EXHIBIT 10.3
SHAREHOLDERS' AGREEMENT
THIS AGREEMENT is made as of 25th day of September, 2000
AMONG:
XXXXXXXX XXXXXX, of 000 0xx Xxxxxx Xxxx, Xxxxx Xxxxxxxxx, Xxxxxxx
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Xxxxxxxx, X0X 0X0
AND: ("Fraser")
XXXXX XXXXXXXX, of 6 - 2475 West 1st Avenue, Vancouver, British
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Columbia, V6H lG5
AND: ("Xxxxxxxx")
XXXX XXXX, of 0000 Xxxx 0xx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X
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2Cl
AND: ("Beis")
KAREL TEN HOOPE, of 4104 St. Albans Avenue, North Vancouver, British
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Xxxxxxxx, X0X 0Xx
AND: ("Ten Hoope")
XXXXXXX XXXXX, of 0000 Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxx, X.X.X. 00000
--------------
AND:
AND: ("Xxxxx")
IQUEST NETWORKS INC., a Wyoming company having an office at 507 -837
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Xxxx Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0
AND: ("iQuest")
XXXXXX.XXX SOFTWARE LTD., a British Columbia company having its
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registered office at 000 Xxxxxxxxxx Xxxxxx, 200 Burrard Street,
Vancouver, British Columbia, V7X lT2
AND: (the "Company")
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BACKGROUND
A. The Company carries on the business of software development with respect to
creating an internet-based network for finding and securely streaming
personal CD collections between community members over the internet.
X. Xxxxxx, Hamilton, Beis, Ten Hoope and Xxxxx are the registered and
beneficial holders of the numbers of issued and outstanding shares in the
capital of the Company set out in Schedule C, which shares represent the
only issued and outstanding shares of the Company.
C. iQuest has agreed to invest $250,000 in Canadian funds in the Company in
return for 2,500,OOO Class B common shares and pursuant to a subscription
agreement dated September 28, 200O.
D. As a condition of completing the transactions contemplated in the
subscription agreement described above, the parties have agreed to enter
into this Shareholders' Agreement to set out their respective rights and
responsibilities with respect to the Company.
TERMS OF AGREEMENT
In consideration of the premises and the mutual covenants contained in this
Agreement, the parties to this Agreement covenant and agree each with the others
as follows:
1. INTERPRETATION
1.1. DEFINITIONS. For the purposes of this Agreement (including the recitals),
the terms in Schedule A shall have the meanings given to them in that
Schedule.
1.2. MEANING OF CONTROL. For the purposes of this Agreement, "control" where
used in connection with a corporation means:
(a) the right to exercise a majority of the votes which may be voted at a
general meeting of such corporation; or
(b) the right to elect or appoint directly or indirectly a majority of the
directors of such corporation or other persons who have the right to
manage or supervise the management of the affairs and business of the
corporation.
1.3. ACCOUNTING TERMINOLOGY. All accounting terms not expressly defined in this
Agreement shall have the respective meanings usually ascribed to them in
accordance with generally accepted accounting principles in Canada.
1.4. MEANING OF PRO RATA. Unless the context otherwise requires, all rights,
obligations or other matters which are, under the terms of this Agreement,
to be determined on a proportionate or pro rata basis shall be determined
on a basis which is pro rata or
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proportionate to the total number of shares of the Company issued and
outstanding as of the date of such determination.
1.5. HEADINGS. The headings used in the Agreement are for convenience and
reference only and shall not affect the construction or interpretation of
this Agreement.
1.6. SCHEDULES. The Schedules to this Agreement which are incorporated and form
part of this Agreement are as follows:
A-Definitions
B-Matters Requiring Unanimous Consent of Directors
C-Capital Contributions
2. REPRESENTATIONS AND WARRANTIES
2.1. iQuest represents and warrants to each of the other parties that:
(a) iQuest is a company duly incorporated under the laws of the State of
Wyoming, and is valid, subsisting and in good standing;
(b) iQuest has the corporate power to enter into this Agreement and to
perform and observe its obligations and agreements set out in this
Agreement;
(c) this Agreement has been duly executed and delivered by iQuest and is a
valid and binding obligation enforceable in accordance with its terms.
2.2. iNoize represents and warrants to each of the other parties that:
(a) iNoize is a company duly incorporated under the laws of the Province
of British Columbia, and is valid, subsisting and in good standing;
(b) iNoize has the corporate power to enter into this Agreement and to
perform and observe its obligations and agreements set out in this
Agreement;
(c) this Agreement has been duly executed and delivered by iNoize and is a
valid and binding obligation enforceable in accordance with its terms.
3. AGREEMENT ON CORPORATE MATTERS
3.1. CORPORATE MATTERS. The Shareholders and the Company agree that,
notwithstanding any provisions to the contrary contained in the Articles of
the Company, the corporate matters referred to in this section 3 shall be
governed by the applicable provisions of this section 3, and that in the
case of any inconsistency or conflict between the Articles of Company and
the provisions of this section 3, the provisions of this section 3 shall
govern.
3.2. DIRECTORS. The Shareholders shall vote their Shares, so that the Board
comprises three directors, which include one nominee of Fraser, one nominee
of Xxxxxxxx and one
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nominee of iQuest. Fraser shall, for a period of one year from the date
first written above, nominate Fraser, as his nominee director provided that
Fraser is living and has not suffered a Permanent Incapacity. After one
year from the date of this Agreement, Fraser may nominate another
individual as his nominee director, provided that iQuest shall have the
right to consent to such nomination, such consent not to be unreasonably
withheld. Xxxxxxxx shall, for a period of one year from the date first
written above, nominate Xxxxxxxx, as its nominee director provided that
Xxxxxxxx is living and has not suffered a Permanent Incapacity. After one
year from the date of this Agreement, Xxxxxxxx may nominate another
individual as his nominee director, provided that iQuest shall have the
right to consent to such nomination, such consent not to be unreasonably
withheld. Subject to the foregoing, if a position on the Board formerly
held by a director is open for any reason, the Shareholder whose nominee
formerly occupied such position shall be entitled to nominate A new
director to fill the vacancy.
3.3. SECRETARY OF THE COMPANY. The Board shall by resolution appoint Xxxx
Xxxxxxxx as Secretary of the Company to hold office until the first annual
general meeting of the Company. Following the first annual general meeting
of the Company, iNoize shall nominate the Secretary of the Company and
shall notify the Board of its selection on an annual basis within one (1)
business day of the conclusion of the annual general meeting of the
Company. The Board shall by resolution appoint iNoize's nomination as
Secretary of the Company.
3.4. OTHER OFFICERS. The officers of the Company, other than the Corporate
Secretary, shall be such persons as the Board shall by resolution appoint.
The Board shall make such appointments on an annual basis immediately
following the annual general meeting of the Company.
3.5. AUDITORS. The shareholders shall vote their shares so that the Auditors of
the Company are the firm of Amisano, Hanson, Chartered Accountants or such
other firm as iQuest, from time to time, nominates.
3.6. MEETINGS OF THE BOARD
(a) Any director of the Company may, in accordance with this subsection
3.6, call a meeting of the Board. At least seven days' prior written
notice shall be given to the other directors of the Company of each
meeting of the Board unless the giving of such notice is waived by
each director before, during or after the meeting. Attendance at the
meeting by a director shall be deemed to be a waiver of the giving of
such notice. The notice of meeting shall set out in reasonable detail
the business to be considered at such meeting and no other business
shall be transacted at such meeting without the consent of all of the
directors.
(b) Meetings of the Board may be held by telephone conference and the
parties specifically consent to the validity of meetings so held
provided the requirements relating to quorum and notice are complied
with.
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(c) A quorum for a meeting of the Board shall be two of the directors of
the Company.
3.7 FAILURE TO VOTE. In the event that a director shall fail to vote and act as
a director to carry out the provisions of this Agreement, the Shareholders
shall exercise their rights as members of the Company to remove such
director from the Board and, subject to subsection 3.2, to elect in his or
her place an individual who will use his or her best efforts to carry out
the provisions of this Agreement.
3.8 MATTERS REQUIRING UNANIMOUS APPROVAL OF DIRECTORS. The matters set out in
Schedule B shall only be undertaken with (in addition to the consents or
approvals, if any, required under the Company Act or the Articles of the
Company) the consent in writing of all of the directors of the Company.
4. FINANCES
4.1 iQUEST RIGHT OF FIRST REFUSAL. The Company shall not agree to any Financing
in excess of $20,000 without first providing iQuest the opportunity to
provide such Financing. The Company shall give iQuest written notice of any
proposed Financing and allow iQuest to match such Financing within seven
days of the provision of the notice. The notice must state the amount of
Financing being sought and the terms of repayment. If iQuest does not
exercise its right of first refusal, then the Company may seek Financing
from any other source on terms materially equivalent to those set out in
the notice, provided that the amount of funds which the Company seeks to
borrow does not vary by more than 5% from the amount set out in the notice.
4.2 BANK FINANCING. Subject to section 4.1 and subject to the Shareholders
agreeing otherwise, the Company shall borrow from the Bank, to the extent
the Company is able on terms satisfactory to the Board, the funds required
from time to time by the Company.
4.3 INTEREST. Shareholders' Loans shall not bear interest unless unanimously
agreed to by the Board.
4.4 SUBORDINATION OF SHAREHOLDERS' LOANS. The Shareholders shall subordinate
and postpone all Shareholders' Loans (including without limitation existing
loans, if any) to all financings or borrowings by the Company to the extent
required by the Board.
4.5 RESTRICTION ON DEMAND. No Shareholder shall demand repayment of a
Shareholder's Loan, unless:
(a) all Shareholders agree in writing to the repayment; or
(b) this Agreement has terminated in accordance with subsection 14.1.
4.6 INDEMNITIES. If at any time a Shareholder (or its Representative or one of
its Affiliates) (the "Indemnitor") becomes a guarantor or a surety of, or
otherwise liable for, any indebtedness or obligations of the Company (or
any of its Subsidiaries) (whether such guarantee or obligation is limited,
several or joint and several) and the incurrence of such
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liability was made at the unanimous written request of the Board, then,
subject to subsection 12.11 of this Agreement, the other Shareholders and
their Representatives and Affiliates, shall jointly and severally indemnify
and save harmless the Indemnitor so that each Shareholder (together with
its Representatives and Affiliates) shall be liable and shall pay its share
of such indebtedness or obligation which is proportionate to each
Shareholder's respective holdings of shares in the capital of the Company.
