. The holder of any such Retracted Shares not redeemed by the
Corporation pursuant to section 5.2 of these share provisions as a result of
solvency requirements of applicable law shall be deemed by giving the Retraction
Request to require Applied to purchase such Retracted Shares from such holder
pursuant to the Exchange Right (as defined in the Voting and Exchange Trust
Agreement).
ARTICLE 6
REDEMPTION OF EXCHANGEABLE SHARES
6.1 Subject to applicable law and if Applied does not exercise the Redemption
Call Right, the Corporation shall on the Automatic Redemption Date redeem the
whole of the then outstanding Exchangeable Shares for an amount per share equal
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to (a) the Current Market Price multiplied by the Current Applied Common Stock
Equivalent, in each case determined on the Automatic Redemption Date, which
shall be satisfied in full in respect of an Exchangeable Share by the
Corporation causing to be delivered to such a holder such number of shares of
Applied Common Stock as is equal to the Current Applied Common Stock Equivalent,
plus (b) the aggregate of all declared and unpaid dividends thereon up to the
Automatic Redemption Date (collectively the "Redemption Price") (provided that
if the record date for any such declared and unpaid dividends occurs on or after
the Automatic Redemption Date, the Redemption Price shall not include such
declared and unpaid dividends) without interest.
6.2 On or after the Automatic Redemption Date and subject to the exercise by
Applied of the Redemption Call Right, the Corporation shall cause to be
delivered to the holders of the Exchangeable Shares the Redemption Price for
each such Exchangeable Share upon presentation and surrender at any office of
the Transfer Agent 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 OBCA and the by-laws of the
Corporation and such additional documents and instruments as the Transfer Agent
may reasonably require. Payment of the total Redemption Price for all of the
Exchangeable Shares held by a holder shall be made by delivery to such 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 any office of the Transfer Agent as may be specified by
the Corporation in such notice, on behalf of the Corporation of certificates
representing the shares of Applied Common Stock to be delivered to the holder in
payment of the Redemption Price for all of the Exchangeable Shares held by such
holder (or the portion thereof payable in Applied Common Stock, as the case may
be) (which shares shall be duly issued as fully paid and non-assessable and
shall be free and clear of any liens) and a cheque of the Corporation payable at
any branch of the bankers of the Corporation in respect of all declared and
unpaid dividends comprising part of the total Redemption Price for all of the
Exchangeable Shares held by such holder (or, if any of such dividends are
payable in property, such property). 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 the
total Redemption Price for their Exchangeable Shares, 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 for such shares has been paid in the manner
hereinafter provided. The Corporation shall have the right at any time 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 company 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 the total Redemption Price for such Exchangeable Shares, against
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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 Redemption Price, the holders of the Exchangeable Shares shall thereafter
be considered and deemed for all purposes to be holders of the Applied Common
Stock delivered to them.
ARTICLE 7
PURCHASE FOR CANCELLATION
7.1 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 tender to all
the holders of record of Exchangeable Shares then outstanding or through the
facilities of any stock exchange on which the Exchangeable Shares are listed or
quoted at any price per share together with an amount equal to all declared and
unpaid dividends thereon without interest. If in response to an invitation for
tenders under the provisions of this Section 7.1, 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 shares were tendered than the
Corporation is prepared to purchase after the Corporation has purchased all the
shares tendered at lower prices. If part only 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.
ARTICLE 8
VOTING RIGHTS
8.1 Except as required by applicable law, and the provisions of section 3.5, 9.1
and 11.2, 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.
ARTICLE 9
AMENDMENT AND APPROVAL
9.1 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.
9.2 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
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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 two-thirds of the votes cast on such resolution at a meeting of
holders of Exchangeable Shares duly called and held at which the holders of at
least 50% of the outstanding Exchangeable Shares at that time are present or
represented by proxy (excluding Exchangeable Shares beneficially owned by
Applied or its Affiliates). If at any such meeting the holders of at least 50%
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 10 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 shall constitute the approval or consent of the holders of the
Exchangeable Shares.
