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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Exchange Act of 1934
Radiant Energy Corporation
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(Name of Small Business Issuer in its charter)
Canada N/A
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
40 Centre Drive, Orchard Park, New York 14127
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(Address of principal executive office) (Zip Code)
Issuer's telephone number: (716) 662-0022
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Securities to be registered pursuant to Section 12(b) of the Act.
Title of each class Name of each exchange on which registered
None
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Securities to be registered pursuant to Section 12(g) of the Act.
Common Stock
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(Title of Class)
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PART I
Item 1. Description of Business.
General
Radiant Energy Corporation ("REC"), through its wholly-owned operating
subsidiary Radiant Aviation Services, Inc. ("RAS") (REC and RAS may be referred
to herein as the "Company"), is in the business of providing its patented
INFRATEK(Registered) deicing technology and services to the commercial airline
industry.
Following four years of development and three years of field tests of the
INFRATEK(Registered) technology at the Rhinelander Oneida County Airport in
Wisconsin and the Greater Buffalo International Airport in New York, the Company
opened its first major commercial deicing facility at Newark International
Airport in New Jersey in December 1999. This facility is being operated by
Continental Airlines, Inc. ("Continental") and revenues from operations at the
facility are being shared with Continental. On December 20, 1999, this facility
was sold to MDFC Equipment Leasing Corporation ("MDFC"), an affiliate of Boeing
Capital Corporation ("Boeing") and, contemporaneously, leased back to the
Company.
The INFRATEK(Registered) Technology and Deicing System
Through the controlled combustion of natural or propane gas, the Company's
proprietary energy process units ("EPUs") melt accumulated ice and snow on
aircraft. The heat energy does not harm the aircraft or the passengers inside.
The Company's unique combination of the optimum infrared energy wavelength, and
the method of concentrating the energy, is proprietary, patented and approved by
the Federal Aviation Administration ("FAA").
The Company's INFRATEK(Registered) system is housed in an open-ended
structure. The EPUs are suspended from an arched frame over the aircraft. To
begin the deicing process an aircraft enters the structure and comes to a full
stop, but is not required to shut off its engines. Passengers and crew remain on
board. An operator at the facility enters the aircraft type into a computer
which controls the EPUs. The computer then starts the EPUs which produce the
required amount of radiant heat energy to melt and evaporate the snow, ice and
frost from the surface of the aircraft. The process time varies depending on the
amount of snow, ice and frost on the aircraft. After the INFRATEK(Registered)
system has been utilized, and the aircraft is "clean", it may be necessary,
depending on weather conditions, to apply a chemical (glycol-
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based) anti-icing fluid to prevent accumulations of snow, ice or frost.
The following table compares the INFRATEK(Registered) system to
traditional, chemical deicing with glycol, assuming a mid-sized aircraft (e.g.,
a Boeing 737) with an average covering of snow, ice and frost:
<TABLE>
<CAPTION>
INFRATEK(Registered) GLYCOL
<S> <C> <C>
Time to deice 3 to 20 minutes 5 to 25 minutes
Gas/Glycol Quantity 5 to 10 million BTUs 75 to 1,000 gallons
Cost per unit (1)$5.00/million BTU $9 to $15 gallon - includes
cost of glycol and recovery
Cost/Application (excluding Labor) $25 to $50 $675 to $15,000
Equipment INFRATEK(Registered) Trucks, deicing equipment,
and a containment system
Labor (Workers) 1 to 2 4 to 8
</TABLE>
The INFRATEK(Registered) system's computerization enables a single
operator to adjust the system for specific aircraft and various deicing
conditions. The control system is PC-based and runs on software set up for the
Company's application.
Advantages of the INFRATEK(Registered) System
Data collected from working installations demonstrate that the
INFRATEK(Trademark) system offers the following advantages over the traditional
chemical deicing process:
1. Operating cost savings;
2. Improved and dependable throughput timing, resulting in greater
airport efficiencies;
3. Capital cost savings; and
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(1) All references herein are to U.S. dollars, unless otherwise indicated.
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4. Environmental risks are reduced and worker safety is improved.
Commercialization of the INFRATEK(Registered) Technology
In March 1997 Prior Aviation Services ("Prior Aviation"), an aviation
service company with extensive experience in aircraft deicing, commenced
operation of the first INFRATEK(Registered) system at the Greater Buffalo
International Airport in New York ("Buffalo Airport").
In January 1998 Radiant sold the first INFRATEK(Registered) system to the
Rhinelander Oneida County Airport ("Rhinelander Airport") in Wisconsin. The
Company retained no rights to this system or to the revenues produced by it. On
March 15, 1998, the system commenced commercial operations. The
INFRATEK(Registered) system deices approximately 50% of Rhinelander's air
traffic, which consists primarily of commuter aircraft including Dash 8s and
Beech 1900s. To date, over 175 deicings utilizing the INFRATEK(Registered)
system have occurred at the Rhinelander Airport.
On December 20, 1999, the Company opened its first major installation of
an INFRATEK(Registered) system at Newark International Airport ("the Newark
Facility"). The 32,868 square foot facility was sold to MDFC, an affiliate of
Boeing, on December 20, 1999, and, contemporaneously, leased back to the
Company. Continental has an option to purchase the Newark Facility. Continental
operates the Newark Facility and charges airlines a per use deicing fee, which
is shared with the Company.
The Market for INFRATEK(Registered) and Plan of Marketing
The potential users of the INFRATEK(Registered) system include commercial
passenger airlines, air cargo haulers, military installations, and the general
aviation industry.
The Company estimates the primary North American market of major hub,
medium- sized and regional airports to be approximately 750 locations, with
approximately an additional 750 locations in Europe. Some of these 1,500
locations have traffic volumes which could justify installation of multiple
INFRATEK(Registered) systems. Primary locations include those with suitable
weather patterns, as well as some warm weather locations (e.g., Atlanta) where
icing occurs. Company owned Deicing Service Centres ("DSCs") are planned to be
located in high-traffic locations to be operated by an airline, with direct
sales taking place to the airports and the military.
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The Company plans to generate revenues:
o by owning DSCs at major hub locations, which will be operated by an
airline;
o through direct sales to end users, with or without a per use deicing
licensing fee; and
o from maintenance agreements.
DSCs
The Company plans to own the INFRATEK(Registered) systems at the major
airline hubs and enter into management contracts with an airline or general
aviation service company to operate the system at the airport. Revenues will be
shared between the Company and the operator of the system. The operator will be
responsible for the operating costs.
Direct Sales
The Company plans to sell INFRATEK(Registered) systems primarily to
airports with low traffic volume. The Company also plans to make direct sales to
the military. As a condition of these sales, the purchaser may be assessed a
royalty fee based on use.
Maintenance Contracts
The Company plans to offer maintenance services for its
INFRATEK(Registered) system on a fixed fee basis.
The Aviation Industry and Deicing
The Deicing of Aircraft
The aviation services industry includes aircraft fueling, cargo
warehousing, and maintenance of aircraft, ground support equipment and aircraft
deicing. The FAA currently requires that aircraft prepared for flight must be
free and clear of frozen contamination (frost,
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snow and ice). This requirement, the "clean aircraft concept", has been a major
factor in both the decrease in the number of ice related aircraft crashes since
1992 and the increase in the amount of glycol used in deicing.
Although the FAA regulates the airline industry, standards for deicing are
determined by the airlines and individual airports. The traditional and most
common method of aircraft deicing consists of spraying a mixture of hot water
and the chemical glycol on the contaminated surfaces. A substantial capital
investment in traditional deicing infrastructure has already been made by the
airline industry, principally in tanker trucks equipped with booms, for training
programs, and contaminant removal and disposal facilities for recovery and
containment of used glycol.
The Environmental Issues
Environmental issues associated with glycol have prompted environmental
protection and regulatory agencies to protest the increased utilization of
chemical-based technologies for deicing operations. Glycol chemicals used in
deicing fluids pose health hazards to operators including eye irritation,
central nervous system depression, and kidney and liver damage. The
environmental risks have prompted increasingly tighter procedures and techniques
in the handling, use and disposal of these chemicals. As a result, airports are
developing multi- million dollar deicing fluid recovery, containment and
disposal facilities. The Company's technology addresses these industry issues by
providing a service that reduces operating costs, environmental risks, operating
risks, and health risks by significantly reducing the need for these chemicals.
FAA Approval and Recognition
The Company received FAA authorization for its INFRATEK(Registered)
deicing system in 1997. In June 1997, the FAA awarded the Company its 1997
Environmental Award in recognition of the Company's efforts to develop a more
environmentally responsible method of deicing aircraft. The Company won the 1997
Technology and Innovation Award presented by Aviation Week & Space Technology
Magazine. The editors of Discover Magazine nominated the Company for the
magazine's Award for Technological Innovation. In February 1998, the Federal
Laboratory Consortium recognized the Company for its outstanding efforts in
technology transfer between industry and federal agencies.
The INFRATEK(Registered) system has been designated by the FAA as eligible
for Federal Airport Improvement Program and Passenger Facility Charge funding.
As a result, U.S. airports are
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eligible to apply for funding from these programs for up to 90% of the total
cost incurred to install an INFRATEK(Registered) system.
Environmentally Responsible Technology
Glycol used for deicing can enter streams, sewage and water supply systems
serving suburban and urban communities, contaminating surface water and
groundwater drinking systems. The Company's technology eliminates the need for
glycol chemicals used in the removal of ice, snow and frost from aircraft
surfaces.
Depending on weather conditions, a light spraying of glycol may be applied
to provide anti-icing protection. This last measure is not part of the
INFRATEK(Registered) system and is common in the industry.
Deicing
Overview
Aircraft deicing consists of the pre-flight removal of ice, snow and frost
from aircraft surfaces. Depending on weather conditions, the application of
anti-icing chemicals may be required after the deicing process to prevent
re-accumulation.
The use of deicing chemicals increased markedly in 1992 and 1993 as a
result of a commercial airliner crash which was suspected to be the result of
improper deicing at LaGuardia Airport in New York. In response to this incident,
the FAA mandated that aircraft be free of ice, snow and frost. Currently,
aircraft deicing is primarily accomplished through the application of chemical
deicing solutions. Due to the hazardous environmental and safety effects of
these chemicals, aircraft deicing operations are facing increasing regulations
and costs.
The Traditional Chemical Deicing Process Using Glycol
Glycol is applied to aircraft as a hot liquid mixture of 50% glycol and
50% hot water. The hot water melts the ice; the glycol is added to the hot water
so it does not refreeze on the aircraft. This mixture is applied under pressure
using a nozzle mounted on a vehicle. The pressure of the liquid hitting the
surface of the aircraft mechanically removes snow and ice, which is also melted
by the heat of the solution. In addition, the antifreeze properties of the
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compound remove snow and ice. The solution that remains on the surface of the
aircraft helps prevent refreezing. The amount of deicing solution used on an
individual aircraft can range from 10 gallons for light frost on a small
corporate jet to several thousand gallons for a large commercial aircraft.
Aircraft deicing is performed by the airline or by a service company. Using
conventional glycol sprays, airlines currently can pay between $675 and $15,000
to deice a narrow body passenger jet, depending on the amount of accumulation
and weather conditions.
Traditional Deicing Environmental Infrastructure
Because most airports were built before environmental regulations for
polluted water runoff were enacted, the infrastructure needed to control large
quantities of deicing fluids does not exist at many airports. Deicing generally
takes place directly on the tarmac. Deicing chemicals may enter the "runoff" and
flow into nearby waterways. In 1987, under Clean Water Act revisions, storm
water runoff was recognized under federal law as a serious water pollution
problem, and the national storm water permit system was adopted to attempt to
control polluted runoff from urban areas, including industrial sites.
To minimize the potentially hazardous effects of aircraft deicing, some
airports use centralized deicing systems which drain into recycling tanks or
large retention ponds. Other airports collect storm water runoff through drains
and treat it before discharging it into a sanitary sewage system. In addition,
many larger airports conduct water monitoring studies. At other airports,
deicing fluid runoff flows directly into creeks and other tributaries.
Competition
The Company faces competition primarily from two sources: (i) existing
chemical deicing methods and the related airport Ground Support Equipment
("GSE") infrastructure, and (ii) alternative deicing methods.
Ethylene and Propylene Glycol
The current method of deicing large aircraft is to first deice the
critical aircraft surfaces using so-called "Type I" or "Type II" ethylene glycol
fluids, which are specifically
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formulated for deicing applications(2). The Company's principal competition,
therefore, comes from the manufacturers of ethylene and propylene glycol
technology in combination with the GSE industry infrastructure (i.e., deicing
trucks, special booms, related procedures and training programs, and the
substantial existing and planned contaminant removal and disposal facilities)
and the companies committed to using glycol. Glycol manufacturers and the GSE
infrastructure have been operating without any substantial competition from
alternative deicing methods. The inertia implicit in the long-standing
relationship between chemical-based deicing delivery systems, airports and
airlines is strong and well entrenched.
The major producer of ethylene glycol in North America is Union Carbide
Corporation. Other producers include Saudi Basic Industries Corp., Shell Oil
Company, Occidental Petroleum Corporation, Texaco Chemical Company, and BASF
Corporation. Due to the potential environmental and human safety hazards posed
by ethylene glycol use, several major U.S. airlines, as well as the U.S. Air
Force, decided in 1993 to cease utilizing ethylene glycol for deicing. Instead,
they now use propylene glycol which has fewer adverse environmental effects than
ethylene glycol. According to one producer, Arco Chemical Co., propylene glycol
is as effective for deicing aircraft as is ethylene glycol, and has no harmful
effects on humans in this application. However, anti-corrosion chemicals added
to a propylene glycol deicer can render the substance just as toxic to aquatic
life as ethylene glycol-based deicing fluids.
GSE Operators and Alternative Deicing Methods
The GSE industry has expanded and adapted its deicing equipment,
materials, and operating standards in an effort to provide acceptable service to
airline clients and comply with aviation and environmental regulations.
The increased attention placed on icing-related aircraft crashes has
resulted in an increase in the use of deicing chemicals. This, in turn, has
caused operating problems in the form of aircraft congestion and longer holdover
times. Airports have attempted to address
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(2) In many cases, so-called "Type II" fluid is then applied for
anti-icing purposes to protect the deiced aircraft from re-accumulation of
frozen contamination prior to and during takeoff. The need to apply such
anti-icing chemicals to an aircraft after deicing is not eliminated by the
utilization of the INFRATEK(Registered) system.
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the congestion and holdover problems in a number of ways, including the
construction of centralized remote deicing facilities removed from gate
activity.
A number of glycol spray truck manufacturers are reviewing other forms of
combined glycol and forced air, or hot forced air systems. To date, no air only
or combined air/glycol systems are in commercial operation or approved by the
FAA.
Intellectual Property
The Company was issued Patent #5,4178,389 by the U.S. Patent and Trademark
Office on May 23, 1995. The Patent was re-issued on December 28, 1999 as Patent
#36468. The Patent covers two aspects of the proprietary INFRATEK(Registered)
system:
(i) generating and focusing specific electromagnetic wavelengths of
radiant energy on a target surface; and
(ii) creating an increased component of radiant energy through natural or
propane gas.
The Company was issued Trademark #2,072,371 for "Infratek" on June 17,
1997.
Material Contracts
The Boeing Investment Agreement and Boeing Financing Agreement
The Boeing Investment Agreement
On June 30, 1999, the Company entered into an agreement with Boeing
pursuant to which Boeing (1) purchased 2,292,260 shares of common stock of the
Company ("Shares") for $2,330,243; (2) was granted the option to purchase
653,145 Shares at a price of Cdn. $1.35(3) per Share; and (3) was granted the
right of first refusal to provide financing on a case
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(3) The following table sets forth the exchange rates for one Canadian
("Cdn.") dollar, expressed in terms of one U.S. dollar, for the past five years.
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by case basis to the Company for construction of INFRATEK(Registered) systems
(the "Boeing Investment Agreement"). The Boeing Investment Agreement, among
other things, grants Boeing (1) proportionate representation on the Company's
board of directors and (2) pre-emptive rights and anti-dilution protection to
enable Boeing to maintain its proportionate equity interest in the Company
should it elect to do so.
The Boeing Financing Agreement
The Company entered into an agreement with Boeing dated June 24, 1999 (the
"Boeing Financing Agreement") in connection with entering into the Boeing
Investment Agreement. The Boeing Financing Agreement provides that Boeing will
provide financing for the construction of up to four (4) INFRATEK(Registered)
systems to an aggregate of $10 million. The Boeing Financing Agreement provides
that upon the construction of an INFRATEK(Registered) system by the Company, the
Company will sell the system to Boeing, which contemporaneously will lease the
system to the Company. The lease term will be seven (7) years. The rent payable
pursuant to the lease will be equal to the sum of (i) 1.432% of the equipment
cost, and (ii) 10% of the monthly deicing revenue from such system. The Company
will be responsible for maintaining insurance and all costs associated with the
systems' operations. The Company will have the option to purchase each
INFRATEK(Registered) system at fair market value, not to exceed
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AVERAGE LOW HIGH YEAR END
1995 .7305 .7023 - .7527 .7323
1996 .7332 .7140 - .7472 .7301
1997 .7286 .7145 - .7513 .7233
1998 .6742 .6490 - .7020 .6521
1999 .6744 .6535 - .6944 .6944
The exchange rates are based upon 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. At February 15, 2000, one Canadian dollar,
as quoted by Telerate and other sources at 4 P.M. Eastern Time for New York
foreign exchange selling rates (for bank transactions of at least $1,000,000),
equaled $.6871 in U.S. dollars. (Source: The Wall Street Journal.)
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37.5% of its original cost, at the expiration of the lease.
The Company sold the Newark Facility to an affiliate of Boeing, MDFC, on
December 20, 1999 for $3,383,700. Contemporaneously with the sale, the Company
leased back the Newark Facility for a period of eight years at a monthly rental
of approximately $49,000 plus 10% of the monthly deicing revenue.
The Continental Agreement
On September 9, 1999, RAS entered into an agreement with Continental for,
among other things, RAS to build an INFRATEK(Registered) system (the
"Continental Agreement") at a site controlled by Continental at Newark
International Airport. This installation, the Newark Facility, was completed on
December 20, 1999.
The Continental Agreement provides that Continental will (1) operate the
Newark Facility, (2) pay for all operating costs, (3) pay RAS a fee (in
accordance with an approved schedule of fees) for use of the
INFRATEK(Registered) system, and (4) share equally in all net revenues generated
for advertising sold to third parties, either on the inside or outside of the
Newark Facility. RAS is responsible for costs of all future capital repairs.
The Continental Agreement also grants Continental the option to purchase
the Newark Facility after May 1, 2000, and before the later of (i) May 1, 2002
or 30 days after the Newark Facility is completed. The purchase option price
ranges from $3,322,793 on May 1, 2000 to $2,815,238 on May 1, 2002. If
Continental exercises the purchase option, Continental will pay RAS $150 for
each deicing treatment of a non-Continental aircraft and $75 for each deicing
treatment of a Continental aircraft.
The Lufthansa Agreement
On May 10, 1999, RAS entered into a contract with Lufthansa Engineering
and Operational Services Gmbh ("Lufthansa") for Lufthansa, on a non-exclusive
basis, to provide the installation, sale, maintenance and service of
INFRATEK(Registered) systems in Europe and Scandinavia. Lufthansa was granted a
right of first refusal, on a project by project basis, for the installation,
maintenance and service of INFRATEK(Registered) systems in these areas. RAS is
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obligated to pay Lufthansa 10,000 D.M.(4) per year regardless of whether sales
are made. If a sale is made by Lufthansa, RAS is obligated to pay a 5%
commission on each sale. RAS has the right to cancel the contract after December
31, 2002 if Lufthansa has not sold a minium of two systems by that date. If not
canceled, the Lufthansa contract will automatically renew for one (1) year
periods beginning December 31, 2002, unless terminated by either party.
Corporate Development
REC was incorporated under the laws of Ontario, Canada on October 21, 1994
as a private company. On February 21, 1996, it was continued as a Canadian
federal corporation and amalgamated with Northern Atlas Inc. ("Northern Atlas"),
an inactive, publicly held Canadian corporation.
Pursuant to the amalgamation, shareholders of Northern Atlas received one
(1) share in the amalgamated company for every four (4) shares held of Northern
Atlas; REC shareholders received two (2) shares in the amalgamated company (now
REC) for each share held in their company. The amalgamation was approved by the
Ontario Securities Commission and the shareholders of both companies.
Immediately after the amalgamation, there were 6,461,823 common shares
("Shares") of REC outstanding, approximately 96% of which were held by the
shareholders of REC prior to the amalgamation.
REC has one subsidiary, RAS, a New York corporation, incorporated on
November 5, 1992, through which it conducts all of its operations. RAS changed
its name from Process Technologies, Inc. effective March 29, 1999. The Company's
website is www.radiantenergycorp.com. The Company has seven employees.
Enforceability of Certain Civil Liabilities
The enforcement by investors of civil liabilities under the United States
federal securities laws may be adversely affected by the fact that REC is
organized under the laws of Canada, and that some of REC officers and directors
are neither citizens nor residents of the
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(4) At February 15, 2000, one (1) Deutsche Mark (D.M.) equaled $.5016.
(Source: Wall Street Journal.)
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United States. There can be no assurance that (i) REC's U.S. shareholders will
be able to effect service of process within the United States upon such persons,
(ii) REC's U.S. shareholders will be able to enforce, in United States courts,
judgments against such persons obtained in such courts predicated upon the civil
liability provisions of United States federal securities laws, (iii) appropriate
foreign courts would enforce judgments of United States courts obtained in
actions against such persons predicated upon the civil liability provisions of
the federal securities laws, and (iv) the appropriate foreign courts would
enforce, in original actions, liabilities against such persons predicated solely
upon the United States federal securities laws.
Risk Factors and Investment Considerations
Investment in REC's shares of common stock ("Shares") is speculative and
subject to many substantial risks.
1. Dependence Upon Relationships With Boeing and Continental. The Company
is dependent upon working relationships it has established, and agreements it
has entered into, with Boeing and Continental. These relationships and
agreements have provided the Company with investment capital, operating
expertise and marketing assistance.
The Company would be adversely and materially affected in the event that
either of these companies fails to perform its obligations under its respective
agreements or the agreements are cancelled, or the respective relationships
deteriorate.
2. The Company's Marketing Plan May Need to be Modified. As a relatively
young company introducing a new technology, the Company will be regularly
monitoring and reviewing its marketing plan in order to make appropriate
modifications to it based upon feedback from the market.
The Company presently plans to market its technology by (a) operating DSCs
in conjunction with airline industry partners, and (b) selling deicing systems.
There can be no assurance that this marketing plan will be effective or that
management will be able to formulate an alternative marketing plan which will be
effective. If the Company is unable to execute its current marketing plan or
modify it, if necessary, the Company will be materially and adversely affected.
3. Resistance of Airline Industry to the Company's Technology. There may
be
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substantial resistance by the airline industry to adopt the Company's
INFRATEK(Registered) technology. Such resistance could be caused by any one or
more of the following factors: (a) uncertainty of effectiveness, safety and cost
of the INFRATEK(Registered) system, (b) additional capital expenditures required
to implement INFRATEK(Registered) deicing technology, (c) concerns about general
liability issues respecting INFRATEK(Registered) deicing technology, (d)
substantial existing investments in traditional chemical deicing infrastructure
and methods, and (e) substantial investment in glycol containment systems, which
will continue to be required (for anti-icing) with the INFRATEK(Registered)
system. If the Company is unable to successfully overcome any such resistance,
the Company will be materially and adversely affected.
4. Environmental Issues and Liabilities. Although the Company's
INFRATEK(Registered) deicing system does not use hazardous chemicals for
deicing, hazardous deicing chemicals are regularly used after the
INFRATEK(Registered) system to prevent new ice build-up. Accordingly, the
Company's operations could be affected by environmental issues and liabilities
encountered by the traditional chemical deicing industry. Some of these issues
involve (a) worker safety, (b) protection of the environment, (c) construction
of facilities to collect, contain and dispose of the chemicals, and (d)
compliance with governmental regulations. The failure of the Company to
effectively address and resolve such issues as they are anticipated or arise
could have a material, adverse affect on the business.
5. Substantial Debt and Lease Obligations. The Company presently has
substantial debt obligations to holders of debentures issued in 1999,
substantial lease obligations to an affiliate of Boeing, and minimal revenues
from operations. If the Company is unable to retire or restructure this debt
obligation when it becomes due or satisfy its lease obligations, the Company
will be materially and adversely affected.
6. The Company's Business is Dependent Upon the Weather. Demand for
deicing services only exists when weather conditions of frost, freezing rain,
sleet and snow are present. Accordingly, the Company's business is cyclical,
being linked to the seasons and weather patterns. Since the Company's initial
market focus is North America, management believes that the peak demand for its
services will be approximately six (6) months long from approximately November 1
- - April 30. If North America experiences unseasonably mild weather, there will
be reduced demand for deicing in general and reduced demand for the Company's
INFRATEK(Registered) system, in particular. Unfavorable weather would have a
materially adverse affect on the Company.
7. Sufficiency of Liability Insurance. The Company presently has
$100,000,000 in general liability coverage. In addition, Continental maintains
general liability coverage of
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$100,000,000 which only covers the Company with respect to operations with
Continental. There can be no assurance that these insurance policies are
adequate for the Company's operations or that they will be maintained. If claims
are made against the Company for losses allegedly incurred as a result of the
Company's technology or operations and insurance coverage is not in effect or
adequate, the Company would be materially and adversely affected.
8. Additional Technical Development of the INFRATEK(Registered) Technology
May be Required. The Company is considering making certain modifications to the
INFRATEK(Registered) system in order to increase its efficiency and lower
operating costs. Presently, the most important change being considered by
management involves the integration of a system of air blowers into the process
which would remove accumulated, loose snow prior to applying the infrared energy
from the EPUs. There can be no assurance that the Company will be able to
develop and integrate an air blower system into the INFRATEK(Registered) system
that will increase the system, efficiency or result in reduced operating costs
or that any other desirable or necessary modifications can be made cost
effectively, or at all. In such event, the Company could be materially and
adversely affected.
9. Additional Financing Requirements and Access to Capital. The Company
anticipates that it may be necessary to raise substantial additional funds in
order to pursue its business. There can be no assurance that any funds will be
available on acceptable terms, or at all.
10. New Business; Continued Dependence on Securing Additional Financing;
Shareholder Dilution. The Company is subject to all of the risks attendant to
young business ventures including, without limitation, raising capital,
acquiring or developing complementary services or technologies which can be
marketed as intended, entering into strategic relationships with other
companies, obtaining necessary personnel, establishing and/or penetrating
markets for such services, and achieving profitable operations, of which there
can be no assurance. Investors should not purchase any Shares unless they are
prepared, and can afford, to lose their entire investment. As a young business
having low sales and revenues, management anticipates that the Company will be
dependent over the foreseeable future upon securing additional financing, of
which there can be no assurance. In order to obtain additional financing, if it
is even available, it is likely that the Company will sell additional Shares or
financial instruments which are exchangeable or convertible into Shares,
resulting in substantial dilution to all shareholders. In order to provide
incentives to current employees and offer attractive compensation packages to
prospective employees and consultants, the Company intends to continue to offer
and issue options to purchase Shares and/or rights,
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exchangeable or convertible into Shares; the exercise of such options and/or
conversion of such other exchangeable or convertible rights into Shares could
result in substantial dilution to all shareholders.
11. Competitive Disadvantage of Company. The Company operates in a highly
competitive environment, and against other corporations, many of which have
substantially greater financial, marketing and other material resources. These
other companies, with substantial capital investment and financial stakes in
traditional chemical deicing methods, have a strong incentive to vigorously
compete with the Company in order to maintain market control and dominance.
Accordingly, the Company is at a substantial competitive disadvantage with
respect to these other companies.
12. Dependence Upon and Retention of Key Personnel. The Company is heavily
dependent upon its senior management team. The continued availability of this
team will be a major contributing factor to the Company's future growth. If any
member of senior management becomes unavailable for any reason, the Company
would be materially and adversely affected. The Company does not maintain
executive life insurance on any member of its senior management team.
The Company's ability to achieve its revenue and operating performance
objectives will depend on its ability to attract and retain qualified and highly
skilled sales, consulting, marketing and management personnel. It vies for all
of its personnel with other companies, where competition for such personnel is
intense and is expected to remain so for the foreseeable future. Failure to
retain and expand its key employees could adversely affect the Company's
business and operating results.
13. Volatility of Stock Price and Absence of Dividends. The market price
of the Shares has been and is likely to be highly volatile. Factors such as a
termination of a bride strategic alliances, announcements of technological
innovations by others or new services offered by the Company or its competitors,
governmental regulatory actions, developments concerning proprietary rights of
the Company or its competitors (including litigation), period-to-period
fluctuations in the Company's operating results, changes in estimates of the
Company's performance by securities analysts, and other factors not within the
control of the Company could have a significant adverse impact on the market
price of the Shares. The Company has never paid cash dividends on its Shares and
does not anticipate paying any cash dividends in the foreseeable future.
17
<PAGE>
14. Limited Trading Market. The Shares trade over-the-counter in Canada
with bid and ask price quotes on the Canadian Dealing Network Inc. There can be
no assurance that an active public market will exist at any time or can be
sustained. Making a market involves maintaining bid and asked quotations for the
Shares and being available as principal to effect transactions in reasonable
quantities at those quoted prices, subject to various securities laws and other
regulatory requirements. A public trading market having the desired
characteristics of depth, liquidity and orderliness depends upon the presence in
the marketplace of willing buyers and sellers of the Shares at any given time,
which presence is dependent upon the individual decisions of investors over
which the Company has no control. Accordingly, an investor may be unable to sell
his or her Shares when he or she wishes to do so, if at all.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Quarter in Review - January 31, 2000
Operational Highlights:
In the first quarter ended January 31, 2000, the Company installed an
INFRATEK(Registered) System 2000 at the Newark International Airport. On
December 20, 1999 the system was turned over to the operator, Continental, to
commence training and to start the process of the integration of the system into
their deicing operations. Throughout the month of January 2000, while learning
how to use the system, Continental treated over 20 aircraft. By the end of
January, the training and integration phase was substantially completed. The
first day of integrated operations occurred on February 3, 2000 when over 20
aircraft were treated.
Revenues
In the quarter, RAS received $3,383,700 from the sale of the Infratek 2000
System installed at Newark International Airport to MDFC. RAS entered into an
agreement to lease the facility back from MDFC. The lease provides for monthly
rental payments of approximately $49,000 per month for 84 months commencing
January 20, 2000 plus 10% of deicing revenues, and a buy-out option equal to
37.5% of the sales price. The cost of the Newark Facility was $2,792,689. The
sale price and cost of sales were recorded on the income statement.
Although the Newark Facility was not in full operation in the quarter,
revenues of $8,160 were generated. The Company also received $14,400 in
maintenance revenue from
18
<PAGE>
the INFRATEK(Registered) system at Rhinelander Airport in Wisconsin.
Interest income in the quarter was $20,876 in 2000 compared to nil in
1999. The Company received interest income on its daily cash bank balance and
from low risk cash deposits.
Marketing expenses:
In the quarter, the Company continued to expand it's marketing efforts.
Marketing expenses in the quarter were $150,170 compared to $42,089 in 1999. For
the quarter ended January 1999, the Company incurred costs for only one sales
person for one month and limited expenditures on general market activities such
as travel and trade shows. In the quarter ended January 31, 2000, the Company
had five people in the sales department and incurred costs for new sales
material and travel.
General and Administrative:
General and administrative expenses for the quarter increased to $278,781
from $106,966 in 1999. Staffing levels remained constant between 2000 and 1999.
The Company incurred higher legal and accounting expenses related to the
proposed registration of it Shares with the Securities and Exchange Commission.
In 2000, costs were incurred for consultants related to the receipt of financing
from Boeing and consulting fees related to investor relations.
Research and product development:
Research and development costs remained constant. The Company continued
research on optional systems that may be incorporated into the system.
Depreciation and amortization:
Depreciation and amortization in the quarter increased to $66,070 from
$54,778 in 1999. The increase resulted from amortization of the costs to issue
the 7% debenture.
Interest expense:
Interest expense in the quarter increased to $11,045 from $5,975 in 1999.
The increase resulted from the issuance of the 7% debenture in May 1999.
Interest expense in 1999
19
<PAGE>
related to the 6% debentures which were converted in October 1999 and the 9%
secured loan that was retired in May 1999.
Liquidity and Capital Resources
Conversion of 7% debentures
The Company received requests in the quarter to convert 7% convertible
debentures with a face value Cdn. $257,100 ($161,273 net of expenses) into
223,573 Shares. From the date of issuance of the 7% debentures to January 31,
2000, 7% debentures with a face value of Cdn. $1,050,900 were converted into to
913,857 Shares. As at January 31, 2000, the remaining 7% debentures had a face
value of Cdn. $830,300 and were convertible at a rate of Cdn. $1.15 into 728,926
Shares.
Exercise of Incentive Stock Options
In the quarter, Shares issued pursuant to the exercise of incentive stock
options continued to be a source of liquidity for the Company. The Company
issued 438,750 Shares to employees, directors and consultants pursuant to the
exercise of these incentive stock options. The Shares were issued at prices
between Cdn. $1.30 and Cdn. $3.45 per Share for total gross proceeds of Cdn.
$488,054. As at January 31, 2000, 777,633 incentive stock options remained
outstanding; the exercise prices range from Cdn. $1.15 to Cdn. $6.00 for a total
potential gross proceeds of $1,650,579 (Cdn. $2,391,524).
Exercise of Stock Options Pursuant to the Boeing Investment Agreement
The Company and Boeing entered into an agreement on June 30, 1999 for the
sale of 2,292,260 Shares and grant of 653,145 options to purchase Shares. The
options are exercisable from time to time over five years, and entitle Boeing to
purchase up to 653,145 Shares at $0.91 (Cdn. $1.35 per Share). The options
become effective each quarter based on the number of Shares issued pursuant to
theE exercise of incentive stock options and through the conversion of
debentures. On December 31, 1999, 159,841 options became eligible to be
exercised by Boeing. In January 2000, Boeing exercised all options eligible to
be exercised.
In summary, the Share capital changed by the following transactions:
20
<PAGE>
SHARES $
ISSUED
Outstanding at October 31, 1999 12,027,934 8,721,039
- ------------------------------------------------------- ---------- ----------
Issued upon conversion of 7% debentures - net of costs 223,573 161,273
Issued upon exercise of stock options 438,750 488,054
Issued upon exercise of stock options to Boeing 159,841 148,930
Outstanding at January 31, 2000 12,850,098 9,519,2960
Year in Review - October 31, 1999
Operational Highlights:
The Company made significant gains in the introduction of the
INFRATEK(Registered) technology to the market. Highlights for the year were:
o Hired sales and marketing staff from within the aviation industry.
o Signed a strategic alliance with Lufthansa for European
distribution.
o Entered into an agreement with Continental for the establishment of
a DSC at Newark International Airport.
Market development
During the period, the Company commenced the implementation of its
strategic plan to introduce INFRATEK(Registered) technology to the aviation
market place. The Company developed a dual marketing approach, as follows:
1) Sell INFRATEK(Registered) systems and charge a user license fee per
deicing.
2) Provide deicing services in a Company owned DSC.
To enhance recognition within the industry, the name of the Company's
wholly owned subsidiary was changed from Process Technologies, Inc. to Radiant
Aviation Services, Inc. Senior representatives of the Company met with key
personnel from several major airlines based in the United States, and the
Company attended major trade shows in North America and Europe. Other marketing
activities included attendance at aviation conferences, print
21
<PAGE>
advertising in aviation trade publications, multi-media video and CD-ROM
presentations, brochures and promotion of a website (www.radiantenergycorp.com).
During the period, the Company expanded it's sales and marketing
personnel. In January 1999, Mr. Robert Maier was appointed Vice President of
Sales and Service. Mr. Maier brought to Radiant 30 years experience in
operational and technical marketing roles at American Airlines, Inc., and its
subsidiary, AMR Services Inc. In his most recent position as Assistant Vice
President - Technical Sales at AMR Services Inc., he was responsible for all
technical sales and the introduction of new technology to the aviation industry.
Lufthansa Agreement for Europe
In May 1999, the Company announced that it entered into an agreement with
Lufthansa to use its best efforts to promote the installation, sale, maintenance
and service of INFRATEK(Registered) aircraft pre-flight deicing systems in
Europe and Scandinavia.
Lufthansa has decades of experience in the de-icing of aircraft and
specializes in providing professional solutions pertaining to all aspects of the
ground handling of aircraft. Its services include aircraft towing and pushback,
the procurement, maintenance and overhaul of ground-support equipment, and the
ground transportation of airline passengers and crews.
Installation at Newark International Airport
For over a year, management held discussions with officers and employees
of Continental in connection with the installation of an INFRATEK(Registered)
System at Newark International Airport. In September 1999, the Company signed an
agreement to install the an INFRATEK(Registered) Deicing System as part of
Continental's global gateway construction project at its major hub at the Newark
International Airport.
Revenues
Revenues were generated from the maintenance agreement with the
Rhinelander Airport in Wisconsin. The maintenance agreement is in effect until
March 2000. In 1999 no new systems were sold. The Company shares in revenues
generated from the Buffalo Airport DSC with Prior Aviation, the operator of the
facility. No deicing revenues were generated for the Company during the year.
Interest income increased to $37,471 from $4,162 in 1998. The increase
resulted from
22
<PAGE>
a higher average cash balance than in 1998.
Marketing expenses:
Marketing expenses increased to $433,192 from virtually no expenditures in
1998. Prior to 1999, the Company was engaged primarily in product development
and market research. In the year the Company increased it's marketing expenses
through the addition of sales and marketing personnel, expenditures on sales
literature, print advertising and attendance at trade shows.
General and Administrative:
General and administrative expenses increased to $618,412 from $175,323 in
1998. In 1998, in order to reflect the nature of the operations of the Company,
all salaries and general administrative expenses were booked to research and
product development. In 1998, the administrative amounts reported on the
financial statements related to professional fees and corporate administrative
service fees.
Research and product development
Research and product development expenses were significantly reduced to
reflect the change from product development and market research to an early
stage operational company. The expenses in 1999 reflect the salaries and
benefits of those employees primarily engaged in product development ($161,087)
and other costs related to product research and development ($28,323).
Depreciation and amortization
Depreciation and amortization was reduced to $128,843 from $156,746 in
1998. As at October 31, 1999, as a result of the Company's increased economic
activity in the U.S., high level of sales and significance of U.S. dollar
denominated assets to operations, the U.S. dollar has become the functional
currency of the Company's operations. Effective the same date, the U.S. dollar
was adopted as the reporting currency. The conversion from the Canadian dollar
to U.S. dollar as the functional currency resulted in an adjustment to
depreciation and amortization. Had the adjustment not been made, the
depreciation and amortization for the year would have been slightly higher in
1999 than 1998.
Interest expense
23
<PAGE>
Interest expense increased to $40,606 from $27,064 in 1998. The increase
resulted from the issuance of the 7% convertible debenture in May 1999 and an
increase in the 9% secured loans.
Income Tax
At October 31, 1999, the Company has Canadian non-capital losses of
approximately $427,000 and net operating losses of approximately $5,316,000.
These losses may be carried forward to reduce taxable income in future years.
The significant components of the Company's deferred tax liabilities and
assets are as follows:
October 31, 1999 October 31, 1998
$ $
Deferred tax assets
Income tax losses available for carryforward 2,680,000 2,020,000
Less valuation allowance (2,680,000) (2,020,000)
Net deferred tax assets -- --
Deferred Tax liabilities
Temporary differences comprehensive 4,402 8,118
income
Total deferred tax liabilities 4,402 8,118
If not utilized, the Canadian losses will expire as follows:
$U.S.
2002 121,000
2003 17,000
2005 156,000
24
<PAGE>
2006 133,000
If not utilized, the U.S. losses will expire as follows:
2009 500,000
2010 1,020,000
2011 843,000
2012 1,686,000
2013 1,267,000
In addition, the Company has approximately $66,000 costs relating to the
issue of Shares, which are deductible over the next three years. The potential
income tax benefits relating to these accumulated losses have not been recorded
in the Company's accounts.
Liquidity and Capital Resources
The Company raised funds adequate to meet its requirements. Key
transactions and events were as follows:
o 4,472,271 warrants expired.
o Rights offering for a 7% debenture that raised $1,277,985 of gross
proceeds (Cdn. $1,889,300) was completed.
o Loans from directors equal to $305,571 were received; and $286,054
of such loans from directors were converted into Shares.
o Private placement of Shares to Boeing for $2,223,712 (net of
expenses) was completed.
o Credit facility for $10,000,000 for the construction of DSCs was
established.
o $617,530 of 6% and 7% debentures outstanding were converted into
Shares.
25
<PAGE>
Expiry of warrants
An aggregate of 4,472,271 warrants issued by the Company expired on March
1, 1999, unexercised. Each warrant entitled the holder to purchase one Share for
Cdn. $2.50. The Company previously issued 4,681,837 warrants on October 31,
1995, of which only 209,566 were exercised.
Completed rights offering for 7% debentures
In May 1999, the Company raised approximately $1.28 million in a rights
offering of 7% debentures. The proceeds were used to retire existing
indebtedness and for working capital. The debentures mature on May 31, 2004,
bear interest at an annual rate of 7% payable semi-annually, and are convertible
at the option of the holders at any time at a conversion price equal to Cdn.
$1.15 per Share if converted prior to May 31, 2000 or Cdn. $1.45 per Share
thereafter. The debentures are guaranteed by RAS, and are redeemable at the
option of the Company on or after the first anniversary of the date of issue
provided that the weighted average price of the Shares, for a specified period
of time, equals or exceeds $2.50 per Share.
Director's loans
$305,571 in additional loans from directors and others associated with
directors was received. In May and June 1999, all outstanding loans from these
persons in the aggregate amount of $504,257 were retired. Of the total
outstanding, $286,054 was converted into 366,647 Shares at Cdn. $1.15 per Share,
and the remaining loans were repaid from the proceeds of the 7% debentures.
Private placement of Shares with an officer of the Company
In April 1999, an officer purchased 250,000 Shares in a private placement
for total proceeds of Cdn. $305,280.
26
<PAGE>
The Boeing Investment Agreement
The Company and Boeing entered into an agreement dated June 30, 1999 for
the sale of 2,292,260 Shares and grant of 653,145 options to Boeing to purchase
Shares for an aggregate purchase price of approximately $2.3 million. The
options are exercisable from time to time over five years, and entitle Boeing to
purchase up to 653,145 Shares at $0.91 (Cdn. $1.35 per Share). In addition,
Boeing was granted a pre-emptive right to maintain its proportionate equity
interest in the Company.
The Boeing Financing Agreement
In a related transaction, on June 24, 1999 RAS and Boeing entered into an
agreement pursuant to which Boeing will provide up to $10 million in financing
for the construction of DSCs. Boeing also has the right to provide lease
financing to qualified customers of the Company.
Redemption and Conversion of 6% Debentures and 7% Debentures
In September, all outstanding 6% debentures were converted into Shares at
a rate of Cdn. $1.25 per Share. Under the terms of the 6% debenture offering
issue, the Company granted the option to purchase up to $84,626 of the
debentures to the placement agent. In May 1999, the agent exercised its option
to purchase $52,313 worth of the debentures. In June, the placement agent
converted its 6% debentures into Shares.
From the date of issuance on May 28, 1999 to October 31, 1999, 7%
debentures with a face value of $486,170 (Cdn. $793,800) were converted into
690,284 Shares at Cdn. $1.15 per Share.
In summary the Share capital changed by the following transactions:
SHARES
ISSUED $
Outstanding at October 31, 1998 8,105,657 5,243,320
Issued upon conversion of 6% debentures - net of costs 161,920 131,360
Issued upon conversion of 7% debentures - net of costs 690,284 486,170
27
<PAGE>
SHARES
ISSUED $
Issued upon conversion of 9% secured loans 366,647 286,054
Issued upon exercise of stock options 54,500 48,123
Issued upon exercise of compensation options to agents 80,000 74,354
Issued for officer for cash 276,666 227,945
Issued to Boeing - net of costs 2,292,260 2,223,712
---------- ----------
Outstanding at October 31, 1999 12,027,934 8,721,039
========== ==========
Year in review - October 31, 1998
Operational Highlights
Revenues
The Company realized it's first revenue from the sale of a system to
Rhinelander Airport in Wisconsin and from the DSC at the Buffalo Airport.
In February 1998, the Company completed the construction of the system at
Rhinelander Airport in approximately thirty (30) working days. The revenues from
the sale to Rhinelander Airport were $949,610 and the direct contribution margin
was 34.1%.
During the year, the Company completed its first full season of operations
at the Buffalo Airport. Prior Aviation Services used the INFRATEK(Registered)
system 233 times to deice 29 different types of aircraft. The various aircraft
deiced included Saab 2000, Bombardier Dash 8, T-38 military jet, Gulfstream G-3,
military helicopters, and a variety of corporate aircraft.
Operating expenses
Operating costs, other than depreciation, increased to $1,071,997 from
$945,364 in 1997. The increase was primarily attributed to the re-acquisition of
the Canadian marketing rights for Cdn. $150,000.
Research and Product Development Cost
28
<PAGE>
Product development and market research costs increased in the year to
$869,610 from $713,652 in 1977. The increase in costs mainly reflect efforts to
increase product awareness through the addition of sales agents and through the
increase of other market development expenses, such as attendance at trade
shows.
Patents Rights Settlement
The Company incurred an expense of $384,315 in settlement of a lawsuit
involving the Company's ownership rights to the patent for the
INFRATEK(Registered) technology.
Depreciation and Amortization
Depreciation taken on the DSC at the Buffalo Airport resulted in an
increase in depreciation from $69,613 in 1997 to $156,746 in 1998.
Liquidity and Capital Resources
The operations were funded by revenue generated in the year ($344,008),
the private placement of a 9% loan from directors and affiliates ($198,686), the
issuance of Shares ($252,683), and cash on hand at the beginning of the year
($348,800).
During the year 37,648 warrants at Cdn. $2.50 each were exercised, 74,950
incentive stock options were exercised for a total of $111,544. During the year,
6% debentures with a face value of $547,660 were converted into 872,600 Shares,
leaving a debenture balance at October 31, 1998 equal to $85,748.
Item 3. Description of Property.
The Company leases its 6,000 square foot corporate offices in Orchard
Park, New York. The lease payment is $44,000; the lease expires May 15, 2001.
The Company leases the Newark Facility (which houses the Company's first
major commercial installation of an INFRATEK(Registered) system) from MDFC, an
affiliate of Boeing. The lease term is for eight years; the monthly rental is
approximately $49,000 plus ten (10%) percent of the monthly deicing revenue. See
"Item 1. Description of Business", "Material Contracts."
29
<PAGE>
Item 4. Security Ownership of Certain Beneficial Owners and Management.
At January 20, 2000, there were 12,664,658 Shares outstanding.
(a) At such date, the following persons are believed to beneficially own
5% or more of the outstanding class:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature
Type of Class Beneficial Owner of Beneficial Owner Percent of Class
<S> <C> <C> <C>
Shares Boeing Capital 2,452,101(1)(2) 19.36%
Services Corporation
4060 Lakewood Blvd
6th Fl.
Long Beach, CA
90808 1700
Shares David Williams 797,500(1)(3) 5.36%
90 Roxborough St. E.
Toronto, Ontario
M4N 1V8
</TABLE>
At such date, CDS & Co. of Toronto, Canada was the registered holder of
5,091,370 Shares or 34.20% of the outstanding class; and CEDE & CO., with
offices in New York, New York, was the registered holder of 4,092,814 Shares, or
27.56% of the outstanding class. The beneficial owners of the Shares held by CDS
& CO. and CEDE & Co. are not known.
Notes:
(1) On June 30, 1999 Boeing and the Company entered into the Boeing
Investment Agreement pursuant to which Boeing purchased 2,292,260 Shares and was
granted options to purchase a total of 653,145 Shares at a price of Cdn.$1.35
per Share. The options are exercisable within 30 days (the "Exercise Period")
from the end of each fiscal quarter of the Company on the basis of one option
for each four Shares issued by the Company during the
30
<PAGE>
preceding fiscal quarter. The options are exercisable only to the extent that
the Company has issued additional Shares within that preceding fiscal quarter
upon the conversion or exercise of other convertible or exchangeable securities
of the Company outstanding as at June 30, 1999. When the Company, as a result of
the exercise of other convertible or exchangeable securities, issues Shares and
Boeing elects not to exercise that portion of the options which it is entitled
to exercise, that portion of the options which are not so exercised within the
Exercise Period will terminate at the end of that Exercise Period. All options
granted to Boeing expire on June 30, 2004. As at January 20, 2000, Boeing had
exercised all of the options it was entitled to exercise during the first
Exercise Period and, pursuant thereto, an additional 159,841 Shares were issued
to Boeing, for a total of 2,452,101 Shares. In addition, the Company has granted
to Boeing a pre-emptive right to acquire additional securities of the Company to
permit it to maintain its proportionate interest in the equity securities of the
Company. The pre-emptive right expires on June 30, 2001.
(2) On June 30, 1999, Boeing, Charles John Chew ("Chew"), Timothy P. Seel
("Seel"), Kathleen Seel (the spouse of Seel), David A. Williams ("Williams") and
Roxborough Holdings Limited ("Roxborough") entered into a shareholders agreement
(the "Shareholders Agreement"). Chew, Seel, Williams and Roxborough, agreed to
vote in favor of the election of Boeing's designated nominees to the board of
directors of the Company. These shareholders also agreed to recommend to the
board of directors of the Company that Boeing be permitted to increase to 25%
its proportionate interest in outstanding Shares if and when the Company intends
to issue additional Shares. The Shareholders Agreement terminates on or before
June 30, 2001.
(3) The Shares owned by Mr. Williams are held in a retirement savings plan
registered under the Income Tax Act (Canada) of which Mr. Williams is the
beneficiary. Mr. Williams has been granted options to acquire 122,600 Shares,
all of which are exercisable within 60 days of the date hereof. In addition, Mr.
Williams holds, directly or indirectly, 7% debentures in the total principal
amount of Cdn. $227,800 that are convertible into a total of 198,086 Shares at
any time up to May 31, 2000 and into a smaller number of Shares thereafter until
May 31, 2004.
(b) At such date, management beneficially owned Shares as follows:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Beneficial Owner Title of Beneficial Ownership Percent of
Class Class
<S> <C> <C> <C>
Charles John Chew (Director) Shares 518,000 (Direct) 3.48%
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of
Beneficial Owner Title of Beneficial Ownership Class
<S> <C> <C> <C>
113 Holiview Road
Ellicotville, New York 14731
Timothy Seel Shares 521,819 (Direct) 3.51%
(Director and Vice President)
139 Zimmerman Blvd.
Tonawanda, New York 14223
Robert Metcalfe (Director) Shares Nil 0.13%
84 Garmley Avenue
Toronto, Ontario M4V 1Z1
John Marsh (Director) Shares 120,273 (Direct) 0.81%
R.R.2 Cedar Crest
Port Colborne, Ontario L3K 5V4
David Williams Shares 797,500(5) 5.36%(5)
(Director and Chairman)
90 Roxborough St. E.
Toronto, Ontario M4N 1V8
Greg O'Hara (Director) Shares 292,640(6) 1.97%(6)
14 Valley View
Toronto, Ontario M4T 1L2
Michael Lupynec (Director) Shares 25,000 (Direct) 0.17%(7)
375 Parkside Drive
Toronto, Ontario M6R 2Z6
Thomas Motherway (Director) Shares 2,452,101(8) 19.36%
10482 Broadview Place
Santa Ana, California 92705
Colin V.F. Digout Shares 26,666(9) 0.18%(9)
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Beneficial Owner Title of Beneficial Ownership Percent of
Class Class
<S> <C> <C> <C>
(C.O.O., C.F.O.and
Secretary - Treasurer)
721 Sugarloaf Street
Port Colborne, Ontario L3K 2R6
Canada
Robert D. Maier Shares 2,000 (Direct) 0.01%(10)
(Vice President of Sales
and Services)
107 Lindsey Lane
Orchard Park, New York 14127
</TABLE>
Notes:
(1) Mr. Chew has been granted options to acquire 26,000 Shares, all of
which are exercisable within 60 days of the date hereof.
(2) Mr. Seel has been granted options to acquire 105,742 Shares, all of
which are exercisable within 60 days of the date hereof.
(3) Mr. Metcalfe has been granted options to acquire 20,000 Shares, all of
which are exercisable within 60 days of the date hereof.
(4) Mr. Marsh has been granted options to acquire 64,875 Shares, all of
which are exercisable within 60 days of the date hereof. In addition, Mr. Marsh
holds 7% debentures in the total principal amount of Cdn. $30,000 that are
convertible into a total of 26,069 Shares at any time up to May 31, 2000 and
into a smaller number of Shares thereafter until May 31, 2004.
(5) The Shares owned by Mr. Williams are held in a retirement savings plan
registered under the Income Tax Act (Canada) of which Mr. Williams is the
beneficiary. Mr. Williams has been granted options to acquire 122,600 Shares,
all of which are exercisable within 60 days of the date hereof. In addition, Mr.
Williams holds, directly or indirectly, 7% debentures in the total principal
amount of Cdn. $227,800 that are convertible
33
<PAGE>
into a total of 198,087 Shares at any time up to May 31, 2000 and into a smaller
number of Shares thereafter until May 31, 2004.
(6) Of the Shares owned by Mr. O'Hara, 140,140 are held by Mr. O'Hara
directly, 10,000 Shares are held by the O'Hara Family Trust, 12,500 Shares are
held by Hara Valley View Investment Inc., a company wholly owned by Mr. O'Hara
and members of his family, and 130,000 Shares are held by Hara Enterprises Ltd.
a company wholly owned by Mr. O'Hara and members of his family. Mr. O'Hara has
been granted options to acquire 155,625 Shares, all of which are exercisable
within 60 days of the date hereof. In addition, Mr. O'Hara holds, directly and
indirectly, 7% debentures in the total principal amount of $124,000 that are
convertible into a total of 107,826 Shares at any time up to May 31, 2000 and
into a smaller number of Shares thereafter until May 31, 2004.
(7) Mr. Lupynec has been granted options to acquire 32,500 Shares, all of
which are exercisable within 60 days of the date hereof. In addition, Mr.
Lupynec holds 7% debentures in the total principal amount of Cdn. $20,000 that
are convertible into a total of 17,391 Shares at any time up to May 31, 2000 and
into a smaller number of Shares thereafter until May 31, 2004.
(8) These Shares are beneficially owned by Boeing. Mr. Motherway is the
Chief Executive Officer of Boeing.
(9) The Shares owned by Mr. Digout are held in a retirement savings plan
registered under the Income Tax Act (Canada) of which Mr. Digout is the
beneficiary. Mr. Digout has been granted options to acquire 45,000 Shares, all
of which are exercisable within 60 days of the date hereof.
(10) Mr. Maier has been granted options to acquire 37,500 Shares, all of
which are exercisable within 60 days of the date hereof. In addition, Mr. Maier
holds 7% debentures in the total principal amount of Cdn. $6,900 that are
convertible into a total of 6,000 Shares at any time up to May 31, 2000 and into
a smaller number of Shares thereafter until May 31, 2004.
(c) There are no arrangements known to management which may result in a
change in control of the Company.
Item 5. Directors and Executive Officers, Promoters and Control Persons.
34
<PAGE>
(a) David A. Williams (58). Mr. Williams has been a member of the board of
directors since February, 1996 and was appointed Chairman of the Board on
January 10, 2000. From 1977 to the present, Mr. Williams has served as President
and portfolio manager for Roxborough Holdings Limited, a private investment
company. From 1969 to 1994, Mr. Williams served in various capacities, including
Chairman of the Board and Chief Executive Officer, with Beutal Goodman, a
securities dealer registered under the Securities Act (Ontario). Mr. Williams
currently serves as a director of several public companies, including Phoenix
Investment Partners, a U.S. based investment management company, Pico Holdings
Inc., a diversified holding company with investments in wholesale water and
storage, real estate and minerals, insurance and investment management, and
Equisure Financial Network Inc., a financial services company.
Colin V.F. Digout (47). Mr. Digout joined the Company in February 1998 as
Chief Financial Officer. In November 1998, Mr. Digout assumed the office of
Chief Operating Officer. Mr. Digout is responsible for the general management of
the Company. From August 1988 to February 1998, Mr. Digout was Vice President of
Finance of Marsh Engineering Limited, a company providing repair and
manufacturing services to the marine, utilities and heavy industries. Mr.
Digout's responsibility included the supervision of group controllers, the
management of banking relationships and the preparation of financial
information. Mr. Digout has been a member of the Institute of Chartered
Accountants of Ontario since 1980.
Timothy P. Seel (43). Mr. Seel is one of the Company's founders and has
served on the board of directors since January 1995. Mr. Seel is also the Vice
President of Engineering and is responsible for all of the Company's engineering
and project coordination activities. Mr. Seel has extensive training and over 20
years experience as an alternative energy resource and fuels combustion
engineer. He has worked extensively with gas approval authorities worldwide and
has established ISO 9000 procedures in various operations. He maintains a
corresponding seat on the Accredited Standards Sub-committee for Gas Fired
Infrared Heaters. Mr. Seel has been involved in a range of new technology
developments in the energy utilization field and is credited as the inventor or
co-inventor on numerous U.S. and foreign patents, including the Company's
INFRATEK(Registered)technology.
Robert D. Maier (54). Mr. Maier joined the Company in January 1999 as Vice
President of Sales and Service. Mr. Maier is responsible for all aspects of the
Company's sales and service activities. Mr. Maier has over 30 years of
experience in aviation management. Mr. Maier has broad experience in aviation
management having held several positions with AMR Services , Inc., a subsidiary
of American Airlines, from 1991 to January
35
<PAGE>
1999. Mr. Maier served as Assistant Vice President Technical Sales & Services
for AMR Services TX from 1997 to 1999 where he was responsible for new business
development and sales for all aviation maintenance services for 260 air
carriers. From 1996 to 1997, Mr. Maier was General Manager at AMR Los Angeles
where he was responsible for the management of international airport operations
including coordinating the handling of baggage within the eight terminal
complex, cargo and passenger operations crew and hotel shuttles and group
equipment maintenance. From 1994 to 1995, Mr. Maier was General Manager at AMR
Hawaii where he was responsible for aircraft maintenance and passenger and ramp
services for contract carriers.
John Charles Chew (64). Mr. Chew is one of the Company's founders and
served as President and Chief Executive Officer from 1994 to 1998 and Chairman
of the Board from 1996 to January 10, 2000. Mr. Chew is now retired from active
participation with the Company.
Michael Lupynec (52). Mr. Lupynec has been a member of the board of
directors since February 1996. Mr. Lupynec practices as a professional engineer
in Ontario, Canada. From 1999 to the present, Mr. Lupynec has served as Chief
Operating Officer of Advantech Solutions Inc., a company involved in software
development for staff and vehicle scheduling in the health care industry. From
1997 to 1999, Mr. Lupynec was an independent engineering consultant. From 1993
to 1997, Mr. Lupynec served as President and Chief Executive Officer of American
Sensors Inc., a manufacturing and distribution company.
John M. Marsh (57). Mr. Marsh has been a member of the board of directors
since February 1996. From 1972 to 1999, Mr. Marsh was a director and President
of Marsh Engineering Limited, a company providing repair and manufacturing
services to the marine, utilities and heavy industries. Mr. Marsh resigned his
positions with that company in 1999. Mr. Marsh is a director of Home Capital
Group, a Toronto Stock Exchange listed company involved primarily in residential
mortgage funding.
Robert J. Metcalfe (59). Mr. Metcalfe has been a member of the board of
directors since February 1996. From January 1998 to the present, Mr. Metcalfe
has served as Executive Advisor of Developments and Legal Counsel of ClubLink
Corporation, a Toronto Stock Exchange listed company involved in the
acquisition, development and operation of best-of-class golf club and related
amenities. From 1997 to 1998, Mr. Metcalfe was Chairman of the Board of Cohesys
Corp., a real estate development company. From 1989 to 1997, Mr. Metcalf was
President and Chief Executive Officer of Armadale Properties Limited and General
Counsel to the Armadale Group of Companies, a privately-held family
36
<PAGE>
enterprise with holdings in, among other things, aviation and charter airline
services. From 1970 to 1980, Mr. Metcalfe was a senior partner with Lang
Michener, a Toronto-based law firm.
Thomas J. Motherway (57). Mr. Motherway has been a member of the board of
directors since August 1999. From 1994 to the present, Mr. Motherway has served
as President and Chief Executive Officer of Boeing Capital Corporation, a
subsidiary of The Boeing Company.
Gregory G. O'Hara (47). Mr. O'Hara has been a member of the board of
directors since February 1996. From 1987 to the present, Mr. O'Hara has served
as President of Hara Enterprises Limited, a privately held investment company.
Item 6. Executive Compensation.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation
Compensation Awards
NAME PRINCIPAL YEAR SALARY SECURITIES
POSITION ($) UNDERLYING
OPTIONS
/SARs
<S> <C> <C> <C> <C>
Colin V. F. Digout Chief Operating 10/31/99 $99,231
Officer and Chief
Financial Officer(5)
Chief Financial 10/31/98 $52,307 64,000
Officer
10/31/97
</TABLE>
- --------
(5) Colin V. F. Digout is also the Company's de facto Chief Executive
Officer. The Company does not have a Chief Executive Officer.
37
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
John Chew Chairman 10/31/99 $ 90,000
President and CEO 10/31/98 $108,056 6,000
President and CEO 10/31/97 $76,500 7,500
Timothy P. Seel Vice President 10/31/99 $97,116 120,000
10/31/98 $92,519 3,738
10/31/97 $76,500 2,004
Robert D. Maier Vice President 10/31/99 $114,808
</TABLE>
Option/SAR Grants in Last Fiscal Year (ended October 31, 1999)
Individual Grants
<TABLE>
(a) (b) (c) (d) (e)
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in Price (Cdn. Expiration
Name Granted (#) Fiscal Year $/Share) Date
<S> <C> <C> <C> <C>
Colin V.F. Digout(6) Nil
Chief Operating Officer
John Chew 6,000 1.29% $3.70 Dec. 21, 2004
Director
Timothy P. Seel 100,000 $1.30 Dec. 18, 2003
Vice President, Director
20,000 $1.30 Jan. 21, 2004
120,000 25.78%
Robert D. Maier 50,000 10.74% $1.80 Dec. 18, 2003
Vice President
</TABLE>
- ----------
(6) Colin V.F. Digout is also the Company's de facto Chief Executive
Officer. The Company does not have a Chief Executive Officer.
38
<PAGE>
Aggregated Options/SAR Grants in Last Fiscal Year and Fiscal Year End (ended
October 31, 1999 Option/SAR Values
Aggregated Exercises (in U.S. Dollars)
<TABLE>
(a) (b) (c) (d) (e)
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options/SARs
Options/SARs at at FY-End ($)
FY-End (#)
Shares
Acquired Value
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Colin V.F. Digout - exercisable Nil Nil 50,000 $10,195
14,000 $9,515
64,000 $19,710
John Chew-exercisable 12,000 $26,025 20,000 $4,076
John Chew-exercisable 6,000 Nil
Timothy P. Seel-exercisable 20,000 $4,078
2,004 $1,975
3,738 $3,811
100,000 $101,951
20,000 $20,390
145,742 $132,205
Robert D. Maier-exercisable 50,000 $33,984
</TABLE>
The Company has entered into employment agreements with C. John Chew,
Colin V.F. Digout, Robert D. Maier, and Timothy P. Seel, all of which obligate
the Company to make certain payments to the employee upon his termination or a
change in control of the Company, as defined in the agreement. All employment
agreements contain
39
<PAGE>
provisions requiring the employee to maintain the confidentiality of Company
information and, upon termination, preventing him from competing with the
Company.
C. John Chew, the Company's Chairman of the Board (until he resigned on
January 10, 2000) and director entered into an employment agreement with the
Company dated October 30, 1998, which provides for an annual salary of $90,000.
His salary terminates in July 2000.
Timothy P. Seel, director and Vice President of Engineering, entered into
an employment agreement with the Company dated November 1, 1999. Mr. Seel's Base
Salary is $100,000. In the event of Mr. Seel's termination for reasons other
than death, incapacity or cause (as defined in the agreement), the Company is
obligated to continue the Base Salary and any benefit arrangements for three (3)
years, and make a lump sum payment equal to the average annual performance
bonus, if any, paid to him prorated for a period of three (3) years.
Robert D. Maier, Vice President of Sales and Service, entered into an
employment agreement with the Company dated November 30, 1998. Mr. Maier's
current Base Salary is $100,000. In the event of Mr. Maier's termination for
reason other than death, incapacity, or cause (as defined in the agreement), the
Company is obligated to continue his Base Salary and any benefit arrangements
for two (2) years, and make a lump sum payment equal to the average annual
performance bonus, if any, paid to him, prorated for a period of two (2) years.
Mr. Maier was paid an additional, one-time payment of $40,000 pursuant to the
employment agreement.
Mr. Colin V.F. Digout, Chief Operating Officer, and Chief Financial
Officer entered into an employment agreement with the Company dated February 2,
1999. Mr. Digout's current Base Salary is $100,000. In the event of Mr. Digout's
termination for reasons other than death, incapacity, or cause (as defined in
the agreement), the Company is obligated to continue his Base Salary and any
benefit arrangements for a period of two (2) years, and make a lump sum payment
to him equal to the average annual performance bonus, if any, paid to him,
prorated for a period of two (2) years.
The directors of REC are entitled to receive fees equal to Cdn. $5,000 per
year plus Cdn. $500 per meeting for each meeting attended in person, and Cdn.
$250 per meeting for each meeting attended via telephone. Each director who is a
member of a committee of the board is entitled to receive Cdn. $250 per meeting
for each meeting attended and which is held separate from a meeting of the
board.
40
<PAGE>
Item 7. Certain Relationships and Related Transactions.
On July 31, 1998, the Company entered into a loan agreement (the "Loan
Agreement") with Timothy P. Seel, Heptagon Investments Ltd., E&M Machinery, a
retirement savings plan registered under the Income Tax Act (Canada) for the
benefit of David A. Williams, Patrick Brigham, and Hara Enterprises Limited
pursuant to which the Company borrowed approximately Cdn.$741,939. As at July
31, 1998, Heptagon Investments Ltd. was a related party of Ian Barnett; E&M
Machinery was a related party of John M. Marsh; and Hara Enterprises Limited was
a related party of Gregory G. O'Hara. Messrs. Seel, Barnett, Marsh, Williams,
Brigham and O'Hara were then (and Messrs. Seel, Marsh, Williams and O'Hara
continue to be) directors or officers, or both, of the Company. Effective May 8,
1999, the Company entered into agreements with each of the lenders (other than
Mr. Williams) for the repayment of the indebtedness owed to them and repaid such
indebtedness by issuing a total of 366,647 Shares at a price of Cdn.$1.15 per
share and paying a total of Cdn.$111,500 in cash. On June 3, 1999, the Company
repaid the total indebtedness (approximately Cdn.$208,794) owed to Mr. Williams.
On June 24, 1999, the Company and Boeing entered into the Boeing Financing
Agreement, pursuant to which Boeing or its assignee agreed to provide financing
of up to $10,000,000 (or $2,400,000 per facility) to RAS for the construction
and installation of deicing facilities. Thomas A. Motherway, a director of the
Company is President of Boeing Capital Services. On December 20, 1999, RAS sold
the Newark Facility to MDFC. By equipment lease agreement dated December 20,
1999, RAS leased the Newark Facility from MDFC for a period of 84 months at a
monthly rental of approximately $49,000 plus 10% of deicing revenue.
On June 30, 1999, REC entered into the Boeing Investment Agreement with
Boeing pursuant to which Boeing purchased a total of 2,292,260 Shares and was
granted options to purchase an additional 653,145 Shares at an exercise price of
Cdn.$1.35 per Share. The purchased securities represent a 20% ownership interest
in the equity securities of the Company. The options are exercisable within 30
days (the "Exercise Period") of the end of each fiscal quarter of the Company
commencing December 31, 1999 on the basis of one option for each four Shares
issued by the Company during the preceding fiscal quarter. The options are
exercisable only to the extent that the Company has issued additional Shares
within that preceding fiscal quarter upon the conversion or exercise of other
convertible or exchangeable securities of the Company outstanding as at June 30,
1999. When the
41
<PAGE>
Company, as a result of the exercise of other convertible or exchangeable
securities, issues Shares and Boeing elects not to exercise that portion of the
options which it is entitled to exercise, that portion of the options which are
not so exercised within the Exercise Period will terminate at the end of that
Exercise Period. All options granted to Boeing expire on June 30, 2004. As at
January 20, 2000, Boeing had exercised all of the options it was entitled to
exercise during the first Exercise Period and, pursuant thereto, an additional
159,841 Shares were issued to Boeing, for a total of 2,452,101 Shares. In
addition, the Company has granted to Boeing a pre-emptive right to acquire
additional securities of the Company to permit it to maintain its proportionate
interest in the equity securities of the Company. The pre-emptive right expires
on June 30, 2001. Mr. Motherway, a director of the Company, is President of
Boeing.
On June 30, 1999, Boeing, Charles John Chew ("Chew"), Timothy P. Seel
("Seel"), Kathleen Seel (the spouse of Timothy P. Seel), David A. Williams
("Williams") and Roxborough Holdings Limited ("Roxborough") entered into an
agreement (the "Shareholders Agreement"). Chew, Seel, Williams and Roxborough,
agreed to vote in favor of the election of Boeing's designated nominees to the
board of directors of the Company. These shareholders have also agreed to
recommend to the board of directors of the Company that Boeing be permitted to
increase to 25% its proportionate interest in outstanding Shares if and when the
Company intends to issue additional Shares. The Shareholders Agreement
terminates on or before June 30, 2001.
Charles J. Chew ("Chew") and Timothy P. Seel ("Seel") entered into Patent
Royalty Agreement with the Company on January 29, 1995 (the "Royalty
Agreement"), granting the Company exclusive rights to the patent applications
covering the INFRATEK(Registered) technology, subject to payment of a 2% royalty
(to a maximum of $1,000,000) to Messrs. Chew and Seel. The Royalty Agreement
also granted the Company the right to purchase the patent applications from
Messrs. Chew and Sell for $500,000. The Company exercised this right, paying
Messrs. Chew and Seel $500,000 on October 31, 1995.
Item 8. Description of Securities.
REC's capital consists of shares of common stock ("Shares"). At January
20, 2000, 12,664,658 Shares were outstanding; the Company is authorized to issue
an unlimited number of Shares.
Each Share is fully paid and non-assessable, carries one vote at all
meetings of shareholders, participates ratably in any dividend declared by the
directors and carries the
42
<PAGE>
right to receive a proportionate share of the assets of REC available to
shareholders in the event of the liquidation, dissolution, or winding up of REC.
There are no pre-emptive rights or cumulative voting rights in the Company's
charter.
In connection with the Boeing Investment Agreement, Boeing is entitled to
designate a number of nominees, in proportion to its holdings, for election or
appointment to REC"s board of directors. Boeing and certain shareholders of REC
holding 1,928,126 Shares (as at January 20, 2000) have agreed to vote all of
their Shares in favor of Boeing's nominees to REC's board of directors and to
recommend to it that additional Shares be issued to Boeing, if as and when
subscribed for, to allow Boeing to increase its equity investment in REC to 25%.
PART II
Item 1. Market Price of and Dividend on the Registrant's for Common Equity and
Related Stockholder Matters.
The Shares are traded on the Canadian Dealer Network, Inc. ("CDN") under
the symbol "MELT."
The high and low bid prices for 1998, 1999, and the first quarter of 2000,
as reported by the CDN, in Canadian dollars were:
1998 1999 2000
LOW HIGH LOW HIGH LOW HIGH
1st Qtr. $1.60 $3.35 $1.10 $2.10 $2.80 $9.00
2nd Qtr. 1.35 2.50 1.10 1.70
3rd Qtr. 1.25 1.90 1.70 4.10
4th Qtr. 1.25 1.85 2.60 4.65
CDN quotations represent inter-dealer prices, without mark-ups,
commissions, etc., and they may not necessarily be indicative of actual sales
prices.
(a) At January 20, 2000, there were 237 shareholders of record.
43
<PAGE>
(b) No dividends have ever been declared by REC.
Item 2. Legal Proceedings.
None.
Item 3. Changes in and Disagreements with Accountants.
None.
Item 4. Recent Sales of Unregistered Securities.
The chart below sets forth all securities sold by the Company within the
last three years without registering the securities under the Securities Act of
1933, as amended (the "1933 Act"). The securities issued to U.S. persons were
issued pursuant to the exemption from registration set forth in Section 4(2) of
the 1933 Act as transactions not involving a public offering due to the limited
number of purchasers in each instance ("Section 4(2) Exemption"). The securities
issued to non-U.S. persons were issued pursuant to Regulation S, promulgated
under the 1993 Act ("Regulation S").
<TABLE>
<CAPTION>
DATE NUMBER AND CLASS OF METHOD OF SALE/ UNDERWRITER
SECURITIES SOLD EXEMPTION UNDER 1933
ACT
<S> <C> <C> <C>
May 22, 1997 6% Redeemable Rights offering to then Thomson Kernaghan & Co. Ltd.
Convertible Secured existing shareholders exempt ("TK"), as soliciting dealer,
Debentures (the "6% from prospectus and received a management fee equal
Debentures") in the total registration requirements to 4% of the gross proceeds of the
principal amount of under the Securities Act offering (Cdn.$45,360). In
Cdn.$1,134,000 (Ontario)./Section 4(2) addition, brokers, including TK,
Exemption; Regulation S were entitled to receive a
solicitation fee equal to 4% of the
gross proceeds. TK received a
total of Cdn.$65,620 in
management and solicitation fees.
