EXHIBIT 10.1
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
▇▇▇▇▇▇▇ TECHNOLOGIES INC.,
613636 BRITISH COLUMBIA, INC.
GOLDEN SOIL, INC.
AND
THE STOCKHOLDERS OF
▇▇▇▇▇▇▇ TECHNOLOGIES INC. NAMED IN SCHEDULE "A" OF THIS AGREEMENT
DATED AS OF OCTOBER 19, 2000
TABLE OF CONTENTS
TABLE OF CONTENTS
1. THE REORGANIZATION...................................................................................... 1
1.1 The Reorganization............................................................................. 1
1.2 Effective Time................................................................................. 2
1.4 Memorandum or Articles of Incorporation, and Bylaws............................................ 2
1.5 Directors and Officers......................................................................... 2
1.6 Conversion of ▇▇▇▇▇▇▇ Common Stock............................................................. 2
1.7 Surrender of Certificates...................................................................... 3
(a) Exchange Agent........................................................................ 3
(b) ▇▇▇▇▇▇▇ to Provide Common Stock....................................................... 3
(c) Exchange Procedures................................................................... 3
(d) Transfers of Ownership................................................................ 3
(e) No Liability.......................................................................... 3
1.8 No Further Ownership Rights in ▇▇▇▇▇▇▇ Common Stock............................................ 3
1.9 Lost, Stolen or Destroyed Certificates......................................................... 3
1.10 Tax Consequences............................................................................... 3
(a) Golden Soil........................................................................... 3
(b) Shareholders of ▇▇▇▇▇▇▇............................................................... 3
(c) General............................................................................... 4
1.11 Taking of Necessary Action; Further Action..................................................... 4
2.0 REPRESENTATIONS AND WARRANTIES OF GOLDEN SOIL AND GS SUB................................................ 4
2.1 Organization of Golden Soil and GS Sub......................................................... 4
2.2 Authority...................................................................................... 4
2.3 Capital Structure of Golden Soil............................................................... 4
2.4 Subsidiaries................................................................................... 5
2.5 Conflict....................................................................................... 5
2.6 Consents....................................................................................... 5
2.7 Golden Soil Financial Statements............................................................... 6
2.8 Securities and Exchange Filings................................................................ 6
2.9 Not a Reporting Issuer in British Columbia..................................................... 6
2.10 No Undisclosed Liabilities..................................................................... 6
2.11 No Changes..................................................................................... 6
2.12 Restrictions on Business Activities............................................................ 6
2.13 Agreements, Contracts and Commitments.......................................................... 6
2.14 Litigation..................................................................................... 6
2.15 Minute Books................................................................................... 7
2.16 Broker's and Finder's Fees: Third Party Expenses............................................... 7
2.17 Compliance with Laws........................................................................... 7
2.18 Complete Copies of Materials................................................................... 7
2.19 Exchangeable Shares and Golden Soil Common Stock............................................... 7
2.20 Taxes.......................................................................................... 7
2.21 Representations Complete....................................................................... 7
3.0 REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇▇............................................................... 7
3.1 Organization of ▇▇▇▇▇▇▇........................................................................ 7
3.2 Authority...................................................................................... 8
3.3 Capital Structure of ▇▇▇▇▇▇▇................................................................... 8
3.4 Subsidiaries................................................................................... 8
3.5 Conflict....................................................................................... 8
3.6 Consents....................................................................................... 8
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3.7 ▇▇▇▇▇▇▇ Financial Statements................................................................... 9
3.8 No Undisclosed Liabilities..................................................................... 9
3.9 Restrictions on Business Activities............................................................ 9
3.10 Agreements, Contracts and Commitments.......................................................... 9
3.11 Litigation..................................................................................... 9
3.12 Minute Books................................................................................... 9
3.13 Broker's and Finder's Fees: Third Party Expenses............................................... 9
3.14 Compliance with Laws........................................................................... 9
3.15 Complete Copies of Materials................................................................... 9
3.16 Taxes.......................................................................................... 9
3.17 Representations Complete...................................................................... 10
4.0 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AS TO THEMSELVES.................................... 10
4.1 Capacity...................................................................................... 10
4.2 Title......................................................................................... 10
4.3 Valid Agreement............................................................................... 10
4.4 Litigation.................................................................................... 10
4.5 Trust Constitution and Power.................................................................. 10
4.6 Governmental Authorization; Consents.......................................................... 10
4.7 Non-Contravention............................................................................. 10
4.8 Acquisition for Investment; Informed Decision................................................. 11
5.0 CONDUCT PRIOR TO THE EFFECTIVE TIME.................................................................... 11
5.1 Conduct of Business of ▇▇▇▇▇▇▇................................................................ 11
5.2 Conduct of Business of Golden Soil and GS Sub................................................. 11
6.0 ADDITIONAL AGREEMENTS.................................................................................. 11
6.1 Sale of Shares and Registration Right......................................................... 12
6.2 Stockholder Approval.......................................................................... 12
6.3 Access to Information......................................................................... 12
6.4 Confidentiality............................................................................... 12
6.5 Expenses...................................................................................... 13
6.6 Public Disclosure............................................................................. 13
6.7 Consents...................................................................................... 13
6.8 Reasonable Effort............................................................................. 13
6.9 Notification of Certain Matters............................................................... 13
6.10 Private Placement............................................................................. 13
(a) Warrant Offering..................................................................... 13
(b) Share Offering....................................................................... 13
6.11 Bridge Loans.................................................................................. 14
6.12 Support Agreement............................................................................. 14
6.13 Voting and Exchange Trust Agreement........................................................... 14
6.14 Escrow Agreement.............................................................................. 14
6.16 Officers and Directors........................................................................ 14
6.17 Additional Documents and Further Assurances................................................... 14
7.0 CONDITIONS TO THE REORGANIZATION....................................................................... 15
7.1 Conditions to Obligations of Each Party to Effect the Reorganization.......................... 15
(a) No Injunctions or Restraints; Illegality............................................. 15
(b) Consents, Permits, Waivers and Approval.............................................. 15
(c) Litigation........................................................................... 15
(d) Private Placement and Bridge Loans................................................... 15
7.2 Additional Conditions to Obligations of ▇▇▇▇▇▇▇............................................... 15
(a) Representations, Warranties and Covenants............................................ 15
(b) Claims............................................................................... 15
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(c) Certificate of President............................................................. 15
7.3 Additional Conditions to the Obligations of Golden Soil....................................... 15
(a) Representations, Warranties and Covenants............................................ 15
(b) Claims............................................................................... 16
(c) Third Party Consents................................................................. 16
(d) Certificate of ▇▇▇▇▇▇▇............................................................... 16
8.0 SURVIVAL OF REPRESENTATIONS AND WARRANTIES............................................................. 16
8.1 Survival of Representations and Warranties.................................................... 16
9.0 TERMINATION, AMENDMENT AND WAIVER...................................................................... 16
9.1 Termination................................................................................... 16
9.2 Effect of Termination......................................................................... 16
(a) General.............................................................................. 16
(b) Loans Advanced....................................................................... 16
(c) Debt Assumption...................................................................... 17
9.3 Amendment..................................................................................... 17
9.4 Extension; Waiver............................................................................. 17
10.0 GENERAL PROVISIONS..................................................................................... 17
10.1 Notices....................................................................................... 17
10.2 Interpretation................................................................................ 18
10.3 Counterparts.................................................................................. 18
10.4 Entire Agreement; Assignment.................................................................. 18
10.5 Severability.................................................................................. 18
10.6 Other Remedies................................................................................ 18
10.7 Governing Law................................................................................. 18
10.8 Rules of Construction......................................................................... 18
10.9 Time of the Essence........................................................................... 18
SCHEDULES:
Schedule A - List of Stockholders of ▇▇▇▇▇▇▇ Technologies Inc.
EXHIBITS:
Exhibit A - Articles of Amendment to Articles of Incorporation of ▇▇▇▇▇▇▇ Technologies Inc. Which Includes
the Exchangeable Share Provisions
Exhibit B - Certificate of Amendment to Articles of Incorporation of Golden Soil, Inc.
Exhibit C - Registration Rights Agreement
Exhibit D - Support Agreement
Exhibit E - Voting and Exchange Trust Agreement
Exhibit F - Escrow Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of October 19, 2000 by and among Golden Soil, Inc., a Nevada
corporation ("Golden Soil"), 613636 British Columbia, Inc., an British Columbia
corporation ("GS Sub"), ▇▇▇▇▇▇▇ Technologies Inc., a British Columbia
corporation ("▇▇▇▇▇▇▇") and the stockholders of ▇▇▇▇▇▇▇ named in Schedule "A" of
this Agreement (each a "Stockholder" and collectively, the "Stockholders").
WHEREAS:
A. The Stockholders are the beneficial and registered owners of all of the
issued and outstanding shares of ▇▇▇▇▇▇▇;
B. On the terms and subject to the conditions of this Agreement, Golden
Soil, GS Sub, ▇▇▇▇▇▇▇ and the Stockholders have agreed to effect the following
reorganization (the "Reorganization"):
(a) The amendment of the share capital of ▇▇▇▇▇▇▇ by Articles of
Amendment in the form attached as Exhibit A to this Agreement to create:
(i) 1,000,000 common shares without par value having the
rights, privileges, restrictions and conditions attributable by law to common
shares under the Company Act (British Columbia); and
(ii) 5,000,000 exchangeable shares (the "Exchangeable Shares")
having the rights, privileges, restrictions and conditions set out in Exhibit A
to this Agreement (collectively, the "Exchangeable Share Provisions").
(b) The recapitalization of the share capital of ▇▇▇▇▇▇▇ by exchanging
each issued and outstanding share of Common Stock of ▇▇▇▇▇▇▇ into that number of
Exchangeable Shares equal to an aggregate total of 3,787,500 (the "Exchange
Ratio").
(c) The amendment of the share capital of Golden Soil by Articles of
Amendment in the form attached as Exhibit B to this Agreement to create:
(i) 100,000,000 common shares with a par value of $0.001
having the rights, privileges, restrictions and conditions attributable by law
to common shares under the Nevada Revised Statutes Chapter 78; and
(ii) 1 preferred share with a par value of $1.00 having the
rights, privileges, restrictions and conditions set out in Exhibit B to this
Agreement.
(d) Immediately after step (c) above, the issuance by ▇▇▇▇▇▇▇ of 10,000
shares of Common Stock of ▇▇▇▇▇▇▇ to GS Sub in consideration of $1,000 and other
good and valuable consideration.
(e) The issuance to the Trustee, on behalf of the holders of the
Exchangeable Shares, one Preferred Share of Golden Soil having the right to cast
that number of votes at meetings of holders of shares of Common Stock of Golden
Soil equal to the number of Exchangeable Shares outstanding from time to time
(excluding any Exchangeable Shares held by Golden Soil or any direct or indirect
subsidiary of Golden Soil).
C. The Exchangeable Shares may be exchanged by the holders for shares
of common stock of Golden Soil on a one-for-one basis, subject to the
Exchangeable Share Provisions, the Voting and Exchange Trust Agreement and the
Support Agreement.
The parties agree as follows:
a) THE REORGANIZATION.
1.1 The Reorganization. On and subject to the terms and conditions of this
Agreement on the Closing Date defined in Section 1.2, the Reorganization shall
be completed as follows:
(a) ▇▇▇▇▇▇▇ will seek shareholder approval of the proposed
transactions contemplated by this Agreement.
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(b) On the Business Day preceding the Closing Date, ▇▇▇▇▇▇▇
will file Articles of Amendment in the form of Exhibit A to create the common
shares and the Exchangeable Shares and to change the issued and outstanding
Common Shares into Exchangeable Shares..
(b) On the Business Day preceding the Closing, Golden Soil
will file Articles of Amendment in the form of Exhibit B to this Agreement to
create the common shares and the preferred shares and to change the name of
Golden Soil.
(c) On the Closing Date, ▇▇▇▇▇▇▇ will deliver to each of the
Stockholders of ▇▇▇▇▇▇▇, certificates for the Exchangeable Shares issuable to
such Stockholder against delivery of certificates for all of the shares of
▇▇▇▇▇▇▇ held by such Stockholder, accompanied by a letter of transmittal signed
by such Stockholder.
(d) On the Closing Date, ▇▇▇▇▇▇▇ will issue 10,000 shares of
Common Stock of ▇▇▇▇▇▇▇ to GS Sub against receipt from GS Sub of $1,000.
(e) On the Closing Date, Golden Soil will issue 1 share of
Preferred Stock of Golden Soil to the Trustee, on behalf of the holders of the
Exchangeable Shares.
(d) On the Closing Date: (i) Golden Soil, ▇▇▇▇▇▇▇ and the
Trustee will enter into the Voting Exchange Trust Agreement; (ii) Golden Soil
and ▇▇▇▇▇▇▇ will enter into the Support Agreement; (iii) Golden Soil, ▇▇▇▇▇▇▇,
the Stockholders and the Trustee will enter into the Escrow Agreement; and (iv)
Golden Soil and the Stockholders will enter into a Registration Rights
Agreement.
1.2 Effective Time. Unless this Agreement is earlier terminated
pursuant to Section 9.1, the closing of the Reorganization (the "Closing") will
take place as promptly as practicable, but no later than two (2) business days
following satisfaction or waiver of the conditions set forth in Section 6, via
facsimile or at the offices of Venture Law Corporation, Suite 618, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇, unless another
place or time is agreed to in writing by Golden Soil and ▇▇▇▇▇▇▇. The date on
which the Closing actually occurs is in this Agreement referred to as the
"Closing Date." The later time of acceptance by the Corporate Registry Office of
the Province of British Columbia and Secretary of State of Nevada of Articles of
Amendment evidenced by the issuance of a stamped certificate of these documents
being referred to in this Agreement as the "Effective Time".
1.4 Memorandum or Articles of Incorporation, and Bylaws.
(a) ▇▇▇▇▇▇▇. The Memorandum of Incorporation and Articles of
▇▇▇▇▇▇▇ will be the Memorandum of Incorporation and Articles as set out in
Exhibit "A" to this Agreement. The Memorandum of Incorporation will create two
classes of shares - common shares and Exchangeable Shares. The rights and
privileges of the Exchangeable Shares are as set out in Exhibit A to this
Agreement.
(b) Golden Soil. Golden Soil agrees to amend its Articles
of Incorporation in the form attached as Exhibit "B" to change the name of
Golden Soil to "▇▇▇▇▇▇▇, Inc." and to create a new class of special voting
stock.
1.5 Directors and Officers. Directors of Golden Soil immediately after
the Effective Time will consist of nine members. Four nominee directors selected
by the selling stockholders of ▇▇▇▇▇▇▇ and five nominees selected by ▇▇▇▇▇
Gushlak, each director to hold the office in accordance with the provisions of
applicable laws and the Bylaws of Golden Soil, until their successors are duly
qualified and elected. The directors and officers of ▇▇▇▇▇▇▇ immediately after
the Effective Time will be appointed by the incoming Board of Directors of
Golden Soil, each to hold office in accordance with the provisions of the Bylaws
of ▇▇▇▇▇▇▇, on conversion as provided for in the succeeding paragraph.
1.6 Conversion of ▇▇▇▇▇▇▇ Common Stock.
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(a) At the Effective Time, all outstanding shares of ▇▇▇▇▇▇▇
Common Stock, without par value ("▇▇▇▇▇▇▇ Common Stock"), on the terms and
subject to the conditions set forth below, will be exchanged by the Stockholders
in accordance with the Exchange Ratio for Exchangeable Shares. Each Exchangeable
Share may be converted into a share of the Common Stock of Golden Soil par value
$0.001 per share ("Golden Soil Common Stock") and will have the rights and
preferences described in Exhibit A. On transfer the name of each such holder of
▇▇▇▇▇▇▇ Common Stock will be removed from the register of holders of ▇▇▇▇▇▇▇
Common Stock and added to the register of holders of Exchangeable Shares of
▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇ will cancel such ▇▇▇▇▇▇▇ Common Stock so exchanged.
(b) The Exchange Ratio will be adjusted to reflect fully the
effect of any stock split, reverse split, stock dividend (including any dividend
or distribution of securities convertible into ▇▇▇▇▇▇▇ Common Stock or Golden
Soil Common Stock), reorganization, recapitalization or other like charge with
respect to ▇▇▇▇▇▇▇ Common Stock or Golden Soil Common Stock occurring after the
date of this Agreement.
(c) No fractional shares will be issued in the Reorganization.
In lieu of fractional shares, any fractional share will be rounded up to the
nearest whole share.
1.7 Surrender of Certificates.
(a) Exchange Agent. The Venture Law Corporation of Vancouver,
British Columbia, Canada will serve as exchange agent (the "Exchange Agent") in
the Reorganization.
(b) ▇▇▇▇▇▇▇ to Provide Common Stock. Promptly after the
Effective Time, ▇▇▇▇▇▇▇ will make available to the Exchange Agent for exchange
in accordance with this Section, the shares of ▇▇▇▇▇▇▇ Common Stock convertible
pursuant to Section 1.6(a) in exchange for Exchangeable Shares.
(c) Exchange Procedures. On or after the Closing Date, the
holders of ▇▇▇▇▇▇▇ Common Stock will surrender the certificates representing
their ▇▇▇▇▇▇▇ Common Stock (the "▇▇▇▇▇▇▇ Stock Certificate") to the Exchange
Agent for cancellation together with a letter of transmittal in such form and
having such provisions that the Exchange Agent reasonably requests. Promptly
following the Effective Time, Exchange Agent will cause to be issued
stockholders certificates for the number of Exchangeable Shares to which such
stockholders are entitled pursuant to Section 1.6.
(d) Transfers of Ownership. If any certificate for
Exchangeable Shares is to be issued in a name other than that in which the
certificate surrendered in exchange therefor is registered or if any cash is to
be delivered to a person other than the person whose name is on the certificate
surrendered, it will be a condition to the issuance and/or delivery that the
certificate so surrendered will be properly endorsed and otherwise in proper
form for transfer and that the person requesting such exchange will have paid to
▇▇▇▇▇▇▇ or any agent designated by it any transfer or other taxes required by
reason or the issuance of a certificate for shares of Exchangeable Shares or the
delivery of any cash in any name other than that of the registered holder of the
certificate surrendered, or established to the satisfaction of the Exchange
Agent or any agent designated by it that such tax has been paid or is not
payable. Golden Soil and the Transfer Agent acknowledge and agree that ▇▇▇▇ ▇▇▇
will designate prior to the Effective Time such persons and respective amounts
of Exchangeable Shares under this Agreement.
(e) No Liability. Notwithstanding anything to the contrary in
this Section 1.7, none of the Exchange Agent, ▇▇▇▇▇▇▇ or any party to this
Agreement will be liable to a holder of shares of Exchangeable Shares or ▇▇▇▇▇▇▇
Common Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in ▇▇▇▇▇▇▇ Common Stock. All shares of
Exchangeable Shares issued on the surrender for exchange of shares of ▇▇▇▇▇▇▇
Common Stock in accordance with the terms of this Agreement, and any cash paid
in respect thereof, will be deemed to be full satisfaction of all rights
pertaining to such shares of ▇▇▇▇▇▇▇ Common Stock, and there will be no further
registration of transfers on the records of Golden Soil of shares of ▇▇▇▇▇▇▇
Common Stock which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, ▇▇▇▇▇▇▇ Stock Certificates are presented to the
Transfer Agent or Golden Soil for any reason, they will be canceled and
exchanged as provided in this Section 1.
1.9 Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing shares of ▇▇▇▇▇▇▇ Common Stock will have been lost,
stolen or destroyed, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed certificates, on the making of an affidavit of that fact by
the holder thereof, such amount, if any,
52
as may be required pursuant to Section 1.6; provided, however, that the Exchange
Agent may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificates to
deliver an indemnity in such sum as it may reasonably direct against any claim
that may be made against Golden Soil or the Exchange Agent with respect to the
certificates alleged to have been lost, stolen or destroyed.
1.10 Tax Consequences.
(a) Golden Soil. It is intended by the parties to this Agreement that the
Reorganization will constitute a reorganization within the meaning of Section
368 of the Internal Revenue Code of 1986, as amended.
(b) Shareholders of ▇▇▇▇▇▇▇. Shareholders of ▇▇▇▇▇▇▇ who receive
Exchangeable Shares on the exchange of their shares of ▇▇▇▇▇▇▇ Common Stock will
be entitled to make an income tax election pursuant to Section 85 of the Income
Tax Act (Canada)(and the analogous provisions of the provincial income tax law)
with respect to the transfer of their shares of ▇▇▇▇▇▇▇ Common Stock into
Exchangeable Shares by providing two signed copies of the necessary election
forms to ▇▇▇▇▇▇▇ within ninety (90) days following the Effective Time, duly
completed with the details of the number of shares transferred and the
applicable agreed amounts for the purposes of such elections. Thereafter,
subject to the election forms complying with the provisions of the Income Tax
Act (Canada) (or applicable provincial income tax law), Golden Soil will cause
the forms to be signed by ▇▇▇▇▇▇▇ and returned to such holders of shares of
▇▇▇▇▇▇▇ Common Stock (within 60 days after the receipt thereof) for filing with
Revenue Canada, Customs, Excise and Taxation (or the applicable provincial
taxing authority). With the exception of execution or causing execution of the
election by ▇▇▇▇▇▇▇, compliance with the requirements for a valid election will
be the sole responsibility of the holder making the election. For purposes of
this provision an eligible holder is a holder who is a Canadian resident for
purposes of the Income Tax Act (Canada) other than a person who is exempt from
tax under the Income Tax Act (Canada) or which is a partnership that owns such
shares if one or more of its members would be entitled to make such election if
such member held such shares directly.
(c) General. Each party has consulted with its own tax advisors with
respect to the tax consequences of the Reorganization.
1.11 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest Merilus with full right, title
and possession to all assets, property, rights, privileges, powers and
franchises of ▇▇▇▇▇▇▇ and GS Sub, the officers and directors of ▇▇▇▇▇▇▇, ▇▇ Sub
and Golden Soil are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
2.0 REPRESENTATIONS AND WARRANTIES OF GOLDEN SOIL AND GS SUB.
Golden Soil and GS Sub represent and warrant to ▇▇▇▇▇▇▇, subject to
such exceptions as are specifically disclosed in the Golden Soil Disclosure
Schedule (referencing the appropriate Section and paragraph numbers) supplied by
Golden Soil to ▇▇▇▇▇▇▇ (the "Golden Soil Disclosure Schedule") and dated as of
the date of this Agreement, as follows:
2.1 Organization of Golden Soil and GS Sub. Golden Soil is a
corporation duly organized, validly existing and in good standing under the laws
of the Nevada. GS Sub is a corporation duly organized, validly existing and in
good standing under the laws of the Province of British Columbia. Golden Soil
and GS Sub each has the corporate power to own its properties and to carry on
its business. Golden Soil and GS Sub has each delivered a true and correct copy
of its Articles of Incorporation and Bylaws and the Certificate of Incorporation
and Bylaws, each as amended to date, to ▇▇▇▇▇▇▇. Xenios Xenopoulous is the sole
director and officer of Golden Soil. Golden Soil has never conducted any
operations.
2.2 Authority. Golden Soil and GS Sub each has all requisite corporate
power and authority to enter into this Agreement and the Related Agreements (as
defined below) and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Related Agreements
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of Golden
Soil and GS Sub except that the Reorganization must be approved by the
stockholders of Golden Soil. This Agreement has been duly executed and delivered
by Golden Soil and GS Sub and
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constitutes, and the Related Agreements, when duly executed and delivered by
Golden Soil and GS Sub, will constitute the valid and binding obligations of
each party, enforceable in accordance with their terms, except as such
enforceability may be limited by principles of public policy and subject to the
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies. The "Related Agreements" will mean all such ancillary
agreements required in this Agreement to be executed and delivered in connection
with the transactions contemplated hereby.
2.3 Capital Structure of Golden Soil.
(a) The authorized capital stock of Golden Soil consists of
100,000,000 shares of authorized Common Stock, par value $0.001 per share, of
which 6,750,000 shares are issued and outstanding and an additional 3,787,500
shares will be issued and outstanding at the Closing which excludes the up to
4,025,000 shares to be issued and disclosed under Section 2.3(b) and 2.14 below.
The authorized capital stock of GS Sub consists of 10,000,000 shares of
authorized Common Stock, no par value, of which 100 shares are issued and
outstanding in favor of Golden Soil. All outstanding shares of Golden Soil
Common Stock are duly authorized, validly issued, fully paid and non-assessable
and not subject to preemptive rights created by statute, the Articles of
Incorporation or Bylaws of Golden Soil or any agreement to which Golden Soil is
a party or by which it is bound and have been issued in compliance with federal
and state securities laws. Golden Soil has no other capital stock authorized,
issued or outstanding.
(b) Golden Soil has arranged two private placements. The first
consists of 2,000,000 warrants. Each warrant is exerciseable for one share of
Common Stock of Golden Soil at an exercise price of $1.00 per share for an
aggregate amount of US$ 2,000,000 (the "Golden Soil Warrants"). The Golden Soil
Warrants have been issued to Imperium Capital Inc. The second private placement
consists of a share offering consisting of a minimum of 1,000,000 to a maximum
of 2,000,000 shares at a purchase price of not less than $5.00 per share. This
second offering is to be completed within 60 days from Closing. No shares have
been sold in the second offering as of the date of this Agreement. A minimum of
$2,000,000 must be raised between the two private placements prior to the
Closing and Golden Soil has agreed to make the entire $2,000,000 available to
▇▇▇▇▇▇▇ on receipt by way of a loan or loans prior to Closing. Except for the
Golden Soil Warrants and the 25,000 shares to be issued as a payment for
consulting services received from Canaccord Capital Corp. as set out in Section
2.16 below, there are no options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which Golden Soil or any of its
shareholders is a party or by which Golden Soil or any of its shareholders is
bound obligating Golden Soil or any of its shareholders to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of the capital stock of Golden Soil or obligating Golden
Soil to grant, extend, accelerate the vesting of, change the price of, otherwise
amend or enter into any such option warrant, call, right, commitment or
agreement. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or other similar rights with respect to Golden
Soil. There are no voting trusts, proxies, or other agreements or understandings
with respect to the voting stock of Golden Soil.
(c) The Golden Soil Common Stock has been duly approved for
quotation on the NASD OTC Bulletin Board. Golden Soil has filed all forms,
reports, exhibits and other documents required to be filed with the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations promulgated respectively
thereunder.
2.4 Subsidiaries. Except for GS Sub, Golden Soil does not have, and has
never had, any subsidiaries or affiliated companies and does not otherwise own,
and has not otherwise owned, any shares in the capital of or any interest in, or
control, directly or indirectly, any other corporation, partnership,
association, joint venture or other business entity. Golden Soil owns all of the
issued and outstanding capital stock of GS Sub.
2.5 Conflict. The execution and delivery of this Agreement and any
Related Agreements to which it is a party by Golden Soil and GS Sub do not, and,
the consummation of the transactions contemplated hereby and thereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation, modification or acceleration of any obligation or loss of any
benefit under (any such event, a "Conflict") (i) any provision of the Articles
of Incorporation and Bylaws of Golden Soil or GS Sub, (ii) any mortgage,
indenture, lease, contract or other agreement or instrument, permit,
54
concession, franchise or license to which Golden Soil, GS Sub or any of their
properties or assets are subject, or (iii) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Golden Soil, GS Sub or their
respective properties or assets.
2.6 Consents. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or other foreign governmental
authority, instrumentality, agency or commission ("Governmental Entity") or any
third party, including a party to any agreement with Golden Soil or GS Sub (so
as not to trigger any Conflict), is required by or with respect to Golden Soil
or GS Sub in connection with the execution and delivery of this Agreement and
any Related Agreements to which Golden Soil or GS Sub is a party or the
consummation of the transactions contemplated hereby and thereby, except for (i)
such consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable securities laws
thereby, and (ii) the filing of the Articles of Amendment of ▇▇▇▇▇▇▇ with the
Corporate Registry Office of the Province of British Columbia and the filing of
the Articles of Amendment of Golden Soil with the Secretary of State of the
State of Nevada.
2.7 Golden Soil Financial Statements. Golden Soil has provided ▇▇▇▇▇▇▇
with a copy of its audited balance sheets as of December 31, 1999, December 31,
1998 and the related audited statements of operations, stockholders' equity and
cash flow for the periods then ended (the "Golden Soil Financials"). The Golden
Soil Financials are correct in all material respects and have been prepared in
accordance with US generally accepted accounting principles applied on a basis
consistent throughout the periods indicated and consistent with each other. The
Golden Soil Financials present fairly the financial condition, operating results
and cash flows of Golden Soil as of the dates and during the periods indicated
therein. The unaudited financial statements for the period ended September 30,
2000 will be substantially the same in all respects as the unaudited financial
statements for the period ended June 30, 2000 provided except for any changes as
a result of entering into this Agreement, the transactions contemplated hereby
and the transactions referenced in Section 6.0 of this Agreement.
2.8 Securities and Exchange Filings. Golden Soil has filed with the
Securities and Exchange Commission true and complete copies of all forms,
reports, schedules, statements and other documents required to be filed by it
since December 13, 1999, and such documents at the time filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such amending or superseding filing), did not contain any misrepresentation (as
defined in the Exchange Act), and complied in all material respects with the
requirements of the applicable securities laws. Golden Soil has not filed any
confidential material change report with the Securities Commission or any other
securities authority or regulator or any stock exchange or other self-regulatory
authority which at the date of this Agreement remains confidential.
2.9 Not a Reporting Issuer in British Columbia. Golden Soil is not a
"reporting issuer" or its equivalent for the purposes of the Securities Act of
British Columbia, as amended, or any other Canadian provincial securities
legislation.
2.10 No Undisclosed Liabilities. Golden Soil and GS Sub do not have any
liability, indebtedness, obligation, expense, claim, deficiency, guaranty or
endorsement of any type, whether accrued, absolute, contingent, matured,
unmatured or other (whether or not required to be reflected in financial
statements in accordance with US generally accepted accounting principles).
2.11 No Changes. Since inception of Golden Soil and GS Sub, there has not
been, occurred or arisen any:
(a) transaction, commitment or obligation by Golden Soil or GS
Sub of any kind other than the stock and warrant issuances described in
paragraph (b) of this Agreement;
(b) issuance or sale, or contract to issue or sell, by Golden
Soil of any shares of Golden Soil Common Stock, by GS Sub of any of its capital
stock or securities exchangeable, convertible or exercisable therefor, or any
securities, warrants, options or rights to purchase any of the foregoing, except
for the issuance of Units and underlying shares of Golden Soil Common Stock and
the issuance of the Golden Soil Warrants previously disclosed in paragraph
2.3(b);
55
(c) negotiation or agreement by Golden Soil or GS Sub or any
officer or employees of both to do any of the things described in the preceding
clauses (a) or (b) (other than negotiations with ▇▇▇▇▇▇▇ and its representatives
regarding the transactions contemplated by this Agreement and the disclosed
private placement offering).
2.12 Restrictions on Business Activities. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which Golden Soil or GS Sub is a party or otherwise binding on Golden Soil which
has or may have the effect of prohibiting or impairing any business practice of
Golden Soil, GS Sub or ▇▇▇▇▇▇▇, any acquisition of property (tangible or
intangible) by Golden Soil, GS Sub or ▇▇▇▇▇▇▇ or the conduct of business by
Golden Soil, GS Sub or ▇▇▇▇▇▇▇.
2.13 Agreements, Contracts and Commitments. Golden Soil and GS Sub are not
a party to nor are they bound by any contracts, obligations or agreements of any
kind except for this Agreement. (collectively a "Contract").
2.14 Litigation. There is no action, suit or proceeding of any nature
pending, or, to Golden Soil's knowledge, threatened, against Golden Soil or GS
Sub, their properties or any of its officers or directors, nor, to the knowledge
of Golden Soil, is there any reasonable basis therefor. There is no
investigation pending or, to Golden Soil's knowledge threatened, against Golden
Soil or GS Sub, their properties or any of its officers or directors (nor, to
the best knowledge of Golden Soil, is there any reasonable basis therefor) by or
before any Governmental Entity. No Governmental Entity has at any time
challenged or questioned the legal right of Golden Soil or GS Sub to conduct its
operations as presently or previously conducted.
2.15 Minute Books. The minutes of Golden Soil delivered to counsel for
▇▇▇▇▇▇▇ are the only minutes of Golden Soil and contain a reasonably accurate
summary of all meetings of the Board of Directors (or committees of the Board of
Directors) of Golden Soil and its shareholders or actions by written consent
since the time of incorporation of Golden Soil.
2.16 Broker's and Finder's Fees: Third Party Expenses. Except for an
agreement to pay Canaccord Capital Corp. 25,000 shares of Common Stock of Golden
Soil for their assistance with this transaction, Golden Soil and GS Sub have not
incurred, nor will they incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with the Agreement or any transaction contemplated hereby.
2.17 Compliance with Laws. Golden Soil and GS Sub have complied with,
are not in violation of, and have not received any notices of violation with
respect to, any foreign, federal, state or local statute, law or regulation.
2.18 Complete Copies of Materials. Golden Soil has delivered or made
available true and complete copies of each document (or summaries of same) that
has been requested by ▇▇▇▇▇▇▇ or its counsel.
2.19 Exchangeable Shares and Golden Soil Common Stock. The Exchangeable
Shares to be issued in connection with the Agreement will be duly and validly
issued by ▇▇▇▇▇▇▇ on the Effective Date as fully paid and non-assessable shares.
The Golden Soil Common Stock to be issued pursuant to the Agreement and on the
exchange from time to time of the Exchangeable Shares will be duly and validly
issued by Golden Soil on their respective date of issue as fully paid and
non-assessable shares.
2.20 Taxes. All United States federal, state, county, municipality,
local or foreign income tax returns and all other material tax returns
(including foreign tax returns) which are required to be filed by or on behalf
of Golden Soil and GS Sub have been or will be filed and all material taxes due
and payable pursuant to such returns or pursuant to any assessment received by
Golden Soil and GS Sub have been or will be paid except those being disputed in
good faith and for which adequate reserves have been established. The charges,
accruals and reserves on the books of Golden Soil and GS Sub in respect of taxes
and other governmental charges have been established in accordance with US
generally accepted accounting principles.
56
2.21 Representations Complete. None of the representations or
warranties made by Golden Soil or GS Sub (as modified by the Golden Soil
Disclosure Schedule), nor any statement made in any Schedule or certificate
furnished by Golden Soil pursuant to this Agreement or furnished in or in
connection with documents mailed or delivered to the shareholders of Golden Soil
for use in soliciting their consent to this Agreement and Reorganization
contains or will contain at the Effective Time, any untrue statement of a
material fact, or omits or will omit at the Effective Time to state any material
fact necessary in order to make the statements contained in this Agreement, in
the light of the circumstances under which made, not misleading.
3.0 REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇▇.
▇▇▇▇▇▇▇ and its subsidiaries represents and warrants to Golden Soil,
subject to such exceptions as are specifically disclosed in the ▇▇▇▇▇▇▇
Disclosure Schedule (referencing the appropriate Section and paragraph numbers)
supplied by ▇▇▇▇▇▇▇ to Golden Soil (the "▇▇▇▇▇▇▇ Disclosure Schedule") and dated
as of the date of this Agreement, as follows (for purposes of this Section 3.0
references to ▇▇▇▇▇▇▇ will include its subsidiaries when appropriate under the
circumstances):
3.1 Organization of ▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇ is a corporation duly organized,
validly existing and in good standing under the laws of the Province of British
Columbia. ▇▇▇▇▇▇▇ has the corporate power to own its properties and to carry on
its business as now being conducted and is duly qualified to do business and is
in good standing in each jurisdiction in which the failure to be so qualified
would have a material adverse effect on the ability of ▇▇▇▇▇▇▇ to consummate the
transactions contemplated hereby. ▇▇▇▇▇▇▇ has delivered a true and correct copy
of its Articles of Incorporation and Bylaws and the Certificate of Incorporation
and Bylaws, each as amended to date, to Golden Soil.
3.2 Authority. ▇▇▇▇▇▇▇ has all requisite corporate power and authority
to enter into this Agreement and the Related Agreements and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Related Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of ▇▇▇▇▇▇▇ except that the Reorganization must be
approved by the stockholders of ▇▇▇▇▇▇▇. This Agreement has been duly executed
and delivered by ▇▇▇▇▇▇▇ and constitutes, and the Related Agreements, when duly
executed and delivered by ▇▇▇▇▇▇▇, will constitute the valid and binding
obligations of ▇▇▇▇▇▇▇, enforceable in accordance with their terms, except as
such enforceability may be limited by principles of public policy and subject to
the laws of general application relating to bankruptcy, insolvency and the
relief of debtors and rules of law governing specific performance, injunctive
relief or other equitable remedies.
3.3 Capital Structure of ▇▇▇▇▇▇▇.
(a) The authorized stock of ▇▇▇▇▇▇▇ consists of 30,000 shares
of Common Stock, with no par value, of which 6,464 shares are issued and
outstanding. All outstanding shares of ▇▇▇▇▇▇▇ Common Stock are duly authorized,
validly issued, fully paid and non-assessable and not subject to preemptive
rights created by statute, the Articles of Incorporation or Bylaws of ▇▇▇▇▇▇▇ or
any agreement to which ▇▇▇▇▇▇▇ is a party or by which it is bound and have been
issued in compliance with federal and state securities laws. ▇▇▇▇▇▇▇ has no
other capital stock authorized, issued or outstanding.
(b) There are no options, warrants, calls, rights, commitments
or agreements of any character, written or oral, to which ▇▇▇▇▇▇▇ or any of its
stockholders is a party or by which ▇▇▇▇▇▇▇ or any of its stockholders is bound
obligating ▇▇▇▇▇▇▇ or any of its stockholders to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of the capital stock of ▇▇▇▇▇▇▇. There are no outstanding
or authorized stock appreciation, phantom stock, profit participation, or other
similar rights with respect to ▇▇▇▇▇▇▇. There are no voting trusts, proxies, or
other agreements or understandings with respect to the voting stock of ▇▇▇▇▇▇▇.
3.4 Subsidiaries. ▇▇▇▇▇▇▇ does not have, and has never had, any
subsidiaries or affiliated companies and does not otherwise own, and has not
otherwise owned, any shares in the capital of or any interest in, or control,
directly or indirectly, any other corporation, partnership, association, joint
venture or other business entity.
57
3.5 Conflict. The execution and delivery of this Agreement and any
Related Agreements to which it is a party by ▇▇▇▇▇▇▇ do not, and, the
consummation of the transactions contemplated hereby and thereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation, modification or acceleration of any obligation or loss of any
benefit under (any such event, a "Conflict") (i) any provision of the Articles
of Incorporation and Bylaws of ▇▇▇▇▇▇▇, (ii) any mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise or
license to which ▇▇▇▇▇▇▇ or any of its properties or assets are subject, or
(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to ▇▇▇▇▇▇▇ or its properties or assets.
3.6 Consents. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or other foreign governmental
authority, instrumentality, agency or commission ("Governmental Entity") or any
third party, including a party to any agreement with ▇▇▇▇▇▇▇ (so as not to
trigger any Conflict), is required by or with respect to ▇▇▇▇▇▇▇ in connection
with the execution and delivery of this Agreement and any Related Agreements to
which ▇▇▇▇▇▇▇ is a party or the consummation of the transactions contemplated
hereby and thereby, except for (i) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable securities laws thereby, and (ii) the filing of the Articles of
Amendment of ▇▇▇▇▇▇▇ with the Corporate Registry Office of the Province of
British Columbia and the filing of the Articles of Amendment of Golden Soil with
the Secretary of State of the State of Nevada.
