EXHIBIT 10.3
ADSERO CORP.
and
YAC CORP.
and
3091732 NOVA SCOTIA COMPANY
AS "ADSERO CALLCO"
and
3091503 NOVA SCOTIA COMPANY
AS "COMPANY" OR "TAC"
and
THE PERSONS WHO HOLD EXCHANGEABLE SHARES
OF THE COMPANY AND
ARE IDENTIFIED AS "HOLDERS" ON THE SIGNATURE
PAGE HEREOF
AS "HOLDERS"
SERIES II EXCHANGEABLE SHARES
VOTING, EXCHANGE AND SUPPORT AGREEMENT
ARTICLE 1
DEFINITIONS AND INTERPRETATION
------------------------------
Page #
Section 1.1 Definitions 2
Section 1.2 Interpretation Not Affected by Headings, Etc. 4
Section 1.3 Number, Gender, Etc. 4
Section 1.4 Date for Any Action 4
Section 1.5 Currency 4
ARTICLE 2
SERIES A SPECIAL VOTING SHARES
------------------------------
Section 2.1 Issuance and Ownership of the Series A
Special Voting Shares 5
Section 2.2 Series A Special Voting Shares Non-Transferable 5
Section 2.3 Series A Special Voting Shares Not to be Pledged 5
ARTICLE 3
EXERCISE OF VOTING RIGHTS
-------------------------
Section 3.1 Voting Rights 5
Section 3.2 Number of Votes 5
Section 3.3 Copies of Shareholder Information 6
Section 3.4 Other Materials 6
Section 3.5 Voting by the Holders, and Attendance of
Holders' Representatives, at Meeting 6
Section 3.6 Surrender of Series A Special Voting Shares
for Cancellation 6
Section 3.7 Surrender of Series A Special Voting Share Certificate 7
ARTICLE 4
INSOLVENCY EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
------------------------------------------------
Section 4.1 Grant and Ownership of the Insolvency Exchange Right 7
Section 4.2 Purchase Price 7
Section 4.3 Exercise Instructions 7
Section 4.4 Delivery of Exchangeable Share Consideration;
Effect of Exercise 8
Section 4.5 Exercise of Insolvency Exchange Right Subsequent
to Retraction 9
Section 4.6 Stamp or Other Transfer Taxes 9
Section 4.7 Notice of Insolvency Event 10
Section 4.8 Automatic Exchange on Liquidation of Adsero 10
Section 4.9 Call Rights 11
ARTICLE 5
CERTAIN RIGHTS OF ADSERO CALLCO
TO ACQUIRE EXCHANGEABLE SHARES
------------------------------
Section 5.1 Adsero Callco Liquidation Call Right 11
Section 5.2 Adsero Callco Retraction Call Right 12
Section 5.3 Withholding Rights 14
Section 5.4 Restrictions on Transfer 14
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ARTICLE 6
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF ADSERO, YAC, ADSERO CALLCO AND THE COMPANY
---------------------------------------------
Page #
Section 6.1 Covenants of Adsero Regarding Series II
Exchangeable Shares 15
Section 6.2 Notification of Certain Events 16
Section 6.3 Delivery of Shares by Adsero 16
Section 6.4 Delivery of Shares 17
Section 6.5 Economic Equivalence 17
Section 6.6 Ownership of Outstanding Shares; Voting 18
Section 6.7 Adsero and Affiliates Not to Vote Exchangeable Shares 18
Section 6.8 Tender Offers, Etc. 19
Section 6.9 Representations and Warranties of Adsero, YAC,
Adsero Callco and the Company 19
Section 6.10 Registration and Reservation of Adsero Common
Shares 20
Section 6.11 Registration under the U.S. Securities Act of 1933 20
Section 6.12 Allocation of Expenses 20
ARTICLE 7
AMENDMENTS AND SUPPLEMENTAL AGREEMENTS
--------------------------------------
Section 7.1 Amendments, Modifications, Etc. 20
Section 7.2 Changes in Capital of Adsero and the Company 20
ARTICLE 8
TERMINATION
-----------
Section 8.1 Term 21
ARTICLE 9
GENERAL
-------
Section 9.1 Severability 21
Section 9.2 Enurement 21
Section 9.3 Notices to Parties 21
Section 9.4 Risk of Payments by Post 23
Section 9.5 Counterparts 23
Section 9.6 Jurisdiction 23
Section 9.7 Language 23
ADDENDA
-------
Schedule "A" - Series II Exchangeable Share Provisions.
Schedule "B" - Rights, Privileges, Restrictions and Conditions Attached to the
Series A Special Voting Shares.
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SERIES II EXCHANGEABLE SHARES
VOTING, EXCHANGE AND SUPPORT AGREEMENT
THIS AGREEMENT is entered into as of January 2, 2005, by Adsero Corp.,
a corporation existing under the laws of the State of Delaware and doing
business as Adsero Corp. ("Adsero"), 3091732 Nova Scotia Company, an unlimited
company existing under the laws of the Province of Nova Scotia ("Adsero
Callco"), 3091503 Nova Scotia Company, an unlimited company existing under the
laws of the Province of Nova Scotia (the `Company"), YAC Corp. ("YAC") and the
persons who hold Preferred Shares of the Company and are Identified as the
"Holders' on the signature page hereof (collectively, the "Holders").
WHEREAS, pursuant to a Share Purchase Agreement dated as of January 2,
2005, by and among Adsero, the Company, Adsero Callco, YAC, Teckn-O-Laser
Company, Teckn-O-Laser Global Company, the Holders, and other security holders
of the Company named therein (the "Purchase Agreement"), the parties thereto
agreed that on the closing of the transactions contemplated under the Purchase
Agreement, the parties hereto would execute and deliver a Voting, Exchange and
Support Agreement containing the terms and conditions set forth as an Exhibit to
the Purchase Agreement;
AND WHEREAS pursuant to the Purchase Agreement, the Company has issued
to the Holders certain exchangeable shares of the Company (the "Series II
Exchangeable Shares") having the rights, privileges, restrictions and conditions
set forth in Schedule "A" (collectively, the "Series II Exchangeable Share
Provisions");
AND WHEREAS the parties desire to make appropriate provision and to
establish a procedure whereby voting rights in Adsero shall be exercisable by
the Holders, and in connection therewith, Adsero is to issue to the Holder of
each Series II Exchangeable Share one preference share in the capital of Adsero,
$0.0001 par value having the rights, privileges, restrictions and conditions set
forth in Schedule "B" attached thereto (collectively the "Series A Special
Voting Shares;
AND WHEREAS Adsero Callco is to have the right, exercisable upon the
occurrence of certain events, to require the Holders to sell their Series II
Exchangeable Shares to Adsero Callco;
NOW THEREFORE, in consideration of the respective covenants and
agreements provided in this agreement and for other good and valuable
consideration (including the payment of $1.00 and other valuable consideration
by the Holders to each of Adsero, YAC, Adsero Callco and the Company in
consideration of the right granted to the Holders herein) (the receipt and
sufficiency of which are hereby acknowledged), the parties agree as follows:
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ARTICLE 1
DEFINITIONS AND INTERPRETATION
------------------------------
SECTION 1.1 Definitions.
In this agreement, the following terms shall have the following meanings:
"ACT" means the Companies Act (Nova Scotia), as amended, consolidated
or reenacted from time to time.
"ADSERO COMMON SHARES" means the shares of Common Stock, par value
$0.001 per share, in the capital of Adsero.
"ADSERO CONSENT" has the meaning provided in Section 3.2 hereof.
"ADSERO LIQUIDATION PRICE" has the meaning provided in Section 4.8(b)
hereof.
"ADSERO MEETING" has the meaning provided in Section 3.2 hereof.
"AFFILIATE" shall have the meaning ascribed thereto in the Canada
Business Corporations Act, as amended, consolidated or re-enacted from
time to time.
"AUTOMATIC EXCHANGE RIGHTS" means the benefit of the obligation of
Adsero Callco to effect the automatic exchange of Adsero Common Shares
for Exchangeable Shares pursuant to Section 4.8 hereof.
"BOARD OF DIRECTORS" means the board of directors of the Company;
"BUSINESS DAY" has the meaning provided in the Series II Exchangeable
Share Provisions.
"CALL RIGHTS" means, collectively, the Liquidation Call Right and the
Retraction Call Right; and "Call Right" shall mean any one of such Call
Rights.
"CANADIAN DOLLAR EQUIVALENT" has the meaning provided in the Series II
Exchangeable Share Provisions.
"DATE OF ISSUANCE" has the meaning provided in Section 5.2(4) hereof.
"EFFECTIVE DATE" has the meaning provided in the Series II Exchangeable
Share Provisions.
"HOLDER(S)" means a Holder who exercises any of the rights provided
hereunder, as the context requires.
"HOLDER VOTES" has the meaning provided in Section 3.2 hereto.
"INSIDER" means (i) an officer or director of Adsero or of a subsidiary
thereof, (ii) a person beneficially owing ten percent (10%) or more of
the issued and outstanding
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voting securities of Adsero or (iii) a person that directly or
indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with Adsero.
"INSOLVENCY EVENT" means the institution by the Company of any
proceeding to be adjudicated a bankrupt or insolvent or to be dissolved
or wound-up, or the consent of the Company to the institution of
bankruptcy, insolvency, dissolution or winding-up proceedings against
it, or the filing of a petition, answer or consent seeking dissolution
or winding-up under any bankruptcy, insolvency or analogous laws,
including without limitation the Companies Creditors' Arrangement Act
(Canada) and the Bankruptcy and Insolvency Act (Canada), and the
failure by the Company to contest in good faith any such proceedings
commenced in respect of the Company within 15 days of becoming aware
thereof, or the consent by the Company to the filing of any such
petition or to the appointment of a receiver, or the making by the
Company of a general assignment for the benefit of creditors, or the
admission in writing by the Company of its inability to pay its debts
generally as they become due or the failure by the Company to declare
and pay any dividends as set forth under Article 3 of the Series II
Exchangeable Share Provisions, or the Company not being permitted,
pursuant to liquidity or solvency requirements of applicable law, to
declare any dividend or to redeem any Retracted Shares pursuant to
Section 6.5 of the Series II Exchangeable Share Provisions.
"INSOLVENCY EXCHANGE RIGHT" has the meaning provided in Section 4.1(a)
hereof.
"LIQUIDATION CALL RIGHT" has the meaning provided in Section 5.1(1)
hereof.
"LIQUIDATION EVENT" has the meaning provided in Section 4.8(a) hereof.
"LIQUIDATION EVENT EFFECTIVE TIME" has the meaning provided in Section
4.8(b) hereof.
"OFFICER'S CERTIFICATE" means, with respect to Adsero or the Company, a
certificate signed on behalf of such entity by any one of the Chairman
of the Board, the Vice-Chairman of the Board, the Chief Executive
Officer, the President, the Chief Financial Officer or any Executive
Vice-President, Senior Vice-President or Vice-President (or the
officers with equivalent responsibilities) of Adsero or the Company.
"PERSON" includes an individual, body corporate, partnership, company,
unincorporated syndicate or organization, trust, trustee, executor,
administrator and other legal representative.
"PREFERRED SHARES" means the Preferred Shares of the Company.
"PURCHASE RIGHT" has the meaning provided in Section 5.2(4) hereof.
"PURCHASED SHARES" has the meaning provided in Section 5.2(4) hereof.
"RETRACTED SHARES" has the meaning provided in Section 4.5 and Section
5.2 hereof, as the context requires.
"RETRACTION CALL PURCHASE PRICE" has the meaning provided in Section
5.2(1) hereof.
"RETRACTION CALL RIGHT" has the meaning provided in Section 5.2(1)
hereof.
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"RETRACTION DATE" has the meaning provided in the Series II
Exchangeable Share Provisions.
"RETRACTION REQUEST" has the meaning provided in the Series II
Exchangeable Share Provisions.
"SERIES II EXCHANGEABLE SHARE CONSIDERATION" has the meaning provided
in the Series II Exchangeable Share Provisions.
"SERIES II EXCHANGEABLE SHARE PROVISIONS" are as described in Schedule
"A" hereto.
"SERIES II EXCHANGEABLE SHARES" has the meaning provided in the Series
II Exchangeable Share Provisions.
"SERIES A SPECIAL VOTING SHARES" has the meaning provided in Schedule
"B" hereto.
"SUBSIDIARY" has the meaning provided in the Series II Exchangeable
Share Provisions.
"VOTING RIGHTS" means the voting rights attached to the Series A
Special Voting Shares as set forth in Schedule "B" hereto.
SECTION 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.
SECTION 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.
SECTION 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.
SECTION 1.5 Currency
All amounts in this agreement and its Schedule "A" (but excluding
Schedule "B") are in Canadian currency, while all amounts in Schedule "B" are in
US currency.
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ARTICLE 2
SERIES A SPECIAL VOTING SHARES
------------------------------
SECTION 2.1 Issuance and Ownership of the Series A Special Voting Shares.
Concomitantly with the issuance of each Series II Exchangeable Share by
the Company, Adsero will issue to each Holder one Series A Special Voting Share
to be hereafter held of record by each Holder. Adsero hereby acknowledges
receipt from each Holder of $1.00 and other good and valuable consideration (and
the adequacy thereof) for the issuance of any number of Series A Special Voting
Shares by Adsero to each Holder.
SECTION 2.2 Series A Special Voting Shares Non-Transferable.
The Holders shall not sell, transfer or otherwise dispose of the Series
A Special Voting Shares, provided, however that upon any sale, exchange or other
disposition of Series II Exchangeable Shares by a Holder permitted pursuant to
Section 5.4 hereof, the Holder shall transfer an equivalent number of Series A
Special Voting Shares to Adsero for cancellation.