May 22, 1997 6% Debentures in the total Compensation option granted
principal amount of to TK under the rights
Cdn.$113,400 offering of 6% Debentures./
Regulation S
Aug. 1-31, 1997 110,000 Shares Conversion of 6%
Debentures./ Regulation S
Sept. 1-30, 1997 28,400 Shares at Cdn.$2.50 Exercise of warrants (the
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
DATE NUMBER AND CLASS OF METHOD OF SALE/ UNDERWRITER
SECURITIES SOLD EXEMPTION UNDER 1933
ACT
<S> <C> <C> <C>
per Share "1996 Warrants") issued in
connection with the
amalgamation of Northern
Atlas Inc. and Radiant Energy
Corporation in Febuary 1996./
Regulation S
Sept. 1-30, 1997 62,400 Shares Conversion of 6%
Debentures./ Regulation S
Oct. 17, 1997 7,500 Shares at Cdn.$1.35 Exercise of incentive stock
per Share options by Michael Kull
20,000 Shares at Cdn. (employee at RAS and U.S.
$1.30 per Share citizen)./ Section 4(2)
Exemption
Feb. 6, 1998 22,648 Shares at Cdn.$2.50 Exercise of 1996 Warrants./
per Share Regulation S
Feb. 15, 1998 19,000 Shares Conversion of 6%
Debentures./ Regulation S
Feb. 18, 1998 35,200 Shares at Cdn.$2.00 Conversion of 6% Debentures
per Share by TK./ Regulation S
Feb. 28, 1998 50,000 Shares at Cdn.$3.00 Issued to Jay Jaski in
per Share exchange for the transfer to
the Company of all of the
shares of Deice Canada Ltd./
Regulation S
Mar. 18, 1998 9,750 Shares at Cdn.$1.35 Exercise of incentive stock
per Share and 30,000 options by David Hecht,
Shares at Cdn.$2.50 per former executive officer./
Share Section 4(2) Exemption
Mar. 1-31, 1998 15,000 Shares at Cdn.$2.50 Exercise of 1996 Warrants./
per Share Regulation S
Mar. 31, 1998 65,000 Shares Conversion of 6% Debentures
issued to TK./ Regulation S
May 31, 1998 709,600 Shares Conversion of 6%
Debentures./ Regulation S
June 1-30, 1998 28,000 Shares Conversion of 6%
Debentures./ Regulation S
July 1-31, 1998 51,000 Shares Conversion of 6%
Debentures./ Regulation S
Aug. 31, 1998 50,000 Shares at Cdn.$1.30 Charles John Chew and
per Share Timothy P. Seel (25,000
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
DATE NUMBER AND CLASS OF METHOD OF SALE/ UNDERWRITER
SECURITIES SOLD EXEMPTION UNDER 1933
ACT
<S> <C> <C> <C>
each) as compensation./
Section 4(2) Exemption
Nov. 1-30, 1998 42,500 Shares at Cdn.$1.35 Exercise of incentive stock
per Share options. Section 4(2)
Exemption
Dec. 1-31, 1998 16,666 Shares at Cdn.$1.50 Private placement to officer of
per Share the Company (Colin V. F.
Digout)./ Regulation S
Mar. 1-31, 1999 10,000 Shares at Cdn.$1.25 Private placement to Colin
per Share V.F. Digout./ Regulation S
Apr. 1-30, 1999 50,000 Shares at Cdn.$1.09 Private placement to Colin
per Share V.F. Digout./ Regulation S
May 1-8, 1999 366,647 Shares at Conversion of indebtedness in
Cdn.$1.15 per Share the principal amount of
Cdn.$421,644 owed to
directors and their affiliates./
Regulation S
May 6, 1999 25,000 Shares at Cdn. Private placement to Colin
$1.14 per Share, 36,000 V.F. Digout./ Regulation S
Shares at Cdn. $1.18 per
Share and 145,000 Shares at
Cdn. 1.24 per share
May 28, 1999 7% Convertible Rights offering to then Brant Securities Limited ("Brant"),
Redeemable Secured existing shareholders exempt as soliciting dealer, received a
Subordinated Debentures from prospectus and management fee equal to 2% of the
(the "7% Debentures") in registration requirements gross proceeds of the offering
the total principal amount of under the Securities Act (Cdn.$37,784). In addition,
Cdn.$1,889,200 (Ontario)./ Regulation S brokers, including Brant, were
entitled to receive a solicitation fee
equal to 5% of the gross proceeds.
Brant received a total of
Cdn$64,500 in management and
solicitation fees.
June 1-30, 1999 56,080 Shares Conversion of 6%
Debentures./ Regulation S
June 1-30, 1999 321,490 Shares Conversion of 7%
Debentures. / Regulation S
June 30, 1999 2,292,260 Shares at Private placement to Boeing. R.H. Caruso & Co., Inc. received
$2,330,242.96 /Section 4(2) Exemption a cash fee of 3% of the
subscription price for the Shares
purchased by Boeing Capital
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
DATE NUMBER AND CLASS OF METHOD OF SALE/ UNDERWRITER
SECURITIES SOLD EXEMPTION UNDER 1933
ACT
<S> <C> <C> <C>
Services Corporation.
July 1-31, 1999 257,660 Shares Conversion of 7%
Debentures./ Regulation S
July 1-31, 1999 40,000 Shares at Cdn.$1.40 Exercise of options by Brant
per Share Securities Limited./
Regulation S
Aug. 1-31, 1999 105,829 Shares Conversion of 7%
Debentures./ Regulation S
Aug. 1-31, 1999 7,500 Shares at Cdn.$1.35 Exercise of incentive stock
per Share and 4,500 Shares options./Section 4(2)
at Cdn. $1.30 per Share Exemption
Sept. 1-30, 1999 43,478 Shares Conversion of 7%
Debentures./ Regulation S
Sept. 24, 1999 105,840 Shares Redemption of all outstanding
6% Debentures./ Regulation
S
Oct. 1-31, 1999 1,826 Shares Conversion of 7%
Debentures./ Regulation S
Dec. 1-31, 1999 43,480 Shares Conversion of 7%
Debentures. / Regulation S
Dec. 10-29, 1999 29,250 Shares at Cdn.$1.30 Exercise of incentive stock
per Share options./ Section 4(2)
Exemption
Jan.21, 2000 159,841 Shares at Exercise of options by
Cdn.$1.35 per Share Boeing./ Section 4(2)
Exemption
Jan. 1-28, 2000 109,500 Shares at Exercise of incentive stock
Cdn.$1.30 per Share options./ Section 4(2)
Exemption
Jan. 1-28, 2000 170,000 Shares at Exercise of incentive stock
Cdn.$1.35 per Share options./ Section 4(2)
Exemption
Jan. 1-28, 2000 41,000 Shares at Cdn.$1.80 Exercise of incentive stock
per Share options./ Section 4(2)
Exemption
Jan. 1-28, 2000 9,000 Shares at Cdn.$2.00 Exercise of incentive stock
per Share options./Section 4(2)
Exemption
Jan. 1-28, 2000 5,000 Shares at Cdn.$3.45 Exercise of incentive stock
per Share options./ Regulation S
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
DATE NUMBER AND CLASS OF METHOD OF SALE/ UNDERWRITER
SECURITIES SOLD EXEMPTION UNDER 1933
ACT
<S> <C> <C> <C>
Jan. 1-28, 2000 5,000 Shares at Cdn.$3.45 Exercise of incentive stock
per Share options. / Regulation S
</TABLE>
Item 5. Indemnification of Directors and Officers.
The by-laws provide that directors and officers will be indemnified from
and against all liabilities, costs and expenses in respect to any action brought
against them relating to their duties as an officer or director.
48
<PAGE>
PART F/S
Financial Statements
1. Consolidated Financial Statements for the years ended October 31, 1999
and 1998 with Auditors Report dated January 10, 2000, prepared by Ernst & Young.
Page 52
2. Consolidated Financial Statements (unaudited) for the period ended
January 31, 2000. Page 71
49
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
RADIANT ENERGY CORPORATION
October 31, 1999 and 1998
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
Radiant Energy Corporation
We have audited the consolidated balance sheets of Radiant Energy Corporation as
at October 31, 1999 and 1998 and the consolidated statements of shareholder's
equity, loss and deficit and cash flows 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 auditing standards generally accepted
in the United States. 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. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above, present
fairly, in all material respects, the consolidated financial position of the
Radiant Energy Corporation as at October 31, 1999 and 1998 and the consolidated
results of its operations and cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States.
On January 10, 2000, we reported separately to the shareholders of Radiant
Energy Corporation on the consolidated financial statements for the same years,
prepared in Canadian dollars and in accordance with accounting principles
generally accepted in Canada.
Hamilton, Canada,
January 10, 2000 [except as to note 11
which is at February 11, 2000] Chartered Accountants
F-2
<PAGE>
Radiant Energy Corporation
Amalgamated under the laws of Canada
CONSOLIDATED BALANCE SHEETS
[U.S. dollars]
As at October 31
1999 1998
$ $
- --------------------------------------------------------------------------------
ASSETS
Current
Cash and term deposits [note 4] 1,981,232 --
Accounts receivable -- 30,000
Inventory 13,912 13,912
Deposits and prepaid expenses 1,203,316 24,168
- --------------------------------------------------------------------------------
Total current assets 3,198,460 68,080
- --------------------------------------------------------------------------------
Deferred charges 67,809 8,031
Patents [note 2] 357,634 367,271
Capital [note 3] 663,336 672,421
- --------------------------------------------------------------------------------
4,287,239 1,115,803
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank overdraft -- 4,578
Accounts payable and accrued liabilities 815,021 170,158
Current portion of long-term debt [note 4] 68,484 256,980
- --------------------------------------------------------------------------------
Total current liabilities 883,505 431,716
- --------------------------------------------------------------------------------
Deferred income taxes 4,402 8,118
Long-term debt [note 4] 871,808 250,066
Shareholders' equity
Share capital [note 5] 8,721,039 5,243,320
Cumulative comprehensive income 5,380 9,922
Deficit (6,198,895) (4,827,339)
- --------------------------------------------------------------------------------
Total shareholders' equity 2,527,524 425,903
- --------------------------------------------------------------------------------
4,287,239 1,115,803
================================================================================
See accompanying notes
On behalf of the Board:
(signed) Gregory G. O'Hara (signed) David A. Williams
Director Director
F-3
<PAGE>
Radiant Energy Corporation
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
[U.S. dollars]
Years ended October 31
<TABLE>
<CAPTION>
Accumulated other
Common Comprehensive comprehensive Retained
stock income income earnings Total
$ $ $ $ $
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, October 31, 1997 4,371,672 -- 45,568 (3,558,289) 858,951
- ---------------------------------------------------------------------------------------------------------------------
Net loss -- (1,269,050) -- (1,269,050) (1,269,050)
Foreign currency translation, net of tax -- (35,646) (35,646) -- (35,646)
----------
Comprehensive income -- (1,304,696) -- -- --
----------
Proceeds on issue of shares [note 5] 871,648 -- -- -- 871,648
- ---------------------------------------------------------------------------------------------------------------------
Balance, October 31, 1998 5,243,320 9,922 (4,827,339) 425,903
- ---------------------------------------------------------------------------------------------------------------------
Net loss -- (1,371,556) -- (1,371,556) (1,371,556)
Foreign currency translation, net of tax -- (4,542) (4,542) -- (4,542)
----------
Comprehensive income -- (1,376,098) -- -- --
----------
Proceeds on issue of shares [note 5] 3,477,719 -- -- -- 3,477,719
- ---------------------------------------------------------------------------------------------------------------------
Balance, October 31, 1999 8,721,039 5,380 (6,198,895) 2,527,524
=====================================================================================================================
</TABLE>
See accompanying notes
F-4
<PAGE>
Radiant Energy Corporation
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
[U.S. dollars]
Years ended October 31
1999 1998
$ $
- --------------------------------------------------------------------------------
Revenue 5,500 963,009
Cost of sales 4,064 625,156
- --------------------------------------------------------------------------------
Gross profit 1,436 337,853
Interest income 37,471 6,155
- --------------------------------------------------------------------------------
38,907 344,008
- --------------------------------------------------------------------------------
Expenses
Marketing 433,192 --
General and administrative 618,412 175,323
Research and product development 189,410 869,610
Patent rights settlement [note 2] -- 384,315
Depreciation and amortization 128,843 156,746
Interest 40,606 27,064
- --------------------------------------------------------------------------------
1,410,463 1,613,058
- --------------------------------------------------------------------------------
Loss for year (1,371,556) (1,269,050)
Deficit, beginning of year (4,827,339) (3,558,289)
- --------------------------------------------------------------------------------
Deficit, end of year (6,198,895) (4,827,339)
================================================================================
Loss per common share (0.15) (0.17)
================================================================================
See accompanying notes
F-5
<PAGE>
Radiant Energy Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
[U.S. dollars]
Years ended October 31
<TABLE>
<CAPTION>
1999 1998
$ $
- --------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Loss for year (1,371,556) (1,269,050)
Add (deduct) item not affecting cash
Depreciation and amortization 128,837 156,746
Deferred taxes (3,716) (29,165)
- --------------------------------------------------------------------------------------------------
(1,246,435) (1,141,469)
Net change in non-cash working capital items relating to
operating activities (500,376) 830,824
- --------------------------------------------------------------------------------------------------
Cash used in operating activities (1,746,811) (310,645)
- --------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of capital assets (63,101) (709,329)
Proceeds on sale of capital assets -- 5,797
- --------------------------------------------------------------------------------------------------
Cash used in investing activities (63,101) (703,532)
- --------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance (repayment) of long-term debt 401,450 (152,097)
(Increase) decrease in deferred charges (55,978) 36,026
Issuance of common shares 3,477,719 871,648
- --------------------------------------------------------------------------------------------------
Cash provided by financing activities 3,823,191 755,577
- --------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (27,469) 12,800
- --------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and term deposits 1,985,810 (245,800)
Cash (overdraft) and term deposits, beginning of year (4,578) 241,222
- --------------------------------------------------------------------------------------------------
Cash (overdraft) and term deposits, end of year 1,981,232 (4,578)
==================================================================================================
Cash interest paid 21,702 42,729
==================================================================================================
</TABLE>
See accompanying notes
F-6
<PAGE>
Radiant Energy Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1999 and 1998 [all amounts in U.S. funds unless otherwise noted]
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of operations
Radiant Energy Corporation is a company incorporated primarily to provide
services in the aviation industry through the development and marketing of its
InfraTek radiant energy deicing technology. The company is in its early stages
of its operations and its ability to continue as a going concern is dependent
upon achieving a profitable level of operations and obtaining sufficient cash
flow and financing. These consolidated financial statements do not give effect
to adjustments that would be necessary should the company be required to realize
its assets and discharge its liabilities in other than the normal course of
business and at amounts different from those in these consolidated financial
statements.
Basis of presentation
The consolidated financial statements have been prepared in United States
dollars and in accordance with accounting principles generally accepted in the
United States and include certain estimates based on management's judgments.
These estimates affect the reported amounts of assets and liabilities at the
date of the consolidated financial statements and the reported amount of
revenues and expenses during the year. Actual results may differ from those
estimates.
Consolidated financial statements prepared in Canadian dollars and in accordance
with accounting principles generally accepted in Canada were previously made
available to shareholders and filed with various securities regulatory
authorities.
For purposes of these consolidated financial statements, the company has adopted
the U.S. dollar as the reporting currency. This improves investors' ability to
compare the company's results with those of most other publicly traded
businesses in the industry. These consolidated financial statements have been
translated from Canadian dollars to U.S. dollars by translating assets and
liabilities at the rate in effect at the respective balance sheet date and
revenues and expenses at the average rate for the year. Any resulting foreign
exchange gains or losses are recorded in accumulated other comprehensive income
(loss).
F-7
<PAGE>
Radiant Energy Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1999 and 1998 [all amounts in U.S. funds unless otherwise noted]
Principles of consolidation
These consolidated financial statements include the accounts of the company and
its wholly-owned subsidiary, Radiant Aviation Services, Inc. ["RAS"] formerly
named Process Technologies Inc.
All significant inter-company transactions have been eliminated.
Cash and cash equivalents
Cash and cash equivalents include cash on deposit and term deposits with
original maturities of less than three months.
Inventory
Inventory is recorded at the lower of actual cost and estimated net realizable
value.
Deferred charges
The costs associated with obtaining debt financing are capitalized and amortized
on a straight-line basis over the life of the debt [5 years].
Patents
The costs associated with obtaining patents are capitalized and amortized on a
straight-line basis over the life of the patent [17 years].
F-8
<PAGE>
Radiant Energy Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1999 and 1998 [all amounts in U.S. funds unless otherwise noted]
Stock based compensation
The company has an incentive stock option plan as more fully described in note
5. Any consideration paid on the exercise of stock options is credited to share
capital.
Capital assets
Capital assets are carried at cost less accumulated depreciation. Depreciation
is provided on a straight-line basis at rates estimated to amortize the cost of
the assets over their estimated useful lives based on the following rates:
Automobiles 5 years
Office furniture and equipment 5 years
Laboratory equipment 5 years
Leasehold improvements 5 years
Deicing service centers 10 years
Financial instruments
The carrying amount of cash and term deposits, accounts receivable, prepaid
expenses, deposits, inventory, bank overdraft, accounts payable and accrued
liabilities are considered to be representative of their respective fair values.
The company has no derivative financial instruments or any financial instruments
that potentially subject the company to concentrations of credit risk.
F-9
<PAGE>
Radiant Energy Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1999 and 1998 [all amounts in U.S. funds unless otherwise noted]
2. PATENT RIGHTS
During 1995, the company acquired all rights to a U.S. patent from two of its
officers for $500,000 U.S.
In July 1995, the company and these two officers commenced legal action against
a third party [the former employer of the two officers] in support of the
company's declaration as sole owner of all right, title, and interest in a
patent. The third party demanded ownership of the patent based upon the prior
employment of the officers and had counter claimed in the action alleging it as
the equitable owner of the patent.
In April 1998, the company, the two officers and the third party reached an out
of court settlement that provided the company with the unequivocal ownership of
the patents. Under the terms of the agreement, the terms and conditions of the
settlement cannot be disclosed. A $50,000 U.S. on deposit with the court was
used as part of the settlement.
F-10
<PAGE>
Radiant Energy Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1999 and 1998 [all amounts in U.S. funds unless otherwise noted]
3. CAPITAL ASSETS
1999
-----------------------------------------
Net
Accumulated book
Cost depreciation value
$ $ $
- -------------------------------------------------------------------------------
Automobiles 63,182 9,167 54,015
Office furniture and equipment 131,461 77,259 54,202
Laboratory equipment 17,568 14,571 2,997
Leasehold improvements 31,222 17,889 13,333
Deicing service centers 673,486 134,697 538,789
- -------------------------------------------------------------------------------
916,919 253,583 663,336
===============================================================================
1998
-----------------------------------------
Net
Accumulated book
Cost depreciation value
$ $ $
- -------------------------------------------------------------------------------
Automobiles 28,642 1,432 27,210
Office furniture and equipment 97,464 54,595 42,869
Laboratory equipment 15,019 11,182 3,837
Leasehold improvements 29,773 9,276 20,497
Deicing service centers 642,231 64,223 578,008
- -------------------------------------------------------------------------------
813,129 140,708 672,421
===============================================================================
During 1998, the company constructed a deicing service center from components
previously held in inventory. The company has entered into an arrangement with a
third party to operate this center on their behalf.
F-11
<PAGE>
Radiant Energy Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1999 and 1998 [all amounts in U.S. funds unless otherwise noted]
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
1999 1998
$ $
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
6% convertible secured debentures, due May 22, 2002 -- 85,748
9% secured loans -- 198,686
7% convertible secured debentures, due May 31, 2004 744,510 --
Other 150,000 200,000
Vehicle loan repayable in monthly
blended payments of principal and interest of $668
bearing interest at 2.9% to August 15, 2001 and $943
bearing interest at 2.9% to July 31, 2002 45,782 22,612
- -------------------------------------------------------------------------------------------------
940,292 507,046
Less current portion 68,484 256,980
- -------------------------------------------------------------------------------------------------
871,808 250,066
=================================================================================================
</TABLE>
Minimum principal payments over the next 5 years are as follows:
$
- -------------------------------------------------------------------------------
2000 68,484
2001 68,665
2002 58,633
2003 --
2004 744,510
6% convertible secured debentures, due May 22, 2002
The 6% convertible secured debentures are convertible in minimum denominations
of $100 [Canadian] at a basic conversion price of $1.00 [Canadian] per share
prior to May 22, 1998 and $1.25 [Canadian] per share, thereafter. The company
has the right after giving 30 days notice to redeem the debentures in whole or
in part should the market price of the shares equal or exceed $3.50 [Canadian]
per share. Redemption is not permitted prior to May 22, 1998.
F-12
<PAGE>
Radiant Energy Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1999 and 1998 [all amounts in U.S. funds unless otherwise noted]
On August 18, 1999, the company called the debentures for redemption on
September 24, 1999. All outstanding 6% convertible debentures totaling $105,116
were converted on the basis of $1.25 per share [Canadian] to 161,920 common
shares.
Under the terms of the debenture issue, the company granted, as compensation to
the agents, the option to purchase up to $113,400 [Canadian] of debentures at
any time on or before May 22, 1999. At October 31, 1998, an option to purchase
$70,100 [Canadian] remained outstanding. On May 13, 1999, the agents exercised
the option to purchase the remaining $70,100 [Canadian] debentures. On June 13,
1999, the agents converted the debentures to common shares. A total of 56,080
common shares were issued.
9% secured loans
On May 8, 1999 accumulated interest and additional loans provided by directors
of the company totaling $741,939 [Canadian] were retired. In settlement of the
loans, the company provided cash of $320,295 [Canadian] and issued 366,647
common shares.
7% convertible secured debentures, due May 31, 2004
The convertible secured debentures were convertible in minimum denominations of
$100 [Canadian] at a basic conversion price of $1.15 [Canadian] per share prior
to May 31, 2000 and $1.45 [Canadian] per share, thereafter. The company has the
right after giving 30 days notice to redeem the debentures in whole or in part
should the market price of the shares equal or exceed $2.50 [Canadian] per
share. Redemption is not permitted prior to May 31, 2000.
In addition, under the terms of the debenture issue, $89,882 of the proceeds was
placed in escrow in a trust account to pay interest when due.
The estimated fair market value of the debentures approximates their carrying
value as of October 31, 1999.
F-13
<PAGE>
Radiant Energy Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1999 and 1998 [all amounts in U.S. funds unless otherwise noted]
5. SHARE CAPITAL
[a] Shares
Authorized
Unlimited number of common shares
<TABLE>
<CAPTION>
Issued and outstanding Number Stated
of shares capital
$
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at October 31, 1997 7,020,459 4,371,672
Issued upon exercise of warrants 37,648 66,181
Issued upon conversion of debentures - net of costs 872,600 547,660
Issued upon conversion of stock options and warrants 74,950 111,544
Issued for acquisition of distributorship 50,000 104,822
Issued to officers for settlement of patent rights 50,000 41,441
- ---------------------------------------------------------------------------------------------
Outstanding at October 31, 1998 8,105,657 5,243,320
- ---------------------------------------------------------------------------------------------
Issued upon conversion of 6% debentures - net of costs 161,920 131,360
Issued upon conversion of 7% debentures - net of costs 690,284 486,170
Issued upon settlement of 9% loans 366,647 286,054
Issued upon conversion of stock options 54,500 48,123
Issued upon conversion of options granted to financial advisors 80,000 74,354
Issued to officer for cash 276,666 227,946
Issued to Boeing Capital Services Corporation - net of costs 2,292,260 2,223,712
- ---------------------------------------------------------------------------------------------
Outstanding at October 31, 1999 12,027,934 8,721,039
=============================================================================================
</TABLE>
[b] Warrants
Warrants to purchase 4,474,719 common shares outstanding at October 31,
1998 expired on March 1, 1999. No warrants were exercised prior to expiry.
F-14
<PAGE>
Radiant Energy Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1999 and 1998 [all amounts in U.S. funds unless otherwise noted]
[c] Stock options
[i] The company has a stock option plan whereby directors, officers, and
employees and consultants, subject to certain conditions, may be granted
options to purchase up to 15% of the outstanding common shares of the
company at the closing price of the common shares at the date when the
option is granted on any stock exchange on which the common shares may be
listed. At October 31, 1999, the maximum stock options available to be
granted was 1,804,190 [1998 - 586,527].
The company applies APB Opinion 25 in accounting for its employee stock options.
The exercise price of all employee stock options is equal to the market price of
the stock at the time of granting. Accordingly, no compensation cost has been
recognized in the financial statements for its employee stock options.
For purposes of meeting requirements of FASB Statement No. 123, the fair value
was estimated at the date of grant using a Black-Scholes option pricing model
with the following weighted-average assumptions for 1999 and 1998, respectively;
risk-free interest rates of 7.5%, 7.5%, dividend yields of 0%, 0%, volatility
factors of the expected market price of the company's common stock of 161.4%,
161.4%, and weighted average expected life per option of 4 years.
The Black-Scholes option pricing model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option pricing models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
F-15
<PAGE>
Radiant Energy Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1999 and 1998 [all amounts in U.S. funds unless otherwise noted]
A summary of the company's stock option and warrant activity and related
information is as follows:
<TABLE>
<CAPTION>
1999 1998
$ $
- ---------------------------------------------------------------------------------------------------
[Canadian] [Canadian]
Weighted Weighted
-average -average
exercise price exercise price
<S> <C> <C> <C> <C>
Options
Outstanding, beginning of year 728,958 1.79 519,719 1.83
Granted 1,228,520 1.78 268,989 1.84
Expired -- -- (20,000) (2.50)
Exercised (130,000) (1.38) (39,750) (2.22)
- ---------------------------------------------------------------------------------------------------
Outstanding and exercisable, end of year 1,827,478 1.81 728,958 1.79
- ---------------------------------------------------------------------------------------------------
Warrants
Outstanding, beginning of period 4,472,271 2.00 4,474,719 2.00
Granted -- -- 35,200 2.00
Expired (4,472,271) (2.00) -- --
Exercised -- -- (37,648) (2.00)
- ---------------------------------------------------------------------------------------------------
-- -- 4,472,271 2.00
- ---------------------------------------------------------------------------------------------------
Total options and warrants, end of year 1,827,478 -- 5,201,229 --
===================================================================================================
Weighted - average fair value
of options granted during the year 1,228,520 1.60 268,989 1.45
===================================================================================================
</TABLE>
The following table summarizes information about options outstanding as at
October 31, 1999:
Options Outstanding
-----------------------------------------------------------
Weighted-average Weighted-
Range of Number remaining average
Exercise prices outstanding contractual life exercise price
- -------------------------------------------------------------------------------
[Canadian]
$1.15 - $2.50 1,746,478 4.3 years $1.73
$2.50 - $3.70 81,000 5 years $3.47
F-16
<PAGE>
Radiant Energy Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1999 and 1998 [all amounts in U.S. funds unless otherwise noted]
[ii] On June 30, 1999, the company completed a private placement for 2,292,260
common shares with Boeing Capital Services Corporation ["BCSC"]. Under the
terms of the private placement, the company offered to BCSC, the option to
purchase up to 653,145 common shares for $1.35 [Canadian] per share. The
options are exercisable at a rate equal to 25% of the common shares to be
issued by the company pursuant to the exercise of options or through the
conversion of securities to common shares that existed on June 30, 1999
["existing options and conversions"]. The options may be exercised between
January 1, 2000 and June 30, 2004 within 30 days of the calendar quarter
end for "existing options and conversions" exercised in the previous
quarter, or in the case of the first conversion date between July 1, 1999
and December 31, 1999. If the BCSC does not exercise their options within
the 30-day period, the options expire. At October 31, 1999, 653,145
options were granted and 141,658 options are exercisable January 1, 2000.
6. INCOME TAX
The significant components of the company's deferred tax liabilities and assets
are as follows:
1999 1998
$ $
- --------------------------------------------------------------------------------
DEFERRED TAX ASSETS
Income tax losses available for carryforward 2,680,000 2,020,000
Less valuation allowance (2,680,000) (2,020,000)
- --------------------------------------------------------------------------------
Net deferred tax assets -- --
================================================================================
DEFERRED TAX LIABILITIES
Temporary differences comprehensive income 4,402 8,118
================================================================================
At October 31, 1999, the company has Canadian non-capital losses of
approximately $427,000 and U.S. net operating losses of approximately
$5,316,000. These losses may be carried forward to reduce taxable income in
future years.
F-17
<PAGE>
Radiant Energy Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1999 and 1998 [all amounts in U.S. funds unless otherwise noted]
If not utilized, the Canadian losses will expire as follows:
$ U.S.
- --------------------------------------------------------------------------------
2002 121,000
2003 17,000
2005 156,000
2006 133,000
If not utilized, the U.S. losses will expire as follows:
$ U.S.
- --------------------------------------------------------------------------------
2009 500,000
2010 1,020,000
2011 843,000
2012 1,686,000
2013 1,267,000
In addition, the company has approximately $66,000 U.S. of Canadian share issue
costs which are deductible over the next three years.
The potential income tax benefits relating to these accumulated losses have not
been recorded in the company's accounts.
7. COMMITMENTS
The company has entered into leases with minimum lease payments over the next 2
years as follows:
$ Canadian
- -------------------------------------------------------------------------------
2000 61,582
2001 33,357
F-18
<PAGE>
Radiant Energy Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1999 and 1998 [all amounts in U.S. funds unless otherwise noted]
8. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect the company's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
company, including those related to the efforts of customers, suppliers, or
other third parties, will be fully resolved.
9. SEGMENTED INFORMATION
The company's only reportable operating segment is aircraft deicing sales and
service. All revenue is derived from its U.S. operations which also includes all
capital and other assets.
10. COMPARATIVE FIGURES
The comparative consolidated statements of cash flows have been restated as
required by new accounting recommendations issued by the Canadian Institute of
Chartered Accountants.
11. SUBSEQUENT EVENTS
On February 11, 1999, the company filed a registration statement with the
Security and Exchange Commission.
F-19
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
RADIANT ENERGY CORPORATION
Interim Financial Statements
January 31, 2000 and 1999
F-20
<PAGE>
Radiant Energy Corporation
Amalgamated under the laws of Canada
CONSOLIDATED BALANCE SHEETS
[in U.S. dollars]
As at January 31
2000 1999
$ $
- --------------------------------------------------------------------------------
ASSETS
Current
Cash and term deposits 3,908,282 6,787
Inventory 13,912 13,883
Deposits and prepaid expenses 36,357 9,750
- --------------------------------------------------------------------------------
Total current assets 3,958,551 30,420
- --------------------------------------------------------------------------------
Deferred charges 50,593 7,639
Patents 350,111 368,328
Capital 621,452 639,370
- --------------------------------------------------------------------------------
4,980,707 1,045,757
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 934,165 214,214
Current portion of long-term debt 68,484 379,833
- --------------------------------------------------------------------------------
Total current liabilities 1,002,649 594,047
- --------------------------------------------------------------------------------
Deferred income taxes 4,402 11,498
Long-term debt 642,495 206,128
Shareholders' equity
Share capital 9,519,296 5,297,044
Cumulative comprehensive income 5,380 14,052
Deficit (6,193,515) (5,077,012)
- --------------------------------------------------------------------------------
Total shareholders' equity 3,331,161 234,084
- --------------------------------------------------------------------------------
4,980,707 1,045,757
- --------------------------------------------------------------------------------
F-21
<PAGE>
Radiant Energy Corporation
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
[in U.S. dollars]
Three months ended January 31, 2000
<TABLE>
<CAPTION>
Accumulated other
Common Comprehensive comprehensive Retained
stock income income earnings Total
$ $ $ $ $
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Balance, October 31, 1998 5,243,320 -- 9,922 (4,827,339) 425,903
=================================================================================================================
Net loss -- (1,371,556) -- (1,371,556) (1,371,556)
Foreign currency translation, net of tax -- (4,542) (4,542) -- (4,542)
----------
Comprehensive income -- (1,376,098) -- -- --
----------
Proceeds on issue of shares 3,477,719 -- -- -- 3,477,719
- -----------------------------------------------------------------------------------------------------------------
Balance, October 31, 1999 8,721,039 5,380 (6,198,895) 2,527,524
- -----------------------------------------------------------------------------------------------------------------
Net income -- 5,380 -- 5,380 5,380
Foreign currency translation, net of tax -- __ -- __
Comprehensive income -- 5,380 -- -- --
----------
Proceeds on issue of shares 798,257 -- -- -- 798,257
- -----------------------------------------------------------------------------------------------------------------
Balance, January 31, 2000 9,519,296 5,380 (6,193,515) 3,331,161
=================================================================================================================
</TABLE>
F-22
<PAGE>
Radiant Energy Corporation
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
[U.S. dollars]
Three months ended January 31
2000 1999
$ $
- --------------------------------------------------------------------------------
Revenue 3,406,260 ---
Cost of sales 2,867,371 ---
- --------------------------------------------------------------------------------
Gross profit 538,889
Interest income 20,876 ---
- --------------------------------------------------------------------------------
559,765 ---
- --------------------------------------------------------------------------------
Expenses
Marketing 150,170 42,089
General and administrative 278,781 106,966
Research and product development 48,320 39,864
Depreciation and amortization 66,070 54,778
Interest 11,045 5,975
- --------------------------------------------------------------------------------
554,386 249,673
- --------------------------------------------------------------------------------
Profit/Loss for year 5,380 (249,673)
Deficit, beginning of year (6,198,895) (4,827,339)
- --------------------------------------------------------------------------------
Deficit, end of year (6,193,515) (5,077,012)
================================================================================
Loss per common share (0.0) (0.01)
================================================================================
F-23
<PAGE>
Radiant Energy Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
[U.S. dollars]
Three months ended January 31
<TABLE>
<CAPTION>
2000 1999
$ $
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Profit/Loss for year 5,380 (249,376)
Add item not affecting cash
Depreciation and amortization 66,070 55,315
Deferred taxes 3,380
- --------------------------------------------------------------------------------------------------
71,450 (190,978)
Net change in non-cash working capital items relating to
operating activities 1,286,105 88,502
- --------------------------------------------------------------------------------------------------
Cash used in operating activities 1,357,555 (102,476)
- --------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of capital assets (12,918) (809)
- --------------------------------------------------------------------------------------------------
Cash used in investing activities (12,918) (809)
- --------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance (repayment) of long-term debt (54,571) 78,916
Conversion of convertible secured debentures (174,744) ---
(Increase) decrease in deferred charges 13,471 ---
Issuance of common shares 798,257 53,724
- --------------------------------------------------------------------------------------------------
Cash provided by financing activities 582,413 132,640
- --------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents --- (17,990)
- --------------------------------------------------------------------------------------------------
Net increase(decrease) in cash and term deposits 1,927,050 11,365
Cash (overdraft) and term deposits, beginning of year 1,981,232 (4,578)
- --------------------------------------------------------------------------------------------------
Cash (overdraft) and term deposits, end of year 3,908,282 6,787
==================================================================================================
Cash interest paid 26,811 198
==================================================================================================
</TABLE>
F-24
<PAGE>
Radiant Energy Corporation
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
[U.S. dollars]
Three months ended January 31
CHANGE IN FUNCTIONAL CURRENCY
The company has historically measured and presented its financial statements in
Canadian dollars. Effective October 31, 1999, as a result of the company's
increased economic activity in the U.S. as demonstrated by its increasingly high
level of sales activity in U.S. dollars and significance of U. S. dollar
denominated assets to the company's operations, the U. S. dollar has become the
functional currency of the company's operations. Effective the same date, the
U.S. dollar has been adopted as the reporting currency.
F-25
<PAGE>
PART III
Item 1. Index to Exhibits.
Exhibit Description
2(a) Articles of Incorporation dated October 21, 1994; Articles of
Amendment dated October 5, 1995.
2(b) Certificate of Amalgamation dated February 21, 1996; Certificate of
Continuance dated February 21, 1996.
2(c) By-laws.
(3) Trust Indenture dated as of May 28, 1999 among and between Radiant
Energy Corporation, Radiant Aviation Services, Inc. and the Trust
Company of Bank of Montreal respecting 7% Debentures.
(5) Agreement dated June 30, 1999 among and between Boeing Capital
Services Corporation, Charles John Chew and others (the "Shareholders
Agreement").
6(a) Agreement dated June 30, 1999 between Company and Boeing Capital
Services Corporation ("Boeing Investment Agreement").
6(b) Agreement dated June 24, 1999 between Radiant Services, Inc. and
Boeing Capital Corporation ("Boeing Financing Agreement").
6(c) Agreement dated September 9, 1999 between Radiant Services, Inc. and
Continental Airlines Inc. (the "Continental Agreement").
6(d) Agreement dated May 10, 1999 between Company and Lufthansa Engineering
and Operational Services GMBH (the "Lufthansa Agreement").
6(e) Agreement between Company and C. John Chew dated October 30, 1998.
6(f) Agreement between Company and Timothy R. Seel dated November 1, 1999.
50
<PAGE>
6(g) Agreement between Company and Robert D. Maier dated November 30, 1998.
6(h) Agreement between Company and Colin V.F. Digout dated February 2,1999.
6(i) Agreement between Company and Timothy P. Seel dated July 31, 1998 (the
"Loan Agreement").
6(j) Lease Agreement dated December 20, 1999 between Radiant Services, Inc.
and MDFC Equipment Leasing Corporation.
6(k) Company Stock Option Plan, as amended April 3, 1998.
6(l) Patent Royalty Agreement between Messrs. Chew and Seel and the Company
dated January 29, 1995.
(13) Form F-X.
51
<PAGE>
SIGNATURES
Pursuant to the requirement of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
RADIANT ENERGY CORPORATION
Date: February 17, 2000 By: /s/ Colin V.F. Digout
----------------------
Colin V.F. Digout
Chief Operating Officer
52
<PAGE>
[SEAL] Ministry of Ministere de Ontario Corporation Number
Consumer and Numero de la compagnie en
Commercial la Consommation Ontario
Relations
For Ministry Use Only et du Commerce 1100909
L'usage exclusif du ministere ----------------------------
CERTIFICATE CERTIFICAT
This is to certify that these Ceci certifie que les presents
articles are effective on statuts entrent en vigeur le
OCTOBER 21 OCTOBRE, 1994
- ----------------------------------------------------------------
Trans Line Comp Method
/s/ [ILLEGIBLE] Code No. Stat Type Incorp.
Director/Directeur ---- ----- ---- ---- -------
Business Corporations Act/Loi A 0 0 A 3
sur les societes par actions ---- ----- ---- ---- -------
18 20 28 29 30
Notice
Share Req'd Jurisdiction
----- ------ ------------------
S N ONTARIO
----- ------ ------------------
31 32 33 47
- --------------------------------------------------------------------------------
ARTICLES OF INCORPORATION
STATUTS CONSTITUTIFS
Form 1 1. The name of the Denomination sociale
Business corporation is: de la compagnie:
Corporations
Act ------------------------------------------------------------
RADIANT ENERGY CORPORATION
Formule ------------------------------------------------------------
numero 1
sur les ------------------------------------------------------------
compagnies
------------------------------------------------------------
------------------------------------------------------------
2. The address of the Address du siege social:
registered office is:
79 Truman Road
---------------------------------------------------------------
(Street & Number or R.R. Number & if Multi-Office
Building give Room No.)
(Rue et numero ou numero de la R.R. et, s'il s'agit d'un
edifice a bureau, numero du bureau)
North York, Ontario M 2 L 2 L 7
---------------------------------------------------------------
(Name of Municipality or Post Office) (Postal Code)
(Nom de la municipalite ou du bureau de poste) (Code postal)
Municipality of
Township of York Metropolitan Toronto
------------------------ in -------------------------
(Name of Municipality, dans le/la (County, District, or
Geographic Township) Regional Municilaplity)
(Nom de la municipalite, (Comte, district,
du canton) Municipalite regionale)
3. Number (or minimum and Nombre (ou nombres minimal et
maximum number) of directors maximal) d'administrateurs:
is:
Minimum of one (1)
Maximum of ten (10)
4. The first diector(s) Premiere(s) Resident
is/are administrateur(s)
First name, initials Residence address, Canadian
and last name giving Street & No. State
Prenom, initiales et or R.R. No., Yes or No
nom de famille Municipality and Resident
Postal Code Canadien
Addresse personelle, y Oui/Non
compris la rue et le
numero, le numero de la
R.R., le nom de la
municipalite et le code
postal
---------------------------------------------------------------
Russell L. Holtby 79 Truman Road Yes
North York, Ontario
M2L 2L7
<PAGE>
5. Restrictions, If any, on business Limites, s'il y a lieu, imposees aux
the corporation may carry on or on activites commerciales ou aux pouvoirs
powers the corporation may exercise. de la compagnie.
None
6. The classes and any maximum number Categories et nombre maximal, s'il y a
of shares that the corporation is lieu, d'actions que la compagnie est
authorized to issue: autorisee a emettre:
Unlimited number of Common Shares
<PAGE>
7. Rights, privileges, restrictions Droits, privileges, restrictions et
and conditions (if any) attaching conditions, s'il y a lieu, rattaches a
to each class of shares and chaque categorie d'actions et pouvoirs
directors authority with respect to des administrateurs relatifs a chaque
any class of shares which may be categorie d'actions qui peut etre
issued in series: emise en serie:
Not Applicable
<PAGE>
8. The issue, transfer or ownership L'emission, le transfert ou la
of shares is/is not restricted and propriete d'actions est/n'est pas
the restrictions (if any) are as restreinte. Les restrictions, s'il y a
follows: lieu, sont les suivantes:
No shares shall be transferred without the express consent of the majority of
the Directors to be signified only by a resolution passed by the Board of
Directors.
<PAGE>
9. Other provisions, if any, are: Autres dispositions, s'il y a lieu:
1. Meetings of the Board of Directors and the Shareholders may be held at any
place within Canada.
2. The number of shareholders of the Corporation, exclusive of persons who
are in the employ of the Corporation, is limited to fifty (50), two or
more persons who are the joint registered owners of one or more shares
being counted as one shareholder.
3. Any invitation to the public to subscribe for any shares of the
Corporation is prohibited.
<PAGE>
10. The names and addresses of the Full residence address or address of
incorporators are registered office or of principal
Nom et adresse des fondateurs place of business giving street &
First name, initials and last name No. or R.R.
or corporate name No., municipality and postal code
Prenom, initiale et nom de famile Adresse personnelle au complet,
ou denomination sociale adresse du siege social ou adresse de
l'etablissement principal, y compris
la rue et le numero, le numero de la
R.R., le nom de la municipalite et le
code postal
- --------------------------------------------------------------------------------
Russell L. Holtby 79 Truman Road
North York, Ontario
M2L 2L7
These articles are signed in duplicate. Les presents statuts sont signes en
double exemplaire.
-----------------------------------------------------------------------
Signatures of incorporators
(Signature des fondateurs)
/s/ Russell L. Holtby
<PAGE>
A l'usage exclusif du ministere
[SEAL] Ministry of Ministere de Ontario Corporation Number
Consumer and Numero de la compagnie en
Commercial la Consommation Ontario
Relations
Ontario Relations et du Commerce 1100909
----------------------------
CERTIFICATE CERTIFICAT
This is to certify that these Ceci certifie que les presents
articles are effective on statuts entrent en vigeur le
OCTOBER 05 OCTOBRE, 1995
- ----------------------------------------------------------------
Trans
/s/ [ILLEGIBLE] Code
Director/Directeur ----
Business Corporations Act/Loi C
de sur les compagnies ----
18
- --------------------------------------------------------------------------------
ARTICLES OF AMENDMENT
STATUTS DE MODIFICATION
Form 3 1. The name of the Denomination sociale
Business corporation is: actuelle de la compagnie:
Corporations
Act ------------------------------------------------------------
RADIANT ENERGY CORPORATION
Formule ------------------------------------------------------------
numero 3
sur loi les ------------------------------------------------------------
compagnies
------------------------------------------------------------
------------------------------------------------------------
2. The name of the corporation is Nouvelle denomination sociale de la
changed to (if applicable): compagnie (s'il y a lieu):
3. Date of incorporation/amalgamation Date de la constitution ou de la
fusion:
21 OCTOBER 1994
- --------------------------------------------------------------------------------
(Day, Month, Year)
(jour, mois, annee)
4. The articles of the corporation are Les statuts de la compagnie sont
amended as follows: modified de la facon suivante:
1. Sections 8, 9(2) and 9(3) of the articles of incorporation of the
corporation dated October 21, 1994 be and they are hereby deleted in their
entirety.
2. The issued and outstanding common shares in the capital of the corporation
be and they are hereby subdivided by changing each of said common shares
into two (2) common shares in the capital of the corporation.
<PAGE>
5. The amendment has been duly La modification a ete dument autorisee
authorized as required by Sections conformement a l'article 168 et, s'il
168 & 170 (as applicable) of the y a lieu, a l'article 170 de la Loi
Business Corporations Act. sur les compagnies.
6. The resolution authorizing the Les actionnaires ou les
amendment was approved by the administrateurs (le cas echeant) de la
shareholders/directors (as compagnie ont approuve la resolution
applicable) of the corporation on autorisant la modification
05 SEPTEMBER 1995
----------------------------------------------------------
(Day, Month, Year)
(jour, mois, annee)
These articles are signed in duplicate. Les presents status sont signes en
double exemplaire.
RADIANT ENERGY CORPORATION
--------------------------------------
(Name of Corporation)
(Denomination sociale de la compagnie)
By/Par: /s/ Laurence Goldberg Secretary
---------------------------------------
(Signature) (Description of Office)
(Signature) (Fonction)
Laurence Goldberg
<PAGE>
[LOGO] Industry Canada Industrie Canada
Certificate Certificat de
of Amalgamation fusion
Canada Business Loi canadienne sur
Corporations Act les societes par actions
- --------------------------------------------------------------------------------
RADIANT ENERGY CORPORATION 323036-8
- ---------------------------------------------- ---------------------
Name of corporation-Denomination de la societe Corporation number-
Numero de la societe
I hereby certify that the above-named corporation resulted from an amalgamation,
under section 185 of the Canada Business Corporations Act, of the corporations
set out in the attached articles of amalgamation.
Je certifie que la societe susmentionnee est issue d'une fusion, en vertu de
l'article 185 de la Loi canadienne sur les societes par actions, des societes
dont les denominations apparaissent dans les statuts de fusion ci-joints.
/s/ [Illegible] February 21, 1996 / le 21 fevrier 1996
Director - Directeur Date of Amalgamation - Date de fusion
Canada [LOGO]
<PAGE>
[LOGO] Consumer and Consommation et
Corporate Affairs Canada Affaires commerciales Canada
Canada Business Loi regissant les societes
Corporations Act par actions de regime federal
FORM 9 FORMULE 9
ARTICLES OF AMALGAMATION STATUTS DE FUSION
(SECTION 185) (ARTICLE 185)
- --------------------------------------------------------------------------------
1 -- Name of amalgamated corporation Denomination de la societe issue de
la fusion
RADIANT ENERGY CORPORATION
- --------------------------------------------------------------------------------
2 -- The place in Canada where the Lieu au Canada ou doit etre situe le
registered office is to siege social
be situated
Suite 810
1 First Canadian Place
Toronto, Ontario, M5X 1A9
- --------------------------------------------------------------------------------
3 -- The classes and any maximum Categories et tout nombre maximal
number of shares that the d'actions que la societe est autorisee
corporation is authorized to a emettre
issue
The Corporation is authorized to issue an unlimited number of shares of
one class to be designated as common shares.
- --------------------------------------------------------------------------------
4 -- Restrictions, if any, on Restrictions sur le transfert des
share transfers actions, s'il y a lieu
None
- --------------------------------------------------------------------------------
5 -- Number (or minimum and maximum Nombre (ou nombre minimal et maximal)
number) of directors d'administrateurs
Not fewer than 3 directors and not more than 9 directors.
- --------------------------------------------------------------------------------
6 -- Restrictions, if any, on Limites imposees a l'activite commerciale
business the corporation may de la societe, s'il y a lieu
carry on
None
- --------------------------------------------------------------------------------
7 -- Other provisions, if any Autres dispositions, s'il y a lieu
None
- --------------------------------------------------------------------------------
8 -- The amalgamation has been 8 -- La fusion a ete approuvee en accord
approved pursuant to that avec l'article ou le paragraphe de
section or subsection of the la Loi indique ci-apres.
Act which is indicated as
follows:
/x/ 183
/ / 184(1)
/ / 184(2)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
9 -- Name of the amalgamating corporations Corporation No. Title
Denomination des societes fusionnantes No de la societe Signature Date Titre
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NORTHERN ATLAS INC. 13229-2 /s/ [Illegible] 02/20/96 DIRECTOR
- -----------------------------------------------------------------------------------------------------------------
PRESIDENT &
RADIANT ENERGY CORPORATION 323035-0 /s/ [Illegible] 02/20/96 DIRECTOR
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
FOR DEPARTMENTAL USE ONLY-- A L'USAGE DU MINISTERE SEULEMENT Filed -- Deposee
Corporation No.-- No de la societe FEB 23 1996
323036-8 FEV
- --------------------------------------------------------------------------------
7530-21-936-1390 (01-93) 46
<PAGE>
Canadian Business Corporations Act
Articles of Amalgamation
FORM 9
INSTRUCTIONS
Format
Documents required to be sent to the Director pursuant to the Canada Business
Corporations Act must conform to sections 5 to 10 of the Canada Business
Corporations Regulations.
Item 1
Set out the proposed name for the amalgamated corporation that complies with
sections 10 and 12 of the Act. If this name is not the same as one of the
amalgamating corporations, articles of amalgamation must be accompanied by a
Canada-biased NUANS search report dated not more than ninety (90) days prior to
the receipt of the articles by the Director. On request, a number name may be
assigned under subsection 11(2) of the Act, without a search.
Item 2
Set out the name of the place and province within Canada where the registered
office is to be situated. A specific street address is not required.
Item 3
Set out the details required by paragraph 6(1)(c) of the Act, including details
of the rights, privileges, restrictions and conditions attached to each class or
series of shares. All shares must be without nominal or par value and must
comply with the provisions of Part V of the Act.
Item 4
If restrictions are to be placed on the right to transfer shares of the
corporation, set out a statement to this effect and the nature of such
restrictions.
Item 5
Set out the number of directors. If cumulative voting is permitted, the number
of directors must be invariable; otherwise it is permissible to specify a
minimum and maximum number of directors.
Item 6
If restrictions are to be placed on the business the corporation may carry on,
set out the restrictions.
Item 7
Set out any provisions, permitted by the Act or Regulations to be set out in the
by-laws of the corporation, that are to form part of the articles, including any
pre-emptive rights or cumulative voting provisions.
Item 8
Indicate whether the amalgamation is under section 183 or subsection 184(1) or
(2) of the Act.
Other Notices and Documents
(1) The articles must be accompanied by a Notice of Registered Office (Form 3),
a Notice of Directors (Form 6) and a statutory declaration of a director or
authorized officer of each amalgamating corporation in accordance with
subsection 185(2) of the Act.
(2) All amalgamating corporations should ensure that all filing requirements
contained in the Act have been met.
Completed documents in duplicate and fees payable to the Receiver General, are
to be sent to:
The Director, Canada Business Corporations Act
Place du Portage
Hull, Quebec, Canada
K1A 0C9
Loi regissant les societes par actions de regime federal
Statuts de fusion
FORMULE 9
INSTRUCTIONS
Presentation
Tous les documents dont l'envoi au directeur est exige par la Loi regissant les
societes par actions de regime federal doivent etre conformes aux articles 5 a
10 du Reglement sur les societes par actions de regime federal.
Rubrique 1
Indiquer la denomination de la societe issue de la fusion, laquelle doit
satisfaire aux exigences des articles 10 et 12 de la Loi. Si cette denomination
differe de celle de l'une des societes fusionnantes. les statuts de fusion
doivent etre accompagnes d'un rapport de recherche NUANS couvrant le Canada,
dont la date remonte a quatre-vingt-dix (90) jours ou moins avant la date de
reception des statuts par le directeur. Si un numero matricule est demande en
guise de denomination sociale, il peut etre assigne, sans recherche prealable,
en vertu du paragraphe 11(2) de la Loi.
Rubrique 2
Indiquer le nom de l'endroit et de la province au Canada ou le siege social doit
etre situe. Une adresse precise n'est pas requise.
Rubrique 3
Indiquer les details requis par l'alinea 6(1)c) de la Loi, y compris les details
des droits, privileges, restrictions et conditions assortis a chaque categorie
ou serie d'actions. Toutes les actions doivent etre sans valeur nominale ou sans
valeur au pair et doivent etre conformes aux dispositions de la partie V de la
Loi.
Rubrique 4
Si le droit de transfert des actions de la societe doit etre restreint, inclure
une declaration a cet effet et indiquer la nature de ces restrictions.
Rubrique 5
Indiquer le nombre des administrateurs. Si un vote cumulatif est prevu, ce
nombre doit etre fixe; autrement, il est permis de specifier un nombre minimal
et maximal d'administrateurs.
Rubrique 6
Si des limites doivent etre imposees a l'activite commerciale de la societe, les
indiquer.
Rubrique 7
Indiquer les dispositions que la Loi ou le reglement permet d'enoncer dans les
reglements administratifs de la societe et qui doivent faire partie des statuts,
y compris les dispositions relatives au vote cumulatif ou aux droits de
preemption.
Rubrique 8
Indiquer si la fusion est faite en vertu de l'article 183 ou des paragraphes
184(1) ou (2) de la Loi.
Autres avis et documents
(1) Les statuts doivent etre accompagnes d'un avis de designation du siege
social (formule 3), d'une liste des administrateurs (formule 6) et d'une
declaration solennelle d'un administrateur ou d'un dirigeant autorise de chaque
societe fusionnante conformement au paragraphe 185(2) de la Loi.
(2) Les societes fusionnantes doivent s'assurer que toutes les exigences de
depot contenues dans la loi ont ete remplies.
Las documents remplis en double et les droits payables au receveur general
doivent etre envoyes au:
Directeur, Loi regissant es societes par actions de regime federal
Place du Portage
Hull (Quebec) Canada
K1A 0C9
<PAGE>
[LOGO] Industry Canada Industrie Canada
Corporations Directorate Direction generale des Corporations
9th floor, Journal Tower S. 9e etage, Edifice Journal, Tour sud
365 Laurier Avenue West 365, avenue Laurier ouest
Ottawa, Ontario Ottawa (Ontario)
K1A 0C8 K1A 0C8
February 23, 1996/le 23 fevrier 1996 Your file - Votre reference
WILDEBOER RAND THOMSON APPS Our file - Notre reference
ATTN: CLIFF RAND 323035-0
1 FIRST CANADIAN PLACE
SUITE 810, P.O. BOX 4
TORONTO, ONT
M5X 1A9
Re - Objet
Radiant Energy Corporation
Enclosed herewith is the document issued in the above matter.
A notice of issuance of CBCA documents will be published in the Canada
Corporations Bulletin. A notice of issuance of CCA documents will be published
in the Canada Corporations Bulletin and the Canada Gazette.
IF A NAME OR CHANGE OF NAME IS INVOLVED, THE FOLLOWING CAUTION SHOULD BE
OBSERVED:
This name is available for use as a corporate name subject to and
conditional upon the applicants assuming full responsibility for any risk
of confusion with existing business names and trade marks (including those
set out in the relevant NUANS search report(s)). Acceptance of such
responsibility will comprise an obligation to change the name to a
dissimilar one in the event that representations are made and established
that confusion is likely to occur. The use of any name granted is subject
to the laws of the jurisdiction where the company carries on business.
Vous trouverez ci-inclus le document emis dans l'affaire precitee.
Un avis de l'emission de documents en vertu de la LCSA sera publie dans le
Bulletin des societes canadiennes. Un avis de l'emission de documents en vertu
de la LCC sera publie dans le Bulletin des societes canadiennes et dans la
Gazette du Canada.
S'IL EST QUESTION D'UNE DENOMINATION SOCIALE OU D'UN CHANGEMENT DE DENOMINATION
SOCIALE, L'AVERTISSEMENT SUIVANT DOIT ETRE RESPECTE:
Cette denomination sociale est disponible en autant que les requerants
assument toute responsabilite de risque de confusion avec toutes
denominations commerciales et toutes marques de commerce existantes (y
compris celles qui sont citees dans le(s) rapport(s) de recherches de
NUANS pertinent(s)). Cette acceptation de responsabilite comprend
l'obligation de changer la denomination de la societe en une denomination
differente advenant le cas ou des representations sont faites etablissant
qu'il y a une probabilite de confusion. L'utilisation de tout nom octroye
est sujette a toute loi de la juridiction ou la societe exploite son
entreprise.
/s/ [Illegible]
For the Director General, pour le Directeur general,
Corporations Directorate Direction generale des Corporations
Canada [LOGO]
<PAGE>
[LOGO] Industry Canada Industrie Canada
Certificate Certificat
of Continuance de prorogation
Canada Business Loi canadienne sur
Corporations Act les societes par actions
- --------------------------------------------------------------------------------
RADIANT ENERGY CORPORATION 323035-0
- ---------------------------------------------- ---------------------
Name of corporation-Denomination de la societe Corporation number-
Numero de la societe
I hereby certify that the above-named corporation was continued under section
187 of the Canada Business Corporations Act, as set out in the attached articles
of continuance.
Je certifie que la societe susmentionnee a ete prorogee en vertu de
l'article 187 de la Loi canadienne sur les societes par actions, tel qu'il est
indique dans les clauses de prorogation ci-jointes.
/s/ [Illegible] February 21, 1996 / le 21 fevrier 1996
Director - Directeur Date of Continuance - Date de la prorogation
Canada [LOGO]
<PAGE>
CANADA BUSINESS CORPORATION ACT
FORM 11
ARTICLES OF CONTINUANCE
(Section 187)
1. Name of Corporation:
Radiant Energy Corporation
2. The place in Canada where the registered office is to be situated:
The Municipality of Metropolitan Toronto, in the Province of Ontario.
3. The classes and any maximum number of shares that the corporation is
authorized to issue:
The Corporation is authorized to issue an unlimited number of one class of
shares which shall be designated as "common shares".
4. Restrictions, if any, on share transfers:
There are no restrictions on the issue, transfer or ownership of shares of
the Corporation.
5. Number (or minimum and maximum number) of directors:
A minimum of three (3) directors and a maximum of ten (10) directors.
Until otherwise determined, the number of directors of the Corporation
shall be fixed at nine (9) persons.
6. Restrictions, if any, on the business the Corporation may carry on:
There are no restrictions on the business the Corporation may carry on.
7. (1) If change of name effected, previous name:
No change of name effected.
(2) Details of incorporation:
The Corporation was incorporated on October 21, 1994 pursuant to
articles of incorporation filed under the Business Corporations Act
(Ontario). By certificate and articles of amendment dated October 5,
1995, the restrictions on the issue,
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transfer and ownership of shares of the Corporation were removed
from the Corporation's articles.
8. Other provisions, if any:
None
Date: February 13, 1996 /s/ John Charles Chew
-------------------------------
John Charles Chew,
President
323035-0 FEB 23 1996
FEV
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BY-LAW NO. 1
A by-law relating generally to the transaction of the business and affairs
of Radiant Energy Corporation.
CONTENTS
Section One - Interpretation
Section Two - Business of the Corporation
Section Three - Borrowing and Debt Obligations
Section Four - Directors
Section Five - Committees
Section Six - Officers
Section Seven - Protection of Directors, Officers and Others
Section Eight - Shares
Section Nine - Dividends and Rights
Section Ten - Meetings of Shareholders
Section Eleven - Notices
Section Twelve - Effective Date
BE IT ENACTED as a by-law of the Corporation as follows:
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SECTION ONE
INTERPRETATION
1.01 DEFINITIONS - In the by-laws of the Corporation, unless the context
otherwise requires:
"Act" means the Business Corporations Act (Ontario), or the Canada
Business Corporations Act in the event that the Corporation is continued
under that Act, and any Act that may be substituted therefor, as from time
to time amended;
"articles" means the articles of incorporation of the Corporation filed
October 21, 1994 as from time to time amended, supplemented or restated;
"board" means the Board of Directors of the Corporation;
"by-laws" means this by-law and all other by-laws and special by-laws of
the Corporation from time to time in force and effect;
"Corporation" means the corporation incorporated by articles under the Act
and named Radiant Energy Corporation;
"non-business day" means Saturday, Sunday and any other day that is a
holiday as defined in the Interpretation Act (Ontario);
"meeting of shareholders" includes an annual or other general meeting of
shareholders and a special meeting of shareholders;
"special meeting of shareholders" includes a meeting of any class or
classes of shareholders, as well as a special general meeting of
shareholders;
"recorded address" means, in the case of a shareholder, his address as
recorded in the register of shareholders and, in the case of a director,
officer, auditor or member of a committee of the board, his address as
recorded in the records of the Corporation;
"signing officer" means, in relation to any instrument, any person
authorized to sign the same on behalf of the Corporation by section 2.04
of this by-law or by a resolution passed pursuant thereto;
save as aforesaid, words and expressions defined in the Act have the same
meanings when used herein and words importing the singular number include the
plural and vice versa; and words importing the masculine gender include the
feminine and neuter genders; and words importing persons include individuals,
bodies corporate, partnerships, trusts and unincorporated organizations.
SECTION TWO
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BUSINESS OF THE CORPORATION
2.01 HEAD OFFICE - Until changed in accordance with the Act, the head office of
the Corporation shall be in the Municipality of Metropolitan Toronto in the
Province of Ontario and at such location therein as the board may from time to
time determine by resolution.
2.02 CORPORATE SEAL - Until changed by resolution of the board, the corporate
seal of the Corporation shall be in the form impressed hereon.
2.03 FINANCIAL YEAR - The financial year of the Corporation shall end on such
date in each year as shall be determined from time to time by resolution of the
directors.
2.04 EXECUTION OF INSTRUMENTS - Deeds, transfers, assignments, contracts,
obligations, certificates and other instruments may be signed on behalf of the
Corporation by two persons, one of whom holds the office of chairman of the
board, president, vice-president, general manager or director and the other of
whom holds one of the said offices or the office of secretary, treasurer,
assistant secretary or assistant treasurer or any other office created by
by-laws or the board. In addition, the board may from time to time direct by
resolution the manner in which and the person or persons by whom any particular
instrument or class of instruments may or shall be signed. Any signing officer
may affix the corporate seal thereto.
2.05 BANKING ARRANGEMENTS - The banking business of the Corporation 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 or powers as the board may
from time to time prescribe or authorize.
2.06 VOTING RIGHTS IN OTHER BODIES CORPORATE - The signing officers of the
Corporation may execute and deliver instruments of proxy 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, certificates or other evidence shall be in favour of such person or
persons as may be determined by the officers signing or arranging for them. In
addition, the board may from time to time direct the manner in which and the
person or persons by whom any particular voting rights or class of voting rights
may or shall be exercised.
2.07 WITHHOLDING INFORMATION FROM SHAREHOLDERS - No shareholder shall be
entitled to discovery of any information respecting any details or conduct of
the Corporation's business which, in the opinion of the board, it would be
inexpedient in the interests of the shareholders or the Corporation to
communicate to the public. The board may from time to time determine whether and
to what extent and at what time and place and under what conditions or
regulations the accounts, records and documents of the Corporation or any of
them shall be open to the inspection of shareholders and no shareholder shall
have any right of
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inspecting any account, record or document of the Corporation except as
conferred by the Act or authorized by the board or by resolution passed at a
general meeting of shareholders.
SECTION THREE
BORROWING AND SECURITIES
3.01 BORROWING POWER - The board may from time to time, in such amounts and on
such terms as it deems expedient:
(a) borrow money on the credit of the Corporation;
(b) issue, sell or pledge debt obligations (including bonds, debentures,
notes or other similar obligations, secured or unsecured) of the
Corporation;
(c) charge, mortgage, hypothecate or pledge all or any of the currently
owned or subsequently acquired real or personal, movable or
immovable, property of the Corporation, including book debts,
rights, powers, franchises and undertaking, to secure any debt
obligations or any money borrowed, or other debt or liability of the
Corporation.
3.02 DELEGATION - The board may from time to time delegate to such one or more
of the directors and officers of the Corporation as may be designated by the
board all or any of the powers conferred on the board by section 3.01 to such
extent and in such manner as the board shall determine at the time of each such
delegation.
SECTION FOUR
DIRECTORS
4.01 NUMBER OF DIRECTORS AND QUORUM - Until changed in accordance with the Act,
the board shall consist of nine (9) directors of whom five (5) shall constitute
a quorum for the transaction of business. A majority of the directors shall be
resident Canadians.
4.02 QUALIFICATION - At least two directors shall not be officers or employees
of the Corporation or of any affiliate of the Corporation. No person shall be
qualified for election or appointment as a director if he is an undischarged
bankrupt; if he is mentally incompetent or
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incapable of managing his affairs; or if he has not attained 18 years of age. A
director need not be a shareholder.
4.03 CONSENT - No election or appointment of a person as a director shall be
effective unless (a) he consents in writing to act as a director before his
election or appointment or within 10 days thereafter, or (b) he was present at
the meeting when he was elected or appointed and did not refuse at that meeting
to act as a director.
4.04 ELECTION AND TERM - 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. The election may be by a
show of hands or by a resolution of the shareholders unless a poll is required
or demanded. If an election of directors is not held at the proper time, the
directors shall continue in office until their successors are elected.
4.05 REMOVAL OF DIRECTORS - Subject to the provisions of the Act, the
shareholders, by resolution passed by a majority of the votes cast thereon at a
meeting of shareholders called for that purpose, may remove any director before
the expiration of his term of office and may elect any qualified person in his
stead for the remainder of his term.
4.06 VACATION OF OFFICE - The office of a director shall be vacated upon the
occurrence of any of the following events: (a) if a receiving order is made
against him or if he makes an assignment under the Bankruptcy Act; (b) if an
order is made declaring him to be a mentally incompetent person or incapable of
managing his affairs; (c) if he shall be removed from office by resolution of
the shareholders as provided in section 4.05; or (d) if by notice in writing to
the Corporation he resigns his office and such resignation, if not effective
immediately, becomes effective in accordance with its terms.
4.07 VACANCIES - If the number of directors is increased, the resulting
vacancies shall be filled at a meeting of shareholders duly called for that
purpose. Subject to the provisions of the Act, if a vacancy should otherwise
occur in the board, the remaining directors, if constituting a quorum, may
appoint a qualified person to fill the vacancy for the remainder of the term. In
the absence of a quorum the remaining directors shall forthwith call a meeting
of shareholders to fill the vacancy.
4.08 ACTION BY THE BOARD - The board shall manage or supervise the management of
the affairs and business of the Corporation. The powers of the board may be
exercised by a meeting at which a quorum of directors is present and at which a
majority of the directors present are resident Canadians or by by-law or
resolution consented to in accordance with the Act by the signatures of all the
directors then in office if constituting a quorum. Where all the directors
consent thereto, any director may participate in a meeting of the board or of
the executive committee by means of conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and a director so participating in the meeting shall be deemed to be
present at that meeting. Where there is a vacancy or vacancies in the board, the
remaining directors may exercise all the powers of the board so long as a quorum
remains in office.
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4.09 PLACE OF MEETINGS - Meetings of the board shall be held at the head office
of the Corporation or elsewhere in Ontario or, if the board so determines or all
absent directors consent, at some place outside Ontario, but in any financial
year of the Corporation a majority of the meetings of the board shall be held in
Canada.
4.10 MEETINGS BY TELEPHONE - Where all the directors have consented thereto, any
director may participate in a meeting of the board by means of conference
telephone or other communications equipment by means of which all persons
participating in the meeting can hear each other, and a director participating
in a meeting pursuant to this section shall be deemed to be present in person at
the meeting. Any consent given hereunder shall be effective whether given before
or after the meeting to which it relates. If a majority of the directors
participating in a meeting held pursuant to this section are then in Canada, the
meeting shall be deemed to have been held in Canada.
4.11 CALLING OF MEETINGS - Meetings of the board shall be held from time to time
at such place (subject to section 4.09) at such time and on such day as the
board, the chairman of the board, the president or any two directors may
determine. Notice of the time and place of every meeting so called shall be
given in the manner provided in Section Eleven to each director (a) not less
than 48 hours before the time when the meeting is to be held if the notice is
mailed, or (b) not less than 24 hours before the time when the meeting is to be
held if the notice is given personally or is delivered or is sent by any means
of transmitted or recorded communication; provided that no notice of a meeting
shall be necessary if all the directors in office are present or if those absent
waive notice of or otherwise consent to such meeting being held.
4.12 ATTENDANCE OF AUDITORS - The auditors of the Corporation shall be entitled
to attend and be heard at meetings of the board on matters relating to their
duties as auditors.
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 REGULAR MEETINGS - The board may appoint a day or days in any month or
months for regular meetings at a place and hour to be named. A copy of any
resolution of the board fixing the place and time of regular meetings of the
board shall be sent to each director forthwith after being passed, but no other
notice shall be required for any such regular meeting.
4.15 CHAIRMAN - The chairman of the board, if such an officer has been elected
and is present, otherwise the president, or in his absence a vice-president who
is a director shall be chairman of any meeting of the board. If no such officer
is present, the directors present shall choose one of their number to be
chairman.
4.16 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 not be entitled to a second or
casting vote.
4.17 CONFLICT OF INTEREST - A director shall not be disqualified by reason of
his office from contracting with the Corporation or a subsidiary thereof.
Subject to the provisions of
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the Act, a director shall not by reason only of his office be accountable to the
Corporation or to its shareholders for any profit or gain realized from a
contract or transaction in which he has an interest, and such contract or
transaction shall not be voidable by reason only of such interest, provided
that, if a declaration and disclosure of such interest is required by the Act,
such declaration and disclosure shall have been made and, if required by the
Act, the director shall have refrained from voting as a director on the contract
or transaction and shall not have been counted in the quorum.
4.18 REMUNERATION AND EXPENSES - The directors shall be paid such remuneration
for their services as directors as may from time to time be authorized by by-law
confirmed at a meeting of shareholders in accordance with the Act. 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 therefor.
SECTION FIVE
COMMITTEES
5.01 EXECUTIVE COMMITTEE - Whenever the board consists of more than six (6)
directors, the board may elect from among its number an executive committee to
be composed of not fewer than three (3) directors, which committee may exercise
all the powers of the board.
5.02 TRANSACTION OF BUSINESS - No business shall be transacted by the executive
committee except at a meeting of its members at which a quorum of the committee
is present and at which a majority of the members present are resident
Canadians. The provisions of sections 4.09 and 4.10 shall apply, with all
changes required by the context, to meetings of the executive committee.
5.03 AUDIT COMMITTEE - The board shall elect annually from among its number an
audit committee to be composed of not fewer than three (3) directors, of whom a
majority shall not be officers or employees of the Corporation or an affiliate
of the Corporation. The audit committee shall have the powers and duties
provided in the Act.
5.04 ADVISORY COMMITTEES - The board may from time to time elect or appoint such
other committees as it may deem advisable, but the functions of any such other
committees shall be advisory only.
5.05 PROCEDURE - Unless otherwise ordered by the board, each committee shall
have power to fix its quorum at not less than a majority of its members, to
elect its chairman and to regulate its procedure.
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SECTION SIX
OFFICERS
6.01 ELECTION OR APPOINTMENT - From time to time the board shall elect or
appoint a president and a secretary, and may elect or appoint one or more
vice-presidents (to which title may be added words indicating seniority or
function), a general manager, a treasurer and such other officers as the board
may determine, including one or more assistants to any of the officers so
elected or appointed. Subject to section 6.02, the officers of the Corporation
may but need not be directors and one person may hold more than one office.
6.02 CHAIRMAN OF THE BOARD - From time to time the board may also elect or
appoint a chairman of the board who shall be a director and who shall not hold
the office of secretary. If so elected or appointed, the chairman of the board
shall, if present, preside at all meetings of the board and, in the absence of
the president, at all meetings of shareholders. In addition, the board may
assign to him any of the powers and duties that are by any provisions of this
by-law assigned to the president, and he shall have such other powers and duties
as the board may prescribe. During the absence or disability of the chairman of
the board, the president shall assume all his powers and duties.
6.03 PRESIDENT - The president shall be the chief executive officer of the
Corporation and, subject to the authority of the board, shall have general
supervision of the affairs and business of the Corporation. Except when the
board has elected or appointed a general manager or managing director, the
president shall also have the powers and be charged with the duties of that
office.
6.04 VICE-PRESIDENT - During the absence or disability of the president, his
duties shall be performed and his powers exercised by the vice-president or, if
there are more than one, by the vice-president designated from time to time by
the board or the president. A vice-president shall have such other powers and
duties as the board or the president may prescribe.
6.05 GENERAL MANAGER - If elected or appointed, the general manager shall have,
subject to the authority of the board and the supervision of the president,
general supervision of the affairs and business of the Corporation and the power
to appoint and remove any and all employees and agents of the Corporation not
elected or appointed by the board and to settle the terms of their employment
and remuneration; and he shall have such other duties as the board or the
president may prescribe. If and so long as the general manager is a director, he
may but need not be known as the managing director.
6.06 SECRETARY - The secretary shall attend and be the secretary of all meetings
of the board and shareholders and shall enter or cause to be entered in records
kept for that purpose minutes of all proceedings thereat. He shall give or cause
to be given, as and when instructed, all notices to directors, shareholders,
auditors and members 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, papers, records, documents 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 duties as the board or
the president may prescribe.
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6.07 TREASURER - The treasurer shall keep proper accounting records in
compliance with the Act and, under the direction of the board, shall control the
deposit of money, the safekeeping of securities and the disbursement of the
funds of the Corporation. He shall render to the board whenever required an
account of all his transactions as treasurer and of the financial position of
the Corporation and he shall have such other duties as the board or the
president may prescribe.
6.08 DUTIES OF OTHER OFFICERS - The duties of all other officers of the
Corporation shall be such as the terms of their engagement call for or as the
board or the president may prescribe. 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 the president otherwise directs.
6.09 VARIATION OF DUTIES - From time to time the board may vary, add to or limit
the powers and duties of any officer.
6.10 TERM OF OFFICE - The board may remove at its pleasure any officer of the
Corporation, without prejudice to any officer's rights under any employment
contract. Otherwise each officer elected or appointed by the board shall hold
office until his successor is elected or appointed.
6.11 TERMS OF EMPLOYMENT AND REMUNERATION - The terms of employment and the
remuneration of officers elected or appointed by the board shall be settled by
it from time to time.
6.12 AGENTS AND ATTORNEYS - The board shall have power from time to time to
appoint agents or attorneys for the Corporation in or out of Canada with such
powers of management or otherwise (including the power to sub-delegate) as may
be thought fit.