4.7. ISSUING CHEQUES. Any cheque drawn upon the Company's bank account shall
require the signatures of two authorized signatories. For any cheque drawn
upon the Company's bank account in an amount greater than $10,000, the
authorized signatories shall consist of an authorized signatory selected by
the Company and an authorized signatory selected by iQuest. The signed
cheque, or notice that the signature will not be provided with reasons why
the signature has not been provided, shall be provided on or before 3:00 pm
the Business Day following a request for signature.
5. RESTRICTIONS ON TRANSFER
5.1. RESTRICTION ON TRANSFER. No Shareholder shall Transfer all or any part of
its Interest to any person, whether a Shareholder or not, except as
otherwise expressly provided in this Agreement.
5.2. ABSOLUTE RESTRICTION ON SALE FOR 1 YEAR. No Shareholder shall sell any of
its Shares for a period of one year commencing on the date of this
Agreement.
5.3. RIGHT OF FIRST REFUSAL
(a) A Shareholder (the "Offeror") desiring to transfer any or all of its
Shares shall give written notice to the Company (the "Transfer
Notice") specifying the number of its Shares that it desires to
transfer (the "Offered Shares"), the price, in lawful money of Canada,
for the Offered Shares, and the terms of payment upon which the
Offeror is prepared to transfer the Offered Shares. The Transfer
Notice shall constitute the Company as the agent of the Offeror for
the sale of the Offered Shares to any other Shareholder or
Shareholders at the price and upon the terms of payment specified in
the Transfer Notice. The Transfer Notice shall also state whether the
Offeror has received an offer to purchase (the "Third Party Offer")
the Offered Shares, OR any of them, from, or proposes to sell the
Offered Shares, or any of them, to, any particular person or persons
who are not Shareholders (the "Third Party Offerors") and, if so, the
names and addresses of those persons and the price and terms in the
Third Party Offer shall be specified in the Transfer Notice. The
Transfer Notice shall constitute an offer by the Offeror to the other
Shareholders to sell the Offered Shares to the other Shareholders and
shall not be revocable.
(b) The Company shall forthwith upon receipt of the Transfer Notice
transmit a copy of it to each Shareholder other than the Offeror and
shall request that each such Shareholder state in writing, within 14
days from the date of the Transfer Notice,
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whether it is willing to purchase any of the Offered Shares and, if
so, the maximum number it is willing to purchase.
(c) Upon the expiration of the 14-day notice period provided for in
paragraph above, if the Company has received from the Shareholders
entitled to receive the Transfer Notice sufficient acceptances to
purchase all the Offered Shares the Company shall thereupon apportion
the Offered Shares among the Shareholders so accepting pro rata in
proportion to the number of shares held by each of them respectively
up to the number of Offered Shares accepted by each of them
respectively. If the Company did not receive sufficient acceptances to
purchase all of the Offered Shares, the Company may, but only with the
consent of the Offeror, who shall not be obliged to sell in the
aggregate less than all the Offered Shares, apportion the Offered
Shares among the Shareholders accepting pro rata in proportion to the
number of shares held by each of them respectively up to the number of
the Offered Shares accepted by each of them respectively.
(d) Upon the Company's receipt of an acceptance to purchase all or any
part of the Offered Shares and after an apportionment has been made
pursuant to paragraph (c) above, if necessary, a binding contract of
purchase and sale between the Offeror and the Shareholder who
transmitted such acceptance shall be deemed to come into existence on
the terms set out in this Agreement and the Transfer Notice, which
contract will be completed in the manner provided in section 12.
(e) After an apportionment has been made pursuant to paragraph (c) above
and upon payment of the price for the Offered Shares apportioned, the
Offeror shall be bound to transfer those shares in accordance with
that apportionment and if the Offeror fails to do so the Company shall
cause the names of the purchasing Shareholders to be entered in the
register of members of the Company as the holders of those shares and
shall cancel the share certificates previously issued to the Offeror
representing those shares whether they have been produced to the
Company or not. Payment to the Company, as agent for the Offeror, of
the Purchase Price shall be sufficient payment by the purchasing
Shareholders and entry of the transfers in the register of members of
the Company shall be conclusive evidence of the validity of the
transfers. Upon completion of the transfers, and delivery of the share
certificates duly endorsed in blank for transfer, the Company shall
pay the Purchase Price to the Offeror.
(f) The Offeror may for a period of 90 days after the expiration of the
14-day period provided for in paragraph (b) above transfer to any
person the Offered Shares not purchased by other Shareholders pursuant
to paragraphs (b), (c), (d) and (e) above, provided that:
(i) if the other Shareholders did not purchase any of the Offered
Shares, the Offeror may not sell less than all the Offered
Shares;
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(ii) the Offeror shall sell the Offered Shares for cash at Closing,
free and clear of encumbrances, and on terms which are otherwise
identical to those specified in the Transfer Notice;
(iii)the Offeror shall not sell any of the Offered Shares to any
person, unless at the time of the sale that person complies with
subsection 5.6; and
(iv) if the Offeror has not transferred the Offered Shares or any of
them within the 90-day period, then the provisions of this
subsection 5.3 shall again become applicable to all of the
Offered Shares not disposed of within the 90-day period.
(g) The provisions as to transfers of Shares contained in paragraphs (a),
(b), (c), (d), (e) and (f) of this subsection 5.3 shall not apply:
(i) if, before the proposed transfer of Shares is made, the other
Shareholders waive their rights to receive the Transfer Notice;
or
(ii) to any transfer of Shares pursuant to the provisions of sections
6, 8, 9 and 10 of this Agreement.
(h) The Offeror may include all or any part of its Shareholder's Loan in
the Transfer Notice, in which case the Shareholder's Loan (or part
thereof) shall be included in the price of the Offered Shares, and all
references to Offered Shares in subsection 5.3 shall include the
portion of the Shareholder's Loan included therein. If the Offeror
does not include its Shareholder's Loan in the Transfer Notice, the
Offeror shall retain its Shareholder's Loan, which shall be repaid as
the Company's finances permit, as determined by the directors.
5.4. TRANSFER TO AFFILIATES. Notwithstanding subsections 5.1, 5.2 and 5.3, any
Shareholder may sell, transfer or otherwise dispose of all, but not less
than all, of its Interest to an Affiliate controlled by such Shareholder or
the Representative of such Shareholder provided that, prior to any such
transfer, the Shareholder and the Affiliate enter into an agreement with
the other parties to this Agreement, in form and content acceptable to such
parties, which provides that:
(a) one hundred percent (100%) of the Shareholder's Interest will be
transferred to the Affiliate;
(b) the Affiliate will remain an Affiliate controlled by the Shareholder
(or the Representative of such Shareholder) for so long as the
Affiliate holds the Interest;
(c) prior to the Affiliate ceasing to be an Affiliate controlled by the
Shareholder (or the Representative of such Shareholder), the Affiliate
will transfer its Interest to the Shareholder or to another Affiliate
controlled by the Shareholder (or the Representative of such
Shareholder), and that such other Affiliate will enter into an
agreement similar to this Agreement with the other Shareholders and
the Company;
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(d) the Affiliate will otherwise be bound by and have the benefit of the
provisions of this Agreement; and
(e) the obligations of the original Shareholder hereunder shall not in any
way be released and shall continue in ml1 force and effect.
5.5. NO TRANSFER BY DEFAULTING SHAREHOLDER. Notwithstanding any other provision
of this Agreement, except as required by the terms of this Agreement, no
Shareholder shall be entitled to sell, transfer, assign or otherwise
dispose of its Interest, or any part thereof, without the prior written
consent of the other Shareholders, if it is at that time a Defaulting
Shareholder, unless prior to or concurrently with that sale, transfer or
other disposition it ceases to be a Defaulting Shareholder.
5.6. FURTHER RESTRICTION OF TRANSFER. No Shareholder shall transfer all or any
part of its Interest to any person, whether a Shareholder or not, who is
not a party to or has not agreed to be bound by this Agreement until such
person subscribes to or agrees to be bound by this Agreement. The
Shareholders and the Company will not recognise or treat as a shareholder
of the Company any person who acquires any interest or control over any
Shares or afford any such person the rights afforded by this Agreement or
any of the incidents connected with being a shareholder of the Company
until such person subscribes to or agrees to be bound by this Agreement,
and the Shareholders need only deal with as a member of the Company persons
who have subscribed to or agreed to be bound by this Agreement.
5.7. PIGGY BACK RIGHTS
(a) if, at any time, an Offeror receives a bona fide Third Party Offer
from a Third Party Offeror to purchase all or any part of the Interest
held by or on behalf of the Offeror, the Offeror shall not accept such
Third Party Offer unless:
(i) the Third Party Offeror has agreed to purchase from the Other
Shareholders all of the Interest held by or for the benefit of
the Other Shareholders for the same per Share and per dollar
amount of Shareholder's Loans price, and on the same terms and
conditions as set out in the Third Party Offer;
(ii) the Offeror has delivered to the Other Shareholders a copy of
such Third Party Offer and a notice in writing (the "Piggy Back
Notice") specifying that the Offeror is prepared to accept such
Third Party Offer; and
(iii)if the Other Shareholders elect to sell their Interest to the
Third Party Offeror pursuant to subparagraph 5.7(b)(i), the Third
Party Offeror has executed such agreements or documents
reasonably acceptable to the Other Shareholders to reflect the
agreement referred to in subparagraph 5.7(a)(i).
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(b) Following receipt by the Other Shareholders of a Piggy Back Notice,
each of the Other Shareholders shall have the right, exercisable
within 30 days from the date of its receipt of the Piggy Back Notice,
to notify the Offeror in writing:
(i) that the Other Shareholder is electing to sell its Interest to
the Third Party Offeror at the same price, and on the same terms
and conditions set out in the Third Party Offer (each an
"Electing Shareholder"); or
(ii) that the Other Shareholder is electing not to sell its Interest
to the Third Party Offeror.
(c) if any of the Other Shareholders does not notify the Offeror in
writing within the period of 30 days provided in paragraph 5.7(b) of
the election by the Other Shareholder to sell its Interest to the
Third Party Offeror pursuant to subparagraph 5.7(b)(i), the Other
Shareholder shall be deemed to have elected not to sell its Interest
to the Third Party Offeror.
(d)
(i) Provided that the Offeror has complied with paragraph 5.7(a), and
provided that all of the Other Shareholders are Electing
Shareholders, following the expiration of the 30-day period
referred to in paragraph 5.7(b) the Offeror and any Electing
Shareholder may, for 30 days thereafter, sell their Interests to
the Third Party Offeror (or its nominee), on the same terms and
conditions as set out in the Third Party Offer.
(ii) The Offeror and any Electing Shareholder shall not sell all or
any part of their Interests pursuant to subparagraph 5.7(d)(i) to
any person other than the Third Party Offeror (or its nominee) or
at any price or on terms different from those set out in the
Third Party Offer.
