FORM 20-F REGISTRATION OF SECURITIES OF FOREIGN PRIVATE
ISSUERS PURSUANT TO SECTION 12(B) OR (G) AND ANNUAL AND
TRANSITION REPORTS PURSUANT TO SECTION 13 AND 15(D)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark one)
[ X ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(g) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
OR
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended ______________________________________________________
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________________ to _________________________
Commission file number________________________________________________________
DURA PRODUCTS INTERNATIONAL INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DURA PRODUCTS INTERNATIONAL INC.
- --------------------------------------------------------------------------------
(Translation of Registrant's name into English)
Ontario, Canada
- --------------------------------------------------------------------------------
(Jurisdiction of incorporation or organization)
60 Carrier Drive, Etobicoke, Ontario, Canada, M9W 5R1
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(g) of the Act.
Common Shares
-------------
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.
Not applicable
--------------
(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report. Not applicable.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12
1
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
Indicate by check mark which financial statement item the registrant has elected
to follow:
Item 17 X Item 18
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act or 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 20-F
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Part I
Item 1. Description of Business ....................................................
Item 2. Description of Property ....................................................
Item 3. Legal Proceedings ..........................................................
Item 4. Control of Registrant ......................................................
Item 5. Nature of Trading Market ...................................................
Item 6. Exchange Controls and Other Limitations Affecting Securities Holders .......
Item 7. Taxation ...................................................................
Item 8. Selected Financial Data ....................................................
Item 9. Management's Discussion and Analysis of Financial Condition and Results
of Operations .......................................................................
Item 10. Directors and Officers of Registrant .......................................
Item 11. Compensation of Directors and Officers .....................................
Item 12. Options of Purchase Securities from Registrant or Subsidiaries .............
Item 13. Interest of Management in Certain Transactions .............................
Part II
Item 14. Description of Securities to be Registered .................................
Part III
Item 15. Defaults Upon Senior Securities ............................................
Item 16. Changes in Securities and Changes in Security for Registered Securities.....
Part IV
Item 17. Financial Statements .......................................................
Item 18. Financial Statements .......................................................
Item 19. Financial Statements and Exhibits ..........................................
Signatures .................................................................
</TABLE>
3
CURRENCY TRANSLATION
The Company publishes its financial statements in Canadian dollars. Unless
otherwise specified, all references to "Cdn dollars", "dollars", "$", or Cdn $"
are to Canadian dollars and references to "US$" are to United States dollars. As
at July 29, 1997, the US dollar equivalent for Canadian dollars is based on the
Noon Buying Rate in New York City for cable transfers in foreign currencies as
certified for customs purposes by the Federal Reserve Bank of New York was US$
1.3855 per Cdn$1.00. No representation is made that the Canadian dollar or US$
amounts shown in this registration statement could have been or could be
converted into US$, as the case may be, at any particular rate or at all.
Fluctuations in the exchange rate between the Canadian dollar and the U.S.
dollar may affect the Company's earnings, the book value of its assets and
shareholders' equity as expressed in Canadian dollars and U.S. dollars.
The following table sets forth, for each period indicated, the high and low
exchange rates for one Canadian dollar expressed in United States dollars, based
on the inverse of the noon buying rate in New York City for cable transfers in
foreign currencies, the average of such exchange rates on the last Saturday of
each month during such period, and the exchange rate at the end of such period,
as certified for custom purposes by the Federal Reserve Bank of New York (the
"Noon Buying Rate"):
<TABLE>
<CAPTION>
- ---------------------- -------------------- --------------------- --------------------- --------------------
Average High Low Period end
- ---------------------- -------------------- --------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Y/E Dec 31/92 0.8835 0.8757 0.7761 0.7865
- ---------------------- -------------------- --------------------- --------------------- --------------------
Y/E Dec 31/93 0.7729 0.8046 0.7439 0.7544
- ---------------------- -------------------- --------------------- --------------------- --------------------
Y/E Dec 31/94 0.7300 0.7632 0.7103 0.7128
- ---------------------- -------------------- --------------------- --------------------- --------------------
Y/E Dec 31/95 0.7305 0.7527 0.7023 0.7323
- ---------------------- -------------------- --------------------- --------------------- --------------------
Y/E Dec 31/96 0.7332 0.7513 0.7235 0.7301
- ---------------------- -------------------- --------------------- --------------------- --------------------
P/E Mar 31/97 0.7357 0.7228 0.7487 0.7228
- ---------------------- -------------------- --------------------- --------------------- --------------------
</TABLE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
General
Dura Products International Inc. ("Dura Products or the Company") is a public
company, with 17,087,447 issued and outstanding common shares, as of June 30,
1997, trading over-the-counter on the Canadian Dealing Network under the symbols
"DURP."
Dura Products was incorporated on August 19, 1983 under the laws of the Province
of Ontario, Canada as Transway Exploration Inc. On July 7, 1993 the name was
changed to Transway Capital Inc. and on February 6, 1997 the Company changed its
name to Dura Products International Inc. Dura Products had two wholly owned
subsidiaries, Dura Skid Inc. and 155433 Canada Inc. Dura Skid Inc. was
incorporated on July 13, 1995 under the laws of the Province of Ontario, Canada
as CanTech Investments Inc. On January 15,
4
1996 the name was changed to CanTech Composites Inc. ("CanTech"), the date on
which the Company concluded its acquisition of CanTech. On February 7, 1997,
Cantech changed its name to Dura Skid Inc. 155433 Canada Inc. ("155433") was
incorporated on April 6, 1987 under the laws of Canada, which was acquired by
the Company in 1994 and subsequently sold in September 1996.
From August 19, 1983 to December 31, 1995, Dura Product's business activities
were in the natural resources and investment industries. With the acquisition of
Dura Skid Inc. in 1996, the Company's business focus was changed to
manufacturing. Prior to 1996, the Company invested in marketable securities and
mining properties and through 155433, owned a mining property in South Lorraine
Township, Timiskaming Mining Division, Ontario ("Lorraine property"). In 1995
the Company ceased its investment activities and sold all of its remaining
marketable securities. All mining properties held directly by the Company had
been allowed to lapse as no economically recoverable reserves had been
discovered. Effective December 31, 1995, 155433 wrote down the carrying value of
the Lorraine property to $1.00 as it did not intend to pursue development and in
September 1996 this subsidiary was disposed of for nominal consideration.
On the basis of the substantive change in the nature of the business conducted
by the Company, management believes any discussion of the business prior to 1996
provides no relevant information to an understanding of the general development
of the business. Accordingly, the description of business has focused on the
developments which began in January 1996.
Effective January 15, 1996, the Company acquired 100% of Dura Skid Inc. for
$400,000. The purchase price was settled by the issuance of 1,000,000 common
shares of the Company and issuance of 500,000 warrants exercisable for 500,000
common shares at $0.40 per share (see Business Overview and Outlook below and
Management's Discussion and Analysis of Financial Condition and Results of
Operations).
In the discussion that follows, Dura Products or the Company refers to the
operations of Dura Products International Inc. and its wholly owned subsidiary,
Dura Skid Inc.
Technology Overview
The Company has developed a proprietary process that produces a composite
material made from a combination of post industrial cellulose fibre and post
consumer plastics. The process starts with a proprietary binding process, which
combines the two dissimilar materials into a composite material used as a feed
stock. Through a combination of heat, pressure and sophisticated die designs,
the composite material is extruded to produce continuous formed profiles, which
are then cut to length. Flow dynamics are continuously monitored to maintain
consistent high quality. The finished product is fully engineered with respect
to impact strength, modulus of flexibility and other important performance
characteristics, enabling the profile to be produced to meet exact customer
requirements. (see Manufacturing Process and Product Description below)
5
Market Overview and Strategy
The Company intends to develop, manufacture and sell a number of commercially
viable products incorporating its proprietary composite material. All products
will be based on "green" design principles. The composite material is superior
to wood in almost any volume application; at this time, management has
specifically targeted the pallet market for the first commercial introduction of
its new technology. The market for pallets is global in nature. Purchasers of
pallets are considering more cost effective and better performing alternatives
to wood as a standard structural material. In North America, the annual demand
for pallets is estimated at approximately US$7 billion in the United States and
US$700 million in Canada. The industry is growing faster than the North American
economy, having enjoyed almost 10% growth per annum since 1984. The pallet
market is confronted with a number of issues including widespread
dissatisfaction with the performance, quality and handling difficulties
associated with wood pallets. These concerns create an opportunity both for the
introduction of new technology and for individual participants with alternative
product offerings to obtain significant market share rapidly. Dura Products
plans to initiate market penetration through the use of joint ventures,
licensing agreements and direct sales efforts.
The Duraskid(TM) Pallet
The Duraskid(TM) pallet is made from Dura Products' proprietary composite
material and is designed to be safe, reusable, recyclable and manufactured to a
consistently high quality. Dura Products' proprietary process produces a
composite material with high load bearing characteristics which gives the
Duraskid(TM) pallet strength usually found only in much heavier and more
expensive plastic-reinforced and metal pallets. The Company's initial standard
product is a fully engineered four-way access 48" x 40" pallet. Block pallets
and other sizes of pallets may also be manufactured as required to fit specific
customer requirements. Based on the Company's initial market analysis, the
Duraskid(TM) pallet is priced to be competitive with a high quality reusable
hardwood pallet and in addition has many value-added features. The Duraskid(TM)
will be marketed on such features as price, quality, recyclability, superior
weight/strength characteristics and dimensional stability.
Manufacturing Process and Product Description
The material used in the manufacture of the Duraskid(TM) pallet is formulated
using a combination of 50% to 60% cellulose, 40% to 50% post consumer
high-density polyethelene ("HDPE") and a binding agent. The relative mix of the
basic raw material components is customized to fit specific needs such as
colour, surface texture and load-bearing capability. The Company uses a variety
of single screw extruders to produce the three profiles
6
required to construct a Duraskid(TM). These machines range in barrel size from
4.5" to 6" with horsepower ranging from 150 to 300. Feedstock material is loaded
into the machine hoppers using a vacuum loading system, automatically feeding
into the barrel of the extruder by the rotation of the screw. To extrude the
thermoplastic, the compound must first be softened, which is done by heating the
length of the extruder barrel to 180(degree) C. As the screw rotates, soft
compound travels along the barrel, gets forced through a proprietary multi-stage
die, and is then cooled by water jackets to hold the desired profile. The
stringers used in the pallet are put into a notching machine, and two 10" x 2"
notches are machined to allow four way entry by forklifts. The stringers and top
and bottom boards are then loaded into a drilling machine to precision drill the
required holes for the bolts. The Duraskid(TM) is then bolted together and
shipped to customers.
The following is a process chart
[GRAPHIC OMMITTED]
Business Overview and Outlook
To date the Company has not generated any significant revenue from operations.
Reference should be made to Management's Discussion and Analysis of Financial
Condition and Results of Operations for a more detailed discussion. The
following is an overview of management's plans to generate revenue from
operations.
Fiscal 1996 was dedicated to research and development, property analysis,
testing and pre-production engineering in order to achieve a commercially viable
product. As the development of the proprietary composite material evolved, it
became evident that the high load-bearing characteristics of the composite would
be suitable for a wide range of both consumer and industrial applications.
7
After an analysis of a number of potential applications, management determined
that the pallet market represented a significant first opportunity for the
Company. In addition, the Company has under consideration several other
potential products.
Plant design and layout work for pallet production commenced in early 1996 and
equipment for three operating lines was ordered and installed. By the end of
1996, Dura Products had substantially completed process research and technology
development and in the first quarter of 1997 initiated preliminary field testing
of prototype pallets. Initial pallet production commenced in the second quarter
of 1997 using the three operating lines.
Once fully operational, the Company's first facility located in Etobicoke,
Ontario will consist of 14 lines of equipment capable of producing approximately
600,000 Duraskid(TM) pallets annually. Financing of the 11 remaining lines of
equipment is in the process of being secured through Bombardier Capital Group
with final delivery of the equipment scheduled for the fourth quarter of 1997.
By the end of the forth quarter of 1997, management expects full operational
capacity will be achieved. As of June 30, 1997, the Company had 25 full time
employees, 16 of whom were in manufacturing, four were in research and
development, one was in sales and marketing and four were in finance and
administration. It is expected that by the end of 1997 there will be
approximately 60 full time employees, of whom 45 will be in manufacturing, five
in research and development, four in sales and marketing and six in finance and
administration.
In addition to the Etobicoke facility, the Company has announced it has signed a
letter of intent to enter into into a joint venture arrangement with Wood
Recycling Inc. The joint venture will manufacture and sell the Duraskid(TM)
pallet in New England and upper New York State. Under the terms of the letter of
intent, the Company will own 51% of the joint venture. The joint venture is
currently investigating locations in the Massachusetts area with the capacity to
operate up to 30 lines of equipment. Management expects that installation of
equipment will begin in the fourth quarter of 1997, with operations commencing
in the first quarter of 1998.
The Company's business plan for the next five years contemplates the
construction of up to ten additional plants in North America each with a planned
minimum capacity of approximately 500,000 pallets per plant per year. These
plants are expected to operate as either joint venture arrangements or to be
wholly owned by Dura Products.
The Company's policy is to expense monies spent on research and development
activities. During 1996 the main focus of the Company was on research and
development and approximately $669,000 was spent supporting these efforts.
During the first quarter of 1997, an additional $289,000 was spent on research
and development. The Company intends to continue to develop additional products
and devote significant resources to its research and development efforts.
The profitability of Dura Products is subject to a number of risk factors
including successful commencement of commercial operations, market acceptance of
the Company's products, competition, handling growth and rapid change
effectively,
8
retaining key employees and continued improvement upon and protection of the
Company's proprietary composite material.
As the pallet industry continues to seek alternatives to wood as a basic raw
material, and third party material handling systems establish themselves, the
Company believes that there will be increased demand for a durable pallet that
will be cost effective on a cost per use basis. While the Duraskid(TM) has many
competitive advantages, the Company's success will depend in part upon the
acceptance of the Duraskid(TM) in the marketplace. Certain competitors may have
substantially greater name recognition and greater financial, technical,
marketing and other resources than the Company.
ITEM 2. DESCRIPTION OF PROPERTY
The Company is located at 60 Carrier Drive, Etobicoke, Ontario, Canada M9W 5R1.
The facility has approximately 65,000 square feet, 5,000 for executive and
administrative offices and the balance for manufacturing. The facility is leased
for a five-year term with a renewal for a further five years. The initial term
expires October 31, 2002. The Company has an option to acquire the property for
approximately $2.1 million.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings in which the Company or its
subsidiary are involved.
ITEM 4. CONTROL OF REGISTRANT
(a) Direct or Indirect Control by Another
To the best of the Company's knowledge, the Company is not directly or
indirectly owned or controlled by a single person, a group of persons or by
another corporation or by any foreign government. It is the view of the Company
that the day to day business operations and affairs of the Company are
controlled by the Board of Directors of the Company.
(b) Ownership of Voting Securities
As of June 30, 1997, 17,087,447 common shares of the Company were issued and
outstanding. At such date, the persons or groups known to the Company to own
more than 10% of the Company's issued and outstanding shares and the number of
common shares owned by officers and directors of the Registrant as a group are
as follows:
<TABLE>
<CAPTION>
- --------------------------- -------------------------- -------------------------- --------------------------
Identity of Person or
Title of Class Group Amount owned Percent of Class
- --------------------------- -------------------------- -------------------------- --------------------------
<S> <C> <C> <C>
- --------------------------- -------------------------- -------------------------- --------------------------
Common shares Officers and directors
as a group 2,618,200 (1) 14.31%
- --------------------------- -------------------------- -------------------------- --------------------------
- --------------------------- -------------------------- -------------------------- --------------------------
</TABLE>
(1) Shares owned by officers and directors include currently excercisable
options to purchase up to 900,000 shares of Common Stock and warrants to
purchase up to 315,200 shares of Common Stock held by directors and
officers of the Company. Options to purchase up to 550,000 shares are
exercisable at $0.70 per share until June 2001 and options to purchase up
to 350,000 shares are exercisable at $1.10 per share until January 2002.
The warrants are exercisable at $0.90 per share until January 1998.
(2) The percentage of class is calculated based on the total of 18,302,647
shares which includes the 17,087,447 common shares issued and outstanding
as at June 30, 1997 and the 1,215,200 currently excercisable options and
warrants held by the directors and officers of the Company.
(c) Change of Control Arrangements
There are no arrangements known to the Company, the operations of which
may, at a date subsequent to the date of this Registration Statement,
result in a change in control of the Company.
ITEM 5. NATURE OF TRADING MARKET
The common shares of the Company are quoted on the Canadian Dealing Network Inc.
under the symbol "DURP", CUSIP number 265904102. The Company has no other class
of securities which are publicly traded.
As at June 30, 1997, 29.86% of the issued and outstanding common shares were
held in the United States by approximately 60 record holders.
Trading history is as follows:
<TABLE>
<CAPTION>
- ------------------------------------ ----------------------------------- -----------------------------------
Quarter High sales prices Low sales prices
<S> <C> <C>
- ------------------------------------ ----------------------------------- -----------------------------------
03/31/95 $2.60 $0.80
- ------------------------------------ ----------------------------------- -----------------------------------
06/30/95 $0.90 $0.40
- ------------------------------------ ----------------------------------- -----------------------------------
9
- ------------------------------------ ----------------------------------- -----------------------------------
09/30/95 $0.45 $0.25
- ------------------------------------ ----------------------------------- -----------------------------------
12/31/95 $0.65 $0.28
- ------------------------------------ ----------------------------------- -----------------------------------
03/31/96 $0.75 $0.35
- ------------------------------------ ----------------------------------- -----------------------------------
06/30/96 $1.19 $0.50
- ------------------------------------ ----------------------------------- -----------------------------------
09/30/96 $1.10 $0.65
- ------------------------------------ ----------------------------------- -----------------------------------
12/31/96 $1.10 $0.75
- ------------------------------------ ----------------------------------- -----------------------------------
03/31/97 $4.40 $0.75
- ------------------------------------ ----------------------------------- -----------------------------------
06/30/97 $2.45 $1.75
- ------------------------------------ ----------------------------------- -----------------------------------
</TABLE>
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
(a) Governmental Laws or Decrees
There is no law, governmental decree or regulation in Canada that restricts the
export or import of capital, including foreign exchange controls, or that
affects the remittance of dividends, interest or other payments to non-resident
holders of common shares, other than withholding tax requirements and potential
capital gains on the disposition of the common shares under certain
circumstances. See Item 7. Taxation.
(b) Limitation on Voting Rights
There is no limitation imposed by Canadian law or by the charter or other
constituent documents of the Company on the right of a non-resident to hold
or vote common shares of the Company, other than as provided in the
Investment Canada Act (Canada) (the "Investment Act"). The following discussion
summarizes the principal features of the Investment Act for a non-resident who
proposes to acquire common shares of the Company. It is general only, it is
not a substitute for independent advice from an investor's own advisor, and it
does not anticipate statutory or regulatory amendments. No amendments are
pending or contemplated at this time.
The Investment Act generally prohibits implementation of a reviewable investment
by an individual, government or agency thereof, corporation, partnership, trust
or joint venture that is not a "Canadian" as defined in the Investment Act (a
"non-Canadian"), unless after review the minister responsible for the Investment
Act (the "Minister") is satisfied that the investment is likely to be of net
benefit to Canada.
An investment in common shares of the Company by a non-Canadian other than an
"American" (as that term is defined in the Investment Act and used in this
discussion) when the Company was not controlled by an American, would be
reviewable under the Investment Act if it was an investment to acquire control
of the Company and the value of the assets of the Company was $5,000,000 or
more, or if an order for review was made by the federal cabinet on the grounds
that the investment related to Canada's cultural heritage or national identity.
An investment in common shares of the Company by an American, or by a
non-Canadian when the Company was controlled by an American, would be reviewable
under the Investment Act if it was an investment to acquire control of the
Company and the value of the assets of the Company was not less than a specified
amount which for 1994 is $150,000,000, and for subsequent years is $153,000,000
in terms of "constant 1992 dollars". A non-Canadian would acquire control of the
Company for the purposes of the Investment Act if he acquired a majority of the
common shares of the Company. The acquisition of less than a majority but one
third or more of the common shares of the Company would be presumed to be an
acquisition of control of the Company unless it could be established that, on
the acquisition, the Company was not controlled in fact by the acquire through
the ownership of common shares.
Certain transactions relating to common share of the Company would be exempt
from the Investment Act, including:
(a) acquisition of common shares of the Company by a person in the ordinary
course of that person's business as a trader or dealer in securities,
(b) acquisition of control of the Company in connection with the realization of
security granted for a loan or other financial assistance and not for a
purpose related to the provisions of the Investment Act, and
(c) acquisition of control of the Company by reason of an amalgamation, merger,
consolidation or corporate reorganization following the ultimate direct or
indirect control in fact of the Company, through the ownership of common
shares, remained unchanged.
ITEM 7. TAXATION
The following is a summary of certain material Canadian federal income tax
provisions applicable to United States corporations, citizens and resident alien
individuals purchasing, holding and disposing of common shares. The discussion
is only a general summary and does not purport to deal with all aspects of
Canadian federal taxation that may be relevant to shareholders, including those
subject to special treatment under the income tax laws. Shareholders are advised
to consult their own tax advisors regarding the Canadian federal income tax
consequences of holding and disposing of the Company's common shares, as well as
any consequences arising under U.S. federal, state or local tax laws of other
jursiductions outside the United States. The summary is based on the assumption
that, for Canadian tax purposes, the purchasers or shareholders (i) deal at
arm's length with the Company, (ii) are not residents of Canada, (iii) hold the
common shares as capital property, and (iv) do not use or hold common shares in,
or in the course of, carrying on business in Canada (a "Non-Resident Holder").
This summary is not exhaustive of all possible income tax considerations and
shareholders and prospective purchasers are advised to consult with their own
tax advisors with respect to their particular circumstances.
Dividends paid to U.S. residents by the Company on the common shares generally
will be subject to Canadian non-resident withholding taxes. For this purpose,
dividends will include amounts paid by the Company in excess of the paid-up
capital of the common shares on a redemption or a purchase for cancellation of
such shares by the Company (other than purchases on the open market). For U.S.
corporations owning at least 10% of
10
the voting stock of the Company, the dividends paid by the Company are subject
to a withholding tax rate of 5% under the Canada-U.S. Income Tax Convention
(1980), as amended by Protocol signed on March 17, 1995 (the "Treaty"). For all
other U.S. shareholders, the Treaty reduces the withholding tax rate from 25% to
15% of the gross dividend. Other applicable tax treaties may reduce the Canadian
tax rate for other Non-Resident Holders.
A Non-Resident Holder will generally not be subject to tax in Canada on capital
gains realized from disposition of common shares, unless such shares are
"taxable Canadian property" within the meaning of the Income Tax Act (Canada).
Generally, the common shares would not be taxable Canadian property unless the
Non-Resident Holder, together with related parties, at any time during the five
years prior to the disposition of the common shares owned not less than 25% of
the issued shares of any class of the capital stock of the Company. Under the
Treaty, a resident of the United States will not be subject to tax under the
Income Tax Act (Canada) in respect of gains realized on the sale of common
shares which constitute "taxable Canadian property", provided that the value of
the common shares at the time of disposition is not derived principally from
real property located in Canada.
ITEM 8. SELECTED FINANCIAL DATA
The selected financial data set forth in the following table is expressed in
Canadian dollars. For a history of the exchange rates for Canadian dollars in
terms of U.S. Dollars see Item 1, "Description of Business", above. The
financial information set forth in the following table includes the accounts of
the Company and subsidiaries on a consolidated basis. This financial information
was prepared in accordance with accounting principles generally accepted in
Canada, the application of which conforms in all material respects for the
periods presented with accounting principles generally accepted in the United
States, except to the extent noted in Note 12 to the Consolidated Financial
Statements appearing elsewhere in this Registration Statement. The selected
financial data should be read in conjunction with and is qualified by such
Consolidated Financial Statements and the Notes thereto.
<TABLE>
<CAPTION>
- --------------- ------------- ------------ ------------ ------------ ------------ ------------ -------------
Three Three
months months Year ended Year ended Year ended Year ended Year ended
ended March ended Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, 1992
31, 1997 March 31, 1996 (1) 1995 1994 1993
-------- ---------- -------- ---- ---- ----
$ 1996 $ $
- ---- - -
$ $ $ $
- - - -
- -------------- - ------------- ------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue 1,050 Nil Nil Nil Nil Nil Nil
- -------------- - ------------- ------------ ------------ ------------ ------------ ------------ -------------
Net loss 480,912 155,046 1,314,126 615,315 813,610 (32,115) 242,374
Net loss per
share 0.031 0.020 0.137 0.107 0.141 (0.042) 0.046
- -------------- - ------------- ------------ ------------ ------------ ------------ ------------ -------------
Total assets
2,863,730 996,098 1,877,391 31,496 611,123 182,400 726
- -------------- - ------------- ------------ ------------ ------------ ------------ ------------ -------------
Capital stock
6,948,679 3,271,150 4,901,150 2,372,154 2,372,154 1,372,154 1,372,154
- -------------- - ------------- ------------ ------------ ------------ ------------ ------------ -------------
</TABLE>
(1) Effective January 15, 1996, the Company purchased Dura Skid Inc. and changed
its business focus. Reference should be made to Item 1. Description of
Business and to Item 9. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
11
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Set out below is management's discussion and analysis of financial condition and
results of operations for the three-month period ended March 31, 1997 and for
the year ended December 31, 1996. Reference should be made to the consolidated
financial statements contained elsewhere in this document and to Note 12 of
those financial statements which sets forth any differences between accounting
principles generally accepted in Canada and those generally accepted in the
United States.
THREE-MONTH PERIOD ENDED MARCH 31, 1997
The loss for the first quarter ended March 31, 1997 was $480,912 or $0.031 per
share and was $155,046 or $0.02 per share for the corresponding period ended
March 31, 1996. The Company commenced limited manufacturing its first product,
the Duraskid(TM) in January 1997. The Duraskid(TM) pallets that were
manufactured were used for field testing with customers. The field-testing
continued throughout the first quarter and into the second quarter. The loss for
the quarter was comprised of research and development of $288,615, general and
administrative expenses of $117,944, and sales and marketing expenses of
$75,403. Operations for the first quarter ended March 31, 1996 focused on
research and development of the composite material.
The results of the field trials to date have been positive with the Duraskid(TM)
pallet meeting performance expectations. A key advantage of the Duraskid(TM) is
that the pallet may be modified to meet specific application requirements. As a
result of the field testing some modifications have been incorporated into the
basic design of the pallets for commercial sale.
During the quarter, the Company raised approximately $2 million from the sale of
common shares through the exercise of stock options and the completion of two
private placements. The proceeds of the equity issues were used to reduce
short-term loans payable and accounts payable, cover operating losses, increase
working capital and acquire production equipment. As at March 31, 1997, the
Company had $493,711 of cash on hand and working capital of $109,679.
Subsequent to the first quarter, on May 9, 1997 the Company received a lease
financing commitment of $3.1 million from Bombardier Capital Group. The proceeds
from the financing will be used to purchase the remaining equipment for the
Etobicoke manufacturing facility. The equipment is expected to be fully
installed and operational in the fourth quarter of this year. Commercial
production of Duraskids(TM) will increase as the equipment is installed and
commissioned.
12
RESULTS OF OPERATIONS
Prior to 1996 the focus of the Company was in the natural resources and
investment industries. The Company invested in marketable securities and mining
properties and, through a wholly-owned subsidiary, owned a mining property in
Ontario. In 1995 the Company ceased its investment activities and sold all of
its remaining marketable securities. All mining properties held directly by the
Company were allowed to lapse as no economically recoverable reserves had been
discovered. Effective December 31, 1995, the remaining mining property located
in northeastern Ontario was written down to $1.00 and subsequently disposed of
in September 1996 when Dura Products sold its interest in the subsidiary.
The focus of the Company during 1996 was to complete its research and
development for its proprietary composite material. The research and development
was substantially completed by year-end and in the first quarter of 1997 the
Company had commenced the manufacture of its first product, a pallet that is
sold under the tradename "Duraskid".
On the basis of the substantive change in the nature of the business conducted
by the Company, management believes that the Company's previous financial
statements are not relevant to its current business activities and as such,
there is no meaningful comparison of the results of operations of 1996 to 1995
and 1994. Accordingly, the following discussion only covers the 1996 fiscal
year.
1996 OPERATING RESULTS
13
Since the Company was completing its process research and technology development
of its new proprietary composite material throughout 1996, the Company had no
revenues.
All costs related to research and development were expensed as incurred. These
costs amounted to $668,995, consisting of salary and wages, die designs, product
specifications, raw materials, rent, utilities, and consulting services.
General and administrative expenses of $635,351 consisted of costs relating to
being a public company, such as investor relations and expenses related to
raising capital, and the initiation of sales and marketing activities.
Interest expense of $9,779 is mainly comprised of interest charges on a
short-term loans payable.
Net loss for the year was $1,314,126 with a loss per share of $0.137.
CAPITAL INVESTMENTS
Dura Products invested approximately $1.2 million in the purchase of production
equipment and other capital assets during the year ended December 31, 1996. Of
this amount, $1.1 million was for production equipment. Three production lines
of equipment were purchased which enabled the Company to commence limited
production of Duraskids(TM) in the first quarter of 1997.
In addition to capital assets, the company invested approximately $680,000 in
technology, know-how and expertise related to composite materials.
LIQUIDITY AND CAPITAL RESOURCES
During 1996, Dura Products issued common shares for gross proceeds of
approximately $2.5 million. Of this amount, approximately $2.1 million was cash
proceeds received on the exercise of stock options and share purchase warrants
and the balance of $400,000 was allocated to the acquisition of Dura Skid Inc.
Cash proceeds were used for research and development activities and purchase of
capital assets.
As at December 31, 1996, the Company had a working capital deficiency of
approximately $1 million. Subsequent to December 31, 1996, Dura Products
finalized arrangements for three private placements for 2,182,612 Units for
total proceeds of approximately $1.8 million. The Units consisted of one common
share and one common share purchase warrant. The warrants have a one-year term
(expiring between January and June 1998) and have the following exercise prices:
1,582,612 at $0.90; and 600,000 at $1.10. If these warrants were to be
exercised, additional proceeds of approximately $2 million would be received.
In addition, the Company signed a letter of intent for an equipment lease
financing for up to $3.1 million for extrusion equipment and related components.
With these arrangements in place the Company will be able to secure the balance
of the required equipment for its first facility.
14
The Company anticipates that future cash requirements for working capital and
expansion will come from a combination of cash flow from operations, debt/lease
financing, and equity issues.
RISK AND UNCERTAINTIES
The profitability of Dura Products is subject to a number of risk factors
including successful commencement of commercial operations, market acceptance of
the Company's products, competition, handling growth and rapid change
effectively, retaining key employees and continued improvement upon and
protection of the Company's proprietary composite material.
As the pallet industry continues to seek alternatives to wood as a basic raw
material, and third party material handling systems establish themselves, the
Company believes that there will be increased demand for a durable pallet that
will be cost effective on a cost per use basis. While the Duraskid(TM) has many
competitive advantages, the Company's success will depend in part upon the
acceptance of the Duraskid(TM) in the marketplace. Certain competitors may have
substantially greater name recognition and greater financial, technical,
marketing and other resources than the Company.
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
- ------------------------------------ ----------------------------------- -----------------------------------
Name Position Term
- ------------------------------------ ----------------------------------- -----------------------------------
<S> <C> <C>
Keith Carrigan Director, President and CEO Director since November 1995 and
President and CEO since February 1996
- ------------------------------------ ----------------------------------- -----------------------------------
Patrick Banfield Director Director since January 1997
- ------------------------------------ ----------------------------------- -----------------------------------
Stuart MacGregor Director Director since February 1996
- ------------------------------------ ----------------------------------- -----------------------------------
15
- ------------------------------------ ----------------------------------- -----------------------------------
John Winter Director, VP Manufacturing Director since May 1996 and VP
Manufacturing since December 1995
- ------------------------------------ ----------------------------------- -----------------------------------
Carl McMurray VP Finance and CFO VP Finance and CFO since May 1996
- ------------------------------------ ----------------------------------- -----------------------------------
Weining Song VP Engineering VP Engineering since December 1995
- ------------------------------------ ----------------------------------- -----------------------------------
</TABLE>
All directors hold office until the next annual meeting of the shareholders of
the Company and until their successors have been elected and qualified. Officers
of the Company serve at the discretion of the Board of Directors.
There are no arrangements or understandings between any of the directors or
officers of the Company and any other person pursuant to which they were
selected as a director or officer of the Company. There are no family
arrangements between any director or officer of the Company and any other
director or officer of the Company.
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS
Compensation Summary
The table below sets forth information concerning the compensation of the
Company's chief executive officer and for all officers as a group for the
Company's financial years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
- ------------ ----------------------------------------------- -----------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
- ------------ ----------------------------------------------- -----------------------------------------------
Name and Year Salary ($) Bonus ($) Other Awards Awards Payouts All other
principal annual securities restricted LTIP (2) compensation
position compensation under Shares or Payouts ($)
($) option/ restricted ($)
SARs (1) share
granted units ($)
(#)
- ------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Keith
Carrigan
President
1996(3) 112,000 Nil Nil Nil Nil Nil Nil
- ------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
J.Hunter,
President 1996(3) Nil Nil Nil Nil Nil Nil Nil
1995 Nil Nil 13,190 Nil Nil Nil Nil
1994 Nil Nil Nil Nil Nil Nil Nil
- ------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Officers 1996 239,500 Nil Nil Nil Nil Nil Nil
as a group 1995 Nil Nil 13190 Nil Nil Nil Nil
1994 Nil Nil Nil Nil Nil Nil Nil
- ------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
(1) Stock appreciation rights
(2) Long term incentive plans
(3) Mr. Hunter was succeeded as President of the Company by Mr. Carrigan on
February 19, 1996
For each of the financial years ended December 31, 1996, 1995 and 1994, there
were no standard arrangements by which directors of the Company were compensated
for their
16
services to the Company as directors. Directors participate in the Company's
stock option plan.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
On April 17, 1996, the board of directors of the Company approved the
establishment of a stock option plan (the "1996 Plan") relating to the common
shares ("Common Shares") of the Company. Disinterested shareholders of the
Company passed a resolution approving the establishment of the 1996 Plan on May
30, 1996. Eligibility for participation in the 1996 Plan is restricted to
directors, officers, employees and consultants of the Company and its affiliates
and other designated persons and their personal holding companies and registered
retirement savings plan "(RRSP's"). The number of Common Shares subject to
options granted under the 1996 Plan (and under all other management options and
employee stock purchase plans) is limited, in the aggregate, to 5,000,000. The
maximum number of Common Shares which may be reserved for issuance to any one
person, including insiders of the Company under the 1996 Plan, is not limited
except to the extent that at no time may such number exceed 5% of the number of
issued and outstanding Common Shares. The exercise price of any option granted
under the 1996 Plan may not be less than the fair market value (e.g., the
prevailing market price) of the Common Shares at the time the option is granted.
Options issued under the 1996 Plan may be exercised during a period determined
by the board of directors which cannot exceed five years and are subject to
earlier termination upon the termination of the optionee's employment, upon the
optionee ceasing to be a director and/or officer of the Company or any
subsidiary, or upon the retirement, permanent disability or death of an
optionee. The options issued under the 1996 Plan are non-transferable. The
Company does not provide any financial assistance to participants under the 1996
Plan to facilitate the purchase of Common Shares.
As of June 30, 1997, the following options were outstanding:
Number of options Expiry date Purchase price
----------------- ----------- --------------
713,000 June 28, 2001 $0.70
450,000 January 27, 2002 $1.10
As of June 30, 1997, directors and officers as a group held options to purchase
up to 900,000 common shares of the Company.
17
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
(a) Material Transactions
Effective January 15, 1996, the Company completed its acquisition of 100% of the
issued and outstanding shares of Dura Skid Inc. for $400,000, which was settled
by the issuance of 1,000,000 common shares of the Company. In addition to the
$400,000 purchase price, the Company granted warrants to the shareholders of
Dura Skid Inc. which entitled the warrant holders to purchase in the aggregate,
500,000 common shares, at a per share price of $0.40. Dura Skid Inc. was owned
equally by two shareholders, one of whom was Mr. Keith Carrigan. Upon signing
the letter of intent, Mr. Carrigan was elected to the Board of Directors of the
Company, and effective February 19, 1996, became President and CEO of the
Company. Mr. Carrigan does not own greater than 10% of the issued and
outstanding common shares of the Company.
(b) Indebtedness of Directors and Officers
No director or officer of the Company, at any time during the fiscal year ended
December 31, 1996 was indebted to the Company.
Except with respect to Mr. James Hunter, a former director and officer of the
Company, who was indebted to the Company to the extent of $31,469 as at December
31, 1995, no director or officer of the Company was indebted to the Company
during the fiscal year ended December 31, 1995.
Except with respect to Mr. James Hunter, a former director and officer of the
Company, who was indebted to the Company to the extent of $29,759 as at December
31, 1994, no director or officer of the Company at any time during the fiscal
year ended December 31, 1994 was indebted to the Company.
Key Employee Agreements
On May 1, 1995 the Company entered into an employment agreement with Keith
Carrigan. Mr. Carrigan holds the offices of Director, President and Chief
Executive Officer. Annual compensation is $120,000. The contract is ongoing
unless otherwise terminated pursuant to the terms thereunder. Mr. Carrigan is
eligible to participate in all stock option plans, bonus plans and other fringe
benefit plans of the Company.
On January 1, 1997 the Company entered into an employment agreement with Carl
McMurray. Mr. McMurray holds the offices of V.P. Finance and Chief Financial
Officer and Secretary to the Board. Annual compensation is $78,000 for 1997
increasing to $102,000 in 1998. The contract is ongoing unless otherwise
terminated pursuant to the terms thereunder. Mr. McMurray is eligible to
participate in all stock option plans, bonus plans and other fringe benefit
plans of the Company.
On August 7, 1996 the Company entered into an employment agreement with Weining
Song. Mr. Song holds the office of V.P. Engineering. Annual compensation is
$75,000. The contract is for a two year term. Mr. Song was granted options to
acquire 150,000 common shares and is eligible to participate in all stock option
plans, bonus plans and other fringe benefit plans of the Company.
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED.
(a) Capital Stock to be Registered
- ----------------------------------
The Company is authorized to issue an unlimited number of common shares without
nominal or par value, the holder of which is entitled to one vote in respect of
each share held at all meetings of the shareholders of the Company.
Each holder of the common shares is entitled to share proportionately in
dividends that may be paid and upon liquidation of the Company. Holders of the
common shares are not entitled to preemptive rights on the issuance of
additional common shares, and there are no conversion rights, redemption rights,
or sinking fund established. All shares issued are fully paid and
non-assessable, and no shareholder is liable for further calls or assessment.
The Company is authorized to issue an unlimited number of Class A Special Shares
without par value, issuable in series and an unlimited number of Class B Special
Shares without par value. There are no Class A or Class B Special Shares issued
and outstanding. The Board of Directors may fix from time to time before issue,
the number of shares to comprise each series of Class A Special Shares and the
designation, rights, privileges, restrictions and conditions of each series of
Class A Special Shares. The Class B Special Shares are redeemable, voting and
non-participating with respect to dividends.
(b) Debt Securities to be Registered
- ------------------------------------
Not applicable, inasmuch as there are no debt securities of the Registrant to be
registered.
(c) American Depository Receipts to be Registered
- -------------------------------------------------
Not applicable, inasmuch as there are no American Depository Receipts of the
Registrant to be registered.
(d) Other Securities to be Registered
- -------------------------------------
Not applicable, inasmuch as there are no other securities of the Registrant to
be registered.
(e) Shareholder Rights Plan
- ---------------------------
On April 23, 1997, the board of directors of the Company (the "Board") adopted
the Dura Products International Inc. shareholder rights plan (the "Rights
Plan"). The Rights Plan, which was subsequently approved by the shareholders of
the Company, is effective as of April 23, 1997, and will expire on December 31,
2002.
The objectives of the Rights Plan are to ensure, to the extent possible, that
all shareholders of the Company are treated equally and fairly in connection
with any take-over bid for the Company. Take-over bids may not always result in
shareholders receiving equal or fair treatment or full value for their
investment. In addition, current Canadian securities legislation only requires a
take-over bid to remain open for 21 days. The Board believes that this period
may be insufficient for the Board to evaluate a bid, pursue alternatives which
could maximize the shareholder value, and make informed recommendations to the
shareholders.
The Rights Plan discourages discriminatory or unfair take-over bids for the
Company and gives the Board time, if appropriate, to pursue alternatives to
maximize shareholder value in the event of unsolicited take-over bid for the
Company. The Rights Plan will encourage a potential offeror to proceed by way of
a permitted bid or to approach the Board with a view to negotiation, by creating
the potential for substantial dilution of any offeror's position. The permitted
bid provisions of the Rights Plan are designed to ensure that, in any take-over
bid, all shareholders are treated equally, receive the maximum value for their
investment and are given adequate time to properly assess the take-over bid on a
fully informed basis.
Pursuant to the Rights Plan, one Right has been issued by the Company pursuant
to the Rights Agreement in respect of each Common Share outstanding at the Close
of Business on April 23, 1997 (the "Record Time"). One Right will also be issued
for each additional Common Share issued after the Record Time and prior to the
earlier of the Separation Time (as defined below), the expiry date of the Rights
Plan or the day of which the right to exercise Rights expires.
The Separation Time is defined in the Rights Agreement as the Close of Business
on the 10th day (or such earlier or later day as may be determined by the Board)
after the earlier of: public disclosure that a person has become an Acquiring
Person (defined in the Rights Agreement as a person who has acquired, other than
pursuant to an exemption available under the Rights Plan or a permitted bid,
beneficial ownership of 10% percent or more of the Voting Shares of the
Company); and the date of the commencement of, or first public announcement of
an intention to commence, a take-over bid (other than a permitted bid) to
acquire beneficial ownership of 20% percent or more of the Common Shares.
Each Right will entitle the registered holder to purchase from the Company one
Common Share at a price per share equal to 50% of the then fair market value,
subject to certain anti-dilution adjustments. The Rights, however, will not be
exercisable until the Separation Time.
Until the Separation Time, the Rights will trade together with the Common
Shares, will be represented by the Common Share certificates and will not be
exercisable. After the Separation Time, the Rights will become exercisable, will
be evidenced by Rights certificates and will be transferable separately from the
Common Shares.
If an offeror successfully completes a permitted bid, the Board shall be deemed
to have elected to redeem the Rights at $0.001 per Right, appropriately adjusted
for anti-dilution, and no further Rights will be issued.
A permitted bid, even if not approved by the Board, may be taken directly to the
shareholders of the Company. Shareholder approval at a special meeting will not
be required for a permitted bid. Instead, shareholders of the Company will
initially have 60 days to deposit their shares. If more than 50 percent of the
outstanding Common Shares (other than Common Shares beneficially owned by the
offeror on the date of the take-over bid) have been deposited and not withdrawn
by the end of such 60-day period, the bid must be extended for a further period
of 10 days to allow initially disapproving shareholders to deposit their shares
if they so choose.
If a potential offeror does not wish to make a permitted bid, it can negotiate
with, and obtain the prior approval of, the Board to make a take-over bid on
terms which the Board considers fair to all shareholders. In such circumstances,
the Board may waive the application of the Rights Plan to that particular
transaction or redeem the Rights, thereby allowing such bid to proceed without
dilution to the offeror.
Under the Rights Agreement, the implementation of the Rights Plan is triggered,
subject to the Board's discretion, upon the occurrence of any transaction or
event in which any person becomes an Acquiring Person. Except as set out below,
from and after the Close of Business on the 10th day following such an event:
(a) any Rights beneficially owned by the acquiring person and affiliate,
associates and transferees of the acquiring person will become void; and (a)
each Right (other than Rights which are void) will entitle the holder thereof to
purchase Common Shares at 50% of the then fair market value. Therefore, an event
triggering the implementation of the Rights Plan, if not approved by the Board,
will result in significant dilution to an Acquiring Person. The Board, at its
option and at any time prior to the occurrence of such an event, may elect to
redeem all of the outstanding Rights at a redemption price of $0.001 per Right,
appropriately adjusted for anti-dilution as set out in the Rights Agreement.
The Company may, from time to time, amend, vary or delete any of the provisions
of the Rights Agreement to, among other things: (i) make any changes which the
Board, acting in good faith, deems necessary or desirable, (ii) cure any
ambiguity or correct any inconsistency; or (iii) increase or decrease the
exercise price of the Rights. Such amendments will not require the approval of
the holders of Rights or Common Shares. The Company may, from time to time, with
the approval of a majority of the holders of Rights, amend, vary or delete any
of the provisions of the Rights Agreement (whether or not such change shall
materially adversely affect the interests of the holders of the Rights).
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES
Not applicable.
PART IV
ITEM 17. FINANCIAL STATEMENTS.
18
Not applicable.
ITEM 18. FINANCIAL STATEMENTS.
The consolidated financial statements of the Company, the accompanying notes
thereto and the independent auditors' reports are included as part of this Form
20-F and immediately follow the signature page of this Form 20-F.
Item 19. Financial Statements and Exhibits
(A) FINANCIAL STATEMENTS
The following financial statements are filed herewith:
1. Consolidated Balance Sheets as at March 31, 1997, December 31, 1996 and
December 31, 1995
2. Consolidated Statements of Earnings and Deficit for the three month
periods ended March 31, 1997 and 1996 and for the years ended December
31, 1996, 1995 and 1994.
3. Consolidated Statements of Changes in Financial Position for the three
month periods ended March 31, 1997 and 1996 and for the years ended
December 31, 1996, 1995 and 1994.
4. Notes to Consolidated Financial Statements
(B) EXHIBITS
The following exhibits are filed herewith:
1.1 Articles of Incorporation as Amended ..................................
1.2 By-laws ...............................................................
3.1 Share Exchange Agreement dated as of January 15, 1996 by and between
the Company and its wholly-owned subsidiary Dura Skid, Inc. ...........
3.2 Lease Agreement dated as of November 1, 1995 between Carrier Drive
Development Ltd. and Cantech Investments Ltd. .........................
3.3 Shareholder Rights Agreement dated as of April 23, 1997 between the
Company and the R-M Trust Company .....................................
3.4 Employment Agreement by and between Keith Carrigan and the Company
dated May 1, 1995......................................................
3.5 Employment Agreement by and between Carl McMurray and the Company
dated January 1, 1997..................................................
3.6 Employment Agreement by and between Weining Song and the Company
dated August 7, 1996...................................................
3.7 1996 Stock Option Plan.................................................