6.13 FIDELITY BONDS - The board may require such officers, employees and agents
of the Corporation as the board deems advisable to furnish bonds for the
faithful discharge of their duties, in such form and with such surety as the
board may from time to time prescribe.
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SECTION SEVEN
PROTECTION OF DIRECTORS, OFFICERS AND OTHERS
7.01 LIMITATION OF LIABILITY - No director or officer of the Corporation shall
be liable for the acts, receipts, neglects or defaults of any other director or
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 by order of the
board 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 whatever which shall happen in the execution of the
duties of his office or in relation thereto, unless the same are occasioned by
his own wilful neglect or default, provided that nothing herein shall relieve
any director or officer of any liability imposed upon him by the Act.
7.02 INDEMNITY - Subject to the limitations contained in the Act, every director
and every officer of the Corporation and every other person who has undertaken
or is about to undertake any liability on behalf of the Corporation or any body
corporate controlled by it and his heirs, executors, administrators and other
legal personal representatives shall, from time to time, be indemnified and
saved harmless by the Corporation from and against:
(a) any liability and all costs, charges and expenses that he sustains
or incurs in respect of any action, suit or proceeding that is
proposed or commenced against him for or in respect of anything done
or permitted by him in respect of the execution of the duties of his
office; and
(b) all other costs, charges and expenses that he sustains or incurs in
respect of the affairs of the Corporation.
7.03 INSURANCE - Subject to the limitations contained in the Act, the
Corporation may purchase and maintain such insurance for the benefit of its
directors and officers as such as the board may from time to time determine.
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SECTION EIGHT
SHARES
8.01 ALLOTMENT - 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, including any shares created by articles of amendment increasing or
otherwise varying the capital of the Corporation, in such manner and to such
persons or class of persons as the board shall by resolution determine, provided
that no share shall be issued until it is fully paid as provided by the Act.
8.02 COMMISSIONS AND DISCOUNTS - The board may from time to time authorize the
payment of commissions or the allowance of discounts to persons in consideration
of their subscribing or agreeing to subscribe, whether absolutely or
conditionally, for shares of the Corporation, or procuring or agreeing to
procure subscriptions, whether absolute or conditional, for such shares, but no
such commission or discount shall exceed 25% of the amount of the subscription
price.
8.03 TRANSFER AGENTS AND REGISTRARS - The board may from time to time by
resolution appoint a registrar to keep the register of security holders and a
transfer agent to keep the register of transfers and may also appoint one or
more branch registrars to keep branch registers of security holders and one or
more branch transfer agents to keep branch registers of transfers, but one
person may be appointed both registrar and transfer agent. The board may at any
time terminate any such appointment.
8.04 REGISTRATION OF TRANSFER - Subject to the provisions of the Act, no
transfer of shares shall be registered in a register of transfers or branch
register of transfers except upon surrender of the certificate representing such
shares with a transfer endorsed thereon or delivered therewith, duly executed by
the registered holder or by his attorney or successor duly appointed, together
with such assurance or evidence of signature, identification and authority to
transfer as the board may from time to time prescribe, and upon payment of all
applicable taxes, compliance with such restrictions on transfer as are
authorized by the articles and satisfaction of any lien referred to in section
8.05.
8.05 LIEN FOR INDEBTEDNESS - Except in the case of any class or series of shares
of the Corporation listed on a stock exchange, the Corporation shall have a lien
on the shares registered in the name of a shareholder who is indebted to the
Corporation, to the extent of such debt.
8.06 NON-RECOGNITION OF TRUSTS - The Corporation shall be entitled to treat the
registered holder of any share as the absolute owner thereof and accordingly
shall not, except as ordered by a court of competent jurisdiction or as required
by statute, be bound to see to the execution of any trust, whether express,
implied or constructive, in respect of any share or to recognize any other claim
to or interest in such share on the part of any person other than the registered
holder thereof.
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8.07 SHARE CERTIFICATES - Every holder of one or more fully paid shares of the
Corporation shall be entitled, without payment, to a share certificate stating
the number and class or series of shares held by him as shown by the register,
and stating that such shares are fully paid. Share certificates shall be in such
form as the board shall from time to time approve. They shall be signed in
accordance with section 2.04 and need not be under the corporate seal; provided
that, unless the board otherwise orders, certificates representing shares in
respect of which a transfer agent and/or registrar has been appointed shall not
be valid unless countersigned by or on behalf of such transfer agent and/or
registrar. The signature of one of the signing officers or, in the case of share
certificates which are not valid unless countersigned by or on behalf of a
transfer agent and/or registrar, the signatures of both signing officers may be
mechanically reproduced in facsimile upon share certificates and every such
facsimile signature shall for all purposes be deemed to be the signature of the
officer whose signature it reproduces and shall be binding upon the Corporation.
A share certificate executed as aforesaid shall be valid notwithstanding that
one or both of the officers whose signature (whether manual or facsimile)
appears thereon no longer holds office at the date of issue or delivery of the
certificate.
8.08 REPLACEMENT OF SHARE CERTIFICATES - The board or any officer or agent
designated by the board may in its or his discretion direct the issue of a new
share certificate in lieu of and upon cancellation of a share certificate that
has been mutilated or in substitution for a share certificate that has been
lost, apparently destroyed or wrongfully taken on payment of such fee, not
exceeding $3, 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.
8.09 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.
8.10 DECEASED SHAREHOLDERS - In the event of the 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 register of shareholders in respect thereof or to make payment
of any dividends thereon 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 agent.
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SECTION NINE
DIVIDENDS AND RIGHTS
9.01 CASH DIVIDENDS - Subject to the provisions of the Act and the articles, the
board may from time to time declare dividends payable to the shareholders
according to their respective rights and interests in the Corporation.
9.02 STOCK DIVIDENDS - For the amount of any dividend that the board may
lawfully declare payable in money, it may declare a stock dividend and issue
therefor shares of the Corporation as fully paid.
9.03 DIVIDEND CHEQUES - A dividend payable in cash shall be paid by cheque drawn
on the Corporation's bankers or one of them 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 ordinary mail, postage prepaid, to such registered holder at his
address appearing on the register of shareholders, 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 the address appearing on the register of
shareholders in respect of such joint holding, or to the first address so
appearing, if there are more than one. The mailing of such cheque as aforesaid,
unless the same be 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.
9.04 NON-RECEIPT OF CHEQUES - In the event of non-receipt of any dividend cheque
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 of 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.
9.05 RECORD DATE FOR DIVIDENDS AND RIGHTS - The board may fix in advance a date,
preceding by not more than 31 days the date for the payment of any dividend or
the date for the issue of any warrant or other evidence of 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. In every such case only such persons as shall be
shareholders of record at the close of business on the record date so fixed
shall be entitled to receive payment of such dividend or to exercise the right
to subscribe for such securities and to receive the warrant or other evidence in
respect of such right, notwithstanding the transfer or issue of any shares after
the record date is fixed.
9.06 UNCLAIMED DIVIDENDS - Any dividend unclaimed after a period of 12 years
from the date on which the same has been declared to be payable shall be
forfeited and shall revert to the Corporation.
<PAGE>
-14-
SECTION TEN
MEETINGS OF SHAREHOLDERS
10.01 ANNUAL MEETINGS - The annual meeting of shareholders shall be held at such
time and on such day in each year as the board, the chairman of the board or the
president may from time to time determine, for the purpose of receiving the
reports and statements required by the Act to be laid before the annual meeting,
electing directors, appointing auditors and fixing or authorizing the board to
fix their remuneration, 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 or the president
shall have power to call a special meeting of shareholders at any time.
10.03 PLACE OF MEETINGS - Meetings of shareholders shall be held at the head
office of the Corporation or elsewhere in the municipality in which the head
office is situate or at such other place or places outside Ontario as the
articles permit or, if the board shall so determine, at some other place in
Ontario.
10.04 NOTICE OF MEETINGS - Notice of the time and place of each meeting of
shareholders shall be given in the manner provided in Section Eleven not less
than 21 nor more than 50 days before the date of the meeting to each director
and to each shareholder who at the close of business on the record date for
notice is entered in the register of shareholders as the holder of one or more
shares carrying the right to vote at the meeting. Notice of a special meeting of
shareholders shall state the general nature of the business to be transacted at
it. The auditors of the Corporation are entitled to receive all notices and
other communications relating to any meeting of shareholders that any
shareholder is entitled to receive.
10.05 RECORD DATE FOR NOTICE - The board may fix in advance a time and a date,
preceding the date of any meeting of shareholders by not more than 50 days and
not less than 21 days, for the determination of the shareholders entitled to
notice of the meeting. If no such record date for notice is fixed by the board,
the record date for notice shall be the day next preceding the day on which
notice is given.
10.06 MEETINGS WITHOUT NOTICE - A meeting of shareholders may be held without
notice at any time and at any place permitted by the Act or the articles (a) if
all the shareholders entitled to vote thereat are present in person or
represented by proxy or if those not present or represented by proxy waive
notice of or otherwise consent to such meeting being held, and (b) if the
auditors and the directors are present or waive notice, or otherwise consent to
such meeting being held; and at such meeting any business may be transacted
which the Corporation at a meeting of shareholders may transact.
10.07 CHAIRMAN, SECRETARY AND SCRUTINEERS - The president or, in his absence,
the chairman of the board, if such an officer has been elected or appointed and
is present, otherwise a vice-president who is a shareholder of the Corporation
shall be chairman of any
<PAGE>
-15-
meeting of shareholders. 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.
10.08 PERSONS ENTITLED TO BE PRESENT - The only persons entitled to attend a
meeting of shareholders shall be those entitled to vote thereat, the auditors 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.
10.09 QUORUM - A quorum for the transaction of business at any meeting of
shareholders shall be two (2) persons present in person, each being a
shareholder entitled to vote thereat or a duly appointed proxy for an absent
shareholder so entitled.
10.10 RIGHT TO VOTE - At any meeting of shareholders every person shall be
entitled to vote who, at the time of the taking of the vote (or, if there is a
record date for voting, at the close of business on such record date), is
entered in the register of shareholders as the holder of one or more shares
carrying the right to vote at such meeting, subject to the provisions of the Act
as to shares that have been mortgaged or hypothecated.
10.11 RECORD DATE FOR VOTING - The board may fix in advance a date, preceding
the date of any meeting of shareholders by not more than two days, excluding
non-business days, for the determination of the shareholders entitled to vote at
the meeting. The record date for voting at a meeting of shareholders shall be
specified in the notice calling the meeting or in the information circular
relating thereto.
10.12 PROXIES - Every shareholder entitled to vote at a meeting of shareholders
may appoint a person, who need not be a shareholder, as his proxy to attend and
act for him at the meeting in the manner, to the extent and with the power
conferred by the instrument appointing him. An instrument appointing a proxy
shall be in writing executed by or on behalf of the appointor and shall conform
with the requirements of the Act.
10.13 TIME FOR DEPOSIT OF PROXIES - The board may fix in advance a time,
preceding the time of any meeting or adjourned meeting of shareholders by not
more than 48 hours, excluding non-business days, before which time instruments
appointing proxies must be deposited. An instrument appointing a proxy shall be
acted upon only if, prior to the time so fixed and specified in the notice
calling the meeting or in the information circular relating thereto, it shall
have been deposited with the Corporation or an agent thereof specified in such
notice or information circular or, if no such time is specified in such notice
or information circular, unless 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.
<PAGE>
-16-
10.14 PERSONAL REPRESENTATIVE - If the shareholder of record is deceased, his
personal representative, upon filing with the secretary of the meeting
sufficient proof of his appointment, shall be entitled to exercise the same
voting rights at any meeting of shareholders as the shareholder of record would
have been entitled to exercise if he were living, and for the purposes of the
meeting shall be considered a shareholder. If there is more than one personal
representative, the provisions of section 10.15 shall apply.
10.15 JOINT SHAREHOLDERS - If shares are held jointly by two or more persons,
any one of them present in person or represented by proxy at a meeting of
shareholders may, in the absence of the other or others, vote thereon; but if
more than one of them shall be present in person or represented by proxy, they
shall vote together as one on the shares jointly held by them.
10.16 VOTES TO GOVERN - At any meeting of shareholders every question shall,
unless otherwise required by the articles or by-laws or by law, be determined by
the 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.
10.17 SHOW OF HANDS - Subject to the provisions of the Act, any question at a
meeting of shareholders shall be decided by a show of hands unless a poll
thereon is required or demanded as hereinafter provided. 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 poll
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
or proportion of the votes recorded in favour of or against any resolution or
other proceeding in respect of the said question, and the result of the vote so
taken shall be the decision of the shareholders upon the said question.
10.18 POLLS - On any question proposed for consideration at a meeting of
shareholders, and whether or not a show of hands has been taken thereon, the
chairman may require or any person entitled to vote on the question may demand a
poll thereon. A poll so required or demanded shall be taken in such manner as
the chairman shall direct. A requirement or demand for a poll may be withdrawn
at any time prior to the taking of the poll. Upon a poll 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 or the
articles, and the result of the poll so taken shall be the decision of the
shareholders upon the said question.
10.19 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.
10.20 ACTION IN WRITING BY SHAREHOLDERS - Any by-law or resolution passed by the
directors may, in lieu of confirmation at a general meeting of shareholders, be
confirmed and consented to in writing by all the shareholders entitled to vote
at such meeting. Any resolution may be consented to by the signature of all the
shareholders who would be entitled to vote at a
<PAGE>
-17-
meeting of shareholders duly called, constituted and held for the purpose of
considering such resolution.
SECTION ELEVEN
NOTICES
11.01 METHOD OF GIVING NOTICES - Any notice (which term includes any
communication or document) to be given, sent, delivered or served pursuant to
the Act, 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
delivered to his recorded address or if mailed to him at his recorded address by
prepaid air or ordinary mail, or if sent to him at his recorded address by any
means of prepaid transmitted or recorded communication. A notice so delivered
shall be deemed to have been given when it is delivered personally or at the
recorded address as aforesaid; a notice so mailed shall be deemed to have been
given when deposited in a post office or public letter box; and a notice sent by
any means of transmitted or recorded communication shall be deemed to have been
given when dispatched or delivered to the appropriate communication company or
agency or its representative for dispatch. The secretary may change or cause to
be changed the recorded address of any shareholder, director, officer or auditor
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 a share, notice to one of such persons shall be sufficient
notice to all of them. Any notice shall be addressed to all of such joint
holders and the address to be used for the purposes of section 11.01 shall be
the address appearing on the register of shareholders in respect of such joint
holding, or the first address so appearing if there are more than one.
11.03 COMPUTATION OF TIME - In 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 date of giving the notice shall be excluded and the date of
the meeting or other event shall be included.
11.04 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.
11.05 PERSONS ENTITLED BY DEATH OR 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 a person from whom
he derives his title to such share previously to his
<PAGE>
-18-
name and address being entered on the register of shareholders, whether such
notice was given before or after the happening of the event upon which he became
so entitled.
11.06 WAIVER OF NOTICE - Any shareholder (or his duly appointed proxy),
director, officer, auditor or member of a committee of the board may waive any
notice required to be given to him under any provision of the Act, the articles,
the by-laws or otherwise and such waiver, whether given before or after the
meeting or other event of which notice is required to be given, shall cure any
default in giving such notice.
SECTION TWELVE
EFFECTIVE DATE
12.01 EFFECTIVE DATE - This by-law shall come into force when ratified and
confirmed by the shareholders of the Corporation.
PASSED by the board the 19th day of January, 1996.
_________________________ _________________________
President Secretary
RATIFIED AND CONFIRMED by the shareholders in accordance with the Act the
13th day of February, 1996.
__________________________
Secretary
<PAGE>
RADIANT ENERGY CORPORATION
(the "Company")
and
RADIANT AVIATION SERVICES, INC.
(the "Guarantor")
and
THE TRUST COMPANY OF BANK OF MONTREAL
(the "Trustee")
-----------------------------------------
TRUST INDENTURE
-----------------------------------------
$2,350,000
7% Redeemable Convertible Secured Subordinated Debentures
Due May 31, 2004
As of May 28, 1999
WILDEBOER RAND THOMSON APPS & DELLELCE
BLAKE, CASSELS & GRAYDON
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 INTERPRETATION.....................................................2
1.01 Definitions..........................................................2
1.02 Number and Gender....................................................5
1.03 Choice of Language...................................................5
1.04 Business Day.........................................................6
1.05 Headings.............................................................6
1.06 Meaning of "Outstanding".............................................6
1.07 Time of the Essence..................................................7
1.08 Applicable Law.......................................................7
1.09 Currency.............................................................7
ARTICLE 2 THE DEBENTURES.....................................................7
2.01 Limit of Issue.......................................................7
2.02 Designation, Interest and Maturity...................................7
2.03 Form of Debentures...................................................7
2.04 Signature on Debentures..............................................8
2.05 Certification........................................................8
2.06 Registration and Transfer of Debentures..............................8
2.07 Transfer from Register to Register...................................9
2.08 Power to Close Registers.............................................9
2.09 Notices to Debentureholders..........................................9
2.10 Inspection of Registers..............................................9
2.11 Persons Regarded as Owners..........................................10
2.12 Mutilation, Loss, Theft or Destruction of Debentures................10
2.13 Exchanges of Debentures.............................................10
2.14 Production of List of Holders.......................................11
2.15 Option of Holder as to Place of Payment.............................11
2.16 Denominations of Debentures.........................................12
2.17 Computation of Interest.............................................12
2.18 Escrowed Funds......................................................12
ARTICLE 3 REDEMPTION AND PURCHASE OF DEBENTURES.............................12
3.01 Redemption..........................................................12
3.02 Limitation on Redemption............................................13
3.03 Partial Redemption of Debentures....................................13
3.04 Notice of Redemption................................................13
3.05 Debentures Due on Redemption Dates..................................14
3.06 Deposit of Redemption Moneys........................................14
3.07 Failure to Surrender Debentures Called for Redemption...............14
3.08 Cancellation and Destruction of Debentures..........................15
3.09 Surrender of Debentures for Cancellation............................15
3.10 Purchase of Debentures..............................................15
3.11 Rights to Convert Preserved.........................................15
ARTICLE 4 CONVERSION OF THE DEBENTURES......................................15
4.01 Conversion Right....................................................15
4.02 Conversion in Multiples.............................................16
4.03 Conversion Procedure................................................16
4.04 Cancellation of Debentures..........................................17
4.05 Adjustment of Price and Terms.......................................17
4.06 Postponement of Subscription........................................22
<PAGE>
4.07 Treatment of Fractions..............................................22
4.08 Notice of Adjustment................................................22
4.09 Notice of Maturity..................................................23
ARTICLE 5 GUARANTEE AND SECURITY............................................23
5.01 Guarantee of Debentures.............................................23
5.02 Gross-up for Withholding Taxes on Payments by the Guarantor
under Debentures..................................................24
5.03 Further Assurances..................................................25
5.04 Registration........................................................25
5.05 Authority to Charge and Maintenance of Security.....................26
5.06 Release and Discharge...............................................26
ARTICLE 6 SUBORDINATION...................................................27
6.01 Subordination of Debentures.........................................27
6.02 Payment of Proceeds in Certain Events...............................27
6.03 Subrogation to Senior Indebtedness..................................28
6.04 Senior Indebtedness Default.........................................28
6.05 Notice to Trustee of Senior Indebtedness Default....................28
6.06 Certain Exceptions..................................................29
6.07 Failure to Act Not a Waiver.........................................29
6.08 Renewal or Extension of Senior Indebtedness.........................29
6.09 Trustee to be Agent of Holders......................................30
6.10 Company to Issue Certificates of Senior Indebtedness................30
ARTICLE 7 CERTAIN COVENANTS OF THE COMPANY..................................30
7.01 General Covenants of the Company....................................30
7.02 General Covenants of the Guarantor..................................32
7.03 Representations and Warranties of the Company and the Guarantor.....34
7.04 Trustee may Perform Covenants.......................................34
7.05 No Other Convertible Obligation to Rank Ahead of Debentures.........34
7.06 Company Not to Extend Time for Payment of Interest..................34
7.07 Annual Compliance Certificate.......................................34
ARTICLE 8 EVENTS OF DEFAULT.................................................35
8.01 Events of Default...................................................35
8.02 Notice of Event of Default..........................................36
8.03 Waiver of Default...................................................36
8.04 Right of Trustee of Enforce Payment.................................37
8.05 Application of Moneys by Trustee....................................37
8.06 Trustee Not Bound to Make Interim Payment...........................37
8.07 Notice of Payment by Trustee........................................38
8.08 Trustee May Demand Production of Debentures.........................38
8.09 Trustee Appointed Attorney..........................................38
8.10 Remedies Cumulative.................................................38
8.11 Covenants for Benefit of Parties and Debentureholders...............38
8.12 Judgment Against Company on an Express Trust........................38
ARTICLE 9 CONSOLIDATION AND AMALGAMATION....................................39
<PAGE>
9.01 Successor Company or Guarantor......................................39
9.02 Successor Company/Successor Guarantor to Possess Powers of
the Company/Guarantor.............................................39
ARTICLE 10 INVESTMENT OF TRUST MONIES.......................................40
10.01 Investment of Trust Monies..........................................40
ARTICLE 11 SUITS BY DEBENTUREHOLDERS AND TRUSTEE............................40
11.01 Debentureholder May Not Sue.........................................40
11.02 Trustee May Sue Without Possession of Debentures....................41
11.03 Delay Not Waiver....................................................41
11.04 Staying Actions.....................................................41
ARTICLE 12 IMMUNITY OF OFFICERS, SHAREHOLDERS AND DIRECTORS.................41
12.01 Immunity of Officers, Shareholders and Directors....................41
ARTICLE 13 CONCERNING THE TRUSTEE...........................................42
13.01 Concerning the Trustee..............................................42
13.02 Rights and Duties of Trustee........................................42
13.03 Evidence, Experts and Advisers......................................43
13.04 Action by Trustee to Protect Interests..............................43
13.05 Trustee Not Required to Give Security...............................43
13.06 Protection of Trustee...............................................44
13.07 Indemnification of Trustee..........................................44
13.08 Replacement of Trustee..............................................44
13.09 Conflict of Interest................................................45
13.10 Acceptance of Trust.................................................45
ARTICLE 14 NON-PRODUCTION OF DEBENTURES.....................................45
14.01 Non-Production of Debentures........................................45
ARTICLE 15 EVIDENCE OF RIGHTS OF DEBENTUREHOLDERS...........................46
15.01 Evidence of Rights of Debentureholders..............................46
ARTICLE 16 DEBENTUREHOLDERS' MEETINGS.......................................46
16.01 Debentureholders' Meetings..........................................46
16.02 Powers Exercisable by Extraordinary Resolution......................49
16.03 Extraordinary Resolutions...........................................50
16.04 Declaration by Chairman of Result of Vote...........................51
16.05 Minutes.............................................................51
16.06 Signed Instrument in Lieu of Extraordinary Resolution...............51
16.07 Binding Effect of Resolutions.......................................52
ARTICLE 17 SUPPLEMENTAL INDENTURES..........................................52
17.01 Supplemental Indentures.............................................52
ARTICLE 18 TERMINATION......................................................53
18.01 Termination.........................................................53
ARTICLE 19 COUNTERPARTS.....................................................53
19.01 Counterparts........................................................53
ARTICLE 20 NOTICES..........................................................54
20.01 Notices to Company and Guarantor....................................54
20.02 Notices to Trustee..................................................54
<PAGE>
20.03 Notice of Debentureholders..........................................54
ARTICLE 21 FORMAL DATE......................................................55
20.01 Formal Date.........................................................55
<PAGE>
THIS TRUST INDENTURE is made as of the 28th day of May, 1999.
BETWEEN:
RADIANT ENERGY CORPORATION, a corporation amalgamated
under the laws of Canada (hereinafter called the
"Company")
OF THE FIRST PART
- and -
RADIANT AVIATION SERVICES, INC., a corporation
incorporated under the laws of the State of New York
(hereinafter called the "Guarantor")
OF THE SECOND PART
- and -
THE TRUST COMPANY OF BANK OF MONTREAL, a trust company existing
under the laws of Canada (hereinafter called the "Trustee")
OF THE THIRD PART
WHEREAS the Company proposes to issue and sell $100 principal amount
of redeemable convertible secured subordinated debentures (the "Debentures")
upon the terms and conditions set forth in a rights offering circular filed with
the Ontario Securities Commission;
AND WHEREAS the Company proposes to issue, in the aggregate, up to
$2,350,000 principal amount of Debentures;
AND WHEREAS, under the laws relating thereto, the Company is duly
authorized to create and issue, from time to time, the Debentures to be issued
as herein provided;
AND WHEREAS the Guarantor is a wholly-owned subsidiary of the
Company;
AND WHEREAS the Debentures are secured by, among other things, a
guarantee of the Company's obligations in respect of the Debentures by the
Guarantor supported by a charge on substantially all of the assets owned by the
Guarantor;
AND WHEREAS all necessary proceedings have been duly taken to make
the creation and issue of the Debentures intended to be certified and issued
hereunder, and these presents and the execution thereof, legal and valid and in
accordance with the laws relating to the Company and with all other laws and
regulations in that behalf;
<PAGE>
AND WHEREAS the Trustee has agreed to act as trustee for and on
behalf of the Debentureholders on the terms and conditions herein set forth;
AND WHEREAS the foregoing recitals are made as representations and
statements of fact by the Company and not by the Trustee;
NOW THEREFORE THIS TRUST INDENTURE WITNESSETH that for good and
valuable consideration mutually given and received, the receipt and sufficiency
of which are hereby acknowledged, it is hereby covenanted, agreed and declared
as follows:
ARTICLE 1
INTERPRETATION
1.01 Definitions
In this Trust Indenture, the recitals hereto and the Debentures, unless
there is something in the subject matter or context inconsistent therewith, the
following terms or expressions shall have the following meanings, respectively:
"this Trust Deed", "this Indenture", "this Trust Indenture", "this deed",
"these presents", "hereto", "herein", "hereof", and similar expressions
refer to this Trust Indenture and not to any particular Article, Section
or other portion hereof and include any and every deed or instrument
supplemental or ancillary hereto or in implement hereof;
"Affiliate" has the meaning ascribed thereto in the Canada Business
Corporations Act;
"Authorized Investments" means short term interest bearing or discount
debt obligations issued or guaranteed by the Government of Canada or a
Province or a Canadian chartered bank (which may include an affiliate or
related party of the Trustee) provided that each such obligation is rated
at least R1 (middle) by DBRS Inc. or an equivalent rating by Canadian Bond
Rating Service;
"business day" means a day which is not a Saturday, Sunday, or civic or
statutory holiday in the City of Toronto;
"CDN" means the Canadian Dealing Network Inc.;
"Company" means Radiant Energy Corporation and any successor company which
shall have complied with the provisions of Article 9 hereof;
"Company's Auditors" or "Auditors of the Company" means the chartered
accountant or firm of accountants duly appointed as auditor or auditors of
the Company from time to time in accordance with the provisions of the
Canada Business Corporations Act;
"Conversion Price" shall have the meaning ascribed thereto in Section 4.01
of this Indenture;
"Counsel" means a barrister and solicitor or a firm of barristers and
solicitors (who may be counsel to the Company) retained by the Company or
retained by the Trustee and acceptable to the Trustee, acting reasonably;
"Current Market Price" means, for any date, the weighted average price at
which the Shares have traded in the over-the-counter market or on a
recognized exchange or market during the 20 consecutive trading days (on
each of which at least 500 Shares are traded in board lots) ending the
fifth trading day before such date as reported by CDN or such other
quotation system as may then be in use, or such other market or exchange
in which the Shares are then trading, and the weighted average price shall
be determined by dividing the aggregate sale price of all Shares sold
<PAGE>
in board lots on the over-the-counter market, or recognized exchange or
market, as the case may be, during the 20 consecutive trading days by the
number of Shares sold. If the Shares are not then traded in the
over-the-counter market or on a recognized exchange or market, the Market
Price of the Shares shall be the fair market value of the Shares as
determined in good faith by the board of directors of the Company after
consultation with a nationally or internationally recognized investment
dealer or investment banker;
"Debentures" means the 7% redeemable convertible secured subordinated
debentures issued, from time to time, and certified hereunder and for the
time being outstanding and includes Debentures issued on the exchange of
any Debenture under Section 2.13, as a result of a partial redemption of
Debentures under Section 3.03;
"Debentureholders" and "holders" means the several persons for the time
being entered in the registers hereinafter mentioned as the holders of
outstanding Debentures;
"Designated Representative" means the trustee or trustees under any
indenture in virtue of which Senior Indebtedness is issued or, failing any
such trustee or trustees, the person or persons designated in writing to
the Trustee by the holders of a majority in outstanding principal amount
of Senior Indebtedness of each class or series or, in the absence of such
designation, the person or persons designed in writing to the Trustee by
the Company;
"Directors" or "directors" means the board of directors of the Company or
the Guarantor, as the case may be, for the time being, and reference to
action by the directors shall mean action by the directors as a board or
by any committee thereof duly empowered to take such action;
"dividends paid in the ordinary course" means dividends paid on the Shares
in any fiscal year of the Company, whether in (i) cash, (ii) shares, (iii)
rights, options or warrants (other than rights, options or warrants
referred to in subsection 4.05(3) or to purchase Shares at a price per
Share less than 95% of the current market price of the Shares on the
record date for such dividend) to purchase any securities, property or
other assets of the Company, or (iv) property or other assets of the
Company; provided that the amount or value of such dividends in the
aggregate (any such securities, property or other assets so distributed to
be valued at the fair market value of such securities, property or other
assets, as the case may be, as determined by the directors, with the
concurrence of the Trustee) does not in any such fiscal year exceed 50% of
the consolidated net income of the Company (before extraordinary items)
for its immediately preceding fiscal year, as determined in accordance
with Canadian generally accepted accounting principles;
"Environmental Laws" means all federal, provincial, state, municipal,
county, local and other laws, statutes, codes, ordinances, by-laws, rules,
regulations, policies, guidelines, certificates, approvals, permits,
consents, directions, standards, judgments, orders and other
authorizations, as well as common law, civil and other jurisprudence or
authority, in each case domestic or foreign, having the force of law at
any time relating in whole or in part to any Environmental Matters and any
permit, order, directions, certificate, approval, consent, registration,
licence or other authorization of any kind held or required to be held in
connection with any Environmental Matters;
"Environmental Matters" means:
(a) condition or substance, heat, energy, sound, vibration,
radiation or odour that may affect any component of the earth
and its surrounding atmosphere or affect human health or any
plant, animal or other living organism; and
<PAGE>
(b) any waste, toxic substance, contaminant or dangerous good or
the deposit, release or discharge of any thereof into any
component of the earth and its surrounding atmosphere;
"Escrowed Funds" has the meaning ascribed thereto in Section 2.18;
"Extraordinary Resolution" has the meaning ascribed thereto in Section
16.03;
"Guarantee" has the meaning ascribed thereto in Article 5;
"Guarantor" means Radiant Aviation Services, Inc., a company incorporated
under the laws of the State of New York and a wholly-owned subsidiary of
the Company;
"Joint Holders" and "Joint Registered Holders" means, the case of two or
more persons being the holders of a Debenture, all of such persons
registered as holding in any estate or in any common capacity be it joint
tenancy, tenancy in common or otherwise;
"Officers' Certificate" and "Certificate of the Company" means a
certificate signed by any two of the Chairman, Chief Operating Officer,
Vice-President or Secretary-Treasurer or by any one of the said officers
and a director of the Company or by any two directors of the Company;
"Patent" means United States Letters Patent No. 5,417,389 issued May 23,
1995 entitled, "Methods and Apparatus For DeIcing an Aircraft by Infrared
Radiation";
"person" includes any individual, corporation, body corporate,
partnership, trust, trustee, unincorporated organization or other judicial
entity, any government agency or instrumentality and words importing
persons have a similar meaning;
"prime rate" for any day means the reference rate of interest reported,
quoted or announced and commonly known as the prime rate of interest by
and of Bank of Montreal for Canadian dollar commercial loans made in
Canada, in all cases adjusted automatically and without the necessity of
any notice to the Company upon each reported, quoted or announced change
to such rate;
"Security" means any mortgage, charge, hypothec, pledge, assignment, lien,
security interest or other encumbrance, including any sale and repurchase
or sale and lease back arrangement or any other arrangement of similar
effect;
"Senior Indebtedness" means the principal of, premium, if any, and
interest on,
(a) indebtedness evidenced by the outstanding 6% redeemable convertible
secured debentures issued by the Company pursuant to the trust
indenture made May 22, 1997 between the Company, the Guarantor and
The R-M Trust Company (now CIBC Mellon Trust Company);
(b) indebtedness (other than indebtedness evidenced by the Debentures)
for money borrowed or to be borrowed by the Company, a Subsidiary,
or both, for the purpose of constructing de-icing service centres,
and
(c) the indebtedness existing as at the date of this Indenture for money
borrowed by the Company from directors, officers and shareholders of
the Company, including but not limited to indebtedness owed to
directors, officers and shareholders of the Company and for which
the Company, the Guarantor, or both, has granted Security, and
renewals, extensions and refundings of any such indebtedness as
follows:
(i) approximately $110,700 owed to Timothy P. Seel, a director,
officer and shareholder of the Company, and
<PAGE>
(ii) approximately $208,794 owed to David A. Williams, a director
of the Company, and his Affiliates;;
"Senior Indebtedness Default" means the occurrence or existence of any
event or circumstance which would permit the holder or holders of any
class or series of Senior Indebtedness or its or their Designated
Representative(s) to declare such Senior Indebtedness due and payable
prior to the stated maturity thereof;
"Shares" means common shares in the issued and outstanding capital of the
Company or any securities into which such common shares may be exchanged,
reclassified, reorganized or otherwise converted;
"Subsidiary" has the meaning ascribed thereto in the Canada Business
Corporations Act; and
"Trustee" means The Trust Company of Bank of Montreal or its successor in
the trusts hereby created.
1.02 Number and Gender
Words importing the singular number only shall include the plural and vice
versa and words importing gender shall include the masculine and feminine
genders and words importing persons shall include firms, associations and
corporations and vice versa.
1.03 Choice of Language
The parties hereto have required that this Indenture and all documents and
notices related thereto and resulting therefrom be drawn up in English. Les
parties aux presentes ont exige que la presente convention ainsi que tous les
documents et avie qui s'y rattachent et qui en decouleront soient rediges en
langue anglaise.
1.04 Business Day
Whenever any payment is due or required to be made or any other action is
required to be taken under this Indenture or the Debentures on or as of a day
that is not a business day, that payment must be made and the other action must
be taken on or as of the next day that is a business day.
1.05 Headings
The division of this Indenture into Articles, Sections, Subsections and
clauses, the provision of a table of contents and the insertion of headings are
for convenience of reference only and shall not affect the construction or
interpretation of this Indenture or the Debentures.
1.06 Meaning of "Outstanding"
Every Debenture certified and delivered by the Trustee hereunder shall be
deemed to be outstanding until it is cancelled or delivered to the Trustee for
cancellation or monies for the payment or redemption thereof have been set aside
under Article 3, provided that:
<PAGE>
(a) Debentures which have been partially redeemed, purchased or
converted will be deemed to be outstanding only to the extent of the
unredeemed, unpurchased, or unconverted part of the principal amount
thereof;
(b) where a new Debenture has been issued in substitution for a
Debenture that has been lost, stolen or destroyed, only one of them
will be counted for the purpose of determining the aggregate
principal amount of Debentures outstanding; and
(c) for the purpose of any provision of this Indenture entitling holders
of outstanding Debentures to vote, sign consents, requests or other
instruments or take any other action under this Indenture,
Debentures owned legally or equitably by the Company or any
Subsidiary thereof shall be disregarded, except that:
(i) for the purpose of determining whether the Trustee shall be
protected in relying on any such vote, consent, request or
other instrument or other action, only the Debentures of which
the Trustee has notice that they are so owned shall be so
disregarded; and
(ii) Debentures so owned which have been pledged in good faith
other than to the Company or any Subsidiary of the Company
shall not be so disregarded if the pledgee shall establish to
the satisfaction of the Trustee the pledgee's right to vote
the Debentures in his or her discretion free from the control
of the Company or any Subsidiary of the Company, as the case
may be, and the terms of the pledge thereof as to the right to
vote shall govern.
1.07 Time of the Essence
Time shall be of the essence in all respects hereof and of the Debentures.
1.08 Applicable Law
This Indenture and the Debentures shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein and shall be treated in all respects as Ontario contracts.
1.09 Currency
Unless otherwise stated, all dollar amounts referred to in this Indenture
are denominated in Canadian dollars.
ARTICLE 2
THE DEBENTURES
2.01 Limit of Issue
The aggregate principal amount of Debentures which may be issued hereunder
is limited to Two Million Three Hundred Fifty Thousand Dollars ($2,350,000) in
lawful money of Canada.
2.02 Designation, Interest and Maturity
The Debentures shall be designated as "7% Redeemable Convertible Secured
Subordinated Debentures", shall be dated May 28, 1999 (regardless of their
actual date of issue), shall mature on May 31, 2004, shall be redeemable as set
forth in Article 3, shall be convertible into Shares as set forth in Article 4,
shall be secured as set forth in Article 5, shall be subordinated as set forth
in Article 6, and shall
<PAGE>
bear interest from their date of issue to and including May 31, 2004 (or their
earlier payment and discharge), at the rate of seven per cent (7%) per annum as
well after as before maturity, default or judgment (with interest on overdue
interest at the said rate) payable semi-annually on November 30 and May 31 of
each year, commencing November 30, 1999. All Debentures shall rank equally and
rateably without discrimination, preference or priority amongst themselves but
shall rank in priority to other present or future indebtedness of the Company,
except as otherwise specified in Article 6. The provisions of this Indenture
shall be binding on the Company, the holders of the Debentures and all persons
claiming through or under them respectively. Holders of Debentures shall be
deemed to have notice of these provisions.
2.03 Form of Debentures
The Debentures shall be issued in registered form in minimum denominations
of one hundred dollars ($100) in or substantially in the form set forth in
Schedule "A" to this Indenture (which is incorporated herein by reference) and
shall bear such distinguishing letters and numbers as the Trustee may approve.
The Debentures may be typewritten, photocopied, engraved, lithographed, printed
or partly in one form and partly in another, as the Company may determine.
2.04 Signature on Debentures
All Debentures issued hereunder shall be signed by any two of the
Chairman, the Chief Operating Officer and a Vice-President of the Company. The
signature or signatures of all or any one or more of such officers may be
engraved, lithographed, printed or otherwise mechanically reproduced on the
Debentures and such engraved, lithographed, printed or otherwise mechanically
reproduced signature or signatures shall be deemed for all purposes to be the
signature of such officer or officers and shall be binding upon the Company,
notwithstanding any change in any of the persons holding the said offices
between the time of actual signing and the certifying and delivery of the said
Debentures and notwithstanding that the Chairman, the Chief Operating Officer or
the Vice-President signing may not have held office at the date of this
Indenture or at the date of the certifying and delivery thereof.
2.05 Certification
(1) No Debenture shall be issued, or, if issued, shall be obligatory or
shall entitle the holder to the benefit of these presents or of the trusts
hereunder until it has been certified by or on behalf of the Trustee, and such
certification by the Trustee upon any such Debenture shall be conclusive
evidence that the Debenture so certified has been duly issued hereunder and that
the holder thereof is entitled to the benefit of these presents and of the
trusts under this Indenture. The certificate of the Trustee on any Debenture
shall be substantially in the form set out in Schedule "A" hereto or in some
other form approved by the Trustee. The certificate of the Trustee signed on the
Debentures shall not be construed as a representation or warranty by the Trustee
as to the validity of this Indenture or of the said Debentures and the Trustee
shall in no respect be liable or answerable for the use made of the said
Debentures or any of them or the proceeds thereof. The certificate of the
Trustee signed on the Debentures shall, however, be a representation and
warranty by the Trustee that the said Debentures have been duly certified by the
Trustee pursuant to the provisions of this Indenture.
(2) Debentures, to the aggregate limit hereinbefore authorized, may,
forthwith upon the execution hereof or from time to time hereafter, be issued by
the Company and be certified by or on behalf of the Trustee, and be delivered by
the Trustee in accordance with and upon the written order of the Company
(evidenced by a written request signed by any two of the Chairman, the Chief
Operating Officer and a Vice-President of the Company) upon receipt by the
Trustee of an opinion of counsel to the effect that this Indenture has been duly
executed; provided, however, that no Debenture shall be certified
<PAGE>
or delivered if the Company is at the time, to the knowledge of the Trustee, in
default under any of the provisions of this Indenture or if at the time, to the
knowledge of the Trustee, any event has occurred which with the passing of time,
the giving of notice, or both, as the case may be, would become an event of
default under this Indenture. Any certification and delivery of any Debentures
by the Trustee shall be conclusive evidence of the absence of knowledge on the
part of the Trustee of any such default or event at the time of such
certification and delivery.
2.06 Registration and Transfer of Debentures
The Debentures to be issued hereunder shall be in registered form only.
The Company shall at all times cause to be kept, by and at the principal
transfer office of the Trustee in the City of Toronto and at such other place or
places, and by the Trustee or such other registrar or registrars, if any, as the
Company, with the approval of the Trustee, may designate, registers in any one
of which shall be entered the names and post office addresses of the holders of
Debentures and particulars of the Debentures held by them respectively and in
which transfers of such Debentures shall be registered. No transfer of a
Debenture shall be valid unless made on one of such registers by the registered
holder or by his or her executors, administrators or other legal representatives
or his, her or their attorney duly appointed by an instrument in writing in form
and execution satisfactory to the Trustee, and upon compliance with such
reasonable requirements as the Trustee or other registrar may prescribe and
unless such transfer shall have been duly noted on the said Debenture by the
Trustee or other registrar. The Company shall not permit the transfer of a
Debenture to be made except in compliance with all applicable laws, including
without limitation, all securities laws, regulations, policy statements, orders,
rulings and other requirements of relevant securities regulatory authorities.
2.07 Transfer from Register to Register
The holders of Debentures may at any time and from time to time, upon
payment of a reasonable fee to be fixed by the Trustee, transfer the Debentures
held by them respectively from the register in which the registration of such
Debentures appears to another register maintained in another place authorized
for that purpose under the provisions of this Indenture. Such registration shall
be noted on the Debentures by the Trustee or other registrar.
2.08 Power to Close Registers
The Company, with the approval of the Trustee, shall have power at any
time to close any register upon which the entries of the registration of any
Debentures appear (other than those kept in the City of Toronto) and in that
event shall transfer the records thereof to another existing register or to a
new register and thereafter such Debentures shall be deemed to be registered on
such existing or new register, as the case may be. In the event that the
register in any place is closed and the records transferred to a register kept
in another place, notice of such change shall be given, in the manner provided
in Section 2.09 hereof, to the holders of the Debentures registered in the
register so closed.
2.09 Notices to Debentureholders
(1) Subject to the provisions hereinafter contained regarding notices of
intention to redeem, as set out in Section 3.04 hereof, all notices given
hereunder to the Debentureholders shall be deemed validly given if sent by first
class prepaid mail addressed to such holders at their postal addresses appearing
in the registers hereinbefore mentioned or, delivered by hand to such addresses,
and in the case of Joint Holders, to the registered address of one of such Joint
Holders. If the Trustee determines that mail service is or is threatened to be
interrupted at the time when the Company or Trustee is required or elects to
give any notice to holders of Debentures, such notice may be given by means of
publication in The Globe and Mail, national edition, or any other English
language daily newspaper of general circulation in Canada approved by the
Trustee. Any notice so given shall be deemed to have been given on the date it
is first published.
<PAGE>
(2) All such notices sent by post may be mailed at any place in Canada
where the Company may have established registers in accordance with the
foregoing provisions of this Indenture or partly at one of such places and
partly at another or others. Every notice so sent by post or by hand shall be
deemed to have been given on the fifth business day after it has been mailed or
on the day upon which it has been delivered, as the case may be. Every notice so
published shall be deemed to have been given on the day when such notice is
posted or on the day upon which it is first published, as aforesaid, as the case
may be.
2.10 Inspection of Registers
The registers hereinbefore referred to shall at all reasonable times be
open for inspection by the Company, the Trustee or any Debentureholder.
2.11 Persons Regarded as Owners
(1) The person in whose name any Debenture shall be registered shall be
deemed and regarded as the owner thereof for all purposes of this Indenture and
payment of or on account of the principal of such Debenture and interest on such
Debenture shall be made only to, or upon the order in writing of, such
registered holder thereof.
(2) The registered holder for the time being of any Debenture shall be
entitled to the principal monies and interest evidenced by such instruments,
free from all equities or rights of set-off or counterclaim between the Company
and the original or any intermediate holder thereof and all persons may act
accordingly, and a transferee of a Debenture shall, after the appropriate form
of transfer is lodged with the registrar and upon compliance with all other
conditions in that behalf required by or pursuant to this Indenture or by the
conditions endorsed on the Debentures or by law, be entitled to be entered on
the register as the owner of such Debenture free from all equities or rights of
set-off or counterclaim between the Company and his or her transferor or any
previous holder thereof, save in respect of equities as to which the Company is
required to take notice by law.
(3) Delivery by a Debentureholder of a Debenture to the Company or the
receipt by such holder of the principal monies, interest, or both, evidenced by
such instrument respectively shall be a good discharge to the Company, which
shall not be bound to enquire into the title of such holder, save as required by
law. Neither the Company nor the Trustee nor any registrar shall be charged with
any notice or be bound to see to the execution of any trust, whether express,
implied or constructive, affecting the ownership of any Debenture or be affected
by notice of any equity that may be subsisting in respect thereof, and the
Trustee, such registrar, or both, may transfer any Debenture on the direction of
the registered holder thereof, whether named as trustee or otherwise, as though
that person were the beneficial owner thereof.
2.12 Mutilation, Loss, Theft or Destruction of Debentures
(1) In case any of the Debentures shall become mutilated or be lost,
stolen or destroyed, the Company in its discretion may issue and thereupon the
Trustee, subject to the conditions contained in this Section 2.12, shall certify
and deliver, a new Debenture of like date and tenor as the one mutilated, lost,
stolen or destroyed, in exchange for and in place of and upon cancellation of
the mutilated Debenture or in lieu of and in substitution for the same, if lost,
stolen or destroyed and the substituted instrument shall be in a form approved
by the Trustee and shall rank equally in accordance with its terms with all
other Debentures.
<PAGE>
(2) In case of loss, theft or destruction, the applicant for a substituted
Debenture shall, as a condition precedent to the issue thereof, furnish to the
Company and to the Trustee such evidence of ownership and of the loss, theft or
destruction of such instrument so lost, stolen or destroyed as shall be
satisfactory to the Company and to the Trustee in their discretion, acting
reasonably and such applicant shall also furnish an indemnity in an amount and
form satisfactory to the Company and the Trustee in their discretion, acting
reasonably and shall pay the expenses which may be incurred by them and their
reasonable charges in the premises.
2.13 Exchanges of Debentures
(1) Except as herein otherwise provided, in every case of exchange of
Debentures of any denomination or form for other Debentures, and for any
registration of Debentures, and for any transfer of Debentures, the Trustee or
other registrar may make a sufficient charge to reimburse it for any stamp taxes
or governmental charge required to be paid and a reasonable charge for its
services and, in addition, may charge a reasonable charge per Debenture issued
upon such exchange, registration or transfer as a condition precedent thereof.
(2) Debentures of any denomination may be exchanged for Debentures of any
other authorized denomination or denominations, any such exchange to be for an
equivalent principal amount of Debentures. All exchanges of Debentures shall be
made at the principal transfer office of the Trustee in the City of Toronto or
at the office or offices of such other registrar or registrars, if any, or at
such other office or offices of the Trustee, if any, as may from time to time be
designated by the Company, with the approval of the Trustee, for such purpose.
In every case of exchange and transfer, the Debenture or Debentures surrendered
shall be cancelled.
(3) Neither the Company nor the Trustee nor any registrar shall be
required (i) to make redemptions, transfers, exchanges, conversions or
registrations of Debentures for a period of fifteen (15) business days next
preceding any interest payment date; or (ii) to make exchanges of any Debentures
during the fifteen (15) business days next preceding any selection by the
Trustee of Debentures to be redeemed. Debentures issued in exchange for
Debentures which at the time of such issue have been selected or called for
redemption shall be deemed to have been called or selected for redemption in the
same manner and shall have noted thereon a statement to that effect.
2.14 Production of List of Holders
Every registrar (including the Trustee) shall when requested in writing to
do so by the Company, the Trustee or a Debentureholder furnish the Company, the
Trustee, or upon payment by the Debentureholder of a reasonable fee and upon
providing the Trustee with the required documents, the Debentureholder, as the
case may be, with a list of the names and addresses of holders of Debentures
showing the principal amount and serial numbers of such Debentures held by such
holders.
2.15 Option of Holder as to Place of Payment
(1) Except as otherwise herein provided, all sums which may at any time
become payable whether at maturity or on redemption or otherwise on account of
any Debenture or interest thereon shall be payable at the option of the holder
at any of the places at which the principal of, and interest on, such Debenture
are respectively payable in accordance with the provisions of such Debenture.
(2) As the interest on Debentures matures (except interest payable at
maturity which shall be paid upon presentation and surrender of Debentures for
payment), at least three (3) business days prior to each date on which interest
on the Debentures becomes due, the Company shall forward to or deposit with the
Trustee a written notice in accordance with Section 2.18 or a cheque or bank
draft in an amount equal to the aggregate amount of interest payable on all then
outstanding Debentures, and the Trustee shall forward or cause to be forwarded
by first class prepaid post (or if mail service is interrupted, by any other
means the Company and the Trustee deem appropriate) to each holder of then
outstanding Debentures for the time being or, in the case of Joint Holders, to
one of such Joint Holders, at his or her
<PAGE>
address appearing on the appropriate register hereinbefore mentioned, a cheque
for such interest (less any tax required to be deducted) payable to the order of
such holder or holders and negotiable at par at each of the places at which
interest upon such Debentures is payable. The forwarding of such cheque shall
satisfy and discharge the liability of the Company for the interest upon such
Debentures to the extent of the sum represented thereby (plus the amount of any
tax deducted as aforesaid) provided that in the event of the non-receipt of such
cheque by the registered holder, or the loss or destruction thereof, the Trustee
upon being furnished with reasonable evidence of such non-receipt, loss or
destruction and indemnity reasonably satisfactory to it shall issue to such
registered holder a replacement cheque for the amount of such cheque.
(3) The principal of the Debentures and interest thereon and all sums
which may at any time become payable thereon, whether at maturity or otherwise,
shall be payable in lawful money of Canada.
2.16 Denominations of Debentures
The Debentures shall be in denominations of $100 only and whole multiples
thereof. The Debentures shall be numbered in such manner as the Company, with
the approval of the Trustee, may determine.
2.17 Computation of Interest
All Debentures issued hereunder, whether originally or upon exchange or in
substitution for previously issued Debentures, shall bear interest from their
date of issue or from the last interest payment date to which interest shall
have been paid or made available for payment on such Debentures, whichever shall
be the later. Interest shall be computed on the basis of a year of 365 or 366
days, as applicable.
2.18 Escrowed Funds
Seven percent (7%) of the aggregate principal amount of the Debentures
issued (the "Escrowed Funds") will be held in escrow by the Trustee and will be
invested by the Trustee in accordance with the provisions of Section 10.01
hereof. Not less than three (3) business days prior to each of the first or
second dates on which interest on the outstanding Debentures becomes due and
payable under the terms of the Debentures (each an "Escrowed Interest Payment
Date"), the Company may, in lieu of the cheque or bank draft required to the
delivered by the Company to the Trustee under Section 2.15(2) hereof, deliver to
the Trustee written notice (an "Escrow Release Notice") instructing the Trustee
to release from escrow that portion of the Escrowed Funds equal to the amount
necessary to make interest payments on that Escrowed Interest Payment Date and
to cause such released Escrowed Funds to be used to make interest payments
required to be made on that Escrowed Interest Payment Date under the terms of
the Debentures. Upon receipt of an Escrow Release Notice from the Company, the
Trustee shall release from escrow that portion of the Escrowed Funds equal to
the amount necessary to make interest payments on that Escrowed Interst Payment
Date and cause such released Escrowed Funds to be used to make interest payments
required to be made on that Escrowed Interest Payment Date under the terms of
the Debentures. If, after the full payment of interest on any Debentures
outstanding as at the second Escrowed Interest Payment Date, the Trustee holds
all or any portion of the Escrowed Funds, the Trustee shall promptly release
from escrow and deliver to the Company the Escrowed Funds (and any interest
accrued thereon).
ARTICLE 3
REDEMPTION AND PURCHASE OF DEBENTURES
<PAGE>
3.01 Redemption
Subject to Section 3.02 hereof, the Company when not in default hereunder
shall have the right at its option to redeem, on not less than thirty (30) days'
prior notice, either in whole at any time or in part from time to time before
maturity, any of the Debentures of the principal amount thereof together in all
cases with interest on the principal amount of the Debentures so redeemed
accrued and unpaid to the date fixed for redemption (the amount, including
interest, at which any Debentures may be redeemed on any date being herein
sometimes referred to as the "redemption price" of the Debentures).
3.02 Limitation on Redemption
No Debentures may be redeemed by the Company prior to May 31, 2000 and
Debentures may not be redeemed after that date unless the Company shall have
filed with the Trustee on the day notice of the proposed redemption is first
given an Officer's Certificate certifying that the Current Market Price of the
Shares as of the date of such notice equals or exceeds $2.50 per Share (subject
to adjustment in accordance with the terms herein).
3.03 Partial Redemption of Debentures
(1) In case less than all the Debentures for the time being outstanding
are at any time to be redeemed, the Debentures so to be redeemed shall be
redeemed pro rata from the outstanding Debentureholders; provided, however, that
in such case the Debentures shall only be redeemed in denominations of $100
principal amount and whole multiples thereof. The holder of any Debenture called
for redemption in part only, upon surrender of such Debenture in accordance with
Section 3.09 hereof, shall be entitled to receive, without expense to such
holder, one or more new Debentures for the unredeemed part of the principal
amount of the Debenture so surrendered.
(2) Unless the context otherwise requires, the word "Debenture" or
"Debentures" as used in this Article 3 shall be deemed to include that part of
the principal amount of any Debenture which shall have become subject to
redemption pursuant to the provisions hereof.
3.04 Notice of Redemption
Notice of intention to redeem any of the Debentures shall be given by or
on behalf of the Company in the following manner:
(a) notice of intention to redeem such Debentures shall be given by
letter or circular sent in the manner provided in Section 2.09 and
shall be mailed or delivered not less than thirty (30) and not more
than sixty (60) days prior to the date fixed for redemption;
provided always that the non-receipt of any such letter or circular
by any of the holder or holders of any of such Debentures shall not
invalidate or otherwise prejudicially affect the redemption of such
Debentures;
(b) unless all of the Debentures for the time being outstanding are to
be redeemed, every notice of redemption shall state the designating
numbers of the Debentures so called for redemption and in case a
Debenture is to be redeemed in part only, that part of the principal
amount thereof so to be redeemed; and
(c) every notice of redemption shall specify the redemption date and the
redemption price and shall state that unless the redemption price of
such Debentures is not paid on presentation thereof such Debentures
and all interest accruing thereon after such redemption date shall
on and after such redemption date cease.
Every notice sent by delivery or published shall be deemed to have been
given on the day on which it is delivered or first published, as the case may
be. Every notice sent by post shall be deemed to have been given on the fifth
business day after it is posted.
<PAGE>
3.05 Debentures Due on Redemption Dates
If notice shall have been given as specified in Section 3.04 and if the
redemption money shall have been duly paid to or to the order of the Trustee as
provided in Section 3.06, but not otherwise, all the Debentures so called for
redemption shall thereupon be and become due and payable at such redemption
price and on such redemption date and in the same manner and with the same
effect as if such redemption date were the date of maturity specified in such
Debentures respectively, anything in such Debentures or herein to the contrary
notwithstanding, and from and after such redemption date interest upon such
Debentures shall cease; but the giving of such notice in conformity with the
provisions hereof shall, if the Company fails to make such payment (whether such
failure results from a change in the Company's intentions, or from circumstances
beyond its control, or otherwise), be of no effect whatsoever, and in the event
of such failure to make payment, such notice shall be deemed to be null, void
and of no effect whatever.
3.06 Deposit of Redemption Moneys
Such redemption shall be provided for by depositing with the Trustee, at
least three (3) business days prior to the redemption date fixed in such notice,
such sums as may be sufficient to pay the redemption price of such Debentures
including accrued interest on the Debentures so called for redemption to the
date of redemption. The Company shall also deposit with the Trustee if required
by it a sum sufficient to pay any charges or expenses which may be incurred by
the Trustee in connection with such redemption. From the sums so deposited the
Trustee shall pay or cause to be paid to the holders of such Debentures so
called for redemption, upon surrender of such Debentures, the principal and
interest to which they are respectively entitled on redemption.
3.07 Failure to Surrender Debentures Called for Redemption
(1) In case the holder of any Debenture so called for redemption shall
fail within sixty (60) days after the date fixed for redemption so to surrender
his Debenture or shall not within such time accept payment of the redemption
monies payable in respect thereof or give such receipt therefor, if any, as the
Trustee may require, such redemption monies shall be set aside in trust for such
holder at such rate of interest, if any, either in the deposit department of the
Trustee or in a chartered bank or trust company in Canada, and such setting
aside shall for all purposes be deemed a payment to the Debentureholder of the
sum so set aside, and to that extent said Debenture shall thereafter not be
considered as outstanding hereunder and the Debentureholder shall have no other
right except to receive payment out of the monies so paid and deposited (upon
surrender and delivery of his or her Debenture) of the redemption price of such
Debenture.
(2) In the event that any monies required to be deposited hereunder with
the Trustee or any depository or paying agent on account of principal of or
interest on Debentures issued hereunder shall remain so deposited for such
period that the right to proceed against the Company for recovery of such monies
by the holders of Debentures has become statute barred, then such monies,
together with any accumulated interest thereon, shall at the end of such period
be paid over by the Trustee or such depository or paying agent to the Company on
its demand. Thereupon the Trustee shall be released from all further liability
with respect to such monies and thereafter the holders of the Debentures in
respect of which such monies were so repaid to the Company shall have no right
in respect thereof except to obtain payment of the monies due thereon from the
Company.
<PAGE>
3.08 Cancellation and Destruction of Debentures
All Debentures redeemed under this Article 3 shall forthwith be delivered
to the Trustee and shall be cancelled by it and shall not be reissued. All
Debentures which shall have been delivered to and cancelled by the Trustee shall
be destroyed by the Trustee and if required in advance in writing by the
Company, the Trustee shall furnish to it a destruction certificate setting out
the numbers and denominations of the Debentures so destroyed.
3.09 Surrender of Debentures for Cancellation
If the principal monies due upon any Debenture issued hereunder shall
become payable by redemption or otherwise before the date of maturity thereof,
the person presenting such Debenture for payment shall surrender the same for
cancellation and the Company shall notwithstanding such surrender pay the
interest accrued and unpaid thereon (computed on a per diem basis) up to the
date on which the principal monies are due if the date fixed for payment of the
principal amount is not an interest due date.
3.10 Purchase of Debentures
(1) At any time when the Company is not in default hereunder it may
purchase all or any of the Debentures in the market (which will include purchase
from or through an investment dealer or a firm holding membership on a
recognized stock exchange) or by tender provided that the price at which such
Debentures may be purchased shall not exceed the principal amount of such
Debentures together with accrued and unpaid interest to the date of purchase
plus reasonable costs of purchase. All Debentures so purchased shall forthwith
be delivered to the Trustee and shall be cancelled by it and shall not be
re-issued.
(2) If on an invitation for tenders more Debentures are tendered at the
same lowest price than the Company is prepared to accept, the Debentures to be
purchased at that price shall be purchased proportionately from the Debentures
tendered by each holder who tenders Debentures at that price.
3.11 Rights to Convert Preserved
Any call for redemption of Debentures made by the Company shall be subject
always to the right of the holders of such Debentures to convert the same, as
provided in Article 4 hereof, prior to the date fixed for redemption of such
Debentures pursuant to Section 3.04.
ARTICLE 4
CONVERSION OF THE DEBENTURES
4.01 Conversion Right
(1) For the purposes of this Article 4, "current Conversion Price" means
as at any particular time the basic conversion price unless an adjusted
conversion price is in effect pursuant to the provisions of Section 4.05 hereof
in which case it means such adjusted conversion price, and "basic conversion
price" means $1.15 per Share if converted prior to May 31, 2000 and $1.45 per
Share if converted thereafter, being a rate of approximately 86.96 Shares and
68.97 Shares, respectively, for each $100 principal amount of Debentures.
(2) Subject to and upon compliance with the provisions of this Article 4,
the holder of each Debenture shall have the right, at his option, at any time up
to the close of business on May 31, 2004 to convert such Debenture into fully
paid and non-assessable Shares, without the payment of any further consideration
therefor, by applying the principal amount of such Debenture, as provided for
herein, to the purchase of such Shares at the then current conversion price;
except that in the case of Debentures which shall be called for redemption such
right shall terminate with respect thereto at the close of business on the
business day immediately prior to the date fixed for such redemption. Should
payment of the
<PAGE>
redemption price of Debentures which have been called for redemption not be paid
on due surrender of the Debentures as provided for herein, then the right of
conversion shall revive and continue as if such Debentures had not been called
for redemption. Any monies which shall have been deposited with the Trustee for
the redemption of any Debenture which shall have been converted subsequent to
the calling of such Debenture for redemption shall, upon delivery to the Trustee
of reasonable evidence of such conversion, be repaid to the Company.
(3) The Shares issuable upon the conversion of any Debenture converted at
or prior to the time fixed for determining the holders of record of Shares for
the payment of dividends on Shares shall qualify for such dividends. No
adjustment shall be made for dividends on any Shares that shall be issuable upon
the conversion of any Debenture, nor for the interest accrued on the principal
amount of any Debenture so converted.
4.02 Conversion in Multiples
The Debentures shall be wholly convertible into Shares in units of One
Hundred Dollars ($100) principal amount and whole multiplies thereof.
4.03 Conversion Procedure
(1) In order to convert any Debenture, such Debenture shall be delivered
at any time during usual business hours to the Trustee at any office of the
Trustee where Debentures may be registered or transferred on the register
maintained thereat by the Trustee for that purpose, accompanied by a written
notice (substantially in the form set forth in Schedule "A" to this Indenture)
duly executed by the registered holder of such Debenture or his attorney duly
authorized in writing, which notice shall state that the holder elects to
convert the said Debenture in accordance with the provisions hereof and which
notice shall further state the name or names (with addresses) in which the
certificate or certificates for Shares issuable on such conversion shall be
issued and if any of the Shares into which such Debenture is to be converted are
to be issued to a person or persons other than the holder of such Debentures,
there shall be paid to the Trustee any transfer tax which may be properly
payable. If any certificate or certificates representing any of the Shares
issuable on conversion are directed to be issued to any person other than the
holder of such Debenture, the signature of such holder, shall be guaranteed by a
bank, trust company, member of a recognized stock exchange in Canada or by
another person satisfactory to the Trustee. Such holder shall, in addition,
comply with such other reasonable requirements as the Trustee may prescribe.
(2) Subject to Section 4.02 hereof, any holder may by such written notice
elect to convert only part of the principal amount of any Debenture, in which
event the Company shall issue and the Trustee shall certify and deliver to such
holder, at the expense of the Company, a new Debenture registered in the name of
such holder, in a principal amount equal to that part of the principal amount of
the said Debenture which the said holder did not elect to convert.
(3) Every such notice of election to convert shall constitute a contract
between the holder of such Debenture and the Company, whereby the holder of such
Debenture shall be deemed to subscribe for the number of Shares which he will be
entitled to receive upon such conversion and in payment and satisfaction of such
subscription, to surrender such Debenture and to release the Company from all
liability thereon, and whereby the Company shall be deemed to agree that the
surrender of such Debenture and the extinguishment of liability thereon shall
constitute full payment of such subscription for the Shares to be issued upon
such conversion. If more than one (1) Debenture shall be surrendered for
conversion at one time by the same holder, the number of full Shares which shall
be issuable upon the
<PAGE>
conversion thereof shall be computed on the basis of the aggregate principal
amount of Debentures so surrendered.
(4) Forthwith after the receipt of such notice of election to convert, the
payment of such transfer tax (if any), the delivery of such Debenture and
compliance with all reasonable requirements of the Trustee as aforesaid, the
Company shall cause the transfer agent for the Shares to issue and deliver, to
or upon the written order of the holder of the Debenture so surrendered (i) a
certificate or certificates for the number of Shares into which such Debenture
has been converted in accordance with the provisions of this Article 4, (ii) a
new Debenture (if required) in a principal amount equal to the principal amount
of the tendered Debenture which the holder did not elect to convert, (iii) an
amount equal to all accrued and unpaid interest on the principal amount of the
Debenture or portion of the Debenture, as the case may be, so converted
calculated to the date on which notice of election is given by the
Debentureholder under this Section 4.03, and (iv) any cash which the Company is
required to pay in accordance with the provisions of Section 4.07 hereof. Such
conversion shall be deemed to have been made immediately prior to the close of
business, at the office of the Trustee where such notice of election was
received, on the date on which all conditions precedent to the conversion of
such Debenture have been fulfilled and the person or persons in whose name or
names any certificate or certificates for Shares shall be issuable shall be
deemed to have become on the said date the holder or holders of record of the
Shares represented thereby; provided, however, that if the transfer books of the
Company for Shares shall be closed on the said date, the Company shall not be
required to issue Shares upon such conversion until the date on which such
transfer books shall be re-opened and such person or persons shall not be deemed
to have become the holder or holders of record of such Shares until the date on
which such transfer books shall be re-opened, but such conversion shall
nevertheless be effected when such transfer books shall be re-opened at the
conversion price in effect on, and otherwise as of, the date of conversion.
(5) The Company covenants that it shall use its best efforts to ensure
that the transfer books for Shares of the Company shall not be closed during any
period which includes a record date for a dividend or other distribution on the
Shares.
4.04 Cancellation of Debentures
All Debentures converted as aforesaid shall be void and shall be
cancelled. All Debentures from time to time converted as aforesaid shall be
cancelled by the Trustee forthwith upon delivery of such Debentures to it and,
subject to Section 4.03, no Debenture shall be issued in substitution therefor.
4.05 Adjustment of Price and Terms
(1) The current conversion price (and the number of Shares issuable upon
conversion of any Debenture) shall be subject to adjustment from time to time as
hereinafter is provided.
(2) If and whenever at any time after the date hereof the Company:
(a) issues Shares or securities exchangeable for or convertible
into Shares, to all or substantially all of the holders of
Shares by way of stock dividend or otherwise (other than an
issue of Shares or securities to holders of Shares who have
elected in the ordinary course to receive dividends in Shares
or securities in lieu of receiving cash dividends);
(b) makes a distribution on its outstanding Shares payable in
Shares or securities exchangeable for or convertible into
Shares (other than a distribution of Shares or securities to
holders of Shares who have elected in the ordinary course to
receive dividends in Shares or securities in lieu of receiving
cash dividends);
(c) subdivides, redivides or changes its outstanding Shares into a
greater number of Shares; or
<PAGE>
(d) reduces, combines or consolidates its outstanding Shares into
a smaller number of Shares.
(any of such events in clauses (a), (b), (c) and (d) being called a "Share
Reorganization"), then the current conversion price shall be adjusted effective
immediately after the effective date or record date for the happening of a Share
Reorganization, as the case may be, at which the holders of Shares are
determined for the purpose of the Share Reorganization, by multiplying the
conversion price in effect immediately prior to such effective date or record
date by a fraction, the numerator of which shall be the number of Shares
outstanding on such effective date or record date before giving effect to such
Share Reorganization and the denominator of which shall be the number of Shares
outstanding immediately after giving effect to such Share Reorganization
(including, in the case where securities exchangeable for or convertible into
Shares are issued or distributed, the number of Shares that would have been
outstanding had all such securities been exchanged for or converted into Shares
on such effective date or record date).
(3) If and whenever at any time after the date hereof the Company fixes a
record date for the issue of rights, options or warrants to all or substantially
all the holders of Shares under which such holders are entitled, during a period
expiring not more than 45 days after the date of such issue (the "Rights
Period"), to subscribe for or purchase Shares or securities ("Exchangeable
Securities") exchangeable for or convertible into Shares at a price per share to
the holder (or at an exchange or conversion price per Share during the Rights
Period to the holder in the case of Exchangeable Securities) of less than 95% of
the Current Market Price for the Shares on such record date (any of such events
being called a "Rights Offering"), then the conversion price shall be adjusted
effective immediately after the end of the Rights Period to a price determined
by multiplying the current conversion price by a fraction:
(a) the numerator of which shall be the aggregate of:
(i) the number of Shares outstanding as of the record date
for the Rights Offering; and
(ii) a number determined by dividing (1) either (A) the
product of the number of Shares issued or subscribed for
during the Rights Period upon the exercise of the
rights, warrants or options under the Rights Offering
and the price at which such Shares are offered, or, as
the case may be, (B) the product of the exchange or
conversion price, immediately following the expiry of
the Rights Period, of the Exchangeable Securities which
were issued or subscribed for during the Rights Period
upon the exercise of the rights, warrants or options
under the Rights Offering and the number of Shares for
or into which such Exchangeable Securities could have
been exchange or converted immediately following the
expiry of the Rights Period, by (2) the Current Market
Price of the Shares as of the record date for the Rights
Offering, and
(b) the denominator of which shall be the number of Shares
outstanding, or the number of Shares which would be
outstanding if all the Exchangeable Securities were exchanged
for or converted into Shares immediately following the expiry
of the Rights Period, after giving effect to the Rights
Offering and including the number of Shares actually issued or
subscribed for during the Rights Period upon exercise of the
rights, warrants or options under the Rights Offering.
To the extent that any such rights, options or warrants are not so exercised on
or before the expiry thereof, the conversion price shall be readjusted to the
conversion price which would then be in effect based on
<PAGE>
the number of Shares (or Exchangeable Securities) actually delivered on the
exercise of such rights, options or warrants. Any holder of Debentures who has
exercised the right to convert Debentures into Shares during the period
beginning immediately after the record date for a Rights Offering and ending on
the last day of the Rights Period for the Rights Offering shall, in addition to
the Shares to which that holder would otherwise be entitled upon such conversion
in accordance with Section 4.01, be entitled but not obligated, and on payment
of the purchase price for any such rights, options or warrants (the "Rights
Offering Price") to obtain that number of additional Shares that such holder
would have been entitled to receive if such conversion had occurred immediately
prior to such record date; provided that the provisions of Section 4.07 shall be
applicable to any fractional interest in a Share to which such holder might
otherwise be entitled under the foregoing provisions of this subsection. Such
additional Shares shall be deemed to have been issued to the holder immediately
following the end of the Rights Period and a certificate for such additional
Shares shall be delivered to such holder within fifteen (15) business days
following the end of the Rights Period.
(4) If and whenever at any time after the date hereof the Company fixes a
record date for the issue or the distribution to all or substantially all the
holders of Shares of (i) securities of the Company, including rights, options or
warrants to acquire securities of the Company or any of its property or assets
and including evidences of indebtedness or (ii) any property, cash or other
assets, including evidences of indebtedness, and if such issuance or
distribution does not constitute a cash dividend or equivalent dividend in stock
paid in the ordinary course, a Share Reorganization or a Rights Offering (any of
such non-excluded events being called a "Special Distribution"), the conversion
price shall be adjusted effective immediately after such record date to a price
determined by multiplying the conversion price in effect on such record date by
a fraction:
(a) the numerator of which shall be:
(i) the product of the number of Shares outstanding on such
record date and the Current Market Price of the Shares
on such record date; less
(ii) the fair market value, as determined by the directors
(whose determination shall be conclusive), of such
securities or property or other assets so issued or
distributed in the Special Distribution; and
(b) the denominator of which shall be the product of the number of
Shares outstanding on such record date and the Current Market
Price of the Shares on such record date.
To the extent that any Special Distribution is cancelled or revoked, whether by
the Company or otherwise, the conversion price shall be readjusted effective
immediately to the conversion price which would then be in effect based upon
such securities or property or other assets actually distributed.
(5) On any adjustment of the current Conversion Price pursuant to
subsection (2), (3) or (4), including any readjustment, the number of Shares
issuable upon the conversion of $100 principal amount of Debentures shall be
adjusted according to the current Conversion Price.
(6) If and whenever at any time after the date hereof there is a
reclassification of the Shares at any time outstanding or change of the Shares
into other shares or into other securities or other capital reorganization
(other than a Share Reorganization), or a consolidation, amalgamation or merger
of the Company with or into any other corporation or other entity (other than a
consolidation, amalgamation or merger which does not result in any
reclassification of the outstanding Shares or a change of the Shares into other
shares), or a transfer of the undertaking or assets of the Company as an
entirety or substantially as an entirety to another corporation or other entity
(any of such events being called a "Capital Reorganization"), any holder of
Debentures who exercises the right to convert Debentures into Shares after the
effective date of such Capital Reorganization shall be entitled to receive, and
shall accept for the same aggregate consideration, in lieu of the number of
Shares to which such holder was previously entitled upon such conversion, the
aggregate number of shares, other securities or other property which
<PAGE>
such holder would have been entitled to receive as a result of such Capital
Reorganization if, on the effective date thereof, such holder had been the
registered holder of the number of Shares to which such holder was previously
entitled upon conversion. The Company shall take all steps necessary to ensure
that, on a Capital Reorganization, the holders of Debentures will receive the
aggregate number of shares, other securities or other property to which they are
entitled as a result of the Capital Reorganization. If necessary, appropriate
adjustments shall be made as a result of any such Capital Reorganization in the
application of the provisions set forth in this Article 4 with respect to the
rights and interests thereafter of holders of Debentures to the end that the
provisions set forth in this Article 4 shall thereafter correspondingly be made
applicable as nearly as may reasonably be in relation to any shares, other
securities or other property thereafter deliverable upon the conversion of any
Debenture. Any such adjustment shall be made by and set forth in an Indenture
supplemental hereto approved by the directors and by the Trustee and entered
into pursuant to the provisions of Article 16 and which shall for all purposes
be conclusively deemed to be an appropriate adjustment.