(iii) if any of the Other Shareholders elects not to sell its Interest
to the Third Party Offeror pursuant to subparagraph 5.7(b)(ii) or
pursuant to subparagraph 5.7(c) is deemed to have elected not to
sell its Interest to the Third Party Offeror, the Offeror and any
Electing Shareholder may sell to the Third Party Offeror all or
any part of the Interest held by or on their behalf provided the
Offeror and each Electing Shareholder first complies with
paragraph 5.3.
5.8 DRAG ALONG RIGHTS. Subject first to the application of the pre-emptive
rights under subsection 5.3, if any arms length third party who is not a
Shareholder, an Affiliate or a Representative (the "Drag-Along Proposed
Purchaser") proposes to acquire a number of Shares for not less than fair
market value that will give the Drag-Along Proposed Purchaser more than
80.1% of the then issued shares of the Company (the "Pre-DA Trigger Offer")
the Drag-Along Proposed Purchaser shall have the right, by notice to all
other Shareholders not less 30 days prior to the Closing, to require those
other Shareholders to also accept the Pre-DA Trigger Offer (a "Drag-Along
Trigger Offer") and those other Shareholders shall accept the Drag-Along
Trigger Offer, provided that:
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(a) if, because other Shareholders exercise their pre-emptive rights under
subsection 5.3, the Drag-Along Proposed purchaser does not have, nor
will it have, more than 80.1% of the then issued shares of the
Company, then the Drag-Along Trigger Offer shall be considered null
and void,
(b) the terms and conditions of the Drag-Along Trigger Offer, including
the consideration to be paid, are no less favourable to the other
Shareholders than those of the Pre-DA Trigger Offer to the Shareholder
or group of Shareholders receiving that offer;
(c) all payments to be made to the Shareholders under the Drag-Along
Trigger Offer are to be made in cash, certified cheque or bank draft
forthwith upon acquisition of the Shares;
(d) no Shareholder is required to provide any representations and
warranties, or give any undertaking or incur or assume any liability,
in connection with the Drag-Along Trigger Offer, except the usual and
customary representations relating to that Shareholder's ownership and
unencumbered title to the Shares, and, if relevant, corporate power;
and
(e) the sale of the Shares under the Pre-DA Trigger Offer and the
Drag-Along Trigger Offer is completed by the relevant parties
concurrently and in accordance with the terms of the Pre-DA Trigger
Offer and the Drag-Along Trigger Offer.
6. TRANSFER OF INTERESTS ON DEATH
6.1. METHOD OF MANDATORY SALE. Upon the death of a Shareholder or a
Representative (the "Deceased"), the surviving Shareholders (the "Subject
Shareholder") shall at their option purchase the Deceased's Interest (the
"Subject Interest") for a Purchase Price equal to the fair market value of
the Subject Interest, determined as of the Date in accordance with
subsection 12.2. Notwithstanding anything to the contrary, the provisions
of section 6 of this Agreement relating to the purchase and sale of a
Subject Interest shall only apply if the Deceased is required, to sell the
Subject Interest under this subsection 6.1.
6.2. OBLIGATION TO PURCHASE. Each Subject Shareholder shall, within 90 days of
the Date, make an election as to whether to proceed under subsection 6.1
and shall notify the Company and the other Shareholders of its election and
the maximum number of shares the Subject Shareholder is willing to
purchase. If a Subject Shareholder fails to notify the Company and the
other Shareholders of its election within 90 days of the Date, that Subject
Shareholder shall be deemed to have elected not to proceed under subsection
6.1. Upon receipt of the notice from the Subject Shareholders of their
election, the Subject Shareholders shall purchase the Subject Interest,
pro-rata between the Subject Shareholders who gave notice of their election
to proceed under subsection 6.1, provided that each Subject Shareholder
shall only purchase up to the maximum number of shares specified in their
notice, If a portion of the Subject Interest has not designated for
purchase after the pro-rata allotment, and the maximum number of shares of
one or more
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Subject Shareholders has not yet been reached, then those shareholders
shall purchase, pro-rata the portion of the Subject Interest not yet
designated for purchase.
6.3. CLOSING OF PURCHASE AND SALE
(a) Upon the Company's receipt of the notice from the Subject Shareholders
of their election, a binding contract of purchase and sale between the
Subject Shareholders and the Deceased shall be deemed to come into
existence on the terms set out in this Agreement, which contract will
be completed in the manner provided in section 11.
(b) The Closing of the purchase and sale of the Subject Interest shall
take place on that date which is the latest of:
(i) 120 days following the Date; and
(ii) 30 days after the final determination of the Purchase Price.
6.4. SHARES NOT PURCHASED. The estate of the Deceased may transfer the portion
of the Subject Interest not purchased pursuant to subsection 6.1 for a
period of 60 days following the Closing set out in paragraph 6.3(b) without
restriction on to whom it may be sold and the price at which it may be
sold, provided that the person purchasing the shares agrees to be bound by
this Agreement. After 60 days following the Closing, as set out in
paragraph 6.3(b) the estate OF the Deceased may transfer the portion of the
Subject Interest not purchased pursuant to subsection 6.1 so long as the
estate of the Deceased complies with section 5 of this Agreement.
7. DEATH OF LAST REPRESENTATIVE
7.1. Notwithstanding any other term in this Agreement, section 6 of this
Agreement shall not apply in any way in respect of the death of the last
Shareholder or Representative to die.
8. BUY AND SELL OPTIONS
8.1. OPTION EVENTS. In this section 8, an option event (an "Option Event") in
respect of a Shareholder means any one of the following:
(a) the Shares of the Shareholder become subject to a proceeding pursuant
to the Family Relations Act (British Colombia); or
(b) the Permanent Incapacity of the Shareholder or the Representative of
the Shareholder.
8.2. OPTIONS. Notwithstanding any other provision of this Agreement, upon the
occurrence of an Option Event in respect of a Shareholder (the "Optionor")
and for a period of 12 months thereafter the following shall apply:
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(a) the other Shareholders shall have the option (the "Buy Option") to
purchase from the Optionor all, but not less than all, of the Interest
then owned by the Optionor (the "Option Interest") at a Purchase Price
equal to the fair market value of the Option Interest determined in
accordance with subsection 12.2; and
(b) in the case only of the occurrence of the Option Event referred to in
paragraph 8.1(b), the Optionor shall have the option (the "Sell
Option") to sell to the other Shareholders the Option Interest at a
Purchase Price equal to the fair market value of the Option Interest
determined in accordance with subsection 12.2.
8.3. EXERCISE OF OPTIONS. The Buy Option or the Sell Option shall be
exercisable:
(a) the case of the Buy Option, by any one or more of the other
Shareholders; or
(b) in the case of the Sell Option, by the Optionor, delivering to the
Company and, in the case of subparagraph 8.3(a), the Optionor and the
other Shareholders (other than the one giving the Exercise Notice),
and in the case of sub-paragraph 8.3(b), the other Shareholders a
notice (the "Exercise Notice") exercising the Buy Option or the Sell
Option, as the case may be.
8.4. APPORTIONMENT BETWEEN SHAREHOLDERS. if the Company receives two or more
Exercise Notices from Shareholders exercising the Buy Option, the Company
shall thereupon apportion the Option Interest among the Shareholders so
accepting pro rata in proportion to the number of shares of the Company
held by each of them respectively and, if the Company receives an Exercise
Option from the Optionor exercising the Sell Option, the Company shall
thereupon apportion the Option Interest among the other Shareholders pro
rata in proportion to the number of shares of the Company held by each of
them respectively.
8.5. CONTRACT FOR PURCHASE OR SALE OF THE OPTION INTEREST. Upon the giving of an
Exercise Notice under subsection 8.3, and after an apportionment has been
made pursuant to subsection 8.4, if necessary, a binding contract of
purchase and sale between the Optionor and the other Shareholder(s) (the
"Optionee") shall be deemed to come into existence on the terms set out in
this section 8, which contract will be completed in the manner provided in
section 11.
8.6. PAYMENT OF PURCHASE PRICE. The Purchase Price for the Option Interest shall
be paid as follows:
(a) on Closing, the Optionee shall pay to the Optionor an amount equal to
the greater of 50% of the Purchase Price and the amount of any
disability insurance proceeds received by the Company on or prior to
the Closing Date as a result of the Permanent Incapacity of the
Representative of the Optionor, but not in excess of the Purchase
Price;
(b) the unpaid balance of the Purchase Price of the Option Interest shall
be paid in five equal annual installments commencing on the first
anniversary of the Closing
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Date and continuing on the second, third, fourth and fifth
anniversaries thereof, and the outstanding balance of the Purchase
Price shall bear interest at the Prime Rate plus l%, calculated
semi-annually not in arrears and such interest shall be payable in
annual installments on the same dates that the principal installments
are due.
9. DEFAULT
9.1. EVENTS OF DEFAULT. An event of default (a "Default") arises if a
Shareholder, or in the case of clauses (a), (b) AND (c) below, a
Representative of a Shareholder (a "Defaulting Shareholder"):
(a) fails to observe, perform or carry out any of its material obligations
under this Agreement and such failure continues for 30 days after any
Shareholder not in default (the "Nondefaulting Shareholder"
individually and the "Nondefaulting Shareholders" collectively) gives
a written notice of such default to the Defaulting Shareholder and the
Company, which notice shall set out particulars of the Default and
demand that the Default be cured;
(b) fails to take reasonable actions to prevent or defend assiduously any
action, proceeding, seizure, execution, or attachment which claims
possession, sale, foreclosure, the appointment of a receiver or
receiver manager of his or her assets, or forfeiture or termination of
or against, any of the Interest of the Defaulting Shareholder, and
such failure continues for 30 days after a Nondefaulting Shareholder
has in writing demanded that such actions be taken or the Defaulting
Shareholder fails to defend successfully any such action, proceeding,
seizure, execution or attachment;
(c) commits or is the subject of an Insolvency Event; or
(d) ceases to be controlled, directly or indirectly, by the Representative
of such Shareholder, OTHER than as a result of the death of such
person.
