As filed with the Securities and Exchange Commission on May __, 1998.
Registration Statement No. 333-_______
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
CHAMPION COMMUNICATION SERVICES, INC.
(Exact name of Registrant)
Delaware 76-0448005
(State of incorporation) (I.R.S. Employer
Identification No.)
Albert F. Richmond
Chairman of the Board and Chief Executive Officer
1610 Woodstead Court, Suite 330
The Woodlands, Texas 77380
(281) 364-1603
Fax: (281) 250-8104
(Address and telephone number of Registrant's executive offices and name,
address and telephone number of agent for service)
Copy to:
J. Rowland Cook
Jenkens & Gilchrist, A Professional Corporation
600 Congress Avenue, Suite 2200
Austin, Texas 78701
(512) 499-3800
Fax: (512) 404-3520
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===============================================================================================================================
Title of Each Class Amount to be Proposed Proposed Amount of
of Securities to be Registered Registered Maximum Maximum Registration Fee
Offering Price Aggregate
Per Share Offering Price
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share, issuable upon 769,850 $ 3.49(1) $ 2,686,776 $885.00
exercise of outstanding warrants
================================================================================================================================
(1) The Common Stock registered herein is issuable upon the exercise of
outstanding transferable Warrants, currently exercisable at a price per share of
CND $5.00 (or US $3.49 at current Wall Street Journal exchange rates). Although
the Company proposes to reduce the exercise price of the Warrants relative to
this Offering to a price not yet determined, the filing fee has been computed at
a price per share of U.S. $3.49.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall have
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
================================================================================
</TABLE>
1
<PAGE>
SUBJECT TO COMPLETION, DATED MAY __, 1998
PROSPECTUS
[LOGO]
Champion Communication Services, Inc.
769,850 Shares
Common Stock
Champion Communication Services, Inc. (the "Company" or "Champion") is
offering 769,850 shares of Common Stock to holders of its outstanding Common
Share Purchase Warrants (the "Warrants") issuable upon exercise of the Warrants
(the "Offering"). Each Warrant provides for the purchase of one share of Common
Stock upon proper and timely exercise. The Warrants are exercisable until their
expiration at 5:00 p.m. Toronto Time on June 30, 1998, at a price of CND $5.00
per share. The Company has determined that during the Offering period, the
Company will allow Warrantholders to exercise the Warrants at a reduced exercise
price of CDN $____ per share (or US $___________ per share assuming the Wall
Street Journal currency exchange rate as of the date of this Prospectus) (the
"Reduced Exercise Price"). In addition, the Offering period has been extended to
commence upon the date of this Prospectus, and to terminate at 5 p.m. Toronto
Time on ________________, 1998. The Company's Common Stock is traded in Canada
on The Canadian Dealing Network under the symbol CHPN, and in the United States
on the OTC Bulletin Board under the symbol CCMS. To the Company's knowledge,
there is no established public trading market for the Warrants.
--------------------
The Common Stock offered hereby involves a high
degree of risk. See "Risk Factors"
beginning on page 5.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
========================================================================================================================
<S> <C> <C> <C> <C>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Company(1)
- ------------------------------------------------------------------------------------------------------------------------
Per Share.................... $ $ -0- $
- ------------------------------------------------------------------------------------------------------------------------
Total(2)..................... $ $ -0- $
========================================================================================================================
<FN>
(1) Before deducting expenses of this offering payable by the Company,
estimated at $_____________.
</FN>
</TABLE>
--------------------
The date of this Prospectus is May ___, 1998.
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<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Such reports can be inspected and copied at the Commission's
public reference facilities at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at its Regional Offices at 801 Cherry St., Suite 1900, Fort
Worth, Texas 76102. Copies of such materials are available at prescribed rates
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Additionally, the Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding issuers such as the Company, that file electronically with the
Commission. The address of this Web site is http.//www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933 (the
"Securities Act") with respect to the Common Stock offered hereby. This
Prospectus, filed as a part of the Registration Statement, does not contain all
of the information set forth in the Registration Statement and the exhibits to
the Registration Statement. For further information with respect to the Company
and the Common Stock, please see the Registration Statement and exhibits
thereto, which may be inspected at the Commission's office without charge, or
copies of which may be obtained from the Commission upon payment of the
prescribed fees, or which may be obtained through the Commission's Web site.
Statements made in the Prospectus regarding the contents of any contract,
agreement or document are not necessarily complete and potential investors
should reference the copy of such document filed as an exhibit to the
Registration Statement.
The Company provides its stockholders with its annual report containing
audited financial statements. The Company will provide without charge to each
person who receives a copy of this Prospectus, upon written request of such
person, a copy of any information that is incorporated by reference in this
Prospectus (not including exhibits to the information requested unless the
exhibits themselves are specifically incorporated by reference). Such requests
should be directed to: Champion Communication Services, Inc., Attn: Mary F.
Garner, 1610 Woodstead Court, Suite 330, The Woodlands, Texas 77380, (281)
362-0144.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(1) the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997;
(2) the Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1998;
(3) all other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since December 31, 1997;
(4) the description of the Common Stock set forth in the Registration
Statement on Form 10-SB, filed with the Commission on December 13,
1996, including any amendment or report filed for the purpose of
updating such description; and
(5) all documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the termination of this
offering of the Shares, from the date of filing of such documents.
Any statement contained in a previously filed document incorporated by
reference shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
accompanying Prospectus supplement, or in any other subsequently filed document
which also is or is deemed to be incorporated by reference, modifies or
3
<PAGE>
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company
The Company provides high-powered CR and trunked SMR dispatch services in
the United States, currently serving approximately 6,000 customers utilizing
30,000 subscriber units (either radio or base stations) in 22 states in the
United States. The Company's customers are principally businesses and government
agencies located in both metropolitan and rural geographic areas.
Dispatch services are offered on the 450-512 MHz and 800 MHz bands.
Operators of these dispatch services are regulated as PMRS providers (i.e.,
private carriers) or as CMRS providers (i.e., common carriers). A repeater is
operated either without an FCC license because the customer is individually
licensed to operate a conventional channel or it is operated with a license held
by the operator for either trunked or conventional operations. A repeater that
is operated as a PMRS is subject to more relaxed regulatory requirements than a
CMRS provider, such as cellular and certain SMR or ESMR licensees.
The Company primarily offers its dispatch services in the 450-512 MHz
bands. It also operates a limited amount of conventional and trunked dispatch
services in the 800 MHz band. The Company is concentrating its business in the
450-512 MHz band because it believes that it can exploit economies of scale by
providing extensive coverage, obtaining equipment at favorable prices and
charging low rates. However, there can be no assurance that this strategy will
be effective. In both the 450-512 MHz and 800 MHz bands, the Company operates
CRs without a license for individually licensed customers and it operates CRs
and SMRs with its own FCC license. All the Company's private carrier and SMR
licenses are PMRS licenses and thus are subject to less stringent regulatory
requirements than CMRS licenses.
The Company has determined that UHF trunking is its primary goal for
business operations in its targeted metropolitan areas. The pursuit of this
primary goal would transform the Company's operations from principally a
community repeater business to a trunked technology business in selected major
metropolitan areas, eliminating single site repeaters and capitalizing upon the
ability to trunk numerous repeaters into a consolidated system with many
channels offering wide geographic coverage.
In the past the Company has utilized independent dealers for sales and
service activites. In the future, the Company will play a greater part in the
management of its assets and customers by establishing Company- owned sales and
supporting services in the targeted markets. The Company has purchased, and is
negotiating purchases of dealerships in these markets to fulfill this goal.
Management has observed that over the last decade all spectrum has
increased in value, precipitated by a fixed supply and increasing utilization.
In the process of securing a limited number of licenses for its own use,
management of the Company discovered that it was highly successful at
identifying and acquiring exclusive licenses after obtaining requisite FCC
consent. The process is technical and lengthy. As a result of the Company's
successes during 1996 and 1997 in securing exclusive licenses, the Company was
able to obtain FCC consent and sell a number of the licenses for in excess of
$3,500,000. Based on this experience, management recognizes the value of
spectrum and will seek to expand the Company's role as a primary spectrum
merchant both for its own benefit to construct and load users, and for sales to
third parties.
The Company is a Delaware corporation. Its principal place of business is
1610 Woodstead Court, Suite 330, The Woodlands, Texas 77380. The Company's
telephone number is (281) 362-0144.
4
<PAGE>
RISK FACTORS
This Prospectus includes "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities
Act") and Section 21E of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act."). All statements other than statements of
historical information provided herein are forward looking and may contain
information about financial results, economic conditions, trends and known
uncertainties. The Company cautions the reader that actual results could
differ materially from those expected by the Company, depending on the
outcome of certain factors, including those factors discussed in this
section. Specifically, there can be no assurance that the Company will be
able to become profitable, compete effectively, sell its licensed systems
at a profit, increase its utilization on its 450 - 512 MHz band systems,
retain its key personnel or take any or all of the other actions described
or referred to in the Prospectus. Readers are cautioned not to place undue
reliance on these forward looking statements, which speak only as of the
date herein. The Company undertakes no obligation to release to investors
the result of any revisions to these forward looking statements which may
be made to reflect events or circumstances after the date herein,
including, without limitation, changes in the Company's business strategy
or planned capital expenditures, or to reflect the occurrence of
unanticipated events.
Lack of Accumulated Earnings; Uncertainty as to Future Profitability
The Company has a limited operating history and has achieved profitability
only in the quarter ended March 31, 1997, when it reported net income of
approximately $2.3 million and in the quartr ended December 31, 1997, when it
reported net income of $6,000. A significant portion of the income reported for
the quarter ended March 31, 1997 was derived from the Company's March 1997 sale
of non-core spectrum, generating $3.6 million in revenues. At December 31, 1997,
the Company had an accumulated earnings deficit of approximately $200,000. For
the Company to become profitable, it will be necessary to continue to be
successful in the sale of spectrum, and to achieve profitability in the
operation of its dispatch service operations. There can be no assurance that the
Company will be profitable in the future, or that an investor in the Common
Stock will not sustain a loss in the investment.
New Technologies
The market for the Company's services is characterized by rapid
technological advances, changes in customer requirements and new service
introductions and enhancements. The Company's growth and future financial
performance will depend, in part, on its ability to enhance existing services,
develop new services that meet technological advances and provide its services
at competitive prices. There can be no assurance that the Company will be
successful in these endeavors. The inability of the Company to respond in a
timely manner to technological advances could have a material adverse effect on
the Company's business.
Competition
The Company experiences significant competition from other dispatch
operators in the 450-512 MHz, 800 MHz and 900 MHz bands, as well as from
providers of cellular phone services. The Company also could face additional
competition from other wireless communications providers, such as PCS operators,
220 MHz operators and paging operators in the 450-512 MHz and 900 MHz bands.
Many of these providers have significantly greater resources than the Company.
There can be no assurance that the Company will be able to compete successfully
in the dispatch services industry in the future.
Furthermore, the availability of new technologies to ESMR network operators
will allow some dispatch operators to offer enhanced dispatch services,
including PSN interconnect and features such as seamless wide area coverage and
data transmission. The Company believes these services may be more expensive
than the services the Company provides, and therefore may not create a
significant competitive threat. However, there can be no assurance that this
will be the case or that competition from ESMR service providers, including
their ability to lower prices due to improved technologies, will not have a
materially adverse effect on the Company's business.
5
<PAGE>
Dependence On Key Personnel
The Company believes its success depends, in large part, upon the continued
services of key management personnel, including Albert F. Richmond and David A.
Terman. The Company has purchased key-employee life insurance policies in the
amount of $1 million on each of Messrs. Richmond and Terman. The Company does
not have employment agreements with either of these employees. The loss of
either of these individuals could have a material adverse effect on the Company.
Control by Officers and Directors
As of December 31, 1997, the executive officers and directors of the
Company owned approximately 63% of the issued and outstanding shares of the
Company's Common Stock. As a result of such ownership, such officers and
directors have the power effectively to control the Company, including the
election of directors, the determination of matters requiring stockholder
approval and other matters relating to corporate governance.
Reliance on Key Suppliers
The Company relies on Motorola, Inc. ("Motorola") and Kenwood Communication
Corporation ("Kenwood") as its primary equipment suppliers and on Motorola as
its primary source of antenna sites. A change or termination of the Company's
arrangements with either or both of these companies could have a material
adverse effect on the Company's business.
Absence of Dividends
The Company has never declared or paid any dividends on the Common Stock
and does not anticipate that it will pay any dividends in the foreseeable
future.
Impact of Regulatory Issues
The Company's dispatch business is a distinct segment of the wireless
communication industry. The wireless communications industry is subject to FCC
regulation. The FCC does not currently regulate prices for PMRS providers, such
as the Company. There can be no assurance, however, that the prices charged by
the Company for its services will not become subject to regulation.
Additionally, pending FCC rule and policy changes, including those relating
to "refarming" (i.e., the ongoing FCC proceeding to rewrite the rules governing
licensing and operation in the 450-512 MHz band where the Company's business is
concentrated), regulatory classification, SMR and other dispatch service
provider regulation, new spectrum allocation and radio towers may not be
adopted, or may be adopted in a different form than the current proposed
version. Any regulatory changes could have a material adverse effect on the
Company.
Inability to Obtain Licenses
For some of its 450-512 MHz and 800 MHz band operations, the Company's
customers hold the necessary FCC licenses; for some operations, the Company
holds the requisite licenses. Each of these licenses is subject to the licensee
operating in compliance with applicable FCC rules and is subject to renewal.
Failure to obtain license renewals by either the Company or its customers would
have a material adverse effect on the Company. There can be no assurance that
the Company's customers will maintain their licenses or that the FCC will renew
the Company's or its customers' licenses.
Furthermore, the Company's strategy includes acquiring co-channel licenses
from third parties to allow trunking in the 450-512 MHz band and to prepare for
the sale of the Company's 800 MHz band systems. There can be no assurance that
the Company will be able to obtain such assignments from other users or that the
FCC will approve these transactions. Failure to obtain the necessary assignments
6
<PAGE>
from other users or to obtain FCC approvals for these assignments of licenses
would have a material adverse effect on the Company.
Provisions Affecting Control
Several provisions of the Company's Certificate of Incorporation and Bylaws
may have the effect of delaying, deferring or preventing a change in control.
The Board of Directors, without further action of the stockholders, has the
authority to issue up to 1,000,000 shares of the Company's preferred stock in
one or more series and to fix the rights, preferences, privileges and
restrictions thereof, and to issue over 13,000,000 additional shares of Common
Stock.
The issuance of preferred stock or additional shares of Common Stock could
adversely affect the voting power of purchasers of Common Stock in this Offering
and could have the effect of delaying, deferring or preventing a change in
control of the Company.
USE OF PROCEEDS
The estimated net proceeds to the Company of the Offering, after deducting
expenses, will be a maximum of approximately $_________________ (assuming an
exercise price for the Warrants during the Offering of $_____________ and
further assuming that all Warrants are exercised during the Offering and
assuming Wall Street Journal currency exchange rates as of the date of this
Prospectus). The Company expects to apply these proceeds as working capital and
for general corporate purposes.
DETERMINATION OF OFFERING PRICE
The Reduced Exercise Price for the Warrants was determined by the Company's
Board of Directors based on a decision to seek to generate cash for working
capital and general corporate purposes, and based on the recent trading prices
for the Company's Common Stock on The Canadian Dealing Network in Toronto and
the OTC Bulletin Board.
PLAN OF DISTRIBUTION
The Company is offering 769,850 shares of Common Stock directly to the
holders of the Warrants upon exercise thereof. No underwriters have been engaged
by the Company in connection with the Offering. However, the Company may arrange
for brokers, dealers or agents to participate, in consideration of commissions
payable by the Company (or, if any such broker, dealer or agent acts as agent
for the Warrantholder, payable by such Warrantholder) in amounts to be
negotiated which are not expected to exceed those customary in the types of
transactions involved. Any broker, dealer or agent participating in the
distribution of shares of Common Stock in connection with exercises of the
Warrants pursuant to the Offering may be deemed to be an "underwriter" within
the meaning of Section 2(11) of the Securities Act. Any commissions or discounts
paid to any such broker, dealer or agent my be deemed to be underwriting
commissions or discounts under the Securities Act.
Holders of the Warrants may exercise the Warrants by sending their warrant
certificate, a completed and executed subscription form and a certified check or
money order for CDN $_______ or US $_______ per share, to be received at the
following address no later than 5:00 p.m. Toronto Time, on _____________, 1998:
Equity Transfer Services Inc.