(7) If the Rights Offering Price referred to in paragraphs (3) or (4) of
this Section 4.05 is decreased, the conversion price shall forthwith be changed
so as to decrease the conversion price to the conversion price that would have
been obtained had the adjustment to the conversion price made under such
paragraph (3) or (4), as the case may be, with respect to such rights, options
or warrants been made on the basis of the Rights Offering Price as so decreased,
provided that the terms of this subsection shall not apply to any decrease in
the Rights Offering Price resulting from terms in any such rights, options or
warrants designed to prevent dilution to the extent that the event giving rise
to such decrease in the Rights Offering Price results in an adjustment of the
conversion price pursuant to any of the preceding paragraphs of this Section
4.05.
(8) (a) The adjustments provided for in this Section 4.05 are cumulative
and shall, in the case of adjustments to the conversion price, be computed to
the nearest $0.001 (one one-hundredth of a cent) and shall be made successively
whenever an event referred to herein occurs, subject to the following clauses of
this subsection.
(b) No adjustment in the conversion price shall be required unless
such adjustment would result in a change of at least one percent (1%) in the
current conversion price; provided, however, that any adjustments which except
for the provisions of this clause would otherwise have been required to be made
shall be carried forward and taken into account in any subsequent adjustment.
(c) No adjustment in the conversion price or in the number of Shares
issuable upon conversion of Debentures shall be made in respect of any event
described in Section 4.05, other than the events referred to in clauses
4.05(2)(c) and (d), if holders of Debentures are entitled to participate in such
event on the same terms, mutatis mutandis, as if they had converted their
Debentures prior to or on the effective date or record date of such event.
(d) No adjustment in the conversion price shall be made pursuant to
Section 4.05 in respect of the issue from time to time of Shares issuable on
conversion of the Debentures or in respect of the issue from time to time as
dividends paid in the ordinary course as Shares to holders of Shares who
exercise an option or election to receive substantially equivalent dividends in
Shares in lieu of receiving a cash dividend, and any such issue shall be deemed
to be a Share Reorganization.
(e) If at any time a dispute arises with respect to adjustments
provided for in Section 4.05, such dispute shall be conclusively determined by
the Company's auditors, or if they are unable or unwilling to act, by such other
nationally recognized independent chartered accountants as may be selected by
action of the Directors and any such determination shall be binding upon the
Company, the Trustee, the holders of Debentures and shareholders of the Company;
such auditors or accountants shall
<PAGE>
be given access to all necessary records of the Company. If any such
determination is made, the Company shall deliver a certificate to the Trustee
describing such determination.
(f) If after the date of this Indenture, the Company takes any
action affecting the Shares, other than action described in Section 4.05, which
in the opinion of the Directors would materially affect the rights of the
holders of Debentures, the conversion price or the number of Shares issuable
upon conversion shall be adjusted in such manner, if any, and at such time, as
the Directors, in their sole discretion, may determine to be equitable in the
circumstances, but subject in all cases to any necessary regulatory approvals.
Failure of the taking of action by the directors so as to provide for an
adjustment on or prior to the effective date of any action by the Company
affecting the Shares shall be conclusive evidence that the directors have
determined that it is equitable to make no adjustment in the circumstances.
(g) If the Company sets a record date to determine the holders of
Shares for the purpose of entitling them to receive any dividend or distribution
or sets a record date to take any other action and thereafter and before the
distribution to such shareholders of any such dividend or distribution or the
taking of any other action, legally abandons its plan to pay or deliver such
dividend or distribution or take such other action, then no adjustment in the
conversion price or the number of Shares issuable upon conversion of any
Debenture shall be required by reason of the setting of such record date.
(h) In the absence of a resolution of the Directors fixing a record
date for a Special Distribution or Rights Offering, the Company shall be deemed
to have fixed as the record date therefor the date on which the board passed the
resolution approving the Special Distribution or Rights Offering.
(i) As a condition precedent to the taking of any action which would
require any adjustment to the conversion price or conversion terms of the
Debentures, the Company shall take all corporate action which may, in the
opinion of counsel, be necessary in order that the Company will have unissued
and reserved in its authorized capital and may validly and legally issue as
fully paid and non-assessable all the shares or other securities which all the
holders of the Debentures are entitled to receive on the full conversion thereof
in accordance with the provisions thereof.
4.06 Postponement of Subscription
In any case in which this Article 4 requires that an adjustment is to be
effective immediately after a record date for an event referred to herein, the
Company may defer, until the occurrence of such an event:
(a) issuing to the holder of any Debenture converted after such record
date and before the occurrence of such event, the additional Shares
issuable upon such conversion by reason of the adjustment required
by such event; and
(b) delivering to such holder any distributions declared with respect to
such additional Shares after such exercise date and before such
event;
provided, however, that the Company delivers to such holder an appropriate
instrument evidencing such holder's right, upon the occurrence of the event
requiring the adjustment, to an adjustment in the conversion price or the number
of Shares issuable on the conversion of any Debenture and to such distributions
declared with respect to any additional Shares issuable on the conversion of any
Debenture.
4.07 Treatment of Fractions
The Company shall not be required to issue fractional Shares upon a
conversion of Debentures pursuant to this Article 4. If any fractional interest
in a Share would, except for the provisions of this Section 4.07, be deliverable
upon the conversion of any Debenture, the Company shall adjust such fractional
interest by payment to the holder of such Debenture of an amount in cash equal
(computed, in
<PAGE>
the case of a fractional of a cent, to the next lower cent) to the value of such
fractional interest computed on the basis of the current Conversion Price for
Shares.
4.08 Notice of Adjustment
At least twenty-one (21) days before the effective date of or record date
for any event referred to in Section 4.05 hereof, the Company shall (i) file
with the Trustee and with the transfer agent for Shares of the Company an
Officer's Certificate showing the adjusted Conversion Price or adjusted
conversion terms, as the case may be, determined as provided in Section 4.05
hereof and setting forth in reasonable detail the facts requiring the adjustment
of the conversion price or conversion terms, as the case may be, and the manner
of determining such adjustment, and (ii) give notice, in accordance with Section
2.09 hereof, to the holders of the Debentures stating the particulars of the
event and the adjustments required. The Trustee shall keep such certificate on
file and available for inspection by Debentureholders during reasonable business
hours.
The Trustee may for all purposes act and rely upon the Officer's
Certificate submitted to it pursuant to this Section 4.08. Except as provided in
Section 12.02, the Trustee shall not at any time be under any duty or
responsibility to any Debentureholder to determine whether any facts exist which
may require any adjustment contemplated by Section 4.05, or with respect to the
nature or extent of any such adjustment when made, or with respect to the method
employed in making the same.
4.09 Notice of Maturity
At least twenty-one (21) days prior to the date that the right to convert
the Debentures into Shares is to expire, whether or not in consequence of the
fact that the Debentures are to mature, the Company shall give notice to the
holders of all registered Debentures, in the manner set forth in Section 2.09
hereof, of such expiry and of the date thereof, unless such expiry will be by
virtue of Debentures having been called for redemption prior to their maturity
date, notice of which redemption has then been provided to the holders of the
Debentures to be redeemed.
ARTICLE 5
GUARANTEE AND SECURITY
5.01 Guarantee of Debentures
(1) The Guarantor covenants with the Trustee on behalf of the holders that
the Company will pay and the Guarantor hereby unconditionally guarantees the due
and punctual payment of the principal amount of, and interest on (including, in
case of default, interest on the amount in default), each Debenture when and as
the same becomes due and payable whether at their respective due dates on
redemption or on maturity or otherwise in accordance with the terms of such
Debenture and of this Indenture (the "Guarantee"); provided, however, that
payment of interest on overdue instalments of interest is hereby guaranteed only
to the extent permitted by applicable law.
(2) In case of default by the Company in the payment of any such principal
or interest, the Guarantor agrees duly and punctually to pay the same without
demand. The Guarantor hereby agrees that its obligations under the Guarantee
shall be unconditional, irrespective of any invalidity, illegality, irregularity
or unenforceability of any Debenture or this Indenture with regard to the
Company (other than by reason or lack of genuineness), or the absence of any
action to enforce the same, the recovery of any judgment against the Company or
any action to enforce the same or any circumstances which might otherwise
constitute a legal or equitable discharge or defence of a guarantor. The
Guarantor hereby
<PAGE>
waives diligence, presentment, demand of payment, the filing of claims with a
court in the event of merger, amalgamation, insolvency or bankruptcy of the
Company, any right to require a proceeding first against the Company, protest or
notice with respect to any Debenture or the indebtedness evidenced thereby and
all demands whatsoever, and covenants that its obligations under this Section
5.01 will not be discharged as to any Debenture except by payment in full of the
principal of and interest on such Debenture.
(3) The Guarantee is a direct obligation of the Guarantor and shall be
secured by a charge on substantially all of the assets of the Guarantor
substantially in the form appended hereto as Schedule "B", such charge ranking
in priority to all other current and future indebtedness of the Guarantor,
subject to any exceptions prescribed by law and subject to Article 6.
(4) In the case of default by the Company the Trustee shall not be bound
or obligated to proceed against the Company or to take any other action before
being entitled to demand payment from the Guarantor hereunder.
(5) The obligation of the Guarantor under this Indenture shall be a
continuing obligation and a fresh cause of action hereunder shall be deemed to
arise in respect of each default.
(6) The Guarantor shall not be or become liable hereunder or under any
Debenture to make any payment of principal or interest in respect to which the
Company shall be in default if the default of the Company in respect of which
the Guarantor would otherwise be or become liable hereunder or under any
Debenture shall have been waived or directed to be waived pursuant to the
provisions in that behalf contained in this Indenture, provided, however, that
no waiver or consent of any kind whatsoever shall release, alter or impair the
unconditional obligation of the Guarantor hereunder or under any Debenture after
giving effect to such waiver or consent.
(7) The Guarantor shall be subrogated to all rights of the holder of each
Debenture and the holders of any interest therein against the Company in respect
of any amount paid by the Guarantor pursuant to the provisions of the Guarantee;
provided, however, that the Guarantor shall not be entitled to enforce, or to
receive any payments arising out of or based upon, such right or subrogation
until the principal of and interest on all Debentures shall have been paid in
full.
(8) No remedy for the enforcement of the rights of the holder of any
Debenture to receive payment of the principal of or interest on, or both, any
Debenture in accordance with its terms under this Indenture or under such
Debenture shall be exclusive of or dependent on any other remedy.
(9) If any monies become payable by the Guarantor hereunder, the Trustee
shall be entitled to enforce the Guarantee and receive payment thereof by the
Guarantor, for the benefit of the holders of the Debentures, and shall be
entitled to recover judgment against the Guarantor for any portion of the same
remaining unpaid and the Trustee shall have further remedies with respect to the
Guarantor similar to the remedies granted to it in Article 8 with respect to the
Company. The whole of the monies from time to time received by the Trustee
hereunder shall be applied by the Trustee in accordance with the provisions of
Section 8.05.
5.02 Gross-up for Withholding Taxes on Payments by the Guarantor under
Debentures
Any and all payments by the Guarantor pursuant to the provisions of
Section 5.01 shall be made without withholding of or deduction for, or on
account of, any present or future taxes imposed by or on behalf of the United
States or any political subdivision thereof unless such taxes are required by
law or by the administration thereof to be withheld or deducted, in which case
the Guarantor shall pay such additional amounts as will result (after the
withholding or deduction of such taxes) in the payment to the holders of the
Debentures of the amounts which would otherwise have been payable pursuant to
Section 5.01; provided, however, that the foregoing obligation to pay additional
amounts will not apply to any one or more of the following:
<PAGE>
(1) any tax, assessment or other governmental charge that would not have
been so imposed but for (i) the existence of any present or former
connection between a Debentureholder (or between a fiduciary,
settlor, beneficiary or member of a Debentureholder, if such
Debentureholder is an estate, a trust or a partnership) and the
United States, including, without limitation, such Debentureholder
(or such fiduciary, settlor, beneficiary or member) being or having
been a citizen or resident or treated as a resident thereof, or
being or having been engaged in a trade or business or present
therein, or having or having had a permanent establishment therein
but excluding a connection consisting solely of the holder or use
outside of the United States or ownership as a non-resident and
non-citizen of the United States of a Debenture and the Guarantee in
respect thereof, or (ii) such Debentureholder's present or former
status as a personal holding company, a foreign personal holding
company, a controlled foreign company for United States tax
purposes, a private foundation or other tax exempt organization or a
company that accumulates earnings to avoid United States Federal
income tax;
(2) any tax, assessment or other governmental charge imposed on interest
received by a person holding, actually or constructively, 10% or
more of the total combined voting power of all classes of stock of
the Company or the Guarantor entitled to vote;
(3) any tax, assessment or other governmental charge which would not
have been imposed but for the failure to comply with any
certification, identification or other reporting requirements
concerning the nationality, residence, identity or connection with
the United States of the holder or beneficial owner of such
Debenture, if compliance is required by the statute or by regulation
of the United States Treasury Department as a precondition to
exemption from such tax, assessment or other governmental charge;
(4) any estate, inheritance, gift, sales, transfer, personal property or
any similar tax, assessment or governmental charge;
(5) any tax, assessment or other governmental charge which would not
have been so imposed but for the presentation by the holder of such
Debenture for payment on a date more than 30 days after the date on
which such payment became due and payable or the date on which
payment thereof is duly provided for, whichever occurs later;
nor will additional amounts be paid (i) with respect to any payment of principal
of or interest on any such Debenture to any Debentureholder who is a fiduciary
or partnership or other than the sole beneficial owner of any such payment to
the extent that a beneficiary or settlor with respect to such fiduciary, a
member of such a partnership or the beneficial owner would not have been
entitled to the additional amounts had such beneficiary, settlor, member or
beneficial owner been the holder of such Debenture, or (ii) to a foreign
partnership unless one or more of the members of the partnership is, for United
States Federal income tax purposes, a foreign company, a non-resident alien
individual or a non-resident alien fiduciary of a foreign estate or trust.
5.03 Further Assurances
The Guarantor shall, subject as herein provided, forthwith, and from time
to time, execute and do or cause to be executed and done all deeds, documents
and things which, in the opinion of counsel, are necessary or advisable for
giving the Trustee charges over the assets of the Guarantor to secure the
payment of all principal monies and interest for the time being and from time to
time owing pursuant to this Indenture and the Debentures.
<PAGE>
5.04 Registration
The Guarantor shall record, file, enter or register the security agreement
set out as Schedule "B" hereto, all agreements supplemental hereto and all other
instruments or further assurances without delay (wherever in the opinion of
counsel it would be of material advantage in preserving and protecting the
security interest created thereby and the rights of the Debentureholders and the
Trustee hereunder for such action to be taken) under the provisions of any and
all statutes providing for or permitting the registration of such security in
any province or territory of Canada and any state, territory or possession of
the United States of America in which assets of the Guarantor are situated or
the business of the Guarantor is carried on; and the Guarantor shall renew such
recordings, filings, enterings or registrations from time to time as and when
required.
5.05 Authority to Charge and Maintenance of Security
The Guarantor covenants with the Trustee:
(a) it has good right and lawful authority to charge its undertaking,
property, rights and assets as provided in and by this Indenture;
and
(b) it will fully and effectually maintain and keep maintained the
security provided for in this Article 5 as valid and effective
security at all times so long as any of the Debentures shall be
outstanding.
5.06 Release and Discharge
(1) The obligation and liability of each of the Guarantor and the Company
under this Indenture, except as otherwise provided in this Indenture, shall not
be released, discharged or in any way affected by any release, discharge, loss
or alteration in or dealing with the secured assets or any part thereof or
anything done, suffered or permitted by the Trustee in relation to any of the
secured assets; or by any extension of time for payment of the Debentures; or by
any modification of any of the Debentures or this Indenture; or by any
forebearance whatsoever, whether as to time, performance or otherwise; or by any
compromise, arrangement or plan or reorganization affecting the Company, the
Guarantor or the security under or pursuant to this Indenture; or by any other
matter or thing whatsoever which would release a guarantor or principal obligor,
as the case may be (except payment in full of the principal of and interest on
the Debentures).
(2) It is understood and agreed that the charges created pursuant to this
Indenture shall be held by the Trustee as security for the performance by the
Company and the Guarantor of their respective covenants herein contained and
that upon the Company becoming entitled to a discharge of this Indenture, then
these presents and the estate and rights by this Indenture granted shall cease
and become utterly null and void and the secured assets shall revert to and
revest in the Guarantor without any release, acquittance or any act or formality
whatsoever; and thereupon the Trustee shall, at the request and at the expense
of the Guarantor and the Company, execute and deliver to the Guarantor and the
Company such instruments as shall be requisite to evidence the satisfaction and
discharge of the security contemplated hereby, and to release or reconvey to the
Guarantor the secured assets freed and discharged from the trusts and
provisions, and to release each of the Guarantor and the Company from their
covenants in this Indenture.
<PAGE>
ARTICLE 6
SUBORDINATION
6.01 Subordination of Debentures
The indebtedness evidenced by the Debentures, including the principal
thereof and interest thereon shall be and is hereby expressly made subordinate
and subject in right of payment, to the extent and in the manner set forth in
this Article 6, to the prior payment in full of all Senior Indebtedness whether
now outstanding or hereafter incurred.
6.02 Payment of Proceeds in Certain Events
(1) Subject to Section 6.06, in the event of any distribution of the
assets of the Company upon any dissolution or winding up or partial or total
liquidation of the Company, whether in bankruptcy, insolvency or receivership
proceedings, or upon an assignment for the benefit of creditors or any other
marshalling of the assets and liabilities of the Company, or any reorganization
or insolvency of the Company:
(a) all Senior Indebtedness shall first be paid in full or provision
made for such payment before any payment is made on account of the
principal of and interest on the Debentures; and
(b) any payment or distribution of assets of the Company, whether in
cash, property or securities, to which the holders of the Debentures
would be entitled except for the provisions of this Article 6, shall
be paid or delivered by the trustee in bankruptcy, receiver,
assignee for the benefit of creditors or other liquidating agent
making such payment or distribution, directly to the Designated
Representatives or to the holders of Senior Indebtedness to the
extent necessary to pay all Senior Indebtedness in full after giving
effect to any concurrent payments or distribution or provision
therefor to or for the benefit of the holders of Senior
Indebtedness, and the holders of the Debentures by acceptance
thereof assign to the Designated Representatives or to the holders
of Senior Indebtedness for the purposes and to the extent set forth
in this Section 6.02(b) all their right, title and interest in and
to any such payment or distribution of the assets of the Company as
aforesaid to which the holders of the Debentures or the Trustee for
their benefit would be entitled except for the provisions of this
Section 6.02(b); and the holders of the Debentures authorize and
direct the Trustee to take such steps as may be necessary or
appropriate to entitle the Designated Representatives or the holders
of Senior Indebtedness to receive rateably such payment or
distribution from the liquidating trustee or agent or other person
making such payment or distribution;
and if, notwithstanding the foregoing, any payment or distribution of assets of
the Company, whether in cash, property or securities, shall be received by the
holders of the Debentures or by the Trustee on behalf of such holders before all
Senior Indebtedness is paid in full, or provision is made for its payment, such
payment or distribution shall be held in trust for the benefit of the holders of
Senior Indebtedness and shall be paid over or delivered to their Designated
Representatives or to the holders of Senior Indebtedness for application to the
payment of all Senior Indebtedness remaining unpaid.
(2) The consolidation, amalgamation or merger of the Company with another
corporation or the sale, transfer or leasing of its property as a whole or
substantially as a whole to another corporation upon the terms and conditions
provided in Article 9 shall not be deemed a winding up for the purpose of
<PAGE>
this Article 6 if such other corporation shall, as part of such consolidation,
amalgamation, merger, sale, transfer or lease, comply with the conditions stated
in Article 9.
6.03 Subrogation to Senior Indebtedness
Subject to the payment in full of all Senior Indebtedness in accordance
with the terms thereof, the holders of the Debentures and the Trustee for the
benefit of such holders shall be subrogated to the rights of the holders of
Senior Indebtedness to receive payments or distribution of assets of the Company
applicable to such Senior Indebtedness, to the extent of the application thereto
of moneys or other assets which would have been received by the holders of
Debentures or by the Trustee for the benefit of such holders but for the
provisions of this Article 6, until the principal of and interest on the
Debentures shall be paid in full; it being understood that the provisions of
this Article 6 are and are intended solely for the purpose of defining the
relative rights of the holders of the Debentures on the one hand and the holders
of the Senior Indebtedness on the other hand, and nothing in this Article 6 or
elsewhere in this Indenture or in the Debentures is intended or shall impair the
obligation of the Company, which is unconditional and absolute, to pay to the
holders of the Debentures the principal of and interest on the Debentures as and
when the same shall become due and payable in accordance with their terms, or to
affect the relative rights of the holders of the Debentures and creditors of the
Company other than the holders of Senior Indebtedness, nor shall anything herein
or in the Debentures prevent the Trustee or the holder of any Debenture from
exercising all remedies otherwise permitted by this Indenture or, except as is
expressly limited hereby or by the Debentures, by applicable law upon default
under the Debentures or this Indenture, subject in any event, to the rights, if
any, under this Article 6 of the holders of Senior Indebtedness in respect of
any payment or distribution of cash, property or securities of the Company
received upon the exercise of any such remedy.
6.04 Senior Indebtedness Default
Upon the happening and during the continuance of a Senior Indebtedness
Default, no payment shall be made by the Company with respect to the principal
of and interest on the Debentures. In the event that, notwithstanding the
foregoing, the Company shall make any payment of principal of or interest on the
Debentures after the happening and during the continuance of a Senior
Indebtedness Default, then such payments received by the Trustee shall be held
in trust for the benefit of the holders of Senior Indebtedness, and shall be
paid over to their Designated Representatives or to the holders of Senior
Indebtedness for application to the payment of all Senior Indebtedness remaining
unpaid. Unless and until written notice has been given to the Trustee by or on
behalf of any holder of any Senior Indebtedness, notifying the Trustee of the
happening of an event of default with respect to such Senior Indebtedness or of
the existence of any other facts which would result in the making of any payment
with respect to the Debentures in contravention of the provisions of this
Article 6, the Trustee shall be entitled to assume that no such event of default
has occurred, or that no such facts exist, and, with respect to any moneys which
may at any time be received by the Trustee in trust pursuant to the provisions
of this Trust Indenture, prior to the receipt by it of such written notice,
nothing in this Indenture will prevent the Trustee from applying such moneys to
the purposes for which the same were so received, notwithstanding the occurrence
or continuance of an event of default with respect to or the existence of such
facts with respect to such Senior Indebtedness.
6.05 Notice to Trustee of Senior Indebtedness Default
The Company shall give prompt written notice to the Trustee of any
dissolution, winding up or liquidation of the Company within the meaning of this
Article 6 or of any Senior Indebtedness Default. The Trustee and the holders of
the Debentures shall be entitled to assume that no such event has occurred
unless the Company has given such notice and, in the case of notice given of any
Senior Indebtedness Default, that such default is continuing until the Company
gives written notice to the Trustee that such default has ceased to exist. Upon
any payment or distribution of assets of the Company referred to in this Article
6, the Trustee and the holders of the Debentures shall be entitled to rely upon
a certificate of the trustee in bankruptcy, receiver, assignee for benefit of
creditors or other liquidating agents making such payment or distribution,
delivered to the Trustee or to the holders of Debentures, for the purpose of
<PAGE>
ascertaining the persons entitled to participate in such distribution, the
holders of the Senior Indebtedness and other indebtedness of the Company, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 6.
6.06 Certain Exceptions
Nothing contained in this Article 6 or elsewhere in this Indenture or in
any of the Debentures shall prevent:
(a) the Company from making payment of the principal of or interest on
the Debentures at any time except upon and during the continuance of
a Senior Indebtedness Default or during the pendency of any
dissolution or winding up or partial or total liquidation of the
Company (whether in bankruptcy, insolvency or receivership
proceedings), or upon an assignment for the benefit of creditors or
any other marshalling of the assets and liabilities of the Company
or during any reorganization or insolvency of the Company;
(b) the Trustee from applying to the payment of principal of and
interest on the Debentures, monies deposited with it for such
purpose; or
(c) the Company from completing any purchase or redemption of Debentures
except during the pendancy of any Senior Indebtedness Default.
The provisions of this Section 6.06 shall not be applicable to any cash,
securities or other property received by the holder of any Debenture or by the
Trustee by virtue of being a holder of Senior Indebtedness.
6.07 Failure to Act Not a Waiver
No right of any present or future holder of any Senior Indebtedness of the
Company to enforce subordination as herein provided shall at any time in any way
be prejudiced or impaired by any act or failure to act on the part of the
Company or by any act or failure to act in good faith, by any such holder, or by
any non-compliance by the Company with the terms, provisions and covenants of
this Indenture, regardless of any knowledge thereof any such holder may have or
with which he may be otherwise charged.
6.08 Renewal or Extension of Senior Indebtedness
A holder of Senior Indebtedness may at any time in his or her discretion
renew or extend the time of payment of the Senior Indebtedness so held or
exercise any other of his or her rights under the Senior Indebtedness,
including, without limitation, the waiver of default thereunder, all without
notice to or assent from the holders of the Debentures or the Trustee.
6.09 Trustee to be Agent of Holders
Each holder of Debentures by his or her acceptance thereof irrevocably
authorizes and directs the Trustee on his or her behalf to take such further
action as may be necessary or appropriate further to assure the subordination as
provided in this Article 6 and appoints the Trustee his or her agent for any and
all such purposes. Without limitation of the foregoing, the Trustee for and on
behalf of the holders from time to time of all the Debentures is authorized and
directed, upon the written request of the Company, to execute from time to time
deeds of subordination in favour of such Designated Representatives or to such
holders of Senior Indebtedness as are specified in such request and to deliver
executed counterparts
<PAGE>
thereof to each such Designated Representative or holder as aforesaid. The
Company shall keep on file at its registered office copies of all deeds of
subordination executed and delivered by it pursuant to this Section 6.09 and
such copies shall be open to inspection by any of the holders of Debentures or
Senior Indebtedness at such office during regular business hours. Each such deed
of subordination shall be conclusive evidence that the indebtedness specified
therein is Senior Indebtedness. Nothing herein contained shall impair the rights
of any Designated Representative or any holders of Senior Indebtedness who have
not entered into such a deed of subordination.
6.10 Company to Issue Certificates of Senior Indebtedness
The Company covenants that during the currency of any event of default or
any event which with notice or lapse of time, or both, would become an event of
default, it will within a reasonable period of time following the request of the
Trustee to do so prepare and deliver to the Trustee an Officers' Certificate
showing in reasonable detail the Senior Indebtedness outstanding as of the date
of such certificate by series, issue or class and the Designated Representatives
of each series, issue or class or the holders of each series, issue or class
insofar as such holders are known to the Company. The Trustee may conclusively
act and rely on each such Officers' Certificate.
ARTICLE 7
CERTAIN COVENANTS OF THE COMPANY
7.01 General Covenants of the Company
The Company will well and truly perform and carry out all of the actions
or things to be done by it as provided in this Indenture. The Company hereby
covenants and agrees that:
(a) Payment of Principal and Interest. It will well, duly and punctually
pay or cause to be paid to every Debentureholder the principal of
and interest accrued on the Debentures of which he or she is the
holder at the dates and places, in the monies and in the manner,
provided for herein and in the Debentures.
(b) To Carry on Business. It will at all times maintain its corporate
existence and diligently carry on and conduct its business in a
proper, efficient and businesslike manner and shall not cease to
operate the whole or substantially the whole of its business except
in accordance with Article 9, and will keep, or cause to be kept,
proper books of account and make, or cause to be made, in accordance
with generally accepted accounting principles therein true and
faithful entries of all dealings and transactions in relation to its
business and at all reasonable times furnish, or cause to be
furnished, to the Trustee or its duly authorized agent or attorney
such information relating to its business as the Trustee may
reasonably require, and such books of account shall at all
reasonable times be open for inspection by the Trustee or such agent
or attorney as the Trustee may from time to time by instrument in
writing for that purpose appoint.
(c) To Pay Taxes. It will from time to time pay or cause to be paid all
taxes, rates, levies, assessments, ordinary or extraordinary,
government fees or dues lawfully levied, assessed or imposed upon or
in respect of its property (real or personal), assets and
undertaking or any part thereof or upon the income and profits of
the Company as and when the same become due and payable, and that it
will exhibit or cause to be exhibited to the Trustee when requested
the receipts and vouchers establishing such payments, and will duly
observe and conform to all valid requirements of any governmental
authority relative to any of its property or rights which are
material to its overall undertaking, provided, however, that the
Company shall have the right to contest in good faith by legal
proceedings any such taxes, rates, levies, assessments, government
fees or dues and, upon such contest, may delay or defer payment or
discharge thereof if the Company shall have set aside on its books
reserves (segregated to the extent required by sound accounting
<PAGE>
practice) deemed by it to be adequate with respect thereto, or if in
the opinion of the Directors, the failure to pay and discharge
promptly the same shall be in the interests of the Company and not
disadvantageous in any material respect to the Debentureholders.
(d) To Maintain Insurance. It will insure and keep insured against loss
or damage by fire its buildings, plants and other properties and
things which are of an insurable nature and of a character usually
insured by prudent corporations carrying on similar operations under
like circumstances, and that it will carry such other insurance as
is usually carried by prudent corporations carrying on similar
operations under like circumstances, and that it will pay, duly and
seasonably, the premiums and other sums of money payable in respect
of such insurance and will exhibit to the Trustee on demand the
receipts for such premiums.
(e) Financial Statements. It will furnish to the Trustee, and such
Debentureholders as shall request the same, (i) within 140 days (or
such longer period as the Trustee in its discretion may consent to)
after the end of its fiscal year, a copy of the consolidated
financial statements and of the report of the Company's auditors
thereon which are furnished to the shareholders of the Company, and
(ii) within 60 days (or such longer period as the Trustee in its
discretion may consent to) after the end of the first, second and
third quarterly accounting periods in each fiscal year, a copy of
the consolidated balance sheet as at the end of such quarterly
accounting period, the related statements of income, retained
earnings and changes in the financial position for the period
commencing with the last day of the previous fiscal year and ending
with the last day of such quarterly accounting period, all certified
by a principal financial or accounting officer of the Company to
present fairly the information contained therein, subject to
year-end and audit adjustments.
(f) Pay Trustee's Remuneration. It will pay to the Trustee reasonable
remuneration for its services as Trustee hereunder and will repay to
the Trustee on demand all monies which shall have been paid by the
Trustee in and about the execution of the trusts hereby created
(including the reasonable compensation and disbursements of its
counsel and all other advisors and assistants not regularly in its
employ but excluding any expense, disbursement or advance as may
arise from the negligence or wilful default of the Trustee), with
interest at the then prevailing prime rate from the date on which
the Trustee notifies the Company of such expenditure until actual
repayment, and such monies and the interest thereon, including the
Trustee's remuneration, shall be payable out of any monies held by
the Trustee under this Indenture in priority to the Debentures. The
said remuneration shall continue payable until the trusts hereof
shall be finally satisfied.
(g) Default. If it should be in default hereunder at any time it will
promptly, after it has become aware of same, give notice to the
Trustee of the occurrence of an event of default or an event which,
with the giving of notice or lapse of time, or both, would become an
event of default; provided, however, that in the event of any
Debentures being issued, re-issued or substituted during the
continuance of such default of which the Trustee is not aware and
being treated by the Trustee as entitled to the benefit hereof, the
Trustee shall not thereby incur any responsibility.
(h) Securities Laws. It will at all times preserve and remain its status
as a "reporting issuer" not in default under the Securities Act
(Ontario) and will, in a timely fashion, file and deposit all
documents and reports with the Ontario Securities Commission and
similar
<PAGE>
securities regulatory authorities required to be filed or deposited
pursuant to applicable legislation.
(i) Debentures. The Debentures, when issued and certified as herein
provided, will be valid and enforceable against the Company and,
subject to the provisions of this Indenture, the Company will cause
the Shares acquired pursuant to the conversion of the Debentures to
be duly issued and delivered in accordance with the Debentures and
the terms thereof. At all times prior to the maturity of the
Debentures, while any of the Debentures are outstanding, the Company
shall reserve and keep available out of its authorized capital,
solely for the purpose of issue upon the exercise of the right of
conversion of Debentures, and there shall be conditionally allotted
but unissued, a number of Shares sufficient to enable the Company to
meet its obligations hereunder.
(j) Notice to Regulatory Authorities. It shall give written notice of
the issue of the Shares pursuant to the conversion of the
Debentures, if required and in such detail as may be required, to
each securities regulatory authority in each relevant jurisdiction
pursuant to applicable law.
(k) Further Assurances. It shall do, execute and acknowledge and deliver
or cause to be done, executed acknowledged and delivered, all other
acts, deeds and assurances as the Trustee may reasonably require for
the better accomplishing and effecting the intentions and provisions
of this Indenture.
7.02 General Covenants of the Guarantor
The Guarantor will well and truly perform and carry out all of the actions
or things to be done by it as provided in this Indenture. The Guarantor hereby
covenants and agrees that:
(a) To Carry on Business. It will at all times maintain its corporate
existence and diligently carry on and conduct its business in a
proper, efficient and businesslike manner and shall not cease to
operate the whole or substantially the whole of its business except
in accordance with Article 9, and will keep, or cause to be kept,
proper books of account and make, or cause to be made, in accordance
with generally accepted accounting principles therein true and
faithful entries of all dealings and transactions in relation to its
business and at all reasonable times furnish, or cause to be
furnished, to the Trustee or its duly authorized agent or attorney
such information relating to its business as the Trustee may
reasonably require, and such books of account shall at all
reasonable times be open for inspection by the Trustee or such agent
or attorney as the Trustee may from time to time by instrument in
writing for that purpose appoint.
(b) To Pay Taxes. It will from time to time pay or cause to be paid all
taxes, rates, levies, assessments, ordinary or extraordinary,
government fees or dues lawfully levied, assessed or imposed upon or
in respect of its property (real or personal), assets and
undertaking or any part thereof or upon the income and profits of
the Guarantor as and when the same become due and payable, and that
it will exhibit or cause to be exhibited to the Trustee when
requested the receipts and vouchers establishing such payments, and
will duly observe and conform to all valid requirements of any
governmental authority relative to any of its property or rights
which are material to its overall undertaking, provided, however,
that the Guarantor shall have the right to contest in good faith by
legal proceedings any such taxes, rates, levies, assessments,
government fees or dues and, upon such contest, may delay or defer
payment or discharge thereof if the Guarantor shall have set aside
on its books reserves (segregated to the extent required by sound
accounting practice) deemed by it to be adequate with respect
thereto, or if in the opinion of the Directors, the failure to pay
and discharge promptly the same shall be in the interests of the
Guarantor and not disadvantageous in any material respect to the
Debentureholders.
<PAGE>
(c) To Maintain Insurance. It will insure and keep insured against loss
or damage by fire its buildings, plants and other properties and
things which are of an insurable nature and of a character usually
insured by prudent corporations carrying on similar operations under
like circumstances, and that it will carry such other insurance as
is usually carried by prudent corporations carrying on similar
operations under like circumstances, and that it will pay, duly and
seasonably, the premiums and other sums of money payable in respect
of such insurance and will exhibit to the Trustee on demand the
receipts for such premiums.
(d) Negative Pledge. Except as otherwise provided in this Indenture, it
will not, as long as any of the Debentures remain outstanding,
create, incur or permit any Security, other than the Senior
Indebtedness, on any of its current or after acquired assets or
undertakings to secure any obligations or indebtedness unless such
Security is subordinate to the Security granted to the Trustee on
behalf of the Debentureholders pursuant to the Security Agreement
attached hereto as Schedule "B".
(e) Subsequent Filings. It will file all necessary applications,
documents or materials required to be filed with any United States,
Canadian or other foreign patent application which corresponds to
the invention(s) disclosed in the Patent.
<PAGE>
7.03 Representations and Warranties of the Company and the Guarantor
Each of the Company and the Guarantor represent and warrant to the Trustee
on behalf of the Debentureholders that the Guarantor is the duly registered
holder of the Patent.
7.04 Trustee may Perform Covenants
If the Company shall fail to perform any of the covenants or fulfil any of
the conditions contained in this Indenture or in the Debentures, the Trustee may
in its discretion perform, but shall be under no obligation to do so, any of the
said covenants or fulfil any such condition capable of being performed or
fulfilled by it and, if any such covenant or condition requires the payment or
expenditure of money, it may make such payments or expenditures with its own
funds, or with money borrowed by or advanced to it for such purpose; and all
sums so expended or advanced shall be at once payable by the Company and shall
bear interest at the then prevailing prime rate until paid and shall be payable
out of any monies held by the Trustee under this Indenture in priority to the
Debentures, but no such performance or payment shall be deemed to relieve the
Company from any default hereunder.
7.05 No Other Convertible Obligation to Rank Ahead of Debentures
The Company hereby covenants with the Trustee for the benefit of the
holders of the Debentures that it will not, so long as any of the Debentures
remain outstanding, issue any obligations convertible into shares in the capital
of the Company pursuant to a trust indenture or like document, unless the same
rank pari passu with or are subordinate in right of payment of principal,
premium (if any), and interest to the Debentures.
7.06 Company Not to Extend Time for Payment of Interest
In order to prevent any accumulation after maturity of interest, the
Company hereby covenants that it will not, directly or indirectly, extend or
assent to the extension of any time for payment of interest upon any Debentures
issued hereunder, and that it will not, directly or indirectly, be a party to or
approve any such arrangement. In case the time for payment of any such interest
shall be so extended, whether or not such extension shall be by or with the
consent of the Company, such interest shall not be entitled, in case of default
hereunder, to the benefit of these presents except subject to the prior payment
in full of the principal of all the Debentures then outstanding, and of all
interest on such Debentures the payment of which has not been so extended.
7.07 Annual Compliance Certificate
On each anniversary of the date hereof, and at any other time if requested
by the Trustee, the Company will deliver to the Trustee an Officer's Certificate
stating that the Company has complied with all covenants, conditions or other
requirements contained in this Indenture the non-compliance with which would,
with the giving of notice or the lapse of time, or both, constitute an event of
default under this Indenture, or if such is not the case, specifying the
covenant, condition or other requirement which has not been complied with and
giving particulars of such non-compliance.
<PAGE>
ARTICLE 8
EVENTS OF DEFAULT
8.01 Events of Default
If one or more of the following events (herein called "events of default")
shall happen, that is to say:
(a) default shall be made in the payment of the principal of any of the
Debentures when the same becomes due and payable; or
(b) default shall be made in the payment of any interest due on any of
the Debentures issued hereunder and such default shall have
continued for a period of twenty-one (21) days; or
(c) any Senior Indebtedness Default shall occur and such default shall
continue beyond the period of grace, if any, specified in the
indenture or agreement under which such Senior Indebtedness is
issued and shall not have been waived; or
(d) the Company or any of its Subsidiaries shall generally not pay its
debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against the Company or any of its Subsidiaries
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding-up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors (including, without limitation, the Companies' Creditors
Arrangement Act), or seeking the entry of an order for relief or the
appointment of a receiver, trustee, or other similar official for it
or for any substantial part of its property and, in the case of any
such proceeding remaining undismissed or unstayed for a period of
thirty (30) days or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief
against it or the appointment of a receiver, trustee, custodian or
other similar official for it or for any substantial part of its
property) shall occur; or the Company or such Subsidiary shall take
any corporate action to authorize any of the actions set forth in
this Subsection 8.01(c); provided that a resolution or order for
winding-up the Company with a view to its consolidation,
amalgamation or merger with another corporation or the transfer of
its assets as a whole, or substantially as a whole, to such other
corporation, as provided in Article 8 shall not constitute an event
of default if such last mentioned corporation shall, as part of such
consolidation, amalgamation, merger or transfer comply with the
conditions to that end stated in Article 9; or
(e) any process of execution be enforced or levied upon any of the
property of the Company or the Guarantor and remain unsatisfied for
a period of ten (10) business days, provided that such process is
not in good faith disputed by the Company or the Guarantor, and
either the Company or the Guarantor shall have given security which,
in the discretion of the Trustee, shall be sufficient to pay in full
the amount claimed in the event that it shall be held to be valid
claim; or
(f) the Guarantor fails to observe or perform any of its covenants
contained in Article 5 and Subsection 6.02;
<PAGE>
(g) the Company fails to observe or perform any of its covenants
contained in Article 7 of this Indenture, except as provided in
Subsection 8.01(b); or
(h) default shall be made in the due observance or performance of any
other covenant or condition in this Indenture required to be
observed or performed by the Company or the Guarantor and any such
default shall continue for a period of thirty (30) days after notice
received by the Company or the Guarantor from the Trustee specifying
such default and requiring the Company or the Guarantor to rectify
such default and any such notice may be given by the Trustee on its
own initiative and shall be given at the written request of the
holders of not less than twenty-five percent (25%) of the aggregate
principal amount of the Debentures issued hereunder at the time
outstanding;
then in each and every such event the Trustee, subject to the provisions of
Section 8.02 hereof, may in its discretion and shall upon the request in writing
of the holders of not less than twenty-five percent (25%) in principal amount of
the Debentures then outstanding, declare the principal of, and interest on, all
the Debentures outstanding hereunder, together with all other monies payable
hereunder, to be due and payable and the same shall forthwith become immediately
due and payable to the Trustee, anything therein or herein to the contrary
notwithstanding, and the Company shall pay forthwith to the Trustee the amount
of the principal of and interest then accrued on all of the Debentures then
outstanding and all other monies payable hereunder, together with interest on
such principal, interest and other monies at the rate of interest borne by the
Debentures from the date of the said declaration until payment is received by
the Trustee. Such payment when made shall be deemed to have been made in
discharge of the Company's obligations hereunder and under the Debentures and
shall be applied in the manner hereinafter provided in Section 8.05 hereof.
8.02 Notice of Event of Default
(1) If an event of default occurs and is continuing the Trustee shall
within ten (10) business days after it becomes aware of the occurrence of such
event of default, give notice of such event of default to the holders of the
Debentures provided that, notwithstanding the foregoing, the Trustee shall not
be required to give such notice if the Trustee in good faith decides that the
withholding of such notice is in the best interests of the holders of Debentures
and has so advised the Company in writing.
(2) Where notice of the occurrence of an event of default has been given
and the event of default is thereafter cured, notice that the event of default
is no longer continuing shall be given by the Trustee to the holders of
Debentures within a reasonable time, but not exceeding ten (10) business days,
after the Trustee has actual knowledge that the event of default has been cured.
8.03 Waiver of Default
Upon the happening of any event of default hereunder, except default in
payment of principal monies at maturity, and in addition to the powers
exercisable by the Debentureholders by Extraordinary Resolution, the holders of
not less than fifty-one percent (51%) in principal amount of all the Debentures
which shall then be outstanding shall have power by an instrument or instruments
in writing or by affirmative votes of such holders at a meeting duly convened
and held as hereinafter provided to require the Trustee to waive the default and
the Trustee shall thereupon waive the default upon such terms and conditions as
such holders shall prescribe. So long as it has not become bound as provided in
this Article 8 to declare the principal of and interest on all the Debentures
then outstanding to be due and payable, or to obtain and enforce payment of the
same, the Trustee shall have power to waive any default arising hereunder,
except default in payment of principal monies at maturity, if in the opinion of
the Trustee the same shall have been cured, or adequate satisfaction made
therefor, upon such terms and conditions as the Trustee may deem advisable;
provided always that no act or omission either of the Trustee or of the
Debentureholders in the premises shall extend to or be taken in any manner
whatsoever to affect any subsequent default or the rights resulting therefrom.
<PAGE>
8.04 Right of Trustee of Enforce Payment
Subject to the provisions of Section 8.03, in case the Company shall fail
to pay to the Trustee, on demand, the principal and interest on all the
Debentures then outstanding, together with any other amounts due hereunder, the
Trustee may in its discretion and, upon the request in writing of the holders of
not less than twenty-five percent (25%) in principal amount of the Debentures
then outstanding and upon being indemnified and funded to its reasonable
satisfaction against all costs, expenses and liabilities to be incurred, shall
proceed in its name as Trustee hereunder to obtain or enforce payment of the
said principal of and interest on all the Debentures then outstanding together
with any other amounts due hereunder, by any remedy provided by law either by
legal proceedings or otherwise including, without limitation, enforcing the
Guarantee provided for in Section 5.01.
8.05 Application of Moneys by Trustee
Except as otherwise herein provided, the monies arising from any
enforcement hereof shall be held by the Trustee and applied by it, together with
any other monies then or thereafter in the hands of the Trustee available for
the purpose, as follows:
(a) firstly, in payment or reimbursement to the Trustee of the
remuneration, expenses, disbursements and advances of the Trustee
earned, incurred or made in the administration or execution of the
trusts hereunder or otherwise in relation to this Trust Indenture
with interest thereon as herein provided;
(b) secondly, but subject to Section 6.06, in payment of the principal
of and accrued and unpaid interest on amounts in default under the
Debentures which shall then be outstanding rateably and
proportionately and without preference or priority or discrimination
as between principal and interest unless otherwise directed by
extraordinary resolution and in that case in such order of priority
as between principal and interest as may be directed by such
resolution; and
(c) the surplus (if any) of such monies shall be paid to the Company or
its assigns.
8.06 Trustee Not Bound to Make Interim Payment
The Trustee shall not be bound to apply or make any partial or interim
payment of any monies coming into its hands if the amount so received by it is
insufficient to make a distribution of at least two percent (2%) of the
aggregate principal amount of the outstanding Debentures, but it may retain the
money so received by it and invest or deposit the same as provided in Article 10
hereof until the money or the investments representing the same, with the income
derived therefrom, together with any other monies for the time being under its
control, shall be sufficient for the said purpose or until it shall consider it
advisable to apply the same in the manner hereinbefore set forth.
<PAGE>
8.07 Notice of Payment by Trustee
Not less than twenty-one (21) days' notice shall be given by the Trustee
of any payment to be made under this Article 8 to the Debentureholders. Such
notice shall state the time and place when and where such payment is to be made
and also the liability under this Indenture upon which it is to be applied.
After the day so fixed, unless payment shall have been duly demanded and have
been refused, the Debentureholders shall be entitled to interest only on the
balance (if any) of the principal monies and interest due to them, respectively,
on the Debentures, after deduction of the respective amounts payable in respect
thereof on the day so fixed.
8.08 Trustee May Demand Production of Debentures
The Trustee shall have the right at the time it makes any payment of
principal or interest required by this Article 8 to demand of the person
claiming such payment the production of the actual Debenture under which he
claims such payment be made, and may cause to be endorsed on the same a
memorandum of the amount so paid and the date of payment, but the Trustee may,
in its discretion, dispense with such production and endorsement in any special
case, upon such indemnity being given to it and to the Company as it shall deem
sufficient.
8.09 Trustee Appointed Attorney
The Company hereby irrevocably appoints the Trustee to be the attorney of
the Company for and in the name and on behalf of the Company to execute and do
any deeds, documents, transfers, conveyances, assignments, assurances, consents
and things which the Company ought to sign, execute and do hereunder and
generally to use the name of the Company in the exercise of all or any of the
powers hereby conferred on the Trustee, with full powers of substitution and
revocation.
8.10 Remedies Cumulative
No remedy herein conferred upon or reserved to the Trustee or upon or to
the holders of the Debentures is intended to be exclusive of any other remedy,
but each and every such remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or now existing or hereafter to exist by law
or by statute.
8.11 Covenants for Benefit of Parties and Debentureholders
All the covenants, stipulations and agreements in this Indenture
contained, by or on behalf of the Company to be kept, observed, fulfilled or
performed, are and shall be for the sole and exclusive benefit of the parties
hereto and of the respective holders of the Debentures.
8.12 Judgment Against Company on an Express Trust
The Company covenants and agrees to and with the Trustee that, in the case
of any proceedings to obtain judgment for the principal of or interest on the
Debentures, judgment may be rendered against it in favour of the
Debentureholders hereunder or in favour of the Trustee, as trustee of an express
trust for the Debentureholders hereunder, for any amount which may remain due in
respect of the Debentures and interest thereon.
ARTICLE 9
CONSOLIDATION AND AMALGAMATION
9.01 Successor Company or Guarantor
(1) Nothing in this Indenture or in any Debenture shall prevent, if
otherwise permitted by law, the reorganization or reconstruction of the Company
or the Guarantor or the consolidation,
<PAGE>
amalgamation or merger of the Company or the Guarantor with any other
corporation, or shall prevent the sale, leasing or other transfer by the Company
or the Guarantor of its undertaking and assets as a whole or substantially as a
whole to another corporation lawfully entitled to acquire and operate the same,
provided that the conditions of this Article 9 are observed, and provided also
that every such successor or assign shall before or contemporaneously with the
consummation of any such reorganization, reconstruction, consolidation,
amalgamation, merger or transfer and in consideration thereof, enter into and
execute an indenture or indentures supplemental hereto in favour of the Trustee
whereby such successor or assign covenants:
(a) to pay punctually when due the principal monies, interest and other
monies due or which may become due hereunder;
(b) to perform and observe punctually all the obligations of the Company
and the Guarantor under these presents and under and in respect of
all outstanding Debentures; and
(b) to observe and perform each and every covenant, stipulation,
promise, undertaking, condition and agreement of the Company and the
Guarantor herein contained as fully and completely as if it had
itself executed this Indenture as Party of the First Part or Party
of the Second Part, as the case may be, hereto and had expressly
agreed herein to observe and perform the same.
(2) Every such reorganization, reconstruction, consolidation,
amalgamation, merger, sale, lease or transfer shall be made on such terms and at
such times and otherwise in such manner as shall be approved by the Company or
the Guarantor, as the case may be, and by the Trustee (acting on such advice as
it deems advisable) as being in no way prejudicial to the interests of the
Debentureholders and as preserving and not impairing the rights and powers of
the Trustee and Debentureholders hereunder, and upon such approval the Trustee
shall facilitate the same in all respects, and may give such consents and sign,
execute or join in such Indentures or other documents and do such acts as in its
discretion may be thought advisable in order that such reorganization,
reconstruction, consolidation, amalgamation, merger, sale, lease or transfer may
be carried out, and the opinion of Counsel as hereinafter mentioned shall be
full warrant and authority to the Trustee for so doing. The Trustee may rely
upon an opinion of Counsel to the Trustee as to the legality of any action
proposed to be taken and as to the validity of any action taken pursuant to the
provisions contained in this Article 9, and the Trustee shall incur no liability
by reason of reliance thereon.
9.02 Successor Company/Successor Guarantor to Possess Powers of the
Company/Guarantor
In case of any reorganization, reconstruction, consolidation, amalgamation
or merger as aforesaid, or in case of such transfer of the undertaking of the
assets of the Company or the Guarantor as a whole or substantially as a whole,
the corporation formed by such consolidation or with which the Company or the
Guarantor shall have been amalgamated or merged or to which such transfer shall
have been made, upon executing an Indenture or Indentures, as provided in
Section 9.01, shall succeed to and be substituted for the Company or the
Guarantor, whichever the case may be, (which may then be wound up, if so desired
by its shareholders), with the same effect as if it had been named herein as an
original party hereto, and shall possess and may exercise each and every right
of the Company or the Guarantor hereunder.
ARTICLE 10
INVESTMENT OF TRUST MONIES
<PAGE>
10.01 Investment of Trust Monies
Unless herein otherwise expressly provided, any funds held by the Trustee,
including but not restricted to the Escrowed Funds, may be deposited in a trust
account in the name of the Trustee (which may be held with the Trustee or an
affiliate or related party of the Trustee), which account shall be non-interest
bearing. Upon the written direction of the Company, the Trustee shall invest in
its name such funds in Authorized Investments in accordance with such direction.
Any direction by the Company to the Trustee as to the investment of the funds
shall be in writing and shall be provided to the Trustee no later than 9:00 a.m.
on the day on which the investment is to be made. Any such direction received by
the Trustee after 9:00 a.m. or received on a non-business day, shall be deemed
to have been given prior to 9:00 a.m. on the next business day. Unless an event
of default shall have occurred and be continuing, all interest or other income
received by the Trustee in respect of such funds shall belong to the Company;
provided that, if an event of default shall have occurred and be continuing, all
interest or other income derived subsequent to such occurrence shall belong
rateably to the Debentureholders and provided further that the Trustee may
receive a fee from any bank or other institution with which funds are deposited
or through which investments are made.
ARTICLE 11
SUITS BY DEBENTUREHOLDERS AND TRUSTEE
11.01 Debentureholder May Not Sue
No holder of any Debenture shall have any right to institute any action,
suit or proceeding at law or in equity for the purpose of enforcing payment of
the principal of or any interest on the Debentures or for the execution of any
trust or power hereunder or for the appointment of a liquidator or receiver or
for a receiving order under the Bankruptcy and Insolvency Act (Canada) or to
have the Company and/or the Guarantor wound up or to file or prove a claim in
any liquidation or bankruptcy proceedings or for any other remedy hereunder,
unless the holders of at least twenty-five percent (25%) in principal amount of
the Debentures then outstanding shall have made written request to the Trustee
or the Debentureholders by resolution passed at a meeting duly held as
hereinafter provided in Article 16 of this Indenture have made request to the
Trustee and in either case the Trustee shall have been afforded reasonable
opportunities either itself to proceed to exercise the powers hereinbefore
granted or to institute an action, suit or proceeding in its name for such
purpose; nor unless such Debentureholder or Debentureholders shall also have
furnished to the Trustee, when so requested by the Trustee, sufficient funds and
security and indemnity satisfactory to it against the costs, expenses and
liabilities to be incurred therein or thereby; nor unless the Trustee shall also
have failed to act within a reasonable time after such notification, request and
offer of indemnity; and such request and offer of indemnity are hereby declared
in every such case, at the option of the Trustee, to be conditions precedent to
any such action, suit or proceeding as aforesaid by or on behalf of the holder
or holders of such Debentures or any of them; it being understood and intended
that no one or more holders of Debentures shall have any right in any manner
whatsoever to enforce any right hereunder, except in the manner herein provided,
and that all powers and trusts hereunder shall be exercised and all proceedings
at law or in equity shall be instituted, had and maintained by the Trustee,
except only as herein provided, and only in any event for the equal benefit of
all holders of outstanding Debentures in proportion to the amounts to which they
may respectively be entitled hereunder.
11.02 Trustee May Sue Without Possession of Debentures
All rights of action under this Indenture may be enforced by the Trustee
without the possession of any of the Debentures or the production thereof at any
trial or other proceedings relative thereto.
11.03 Delay Not Waiver
No delay or omission of the Trustee or of any of the Debentureholders to
exercise any right or power accruing hereunder shall impair any such right or
power, or shall be construed to be a waiver of any default or an acquiescence
therein, and every power and remedy given hereby to the Trustee or to the
<PAGE>
Debentureholders may be exercised by it or by them from time to time as often as
may be deemed expedient by it or them.
11.04 Staying Actions
In case any action, suit or other proceeding shall have been brought by
the Trustee or by any Debentureholder or Debentureholders after failure of the
Trustee to act, the Debentureholders may by Extraordinary Resolution direct the
Trustee or the Debentureholder or Debentureholders bringing any such action,
suit or other proceeding to waive the default in respect of which any such
action, suit or other proceeding shall have been brought upon payment of the
costs, charges and expenses incurred by the Trustee or the Debentureholder or
Debentureholders, as the case may be, in connection therewith, and to stay or
discontinue or otherwise deal with any such action, suit or other proceeding and
such directions shall be binding upon the Trustee and such Debentureholder or
Debentureholders and shall be observed by them.
ARTICLE 12
IMMUNITY OF OFFICERS, SHAREHOLDERS AND DIRECTORS
12.01 Immunity of Officers, Shareholders and Directors
The obligations on the part of the Company and the Guarantor contained
herein and in the Debentures are solely corporate obligations, and accordingly
no recourse under or upon any obligation, covenant or agreement contained in
this Indenture or in any Debenture or under any judgment obtained against the
Company or the Guarantor, or by the enforcement of any assessment or by any
legal or equitable proceeding by virtue of any constitution or statute or
otherwise or under any circumstances under or independently of this Indenture,
shall be had against any shareholder, officer or director, past, present or
future, of the Company or the Guarantor (excluding the Company as a Shareholder
of the Guarantor) or of any successor corporation, either directly or through
the Company or the Guarantor or otherwise for payment for or to the Company or
the Guarantor or any receiver, liquidator, trustee or sequestrator thereof or
for or to the holder of any Debenture issued hereunder, or otherwise, of any sum
that may be due and unpaid by the Company hereunder or upon or under any such
Debenture and any and all personal liability of every nature and kind, whether
at common law or in equity or by statute or by constitution or otherwise, of any
such shareholder, officer or director on account of this Indenture or on account
of the Debentures and indebtedness represented thereby, is hereby expressly
waived and released as a condition of and as part of the consideration for the
execution of this Indenture and the issue of the Debentures.
ARTICLE 13
CONCERNING THE TRUSTEE
13.01 Concerning the Trustee
(1) In this Article 13 the term "applicable legislation" means the
provisions, if any, of the Canada Business Corporations Act and any other
statute of Canada, and of regulations under any such statute, relating to trust
indentures and to the right, duties and obligations of trustees under trust
indentures and of corporations issuing debt obligations under trust indentures,
to the extent that such provisions are at the time in force and applicable to
this Indenture. The Trustee shall not be liable except for the performance of
such duties as are specifically set out in this Indenture.
<PAGE>
(2) If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with a mandatory requirement of applicable legislation,
such mandatory requirement shall prevail.
(3) The Company, the Guarantor and the Trustee agree that each will at all
times in relation to this Indenture and any action to be taken hereunder,
observe and comply with and be entitled to the benefits of applicable
legislation.
13.02 Rights and Duties of Trustee
(1) In the exercise of the rights, duties and obligations prescribed or
conferred by the terms of this Trust Indenture, the Trustee shall exercise that
degree of care, diligence and skill that a reasonably prudent trustee would
exercise in comparable circumstances.
(2) The Trustee shall not be bound to give any notice or do or take any
act, action or proceeding by virtue of the powers conferred on it hereby unless
and until it shall have been required so to do under the terms hereof, nor shall
the Trustee be required to take notice of any default hereunder, unless and
until notified in writing of such default, which notice shall distinctly specify
the default desired to be brought to the attention of the Trustee and in the
absence of any such notice the Trustee may for all purposes of this Indenture
conclusively assume that no default has been made in the observance or
performance of any of the representations, warranties, covenants, agreements or
conditions contained herein. Any such notice shall in no way limit any
discretion herein given to the Trustee to determine whether or not the Trustee
shall take action with respect to any default.
(3) Subject only to the immediately preceding paragraph, the obligation of
the Trustee to commence or continue any act, action or proceeding for the
purpose of enforcing any rights of the Trustee or the Debentureholders hereunder
shall be conditional upon the Debentureholders furnishing, when required by
notice in writing by the Trustee, sufficient funds to commence or continue such
act, action or proceeding and indemnity reasonably satisfactory to the Trustee
to protect and hold harmless the Trustee against the costs, charges and expenses
and liabilities to be incurred thereby and any loss and damage it may suffer by
reason thereof. None of the provisions contained in this Trust Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers unless indemnified as aforesaid.
(4) The Trustee may, before commencing or at any time during the
continuance of any such act, action or proceeding, require the Debentureholders
at whose instance it is acting to deposit with the Trustee the Debentures held
by them, for which Debentures the Trustee shall issue receipts.
(5) Every provision of this Indenture that by its terms relieves the
Trustee of liability or entitles it to rely upon any evidence submitted to it,
is subject to the provisions of applicable legislation and of this Section 13.02
and of Section 13.03.
13.03 Evidence, Experts and Advisers
(1) In addition to the reports, certificates, opinions and other evidence
required by this Indenture, the Company shall furnish to the Trustee such
additional evidence of compliance with any provision hereof, and in such form,
as may be prescribed by applicable legislation or as the Trustee may reasonably
require by written notice to the Company.
(2) In the exercise of its rights, duties and obligations, the Trustee
may, if it is acting in good faith, rely as to the truth of the statements and
the accuracy of the opinions expressed therein, upon statutory declarations,
opinions, reports, certificates or other evidence referred to in Subsection
13.03(1) provided that such evidence complies with applicable legislation and
that the Trustee examines the same in order to determine whether such evidence
indicates compliance with the applicable requirements of this Trust Indenture.
<PAGE>
(3) Whenever applicable legislation requires that evidence referred to in
Subsection 13.03(1) be in the form of a statutory declaration, the Trustee may
accept such statutory declaration in lieu of a certificate of the Company
required by any provision hereof. Any such statutory declaration may be made by
one or more of the Chairman, Chief Operating Officer, Vice-President,
Secretary-Treasurer or a director of the Company.
(4) Proof of the execution of an instrument in writing by any
Debentureholder may be made by the certificate of a notary public or other
officer with similar powers, that the person singing such instrument
acknowledged to him the execution thereof, or by an affidavit of a witness to
such execution or in any other manner which the Trustee may consider adequate.
(5) The Trustee may employ or retain such counsel, accountants, engineers,
appraisers or other experts or advisers as it may reasonably require for the
purpose of discharging its duties and determining its rights hereunder, may pay
the reasonable compensation and disbursements of any such expert or adviser, may
act and rely on the advice or opinion of any such expert or adviser and shall
not be responsible for any misconduct on the part of any of them. Any
remuneration so paid by the Trustee shall be repaid to the Trustee by the
Company in accordance with Section 7.01(g).
13.04 Action by Trustee to Protect Interests
The Trustee shall have power to institute and to maintain such actions and
proceedings as it may consider necessary or expedient to preserve, protect or
enforce its interests and the interests of the Debentureholders.
13.05 Trustee Not Required to Give Security
The Trustee shall not be required to give any bond or security in respect
of the execution of the trusts and powers of this Indenture or otherwise in
respect of the premises.
13.06 Protection of Trustee
By way of supplement to the provisions of any law for the time being
relating to trustees, it is expressly declared and agreed as follows:
(1) The Trustee shall not be liable for or by reason of any statements of
fact or recitals in this Indenture or in the Debentures (except the
representation contained in Subsection 13.09 and the certificate of the
Trustee contained in the Debentures) or be required to verify the same,
but all such statements or recitals are and shall be deemed to be made by
the Company.
(2) Nothing herein contained shall impose any obligation on the Trustee to
see to or to require evidence of the registration or filing (or renewal
thereof) of this Indenture or any instrument ancillary or supplemental
hereto.
(3) The Trustee shall not be bound to give notice to any person or persons
of the execution hereof.
(4) The Trustee shall not incur any liability whatever or be in any way
responsible for the consequence of any breach on the part of the Company
of any of the covenants herein contained or of any acts of the agents or
servants of the Company.
<PAGE>
(5) The Trustee, in its personal or any other capacity, may buy, lend upon
and deal in shares in the capital of the Company and in the Debentures and
generally may contract and enter into financial transactions with the
Company or any Affiliate without being liable to account for any profit
made thereby.
13.07 Indemnification of Trustee
In addition to and without limiting any other protection hereunder or
otherwise by law of the Trustee and its officers, directors, employees, agents,
representatives, successors and assigns (collectively, "Representatives"), the
Company and the Guarantor hereby indemnify, defend and save harmless, on a joint
and several basis, the Trustee and its Representatives from and against any and
all liabilities, losses, claims, damages, penalties, fines, actions, suits,
demands, levies, assessments, costs, charges, expenses and disbursements
(including, without limitation, any and all legal and advisor fees and
disbursements) (collectively, "Liabilities") of whatever kind or nature which
may at any time be suffered by, imposed upon, incurred by or asserted against
the Trustee and its Representatives, whether groundless or otherwise, howsoever
arising from or out of any act, omission or error of the Trustee made in
connection with its acting as Trustee hereunder. Without limiting the generality
of the foregoing, the obligation to indemnify, defend and save harmless in
accordance herewith shall apply in respect of Liabilities suffered by, imposed
upon, incurred in any way connected with or arising from, directly or
indirectly, any Environmental Laws. Notwithstanding any other provision hereof,
the obligations provided for in this section shall survive any termination of
the trust created hereby, whether by reason of removal or resignation of the
Trustee, termination or discharge of this Indenture or otherwise.
13.08 Replacement of Trustee
The Trustee may resign its trust and be discharged from all further duties
and liabilities hereunder by giving to the Company not less than thirty (30)
days' prior notice in writing or such shorter notice as the Company may accept
as sufficient. The Debentureholders by Extraordinary Resolution shall have power
at any time to remove the Trustee and to appoint a new Trustee. In the event of
the Trustee resigning or being removed as aforesaid or being dissolved, becoming
bankrupt, going into liquidation or otherwise becoming incapable of acting
hereunder, the Company shall forthwith appoint a new Trustee unless a new
Trustee has already been appointed by the Debentureholders; failing such
appointment by the Company the retiring Trustee, at the expense of the Company,
or any Debentureholder may apply to a judge of the Superior Court of Justice on
such notice as such judge may direct, for the appointment of a new Trustee; but
any new Trustee so appointed by the Company or by the Court shall be subject to
removal as aforesaid by the Debentureholders. Any new Trustee appointed under
any provision of this section shall be a corporation authorized to carry on the
business of a trust company in the province of Ontario and having offices in the
City of Toronto. On any new appointment, the new Trustee shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named herein as Trustee without any further assurance, conveyance,
act or deed; but there shall be immediately executed, at the expense of the
Company, all such conveyances or other instruments as may, in the opinion of
counsel, be necessary or advisable for the purpose of assuring the same to the
new Trustee.
Any corporation into or with which the Trustee may be merged or
consolidated or amalgamated, or any corporation succeeding to the trust business
of the Trustee shall be the successor of the Trustee hereunder without any
further act on its part or of any of the parties hereto provided that such
corporation would be eligible for appointment as a new Trustee under this
Section 13.08.
13.09 Conflict of Interest
The Trustee represents that at the time of the execution and delivery
hereof no material conflict of interest exists in the Trustee's role as a
fiduciary hereunder and agrees that in the event of a material conflict of
interest arising hereafter it will, within ninety (90) days after ascertaining
that it has such material conflict of interest, either eliminate the same or
resign its trust hereunder.
<PAGE>
13.10 Acceptance of Trust
The Trustee hereby accepts the trusts in this Indenture declared and
provided for and agrees to perform the same upon the terms and conditions herein
set forth.
ARTICLE 14
NON-PRODUCTION OF DEBENTURES
14.01 Non-Production of Debentures
In the event of a holder not producing any Debenture upon the redemption,
maturity or other date of payment thereof, a certificate of the Trustee
hereunder of the deposit with it for payment of the principal amount of such
Debenture and of such interest as may be due thereon shall avail as a
cancellation of such Debenture for the purposes hereof, and as sufficient
authorization to the Company and to the Trustee to cancel all entries in any
register or elsewhere relating to such Debenture.
<PAGE>
ARTICLE 15
EVIDENCE OF RIGHTS OF DEBENTUREHOLDERS
15.01 Evidence of Rights of Debentureholders
Any request, direction, notice, consent or other instrument which this
Indenture may require or permit to be signed or executed by the Debentureholders
may be in any number of concurrent instruments of similar tenor and may be
signed or executed by such Debentureholders in person or by attorney dull
appointed in writing. Proof of the execution of any such request or other
instrument, or of a writing appointing any such attorney, or (subject to the
provisions of Article 16 with regard to voting at meetings of Debentureholders)
of the holding by any person of Debentures shall be sufficient for any purpose
of this Indenture if made in the following manner:
(a) the fact and date of the execution by any person of such request or
other instrument in writing may be proved by the certificate of any
notary public, or other officer authorized to take acknowledgements
of deeds to be recorded at the place where such certificate is made,
that the person signing such request or other instrument or writing
acknowledged to him the execution thereof, or by an affidavit of a
witness of such execution, or in any other manner which the Trustee
may consider adequate; and
(b) the ownership of Debentures shall be proved by the registers as
hereinbefore provided.
ARTICLE 16
DEBENTUREHOLDERS' MEETINGS
16.01 Debentureholders' Meetings
Meetings of Debentureholders shall be convened, held and conducted in the
manner following:
(a) Calling of Meetings. At any time and from time to time the Trustee
may, and the Trustee shall on being served with a requisition signed
by the Company or by Debentureholders representing at least ten
percent (10%) of the aggregate principal amount of the Debentures
then outstanding, provided that the Trustee has received funding and
is indemnified to its reasonable satisfaction by the Company or the
Debentureholders requesting a meeting against the costs which may be
incurred in connection with the calling and holding of such meeting,
convene a meeting of the Debentureholders. In the event of the
Trustee failing to convene a meeting after being thereunto required
by the Debentureholders and indemnified and funded as herein set
forth, such Debentureholders representing the requisite percentage
of Debentures as aforesaid may themselves convene such meeting and
the notice calling such meeting may be signed by such person or
persons as such Debentureholders may specify. Every such meeting
shall be held in the City of Toronto, or at such other place as the
Trustee may in any case determine or approve.
(b) Notice. At least twenty-one (21) days' notice of such meeting shall
be given to the Debentureholders and such notice shall state the
time when, and the place where said meeting is to be held and shall
specify in general terms the nature of the business to be transacted
thereat, and shall contain such information as is reasonably
necessary to enable a Debentureholder to make a reasoned decision on
the matter, but it shall not be necessary to specify in the notice
the text of the resolutions to be passed. Notices shall be given in
the manner set forth in Section 2.09 hereof, and a copy thereof
shall be sent by post or delivered to the Trustee and the Company
unless the meeting has been called by it. It shall not be necessary
to specify in the notice of any adjournment of a meeting the nature
of the business to be transacted at the adjourned meeting.
<PAGE>
(c) Quorum. At any meeting of the Debentureholders, subject to the
provisions of Section 16.03 hereof, a quorum shall consist of two or
more persons present in person holding either personally or as
proxies for holders not less than twenty-five percent (25%) in
principal amount of all outstanding Debentures. Notwithstanding the
foregoing, if there is only one holder of outstanding Debentures,
that Debentureholder present in person or represented by proxy at
the meeting shall constitute a quorum and a meeting. In the event of
such quorum not being present on the date for which the meeting is
called within one half hour after the time fixed for the holding of
such meeting, the meeting may be adjourned to a date not later than
thirty (30) days from the date for which the meeting was first
called and not less than fourteen (14) days' notice of the date to
which such meeting is adjourned shall be given in the manner
prescribed for notice of meetings of Debentureholders. Such notice
shall state that at the adjourned meeting the Debentureholders
present in person or by proxy shall form a quorum, but it shall not
be necessary to set forth the purposes for which the meeting was
originally called or any other particulars. At the adjourned
meeting, the Debentureholders present in person or by proxy shall
form a quorum and may transact the business for which the meeting
was originally convened.
(d) Chairman. Some person, who need not be a Debentureholder, nominated
in writing by the Trustee shall be chairman of the meeting and, if
no person is so nominated or if the person so nominated is not
present within thirty (30) minutes from the time fixed for the
holding of the meeting, the Debentureholders and proxies for
Debentureholders present shall choose one of their number to be
chairman.
(e) Certain Debentures Deemed Not Outstanding. Debentures owned directly
or indirectly, legally or equitably, by the Company or by any
Affiliate shall not be deemed to be outstanding Debentures for any
purpose of this Article 16; provided, however, that any such
Debentures pledged or charged in good faith (other than to the
Company or an Affiliate) as security for loans or other indebtedness
shall, for all such purposes, be deemed to be outstanding Debentures
and the pledgees thereof or holders of any lien or charge thereon
shall be qualified and entitled to sign any requisition or notice,
attend all meetings of Debentureholders, and vote thereat in respect
of the Debentures so pledged or charged by the Company unless such
pledgees or holders are expressly precluded under the terms of the
pledge or charge from freely exercising in their discretion,
uncontrolled by the Company, or any Affiliate, the right to vote
such Debentures, in which case the terms of the pledge or charge
shall govern.
(f) Majority Vote on Ordinary Resolution. Every question submitted to a
meeting, except an Extraordinary Resolution, shall be decided in the
first place by a majority of the votes given on a show of hands. In
the case of an equality of votes on a show of hands the chairman
shall have a casting vote.
(g) Taking a Poll. A poll shall be taken on every Extraordinary
Resolution and, when requested by a Debentureholder or
Debentureholders or by a proxy or proxies representing a
Debentureholder or Debentureholders holding at least Twenty-Five
Thousand Dollars ($25,000) principal amount of the Debentures, on
any other question or resolution. If at any meeting a poll is so
demanded as aforesaid on the election of a chairman or on a question
of adjournment, it shall be taken forthwith. If at any meeting a
poll is so demanded on any other question, or an extraordinary
resolution is to be voted upon, a poll shall be taken in such manner
and either at once or after an adjournment as
<PAGE>
the chairman directs. The results of a poll shall be deemed to be
the decision of the meeting at which the poll was demanded.
(h) Votes on a Poll. At any meeting of the Debentureholders, each
Debentureholder shall on a poll have one vote for every One Hundred
Dollars ($100) principal amount of Debentures of which he shall be
the holder. Votes may be given in person or by proxy and a proxy
need not be a Debentureholder.
(i) Trustee May Make Regulations. The Trustee may (for the purpose of
enabling the holders of Debentures to be present and vote at any
meeting by proxy and of lodging such proxies at some place or places
other than the place where the meeting is to be held) from time to
time make and from time to time vary such regulations as it shall
think fit providing for and governing:
(i) the voting by proxy by holders of Debentures and the form of
instrument appointing proxies where authorized under such
regulations and the manner in which the same shall be
executed, and for the production of the authority of any
person signing on behalf of the giver of such proxy;
(ii) the lodging of such certificates and of the instruments
appointing proxies at such place or places and in such custody
as the Trustee directs and the time, if any, before the
holding of the meeting or adjourned meeting by which the same
shall be deposited; and
(iii) the forwarding by the custodian of particulars of such
certificates and instruments appointing proxies by letter or
telecopy with the original to follow before the meeting to the
Company or to the Trustee or to the chairman of the meeting
and providing that certificates or instruments appointing
proxies so lodged and particulars of which are forwarded in
accordance with such regulations will confer the same right to
vote as though the certificates or instruments themselves were
produced at the meeting.