3.7 ▇▇▇▇▇▇▇ Financial Statements. ▇▇▇▇▇▇▇ has furnished Golden Soil
with a true and complete copy of its audited balance sheet as of September 30,
1999 and September 30, 1998 and the related audited statements of operations,
stockholders' equity and cash flow for the periods then ended (the "▇▇▇▇▇▇▇
Financials"). The ▇▇▇▇▇▇▇ Financials are correct in all material respects and
have been prepared in accordance with Canadian generally accepted auditing
standards applied on a basis consistent throughout the periods indicated and
consistent with each other. The ▇▇▇▇▇▇▇ Financials present fairly the financial
condition of ▇▇▇▇▇▇▇ as of the date indicated. ▇▇▇▇▇▇▇ will deliver to Golden
Soil its audited balance sheet as of ended September 30, 2000 and the related
audited financial statements of operations, stockholders' equity and cash flow
for the periods then ended on or before November 30, 2000.
3.8 No Undisclosed Liabilities. Except as disclosed in the ▇▇▇▇▇▇▇
Financials, ▇▇▇▇▇▇▇ does not have any liability, indebtedness, obligation,
expense, claim, deficiency, guaranty or endorsement of any type, whether
accrued, absolute, contingent, matured, un-matured or other (whether or not
required to be reflected in financial statements in accordance with Canadian
generally accepted accounting principles).
3.9 Restrictions on Business Activities. Other than license and other
restrictions included in agreements entered into in the ordinary course of
business, there is no agreement (non-compete or otherwise), commitment,
judgment, injunction, order or decree to which ▇▇▇▇▇▇▇ is a party or otherwise
binding on ▇▇▇▇▇▇▇ which has or may have the effect of prohibiting or impairing
any business practice of ▇▇▇▇▇▇▇, any acquisition of property (tangible or
intangible) by ▇▇▇▇▇▇▇ or the conduct of business by ▇▇▇▇▇▇▇.
3.10 Agreements, Contracts and Commitments. ▇▇▇▇▇▇▇ is in compliance
with and has not breached, violated or defaulted under, or received notice that
it has breached, violated or defaulted under, any of the terms or conditions of
any agreement, contract, covenant, instrument, lease, license or commitment to
which ▇▇▇▇▇▇▇ is a party or by which it is bound (collectively a "Contract"),
nor is ▇▇▇▇▇▇▇ aware of any event that would constitute such a breach, violation
or default with the lapse of time, giving of notice or both. ▇▇▇▇▇▇▇ has
obtained, or will obtain prior to the Closing Date, all necessary consents,
waivers and approvals as are required in connection with the Reorganization.
3.11 Litigation. There is no action, suit or proceeding of any nature
pending, or, to ▇▇▇▇▇▇▇'▇ knowledge, threatened, against ▇▇▇▇▇▇▇, its properties
or any of its officers or directors, nor, to the knowledge of ▇▇▇▇▇▇▇, is there
any reasonable basis therefor. There is no investigation pending or, to
▇▇▇▇▇▇▇'▇ knowledge threatened, against ▇▇▇▇▇▇▇, its properties or any of its
officers or directors (nor, to the best knowledge of ▇▇▇▇▇▇▇, is
58
there any reasonable basis therefor) by or before any Governmental Entity. No
Governmental Entity has at any time challenged or questioned the legal right of
▇▇▇▇▇▇▇ to conduct its operations as presently or previously conducted.
3.12 Minute Books. The minutes of ▇▇▇▇▇▇▇ made available to counsel for
Golden Soil are the only minutes of ▇▇▇▇▇▇▇ and contain a reasonably accurate
summary of all meetings of the Board of Directors (or committees of the Board of
Directors) of ▇▇▇▇▇▇▇ and its shareholders or actions by written consent since
the time of incorporation of ▇▇▇▇▇▇▇.
3.13 Broker's and Finder's Fees: Third Party Expenses. ▇▇▇▇▇▇▇ has not
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with the Agreement or any transaction contemplated hereby.
3.14 Compliance with Laws. ▇▇▇▇▇▇▇ has complied with in all material
respects, is not in violation of, and has not received any notices of violation
with respect to, any foreign, federal, state or local statute, law or
regulation.
3.15 Complete Copies of Materials. ▇▇▇▇▇▇▇ has delivered or made available
true and complete copies of each document (or summaries of same) that has been
requested by Golden Soil or its counsel.
3.16 Taxes. All Canadian federal, state, county, municipality, local or
foreign income tax returns and all other material tax returns (including foreign
tax returns) which are required to be filed by or on behalf of ▇▇▇▇▇▇▇ have been
filed and all material taxes due and payable pursuant to such returns or
pursuant to any assessment received by ▇▇▇▇▇▇▇ have been paid except those being
disputed in good faith and for which adequate reserves have been established.
The charges, accruals and reserves on the books of ▇▇▇▇▇▇▇ in respect of taxes
and other governmental charges have been established in accordance with Canadian
generally accepted accounting principles.
3.17 Representations Complete. None of the representations or
warranties made by ▇▇▇▇▇▇▇ (as modified by the ▇▇▇▇▇▇▇ Disclosure Schedule), nor
any statement made in any Schedule or certificate furnished by ▇▇▇▇▇▇▇ pursuant
to this Agreement or finished in or in connection with documents mailed or
delivered to the shareholders of ▇▇▇▇▇▇▇ for use in soliciting their consent to
this Agreement and the Reorganization contains or will contain at the Effective
Time, any untrue statement of a material fact, or omits or will omit at the
Effective Time to state any material fact necessary in order to make the
statements contained in this Agreement, in the light of the circumstances under
which made, not misleading.
4.0 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AS TO
THEMSELVES
Each Stockholder hereby represents and warrants to Golden Soil, as to
such Stockholder and no other Stockholder, that:
4.1 Capacity. Such Stockholder is either an individual, corporation
or a trust.
4.2 Title. Such Stockholder is the record and beneficial owner of, and
has full right, title and interest in and to, ▇▇▇▇▇▇▇ Common Shares listed on
the signature s hereof adjacent to such Stockholder's name, free and clear of
any Lien. The ▇▇▇▇▇▇▇ Common Shares are not subject to any other contract,
agreement, arrangement, commitment or understanding restricting or otherwise
relating to the voting, dividend rights or disposition of such ▇▇▇▇▇▇▇ Common
Shares. At the Closing, such Stockholder will transfer and deliver to Golden
Soil valid title to, and all of such Stockholder's right, title and interest in
and to, such ▇▇▇▇▇▇▇ Common Shares free and clear of any Lien or any claim in
respect of such shares, including under any applicable community property law.
4.3 Valid Agreement. This Agreement has been duly authorized, executed and
delivered by such Stockholder and constitutes a valid and binding agreement of
such Stockholder.
59
4.4 Litigation. There is no action, suit or proceeding pending or, to
the knowledge of such Stockholder, threatened against or affecting such
Stockholder or such Stockholder's properties before any court, arbitrator or
governmental body, agency or official which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by this
Agreement.
4.5 Trust Constitution and Power. If such Stockholder is a trust:
(a) such Stockholder will prior to Closing, deliver to Golden
Soil a true and complete copy of such Stockholder's trust agreement or other
constitution document as currently in effect, and
(b) the execution, delivery and performance by such
Stockholder of this Agreement, and the consummation by such Stockholder of the
transaction contemplated hereby are within such Stockholder's powers and have
been duly authorized by all necessary action of such Stockholder's trustees or
other relevant parties.
4.6 Governmental Authorization; Consents.
(a) The execution, delivery and performance by such
Stockholder of this Agreement require no action by or in respect of, or filing
with, any governmental body, agency, official or authority.
(b) No consent, approval, waiver or other action by any Person
(other than any governmental body, agency, official or authority referred to in
4.6(a) above) under any contract, agreement, indenture, lease, instrument or
other document to which such Stockholder is a party or by which such Stockholder
is bound is required for the execution, delivery and performance of this
Agreement by such Stockholder or the consummation by the Stockholder of the
transactions contemplated hereby.
4.7 Non-Contravention. The execution, delivery and performance by
such Stockholder of this Agreement do not and will not:
(a) if such Stockholder is a trust, contravene or conflict
with the trust agreement or other constitution document, as applicable, of such
Stockholder,
(b) assuming compliance with the matters referred to in
4.6(a), contravene or conflict with or constitute a violation of any provision
of any law, regulation, judgment, injunction, order or decree binding on or
applicable to such Stockholder,
(c) constitute a default under or give rise to any right of
termination, cancellation or acceleration of any right or obligation of such
Stockholder under any material agreement, contract or other instrument binding
on such Stockholder or under any material license, franchise, permit or other
similar authorization held by such Stockholder, or
(d) result in the creation or imposition of any Lien on
▇▇▇▇▇▇▇ Common Shares held by such Stockholder.
4.8 Acquisition for Investment; Informed Decision. Such Stockholder is
acquiring the Exchangeable Shares which are convertible into shares of Golden
Soil Common Shares for its own account and not with a view to, or for sale in
connection with, any distribution thereof. Such Stockholder has sufficient
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of its acquisition of the Exchangeable Shares in
accordance with this Agreement, and of its decision to enter into and perform
this Agreement. Such Stockholder has been given an opportunity to ask questions
and receive answers from ▇▇▇▇▇▇▇ and Golden Soil concerning the business and
financial condition of ▇▇▇▇▇▇▇ and Golden Soil, concerning the terms and
conditions of this Agreement, and concerning such other matters that such
Stockholder deemed relevant in connection with its decision to enter into this
Agreement. In particular, such Stockholder acknowledges that such Stockholder's
rights under this Agreement may not be assigned without Golden Soil's written
consent.
5.0 CONDUCT PRIOR TO THE EFFECTIVE TIME.
5.1 Conduct of Business of ▇▇▇▇▇▇▇. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, ▇▇▇▇▇▇▇ agrees that it will not:
60
(a) issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities except if in connection therewith, it negotiates a
proportionate adjustment in the Exchange Ratio.
(b) cause or permit any amendments to its Articles of
Incorporation or Bylaws; or
(c) Take, or agree in writing or otherwise to take, any
of the actions described in Sections 5.1 above, or any other action that would
prevent ▇▇▇▇▇▇▇ from performing or cause ▇▇▇▇▇▇▇ not to perform its covenants
hereunder.
5.2 Conduct of Business of Golden Soil and GS Sub. During the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, Golden Soil and GS Sub each
agrees that it will not:
(a) issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of its capital stock (other than shares issued on exercise of the
Golden Soil Warrants) or securities convertible into, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or other convertible securities
except if in connection therewith, it negotiates a proportionate adjustment in
the Exchange Ratio;
(b) enter into any contract, arrangement or obligation of
any kind;
(c) cause or permit any amendments to their Articles of
Incorporation or Bylaws; or
(d) Take, or agree in writing or otherwise to take, any
of the actions described in Sections 5.2 above, or any other action that
would prevent Golden Soil or GS Sub from performing or cause Golden Soil
or GS Sub not to perform its covenants hereunder.
6.0 ADDITIONAL AGREEMENTS.
6.1 Sale of Shares and Registration Right. The parties to this
Agreement acknowledge and agree that the Exchange Shares and the Golden Soil
Common Stock to be issued on the exchange of the Exchangeable Shares will
constitute "restricted securities" within the meaning of the Securities Act and
the Securities Act (British Columbia). The certificates for all such securities
will bear appropriate legends to identify such securities as being restricted
under the Securities Act, to comply with applicable state and provincial
securities laws and, if applicable, to notice the restrictions on transfer of
such shares. Golden Soil and the holders of Exchangeable Shares will execute
immediately after the Effective Date a Registration Rights Agreement in the form
attached as Exhibit C to this Agreement which will provide certain registration
rights with respect to the registration of the Golden Soil Common Stock to be
issued on the exchange of the Exchangeable Shares under the Securities Act.
Golden Soil will use its best effort to obtain all orders which may be required
from the British Columbia Securities Commission to permit the issuance and first
resale of the Exchangeable Shares and the Golden Soil Common Stock issued on
exchange of the Exchangeable Shares from time to time, provided however, neither
Golden Soil or ▇▇▇▇▇▇▇ will be required to register or qualify as a foreign
corporation or a reporting issuer where they are not now registered or qualified
except as to matters and transactions arising solely from the issuance of the
Exchangeable Shares or the Golden Soil Common Stock to be issued on the exchange
of the Exchangeable Shares.
6.2 Stockholder Approval. ▇▇▇▇▇▇▇ and Golden Soil will promptly submit
this Agreement and the transactions contemplated hereby to their stockholders
for approval and adoption as required by law. Golden Soil will include in its
proxy materials submitted to its shareholders a proposal to:
(a) amend its charter to change its name from Golden
Soil, Inc. to "▇▇▇▇▇▇▇, Inc." and to create a class of preferred voting shares;
and
(b) to approve an omnibus stock incentive plan for up to
1,400,000 shares of Golden Soil Common Stock for issuance under such plan to
officers, directors, employees and consultants of Golden Soil and its
subsidiaries and affiliates. Golden Soil agrees that up to 750,000 of these
options will be issued for a nominal price to nominees of ▇▇▇▇ ▇▇▇, subject to
compliance with all applicable laws and legal restrictions.
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6.3 Access to Information. Each party will afford the other and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to (a) all of such
party's properties, books, contracts, commitments and records and (b) all other
information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of such party as the other may
reasonably request. No information or knowledge obtained in any investigation
pursuant to this Section will affect or be deemed to modify any representation
or warranty contained in this Agreement or the conditions to the obligations of
the parties to consummate the Reorganization.
6.4 Confidentiality. Each party acknowledges that in the course of the
performance of this Agreement, it may obtain the Confidential Information of the
other party. The Receiving Party will, at all times, both during the term of
this Agreement and thereafter, keep in confidence and trust all of the
Disclosing Party's Confidential Information received by it. The Receiving Party
will not use the Confidential Information of the Disclosing Party other than as
expressly permitted under the terms of this Agreement or by a separate written
agreement. The Receiving Party will take all reasonable steps to prevent
unauthorized disclosure or use of the Disclosing Party's Confidential
Information and to prevent it from falling into the public domain or into the
possession of unauthorized persons. The Receiving Party will not disclose
Confidential Information of the Disclosing Party to any person or entity other
than its officers or employees (or outside legal, financial or accounting
advisors) who need ▇▇▇▇▇▇▇ to such Confidential Information in order to effect
the intent of this Agreement and who have entered into confidentiality
agreements with such person's employer or who are subject to ethical
restrictions on disclosure which protects the Confidential Information of the
Disclosing Party. The Receiving Party will immediately give notice to the
Disclosing Party of any unauthorized use or disclosure of Disclosing Party's
Confidential Information. The Receiving Party agrees to assist the Disclosing
Party to remedy such unauthorized use or disclosure of its Confidential
Information. These obligations will not apply to the extent that Confidential
Information includes information which:
(a) is already known to the Receiving Party at the time
of disclosure, which knowledge the Receiving Party will have the burden of
proving;
(b) is, or through no act or failure to act of the
Receiving Party becomes, publicly known;
(c) is received by the Receiving Party from a third party
without restriction on disclosure (although this exception will not apply if
such third party is itself violating a confidentiality obligation by making
such disclosure);
(d) is independently developed by the Receiving Party without
reference to the Confidential Information of the Disclosing Party, which
independent development the Receiving Party will have the burden of proving;
(e) is approved for release by written authorization of
the Disclosing Party; or
(f) is required to be disclosed by a Government Body to
further the objectives of this Agreement or by a proper order of a court of
competent jurisdiction; provided, however that the Receiving Party will
use its best efforts to minimize such disclosure and will consult with and
assist the Disclosing Party in obtaining a protective order prior to such
disclosure.
6.5 Expenses. Whether or not the Reorganization is consummated, all
fees and expenses incurred in connection with the Reorganization including,
without limitation, all legal, accounting, financial advisory, consulting and
all other fees and expenses of third parties ("Third Party Expenses") incurred
by a party in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby, will be
the obligation of the respective party incurring such fees and expenses.
6.6 Public Disclosure. Unless otherwise required by law, prior to the
Effective Time, no disclosure (whether or not in response to an inquiry) of the
subject matter of this Agreement will be made by any party to this Agreement
unless approved by Golden Soil and ▇▇▇▇▇▇▇ prior to release, provided that such
approval will not be unreasonably withheld.
6.7 Consents. Each party will use its best efforts to obtain the
consents, waivers and approvals as may be required in connection with the
Reorganization so as to preserve all rights of, and benefits to, such party
following the Reorganization.
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6.8 Reasonable Effort. Subject to the terms and conditions provided in
this Agreement, each of the parties to this Agreement will use commercially
reasonable efforts to take promptly, or cause to be taken, all actions, and to
do promptly, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to complete and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents and
approvals and to effect all necessary registrations and filings and to remove
any injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties to this Agreement the benefits
contemplated by this Agreement.
6.9 Notification of Certain Matters. Each party will give prompt notice
to the other of (i) the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which is likely to cause any representation or
warranty of such party contained in this Agreement to be untrue or inaccurate at
or prior to the Effective Time and (ii) any failure of such party to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section will not limit or otherwise affect any remedies available to the
party receiving such notice.
6.10 Private Placement. Golden Soil will:
(a) Warrant Offering. Carry out a private placement warrant
offering with Imperium whereby Imperium will receive 2,000,000 warrants, each
warrant exercisable for one share of common stock of Golden Soil at $1.00 per
share. Imperium hereby agrees to exercise a sufficient number of these warrants
on or before November 15, 2000 to ensure Golden Soil has raised $2,000,000 in
cash proceeds, minus any amount loaned to ▇▇▇▇▇▇▇, by that date from all private
placements. Golden Soil agrees the entire $2,000,000 will be immediately
available to ▇▇▇▇▇▇▇ on receipt by way of a loan or loans.
(b) Share Offering. Carry out a private placement offering of
a minimum of 1,000,000 to a maximum of 2,000,000 shares at a purchase price of
not less than $5.00 per share to be completed within 60 days from Closing.
Golden Soil will not conduct any other private placements other than those
offerings discussed section 5(a) and (b).
All such offering will be conducted in accordance with all applicable laws.
6.11 Bridge Loans. Golden Soil has or will provide ▇▇▇▇▇▇▇ with the
following bridge loans from all private placement funds received:
(a) a loan of $150,000 on August 31, 2000;
(b) a loan of $150,000 on October 6, 2000;
(c) a loan of $150,000 on October 19, 2000;
(d) a loan of $200,000 on October 31, 2000; and
(e) a loan or loans totaling with all previous loans not less than
$2,000,000 from all private placement funds received by Golden Soil immediately
on receipt of such funds, but in any event not later than November 15, 2000.
All bridge loans are subject to Golden Soil having received a duly executed
promissory notes from ▇▇▇▇▇▇▇ for such funds prior to release. The loan proceeds
will be available for pick-up by bank draft or solicitor's trust cheque at 618 -
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ on the date due. The
maturity date of these promissory notes will be 270 days from the date of
termination of this Agreement in the event the Closing will not occur. The
parties agree the loan may be repaid or assumed by Golden Soil on closing the
private placement contemplated in sub-section 6.10 above.
6.12 Support Agreement. Immediately after the Closing, Golden Soil and
▇▇▇▇▇▇▇ will execute and deliver a Support Agreement between Golden Soil and
▇▇▇▇▇▇▇ containing the terms and conditions set forth in Exhibit D (the "Support
Agreement"), together with such other terms and conditions as may be agreed to
by the parties to this Agreement acting reasonably
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6.13 Voting and Exchange Trust Agreement. Golden Soil, ▇▇▇▇▇▇▇ and
Interwest Transfer Company, Inc. will execute and deliver a Voting and Exchange
Trust Agreement containing the terms and conditions set forth in Exhibit E (the
"Voting and Exchange Trust Agreement"), together with such other terms and
conditions as may be agreed to by the parties to this Agreement acting
reasonably
6.14 Escrow Agreement. Golden Soil, ▇▇▇▇▇▇▇ and Interwest Transfer
Company, Inc. will execute and deliver an escrow agreement which will result in
all Golden Soil Common Stock to be issued on the exchange of the Exchangeable
Shares to be subject to a one year hold from the Effective Date. The escrow
agreement will contain the terms and conditions set forth in Exhibit F (the
"Escrow Agreement"), together with such other terms and conditions as may be
agreed to by the parties to this Agreement acting reasonably.
6.15 Employment Agreements. Immediately after Closing, ▇▇▇▇▇▇▇ will
enter into employment agreements with Messrs. ▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ in form and substance acceptable to the
Board of Directors of Golden Soil and each contracting party.
6.16 Officers and Directors. Golden Soil will cause each of their
officers and directors to submit and such persons will have submitted written
resignations effective as of the Closing and the nominees selected as per
Section 1.5 will have been appointed officers and directors of Golden Soil and
▇▇▇▇▇▇▇, as applicable, effective as of the Closing.
6.17 Additional Documents and Further Assurances. Each party to this
Agreement, at the request of another party to this Agreement, will execute and
deliver such other instruments and do and perform such other acts and things as
may be necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
7.0 CONDITIONS TO THE REORGANIZATION.
7.1 Conditions to Obligations of Each Party to Effect the
Reorganization. The respective obligations of each party to this Agreement to
effect the Reorganization will be subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Reorganization will be in effect, nor will
any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor will there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Reorganization, which makes the consummation of the Reorganization illegal.
(b) Consents, Permits, Waivers and Approval. The parties will
have obtained any and all consents, permits, waivers, and approvals necessary or
appropriate for consummation of the transaction contemplated under this
Agreement (except for such as may be properly obtained subsequent to Closing).
(c) Litigation. There will be no bona fide action, suit, claim
or proceeding of any nature pending, or overtly threatened, against Golden Soil
or ▇▇▇▇▇▇▇, their respective properties or any of their officers or directors,
arising out of, or in any way connected with, the Reorganization or the other
transactions contemplated by the terms of this Agreement.
(d) Private Placement and Bridge Loans. Golden Soil will have
raised not less than $2,000,000 from all private placements conducted in
accordance with Section 6.10 of this Agreement and will have loaned $2,000,000
in total to ▇▇▇▇▇▇▇ for working capital purposes on or before November 15, 2000
in accordance with Section 6.11 of this Agreement.
7.2 Additional Conditions to Obligations of ▇▇▇▇▇▇▇. The obligations of
▇▇▇▇▇▇▇ to consummate and effect this Agreement and the transactions
contemplated hereby will be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, exclusively by ▇▇▇▇▇▇▇:
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(a) Representations, Warranties and Covenants. The
representations and warranties of Golden Soil in this Agreement will be true and
correct in all material respects on and as of the Effective Time as though such
representations and warranties were made on and as of such time and Golden Soil
will have performed and complied in all material respects with all covenants and
obligations of this Agreement required to be performed and complied with by it
as of the Effective Time.
(b) Claims. There will not have occurred any claims (whether
or not asserted in litigation) which may materially and adversely affect the
consummation of the transactions contemplated hereby or may have a material
adverse effect on Golden Soil.
(c) Certificate of President. ▇▇▇▇▇▇▇ will have been provided
with a certificate executed on behalf of Golden Soil by its President to the
effect that, as of the Effective Time:
(i) all representations and warranties made by
Golden Soil in this Agreement are true and correct in all material respects;
(ii) all covenants and obligations of this
Agreement to be performed by Golden Soil on or before such date have been so
performed in all material respects.
(iii) the conditions set forth in Section 7.1 and
7.2 have been satisfied.
7.3 Additional Conditions to the Obligations of Golden Soil. The
obligations of Golden Soil to consummate and effect this Agreement and the
transactions contemplated hereby will be subject to the satisfaction at or prior
to the Effective Time of each of the following conditions, any of which may be
waived, in writing, exclusively by Golden Soil:
(a) Representations, Warranties and Covenants. The
representations and warranties of ▇▇▇▇▇▇▇ in this Agreement will be true and
correct in all material respects on and as of the Effective Time as though such
representations and warranties were made on and as of the Effective Time and
▇▇▇▇▇▇▇ will have performed and complied in all material respects with all
covenants and obligations of this Agreement required to be performed and
complied with by it as of the Effective Time.
(b) Claims. There will not have occurred any claims (whether
or not asserted in litigation) which may materially and adversely affect the
consummation of the transactions contemplated hereby or may have a material
adverse effect on ▇▇▇▇▇▇▇.
(c) Third Party Consents. Any and all consents, waivers,
and approvals required by ▇▇▇▇▇▇▇ will have been obtained.
(d) Certificate of ▇▇▇▇▇▇▇. Golden Soil will have been
provided with a certificate executed on behalf of ▇▇▇▇▇▇▇ by its President to
the effect that, as of the Effective Time:
(i) all representations and warranties made by
▇▇▇▇▇▇▇ in this Agreement are true and correct in all material respects; and
(ii) all covenants and obligations of this
Agreement to be performed by ▇▇▇▇▇▇▇ on or before such date have been so
performed in all material respects; and
(iii) the provisions set forth in Section 7.3 have
been satisfied.
8.0 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
8.1 Survival of Representations and Warranties. All representations,
warranties, agreements, covenants contained in this Agreement will survive for a
period of three years from the anniversary date of the Effective Date; except
for the representations and warranties relating or pertaining to any tax or tax
returns by the parties which will survive until the expiration of all applicable
statutes of limitations, or extensions, governing each tax or tax returns.
9.0 TERMINATION, AMENDMENT AND WAIVER.
9.1 Termination. Except as provided in Section 9.2, this Agreement
may be terminated and the Reorganization abandoned at any time prior to the
Effective Time:
(a) by mutual consent of ▇▇▇▇▇▇▇ and Golden Soil;
65
(b) by Golden Soil or ▇▇▇▇▇▇▇ if (a) the Effective Time has
not occurred by November 30, 2000; (b) there will be a final nonappealable order
of a federal or state court in effect preventing consummation of the
Reorganization; or (c) there will be any statute, rule, regulation or order
enacted, promulgated or issued or deemed applicable to the Reorganization by any
Governmental Entity that would make consummation of the Reorganization illegal;
(c) by either party if there will be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Reorganization by any Governmental Entity, which would
prohibit ▇▇▇▇▇▇▇'▇ ownership or operation of any portion of the business of
Golden Soil;
(d) by ▇▇▇▇▇▇▇ if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Golden Soil and such breach has not been cured within ten (10)
calendar days after written notice to Golden Soil; provided, however, that, no
cure period will be required for a breach which by its nature cannot be cured;
(e) by Golden Soil if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of ▇▇▇▇▇▇▇ and such breach has not been cured within ten (10) calendar
days after written notice to ▇▇▇▇▇▇▇; provided, however, that no cure period
will be required for a breach which by its nature cannot be cured. Where action
is taken to terminate this Agreement pursuant to this Section 9.1, it will be
sufficient for such action to be authorized by the Board of Directors (as
applicable) of the party taking such action.
9.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 9.1:
(a) General. This Agreement will forthwith become void and
there will be no liability or obligation on the part of Golden Soil or ▇▇▇▇▇▇▇,
or their respective officers, directors or shareholders, provided that each
party will remain liable for any breaches of this Agreement prior to its
termination; provided further that the provisions of Sections 6.4, 6.5 and 6.6,
Section 9 and this Section 9.2 will remain in full force and effect and survive
any termination of this Agreement;
(b) Loans Advanced. All loans advanced by Golden Soil to
▇▇▇▇▇▇▇ will become due and payable 270 days from the date of termination; and
(c) Debt Assumption. Imperium Capital Inc., as a break
up fee, will assume the Can $250,000 debt obligation that ▇▇▇▇▇▇▇ has to ▇▇▇▇▇
Resources Ltd., and the Can $250,000 debt obligation that ▇▇▇▇▇▇▇ has to Bank
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇ & Cie (Schweiz) AG.
9.3 Amendment. This Agreement may be amended by the parties to this
Agreement at any time by execution of an instrument in writing signed on behalf
of each of the parties to this Agreement.
9.4 Extension; Waiver. At any time prior to the Effective Time, Golden
Soil and ▇▇▇▇▇▇▇, may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations of the other party to this Agreement,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained in this Agreement or in any document delivered pursuant to this
Agreement, and (iii) waive compliance with any of the agreements or conditions
for the benefit of such party contained in this Agreement. Any agreement on the
part of a party to this Agreement to any such extension or waiver will be valid
only if set forth in an instrument in writing signed on behalf of such party.
10.0 GENERAL PROVISIONS.
10.1 Notices. All notices and other communications hereunder will be in
writing and will be deemed given if delivered personally or by commercial
messenger or courier service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as will be specified by like notice), provided, however,
that notices sent by mail will not be deemed given until received:
(a) if to Golden Soil, to:
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Venture Law Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇, ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to ▇▇▇▇▇▇▇, to:
▇▇▇▇▇▇▇ Technologies Inc.
#307, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attn: ▇▇▇▇ ▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and copies to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Company
Barristers & Solicitors
▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
Nexus Venture Capital Lawyers
▇▇▇▇ - ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, P.L.L.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
10.2 Interpretation. The words include, includes and including when
used in this Agreement will be deemed in each case to be followed by the words
without limitation. The headings contained in this Agreement are for reference
purposes only and will not affect in any way the meaning or interpretation of
this Agreement.
10.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement and
will become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.4 Entire Agreement; Assignment. This Agreement, the Exhibits to this
Agreement and the documents and instruments and other agreements among the
parties to this Agreement referenced in this Agreement: (a) constitute the
entire agreement among the parties with respect to the subject matter of this
Agreement and
67
supersede all prior agreements and understandings both written and oral among
the parties with respect to the subject matter of this Agreement, (b) are not
intended to confer on any other person any rights or remedies hereunder; and (c)
will not be assigned by operation of law or otherwise.
10.5 Severability. In the event that any provision of this Agreement or
the application of this Agreement, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties to this Agreement. The parties
further agree to replace such void or unenforceable provision of this Agreement
with a valid and enforceable provision that will achieve, to the extent
possible, the economic, business and other purposes of such void or
unenforceable provision.
10.6 Other Remedies. Except as otherwise provided in this Agreement,
any and all remedies in this Agreement expressly conferred on a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity on such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy.
10.7 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Nevada, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws of the
State of Nevada. Each of the parties to this Agreement irrevocably consents to
the exclusive jurisdiction and venue of any court within ▇▇▇▇▇ County, State of
Nevada, in connection with any matter based on or arising out of this Agreement
or the matters contemplated in this Agreement, agrees that process may be served
on them in any manner authorized by the laws of the State of Nevada for such
persons and waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction, venue and such process.
10.8 Rules of Construction. The parties to this Agreement agree that
they have been represented by counsel during the negotiation and execution of
this Agreement and, therefor, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
10.9 Time of the Essence. Time will be of the essence.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of October __,
2000.
[SIGNATURE FOLLOWS]
68
SIGNATURE FOR AGREEMENT AND PLAN OF REORGANIZATION
▇▇▇▇▇▇▇ TECHNOLOGIES INC. GOLDEN SOIL, INC.
By:_____________________________ By:___________________________
Name: ▇▇▇▇ ▇▇▇ Name: Xenios Xenopoulous
Title: Chief Executive Officer and Title: President
613636 BRITISH COLUMBIA, INC.
By:___________________________
Name:
Title:
▇▇▇▇▇▇▇ Exchangeable
Common Stock Shares to be
to be Delivered Received Name, Address and Signature
--------------- -------------------- ---------------------------
1408 825,000
By:___________________________
Name: ▇▇▇▇ ▇. ▇▇▇
Address: #60 - ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
1408 825,000
By:___________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
1408 825,000
By:___________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇
Address:5685 ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
1408 825,000
By:___________________________
Name: ▇▇▇▇▇▇▇▇ ▇▇▇
Address: #60 - ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
64 37,500
By:___________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
69
64 37,500
By:___________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
64 37,500
By:___________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇
Address: ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
128 75,000
By:___________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Address: #▇▇ - ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
64 37,500
By:___________________________
Name: ▇▇▇▇▇▇ NICKLOM
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
64 37,500
By:___________________________
Name: ▇▇▇ ▇▇▇▇▇▇▇▇▇
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
192 112,500
By:___________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
128 75,000
By:___________________________
Name: ▇▇▇▇ BAILWARD
Address: #102 - ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
64 37,500
By:___________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Director
Address:_______________________
70
Agreed and accepted to as to Sections Agreed and accepted to as to Sections
1.7 and 9 of this Agreement: 6.10 and 9.2 of this Agreement:
VENTURE LAW CORPORATION IMPERIUM CAPITAL INC.
By:_____________________________ By:_____________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ Gushlak
Title: President Title: President
71
EXHIBIT A
SHARE CAPITAL AND OTHER PROVISIONS
TO BE INCLUDED IN THE ARTICLES OF INCORPORATION OF ▇▇▇▇▇▇▇ TECHNOLOGIES INC.
----------------------------------------------------------------------------
A. SHARE CAPITAL PROVISIONS ATTACHING TO THE COMMON SHARES
-------------------------------------------------------
The common shares ("Common Shares") in the capital of ▇▇▇▇▇▇▇
Technologies Inc. ("▇▇▇▇▇▇▇ Canada") will have the following rights, privileges,
restrictions and conditions attached:
Dividends
---------
The holders of Common Shares are entitled, subject to the rights,
privileges, restrictions and conditions attaching to any other class of shares
of ▇▇▇▇▇▇▇ Canada, to receive dividends when declared by the Board of Directors
out of property of ▇▇▇▇▇▇▇ Canada legally available for that purpose.
Liquidation
-----------
Subject to the prior rights of the Exchangeable Shares and any other
shares ranking prior to the Common Shares, the holders of Common Shares will, on
any liquidation, dissolution or winding-up of ▇▇▇▇▇▇▇ Canada, whether voluntary
or involuntary, or other distribution of the assets of ▇▇▇▇▇▇▇ Canada for the
purpose of winding-up its affairs, be entitled to receive the remaining property
and assets of ▇▇▇▇▇▇▇ Canada.
Voting
------
The holders of the Common Shares will be entitled to receive notice of
and to attend all meetings of shareholders (other than separate meetings of
other classes or series of shares), and will be entitled to one vote for each
Common Share held.
B. PROVISIONS ATTACHING TO THE EXCHANGEABLE SHARES
-----------------------------------------------
The Exchangeable Shares in the capital of ▇▇▇▇▇▇▇ Canada will have the
following rights, privileges, restrictions and conditions:
1.0 INTERPRETATION
1.1 For the Purposes of These Rights, Privileges, Restrictions and
Conditions:
"Act" means the Company Act (British Columbia), as amended,
consolidated or reenacted from time to time.
"Aggregate Equivalent Vote Amount" means, with respect to any matter,
proposition or question on which holders of ▇▇▇▇▇▇▇ USA Common Stock are
entitled to vote, consent or otherwise act, the product of (i) the number of
Exchangeable Shares then issued and outstanding and held by holders (other than
▇▇▇▇▇▇▇ USA and its Subsidiaries) multiplied by (ii) the number of votes to
which a holder of one share of ▇▇▇▇▇▇▇ USA Common Stock is entitled with respect
to such matter, proposition or question.
"Automatic Redemption Date" means the date for the automatic redemption
by ▇▇▇▇▇▇▇ Canada of Exchangeable Shares pursuant to Article 7 of these share
provisions, which date will be the first to occur of (a) the date, if any,
selected pursuant to this clause (a) by the Board of Directors of ▇▇▇▇▇▇▇
Canada, such date to be no earlier than the tenth anniversary of the Effective
Date of the Reorganization, (b) the date selected by the Board of Directors of
▇▇▇▇▇▇▇ Canada (such date to be no earlier than the third anniversary of the
Effective Date of the Reorganization) at a time when less than 10% of the number
of Exchangeable Shares issuable on the Effective Date (other than Exchangeable
Shares held by ▇▇▇▇▇▇▇ USA and its Subsidiaries, 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
72
distribution of other securities or rights or evidences of indebtedness or
assets, or any other capital reorganization or other transaction involving or
affecting the Exchangeable Shares) are outstanding, (c) the Business Day prior
to the record date for any meeting or vote of the shareholders of ▇▇▇▇▇▇▇ Canada
to consider any matter on which the holders of Exchangeable Shares would be
entitled to vote as shareholders of ▇▇▇▇▇▇▇ Canada, 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 ▇▇▇▇▇▇▇ USA Common
Stock.
"Board of Directors" means the board of directors of ▇▇▇▇▇▇▇ Canada and
any committee thereof acting within its authority.
"Business Day" means any day other than a Saturday, a Sunday or a day
when banks are not open for business in Vancouver, British Columbia.
"Common Shares" means the common shares in the capital of ▇▇▇▇▇▇▇
Canada.
"Current Market Price" means, in respect of a share of ▇▇▇▇▇▇▇ USA
Common Stock on any date, the average of the closing sale prices per share
(computed and rounded to the third decimal point) of shares of ▇▇▇▇▇▇▇ USA
Common Stock during the period of 20 consecutive trading days ending not more
than five trading days before such date on the OTCBB, or, if ▇▇▇▇▇▇▇ USA Common
Stock is not then traded on the OTCBB, on such other stock exchange or automated
quotation system on which ▇▇▇▇▇▇▇ USA Common Stock is 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 ▇▇▇▇▇▇▇ USA Common Stock during such period
does not create a market which reflects the fair market value of a share of
▇▇▇▇▇▇▇ USA Common Stock, then the Current Market Price of a share of ▇▇▇▇▇▇▇
USA Common Stock will be determined by the Board of Directors based on the
advice of such qualified independent financial advisors as the Board of
Directors may deem to be appropriate, and provided further than any such
selection, opinion or determination by the Board of Directors will be conclusive
and binding.
"Exchange Put Date" has the meaning provided in Section 8.2.
"Exchange Put Right" has the meaning provided in Section 8.1.
"Exchangeable Share Consideration" means, for any acquisition of or
redemption of or distribution of assets of ▇▇▇▇▇▇▇ Canada in respect of or
purchase pursuant to these share provisions, the Reorganization Agreement, the
Support Agreement or the Voting and Exchange Trust Agreement:
(a) certificates representing the aggregate number of shares of
▇▇▇▇▇▇▇ USA Common Stock deliverable in connection with such
action;
(b) a cheque or cheques payable at par at any branch of the
bankers of the payor in the amount of all declared, payable
and unpaid, and all undeclared but payable, cash dividends
deliverable in connection with such action; and
(c) such stock or other property constituting any declared and
unpaid, and all undeclared but payable, non-cash dividends
deliverable in connection with such action,
provided that (i) that part of the consideration which represents (a) above,
will be fully paid and satisfied by the delivery of one share of ▇▇▇▇▇▇▇ USA
Common Stock for each one Exchangeable Share, such share to be duly issued as a
fully paid and non-assessable share, (ii) that part of the consideration which
represents (c), above, unpaid will be fully paid and satisfied by delivery of
such non-cash items, and (iii) any such consideration will be delivered free and
clear of any lien, claim, encumbrance, security interest or adverse claim or
interest less any tax required to be deducted and withheld therefrom and without
interest.
"Exchangeable Share Price" means, for each Exchangeable Share, an
amount equal to the aggregate of:
73
(a) the Current Market Price of a share of ▇▇▇▇▇▇▇ USA Common Stock;
plus
(b) an additional amount equal to the full amount of all cash
dividends declared, payable and unpaid on such Exchangeable
Share; plus
(c) an additional amount equal to all dividends declared and payable
on ▇▇▇▇▇▇▇ USA Common Stock which have not been declared on
Exchangeable Shares in accordance herewith; plus
(d) an additional amount representing non-cash dividends declared,
payable and unpaid on such Exchangeable Share.