120 Adelaide St. West
Suite 800
Toronto, Ontario M5H 3V1
Attention: Richard Banowski
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Jenkens & Gilchrist, A Professional Corporation, Austin, Texas.
EXPERTS
The financial statements of Champion Communication Services, Inc. as of
December 31, 1997 and 1996, and for each of the years in the two year period
ended December 31, 1997, have been incorporated by reference in reliance upon
the report of KPMG Peat Marwick LLP, independent certified public accountants
incorporated by reference, and upon the authority of such firm as experts in
accounting and auditing.
7
<PAGE>
=============================================
=============================================
769,850 Shares
No dealer, salesman, or other person has
been authorized to give any information or to
make any representations other than those
contained in this Prospectus and, if given or
made, such information or representations
must not be relied upon as having been
authorized by the Company or the Selling
Shareholders. This Prospectus does not
constitute an offer to sell or a solicitation Champion
of an offer to buy any securities other than Communication
the Shares nor does it constitute an offer or Services, Inc.
solicitation by anyone in any jurisdiction in
which such offer or solicitation would be
unlawful or to any person to whom it is
unlawful to make such offer or solicitation.
Neither the delivery of this Prospectus nor
any offer or sale made hereunder at any time
shall imply that information herein is
correct as of any time subsequent to the date
hereof.
Common Stock
---------------
TABLE OF CONTENTS
--------------
Available Information..................... 3
Incorporation of Certain Documents PROSPECTUS
by Reference .......................... 3
The Company .............................. 4 --------------
Risk Factors ............................. 5
Use of Proceeds .......................... 7
Determination of Offering Price .......... 7
Plan of Distribution ..................... 7
Legal Matters ............................ 7
Experts .................................. 7
May ___, 1998
============================================
============================================
8
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses in connection with the issuance and distribution of
the securities being registered, all of which will be borne by the Company, are
set forth in the following itemized table:
SEC Registration Fee.................................... $ 885.00
Transfer Agent's Fees...................................
Blue Sky Fees and Expenses..............................
Accounting Fees.........................................
Legal Fees..............................................
Miscellaneous...........................................
------------
Total.......................................... $
============
Item 15. Indemnification of Directors and Officers
The Company's Certificate of Incorporation provides that, to the fullest
extent permitted by Delaware General Corporation Law, the Company will indemnify
any officer or director who is, was, or is threatened to be made a party to a
proceeding because he or she (1) is or was a director or officer or (2) while a
director or officer, at the Company's request, was serving as a director,
officer, partner, venturer, proprietor, trustee, employee or agent of another
entity.
The Certificate of Incorporation also provides that a director of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for breaches of fiduciary duties, except for liability (1) for
any breach of the duty of loyalty to the Company or its stockholders; (2) for
acts or omissions not in good faith or in knowing violation of the law; (3)
under Section 174 of the Delaware General Corporate Law, which provides for
liability for unlawful dividends and unlawful stock purchases or redemptions; or
(4) for any transaction from which the director received an improper personal
benefit.
The Company has entered into indemnification agreements with each of Albert
F. Richmond, David A. Terman, Mary F. Garner, Pamela R. Cooper, Peter F. Dicks
and Randel R. Young. Each agreement provides for indemnification to the fullest
extent permitted by law against claims in connection with service as an officer
or director, or service as an officer, director, employee, trustee, agent or
fiduciary of another entity at the Company's request.
Item 16. Exhibits.
4.1 Specimen share certificate (incorporated by reference to the Company's
Registration Statement No. 0-29032 on Form 10-SB filed on December 13,
1996)
4.3 Warrant Indenture dated September 25, 1996 between the Company and
Equity Transfer Services Inc.
4.4 Supplemental Indenture dated March ___, 1998 between the Company and
Equity Transfer Services Inc.
II-1
<PAGE>
4.5 Form of warrant certificate (contained in Exhibit 4.4)
5 Opinion of Jenkens & Gilchrist, A Professional Corporation, regarding
legality
23(a)Consent of Jenkens & Gilchrist, A Professional Corporation (contained
in its opinion filed as Exhibit 5)
23(b)Consent of KPMG Peat Marwick LLP (contained in Part II of this
Registration Statement)
24 Power of Attorney (included on the signature pages hereof)
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement
to:
(i) Include any prospectus required by section 10(a)(3) of
the Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statementof the
securities offered, and the offering of the securities at that time to
be the initial bona fide offering.
(3) To file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of
the Offering.
(4) (i) For purposes of determining any liability under the
Securities Act of 1933, to treat the information omitted in the form
of prospectus filed as part of this registration statement in reliance
on Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or Rule 497(h) under the
Securities Act as part of the registration statement as of the time it
was declared effective; and (ii) for the purpose of determining
liability under the Securities Act of 1933, to treat each
post-effective amendment that contains a form of prospectus as a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time as the initial bona fide
offering of those securities.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions contained in the
Amended Certificate of Incorporation and Bylaws of the Registrant and
the laws of the State of Delaware, or otherwise, the Registrant has
been advised that in the opinion of the Securities Exchange Commission
such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful
defense of any action, suit or proceedings) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of The Woodlands, State of Texas, on May 15, 1998.
CHAMPION COMMUNICATION SERVICES, INC.
By: /s/ Albert F. Richmond
-----------------------------------------
Albert F. Richmond,
Chairman of the Board, Chief Executive Officer
Each person whose signature appears below hereby constitutes and appoints
Albert F. Richmond, his true and lawful attorneys-in-fact and agent, for him and
in his name, place and stead, in any and all capacities, to sign any or all
amendments to this Registration Statement (including post-effective amendments),
and to file the same with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person hereby
ratifying and confirming that all that said attorneys-in-fact or his substitutes
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below in multiple counterparts with the effect of one
original by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Albert R. Richmond
___________________________ Chairman of the Board May 15, 1998
Albert R. Richmond Chief Executive Officer and Director
(Principal Executive Officer)
/s/ David A. Terman
______________________________ President and Director May 15, 1998
David A. Terman
/s/ Pamela R. Cooper
______________________________ Chief Financial Officer, Controller May 15, 1998
Pamela R. Cooper and Treasurer
(Principal Financial and Accounting Officer)
/s/ Peter F. Dicks
______________________________ Director May 15, 1998
Peter F. Dicks
/s/ Randel R. Young
______________________________ Director May 15, 1998
Randel R. Young
</TABLE>
II-3
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the use of our report dated February 20, 1998, related the
financial statements of Champion Communication Services, Inc. as of December 31,
1997 and 1996 and for each of the years in the two-year period ended December
31, 1997, incorporated by reference and to the reference to our firm under the
heading "Experts" in the Registration Statement.
KPMG PEAT MARWICK LLP
Houston, Texas
May 15, 1998
WARRANT INDENTURE
Providing for the Issue of up to 811,000 Warrants
exercisable for common shares
of Champion Communication Services, Inc.
BETWEEN
CHAMPION COMMUNICATION SERVICES, INC.
- and -
EQUITY TRANSFER SERVICES INC.
Dated September 25, 1996
<PAGE>
-i-
TABLE OF CONTENTS
Page
ARTICLE I
INTERPRETATION...................................................... 2
1.1 Definitions................................................ 2
1.2 Meaning of Outstanding..................................... 4
1.3 Gender and Number.......................................... 5
1.4 Interpretation not Affected by Headings, etc............... 5
1.5 Day not a Business Day..................................... 5
1.6 Time of the Essence........................................ 5
1.7 Currency................................................... 5
ARTICLE II
THE WARRANTS........................................................ 6
2.1 Creation and Issue of Warrants............................. 6
2.2 Form of Warrants........................................... 6
2.3 Terms of Warrants.......................................... 6
2.4 Warrantholder not a Shareholder............................ 6
2.5 Warrants to Rank Pari Passu................................ 7
2.6 Signing of Warrant Certificates............................ 7
2.7 Certification by the Warrant Agent......................... 7
2.8 Issue in Substitution for Warrant Certificates Lost, etc... 8
2.9 Exchange of Warrant Certificates........................... 8
2.10 Charges for Exchange....................................... 8
2.11 Transfer and Ownership of Warrants......................... 9
2.12 Assumption by Transferee and Release of Transferor......... 10
2.13 Registration of Warrants................................... 10
ARTICLE III
EXERCISE OF WARRANTS................................................ 11
3.1 Method of Exercise of Warrants............................. 11
3.2 Effect of Exercise of Warrants............................. 12
3.3 Partial Exercise of Warrants; Fractions.................... 13
3.4 Accelerated Exercise of Warants............................ 14
3.5 Cancellation of Surrendered Warrants....................... 14
3.6 Accounting and Recording................................... 14
ARTICLE IV
ADJUSTMENT OF NUMBER OF COMMON SHARES............................... 15
4.1 Adjustment of Number of Common Shares and Exercise Price... 15
4.2 Entitlement to Shares on Exercise of Warrant............... 19
4.3 Determination by Corporation's Auditors.................... 19
4.4 Proceedings Prior to any Action Requiring Adjustment....... 19
4.5 Certificate of Adjustment.................................. 20
<PAGE>
-ii-
4.6 Notice of Special Matters.................................. 20
4.7 No Action after Notice..................................... 20
4.8 Subscription Rights Adjustment Rules....................... 20
ARTICLE V
RIGHTS OF THE CORPORATION AND COVENANTS............................. 22
5.1 Optional Purchases by the Corporation...................... 22
5.2 General Covenants.......................................... 22
5.3 Warrant Agent's Remuneration and Expenses.................. 23
5.4 Securities Qualification Requirements...................... 24
5.5 Performance of Covenants by Warrant Agent.................. 24
ARTICLE VI
ENFORCEMENT......................................................... 24
6.1 Suits by Warrantholders.................................... 24
6.2 Immunity of Shareholders, etc.............................. 25
6.3 Waiver of Default.......................................... 25
ARTICLE VII
MEETINGS OF WARRANTHOLDERS.......................................... 26
7.1 Right to Convene Meetings.................................. 26
7.2 Notice..................................................... 26
7.3 Chairman................................................... 26
7.4 Quorum..................................................... 26
7.5 Power to Adjourn........................................... 27
7.6 Show of Hands.............................................. 27
7.7 Poll and Voting............................................ 27
7.8 Regulations................................................ 28
7.9 Corporation and Warrant Agent May be Represented........... 29
7.10 Powers Exercisable by Extraordinary Resolution............. 29
7.11 Meaning of Extraordinary Resolution........................ 30
7.12 Powers Cumulative.......................................... 31
7.13 Minutes.................................................... 31
7.14 Instruments in Writing..................................... 31
7.15 Binding Effect of Resolutions.............................. 32
7.16 Holdings by Corporation or Subsidiaries Disregarded........ 32
ARTICLE VIII
SUPPLEMENTAL INDENTURES............................................. 32
8.1 Provision for Supplemental Indentures for Certain Purposes. 32
8.2 Successor Corporations..................................... 33
<PAGE>
-iii-
ARTICLE IX
CONCERNING THE WARRANT AGENT........................................ 34
9.1 Legislation................................................ 34
9.2 Rights and Duties of Warrant Agent......................... 34
9.3 Evidence, Experts and Advisers............................. 35
9.4 Documents, Monies, etc. Held by Warrant Agent.............. 36
9.5 Actions by Warrant Agent to Protect Interest............... 36
9.6 Warrant Agent Not Required to Give Security................ 37
9.7 Protection of Warrant Agent................................ 37
9.8 Replacement of Warrant Agent; Successor by Merger.......... 38
9.9 Conflict of Interest....................................... 39
9.10 Acceptance of Obligation................................... 39
9.11 Warrant Agent Not to be Appointed Receiver................. 40
9.12 ........................................................... 40
ARTICLE X
GENERAL............................................................. 40
10.1 Notice to the Corporation and the Warrant Agent............ 40
10.2 Notice to Warrantholders................................... 41
10.3 Evidence of Ownership...................................... 42
10.4 Counterparts............................................... 42
10.5 Satisfaction and Discharge of Indenture.................... 42
10.6 Provisions of Indenture and Warrants for the
Sole Benefit of Parties and Warrantholders............... 43
10.7 Warrants Owned by the Corporation or its
Subsidiaries - Certificate to be Provided................ 43
10.8 Ownership and Transfer of Warrants......................... 43
10.9 Waiver..................................................... 44
10.10 Governing Law.............................................. 44
10.11 Choice of Language......................................... 44
<PAGE>
THIS WARRANT INDENTURE is made as of the 25th day of September, 1996,
BETWEEN:
CHAMPION COMMUNICATION SERVICES, INC.,
a corporation formed under the laws of
the State of Delaware, having an office
in The Woodlands, in the State of Texas
(hereinafter referred to as the "Corporation")
OF THE FIRST PART
- and -
EQUITY TRANSFER SERVICES INC., a company
incorporated under the laws of the
Province of Ontario, having an office in
City of Toronto, Ontario
(hereinafter referred to as the "Warrant Agent")
OF THE SECOND PART.
WHEREAS the Corporation desires to issue an aggregate of up to 811,000
common share purchase warrants, each such common share purchase warrant
exercisable into one Common Share of the Corporation at a purchase price of
$5.00, at any time until the Expiry Time, all upon the terms and subject to the
conditions contained herein;
AND WHEREAS for such purpose the Corporation deems it necessary to, subject
to certain conditions, create common share purchase warrants, to be constituted
and issued in the manner hereinafter set forth;
AND WHEREAS the Corporation is duly authorized to create and issue the
common share purchase warrants to be issued;
AND WHEREAS all necessary acts and deeds have been undertaken and performed
to make the common share purchase warrants, when created as provided in this
Indenture, legal, valid and binding upon the Corporation, with the benefits set
forth in, and subject to the terms of, this Indenture;
<PAGE>
- 2 -
AND WHEREAS the Warrant Agent has agreed to enter into this Indenture and
to hold all rights, interests and benefits contained herein for and on behalf of
those persons who from time to time become holders of common share purchase
warrants issued pursuant to this Indenture;
AND WHEREAS the foregoing recitals are made as representations and
statements of fact by the Corporation and not by the Warrant Agent.
NOW THEREFORE, THIS INDENTURE WITNESSETH that for good and valuable
consideration mutually given and received, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
INTERPRETATION
1.1 Definitions
In this Indenture, including the recitals and schedules hereto and in all
indentures supplemental hereto, the following words and terms shall have the
indicated meanings:
(a) "Applicable Legislation" means such provisions of any statute of
Canada or of a province thereof, and of regulations under any such
statute, relating to trust indentures or to the rights, duties and
obligations of corporations and of warrant agents under trust
indentures, as are from time to time in force and applicable to this
indenture;
(b) "Business Day" means a day other than a Saturday, Sunday or other
statutory or civic holiday in Ontario.