9.2. REMEDIES. If a Default occurs under subsection 11 .l, any one or more of
the Nondefaulting Shareholders may:
(a) pursue any remedy available in law or in equity, each Shareholder and
Representative acknowledging that specific performance, injunctive
relief (mandatory or otherwise) or other equitable relief may be the
only adequate remedy for a Default;
(b) take all actions in their own name or in the name of the Defaulting
Shareholder or the Defaulting Shareholder's Representative, the
Shareholders or the Company as may reasonably be required to cure the
Default, and all payments, costs and expenses incurred by the
Nondefaulting Shareholder(s) shall be payable by the Defaulting
Shareholder to the Nondefaulting Shareholder(s) on demand with
interest at the Prime Rate plus 2% per annum;
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(c) implement the buy-sell procedure set out in subsection 9.3 by
notifying the Company of the Default, the name of the Defaulting
Shareholder and the Nondefaulting Shareholder's election to implement
such procedure (the "Notice of Default"); and
(d) waive the Default, provided that any waiver of a particular Default
shall only be effective if it is in writing, signed by the
Nondefaulting Shareholder, shall not operate as a waiver of any
subsequent or continuing Default, and shall not be binding upon, or
limit the remedies available to, any Nondefaulting Shareholder who has
not signed such waiver.
9.3. BUY-SELL PROCEDURE ON DEFAULT. In the event the buy-sell procedure in this
subsection 9.3 is implemented pursuant to paragraph 9.2(c), the Defaulting
Shareholder shall be deemed to offer to sell (the "Offer") to the Company
and the Non-Defaulting Shareholder(s) all, but not less than all, of its
Interest on the following terms and conditions:
(a) the Purchase Price payable shall be equal to 90% of the fair market
value of the Defaulting Shareholder's Interest determined as of the
date of the Notice of Default in accordance with subsection 12.2;
(b) upon receipt of the Notice of Default, the President of the Company
shall forthwith:
(i) transmit the Notice of Default and Offer to each director of the
Company;
(ii) transmit the Notice of Default and Offer to each of the
Nondefaulting Shareholder(s); and
(iii)call a meeting of the Board to consider the Offer;
(c) the Company shall have the first right to accept the Offer and to the
extent that it is accepted, the Nondefaulting Shareholder(s) agree to
refuse any pro rata offer by the Company to purchase the Interest
which is required to be made by the Company under the Company Act, the
Articles of the Company or this Agreement;
(d) if the Offer is not wholly accepted by the Company within 30 days
after the date of the Notice of Default:
(i) the Secretary of the Company shall advise the Nondefaulting
Shareholder(s) of the extent to which the Offer is still open,
forthwith upon the expiration of the aforesaid 30-day period;
(ii) that portion of the Offer not accepted by the Company shall be
open for acceptance within the next 14 days by the Nondefaulting
Shareholder(s) pro rata in accordance with their respective
shareholdings in the Company;
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(iii)acceptance by the Nondefaulting Shareholder(s) of the Offer
shall be by notice to the Secretary of the Company and by such
acceptance a Nondefaulting Shareholder may specify any
additional portion of the Interest offered for sale that such
Nondefaulting Shareholder is prepared to purchase in the event
that any of the other Nondefaulting Shareholder(s) fails to
accept such Offer, and if any of the other Nondefaulting
Shareholder(s) fails to accept such Offer, such Nondefaulting
Shareholder (pro rata if more than one) shall be entitled to
purchase such additional portion of the Interest as shall be so
available; and
(iv) the Secretary of the Company shall advise each of the directors
of the Company of the extent to which the Offer is still open
forthwith upon the expiration of the aforesaid 14-day period;
(e) after compliance with paragraph 9.3(d), to the extent the Offer has
not been accepted, the Company shall be deemed to accept the Offer
with respect to such portion of the Interest as shall then be
available; and
(f) upon the acceptance of the Offer, a binding contract of purchase and
sale for the Interest of the Defaulting Shareholder shall be deemed to
be formed between the Defaulting Shareholder and the Company and/or
the Nondefaulting Shareholder(s), as the case may be, on the terms and
conditions set out in the Offer and this Agreement, which contract
shall be completed in the manner provided in section 11.
9.4. MONIES HELD. if and so long as a Shareholder is a Defaulting Shareholder,
all monies payable to that Defaulting Shareholder by the Company by way of
dividends, repayment of loans or other distributions shall be held by the
Company until such time as the Shareholder is no longer a Defaulting
Shareholder.
10. INTER VIVOS BUY-SELL RIGHTS OF SHAREHOLDERS
10.1. COMPULSORY BUY-OUT. Subject to subsection 10.6, any one or more
Shareholders (collectively, the "Offeror Shareholders') may, any time after
September 25, 2002, by written notice (the "Shareholder Offer") to the
remaining Shareholders (the "Offeree Shareholders") of the Company and to
the Company, require the Offeree Shareholders to elect either:
(a) to sell all of the Offeree Shareholders' Interests to the Offeror
Shareholders for a Purchase Price equal to the fair market value of
such Interests, determined as of the date on which the Shareholder
Offer is delivered in accordance with subsection 12.2; or
(b) to purchase all of the Offeror Shareholders' Interests for a Purchase
Price equal to the fair market value of such Interests determined as
of the date on which the Shareholder Offer is delivered in accordance
with subsection 12.2; on the terms and conditions set out in the
Shareholder Offer and this Agreement.
17
10.2.DEEMED OFFER. The Offeror Shareholders, by sending the Shareholder Offer,
shall be deemed to make the following offer to the Offeree Shareholders:
(a) to buy all, but not less than all, of the Offeree Shareholders'
Interests at the Purchase Price referred to in paragraph 10.1 (a); and
(b) to sell all, but not less than all, of the Offeree Shareholders'
Interest at the Purchase Price referred to in paragraph 10.1 (b); on
the terms and conditions set out in the Shareholder Offer and this
Agreement.
10.3.OFFEREE SHAREHOLDERS' OBLIGATION TO BUY OR SELL. Upon receipt of the
Shareholder Offer, the Offeree Shareholders shall be obligated to elect:
(a) to sell the Interests held by the Offeree Shareholders to the Offeror
Shareholders at the Purchase Price referred to in paragraph 10.1(a);
or
(b) to buy the Offeror Shareholders' Interests at the Purchase Price
referred to in paragraph 10.1 (b); on the terms and conditions set out
in the Shareholder Offer and this Agreement.
10.4. ELECTION TO BUY OR SELL. If the Offeree Shareholders elect to buy the
Interests of the Offeror Shareholders, or to sell the Interests of the
Offeree Shareholders to the Offeror Shareholders, the Offeree Shareholders
shall give written notice of such election to the Offeror Shareholders (and
to every Offeree Shareholder) within 30 days after receipt of the
Shareholder Offer and, if all of the Offeree Shareholders elect either to
buy the Interests of the Offeror Shareholders or to sell the Interests of
the Offeree Shareholders, by the giving of such written notices a binding
contract of purchase and sale for such Interests shall be deemed to be
formed between the Offeror Shareholders and the Offeree Shareholders on the
terms and conditions set out in the Shareholder Offer, and this Agreement,
which contract shall be completed in the manner provided in section 11.
10.5. No RESPONSE OR INCONSISTENT RESPONSES-DEEMED CONTRACT. If one or more of
the Offeree Shareholders does not notify the Offeror Shareholders in
writing within 30 days of receipt by the Offeree Shareholders of the
Shareholder Offer of the election by such Offeree Shareholder to buy the
Offeror Shareholders' Interest or to sell the Interest of such Offeree
Shareholder to the Offeror Shareholders, or if one or more of the Offeree
Shareholders gives a notice electing to buy the Offeror Shareholders'
Interests and one or more of the Offeree Shareholders gives a notice
electing to sell its Interests to the Offeror Shareholders, the Offeree
Shareholders shall be deemed to have accepted the offer of the Offeror
Shareholders to buy the Offeree Shareholders' Interests in accordance with
the terms of this section 10 and a binding contract of purchase and sale
for such Interests between the Offeror Shareholders and Offeree
Shareholders shall be deemed to come into existence, which contract shall
be completed in the manner provided in section 11. By this subsection 10.5,
the Offeror Shareholders expressly waive any requirement to receive
communication from the Offeree Shareholders of the Offeree Shareholders'
acceptance of the offer and the deemed acceptance of the offer to buy
provided by this section shall
18
be a complete estoppel to any action taken or defence raised by any person
which in any way contests the validity, formation or existence of the
contract of purchase and sale constituted by this subsection 10.5.
10.6. ONE OFFER AT A TIME. During the period that any Shareholder Offer made
under subsection 10.1 has not been completely disposed of, no other
Shareholder Offer shall be made under those provisions.
11. COMPLETION OF TRANSFERS
11.1 TIME AND PLACE OF CLOSING. Except as otherwise expressly provided in this
Agreement, or unless the Purchaser and the Vendor otherwise agree in
writing, each contract of purchase and sale arising out of sections 5
(other than sales under subsection 5.7), 6, 8, 9 or 10 shall be completed
at a Closing to be held at 11100 a.m., Vancouver time, at the registered
office of the Company or at such other place as the parties to such
contract may agree, on the day (the "Closing Date") which is, in the case
of contracts referred to in:
(a) sections 5, 89 and 10, the later of:
(b) 60 days following the date on which such contract is formed; and
(c) 30 days following the final determination of the Purchase Price
thereunder; and
(d) section 6, the date determined in accordance with paragraph 6.3(b);
or, if such day is not a Business Day, on the next Business Day, or on such
earlier day as the parties to such contract may agree.
11.2 PARTIES TO THE CONTRACT. In this section 11, a contract of purchase and
sale referred to in subsection 11.1 is called a "Contract", and the Shares
or Interest to be sold and purchased pursuant to a Contract are called the
"Transfer Interest".
11.3 PAYMENT FOR TRANSFER INTEREST. Except as otherwise expressly provided in
this Agreement, or unless the Purchaser and the Vendor otherwise agree in
writing, the Purchase Price for the Transfer Interest shall, subject to
subsection 8.6, be paid in full on the Closing Date. In the circumstances
described in subsection 8.6, the Purchase Price for the Transfer Interest
shall be paid at the times and in the manner specified therein.
11.4 SECURITY FOR BALANCE OF PURCHASE PRICE. Where pursuant to any provision of
this Agreement the Purchase Price to be paid for the Transfer Interest is
not to be paid in full on the Closing, the Purchaser shall as security for
the unpaid balance of the Purchase Price, together with any interest
accruing thereon, deliver to the Vendor at the Closing the following:
(a) a promissory note in form reasonably satisfactory to the Vendor
evidencing the outstanding balance of the Purchase Price;
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(b) an escrow agreement in form reasonably satisfactory to the Vendor
providing that the new share certificates issued to the Purchaser
which represent the Shares transferred by the Vendor are to be
endorsed in blank and held in escrow by the Vendor's solicitors; and
(c) subject to obtaining any required consents from the existing lenders
of the Company and compliance with the Company Act, a mortgage and
general security agreement, in forms reasonably satisfactory to the
Vendor granting respectively a mortgage over all real property then
owned by the Company and its Subsidiaries and a charge over all of the
then presently owned and after-acquired personal property of the
Company and its Subsidiaries, provided that the Vendor shall agree to
subordinate and postpone such security to all existing and future
security granted by the Company and its Subsidiaries to its Bank and
to execute all such documents as are necessary to give effect to such
subordination and postponement.