SECTION 2.3 Series A Special Voting Shares Not to be Pledged.
The Holders shall not pledge, charge, hypothecate, grant a security
interest in, otherwise encumber or create any lien or adverse claim in respect
of the Series A Special Voting Shares.
ARTICLE 3
EXERCISE OF VOTING RIGHTS
-------------------------
SECTION 3.1 Voting Rights.
The Holders, as the holders of record of the Series A Special Voting
Shares, shall be entitled to all of the Voting Rights, including the right to
consent to or to vote, in person or by proxy, the Series A Special Voting
Shares, on any matter, question or proposition whatsoever that may properly come
before the shareholders of Adsero at an Adsero Meeting or in connection with an
Adsero Consent. Except for the Voting Rights, the Holders shall not be entitled
to any other voting rights, entitlements or privileges in their capacity as the
holders of the Series A Special Voting Shares.
SECTION 3.2 Number of Votes.
With respect to all meetings of shareholders of Adsero at which holders
of Adsero Common Shares are entitled to vote (an "Adsero Meeting") and with
respect to all written consents sought by Adsero including the holders of Adsero
Common Shares (an "Adsero Consent"), each Holder shall be entitled to cast and
exercise a number of votes equal to the number of Series A Special Voting Shares
owned of record by such Holder on the record date established by Adsero or by
applicable law for such Adsero Meeting or Adsero Consent, as the case may be,
(the "Holder Votes') in respect of each matter, question or proposition to be
voted on at such Adsero Meeting or to be consented to in connection with such
Adsero Consent.
For the purpose of determining the Holder Votes to which each Holder is
entitled in respect of any such Adsero Meeting or Adsero Consent, the number of
Series A Special Voting
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Shares owned of record by such Holder shall be determined at the close of
business on the record date established by Adsero or by applicable law for
purposes of determining shareholders entitled to vote at such Adsero Meeting or
to give written consent in connection with such Adsero Consent. With respect to
each Adsero Meeting and Adsero Consent, Adsero shall mail or cause to be mailed
(or otherwise communicate in the same manner as Adsero uses in communications to
holders of Adsero Common Shares) to the Holders on the same day as the initial
mailing or notice (or other communication) with respect thereto is given by
Adsero to holders of Adsero Common Shares, a copy of such notice, together with
any proxy or information statement and related materials provided to holders of
Adsero Common Shares.
SECTION 3.3 Copies of Shareholder Information.
Adsero shall mail or cause to be mailed (or otherwise communicate in
the same manner as Adsero uses in communications to holders of Adsero Common
Shares) to the Holders copies of all proxy materials (including notices of
Adsero Meetings), information statements, reports (including without limitation
all interim and annual financial statements) and other written communications
that are distributed from time to time to holders of Adsero Common Shares at the
same time as such materials are first sent to holders of Adsero Common Shares.
SECTION 3.4 Other Materials.
Immediately after receipt by Adsero of any material sent or given
generally to the holders of Adsero Common Shares by or on behalf of a third
party, including without limitation dissident proxy and information circulars
(and related information and material) and tender and exchange offer circulars
(and related information and material), Adsero shall obtain and deliver to the
Holders copies thereof as soon as possible thereafter.
SECTION 3.5 Voting by the Holders, and Attendance of Holders'
Representatives at Meeting.
Adsero warrants and represents that provisions substantially similar to the
provisions included in subparagraph (a) and (b) below are included in its
by-laws or other binding internal documents:
(a) In connection with each Adsero Meeting and Adsero Consent, each Holder
may exercise, either in person or by proxy, the Holder Votes as to
which such Holder is entitled to vote.
(b) At any Adsero Meeting, a representative of each Holder shall have the
same rights as any holder of Adsero Common Shares 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.
SECTION 3.6 Surrender of Series A Special Voting Shares for Cancellation
Upon receipt of the Series II Exchangeable Share Consideration by a
Holder of a Series II Exchangeable Share for any reason, such Holder shall
immediately surrender for cancellation, to Adsero, a number of Series A Special
Voting Shares equal to the number of Series II Exchangeable Shares then
transferred or cancelled.
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SECTION 3.7 Surrender of Series A Special Voting Share Certificate.
Contemporaneously with the completion of any transaction pursuant to
which any Series II Exchangeable Share held by a Holder at such time is
retracted, redeemed, purchased or exchanged, such Holder shall surrender to
Adsero, for cancellation, the certificate representing the Series A Special
Voting Shares held by such Holder being surrendered pursuant to Section 3.6
above. If only a part of the Series A Special Voting Shares represented by any
certificate surrendered to Adsero are to be cancelled by Adsero hereunder, a new
certificate for the balance of such Series A Special Voting Shares shall be
issued by Adsero and delivered to the Holder at the expense of Adsero.
ARTICLE 4
INSOLVENCY EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
------------------------------------------------
SECTION 4.1 Grant and Ownership of the Insolvency Exchange Right.
Subject to the last sentence of this Section 4.1, at any point in time
after the issuance of any Series II Exchangeable Share, Adsero Callco hereby
grants to each Holder:
(a) the right (the "Insolvency Exchange Right"), upon the occurrence and during
the continuance of an Insolvency Event, to require Adsero Callco to purchase
from the Holder all or any part of the Series II Exchangeable Shares held by the
Holder. The Insolvency Exchange Right may only be exercised by a Holder if the
Insolvency Event relates to the Company; and
(b) the Automatic Exchange Right,
all in accordance with the provisions of this agreement and the Series II
Exchangeable Share Provisions, as the case may be.
SECTION 4.2 Purchase Price.
The purchase price payable by Adsero Callco for each Series II
Exchangeable Share to be purchased by Adsero Callco under the Insolvency
Exchange Right shall be an amount equal to the applicable Series II Exchangeable
Share Consideration on the last Business Day prior to the day of closing of the
purchase and sale of such Series II Exchangeable Share under the Insolvency
Exchange Right. In connection with each exercise of the Insolvency Exchange
Right, Adsero will provide to the Holder an Officer's Certificate setting forth
the calculation of the applicable Series II Exchangeable Share Consideration.
The applicable Series II Exchangeable Share Consideration for each such Series
II Exchangeable Share so purchased shall be satisfied by the delivery by Adsero
Callco, to the Holder exercising the Insolvency Exchange Right, of the
applicable Series II Exchangeable Share Consideration [less any amounts properly
withheld pursuant to Section 5.3 hereof, if any].
SECTION 4.3 Exercise Instructions.
(1) Subject to the terms and conditions set forth in Section 4.1 and the
other terms and conditions set forth herein, each Holder shall be entitled, upon
the occurrence and during the continuance of an Insolvency Event, to exercise
the Insolvency Exchange Right with respect to all or any part of the Series II
Exchangeable Shares registered in the name of the Holder on the
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books of the Company. To cause the exercise of the Insolvency Exchange Right,
the Holder shall deliver to Adsero Callco, in person or by certified or
registered mail, at its head office or at such other places as Adsero Callco may
from time to time designate by written notice to the Holder, with a copy to the
Company, at its principal executive office, the certificates representing the
Series II Exchangeable Shares which the Holder desires Adsero Callco to purchase
duly endorsed for transfer to Adsero Callco, and accompanied by such other
documents and instruments as may be required to effect a transfer of Series II
Exchangeable Shares under the Act and the constating documents of the Company,
together with:
(a) a duly completed form of notice of exercise of the Insolvency
Exchange Right, contained on the reverse of or attached to the Series II
Exchangeable Share certificates, stating:
(i) that the Holder is exercising the Insolvency
Exchange Right so as to require Adsero Callco to purchase from
the Holder the number of Series II Exchangeable Shares
specified therein;
(ii) that the Holder has good title to and owns all
such Series II Exchangeable Shares to be acquired by Adsero
Callco free and clear of all liens, hypothecs, pledges,
encumbrances, security interests, options, restrictions,
proxies and. adverse claims except as set forth herein and in
the Series II Exchangeable Share Provisions; and
(iii) the address of the Persons to whom the Series
II Exchangeable Share Consideration should be delivered; and
(b) payment (or evidence satisfactory to the Company
and Adsero Callco if payment) of the taxes (if any) payable as contemplated by
Section 4.6 hereof.
(2) If only a part of the Series II Exchangeable Shares represented by
any certificate delivered to Adsero Callco is to be purchased by Adsero Callco
under the Insolvency Exchange Right, a new certificate for the balance of such
Series II Exchangeable Shares shall be issued to the Holder at the expense of
the Company.
SECTION 4.4 Delivery of Exchangeable Share Consideration;
Effect of Exercise.
Promptly after receipt of the Series II certificates
representing the Series II Exchangeable Shares which the Holder desires Adsero
Callco to purchase under the Insolvency Exchange Right (together with such
documents and instruments of transfer and a duly completed form of notice of
exercise of the Insolvency Exchange Right), duly endorsed for transfer to Adsero
Callco, which notice to Adsero Callco and the Company shall constitute exercise
of the Insolvency Exchange Right by the Holder, Adsero Callco shall promptly
thereafter transfer to the Holder the Series II Exchangeable Share Consideration
deliverable in connection with the exercise of the Insolvency Exchange Right
less any amounts properly withheld pursuant to Section 5.3 hereof; provided,
however, that no such delivery shall be made unless and until the Holder shall
have paid (or provided evidence satisfactory to the Company and Adsero Callco of
the payment of) the taxes (if any) payable as contemplated by Section 4.6
hereof. Immediately upon the giving of notice by the Holder to Adsero Callco and
the Company of the exercise of the Insolvency Exchange Right, as provided in
this Section 4.4, the Holder shall be deemed to have transferred to Adsero
Callco all of its right, title and interest in and to such Series II
Exchangeable Shares, shall cease to be a holder of such Series II Exchangeable
8
Shares and shall not be entitled to exercise any of the rights of a holder in
respect thereof, other than the right to receive the purchase price therefor
unless the Series II Exchangeable Share Consideration is not delivered by Adsero
Callco to the Holder by the date specified, in which case the rights of the
Holder shall remain unaffected until such Series II Exchangeable Share
Consideration is delivered by Adsero Callco and any cheque included therein is
paid. Notwithstanding the foregoing, until the Series II Exchangeable Share
Consideration is delivered to the Holder, the Holder shall be deemed to be a
holder of the sold Series II Exchangeable Shares for purposes of any right with
respect thereto under this agreement. For greater certainty, Section 3.6 applies
herewith.
SECTION 4.5 Exercise of Insolvency Exchange Right Subsequent to
Retraction.
In the event that a Holder has exercised its right under Article 6 of
the Series II Exchangeable Share Provisions to require the Company to redeem any
or all of the Series II Exchangeable Shares held by the Holder (such number of
Series II Exchangeable Shares so required to be redeemed being hereinafter
collectively referred to as the "Retracted Shares") and is notified by the
Company pursuant to Section 6.5 of the Series II Exchangeable Share Provisions
that the Company will not be permitted as a result of liquidity or solvency
requirements or other provisions of applicable law to redeem all such Retracted
Shares, subject to receipt by such Holder of written notice to that effect from
the Company and provided that the Retraction Call Right with respect to the
Retracted Shares shall not have been exercised, the Retraction Request will
constitute, and will be deemed to constitute, notice from such Holder to Adsero
Callco that such Holder is exercising the Insolvency Exchange Right with respect
to those Retracted Shares which the Company is not permitted by applicable law
to redeem. In any such event, the Company hereby agrees with such Holder
immediately to notify such Holder of such prohibition against the Company
redeeming all of the Retracted Shares and immediately to forward or cause to be
forwarded to Adsero Callco all relevant materials delivered by such Holder to
the Company (including without limitation a copy of the Retraction Request
delivered pursuant to Section 6.1 of the Series II Exchangeable Share
Provisions) in connection with such proposed redemption of the Retracted Shares,
and Adsero Callco will thereupon purchase such shares in accordance with the
provisions of this Article 4.
SECTION 4.6 Stamp or Other Transfer Taxes.
Upon any sale of Series II Exchangeable Shares to Adsero Callco
pursuant to the Insolvency Exchange Right or the Automatic Exchange Rights, the
share certificate representing Adsero Common Shares to be delivered in
connection with the payment of the total purchase price therefor shall be issued
in the name of the Holder without charge to the Holder, provided, however, that
the Holder:
(a) shall pay (and none of Adsero Callco or the Company shall be
required to pay) any documentary, stamp, transfer or other similar
taxes that may be payable in respect of any such transfer; or
(b) shall have established to the satisfaction of the Adsero Callco and
the Company acting reasonably that such taxes, if any, have been paid.
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SECTION 4.7 Notice of Insolvency Event.
Promptly following 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, Adsero and the Company shall give written notice
thereof to the Holders.
SECTION 4.8 Automatic Exchange on Liquidation of Adsero.
(a) Adsero will give the Holders written notice of each of the
following events (each, a "Liquidation Event") at the time set forth
below:
(i) in the event of any determination by the board of
directors of Adsero to institute voluntary
liquidation, dissolution or winding-up proceedings
with respect to Adsero or to effect any other
distribution of assets of Adsero among its
stockholders for the purpose of winding up its
affairs at least ten days prior to the proposed
effective date of such liquidation, dissolution,
winding-up or other distribution;
(ii) the sale of all or substantially all of the assets of
Adsero; and
(iii) immediately, upon the earlier of:
(A) receipt by Adsero of notice of; and
(B) Adsero otherwise becoming aware of,
any instituted claim, suit, petition or other proceedings with
respect to the involuntary liquidation, dissolution or
winding-up of Adsero or to effect any other distribution of
assets of Adsero among its stockholders for the purpose of
winding up its affairs, provided, however, that such shall
only be a Liquidation Event if Adsero has failed to contest in
good faith any such proceeding commenced in respect of Adsero
within 30 days of becoming aware thereof.