(c) "Common Shares" means fully paid and non-assessable common shares in
the capital of the Corporation, as presently constituted and, except
where the context otherwise requires, includes such Common Shares to
be issued or distributed, as the case may be, in accordance with the
exercise of the Warrants hereunder;
(d) "Corporation's Auditors" means a firm of chartered accountants duly
appointed as auditors of the Corporation;
(e) "Counsel" means a barrister or solicitor or a firm of barristers and
solicitors retained by the Warrant Agent or retained by the
Corporation and acceptable to the Warrant Agent;
(f) "Current Market Price" of the Common Shares at any date means the
price per share equal to the weighted average price at which the
Common Shares have traded on The Toronto Stock Exchange ("TSE") or, if
<PAGE>
- 3 -
the Common Shares are not then traded on the TSE, as quoted by The
Canadian Dealing Network Inc. ("CDN") or, if the Common Shares are not
then quoted on CDN, on such stock exchange on which such shares are
listed as may be selected for such purpose by the directors, in each
case during the period of 30 consecutive Trading Days commencing not
more than 45 Trading Days before such date;
(g) "director" means a director of the Corporation for the time being and,
unless otherwise specified herein, reference to action "by the
directors" means action by the directors of the Corporation as a board
or, whenever duly empowered, action by any committee of such board;
(h) "Exercise Date" means, with respect to any Warrant, the date on which
the Warrant Certificate representing such Warrant is surrendered for
exercise in accordance with the provisions of Article 3;
(i) "Expiry Time" means 5:00 p.m. (Toronto time) on the day which is 18
months after the Qualification Date;
(j) "person" means an individual, body corporate, partnership, trust,
Warrant Agent, executor, administrator, legal representative or any
unincorporated organization;
(k) "Qualification Date" means September 25, 1996;
(l) "Shareholder" means a holder of record of one or more Common Shares;
(m) "this Warrant Indenture", "this Indenture", "herein", "hereby" and
similar expressions mean and refer to this Indenture and any
indenture, deed or instrument supplemental hereto; and the expressions
"Article", "Section", "subsection" and "paragraph" followed by a
number mean and refer to the specified article, section, subsection or
paragraph of this Indenture;
(n) "Trading Day" means, with respect to a stock exchange, a day on which
such exchange or facility is open for the transaction of business and
with respect to the CDN over-the-counter market means a day on which
The Toronto Stock Exchange is open for the transaction of business;
(o) "Warrant Agent" means Equity Transfer Services Inc. or its successors
from time to time in the trust hereby created;
<PAGE>
- 4 -
(p) "Warrant Agency" means the office of the Warrant Agent located at The
Richmond Adelaide Centre, 120 Adelaide Street West, Suite 800,
Toronto, Ontario M5H 3V1, or such other places as may be designated in
accordance with subsection 3.1(c);
(q) "Warrant Certificate" means a certificate, in substantially the form
set forth in Schedule "A", issued to evidence Warrants;
(r) "Warrantholders" or "holders" without reference to Common Shares means
the persons who are registered owners of Warrants;
(s) "Warrants" means up to 811,000 common share purchase warrants of the
Corporation, each entitling the holder to purchase one (1) Common
Share of the Corporation at an exercise price of $5.00 at any time
until the Expiry Time, subject to adjustment as provided herein;
(t) "Warrantholders' Request" means an instrument signed in one or more
counterparts by Warrantholders entitled to acquire in the aggregate
not less than 25% of the aggregate number of Common Shares which could
be acquired pursuant to the exercise of all Warrants then unexercised
and outstanding, requesting that the Warrant Agent take some action or
proceeding specified in such instrument; and
(u) "written order of the Corporation", "written request of the
Corporation", "written consent of the Corporation" and "certificate of
the Corporation" mean, respectively, a written order, request, consent
and certificate signed in the name of the Corporation by its
President, and may consist of one or more instruments so executed.
1.2 Meaning of Outstanding
Every Warrant certified and delivered by the Warrant Agent hereunder shall
be deemed to be outstanding until it shall be cancelled or delivered to the
Warrant Agent for cancellation provided that:
(a) When a new Warrant certificate has been issued in substitution for a
Warrant certificate which has been mutilated, lost, stolen or
destroyed, only one of such Warrant certificates shall be counted for
the purpose of determining the aggregate number of Warrants
outstanding; and
(b) For the purposes of any provision of this Indenture entitling holders
of outstanding Warrants to vote, sign consents, requisitions or other
instruments or take any other action under this Indenture, Warrants
owned, directly or indirectly, legally or equitably, by the
Corporation shall be disregarded, except that:
<PAGE>
- 5 -
(i) for the purpose of determining whether the Warrant Agent shall be
protected in acting and relying on any such vote, consent,
requisition or other instrument or action, only the Warrants
which the Warrant Agent has written notice that they are so owned
shall be so disregarded; and
(ii) Warrants so owned which have been pledged in good faith other
than to the Corporation shall not be so disregarded if the
pledgee shall establish to the satisfaction of the Warrant Agent
that the pledgee's right to vote such Warrants in the pledgee's
discretion is free from control of the Corporation.
1.3 Gender and Number
Unless herein otherwise expressly provided or unless the context otherwise
requires, words importing the singular include the plural and vice versa and
words importing gender include all genders.
1.4 Interpretation not Affected by Headings, etc.
The division of this Indenture into Articles and Sections, the provision of
a table of contents and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Indenture or any provision hereof.
1.5 Day not a Business Day
In the event that any day on or before which any action is required to be
taken under this Indenture is not a Business Day, then such action shall be
required to be taken at or before the requisite time on the next succeeding day
that is a Business Day.
1.6 Time of the Essence
Time shall be of the essence of this Indenture.
1.7 Currency
All currency referred to in this Indenture or the Warrants is in Canadian
dollars, unless otherwise specifically stated.
<PAGE>
- 6 -
ARTICLE II
THE WARRANTS
2.1 Creation and Issue of Warrants
Subject to the provisions hereof, up to Eight Hundred Eleven Thousand
(811,000) Warrants, each entitling the holders thereof to acquire one fully paid
and non-assessable Common Share on the terms and subject to the conditions
herein provided, are hereby created and authorized for issuance, each such
Warrant exercisable at any time before the Expiry Time at a price of $5.00 per
Common Share. The Warrants shall be issued from time to time upon exercise of
the Special Warrants in accordance with the provisions of the Special Warrant
Indenture, subject to compliance with provisions and conditions set forth in
this Indenture and upon the written order of the Corporation.
2.2 Form of Warrants
(a) The Warrant Certificates (including all replacements issued in
accordance with this Indenture) shall be fully registered and shall be
substantially in the form set out in Schedule "A" hereto, dated as of
the date of issue and shall bear such legends and distinguishing
letters and numbers as the Corporation may, with the approval of the
Warrant Agent, prescribe and shall be issuable in any denomination
excluding fractions.
(b) The Warrant Certificates may be engraved, lithographed or printed (the
expression "printed" including for purposes hereof both original
typewritten material as well as mimeographed, mechanically,
photographically, photostatically or electronically reproduced,
typewritten or other written material), or partly in one form and
partly in another, as the Corporation may determine.
2.3 Terms of Warrants
No holder of any Warrant or any other person shall have any right, or by
virtue of such Warrant or this Warrant Indenture, to subscribe for or purchase
any Common Shares in the capital of the Corporation subsequent to the Expiry
Time. After the Expiry Time of the Warrants, all rights under this Warrant
Indenture and any of the Warrants in respect of which the right of subscription
and purchase herein and therein provided for shall not theretofore have been
exercised shall wholly cease and terminate and such Warrants shall be wholly
void and of no value or effect.
2.4 Warrantholder not a Shareholder
Nothing in this Indenture or in the holding of a Warrant or Warrant
Certificate or otherwise, shall, in itself, confer or be construed as conferring
upon a Warrantholder any right or interest whatsoever as a Shareholder or as any
<PAGE>
- 7 -
other shareholder of the Corporation, including, but not limited to, the right
to vote at, to receive notice of, or to attend, meetings of shareholders or any
other proceedings of the Corporation, or the right to receive dividends and
other distributions.
2.5 Warrants to Rank Pari Passu
All Warrants shall rank pari passu, whatever may be the actual date of
creation thereof.
2.6 Signing of Warrant Certificates
The Warrant Certificates shall be signed by any director or officer of the
Corporation. The signature of such persons may be mechanically reproduced by way
of photocopy or facsimile and Warrant Certificates bearing such photocopy or
facsimile signature shall be binding upon the Corporation as if they had been
manually signed by such persons. Notwithstanding that any person whose manual or
facsimile signature appears on any Warrant Certificate as a director or officer
may no longer hold office at the date of such Warrant Certificate or at the date
of certification or delivery thereof, any Warrant Certificate signed as
aforesaid shall, subject to Section 2.7, be valid and binding upon the
Corporation and the holder thereof shall be entitled to the benefits of this
Indenture.
2.7 Certification by the Warrant Agent
(a) No Warrant Certificate shall be issued or, if issued, shall be valid
for any purpose or entitle the holder thereof to the benefit of this
Indenture until it has been certified by manual signature by or on
behalf of the Warrant Agent substantially in the form set out in
Schedule "A" or in such other form approved by the Warrant Agent and
such certification by the Warrant Agent upon any Warrant Certificate
shall be conclusive evidence as against the Corporation that the
Warrant Certificate so certified has been duly issued hereunder and
that the holder thereof is entitled to the benefits of this Indenture.
(b) The certification of the Warrant Agent on Warrant Certificates issued
hereunder shall not be construed as a representation or warranty by
the Warrant Agent as to the validity of this Indenture or the Warrant
Certificates (except the due certification thereof) and the Warrant
Agent shall in no respect be liable or answerable for the use made of
the Warrant Certificates or any of them or of the consideration
therefor except as otherwise specified herein.
<PAGE>
- 8 -
2.8 Issue in Substitution for Warrant Certificates Lost, etc.
(a) If any Warrant Certificate becomes mutilated or is lost, destroyed or
stolen, the Corporation, subject to applicable law, shall issue and
thereupon the Warrant Agent shall certify and deliver, a new Warrant
Certificate of like tenor as the one mutilated, lost, destroyed or
stolen in exchange for and in place of and upon cancellation of such
mutilated Warrant Certificate, or in lieu of and in substitution for
such lost, destroyed or stolen Warrant Certificate, and the
substituted Warrant Certificate shall be in a form approved by the
Warrant Agent and the Warrants evidenced thereby shall be entitled to
the benefits hereof and shall rank equally, in accordance with their
terms, with all other Warrants created or to be created hereunder.
(b) The applicant for the issue of a new Warrant Certificate pursuant to
this Section 2.8 shall bear the cost of the issue thereof and in case
of loss, destruction or theft shall, as a condition precedent to the
issue thereof, furnish to the Corporation and to the Warrant Agent
such evidence of ownership and of the loss, destruction or theft of
the Warrant Certificate so lost, destroyed or stolen as shall be
satisfactory to the Corporation and to the Warrant Agent in their sole
discretion, acting reasonably, and such applicant may also be required
to furnish an indemnity or security in such amount and form as the
Corporation and the Warrant Agent may, in their discretion, acting
reasonably, consider necessary or desirable and shall pay the
reasonable charges of the Corporation and the Warrant Agent in
connection therewith.
2.9 Exchange of Warrant Certificates
(a) Warrant Certificates representing any number of Warrants may, upon
compliance with the reasonable requirements of the Warrant Agent, be
exchanged for another Warrant Certificate or Warrant Certificates
representing the same aggregate number of Warrants as represented by
the Warrant Certificate or Warrant Certificates tendered for exchange.
(b) Warrant Certificates may be exchanged only at the Warrant Agency or at
any other place that is designated by the Corporation, with the
approval of the Warrant Agent. Any Warrant Certificate tendered for
exchange shall be cancelled by the Warrant Agent.
2.10 Charges for Exchange
Except as otherwise provided in this Indenture, the Warrant Agent may
charge to a holder requesting an exchange of a Warrant Certificate or Warrant
Certificates a reasonable sum for each new Warrant Certificate issued in
exchange for an existing Warrant Certificate or Warrant Certificates, and
<PAGE>
- 9 -
payment of such charges and reimbursement of the Warrant Agent or the
Corporation for any and all stamp taxes or governmental or other charges
required to be paid shall be made by such holder as a condition precedent to
such exchange.
2.11 Transfer and Ownership of Warrants
(a) The Warrants may only be transferred on the register maintained at the
office of the Warrant Agent by the holder or its legal representative
or its attorney duly appointed by an instrument in writing in form and
execution satisfactory to the Warrant Agent, acting reasonably, only
upon surrendering to the Warrant Agent the Warrant Certificate or
Warrant Certificates representing the Warrants to be transferred
together with a payment representing any transfer fees charged by the
Warrant Agent and upon compliance with:
(i) the conditions set forth in this Indenture;
(ii) such reasonable requirements as the Warrant Agent and the
Corporation may prescribe; and
(iii)all applicable securities legislation and applicable
requirements of regulatory authorities;
and such transfer shall be duly noted in such register by the Warrant
Agent. Upon compliance with such requirements, the Warrant Agent shall
issue to the transferee one or more Warrant Certificates representing
the Warrants transferred.
(b) The Corporation and the Warrant Agent will deem and treat the
registered owner of any Warrant as the beneficial owner thereof for
all purposes and neither the Corporation nor the Warrant Agent shall
be affected by any notice to the contrary except where the Corporation
or the Warrant Agent is required to take notice by statute or by order
of a court of competent jurisdiction.
(c) Subject to the provisions of this Indenture and applicable law, the
Warrantholders shall be entitled to the rights and privileges
attaching to the Warrants. The issue of Common Shares by the
Corporation upon the exercise of Warrants by any Warrantholder in
accordance with the terms and conditions herein contained shall
discharge all responsibilities of the Corporation and the Warrant
Agent with respect to such Warrants and neither the Corporation nor
the Warrant Agent shall be bound to inquire into the title of any such
holder.
<PAGE>
- 10 -
(d) Except as otherwise provided in this Indenture, the Warrant Agent may
charge to a holder requesting a transfer of a Warrant Certificate or
Certificates a reasonable sum for such transfer or transfers, and
payment of such charges and reimbursement of the Warrant Agent or the
Corporation for any and all stamp taxes or governmental or other
charges required to be paid shall be made by such holder as a
condition precedent to such transfer.
2.12 Assumption by Transferee and Release of Transferor
Upon becoming a Warrantholder in accordance with the provisions of this
Indenture, the transferee thereof shall be deemed to have acknowledged and
agreed to be bound by this Indenture. Upon the registration of such transferee
as the Warrantholder of a Warrant, the transferor shall cease to have any
further rights under this Indenture with respect to such Warrant or the Common
Shares in respect thereof.
2.13 Registration of Warrants
The Corporation hereby appoints the Warrant Agent as registrar of the
Warrants. The Corporation may hereinafter, with the approval of the Dealer and
the Warrant Agent, appoint one or more other or additional registrars of the
Warrants.
The Corporation shall cause to be kept by and at the principal office of
the registrar located at The Richmond Adelaide Centre, 120 Adelaide Street West,
Suite 800, Toronto, Ontario, M5H 3V1, and at such other place or places as the
Corporation (with the approval of the Dealer and the Warrant Agent) may
designate, registers in which shall be entered the names, addresses and telecopy
numbers of the holders of Warrants and particulars of the Warrants held by them,
respectively, including all transfers of such Warrants. No transfer of a Warrant
shall be valid unless made by the registered holder or its executors or
administrators or other legal representatives or its or their attorney duly
appointed by an instrument in writing in form and execution satisfactory to the
registrar, acting reasonably, and unless made in compliance with the provisions
of Section 2.11 and with such reasonable requirements as the registrar and the
Corporation may prescribe and unless such transfer shall have been duly entered
on one of the appropriate registers and/or noted on such Warrant certificate by
the registrar.
The registers referred to in this Section shall at all reasonable times on
a business day be open and available for inspection by the Corporation, by the
Dealer, by the Warrant Agency and by any Warrantholder.
Subject to the provisions of Section 2.11, the holder of a Warrant may at
any time and from time to time have such Warrant transferred at any of the
places at which a register of transfers is kept pursuant to the provisions of
this Section, in accordance with such reasonable regulations as the registrar
and the Corporation may prescribe.
<PAGE>
- 11 -
Except in the case of the register required to be kept at the principal
office of the registrar in the Municipality of Metropolitan Toronto, the
Corporation shall (subject to the Dealer's and the Warrant Agent's approval)
have power at any time to close any branch register. In the event that the
register in any place is closed, notice of the closing shall be given, in the
manner provided in Section 10.2, to the holders of the Warrants.
The registrar shall, when requested so to do by the Corporation and at the
Corporation's expense, furnish the Corporation with a list of names and
addresses of the holders of Warrants showing the number of Warrants held by each
holder.
The Corporation and the Warrant Agent may deem and treat the registered
holder of a Warrant certificate as the absolute owner of the Warrants
represented thereby for all purposes and, save as required by law, neither the
Warrant Agent nor the registrar nor the Corporation shall be charged with notice
of or be bound to see to the execution of any trust, whether express, implied or
constructive, in respect of any Warrant, and, subject to the provisions of
Section 2.11, the registrar and/or the Corporation may transfer any Warrant on
the direction of the holder thereof whether named as trustee or otherwise, as
though that person were the beneficial owner thereof.
ARTICLE III
EXERCISE OF WARRANTS
3.1 Method of Exercise of Warrants
(a) The holder of any Warrant may exercise the right conferred on such
holder to acquire Common Shares (as evidenced by such Warrant) by
surrendering to the Warrant Agent at the Warrant Agency, prior to the
Expiry Time, the Warrant Certificate with a duly completed and
executed exercise form, accompanied by the purchase price for the
Common Shares (at the rate of $5.00 per Common Share) in the capital
of the Corporation subscribed for either in bank draft, money order or
by certified cheque payable to or the order of the Warrant Agent. A
Warrant Certificate with the duly completed and executed exercise form
referred to in this subsection 3.1(a) shall be deemed to be
surrendered only upon personal delivery thereof or, if sent by mail or
other means of transmission, upon actual receipt thereof by the
Warrant Agent at the Warrant Agency.