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
DURA PRODUCTS INTERNATIONAL INC. August 4, 1997
- ------------------------------------- ------------------------------
(Registrant) (Date)
19
/s/ Keith A. Carrigan /s/ Carl D. McMurray
- ------------------------------------- ------------------------------
(Signature) (Signature)
President and Chief Executive Officer Vice President Finance & Chief
Financial Officer
- ------------------------------------- ------------------------------
20
AUDITORS' REPORTS
We have audited the consolidated balance sheets of Dura Products International
Inc. (formerly Transway Capital Inc.) as at December 31, 1996 and 1995 and the
consolidated statements of earnings and deficit and changes in financial
position for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1996
and 1995 and the results of its operations and changes in its financial position
for the years then ended in accordance with accounting principles generally
accepted in Canada.
Selby & Silverstein
Chartered Accountants
Toronto, Ontario
February 21, 1997
I have audited the consolidated statements of earnings and deficit and changes
in financial position of Dura Products International Inc. (formerly Transway
Capital Inc.) for the year ended December 31, 1994. These financial statements
are the responsibility of the Company's management. My responsibility is to
express an opinion on these statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
In my opinion, these consolidated financial statements present fairly, in all
material respects, the results of the operations of the Company and the changes
in its financial position for the year ended December 31, 1994 in accordance
with accounting principles generally accepted in Canada.
Ian Campbell
Chartered Accountant
Toronto, Ontario
21
May 11, 1995
DURA PRODUCTS INTERNATIONAL INC.
(FORMERLY TRANSWAY CAPITAL INC.)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ------------------------------------------------------ ----------------- ----------------- -----------------
March 31, 1997 December 31, December 31,
(unaudited) 1996 1995
- ------------------------------------------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C>
ASSETS
- ------------------------------------------------------ ----------------- ----------------- -----------------
Current assets
- ------------------------------------------------------ ----------------- ----------------- -----------------
Cash $ 493,711 $ 12,192 $ 26
- ------------------------------------------------------ ----------------- ----------------- -----------------
Accounts receivable 40,129 32,505 31,469
- ------------------------------------------------------ ----------------- ----------------- -----------------
Prepaid expenses 60,073 4,000 0
- ------------------------------------------------------ ----------------- ----------------- -----------------
593,913 48,697 31,495
- ------------------------------------------------------ ----------------- ----------------- -----------------
Capital assets, net (Note 3) 1,589,850 1,148,727 0
- ------------------------------------------------------ ----------------- ----------------- -----------------
Technology and other intangible assets (Note 2)
679,967 679,967 0
- ------------------------------------------------------ ----------------- ----------------- -----------------
Mining Property (Notes 2 and 4)
0 0 1
- - -
- ------------------------------------------------------ ----------------- ----------------- -----------------
$ 2,863,730 $ 1,877,391 $ 31,496
- ------------------------------------------------------ ----------------- ----------------- -----------------
LIABILITIES
- ------------------------------------------------------ ----------------- ----------------- -----------------
Current liabilities
- ------------------------------------------------------ ----------------- ----------------- -----------------
Account payable (Note 7) $ 415,132 $ 373,336 $ 83,969
- ------------------------------------------------------ ----------------- ----------------- -----------------
Accrued liabilities 69,103 350,000 0
- ------------------------------------------------------ ----------------- ----------------- -----------------
Short-term loans payable (Note 8) 0 341,177 349,519
- ------------------------------------------------------ ----------------- ----------------- -----------------
484,235 1,064,513 433,488
- ------------------------------------------------------ ----------------- ----------------- -----------------
SHAREHOLDERS' EQUITY
- ------------------------------------------------------ ----------------- ----------------- -----------------
Common shares, no par value, unlimited authorized;
15,877,461, 14,105,919 and 5,759,927 issued and
outstanding at March 31, 1997, December 31, 1996 and
1995 (Note 5) 6,948,679 4,901,150 2,372,154
- ------------------------------------------------------ ----------------- ----------------- -----------------
Deficit (4,569,184) (4,088,272) (2,774,146)
- ------------------------------------------------------ ----------------- ----------------- -----------------
$ 2,863,730 $ 1,877,391 $ 31,496
- ------------------------------------------------------ ----------------- ----------------- -----------------
</TABLE>
(see accompanying notes to consolidated financial statements)
22
DURA PRODUCTS INTERNATIONAL INC.
(FORMERLY TRANSWAY CAPITAL INC.)
CONSOLIDATED STATEMENTS OF EARNINGS AND DEFICIT
<TABLE>
<CAPTION>
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Three month Three month
period period ended
ended March March 31,
31, 1997 1996 Year ended Year ended Year ended
December December 31, December
(unaudited) 31, 1996 1995 31, 1994
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Revenue $ $ $ $ $
------------- -------------- ------------- -------------- -------------
1,050 0
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Expenses
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Research and development 288,615 92,060 668,996 0 0
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
General & administration 117,944 55,292 635,351 66,628 87,470
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Sales and marketing 75,403 0 0 0 0
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Interest - short-term 0 0 9,779 27,044 24,843
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Loss on sale of investments 0 0 0 9,228 353,701
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Write-down of mining properties
(Note 2) 0 0 0 512,415 0
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Unrealized loss on investments 0 0 0 0 337,636
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Excess of book over cost on the
purchase of 155433 Canada Inc. 0 0 0 0 9,960
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Loss for the period 480,912 155,046 1,314,126 615,315 813,610
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Deficit, beginning of period 4,088,272 2,774,146 2,774,146 2,158,831 1,345,221
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Deficit, end of period $ 4,569,184 $ 2,929,192 $ 4,088,272 $ 2,774,146 $ 2,158,831
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Loss per share
$ (0.031) $ (0.020) $ (0.137) $ (0.107) $ (0.141)
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Weighed average common shares
outstanding 15,422,653 7,752,300 9,564,501 5,759,927 5,759,927
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
</TABLE>
(see accompanying notes to consolidated financial statements)
23
DURA PRODUCTS INTERNATIONAL INC.
(FORMERLY TRANSWAY CAPITAL INC.)
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Three month Three month
period period Year ended Year ended Year ended
ended March ended March December 31, December December
31, 1997 31, 1996 1996 31, 1995 31, 1994
(unaudited)
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Cash provided by (used in)
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Operating activities
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
(Loss) for the period $ (480,912) $ (155,046) $(1,314,126) $ (615,315) $ (813,610)
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Add non-cash items:
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Amortization 5,876 0 11,166 0 0
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Loss on sale of investments 0 0 0 9,228 353,701
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Write-down of mining properties
0 0 0 512,415 0
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Unrealized loss on investments 0 0 0 0 337,636
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Excess of book over cost on
purchase of 155433 Cana 0 0 0 0 9,960
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
(475,036) (155,046) (1,302,960) (93,672) (112,313)
------------ ------------ --------------- ------------- -------------
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Financing activities
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Change in accounts payable and
accrued liabilities (239,101) 97,814 639,367 57,036 (128,534)
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Change in short-term loans payable
(341,177) (139,175) (8,342) (20,046) 369,565
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Change in accounts receivable and
prepaid expenses (63,697) (88,751) (5,036) (1,710) (16,453)
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Issuance of common shares 2,047,529 899,094 2,528,996 0 1,000,000
------------- ------------- --------------- ------------- -------------
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
1,403,554 768,982 3,154,985 35,280 1,224,578
------------ ------------- --------------- ------------- -------------
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
24
Investing activities
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Additions to capital assets (446,999) (193,108) (1,159,893) 0 0
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Technology and other intangible
assets 0 (421,998) (679,967) 0 0
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Deferred exploration expense 0 0 1 (45,280) (4,636)
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Sale of tailings 0 0 0 0 20,000
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Purchase of 155433 Canada Inc. 0 0 0 0 (492,460)
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Proceeds on sale of investments 0 0 0 105,000 328,323
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Purchase of investments
-----------------------------------------------------------------------
0 0 0 0 (965,000)
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
(446,999) (615,106) (1,839,859) 59,720 (1,113,773)
------------ ------------ --------------- ------------- -------------
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Increase (decrease) in cash during
the period 481,519 (1,172) 12,166 1,328 (1,508)
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Cash (overdraft), beginning of
period 12,192 3,827 26 (1,302) 206
------ ----- -- ------- ---
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Cash (overdraft), end of period
$ 493,711 $ 2,655 $ 12,192 $ 26 $ (1,302)
------------ ------------- -------------- ------------- -------------
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Supplemental disclosures of cash
flow information:
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Cash paid for interest $ 0 $ 0 $ 19,202 $ 17,621 $ 24,843
Cash paid for income taxes $ 0 $ 0 $ 0 $ 0 $ 0
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
</TABLE>
(see accompanying notes to consolidated financial statements)
DURA PRODUCTS INTERNATIONAL INC.
(FORMERLY TRANSWAY CAPITAL INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1997 AND
SUBSEQUENT TO DECEMBER 31, 1996 IS UNAUDITED)
SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
These consolidated financial statements have been prepared in Canadian dollars
and in accordance with accounting principles generally accepted in Canada, which
conform, in all material respects, with accounting principles generally accepted
in the United States,
25
except as disclosed in Note 12.
In the opinion of management, the unaudited interim financial statements contain
all adjustments (consisting only of normal, recurring accruals), necessary to
present fairly, in all material respects, the financial position of the Company
as at March 31, 1997 and the results of its operations and changes in financial
position for the three month periods ended March 31, 1997 and 1996.
Effective February 6, 1997 the Company changed its name from Transway Capital
Inc. to Dura Products International Inc.
(B) PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of the Company and its wholly
owned subsidiary Dura Skid Inc. ("Dura Skid"). Effective February 7, 1997
Cantech Composites Inc. changed its name to Dura Skid Inc.
(C) CAPITAL ASSETS
Capital assets are recorded at cost, with amortization being provided for on a
straight-line basis as follows:
Computer equipment and software 3 years
Furniture and equipment 5 years
Leasehold improvements term of the lease plus one renewal period
Production equipment 10 years
Amortization in the year of purchase is calculated at one-half of the annual
rate. Amortization of production equipment will commence with commercial
production.
(D) TECHNOLOGY AND OTHER INTANGIBLE ASSETS
Through its acquisition of Dura Skid Inc., the Company acquired technology,
know-how and expertise related to composite materials, which is recorded at
cost. This asset is assessed for future recoverability on an annual basis by
estimating future net undiscounted cash flows and residual values. When the net
carrying amount of an intangible asset exceeds the estimated net recoverable
amount, the asset is written down with a charge against income.
Amortization of technology and other intangible assets will be recorded on a
straight-line basis over five years, commencing with commercial production.
(E) RESEARCH AND DEVELOPMENT
Research and development costs are expenses as incurred. Any investment tax
credits earned on these costs will be recorded as income when reasonable
assurance of recovery exists.
(F) MARKETABLE INVESTMENTS
26
Marketable investments are carried at the lower of cost and quoted market value.
The market value is the price of the most recent trade if the security traded on
the financial statement date or the "bid" price as reported by the Company's
brokers. Due to the variations in the number of securities represented and to
other factors, these prices may or may not be representative of the price which
might be obtained if the Company disposed of all of its securities on the
financial statement date.
(G) MINING PROPERTIES
Acquisition costs of mining claims together with direct exploration expenditures
thereon are deferred in the account to be amortized into income when production
is attained, or written off if disposition or abandonment occurs, or there is no
intention of further development.
(H) LOSS PER SHARE
The loss per share has been calculated using the weighted average number of
shares outstanding during the year.
(I) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid instruments with a maturity of three
months or less when purchased to be cash equivalents and are grouped with "Cash"
on the balance sheet.
(J) USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual amounts could differ from those estimates.
(K) FINANCIAL INSTRUMENTS
Due to the short-term nature of the Company's financial instruments, the market
value approximates their carrying values.
1. BASIS OF OPERATIONS
During 1996 the Company substantially completed its research and development on
a new proprietary composite material. The Company's first product using this
material is a pallet trademarked "Duraskid". As at December 31, 1996 the company
had a working capital deficiency of $1,015,816 ($401,993 December 31, 1995). The
Company's future is dependent upon its ability to raise additional capital to
meet its obligations and to commence commercial operations (see Note 10).
2. BUSINESS ACQUISITIONS AND DIVESTITURES
Effective January 15, 1996, the Company acquired 100% of the issued and
outstanding shares of Dura Skid for $400,000. The purchase price was settled by
the issuance of
27
1,000,000 common shares of the Company. The major asset of Dura Skid was
technology, know-how and expertise. Accordingly, the $400,000 was allocated to
technology and other intangible assets along with the accumulated shareholder
deficiency of Dura Skid plus legal expenses. In addition to the $400,000
purchase price, the Company granted warrants to the shareholders of Dura Skid
which entitle the warrant holders to purchase in the aggregate, 500,000 common
shares, at a per share price of $0.40, all of which were exercised during the
year. The acquisition was accounted for using the purchase method. The breakdown
of the purchase is as follows:
Cash $ 3,801
Other current assets 13,159
Capital and other assets 13,310
Current liabilities (261,915)
----------
Net liabilities acquired (231,645)
Technology and other intangible assets acquired 631,645
----------
Purchase price $ 400,000
----------
Effective September 28, 1996, the Company sold its 100% interest in 155433
Canada Ltd. ("155433") for $2.00. 155433 owns the mining properties which had
been written down to $1.00 as of December 31, 1995 (see Note 4).
3. CAPITAL ASSETS
Capital assets consist of:
March 31, 1997 Accumulated Net Book Value
Cost Amortization
Computer equipment and software $ 49,207 $ 10,879 $ 38,328
Furniture and fixtures 47,535 5,807 41,728
Leasehold improvements 5,055 356 4,699
Production equipment 1,505,094 0 1,505,094
------------ ------------- ------------
$ 1,606,891 $ 17,041 $ 1,589,850
------------ ------------- ------------
December 31, 1996 Accumulated Net Book Value
Cost Amortization
Computer equipment and software $ 42,428 $ 7,072 $ 35,356
Furniture and fixtures 38,569 3,857 34,712
Leasehold improvements 4,745 237 4,508
Production equipment 1,074,151 0 1,074,151
------------ ------------- -------------
$ 1,159,893 $ 11,166 $ 1,148,727
------------ ------------- -------------
28
Amortization expense for the three-month period ended March 31, 1997 was $5,876
and for the year ended December 31, 1996 was $11,166. No amortization expense
was reported for any other periods.
4. MINING PROPERTIES
Prior to 1996, the Company held 13 contiguous and one isolated patented mining
claims covering approximately 189 hectares in South
Lorraine Township, Timiskaming Mining Division, Ontario which were acquired at
the following cost. These properties were acquired as part of the transaction to
purchase 155433 Canada Inc. in 1994 for $467,136, cash.
- ------------------------------------------------------ -------------------------
1995
- ------------------------------------------------------ -------------------------
Mining claims - at cost $ 482,500
- ------------------------------------------------------ -------------------------
Exploration
- ------------------------------------------------------ -------------------------
Geology 47,402
- ------------------------------------------------------ -------------------------
Taxes and fees 2,514
- ------------------------------------------------------ -------------------------
532,416
- ------------------------------------------------------ -------------------------
Less: Proceeds on sale of tailings (20,000)
- ------------------------------------------------------ -------------------------
Write-down of properties (512,415)
- ------------------------------------------------------ -------------------------
Balance (see Note 2) $ 1
---------------------
- ------------------------------------------------------ -------------------------
The Company wrote down the carrying value of the properties as it did not intend
to pursue their development. Effective September 1996, the Company disposed of
the properties (see Note 2)
5. SHARE CAPITAL
Class A Special Shares
The Class A Special Shares are voting and may be issued in one or more series.
The directors of the Company may establish, before an issue, the number of
shares to comprise each series and the designation, rights, privileges,
restrictions and conditions attached to each series and without limiting the
generality of the foregoing, the rate or amount of dividends or the method of
calculating dividends, the dates of payment, the redemption, purchase and/or
conversion prices and terms and conditions of redemption and any sinking fund or
other provisions. As at December 31, 1996 and March 31, 1997, no Class A Special
Shares had been issued.
Class B Special Shares
The Class B Special Shares are designated as redeemable, voting,
non-participating shares. No dividends shall be declared, set aside or paid on
the Class B Special Shares. As at December 31, 1996 and March 31, 1997, no Class
B Special Shares had been issued.
<TABLE>
<CAPTION>
<S> <C> <C>
Common Shares Issued
Shares Amount
--------- ---------
Balance as of December 31, 1993 759,927 $ 1,372,154
Issue of shares for cash 5,000,000 1,000,000
--------- ---------
29
Balance as of December 31, 1994 and 1995
5,759,927 2,372,154
Acquisition of Dura Skid Inc. 1,000,000 400,000
Exercise of stock options 1,725,992 892,996
Exercise of warrants 5,500,000 1,200,000
Severance payment 120,000 36,000
------- ------
Balance, December 31, 1996 14,105,919 4,901,150
Issue for cash 1,182,612 1,402,929
Exercise of stock options 589,000 644,600
------- -------
Balance, March 31, 1997 15,877,531 $ 6,948,679
---------- ------------
</TABLE>
Stock options
The Company has issued stock options pursuant to the following plans:
(i) the 1995 stock option plan was limited to 575,992 shares in the aggregate,
and restricted to directors, officers, employees and consultants of the Company.
The exercise price of any options granted may not be less than the fair market
value at the time the option is granted. Vesting provisions are at the
discretion of the board. The term of the options cannot exceed five years.
(ii) the 1996 stock option plan was limited to 1,000,000 shares in the
aggregate, and restricted to directors, officers, employees and consultants of
the Company. The exercise price of any options granted may not be less than the
fair market value at the time the option is granted. Vesting provisions are at
the discretion of the board. The term of the options cannot exceed five years.
(iii) the 1996 replacement stock option plan was limited to 2,500,000 shares in
the aggregate, and restricted to directors, officers, employees and consultants
of the Company and its subsidiaries and other designated persons as designated
from time to time by the board. The exercise price of any options granted may
not be less than the fair market value at the time the option is granted.
Vesting provisions are at the discretion of the board. The term of the options
cannot exceed five years. This plan was subsequently amended to increase the
limit of shares from 2,500,000 to 5,000,000 shares in the aggregate.
<TABLE>
<CAPTION>
The following is a continuity of stock options outstanding:
Price per share Number
--------------- ------
<S> <C> <C>
Granted in 1995 at: $0.50 575,992
Granted during 1996 at: $0.50 1,000,000
Granted during 1996 at: $0.70 1,300,000
Exercised during 1996 at: $0.50 (1,575,992)
Exercised during 1996 at: $0.70 (150,000)
----- ----------
Balance, at December 31, 1996 at: $0.70 1,150,000
Granted during 1997 at: $1.10 577,000
Granted during 1997 at: $4.00 55,000
Exercised during 1997 at: $0.70 (407,000)
Exercised during 1997 at: $1.10 (127,000)
Exercised during 1997 at: $4.00 (55,000)
----- ----------
Balance, at March 31 at: $0.70 and $1.10 1,193,000
--------------- ----------
</TABLE>
Of the total options outstanding, 743,000, issued with an excercise price of
$0.70 per share expire on June 27, 2001, and 450,000, issued with an exercise
price of $1.10 per share expire on January 27, 2002. All options are currently
excercisable
<TABLE>
<CAPTION>
<S> <C> <C>
Warrants
The following is a continuity of warrants outstanding:
Price per share Number
--------------- ------
Issued in 1994 at: $0.20 5,000,000
Issued during 1996 at: $0.40 500,000
Exercised during 1996 at: $0.20 (5,000,000)
30
Exercised during 1996 at: $0.40 (500,000)
----- ---------
Balance at December 31, 1996 nil nil
Issued during 1997and balance at March 31, 1997
$0.90 1,182,612
----- ---------
</TABLE>
6. INCOME TAXES
As at December 31, 1996, the Company had operating losses of approximately
$2,334,800 available to offset future taxable income. The potential tax savings
of these losses have not been recognized in these financial statements. These
losses expire according to the following schedule:
December 31, 1997 $ 44,087
December 31, 1998 35,342
December 31, 1999 35,314
December 31, 2000 30,756
December 31, 2001 112,113
December 31, 2002 325,672
December 31, 2003 1,751,484
In addition, the Company has available capital losses of approximately
$2,022,000, which may be applied against future capital gains. These losses do
not expire. The potential tax savings of these losses have not been recognized
in these financial statements.
7. COMMITMENTS
The Company leases its premises and some office equipment. The lease for
premises is an operating lease. Office equipment is under capital lease. The
minimum lease payments for each of the next five years is as follows:
Operating leases Capital leases
---------------- --------------
1997 $ 97,128 $ 4,953
1998 159,012 1,971
1999 168,874 542
2000 148,060 0
less imputed interest (0) (1,069)
------------ --------
$ 573,074 $ 6,397
------------ --------
Capital leases are included with accounts payable and accrued liabilities.
Operating lease expense for the three month period ended March 31, 1997 was
$20,535 and for the year ended December 31, 1996 was $82,140.
The Company is subject to the payment of royalties to unrelated third parties on
product sales utilizing specific technologies. The payment of these royalties is
contingent upon the determination of the usage of these specific technologies.
8. SHORT TERM LOANS PAYABLE
31
Short-term loans payable are promissory notes payable repayable on demand. The
notes are non-interest bearing. Subsequent to year-end these notes were
refinanced through the completion of private placements (see Note 10).
9. CONTINGENCIES
During the year, the Company was notified of a filing of a statement of claim
against the Company and its former President pertaining to an alleged agreement
to obtain a private placement for shares of the Company. Management and the
company's legal counsel were of the opinion that such an agreement, if any was
solely between the plaintiff and the former President. The former President
agreed to indemnify the Company from any judgment regarding this action. Since
discovery of the plaintiff, no steps have been taken to pursue the claim.
10. SUBSEQUENT EVENTS
The Company completed the following financial arrangements:
(a) Private placement for 600,000 Units. Each Unit consisted of one common
share for $0.85 per share and one common share purchase warrant. Each
common share purchase warrant entitles the holder to purchase one common
share for $0.90 per share and 400,000 expires in March 1998 and 200,000
expires in June 1998. This private placement closed June 30, 1997.
(b) Private placement for 600,000 Units. Each Unit consisted of one common
share for $1.05 per share and one common share purchase warrant. The common
share purchase warrant entitles the holder to purchase one common share for
$1.10 per share and expires in January 1998. The Company received proceeds
of approximately $500,000 with the balance being received during the second
quarter and the placement closed June 30, 1997.
(c) Signed a letter of intent for a lease financing arrangement under a master
lease agreement for up to $3.1 million for extrusion equipment and related
components.
11. COMPARATIVE FIGURES
Certain prior years' comparative figures have been reclassified to conform to
the current year's presentation.
12. RECONCILIATION OF ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN CANADA AND
THE UNITED STATES The Company's accounting principles do not differ materially
from accounting principles generally accepted in the United States ("US GAAP")
except as follows:
32
(a) Income taxes
The Financial Accounting Standards Board has issued Statement 109 ("FAS 109"),
Accounting for Income Taxes. This standard uses the liability method to
calculate the income tax provision for reporting purposes. The Company adopted
FAS 109, for US GAAP purposes, effective January 1, 1993. Due to the significant
uncertainty relating to the Company's ability to utilize the loss carry-forwards
to offset taxable income, a valuation allowance equal to the net deferred tax
asset was provided for. Accordingly, no differences arise between FAS 109 and
Canadian generally accepted accounting principles.
(b) Deferred exploration expenses
US GAAP requires that exploration expenses be expensed in the year incurred. In
1994 and 1995 such expenses were incurred. Prior to 1994 all such expenses had
been written off and accordingly for the periods presented herein there is no
impact. The impact on 1995 is set out below.
(c) Statement of changes in financial position
During the year ended December 31, 1996 several non-cash transactions occurred
which for US GAAP purposes should be excluded from the statement. These
transactions include:
(i) the acquisition of Dura Skid Inc. The purchase price was settled
with the issuance of share capital. Accordingly, the purchase has been
reflected in investing activities and the issuance of share capital as
a financing activity, in the amount of $400,000;
(ii) share capital was issued for $36,000 as part of a severance
payment both of which were reflected as financing activities;
(iii) capital assets of $9,973 were acquired under capital leases.
These were reflected as investing and financing activities.
Since these non-cash transactions are pervasive throughout the statement, a
separate statement of changes in financial position has been prepared using US
GAAP, which is set out below.
(d) Business acquisition
The acquisition of Dura Skid Inc. in January 1996 (refer to Note 2) was settled
by way of common shares and share purchase warrants. Under US GAAP the share
purchase warrants must be valued and included in the purchase price. The value
ascribed to the warrants, as determined under the Black-Scholes model, was
$85,000, which would be added to Technology and other intangible assets. For the
periods ended December 31, 1996 and March 31, 1997 there is no impact on the
statements of earnings and deficit.
(e) Stock options
The Company has elected to follow ABP Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25") in accounting for its stock option plans. Under
APB 25 no compensation expense has been recognized. Statement of Financial
Accounting Standards No. 123 ("FAS 123"), Accounting and Disclosure of
Stock-Based Compensation, has been issued. For a description of the option plans
reference should be made to Note 5. The assumptions used in the Black-Sholes
model are as follows: the risk free interest rate used was 4%; expected
dividends was 0%; expected life ranged from .08 to 2.5; and expected volatility
ranged from .936 to 2.545. The weighted-average grant date fair value of options
granted during 1997 was $0.61; 1996 was $0.27; and 1995 was $0.32. The pro-forma
effect of the options granted under the option plans is presented below.
(f) Earnings per share
Statement of Financial Accounting Standards No. 128 ("FAS 128"), Earnings per
Share, has been issued. Due to the fact there are no common stock equivalents
for the periods presented, basic earnings (loss) per share under FAS 128 would
be equal to the primary earnings (loss) per shares numbers presented below.
Statement of Earnings and Deficit
33
<TABLE>
<CAPTION>
- ------------------------------------------- --------------- ---------------- --------------- ---------------
PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
MAR 31/97 MAR 31/96 DEC 31/96 DEC 31/95
- ------------------------------------------- --------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Loss for the period as reported under
Canadian GAAP $ 480,912 $ 155,046 $1,314,126 $ 615,315
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Add back write down of mining properties
0 0 0 (512,415)
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Deduct exploration expenses incurred
during the period 0 0 0 45,280
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Loss for the period as reported under US
GAAP 480,912 155,046 1,314,126 148,180
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Deficit, beginning of period 4,088,272 2,774,146 2,774,146 2,625,996
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Deficit, end of period $4,569,184 $2,929,192 $4,088,272 $2,774,146
- ------------------------------------------- --------------- ---------------- --------------- ---------------
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Loss per share $ (0.031) $ (0.020) $ (0.137) $ (0.026)
--------------- ---------------- --------------- ---------------
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Pro-forma disclosures under FAS 123
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Loss $ 886,702 $ 155,046 $ 1,940,126 $ 332,497
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Loss per share $ (0.056) $ (0.020) $ (0.203) $ (0.058)
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Statement of Changes in Financial Position
- ------------------------------------------- --------------- ---------------- --------------- ---------------
PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
MAR 31/97 MAR 31/96 DEC 31/96 DEC 31/95
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Operating activities:
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Loss for the period as reported under US
GAAP (480,912) (155,046) (1,314,126) (148,180)
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Add non-cash items:
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Amortization 5,876 0 11,166 0
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Loss on sale of investments 0 0 0 9,228
- ------------------------------------------- --------------- ---------------- --------------- ---------------
(475,036) (155,046) (1,302,960) (138,952)
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Financing activities:
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Change in account payable and accrued
liabilities (239,101) 97,814 592,119 57,036
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Change in short-term loans payable
(341,177) (139,175) (187,009) (20,046)
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Change in accounts receivable and prepaid
expenses (63,697) (88,751) 8,123 (1,710)
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Issuance of common shares 2,047,529 899,094 2,092,996 0
- ------------------------------------------- --------------- ---------------- --------------- ---------------
1,403,554 768,982 2,506,229 35,280
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Investing activities:
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Additions to capital assets (446,999) (193,108) (1,155,308) 0
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Mining properties and investments
0 0 1 105,000
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Technology and other intangible assets
0 (421,998) (39,597) 0
- ------------------------------------------- --------------- ---------------- --------------- ---------------
(446,999) (615,106) (1,194,904) 105,000
- ------------------------------------------- --------------- ---------------- --------------- ---------------
34
Net increase (decrease) in cash during
the period 481,519 (1,172) 8,365 1,328
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Cash (Bank indebtedness), beginning of
period 12,192 3,827 3,827 (1,302)
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Cash, end of period 493,711 2,655 12,192 26
- ------------------------------------------- --------------- ---------------- --------------- ---------------
</TABLE>
35
INDEX TO EXHIBITS
1.1 Articles of Incorporation as Amended
1.2 By-laws
3.1 Share Exchange Agreement dated as of January 15, 1996 by and between the
Company and its wholly-owned subsidiary Dura Skid, Inc.
3.2 Lease Agreement dated as of November 1, 1995 between Carrier Drive
Development Ltd. and the Company
3.3 Shareholder Rights Agreement dated as of April 23, 1997 between the
Company and the R-M Trust Company
3.4 Employment Agreement by and between Keith Carrigan and the Company dated
May 1, 1995
3.5 Employment Agreement by and between Carl McMurray and the Company dated
January 1, 1997
3.6 Employment Agreement by and between Weining Song and the Company dated
August 7, 1996
3.7 1996 Stock Option Plan
EXHIBIT 1.1
Form 1 Business Corporations Act, 1982
Ministry of Consumer and Commercial Relations, Ontario Ontario
Certificate Corporation #
This is to certify that these articles are effective on 562022
August 19, 1983
Articles of Incorporation
1. The name of the corporation is: Transway Explorations Inc.
2. The address of the registered office is: 45 Richmond Street West, #1205,
Toronto, Ontario M5H 1Z2
Name of Municipality: City of Toronto in the Municipality of Metropolitan
Toronto
3. Number (or minimum and maximum number) of directors is:
Minimum: two (2)
Maximum: Three (3)
4. The first director(s) is/are:
William P. Dickie 21 Hilltop Road, Toronto, Ontario M2C 3C8
(resident of Canada)
Norman Edward Heard 80 St. Clair Ave E. #905, Toronto, Ontario M4T 1N7
(resident of Canada)
5. Restriction, if any, on the business the corporation may carry on or on
powers the corporation may exercise. There are no such restrictions.
6. The classes and any maximum number of shares that the corporation is
authorized to issue. Ten million (10,000,000) common shares without par
value, and one million (1,000,000) preference shares.
7. Rights, privileges, restrictions and conditions (if any) attaching to each
class of shares and directors authority with respect to any class of shares
which may be issued in series:
(a) Provided that the special shares (hereinafter called the "Preference
Shares") shall have attached thereto the following:
(1) The Preference Shares shall be designated as redeemable, voting,
non-participating shares.
(2) No dividends at any time shall be declared, set aside or paid on the
Preference Shares.
(3) In the event of the liquidation, dissolution or winding up of the
corporation or other distribution of assets of property of the
corporation among shareholders for the purpose of winding up its affairs
the holders of the Preference Shares shall be entitled to receive from
the assets and property of the corporation a sum equivalent to the
consideration paid to the corporation for the issuance of the Preference
Shares held by them respectively before any amount shall be paid or any
property or assets of the corporation distributed to the holder of any
common shares or shares of any other class ranking junior to the
Preference Shares. After payment to the holders of the Preference Shares
of the amount so payable to them as above provided they shall not be
entitled to share in any further distribution of the assets or property
of the corporation.
(4) The Preference Shares shall be issued only for cash and may, if
authorized by the directors of the corporation, be accompanied by
warrants to purchase common
shares in the capital of the corporation on the basis of one warrant for
each Preference Share.
(5) In the event that warrants to purchase common shares in the capital of
the corporation which accompanied Preference Shares, are exercised, the
Preference Shares which such warrants accompanied shall be redeemed.
(6) The Preference Shares shall be redeemable in accordance with the
provisions set forth in Clause 7 hereof, upon notice by the corporation,
on payment for each share to be redeemed of the par value thereof.
(7) Subject to the provisions of Clause 5 hereof, the corporation may not
redeem the Preference Shares or any of them prior to the expiration of
five (5) years from the respective dates of issuance thereof, without
the prior consent of the holders of the Preference Shares to be
redeemed. The corporation shall redeem all the then-outstanding
Preference Shares five (5) years from the respective dates of issue of
the Preference Shares.
(8) The corporation may at any time or times purchase for cancellation all
or any part of the Preference Shares outstanding from time to time from
the holders thereof, at a price not exceeding the price paid to the
corporation therefor, with the consent of the holders thereof.
(9) The holders of the Preference Shares shall be entitled to receive notice
of and attend all meetings of shareholders of the corporation and shall
have one (1) vote for each Preference Share held at all meetings of the
shareholders of the corporation.
(b) Provided that the transfer of shares of the corporation shall be
restricted in that no shareholder shall be entitled to sell, assign,
transfer or otherwise dispose of any Preference Share or Preference
Shares without the prior written consent of The Ontario Securities
Commission.
8. The issue, transfer or ownership of shares is/is not restricted and the
restrictions (if any) are as follows: there is no restriction with
respect to the issue, transfer or ownership of common shares.
9. Other provisions, if any, are: there are no other provisions.
10. The names and addresses of the incorporators are: William P. Dickie 21
Hilltop Road Toronto, Ontario M2C 3C8 and Norman Edward Heard 80 St.
Clair Ave E. #905, Toronto, Ontario M4T 1N7.
These articles are signed in duplicate.
(signed) (signed)
William P. Dickie Norman Edward Heard
Form 3 Business Corporations Act, 1982
Ministry of Consumer and Commercial Relations, Ontario Ontario
Certificate Corporation #
This is to certify that these articles are effective on 562022
June 1, 1984
Articles of Amendment
1. The present name of the corporation is: Transway Explorations Inc.
2. The name of the corporation is changed to (if applicable): n/a
3. Date of incorporation/amalgamation: August 19, 1983
4. The articles of the corporation are amended as follows:
Be it Resolved That:
1. The Company be and it is hereby authorized to amend its Articles of
Incorporation by:
(a) deleting from the Articles the restriction on the number of common
shares without par value;
(b) deleting from the Articles the restriction on the number of preference
shares without par value;
(c) declaring that the preference shares of the Company consist of two
classes of shares:
(i) an unlimited number of Class A Special Shares without par value,
issuable in series;
(ii) an unlimited number of Class B Special Shares without par value;
(d) after giving effect to the foregoing, declaring that after such increase
the capital of the Company shall consist of:
(i) an unlimited number of common shares without par value of which
790,003 have been issued and are outstanding as fully paid and
non-assessable;
(ii) an unlimited number of Class A Special Shares without par value of
which none have been issued;
(iii)an unlimited number of Class B Special Shares without par value of
which 500,000 have been issued and are outstanding as fully paid and
non-assessable.
(e) determining that the minimum number of directors shall be 3 and the
maximum number of directors shall be 7 and the number of directors to be
elected at annual meetings of shareholders shall be such number as shall
be determined from time to time by resolution of the directors.
2. Any director or officer of the Company be and he is hereby authorized
and directed on behalf of the Company to deliver Articles of Amendment
in duplicate to the Ministry of Consumer Relations and to sign and
execute all documents and to do all such things necessary or advisable
in connection with the foregoing.
Class A Special Shares
(a) the Class A Special Shares without par value (which class is hereinafter
referred to as the "Class A Special Shares") shall, as a class, have
attached thereto the following:
(i) the Class A Special Shares may from time to time be issued in one or more
series and, subject to the following provision, and subject to the
sending of Articles of Amendment in prescribed form, and the endorsement
thereon of a Certificate of Amendment in respect thereof, the directors
may fix from time to time before such issue the number of shares that is
to comprise each series and the designation, rights, privileges,
restrictions and conditions attaching to each series of Class A Special
Shares including, without limiting the generality of the foregoing, the
rate or amount of dividends or the method of calculating dividends, the
dates of payment thereof, the redemption, purchase and/or conversion
prices and terms and conditions of redemption, purchase and/or
conversion, and any sinking fund or other provisions;
(ii) the Class A Special Shares of each series shall, with respect to the
payment of dividends and the distribution of assets or return of capital
in the event of liquidation, dissolution, or winding up or the
Corporation whether voluntary or involuntary, or any other return of
capital or distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs, rank on a parity
with the Class A Special Shares of every other series and be entitled to
preference over the common shares and over any other shares of the
Corporation ranking junior to the Class A Special Shares. The Class A
Special Shares of any series may also be given such other preferences,
not inconsistent with these articles, over the common shares and any
other shares of the Corporation ranking junior to such Class A Special
Shares as may be fixed in accordance with clause (a) (i);
(iii) if any cumulative dividends or amounts payable on the return of capital
in respect to the series of Class A Special Shares are not paid in full,
all series of Class A Special Shares shall participate rateably in
respect to such dividends and return of capital;
(iv) the Class A Special Shares of any series may be made convertible into
common shares;
(v) unless the directors otherwise determine in the Articles of Amendment
designating a series, no holder of Class A Special Shares shall be
entitled to receive notice of, attend, be represented at or vote in
respect thereof at any annual or special meeting of the Corporation
unless the meeting is convened for considering the winding up of the
Corporation, the amalgamation of the Corporation with another corporation
or corporations or sanction the sale of all or substantially all of its
assets or undertaking or other events specified in the Act, in any of
which events each holder of Class A Special Shares shall have one (1)
vote for each such share held;
(vi) the holders of Class A Special Shares shall not be entitled to vote
separately as a class or series upon a proposal, and shall not be
entitled to dissent pursuant to section 184(2) of the Business
Corporations Act, 1982 (or any other statutory provision of like or
similar effect from time to time in force) in respect to a resolution at
amend the Articles of the Corporation to;
(a) increase or decrease any maximum number of
authorized Class A Special Shares or any series thereof, or increase
any maximum number of authorized shares of a class or series having
rights or privileges equal or superior to the Class A Special Shares
or any series thereof;
(b) effect an exchange, reclassification or cancellation of the Class A
Special Shares or any series thereof; or
(c) create a new class or series of shares equal or superior to the Class
A Special Shares or any series thereof,
(vii) provided that the holders of Class A Special Shares shall be entitled to
receive notice of meeting of common shareholders called for the purpose
of authorizing an amendment to the Articles of the Corporation of the
nature referred to above.
Class B Special Shares
(a) the Class B Special shares without par value shall be designated as
redeemable, voting, non-participating Class B Special Shares without par
value;
(b) no dividends at any time shall be declared, set aside or paid on the
Class B Special Shares;
(c) in the event of the liquidation, dissolution or winding up of the
Corporation or other distribution of assets or property of the
Corporation among shareholders for the purpose of winding up its affairs,
the holders of the Class B Special Shares shall be entitled to receive
from the assets and property of the Corporation, a sum equivalent to the
aggregate of the amount paid up on the Class B Special Shares held by
them respectively before any amount shall be paid or any property or
assets of the Corporation distributed to the holders of any common shares
or shares of any other class ranking junior to the Class B Special
Shares. After payment to the holders of the Class B Special Shares of the
amount so payable to them as above provided, they shall not be entitled
to share in any further distribution of the assets or property of the
Corporation;
(d) the Class B Special Shares shall be redeemable at any time at the option
of the Corporation without the consent of the holders thereof on payment
for each Class B Special Shares to be redeemed of the amount paid up
thereon. In the case of redemption of Class B Special Shares, the
Corporation shall at least 30 days before the date specified for
redemption, mail to each person who at the date of mailing is a
registered holder of Class B Special Shares to be redeemed, a notice in
writing of the intention of the Corporation to redeem such Class B
Special Shares. Such notice shall be mailed by letter, postage prepaid,
addressed to each such shareholder at his address as it appears on the
records of the Corporation or in the event of the address of any such
shareholders not so appearing, then to the last known address of such
shareholder; provided, however, that accidental failure to give any such
notice to one (1) or more of such shareholders shall not affect the
validity of such redemption. Such notice shall set out the redemption
price and the date on which redemption is to take place, and, if part
only of the shares held by the person to whom it is addressed is to be
redeemed, the number thereof so to be redeemed. On or after the date so
specified for redemption, the Corporation shall pay or cause to be paid
to or to the order of the registered holders of the Class B Special
Shares to be redeemed, the redemption price thereof on presentation and
surrender at the head office of the Corporation or any other place
designated in such notice of certificated representing
the Class B Special Shares called for redemption. If a part only of the
shares represented by any certificate be redeemed, a new certificate for
the balance shall be issued at the expense of the Corporation. From and
after the date specified for redemption in any such notice, the holders
thereof shall not be entitled to exercise any of the rights of Class B
Special Shareholders in respect thereof unless payment of the redemption
price shall not be made upon presentation of certificates in accordance
with the foregoing provisions, in which case the rights of the Class B
Special Shareholders shall remain unaffected. The Corporation shall have
the right at any time after the mailing of notice of its intention to
redeem any Class B Special Shares to deposit the redemption price of the
shares so called for redemption or of such of the said Class B Special
Shares represented by certificates as have not at the date of such
deposit been surrendered by the holders thereof in connection with such
redemption, to a special account in any chartered bank or trust company
in Canada named in such notice, to be paid without interest to or to the
order of the respective holders of such Class B Special Shares called for
redemption upon representation and surrender to such bank or trust
company of the certificates representing the same, and upon such deposit
being made or upon the date specified for redemption in such Notice
whichever is the later, the Class B Special Shares in respect whereof
such deposit shall have been made shall be redeemed and the rights of the
holders thereof after such deposit or redemption date as the case may be
shall be limited to receiving, without interest, their proportionate part
of the total redemption price so deposited against presentation and
surrender of the certificates held by them respectively;
(e) the holders of the Class B Special Shares shall be entitled to receive
notice of and to attend at all meetings of shareholders of the
Corporation and shall be entitled to one (1) vote thereat for each Class
B Special Share held at all meeting of the shareholders of the
Corporation;
Common Shares
The holders of the common shares are entitled to one (1) vote per share at all
meetings of shareholders and to receive the property of the Corporation upon a
dissolution.
5. The amendment has been duly authorized as required by Sections 167 of the
Business Corporations Act.
6. The resolution authorizing the amendment was approved by the
shareholders/directors (as applicable) of the corporation on May 31,
1984.
These articles are signed in duplicate.
Transway Explorations Inc. By: President
Secretary
Form 3 Business Corporations Act
Ministry of Consumer and Commercial Relations, Ontario Ontario
Certificate Corporation #
This is to certify that these articles are effective on 562022
July 7, 1993
Articles of Amendment
1. The present name of the corporation is: Transway Explorations Inc.
2. The name of the corporation is changed to (if applicable): Transway Capital
Inc.
3. Date of incorporation/amalgamation: August 19, 1983
4. The articles of the corporation are amended as follows:
(1) the name of the Corporation is changed to Transway Capital Inc.; and
(2) the issued and outstanding common shares of the Corporation are
consolidated on the basis of one (1) new common share for every seven
(7) common shares.
5. The amendment has been duly authorized as required by Sections 168 & 170 (as
applicable) of the Business Corporations Act.]
6. The resolution authorizing the amendment was approved by the shareholders of
the corporation on July 7, 1993.
These articles are signed in duplicate.
Transway Explorations Inc. By: President
Form 3 Business Corporations Act
Ministry of Consumer and Commercial Relations, Ontario Ontario
Certificate Corporation #
This is to certify that these articles are effective on 562022
February 6, 1997
Articles of Amendment
1. The present name of the corporation is: Transway Capital Inc.
2. The name of the corporation is changed to (if applicable): Dura Products
International Inc.
3. Date of incorporation/amalgamation: August 19, 1983
4. The articles of the corporation are amended as follows:
(1) the name of the Corporation is changed to Dura Products International
Inc.
5. The amendment has been duly authorized as required by Sections 168 & 170 (as
applicable) of the Business Corporations Act.
6. The resolution authorizing the amendment was approved by the shareholders of
the corporation on May 30, 1996.
These articles are signed in duplicate.
Transway Capital Inc. By: Chief Financial Officer
EXHIBIT 1.2
By-Law No. B-1
A by-law relating generally to the transaction of the business and affairs of
Transway Explorations Inc.
(hereinafter called the "Corporation")
Contents
One - Interpretation
Two - Business of the Corporation
Three - Borrowing and Security
Four - Directors
Five - Committees
Six - Officers
Seven - Protection of Directors, Officers and Others
Eight - Shares
Nine - Dividends and Rights
Ten - Meetings of Shareholders
Eleven - Notices
Twelve - Effective Date
Be It Enacted as a by-law of the Corporation as follows:
Section One
Interpretation
1.01 Definitions. In the by-laws of the Corporation, unless the context
otherwise requires:
"Act" means The Business Corporations Act, 1982 (Ontario), or any statute
that may be substituted therefor, as from time to time amended,
"appoint" includes "elect" and vice versa;
"articles" means the articles on which is endorsed the certificate of
incorporation of the Corporation as from time to time amended or restated;
"board" means the board of directors of the Corporation and "director"
means a member of the board;
"by-laws" means this by-law and all other by-laws of the Corporation from
time to time in force and effect;
"cheque' includes a draft;
"Corporation" means the corporation incorporated under the Act by the said
certificate endorsed on the articles and named "Transway Explorations
Inc.";
"meeting or shareholders" includes an annual meeting of shareholders and a
special meeting of shareholders;
"offering Corporation" means a corporation as defined in the Act;
"special meeting of shareholders" includes a meeting of any class or
classes of shareholders and a special meeting of all shareholders entitled
to vote at an annual meeting of shareholders; and
"recorded address" has the meaning set forth in section 11.08.
Save as aforesaid, words and expressions defined in the Act, including
"resident Canadian" have the same meanings when used herein. Words
importing the
singular number include plural and vice versa; words importing gender
include the masculine, feminine and neuter genders; and words importing a
person include an individual, sole proprietorship, partnership,
unincorporated association, unincorporated syndicate, unincorporated
organization, trust, body corporate, and a natural person in his capacity
as trustee, executor, administrator, or other legal representative.
Section Two
Business of the Corporation
2.01 Registered Office. The registered office of the Corporation shall be
at the place within Ontario from time to time specified in the
articles and at such location therein initially as is specified in
the articles and thereafter as the board may from time to time
determine.
2.02 Corporate Seal. The Corporation may, but need not have, a corporate
seal and if one is adopted it shall be in a form approved from time
to time by the board,
2.03 Financial Year. Until changed by the board, the financial year of
the Corporation shall end on the last day of December in each year.