(b) In order that the Holders will be able to participate on a pro rata
basis with the holders of Adsero Common Shares in the distribution of
assets of Adsero 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 Series II Exchangeable
Shares shall be automatically exchanged for Adsero Common Shares as
contemplated in the definition of Series II Exchangeable Share
Consideration and shall also be entitled to the remaining Series II
Exchangeable Share Consideration, if any. To effect such automatic
exchange, Adsero Callco shall be deemed to have purchased each Series
II Exchangeable Share outstanding immediately prior to the Liquidation
Event Effective Time held by the Holders, and the Holders shall be
deemed to have sold the Series II Exchangeable Shares held by them at
such time, for a purchase price per share equal to the Series II
Exchangeable Share Consideration applicable at the Liquidation Event
Effective Time (the "Adsero Liquidation Price"). Moreover, the Holder
shall be deemed immediately to be Holder of a number of Adsero Common
Shares to be delivered as part of the Series II Exchangeable Share
Consideration and to be entitled to exercise all rights related
thereto. Adsero further acknowledges that if a certificate representing
the Adsero Common Shares issued to a Holder pursuant to Article 4 is
not
10
promptly delivered to such Holder as contemplated herein, then such
Holder shall be entitled to pursue any remedy under this Agreement, the
Adsero Common Shares or the applicable law as if such share certificate
had been duly issued and delivered to such Holder and registered in the
records of Adsero. In connection with such automatic exchange, Adsero
will provide to the Holders an Officer's Certificate setting forth the
calculation of the Adsero Liquidation Price.
(c) Immediately prior to the Liquidation Event Effective Time, the
Holders shall be deemed to have transferred to Adsero Callco all of
their right, title and interest in and to such Series II Exchangeable
Shares and shall cease to be holders of such Series II Exchangeable
Shares, and Adsero Callco shall transfer and deliver to the Holders the
Series II Exchangeable Share Consideration representing the Holders'
total Adsero Liquidation Price less any amounts properly withheld
pursuant to Section 5.3 hereof. Upon the surrender by a Holder of
certificates representing the transferred Series II Exchangeable
Shares, duly endorsed for transfer to Adsero Callco and accompanied by
such instruments of transfer as Adsero Callco may reasonably require,
Adsero Callco shall deliver or cause to be delivered to the Holder
certificates representing the Adsero Common Shares of which such Holder
is the holder. Notwithstanding the foregoing, until such Holder is
actually entered on the register of holders of Adsero Common Shares,
such Holder shall be deemed to still be a holder of the transferred
Series II Exchangeable Shares for purposes of all rights with respect
thereto under this agreement
SECTION 4.9 Call Rights.
The Holders and the Company hereby acknowledge the Call Rights in
favour of Adsero Callco and further agree that the Call Rights (i) are granted
to Adsero Callco by the Holders in partial consideration of the obligations of
Adsero under the Purchase Agreement; and (ii) may be assigned at any time and
from time to time by Adsero Callco in whole or in part upon written notice to
the Holders provided that:
(x) such assignee acknowledges in writing the Series II
Exchangeable Share Provisions and agrees to be bound
by the terms of this agreement; and
(y) notwithstanding such assignment, Adsero Callco shall
remain solidarily (jointly and severally) liable with
such assignee in respect of the obligations of such
assignee in connection with the exercise of any of
the Call Rights.
ARTICLE 5
CERTAIN RIGHTS OF ADSERO CALLCO TO ACQUIRE EXCHANGEABLE SHARES
--------------------------------------------------------------
SECTION 5.1 Adsero Callco Liquidation Call Right.
(1) At any point in time after the issuance of a Series II Exchangeable
Share, Adsero Callco shall have the overriding right (the "Liquidation Call
Right"), in the event of the proposed liquidation, dissolution or winding-up of
the Company pursuant to Article 5 of the Series II Exchangeable Share
Provisions, to purchase from the Holders who hold the Series II
11
Exchangeable Shares in the Company on the Liquidation Date (as defined therein)
all but not less than all of the Series II Exchangeable Shares held by the
Holders on payment by Adsero Callco of an amount per share (the "Liquidation
Call Purchase Price') equal to the Series II Exchangeable Share Consideration
applicable on the last Business Day prior to the Liquidation Date, which shall
be satisfied in full by Adsero Callco delivering or causing to be delivered to
the Holders the Series II Exchangeable Share Consideration representing the
Holders' total Liquidation Call Purchase Price less any amounts withheld
pursuant to Section 5.3 hereof. In the event of the exercise of the Liquidation
Call Right by Adsero Callco as aforesaid, each Holder shall be obligated to sell
all of the Series II Exchangeable Shares held by the Holder to Adsero Callco on
the Liquidation Date on payment by Adsero Callco to the Holder of the
Liquidation Call Purchase Price for each such share, and provided Adsero Callco
completes such purchase, the Company shall have no obligation to redeem such
shares so purchased by Adsero Callco.
(2) To exercise the Liquidation Call Right, Adsero Callco must notify the
Company and the Holders of Adsero Callco's intention to exercise such right at
least 30 days before the Liquidation Date in the case of a voluntary
liquidation, dissolution or winding-up of the Company and at least five Business
Days before the Liquidation Date in the case of an involuntary liquidation,
dissolution or winding-up of the Company. The Company will notify the Holders as
to whether or not Adsero Callco has exercised the Liquidation Call Right
forthwith after the expiry of the period during which the same may be exercised
by Adsero Callco. If Adsero Callco exercises the Liquidation Call Right, then on
the Liquidation Date Adsero Callco will purchase and each Holder will sell all
of the Series II Exchangeable Shares then held by the Holder for a price per
share equal to the Liquidation Call Purchase Price, which price shall be
satisfied in the manner set forth in Section 5.1(1) hereof.
(3) For the purposes of completing the purchase of the Series II
Exchangeable Shares pursuant to the Liquidation Call Right, Adsero Callco shall
deliver to each Holder, on or before the Liquidation Date, the Series II
Exchangeable Share Consideration in payment of the total Liquidation Call
Purchase Price (less any amounts properly withheld pursuant to Section 5.4
hereof) upon presentation and surrender by the Holders of certificates
representing the Series II Exchangeable Shares held by the Holder, together with
such other documents and instruments as may be required to effect a transfer of
Series II Exchangeable Shares under the Act and the constating documents of the
Company and such additional documents and instruments as Adsero Callco may
reasonably require. If Adsero Callco does not exercise the Liquidation Call
Right in the manner described above, then on the Liquidation Date the Holders
will be entitled to receive in exchange therefor the liquidation price otherwise
payable by the Company, in connection with the liquidation, dissolution or
winding-up of the Company pursuant to Article 5 of the Series II Exchangeable
Share Provisions.
SECTION 5.2 Adsero Callco Retraction Call Right.
(1) Adsero Callco shall have the overriding right, notwithstanding the
proposed retraction of any Series II Exchangeable Shares by a Holder pursuant to
Article 6 of the Series II Exchangeable Share Provisions, to purchase from such
Holder on such Retraction Date a number of Series II Exchangeable Shares that
such Holder has requested to be redeemed by the Company (the "Retracted Shares")
held by such Holder on payment by Adsero Callco to such Holder of an amount per
Retracted Share (the "Retraction Call Purchase Price") equal to the Series II
Exchangeable Share Consideration applicable on the last Business Day prior to
the Retraction Date, which shall be satisfied in full by Adsero Callco
delivering or causing to be
12
delivered to such Holder, the Series II Exchangeable Share Consideration, less
any amounts properly withheld pursuant to Section 5.3 hereof. In the event of
the exercise of the Retraction Call Right by Adsero Callco, such Holder shall be
obligated to sell all of the Retracted Shares held by such Holder to Adsero
Callco on the Retraction Date on payment by Adsero Callco to such Holder of the
Retraction Call Purchase Price for each such share, less any amounts withheld
pursuant to Section 5.3 hereof, and the Company shall have no obligation to
redeem such shares so purchased by Adsero Callco.
(2) Upon receipt by the Company of a Retraction Request, the Company shall
immediately notify Adsero Callco thereof. To exercise the Retraction Call Right,
Adsero Callco must notify the Company and the Holders of Adsero Callco's
intention to exercise such right within ten days of such notification to Adsero
Callco by the Company of receipt of the Retraction Request. The Company will
notify such Holders as to whether or not Adsero Callco has exercised the
Retraction Call Right forthwith after the expiry of the period during which the
same may be exercised by Adsero Callco. If Adsero Callco exercises the
Retraction Call Right, and provided that the Retraction Request is not revoked
by the Holder in the manner specified in Section 6.6 of the Series II
Exchangeable Share Provisions, the Retraction Request shall thereupon be
considered only to be an offer by the Holder to sell such Retracted Shares to
Adsero Callco in accordance with the Retraction Call Right, and on the
Retraction Date Adsero Callco will purchase and each Holder will sell such
Retracted Shares for a price per share equal to the Retraction Call Purchase
Price which price shall be satisfied in the manner set forth in Section 5.2(1)
hereof.
(3) For the purposes of completing the purchase of the Retracted Shares
pursuant to the Retraction Call Right, Adsero Callco shall deliver to each
Holder, on or before the Retraction Date, the Series II Exchangeable Share
Consideration in payment of the total Retraction Call Purchase Price (less any
amounts withheld pursuant to Section 5.3 hereof) upon presentation and surrender
by the Holders of certificates representing such Retracted Shares, together with
such other documents and instruments as may be required to effect a transfer of
Retracted Shares under the Act and the constating documents of the Company. If
Adsero Callco does not exercise the Retraction Call Right in the manner
described above, then on the Retraction Date such Holder will be entitled to
receive in exchange therefor the Retraction Call Purchase Price otherwise
payable by the Company in connection with the retraction of the Retracted Shares
pursuant to Article 6 of the Series II Exchangeable Share Provisions.
(4) At any point in time during the first ninety (90) days after the
date of issuance (the "Date of Issuance") of any Series II Exchangeable Share
but not later, and in addition to the right granted to Adsero Callco pursuant to
Section 5.2(1) hereof, Adsero Callco shall have the overriding right (the
"Purchase Right") to purchase from such Holder a number of Series II
Exchangeable Shares equal to a maximum of one-half of any such shares issued on
any Date of Issuance (the "Purchased Shares") on payment by Adsero Callco to
such Holder of an amount of $0.50 per Purchased Share (the "Purchase Price"),
which shall be satisfied in full by Adsero Callco by cheque payable forthwith to
the Holder, less any amounts properly withheld pursuant to Section 5.3 hereof,
if any. In the event of the exercise of the Purchase Right by Adsero Callco,
such Holder shall be obligated to sell all the Purchased Shares held by such
Holder to Adsero Callco on payment by Adsero Callco to such Holder of the
Purchase Price for each such Purchased Share, less any amounts withheld pursuant
to Section 5.3 hereof, and the Company shall have no obligation to redeem such
shares so purchased by Adsero Callco.
13
SECTION 5.3 Withholding Rights.
The Company, Adsero Callco and Adsero, as the case may be, shall be
entitled to deduct and withhold from any dividend or consideration otherwise
payable to any Holder such amounts as the Company, Adsero Callco or Adsero, as
the case may be, is required to deduct and withhold with respect to such payment
under the Income Tax Act (Canada), the United States Internal Revenue Code or
any provision of provincial, state, local or foreign tax law, in each case, as
amended. To the extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes hereof as having been paid to such Holder of the
Series II Exchangeable Shares in respect of which such deduction and withholding
was made, provided that such withheld amounts are actually remitted to the
appropriate taxing authority. To the extent that such amount so required to be
deducted or withheld from any payment to a Holder exceeds the cash portion of
the consideration otherwise payable to the Holder, the Company, Adsero and
Adsero Callco, as the case may be, shall promptly notify the Holder and unless
such Holder remits the difference in cash to the Company, Adsero or Adsero
Callco, as the case may be, before the tax amount is required to be remitted to
the taxing authority, then the Company, Adsero and Adsero Callco, as the case
may be, may sell or otherwise dispose of such portion of the consideration
(including, without limitation, any of the Adsero Common Shares) as is necessary
to provide sufficient funds to the Company, Adsero and Adsero Callco, as the
case may be, to enable it to comply with such deduction or withholding
requirement and the Company, Adsero and Adsero Callco, as the case may be, shall
notify such Holder and remit any unapplied balance of the net proceeds of such
sale.
In order to assist the Company, Adsero and Adsero Callco, as the case
may be, in complying with any such deduction and withholding requirement, the
Holder shall, to the extent applicable, deliver to the Company, Adsero or Adsero
Callco, as the case may be, (i) if such Holder is an individual, trust or
corporation, a declaration sworn by the individual, a trustee or a director, as
the case may be, before a notary or commissioner for oaths to the effect that
such Holder, is not and will not be, on the date of payment, a non-resident of
Canada for the purposes of the Income Tax Act (Canada) or (ii) if such Holder is
a partnership, a declaration sworn by a general partner before a notary or
commissioner for oaths to the effect that such Holder is a Canadian partnership,
as defined in the Income Tax Act (Canada).