11.5 CLOSING DOCUMENTS AND ESCROW BY COMPANY.
(d) In addition to any other documents required by this Agreement or the
terms of the Contract, the Vendor shall deliver to the Company at the
Closing, duly executed where appropriate:
(i) an instrument of transfer, share certificates representing the
shares being transferred, duly endorsed for transfer, and such
other documents as may be necessary to assign and transfer the
Transfer Interest to the Purchaser;
(ii) the resignation of the Vendor and any persons nominated by the
Vendor as directors or officers of the Company from all offices
and directorships in the Company and its Subsidiaries, effective
on the Closing Date;
(iii) if the Vendor is indebted to the Company, a certified cheque of
the Vendor payable to the Company for the amount of such
indebtedness;
(iv) a release of any and all claims which the Vendor may have against
the Company; and
(v) all such other documents and assurances as may be required to
comply with and to fulfil the intent of this Agreement and the
terms of the Contract.
(e) In addition to any other documents and things required by this
Agreement or the terms of the Contract, the Purchaser shall deliver to
the Vendor at the Closing, duly executed where appropriate, against
delivery by the Vendor to the Purchaser of the documents referred to
in paragraph 11.5(a):
(i) the Purchase Price for the Transfer Interest payable at the
Closing in cash or by certified cheque drawn on a Canadian
chartered bank;
20
(ii) a release by the Company of all claims which the Company may have
against the Vendor; and
(iii) all such other documents and assurances as may be required to
comply with and to fulfil the intent of this Agreement and the
terms of the Contract.
(f) All documents delivered by the Vendor to the Company at or before the
Closing shall be held by the Company until the Purchaser has delivered
all documents and paid all money required to be delivered or paid to
the Vendor by the Purchaser at the Closing, at which time the Company
shall deliver to the Purchaser the documents delivered by the Vendor
pursuant to paragraph 11.5(a) and the transfer of the Transfer
Interest to the Purchaser shall be completed by the Company and new
certificates issued for the Shares included in the Transfer Interest.
11.6 TIME TO BE OF THE ESSENCE. Time shall be of the essence of each Contract
and each Contract shall be binding upon the parties thereto and upon their
respective heirs, executors, administrators, successors, legal
representatives and assigns.
11.7 FAILURE TO COMPLETE
(a) If the Vendor fails to attend the Closing or is present but fails for
any reason whatsoever to complete the sale of the Transfer Interest
when the Purchaser is ready, willing and able to do so, the Purchaser
may deposit the Purchase Price for the Transfer Interest into a
special account at any branch in Vancouver, British Columbia of any
Canadian chartered bank in the name of the Vendor and such deposit
shall constitute valid and effective payment to the Vendor at the
Closing even though the Vendor may have voluntarily encumbered or
disposed of any of the Transfer Interest and notwithstanding the fact
that a certificate or certificates representing any of the Transfer
Interest may have been delivered to any pledgee, transferee or other
person.
(b) If the Purchaser deposits the Purchase Price for the Transfer Interest
into a special account pursuant to paragraph 11.7(a), then from and
after the date of such deposit (even if any certificate representing
any of the Transfer Interest has not been delivered to the Purchaser
OR the Company) the sale and purchase of the Transfer Interest shall
be deemed to have been completed and all right, title, benefit and
interest, both at law and in equity, in and to the Transfer Interest
shall be conclusively deemed to have been transferred and assigned to
and become vested in the Purchaser and all right, title, benefit and
interest, both at law and in equity, of the Vendor, and of any other
assignee, transferee or other person having any interest, legal or
equitable, in or to the Transfer Interest, whether as a shareholder or
creditor of the Company or the Vendor, or otherwise, shall cease and
determine, but the Vendor shall be entitled to receive the Purchase
Price for the Transfer Interest, without interest, upon completion of
all acts and deeds as were required of the Vendor to complete the sale
of the Transfer Interest.
21
(c) For the purposes of this subsection 11.7, each Shareholder hereby
irrevocably constitutes and appoints each other Shareholder as its
true and lawful attorney in fact and agent for, in the name of and on
behalf of such first Shareholder to execute and deliver, and to
receive delivery of, all such assignments, transfers, deeds,
assurances and instruments as may be necessary to effectively complete
the sale of any Interest pursuant to sections 5, 6, 8, 9 or 10 on the
records of the Company, and such appointment and power of attorney
shall not be revoked by the bankruptcy, insolvency, winding-up,
liquidation, dissolution, incapacity or death of such first
Shareholder and such fast Shareholder hereby ratifies and confirms and
agrees to ratify and confirm all that any other Shareholder, as
attorney in fact and agent for, in the name of and on behalf of such
first Shareholder, may lawfully do or cause to be done by virtue of
this paragraph 11.7(c).
(d) If the Purchaser defaults at the Closing in paying the Purchase Price
for the Transfer Interest, then the Vendor may, by delivering written
notice to the Purchaser and the Company that the Vendor is terminating
the Contract, terminate the Contract and retake possession of the
Transfer Interest as the absolute owner thereof, in which event the
rights of the Purchaser in respect of the Transfer Interest shall
revert to the Vendor and the Vendor shall be entitled, upon delivering
to the Company and each Shareholder its duly executed subscription to
this Agreement to the return from the Company of the documents
delivered by the Vendor to the Company in escrow in connection with
the Contract.
(e) If either the Vendor or the Purchaser fails to complete the Contract
as required herein, the Contract is specifically enforceable and
nothing in this Agreement shall be construed to mitigate the
availability of the remedy of specific performance in respect of the
Contract in a court of law.
11.8 WAIVER AND CONSENTS. Each of the Shareholders hereby expressly consents to
the transfer of any Shares or Interests transferred in accordance with this
Agreement, agrees to execute promptly on demand specific waivers and
consents if requested by another party, covenants and agrees to waive any
restriction on transfer contained in the memorandum or articles of the
Company in order to give effect to such transfers and agrees to vote in
favour of or consent in writing to resolutions of the members (if
applicable) of the Company approving the transfer of any Shares or
Interests which is not prohibited by this Agreement. In the case of any
transfer of Shares in accordance with this Agreement where the Company is
the Purchaser of such Shares, the Shareholders other than the Vendor in
respect of such Contract hereby waive their rights to require the Company
to purchase their Shares, except as expressly set forth in this Agreement
and covenant to reject any pro rata offer to purchase Shares which the
Company may be obliged to make pursuant to the provisions of the Company
Act.
12. GENERAL PROVISIONS ON TRANSFER
12.1 TRANSFER OF SHARES. The transfer of the Shares or Interest of any
Shareholder pursuant to any of the terms of this Agreement shall be subject
to the general provisions set out in this section 12. In the event of any
inconsistency between any of the provisions of
22
sections 5, 6, 8, 9 or 10 and any of the provisions of this section 12, the
provisions of this section 12 shall govern.
12.2 DETERMINATION OF FAIR MARKET VALUE.
(a) Where pursuant to the provisions of subsections 6.1, 8.2, 9.3 or 10.1 of
this Agreement a determination of the fair market value of an Interest is
required to be made (in this subsection 12.2 referred to as the "Subject
Interest"), a Shareholder may give written notice to the other Shareholders
requesting that the Shareholders forthwith meet and attempt in good faith
to agree upon the fair market value of the Subject Interest. In the event
that all of the Shareholders are able to reach agreement on the fair market
value of the Subject Interest, such agreed value shall be deemed to be the
fair market value of the Subject Interest for the purposes of this
Agreement.
(b) In the event that the Shareholders are for any reason unable to reach
agreement on the fair market value of the Subject Interest within 14 days
of the delivery of the notice referred to in paragraph 12.2(a), then the
Shareholders shall forthwith meet for the purposes of identifying and
retaining a valuator (the "First Valuator") for the purpose of determining
the fair market value of the Subject Interest. Unless otherwise unanimously
agreed by the Shareholders, the First Valuator shall be an accountant
practising with the Auditors who has at least five years" experience in
valuating businesses and is accredited as a chartered business valuator. In
the event that the Shareholders do not agree upon a First Valuator within
30 days of the delivery of the notice referred to in paragraph 12.2(a),
then any Shareholder may refer the determination of the First Valuator to
arbitration pursuant to section 15.
(c) The First Valuator shall prepare and deliver to each of the Shareholders a
written report (the "First Valuation Report") setting out its Valuation of
the Subject Interest as soon as possible, and in any event within 45 days
after being retained.
(d) Any Shareholder may within 30 days of its receipt of the First Valuation
Report provide written notice to the other Shareholders advising that it
wishes to have a second Valuation of the Subject Interest undertaken. if no
such notice is given, the First Valuation Report shall be final and binding
on the parties. if such notice is given the Shareholders shall forthwith
meet for the purposes of identifying and retaining a second valuator (the
"Second Valuator") for the purpose of preparing a second Valuation of the
Subject Interest. The Second Valuator shall be an accountant practising
with a national accounting firm other than the Auditors and who has the
experience and credentials referred to in paragraph 12.2(b). In the event
that the Shareholders do not agree upon a Second Valuator within 14 days of
the delivery of the notice referred to in this paragraph, then any
Shareholder may refer the determination of the Second Valuator to
arbitration pursuant to section 15.
23
(e) The Second Valuator shall prepare and deliver to each of the Shareholders a
written report (the "Second Valuation Report") setting out its Valuation of
the Subject Interest as soon as possible, and in any event within 45 days
after being retained. Where a Second Valuation Report has been prepared,
the fair market value of the Subject Interest for the purposes of
subsections 6.1, 8.2, 9.3 or 10.1 of this Agreement shall be equal to the
average of the fair market values of the Subject Interest as set out in the
First Valuation Report and the Second Valuation Report.
(f) The Company and each of the Shareholders shall make available to the First
Valuator and the Second Valuator all books, records and other data and
information in their possession or control as the First Valuator or Second
Valuator may reasonably require for the purposes of its valuation.
(g) In determining the fair market value of the Subject Interest under this
subsection 12.2, the First Valuator and the Second Valuator may apply such
principles of valuation as each considers appropriate in the circumstances
provided that:
(i) there shall be no premium for a control position or discount for a
minority position;
(ii) the proceeds of any life insurance shall not be taken into account in
determining the value of the Subject Interest;
(iii) the fair market value of any Shareholder Loans shall not be
discounted by reason only of the fact that such Loans are not demand
loans and may not bear interest; and
(iv) the Company shall be valued on a going-concern basis.