2.04 Execution of Instruments. Contracts, documents or instruments in
writing requiring execution by the Corporation may be signed by two
persons, one of whom holds the office of president or is the
solicitor of the corporation and the other of whom is a director or
the president, or the solicitor of the corporation or holds the
office of secretary of the corporation and all contracts, documents
or instruments in writing so signed shall be binding upon the
Corporation without any further authorization or formality. The
board is authorized from time to time by resolution to appoint any
officer of officers of any other person or persons on behalf of the
Corporation to sign and deliver either contracts, documents or
instruments in writing generally or to sign either manually or by
facsimile signature and deliver specific contracts, documents or
instruments in writing. The term "contracts, documents or
instruments in writing" as used in this by-law shall include
proxies, deeds, mortgages, hypothecs, pledges, discharges, releases,
main-levees, charges, conveyances, powers of attorney, transfers and
assignments of property of all kinds including, specifically and
without limitation transfers and assignments of shares, warrants,
bonds, debentures or other securities and all paper writings.
2.05 Banking Arrangement. The banking business of the Corporation,
including, without limitation, the borrowing of money and the giving
of security therefor, shall be transacted with such banks, trust
companies or other bodies corporate or organizations as may from
time to time be designated by or under the authority of the board.
Such banking business or any part thereof shall be transacted under
such agreements, instructions and delegations of powers as the board
may from time to time prescribe.
2.06 Voting Rights in Other Bodies Corporate. The signing officers of the
Corporation under section 2.04 may execute and deliver proxies and
arrange for the issuance of voting certificates or other evidence of
the right to exercise the voting rights attaching to any securities
held by the Corporation. Such instruments shall be in favour of such
persons as may be determined by the
officers executing or arranging for the same. In addition, the board
may from time to time direct the manner in which and the persons by
whom any particular voting rights or class of voting rights may or
shall be exercised.
2.07 Divisions. The board may cause the business and operations of the
Corporation or any part thereof to be divided into one or more
divisions upon such basis, including without limitation types of
business or operations, geographical territories, product lines or
goods or services, as may be considered appropriate in each case. In
connection with any such division the board or, subject to any
direction by the board, the chief executive officer may authorize
from time to time, upon such basis as may be considered appropriate
in each case;
(a) Subdivision and Consolidation - the further divisions of the
business and operations of any such division into sub-units
and the consolidation of the business and operations of any
such divisions and sub-units;
(b) Name - the designation of any such division or sub-unit by,
and the carrying on of the business and operations of any
such division or sub-unit under, a name other than the name
of the Corporation; provided that the Corporation shall set
out its name in legible characters in all places require by
law; and
(c) Officers - the appointment of officers for any such division
or sub-unit, the determination or their powers and duties,
and the removal of any of such officers as appointed,
provided that any such officers shall not, as such, be
officers of the Corporation.
Section Three
Borrowing and Security
3.01 Borrowing Power. Without limiting the borrowing powers of the
Corporation as set forth in the Act, but subject to the articles the
board may from time to time on behalf of the Corporation, without
the authorization of the shareholders:
(a) borrow money upon the credit of the Corporation;
(b) issue, reissue, sell or pledge bonds, debentures, notes or
other evidences of indebtedness or guarantee of the
Corporation, whether secured or unsecured;
(c) to the extent permitted by the Act, give directly or
indirectly financial assistance to any person by means of a
loan, a guarantee on behalf of the Corporation to secure
performance of any present or future indebtedness, liability
or obligation of any person, or otherwise; and
(d) mortgage, hypothecate, pledge or otherwise create a security
interest in all or any currently owned or subsequently
acquired real or personal, movable or immovable, property of
the Corporation including book debts, rights, powers,
franchises and undertakings, to secure any such bonds,
debentures, notes or other evidences of indebtedness or
guarantee or any other present or future indebtedness,
liability or obligation of the Corporation.
Nothing in this section limits or restricts the borrowing of money by the
Corporation on bills of exchange or promissory notes made, drawn,
accepted or endorse by or on behalf of the Corporation.
3.02 Delegation. Subject to the Act and the articles the board may from
time to time delegate to a committee of the board, a director or an
officer of the Corporation or any other person as may be designated
by the board all or any of the powers
conferred on the board by section 3.01 or by the Act to such extent and in
such manner as the board may determine at the time of such delegation.
Section Four
Directors
4.01 Number of Directors. Until changed in accordance with the Act, the
board shall consist of not fewer than the minimum number and not
more than the maximum number of directors provided in the articles.
4.02 Qualification. No person shall be qualified for election as a
director if he is less than 18 years of age, if he is of unsound
mind and has been so found by a court in Canada or elsewhere; if he
is not an individual; of if he has the status of a bankrupt. A
director need not be a shareholder. A majority of the directors
shall be resident Canadians.
4.03 Election and Terms. The election of directors shall take place at
each annual meeting of shareholders and all the directors then in
office shall retire but, if qualified, shall be eligible for
re-election. Subject to the Act, the number of directors to be
elected at any such meeting shall be the number of directors
determined from time to time by special resolution or, if the
special resolution empowers the directors to determine the number,
by resolution of the board. Where the shareholders adopt an
amendment to the articles to increase the number or minimum number
of directors, the shareholders may, at the meeting at which they
adopt the amendment, elect the additional number of directors
authorized by the amendment. The election shall be by resolution. If
an election of directors is not held at the proper time, the
incumbent directors shall continue in office until their successors
are elected.
4.04 Removal of Directors. Subject to the Act, the shareholders may by
ordinary resolution passed at an annual or special meeting of
shareholders remove any director from office and the vacancy created
by such removal may be filled at the same meeting, failing which it
may be filled by the board.
4.05 Vacation of Office. A director ceases to hold office when he dies,
he is removed from office by the shareholders, he ceases to be
qualified for elections as a director, or his written resignation is
received by the Corporation, or, if a time is specified in such
resignation, at the time so specified, whichever is later.
4.06 Vacancies. Subject to the Act, a quorum of the board may fill a
vacancy in the board, except a vacancy resulting from an increase in
the number or minimum number of directors or from a failure of the
shareholders to elect the number or minimum number of directors.
4.07 Action by the Board. Subject to any unanimous shareholder agreement,
the board shall manage or supervise the management of the business
and affairs of the Corporation. The powers of the board may be
exercised at a meeting (subject to sections 4.08 and 4.09) at which
a quorum is present or by resolution in writing signed by all the
directors entitled to vote on that resolution at a meeting of the
board. Where there is a vacancy in the board, the remaining
directors may exercise all the powers of the board so long as a
quorum remains in office. Where the Corporation has a board
consisting of only one director, that director may constitute a
meeting.
4.08 Canadian majority at Meetings. The board shall not transact business
at a meeting, other than filling a vacancy in the board, unless a
majority of the directors present are resident Canadians, except
where
(a) a resident Canadian director who is unable to be present
approves in writing or by telephone, electronic, or other
communications facilities the business transacted at the
meeting; and
(b) a majority of resident Canadians would have been present had
that director been present at the meeting.
4.09 Meeting by Telephone. If all the directors of the Corporations
consent thereto generally or in respect of a particular meeting, a
director may participate in a meeting of the board of a committee of
the board by means of such telephone, electronic or other
communications facilities as permit all persons participating in the
meeting to communicate with each other, simultaneously and
instantaneously, and a director participating in such a meeting by
such means is deemed to be present at the meeting. Any such consent
shall be effective whether given before or after the meeting to
which it relates and may be given with respect to all meetings of
the board and of committees of the board.
4.10 Place of Meetings. Meetings of the board may be held at any place
within or outside Ontario and in any financial year of the
Corporation a majority of the meetings need not be held in Canada.
4.11 Calling of Meetings. Meetings of the board shall be held from time
to time at such time and at such place as the board, the chairman of
the board, the managing director, the president or any two directors
may determine.
4.12 Notice of Meeting. Notice of the time and place of each meeting of
the board shall be given in the manner provided in section Eleven to
each director not less than 48 hours before the time when the
meeting is to be held. A notice of a meeting of directors need not
specify the purpose of or the business to be transacted at the
meeting except where the Act requires such purpose or business of
the general nature thereof to be specified.
4.13 First Meeting of New Board. Provided a quorum of directors is
present, each newly elected board may without notice hold its first
meeting immediately following the meeting of shareholders at which
such board is elected.
4.14 Adjourned Meeting. Notice of an adjourned meeting of the board is
not required if the time and place of the adjourned meeting is
announced at the original meeting.
4.15 Regular Meetings. The board may appoint a day or days in any month
or months for regular meeting of the board at a place and hour to be
named. A copy of any resolution of the board fixing the place and
time of such regular meetings shall be sent to each director
forthwith after being passed, but not other notice shall be required
for any such regular meeting except where the Act required the
purpose thereof or the business to be transacted thereat to be
specified.
4.16 Chairman. The chairman of any meeting of the board shall be the
first mentioned of such of the following officers as have been
appointed and who is a director and is present at the meeting;
chairman of the board, managing director or president. If no such
officer is present, the directors present shall choose one of their
number to be chairman.
4.17 Quorum. Subject to section 4.08, the quorum for the transaction of
business at any meeting of the board shall be two-fifths of the
number of directors or minimum number of directors, as the case may
be, or such greater number of directors as the board may from time
to time determine.
4.18 Votes to Govern. At all meetings of the board every question shall
be decided by a majority of the votes cast on the question. In case
of an equality of votes the chairman of the meeting shall be
entitled to a second or casting vote.
4.19 Conflict of Interest. A director who is a party to, or who is a
director or officer of or has a material interest in any person who
is a party to, a material contract or transaction or proposed
material contract or transaction with the Corporation shall disclose
to the Corporation the nature and extent of his interest at the time
in the manner provided by the Act. Such a director shall not vote on
any resolution to approve the same except as provided by the Act.
4.20 Remuneration and Expenses. The directors shall be paid such
remuneration for their services as the board may from time to time
determine. The directors shall also be entitled to be reimbursed for
travelling and other expenses properly incurred by them in attending
meetings of the board or any committee thereof. Nothing herein
contained shall preclude any director from serving the Corporation
in any other capacity and receiving remuneration thereof.
4.21 Submission of Contracts or Transactions. The board of directors in
its discretion may submit any contract, act or transaction for
approval, confirmation or ratification at any annual meeting of the
shareholders or at any special meeting of the shareholders called
for the purpose of considering the same and, subject to the
provisions of the Act, any such contract, act or transaction that
shall be approved or ratified or confirmed by a resolution passed by
a majority of the votes cast at any such meeting (unless any
different or additional requirement is imposed by the Act or by the
Corporation's articles or any other by-law) shall be valid and as
binding upon the Corporation and upon all the shareholders as though
it had been approved, ratified or confirmed by every shareholder of
the Corporation.
Section Five
Committees
5.01 Committees of the Board. The board may appoint from their number one
or more committees of the board, however designated, and delegate to
any such committee any of the powers of the board except those which
pertain to items which, under the Act, a committee of the board has
no authority to exercise. A majority of the members of any such
committee shall be resident Canadians.
5.02 Transaction of Business. The powers of a committee of the board may
be exercised by a meeting at which a quorum is present or by
resolution in writing signed by all members of such committee who
have been entitled to vote on that resolution at a meeting of the
committee. Meetings of such committee may be held at any place in or
outside Ontario.
5.03 Audit Committee. The board of an offering corporation shall elect
annually form among its numbers an audit committee to be composed of
not fewer than 3 directors of whom a majority shall not be officers
or employees of the Corporation or its
affiliates. The audit committee shall have the powers and duties
provided in the Act.
5.04 Advisory Bodies. The board may from time to time appoint such
advisory bodies as it may deem advisable.
5.05 Procedure. Unless otherwise determined by the board each committee
and advisory body shall have the poser to fix its quorum to not less
than a majority of its members, to elect its chairman and to
regulate its procedure.
Section Six
Officers
6.01 Appointment. The board may from time to time appoint a president,
one or more vice-presidents (to which title may be added words
indicating seniority or function), a secretary, a treasurer and such
other officers as the board may determine, including one or more
assistants to any of the officers so appointed. One person may hold
more than one office. The board may specify the duties of and, in
accordance with this by-law and subject to the Act, delegate to such
officers powers to manage the business and affairs of the
Corporation. Subject to section 6.02 and 6.03 an officer may but
need not be a director.
6.02 Chairman of the Board. The board may from time to time also appoint
a chairman of the board who shall be a director. If appointed, the
board may assign to him any of the powers and duties that are by any
provisions of this by-law assigned to the managing director or to
the president; and he shall have such other powers and duties as the
board may specify.
6.03 Managing Director. The board may from time to time also appoint a
managing director who shall be a resident Canadian and a director.
If appointed, he shall be the chief executive officer and, subject
to the authority of the board, shall have general supervision of the
business and affairs of the Corporation; and he shall have such
other powers and duties as the board may specify. During the absence
or disability of the president, or if no president has been
appointed, the managing director shall also have the powers and
duties of that office.
6.04 President. The president shall be the chief executive officer of the
Corporation unless otherwise determined by resolution of the board
of directors. The president shall be vested with and may exercise
all the powers and shall perform all the duties of the chairman of
the board and/or vice-chairman of the board if none be appointed or
if the chairman of the board and/or vice-chairman of the board are
absent or are unable or refuse to act; provided, however, that
unless he is a director he shall not preside as chairman at any
meeting of directors or of any committee of directors, if any, or,
subject to section 10 of this by-law, at any meeting of
shareholders.
6.05 Vice-President. The vice-president or, if more than one, the
vice-presidents, in order of seniority, shall be vested with all the
powers and shall perform all the duties of the president in the
absence of or inability or refusal to act of the president;
provided, however, that a vice-president who is not a director shall
not preside as chairman at any meeting of directors or of the
committee of directors, if any, subject to section 10 of this
by-law, at any meeting of shareholders.
6.06 Secretary. Unless otherwise determined by the board, the secretary
shall be the secretary of all meetings of the board, shareholders
and committees of the board
that he attends. The secretary shall enter or cause to be entered in
records kept for that purpose minutes of all proceedings at meetings
of the board, shareholders and committees of the board, whether or
not he attends such meetings; he shall give or cause to be given, as
and when instructed, all notices to shareholders, directors,
officers, auditors and member of committees of the board; he shall
be the custodian of the stamp or mechanical device generally used
for affixing the corporate seal of the Corporation and of all books,
records and instruments belonging to the corporation, except when
some other officer or agent has been appointed for that purpose; and
he shall have such other powers and duties as otherwise may be
specified.
6.07 Treasurer. Subject to the provisions of any resolution of the board
of directors, the treasurer shall have the care and custody of all
the funds and securities of the Corporation and shall deposit the
same in the name of the Corporation in such bank or banks or with
such other depositary or depositaries as the board of directors may
direct. He shall keep or cause to be kept the accounting records
referred to in the Act. He may be required to give such bond for the
faithful performance of his duties as the board of directors in its
uncontrolled discretion may require but no director shall be liable
for failure to require any such bond or for the insufficiency of any
such bond or for any loss by reason of the failure of the
Corporation to receive any indemnity thereby provided.
6.08 Powers and Duties of Officers. All officers shall sign contracts,
documents or instruments in writing as require their respective
signatures and shall respectively have and perform all powers and
duties respectively as may from time to time be assigned to them by
the board. Any of the powers and duties of an officer to whom an
assistant has been appointed may be exercised and performed by such
assistant, unless the board or chief executive officer otherwise
directs.
6.09 Remuneration and Removal. The remuneration of all officers appointed
by the board of directors shall be determined from time to time by
resolution of the board of directors. The fact that any officers or
employee is a director or shareholder of the Corporation shall not
disqualify him from receiving such remuneration as may be
determined. All officers, in the absence of agreement to the
contrary, shall be subject to removal by resolution of the board of
directors at any time, with or without cause.
6.10 Agents and Attorneys. The Corporation, by or under the authority of
the board, shall have power from time to time to appoint agents or
attorneys for the Corporation in or outside Canada with such powers
(including the power to subdelegate) of management, administration
or otherwise as may be thought fit.
6.11 Conflict of Interest. An officer shall disclose his interest in any
material contract or transaction with the Corporation in the same
manner as provided for in section 4.19.
Section Seven
Protection of Directors, Officers and Others
7.01 Limitation of Liability. Every director and officer of the
Corporation in exercising his powers and discharging his duties
shall act honestly and in good faith with a view to the best
interests of the Corporation and exercise the care, diligence and
skill that a reasonable prudent person would exercise in comparable
circumstances.
Subject to the foregoing, no director or officer shall be liable for
the acts, receipts, neglects or defaults of any other director,
officer or employee, or for joining in any receipt or other act for
conformity, or for any loss, damage or expense happening to the
Corporation through the insufficiency or deficiency of title to any
property acquired for or on behalf of the Corporation, or for the
insufficiency or deficiency of any security in or upon which any of
the moneys of the Corporation shall be invested, or for any loss or
damage arising from the bankruptcy, insolvency or tortious acts of
any person with whom any of the moneys, securities or effects of the
Corporation shall be deposited, or for any loss occasioned by any
error of judgment or oversight on his part, or for any other loss,
damage or misfortune which shall happen in the execution of the
duties of his office or in relation thereto; provided that nothing
herein shall relieve any director or officer from the duty to act in
accordance with the Act and the regulations thereunder or from
liability for any breach thereof.
7.02 Indemnity. Subject to the Act, the Corporation shall indemnify a
director or officer, a former director or officer, or a person who
acts or acted at the Corporation's request as a director or officer
of a body corporate of which the Corporation is or was a shareholder
or creditor, and his heirs and legal representatives, against all
costs, charges and expenses, including an amount paid to settle an
action or satisfy a judgment, reasonable incurred by him in respect
of any civil, criminal or administrative action or proceeding to
which he is made a part by reason of being or having been director
or officer of the Corporation or such body corporate, if (a) he
acted honestly and in good faith with a view to the best interests
of the Corporation; and (b) in the case of a criminal or
administrative action or proceeding that is enforced by a monetary
penalty, he had reasonable ground for believing that his conduct was
lawful. The Corporation shall also indemnify such person in such
other circumstances as the Act or law permits or requires. Nothing
in this by-law shall limit the right of any person entitled to
indemnity to claim indemnity apart from the provisions of this
by-law.
7.03 Insurance. Subject to the Act, the Corporation may purchase and
maintain such insurance for the benefit of any person referred to in
section 7.02 hereof as the board may from time to time determine.
7.04 Material Interest. In supplement of and not by way of limitation
upon any rights conferred upon directors by the Act, it is declared
that no director shall be disqualified by his office from, or vacate
his office by reason of, holding any office or place of profit under
the Corporation or under any body corporate in which the Corporation
shall be a shareholder or by reason of being otherwise in any way
directly or indirectly interested or contracting with the
Corporation either as vendor, purchaser or otherwise or being
concerned in any contract or arrangement made or proposed to be
entered into with the Corporation in which he is in any way directly
or indirectly interested either as vendor, purchaser or otherwise
not shall any director be liable to account to the Corporation or
any if its shareholders or creditors for any profit arising from any
such office or place or profits; and, subject to the provisions of
the Act, no contract or arrangement entered into by or on behalf of
the Corporation in which any director shall be in any way directly
or indirectly interested shall be avoided or voidable and no
director shall be liable to account to
the Corporation or any of its shareholders or creditors for any
profit realized by or from any such contract or arrangement by
reason of any fiduciary relationship. Notwithstanding the provisions
of the Act, every director and officer shall declare any material
interest in respect of a material transaction, material contract,
proposed material contract or proposed material transaction with the
Corporation or an affiliate of the Corporation in which such
director or affiliate is in any way directly or indirectly
interested and any director shall refrain from voting in respect of
such contract, proposed contract or transaction.
Section Eight
Shares
8.01 Allotment of Shares. Subject to the Act and the articles the board
may from time to time allot or grant options to purchase the whole
or any part of the authorized and unissued shares of the Corporation
at such times and to such persons and for such consideration as the
board shall determine, provide that no share shall be issued until
it is fully paid as provided by the Act.
8.02 Commissions. The board may from time to time authorize the
Corporation to pay a reasonable commission to any person in
consideration of his purchasing or agreeing to purchase shares of
the Corporation, whether from the Corporation or from any other
person, or procuring or agreeing to procure purchasers for any such
shares.
8.03 Registration of Transfers. Subject to the Act, no transfer of a
share shall be registered in a securities register except upon
presentation of the certificate representing such share with an
endorsement which complies with the Act made thereon or delivered
therewith duly executed by an appropriate person as provided by the
Act, together with such reasonable assurance that the endorsement is
genuine and effective as the board may from time to time prescribe
and upon payment of all applicable taxes and any reasonable fees
prescribed by the board and upon compliance with such restrictions
on issue, transfer or ownership as are authorized by the articles.
8.04 Other Securities Registers. A securities registered and the register
of transfers of the Corporation shall be kept at the registered
office of the Corporation or at such other office of place in
Ontario as may from time to time be designated by resolution of the
Board and a branch securities register or registers of transfers may
be dept at such office or offices of the Corporation or other place
or places, either in or outside Ontario, as may from time to time be
designated by resolution of the Board.
8.05 Non-recognition of Trusts. Subject to the Act, the Corporation may
treat the registered holder of any share as the person exclusively
entitled to vote, to receive notices, to receive any dividend or
other payment in respect of the share, and otherwise to exercise all
the rights and powers of an owner of the share.
8.06 Share Certificates. Every holder of one or more shares of the
Corporation shall be entitled, at his option, to a share
certificate, or to a non-transferable written certificate of
acknowledgement of his right to obtain a share certificate, stating
the number of class or series of shares held by him as shown on the
securities register. Such certificates shall be in such form as the
board may from time to time approve.
Any such certificate shall be signed in accordance with section 2.04
and need not be under corporate seal.
8.07 Replacement of Share Certificates. The board or any officer or agent
designated by the board may in its discretion direct the issue of a
new share or other such certificate in lieu of and upon cancellation
of a certificate claimed to have been lost, apparently destroyed or
wrongfully taken on payment of such reasonable fee and on such terms
as to indemnity, reimbursement of expenses and evidence of loss and
of title as the board may from time to time prescribe, whether
generally or in any particular case.
8.08 Joint Shareholders. If two or more persons are registered as joint
holders of any share, the Corporation shall not be bound to issue
more than one certificate in respect thereof, and delivery of such
certificate to one of such persons shall be sufficient delivery to
all of them. Any one of such persons may give effectual receipts for
the certificate issued in respect thereof or for any dividend,
bonus, return of capital or other money payable or warrant issuable
in respect of such share.
8.09 Deceased Shareholders. In the event of death of a holder, or of one
of the joint holders, of any share, the Corporation shall not be
required to make any entry in the securities register in respect
thereof or to make any dividend or other payments in respect thereof
except upon production of all such documents as may be required by
law and upon compliance with the reasonable requirements of the
Corporation and its transfer agents.
8.10 Transfer Agent and Registrar. The directors may from time to time by
resolution appoint or remove one or more transfer agents and/or
branch transfer agents and/or registrars and/or branch registrars
(which may or may not be the same individual or body corporate) for
the securities issued by the Corporation in registered form (or for
such securities of any class or classes) and may provide for the
registration of transfers of such securities (or such securities of
any class or classes) in one or more places and such transfer agents
and/or branch transfer agents and/or registrars and/or branch
registrars shall keep all necessary books and registers of the
Corporation for the registering of such securities (or such
securities of the class or classes in respect of which any such
appointment has been made). In the event of any such appointment in
respect of the shares (or the shares of any class or classes) of the
Corporation, all share certificates issued by the Corporation in
respect of the shares (or shares of the class or classes in respect
of which any such appointment has been made) of the Corporation
shall be countersigned by or on behalf of one of the said transfer
agents and/or branch transfer agents and by or no behalf of one of
the said registrars and/or branch registrars, if any. One person may
be designated both registrar and transfer agent.
8.11 Shareholder Indebted to the Corporation. Subject to the Act, the
Corporation has a lien on a share registered in the name of a
shareholder or his legal representative for a debt of that
shareholder to the Corporation. By way of enforcement of such lien
the directors may refuse to permit the registration of a transfer of
such share.
Section Nine
Dividends and Rights
9.01 Dividends. Subject to the Act, the board may from time to time
declare dividends payable to the shareholders according to their
respective rights and interests in the Corporation. Dividends may be
paid in money or property or by issuing fully paid shares of the
Corporation or options or rights to acquire fully paid shares of the
Corporation. Any dividend unclaimed after a period of 6 years from
the date on which the same has been declared to be payable shall be
forfeited and shall revert to the Corporation.
9.02 Dividend Cheques. A dividend payable in money shall be paid by
cheque to the order of each registered holder of shares of the class
or series in respect of which it has been declared and mailed by
prepaid ordinary mail to such registered holder at his recorded
address, unless such holder otherwise directs. In the case of joint
holders the cheque shall, unless such joint holders otherwise
direct, be made payable to the order of all of such joint holders
and mailed to them at their recorded address. The mailing of such
cheque as aforesaid, unless the same is not paid on due
presentation, shall satisfy and discharge the liability for the
dividend to the extent of the sum represented thereby plus the
amount of any tax which the Corporation is required to and does
withhold. In the event of non-receipt of any dividend cheques by the
person to whom it is sent as aforesaid, the Corporation shall issue
to such person a replacement cheque for a like amount on such terms
as to indemnity, reimbursement or expenses and evidence of
non-receipt and of title as the board may from time to time
prescribe, whether generally or in any particular case.
9.03 Record Date for Dividends and Rights. The board may fix in advance a
date, preceding by not more than 50 days the date for the payment of
any dividend or the date for the issue of any warrant or other
evidence of the right to subscribe for securities of the
Corporation, as a record date for the determination of the persons
entitled to receive payment of such dividend or to exercise the
right to subscribe for such securities, and notice of any such
record date shall be given not less than 7 days before such record
date in the manner provided by the Act. If no record date is so
fixed, the record date for the determination of the persons entitled
to receive payment of any dividend or to exercise the right to
subscribe for securities of the Corporation shall be at the close of
business on the day on which the resolution relating to such
dividends or right to subscribe is passed by the board.
Section Ten
Meeting of Shareholders
10.01 Annual Meetings. The annual meeting of shareholders shall be held at
such time in each year and, subject to section 10.03, at such place
as the board, the chairman of the board, the managing director or
the president may from time to time determine, for the purpose of
considering the financial statements and reports required by the Act
to be placed before the annual meeting, electing directors,
appointing auditors and for the transaction of such other business
as may properly be brought before the meeting.
10.02 Special Meetings. The board, the chairman of the board, the managing
director or the president shall have power to call a special meeting
of shareholders at any time.
10.03 Place of Meeting. Meetings of shareholders of the Corporation shall
be held at such place in or outside Ontario as the directors
determine or, in the absence of such a determination, at the place
where the registered office of the Corporation is located.
10.04 Notice of Meetings. A printed, written or typewritten notice stating
the day, hour and place of meeting shall be given by serving such
notice on each shareholder entitled to vote at such meeting, on each
director and on the auditor of the Corporation in the manner
specified in section 11 of this by-law, not less than ten days or if
the Corporation is an offering Corporation not less than twenty-one
days but in either case not more than fifty days (in each case,
subject to the Act, exclusive of the day on which the notice is
delivered or sent and the day for which notice is given) before the
date of the meeting. Notice of a meeting at which special business
is to be transacted shall state or be accompanied by a statement of
(a) the nature of that business in sufficient detail to permit the
shareholder to form a reasoned judgment thereon, and (b) the text of
any special resolution or by-law to be submitted to the meeting.
10.05 List of Shareholders Entitled to Notice. For every meeting of
shareholders, the Corporation shall prepare a list of shareholders
entitled to receive notice of the meeting, arranged in alphabetical
order and showing the number of shares held by each shareholder
entitled to vote at the meeting. If a record date for the meeting is
fixed pursuant to section 10.06, the shareholders listed shall be
those registered at the close of business on such record date. If no
record date is fixed, the shareholders listed shall be those
registered at the close of business on the day immediately preceding
the day on which notice of the meeting is given or, where no such
notice is given, the day on which the meeting is held. The list
shall be available for examination by any shareholder during usual
business hours at the registered office of the Corporation or at the
place where the central securities register is maintained and at the
meeting for which the list was prepared. Where a separate list of
shareholders has not been prepared the names of persons appearing in
the securities register at the requisite time as the holder of one
or more shares carrying the right to vote at such meeting shall be
deemed to be a list of shareholders.
10.06 Record Date for Notice. The board may fix in advance a date,
preceding the date of any meeting of shareholders by not more than
50 days and not less than 21 days, as a record date for the
determination of the shareholders entitled to notice of the meeting,
and notice of any such record date shall be given not less than
seven days before such record date by newspaper advertisement in the
manner provided by the Act and, if any shares of the Corporation are
listed for trading on a stock exchange in Canada, by written notice
to each such stock exchange. If no record date is so fixed, the
record date for the determination of the shareholders entitled to
notice of the meeting shall be at the close of business on the day
immediately preceding the day on which the notice is given or, if no
notice is given, the day on which the meeting is held.
10.07 Meetings Without Notice. A meeting of shareholders may be held
without notice at any time and place permitted by the Act (a) if all
the shareholders entitled to vote thereat are present or duly
represented or if those not present or represented
waive notice of or otherwise consent to such meeting being held, and
(b) if the auditors and the directors are present or waive notice of
or otherwise consent to such meeting being held; so long as such
shareholders, auditors or directors present are not attending for
the express purpose of objecting to the transaction of business on
the grounds that the meeting is not lawfully called. At such a
meeting any business may be transacted which the Corporation at a
meeting of shareholders may transact.
10.08 Chairman, Secretary and Scrutineers. The chairman of any meeting of
shareholders shall be the first mentioned of such of the following
officers as have been appointed and who is present at the meeting;
managing director, president; chairman of the board, or a
vice-president who is a shareholder. If no such officer is present
within 15 minutes from the time fixed for holding the meeting, the
persons present and entitled to vote shall choose one of their
number to be chairman. If the secretary of the Corporation is
absent, the chairman shall appoint some person, who need not be a
shareholder, to act as secretary of the meeting. If desired, one or
more scrutineers, who need not be shareholders, may be appointed by
a resolution or by the chairman with the consent of the meeting.
10.09 Persons Entitled to be Present. The only persons entitled to be
present at a meeting of shareholders shall be those entitled to vote
thereat, the directors and auditor of the Corporation and others
who, although not entitled to vote, are entitled or required under
any provision of the Act or the articles or by-laws to be present at
the meeting. Any other person may be admitted only on the invitation
of the chairman of the meeting or with the consent of the meeting.
10.10 Quorum. Subject to the Act in respect of a majority shareholder, a
quorum for the transaction of business at any meeting of
shareholders shall be two persons present in person, each being a
shareholder entitled to vote thereat or a duly appointed proxyholder
or representative for a shareholder so entitled. If a quorum is
present at the opening of any meeting of shareholders, the
shareholders present or represented may proceed with the business of
the meeting notwithstanding that a quorum is not present throughout
the meeting. If a quorum is not present at the time appointed for
the meeting or within a reasonable time thereafter as the
shareholders may determine, the shareholders present or represented
may adjourn the meeting to a fixed time and place but may not
transact any other business.
10.11 Right to Vote. Every person named in the list referred to in section
10.05 shall be entitled to vote the shares shown thereon opposite
his name at the meeting to which such list relates, except to the
extent that (a) where the Corporation has fixed a record date in
respect of such meeting, such person has transferred any of his
shares after such record date or, where the Corporation has not
fixed a record date in respect of such meeting, such person has
transferred any of his shares after the date on which such list is
prepared, and (b) the transferee, having produced properly endorsed
certificates evidencing such shares or having otherwise established
that he owns such shares, has demanded not later than 10 days before
the meeting that his name be included in such list. In any such
excepted case the transferee shall be entitled to vote the
transferred shares at such meeting.
10.12 Proxyholders and Representative. Every shareholder entitled to vote
at a meeting of shareholders may appoint a proxyholder, or one or
more alternate proxyholders,
as his nominee to attend and act at the meeting in the manner and to
the extent authorized and with the authority conferred by the proxy.
A proxy shall be in writing executed by the shareholder or his
attorney and shall conform with the requirements of the Act.
Alternatively, every such shareholder which is a body corporate or
association may authorize by resolution of its directors or
governing body an individual to represent it at a meeting of
shareholders and such individual may exercise on the shareholder's
behalf all the powers it could exercise if it were an individual
shareholder. The authority of such an individual shall be
established by depositing with the Corporation a certified copy of
such resolution, or in such other manner as may be satisfactory to
the secretary of the Corporation or the chairman of the meeting. Any
such proxyholder or representative need not be a shareholder.
10.13 Time for Deposit of Proxies. The board may fix a time not exceeding
48 hours, excluding Saturdays and holidays, preceding any meeting or
adjourned meeting of shareholders before which time proxies to be
used at the meeting must be deposited with the Corporation or an
agent thereof, and any period of time so fixed shall be specified in
the notice calling the meeting. A proxy shall be acted upon only if,
prior to the time so specified, it shall have been deposited with
the Corporation or an agent thereof specified in such notice or if,
no such time having been specified in such notice, it has been
received by the secretary of the Corporation or by the chairman of
the meeting or any adjournment thereof prior to the time of voting.
10.14 Joint Shareholders. If two or more persons hold shares jointly, any
one of them present in person or duly represented at a meeting of
shareholders may, in the absence of the other or others, vote the
shares; but if two or more of those persons are present in person or
represented and vote, they shall vote as one the shares jointly held
by them.
10.15 Votes to Govern. At any meeting of shareholders every question
shall, unless otherwise required by the articles or by law, be
determined by a majority of the votes cast on the question. In case
of an equality of votes either upon a show of hands or upon a poll,
the chairman of the meeting shall be entitled to a second or casting
vote.
10.16 Show of Hands. Subject to the Act, any question at a meeting of
shareholders shall be decided by a show of hands, unless a ballot
thereon is required or demanded as hereinafter provided, and upon a
show of hands every person who is present and entitled to vote shall
have one vote. Whenever a vote by show of hands shall have been
taken upon a question, unless a ballot thereon is so required or
demanded, a declaration by the chairman of the meeting that the vote
upon the question has been carried or carried by a particular
majority or not carried and an entry to that effect in the minutes
of the meeting shall be prima facie evidence of the fact without
proof of the number of proportion of the votes recorded in favour of
or against any resolution or other proceeding in respect of the said
question, and the results of the vote so taken shall be the decision
of the shareholders upon the said question.
10.17 Ballots. On any question for consideration at a meeting of
shareholders, and whether or not a show of hands has been taken
thereon, the chairman may require
a ballot or any person who is present and entitled to vote on such
question at the meeting may demand a ballot. A ballot so required or
demanded shall be taken in such manner as the chairman shall direct.
A requirement or demand for a ballot may be withdrawn at any time
prior to the taking of the ballot. If a ballot is taken each person
present shall be entitled, in respect of the shares which he is
entitled to vote at the meeting upon the question, to that number of
votes provided by the Act the articles, and the result of the ballot
so taken shall be the decision of the shareholders upon the said
question.
10.18 Adjournment. The chairman at a meeting of shareholders may, with the
consent of the meeting and subject to such conditions as the meeting
may decide, adjourn the meeting from time to time and from place to
place. If a meeting of shareholders is adjourned for less than 30
days, it shall not be necessary to give notice of the adjourned
meeting, other than by announcement at the earliest meeting that is
adjourned. Subject to the Act, if a meeting of shareholders is
adjourned by one or more adjournments for an aggregate of 30 days or
more, notice of the adjourned meeting shall be given as for an
original meeting.
10.19 Action in Writing by Shareholders. A resolution in writing signed by
all the shareholders entitled to vote on that resolution at a
meeting of shareholders is as valid as if had been passed at a
meeting of the shareholders unless, in accordance with the Act, (a)
in the case of the resignation or removal of a director, or the
appointment or election of another person to fill the place of such
director, a written statement is submitted to the Corporation by the
director giving the reasons for his resignation or the reasons why
he opposes any proposed action or resolution for the purpose of
removing him from office or the election of another person to fill
the office of such a director; or (b) in the case of the removal or
resignation of an auditor, or the appointment or election of another
person to fill the office of auditor, representations in writing are
made to the Corporation by that auditor concerning his proposed
removal, the appointment or election of another person to fill the
office of auditor, or his resignation.
10.20 Only One Shareholder. Where the Corporation has only one shareholder
or only one holder of any class or series of shares, the shareholder
present in person or duly represented constitutes a meeting.
10.21 Information to Shareholders. Except as provided by the Act, no
shareholder shall be entitled to discovery of any information
respecting any details or conduct of the Corporation's business with
in the opinion of the directors it would be inexpedient in the
interests of the Corporation to communicate to the public. The
directors may from time to time, subject to rights conferred by the
Act, determine whether and to what extent and at what time and place
and under what conditions or regulations the document, books and
registers and accounting records of the Corporation or any of them
shall be open to the inspection of shareholders and no shareholder
shall have any right to inspect any document or book or register or
accounting record of the Corporation except as conferred by statute
or authorized by the board of directors or by a resolution of the
shareholders.
Section Eleven
Notices
11.01 Method of Giving Notices. Any notice (which term includes any
communication or document) to be given (which term includes sent,
delivered or served) pursuant to the Act, the regulations
thereunder, the articles, the by-laws or otherwise to a shareholder,
director, officer, auditor or member of a committee of the board
shall be sufficiently given if delivered personally to the person to
whom it is to be given or if mailed to him at this recorded address
by prepaid mail. A notice so delivered shall be deemed to have been
given when it is delivered personally and a notice so mailed shall
be deemed to have been given on the fifth day after it is deposited
in a post office or public letter box. The secretary may change or
cause to be changed the recorded address of any shareholder,
director, officer, auditor or member of a committee of the board in
accordance with any information believed by him to be reliable.
11.02 Notice to Joint Shareholders. If two or more persons are registered
as joint holders of any share, any notice may be addressed to all
such joint holders, but notice addressed to one of such persons
shall be sufficient notice to all of them.
11.03 Computation of Time. Inc computing the date when notice must be
given under any provision requiring a specified number of days'
notice of any meeting or other event, the day of giving the notice
shall be excluded and the day of the meeting or other event shall be
excluded.
11.04 Undelivered Notices. If any notice given to a shareholder pursuant
to section 11.01 is returned on three consecutive occasions because
he cannot be found, the Corporation shall not be required to give
any further notices to such shareholder until he informs the
Corporation in writing of his new address.
11.05 Omissions and Errors. The accidental omission to give any notice to
any shareholder, director, officer, auditor or member of a committee
of the board or the non-receipt of any notice by any such person or
any error in any notice not affecting the substance thereof shall
not invalidate any action taken at any meeting held pursuant to such
notice or otherwise founded thereon.
11.06 Persons Entitled by Death of Operation of Law. Every person who, by
operation of law, transfer, death of a shareholder or any other
means whatsoever, shall become entitled to any share, shall be bound
by every notice in respect of such share which shall have been duly
given to the shareholder from whom he derives his title to such
share prior to his name and address being entered on the securities
register (whether such notice was given before or after the
happening of the event upon which he became so entitled) and prior
to his furnishing to the Corporation the proof of authority or
evidence of his entitlement prescribed by the Act.
11.07 Waiver of Notice. Any shareholder, proxyholder or other person
entitled to attend a meeting of shareholders, director, officer,
auditor or member of a committee of the board may at any time waive
any notice, or waive or abridge the time for any notice, required to
be given to him under the Act, the regulations thereunder, the
articles, the by-laws or otherwise, and such waiver or abridgement,
whether given before or after the meeting or other event of which
notice is required to be given, shall cure any default in the giving
or in the time of such notice, as the case may be. Any such waiver
or abridgement shall be in writing except a waiver of notice of a
meeting of shareholders or of the board or a committee of the board
which may be given in any manner.
11.08 Recorded Address. In this by-law, "recorded address" means in the
case of a shareholder his address as recorded in the securities
register; and in the case of a joint shareholders the address
appearing in the securities register in respect of such joint
holding or the first address so appearing if there are more than
one; in the case of an officer, auditor or member of a committee of
the board, his latest address as recorded in the records of the
Corporation; and in the case of a director, his latest address as
recorded in the most recent notice filed under the Corporations
Information Act whichever is the more current.
11.09 Deceased Shareholders. Subject to the Act any notice or other
document delivered or sent by post, prepaid transmitted, recorded
communication or left at the address of any shareholder as the same
appears in the records of the Corporation, shall, notwithstanding
that such shareholder be then deceased, and whether or not the
Corporation has notice of his decease, be deemed to have been duly
served in respect of the shares held by such shareholder (whether
held solely or with any other person or persons) until some other
person be entered in his stead in the records of the Corporation as
the holder or one of the holders thereof and such service shall for
all purposes be deemed a sufficient service of such notice or
document on his heirs, executors or administrators and on all
persons, if any, interested through him or with him in such shares.
11.10 Proof of Service. A certificate of the chairman of the board (if
any), the president, a vice-president, the secretary or the
treasurer or of any other office of the Corporation in office at the
time of the making of the certificate or of a transfer officer or
any transfer agent or branch transfer agent of shares of any class
or the Corporation as to the facts in relation to the mailing or
delivery of any notice or other document to any shareholder,
director, officer or auditor or publication of any notice or other
document shall be conclusive evidence thereof and shall be binding
on every shareholder, director or auditor of the Corporation as the
case may be.
Section Twelve
Effective Date
12.01. Effective Date. This by-law shall come into force when made by the
board in accordance with the Act.
12.02. Repeal. Upon this by-law coming into force, all prior by-laws
presently in force other than by-laws relating to the borrowing
powers of the Corporation are repealed provided that such repeal
shall not affect the previous operation of such by-laws so repealed
or affect the validity of any act done or right, privilege,
obligation or liability acquired or incurred or the validity of any
contract or agreement made pursuant to any such by-laws prior to
their repeal. All officers and persons acting under such by-laws so
repealed shall continue to act as if appointed under the provisions
of this by-law and all resolutions of the shareholders or board
passed under such repealed by-laws shall continue to be good and
valid except to the extent that they are inconsistent with this
by-law or until amended or repealed.
Made by the board the 4th day of May, 1984.
Signed by: President Secretary
EXHIBIT 3.1
-----------
SHARE EXCHANGE AGREEMENT
THIS AGREEMENT made as of the 15th day of January, 1996.
BETWEEN:
KEITH CARRIGAN,
(hereinafter called "Carrigan")
- - and -
MADELEINE H. ZUK
(hereinafter called "Zuk"
- - and -
TRANSWAY CAPITAL INC.
(hereinafter called "TCI"),
WITNESSES THAT:
WHEREAS:
A. Carrigan is the registered and beneficial owner of 500,000 of the issued
and outstanding common shares (the "Carrigan Shares") of CANTECH
COMPOSITES INC. (formerly known as CANTECH INVESTMENTS LTD.) ("CanTech")
B. Zuk is the registered and beneficial owner of 500,000 of the issued and
outstanding common shares (the "Zuk Shares") of CanTech;
C. TCI has agreed to exchange with Carrigan certain of the shares of TCI for
the Carrigan Shares and to exchange with Zuk certain of the shares of TCI
for the Zuk Shares;
NOW THEREFORE for and in consideration of the premises, the mutual covenants and
agreements to be kept and performed by each of the parties, the parties agree as
follows:
1 EXCHANGE OF SHARES
1.1 Delivery of Shares by Carrigan and Zuk
On the terms and subject to the conditions of this Agreement, on the
Closing Date (as defined in Article 2):
(a) Carrigan shall assign transfer and exchange with TCI the Carrigan
Shares for common shares of TCI which exchange will be on the basis set
forth in Section 1.2; and
(b) Zuk shal l assign transfer and exchange with TCI the Zuk Shares for
common shares of TCI which exchange will be on the basis set forth in
Section 1.3.
The Carrigan Shares and the Zuk Shares shall be free and clear of all
liens, security interests, claims, charges and encumbrances of any nature and
kind whatsoever.
1.2 Consideration for Exchange of Carrigan Shares
As consideration for the assignment and transfer by Carrigan to TCI of the
Carrigan Shares, TCI shall issue to Carrigan in exchange for the Carrigan
Shares:
(a) 500,000 previously unissued common shares of TCI (the "Carrigan Exchanged
Shares"); and
(b) 250,000 common share purchase warrants of TCI (the "Warrants"), each
Warrant entitling the holder thereof to purchase one (1) common share of
TCI at the price per share of $0.40 the certificate representing the said
Warrants being in the form of Schedule A attached hereto and being
exercisable for a period of one year from the Date of Closing (the
"Carrigan TCI Warrant").
The Carrigan Exchanged Shares and the common shares of TCI, if any, issued
pursuant to the Carrigan TCI Warrant shall be issued and allotted by TCI
to Carrigan as fully paid and non-assessable upon receipt by TCI of the
consideration therefor.
1.3 Consideration for Exchange of Zuk Shares
As Consideration for the assignment and transfer by Zuk to TCI of the Zuk
Shares, TCI shall issue to Zuk in exchange for the Zuk Shares:
(a) 500,000 previously unissued common shares of the TCI (the "Zuk Exchanged
Shares"); and
(b) 250,000 Warrants, each Warrant entitling the holder thereof to purchase
one (1) common share of TCI at the price per share of $0.40 the
certificate representing the said Warrants being in the form of Schedule A
attached hereto and being exercisable for a period of one year from the
Date of Closing (the "Zuk TCI Warrant").
The Zuk Exchanged Shares and the common shares of TCI, if any, issued pursuant
tot he Zuk TCI Warrant shall be issued and allotted by TCI to Carrigan as fully
paid and non-assessable upon receipt by TCI of the consideration therefor.
1.4 Section 85(1) Transfers
TCI agrees with each of Carrigan and Zuk that the exchange of the Zuk Shares and
the exchange of the Carrigan Shares for unissued common shares and warrants of
TCI shall each be completed in accordance with the rules contained in subsection
85(1) of the Income Tax Act, R.S.C. 1985, as amended (the "Act").
TCI, Zuk and Carrigan shall file such elections as may be necessary or advisable
in order that the transactions contemplated by this section 1 may be completed
in accordance with the rules set out in subsection 85(1) of the Act. TCI, Zuk
and Carrigan acknowledge and agree that they shall elect an amount in respect of
the respective sales and purchases of the Carrigan and Zuk Shares which amount
shall be the cost amount (within the meaning of the Act) of the Carrigan Shares
and the Zuk Shares, as the case may be, on the Closing Date.
If the Department of National Revenue should refuse to accept the purchase price
or any other amount elected or relied upon by TCI, Carrigan or Zuk in connection
with the sale and purchase of the Carrigan or Zuk Shares, and should suggest
some alternative amount or assess based upon some alternative amount, then:
(a) TCI of Carrigan or Zuk may challenge such alternative amount and
negotiate with the Department of national Revenue or object to the
appeal from any assessment issued by the said Department which relies on
such alternative amount. In the event of such negotiation, objection
and/or appeal by any one of TCI, Carrigan or Zuk, the other party to the
transaction being reviewed covenants to co-operate with the party
negotiating, objecting and/or appealing; and
(b) If as a result of such negotiation, object and/or appeal, it is
finally determined, whether by agreement with the Department of national
Revenue or as a result of a hearing by the Tax Court of Canada or any
higher tribunal that any amount elected or relied upon by the parties
hereto in connection with the purchase and sale of the Carrigan or Zuk
Shares was an amount (hereinafter referred to as the "final amount")
different from the amount elected or relied upon by the parties hereto,
TCI, Carrigan and Zuk covenant to accept the final amount, and:
(i) to adjust the purchase price and the method of payment therefor; and
(ii) to adjust any elected amount, so as to avoid any taxable capital
gain, deemed dividend or income accruing to TCI, Carrigan or Zuk in
respect of the transactions contemplated in this agreement.