SECTION 5.4 Restrictions on Transfer
No Holder shall Transfer any Series II Exchangeable Shares (or any
other securities of the Company received on account of the Holder's ownership of
Series II Exchangeable Shares) unless such Transfer is (i) a Transfer of Series
II Exchangeable Shares by such Holder for the Series II Exchangeable Share
Consideration pursuant to the terms of this agreement or the Series II
Exchangeable Share Provisions or (ii) is a Transfer approved by the Board of
Directors, which approval may be withheld for any reason. As used above, the
term "Transfer" includes the making of any sale, exchange, assignment,
hypothecation, gift, security interest, pledge or other encumbrance, or any
contract therefor, any voting trust or other agreement or arrangement with
respect to the transfer of voting rights or any other beneficial interest in
such securities, the creation of any other claim thereto or any other transfer
or disposition whatsoever, whether voluntary or involuntary, affecting the
right, title, interest or possession in or to such securities.
14
ARTICLE 6
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF ADSERO, YAC, ADSERO CALLCO AND THE COMPANY
---------------------------------------------
SECTION 6.1 Covenants of Adsero Regarding Series II Exchangeable Shares.
So long as any Series II Exchangeable Shares are outstanding and so
long as any Series II Exchangeable Shares can be issued as a result of the
conversion of any issued and outstanding Preferred Share, Adsero will and will,
in the case of Section 6.1(c), (d), (e), (f) and (g) cause its Subsidiaries to:
(a) not declare or pay any dividend on the Adsero Common Shares unless
(i) the Company shall declare or pay, as the case may be, an equivalent
dividend (as provided for in the Series II Exchangeable Share
Provisions) on the Series II Exchangeable Shares and (ii) the Company
shall have sufficient money or other assets or authorized but unissued
securities available to enable the due declaration and the due and
punctual payment, in accordance with applicable law, of any such
dividend on the Series II Exchangeable Shares;
(b) advise each of the Company and the Holders sufficiently in advance
of the declaration by Adsero of any dividend on Adsero Common Shares
and take all such other actions as are reasonably necessary, in
co-operation with the Company to ensure that the respective declaration
date, record date and payment date for a dividend on the Series II
Exchangeable Shares shall, subject to applicable law, be the same as
the declaration date, record date and payment date for the
corresponding dividend on the Adsero Common Shares;
(c) not permit the Company to issue any further Series II Exchangeable
Shares, or any other shares of the Company having an attribute which
permits the holders thereof to exchange or convert into shares of
Adsero or any Affiliate of Adsero;
(d) enable, cause and permit the Company, in accordance with and
subject to applicable law, to pay and otherwise perform its obligations
with respect to the satisfaction of the Series II Exchangeable Share
Consideration representing the Liquidation Amount in respect of each
issued and outstanding Series II Exchangeable Share upon the
liquidation, dissolution or winding-up of the Company or any other
distribution of the assets of the Company for the purpose of winding up
its affairs, including without limitation all such actions and all such
things as are reasonably necessary or, in Adsero's judgment's
desirable, to enable and permit the Company to cause to be delivered
Adsero Common Shares to the Holders in accordance with the provisions
of Article 5 of the Series II Exchangeable Share Provisions;
(e) enable, cause and permit the Company in accordance with and subject
to applicable law, to pay and otherwise perform its obligations with
respect to the satisfaction of the Series II Exchangeable Share
Consideration representing the Retraction Price, as defined in the
Series II Exchangeable Share Provisions including, without limitation
to enable and permit the Company to cause to be delivered Adsero Common
Shares to the Holders upon the retraction of the Series II Exchangeable
Shares in accordance with the provisions of Article 6 of the Series II
Exchangeable Share Provisions;
15
(f) enable and permit Adsero Callco and any assignee of Adsero Callco,
in accordance with applicable law, to perform its obligations arising
upon the exercise by it of any Call Right, including without limitation
to enable and permit Adsero Callco to cause to be delivered Adsero
Common Shares to the Holders in accordance with the provisions of any
Call Right as the case may be; and
(g) not consent to nor exercise its vote as a member of the Company to
initiate or permit the voluntary liquidation, dissolution or winding-up
of the Company nor take any action or omit to take any action that is
designed to result in the liquidation, dissolution or winding-up of the
Company.
SECTION 6.2 Notification of Certain Events.
In order to assist Adsero and Adsero Callco to comply with their
respective rights and obligations hereunder, the Company will give each of
Adsero, Adsero Callco and, as the case may be, the Holders notice of each of the
following events at the time set forth below:
(a) any determination by the Board of Directors to institute voluntary
liquidation, dissolution or winding-up proceedings with respect to the
Company or to effect any other distribution of the assets of the
Company among its members for the purpose of winding-up its affairs, at
least 30 days prior to the proposed effective date of such liquidation,
dissolution, winding-up or other distribution; it being understood that
any merger, amalgamation, consolidation, or similar transaction, and
any sale of all or any or substantially all of the assets of the
Company shall not, in and of itself, constitute a liquidation,
dissolution or winding-up;
(b) promptly, upon the earlier of (i) receipt by the Company of notice
of, and (ii) the Company otherwise becoming aware of any threatened or
instituted claim, suit, petition or other proceedings with respect to
the involuntary liquidation, dissolution or winding-up of the Company
or to effect any other distribution of the assets of the Company among
its members for the purpose of winding-up its affairs or of the
occurrence of any Insolvency Event;
(c) promptly, upon receipt by the Company of a Retraction Request; and
(d) promptly in the event of any determination by the Board of
Directors to take any action which would require a vote of the holders
of Series II Exchangeable Shares.
SECTION 6.3 Delivery of Shares by Adsero.
Upon notice from the Company, Adsero Callco or the Holders of any
event that requires the Company or Adsero Callco to cause to be delivered Adsero
Common Shares to any Holder, Adsero shall arrange for the delivery of the
requisite number of Adsero Common Shares to YAC, then YAC shall subscribe to the
requisite number of common shares of Adsero Callco, such subscription payable in
kind by the delivery of the requisite number of Adsero Common Shares to Adsero
Callco, and if need be, Adsero Callco, if so required, shall subscribe to the
requisite number of common shares of the Company, such subscription payable in
kind by the delivery of the requisite number of Adsero Common Shares to the
Company, as may be required, under this agreement or the Series II Exchangeable
Shares Provisions. Moreover, Adsero shall cause
16
Adsero Callco or the Company, as the case may be, to deliver to the Holder of
the surrendered Series II Exchangeable Shares any other part of the Series II
Exchangeable Share Consideration.
SECTION 6.4 Delivery of Shares.
All Adsero Common Shares issuable pursuant to this agreement or the
Series II Exchangeable Share Provisions shall be duly issued as fully paid and
non-assessable free and clear of any lien, hypothec, pledge, claim, encumbrance,
security interest or adverse claim or interest, other than those arising
hereunder or under the Series II Exchangeable Share Provisions. Any Series II
Exchangeable Shares delivered by the Holders to the Company, Adsero Callco,
Adsero or their Affiliates pursuant to this agreement or the Series II
Exchangeable Share Provisions shall be delivered free and clear of any lien,
hypothec, pledge, claim, encumbrance, security interest or adverse claim or
interest, other than those arising hereunder, under the Series II Exchange Share
Provisions, the Lock-up Agreement or under applicable securities laws.
SECTION 6.5 Economic Equivalence.
So long as any Series II Exchangeable Shares are outstanding, and so
long as any issued and outstanding Preferred Shares can be converted into any
Series II Exchangeable Shares:
(a) in the event Adsero takes any of the following actions:
(i) distributes Adsero Common Shares (or securities
exchangeable for or convertible into or carrying rights to
acquire Adsero Common Shares) to the holders of all or
substantially all of the then outstanding Adsero Common Shares
by way of stock dividend, or other distribution, other than an
issue of Adsero Common Shares (or securities exchangeable for
or convertible into or carrying rights to acquire Adsero
Common Shares) to holders of Adsero Common Shares who exercise
an option to receive dividends in Adsero Common Shares (or
securities exchangeable for or convertible into or carrying
rights to acquire Adsero Common Shares) in lieu of receiving
cash dividends; or
(ii) distributes rights, options or warrants to the holders of
all or substantially all of the then outstanding Adsero Common
Shares entitling them to subscribe for or to purchase Adsero
Common Shares (or securities exchangeable for or convertible
into or carrying rights to acquire Adsero Common Shares); or
(iii) distributes to the holders of all or substantially all
of the then outstanding Adsero Common Shares, (a) shares or
securities of Adsero of any class other than Adsero Common
Shares (and other than shares convertible into or exchangeable
for or carrying rights to acquire Adsero Common Shares), (b)
rights, options or warrants other than those referred to in
(ii) above, (c) evidences of indebtedness of Adsero or (d)
assets of Adsero,
Adsero will ensure that the economic equivalent on a per share basis of
such rights, options, securities, shares, evidence of indebtedness or
other assets shall be issued or distributed simultaneously to holders
of the Series II Exchangeable Shares;
17
(b) in the event Adsero takes any of the following actions:
(i) subdivides, redivides or changes the then outstanding
Adsero Common Shares into a greater number of Adsero Common
Shares; or
(ii) reduces, combines, consolidates or changes the then
outstanding Adsero Common Shares into a lesser number of
Adsero Common Shares; or
(iii) reclassifies or otherwise changes any of the terms and
conditions of the Adsero Common Shares, or effect an
amalgamation, merger, reorganization or other transaction
affecting Adsero Common Shares,
Adsero will provide at least 20 Business Days prior written notice
thereof to the Holders and ensure that the equivalent change shall
simultaneously be made to, or in the rights of the Holders of the
Series II Exchangeable Shares;
Furthermore, Adsero will take or will cause to be taken all necessary
measures in order to ensure that immediately after the completion of
any transactions contemplated in this Section 6.5, the Holders of
Series A Special Voting Shares shall have the same percentage of Voting
Rights they held in Adsero immediately before the closing of such
transaction;
(c) to the extent required, upon due notice from Adsero, the Company
will take or cause to be taken such steps as may be necessary for the
purposes of ensuring that appropriate dividends are paid or other
distributions are made by the Company or subdivisions, redivisions or
changes are made to the Series II Exchangeable Shares, in order to
implement the required economic equivalent or, as the case may be, to
reflect the equivalent rights with respect to the Adsero Common Shares
and Series II Exchangeable Shares as provided for in this Section 6.5.
SECTION 6.6 Ownership of Outstanding Shares; Voting.
So long as any Series II Exchangeable Shares are outstanding and so
long as any issued and outstanding Preferred Shares can be converted into any
Series II Exchangeable Shares, (i) Adsero shall remain the sole shareholder of
YAC; (ii) YAC shall remain the sole shareholder of Adsero Callco; and (iii)
Adsero Callco shall remain the sole owner of issued and outstanding securities
of the Company to which are attached the voting interests for the election of
directors of the Company unless it obtains the prior approval of the Holders
given in accordance with Section 8.2 of the Series II Exchangeable Share
Provisions. Adsero and its Subsidiaries shall not vote any Series II
Exchangeable Shares in respect of any resolution referred to in Section 8.2 of
the Series II Exchangeable Share Provisions.
SECTION 6.7 Adsero and Affiliates Not to Vote Series II
Exchangeable Shares.
Each of Adsero and Adsero Callco will appoint and cause to be appointed
proxyholders with respect to all Series II Exchangeable Shares held by it or
them and its or their respective Affiliates for the sole purpose of attending
each meeting of Holders in order to be counted as part of the quorum for each
such meeting. Each of Adsero and Adsero Callco further covenants and agrees that
it and they will not and will cause its and their Affiliates not to exercise any
18
voting rights with respect to the Series II Exchangeable Shares held by it or
them or its or their Affiliates in respect of any matter considered at any
meeting of holders of Series II Exchangeable Shares.
SECTION 6.8 Tender Offers, Etc.
Adsero shall provide timely notice to the Holders of any proposed share
exchange offer, issuer bid, take-over bid or similar transaction (including any
Adsero Control Transaction as defined in the Series II Exchangeable Share
Provisions) with respect to Adsero Common Shares proposed by Adsero or proposed
to Adsero or its stockholders (the "Offer") and recommended by the board of
directors of Adsero, or otherwise effected or to be effected with the consent or
approval of the board of directors of Adsero. Moreover, Adsero will use its best
efforts expeditiously and in good faith to take all such actions and to do all
such things as are necessary and desirable to enable and permit the Holders to
participate in such Offer to the same extent and on an economically equivalent
basis as the holders of Adsero Common Shares, without discrimination. Without
limiting the generality of the foregoing, Adsero will use its best efforts
expeditiously and in good faith to ensure that the Holders may participate in
all such Offers without being required to retract Series II Exchangeable Shares
as against the Company (or, if so required, to ensure that any such retraction
shall be effective only upon, and shall be conditional upon, the closing of the
Offer and only to the extent necessary to tender a deposit to the Offer).
SECTION 6.9 Representations and Warranties of Adsero, YAC,
Adsero Callco and the Company
Each of Adsero, YAC, Adsero Callco and the Company hereby represent and
warrant that:
(a) it is a corporation incorporated and existing under the laws of its
incorporating jurisdiction and has the corporate power and authority to
enter into and perform its obligations under this agreement;
(b) the execution, delivery and performance by it of this agreement
(i) has been duly authorized by all necessary
corporate action on its part;
(ii) do not (or would not with the giving of notice,
the lapse of time or the happening of any other event or
condition) result in a breach or a violation of, or conflict
with, any of the terms or provisions of its constating
documents or articles of association or any material contracts
or instruments to which it is a party or pursuant to which any
of its assets or property may be affected; and
(iii) will not result in the violation of any law; and
(c) this agreement has been duly executed and delivered by it and
constitutes a legal, valid and binding obligation enforceable against
it in accordance with its terms.