(b) Any exercise form referred to in subsection 3.1(a) shall be signed by
the Warrantholder and shall specify:
(i) the number of Common Shares which the holder wishes to acquire
(being not more than the number of Common Shares which the holder
is entitled to acquire pursuant to the Warrant Certificate(s)
surrendered);
<PAGE>
- 12 -
(ii) the person or persons in whose name or names such Common Shares
are to be issued;
(iii) the address or addresses of such person or persons; and
(iv) the number of Common Shares to be issued to each such person if
more than one is so specified.
If any of the Common Shares subscribed for are to be issued to a
person or persons other than the Warrantholder, the Warrantholder
shall pay to the Corporation or the Warrant Agent on behalf of the
Corporation, all applicable transfer or similar taxes and the
Corporation shall not be required to issue or deliver certificates
evidencing Common Shares unless or until such Warrantholder has paid
to the Corporation, or the Warrant Agent on behalf of the Corporation,
the amount of such tax or shall have established to the satisfaction
of the Corporation that such tax has been paid or that no tax is due.
(c) In connection with the exchange of Warrant Certificates and the
exercise of Warrants and compliance with such other terms and
conditions hereof as may be required, the Corporation has appointed
the offices of the Warrant Agent located at The Richmond Adelaide
Centre, 120 Adelaide Street West, Suite 800, Toronto, Ontario M5H 3V1
as the agency at which Warrant Certificates may be surrendered for
exchange or at which Warrants may be exercised and the Warrant Agent
has accepted such appointment. The Corporation may, from time to time
with the prior approval of the Warrant Agent, designate alternate or
additional places as the Warrant Agency and shall give notice to the
Warrant Agent of any change of the Warrant Agency.
3.2 Effect of Exercise of Warrants
(a) Upon compliance by the holder of any Warrant Certificate with the
provisions of Section 3.1, and subject to Section 3.3, the Common
Shares to be issued upon the exercise of any Warrants shall be deemed
to have been issued and the person or persons to whom such Common
Shares are to be issued shall be deemed to have become the holder or
holders of record of such Common Shares on the Exercise Date, unless
the transfer register of the Corporation shall be closed on such date,
in which case the Common Shares to be issued upon the exercise of any
Warrants shall be deemed to have been issued and such person or
persons deemed to have become the holder or holders of record of such
Common Shares on the date on which such transfer registers are
reopened.
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(b) Within three Business Days after the Exercise Date of a Warrant as set
forth above, the Corporation shall cause to be mailed to the person or
persons in whose name or names Common Shares have been issued upon the
exercise of Warrants, as specified in the exercise form, at the
address specified in such exercise form or, if so specified in such
exercise form, cause to be delivered to such person or persons at the
Warrant Agency where the Warrant Certificate was surrendered, a
certificate or certificates for the appropriate number of Common
Shares.
3.3 Partial Exercise of Warrants; Fractions
(a) The holder of any Warrants may exercise his right to acquire Common
Shares in part and may thereby acquire a number of Common Shares less
than the aggregate number which such holder is entitled to acquire
pursuant to Warrant Certificate(s) surrendered in connection
therewith, provided that, in no event shall fractional Common Shares
be issued with regard to Warrants exercised. In the event of any
acquisition of a number of Common Shares less than the number which
the holder is entitled to acquire, the holder of the Warrants shall,
upon exercise thereof, be entitled to receive, without charge
therefor, a new Warrant Certificate or Warrant Certificates
representing the balance of the Common Shares which such holder was
entitled to acquire pursuant to the surrendered Warrant Certificate(s)
and which were not then acquired.
(b) Notwithstanding anything contained in this Indenture, including any
adjustment provided for in Article 4, the Corporation shall not be
required, upon the exercise of any Warrants, to issue fractions of
Common Shares or to issue certificates which evidence a fractional
Common Share. In lieu of a fractional Common Share, the Corporation
shall pay to any holder, who would otherwise be entitled to acquire a
fractional interest in a Common Share upon the exercise of Warrants,
within 10 Business Days after the Exercise Date, an amount in lawful
money of Canada equal to the then current market value of such
fractional interest, computed on the basis of the closing price of the
Common Shares, as applicable, on The Toronto Stock Exchange (or if the
Common Shares are not then listed thereon on such other exchange on
which such shares are listed or, if not listed on any exchange, on the
over-the-counter market, or, if not traded on any over the counter
market, as designated by action of the directors) for the Trading Day
immediately prior to the Exercise Date or where there is no sale on
the applicable exchange or market on the Trading Day immediately prior
to the Exercise Date, the average of the last bid and ask prices on
the applicable exchange or market provided that the Corporation shall
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not be required to make any payment, calculated as aforesaid, that is
less than $1.00.
3.4 Accelerated Exercise of Warrants
The Corporation may, if the Common Shares of the Corporation are trading
for at least ten (10) consecutive Trading Days for at least $5.50 per share (as
such calculation may be adjusted pursuant to the terms of this Indenture), upon
thirty (30) days prior written notice (the "Exercise Notice") to Warrant
Holders, require such Warrant Holders to exercise such number of Warrants as the
Corporation, in its sole discretion, shall deem appropriate. Failure by any such
Warrant Holder to exercise such Warrants within thirty (30) days of receipt of
the Exercise Notice will thereafter result in all rights under this Warrant
Indenture and any of the Warrants in respect of which the Exercise Notice has
been received to wholly cease and terminate and such Warrants shall be wholly
void and of no value or effect.
3.5 Cancellation of Surrendered Warrants
All Warrant Certificates surrendered pursuant to Sections 2.8, 2.9, 2.11,
3.1, 3.3 and 5.1 shall be returned to the Warrant Agent for cancellation and,
after the expiry of any period of retention prescribed by law or required by the
policies of the Warrant Agent, destroyed by the Warrant Agent. Upon the request
of the Corporation, the Warrant Agent shall furnish to the Corporation a
destruction certificate identifying the Warrant Certificates so destroyed and
the number of Warrants evidenced thereby.
3.6 Accounting and Recording
(a) The Warrant Agent shall promptly account to the Corporation with
respect to Warrants exercised. All funds from time to time received by
the Warrant Agent, shall be received in trust for, and shall be
segregated and kept apart by the Warrant Agent in trust for, the
Corporation.
(b) The Warrant Agent shall record the particulars of Warrants exercised,
which shall include the date of exercise and the names and addresses
of the persons who become holders of Common Shares on the exercise
thereof. Within five Business Days of each Exercise Date, the Warrant
Agent shall provide such particulars in writing to the Corporation.
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ARTICLE IV
ADJUSTMENT OF NUMBER OF COMMON SHARES
4.1 Adjustment of Number of Common Shares and Exercise Price
(1) Provided that the attributes of the Warrants have not been amended pursuant
to the terms of the Special Warrant Indenture, the exercise price of the
Warrants of $5.00 per share (the "Exercise Price") shall be subject to
adjustment from time to time in the events and in the manner provided as
follows:
(a) If and whenever at any time from the date hereof and prior to the
Expiry Time, the Corporation shall:
(i) issue Common Shares to all or substantially all the holders of
Common Shares as a stock dividend, or
(ii) make a distribution on its outstanding Common Shares payable in
Common Shares or convertible securities,
(any of such events being called herein a "Share Reorganization") then
the Exercise Price shall be adjusted effective immediately after the
record date on which the holders of Common Shares are determined for
the purposes of the Share Reorganization by multiplying the Exercise
Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of Common Shares
outstanding on such record date before giving effect to such Share
Reorganization and the denominator of which shall be the number of
Common Shares outstanding after giving effect to such Share
Reorganization (including, in the case where convertible securities
are distributed, the number of Common Shares that would have been
outstanding had such securities been exchanged for or converted into
Common Shares on such record date).
(b) If and whenever at any time from the date hereof and prior to the
Expiry Time, the Corporation shall issue rights, options or warrants
to all or substantially all of the holders of Common Shares under
which such holders are entitled, during a period expiring not more
than 45 days after the record date for such issue (the "Rights
Period"), to subscribe for, or purchase Common Shares or convertible
securities at a price per share to the holder (or at an exchange or
conversion price per share at the date of issue of such securities to
the holder in the case of Convertible Securities) at less than 95% of
the then Current Market Price of the Common Shares on such record date
(any of such events being herein called a "Rights Offering") then the
Exercise Price shall be adjusted effective immediately after the end
of the Rights Period to a price determined by multiplying the Exercise
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Price in effect immediately prior to the end of the Rights Period by a
fraction:
(i) the numerator of which shall be the aggregate of:
(A) the number of Common Shares outstanding as of the record
date for the Rights Offering; and
(B) a number determined by dividing: (1) either of (a) the
product of the number of Common Shares issued or subscribed
during the Rights Period upon exercise of the rights,
warrants, or options under the Rights Offering and the price
at which such Common Shares are offered, or, as the case may
be, (b) the product of the exchange or conversion price of
such securities offered and the number of Common Shares for
or into which the securities so offered pursuant to the
Rights Offering have been exchanged or converted during the
Rights Period, by (2) the Current Market Price of the Common
Shares on the record date for the Rights Offering; and
(ii) the denominator of which shall be the number of Common Shares
outstanding after giving effect to the Rights Offering (including
the number of Common Shares actually issued or subscribed for
during the Rights Period upon exercise of the rights, warrants or
options under the Rights Offering).
Any Warrantholder who shall have exercised its right to purchase
Common Shares in accordance with section 3.1 during the period
beginning immediately after the record date for a Rights Offering and
ending on the last day of the Rights Period therefor shall receive
from the Corporation, no later than 60 days after the end of the
Rights Period, a cash payment equal to the difference, if any, between
the Exercise Price in effect immediately prior to the end of such
Rights Period and the Exercise Price as adjusted for such Rights
Offering pursuant to this subsection (2) multiplied by the number of
Common Shares purchased upon exercise by such Warrantholder during
such period. Such payment shall be made by cheque mailed to the
address to which the Common Shares purchased upon such exercise are to
be sent.
(c) If and whenever at any time from the date hereof and prior to the
Expiry Time, the Corporation shall issue or distribute to all or
substantially all holders of Common Shares, (i) shares of the
Corporation of any class other than Common Shares, (ii) rights,
options or warrants to acquire Common Shares or convertible securities
or property or other assets of the Corporation, (iii) evidences of
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indebtedness, or (iv) any property or other assets, and if such
issuance or distribution does not constitute dividends in the ordinary
course, a Share Reorganization or a Rights Offering (any of such non-
excluded events being called herein a "Special Distribution"), the
Exercise Price shall be adjusted effective immediately after the
record date at which the holders of Common Shares are determined for
purposes of the Special Distribution to a price determined by
multiplying the Exercise Price in effect on the record date for the
Special Distribution by a fraction:
(i) the numerator of which shall be the difference between:
(A) the product of the number of Common Shares outstanding on
such record date and the Current Market Price of the Common
Shares on such record date; and
(B) the fair market value, as determined by the directors of the
Corporation (whose determination shall be conclusive), to
the holders of Common Shares of the shares, rights, options,
warrants, evidences of indebtedness or property or other
assets to be issued or distributed in the Special
Distribution; and
(ii) the denominator of which shall be the number of Common Shares
outstanding on such record date multiplied by the Current Market
Price of the Common Shares on such record date.
(2) Provided that the attributes of the Warrants have not been amended pursuant
to the terms of the Special Warrant Indenture, the acquisition rights in effect
at any date attaching to the Warrants shall be subject to adjustment from time
to time as follows:
(a) if and whenever at any time from the date hereof and prior to the
Expiry Time of the Warrants the Corporation shall:
(i) subdivide, redivide or change its outstanding Common Shares into
a greater number of shares; or
(ii) reduce, combine or consolidate its outstanding Common Shares into
a smaller number of shares;
then in each such event the number of Common Shares obtainable under
each Warrant shall be adjusted immediately after the effective date of
such subdivision, redivision, change, reduction, combination or
consolidation, by multiplying the number of Common Shares theretofore
obtainable upon the exercise of such Warrant by a fraction the
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numerator of which shall be the total number of Common Shares
outstanding immediately after such date and the denominator of which
shall be the total number of Common Shares outstanding immediately
prior to such date. Such adjustment shall be made successively
whenever any event referred to in this subsection 4.1 (2) shall occur;
(b) if and whenever at any time from the date hereof and prior to the
expiry time of the Warrants, there is a reclassification of the Common
Shares or a capital reorganization of the Corporation other than as
described in subsection 4.1(2)(a) or an amalgamation, arrangement or
merger of the Corporation with or into any other body corporate,
trust, partnership or other entity, or a sale or conveyance of the
property and assets of the Corporation as an entirety or substantially
as an entirety to any other body corporate, trust, partnership or
other entity, any Warrantholder who has not exercised its right of
acquisition prior to the effective date of such reclassification,
reorganization, amalgamation, arrangement, merger, sale or conveyance
shall, upon the exercise of such right thereafter, be entitled to
receive and shall accept, in lieu of the number of Common Shares then
sought to be acquired by it, the number of shares or other securities
or property of the Corporation or of the body corporate, trust,
partnership or other entity resulting from such merger, amalgamation
or to which such sale or conveyance may be made, as the case may be,
that such Warrantholder would have been entitled to receive on such
reclassification, reorganization, amalgamation, arrangement, merger,
sale or conveyance, if, on the record date or the effective date
thereof, as the case may be, the Warrantholder had been the registered
holder of the number of Common Shares sought to be acquired by it. If
determined appropriate by the Warrant Agent to give effect to or to
evidence the provisions of this subsection 4.1(2), the Corporation,
its successor, or such purchasing body corporate, partnership, trust
or other entity, as the case may be, shall, prior to or
contemporaneously with any such reclassification, reorganization,
amalgamation, arrangement, merger, sale or conveyance, enter into an
indenture which shall provide, to the extent possible, for the
application of the provisions set forth in this Indenture with respect
to the rights and interests thereafter of the Warrantholders to the
end that the provisions set forth in this Indenture shall thereafter
correspondingly be made applicable, as nearly as may reasonably be
possible, with respect to any shares, other securities or property to
which a Warrantholder is entitled on the exercise of its acquisition
rights thereafter. Any indenture entered into between the Corporation
and the Warrant Agent pursuant to the provisions of this subsection
4.1(2) shall be a supplemental indenture entered into pursuant to the
provisions of Article 8. Any indenture entered into between the
Corporation, any successor to the Corporation or such purchasing body
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corporate, partnership, trust or other entity and the Warrant Agent
shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided in this Section 4.1 and
which shall apply to successive reclassifications, reorganizations,
amalgamations, arrangements, mergers, sales or conveyances; and
(c) the adjustments provided for in this Article 4 in the number of Common
Shares, classes of securities which are to be received on the exercise
of Warrants and the Exercise Price are cumulative. After any
adjustment pursuant to this Section 4.1, the term "Common Shares"
where used in this Indenture shall be interpreted to mean securities
of any class or classes which, as a result of such adjustment and all
prior adjustments pursuant to this Section 4.1, the Warrantholder is
entitled to receive upon the exercise of its Warrant, and the number
of Common Shares indicated by any exercise made pursuant to a Warrant
shall be interpreted to mean the number of Common Shares or other
property or securities a Warrantholder is entitled to receive, as a
result of such adjustment and all prior adjustments pursuant to this
Section 4.1, upon the full exercise of a Warrant.
4.2 Entitlement to Shares on Exercise of Warrant
All shares of any class or other securities which a Warrantholder is at the
time in question entitled to receive upon the exercise of its Warrants, whether
or not as a result of adjustments made pursuant to this Article 4, shall, for
the purposes of the interpretation of this Indenture, be deemed to be shares
which such Warrantholder is entitled to acquire pursuant to such Warrant.
4.3 Determination by Corporation's Auditors
In the event of any question arising with respect to the adjustments
provided for in this Article 4, such question shall be conclusively determined
by the Corporation's Auditors, who shall have access to all necessary records of
the Corporation, and such determination shall be binding upon the Corporation,
the Warrant Agent, all Warrantholders and all other persons interested therein.
4.4 Proceedings Prior to any Action Requiring Adjustment
As a condition precedent to the taking of any action which would require an
adjustment in any of the acquisition rights pursuant to any of the Warrants,
including the number of Common Shares which are to be received upon the exercise
thereof, the Corporation shall take any corporate action which may, in the
opinion of Counsel to the Corporation, be necessary to ensure that the
Corporation has sufficient authorized capital and to ensure that the Corporation
may validly and legally issue, as fully paid and non-assessable shares, all of
the shares which the holders of such Warrants are entitled to receive on the
full exercise thereof in accordance with the provisions of this Indenture.