2 CLOSING
2.1 Closing Date, Time and Place
(a) Subject to paragraph 2.1(b), the closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the
offices of Miller Thomson, Barristers and Solicitors, 2700-20 Queen
Street West, Toronto, Ontario, on January 15, 1996.
(b) If Closing does not occur by the Closing Date, the date and time for
Closing may be extended by mutual agreement of Carrigan, Zuk and TCI.
Alternatively any party may terminate this Agreement by notice in
writing to the other parties, in which case this Agreement shall be of
no further force or effect.
2.2 Deliveries by Carrigan and Zuk
At the Closing, each of Carrigan and Zuk shall deliver to TCI:
(a)a resolution shall be passed by the Board of Directors of CanTech
authorizing the transfer of the Carrigan Shares and the Zuk Shares to
TCI;
(b)certificates representing the Carrigan Shares and the Zuk Shares
respectively duly endorsed in blank for transfer by Carrigan and Zuk
respectively to TCI;
(c) all corporate books and records of the CanTech; and
(d)such other documents and instruments as counsel for TCI may reasonably
require to effectuate or evidence the transactions contemplated hereby.
2.3 Deliveries and Action by TCI
At the closing, TCI shall deliver to Carrigan and Zuk:
a)certificates representing the Carrigan Exchanged Shares and the Zuk
Exchanged Shares;
b)an opinion of TCI's counsel in form and substance substantially the
same as the form of opinion attached as Schedule "G"; and
c)such other documents and instruments as counsel for Carrigan or Zuk may
reasonably require to effectuate or evidence the transactions
contemplated hereby.
3 REPRESENTATIONS AND WARRANTIES OF CARRIGAN AND ZUK
Carrigan and Zuk hereby severally and separately represent and warrant to TCI as
follows:
3.1 Authorized Capitalization, Outstanding Shares and Title
The authorized capital stock of the CanTech will, at the date of Closing consist
of an unlimited number of Common Shares of which only the Carrigan Shares and
the Zuk Shares will be issued and outstanding. All of the issued and outstanding
shares of the CanTech will have been duly authorized and validly issued as fully
paid and non-assessable shares. Carrigan will be the recorded and beneficial
owner of, and have legal title to, all of the Carrigan Shares free and clear of
all liens, pledges, charges, claims and other encumbrances and Zuk will be the
recorded and beneficial owner of, and have legal title to, all of the Zuk Shares
free and clear of all liens, pledges, charges, claims and other encumbrances.
3.2 Organization, Good Standing,, Power, Etc.
The CanTech is a corporation duly organized, validly existing and in good
standing under the laws of the Province of Ontario, is not required at the date
hereof to be authorized or licensed to do business as an extra-provincial or
foreign corporation in any other jurisdiction within or outside in any other
jurisdiction within or outside Canada) by reason of the nature of the business
conducted by it, has the requisite power and authority to own, lease and operate
its properties and assets and to carry on its business as currently conducted
and is a private company as defined by subsection (1) of The Securities Act
(Ontario).
3.3 Agreements Relating to Stock, Options, Warrants, Restrictions on Shares,
Etc.
None of CanTech, Carrigan or Zuk is a party to a party to any written or oral
agreement, understanding, arrangement or commitment or bound by any certificate
of incorporation, by-law or instrument including options, warrants or
convertible securities) which creates any rights in a person with respect to
shares of the capital stock or any other securities of the CanTech or which
relates to the voting of restricts the transfer of, requires the Can Tech,
Carrigan or Zuk to issue or sell, or create rights in any person with respect to
the capital stock or other securities of the CanTech for warrants or rights with
respect thereto) except for the right of the CanTech's bankers to require that
their prior consent be given to a change in control There exists no option or
other right purchase, or right to convert any securities or obligations into,
any shares of the capital stock or other securities of the CanTech.
3.4 Certificate of Incorporation and By-Laws: Officers and Directors
Complete and correct copies of the CanTech's certificate and Articles of
Incorporation as amended to date ("Articles of Incorporation") certified by the
appropriate official of the jurisdiction of incorporation, and its By-Laws as
amended to date ("By-Laws") certified by an officer of CanTech have been
delivered to TCI. Such Articles of Incorporation and ByLaws are in full force
and effect and the CanTech is not in violation of any of the provisions thereof.
A complete and correct list of all CanTech officers and directors has been
delivered to TCI.
3.5 No Subsidiaries
The CanTech has no interest, direct or indirect, in any other corporation,
company business, trust, partnership, limited partnership, joint venture or
other entity or association.
3.6 Authorizations and Enforceability
Carrigan and Zuk each has all requisite power, authority and capacity to enter
into, deliver and perform this Agreement and to consummate the transactions
contemplated hereby without first obtaining the consent of any other person or
body corporate.
3.7 Effect of Agreement, Etc.
The execution, delivery and performance of this Agreement by Carrigan and Zuk
and the consummation of the transactions contemplated hereby will not, with or
without the giving of notice or the lapse of time, or both, violate any
provision of law, statute, rule or regulation to which the CanTech, Carrigan or
Zuk is subject, including any Act of the Legislature of the Province of Ontario
governing family relations or the rights of a spouse.
3.8 Restrictions, Burdensome Agreements
None of CanTech, Carrigan or Zuk is a party to any agreement, debt instrument,
commitment or agreement and none of CanTech, Carrigan or Zuk nor any of their
respective properties and assets are subject to or bound or affected by any
charter, by-law or other corporate restriction, or any order, judgement, decree,
law, statute, ordinance, rule, regulation or other restriction of any kind or
character which would:
(a) prevent any of them from entering into this Agreement or from
consummating the transactions contemplated hereby: or
(b) adversely affect, or in the future adversely affect, the business,
properties, prospects or the condition, financial or otherwise, of
CanTech or accelerate the due date for payment of any liabilities of
CanTech.
3.9 Government and Other Consents
No consent, authorization or approval of or exemption by or filing with any
governmental, public or self-regulatory body or authority is required in
connection with the execution, delivery and performance by
Carrigan or Zuk of this Agreement or any of the instruments or agreements herein
referred to or the taking of any action herein contemplated.
3.10 Permits, Licenses, Compliance with Applicable Laws and Court Orders
CanTech has all requisite corporate power and authority, and all permits,
licenses, orders and approvals of governmental and administrative authorities to
own, lease and operate its properties and to carry on its business as presently
conducted. CanTech's conduct of its business does not violate or infringe any
domestic or foreign law, statute, ordinance or regulation currently in effect,
scheduled to come into effect or, to the knowledge of Carrigan or Zuk, proposed
to be adopted, the enforcement of which would adversely affect the financial
condition, results of operations, properties or business of CanTech. CanTech is
not aware of any default in any respect under any executive, legislative,
administrative or private (such as arbitrational ruling, order, writ, injunction
or decree.
3.11 Financial Statements, Absence of Undisclosed Liabilities
The financial statements of CanTech for the period ended October 31, 1995, which
are attached hereto as Schedule B are true and correct in all material respects
and present fairly the financial position of CanTech as of those dates, and the
results of its operations for the periods then ended, in accordance with
generally accepted accounting principles applied on a consistent basis with that
of the previous years and since then there has not been any adverse material
change has occurred in the financial position, condition or affairs of CanTech.
3.12 Title to Properties, Absence of Liens and Encumbrances, Etc.
CanTech owns and has good and marketable title to its properties, assets and
leases used in the business free and clear of all mortgages, security interests,
claims, liens, charges, encumbrances, restrictions on use or transfer or other
defects in title. No default or event of default exists and not event which,
with notice or lapse of time or both, would constitute a default, has occurred
and is continuing under the terms or provisions, express or implied, of any
agreement to which any of the properties of CanTech is subject, nor has CanTech
received notice of any claim of such default, nor has CanTech failed to comply
in any respect with any provision or condition of any such agreement. CanTech
has not received a notice of violation of any applicable law, ordinance,
regulation, order or requirement relating to its operations or its owned or
leased properties.
3.13 Royalty Payments
Except pursuant to the sublicense agreement attached as Schedule C, CanTech is
not obligated to pay any royalty or similar payments to any person, firm, or
corporation.
3.14 Associated Liabilities of CanTech
No officer, director, employee or shareholder of CanTech is indebted or under
any obligation to the CanTech on any account whatsoever.
3.15 Tax Liabilities
Except as set forth in the financial statements referred to in Section 3.11 or
which are accrued in the books and records of CanTech since October 31, 1995,
CanTech has no liability for income or sales or use taxes.
3.16 Agreements, Plans, Arrangements, Etc.
Except for the contracts set forth in Schedule D, CanTech is not a party to, nor
is CanTech or any of its properties and assets bound or affected by any oral or
written agreement of any sort, including without limitation:
(a) lease agreement (whether as lessor or lessee) relating to real or
personal property;
(b) license agreement, assignment or other contract (whether as licensor
or licensee, assignor or assignee) relating to trademarks, trade
names, patents, copyrights (or applications therefor), unpatented
designs or styles, know-how or technical assistance;
(c) employment or consulting agreement;
(d) agreement for the purchase or sale of goods, material, supplies,
machinery, capital assets or services;
(e) agreement with any labour union;
(f) agreement with any supplier, distributor, franchisor, dealer, sales
agent or representative;
(g) agreement with any manufacturer, supplier or customer with respect to
discounts or allowances;
(h) joint venture or partnership agreement with any other person;
(i) agreement for the borrowing or lending of money or guaranteeing,
indemnifying or otherwise becoming liable for the obligations or
liabilities of another;
(j) agreement with any bank, factor, financing company or similar
organization regarding the financing of accounts receivable or other
extensions or credit;
(k) agreement granting any lien, security interest or mortgage on any
property or asset of CanTech including, without limitation, any
factoring agreement for the assignment of accounts receivable;
(l) agreement for the construction or modification of any building or
structure or for the incurrence of any other capital expenditure;
(m) advertising agreement of any kind;
(n) agreement which restricts it from doing business anywhere in the world
(o) agreement, statute or regulation giving any party the right to
re-negotiate or require a reduction in prices or the re-payment of any
amount previously paid;
(p) any agreement to defend, indemnify and/or hold harmless any person;
(q) agreement, pension plan, profit sharing plan, bonus plan, undertaking
or arrangements, whether oral, written or implied, with the employees,
lessees, licensees, manager, accountants, suppliers, agents,
distributors, its officers or Directors or others which cannot be
terminated on not more than one (1) month's notice; or
(r) agreement to pay severance pay for separation allowances, except for
any requirement which may be applicable at law.
3.17 Litigation
There is no claim, action, suit, proceeding, arbitration, investigation or
inquiry pending or threatened against, relating to or affecting CanTech or any
of the assets, properties or businesses of CanTech or the transactions
contemplated by this Agreement which may have any adverse effect upon the
assets, properties or business of CanTech or the transactions contemplated by
this Agreement. There is not in existence at the date hereof any order,
judgement or decree of any court or other tribunal or any agency or
self-regulatory body to which CanTech or the business, properties or assets of
CanTech are subject or by which they are bound.
3.18 Intangible Property
CanTech owns or possesses licenses or other rights to use such intangible
properties and know-how and other proprietary information necessary to the
conduct of its business as presently conducted.
3.19 Books and Records
The minute book of CanTech contains complete and accurate records of all
meetings and accurately reflects all other corporate action of the shareholders
and directors (and committees thereof) of CanTech as of the date hereof and all
material transactions or property recorded and filed.
3.20 Resident
Each of Carrigan and Zuk is a resident of Canada within the meaning of Section
116 of the Income Tax Act of Canada.
3.21 No Finder
None of CanTech, Carrigan or Zuk has taken any action which would give to any
firm, corporation, agency or other person a right to a consultant's or finder's
fee or any type of brokerage commission in relation to or in connection with the
transactions contemplated by this Agreement.
4 REPRESENTATIONS AND WARRANTIES OF TCI
TCI represents and warrants to Carrigan and Zuk as follows:
4.1 Organization, Good Standings Power, Etc.
TCI is a corporation duly organized, validly existing and in good standing under
the laws of the Province of Ontario. TCI has all requisite corporate power and
authority to execute, deliver and perform this Agreement and consummate the
transactions contemplated herein.
4.2 Authorization of Agreement and Enforceability
The Agreement has been duly and validly authorized, executed and delivered by
TCI and constitutes a valid and binding obligation of TCI fully enforceable in
accordance with its terms.
4.3 Reporting Issuer
TCI is now and has been a reporting issuer for at least twelvemonths under the
Securities Act of Ontario and the regulations thereunder and is not in default
of any requirement under the Securities Act of Ontario and the regulations
thereunder. In particular, without limiting the foregoing, no material change
relating to TCI has occurred with respect to which the requisite material change
statement has not been filed with all relevant securities regulatory
authorities.
4.4 No Cease Trade Order
No order to cease trading in the securities of TCI or prohibiting the issue,
sale and delivery of the Zuk Exchanged Shares, the Carrigan Exchanged Shares,
the Zuk TCI Warrants and/or the Carrigan TCI Warrant has been issued and no
proceedings for such purpose are pending or threatened.
4.5 TCI's Listing
TCI's shares are quoted on the Canadian Dealer Network Inc. (the "CDN") and TCI
is in compliance with Ontario Securities Commission policy respecting the CDN.
4.6 No Breach
The execution and delivery of this Agreement, the performance of the terms
hereof, the issue, sale and delivery at closing of the Carrigan Exchanged Shares
and the Zuk Exchanged shares, and the issue and delivery of the requisite number
of shares of TCI upon exercise of the Carrigan TCI Warrant and the Zuk TCI
Warrant do not and will not result in the breach of, and do not create a state
of facts after which notice or elapse of time or both will result in a breach
of, and do not and will not conflict with, any of the terms, conditions or
provisions of: (a) any statute, rule or regulation applicable to TCI or any of
its subsidiaries, including, without limitation, any applicable securities law;
(b) the constating documents, by-laws or resolutions of TCI or any of its
subsidiaries; (c) any applicable administrative regulation, court judgement,
decree or order binding upon TCI or any of its subsidiaries; or (d) any
indenture, agreement or other
instrument to which TCI or any of its subsidiaries is a party or by which TCI or
any of its subsidiaries is bound.
4.7 Purchaser's Stock
(a) The authorized capital of TCI will be, immediately prior to Closing, an
unlimited number of common shares without nominal or par value, an unlimited
number of Class A Special Shares without par value and issuable in series
and an unlimited number of Class B special shares without par value, of
which only 6,335,919 common shares will be issued and outstanding (excluding
the shares required to be issued hereunder). There are existing 5,000,000
warrants of TCI (the "Existing Warrants") issued and outstanding each of
which entitles the holder thereof to purchase, on or before January 13,
1997, one common share of TCI at a price of $0.20. In addition, the Board of
TCI has approved the reservation for issuance of 1,000,000 Common Shares
under TCI's employees stock option plans which approval is subject to
shareholder approval. Except as set forth in this Section 4.3(a) or as
contemplated by this Agreement, there exists no option or other right to
purchase, or right to convert any securities or obligations into, any shares
of the capital stock or other securities of the TCI.
(b) All of the issued and outstanding shares of TCI have been duly authorized
and validly issued and are issued and allotted as fully paid and
non-assessable shares. All of the shares of TCI issued and allotted pursuant
to the Carrigan TCI Warrant or the Zuk TCI Warrant have been duly authorized
and will, upon receipt by TCI of the consideration therefor when issued, be
validly issued and allotted. Except as referred to in this Section 4.3 there
are no commitments plans or arrangements of any kind to issue and no
outstanding options, warrants convertible securities or other rights calling
for the issuance of or the purchase of any unissued shares of TCI.
4.8 Effect of Agreement, Consents, Etc.
No consent, authorization or approval or exemption by or filing with any
governmental or public body or authority is required in connection with the
execution, delivery and performance by TCI of this Agreement or the taking of
any action hereby contemplated except as may arise out of the Determination.
4.9 No Finder
There is no firm, corporation, agency or other person that is entitled to a
consultant's or finder's fee or any type of brokerage in connection with the
transactions contemplated by this Agreement.
4.10 Investment
TCI is acquiring the Carrigan Shares and the Zuk Shares for its own account and
not with a view to or for resale, and TCI has no present intention of
distributing or reselling to others any of the Carrigan Shares or the Zuk Shares
or granting any participation therein, except in compliance with all applicable
provincial securities laws.
4.11 Certificate of Incorporation, etc.
Complete and correct notarial copies of TCI's incorporating documents as amended
to date (the "Articles") certified by the appropriate official of the
jurisdiction of incorporation and copies of TCI's By-Laws as amended to date
(the "By-Laws") certified by an officer of TCI will be delivered at Closing by
TCI to Carrigan and Zuk. The Articles and By-Laws are in full force and effect
and TCI is not in violation of any of the provisions thereof.
4.12 Financial Statements, Absence of Undisclosed Liabilities
The audited financial statements for the period ended December 31, 1994 and the
unaudited financial statements of TCI for the period ended September 31, 1995,
which are attached hereto as Schedule E are true and correct in all material
respects and present fairly the financial position of TCI as of those dates,
and the results of its operations for the periods then ended, in accordance with
generally accepted accounting principles applied on a consistent basis with that
of the previous years and since September 30, 1995 no adverse material change
has occurred in the financial position, condition or affairs of TCI.
4.13 Accuracy of Filing Statements
The information to be set forth in any documents filed by TCI in connection with
the transactions contemplated by this Agreement will be complete and accurate of
the time of the filing and will not contain a mis-statement of material facts
nor will it omit any statement of any material fact necessary to make any
statement contained therein not misleading.
4.14 Transaction in the Ordinary Course
Since September 30, 1995, TCI has only operated its business in the ordinary
course and has not entered into any transactions with any person, firm or
corporation with which it does not deal at "arm's length".
4.15 Tax Filing
TCI has filed with the appropriate governmental agencies all tax returns
required to be filed up to the date of this Agreement and there are no unpaid
assessments and no notification has been received from any governmental
authority that it proposes to issue a reassessment to TCI in respect of any
taxes shown on those tax returns. All taxes required to be paid by TCI have been
paid within the time required therefore and all accrued liability for taxes, if
any, have been paid when due and all other liability for such taxes has been
provided for in the books and records of TCI.
4.16 Litigation
There are no claim, action, suit, proceeding, arbitration, investigation or
inquiry pending or threatened against, relating to or affecting, TCI or any of
the assets, properties or the business of TCI or the transaction contemplated by
this Agreement, nor is there any basis for any such claim, action, suit,
proceeding, arbitration, investigation or Enquirer which may have an adverse
effect upon the assets, properties or business of TCI or the transaction
contemplated by this agreement. Neither TCI nor any officer, director or
employee of TCI has been enjoined or barred by any order, judgement or decree of
any court or other tribunal or any agency or self-regulatory body from engaging
in or continuing in any conduct or practice which would be material to the
transaction contemplated by this Agreement. There exists no order, judgement or
decree of any court o other tribunal or any agency or self-regulatory body to
which TCI or the business, properties or assets of TCI are subject or by which
they are bound.
4.17 Investment Canada Act
TCI is a Canadian within the meaning of the Investment Canada Act.
5 ADDITIONAL COVENANTS OF THE PARTIES
5.1 Covenant of Confidentiality
Each of Carrigan and Zuk covenants not at any time to publish or disclose or
authorize, or permit any of their respective agents, or representatives or any
third party under their control to publish or disclose any information or other
data, including, without limitation, financial information, or business or
financial books, record or other information of or pertaining to TCI which has
been furnished by or on behalf of TCI in connection with this Agreement and
which is not otherwise publicly available, except as required by law, and except
for the purpose of obtaining any necessary consents to the transfer of the
Carrigan Shares or the Zuk Shares to TCI.
5.2 Covenant Not to Disclose
Each of Carrigan and Zuk covenants not to, unless and until this Agreement is
terminated, he at any time disclose or otherwise make known or available to any
person, firm, corporation, or other entity other than TCI or its affiliates, or
use for their own account, any information that relates to the CanTech, this
Agreement, the transactions contemplated hereby, the existing business of
CanTech or the reasonably contemplated or foreseeable business of CanTech,
including, but not limited to, trade secrets, formulae, marketing plans or
proposals, financial information, or any observations, data, written material,
records of documents used by or relating to the business of CanTech which are of
a confidential nature (collectively, the "Proprietary Information") for any
reason or purpose except this provision shall not prohibit Carrigan or Zuk from
making disclosure in their respective capacity as an officer or director of
CanTech provided such disclosures are for the benefit of CanTech and are made in
the ordinary course of CanTech's business. Proprietary Information includes any
such information ;whether or not such information was developed, devised or
otherwise created in whole or in part by the efforts of Carrigan or Zuk, and
whether or not it is a matter of public knowledge unless it became public
knowledge as a result of authorized disclosure to the general public.
5.3 Access to CanTech by TCI
Pending Closing, TCI and TCI's counsel, accountants and other professional
advisors shall have full access during normal business hours between the date
hereof and the Closing Date to all properties, books, contracts, commitments and
records of CanTech and shall furnish to TCI all such information regarding the
business, affairs and property of CanTech as TCI may reasonably request.
5.4 Access to TCI by Carrigan and Zuk
TCI shall permit Carrigan and Zuk and their counsel, accountants or other
representatives between the date hereof and the Date of Closing to have full
access during normal business hours to all properties, books, contract,
commitments and records of TCI and will furnish to Carrigan and Zuk all such
information as either of them may reasonably request.
5.4 TCI's Obligation to Provide Funding to CanTech
As soon as possible, and in any event within 12 months after Closing, TCI shall:
(a) raise not less than $1,500,000 in cash; and
(b)make a cash investment in CanTech of not less than $1,500,000 the
proceeds of which shall be applied and used to develop, manufacture,
market, distribute and sell the products (the "Sublicensed Products")
which it is authorized to manufacture, market, distribute and sell
pursuant to the Sublicense Agreement.
In addition, TCI shall provide to CanTech, or cause CanTech to raise, sufficient
additional funds to enable CanTech to properly and fully develop and exploit the
market for the Sublicensed Products.
6 CONDITIONS TO TCI's OBLIGATIONS
The obligations of TCI hereunder are subject to the fulfilment, at or prior to
the Closing, of each of the following conditions, any or all of which may be
waived in writing by TCI in its sole discretion.
6.1 Accuracy of Representations and Warranties
Each of the representations and warranties of Carrigan and Zuk contained in this
Agreement shall be true on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date, except as affected by
transactions contemplated hereby and each of Carrigan and Zuk shall have
delivered a certificate to that effect.
6.2 Performance of Covenants
Carrigan and Zuk shall have performed, complied and have caused the CanTech to
perform and comply, with all covenants, obligations and agreements to be
performed or complied with by them on or before the Closing Date Pursuant to
this Agreement.
6.3 Litigation, Etc.
(a) No Claims, Etc.
No claim, action, suit, proceeding, arbitration, investigation or hearing
or notice of hearing shall be pending or threatened against or affecting
TCI, CanTech, Carrigan or Zuk which would have a material adverse effect
upon CanTech or the transactions contemplated by this Agreement.
(b) No violations
Noviolation shall exist, or be alleged by any governmental authority to
exist, or any law, statute, ordinance or regulation, the enforcement of
which would materially adversely affect the financial condition, results
of operations, properties or business of CanTech.
(c) Laws, Etc.
No law, regulation or decree shall have been proposed, adopted or
promulgated, or have become effective, the enforcement of which would
materially adversely affect the ability of Carrigan or Zuk to consummate
the transactions contemplated by this Agreement.
6.4 Consents
Carrigan and Zuk shall have delivered to TCI all consents and approvals of all
persons and entities necessary for the performance of the transactions
contemplated by this Agreement.
6.5 Carrigan's Employment Contract
Carrigan shall have confirmed that he employment contract attached as Schedule F
(the "Employment Contract") has been duly executed by Carrigan and CanTech and
is in full force and effect unamended as at Closing.
6.6 Determination
TCI shall be satisfied that the issuance of the Carrigan Exchanged Shards, the
Zuk Exchanged Shares and the Carrigan TCI Warrant and the Zuk TCI Warrant
required to be issued under this Agreement to Carrigan and Zuk respectively will
be exempt from prospectus requirements under the Ontario Securities Act and that
no exemption order under the Ontario Securities Act is required (the
"Determination").
6.7 Other Documents, Etc.
TCI shall have received from Carrigan and Zuk such other instruments, documents
and certificates certifying that CanTech is validly existing under the Province
of Ontario it shall reasonably request.
6.8 TCI to Continue to be Reporting Issuer
TCI will hereafter use its best efforts to continue to be a reporting issuer not
in default of any material requirement under applicable securities laws and
regulations of the province of Ontario.
7 CONDITIONS TO CARRIGAN'S AND ZUK'S OBLIGATIONS
The obligations of Carrigan and Zuk hereunder are subject to the fulfilment, at
or prior to the Closing, of each of the following conditions, any or all of
which may be waived in writing by Carrigan and Zuk in their sole discretion.
7.1 Accuracy of Representations and Warranties
Each of the representations and warranties of TCI contained in this Agreement
shall be true on and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date, except as
affected by transactions contemplated hereby and TCI shall have delivered a
certificate of a senior office to that effect.
7.2 Performance of Covenants
TCI shall have performed and complied with all covenants, obligations and
agreements to be performed or complied with by it on or before the Closing Date
pursuant to this Agreement.
7.3 Litigation, Etc.
No claim, action, suit, proceeding, arbitration, investigation or hearing or
notice of hearing shall be pending or threatened against or affecting the TCI
which might result or has resulted either in an action to enjoin or prevent or
delay the consummation of the transactions contemplated by this Agreement.
7.4 Satisfaction with the Determination
Carrigan and Zuk shall be satisfied that the Determination is correct.
7.5 Carrigan Employment Contract
TCI shall have acknowledged and confirmed the Employment Contract and shall have
executed and delivered to Carrigan the covenant attached as Schedule H.
7.6 Funding Arrangements for CanTech
Carrigan and Zuk shall be satisfied that TCI has made the necessary arrangements
or has a feasible plan in place to,
(a) raise not less than $1,500,000; and
(b) to make a cash investment in CanTech of not less than $1,500,000
within 12 months after Closing, the proceeds of which shall be applied
and used to develop, manufacture, market, distribute and sell the
Sublicensed Products.
7.7 Arrangements Regarding Existing Warrants
On or before Closing, TCI shall have entered into arrangements with the holders
of the Existing Warrants such that neither the exercise by the holders of any of
the Existing Warrants nor any trades of the shares of TCI issued pursuant to any
of the Existing Warrants do not adversely affect the market for the shares in
TCI. Such arrangements shall be satisfactory to Carrigan and Zuk.
8 TERMINATION
This Agreement may be terminated prior to the Closing Date:
(a) By Carrigan and Zuk or TCI if the Closing has not taken place on or
before November 30, 1995 provided however that such termination shall
not relieve any party from liability if such party, as of the
termination date, is in breach of any of the provisions of this
Agreement.
(b) By TCI, if on the Closing Date any of the conditions set forth in
Article 6 have not been satisfied, or waived by TCI.
(c) By Carrigan or Zuk, if on the Closing Date any of the conditions set
forth in Article 7 have not been satisfied or waived by Carrigan or
Zuk, as the case may be.
9 INDEMNIFICATION
9.1 Survival of Representation, Warranties and Indemnification
All representations, warranties, covenants and agreements herein contained on
the part of each of Carrigan, Zuk and TCI shall survive the Closing provided
that such representations and warranties except with respect to tax matters
(which shall continue until the expiry of the applicable statute of limitations,
and claims based on fraud which shall not expire) shall only survive until the
day is 2 years from the
Closing Date after which time if no claim shall have been made hereunder against
a party hereto with respect to any incorrectness in or breach of any
representation or warranty made herein by such party, such party shall have no
further liability hereunder with respect to such representation and warranty.
9.2 Limitation on Liability
No breach of any representation or warranty shall give rise to a claim by either
Carrigan, Zuk or TCI against the other unless the amount determined to be owing
by either of them to the other as a result thereof would exceed $10,000 for any
single breach or if the amount at issue would when added to the sum of all prior
amounts in respect of which a claim would otherwise be made, total in excess of
$25,000 in ;which case all of the amounts then at issue shall be recoverable.
10 GENERAL
10.1 Expenses, Etc.
TCI shall pay all reasonable costs, fees and expenses incurred by each party to
this Agreement to his, her or its respective legal counsel and accountants and
other experts.
10.2 Waiver
No Action taken pursuant to this Agreement, including any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party taking
such action of compliance with any representation, warranty, covenant or
agreement contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
10.3 Binding Effect, Benefits
This Agreement shall enure to the benefit of and shall be binding upon the
parties hereto and their respective heirs, personal representatives, successors
and assigns.
10.4 Notice
All notices, requests, demands and other communications which are required to be
or may be given under this Agreement shall be in writing and shall be deemed to
have been duly given when delivered in person or transmitted ;by telex, or other
telecommunication facility or on receipt after dispatch by certified or
registered first class mail, postage prepaid, return receipt requested, to the
party to whom the same is so given or made as follows:
(a) if to Carrigan, to:
20 Humbertrail
Bolton, Ontario
L7Z 5R8
(b) if to Zuk, to:
R.R.#1
Delhi, Ontario
N4B 2W4
(c) if to TCI, to:
Suite 703
27 St. Clair Avenue East
Toronto, Ontario
M4T 2N5
Attention: President
Fax: 416-921-1443
Or to such other address as any party may designate by giving notice to the
other parties hereto.
10.5 Entire Agreement, Amendment
This Agreement (including all Schedules attached hereto) constitutes the entire
agreement and supersedes all prior agreements and understandings, oral and
written, between the parties hereto with respect to the subject matter hereof
and may not be amended, modified or terminated unless in a written instrument
executed by the party or parties sought to be bound.
10.6 Headings
The section and other headings contained in this Agreement are for reference
purposes only and shall not be deemed to be part of this Agreement or to affect
the meaning or interpretation of this Agreement.
10.7 Counterparts
This Agreement may be executed in any number of counterparts, each of which,
when executed, shall be deemed to be an original and all of which together shall
be deemed to be one and the same instrument.
10.7 Gender, Singular and Plural
Any reference in this Agreement in the masculine gender shall include the
feminine and neuter genders, and vice versa, as appropriate. Any reference in
this Agreement in the singular shall mean the plural, and vice versa, as
appropriate.
10.8 Governing Law
This Agreement shall be construed as to both validity and performance and
enforced in accordance with and governed by the laws of the Province of Ontario.
10.9 Time of Essence
Time is of the essence of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date on the first page hereof.
SIGNED, SEALED AND DELIVERED )
In the presence of )
) __________________________ l/s
) Keith Carrigan
)
)
) __________________________ l/s
) Madeleine H. Zuk
)
)
TRANSWAY CAPITAL INC.
Per: ______________________
Name:
Title:
EXHIBIT 3.2
LEASE dated as of the 1st day of November, 1995.
BETWEEN:
THE CARRIER DRIVE DEVELOPMENT LTD.
(hereinafter called "Landlord")
OF THE FIRST PART;
- - and -
CANTECH INVESTMENTS LTD.
(hereinafter called "Tenant")
OF THE SECOND PART;
ARTICLE I
1.00 - LEASE SUMMARY
1.01 Lease Summary
The following is a summary of some of the basic terms of this Lease. For details
of the terms referred to below, recourse should be had to the balance of this
Lease. This Section 1.01 is for convenience and if a conflict occurs between the
provisions of this Section 1.01 and any other provisions of this Lease, the
other provisions of this Lease shall govern.
(a) Premises: a free standing building and adjacent lands described as the Lands
and Building Municipally known as 60 Carrier Drive, Etobicoke, Ontario
(b) Term:Five (5) years
(c) Commencement Date: November 1, 1995
(d) Expiry Date: October 31, 2000
(e) Basic Rent:
Year Basic Rent Monthly Basic Annual Basic
Per square foot Rent Rent
1 $1.25 $ 6,845.31 $82,143.75
2 $1.25 $ 6,845.31 $ 82,143.75
3 $2.35 $12,869.19 $154,430.25
4 $2.50 $13,690.63 $164,287.50
5 $2.65 $14,512.06 $174,144.75
(f) Option to Renew: For further five (5) year period
(g) Use of Premises: manufacturing/warehousing of wood and
related bi-products and general
offices
(h) Security Deposit letter of Credit for $42,000 for a
minimum term of two (2) years as per
Clause 22 - Offer to Lease.
(i) Option to Purchase $2,102,880.00 ($32.00 per square foot)
ARTICLE II
2.00 - DEFINITIONS
2.01 Definitions
Where used in this Lease, the following words of phrases shall have the
meanings set forth in the balance of this Article.
2.02 "Additional Rent" shall have the meaning ascribed to it in Section 5.03.
2.03 "Building" means the building located on the Lands and forming part of the
Premises and containing approximately 65,715 square feet of area.
2.04 "Commencement Date" shall have the meaning ascribed to it in Section 1.01.
2.05 "Lands" means the lands more particularly described in Schedule "A" hereto.
2.06 "Laws" means all statutes, regulations, bylaws, orders, rules, requirements
and directions of all federal, provincial, municipal and other
governmental authorities having jurisdiction.
2.07 "Lease" means this Lease including all of the schedules attached hereto.
2.08 "Premises" means the Lands and the Building.
2.09 "Realty Taxes" means all taxes, rates, duties, levies, fees, charges,
local improvement rates, imposed charges, levies and assessments whatever
(including school taxes, water and sewer taxes, extraordinary and special
assessments andall rates, charges, excises or levies, whether or not of
the foregoing nature), and whether municipal, provincial, federal or
otherwise, which may be levied, confirmed, imposed, assessed, charged or
rated against the Premises or any part thereof or any furniture, futures,
equipment or improvements herein, or against Landlord in respect of any of
the same or in respect of any rental or other compensation receivable by
Landlord in respect of the same, excluding only Landlord's income taxes
thereon, but including all of such taxes which may be incurred by or
imposed upon Landlord in lieu of or in addition to the foregoing.
2.10 "Rent" shall have the meaning ascribed to it in Section 5.01 hereof.
2.11 "Rental Year" means a period of twelve (12) consecutive calendar months.
2.12 "Term" shall have the meaning ascribed to it in Section 4.02.
ARTICLE III
3.00 - INTENT OF LEASE
3.01 Net Lease
It is the intent of the parties hereto that this Lease be a lease that is
absolutely net to Landlord, and that, except as expressly herein set out,
Landlord shall not be responsible for any expenses or obligations of any
kind whatsoever in respect of or attributable to the Premises.
ARTICLE IV
4.00 - LEASE OF PREMISES
4.01 Premises
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
the Premises.
4.02 Terms
The Term of the Lease shall be for the period described as the Term in
Section 1.01 hereof, commencing on the Commencement date and to be fully
completed and ended on the date described as the Expiry Date in Section
1.01 hereof.
4.03 Quiet Enjoyment
Subject to all of the terms of this Lease and object to Tenant's paying
all Rent and performing all obligations whatsoever as and when the same
are due to be paid and performed by Tenant, Tenant may peaceably possess
and enjoy the Premises for the Term without interruption by Landlord or
any person claiming by, from or under Landlord.
ARTICLE V
5.00 - RENT
5.01 Tenant to Pay
Tenant shall pay in lawful money of Canada at par at such address as
shall be designated from time to time by Landlord, Basic Rent and
Additional Rent (all of which are collectively herein sometimes referred
to as "Rent") as herein provided without any deduction, set-off or
abatement whatsoever, Tenant hereby agreeing to wave any rights it may
have pursuant to the provisions of Section 35 of the Landlord and Tenant
Act R.S.O. 1980 or any other statutory provision to the same or similar
effect and any other rights it may have at law to set-off.
5.02 Basic Rent
Commencing on the Commencement Date, Tenant shall pay to Landlord a fixed
minimum annual rent ("Basic Rent") in the amount described as Basic Rent
in Section 1.01(e) hereof, to be paid in equal monthly instalments in
advance on the first day of each month during the Term.
If the first day upon which Rent is payable is other than the first day
of a calendar month, the Tenant shall pay upon such date Rent from such
date to the end of such month calculated at a daily rate of 1/365th of
the annual Basic Rent.
5.03 Additional Rent
In addition to Basic Rent, Tenant shall pay to Landlord all other amounts
as and when the same shall be due and payable pursuant to the provisions
of this Lease all of which shall be deemed to accrue on a per diem basis.
5.04 Deemed Rent and Allocation
If Tenant defaults in payment of any Rent (whether to Landlord or
otherwise) as and when the same is due and payable hereunder, Landlord
shall have the same rights and remedies against Tenant (including rights
of distress) upon such default as if such sum or sums were rent in
arrears under this Lease. All Rent shall, as between the parties hereto,
be deemed to be rent due on the date upon which such sum or sums were
originally payable pursuant to this Lease and shall be paid in accordance
with this Lease without any deduction, abatement or set-off whatsoever.
Landlord may, at its option, from time to time, apply or allocate or
re-apply or re-allocate any sums received from or payable by Tenant to
Landlord on account of any amounts payable by Tenant hereunder in such
manner as Landlord determines in its sole and absolute discretion,
without regard to and notwithstanding any instructions given by or
allocations in respect of such amounts made by Tenant.
No payment by Tenant or acceptance of payment by Landlord of any amount
less than the full amount payable to Landlord, and no endorsement,
direction or note on any cheque or other written instruction or statement
respecting any payment by Tenant shall be deemed to constitute payment in
full or an accord and satisfaction of any obligation of Tenant and
Landlord may receive any such lesser amount and any such endorsement,
direction, note, instruction or statement without prejudice to any of
Landlord's other rights under this Lease or at law, whether or not
Landlord notifies Tenant of any disagreement with or non-acceptance of
any amount laid or any endorsement, direction, note, instruction or
statement received.
5.05 Monthly Payments of Additional Rent
Landlord may from time to time estimate any amount(s) payable; by Tenant
pursuant to any provisions of this Lease for the then current or the next
following fiscal period or, if applicable, any broken portion thereof and
may notify Tenant in writing of the estimated amounts thus payable by
Tenant. The amounts so estimated shall be payable by Tenant in advance in
equal monthly instalments over the fiscal period or broken portion
thereof, such monthly instalments being payable on the same day as the
monthly payments of Basic Rent. Landlord may, from time to time,
designate or alter the fiscal period selected in each case. As soon as
practicable after the expiration of each fiscal period, Landlord shall
furnish to Tenant a statement of the actual expenses it has incurred
which are the Tenant's responsibility for such fiscal period and shall
make a final determination of the amounts payable by Tenant. If the
amount determined to be payable by Tenant as aforesaid shall be greater
or less than the payments on account thereof made by Tenant prior to the
date of such determination, then the appropriate adjustments will be made
and Tenant shall pay any deficiency to Landlord within thirty (30) days
after delivery of such statement and final determination and if Tenant is
not in default under the terms of the Lease, the amount of any
overpayment shall be paid to or credited to the account of Tenant within
thirty (30) days after the delivery of such statement.
Notices by Landlord stating the amount of any estimate or re-estimate of
any amount(s) payable hereunder need not include particulars of any of
such amounts.
ARTICLE VI
6.00 - TAXES
6.01 Payment of Taxes
Landlord shall have the right to require Tenant to pay such Realty Taxes
and any other taxes which are Tenant's responsibility as set out herein
to the relevant taxing authority or Landlord shall have the right to pay
any such Realty Taxes or other taxes directly to such taxing authority
without thereby affecting Tenant's obligation to pay or contribute to
such Realty Taxes or other taxes. To the extent of Realty Taxes received
by Landlord from Tenant, Landlord shall pay same to the relevant taxing
authority.
6.02 Taxes Payable by Tenant
Commencing on the Commencement date and thereafter at all time throughout
the Term, Tenant shall pay to the City of Etobicoke or the relevant
taxing authority, as required by Landlord, not later than the time when
they fall due all Realty Taxes and other taxes, if any.
6.03 Business Taxes
Tenant shall pay as and when the same are due and payable all business
taxes including all taxes charged in respect of any business conducted on
the Premises or in respect of any use or occupancy of the Premises,
whether or not charged against Landlord o r the Premises. In the event
that the Tenant is not assessed for business taxes as a result of its
being business tax exempt but the Landlord is assessed for business taxes
for the business carried by the Tenant in the Premises, the Tenant shall
pay to the Landlord forthwith upon demand all such business taxes
assessed against the Landlord in respect of the Tenant" use of the
Premises.
6.04 Tax Bills and Assessment Notices
Tenant shall promptly deliver to Landlord forthwith upon Tenant's
receiving the same:
(a) copies of all assessment notices, tax bills and any other
documents received by Tenant related to Realty taxes
chargeable against or in respect of the Premises; and
(b) receipts for payment of Realty Taxes and business taxes
payable by Tenant pursuant hereto.
On or before the expiry of each calendar year, Tenant shall provide to
Landlord evidence satisfactory to Landlord that all Realty Taxes and
business taxes payable by Tenant pursuant to the terms hereof up to the
expiry of such calendar year, including all penalties and interest
resulting from the payment of Realty Taxes and business taxes, have been
duly paid.
6.05 Contest of Realty Taxes
Realty Taxes, or the assessments in respect of Realty Taxes which are the
subject of any contest by Landlord or Tenant shall nonetheless be payable
in accordance with the foregoing provisions hereof provided, however,
that in the event Tenant shall have paid any amount in respect of Realty
Taxes in excess of the amount ultimately found payable as a result of the
disposition of any such contest, and Landlord receives a refund in
respect thereof, if Tenant is not in default hereunder the appropriate
amount of such refund shall be refunded to or, at the option of Landlord,
credited to the account of Tenant.
Landlord may contest any Realty Taxes and appeal any assessments related
thereto and may withdraw any such contest or appeal or may agree with the
relevant authorities on any settlement, compromise or conclusion in
respect thereof and Tenant consents to Landlord's so doing. Tenant shall
co-operate with landlord in respect of any such contest and appeal and
shall make available to Landlord such information in respect thereof as
Landlord requests. Tenant will execute forthwith on request all consents,
authorizations or other documents as Landlord request to give full effect
to the foregoing.
Tenant shall not contest any Realty Taxes or appeal any assessments
related thereto without first notifying Landlord in writing.
Tenant shall pay to Landlord forthwith upon demand all costs and expenses
of any kind incurred by Landlord bona fide and acting reasonably in
obtaining or attempting to obtain information in respect of or a
reduction in respect of Realty Taxes and any assessments related thereto
including, with limitation, legal, appraisal, administration and overhead
costs.
6.06 Adjustments
Any amounts payable by Tenant on account of Realty Taxes shall be
adjusted on a per diem basis in respect of any period not falling wholly
within the Term, for which Realty Taxes are payable.
ARTICLE VII
7.00 - OPERATION OF PREMISES
7.01 Operation of Premises by Tenant
The Tenant at its own expense shall maintain, manage and operate the
Premises in the same manner as a reasonable and prudent owner and tenant
of same would do in a first, class and reputable manner befitting the
Premises and in conformity with all present and future requirements of
every governmental or other authority having jurisdiction and shall act
diligently and use all proper and reasonable efforts consistent with good
business practice.
7.02 Landlord May Perform or Pay
In the event that Tenant fails to pay any cost or expense associated with
or arising in connection with its use and operation, maintenance and
repair of the Premises and including any and every obligation contained
in this Lease or in the event Tenant fails to perform or fulfil any of
its obligations hereunder, Landlord may pay or perform the same and shall
be entitled to charge all of its costs and expenses together with an
administrative charge of twenty (20^) percent in connection therewith to
the Tenant as Additional Rent who shall pay them forthwith on demand.
Landlord without prejudice and in addition to any other rights shall have
the same remedies and may take the same steps for the recovery of all
such sums as Landlord might have taken for the recovery of rent in
arrears hereunder.
ARTICLE VIII
8.00 - USE OF PREMISES
8.01 Use of Premises
Tenant convenants that it shall not use and shall not cause, suffer or
permit the Premises to be used for any purpose other than as described as
Use of Premises in Section 1.01(f) hereof without Landlord's prior
written consent which may be withheld in Landlord's sole and absolute
discretion.
8.02 Conduct of Business
At all times throughout the Term, Tenant shall continuously, actively and
diligently conduct its business in the whole of the Premises in a first
class and reputable manner.
8.03 Tenant's Fixtures
Tenant shall install and maintain at al times during the Term in the
Premises first-class trade fixtures including furnishings and equipment
adequate and appropriate for the business to be conducted on the Premises
and of no less a quality or quantity than whatever is usual for such type
of business, all of which shall be kept in good order and conditions.
Tenant may not remove any trade fixtures of the Premises therefrom other
than in the ordinary course of business except that, with the prior
written consent of Landlord, Tenant may remove such trade fixtures
provided that Tenant provides evidence satisfactory to Landlord that it
is substituting therefor trade fixtures at least equal in value and
function to those being removed.
8.04 Signs
The Tenant shall have the right to erect signs on or about the Premises
(except on or from the roof) advertising its business provided that such
signs are approved in writing by the Landlord and such signs shall:
(a) comply with all applicable bylaws and regulations;
(b) be maintained in good repair by the Tenant and
(c) not be erected if to do the same would weaken or impair the
structural strength of the Building;
(d) at Landlord's request be removed on termination of the Lease.
The Tenant shall upon removal of such signs repair any damage caused by
their installation or removal.
8.05 Waste Removal
Tenant shall not allow any refuse, garbage or any loose or objectionable
material to accumulate in or about the Premises and will at all times
keep the Premises in a clean and neat condition. Tenant shall comply with
Landlord's regulations respecting the removal of waste and Tenant shall
at its own expense remove all waste from the Premises. Until removed from
the Premises, all waste from the Premises shall be kept in appropriate
containers.
8.06 Pest Control
Tenant shall be responsible for pest extermination in respect of the
Premises and shall engage, for such purpose, such contractors and at such
intervals as Landlord shall require.
8.07 Waste and Nuisance
(a) Tenant shall not cause, suffer of permit any waste or damage
to the Premises or leasehold improvements, fixtures or
equipment therein nor permit any overloading of the floors
thereof and shall not use or permit to be used any part of the
Premises for any dangerous, noxious or offensive activity or
goods and shall not do anything or permit anything to be done
upon or about the Premises nor anything to be brought thereon
which Landlord may reasonable deem to be hazardous or a
nuisance or annoyance. Tenant shall take every reasonable
precaution to protect the Premises from risk of damage by
fire, water or the elements or any other cause.