"Exchangeable Shares" means the Exchangeable Shares of ▇▇▇▇▇▇▇ Canada
having the rights, privileges, restrictions and conditions set forth herein.
"Liquidation Amount" has the meaning provided in Section 5.1.
"Liquidation Call Right" has the meaning provided in the Articles of
Incorporation of ▇▇▇▇▇▇▇ Canada.
"Liquidation Date" has the meaning provided in Section 5.1.
"▇▇▇▇▇▇▇ Canada" means ▇▇▇▇▇▇▇ Technologies Inc., a corporation
organized and existing under the Act and includes any successor corporation.
"▇▇▇▇▇▇▇ USA" means ▇▇▇▇▇▇▇, Inc., a corporation organized and existing
under the laws of the State of Nevada and includes any successor corporation or
any corporation in which the holders of ▇▇▇▇▇▇▇ USA Common Stock hold securities
resulting from the application of Section 2.7 of the Support Agreement;
"▇▇▇▇▇▇▇ USA Call Notice" has the meaning provided in Section 6.3.
"▇▇▇▇▇▇▇ USA Common Stock" means the shares of common stock of ▇▇▇▇▇▇▇
USA, with a par value of U.S. $0.001 per share, having voting rights of one vote
per share, and any other securities resulting from the application of Section
2.7 of the Support Agreement.
"▇▇▇▇▇▇▇ USA Dividend Declaration Date" means the date on which the
board of directors of ▇▇▇▇▇▇▇ USA declares any dividend on ▇▇▇▇▇▇▇ USA Common
Stock.
"▇▇▇▇▇▇▇ USA Special Share" means the one share of Special Voting Stock
of ▇▇▇▇▇▇▇ USA, with a par value of U.S. $0.01, and having voting rights at
meetings of holders of ▇▇▇▇▇▇▇ USA Common Stock equal to the Aggregate
Equivalent Voting Amount.
"Purchase Price" has the meaning provided in Section 6.3.
"Redemption Call Purchase Price" has the meaning provided in the
Articles of Incorporation of ▇▇▇▇▇▇▇ Canada.
"Redemption Call Right" has the meaning provided in the Articles of
Incorporation of ▇▇▇▇▇▇▇ Canada.
"Redemption Price" has the meaning provided in Section 7.1.
"Reorganization Agreement" means the Agreement and Plan of
Reorganization involving and affecting ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ USA and the holders of
common shares and options of ▇▇▇▇▇▇▇ Canada, dated as of October __, 2000, as
further amended and restated from time to time.
"Retracted Shares" has the meaning provided in subsection 6.1 (a).
"Retraction Call Right" has the meaning provided in subsection 6.1 (c).
74
"Retraction Date" has the meaning provided in subsection 6.1 (b).
"Retraction Price" has the meaning provided in Section 6.1.
"Retraction Request" has the meaning provided in Section 6.1.
"Subsidiary", in relation to any person, means any body corporate,
partnership, joint venture, association or other entity of which more than 50%
of the total voting power of shares of stock or units of ownership or beneficial
interest entitled to vote in the election of directors (or members of a
comparable governing body) is owned or controlled, directly or indirectly, by
such person.
"Support Agreement" means the Support Agreement between ▇▇▇▇▇▇▇ USA and
▇▇▇▇▇▇▇ Canada, made as of November ___ , 2000.
"Transfer Agent" means Interwest Tansfer Company, Inc.
"Trustee" means the Trustee appointed under the Voting and Exchange
Trust Agreement, and any successor trustee.
"Voting and Exchange Trust Agreement" means the Voting and Exchange
Trust Agreement among ▇▇▇▇▇▇▇ Canada, ▇▇▇▇▇▇▇ USA and the Trustee, made as of
November __ , 2000.
2.0 Ranking of Exchangeable Shares
2.1 The Exchangeable Shares will rank pari passu with the Common
Shares, with respect to the payment of dividends and the distribution of assets
in the event of the liquidation, dissolution or winding-up of ▇▇▇▇▇▇▇ Canada,
whether voluntary or involuntary, or any other distribution of the assets of
▇▇▇▇▇▇▇ Canada among its shareholders for the purpose of winding-up its affairs.
3.0 Dividends
3.1 A holder of an Exchangeable Share will be entitled to receive and
the Board of Directors will, subject to applicable law, on each ▇▇▇▇▇▇▇ USA
Dividend Declaration Date, declare a dividend on each Exchangeable Share
(a) in the case of a cash dividend declared on ▇▇▇▇▇▇▇ USA Common
Stock, in an amount in cash for each Exchangeable Share equal
to the cash dividend declared on each share of ▇▇▇▇▇▇▇ USA
Common Stock;
(b) in the case of a stock dividend declared on ▇▇▇▇▇▇▇ USA Common
Stock to be paid in ▇▇▇▇▇▇▇ USA Common Stock, in such number
of Exchangeable Shares for each Exchangeable Share as is equal
to the number of shares of ▇▇▇▇▇▇▇ USA Common Stock to be paid
on each share of ▇▇▇▇▇▇▇ USA Common Stock;
(c) in the case of a dividend declared on ▇▇▇▇▇▇▇ USA Common Stock
in property other than cash or securities of ▇▇▇▇▇▇▇ USA, in
such type and amount of property for each Exchangeable Share
as is the same as the type and amount of property declared as
a dividend on each share of ▇▇▇▇▇▇▇ USA Common Stock; or
(d) in the case of a dividend declared on ▇▇▇▇▇▇▇ USA Common Stock
to be paid in securities of ▇▇▇▇▇▇▇ USA other than ▇▇▇▇▇▇▇ USA
Common Stock, in such number of either such securities or
economically equivalent securities of ▇▇▇▇▇▇▇ Canada, as the
Board of Directors determines, for each Exchangeable Share as
is equal to the number of securities of ▇▇▇▇▇▇▇ USA to be paid
on each share of ▇▇▇▇▇▇▇ USA Common Stock. Such dividends will
be paid out of money, assets or property of ▇▇▇▇▇▇▇ Canada
properly applicable to the payment of dividends, or out of
authorized but unissued shares of ▇▇▇▇▇▇▇ Canada.
3.2 Cheques of ▇▇▇▇▇▇▇ Canada payable at par at any branch of the
bankers of ▇▇▇▇▇▇▇ Canada will be issued in respect of any cash dividends
contemplated by subsection 3.1 (a) hereof and the sending of such a cheque to
each holder of an Exchangeable Share (less any tax required to be deducted and
withheld from such dividends
75
paid or credited by ▇▇▇▇▇▇▇ Canada) will satisfy the cash dividends represented
thereby unless the cheque is not paid on presentation. Certificates registered
in the name of the registered holder of Exchangeable Shares will be issued or
transferred in respect of any stock dividends contemplated by subsections 3.1
(b) or (d) hereof and the sending of such a certificate to each holder of an
Exchangeable Share will satisfy the stock dividend represented thereby or
dividend payable in other securities represented thereby. Such other type and
amount of property in respect of any dividends contemplated by subsection 3.1
(c) hereof will be issued, distributed or transferred by ▇▇▇▇▇▇▇ Canada in such
manner as it will determine and the issuance, distribution or transfer thereof
by ▇▇▇▇▇▇▇ Canada to each holder of an Exchangeable Share will satisfy the
dividend represented thereby. In all cases, any such dividends will be subject
to any reduction or adjustment for tax required to be deducted and withheld from
such dividends paid or credited by ▇▇▇▇▇▇▇ Canada. No holder of an Exchangeable
Share will be entitled to recover by action or other legal process against
▇▇▇▇▇▇▇ Canada any dividend which is represented by a cheque that has not been
duly presented to ▇▇▇▇▇▇▇ Canada's bankers for payment or which 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 will
be the same dates as the record date and payment date, respectively, for the
corresponding dividend declared on ▇▇▇▇▇▇▇ USA 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 which
remain unpaid will be paid on a subsequent date or dates determined by the Board
of Directors on which ▇▇▇▇▇▇▇ Canada will have sufficient moneys, assets or
property properly applicable to the payment of such dividends.
3.5 Except as provided in this Article 3, the holders of Exchangeable
Shares will not be entitled to receive dividends.
4.0 Certain Restrictions
4.1 So long as any of the Exchangeable Shares are outstanding, ▇▇▇▇▇▇▇
Canada will not at any time without, but may at any time with, the approval of
the holders of the Exchangeable Shares given as specified in Article 10 of these
share provisions:
(a) pay any dividends on the Common Shares, or any other shares,
other than stock dividends payable in any such other shares
ranking junior to the Exchangeable Shares;
(b) redeem or purchase or make any capital distribution in respect of
Common Shares or any other shares with respect to the payment of
dividends or on any liquidation distribution;
(c) redeem or purchase any other shares of ▇▇▇▇▇▇▇ Canada ranking
equally with the Exchangeable Shares with respect of the payment
of dividends or on any liquidation distribution; or
(d) amend the articles or by-laws of ▇▇▇▇▇▇▇ Canada, in either case
in any manner that would affect the rights or privileges of the
holders of the Exchangeable Shares.
The restrictions in subsections 4.1 (a), 4.1 (b) and 4.1 (c) above will
not apply if all dividends on the outstanding Exchangeable Shares corresponding
to dividends declared with a record date on or following the effective date of
the Reorganization Agreement on ▇▇▇▇▇▇▇ USA Common Stock will have been declared
on the Exchangeable Shares and paid in full. Nothing herein will be interpreted
to restrict ▇▇▇▇▇▇▇ Canada from issuing additional Common Shares or Exchangeable
Shares.
5.0 Distribution on Liquidation
5.1 In the event of the liquidation, dissolution or winding-up of
▇▇▇▇▇▇▇ Canada or any other distribution of the assets of ▇▇▇▇▇▇▇ Canada among
its shareholders for the purpose of winding-up its affairs, a holder of
Exchangeable Shares will be entitled, subject to applicable law, to receive from
the assets of ▇▇▇▇▇▇▇ Canada in respect of each Exchangeable Share held by such
holder on the effective date of such liquidation, dissolution or
76
winding-up (the"Liquidation Date"), before any distribution of any part of the
assets of ▇▇▇▇▇▇▇ Canada to the holders of the Common Shares or any other shares
ranking junior to the Exchangeable Shares, an amount equal to the Exchangeable
Share Price applicable on the last Business Day prior to the Liquidation Date
(the"Liquidation Amount") in accordance with Section 5.2, which will be
satisfied in full by ▇▇▇▇▇▇▇ Canada causing to be delivered to such holder a
▇▇▇▇▇▇▇ USA Common Share, together with all declared and unpaid dividends on
each such Exchangeable Share held by such holder on any dividend record date
which occurred prior to the Liquidation Date. In connection with payment of the
Liquidation Amount, ▇▇▇▇▇▇▇ Canada will be entitled to liquidate some of ▇▇▇▇▇▇▇
USA Common Stock which would otherwise be deliverable as Exchangeable Share
Consideration to the particular holder of Exchangeable Shares in order to fund
any statutory withholding tax obligation.
5.2 On or promptly after the Liquidation Date, and subject to the
exercise by ▇▇▇▇▇▇▇ USA of the Liquidation Call Right, ▇▇▇▇▇▇▇ Canada will cause
to be delivered to the holders of the Exchangeable Shares the Liquidation Amount
for each such Exchangeable Share on 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 applicable law and the by-laws of ▇▇▇▇▇▇▇ Canada and
such additional documents and instruments as the Transfer Agent may reasonably
require, at the registered office of ▇▇▇▇▇▇▇ Canada or at any office of the
Transfer Agent as may be specified by ▇▇▇▇▇▇▇ Canada in Schedule A hereto or by
notice to the holders of the Exchangeable Shares. Payment of the total
Liquidation Amount for such Exchangeable Shares will be made by delivery to each
holder, at the address of the holder recorded in the securities register of
▇▇▇▇▇▇▇ Canada for the Exchangeable Shares or by holding for pick up by the
holder at the registered office of ▇▇▇▇▇▇▇ Canada or at any office of the
Transfer Agent as may be specified by ▇▇▇▇▇▇▇ Canada in Schedule A hereto or by
notice to the holders of Exchangeable Shares, on behalf of ▇▇▇▇▇▇▇ Canada of the
Exchangeable Share Consideration representing the total Liquidation Amount. On
and after the Liquidation Date, the holders of the Exchangeable Shares will
cease to be holders of such Exchangeable Shares and will not be entitled to
exercise any of the rights of holders in respect thereof, other than the right
to receive their proportionate part of the total Liquidation Amount, unless
payment of the total Liquidation Amount for such Exchangeable Shares will not be
made on presentation and surrender of share certificates in accordance with the
foregoing provisions, in which case the rights of the holders will remain
unaffected until the total Liquidation Amount has been paid in the manner
hereinbefore provided. ▇▇▇▇▇▇▇ Canada will have the right at any time on or
after the Liquidation Date to deposit or cause to be deposited the Exchangeable
Share Consideration 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 or for safe keeping, in the case of
non-cash items, with any chartered bank or trust company in Canada. On such
deposit being made, the rights of the holders of Exchangeable Shares after such
deposit will be limited to receiving their proportionate part of the total
Liquidation Amount for such Exchangeable Shares so deposited, against
presentation and surrender of the said certificates held by them, respectively,
in accordance with the foregoing provisions. On such payment or deposit of such
Exchangeable Share Consideration, the holders of the Exchangeable Shares will
thereafter be considered and deemed for all purposes to be the holders of
▇▇▇▇▇▇▇ USA Common Stock delivered to them. Notwithstanding the foregoing, until
such payment or deposit of such Exchangeable Share Consideration, the holder
will be deemed to still be a holder of Exchangeable Shares for purposes of all
voting rights with respect thereto under the Voting and Exchange Trust
Agreement.
5.3 After ▇▇▇▇▇▇▇ Canada has satisfied its obligations to pay the
holders of the Exchangeable Shares the Liquidation Amount per Exchangeable
Share, such holders will not be entitled to share in any further distribution of
the assets of ▇▇▇▇▇▇▇ Canada.
6.0 Retraction of Exchangeable Shares by Holder
6.1 A holder of Exchangeable Shares will be entitled at any time,
subject to the exercise by ▇▇▇▇▇▇▇ USA of the Retraction Call Right and
otherwise on compliance with the provisions of this Article 6, to require
▇▇▇▇▇▇▇ Canada to redeem any or all of the Exchangeable Shares registered in the
name of such holder for an amount equal to the Exchangeable Share Price
applicable on the last Business Day prior to the Retraction Date (the"Retraction
Price") in accordance with Section 6.4, which will be satisfied in full by
▇▇▇▇▇▇▇ Canada causing to be delivered to such holder a ▇▇▇▇▇▇▇ USA Common Stock
for each Exchangeable Share presented and surrendered by the holder, together
with the full amount of all declared and unpaid dividends on each such
Exchangeable Share held by such holder on any dividend record date which
occurred prior to the Retraction Date. In connection with payment of the
Retraction Price, ▇▇▇▇▇▇▇ Canada will be entitled to liquidate some of ▇▇▇▇▇▇▇
USA Common Stock that would otherwise be deliverable as Exchangeable Share
Consideration to the particular holder of Exchangeable Shares in
77
order to fund any statutory withholding tax obligation. To effect such
redemption, the holder will present and surrender at the registered office of
▇▇▇▇▇▇▇ Canada or at any office of the Transfer Agent as may be specified by
▇▇▇▇▇▇▇ Canada in Schedule A hereto or by notice to the holders of Exchangeable
Shares the certificate or certificates representing the Exchangeable Shares
which the holder desires to have ▇▇▇▇▇▇▇ Canada redeem, together with such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under applicable law and the by-laws of ▇▇▇▇▇▇▇ Canada 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 to
▇▇▇▇▇▇▇ Canada:
a) specifying that the holder desires to have all or any number
specified therein of the Exchangeable Shares represented by
such certificate or certificates (the"Retracted Shares")
redeemed by ▇▇▇▇▇▇▇ Canada;
(b) stating the Business Day on which the holder desires to have
▇▇▇▇▇▇▇ Canada redeem the Retracted Shares (the"Retraction
Date"), provided that the Retraction Date will be not less
than five Business Days nor more than 10 Business Days after
the date on which the Retraction Request is received by
▇▇▇▇▇▇▇ Canada and further provided that, in the event that no
such Business Day is specified by the holder in the Retraction
Request, the Retraction Date will be deemed to be the tenth
Business Day after the date on which the Retraction Request is
received by ▇▇▇▇▇▇▇ Canada; and
(c) acknowledging the overriding right (the"Retraction Call
Right") of ▇▇▇▇▇▇▇ USA to purchase all but not less than all
the Retracted Shares directly from the holder and that the
Retraction Request will be deemed to be a revocable offer by
the holder to sell the Retracted Shares in accordance with the
Retraction Call Right on the terms and conditions set out in
Section 6.3 below.
6.2 Subject to the exercise by ▇▇▇▇▇▇▇ USA of the Retraction Call
Right, on receipt by ▇▇▇▇▇▇▇ Canada or the Transfer Agent in the manner
specified in Section 6.1 hereof of a certificate or certificates representing
the number of Exchangeable Shares which the holder desires to have ▇▇▇▇▇▇▇
Canada redeem, together with a Retraction Request, and provided that the
Retraction Request is not revoked by the holder in the manner specified in
▇▇▇▇▇▇▇ ▇.▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ will redeem the Retracted Shares effective at the
close of business on the Retraction Date and will cause to be delivered to such
holder the total Retraction Price with respect to such shares in accordance with
Section 6.4 hereof. If only a part of the Exchangeable Shares represented by any
certificate are redeemed or purchased by ▇▇▇▇▇▇▇ USA pursuant to the Retraction
Call right, a new certificate for the balance of such Exchangeable Shares will
be issued to the holder at the expense of ▇▇▇▇▇▇▇ Canada.
6.3 On receipt by ▇▇▇▇▇▇▇ Canada of a Retraction Request, ▇▇▇▇▇▇▇
Canada will immediately notify ▇▇▇▇▇▇▇ USA and provide to ▇▇▇▇▇▇▇ USA a copy of
the Retraction Notice. In order to exercise the Retraction Call Right, ▇▇▇▇▇▇▇
USA must notify ▇▇▇▇▇▇▇ Canada in writing of its determination to do so
(the"▇▇▇▇▇▇▇ USA Call Notice") within two Business Days of such notification. If
▇▇▇▇▇▇▇ USA does not so notify ▇▇▇▇▇▇▇ Canada within such two Business Days,
▇▇▇▇▇▇▇ Canada will notify the holder as soon as possible thereafter that
▇▇▇▇▇▇▇ USA will not exercise the Retraction Call Right. If ▇▇▇▇▇▇▇ USA delivers
▇▇▇▇▇▇▇ USA Call Notice within such two Business Days, and provided that the
Retraction Request is not revoked by the holder in the manner specified in
Section 6.7, the Retraction Request will thereon be considered only to be an
offer by the holder to sell the Retracted Shares to ▇▇▇▇▇▇▇ USA in accordance
with the Retraction Call Right. In such event, ▇▇▇▇▇▇▇ Canada will not redeem
the Retracted Shares and ▇▇▇▇▇▇▇ USA will purchase from such holder and such
holder will sell to ▇▇▇▇▇▇▇ USA on the Retraction Date the Retracted Shares for
a purchase price per share (the"Purchase Price") equal to the Retraction Price.
For the purposes of completing a purchase pursuant to the Retraction Call Right,
▇▇▇▇▇▇▇ USA will deposit with the Transfer Agent, on or before the Retraction
Date, the Exchangeable Share Consideration representing the total Purchase
Price. Provided that such Exchangeable Share Consideration 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 will be deemed to have occurred as
at the close of business on the Retraction Date and, for greater certainty, no
redemption by ▇▇▇▇▇▇▇ Canada of such Retracted Shares will take place on the
Retraction Date. In the event that ▇▇▇▇▇▇▇ USA does not deliver a ▇▇▇▇▇▇▇ USA
Call Notice within two Business Days or otherwise comply with these Exchangeable
Share provisions in respect thereto, and provided that Retraction Request is not
revoked by the holder in the manner specified in ▇▇▇▇▇▇▇ ▇.▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
will redeem the Retracted Shares on the Retraction Date and in the manner
otherwise contemplated in this Article 6.
78
6.4 ▇▇▇▇▇▇▇ Canada or ▇▇▇▇▇▇▇ USA, as the case may be, will deliver or
cause the Transfer Agent to deliver to the relevant holder, at the address of
the holder recorded in the securities register of ▇▇▇▇▇▇▇ Canada for the
Exchangeable Shares or at the address specified in the holder's Retraction
Request or by holding for pick up by the holder at the registered office of
▇▇▇▇▇▇▇ Canada or at any office of the Transfer Agent as may be specified by
▇▇▇▇▇▇▇ Canada in Schedule A hereto or by notice to the holders of Exchangeable
Shares, the Exchangeable Share Consideration representing the total Retraction
Price or the total Purchase Price, as the case may be, and such delivery of such
Exchangeable Share Consideration to the Transfer Agent will be deemed to be
payment of and will satisfy and discharge all liability for the total Retraction
Price or total Purchase Price, as the case may be, except as to any cheque
included therein which is not paid on due presentation.
6.5 On and after the close of business on the Retraction Date, the
holder of the Retracted Shares will cease to be a holder of such Retracted
Shares and will not be entitled to exercise any of the rights of a holder in
respect thereof, other than the right to receive such holder's proportionate
part of the total Retraction Price or total Purchase Price, as the case may be,
unless on presentation and surrender of certificates in accordance with the
foregoing provisions, payment of the total Retraction Price or the total
Purchase Price, as the case may be, will not be made, in which case the rights
of such holder will remain unaffected until the Exchangeable Share Consideration
representing the total Retraction Price or the total Purchase Price, as the case
may be, has been paid in the manner hereinbefore provided. On and after the
close of business on the Retraction Date, provided that presentation and
surrender of certificates and payment of the Exchangeable Share Consideration
representing the total Retraction Price or the total Purchase Price, as the case
may be, has been made in accordance with the foregoing provisions, the holder of
the Retracted Shares so redeemed by ▇▇▇▇▇▇▇ Canada or purchased by ▇▇▇▇▇▇▇ USA
will thereafter be considered and deemed for all purposes to be a holder of
▇▇▇▇▇▇▇ USA Common Stock delivered to it. Notwithstanding the foregoing, until
such payment of such Exchangeable Share Consideration to the holder, the holder
will be deemed to still be a holder of Exchangeable Shares for purposes of all
voting rights with respect thereto under the Voting and Exchange Trust
Agreement.
6.6 Notwithstanding any other provision of this Article 6, ▇▇▇▇▇▇▇
Canada will 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 liquidity or solvency requirements or other provisions of
applicable law. If ▇▇▇▇▇▇▇ Canada 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 ▇▇▇▇▇▇▇ USA will not
have exercised the Retraction Call Right with respect to the Retracted Shares,
▇▇▇▇▇▇▇ Canada will only be obligated to redeem Retracted Shares specified by a
holder in a Retraction Request to the extent of the maximum number that may be
so redeemed (rounded down to a whole number of shares) as would not be contrary
to such provisions and will notify the holder at least two Business Days prior
to the Retraction Date as to the number of Retracted Shares which will not be
redeemed by ▇▇▇▇▇▇▇ Canada. In any case in which the redemption by ▇▇▇▇▇▇▇
Canada of Retracted Shares would be contrary to liquidity or solvency
requirements or other provisions of applicable law, ▇▇▇▇▇▇▇ Canada will redeem
Retracted Shares in accordance with Section 6.2 of these share provisions on a
pro rata basis and will issue to each holder of Retracted Shares a new
certificate, at the expense of ▇▇▇▇▇▇▇ Canada, representing the Retracted Shares
not redeemed by ▇▇▇▇▇▇▇ Canada pursuant to Section 6.2 hereof. Provided that the
Retraction Request is not revoked by the holder in the manner specified in
Section 6.7, the holder of any such Retracted Shares not redeemed by ▇▇▇▇▇▇▇
Canada pursuant to Section 6.2 of these share provisions as a result of
liquidity or solvency requirements or applicable law will be deemed by giving
the Retraction Request to require ▇▇▇▇▇▇▇ USA to purchase such Retracted Shares
from such holder on the Retraction Date or as soon as practicable thereafter on
payment by ▇▇▇▇▇▇▇ USA to such holder of the Purchase Price for each such
Retracted Share, all as more specifically provided in the Voting and Exchange
Trust Agreement, and ▇▇▇▇▇▇▇ USA will make such purchase.
6.7 A holder of Retracted Shares may, by notice in writing given by the
holder to ▇▇▇▇▇▇▇ Canada before the close of business on the Business Day
immediately preceding the Retraction Date, withdraw its Retraction Request in
which event such Retraction Request will be null and void and, for greater
certainty, the revocable offer constituted by the Retraction Request to sell the
Retracted Shares to ▇▇▇▇▇▇▇ USA will be deemed to have been revoked.
7.0 Redemption of Exchangeable Shares by ▇▇▇▇▇▇▇ Canada
79
7.1 Subject to applicable law, and if ▇▇▇▇▇▇▇ USA does not exercise the
Redemption Call Right, ▇▇▇▇▇▇▇ Canada will on the Automatic Redemption Date
redeem the whole of the then outstanding Exchangeable Shares for an amount equal
to the Exchangeable Share Price applicable on the last Business Day prior to the
Automatic Redemption Date (the"Redemption Price") in accordance with Section
7.3. In connection with payment of the Redemption Price, ▇▇▇▇▇▇▇ Canada will be
entitled to liquidate some of ▇▇▇▇▇▇▇ USA Common Stock which would otherwise be
deliverable as Exchangeable Share Consideration to the particular holder of
Exchangeable Shares in order to fund any statutory withholding tax obligation.
7.2 In any case of a redemption of Exchangeable Shares under this
Article 7, ▇▇▇▇▇▇▇ Canada, or the Transfer Agent on behalf of ▇▇▇▇▇▇▇ Canada,
will, at least 45 days before an Automatic Redemption Date or before a possible
Automatic Redemption Date which may result from a failure of the holders of
Exchangeable Shares to take necessary action as described in clause (d) of the
definition of Automatic Redemption Date send or cause to be sent to each holder
of Exchangeable Shares a notice in writing of the redemption or possible
redemption by ▇▇▇▇▇▇▇ Canada or the purchase by ▇▇▇▇▇▇▇ USA under the Redemption
Call Right, as the case may be, of the Exchangeable Shares held by such holder.
Such notice will set out the Redemption Price or the Redemption Call Purchase
Price, as the case may be, the Automatic Redemption Date and, if applicable,
particulars of the Redemption Call Right. In the case of any notice given in
connection with a possible Automatic Redemption Date, such notice will be given
contingently and will be withdrawn if the contingency does not occur.
7.3 On or after the Automatic Redemption Date and subject to the
exercise by ▇▇▇▇▇▇▇ USA of the Redemption Call Right, ▇▇▇▇▇▇▇ Canada will cause
to be delivered to the holders of the Exchangeable Shares to be redeemed the
Redemption Price for each such Exchangeable Share on presentation and surrender
at the registered office of ▇▇▇▇▇▇▇ Canada or at any office of the Transfer
Agent as may be specified by ▇▇▇▇▇▇▇ Canada in such notice 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
applicable law and the by-laws of ▇▇▇▇▇▇▇ Canada and such additional documents
and instruments as the Transfer Agent may reasonably require. Payment of the
total Redemption Price for such Exchangeable Shares will be made by delivery to
each holder, at the address of the holder recorded in the securities register or
at any office of the Transfer Agent as may be specified by ▇▇▇▇▇▇▇ Canada in
such notice, on behalf of ▇▇▇▇▇▇▇ Canada, of the Exchangeable Share
Consideration representing the total Redemption Price. On and after the
Automatic Redemption Date, the holders of the Exchangeable Shares called for
redemption will cease to be holders of such Exchangeable Shares and will not be
entitled to exercise any of the rights of holders in respect thereof, other than
the right to receive their proportionate part of the total Redemption Price,
unless payment of the total Redemption Price for such Exchangeable Shares will
not be made on presentation and surrender of certificates in accordance with the
foregoing provisions, in which case the rights of the holders will remain
unaffected until the total Redemption Price has been paid in the manner
hereinbefore provided. ▇▇▇▇▇▇▇ Canada will have the right at any time after the
sending of notice of its intention to redeem the Exchangeable Shares as
aforesaid to deposit or cause to be deposited the Exchangeable Share
Consideration with respect to 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 or for safe keeping, in
the case of non-cash items, with any chartered bank or trust company in Canada
named in such notice. On the later of such deposit being made and the Automatic
Redemption Date, the Exchangeable Shares in respect whereof such deposit will
have been made will be redeemed and the rights of the holders thereof after such
deposit or Automatic Redemption Date, as the case may be, will be limited to
receiving their proportionate part of the total Redemption Price for such
Exchangeable Shares so deposited, against presentation and surrender of the said
certificates held by them, respectively, in accordance with the foregoing
provisions. On such payment or deposit of such Exchangeable Share Consideration,
the holders of the Exchangeable Shares will thereafter be considered and deemed
for all purposes to be holders of ▇▇▇▇▇▇▇ USA Common Stock delivered to them.
Notwithstanding the foregoing, until such payment or deposit of such
Exchangeable Share Consideration is made, the holder will be deemed to still be
a holder of Exchangeable Shares for purposes of all voting rights with respect
thereto under the Voting and Exchange Trust Agreement.
8.0 Exchange Put Right
8.1 On and subject to the terms and conditions contained in these share
provisions and the Voting and Exchange Trust Agreement:
80
(a) a holder of Exchangeable Shares will have the right (the
"Exchange Put Right") at any time to require ▇▇▇▇▇▇▇ USA to
purchase all or any part of the Exchangeable Shares of the
holder; and
(b) on the exercise by the holder of the Exchange Put Right and
provided that, at the time of purchase, the Exchangeable Shares
are registered in the United States, the holder will be required
to sell to ▇▇▇▇▇▇▇ USA, and ▇▇▇▇▇▇▇ USA will be required to
purchase from the holder, that number of Exchangeable Shares in
respect of which the Exchange Put Right is exercised, in
consideration of the payment by ▇▇▇▇▇▇▇ USA of the Exchangeable
Share Price applicable thereto (which will be the Exchangeable
Share Price applicable on the last Business Day prior to receipt
of notice required under section 8.2) and delivery by or on
behalf of ▇▇▇▇▇▇▇ USA of the Exchangeable Share Consideration
representing the total applicable Exchangeable Share Price. In
connection with payment of the Exchangeable Share Consideration,
▇▇▇▇▇▇▇ Canada will be entitled to liquidate some of ▇▇▇▇▇▇▇ USA
Common Stock which would otherwise be deliverable to the
particular holder of Exchangeable Shares in order to fund any
statutory withholding tax obligation.
8.2 The Exchange Put Right provided in section 8.1 hereof and in
Article 5 of the Voting and Exchange Trust Agreement may be exercised at any
time by notice in writing given by the holder to and received by the Trustee
(the date of such receipt, the"Exchange Put Date") and accompanied by
presentation and surrender of the certificates representing such Exchangeable
Shares, together with such documents and instruments as may be required to
effect a transfer of Exchangeable Shares under the Act and the by-laws of
▇▇▇▇▇▇▇ Canada and such additional documents and instruments as the Trustee may
reasonably require, at the principal transfer offices in Salt Lake City, Utah,
of the Trustee, or at such other office or offices of the Trustee or of other
persons designated by the Trustee for that purpose as may from time to time be
maintained by the Trustee for that purpose. Such notice may be (i) in the form
of the panel, if any, on the certificates representing Exchangeable Shares, (ii)
in the form of the notice and election contained in any letter of transmittal
distributed or made available by ▇▇▇▇▇▇▇ Canada for that purpose, or (iii) in
other form satisfactory to the Trustee (or such other persons aforesaid), will
stipulate the number of Exchangeable Shares in respect of which the right is
exercised (which may not exceed the number of shares represented by certificates
surrendered to the Trustee), will be irrevocable unless the exchange is not
completed in accordance herewith and with the Voting and Exchange Trust
Agreement and will constitute the holder's authorization to the Trustee (and
such other persons aforesaid) to effect the exchange on behalf of the holder.
8.3 The completion of the sale and purchase referred to in section 8.1
will be required to occur, and ▇▇▇▇▇▇▇ USA will be required to take all actions
on its part necessary to permit it to occur, not later than the close of
business on the third Business Day following the Exchange Put Date.
8.4 The surrender by the holder of Exchangeable Shares under section
8.2 will constitute the representation, warranty and covenant of the holder that
the Exchangeable Shares so purchased are sold free and clear of any lien,
encumbrance, security interest or adverse claim or interest.
8.5 If a part only of the Exchangeable Shares represented by any
certificate are to be sold and purchased pursuant to the exercise of the
Exchange Put Right, a new certificate for the balance of such Exchangeable
Shares will be issued to the holder at the expense of ▇▇▇▇▇▇▇ Canada.
8.6 On receipt by the Trustee of the notice, certificates and other
documents or instruments required by section 8.2, the Trustee will deliver or
cause to be delivered, on behalf of ▇▇▇▇▇▇▇ USA and subject to receipt by the
Trustee from ▇▇▇▇▇▇▇ USA of the applicable Exchangeable Share Consideration, to
the relevant holder at the address of the holder specified in the notice or by
holding for pick-up by the holder at the registered office of ▇▇▇▇▇▇▇ Canada or
at any office of the Trustee (or other persons aforesaid) maintained for that
purpose, the Exchangeable Share Consideration representing the total applicable
Exchangeable Share Price, within the time stipulated in section 8.3. Delivery by
▇▇▇▇▇▇▇ USA to the Trustee of such Exchangeable Share Consideration will be
deemed to be payment of and will satisfy and discharge all liability for the
total applicable Exchangeable Share Price, except as to any cheque included
therein which is not paid on due presentation.
8.7 On and after the close of business on the Exchange Put Date, the
holder of the Exchangeable Shares in respect of which the Exchange Put Right is
exercised will not be entitled to exercise any of the rights of a holder in
respect thereof, other than the right to receive the total applicable
Exchangeable Share Price, unless on presentation and surrender of certificates
in accordance with the foregoing provisions, payment of the Exchangeable Share
81
Consideration will not be made, in which case the rights of such holder will
remain unaffected until such payment has been made. On and after the close of
business on the Exchange Put Date provided that presentation and surrender of
certificates and payment of the Exchangeable Share Consideration has been made
in accordance with the foregoing provisions, the holder of the Exchangeable
Shares so purchased by ▇▇▇▇▇▇▇ USA will thereafter be considered and deemed for
all purposes to be a holder of ▇▇▇▇▇▇▇ USA Common Stock delivered to it.
Notwithstanding the foregoing, until payment of the Exchangeable Share
Consideration to the holder, the holder will be deemed to still be a holder of
Exchangeable Shares for purposes of all voting rights with respect thereto under
the Voting and Exchange Trust Agreement.
9.0 Voting Rights
9.1 Except as required by applicable law and the provisions hereof, the
holders of the Exchangeable Shares will not be entitled as such to receive
notice of or to attend any meeting of the shareholders of ▇▇▇▇▇▇▇ Canada or to
vote at any such meeting.
10.0 Amendment and Approval
10.1 The rights, privileges, restrictions and conditions attaching to
the Exchangeable Shares may be added to, changed or removed but, except as
hereinafter provided, only with the approval of the holders of the Exchangeable
Shares given as hereinafter specified.
10.2 Any approval given by the holders of the Exchangeable Shares to
add to, change or remove any right, privilege, restriction or condition
attaching to the Exchangeable Shares or any other matter requiring the approval
or consent of the holders of the Exchangeable Shares will be deemed to have been
sufficiently given if it will have been given in accordance with applicable law
subject to a minimum requirement that such approval be evidenced by resolution
passed by not less than 66 2/3% of the votes cast on such resolution by persons
represented in person or by proxy at a meeting of holders of Exchangeable Shares
(excluding Exchangeable Shares beneficially owned by ▇▇▇▇▇▇▇ USA or its
Subsidiaries) 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. 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 will
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 66 2/3%
of the votes cast on such resolution by persons represented in person or by
proxy at such meeting (excluding Exchangeable Shares beneficially owned by
▇▇▇▇▇▇▇ USA or its Subsidiaries) will constitute the approval or consent of the
holders of the Exchangeable Shares. For the purposes of this section, any
spoiled votes, illegible votes, defective votes and abstinences will be deemed
to be votes not cast.
11.0 Reciprocal Changes, Etc. in Respect of ▇▇▇▇▇▇▇ USA Common Stock
11.1
(a) Each holder of an Exchangeable Share acknowledges that the
Support Agreement provides, in part, that ▇▇▇▇▇▇▇ USA will
not:
(i) issue or distribute shares of ▇▇▇▇▇▇▇ USA Common
Stock (or securities exchangeable for or convertible
into or carry rights to acquire shares of ▇▇▇▇▇▇▇ USA
Common Stock) to the holders of all or substantially
all of the then outstanding shares of ▇▇▇▇▇▇▇ USA
Common Stock by way of stock dividend or other
distribution; or
(ii) issue or distribute rights, options or warrants to
the holders of all or substantially all of the then
outstanding shares of ▇▇▇▇▇▇▇ USA Common Stock
entitling them to subscribe for or to purchase shares
of ▇▇▇▇▇▇▇ USA Common Stock (or securities
exchangeable for or convertible into or carrying
rights to acquire shares of ▇▇▇▇▇▇▇ USA Common
Stock); or
82
(iii) issue or distribute to the holders of all or
substantially all of the then outstanding shares of
▇▇▇▇▇▇▇ USA Common Stock (A) shares or securities of
▇▇▇▇▇▇▇ USA of any class other than ▇▇▇▇▇▇▇ USA
Common Stock (other than shares convertible into or
exchangeable for or carrying rights to acquire shares
of ▇▇▇▇▇▇▇ USA Common Stock), (B) rights, options or
warrants other than those referred to in subsection
11.1 (a) (ii) above, (C) evidences of indebtedness of
▇▇▇▇▇▇▇ USA or (D) assets of ▇▇▇▇▇▇▇ USA;
unless one or both of ▇▇▇▇▇▇▇ USA and ▇▇▇▇▇▇▇ Canada is
permitted under applicable law to issue or distribute the
economic equivalent on a per share basis of such rights,
options, warrants, securities, shares, evidences of
indebtedness or other assets to the holders of the
Exchangeable Shares, and one or both of ▇▇▇▇▇▇▇ USA and
▇▇▇▇▇▇▇ Canada will issue or distribute the economic
equivalent on a per share basis of such rights, options,
warrants, securities, shares, evidences of indebtedness or
other assets simultaneously to the holders of the Exchangeable
Shares.
(b) Each holder of an Exchangeable Share acknowledges that the
Support Agreement further provides, in part, that ▇▇▇▇▇▇▇ USA
will not:
(i) subdivide, redivide or change the then outstanding
shares of ▇▇▇▇▇▇▇ USA Common Stock into a greater
number of shares of ▇▇▇▇▇▇▇ USA Common Stock; or
(ii) reduce, combine or consolidate or change the then
outstanding shares of ▇▇▇▇▇▇▇ USA Common Stock into a
lesser number of shares of ▇▇▇▇▇▇▇ USA Common Stock;
or
(iii) reclassify or otherwise change the shares of ▇▇▇▇▇▇▇
USA Common Stock or effect an amalgamation, merger,
reorganization or other transaction involving or
affecting the shares of ▇▇▇▇▇▇▇ USA Common Stock;
unless ▇▇▇▇▇▇▇ Canada is permitted under applicable law to
simultaneously make the same or an economically equivalent
change to, or in the rights of the holders of, the
Exchangeable Shares, and the same or an economically
equivalent change is simultaneously made to, or in the rights
of the holders of, the Exchangeable Shares. The Support
Agreement further provides, in part, that, with the exception
of certain ministerial amendments, the aforesaid provisions of
the Support Agreement will not be changed without the approval
of the holders of the Exchangeable Shares given in accordance
with Article 10 of these share provisions.