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4.5 Certificate of Adjustment
The Corporation shall, immediately after the occurrence of any event which
requires an adjustment or readjustment as provided in this Article 4, deliver a
certificate of the Corporation to the Warrant Agent and to the holders
specifying the nature of the event requiring such adjustment or readjustment and
the amount of the adjustment or readjustment necessitated thereby and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based, which certificate shall be supported by a certificate
of the Corporation's Auditors verifying such calculation, and the Warrant Agent
may act and rely absolutely on the certificate of the Corporation and the
Corporation's Auditors.
4.6 Notice of Special Matters
The Corporation covenants with the Warrant Agent that, so long as any
Warrant remains outstanding, it will give notice to the Warrant Agent and to the
Warrantholders of its intention to fix the record date for the issuance of
rights, options (other than pursuant to any stock option or stock purchase plan
in force from time to time for officers, directors, employees or consultants of
the Corporation) or warrants (other than the Warrants) to all or substantially
all of the holders of its outstanding Common Shares. Such notice shall specify
the particulars of such event and the record date for such event, provided that
the Corporation shall only be required to specify in the notice such particulars
of the event as shall have been fixed and determined on the date on which the
notice is given. The notice shall be given in each case not less than 14 days
prior to such applicable record date.
4.7 No Action after Notice
The Corporation covenants with the Warrant Agent that it will not close its
transfer books or take any other corporate action which might deprive the holder
of a Warrant of the opportunity to exercise its right of acquisition pursuant
thereto during the period of fourteen (14) days after the giving of the
certificate or notices referred to in Sections 4.5 and 4.6.
4.8 Subscription Rights Adjustment Rules
The following rules and procedures shall be applicable to adjustments made
pursuant to Section 4.1 hereof:
(a) No adjustment in the Exercise Price shall be required unless such
adjustment would result in a change of at least 1% in the Exercise
Price then in effect and no adjustment shall be made in the number of
Common Shares purchasable on exercise of a Warrant unless it would
result in a change of at least one one-hundredth of a share, provided,
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however, that any adjustments which, except for the provisions of this
subsection (2) would otherwise have been required to be made, shall be
carried forward and taken into account in any subsequent adjustment.
(b) No adjustment in the Exercise Price shall be made pursuant to section
4.1 in respect of the issue of Common Shares pursuant to the exercise
of any Warrants under the terms of this Indenture or in respect of the
issue from time to time as a dividend in the ordinary course of Common
Shares to holders of Common Shares who exercise an option or election
to receive substantially equivalent dividends in Common Shares in lieu
of receiving cash dividends, and any such issue shall be deemed not to
be a Share Reorganization or a Special Distribution.
(c) No adjustment in the Exercise Price or the number of Common Shares
purchasable on exercise shall be made in respect of any event
described in section 4.1 (other than clauses (c) of subsection (1)
thereof) if Warrantholders are entitled to participate in such event
on the same terms mutatis mutandis as if Warrantholders had exercised
their Warrants prior to or on the effective date or record date of
such event.
(d) If the Corporation shall set a record date to determine the holders of
Common Shares for the purpose of entitling them to receive any
dividend or distribution or any subscription or purchase rights and
shall, thereafter and before the distribution to such shareholders of
any such dividend, distribution or subscription or purchase rights,
legally abandon its plan to pay or deliver such dividend, distribution
or subscription or purchase rights, then no adjustment in the Exercise
Price of the number of Common Shares purchasable upon exercise of any
Warrant shall be required by reason of the setting of such record
date.
(e) Subject to the rules of this section 4.8, if a dispute shall at any
time arise with respect to the operation of the provisions of section
4.1, such dispute shall be exclusively determined by the Corporation's
Auditors or, if they are unable or unwilling to act, by such other
nationally recognized firm of independent chartered accountants as may
be selected by the directors and any such determination shall be
binding upon the Corporation and the Warrant Agent and all
Warrantholders and Shareholders of the Corporation.
(f) In case the Corporation after the date hereof shall take any action
affecting the Common Shares, other than an action described in Section
4.1, which in the opinion of the directors would materially affect the
rights of Warrantholders, the Exercise Price and/or the number of
Common Shares purchasable upon exercise shall, subject to regulatory
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approval, be adjusted in such manner, if any, and at such time and by
such action by the directors, in their sole discretion, as they may
determine to be equitable in the circumstances. Failure of the taking
of action by the directors so as to provide for an adjustment prior to
the effective date of any action by the Corporation affecting the
Common Shares shall be conclusive evidence that the directors have
determined that it is equitable to make no adjustment in the
circumstances.
In any case where the application of section 4.1 results in a decrease of
the Exercise Price taking effect immediately after the record date for a
specific event, if any Warrants are exercised after that record date and prior
to completion of the event, the Corporation may postpone the issuance to the
holder of the Warrants of the Common Shares to which it is entitled by reason of
the decrease of the Exercise Price but such Common Shares shall be so issued and
delivered to that holder upon completion of that event, with the number of such
Common Shares calculated on the basis of the Exercise Price on the Exercise Date
adjusted for completion of that event, and the Corporation shall within the time
period specified in subsection 1(a) of Section 4.1 deliver to the person(s) in
whose name(s) the Common Shares are to be issued an appropriate instrument
evidencing its or their right to receive such Common Shares.
ARTICLE V
RIGHTS OF THE CORPORATION AND COVENANTS
5.1 Optional Purchases by the Corporation
Subject to compliance with securities legislation and the receipt of any
necessary approvals of applicable regulatory authorities, the Corporation may
from time to time purchase, by private contract or otherwise, any of the
Warrants. Any such purchase shall be made at the lowest price or prices at
which, in the opinion of the directors of the Corporation, such Warrants are
then obtainable, plus reasonable costs of purchase, and may be made in such
manner, from such persons and on such other terms as the Corporation, in its
sole discretion, may determine. Any Warrant Certificates representing the
Warrants purchased pursuant to this Section 5.1 shall forthwith be delivered to
and cancelled by the Warrant Agent. No Warrants shall be issued in replacement
thereof.
5.2 General Covenants
The Corporation covenants with the Warrant Agent that so long as any
Warrants remain outstanding:
(a) it will ensure that the authorized capital of the Corporation is
sufficient for the purpose of enabling it to satisfy its obligations
to issue Common Shares upon the exercise of the Warrants;
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(b) it will cause the Common Shares and the certificates representing the
Common Shares from time to time acquired pursuant to the exercise of
the Warrants to be duly issued and delivered in accordance with the
Warrant Certificates and the terms hereof;
(c) all Common Shares which shall be issued upon exercise of the right to
acquire provided for herein and in the Warrant Certificates shall be
fully paid and non-assessable;
(d) it will use its best efforts to maintain its corporate existence and
carry on its business in the ordinary course and conduct its business
in a proper, efficient and businesslike manner and in accordance with
good business practice; will keep or cause to be kept proper books of
account in accordance with generally accepted accounting practice; and
will, if and whenever required in writing by the Warrant Agent, file
with the Warrant Agent copies of all annual financial statements and
other materials of the Corporation furnished to its shareholders;
(e) it will use its best efforts to ensure that all Common Shares of the
Corporation outstanding or issuable from time to time continue to be
or are quoted for trading on The Canadian Dealing Network Inc. and at
such time as its Common Shares are listed and posted for trading on
The Toronto Stock Exchange, will use its best efforts to ensure that
all Common Shares outstanding or issuable from time to time continue
to be so listed and posted for trading on such exchange;
(f) it will use its best efforts to make all requisite filings under
applicable Canadian securities legislation including those necessary
to remain a reporting issuer not in default in such jurisdictions in
which it is presently or in which it becomes a reporting issuer; and
(g) generally, it will well and truly perform and carry out all of the
acts or things to be done by it as provided in this Indenture.
5.3 Warrant Agent's Remuneration and Expenses
The Corporation covenants that it will pay to the Warrant Agent from time
to time reasonable remuneration for its services hereunder and will pay or
reimburse the Warrant Agent upon its request, for all reasonable expenses,
disbursements and advances incurred or made by the Warrant Agent in the
administration or execution of the trusts hereby created (including the
reasonable compensation and the disbursements of its counsel and all other
advisers and assistants not regularly in its employ), both before any default
hereunder and thereafter until all duties of the Warrant Agent hereunder shall
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be finally and fully performed, except any such expense, disbursement or advance
as may arise out of or result from the Warrant Agent's negligence, wilful
misconduct or bad faith.
5.4 Securities Qualification Requirements
(a) If, in the opinion of counsel, any prospectus or registration
statement is required to be filed with or any permission is required
to be obtained from any governmental authority in Canada or any other
step is required under any federal or provincial law of Canada before
any Common Shares which a Warrantholder is entitled to purchase
pursuant to his Warrant may properly and legally be issued upon due
exercise thereof, the Corporation covenants that it will take such
action so required.
(b) The Corporation will give notice of the issue of Common Shares
pursuant to the exercise of Warrants, if required, and in such detail
as may be required, to each securities commission or similar
regulatory authority in each jurisdiction in Canada in which there is
legislation or regulation permitting or requiring the giving of any
such notice in order that such issue of Common Shares and the
subsequent disposition of the Common Shares so issued will not be
subject to the prospectus qualification requirements of such
legislation or regulation.
5.5 Performance of Covenants by Warrant Agent
If the Corporation shall fail to perform any of its covenants contained in
this Indenture, the Warrant Agent may notify the Warrantholders of such failure
on the part of the Corporation or may itself perform any of the covenants
capable of being performed by it but, subject to Section 9.2, shall be under no
obligation to perform such covenants or to notify the Warrantholders of such
performance by it. All sums expended or advanced by the Warrant Agent in so
doing shall be repayable as provided in Section 5.3. No such performance,
expenditure or advance by the Warrant Agent shall relieve the Corporation of any
default hereunder or of its continuing obligations under the covenants contained
in this Indenture.
ARTICLE VI
ENFORCEMENT
6.1 Suits by Warrantholders
All or any of the rights conferred upon any Warrantholder by any of the
terms of the Warrant Certificates or of this Indenture, or of both, may, subject
to Section 7.10 of this Indenture, be enforced by the Warrantholder by
appropriate proceedings, but without prejudice to the right which is hereby
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conferred upon the Warrant Agent to proceed in its own name to enforce each and
all of the provisions herein contained for the benefit of the Warrantholders.
6.2 Immunity of Shareholders, etc.
(a) The Warrant Agent and, by the acceptance of the Warrant Certificates
and as part of the consideration for the issue of the Warrants, the
Warrantholders, hereby, waive and release any right, cause of action
or remedy now or hereafter existing in any jurisdiction against any
incorporator or any past, present or future shareholder, director,
officer, employee or agent of the Corporation or any successor
Corporation (as defined in Section 8.2) on any covenant, agreement,
representation or warranty by the Corporation contained in this
Indenture or in the Warrant Certificates.
(b) The obligations hereunder are not personally binding upon, nor shall
resort hereunder be had to, the private property of any of the past,
present or future directors or shareholders of the Corporation or any
successor Corporation or any of the past, present or future officers,
employees or agents of the Corporation or any successor Corporation,
but only the property of the Corporation or any successor Corporation
shall be bound in respect hereof.
6.3 Waiver of Default
Upon the happening of any default hereunder:
(a) the holders of not less than sixty-six percent (66%) of the Warrants
then outstanding shall have the power, by notice in writing, to
instruct the Warrant Agent to waive any default hereunder and the
Warrant Agent shall upon receipt of any such notice waive the default
upon such terms and conditions as shall be prescribed in such notice;
or
(b) the Warrant Agent shall have power to waive any default hereunder upon
such terms and conditions as the Warrant Agent may deem advisable, if,
in the Warrant Agent's opinion, the same shall have been cured or
adequate provision made therefor;
provided that no delay or omission of the Warrant Agent or of the Warrantholders
to exercise any right or power accruing upon any default shall impair any such
right or power or shall be construed to be a waiver of any such default or
acquiescence therein and provided further that no act or omission either of the
Warrant Agent or of the Warrantholders in the premises shall extend to or be
taken in any manner whatsoever to affect any subsequent default hereunder or the
rights resulting therefrom.
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ARTICLE VII
MEETINGS OF WARRANTHOLDERS
7.1 Right to Convene Meetings
The Warrant Agent may at any time, from time to time, and shall on receipt
of a written request of the Corporation or of a Warrantholders' Request and upon
being indemnified and funded to its reasonable satisfaction by the Corporation
or by the Warrantholders who signed such Warrantholders' Request against the
costs which may be incurred in connection with the calling and holding of such
meeting, call and convene a meeting of the Warrantholders. In the event of the
Warrant Agent failing to so call a meeting within seven days after receipt of
such written request of the Corporation or such Warrantholders' Request and
indemnity and funding given as aforesaid, the Corporation or the Warrantholders
who signed such Warrantholders' Request, as the case may be, may call and
convene such meeting. Every such meeting shall be held in the City of Toronto or
at such other place as may be approved or determined by the Warrant Agent.
7.2 Notice
At least 30 days' prior notice of any meeting of Warrantholders shall be
given to the Warrantholders in the manner provided for in Section 10.2 and a
copy of such notice shall be sent by mail to the Warrant Agent (unless the
meeting has been called by the Warrant Agent) and to the Corporation (unless the
meeting has been called by the Corporation). Such notice shall state the time
when and the place where the meeting is to be held, shall state briefly the
general nature of the business to be transacted thereat and shall contain such
information as is reasonably necessary to enable the Warrantholders to make a
reasoned decision on the matter or matters to be brought before the meeting, but
it shall not be necessary for any such notice to set out the terms of any
resolution to be proposed or any of the provisions of this Article 7.
7.3 Chairman
An individual (who need not be a Warrantholder) designated in writing by
the Warrant Agent shall be chairman of any meeting of Warrantholders and if no
individual is so designated, or if the individual so designated is not present
within 15 minutes from the time fixed for the holding of the meeting, the
Warrantholders present in person or by proxy shall choose some individual
present to be chairman.
7.4 Quorum
Subject to the provisions of Section 7.11, at any meeting of the
Warrantholders a quorum shall consist of Warrantholders present in person or by
proxy and holding at least 10% of the aggregate number of the then outstanding
Special Warrants, provided that at least two persons entitled to vote thereat
are personally present. If a quorum of the Warrantholders shall not be present
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within 30 minutes from the time fixed for holding any meeting, the meeting, if
summoned by the Warrantholders or on a Warrantholders' Request, shall be
dissolved; but in any other case the meeting shall be adjourned to the same day
in the next week (unless such day is not a Business Day, in which case it shall
be adjourned to the next following Business Day) at the same time and place and
no notice of the adjournment need be given. Any business may be brought before
or dealt with at an adjourned meeting which might have been dealt with at the
original meeting in accordance with the notice calling the same. No business
shall be transacted at any meeting of Warrantholders unless a quorum is present
at the commencement of the meeting. At the adjourned meeting any one
Warrantholder present in person or by proxy shall form a quorum and may transact
the business for which the meeting was originally convened, notwithstanding that
the Warrantholder or Warrantholders, as the case may be, present may not hold at
least 10% of the aggregate number of the then outstanding Warrants.
7.5 Power to Adjourn
The chairman of any meeting of Warrantholders at which a quorum of the
Warrantholders is present may, with the consent of the meeting, adjourn any such
meeting, and no notice of such adjournment need be given except such notice, if
any, as the meeting may prescribe.
7.6 Show of Hands
Every question submitted to a meeting of Warrantholders shall be decided in
the first place by a majority of the votes given on a show of hands except that
votes on an extraordinary resolution shall be given in the manner hereinafter
provided. At any such meeting, unless a poll is duly demanded as herein
provided, a declaration by the chairman that a resolution has been carried or
carried unanimously or by a particular majority or lost or not carried by a
particular majority shall be conclusive evidence of the fact.
7.7 Poll and Voting
(a) On every extraordinary resolution, and on any other question submitted
to a meeting of Warrantholders and after a vote by show of hands when
demanded by the chairman or by one or more of the Warrantholders
acting in person or by proxy and holding at least 5% of the aggregate
number of Warrants then outstanding, a poll shall be taken in such
manner as the chairman shall direct. Questions other than those
required to be determined by extraordinary resolution shall be decided
by a majority of the votes cast on the poll.