ARTICLE 10
ECONOMIC EQUIVALENCE; CHANGES RELATING TO APPLIED
10.1 The Board of Directors shall determine, in good faith and in its sole
discretion (with the assistance of such reputable and qualified independent
financial advisors and/or other experts as the Board of Directors may require)
economic equivalence for the purposes of any provision herein that requires such
a determination and each such determination shall be conclusive and binding on
Applied and the holders of Exchangeable Shares, where applicable.
10.2 If at any time there is a capital reorganization of Applied or a
consolidation, merger, arrangement or amalgamation (statutory or otherwise) of
Applied with or into another entity (any such event being called a "Capital
Reorganization") that is not provided for in the definitions of "Applied Common
Stock Reorganization", "Rights Offering" or "Special Distribution", any holder
of Exchangeable Shares whose Exchangeable Shares have not been exchanged for
shares of Applied Common Stock in accordance with the provisions hereof or the
provisions of the Plan of Arrangement or the Voting and Exchange Trust Agreement
prior to the record date for such Capital Reorganization shall be entitled to
receive and shall accept, upon any such exchange occurring pursuant to the
provisions hereof or thereof at any time after the record date for such Capital
Reorganization in lieu of the shares of Applied Common Stock that he would
otherwise have been entitled to receive pursuant to the provisions hereof, the
number of shares or other securities of Applied or of the body corporate
resulting, surviving or continuing from the Capital Reorganization, or other
property, that such holder would have been entitled to receive as a result of
such Capital Reorganization if, on the record date, he had been the registered
holder of the number of shares of Applied Common Stock to which he was then
entitled upon any exchange of his Exchangeable Shares into Applied Common Stock
in accordance with the provisions hereof, subject to adjustment thereafter in
the same manner, as nearly as may be possible, as is provided for in the
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definition of "Current Applied Common Stock Equivalent"; provided that no such
Capital Reorganization shall be carried into effect unless all necessary steps
shall have been taken so that each holder of Exchangeable Shares shall
thereafter be entitled to receive, upon any exchange of his Exchangeable Shares
pursuant to the provisions hereof, such number of shares or other securities of
Applied or of the body corporate resulting, surviving or continuing from the
Capital Reorganization, or other property.
10.3 In the case of a reclassification of, or other change in, the outstanding
shares of Applied Common Stock other than a Applied Common Stock Reorganization,
Rights Offering, Special Distribution or a Capital Reorganization, such changes
shall be made in the rights attaching to the Exchangeable Shares, without any
action on the part of the Corporation or the holders of the Exchangeable Shares
to the extent permitted by applicable law, effective immediately following the
record date for such reclassification or other change, to the extent necessary
to ensure that holders of Exchangeable Shares shall be entitled to receive, upon
the occurrence at any time after such record date of any event whereby they
would receive Applied Common Stock pursuant to the previous provisions hereof or
the provisions of the Plan of Arrangement or the Voting and Exchange Trust
Agreement, such shares, securities or rights as they would have received if
their Exchangeable Shares had been exchanged for Applied Common Stock pursuant
to the provisions hereof or thereof immediately prior to such record date,
subject to adjustment thereafter in the same manner, as nearly as may be
possible, as is provided for in the definition "Current Applied Common Stock
Equivalent".
10.4 No certificates or scrip representing fractional Applied Common Stock shall
be delivered to holders of Exchangeable Shares pursuant to the provisions
hereof.
ARTICLE 11
ACTIONS BY THE CORPORATION UNDER SUPPORT AGREEMENT
11.1 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 Applied with all provisions of the Support Agreement and the
Voting and Exchange Trust Agreement applicable to the Corporation and Applied,
respectively, in accordance with the 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 under or pursuant to such agreements.