Any regulations so made shall be binding and effective and votes
given in accordance therewith shall be valid and shall be counted.
The Trustee may dispense with any such deposit and permit
Debentureholders to make proof of ownership in such other manner, if
any, as the Trustee may approve. Save as aforesaid the only persons
who shall be recognized at any meeting as the holders of Debentures
or as entitled to vote or be present at the meeting in respect
thereof shall be registered Debentureholders.
(j) The Company, Trustee and Legal Advisers. The Company and the Trustee
by their respective employees, officers and directors may attend any
meeting of Debentureholders. The legal advisers of the Company, the
Debentureholders and the Trustee may also attend any such meeting.
16.02 Powers Exercisable by Extraordinary Resolution
Unless otherwise provided in this Indenture, a meeting of the
Debentureholders shall, in addition to any powers hereinbefore given, have the
following powers, exercisable from time to time by Extraordinary Resolution:
(a) to sanction any modification, abrogation, alteration, compromise or
arrangement of the rights of the holders of Debentures, the Trustee,
or both, against the Company, the Guarantor, or both, or against
their property, whether such rights arise under this Indenture or
the Debentures or otherwise;
<PAGE>
(b) to sanction any scheme for the reconstruction or reorganization of
the Company, the Guarantor, or both, or for the consolidation,
amalgamation or merger of the Company, the Guarantor, or both, with
any other corporation or for the sale, leasing, transfer or other
disposition of the undertaking, property and assets of the Company,
the Guarantor, or both, or any part thereof, provided that no such
sanction will be necessary in respect of any such transaction if
Section 9.01 has been complied with;
(c) to direct or authorize the Trustee, subject to funding and
indemnity, to exercise any power, right, remedy or authority given
to it by this Indenture in any manner specified in any such
Extraordinary Resolution or to refrain from exercising any such
power, right, remedy or authority;
(d) to waive and direct the Trustee to waive any default hereunder or
cancel, or both, any declaration made by the Trustee pursuant to
Section 8.01 either unconditionally or upon any condition specified
in such Extraordinary Resolution;
(e) to direct any holder of Debentures who as such has brought any
action, suit or proceeding, to stay or discontinue or otherwise deal
with the same upon payment, if the taking of such suit, action or
proceeding has been permitted by Section 11.01, of the costs,
charges and expenses reasonably and property incurred by such holder
in connection therewith;
(f) to remove the Trustee from office and to appoint a new Trustee or
Trustees, provided that so long as an event of default has not
occurred and is continuing, such removal or appointment, as the case
may be, has been approved by the Company;
(g) to approve the exchange of the Debentures for or the conversion
thereof into shares, bonds, debentures, notes or other securities of
the Company or of any corporation formed or to be formed, which has
been approved by the Company;
(h) to assent to any compromise or arrangement by the Company, the
Guarantor, or both, with any creditor, creditors or class or classes
of creditors or with the holders of any shares or securities of the
Company, the Guarantor, or both;
(i) to restrain any holder of any Debenture outstanding hereunder from
taking or instituting any suit, action or proceeding for the
execution of any trust or power hereunder or for the appointment of
a liquidator or receiver or trustee in bankruptcy or to have the
Company, the Guarantor, or both, wound up or for any other remedy
hereunder and to direct such holder of any Debenture to waive any
default or defaults by the Company, the Guarantor, or both, on which
any suit or proceeding is founded;
(j) to assent to any modification of or change in or addition to or
omission from the provisions contained in this Indenture which has
been agreed to by the Company and the Guarantor and to authorize the
Trustee to concur in and execute any deed supplemental to this
Indenture embodying any such modification, change, addition or
omission or any deeds, documents or writings authorized by such
extraordinary resolution;
(k) to appoint a committee with power and authority (subject to such
limitations, if any, as may be prescribed in the resolution) to
exercise, and to direct the Trustee to exercise, on behalf of the
Debentureholders, such of the powers of the Debentureholders which
are exercisable by extraordinary or other resolution as shall be
included in the resolution
<PAGE>
appointing the committee. The resolution making such appointment may
provide for payment of the expenses and disbursements of and
compensation to such committee. Such committee shall consist of such
number of persons as shall be prescribed in the resolution
appointing it and the members need not be themselves
Debentureholders. Every such committee may elect its chairman and
may make regulations respecting its quorum, the calling of its
meetings, the filling of vacancies occurring in its number and its
procedure generally. Such regulations may provide that the committee
may act at a meeting at which a quorum is present or may act by
minutes signed by the number of members thereof necessary to
constitute a quorum. All acts of any such committee within the
authority delegated to it shall be binding upon all
Debentureholders. Neither the committee nor any member thereof shall
be liable for any loss arising from or in connection with any action
taken or omitted to be taken by them in good faith; and
(l) to amend, alter or repeal any Extraordinary Resolution previously
passed or consented to by Debentureholders before it is acted upon
without further approval by the Debentureholders.
The foregoing powers shall be deemed to be several and not dependent on
each other and each paragraph of this Section 16.02 and each power therein
conferred shall, accordingly, be construed as complete in itself and not by
reference to any other paragraph or power in said section and the exercise of
any one or more of such powers, or any combination of such powers, from time to
time, shall not be deemed to exhaust the rights of the Debentureholders to
exercise such power or powers, or combination of powers, thereafter from time to
time.
16.03 Extraordinary Resolutions
(1) An Extraordinary Resolution, passed at a meeting of the
Debentureholders held in accordance with the provisions hereof, shall be binding
upon all the Debentureholders and upon each and every Debentureholder whether
present or absent and each and every Debentureholder and the Trustee (subject to
the provisions for its indemnity herein contained) shall be bound to give effect
thereto accordingly.
(2) The expression "Extraordinary Resolution" when used in this Indenture
means, subject as hereinafter in this Article 16 provided, a resolution proposed
to be passed as an Extraordinary Resolution at a meeting of Debentureholders
duly convened for the purpose and held in accordance with the provisions of this
Article 16 at which, subject to Subsection 16.05(3), holders of at least
fifty-one (51%) percent in principal amount of the Debentures then outstanding
are present in person or by proxy and passed by the favourable votes of the
holders of not less than sixty-six and two thirds (66-2/3%) percent of the
principal amount of Debentures represented at the meeting and voted on a poll
upon such resolution.
(3) If at any such meeting holders of fifty-one (51%) percent in principal
amount of the Debentures outstanding are not present in person or by proxy
within thirty (30) minutes after the time appointed for the meeting, then the
meeting, if convened by Debentureholders or on a request of Debentureholders
shall be dissolved: but if otherwise convened the meeting shall stand adjourned
to such date, being not less than fifteen (15) nor more than fifty (50) days
later, and to such place and time as may be appointed by the chairman. Not less
than ten (10) days notice shall be given of the time and place of such adjourned
meeting in the manner prescribed for notice of meetings of Debentureholders.
Such notice shall state that at the adjourned meeting the Debentureholders
present in person or by proxy shall form a quorum but it shall not be necessary
to set forth the purposes for which the meeting was originally called or any
other particulars. At the adjourned meeting the Debentureholders present in
person or by proxy shall form a quorum and may transact the business for which
the meeting was originally convened and a resolution proposed at such adjourned
meeting and passed by the requisite vote as provided in Subsection 16.03(2)
shall be an Extraordinary Resolution within the meaning of this Indenture,
notwithstanding that holders of fifty-one (51%) percent in principal amount of
the Debentures then outstanding are not present in person or by proxy at such
adjourned meeting.
<PAGE>
(4) Votes on an Extraordinary Resolution shall always be given on a poll
and no demand for a poll on an Extraordinary Resolution shall be necessary.
(5) Save as herein expressly otherwise provided, no action shall be taken
at a meeting of the Debentureholders which changes any provision of this
Indenture or changes or prejudices the exercise of any right of any
Debentureholder except by Extraordinary Resolution as above provided.
16.04 Declaration by Chairman of Result of Vote
At any meeting of the Debentureholders, in cases where no poll is required
or requested, a declaration made by the Chairman that a resolution has been
carried, or carried by any particular majority, or lost, shall be conclusive
evidence thereof.
16.05 Minutes
Minutes of all resolutions and proceedings at every meeting of the
Debentureholders shall be made and duly entered in books to be provided from
time to time for that purpose by the Trustee at the expense of the Company and
any such minutes, if signed by the Chairman of the meeting at which such
resolutions were passed or proceedings had, or by the Chairman of the next
succeeding meeting of Debentureholders, shall be prima facie evidence of the
matters therein stated, and until the contrary is proved, every such meeting in
respect of the proceedings of which minutes shall have been made shall be deemed
to have been duly held and convened and all resolutions passed or proceedings
had thereat to have been duly passed and had.
16.06 Signed Instrument in Lieu of Extraordinary Resolution
Notwithstanding the foregoing provisions of this Indenture, any resolution
or instrument signed in one or more counterparts by the holders of not less than
sixty-six and two thirds per cent (66-2/3%) of the aggregate principal amount of
the Debentures for the time being outstanding shall have the same force and
effect as an Extraordinary Resolution duly adopted by the Debentureholders under
the provisions of this Article 16 with respect to Extraordinary Resolutions.
16.07 Binding Effect of Resolutions
Every resolution and every Extraordinary Resolution passed in accordance
with the provisions of this Article 16 at a meeting of Debentureholders shall be
binding upon all the Debentureholders, whether present at or absent from such
meeting, and every instrument in writing signed by Debentureholders in
accordance with Section 16.06 shall be binding upon the Debentureholders,
whether signatories thereto or not, and each and every Debentureholder and the
Trustee (subject to the provisions for indemnity herein contained) shall be
bound to give effect accordingly to every such resolution and instrument in
writing. In the case of an instrument in writing, the Trustee shall give notice
of the instrument in writing in the manner contemplated in Section 20.01 and
20.03 to the Company and all Debentureholders, respectively, as soon as is
reasonably practicable.
<PAGE>
ARTICLE 17
SUPPLEMENTAL INDENTURES
17.01 Supplemental Indentures
(1) From time to time, the Company, the Guarantor and the Trustee may,
when authorized by a resolution of the Directors and, subject to the provisions
of this Indenture, they shall, when so directed by this Indenture, execute,
acknowledge and deliver, by their respective proper officers, deeds or
Indentures supplemental hereto, which thereafter shall form part hereof, for any
one or more of the following purposes:
(a) adding to the limitations or restrictions herein specified further
limitations or restrictions thereafter to be observed; provided that
the Trustee shall be of the opinion that such further limitations or
restrictions shall not be prejudicial to the interests of the
Debentureholders;
(b) adding to the covenants of the Company and the Guarantor herein
contained for the protection of the holders of the Debentures or
providing for events of default in addition to those herein
specified, or both;
(c) making such provisions not inconsistent with this Indenture as may
be necessary or desirable with respect to matters or questions
arising hereunder, including the making of any modifications in the
form of the Debentures which do not affect the substance thereof and
which, in the opinion of the Trustee, it may be expedient to make;
provided that the Trustee (based on the advice of Counsel) shall be
of the opinion that such provisions and modifications will not be
prejudicial to the interests of the Debentureholders;
(d) making any additions to, deletions from or alterations of the
provisions of this Indenture which in the opinion of Counsel may
from time to time be necessary or advisable to conform the same to
"applicable legislation" as that term is defined in Article 13;
(e) evidencing the succession, or successive successions, of other
corporations to the Company and to the covenants of and obligations
assumed by any such successor in accordance with the provisions of
this Indenture;
(f) setting forth any adjustment of the current Conversion Price of the
Debentures in accordance with Section 4.05 and resulting from any
action referred to in Section 4.05;
(g) giving effect to any Extraordinary Resolution or signed instrument
in accordance with Section 16.06; and
(h) for any other purpose not inconsistent with the terms of this
Indenture.
(2) The Trustee may also, without the consent or concurrence of the
Debentureholders, by supplemental indenture or otherwise concur with the Company
in making any changes or corrections in this Indenture as to which it shall have
been advised by Counsel are required for the purpose of curing or correcting any
ambiguity or defective or inconsistent provision or clerical omission or mistake
or manifest error contained herein or in any deed or indenture supplemental or
ancillary hereto.
ARTICLE 18
TERMINATION
18.01 Termination
<PAGE>
Except as otherwise expressly stated herein, this Indenture shall
terminate and be void and the Trustee shall, at the request and at the expense
of the Company, execute and deliver to the Company such deeds or other
instruments as shall be necessary to effect the cancellation hereof, if the
Company shall have first satisfied the Trustee that adequate provision has been
made for payment of the fees and expenses of the Trustee hereunder and in
connection with such termination and that it has paid or made due provision
satisfactory to the Trustee for the payment of all amounts due or to become due
on all of the Debentures in the manner therein and herein provided and also all
other monies payable hereunder by the Company or shall surrender or cause to be
surrendered to the Trustee for cancellation all of the Debentures and shall pay
all sums which may be due to the Trustee hereunder, or if the Debentureholders
by Extraordinary Resolution shall so require and shall cause to be paid all said
sums which may be due to the Trustee hereunder. Debentures for the payment or
redemption of which money shall have been set apart by or paid to the Trustee in
conformity with the provisions of this Indenture shall be deemed to be paid
within the meaning of this Article 18. For greater certainty, Section 13.07
shall survive defeasance.
ARTICLE 19
COUNTERPARTS
19.01 Counterparts
This Indenture may be executed in one or more counterparts, each of which
so executed shall be deemed to be an original, and all of such counterparts
together shall constitute one and the same instrument.
ARTICLE 20
NOTICES
20.01 Notices to Company and Guarantor
Any notice to the Company or the Guarantor under this Indenture will be
valid and effective if given by registered letter, postage prepaid, by personal
delivery or by facsimile addressed to the Company to the attention of the Chief
Operating Officer at 40 Centre Drive, Orchard Park, New York 14127-4102
(facsimile number (716) 662-0033) and shall be deemed to have been effectively
given five (5) business days after the date of mailing and on the next business
day if personally delivered or sent by facsimile. The Company and the Guarantor
may from time to time notify the Trustee in writing of a change of address which
thereafter, until changed by like notice, shall be the address of the Company or
the Guarantor (as the case may be) for all purposes of this Indenture. In the
event of a general discontinuance of postal service due to strike, lockout or
otherwise, notices and other communications shall be delivered by hand or sent
by facsimile or other means of electronic communication and shall be deemed to
have been received if sent by facsimile or other means of electronic
communication, on the business day following the sending, or if delivered by
hand at the time it is delivered to the applicable address noted above either to
the individual designated herein or to an individual at such address having
apparent authority to accept deliveries on behalf of the address.
20.02 Notices to Trustee
Any notice to the Trustee under the provisions of this Indenture shall be
valid and effective if given by registered letter, postage prepaid, addressed to
the Trustee at its principal office in the City of Toronto to the attention of
the Senior Trust Officer at Suite 5104, 1 First Canadian Place, Toronto, Ontario
M5X 1A1 (facsimile number (416) 867-6264) and shall be deemed to have been
effectively given five (5) business days after the date of mailing and on the
next business day if personally delivered or sent
<PAGE>
by fax. In the event of a general discontinuance of postal service due to
strike, lockout or otherwise, notices and other communications shall be
delivered by hand or sent by facsimile or other means of electronic
communication and shall be deemed to have been received if sent by facsimile or
other means of electronic communication, on the business day following the
sending, or if delivered by hand at the time it is delivered to the applicable
address noted below either to the individual designated herein or to an
individual at such address having apparent authority to accept deliveries on
behalf of the address.
20.03 Notice of Debentureholders
Notices to the Debentureholder shall be given in accordance with Section
2.09.
<PAGE>
ARTICLE 21
FORMAL DATE
20.01 Formal Date
For the purposes of convenience, this Indenture may be referred to as
bearing formal date of May 28, 1999 irrespective of the actual date of the
execution hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Indenture.
RADIANT ENERGY CORPORATION
Per:_______________________________________
Authorized Signing Officer
RADIANT AVIATION SERVICES, INC.
Per:_______________________________________
Authorized Signing Officer
THE TRUST COMPANY OF BANK OF MONTREAL
Per:_______________________________________
Authorized Signing Officer
<PAGE>
SHAREHOLDERS AGREEMENT
THIS AGREEMENT is made the 30th day of June, 1999
B E T W E E N:
BOEING CAPITAL SERVICES CORPORATION, a corporation incorporated under the
laws of the State of Delaware
(hereinafter referred to as "Boeing")
- and -
CHARLES JOHN CHEW, an individual resident in the Town of Ellicottville, in
the State of New York;
(hereinafter referred to as "Chew")
- and -
TIMOTHY P. SEEL, an individual resident in the Town of Getzville, in the
State of New York;
(hereinafter referred to as "Tim")
- and -
KATHLEEN A. SEEL, an individual resident in the Town of Getzville, in the
State of New York
(hereinafter referred to as "Kathleen")
- and -
DAVID A. WILLIAMS, an individual resident in the City of Toronto, in the
Province of Ontario
(hereinafter referred to as "Williams")
- and -
ROXBOROUGH HOLDINGS LIMITED, a corporation incorporated under the laws of
the Province of Ontario
(hereinafter referred to as "Roxborough")
- and -
RADIANT ENERGY CORPORATION, a corporation subsisting under the laws of
Canada
(hereinafter referred to as the "Corporation")
WHEREAS:
A. pursuant to a Subscription and Purchase Agreement dated June 30, 1999 between
Boeing and the Corporation (the "Subscription Agreement"), Boeing has agreed to
subscribe for and purchase 2,292,260 common shares and 653,145 options
(collectively, the "Securities") in the capital of the Corporation;
<PAGE>
2
B. pursuant to the Subscription Agreement, the Corporation has agreed that
Boeing shall be, among other things, entitled, from time to time, to designate
duly qualified nominees for election or appointment to the board of directors of
the Corporation in such number as is proportionate to the number of issued and
outstanding shares in the capital of the Corporation held by Boeing;
C. Chew, Tim, Kathleen, Williams and Roxborough (collectively, the "Major
Shareholders") are the beneficial, direct or indirect owners of an aggregate of
2,120,126 common shares in the capital of the Corporation in such proportions as
detailed in Schedule A hereto;
D. Williams is the sole shareholder of Roxborough; and
E. each of the Major Shareholders is of the opinion that he, she or it will, as
a direct or indirect shareholder of the Corporation, benefit from the purchase
of the Securities by Boeing and, therefore, wishes to enter into this Agreement
to facilitate the purchase of the Securities by Boeing.
NOW, THEREFORE, THIS AGREEMENT WITNESSES that in consideration of the
respective covenants and agreements herein contained, other good and valuable
consideration and the sum of TEN DOLLARS ($10.00) now paid by each of the
parties to this Agreement to each of the other parties to this Agreement, the
receipt and sufficiency of which is hereby by each of the parties respectively
acknowledged, the parties to this Agreement hereby covenant and agree as
follows:
1. Voting.
Each of the Major Shareholders covenants and agrees with each other and
Boeing that:
(a) at all meetings of the shareholders of the Corporation called for
the purpose of electing directors, all of the common shares of the
Corporation then beneficially or directly held by such Major
Shareholder, or over which such Major Shareholder exercises
direction or control, shall be voted in favour of the nominee or
nominees that Boeing is entitled to designate pursuant to the terms
of the Subscription Agreement; and
(b) solely in its capacity as a direct or beneficial shareholder of the
Corporation, each of the Major Shareholders shall recommend to the
board of directors of the Corporation that such additional common
shares in the capital of the Corporation be issued and sold to
Boeing from time to time to permit Boeing to increase its
proportionate investment interest in common shares in the capital of
the Corporation to 25% of the then issued and outstanding common
shares in the capital of the Corporation ("Private Placements"), and
at all meetings of shareholders of the Corporation called for the
purpose of approving any such Private Placement vote all of the
common shares of the Corporation then beneficially or directly held
by such Major Shareholder or over which such Major Shareholder
exercises direction or control in favour of such Private Placement.
<PAGE>
3
2. Restrictions on Transfer.
(1) Except as otherwise provided in this section 2, the Major Shareholders
covenant and agree with each other and Boeing that they will not transfer any of
the common shares owned by them, or any of them, as at the date hereof to any
person unless Boeing has provided its prior written consent to such transfer,
which consent shall not be unreasonably withheld. For purposes of this section,
by way of example and not in limitation thereof, Boeing shall not be considered
to be unreasonably withholding its consent if Boeing determines, in its
discretion (acting reasonably), that the proposed transfer, by itself or
together with all previous transfers by a Major Shareholder, would have a
material adverse affect in the value of the Securities, business, assets,
operations or financial position of the Corporation or any of the rights granted
to Boeing under section 1 of this Agreement.
(2) Notwithstanding subsection 2(1),
(a) Chew shall be entitled on prior written notice to, but without the
consent of, Boeing, at any time and from time to time prior to the
termination of this Agreement to transfer and sell common shares
beneficially, directly or indirectly held by him, at a rate of no
more than 20,000 common shares per week, provided that he shall
continue to hold, directly, indirectly or beneficially, no fewer
than 500,000 common shares;
(b) Tim and Kathleen shall be entitled on prior written notice to, but
without the consent of, Boeing, at any time and from time to time
prior to the termination of this Agreement to transfer and sell
common shares beneficially, directly or indirectly held by them, at
a rate of no more than 20,000 common shares per week, provided that
they shall continue to hold in the aggregate, directly, indirectly
or beneficially, no fewer than 500,000 common shares; and
(c) Williams and Roxborough shall be entitled on prior written notice
to, but without the consent of, Boeing, at any time and from time to
time prior to the termination of this Agreement to transfer and sell
common shares beneficially, directly or indirectly held by them, at
a rate of no more than 20,000 common shares per week, provided that
they shall continue to hold, directly, indirectly or beneficially,
no fewer than 700,000 common shares.
(3) Notwithstanding subsection 2(1), Boeing's consent to any transfer of common
shares owned beneficially, directly or indirectly, by a Major Shareholder shall
not be unreasonably withheld or delayed provided the transferee is a Permitted
Transferee and the Major Shareholder has delivered to Boeing an executed
counterpart copy of this Agreement or another document, satisfactory to Boeing
(acting reasonably) wherein the Permitted Transferee agrees to be bound by the
terms and conditions of this Agreement.
(4) For purposes of this section 2, a "transfer" shall not include a transfer by
way of pledge or other security interest in any of the common shares
beneficially held by a Major Shareholder to a bank, trust company or other
reputable financial institution as security for any bona fide debt incurred by a
Major Shareholder.
(5) For the purposes of this section 2,
(a) a "Permitted Transferee" shall include the following persons:
<PAGE>
4
(i) any one or more persons who are members of the Major
Shareholder's Immediate Family (as hereinafter defined),
provided that such Major Shareholder (whether by way of voting
trust or otherwise) shall retain the right to vote all of the
transferred common shares;
(ii) a trust the beneficiaries of which are one or more persons who
are members of the Major Shareholder's Immediate Family
provided that such Major Shareholder exercises control and
direction over the activities of such trust; and
(iii) a corporation, all of the voting securities of which are
directly, indirectly or beneficially owned by the Major
Shareholder either alone or together with any one or more
persons who are members of the Major Shareholder's Immediate
Family or any affiliate (as that term is defined in the Canada
Business Corporations Act) of the Major Shareholder; and
(b) "Immediate Family" means any one or more persons who are the Major
Shareholder's spouse (including common law spouse), the naturally
born and legally adopted children of such Major Shareholder, the
naturally born and legally adopted descendants of such children, the
spouse (including common law spouse) of each such child and the
spouse (including common law spouse) of each such descendant.
3. Representations and Warranties of the Parties
Each of the parties hereto hereby individually represents and warrants to
each of the other parties to this Agreement, in respect of itself only, as
follows:
(a) (i) in the case of Roxborough, the Corporation and Boeing, each
are corporations duly organized, validly subsisting and in
good standing under the laws of the Province of Ontario with
respect to Roxborough, the laws of Dominion of Canada with
respect to the Corporation and the State of Delaware with
respect to Boeing and each has all necessary power, capacity
and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions
contemplated hereby; the execution and delivery of this
Agreement by each of Roxborough, the Corporation and Boeing,
the performance by each of their respective obligations
hereunder and the consummation by each of the transactions
contemplated hereby have been duly authorized by all requisite
corporate action;
(ii) in the case of Chew, Tim and Kathleen, each is an adult
citizen of the United States of America and is competent to
execute and deliver this Agreement, to perform his or her
respective obligations hereunder and to consummate the
transactions contemplated hereby;
(iii) in the case of Williams, is an adult citizen of Canada and is
competent to execute and deliver this Agreement, to perform
his obligations hereunder and to consummate the transactions
contemplated hereby; and
(iv) this Agreement has been duly executed and delivered by such
party and constitutes a legal, valid and binding obligation of
such party,
<PAGE>
5
enforceable against such party in accordance with its terms;
(b) the execution, delivery and performance of this Agreement by each
party does not and will not (i) in the case of the Corporation,
Boeing and Roxborough, violate, conflict with or result in the
breach of any provision of their respective charters or by-laws (or
similar organizational documents) or (ii) conflict with or violate
in any material respect any law or governmental order applicable to
each party; and
(c) the execution, delivery and performance of this Agreement by each
party does not and will not require any consent, approval,
authorization or other order of any juridical or governmental
authority.
4. Representations and Warranties of the Major Shareholders
Each of the Major Shareholders represents and warrants to Boeing that (i)
it is the beneficial shareholder, directly and indirectly, of exactly that
number of common shares set opposite such Major Shareholder's respective name on
Schedule A hereto (ii) such Major Shareholder does not beneficially own,
directly or indirectly, or exercise control or direction over any other shares
in the capital of the Corporation and (iii) except for the 64,889 common shares
of the Corporation pledged by each of Chew and Tim and Kathleen as security for
payment pursuant to a settlement agreement dated April 20, 1992 between
Roberts-Gordon, Inc., Chew, Tim, Radiant Aviation Services, Inc. and the
Corporation, no person, firm, corporation or other entity has any agreement,
warrant, option, right or privilege being or capable of becoming an agreement
for the purchase and sale of any of the common shares beneficially owned,
directly or indirectly, by the Major Shareholders and set out opposite such
Major Shareholder's respective name on Schedule A hereto.
5. Covenant of the Corporation
The Corporation agrees that it will not register on the books of the
Corporation any transfer of common shares from the holdings of a Major
Shareholder, unless such transfer is permitted under the provisions of section 2
hereof.
6. Termination
This Agreement shall terminate at 5:00 p.m. on the day which is the later
of (a) the 120th day following the first anniversary of this Agreement, and (b)
the earlier of (i) the 120th day following the day on which Boeing ceases to
hold, directly, indirectly or beneficially, at least 15% of the then issued and
outstanding common shares in the capital of the Corporation, and (ii) June 30,
2001.
<PAGE>
6
7. Legal Advice
Each of the Major Shareholders represents and warrants to each other and
Boeing that the Major Shareholder has had an opportunity to seek and was not
prevented nor discouraged by the Corporation or any party to this Agreement from
seeking independent legal advice prior to the execution and delivery of this
Agreement and that, if the Major Shareholder did not take advantage of the
opportunity prior to signing this Agreement, the Major Shareholder did so
voluntarily without any undue pressure and agrees that the Major Shareholder's
failure to obtain independent legal advice shall not be used by the Major
Shareholder as a defence to the enforcement of the Major Shareholder's
obligations under this Agreement.
8. General.
(1) Notices. Any notice, direction or other instrument required or
permitted to be given under this Agreement shall be in writing and
given by delivering or sending it by telecopy or a reputable
overnight courier addressed:
(a) if to Boeing, at:
Boeing Capital Services Corporation
4060 Lakewood Boulevard
6th Floor
Long Beach, CA 9080-1700
Attention: Vice President - Taxes & Associate General Counsel
Telecopier: (562) 627-6514
(b) if to Chew, at:
Charles John Chew
P.O. Box 1257
113 Holiview Road
Ellicottville, New York 14731
Telecopier: (716) 699-4545
(c) if to Tim, Kathleen, or both, at
Timothy P. Seel / Kathleen A. Seel
155 Golden Pleasant Drive
Getzville, New York 14068
Telecopier: (716) 636-5375
(d) if to Williams or Roxborough, at:
Roxborough Holdings Limited
One First Canadian Place
Suite 6250
Toronto, Ontario
M5X 1C7
Attention: David A. Williams
President
<PAGE>
7
Telecopier: (416) 364-6650
(e) if to the Corporation, at:
Radiant Energy Corporation
40 Centre Drive
Orchard Park, New York 14127
Attention: Chief Operating Officer
Telecopier: (716) 662-0033
Any notice, direction or other instrument given to a person in accordance with
this section shall be deemed to have been given, sent and delivered to, and
received by, such person on the first business day after transmission. Any party
may from time to time, by notice given in accordance with this section to the
other party, change any one or more of the address or telecopier number.
(2) Entire Agreement. This Agreement constitutes the entire agreement between
the parties pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. There are no representations, warranties, conditions or
other agreements, express or implied, statutory or otherwise, between the
parties in connection with the subject matter of this Agreement, except as
specifically set forth in this Agreement.
(3) Amendments. This Agreement may only be amended, modified or supplemented by
a written agreement signed by the parties.
(4) Severability. Any section, subsection or other subdivision of this Agreement
or any other provision of this Agreement which is, or becomes, illegal, invalid
or unenforceable shall be severed from this Agreement and be ineffective to the
extent of such illegality, invalidity or unenforceability and shall not affect
or impair the remaining provisions of this Agreement.
(5) Waiver. No waiver of any provision of this Agreement shall be deemed to
constitute a waiver of any other provision (whether or not similar), nor shall
such waiver constitute a waiver or continuing waiver unless otherwise expressly
provided in writing duly executed by the party to be bound thereby.
(6) Assignment. This Agreement shall not be assignable by any party without
prior written consent of the other parties hereto.
(7) Parties Bound. This Agreement shall enure to the benefit of and be binding
upon Boeing and Roxborough and their respective successors and permitted
assigns, and the Major Shareholders and their respective heirs, executors,
administrators, other legal representatives and permitted assigns.
(8) Time of the Essence. Time shall be of the essence of this Agreement.
(9) Gender and Number. Any reference in this Agreement to gender shall include
all genders, and words importing the singular number only shall include the
plural and vice versa.
<PAGE>
8
(10) Headings, etc. The division of this Agreement into sections and the
insertion of headings are for convenience of reference only and shall not affect
or be utilized in the construction or interpretation of this Agreement.
(11) Governing Law. This Agreement shall be governed and construed in accordance
with the laws of the Province of Ontario and the federal laws of Canada
applicable therein. Each of the parties hereby irrevocably attorns to the
non-exclusive jurisdiction of the courts of the Province of Ontario with respect
to any matters arising out of this Agreement.
(12) Execution in Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which when
taken together shall constitute one and the same instrument.
[INTENTIONALLY LEFT BLANK]
<PAGE>
9
(13) Execution by Facsimile. This Agreement may be executed by any party by
facsimile and if so executed shall be legal, valid and binding on the party
executing in such manner.
IN WITNESS WHEREOF this Agreement has been executed by the parties as of
the date first above written.
BOEING CAPITAL SERVICES
CORPORATION
Per:
---------------------------------------
Name: Thomas J. Motherway
Title: President
Per:
---------------------------------------
Name: Daniel O. Anderson
Title: Vice President,-Operations
SIGNED, SEALED AND DELIVERED )
In the presence of: )
)
)
- ------------------------------------ ) ---------------------------------------
Witness ) Charles John Chew
SIGNED, SEALED AND DELIVERED )
In the presence of: )
)
- ------------------------------------ ) ---------------------------------------
Witness ) Timothy P. Seel
SIGNED, SEALED AND DELIVERED )
In the presence of: )
)
- ------------------------------------ ) ---------------------------------------
Witness ) Kathleen A. Seel
SIGNED, SEALED AND DELIVERED )
In the presence of: )
)
- ------------------------------------ ) ---------------------------------------
Witness ) David A. Williams
(Signatures are continued on the next page)
<PAGE>
10
(Signatures continued from the preceding page)
ROXBOROUGH HOLDINGS LIMITED
Per:
---------------------------------------
Name: David A. Williams
Title: President
RADIANT ENERGY CORPORATION
Per:
---------------------------------------
Name: Timothy P. Seel
Title: Vice-President, Engineering
Per:
---------------------------------------
Name: Robert D. Maier
Title: Vice-President, Sales
and Marketing
<PAGE>
1
SCHEDULE A
Percentage of
Name of Issued
Beneficial Number of and Outstanding
Name of Owner or Indirect Owner Shares Shares
- ------------ ----------------- --------- ---------------
Chew Chew 800,807 8.75
Tim and
Kathleen, as
Tim and Kathleen joint tenants 521,819 5.92
Roxborough Williams 280,000 3.06
Williams RRSP
Account #05727 Williams 517,500 5.66
<PAGE>
SUBSCRIPTION AND PURCHASE AGREEMENT
THIS AGREEMENT is made the 30th day of June, 1999
BETWEEN:
BOEING CAPITAL SERVICES CORPORATION, a corporation formed under and
governed by the laws of the State of Delaware
(hereinafter called the "Purchaser")
- and -
RADIANT ENERGY CORPORATION, a corporation formed under and governed by the
laws of Canada
(hereinafter called the "Corporation")
WHEREAS:
A. the Purchaser wishes to subscribe for and purchase the Securities (as
hereinafter defined) upon and subject to the terms and conditions set forth in
this Agreement; and
B. the Corporation wishes to accept the Purchaser's subscription herein
contained and to allot and issue the Securities to the Purchaser;
NOW THEREFORE, in consideration of the premises, mutual covenants and
agreements herein contained, the parties hereto covenant and agree as follows:
ARTICLE 1
INTERPRETATION
1.01 Defined Terms
The following capitalized terms used in this Agreement have the following
meanings:
"Agreement" means this subscription and purchase agreement and all
schedules and instruments in amendment or confirmation of it; "hereof",
"hereto" and "hereunder" and similar expressions mean and refer to this
Agreement and not to any particular Article, Section, Subsection or
similar subdivision; "Article", "Section", "Subsection" or other
subdivision of this Agreement followed by a number means and refers to the
specified Article, Section, Subsection or other subdivision of this
Agreement;
"Business Day" means any day except a Saturday, Sunday, statutory holiday
in Toronto, Ontario, or any day on which banks are not generally open for
business in the United States of America;
<PAGE>
-2-
"Closing" means the completion on the Closing Date of the transaction of
purchase and sale in respect of the Common Shares as contemplated by this
Agreement;
"Closing Date" means June 30, 1999, or such other date as agreed to by the
Corporation and the Purchaser;
"Common Shares" has the meaning specified in Section 2.01;
"Expiry Date" means the day which is the fifth anniversary of the date on
which the securities of the Corporation are listed and posted for trading
on a stock exchange or quotation system located in the United States of
America;
"Incentive Options" means options to purchase common shares granted to
directors, officers and employees of and consultants to the Corporation;
"Intellectual Property" means any patent, copyright, trade name,
trademark, trade secret, know-how, mask work, right of privacy, right of
publicity, moral right, or any other intellectual property right, whether
registered or unregistered;
"Licenses" has the meaning specified in Section 3.04(k);
"Necessary Intellectual Property" means with respect to any person, all
Intellectual Property used in or necessary for the ordinary day-to-day
conduct of its business;
"Options" has the meaning ascribed thereto in Section 2.01;
"Options Certificate" has the meaning ascribed thereto in Section 2.05;
"Patent" means patent #5,417,318 issued in the United States of America on
May 23, 1995 comprising 13 individual claims and describing two central
concepts and innovations and their applicability for aircraft de-icing;
"Patent Applications" means the reissue application in respect of the
Patent and each of the applications to patent the technology described in
the Patent in Canada, Austria, Belgium, France, Denmark, Germany, Great
Britain, Ireland, Italy, Liechtenstein, the Netherlands, Sweden,
Switzerland, China, Finland, Japan and Korea;
"Permitted Encumbrances" means
(a) the security interests granted by the Subsidiary:
(i) pursuant to a security agreement made May 23, 1997 in favour
of CIBC Mellon Trust Company, as trustee of the 6% redeemable
convertible secured debentures of the Corporation, in support
of the Subsidiary's guarantee of the obligations of the
Corporation under the trust indenture made May 23, 1997
between the Corporation, the Subsidiary and CIBC Mellon Trust
Company, and
(ii) pursuant to a security agreement made May 28, 1999 in favour
of The Trust Company of Bank of Montreal, as trustee of the 7%
redeemable convertible secured subordinated debentures of the
Corporation, in support of the Subsidiary's guarantee of the
obligations of the Corporation under the trust
<PAGE>
-3-
indenture made May 28, 1999 between the Corporation, the
Subsidiary and The Trust Company of Bank of Montreal; and
(b) the pledge of all of the issued and outstanding shares in the
capital stock of the Subsidiary by the Corporation to CIBC Mellon
Trust Company (the "Pledgee") pursuant to the share pledge agreement
dated as of May 22, 1997 between the Corporation and the Pledgee;
"Products" means any product that embodies any portion of the Patent or
other Intellectual Property related to the Patent, including all of the
InfraTek(R) systems.
"Purchase Price" has the meaning specified in Section 2.03;
"Restricted Equity Securities" means any shares of the Corporation,
options, warrants or rights to acquire such shares or any securities
evidencing rights substantially similar thereto and excluding therefrom
any Incentive Options and common shares issued pursuant to the exercise of
such Incentive Options;
"Securities" means the Common Shares and Options;
"Securities Laws" means the securities laws, regulations and rules, and
the blanket rulings and policies and written interpretations of, and
multi-level or national instruments adopted by, the Ontario Securities
Commission;
"Subsidiary" means the wholly-owned subsidiary of the Corporation known as
Radiant Aviation Services, Inc., a corporation incorporated under the laws
of the State of New York;
"Time of Closing" has the meaning specified in Section 4.01; and
"U.S. Securities Act" means the United States Securities Act of 1933, as
amended.
1.02 Gender and Number
Any reference in this Agreement to gender shall include all genders, and
words importing the singular number only shall include the plural and vice
versa.
1.03 Headings, etc.
The division of this Agreement into Articles, Sections, Subsections and
other subdivisions and the insertion of headings are for convenience of
reference only and shall not affect or be utilized in the construction or
interpretation of this Agreement.
1.04 Currency
All references in this Agreement to dollars, unless otherwise specifically
indicated, are expressed in currency of the United States of America.
<PAGE>
-4-
1.05 Severability
Any Article, Section, Subsection or other subdivision of this Agreement or
any other provision of this Agreement which is, or becomes, illegal, invalid or
unenforceable shall be severed from this Agreement and be ineffective to the
extent of such illegality, invalidity or unenforceability and shall not affect
or impair the remaining provisions of this Agreement.
1.06 Entire Agreement
This Agreement constitutes the entire agreement between the parties
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties. There are no representations, warranties, conditions or other
agreements, express or implied, statutory or otherwise, between the parties in
connection with the subject matter of this Agreement, except as specifically set
forth in this Agreement.
1.07 Amendments
This Agreement may only be amended, modified or supplemented by a written
agreement signed by the parties.
1.08 Waiver
No waiver of any provision of this Agreement shall be effective unless
expressly provided for in a written document duly executed by the party to be
bound thereby, and no such waiver shall be deemed to constitute a waiver of any
other provision (whether or not similar), nor shall such waiver be deemed a
continuing waiver unless expressly provided for therein.
1.09 Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario and the federal laws of Canada applicable
therein.
1.10 Inclusion
Where the word "including" is used in this Agreement, it shall mean
"including without limitation".
1.11 Incorporation of Schedules
The following are the schedules attached to and incorporated in this
Agreement:
Schedule A - Rights to Purchase Common Shares
Schedule B - Option Certificate
Schedule C - Disclosure of Intellectual Property Claims
Schedule D - List of Documents provided to the Purchaser
Schedule E - Shareholder List
<PAGE>
-5-
ARTICLE 2
SUBSCRIPTION AND SALE
2.01 Subscription
The Purchaser hereby subscribes for and agrees to purchase from the
Corporation, at the Time of Closing on the Closing Date, 2,292,260 common shares
in the capital of the Corporation (the "Common Shares") and 653,145 options to
purchase common shares in the capital of the Corporation (the "Options").
2.02 Acceptance of Subscription
The Corporation hereby accepts the subscription of the Purchaser contained
in Section 2.01 and allots the Common Shares and grants the Options to the
Purchaser subject to issue upon payment in full of the Purchase Price.
2.03 Purchase Price
The aggregate price (the "Purchase Price") payable by the Purchaser to the
Corporation for the Common Shares and Options shall be TWO MILLION THREE HUNDRED
THIRTY THOUSAND TWO HUNDRED FORTY TWO DOLLARS AND NINETY SIX CENTS
($2,330,242.96).
2.04 Payment of Purchase Price
The Purchase Price shall be paid and satisfied by certified cheque, bank
draft or wire transfer in same day funds to or to the order of the Corporation
at the Time of Closing.
2.05 Option Terms
The Options shall be evidenced by a certificate (the "Option Certificate")
substantially in the form of Schedule B and shall have attached thereto such
terms and conditions as are imprinted thereon.
ARTICLE 3
Acknowledgements, Representations, Warranties
3.01 Acknowledgements of the Purchaser
The Purchaser hereby acknowledges that:
(a) the Securities are subject to resale restrictions under the
Securities Laws and the Purchaser will comply with all the
Securities Laws concerning any resale of the Securities and
will consult with its legal advisors or counsel to the
Corporation with respect to complying with all restrictions
applying to such resale;
(b) the offering of Securities under this Agreement will not be
registered under the U.S. Securities Act or any state
securities law on the grounds that the offering and sale of
the Securities contemplated by this Agreement are privately
made and are exempt from registration pursuant to Section 4(2)
of the U.S. Securities Act and/or similar applicable
exemptions, and that the Corporation's reliance on
<PAGE>
-6-
those exemptions is predicated in part on the Purchaser's
representations as set forth in this Agreement;
(c) the Purchaser has had access to such information concerning
the Corporation as it has considered necessary in connection
with its decision to acquire the Securities;
(d) no prospectus or offering memorandum within the meaning of the
Securities Laws has been delivered to the Purchaser in
connection with the transaction contemplated by this
Agreement;
(e) in purchasing the Securities the Purchaser has relied upon the
representations and warranties contained in this Agreement and
information and answers provided by authorized officers,
agents and employees of the Corporation during the course of
the performance of the Purchaser's due diligence;
(f) it is solely responsible for obtaining such legal advice as it
considers appropriate in connection with the execution,
delivery and performance by it of this Agreement and the
transactions contemplated hereunder;
(g) in entering into this Agreement, the Corporation is relying
upon the acknowledgements, representations and warranties of
the Purchaser set out herein in connection with determining
the eligibility of the Purchaser to purchase the Securities
under the Securities Laws and the U.S. Securities Act and the
Purchaser hereby agrees to notify the Corporation immediately
of any change in any representation, warranty or other
information relating to the Purchaser in this Agreement which
takes place prior to Closing;
(h) the Securities are subject to the terms, conditions and
provisions of this Agreement and the articles of the
Corporation;
(i) no person has made any written or oral representations to the
Purchaser:
(i) that any person will resell or repurchase the
Securities;
(ii) that any person will refund the Purchase Price of the
Securities;
(iii) as to the future price or value of the Securities; or
(iv) that the Securities will be listed and posted for
trading on any stock exchange or that application has
been made therefor other than as provided in Section
5.02; and
(j) the Corporation will imprint a restrictive legend in
substantially the following form on the certificates
evidencing the Securities and stop transfer orders or other
appropriate instructions to the same effect will be maintained
against the transfer of the Common Shares on the transfer
records of the Corporation or its transfer agent:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") OR THE
<PAGE>
-7-
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE
SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF IN THE UNITED STATES IN THE ABSENCE OF SUCH
REGISTRATION STATEMENT OR AN EXEMPTION FROM REGISTRATION."
3.02 Representations, Warranties of the Purchaser
The Purchaser hereby represents and warrants to the Corporation, and
acknowledges that the Corporation is relying upon such representations and
warranties in issuing and selling the Securities to the Purchaser, that:
(a) the Purchaser is a corporation incorporated and existing under
the laws of the State of Delaware, and has all necessary
corporate power and authority to enter into and perform its
obligations under this Agreement;
(b) this Agreement has been duly authorized, executed and
delivered by the Purchaser and constitutes a valid and binding
obligation of the Purchaser enforceable against the Purchaser
in accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting the rights
of creditors generally and except as limited by the
application of equitable principles when equitable remedies
are sought;
(c) the Purchaser is not a citizen or resident of Canada, or a
corporation, partnership or other entity created in or
organized under the laws of Canada or any province or
territory thereof (collectively a "Canadian person") and is
not purchasing the Securities for the account of any Canadian
person;
(d) the Purchaser is acquiring the Securities for the Purchaser's
own account as principal, for investment and not for the
benefit of any other person or with a view to resale or
distribution of all or any part of the Securities except in
accordance with and as provided for in this Agreement;
(e) immediately prior to the purchase contemplated by this
Agreement:
(i) the Purchaser has such knowledge and experience in
financial and business matters that the Purchaser is
capable of evaluating the risks and merits of investment
in the Securities; and
(ii) the Purchaser is able to bear the economic risk of the
investment and is able, without materially impairing its
financial condition, to hold the Securities for an
indefinite period of time;
(f) the Purchaser has been informed by the Corporation as to the
business activities of the Corporation and has been given the
opportunity to review all documents the existence and contents
of which were disclosed to the Purchaser and based on such
disclosure the Purchaser believes it has reviewed all
documents it believes are material to an investment in the
Securities;
<PAGE>
-8-
(g) the Purchaser has had an opportunity to ask questions of, and
receive answers from, appropriate representatives of the
Corporation, including its officers and directors, concerning
the Corporation and its business, and the terms and conditions
of the offering of the Securities, and to obtain such
additional information necessary to satisfy the Purchaser as
to the adequacy of the information obtained by the Purchaser;
(h) the Purchaser is an "accredited investor" as that term is
defined and construed pursuant to Rule 501 under the U.S.
Securities Act because the Purchaser is a corporation, not
formed for the purpose of acquiring the Securities offered
with total assets in excess of $5,000,000;
(i) the Purchaser fully understands and agrees that the Securities
have not been registered under the U.S. Securities Act, and,
therefore they cannot be sold, pledged, assigned or otherwise
disposed of in the United States of America unless they are
subsequently registered under the U.S. Securities Act or an
exemption from such registration is available;
(j) the Purchaser understands that no U.S. federal or state agency
has passed upon the offering of the Securities or made any
finding or determination as to the fairness of the offering of
the Securities;
(k) the Purchaser will execute and deliver within the applicable
time periods all documentation as may be required by the
Securities Laws to permit the purchase of the Securities on
the terms set forth in this Agreement; and
(l) if required by the Securities Laws, the Purchaser will
execute, deliver, file and otherwise assist the Corporation,
in filing such reports, undertakings and other documents with
respect to the issuance of the Securities as may be required.
3.03 Representations, Warranties of the Corporation
The Corporation represents and warrants to the Purchaser, and acknowledges
that the Purchaser is relying upon such representations and warranties in
purchasing the Common Shares, that:
(a) the Corporation has been duly amalgamated and is validly
existing, current in all its filings and in good standing
under the Canada Business Corporations Act, has all requisite
power and authority and is duly qualified to carry on its
business as now conducted and to own its properties and assets
and has all requisite power and authority to carry out its
obligations under this Agreement;
(b) the Corporation has no subsidiaries other than the Subsidiary;
(c) all consents, approvals, permits, authorizations or filings as
may be required under the Securities Laws necessary for the
execution and delivery of this Agreement have been made or
obtained, as applicable;
(d) this Agreement has been duly authorized, executed and
delivered by the Corporation and constitutes a valid and
binding obligation of the Corporation enforceable against the
Corporation in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or
affecting the rights of creditors
<PAGE>
-9-
generally and except as limited by the application of
equitable principles when equitable remedies are sought, and
by the fact that rights to indemnity, contribution and waiver,
and the ability to sever unenforceable terms, may be limited
by applicable law;
(e) the execution and delivery of this Agreement, the performance
by the Corporation of its obligations hereunder, the issuance
and sale of the Common Shares, the granting of the Options and
the issuance of the Common Shares upon the exercise thereof,
and the consummation of the transactions contemplated in this
Agreement, do not and will not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, (whether after notice or lapse of
time or both), (i) any statute, rule or regulation applicable
to the Corporation including the Securities Laws; (ii) the
constating documents, articles, by-laws or resolutions of the
directors or shareholders of the Corporation which are in
effect at the date hereof; (iii) any mortgage, note,
indenture, contract, agreement, instrument, lease or other
document to which the Corporation is a party or by which it or
the property or assets of the Corporation are bound; or (iv)
any judgment, decree or order binding the Corporation or the
property or assets of the Corporation;
(f) except for the Securities and as disclosed on Schedule A to
this Agreement, no common shares or other securities of the
Corporation are issuable, and no other rights, warrants or
options to acquire, or instruments are convertible into or
exchangeable for, any common shares in the capital of the
Corporation;
(g) all necessary corporate action has been taken by the
Corporation to create, allot and authorize the issuance of the
Securities and, upon receipt by the Corporation of the
Purchase Price in respect of the Common Shares, the Common
Shares will be validly issued as fully paid and non-assessable
securities in the capital of the Corporation;
(h) the authorized capital of the Corporation consists of an
unlimited number of common shares, of which exactly 9,169,041
are issued and outstanding as fully paid and non-assessable;
(i) no legal or governmental proceedings are pending to which the
Corporation or the Subsidiary is a party or to which their
property is subject that would result individually or in the
aggregate in any material adverse change in the operation,
business or condition of the Corporation or the Subsidiary
and, to the knowledge of the Corporation, no such proceedings
have been threatened against or are contemplated with respect
to the Corporation or the Subsidiary or with respect to their
properties;
(j) each of the Corporation and the Subsidiary has conducted and
is conducting its business in material compliance with all
applicable laws and regulations of each jurisdiction in which
it carries on business (including all applicable Canadian and
United States federal, provincial, state, municipal and local
environmental, anti-pollution and licensing laws, regulations
and other lawful requirements of any governmental or
regulatory body) and has not received a notice of
non-compliance with any such laws or regulations which would
have a material adverse effect on the Corporation;
<PAGE>
-10-
(k) each of the Corporation and the Subsidiary has all licenses,
permits, authorizations and other approvals (collectively,
"Licenses"), except where the failure to do so would not have
a material adverse effect on the Corporation; each such
License is valid and subsisting and in good standing and none
of the same contains any burdensome term, provision, condition
or limitation which has or may have a material adverse effect
on the operation, or condition of either the Corporation or
the Subsidiary;
(l) each of the Corporation and the Subsidiary has good and
marketable title to all of its Necessary Intellectual
Property; in regard to the Necessary Intellectual Property of
the Corporation or the Subsidiary, any patents, trademarks and
copyrights are valid, subsisting and enforceable and all
patents, registered trademarks and registered copyrights are
duly recorded in the name of and can be recorded in the name
of the Corporation or the Subsidiary as the case may be;
except for the Permitted Encumbrances, each of the Corporation
and the Subsidiary has and after the Closing will have the
sole and exclusive ownership and right, free from any
licenses, liens, mortgages, security interests, charges or
encumbrances of any kind whatsoever to use and exploit its
Necessary Intellectual Property and the consummation of the
transactions contemplated hereby will not alter or impair any
such rights; except as disclosed in Part III of Schedule C, no
claims have been asserted by any person with respect to, or
challenging or questioning the ownership, validity,
enforceability or use of the Necessary Intellectual Property
of either the Subsidiary or the Corporation and there is no
valid basis for any such claim; the use or other exploitation
of the Necessary Intellectual Property by the Corporation or
the Subsidiary, as the case may be, does not infringe the
rights of any other person; and to the knowledge of the
Corporation and the Subsidiary no entity or person is
infringing the Necessary Intellectual Property of either one;
(m) excluding the Permitted Encumbrances, each of the Corporation
and the Subsidiary is the holder of and in good standing under
all of its Licenses and is the exclusive owner of the
Intellectual Property free and clear of any encumbrance which
would have a material adverse effect on the Corporation or the
Subsidiary, and the Corporation has no knowledge of any claim
of adverse ownership in respect thereof;
(n) except for the late filing by the Subsidiary of the 1998 New
York State and United States federal income tax returns (the
"Late Filing"), each of the Corporation and the Subsidiary has
timely filed all necessary federal, provincial, state, local
and foreign tax returns and notices and has paid or made
provision for all applicable taxes of whatever nature to the
extent such taxes have become due or have been alleged to be
due and the Corporation is not aware of any material tax
deficiencies or material interest or penalties accrued or
accruing, or alleged to be accrued or accruing thereon which
have not otherwise been provided for by the Corporation, and
the Late Filing will not constitute or result in any such
material deficiency or material accrual of interest or
penalty;
(o) the Corporation has not made any loans to or guaranteed the
obligations of, any person;
<PAGE>
-11-
(p) other than R.H. Caruso and Co., Inc., there is no person
acting or purporting to act at the request or on behalf of the
Corporation that is entitled to any brokerage or finder's fee
in connection with the transactions contemplated by this
Agreement;
(q) the authorized capital of the Subsidiary consists of 200
shares of common stock of which exactly 100 shares are issued
and outstanding; the Corporation is the registered and
beneficial owner of all 100 shares of the Subsidiary (the
"Subsidiary Shares"), with a good and marketable title thereto
and, except for Permitted Encumbrances, such title is free and
clear of all mortgages, liens, charges, security interests,
adverse claims, pledges, encumbrances and demands whatsoever;
(r) the corporate records and minute books of the Corporation
contain complete and accurate minutes of all meetings of the
directors and shareholders of the Corporation held since the
amalgamation of the Corporation, all such meetings were duly
called and held and the shareholder list provided to the
Purchaser and attached as Schedule E is complete and accurate
as of the date specified therein;
(s) each of the Corporation and the Subsidiary has its property
insured against loss or damage by all insurable hazards or
risks typically insured by corporations in the same industry,
including product liability, general warranty, public
liability and other insurance, the Corporation is not in
default with respect to any of the provisions contained in any
such insurance policies and has not failed to give any notice
or present any claim under any such insurance policy in due
and timely fashion;
(t) the Patent is valid and subsisting, issued and registered in
the name of the Subsidiary, the Subsidiary is the sole named
applicant on all of the Patent Applications, and the
Subsidiary has and after Closing will have, the sole and
exclusive ownership right to the Patent and Patent
Applications, free and clear from any licenses, liens,
mortgages, security interests, charges or encumbrances and,
other than the Permitted Encumbrances, the Subsidiary has not
granted, licensed, sold or otherwise transferred any interest
in the Patent to any third party; other than the Permitted
Encumbrances, neither the Subsidiary nor the Corporation,
knows of any reason why claims included in the Patent would be
declared to be invalid and neither knows of any reason why
claims included in any Patent Applications should not be
granted; except as disclosed in Schedule C, there have not
been any claims asserted by any person with respect to, or
challenging or questioning the ownership, validity or
enforceability of the Patent or any of the Patent
Applications;
(u) excluding the forward looking statements contained therein,
each of the documents furnished by the Corporation to the
Purchaser in connection with the transaction contemplated
herein and listed in Schedule D was accurate, true and correct
as of the date thereof and no such document omits to state any
material fact necessary to make such document not misleading
as of the date thereof; and
(v) none of the foregoing representations and statements of fact
contain any untrue statement of material fact or omit to state
any material fact necessary to make any such statement or
representation not misleading to a prospective investor in the
<PAGE>
-12-
Securities seeking full information as to the business and
assets of the Corporation and the Subsidiary, and neither the
Corporation nor the Subsidiary has information or knowledge of
any facts relating to the business or the assets which, if
known to the Purchaser, might reasonably be expected to affect
the investment decision of the Purchaser or deter the
Purchaser from completing the transaction herein contemplated.
ARTICLE 4
CLOSING
4.01 Closing
Delivery of and payment for the Securities shall be completed and take
place at the offices of Wildeboer Rand Thomson Apps & Dellelce, Toronto,
Ontario, on the Closing Date at the hour of 3:00 o'clock in the afternoon
(Toronto time) (the "Time of Closing"), or at such other place, on such other
date, and at such other time as may be agreed upon in writing between the
Purchaser and the Corporation.
4.02 Closing Conditions
(1) The Purchaser's obligation to purchase the Securities from the
Corporation at the Time of Closing shall be conditional upon the
fulfillment at or before the Time of Closing of the following
conditions:
(a) since December 31, 1998, there shall have been no material
adverse change (actual, anticipated, contemplated or
threatened, whether financial or otherwise) in the business,
affairs, operations, assets, liabilities (contingent or
otherwise) or capital of the Corporation except as has been
publicly disclosed on a non-confidential basis prior to June
4, 1999;
(b) no order, ruling or determination having the effect of
suspending the sale or ceasing the trading in any securities
of the Corporation shall have been issued by any regulatory
authority and continuing in effect and no proceedings for that
purpose shall have been instituted or be pending or, to the
knowledge of the Corporation be contemplated or threatened by
any regulatory authority;
(c) the Corporation shall have duly complied with all the terms,
covenants and conditions of this Agreement on its part to be
complied with up to the Time of Closing;
(d) the representations and warranties of the Corporation
contained in this Agreement shall be true and correct as of
the Time of Closing with the same force and effect as if made
at and as of the Time of Closing after giving effect to the
transactions contemplated by this Agreement;
(e) the Purchaser shall have received a certificate, dated as of
the Closing Date, signed by two senior officers of the
Corporation as the Purchaser may agree, certifying for and on
behalf of the Corporation as to the satisfaction of each of
the conditions contemplated in sections (a) to (d) hereof;
<PAGE>
-13-
(f) the Purchaser shall have received at the Time of Closing
certificates dated the Closing Date, signed by appropriate
officers of the Corporation addressed to the Purchaser and its
counsel, with respect to the articles and by-laws of the
Corporation, all resolutions of the Corporation's board of
directors relating to this Agreement and the transactions
contemplated hereby, the incumbency and specimen signatures of
signing officers, and such other matters as the Purchaser may
reasonably request;
(g) the Purchaser shall have received a certificate of compliance
with respect to the Corporation issued by the appropriate
government officials of the jurisdiction of its amalgamation;
(h) the investment committee of the Purchaser shall have approved
the purchase of the Securities on the terms and conditions set
forth in this Agreement;
(i) the Purchaser shall have determined in its sole discretion
(acting reasonably) that the sale and delivery of the
Securities is exempt from the prospectus and registration
requirements of the Securities Laws and the U.S. Securities
Act;
(j) the Purchaser shall have received a legal opinion from legal
counsel for the Corporation in form and substance satisfactory
to the Purchaser's legal counsel, acting reasonably;
(k) the Corporation shall have in place, and the Purchaser shall
have received evidence of, such insurance as is deemed
necessary for the Corporation by the Purchaser in its sole
discretion;
(l) the consent of Brant Securities Limited to the transaction
contemplated herein shall have been obtained; and
(m) the Purchaser shall have received a share certificate
evidencing the Common Shares and an Options Certificate
evidencing the Options.
(2) The Corporation's obligation to issue and sell the Securities to the
Purchaser at the Time of Closing shall be conditional upon the
fulfilment at or before the Time of Closing of the following
conditions:
(a) the Corporation shall have received a certified cheque; bank
draft or wire transfer in same day funds on the Closing Date
representing the Purchase Price payable by the Purchaser for
the Securities;
(b) the Corporation shall have received all documentation required
by the Securities Laws duly completed and signed by the
Purchaser;
(c) the Corporation shall have obtained all consents, approvals,
and authorizations necessary or reasonably required to
effectively carry out the intention of this Agreement;
(d) the Corporation shall have determined in its sole discretion
(acting reasonably) that the issuance, sale and delivery of
the Securities is exempt
<PAGE>
-14-
from the prospectus and registration requirements of the
Securities Laws and the U.S. Securities Act; and
(e) the consent of Brant Securities Limited to the transaction
contemplated herein shall have been obtained.
ARTICLE 5
POST-CLOSING COVENANTS
5.01 Nominees to Board of Directors
(1) For so long as the Purchaser is the holder of not less than 10% of
the issued and outstanding common shares in the capital of the
Corporation, the Purchaser shall be entitled, from time to time, by
notice to the Corporation, to designate a Proportionate Number (as
hereinafter defined) of duly qualified nominees for election or
appointment to the board of directors of the Corporation. For the
purpose of this section, "Proportionate Number" is computed by
rounding up the result of multiplying the total number of common
shares that the Purchaser holds at the time of such election or
appointment by the number of directors that will constitute the
board of directors after such election or appointment and dividing
by the total number of common shares then issued and outstanding.
For so long as the Proportionate Number of nominees of the Purchaser
does not constitute a majority on the board of directors, the
Purchaser shall not be required to designate nominees that are
resident Canadians within the meaning of section 105(3) of the
Canada Business Corporations Act.
(2) Without in any way restricting the rights of all shareholders of the
Corporation with respect to the election of directors, the
Corporation shall act diligently and promptly to take such actions
as are necessary in order that, at any time, the board of directors
of the Corporation includes the then latest nominees designated by
the Purchaser in accordance with this Section 5.01 for election or
appointment to the board of directors of the Corporation, except for
any such nominee as is not ready, willing or able to serve as a
director of the Corporation.
(3) Subject to applicable laws governing the Corporation and provided
the Purchaser is then entitled to designate a nominee to the board
of directors of the Corporation under Subsection 5.01(1), the
Purchaser shall be entitled to designate a replacement for any
vacancy on the board of directors of the Corporation arising as a
result of a nominee of the Purchaser ceasing to be a director of the
Corporation.
<PAGE>
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5.02 U.S. Registration
The Corporation agrees to use its commercially reasonable best efforts to
cause its common shares to be registered under the Securities Exchange Act of
1934, as amended, and to have its common shares (including the Common Shares and
the common shares issuable upon the exercise of the Options) listed for trading
on a U.S. national securities exchange or on the NASD automated quotation system
in the United States within three years after the Closing Date; provided,
however, that the Corporation shall not be under any obligation to effect such
registration and listing if the board of directors of the Corporation makes a
good faith determination that it is not in the best interests of the Corporation
to do so for any reason including, if such registration or listing would have an
adverse effect on or require disclosure of any proposal or plan by the
Corporation to engage in any acquisition of securities or assets (other than in
the ordinary course of business) or any merger, consolidation, tender offer or
similar transaction.
5.03 Pre-emptive Rights and Anti-dilution
(1) The Corporation agrees that it will not issue, without the prior
written consent of the Purchaser, any Restricted Equity Securities
to any person during the 24 month period commencing on the Closing
Date in reliance on an exemption from the registration and
prospectus requirements of the Securities Laws without first having
offered such Restricted Equity Securities to the Purchaser in such
number as to permit the Purchaser to maintain its proportionate
interest in the then issued and outstanding common shares of the
Corporation, on no less favourable terms and conditions than those
offered to such person, and on such further terms and conditions as
will allow the Purchaser to purchase such Restricted Equity
Securities pursuant to an available exemption from both the
registration and prospectus requirements of the then applicable
Canadian securities laws and the registration requirements of the
then applicable securities laws of the United States.
(2) The Corporation agrees that during the 24 month period commencing on
the Closing Date it will not, without the prior written consent of
the Purchaser, in any 12 month period, reserve common shares for
issuance pursuant to the exercise of any Incentive Options in excess
of 5% of the number of common shares that were issued and
outstanding at the beginning of such 12 month period or the Closing
Date, whichever is later.
5.04 Sale or Lease of a Product
(1) If the Corporation or the Subsidiary determines to seek leasing
arrangements or financing for ("Funding") the design, development,
manufacturing, construction, sale, leasing or licensing of any
Product (a "Transaction"), it shall request such Funding from the
Purchaser by notice in writing indicating the minimum principal
amount required ("Minimum Amount"). Upon receipt of such a request
for Funding, the Purchaser shall have 20 Business Days in which to
elect whether or not to fund the Transaction, during which period
the Corporation shall provide the Purchaser with access to all
information reasonably required by the Purchaser to make such
election. In the event that the Purchaser elects to fund the
Transaction, it shall send a notice detailing the terms and
conditions on which it is willing to fund (the "Funding Proposal").
In the event that the Purchaser elects not to fund, or 20 Business
Days have elapsed from the date of the request for Funding, the
Corporation shall be entitled to seek and obtain Funding for the
Transaction in a principal amount no less than the Minimum Amount.
<PAGE>
-16-
(2) Notwithstanding section (1), the Corporation shall not be bound by
the terms and conditions of a Funding Proposal if:
(a) the terms and conditions are commercially unreasonable; or
(b) the Corporation determines that it no longer requires or desires
Funding in respect of a Transaction.
(3) The Corporation agrees that until the Expiry Date:
(a) it will not, and it will ensure that the Subsidiary does not,
without the prior written consent of the Purchaser, sell any
Products to any person that is related to or does not deal at arm's
length with the Corporation;
(b) it will not voluntarily dispose of any shares of the Subsidiary and
the Subsidiary will remain wholly-owned; and
(c) it will not and it will ensure that the Subsidiary does not, without
the prior written consent of the Purchaser, voluntarily sell,
assign, transfer, lease, license or dispose in any way of, or of a
portion of, the Patent, the rights to the Patent Applications, or
any Intellectual Property related thereto.
5.05 No Default
The Corporation agrees to use its commercially reasonable best efforts to
ensure that neither it nor the Subsidiary defaults under the R-G Settlement
Agreement (as defined in Schedule D hereto) or any obligation, agreement or
indenture the performance of the terms of which is secured by any of the
Permitted Encumbrances.
5.06 Restrictions on Private Placements
During the period commencing on the Closing Date and ending January 1,
2000, the Corporation shall not issue any common shares of the Corporation or
securities convertible into common shares of the Corporation, other than
pursuant to the exercise of the convertible securities outlined in Schedule A,
unless prior to such issuance, the approval of the granting of the Options has
been obtained from a majority of the shareholders of the Corporation, excluding
the Purchaser.
ARTICLE 6
MISCELLANEOUS
6.01 Notices
(1) Any notice, direction or other instrument required or permitted to
be given under this Agreement shall be in writing and given by
delivering or sending it by telecopy or a reputable overnight
courier addressed:
<PAGE>
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(a) if to the Purchaser, at:
Boeing Capital Services Corporation
4060 Lakewood Boulevard
6th Floor
Long Beach, CA 90808-1700
Attention: Vice President - Taxes & Associate General Counsel
Telecopier: (562) 627-6514
with a copy to:
Macleod Dixon
3700 Canterra Tower
400 - 3rd Avenue S.W.
Calgary, Alberta
T2P 4H2
Attention: Jennifer K. Kennedy or Asi Kirmayer
Telecopier: (403) 264-5973
(b) if to the Corporation or the Subsidiary, at:
Radiant Energy Corporation
40 Centre Drive
Orchard Park, NY 14127
Attention: Chief Operating Officer
Telecopier: (716) 662-0033
with a copy to:
Wildeboer Rand Thomson Apps & Dellelce
1 First Canadian Place
Suite 810
Toronto, Ontario
M5X 1A9
Attention: Cliff Rand
Telecopier: (416) 361-1790
(2) Any notice, direction or other instrument given to a person in
accordance with Subsection 6.01(1) shall be deemed to have been
given, sent and delivered to, and received by, such person on the
first Business Day after transmission.
(3) Any party may from time to time, by notice given in accordance with
Subsection 6.01(1) to the other party, change any one or more of the
address, addressee, telephone number or telecopier number.
<PAGE>
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6.02 Time of the Essence
Time shall be of the essence of this Agreement.
6.03 Expenses
All costs and expenses (including the fees and disbursements of legal
counsel, investment advisers and auditors) incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses.
6.04 Execution in Counterparts
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which when taken together shall
constitute one and the same instrument.
6.05 Execution by Facsimile
This Agreement may be executed by any party by facsimile and if so
executed shall be legal, valid and binding on the party executing in such
manner.
[INTENTIONALLY LEFT BLANK]
<PAGE>
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6.06 Non-Merger
The covenants, representations and warranties of the Purchaser and the
Corporation contained in this Agreement shall not merge on and shall survive the
Closing and, notwithstanding the Closing or any investigation made by or on
behalf of the Purchaser or the Corporation, shall continue in full force and
effect.
6.07 Assignment
The terms and provisions of this Agreement shall be binding upon and enure
to the benefit of the Purchaser and the Corporation and their respective
successors and assigns; provided that this Agreement shall not be assignable by
any party without prior written consent of the other party. The benefit and
obligations of this Agreement, insofar as they apply to the Purchaser, shall
pass with any assignment or transfer of the Securities.
IN WITNESS WHEREOF this Agreement has been executed by the parties as of
the date first above written.
BOEING CAPITAL SERVICES CORPORATION
Per: "Thomas J. Motherway"
----------------------
Name: Thomas J. Motherway
Title: President
Per: "Daniel O. Anderson
----------------------
Name: Daniel O. Anderson
Title: Vice President - Commercial Finance
RADIANT ENERGY CORPORATION
Per: "Timothy P. Seel"
----------------------
Name: Timothy P. Seel
Title: Vice-President, Engineering
Per: "Robert D. Maier"
----------------------
Name: Robert D. Maier
Title: Vice-President, Sales and Service
<PAGE>
-1-
Schedule A
RIGHTS TO PURCHASE COMMON SHARES
Options:
Number of Exercise Price
Common Shares Under Option Per Common Share Expiry Date
- -------------------------- ---------------- -----------
114,500 $1.40 June 16, 2000(1)
165,000 $2.50 February 28, 2001
252,469 $1.35 November 15, 2001
103,875 $2.00 December 22, 2002
90,114 $1.30 August 25, 2003
50,000 $2.50 August 25, 2003
25,000 $1.80 October 29, 2003
45,625 $1.30-$1.35 December 14, 2003
150,000 $1.30-$1.80 December 18, 2003
39,700 $1.30 January 21, 2004
68,100 $1.45 March 3, 2004
6,000 $1.15 April 7, 2004
75,000 $1.35 June 16, 2004
Notes:
(1) Expires as to 25% of options on each of September 16, 1999, December
16, 1999, March 16, 2000 and June 16, 2000.
6% Redeemable Convertible Secured Debenture Issued May 23, 1997:
On May 23, 1997, the Corporation issued $1,134,000 principal amount of
redeemable convertible secured debentures (the "6% Debentures"). The 6%
Debentures mature on May 22, 2002 and bear interest at an annual rate of 6%,
payable annually. The 6% Debentures are redeemable by the Corporation upon 30
days prior written notice following any period of 20 consecutive trading days,
ending not more than five trading days prior to the date on which notice of
redemption is given, during which the weighted average market price of the
Corporation's common shares equals or exceeds $3.50 (subject to adjustment in
certain events). The 6% Debentures are convertible at the holder's option into
common shares at any time prior to maturity or, if called for redemption, on or
before the last business day preceding the date specified for redemption, at a
conversion price of $1.25 per common share (subject to adjustment in certain
events), being a rate of 80 common shares for each $100 principal amount of 6%
Debentures. As at the date of this Agreement, approximately $132,000 principal
amount of the 6% Debentures remain outstanding and 105,840 common shares are
reserved for issuance upon conversion of such outstanding 6% Debentures.
<PAGE>
-2-
7% Redeemable Convertible Secured Subordinated Debentures Issued May 28, 1999:
On May 28, 1999, the Corporation issued $1,889,200 principal amount of
redeemable convertible secured subordinated debentures (the "7% Debentures").
The 7% Debentures mature on May 28, 2004 and bear interest at an annual rate of
7%, payable semi-annually on November 30 and May 31 of each year, commencing
November 30, 1999. After May 31, 2000, the 7% Debentures are redeemable by the
Corporation upon 30 days prior written notice following any period of 20
consecutive trading days, ending not more than five trading days prior to the
date on which notice of redemption is given, during which the weighted average
market price of the Corporation's common shares equals or exceeds $2.50 (subject
to adjustment in certain events). The 7% Debentures are convertible at the
holder's option into common shares at any time prior to maturity or, if called
for redemption, on or before the last business day preceding the date specified
for redemption, at a conversion price of $1.15 per common share if converted
prior to May 31, 2000 and $1.45 per common share if converted thereafter
(subject, on both cases, to adjustment in certain events), being a rate of
approximately 86.96 common shares or 68.97 common shares, respectively, for each
$100 principal amount of 7% Debentures. As at the date of this Agreement,
approximately $1,519,500 principal amount of the 7% Debentures remain
outstanding and 1,321,358 common shares are reserved for issuance upon
conversion of such outstanding 7% Debentures.
<PAGE>
-1-
Schedule B
OPTION CERTIFICATE
<PAGE>
-1-
Schedule C
DISCLOSURE OF INTELLECTUAL PROPERTY CLAIMS
In April 1998, the Corporation along with two of its directors and
shareholders, John Chew and Timothy P. Seel, and Roberts-Gordon, Inc. ("R-G")
settled lawsuits relating to the ownership of the Patent, the alleged use of R-G
"confidential information" and alleged tortious interference with contractual
relations. As a result of the settlement, the Subsidiary's ownership of the
Patent was confirmed and R-G agreed, for a period of five years from the date of
the settlement, not to compete with the Corporation in the business of selling
systems to de-ice aircraft before take-off as a manufacturer, supplier,
manufacturer's representative or any other capacity throughout the world. In
return, the Corporation agreed not to compete in the infrared heating industry
as a manufacturer, supplier or manufacturer's representative throughout the
world for a period of five years.
<PAGE>
- 1 -
Schedule D
LIST OF DOCUMENTS PROVIDED TO THE PURCHASER
Radiant Energy
List of documents submitted by Radiant Energy for the Due Diligence Process.
1. Five Year P/L, B/S and C/F Projections with assumptions.
2. 1998 Annual Report
3. Copy of draft contract with Continental Airlines for the Newark Infratek
2000 system.
4. Copy of draft contract with Lufthansa Engineering and Operational Services
Gmbh.
5. Summary (3 pages) - Economics of De-Icing Using the Infratek System.
6. Confidential Private Placement Memorandum.
7. Radiant Energy Corporation - Offer of Rights to subscribe for Debentures.
8. Copy of 5/6/99 Presentation to Boeing Capital (in Scottsdale).
9. Summary Gross Margin made on the various Infratek Models.
10. Summary of Continental's savings at Newark on the Infratek 2000.
11. Suggested pricing schedule for various aircraft types using Infratek
System.