(b) On a show of hands, every person who is present and entitled to vote,
whether as a Warrantholder or as proxy for one or more absent
Warrantholders, or both, shall have one vote. On a poll, each
Warrantholder present in person or represented by a proxy duly
appointed by instrument in writing shall be entitled to one vote in
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respect of each Warrant then held or represented by him. A proxy need
not be a Warrantholder. The chairman of any meeting shall be entitled,
both on a show of hands and on a poll, to vote in respect of the
Warrants, if any, held or represented by him.
7.8 Regulations
The Warrant Agent, or the Corporation with the approval of the Warrant
Agent, may from time to time make and from time to time vary such regulations as
it shall think fit for:
(a) the setting of the record date for a meeting of Warrantholders for the
purpose of determining Warrantholders entitled to receive notice of
and to vote at the meeting;
(b) the issue of voting certificates by any bank, trust company or other
depositary satisfactory to the Warrant Agent stating that the Warrant
Certificates specified therein have been deposited with it by a named
person and will remain on deposit until after the meeting, which
voting certificate shall entitle the persons named therein to be
present and vote at any such meeting and at any adjournment thereof or
to appoint a proxy or proxies to represent them and vote for them at
any such meeting and at any adjournment thereof in the same manner and
with the same effect as though the persons so named in such voting
certificates were the actual bearers of the Warrant Certificates
specified therein;
(c) the deposit of voting certificates and instruments appointing proxies
at such place and time as the Warrant Agent, the Corporation or the
Warrantholders convening the meeting, as the case may be, may in the
notice convening the meeting direct;
(d) the deposit of voting certificates and instruments appointing proxies
at some approved place or places other than the place at which the
meeting is to be held and enabling particulars of such instruments
appointing proxies to be mailed, cabled or telegraphed or sent by
other means of prepaid, transmitted, recorded communication before the
meeting to the Corporation or to the Warrant Agent at the place where
the meeting is to be held and for the voting of proxies so deposited
as though the instruments themselves were produced at the meeting;
(e) the form of the instrument of proxy; and
(f) generally for the calling of meetings of Warrantholders and the
conduct of business thereat.
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Any regulations so made shall be binding and effective and the votes given in
accordance therewith shall be valid and shall be counted. Except as such
regulations may provide, the only persons who shall be recognized at any meeting
as a Warrantholder, or be entitled to vote or be present at the meeting in
respect thereof (subject to Section 7.9), shall be Warrantholders or their
counsel, or proxies of Warrantholders.
7.9 Corporation and Warrant Agent May be Represented
The Corporation and the Warrant Agent, by their respective directors,
officers, and employees and the counsel for the Corporation and for the Warrant
Agent may attend any meeting of the Warrantholders, but shall have no vote as
such, unless in their capacity as a Warrantholder.
7.10 Powers Exercisable by Extraordinary Resolution
In addition to all other powers conferred upon them by any other provisions
of this Indenture or by law, the Warrantholders at a meeting shall, subject to
the provisions of Section 7.11, have the power, exercisable from time to time by
extraordinary resolution:
(a) to agree to any modification, abrogation, alteration, compromise or
arrangement of the rights of Warrantholders or the Warrant Agent in
its capacity as Warrant Agent hereunder or on behalf of the
Warrantholders against the Corporation whether such rights arise under
this Indenture or the Warrant Certificates or otherwise;
(b) to amend, alter or repeal any extraordinary resolution previously
passed or sanctioned by the Warrantholders;
(c) to direct or to authorize the Warrant Agent, subject to funding and
indemnity, to enforce any of the covenants on the part of the
Corporation contained in this Indenture or the Warrant Certificates or
to enforce any of the rights of the Warrantholders in any manner
specified in such extraordinary resolution or to refrain from
enforcing any such covenant or right;
(d) to waive, and to direct the Warrant Agent to waive, any default on the
part of the Corporation in complying with any provisions of this
Indenture or the Warrant Certificates either unconditionally or upon
any conditions specified in such extraordinary resolution;
(e) to restrain any Warrantholder from taking or instituting any suit,
action or proceeding against the Corporation for the enforcement of
any of the covenants on the part of the Corporation contained in this
Indenture or the Warrant Certificates or to enforce any of the rights
of the Warrantholders;
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(f) to direct any Warrantholder who, as such, has brought any suit, action
or proceeding to stay or to discontinue or otherwise to deal with the
same upon payment of the costs, charges and expenses reasonably and
properly incurred by such Warrantholder in connection therewith;
(g) to assent to any change in or omission from the provisions contained
in the Warrant Certificates or this Indenture, including any amendment
to the Expiry Time, or any ancillary or supplemental instrument which
may be agreed to by the Corporation, and to authorize the Warrant
Agent to concur in and execute any ancillary or supplemental indenture
embodying the change or omission;
(h) to remove the Warrant Agent or its successor in office and to appoint
a new Warrant Agent or Warrant Agents to take the place of the Warrant
Agent so removed;
(i) to assent to any compromise or arrangement with any creditor or
creditors or any class or classes of creditors, whether secured or
otherwise, and with holders of any shares or other securities of the
Corporation; and
(j) to amend, alter or repeal any extraordinary resolution previously
passed by the Warrantholders.
7.11 Meaning of Extraordinary Resolution
(a) The expression "extraordinary resolution" when used in this Indenture
means, subject to as hereinafter provided in this Section 7.11 and in
Section 7.14, a resolution proposed at a meeting of Warrantholders
duly convened for that purpose and held in accordance with the
provisions of this Article 7, at which there are present in person or
by proxy Warrantholders holding at least 25% of the aggregate number
of the then outstanding Warrants and passed by the affirmative votes
of Warrantholders holding not less than 66 2/3% of the aggregate
number of the then outstanding Warrants represented at the meeting and
voted on the poll upon such resolution.
(b) If, at the meeting of Warrantholders at which an extraordinary
resolution is to be considered, Warrantholders holding at least 25% of
the aggregate number of the then outstanding Warrants are not present
in person or by proxy within 30 minutes after the time appointed for
the meeting, then the meeting, if convened by Warrantholders or on a
Warrantholders' Request, shall be dissolved, but in any other case it
shall stand adjourned to such day, being not less than 15 or more than
60 days later, and to such place and time as may be determined by the
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chairman. Not less than 10 days' prior notice shall be given of the
time and place of such adjourned meeting in the manner provided for in
Section 10.2. Such notice shall state that at the adjourned meeting
the Warrantholders present in person or by proxy shall form a quorum
but it shall not be necessary to set forth the purposes for which the
meeting was originally called or any other particulars. At the
adjourned meeting the Warrantholders present in person or by proxy
shall form a quorum and may transact the business for which the
meeting was originally convened and a resolution proposed at such
adjourned meeting and passed by the requisite vote as provided in
subsection 7.11(a) shall be an "extraordinary resolution" within the
meaning of this Indenture notwithstanding that Warrantholders holding
at least 25% of the aggregate number of the then outstanding Warrants
are not present in person or by proxy at such adjourned meeting.
(c) Votes on an extraordinary resolution shall always be given on a poll
and no demand for a poll on an extraordinary resolution shall be
necessary.
7.12 Powers Cumulative
Any one or more of the powers or any combination of the powers in this
Indenture stated to be exercisable by the Warrantholders by extraordinary
resolution or otherwise may be exercised from time to time and the exercise of
any one or more of such powers or any combination of powers from time to time
shall not be deemed to exhaust the right of the Warrantholders to exercise such
power or powers or combination of powers then or thereafter from time to time.
7.13 Minutes
Minutes of all resolutions and proceedings at every meeting of
Warrantholders shall be made and duly entered in books to be provided from time
to time for that purpose by the Warrant Agent at the expense of the Corporation,
and any such minutes as aforesaid, if signed by the chairman or the secretary of
the meeting at which such resolutions were passed or proceedings taken, shall be
prima facie evidence of the matters therein stated and, until the contrary is
proved, every such meeting in respect of the proceedings of which minutes shall
have been made shall be deemed to have been duly convened and held, and all
resolutions passed thereat or proceedings taken shall be deemed to have been
duly passed and taken.
7.14 Instruments in Writing
All actions which may be taken and all powers that may be exercised by the
Warrantholders at a meeting held as provided in this Article 7 may also be taken
and exercised by Warrantholders holding at least 66 2/3% of the aggregate number
of the then outstanding Warrants by an instrument in writing signed in one or
more counterparts by such Warrantholders in person or by attorney duly appointed
<PAGE>
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in writing, and the expression "extraordinary resolution" when used in this
Indenture shall include an instrument so signed.
7.15 Binding Effect of Resolutions
Every resolution and every extraordinary resolution passed in accordance
with the provisions of this Article 7 at a meeting of Warrantholders shall be
binding upon all of the Warrantholders, whether present at or absent from such
meeting, and every instrument in writing signed by Warrantholders in accordance
with Section 7.14 shall be binding upon all of the Warrantholders, whether
signatories thereto or not, and each and every Warrantholder and the Warrant
Agent (subject to the provisions for indemnity herein contained) shall be bound
to give effect accordingly to every such resolution and instrument in writing.
7.16 Holdings by Corporation or Subsidiaries Disregarded
In determining whether Warrantholders holding the required number of
Warrants are present at a meeting of Warrantholders for the purpose of
determining a quorum or have concurred in any consent, waiver, extraordinary
resolution, Warrantholders' Request or other action under this Indenture,
Warrants owned legally or beneficially by the Corporation or any Subsidiary of
the Corporation shall be disregarded in accordance with the provisions of
Section 10.7.
ARTICLE VIII
SUPPLEMENTAL INDENTURES
8.1 Provision for Supplemental Indentures for Certain Purposes
From time to time the Corporation (when authorized by action of the
directors) and the Warrant Agent, may, subject to the provisions hereof, and
they shall, when so directed in accordance with the provisions hereof, execute
and deliver by their proper officers, indentures or instruments supplemental
hereto, which thereafter shall form part hereof, for any one or more or all of
the following purposes:
(a) setting forth any adjustments resulting from the application of the
provisions of Article 4;
(b) adding to the provisions hereof such additional covenants and
enforcement provisions as, in the opinion of Counsel, are necessary or
advisable in the circumstances, provided that the same are not in the
opinion of the Warrant Agent and counsel prejudicial to the interests
of the Warrantholders;
(c) giving effect to any extraordinary resolution passed as provided in
Article 7;
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(d) adding to, deleting or altering the provisions hereof in respect of
the transfer of Warrants, making provision for the exchange of Warrant
Certificates, and making any modification in the form of the Warrant
Certificates which, in each case, does not affect the substance
thereof;
(e) modifying any of the provisions of this Indenture, including relieving
the Corporation from any of the obligations, conditions or
restrictions herein contained, provided that such modification or
relief shall be or become operative or effective only if, in the
opinion of the Warrant Agent, and in the opinion of counsel, such
modification or relief in no way prejudices any of the rights of the
Warrantholders or of the Warrant Agent, and provided further that the
Warrant Agent may in its sole discretion decline to enter into any
such supplemental indenture which in its opinion may not afford
adequate protection to the Warrant Agent when the same shall become
operative;
(f) making such provisions not inconsistent with this Indenture as may be
necessary or desirable with respect to matters or questions arising
hereunder or for the purpose of obtaining a listing or quotation of
the Warrants on any stock exchange, provided that such provisions are
not, in the opinion of the Warrant Agent, and in the opinion of
counsel, prejudicial to the interests of the Warrantholders; and
(g) for any other purpose not inconsistent with the terms of this
Indenture, including the correction or rectification of any
ambiguities, defective or inconsistent provisions, errors, mistakes or
omissions herein, provided that in the opinion of the Warrant Agent,
and in the opinion of counsel, the rights of the Warrant Agent and of
the Warrantholders are in no way prejudiced thereby.
Copies of any such amendments shall be given to each Warrantholder.
8.2 Successor Corporations
In the case of the consolidation, amalgamation, merger or transfer of the
undertaking or assets of the Corporation as an entirety or substantially as an
entirety to another corporation ("successor Corporation"), the successor
Corporation resulting from such amalgamation, merger or transfer (if not the
Corporation) shall expressly assume, by supplemental indenture satisfactory in
form to the Warrant Agent and executed and delivered to the Warrant Agent, the
due and punctual performance and observance of each and every covenant and
condition of this Indenture to be performed and observed by the Corporation.
<PAGE>
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ARTICLE IX
CONCERNING THE WARRANT AGENT
9.1 Legislation
(a) If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with a mandatory requirement of Applicable
Legislation, such mandatory requirement shall prevail.
(b) The Corporation and the Warrant Agent agree that each will, at all
times in relation to this Indenture and any action to be taken
hereunder, observe and comply with and be entitled to the benefits of
Applicable Legislation.
9.2 Rights and Duties of Warrant Agent
(a) In the exercise of the rights and duties prescribed or conferred by
the terms of this Indenture, the Warrant Agent shall act honestly and
in good faith with a view to the best interests of the Warrantholders
and shall exercise that degree of care, diligence and skill that a
reasonably prudent Warrant Agent would exercise in comparable
circumstances. No provision of this Indenture shall be construed to
relieve the Warrant Agent from liability for its own negligent action,
its own negligent failure to act, or its own wilful misconduct or bad
faith.
(b) The obligation of the Warrant Agent to commence any act, action or
proceeding for the purpose of enforcing any rights of the Warrant
Agent or the Warrantholders hereunder shall be conditional upon (i)
the Warrant Agent receiving a Warrantholders' Request to commence such
act, action or proceeding and (ii) the Warrantholders furnishing, when
required from time to time by a notice of the Warrant Agent,
sufficient funds to commence and to continue such act, action or
proceeding and an indemnity reasonably satisfactory to the Warrant
Agent to protect and to hold harmless the Warrant Agent against the
costs, charges and expenses and liabilities to be incurred thereby and
any loss and damage it may suffer by reason thereof.
(c) None of the provisions contained in this Indenture shall require the
Warrant Agent to expend or to risk its own funds or otherwise to incur
financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers unless indemnified as
aforesaid.
(d) The Warrant Agent may, before commencing or at any time during the
continuance of any such act, action or proceeding, require the
Warrantholders, at whose instance it is acting, to deposit with the
Warrant Agent the Warrants held by them, for which Warrants the
Warrant Agent shall issue recepits.
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(e) Every provision of this Indenture that by its terms relieves the
Warrant Agent of liability or entitles it to rely upon any evidence
submitted to it is subject to the provisions of Applicable
Legislation, to this Section 9.2 and to Section 9.3.
(f) The Warrant Agent shall not be bound to give any notice or do or take
any act, action or proceeding by virtue of the powers conferred on it
hereby unless and until it shall have been required so to do under the
terms hereof; nor shall the Warrant Agent be required to take notice
of any default hereunder, unless and until notified in writing of such
default, which notice shall distinctly specify the default desired to
be brought to the attention of the Warrant Agent and in the absence of
any such notice the Warrant Agent may for all purposes of this
Indenture conclusively assume that no default has been made in the
observance or performance of any of the representations, warranties,
covenants, agreements or conditions contained herein. Any such notice
shall in no way limit any discretion herein given the Warrant Agent to
determine whether or not the Warrant Agent shall take action with
respect to any default.
9.3 Evidence, Experts and Advisers
(a) In addition to the reports, certificates, opinions and other evidence
required by this Indenture, the Corporation shall furnish to the
Warrant Agent such additional evidence of compliance with any
provision hereof in such form as may be prescribed by Applicable
Legislation or as the Warrant Agent may reasonably require by `written
notice to the Corporation.
(b) In the exercise of its rights and duties hereunder, the Warrant Agent
may, if it is acting in good faith, act and rely as to the truth of
the statements and the accuracy of the opinions expressed in statutory
declarations, opinions, reports, written requests, consents, or orders
of the Corporation, certificates of the Corporation or other evidence
furnished to the Warrant Agent pursuant to a request of the Warrant
Agent, provided that such evidence complies with Applicable
Legislation and that the Warrant Agent complies with Applicable
Legislation and that the Warrant Agent examines the same and
determines that such evidence complies with the applicable
requirements of this Indenture.
(c) Whenever it is provided in this Indenture or under Applicable
Legislation that the Corporation shall deposit with the Warrant Agent
resolutions, certificates,
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reports, opinions, requests, orders or other documents, it is intended
that the truth and accuracy on the effective date thereof and the
facts and opinions stated in all such documents so deposited shall, in
each and every such case, be conditions precedent to the right of the
Corporation to have the Warrant Agent take the action to be based
thereon.