19
SECTION 6.10 Registration and Reservation of Adsero Common Shares.
Adsero hereby represents, warrants and covenants that it has 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 Adsero Common Shares as are
now and may hereafter be required to enable and permit the Company to meet its
obligations hereunder and under the Series II Exchangeable Share Provisions.
Furthermore, Adsero represents, warrants and covenants that it will, at all
times as of the effective date of its registration statement being accepted by
the United States Securities and Exchange Commission maintain a sufficient
number of Adsero Common Shares duly registered in accordance with the Securities
▇▇▇ ▇▇▇▇ and the Securities ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ as are now and may hereafter be
required in order to enable the Company or, as the case may be, Adsero Callco to
meet their respective obligations hereunder or under the Series II Exchangeable
Share Provisions; Adsero shall maintain at all times the Adsero Common Shares
listed on the OTC Bulletin Board or an equivalent recognized North American
Stock Exchange.
SECTION 6.11 Registration Under the U.S. Securities Act of 1933
Adsero hereby represents, warrants and covenants that it will file a
registration statement for Adsero Common Shares under the United States
Securities Act of 1933, as amended within 90 days of the reservation of any of
its Common Shares pursuant to this agreement. Moreover, Adsero represents,
warrants and covenants that it shall issue a "Stock Transfer" instruction to its
transfer agent with respect to its Common Shares issued in payment of the Series
II Exchangeable Shares pending registration and shall also issue a "Stock
Transfer" instruction to its transfer agent to disclose the terms of the Lock Up
Agreement.
SECTION 6.12 Allocation of Expenses
The parties agree that all registration and filing fees, printing
expenses, fees and disbursements of counsel for Adsero and its Affiliates and
any accountant's fees should be borne by Adsero. Conversely, all selling
commissions or discounts applicable to sales of Adsero Common Shares by the
Holders and all fees and disbursements of counsel for the Holders should be
borne by the Holders.
ARTICLE 7
AMENDMENTS AND SUPPLEMENTAL AGREEMENTS
--------------------------------------
SECTION 7.1 Amendments, Modifications, Etc.
This agreement may not be amended, modified or waived except by an
agreement in writing executed by the parties hereto.
SECTION 7.2 Changes in Capital of Adsero and the Company.
At all times after the occurrence of any event effected pursuant to the
Series II Exchangeable Share Provisions or this agreement as a result of which
either Adsero Common Shares or the Series II Exchangeable Shares or both are in
any way changed, this agreement shall forthwith be amended and modified as
necessary in order that the Holders maintain economically equivalent rights and,
in order that, where required, this agreement will apply with
20
full force and effect, mutatis mutandis, to all new securities into which Adsero
Common Shares or the Series II Exchangeable Shares or both are so changed and
the parties hereto shall execute and deliver a supplemental agreement giving
effect to and evidencing such necessary amendments and modifications. So long as
there are any Series II Exchangeable Shares outstanding, (i) the Company will
not issue any additional Series II Exchangeable Shares to any Person, (other
than the Holders), (ii) YAC will not issue any securities to any Person other
than Adsero; and (iii) Adsero Callco will not issue any securities to any
Person, other than YAC.
ARTICLE 8
TERMINATION
-----------
SECTION 8.1 Term.
This agreement shall continue until the earlier occurrence of the
following events:
(a) no Preferred Share is outstanding and no Series II Exchangeable
Share is outstanding, or
(b) each of the parties hereto elects in writing to terminate this
agreement
ARTICLE 9
GENERAL
-------
SECTION 9.1 Severability.
The provisions of this agreement shall be deemed severable and
the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof. If any provision of
this agreement, or the application thereof to any Person or entity or any
circumstance, is invalid or unenforceable, the remainder of this agreement and
the application of such provision to other Persons or circumstances shall not be
affected by such invalidity or unenforceability nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
SECTION 9.2 Enurement.
This agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
SECTION 9.3 Notices to Parties.
Any notice, direction or other communication given under this agreement
shall be in writing and given by mail or delivering it or sending it by telecopy
or similar form or recorded communication addressed:
21
(a) if to Adsero, YAC or to Adsero Callco, to:
ADSERO CORP.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Attention: Chief Executive Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Gottbetter & Partners LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to:
c/o Adsero Corp
as set forth above.
(c) if to any Holder, to:
the address of the Holder recorded in the
securities register of the Company, or, in the
event of the address of any such Holder not being
so recorded, then at the last known address of
such Holder.
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ s.e.n.c
▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention ▇▇▇▇▇▇ ▇▇▇▇▇▇
Any notice, request or other communication to be given to a Holder of
Series II Exchangeable Shares by or on behalf of the Company shall be in writing
and shall be valid and effective if given by mail (postage prepaid) or by
telecopy or delivery to the address of the Holder of record in the securities
register of the Company or, in the event of the address of any such Holder not
being so recorded, then at the last known address of such Holder. Any such
notice, request or other communication, if given by mail or telecopy, shall only
be deemed to have been given and received on the second Business Day following
the date of mailing and, if given by delivery, shall be deemed to have been
given and received on the date of delivery.
22
The failure to deliver a notice to an Insider of either the Company, Adsero
Callco, YAC or Adsero at the time such notice was required to be sent shall not
amount to a default under this agreement or the Series II Exchangeable Share
Provisions.
SECTION 9.4 Risk of Payments by Post.
Whenever payments are to be made or documents are to be sent to the
Holders by the Company, Adsero or Adsero Callco, or by the Holders to the
Company, Adsero or Adsero Callco, the making of such payment or sending of such
document sent through the post shall be at the risk of the Company, Adsero or
Adsero Callco, in the case of payments made or documents sent by the Company,
Adsero or Adsero Callco, and the Holders, in the case of payments made or
documents sent by the Holders.
SECTION 9.5 Counterparts.
This agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and the
same instrument.
SECTION 9.6 Jurisdiction.
This agreement shall be construed and enforced in accordance with the
laws of the Province of Quebec and the laws of Canada applicable therein.
SECTION 9.7 Language
Parties have agreed that this Agreement and its schedules be drafted in
the English language only. Les Parties ont convenu que cette convention et ses
annexes soient redigees en anglais seulement.
IN WITNESS WHEREOF, the parties hereby have executed this agreement or
caused this agreement to be executed by their respective duly authorized
officers as of the date first above written. [Signatures to be updated]
ADSERO CORP. 3091503 NOVA SCOTIA COMPANY
Per: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ Per: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------- ------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Financial Officer Title: President
3091732 NOVA SCOTIA COMPANY YAC CORP.
Per: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ Per: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------- ------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: President Title: President
23
HOLDERS:
▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ INC. ▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ INC.
Per: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇ Per: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------- ---------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President Title: President
24
SCHEDULE "A"
PROVISIONS ATTACHING TO SERIES II EXCHANGEABLE SHARES OF
3091503 NOVA SCOTIA COMPANY
The Series II Exchangeable Shares having a par value of $0.00001 each
in the capital of the Company shall have the following rights, privileges,
restrictions and conditions:
ARTICLE 1
INTERPRETATION
--------------
For the purposes of these rights, privileges, restrictions and
conditions:
SECTION 1.1 Definitions.
"ACT" means the Companies Act (Nova Scotia) as amended, consolidated or
re-enacted from time to time.
"ADSERO" means Adsero Corp., a Delaware corporation doing business as Adsero and
includes any successor corporation.
"ADSERO CALLCO" means 3091732 Nova Scotia Company, an unlimited company
incorporated and existing under the laws of the Province of Nova Scotia, and
includes any successor company.
"ADSERO COMMON SHARES" means the shares of Common Stock, par value U.S. $0.001
per share, in the capital of Adsero.
"ADSERO CONTROL TRANSACTION" shall be deemed to have occurred if:
(a) except for the holders or any of them, any person, firm or
corporation acquires directly or indirectly the Beneficial Ownership
(as defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of any voting security of Adsero and immediately after such
acquisition, the acquirer has Beneficial Ownership of voting securities
representing 50% or more of the total voting power of all the then
outstanding voting securities of Adsero;
(b) The individuals who:
(i) as of the Effective Date constitute the Board of
Directors of Adsero (the "Original Directors");
(ii) thereafter are elected to the Board of Directors
of Adsero (the "Adsero Board") and whose election, or
nomination for election, to the Adsero Board was approved by a
vote of at least 2/3 of the Original Directors then still in
office (such directors being called "Additional Original
Directors"); or
25
(iii) are elected to the Adsero Board and whose
election, or nomination for election, to the Adsero Board was
approved by a vote of at least 2/3 of the Original Directors
and Additional Original Directors then still in office,
cease for any reason to constitute a majority of the members of the Adsero
Board;
(c) The stockholders of Adsero shall approve a merger, consolidation,
recapitalization or reorganization of Adsero or consummation of any
such transaction if stockholder approval is not sought or obtained,
other than any such transaction which would result in at least 75% of
the total voting power represented by the voting securities of the
surviving entity outstanding immediately alter such transaction being
Beneficially Owned by holders of outstanding voting securities of
Adsero immediately prior to the transaction, with the voting power of
each such continuing holder relative to such other continuing holders
being not altered substantially in the transaction; or
(d) The stockholders of Adsero shall approve a plan of complete
liquidation of Adsero or an agreement for the sale or disposition by
Adsero of all or a substantial portion of Adsero's assets (i.e. 50% or
more in value of the total assets of Adsero).
"ADSERO DIVIDEND DECLARATION DATE" means the date on which the board of
directors of Adsero declares any dividend on the Adsero Common Shares.
"AFFILIATE" has the meaning ascribed thereto in the Canada Business Corporations
Act as amended, consolidated or re-enacted from time to time.
"BOARD OF DIRECTORS" means the Board of Directors of the Company 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 generally open for business in Montreal, Quebec or New York, New
York.
"CALL RIGHTS" means, collectively, the Liquidation Call Right, and the
Retraction Call Right; and "CALL RIGHT" shall mean any one of such Call Rights.
"CANADIAN DOLLAR EQUIVALENT" means in respect of an amount expressed in a
currency other than Canadian dollars (the "Foreign Currency Amount"), at any
date, the product obtained by multiplying:
(a) the Foreign Currency Amount, by
(b) the noon spot exchange rate on such date for such foreign currency
expressed in Canadian dollars as reported by the Bank of Canada or, in the event
such spot exchange rate is not available, such spot exchange rate on such date
for such foreign currency expressed in Canadian dollars as may be deemed by the
Board of Directors acting reasonably to be appropriate for such purpose.
"COMMON SHARES" means the common shares in the capital of the Company.
"COMPANY" means 3091503 Nova Scotia Limited, a company existing under the Act.
26
"CURRENT MARKET PRICE" means, in respect of a Adsero Common Share on any date,
the closing price per Adsero Common Share on the day prior to such date on the
OTC Bulletin Board or, if Adsero Common Shares are not then listed on the OTC
Bulletin Board, on such other principal North American stock exchange or
automated quotation system on which Adsero Common Shares are listed or quoted,
as the case may be, as may be selected by the Board of Directors for such
purpose; provided, however, that if there is no public distribution or trading
activity of Adsero Common Shares at such date, then the Current Market Price of
an Adsero Common Share shall be determined by the Board of Directors of Adsero
based upon the advice of the then auditors of Adsero, and provided further that
any such opinion or determination by the Board of Directors shall be conclusive
and binding. If the Adsero Common Shares are quoted on more than one recognized
stock exchange in North America, then the Current Market Price shall be the
average of the closing prices of each such exchange determined as provided
above.
"EFFECTIVE DATE" means the date of issue of the Series II Exchangeable Shares.
"EXCHANGEABLE SHARE VOTING EVENT" means any matter in respect of which holders
of Series II Exchangeable Shares are entitled to vote as members (shareholders)
of the Company, other than an Exempt Exchangeable Share Voting Event.
"EXEMPT EXCHANGEABLE SHARE VOTING EVENT" means any matter in respect of which
holders of Series II Exchangeable Shares are entitled to vote as members
(shareholders) of the Company in order to approve or disapprove, as applicable,
any change to, or in the rights of the holders of the Series II Exchangeable
Shares, where the approval or disapproval, as applicable, of such change would
be required to maintain the equivalence of the Series II Exchangeable Shares and
the Adsero Common Shares.
"LIQUIDATION AMOUNT" has the meaning provided in Section 5.1 hereof.
"LIQUIDATION CALL RIGHT" has the meaning provided in the Series II Exchangeable
Shares Voting, Exchange and Support Agreement.
"LIQUIDATION DATE" has the meaning provided in Section 5.1 hereof.
"RETRACTED SHARES" has the meaning provided in Section 6.1(a) hereof.
"RETRACTION CALL RIGHT" has the meaning provided in the Series II Exchangeable
Shares Voting, Exchange and Support Agreement.
"RETRACTION DATE" has the meaning provided in Section 6.1(b) hereof.
"RETRACTION PRICE" has the meaning provided in Section 6.1 hereof.
"RETRACTION REQUEST" has the meaning provided in Section 6.1 hereof.