12. Summary list of Infratek advantages (provided by Robert Maier during
credit interview).
13. Marketing brochure on Radiant Energy Corporation.
14. Settlement Agreement dated April 20, 1998 among Roberts-Gordon Inc.,
Charles John Chew, Timothy Seel, Radiant Aviation Services, Inc. (formerly
known as Process Technologies, Inc.) and the Corporation (the "R-G
Settlement Agreement")
<PAGE>
Schedule E
SHAREHOLDER LIST
<PAGE>
Daniel O. Anderson Boeing Capital Corporation
Vice President 4060 Lakewood Blvd., 6th Floor
Commercial Finance Long Beach, CA 90808
June 24, 1999
Mr. Colin V.F. Digout
Vice President of Finance
Radiant Aviation Services
40 Centre Drive
Orchard Park, New York 14127
Dear Mr. Digout:
It is a pleasure to offer Radiant Aviation Services a $10 million lease line
commitment based upon the following terms and conditions:
Lessee: Radiant Aviation Services, Inc., a U.S. Corporation
Lessor: Boeing Capital Corporation or its assignee.
Guarantor: Radiant Energy Corporation, a Canadian Corporation, will
provide an absolute and unconditional guaranty of all Lessee's
obligations under the lease.
Equipment: Four (4) 2000 InfraTek Deicing Systems (System). A detailed
description, including cost breakdown, is to be attached to
this proposal. All Equipment is subject to Lessor's approval
prior to funding.
Equipment Equipment cost not to exceed $2,400,000.
Cost:
Lease Term The lease for each System shall be 84 months commencing on the
and Rentals: date the System is placed in service. The Lessee shall be
required to make 84 consecutive monthly lease payments, each
in advance, each equal to 1.432% of Equipment cost.
The lease rental factor quoted in this letter shall float
until drawdown at which time they shall be fixed for the term
of the lease. The quoted rental factor is based upon the
average yield on the U.S. Treasury notes maturing 60 months
from the current month, which yield is 5.73% as of June 7,
1999. The lease rental factor shall be increased
<PAGE>
-2-
or decreased by .000386% for each basis point change between
the 5.73% stated above and the average yield on U.S. Treasury
notes maturing 60 months from the month in which the Lease is
funded, as stated in the TREASURY BONDS, NOTES & BILLS section
of the Wall Street Journal on the first or fifteenth day of
the month for the month in which funding occurs. If there is
no U.S. Treasury note maturing 60 months from the month in
which funding occurs, then the average of the Lease Term
yields on the next succeeding month for which a U.S. and
Rentals: Treasury note is quoted shall be used.
Contingent Lessee to pay Lessor contingent rent equal to 10% of the
Rent: monthly deicing revenue. Such payment is due 90 days after the
end of such deicing month.
Net Lease: This will be a net lease transaction whereby cost of
maintenance, insurance, license fees, taxes and
indemnification against the loss of Lessor's depreciation
benefits and all items of a similar nature will be borne by
the Lessee.
UCC Filing: The Lessor will file precautionary financing
statements against the Lessee pursuant to the Uniform
Commercial Code; such filings to be satisfactory to Lessor.
The cost of such filings shall be for Lessee's account.
Landlord or Lessee shall obtain from the landlord or mortgagee of its
Mortgagee's premises a waiver stating that the Equipment under lease is
Waiver: Lessor's personal property and that no claim will be made
against the Equipment by such landlord or mortgagee during the
lease term.
Insurance: At its expense, the Lessee will carry insurance for all risks
in amounts equal to Lessor's stipulated loss values and
provide liability insurance in an amount acceptable to Lessor.
Certificates of insurance shall reflect Lessor as an
additional named insured and loss payee and shall be issued by
companies and contain endorsements satisfactory to Lessor.
Maintenance: Lessee shall be required to maintain the Equipment in
compliance with all applicable laws, rules and regulations
including all bulletins, inspections and services prescribed
by the manufacturer of the Equipment.
Location: The Equipment shall be located and operated in the United
States. In the event the system is not located in the United
States, the rental rate will be adjusted to reflect the
differences in the tax benefits available to Lessor.
<PAGE>
-3-
Return The Equipment shall be in good condition upon its return to
Conditions: Lessor.
End of Lease (A) Upon expiration of the initial lease term, Lessee shall
Options: have the option to purchase all the Equipment for fair
market value not to exceed 37.5% of equipment cost.
OR
(B) Return the Equipment pursuant to Lessor's instructions.
Depreciation Lessor is entitled to all depreciation benefits assuming a
Benefits: MACRS recovery period of five years and using the 200%
declining balance method of depreciation. Lessee shall
indemnify Lessor for the loss of tax benefits assumed to be
available with respect to the equipment.
Commitment The Equipment shall be placed in service on or before March
Termination: 31, 2000 when Lessor's obligation to purchase the Equipment
and enter into a lease pursuant to this offer will terminate
unless extended by Lessor.
Rent Prepayment: A prepayment of rent, equal to $25,000 is to be remitted
with the executed copy of this proposal. As the Equipment is
placed under lease, Lessor shall apply such proceeds to the
first rentals as they become due, provided that such a
drawdown occurs prior to the termination of this commitment.
Acceptance & This offer is open for your written acceptance
Expiration of through June 25, 1999 and is subject to completion of
Proposal: documentation mutually satisfactory to Lessor and Lessee.
Additional Terms This offer to lease, as well as each funding, is subject to
and Conditions: the following terms and conditions:
Execution of the Subscription and Purchase Agreement for
shares of Radiant Energy Corporation by Lessor and Guarantor.
From the date of this letter to the date of each drawdown
there shall not have occurred any material adverse change in
Lessee's financial condition which in Lessor's reasonable
opinion is material. Lessee shall provide Lessor with
quarterly financial statements which accurately reflect its
financial condition.
If, from the date of this letter to the date of each drawdown,
there should occur any change in Federal income tax law,
regulations, or administrative interpretations thereof
(including any technical correction thereto regardless of date
of enactment) which changes Lessor's net economic return with
respect to the equipment, then the rental payments will be
adjusted, either downward or upward, to maintain Lessor's
economic return.
<PAGE>
-4-
If this proposal is acceptable, please acknowledge your acceptance below and
return a copy to me, along with your check.
If you have any questions or would like to discuss this proposal in greater
detail, please contact me.
Very truly yours, AGREED AND ACCEPTED:
/s/ Colin V.F. Digout
/s/ Daniel O. Anderson
By: /s/ Timothy P. Seel
---------------------------
Daniel O. Anderson
Vice President
Commercial Finance Date: June 24, 1999
-----------------------
DOA:TRUELEASES:RAS5Y
<PAGE>
CONTRACT BETWEEN
CONTINENTAL AIRLINES, INC.
AND
RADIANT AVIATION SERVICES, INC.
Contract No. Q96-006
PROJECT: Continental Airlines - NEWARK Aircraft Deicing Facility
("the Facility")
CONTRACTOR: Radiant Aviation Services, Inc.
THIS AGREEMENT made this 9th day of September 1999, by and between Continental
Airlines, Inc. (hereinafter called "Continental"), whose address is P.O. Box
4607, Houston, Texas 77210-4607, and Radiant Aviation Services, Inc.,
(hereinafter called "RAS"), whose principal address is 40 Centre Drive, Orchard
Park, NY 14127.
IN CONSIDERATION OF the mutual covenants and promises herein, Continental and
RAS agree as follows:
ARTICLE 1 - CONTRACT
1.1 Continental is a party to this agreement (hereinafter the "Contract") with
RAS for the supply, fabrication, installation, testing and maintenance and
repair of the InfraTek Aircraft Deicing System at the Newark International
Airport at a location approved, maintained and controlled by Continental
(hereinafter the "Site").
ARTICLE 2 - CONTRACTUAL OBLIGATIONS
2.1 RAS agrees to furnish and pay for all materials, labor, layout,
supervision, utility installation costs, equipment, tools, transportation,
storage, cleanup, appliances and other things necessary to fully do and
complete the work described in Article 3.1 in accordance with the Contract
and all schedules thereto. RAS and Continental acknowledge that they have
fully reviewed and informed themselves of the Contract and all schedules.
The failure of RAS or Continental to independently investigate and become
informed of the Contract will not relieve RAS or Continental from their
responsibilities thereunder. RAS agrees to be bound to Continental for all
duties and obligations as specified in the Contract regarding the Work, as
hereinafter. The Contract and all schedules, attachments, amendments and
modifications constitute the Contract Documents.
<PAGE>
ARTICLE 3 - SCOPE OF WORK
3.1 RAS and Continental agree that the materials to be furnished and the work
to be done by RAS with respect to the installation, testing and operation
of the Facility are described in the following schedules:
Schedule "A" - Scope of Work (hereinafter the "Work")
Schedule "B" - System Specifications - NEWARK De-icing Facility
Schedule "C" - Contract Price and Payment Terms
Schedule "D" - De-ice Facility Operating Agreement
Schedule "E" - User License Fee Agreement
Schedule "F" - Land Lease with Newark Airport Authority
3.2 RAS shall commence the Work on October 31, 1999 ("Commencement Date"). RAS
agrees to commence the Work on the Commencement Date and to work
diligently and continuously to complete the Work and to coordinate the
Work with other work being done on the Project by other trades, so that
RAS or the work of any other subcontractors shall not be delayed by any
act or omission of RAS, its agents or employees in completion of their
work on the Project within the time specified in the Contract, as may be
amended from time to time in writing. Failure by RAS to timely complete
the work will be deemed a default of the contract. To the extent RAS
causes the Project to be delayed, but given the nature of this Contract,
Continental hereby waives entitlement to any and all consequential damages
caused directly or indirectly by RAS.
3.4 RAS shall ensure that installation and servicing of the Facility and
equipment are accomplished in accordance with the specifications of the
Contract and that RAS has performed the necessary inspections to provide
quality assurance.
3.5 RAS shall establish and maintain the appropriate procedures to inspect,
control, calibrate, maintain and test equipment (including test software)
in order to demonstrate conformance of the product to the specified
requirements.
3.6 RAS will obtain the necessary approvals from the Newark Airport Port
Authority ("Port Authority") with respect to the installations of the
work. Continental shall assist RAS, in a reasonable manner as necessary,
in obtaining such approvals.
3.7 Time is of the essence in this Contract.
ARTICLE 4 - INDEPENDENT CONTRACTOR
4.1 RAS shall perform its obligations hereunder as an Independent Contractor
and not as an agent or employee of Continental.
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<PAGE>
ARTICLE 5 - REPRESENTATIONS
5.1 By signing this Contract, RAS agrees that it has carefully considered all
conditions affecting or which may affect the execution of the Work in
accordance with the Contract Documents, and RAS, in agreeing to complete
the Work within the time specified, has taken into consideration and made
allowance for all hindrances and delays incidental to the Work.
ARTICLE 6 - SPECIFICATIONS AND PLANS
6.1 RAS agrees that the plans and drawings, both general and detailed,
referred to in this Contract, shall be deemed a part hereof and that the
Contract Documents, including any specifications, plans and drawings, are
to be considered together with any work shown or specified on all such
documents.
ARTICLE 7 - COMPLETION SCHEDULE
7.1 RAS agrees to complete the Work to the satisfaction of the Continental's
Representative, acting reasonably. Any Work, which in the reasonable
opinion of Continental or the Port Authority is defective, shall be
rectified at the expense of RAS.
ARTICLE 8 - PAYMENT TERMS AND PROCEDURE
8.1 Unless modified in Schedule "C", payments and payment procedures will be
as specified in this Article 8 of the Contract. RAS shall submit itemized
invoices to Continental for all payments to be made by Continental for
overtime or authorized change orders pursuant to the Contract and
Continental shall within thirty 30) days, remit such payment to RAS.
8.2 RAS shall submit said invoices for payment with a breakdown of the
estimated amount due in accordance with Continental's reasonable
requirements. With each progress billing invoice, RAS shall furnish a
written statement confirming that all bills and expenses for labor,
material, supplies, rentals and taxes incurred in the performance of this
Contract up to the date of the invoice have been paid. RAS agrees to
protect and hold harmless Continental and the Port Authority against any
liens which may arise from the performance of this Contract. On submittal
of the final invoice, RAS will provide the above-mentioned statement and a
release discharging Continental and any other party or parties for whom
said Work is done from any and all liens, claims, demands and causes of
action which arise out of or in connection with the Work.
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<PAGE>
8.3 Due to the nature of this Contract, no holdback is required. For Work
outlined in Article 14 of this Contract, Continental reserves the right to
withhold ten percent (10%) of each approved invoice amount until all
outstanding items relating to the Contract scope of work are completed and
accepted by Continental. If RAS and Continental have any dispute with
respect to the holdback contemplated by Article 14, RAS and Continental
agree to resolve any and all such disputes by arbitration.
ARTICLE 9 - TAXES
9.1 RAS and Continental shall each be responsible for the payment of taxes
arising from the performance of this Contract as may be imposed by law on
RAS and/or Continental by Federal, State or local law.
9.2 RAS shall be responsible for the payment of State sales taxes as may be
unpaid in respect of the materials used for work.
ARTICLE 10 - AUTHORIZED OVERTIME
10.1 Continental will reimburse RAS for authorized overtime upon receipt by
Continental of an RAS invoice, including attachment of actual time sheets
approved by the Continental Field Representative, relating to such
overtime. No overhead, project or percentage fees will be allowed with
respect to authorized overtime.
ARTICLE 11 - SUBCONTRACTING
11.1 This Contract may require portions of the construction and installation
process to include subcontracting in whole or in part by RAS with the
prior written consent of Continental and/or Port Authority. Continental
will assist RAS in obtaining, when necessary, approval from the Port
Authority. RAS will insure all subcontractors are reasonably qualified in
the specific trades and RAS shall ensure that any work completed by any
subcontractors is in accordance with the Contract.
11.2 Should RAS propose to assign the whole or any part of the Work, RAS shall
submit a proposal listing the lower tier contractors on whose work the bid
is based.
11.3 Nothing contained in any said subcontract shall create any contractual
duty of Continental to pay or see to the payment of any sums to any
subcontractor.
11.4 RAS will, upon the reasonable request of Continental, immediately
terminate any such subcontract, without cost to Continental, and RAS shall
make other arrangements to perform its obligations hereunder.
4
<PAGE>
11.5 During the performance of the Work, RAS will, upon written request by
Continental, provide Continental with a list of all persons providing RAS
with material, labor or equipment who, under the law where the Site is
located, may have or may file a mechanic's lien. If any person providing
labor, material, or equipment to RAS for the work files a lien then (i)
Continental may retain sufficient monies to cover the reasonable expenses
and costs of Continental in clearing the lien and (ii) RAS shall cause
such lien to be bonded around or otherwise removed within fifteen (15)
days after RAS becoming aware thereof.
ARTICLE 12 - PROPRIETARY INFORMATION
12.1 All plans, drawings, specification and the subject matter contained
herein, and all other information given to Continental in connection with
the Contract shall remain the property of RAS and shall not be used by
Continental or its employees, servants and agents for any purpose other
than reviewing performance of the Work. Upon completion of the Work,
Continental shall immediately return all such documents to RAS.
12.2 Upon purchase of the Facility by Continental in accordance with the
Contract, all documents and as-built drawings relating to the operation of
the Facility will become the property of Continental who agrees not to
disclose such information and documentation to any person without the
written consent of RAS unless required by law or governmental agency, the
information is otherwise available to the public. In any event consent
shall not be unreasonably withheld, conditioned or delayed.
12.3 If RAS defaults on completion of the work, RAS shall, in Continental's
sole discretion, within ninety (90) days from the date of written notice
of such default either (i) dismantle and remove the Facility at the cost
of RAS or, (ii) provide to Continental upon demand by Continental the
necessary plans, drawings and specifications to complete the Work in
accordance with the Contract . At the expiry of the said ninety (90) day
period, (or if Continental has elected to finish the work itself, at the
completion of construction), Continental shall forthwith return said
plans, drawings and specifications to RAS and Continental shall certify to
RAS that plans, drawings and specifications have not, either directly or
indirectly, been copied or duplicated by Continental (except for use by
Continental's contractor, etc.) unless required by law or governmental
agency, or the information is otherwise available to the public.
ARTICLE 13 - FIELD CHANGES
13.1 During the course of the Work, certain changes in the Work may be required
and completed pursuant to oral discussions between RAS and Continental's
Field Representative. Such changes are those which do not affect the cost
or the schedule of the Work or which do not result in a material change in
the approved
5
<PAGE>
request and obtain authorization from Continental, as provided in
Article 14 hereof. RAS should not have such authority.
ARTICLE 14 - CHANGES AND EXTRA WORK
14.1 Continental may, by written notice, make reasonable changes, additions or
deletions from and to the Work to be performed by RAS who shall promptly
comply with all such written change orders. Changes and additions shall
not extend any completion date unless such extension is first mutually
agreed and approved by Continental and RAS prior to performance of the
Work.
14.2 Should RAS consider any changes as justification for an adjustment to the
contract price, RAS agrees to notify Continental immediately. Such
notification shall be in the form of a detailed written estimate of cost
and an adjustment in the Completion Date, if required. RAS shall not
proceed with such change until written approval is received from
Continental. If the change is approved, Continental will issue a contract
amendment. No changes will be made, additional work performed or materials
furnished until the amount of adjustment in the Contract Price and the
Completion Date with respect thereto have been mutually agreed upon and
RAS has received written notice from Continental authorizing RAS to
proceed with such work.
14.3 The basis of payment for changes and extra work will be in accordance with
Article 8.
14.4 RAS shall invoice for any extra work against the Contract number noted
above. Each invoice shall be fully supported with Daily Foreman's Reports
and Daily Equipment Use Reports signed by the Continental Field
Representative, and a copy of vendors invoices referenced to Material
Requisition number. Materials must be approved by Continental Field
Representative reflecting the materials and the date, names, rates, and
hours worked by each employee, plus a brief description of the work
performed. One copy of the said Daily Report and Daily Equipment Use
Report shall be given to Continental's Field Representative each day
during the period of the extra work.
ARTICLE 15 - GUARANTEE
15.1 RAS hereby guarantees all the Work to be performed hereunder to be free of
defects in material or workmanship, for a period of two years after the
date of completion of the work ("Warranty Period"). RAS shall promptly,
after RAS' receipt of written notice thereof, repair and make good any
defects in or arising from RAS supplies, material or workmanship which may
develop during the two year period. All repaired or replaced parts and
labor shall have a like warranty from the date of repair or replacement.
15.2 RAS hereby warrants that the deicing technology to be installed in the
Facility, when used properly, is a safe and effective method for deicing
aircraft.
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<PAGE>
ARTICLE 16 - WARRANTY OF TITLE
16.1 RAS warrants good title to all materials, supplies, and equipment
installed or delivered to the Site together with all improvements and
appurtenances constructed or placed thereon by RAS to be free of any
claim, liens, or charges. RAS shall comply with all provisions of laws
relating to the mechanic's and materialmen's liens.
ARTICLE 17 - DAMAGE TO EQUIPMENT\FACILITY
17.1 RAS and Continental are each responsible for any loss of or damage to any
tools, equipment and vehicles used by them during the period of the Work.
Continental is responsible for damage caused during the operation of the
Facility by Continental.
ARTICLE 18 - INDEMNIFICATION
18.1 Continental agrees to defend, indemnify and hold harmless RAS and its
directors, officers, agents, employees, contractors, subcontractors,
parent corporation, subsidiaries or affiliates (referred to individually
and collectively as the indemnified party"), for, from and against any and
all asserted and unasserted claims, liabilities, losses, damages, costs,
fines, penalties, causes of action, and expenses, including, but not
limited to attorney's fees and all costs of litigation (the foregoing
referred to individually and collectively as "claims"), which the
indemnified party may hereafter incur, suffer or be required to pay by
reason of damage to property or injury to or death of persons arising from
or relating to Continental's performance, or failure to perform, the
services and obligations of Continental under the Contract. The
indemnified party shall have the right, but not the duty, to participate
in the defense of any claim or related litigation with attorneys of its
own choosing without relieving Continental of any duty or obligation
hereunder. The indemnified party's rights and the duties, obligations and
liabilities of Continental established under this paragraph shall survive
the expiration or termination of this Agreement.
18.2 In addition to defending, indemnifying and holding harmless the
indemnified party as set forth above, Continental now and forever
releases, acquits and discharges the indemnified party for and from any
and all claims suffered or incurred by Continental, or by any entity or
person claiming through Continental arising from or relating Continental's
performance or failure to perform the services,
18.3 RAS agrees to defend, indemnify and hold harmless Continental and its
directors, officers, agents, employees, contractors, subcontractors,
parent corporation, subsidiaries or affiliates (referred to individually
and collectively as the "indemnified party"), for, from and against any
and all asserted and unasserted claims,
7
<PAGE>
liabilities, losses, damages, costs, fines, penalties, causes of action,
and expenses, including, but not limited to attorney's fees and all costs
of litigation (the foregoing referred to individually and collectively as
"claims"), which the indemnified party may hereafter incur, suffer or be
required to pay by reason of damage to property or injury to or death of
persons arising from or relating to RAS's performance, or failure to
perform, the services and obligations of RAS under the Contract. The
indemnified party shall have the right, but not the duty, to participate
in the defense of any claim or related litigation with attorneys of its
own choosing without relieving RAS of any duty or obligation hereunder.
The indemnified party's rights and the duties, obligations and liabilities
of RAS established under this paragraph shall survive the expiration or
termination of this Agreement.
18.4 In addition to defending, indemnifying and holding harmless the
indemnified party as set forth above, RAS now and forever releases,
acquits and discharges the indemnified party for and from any and all
claims suffered or incurred by RAS, or by any entity or person claiming
through RAS arising from or relating to RAS's performance or failure to
perform the services,
ARTICLE 19 - PERMITS, LICENSES, FEES, APPLICABLE LAWS AND REGULATIONS
19.1 RAS shall obtain and pay for any permits, licenses and easements required
for structures or permanent changes in the existing Facilities, as well as
all other permits and licenses as may be required to fully comply with all
legal requirements in connection with the completion of the Work and the
performance of all obligations under the Contract.
19.2 RAS shall indemnify and save Continental harmless from and against any and
all additional costs, damages, and liability which may arise out of the
failure of the RAS to secure and pay for any such licenses and permits or
to comply fully with all applicable laws, ordinances, regulations, and
notices.
19.3 Continental shall assist RAS in a reasonable manner in obtaining any
permits, licenses and easements required for the completion of the Work
and the performance of all obligations under the Contract.
ARTICLE 20 - WORK AREA AND CLEAN-UP RESPONSIBILITY
20.1 RAS agrees to continuously maintain the area of work in a safe, neat, and
orderly manner and to protect the Work and the property of Continental
from injury or loss arising in connection with this Work. RAS shall make
final clean-up to Foreign Object Damage (F.O.D.) standard including the
removal of its scaffolding, tools and equipment. If after five days
notification of any failure on the part of RAS under this Article,
Continental reasonably elects to perform such cleanup, Continental may
back charge RAS for the reasonable clean up costs.
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<PAGE>
ARTICLE 21 - TERMINATION FOR CAUSE
21a. If at any time Continental elects not to exercise their option to
purchase or to use the Facility Continental will so notify RAS. Following
said notice RAS will dismantle and remove the Facility from the Site.
21.1 Continental may for cause, terminate the Work in whole or in part at any
time by written or telegraphic notice to RAS stating the extent and the
effective date of such termination; whereupon RAS shall:
(i) stop all Work and place no further orders or subcontracts for
materials, services, equipment, or supplies except as may be
necessary to complete portions of the Work not terminated;
(ii) assign to Continental in the manner and to the extent directed, all
of the rights of RAS under work order, contracts and subcontracts
relating to the terminated portions of the Work;
(iii) terminate work orders, purchase orders, and subcontracts outstanding
to the extent that they relate to the terminated portion of the work
and are not assigned to Continental;
(iv) take any necessary action to protect the property in the possession
of Continental in which Continental has or may acquire an interest;
(v) complete performance of that portion of the Work that was not
terminated; and
(vi) take any other reasonable action toward termination of the Work
which Continental may reasonably direct, or
(vii) if directed by Continental, within ninety (90) days from the date of
written notice of such default, dismantle and remove the Facility at
the cost of RAS.
21.2 In the event of termination under this Article, unless Continental directs
RAS to dismantle the Facility, Continental shall pay to RAS in full
settlement hereof and subject to the limitations hereinafter set forth, a
mutually agreed upon amount reflecting that portion of the Contract that
was performed by RAS. Deduction shall be made by Continental for amounts
previously paid to RAS. The total amount of all payments to RAS shall not
exceed, in any event, that portion of the total contract price, as it may
have been increased or decreased, that the Work actually performed and
materials delivered at the Site on the date of termination bears to the
entire Work to be performed hereunder. If Continental elects to direct RAS
to dismantle the Facility pursuant to paragraph 21.1 (vii), no such
settlement
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shall be made and RAS shall return to Continental all amounts
previously paid to RAS under the contract, except paid for deicing
services.
21.3 RAS shall include a provision in any subcontract wherein RAS shall be
entitled to terminate such subcontract on thirty (30) days written notice.
ARTICLE 22 - RAS DEFAULT
22.1 If RAS fails to keep and perform its obligations under this Contract to
the satisfaction of Continental, acting reasonably, at the times and in
the manner herein provided, or shall violate any of the covenants,
conditions, and stipulations of this Contract; or be barred from access to
the Site; or if RAS shall, in the opinion of Continental refuse to
commence performance, quit, abandon, or desert the Work herein required to
be performed by RAS without the prior consent of Continental, or if RAS
shall be adjudicated a bankrupt or make an assignment for the benefit of
creditors, or if the property and equipment of RAS shall be levied upon or
sold under execution, or shall by law become vested in another person,
firm, or corporation, or if a receiver shall be appointed for RAS, then
Continental shall have the right, at its sole and absolute discretion, to
terminate the Work and cancel this Contract immediately upon the happening
of any such event, with notice thereof, it being understood its failure to
exercise any such right shall not be deemed to amount to a waiver thereof.
In such event, RAS shall be liable to reimburse and to pay Continental for
all reasonable extra costs and expenses to complete the Work.
ARTICLE 23 - LABOR AND LABOR DISPUTES
23.1 Whenever an actual or potential labor dispute is delaying or threatens to
delay the timely performance of any contract, RAS will immediately give
notice in writing thereof to Continental.
23.2 Continental shall have the right to require RAS to remove from the Site,
any employee deemed by Continental to be (1) unqualified for the job
assigned him, (2) guilty of improper conduct, or (3) otherwise undesirable
or unacceptable by generally accepted standards or may or could be deemed
unacceptable to clear security required under the local airport badging
requirements.
ARTICLE 24 - EQUAL EMPLOYMENT OPPORTUNITY
24.1 In the performance of the Work hereunder, RAS will comply with the
requirements of the Port Authority including the provisions of all Federal
equal opportunity laws, all State and Local laws and the Minority Business
Enterprise ("MBE") and Women Business Enterprise ("WBE") requirements.
Continental may,
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from time to time, direct RAS to purchase certain material or use certain
lower tier contractor in order to comply with MBE or WBE requirements
under the Contract.
ARTICLE 25 - NON-WAIVER
25.1 No waiver of a breach of any provision of this Contract shall constitute a
waiver of any such breach, or breach of any other provision of this
Contract.
ARTICLE 26 - INSURANCE
26.1 RAS to provide or cause to be provided during the period of the
construction and installation of the Facility:
(i) All Risk Builders Risk Coverage in an amount equal to the
replacement value of the project. The policy shall feature a waiver
of subrogation against Continental.
(ii) General Liability Insurance, shall not be less than $25,000,000,
under the appropriate policy form, to cover any and all claims
brought against RAS as a result of the Work. The policy of insurance
shall name Continental, Continental Express, and the Port Authority
as an Additional Insured with respect to the operations of RAS.
(iii) Workers' Compensation and Employers Liability Insurance subject to a
limit of at least $1,000,000. RAS will provide a waiver of
subrogation against Continental , its Directors, Officers,
employees, agents, successors, assignees or other authorized
representatives.
(vi) The policy or policies of insurance shall (1) name Continental and
affiliated or related companies as Additional Insureds with respect
to the construction and installation of the Facility; (2) not be
invalidated with respect to the interests of Continental by reason
of any breach or violation of any warranties, representations or
conditions contained in the policies, and (3) contain any
undertaking by the Insurers to notify RAS in writing not less than
thirty (30) days prior to any material change to or cancellation of
the insurance.
26.2 RAS to provide or cause to be provided upon completion of the installation
of the Facility and during the period of operation of the Facility by
Continental:
(i) General Liability Insurance, subject to a limit of not less than
$100,000,000 under the appropriate policy form relating to the
design and operation of the Facility.
(ii) All Risk Property Insurance in an amount equal to the replacement
value of the Facility.
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26.3 Continental to provide or cause to be provided upon completion of the
installation of the Facility and during the period of operation of the
Facility by Continental:
(i) General Liability Insurance, subject to a limit of not less than
$100,000,000 under the appropriate policy form to cover any and all
claims arising out of the actual structure, equipment and the
operation of the Facility by Continental.
(ii) Workers Compensation and Employers Liability insurance subject to a
limit of at least $1,000,000.
(iii) Airport/Fixed Base Operator's Liability policy including
Hangarkeepers and Grounding Liability with limits of at least
$100,000,000 with respect to the operation of the Facility under the
De-ice Facility Operating Agreement.
(iv) The policy or policies of insurance shall (1) name Radiant Energy
Corporation and/or Radiant Aviation Services Inc. and affiliated or
related companies as Additional Insureds with respect to the
operations of Continental; (2) not be invalidated with respect to
the interests of RAS by reason of any breach or violation of any
warranties, representations or conditions contained in the policies,
and (3) contain any undertaking by the Insurers to notify RAS in
writing not less than thirty (30) days prior to any material change
to or cancellation of the insurance.
26.4 RAS shall furnish or have its Insurer furnish a Certificate or
Certificates of Insurance under all such policies providing that thirty
(30) days advance written notification of material changes in, or
cancellation of, the policies shall be addressed to Continental, by
certified mail, return receipt requested. Certificates shall specifically
state that policies are in full force and effect.
26.5 Continental shall furnish or have its Insurer furnish a Certificate or
Certificates of Insurance under all such policies providing that thirty
(30) days advanced written notification of material changes in, or
cancellation of, the policies shall be addressed to RAS, by certified
mail, return receipt requested. Certificates shall specifically state that
policies are in full force and effect.
ARTICLE 27 - BOOKS AND RECORDS
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27.1 If Continental approves extra work under the Contract, RAS will maintain
complete books and records of the extra work, including material purchased
and used, labor used, equipment used and expenses and costs relating to
the extra work. Upon the written request of Continental, RAS will provide
a copy of the said books and records to Continental.
ARTICLE 28 - SAFETY & SECURITY
28.1 RAS shall comply with applicable safety and security laws and regulations
enforced at the Site and as modified from time to time. All personnel
working in the area shall be authorized to work in the restricted area of
the airport. All personnel shall comply with all airport and federal
regulations respecting security clearance and screening.
ARTICLE 29 - CONTRACT PRICE
29.1 The total price of this contract is according to attached Schedules.
ARTICLE 30 - ASSIGNMENT
30.1 Subject to the terms referred to herein, this Agreement is not assignable
without the prior written consent of RAS and Continental. Any attempt to
assign any of the rights, duties or obligations of this Agreement without
written consent of RAS and Continental is void.
ARTICLE 31 - NOTICES
31.1 All notices required pursuant to this agreement shall be delivered by hand
to the party for which it is intended, sent by telex, fax, telegram, or
similar form of transmitted message or sent by prepaid courier directed to
such party at the address indicated below, or at such other address as
either party may stipulate by notice to the other. Any notice delivered by
hand or prepaid courier shall be deemed to be received on the date of
actual delivery thereof. Any notice so sent by telex, telegram or similar
form of transmitted message shall be deemed to have been received on the
next day following transmission.
TO RAS:
Radiant Aviation Services Inc. Continental Airlines, Inc.
40 Centre Drive P.O. Box 4607
Orchard Park, New York 14127 Houston, Texas 77210-4607
Fax: (716) 662-0033 Fax:(713) 324-2687
Attention: Mr. C.V. Digout Attention: General Counsel
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ARTICLE 32 - AMENDMENTS
32.1 If at any time during the continuation of this Contract the parties shall
deem it necessary or expedient to make any alteration in any article,
clause, matter or thing contained in it, they may do so by a writing
signed by them and endorsed on these articles, and all of these
alterations shall be adhered to and have the same force as if they had
originally formed part of this Contract.
ARTICLE 33 - ENTIRE CONTRACT
33.1 This Contract contains the entire agreement of the parties, and supersedes
all negotiations, proposals, notices of award, purchase orders,
agreements, and understanding, if any, written or oral heretofore had
between the parties relating to the Work. No amendment, variance, or
change in the provisions of this Contract shall be made unless the same is
by a writing signed by the authorized representatives of the parties
hereto.
ARTICLE 34 - FURTHER DOCUMENTS
34.1 RAS and Continental agree that each of them shall, upon reasonable request
of the other, do or cause to be done all further lawful acts, deeds and
assurances whatever that may be required for the better performance of the
terms and conditions of this Contract.
ARTICLE 35 - VALIDITY AND INTERPRETATION
35.1 Headings
35.1.1 The headings used in this Contract are for convenience only and are not
to be considered a part of this Contract and do not in any way limit or
amplify the terms and provisions of this Contract.
35.2 Invalidity of Particular Provision
35.2.1 If any provision of this Contract is held by competent authority to be
invalid, illegal or unenforceable, for any reason, the remaining
provisions of this Contract and its attachments will continue in full
force so long as they express the intent of the parties. If the intent of
either party cannot be preserved,
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this Contract shall be either re-negotiated or terminated by the parties.
35.3 Number and Gender
35.3.1 It is agreed that unless the context of this Contract requires otherwise,
the singular number shall include the plural and vice- versa, the number
of the verb shall be construed as agreeing with the word so substituted,
words importing the masculine gender shall include the feminine and neuter
genders, and words importing persons shall include firms and corporations
and vice-versa.
35.4 Disputes; Governing Law; Venue
35.4.1 Any dispute which is not settled by Agreement of the parties will be
finally resolved by the courts of the State of New Jersey. The
interpretation, construction and meaning of this contract shall be
governed by the laws of the State of New Jersey, excluding its conflict of
law rules. The parties hereto consent to the jurisdiction of the courts of
general jurisdiction in the State of New York for the purpose of resolving
any matter directly or indirectly relating to this Contract.
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ADDENDUM TO THE CONTRACT BETWEEN
CONTINENTAL AIRLINES, INC.
AND
RADIANT AVIATION SERVICES, INC.
CHANGE TO SCHEDULE E PARAGRAPH 5 OPTION TO PURCHASE AND USER LICENSE FEE
AGREEMENT.
The amount of the monthly lease payment is to change from $34,366 to $49,094. .
CHANGE TO SCHEDULE "E-1"
To reflect a higher capital cost, the purchase price option will change to
attached waived schedule.
CHANGE TO SCHEDULE "D" ATTACHMENT
A discount equal to 40% of the rate Radiant charges to CO/CE apply for all fee
charges to May 1, 2000. A discount of 30% to May 2, 2001. A discount of 20% to
May 1, 2002.
SIGNATURE BY AUTHORIZED REPRESENTATIVES:
RADIANT AVIATION SERVICES, INC.
By: _____________________ By: _____________________
Title: __________________ Title: __________________
Date: ___________________ Date: ___________________
CONTINENTAL AIRLINES, INC.
By: ____________________ By: _____________________
Title: _________________ Title:___________________
Date: _________________ Date: ___________________
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SCHEDULE "A"
SCOPE OF WORK
NEWARK INTERNATIONAL AIRPORT
CONTINENTAL AIRLINES
Furnish labor, equipment and miscellaneous materials required for work to be
completed at the Proposed aircraft deicing location as designated by
Continental:
SYSTEM LOCATION: NEWARK INTERNATIONAL AIRPORT
The scope of work to be completed is as follows:
1. Obtain the necessary permits, including security, building, electrical and
welding/cutting for the required scope of work for the installation and
erection of the Facility at the Newark site.
Major Components of the InfraTek(Registered)System 2000
2. The InfraTek(Registered)System 2000 includes as a minimum, the following
component systems, equipment and labor:
o InfraTek(Registered) facility, sized for service of commercial
airliner (757) and similar or smaller, aircraft, completely erected
on site with lighting, electrical and gas distribution systems
included.
o Energy Process Units (EPU) mounted in banks of 4 individual burners
depending on the aircraft layout agreed upon. Each individual EPU is
fired by natural gas. Total number of EPU units is determined by
aircraft fleet serviced. Each EPU runs on 120 VAC, and has a
connected load of approximately 1 amp.
o Electrical distribution and control panel as necessary for equipment
installed in the system. Supply voltage required is 120/240 VAC
single phase, 60 hz.
o Computer control system for operation of EPU units with capability
of various custom time cycles for different aircraft configurations.
o Gas safety and control valving as necessary for equipment installed
in the system.
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o All labor, whether provided through local sources or through Radiant
Aviation (RAS), to erect the InfraTek(Registered) structure, install
the electrical and gas distribution system in the structure, install
and commission the EPU units. Labor to be per allowances established
in the contract.
o Training to Continental airport personnel (for a maximum of three
days) on the operation, maintenance and troubleshooting of the
structure, the EPU units and related systems.
o Access to 24 hour support from RAS technical service personnel.
o Operating manuals and documentation for all mechanical, electrical
and system components of the InfraTek(Registered) system.
o 2 year complete warranty on all components.
3. RAS, with the Continental's assistance as necessary, will provide for the
following:
o Gas utility service hook up and supply piping to the Facility.
Minimum 2 psi service pressure required.
o Electric utility service hook up and supply to the structure control
panel.
o Installation expenses exceeding allowances quoted.
o Obstruction and demarcation lighting, if required.
o Site preparation and foundations.
4. RAS shall use its best efforts to ensure that the employees, servants,
agents and subcontractors of RAS follow the security guidelines and
directions of Continental, the Port Authority and the Federal Aviation
Administration.
5. RAS is responsible for set-up and testing the Facility.
6. Clean up the work area to Foreign Object Damage (F.O.D.) standard.
7. Participate in a walk-through inspection with a Continental representative
and complete required action on outstanding items.
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SCHEDULE "B"
SYSTEM SPECIFICATION
NEWARK INTERNATIONAL AIRPORT
CONTINENTAL AIRLINES
Specifications InfraTek(Registered)System 2000
1.0 GENERAL:
1.1 The system facility shall be a frame supported, tension fabric structure
of modular design, providing unobstructed area for aircraft access.
1.2 The system facility shall have fabric panels which can be removed from
ground level with the structure erected and operational, without affecting
the structural integrity of the structure.
1.3 The system shall incorporate high output infrared devices specifically
designed for deice operations.
1.4 The system shall include all necessary control systems for safe and
efficient operation.
2.0 SPECIFICATIONS:
2.1 Facility
2.1.1 Dimensions:
2.1.1.1 The structure shall have nominal external dimensions as follows: Width:
166', Height: 56' with an eave height of 16'; Length: 208'. The structure
shall consist of 13 bays, 16' in length.
2.1.2 Structure Operational Characteristics:
2.1.2.1 The standard structure shall withstand steady winds of 80 miles per hour
and ground snow loads of 30 pounds per square foot as assessed under the
criteria of the U. S. Metal Builders Manufactures Association with the
recommended US Aluminum Association Safety Factor of 1.95 when equipped
with the standard array of EPU equipment. Non- standard configurations can
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accommodate loads to meet higher local conditions, and are available at
extra cost.
2.1.2.2 The structure shall have an operational service range of - 20(degrees)
to +160(degrees) Fahrenheit
2.1.2.3 The minimum structure life span of all frame components shall be thirty
(30) years. Fabric coverings of the structure are covered fully for five
(5) years with prorated coverage for years 5 through 12.
2.1.2.4 he structure shall be erected on a concrete surface or foundation
prepared per facility manufacturer's recommendations.
2.1.3 Installation/Disassembly:
2.1.3.1 The structure shall be capable of being erected/struck by ten-to-twelve
untrained persons in four weeks, or less.
2.1.3.2 The structure shall be capable of being erected/struck in wind speeds up
to twenty-five (25) miles per hour.
2.1.3.3 The structure will require a crane and manlifts with suitable capacity
and height reach for assembly.
2.1.3.4 Concrete footings, or a concrete tarmac, suitable to withstand reaction
loads provided by the facility manufacturer and local code requirements
shall be provided at each arch termination point.
2.1.4 Materials:
2.1.4.1 Weather Barrier Fabric:
2.1.4.1.1 The fabric shall be a laminated or coated PVC fabric with an
appropriate topcoat to facilitate shedding of snow and of sufficient
weight and strength to meet the performance characteristics required of
the structure and subject to the following minimum requirements.
2.1.4.1.2 The fabric shall have minimum tensile strength of 385 pounds in the
warp and fill directions per FED-STD-191 Test Method 5100.
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2.1.4.1.3 The fabric shall be UV stabilized in high and/or low humidity
conditions.
2.1.4.1.4 The fabric shall not be susceptible to rot or mildew.
2.1.4.1.5 The fabric shall be flame resistant per NFPA 701 criteria.
2.1.4.1.6 The fabric shall remain serviceable in temperatures from - 20(degrees)
F to +160(degrees) Fahrenheit for the life of the structure without
tearing.
2.1.4.1.7 The color of the fabric shall be White/White, Ivory/White or
Beige/White. Weight to be 24 oz. - 0 + 2 oz.
2.1.5 Frame:
2.1.5.1 The frame extrusions shall be constructed of 6061-T6 aluminum alloy to
U. S. Federal Spec. QQ-A-200/8 (equivalent to Mil-E-16053 and ASTM-B221).
2.1.5.2 Interchangeability/Modularity - Structure components shall be such that
like components can be exchanged within or between structures.
2.1.5.3 Channels - The frame shall have channels which have provisions to accept
both inner and outer tensioned fabric panels. The channels shall be smooth
and allow the fabric panels to pass through them unobstructed.
2.1.5.4 Purlins shall be located on the inside of the fabric/weather barrier.
2.1.5.5 The structure shall have a panel rail termination system that secures
panels to the footings.
2.1.6 Personnel Doors (optional):
2.1.6.1 Single personnel doors shall be provided at customer designated bays
along the sides of the structure.
2.1.6.2 Single personnel doors shall be of hollow metal construction.
2.1.6.3 The personnel doors shall have minimum dimensions of 3'-0" wide x 6'8"
high.
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2.1.7 Support Systems:
2.1.7.1 Electrical Power Distribution:
2.1.7.1.1 A weatherproof, power distribution panel shall be provided for
controlling electrical operations.
2.1.7.1.2 All controls shall be clearly marked.
2.1.7.1.3 The electrical system shall conform to the current National Electrical
Code.
2.1.7.2 Lighting:
2.1.7.2.1 The lighting system consists of five (5) harnesses, each with two
Hi-Bay light fixtures. Lighting provided shall provide 20 F.C. minimum @
36" above the floor.
2.1.7.2.2 Lights shall be capable of being installed and secured from the ground
before the framework is raised into its vertical position.
2.1.7.2.3 Lights shall be provided with pre-wired harness for ease of
installation.
2.1.7.3 Anchoring:
2.1.7.3.1 The anchoring system shall match prescribed local wind and snow load
conditions.
2.2 Energy Process Units
2.2.1 The Energy Process Units (EPU) shall be an unvented forced draft high
output infrared radiant process burner designed for aircraft deicing.
Total output should be sufficient for fast and economical deice
operations.
2.2.2 The EPU units shall be suitable for operation in altitudes to 2000 feet
above sea level without adjustments. Above 2000 feet above sea level
operation with appropriate orifice jet adjustments should be possible.
2.2.3 The EPU units shall be capable of being fired with Natural or Propane gas.
2.2.4 The EPU Units shall be constructed according to methods listed in the
following approval standards:
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ANSI Z83.6-1990 Gas-Fired Infrared Heaters
ANSI Z83.6a-1992 Addenda to ANSI Z83.6-1990
ANSI Z83.6b-1993 Addenda to ANSI Z83.6-1990
ANSI/NFPA Article 70 National Electric Code
CAN1-2.16-M81 Gas-Fired Infrared Heaters and Interim
Requirement No. 24, Tube Type
Radiant Heaters
CAN/CGA-2.17-M91 Gas-Fired Appliances for Use at High Altitude
CAN1-2.21-M85 Gas-Fired Appliances for Outdoor Installation
CSAC22.2 No.0-M1991 General Requirements-Canadian Electric Code,
Part II
CSA C22.2 No.3-M1988 Electronic Features of Fuel-Burning Equipment
2.2.5 EPUs Units shall be installed according to methods listed in the following
approval standards:
ANSI Z223.1-1992/(NFPA 54) National Fuel Gas Code
ANSI/NFPA Article 70 National Electric Code
CAN/CGA B149.1 and B149.2 General Installation Codes
CSA C22.2 No.0-M1991 General Requirements-Canadian
Electric Code
2.2.6 EPU Unit electrical rating shall be as follows:
Standard Equipment: 120 VAC; 60 Hz; 1.3 Amps; 1 Phase (North America)
Optional Equipment: 220-240 VAC; 50 Hz; .7 Amps; 1 Phase, Phase- Neutral
System (Europe)
2.2.7 EPU Unit gas pressure ratings shall be as follows:
Minimum Supply Pressure: Natural Gas - 5.0" W.C.
Propane Gas - 11.0" W.C.
Manifold Pressure: Natural Gas - 3.5" W.C.
Propane Gas - 10.5" W.C.
2.3 Auxiliary Equipment
2.3.1 The Facility shall be equipped with a breaker type electrical distribution
panel which accepts power from local utilities and distributes it to EPUs,
lighting and accessory outlet connections according to local code
requirements. The load rating of the panel shall be sufficient to
accommodate EPUs and Support Equipment.
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2.3.2 EPU units shall be controlled by a computerized system operated by a
single operator capable of custom time cycles for multiple aircraft
categories.
2.3.3 Integral lighting fixtures shall be provided to supply a minimum 20 foot-
candles illumination at a level 3 feet above finished floor within the
Facility. Typical fixtures are of the 1000 watt, metal halide variety.
2.3.4 The Facility shall be capable of distributing gas from local utility
sources. Both high pressure (2-4 psi) and low pressure (1/2 psi or less)
distribution systems shall be accommodated. Metering and safety relief
outside the structure shall be according to local code requirements.
2.3.5 Connection between the gas distribution piping and the EPU bank
distribution piping shall be provided via flexible, corrugated stainless
steel tube wrapped in PVC. Flexible tubing shall be approved for use
according to a variety of standards including the Canadian and American
Gas Associations.
3.0 Port Authority Approval
3.1 RAS shall obtain the approval from the Port Authority with respect to the
system specifications contained herein.
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SCHEDULE "C"
CONTRACT PRICE AND PAYMENT TERMS
1. Contract Price
1.1 Subject to the terms set out in the Contract and Schedules, RAS
shall be responsible to pay for the installation and set up costs of
the Facility.
2. Payment Terms
2.1 Continental shall pay any amounts due from Continental pursuant to
the Contract within thirty (30) days after receipt of an invoice
from RAS.
2.2 With respect to the Deicing Facility Operating Agreement,
Continental shall pay all required licensing fees payable to RAS in
accordance with Schedule "D" on or before the 30th day of the month
Following the month in which such fees accrued.
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SCHEDULE "D"
DEICE FACILITY OPERATING AGREEMENT
This Deicing Facility Operating Agreement ("OA") is applicable for CONTINENTAL-
NEWARK Aircraft Deicing Facility ("Facility") at the Newark International
Airport (the "Airport"), including operations of the Facility
Until the date, if ever, that Continental purchases the Facility from RAS, it is
agreed as follows:
(i) RAS shall provide the training for those employees of Continental
who will operate the Facility. Continental shall be responsible for
all payroll and benefits costs of the employees of Continental.
(ii) RAS shall obtain all governmental permits, licenses or approvals to
operate the Facility and RAS will be responsible for the operation
of the Facility in accordance with any and all reasonable guidelines
established by, the Federal Aviation Administration and/or the
Newark Airport Authority. Continental will assist RAS in a
reasonable manner in obtaining such governmental permits, licenses
or approvals.
(iii) Continental will pay RAS a fee for use of the InfraTek system for
deicing in accordance with the attached Modified Pricing Schedule
with Commuters or such other fee as may be agreed in writing by RAS
and Continental.
(iv) No fees will be paid by Continental to RAS for anti-icing service
and glycol deicing services.
(v) All advertising space on the inside or the outside of the structure
of the Facility shall be sold by Continental or its agents.
Continental may, at its option, elect to not sell advertising space
on or in the Facility. The advertising net revenues (net of all
costs, including, w/o limitation any Port Authority costs) shall be
shared equally by RAS and Continental and fifty (50) percent of such
net revenues shall be distributed by Continental to RAS on a monthly
basis. Continental shall generate invoices to and collect fees from
the advertising customers and remit to RAS all amounts due to RAS on
a monthly basis.
(vi) Continental will be responsible for all variable operating expenses.
Variable operating expenses are inclusive of the following: manpower
and related workers' compensation insurance and benefits for
Continental employees to operate the Facility; natural gas or
propane
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gas service and supply; electrical service and supply; rent to the
Airport; local advertising and promotion; insurance coverage for
operations: miscellaneous supplies; and, inter alia, sales and
administrative services. For greater certainty, RAS shall not be
responsible for any costs to operate the Facility.
(vii) RAS will be responsible for the costs to acquire and install the
system as well as costs respecting future capital enhancements to
the system.
(vii) RAS and Continental shall mutually agree on any press release
concerning the Contract or the Facility.
(ix) Continental acknowledges that it is not acquiring any right, title
or interest of any nature in or to the patents or trademarks of RAS
but is merely acquiring the exclusive right to operate the Facility
at Newark International Airport. Continental shall immediately
advise RAS in writing of any possible infringement of any patent
and/or trademark of RAS by any entity and RAS agrees to hold
Continental harmless as a result of such notice of possible
infringement of patent and/or trademark.
(x) After installation of the Facility, RAS senior management and
engineering personnel and RAS invited guests shall have reasonable
access to the Facility. If a third party, other than those approved
by RAS, wishes access to the Facility, the third party must be
approved by Continental and such third party must be accompanied by
a representative of Continental.
(xi) In the event the Facility needs to be dismantled and removed at the
end of the Contract, or if Continental or The Port Authority,
require that the system to be removed or dismantled and relocated to
another area of the said airport, the costs of such removal or
reinstallation shall be borne by RAS. If Continental elects not to
exercise the purchase option and if Continental requires that the
Facility be dismantled and reinstalled at another location on the
Newark Airport, the costs of such removal/reinstallation shall be
negotiated by RAS and Continental. In the event that RAS and
Continental are unable to agree on such costs, RAS and Continental
agree to resolve the dispute by binding arbitration.
(xii) Continental will not, so long as RAS is not in default under the
Contract, promote the use of an alternative system using the same or
similar technology, at the Site.
27
<PAGE>
(xiii) Continental will have use of the Facility structure on a year
around basis. Continental has the right to sub-lease or rent the
Facility, provided however that if the Facility is operational, the
sub-lease or rental is not during the deicing season and the
sub-lease or rental does not interfere, either directly or
indirectly, with the operation of the Facility. All rental income,
other than the advertising revenue referred to herein, is to the
benefit of Continental.
SCHEDULE "D" - ATTACHMENT
CONTINENTAL AIRLINES NEWARK
MODIFIED PRICING SCHEDULE WITH COMMUTERS
[Graphic Omitted]
NOTE:
Payment due to Radiant for aircraft treatment within the facility are listed in
column titled "Radiant Charge to CO/CE".
This pricing model shows the retail cost for a Radiant Aviation Services
Facility. This pricing model only valid with increased thru-put Original pricing
using $500 Continental cost with 28 aircraft @ 50 days. This was the minimum
required by Radiant.
28
<PAGE>
New information of commuter usage and increased aircraft activity from 28 to
estimated 45 This pricing model allows for modification of our projections
assuming greater utilization of the Facility.
* Assumptions 1 gal of type 1 glycol @ $4.50 per gal, deicing equipment/manpower
& maintenance included
29
<PAGE>
SCHEDULE "E"
OPTION TO PURCHASE AND USER LICENSE FEE AGREEMENT
1. Continental shall have the option to purchase the Facility after May 1,
2000 or before the later of (i) May 1, 2002 or 30 days after the date the
Facility is completed and notice of such event is given to Continental.
2. If Continental does not exercise the option within such time, then this
option shall expire and be of no force and effect. Continental shall have
first right of refusal for purchase of the Facility at Newark.
3. If Continental decides to exercise the option and to purchase the
Facility, Continental shall provide RAS with at least one (1) month
written notice of such intention to exercise the said option.
4. In the event that Continental exercises the option referred to herein, the
purchase price shall be based on the schedule outlined in Schedule E-1
plus a "break funding/make whole" if the three year Treasury is less than
5.69% at that time.
5. At any time prior to May 1, 2002, Continental has the option to take over
the payment obligation between RAS and its lender, Boeing Capital
Corporation. The payments are based on a seven year term commencing
November 1, 1999 with monthly payments equal to $34,366 per month paid in
advance. The payment will be fixed November 1, 1999 and may be subject to
adjustment if tthree year Treasury yield changes from 5.69%. The
adjustment will be $9.264 per month per $1,000 of 2.4 million US dollars
per basis point change.
6. After the purchase option is exercised or if Continental assumes the
payment obligations referred to in point 5. Above Facility, Continental
shall pay monthly a user license fee equal to $150.00 for each deicing
treatment in the Facility. However, RAS will provide Continental with a
credit of $75.00 for each (such that Continental pays only $75.00 for each
deicing treatment of a Continental or Continental Express owned aircraft)
deicing treatment of aircraft owned by Continental and Continental
Express. Continental shall certify to RAS the number of aircraft that were
treated at the Facility on a monthly basis and Continental shall remit to
RAS the required user license fees with such certification.
30
<PAGE>
SCHEDULE "E-1"
PURCHASE PRICE OPTION
OPTION DATE PURCHASE PRICE
May 1, 2000 $3,322,793
June 1, 2000 3,305,875
July 1, 2000 3,285,573
August 1, 2000 3,268,654
September 1, 2000 3,248,352
October 1, 2000 3,228,050
November 1, 2000 3,211,131
December 1, 2000 3,190,829
January 1, 2001 3,170,527
February 1, 2001 3,150,225
March 1, 2001 3,126,539
April 1, 2001 3,106,237
May 1, 2001 3,089,318
June 1, 2001 3,065,632
July 1, 2001 3,041,946
August 1, 2001 3,021,644
September 1, 2001 2,997,958
October 1, 2001 2,977,656
November 1, 2001 2,953,970
December 1, 2001 2,930,284
January 1, 2002 2,906,598
February 1, 2002 2,886,296
March 1, 2002 2,862,610
April 1, 2002 2,838,924
May 1, 2002 2,815,238
31
<PAGE>
SCHEDULE "F"
LAND LEASE WITH NEWARK AIRPORT AUTHORITY
1. Continental shall request from the Port authority of New York and New
Jersey "Port Authority")lands suitable for use of the Facility.
2. Continental is responsible for any and all costs associated with the lease
of the lands from the Newark Airport Authority.
3. Continental shall use diligent efforts to obtain the land lease on time
satisfactory to Continental on the applicable lands for a term of not less
than one (1) year.
4. Continental shall not be liable to RAS if Continental is not able to, or
become unwilling to secure a lease from the Port Authority.
5. The Facility is and shall , during the terms of such lease, remain the
property of RAS. Upon expiration of the land lease or upon termination of
the Contract, RAS shall have the right (and unless Continental agrees
otherwise, the duty) to disassemble and remove the structure. All
improvements to the lands not removed by RAS shall become the property of
Continental or the Port Authority.
6. In the event that Continental is unable to secure a land lease from the
Port Authority with respect to the required lands for the operation of the
Facility, RAS reserves the right to terminate this Contract by written
notice whereupon this Contract is null and void and the obligations of RAS
and Continental pursuant to the Contract are thereby terminated forthwith
upon receipt of such notice.
<PAGE>
RADIANT AVIATION SERVICES, INC.
A subsidiary of Radiant Energy Corporation
May 10, 1999
Dietrich Rohrdanz
Lufthansa LEOS
Lufthansa Engineering and Operational Services GmbH
Dept. FRA UN
Rhein-Main-Airport
60546 Frankfurt/Main
Dear Mr. Rohrdanz:
The purpose of this letter is to set out the terms of an agreement between
Radiant Aviation Services, Inc. ("Radiant") and Lufthansa Engineering and
Operational Services GmbH ("LEOS") to promote the installation, sale,
maintenance and service of Radiant's infrared aircraft de-icing system (the
"INFRATEK(Registered) System") in Europe and Scandinavia (the "Agreed Areas").
1. General
Radiant and LEOS agree to work together using their respective best efforts to
promote the installation, sale, maintenance and service of Radiant's
InfraTek(Registered) System in the Agreed Areas, subject to the terms of this
letter agreement.
LEOS shall provide its engineering capacity, know-how, project management and
manpower in the installation, sale, maintenance and service of the
InfraTek(Registered) System in the Agreed Areas as the contract partner of
Radiant in the Agreed Areas..
Radiant shall be responsible for the proper functioning of the
INFRATEK(Registered) System as well as the on-time delivery of the
INFRATEK(Registered) System and related products to airport sites in accordance
with the terms of any particular contract entered into by Radiant for the
installation or sale of the INFRATEK(Registered) System.
2. Scope of Services
Radiant will authorize LEOS to install, sell, maintain and service the
INFRATEK(Registered) System in the Agreed Areas on terms and conditions to be
agreed upon between the parties on a project-by-project basis. By the term
"project-by-project basis" it is intended that LEOS as the contract partner will
perform the work if requested by the customer but on specific
<PAGE>
terms and conditions applicable and agreed to by the parties for each specific
project. Radiant shall deliver pre-checked INFRATEK(Registered) Systems and
spare parts to be installed by LEOS according to specifications to be agreed
upon among Radiant, LEOS, the customer and/or relevant airport authority.
LEOS shall provide engineering services and a project organization to install
and adapt the INFRATEK(Registered) System to local requirements and customer
requests as may be agreed upon between the parties on a project-by-project
basis.
LEOS may perform the work described in this letter agreement either directly or,
with the prior written approval of Radiant on a project-by-project basis,
through the use of subcontractors.
LEOS shall be involved actively in the negotiations, or shall be notified
promptly by Radiant, of any proposed new installation or sale of the
INFRATEK(Registered) System in the Agreed Areas, so that LEOS may properly
manage the availability of its personnel and make necessary arrangements for its
personnel to travel to the location to install of a new INFRATEK(Registered)
System.
Although the rights of LEOS under this letter agreement are non-exclusive to
LEOS, Radiant agrees to grant LEOS a right of first refusal, on a
project-by-project basis, to be the contractor for Radiant (or its designated
affiliate) on any project for the installation, maintenance and/or service of
the INFRATEK(Registered) System in the Agreed Areas. LEOS must exercise its
right of first refusal within 21 days of receipt of any specific bona fide
written proposal for the installation, maintenance and/or service of one or more
INFRATEK(Registered) Systems in the Agreed Areas.
Notwithstanding any provision in this agreement, it is agreed that any sale of
the INFRATEK(Registered) System in Norway, Sweden, Denmark, Finland and Iceland
must be made subject to the terms of a distribution agreement dated March 7,
1997 between Process Technologies, Inc. and Oakmoor Enterprises Inc., a copy of
which has been delivered to LEOS.
3. LEOS obligations
LEOS shall train its staff to perform all of LEOS's sales and engineering
activities, installations, maintenance and repair service in respect of the
INFRATEK(Registered) System.
LEOS shall offer customer training if requested to ensure proper preparation for
the use of the INFRATEK(Registered) System by the customers or personnel.
<PAGE>
LEOS shall engage, train and supervise local personnel in the event that LEOS
itself commercially operates an INFRATEK(Registered) System and LEOS shall enter
into contracts from time to time for aircraft de-icing with aircraft operators
or airport authorities, all on terms and conditions agreed to with Radiant,
based on a prearranged agreement between LEOS and Radiant. LEOS shall store
Radiant's spare parts at its Frankfurt airport facility, or other approved local
airport installation area, to assure timely maintenance and repair services.
LEOS may engage and train local subcontractors to maintain and repair the
INFRATEK(Registered) System as an alternative to LEOS mechanics traveling to a
customer's location.
LEOS shall settle warranty items for Radiant. Warranty work that will exceed
2,000.00 DM must be approved by Radiant prior to the performance of the work.
LEOS may offer an after-warranty contract to Radiant's customers in the Agreed
Areas, covering inspection, maintenance and repair of the INFRATEK(Registered)
System once Radiant's warranty period has expired.
4. Radiant's obligations
Radiant shall deliver sales and marketing materials, specifications, and valid
price information to LEOS and shall support LEOS's sales activities.
Radiant shall deliver all components of the INFRATEK(Registered) System for its
installation and necessary adjustments and shall pay the expenses for the
installation and delivery of the INFRATEK(Registered) System including training
and travel costs.
Radiant shall provide to LEOS in Frankfurt all necessary spare parts and
technical support in respect of Radiant's warranty period on a particular
installation free of costs to LEOS. Radiant shall repair removed components if
necessary.
Radiant shall compensate LEOS for its expenses incurred in the provision of
services in connection with Radiant's warranty obligations and Radiant will
supply material to the site of the operating INFRATEK(Registered) System under
Radiant's warranty without charge to LEOS.
Radiant shall supply a list of recommended spare parts and the parts themselves
to the LEOS Frankfurt airport facility without charge to LEOS.
Radiant shall pay LEOS an amount of 10,000.00 DM per year for the preparation
and performance of the LEOS sales activities, whether or not any sales contracts
are obtained.
<PAGE>
Radiant shall pay LEOS an amount of 5% of the system price as a commission
fee if Radiant has sold an INFRATEK(Registered) System to a customer as a result
of the sales efforts of LEOS or if LEOS's efforts resulted in a contract entered
into with Radiant to install an INFRATEK(Registered) System at an airport even
if such INFRATEK(Registered) System is to be owned by Radiant or LEOS. The 5%
commission will also be applicable for sales covered by the Agreement with
Oakmoor Enterprises Inc. The 5% commission shall be paid to LEOS within 30 days
of the installation of such INFRATEK(Registered) System. This letter agreement
shall not be regarded as granting LEOS an exclusive right to sell
INFRATEK(Registered) Systems in the Agreed Areas. All contracts for the sale or
installation of an INFRATEK(Registered) System must be approved by Radiant and
nothing in this letter agreement shall be viewed as giving LEOS the right to
negotiate or enter into contracts for or on behalf of Radiant for the sale or
installation of an INFRATEK(Registered) System.
i Radiant agrees that no company other than LEOS and Radiant shall have the
right to sell, install, maintain and service the INFRATEK(Registered) System
within the Agreed Areas, except that a customer of Radiant may maintain and
service the INFRATEK(Registered) Systems that it has acquired from Radiant for
that customer's use.
5. Warranty
Radiant shall bear all costs of warranty and performance reliability of the
INFRATEK(Registered) System except as limited by a sales or installation
contract.
LEOS shall begin to provide the warranty services at a customer's location
within two working days as a minimum of being required to do so by the operator
or owner of an INFRATEK(Registered) System provided that such time limit has
been set out in the installation or sales contract with Radiant.
6. Payment
LEOS shall bill Radiant once a month for performed installation services,
including warranty claims. Invoices are to be paid net within 30 days of the
date of invoice. Notwithstanding any other provision in this letter agreement,
other than the payment of a 5% commission to LEOS on the sale or installation of
an INFRATEK(Registered) System as described in paragraph 4 above, all of the
obligations, costs and expenses to be incurred by, or passed on to, Radiant
under this letter agreement shall be on terms and at rates that are agreed by
parties to annually and on a project-by-project to the hereto from time to time
basis.
7. Termination of contract
<PAGE>
This letter agreement will remain in force until December 31,2004 and will
be renewed on an annual basis thereafter unless either party gives notice of
termination to the other at least 6 months prior to (i) December 31,2004 or (ii)
the end of each annual renewal period. Notwithstanding the foregoing, Radiant
shall have the option to terminate this letter agreement at any time after
December 31, 2002 if LEOS's efforts have not by that time resulted in the
installation or sale of at least two INFRATEK(Registered) Systems in the Agreed
Areas.
8. Confidentiality
Any information, technology or know-how supplied by Radiant to LEOS will be kept
confidential by LEOS and will not, without Radiant's prior written consent, be
disclosed or used by LEOS or its representatives, directly or indirectly, for
any purpose whatsoever other than as required for the purpose of complying with
LEOS's obligations under this letter agreement. This obligation of
confidentiality shall extend for a maximum of 2 years beyond the termination of
this letter agreement.
9. Assignment
Radiant may from time to time, at its sole discretion, assign all of its rights
and obligations under this letter agreement to any subsidiary or affiliate of
Radiant.
10. Governing law
This agreement shall be governed by and construed in accordance with the laws of
the Province of Ontario without regard to any conflicts of law provision.
11. Insurance
On a project-by-project basis, Radiant and LEOS shall maintain such levels of
insurance as are reasonable in respect of the ownership and operation of the
INFRATEK(Registered) System. Any insurance policies will name both Radiant and
LEOS as the co-insured parties. LEOS will be liable for the performed part of
work and/or services.
* ** ** ** **
If you are in agreement with the foregoing, please so indicate by signing and
returning one copy of this letter whereupon this letter will constitute our
binding agreement with respect to this matter.
Yours very truly,
<PAGE>
RADIANT AVIATION SERVICES, INC.
Per: ______________________________
Per: ______________________________
Accepted and agreed to as of
this day of , 1999.
LUFTHANSA ENGINEERING AND
OPERATIONAL SERVICES GMBH
Per:_______________________________
Accepted and agreed to as of
this day of , 1999.
<PAGE>
- --------------------------------------------------------------------------------
PROCESS TECHNOLOGIES, INC.
and
RADIANT ENERGY CORPORATION
as Corporations,
and
C. JOHN CHEW
as Chew
- --------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT
October 30, 1998
- --------------------------------------------------------------------------------
---------------------------------------------------------------------
<PAGE>
EMPLOYMENT AGREEMENT
Employment agreement dated October 30, 1998 (the "Effective Date"), between
Radiant Energy Corporation and Process Technologies, Inc. (The "Corporations" or
the "Companies") and C. John Chew ("Chew").
WHEREAS the Corporations and Chew are desirous to agree on terms of the
employment relationship between now and the retirement of Chew for their mutual
benefit:
AND WHEREAS the terms of the employment relationship between the parties will
commence on the Effective Date of this Agreement;
AND WHEREAS the Corporations and Chew have agreed that the terms and conditions
of the employment relationship shall be as set out herein;
NOW THEREFORE in consideration of the respective covenants and agreements herein
contained and for other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged by each of the parties hereto), the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms As used in this Agreement, the following terms have the
following meanings:
"Arm's Length" has the meaning given to that term in the Income Tax Act
(Canada) as now in effect;
"Business" means the Business presently and heretofore carried on by the
Corporations consisting of supply, financing and/or operations of radiant
energy deicing systems (1)
"Change of Control" means either (I) the occurrence of any transaction
that results in any person acting at Arm's Length from the Corporations,
obtaining shares or debt carrying that results in the execution of
significant influence on more than 50% of the votes attaching to all of
the then outstanding Corporations' shares; or (ii) the sale of all or
substantially all of the assets used in the Business to any person acting
at Arm's Length from the Corporations;
"Customer" means any Person, which in the year preceding the date of the
termination of the employment of Chew with the Corporations, has been a
customer of the Corporations or a solicited potential customer of the
Corporations;
"Person" includes, without limitation, an individual, corporation,
partnership, joint venture, association, trust, firm, unincorporated
organization or other legal or business entity;
"Subsidiary" has the meaning given to that term in the Business
Corporations Act (Ontario) as now in effect; and
"Territory" means the present geographical area of: (i) the Province of
Ontario; plus (ii) the remainder of Canada; plus (iii) the United States
of America;
- ----------
(1) or any related application of the Corporations technology
<PAGE>
ARTICLE 2
SCOPE OF EMPLOYMENT
2.1 Employment The Corporations hereby agree to employ Chew as Employee and Chew
hereby accepts such employment on a basis as outlined in Section 2.2 until July
7, 2000. Notwithstanding Chew's resignation under section 5.5 hereunder, Chew
shall serve as non-executive Chairman and a member of the Executive Committee of
the Board of Directors of the Corporations for the remainder of his current
term, and thereafter as may be elected by the shareholders. This agreement shall
remain in full force and effect, and the obligations of the Corporations shall
continue notwithstanding Chew's resignation as Chairman of the Board of
Directors or Director of the Corporations, during the term of this agreement.
2.2 Duties and Responsibilities The duties and responsibilities of Chew shall be
on a as requested basis by management, given at least two weeks notice, to
perform the following:
2.2.1 Attend up to eight trade shows per year between the effective date and
July 7, 2000;
2.2.2. Establish contact and meet with representatives of aviation associations
at least once a year as might be required by the Corporations; and
2.2.3. Visit at least one overseas government agency as might be required by the
Corporations.
2.3 Full and Faithful Service Chew will devote to the business and affairs of
the Corporations, all of the time and attention reasonably necessary to carry
out the duties of his position, and will ensure that he is not at any time
engaged in conduct which would constitute a conflict with the interests of the
Corporations. During his employment with the Corporations, Chew shall not engage
in any other employment or gainful occupation, undertake any other business, or
become a director, officer or agent of any other Companies, firm or individual
without the express written consent of the Board of Directors, such consent not
to be unreasonably withheld.
2.4 Liability Insurance Subject to the by-laws of the Corporations and
applicable law, the Corporations shall purchase and maintain directors and
officers liability insurance for the benefit of Chew in an amount equal to that
provided to other directors and officers of the Corporations from time to time.
2.5 Acknowledgment Chew acknowledges that the effective performance of his
duties requires the highest level of integrity and the Corporation's complete
confidence in Chew's relationship with other employees of the Corporations and
with all persons dealt with in the course of his employment. Chew shall
diligently, faithfully and honestly serve the Corporations during the
continuance of his employment hereunder and shall use his best efforts to
promote the interests of the Corporations.
ARTICLE 3
CURRENCY
3.1 All amounts are in US dollars unless otherwise noted.
<PAGE>
ARTICLE 4
REMUNERATION
4.1 Salary As remuneration for his services hereunder, Chew shall be paid a base
salary, at the rate of Ninety Thousand Dollars ($90,000) per annum. The base
salary shall be paid biweekly in arrears, subject to all necessary statutory
deductions up to July 7, 2000.
4.2 Automobile and personal computer During the term of his employment as herein
designated, with the Corporations, the Corporations shall provide Chew with the
automobile currently being used by Chew. On July 7, 2000 the automobile will be
sold to Chew for $1.00 and the Companies agree to clear any and all liens on the
automobile. The Companies also agree to sell to Chew on July 7, 2000 for $1.00
the personal computer and printer currently being used by Chew. All other
automobile and computer expenses will be provided to Chew through out the term
of this agreement on the same basis as currently provided to other Senior
Management of the Companies.
4.3 Change of Control Payment to Chew under this agreement shall continue
regardless of the occurrence of a change of control.
4.4 Benefits Unless otherwise covered by another insured benefit program, Chew
will be entitled, during the course of his employment with the Corporations,
through the time Chew reaches the age of 65, to participate in the employee
benefit plans and programs of the Corporations which are made available to
employees of the Corporations generally from time to time in accordance with the
terms of such benefit plans and programs. The Corporations hereby waives any
qualification periods which may exist with respect to such benefit plans and
programs.
4.5 Expenses During the term of his employment with the Corporations, Chew shall
be reimbursed for all reasonable travel and business expenses (other than
automobile which are to be reimbursed in accordance with Section 4.2), including
charges associated with the use of personal or mobile telephones used for
business related to the Companies, personal computer costs, business association
fees, and fees incurred by him in the performance of his duties hereunder,
subject to such limitations as may be established by the Board of Directors of
the Corporations and revised by them from time to time. As a condition to the
reimbursement of such expenses, Chew shall furnish to the Corporations, receipts
for expenses incurred, to be approved by the Vice President -Engineering or
Officer designated by the Board of Directors.
4.6 Contingency The obligations of the Corporations hereunder are contingent
upon completion of the next phase of financing. Until such completion, Chew
shall receive all current remuneration. The Corporations shall notify Chew per
section 9.2 at such time as the next phase of financing is complete, at which
time this contingency shall be deemed removed, and the obligations of the
Corporations under this agreement shall commence.
<PAGE>
ARTICLE 5
TERMINATION OF EMPLOYMENT
5.1 Terms and Conditions Subject to Section 9.10, this Agreement and the
employment contemplated hereunder may be terminated in the following manner and
in the following circumstances:
(i) by the Corporations, at any time, for cause, in which case Chew's employment
shall terminate immediately upon receipt of a written notice from the
Corporations to Chew setting out the cause for termination, and the Corporations
shall pay to Chew his Base Salary up to the date of termination. "Cause" shall
include, but not be limited to, (a) gross negligence or a willful act of
misfeasance or malfeasance in respect of the duties and responsibilities
assigned to Chew; (b) willful violation of Companies policy or code of conduct
adopted by the Board of Directors; or (c) final judgment convicting Chew of an
indictable offense under criminal statute; or
(ii) by the Corporations for any reason other than in 5.1 (i) and at any time
upon payment to Chew of the termination payments provided for in Section 5.2.
5.2 Termination Payments If Chew's employment with the Corporations is
terminated pursuant to Subsection 5.1 (ii), the Corporations shall:
(i) continue Chew's Base Salary as outlined in Paragraph 4.1, and continue all
benefit arrangements as outlined in this agreement.
(ii) provide Chew clear, and unencumbered, title and possession of his then
current company automobile, computer and printer, as provided under Section 4.2.