(d) Proof of the execution of an instrument in writing, including a
Warrantholders' Request, by any Warrantholder may be made by the
certificate of a notary public, or other officer with similar powers,
stating that the person signing such instrument acknowledged to it the
execution thereof, or by an affidavit of a witness to such execution
or in any other manner which the Warrant Agent may consider adequate.
(e) The Warrant Agent may employ or retain such Counsel, accountants,
appraisers or other experts or advisers as it may reasonably require
for the purpose of discharging its duties hereunder and may pay
reasonable remuneration for all services so performed by any of them,
without taxation of costs of any Counsel, and shall not be responsible
for any misconduct or negligence on the part of any such experts or
advisers who have been appointed with due care by the Warrant Agent.
Any remuneration so paid by the Warrant Agent shall be repaid to the
Warrant Agent by the Corporation in accordance with section 5.3.
9.4 Documents, Monies, etc. Held by Warrant Agent
Any securities, documents of title or other instruments that may at any
time be held by the Warrant Agent may be placed in the deposit vaults of the
Warrant Agent or of any Canadian chartered bank or trust company or deposited
for safekeeping with any such bank or trust company. Unless otherwise expressly
provided herein, any monies so held, pending the application or withdrawal
thereof under any provisions of this Indenture, may be deposited in the name of
the Warrant Agent in any Canadian chartered bank or trust company at the rate of
interest (if any) then current on similar deposits or may be deposited in such
institutions or invested in such securities as the Corporation may consent to.
All interest or other income received by the Warrant Agent in respect of such
deposits and investments shall belong to the Warrantholders or the Corporation,
as provided for herein.
9.5 Actions by Warrant Agent to Protect Interest
The Warrant Agent shall have power to institute and to maintain such
actions and proceedings as it may consider necessary or expedient to preserve,
protect or enforce its interests and the interests of the Warrantholders.
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9.6 Warrant Agent Not Required to Give Security
The Warrant Agent shall not be required to give any bond or security in
respect of the execution of this Indenture or otherwise in respect of the
premises.
9.7 Protection of Warrant Agent
Except as provided in Section 9.2, by way of supplement to the provisions
of any law for the time being relating to Warrant Agents, it is expressly
declared and agreed that the Warrant Agent shall not:
(a) be liable for or by reason of any statements of fact or recitals in
this Indenture or in the Warrant Certificates (except the
representation contained in Section 9.9 or in the certificate of the
Warrant Agent on the Warrant Certificates) or be required to verify
the same, but all such statements (other than those relating
specifically to the Warrant Agent) or recitals are and shall be deemed
to be made by the Corporation;
(b) be bound to give notice to any person or persons of the execution
hereof;
(c) incur any liability or responsibility whatsoever, or be in any way
responsible, for the consequence of any breach on the part of the
Corporation of any of the covenants herein contained or of any acts of
any directors, officers, employees, agents or servants of the
Corporation;
(d) at any time be under any duty or responsibility to any Warrantholder
to determine whether any facts exist which may require any adjustment
contemplated by Section 4.1, or with respect to the nature or extent
of any such adjustment when made, or with respect to the method
employed in making the same;
(e) be accountable with respect to the validity or value (or the kind or
amount) of any Common Shares or of any shares or other securities or
property which may at any time be issued or delivered upon the
exercise of the rights attaching to any Warrant;
(f) be responsible for any failure of the Corporation to issue, transfer
or deliver Common Shares or certificates representing Common Shares
upon the surrender of any Warrants for the purpose of the exercise of
such rights or to comply with any of the covenants contained in
Article 4;
(g) have any duties except those which are expressly set forth herein, and
it shall not be bound by any notice of a claim or demand with respect
to, or any waiver, modification, amendment, termination or rescission
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of this Indenture, unless received by it in writing, and signed by the
parties hereto and if its duties herein are affected, unless it shall
have given its prior written consent thereto;
(h) be liable for any error in judgment or for any act done or step taken
or omitted by it in good faith or for any mistake, in fact or law, or
for anything which it may do or refrain from doing in connection
herewith except arising out of its own negligence or wilful
misconduct; and
(i) incur any liability with respect to the delivery of non-delivery of
any certificate or certificates whether delivered by hand, mail or any
other means.
9.8 Replacement of Warrant Agent; Successor by Merger
(a) The Warrant Agent may resign its trust and be discharged from all
further duties and liabilities hereunder, subject to this Section 9.8,
by giving to the Corporation not less than 30 days prior notice in
writing or such shorter prior notice as the Corporation may accept as
sufficient. The Warrantholders by extraordinary resolution shall have
power at any time to remove the existing Warrant Agent and to appoint
a new Warrant Agent. In the event of the Warrant Agent resigning or
being removed as aforesaid or being dissolved, becoming bankrupt,
going into liquidation or otherwise becoming incapable of acting
hereunder, the Corporation shall forthwith appoint a new Warrant Agent
unless a new Warrant Agent has already been appointed by the
Warrantholders; failing such appointment by the Corporation, the
retiring Warrant Agent or any Warrantholder may apply to a justice of
the Ontario Court of Justice (General Division) on such notice as such
justice may direct, for the appointment of a new Warrant Agent; but
any new Warrant Agent so appointed by the Corporation or by the Court
shall be subject to removal as aforesaid by the Warrantholders. Any
new Warrant Agent appointed under this Section 9.8 shall be a
corporation authorized to carry on the business of a trust company in
the Province of Ontario and, if required by the Applicable Legislation
of any other provinces, in such other provinces. On any such
appointment the new Warrant Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been
originally named herein as Warrant Agent under this Indenture.
(b) The Warrant Agent upon payment of its outstanding remuneration and
expenses shall execute and deliver to its successor an appropriate
instrument transferring to the new warrant agent all rights and powers
of the Warrant Agent hereunder, and all securities, documents or other
instruments and all property held by the Warrant Agent hereunder.
<PAGE>
- 39 -
(c) Upon the appointment of a successor Warrant Agent, the Corporation
shall promptly notify the Warrantholders thereof in the manner
provided for in Section 10.2.
(d) Any corporation into or with which the Warrant Agent may be merged,
consolidated or amalgamated, or any corporation resulting therefrom to
which the Warrant Agent shall be a party, or any corporation
succeeding to the business of the Warrant Agent shall be the successor
to the Warrant Agent hereunder without any further act on its part or
any of the parties hereto, provided that such corporation would be
eligible for appointment as a successor Warrant Agent under subsection
9.8(a).
(e) Any Warrant Certificates certified but not delivered by a predecessor
warrant agent may be certified by the successor warrant agent in the
name of the predecessor or successor warrant agent.
9.9 Conflict of Interest
(a) The Warrant Agent represents to the Corporation that at the time of
execution and delivery hereof no material conflict of interest exists
between its role as a Warrant Agent hereunder and its role in any
other capacity and agrees that in the event of a material conflict of
interest arising hereafter it will, within 90 days after ascertaining
that it has such material conflict of interest, either eliminate the
same or assign its rights and obligations hereunder to a successor
Warrant Agent approved by the Corporation and meeting the requirements
set forth in subsection 9.8(a). Notwithstanding the foregoing
provisions of this subsection 9.9(a), if any such material conflict of
interest exists or hereafter shall exist, the validity and
enforceability of this Indenture and the Warrant Certificates shall
not be affected in any manner whatsoever by reason thereof.
(b) The Warrant Agent, in its personal or any other capacity, may buy,
lend upon and deal in securities of the Corporation and generally may
contract and enter into financial transactions with the Corporation or
any Subsidiary of the Corporation without being liable to account for
any profit made thereby.
9.10 Acceptance of Obligation
The Warrant Agent hereby accepts the obligations declared and provided for
in this Indenture and agrees to perform the same upon the terms and conditions
herein set forth.
<PAGE>
- 40 -
9.11 Warrant Agent Not to be Appointed Receiver
The Warrant Agent and any person related to the Warrant Agent shall not be
appointed a receiver, a receiver and manager or liquidator of all or any part of
the assets or undertaking of the Corporation.
9.12 The Corporation hereby indemnifies and saves harmless the Warrant
Agent and its directors, officers and employees of and from any and all
liabilities, losses, costs, suits, claims and demands whatsoever arising
directly or indirectly out of the performance of its duties hereunder or any
failure to act hereunder, save only in the event of negligence or wilful
misconduct on the part of the Warrant Agent. It is understood and agreed that
this indemnification will survive the termination or discharge of this Indenture
or the resignation or replacement of the Warrant Agent.
ARTICLE X
GENERAL
10.1 Notice to the Corporation and the Warrant Agent
(a) Unless herein otherwise expressly provided, any notice to be given
hereunder to the Corporation or the Warrant Agent shall be deemed to
be validly given if delivered, sent by registered letter, postage
prepaid or faxed:
If to the Corporation:
Champion Communication Services, Inc.
1610 Woodstead Court, #330
The Woodlands Texas, U.S.A. 77380
Attention: Albert F. Richmond, Chairman and Chief Executive Officer
-------------------------------------------------------------------
Telephone: (713) 362-0144
Fax: (713) 364-1603
If to the Warrant Agent:
Equity Transfer Services, Inc.
The Richmond Adelaide Centre
120 Adelaide Street West, Suite 800
Toronto, Ontario M5H 3V1
Attention: President
--------------------
<PAGE>
- 41 -
Telephone: (416) 361-0152
Fax: (416) 361-0470
and any such notice delivered or faxed in accordance with the
foregoing shall be deemed to have been received, if delivered, on the
date of delivery, or, if faxed, on the Business Day following the date
it was faxed, or, if mailed, on the third Business Day following the
date of the postmark on such notice.
(b) The Corporation or the Warrant Agent, as the case may be, may from
time to time notify the other in the manner provided in subsection
10.1(a) of a change of address which, from the effective date of such
notice and until changed by like notice, shall be the address of the
Corporation or the Warrant Agent, as the case may be, for all purposes
of this Indenture.
(c) If, by reason of a strike, lockout or other work stoppage, actual or
threatened, involving postal employees, any notice to be given to the
Warrant Agent or to the Corporation hereunder could reasonably be
considered unlikely to reach its destination, such notice shall be
valid and effective only if it is delivered or faxed to the named
officer of the party to which it is addressed.
10.2 Notice to Warrantholders
(a) Unless otherwise provided herein, any notice to the Warrantholders
under the provisions of this Indenture shall be valid and effective if
faxed, sent by registered letter, postage prepaid or delivered
addressed to such holders at their addresses appearing on the register
referred to above and shall be deemed to have been effectively given
on the date of delivery or, if mailed, on the date that is three
Business Days following actual posting of the notice or, if faxed, on
the next Business Day following the date of transmission provided that
its contents are transmitted and received completely and accurately.
(b) If, by reason of a strike, lockout or other work stoppage, actual or
threatened, involving postal employees, any notice to be given to the
Warrantholders hereunder could reasonably be considered unlikely to
reach its destination, such notice shall be valid and effective only
if it is delivered personally to such Warrantholders or if delivered
to the address for such Warrantholders contained in the register of
Warrants maintained by the Warrant Agent, by telex, fax or other means
of prepaid transmitted and recorded communication.
<PAGE>
- 42 -
10.3 Evidence of Ownership
(a) Upon receipt of a certificate of any bank, trust company or other
depositary satisfactory to the Warrant Agent stating that the Warrants
specified therein have been deposited by a named person with such
bank, trust company or other depositary and will remain so deposited
until the expiry of the period specified therein, the Corporation and
the Warrant Agent may treat the person so named as the owner, and such
certificate as sufficient evidence of the ownership by such person of
such Warrant during such period, for the purpose of any requisition,
direction, consent, instrument or other document to be made, signed or
given by the holder of the Warrant so deposited.
(b) The Corporation and the Warrant Agent may accept as sufficient
evidence of the fact and date of the signing of any requisition,
direction, consent, instrument or other document by any person, (i)
the signature of any officer of any bank, trust company, or other
depositary satisfactory to the Warrant Agent as witness of such
execution, (ii) the certificate of any notary public or other officer
authorized to take acknowledgments of deeds to be recorded at the
place where such certificate is made that the person signing
acknowledged to him the execution thereof, (iii) a satisfactory
declaration of a witness of such execution, or (iv) any other
documentation satisfactory to the Warrant Agent and the Corporation.
10.4 Counterparts
This Indenture may be executed in several counterparts, each of which when
so executed shall be deemed to be an original and such counterparts together
shall constitute one and the same instrument and notwithstanding their date of
execution they shall be deemed to be executed as of the date hereof.
10.5 Satisfaction and Discharge of Indenture
Upon the earlier of:
(a) the date by which there shall have been delivered to the Warrant Agent
for exercise or destruction all Warrant Certificates theretofore
certified hereunder; or
(b) the Expiry Time of the Warrants;
and, if all certificates representing Common Shares required to be issued have
been issued and delivered, this Indenture shall cease to be of force or effect
and the Warrant Agent, on demand of and at the cost and expense of the
Corporation and upon delivery to the Warrant Agent of a certificate of the
<PAGE>
- 43 -
Corporation stating that all conditions precedent to the satisfaction and
discharge of this Indenture have been complied with, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture.
Notwithstanding the foregoing, the indemnities provided to the Warrant Agent by
the Corporation hereunder shall remain in full force and effect and survive the
termination of this Indenture.
10.6 Provisions of Indenture and Warrants for the Sole Benefit of Parties and
Warrantholders
Nothing in this Indenture or in the Warrant Certificates, express or
implied, shall give or be construed to give to any person other than the parties
hereto and the Warrantholders, as the case may be, any legal or equitable right,
remedy or claim under this Indenture, or under any covenant or provision herein
or therein contained, all such covenants and provisions being for the sole
benefit of the parties hereto and the Warrantholders.
10.7 Warrants Owned by the Corporation or its Subsidiaries - Certificate to be
Provided
For the purpose of disregarding any Warrants owned legally or beneficially
by the Corporation or any Subsidiary of the Corporation in Section 7.16, the
Corporation shall provide to the Warrant Agent, from time to time, a certificate
of the Corporation setting forth, as at the date of such certificate:
(a) the names (other than the name of the Corporation) of the registered
holders of Warrants which, to the knowledge of the Corporation, are
owned by or held for the account of the Corporation or any Subsidiary
of the Corporation; and
(b) the number of Warrants owned legally or beneficially by the
Corporation or any Subsidiary of the Corporation;
and the Warrant Agent, in making the computations in Section 7.16, shall be
entitled to act and rely on such certificate without any additional evidence.
10.8 Ownership and Transfer of Warrants
The Corporation and the Warrant Agent may deem and treat the registered
holder of any Warrant Certificate as the absolute owner of the Warrants
represented thereby for all purposes, and the Corporation and the Warrant Agent
shall not be affected by any notice or knowledge to the contrary except where
the Corporation or the Warrant Agent is required to take notice by statute or by
order of a court of competent jurisdiction. A Warrantholder shall be entitled to
the rights evidenced by such Warrant Certificate free from all equities or
rights of set off or counterclaim between the Corporation and the original or
any intermediate holder thereof and all persons may act accordingly and the
<PAGE>
- 44 -
receipt of any such Warrantholder for the Common Shares purchasable pursuant
thereto shall be a good discharge to the Corporation and the Warrant Agent for
the same, and neither the Corporation nor the Warrant Agent shall be bound to
inquire into the title of any such holder except where the Corporation or the
Warrant Agent is required to take notice by statute or by order of a court of
competent jurisdiction.
10.9 Waiver
Each of the parties hereto shall have the right to waive any of its rights
under this Indenture, in whole or in part, in its absolute discretion, and any
such right once waived may thereafter, subject to the terms of the waiver, be
reasserted by such party at any time and enforced pursuant to the terms of this
Indenture.
10.10 Governing Law
This Indenture shall be governed by and construed in accordance with the
laws of the Province of Ontario and the federal laws of Canada applicable
therein. Each of the parties irrevocably attorns to the exclusive jurisdiction
of the courts of the Province of Ontario with respect to all matters arising out
of this Indenture and the transactions contemplated herein.
10.11 Choice of Language
The parties hereby acknowledge that they have expressly required this
Indenture and all notices, statements of account and other documents required or
permitted to be given or entered into pursuant hereto to be drawn up in the
English Language only. Les parties reconnaissent avoir expressment demandees que
la presente Convention ainsi que tout avis, tout etat de compte et tout autre
document a etre ou pouvant etre donne ou conclu en vertu des dispositions des
presentes, soient rediges en langue anglaise seulement.