"SERIES II EXCHANGEABLE SHARE CONSIDERATION" means, with respect to each Series
II Exchangeable Share, for any acquisition of, or redemption of, or retraction
of, or distribution of assets of the Company in respect of the Series II
Exchangeable Share or purchase of the
27
Series II Exchangeable Share pursuant to the Series II Exchangeable Shares
Voting, Exchange and Support Agreement or hereunder, the aggregate of the
following:
(a) the Current Market Price of one Adsero Common Share, such
consideration to be fully paid and satisfied by the delivery of one
Adsero Common Share, as evidenced by a certificate representing the
aggregate number of such Adsero Common Shares; plus
(b) the amount of all cash dividends declared and unpaid by Adsero on
an Adsero Common Share at the effective time of any such action,
payable by means of a cheque payable at any branch of the bankers of
the payor; plus
(c) the amount of all declared and unpaid non-cash dividends or other
distributions by Adsero on a Adsero Common Share at the effective time
of any such action, payable by means of a cheque payable at any branch
of the bankers of the payor in an amount equal to the fair market value
of the property distributed on the effective date of the relevant
action or, at the option of the Board of Directors, payable by the
delivery of such non-cash items;
provided that (i) any such Adsero Common Share shall be duly issued as fully
paid and non-assessable free and clear of lien, hypothec, pledge, claim,
encumbrance security interest or adverse claim or interest other than those
under applicable securities laws and (ii) such consideration shall be paid less
any amounts required to be deducted and withheld therefrom pursuant to Section
12.3 hereof, and all without interest. For greater certainty, in no event shall
a holder of Series II Exchangeable Shares be entitled to receive or demand any
consideration for the acquisition of, or redemption of, or retraction of, or
distribution of the assets of the Company in respect of any Series II
Exchangeable Shares, whether pursuant to the Series II Exchangeable Shares
Voting, Exchange and Support Agreement or hereunder, other than Adsero Common
Shares and/or the amounts referred to in paragraphs (b) and (c) above.
"SERIES II EXCHANGEABLE SHARES" means the non-voting exchangeable shares in the
capital of the Company having the rights, privileges, restrictions and
conditions set forth herein.
"SERIES II EXCHANGEABLE SHARES VOTING, EXCHANGE AND SUPPORT AGREEMENT" means
that certain Voting, Exchange and Support Agreement between Adsero, YAC, Adsero
Callco, the Company, and the holders of Exchangeable Shares as of the Effective
Date to be entered into contemporaneously with the first issue of the Series II
Exchangeable Shares.
"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 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.
"TRANSFER" has the meaning provided in Section 10.4 hereof.
"YAC" means YAC Corp., a Delaware corporation doing business as YAC and
including any successor corporation.
28
ARTICLE 2
RANKING OF SERIES II EXCHANGEABLE SHARES
----------------------------------------
SECTION 2.1
The Series II Exchangeable Shares shall be entitled to a preference, as
provided in Article 5, over the Common Shares and any other shares ranking
junior to the Series II Exchangeable Shares with respect to the distribution of
assets in the event of the liquidation, dissolution or winding-up of the
Company, whether voluntary or involuntary, or any other distribution of the
assets of the Company among its members for the purpose of winding-up its
affairs. For greater certainty, the Series II Exchangeable Shares shall rank
pari passu with the Series I Exchangeable Shares, but rank after the Preferred
Shares.
ARTICLE 3
DIVIDENDS
---------
SECTION 3.1
(1) A holder of a Series II Exchangeable Share shall be entitled to
receive and the Board of Directors shall, subject to applicable law, declare a
dividend on each Series II Exchangeable Share, on each Adsero Dividend
Declaration Date:
(a) in the case of a cash dividend declared on the Adsero Common
Shares, in an amount in cash for each Series II Exchangeable Share in
U.S. dollars, or the Canadian Dollar Equivalent thereof on the Adsero
Dividend Declaration Date, in each case, corresponding to the cash
dividend declared on each Adsero Common Share;
(b) in the case of a stock dividend on the Adsero Common Shares to be
paid in Adsero Common Shares, by the issue or transfer by the Company
of such number of Series II Exchangeable Shares for each Series II
Exchangeable Share as is equal to the number of Adsero Common Shares to
be paid on each Adsero Common Share unless, in lieu of such stock
dividend, Adsero elects to effect a corresponding and contemporaneous
subdivision of the outstanding Series II Exchangeable Shares; or
(c) in the case of a dividend declared on the Adsero Common Shares in
property other than cash or Adsero Common Shares, in such type and
amount of property for each Series II Exchangeable Share as is the same
as the type and amount of property declared as a dividend on each
Adsero Common Share.
(2) Such dividends shall be paid out of money, assets or property of
the Company properly applicable to the payment of dividends, or out of
authorized but unissued shares of the Company.
SECTION 3.2
Cheques of the Company payable at any branch of the bankers of the
Company shall be issued in respect of any cash dividends contemplated by Section
3.1(1)(a) hereof and the sending of such a cheque to each holder of a Series II
Exchangeable Share shall satisfy the
29
cash dividend represented thereby unless the cheque is not paid on presentation.
Certificates registered in the name of the registered holder of Series II
Exchangeable Shares shall be issued or transferred in respect of any stock
dividends contemplated by Section 3.1(1)(b) hereof and the sending of such a
certificate to each holder of a Series II Exchangeable Share shall satisfy the
stock dividend represented thereby. Such other type and amount of property in
respect of any dividends contemplated by Section 3.1(1)(c) hereof shall be
issued, distributed or transferred by the Company in such manner as it shall
determine and the issuance, distribution or transfer thereof by the Company to
each holder of a Series II Exchangeable Share shall satisfy the dividend
represented thereby. No holder of a Series II Exchangeable Share shall be
entitled to recover by action or other legal process against the Company any
dividend that is represented by a cheque that has not been duly presented to the
Company's bankers for payment or that otherwise remains unclaimed for a period
of six years from the date on which such dividend was payable.
SECTION 3.3
The record date for the determination of the holders of Series II
Exchangeable Shares entitled to receive payment of, and the payment date for,
any dividend declared on the Series II Exchangeable Shares under Section 3.1
hereof shall be the same dates as the record date and payment date,
respectively, for the corresponding dividend declared on the Adsero Common
Shares.
SECTION 3.4
If on any payment date for any dividends declared on the Series II
Exchangeable Shares under Section 3.1 hereof the dividends are not paid in full
on all of the Series II Exchangeable Shares then outstanding, any such dividends
that remain unpaid shall be paid on a subsequent date or dates determined by the
Board of Directors on which the Company shall have sufficient moneys, assets or
property properly applicable to the payment of such dividends.
SECTION 3.5
Except as provided in this Article 3, the holders of Series II
Exchangeable Shares shall not be entitled to receive any other or further
dividends in respect thereof.
ARTICLE 4
CERTAIN RESTRICTIONS
--------------------
SECTION 4.1
So long as any of the Series II Exchangeable Shares are outstanding, or
as long as any issued and outstanding Preferred Share can be converted into a
Series II Exchangeable Share, the Company shall not without, but may at any time
with the approval of the holders of the Series II Exchangeable Shares given as
specified in Section 8.2 of these share provisions:
(a) amend the constating documents of the Company in a manner which
would prejudicially affect the holders of Series II Exchangeable Shares
in any material respect; or
30
(b) initiate the voluntary liquidation, dissolution or winding-up of
the Company or take any action or omit to take any action that is
designed to result in the liquidation, dissolution or winding-up of the
Company.
SECTION 4.2
So long as any of the Series II Exchangeable Shares are outstanding and
any dividends required to have been declared and paid on the outstanding Series
II Exchangeable Shares pursuant to Article 3 have not been declared and paid in
full, the Company shall not without, but may at any time with the approval of
the holders of the Series II Exchangeable Shares given as specified in Section
8.2 of these share provisions:
(a) pay any dividends on the Common Shares, or any other shares ranking
junior to the Series II Exchangeable Shares, other than share dividends
payable on any such other shares ranking junior to the Series II
Exchangeable Shares;
(b) redeem or purchase or make any capital distribution in respect of
Common Shares or any other shares ranking junior to the Series II
Exchangeable Shares with respect to the payment of dividends or on any
liquidation distribution; or
(c) redeem or purchase any other shares of the Company ranking equally
with the Series II Exchangeable Shares with respect to the payment of
dividends or on any liquidation distribution.
ARTICLE 5
DISTRIBUTION ON LIQUIDATION
---------------------------
SECTION 5.1
At any point in time after the issuance of a Series II Exchangeable
Share, in the event of the liquidation, dissolution or winding-up of the Company
or any other distribution of the assets of the Company among its members for the
purpose of winding-up its affairs, a holder of Series II Exchangeable Shares
shall be entitled, subject to applicable law, to receive pari passu with any
holder of Series I Exchangeable Shares from the assets of the Company in respect
of each Series II Exchangeable Share held by such holder on the effective date
of such liquidation, dissolution or winding-up (the "Liquidation Date"), before
any distribution of any part of the assets of the Company to the holders of the
Common Shares or any other shares ranking junior to the Series II Exchangeable
Shares, an amount equal to the Series II Exchangeable Share Consideration
applicable on the last Business Day prior to the Liquidation Date (the
Liquidation Amount"), which as set forth in Section 5.2, shall, subject to the
exercise by Adsero Callco of the Liquidation Call Right, be fully paid and
satisfied by the delivery by or on behalf of the Company of the Series II
Exchangeable Share Consideration representing such holder's total Liquidation
Amount.
SECTION 5.2
On or promptly after the Liquidation Date, and subject to the exercise
by Adsero Callco of the Liquidation Call Right, the Company shall cause to be
delivered to the holders of the Series II Exchangeable Shares the Series II
Exchangeable Share Consideration representing
31
the Liquidation Amount for each such Series II Exchangeable Share upon
presentation and surrender of the certificates representing such Series II
Exchangeable Shares, together with such other documents and instruments as may
be required to effect a transfer of Series II Exchangeable Shares under the Act
and the constating documents of the Company and such additional documents and
instruments as the Company may reasonably require, at the principal executive
offices of the Company or at such other reasonable place as may be specified by
the Board of Directors by notice to the holders of Series II Exchangeable
Shares. The Series II Exchangeable Share Consideration representing the total
Liquidation Amount for such Series II Exchangeable Shares shall be delivered to
each holder, at the address of the holder recorded in the securities register of
the Company for the Series II Exchangeable Shares or by holding for pick up by
the holder at the place of delivery.
On and after the Liquidation Date, the holders of the Series II
Exchangeable Shares shall cease to be holders of such Series II Exchangeable
Shares and shall not be entitled to exercise any of the rights of holders in
respect thereof, other than the right to receive their proportionate share of
the Series II Exchangeable Share Consideration representing the total
Liquidation Amount, unless payment of the Series II Exchangeable Share
Consideration representing the total Liquidation Amount for such Series II
Exchangeable Shares shall not be made upon presentation and surrender of share
certificates in accordance with the foregoing provisions in which case the
rights of the holders shall remain unaffected until the Series II Exchangeable
Share Consideration representing the total Liquidation Amount has been paid in
the manner hereinbefore provided. The Company shall have the right at any time
on or after the Liquidation Date to deposit or cause to be deposited the Series
II Exchangeable Share Consideration in respect of the Series II Exchangeable
Shares represented by certificates that have not at the Liquidation Date been
surrendered by the holders thereof in a custodial account or for safekeeping, in
the case of non-cash items, with any chartered bank or trust company in Canada.
Upon such deposit being made, the rights of the holders of Series II
Exchangeable Shares after such deposit shall be limited to receiving their
proportionate share of the Series II Exchangeable Share Consideration
representing the total Liquidation Amount for such Series II Exchangeable Shares
so deposited against presentation and surrender of such certificates held by
them, respectively, in accordance with the foregoing provisions. Upon such
payment or deposit of such Series II Exchangeable Share Consideration, the
holders of the Series II Exchangeable Shares shall thereafter be considered and
deemed for all purposes to be the holders of the Adsero Common Shares delivered
to them or the custodian on their behalf.
SECTION 5.3
After the Company has satisfied its obligations to pay the holders of
the Series II Exchangeable Shares the Series II Exchangeable Share Consideration
representing the Liquidation Amount per Series II Exchangeable Share, such
holders shall not be entitled to share in any further distribution of the assets
of the Company.
ARTICLE 6
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
-------------------------------------------
SECTION 6.1
For a period of ninety (90) days from the date of issuance (the "Date
of Issuance") of any Series II Exchangeable Share, a holder of Series II
Exchangeable Shares shall be entitled at
32
any time, subject to the exercise by Adsero Callco of the Retraction Call Right,
and otherwise upon compliance with the provisions of this Article 6, to require
the Company to redeem a number of Series II Exchangeable Shares equal to the
maximum to one-half of any such shares issued on any Date of Issuance registered
in the name of such holder in tranches of 50,000 Series II Exchangeable Shares
or integral multiples thereof (or the balance of the Series II Exchangeable
Shares then held by such holder, if such balance is less than 50,000 Series II
Exchangeable Shares) for an amount equal to the Series II Exchangeable Share
Consideration applicable on the last Business Day prior to the Retraction Date
(the "Retraction Price"), which as set forth in Section 6.3, shall, subject to
the exercise by Adsero Callco of the Retraction Call Right, be fully paid and
satisfied by the delivery by or on behalf of the Company of the Series II
Exchangeable Share Consideration representing such holder's total Retraction
Price.