12.0 Actions by ▇▇▇▇▇▇▇ Canada under Support Agreement
12.1 ▇▇▇▇▇▇▇ Canada will take all such actions and do all such things
as will be necessary or advisable to perform and comply with and to ensure
performance and compliance by ▇▇▇▇▇▇▇ USA with all provisions of the Support
Agreement, the Voting Trust and Exchange Agreement and ▇▇▇▇▇▇▇ USA's Certificate
of Incorporation applicable to ▇▇▇▇▇▇▇ Canada and ▇▇▇▇▇▇▇ USA, respectively, in
accordance with the terms thereof including, without limitation, taking all such
actions and doing all such things as will be necessary or advisable to enforce
to the fullest extent possible for the direct benefit of ▇▇▇▇▇▇▇ Canada all
rights and benefits in favour of ▇▇▇▇▇▇▇ Canada under or pursuant thereto.
12.2 ▇▇▇▇▇▇▇ Canada will 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, the Voting Trust and Exchange Agreement or ▇▇▇▇▇▇▇
USA's Certificate of Incorporation without the approval of the holders of the
Exchangeable Shares given in accordance with Article 10 of these share
provisions other than such amendments, waivers and/or forgiveness as may be
necessary or advisable for the purpose of:
(a) adding to the covenants of the other party or parties to such
agreement for the protection of ▇▇▇▇▇▇▇ Canada or the holders of
Exchangeable Shares; or
(b) making such provisions or modifications not inconsistent with
such agreement or certificate 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
83
Directors will be of the opinion, after consultation with
counsel, that such provisions and modifications will not be
prejudicial to the interests of the holders of the Exchangeable
Shares; or
(c) making such changes in or corrections to such agreement or
certificate which, on the advice of counsel to ▇▇▇▇▇▇▇ Canada,
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 will 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.
13.0 Legend
13.1 The certificates evidencing the Exchangeable Shares will 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
Reorganization Agreement relating to the Liquidation Call Right, the Retraction
Call Right and the Redemption Call Right, and the Voting and Exchange Trust
Agreement (including the provisions with respect to the voting rights and
exchange provisions thereunder).
14.0 Miscellaneous
14.1 Any notice, request or other communication to be given to ▇▇▇▇▇▇▇
Canada by a holder of Exchangeable Shares will be in writing and will be valid
and effective if given by mail (postage prepaid) or by telecopy or by delivery
to the registered office of ▇▇▇▇▇▇▇ Canada and addressed to the attention of the
President. Any such notice, request or other communication, if given by mail,
telecopy or delivery, will only be deemed to have been given and received on
actual receipt thereof by ▇▇▇▇▇▇▇ Canada.
14.2 Any presentation and surrender by a holder of Exchangeable Shares
to ▇▇▇▇▇▇▇ Canada or the Transfer Agent of certificates representing
Exchangeable Shares in connection with the liquidation, dissolution or
winding-up of ▇▇▇▇▇▇▇ Canada or the retraction, redemption or exchange of
Exchangeable Shares will be made by registered mail (postage prepaid) or by
delivery to the registered office of ▇▇▇▇▇▇▇ Canada or to such office of the
Transfer Agent as may be specified by ▇▇▇▇▇▇▇ Canada, in each case addressed to
the attention of the President of ▇▇▇▇▇▇▇ Canada. Any such presentation and
surrender of certificates will only be deemed to have been made and to be
effective on actual receipt thereof by ▇▇▇▇▇▇▇ Canada or the Transfer Agent, as
the case may be, and the method of any such presentation and surrender of
certificates will be at the sole risk of the holder.
14.3 Any notice, request or other communication to be given to a holder
of Exchangeable Shares by or on behalf of ▇▇▇▇▇▇▇ Canada will be in writing and
will 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 ▇▇▇▇▇▇▇ Canada
or, in the event of the address of any such holder not being so recorded, then
at the last address of such holder known to ▇▇▇▇▇▇▇ Canada. Any such notice,
request or other communication, if given by mail, will be deemed to have been
given and received on the fifth Business Day following the date of mailing and,
if given by delivery, will 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 will not invalidate
or otherwise alter or affect any action or proceeding to be or intended to be
taken by ▇▇▇▇▇▇▇ Canada.
14.4 For greater certainty, ▇▇▇▇▇▇▇ Canada will not be required for any
purpose under these share provisions to recognize or take account of persons who
are not so recorded in such securities register.
14.5 All Exchangeable Shares acquired by ▇▇▇▇▇▇▇ Canada on the
redemption or retraction thereof will be canceled.
84
SCHEDULE A
RETRACTION REQUEST
------------------
To: ▇▇▇▇▇▇▇ Technolgies Inc. ("▇▇▇▇▇▇▇ Canada") and ▇▇▇▇▇▇▇, Inc. ("▇▇▇▇▇▇▇
USA")
This request is given pursuant to Article 6 of the provisions (the "Share
Provisions") attaching to the Exchangeable Shares of ▇▇▇▇▇▇▇ Canada and all
capitalized words and expressions used in this request which are defined in the
Share Provisions have the meaning attributed to such words and expressions in
such Share Provisions.
The undersigned hereby notifies ▇▇▇▇▇▇▇ Canada that, subject to the Retraction
Call Right referred to below, the undersigned requests ▇▇▇▇▇▇▇ Canada to redeem
in accordance with Article 6 of the Share Provisions:
[ ] all share(s) represented by the accompanying certificate(s); or
[ ] share(s) only.
The undersigned hereby notifies ▇▇▇▇▇▇▇ Canada that the Retraction Date will be
NOTE: The Retraction Date must be a Business Day and must not be less than five
Business Days nor more than 10 Business Days after the date on which this notice
and the accompanying shares are received at the registered office of ▇▇▇▇▇▇▇
Canada or at any office of the Transfer Agent as may be specified in this
Retraction Request or as may be specified by the ▇▇▇▇▇▇▇ Canada by notice to the
holders of the Exchangeable Shares. In the event that no such Business Day is
correctly specified above, the Retraction Date will be deemed to be the tenth
Business Day after the date on which this request is received by ▇▇▇▇▇▇▇ Canada.
The undersigned acknowledges the Retraction Call Right of ▇▇▇▇▇▇▇ USA to
purchase all but not less than all the Retracted Shares from the undersigned and
that this request will be deemed to be a revocable offer by the undersigned to
sell the Retracted Shares to ▇▇▇▇▇▇▇ USA in accordance with the Retraction Call
Right on the Retraction Date for the Retraction Price and on the other terms and
conditions set out in Section 6.3 of the Share Provisions. If ▇▇▇▇▇▇▇ USA
determines not to exercise the Retraction Call Right, ▇▇▇▇▇▇▇ Canada will notify
the undersigned of such fact as soon as possible. This retraction request, and
offer to sell the Retracted Shares to ▇▇▇▇▇▇▇ USA, may be revoked and withdrawn
by the undersigned by notice in writing given to ▇▇▇▇▇▇▇ Canada at any time
before the close of business on the Business Date immediately preceding the
Retraction Date.
The undersigned acknowledges that if, as a result of liquidity or solvency
provisions of applicable law, ▇▇▇▇▇▇▇ Canada is unable 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 ▇▇▇▇▇▇▇ USA
to purchase the unredeemed Retracted Shares.
The undersigned hereby represents and warrants to ▇▇▇▇▇▇▇ Canada and ▇▇▇▇▇▇▇ USA
that the undersigned has good title to, and owns, the share(s) represented by
the accompanying certificate free and clear of all liens, claims, encumbrances,
security interests and adverse claims or interests.
------------------- ---------------------------- -----------------------
(Date) (Signature of Shareholder) (Guarantee of Signature)
[ ] Please check box if the legal or beneficial owner of the Retracted Shares
is a non-resident of Canada.
[ ] Please check box if the securities and any cheque(s) or other non-cash
assets resulting from the retraction of the Retracted Shares are to be held for
pick-up by the shareholder at the principal transfer offices of Interwest
Transfer Company, Inc. (the"Transfer Agent") in Salt Lake City, Utah, failing
which the securities and any cheque(s) or other non-cash assets will be
delivered to the shareholder in accordance with the share provisions.
85
NOTE: This panel must be completed and the accompanying certificate, together
with such additional documents as the Transfer Agent may require, must be
deposited with the Transfer Agent at its principal transfer offices in Salt Lake
City, Utah. The securities and any cheque(s) or other non-cash assets resulting
from the retraction or purchase of the Retracted Shares will be issued and
registered in, and made payable to, or transferred into, respectively, the name
of the shareholder as it appears on the register of ▇▇▇▇▇▇▇ Canada and the
securities, cheque (s) and other non-cash assets resulting from such retraction
or purchase will be delivered to the shareholder in accordance with the Share
Provisions.
-----------------------------------------
Name of Person in Whose Name Securities or
Cheque(s) or Date Other Non-cash Assets 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 this retraction request is for less than all of the share(s)
represented by the accompanying certificate, a certificate representing the
remaining shares of ▇▇▇▇▇▇▇ Canada will be issued and registered in the name of
the shareholder as it appears on the register of the ▇▇▇▇▇▇▇ Canada or its
lawful transferee.
86
C. OTHER PROVISIONS
1.1 Meetings
Meetings of shareholders of ▇▇▇▇▇▇▇ Canada will be held in the location
determined by the directors of ▇▇▇▇▇▇▇ Canada.
1.2 Definitions
Unless there is something in the subject matter or context inconsistent
therewith in Sections 1.3, 1.4 and 1.5 below, the following terms will have the
respective meanings set out below and grammatical variations of such terms will
have corresponding meanings:
"BCCA" means the Company Act (British Columbia), as amended;
"Automatic Redemption Date" has the meaning provided in the Exchangeable Share
Provisions;
"▇▇▇▇▇▇▇ USA" has the meaning provided in the Exchangeable Share Provisions;
"▇▇▇▇▇▇▇ USA Common Stock" has the meaning provided in the Exchangeable Share
Provisions;
"Business Day" has the meaning provided in the Exchangeable Share Provisions;
"Exchange Put Right" has the meaning provided in the Exchangeable Share
Provisions;
"Exchangeable Share Consideration" has the meaning provided in the Exchangeable
Share Provisions;
"Exchangeable Share Price" has the meaning provided in the Exchangeable Share
Provisions;
"Exchangeable Share Provisions" means the rights, privileges, restrictions and
conditions attaching to the Exchangeable Shares;
"Exchangeable Shares" means the Exchangeable Shares in the capital of ▇▇▇▇▇▇▇
Canada;
"Liquidation Call Purchase Price" has the meaning provided in Section 1.3;
"Liquidation Call Right" has the meaning provided in Section 1.3;
"Liquidation Date" has the meaning provided in the Exchangeable Share
Provisions;
"Redemption Call Purchase Price" has the meaning provided in Section 1.4;
"Redemption Call Right" has the meaning provided in Section 1.4;
"Subsidiary" has the meaning provided in the Exchangeable Share Provisions;
"Transfer Agent" means Interwest Transfer Company, Inc.; and
"Voting and Exchange Trust Agreement" has the meaning provided in the
Exchangeable Share Provisions.
1.3 ▇▇▇▇▇▇▇ USA Liquidation Call Right
(a) ▇▇▇▇▇▇▇ USA will have the overriding right (the"Liquidation Call
Right"), in the event of and notwithstanding any proposed liquidation,
dissolution or winding-up of ▇▇▇▇▇▇▇ Canada as referred to in Article 5
of the Exchangeable Share Provisions, to purchase from all but not less
than all of the holders (other than ▇▇▇▇▇▇▇ USA or any Subsidiary
thereof) of Exchangeable Shares on the Liquidation Date all but not
less than all of the Exchangeable Shares held by such holders on
payment by ▇▇▇▇▇▇▇ USA to each
87
holder of the Exchangeable Share Price applicable on the last Business
Day prior to the Liquidation Date (the"Liquidation Call Purchase
Price") in accordance with subsection 1.3(c). In the event of the
exercise of the Liquidation Call Right by ▇▇▇▇▇▇▇ USA, each holder will
be obligated to sell all the Exchangeable Shares held by such holder to
▇▇▇▇▇▇▇ USA on the Liquidation Date on payment by ▇▇▇▇▇▇▇ USA to the
holder of the Liquidation Call Purchase Price for each such share.
(b) To exercise the Liquidation Call Right, ▇▇▇▇▇▇▇ USA must notify
▇▇▇▇▇▇▇ Canada's Transfer Agent in writing, as agent for the holders of
Exchangeable Shares, and ▇▇▇▇▇▇▇ Canada of ▇▇▇▇▇▇▇ USA'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 ▇▇▇▇▇▇▇
Canada and at least five Business Days before the Liquidation Date in
the case of an involuntary liquidation, dissolution or winding-up of
▇▇▇▇▇▇▇ Canada. The Transfer Agent will notify the holders of
Exchangeable Shares as to whether or not ▇▇▇▇▇▇▇ USA has exercised the
Liquidation Call Right forthwith after the expiry of the date by which
the same may be exercised by ▇▇▇▇▇▇▇ USA. If ▇▇▇▇▇▇▇ USA exercises the
Liquidation Call Right, on the Liquidation Date, ▇▇▇▇▇▇▇ USA will
purchase and the holders will sell all of the Exchangeable Shares then
outstanding for a price per share equal to the Liquidation Call
Purchase Price.
(c) For the purposes of completing the purchase of the Exchangeable
Shares pursuant to the Liquidation Call Right, ▇▇▇▇▇▇▇ USA will deposit
with the Transfer Agent, on or before the Liquidation Date, the
Exchangeable Share Consideration representing the total Liquidation
Call Purchase Price. Provided that such Exchangeable Share
Consideration has been so deposited with the Transfer Agent, on and
after the Liquidation Date, the right of each holder of Exchangeable
Shares will be limited to receiving such holder's proportionate part of
the total Liquidation Call Purchase Price payable by ▇▇▇▇▇▇▇ USA,
without interest, on presentation and surrender by the holder of
certificates representing the Exchangeable Shares held by such holder
and the holder will, on and after the Liquidation Date, be considered
and deemed for all purposes to be the holder of ▇▇▇▇▇▇▇ USA Common
Stock delivered to such holder. On 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 BCCA and the by- laws of
▇▇▇▇▇▇▇ Canada and such additional documents and instruments as the
Transfer Agent may reasonably require, the holder of such surrendered
certificate or certificates will be entitled to receive in exchange
therefor, and the Transfer Agent on behalf of ▇▇▇▇▇▇▇ USA will deliver
to such holder, the Exchangeable Share Consideration to which such
holder is entitled. If ▇▇▇▇▇▇▇ USA 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 ▇▇▇▇▇▇▇
Canada in connection with the liquidation, dissolution or winding-up of
▇▇▇▇▇▇▇ Canada pursuant to Article 5 of the Exchangeable Share
Provisions. Notwithstanding the foregoing, until such Exchangeable
Share Consideration is delivered to the holder, the holder will be
deemed to still be a holder of Exchangeable Shares for purposes of all
voting rights with respect thereto under the Voting and Exchange Trust
Agreement.
1.4 ▇▇▇▇▇▇▇ USA Redemption Call Right
(a) ▇▇▇▇▇▇▇ USA will have the overriding right (the"Redemption Call
Right"), notwithstanding any proposed redemption of the Exchangeable
Shares by ▇▇▇▇▇▇▇ Canada pursuant to Article 7 of the Exchangeable
Share Provisions, to purchase from all but not less than all of the
holders (other than ▇▇▇▇▇▇▇ USA or any Subsidiary thereof) 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 ▇▇▇▇▇▇▇ USA to the holder of the Exchangeable Share Price applicable
on the last Business Day prior to the Automatic Redemption Date
(the"Redemption Call Purchase Price") in accordance with subsection
1.4(c). In the event of the exercise of the Redemption Call Right by
▇▇▇▇▇▇▇ USA, each holder will be obligated to sell all the Exchangeable
Shares held by the holder to ▇▇▇▇▇▇▇ USA on the Automatic Redemption
Date on payment by ▇▇▇▇▇▇▇ USA to the holder of the Redemption Call
Purchase Price for each such share.
(b) To exercise the Redemption Call Right, ▇▇▇▇▇▇▇ USA must notify the
Transfer Agent in writing, as agent for the holders of Exchangeable
Shares, and ▇▇▇▇▇▇▇ Canada of ▇▇▇▇▇▇▇ Canada's intention to exercise
such right not later than the date by which ▇▇▇▇▇▇▇ Canada is required
to give notice of the Automatic Redemption Date. The Transfer Agent
will notify the holders of the Exchangeable Shares as to whether or
88
not ▇▇▇▇▇▇▇ USA has exercised the Redemption Call Right forthwith after
the date by which the same may be exercised by ▇▇▇▇▇▇▇ USA. If ▇▇▇▇▇▇▇
USA exercises the Redemption Call Right, on the Automatic Redemption
Date, ▇▇▇▇▇▇▇ USA will purchase and the holders will sell all of the
Exchangeable Shares then outstanding for a price per share equal to the
Redemption Call Purchase Price.
(c) For the purposes of completing the purchase of the Exchangeable
Shares pursuant to the Redemption Call Right, ▇▇▇▇▇▇▇ USA will deposit
with the Transfer Agent, on or before the Automatic Redemption Date,
the Exchangeable Share Consideration representing the total Redemption
Call Purchase Price. Provided that such Exchangeable Share
Consideration 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 payable
by ▇▇▇▇▇▇▇ USA on presentation and surrender by the holder of
certificates representing the Exchangeable Shares held by such holder
and the holder will on and after the Automatic Redemption Date be
considered and deemed for all purposes to be the holder of ▇▇▇▇▇▇▇ USA
Common Stock delivered to such holder. On 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 BCCA and
the by-laws of ▇▇▇▇▇▇▇ Canada and such additional documents and
instruments as the Transfer Agent may reasonably require, the holder of
such surrendered certificate or certificates will be entitled to
receive in exchange therefor, and the Transfer Agent on behalf of
▇▇▇▇▇▇▇ USA will deliver to such holder, the Exchangeable Share
Consideration to which such holder is entitled. If ▇▇▇▇▇▇▇ USA 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 ▇▇▇▇▇▇▇ Canada in connection with the redemption
of the Exchangeable Shares pursuant to Article 7 of the Exchangeable
Share Provisions. Notwithstanding the foregoing, until such
Exchangeable Share Consideration is delivered to the holder, the holder
will be deemed to still be a holder of Exchangeable Shares for purposes
of all voting rights with respect thereto under the Voting and Exchange
Trust Agreement.
1.5 Exchange Put Right. On and subject to the terms and conditions
contained in the Exchangeable Share Provisions and the Voting and Exchange Trust
Agreement, a holder of Exchangeable Shares will have the Exchange Put Right.
89
EXHIBIT B
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
GOLDEN SOIL, INC.
Pursuant to the provisions of section 78.209, Nevada Revised Statutes,
the undersigned President and Secretary of Rich Earth, Inc. (the "Corporation"),
does hereby certify the Board of Directors of the Corporation adopted a
resolution to amend the original articles as follows:
Article I which presently reads as follows:
ARTICLE FIRST
Corporate Name
The name of the corporation is: GOLDEN SOIL, INC.
Is hereby amended to read as follows:
ARTICLE FIRST
Corporate Name
The name of the corporation is: ▇▇▇▇▇▇▇, INC.
Article IV which presently reads as follows:
ARTICLE FOURTH
Stock
4.1 The total authorized capital stock of the Corporation consists of:
A. 100,000,000 shares of Common Stock, with a par value of $0.001 (1 mil).
B. One (1) preferred share (of $1.00 par value) which shall be designated
as the "Special Voting Preferred Share" (the " Preferred Share"), the
preferences and relative, optional and other special rights of which
and the qualifications, limitations or restrictions of which shall be
as follows:
(a) Dividends and Distributions. The holder of the Preferred Share shall
not be entitled to receive any portion of any dividend or distribution at
any time.
(b) Voting Rights. The holder of the Preferred Share shall have the
following voting rights:
(i) The Preferred Share shall entitle the holder thereof
to an aggregate number of votes equal to the number
of Exchangeable Shares ("Exchangeable Shares") of
▇▇▇▇▇▇▇ Technologies Inc., a British Columbia
corporation ("▇▇▇▇▇▇▇ Canada"), outstanding from time
to time which are not owned by the Corporation or any
of its direct or indirect subsidiaries.
(ii) Except as otherwise provided herein or by law, the
holder of the Preferred Share and the holders of
Common Shares and of Series A Preferred Shares shall
vote together as one class on all matters submitted
to a vote of shareholders of the Corporation.
(iii)Except as set forth herein, the holder of the
Preferred Share shall have no special voting rights,
and its consent shall not be required (except to the
extent it is entitled to vote with holders of Common
Shares and of Series A Preferred Shares as set forth
herein) for taking any corporate action.
(c) Additional Provisions.
90
(i) The Holder of the Preferred Share is entitled to
exercise the voting rights attendant thereto in such
manner as such holder desires.
(ii) At such time as:
(A) the Preferred Share entitles its holder to a number of
votes equal to zero because there are no Exchangeable
Shares of ▇▇▇▇▇▇▇ Canada outstanding which are not
owned by the Corporation or any of its direct or
indirect subsidiaries, and
(B) there is no share of stock, debt, option or other
agreement, obligation or commitment of ▇▇▇▇▇▇▇ Canada
which could by its terms require ▇▇▇▇▇▇▇ Canada to
issue any Exchangeable Shares to any person other than
the Corporation or any of its direct or indirect
subsidiaries, then the Preferred Share shall thereupon
be retired and cancelled promptly thereafter. Such
share shall upon its cancellation, and upon the taking
of any action required by applicable law, become an
authorized but unissued preferred share and may be
reissued as part of a new series of preferred shares to
be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions
on issuance set forth herein.
(d) Reacquired Share. If the Preferred Share should be
purchased or otherwise acquired by the Corporation in any
manner whatsoever, then the Preferred Share shall be retired
and canceled promptly after the acquisition thereof. Such
share shall upon its cancellation, and upon the taking of any
action required by applicable law, become an authorized but
unissued preferred share and may be reissued as part of a new
series of preferred F-1 shares to be created by resolution or
resolutions of the Board of Directors, subject to the
conditions and restrictions on issuance set forth herein. (e)
Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, the holder of
the Preferred Share shall not be entitled to any portion of
any distribution.
(f) No Redemption or Conversion. The Preferred Share shall not
be redeemable or convertible. All stock when issued shall be
deemed fully paid and nonassessable. No cumulative voting, on
any matter to which Stockholders shall be entitled to vote,
shall be allowed for any purpose. The authorized stock of this
corporation may be issued at such time, upon such terms and
conditions and for such consideration as the Board of
Directors shall, from time to time, determine. Shareholders
shall not have pre-emptive rights to acquire unissued shares
of the stock of this Corporation.
4.2 All stock when issued shall be deemed fully paid and nonassessable.
No cumulative voting, on any matter to which Stockholders shall be entitled to
vote, shall be allowed for any purpose.
4.3 The authorized stock of this corporation may be issued at such
time, upon such terms and conditions and for such consideration as the Board of
Directors shall, from time to time, determine. Shareholders shall not have pre-
emptive rights to acquire unissued shares of the stock of this Corporation.
--------------
The number of shares of the Corporation outstanding and entitled to
vote on an amendment to the Articles of Incorporation is 6,750,000; that the
said changes and amendments have been consented to and approved by a majority
vote of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon.
The effective date of this amendment is December __, 2000, at the
Closing.
------------------------------ ------------------------------
Xenios Xenopoulos, Secretary Xenios Xenopoulos, President
On the _____ Day of November, 2000 Xenios Xenopoulos the sole director and
officer of the Company personally appeared before me, a Notary Public in and for
the Country of Cyprus, and acknowledged that he executed the above instrument.
------------------------------
Notary Public in and for the Country of Cyprus
91
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of November
__, 2000, between ▇▇▇▇▇▇▇ USA, Inc., a Nevada corporation ("▇▇▇▇▇▇▇ USA"), and
the persons and entities listed on the Schedule of Purchasers attached to this
Agreement (the "Holders")
RECITALS
WHEREAS:
A. Pursuant to an Agreement and Plan of Reorganization dated as of October
__, 2000 (the "Reorganization Agreement"), among ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ British
Columbia, Inc., a wholly owned subsidiary of ▇▇▇▇▇▇▇ USA, and ▇▇▇▇▇▇▇
Technologies Inc. ("▇▇▇▇▇▇▇ Canada"), the parties agreed that on the closing of
the transaction contemplated under the Reorganization Agreement, ▇▇▇▇▇▇▇ USA
would execute and deliver a Registration Rights Agreement containing the terms
and conditions set forth in an Exhibit to the Reorganization Agreement together
with such other terms and conditions as may be agreed to by the parties to the
Reorganization Agreement acting reasonably.
B. Pursuant to a reorganization of the capital structure of ▇▇▇▇▇▇▇ Canada
(the "Reorganization") contemplated in the Reorganization Agreement, ▇▇▇▇▇▇▇
Canada issued certain exchangeable shares (the "Exchangeable Shares") having
attached thereto certain rights, privileges, restrictions and conditions
(collectively, the "Exchangeable Share Provisions").
C. The Holders may elect to convert any or all of the Exchangeable Shares
into shares of the Common Stock of ▇▇▇▇▇▇▇ USA at anytime;
1.0 DEFINITIONS AND INTERPRETATION.
1.1 Defined Terms. As used in this Agreement, the following terms will have
the following respective meanings:
"Closing Date" means the Effective Date of the Share Restructuring Plan as
defined in the Combination Agreement.
"Commission" means the Securities and Exchange Commission, or any other
federal agency at the time administering the Exchange Act or the Securities Act,
whichever is the relevant statute for the particular purpose.
"Common Stock" means the Common Stock, par value $0.001 per share, of
▇▇▇▇▇▇▇ USA, and any other securities of ▇▇▇▇▇▇▇ USA or any successor which may
be issuable on conversion of the Exchangeable Shares pursuant to the
Reorganization Agreement and Exchangeable Share Provisions.
"Exchange Act" means the Securities Exchange Act of 1934, or any successor
thereto, as the same will be amended from time to time.
"Exchangeable Shares" will have the meaning assigned to such term in the
Recitals to this Agreement.
The term "holder" means any person that is the record owner of Registrable
Securities or any person that has a beneficial interest in an Exchangeable Share
convertible into Registrable Securities or any person who will, on the Closing
Date, have a beneficial interest in an Exchangeable Share convertible into
Registrable Securities.
92
The term "managing underwriter or underwriters" means the person or persons
selected under this Agreement to manage an underwritten offering of Registrable
Securities.
The term "person" will include an individual, body corporate, partnership,
company, limited liability company, limited liability partnership,
unincorporated syndicate or organization, trust, trustee, executor,
administrator or other legal representative.
"Prospectus" means the prospectus (including any preliminary prospectus and
any final prospectus) included in any Registration Statement, as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement and by all other amendments and supplements to such
prospectus, including all material incorporated by reference in such prospectus
and all documents filed after the date of such prospectus by ▇▇▇▇▇▇▇ USA under
the Exchange Act and incorporated by reference therein.
"Registrable Securities" means all or any portion of the Common Stock
issuable on exchange of the Exchangeable Shares, including any Common Stock
issued in conjunction with a stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. provided, however, that a security ceases to be a
Registrable Security when (a) a registration statement with respect to the sale
of such securities will have become effective under the Securities Act and such
securities will have been disposed of in accordance with such registration
statement, (b) they will have been distributed to the public pursuant to Rule
144 (or any successor provision) under the Securities Act, (c) they will have
been otherwise transferred, new certificates for them not bearing a legend
restricting further transfer will have been delivered by ▇▇▇▇▇▇▇ USA and
subsequent disposition of them will not require registration or qualification of
them under the Securities Act or any similar state law then in force, (d) they
will have ceased to be outstanding, (e) on the expiration of the applicable
Registration Maintenance Period or (f) any and all legends restricting transfer
have been removed in accordance with the provisions of Rule 144(k) (or any
successor provision) under the Securities Act.
"Registration Expenses": All expenses incident to ▇▇▇▇▇▇▇ USA's performance
of or compliance with this Agreement, including, without limitation, all
registration, filing and NASD fees, all stock exchange and OTC Bulletin Board or
other NASD or stock exchange listing fees, all fees and expenses of complying
with securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of counsel
for ▇▇▇▇▇▇▇ USA and of its independent public accountants, including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance, the reasonable fees and disbursements of not
more than one law firm (not to exceed $20,000) retained by the holder or holders
of more than 50% of the Registrable Securities, premiums and other costs of
policies of insurance of ▇▇▇▇▇▇▇ USA against liabilities arising out of the
public offering of the Registrable Securities being registered and any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities, but excluding underwriting discounts and commissions and transfer
taxes, if any, provided that, in any case where Registration Expenses are not to
be borne by ▇▇▇▇▇▇▇ USA, such expenses will not include salaries of Company
personnel or general overhead expenses of ▇▇▇▇▇▇▇ USA, auditing fees, premiums
or other expenses relating to liability insurance required by underwriters of
▇▇▇▇▇▇▇ USA or other expenses for the preparation of financial statements or
other data normally prepared by ▇▇▇▇▇▇▇ USA in the ordinary course of its
business or which ▇▇▇▇▇▇▇ USA would have incurred in any event.
"Registration Maintenance Period": As defined in Section 2.3.
"Reorganization Agreement": As defined in the recitals to this Agreement.
"Restricted Security" means any security or share of Common Stock issuable
on conversion or exchange thereof unless or until (i) it has been effectively
registered under the Securities Act and sold in a manner contemplated by the
Registration Statement or (ii) it has been transferred in compliance with Rule
144 under the Securities Act (or any successor provision thereto).
93
"Rules and Regulations" means the published rules and regulations of
the Commission promulgated under the Securities Act or the Exchange Act, as in
effect at any relevant time.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor thereto, as the same will be amended from time to time.
"Sellers' Representative": ▇▇▇▇ ▇▇▇ or such Person designated by ▇▇▇▇
▇▇▇ as of the time of disposition of the Registrable Securities held by the
Holders (or subsequent Sellers' Representative).
The term "underwriter" will hereinafter mean any underwriter of an
underwritten offering of Registrable Securities.
1.2 Interpretation Not Affected by Headings, Etc. The division of this
agreement into articles, sections and paragraphs and the insertion of headings
are for convenience of reference only and shall not affect the construction or
interpretation of this agreement.
1.3 Number, Gender, Etc. Words importing the singular number only shall
include the plural and vice versa. Words importing the use of any gender shall
include all genders.
2.0 REGISTRATION UNDER SECURITIES ACT, ETC.
2.1 Required Shelf Registration.
(a) Registration of Registrable Securities. On or before November 1,
2001, ▇▇▇▇▇▇▇ USA will prepare and file with the Commission a
registration statement on Form S-3 (or successor or replacement
form) for an offering to be made on a delayed or continuous basis
pursuant to Rule 415 of the Securities Act (a "Shelf
Registration") registering the resale from time to time by the
Holders of all of the Registrable Securities (the "Initial Shelf
Registration"). The registration statement for any Shelf
Registration shall be on Form S-3 or another available form
permitting registration of such Registrable Securities for resale
by such Holders in the manner or manners designated by them
(including, without limitation, one or more underwritten
offerings). ▇▇▇▇▇▇▇ USA shall use all commercially reasonable
best efforts to cause the Initial Shelf Registration to become
effective under the Securities Act as promptly as is practicable
and to keep the Initial Shelf Registration continuously effective
under the Securities Act for a period of not less than seven
months (the "Effectiveness Period").
(b) Subsequent Shelf Registration. If the Initial Shelf Registration
or any Subsequent Shelf Registration (as defined below) ceases to
be effective for any reason at any time during the Effectiveness
Period (other than because all Registrable Securities shall have
been sold or shall have ceased to be Registrable Securities),
▇▇▇▇▇▇▇ USA shall use all commercially reasonable best efforts to
obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within thirty (30)
days of such cessation of effectiveness amend the Shelf
Registration in a manner reasonably expected to obtain the
withdrawal of the order suspending the effectiveness thereof, or
file an additional Shelf Registration covering all of the
Registrable Securities (a "Subsequent Shelf Registration"). If a
Subsequent Shelf Registration is filed, ▇▇▇▇▇▇▇ USA shall use all
commercially reasonable best efforts to cause the Subsequent
Shelf Registration to become effective as promptly as is
practicable after such filing and to keep such Registration
Statement continuously effective until the end of the
Effectiveness Period.
(c) Amendments to Shelf Registration. ▇▇▇▇▇▇▇ USA shall supplement
and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form
used by ▇▇▇▇▇▇▇ USA for such Shelf Registration, if required by
the Securities Act, or if reasonably requested by any Holder of
the Registrable Securities covered by such Registration Statement
or by any managing underwriter of such Registrable Securities.
94
(d) Terms of Sale of Registrable Securities. Each Holder of
Registrable Securities agrees that if it wishes to sell any
Registrable Securities pursuant to a Shelf Registration and
related Prospectus, it will do so only in accordance with this
Section 2.1(d). Each Holder of Registrable Securities agrees to
give written notice to ▇▇▇▇▇▇▇ USA at least six (6) Business Days
prior to any intended distribution of Registrable Securities
under the Shelf Registration, which notice shall specify the date
on which such Holder intends to begin such distribution and any
information with respect to such Holder and the intended
distribution of Registrable Securities by such Holder required to
amend or supplement the registration statement with respect to
such intended distribution of Registrable Securities by such
Holder; provided that no Holder may give such notice unless such
notice, together with notices given by other holders of
Registrable Securities joining in such notice or giving similar
notices, covers at least five percent (5%) of the Registrable
Securities. As promptly as is practicable after the date such
notice is provided, and in any event within five (5) Business
Days after such date, ▇▇▇▇▇▇▇ USA shall either:
(i) Preparation for Sale.
(A) Prepare and file with the Commission a post-effective
amendment to the Shelf Registration or a supplement to
the related Prospectus or a supplement or amendment to
any document incorporated therein by reference or any
other required document, so that such registration
statement will not contain any untrue statement of a
material fact or omit to state a material fact required
to be stated therein or necessary to make the
statements therein not misleading, and so that, as
thereafter delivered to purchasers of the Registrable
Securities being sold thereunder, such Prospectus will
not contain any untrue statement of a material fact or
omit to state a material fact required to be stated
therein or necessary to make the statements therein, in
light of the circumstances under which they were made,
not misleading;
(B) Provide all relevant parties a copy of any documents
filed pursuant to Section 2.1(d)(i)(A); and
(C) Inform each relevant party that ▇▇▇▇▇▇▇ USA has
complied with its obligations in Section 2.1(d)(i)(A)
and that the registration statement and related
Prospectus may be used for the purpose of selling all
or any of such Registrable Securities (or that, if
▇▇▇▇▇▇▇ USA has filed a post-effective amendment to the
Shelf Registration which has not yet been declared
effective, ▇▇▇▇▇▇▇ USA will notify each relevant party
to that effect, will use all commercially reasonable
best efforts to secure the effectiveness of such
post-effective amendment and will immediately so notify
each selling Holder when the amendment has become
effective); each Holder will sell all or any of such
Registrable Securities pursuant to the Shelf
Registration and related Prospectus only during the
Effectiveness Period; each Holder agrees that it will
not sell any Registrable Securities pursuant to such
registration statement or Prospectus after such selling
period; or
(ii) Black-Out Periods. If, in the judgment of ▇▇▇▇▇▇▇ USA, it is
advisable to suspend use of the Prospectus for a period of time
due to pending material corporate developments or similar
material events that have not yet been publicly disclosed and as
to which ▇▇▇▇▇▇▇ USA believes public disclosure will be
prejudicial to ▇▇▇▇▇▇▇ USA, ▇▇▇▇▇▇▇ USA shall deliver a
certificate in writing, signed by its Chief Executive Officer,
Chief Financial Officer or General Counsel, to the Holders, the
Special Counsel and the Managing Underwriters, if any, to the
effect of the foregoing and, upon receipt of such certificate,
each such Holder's Selling Period will not commence until such
Holder's receipt of copies of the supplemented or amended
Prospectus provided for in Section 2.1(d)(i)(A) hereof, or until
it is advised in writing by ▇▇▇▇▇▇▇ USA that the Prospectus may
be used, and has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated
by reference in such Prospectus. ▇▇▇▇▇▇▇ USA will use all
commercially reasonable best efforts to ensure that the use of
the Prospectus may be resumed, and the Selling Period will
commence, upon the earlier of (x) public disclosure of such
pending
95
material corporate development or similar material event or (y) a
determination by ▇▇▇▇▇▇▇ USA that, in the judgment of ▇▇▇▇▇▇▇
USA, public disclosure of such material corporate development or
similar material event would not be prejudicial to ▇▇▇▇▇▇▇ USA.
Notwithstanding the foregoing, ▇▇▇▇▇▇▇ USA shall not under any
circumstances be entitled to exercise its right under Section
2.1(d)(ii) to defer the commencement of a Selling Period more
than one time in any three (3)-month period, and the period in
which a Selling Period is suspended shall not exceed fifteen (15)
days unless ▇▇▇▇▇▇▇ USA shall deliver to such Holders a second
certificate to the effect set forth above, which shall have the
effect of extending the period during which such Selling Period
is deferred by up to an additional fifteen (15) days, or such
shorter period of time as is specified in such second
certificate. In no event shall ▇▇▇▇▇▇▇ USA be permitted to extend
the period during which such Selling Period is deferred from and
after the date a Holder provides notice to ▇▇▇▇▇▇▇ USA in
accordance with Section 2.1(d)(ii) of its intention to distribute
Registrable Securities beyond such thirty (30)-day period.
(e) Underwriting. In the event that a registration pursuant to this
Section 2.1 is for a registered public offering involving an
underwriting, ▇▇▇▇▇▇▇ USA shall so advise the Holders as part of the
notice given pursuant to Section 2.1(a)(i). In such event, the right
of any Holder to registration pursuant to this Section shall be
conditioned upon such Holder's participation in the underwriting
arrangements required by this Section 2.1 , and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent
requested shall be limited as provided herein. ▇▇▇▇▇▇▇ USA shall
(together with all Holders proposing to distribute their securities
through such underwriting) enter into an underwriting agreement in
customary form with managing underwriter(s) selected for such
underwriting by a majority in interest of the Initiating Holders, but
subject to ▇▇▇▇▇▇▇ USA's reasonable approval. Notwithstanding any
other provision of this Section 2.1, if the managing underwriter(s)
advise(s) the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then
▇▇▇▇▇▇▇ USA shall so advise all Holders participating and the number
of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all Holders
thereof in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such Holders at the time of
filing the registration statement. No Registrable Securities excluded
from the underwriting by reason of the underwriters' marketing
limitation shall be included in such registration. To facilitate the
allocation of shares in accordance with the above provisions, ▇▇▇▇▇▇▇
USA or the underwriters may round the number of shares allocated to
any Holder to the nearest 100 shares. If any Holder disapproves of the
terms of the underwriting, such person may elect to withdraw therefrom
by written notice to ▇▇▇▇▇▇▇ USA, the managing underwriter and the
Initiating Holders. The Registrable Securities so withdrawn shall also
be withdrawn from registration, and such Registrable Securities shall
not be transferred in a public distribution prior to 90 days after the
effective date of such registration, or such other shorter period of
time as the underwriters may require.