(h) The Company shall pay all fees and expenses charged by the First Valuator
for preparing the First Valuation Report, The Shareholder(s) who request
the Second Valuation shall pay all fees and expenses charged by the Second
Valuator for preparing the Second Valuation Report.
(i) The First Valuator and the Second Valuator shall be entitled to retain
such qualified independent appraisers as each may deem appropriate to
assist with its valuation.
12.3 PROHIBITION. If a Purchaser under this Agreement is in default of any the
terms of the Agreement relating to its purchase of the Shares, then so long
only as the default remains, that Purchaser shall not vote its Shares or
any of them without the prior written consent of its Vendor, which consent
shall not be unreasonably withheld, in favour of a resolution:
(j) to amend or alter in any way the Articles or Memorandum of the
Company;
(k) to declare or pay any dividends other than as have in the past been
regularly paid, provided that all dividends received by a Purchaser
who is in default shall be
24
received by the defaulting Purchaser in trust for the Vendor and paid
over to the Vendor forthwith and such payment shall be applied first
to pay any interest due hereunder and the balance to reduce the
principal;
(l) to make any other distribution of the Company's capital or surplus or
to pay any salary, bonus or other remuneration in excess of amounts
that have in the past been regularly paid;
(m) to wind up or liquidate the Company;
(n) to alter the capital structure of the Company in any manner, or allot
or agree to allot any further shares in the capital of the Company;
(o) to sell any assets of the Company except in the ordinary course of the
business of the Company;
(p) to create any mortgage, lien or other charge whether specific or
floating upon the assets of the Company;
(q) to borrow money in excess of the amount that the Vendor may specify in
writing; or
(r) to advance money of the Company to any Shareholder or to any person,
firm or company affiliated with any of the Shareholders.
12.4 UNPAID VENDOR. While there is any Vendor who has not been paid in full by a
Purchaser or who is a creditor of the Company, the Company shall:
(s) take the necessary steps to be taken to keep the Company in good
standing with the Registrar of Companies of the Province of British
Columbia pursuant to the Company Act and all amendments thereto;
(t) insure and keep insured against loss or damage by fire, earthquake,
explosion, storm or other casualty, with an insurance company or
companies approved by the Vendor, all insurable assets of the Company
to the full insurable value thereof and pay all costs and premiums in
respect of that insurance and, at the request of any party still owed
money hereunder, use the insurance money payable in respect of any
loss for the purpose of replacing assets of the Company destroyed by
any casualty or for any other purpose approved in writing by the party
still owed money.
12.5 MULTIPLE PURCHASERS. If the Purchaser includes two or more Shareholders,
the purchasing Shareholders shall purchase the Interest of the Vendor pro
rata in accordance with the purchasing Shareholders' respective
shareholdings in the Company, excluding the Shares of the Vendor, and each
purchasing Shareholder shall be liable only for payment of the portion of
the Purchase Price payable in respect of the Interest to be purchased by
it. In order to avoid fractional shares, some Shares may be held by the
purchasing Shareholders as tenants in common.
25
12.6 SET OFF IF VENDOR INDEBTED TO THE COMPANY. Notwithstanding anything in this
Agreement to the contrary, if on the date of a Closing the Vendor is,
according to the books of the Company and as certified by the Auditors of
the Company, indebted to the Company, the Purchaser has the right, in the
case of a liquidated claim, to pay and discharge the indebtedness of the
Vendor out of the purchase money payable by it to the Vendor, or in the
case of an unliquidated claim, to deposit in an interest-bearing trust
account in a Canadian chartered bank or trust company in escrow an amount
estimated by the Purchaser to be equal to the unliquidated claim, and, in
either case, to reduce the amount of the Purchase Price payable to the
Vendor by the amount so paid or deposited. Any amount deposited in escrow
as aforesaid shall remain deposited until the claim has either been settled
or adjudicated, at which time it shall be withdrawn and paid out pursuant
to the settlement or adjudication.
12.7 PAYMENT OF LIENS ON SHARES Notwithstanding anything in this Agreement to
the contrary, if by reason of any lien, charge or encumbrance on the
Interest of the Vendor, the Vendor is unable to make delivery of the
Vendor's Interest free and clear of all charges, liens or encumbrances to
the Purchaser within the time limited therefor, the Purchaser shall be at
liberty to make payment to the holder of the lien or charge or the
governmental authority imposing the duty, tax, levy or lien, which payment
shall be deemed to be payment to the Vendor and shall be applied in
reduction of the unpaid balance of the Purchase Price and interest accrued
thereon.
12.8 PREPAYMENT. A Purchaser shall be entitled individually to prepay in whole
at any time or in part from time to time the Purchaser's portion of the
Purchase Price, without penalty, notice or bonus, together with interest
accrued on the portion of the Purchase Price up to the date of the
prepayment provided that any partial prepayment shall reduce the ultimate
unpaid balance owing and shall not relieve the Purchaser from making the
monthly consecutive installments payable under the provisions applicable to
the sale and purchase in respect of which the Purchase Price is owing until
the balance of the Purchaser's portion of the Purchase Price plus interest
is paid in full.
12.9 ACCELERATION. Upon any default by a Purchaser under any of the provisions
applicable to a purchase of Shares or Interest by the Purchaser, the
Vendor, may, if that default has continued for more than seven days, give
to the Purchaser written notice that the entire unpaid balance of that
Purchaser's portion of the Purchase Price and accrued interest thereon
shall become immediately due and payable unless the default is remedied
within seven days after the date of that notice. If the default is not
remedied within that seven-day period, the entire unpaid balance of the
Purchaser's portion of the Purchase Price and accrued interest thereon
shall be immediately due and payable.
12.10 REMEDY OF DEFAULT. Notwithstanding anything in this Agreement to the
contrary, where the Purchaser defaults in the payment of any installments,
whether of principal or interest or both, and notice is given pursuant to
subsection 12.9, after expiry of the seven-day period, that Purchaser may
not remedy the default by payment only of the monthly installments then in
arrears, but rather the default, unless waived by the Vendor in
26
writing, may only be remedied by payment in full of the entire unpaid
balance of that Purchaser's portion of the Purchase Price plus accrued
interest to the date of payment.
12.11 INDEMNITY. The Purchasers shall jointly and severally indemnify any Vendor
and its Representative from all guarantees of the obligations of the
Company or its Subsidiaries granted by the Vendor or its Representative.
Notwithstanding the joint and several nature of the indemnity from the
Purchasers to the Vendor (and its Representative), as between themselves
the respective liability of each Purchaser shall be in the same proportion
as its shareholding in the Company, excluding the shareholding of the
Vendor. The Purchasers and the Company shall take all reasonable steps to
have the Vendor (and its Representative) released from all guarantees of
the obligations of the Company and its Subsidiaries.
12.12 FINANCIAL STATEMENTS. SO long as the Purchase Price has not been paid in
full, the Company shall provide copies of the annual financial statements
of the Company to the Vendor.
12.13 REMAINING SHAREHOLDERS. Notwithstanding anything contained in this
Agreement to the contrary, if at any time the number of remaining
Shareholders is fewer than three and thereafter one of the remaining
Shareholders dies or becomes a Vendor hereunder, the Purchaser may elect to
require the Vendor to sell to the Company and the Company shall purchase
from the Vendor, any or all of the Interest of the Vendor and the
provisions of the section hereto applicable to the sale and purchase of
such Interest shall apply to that sale mutatis mutandis as though the
Company was a Purchaser thereunder.
12.14 COMPANY PURCHASING INTEREST. Whenever in this Agreement there is a
reference to the Company purchasing an Interest or part of an Interest,
then if the Interest includes a Shareholder's Loan, upon Closing such
Shareholder's Loan, or the part thereof being "purchased" by the Company,
as the case may be, shall be deemed to have been repaid.
13. NON-COMPETITION AND CONFIDENTIALITY
13.1 COVENANTS OF SHAREHOLDERS. So long as a Shareholder owns any Shares and for
a period of one year after the Shareholder ceases to own any Shares,
neither the Shareholder nor its Representative shall, subject to subsection
13.2, either individually or in partnership, whether by way of trust,
agency or otherwise, jointly or in connection with any person or persons,
including without limitation any individual, firm, association, syndicate,
company, corporation or other business enterprise, as principal, agent,
shareholder, director, officer, employee or in any other manner whatsoever:
(a) carry on or be engaged in or be concerned with or interested in or
advise, lend money to, guarantee the debts or obligations of or permit
the Shareholder's or its Representative's name to be used or employed
by any individual, firm, syndicate, corporation or other business
enterprise engaged in or concerned with any business which:
(i) is similar to or competitive with any business which is being
carried on by the Company or any of its Subsidiaries during the
time the Shareholder
27
owns the Shares or any business which is being carried on by the
Company or any of it Subsidiaries at the time the Shareholder
ceases to own any Shares; and
(ii) is located any place where the Company or any of its Subsidiaries
carries on business while the Shareholder owns the Shares or of
any place where the Company or any of its Subsidiaries is
carrying on business as at the date that the Shareholder ceased
to own any Shares;
(b) attempt to solicit any business or customers away from the Company or
its Subsidiaries;
(c) do any act the probable effect of which would be detrimental to the
business of the Company or any of its Subsidiaries or would impair
relations between the Company and any of its Subsidiaries and its
customers or employees; or
(d) use or disclose to any person, except to duly authorized officers and
employees of the Company or its Subsidiaries, any trade secret,
business data or other confidential or proprietary information
acquired by reason of the Shareholder's or its Representative's
involvement and association with the Company or any of its
Subsidiaries.
13.2 PROVISIONS NOT APPLICABLE. The provisions of paragraph 13.1(a), 13.1(b) and
13.1(c) SHALL not apply to a Shareholder where the Interest of such
Shareholder has been purchased pursuant to the provisions of section 10.
13.3 BREACH OF SHAREHOLDERS' COVENANTS. Each of the parties acknowledges that by
reason of his or her unique knowledge of an association with the business
of the Company and its Subsidiaries, the scope of the covenants in
subsection 13.1 are reasonable and commensurate with the protection of the
legitimate interests of the Company and that a breach by an party of any of
the covenants contained in subsection 13.1 would result in damages to the
Company and that the Company cannot adequately be compensated for such
damages by a monetary award. The parties therefore acknowledge that in the
event of any such breach, in addition to all other remedies available to
the Company at law or in equity, the Company is entitled to such relief by
way of restraining order, injunction, decree, declaration or otherwise as
may be appropriate to ensure compliance with the provisions of subsection
13.1 as may be granted by a court of competent jurisdiction and each of the
parties acknowledges that the granting of such relief is fair and
reasonable in the circumstances. Each of the parties further acknowledges
that the covenants contained in section 13.1 continue in force even if the
remainder of this Agreement is terminated for any reason whatsoever other
than the agreement in writing of all the parties and is severable for such
purpose.