(b) Tenant shall not use any advertising transmitting or other
media or transmissions of any kind, or other devices in a
manner which can be heard, seen, or received outside the
Premises, or which would in any way interfere with any
communications or other systems outside of the Premises.
8.08 Compliance with Law
(a) Tenant shall be solely responsible for obtaining from all
authorities having jurisdiction all necessary permits,
licences and approvals as may be necessary to permit Tenant to
hold this Lease and to occupy the Premises and conduct its
business thereon, as required by al applicable laws,
including, without limiting the generality of the foregoing,
any necessary extra provincial licence, any necessary licence
and any necessary approvals under the Foreign Investment
Review Act (Canada). Tenant shall be responsible for and shall
comply at its own expense with all applicable Laws respecting
the use, condition and occupation of the Premises, and all
leasehold improvements, trade fixtures, furniture, fixtures,
equipment and contents thereof (collectively called
"Contents") and Tenant shall promptly perform all necessary
repairs, alterations, changes and improvements to the Premises
and Tenant's business, use, or occupancy thereon and the
Contents in order to comply with all of such laws. Landlord
covenants to Tenant that the Premises comply with all Laws as
at the Commencement Date.
(b) Tenant shall provide Landlord on request with evidence
satisfactory to Landlord acting reasonably that Tenant has
obtained and is complying with the terms of all applicable
licences, approvals and permits from time to time.
8.09 Prohibited Uses
If, in the opinion of Landlord, Tenant is in breach of any of the
provisions of this Article, Tenant shall immediately discontinue such use
upon Landlord's written request.
ARTICLE IX
9.00 - SERVICES AND UTILITIES
9.01 Utilities
(a) Tenant shall be solely responsible for supplying all
utilities, heating and air-conditioning equipment in such a
manner as a reasonable and prudent owner of the Premises would
do and in any event in such a manner so as to prevent damage
to the Building from the elements. Tenant shall promptly pay
for, as and when they fall due, all costs of supplying hot and
cold water, electricity, fuel, gas, steam, sewer charges and
other utilities, forms of energy, or other services to or used
in respect of the Premises including, without limitation, the
cost of such utilities consumed in or with respect to the
Premises. Tenant shall further be responsible for the
maintenance, repair and replacement of all utilities systems
and equipment serving the Premises.
(b) Tenant's use of any such utilities shall not exceed the
available capacity of the existing systems from time to time.
If Tenant desires at any time to obtain any such utilities in
excess of such available capacity, Tenant may supply and
install at its expense any special wires, conducts or other
equipment necessary to provide such additional capacity
subject to the prior written consent of Landlord.
9.02 Non-Liability of Landlord
Landlord shall not be liable for any damages, direct or indirect,
resulting from or contributed to by any interruption or cessation of or
failure in supply of any utilities, or any heating or air-conditioning
equipment or any other systems or equipment on the Premises. Without
limiting the generality of the foregoing, Landlord shall not be liable
for and Tenant shall indemnify Landlord and save Landlord harmless from
and against any and all indirect or consequential damages or damages for
personal discomfort or illness of Tenant or any persons permitted by it
to be on the Premises by reason of the suspension, non-operation, or
failure for any period of time of any utilities, heating or
air-conditioning equipment or any other systems or equipment on the
Premises.
9.03 Landlord's Suspension of Utilities, etc.
Should Landlord at any time wish to effect or make any inspection
regarding any maintenance, repairs, replacements, alterations or
improvements to any utilities, heating or air-conditioning equipment or
systems (notwithstanding that Landlord has no obligation to do so),
Landlord shall have the right, on at least 4 day's written notice to the
Tenant except in an emergency, without any liability and without thereby
constituting an interference with Tenant's rights under this Lease or a
breach by landlord of this Lease, and without thereby entitling Tenant to
any rights in respect thereof, to discontinue, suspend or modify any
utilities, heating, air-conditioning and other systems at such time or
times and from time to time as Landlord shall deem desirable. In such
circumstances the Landlord shall use its best efforts to minimize any
adverse impact on Tenant" business operations or quiet enjoyment of the
Premises. The costs incurred by the Landlord in connection with any of
the above shall be payable by Tenant forthwith on demand therefore and
shall be recoverable by Landlord as Additional Rent.
ARTICLE X
10.00 - MAINTENANCE, REPAIRS AND ALTERATIONS
10.01 Maintenance and Repairs of Premises
(a) At all times throughout the Term the Tenant at its sole
expense shall perform or cause to be performed maintenance,
decoration, repairs and replacements to keep the Premises and
all the contents thereof and all services, equipment and
systems located in or serving the Premises, at all times in
first-class appearance and condition, and in accordance with
all Laws.
(b) The Landlord shall be responsible at its sole cost for
structural repairs to the building including those for
structural defect or weakness of the leased Premises
including, without limitation, the foundations, exterior wall
assemblies including weather walls, subfloors, roof
replacement, structural columns, beams and elements of the
Leased Premises; any loss, injury or damage caused by any
peril against which the Landlord is, or ought to have been
insured as required by the Lease, or the use of defective or
faulty material in the original construction of the Leased
Premises by the Landlord or its contractors, or those for whom
the Landlord is in law responsible, or change in governmental
requirement which affect the Leased Premises, if not
occasioned by the fault of the Tenant or those for whom the
Tenant is responsible.
(c) Not withstanding anything contained in this Lease the Landlord
warrants and represents that prior to October 31, 1996, it
shall be responsible for damage caused by any roof leak and
shall indemnify the Tenant against all expenses related to
such roof leak during the first year of the Term. From
November 1, 1996, for the balance of the Term and any renewal,
the Tenant shall be responsible for all roof repairs to an
annual maximum of Ten Thousand ($10,000) Dollars. In the event
such repairs exceed Ten Thousand ($10,000) Dollars in any
given Lease Year, the Landlord, upon presentation of evidence
of such expenditure shall reimburse the Tenant within fifteen
(15) working days.
10.02 Approval of Repairs and Alterations
(a) Tenant shall not make any repairs, replacements, changes, additions,
improvements or alterations (hereinafter in this Article X referred to as
"Alterations") to the Premises without Landlord's prior written consent,
which consent shall not be unreasonably withheld unless such proposed
Alterations might; (I) in any way affect the structure of the Premises or
the coverage of the Lands for zoning purposes; or (ii) in the opinion of
the Landlord, detrimentally affect the appearance or equality of the
Premises, or impair the value or usefulness of the Premises, in either of
which events such consent may be unreasonably withheld in Landlord's sole
discretion.
(b) With its request for Landlord's consent, Tenant shall submit to Landlord
details of the proposed Alterations including plans and specification in
respect thereof prepared by qualified architects or engineers, and which
alterations shall be completed in accordance with the plans and
specifications approved in writing by Landlord. Unless expressly
authorized in writing by Landlord to the contrary, all Alterations which
might cost in excess of Ten thousand ($10,000) dollars to complete or
which might affect the structure or mechanical or electrical systems of
the Premises, shall be conducted under the supervision of a qualified
architect or engineer approved by Landlord, such approval not to be
unreasonably withheld.
(c) All Alterations shall be planned and completed in compliance with all
Laws and Tenant shall, prior to commencing any Alterations, obtain, at
its expense, all necessary permits and licences and provide evidence
thereof satisfactory to Landlord.
(d) Tenant shall, prior to the commencement of any such Alterations furnish
to Landlord at Tenant's expense such evidence as reasonable required by
Landlord of the projected cost of Alterations together with such
indemnification against costs, liens and damages as Landlord shall
reasonably require including, if required by Landlord, a performance bond
in such terms and issued by such company as shall be acceptable to
Landlord in its sole discretion in an amount at least equal to the
estimated cost of such Alterations, guaranteeing completion within a
reasonable time of such Alterations free and clear of any liens or
encumbrances.
(e) All Alterations shall be performed promptly and in a good and workmanlike
manner and in compliance with landlord's rules and regulations by
competent contractors or workmen who shall be designated or approved by
Landlord.
(f) If Tenant performs any such Alterations without compliance with all of
the foregoing provisions of this Article X, Landlord, without prejudice
to and without limiting Landlord's other rights
pursuant to this Lease and at law, shall have the right to require Tenant
to remove such Alterations forthwith.
(g) The Landlord acknowledges that the Tenant may, at its own expense,
install four (4) to six (6) silos on the east side of the building for
purposes of sawdust collection.
10.03 Repair According to Landlord's Notice
Landlord or any persons designated by it shall have the right to enter
the Premises at any time upon reasonable prior notice to view the state
of repair, condition and use thereof and Tenant shall promptly perform
any maintenance, decoration, repairs, replacements or Alterations
according to written notice from Landlord. In the event that the Tenant
shall refuse or neglect to make forthwith the repairs referred to in any
such notice, the Lessor may make the same and the costs thereto shall be
paid forthwith by the Tenant as additional rent.
10.04 Notice by Tenant
Tenant shall give immediate written notice to Landlord of any accident,
defect, damage or deficiency in any part of the Premises, which comes to
the attention of Tenant or any of its employees or contractors
notwithstanding the fact that Landlord has no obligation in respect of
the same. The provisions of this Section 10.04 shall not be interpreted
so as to imply or impose any obligation whatsoever upon Landlord. Tenant
shall exercise all due diligence to become aware of any such situation.
10.05 Ownership of Leasehold Improvements
All leasehold improvements installed in the Premises shall forthwith upon
the installation thereof become the absolute property of Landlord without
compensation therefor but without Landlord's having or thereby accepting
any responsibility in respect of the maintenance, repair of replacement
thereof, all of which shall be Tenant's responsibility. The expression
"Leasehold improvements" where used in this Lease includes, without
limitation, all fixtures, improvements, installations, alterations and
additions from time to time made, erected or installed in or about the
Premises, and includes all the following, whether or not easily
disconnected and moveable: doors partitions and hardware, mechanical,
electrical and utility installations, carpeting, drapes, other floor and
window coverings, and drapery hardware, and decorations of any kind,
heating, ventilating, air conditioning and humidity control equipment,
lighting fixtures, built-in furniture and furnishings, all counters in
any way connected to the Premises or to any utility services located
therein.
The only exclusions from "Leasehold improvements" are free-standing
furniture, trade fixtures and equipment not in any way connected to the
Premises or to any utility systems located therein.
10.06 Construction Liens
Tenant shall make all payments and take all steps necessary to ensure
that no lien or other charge is registered against the Premises or any
portion thereof or against either Landlord's or Tenant's interest therein
as a result of any work done or material implied to Tenant or the
Premises. Tenant shall cause any such registrations to be discharged or
vacated immediately after notice from Landlord, or within ten (10) days
after registration, whichever is earlier. Tenant shall indemnify and save
harmless Landlord from and against any liabilities, claims, damages,
costs or expenses, including legal expenses, arising in connection with
any work done or materials supplied in respect of the Premises.
If Tenant permits there to be registered or fails to cause any such
registration to be discharged or vacated as aforesaid, then, in addition
to any other rights of Landlord, Landlord may, but shall not be obliged
to, discharge or vacate the same by paying the amount claimed to be due
together with any other amounts into court or otherwise as Landlord
determines, including legal fees and disbursements, in this arranging for
the discharging or vacating of any such liens or certificates of action
and all amounts so paid by Landlord shall be paid by Tenant to Landlord
forthwith
upon demand together with reasonable compensation to Landlord for
administration in respect thereof.
ARTICLE XI
11.01 11.01 Vacating of Possession
Forthwith upon the expiry or earlier termination of the Term, Tenant
shall peaceable deliver to Landlord vacant possession of the Premises in
such condition in which Tenant is required to maintain and keep the
Premises during the Term pursuant hereto and shall leave the Premises in
a neat, clean and broom-swept condition and Tenant shall deliver all keys
for the Premises and all key or combinations to locks on doors, safes or
vaults within the Premises.
11.02 Removal of Trade Fixtures
Provided that Tenant has paid all Rent to the date of expiry or earlier
termination of the Term and any and all damages and other amounts payable
by Tenant to Landlord for any reason whatever and provided Tenant is not
otherwise in default hereunder, or if otherwise authorized or requested
by the Landlord, Tenant shall at the expiry or earlier termination of the
Term from the installation or removal of such trade fixtures. Other than
as provided above, tenant shall not remove trade fixtures from the
Premises.
If at the expiry or earlier termination of the Term, Tenant does not
remove its trade fixtures or any of its other property on the Premises,
Landlord shall have no obligation in respect of any such trade fixtures
or property and may sell or destroy the same or have them removed or
stored at the expense of Tenant or dispose of them in any other manner
whatsoever as may be determined by Landlord in its sole discretion; at
the option of Landlord, such trade fixtures or property not removed at
the expiry or earlier termination of the Term shall become the absolute
property of Landlord without payment of any compensation therefor to
Tenant and may be dealt with by Landlord in such manner as it determines.
11.03 Removal of Leasehold Improvements
Notwithstanding that the leasehold improvements become the absolute
property of Landlord upon installation, at the expiry or earlier
termination of the Term, Tenant shall remove any or all of such leasehold
improvements as required by Landlord and in so doing, shall repair any
damage caused as a result of the installation or removal of the same.
11.04 Overholding by Tenant
If Tenant remains in possession of all or any part of the Premises after
the expiry of the Term with the consent of Landlord and without any
further written agreement, this Lease shall not be deemed thereby to have
been renewed and Tenant shall be deemed conclusively to be occupying the
Premises as a monthly tenant on the same terms as set forth in this Lease
so far as they are applicable to a monthly tenancy except the monthly
Rent shall be 200% of an amount determined by taking 1/12 of the Rent
payable for the period of the last twelve months of the Term.
ARTICLE XII
12.00 - DAMAGE AND DESTRUCTION
12.01 Termination of Lease
If any part of the Premises is damaged or destroyed and either
(a) in the opinion of Landlord acting reasonably, the damage or
destruction cannot be repaired or rebuilt within one hundred and
eighty (180) days after the damage or destruction; or
(b) such damage or destruction is caused by an occurrence against which
Landlord is not insured or required to insure or the cost of repairs
of which would be in excess of the amount which Landlord is required
to insure pursuant hereto or is otherwise insured; or
(c) such damage or destruction occurs within two (2) years prior to the
expiry of the Term and either there are no remaining rights in
Landlord or Tenant to extend or renew this Lease or Landlord or
Tenant, having the right to renew or extend this Lease, fails to do
so within fifteen (15) days after such occurrence;
Landlord may, at its option to be exercised by written notice given to
Tenant within sixty (60) days after such occurrence, terminate this Lease
whereupon Tenant will immediately surrender the Premises and all its interest
therein to Landlord and Basic Rent and all other payments for which Tenant is
liable pursuant to this Lease shall be apportioned to the effective date of
termination (but subject to any abatement to which the Tenant may be entitled
under Section 12.03 of this Lease by reason of the Premises having been rendered
in whole or in part not reasonably capable of use or occupancy). Tenant will
remain liable to Landlord for all sums accrued due under this Lease to the date
of termination, and Landlord may re-enter and repossess the Premises discharged
of this Lease.
12.02 Repair and Rebuilding
If this lease is not terminated pursuant to this Article XII:
(a) Landlord, to the extent of insurance proceeds which Landlord receives
or would have received if it had maintained such insurance as is
required to be maintained by the Landlord hereunder, and to the
extent that any mortgagee entitled to be paid such insurance proceeds
consents to the use of same for repair of such damage or destruction,
shall diligently proceed to perform such repairs to the Premises to
the extent of insurance proceeds being available. Within thirty (30)
days after Landlord has completed its repairs, Tenant shall complete
any necessary repairs to the Premises to render the Premises usable
for Tenant's purposes and shall fully fixture, stock and staff the
Premises and recommence the operation of Tenant's business.
(b) Landlord, in performing its repairs to the Premises or the Common
Facilities as required hereby shall not be obliged to repair or
rebuild in accordance with plans or specifications for the Premises
as they existed prior to such damage or destruction, but Landlord may
repair or rebuild the same in accordance with any plans and
specifications chosen by Landlord in its sole and absolute discretion
provided that Tenant's use and occupancy of and access to the
Premises and the general overall ability of the Premises are not
materially detrimentally affected by any difference in plans,
specifications, or form of the Premises or from such plans,
specifications and form as the same existed immediately prior to the
occurrence of such damage or destruction.
12.03 Abatement
(a) If the damage or destruction in such as to render the whole or any
part of the Premises unusable for the purpose of Tenant's use as
permitted hereby, then Rent shall abate from the date of the damage
or destruction until the Premises are again usable by Tenant for the
purpose intended. Rent shall abate to the extent that Tenants use and
occupancy of the Premises is in fact diminished, which determination
shall be made by landlord in its sole discretion acting reasonably.
The abatement will diminish proportionately as repairs are made and
more of the Premises is returned to a usable state.
(b) Notwithstanding any other provision of this Section 12.03:
(i) if the necessary repairs have been made within fifteen (15) days
after the date of the damage or destruction, there will be no
abatement of Rent;
(ii) to the extent that any part of the Premises remains unusable
because Tenant's repairs have not been completed, no abatement of
Rent will extend beyond the date by which, in the opinion of
Landlord arrived at on a reasonable basis, Tenant's repairs would
have been completed had Tenant exercised reasonable diligence.
12.04 Determination of Matters
For the purposes of this Article XII, all matters requiring determination
such as, without limitation, the extent to which any area(s) of the
Premises are damaged, or are not capable of being used, or the times
within which repairs may be made shall be determined by Landlord acting
reasonably, such determination to be final and binding on the parties.
ARTICLE XIII
13.00 - INSURANCE AND INDEMNITY
13.01 Landlord's Insurance
Landlord shall obtain in full force and effect during the Term with
respect to the Premises insurance against such occurrences and in such
amounts and on such terms and conditions and with such deductible(s) as
Landlord may determine from time to time, it being agreed that landlord
need not communicate any determination to Tenant, Unless and until
otherwise determined by Landlord, such insurance shall include, without
limitation:
(a) insurance on the building and improvements and equipment
contained therein owned or leased by Landlord or which
Landlord desires to insure, for full replacement cost, against
damage by fire, lightning, explosion, sprinkler leakage and
other risks contained in fire insurance policies with
endorsements generally known as extended coverage and riot
vandalism and malicious acts, endorsements or, at Landlord's
option, all risks insurance;
(b) boiler and machinery insurance on such insurable objects as
Landlord may elect to insure;
(c) rental income insurance covering such occurrences, in such
form, and with such period of indemnity as Landlord may
determine;
(d) public liability insurance; and
(e) such other insurance and insurance in such amounts and on such
terms as Landlord, in its discretion, may determine.
Notwithstanding that Tenant shall be contributing to or paying for
Landlord's costs and premiums respecting such insurance pursuant tot he
terms of this Lease, Tenant shall not have any insurable or other
interest in any of Landlord's insurance other than the rights, if any,
expressly set forth in this Lease or in any policy of insurance obtained
by Landlord, and, in any event, Tenant shall not have any interest in or
any right to recover any proceeds under any of Landlord's insurance
policies. Landlord shall use reasonable efforts to obtain in its property
insurance policies upon Tenant's request a waiver of subrogation against
Tenant, if same can be obtained from Landlord's insurer on such terms and
with such limits and deductibles as Landlord shall determine.
13.02 Commencing on the Commencement Date and thereafter at all times
throughout the term, Tenant shall pay to Landlord or as the Landlord may
direct not later than the time when they shall fall due, all premiums and
costs payable by the Landlord to obtain the Landlord's Insurance.
13.03 Tenant's Effect on Other Insurance
(a) Tenant shall not do and shall not cause, suffer or permit to be done
or omitted to be done by any of its servants, agents, contractors, or
person; for whom Tenant is in law responsible anywhere on the
Premises or by any person in, on or about the Premises and shall not
permit there to be on the Premises anything which might:
(i) result in any increase in the cost of any insurance policies
of Landlord;
(ii) result in an actual or threatened cancellation of or adverse
change in any policy of insurance of Landlord; or
(iii) be prohibited by any policy or insurance of Landlord in
force from time to time in respect of the Premises or any
part of contents thereof.
(b) If the cost of any insurance policies of Landlord on or related to
the Premises or any part of contents thereof shall be increased as a
result of:
(i) the use of occupancy of the Premises by Tenant or any other
person on the Premises;
(ii) anything kept or permitted to be kept by Tenant or by any
person anywhere in the Premises; or
(iii) any act or omission of Tenant or any person in the Premises.
Tenant shall pay the full amount of such increase in cost to Landlord
forthwith upon demand.
In determining Tenant's responsibility for any increased cost of
insurance as aforesaid, a statement issued by the organization, company or
insurer establishing the insurance premiums or rates
for the relevant policy shall be conclusive evidence of the various components
of such premiums of rates and the factors giving rise to any increase therein.
(c) In the event of an actual or threatened cancellation of or adverse
change in any policy of insurance of Landlord on or related to the
Premises or any part of contents thereof by reason of:
(i) the use of occupancy of the Premises by tenant or any other
person permitted by Tenant on the Premises; or
(ii) anything placed on or permitted by Tenant or any person in the
Premises and if Tenant fails to remedy the situation, condition,
use, occupancy or other factor giving rise to such actual or
threatened cancellation or change within twenty-four (24) hours
after notice thereof by Landlord,
Landlord may, at its option, either:
(i) terminate this Lease forthwith by written notice; or
(ii) remedy the situation, condition, use, occupancy or other factor
giving rise to such actual or threatened cancellation or change,
all at the cost of Tenant to be paid to Landlord forthwith upon
demand; for any or all of such purposes as set forth in this
subsection (ii) Landlord shall have the right to enter upon the
Premises without further notice.
13.04 Tenant's Insurance
The Tenant shall maintain during the Term (i) all risks insurance upon
property owned by the Tenant or for which it is liable (including glass)
and which is located on the Premises including, without limitation,
furniture, fitting, installations, alterations, additions, partitions and
fixtures or anything in the nature of a leasehold improvement made or
installed by or on behalf of the Tenant in an amount equal to the full
replacement cost thereof; (ii) comprehensive general liability insurance
against claims for death, personal injury and property damage in or about
the Premises in amounts satisfactory from time to time to the Landlord
acting reasonably but in any event in an amount not less than
$2,000,000.00 per occurrence for personal injury and property damage;
(iii) tenant's legal liability insurance for limits satisfactory from
time to time to the Landlord acting reasonably; (iv) Business
interruption insurance; and (v) such other insurance as Landlord may from
time to time require. Each such policy shall be in form and with insurers
acceptable to the Landlord. The insurance described in parts (1) and (ii)
shall name the Landlord and anyone designated in writing by the Landlord
as Mortgagee as additional insureds as their interests may appear. All
property damage and public liability insurance shall contain a provision
for cross-liability or severability of interest as between the Landlord
and the Tenant. The Tenant hereby releases the Landlord from any
liability for loss to the extent of all insurance proceeds paid under
policies of insurance carried by the Tenant or which would have been paid
if the Tenant had maintained the insurance it is required to maintain
under this Lease. Such policies shall contain an endorsement requiring
the insurers under such policies to notify the Landlord in writing at
least thirty (30) days prior to any material change or cancellation
thereof. The Tenant shall furnish to the Landlord certified copies of all
such policies for its acceptance, as aforesaid, and shall provide written
evidence of the continuation of such policies not less than ten days
prior to their respective expiry dates. The cost or premium for each and
every such policy shall be paid by the Tenant. If the Tenant fails to
maintain such insurance, the Landlord shall have the right, but not the
obligation of any liability to do so, to pay the cost or premium
therefor, and in such event the Tenant shall repay to the Landlord, as
Additional Rent, forthwith on demand the amount so paid.
13.5 Landlord's Non-Liability
Tenant agrees that Landlord shall not be liable or responsible in any way
for any injury or death to any person or for any loss or damage to any
property at any time, in, on or about the Premises, no matter how the
same shall be caused and unless any such death, injury, loss or damage is
caused or attributed to the gross negligence of the Landlord, its
servants, agents, employees, contractors or persons for whom Landlord is
in law responsible in performing any of
its obligations hereunder. Without limiting the generality of the
foregoing, Landlord shall not be liable or responsible for any injury,
death, loss or damage to any persons or property caused or contributed to
by any of the following: fire, explosion, steam, water, rain, snow,
electricity, gas, or falling plaster; or by dampness or leaks from any
pipes, appliances, plumbing works, roof, exterior walls or any other
source whatsoever. All property kept or stored in or about the Premises
shall be at the sole risk of Tenant and Tenant shall indemnify Landlord
and save it harmless in respect of the same. Without in any way limiting
or affecting the generality or interpretation of the foregoing provisions
of this Section 13.05, it is agreed that Landlord shall in no event be
liable for any indirect or consequential damages suffered by Tenant or
any person arising therefrom except if arising from the Landlord's gross
negligence in performing any of its obligations hereunder.
13.06 Indemnity of Landlord
Tenant shall indemnify Landlord and all of its servants, agents,
employees, contractors and persons for whom Landlord is in law
responsible and shall hold them and each of them harmless from and
against any and all liability, claims, damages, losses and expenses,
including all legal fees and disbursements, due to, arising from or to
the extent contributed to by:
(a) any breach by Tenant of any of the provisions of this Lease;
(b) any act or omission of any person on the Premises or any use of
occupancy of or any articles in the Premises;
(c) any act or omission of Tenant or any of its servants, agents,
employees, invitees, licensees, sub-tenants, concessionaires,
contractors or persons for whom Tenant is in law responsible on the
Premises;
(d) any injury, death or damage to persons or property of Tenant of its
servants, agents, employees, customers, contractors or any other
persons on the Premises by or with the invitation, licence or consent
of Tenant.
(e) Any damage, destruction or need of repair to any part of the Premises
caused by any act or omission of Tenant or its servants, agents,
employees, customers, contractors, or persons for whom Tenant is in
law responsible, notwithstanding any other provisions of this Lease
including Landlord's repair obligations under Section 10.07 above.
13.07 Landlord's Employees
It is agreed that every indemnity, exclusion or release of liability and
waiver of subrogation herein contained for the benefit of Landlord shall
extend to and benefit all of Landlord's servants, agents, employees, and
those for whom Landlord is in law responsible (collectively referred to
in this Section 13.07 as "Employees"); solely for such purpose, and to
the extent that Landlord expressly chooses to enforce the benefits of the
Section 13.07 for its Employees, it is agreed that Landlord is the agent
or trustee for its Employees.
ARTICLE XIV
14.00 - ASSIGNMENT, SUBLETTING AND CHANGE OF CONTROL
14.01 Consent Required
This Lease is personal to Tenant only and therefore Tenant shall not
assign this Lease in whole or in part and shall not sublet or part with
or share possession of all or any part of the Premises without the
written consent of the Landlord, which written consent is to be obtained
in advance from the Landlord such consent not to be unreasonably or
arbitrarily delayed or withheld, and shall not grant any concessions,
franchises, licences or other rights to others to use any portion of the
Premises without Landlord's prior consent as aforesaid (all of the
foregoing being hereinafter individually or collectively referred to as
"Transfer"). If the Tenant has entered into a bona fide arm's length
agreement to sell the business conducted at the Premises, Tenant may
transfer this Lease to the purchases thereunder but only with the prior
written consent of
Landlord in each instance, which consent may not be unreasonably or
arbitrarily delayed or withheld.
Notwithstanding and without in any way affecting or limiting the
interpretation of the foregoing, it is agreed that it shall be reasonable
for Landlord to withhold its consent to a Transfer unless it is shown to
the Landlord's satisfaction that:
(h) the proposed Transferee has a good business and personal reputation;
(i) The proposed Transferee has not been bankrupt or the holder of twenty
(20%) percent or more of the issued shares of any class of shares of a
corporation or of an interest in a partnership, either of which has been
bankrupt in the ten (10) years preceding the date of the proposed
Transfer;
No transfer may be made other than pursuant to an agreement in writing of
which a copy is given to Landlord together with the request for consent.
The provisions of this Article XIV shall apply to any transfer which
might occur by inheritance or operation of law.
14.02 Obtaining Consent
All requests to Landlord for consent to any Transfer shall be made to
Landlord in writing together with a copy of the agreement pursuant to
which the proposed Transfer will be made and a copy of the agreement of
purchase and sale in respect of the business. All costs incurred by
Landlord, in respect of any such request for consent, including legal
costs and Landlord's administrative fee, shall be the responsibility of
and shall be paid by Tenant forthwith upon demand, whether or not
Landlord grants its consent to any proposed Transfer.
All such requests to Landlord for consent to any Transfer shall be
accompanied by such information in writing as a Landlord might reasonably
require respecting a proposed Transferee and which might be required to
provide Landlord with all the information necessary to determine whether
the aforementioned factors are satisfied, and which information shall
include, without limitation, the name, business and home addresses and
telephone numbers, business experience, credit information and rating,
financing position and banking and personal references of such proposed
Transferee.
14.03 Terms of Consent
If Landlord consents to a Transfer, or a consent to such Transfer is
obtained by the order of a court of competent jurisdiction, or if a
Transfer occurs as a result of operation of law not requiring Landlord's
consent (notwithstanding the express agreement between the parties hereto
that any Transfer by operation of law shall in any event be subject to
the consent of landlord and all of the other provisions as contained in
this Article XIV), Landlord shall have the following rights, in default
of any of which no such Transfer shall occur or be effective:
(a) to collect a deposit or further deposit to be held as a security
deposit for the prompt performance by the Transferee of all of the
terms, covenants, conditions and provisions of this Lease such that a
security deposit held by Landlord shall be equivalent to at least,
two (2) months' Rent payable in respect of the Transferred Premises;
(b) to require Tenant and the transferee and any indemnifier in respect
of Tenant's or Transferee's obligations hereunder to enter into an
agreement in writing and under seal to implement any amendments to
this Lease to give effect to Landlord's exercise of any of its rights
hereunder;
(c) to require the Transferee to enter into an agreement with Landlord in
writing and under seal to be bound by all of Tenant's obligations
under this Lease amended as herein provided;
(d) to require the Transferee to waive any rights pursuant to subsection
39(2) of the Landlord and Tenant Act (Ontario) and any amendments
thereto and any other statutory provisions of the same of similar
effect, to pay any Rent less than the amount payable hereunder;
(e) to require, if the Transfer is a sublease or other transaction not
including an assignment, that all amounts payable by the Transferee
to the Tenant be paid directly to Landlord who shall apply the same
on account of Tenant's obligations under this Lease;
(f) to require if the Transfer provides for a rental, a bonus, key money,
a lump sum payment or any consideration incidental thereto which is
in excess of the Rent or that portion of Rent attributable to a
portion of the Premises transferred, then the excess shall be paid by
Tenant to Landlord as Additional Rent, it being acknowledged by
Tenant that it is not permitted to profit in any way from
Transferring this Lease or parting with any portion of the Premises
and that all additional payments in excess of the Rent and Additional
Rent provided herein shall also be paid to Landlord as Additional
Rent.
14.04 Effect of Transfer
(a) No consent of Landlord to a Transfer shall be effective unless given
in writing an executed by Landlord under seal and no such consent
shall be deemed or presumed by any act or omission of Landlord or by
Landlord's failure to respond to any request for consent or by
Landlord's accepting any payment of any amount payable hereunder from
any party other than Tenant. Without limiting the generality of the
foregoing, Landlord may collect rent and any other amounts from any
Transferee and apply the net amount collect to any Rent and the
collection or acceptance of any Rent shall not be deemed to be a
waiver of Landlord's rights under this section nor any acceptance of
or consent to any such Transfer or a release of any of Tenant's
obligations under this Lease. No Transfer and no consent by Landlord
to any Transfer shall constitute a waiver of the necessity to obtain
Landlord's consent to any subsequent or other Transfer.
(b) In the event of any Transfer or any consent by Landlord to any
Transfer, Tenant shall not thereby be released from any of its
obligations hereunder but shall remain bound by all such obligations
pursuant to this Lease for the balance of the Term. Tenant hereby
consents to any amendments of this Lease which may be made between
the Transferee and Landlord without the further consent or agreement
of Tenant ("Amendments") and Tenant also consents to all Alterations
as referred to in Section 10.02 above after any such Transfer. Tenant
shall continue to be bound by all of its obligations pursuant hereto
notwithstanding any such Amendments or Alterations, to the extent of
what would have been Tenant's obligations pursuant hereto had such
Amendments or Alterations not been made.
(c) Every Transferee shall be obliged to comply with all of the
obligations of Tenant under this Lease. Tenant shall enforce all of
such obligations against each Transferee. Any default of any
Transferee shall also constitute a default of Tenant hereunder.
(d) Tenant agrees that if this Lease is ever disclaimed or terminated by
a trustee in bankruptcy of a Transferee or, if Landlord terminates
this Lease as a result of the bankruptcy, insolvency or any act or
default of any Transferee, Tenant shall, upon Landlord's request,
enter into a new lease of the Premises on the identical terms hereof
subject to such amendments hereto which had been agreed upon prior to
such disclaimer or termination, with the exception only of the length
of the Term which shall commence on the date upon which Landlord
exercises its right to require Tenant to enter into such new lease
and shall expire on the date upon which the Term would have expired
but for such disclaimer or termination by such trustee in bankruptcy
or such termination by Landlord, and with the exception that Tenant
will accept the Premises in an "as is" condition, as of such date
upon which Landlord exercises its right to require Tenant to enter
into such new lease.
14.05 No Advertising of Premises
Tenant shall not advertise this Lease or all or any part of the Premises
or the business or fixtures or contents therein for sale without
Landlord's prior written consent, which consent Landlord shall not
unreasonably withhold subject to the other provisions hereof.
14.06 Mortgage of Lease
The restrictions on Transfer as aforesaid shall apply, mutatis mutandis,
to any assigning, subletting, mortgaging, charging or otherwise
transferring of the Premises or this Lease for the purpose of securing
any loan or the repayment thereof by Tenant.
14.07 Corporate Tenant
If Tenant or any occupant of the Premises at any time is a corporation,
it is acknowledged and agreed that the transfer of the majority of the
issued shares in the capital stock or any transfer, issuance or division
of any shares of the corporation or of any affiliated corporation of the
corporation sufficient to transfer control to others than the then
present shareholders of the corporation shall be deemed for all purposes
of this Article XIV to be a Transfer and, according, a breach of this
Article XIV, and it is agreed that the parties hereto shall have all of
the same rights and obligations in respect thereof as are applicable to a
Transfer. Landlord shall have access at all times to the corporate books
and records of Tenant, which Tenant agrees will be located at such place
in Canada of which Landlord shall at all times be kept notified by Tenant
in writing, and Tenant shall make the same available to Landlord and its
representatives upon request, for inspection at all times in order to
ascertain whether or not there has at any time during the Term been a
transfer, issuing or division of shares sufficient to constitute a change
in control of Tenant corporation as aforesaid. This Section 14.07 shall
not apply to Tenant if and as long as Tenant is in occupancy of the
Premises and is a corporation whose shares are listed and traded on any
recognized public stock exchange in Canada or the United States.
14.08 Assignment by Landlord
Landlord shall have the right to sell, lease, convey or otherwise dispose
of the Premises and to assign this Lease and any interest of Landlord
pursuant to this Lease without restriction. If Landlord shall sell,
lease, convey or otherwise dispose of the Premises or shall assign this
Lease or any interest of Landlord pursuant to this Lease, then, to the
extent that the purchaser or assignee agrees with landlord to assume the
covenants and obligations of Landlord hereunder, Landlord shall thereupon
and without further agreement be release of all liability pursuant to the
terms of this Lease.
ARTICLE XV
15.00 - STATUS AND SUBORDINATION OF LEASE
15.01 Status Statement
Tenant shall, within ten (10) days' after written request from Landlord,
execute and deliver to Landlord, or to any actual or proposed lender,
purchaser or assignee of Landlord, a statement or certificate in such
form as requested by Landlord stating with reasonable particularity (if
such is the case or stating with reasonable particularity the manner in
which such may not be the case):
(a) that this Lease is unmodified and in full force and effect, or
particulars of any such modifications or stating that this Lease is
not in full force and effect if such is the case;
(b) the date of commencement and expiry of the Term and the dates to
which Basic Rent and any other Rent, including any prepaid rent have
been paid;
(c) whether or not there is any existing default by either party under
this Lease and, if so, specifying such default;
(d) that there is reason why the obligations of Tenant under this Lease
may not be fully enforced in accordance with their terms and that
there are no defences, counter-claims or rights of set-off in respect
of any of the same; and
(e) full details of the financial and credit standing and details of the
corporate organization of Tenant and the Indemnifier, if any, it
being intended that any such statement delivered pursuant hereto may
be relied upon by an actual or prospective lender, purchaser and
assignee of any interest of Landlord under this Lease or in the
Premises.
15.02 Subordination
This Lease and the rights of Tenant hereunder are and shall be subject
and subordinate to any and all mortgages, trust deeds, and charges (any
of which are herein called "Mortgage" or "Mortgages"" on or in the
future, including all renewals, extensions, modifications and
replacements of any Mortgages from time to time. Tenant shall at any time
on notice from Landlord or a holder of Mortgage attorn to and become a
tenant of the holder of any of such Mortgages upon the same terms and
conditions as set forth herein and shall execute promptly on request by
Landlord any certificates, agreements, instruments of postponement or
attornment or other such instruments or agreements as requested from time
to time to postpone or subordinate this Lease and all of Tenant's rights
hereunder to any of such Mortgages or to otherwise give full effect to
any of the provisions of this Article XV.
Tenant agrees to attorn to and become the tenant of any party whose title
to the Premises is superior to that of Landlord or to any assignee from
Landlord of landlord's interest under this Lease upon the same terms and
conditions as are set forth in this Lease and shall execute promptly on
request any agreements or instruments of attornment to give effect to
such attornment as shall be requested by Landlord at any time and from
time to time.
Provided Tenant is not in default hereunder, Landlord shall use
reasonable best efforts to obtain from the holder of any Mortgage, in
respect of which Tenant has executed and delivered an instrument of
postponement, subordination or attornment as required hereby, its
agreement to permit Tenant to continue in occupation of the Premises in
accordance with and subject to the terms of this Lease.
15.03 Tenant's Failure to Comply
If Tenant fails to execute any certificate, agreement, instrument, or
other document as required by the foregoing provisions of this Article XV
within ten (10) days after request by Landlord, then Landlord shall have
the right to:
(a) execute any such certificate, agreement, instrument or document for
and on behalf of Tenant and in Tenant's name, Tenant hereby agreeing
to be bound by the same, and for such purpose Tenant hereby
irrevocably appoints Landlord as Tenant's attorney for and on behalf
of Tenant pursuant to the Powers of Attorney Act (Ontario) and which
appointment shall survive the death or incapacity of Tenant.
15.04 Registration
Tenant shall not register this Lease or any short form or notice hereof
except in Landlord's form prepared by landlord on Tenant's request or in
such form as has been approved by Landlord in writing. The cost of
preparation, approval, execution and registration of any notice or short
form of this Lease or other document to be registered by Tenant shall be
borne by Tenant and shall be paid by Tenant forthwith upon demand. If
Tenant registers or causes or permits there to be registered against the
title to the Lands any short form or notice of this Lease or other
document, Tenant shall forthwith provide to the Landlord details of such
registration and a duplicate registered copy of the registered document.
Any lease or notice or short form of this Lease registered by or at the
request of Tenant shall contain an irrevocable power of attorney by
Tenant in favour of Landlord, which power of attorney is also hereby
irrevocably granted by Tenant to Landlord under the Powers of Attorney
Act (Ontario) and which power of attorney shall survive the death or
incapacity of Tenant, authorizing Landlord to execute on behalf of and in
the name of Tenant such notices, agreements and documents as shall be
required or desired by Landlord to expunge or discharge from the register
of the title of the lands any interest of Tenant therein after the expiry
or earlier termination of this Lease.
ARTICLE XVI
16.00 - DEFAULT AND REMEDIES
16.01 Default and Remedies
If any of the following shall occur:
(a) Tenant shall fail, for any reason, to make any payment of Rent as and
when the same is due to be paid hereunder and such default shall
continue for fifteen (15) days after such payment was due, whether or
not notice is given to Tenant;
(b) Tenant shall fail, for any reason, to perform any other covenant,
condition, agreement or other obligation on the part of Tenant to be
observed or performed pursuant to this Lease (other than the payment
of any Rent) and such default shall continue for fifteen (15) days
after written notice thereof or such shorter period as expressly
provided herein;
(c) Any of the policies of Landlord's insurance on the Premises or any
part or contents thereof shall be actually or threatened to be
cancelled or adversely changed as a result of any use of occupancy of
or contents in the Premises;
(d) Tenant shall purport to make a Transfer affecting the Premises, or
the Premises shall be used by any person or for any purpose, other
than in compliance with and as expressly authorized by this Lease;
(e) Tenant or any other person occupying any portion of the Premises
shall make an assignment for the benefit of creditors or become
bankrupt or insolvent or take the benefit of any statute for bankrupt
or insolvent debtors or make any proposal, assignment, arrangement or
compromise with its creditors or, if any steps are taken or action or
proceedings commenced by any person for the dissolution, winding-up
or other termination of Tenant's existence or liquidation of its
assets;
(f) A trustee, receiver, receiver-manager, agent or other like person
shall be appointed in respect of the assets or business of Tenant or
any other occupant of the Premises;
(g) Tenant attempts to or does abandon the Premises or remove or dispose
of any goods and chattels from the Premises so that there would not,
in the event of such removal or dispose, be sufficient goods of
Tenant on the Premises subject to distress to satisfy all arrears of
Rent payable under this Lease and all Rent payable hereunder for a
further period of at least twelve (12) months, or if the Premises
shall be vacant or unoccupied for a period of five (5) consecutive
days or more without the prior written consent of Landlord;
(h) Tenant makes any sale in bulk affecting any property on the Premises
(other than in conjunction with a Transfer approved in writing by
Landlord and made pursuant to all applicable legislation);
(i) This Lease or any goods or other property of Tenant shall at any time
be sized or taken in execution or attachment which remains
unsatisfied for a period of five (5) days or more; and
(j) Termination or re-entry by Landlord is permitted under any provision
of this Lease or at law;
Then, without prejudice to and in addition to any other rights and
remedies to which Landlord is entitled pursuant hereto or at law, the
then current and the next three (3) months' Rent shall be forthwith due
and payable and Landlord shall have the following rights and remedies,
all of which are cumulative and not alternative, to:
(a) terminate this Lease in respect of the whole or any part of the
Premises by written notice to Tenant; if this Lease is terminated in
respect of part of the Premises, this Lease shall be deemed to be
amended by the appropriate amendments, and proportionate adjustments
in respect of Rent and any other appropriate adjustments shall be
made in such manner as shall be determined by Landlord;
(b) enter the Premises as agent of Tenant and as such agent to relet them
for whatever term (which may be for a term extending beyond the Term)
and on whatever terms and conditions as Landlord in its sole
discretion may determine and to receive the rent therefor and, as the
agent of Tenant, to take possession of any furniture, fixtures,
equipment, stock or
other property thereon and, upon giving written notice to Tenant, to
store the same at the expense and risk of Tenant or to sell or
otherwise dispose of the same at public or private sale without
further notice, and to make such alterations to the Premises in order
to facilitate their reletting as Landlord shall determine, and to
apply the net proceeds of the sale of any furniture, fixtures,
equipment, stock or other property or from the reletting of the
Premises, less all expenses incurred by Landlord in making the
Premises ready for reletting and in reletting the Premises, on
account of the Rent due and to become due under Lease and Tenant
shall be liable to Landlord for any deficiency and for all such
expense incurred by Landlord as aforesaid; no such entry or taking
possession of or performing alterations to or reletting of the
Premises by Landlord shall be construed as an election on Landlord's
part to terminate this Lease unless a written notice of such
intention or termination is given by Landlord to Tenant;
(c) remedy or attempt to remedy any default of Tenant in performing any
repairs, work or other covenants of Tenant hereunder and, in so
doing, to make any payments due or claimed to be due by Tenant to
third parties and to enter upon the Premises, without any liability
to Tenant therefor or for any damages resulting thereby, and without
constituting a re-entry of the Premises or termination of this Lease,
and without being in breach of any of Landlord's covenants hereunder
and without thereby being deemed to infringe upon any of Tenant's
rights pursuant hereto, and, in such case, Tenant shall pay to
Landlord forthwith upon demand all amounts paid by Landlord to third
parties in respect of such default and all reasonable costs of
Landlord in remedying or attempting to remedy any such default plus
ten (10%) percent of the amount of such costs of Landlord" inspection
and supervision plus a further ten (10%) percent for overhead and
profit;
(d) obtain damages from Tenant including, without limitation, if this
Lease is terminated by Landlord, all deficiencies between all amounts
which would have been payable by Tenant for what would have been the
balance of the Term, but for such termination, and all net amounts
actually received by Landlord for such period of time; and
16.02 Interest
All mounts of Rent shall bear interest from their respective due dates
until the actual dates of payment at a rate of which shall be the greater
of (I) three (3%) percent per annum in excess of the prime commercial
rate of interest charged by Landlord's bank in Ontario for loans to its
most favoured commercial customers from time to time; and (ii) the rate
expressly agreed by Tenant in writing to be paid in respect of any
amount(s) from time to time.
16.03 Costs
Tenant shall be responsible for and pay to Landlord forthwith upon demand
all costs incurred by Landlord, including, without limitation, reasonable
compensation for all time expended by Landlord's own personnel, legal
costs on a solicitor and his own client basis, and all other costs of any
kind whatsoever, arising from or incurred as a result of any default of
Tenant or any enforcement by Landlord of any of Tenant's obligations
under this Lease or any other agreement or obligation of Tenant to
Landlord, whether or not related to the Premises.
16.04 Allocation of Payments
Tenant agrees that Landlord may, at its option to be exercised by written
notice to Tenant at any time, apply all sums received by Landlord from
Tenant or any other persons in respect of any Rent to any amounts
whatsoever payable by Tenant and it is further agreed that any allocation
made by Landlord, on its books and records or by written notice to Tenant
or otherwise, may subsequently be re-allocated by Landlord as it may
determine in its sole discretion, and any such allocation and
re-allocation from time to time shall be final and binding on Tenant
unless and to the extent subsequently re-allocated by Landlord.
16.05 Security Deposit
Within forty-eight (48) hours after acceptance of the Offer to Lease, and
execution of the Lease Agreement, the Tenant agrees to provide the
Landlord with a Letter of Credit in the amount of Forty-two Thousand
($42,000) Dollars for a minimum term of two (2) years. This Letter of
Credit shall expire upon the following two (2) conditions being
fulfilled:
(a) the Tenant remains a tenant in good standing, i.e. all realty taxes
and net rent are up to date; and
(b) the Tenant provides the Landlord with financial statements showing
that his net worth in Cantech Investments Ltd. is over One Million
($1,000,000) Dollars.