2.2 Incidental Registration.
(a) Right to Include Registrable Securities. If at any time after the date
of this Agreement but before the third anniversary of the date of this
Agreement, ▇▇▇▇▇▇▇ USA proposes to register any of its securities
under the Securities Act (other than by a registration in connection
with an acquisition in a manner which would not permit registration of
Registrable Securities for sale to the public, on Form S-8, or any
successor form thereto, on Form S-4, or any successor form thereto and
other than pursuant to Section 2.1), on an underwritten basis (either
best-efforts or firm-commitment), then, ▇▇▇▇▇▇▇ USA will each such
time give prompt written notice to all holders of Registrable
Securities of its intention to do so and of such holders' rights under
this Section 2.2. On the written request of any such holder made
within twenty (20) days after the receipt of any such notice (which
request will specify the Registrable Securities intended to be
disposed of by such holder and the intended method of disposition),
▇▇▇▇▇▇▇ USA will, subject to the terms of this Agreement,
96
use its commercially reasonable best efforts to effect the
registration under the Securities Act of the Registrable Securities,
to the extent requisite to permit the disposition (in accordance with
the intended methods as aforesaid) of such Registrable Securities so
to be registered, by inclusion of such Registrable Securities in the
registration statement which covers the securities which ▇▇▇▇▇▇▇ USA
proposes to register, provided that if, at any time after written
notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with
such registration, ▇▇▇▇▇▇▇ USA will determine for any reason either
not to register or to delay registration of such securities, ▇▇▇▇▇▇▇
USA may, at its election, give written notice of such determination to
each holder and, thereon, (i) in the case of a determination not to
register, will be relieved of this obligation to register any
Registrable Securities in connection with such registration (but not
from its obligation to pay the Registration Expenses in connection
therewith), and (ii) in the case of a determination to delay
registering, will be permitted to delay registering any Registrable
Securities, for the same period as the delay in registering such other
securities. No registration effected under this Section 2.2 will
relieve ▇▇▇▇▇▇▇ USA of its obligation to effect any registration under
Section 2.1, nor will any such registration hereunder be deemed to
have been effected pursuant to Section 2.1. ▇▇▇▇▇▇▇ USA will pay all
Registration Expenses in connection with each registration of
Registrable Securities requested pursuant to this Section 2.2. The
right provided the holders of the Registrable Securities pursuant to
this Section will be exercisable at their sole discretion.
(b) Priority in Incidental Registrations. If the managing underwriter of
the underwritten offering contemplated by this Section 2.2 will inform
▇▇▇▇▇▇▇ USA and holders of the Registrable Securities requesting such
registration by letter of its belief that the number of securities
requested to be included in such registration exceeds the number which
can be sold in such offering, then ▇▇▇▇▇▇▇ USA will include in such
registration, to the extent of the number which ▇▇▇▇▇▇▇ USA is so
advised can be sold in such offering, (i) first securities proposed by
▇▇▇▇▇▇▇ USA to be sold for its own account, and (ii) second
Registrable Securities and securities of other selling security
holders requested to be included in such registration pro rata on the
basis of the number of shares of such securities so proposed to be
sold and so requested to be included; provided, however, the holders
of Registrable Securities will have priority to all shares sought to
be included by officers and directors of ▇▇▇▇▇▇▇ USA as well as
holders of ten percent (10%) or more of ▇▇▇▇▇▇▇ USA's Common Stock.
2.3 Registration Procedures. If and whenever ▇▇▇▇▇▇▇ USA is required to
effect the registration of any Registrable Securities under the Securities Act
as provided in Section 2.1 and, as applicable, 2.2, ▇▇▇▇▇▇▇ USA will, as
expeditiously as possible:
(a) prepare and file with the Commission a registration statement or
amendments thereto, to effect such registration (including such
audited financial statements as may be required by the Securities Act
or the rules and regulations promulgated thereunder) and thereafter
use its commercially reasonable best efforts to cause such
registration statement to be declared effective by the Commission, as
soon as practicable, but in any event no later than the Required
Effectiveness Date (with respect to a registration pursuant to Section
2.1); provided, however, that before filing such registration
statement or any amendments thereto, ▇▇▇▇▇▇▇ USA will furnish to the
counsel selected by the holders of Registrable Securities which are to
be included in such registration, copies of all such documents
proposed to be filed;
(b) with respect to any registration statement pursuant to Section 2.1,
prepare and file with the Commission such amendments and supplements
to such registration statement and the Prospectus used in connection
therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by
such registration statement until the earlier to occur of two (2)
years after the date of this Agreement (subject to the right of
▇▇▇▇▇▇▇ USA to suspend the effectiveness for not more than 10
consecutive days or an aggregate of 30 days in such two (2)
97
years period) or such time as all of the securities which are the
subject of such registration statement cease to be Registrable
Securities (such period, in each case, the "Registration Maintenance
Period");
(c) furnish to each seller of Registrable Securities covered by such
registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies
of the Prospectus contained in such registration statement (including
each preliminary Prospectus and any summary Prospectus) and any other
Prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such other
documents, as such seller and underwriter, if any, may reasonably
request in order to facilitate the public sale or other disposition of
the Registrable Securities owned by such seller;
(d) use its commercially reasonable best efforts to register or qualify
all Registrable Securities and other securities covered by such
registration statement under such other securities laws or blue sky
laws as any seller will reasonably request, to keep such registrations
or qualifications in effect for so long as such registration statement
remains in effect, and take any other action which may be reasonably
necessary to enable such seller to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that
▇▇▇▇▇▇▇ USA will not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this subdivision (d)
be obligated to be so qualified or to consent to general service of
process in any such jurisdiction;
(e) use its commercially reasonable best efforts to cause all Registrable
Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as
may be necessary to enable the seller or sellers to consummate the
disposition of such Registrable Securities;
(f) furnish to each seller of Registrable Securities a signed counterpart,
addressed to such seller, and the underwriters, if any, of:
(i) an opinion of counsel for ▇▇▇▇▇▇▇ USA, dated the effective date
of such registration statement (or, if such registration includes
an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), reasonably
satisfactory in form and substance to such seller including that
the Prospectus and any Prospectus supplement forming a part of
the registration statement does not contain an untrue statement
of a material fact or omits a material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading, and
(ii) if such registration includes an underwritten public offering, a
"comfort letter" dated the date of the closing and required to be
delivered to the underwriter under the underwriting agreement,
signed by the independent public accountants who have certified
▇▇▇▇▇▇▇ USA's financial statements;
(g) notify the Sellers' Representative and its counsel promptly and
confirm such advice in writing promptly after ▇▇▇▇▇▇▇ USA has
knowledge:
(i) when the registration statement, the Prospectus or any Prospectus
supplement related thereto or post-effective amendment to the
registration statement has been filed, and, with respect to the
registration statement or any post-effective amendment thereto,
when the same has become effective;
(ii) of any request by the Commission for amendments or supplements to
the Registration Statement or the Prospectus or for additional
information;
(iii)of the issuance by the Commission of any stop order suspending
the effectiveness of the registration statement or the initiation
of any proceedings by any Person for that purpose; and
98
(iv) of the receipt by ▇▇▇▇▇▇▇ USA of any notification with respect to
the suspension of the qualification of any Registrable Securities
for sale under the securities or blue sky laws of any
jurisdiction or the initiation or threat of any proceeding for
such purpose;
(h) notify each seller of Registrable Securities covered by such
registration statement, at any time when a Prospectus relating thereto
is required to be delivered under the Securities Act, on discovery
that, or on the happening of any event as a result of which, the
Prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material facts required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing, and at the request of any such seller promptly prepare
and furnish to such seller a reasonable number of copies of a
supplement to or an amendment of such Prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such securities,
such Prospectus will not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances then existing;
(i) use its commercially reasonable best efforts to obtain the withdrawal
of any order suspending the effectiveness of the registration
statement at the earliest possible moment;
(j) otherwise use its commercially reasonable best efforts to comply with
all applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably practicable,
an earnings statement covering the period of at least twelve months,
but not more than eighteen months, beginning with the first full
calendar month after the effective date of such registration
statement, which earnings statement will satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) use its commercially reasonable best efforts to list all Registrable
Securities covered by such registration statement on any securities
exchange on which any of the Registrable Securities are then listed.
▇▇▇▇▇▇▇ USA may require each seller of Registrable Securities as to
which any registration is being effected to furnish Merilus USA such information
regarding such seller and the distribution of such securities as ▇▇▇▇▇▇▇ USA may
from time to time reasonably request in writing.
▇▇▇▇▇▇▇ USA will not file any registration statement pursuant to
Section 2.1, or amendment thereto or any Prospectus or any supplement thereto
(including such documents incorporated by reference and proposed to be filed
after the initial filing of the registration statement) to which the Sellers'
Representative will reasonably object, provided that ▇▇▇▇▇▇▇ USA may file such
documents in a form required by law or on the advice of its counsel.
▇▇▇▇▇▇▇ USA represents and warrants to each holder of Registrable
Securities that it has obtained all necessary waivers, consents and
authorizations necessary to execute this Agreement and consummate the
transactions contemplated hereby other than such waivers, consents and/or
authorizations specifically contemplated by the Reorganization Agreement.
The Holders agrees that, on receipt of any notice from ▇▇▇▇▇▇▇ USA of
the occurrence of any event of the kind described in subdivision (h) of this
Section 2.3, the Holders will forthwith discontinue the Holders' disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such Holders' receipt of the copies of the
supplemented or amended Prospectus contemplated by subdivision (h) of this
Section 2.3 and, if so directed by ▇▇▇▇▇▇▇ USA, will deliver to ▇▇▇▇▇▇▇ USA (at
▇▇▇▇▇▇▇ USA's expense) all copies, other than permanent file copies, then in the
Holders' possession of the Prospectus relating to such Registrable Securities
current at the time of receipt of such notice.
2.4 Underwritten Offerings.
99
(a) Incidental Underwritten Offerings. If ▇▇▇▇▇▇▇ USA at any time proposes
to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed
by or through one or more underwriters, ▇▇▇▇▇▇▇ USA will, if requested
by any holder of Registrable Securities as provided in Section 2.2 and
subject to the provisions of Section 2.2(a), use its commercially
reasonable best efforts to arrange for such underwriters to include
all the Registrable Securities to be offered and sold by such holder
among the securities to be distributed by such underwriters.
(b) Holdback Agreements. Subject to such other reasonable requirements as
may be imposed by the underwriter as a condition of inclusion of
holder's Registrable Securities in the registration statement, each
holder agrees by acquisition of Registrable Securities, if so required
by the managing underwriter, not to sell, make any short sale of,
loan, grant any option for the purchase of, effect any public sale or
distribution of or otherwise dispose of, except as part of such
underwritten registration, any equity securities of ▇▇▇▇▇▇▇ USA,
during such reasonable period of time requested by the underwriter;
provided however, such period will not exceed the 150 day period
commencing 30 days prior to the commencement of such underwritten
offering and ending 120 days following the completion of such
underwritten offering.
(c) Participation in Underwritten Offerings. No holder of Registrable
Securities may participate in any underwritten offering under Section
2.2 unless such holder of Registrable Securities (i) agrees to sell
such Person's securities on the basis provided in any underwriting
arrangements approved, subject to the terms and conditions of this
Agreement, approved by ▇▇▇▇▇▇▇ USA and (ii) completes and executes all
questionnaires, indemnities, underwriting agreements and other
documents (other than powers of attorney) required under the terms of
such underwriting arrangements. Notwithstanding the foregoing, no
underwriting agreement (or other agreement in connection with such
offering) will require any holder of Registrable Securities to make
any representations or warranties to or agreements with ▇▇▇▇▇▇▇ USA or
the underwriters other than representations and warranties contained
in a writing furnished by such holder expressly for use in the related
registration statement or representations, warranties or agreements
regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution and any other representation
required by law.
2.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, ▇▇▇▇▇▇▇ USA will give Sellers' Representative and
counsel and accountants for Sellers' Representative, the opportunity to
participate in the preparation of such registration statement, each Prospectus
included therein or filed with the Commission, and each amendment or supplement
thereto, and will give each of them such access to its books and records and
such opportunities to discuss the business of ▇▇▇▇▇▇▇ USA with its officers and
the independent public accountants who have certified its financial statements
as will be necessary, in the reasonable opinion of such holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
2.6 Indemnification.
(a) Indemnification by ▇▇▇▇▇▇▇ USA. In the event of any registration of
any securities of ▇▇▇▇▇▇▇ USA under the Securities Act, ▇▇▇▇▇▇▇ USA
will, and hereby does agree to indemnify and hold harmless the holder
of any Registrable Securities covered by such registration statement,
its directors and officers, each other Person who participates as an
underwriter in the offering or sale of such securities and each other
Person, if any, who controls such holder or any such underwriter
within the meaning of the Securities Act against any losses, claims,
damages or liabilities, joint or several, to which such holder or any
such director or officer or underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings,
whether commenced or threatened) arise out of or are based on any
untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities
were registered under the Securities Act, any
100
preliminary Prospectus, final Prospectus or summary Prospectus
contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and ▇▇▇▇▇▇▇ USA will reimburse such holder and each such
director, officer, underwriter and controlling person for any legal or
any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding, provided that ▇▇▇▇▇▇▇ USA will not be liable in any such
case to the extent that any such loss, claim, damage, liability, (or
action or proceeding) or expense arises out of or is based on an
untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary
Prospectus, final Prospectus, summary Prospectus, amendment or
supplement in reliance on and in conformity with written information
furnished to ▇▇▇▇▇▇▇ USA by such holder or underwriter stating that it
is for use in the preparation such documents and, provided further
that ▇▇▇▇▇▇▇ USA will not be liable to any Person who participates as
an underwriter in the offering or sale of Registrable Securities or to
any other Person, if any, who controls such underwriter within the
meaning of the Securities Act, in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding) or
expense arises out of such Person's failure to send or give a copy of
the final Prospectus, as the same may be then supplemented or amended,
within the time required by the Securities Act to the Person asserting
the existence of an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation
of the sale of Registrable Securities to such Person if such statement
or omission was corrected in such final Prospectus or an amendment or
supplement thereto. Such indemnity will remain in full force and
effect regardless of any investigation made by or on behalf of such
holder or any such director, officer, underwriter or controlling
person and will survive the transfer of such securities by such
holder.
(b) Indemnification by the Holders. ▇▇▇▇▇▇▇ USA may require, as a
condition to including any Registrable Securities in any registration
statement filed pursuant to this Agreement, that ▇▇▇▇▇▇▇ USA will have
received an undertaking satisfactory to it from the prospective seller
of such Registrable Securities, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of
this Section 2.6) ▇▇▇▇▇▇▇ USA, each director of ▇▇▇▇▇▇▇ USA, each
officer of ▇▇▇▇▇▇▇ USA and each other Person, if any, who controls
▇▇▇▇▇▇▇ USA within the meaning of the Securities Act, with respect to
any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary Prospectus, final
Prospectus or summary Prospectus contained therein, or any amendment
or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance on and in conformity
with written information furnished to ▇▇▇▇▇▇▇ USA through an
instrument duly executed by such seller specifically stating that it
is for use in the preparation of such registration statement,
preliminary Prospectus, final Prospectus, summary Prospectus,
amendment or supplement. Any such indemnity will remain in full force
and effect, regardless of any investigation made by or on behalf of
▇▇▇▇▇▇▇ USA or any such director, officer or controlling person and
will survive the transfer of such securities by such seller.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 2.6,
such indemnified party will, if a claim is to be made against an
indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein will not relieve
the indemnifying party of its obligations under the preceding
subdivisions of this Section 2.6, except to the extent that the
indemnifying party is actually prejudiced by such failure to give
notice. In case any such action is brought against an indemnified
party, unless in the opinion of the indemnified party's counsel a
conflict of interest between such indemnified and indemnifying parties
may exist in respect of such claim, the indemnifying party will be
entitled to participate in and to assume the defense, jointly with any
other indemnifying party similarly notified, to the extent that the
indemnifying party may wish, with counsel reasonably satisfactory to
such
101
indemnified party, and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense, the
indemnifying party will not be liable to such indemnified party for
any legal or other expenses subsequently incurred by the latter in
connection with the defense other than reasonable costs of
investigation. No indemnifying party will, without the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement of any such action which does not include as an
unconditional term the giving by the claimant or plaintiff to such
indemnified party of a release from all liability, or a covenant not
to ▇▇▇, in respect to such claim or litigation. No indemnified party
will consent to entry of any judgment or enter into any settlement of
any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
(d) Other Indemnification. Indemnification similar to that specified in
the preceding subdivisions of this Section 2.6 (with appropriate
modifications) will be given by ▇▇▇▇▇▇▇ USA and each seller of
Registrable Securities (but only if and to the extent required
pursuant to the terms of Section 2.6(b)) with respect to any required
registration or other qualification of securities under any Federal or
state law or regulation of any governmental authority, other than the
Securities Act.
(e) Indemnification Payments. The indemnification required by this Section
2.6 will be made by periodic payments of the amount during the course
of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in the preceding
subdivision of this Section 2.6 is unavailable to an indemnified party
in respect of any expense, loss, claim, damage or liability referred
to therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, will contribute to the amount paid or payable by
such indemnified party as a result of such expense, loss, claim,
damage or liability (i) in such proportion as is appropriate to
reflect the relative benefits received by ▇▇▇▇▇▇▇ USA on the one hand
and the holder or underwriter, as the case may be, on the other from
the distribution of the Registrable Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the
relative fault of ▇▇▇▇▇▇▇ USA on the one hand and of the holder or
underwriter, as the case may be, on the other in connection with the
statements or omissions which resulted in such expense, loss, damage
or liability, as well as any other relevant equitable considerations.
The relative benefits received by ▇▇▇▇▇▇▇ USA on the one hand and the
holder or underwriter, as the case may be, on the other in connection
with the distribution of the Registrable Securities will be deemed to
be in the same proportion as the total net proceeds received by
▇▇▇▇▇▇▇ USA from the initial sale of the Registrable Securities by
▇▇▇▇▇▇▇ USA to the purchasers bear to the gain, if any, realized by
all selling holders participating in such offering or the underwriting
discounts and commissions received by the underwriter, as the case may
be. The relative fault of ▇▇▇▇▇▇▇ USA on the one hand and of the
holder or underwriter, as the case may be, on the other will be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission to state a
material fact relates to information supplied by ▇▇▇▇▇▇▇ USA, by the
holder or by the underwriter and the parties' relative intent,
knowledge, access to information supplied by ▇▇▇▇▇▇▇ USA, by the
holder or by the underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission, provided that the foregoing contribution
agreement will not inure to the benefit of any indemnified party if
indemnification would be unavailable to such indemnified party by
reason of the provisions contained in the first sentence of
subdivision (a) of this Section 2.6, and in no event will the
obligation of any indemnifying party to contribute under this
subdivision (f) exceed the amount that such indemnifying party would
have been obligated to pay by way of indemnification if the
indemnification provided for under subdivision (b) of this Section 2.6
had been available under the circumstances.
102
▇▇▇▇▇▇▇ USA and the holders of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this subdivision (f)
were determined by pro rata allocation (even if the holders and any underwriters
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraph will be deemed to include,
subject to the limitations set forth in the preceding sentence and subdivision
(c) of this Section 2.6, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim.
Notwithstanding the provisions of this subdivision (f), no holder of
Registrable Securities or underwriter will be required to contribute any amount
in excess of the amount by which (i) in the case of any such holder, the net
proceeds received by such holder from the sale of Registrable Securities or (ii)
in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
allege untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
3.0 RULE 144.
▇▇▇▇▇▇▇ USA will timely file the reports required to be filed by it
under the Securities Act and the Exchange Act (including but not limited to the
reports under Sections 13 and 15(d) of the Exchange Act referred to in
subparagraph (c) of Rule 144 adopted by the Commission under the Securities Act)
and the rules and regulations adopted by the Commission thereunder (or, if
▇▇▇▇▇▇▇ USA is not required to file such reports, will, on the request of any
holder of Registrable Securities, make publicly available other information) and
will take such further action as any holder of Registrable Securities may
reasonably request, all to the extent reasonably required from time to time to
enable such holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144
under the Securities Act, as such Rule may be amended from time to time, or (b)
any similar rule or regulation hereafter adopted by the Commission. On the
request of any holder of Registrable Securities, ▇▇▇▇▇▇▇ USA will deliver to
such holder a written statement as to whether it has complied with the
requirements of this Section 3.
4.0 AMENDMENTS AND WAIVERS.
This Agreement may be amended and ▇▇▇▇▇▇▇ USA may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if ▇▇▇▇▇▇▇ USA will have obtained the written consent to such
amendment, action or omission to act, of the holder or holders of the sum of 51%
or more of the shares of (i) Registrable Securities issued at such time, plus
(ii) Registrable Securities issuable on exercise or conversion of the Securities
then constituting derivative securities (if such Securities were not fully
exchanged or converted in full as of the date such consent if sought). Each
holder of any Registrable Securities at the time or thereafter outstanding will
be bound by any consent authorized by this Section 5, whether or not such
Registrable Securities will have been marked to indicate such consent.
5.0 NOMINEES FOR BENEFICIAL OWNERS.
In the event that any Registrable Securities are held by a nominee for
the beneficial owner, the beneficial owner may, at its election, be treated as
the holder of such Registrable Securities for purposes of any request or other
action by any holder or holders of Registrable Securities pursuant to this
Agreement or any determination of any number of percentage of shares of
Registrable Securities held by an holder or holders of Registrable Securities
contemplated by this Agreement. If the beneficial owner of any Registrable
Securities so elects, ▇▇▇▇▇▇▇ USA may require assurances reasonably satisfactory
to it of such owner's beneficial ownership of such Registrable Securities.
6.0 NOTICES.
103
Except as otherwise provided in this Agreement, all notices, requests
and other communications to any Person provided for hereunder will be in writing
and will be given to such Person:
(a) in the case of a party hereto other than ▇▇▇▇▇▇▇ USA,
addressed to such party in the manner set forth in the
Reorganization Agreement or at such other address as such
party will have furnished to ▇▇▇▇▇▇▇ USA in writing, or
(b) in the case of any other holder of Registrable Securities, at
the address that such holder will have furnished to ▇▇▇▇▇▇▇
USA in writing, or, until any such other holder so furnishes
to ▇▇▇▇▇▇▇ USA an address, then to and at the address of the
last holder of such Registrable Securities who has furnished
an address to ▇▇▇▇▇▇▇ USA, or
(c) in the case of ▇▇▇▇▇▇▇ USA, at the address set forth on the
signature page hereto, to the attention of its President, or
at such other address, or to the attention of such other
officer, as ▇▇▇▇▇▇▇ USA will have furnished to each holder of
Registrable Securities at the time outstanding.
Each such notice, request or other communication will be effective if given by
mail, four (4) days after such communication is deposited in the United States
mails with first class postage prepaid, addressed as aforesaid, or if given by
any other means (including, without limitation, by fax or air courier), when
delivered at the address specified above, provided that any such notice, request
or communication will not be effective until received.
7.0 ASSIGNMENT.
This Agreement will be binding on and inure to the benefit of and be
enforceable by the parties hereto. In addition, and whether or not any express
assignment will have been made, the provisions of this Agreement which are for
the benefit of the parties hereto other than ▇▇▇▇▇▇▇ USA will also be for the
benefit of and enforceable by any subsequent holder of any Registrable
Securities. Each of the holders of the Registrable Securities agrees, by
accepting any portion of the Registrable Securities after the date of this
Agreement, to the provisions of this Agreement including, without limitation,
appointment of the Sellers' Representative to act on behalf of such holder
pursuant to the terms of this Agreement which such actions will be made in the
good faith discretion of the Sellers' Representative and be binding on all
persons for all purposes.
8.0 DESCRIPTIVE HEADINGS.
The descriptive headings of the several sections and paragraphs of this
Agreement are inserted for reference only and will not limit or otherwise affect
the meaning of this Agreement.
9.0 GOVERNING LAW.
THIS AGREEMENT WILL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND
THE RIGHTS OF THE PARTIES WILL BE GOVERNED BY, THE LAWS OF THE STATE OF NEVADA
WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAWS.
10.0 COUNTERPARTS.
This Agreement may be executed by facsimile and may be signed
simultaneously in any number of counterparts, each of which will be deemed an
original, but all such counterparts will together constitute one and the same
instrument.
11.0 ENTIRE AGREEMENT.
This Agreement embodies the entire agreement and understanding between
▇▇▇▇▇▇▇ USA and each other party hereto relating to the subject matter of this
Agreement and supercedes all prior agreements and understandings relating to
such subject matter.
12.0 SEVERABILITY.
If any provision of this Agreement, or the application of such
provisions to any Person or circumstance, will be held invalid, the remainder of
this Agreement, or the application of such provision to Persons or circumstances
other than those to which it is held invalid, will not be affected thereby.
[SIGNATURE PAGE FOLLOWS]
104
SIGNATURE PAGE FOR RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers duly authorized as of the
date first above written.
▇▇▇▇▇▇▇, INC.
-----------------------------------
By: ______________________
Title: President
Address:
Fax:
Tel.:
----------------------------------- ------------------------------
Name: ______________________________ Name: ________________________
Address: ___________________________ Address: _____________________
-------------------------- --------------------
Tel: __________________________ Tel: ____________________
Fax: __________________________ Fax: ____________________
----------------------------------- ------------------------------
Name: ______________________________ Name: ________________________
Address: ___________________________ Address: _____________________
-------------------------- --------------------
Tel: __________________________ Tel: ____________________
Fax: __________________________ Fax: ____________________
105
----------------------------------- ------------------------------
Name: _____________________________ Name: ________________________
Address: __________________________ Address: _____________________
------------------------- --------------------
Tel: _________________________ Tel: ____________________
Fax: _________________________ Fax: ____________________
106
SCHEDULE I
SCHEDULE OF HOLDERS
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Name Address/Facsimile Number $ Amount of Subscription
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107
EXHIBIT D
SUPPORT AGREEMENT
-----------------
THIS SUPPORT AGREEMENT is entered into as of November ___, 2000, between
▇▇▇▇▇▇▇, Inc., formerly known as Golden Soil, Inc., a Nevada corporation
("▇▇▇▇▇▇▇ USA"), and ▇▇▇▇▇▇▇ Technologies, Inc., a British Columbia corporation
("▇▇▇▇▇▇▇ Canada").
RECITALS
WHEREAS:
A. Pursuant to an Agreement and Plan of Reorganization dated as of
October ___, 2000 (the "Reorganization Agreement"), among ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇
British Columbia, Inc., a wholly owned subsidiary of ▇▇▇▇▇▇▇ USA, and ▇▇▇▇▇▇▇
Canada, the parties agreed that on the closing of the transaction contemplated
under the Reorganization Agreement, ▇▇▇▇▇▇▇ USA and ▇▇▇▇▇▇▇ Canada would execute
and deliver a Support Agreement containing the terms and conditions set forth in
an Exhibit to the Reorganization Agreement together with such other terms and
conditions as may be agreed to by the parties to the Reorganization Agreement
acting reasonably.
B. Pursuant to a reorganization of the capital structure of ▇▇▇▇▇▇▇
Canada (the "Reorganization") contemplated in the Reorganization Agreement,
▇▇▇▇▇▇▇ Canada issued certain exchangeable shares (the "Exchangeable Shares")
having attached thereto certain rights, privileges, restrictions and conditions
(collectively, the "Exchangeable Share Provisions").
C. The parties hereto desire to make appropriate provision and to
establish a procedure whereby ▇▇▇▇▇▇▇ USA will take certain actions and make
certain payments and deliveries necessary to ensure that ▇▇▇▇▇▇▇ Canada will be
able to make certain payments and to deliver or cause to be delivered shares of
▇▇▇▇▇▇▇ USA Common Stock in satisfaction of the obligations of ▇▇▇▇▇▇▇ Canada
under the Exchangeable Share Provisions with respect to the payment and
satisfaction of dividends, Liquidation Amounts, Retraction Prices and Redemption
Prices, all in accordance with the Exchangeable Share Provisions.
NOW, THEREFORE, in consideration of the respective covenants
and agreements provided in this agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
1.0 DEFINITIONS AND INTERPRETATION.
1.1 Defined Terms. Each term denoted herein by initial capital letters
and not otherwise defined herein shall have the meaning attributed thereto in
the rights, privileges, restrictions and conditions (collectively, the
"Exchangeable Share Provisions") attaching to the Exchangeable Shares attached
as Exhibit A to the Reorganization Agreement, unless the context requires
otherwise.
1.2 Interpretation Not Affected by Headings, Etc. The division of this
agreement into articles, sections and paragraphs and the insertion of headings
are for convenience of reference only and shall not affect the construction or
interpretation of this agreement.
1.3 Number, Gender, Etc. Words importing the singular number only
shall include the plural and vice versa. Words importing the use of any gender
shall include all genders.
1.4 Date for Any Action. If any date on which any action is required to
be taken under this agreement is not a Business Day, such action shall be
required to be taken on the next succeeding Business Day.
108
2.0 COVENANTS OF ▇▇▇▇▇▇▇ USA AND ▇▇▇▇▇▇▇ CANADA.
2.1 Covenants of ▇▇▇▇▇▇▇ USA Regarding Exchangeable Shares. So long as any
Exchangeable Shares are outstanding, ▇▇▇▇▇▇▇ USA will:
A: not declare or pay any dividend on ▇▇▇▇▇▇▇ USA Common Stock
unless:
A: ▇▇▇▇▇▇▇ Canada will have sufficient assets, funds and other
property available to enable the due declaration and the due
and punctual payment in accordance with applicable law of an
equivalent dividend on the Exchangeable Shares, and
B: subsection 2.1 (b) shall be complied with in connection with
such dividend;
(b) cause ▇▇▇▇▇▇▇ Canada to declare simultaneously with the
declaration of any dividend on ▇▇▇▇▇▇▇ USA Common Stock an
equivalent dividend on the Exchangeable Shares and, when such
dividend is paid on ▇▇▇▇▇▇▇ USA Common Stock, cause ▇▇▇▇▇▇▇
Canada to pay simultaneously such equivalent dividend on the
Exchangeable Shares, in each case in accordance with the
Exchangeable Share Provisions;
(c) advise ▇▇▇▇▇▇▇ Canada sufficiently in advance of the declaration
by ▇▇▇▇▇▇▇ USA of any dividend on ▇▇▇▇▇▇▇ USA Common Stock and
take all such other actions as are necessary, in cooperation with
▇▇▇▇▇▇▇ Canada, to ensure that the respective declaration date,
record date and payment date for a dividend on the Exchangeable
Shares shall be the same as the record date, declaration date and
payment date for the corresponding dividend on ▇▇▇▇▇▇▇ USA Common
Stock and that such dividend on the Exchangeable Shares will
correspond with any requirement of the principal stock exchange
on which the Exchangeable Shares are listed;
(d) ensure that the record date for any dividend declared on ▇▇▇▇▇▇▇
USA Common Stock is not less than ten Business Days after the
declaration date for such dividend;
(e) take all such actions and do all such things as are necessary or
desirable to enable and permit ▇▇▇▇▇▇▇ Canada, in accordance with
applicable law, to pay and otherwise perform its obligations with
respect to the satisfaction of the Liquidation Amount in respect
of each issued and outstanding Exchangeable Share on the
liquidation, dissolution or winding-up of ▇▇▇▇▇▇▇ Canada or any
other distribution of the assets of ▇▇▇▇▇▇▇ Canada for the
purpose of winding-up its affairs, including without limitation
all such actions and all such things as are necessary or
desirable to enable and permit ▇▇▇▇▇▇▇ Canada to cause to be
delivered shares of ▇▇▇▇▇▇▇ USA Common Stock to the holders of
Exchangeable Shares in accordance with the provisions of Article
5 of the Exchangeable Share Provisions;
(f) take all such actions and do all such things as are necessary or
desirable to enable and permit ▇▇▇▇▇▇▇ Canada, in accordance with
applicable law, to pay and otherwise perform its obligations with
respect to the satisfaction of the Retraction Price and the
Redemption Price, including without limitation all such actions
and all such things as are necessary or desirable to enable and
permit ▇▇▇▇▇▇▇ Canada to cause to be delivered shares of ▇▇▇▇▇▇▇
USA Common Stock to the holders of Exchangeable Shares, on the
retraction or redemption of the Exchangeable Shares in accordance
with the provisions of Article 6 or Article 7 of the Exchangeable
Share Provisions, as the case may be; and
(g) not exercise its vote as a direct or indirect shareholder to
initiate the voluntary liquidation, dissolution or winding-up of
▇▇▇▇▇▇▇ Canada nor take any action or omit to take any action
that is designed to result in the liquidation, dissolution or
winding-up of ▇▇▇▇▇▇▇ Canada.
2.2 Segregation of Funds. ▇▇▇▇▇▇▇ USA will cause ▇▇▇▇▇▇▇ Canada to
deposit a sufficient amount of funds in a separate account and segregate a
sufficient amount of such assets and other property as is necessary to enable
▇▇▇▇▇▇▇ Canada to pay or otherwise satisfy the applicable dividends, Liquidation
Amount, Retraction Price or Redemption Price, in each case for the benefit of
holders from time to time of the Exchangeable Shares, and ▇▇▇▇▇▇▇ Canada will
use such funds, assets and other property so segregated exclusively for the
payment of dividends and the payment or other satisfaction of the Liquidation
Amount, the Retraction Price or the Redemption Price, as applicable, net of any
corresponding withholding tax obligations and for the remittance of such
withholding tax obligations.
109
2.3 Reservation of Shares of ▇▇▇▇▇▇▇ USA Common Stock. ▇▇▇▇▇▇▇ USA
hereby represents, warrants and covenants that it has irrevocably reserved for
issuance and will at all times keep available, free from pre-emptive and other
rights, out of its authorized and unissued capital stock such number of shares
of ▇▇▇▇▇▇▇ USA Common Stock (or other shares or securities into which ▇▇▇▇▇▇▇
USA Common Stock may be reclassified or changed as contemplated by section 2.7
hereof) (i) as is equal to the sum of (A) the number of Exchangeable Shares
issued and outstanding from time to time and (B) the number of Exchangeable
Shares issuable on the exercise of all rights to acquire Exchangeable Shares
outstanding from time to time and (ii) as are now and may hereafter be required
to enable and permit ▇▇▇▇▇▇▇ Canada to meet its obligations hereunder, under the
Voting and Exchange Trust Agreement, under the Exchangeable Share Provisions and
under any other security or commitment pursuant to the Reorganization with
respect to which ▇▇▇▇▇▇▇ USA may now or hereafter be required to issue shares of
▇▇▇▇▇▇▇ USA Common Stock.
2.4 Notification of Certain Events. In order to assist ▇▇▇▇▇▇▇ USA to
comply with its obligations hereunder, ▇▇▇▇▇▇▇ Canada will give ▇▇▇▇▇▇▇ USA
notice of each of the following events at the time set forth below:
(a) immediately, in the event of any determination by the Board of
Directors of ▇▇▇▇▇▇▇ Canada to take any action which would
require a vote of the holders of Exchangeable Shares for
approval;
(b) immediately, on the earlier of (i) receipt by ▇▇▇▇▇▇▇ Canada
of notice of, and (ii) ▇▇▇▇▇▇▇ Canada otherwise becoming aware
of, any threatened or instituted claim, suit, petition or
other proceedings with respect to the involuntary liquidation,
dissolution or winding-up of ▇▇▇▇▇▇▇ Canada or to effect any
other distribution of the assets of ▇▇▇▇▇▇▇ Canada among its
shareholders for the purpose of winding-up its affairs;
(c) immediately, on receipt by ▇▇▇▇▇▇▇ Canada of a Retraction
Request (as defined in the Exchangeable Share Provisions);
(d) at least 130 days prior to any Automatic Redemption Date
determined by the Board of Directors of ▇▇▇▇▇▇▇ Canada in
accordance with clause (b) of the definition of Automatic
Redemption Date in the Exchangeable Share Provisions;
(e) as soon as practicable on the issuance by ▇▇▇▇▇▇▇ Canada of
any Exchangeable Shares or rights to acquire Exchangeable
Shares; and
(f) in the event of any determination by the Board of Directors of
▇▇▇▇▇▇▇ Canada to institute voluntary liquidation, dissolution
or winding-up proceedings with respect to ▇▇▇▇▇▇▇ Canada or to
effect any other distribution of the assets of ▇▇▇▇▇▇▇ Canada
among its shareholders for the purpose of winding-up its
affairs, at least 60 days prior to the proposed effective date
of such liquidation, dissolution, winding-up or other
distribution.
2.5 Delivery of Shares of ▇▇▇▇▇▇▇ USA Common Stock. In furtherance of
its obligations hereunder, on notice of any event which requires ▇▇▇▇▇▇▇ Canada
to cause to be delivered shares of ▇▇▇▇▇▇▇ USA Common Stock to any holder of
Exchangeable Shares, ▇▇▇▇▇▇▇ USA shall forthwith issue and deliver the requisite
shares of ▇▇▇▇▇▇▇ USA Common Stock to or to the order of the former holder of
the surrendered Exchangeable Shares, as ▇▇▇▇▇▇▇ Canada shall direct. All such
shares of ▇▇▇▇▇▇▇ USA Common Stock 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 or interest.
2.6 Equivalence.
(a) ▇▇▇▇▇▇▇ USA will not without the prior approval of the holders
of the Exchangeable Shares:
(i) issue or distribute shares of ▇▇▇▇▇▇▇ USA Common Stock
(or securities exchangeable for
or convertible into or carrying rights to acquire
shares of ▇▇▇▇▇▇▇ USA Common Stock) to the holders of
all or substantially all of the then outstanding
shares of ▇▇▇▇▇▇▇ USA Common Stock by way of stock
dividend or other distribution; or
(ii) issue or distribute rights, options or warrants to
the holders of all or substantially all of the then
outstanding shares of ▇▇▇▇▇▇▇ USA Common Stock
entitling them to subscribe for or to purchase shares
of ▇▇▇▇▇▇▇ USA Common Stock (or securities
exchangeable for or convertible into or carrying
rights to acquire shares of ▇▇▇▇▇▇▇ USA Common
Stock); or
110
(iii) issue or distribute to the holders of all or
substantially all of the then outstanding shares of
▇▇▇▇▇▇▇ USA Common Stock (A) shares or securities of
▇▇▇▇▇▇▇ USA of any class other than ▇▇▇▇▇▇▇ USA
Common Stock (other than shares convertible into or
exchangeable for or carrying rights to acquire shares
of ▇▇▇▇▇▇▇ USA Common Stock), (B) rights, options or
warrants other than those referred to in subsection
2.6 (a) (ii) above, (C) evidences of indebtedness of
▇▇▇▇▇▇▇ USA or (D) assets of ▇▇▇▇▇▇▇ USA;
unless, one or both of ▇▇▇▇▇▇▇ USA and ▇▇▇▇▇▇▇ Canada is
permitted under applicable law to issue or distribute the
economic equivalent on a per share basis of such rights,
options, warrants, securities, shares, evidences of
indebtedness or other assets to the holders of the
Exchangeable Shares, and one or both of ▇▇▇▇▇▇▇ USA and
▇▇▇▇▇▇▇ Canada shall issue or distribute the economic
equivalent on a per share basis of such rights, options,
warrants, securities, shares, evidences of indebtedness or
other assets simultaneously to the holders of the Exchangeable
Shares.