14. TERM OF AGREEMENT
14.1. TERM. This Agreement shall come into force and effect as of the date set
out above and shall continue in force until the earlier of:
28
(a) the date on which only one Shareholder holds Shares in the Company;
(b) the date on which the Company suffers an Insolvency Event; or
(c) the date of execution of an agreement of termination of this Agreement
in writing by all of the Shareholders.
14.2. TERMINATION SHALL NOT AFFECT RIGHT TO RECEIVE MONEY. No termination of
this Agreement shall affect the right of any party to whom money is owed at
the time of termination to receive that money according to the provisions
of this Agreement, or affect any other rights of that party under this
Agreement.
15. ARBITRATION
15.1. ARBITRATION. Except for any determination of the value of an Interest made
in accordance with subsection 12.2, which determination shall be final and
binding on the parties, all disputes arising out of or in connection with
this Agreement shall be referred to and finally resolved by a single
arbitrator (the "Arbitrator") pursuant to the Commercial Arbitration Act,
R.S.B.C. 1996, c. 55, as amended.
15.2. FINAL AND BINDING. The decision of the Arbitrator on all issues or matters
submitted to the Arbitrator for resolution shall be conclusive, final and
binding on all of the parties.
15.3. COSTS. The Arbitrator shall determine who shall bear the costs of
arbitration pursuant to this section 15.
16. GENERAL
16.1. GENDER, PLURAL AND SINGULAR. In this Agreement, the masculine includes the
feminine and the neuter genders and the plural includes the singular and
vice versa and modifications to the provisions of this Agreement may be
made accordingly as the context requires.
16.2. LEGEND ON SHARE CERTIFICATES. All share certificates issued by the Company
(including existing certificates) shall have typed or otherwise written
thereon the following legend:
"The shares represented by this certificate are subject to the provisions
of an agreement dated as of September 28, 2000 among Xxxxxxxx Xxxxxx, Xxxxx
Xxxxxxxx, Xxxx Xxxx, Xxxxx Ten Hoope, Xxxxxxx Xxxxx, iQuest Networks Inc.
and xXxxxx.xxx Software Ltd., which agreement contains restrictions on the
right of the holder hereof to sell, exchange, transfer, assign, gift,
pledge, encumber, hypothecate or otherwise alienate the shares represented
hereby and notice of those restrictions is hereby given."
16.3. ALTERATIONS. No alteration or amendment to this Agreement shall take
effect unless it is in writing duly executed by each of the parties.
16.4. PROPER LAW OF AGREEMENT. This Agreement shall be governed by and construed
in accordance with the laws of the Province of British Columbia and Canada.
29
16.5. INVALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision and any such invalid or unenforceable provision shall be deemed
to be severable.
16.6. INCLUSIVE LANGUAGE. The word "including", when followed by any general
statement, term or matter, is not to be construed to limit such general
statement, term or matter to the specific items or matters set forth
immediately following such word or to similar items or matters, but rather
it is to be construed to refer to all other items or matters that could
reasonably fall within the broadest possible scope of such general
statement, term OR matter.
16.7. TIME OF THE ESSENCE. Time shall be of the essence of this Agreement.
16.8. NOTICES. Any notice, payment or other communication required or permitted
to be given or served pursuant to this Agreement shall be in writing and
shall be delivered personally or forwarded by registered mail to the party
concerned addressed as follows:
If to Fraser:
Xxxxxxxx Xxxxxx
000 0xx Xxxxxx Xxxx
Xxxxx Xxxxxxxxx, XX
X0X 152
If to Xxxxxxxx:
Xxxxx Xxxxxxxx
6 - 0000 Xxxx 0xx Xxxxxx
Xxxxxxxxx, XX
X0X lG5
If to Beis:
Xxxx Xxxx
0000 Xxxx 0xx Xxxxxx
Xxxxxxxxx, XX
X0X 2Cl
If to Ten Hoope:
Karel Ten Hoopoe
0000 Xx. Xxxxxx Xxxxxx
Xxxxx Xxxxxxxxx, XX
X0X 0Xx
If to Xxxxx:
Xxxxxxx Xxxxx
0000 Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxx
XXX 00000
30
If to iQuest:
iQuest Networks Inc.
000 - 000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX
X0X 0X0
Attention: Xxxxx Xxxxxxxx
if to the Company:
xXxxxx.xxx Software Ltd.
000 Xxxxxxxxxx Xxxxxx, 000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX
X0X lT2
Attention: Xxxxxx Xxxxxxxxx
or to any other address as may from time to time be notified in writing by
any of the parties. Any notice, payment or other communication shall be
deemed to have been given on the day delivered, if delivered by hand, and
within four Business Days following the date of posting, if mailed;
provided that if there shall be at the time or within four Business Days of
mailing a mail strike, slow-down or other labour dispute that might affect
delivery by mail, then the notice, payment or other communication shall be
effective only when actually delivered.
16.9. SHAREHOLDERS TO TAKE FURTHER STEPS. Each Shareholder shall take all
necessary actions (including amending the Articles of the Company) and
shall exercise that Shareholder's rights as a Shareholder of the Company to
cause the Company to pass all necessary resolutions and effect all
necessary corporate acts to comply with the intent and provisions of this
Agreement, including the convening and attending at meetings, voting
approval of necessary resolutions, or otherwise as may be necessary for the
purpose of this Agreement.
16.10. COMPANY TO BE BOUND. The Company, so far as its powers apply, shall be
bound by the terms of this Agreement and shall do and perform all such acts
and things and execute all such documents and assurances as it has power to
do and as is necessary to fully and effectually carry out the terms of this
Agreement.
16.11. ENTIRE AGREEMENT. The provisions of this Agreement constitute the entire
agreement between the parties and supersede all previous communications,
representations and agreements, whether oral or written, between the
parties with respect to the subject matter of this Agreement.
16.12. ENUREMENT. This Agreement shall enure to the benefit of and be binding
upon the parties and, except as otherwise provided or as would be
inconsistent with the provisions of this Agreement, their respective heirs,
executors, administrators, successors and assigns.
16.13. COUNTERPARTS. This Agreement may be executed in two or more counterparts
and or by facsimile each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument
31
AS EVIDENCE OF THEIR AGREEMENT, the parties have executed this Agreement as of
the date and year first above written.
SIGNED, SEALED AND DELIVERED )
by XXXXXXXX XXXXXX )
in the presence of: )
) _______________________________
_______________________________ ) XXXXXXXX XXXXXX
Name of Witness )
)
_______________________________ )
Signature of Witness )
SIGNED, SEALED AND DELIVERED )
by XXXXX XXXXXXXX )
in the presence of: )
) _______________________________
_______________________________ ) XXXXX XXXXXXXX
Name of Witness )
)
_______________________________ )
Signature of Witness )
SIGNED, SEALED AND DELIVERED )
by XXXX XXXX )
in the presence of: )
) _______________________________
_______________________________ ) XXXX XXXX
Name of Witness )
)
_______________________________ )
Signature of Witness )
SIGNED, SEALED AND DELIVERED )
by KAREL TEN HOOPE )
in the presence of: )
32
) _______________________________
_______________________________ ) KAREL TEN HOOPE
Name of Witness )
)
_______________________________ )
Signature of Witness )
SIGNED, SEALED AND DELIVERED )
by XXXXXXX XXXXX )
in the presence of: )
) _______________________________
_______________________________ ) XXXXXXX XXXXX
Name of Witness )
)
_______________________________ )
Signature of Witness )
XXXXXX.XXX SOFTWARE LTD.
By: ______________________________
Authorized Signatory
iQUEST NETWORKS INC.
By: ______________________________
Authorized Signatory - Director
33
SCHEDULE A
Definitions
The following words shall whenever used in this Agreement have the following
meanings:
"Affiliate" means, with respect to any Shareholder or by the Representative of
such Shareholder:
(a) any corporation which is directly or indirectly controlled (de facto
control) by such Shareholder and, if any Shareholder is a corporation,
means in addition to the foregoing any person who controls such
corporate shareholder;
(b) any person, firm or corporation which is not acting at arm's length to
such Shareholder, within the meaning ascribed to that expression in
the Income Tax Act, R.S.C. 1985, 5th Supp., c. 1 in effect on the date
of this Agreement;
"Agreement" means the shareholders' agreement between Fraser, Hamilton, Beis,
Ten Hoope, Mumey, iQuest and the Company, dated September 28,200O;
"Arbitrator" has the meaning given to that term in subsection 15.1;
"Auditors" means the firm of Amisano, Hanson, Chartered Accountants, or such
other firm as the Board may from time to time determine;
"Bank" means the Canadian Imperial Bank of Commerce or such other bank or
financial institution as the Board may from time to time determine;
"Board" means the board of directors of the Company;
"Business Day" means any day except Saturdays, Sundays or statutory holidays in
British Columbia;
"Buy Option" has the meaning given to that term in subsection 8.2;
"Closing" means any closing of the purchase and sale of an Interest of a
Shareholder as provided in this Agreement;
"Closing Date" has the meaning given to that term in subsection 11.1;
"Company Act" means the Company Act, R.S.B.C. 1996, c. 62, as amended;
"Contract" has the meaning given to that term in subsection 11.2;
"Date" means the date of death of the Deceased;
"Deceased" has the meaning given to that term in subsection 6.1;
"Default" has the meaning given to that term in subsection 9.1;
34
"Defaulting Shareholder" has the meaning given to that term in subsection 9.1;
"Drag-Along Proposed Purchaser" has the meaning given to that term in subsection
5.8;
"Drag-Along Trigger Offer" has the meaning given to that term in subsection 5.8;
"Exercise Notice" has the meaning given to that term in subsection 8.3;
"Financing" means the raising of funds through debt, including debt convertible
into equity of the Company in the Company, but does not include short term
financing (less than 60 days) provided by suppliers of goods or services.