11.2 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 Voting and Exchange Trust Agreement without the
approval of the holders of the Exchangeable Shares given in accordance with
section 9.2 of these share provisions other than such amendments, waivers and/or
forgiveness as may be necessary or advisable for the purposes of:
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(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; or
(b) making such provisions or modifications not inconsistent with such
agreements 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 agreements 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 opinion, after consultation
with counsel, that such changes or corrections will not be prejudicial to
the interests of the holders of the Exchangeable Shares.
ARTICLE 12
LEGEND
12.1 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 provisions of the Plan of
Arrangement relating to the Retraction Call Right, the Liquidation Call Right
and the Redemption Call Right, and the Voting and Exchange Trust Agreement
(including the provisions with respect to the Voting Rights, Exchange Rights and
Automatic Exchange Rights thereunder).
ARTICLE 13
NOTICES
13.1 Any notice, request or other communication to be given to the Corporation
by a holder of Exchangeable Shares shall be in writing and shall be valid and
effective if given by mail (postage paid) or by telecopy or by delivery to the
registered office of the Corporation and addressed to the attention of the
President. Any such notice, request or other communication, if given by mail,
telecopy or delivery, shall only be deemed to have been given and received upon
actual receipt thereof by the Corporation.
13.2 Any presentation and surrender by a holder of Exchangeable Shares to the
Corporation or the Transfer Agent 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 to such office of the Transfer Agent as may be specified by
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the Corporation, 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 or the Transfer Agent, as the case may be. Any such presentation and
surrender of certificates made by registered mail shall be at the sole risk of
the holder mailing the same.
13.3 Any notice, request or other communication to be given to a holder of
Exchangeable Shares by or on behalf of the Corporation shall be in writing and
shall be valid and effective if given by mail (postage prepaid) or by delivery
to the address of the holder recorded in the securities register of the
Corporation or, in the event of the address of any such holder not being so
recorded, then at the last known address of such holder. Any such notice,
request or other communication, if given by mail, shall be deemed 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.
PROVISIONS ATTACHING TO THE PREFERRED SHARES AS A CLASS
PREFERRED SHARES
The Preferred Shares, as a class, shall have attached thereto the following
rights, privileges, restrictions and conditions:
1 The Preferred Shares may from time to time be issued in one or more series and
subject to the following provisions, and subject to the sending of articles of
amendment in prescribed form, and the endorsement thereon of a certificate of
amendment in respect thereof, the directors may fix from time to time before
such issue the number of shares that is to comprise each series and the
designation, rights, privileges, restrictions and conditions attaching to each
series of Preferred Shares including, without limiting the generality of the
foregoing, the issue price per share of the shares of such series, the rate or
amount of any dividends or the method of calculating any dividends, the dates of
payment thereof, any redemption, purchase and/or conversion prices and terms and
conditions of any redemption, purchase and/or conversion, and any sinking fund
or other provisions;
2 The Preferred Shares of each series shall, with respect to the payment of any
dividends and any distribution of assets or return of capital in the event of
liquidation, dissolution or winding-up of the Corporation, whether voluntary or
involuntary, or any other return of capital or distribution of the assets of the
Corporation among its shareholders for the purpose of winding-up its affairs,
rank on a parity with the Preferred Shares of every other series and be entitled
to preference over any other shares of the Corporation ranking junior to the
Preferred Shares. The Preferred Shares of any series may also be given such
other preferences, not inconsistent with these articles, over the Common Shares
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and any other shares of the Corporation ranking junior to such Preferred Shares
as may be fixed in accordance with section 1 above;
3 If any cumulative dividends or amounts payable on the return of capital in
respect of a series of Preferred Shares are not paid in full, all series of
Preferred Shares shall participate rateably in respect of such dividends and
return of capital;
4 The Preferred Shares of any series may be made convertible into Common Shares;
5 Unless the directors otherwise determine in the articles of amendment
designating a series, and subject to the provisions of the OBCA and section 6
below, the Preferred Shares shall have no voting rights as a class; and
6 Any amendment to the articles of the Corporation to remove or vary any rights,
privileges, restrictions and conditions attaching to the Preferred Shares as a
class or to create any other class of shares ranking in priority to or on a
parity with the Preferred Shares, in addition to the authorization by special
resolution, must be given by at least two-thirds of the votes cast at a meeting
of the holders of Preferred Shares duly called for that purpose and at every
such meeting a holder of a Preference Share shall be entitled to one vote in
respect of each Preference Share held in addition to any other vote required by
the OBCA.