(b) ▇▇▇▇▇▇▇ USA will not without the prior approval of the holders
of the Exchangeable Shares:
(i) subdivide, redivide or change the then outstanding
shares of ▇▇▇▇▇▇▇ USA Common
Stock into a greater number of shares of ▇▇▇▇▇▇▇ USA
Common Stock; or
(ii) reduce, combine or consolidate or change the then
outstanding shares of ▇▇▇▇▇▇▇ USA Common Stock into
a lesser number of shares of ▇▇▇▇▇▇▇ USA Common
Stock; or
(iii) reclassify or otherwise change the shares of ▇▇▇▇▇▇▇
USA Common Stock or effect an amalgamation, merger,
reorganization or other transaction involving or
affecting the shares of ▇▇▇▇▇▇▇ USA Common Stock;
unless, ▇▇▇▇▇▇▇ Canada is permitted under applicable law to
simultaneously make the same or an economically equivalent
change to, or in the rights of the holders of, the
Exchangeable Shares, and the same or an economically
equivalent change is simultaneously made to, or in the rights
of the holders of, the Exchangeable Shares.
(c) ▇▇▇▇▇▇▇ USA will ensure that the record date for any event
referred to in section 2.6 (a) or 2.6 (b) above, or (if no
record date is applicable for such event) the effective date
for any such event, is not less than 10 Business Days after
the date on which such event is declared or announced by
▇▇▇▇▇▇▇ USA (with simultaneous notice thereof to be given by
▇▇▇▇▇▇▇ USA to ▇▇▇▇▇▇▇ Canada).
2.7 Tender Offers, Etc. In the event that a tender offer, share
exchange offer, issuer bid, take-over bid or similar transaction with respect to
▇▇▇▇▇▇▇ USA Common Stock (an "Offer") is proposed by ▇▇▇▇▇▇▇ USA or is proposed
to ▇▇▇▇▇▇▇ USA or its shareholders and is recommended by the Board of Directors
of ▇▇▇▇▇▇▇ USA, or is otherwise effected or to be effected with the consent or
approval of the Board of Directors of ▇▇▇▇▇▇▇ USA, ▇▇▇▇▇▇▇ USA shall, in good
faith, take all such actions and do all such things as are necessary or
desirable to enable and permit holders of Exchangeable Shares to participate in
such Offer to the same extent and on an equivalent basis as the holders of
shares of ▇▇▇▇▇▇▇ USA Common Stock, without discrimination, including, without
limiting the generality of the foregoing, ▇▇▇▇▇▇▇ USA will use its good faith
efforts expeditiously to (and shall, in the case of a transaction proposed by
▇▇▇▇▇▇▇ USA or where ▇▇▇▇▇▇▇ USA is a participant in the negotiation thereof)
ensure that holders of Exchangeable Shares may participate in all such Offers
without being required to retract Exchangeable Shares as against ▇▇▇▇▇▇▇ Canada
(or, if so required, to ensure that any such retraction shall be effective only
on, and shall be conditional on, the closing of the Offer and only to the extent
necessary to tender or deposit to the Offer).
2.8 Ownership of Outstanding Shares. Without the prior approval of
▇▇▇▇▇▇▇ Canada and the prior approval of the holders of the Exchangeable Shares
given in accordance with Section 10.2 of the Exchangeable Share Provisions,
▇▇▇▇▇▇▇ USA covenants and agrees in favor of ▇▇▇▇▇▇▇ Canada that, as long as any
outstanding Exchangeable Shares are owned by any person or entity other than
▇▇▇▇▇▇▇ USA or any of its Subsidiaries, ▇▇▇▇▇▇▇ USA will be and remain the
direct or indirect beneficial owner of all issued and outstanding common shares
of ▇▇▇▇▇▇▇ Canada. Notwithstanding the foregoing, this Section 2.8 shall not
require ▇▇▇▇▇▇▇ USA to own the common shares of ▇▇▇▇▇▇▇ Canada longer than that
date which is three years following the date hereof.
2.9 ▇▇▇▇▇▇▇ USA Not to Vote Exchangeable Shares. ▇▇▇▇▇▇▇ USA covenants
and agrees that it will appoint and cause to be appointed proxy holders with
respect to all Exchangeable Shares held by ▇▇▇▇▇▇▇ USA and its Subsidiaries for
the sole purpose of attending each meeting of holders of Exchangeable Shares in
order to be counted as part of the quorum for each such meeting. ▇▇▇▇▇▇▇ USA
further covenants and agrees that it will not, and
111
will cause its Subsidiaries not to, exercise any voting rights which may be
exercisable by holders of Exchangeable Shares from time to time pursuant to the
Exchangeable Share Provisions or pursuant to the provisions of the Act with
respect to any Exchangeable Shares held by it or by its Subsidiaries in respect
of any matter considered at any meeting of holders of Exchangeable Shares.
2.10 Rule 10b-18 Purchases. For certainty, nothing contained in this
agreement, including without limitation the obligation of ▇▇▇▇▇▇▇ USA contained
in section 2.7 of this agreement, will limit the ability of ▇▇▇▇▇▇▇ USA or
▇▇▇▇▇▇▇ Canada to make a "Rule 10b-18 Purchase" of ▇▇▇▇▇▇▇ USA Common Stock
pursuant to Rule 10b- 18 of the United States Securities and Exchange Act of
1934, as amended.
2.11 Due Performance. On and after the Effective Date, ▇▇▇▇▇▇▇ USA
shall duly and timely perform all of its obligations provided for in connection
with the Reorganization Agreement and the Articles of Incorporation of ▇▇▇▇▇▇▇
Canada, including any obligations that may arise on the exercise of ▇▇▇▇▇▇▇
USA's rights under the Exchangeable Share Provisions.
3.0 GENERAL.
3.1 Term. This agreement shall come into force and be effective as of
the date hereof and shall terminate and be of no further force and effect at
such time as no Exchangeable Shares (or securities or rights convertible into or
exchangeable for or carrying rights to acquire Exchangeable Shares) are held by
any party other than ▇▇▇▇▇▇▇ USA and any of its Subsidiaries.
3.2 Changes in Capital of ▇▇▇▇▇▇▇ USA and ▇▇▇▇▇▇▇ Canada.
Notwithstanding the provisions of section 3.4 hereof, at all times after the
occurrence of any event effected pursuant to section 2.6 or 2.7 hereof, as a
result of which either ▇▇▇▇▇▇▇ USA Common Stock or the Exchangeable Shares or
both are in any way changed, this agreement shall forthwith be amended and
modified as necessary in order that it shall apply with full force and effect,
mutatis mutandis, to all new securities into which ▇▇▇▇▇▇▇ USA Common Stock or
the Exchangeable Shares or both are so changed, and the parties hereto shall as
soon as possible execute and deliver an agreement in writing giving effect to
and evidencing such necessary amendments and modifications.
3.3 Severability. If any provision of this agreement is held to be
invalid, illegal or unenforceable, the validity, legality or enforceability of
the remainder of this agreement shall not in any way be affected or impaired
thereby and this agreement shall be carried out as nearly as possible in
accordance with its original terms and conditions.
3.4 Amendments, Modifications, Etc. This agreement may not be amended,
modified or waived except by an agreement in writing executed by ▇▇▇▇▇▇▇ Canada
and ▇▇▇▇▇▇▇ USA and approved by the holders of the Exchangeable Shares in
accordance with Section 10.2 of the Exchangeable Share Provisions.
3.5 Ministerial Amendments. Notwithstanding the provisions of section
3.4, the parties to this agreement may in writing, at any time and from time to
time, without the approval of the holders of the Exchangeable Shares, amend or
modify this agreement for the purposes of:
(a) adding to the covenants of either or both parties for the
protection of the holders of the Exchangeable Shares;
(b) making such amendments or modifications not inconsistent with
this agreement as may be necessary or desirable with respect
to matters or questions which, in the opinion of the board of
directors of each of ▇▇▇▇▇▇▇ Canada and ▇▇▇▇▇▇▇ USA, it may be
expedient to make, provided that each such board of directors
shall be of the opinion that such amendments or modifications
will not be prejudicial to the interests of the holders of the
Exchangeable Shares; or
(c) making such changes or corrections which, on the advice of
counsel to ▇▇▇▇▇▇▇ Canada and ▇▇▇▇▇▇▇ USA, are required for
the purpose of curing or correcting any ambiguity or defect or
inconsistent provision or clerical omission or mistake or
manifest error; provided that the boards of
112
directors of each of ▇▇▇▇▇▇▇ Canada and ▇▇▇▇▇▇▇ USA shall be
of the opinion that such changes or corrections will not be
prejudicial to the interests of the holders of the
Exchangeable Shares.
3.6 Meeting to Consider Amendments. ▇▇▇▇▇▇▇ Canada, at the request of
▇▇▇▇▇▇▇ USA, shall call a meeting or meetings of the holders of the Exchangeable
Shares for the purpose of considering any proposed amendment or modification
requiring approval of such shareholders. Any such meeting or meetings shall be
called and held in accordance with the by-laws of ▇▇▇▇▇▇▇ Canada, the
Exchangeable Share Provisions and all Applicable Laws.
3.7 Amendments Only in Writing. No amendment to or modification or
waiver of any of the provisions of this agreement otherwise permitted hereunder
shall be effective unless made in writing and signed by both of the parties
hereto.
3.8 Inurement This agreement shall be binding on and inure to the
benefit of the parties hereto and the holders, from time to time, of
Exchangeable Shares and each of their respective heirs, successors and assigns.
3.9 Notices to Parties. All notices and other communications between
the parties shall be in writing and shall be deemed to have been given if
delivered personally or by confirmed telecopy to the parties at the following
addresses (or at such other address for either such party as shall be specified
in like notice):
(a) if to ▇▇▇▇▇▇▇ USA, to:
Venture Law Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇, ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to ▇▇▇▇▇▇▇, to:
▇▇▇▇▇▇▇ Technologies Inc.
#37, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and copies to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Company
Barristers & Solicitors
▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
Nexus Venture Capital Lawyers
▇▇▇▇ - ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
113
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, P.L.L.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any notice or other communication given personally shall be
deemed to have been given and received on delivery thereof and if given by
telecopy shall be deemed to have been given and received on the date of
confirmed receipt thereof, unless such day is not a Business Day, in which case
it shall be deemed to have been given and received on the immediately following
Business Day.
3.10 Counterparts. This agreement may be executed in counterparts, each
of which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
3.11 Jurisdiction. This agreement shall be construed and enforced in
accordance with the laws of the Province of British Columbia and the federal
laws of Canada applicable therein.
3.12 Attornment. ▇▇▇▇▇▇▇ USA agrees that any action or proceeding
arising out of or relating to this agreement may be instituted in the courts of
the Province of British Columbia, waives any objection which it may have now or
hereafter to the venue of any such action or proceeding, irrevocably submits to
the jurisdiction of such courts in any such action or proceeding, agrees to be
bound by any judgment of such courts and not to seek, and hereby waives, any
review of the merits of any such judgment by the courts of any other
jurisdiction and hereby appoints ▇▇▇▇▇▇▇ Canada at its registered office in the
Province of British Columbia as ▇▇▇▇▇▇▇ USA's attorney for service of process.
IN WITNESS WHEREOF, ▇▇▇▇▇▇▇ USA and ▇▇▇▇▇▇▇ Canada have caused
this agreement to be signed by their respective officers thereunder duly
authorized, all as of the date first written above.
▇▇▇▇▇▇▇ TECHNOLOGIES INC. ▇▇▇▇▇▇▇ USA, INC.
By:_____________________________ By:___________________________
Name: ▇▇▇▇ ▇▇▇ Name: Xenios Xenopoulous
Title: Chief Executive Officer and Title: President
114
EXHIBIT E
VOTING AND EXCHANGE TRUST AGREEMENT
THIS VOTING AND EXCHANGE TRUST AGREEMENT is entered into as of November
____ , 2000, by and between ▇▇▇▇▇▇▇ USA, Inc., a Nevada corporation ("▇▇▇▇▇▇▇
USA"), ▇▇▇▇▇▇▇ Technologies Inc., a British Columbia corporation ("▇▇▇▇▇▇▇
Canada"), and Interwest Transfer Company, Inc., a U.S. trust company
("Trustee").
WHEREAS:
A. Pursuant to an Agreement and Plan of Reorganization dated as of
October ___, 2000 (the "Reorganization Agreement"), among ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇
British Columbia, Inc., a wholly owned subsidiary of ▇▇▇▇▇▇▇ USA, and ▇▇▇▇▇▇▇
Canada, the parties agreed that on the closing of the transaction contemplated
under the Reorganization Agreement, ▇▇▇▇▇▇▇ USA and ▇▇▇▇▇▇▇ Canada would execute
and deliver a Voting and Exchange Trust Agreement containing the terms and
conditions set forth in an Exhibit to the Reorganization Agreement together with
such other terms and conditions as may be agreed to by the parties to the
Reorganization Agreement acting reasonably.
B. Pursuant to a reorganization of the capital structure of ▇▇▇▇▇▇▇
Canada (the "Reorganization") contemplated in the Reorganization Agreement,
▇▇▇▇▇▇▇ Canada issued certain exchangeable shares (the "Exchangeable Shares")
having attached thereto certain rights, privileges, restrictions and conditions
(collectively, the "Exchangeable Share Provisions").
▇. ▇▇▇▇▇▇▇ USA is to provide voting rights in ▇▇▇▇▇▇▇ USA to each
holder (other than ▇▇▇▇▇▇▇ USA and its Subsidiaries) from time to time of
Exchangeable Shares, such voting rights per Exchangeable Share to be equivalent
to the voting rights per share of ▇▇▇▇▇▇▇ USA Common Stock.
▇. ▇▇▇▇▇▇▇ USA is to grant to and in favor of the holders (other than
▇▇▇▇▇▇▇ USA and its Subsidiaries) from time to time of Exchangeable Shares the
right, in the circumstances set forth herein, to require ▇▇▇▇▇▇▇ USA to purchase
from each such holder all or any part of the Exchangeable Shares held by the
holder.
E. The parties desire to make appropriate provision and to establish a
procedure whereby voting rights in ▇▇▇▇▇▇▇ USA will be exercisable by holders
(other than ▇▇▇▇▇▇▇ USA and its Subsidiaries) from time to time of Exchangeable
Shares by and through the Trustee, which will hold legal title to one share of
▇▇▇▇▇▇▇ USA Special Voting Stock (the "▇▇▇▇▇▇▇ USA Special Voting Stock") to
which voting rights attach for the benefit of such holders and whereby the
rights to require ▇▇▇▇▇▇▇ USA to purchase Exchangeable Shares from the holders
thereof (other than ▇▇▇▇▇▇▇ USA and its Subsidiaries) will be exercisable by
such holders from time to time of Exchangeable Shares by and through the
Trustee, which will hold legal title to such rights for the benefit of such
holders.
F. These recitals and any statements of fact in this agreement
are made by ▇▇▇▇▇▇▇ USA and ▇▇▇▇▇▇▇ Canada and not by the Trustee.
NOW THEREFORE, in consideration of the respective covenants
and agreements provided in this agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
1.0 DEFINITIONS AND INTERPRETATION.
1.1 Defined Terms. Each term denoted herein by initial capital letters
and not otherwise defined herein will have the meaning attributed thereto in the
rights, privileges, restrictions and conditions (collectively, the "Exchangeable
Share Provisions") attaching to the Exchangeable Shares attached as Exhibit A to
the Merger Agreement. In addition, the following terms will have the following
meanings:
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"Aggregate Equivalent Vote Amount" means, with respect to any matter,
proposition or question on which holders of ▇▇▇▇▇▇▇ USA Common Stock are
entitled to vote, consent or otherwise act, the product of (i) the number of
shares of Exchangeable Shares issued and outstanding and held by Holders
multiplied by (ii) the Equivalent Vote Amount.
"Automatic Exchange Rights" means the benefit of the obligation of
▇▇▇▇▇▇▇ USA to effect the automatic exchange of shares of ▇▇▇▇▇▇▇ USA Common
Stock for Exchangeable Shares pursuant to Section 5.12 hereof.
"Board of Directors" means the Board of Directors of ▇▇▇▇▇▇▇ Canada.
"Business Day" has the meaning provided in the Exchangeable Share
Provisions.
"▇▇▇▇▇▇▇ USA Common Stock" has the meaning provided in the Exchangeable
Share Provisions.
"▇▇▇▇▇▇▇ USA Consent" has the meaning provided in Section 4.2 hereof.
"▇▇▇▇▇▇▇ USA Meeting" has the meaning provided in Section 4.2 hereof.
"▇▇▇▇▇▇▇ USA Special Voting Stock" has the meaning provided in the
recitals hereto.
"▇▇▇▇▇▇▇ USA Successor" has the meaning provided in subsection 11. 1
(a) hereof.
"Equivalent Vote Amount" means, with respect any matter, proposition or
question on which holders of ▇▇▇▇▇▇▇ USA Common Stock are entitled to vote,
consent or otherwise act, the number of votes to which a holder of one share of
▇▇▇▇▇▇▇ USA Common Stock is entitled with respect to such matter, proposition or
question.
"Exchange Put Right" has the meaning provided in the Exchangeable Share
Provisions.
"Exchange Right" has the meaning provided in Article 5 hereof.
"Exchangeable Share Consideration" has the meaning provided in the
Exchangeable Share Provisions.
"Exchangeable Share Price" has the meaning provided in the Exchangeable
Share Provisions.
"Exchangeable Share Provisions" has the meaning provided in the
recitals hereto.
"Exchangeable Shares" has the meaning provided in the recitals hereto.
"Holder Votes" has the meaning provided in Section 4.2 hereof.
"Holders" means the registered holders from time to time of
Exchangeable Shares, other than ▇▇▇▇▇▇▇ USA and its Subsidiaries.
"Insolvency Event" means the institution by ▇▇▇▇▇▇▇ Canada of any
proceeding to be adjudicated a bankrupt or insolvent or to be dissolved or
wound-up, or the consent of ▇▇▇▇▇▇▇ Canada to the institution of bankruptcy,
insolvency, dissolution or winding-up proceedings against it, or the filing of a
petition, answer or consent seeking dissolution or winding-up under any
bankruptcy, insolvency or analogous laws, including without limitation the
Companies Creditors Arrangement Act (Canada) and the Bankruptcy and Insolvency
Act (Canada), and the failure by ▇▇▇▇▇▇▇ Canada to contest in good faith any
such proceedings commenced in respect of ▇▇▇▇▇▇▇ Canada within 15 days of
becoming aware thereof, or the consent by ▇▇▇▇▇▇▇ Canada to the filing of any
such petition or to the appointment of a receiver, or the making by ▇▇▇▇▇▇▇
Canada of a general assignment for the benefit of creditors, or the admission in
writing by ▇▇▇▇▇▇▇ Canada of its inability to pay its debts generally as they
become
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due, or ▇▇▇▇▇▇▇ Canada's not being permitted, pursuant to liquidity or solvency
requirements of applicable law, to redeem any Retracted Shares pursuant to
Section 6.6 of the Exchangeable Share Provisions.
"Liquidation Call Right" has the meaning provided in the Exchangeable
Share Provisions.
"Liquidation Event" has the meaning provided in subsection 5.12(b)
hereof.
"Liquidation Event Effective Time" has the meaning provided in
subsection 5.12(c) hereof.
"List" has the meaning provided in Section 4.6 hereof.
"Officer's Certificate" means, with respect to ▇▇▇▇▇▇▇ USA or ▇▇▇▇▇▇▇
Canada, as the case may be, a certificate signed by any one of the Chairman of
the Board, the Vice-Chairman of the Board (if there be one), the President or
any Vice-President of ▇▇▇▇▇▇▇ USA or ▇▇▇▇▇▇▇ Canada, as the case may be.
"Person" includes an individual, body corporate, partnership, company,
unincorporated syndicate or organization, trust, trustee, executor,
administrator and other legal representative.
"Redemption Call Right" has the meaning provided in the Exchangeable
Share Provisions.
"Reorganization" has the meaning provided in the recitals hereto.
"Retracted Shares" has the meaning provided in Section 5.7 hereof.
"Retraction Call Right" has the meaning provided in the Exchangeable
Share Provisions.
"Subsidiary" has the meaning provided in the Exchangeable Share
Provisions.
"Support Agreement" means that certain support agreement made as of
even date hereof by and between ▇▇▇▇▇▇▇ USA and ▇▇▇▇▇▇▇ Canada.
"Trust" means the trust created by this agreement.
"Trust Estate" means the Voting Share, any other securities, the
Exchange Put Right, the Exchange Right, the Automatic Exchange Rights and any
money or other property which may be held by the Trustee from time to time
pursuant to this agreement.
"Trustee" means Interwest Transfer Company, Inc. and, subject to the
provisions of Article 10 hereof, includes any successor trustee or permitted
assigns.
"Voting Rights" means the voting rights attached to the Voting Share.
"Voting Share" means the one share of ▇▇▇▇▇▇▇ USA Special Voting Stock,
U.S. $0.01 par value, issued by ▇▇▇▇▇▇▇ USA to and deposited with the Trustee,
which entitles the holder of record to a number of votes at meetings of holders
of ▇▇▇▇▇▇▇ USA Common Stock equal to the Aggregate Equivalent Vote Amount.
1.2 Interpretation Not Affected by Headings, Etc. The division of this
agreement into articles, sections and paragraphs and the insertion of headings
are for convenience of reference only and will not affect the construction or
interpretation of this agreement.
1.3 Number, Gender, Etc. Words importing the singular number only
will include the plural and vice versa. Words importing the use of any gender
will include all genders.
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1.4 Date for Any Action. If any date on which any action is required to
be taken under this agreement is not a Business Day, such action will be
required to be taken on the next succeeding Business Day.
1.5 Payments. All payments to be made hereunder will be made without
interest and less any tax required by Canadian law to be deducted or withheld.
2.0 PURPOSE OF AGREEMENT.
The purpose of this agreement is to create the Trust for the benefit of
the Holders, as herein provided. The Trustee will hold the Voting Share in order
to enable the Trustee to exercise the Voting Rights and will hold the Exchange
Put Right, the Exchange Right and the Automatic Exchange Rights in order to
enable the Trustee to exercise such rights, in each case as trustee for and on
behalf of the Holders as provided in this agreement.
3.0 VOTING SHARE.
3.1 Issuance and Ownership of the Voting Share. ▇▇▇▇▇▇▇ USA hereby
issues to and deposits with the Trustee the Voting Share to be hereafter held of
record by the Trustee as trustee for and on behalf of, and for the use and
benefit of, the Holders and in accordance with the provisions of this agreement.
▇▇▇▇▇▇▇ USA hereby acknowledges receipt from the Trustee as trustee for and on
behalf of the Holders of good and valuable consideration (and the adequacy
thereof) for the issuance of the Voting Share by ▇▇▇▇▇▇▇ USA to the Trustee.
During the term of the Trust and subject to the terms and conditions of this
agreement, the Trustee will possess and be vested with full legal ownership of
the Voting Share and will be entitled to exercise all of the rights and powers
of an owner with respect to the Voting Share, provided that the Trustee will:
(a) hold the Voting Share and the legal title thereto as trustee
solely for the use and benefit of the Holders in accordance
with the provisions of this agreement; and
(b) except as specifically authorized by this agreement, have no
power or authority to sell, transfer, vote or otherwise deal
in or with the Voting Share, and the Voting Share will not be
used or disposed of by the Trustee for any purpose other than
the purposes for which this Trust is created pursuant to this
agreement.
3.2 Legended Share Certificates. ▇▇▇▇▇▇▇ Canada will cause each
certificate representing Exchangeable Shares to bear an appropriate legend
notifying the Holders of their right to instruct the Trustee with respect to the
exercise of the Voting Rights with respect to the Exchangeable Shares held by a
Holder.
3.3 Safe Keeping of Certificate. The certificate representing the
Voting Share will at all times be held in safe keeping by the Trustee or its
agent.
4.0 EXERCISE OF VOTING RIGHTS.
4.1 Voting Rights. The Trustee, as the holder of record of the Voting
Share, will be entitled to all of the Voting Rights, including the right to
consent to or to vote in person or by proxy the Voting Share, on any matter,
question or proposition whatsoever that may properly come before the
stockholders of ▇▇▇▇▇▇▇ USA at a Merilus USA Meeting or in connection with a
Merilus USA Consent (in each case, as hereinafter defined). The Voting Rights
will be and remain vested in and exercised by the Trustee. Subject to Section
7.15 hereof, the Trustee will exercise the Voting Rights only on the basis of
instructions received pursuant to this Article 4 from Holders entitled to
instruct the Trustee as to the voting thereof at the time at which a Merilus USA
Consent is sought or a Merilus USA Meeting is held. To the extent that no
instructions are received from a Holder with respect to the Voting Rights to
which such Holder is entitled, the Trustee will not exercise or permit the
exercise of such Holder's Voting Rights.
4.2 Number of Votes. With respect to all meetings of stockholders of
Merilus USA at which holders of shares of Merilus USA Common Stock are entitled
to vote (a "Merilus USA Meeting") and with respect to all written consents
sought by Merilus USA from its stockholders including the holders of shares of
Merilus USA
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Common Stock (a "Merilus USA Consent"), each Holder will be entitled to instruct
the Trustee to cast and exercise, in the manner instructed, a number of votes
equal to the Equivalent Vote Amount for each Exchangeable Share owned of record
by such Holder on the record date established by Merilus USA or by applicable
law for such Merilus USA Meeting or Merilus USA Consent, as the case may be,
(the "Holder Votes") in respect of each matter, question or proposition to be
voted on at such Merilus USA Meeting or to be consented to in connection with
such Merilus USA Consent.
4.3 Mailings to Shareholders. With respect to each Merilus USA Meeting
and Merilus USA Consent, the Trustee will mail or cause to be mailed (or
otherwise communicate in the same manner as Merilus USA utilizes in
communications to holders of Merilus USA Common Stock, subject to the Trustee's
ability to provide this method of communication and on being advised in writing
of such method) to each of the Holders named in the List on the same day as the
initial mailing or notice (or other communication) with respect thereto is given
by Merilus USA to its stockholders:
(a) a copy of such notice, together with any proxy or information
statement and related materials to be provided to stockholders of
Merilus USA;
(b) a statement that such Holder is entitled to instruct the Trustee
as to the exercise of the Holder Votes with respect to such
Merilus USA Meeting or Merilus USA Consent, as the case may be,
or, pursuant to Section 4.7 hereof, to attend such Merilus USA
Meeting and to exercise personally the Holder Votes thereat;
(c) a statement as to the manner in which such instructions may be
given to the Trustee, including an express indication that
instructions may be given to the Trustee to give:
(i) a proxy to such Holder or such Holder's designee to exercise
personally the Holder Votes; or
(ii) a proxy to a designated agent or other representative of the
management of Merilus USA to exercise such Holder Votes;
(d) a statement that if no such instructions are received from the
Holder, the Holder Votes to which such Holder is entitled will
not be exercised;
(e) a form of direction whereby the Holder may so direct and instruct
the Trustee as contemplated herein; and
(f) a statement of:
(i) the time and date by which such instructions must be
received by the Trustee in order to be binding on it,
which in the case of a Merilus USA Meeting will not
be earlier than the close of business on the Business
Day prior to such meeting, and
(ii) the method for revoking or amending such instructions.
The materials referred to above are to be provided by Merilus
USA to the Trustee, but will be subject to review and comment by the Trustee.
For the purpose of determining Holder Votes to which a Holder
is entitled in respect of any such Merilus USA Meeting or Merilus USA Consent,
the number of Exchangeable Shares owned of record by the Holder will be
determined at the close of business on the record date established by Merilus
USA or by applicable law for purposes of determining stockholders entitled to
vote at such Merilus USA Meeting or to give written consent in connection with
such Merilus USA Consent. Merilus USA will notify the Trustee in writing of any
decision of the board of directors of Merilus USA with respect to the calling of
any such Merilus USA Meeting or the seeking of any such Merilus USA Consent and
will provide all necessary information and materials to the Trustee in each case
promptly and in any event in sufficient time to enable the Trustee to perform
its obligations contemplated by this Section 4.3.
4.4 Copies of Stockholder Information. Merilus USA will
deliver to the Trustee copies of all proxy materials, (including notices of
Merilus USA Meetings, but excluding proxies to vote shares of Merilus USA Common
Stock), information statements, reports (including without limitation all
interim and annual financial statements) and other written communications that
are to be distributed from time to time to holders of Merilus USA
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Common Stock in sufficient quantities and in sufficient time so as to enable the
Trustee to send those materials to each Holder at the same time as such
materials are first sent to holders of Merilus USA Common Stock. The Trustee
will mail or otherwise send to each Holder, at the expense of Merilus USA,
copies of all such materials (and all materials specifically directed to the
Holders or to the Trustee for the benefit of the Holders by Merilus USA)
received by the Trustee from Merilus USA at the same time as such materials are
first sent to holders of Merilus USA Common Stock. The Trustee will make copies
of all such materials available for inspection by any Holder at the Trustee's
principal transfer office in the cities of Calgary and Toronto.
4.5 Other Materials. Immediately after receipt by Merilus USA or any
stockholder of Merilus USA of any material sent or given generally to the
holders of Merilus USA Common Stock by or on behalf of a third party, including
without limitation dissident proxy and information circulars (and related
information and material) and tender and exchange offer circulars (and related
information and material), Merilus USA will use its reasonable best efforts to
obtain and deliver to the Trustee copies thereof in sufficient quantities so as
to enable the Trustee to forward such material (unless the same has been
provided directly to Holders by such third party) to each Holder as soon as
possible thereafter. As soon as practicable after receipt thereof, the Trustee
will mail or otherwise send to each Holder, at the expense of Merilus USA,
copies of all such materials received by the Trustee from Merilus USA. The
Trustee will also make copies of all such materials available for inspection by
any Holder at the Trustee's principal transfer office in the cities of Calgary
and Toronto.
4.6 List of Persons Entitled to Vote. Merilus Canada will, (i) prior to
each annual, general or special Merilus USA Meeting or the seeking of any
Merilus USA Consent and (ii) forthwith on each request made at any time by the
Trustee in writing, prepare or cause to be prepared a list (a "List") of the
names and addresses of the Holders arranged in alphabetical order and showing
the number of Exchangeable Shares held of record by each such Holder, in each
case at the close of business on the date specified by the Trustee in such
request or, in the case of a List prepared in connection with a Merilus USA
Meeting or a Merilus USA Consent, at the close of business on the record date
established by Merilus USA or pursuant to applicable law for determining the
holders of Merilus USA Common Stock entitled to receive notice of and/or to vote
at such Merilus USA Meeting or to give consent in connection with such Merilus
USA Consent. Each such List will be delivered to the Trustee promptly after
receipt by Merilus Canada of such request or the record date for such meeting or
seeking of consent, as the case may be, and in any event within sufficient time
as to enable the Trustee to perform its obligations under this agreement.
Merilus USA agrees to give Merilus Canada written notice (with a copy to the
Trustee) of the calling of any Merilus USA Meeting or the seeking of any Merilus
USA Consent, together with the record dates therefor, sufficiently prior to the
date of the calling of such meeting or seeking of such consent so as to enable
Merilus Canada to perform its obligations under this Section 4.6.
4.7 Entitlement to Direct Votes. Any Holder named in a List prepared in
connection with any Merilus USA Meeting or any Merilus USA Consent will be
entitled (i) to instruct the Trustee in the manner described in Section 4.3
hereof with respect to the exercise of the Holder Votes to which such Holder is
entitled or (ii) to attend such meeting and personally to exercise thereat (or
to exercise with respect to any written consent), as the proxy of the Trustee,
the Holder Votes to which such Holder is entitled.
4.8 Voting by Trustee, and Attendance of Trustee Representative, at
Meeting.
(a) In connection with each Merilus USA Meeting and Merilus USA
Consent, the Trustee will exercise, either in person or by
proxy, in accordance with the instructions received from a
Holder pursuant to Section 4.3 hereof, the Holder Votes as to
which such Holder is entitled to direct the vote (or any
lesser number thereof as may be set forth in the
instructions); provided, however, that such written
instructions are received by the Trustee from the Holder prior
to the time and date fixed by it for receipt of such
instructions in the notice given by the Trustee to the Holder
pursuant to Section 4.3 hereof.
(b) The Trustee will cause such representatives as are empowered
by it to sign and deliver, on behalf of the Trustee, proxies
for Voting Rights to attend each Merilus USA Meeting. On
submission by a Holder (or its designee) of identification
satisfactory to the Trustee's representatives, and at the
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Holder's request, such representatives will sign and deliver
to such Holder (or its designee) a proxy to exercise
personally the Holder Votes as to which such Holder is
otherwise entitled hereunder to direct the vote, if such
Holder either:
(i) has not previously given the Trustee instructions pursuant
to Section 4.3 hereof in respect of such meeting, or
(ii) submits to the Trustee's representatives written revocation
of any such previous instructions.
At such meeting, the Holder exercising such Holder Votes will
have the same rights as the Trustee to speak at the meeting in respect of any
matter, question or proposition, to vote by way of ballot at the meeting in
respect of any matter, question or proposition and to vote at such meeting by
way of a show of hands in respect of any matter, question or proposition.
4.9 Distribution of Written Materials. Any written materials to be
distributed by the Trustee to the Holders pursuant to this agreement will be
delivered or sent by mail (or otherwise communicated in the same manner as
Merilus USA utilizes in communications to holders of Merilus USA Common Stock
subject to the Trustee's ability to provide this method of communication and on
being advised in writing of such method) to each Holder at its address as shown
on the books of Merilus Canada . Merilus Canada will provide or cause to be
provided to the Trustee for this purpose, on a timely basis and without charge
or other expense:
(a) current lists of the Holders; and
(b) on the request of the Trustee, mailing labels to enable the
Trustee to carry out its duties under this agreement.
The materials referred to above are to be provided by Merilus
Canada to the Trustee, but will be subject to review and comment by the Trustee.
4.10 Termination of Voting Rights. Except as otherwise provided herein
or in the Exchangeable Share Provisions, all of the rights of a Holder with
respect to the Holder Votes exercisable in respect of the Exchangeable Shares
held by such Holder, including the right to instruct the Trustee as to the
voting of or to vote personally such Holder Votes, will be deemed to be
surrendered by the Holder to Merilus USA, and such Holder Votes and the Voting
Rights represented thereby will cease immediately, on the delivery by such
Holder to the Trustee of the certificates representing such Exchangeable Shares
in connection with the exercise by the Holder of the Exchange Put Right or the
Exchange Right or the occurrence of the automatic exchange of Exchangeable
Shares for shares of Merilus USA Common Stock, as specified in Article 5 hereof
(unless in any case Merilus USA will not have delivered the Exchangeable Share
Consideration deliverable in exchange therefor to the Trustee for delivery to
the Holders), or on the redemption of Exchangeable Shares pursuant to Article 6
or Article 7 of the Exchangeable Share Provisions, or on the effective date of
the liquidation, dissolution or winding-up of Merilus Canada or any other
distribution of the assets of Merilus Canada among its shareholders for the
purpose of winding up its affairs pursuant to Article 5 of the Exchangeable
Share Provisions, or on the purchase of Exchangeable Shares from the holder
thereof by Merilus USA pursuant to the exercise by Merilus USA of the Retraction
Call Right, the Redemption Call Right or the Liquidation Call Right.
5.0 EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
5.1 Grant and Ownership of the Exchange Put Right, Exchange Right and
Automatic Exchange Right. Merilus USA hereby grants to the Trustee as trustee
for and on behalf of, and for the use and benefit of, the Holders:
(a) the Exchange Put Right;
(b) the right (the "Exchange Right"), on the occurrence and during
the continuance of an Insolvency Event, to require Merilus USA to
purchase from each or any Holder all or any part of the
Exchangeable Shares held by the Holders; and
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(c) the Automatic Exchange Rights, all in accordance with the
provisions of this agreement and the Exchangeable Share
Provisions, as the case may be. Merilus USA hereby acknowledges
receipt from the Trustee as trustee for and on behalf of the
Holders of good and valuable consideration (and the adequacy
thereof) for the grant of the Exchange Put Right, the Exchange
Right and the Automatic Exchange Rights by Merilus USA to the
Trustee. During the term of the Trust and subject to the terms
and conditions of this agreement, the Trustee will possess and be
vested with full legal ownership of the Exchange Put Right, the
Exchange Right and the Automatic Exchange Rights and will be
entitled to exercise all of the rights and powers of an owner
with respect to the Exchange Put Right, the Exchange Right and
the Automatic Exchange Rights, provided that the Trustee will:
(d) hold the Exchange Put Right, the Exchange Right and the Automatic
Exchange Rights and the legal title thereto as trustee solely for
the use and benefit of the Holders in accordance with the
provisions of this agreement; and
(e) except as specifically authorized by this agreement, have no
power or authority to exercise or otherwise deal in or with the
Exchange Put Right, the Exchange Right or the Automatic Exchange
Rights, and the Trustee will not exercise any such rights for any
purpose other than the purposes for which this Trust is created
pursuant to this agreement.
5.2 Legended Share Certificates. Merilus Canada will cause each certificate
representing Exchangeable Shares to bear an appropriate legend notifying the
Holders of:
(a) their right to instruct the Trustee with respect to the
exercise of the Exchange Put Right and the Exchange Right in
respect of the Exchangeable Shares held by a Holder; and
(b) the Automatic Exchange Rights.
5.3 General Exercise of Exchange Put Right and the Exchange Right. The
Exchange Put Right and the Exchange Right will be and remain vested in and
exercised by the Trustee. Subject to Section 7.15 hereof, the Trustee will
exercise the Exchange Put Right and the Exchange Right only on the basis of
instructions received pursuant to this Article 5 from Holders entitled to
instruct the Trustee as to the exercise thereof. To the extent that no
instructions are received from a Holder with respect to the Exchange Put Right
and the Exchange Right, the Trustee will not exercise or permit the exercise of
the Exchange Put Right and the Exchange Right.
5.4 Purchase Price. The purchase price payable by Merilus USA for each
Exchangeable Share to be purchased by Merilus USA (i) under the Exchange Put
Right will be the amount determined under the Exchangeable Share Provisions; and
(ii) under the Exchange Right will be an amount equal to the Exchangeable Share
Price on the last Business Day prior to the day of closing of the purchase and
sale of such Exchangeable Share under the Exchange Right. In connection with
each exercise of the Exchange Right, Merilus USA will provide to the Trustee an
Officer's Certificate setting forth the calculation of the applicable
Exchangeable Share Price for each Exchangeable Share. The applicable
Exchangeable Share Price for each such Exchangeable Share so purchased may be
satisfied only by Merilus USA's issuing and delivering or causing to be
delivered to the Trustee, on behalf of the relevant Holder, the applicable
Exchangeable Share Consideration representing the total applicable Exchangeable
Share Price.
5.5 Exercise Instructions for Exchange Right. Subject to the terms and
conditions herein set forth, a Holder will be entitled, on the occurrence and
during the continuance of an Insolvency Event, to instruct the Trustee to
exercise the Exchange Right with respect to all or any part of the Exchangeable
Shares registered in the name of such Holder on the books of Merilus Canada. To
cause the exercise of the Exchange Right by the Trustee, the Holder will deliver
to the Trustee, in person or by certified or registered mail, at its principal
transfer offices in Calgary, British Columbia and Toronto, Ontario or at such
other places in Canada as the Trustee may from time to time designate by written
notice to the Holders, the certificates representing the Exchangeable Shares
which such Holder desires Merilus USA to purchase, duly endorsed in blank, and
accompanied by such other documents and instruments as may be required to effect
a transfer of Exchangeable Shares under applicable law and the by-laws of
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Merilus Canada and such additional documents and instruments as the Trustee may
reasonably require, together with:
(a) a duly completed form of notice of exercise of the Exchange
Right, contained on the reverse of or attached to the
Exchangeable Share certificates, stating:
(i) that the Holder thereby instructs the Trustee to
exercise the Exchange Right so as to require Merilus
USA to purchase from the Holder the number of
Exchangeable Shares specified therein,
(ii) that such Holder has good title to and owns all such
Exchangeable Shares to be acquired by Merilus USA
free and clear of all liens, claims, encumbrances,
security interests and adverse claims or interests,
(iii) the names in which the certificates representing
Merilus USA Common Stock issuable in connection with
the exercise of the Exchange Right are to be issued,
and
(iv) the names and addresses of the persons to whom the
Exchangeable Share Consideration should be delivered;
and
(b) payment (or evidence satisfactory to the Trustee, Merilus
Canada and Merilus USA of payment) of the taxes (if any)
payable as contemplated by Section 5.8 of this agreement.