"First Valuation Report" has the meaning given to that term in paragraph
12.2(c);
"First Valuator" has the meaning given to that term in paragraph 12.2(b);
"Indemnitor" has the meaning given to that term is subsection 4.6;
"Insolvency Event" means the winding-up or liquidation of a company, the
institution of proceedings to be adjudicated a bankrupt or insolvent under the
Bankruptcy and Insolvency Act (Canada) or any analogous laws, the consenting to
the institution of such proceedings, the consenting to the filing of any
petition under the Bankruptcy and Insolvency Act (Canada) or to the appointment
of a receiver or receiver manager, the making of a general assignment for the
benefit of creditors, the filing of a proposal to settle payment of creditors
liabilities under the Companies' Creditors Arrangement Act, (Canada) the
admission in writing of insolvency, the taking of any action in furtherance of
any of the above, the passing of a resolution by a company for its winding-up or
dissolution pursuant to s. 258, 267 or 271 of the Company Act or any similar
provision enacted in substitution therefor, or upon dissolution of such a
company by order of the Lieutenant Governor in Council pursuant to s. 256 of the
Company Act or any similar provision acted in substitution therefor;
"Interest" means, in respect of each Shareholder, all of that Shareholder's
Shares and Shareholder's Loans and any other right or claim that the Shareholder
may have against the Company and the other Shareholders in that Shareholder's
capacity as a member of the Company;
"Nondefaulting Shareholder" has the meaning given to that term in paragraph 9.1
(a);
"Notice of Default" has the meaning given to that term in paragraph 9.2(c);
"Offer" has the meaning given to that term in subsection 9.3;
"Offeree Shareholders has the meaning given to that term in subsection 10.1;
"Offered Shares" has the meaning given to that term in paragraph 5.3(a);
"Offeror" has the meaning given to that term in paragraph 5.3(a);
"Offeror Shareholder" has the meaning given to that term in subsection 10.1;
35
"Optionee" has the meaning given to that term in subsection 8.5;
"Option Event" has the meaning given to that term in subsection 8.1;
"Option Interest" has the meaning given to that term in paragraph 8.2(a);
"Optionor" has the meaning given to that term in subsection 8.2;
"Other Shareholders" means all other Shareholders of the Company other than the
Offeror;
"Permanent Incapacity" means, with respect to any person, the condition that
will be deemed to exist where:
(a) such person has been declared by a court of competent jurisdiction to
be mentally incompetent and such declaration has not, at the relevant
time, been revoked; or
(b) such person becomes unable, by reason of illness, mental or physical
disability or incapacity or otherwise, to perform his or her normal
duties as a director or officer of the Company or as a full-time
employee of the Company:
(i) for a period of 180 consecutive days; or
(ii) for 270 days in the aggregate during any period of 365
consecutive days;
provided that in the event a qualified medical doctor certifies that
the person's illness, disability or incapacity is not permanent but
merely temporary and that the person shall be fully recovered and able
to perform his or her normal duties as a director, officer and/or
full-time employee of the Company within 180 days of the date of the
certificate, then such illness, disability or incapacity shall not be
deemed to constitute "Permanent Incapacity";
"Piggy Back Notice" has the meaning given to that term in subparagraph
5.7(a)(ii);
"Pre-DA Trigger Offer" has the meaning given to that term in subsection 5.8;
"Prime Rate" means the annual rate of interest designated from time to time by
the Bank as its prime rate for Canadian dollar commercial loans made in Canada;
"Purchase Price" means, with respect to any sale and purchase of an Interest of
a Shareholder, the amount payable to purchase such Interest as determined in
accordance with the provisions of this Agreement applicable to that sale and
purchase;
"Purchaser" means the Shareholder(s) who is/are the purchaser(s) of Shares or of
an Interest pursuant to any of the provisions of this Agreement;
"Representative" means, for a Shareholder that is a company, the individual(s)
who exercise control over that company;
"Second Valuation Report" has the meaning given to that term in paragraph
12.2(e);
36
"Second Valuator" has the meaning given to that term in paragraph 12.2(d);
"Sell Option" has the meaning given to that term in paragraph 8.2(b);
"Shareholder" means in respect of the Company, any one of Fraser, Hamilton,
Beis, Ten Hoope, Xxxxx or iQuest and "Shareholders" means any two or more of
them;
"Shareholder Offer" has the meaning given to that term in subsection 10.1;
"Shareholder's or Shareholders' Loans" means, in respect of each Shareholder,
the aggregate amount of money advanced from time to time as a loan by that
Shareholder to the Company and not repaid, together with accrued and unpaid
interest, if any, but does not include a loan made pursuant to section 4.1;
"Shares" means, in respect of each Shareholder, all of the Class A common shares
and Class B common shares in the capital of the Company directly or indirectly
owned by that Shareholder or in respect of which that Shareholder has any right
to purchase (except under this Agreement);
"Subject Interest" has the meaning given to that term in paragraph 6.1(a) or
paragraph 12.2(a);
"Subject Purchaser" means the purchaser or purchasers of the Subject Interest;
"Subject Shareholder" has the meaning given to that term in subsection 6.1;
"Subsidiary" has the meaning given to that term in s. l(3) of the Company Act in
effect on the date hereof;
"Third Party Offer" has the meaning given to that term in paragraph 5.3(a);
"Third Party Offerors" has the meaning given to that term in subparagraph
5.3(a);
"Transfer" of an Interest includes any sale, exchange, transfer, assignment,
gift, pledge, encumbrance, hypothecation, alienation or other transaction,
whether voluntary, involuntary or by operation of law, whether in whole or in
part, by which the legal or beneficial ownership of, or any security interest or
other interest in an Interest, passes from one person to another, or to the same
person in a different capacity, whether or not for value, and "to transfer",
"transferred" and similar expressions have corresponding meanings;
"Transfer Interest" has the meaning given to that term in subsection 11.2;
"Transfer Notice" has the meaning given to that term in paragraph 5.3(a);
"Valuation" means a valuation prepared pursuant to subsection 12.2 and which
expresses the value per Share and per dollar amount of any Shareholder's Loan;
and
"Vendor" means a Shareholder who is the seller of an Interest or Interests
pursuant to any of the provisions of this Agreement.
37
SCHEDULE B
Matters Requiring Unanimous Consent of the Directors
Pursuant to subsection 3.8 of the Agreement, the following matters shall require
the consent of all the directors of the Company:
(a) the approval of the annual operating and capital expenditure budgets or the
business plan of the Company or any of its Subsidiaries;
(b) any amendment to the annual operating and/or capital expenditure budget
which increases the annual operating and/or capital expenditure budget by
more than 15%;
(c) any material change in the direction of the business as compared to the
business plan of the Company as approved in paragraph (a) above;
(d) except for any expenditures contemplated by an approved capital expenditure
or operating budget, any single capital expenditure of the Company or its
Subsidiaries in excess of $20,000 per year, or any series of related
capital expenditures which exceed, in the aggregate, the sum of $20,000 per
year;
(e) the acquisition (by purchase, lease or otherwise) by the Company or any
Subsidiary of any asset having a value in excess of $20,000;
(f) the entering into, execution, acknowledgement, amendment, supplement,
cancellation or termination of any Material Contract on behalf of the
Company or any of its Subsidiaries and, for this purpose, "Material
Contract" means any of the following:
(i) any contract, agreement, or other instrument to be entered into by the
Company or any of its Subsidiaries with any Shareholder or an
Affiliate of a Shareholder;
(ii) any contract, agreement or other instrument to be entered into by the
Company or any of its Subsidiaries which may in the aggregate over the
term of the contract, agreement or other instrument involve an
obligation of the Company, or any of its Subsidiaries, to pay in
excess of $20,000; and
(iii) any other contract, agreement or other instrument to be entered into
by the Company or any of its Subsidiaries which is material to the
business, condition (financial or otherwise), operations or
performance of the Company or its Subsidiaries;
(g) any change in the authorized officers of the Company or any of its
Subsidiaries in respect of legal documents or transactions with any bank or
other financial institution;
(h) the appointment of, or any changes to, the officers, other than the
Secretary of the Company, or other management of the Company or any of its
Subsidiaries;
38
(i) the hiring or termination of employment of any management employee or any
other employee whose annual salary and other remuneration exceeds $50,000;
(j) any material change in the salary, fringe benefits or other compensation
whatsoever to be paid to the officer or senior management of the Company or
any of its Subsidiaries;
(k) the adoption or amendment of any bonus, incentive, deferred compensation,
stock option, profit sharing, pension or similar plan for any or all of the
employees of the Company or any of its Subsidiaries;
(l) the declaration or payment or payment of, or agreement to declare or pay,
any dividend, salary, bonus, fees or other amount by the Company or any of
its Subsidiaries to any Shareholder or Affiliate of a Shareholder;
(m) any borrowing by the Company or any of its Subsidiaries, other than
Shareholder Loans which must be offered pro rata to the Shareholders;
(n) the guarantee by the Company or any of its Subsidiaries of the debt of any
other person;
(o) any loans by the Company or any of its Subsidiaries to any other person;
(p) the sale, lease, transfer, mortgage, pledge, or other disposition of all or
substantially all of the undertaking of the Company or any of its
Subsidiaries;
(q) any amendment to the Memorandum, Articles, or other constating documents of
the Company or any of its Subsidiaries;
(r) the consolidation, merger or amalgamation of the Company or any of its
Subsidiaries with any other company, association, partnership or other
legal entity;
(s) the creation, allotment or issuance of, or agreement to create, allot or
issue, any shares or other securities of the Company or any of its
Subsidiaries, or the granting of any option or right capable of becoming an
option to purchase any shares or other securities of the Company or any of
its Subsidiaries;
(t) the winding-up or liquidation of the Company or any of its Subsidiaries,
the institution of proceedings to be adjudicated a bankrupt or insolvent
under the Bankruptcy and Insolvency Act (Canada), the consenting to the
institution of such proceedings against the Company or any of its
Subsidiaries, the consenting to the institution of bankruptcy or insolvency
proceedings against the Company or any of its Subsidiaries under the
Bankruptcy and Insolvency Act (Canada) or any other analogous laws, the
consenting to the filing of any such petition or to the appointment of a
receiver or receiver manager of the property of the Company or any of its
Subsidiaries, the making of a general assignment for the benefit of
creditors, the filing of a proposal to settle payments of creditors'
liabilities under the Companies Arrangement Act, the admission in writing
of the insolvency of the Company or any of its Subsidiaries, or the taking
of any corporate
39
action in furtherance of any of the aforesaid purposes; and
(u) the redemption, repurchase or retirement for value of any shares or other
securities of the Company, except under the provisions of this Agreement or
unless the Company offers to redeem, repurchase or retire all of the issued
and outstanding shares or securities to. be redeemed, repurchased or
retired, the Company offers to redeem, repurchase or retire such shares or
securities on a pro rata basis.
40
SCHEDULE C
The registered and beneficial holders of all the issued and outstanding shares
in the capital of the Company are as follows:
Shareholder Number and Class of Shares
----------------- -----------------------------------
Xxxxxxxx Xxxxxx 1,762,500 Class B Common shares
Xxxxx Xxxxxxxx 1,762,500 Class B Common shares
Xxxx Xxxx 787,500 Class B Common shares
Karel Ten Hoope 475,000 Class B Common shares
Xxxxxxx Xxxxx 212,500 Class B Common shares