It is furthermore agreed that this Letter of Credit may be drawn down
should the Tenant become delinquent in its rental and/or realty tax
payments. The Landlord shall not draw on the Letter of Credit without
first giving the Tenant thirty (30) days notice to cure the default. When
the Letter of Credit has been discharged/expired, the Tenant shall pay
the last month's net rent, plus GST as a further deposit.
16.06 Remedies to Subsist
(a) No waiver of any of Tenant's obligations under this Lease and no
waiver of any of Landlord's rights hereunder in respect of any
default by Tenant hereunder shall be deemed to have occupied or be
given as a result of any condoning, excusing, overlooking or delay in
acting upon by Landlord in respect of any default by Tenant or by any
other act or omission of Landlord including, without limitation, the
acceptance of any Rent less than the full amount thereof, the
acceptance of any Rent after the occurrence of any default by Tenant,
or any verbal or written statements or agreements made by any
employee of Landlord other than an agreement in writing duly executed
on behalf of Landlord by one of its personnel with ostensible
authority to do so. No waiver of any of Tenant's obligations or any
of Landlord's rights hereunder shall be effective except and only to
the extent of any express waiver in writing duly executed on behalf
of Landlord by one of its personnel with ostensible authority to do
so. The waiver by Landlord of any default of Tenant or of any rights
of Landlord shall not be deemed to be a waiver of any term, covenant
or condition in respect of which such default or right has been
waived and shall not be deemed to be a waiver of any subsequent
default of Tenant or right of Landlord.
(b) All rights and remedies of Landlord under this Lease and at law,
shall be cumulative and not alternative, and the exercise by Landlord
of any of its rights pursuant to this Lease or at law shall at all
times be without prejudice to any other rights of Landlord, whether
or not the are expressly reserved.
(c) If Landlord assigns this Lease to a mortgagee or holder of other
security on the Premises or any part thereof or to any other person
whatsoever, landlord shall nonetheless be entitled to exercise all
rights and remedies available to it pursuant to this Lease and at law
without providing evidence of the approval or consent of such
mortgagee, holder of other security or other person whatsoever.
(d) All Rent shall be paid by Tenant to landlord without deduction,
abatement or set-off whatsoever, except as and to the extent
expressly permitted pursuant to the terms of this Lease, and Tenant
hereby waives any rights of deduction, abatement or set-off available
to it now or at any time in the future, including any right to
deduction, abatement or set-off contained in any statute.
16.07 Impossibility of Performance
If and to the extent that either Landlord or Tenant shall be unable to
fulfil or shall be delayed or restricted in the fulfilment of any
obligation under this Lease, other than the payment by Tenant of any
Rent, by reason of unavailability of material, equipment utilities,
services or labour required to enable it to fulfil such obligation or by
reason of any laws, or by reason of its not being able to obtain any
permission or authority required pursuant to any applicable laws or by
reason of any other such cause beyond its control and not the fault of
the party being delayed and not avoidable by the exercise of reasonable
foresight (excluding the inability to pay for the performance of such
obligation), then the party being delayed shall be entitled to extend the
time for fulfilment of such obligation by a time equal to the duration of
such delay or restriction, and the other party shall not be entitled to
any compensation for any loss, inconvenience, nuisance or discomfort
occasioned thereby. The party delayed will, however, use its best efforts
to fulfil the obligation in question as soon as is reasonably practicable
by arranging an alternate method of providing the work, services or
materials being delayed subject, in the case of performance by Tenant, to
the approval of Landlord in its sole and absolute discretion. In any
event, the provisions of this Section 16.07 shall not apply to permit any
delay in any payment by Tenant of any Rent.
ARTICLE XVII
17.00 - CONTROL OF PREMISES
17.01 Rules and Regulations
Landlord may, from time to time, make and amend such rules and
regulations for the management and operation of the Premises as Landlord
shall determine and Tenant and all persons under its control shall be
bound by and shall comply with all of such rules and regulations of which
notice is given to Tenant from time to time and all of such rules and
regulations shall be deemed to be incorporated into and form a part of
this Lease. Without limiting the generality of the foregoing, Tenant
shall comply with all rules and regulations made by Landlord respecting
security and respecting shipping, receiving, loading and unloading of
merchandise, supplies, materials, garbage and all other things
whatsoever, all of which shall be made only at such times and from, over
or by means of such access routes, driveways, doors, loading areas,
stairs and other areas or passages whatsoever as Landlord shall determine
in writing from time to time. Landlord shall not make any rules or
regulations which conflict with any express provision of this Lease
unless and only to the extent required by any applicable laws or unless
Tenant consents thereto. Landlord shall act reasonably in enforcing such
rules and regulations but the imposition of any rules and regulations
shall not create or imply any obligation of Landlord to enforce them or
create any liability of Landlord for their non-enforcement or otherwise.
17.02 Access to Premises
(a) Landlord (including its agents, employees, contractors or
representatives), without limiting any other rights Landlord may have
pursuant hereto or at law, shall have the right, but not the
obligation, to enter the Premises at any time upon reasonable prior
notice and for any of the following purposes:
(i) to examine the Premises and to perform any maintenance,
repairs and alterations to the same or any part thereof as may be
required or permitted by this Lease and to perform any
maintenance, repairs and alterations to any mechanical,
electrical, heating, ventilating, air-conditioning and humidity
control equipment and services located therein serving the
Premises or any part thereof, and for all of such purposes,
Landlord may take such material and equipment into the Premises as
Landlord may require;
(ii) to protect the Premises in respect of any construction or
other work being performed in premises adjoining or in the
vicinity of the Premises;
(iii) for any purposes as determined by Landlord in cases of
emergency;
(iv) to read any utility or other similar meters located in the
Premises
(v) during the last twelve (12) months of the Term to show the
Premises to prospective tenants, and to permit prospective tenants
to make inspections, measurements, and plans;
(vi) at any time during the Term, to show the Premises to
prospective purchasers, mortgagees or lenders; and
(vii) to exercise any of the rights available to Landlord pursuant
to this Lease.
(b) Landlord shall have the right to run through the Premises conduits,
wires, pipes, ducts and other elements of any systems for utilities,
heating, ventilating, air-conditioning and humidity control,
telephone and other communications systems and any other such systems
to serve the Premises or any parts thereof and landlord shall have
access for itself and those designated by it to the Premises for the
purpose of inspecting, maintaining, repairing, replacing, and
altering any services in respect of any of the same. In such
circumstances the Landlord shall use its best efforts to minimize any
adverse impact on Tenant's business operations or quiet enjoyment of
the Premises. Notwithstanding the foregoing, the Rent shall not be
reduced or otherwise affected as a result of any of such systems
being located on or running through the Premises.
(c) Landlord shall exercise its rights pursuant to this Section 17.02 in
such manner and at such times as Landlord, acting reasonably but in
its sole discretion, shall determine; at any time that entry by
landlord is desired in case of emergency, and if no personnel of
Tenant are known by landlord to be present on the Premises of if such
personnel fail for any reason to provide Landlord immediate access at
the time such entry is desired, Landlord may forceable enter the
Premises without liability for damage caused thereby.
ARTICLE XVIII
18.00 - EXPROPRIATION
18.01 Expropriation
If the whole or any part of the Premises shall be expropriated (which
term shall for the purposes of this Article XVII include expropriation,
condemnation or sale by landlord to an authority with the power to expropriate,
condemn or take) by any competent authority then:
(a) Landlord and Tenant shall co-operate with each other in respect of
such expropriation so that each may receive the maximum award to
which it may be entitled in law for such expropriation;
(b) Landlord shall have the option, to be exercised by written notice
to Tenant, to terminate this Lease, such termination to be
effective on the date the expropriating authority takes possession
of the whole or substantial portion of the Premises; and
(c) This lease shall continue in full force and effect in accordance
with its terms until the date on which this Lease is terminated in
accordance with the provisions of this Article XVIII, if
terminated in accordance with the express provisions hereof and,
if terminated, Rent and all other obligations under this Lease
shall be adjusted as of the date of such termination.
ARTICLE XIX
19.00 - MISCELLANEOUS
19.01 Notices
All notices, demands, requests or other instruments ("Notices") which
may be or are required to be given under this Lease shall be in writing
and shall be delivered in person or sent by prepaid registered Canadian
mail or by CN/CP Telegram addressed:
To the Tenant:
Cantech Investments ltd.
At the Premises
To the Landlord:
The Carrier Drive Development Limited
40 The Bridle Path
North York, Ontario
M2L 1C8
All such notices shall be conclusively deemed to have been given upon
the day the same is personally delivered or, if mailed as aforesaid,
four (4) business days (excluding Saturdays,
Sundays, holidays and days upon which regular postal service is
interrupted or unavailable for any reason) after the same is mailed as
aforesaid, or if forwarded by CN/CP telegrams as aforesaid, two (2)
business days (excluding Saturdays, Sundays, holidays and days upon
which regular telegram service is interrupted or unavailable for any
reason) after the same is delivered to CP/CP telegram office in Canada
for transmitting, as the case may be. Any party may at any time by
notice in writing to the other, change its address for service of
Notices.
19.02 Planning Act
This Lease is entered into subject to the provisions of and compliance
with the provisions of all applicable legislation dealing with planning
restrictions including the Planning Act R.S.O. 1990 and amendments.
19.03 Complete Agreement
It is understood and agreed that other than and to the extent that any
other written agreement between Landlord and Tenant respecting the
Premises remains in force, this Lease constitutes the complete
agreement between the parties and that there are no covenants,
representations, agreements, warranties or conditions in any way
relating to the subject matter of this Lease or the tenancy created
hereby, expressed or implied, collateral or otherwise, except as
expressly set forth herein. Tenant acknowledges that no representatives
of Landlord are authorized to make on Landlord's behalf any covenants,
representations, agreements, warranties or conditions of any kind or in
any manner whatsoever other than as expressly set forth in writing in
this Lease in the form in which it is executed by Landlord under seal.
No amendment to this Lease shall be binding upon Landlord unless the
same is in writing and executed by landlord under seal.
19.04 Use Prior to Commencement Date
If Tenant uses or occupies the whole or any part of the Premises in any
way prior to the Commencement date without entering into a lease with
landlord in respect of such use or occupancy, then during the period of
such use or occupancy, Tenant shall be a tenant of Landlord subject to
all the terms and conditions as contained in this Lease which shall
apply to such tenancy mutatis mutandis; the inclusion of this paragraph
shall not be deemed to authorize or permit Tenant to use or occupy the
whole or any portion of the Premises in any way prior to the
Commencement Date.
19.05 Acceptance of Premises
Tenant accepts the Premises in the state and condition in which they
are received from Landlord and, Tenant's entering into possession of
all or any part of the Premises shall be conclusive evidence of the
acceptance by Tenant of the condition and state of repair of the
Premises. The Lessor warrants that all heating, ventilation, air
conditioning (HVAC System), electrical, mechanical (including dock
levellers), plumbing and sprinkler systems will be in good working
condition at the date of official commencement of the Lease Term
(November 1, 1995) by the Lessee and will continue to be guaranteed
until June 15, 1996. Furthermore, the Lessor warrants that the current
sprinkler system conforms to all building codes/fire regulations, as
pertaining to all applicable municipal and governmental authorities.
The Lessor further agrees to deliver the premises in a clean and
orderly condition.
19.06 Time of the Essence
Time is of the essence of this Lease and all parts hereof.
19.07 Applicable Law
This Lease shall be governed by and interpreted in accordance with the
laws of the Province of Ontario. The parties agree that the Courts of
Ontario shall have jurisdiction to determine any matters arising
hereunder, except to the extent, if any, expressly provided to the
contrary herein, and the parties hereby attorn to the jurisdiction of
the Courts of Ontario.
19.08 Severability
If any provision of this Lease of any portion thereof or the
application of any of the same is illegal, unenforceable or invalid, it
shall be considered separate and severable from this Lease and all of
the remaining provisions hereof shall remain in full force and effect
as though any such provision of this Lease or any portion thereof had
not be included in this Lease but such provision of this Lease or
portion hereof shall nonetheless continue to be enforeceable to the
full extent permitted by law. Neither party is obliged to enforce this
Lease to the extent that by so doing they would be contravening any
applicable laws.
19.09 Option to Purchase
The Tenant, if not in default under the Lease and with thirty (30) days
written notice to the Landlord, shall have the Option to purchase the
land, building and all improvements thereon during the lease term at
the purchase price of Two Million One Hundred and Two Thousand Eight
Hundred and Eighty ($2,102,880.00) Dollars, based on Thrity-two
($32.00) Dollars per square foot. The remaining terms and conditions of
the option to purchase shall be mutually agreed upon between the
Landlord and the Tenant within fifteen (15) business days of the
exercising of this option by the Tenant. The closing date of the
purchase shall occur as quickly as reasonably possible thereafter,
which closing date shall be mutually agreed upon by the Landlord and
the Tenant.
19.10 Option to Renew
As long as Tenant is not in default of any of the terms of this Lease
and shall have regularly, diligently and punctually paid Rent as and
when due and duly and regularly performed its other covenants under the
Lease through the Term, Tenant shall have the right to renew this Lease
from its Expiry Date for a further term of Five (5) years provided that
Tenant has notified Landlord in writing of its intention to exercise
its option to renew not less than Six (6) months prior to the
expiration of the Term. In the event of failure to give written notice
within the time or in the manner prescribed, this option shall be null
and void. In the event that the exercise of this option shall be duly
and properly completed by Tenant, then all of the terms of this Lease
shall apply during the renewal term except:
(a) there shall be not further right of renewal unless agreed upon in
writing at the time of renewal, if any of this Lease; and
(b) Basic Rent shall be agreed upon between Landlord and Tenant
negotiating in good faith and shall be based upon the prevailing
rental rates for substantially similar Industrial/Office space in a
substantially similar area.
Should Landlord and Tenant fail to agree as to the amount of Basic Rent
to be paid during the renewal term by the SIXTIETH (60th) day preceding
the Commencement of the Renewal Term, such amount shall be determined
by binding arbitration to be conducted pursuant to the relevant
provisions of the Ontario Arbitration's Act, R.S.O. 1990 and amendments
thereto with the intention that Basic Rent shall be based on the
prevailing rental rates for substantially similar space in a
substantially similar area. Should the arbitration continue past the
Commencement Date of the Renewal Term, Tenant shall nevertheless pay
Basic Rent during the renewal term, until the Basic Rent is determined,
at a Basic Rent rate of Two Dollars and Sixty-five Cents ($2.65) per
square foot, per annum, plus all Additional Rent specified under this
Lease.
19.11 Environmental Practices
(a) In this Lease:
(i) "Environmental Audit" shall mean a complete review of the
Premises and the environmental practices of the Tenant
thereon by the Landlord, its employees or agents and shall
include such visual inspections, interviews with the
Tenant, its employees, servants, or agents, and such soil,
air, or other tests as the Landlord shall in its sole
discretion deem to be necessary.
(ii) "Hazardous Substance" means any contaminant, pollutant or
hazardous substance that is likely to cause immediately or
at some future time, harm or degradation to the
environment or risk to human health or safety, and without
restricting the generality of the foregoing, includes
without limitation any pollutant, contaminant, waste,
hazardous waste, toxic substance or dangerous good which
is defined or identified in any municipal, provincial or
federal environmental legislation.
(b) The Tenant shall at all times use the Premises so as to comply
with all municipal, provincial and federal environmental
legislation in keeping with first class environmental protection
practices.
(c) The Landlord shall have the right to conduct an Environmental
Audit of the Premises at any time and from time to time throughout
the term and any renewal thereof. Such Environmental Audit shall
be at the landlord's sole expense.
(d) In the event that the Environmental Audit reveals that the Tenant
is storing, handling, transporting, manufacturing, processing or
otherwise dealing with any hazardous Substances in the Premises,
the Landlord shall give the Tenant ninety (90) days within which
to amend if required by municipal, provincial or federal
environmental legislation its manner of storing, handling,
transporting, manufacturing, processing or otherwise dealing with
such Hazardous Substances to comply with municipal, provincial or
federal governmental legislation. The Tenant shall, at its
expense, further forthwith carry out such procedures including a
clean up of any Hazardous Substances released by the Tenant onto
the Premises (but expressly excluding any other Hazardous
Substances) so as to be in compliance with applicable municipal,
provincial and federal environmental legislation, and to forestall
any damage to the Premises which in the opinion of the Landlord
may be created by the unsatisfactory storing, handling,
transporting, manufacturing, processing or otherwise dealing with
any hazardous Substances.
(e) In the event that the Tenant shall be in default of the provisions
hereof and shall fail to amend its practices or take such
corrective measures as are required pursuant to subparagraph (d)
hereof within the aforesaid ninety (90) day period the Landlord
shall have the right to enter upon the Premises and carry out such
procedures as are, in the sole opinion of the Landlord, necessary
to correct any damage which may have been done to the Premises or
to forestall any damage to the Premises which in the opinion of
the Landlord may be created by the unsatisfactory storing,
handling, transporting, manufacturing, processing or otherwise
dealing with such Hazardous Substances and the Tenant shall pay to
the Landlord on demand, as Additional Rent, all costs and expenses
of carrying out such procedures.
(f) Any entry on the Premises of the Tenant by the landlord pursuant
to the terms of the Lease shall not constitute a breach of the
Landlord's covenant of Quiet Enjoyment.
19.12 Goods and Services Tax
Goods and Services Tax means any and all goods and services taxes,
sales taxes, value added taxes, business transfer taxes, or any other
taxes imposed on the Landlord with respect to the Rent payable by the
Tenant to the Landlord under this Lease, or in respect of the rental of
space under this Lease, whether characterized as a goods and services
tax, sales tax, value added tax, business transfer tax or otherwise.
Notwithstanding anything to the contrary contained herein, the Tenant
shall pay to the Landlord an amount equal to the Landlord's liability
(pursuant to the applicable legislation) for any and all Goods and
Services Tax, levied, rated, charged or assessed in connection with
this Lease, it being the intention of the parties that the Landlord
shall be fully reimbursed by the Tenant with respect to all Goods and
Services Tax payable or collectible by the landlord in respect of Rent
or the rental of space under this Lease. The amount of Goods and
Services Tax so payable by the Tenant shall be calculated by the
Landlord in accordance with the applicable legislation and shall be
paid to the Landlord at the same time as the amounts to which the Goods
and Services Tax are payable to the Landlord under the terms of this
Lease or upon demand at such other time or times as the Landlord from
time to time determines. Despite any other paragraph or clause of this
Lease, the amount payable by the Tenant under this paragraph shall be
deemed to be a tax and not Rent but the Landlord shall have all of the
same remedies for and rights of recovery of such amount as it has for
recovery of Rent under this Lease and may require it to be paid in the
same manner as Additional Rent for purposes of collection.
19.13 Section Numbers and Headings
The table of contents of this Lease and all section numbers and all
headings are inserted as a matter of convenience only and shall in no
way limit or affect the interpretation of this Lease.
19.14 Interpretation
Whenever a word importing singular or plural is used in this Lease such
word shall include the plural and singular respectively. Where any
party is comprised of more than one entity, the obligations of each of
such entities shall be joint and several. Words importing either gender
of firms or corporations shall include persons of the other gender and
firms or corporations as applicable. Subject to the express provisions
contained in this Lease, words such as "hereof", "herein", "hereby",
"hereinafter", and "hereunder" and all similar words or expressions
shall refer to this Lease as a whole and not to any particular section,
or portion thereof being less that the whole.
19.15 Successors
This Lease and all portions hereof shall enure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrator, successors, assigns and other legal representatives
excepting only that this Lease shall not enure to the benefit of any
such parties unless and only to the extent expressly permitted pursuant
to the provisions of this Lease.
19.16 Reasonability Clause
Despite anything contained in this Lease to the contrary, 9a) any
allocations of any cost, charge or expense which is to be determined by
Landlord under his Lease shall be done on a reasonable and equitable
basis, (b) whenever in this Lease landlord's consent, permission or
approval is required, such consent, permission or approval shall not be
unreasonably withheld or delayed, but if Landlord does not respond
within fifteen 915) days to Tenant's request for such consent,
permission or approval, then Landlord's consent, permission or approval
shall be deemed to be given to Tenants request, and (c) in exercising
any of its rights under this Lease, landlord shall act reasonably and
as a prudent owner of a similar Premises having regard to size, age,
and location.
IN WITNESS WHEREOF this Lease has been executed by the parties hereto
under their respective corporate seals and under the and of their duly
authorized officer in that behalf, as of the day and year first written
above.
SIGNED, SEALED AND DELIVERED ) THE CARRIER DRIVE DEVELOPMENT LTD.
)
in the presence of: ) per: ___________________________
)
)
)
) CANTECH INVESTMENTS LTD.
)
) per: ___________________________
SCHEDULE "A"
Parcel 36-36, Section E-24, being part of Lot 36, Concession 3 Fronting the
Humber, designated as PART 1 on Plan 66R-8320, city of Etobicoke (formerly the
Borough of Etobicoke), Municipality of Metropolitan Toronto.
SCHEDULE "B"
LANDLORD'S WORK
The Landlord, at its own expense, shall complete the following work in a good
and workmanlike manner, prior to September, 1, 1995:
Office Area
o Replace any damaged/soiled/missing ceiling tiles, lighting covers and
floor tiles.
o Steam clean entire office area carpet; however, re-carpet certain
office areas. The areas to be re-carpeted shall be agreed upon between
the Landlord and the Tenant before installation, including the type,
style and colour of the carpet from the Landlord's standard selection
available.
o Paint the entire office area; the colour to be agreed upon between the
Landlord and the Tenant prior to the commencement of such work.
o Leave existing security system in place. (It is acknowledged by both
parties that as the security system is a leased system and not owned by
the Landlord, that the security company may remove the system at any
time prior to a new Lease being entered into).
WarehouseArea
o Fix and ensure that all shipping doors (truck level and drive in) are
in good working order and sealed properly including holes, gaps, et
cetera.
o Fix and ensure all exit signs and emergency lighting is in proper
working order.
o Fix and seal all cracks/separations in the block walls throughout
warehouse area. Ensure all bolts in the floor are removed properly and
that the floor is in good condition
o Replace the missing washroom ceiling tiles, fix the door handles, paint
the walls and ensure all plumbing is working properly. This work is to
be agreed upon between the Landlord and the Tenant prior to the
commencement of this work.
o Ensure that there is 400 amps. 600 volts of electrical power into the
building.
Outside Area
o Fix the asphalt area around the west side shipping area sewer to ensure
proper drainage and safety.
EXHIBIT 3.3
SHAREHOLDER RIGHTS AGREEMENT
THIS SHAREHOLDER RIGHTS AGREEMENT dated as of April 23, 1997.
B E T W E E N:
DURA PRODUCTS INTERNATIONAL INC., a corporation
incorporated under the laws of Ontario (the "Corporation"),
- and -
THE R-M TRUST COMPANY, a trust company incorporated under
the laws of Canada, as Rights Agent (the "Rights Agent").
WHEREAS:
A. The Board of Directors has determined that it is advisable and in the best
interests of the Corporation to adopt a shareholder rights plan (the "Rights
Plan") to ensure, to the extent possible, that shareholder value is maximized
and that all shareholders of the Corporation are treated fairly and equally in
connection with any take-over offer for the Corporation.
B. In order to implement the Rights Plan, the Board of Directors has:
(a) authorized and declared a distribution of one right (a
"Right") effective at the Record Time in respect of each
Common Share outstanding at that time; and
(b) authorized the issuance of one Right in respect of each Common
Share issued after the Record Time and prior to the earlier of
the Separation Time and the Expiration Time.
C. Each Right entitles the holder thereof, after the Separation Time, to
purchase securities of the Corporation pursuant to the terms and subject to the
conditions set forth in this Agreement.
D. The Corporation desires to appoint the Rights Agent to act on behalf of the
Corporation, and the Rights Agent is willing to so act, in connection with the
issuance, transfer, exchange and replacement of Rights Certificates, the
exercise of Rights and other matters referred to in this Agreement.
NOW THEREFORE in consideration of the premises and their
respective agreements set forth in this Agreement, the parties agree as follows:
ARTICLE 1 - INTERPRETATION
- 2 -
1.1 CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms
have the meanings indicated:
(a) "ACQUIRING PERSON" means any Person who is the Beneficial
Owner of 10% or more of the outstanding Voting Shares, but
does not include:
(i) the Corporation, any Subsidiary of the Corporation or
any employee benefit plan, deferred profit sharing
plan, stock participation plan or trust for the
benefit of employees of the Corporation or any
Subsidiary of the Corporation;
(ii) any Person who becomes the Beneficial Owner of 10% or
more of the outstanding Voting Shares as a result of:
(A) a Voting Share Reduction;
(B) a Permitted Bid Acquisition;
(C) an Exempt Acquisition; or
(D) a Pro Rata Acquisition;
provided, however, that if a Person becomes the
Beneficial Owner of 10% or more of the outstanding
Voting Shares by reason of a Voting Share Reduction,
a Permitted Bid Acquisition, an Exempt Acquisition or
a Pro Rata Acquisition, and thereafter becomes the
Beneficial Owner of any additional Voting Shares
(other than pursuant to a Voting Share Reduction, a
Permitted Bid Acquisition, an Exempt Acquisition or a
Pro Rata Acquisition), then, as of the date that such
Person becomes the Beneficial Owner of such
additional Voting Shares, such Person shall become an
"Acquiring Person";
(iii) for the period of 10 days after the Disqualification
Date (as defined below), any Person who becomes the
Beneficial Owner of 10% or more of the outstanding
Voting Shares as a result of such Person becoming
disqualified from relying on Clause 1.1(d)(vii)
solely because such Person or the Beneficial Owner of
such Voting Shares has participated in, has made,
proposes or intends to make or is participating in a
Take-over Bid or any plan or proposal relating
thereto or resulting therein, either alone or by
acting jointly or in concert with any other Person.
For the purposes of this definition,
"Disqualification Date" means the first date of
public announcement of facts indicating that any
Person has
-3-
participated in, has made, proposes or intends to
make or is participating in a Take-over Bid or any
plans or proposals relating thereto or resulting
therein including, without limitation, a report filed
pursuant to Section 101 of the Securities Act or
Section 13(d) of the 1934 Exchange Act; or
(iv) an underwriter or member of a banking or selling
group that becomes the Beneficial Owner of 10% or
more of the Voting Shares in connection with a bona
fide distribution to the public of securities.
(b) "AFFILIATE", when used to indicate a relationship with a
specified Person, means a Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled
by, or is under common control with, such specified Person and
a Person shall be deemed to be controlled by another Person if
controlled in any manner whatsoever that results in control in
fact by that other Person, whether directly or indirectly, and
whether through share ownership, a trust, a contract or
otherwise.
(c) "ASSOCIATE", when used to indicate a relationship with a
specified Person, means:
(i) any body corporate, partnership or other organization
of which such specified Person is a director, officer
or partner;
(ii) any trust or estate in which specified Person has a
beneficial interest and with whom such specified
Person is acting jointly or in concert, or in which
such specified Person has a 50% or greater beneficial
interest or in respect of which such specified Person
serves as a trustee or in a similar capacity
provided, however, that a Person shall not be an
Associate of a trust by reason only of the fact that
such Person serves as trustee or in a similar
capacity in relation to such trust if such Person is
duly licensed to carry on the business of a trust
company under applicable laws or if the ordinary
business of such Person includes the management of
investment funds for unaffiliated investors and such
Person acts as trustee or in a similar capacity in
relation to such trust in the ordinary course of such
business;
(iii) any relative of such specified Person who has the
same home as such specified Person, or any person to
whom such specified Person is married, or any person
with whom such specified Person is living in a
conjugal relationship outside marriage, or any
relative of such spouse or other person who has the
same home as such specified Person;
- 4 -
(iv) any Person who is a director, officer, partner or
trustee of such specified Person or of any body
corporate, partnership or other organization (other
than the Corporation or any wholly-owned Subsidiary
of the Corporation) that is an Affiliate or Associate
of such specified Person; and
(v) any body corporate of which such specified Person
owns at law or in equity shares or securities
currently convertible into or exchangeable for shares
carrying more than 10% of the voting rights
exercisable with respect to the election of directors
under all circumstances or by reason of the
occurrence of an event that has occurred and is
continuing, or a currently exercisable option or
right to purchase such shares or such convertible or
exchangeable securities, and with whom such specified
Person is acting jointly or in concert.
(d) A Person is deemed the "BENEFICIAL OWNER" and to have
"BENEFICIAL OWNERSHIP" of, and to "BENEFICIALLY OWN":
(i) any securities as to which such Person or any of such
Person's Affiliates or Associates is, or may be
deemed to be, the direct or indirect beneficial owner
and, for this purpose, a Person shall be deemed to be
a beneficial owner of all securities:
(A) owned by a partnership of which such Person
is a partner;
(B) owned by a trust in which the Person has a
beneficial interest and which is acting
jointly or in concert with that Person or of
which the Person has a 50% or greater
beneficial interest;
(C) over which such Person or any of such
Person's Affiliates or Associates exercises
control or is deemed to exercise control
pursuant to the Securities Act;
(D) owned jointly or in common with others; and
(E) of which such Person or any of such Person's
Affiliates or Associates is deemed to be the
beneficial owner pursuant to the Company Act
or the Securities Act for the purposes of
insider trading or take-over bids or
pursuant to Rule 13d-3 or 13d-5 under the
1934 Exchange Act, whether or not such laws
or regulations apply to such Person or such
Person's Affiliates or
- 5 -
Associates and whether or not such
beneficial owner or deemed beneficial owner
is the holder of record of such securities;
(ii) any securities as to which such Person or any of such
Person's Affiliates or Associates has, directly or
indirectly:
(A) the right to become Beneficial Owner within
the meaning of Clause (i) of this Subsection
1.1(d), (whether such right is exercisable
immediately or after the passage of time or
upon the occurrence of a contingency or
payment of instalments or otherwise)
pursuant to any agreement, arrangement,
pledge or understanding or otherwise,
whether or not in writing (other than (x)
customary agreements with and between
under-writers and/or banking group and/or
selling group members with respect to a bona
fide distribution to the public of
securities and (y) pledges of securities in
the ordinary course of business that meet
all of the conditions specified in Rule
13d-3(d)(3) under the 1934 Exchange Act
(except for the condition in Rule 13d-
3(d)(3)(ii) and except for a pledge
agreement with a registered securities
dealer relating to the extension of credit
for purchases of securities on margin in the
ordinary course of the dealer's business)),
or upon the exercise of conversion rights,
exchange rights, rights (other than the
Rights), warrants or options, or otherwise;
or
(B) the right to vote such securities (whether
such right is exercisable immediately or
after the passage of time or upon the
occurrence of a contingency or payment of
instalments or other- wise) pursuant to any
agreement, arrangement or understanding
(whether or not in writing), or otherwise
(other than pledges of securities in the
ordinary course of business that meet all of
the circumstances specified in Rule
13-3(d)(3) under the 1934 Exchange Act other
than the condition in Rule 13d-3(d)(3)(ii)
and other than a pledge agreement with a
registered securities dealer relating to the
extension of credit for purchases of
securities on margin in the ordinary course
of the dealer's business); and
(iii) any securities which are Beneficially Owned within
the meaning of Clauses (i) or (ii) of this Subsection
1.1(d) by any other Person with which such Person or
any of such Person's Affiliates or Associates is
acting jointly or in concert or has any agreement,
arrangement or understanding, whether or not in
writing (other than (x) customary agreements with and
between underwriters and/or banking group and/or
-6-
selling group members with respect to a bona fide
distribution to the public of securities and (y)
pledges of securities in the ordinary course
of business that meet all of the conditions specified
in Rule 13d-3(d)(3) under the 1934 Exchange Act) with
respect to, or for the purpose of, acquiring,
holding, voting or disposing of any Voting Shares or
acquiring, holding or disposing of a significant
portion of the property or assets of the Corporation
or any Subsidiary of the Corporation, and any
securities which are Beneficially Owned (within the
meaning of Clauses (i) or (ii) of this Subsection
1.1(d)) by any Affiliate or Associate of such other
Person or any Person that is acting jointly or in
concert with, or has any agreement, arrangement or
understanding of the type referred to above with,
such other Person;
provided, however, that a Person shall not be deemed the
"Beneficial Owner" or to have "Beneficial Ownership" of, or to
"Beneficially Own", any security:
(iv) solely because such security has been deposited or
tendered pursuant to a tender or exchange offer or
take-over bid made by such Person or any of such
Person's Affiliates or Associates or any other Person
referred to in paragraph (iii) of this definition
until the earlier of such deposited or tendered
security being accepted unconditionally for payment
or exchange or being taken up and paid for;
(v) solely because such Person or any of such Person's
Affiliates or Associates or any other Person referred
to in paragraph (iii) of this definition has or
shares the power to vote or direct the voting of such
security pursuant to a revocable proxy given in
response to a public proxy solicitation made pursuant
to, and in accordance with, the applicable rules and
regulations under the Company Act, the Securities Act
and the 1934 Exchange Act, except if such power (or
the arrangements relating thereto) is then reportable
under Section 101 of the Securities Act or under Item
6 of Schedule 13D under the 1934 Exchange Act;
(vi) solely because such Person or any of such Person's
Affiliates or Associates or any other Person referred
to in paragraph (iii) of this definition has or
shares the power to vote or direct the voting of such
security in connection with, or in order to
participate in, a public proxy solicitation made or
to be made pursuant to, and in accordance with, the
applicable rules and regulations referred to in
clause (v) above, except if such power (or the
arrangements relating thereto) is then reportable
-7-
under Section 101 of the Securities Act or under Item
6 of Schedule 13D under the 1934 Exchange Act;
(vii) solely because any such Person, any of such Person's
Affiliates or Associates or any other Person referred
to in paragraph (iii) of this definition has an
agreement, arrangement or understanding (whether or
not in writing) with respect to a shareholder
proposal or a matter or matters to come before a
meeting of shareholders, including the election of
directors;
(viii) solely because such Person (hereinafter in this
Clause 1.1(d) referred to as the "Manager"), being
principally engaged in the business of managing
investment funds for other Persons who are not
Affiliates or Associates of the Manager and who do
not act jointly or in concert with the Manager as
part of the Manager's duties as agent for fully
managed accounts, holds or exercises voting or
dispositive power over such security; provided,
however, that:
(A) such security shall be deemed, in such case,
to be Beneficially Owned by such other
Persons;
(B) the Manager does not, individually,
Beneficially Own in excess of five percent
of the outstanding Voting Shares; and
(C) the Manager does not make or propose to make
a Take-over Bid by means of a Take-over Bid
circular or any other means, other than an
Offer to Acquire Voting Shares or other
securities by means of a distribution by the
Corporation or by means of ordinary market
transactions (including prearranged trades)
executed through the facilities of a stock
exchange or organized over-the-counter
market, alone or acting jointly or in
concert with any other Person;
and provided further that, notwithstanding the foregoing, the
Board of Directors shall have the right to and may determine,
acting in good faith, that conditions exist which should
disentitle the Manager from relying on this Subclause (viii)
and, in such event, the Manager's Beneficial Ownership of
securities shall be determined without reference to this
Subclause (viii);
(ix) solely because such Person (hereinafter in this
Clause 1.1(d)(ix) referred to as the "Trust Company")
holds or exercises voting or dispositive power over
such securities, provided that:
-8-
(A) the Trust Company is licensed to carry on
the business of a trust company under
applicable law and, as such, acts as trustee
or administrator or in similar capacity in
relation to the estates of deceased or
incompetent Persons (each an "Estate
Account") or in relation to other accounts
(each an "Other Account") and holds such
voting or dispositive power over such
security in the ordinary course of such
duties for the estate of any such deceased
or incompetent Person or for such other
accounts; and
(B) the Trust Company does not make or propose
to make a Take- over Bid by means of a
Take-over Bid circular or any other means,
other than an Offer to Acquire Voting Shares
or other securities by means of a
distribution by the Corporation or by means
of ordinary market transactions (including
prearranged trades) executed through the
facilities of a stock exchange or organized
over-the-counter market, alone or acting
jointly or in concert with any other Person;
and provided further that, notwithstanding the foregoing, the
Board of Directors shall have the right to and may determine,
acting in good faith, that conditions exist which should
disentitle the Trust Company from relying on this Subclause
(ix) and, in such event, the Trust Company's Beneficial
Ownership of securities shall be determined without reference
to this Subclause (ix);
(x) held for or pursuant to the terms of any employee
benefit plan, deferred profit sharing plan, stock
participation plan or trust for the benefit of
employees of the Corporation or any Subsidiary of the
Corporation; or
(xi) solely because such Person is a Client of the same
Manager as another Person on whose account the
Manager holds or exercises voting or dispositive
power over such security, or solely because such
Person is an Estate Account or an Other Account of
the same Trust Company as another Person on whose
account the Trust Company holds or exercises voting
or dispositive power over such security.
For purposes of this Agreement, in determining the percentage
of the outstanding Voting Shares with respect to which a
Person is or is deemed to be the Beneficial Owner, all Voting
Shares as to which such Person is deemed the Beneficial Owner
shall be deemed outstanding.
(e) "BOARD OF DIRECTORS" means the board of directors of the
Corporation.
- 9 -
(f) "BUSINESS DAY" means any day other than a Saturday, Sunday or
a day on which chartered banks in the City of Toronto are
authorized or obliged by law to close.
(g) "CANADIAN DOLLAR EQUIVALENT" of any amount which is expressed
in United States dollars means, on any date, the Canadian
dollar equivalent of such amount determined by multiplying
such amount by the U.S.-Canadian Exchange Rate in effect on
such date.
(h) "CANADIAN-U.S. EXCHANGE RATE" means, on any date, the inverse
of the U.S.-Canadian Exchange Rate in effect on such date.
(i) "CLOSE OF BUSINESS" on any given date means the time on such
date (or, if such date is not a Business Day, the time on the
next succeeding Business Day) at which the office of the
transfer agent for the Common Shares in the City of Toronto
(or, after the Separation Time, the office of the Rights Agent
in the City of Toronto), is closed to the public.
(j) "COMMON SHARES" means the common shares in the capital of the
Corporation (including common shares evidenced by instalment
receipts) and "common shares", when used with reference to any
Person other than the Corporation, means the class or classes
of shares (or similar equity interest) with the greatest per
share voting power entitled to vote generally in the election
of all directors of such other Person or the equity securities
or other equity interest having power (whether or not
exercised) to control or direct the management of such other
Person or, if such other Person is a Subsidiary of another
Person, the Person or Persons which ultimately control such
first-mentioned other Person.
(k) "COMPANY ACT" means the Business Corporations Act (Ontario)
R.S.O. 1990, c.B.16, as amended, and the regulations made
thereunder, as now in effect or as the same may from time to
time be amended, re-enacted or replaced.
(l) "ELECTION TO EXERCISE" has the meaning attributed thereto in
Clause 2.2(d)(i).
(m) "EXEMPT ACQUISITION" means a share acquisition in respect of
which the Board of Directors has waived the application of
Section 3.1 pursuant to the provisions of Subsections 5.1(d)
or 5.1(e).
(n) "EXERCISE PRICE" means, as of any date, the price at which a
holder of a Right may purchase the securities issuable upon
exercise of one whole Right. Until adjustment thereof in
accordance with the terms hereof, the Exercise Price shall be
$2.
- 10 -
(o) "EXPIRATION TIME" means the earlier of (i) the Termination
Time and (ii) the Close of Business on December 31, 2002.
(p) "EXPIRY DATE OF THE PERMITTED BID" means the date, which shall
not be less than 60 days following the date on which the
proper Take-over Bid documentation relating to such Permitted
Bid is sent to the shareholders of the Corporation, which is
indicated in such documentation as the date until which such
Permitted Bid is open for acceptance.
(q) "FLIP-IN EVENT" means a transaction or event in or pursuant to
which any Person becomes an Acquiring Person.
(r) "INDEPENDENT SHAREHOLDERS" means holders of Voting Shares,
other than (i) any Acquiring Person, (ii) any Offeror, (iii)
any Affiliate or Associate of any Acquiring Person or Offeror,
(iv) any Person acting jointly or in concert with any
Acquiring Person or Offeror, or with any Affiliate or
Associate of any Acquiring Person or Offeror and (v) any
Person holding Voting Shares which are Beneficially Owned by
any of such Persons.
(s) "MARKET PRICE" per security of any securities on any date of
determination means the average of the daily closing prices
per security of such securities (determined as described
below) on each of the 20 consecutive Trading Days through and
including the Trading Day immediately preceding such date;
provided, however, that if an event of a type analogous to any
of the events described in Section 2.3 hereof shall have
caused the closing prices used to determine the Market Price
on any Trading Day not to be fully comparable with the closing
price on the Trading Day immediately preceding such date of
determination, each such closing price so used shall be
appropriately adjusted in a manner analogous to the applicable
adjustment provided for in Section 2.3 in order to make it
fully comparable with the closing price on the Trading Day
immediately preceding such date of determination. The closing
price per security of any securities on any date shall be:
(i) the closing board lot sale price or, in case no such
sale takes place on such date, the average of the
closing bid and asked prices for each of such
securities as reported by the principal Canadian
stock exchange (as determined by the Board of
Directors) on which such securities are listed or
admitted to trading;
(ii) if for any reason none of such prices is available on
such day or the securities are neither listed or
posted for trading on a Canadian stock exchange nor
quoted on the Canadian Dealing Network Inc., the last
sale
-11-
price or, in case no such sale takes place on such
date, the average of the closing bid and asked prices
for each of such securities as reported by the
principal national United States securities exchange
(as determined by the Board of Directors) on which
such securities are listed or admitted to trading;
(iii) if for any reason none of such prices is available on
such day or the securities are not listed or admitted
to trading on a Canadian stock exchange or a national
United States securities exchange, the last sale
price, or in case no sale takes place on such date,
the average of the high bid and low asked prices for
each of such securities in the over-the-counter
market, as quoted by any reporting system then in use
(as determined by the Board of Directors); or
(iv) if for any reason none of such prices is available on
such day or the securities are not listed or admitted
to trading on a Canadian stock exchange or a national
United States securities exchange or quoted by any
such reporting system, the average of the closing bid
and asked prices as furnished by a professional
market maker making a market in the securities
selected by the Board of Directors;
provided, however, that if for any reason none of such prices
is available on such day, the closing price per security of
such securities on such date means the fair value per security
of such securities on such date as determined by the Board of
Directors, after consultation with a nationally recognized
investment dealer or investment banker with respect to the
fair value per security of such securities. The Market Price
shall be expressed in Canadian dollars and, if initially
determined in respect of any day forming part of the 20
consecutive Trading Day period in question in United States
dollars, such amount shall be translated into Canadian dollars
on such date at the Canadian Dollar Equivalent thereof.
(t) "1934 Exchange Act" means the Securities Exchange Act of 1934
of the United States, as amended, and the rules and
regulations thereunder as now in effect or as the same may
from time to time be amended, re-enacted or replaced.
(u) "OFFER TO ACQUIRE" includes:
(i) an offer to purchase or a solicitation of an offer to
sell Voting Shares, or a public announcement of an
intention to make such an offer or solicitation; and
-12-
(ii) an acceptance of an offer to sell Voting Shares,
whether or not such offer to sell has been solicited;
or any combination thereof, and the Person accepting an offer
to sell shall be deemed to be making an Offer to Acquire to
the Person that made the offer to sell.
(v) "OFFEROR" means a Person who has announced an intention to
make, or who has made, a Take-over Bid.
(w) "OFFEROR'S SECURITIES" means the aggregate of the Voting
Shares Beneficially Owned on the date of a Take-over Bid by an
Offeror.
(x) "PERMITTED BID" means a Take-over Bid made in compliance with,
and not on a basis which is exempt from or otherwise not
subject to the provisions of Sections 95 through 100,
inclusive, of the Securities Act, and, if applicable, Sections
10, 13(d) and 14 of the 1934 Exchange Act, subject to any
exemptions ordered or granted for purposes of uniformity, and
which also complies with the following additional
requirements:
(i) the same Take-over Bid is made for all outstanding
Voting Shares to all holders of record of Voting
Shares wherever resident as registered in the books
of the Corporation;
(ii) the Offeror's Securities do not, in the aggregate,
exceed 10% of the outstanding Voting Shares and the
Offeror does not become the Beneficial Owner of any
additional Voting Shares prior to the Close of
Business on the Expiry Date of the Permitted Bid
(provided that this clause (ii) shall not apply if
the Offeror is the Beneficial Owner of more than 10%
of the outstanding Voting Shares as at the Record
Time and, as at the Record Time, has filed a report
pursuant to Section 101 of the Securities Act or
Section 13(d) under the 1934 Exchange Act; provided,
however, that this exception shall not be, and shall
cease to be applicable, to an Offeror if such
Offeror, after the Record Time, becomes the
Beneficial Owner of additional Common Shares or
Voting Shares other than pursuant to a Permitted Bid
Acquisition, an Exempt Acquisition, a Pro Rata
Acquisition or a Voting Share Reduction);
(iii) the Take-over Bid contains, and the take-up and
payment for securities tendered or deposited
thereunder is subject to, irrevocable and unqualified
provisions that:
-13-
(A) no Voting Shares will be taken up or paid
for pursuant to the Take-over Bid (x) prior
to the Close of Business on the Expiry Date
of the Permitted Bid and (y) unless, at the
Close of Business on the Expiry Date of the
Permitted Bid, more than 50% of the then
outstanding Voting Shares, other than the
Offeror's Securities, have been deposited or
tendered pursuant to the Take-over Bid and
not withdrawn;
(B) Voting Shares may be deposited pursuant to
such Take-over Bid at any time prior to the
Close of Business on the Expiry Date of the
Permitted Bid;
(C) any Voting Shares deposited pursuant to the
Take-over Bid may be withdrawn until taken
up and paid for;
(D) in the event that the requirement set forth
in Subclause (A)(y) of this Clause
1.1(y)(iii) is satisfied, the Offeror will
make a public announcement of that fact and
the Take-over Bid will remain open for
deposits and tenders of Voting Shares for
not less than 10 days from the date of such
public announcement; and
(iv) if the consideration offered pursuant to the
Take-over Bid is not payable entirely in cash, the
circular accompanying or forming part of the
Take-over Bid shall be accompanied by a favourable
opinion of a nationally recognized investment dealer
or investment banker dated the date of the Take-over
Bid and addressed to the offeree holders of Voting
Shares (x) that the value of the consideration to be
paid to the holders of Voting Shares of the
Corporation is fair to such holders and (y) as to the
market trading cash value of the non-cash
consideration in the hands of the offeree holders of
Voting Shares on a fully distributed basis.