Once the ninety (90) days period from the Date of Issuance of any
Series II Exchangeable Shares has expired, any holder of Series II Exchangeable
Shares shall be entitled at any time to require the Company to redeem any or all
of the Series II Exchangeable Shares registered in the name of such holder as
more fully set forth above in this Section 6.1. To effect such redemption, the
holder shall present and surrender at the principal executive offices of the
Company the certificates representing the Series II Exchangeable Shares which
the holder desires to have the Company redeem, together with such other
documents and instruments as may be required to effect a transfer of Series II
Exchangeable Shares under the Act and the constating documents of the Company,
and together with a duly executed statement (the "Retraction Request') in the
form of Exhibit "A' hereto or in such other form as may he acceptable to the
Company:
(a) specifying that the holder desires to have all or any number
specified therein of the Series II Exchangeable Shares represented by
such certificate or certificates (the "Retracted Shares") redeemed by
the Company;
(b) stating the Business Day on which the holder desires to have the
Company redeem the Retracted Shares (the `Retraction Date"), provided
that the Retraction Date
(i) shall be not less than two (2) Business Days from the date
or after the date of a news release by Adsero;
(ii) shall not be less than ten (10) days from the date or
after the date of the release of quarterly or annual financial
results of Adsero;
(iii) shall not be less than 10 days nor more than 30 days
after the date on which the Retraction Request is received by
the Company; and
(iv) further provided that, in the event that no such Business
Day is specified by the holder in the Retraction Request, the
Retraction Date shall be deemed to be the 30th day (or, if
such day is not a Business Day, the first Business Day
thereafter) after the date on which the Retraction Request is
received by the Company; and
33
(c) acknowledging the Retraction Call Right of Adsero Callco in the
Series II Exchangeable Shares Voting, Exchange and Support Agreement to
purchase the appropriate number of Retracted Shares directly from the
holder and that the Retraction Request shall be deemed to be a
revocable offer by the holder to sell the Retracted Shares in
accordance with the Series II Exchangeable Shares Voting, Exchange and
Support Agreement.
SECTION 6.2
Subject to the exercise by Adsero Callco of the Retraction Call Right,
upon receipt by the Company in the manner specified in Section 6.1 hereof of a
certificate or certificates representing the number of Series II Exchangeable
Shares which the holder desires to have the Company redeem, together with a
Retraction Request, and provided that the Retraction Request is not revoked by
the holder in the manner specified in Section 6.6 hereof, the Company shall
redeem the Retracted Shares effective at the close of business on the Retraction
Date and shall cause to be delivered to such holder the Series II Exchangeable
Share Consideration representing the total Retraction Price with respect to such
shares in accordance with Section 6.3 hereof. If only a part of the Series II
Exchangeable Shares represented by any certificate is redeemed, a new
certificate for the balance of such Series II Exchangeable Shares shall be
issued to the holder at the expense of the Company.
SECTION 6.3
The Company shall deliver, or cause to be delivered, the Series II
Exchangeable Share Consideration representing the total Retraction Price to the
relevant holder, at the address of the holder recorded in the securities
register of the Company for the Series II Exchangeable Shares or at the address
specified in the holder's Retraction Request or upon demand by the holder, by
holding for pick up by the holder at the principal executive offices of the
Company.
SECTION 6.4
On and after the close of business on the Retraction Date, the holder
of the Retracted Shares shall not be entitled to exercise any of the rights of a
holder in respect thereof, other than the right to receive his proportionate
share of the Series II Exchangeable Share Consideration representing the total
Retraction Price, unless upon presentation and surrender of certificates in
accordance with the foregoing provisions, payment of the Series II Exchangeable
Share Consideration representing the total Retraction Price shall not be made as
provided in Section 6.3 hereof, in which case the rights of such holder shall
remain unaffected until the Series II Exchangeable Share Consideration
representing the total Retraction Price has been paid in the manner hereinbefore
provided. On and after the close of business on the Retraction Date, provided
that presentation and surrender of certificates and payment of the total
Retraction Price has been made in accordance with the foregoing provisions, the
holder of the Retracted Shares so redeemed by the Company shall thereafter be
considered and deemed for all purposes to be a holder of the Adsero Common
Shares.
SECTION 6.5
Notwithstanding any other provision of this Article 6, the Company
shall not be obligated to redeem Retracted Shares specified by a holder in a
Retraction Request to the extent that such redemption of Retracted Shares would
be contrary to liquidity or solvency requirements or
34
other provisions of applicable law. If the Company 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
Adsero Callco shall not have exercised the Retraction Call Right with respect to
the Retracted Shares, the Company shall only be obligated to redeem Retracted
Shares specified by a holder in a Retraction Request to the extent of the
maximum number that may be so redeemed (rounded down to a whole number of
shares) as would not be contrary to such provisions and shall notify the holder
at least two Business Days prior to the Retraction Date as to the number of
Retracted Shares which will not be redeemed by the Company. In any case in which
the redemption by the Company of Retracted Shares would be contrary to liquidity
or solvency requirements or other provisions of applicable law, the Company
shall redeem Retracted Shares in accordance with Section 6.2 of these share
provisions on a pro rata basis and shall issue to each holder of Retracted
Shares a new certificate, at the expense of the Company, representing the
Retracted Shares not redeemed by the Company pursuant to Section 6.2 hereof.
Provided that the Retraction Request is not revoked by the holder in the manner
specified in Section 6.6 hereof, the holder of any such Retracted Shares not
redeemed by the Company pursuant to Section 6.2 of these share provisions as a
result of liquidity or solvency requirements or applicable law shall be deemed
by giving the Retraction Request to require Adsero Callco to purchase such
Retracted Shares from such holder on the Retraction Date or as soon as
practicable thereafter on payment by Adsero Callco to such holder of the Series
II Exchangeable Share Consideration representing the Retraction Price for each
such Retracted Share, all as more specifically provided in the Series II
Exchangeable Shares Voting, Exchange and Support Agreement.
SECTION 6.6
A holder of Retracted Shares may, by notice in writing given by the
holder to the Company before the close of business on the third Business Day
immediately preceding the Retraction Date, withdraw its Retraction Request in
which event such Retraction Request shall be null and void and, for greater
certainty, the revocable offer constituted by the Retraction Request to sell the
Retracted Shares to Adsero Callco shall be deemed to have been revoked.
ARTICLE 7
VOTING RIGHTS
-------------
SECTION 7.1
Except as required by applicable law and the provisions hereof, the
holders of the Series II Exchangeable Shares shall not be entitled as such to
receive notice of or to attend any meeting of the members of the Company or to
vote at any such meeting or to vote by written consent on any matter.
ARTICLE 8
AMENDMENT AND APPROVAL
----------------------
SECTION 8.1
Subject to the approval of the holders of the Series II Exchangeable
Shares to which are attached the right to vote in the event that such change,
removal or addition would affect
35
their respective rights, the rights, privileges, restrictions and conditions
attaching to the Series II Exchangeable Shares may be added to, changed or
removed as hereinafter provided in Section 8.2.
SECTION 8.2
Any approval given by holders of the Series II Exchangeable Shares to
add to, change or remove any right, privilege, restriction or condition
attaching to the Series II Exchangeable Shares or any other matter requiring the
approval or consent of the holders of the Series II Exchangeable Shares shall be
deemed to have been sufficiently given if it shall have been given in accordance
with applicable law, provided, however, that such approval must be evidenced by
a written resolution passed by not less than 75% of the votes cast on such
resolution by persons represented in person or by proxy or such other authorized
person at a meeting of holders of Series II Exchangeable Shares duly called and
held at which the holders of at least 50% of the outstanding Series II
Exchangeable Shares at that time are present or represented by proxy or such
other authorized person (excluding Series II Exchangeable Shares beneficially
owned by Adsero, YAC, Adsero Callco, their Affiliates or Subsidiaries) or by a
written resolution signed by the holders of the then outstanding Series II
Exchangeable Shares excluding Exchangeable Shares beneficially owned by Adsero,
YAC, Adsero Callco, their Affiliates or Subsidiaries. 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 or such other authorized person within
one-half hour after the time appointed for such meeting, then the meeting shall
be adjourned to such date not less than ten days thereafter and to such time and
place as may be designated by the Chairperson of such meeting. At such adjourned
meeting, the holders of Series II Exchangeable Shares present or represented by
proxy or such other authorized person 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 75% of the votes cast on such resolution by
persons represented in person or by proxy or such other authorized person at
such meeting (excluding Series II Exchangeable Shares beneficially owned by
Adsero, YAC, Adsero Callco, their Affiliates or Subsidiaries) shall constitute
the approval or consent of the holders of the Series II Exchangeable Shares.
ARTICLE 9
ACTIONS BY THE COMPANY UNDER
SERIES II EXCHANGEABLE SHARES VOTING, EXCHANGE AND SUPPORT AGREEMENT
--------------------------------------------------------------------
SECTION 9.1
The Company will take all reasonable efforts to perform and comply with
and to ensure performance and compliance by Adsero, YAC, Adsero Callco and the
Company with all provisions of the Series II Exchangeable Shares Voting,
Exchange and Support Agreement applicable to Adsero, YAC, Adsero Callco and the
Company, respectively, in accordance with the terms thereof including, without
limitation, taking all such actions and doing all such things as shall be
necessary or advisable to enforce to the fullest extent possible for the direct
benefit of the Company and the holders of the Series II Exchangeable Shares all
rights and benefits in favour of the Company and the holders of the Series II
Exchangeable Shares pursuant thereto.
36
SECTION 9.2
The Company shall not propose, agree to or otherwise give effect to any
amendment to, or waiver or forgiveness of its obligations under the Series II
Exchangeable Shares Voting, Exchange and Support Agreement without the approval
of the holders of the Series II Exchangeable Shares given in accordance with
Section 8.2 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 the holders of Series II Exchangeable
Shares; or
(b) making such provisions or modifications not inconsistent with such
agreement as may be necessary or desirable with respect to matters or
questions arising thereunder which, in the opinion of the Board of
Directors, it may be expedient to make, provided that such provisions
and modifications will not be prejudicial or adverse to the interests
of the holders of Series II Exchangeable Shares; or
(c) making such changes in or corrections to such agreement which, on
the advice of counsel to the Company, are required for the purpose of
curing or correcting any defect or clerical omission or mistake or
manifest error contained therein, provided that the Board of Directors
shall be of the opinion, after consultation with counsel, that such
changes or corrections will not be prejudicial to the interests of the
holders of the Series II Exchangeable Shares.
ARTICLE 10
LEGEND; CALL RIGHTS
-------------------
SECTION 10.1
The certificates evidencing the Series II Exchangeable Shares shall
contain or have affixed thereto a legend, in form and on terms approved by the
Board of Directors, with respect to the Call Rights and the Series II
Exchangeable Shares Voting, Exchange and Support Agreement. Moreover, the
following legend will be placed on each certificate endorsing the Adsero Common
Shares:
"The Securities represented by this certificate have not been
registered under the Securities Act of 1933 (the "Securities Act") and
may not be transferred except in compliance with the registration
provisions of the Securities Act and applicable State securities laws,
or pursuant to an available exemption from such registration provisions
and are subject to the Lock-Up Agreement".
SECTION 10.2
Each holder of a Series II Exchangeable Share, whether of record or
beneficial, by virtue of becoming and being such a holder shall be deemed to
acknowledge each of the Call Rights in favour of Adsero Callco or its assignee
(as provided in the Series II Exchangeable Shares Voting, Exchange and Support
Agreement) and the overriding nature thereof in connection with the liquidation,
dissolution or winding-up of the Company or the retraction of Series II
37
Exchangeable Shares, as the case may be, and to be bound thereby in favour of
Adsero Callco or its assignee (as provided in the Series II Exchangeable Shares
Voting, Exchange and Support Agreement) as therein provided.
SECTION 10.3
The Company, Adsero Callco and Adsero as the case may be, shall be
entitled to deduct and withhold from any dividend or consideration otherwise
payable to any holder of Series II Exchangeable Shares such amounts as the
Company, Adsero Callco or Adsero, as the case may be, is required to deduct and
withhold with respect to such payment under the Income Tax Act (Canada), the
United States Internal Revenue Code or any provision of provincial, state, local
or foreign tax law, in each case, as amended. To the extent that amounts are so
withheld, such withheld amounts shall be treated for all purposes hereof as
having been paid to such holder of the Series II Exchangeable Shares in respect
of which such deduction and withholding was made, provided that such withheld
amounts are actually remitted to the appropriate taxing authority. To the extent
that such amount so required to be deducted or withheld from any payment to a
holder exceeds the cash portion of the consideration otherwise payable to the
holder, the Company, Adsero and Adsero Callco, as the case may be, shall
promptly notify the holder and unless such holder remits the difference in cash
to the Company, Adsero or Adsero Callco, as the case may be, before the tax
amount is required to be remitted to the taxing authority, then the Company,
Adsero and Adsero Callco, as the case may be, may sell or otherwise dispose of
such portion of the consideration (including, without limitation, any of the
Adsero Common Shares) as is necessary to provide sufficient funds to the
Company, Adsero and Adsero Callco, as the case may be, to enable it to comply
with such deduction or withholding requirement and the Company, Adsero and
Adsero Callco, as the case may be, shall notify such holder and remit any
unapplied balance of the net proceeds of such sale.
In order to assist the Company, Adsero and Adsero Callco, as the case
may be, in complying with any such deduction and withholding requirement, the
relevant holder shall, to the extent applicable, deliver to the Company, Adsero
or Adsero Callco, as the case may be, (i) if such holder is an individual, trust
or corporation, a declaration sworn by the individual, a trustee or a director,
as the case may be, before a notary or commissioner for oaths to the effect that
such holder, is not and will not be, on the date of payment, a non-resident of
Canada for the purposes of the Income Tax Act (Canada) or (ii) if such holder is
a partnership1 a declaration sworn by a general partner before a notary or
commissioner for oaths to the effect that such holder is a Canadian partnership,
as defined in the Income Tax Act (Canada).