IN WITNESS WHEREOF the parties hereto have executed this Indenture under
their respective corporate seals and the hands of their proper officers as of
the date first above written.
CHAMPION COMMUNICATION SERVICES,
INC.
Per:
-------------------------
Per:
-------------------------
<PAGE>
- 45 -
EQUITY TRANSFER SERVICES INC.
Per:
-------------------------
Per:
-------------------------
<PAGE>
- 1 -
THIS IS SCHEDULE "A" to the Warrant Indenture made as of
September 25, 1996 between CHAMPION COMMUNICATION SERVICES,
INC. and EQUITY TRANSFER SERVICES INC., as Warrant Agent.
--------------------------------------------------------------
CERTIFICATE No. No. OF WARRANTS
--------------- ---------------
WARRANTS EXERCISABLE FOR COMMON SHARES OF
CHAMPION COMMUNICATION SERVICES, INC.
EXERCISABLE BEFORE 5:00 p.m. (TORONTO TIME) ON MARCH
25, 1998.
COMMON SHARE PURCHASE WARRANTS TO PURCHASE
COMMON SHARES OF CHAMPION COMMUNICATION
SERVICES, INC.
THIS IS TO CERTIFY THAT, for value received,
(the "holder") is entitled, subject to adjustment, to purchase for $5.00 per
share at any time before 5:00 p.m. (Toronto time) on March 25, 1998 (the "Expiry
Time") fully paid and non-assessable common shares ("Common Shares") in the
capital of Champion Communication Services, Inc. (the "Company") as constituted
on the date hereof, on the basis of one (1) Common Share for each of the number
specified above of whole Warrants, by surrendering to Equity Transfer Services
Inc. (the "Warrant Agent") at the principal office of its Transfer Department in
Toronto, Ontario, this Warrant certificate, with a subscription in the form set
forth on the reverse side hereof or such other form satisfactory to the Warrant
Agent duly completed and executed, and a certified cheque, bank draft or money
order in lawful money of Canada, payable to or to the order of the Warrant
Agent, at par in Toronto, in an amount equal to the purchase price of the Common
Shares so subscribed for.
The Company has the right to accelerate conversion of the
Warrants if the average price for the Common Shares of the Company is at least
$5.50 for 10 consecutive trading days, upon 30 days prior notice of such
conversion.
The Warrants represented hereby shall be deemed to be so
surrendered only upon receipt thereof by the Warrant Agent at the office
specified above and shall be surrendered only by personal delivery, courier or
prepaid registered mail.
<PAGE>
- 2 -
Subject to adjustment thereof in the events and in the manner
set forth in the Warrant Indenture hereinafter referred to, the purchase price
(the "Exercise Price") payable for each Common Share on exercise of any Warrants
evidenced by this Warrant certificate will be $5.00 at any time before the
Expiry Time in lawful money of Canada.
Common Shares will not be issued pursuant to any Warrants if
the issuance of such Common Shares would constitute a violation of the
securities laws of any jurisdiction.
Certificates representing the Common Shares subscribed for
hereunder will be mailed to the person or persons specified in the subscription
form at the address or respective addresses specified therein or, if so
specified in the subscription form, delivered to such person or persons at the
office where this Warrant certificate was surrendered. If fewer Common Shares
are purchased than the number that may be subscribed for pursuant to the
Warrants evidenced by this Warrant certificate, the holder will be entitled to
receive, without charge, a new Warrant certificate in respect of the balance of
such unexercised Warrants. To the extent that any Warrant evidenced hereby
confers the right to purchase a fraction of a Common Share, such right may be
exercised in respect of such fraction only in combination with another Warrant
certificate or other Warrant certificates which in the aggregate entitle the
holder to be issued a whole number of Common Shares, and under no circumstances
is the Company obligated to issue any fractional Common Share. In lieu of
fractional shares, the Holder will receive a cash payment determined in
accordance with the Warrant Indenture (as defined below).
This Warrant certificate represents Warrants exercisable for
Common Shares of the Company issued or issuable under the provisions of a
Warrant Indenture (which Warrant Indenture together with all other instruments
supplemental or ancillary thereto is herein referred to as the "Warrant
Indenture") dated as of September 25, 1996 between the Company and the Warrant
Agent, as warrant agent, to which Warrant Indenture reference is hereby made for
particulars of the rights of the holders of the Warrants and of the Company and
of the Warrant Agent in respect thereof and the terms and conditions upon which
the Warrants are issued and held, all to the same effect as if the provisions of
the Warrant Indenture were herein set forth, to all of which the holder of the
Warrants represented hereby by acceptance hereof assents. Capitalized terms used
herein and not otherwise defined herein shall have the respective meanings
ascribed thereto in the Warrant Indenture, unless the context hereof otherwise
requires. A copy of the Warrant Indenture will be available for inspection at
the principal office of the Warrant Agent in the Municipality of Metropolitan
Toronto upon the request of the holder.
Upon presentation at the principal office of the Warrant Agent
in the Municipality of Metropolitan Toronto, subject to the provisions of the
Warrant Indenture and upon compliance with the reasonable requirements of the
Warrant Agent, Warrant certificates of any denomination may be exchanged for
Warrant certificates of any other denomination, any such exchange to be made for
an equal aggregate number of Warrants. The Company and the Warrant Agent may
deem and treat the registered holder of this Warrant Certificate as the absolute
owner of the Warrants represented hereby for all purposes. The holding of this
Warrant certificate shall not constitute the holder hereof a holder of Common
<PAGE>
- 3 -
Shares nor entitle such holder to any right or interest in respect thereof
except as herein and in the Warrant Indenture expressly provided.
The Warrants represented hereby may only be transferred, upon
compliance with the conditions prescribed in the Warrant Indenture, on the
registers to be kept at the offices of the Warrant Agent, by the registered
Holder hereof or such holder's executors or administrators or other legal
representatives, or the holder's attorney duly appointed by an instrument in
writing in form and evidence satisfactory to the Warrant Agent acting
reasonably, upon compliance with the requirements of all relevant stock
exchanges and upon compliance with such reasonable requirements as the Warrant
Agent and the Company may prescribe.
In case this certificate shall become mutilated or be lost,
stolen or destroyed, the Company shall issue, and thereupon the Warrant Agent
shall certify and deliver, a new certificate upon surrender and cancellation of
the mutilated certificate, or in the case of a lost, stolen or destroyed
certificate, in lieu of and in substitution for the same, provided that the
applicant for a substituted certificate shall furnish to the Company and to the
Warrant Agent evidence of ownership and of the loss, theft or destruction as
shall be satisfactory to them in their discretion, acting reasonably, and shall
also furnish an indemnity satisfactory to them in their discretion, acting
reasonably, and shall pay all reasonable expenses incidental to the issuance of
such substituted certificate.
The Warrant Indenture contains provisions making binding upon
all holders of Warrants outstanding thereunder resolutions passed at meetings of
such holders held in accordance with such provisions and instruments in writing
signed by Warrantholders holding a specified percentage of the Warrants.
The holding of this Warrant Certificate will not constitute
the holder a shareholder of the Company or entitle the holder to any right or
interest in respect thereof except as otherwise provided in the Warrant
Indenture.
The Warrants and the Warrant Indenture shall be governed by
and construed in accordance with the laws of the Province of Ontario and the
federal laws of Canada applicable therein and shall be treated in all respects
as Ontario contracts. Time shall be of the essence hereof and of the Warrant
Indenture.
<PAGE>
- 4 -
This Warrant Certificate shall not be valid for any purpose
whatever unless and until it has been certified by or on behalf of the Warrant
Agent for the time being under the Warrant Indenture.
IN WITNESS WHEREOF the Company has caused this Warrant
Certificate to be signed by its duly authorized officers as of September 25,
1996.
CHAMPION COMMUNICATION
SERVICES, INC.
By:
-------------------------------
This Warrant certificate represents
Warrants referred to in the Warrant
Indenture within mentioned.
EQUITY TRANSFER SERVICES INC.
Warrant Agent
By:
------------------------------ -----------------------------------
Authorized Signing Officer Date of Certification
<PAGE>
- 5 -
TRANSFER FORM
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) to
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
Telecopier Number: the Warrants represented by the within
- ----------------------------------------
Warrant certificate and do(es) hereby irrevocably constitute and appoint
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
attorney to transfer the said Warrants represented hereby on the books of the
Company with full power of substitution in the premises.
DATED , 199 .
---------------------- ---
In the presence of
- ---------------------------------- --------------------------------------
Signature Guaranteed Signature of Registered Warrantholder*
--------------------------------------
Print Name in Full
NOTICE: The signature on this assignment must correspond with the name entered
in the registration panel of this certificate. The transferor must pay
to the Warrant Agent all exigible taxes.
* A guarantee of signature will be required with respect to the execution of
the Subscription Form or a transaction relating to the Warrants
represented by this Warrant certificate which results in a change of
registration of this Warrant certificate or the registration of Common
Shares upon the exercise of the Warrants represented hereby. A guarantee
of signature may be given by any Canadian chartered bank, any trust
company which is a member of The Trust Companies Association of Canada or
by a member firm of The Toronto Stock Exchange.
<PAGE>
SUBSCRIPTION FORM
TO: Champion Communication Services, Inc.
c/o Equity Transfer Services Inc.
The Richmond Adelaide Centre
120 Adelaide Street West, Suite 800
Toronto, Ontario M5H 3V1
The undersigned holder of the Warrants evidenced by the within Warrant
certificate hereby subscribes for Common Shares of Champion
-----------------
Communication Services, Inc. (or such number of Common Shares or other
securities or property to which such subscription entitles the holder in lieu
thereof or in addition thereto under the provisions of the Warrant Indenture
mentioned in such Warrant certificate) pursuant to such Warrants at $5.00 per
share until the Expiry Time (or such other price as is determined pursuant to
such Warrant Indenture) on the terms specified in such Warrant certificate and
Warrant Indenture, and encloses herewith a certified cheque, bank draft or money
order payable to the order of Equity Transfer Services Inc. in payment therefor.
The undersigned hereby irrevocably directs that the said Common Shares be
issued and delivered as follows:
Taxpayer
Identification
Name(s) in Full Address(es) SIN Number Number(s) of Number (if
(if applicable) Common Shares applicable)
- --------------- ------------ ---------------- --------------- --------------
- --------------- ------------ ---------------- --------------- --------------
- --------------- ------------ ---------------- --------------- --------------
- --------------- ------------ ---------------- --------------- --------------
(Page 1 of 2)
<PAGE>
- 2 -
(Please print full name in which share certificates are to be issued. If any
shares are to be issued to a person or persons other than the holder, the holder
must pay to The R-M Trust Company all exigible transfer taxes or other
government charges.)
DATED this day of , 199 .
---------- ------------------------- ----
- --------------------------------- -----------------------------------
Signature Guaranteed Signature of Subscriber
-----------------------------------
Name of Subscriber
-----------------------------------
Address of Subscriber
-----------------------------------
o Please check if the share certificates are to be delivered at the
office where this Warrant certificate is surrendered, failing which the
certificates will be mailed.
Certificates will be delivered or mailed only after the transfer books
of the Company have been opened for five (5) Business Days after the
due surrender of this Warrant certificate as aforesaid.
(Page 2 of 2)
THIS SUPPLEMENTAL INDENTURE is made as of the day of March, 1998
----
B E T W E E N:
CHAMPION COMMUNICATION SERVICES,
INC., a corporation formed under the laws of the
State of Deleware,
(hereinafter called the "Company")
OF THE FIRST PART
- and -
EQUITY TRANSFER SERVICES INC., a
corporation incorporated under the laws of the
Province of Ontario,
(hereinafter called the "Warrant Agent")
OF THE SECOND PART
WHEREAS the Company and the Warrant Agent have entered into a warrant
indenture made as of the 25th day of September, 1996 (the "Warrant Indenture")
which provided for the issuance by the Company of up to 811,000 warrants of the
Company (the "Warrants"), each such Warrant currently exercisable at a purchase
price of $5.00 for 1 common share of the Company;
AND WHEREAS none of the Warrants have been exercised;
AND WHEREAS the parties hereto wish to execute this supplemental indenture
for the purpose of extending the expiry date of the Warrants as provided for
herein;
NOW THEREFORE THIS SUPPLEMENTAL INDENTURE WITNESSETH that for good and
valuable consideration mutually given and received, the receipt and sufficiency
of which are hereby acknowledged, it is hereby agreed as follows:
1. The Purchase Warrant Indenture is hereby amended as follows:
(a) to amend the definition of "Expiry Time" contained in section 1.1 of
the Warrant Indenture to read as follows:
"means 5:00 p.m. (Toronto time) on June 30, 1998.";
<PAGE>
(b) to amend the legend "EXERCISABLE BEFORE 5:00 P.M. (TORONTO TIME) ON
MARCH 25, 1998" on page 1 of Schedule "A" to the Warrant Indenture to
read as follows:
"EXERCISABLE BEFORE 5:00 P.M. (TORONTO TIME) ON JUNE 30, 1998."; and
(c) to replace the words "5:00 p.m. (Toronto time) on March 25, 1998 (the
"Expiry Time") fully paid and non-assessable common shares ("Common
Shares") in the capital of Champion Communication Services, Inc. (the
"Company")" contained on page 1 of Schedule "A" to the Warrant
Indenture with the following, "5:00 p.m. (Toronto time) on June 30,
1998 (the "Expiry Time") fully paid and non-assessable common shares
("Common Shares") in the capital of Champion Communication Services,
Inc. (the "Company")".
IN WITNESS WHEREOF the parties hereto have executed this supplemental
indenture as of the date first above written.
CHAMPION COMMUNICATION
SERVICES, INC.
By:
--------------------------
Authorized Signing Officer
EQUITY TRANSFER SERVICES INC.
By:
--------------------------
Authorized Signing Officer
Jenkens & Gilchrist
A P R O F E S S I O N A L C O R P O R A T I O N
2200 ONE AMERICAN CENTER
600 CONGRESS AVENUE
AUSTIN, TEXAS 78701
(512) 499-3800
TELECOPIER (512) 404-3520
DALLAS, TEXAS
(214) 855-4500
HOUSTON, TEXAS
(713) 951-3300
LOS ANGELES, CALIFORNIA
(310) 820-8800
SAN ANTONIO, TEXAS
(210) 246-5000
WASHINGTON, D.C.
(212) 326-1500
May 15, 1998
WRITER'S DIRECT DIAL NUMBER
J. Rowland Cook
(512) 499-3821
Champion Communication Services, Inc.
1610 Woodstead Court, Suite 330
The Woodlands, Texas 77380
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
On May 15, 1998, Champion Communication Services, Inc., a Delaware
corporation (the "Company"), filed with the Securities and Exchange Commission
("Commission") a Registration Statement on Form S-3 (the "Registration
Statement"), under the Securities Act of 1933, as amended (the "Act"), relating
to the Company's offer of an aggregate of 769,850 shares of common stock, $.01
par value per share (the "Shares"). We have acted as counsel to the Company in
connection with the preparation and filing of the Registration Statement.
In connection therewith, we have examined and relied upon the original or
copies, certified to our satisfaction, of (i) the Certificate of Incorporation
and the Bylaws of the Company, in each case as amended to date, (ii) copies of
resolutions of the Board of Directors of the Company authorizing the offering
and the issuance of the shares to be sold by the Company and related matters,
(iii) the Registration Statement, and all exhibits thereto, and (iv) such other
documents and instruments as we have deemed necessary for the expression of
opinions herein contained. In making the foregoing examinations, we have assumed
the genuineness of all signatures and the authenticity of all documents
submitted to us as originals, and the conformity to original documents of all
documents submitted to us as certified or photostatic copies. As to various
questions of fact material to this opinion, we have relied, to the extent we
deem reasonably appropriate, upon representations or certificates of officers or
directors of the Company and upon documents, records and instruments furnished
to us by the Company, without independent check or verification of their
accuracy.
<PAGE>
Jenkens & Gilchrist
A P R O F E S S I O N A L C O R P O R A T I O N
Champion Communication Services, Inc.
May 15, 1998
Page 2
Based upon the foregoing examination, we are of the opinion that the
Shares have been duly and validly authorized and are legally issued, fully paid
and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement. In
giving such consent, we do not admit that we come within the category of persons
whose consent is required by Section 7 of the Act or the rules and regulations
of the Commission thereunder.
Respectfully submitted,
JENKENS & GILCHRIST,
A Professional Corporation
By: /s/ J. Rowland Cook
----------------------
J. Rowland Cook
Authorized Signatory