For purposes of this Agreement, (i) should a Permitted Bid
cease to be a Permitted Bid because it ceases to meet any or
all of the requirements mentioned above at any time, any
acquisition of Voting Shares made pursuant to such Permitted
Bid, including any acquisition of Voting Shares theretofore
made, shall cease to be a Permitted Bid Acquisition, and (ii)
should the initial terms of a Permitted Bid be varied by
reason only of an increase in the cash consideration offered
to the shareholders of the Corporation, the initial period of
time during which shareholders may deposit their Voting Shares
pursuant to the Permitted Bid shall continue to run,
unaffected by such variation. In all other circumstances, any
change or variation to the initial terms or conditions of a
Permitted Bid shall trigger a new period of at least 60 days
during which Voting
-14-
Shares may be deposited pursuant to the Take-over Bid and the
initial Expiry Date of the Permitted Bid shall be modified
accordingly.
(y) "PERMITTED BID ACQUISITION" means an acquisition of Voting
Shares made pursuant to a Permitted Bid.
(z) "PERSON" includes any individual, firm, partnership,
association,trust, trustee, executor, administrator, legal
personal representative, government, governmental body or
authority, group (as such term is used in Rule 13d-5 under the
1934 Exchange Act, as in effect on the date of this
Agreement), corporation or other incorporated or
unincorporated organization.
(aa) "PRO RATA ACQUISITION" means an acquisition by a Person of
Voting Shares pursuant to (w) any dividend reinvestment plan
or share purchase plan of the Corporation, (x) a stock
dividend, a stock split or other event pursuant to which such
Person becomes the Beneficial Owner of Voting Shares on the
same pro rata basis as all other holders of Voting Shares of
the same class or series, (y) the exercise of rights to
purchase Voting Shares distributed to all holders of Voting
Shares pursuant to a bona fide rights offering which complies
with the requirements of Policy 6.2 of the Ontario Securities
Commission or is made pursuant to a prospectus, or (z) a
distribution to the public of Voting Shares, or securities
convertible into or exchangeable for Voting Shares, made
pursuant to a prospectus or by way of a private placement
completed in accordance with applicable securities
legislation; provided, however, in the case of an acquisition
referred to in Subclause (z), such acquisition is made for
such number of Voting Shares or of such securities as is
necessary for such Person to maintain the percentage of Voting
Shares it held immediately prior to the announcement of such
distribution to the public or private placement.
(bb) "RECORD TIME" means the Close of Business on April 23, 1997.
(cc) "REDEMPTION PRICE" has the meaning attributed thereto in
Clause 5.1(a).
(dd) "REGULAR PERIODIC CASH DIVIDEND" means cash dividends paid on
the Common Shares at regular intervals in any fiscal year of
the Corporation to the extent that such cash dividends do not
exceed in the aggregate in any fiscal year, on a per share
basis, the greatest of:
(i) 200% of the aggregate amount of cash dividends
declared payable by the Corporation on the Common
Shares in its immediately preceding fiscal year
divided by the number of Common Shares outstanding as
at the end of such fiscal year;
-15-
(ii) 300% of the arithmetic mean of the aggregate amounts
of cash dividends declared payable by the Corporation
on the Common Shares in its three immediately
preceding fiscal years divided by the arithmetic mean
of the numbers of Common Shares outstanding as at the
end of each of such fiscal years; and
(iii) 100% of the aggregate consolidated net income of the
Corporation, before extraordinary items, for its
immediately preceding fiscal year divided by the
number of Common Shares outstanding as at the end of
such fiscal year.
(ee) "RIGHT" has the meaning given to it in Recital B above.
(ff) "RIGHTS CERTIFICATE" means the certificates representing the
Rights after the Separation Time which shall be substantially
in the form attached hereto as Exhibit A.
(gg) "RIGHTS PLAN" has the meaning given to it in Recital A above.
(hh) "SECURITIES ACT" means the Securities Act, R.S.O. 1990, c.
S-5, as amended, and the regulations made thereunder, as now
in effect or as the same may from time to time be amended,
re-enacted or replaced.
(ii) "SEPARATION TIME" means the Close of Business on the tenth day
after the earlier of:
(i) the Stock Acquisition Date; and
(ii) the date of the commencement of, or first public
announcement of the intent of any Person (other than
the Corporation or any Subsidiary of the Corporation)
to commence, a Take-over Bid (other than a Permitted
Bid, so long as such Take-over Bid continues to
satisfy the requirements of a Permitted Bid);
or such earlier or later date as may from time to time be
determined by the Board of Directors, provided that if any
such Take-over Bid expires, is cancelled, is terminated or is
otherwise withdrawn prior to the Separation Time, such offer
shall be deemed, for the purposes of this Subsection 1.1(aj),
never to have been made.
(jj) "STOCK ACQUISITION DATE" means the first date of public
announcement (which for purposes of this definition includes,
without limitation, a report filed
-16-
pursuant to Section 101 of the Securities Act or Section 13(d)
of the 1934 Exchange Act) of facts indicating that a Person
has become an Acquiring Person.
(kk) "SUBSIDIARY" of any specified Person means any corporation or
other entity of which a majority of the voting power of the
equity securities or a majority of the equity interest is
Beneficially Owned, directly or indirectly, by such Person.
(ll) "TAKE-OVER BID" means an Offer to Acquire Voting Shares or
securities convertible into Voting Shares, where the Voting
Shares subject to the Offer to Acquire, together with the
Voting Shares into which the securities subject to the Offer
to Acquire are convertible, and the Offeror's Securities
constitute in the aggregate 20% or more of the outstanding
Voting Shares at the date of the Offer to Acquire.
(mm) "TERMINATION TIME" means the time at which the right to
exercise Rights shall terminate pursuant to Subsections 3.2(b)
or 5.1(c).
(nn) "TRADING DAY", when used with respect to any securities, means
any day on which the principal Canadian or United States
securities exchange (as determined by the Board of Directors)
on which such securities are listed or admitted to trading is
open for the transaction of business or, if the securities are
not listed or admitted to trading on any Canadian or United
States securities exchange, a Business Day.
(oo) "U.S.-CANADIAN EXCHANGE RATE" means, on any date:
(i) if on such date the Bank of Canada sets an average
noon spot rate of exchange for the conversion of one
United States dollar into Canadian dollars, such
rate; and
(ii) in any other case, the rate for such date for the
conversion of one United States dollar into Canadian
dollars calculated in such manner as may be
determined by the Board of Directors from time to
time acting in good faith.
(pp) "U.S. DOLLAR EQUIVALENT" of any amount which is expressed in
Canadian dollars means, on any date, the United States dollar
equivalent of such amount determined by multiplying such
amount by the Canadian-U.S. Exchange Rate in effect on such
date.
-17-
(qq) "VOTING SHARES" means the Common Shares of the Corporation and
any other shares of capital stock or voting interests of the
Corporation entitled to vote generally in the election of
directors and "voting shares", when used with reference to any
Person other than the Corporation, means common shares of such
other Person and any other shares of capital stock or voting
interests of such other Person entitled to vote generally in
the election of the directors of such other Person. For
purposes of this Agreement, the percentage of Voting Shares
Beneficially Owned by any Person shall be, and be deemed to
be,the product determined by the formula:
100 x A
---
B
where
A = the aggregate number of votes for the election of all
directors generally attaching to the Voting Shares
Beneficially Owned by such Person; and
B = the aggregate number of votes for the election of all
directors generally attaching to all outstanding Voting
Shares.
Where any Person is deemed to Beneficially Own unissued Voting
Shares, such Voting Shares shall be deemed to be outstanding
for the purpose of both A and B above.
(rr) "Voting Share Reduction" means an acquisition or redemption by
the Corporation of Voting Shares which, by reducing the number
of Voting Shares outstanding, increases the percentage of
Voting Shares Beneficially Owned by any Person to 20% or more
of the Voting Shares then outstanding.
1.2 CURRENCY. All sums of money which are referred to in this Agreement are
expressed in lawful money of Canada, unless otherwise specified.
1.3 NUMBER AND GENDER. Wherever the context so requires, terms used herein
importing the singular number only shall include the plural and vice versa and
words importing any one gender shall include all others.
1.4 SECTIONS AND HEADINGS. The division of this Agreement into Articles,
Sections, Subsections, Clauses and Subclauses and the insertion of headings are
for convenience of reference only and shall not affect the construction or
interpretation of this Agreement. The terms "this Agreement", "hereof",
"hereunder" and similar expressions refer to this Agreement
-18-
and not to any particular Article, Section or other portion hereof and include
any agreement or instrument supplemental or ancillary hereto. Unless something
in the subject matter or context is inconsistent therewith, references herein to
Articles, Sections, Subsections, Clauses and Subclauses are to Articles,
Sections, Subsections, Clauses and Subclauses of this Agreement.
1.5 STATUTORY REFERENCES. Unless the context otherwise requires, any reference
herein to a specific Section, Subsection, Clause or Rule of any act or
regulation shall be deemed to refer to the same as it may be amended, re-enacted
or replaced or, if repealed and there shall be no replacement therefor, to the
same as it is in effect on the date of this Agreement.
1.6 ACTING JOINTLY OR IN CONCERT. For the purposes of this Agreement, a Person
shall be deemed to be acting jointly or in concert with another Person if such
Person would be deemed to be acting jointly or in concert with such Person for
the purpose of Section 91 of the Securities Act.
ARTICLE 2 - THE RIGHTS
2.1 LEGEND ON COMMON SHARE CERTIFICATES.
(a) Certificates for Common Shares issued after the later of (i)
the Record Time and (ii) the date on which all regulatory
approvals for this Agreement have been received but prior to
the earlier of (iii) the Separation Time and (iv) the
Expiration Time shall, subject to Subsection 2.3(j), also
evidence one Right for each Common Share represented thereby
and shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:
"Until the Separation Time (as defined in the Rights Agreement
referred to below), this certificate also evidences and
entitles the holder hereof to certain Rights as set forth in a
Shareholder Rights Agreement dated as of April 23, 1997 (the
"Rights Agreement"), between the Corporation and The R-M Trust
Company, as Rights Agent, the terms of which are incorporated
herein by reference and a copy of which is on file at the
principal office of the Corporation. Under certain
circumstances, as set forth in the Rights Agreement, such
Rights may be amended or redeemed, may expire, may become void
(if, in certain cases, they are "Beneficially Owned" by an
"Acquiring Person", as such terms are defined in the Rights
Agreement, or a transferee thereof), or may be evidenced by
separate certificates and may no longer be evidenced by this
certificate. The Corporation will mail, or arrange for the
mailing of, a copy of the Rights
-19-
Agreement to the holder of this certificate without charge
promptly after the receipt of a written request therefor."
(b) Certificates representing Common Shares that are issued and
outstanding at the later of (i) the Record Time and (ii) the
date on which all regulatory approvals for this Agreement have
been received shall evidence one Right for each Common Share
evidenced thereby, notwithstanding the absence of the
foregoing legend, until the earlier of (iii) the Separation
Time and (iv) the Expiration Time.
2.2 INITIAL EXERCISE PRICE; EXERCISE OF RIGHTS; DETACHMENT OF
RIGHTS.
(a) Subject to adjustment as herein set forth, each Right will
entitle the holder thereof, after the Separation Time and
prior to the Expiration Time, to purchase one Common Share for
the Exercise Price, or the U.S. Dollar Equivalent of the
Exercise Price as at the Business Day immediately preceding
the Separation Time (which Exercise Price and number of Common
Shares are subject to adjustment as set forth below).
Notwithstanding any other provision of this Agreement, any
Rights held by the Corporation or any of its Subsidiaries
shall be void.
(b) Until the Separation Time (i) the Rights shall not be
exercisable and no Right may be exercised and (ii) for
administrative purposes, each Right will be evidenced by the
certificate for the associated Common Share registered in the
name of the holder thereof (which certificate shall be deemed
to represent a Rights Certificate) and will be transferable
only together with, and will be transferred by a transfer of,
such associated Common Share.
(c) After the Separation Time and prior to the Expiration Time,
the Rights may be exercised and the registration and transfer
of the Rights shall be separate from and independent of Common
Shares. Promptly following the Separation Time, the Rights
Agent will mail to each holder of record of Common Shares as
of the Separation Time (other than an Acquiring Person and, in
respect of any Rights Beneficially Owned by such Acquiring
Person which are not held of record by such Acquiring Person,
the holder of record of such Rights) at such holder's address
as shown on the records of the Corporation (the Corporation
hereby agreeing to furnish copies of such records to the
Rights Agent for this purpose):
(i) a Rights Certificate appropriately completed,
representing the number of Rights held by such holder
at the Separation Time, and having such marks of
identification or designation and such legends,
summaries or endorsements printed thereon as the
Corporation may deem appropriate
-20-
and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with
any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock
exchange or quotation system on which the Rights may
from time to time be listed or traded, or to conform
to usage; and
(ii) a disclosure statement prepared by the Corporation
describing the Rights.
(d) Rights may be exercised in whole or in part on any Business
Day after the Separation Time and prior to the Expiration Time
by submitting to the Rights Agent at its principal office in
the City of Toronto:
(i) the Rights Certificate evidencing such Rights, with
an Election to Exercise (an "Election to Exercise")
substantially in the form attached to the Rights
Certificate appropriately completed and duly executed
by the holder or his executors or administrators or
other legal personal representatives or his or their
attorney duly appointed by an instrument in writing
in form and executed in a manner satisfactory to the
Rights Agent; and
(ii) payment by certified cheque, bankers draft or money
order payable to the order of the Corporation, of a
sum equal to the Exercise Price multiplied by the
number of Rights being exercised and a sum sufficient
to cover any transfer tax or charge which may be
payable in respect of any transfer involved in the
transfer or delivery of Rights Certificates or the
issuance or delivery of certificates for Common
Shares in a name other than that of the holder of the
Rights being exercised.
(e) Upon receipt of a Rights Certificate, with an Election to
Exercise appropriately completed and duly executed, which does
not indicate that such Right is void as provided by Subsection
3.1(b), accompanied by payment as set forth in Clause
2.2(d)(ii), the Rights Agent (unless otherwise instructed by
the Corporation) will thereupon promptly:
(i) requisition from the transfer agent of the Common
Shares certificates for the number of Common Shares
to be purchased (the Corporation hereby irrevocably
agreeing to authorize such transfer agent to comply
with all such requisitions);
-21-
(ii) after receipt of such Common Share certificates,
deliver such certificates to, or to the order of, the
registered holder of such Rights Certificate,
registered in such name or names as may be designated
by such holder;
(iii) when appropriate, requisition from the Corporation
the amount of cash, if any, to be paid in lieu of
issuing fractional Common Shares;
(iv) after receipt of such cash, deliver such cash to, or
to the order of, the registered holder of the Rights
Certificate; and
(v) tender to the Corporation all payments received on
exercise of the Rights.
(f) If the holder of any Rights exercises less than all the Rights
evidenced by such holder's Rights Certificate, a new Rights
Certificate evidencing the Rights remaining unexercised will
be issued by the Rights Agent to such holder or to such
holder's duly authorized assigns.
(g) The Corporation covenants and agrees that it will:
(i) take all such action as may be necessary and within
its power to ensure that all Common Shares delivered
upon exercise of Rights shall, at the time of
delivery of the certificates for such Common Shares
(subject to payment of the Exercise Price), be duly
and validly authorized, executed, issued and
delivered as fully paid and non-assessable;
(ii) take all such action as may reasonably be considered
to be necessary and within its power to comply with
any applicable requirements of the Company Act, the
Securities Act and the securities legislation of each
of the other provinces and territories of Canada in
connection with the issuance and delivery of the
Rights Certificates and the issuance of any Common
Shares upon exercise of Rights;
(iii) use reasonable efforts to cause all Common Shares
issued upon exercise of Rights to be listed upon
issuance on the stock exchange(s) where the Common
Shares may be listed at that time; and
(iv) pay when due and payable, any and all Canadian and
United States federal, provincial and state taxes
(not in the nature of income or withholding taxes)
and charges which may be payable in respect of the
original issuance or delivery of the Rights
Certificates or certificates for Common Shares issued
upon exercise of Rights, provided that the
-22-
Corporation shall not be required to pay any transfer
tax or charge which may be payable in respect of any
transfer of Rights or the issuance or delivery of
certificates for Common Shares issued upon exercise
of Rights in a name other than that of the holder of
the Rights being exercised.
2.3 ADJUSTMENTS TO EXERCISE PRICE; NUMBER OF RIGHTS.
(a) The Exercise Price, the number and kind of securities subject
to purchase upon exercise of each Right and the number of
Rights outstanding are subject to adjustment from time to time
as provided in this Section 2.3.
(b) If the Corporation at any time after the Record Time and prior
to the Expiration Time:
(i) declares or pays a dividend on the Common Shares
payable in Common Shares (or other securities
exchangeable for or convertible into or giving a
right to acquire Common Shares) other than pursuant
to any dividend reinvestment plan;
(ii) subdivides or changes the then outstanding Common
Shares into a greater number of Common Shares;
(iii) consolidates or changes the then outstanding Common
Shares into a smaller number of Common Shares; or
(iv) issues any Common Shares (or other securities
exchangeable for or convertible into or giving a
right to acquire Common Shares) in respect of, in
lieu of, or in exchange for existing Common Shares,
the Exercise Price and the number of Rights
outstanding shall be adjusted as follows:
(A) the Exercise Price in effect after such
adjustment will be equal to the Exercise
Price in effect immediately prior to such
adjustment divided by the number of Common
Shares (the "Adjustment Factor") that a
holder of one Common Share immediately prior
to such dividend, subdivision, change,
consolidation or issuance would hold
thereafter as a result thereof (assuming the
exercise of all such exchange or conversion
rights, if any); and
(B) each Right held prior to such adjustment
will become that number of Rights equal to
the Adjustment Factor, and the adjusted
number of Rights will be deemed to be
distributed among the
-23-
Common Shares with respect to which the
original Rights were associated (if they
remain outstanding) and the shares issued in
respect of such dividend, subdivision,
change, consolidation or issuance, so that
each such Common Share will have exactly one
Right associated with it.
(c) If the Corporation, at any time after the Record Time and
prior to the Expiration Time, fixes a record date for the
making of a distribution to substantially all holders of
Common Shares of rights or warrants entitling them (for a
period expiring within 45 calendar days after such record
date) to subscribe for or purchase Common Shares (or
securities convertible into or exchangeable for or carrying a
right to purchase or subscribe for Common Shares) at a price
per Common Share (or, in the case of a security convertible
into or exchangeable for or carrying a right to purchase or
subscribe for Common Shares, having a conversion, exchange or
exercise price per share (including the price required to be
paid to purchase such convertible or exchangeable security or
right)) less than 90 percent of the Market Price per Common
Share on such record date, the Exercise Price shall be
adjusted. The Exercise Price in effect after such record date
will equal the Exercise Price in effect immediately prior to
such record date multiplied by a fraction, of which the
numerator shall be the number of Common Shares outstanding on
such record date plus the number of Common Shares which the
aggregate offering price of the total number of Common Shares
so to be offered (and/or the aggregate initial conversion,
exchange or exercise price of the convertible or exchangeable
securities or rights so to be offered (including the price
required to be paid to purchase such convertible or
exchangeable securities or rights) would purchase at such
Market Price per Common Share and of which the denominator
shall be the number of Common Shares outstanding on such
record date plus the number of additional Common Shares to be
offered for subscription or purchase (or into which the
convertible or exchangeable securities or rights to be so
offered are initially convertible, exchangeable or
exercisable). In case such subscription price may be paid in a
consideration part or all of which will be in a form other
than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors. To the
extent that such rights or warrants are not exercised prior to
the expiration thereof, the Exercise Price shall be readjusted
to the Exercise Price which would then be in effect based on
the number of Common Shares (or securities convertible into or
exchangeable for Common Shares) actually issued upon the
exercise of such rights. For purposes of this Agreement, the
granting of the right to purchase Common Shares (whether from
treasury shares or otherwise) pursuant to any dividend
reinvestment plan and/or any share purchase plan (so long as
such right to purchase is in no case evidenced by the delivery
of rights or warrants by the Corporation) shall not be deemed
to
-24-
constitute an issue of rights or warrants by the Corporation;
provided, however, that, in the case of any dividend
reinvestment plan or share purchase plan, the right to
purchase Common Shares is at a price per share of not less
than 90 percent of the current market price per share
(determined in accordance with such plans) of the Common
Shares.
(d) If the Corporation, at any time after the Record Time and
prior to the Expiration Time, fixes a record date for the
making of a distribution to substantially all holders of
Common Shares of evidences of indebtedness or assets (other
than a Regular Periodic Cash Dividend or a dividend paid in
Common Shares but including any dividend payable in securities
other than Common Shares) or rights or warrants entitling them
to subscribe for or purchase Common Shares (or securities
convertible into or exchangeable for or carrying a right to
purchase or subscribe for Common Shares) at a price per Common
Share (or, in the case of a security convertible into or
exchangeable for or carrying a right to purchase or subscribe
for Common Shares, having a conversion, exchange or exercise
price per share (including the price required to be paid to
purchase such convertible or exchangeable security or right))
less than 90 percent of the Market Price per Common Share on
such record date (excluding rights or warrants referred to in
Subsection 2.3(c)), the Exercise Price in effect after such
record date shall be equal to the Exercise Price in effect
immediately prior to such record date less the fair market
value (as determined by the Board of Directors) of the portion
of the assets, evidences of indebtedness, rights or warrants
so to be distributed applicable to a Common Share.
(e) Each adjustment made pursuant to this Section 2.3 shall be
made as of:
(i) the payment or effective date for the applicable
dividend, subdivision, change, consolidation or
issuance, in the case of an adjustment made pursuant
to Subsection 2.3(b); and
(ii) the record date for the applicable dividend or
distribution, in the case of an adjustment made
pursuant to Subsections 2.3(c) or (d).
(f) If the Corporation, shall at any time after the Record Time
and prior to the Expiration Time, issue any shares of capital
stock (other than Common Shares), or rights or warrants to
subscribe for or purchase any such capital stock, or
securities convertible into or exchangeable for any such
capital stock, in a transaction referred to in Clauses
2.3(b)(i) or (iv), if the Board of Directors acting in good
faith determines that the adjustments contemplated by
Subsections 2.3(b), (c) and (d) in connection with such
transaction will not appropriately protect the interests of
the holders of Rights, the Corporation may determine
-25-
what other adjustments to the Exercise Price, number of Rights
and/or securities purchasable upon exercise of Rights would be
appropriate and, notwithstanding Subsections 2.3(b), (c) and
(d), such adjustments, rather than the adjustments
contemplated by Subsections 2.3(b), (c) and (d), shall be
made. The Corporation and the Rights Agent shall amend this
Agreement as appropriate to provide for such adjustments.
(g) Notwithstanding anything herein to the contrary, no adjustment
of the Exercise Price shall be required unless such adjustment
would require an increase or decrease of at least one per cent
in such Exercise Price; provided, however, that any
adjustments which by reason of this Subsection 2.3(g) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All adjustments made
pursuant to this Section 2.3 shall be made to the nearest cent
or to the nearest one ten-thousandth of a Common Share or a
Right, as the case may be.
(h) All Rights originally issued by the Corporation subsequent to
any adjustment made to an Exercise Price hereunder shall
evidence the right to purchase, at the adjusted Exercise
Price, the number of Common Shares purchasable from time to
time hereunder upon exercise of the Rights, all subject to
further adjustment as provided herein.
(i) Unless the Corporation shall have exercised its election, as
provided in Subsection 2.3(j), upon each adjustment of an
Exercise Price as a result of the calculations made in
Subsections 2.3(c) and (d), each Right outstanding immediately
prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Exercise
Price, that number of Common Shares obtained by:
(i) multiplying (A) the number of Common Shares covered
by a Right immediately prior to this adjustment, by
(B) the relevant Exercise Price in effect immediately
prior to such adjustment of the relevant Exercise
Price; and
(ii) dividing the product so obtained by the relevant
Exercise Price in effect immediately after such
adjustment of the relevant Exercise Price.
(j) The Corporation may elect on or after the date of any
adjustment of an Exercise Price to adjust the number of
Rights, in lieu of any adjustment in the number of Common
Shares purchasable upon the exercise of a Right. Each of the
Rights outstanding after the adjustment in the number of
Rights shall be exercisable for the number of Common Shares
for which a Right was exercisable immediately
-26-
prior to such adjustment. Each Right held of record prior to
such adjustment of the number of Rights shall become the
number of Rights obtained by dividing the relevant Exercise
Price in effect immediately prior to adjustment of the
relevant Exercise Price by the relevant Exercise Price in
effect immediately after adjustment of the relevant Exercise
Price. The Corporation shall make a public announcement of its
election to adjust the number of Rights, indicating the record
date for the adjustment, and, if known at the time, the amount
of the adjustment to be made. This record date may be the date
on which the relevant Exercise Price is adjusted or any day
thereafter, but, if the Rights Certificates have been issued,
shall be at least 10 calendar days later than the date of the
public announcement. If Rights Certificates have been issued,
upon each adjustment of the number of Rights pursuant to this
Subsection 2.3(j), the Corporation shall, as promptly as
practicable, cause to be distributed to holders of record of
Rights Certificates on such record date, Rights Certificates
evidencing, subject to Section 5.5, the additional Rights to
which such holders shall be entitled as a result of such
adjustment, or, at the option of the Corporation, shall cause
to be distributed to such holders of record in substitution
and replacement for the Rights Certificates held by such
holders prior to the date of adjustment, and upon surrender
thereof, if required by the Corporation, new Rights
Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates
so to be distributed shall be issued, executed and
countersigned in the manner provided for herein and may bear,
at the option of the Corporation, the relevant adjusted
Exercise Price and shall be registered in the names of holders
of record of Rights Certificates on the record date specified
in the public announcement.
(k) Irrespective of any adjustment or change in the securities
purchasable upon exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to
express the securities so purchasable which were expressed in
the initial Rights Certificates issued hereunder.
(l) In any case in which this Section 2.3 shall require that an
adjustment in an Exercise Price be made effective as of a
record date for a specified event, the Corporation may elect
to defer until the occurrence of such event the issuance to
the holder of any Right exercised after such record date of
the number of Common Shares and other securities of the
Corporation, if any, issuable upon such exercise over and
above the number of Common Shares and other securities of the
Corporation, if any, issuable upon such exercise on the basis
of the relevant Exercise Price in effect prior to such
adjustment; provided, however, that the Corporation shall
deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such
additional
-27-
Common Shares (fractional or otherwise) or other securities
upon the occurrence of the event requiring such adjustment.
(m) Notwithstanding anything in this Section 2.3 to the contrary,
the Corporation shall be entitled to make such reductions in
the Exercise Price, in addition to those adjustments expressly
required by this Section 2.3, as and to the extent that in its
good faith judgment the Board of Directors shall determine to
be advisable in order that any (i) subdivision or
consolidation of the Common Shares, (ii) issuance wholly for
cash of any Common Shares at less than the applicable Market
Price, (iii) issuance wholly for cash of any Common Shares or
securities that by their terms are exchangeable for or
convertible into or give a right to acquire Common Shares,
(iv) stock dividends or (v) issuance of rights, options or
warrants referred to in this Section 2.3, hereafter made by
the Corporation to holders of its Common Shares, subject to
applicable taxation laws, shall not be taxable to such
shareholders.
(n) The Corporation covenants and agrees that, after the
Separation Time, it will not, except as permitted by Section
5.1 or 5.4, take (or permit any Subsidiary of the Corporation
to take) any action if at the time such action is taken it is
reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to
be afforded by the Rights.
(o) Whenever an adjustment to the Exercise Price or a change in
the securities purchasable upon exercise of the Rights is made
pursuant to this Section 2.3, the Corporation shall promptly:
(i) file with the Rights Agent and with the transfer
agent for the Common Shares a certificate specifying
the particulars of such adjustment or change; and
(ii) cause notice of the particulars of such adjustment or
change to be given to the holders of the Rights.
Failure to file such certificate or to cause such notice to be
given as aforesaid, or any defect therein, shall not affect
the validity of any such adjustment or change.
2.4 DATE ON WHICH EXERCISE IS EFFECTIVE. Each Person in whose name any
certificate for Common Shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Common Shares
represented thereby on, and such certificate shall be dated, the date upon which
the Rights Certificate evidencing such Rights was duly surrendered (together
with an appropriately completed and duly executed Election to Exercise) and
payment of the Exercise Price for such Rights (and any applicable
-28-
transfer taxes or charges payable by such Person hereunder) was made in
accordance with Subsection 2.2(d); provided, however, that if the date of such
surrender and payment is a date upon which the Common Share transfer books of
the Corporation are closed, such Person shall be deemed to have become the
holder of record of such shares on, and such certificate shall be dated, the
next succeeding Business Day on which the Common Share transfer books of the
Corporation are open.
2.5 EXECUTION, AUTHENTICATION, DELIVERY AND DATING OF RIGHTS
CERTIFICATES.
(a) The Rights Certificates shall be executed on behalf of the
Corporation by its President, its Chief Financial Officer or
its Secretary. The signature of any of these officers on the
Rights Certificates may be manual or facsimile. Rights
Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the
Corporation shall bind the Corporation, notwithstanding that
such individuals or any of them have ceased to hold such
offices prior to the countersignature and delivery of such
Rights Certificates.
(b) Promptly following the Separation Time, the Corporation will
notify the Rights Agent of such Separation Time and will
deliver Rights Certificates executed by the Corporation to the
Rights Agent for countersignature, and the Rights Agent will
countersign (manually or by facsimile signature in a manner
satisfactory to the Corporation) and deliver such Rights
Certificates to the holders of the Rights pursuant to
Subsection 2.2(c). No Rights Certificate shall be valid for
any purpose until countersigned by the Rights Agent as
aforesaid.
(c) Each Rights Certificate shall be dated the date of
countersignature thereof.
2.6 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
(a) After the Separation Time, the Corporation will cause to be
kept a register (the "Rights Register") in which, subject to
such reasonable regulations as it may prescribe, the
Corporation will provide for the registration and transfer of
Rights. The Rights Agent is hereby appointed "Rights
Registrar" for the purpose of maintaining the Rights Register
for the Corporation and registering Rights and transfers and
exchanges of Rights as herein provided. If the Rights Agent
shall cease to be the Rights Registrar, the Rights Agent will
have the right to examine the Rights Register at all
reasonable times.
(b) After the Separation Time and prior to the Expiration Time,
upon surrender for registration of transfer or exchange of any
Rights Certificate, and subject to the provisions of
Subsection 2.6(d) and 3.1(b), the Corporation will execute,
and the Rights Agent will countersign, deliver and register,
in the name of the
-29-
holder or the designated transferee or transferees, as
required pursuant to the holder's instructions, one or more
new Rights Certificates evidencing the same aggregate number
of Rights as did the Rights Certificates so surrendered.
(c) All Rights issued upon any registration of transfer or
exchange of Rights Certificates shall be the valid obligations
of the Corporation, and such Rights shall be entitled to the
same benefits under this Agreement as the Rights surrendered
upon such registration of transfer or exchange.
(d) Every Rights Certificate surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to
the Corporation or the Rights Agent, as the case may be, duly
executed by the holder thereof or such holder's attorney duly
authorized in writing. As a condition to the issuance of any
new Rights Certificate under this Section 2.6, the Corporation
may require the payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and
expenses of the Rights Agent) connected therewith.
2.7 MUTILATED, DESTROYED, LOST AND STOLEN RIGHTS CERTIFICATES
(a) If any mutilated Rights Certificate is surrendered to the
Rights Agent prior to the Expiration Time, the Corporation
shall execute and the Rights Agent shall countersign and
deliver in exchange therefor a new Rights Certificate
evidencing the same number of Rights as did the Rights
Certificate so surrendered.
(b) If there shall be delivered to the Corporation and the Rights
Agent prior to the Expiration Time (i) evidence to their
satisfaction of the destruction, loss or theft of any Rights
Certificate and (ii) such security or indemnity as may be
required by them to save each of them and any of their agents
harmless, then, in the absence of notice to the Corporation or
the Rights Agent that such Rights Certificate has been
acquired by a bona fide purchaser, the Corporation shall
execute and upon its request the Rights Agent shall
countersign and deliver, in lieu of any such destroyed, lost
or stolen Rights Certificate, a new Rights Certificate
evidencing the same number of Rights as did the Rights
Certificate so destroyed, lost or stolen.
(c) As a condition to the issuance of any new Rights Certificate
under this Section 2.7, the Corporation may require the
payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto
and any other expenses (including the fees and expenses of the
Rights Agent) connected therewith.
-30-
(d) Every new Rights Certificate issued pursuant to this Section
2.7 in lieu of any destroyed, lost or stolen Rights
Certificate shall evidence a contractual obligation of the
Corporation, whether or not the destroyed, lost or stolen
Rights Certificate shall be at any time enforceable by anyone,
and shall be entitled to all the benefits of this Agreement
equally and proportionately with any and all other Rights duly
issued hereunder.
2.8 PERSONS DEEMED OWNERS. Prior to due presentment of a Rights Certificate (or,
prior to the Separation Time, the associated Common Share certificate) for
registration of transfer, the Corporation, the Rights Agent and any agent of the
Corporation or the Rights Agent may deem and treat the person in whose name such
Rights Certificate (or, prior to the Separation Time, such Common Share
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby for all purposes whatsoever. As used in this Agreement, unless
the context otherwise requires, the term "holder" of any Rights means the
registered holder of such Rights (or, prior to the Separation Time, the
associated Common Shares).
2.9 DELIVERY AND CANCELLATION OF CERTIFICATES. All Rights Certificates
surrendered upon exercise or for redemption, or for registration of transfer or
exchange shall, if surrendered to any person other than the Rights Agent, be
delivered to the Rights Agent and, in any case, shall be promptly cancelled by
the Rights Agent. The Corporation may at any time deliver to the Rights Agent
for cancellation any Rights Certificates previously countersigned and delivered
hereunder which the Corporation may have acquired in any manner whatsoever, and
all Rights Certificates so delivered shall be promptly cancelled by the Rights
Agent. No Rights Certificate shall be countersigned in lieu of or in exchange
for any Rights Certificates cancelled as provided in this Section 2.9, except as
expressly permitted by this Agreement. The Rights Agent shall destroy all
cancelled Rights Certificates and deliver a certificate of destruction to the
Corporation.
2.10 AGREEMENT OF RIGHTS HOLDERS. Every holder of Rights, by accepting such
Rights, consents and agrees with the Corporation and the Rights Agent and with
every other holder of Rights that:
(a) such holder shall be bound by and subject to the provisions of
this Agreement, as amended from time to time in accordance
with the terms hereof, in respect of all Rights held;
(b) prior to the Separation Time, each Right will be transferable
only together with, and will be transferred by a transfer of,
the associated Common Share;
(c) after the Separation Time, the Rights will be transferable
only on the Rights Register as provided herein;
-31-
(d) prior to due presentment of a Rights Certificate (or, prior to
the Separation Time, the associated Common Share certificate)
for registration of transfer, the Corporation, the Rights
Agent and any agent of the Corporation or the Rights Agent may
deem and treat the person in whose name the Rights Certificate
(or, prior to the Separation Time, the associated Common Share
certificate) is registered as the absolute owner thereof and
of the Rights evidenced thereby (notwithstanding any notations
of ownership or writing on such Rights Certificate or the
associated Common Share certificate made by anyone other than
the Corporation or the Rights Agent) for all purposes
whatsoever, and neither the Corporation nor the Rights Agent
shall be affected by any notice to the contrary;
(e) such holder is not entitled to receive any fractional Rights
or fractional Common Shares upon the exercise of Rights; and
(f) without the approval of any holder of Rights and upon the sole
authority of the Board of Directors this Agreement may be
supplemented or amended from time to time as provided herein.
ARTICLE 3 - ADJUSTMENTS TO THE RIGHTS
3.1 FLIP-IN EVENT.
(a) Subject to Section 3.2 and Subsections 5.1(d) and 5.1(e), in
the event that prior to the Expiration Time a Flip-in Event
shall occur, each Right shall constitute, effective from and
after the later of its date of issue and the Close of Business
on the tenth day following the Stock Acquisition Date until
the Expiration Time, the right to purchase from the
Corporation, upon exercise thereof in accordance with the
terms hereof, that number of Common Shares having an aggregate
Market Price on the date of consummation or occurrence of such
Flip-in Event equal to twice the Exercise Price for an amount
in cash equal to the Exercise Price (such right to be
appropriately adjusted in a manner analogous to the applicable
adjustment provided for in Section 2.3 in the event that,
after such date of consummation or occurrence, an event of a
type analogous to any of the events described in Section 2.3
shall have occurred with respect to such Common Shares).
(b) Notwithstanding anything in this Agreement to the contrary,
upon the occurrence of any Flip-in Event, any Rights that are
or were Beneficially Owned on or after the earlier of the
Separation Time and the Stock Acquisition Date by an Acquiring
Person shall become null and void without any further action
and any holder of such Rights (including any transferee of, or
other successor in title
-32-
to, such Rights, whether directly or indirectly) shall
thereafter have no right to exercise such Rights under any
provision of this Agreement and shall have no other rights
whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise. The holder of any
Rights represented by a Rights Certificate which is submitted
to the Rights Agent upon exercise or for registration of
transfer or exchange which does not contain the necessary
certifications set forth in the Rights Certificate
establishing that such Rights are not void under this
Subsection 3.1(b) shall be deemed to be an Acquiring Person
for the purposes of this Subsection 3.1(b) and such Rights
shall become null and void.
(c) After the Separation Time, the Corporation shall do all such
acts and things as are necessary and within its power to
ensure compliance with the provisions of this Section 3.1
including, without limitation, all such acts and things as may
be required to satisfy the requirements of the Company Act in
respect of the issue of Common Shares upon the exercise of
Rights in accordance with this Agreement.
3.2 EXCHANGE OPTION
(a) If the Board of Directors determines that conditions exist
which would eliminate or otherwise materially diminish in any
respect the benefits intended to be afforded to the holders of
Rights pursuant to this Agreement, the Board of Directors may,
at its option and without seeking the approval of the holders
of Common Shares or Rights, at any time after a Flip-in Event
has occurred, authorize the Corporation to issue or deliver in
respect of each Right which is not void pursuant to Subsection
3.1(b), either:
(i) in return for the Exercise Price and the Right, cash,
debt or equity securities or other assets (or a
combination thereof) having a cash value equal to
twice the Exercise Price; or
(ii) in return for the Right and without further charge,
subject to any amounts that may be required to be
paid under applicable law, cash, debt or equity
securities or other assets (or a combination thereof)
having a cash value equal to the Exercise Price,
in full and final settlement of all rights attaching to the
Rights, where in either case the value of such debt or equity
securities or other assets shall be determined by the Board of
Directors who may rely upon the advice of a nationally
recognized investment dealer or investment banker selected by
the Board of Directors. To the extent that the Board of
Directors determines that
-33-
some action need be taken pursuant to this Section 3.2, the
Board of Directors may suspend the exercisability of the
Rights for a period of up to 60 days following the date of the
occurrence of the relevant Flip-in Event in order to decide
the appropriate form of distribution to be made and to
determine the value thereof. In the event of any such
suspension, the Corporation shall notify the Rights Agent and
issue as promptly as practicable a public announcement stating
that the exercisability of the Rights has been temporarily
suspended.
(b) If the Board of Directors authorizes the exchange of debt or
equity securities or other assets (or a combination thereof)
for Rights pursuant to Subsection 3.2(a), then, without any
further action or notice, the right to exercise the Rights
will terminate and the only right thereafter of a holder of
Rights shall be to receive such debt or equity securities or
other assets (or a combination thereof) in accordance with the
exchange formula authorized by the Board of Directors. Within
10 Business Days after the Board of Directors has authorized
the exchange of debt or equity securities or other assets (or
a combination thereof) for Rights pursuant to Subsection
3.2(a), the Corporation shall give notice of such exchange to
the holders of such Rights. Each such notice of exchange will
state the method by which the exchange of debt or equity
securities or other assets (or a combination thereof) for
Rights will be effected.
ARTICLE 4 - THE RIGHTS AGENT
4.1 General.
(a) The Corporation hereby appoints the Rights Agent to act as
agent for the Corporation and the holders of Rights in
accordance with the terms and conditions of this Agreement,
and the Rights Agent hereby accepts such appointment. The
Corporation may from time to time appoint such Co-Rights
Agents as it may deem necessary or desirable. In the event the
Corporation appoints one or more Co-Rights Agents, the
respective duties of the Rights Agents and Co-Rights Agents
shall be as the Corporation, with the approval of Rights Agent
and Co-Rights Agent, may determine. The Corporation agrees to
pay to the Rights Agent reasonable compensation for all
services rendered by it hereunder and, from time to time, on
demand of the Rights Agent, its reasonable expenses and
counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the
exercise and performance of its duties hereunder, with the
approval of the Corporation, such approval not to be
unreasonably withheld (including the reasonable fees and other
disbursements of any expert retained by the Rights Agent). The
Corporation also agrees to indemnify the Rights Agent for, and
to hold it harmless against, any loss, liability, or expense,
incurred without negligence,
-34-
bad faith or wilful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance, execution and administration
of this Agreement and the exercise and performance of its
duties hereunder, including without limitation the costs and
expenses of defending against any claim of liability, which
right to indemnification will survive the termination of this
Agreement.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or
omitted by it in connection with its administration of this
Agreement in reliance upon any certificate for Common Shares,
Rights Certificate, certificate for other securities of the
Corporation, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper
Person or Persons.
4.2 MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or amalgamated or with which it may
be consolidated, or any corporation resulting from any merger,
amalgamation or consolidation to which the Rights Agent or any
successor Rights Agent is a party, or any corporation
succeeding to the shareholder or stockholder services business
of the Rights Agent or any successor Rights Agent, will be the
successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor
Rights Agent under the provisions of Section 4.4 hereof. In
case at the time such successor Rights Agent succeeds to the
agency created by this Agreement any of the Rights
Certificates have been countersigned but not delivered, any
such successor Rights Agent may adopt the countersignature of
the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of
the Rights Certificates have not been countersigned, any
successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all
such cases such Rights Certificates will have the full force
provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent is changed
and at such time any of the Rights Certificates shall have
been countersigned but not delivered, the Rights Agent may
adopt the countersignature under its prior name and deliver
Rights Certificates so countersigned; and in case at that time
any of the
-35-
Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.
4.3 DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Corporation and the holders of Rights Certificates, by their
acceptance thereof, shall be bound:
(a) the Rights Agent may consult with legal counsel (who may be
legal counsel for the Corporation), and the opinion of such
counsel will be full and complete authorization and protection
to the Rights Agent as to any action taken or omitted by it in
good faith and in accordance with such opinion; the Rights
Agent may also, with the approval of the Corporation (such
approval not to be unreasonably withheld), consult with such
other experts as the Rights Agent shall consider necessary or
appropriate to properly carry out the duties and obligations
imposed under this Agreement and the Rights Agent shall be
entitled to rely in good faith on the advice of any such
expert;
(b) whenever in the performance of its duties under this Agreement
the Rights Agent deems it necessary or desirable that any fact
or matter be proved or established by the Corporation prior to
taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by a person
believed by the Rights Agent to be the President and Chief
Executive Officer or the Chief Financial Officer or the Vice
President and General Counsel of the Corporation and delivered
to the Rights Agent; and such certificate will be full
authorization to the Rights Agent for any action taken or
suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate;
(c) the Rights Agent will be liable hereunder only for its own
negligence, bad faith or wilful misconduct;
(d) the Rights Agent will not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement
or in the certificates for Common Shares or the Rights
Certificates (except its countersignature thereof) or be
required to verify the same, but all such statements and
recitals are and will be deemed to have been made by the
Corporation only;
-36-
(e) the Rights Agent will not be under any responsibility in
respect of the validity of this Agreement or the execution and
delivery hereof (except the due authorization, execution and
delivery hereof by the Rights Agent) or in respect of the
validity or execution of any Common Share certificate or
Rights Certificate (except its countersignature thereof); nor
will it be responsible for any breach by the Corporation of
any covenant or condition contained in this Agreement or in
any Rights Certificate; nor will it be responsible for any
change in the exercisability of the Rights (including the
Rights becoming void pursuant to Subsection 3.1(b)) or any
adjustment required under the provisions of Section 2.3 or
responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the
exercise of Rights after receipt of the certificate
contemplated by Subsection 2.3(o) hereof describing any such
adjustment); nor will it by any act hereunder be deemed to
make any representation or warranty as to the authorization of
any Common Shares to be issued pursuant to this Agreement or
any Rights or as to whether any Common Shares will, when
issued, be duly and validly authorized, executed, issued and
delivered and fully paid and non-assessable;
(f) the Corporation agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by
the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement;
(g) the Rights Agent is hereby authorized and directed to accept
written instructions with respect to the performance of its
duties hereunder from any Person believed by the Rights Agent
to be the Chief Executive Officer, the Chief Financial
Officer, the Secretary or a Vice-President of the Corporation,
and to apply to such persons for advice or instructions in
connection with its duties and it shall not be liable for any
action taken or suffered by it in good faith in accordance
with instructions of any such person;
(h) the Rights Agent and any shareholder or stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal
in Common Shares, Rights or other securities of the
Corporation or become pecuniarily interested in any
transaction in which the Corporation may be interested, or
contract with or lend money to the Corporation or otherwise
act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Corporation or
for any other legal entity; and
-37-
(i) the Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents, and
the Rights Agent will not be answerable or accountable for any
act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Corporation resulting from any
such act, default, neglect or misconduct, provided reasonable
care was exercised in the selection and continued employment
thereof.
4.4 CHANGE OF RIGHTS AGENT. The Rights Agent may resign and be discharged from
its duties under this Agreement upon 30 days' notice (or such lesser notice as
is acceptable to the Corporation) in writing mailed to the Corporation and to
the transfer agent of Common Shares by registered or certified mail, and to the
holders of the Rights in accordance with Section 5.9. The Corporation may remove
the Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent and
to the transfer agent of the Common Shares by registered or certified mail, and
to the holders of the Rights in accordance with Section 5.9. If the Rights Agent
should resign or be removed or otherwise become incapable of acting, the
Corporation will appoint a successor to the Rights Agent. If the Corporation
fails to make such appointment within a period of 30 days after such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of any Rights (which
holder shall, with such notice, submit such holder's Rights Certificate for
inspection by the Corporation), then the resigning Rights Agent or the holder of
any Rights may apply to any court of competent jurisdiction, at the
Corporation's expense, for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Corporation or by such a court, shall be
a corporation incorporated under the laws of Canada or a province thereof. After
appointment, the successor Rights Agent will be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment, the Corporation will file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares, and mail
a notice thereof in writing to the holders of the Rights. Failure to give any
notice provided for in this Section 4.4, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
ARTICLE 5 - MISCELLANEOUS
5.1 REDEMPTION AND WAIVER.
(a) The Board of Directors may, at its option, at any time prior
to the occurrence of a Flip-in Event, elect to redeem all but
not less than all of the then outstanding
-38-
Rights at a redemption price of $0.001 per Right appropriately
adjusted in a manner analogous to the applicable adjustment
provided for in Section 2.3 in the event that an event of the
type analogous to any of the events described in Section 2.3
shall have occurred (such redemption price being herein
referred to as the "Redemption Price"). The redemption of the
Rights by the Board of Directors may be made effective at such
time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish.