SERIES A PREFERRED SHARES
The first series of Preferred Shares shall consist of one share and shall be
designated as Series A Preferred Shares and in addition to the rights,
privileges, restrictions and conditions attaching to the Preferred Shares as a
class shall have attached thereto the following rights, privileges, restrictions
and conditions:
1 Ranking
The Series A Preferred Share shall rank junior to any other shares of the
Corporation with respect to the payment of dividends and repayment of capital.
2 Dividends
The holder of the Series A Preferred Share shall not be entitled to receive any
dividend declared by the directors of the Corporation.
3 Voting Rights
The holder of the Series A Preferred Share shall be entitled to receive notice
of and to attend and vote at meetings of the shareholders of the Corporation.
4 Rights on Dissolution
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In the event of the liquidation, dissolution or winding-up of the Corporation
whether voluntary or involuntary, the holder of the Series A Preferred Share
shall be entitled to receive in respect of such share, before any distribution
of any part of the assets of the Corporation among the holders of any other
class of shares of the Corporation ranking junior to the Series A Preferred
Share, an amount equal to $.01 per Series A Preferred Share.
5 Conversion
(a) Upon and subject to the terms and conditions hereinafter set forth the
holder of the Series A Preferred Share shall have the right to convert the
Series A Preferred Share into one fully-paid and non-assessable Common
Share on the basis of one Common Share as presently constituted for the
Series A Preferred Share so converted;
(b) The conversion privilege herein provided for may be exercised by notice in
writing given to the Secretary of the Corporation at its registered office,
signed by such holder or his agent;
(c) Upon the conversion of the Series A Preferred Share, there shall be no
payment or adjustment by the Corporation or by the holder of the Series A
Preferred Share on account of any dividends either on the Series A
Preferred Share so converted or on the Common Share resulting from such
conversion;
(d) On the conversion of the Series A Preferred Share the share certificate for
the Common Share resulting therefrom shall be issued in the name of the
registered holder of the Series A Preferred Share so converted or in such
name or names as such registered holder may direct in writing (either in
the notice referred to in subparagraph (b) or otherwise), provided that
such registered holder shall pay any governmental or other tax imposed in
respect of such conversion;
(e) Subject as hereinafter provided in this subparagraph the right of a holder
of the Series A Preferred Share to convert the same into a Common Share
shall be deemed to have been exercised, and the registered holder of the
Series A Preferred Share to be converted (or any person or persons in whose
name or names any such registered holder of Series A Preferred Share shall
have directed the certificate representing the Common Share to be issued as
provided in subparagraph (d)) shall be deemed to have become the holder of
record of Common Shares, for all purposes on the date of actual receipt by
the Corporation of the notice in writing, notwithstanding any delay in the
delivery of the certificate representing the Common Share into which such
Series A Preferred Share has been converted; provided, however, that should
notice be given during a period when the registers of transfers of Common
Shares are properly closed, the registered holder of such share (or such
other person or persons as aforesaid) shall be deemed to become holders of
record of Common Shares immediately upon the re-opening of such registers
of transfers.
In the event of the Common Shares or the Series A Preferred Shares being, at any
time while any Series A Preferred Shares are outstanding, consolidated,
subdivided, reclassified or otherwise changed into a lesser or greater number of
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shares of the same class or a lesser or greater or the same number of shares of
a different class or different classes of shares of the Corporation, appropriate
adjustments shall contemporaneously be made to the rights (including, without
limitation, the conversion right attached to the Series A Preferred Shares)
privileges, restrictions and conditions attaching to the Common Shares and the
Series A Preferred Shares, respectively, so as to preserve in all respects the
benefits conferred on the holders of the Series A Preferred Shares by these
provisions.