ARTICLE 11
MISCELLANEOUS
-------------
SECTION 11.1
Any notice, request or other communication to be given to the Company
by a holder of Series II Exchangeable Shares shall be in writing and shall be
valid and effective if given by mail (postage prepaid) or by telecopy or
delivery to the principal executive offices of the Company or at such other
reasonable place as may be specified by the Board of Directors by notice to the
holders of Series II Exchangeable Shares, and addressed to the attention of the
President. Any such notice, request or other communication, if given by mail,
telecopy, facsimile or delivery, shall only be deemed to have been given and
received on the second Business Day following
38
the date of mailing and, if given by delivery, shall be deemed to have been
given and received on the date of delivery.
SECTION 11.2
Any presentation and surrender by a holder of Series II Exchangeable
Shares to the Company of certificates representing Series II Exchangeable Shares
in connection with the liquidation, dissolution or winding-up of the Company or
the retraction of Series II Exchangeable Shares shall be made by registered mail
(postage prepaid) or by delivery to the principal executive offices of the
Company by notice to the holders of Series II Exchangeable Shares addressed to
the attention of the President of the Company. Any such presentation and
surrender of certificates shall only be deemed to have been made and to be
effective upon actual receipt thereof by the Company, as the case may be, and
the method of any such presentation and surrender of certificates shall be at
the sole risk of the holder, mailing the same.
SECTION 11.3
Any notice request or other communication to be given to a holder of
Series II Exchangeable Shares by or on behalf of the Company shall be in writing
and shall be valid and effective if given by mail (postage prepaid) or by
telecopy or delivery to the address of the holder recorded in the securities
register of the Company or, in the event of the address of any such holder not
being so recorded, then at the last known address of such holder. Any such
notice, request or other communication, if given by mail or telecopy, shall only
be deemed to have been given and received on the second Business Day following
the date of mailing and, if given by delivery, shall be deemed to have been
given and received on the date of delivery.
SECTION 11.4
For greater certainty, the Company shall 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.
SECTION 11.5
All Series II Exchangeable Shares acquired by the Company upon the
retraction thereof shall be cancelled.
SECTION 11.6
Immediately upon the issuance and delivery to a holder of Series II
Exchangeable Shares at any time and from time to time of Adsero Common Shares
and the other Series II Exchangeable Share Consideration (if any) pursuant to
any Call Right, or any Insolvency Exchange Right or Automatic Exchange Right (as
such terms are defined in the Series II Exchangeable Shares Voting, Exchange and
Support Agreement), the Series II Exchangeable Shares which are the subject of
right shall be automatically converted into Common Shares of the Company on a
one-for-one basis and the holder thereof is entitled to receive a certificate or
certificates upon demand representing the Common Shares resulting from such
conversion. All Common Shares issued by the Company in respect of any conversion
of issued and fully paid Series II Exchangeable Shares shall be deemed to be
fully paid and non-assessable.
39
EXHIBIT "A"
RETRACTION REQUEST
TO: 3091503 Nova Scotia Company (the "Company")
AND TO: 3091732 Nova Scotia Company ("Adsero Callco")
This notice is given pursuant to Article 6 of the provisions (the
"Series II Exchangeable Share Provisions") attaching to the Series II
Exchangeable Shares of the Company represented by this certificate and all
capitalized words and expressions used in this notice which are defined in the
Series II Exchangeable Share Provisions have the meaning attributed to such
words and expressions in such Series II Exchangeable Share Provisions.
The undersigned hereby notifies the Company that, subject to the
Retraction Call Right referred to below, the undersigned desires to have the
Company redeem in accordance with Article 6 of the Series II Exchangeable Share
Provisions:
[_] all share(s) represented by this certificate; or
[_] _________________________ share(s) only.
The undersigned hereby notifies the Company that the Retraction Date
shall be ________________________.
NOTE: The Retraction Date must be a Business Day and must not be less than 10
days nor more than 30 days after the date upon which this notice is
received by the Company. In the event that no such Business Day is
correctly specified above, the Retraction Date shall be deemed to be
the 30th day (or, if such day is not a Business Day, the first Business
Day thereafter) after the date on which this notice is received by the
Company.
The undersigned acknowledges the overriding Retraction Call Right of
Adsero Callco to purchase all but not less than all the Retracted Shares from
the undersigned and that this notice is and shall be deemed to be a revocable
offer by the undersigned to sell the Retracted Shares to Adsero Callco in
accordance with the Retraction Call Right on the Retraction Date for the price
and on the other terms and conditions set out in the Series II Exchangeable
Shares Voting, Exchange and Support Agreement and in these Exchangeable Share
Provisions. If Adsero Callco determines not to exercise the Retraction Call
Right, the Company will notify the undersigned of such fact as soon as possible.
This notice of retraction, and this offer to sell the Refracted Shares to Adsero
Callco, may be revoked and withdrawn by the undersigned by notice in writing
given to the Company at any time before the close of business on the third
Business Day immediately preceding the Retraction Date.
The undersigned acknowledges that if, as a result of liquidity or
solvency provisions of applicable law, the Company is unable to redeem all
Retracted Shares, the undersigned will be deemed to have exercised the
Insolvency Exchange Right (as defined in the Series II Exchangeable Shares
Voting Exchange and Support Agreement) so as to require Adsero Callco to
purchase the unredeemed Retracted Shares.
40
The undersigned represents and warrants to the Company and Adsero
Callco that the undersigned:
[_] is
[_] is not
a non-resident of Canada for purposes of the Income Tax Act (Canada). The
undersigned acknowledges that in the absence of an indication that the
undersigned is not a non-resident of Canada, withholding on account of Canadian
tax may be made from amounts payable to the undersigned from net proceeds of
sale or Adsero Common Shares deliverable on the redemption or purchase of the
Retracted Shares.
The undersigned hereby represents and warrants to the Company and
Adsero Callco that the undersigned has good title to, and owns, the share(s)
represented by this certificate to be acquired by the Company or Adsero Callco,
as the case may be, free and clear of all liens, hypothecs, pledges, claims,
encumbrances, security interests and adverse claims or interests except pursuant
to the Series II Exchangeable Shares Voting, Exchange and Support Agreement or
these Series II Exchangeable Share Provisions.
--------------------- --------------------------
(Date) (Signature of Shareholder)
[_] Please check box if the securities and any cheque(s) resulting from the
retraction of the Retracted Shares are to be held for pick-up by the
shareholder at the principal executive office of the Company, failing
which the securities and any cheque(s) or other non-cash assets will be
delivered to the shareholder in accordance with the Exchangeable Share
Provisions.
NOTE: This panel must be completed and this certificate, together with such
additional documents as the Company may require, must be deposited with
the Company at its principal executive office. The securities and any
cheque(s) resulting from the retraction or purchase of the Retracted
Shares will be issued and registered in, and made payable to, or
transferred into, respectively, the name of the shareholder as it
appears on the register of the Company and the securities and cheque(s)
resulting from such retraction or purchase will be delivered to the
shareholder in accordance with these Series II Exchangeable Share
Provisions.
Name of person in whose name securities or
cheque(s) are to be registered, issued or delivered
(PLEASE PRINT)
-----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇.▇. ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ and Postal Code
-----------------------------------------
Signature of Shareholder
41
NOTE: If this notice of retraction is for less than all of the share(s)
represented by this certificate, a certificate representing the
remaining shares of the Company will be issued and registered in the
name of the shareholder as it appears on the register of the Company,
unless the Share Transfer Power on the certificate is duly completed in
respect of such shares.
42
SCHEDULE "B"
CERTIFICATE OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RIGHTS OF
SERIES A SPECIAL VOTING SHARES
OF ADSERO CORP.
Pursuant to Sections 151(g) of the General Corporation Law
of the State of Delaware
I, ▇▇▇▇▇▇▇ ▇▇▇▇▇, the Chief Financial Officer of Adsero Corp., a Delaware
corporation (the "Company"), in accordance with the provisions of Section 103 of
the General Corporation Law of the State of Delaware (the "DGCL"), D0 HEREBY
CERTIFY that, pursuant to the provisions of Section 151 of the DGCL by unanimous
written agreement of the Board of Directors dated December , 2004 in lieu of a
meeting in accordance with Section 141(f) of the DGCL, the following resolutions
were unanimously adopted by the Board of Directors of the Company and pursuant
to authority conferred upon the Board of Directors by the provisions of the
March 19, 2004 Certificate of Amendment to the Certificate of Incorporation of
the Company (the "Certificate of Incorporation"), the Board of Directors of the
Company adopted resolutions providing for the issuance of a series of Preferred
Stock of the Company and fixing the relative powers, designations, preferences,
rights, qualifications, limitations and restrictions of such stock. These
resolutions which remain in full force and effect on the date hereof are as
follows:
"RESOLVED, that pursuant to authority expressly granted to and
vested in the Board of Directors of the Company by the provisions of
the Certificate of Incorporation, the issuance of a series of Preferred
Stock of the Company to be designated "Series A Special Voting Shares",
par value $0.0001 per share, which shall consist of 11,330,000 of the
20,000,000 shares of Preferred Stock which the Company now has
authority to issue, be, and the same hereby is authorized, and the
Board hereby fixes the powers, designations, preferences and relative,
participating, optional and other rights, and the qualifications,
limitations and restrictions thereof, of the 11,330,000 shares of such
series (in addition to the powers, designations, preferences and
relative, participating, optional or other rights, and the
qualifications, limitations or restrictions thereof, set forth in the
Certificate of Incorporation which may be applicable to the Preferred
Stock of this series) as follows:
I. AUTHORIZED NUMBER AND DESIGNATION. 11,330,000 shares
of the Preferred Stock, each share having a par value
of $0.0001 of the Company is hereby constituted as a
series of the Preferred Stock designated as Series A
Special Voting Shares (the "Series A Special Voting
Shares").
II. DIVIDENDS AND DISTRIBUTIONS. The holders of Series A
Special Voting Shares shall not be entitled to
receive on such Series A Special Voting Shares any
dividends declared and paid by the Company.
III. VOTING RIGHTS. Except as otherwise required by law or
by the Certificate of Incorporation, the holders of
record of the Series A Special Voting
43
Shares will be entitled to all of the voting rights,
including the right to vote in person or by proxy, of
the Series A Special Voting Shares on any matters,
questions, proposals or propositions whatsoever that
may properly come before the shareholders of the
Company at a meeting at which holders of the
Company's Common Stock ("Common STOCK") are entitled
to vote ("Company Meeting") or with respect to all
written consents sought by the Company from its
shareholders including the holders of the Company's
Common Stock ("Company Consent"). In respect of all
matters concerning the Voting Rights, the Series A
Special Voting Shares and the Common Stock shall vote
as a single class.
IV. REDEMPTION AND ADJUSTMENTS OF SERIES A SPECIAL VOTING
SHARES
Subject to applicable law, the Company shall
automatically redeem Series A Special Voting Shares
for an amount per share equal to $0.0001, in direct
proportion to, and at the time of, each issuance of
shares of the Company's Common Stock, to holders of
Series A Special Voting Shares whenever any Series I
or Series II Exchangeable Shares held by a holder in
the capital of 3091503 Nova Scotia Company at such
time is retracted, purchased or exchanged pursuant to
a certain Series I or Series II Exchangeable Shares
Voting, Exchange and Support Agreement among the
Company, YAC Corp., 3091732 Nova Scotia Company,
3091503 Nova Scotia Company and the holders of shares
as defined in such Series I or Series II Exchangeable
Shares Voting, Exchange and Support Agreement. From
and after each redemption date, all rights of the
holders of redeemed Series A Special Voting Shares
shall cease with respect to such shares and such
shares shall not hereafter be deemed to be
outstanding for any purpose whatsoever. Any such
holder shall surrender to the Company, for
cancellation, the certificate representing the Series
A Special Voting Shares held by such holder being
surrendered pursuant to these provisions. If only a
part of the Series A Special Voting Shares
represented by any certificate surrendered to the
Company are to be the cancelled by the Company
hereunder, a new certificate for the balance of such
Series A Special Voting Shares shall be issued by the
Company and delivered to the holder at the expense of
the Company.
V. LIQUIDATION PREFERENCE.
Upon any liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary, and
subject to any prior rights of holders of shares of
Preferred Stock ranking senior to the Series A
Special Voting Shares, the holders of Series A
Special Voting Shares shall be paid an amount
totaling $0.0001 per share, together with payment to
any class of stock ranking equally with the Series A
Special Voting Shares, and before payment shall be
made to the holders of any stock ranking on
liquidation junior to the Series A Special Voting
Shares.
44
VI. RANKING.
The Series A Special Voting Shares shall rank junior
to all other series of the Company's Preferred Stock,
unless the terms of any such series shall provide
otherwise.
VII. VETO.
As long as any Special Voting Share is outstanding,
(i) the Company shall not issue or create any other
series of the Preferred Stock which may affect the
voting rights of the holders of the Series A Special
Voting Shares and (ii) the Company may not take any
corporate action that would serve to diminish the
voting rights of holders of the Series A Special
Voting Shares in a manner different from the voting
rights of holders of the Company's Common shares
without the prior written consent of persons holding
at least 75% of the then outstanding Series A Special
Voting Shares.
RESOLVED FURTHER, that the Chief Executive Officer, President or any Vice
President and the Secretary or any Assistant Secretary of the Company be, and
they hereby are authorized and directed to prepare and file (or cause to be
prepared and filed) a Certificate of the Powers, Designations, Preferences and
Rights in accordance with the foregoing resolution and the provisions of the
laws of Delaware and to take such actions as they may deem necessary or
appropriate to carry out the intent of the foregoing resolutions.
IN WITNESS WHEREOF, I have executed and subscribed to this Certificate and do
hereby affirm the foregoing as true under the penalties of perjury this ________
day of _____________, 2004.
ADSERO CORP.
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Chief Financial Officer
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