(b) If an Offeror successfully completes a Permitted Bid, the
Board of Directors shall, without further formality, be deemed
to have elected to redeem the Rights at the Redemption Price
on the Expiry Date of the Permitted Bid.
(c) If the Board of Directors elects to or is deemed to have
elected to redeem the Rights: (i) the right to exercise the
Rights will thereupon without further action and without
notice terminate and the only right thereafter of the holder
of a Right shall be to receive the Redemption Price. Within 10
days of the Board of Directors electing or being deemed to
have elected to redeem the Rights, the Corporation shall give
notice of such redemption to the holders of the then
outstanding Rights. Each such notice of redemption shall state
the method by which the payment of the Redemption Price shall
be made; and (ii) no further Rights shall thereafter be
issued.
(d) The Board of Directors may until the occurrence of a Flip-in
Event determine, upon prior written notice delivered to the
Rights Agent, to waive the application of Section 3.1 to any
particular Flip-in Event.
(e) The Board of Directors may prior to the Close of Business on
the tenth day following the Stock Acquisition Date determine,
upon prior written notice delivered to the Rights Agent, to
waive or to agree to waive the application of Section 3.1 to
that Flip-in Event, provided that the Acquiring Person has
reduced its Beneficial Ownership of Voting Shares (or has
entered into a contractual arrangement with the Corporation,
acceptable to the Board of Directors, to do so within 30 days
of the date on which such contractual arrangement is entered
into) such that at the time the waiver becomes effective
pursuant to this Subsection 5.1(e) it is no longer an
Acquiring Person. In the event of such a waiver, for the
purposes of this Agreement, such Flip-in Event shall be deemed
not to have occurred.
5.2 EXPIRATION. No Person shall have any rights pursuant to this Agreement or in
respect of any Right after the Expiration Time, except the Rights Agent as
specified in Subsection 4.1(a) hereof.
-39-
5.3 ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of the provisions
of this Agreement or of the Rights to the contrary, the Corporation may, at its
option, issue new Rights Certificates evidencing Rights in such form as may be
approved by the Board of Directors to reflect any adjustment or change in the
number or kind or class of shares purchasable upon exercise of Rights made in
accordance with the provisions of this Agreement.
5.4 SUPPLEMENTS AND AMENDMENTS.
(a) Subject to Subsections 5.4(b) and (c), the Corporation may
from time to time, without the approval of any holders of
Rights or Common Shares amend, vary or delete any of the
provisions of this Agreement and the Rights in order to:
(i) make such changes as the Board of Directors, acting
in good faith, may determine are necessary or
desirable, provided that no such amendment, variation
or deletion made on or after the Stock Acquisition
Date shall materially adversely affect the interests
of the holders of Rights generally and provided
further that no such amendment, variation or deletion
shall be made to the provisions of Article 4 except
with the written agreement of the Rights Agent
thereto;
(ii) cure any ambiguity or to correct or supplement any
provision contained herein which may be inconsistent
with any of the other provisions herein or otherwise
defective; or
(iii) increase or decrease the Exercise Price.
(b) Any amendment, variation or deletion made by the Board of
Directors pursuant to Clause 5.4(a)(i) in connection with the
definitions of "Acquiring Person", "Expiration Time", "Flip-in
Event" or "Permitted Bid" shall:
(i) if made prior to the Separation Time, be submitted to
the shareholders of the Corporation at the next
meeting of shareholders and the shareholders may, by
resolution passed by a majority of the votes cast by
Independent Shareholders who vote in respect of such
amendment, variation or deletion, confirm or reject
such amendment or supplement; or
(ii) if made after the Separation Time, be submitted to
the holders of Rights at a meeting to be called for
on a date not later than immediately following the
next meeting of shareholders of the Corporation and
the holders of Rights may, by resolution passed by a
majority of the votes
-40-
cast by the holders of Rights who vote in respect of
such amendment, variation or deletion, confirm or
reject such amendment or supplement.
An amendment, variation or deletion shall be effective from
the date of the resolution of the Board of Directors adopting
such amendment, variation or deletion until it is confirmed or
rejected or until it ceases to be effective (as described in
the next sentence) and, where such amendment, variation or
deletion is confirmed, it continues in effect in the form so
confirmed. If such amendment, variation or deletion is
rejected by the shareholders or the holders of Rights or is
not submitted to the shareholders or holders of Rights as
required, then such amendment, variation or deletion shall
cease to be effective from and after the termination of the
meeting at which it was rejected or to which it should have
been but was not submitted or from and after the date of the
meeting of holders of Rights that should have been but was not
held, and no subsequent resolution of the Board of Directors
to amend, vary or delete any provision of this Agreement to
substantially the same effect shall be effective until
confirmed by the shareholders or holders of Rights, as the
case may be.
(c) The Corporation may, with the consent of the holders of
Rights, at any time on or after the Stock Acquisition Date,
amend, vary or delete any of the provisions of this Agreement
and the Rights (whether or not such action would materially
adversely affect the interests of the holders of Rights
generally), provided that no such amendment, variation or
deletion shall be made to the provisions of Article 4 except
with the written agreement of the Rights Agent thereto. Such
consent shall be deemed to have been given if such amendment,
variation or deletion is authorized by the affirmative votes
of the holders of Rights present or represented at and
entitled to be voted at a meeting of the holders and
representing 50 per cent plus one of the votes cast in respect
thereof For the purposes hereof, each outstanding Right (other
than a Right which is void pursuant to the provisions hereof)
shall be entitled to one vote, and the procedures for the
calling, holding and conduct of the meeting shall be those, as
nearly as may be, which are provided in the Corporation's
by-laws and the Company Act with respect to meetings of
shareholders of the Corporation.
(d) Any approval of the holders of Rights shall be deemed to have
been given if the action requiring such approval is authorized
by the affirmative votes of the holders of Rights present or
represented at and entitled to be voted at a meeting of the
holders of Rights and representing a majority of the votes
cast in respect thereof. For the purposes hereof, each
outstanding Right (other than Rights which are void pursuant
to the provisions hereof) shall be entitled to one vote, and
the procedures for the calling, holding and conduct of the
meeting shall be
-41-
those, as nearly as may be, which are provided in the
Corporation's by-laws and the Company Act with respect to
meetings of shareholders of the Corporation.
5.5 FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Corporation shall not be required to issue fractions of
Rights or to distribute Rights Certificates which evidence
fractional Rights. After the Separation Time, there shall be
paid to the registered holders of the Rights Certificates with
regard to which fractional Rights would otherwise be issuable,
an amount in cash equal to the same fraction of the Market
Value of a whole Right in lieu of such fractional Rights,
(b) The Corporation shall not be required to issue fractional
Common Shares upon exercise of the Rights or to distribute
certificates which evidence fractional Common Shares. In lieu
of issuing fractional Common Shares, the Corporation shall pay
to the registered holder of Rights Certificates at the time
such Rights are exercised as herein provided, an amount in
cash equal to the same fraction of the Market Value of one
Common Share.
5.6 RIGHTS OF ACTION. Subject to the terms of this Agreement, rights of action
in respect of this Agreement, other than rights of action vested solely in the
Rights Agent, are vested in the respective holders of the Rights; and any holder
of any Rights, without the consent of the Rights Agent or of the holder of any
other Rights, may, on such holder's own behalf and for such holder's own benefit
and the benefit of other holders of Rights, enforce, and may institute and
maintain any suit, action or proceeding against the Corporation to enforce, or
otherwise act in respect of, such holder's right to exercise such holder's
Rights in the manner provided in such holders Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the obligations of
any Person subject to this Agreement.
5.7 HOLDER OF RIGHTS NOT DEEMED A SHAREHOLDER. No holder, as such, of any Rights
shall be entitled to vote, receive dividends or be deemed for any purpose the
holder of Common Shares or any other securities which may at any time be
issuable on the exercise of such Rights, nor shall anything contained herein or
in any Rights Certificate be construed to confer upon the holder of any Rights,
as such, any of the rights of a shareholder of the Corporation or any right to
vote for the election of directors or upon any matter submitted to shareholders
at any meeting thereof, or to give or withhold consent to any corporate action,
or to receive notice of meetings or other actions affecting shareholders (except
as provided in
-42-
Section 5.8 hereof), or to receive dividends or subscription rights or
otherwise, until such Rights shall have been exercised in accordance with the
provisions hereof.
5.8 NOTICE OF PROPOSED ACTIONS. In case the Corporation shall propose after the
Separation Time and prior to the Expiration Time, to effect the liquidation,
dissolution or winding up of the Corporation or the sale of all or substantially
all of the Corporation's assets, then, in each such case, the Corporation shall
give to each holder of a Right, a notice of such proposed action, which shall
specify the date on which such liquidation, dissolution, or winding up is to
take place, and such notice shall be so given at least 20 Business Days prior to
the date of taking of such proposed action by the Corporation.
5.9 NOTICES. Notices or demands authorized or required by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights to or on the
Corporation shall be sufficiently given or made if delivered or sent by first
class mail, postage prepaid, or by facsimile transmission addressed (until
another address is filed in writing with the Rights Agent) as follows:
Dura Products International Inc.
60 Carrier Drive
Etobicoke, Ontario
M9W 5R1
Facsimile No.: (416) 679-0614
Attention: President
Any notice or demand authorized or required by this Agreement to be given or
made by the Corporation or by the holder of any Rights to or on the Rights Agent
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, facsimile transmission, or delivered, addressed (until another address
is filed in writing with the Corporation) as follows:
The R-M Trust Company
393 University Avenue
5th Floor
Toronto, Ontario
M5G 2M7
Facsimile No.: (416) 813-4555
Attention: Vice President Client Services
-43-
Notices or demands authorized or required by this Agreement to be given or made
by the Corporation or the Rights Agent to or on the holder of any Rights shall
be sufficiently given or made if delivered or sent by first-class mail, postage
prepaid, addressed to such holder at the address of such holder as it appears on
the Rights Register or, prior to the Separation Time, on the registry books of
the Corporation for the Common Shares. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice.
5.10 COSTS OF ENFORCEMENT. The Corporation agrees that if the Corporation or any
other Person the securities of which are purchasable upon exercise of Rights
fails to fulfil any of its obligations pursuant to this Agreement, then the
Corporation or such Person will reimburse the holder of any Rights for the costs
and expenses (including legal fees) incurred by such holder in actions to
enforce his rights pursuant to any Rights or this Agreement.
5.11 REGULATORY APPROVALS. Any obligation of the Corporation or action or event
contemplated by this Agreement, or any amendment to this Agreement, shall be
subject to the receipt of any requisite approval or consent from any
governmental or regulatory authority.
5.12 DECLARATION AS TO NON-CANADIAN AND NON-U.S. HOLDERS. If in the opinion of
the Board of Directors (who may rely upon the advice of counsel), any action or
event contemplated by this Agreement would require compliance with the
securities laws or comparable legislation of a jurisdiction outside Canada and
the United States of America, the Board of Directors acting in good faith may
take such actions as it may deem appropriate to ensure that such compliance is
not required, including without limitation establishing procedures for the
issuance to a Canadian resident fiduciary of Rights or securities issuable on
exercise of Rights, the holding thereof in trust for the Persons entitled
thereto (but reserving to the fiduciary or to the fiduciary and the Corporation,
as the Corporation may determine, absolute discretion with respect thereto) and
the sale thereof and remittance of the proceeds of such sale, if any, to the
Persons entitled thereto. In no event shall the Corporation or the Rights Agent
be required to issue or deliver Rights or securities issuable on exercise of
Rights to Persons who are citizens, residents or nationals of any jurisdiction
other than Canada and any province or territory thereof and the United States of
America in which such issue or delivery would be unlawful without registration
of the relevant Persons or securities for such purposes.
5.13 SUCCESSORS. All the covenants and provisions of this Agreement by or for
the benefit of the Corporation or the Rights Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
5.14 BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to
give to any Person, other than the Corporation, the Rights Agent and the holders
of the Rights, any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall
-44-
be for the sole and exclusive benefit of the Corporation, the Rights Agent and
the holders of the Rights.
5.15 GOVERNING LAW. This Agreement and each Right issued hereunder shall be
deemed to be a contract made under the laws of the Province of Ontario and for
all purposes shall be governed by and construed in accordance with the laws of
such province applicable to contracts to be made and performed entirely within
such province.
5.16 COUNTERPARTS. This Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same instrument.
5.17 SEVERABILITY. If any term or provision hereof or the application thereof to
any circumstance shall, in any jurisdiction and to any extent, be invalid or
unenforceable, such term or provision shall be ineffective as to such
jurisdiction to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable the remaining terms and provisions
hereof or the application of such term or provision to circumstances other than
those as to which it is held invalid or unenforceable.
5.18 EFFECTIVE DATE. This Agreement is effective from the date hereof, subject
to the receipt of all required regulatory approvals. If the Rights Plan is not
confirmed by resolution passed by a majority of the votes cast by Independent
Shareholders who vote in respect of such Rights Plan at a meeting to be held not
later than June 30, 1997, then this Agreement and any
-45-
then outstanding Rights shall be of no further force and effect from that date
which is the earlier of (a) the date of such meeting, and (b) June 30, 1997.
5.19 TIME OF THE ESSENCE. Time shall be of the essence hereof.
5.20 DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS. The Board of
Directors shall have the exclusive power and authority to administer and amend
this Agreement in accordance with the terms hereof and to exercise all rights
and powers specifically granted hereunder to the Board of Directors or the
Corporation, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not to redeem the Rights or to amend the Agreement,
in accordance with the terms hereof). All such actions, calculations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board of Directors in
good faith, shall (x) be final, conclusive and binding on the Corporation, the
Rights Agent, the holders of the Rights and all other parties and (y) not
subject the Board of Directors to any liability to the holders of the Rights or
any other parties.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
DURA PRODUCTS INTERNATIONAL INC.
Per:________________________________
Authorized Signatory
Per:________________________________
Authorized Signatory
THE R-M TRUST COMPANY
Per:________________________________
Authorized Signatory
Per:________________________________
Authorized Signatory
EXHIBIT A
[Form of Rights Certificate]
Certificate No._____________ _______________Rights
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE CORPORATION,
ON THE TERMS SET FORTH IN THE SHAREHOLDER RIGHTS AGREEMENT. UNDER
CERTAIN CIRCUMSTANCES (SPECIFIED IN SUBSECTION 3.1(b) OF SUCH
AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSONS CERTAIN
RELATED PARTIES OF AN ACQUIRING PERSON OR A TRANSFEREE OF AN ACQUIRING
PERSON OR ANY SUCH RELATED PARTIES WILL BECOME VOID WITHOUT FURTHER
ACTION.
RIGHTS CERTIFICATE
This certifies that ______________________________ is the
registered holder of the number of Rights set forth above, each of which
entitles the registered holder thereof, subject to the terms, provisions and
conditions of the Shareholder Rights Agreement dated as of April 23, 1997 (the
"Rights Agreement") between Dura Products International Inc., a corporation
incorporated under the laws of Ontario (the "Corporation") and The R-M Trust
Company, a trust company incorporated under the laws of Canada, as Rights Agent
(the "Rights Agent", which term shall include any successor Rights Agent under
the Rights Agreement), to purchase from the Corporation, at any time after the
Separation Time and prior to the Expiration Time (as such terms are defined in
the Rights Agreement), one fully paid common share of the Corporation (a "Common
Share") at the Exercise Price referred to below, upon presentation and surrender
of this Rights Certificate, together with the Form of Election to Exercise
appropriately completed and duly executed, to the Rights Agent at its principal
office in the City of Toronto. Until adjustment thereof in certain events as
provided in the Rights Agreement, the Exercise Price shall be $2.00 per Right
(payable in cash, certified cheque or money order payable to the order of the
Corporation).
In certain circumstances described in the Rights Agreement,
each Right evidenced hereby may entitle the registered holder thereof to
purchase or receive assets, debt securities or shares in the capital of the
Corporation other than Common Shares, or more or less than one Common Share (or
a combination thereof), all as provided in the Rights Agreement.
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Rights Agent, the Corporation and the holders of the Rights Certificates.
-2-
Copies of the Rights Agreement are on file at the head office of the Corporation
and are available upon written request.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the principal office of the Rights Agent in the
City of Toronto, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor evidencing an aggregate number of Rights equal to the
aggregate number of Rights evidenced by the Rights Certificate or Rights
Certificates surrendered. If this Rights Certificate shall be exercised in part,
the registered holder shall be entitled to receive, upon surrender hereof,
another Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Corporation at a
redemption price of $0.001 per Right, subject to adjustment in certain events,
or (ii) may be exchanged, at the option of the Corporation, for cash, debt or
equity securities or other assets (or a combination thereof).
No fractional Common Shares will be issued upon the exercise
of any Right or Rights evidenced hereby, but in lieu thereof a cash payment will
be made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be
entitled to vote or receive dividends or be deemed for any purpose the holder of
Common Shares or any other securities which may at any time be issuable upon the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Corporation or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
any meeting or other actions affecting shareholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights or otherwise,
until the Rights evidenced by this Rights Certificate shall have been exercised
as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Corporation.
Date:_______________________________
DURA PRODUCTS INTERNATIONAL INC.
Per:________________________________
-3-
Authorized Signatory
Per:________________________________
Authorized Signatory
Countersigned:
THE R-M TRUST COMPANY
Per:________________________________
Authorized Signatory
FORM OF ELECTION TO EXERCISE
TO: DURA PRODUCTS INTERNATIONAL INC.
The undersigned hereby irrevocably elects to exercise
__________________ whole Rights represented by this Rights Certificate to
purchase the Common Shares issuable upon the exercise of such Rights and
requests that certificates for such Common Shares be issued in the name of and
delivered to:
- ------------------------------------
Name
- ------------------------------------
Address
- ------------------------------------
City and Province
- ------------------------------------
Social Insurance No. or other taxpayer
identification number
If such number of Rights shall not be all the Rights evidenced
by this Rights Certificate, a new Rights Certificate for the balance of such
Rights shall be registered in the name of and delivered to:
- ------------------------------------
Name
- ------------------------------------
Address
- ------------------------------------
City and Province
- ------------------------------------
Social Insurance No. or other taxpayer
-2-
identification number
Date:____________________________ Signature: ___________________________
(Signature must correspond to name as
written upon the face of this Rights
Certificate in every particular, without
alteration or enlargement or any change
whatsoever)
- --------------------------
Signature Guaranteed
Signature must be guaranteed by a member firm of a recognized
stock exchange in Canada, a registered national securities exchange in the
United States, a member of the Investment Dealers Association of Canada or
National Association of Securities Dealers, Inc., or a commercial bank or trust
company having an office or correspondent in Canada or the United States.
(To be completed if true)
The undersigned hereby represents, for the benefit of the
Corporation and all holders of Rights and Common Shares, that the Rights
evidenced by this Rights Certificate are not and, to the knowledge of the
undersigned, have never been, Beneficially Owned by an Acquiring Person or by
any Affiliate or Associate of an Acquiring Person, any other Person acting
jointly or in concert with an Acquiring Person or any Affiliate or Associate of
any such other Person (as such terms are defined in the Rights Agreement).
- ---------------------------------------
Signature
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
- ------------------------------------------------------------------------------
(Please print name and address of transferee)
the Rights represented by this Rights Certificate, together with all right,
title and interest therein.
Date:_____________________ Signature: ______________________________
(Signature must correspond to name as
written upon the face of this Rights
Certificate in every particular, without
alteration or enlargement or any change
whatsoever)
- --------------------------
Signature Guaranteed
Signature must be guaranteed by a member firm of a recognized stock exchange in
Canada, a registered national securities exchange in the United States, a member
of the Investment Dealers Association of Canada or National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an office
or correspondent in Canada or the United States.
(To be completed if true)
The undersigned hereby represents, for the benefit of the Corporation and all
holders of Rights and Common Shares, that the Rights evidenced by this Rights
Certificate are not and, to the knowledge of the undersigned, have never been,
Beneficially Owned by an Acquiring Person or by any Affiliate or Associate of an
Acquiring Person, any other Person acting jointly or in concert with an
Acquiring Person or any Affiliate or Associate of any such other Person (as such
terms are defined in the Rights Agreement).
-----------------------------------
Signature
NOTICE
If the certifications set forth above in the Forms of Election to Exercise and
Assignment are not completed, the Corporation shall deem the Beneficial Owner of
the Rights represented by this Rights Certificate to be an Acquiring Person (as
defined in the Rights Agreement) and, accordingly, such Rights shall be null and
void.
EMPLOYMENT AGREEMENT
This Employment Agreement (this Agreement) dated as of May 1, 1995 is made by
and between Keith Carrigan (Carrigan) and Can Tech Investments Ltd. (Can Tech) a
Canadian corporation.
In consideration for their mutual promises and covenants and the terms and
conditions contained in this Agreement, Can Tech hereby offers and Carrigan
hereby accepts employment with Can Tech upon the terms and conditions set forth
herein.
AGREEMENT
1 Term; Termination of Employment.
1.1 The term of employment pursuant to this Agreement shall continue until
terminated by Can Tech of Carrigan in accordance with this Agreement.
Either party may terminate the employment as follows.
(a) Carrigan may terminate his employment at any time and for any reason
upon sixty (60) days prior written notice to Can Tech.
(b) Can Tech may terminate Carrigans employment at any time and for any
reason on 365 days prior written notice.
(c) Can Tech may terminate Carrigans employment for cause, if Carrigan has
failed to remedy the non-performance within a reasonable period after
written notice of any of material any non-performance has been given by
Can Tech to Carrigan to remedy any instance of material non-performance.
For purposes of the preceding sentence cause shall include, dishonesty
fraud, conviction or confession of an indictable offence or of a crime
involving moral turpitude, destruction or theft of Can Techs property,
physical attack resulting in injury to a fellow employee, intoxication at
work, use of narcotics or alcohol to an extent which impair the
performance of duties, willful malfeasance or gross negligence use of
narcotics or alcohol to an extent which impairs duties, misconduct
materially injurious to Can Tech, or any breach or threatened breach of
this Agreement.
1.2 If Carrigans employment is terminated, he shall continue to be bound by the
terms of paragraphs 5 and 6 of this Agreement.
2 Powers, Duties, Responsibilities.
Carrigan shall hold the offices of Director, President, Chief Operating Officer
and Chief Executive Office of Can Tech and shall have the power and authority
commensurate with those offices and shall have responsibilities and shall carry
out the duties and responsibilities commensurate with those offices along with
such other reasonable duties as assigned by the Board of Directors of Can Tech
from time to time.
3 Compensation.
3.1 Can Tech shall pay to Carrigan:
(a) a salary of $5,000 per month until January 31, 1996;
(b) a salary of $8,000 per month from February 1, 1996 through July 31,
1996; and
(c) thereafter, a salary, payable monthly, which is equal to that paid to
individuals with similar duties and responsibilities in other
corporations with similar revenues in the manufacturing industry in but
which salary shall, in any event, not be less than $10,000 per month.
3.2 As additional compensation Carrigan shall receive the following benefits:
(a) the exclusive use of a late model automobile provided by Can Tech and
all operating, maintenance, repair and insurance costs in connection
with the automobile shall be paid by Can Tech;
(b) any and all medical, prescriptions, dental and visual coverage, all
life and accidental death and disability insurance available to
employees of Can Tech or any affiliate of Can Tech;
(c) paid vacation benefit of 4 weeks per year subject to the normal
policies and procedures established by Can Tech from time to time;
(d) Clue dues and/or fees of not less than $2,000 per year;
(e) Commencing in 1997, and in each year thereafter, an annual contribution
of $13,500 or such greater or lesser amount as is equal to the maximum
contribution Carrigan is permitted to make in that applicable year to
Carrigans RRSP plus an annual cash bonus sufficient to offset the
income taxes on said contribution;
(f) Carrigan shall be entitled to participate in any and all stock option
plans established by Can Tech on such basis which is commensurate with
his position as the senior officer of Can Tech; and
(g) Carrigan shall be entitled to participate in any and all bonus programs
as established by the Board of Directors of Can Tech from time to time.
4 Benefits.
Carrigan shall participate fully in all other benefits provided by Can Tech to
its employees.
5 Covenant Not to Compete.
In consideration for the employment granted to him by this Agreement, Carrigan
agrees that he will not directly or indirectly compete with Can Tech during the
term of his employment with Can Tech, or for a period of two (2) years from the
date on which his employment with Can Tech terminates. This covenant not to
compete shall include all geographical areas in which Can Tech is actively
marketing products as of the termination date and shall prohibit the following
activities:
(a)design, develop, manufacture, produce, sell, market, solicit or accept
orders with regard to any product, concept, or business line which is
directly competitive with any aspect of the business of Can Tech as
conducted as of the termination date, whether or not using and
Confidential Information (as defined below);
(b)anywhere in the world where Can Tech is actively marketing products or
services as of the date of termination of employment, have any business
dealings or contacts except those which demonstrably do not relate to
or compete with the business or interests of Can Tech; or
(c)be an employee, employer, consultant, officer, director, partner,
trustee, or shareholder of more than 10% of the outstanding common
stock of any person or entity that does any of the activities just
listed.
The foregoing restrictive covenant shall not be considered to be breached by
reason only of Carrigan holding any shares of a corporation where such shares
are publicly traded.
6. Ownership of Technology; Confidentiality.
Carrigan recognizes and acknowledges that during the course of his employment he
will have access to certain information not generally known to the public,
relating to the products, sales or business of Can Tech, which may include
without limitation software, literature, data programs, customer or contact
lists, sources of supply, prospects or projections, manufacturing techniques,
processes, formulas, research or experimental work, work in process, trade
secrets or any other proprietary or confidential matter (collectively, the
Confidential Information). Carrigan recognizes and acknowledges that this
Confidential Information constitutes a valuable, special and unique asset of
access to and knowledge of which are essential to the performance of Carrigan's
Duties. Carrigan acknowledges and agrees that all
such Confidential Information, including without limitation that which he
conceives or develops, either alone or with others, at any time during his
employment Can Tech, is and shall remain the exclusive property of Can Tech.
Carrigan further recognizes, acknowledges and agrees that in order to enable Can
Tech to perform services for its customers or clients, such customers or clients
may furnish to Can Tech Confidential Information concerning their business
affairs, property, methods of operation or other data, that the goodwill
afforded to Can Tech depends upon Can Tech and its employees preserving the
confidentiality of such information, and that such information shall be treated
as Confidential Information of Can Tech for all purposes under this Agreement.
6.1 Non-Disclosure. Carrigan agrees that, except as directed by Can Tech,
Carrigan will not at any time, whether during or after his employment
with Can Tech, use or disclosure to any person for any purpose other
than for the benefit of Can Tech any Confidential Information, or
permit any person to use, examine and/or make copies of any documents,
files, data or other information sources which contain or are derived
from Confidential Information, whether prepared by Carrigan or
otherwise coming into Can Tech's possession or control, without the
prior written permission of Can Tech.
6.2 Possession. Carrigan agrees that upon request by Can Tech, and in any
event upon termination of employment, Carrigan shall turn over to Can
Tech all Confidential Information in Carrigan's possession or under his
control which was created pursuant to, is connected with or is derived
from Carrigan's services to Can Tech, or which is related in any manner
to Can Tech's business activities or research and development efforts,
whether or not such materials are in Carrigan's possession as of the
date of this Agreement.
6.3 Saving Provision. Can Tech and Carrigan agree that the agreements and
covenants not to compete contained in the preceding paragraphs 5 and 6,
including the scope of the restricted activities described therein and
the duration and geographic extent of such restrictions, are fair and
reasonably necessary for the protection of Can Tech's Confidential
Information, goodwill, and other interests, in light of all of the
facts and circumstances of the relationship between Carrigan and Can
Tech. In the event a court of competent jurisdiction should decline to
enforce any provision of the preceding paragraphs, such paragraphs
shall be deemed to be modified to restrict Carrigan's competition with
Can Tech to the maximum extent, in both time and geography, which the
court shall find enforceable.
7. Injunctive Relief.
Carrigan acknowledges that disclosure of any Confidential Information or breach
or threatened breach of the non-competition and non-disclosure covenants or
other agreements contained herein would give rise to irreparable injury to Can
Tech or clients of Can Tech, which injury would be inadequately compensable in
money damages. Accordingly, Can Tech or where appropriate, a client of Can Tech,
may seek and obtain injunctive relief from the breach or threatened breach of
any provision, requirement or covenant of this Agreement, in addition to and not
in limitation of any other legal remedies which may be available.
8. General
(a) This Agreement is made under and subject to the laws of the Province of
Ontario and the laws of Canada applicable therein.
b) There are no oral or other agreements which modify or affect this
Agreement.
(c) All dollars expressed in this Agreement are in Canadian dollars.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
day, month and year first above written.
CAN TECH INVESTMENTS LTD.
Per: ___________________________
Name:
Title:
SIGNED, SEALED AND DELIVERED )
In the presence of )
)
)
____________________________ ) ___________________________ l/s
) Keith Carrigan
EMPLOYMENT AGREEMENT
This Employment Agreement (this Agreement) dated as of January 1, 1997 is made
by and between Carl McMurray (McMurray) and Transway Capital Inc. and
Cantech Composites Inc. (both referred to as Transway).
In consideration for their mutual promises and covenants and the terms and
conditions contained in this Agreement, Transway hereby offers and McMurray
hereby accepts employment with Transway upon the terms and conditions set forth
herein.
AGREEMENT
1. TERM, TERMINATION OF EMPLOYMENT
1.1 The term of employment pursuant to this Agreement shall continue until
terminated by Transway or McMurray in accordance with this Agreement.
Either party may terminate the employment as follows:
(a) McMurray may terminate his employment at any time and for any reason
upon sixty (60) days prior written notice to Transway.
(b) Transway may terminate McMurray's employment at any time and for any
reason on 90 days prior written notice.
(c) Transway may terminate McMurray's employment for cause, if McMurray has
failed to remedy the non-performance within a reasonable period after
written notice has been given by Transway to McMurray to remedy any
instance of material non-performance. For purposes of the preceding
sentence cause shall include; dishonesty, fraud, conviction or
confession of an indictable offense or of a crime involving moral
turpitude, destruction or theft of Transways property, physical attack
resulting in injury to a fellow employee, intoxication at work, use of
narcotics or alcohol to an extent which impairs the performance of
duties, willful malfeasance or gross negligence use of narcotics or
alcohol to an extent which impairs duties, misconduct materially
injurious to Transway, or any breach or threatened breach of this
Agreement.
1.2 If McMurray's employment is terminated, he shall continue to be bound by
the terms of paragraphs 4 and 5 of this Agreement.
2. POWERS, DUTIES RESPONSIBILITIES
McMurray shall hold the offices of VP Finance and Chief Financial Officer and
Secretary to the Board of Directors of Transway and shall have the power and
authority commensurate with those offices and shall have responsibilities and
shall carry out the duties and responsibilities commensurate with those offices
along with such other reasonable duties as assigned by the President of Transway
from time to time.
3. COMPENSATION
3.1 Transway shall pay to McMurray:
(a) a salary of $5,000.00 per month until March 31, 1997, or until
commercial production commences which is evidenced by an order of pallets
from a customer;
(b) a salary of $7,000.00 per month from April 1, 1997 through December 31,
1997; and
(c) thereafter, a salary, payable monthly, which is equal to that paid to
individuals with similar duties and responsibilities in other
corporations with similar revenues in the manufacturing industry but
which salary, in any event, not be less than $8,500.00 per month.
3.2 As additional compensation McMurray shall receive the following benefits:
(a) McMurray shall fully participate in any and all benefits provided by
Transway to its employees.
(b) paid vacation benefits of 4 weeks per year subject to the normal
policies and procedures established by Transway from time to time. No
more than 2 weeks to be taken concurrently;
(c) Club dues and/or fees of not less than $1,500.00 per year;
(d) life insurance and critical illness coverage as provided to other
members of senior management of Transway. McMurray shall have the
option of transferring these plans in the event of termination of
employment with Transway. McMurray shall be entitled to participate in
any other deferred compensation programs established by Transway for
senior management.
(e) an annual contribution equal to 50% of the annual maximum contribution
McMurray is permitted to make in that applicable year to McMurray's
RRSP plus an annual cash bonus sufficient to offset the income taxes on
said contribution. Such contribution to be subject to applicable income
tax rules and regulations;
(f) a monthly fee of $200.00 for local transportation costs;
(g) McMurray shall be entitled to participate in any and all stock options
plans established by Transway on such basis which is commensurate with
his position as a senior officer of Transway; and
(h) McMurray shall be entitled to participate in any and all bonus programs
as established by the Board of Directors of Transway from time to time,
less any amount contributed to McMurray's RRSP pursuant to (e) above.
4. COVENANT NOT TO COMPETE
In consideration for the employment granted to him by this Agreement, McMurray
agrees that he will not directly or indirectly compete with Transway during the
term of his employment with Transway, or for a period of two (2) years from the
date on which his employment with Transway terminates. This covenant not to
compete shall include all geographical areas in which Transway is actively
marketing products as of the termination date and shall prohibit the following
activities:
(a) design, develop, manufacture, produce, sell, market, solicit or accept
orders with regard to any product, concept, or business line which is
directly competitive with any aspect of the business of Transway as
conducted as of the termination date, whether or not using any
Confidential Information (as defined below);
(b) anywhere in the world where Transway is actively marketing products or
services as of the date of termination of employment, have any business
dealings or contacts except those which demonstrably do not relate to
or compete with the business or interests of Transway; or
(c) be an employee, employer, consultant, officer, director, partner,
trustee or shareholder of more than 10% of the outstanding common stock
of any person or entity that does any of the activities just listed.
The foregoing restrictive covenant shall not be considered to be breached by
reason only of McMurray holding any shares of a corporation where such shares
are publicly traded.
5. OWNERSHIP OF TECHNOLOGY; CONFIDENTIALITY
McMurray recognizes and acknowledges that during the course of his employment he
will have access to certain information not generally known to the public,
relating to the products, sales or business of Transway, which may include
without limitation software, literature, data, programs, customer or contact
lists, sources of supply, prospects or projections, manufacturing techniques,
processes, formulas, research or experimental work, work in process, trade
secrets or any other proprietary or confidential matter (collectively, the
Confidential Information). McMurray recognizes and acknowledges that this
Confidential Information constitutes a valuable, special and unique asset of
access to and knowledge of which are essential to the performance of McMurray's
duties. McMurray acknowledges and agrees that all such Confidential Information,
including without limitation that which he conceives or develops, either alone
or with others, at any time during his employment with Transway, is and shall
remain the exclusive property of Transway. McMurray further recognizes,
acknowledges and agrees that in order to enable Transway to perform services for
its customers or clients, such customers or clients may furnish to Transway
Confidential Information concerning their business affairs, property, methods of
operation or other data, that the goodwill afforded to Transway depends upon
Transway and its employees preserving the confidentiality of such information,
and that such information shall be treated as Confidential Information of
Transway for all purposes under this Agreement.
5.1 Non-disclosure. McMurray agrees that, except as directed by Transway,
McMurray will not at any time, whether during or after his employment with
Transway, use or disclose to any person for any purpose other than for the
benefit of Transway any Confidential Information, or permit any person to
use, examine and/or make copies of any documents, files, data or other
information sources which contain or are derived from Confidential
Information, whether prepared by McMurray or otherwise coming into
Transways possession or control, without the prior written permission of
Transway.
5.2 Possession. McMurray agrees that upon request by Transway, and in any event
upon termination of employment, McMurray shall turn over to Transway all
Confidential Information in McMurray's possession or under his control
which was created pursuant to, is connected with or is derived from
McMurray's services to Transway, or which is related in any manner to
Transways business activities or research and development efforts, whether
or not such materials are in McMurray's possession as of the date of this
Agreement.
5.3 Saving Provision. Transway and McMurray agree that the agreements and
covenants not to compete contained in the preceding paragraphs 4 and 5,
including the scope of the restricted activities described therein and the
duration and geographic extent of such restrictions, are fair and
reasonably necessary for the protection of Transway's Confidential
Information, goodwill, and other interests, in light of all of the facts
and circumstances of the relationship between McMurray and Transway. In the
event a court of competent jurisdiction should decline to enforce any
provision of the preceding paragraphs, such paragraphs shall be deemed to
be modified to restrict McMurray's competition with Transway to the maximum
extent, in both time and geography, which the court shall find enforceable.
6. INJUNCTIVE RELIEF
McMurray acknowledges that disclosure of any Confidential Information or breach
or threatened breach of the non-competition and non-disclosure covenants or
other agreements contained herein would give rise to irreparable injury to
Transway or clients of Transway, which injury would be inadequately, compensable
in money damages. Accordingly, Transway or where appropriate, a client of
Transway, may seek and obtain injunctive relief from the breach or threatened
breach of any provision, requirement or covenants of this Agreement, in addition
to and not in limitation of any other legal remedies which may be available.
7. GENERAL
(a) This Agreement is made under and subject to the laws of the Province of
Ontario and the laws of Canada applicable therein.
(b) There are no oral or other agreements which modify or affect this
Agreement.
(c) All dollar amounts expressed in this Agreement are in Canadian dollars.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
day, month and year first above written.
TRANSWAY CAPITAL INC. AND
CANTECH COMPOSITES INC.
per:__________________________
Name:
Title:
SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF
- ----------------- ------------------------
CARL MCMURRAY
EMPLOYMENT AGREEMENT
This Employment Agreement (this Agreement) dated as of August 7, 1996 is made by
and between Weining Song (Song) and CanTech Investments Ltd. (CanTech) a
Canadian corporation.
In consideration for their mutual promises and covenants and the terms and
conditions contained in the Agreement, CanTech hereby offers and Song hereby
accepts employment with CanTech upon the terms and conditions set forth herein.
AGREEMENT
1 TERM; TERMINATION OF EMPLOYMENT.
1.1 The term of employment pursuant to this Agreement shall continue until
terminated by CanTech or Song in accordance with this Agreement. Either party
may terminate the employment as follows.
(a) The period of this Agreement will extend for a period of two (2) years
and may be extended subject to agreement by both parties.
(b) Can Tech may terminate Song's employment for cause, if Song has failed
to remedy the non-performance within a reasonable period after written
notice of any of material any non-performance has been given by CanTech
to Song to remedy any instance of material non-performance. For
purposes of the preceding sentence, cause shall include dishonesty,
fraud, conviction or confession of an indictable offense, or of a crime
involving moral turpitude, destruction or theft of CanTech's property,
physical attack resulting in injury to a fellow employee, intoxication
at work, use of narcotics or alcohol to an extent which impairs the
performance of duties, willful malfeasance or gross negligence, use of
narcotics or alcohol to an extent which impairs duties, misconduct
materially injurious to CanTech, non-performance of powers, duties or
responsibilities or any breach or threatened breach of this Agreement.
1.2 If Song's employment is terminated, he shall continue to be bound by the
terms of paragraphs 5 and 6 of this Agreement.
2 POWERS, DUTIES, RESPONSIBILITIES.
Song shall hold the office of Vice President Engineering of CanTech and shall
have the power and authority commensurate with those offices and shall have
responsibilities and shall carry out the duties and responsibilities
commensurate with those offices along with such other reasonable duties as
assigned by the Board of Directors of CanTech from time to time.
3 COMPENSATION.
3.1 CanTech shall pay to Song:
(a) an annual salary of $75,000 effective August 1, 1996;
3.2 As additional compensation, Song shall receive the following benefits:
(a) any and all medical, prescriptions, dental and visual coverage, all
life and accidental death and disability insurance available to
employees of CanTech or any affiliate of CanTech;
(b) paid vacation benefits of 3 weeks per year subject to the normal
policies and procedures established by CanTech from time to time;
(c) Song will be granted a stock option to acquire 150,000 common shares at
$0.70 per share. In addition Song shall be entitled to participate in
any and all stock option plans established by CanTech on such basis
which is commensurate with his position as a senior office of CanTech;
and
(g) Song shall be entitled to participate in any and all bonus programs as
established by the Board of Directors of CanTech from time to time.
4 BENEFITS.
Song shall participate fully in all other benefits provided by CanTech to its
employees.
5 COVENANT NOT TO COMPETE.
In consideration for the employment granted to him by this Agreement, Song
agrees that he will not directly or indirectly compete with CanTech during the
term of his employment with CanTech, or for a period of two (2) years from the
date on which his employment with CanTech terminates. This covenant not to
compete shall include all geographical areas in which CanTech is actively
marketing products as of the termination date and shall prohibit the following
activities:
(a) design, develop, manufacture, produce, sell, market, solicit or accept
orders with regard to any product, concept, or business line which is
directly competitive with any aspect of the business of CanTech as
conducted as of the termination date, whether or not using any
Confidential Information (as defined below);
(b) anywhere in the world where CanTech is actively marketing products or
services as of the date of termination of employment, have any business
dealings or contracts except those which demonstrably do not relate to
or compete with the business or interests of CanTech; or
(c) be an employee, employer, consultant, officer, director, partner,
trustee or shareholder of more than 10% of the outstanding common stock
of any person or entity that does any of the activities just listed.
The foregoing restrictive covenant shall not be considered to be breached by
reason only of Song holding any shares of a corporation where such shares are
publicly traded.
6 OWNERSHIP OF TECHNOLOGY; CONFIDENTIALITY.
Song recognizes and acknowledges that during the course of his employment he
will have access to certain information not generally known to the public,
relating to the products, sales or business of CanTech, which may include
without limitation software, literature, data, programs, customer or contact
lists, sources of supply, prospects or projections, manufacturing techniques,
processes, formulas, research or experimental work, work in process, trade
secrets or any other proprietary or confidential matter (collectively, the
Confidential Information). Song recognizes and acknowledges that this
Confidential Information constitutes a valuable, special and unique asset of
access to and knowledge of which are essential to the performance of Song's
Duties. Song acknowledges and agrees that all such Confidential Information,
including without limitation that which he conceives or develops, either alone
or with others, at any time during his employment CanTech is and shall remain
the exclusive property of CanTech. Song further recognizes, acknowledges and
agrees that in order to enable CanTech to perform services for its customers or
clients, such customers or clients may furnish to CanTech Confidential
Information concerning their business affairs, property, methods of operation or
other data, that the goodwill afforded to CanTech depends upon CanTech and its
employees preserving the confidentiality of such information, and that such
information shall be treated as Confidential Information of CanTech for all
purposes under this Agreement.
6.1 Non-Disclosure. Song agrees that, except as directed by CanTech, Song
will not at any time, whether during or after his employment with CanTech,
use or disclose to any person for any purpose other than for the benefit of
CanTech any Confidential Information, or permit any person to use, examine
and/or make copies of any documents, files, data or other information
sources which contain or are derived from Confidential Information, whether
prepared by Song or otherwise coming into CanTech's possession or control,
without the prior written permission of CanTech.
6.2 Possession. Song agrees that upon request by CanTech, and in any event
upon termination of employment, Song shall turn over to CanTech all
Confidential Information in Song's possession or under his control which
was created pursuant to, is connected with or is derived from Song's
services to CanTech, or which is related in any manner to CanTech's
business activities or research and development efforts, whether or not
such materials are in Song's possession as of the date of this Agreement.
6.3 Saving Provision. CanTech and Song agree that the agreements and
covenants not to compete contained in the preceding paragraphs 5 and 6,
including the scope of the restricted activities described therein and the
duration and geographic extent of such restrictions, are fair and
reasonably necessary for the protection of CanTech's Confidential
Information, goodwill, and other interests, in light of all of the facts
and circumstances of the relationship between Song and CanTech. In the
event a court of competent jurisdiction should decline to enforce any
provision of the preceding paragraphs, such paragraphs shall be deemed to
be modified to restrict Song's competition with CanTech to the maximum
extent, in both time and geography, which the court shall find enforceable.
7 INJUNCTIVE RELIEF.
Song acknowledges that disclosure of any Confidential Information or breach or
threatened breach of the non-competition and non-disclosure covenants or other
agreements contained herein would give rise to irreparable injury to CanTech or
clients of CanTech, which injury would be inadequately compensable in money
damages. Accordingly, CanTech or where appropriate, a client of CanTech, may
seek and obtain injunctive relief from the breach or threatened breach of any
provision, requirement or covenant of this Agreement, in addition to and not in
limitation of any other legal remedies which may be available.
8 GENERAL.
(a) This Agreement is made under and subject to the laws of the Province of
Ontario and the laws of Canada applicable therein.
(b) There are no oral or other agreements which modify or affect this
Agreement.
(c) All dollars expressed in this Agreement are in Canadian dollars.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
day, month and year first above written.
CANTECH INVESTMENTS LTD.
Per:
---------------------------
NAME & TITLE
SIGNED, SEALED AND DELIVERED }
IN THE PRESENCE OF }
}
}
} L/S
} ------------------------
} WEINING SONG
DURA PRODUCTS INTERNATIONAL INC.
STOCK OPTION PLAN
ADOPTION
At the 1996 annual and special meeting of shareholders, Dura Products
International Inc's (the "Company") stock option plan (the "1996 Plan") was
approved. At the 1997 annual and special meeting of shareholders, the Company's
1996 Plan was amended to increase the Common Shares issuable pursuant to the
1996 Plan.
ISSUER
Common Shares of Dura Products International Inc. will be issued pursuant to the
stock option plan.
NUMBER
The number of Common Shares subject to options granted under the 1996 Plan (and
under all other management options and employee stock purchase plans) is
limited, in the aggregate, to 5,000,000.
The maximum number of Common Shares which may be reserved for issuance to any
one person, including insiders of the Company under the 1996 Plan, is not
limited except to the extent that at no time may such number exceed 5% of the
number of issued and outstanding common shares.
ELIGIBILITY
Eligibility for participation in the 1996 Plan is restricted to directors,
officers, employees and consultants of the Company and its affiliates and other
designated persons and their personal holding companies and registered
retirement savings plan (RRSP).
PRICE
The exercise price of any option granted under the 1996 Plan may not be less
than the fair market value (e.g., the prevailing market price) of the Common
Shares at the time the option is granted.
TERM
Options issued under the 1996 Plan may be exercised during a period determined
by the board of directors which cannot exceed five years and are subject to
earlier termination upon the termination of the optionees employment, upon the
optionee ceasing to be a director and/or officer of the Company or any
subsidiary, or upon the retirement, permanent disability or death of an
optionee.
OTHER RESTRICTIONS/CONDITIONS
Options issued under the 1996 Plan may have vesting provisions as determined by
the board of directors.
The options issued under the 1996 Plan are non-transferable.
The Company does not provide any financial assistance to participants under the
1996 Plan to facilitate purchase of Common Shares.