If only a part of the Exchangeable Shares represented by any
certificate or certificates delivered to the Trustee are to be purchased by
Merilus USA under the Exchange Right, a new certificate for the balance of such
Exchangeable Shares will be issued to the Holder at the expense of Merilus
Canada.
5.6 Delivery of Exchangeable Share Consideration; Effect of Exercise.
Promptly after receipt of the certificates representing the Exchangeable Shares
which the Holder desires Merilus USA to purchase under the Exchange Put Right or
the Exchange Right (together with such documents and instruments of transfer and
a duly completed form of notice of exercise of the Exchange Put Right or the
Exchange Right), duly endorsed for transfer to Merilus USA, the Trustee will
notify Merilus USA and Merilus Canada of its receipt of the same, which notice
to Merilus USA and Merilus Canada will constitute exercise of the Exchange Put
Right or the Exchange Right by the Trustee on behalf of the Holder of such
Exchangeable Shares, and Merilus USA will immediately thereafter deliver or
cause to be delivered to the Trustee, for delivery to the Holder of such
Exchangeable Shares (or to such other persons, if any, properly designated by
such Holder), the Exchangeable Share Consideration deliverable in connection
with the exercise of the Exchange Put Right or the Exchange Right; provided,
however, that no such delivery will be made unless and until the Holder
requesting the same will have paid (or provided evidence satisfactory to the
Trustee, Merilus Canada and Merilus USA of the payment of) the taxes (if any)
payable as contemplated by Section 5.8 of this agreement. Immediately on the
giving of notice by the Trustee to Merilus USA and Merilus Canada of the
exercise of the Exchange Put Right or the Exchange Right, as provided in this
Section 5.6, (i) the closing of the transaction of purchase and sale
contemplated by the Exchange Put Right or the Exchange Right will be deemed to
have occurred, (ii) Merilus USA will be required to take all action necessary to
permit it to occur, including delivery to the Trustee of the relevant
Exchangeable Share Consideration, no later than the close of business on the
third Business Day following the receipt by the Trustee of notice, certificates
and other documents as aforesaid and (iii) the Holder of such Exchangeable
Shares will be deemed to have transferred to Merilus USA all of its right, title
and interest in and to such Exchangeable Shares and the related interest in the
Trust Estate, will cease to be a holder of such Exchangeable Shares and will not
be entitled to exercise any of the rights of a holder in respect thereof, other
than the right to receive his proportionate part of the total purchase price
therefor, unless such Exchangeable Share Consideration is not delivered by
Merilus USA to the Trustee by the date specified above, in which case the rights
of the Holder will remain unaffected until such Exchangeable Share Consideration
is delivered by Merilus USA and any cheque included therein is paid.
Concurrently with such Holder ceasing to be a holder of Exchangeable Shares, the
Holder will be considered and deemed for all purposes to be the holder of the
shares of Merilus USA Common Stock delivered to it pursuant to the Exchange Put
Right or the Exchange Right. Notwithstanding the foregoing, until the
Exchangeable Share Consideration is delivered to the Holder, the Holder
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will be deemed to still be a holder of the sold Exchangeable Shares for purposes
of voting rights with respect thereto under this agreement.
5.7 Exercise of Exchange Right Subsequent to Retraction. In the event
that a Holder has exercised its right under Article 6 of the Exchangeable Share
Provisions to require Merilus Canada to redeem any or all of the Exchangeable
Shares held by the Holder (the "Retracted Shares") and is notified by Merilus
Canada pursuant to Section 6.6 of the Exchangeable Share Provisions that Merilus
Canada will not be permitted as a result of liquidity or solvency provisions of
applicable law to redeem all such Retracted Shares, subject to receipt by the
Trustee of written notice to that effect from Merilus Canada and provided that
Merilus USA will not have exercised the Retraction Call Right with respect to
the Retracted Shares and that the Holder has not revoked the retraction request
delivered by the Holder to Merilus Canada pursuant to Section 6.1 of the
Exchangeable Share Provisions, the retraction request will constitute and will
be deemed to constitute notice from the Holder to the Trustee instructing the
Trustee to exercise the Exchange Right with respect to those Retracted Shares
which Merilus Canada is unable to redeem. In any such event, Merilus Canada
hereby agrees with the Trustee and in favour of the Holder immediately to notify
the Trustee of such prohibition against Merilus Canada's redeeming all of the
Retracted Shares and immediately to forward or cause to be forwarded to the
Trustee all relevant materials delivered by the Holder to Merilus Canada or to
the transfer agent of the Exchangeable Shares (including without limitation a
copy of the retraction request delivered pursuant to Section 6.1 of the
Exchangeable Share Provisions) in connection with such proposed redemption of
the Retracted Shares, and the Trustee will thereon exercise the Exchange Right
with respect to the Retracted Shares which Merilus Canada is not permitted to
redeem and will require Merilus USA to purchase such shares in accordance with
the provisions of this Article 5.
5.8 Stamp or Other Transfer Taxes. On any sale of Exchangeable Shares
to Merilus USA pursuant to the Exchange Put Right, the Exchange Right or the
Automatic Exchange Rights, the share certificate or certificates representing
Merilus USA Common Stock to be delivered as Exchangeable Share Consideration in
connection with the payment of the total purchase price therefor will be issued
in the name of the Holder of the Exchangeable Shares so sold or in such names as
such Holder may otherwise direct in writing without charge to the holder of the
Exchangeable Shares so sold, provided, however, that such Holder:
(a) will pay (and neither Merilus USA, Merilus Canada nor the
Trustee will be required to pay) any documentary, stamp,
transfer or other similar taxes that may be payable in respect
of any transfer involved in the issuance or delivery of such
shares to a person other than such Holder; or
(b) will have established to the satisfaction of the Trustee,
Merilus USA and Merilus Canada that such taxes, if any, have
been paid.
5.9 Notice of Insolvency Event. Immediately on the occurrence of an
Insolvency Event or any event which with the giving of notice or the passage of
time or both would be an Insolvency Event, Merilus Canada and Merilus USA will
give written notice thereof to the Trustee. As soon as practicable after
receiving notice from Merilus Canada or Merilus USA of the occurrence of an
Insolvency Event, the Trustee will mail to each Holder, at the expense of
Merilus USA, a notice of such Insolvency Event in the form provided by Merilus
USA, which notice will contain a brief statement of the right of the Holders
with respect to the Exchange Right.
5.10 Qualification of Merilus USA Common Stock. Merilus USA represents
and warrants that it has taken all actions and done all things as are necessary
under any United States or Canadian federal, provincial or state law or
regulation or pursuant to the rules and regulations of any regulatory authority
or fulfilment of any other legal requirement (collectively the "Applicable
Laws") as they exist on the date of this agreement and will in good faith,
expeditiously take all such actions and do all such things as are necessary
under Applicable Laws as they may exist in the future to cause such shares of
Merilus USA Common Stock to be issued and delivered pursuant to the Exchangeable
Share Provisions, the Exchange Put Right, the Exchange Right and the Automatic
Exchange Rights; provided that all such shares of Merilus USA Common Stock will
be subject to such resale restrictions as imposed by any and all applicable
securities legislation.
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5.11 Reservation of Shares of Merilus USA Common Stock. Merilus USA
hereby represents, warrants and covenants that it has irrevocably reserved for
issuance and will at all times keep available, free from pre-emptive and other
rights, out of its authorized and unissued capital stock such number of shares
of Merilus USA Common Stock:
(a) as is equal to the sum of
(i) the number of Exchangeable Shares issued and outstanding
from time to time, and
(ii) the number of Exchangeable Shares issuable on the exercise
of all rights to acquire Exchangeable Shares outstanding
from time to time; and
1. as are now and may hereafter be required to enable and permit
Merilus Canada to meet its obligations hereunder, under the
Certificate of Incorporation of Merilus USA, under the Support
Agreement, under the Exchangeable Share Provisions and under
any other security or commitment pursuant to the Merger
Agreement with respect to which Merilus USA may now or
hereafter be required to issue shares of Merilus USA Common
Stock.
5.12 Automatic Exchange on Liquidation of Merilus USA
(a) Merilus USA will give the Trustee written notice of each of the
following events at the time set forth below:
(i) in the event of any determination by the board of directors
of Merilus USA to institute voluntary liquidation,
dissolution or winding-up proceedings with respect to
Merilus USA or to effect any other distribution of assets of
Merilus USA among its stockholders for the purpose of
winding-up its affairs, at least 60 days prior to the
proposed effective date of such liquidation, dissolution,
winding-up or other distribution; and
(ii) immediately, on the earlier of
(A) receipt by Merilus USA of notice of, and
(B) Merilus USA's otherwise becoming aware of
any threatened or instituted claim, suit,
petition or other proceedings with respect
to the involuntary liquidation, dissolution
or winding-up of Merilus USA or to effect
any other distribution of assets of Merilus
USA among its stockholders for the purpose
of winding up its affairs.
(b) Immediately following receipt by the Trustee from Merilus USA of
notice of any event (a "Liquidation Event") contemplated by Section
5.12(a) above, the Trustee will give notice thereof to the Holders.
Such notice will be provided by Merilus USA to the Trustee and will
include a brief description of the automatic exchange of Exchangeable
Shares for shares of Merilus USA Common Stock provided for in Section
5.12(c) below.
(c) In order that the Holders will be able to participate on a pro rata
basis with the holders of Merilus USA Common Stock in the distribution
of assets of Merilus USA in connection with a Liquidation Event,
immediately prior to the effective time (the "Liquidation Event
Effective Time") of a Liquidation Event, all of the then outstanding
Exchangeable Shares will be automatically exchanged for shares of
Merilus USA Common Stock. To effect such automatic exchange, Merilus
USA will be deemed to have purchased each Exchangeable Share
outstanding immediately prior to the Liquidation Event Effective Time
and held by Holders, and each Holder will be deemed to have sold the
Exchangeable Shares held by it at such time, for a purchase price per
share equal to the Exchangeable Share Price applicable at such time.
In connection with such automatic exchange, Merilus USA will provide
to the Trustee an Officer's Certificate setting forth the calculation
of the purchase price for each Exchangeable Share.
(d) The closing of the transaction of purchase and sale contemplated by
Section 5.12(c) above will be deemed to have occurred immediately
prior to the Liquidation Event Effective Time, and each Holder of
Exchangeable Shares will be deemed to have transferred to Merilus USA
all of the Holder's right, title and interest in and to such
Exchangeable Shares and the related interest in the Trust Estate and
will cease to be a holder of such Exchangeable Shares, and Merilus USA
will deliver to the Holder the Exchangeable Share Consideration
deliverable on the automatic exchange
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of Exchangeable Shares. Concurrently with such Holder's ceasing to be
a holder of Exchangeable Shares, the Holder will be considered and
deemed for all purposes to be the holder of the shares of Merilus USA
Common Stock issued to it pursuant to the automatic exchange of
Exchangeable Shares for Merilus USA Common Stock, and the certificates
held by the Holder previously representing the Exchangeable Shares
exchanged by the Holder with Merilus USA pursuant to such automatic
exchange will thereafter be deemed to represent the shares of Merilus
USA Common Stock issued to the Holder by Merilus USA pursuant to such
automatic exchange. On the request of a Holder and the surrender by
the Holder of Exchangeable Share certificates deemed to represent
shares of Merilus USA Common Stock, duly endorsed in blank and
accompanied by such instruments of transfer as Merilus USA may
reasonably require, Merilus USA will deliver or cause to be delivered
to the Holder certificates representing the shares of Merilus USA
Common Stock of which the Holder is the holder. Notwithstanding the
foregoing, until each Holder is actually entered on the register of
holders of Merilus USA Common Stock, such Holder will be deemed to
still be a holder of the transferred Exchangeable Shares for purposes
of all voting rights with respect thereto under this agreement.
5.13 Withholding Rights. Merilus USA, Merilus Canada and the Trustee
shall be entitled to deduct and withhold from any consideration otherwise
payable under this agreement to any Holder of Exchangeable Shares or Merilus USA
Common Shares such amounts as Merilus USA, Merilus Canada or the Trustee is
required or permitted to deduct and withhold with respect to such payment under
the Income Tax Act (Canada), the United States Internal Revenue Code of 1986 or
any provision of provincial, state, local or foreign tax law, in each case as
amended or succeeded. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes as having been paid to the Holder of
the shares in respect of which such deduction and withholding was made, provided
that such withheld amounts are actually remitted to the appropriate taxing
authority. To the extent that the amount so required or permitted to be deducted
or withheld from any payment to a Holder exceeds the cash portion of the
consideration otherwise payable to the Holder, Merilus USA, Merilus Canada and
the Trustee are hereby authorized to sell or otherwise dispose of such portion
of the consideration as is necessary to provide sufficient funds to Merilus USA,
Merilus Canada or the Trustee, as the case may be, to enable it to comply with
such deduction or withholding requirement and Merilus USA, Merilus Canada or the
Trustee shall notify the Holder thereof and remit to such Holder any unapplied
balance of the net proceeds of such sale. Merilus USA represents and warrants
that, based upon facts currently known to it, it has no current intention, as at
the date of this agreement, to deduct or withhold from any dividend paid to
Holders of Exchangeable Shares any amounts under the United States Internal
Revenue Code of 1986.
6.0 RESTRICTIONS ON ISSUANCE OF MERILUS USA SPECIAL VOTING STOCK
During the term of this agreement, Merilus USA will not issue any
shares of Merilus USA Special Voting Stock in addition to the Voting Share.
7.0 CONCERNING THE TRUSTEE
7.1 Powers and Duties of the Trustee. The rights, powers and
authorities of the Trustee under this agreement, in its capacity as trustee of
the Trust, will include:
(a) receipt and deposit of the Voting Share from Merilus USA as trustee
for and on behalf of the Holders in accordance with the provisions of
this agreement;
(b) granting proxies and distributing materials to Holders as provided in
this agreement;
(c) voting the Holder Votes in accordance with the provisions of this
agreement;
(d) receiving the grant of the Exchange Put Right and the Exchange Right
and the Automatic Exchange Rights from Merilus USA as trustee for and
on behalf of the Holders in accordance with the provisions of this
agreement;
(e) exercising the Exchange Put Right and the Exchange Right and enforcing
the benefit of the Automatic Exchange Rights, in each case in
accordance with the provisions of this agreement, and
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in connection therewith receiving from Holders Exchangeable Shares and
other requisite documents and distributing to such Holders the shares
of Merilus USA Common Stock and cheques, if any, to which such Holders
are entitled on the exercise of the Exchange Put Right and the
Exchange Right or pursuant to the Automatic Exchange Rights, as the
case may be;
(f) holding title to the Trust Estate;
(g) investing any moneys forming, from time to time, a part of the Trust
Estate as provided in this agreement;
(h) taking action at the direction of a Holder or Holders to enforce the
obligations of Merilus USA under this agreement; and
(i) taking such other actions and doing such other things as are
specifically provided in this agreement.
In the exercise of such rights, powers and authorities, the
Trustee will have (and is granted) such incidental and additional rights, powers
and authority not in conflict with any of the provisions of this agreement as
the Trustee, acting in good faith and in the reasonable exercise of its
discretion, may deem necessary, appropriate or desirable to effect the purpose
of the Trust. Any exercise of such discretionary rights, powers and authorities
by the Trustee will be final, conclusive and binding on all persons. For greater
certainty, the Trustee will have only those duties as are set out specifically
in this agreement.
The Trustee in exercising its rights, powers, duties and
authorities hereunder will act honestly and in good faith with a view to the
best interests of the Holders and will exercise the care, diligence and skill
that a reasonably prudent trustee would exercise in comparable circumstances.
The Trustee will not be bound to give any notice or do or take
any act, action or proceeding by virtue of the powers conferred on it hereby
unless and until it will be specifically required to do so under the terms
hereof nor will the Trustee be required to take any notice of, or to do or to
take any act, action or proceeding as a result of any default or breach of any
provision hereunder, unless and until notified in writing of such default or
breach, which notices will distinctly specify the default or breach desired to
be brought to the attention of the Trustee and in the absence of such notice the
Trustee may for all purposes of this agreement conclusively assume that no
default or breach has been made in the observance or performance of any of the
representations, warranties, covenants, agreements or conditions contained
herein.
7.2 No Conflict of Interest. The Trustee represents to Merilus Canada
and Merilus USA that at the date of execution and delivery of this agreement
there exists no material conflict of interest in the role of the Trustee as a
fiduciary hereunder and the role of the Trustee in any other capacity. The
Trustee will, within 90 days after it becomes aware that such a material
conflict of interest exists, either eliminate such material conflict of interest
or resign in the manner and with the effect specified in Article 10 hereof. If,
notwithstanding the foregoing provisions of this Section 7.2, the Trustee has
such a material conflict of interest, the validity and enforceability of this
agreement will not be affected in any manner whatsoever by reason only of the
existence of such material conflict of interest. If the Trustee contravenes the
foregoing provisions of this Section 7.2, any interested party may apply to the
superior court of the province in which Merilus Canada has its registered office
for an order that the Trustee be replaced as trustee hereunder.
7.3 Dealings with Transfer Agents, Registrars, Etc. Merilus Canada
and Merilus USA irrevocably authorize the Trustee, from time to time, to:
(a) consult, communicate and otherwise deal with the respective
registrars and transfer agents, and with any such subsequent
registrar or transfer agent, of the Exchangeable Shares and
Merilus USA Common Stock; and
(b) requisition, from time to time,
(i) from any such registrar or transfer agent any
information readily available from the records
maintained by it which the Trustee may reasonably
require for the discharge of its duties and
responsibilities under this agreement, and
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(ii) from the transfer agent of Merilus USA Common Stock,
and any subsequent transfer agent of such shares, to
complete the exercise from time to time of the
Exchange Put Right, the Exchange Right and the
Automatic Exchange Rights in the manner specified in
Article 5 hereof, the share certificates issuable on
such exercise.
Merilus Canada and Merilus USA irrevocably authorize their
respective registrars and transfer agents to comply with all such requests.
Merilus USA covenants that it will supply its transfer agent with duly executed
share certificates for the purpose of completing the exercise from time to time
of the Exchange Put Right, the Exchange Right and the Automatic Exchange Rights,
in each case pursuant to Article 5 hereof.
7.4 Books and Records. The Trustee will keep available for inspection
by Merilus USA and Merilus Canada, at the Trustee's principal transfer office in
Calgary, British Columbia, correct and complete books and records of account
relating to the Trustee's actions under this agreement, including without
limitation all information relating to mailings and instructions to and from
Holders and all transactions pursuant to the Voting Rights, the Exchange Put
Right, the Exchange Right and the Automatic Exchange Rights for the term of this
agreement. On or before March 31, 2000, and on or before March 31 in every year
thereafter, so long as the Voting Share is on deposit with the Trustee, the
Trustee will transmit to Merilus USA and Merilus Canada a brief report, dated as
of the preceding December 31, with respect to:
(a) the property and funds comprising the Trust Estate as of that
date;
(b) the number of exercises of the Exchange Put Right and the
Exchange Right, if any, and the aggregate number of
Exchangeable Shares received by the Trustee on behalf of
Holders in consideration of the issue and delivery by Merilus
USA of shares of Merilus USA Common Stock in connection with
the Exchange Put Right and the Exchange Right, during the
calendar year ended on such date; and
(c) all other actions taken by the Trustee in the performance of
its duties under this agreement which it had not previously
reported.
7.5 Income Tax Returns and Reports. The Trustee will, to the extent
necessary, prepare and file on behalf of the Trust appropriate United States and
Canadian income tax returns and any other returns or reports as may be required
by applicable law or pursuant to the rules and regulations of any securities
exchange or other trading system through which the Exchangeable Shares are
traded and, in connection therewith, may obtain the advice and assistance of
such experts as the Trustee may consider necessary or advisable. If requested by
the Trustee, Merilus USA will retain such experts for purposes of providing such
advice and assistance.
7.6 Indemnification Prior to Certain Actions by Trustee. The Trustee
will exercise any or all of the rights, duties, powers or authorities vested in
it by this agreement at the request, order or direction of any Holder on such
Holder's furnishing to the Trustee reasonable funding, security and indemnity
against the costs, expenses and liabilities which may be incurred by the Trustee
therein or thereby; provided that no Holder will be obligated to furnish to the
Trustee any such funding, security or indemnity in connection with the exercise
by the Trustee of any of its rights, duties, powers and authorities with respect
to the Voting Share pursuant to Article 4 hereof, subject to Section 7.15
hereof, and with respect to the Exchange Put Right and the Exchange Right
pursuant to Article 5 hereof, subject to Section 7.15 hereof, and with respect
to the Automatic Exchange Rights pursuant to Article 5 hereof. None of the
provisions contained in this agreement will require the Trustee to expend or
risk its own funds or otherwise incur financial liability in the exercise of any
of its rights, powers, duties or authorities unless funded, given funds,
security and indemnified as aforesaid.
7.7 Actions by Holders. No Holder will have the right to institute any
action, suit or proceeding or to exercise any other remedy authorized by this
agreement for the purpose of enforcing any of its rights or for the execution of
any trust or power hereunder unless the Holder has requested the Trustee to take
or institute such action, suit or proceeding and furnished the Trustee with the
funding, security and indemnity referred to in Section 7.6 hereof and the
Trustee will have failed to act within a reasonable time thereafter. In such
case, but not otherwise, the Holder will be entitled to take proceedings in any
court of competent jurisdiction such as the Trustee might have
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taken; it being understood and intended that no one or more Holders will have
any right in any manner whatsoever to affect, disturb or prejudice the rights
hereby created by any such action, or to enforce any right hereunder or under
the Voting Rights, the Exchange Put Right, the Exchange Right or the Automatic
Exchange Rights, except subject to the conditions and in the manner herein
provided, and that all powers and trusts hereunder will be exercised and all
proceedings at law will be instituted, had and maintained by the Trustee, except
only as herein provided, and in any event for the equal benefit of all Holders.
7.8 Reliance on Declarations. The Trustee will not be considered to be
in contravention of any of its rights, powers, duties and authorities hereunder
if, when required, it acts and relies in good faith on lists, mailing labels,
notices, statutory declarations, certificates, opinions, reports or other papers
or documents furnished pursuant to the provisions hereof or required by the
Trustee to be furnished to it in the exercise of its rights, powers, duties and
authorities hereunder, and such lists, mailing labels, notices, statutory
declarations, certificates, opinions, reports or other papers or documents
comply with the provisions of Section 7.9 hereof, if applicable, and with any
other applicable provisions of this agreement.
7.9 Evidence and Authority to Trustee. Merilus Canada and/or Merilus
USA will furnish to the Trustee evidence of compliance with the conditions
provided for in this agreement relating to any action or step required or
permitted to be taken by Merilus Canada and/or Merilus USA or the Trustee under
this agreement or as a result of any obligation imposed under this agreement,
including, without limitation, in respect of the Voting Rights or the Exchange
Put Right, the Exchange Right or the Automatic Exchange Rights and the taking of
any other action to be taken by the Trustee at the request of or on the
application of Merilus Canada and/or Merilus USA forthwith if and when:
(a) such evidence is required by any other section of this
agreement to be furnished to the Trustee in accordance with
the terms of this Section 7.9; or
(b) the Trustee, in the exercise of its rights, powers, duties and
authorities under this agreement, gives Merilus Canada and/or
Merilus USA written notice requiring it to furnish such
evidence in relation to any particular action or obligation
specified in such notice.
Such evidence will consist of an Officer's Certificate of
Merilus Canada and/or Merilus USA or a statutory declaration or a certificate
made by persons entitled to sign an Officer's Certificate stating that any such
condition has been complied with in accordance with the terms of this agreement.
Whenever such evidence relates to a matter other than the
Voting Rights or the Exchange Put Right, the Exchange Right or the Automatic
Exchange Rights, and except as otherwise specifically provided herein, such
evidence may consist of a report or opinion of any solicitor, auditor,
accountant, appraiser, valuer, engineer or other expert or any other person
whose qualifications give authority to a statement made by him, provided that,
if such report or opinion is furnished by a director, officer or employee of
Merilus Canada and/or Merilus USA, it will be in the form of an Officer's
Certificate or a statutory declaration.
Each statutory declaration, certificate, opinion or report
furnished to the Trustee as evidence of compliance with a condition provided for
in this agreement will include a statement by the person giving the evidence:
(i) declaring that such person has read and understands the
provisions of this agreement relating to the condition in
question;
(ii) describing the nature and scope of the examination or
investigation on which such person based the statutory
declaration, certificate, statement or opinion; and
(iii)declaring that such person has made such examination or
investigation as such person believes is necessary to enable such
person to make the statements or give the opinions contained or
expressed therein.
7.10 Experts, Advisers and Agents. The Trustee may:
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(a) in relation to these presents act and rely on the opinion or
advice of or information obtained from or prepared by any
solicitor, auditor, accountant, appraiser, valuer, engineer or
other expert, whether retained by the Trustee or by Merilus
Canada and/or Merilus USA or otherwise, and may employ such
assistants as may be necessary to the proper determination and
discharge of its powers and duties and determination of its
rights hereunder and may pay proper and reasonable
compensation for all such legal and other advice or assistance
as aforesaid; and
(b) employ such agents and other assistants as it may reasonably
require for the proper determination and discharge of its
powers and duties hereunder, and may pay reasonable
remuneration for all services performed for it (and will be
entitled to receive reasonable remuneration for all services
performed by it) in the discharge of the trusts hereof and
compensation for all disbursements, costs and expenses made or
incurred by it in the determination and discharge of its
duties hereunder and in the management of the Trust.
7.11 Investment of Moneys Held by Trustee. Unless otherwise provided in
this agreement, any moneys held by or on behalf of the Trustee which under the
terms of this agreement may or ought to be invested or which may be on deposit
with the Trustee or which may be in the hands of the Trustee, may be invested
and reinvested in the name or under the control of the Trustee in securities in
which, under the laws of the Province of British Columbia, trustees are
authorized to invest trust moneys; provided that such securities are stated to
mature within two years after their purchase by the Trustee, and the Trustee
will so invest such moneys on the written direction of Merilus Canada. Pending
the investment of any moneys as hereinbefore provided, such moneys may be
deposited in the name of the Trustee in any bank, loan or trust company
authorized to accept deposits under the laws of United States or Canada or any
state or province thereof at the rate of interest then current on similar
deposits.
7.12 Trustee Not Required to Give Security. The Trustee will not be
required to give any bond or security in respect of the execution of the trusts,
rights, duties, powers and authorities of this agreement or otherwise in respect
of the premises.
7.13 Trustee Not Bound to Act on Request. Except as in this agreement
otherwise specifically provided, the Trustee will not be bound to act in
accordance with any direction or request of Merilus Canada and/or Merilus USA or
of the directors thereof until a duly authenticated copy of the instrument or
resolution containing such direction or request will have been delivered to the
Trustee, and the Trustee will be empowered to act and rely on any such copy
purporting to be authenticated and believed by the Trustee to be genuine.
7.14 Authority to Carry on Business. The Trustee represents to Merilus
Canada and Merilus USA that at the date of execution and delivery by it of this
agreement it is authorized to carry on the business of a transfer and trust
company in the State of Utah but if, notwithstanding the provisions of this
Section 7.14, it ceases to be so authorized to carry on business, the validity
and enforceability of this agreement and the Voting Rights, the Exchange Put
Right, the Exchange Right and the Automatic Exchange Rights will not be affected
in any manner whatsoever by reason only of such event; provided, however, the
Trustee will, within 90 days after ceasing to be authorized to carry on the
business of a transfer and trust company in the State of Utah, either become so
authorized or resign in the manner and with the effect specified in Article 10
hereof.
7.15 Conflicting Claims. If conflicting claims or demands are made or
asserted with respect to any interest of any Holder in any Exchangeable Shares,
including any disagreement between the heirs, representatives, successors or
assigns succeeding to all or any part of the interest of any Holder in any
Exchangeable Shares resulting in conflicting claims or demands being made in
connection with such interest, then the Trustee will be entitled, at its sole
discretion, to refuse to recognize or to comply with any such claim or demand.
In so refusing, the Trustee may elect not to exercise any Voting Rights,
Exchange Put Right, Exchange Right or Automatic Exchange Rights subject to such
conflicting claims or demands and, in so doing, the Trustee will not be or
become liable to any person on account of such election or its failure or
refusal to comply with any such conflicting claims or demands. The Trustee will
be entitled to continue to refrain from acting and to refuse to act until:
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(a) the rights of all adverse claimants with respect to the Voting
Rights, Exchange Put Right, Exchange Right or Automatic
Exchange Rights subject to such conflicting claims or demands
have been adjudicated by a final judgment of a court of
competent jurisdiction; or
(b) all differences with respect to the Voting Rights, the
Exchange Put Right, Exchange Right or Automatic Exchange
Rights subject to such conflicting claims or demands have been
conclusively settled by a valid written agreement binding on
all such adverse claimants, and the Trustee will have been
furnished with an executed copy of such agreement.
If the Trustee elects to recognize any claim or comply with
any demand made by any such adverse claimant, it may in its discretion require
such claimant to furnish such surety bond or other security satisfactory to the
Trustee as it will deem appropriate fully to indemnify it as between all
conflicting claims or demands.
7.16 Acceptance of Trust. The Trustee hereby accepts the Trust created
and provided for by and in this agreement and agrees to perform the same on the
terms and conditions herein set forth and to hold all rights, privileges and
benefits conferred hereby and by law in trust for the various persons who will
from time to time be Holders, subject to all the terms and conditions herein set
forth.
8.0 COMPENSATION
Merilus USA and Merilus Canada jointly and severally agree to
pay to the Trustee reasonable compensation for all of the services rendered by
it under this agreement and will reimburse the Trustee for all reasonable
expenses (including but not limited to taxes, compensation paid to experts,
agents and advisors, and travel expenses) and disbursements, including the cost
and expense of any suit or litigation of any character and any proceedings
before any governmental agency, reasonably incurred by the Trustee in connection
with its rights and duties under this agreement; provided that Merilus USA and
Merilus Canada will have no obligation to reimburse the Trustee for any expenses
or disbursements paid, incurred or suffered by the Trustee in any suit or
litigation in which the Trustee is determined to have acted in bad faith or with
negligence or willful misconduct.
9.0 INDEMNIFICATION AND LIMITATION OF LIABILITY
9.1 Indemnification of the Trustee. Merilus USA and Merilus Canada
jointly and severally agree to indemnify and hold harmless the Trustee and each
of its directors, officers, employees and agents appointed and acting in
accordance with this agreement (collectively, the "Indemnified Parties") against
all claims, losses, damages, costs, penalties, fines and reasonable expenses
(including reasonable expenses of the Trustee's legal counsel) which, without
fraud, negligence, willful misconduct or bad faith on the part of such
Indemnified Party, may be paid, incurred or suffered by the Indemnified Party by
reason of or as a result of the Trustee's acceptance or administration of the
Trust, its compliance with its duties set forth in this agreement, or any
written or oral instructions delivered to the Trustee by Merilus USA or Merilus
Canada pursuant hereto.
In no case will Merilus USA or Merilus Canada be liable under
this indemnity for any claim against any of the Indemnified Parties unless
Merilus USA and Merilus Canada will be notified by the Trustee of the written
assertion of a claim or of any action commenced against the Indemnified Parties,
promptly after any of the Indemnified Parties will have received any such
written assertion of a claim or will have been served with a summons or other
first legal process giving information as to the nature and basis of the claim.
Subject to (ii) below, Merilus USA and Merilus Canada will be entitled to
participate at their own expense in the defense and, if Merilus USA or Merilus
Canada so elect at any time after receipt of such notice, either of them may
assume the defense of any suit brought to enforce any such claim. The Trustee
will have the right to employ separate counsel in any such suit and participate
in the defense thereof, but the fees and expenses of such counsel will be at the
expense of the Trustee unless: (i) the employment of such counsel has been
authorized by Merilus USA or Merilus Canada, such authorization not to be
unreasonably withheld; or (ii) the named parties to any such suit include both
the Trustee and Merilus USA or Merilus Canada and the Trustee will have been
advised by counsel acceptable to Merilus USA or Merilus Canada that there may be
one or more legal defenses available to the Trustee that are different from or
in addition to those available to Merilus USA or Merilus Canada and that an
actual or potential conflict of interest
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exists (in which case Merilus USA and Merilus Canada will not have the right to
assume the defense of such suit on behalf of the Trustee, but will be liable to
pay the reasonable fees and expenses of counsel for the Trustee). This indemnity
will survive the resignation or removal of the Trustee and the termination of
the trust.
9.2 Limitation of Liability. The Trustee will not be held liable for
any loss which may occur by reason of depreciation of the value of any part of
the Trust Estate or any loss incurred on any investment of funds pursuant to
this agreement, except to the extent that such loss is attributable to the
fraud, negligence, willful misconduct or bad faith on the part of the Trustee.
10.0 CHANGE OF TRUSTEE.
10.1 Resignation. The Trustee, or any trustee hereafter appointed, may
at any time resign by giving written notice of such resignation to Merilus USA
and Merilus Canada specifying the date on which it desires to resign, provided
that such notice will never be given less than 60 days before such desired
resignation date unless Merilus USA and Merilus Canada otherwise agree and
provided further that such resignation will not take effect until the date of
the appointment of a successor trustee and the acceptance of such appointment by
the successor trustee. On receiving such notice of resignation, Merilus USA and
Merilus Canada will promptly appoint a successor trustee by written instrument,
in duplicate, one copy of which will be delivered to the resigning trustee and
one copy to the successor trustee. Failing acceptance by a successor trustee, a
successor trustee may be appointed by an order of the superior court of the
province in which Merilus Canada has its registered office on application of one
or more of the parties hereto.
10.2 Removal. The Trustee, or any trustee hereafter appointed, may be
removed with or without cause, at any time on 60 days prior notice by written
instrument executed by Merilus USA and Merilus Canada, in duplicate, one copy of
which will be delivered to the trustee so removed and one copy to the successor
trustee; provided that, in connection with such removal, provision is made for a
replacement trustee similar to that contemplated in Section 10.1.
10.3 Successor Trustee. Any successor trustee appointed as provided
under this agreement will execute, acknowledge and deliver to Merilus USA and
Merilus Canada and to its predecessor trustee an instrument accepting such
appointment. Thereon the resignation or removal of the predecessor trustee will
become effective and such successor trustee, without any further act, deed or
conveyance, will become vested with all the rights, powers, duties and
obligations of its predecessor under this agreement, with like effect as if
originally named as trustee in this agreement. However, on the written request
of Merilus USA and Merilus Canada or of the successor trustee, the trustee
ceasing to act will, on payment of any amounts then due it pursuant to the
provisions of this agreement, execute and deliver an instrument transferring to
such successor trustee all the rights and powers of the trustee so ceasing to
act. On the request of any such successor trustee, Merilus USA, Merilus Canada
and such predecessor trustee will execute any and all instruments in writing for
more fully and certainly vesting in and confirming to such successor trustee all
such rights and powers.
10.4 Notice of Successor Trustee. On acceptance of appointment by a
successor trustee as provided herein, Merilus USA and Merilus Canada will cause
to be mailed notice of the succession of such trustee hereunder to each Holder
specified in a List. If Merilus USA or Merilus Canada will fail to cause such
notice to be mailed within 10 days after acceptance of appointment by the
successor trustee, the successor trustee will cause such notice to be mailed at
the expense of Merilus USA and Merilus Canada.
11.0 Merilus USA SUCCESSORS.
11.1 Certain Requirements in Respect of Combination, Etc. Merilus USA
will not enter into any transaction (whether by way of reconstruction,
reorganization, consolidation, merger, transfer, sale, lease or otherwise)
whereby all or substantially all of its undertaking, property and assets would
become the property of any other Person or, in the case of a merger, of the
continuing corporation resulting therefrom, but may do so if:
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(a) such other Person or continuing corporation (the "Merilus USA
Successor"), by operation of law, becomes, without further action,
bound by the terms and provisions of this agreement or, if not so
bound, executes, prior to or contemporaneously with the consummation
of such transaction an agreement supplemental hereto and such other
instruments (if any) as are satisfactory to the Trustee and in the
opinion of legal counsel to the Trustee are necessary or advisable to
evidence the assumption by the Merilus USA Successor of liability for
all moneys payable and property deliverable hereunder, the covenant of
such Merilus USA Successor to pay and deliver or cause to be delivered
the same and its agreement to observe and perform all the covenants
and obligations of Merilus USA under this agreement; and
(b) such transaction will, to the satisfaction of the Trustee and in the
opinion of legal counsel to the Trustee, be on such terms which
substantially preserve and do not impair in any material respect any
of the rights, duties, powers and authorities of the Trustee or of the
Holders hereunder.
11.2 Vesting of Powers in Successor. Whenever the conditions of Section
11.1 hereof have been duly observed and performed, the Trustee, if required by
Section 11.1 hereof, the Merilus USA Successor and Merilus Canada will execute
and deliver the supplemental agreement provided for in Article 12 hereof, and
thereon the Merilus USA Successor will possess and from time to time may
exercise each and every right and power of Merilus USA under this agreement in
the name of Merilus USA or otherwise and any act or proceeding by any provision
of this agreement required to be done or performed by the board of directors of
Merilus USA or any officers of Merilus USA may be done and performed with like
force and effect by the directors or officers of such Merilus USA Successor.
11.3 Wholly-owned Subsidiaries Nothing herein will be construed as
preventing the amalgamation or merger of any wholly-owned subsidiary of Merilus
USA with or into Merilus USA or the winding-up, liquidation or dissolution of
any wholly-owned subsidiary of Merilus USA provided that all of the assets of
such subsidiary are transferred to Merilus USA or another wholly-owned
subsidiary of Merilus USA, and any such transactions are expressly permitted by
this Article 11.
12.0 AMENDMENTS AND SUPPLEMENTAL AGREEMENTS.
12.1 Amendments, Modifications, Etc. Subject to Sections 12.2 and 12.4,
this agreement may not be amended, modified or waived except by an agreement in
writing executed by Merilus Canada, Merilus USA and the Trustee and approved by
the Holders in accordance with Section 10.2 of the Exchangeable Share
Provisions. No amendment to or modification or waiver of any of the provisions
of this agreement otherwise permitted hereunder will be effective unless made in
writing and signed by all of the parties hereto.
12.2 Ministerial Amendments. Notwithstanding the provisions of Section
12.1 hereof, the parties to this agreement may in writing, at any time and from
time to time, without the approval of the Holders, amend or modify this
agreement for the purposes of:
(a) adding to the covenants of any or all of the parties hereto
for the protection of the Holders hereunder subject to the
receipt by the Trustee of an opinion of counsel that the
addition of the proposed covenant is not prejudicial to the
interests of the holders as a whole or the Trustee;
(b) making such amendments or modifications not inconsistent with
this agreement as may be necessary or desirable with respect
to matters or questions which, in the opinion of the board of
directors of each of Merilus USA and Merilus Canada and in the
opinion of the Trustee and its counsel, having in mind the
best interests of the Holders as a whole, it may be expedient
to make, provided that such boards of directors and the
Trustee and its counsel will be of the opinion that such
amendments and modifications will not be prejudicial to the
interests of the Holders as a whole; or
(c) making such changes or corrections which, on the advice of
counsel to Merilus Canada, Merilus USA and the Trustee, are
required for the purpose of curing or correcting any ambiguity
or defect or inconsistent provision or clerical omission or
mistake or manifest error; provided that the
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Trustee and its counsel and the board of directors of each of
Merilus Canada and Merilus USA will be of the opinion that
such changes or corrections will not be prejudicial to the
interests of the Holders as a whole.