COMMON SHARES
1 Voting Rights
Each holder of Common Shares shall be entitled to receive notice of and to
attend all meetings of shareholders of the Corporation and to vote thereat,
except meetings at which only holders of a specified class of shares (other than
Common Shares) or specified series of shares are entitled to vote. At all
meetings of which notice must be given to the holders of the Common Shares, each
holder of Common Shares shall be entitled to one vote in respect of each Common
Share held by him or her.
2 Dividends
The holders of the Common Shares shall be entitled, subject to the rights,
privileges, restrictions and conditions attaching to any other class of shares
of the Corporation, to receive any dividend declared by the Corporation.
3 Rights on Dissolution
The holders of the Common Shares shall be entitled, subject to the rights,
privileges, restrictions and conditions attaching to any other class of shares
of the Corporation, to receive the remaining property of the Corporation on a
liquidation, dissolution or winding-up of the Corporation, whether voluntary or
involuntary.
SCHEDULE "A"
NOTICE OF RETRACTION
TO: Commstar Ltd. (the "Corporation") and Applied Cellular Technology, Inc.
("Applied")
This notice is given pursuant to Article 5 of the provisions (the "Share
Provisions") attaching to the share(s) 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 5 of the Share Provisions:
* all shares(s) represented by this certificate; or
* shares only.
The undersigned acknowledges the Retraction Call Right of Applied to purchase
all but not less than all the Retracted Shares from the undersigned and that
this notice shall be deemed to be an irrevocable offer (subject as hereinafter
provided) by the undersigned to sell the Retracted Shares to Applied in
accordance with the Retraction Call Right on the Retraction Date for the
Retraction Call Purchase Price and on the other terms and conditions set out in
the Share Provisions. If Applied determines not to exercise the Retraction Call
Right, the Corporation will notify the undersigned of such fact as soon as
possible in which event the offer contained in this notice may be revoked by the
undersigned by a further notice in writing addressed to the Corporation and
Applied specifically referencing this Notice of Retraction and delivered to the
Transfer Agent.
The undersigned acknowledges that if, as a result of solvency provisions of
applicable law or otherwise, the Corporation fails to redeem all Retracted
Shares, the undersigned will be deemed to have exercised the Exchange Right (as
defined in the Voting and Exchange Trust Agreement) so as to require Applied to
purchase the unredeemed Retracted Shares.
The undersigned hereby represents and warrants to the Corporation and Applied
that the undersigned has good title to, and owns, the share(s) represented by
this certificate to be acquired by the Corporation or Applied, as the case may
be, free and clear of all liens.
------------------- ---------------------------- ---------------------------
(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 principal transfer office of
_____________________________ (the "Transfer Agent") in __________,
failing which the securities and any cheque(s) will be mailed to the
last address of the shareholder as it appears on the register of
holders of Exchangeable Shares.
NOTE:This panel must be completed and this certificate, together with such
additional documents as the Transfer Agent may require, must be deposited
with the Transfer Agent at its principal transfer 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 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.
---------------------------------- ------------------------
Name of Person in Whose Name Date
Securities or Cheque(s) Are To Be
Registered, Issued or Delivered
(please print)
---------------------------------- ------------------------
Street Address or P.O. Box Signature of Shareholder
---------------------------------- ------------------------
City-Province Signature Guaranteed by
NOTE:If the notice of retraction is for less than all of the share(s)
represented by this certificate, a certificate representing the remaining
shares of the Corporation will be issued and registered in the name of the
shareholder as it appears on the register of the Corporation, unless the
Share Transfer Power on the share certificate is duly completed in respect
of such shares.