5.3 Release of Claims Upon the expiry of this Agreement, upon notice being given
pursuant to Section 5.1(i); or upon the payment of the amounts referred to in
Section 5.1(ii); as the case may be, the employment of Chew shall be wholly
terminated and this Agreement shall cease to have any further effect save and
except in respect of Articles 6, 7 and 8 which shall continue in full force and
effect for a concurrent period as determined in Section 5.2 (i), plus an
additional 2 years. Upon any such termination, Chew shall have no claim against
the Corporations for damages, termination pay, severance pay, pay in lieu of
notice of termination, statutory or otherwise, except in respect of payment of
remuneration earned, due and owing to the effective date of termination plus any
amount payable under Section 5.2.
5.4 Reasonableness The parties hereto acknowledge and agree that there are no
implied rights whatsoever with respect to the termination of this Agreement and
employment contemplated hereunder. The parties further acknowledge and agree
that if any of the payments referred to in Section 5.2 are made, it constitutes
a reasonable estimate of the damages that might be suffered
<PAGE>
by Chew for early termination of this Agreement, said amount being liquidated
damages and not a penalty.
5.5 Resignation Chew agrees that upon execution of this agreement, he shall
immediately tender his resignation from any position he may hold as an officer
of the Corporations or its subsidiaries.
ARTICLE 6
CONFIDENTIALITY
6.1 Confidential Information Chew acknowledges that during the course of
employment with the Corporations, he will be exposed to secret and confidential
business information belonging to the Corporations which gives them a commercial
advantage over others. Except as may be required by law, Chew agrees to not use,
directly or indirectly, for his own account or for the account of any person,
firm, corporation or other entity or disclose to any person, firm, corporation
or other entity, the Corporations' proprietary information disclosed or
entrusted to him or developed or generated by him in the performance of his
duties hereunder, including, but not limited to, information relating to the
Corporation's organizational structure, operations, business plans, technical
projects, pricing data, business costs, research data results, inventions, trade
secrets, customers lists or other work produced, developed by or for the
Corporations, whether on the premises of the Corporations or elsewhere.
6.2 Exceptions The provisions of Section 6.1 shall not apply to any proprietary,
confidential or secret information which is, at the commencement of the term of
this Agreement or at some later date, publicly known under circumstances
involving no breach of this Agreement.
6.3 Property and Documents Chew acknowledges, understands and agrees that all
memoranda, notes, records, charts, formulae, client lists, price lists,
marketing plans, financial information and other documents made, received, held
or used by Chew during the course of his employment or as a consultant to the
Corporations, shall be the property of the Corporations and shall be delivered
by Chew to the Corporations upon request at any time during the course of
employment and upon the termination of his employment as hereinbefore provided.
With respect to all confidential information and other documents of the
Corporations held by Chew, Chew acknowledges that he is in a position of trust
and subject to a fiduciary duty to use the information only in the interests of
the Corporations and its business.
<PAGE>
ARTICLE 7
NON-COMPETITION AND NON-SOLICITATION
7.1 Non-Competition Chew convenants and agrees that, except on behalf of and for
the benefit of the Corporations or its Subsidiaries, he shall not (without the
prior written consent of the Corporations, such consent not to be unreasonably
withheld), while in the employ of the Corporations and (a) where Chew is
terminated by the Corporations for cause or (b) where Chew is terminated by the
Corporations other than for cause, during the relevant monthly period for which
Chew received termination payments pursuant to Subsection 5.2(i) or (ii), either
individually or in partnership or in conjunction with any Person as employee,
employer, principal, agent, joint venture, partner, shareholder or other equity
holder, independent contractor, licenser, licensee, franchiser, franchisee,
distributor, consultant, supplier, trustee or by or through any corporations,
companies, cooperative, partnership, trust entity with juridical personality,
unincorporated association or in any other manner whatsoever:
(i) carry on or be engaged in, have any financial or other interest in or be
otherwise commercially involved in any endeavor, activity or business, in all or
part of the Territory, which is substantially the same as, or in competition
with the Business;
(ii) interfere or attempt to interfere with the Business or persuade or attempt
to persuade any Customer, employee or supplier of the Corporations or their
Subsidiaries to discontinue or alter such Person's relationship with the
Corporations or their Subsidiaries;
(iii) directly or indirectly, canvas, solicit or attempt to solicit, accept or
supply goods or services to any Customer, except on behalf of and for the
benefit of the Corporations or its Subsidiaries except with respect to a
business not the same as or similar to the Corporations Business; or
(iv) employ, offer employment to or solicit the employment or engagement of or
otherwise entice away from the employment of the Corporations any individual
employed by the Corporations at the date of termination of Chew's employment.
7.2 Exception Provided that nothing construed herein shall prohibit Chew from
holding for investment purposes only up to 5% of the issued publicly traded or
privately held shares of any companies engaged in a business the same as or
similar to the Business presently carried on by the Corporations.
7.3 Severability If any convenant or provision in this Article 7 is determined
to be void or unenforceable in whole or in part, it shall not be deemed to
affect or impair the validity of any other covenant or provision hereof, which
provisions shall remain in full force and effect.
<PAGE>
ARTICLE 8
REASONABLENESS
8.1 Reasonableness Chew agrees that all restrictions contained in Articles 6 and
7 are reasonable and valid and all defenses to the strict enforcement thereof by
the Corporations are hereby waived. Chew agrees and acknowledges that the breach
of the provisions of Articles 6 and 7 by him would cause irreparable harm to the
Corporations which would not be adequately compensationable in damages and Chew
hereby consents to an injunction being issued restraining any breach or further
breach of the provisions hereof without prejudice to any other remedy the
Corporations may have.
ARTICLE 9
GENERAL
9.1 Entire Agreement This Agreement, and the terms hereof, shall constitute the
entire agreement between the parties hereto with respect to all of the matters
herein and the parties hereto acknowledge and agree that its execution has not
been induced by, nor do either of the parties hereto rely upon or regard as
material, any representations or writings whatsoever not incorporated herein and
made a part hereof. This Agreement shall not be amended, altered or qualified
except by an agreement in writing signed by both of the parties hereto. This
Agreement supersedes any prior agreements which are hereby canceled and
supersedes all previous understandings, negotiations, and representations with
respect hereto, whether oral or written.
9.2 Notice Any notice to be given hereunder shall be given in writing and shall
be deemed to have been duly given if delivered by hand or mailed by first-class
mail, postage prepaid and addressed to the recipient as follows:
(a) To the Corporations:
40 Centre Drive,
Orchard Park, NY
14127
(b) To Chew:
P.O. Box 1257
Ellicottville, NY
14731
Any such notice, if mailed, shall be deemed to have been received on the fifth
business day next following the date of mailing and, if delivered, on the date
of delivery. Either party may, by notice given in accordance with the foregoing,
change his or its address for the purposes of this Agreement. In the event of a
postal strike in progress, notice shall be given only by delivery by hand in
accordance with this Section 9. In the event of a postal strike occurring within
5
<PAGE>
business days after the giving of notice by mail as hereinbefore set out, such
notice shall be deemed ineffective and thereafter, during the continuance of the
postal strike, notice shall be effective only if delivered by hand.
9.3 Further Assurances The parties hereto and each of them hereby consents and
agrees to do such things, attend such meetings and to execute such further
documents and assurances as may be deemed necessary or advisable from time to
time in order to carry out the terms and conditions of this Agreement in
accordance with its true intent.
9.4 Waivers No waiver of any breach of default of any of the provisions hereof
shall be effective unless in writing and signed by the party to be charged with
such waiver. No waiver shall be deemed a continuing waiver or waiver in respect
of any subsequent breach of default, either of a similar or different nature,
unless expressly so stated in writing.
9.5 Severability If any provision of this Agreement is determined to be illegal
or unenforceable, in whole or in part, such illegal or unenforceable provision
or part thereof, shall be severable from this Agreement and shall not affect the
remaining provisions hereof.
9.6 Headings The insertion of headings and the division of this Agreement into
Sections and Subsections is for convenience of reference only and shall not
affect the interpretation hereof.
9.7 Assignment This Agreement may not be assigned by Chew without the prior
written consent of the Corporations, which consent may be withheld for any
reason.
9.8 Benefit This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, legal personal
representatives, successors and permitted assigns.
9.9 Governing Law This Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the State of New York and the federal
laws of the United States of America applicable therein. Any litigation or
arbitration to resolve any dispute concerning this agreement shall take place
within Erie County, New York.
9.10 Survival The provisions of Articles 6, 7 and 8 shall survive the
termination of this Agreement.
9.11 Independent Legal Advice Chew hereby represents and warrants to the
Corporations that he had the opportunity to seek and was not prevented nor
discouraged by the Corporations from seeking independent legal advice prior to
the execution of this Agreement and that, in the event that he did not avail
himself of that opportunity prior to signing this Agreement, he did so
voluntarily without any undue pressure and agrees that his failure to obtain
independent legal advice shall not be used by him as a defense to the
enforcement of his obligations under this Agreement.
<PAGE>
IN WITNESS WHEREOF the parties have caused this Agreement to be executed with
effect as of the date first above written.
RADIANT ENERGY CORPORATION
Per:
Per:
PROCESS TECHNOLOGIES, INC.
Per:
Per:
SIGNED, SEALED AND DELIVERED )
IN THE PRESENCE OF: )
)
)
)
___________________________________ ________________________________________
WITNESS C. John Chew
<PAGE>
- --------------------------------------------------------------------------------
RADIANT AVIATION SERVICES, INC.
and
RADIANT ENERGY CORPORATION
as Corporations,
and
TIMOTHY P. SEEL
as Seel
EMPLOYMENT AGREEMENT
November 01, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EMPLOYMENT AGREEMENT
Employment agreement dated November 01, 1999 (the "Effective Date"), between
Radiant Energy Corporation, Radiant Aviation Services, Inc. (The "Corporations"
or the "Companies") and Timothy P. Seel ("Seel").
WHEREAS the Corporations and Seel are desirous of entering into an employment
relationship for their mutual benefit:
AND WHEREAS the employment relationship between the parties will commence on the
Effective Date of this Agreement;
AND WHEREAS the Corporations and Seel have agreed that the terms and conditions
of the employment relationship shall be as set out herein;
NOW THEREFORE in consideration of the respective covenants and agreements herein
contained and for other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged by each of the parties hereto), the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms As used in this Agreement, the following terms have the
following meanings:
"Applicable Time Period" means: (i) the period commencing with the date of
the termination of Seel's employment with the Corporations and ending
immediately prior to the first anniversary of the date of such
termination; plus (ii) the period commencing on the first anniversary of
Seel's termination of employment with the Corporations and ending
immediately prior to the second anniversary of the date of such
termination;
"Arm's Length" has the meaning given to that term in the Income Tax Act
(Canada) as now in effect;
"Business" means the Business presently and heretofore carried on by the
Corporations consisting of supply, financing and/or operations of radiant
energy deicing systems (1)
"Change of Control" means either (I) the occurrence of any transaction
that results in any person acting at Arm's Length from the Corporations,
obtaining shares or debt carrying that results in the execution of
significant influence on more than 50% of the votes attaching to all of
the then outstanding Corporations' shares; or (ii) the sale of all or
substantially all of the assets used in the Business to any person acting
at Arm's Length from the Corporations;
"Customer" means any Person, which in the year preceding the date of the
termination of the employment of Seel with the Corporations, has been a
customer of the Corporations or a solicited potential customer of the
Corporations;
"Person" includes, without limitation, an individual, corporation,
partnership, joint venture, association, trust, firm, unincorporated
organization or other legal or business entity;
"Subsidiary" has the meaning given to that term in the Business
Corporations Act (Ontario) as now in effect; and
"Territory" means the present geographical area of: (i) the Province of
Ontario; plus (ii) the remainder of Canada; plus (iii) the United States
of America;
- ----------
(1) or any related application of the Corporations technology
2
<PAGE>
ARTICLE 2
SCOPE OF EMPLOYMENT
2.1 Employment The Corporations hereby agrees to employ Seel and Seel hereby
accepts such employment on a full time basis in the position of Vice President
of Engineering.
2.2 Duties and Responsibilities The duties and responsibilities of Seel shall
consist of those necessary or incidental to perform the functions of such
aforesaid executive office of the Corporations. Seel shall be responsible for
the overall direction and management of Engineering resources of the
Corporations. Seel shall perform such other duties and exercise such powers as
may from time to time be determined by the Board of Directors of the
Corporations consistent with his position as Vice President of the Corporations.
2.3 Full and Faithful Service Seel will devote to the business and affairs of
the Corporations, all of the time and attention reasonably necessary to carry
out the duties of his position, and will ensure that he is not at any time
engaged in conduct which would constitute a conflict with the interests of the
Corporations. During his employment with the Corporations, Seel shall not engage
in any other employment or gainful occupation, undertake any other business, or
become a director, officer or agent of any other Companies, firm or individual
without the written consent of the President of the Corporations, or other such
officer of the Corporations as the Board of Directors of the Corporations shall
direct from time to time, such consent not to be unreasonably withheld.
2.4 Liability Insurance Subject to the by-laws of the Corporations and
applicable law, the Corporations shall purchase and maintain directors and
officers liability insurance for the benefit of Seel in an amount equal to that
provided to other directors and officers of the Corporations from time to time.
2.5 Acknowledgment Seel acknowledges that the effective performance of his
duties requires the highest level of integrity and the Corporation's complete
confidence in Seel's relationship with other employees of the Corporations and
with all persons dealt with in the course of his employment. Seel shall
diligently, faithfully and honestly serve the Corporations during the
continuance of his employment hereunder and shall use his best efforts to
promote the interests of the Corporations.
ARTICLE 3
CURRENCY
3.1 All amounts are in US dollars unless otherwise noted.
ARTICLE 4
REMUNERATION
4.1 Salary As remuneration for his services hereunder, Seel shall be paid a base
salary, subject to adjustments as hereinafter provided, (the "Base Salary") at
the rate of One Hundred Thousand Dollars ($100,000) per annum, which Base Salary
shall be paid in arrears and in twenty-six (26) equal installments, subject to
all necessary statutory deductions. The Base Salary shall be reviewed from time
to time and increased annually, to account for variances to cost of living and
monetary inflation indices, as recommended by the Compensation Committee of the
Board of Directors, with no obligation to effect an increase thereof.
4.2 Performance Bonus. Seel will receive performance bonuses from time to time
in the form of cash as determined by the Compensation Committee of the Board of
Directors.
3
<PAGE>
4.3 Automobile During the term of his employment with the Corporations, the
Corporations shall either provide Seel with an automobile or provide Seel with
an automobile allowance sufficient for capital costs and insurance. The
automobile type will be as approved by the President of the Corporations, and
will be equivalent to current Corporation vehicles. All other automobile
expenses will be provided on the same basis as other Senior Management of the
Companies.
4.4 Stock Options Seel will receive stock options from time to time, based on
the recommendations of the Compensation Committee and as approved by the Board
of Directors. The terms and conditions of the Options are subject to the terms
and conditions of the Employee Stock Option Plan, as may be amended from time to
time by the Companies.
4.5 Transaction Bonus A cash bonus (the "Transaction Bonus") shall be paid to
Seel within sixty (60) days following a Change of Control of either of the
Corporations during the term of Seel's employment, such Transaction Bonus to be
calculated under 5.2 (a), if the Change of Control occurs and Seel is terminated
by the Companies within two years of the Change of Control. Notwithstanding the
foregoing, Seel shall not be entitled to the Transaction Bonus if the Change of
Control occurs after his employment is terminated for cause.
4.6 Benefits Unless otherwise covered by another insured benefit program, Seel
will be entitled, during the course of his employment with the Corporations, to
participate in the employee benefit plans and programs of the Corporations which
are made available to employees of the Corporations generally from time to time
in accordance with the terms of such benefit plans and programs. The
Corporations hereby waives any qualification periods, which may exist with
respect to such benefit plans and programs.
4.7 Vacation Seel shall be entitled to 15 days vacation leave during each year
that this Agreement is in effect, at the Base Salary provided for in Section
4.1. Such vacation shall be taken at such time or times as the Corporations may
determine having regard to the business and undertaking of the Corporations. In
the event Seel's employment is terminated, Seel shall be entitled to pro-rated
vacation pay for the portion of the year that he has been actively employed.
Additionally, Seel shall be paid for all vacation not taken.
4.8 Expenses During the term of his employment with the Corporations, Seel shall
be reimbursed for all reasonable travel and business expenses (other than
automobile which are to be reimbursed in accordance with Section 4.3), including
charges associated with the use of personal or mobile telephones, personal
computer costs, business association fees, and fees incurred by him in the
performance of his duties hereunder, subject to such limitations as may be
established by the Board of Directors of the Corporations and revised by them
from time to time. As a condition to the reimbursement of such expenses, Seel
shall furnish to the Corporations, receipts for expenses incurred, to be
approved by the President, or other such officer of the Corporations as
determined by the Board of Directors.
ARTICLE 5
TERMINATION OF EMPLOYMENT
5.1 Terms and Conditions Subject to Section 9.10, this Agreement and the
employment contemplated hereunder may be terminated in the following manner and
in the following circumstances:
(i) by the Corporations, at any time, for cause, in which case Seel's employment
shall terminate immediately upon receipt of a written notice from the
Corporations to Seel setting out the cause for termination, and the Corporations
shall pay to Seel his Base Salary up to the date of termination. "Cause" shall
include, but not be limited to, (a) gross negligence or a willful act of
misfeasance or malfeasance in respect of the duties and responsibilities
assigned to Seel; (b) willful violation of Companies policy or code of conduct
adopted by the Board of Directors; or (c) final judgment convicting Seel of an
indictable offense under criminal statute; or
4
<PAGE>
(ii) by the Corporations, upon the death of Seel, in which case his employment
pursuant to this Agreement shall terminate on the date of death.
(iii) by the Corporations, if Seel is unable to discharge his duties hereunder
by reason of illness, disease, mental or physical disability or otherwise, for
an aggregate of six (6) months in any one (1) calendar year, whether or not
consecutive, in which case his employment pursuant to this Agreement shall
terminate at the end of such six (6) month period; or
(iv) by the Corporations for any reason other than in 5.1 (i) (ii) or (iii) and
at any time upon payment to Seel of the termination payments provided for in
Section 5.2.
5.2 Termination Payments If Seel's employment with the Corporations is
terminated pursuant to Subsection 5.1 (iv), the Corporations shall:
(i) continue Seel's Base Salary and all benefit arrangements in effect at the
date of termination for a period of three (3) years, following Seel's
termination and
(ii) pay to Seel within thirty (30) days of termination, a lump sum amount equal
to the average annual Performance Bonus paid to Seel during the course of his
employment, prorated for a period of three (3) years and
(iv) provide Seel clear, and unencumbered, title and possession of his then
current company automobile, as provided under Section 4.3.
5.3 Release of Claims Upon the expiry of this Agreement, upon notice being given
pursuant to Section 5.1(i); upon the death of Seel as referred to in Section
5.1(ii); upon the expiration of the period referred to in Section 5.1(iii); or
upon the payment of the amounts referred to in Section 5.1(iv); as the case may
be, the employment of Seel shall be wholly terminated and this Agreement shall
cease to have any further effect save and except in respect of Articles 6, 7 and
8 which shall continue in full force and effect for a concurrent period as
determined in Section 5.2 (I), plus an additional 1 year. Upon any such
termination, Seel shall have no claim against the Corporations for damages,
termination pay, severance pay, pay in lieu of notice of termination, statutory
or otherwise, except in respect of payment of remuneration earned, due and owing
to the effective date of termination plus any amount payable under Section 5.2.
5.5 Reasonableness The parties hereto acknowledge and agree that there are no
implied rights whatsoever with respect to the termination of this Agreement and
employment contemplated hereunder. The parties further acknowledge and agree
that if any of the payments referred to in Section 5.2 are made, it constitutes
a reasonable estimate of the damages that might be suffered by Seel for early
termination of this Agreement, said amount being liquidated damages and not a
penalty.
5.6 Resignation on Termination Seel agrees that upon any termination of his
employment with the Corporations, he shall immediately tender his resignation
from any position he may hold as an officer or director of the Corporations or
its subsidiaries.
5
<PAGE>
ARTICLE 6
CONFIDENTIALITY
6.1 Confidential Information Seel acknowledges that during the course of
employment with the Corporations, he will be exposed to secret and confidential
business information belonging to the Corporations, which gives them a
commercial advantage over others. Except as may be required by law, Seel agrees
to not use, directly or indirectly, for his own account or for the account of
any person, firm, corporation or other entity or disclose to any person, firm,
corporation or other entity, the Corporations' proprietary information disclosed
or entrusted to him or developed or generated by him in the performance of his
duties hereunder, including, but not limited to, information relating to the
Corporation's organizational structure, operations, business plans, technical
projects, pricing data, business costs, research data results, inventions, trade
secrets, customers lists or other work produced, developed by or for the
Corporations, whether on the premises of the Corporations or elsewhere.
6.2 Exceptions The provisions of Section 6.1 shall not apply to any proprietary,
confidential or secret information which is, at the commencement of the term of
this Agreement or at some later date, publicly known under circumstances
involving no breach of this Agreement.
6.3 Property and Documents Seel acknowledges, understands and agrees that all
memoranda, notes, records, charts, formulae, client lists, price lists,
marketing plans, financial information and other documents made, received, held
or used by Seel during the course of his employment or as a consultant to the
Corporations, shall be the property of the Corporations and shall be delivered
by Seel to the Corporations upon request at any time during the course of
employment and upon the termination of his employment as hereinbefore provided.
With respect to all confidential information and other documents of the
Corporations held by Seel, Seel acknowledges that he is in a position of trust
and subject to a fiduciary duty to use the information only in the interests of
the Corporations and its business.
ARTICLE 7
NON-COMPETITION AND NON-SOLICITATION
7.1 Non-Competition Seel covenants and agrees that, except on behalf of and for
the benefit of the Corporations or its Subsidiaries, he shall not (without the
prior written consent of the Corporations, such consent not to be unreasonably
withheld), while in the employ of the Corporations and (a) where Seel is
terminated by the Corporations for cause, during the Applicable Time Period or
(b) where Seel is terminated by the Corporations other than for cause, during
the relevant monthly period for which Seel received termination payments
pursuant to Subsection 5.2(i) or (ii), either individually or in partnership or
in conjunction with any Person as employee, employer, principal, agent, joint
venture, partner, shareholder or other equity holder, independent contractor,
licenser, licensee, franchiser, franchisee, distributor, consultant, supplier,
trustee or by or through any corporations, companies, cooperative, partnership,
trust entity with juridical personality, unincorporated association or in any
other manner whatsoever:
(i) carry on or be engaged in, have any financial or other interest in or be
otherwise commercially involved in any endeavor, activity or business, in all or
part of the Territory, which is substantially the same as, or in competition
with the Business;
(ii) interfere or attempt to interfere with the Business or persuade or attempt
to persuade any Customer, employee or supplier of the Corporations or their
Subsidiaries to discontinue or alter such Person's relationship with the
Corporations or their Subsidiaries;
(iii) directly or indirectly, canvas, solicit or attempt to solicit, accept or
supply goods or services to any Customer, except on behalf of and for the
benefit of the Corporations or its
6
<PAGE>
Subsidiaries except with respect to a business not the same as or similar to the
Corporations Business; or
(iv) employ, offer employment to or solicit the employment or engagement of or
otherwise entice away from the employment of the Corporations any individual
employed by the Corporations at the date of termination of Seel's employment.
7.2 Exception Provided that nothing construed herein shall prohibit Seel from
holding for investment purposes only up to 5% of the issued publicly traded or
privately held shares of any companies engaged in a business the same as or
similar to the Business presently carried on by the Corporations.
7.3 Severability If any covenant or provision in this Article 7 is determined to
be void or unenforceable in whole or in part, it shall not be deemed to affect
or impair the validity of any other covenant or provision hereof, which
provisions shall remain in full force and effect.
ARTICLE 8
REASONABLENESS
8.1 Reasonableness Seel agrees that all restrictions contained in Articles 6 and
7 are reasonable and valid and all defenses to the strict enforcement thereof by
the Corporations are hereby waived. Seel agrees and acknowledges that the breach
of the provisions of Articles 6 and 7 by him would cause irreparable harm to the
Corporations which would not be adequately compensationable in damages and Seel
hereby consents to an injunction being issued restraining any breach or further
breach of the provisions hereof without prejudice to any other remedy the
Corporations may have.
ARTICLE 9
GENERAL
9.1 Entire Agreement This Agreement, and the terms hereof, shall constitute the
entire agreement between the parties hereto with respect to all of the matters
herein and the parties hereto acknowledge and agree that its execution has not
been induced by, nor do either of the parties hereto rely upon or regard as
material, any representations or writings whatsoever not incorporated herein and
made a part hereof. This Agreement shall not be amended, altered or qualified
except by an agreement in writing signed by both of the parties hereto. This
Agreement supersedes any prior agreements, which are hereby canceled, and
supersedes all previous understandings, negotiations, and representations with
respect hereto, whether oral or written.
9.2 Notice Any notice to be given hereunder shall be given in writing and shall
be deemed to have been duly given if delivered by hand or mailed by first-class
mail, postage prepaid and addressed to the recipient as follows:
(a) To the Corporations:
40 Centre Drive,
Orchard Park, NY
14127
(b) To Seel:
155 Golden Pheasant Drive
Getzville, NY 14068
Any such notice, if mailed, shall be deemed to have been received on the fifth
business day next following the date of mailing and, if delivered, on the date
of delivery. Either party may, by notice given in accordance with the foregoing,
change his or its address for the purposes of this
7
<PAGE>
Agreement. In the event of a postal strike in progress, notice shall be given
only by delivery by hand in accordance with this Section 9. In the event of a
postal strike occurring within 5 business days after the giving of notice by
mail as hereinbefore set out, such notice shall be deemed ineffective and
thereafter, during the continuance of the postal strike, notice shall be
effective only if delivered by hand.
9.3 Further Assurances The parties hereto and each of them hereby consents and
agrees to do such things, attend such meetings and to execute such further
documents and assurances as may be deemed necessary or advisable from time to
time in order to carry out the terms and conditions of this Agreement in
accordance with its true intent.
9.4 Waivers No waiver of any breach of default of any of the provisions hereof
shall be effective unless in writing and signed by the party to be charged with
such waiver. No waiver shall be deemed a continuing waiver or waiver in respect
of any subsequent breach of default, either of a similar or different nature,
unless expressly so stated in writing.
9.5 Severability If any provision of this Agreement is determined to be illegal
or unenforceable, in whole or in part, such illegal or unenforceable provision
or part thereof shall be severable from this Agreement and shall not affect the
remaining provisions hereof.
9.6 Headings The insertion of headings and the division of this Agreement into
Sections and Subsections is for convenience of reference only and shall not
affect the interpretation hereof.
9.7 Assignment This Agreement may not be assigned by Seel without the prior
written consent of the Corporations, which consent may be withheld for any
reason.
9.8 Benefit This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, legal personal
representatives, successors and permitted assigns.
9.9 Governing Law This Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the State of New York and the federal
laws of the United States of America applicable therein. Any litigation or
arbitration to resolve any dispute concerning this agreement shall take place
within Erie County, New York.
9.10 Survival The provisions of Articles 6, 7 and 8 shall survive the
termination of this Agreement.
9.11 Independent Legal Advice Seel hereby represents and warrants to the
Corporations that he had the opportunity to seek and was not prevented nor
discouraged by the Corporations from seeking independent legal advice prior to
the execution of this Agreement and that, in the event that he did not avail
himself of that opportunity prior to signing this Agreement, he did so
voluntarily without any undue pressure and agrees that his failure to obtain
independent legal advice shall not be used by him as a defense to the
enforcement of his obligations under this Agreement.
8
<PAGE>
IN WITNESS WHEREOF the parties have caused this Agreement to be executed with
effect as of the date first above written.
RADIANT ENERGY CORPORATION
Per:
Per:
RADIANT AVIATION SERVICES, INC.
Per:
Per:
SIGNED, SEALED AND DELIVERED )
IN THE PRESENCE OF: )
)
)
)
)
___________________________________ ________________________________________
WITNESS Timothy P. Seel
9
<PAGE>
PROCESS TECHNOLOGIES, INC.
and
RADIANT ENERGY CORPORATIONS
as Corporations
and
ROBERT D. MAIER
as Maier
- -------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT
November 30, 1998
- -------------------------------------------------------------------------------
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement Dated November 30, 1998 between Radiant Energy
Corporations and Process Technologies, Inc. (The "Corporations" or the
"Companies") and Robert D. Maier ("Maier").
WHEREAS the Corporations and Maier are desirous of entering into an
employment relationship for their mutual benefit:
AND WHEREAS the Corporations are in the process of securing equity
financing for the Corporations;
AND WHEREAS the employment relationship between the parties will commence
on the Effective Date of this Agreement;
AND WHEREAS the Corporations and Maier have agreed that the terms and
conditions of the employment relationship shall be as set out herein;
NOW THEREFORE in consideration of the respective covenants and agreements
herein contained and for other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged by each of the parties hereto), the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms have the
following meanings:
"Applicable Time Period" means: (i) the period commencing with the date of
the termination of Maier's employment with the Corporations and ending
immediately prior to the first anniversary of the date of such termination; plus
(ii) the period commencing on the first anniversary of Maier's termination of
employment with the Corporations and ending immediately prior to the second
anniversary of the date of such termination;
"Arm's Length" has the meaning given to that term in the Income Tax Act
(Canada) as now in effect;
"Business" means the Business presently and heretofore carried on by the
Corporations consisting of supply, financing and/or operations of radiant energy
deicing systems(1)
- ----------
(1) or any related application
2
<PAGE>
"Change of Control" means either (I) the occurrence of a transaction that
results in a Person acting at Arm's Length from the Corporations obtaining
shares or debt carrying more that results in the execution of significant
influence of the Corporations than 50% of the votes attaching to all of the then
outstanding shares; or (ii) the sale of all or substantially all of the assets
used in the Business to a person acting at Arm's Lengthfrom the Corporations;
3
<PAGE>
"Customer" means any Person which in the year preceding the date of the
termination of the employment of Maier with the Corporations, has been a
customer of the Corporations or a solicited potential customer of the
Corporations;
"Person" includes, without limitation, an individual, Corporations,
partnership, joint venture, association, trust, firm, unincorporated
organization or other legal or business entity;
"Subsidiary" has the meaning given to that term in the Statues of the
State of New York as now in effect; and
"Territory" means the present geographical area of the United States of
America;
ARTICLE 2
SCOPE OF EMPLOYMENT
2.1 Employment. The Corporations hereby agrees to employ Maier and Maier hereby
accepts such employment on a full time basis in the position of Vice President
of Sales. The start date of such employment is the Effective Date January 4,
1999 (the "Effective Date"). This agreement is conditional on the Corporations
successfully raising new debt or equity for the Corporations. The Corporations
will inform Maier no later than November 15, 1998 on its ability to satisfy this
condition.
2.2 Duties and Responsibilities. The duties and responsibilities of Maier shall
consist of those necessary or incidental to perform the functions of such
aforesaid office of the Corporations. Maier shall be responsible for the overall
direction and management of the Corporations Sales and Marketing efforts. Maier
shall perform such other duties and exercise such powers as may from time to
time be determined by the Board of Directors of the Corporations consistent with
his position as Vice President of Sales of the Corporations.
2.3 Full and Faithful Service. Maier will devote to the business and affairs of
the Corporations, all of the time and attention reasonably necessary to carry
out the duties of his position, and will ensure that he is not at any time
engaged in conduct which would constitute a conflict with the interests of the
Corporations. During his employment with the Corporations, Maier shall not
engage in any other employment or gainful occupation, undertake any other
business, or become a director, officer or agent of any other Companies, firm or
individual without the express written consent of the President of the
Corporations, such consent not to be unreasonably withheld.
2.4 Liability Insurance. Subject to the by-laws of the Corporations and
applicable law, the Corporations shall purchase and maintain directors and
officers liability insurance for the benefit of Maier on the same basis and in
an amount equal to that provided to the directors and officers of the
Corporations from time to time.
2.5 Acknowledgment. Maier acknowledges that the effective performance of his
duties requires the highest level of integrity and the Corporation's complete
confidence in Maier's relationship with other employees of the Corporations and
with all persons dealt with in the course of his employment. Maier shall
diligently, faithfully and honestly serve the Corporations during the
continuance of his employment hereunder and shall use his best efforts to
promote the interests of the Corporations.
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ARTICLE 3
CURRENCY
3.1 All amounts are in US dollars unless otherwise noted.
ARTICLE 4
REMUNERATION
4.1 Salary As remuneration for his services hereunder, Maier shall be paid a
base salary, subject to adjustments as hereinafter provided, (the "Base Salary")
at the rate of Ninety Thousand Dollars ($90,000) per annum, which Base Salary
shall be paid in arrears and in twenty-six (26) equal installments, subject to
all necessary statutory deductions. Such Base Salary shall be reviewed by the
Board of Directors from time to time with no obligation to effect an increase
thereof.
4.2 Performance Bonus. Maier will receive performance bonuses based on the
annual budget in the form of cash or stock options as determined by the
Compensation Committee of the Board of Directors.
4.3 Stock Options. Maier will receive stock options based on the recommendations
of the Compensation Committee as approved by the Board of Directors. A stock
option equal to 50,000 options with an exercise price at $1.80 Canadian will be
awarded three months after the Effective Date of employment. The terms and
conditions of the Options are subject to the terms and conditions of the
Employee Stock Option Plan as may be amended from time to time by the Companies.
4.4 Termination Payment on Change of Control. A cash bonus (the "Termination
Payment") shall be paid to Maier within sixty (60) days after termination for
any reason other than outlined in Section 5.1 (a), 5.1(b) or 5.1(c) following a
Change of Control, or if termination is within three months prior to or within
two years after a Change of Control of either of the Corporations and such
Termination Payment to be calculated under 5.2 (a).
4.5 Benefits. Unless otherwise covered by another insured benefit program, Maier
will be entitled during the course of his employment with the Corporations to
participate in the employee benefit plans and programs of the Corporations which
are made available to employees of the Corporations generally from time to time
in accordance with the terms of such benefit plans and programs. The
Corporations hereby waives any qualification periods which may exist with
respect to such benefit plans and programs.
4.6 Vacation. Maier shall be entitled to three (3) calendar weeks vacation leave
during each year that this Agreement is in effect at the Base Salary provided
for in Section 4.1. Such vacation shall be taken at such time or times as the
Corporations may determine having regard to the business and undertaking of the
Corporations. In the event Maier's employment is terminated, Maier shall be
entitled to pro-rated vacation pay for the portion of the year that he has been
actively employed. Maier shall be paid for all vacation not taken.
4.7 Automobile. During the term of his employment with the Corporations, the
Corporations shall reimburse Maier for use of his personal automobile for
business purposes at a rate of $.30 per mile.
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4.8 Expenses. During the term of his employment with the Corporations, Maier
shall be reimbursed for all reasonable travel and business expenses (other than
automobile which are to be reimbursed in accordance with Sections 4.7),
including long distance charges associated with the use of a mobile telephone,
personal computer costs, business association fees, immigration legal costs and
fees incurred by him in the performance of his duties hereunder, subject to such
limitations as may be established by the Board of Directors of the Corporations
and revised by them from time to time. As a condition to the reimbursement of
such expenses, Maier shall furnish to the Corporations receipts for expenses
incurred to be approved by the President, Chief Operating Officer or such
Officer of the Corporation so designated by the Board of Directors.
4.9 Moving expenses. Maier will be compensated for moving expenses to the
Buffalo area to a maximum of $7,500.00, provided the expenses are incurred
within six months of the Effective Date of employment. Moving expenses are
inclusive of costs to move furniture, real estate or closing costs, air fares,
if applicable, and reasonable living expenses during the move.
4.10 Compensation for forgone bonus. The Companies agree to make a one time
payment to Maier as compensation for bonuses foregone with his existing
employer. The payment equal to $40,000.00 will be made by way of a forgivable
loan. The loan will be forgiven after six months of employment with the
Companies. At Maier's option, Maier may choose to receive all or a portion of
the payment in the form of stock issued from the Treasury of Radiant Energy
Corporation based on a rate per share of the then current market price, subject
to applicable regulatory requirements and approvals.
ARTICLE 5
TERMINATION OF EMPLOYMENT
5.1 Terms and Conditions. Subject to Section 9.10, this Agreement and the
employment contemplated hereunder may be terminated in the following manner and
in the following circumstances:
(a) by the Corporations, at any time, for cause, in which case Maier's
employment shall terminate immediately upon receipt of a written notice from the
Corporations to Maier setting out the cause for termination and the Corporations
shall pay to Maier his Base Salary up to the date of termination. "Cause" shall
include, but not be limited to, (a) gross negligence or a willful act of
misfeasance or malfeasance in respect of the duties and responsibilities
assigned to Maier; (b) willful violation of Companies policy or code of conduct
adopted by the Board of Directors; or (c) final judgment convicting Maier of an
indictable offense under criminal statute;
(b) by the Corporations, upon the death of Maier, in which case his
employment pursuant to this Agreement shall terminate on the date of death;
(c) by the Corporations, if Maier is unable to discharge his duties
hereunder by reason of illness, disease, mental or physical disability or
otherwise, for an aggregate of six (6) months in any one (1) year, whether or
not consecutive, in which case his employment pursuant to this Agreement shall
terminate at the end of such six (6) month period; or
(d) by the Corporations for any reason other than in 5.1 (a) (b) or (c)
and at any time upon payment to Maier of the termination payments provided for
in Section 5.2.
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5.2 Termination Payments. If Maier's employment with the Corporations is
terminated pursuant to Subsection 5.1 (d), the Corporations shall:
(a) continue Maier's Base Salary and continue all benefit arrangements in
effect at the date of termination for a period of two (2) years less any amounts
due under Article 4.4, following Maier's termination and shall pay to Maier
within thirty (30) days of termination a lump sum amount equal to the average
annual Performance Bonus paid to Maier during the course of his employment, pro-
rated for a period of two (2) years. If employment is terminated within one year
after the Effect Date of employment and amounts are not due under Article 4.4
the Corporation shall continue Maier's Base Salary and continue all benefit
arrangements in effect at the date of termination for a period of one (1) years.
5.3 Release of Claims. Upon the expiry of this Agreement upon notice being given
pursuant to Subsection 5.1 (a); upon the death of Maier as referred to in
Subsection 5.1 (b); upon the expiration of the period referred to in Subsection
5.1 (c); or upon the payment of the amounts referred to in Subsection 5.1 (d);
as the case may be, the employment of Maier shall be wholly terminated and this
Agreement shall cease to have any further effect save and except in respect of
Sections 6, 7 and 8 which shall continue in full force and effect. Upon any such
termination, Maier shall have no claim against the Corporations for damages,
termination pay, severance pay, pay in lieu of notice of termination, statutory
or otherwise, except in respect of payment of remuneration earned, due and owing
to the effective date of termination plus any amount payable under Section 5.2.
5.5 Reasonableness. The parties hereto acknowledge and agree that there are no
implied rights whatsoever with respect to the termination of this Agreement and
employment contemplated hereunder. The parties further acknowledge and agree
that if any of the payments referred to in Section 5.2 are made, it constitutes
a reasonable estimate of the damages that might be suffered by Maier for early
termination of this Agreement, said amount being liquidated damages and not a
penalty.
5.6 Resignation on Termination. Maier agrees that upon any termination of his
employment with the Corporations, he shall immediately tender his resignation
from any position he may hold as an officer or director of the Corporations or
its subsidiaries.
ARTICLE 6
CONFIDENTIALITY
6.1 Confidential Information. Maier acknowledges that during the course of
employment with the Corporations, he will be exposed to secret and confidential
business information belonging to the Corporations which gives it a commercial
advantage over others. Except as may be required by law, Maier agrees to not
use, directly or indirectly, for his own account or for the account of any
person, firm, Corporations or other entity or disclose to any person, firm,
Corporations or other entity, the Corporation's proprietary information
disclosed or entrusted to him or developed or generated by him in the
performance of his duties hereunder, including but not limited to information
relating to the Corporation's organizational structure, operations, business
plans, technical projects, pricing data, business costs, research data results,
inventions, trade secrets, customers lists or other work produced, developed by
or for the Corporations, whether on the premises of the Corporations or
elsewhere.
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6.2 Exceptions. The provisions of Section 6.1 shall not apply to any
proprietary, confidential or secret information which is, at the commencement of
the term of this Agreement or at some later date, publicly known under
circumstances involving no breach of this Agreement.
6.3 Property and Documents. Maier acknowledges, understands and agrees that all
memoranda, notes, records, charts, formulae, client lists, price lists,
marketing plans, financial information and other documents made, received, held
or used by Maier during the course of his employment or as a consultant to the
Corporations, shall be the property of the Corporations and shall be delivered
by Maier to the Corporations upon request at any time during the course of
employment and upon the termination of his employment as hereinbefore provided.
With respect to all confidential information and other documents of the
Corporations held by Maier, Maier acknowledges that he is in a position of trust
and subject to a fiduciary duty to use the information only in the interests of
the Corporations and its business.
6.4 Inventions and Improvements Maier agrees to promptly disclose, fully and in
confidence to the Corporations, and hereby assigns and transfers to the
Corporation all of his right, title and interest (if any) in and to, all
inventions, procedures. improvements, upgrades, designs, or discoveries
(collectively, the "Inventions") made or conceived by Maier during the term of
this Agreement either solely, or jointly with others, in the performance of the
employment or with the use of the Companies' time, equipment, material,
supplies, concepts, ideas, facilities or related to or suggested by trade secret
information, other private or confidential matters acquired during the term of
his employment, the business of the Companies, the Companies' actual or
demonstrably anticipated business plans, processes or research and development;
provided that any Inventions which do not relate to the business of the
Companies or the Companies' actual or demonstrably anticipated business plans,
processes or research and development or which do not result from any work
performed by Maier for the Companies shall remain the sole and exclusive
property of Maier.
ARTICLE 7
NON-COMPETITION AND NON-SOLICITATION
7.1 Non-Competition. Maier convenants and agrees that, except on behalf of and
for the benefit of the Corporations or its Subsidiaries, he shall not (without
the prior written consent of the Corporations, such consent not to be
unreasonably withheld), while in the employ of the Corporations and (I) where
Maier is terminated by the Corporations for cause, during the Applicable Time
Period or (ii) where Maier is terminated by the Corporations other than for
cause, during the relevant monthly period for which Maier received termination
payments pursuant to Subsection 5.2(a) or (b), either individually or in
partnership or in conjunction with any Person as employee, employer, principal,
agent, joint venture, partner, shareholder or other equity holder, independent
contractor, licenser, licensee, franchiser, franchisee, distributor, consultant,
supplier, trustee or by or through any Corporations, Companies, cooperative,
partnership, trust entity with juridical personality, unincorporated association
or in any other manner whatsoever:
(a) carry on or be engaged in, have any financial or other interest in or
be otherwise commercially involved in any endeavor, activity or business in all
or part of the Territory which is substantially the same as or in competition
with the Business;
(b) interfere or attempt to interfere with the Business or persuade or
attempt to persuade any Customer, employee or supplier of the Corporations of
its Subsidiaries to discontinue or alter such Person's relationship with the
Corporations or its Subsidiaries;
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(c) directly or indirectly, canvas, solicit or attempt to solicit, accept
or supply goods or services to any Customer which includes the solicitation of
potential customers, except on behalf of and for the benefit of the Corporations
or its Subsidiaries or except with respect to a business not the same as or
similar to the Business; or
(d) employ, offer employment to or solicit the employment or engagement of
or otherwise entice away from the employment of the Corporations any individual
employed by the Corporations at the date of termination of Maier's employment.
7.2 Exception. Provided that nothing construed herein shall prohibit Maier from
holding for investment purposes only up to 5% of the issued publicly traded
shares of the Corporations a Companies engaged in a business the same as or
similar to the Business presently carried on by the Corporations.
7.3 Severability. If any convenant or provision in this Article 7 is determined
to be void or unenforceable in whole or in part, it shall not be deemed to
affect or impair the validity of any other covenant or provision hereof, which
provisions shall remain in full force and effect.
ARTICLE 8
REASONABLENESS
8.1 Reasonableness. Maier agrees that all restrictions contained in Articles 6
and 7 are reasonable and valid and all defenses to the strict enforcement
thereof by the Corporations are hereby waived. Maier agrees and acknowledges
that the breach of the provisions of Articles 6 and 7 by him would cause
irreparable harm to the Corporations which would not be adequately
compensationable in damages and Maier hereby consents to an injunction being
issued restraining any breach or further breach of the provisions hereof without
prejudice to any other remedy the Corporations may have.
ARTICLE 9
GENERAL
9.1 Entire Agreement. This Agreement and the terms hereof shall constitute the
entire agreement between the parties hereto with respect to all of the matters
herein and the parties hereto acknowledge and agree that its execution has not
been induced by, nor do either of the parties hereto rely upon or regard as
material, any representations or writings whatsoever not incorporated herein and
made a part hereof. This Agreement shall not be amended, altered or qualified
except by an agreement in writing signed by both of the parties hereto. This
Agreement supersedes any prior agreements which are hereby canceled and
supersedes all previous understandings, negotiations, and representations with
respect hereto, whether oral or written.
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9.2 Notice. Any notice to be given hereunder shall be given in writing and shall
be deemed to have been duly given if delivered by hand or mailed by first-class
mail, postage prepaid and addressed to the recipient as follows:
(a) To the Corporations:
o 40 Centre Drive,
Orchard Park, NY
14127
(b) To Maier:
o 581 Bowsprit Lane
Longboat Key, FL 34228
Any such notice, if mailed, shall be deemed to have been received on the fifth
business day next following the date of mailing and, if delivered, on the date
of delivery. Either party may, by notice given in accordance with the foregoing,
change his or its address for the purposes of this Agreement. In the event of a
postal strike in progress, notice shall be given only by delivery by hand in
accordance with this Section 9. In the event of a postal strike occurring within
5 business days after the giving of notice by mail as hereinbefore set out, such
notice shall be deemed ineffective and thereafter, during the continuance of the
postal strike, notice shall be effective only if delivered by hand.
9.3 Further Assurances. The parties hereto and each of them hereby consents and
agrees to do such things, attend such meetings and to execute such further
documents and assurances as may be deemed necessary or advisable from time to
time in order to carry out the terms and conditions of this Agreement in
accordance with its true intent.
9.4 Waivers. No waiver of any breach of default of any of the provisions hereof
shall be effective unless in writing and signed by the party to be charged with
such waiver. No waiver shall be deemed a continuing waiver or waiver in respect
of any subsequent breach of default, either of a similar or different nature,
unless expressly so stated in writing.
9.5 Severability. If any provision of this Agreement is determined to be illegal
or unenforceable, in whole or in part, such illegal or unenforceable provision
or part thereof, shall be severable from this Agreement and shall not affect the
remaining provisions hereof.
9.6 Headings. The insertion of headings and the division of this Agreement into
Sections and Subsections is for convenience of reference only and shall not
affect the interpretation hereof.
9.7 Assignment. This Agreement may not be assigned by Maier without the prior
written consent of the Corporations, which consent may be withheld for any
reason.
9.8 Ennourement. This Agreement shall endure to the benefit of and be binding
upon the parties hereto and their respective heirs, executors, legal personal
representatives, successors and permitted assigns.
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9.9 Governing Law. This Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the State of New York and the federal
laws of the United States of America applicable therein. Any litigation or
arbitration to resolve any dispute concerning this agreement shall take place
within Erie County, New York.
9.10 Survival. The provisions of Articles 6, 7 and 8 shall survive the
termination of this Agreement.
9.11 Independent Legal Advice. Maier hereby represents and warrants to the
Corporations that he had the opportunity to seek and was not prevented nor
discouraged by the Corporations from seeking independent legal advice prior to
the execution of this Agreement and that, in the event that he did not avail
himself of that opportunity prior to signing this Agreement, he did so
voluntarily without any undue pressure and agrees that his failure to obtain
independent legal advice shall not be used by him as a defense to the
enforcement of his obligations under this Agreement.
IN WITNESS WHEREOF the parties have caused this Agreement to be executed
with effect as of the date first above written.
RADIANT ENERGY CORPORATIONS
Per: ___________________________________
Per: ___________________________________
PROCESS TECHNOLOGIES, INC.
Per: ___________________________________
Per: ___________________________________
SIGNED, SEALED AND DELIVERED )
IN THE PRESENCE OF: )
)
)
)
)
- ----------------------------------- ----------------------------------------
WITNESS Robert D. Maier
<PAGE>
PROCESS TECHNOLOGIES, INC.
RADIANT ENERGY CORPORATION
as Corporation
and
COLIN DIGOUT
as Digout
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EMPLOYMENT AGREEMENT
FEBRUARY 1998
------------------------------------------------------------------------------
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EMPLOYMENT AGREEMENT
Employment agreement dated February , 1998 (the "Effective Date"),
between Process Technologies, Inc. (The "Corporation") and Colin Digout
("Digout").
WHEREAS the Corporation and Digout are desirous of entering into an
employment relationship for their mutual benefit:
AND WHEREAS the employment relationship between the parties will commence
on the Effective Date of this Agreement;
AND WHEREAS the Corporation and Digout have agreed that the terms and
conditions of the employment relationship shall be as set out herein;
NOW THEREFORE in consideration of the respective covenants and agreements
herein contained and for other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged by each of the parties hereto), the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms have the
following meanings:
"Applicable Time Period" means: (i) the period commencing with the date of
the termination of Digout's employment with the Corporation and ending
immediately prior to the first anniversary of the date of such
termination; plus (ii) the period commencing on the first anniversary of
Digout's termination of employment with the Corporation and ending
immediately prior to the second anniversary of the date of such
termination;
"Arm's Length" has the meaning given to that term in the Income Tax Act
(Canada) as now in effect;
"Business" means the Business presently and heretofore carried on by the
Corporation consisting of supply, financing and/or operations of radiant
energy deicing systems (1)
"Change of Control" means either (I) the occurrence of a transaction that
results in a Person acting at Arm's Length from the Corporation obtaining
shares or debt carrying more that results in the execution of significant
influence of the Corporation than 50% of the votes attaching to all of the
then outstanding shares; or (ii) the sale of all or substantially all of
the assets used in the Business to a person acting at Arm's Length from
the Corporation;
"Customer" means any Person which in the year preceding the date of the
termination of the employment of Digout with the Corporation, has been a
customer of the Corporation or a solicited potential customer of the
Corporation;
"Person" includes, without limitation, an individual, corporation,
partnership, joint venture, association, trust, firm, unincorporated
organization or other legal or business entity;
- ----------
(1) or any related application
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<PAGE>
"Subsidiary" has the meaning given to that term in the Business
Corporations Act (Ontario) as now in effect; and
"Territory" means the present geographical area of: (I) the Province of
Ontario; plus (ii) the remainder of Canada; plus (iii) the United States
of America; and
ARTICLE 2
SCOPE OF EMPLOYMENT
2.1 Employment. The Corporations hereby agrees to employ Digout and Digout
hereby accepts such employment on a full time basis in the position of Vice
President of Finance.
2.2 Duties and Responsibilities. The duties and responsibilities of Digout shall
consist of those necessary or incidental to perform the functions of such
aforesaid executive office of the Corporations. Digout shall be responsible for
the overall direction and management of the Corporations. Digout shall perform
such other duties and exercise such powers as may from time to time be
determined by the Board of Directors of the Corporation consistent with his
position as Vice President and Chief Financial Officer of the Corporations.
2.3 Full and Faithful Service. Digout will devote to the business and affairs of
the Corporations, all of the time and attention reasonably necessary to carry
out the duties of his position, and will ensure that he is not at any time
engaged in conduct which would constitute a conflict with the interests of the
Corporations. During his employment with the Corporations Digout shall not
engage in any other employment or gainful occupation, undertake any other
business, or become a director, officer or agent of any other company, firm or
individual without the express written consent of the President of the
Corporations, such consent not to be unreasonably withheld.
2.4 Liability Insurance. Subject to the by-laws of the Corporations and
applicable law, the Corporations shall purchase and maintain directors and
officers liability insurance for the benefit of Digout in an amount equal to
that provided to the directors and officers of the Corporation from time to
time.
2.5 Acknowledgment. Digout acknowledges that the effective performance of his
duties requires the highest level of integrity and the Corporation's complete
confidence in Digout's relationship with other employees of the Corporations and
with all persons dealt with in the course of his employment. Digout shall
diligently, faithfully and honestly serve the Corporations during the
continuance of his employment hereunder and shall use his best efforts to
promote the interests of the Corporations.
ARTICLE 3
CURRENCY
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3.1 All amounts are in US dollars unless otherwise noted. If a material change
occurs in the Canadian to US dollar exchange rate, the Compensation
Committee will reconsider the changes.
ARTICLE 4
REMUNERATION
4.1 Salary As remuneration for his services hereunder, Digout shall be paid a
base salary, subject to adjustments as hereinafter provided, (the "Base Salary")
at the rate of Eighty Thousand Dollars ($80,000) per annum, which Base Salary
shall be paid in arrears and in twenty-six (26) equal installments, subject to
all necessary statutory deductions. The base shall be increased by $10,000
immediately after the Company receives $7,500,000 in new cash injection of
either debt or equity. Such Base Salary shall be reviewed by the Board of
Directors from time to time with no obligation to effect an increase thereof.
4.2 Performance Bonus. Digout will receive performance bonuses in the form of
cash or stock options as determined by the Remuneration Committee.
4.3 Stock Options. Digout will receive stock options based on the
recommendations of the Compensation Committee as approved by the Board of
Directors. As stock option equal to 50,00 options with an excise value at $2.50
Canadian will be awarded at the time of signing this agreement, subject to Board
Approval. The terms and conditions of the options are subject to the terms and
conditions of the Employee Stock Option Plan as may be amended from time to time
by the Companies.
4.4 Transaction Bonus. A cash bonus (the "Transaction Bonus") shall be paid to
Digout within sixty (60) days following a Change of Control of either Process or
Radiant during the term of Digout's employment, such Transaction Bonus to be
calculated under 5.2 (a), if the Change of Control occurs and Digout is
terminated by the Company within two years of the Change of Control.
Notwithstanding the foregoing, Digout shall not be entitled to the Transaction
Bonus if the Change of Control occurs after his employment is terminated for
cause.
4.5 Benefits. Unless otherwise covered by another insured benefit program,
Digout will be entitled during the course of his employment with the
Corporations to participate in the employee benefit plans and programs of the
Corporations which are made available to employees of the Corporations generally
from time to time in accordance with the terms of such benefit plans and
programs. The Corporations hereby waives any qualification periods which may
exist with respect to such benefit plans and programs.
Digout has the option to purchase a benefit plan based in Canada. The total
premiums shall not exceed the premium costs of the plans based in the US. The
plan should be similar to the plan available to American based executives.
4.6 Vacation. Digout shall be entitled to four (4) calendar weeks vacation leave
during each year that this Agreement is in effect at the Base Salary provided
for in Section 4.1. Such vacation shall be taken at such time or times as the
Corporations may determine having regard to the business and undertaking of the
Corporations. In the event Digout's employment is terminated, Digout shall be
entitled to pro-rated vacation pay for the portion of the year that he has been
actively employed. Digout shall be paid for all vacation not taken.
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<PAGE>
4.7 Automobile. During the term of his employment with the Corporations, the
Corporations shall either provide Digout with an automobile or provide
Digout with an automobile allowance equal to $840.00 per month for capital
costs and insurance. All other automobile expenses will be provided on the
same basis as other Senior Management of the Companies.
4.8 Expenses. During the term of his employment with the Corporation, Digout
shall be reimbursed for all reasonable travel and business expenses (other than
automobile which are to be reimbursed in accordance with Sections 4.7),
including long distance charges associated with the use of a mobile telephone,
personal computer costs, business association fees, immigration legal costs and
fees incurred by him in the performance of his duties hereunder, subject to such
limitations as may be established by the Board of Directors of the Corporations
and revised by them from time to time. As a condition to the reimbursement of
such expenses, Digout shall furnish to the Corporations receipts for expenses
incurred to be approved by the President.
ARTICLE 5
TERMINATION OF EMPLOYMENT
5.1 Terms and Conditions. Subject to Section 9.10, this Agreement and the
employment contemplated hereunder may be terminated in the following manner and
in the following circumstances:
(a) by the Corporations, at any time, for cause, in which case Digout's
employment shall terminate immediately upon receipt of a written notice
from the Corporations to Digout setting out the cause for termination and
the Corporations shall pay to Digout his Base Salary up to the date of
termination. "Cause" shall include, but not be limited to, (a) gross
negligence or a willful act of misfeasance or malfeasance in respect of
the duties and responsibilities assigned to Digout; (b) willful violation
of Companies policy or code of conduct adopted by the Board of Directors;
or (c) final judgment convicting Digout of an indictable offense under
criminal statute;
(b) by the Corporations, upon the death of Digout, in which case his
employment pursuant to this Agreement shall terminate on the date of
death;
(c) By the Corporations, if Digout is unable to discharge his duties hereunder
by reason of illness, disease, mental or physical disability or otherwise,
for an aggregate of six (6) months in any one (1) year, whether or not
consecutive, in which case his employment pursuant to this Agreement shall
terminate at the end of such six (6) month period; or
(d) by the Corporations for any reason other than in 5.1 (a) (b) or (c) and at
any time upon payment to Digout of the termination payments provided for
in Section 5.2.
5.2 Termination Payments. If Digout's employment with the Corporations is
terminated pursuant to Subsection 5.1 (d), the Corporations shall:
(a) continue Digout's Base Salary and continue all benefit arrangements in
effect at the date of termination for a period of two (2) years less any
amounts due under Article 4.4, following Digout's termination and shall
pay to Digout within thirty (30) days of termination a lump sum amount
equal to the average annual Performance Bonus paid to Digout during the
course of his employment, pro-rated for a period of two (2) years.
5
<PAGE>
5.3 Release of Claims. Upon the expiry of this Agreement upon notice being given
pursuant to Subsection 5.1 (a); upon the death of Digout as referred to in
Subsection 5.1 (b); upon the expiration of the period referred to in Subsection
5.1 (c); or upon the payment of the amounts referred to in Subsection 5.1 (d);
as the case may be, the employment of Digout shall be wholly terminated and this
Agreement shall cease to have any further effect save and except in respect of
Sections 6, 7 and 8 which shall continue in full force and effect. Upon any such
termination, Digout shall have no claim against the Corporations for damages,
termination pay, severance pay, pay in lieu of notice of termination, statutory
or otherwise, except in respect of payment of remuneration earned, due and owing
to the effective date of termination plus any amount payable under Section 5.2.
5.5 Reasonableness. The parties hereto acknowledge and agree that there are no
implied rights whatsoever with respect to the termination of this Agreement and
employment contemplated hereunder. The parties further acknowledge and agree
that if any of the payments referred to in Section 5.2 are made, it constitutes
a reasonable estimate of the damages that might be suffered by Digout for early
termination of this Agreement, said amount being liquidated damages and not a
penalty.
5.6 Resignation on Termination. Digout agrees that upon any termination of his
employment with the Corporations, he shall immediately tender his resignation
from any position he may hold as an officer or director of the Corporations or
its subsidiaries.
ARTICLE 6
CONFIDENTIALITY
6.1 Confidential Information. Digout acknowledges that during the course of
employment with the Corporations, he will be exposed to secret and confidential
business information belonging to the Corporations which gives it a commercial
advantage over others. Except as may be required by law, Digout agrees to not
use, directly or indirectly, for his own account or for the account of any
person, firm, Corporations or other entity or disclose to any person, firm,
corporation or other entity, the Corporation's proprietary information disclosed
or entrusted to him or developed or generated by him in the performance of his
duties hereunder, including but not limited to information relating to the
Corporation's organizational structure, operations, business plans, technical
projects, pricing data, business costs, research data results, inventions, trade
secrets, customers lists or other work produced, developed by or for the
Corporation, whether on the premises of the Corporations or elsewhere.
6.2 Exceptions. The provisions of Section 6.1 shall not apply to any
proprietary, confidential or secret information which is, at the commencement of
the term of this Agreement or at some later date, publicly known under
circumstances involving no breach of this Agreement.
6.3 Property and Documents. Digout acknowledges, understands and agrees that all
memoranda, notes, records, charts, formulae, client lists, price lists,
marketing plans, financial information and other documents made, received, held
or used by Digout during the course of his employment or as a consultant to the
Corporations, shall be the property of the Corporations and shall be delivered
by Digout to the Corporations upon request at any time during the course of
employment and upon the termination of his employment as hereinbefore provided.
With respect to all confidential information and other documents of the
Corporations held by Digout, Digout acknowledges that he is in a position of
trust and subject to a fiduciary duty to use the information only in the
interests of the Corporations and its business.
6
<PAGE>
ARTICLE 7
NON-COMPETITION AND NON-SOLICITATION
7.1 Non-Competition. Digout convenants and agrees that, except on behalf of and
for the benefit of the Corporations or its Subsidiaries, he shall not (without
the prior written consent of the Corporations, such consent not to be
unreasonably withheld), while in the employ of the Corporations and (I) where
Digout is terminated by the Corporations for cause, during the Applicable Time
Period or (ii) where Digout is terminated by the Corporations other than for
cause, during the relevant monthly period for which Digout received termination
payments pursuant to Subsection 5.2(a) or (b), either individually or in
partnership or in conjunction with any Person as employee, employer, principal,
agent, joint venture, partner, shareholder or other equity holder, independent
contractor, licenser, licensee, franchiser, franchisee, distributor, consultant,
supplier, trustee or by or through any Corporations, Companies, cooperative,
partnership, trust entity with juridical personality, unincorporated association
or in any other manner whatsoever:
(a) carry on or be engaged in, have any financial or other interest in
or be otherwise commercially involved in any endeavor, activity or
business in all or part of the Territory which is substantially the
same as or in competition with the Business;
(b) interfere or attempt to interfere with the Business or persuade or
attempt to persuade any Customer, employee or supplier of the
Corporations of its Subsidiaries to discontinue or alter such
Person's relationship with the Corporations or its Subsidiaries;
(c) directly or indirectly, canvas, solicit or attempt to solicit,
accept or supply goods or services to any Customer, except on behalf
of and for the benefit of the Corporations or its Subsidiaries or
except with respect to a business not the same as or similar to the
Business; or
(d) employ, offer employment to or solicit the employment or engagement
of or otherwise entice away from the employment of the Corporations
any individual employed by the Corporations at the date of
termination of Digout's employment.
7.2 Exception. Provided that nothing construed herein shall prohibit Digout from
holding for investment purposes only up to 5% of the issued publicly traded
shares of Companies engaged in a business the same as or similar to the Business
presently carried on by the Corporations
7.3 Severability. If any convenant or provision in this Article 7 is determined
to be void or unenforceable in whole or in part, it shall not be deemed to
affect or impair the validity of any other covenant or provision hereof, which
provisions shall remain in full force and effect.
ARTICLE 8
REASONABLENESS
8.1 Reasonableness. Digout agrees that all restrictions contained in Articles 6
and 7 are reasonable and valid and all defenses to the strict enforcement
thereof by the Corporation are hereby waived. Digout agrees and acknowledges
that the breach of the provisions of Articles 6 and 7 by him would cause
irreparable harm to the Corporations which would not be adequately
compensationable in damages and Digout hereby consents to an injunction being
issued restraining any breach or further breach of the provisions hereof without
prejudice to any other remedy the Corporations may have.
7
<PAGE>
ARTICLE 9
GENERAL
9.1 Entire Agreement. This Agreement and the terms hereof shall constitute the
entire agreement between the parties hereto with respect to all of the matters
herein and the parties hereto acknowledge and agree that its execution has not
been induced by, nor do either of the parties hereto rely upon or regard as
material, any representations or writings whatsoever not incorporated herein and
made a part hereof. This Agreement shall not be amended, altered or qualified
except by an agreement in writing signed by both of the parties hereto. This
Agreement supersedes any prior agreements which are hereby canceled and
supersedes all previous understandings, negotiations, and representations with
respect hereto, whether oral or written.
9.2 Notice. Any notice to be given hereunder shall be given in writing and shall
be deemed to have been duly given if delivered by hand or mailed by first-class
mail, postage prepaid and addressed to the recipient as follows:
(a) To the Corporations:
o 40 Centre Drive
Orchard Park, NY 14127
(b) To the Employee:
o 721 Sugarloaf Street
Port Colborne, Ontario L3K 2R6
Any such notice, if mailed, shall be deemed to have been received on the fifth
business day next following the date of mailing and, if delivered, on the date
of delivery. Either party may, by notice given in accordance with the foregoing,
change his or its address for the purposes of this Agreement. In the event of a
postal strike in progress, notice shall be given only by delivery by hand in
accordance with this Section 9. In the event of a postal strike occurring within
5 business days after the giving of notice by mail as hereinbefore set out, such
notice shall be deemed ineffective and thereafter, during the continuance of the
postal strike, notice shall be effective only if delivered by hand.
9.3 Further Assurances. The parties hereto and each of them hereby consents and
agrees to do such things, attend such meetings and to execute such further
documents and assurances as may be deemed necessary or advisable from time to
time in order to carry out the terms and conditions of this Agreement in
accordance with its true intent.
9.4 Waivers. No waiver of any breach of default of any of the provisions hereof
shall be effective unless in writing and signed by the party to be charged with
such waiver. No waiver shall be deemed a continuing waiver or waiver in respect
of any subsequent breach of default, either of a similar or different nature,
unless expressly so stated in writing.
9.5 Severability. If any provision of this Agreement is determined to be illegal
or unenforceable, in whole or in part, such illegal or unenforceable provision
or part thereof, shall be severable from this Agreement and shall not affect the
remaining provisions hereof.
9.6 Headings. The insertion of headings and the division of this Agreement into
Sections and Subsections is for convenience of reference only and shall not
affect the interpretation hereof.
9.7 Assignment. This Agreement may not be assigned by Digout without the prior
written consent of the Corporations, which consent may be withheld for any
reason.
8
<PAGE>
9.8 Endurement. This Agreement shall endure to the benefit of and be binding
upon the parties hereto and their respective heirs, executors, legal personal
representatives, successors and permitted assigns.
9.9 Governing Law. This Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the Province of Ontario and the federal
laws of Canada applicable therein.
9.10 Survival. The provisions of Articles 6, 7 and 8 shall survive the
termination of this Agreement.
9.11 Independent Legal Advice. Digout hereby represents and warrants to the
Corporations that he had the opportunity to seek and was not prevented nor
discouraged by the Corporations from seeking independent legal advice prior to
the execution of this Agreement and that, in the event that he did not avail
himself of that opportunity prior to signing this Agreement, he did so
voluntarily without any undue pressure and agrees that his failure to obtain
independent legal advice shall not be used by him as a defense to the
enforcement of his obligations under this Agreement.
9
<PAGE>
IN WITNESS WHEREOF the parties have caused this Agreement to be executed
with effect as of the date first above written.
RADIANT ENERGY CORPORATION
Per: ____________________________
Per: ____________________________
SIGNED, SEALED AND DELIVERED )
IN THE PRESENCE OF: )
)
)
)
)
- --------------------------- ) -------------------------------
WITNESS Colin Digout
<PAGE>
THIS LOAN AGREEMENT made as of the 31st day of July, 1998.
BETWEEN:
RADIANT ENERGY CORPORATION,
a corporation amalgamated under the laws of
Canada (hereinafter called the "Company")
OF THE FIRST PART
- and-
PROCESS TECHNOLOGIES, INC.,
a corporation incorporated under the laws of
the State of New York (hereinafter called the "Guarantor")
OF THE SECOND PART
- and -
TIMOTHY P. SEEL, a resident of the State of New York;
HEPTAGON INVESTMENTS LTD., a British Virgin Island
corporation; E&M MACHINERY, INC., a corporation
incorporated under the laws of the State of New York;
RRSP ACCOUNT #005727; PATRICK BRIGHAM, a resident of
the Province of Ontario and HARA ENTERPRISES LIMITED,
a corporation incorporated under the laws of the
Province of Ontario (hereinafter collectively called
the "Lenders")
OF THE THIRD PART
WHEREAS the Company has agreed to borrow from the Lenders and the
Lenders have agreed to lend to the Company the following amounts (collectively,
the "Loans"):
- --------------------------------------------------------------------------------
From Timothy P. Seel U.S.$10,000.00
- --------------------------------------------------------------------------------
From Heptagon Investments Ltd. Cdn.$50,000.00
- --------------------------------------------------------------------------------
From E&M Machinery, Inc. U.S.$15,000.00
- --------------------------------------------------------------------------------
From Hara Enterprises Limited Cdn.$50,000.00
- --------------------------------------------------------------------------------
From Patrick Brigham Cdn.$25,000.00
- --------------------------------------------------------------------------------
From RRSP Account #005727 Cdn.$138,000.00
- --------------------------------------------------------------------------------
AND WHEREAS the Guarantor is a wholly-owned subsidiary of the
Company;
<PAGE>
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AND WHEREAS the Company's obligations under this Agreement shall be
secured by, among other things, a guarantee of the Company's obligations by the
Guarantor supported by a charge on substantially all of the assets owned by the
Guarantor;
NOW THEREFORE THIS AGREEMENT WITNESSETH that for good and valuable
consideration mutually given and received, the receipt and sufficiency of which
are hereby acknowledged, it is hereby covenanted, agreed and declared as
follows:
ARTICLE 1
INTERPRETATION
1.01 Definitions
In this Agreement, the recitals hereto, unless there is something in the
subject matter or context inconsistent therewith, the following terms or
expressions shall have the following meanings, respectively:
"this Agreement", "these presents", "hereto", "herein", "hereof" and
similar expressions refer to this loan agreement and not to any particular
Article, Section or other portion hereof;
"Affiliate" has the meaning ascribed thereto in the Business Corporations
Act (Canada);
"business day" means a day which is not a Saturday, Sunday, or civic or
statutory holiday in the Municipality of Metropolitan Toronto;
"Company" means Radiant Energy Corporation and any successor company which
shall have complied with the provisions of Article 8 hereof;
"Company's Auditors" or "Auditors of the Company" means the chartered
accountant or firm of accountants duly appointed as auditor or auditors of
the Company from time to time in accordance with the provisions of the
Business Corporations Act (Canada);
"Counsel" means a barrister and solicitor or a firm of barristers and
solicitors (who may be counsel to the Company) retained by the Company or
retained by the Trustee and acceptable to the Trustee, acting reasonably;
"Debentures" means the 6% Redeemable Convertible Secured Debentures issued
by the Company on May 22, 1997;
"Directors" or "directors" means the Board of Directors of the Company
and/or the Guarantor, as the case may be, for the time being, and
reference to action by the Directors shall mean action by the Directors as
a board or by any committee thereof duly empowered to take such action;
"Environmental Laws" means all federal, provincial, state, municipal,
county, local and other laws, statutes, codes, ordinances, by-laws, rules,
regulations, policies, guidelines, certificates, approvals, permits,
consents, directions, standards, judgements, orders and
<PAGE>
-3-
other authorizations, as well as common law, civil and other jurisprudence
or authority, in each case domestic or foreign, having the force of law at
any time relating in whole or in part to any Environmental Matters and any
permit, order, directions, certificate, approval, consent, registration,
licence or other authorization of any kind held or required to be held in
connection with any Environmental Matters;
"Environmental Matters" means:
(a) condition or substance, heat, energy, sound, vibration,
radiation or odour that may affect any component of the earth
and its surrounding atmosphere or affect human health or any
plant, animal or other living organism; and
(b) any waste, toxic substance, contaminant or dangerous good or
the deposit, release or discharge of any thereof into any
component of the earth and its surrounding atmosphere;
"Guarantee" has the meaning ascribed thereto in Article 5;
"Guarantor" means Process Technologies, Inc., a company incorporated under
the laws of the State of New York and a wholly-owned subsidiary of the
Company;
"Patent" means United States Letters Patent No. 5,417,389 issued May 23,
1995 entitled, "Methods and Apparatus For DeIcing an Aircraft by Infrared
Radiation";
"person" includes any individual, corporation, body corporate,
partnership, trust, trustee, unincorporated organization or other judicial
entity, any government agency or instrumentality and words importing
persons have a similar meaning;
"prime rate" for any day means the reference rate of interest reported,
quoted or announced and commonly known as the prime rate of interest by
and of Bank of Hong Kong for Canadian dollar commercial loans made in
Canada, in all cases adjusted automatically and without the necessity of
any notice to the Company upon each reported, quoted or announced change
to such rate;
"Security" means any mortgage, charge, hypothec, pledge, assignment, lien,
security interest or other encumbrance, including any sale and repurchase
or sale and lease back arrangement or any other arrangement of similar
effect;
"Shares" means common shares in the issued and outstanding capital of the
Company or any securities into which such common shares may be exchanged,
reclassified, reorganized or otherwise converted;
"Subsidiary" has the meaning ascribed thereto in the Business Corporations
Act (Canada);
<PAGE>
-4-
1.02 Number and Gender
Words importing the singular number only shall include the plural and vice
versa and words importing the masculine gender shall include the feminine gender
and words importing persons shall include firms, associations and corporations
and vice versa.
1.03 Choice of Language
The parties hereto have required that this Agreement and all documents and
notices related thereto and/or resulting therefrom be drawn up in English. Les
parties aux presentes ont exige que la presente convention ainsi que tous les
documents et avie qui s'y rattachent et/ou qui en decouleront soient rediges en
langue anglaise.
1.04 Business Day
Whenever any payment is due or required to be made or any other action is
required to be taken under this Agreement on or as of a day that is not a
business day, that payment must be made and the other action must be taken on or
as of the next day that is a business day.
1.05 Headings
The division of this Agreement into Articles, Sections, Subsections and
clauses, the provision of a table of contents and the insertion of headings are
for convenience of reference only and shall not affect the construction or
interpretation of this Indenture or the Debentures.
1.06 Time of the Essence
Time shall be of the essence in all respects hereof and of the Debentures.
1.07 Applicable Law
This Indenture and the Debentures shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein and shall be treated in all respects as Ontario contracts.
<PAGE>
-5-
1.08 Currency
Unless otherwise stated, all dollar amounts referred to in this Indenture
are denominated in Canadian dollars.
ARTICLE 2
THE LOANS
2.01 Limit of Borrowed Funds
The aggregate principal amount of the Loans which may be issued hereunder
is limited to Three Hundred Thousand Dollars ($300,000) in lawful money of
Canada.