12.3 Meeting to Consider Amendments. Merilus Canada, at the request of
Merilus USA, will call a meeting or meetings of the Holders for the purpose of
considering any proposed amendment or modification requiring approval pursuant
hereto. Any such meeting or meetings will be called and held in accordance with
the by- laws of Merilus Canada, the Exchangeable Share Provisions and all
applicable laws.
12.4 Changes in Capital of Merilus USA and Merilus Canada. At all times
after the occurrence of any event effected pursuant to Section 2.7 or Section
2.8 of the Support Agreement, as a result of which either Merilus USA Common
Stock or the Exchangeable Shares or both are in any way changed, this agreement
will forthwith be amended and modified as necessary in order that it will apply
with full force and effect, mutatis mutandis, to all new securities into which
Merilus USA Common Stock or the Exchangeable Shares or both are so changed, and
the parties hereto will execute and deliver a supplemental agreement giving
effect to and evidencing such necessary amendments and modifications.
12.5 Execution of Supplemental Agreements. From time to time, Merilus
Canada (when authorized by a resolution of its Board of Directors), Merilus USA
(when authorized by a resolution of its board of directors) and the Trustee may,
subject to the provisions of these presents, and they will, when so directed by
these presents, execute and deliver by their proper officers, agreements or
other instruments supplemental hereto, which thereafter will form part hereof,
for any one or more of the following purposes:
(a) evidencing the succession of any Merilus USA Successors to
Merilus USA and the covenants of and obligations assumed by
each such Merilus USA Successor in accordance with the
provisions of Article 11 and the successor of any successor
trustee in accordance with the provisions of Article 10;
(b) making any additions to, deletions from or alterations of the
provisions of this agreement or the Voting Rights, the
Exchange Right or the Automatic Exchange Rights which, in the
opinion of the Trustee and its counsel, will not be
prejudicial to the interests of the Holders as a whole or are
in the opinion of counsel to the Trustee necessary or
advisable in order to incorporate, reflect or comply with any
legislation the provisions of which apply to Merilus USA,
Merilus Canada, the Trustee or this agreement; and
(c) for any other purposes not inconsistent with the provisions of
this agreement, including without limitation to make or
evidence any amendment or modification to this agreement as
contemplated hereby, provided that, in the opinion of the
Trustee and its counsel, the rights of the Trustee and the
Holders as a whole will not be prejudiced thereby.
13.0 TERMINATION
13.1 Term. The Trust created by this agreement will continue until
the earliest to occur of the following events:
(a) no outstanding Exchangeable Shares are held by a Holder;
(b) each of Merilus Canada and Merilus USA elects in writing to
terminate the Trust and such termination is approved by the
Holders of the Exchangeable Shares in accordance with Section
10.1 of the Exchangeable Share Provisions; and
(c) 21 years after the death of the last survivor of the
descendants of His Majesty King George VI of the United
Kingdom of Great Britain and Northern Ireland living on the
date of the creation of the Trust.
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13.2 Survival of Agreement. This agreement will survive any termination
of the Trust and will continue until there are no Exchangeable Shares
outstanding held by a Holder; provided, however, that the provisions of Articles
8 and 9 hereof will survive any such termination of this agreement.
14.0 GENERAL.
14.1 Severability. If any provision of this agreement is held to be
invalid, illegal or unenforceable, the validity, legality or enforceability of
the remainder of this agreement will not in any way be affected or impaired
thereby, and the agreement will be carried out as nearly as possible in
accordance with its original terms and conditions.
14.2 Inurement. This agreement will be binding on and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns and to the benefit of the Holders.
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14.3 Notices to Parties. All notices and other communications between
the parties hereunder will be in writing and will be deemed to have been given
if delivered personally or by confirmed telecopy to the parties at the following
addresses (or at such other address for such party as will be specified in like
notice):
(a) if to Merilus USA, to:
Venture Law Corporation
688 West Hastings Street, Suite 618
Vancouver, BC, V6B 1P1
Attention: Alixe B. Cormick
Telephone No.: (604) 659-9188
Facsimile No.: (604) 659-9178
(b) if to Merilus, to:
Merilus Technologies Inc.
#37, 46165 Yale Road
Chilliwack, British Columbia
Attn: Dana Epp
Telephone No.: (604) 792-0100
Facsimile No.: (604) 792-0911
and copies to:
Sliman, Stander & Company
Barristers & Solicitors
204-45389 Luckakuck Way
Chilliwack, British Columbia V2R 3C7
Attn: Bruce Davies
Telephone No.: (604) 824-7777
Facsimile No.: (604) 824-7770
and to:
Nexus Venture Capital Lawyers
3400 - 666 Burrard Street
Vancouver, British Columbia V6C 2X8
Attn: Paul Visosky
Telephone No.: (604) 639-3131
Facsimile No.: (604) 639-2803
and to:
Ogden Murphy Wallace, P.L.L.C.
1601 Fifth Avenue, Suite 2100
Seattle, WA 98101
Attn: Shea Wilson and Derek Woolston
Telephone No.: (206) 447-7000
Facsimile No.: (206) 447-0215
(c) if to the Trustee to:
Interwest Transfer Company, Inc.
1981 East Murray Holladay Road, Suite 100
Salt Lake City, Utah 84117
Attn: Kurtis Hughes
Telephone No.: (801) 272-9294
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Facsimile No.: (601) 277-3147
Any notice or other communication given personally will be deemed to
have been given and received on delivery thereof, and if given by telecopy will
be deemed to have been given and received on the date of receipt thereof unless
such day is not a Business Day in which case it will be deemed to have been
given and received on the immediately following Business Day.
14.4 Notice to Holders. Any and all notices to be given and any
documents to be sent to any Holders may be given or sent to the address of such
Holder shown on the register of Holders of Exchangeable Shares in any manner
permitted by the Exchangeable Share Provisions and will be deemed to be received
(if given or sent in such manner) at the time specified in such Exchangeable
Share Provisions, the provisions of which Exchangeable Share Provisions will
apply mutatis mutandis to notices or documents as aforesaid sent to such
Holders.
14.5 Risk of Payments by Post. Whenever payments are to be made or
documents are to be sent to any Holder by the Trustee, by Merilus Canada or by
Merilus USA or by such Holder to the Trustee or to Merilus USA or Merilus
Canada, the making of such payment or sending of such document sent through the
mail will be at the risk of Merilus Canada or Merilus USA, in the case of
payments made or documents sent by the Trustee or Merilus Canada or Merilus USA,
and the Holder, in the case of payments made or documents sent by the Holder.
14.6 Counterparts. This agreement may be executed in counterparts, each
of which will be deemed an original, but all of which taken together will
constitute one and the same instrument.
14.7 Jurisdiction. This agreement will be construed and enforced in
accordance with the laws of the Province of British Columbia and the federal
laws of Canada applicable therein.
14.8 Attornment. Merilus USA agrees that any action or proceeding
arising out of or relating to this agreement may be instituted in the courts of
British Columbia, waives any objection which it may have now or hereafter to the
venue of any such action or proceeding, irrevocably submits to the jurisdiction
of such courts in any such action or proceeding, agrees to be bound by any
judgment of such courts and agrees not to seek, and hereby waives, any review of
the merits of any such judgment by the courts of any other jurisdiction and
hereby appoints Merilus Canada at its registered office in the Province of
British Columbia as Merilus USA's attorney for service of process.
IN WITNESS WHEREOF, the parties hereby have caused this agreement to be
duly executed as of the date first above written.
MERILUS, INC. MERILUS TECHNOLOGIES INC.
By:_____________________________ By:_____________________________
Name:__________________________ Name:__________________________
Title:___________________________ Title:___________________________
INTERWEST TRANSFER COMPANY, INC.
By:_____________________________
Name:__________________________
Title:___________________________
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EXHIBIT F
ESCROW AGREEMENT
This Escrow Agreement (this "Escrow Agreement") is made and entered into as of
November ___, 2000 (the "Effective Date") by and among Merilus, Inc., a Nevada
corporation ("Merilus USA"); Merilus Technologies, Inc., a British Columbia
corporation (the "Merilus Canada"); the persons and entities listed on the
Schedule of Stockholders attached to this Escrow Agreement (the "Holders"); and
Interwest Transfer Company, Inc., as escrow agent and custodian of the Escrow
Fund (as defined below) (the "Escrow Agent").
WHEREAS:
A. Pursuant to an Agreement and Plan of Reorganization dated as of
October ___, 2000 (the "Reorganization Agreement"), among Merilus USA, 613636
British Columbia, Inc., a wholly owned subsidiary of Merilus USA, and Merilus
Canada, the parties agreed that on the closing of the transaction contemplated
under the Reorganization Agreement, Merilus USA, Merilus Canada and the Holders
would execute and deliver an Escrow Agreement containing the terms and
conditions set forth in an Exhibit to the Reorganization Agreement together with
such other terms and conditions as may be agreed to by the parties to the
Reorganization Agreement acting reasonably.
B. Pursuant to a reorganization of the capital structure of Merilus
Canada (the "Reorganization") contemplated in the Reorganization Agreement,
Merilus Canada issued certain exchangeable shares (the "Exchangeable Shares")
having certain rights, privileges, restrictions and conditions attached
(collectively, the "Exchangeable Share Provisions") to the Holders which are
convertible into shares of Common Stock of Merilus USA.
C. The Reorganization Agreement provides that all (100%) (the "Escrow
Percentage") of the shares of the Common Stock of Merilus USA received by the
Holders in exchange for outstanding Exchangeable Shares issued pursuant to the
Reorganization Agreement will be placed in an escrow account immediately when
issued on the terms and conditions set forth in this Escrow Agreement (the
"Escrow Shares").
D. Unless otherwise indicated herein, all terms used herein
without definition will have the same meaning as set forth in the Reorganization
Agreement.
NOW THEREFORE, for and in consideration of the foregoing and
the mutual covenants and agreements contained in the Reorganization Agreement
and in this Escrow Agreement, the parties agree as follows:
1.0 ESTABLISHMENT OF ESCROW ACCOUNT
1.1 Deposit of Shares. Merilus USA will deposit as soon as practicable
on the Holder's behalf with the Escrow Agent stock certificates representing the
Escrow Shares issued pursuant to the Reorganization Agreement registered in the
name of the Holder and in the relative amounts set forth on Exhibit 1.1 attached
(the "Initial Escrow Shares") and an Assignment separate from the stock
certificates executed by such Holder. Any shares of Common Stock of Merilus USA
that result from any share dividend, reclassification, stock split, subdivision
or combination of shares, recapitalization, merger or other events made with
respect to any Escrow Shares held in escrow under this Escrow Agreement
("Additional Shares") will be delivered to the Escrow Agent by Merilus USA on
behalf of the Holder and will be held by the Escrow Agent in accordance with
this Escrow Agreement. Unless otherwise indicated, as used in this Escrow
Agreement, the term "Escrow Shares" includes the Initial Escrow Shares and any
Additional Shares, and the term "Escrow Fund" will include the Escrow Shares and
the Proceeds (as defined below). The Escrow Agent agrees to accept delivery of
the Escrow Shares and to hold the Escrow Fund in escrow in accordance with this
Escrow Agreement and to release the Escrow Fund out of escrow as provided in
this Escrow Agreement.
1.2 Dividends; Voting and Rights of Ownership. Any cash dividends,
dividends payable in property or other distributions of any kind (except for
Additional Shares) made in respect of the Escrow Shares will be held
138
by the Escrow Agent pursuant to this agreement. The Holder will have the right
to vote the Escrow Shares held in escrow for the account of Holder so long as
such Escrow Shares are held in escrow. While the Escrow Shares remain in the
Escrow Agent's possession pursuant to this Escrow Agreement, the Holder will
retain and will be able to exercise all other incidents of ownership of the
Escrow Shares that are not inconsistent with the terms and conditions of this
Escrow Agreement. Without limiting the foregoing, following the expiration of
the lock-up period required under the "pooling of interests" accounting rules
(the "Lock-Up Date"), the Holder may instruct the Escrow Agent to sell the
Escrow Shares for cash provided that any and all proceeds (the "Proceeds") from
such sale will become part of the Escrow Fund and will be disbursed in
accordance with this Escrow Agreement. The Escrow Agent will hold such Proceeds
in the Escrow Fund and will invest such Proceeds as hereinafter provided.
1.3 No Encumbrance. None of the Escrow Fund or any beneficial interest
therein may be pledged, sold, assigned or transferred, including by operation of
law or by Holder, or may be taken or reached by any legal or equitable process
in satisfaction of any debt or other liability of Holder, prior to the delivery
of the Escrow Fund by the Escrow Agent or Merilus USA to Holder pursuant to this
Escrow Agreement.
1.4 Power to Transfer Escrow Fund. The Escrow Agent is hereby
granted the power to effect any transfer of the Escrow Fund provided for in this
Escrow Agreement.
1.5 Investment of Proceeds. During the term of this Escrow Agreement
and following the Lock-Up Date, the Proceeds (if any) will be invested and
reinvested by the Escrow Agent (i) in the investment indicated on Schedule 1,
(ii) at the direction, if any, of the Holder, in the investments described in
Schedule 2, or (iii) in such other investments as will be directed in writing by
Merilus USA and the Holder and as will be acceptable to the Escrow Agent. All
investment orders involving U.S. Treasury obligations, commercial paper and
other direct investments may be executed through broker-dealers selected by the
Escrow Agent (which will include affiliates of the Escrow Agent). Periodic
statements will be provided to the Holder and Merilus USA reflecting
transactions executed on behalf of the Escrow Fund. Merilus USA and Holder, upon
written request, will receive a statement of transaction details upon completion
of any securities transaction in the Proceeds without any additional cost. The
Escrow Agent will have the right to liquidate any investments held in order to
provide funds necessary to make required payments under this Escrow Agreement.
The Escrow Agent will have no liability for any loss sustained as a result of
any investment in an investment indicated on Schedule 1 or any investment made
pursuant to the instructions of the parties to this Escrow Agreement or as a
result of any liquidation of any investment prior to its maturity or for the
failure of the parties to give the Escrow Agent instructions to invest or
reinvest the Proceeds.
2.0 RESOLUTION OF CLAIMS
2.1 Indemnification Obligations. The Escrow Fund will serve as the
first source, but not the sole source, of payment for the indemnity obligations
of the Holder under Article XI of the Reorganization Agreement, which
obligations will continue in accordance with Article XI of the Reorganization
Agreement. Payment for any amount determined as provided below to be owing to
Merilus USA or Merilus Canada under such indemnity obligations under the
Reorganization Agreement ("Damages") and any award of attorneys' fees and
charges owing to Merilus USA pursuant to Sections 2.3(c)(iv) or 4.3 of this
Reorganization Agreement (a "Prevailing Party Award") will be made by the
release of all or a portion, as the case may be, of the Escrow Fund to Merilus
USA (each such payment, an "Escrow Adjustment"), subject to the limitations set
forth in Section 11.02 of the Reorganization Agreement. By the execution of this
Escrow Agreement, the Holder agrees to be bound 3 by the indemnification
provisions set forth in Article XI of the Reorganization Agreement and confirms
that the issuance by Merilus USA of the Escrow Percentage of Merilus USA Stock
pursuant to the Reorganization Agreement is subject to this Escrow Agreement.
Notwithstanding anything to the contrary herein, Merilus USA will not be
entitled to receive payment of any portion of a Prevailing Party Award which is
already a part of Damages (i.e., there will be no double payment of legal fees).
Any Escrow Adjustments and corresponding release to Merilus USA of the Escrow
Fund will be made as of the date or dates specified and the manner provided for
in this Escrow Agreement. Each Escrow Adjustment to the Escrow Fund will be made
by the release to Merilus USA of a portion of the Escrow Fund having an
aggregate value equal to the Damages and any Prevailing Party Award, with the
per share value of any Escrow Shares being equal, for all purposes under this
Escrow Agreement, to the closing price of such Escrow Shares on the Closing Date
(the "Merilus USA Stock Price"). Any such release will be made first through the
release of Escrow Shares, if any are then held in the Escrow Fund, and
thereafter through the release of Proceeds
139
having an aggregate value equal to the value of the number of Escrow Shares
which would otherwise have been so released hereunder in satisfaction of the
Holder's indemnification obligation. In lieu of releasing any fractional Escrow
Shares, any fraction of a released Escrow Share that would otherwise be released
will be rounded to the nearest whole Escrow Share and any amounts released in
excess of the Damages as a result of such rounding will be returned to Escrow
Fund. In the event of doubt, and notwithstanding any contained in this Section
2.1 to the contrary, Merilus USA, and the Holder agree that the foregoing
provisions of this Section 2.1 will be applied and interpreted in a manner
consistent with the "pooling of interests" accounting rules.
2.2 Notice of Claims. Promptly after the receipt by Merilus USA of
notice or discovery of any claim, damage, or legal action or proceeding giving
rise to indemnification rights under the Reorganization Agreement (a "Claim")
Merilus USA will give the Holder written notice of such Claim and will provide a
copy of such notice to the Escrow Agent. Each notice of a Claim by Merilus USA
(a "Notice of Claim") will be in writing, will be delivered on or before the
Release Date (as defined in Section 3.1 below) and will contain a detailed
account of the specific facts known to Merilus USA on which the Claim is based,
including a description of the specific representation, warranty or covenant in
the Reorganization Agreement (if any) which Merilus USA reasonably believes has
been breached. The Notice of Claim will specify whether the matter is subject to
a third-party claim against Merilus USA or Merilus Canada in a litigation or
arbitration or whether the matter concerns disputes regarding a breach of
representations and warranties or performance or nonperformance of a party's
obligations under the Reorganization Agreement.
2.3 Resolution of Claims. Any Notice of Claim received by the Holder
and the Escrow Agent pursuant to Section 2.2 above will be resolved as follows:
(a) Uncontested Claims. In the event that the Holder does not contest
a Notice of Claim (an "Uncontested Claim") in writing within
thirty (30) calendar days, as provided below in Section 2.3(b),
Merilus USA may deliver to the Escrow Agent, with a copy to the
Holder, a written demand by Merilus USA (a "Merilus USA Demand")
stating that a Notice of Claim has been given as required in this
Escrow Agreement and that no notice of contest has been received
from the Holder during the period specified in this Escrow
Agreement and further setting forth the proposed Escrow
Adjustments to be made in accordance with this Section 2.3(a).
Within thirty (30) calendar days after receipt of Merilus USA
Demand, the Holder may object in a written notice delivered to
Merilus USA and the Escrow Agent to the computations or other
administrative matters relating to the proposed Escrow
Adjustments (but may not object to the validity or amount of the
Claim previously disclosed in the Notice of Claim), whereupon
neither the Escrow Agent nor Merilus USA will make any of the
Escrow Adjustments until either:
(i) Merilus USA and the Holder will have given the Escrow Agent
joint written notice setting forth the agreed Escrow
Adjustments, or
(ii) the matter is resolved as provided in Sections 2.3(b) and
2.3(c).
Upon satisfaction of the foregoing, the Escrow Agent, as
directed in writing by Merilus USA, and Merilus USA will
promptly take all steps to implement the final Escrow
Adjustments.
(b) Contested Claims. In the event that the Holder gives written
notice to Merilus USA and the Escrow Agent contesting all or a
portion of a Notice of Claim (a "Contested Claim") within the
30-day period provided above, matters relating to such Contested
Claim that are subject to third party claims against Merilus USA
or Merilus Canada in a litigation or arbitration will await the
final decision, award or settlement of such litigation or
arbitration, while matters relating to such Contested Claim that
arise between Merilus USA on the one hand and Merilus Canada
and/or the Holder on the other hand, including any disputes
regarding breach of representations and warranties or performance
or nonperformance of a party's obligations under the
Reorganization Agreement ("Arbitrable Claims") will be settled in
accordance with Section 2.3(c) below. Any portion of a Notice of
Claim that is not contested or is subsequently settled by Merilus
USA and the Holder will be resolved as set forth above in Section
2.3(a). If written notice is received by the Escrow Agent that a
Notice of Claim is contested by the Holder, then the Escrow Agent
will hold hereunder after what would otherwise be the Release
Date (as defined in Section 3.1 below), the
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number of Escrow Shares specified in the Release Notice or as
otherwise provided in Section 3.1, until the earlier of:
(i) receipt of a settlement agreement executed by Merilus USA and the
Holder setting forth a resolution of the Notice of Claim and the
Escrow Adjustments;
a. receipt of a written notice from Merilus USA (a
"Merilus Usa Distribution Notice") attaching a copy of
the final award or decision of the arbitrator and
setting forth the Escrow Adjustments (Merilus USA will
at the same time provide a copy of Merilus USA
Distribution Notice to the Holder); or
b. receipt of a written notice from the Holder (a
"Representative Distribution Notice") attaching a copy
of the final award or decision of the arbitrator that
no Escrow Adjustments are to be made as a result of
such award (the Holder will at the same time provide a
copy of the Representative Distribution Notice to
Merilus USA). If the earliest of the three events
described in the preceding sentence is (i) or (ii), the
Escrow Agent will, within twenty (20) calendar days of
receipt of the settlement agreement or Merilus USA
Distribution Notice, as applicable,
(a) release to Merilus USA of that portion of the Escrow
Fund specified in the Escrow Adjustments and
(b) if the Release Date has occurred, and there are no
remaining unresolved Contested Claims, release to the
Holder the balance of the Escrow Fund. If the earliest
of the three events described above is (iii) and the
Release Date has occurred, and there are no remaining
unresolved Contested Claims, the Escrow Agent will,
within twenty (20) calendar days of receipt of the
Representative Distribution Notice, release to the
Holder the Retained Escrow (as defined in Section 3.1),
provided that if the Release Date has not occurred the
Escrow Fund will continue to be held pursuant to the
terms of this Escrow Agreement.
(c) Arbitration.
(i) Arbitration Rules. Any Arbitrable Claim, and any dispute
between the Holder and Merilus USA under this Escrow
Agreement, will be submitted to final and binding
arbitration before a single arbitrator in San Diego,
California in accordance with the commercial arbitration
rules of the American Arbitration Association; provided,
however, that if the Arbitrable Claim will exceed
$1,000,000, the arbitration will be before three
arbitrators, two of whom will be lawyers with not less than
ten (10) years of corporate or related business experience.
Among other matters, such arbitrator(s) will be authorized
upon request of either Merilus USA or the Holder determine
whether such Arbitrable Claim is of a nature which may be
resolved, and appropriate relief afforded, pursuant to
arbitration.
(ii) Binding Effect. The final decision of the arbitrator
will be furnished in writing to the Escrow Agent, the
Holder, the Holder and Merilus USA and will constitute a
conclusive determination of the issue in question, binding
upon the Holder and Merilus USA. The arbitrator 5 will have
the authority to grant any equitable and legal remedies that
would be available in any judicial proceeding instituted to
resolve an Arbitrable Claim. Any judgment upon the award
rendered by the arbitrator may be entered in any court
having jurisdiction over the subject matter.
(iii) Compensation of Arbitrator. The arbitrator will be
compensated for his or her services, as provided below in
Section 2.3(c)(iv), in accordance with the commercial
arbitration rules of the American Arbitration Association.
(iv) Payment of Costs. The substantially prevailing party in
any arbitration will be entitled to an award of attorneys'
fees and costs, and all costs of arbitration, including
those provided for above, will be paid by the losing party,
subject in each case to a determination by the arbitrator as
to which party is the substantially prevailing party and the
amount of such fees and costs to be allocated to such party
and subject to the terms of Section 2.3(c)(iii). Any amounts
payable to Merilus USA by or on account of the Holder under
this subsection will be reimbursed as if the amount of such
awarded fees and expenses were an Uncontested Claim.
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(v) Terms of Arbitration. The arbitrator chosen in
accordance with these provisions will not have the power to
alter, amend or otherwise affect the terms of these
arbitration provisions or the provisions of this Escrow
Agreement, the Reorganization Agreement or any other
documents that are executed in connection therewith.
(vi) Exclusive Remedy. Arbitration or mediation under this
Section 2.3(c) will be the sole and exclusive remedy of the
parties for any Arbitrable Claim arising out of this Escrow
Agreement.
3.0 RELEASE FROM ESCROW
3.1 Release of Escrow Fund. The Escrow Fund will be released by the
Escrow Agent and Merilus USA as soon as practicable, taking into account the
notices to be delivered under this Section 3.1, after the first anniversary of
the date of this Escrow Agreement (the "Release Date") Less:
(a) any of the Escrow Fund delivered to or deliverable to Merilus USA
in satisfaction of Uncontested Claims or Contested Claims which
have been settled by the parties to this Escrow Agreement, and
(b) any of the Escrow Fund subject to delivery to Merilus USA in
accordance with Section 2.3(b) with respect to any then pending
Contested Claims. Within ten (10) of the Escrow Agent's Business
Days (as defined in Section 7.4) after the Release Date, Merilus
USA and the Holder will deliver to the Escrow Agent a written
notice jointly signed (a "Release Notice") setting forth the
amount of the Escrow Fund to be released by the Escrow Agent (the
"Released Escrow") including the amount of the Escrow Fund to be
released to each Holder and the amount of the Escrow Fund to be
retained as provided in this Section 3.1 (the "Retained Escrow").
Merilus USA and the Holder will make a good faith effort to agree
on a reasonable portion of the Escrow Fund to retain for pending
Contested Claims and Prevailing Party Awards and related
expenses, which will be an amount reasonably determined by
Merilus USA to cover the amount of the Contested Claim or
Prevailing Party Award plus related indemnifiable costs, but not
to exceed two times the value of the Contested Claim or
Prevailing Party Award. Until such agreement is reached, or a
determination is made in accordance with Section 2.3(c), the
remaining Escrow Fund will be the Retained Escrow. The Released
Escrow will be released to the Holder in proportion to their
respective interests in the Initial Escrow Shares. In lieu of
releasing any fractional Escrow Shares, any fraction of a
released Escrow Share that would otherwise be released will be
rounded to the nearest whole Escrow Share. Promptly after receipt
of the Release Notice, the Escrow Agent will deliver the Escrow
Fund in accordance with the Release Notice. The Escrow Agent will
not be required to take 6 such action until the Escrow Agent has
received the Release Notice executed by Merilus USA and the
Holder or, in the event Merilus USA and the Holder fail to
execute and deliver a jointly approved Release Notice, a final
award or decision which specifies the distribution of the Escrow
Fund.
3.2 Release of Retained Escrow. Upon the resolution of Contested Claims
as provided for in Section 2.3(b), the Retained Escrow will be subject to
release by the Escrow Agent to Merilus USA and/or to the Holder in accordance
with Section 2.3(b), this Section and as otherwise provided for in this Escrow
Agreement. The Escrow Agent and Merilus USA will cause the transfer agent to
transfer to Merilus USA the number of Escrow Shares to be released to Merilus
USA pursuant to Section 2.3(b) and reissue certificates for Escrow Shares that
are to be either distributed to the Holder pursuant to Section 3.1 or further
retained by the Escrow Agent pending the resolution of Contested Claims and/or
Prevailing Party Awards. Any Escrow Fund released from escrow to Merilus USA
will be subject to cancellation by Merilus USA without requiring Merilus USA to
pay any consideration whatsoever in receipt to Merilus Canada or any of the
Holder, except in satisfaction of the Claim.
3.3 Expenses of Holder. The Holder will be entitled to be reimbursed
his reasonable out-of-pocket expenses and the reasonable fees and disbursements
of counsel retained by him. Such reimbursements will be treated as an
Uncontested Claim on a pro rata basis among the contributors to the Escrow Fund,
for all services performed pursuant to the Reorganization Agreement and this
Escrow Agreement; provided, however, that payment of any Escrow Adjustment will
take priority over payments to the Holder, as provided herein. The Escrow Agent
will follow the joint written instructions of the Holder and Merilus USA
concerning the release or sale of Escrow Fund
142
relating to the reimbursement of the Holder. If upon termination of this Escrow
Agreement, the Holder will not have received the reimbursements to which he is
entitled hereunder, then the Holder will be entitled to reimbursement from the
other Holder on a joint and several basis.
4.0 ESCROW AGENT
4.1 Escrow Agent. The Escrow Agent undertakes to perform only such
duties as are expressly set forth herein and no duties will be implied. The
Escrow Agent will have no liability under and no duty to inquire as to the
provisions of any agreement other than this Escrow Agreement. The Escrow Agent
may rely upon and will not be liable for acting or refraining from acting upon
any written notice, instruction or request furnished to it hereunder and
believed by it to be genuine and to have been signed or presented by the proper
party or parties. The Escrow Agent will be under no duty to inquire into or
investigate the validity, accuracy or content of any such document. The Escrow
Agent will have no duty to solicit any payments which may be due it. The Escrow
Agent will not be liable for any action taken or omitted by it in good faith
except to the extent that a court of competent jurisdiction determines that the
Escrow Agent's gross negligence or willful misconduct was the primary cause of
any loss to Merilus USA or Holder. The Escrow Agent may execute any of its
powers and perform any of its duties hereunder directly or through agents or
attorneys (and will be liable only for the careful selection of any such agent
or attorney) and may consult with independent counsel and accountants to be
selected and retained by it. The Escrow Agent will not be liable for anything
done, suffered or omitted in good faith by it in accordance with the advice or
opinion of any such counsel, accountants or other skilled persons. In the event
that the Escrow Agent will be uncertain as to its duties or rights hereunder or
will receive instructions, claims or demands from any party to this Escrow
Agreement which, in its opinion, conflict with any of the provisions of this
Escrow Agreement, it will be entitled to refrain from taking any action and its
sole obligation will be entitled to keep safely all property held in escrow
until it will be directed otherwise in writing by all of the other parties to
this Escrow Agreement or by a final order or judgment of a court of competent
jurisdiction. Anything in this Escrow Agreement to the 7 contrary
notwithstanding, in no event will the Escrow Agent be liable for special,
indirect or consequential loss or damage of any kind whatsoever (including but
not limited to lost profits), even if the Escrow Agent has been advised of the
likelihood of such loss or damage and regardless of the form of action.
4.2 Succession. The Escrow Agent may resign and be discharged from its
duties or obligations hereunder by giving 10 days advance notice in writing of
such resignation to the other parties to this Escrow Agreement specifying a date
when such resignation will take effect. Any corporation or association into
which the Escrow Agent may be merged or converted or with which it may be
consolidated, or any corporation or association to which all or substantially
all the escrow business of the Escrow Agent's corporate trust line of business
may be transferred, will be the Escrow Agent under this Escrow Agreement without
further act.
4.3 Fees. Merilus USA and the Holder agree to equally:
(a) pay the Escrow Agent upon execution of this Escrow Agreement
and from time to time thereafter reasonable compensation for
the services to be rendered hereunder, which unless otherwise
agreed in writing will be as described in Schedule 1 attached,
and
(b) pay or reimburse the Escrow Agent upon request for all
expenses, disbursements and advances, including reasonable
attorney's fees and expenses, incurred or made by it in
connection with the preparation, execution, performance,
delivery, modification and termination of this Escrow
Agreement.
Each party will have a right of contribution against the other party to the
extent such party pays more than its 50% share of the expenses set forth in (i)
and (ii) of this Section 4.3.
4.4 Indemnity. Merilus USA and the Holder will jointly and severally
indemnify, defend and save harmless the Escrow Agent and its directors,
officers, agents and employees (the "indemnitees") from all loss, liability or
expense (including the fees and expenses of in house or outside counsel) arising
out of or in connection with:
143
(a) the Escrow Agent's execution and performance of this Escrow
Agreement, except in the case of any indemnitee to the extent
that such loss, liability or expense is due to the gross
negligence or willful misconduct of such indemnitee, or
(b) its following any instructions or other directions from
Merilus USA or Holder, except to the extent that its following
any such instruction or direction is expressly forbidden by
the terms of this Escrow Agreement.
The parties to this Escrow Agreement acknowledge that the foregoing indemnities
will survive the resignation or removal of the Escrow Agent or the termination
of this Escrow Agreement. The parties hereby grant the Escrow Agent a lien on,
right of set-off against and security interest in the Escrow Fund for the
payment of any claim for indemnification, compensation, expenses and amounts due
hereunder.
4.5 TINS. Merilus USA and Holder each represent that its correct
Taxpayer Identification Number ("TIN") assigned by the Internal Revenue Service
or any other taxing authority is set forth in Schedule 1. All interest or other
income earned under the Escrow Agreement will be allocated to Holder in
proportion to Holder's interest in the Escrow Fund and reported by the Holder to
the Internal Revenue Service or any other taxing authority. Notwithstanding such
written directions, Escrow Agent will report and, as required withhold any taxes
as it determines may be required by any law or regulation in effect at the time
of the distribution. In the event that any earnings remain undistributed at the
end of any calendar year, Escrow Agent will report to the Internal Revenue
Service or such other authority such earnings as it deems appropriate or as
required by any applicable law or regulation or, to the extent consistent
therewith, as directed in writing by Merilus USA and the Holder. In addition,
Escrow Agent will withhold any taxes it deems appropriate and will remit such
taxes to the appropriate authorities.
5.0 TERMINATION; DEFICIENCY CLAIMS
This Escrow Agreement and the escrow created hereby will
terminate following Escrow Agent's delivery, and the Holder's and Merilus USA's
release of all remaining Escrow Fund to the Holder and/or Merilus USA pursuant
to Sections 2 or 3. In the event that upon the termination of this Escrow
Agreement, the value of the Escrow Fund released to Merilus USA pursuant to the
provisions of this Escrow Agreement is insufficient to pay in full to Merilus
USA the total amount of the Damages and Prevailing Party Awards to which it is
entitled, then Merilus USA will be entitled to pursue its remedies for any such
deficiency under the Reorganization Agreement; provided, however, that no party
to this Escrow Agreement in connection with any such action may contest any
Uncontested Claim or any Contested Claim that has been resolved in accordance
with the provisions of this Escrow Agreement.
6. MISCELLANEOUS PROVISIONS
6.1 Parties in Interest. This Escrow Agreement is not intended, nor
will it be construed, to confer any enforceable rights on any Person not a party
to this Escrow Agreement. All of the terms and provisions of this Escrow
Agreement will be binding upon and inure to the benefit of and be enforceable by
the respective successors and assigns of the parties to this Escrow Agreement.
6.2 Attorneys' Fees. In the event of any action to enforce any
provision of this Escrow Agreement by Merilus USA or the Holder, or on account
of any default under or breach of this Escrow Agreement by Merilus USA or the
Holder, the substantially prevailing party in such action will be entitled to
recover, in addition to all other relief, from the other party all attorneys'
fees incurred by the substantially prevailing party in connection with such
action (including, but not limited to, any appeal); provided, however that any
such fees will not be duplicative of attorneys fees and expenses payable under
Section 2.3(c)(iv).
6.3 Entire Agreement. This Escrow Agreement constitutes the final and
entire agreement among the parties with respect to the subject matter of this
Escrow Agreement and supersedes all prior arrangements or understandings.
6.4 Form of Communication. All communications hereunder will be in writing
and will be deemed to be duly given and received:
144
(a) upon delivery if delivered personally or upon confirmed
transmittal if by facsimile;
(b) on the next Business Day (as hereinafter defined) if sent by
overnight courier; or
(c) four (4) Business Days after mailing if mailed by prepaid
registered mail, return receipt requested, to the appropriate
notice address set forth on Schedule 1 or at such other address
as any party to this Escrow Agreement may have furnished to the
other parties in writing by registered mail, return receipt
requested.
Notwithstanding the above, in the case of communications delivered to the Escrow
Agent pursuant to (ii) and (iii) of this Section 6.4, such communications will
be deemed to have been given on the date received by the Escrow Agent. In the
event that the Escrow Agent, in its sole discretion, will determine that an
emergency exists, the Escrow Agent may use such other means of communication as
the Escrow Agent deems appropriate. "Business Day" will mean any day other than
a Saturday, 9 Sunday or any other day on which the Escrow Agent located at the
notice address set forth on Schedule 1 is authorized or required by law or
executive order to remain closed.
6.5 Security Procedures. In the event Escrow Share transfer
instructions are given (other than in writing at the time of execution of this
Escrow Agreement), whether in writing, by telecopier or otherwise, the Escrow
Agent is authorized to seek confirmation of such instructions by telephone
call-back to the person or persons designated on Schedule 2 attached ("Schedule
2"), and the Escrow Agent may rely upon the confirmation of anyone purporting to
be the person or persons so designated. The persons and telephone numbers for
call-backs may be changed only in a writing actually received and acknowledged
by the Escrow Agent. The Escrow Agent and the beneficiary any Escrow Share
transfer may rely solely upon any account numbers or similar identifying numbers
provided by Merilus USA or Holder to identify such beneficiary. The Escrow Agent
may apply any of the Escrow Fund for any payment order it executes using any
such identifying number, even where its use may result in a person other than
the beneficiary being paid. The parties to this Escrow Agreement acknowledge
that these security procedures are commercially reasonable.
6.6 Severability. If any term or provision of this Escrow Agreement or
the application as to any Person or circumstance will to any extent be invalid
or unenforceable, the remaining terms and provisions of this Escrow Agreement or
the application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable will not be affected
thereby and each term and provision of this Escrow Agreement will be valid and
enforceable to the fullest extent permitted by law.
6.7 Counterparts. This Escrow Agreement may be executed in two or more
partially or fully executed counterparts, each of which will be deemed an
original and will bind the signatory, but all of which together will constitute
but one and the same instrument. The execution and delivery of a Signature Page
to Escrow Agreement in the form annexed to this Escrow Agreement by any party to
this Escrow Agreement who will have been furnished the final form of this Escrow
Agreement will constitute the execution and delivery of this Escrow Agreement by
such party.
6.8 Headings. The headings of the various sections of this Escrow
Agreement have been inserted for convenience of reference only and will not be
deemed to be a part of this Escrow Agreement.
6.9 Miscellaneous. The provisions of this Escrow Agreement may be
waived, altered, amended or supplemented, in whole or in part, only by a writing
signed by all of the parties to this Escrow Agreement. Neither this Escrow
Agreement nor any right or interest hereunder may be assigned in whole or in
part by any party, except as provided in Section 6, without the prior consent of
the other parties. This Escrow Agreement will be governed by and construed under
the laws of the State of Nevada, except the rights, duties and obligations of
the Escrow Agent will be governed by the laws of the State of Utah. The parties
further hereby waive any right to a trial by jury with respect to any lawsuit or
judicial proceeding arising or relating to this Escrow Agreement. No party to
this Escrow Agreement is liable to any other party for losses due to, or if it
is unable to perform its obligations under the terms of this Escrow Agreement
because of, acts of God, fire, floods, strikes, equipment or transmission
failure, or other causes reasonably beyond its control.
145
IN WITNESS WHEREOF, the parties have duly executed this Escrow
Agreement as of the day and year set forth on Schedule 1.
MERILUS, INC.
By:_____________________________
Name:__________________________
Title:___________________________
MERILUS TECHNOLOGIES INC.
By:_____________________________
Name:__________________________
Title:___________________________
INTERWEST TRANSFER COMPANY, INC.
By:_____________________________
Name:__________________________
Title:___________________________