2.02 Interest and Maturity
The Loans shall mature on November 30, 1998, shall be repayable as set
forth in Article 3, shall be secured as set forth in Article 5 and shall bear
interest from their date of advance to and including November 30, 1998 (or their
earlier payment and discharge), at the rate of 9% per annum as well after as
before maturity, default or judgement (with interest on overdue interest at the
said rate) payable on the date of maturity. All Loans shall rank equally
rateably without discrimination, preference or priority but shall rank in
priority with other present or future indebtedness of the Company other than the
Debentures. The Lenders and all persons claiming through or under them
respectively.
2.03 Option of Lender as to Place of Payment
(1) Except as otherwise herein provided, all sums which may at any time
become payable whether at maturity or on redemption or otherwise on account of
any Loan or interest thereon shall be payable to the Lenders at the addresses
indicated in Section 15.02
(2) As the interest on the Loans matures (except interest payable at
maturity which may be paid upon presentation and surrender of loan for payment),
at least three (3) business days prior to each date on which interest on the
Loans becomes due, the Company shall forward a cheque or bank draft in an amount
equal to the aggregate amount of interest payable on all then outstanding Loans
(3) The principal amount of the Loans and interest thereon and all sums
which may at any time become payable thereon, whether at maturity or otherwise,
shall be payable in the same currency as the currency in which the Loans were
advanced to the Company.
2.04 Computation of Interest
The Loans shall bear interest from their date of advance or from the last
interest payment date to which interest shall have been paid or made available
for payment on such Loan,
<PAGE>
-6-
whichever shall be the later. Interest shall be computed on the basis of a year
of 365 or 366 days, as applicable.
ARTICLE 3
REPAYMENT OF LOANS
3.01 Repayment
The Company when not in default hereunder shall have the right at its
option to repay, on not less than ten (10) days' notice, either in whole at any
time or in part from time to time before maturity, any portion of the principal
amount of the Loans, together in all cases with interest on the principal amount
of the Loans accrued and unpaid to the date fixed for repayment (the amount,
including interest, at which any loan may be repaid on any date being herein
sometimes referred to as the "redemption price" of the Loan).
3.02 Partial Repayment of the Loans
(1) In case less than all of the principal amount of the Loans for the
time being outstanding are at any time to be repaid, the Loans shall be repaid
pro rata among the Lenders; provided, however, that in such case the Loans shall
only be repaid in denominations of $100 principal amount and whole multiples
thereof.
(2) Unless the context otherwise requires, the word "Loan" or "Loans" as
used in this Article 3 shall be deemed to include that part of the principal
amount of any Loan which shall have become subject to repayment pursuant to the
provisions hereof.
3.03 Notice of Repayment
Notice of intention to repay any of the Loans shall be given by letter or
circular sent in the manner provided in Section 15.02 hereof and shall be mailed
or delivered not less than ten (10) and not more than sixty (60) days prior to
the date fixed for repayment; provided always that the non-receipt of any such
letter or circular by any of the Lenders shall not invalidate or otherwise
prejudicially affect the repayment of such Loans.
ARTICLE 4
[Intentionally deleted.]
<PAGE>
-7-
ARTICLE 5
GUARANTEE AND SECURITY
5.01 Guarantee of Loans
(1) Subject to the terms of the Debenture, the Guarantor covenants with
the Lenders that the Company will pay and the Guarantor hereby unconditionally
guarantees the due and punctual payment of the principal amount of, and interest
on (including, in case of default, interest on the amount in default), each Loan
when and as the same becomes due and payable whether at their respective due
dates on repayment or on maturity or otherwise in accordance with the terms of
such Loan and of this Agreement (the "Guarantee"); provided, however, that
payment of interest on overdue installments of interest is hereby guaranteed
only to the extent permitted by applicable law.
(2) Subject to the terms of the Debenture, in case of default by the
Company in the payment of any such principal or interest, the Guarantor agrees
duly and punctually to pay the same without demand. The Guarantor hereby agrees
that its obligations under the Guarantee shall be unconditional, irrespective of
any invalidity, illegality, irregularity or unenforceability of any Loan with
regard to the Company (other than by reason or lack of genuineness), or the
absence of any action to enforce the same, the recovery of any judgment against
the Company or any action to enforce the same or any circumstances which might
otherwise constitute a legal or equitable discharge or defence of a guarantor.
The Guarantor hereby waives diligence, presentment, demand of payment, the
filing of claims with a court in the event of merger, amalgamation, insolvency
or bankruptcy of the Company, any right to require a proceeding first against
the Company, protest or notice with respect to any Loan and all demands
whatsoever, and covenants that its obligations under this Section 5.01 will not
be discharged as to any Loan except by payment in full of the principal of and
interest on such Loan.
(3) The Guarantee is a direct obligation of the Guarantor and shall be
secured by a charge on substantially all of the assets of the Guarantor
substantially in the form appended hereto as Schedule "B", such charge ranking
in priority to all other current and future indebtedness of the Guarantor, other
than the Debentures subject to any exceptions prescribed by law.
(4) The obligations of the Guarantor under this Agreement shall be a
continuing obligation and a fresh cause of action hereunder shall be deemed to
arise in respect of each default.
(5) The Guarantor shall not be or become liable hereunder to make any
payment of principal or interest in respect to which the Company shall be in
default if the default of the Company in respect of which the Guarantor would
otherwise be or become liable hereunder shall have been waived or directed to be
waived pursuant to the provisions in that behalf contained in this Agreement,
provided, however, that no waiver or consent of any kind whatsoever shall
<PAGE>
-8-
release, alter or impair the unconditional obligation of the Guarantor hereunder
after giving effect to such waiver or consent.
(6) The Guarantor shall be subrogated to all rights of the Lenders and the
holders of any interest therein against the Company in respect of any amount
paid by the Guarantor pursuant to the provisions of the Guarantee; provided,
however, that the Guarantor shall not be entitled to enforce, or to receive any
payments arising out of or based upon, such right or subrogation until the
principal of and interest on all Loans shall have been paid in full.
(7) No remedy for the enforcement of the rights of the Lenders to receive
payment of the principal of and/or interest on any Loan in accordance with the
terms of this Agreement shall be exclusive of or dependent on any other remedy.
5.02 Further Assurances
The Guarantor shall, subject as herein provided, forthwith, and from time
to time, execute and do or cause to be executed and done all deeds, documents
and things which, in the opinion of counsel, are necessary or advisable for
giving the Lenders charges over the assets of the Guarantor to secure the
payment of all principal monies and interest for the time being and from time to
time owing pursuant to this Agreement.
5.03 Registration
The Guarantor shall record, file, enter or register the security agreement
set out as Schedule "B" hereto, all agreements supplemental hereto and all other
instruments or further assurances without delay (wherever in the opinion of
counsel it would be of material advantage in preserving and protecting the
security interest created thereby and the rights of the Lenders hereunder for
such action to be taken) under the provisions of any and all statutes providing
for or permitting the registration of such security in any Province or Territory
of Canada and any State or Territory of the United States of America in which
assets of the Guarantor are situated or the business of the Guarantor is carried
on; and the Guarantor shall renew such recordings, filings, enterings or
registrations from time to time as and when required.
5.04 Authority to Charge and Maintenance of Security
(1) The Guarantor represents, warrants and covenants to and with the
Lenders that:
(a) It has good right and lawful authority to charge its
undertaking, property, rights and assets as provided in and by
this Agreement; and
(b) It will fully and effectually maintain and keep maintained the
security provided for in this Article 5 as valid and effective
security at all times so long as any of the Loans shall be
outstanding.
5.05 Release and Discharge
(1) The obligation and liability of each of the Guarantor and the Company
under this Agreement, except as otherwise provided in this Indenture, shall not
be released, discharged or
<PAGE>
-9-
in any way affected by any release, discharge, loss or alteration in or dealing
with the secured assets or any part thereof or anything done, suffered or
permitted by the Lenders in relation to any of the secured assets; or by any
extension of time for payment of the Loans; or by any modification of any term
of this Agreement; or by any forebearance whatsoever, whether as to time,
performance or otherwise; or by any compromise, arrangement or plan or
reorganization affecting the Company, the Guarantor or the security under or
pursuant to this Indenture; or by any other matter or thing whatsoever which
would release a guarantor or principal obligor, as the case may be (except
payment in full of the principal of and interest on the Debentures).
(2) It is understood and agreed that the charges created pursuant to
this Agreement shall be held by the Lenders as security for the performance by
the Company and the Guarantor of their respective covenants herein contained and
that upon the Company becoming entitled to a discharge of this Agreement, then
these presents and the estate and rights by this Agreement granted, including
the pledge of the Company, shall cease and become utterly null and void and the
secured assets shall revert to and revest in the Guarantor without any release,
acquittance or any act or formality whatsoever; and thereupon the Lenders shall,
at the request and at the expense of the Guarantor and the Company, execute and
deliver to the Guarantor and the Company such instruments as shall be requisite
to evidence the satisfaction and discharge of the pledge and security
contemplated hereby, and to release or reconvey to the Guarantor the secured
assets freed and discharged from the trusts and provisions, and to cancel the
pledge of shares by the Company, and to release each of the Guarantor and the
Company from their covenants in this Agreement.
ARTICLE 6
CERTAIN COVENANTS OF THE COMPANY
6.01 General Covenants of the Company
The Company will well and truly perform and carry out all of the actions
or things to be done by it as provided in this Agreement. The Company hereby
covenants and agrees that:
(a) Payment of Principal and Interest. It will well, duly and punctually
pay or cause to be paid to the Lenders the principal of and interest accrued on
the Loans of which he or she is the holder at the dates and places, in the
monies and in the manner, provided for herein.
(b) To Carry on Business. It will at all times maintain its corporate
existence and diligently carry on and conduct its business in a proper,
efficient and businesslike manner and shall not cease to operate the whole or
substantially the whole of its business except in accordance with Article 8, and
will keep, or cause to be kept, proper books of account and make, or cause to be
made, in accordance with generally accepted accounting principles therein true
and faithful entries of all dealings and transactions in relation to its
business and at all reasonable times furnish, or cause to be furnished, to the
Lenders or its duly authorized agent or attorney such information relating to
its business as the Lenders may reasonably require, and such books
<PAGE>
-10-
of account shall at all reasonable times be open for inspection by the Lenders
or such agent or attorney as the Lenders may from time to time by instrument in
writing for that purpose appoint.
(c) To Pay Taxes. It will from time to time pay or cause to be paid all
taxes, rates, levies, assessments, ordinary or extraordinary, government fees or
dues lawfully levied, assessed or imposed upon or in respect of its property
(real or personal), assets and undertaking or any part thereof or upon the
income and profits of the Company as and when the same become due and payable,
and that it will exhibit or cause to be exhibited to the Lenders when requested
the receipts and vouchers establishing such payments, and will duly observe and
conform to all valid requirements of any governmental authority relative to any
of its property or rights which are material to its overall undertaking,
provided, however, that the Company shall have the right to contest in good
faith by legal proceedings any such taxes, rates, levies, assessments,
government fees or dues and, upon such contest, may delay or defer payment or
discharge thereof if the Company shall have set aside on its books reserves
(segregated to the extent required by sound accounting practice) deemed by it to
be adequate with respect thereto, or if in the opinion of the Directors, the
failure to pay and discharge promptly the same shall be in the interests of the
Company and not disadvantageous in any material respect to the Lenders.
(d) To Maintain Insurance. It will insure and keep insured against loss or
damage by fire its buildings, plants and other properties and things which are
of an insurable nature and of a character usually insured by prudent
corporations carrying on similar operations under like circumstances, and that
it will carry such other insurance as is usually carried by prudent corporations
carrying on similar operations under like circumstances, and that it will pay,
duly and seasonably, the premiums and other sums of money payable in respect of
such insurance and will exhibit to the Trustee on demand the receipts for such
premiums.
(e) Financial Statements. It will furnish to the Lenders, within 140 days
after the end of its fiscal year a copy of the consolidated financial statements
and of the report of the Company's auditors thereon which are furnished to the
shareholders of the Company. The Company will furnish sufficient copies to the
Lenders, within 60 after the end of the first, second and third quarterly
accounting periods in each fiscal year, of the consolidated balance sheet as at
the end of such quarterly accounting period and sufficient copies of the related
statements of income, retained earnings and changes in the financial position
for the period commencing with the last day of the previous fiscal year and
ending with the last day of such quarterly accounting period, all certified by a
principal financial or accounting officer of the Company to present fairly the
information contained therein, subject to year-end and audit adjustments.
(f) Default. If it should be in default hereunder at any time it will
promptly, after it has become aware of same, give notice to the Lenders of the
occurrence of an event of default or an event which, with the giving of notice
or lapse of time, or both, would become an event of default
(g) Securities Laws. It will at all times preserve and remain its status
as a "reporting issuer" not in default under the Securities Act (Ontario) and
will, in a timely fashion, file and deposit all documents and reports with the
Ontario Securities Commission and similar securities regulatory authorities
required to be filed or deposited pursuant to applicable legislation.
(h) Further Assurances. It shall do, execute and acknowledge and deliver
or cause to be done, executed acknowledged and delivered, all other acts, deeds
and assurances as the
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Lenders may reasonably require for the better accomplishing and effecting the
intentions and provisions of this Indenture.
6.02 General Covenants of the Guarantor
The Guarantor will well and truly perform and carry out all of the actions
or things to be done by it as provided in this Indenture. The Guarantor hereby
covenants and agrees that:
(a) To Carry on Business. It will at all times maintain its corporate
existence and diligently carry on and conduct its business in a proper,
efficient and businesslike manner and shall not cease to operate the whole or
substantially the whole of its business except in accordance with Article 8, and
will keep, or cause to be kept, proper books of account and make, or cause to be
made, in accordance with generally accepted accounting principles therein true
and faithful entries of all dealings and transactions in relation to its
business and at all reasonable times furnish, or cause to be furnished, to the
Lenders or its duly authorized agent or attorney such information relating to
its business as the Lenders may reasonably require, and such books of account
shall at all reasonable times be open for inspection by the Lenders or such
agent or attorney as the Lenders may from time to time by instrument in writing
for that purpose appoint.
(b) To Pay Taxes. It will from time to time pay or cause to be paid all
taxes, rates, levies, assessments, ordinary or extraordinary, government fees or
dues lawfully levied, assessed or imposed upon or in respect of its property
(real or personal), assets and undertaking or any part thereof or upon the
income and profits of the Guarantor as and when the same become due and payable,
and that it will exhibit or cause to be exhibited to the Lenders when requested
the receipts and vouchers establishing such payments, and will duly observe and
conform to all valid requirements of any governmental authority relative to any
of its property or rights which are material to its overall undertaking,
provided, however, that the Guarantor shall have the right to contest in good
faith by legal proceedings any such taxes, rates, levies, assessments,
government fees or dues and, upon such contest, may delay or defer payment or
discharge thereof if the Guarantor shall have set aside on its books reserves
(segregated to the extent required by sound accounting practice) deemed by it to
be adequate with respect thereto, or if in the opinion of the Directors, the
failure to pay and discharge promptly the same shall be in the interests of the
Guarantor and not disadvantageous in any material respect to the Lenders.
(c) To Maintain Insurance. It will insure and keep insured against loss or
damage by fire its buildings, plants and other properties and things which are
of an insurable nature and of a character usually insured by prudent
corporations carrying on similar operations under like circumstances, and that
it will carry such other insurance as is usually carried by prudent corporations
carrying on similar operations under like circumstances, and that it will pay,
duly and seasonably, the premiums and other sums of money payable in respect of
such insurance and will exhibit to the Trustee on demand the receipts for such
premiums.
(d) Negative Pledge. It will not, as long as any of the Loans remain
outstanding, create, incur or permit any Security on any of its current or after
acquired assets or undertakings
<PAGE>
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to secure any obligations or indebtedness unless such Security is subordinate to
the Security granted to the Lenders.
(e) Subsequent Filings. It will file all necessary applications, documents
or materials required to be filed with any United States, Canadian or other
foreign patent application which corresponds to the invention(s) disclosed in
the Patent.
6.03 Representations and Warranties of the Company and the Guarantor
Each of the Company and the Guarantor represent and warrant to the Lenders
that the Guarantor is the duly registered holder of the Patent.
6.04 Lenders may Perform Covenants
If the Company shall fail to perform any of the covenants or fulfil any of
the conditions contained in this Agreement, the Lenders may in its discretion
perform, but shall be under no obligation to do so, any of the said covenants or
fulfil any such condition capable of being performed or fulfilled by it and, if
any such covenant or condition requires the payment or expenditure of money, it
may make such payments or expenditures with its own funds, or with money
borrowed by or advanced to it for such purpose; and all sums so expended or
advanced shall be at once payable by the Company and shall bear interest at the
then prevailing prime rate until paid and shall be payable out of any monies
held by the Lenders under , but no such performance or payment shall be deemed
to relieve the Company from any default hereunder.
6.05 Company Not to Extend Time for Payment of Interest
In order to prevent any accumulation after maturity of interest, the
Company hereby covenants that it will not, directly or indirectly, extend or
assent to the extension of any time for payment of interest upon any Loans
issued hereunder, and that it will not, directly or indirectly, be a party to or
approve any such arrangement. In case the time for payment of any such interest
shall be so extended, whether or not such extension shall be by or with the
consent of the Company, such interest shall not be entitled, in case of default
hereunder, to the benefit of these presents except subject to the prior payment
in full of the principal of all the Loans then outstanding, and of all interest
on such Loans the payment of which has not been so extended.
<PAGE>
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ARTICLE 7
EVENTS OF DEFAULT
7.01 Events of Default
If one or more of the following events (herein called "events of default")
shall happen, that is to say:
(a) default shall be made in the payment of the principal of any of the
Loans when the same becomes due and payable; or
(b) default shall be made in the payment of any interest due on any of
the Loans issued hereunder and such default shall have continued for
a period of twenty-one (21) days; or
(c) the Company or any of its Subsidiaries shall generally not pay its
debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against the Company or any of its Subsidiaries
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding-up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors (including, without limitation, the Companies' Creditors
Arrangement Act), or seeking the entry of an order for relief or the
appointment of a receiver, trustee, or other similar official for it
or for any substantial part of its property and, in the case of any
such proceeding remaining undismissed or unstayed for a period of
thirty (30) days or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief
against it or the appointment of a receiver, trustee, custodian or
other similar official for it or for any substantial part of its
property) shall occur; or the Company or such Subsidiary shall take
any corporate action to authorize any of the actions set forth in
this Subsection 7.01(c); provided that a resolution or order for
winding-up the Company with a view to its consolidation,
amalgamation or merger with another corporation or the transfer of
its assets as a whole, or substantially as a whole, to such other
corporation, as provided in Article 8 shall not constitute an event
of default if such last mentioned corporation shall, as part of such
consolidation, amalgamation, merger or transfer comply with the
conditions to that end stated in Article 8; or
(d) any process of execution be enforced or levied upon any of the
property of the Company or the Guarantor and remain unsatisfied for
a period of ten (10) business days, provided that such process is
not in good faith disputed by the Company or the Guarantor, and
neither the Company nor the Guarantor shall not have given security
which, in the discretion of the Trustee, shall be sufficient to
<PAGE>
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pay in full the amount claimed in the event that it shall be held to
be valid claim; or
(e) the Guarantor fails to observe or perform any of its covenants
contained in Article 5 and Subsection 6.02;
(f) the Company fails to observe or perform any of its covenants
contained in Article 6 of this Agreement, except as provided in
Subsection 7.01(b); or
(g) default shall be made in the due observance or performance of any
other covenant or condition in this Agreement required to be
observed or performed by the Company or the Guarantor and any such
default shall continue for a period of thirty (30) days after notice
received by the Company or the Guarantor from the Lenders specifying
such default and requiring the Company or the Guarantor to rectify
such default and any such notice may be given by the Lenders; or
(h) the Company or the Guarantor receives notice of an event of default
under Subsection 7.12 of the trust indenture pursuant to which the
Debentures were created,
then in each and every such event the Lenders, declare the principal of, and
interest on, all the Loans outstanding hereunder, together with all other monies
payable hereunder, to be due and payable and the same shall forthwith become
immediately due and payable to the Lenders, anything therein or herein to the
contrary notwithstanding, and the Company shall pay forthwith to the Lenders the
amount of the principal of and interest then accrued on all of the Loans then
outstanding and all other monies payable hereunder, together with interest on
such principal, interest and other monies at the rate of interest borne by the
Loans from the date of the said declaration until payment is received by the
Lenders. Such payment when made shall be deemed to have been made in discharge
of the Company's obligations hereunder and under the Loans and shall be applied
in the manner hereinafter provided in Section 7.04 hereof.
7.02 Waiver of Default
Upon the happening of any event of default hereunder, the Lenders shall
have power to waive any default arising hereunder
7.03 Right of Lenders to Enforce Payment
Subject to the provisions of Section 7.02 hereof, in case the Company
shall fail to pay to the Lenders, on demand, the principal and interest on all
the Loans then outstanding, together with any other amounts due hereunder. The
Lenders may in their discretion obtain or enforce payment of the said principal
of and interest on all the Loans then outstanding together with any other
amounts due hereunder, by any remedy provided by law either by legal proceedings
or otherwise including, without limitation, enforcing the Guarantee provided for
in Section 5.01.
7.04 Application of Moneys
<PAGE>
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Except as otherwise herein provided, the monies arising from any
enforcement hereof shall be held by the Lenders and applied by them, together
with any other monies then or thereafter in the hands of the Lenders available
for the purpose, as follows:
(a) firstly, in payment of the principal of and accrued and unpaid
interest on amounts in default under the Loans which shall then be
outstanding rateably and proportionately and without preference or
priority or discrimination as between principal and interest unless
otherwise directed by extraordinary resolution and in that case in
such order of priority as between principal and interest as may be
directed by such resolution; and
(b) the surplus (if any) of such monies shall be paid to the Company or
its assigns.
7.05 Lenders Appointed Attorney
The Company hereby irrevocably appoints the Lenders to be the attorney of
the Company for and in the name and on behalf of the Company to execute and do
any deeds, documents, transfers, conveyances, assignments, assurances, consents
and things which the Company ought to sign, execute and do hereunder and
generally to use the name of the Company in the exercise of all or any of the
powers hereby conferred on the Lenders, with full powers of substitution and
revocation.
7.6 Remedies Cumulative
No remedy herein conferred upon or reserved to the Lender is intended to
be exclusive of any other remedy, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
existing or hereafter to exist by law or by statute.
ARTICLE 8
CONSOLIDATION AND AMALGAMATION
8.01 Successor Company or Guarantor
(1) Nothing in this Agreement shall prevent, if otherwise permitted by
law, the reorganization or reconstruction of the Company or the Guarantor or the
consolidation, amalgamation or merger of the Company or the Guarantor with any
other corporation, or shall prevent the sale, leasing or other transfer by the
Company or the Guarantor of its undertaking and assets as a whole or
substantially as a whole to another corporation lawfully entitled to acquire and
operate the same, provided that the conditions of this Article 8 are observed,
and provided also that every such successor or assign shall before or
contemporaneously with the consummation of any such reorganization,
reconstruction, consolidation, amalgamation, merger or transfer and in
consideration thereof, enter into and execute an Agreement supplemental hereto
in favour of the Lenders whereby such successor or assign covenants:
<PAGE>
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(a) to pay punctually when due the principal monies, interest and other
monies due or which may become due hereunder;
(b) to perform and observe punctually all the obligations of the Company
and the Guarantor under this Agreement and under and in respect of
all outstanding Loans; and
(b) to observe and perform each and every covenant, stipulation,
promise, undertaking, condition and agreement of the Company and the
Guarantor herein contained as fully and completely as if it had
itself executed this indenture as Party of the First Part hereto and
had expressly agreed herein to observe and perform the same.
(2) Every such reorganization, reconstruction, consolidation,
amalgamation, merger, sale, lease or transfer shall be made on such terms and at
such times and otherwise in such manner as shall be approved by the Company or
the Guarantor, as the case may be, and by the Lenders (acting on such advice as
it deems advisable) as being in no way prejudicial to the interests of the
Lenders and as preserving and not impairing the rights and powers of Lenders,
and upon such approval the Lenders shall facilitate the same in all respects,
and may give such consents and sign, execute or join in this Agreement or other
documents and do such acts as in its discretion may be thought advisable in
order that such reorganization, reconstruction, consolidation, amalgamation,
merger, sale, lease or transfer may be carried out, and the opinion of Counsel
as hereinafter mentioned shall be full warrant and authority to the Lenders for
so doing. The Trustee may rely upon an opinion of Counsel to the Lenders as to
the legality of any action proposed to be taken and as to the validity of any
action taken pursuant to the provisions contained in this Article 8, and the
Trustee shall incur no liability by reason of reliance thereon.
8.02 Successor Company/Successor Guarantor
to Possess Powers of the Company/Guarantor
In case of any reorganization, reconstruction, consolidation, amalgamation
or merger as aforesaid, or in case of such transfer of the undertaking of the
assets of the Company or the Guarantor as a whole or substantially as a whole,
the corporation formed by such consolidation or with which the Company or the
Guarantor shall have been amalgamated or merged or to which such transfer shall
have been made, upon executing an Indenture or Indentures, as provided in
Section 8.01, shall succeed to and be substituted for the Company or the
Guarantor, whichever the case may be, (which may then be wound up, if so desired
by its shareholders), with the same effect as if it had been named herein as an
original party hereto, and shall possess and may exercise each and every right
of the Company or the Guarantor hereunder.
ARTICLE 9
SUITS BY LENDERS
9.01 Lenders May Not Sue
No Lender shall have any right to institute any action, suit or proceeding at
law or in equity for the purpose of enforcing payment of the principal of or any
interest on the Loans or for the execution of any trust or power hereunder or
for the appointment of a liquidator or receiver or
<PAGE>
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for a receiving order under the Bankruptcy and Insolvency Act or to have the
Company and/or the Guarantor wound up or to file or prove a claim in any
liquidation or bankruptcy proceedings or for any other remedy hereunder, unless
the holders of at least twenty-five percent (25%) in principal amount of the
Loans then outstanding shall have made by resolution passed at a meeting duly
held as hereinafter provided in Article 11 of this Agreement proceed to exercise
the powers hereinbefore granted or to institute an action, suit or proceeding in
its name for such purpose; it being understood and intended that no one or more
holders of Loans shall have any right in any manner whatsoever to enforce any
right hereunder, except in the manner herein provided, except only as herein
provided, and only in any event for the equal benefit of all holders of
outstanding Loans in proportion to the amounts to which they may respectively be
entitled hereunder.
9.02 Delay Not Waiver
No delay or omission of the Lenders to exercise any right or power
accruing hereunder shall impair any such right or power, or shall be construed
to be a waiver of any default or an acquiescence therein, and every power and
remedy given hereby to the Lenders may be exercised by it or by them from time
to time as often as may be deemed expedient by it or them.
ARTICLE 10
IMMUNITY OF OFFICERS, SHAREHOLDERS AND DIRECTORS
10.01 Immunity of Officers, Shareholders and Directors
The obligations on the part of the Company and the Guarantor
contained herein are solely corporate obligations, and accordingly no recourse
under or upon any obligation, covenant or agreement contained in this Agreement
or under any judgement obtained against the Company or the Guarantor, or by the
enforcement of any assessment or by any legal or equitable proceeding by virtue
of any constitution or statute or otherwise or under any circumstances under or
independently of this Indenture, shall be had against any shareholder, officer
or director, past, present or future, of the Company or the Guarantor (excluding
the Company as a Shareholder of the Guarantor) or of any successor corporation,
either directly or through the Company or the Guarantor or otherwise for payment
for or to the Company or the Guarantor or any receiver, liquidator, trustee or
sequestrator thereof or for or to the holder of any Agreement issued hereunder,
or otherwise, of any sum that may be due and unpaid by the Company hereunder or
upon or under any such Loan and any and all personal liability of every nature
and kind, whether at common law or in equity or by statute or by constitution or
otherwise, of any such shareholder, officer or director on account of this
Agreement or on account of the Loans and indebtedness represented thereby, is
hereby expressly waived and released as a condition of and as part of the
consideration for the execution of this Agreement and the issue of the Loans.
<PAGE>
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ARTICLE 11
LENDERS' MEETINGS
11.01 Lenders' Meetings
Meetings of Lenders shall be convened, held and conducted in the manner
following:
(a) Calling of Meetings. At any time and from time to time, a Lender
representing at least ten percent (10%) of the aggregate principal amount of the
Loans may convene a meeting of the Lenders. Every such meeting shall be held in
the City of Toronto, or at such other place as the Lenders may in any case
determine or approve.
(b) Notice. At least twenty-one (21) days' notice of such meeting shall be
given to each of the Lenders and such notice shall state the time when, and the
place where said meeting is to be held and shall specify in general terms the
nature of the business to be transacted thereat, and shall contain such
information as is reasonably necessary to enable a Lender to make a reasoned
decision on the matter, but it shall not be necessary to specify in the notice
the text of the resolutions to be passed. Notices shall be given in the manner
set forth in Article 15 hereof, and a copy thereof shall be sent by post or
delivered to the Lenders and the Company unless the meeting has been called by
it. It shall not be necessary to specify in the notice of any adjournment of a
meeting the nature of the business to be transacted at the adjourned meeting.
(c) Quorum. At any meeting of the Lenders, subject to the provisions of
Section 11.03 hereof, a quorum shall consist of two or more persons present in
person holding either personally or as proxies for holders not less than
twenty-five percent (25%) in principal amount of all outstanding Loans. In the
event of such quorum not being present on the date for which the meeting is
called within one half hour after the time fixed for the holding of such
meeting, the meeting may be adjourned to a date not later than thirty (30) days
from the date for which the meeting was first called and not less than fourteen
(14) days' notice of the date to which such meeting is adjourned shall be given
in the manner prescribed for notice of meetings of Lenders. Such notice shall
state that at the adjourned meeting the Lenders present in person or by proxy
shall form a quorum, but it shall not be necessary to set forth the purposes for
which the meeting was originally called or any other particulars. At the
adjourned meeting, the Lenders present in person or by proxy shall form a quorum
and may transact the business for which the meeting was originally convened.
(d) Chairman. The Lenders and proxies for Lenders present shall choose one
of their number to be chairman.
(f) Majority Vote on Ordinary Resolution. Every question submitted to a
meeting, except an Extraordinary Resolution, shall be decided in the first place
by a majority of the votes given on a show of hands. In the case of an equality
of votes on a show of hands the chairman shall have a casting vote.
(g) Taking a Poll. A poll shall be taken on every Extraordinary Resolution
and, when requested by a Lender or by a proxy or proxies representing a Lender
holding at least Cdn. Ten Thousand Dollars ($10,000) principal amount of the
Loans, on any other question or resolution. If at any meeting a poll is so
demanded as aforesaid on the election of a chairman or on a question of
adjournment, it shall be taken forthwith. If at any meeting a poll is so
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demanded on any other question, or an extraordinary resolution is to be voted
upon, a poll shall be taken in such manner and either at once or after an
adjournment as the chairman directs. The results of a poll shall be deemed to be
the decision of the meeting at which the poll was demanded.
(h) Votes on a Poll. At any meeting of the Lenders, each Lender shall on a
poll have one vote for every Cdn. One Thousand Dollars ($1,000) principal amount
of Loan of which he shall be the holder. Votes may be given in person or by
proxy and a proxy need not be a Lender.
(i) The Company, and Legal Advisers. The Company by their respective
employees, officers and directors may attend any meeting of Lenders. The legal
advisers of the Company and the Lenders may also attend any such meeting.
11.02 Powers Exercisable by Extraordinary Resolution
Unless otherwise provided in this Agreement, a meeting of the Lenders
shall, in addition to any powers hereinbefore given, have the following powers,
exercisable from time to time by Extraordinary Resolution:
(a) Power to sanction any modification, abrogation, alteration,
compromise or arrangement of the rights of the Lenders against the
Company and/or the Guarantor, or against their property, whether
such rights arise under this Agreement or otherwise;
(b) Power to sanction any scheme for the reconstruction or
reorganization of the Company and/or the Guarantor or for the
consolidation, amalgamation or merger of the Company and/or the
Guarantor with any other corporation or for the sale, leasing,
transfer or other disposition of the undertaking, property and
assets of the Company and/or the Guarantor or any part thereof,
provided that no such sanction will be necessary in respect of any
such transaction if Section 8.01 has been complied with;
(c) Power to exercise any power, right, remedy or authority given to it
by this Agreement in any manner specified in any such Extraordinary
Resolution or to refrain from exercising any such power, right,
remedy or authority;
(d) Power to waive any default hereunder and/or cancel any declaration
made by the Trustee pursuant to Section 7.01 either unconditionally
or upon any condition specified in such Extraordinary Resolution;
(e) Power to direct any Lender who as such has brought any action, suit
or proceeding, to stay or discontinue or otherwise deal with the
same upon payment, if the taking of such suit, action or proceeding
has been permitted by Section 10.01, of the costs, charges and
expenses reasonably and property incurred by such holder in
connection therewith;
<PAGE>
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(f) Power to approve the exchange of the Loans for or the conversion
thereof into shares, bonds, debentures, notes or other securities of
the Company or of any corporation formed or to be formed, which has
been approved by the Company;
(g) Power to assent to any compromise or arrangement by the Company
and/or the Guarantor with any creditor, creditors or class or
classes of creditors or with the holders of any shares or securities
of the Company;
(h) Power to restrain any Lender hereunder from taking or instituting
any suit, action or proceeding for the execution of any trust or
power hereunder or for the appointment of a liquidator or receiver
or trustee in bankruptcy or to have the Company and/or the Guarantor
wound up or for any other remedy hereunder and to direct such Lender
to waive any default or defaults by the Company and/or the Guarantor
on which any suit or proceeding is founded;
(i) Power to assent to any modification of or change in or addition to
or omission from the provisions contained in this Agreement which
has been agreed to by the Company and the Guarantor and to authorize
the Trustee to concur in and execute any deed supplemental to this
Promissory Note embodying any such modification, change, addition or
omission or any deeds, documents or writings authorized by such
extraordinary resolution;
(j) Power to appoint a committee with power and authority (subject to
such limitations, if any, as may be prescribed in the resolution) to
exercise, on behalf of the Lenders, such of the powers of the
Lenders which are exercisable by extraordinary or other resolution
as shall be included in the resolution appointing the committee. The
resolution making such appointment may provide for payment of the
expenses and disbursements of and compensation to such committee.
Such committee shall consist of such number of persons as shall be
prescribed in the resolution appointing it and the members need not
be themselves Lenders. Every such committee may elect its chairman
and may make regulations respecting its quorum, the calling of its
meetings, the filling of vacancies occurring in its number and its
procedure generally. Such regulations may provide that the committee
may act at a meeting at which a quorum is present or may act by
minutes signed by the number of members thereof necessary to
constitute a quorum. All acts of any such committee within the
authority delegated to it shall be binding upon all Lenders. Neither
the committee nor any member thereof shall be liable for any loss
arising from or in connection with any action taken or omitted to be
taken by them in good faith; and
(k) Power to amend, alter or repeal any Extraordinary Resolution
previously passed or consented to by Lenders.
The foregoing powers shall be deemed to be several and not dependent on
each other and each paragraph of this Section 11.02 and each power therein
conferred shall, accordingly, be construed as complete in itself and not by
reference to any other paragraph or power in said section and the exercise of
any one or more of such powers, or any combination of such powers,
<PAGE>
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from time to time, shall not be deemed to exhaust the rights of the Lenders to
exercise such power or powers, or combination of powers, thereafter from time to
time.
11.03 Extraordinary Resolutions
(1) An Extraordinary Resolution, passed at a meeting of the Lenders held
in accordance with the provisions hereof, shall be binding upon all the Lenders
and upon each and every Lender whether present or absent and each and every
shall be bound to give effect thereto accordingly.
(2) The expression "Extraordinary Resolution" when used in this Agreement
means, subject as hereinafter in this Article 11 provided, a resolution proposed
to be passed as an Extraordinary Resolution at a meeting of Lenders duly
convened for the purpose and held in accordance with the provisions of this
Article 11 at which, subject to Subsection 11.05(3), holders of at least
fifty-one (51%) percent in principal amount of the Loans then outstanding are
present in person or by proxy and passed by the favourable votes of the holders
of not less than sixty-six and two thirds (66-2/3%) percent of the principal
amount of Loans represented at the meeting and voted on a poll upon such
resolution.
(3) If at any such meeting holders of fifty-one (51%) percent in principal
amount of the Loans outstanding are not present in person or by proxy within
thirty (30) minutes after the time appointed for the meeting, then the meeting,
if convened by shall be dissolved: but if otherwise convened the meeting shall
stand adjourned to such date, being not less than fifteen (15) nor more than
fifty (50) days later, and to such place and time as may be appointed by the
chairman. Not less than ten (10) days notice shall be given of the time and
place of such adjourned meeting in the manner prescribed for notice of meetings
of Lenders. Such notice shall state that at the adjourned meeting the Lenders
present in person or by proxy shall form a quorum but it shall not be necessary
to set forth the purposes for which the meeting was originally called or any
other particulars. At the adjourned meeting the Lenders present in person or by
proxy shall form a quorum and may transact the business for which the meeting
was originally convened and a resolution proposed at such adjourned meeting and
passed by the requisite vote as provided in Subsection 11.03(2) shall be an
Extraordinary Resolution within the meaning of this Indenture, notwithstanding
that holders of fifty-one (51%) percent in principal amount of the outstanding
Loans then outstanding are not present in person or by proxy at such adjourned
meeting.
(4) Votes on an Extraordinary Resolution shall always be given on a poll
and no demand for a poll on an Extraordinary Resolution shall be necessary.
(5) Save as herein expressly otherwise provided, no action shall be taken
at a meeting of the Lenders which changes any provision of this Indenture or
changes or prejudices the exercise of any right of any Lender except by
Extraordinary Resolution as above provided.
11.04 Declaration by Chairman of Result of Vote
<PAGE>
-22-
At any meeting of the Lenders, in cases where no poll is required or
requested, a declaration made by the Chairman that a resolution has been
carried, or carried by any particular majority, or lost, shall be conclusive
evidence thereof.
11.05 Minutes
Minutes of all resolutions and proceedings at every such meeting, as
aforesaid, shall be made and duly entered in books to be provided by the Company
and any such minutes, as aforesaid, if signed by the Chairman of the meeting at
which such resolutions were passed or proceedings had, or by the Chairman of the
next succeeding meeting of Lenders, shall be prima facie evidence of the matters
therein stated, and until the contrary is proved, every such meeting in respect
of the proceedings of which minutes shall have been made shall be deemed to have
been duly held and convened and all resolutions passed or proceedings had
thereat to have been duly passed and had.
11.06 Signed Instrument in Lieu of Extraordinary Resolution
Notwithstanding the foregoing provisions of this Agreement, any resolution
or instrument signed in one or more counterparts by the holders of not less than
sixty-six and two thirds per cent (66-2/3%) of the aggregate principal amount of
the Loan for the time being outstanding shall have the same force and effect as
an Extraordinary Resolution duly adopted by the Lenders under the provisions of
this Article 11 with respect to Extraordinary Resolutions.
11.07 Binding Effect of Resolutions
Every resolution and every Extraordinary Resolution passed in accordance
with the provisions of this Article 11 at a meeting of Lenders shall be binding
upon all the Lenders, whether present at or absent from such meeting, and every
instrument in writing signed by Lenders in accordance with Section 11.06 shall
be binding upon the Lenders, whether signatories thereto or not, and each and
every Lender shall be bound to give effect accordingly to every such resolution
and instrument in writing. In the case of an instrument in writing, the Lender
shall give notice of the instrument in writing in the manner contemplated in
Article 15 to the Company and all Lenders, respectively, as soon as is
reasonably practicable.
ARTICLE 12
SUPPLEMENTAL INDENTURES
12.01 Supplemental Indentures
(1) From time to time, the Company, the Guarantor and the Lenders may,
when authorized by a resolution of the Directors and, subject to the provisions
of this Agreement, they shall, when so directed, execute, acknowledge and
deliver, by their respective proper officers, deeds or agreement supplemental
hereto, which thereafter shall form part hereof, for any one or more of the
following purposes:
(a) adding to the limitations or restrictions herein specified further
limitations or restrictions thereafter to be observed; provided that
the Lender shall be of the
<PAGE>
-23-
opinion that, and in the opinion of Counsel, such further
limitations or restrictions shall not be prejudicial to the
interests of the Lenders;
(b) adding to the covenants of the Company and the Guarantor herein
contained for the protection of the Lenders and/or providing for
events of default in addition to those herein specified;
(c) making such provisions not inconsistent with this Agreement as may
be necessary or desirable with respect to matters or questions
arising hereunder, such provisions and modifications will not be
prejudicial to the interests of the Lenders;
(d) making any additions to, deletions from or alterations of the
provisions of this Indenture which in the opinion of Counsel may
from time to time be necessary or advisable to conform the same to
"applicable legislation" as that term is defined in Article 12;
(e) evidencing the succession, or successive successions, of other
corporations to the Company and to the covenants of and obligations
assumed by any such successor in accordance with the provisions of
this Agreement;
(f) giving effect to any Extraordinary Resolution or signed instrument
in accordance with Article 11.06 hereof; and
(g) for any other purpose not inconsistent with the terms of this
Agreement.
<PAGE>
-24-
ARTICLE 13
TERMINATION
13.01 Termination
Except as otherwise expressly stated herein, this Agreement shall
terminate and be void and the Lenders shall, at the request and at the expense
of the Company, execute and deliver to the Company such deeds or other
instruments as shall be necessary to effect the cancellation hereof, if the
Company shall have first satisfied the Lender for the payment of all amounts due
or to become due on all of the Loans in the manner therein and herein provided
and also all other monies payable hereunder by the Company.
ARTICLE 14
COUNTERPARTS
14.01 Counterparts
This Agreement may be executed in one or more counterparts, each of which
so executed shall be deemed to be an original, and all of such counterparts
together shall constitute one and the same instrument.
ARTICLE 15
NOTICES
15.01 Notices to Company and Guarantor
Any notice to the Company or the Guarantor under this Agreement will be
valid and effective if given by registered letter, postage prepaid, by personal
delivery or by facsimile addressed to the Company to the attention of the
Chairman at 40 Centre Drive, Orchard Park, New York 14127-4102 (facsimile number
(716) 662-0033) and shall be deemed to have been effectively given from the date
five (5) business days after the date of mailing and on the next business day if
personally delivered or sent by facsimile. The Company and the Guarantor may
from time to time notify the Lender in writing of a change of address which
thereafter, until changed by like notice, shall be the address of the Company or
the Guarantor (as the case may be) for all purposes of this Indenture. In the
event of a general discontinuance of postal service due to strike, lockout or
otherwise, notices and other communications shall be delivered by hand or sent
by facsimile or other means of electronic communication and shall be deemed to
have been received if sent by facsimile or other means of electronic
communication, on the business day following the sending, or if delivered by
hand at the time it is delivered to the applicable address noted above either to
the individual designated herein or to an individual at such address having
apparent authority to accept deliveries on behalf of the address.
15.02 Notices to Lenders
<PAGE>
-25-
Any notice to the Lenders under the provisions of this Agreement shall be
valid and effective if given by registered letter, postage prepaid, addressed to
the Lenders at their principal office as set forth below:
Timothy P. Seel
155 Golden Pheasant Drive
Getzville, NY 14068
Fax No.: 1-716-662-0033
Patrick Brigham
c/o Schwartz, Levitsky, Feldman
1167 Caledonia Road
Toronto, Ontario
M6A 2X1
Attention: Bernard Taud
Fax No.: 416-785-5663
Heptagon Investments Ltd.
Broughton House,
6-8 Sackville Street
London, England
W1X 10D
Attention: Ian Barnett
Fax No.: (44171) 434-1393
E&M Machinery, Inc.
10 Kelly Avenue
Middleport, NY 14105
Attention: Scott Marsh
Fax No.: (716) 735-9023
RRSP Account #005727
c/o Roxborough Holdings Limited
One First Canadian Place
Suite 8250
Toronto, Ontario
M5X 1C7
Attention: David A. Williams
Fax No.: (416) 364-6650
<PAGE>
-26-
Hara Enterprises Limited
1 Balmoral Avenue
Suite 507
Toronto, Ontario
M4V 3B9
Attention: Greg O'Hara
Fax No.: (416) 513-0865
and shall be deemed to have been effectively given from the date five (5)
business days after the date of mailing and on the next business day if
personally delivered or sent by fax. In the event of a general discontinuance of
postal service due to strike, lockout or otherwise, notices and other
communications shall be delivered by hand or sent by facsimile or other means of
electronic communication and shall be deemed to have been received if sent by
facsimile or other means of electronic communication, on the business day
following the sending, or if delivered by hand at the time it is delivered to
the applicable address noted below either to the individual designated herein or
to an individual at such address having apparent authority to accept deliveries
on behalf of the address.
ARTICLE 16
FORMAL DATE
16.01 Formal Date
For the purposes of convenience, this Agreement may be referred to as
bearing formal date of July 31, 1998 irrespective of the actual date of the
execution hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Indenture.
RADIANT ENERGY CORPORATION
Per:_______________________________
Authorized Signing Officer
Per:_______________________________
Authorized Signing Officer
<PAGE>
-27-
PROCESS TECHNOLOGIES, INC.
Per: ______________________________________
Authorized Signing Officer
Per: ______________________________________
Authorized Signing Officer
HEPTAGON INVESTMENTS LTD.
Per: ______________________________________
Authorized Signing Officer
Per: ______________________________________
Authorized Signing Officer
E&M MACHINERY, INC.
Per: ______________________________________
Authorized Signing Officer
RRSP ACCOUNT #005727
Per: ______________________________________
Authorized Signing Officer
HARA ENTERPRISES LIMITED
Per: ______________________________________
Authorized Signing Officer
- ------------------------------- ------------------------------------------
Witness: Timothy P. Seel
- ------------------------------ ------------------------------------------
Witness: Patrick Brigham
<PAGE>
MDFC Equipment Leasing Corporation
Equipment Lease Agreement
Equipment Lease No. 3567-1
THIS EQUIPMENT LEASE AGREEMENT ("Lease") is dated as of the 20 day of December
1999, and is by and between -- MDFC Equipment Leasing Corporation, a Delaware
corporation ("Lessor") and Radiant Aviation Services, Inc., a New York
corporation ("Lessee").
W i t n e s s e t h:
1. Lease. Lessor hereby agrees, subject to satisfaction of the conditions
herein, to lease to Lessee and Lessee hereby agrees to lease from Lessor each
item of equipment (individually called an "Item of Equipment" and collectively
the "Equipment") described in each Individual Equipment Record ("IER") executed
and delivered by Lessor and Lessee pursuant to the terms of this Lease. Each IER
is hereby incorporated herein by this reference.
2. Term. The term ("Term") of this Lease shall commence, with respect to
an Item of Equipment, on the acceptance date ("Acceptance Date") for such Item
of Equipment as set forth in the applicable IER, and, subject to the terms
hereof, shall continue until the end of the base term ("Base Term") set forth in
such IER as measured from the base term commencement date ("Base Term
Commencement Date") set forth in such IER, plus any extensions or renewals of
the Base Term. This Lease shall be noncancellable for the Term except as
provided herein.
3. Rent; Overdue Rate. Lessee shall pay Lessor rent for an Item of
Equipment throughout the Term as set forth in the applicable IER, without
deduction or offset, in the amounts and at the times set forth in such IER. Any
rent or other amount not paid to Lessor when due hereunder shall bear interest,
both before and after any judgment or termination hereof, at the lesser of the
Prime Rate (as defined below) plus 3% per annum or the maximum rate allowed by
law (the "Overdue Rate"). Prime Rate shall mean the rate of interest equal to
the prime rate announced publicly from time to time by Chase Manhattan Bank in
New York (or any successor thereto). Acceptance of interest on overdue payments
by Lessor shall in no event constitute a waiver of Lessee's default with respect
to such overdue amount or prevent Lessor from exercising any of the other rights
and remedies granted hereunder or by applicable law. Rent and all other amounts
payable to Lessor hereunder shall be payable by federal funds wire transfer or
by Automated Clearing House (ACH) payment format Cash Concentration and
Disbursement Plus Addendum (CCD+) for the account of the Lessor to a bank to be
designated by Lessor, together with notice so as to provide Lessor with the use
of the funds on or before 11 a.m., California time, on the due date.
4. Taxes Against Lessor or Equipment. Lessee agrees to pay and to
indemnify against and hold Lessor harmless from, all license and registration
fees and sale, use, transfer, personal property, stamp or other taxes, levies,
imposts, duties, charges or withholdings of any nature whatsoever together with
any penalties, fines or interest thereon (collectively, "Taxes") imposed against
Lessor, Lessee or the Equipment or any part thereof by any foreign, Federal,
state, or local government or taxing authority, during the Term or in connection
with the termination of this Lease, upon or with respect to the Equipment or any
part thereof or upon the purchase, ownership, delivery, lease, possession, use,
operation, return or other disposition thereof, or upon the rentals, receipts or
earnings arising therefrom, or upon or with respect to this Lease (excluding,
however, (i) any taxes imposed by the Federal government on, based on, or
measured by, the net income of Lessor and (ii) any income or franchise taxes
imposed by any taxing authority other than the Federal government on, based on,
or measured by, the net income of Lessor which in the aggregate do not exceed
the amount of any such taxes which would be payable to the taxing authorities of
the jurisdictions, other than the United States of America, in which Lessor has
its principal place of business assuming no allocation or apportionment to any
other taxing authority). In case any report or return is required to be made
with respect to any obligation of Lessee under this Section or arising out of
this Section, Lessee will notify Lessor of such requirement and Lessee will
prepare such report or return for filing by Lessor in such manner as shall be
satisfactory to Lessor. If claim is made against Lessor for any Taxes, Lessor
shall promptly notify Lessee. If reasonably requested by Lessee in writing,
Lessor shall, at Lessee's expense, take such action as Lessee may reasonably
request with respect to such asserted liability, provided that Lessee furnishes
an opinion of independent counsel, which opinion and counsel shall both be
satisfactory to Lessor, to the effect that such action is prudent, reasonable
and proper, and if reasonably so requested by Lessee, any payment by Lessor of
such Taxes shall be made under protest, if protest is necessary and proper.
Notwithstanding the above, Lessor shall have the sole control over the contest
of such asserted liability. In addition, Lessor shall have the right to pay such
asserted liability at any time in its sole discretion in which case Lessor
shall, at Lessee's expense, take such action as Lessee may reasonably request to
recover such payment and shall, if requested, permit Lessee in Lessor's name to
file a claim or prosecute an action to recover such payment. All of the
Equipment Lease Agreement Page 1 of 11
<PAGE>
obligations of Lessee under this Section with respect to any Taxes imposed or
accrued before the expiration or other termination of this Lease shall continue
in full force and effect notwithstanding such expiration or other termination
and are expressly made for the benefit of, and shall be enforceable by, Lessor
and its successors and assigns.
5. Lessor's Right to Pay or Perform for Lessee. Should Lessee fail to make
any payment or do any act as herein required, then Lessor shall have the right,
but not the obligation, without releasing Lessee from any obligation hereunder,
to make or do the same, and to pay, purchase, contest or compromise any Lien (as
defined in Section 20 hereof) not permitted hereunder which in Lessor's judgment
may affect the Equipment or Lessor's rights with respect thereto, and in
exercising any such rights, incur any liability and expend whatever amounts in
its discretion it may deem necessary therefor. All sums so incurred or expended
by Lessor shall be payable by Lessee and shall bear interest at the Overdue Rate
from a date ten days after Lessee has been invoiced by Lessor to the date Lessor
is reimbursed therefor by Lessee.
6. Use and Ownership. Lessee shall use, operate, maintain and store the
Equipment in a careful and proper manner and shall comply with all laws,
ordinances, rules, regulations and insurance requirements in any way relating to
the possession, use, operation or maintenance of the Equipment. Lessee shall use
the Equipment only in the manner contemplated by the manufacturer thereof.
Lessee agrees to pay all costs incurred in connection with the use and operation
of the Equipment, during the Term thereof, including but not limited to repairs,
maintenance, storage and servicing.
Lessee acknowledges and agrees that it does not have and will not
acquire legal title to the Equipment, it being expressly understood that this
Lease is an agreement of lease only. If requested by Lessor, Lessee shall
promptly affix, keep and maintain upon each Item of Equipment labels provided by
Lessor indicating Lessor's ownership of the Equipment.
Lessee shall keep the Equipment free from any markings or labeling
which might be interpreted as a claim of ownership thereof by Lessee or any
party other than Lessor and its successors or assigns. Lessee shall not remove
an Item of Equipment from the location set forth in the IER applicable to such
Item of Equipment or transfer possession of the Equipment in any manner without
Lessor's prior written consent. Upon request by Lessor, Lessee promptly shall
give Lessor written notice of the exact location of the Equipment.
7. Alterations. Lessee shall not make any alterations, additions or
improvements to the Equipment without the prior written consent of Lessor except
such alterations, additions, or improvements that are required in order to
comply with the terms of this Lease or are required by law. All such
alterations, additions or improvements shall automatically become the property
of Lessor and shall be free of all Liens and Lessee shall provide a bill of sale
to Lessor for all such alterations, additions or improvements.
8. Maintenance and Repair. Lessee, at its sole cost and expense, shall
keep the Equipment in good operating order, repair, condition and appearance and
shall furnish any and all parts, mechanisms or devices required to keep the
Equipment in good mechanical and working order. In performing maintenance and
repair, Lessee shall comply with all of the manufacturer's specifications and
recommendations.
9. Delivery and Acceptance. Prior to execution of each IER, Lessee shall
have made at its expense all necessary inspections and tests of the applicable
Equipment, to determine whether such Equipment conforms to Lessee's
specifications. Upon execution of each IER by Lessee, the applicable Equipment
shall be deemed (as between Lessor and Lessee) to conform to Lessee's
specifications, to be in good condition and without defects and to be Equipment
accepted for all purposes of, and subject to the terms of, this Lease.
10. Inspection and Lessee Reports. Upon reasonable notice to the Lessee,
Lessor shall during normal business hours have the right to enter the premises
where the Equipment may be located for the purpose of inspecting and examining
the Equipment, its condition, use, and operation to ensure compliance by Lessee
with its obligations hereunder; provided, however, that Lessor shall have no
duty to inspect and shall not incur any liability or obligation by reason of not
making any such inspection.
Lessee shall immediately notify Lessor of any accident involving the
Equipment of which Lessee is aware and which may give rise to any claim by a
third party for personal injury or property damage including in such report the
time, place and nature of the accident, the damage caused to property, the names
and addresses of persons injured and of witnesses, and such other information as
may be relevant to such accident.
Lessee shall, as soon as practicable but no later than 90 days after
the close of each quarter and fiscal year of Lessee during the Term, furnish to
Lessor copies of Lessee's financial reports prepared by it in accordance with
generally accepted accounting principles as of the close of the period ended,
including Lessee's balance sheet and profit and loss statement,
Equipment Lease Agreement Page 2 of 11
<PAGE>
with said fiscal year reports audited by a recognized firm of independent
certified public accountants reasonably satisfactory to Lessor. If Lessee is a
corporation with publicly held debt or equity, Lessee also agrees to furnish
Lessor during the Term, promptly upon their availability, copies of all
financial statements, reports, notices and proxy statements, if any, sent by
Lessee to its public security holders, and of all regular and periodic reports
filed by Lessee with the principal securities exchange on which the securities
of Lessee are listed, if any, or with the Securities and Exchange Commission,
including but not limited to 10-K and 10-Q reports. Further, Lessee agrees to
furnish Lessor from time to time such other information as Lessor may reasonably
request.
11. Warranties. LESSOR IS NOT A MANUFACTURER OF THE EQUIPMENT OR A DEALER
IN SIMILAR EQUIPMENT AND HAS NOT INSPECTED THE EQUIPMENT PRIOR TO DELIVERY TO
AND ACCEPTANCE BY LESSEE. LESSOR HAS NOT MADE AND DOES NOT MAKE, BY VIRTUE OF
HAVING LEASED THE EQUIPMENT UNDER THIS LEASE OR BY VIRTUE OF ANY NEGOTIATIONS IN
RESPECT OF THIS LEASE, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO
TITLE, CONDITION, COMPLIANCE WITH SPECIFICATIONS OR REGULATIONS, QUALITY, VALUE,
DURABILITY, SUITABILITY, MERCHANTABILITY OR FITNESS FOR USE OR FITNESS FOR A
PARTICULAR PURPOSE OR ANY OTHER WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE EQUIPMENT. THE EQUIPMENT IS LEASED HEREUNDER BY LESSOR "AS-IS".
Lessor hereby covenants that, conditioned upon Lessee performing all
of the terms, covenants and conditions hereof, Lessor, its successors and
assigns, will not disturb Lessee's quiet possession and use of the Equipment
during the Term of this Lease.
So long as no Event of Default (as hereafter defined) has occurred
and is continuing, Lessor hereby authorizes Lessee during the Term of this Lease
to assert for Lessor's account all of its right, title and interest in, under
and to any warranty in respect of the Equipment issued by the manufacturer
thereof, and agrees to execute and deliver such further instruments as may be
reasonably necessary to enable Lessee to enforce such warranty. All claims or
actions on any warranty shall be made or prosecuted by Lessee, at its sole cost
and expense, and Lessor shall have no obligation whatsoever to make any claim on
such warranty. The parties agree that this Lease is intended to qualify as a
"finance lease" under Article 2A of the Uniform Commercial Code. Lessee
acknowledges that prior to execution of any IER Lessor has informed Lessee in
writing that Lessee may have rights under the purchase contract(s) under which
Lessor acquired the Equipment and that Lessee should contact the supplier(s) for
a description of any such rights.
12. Insurance. Throughout the Term of this Lease, Lessee at its own
expense shall maintain with respect to each Item of Equipment, as provided in
the applicable IER, (a) all risk physical loss insurance on such Item of
Equipment for an amount at least equal to the greater of the Stipulated Loss
Value set out in the applicable IER from time to time, or the then fair market
value with respect to such Item of Equipment and (b) public liability and
property damage insurance with respect to such Item of Equipment as set forth in
the IER. Such liability insurance shall be on an occurrence basis rather than a
claims made basis and it will operate with respect to the Lessor as a separate
policy, except as to the limits of liability. Such insurance shall be primary
insurance up to and including the stated policy limits and not excess over other
coverage. Such insurance shall (i) with respect to liability insurance, name
Lessor as an additional insured, (ii) with respect to all risk physical loss
insurance, name Lessor as loss payee and additional insured, (iii) waive any and
all rights of subrogation which the insurers may have or may acquire against the
Lessor, and (iv) be with companies satisfactory to Lessor. The Lessor has the
right to carry additional insurance at its own expense, provided that such
additional insurance does not increase the cost to the Lessee of carrying the
required insurance. There shall be no right of contribution with respect to any
insurance maintained by Lessor, Lessee or any other person.. All insurance
required hereunder shall provide that coverage may not be altered or canceled by
the insurer without thirty (30) days' prior written notice to Lessor. Losses
shall be adjusted only with and paid to, Lessor and its assignee, if any. Such
insurance shall not be invalidated, as against Lessor, by any action or inaction
of Lessee or any other person and shall insure Lessor regardless of any breach
or violation by Lessee or any other person of any warranties, declarations or
conditions contained in the policies evidencing such insurance or in
applications for such insurance. All such insurance required hereunder shall be
satisfactory to Lessor and shall contain such other endorsements as may be
requested by Lessor. Lessee hereby appoints Lessor as Lessee's attorney-in-fact
to make claim for, receive payment of and execute and endorse all documents,
checks or drafts for loss or damages or return premium under any insurance
policy issued on the Equipment; provided however, Lessor shall not exercise this
power of attorney unless an Event of Default has occurred and is continuing.
Lessee's obligations to keep the Equipment insured as provided herein shall
continue until the Equipment is returned to Lessor pursuant to the provisions
hereof.
Equipment Lease Agreement Page 3 of 11
<PAGE>
The insurance policy shall be endorsed to provide that the Lessor
will have no liability for premiums or other costs of the insurance required
hereby. The insurance carried by Lessee with respect to the Equipment shall be
no less favorable in scope or amount than that carried by Lessee with respect to
other comparable equipment. Such insurance shall not include any self-insured
retentions. Such insurance shall not include any deductibles except for any
deductibles which are consistent with Lessee's industry standard and are
acceptable to Lessor.
Lessee shall furnish Lessor with insurance certificates evidencing
such insurance prior to the Acceptance Date of the applicable IER and prior to
the earlier of the expiration of such certificates or each anniversary date of
the Acceptance Date. Each certificate of insurance shall be attached to a letter
from an insurance broker acceptable to Lessor confirming that the underlying
insurance policy summarized by the certificate of insurance complies with the
requirements of this Section 12. At Lessor's request, Lessee shall provide to
Lessor a copy of the entire insurance policy covering the Equipment.
For purposes of this Lease the term "Stipulated Loss Value" for an
Item of Equipment as of any date of computation shall be the product of (x) the
cost paid by Lessor for such Item of Equipment as set forth in the applicable
IER and (y) that Stipulated Loss Value percentage set forth in such IER opposite
the applicable rental payment with respect to such Item of Equipment.
13. Risk, Event of Loss and Condemnation.
(a) Risk: Commencing on the Acceptance Date and continuing until the
expiration of the Term of this Lease and the return by Lessee of the Equipment
to Lessor pursuant to the provisions hereof, Lessee assumes the entire risk of
any Event of Loss (as defined below) and no such Event of Loss shall relieve
Lessee of any of its obligations hereunder.
(b) Definition - Event of Loss: For purposes of this Section an
Event of Loss with respect to an Item of Equipment shall mean any of the
following events: (i) the actual or constructive total loss of such Item of
Equipment; (ii) such Item of Equipment shall become lost, stolen, destroyed,
damaged beyond repair or permanently rendered unfit for its intended use for any
reason whatsoever; (iii) the condemnation, confiscation or seizure of, or
requisition of title to or use of, such Item of Equipment; or (iv) the
termination, for any reason whatsoever, of this Lease by operation of law.
(c) Deprivation Constituting an Event of Loss: Upon the occurrence
of an Event of Loss, Lessee shall promptly give notice thereof to Lessor and
shall pay or cause to be paid to Lessor, on the earlier of the next rental
payment date or thirty (30) days after the occurrence of an Event of Loss, in
immediately available funds: (i) accrued rentals on a daily basis, if any, with
respect to such Item of Equipment to the payment date, (ii) the greater of the
Stipulated Loss Value for such Item of Equipment computed as of such payment
date or the then fair market value with respect to such Item of Equipment, (iii)
interest on the unpaid balance of the amount set forth in (i) and (ii) above at
the Overdue Rate from the date such payment is due to the date of receipt and
(iv) all other unpaid amounts due hereunder. At such time as Lessor has received
the sum of (i), (ii), (iii) and (iv) above, the obligation of Lessee to pay rent
hereunder with respect to such Item of Equipment shall terminate and Lessor will
transfer to Lessee, without recourse or warranty, "AS IS, WHERE IS", all of
Lessor's right, title and interest, if any, in and to the Item of Equipment with
respect to which such Event of Loss occurred.
(d) Deprivation Not Constituting an Event of Loss: In the event of
damage to any Item of Equipment not constituting an Event of Loss, Lessee shall
promptly notify Lessor in writing of such damage and shall remain obligated to
make all payments of rent and other amounts due with respect to such Item of
Equipment which may become due hereunder in the same manner as if such damage
had not occurred. Lessee shall repair and restore such Item of Equipment with
new and unused components to the condition it was in immediately prior to the
occurrence of such damage (assuming such Item of Equipment was maintained in
accordance with the terms of this Lease). So long as no Event of Default shall
have occurred and be continuing, all payments from insurance proceeds or
otherwise with respect to any such damage shall be used to reimburse Lessee for
its out-of-pocket expenses upon receipt by Lessor of satisfactory evidence that
Lessee has repaired such Item of Equipment.
(e) Application of Payments: Upon the occurrence of any Event of
Loss, Lessor shall be entitled to and shall receive the entire award, judgment,
settlement, insurance proceeds or payments and all installments thereof to the
extent of Lessee's obligations under 13(c) hereof. Lessee hereby assigns to
Lessor, to the extent provided in the immediately preceding sentence any right
or interest Lessee may have or may hereafter acquire in any such award or
payment.
14. Indemnity; Exemption of Lessor from Liability. Lessee agrees to defend
at its own cost and to indemnify and hold harmless Lessor, its successors and
assigns, and their respective agents and employees, from and against any and all
losses, claims, patent infringements, costs, expenses (including attorneys'
fees), damages and liabilities (including those for strict liability in tort),
however caused, resulting directly or indirectly in any manner from the issuance
of Lessor's purchase order, assignment of
Equipment Lease Agreement Page 4 of 11
<PAGE>
Lessee's purchase order or agreement to purchase, Lessee's failure, delay or
refusal to accept delivery, the ownership, purchase, lease, maintenance,
possession, return or disposition of the Equipment, or directly or indirectly
from or pertaining to the use, condition, design (including without limitation
latent or other defects whether or not discoverable) or operation of the
Equipment or the performance of this Lease (including without limitation such
losses, claims, costs, expenses, damages and liabilities arising from the death
or injury to agents or employees of Lessee or Lessor or any third person, or
damage to the property of Lessee or Lessor, their agents or employees, or any
third person) except for such damages, losses, expenses or liabilities arising
out of the gross negligence or willful misconduct of Lessor, its agents or
employees. This indemnification shall survive the expiration, cancellation or
other termination of this Lease and is for the benefit of and enforceable by
Lessor and its successors and assigns.
Lessee hereby agrees that Lessor shall not be liable for any damage
to Lessee's business or any loss of income therefrom or for damage to the goods,
wares, merchandise or other property of Lessee, or for injury to the Lessee or
any of its officers, directors, agents or invitees, resulting from this Lease or
caused in any way by an Item of Equipment.
15. Return of Equipment. Upon the expiration or earlier termination of the
Term of this Lease with respect to an Item of Equipment, or upon request of
Lessor pursuant to Section 16(b)(1), Lessee shall return such Item of Equipment
to Lessor, free of all advertising or insignia placed thereon by Lessee, free
and clear of all mortgages, liens, security interests, charges, encumbrances and
claims, and in the same operating order, repair, condition and appearance as
when received, and shall pay for any repairs and refurbishing necessary to
restore such Item of Equipment to its original condition, ordinary wear and tear
excepted. Lessee shall return such Item of Equipment to Lessor and shall load
and ship same, freight and insurance prepaid, to a destination directed by
Lessor.
In addition, Lessee shall permit Lessor to store any such Item of
Equipment for a period not to exceed ninety (90) days after the expiration of
the Term. Until such Item of Equipment shall have been delivered to Lessor,
Lessee shall bear any costs of storage and risk of loss. Notwithstanding
anything to the contrary contained herein, commencing on the expiration of the
Term, Lessee shall provide Lessor, or any person designated by Lessor, access to
such Equipment and will allow Lessor to demonstrate the Equipment to authorized
representative(s) or agent(s) of prospective purchasers or lessees of such
Equipment or Lessor's representative(s) or agent(s), and will permit said
representative(s) or agent(s) to examine the maintenance, operating performance
or other records relating to such Equipment. The delivery, storage and
transporting of the Equipment as hereinbefore provided are of the essence of the
Lease, and upon application to any court of equity having jurisdiction Lessor
shall be entitled to a decree against Lessee requiring specific performance of
the covenants of Lessee to assemble, deliver, store and transport the Equipment.
In the event Lessee fails to complete any necessary repairs or
replacements or return any Item of Equipment as provided in this Section or
otherwise fails to comply with any provision of this Section, Lessor may, at its
option and in addition to any other remedy or remedies afforded Lessor herein or
by law, charge Lessee, and Lessee agrees to pay, interim rent equal to the daily
rent equivalent of the rental installments set forth in the applicable IER for
each day until (i) such repairs and replacements are completed, (ii) such Item
of Equipment is returned to Lessor, and (iii) Lessee takes such other action as
is necessary to comply with the provisions of this Section. During such
continuation period Lessee shall, in addition to the payment of interim rent,
continue to perform all obligations under the Lease. Lessor may terminate such
continued leasehold interest upon ten (10) days notice to Lessee.
Notwithstanding the foregoing, if Lessor and Lessee have agreed to
specific return conditions for an Item of Equipment (which shall be included
either as an addendum to this Lease, or contained within the applicable IER),
then such return conditions shall be controlling to the extent that the
conditions are inconsistent with those contained in this Section.
16. Default, Remedies and Damages.
(a) Defaults: For purposes of this Lease, the following events shall
each constitute an "Event of Default":
(1) Lessee shall fail to make any payment to Lessor or to
third parties when due under this Lease and such failure to pay shall continue
for a period of ten (10) or more days after the due date thereof.
(2) There shall occur any termination of, material alteration
in the scope of the coverage of, or reduction in the maximum amounts payable
under any insurance required to be maintained by Lessee pursuant to this Lease.
Equipment Lease Agreement Page 5 of 11
<PAGE>
(3) Any representation or warranty made by Lessee herein or by
Lessee or any guarantor of Lessee's obligations to Lessor hereunder
("Guarantor") in any document or certificate furnished Lessor in connection
herewith shall prove to be incorrect when made in any material respect.
(4) Lessee or Guarantor shall fail to perform or observe any
other covenant, condition, or agreement to be performed or observed hereunder or
under any guaranty of this Lease and such failure shall continue unremedied for
a period of thirty (30) days.
(5) Lessee or any affiliate shall default in the payment of,
or other performance under, any obligation for payment or lease. Guarantor shall
fail to pay and obligation for borrowed money, for the deferred purchase price
of property or for the payment of rent or hire (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise).
(6) There shall be entered any judgment, against Lessee or any
Guarantor for the payment of money, which is final and not discharged, appealed
or bonded within thirty (30) days.
(7) There shall be (i) entered a decree or order for relief by
a court having jurisdiction in respect of Lessee or any Guarantor in an
involuntary case under any applicable federal, state or foreign bankruptcy,
insolvency or other similar law as now or hereafter constituted (collectively,
"Bankruptcy Laws"), or the appointing of a receiver, liquidator, or similar
official ("Receiver") of Lessee or any Guarantor for a material portion of its
assets, or ordering the winding-up or liquidation of its affairs and the
continuance of any such decree or order remains unstayed and in effect for a
period of sixty (60) consecutive days, or (ii) commenced by Lessee or any
Guarantor a voluntary case under the Bankruptcy Laws, or the consent by it to
the appointment of or taking possession by a Receiver for Lessee or any
Guarantor or for a material portion of its assets or the making by it of any
assignment for the benefit of creditors, or the admission by it of its
insolvency or inability to pay its debts as they come due, or (iii) any seizure
or attachment of a material portion of the assets of Lessee or of any Guarantor
which is not vacated or bonded within sixty (60) days.
(b) Remedies: Upon the occurrence and at any time during the
continuance of any Event of Default, Lessor may in its sole discretion do any
one or more of the following with respect to the Equipment or any Item of
Equipment:
(1) Instruct Lessee to immediately comply with the provisions
of Section 15 (and Lessee hereby agrees to then so comply).
(2) Terminate this Lease.
(3) Enter, with or without legal process, any premises where
any Item(s) of Equipment is believed to be and take possession thereof (and
Lessee hereby authorizes Lessor to do so).
(4) Instruct Lessee to pay Lessor the Stipulated Loss Value of
the Equipment. Lessee shall, no more than five (5) business days following its
receipt of such instruction pay to Lessor (i) the Stipulated Loss Value of the
Item(s) of Equipment (calculated as of the rental date immediately preceding the
declaration of default), and (ii) all rentals and other sums then due and
payable hereunder.
(5) Lessor may, but shall not be required to, sell any Item(s)
of Equipment at private or public sale, in bulk or in parcels, with or without
notice, and without having the Item(s) of Equipment present at the place of
sale; or Lessor may, but shall not be required to, lease, otherwise dispose of
or keep idle all or part of the Equipment; and Lessor may use Lessee's premises
for any or all of the foregoing without liability for rent, costs, damages or
otherwise. The proceeds of sale, lease or other disposition, if any, shall be
applied upon receipt by Lessor in the following order of priorities: (i) to pay
all of Lessor's costs, charges and expenses incurred in repossessing,
recovering, storing, repairing, selling, leasing or otherwise disposing of
Equipment including without limitation attorneys' fees and costs; then, (ii) to
the extent not previously paid by Lessee, to pay Lessor all sums then due and
payable from Lessee; then (iii) to reimburse Lessee any sums previously paid by
Lessee under (4) above; and (iv) any surplus shall be retained by Lessor. Lessee
shall pay the sums described in (i) above within five (5) days of billing
therefor.
The foregoing remedies are cumulative, and any or all thereof may be
exercised in lieu of or in addition to each other or any remedies at law, in
equity or under statute. Waiver of any default shall not be waiver of any other
or subsequent default.
Equipment Lease Agreement Page 6 of 11
<PAGE>
Any default under the terms of this or any other agreement between
Lessor and Lessee which is not waived by Lessor may be declared by Lessor a
default under this and any such other agreement.
17. Assignment, Merger or Asset Sale By Lessee. WITHOUT THE PRIOR WRITTEN
CONSENT OF LESSOR (WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD), LESSEE
SHALL NOT TRANSFER, SUBLEASE, ASSIGN, PLEDGE OR HYPOTHECATE THIS LEASE, THE
EQUIPMENT OR ANY PART THEREOF OR ANY INTEREST THEREIN, MERGE INTO OR CONSOLIDATE
WITH ANY OTHER CORPORATION OR ENTITY, OR SELL, LEASE OR OTHERWISE DISPOSE OF A
MAJORITY OF ITS ASSETS. IN THE EVENT LESSOR CONSENTS TO ANY OF THE FOREGOING
ACTS, LESSEE AGREES THAT LESSOR MAY CHARGE LESSEE A REASONABLE DOCUMENTATION AND
ADMINISTRATION FEE. CONSENT TO ANY OF THE FOREGOING ACTS SHALL NOT BE DEEMED TO
BE CONSENT TO ANY SUBSEQUENT SIMILAR ACT.
18. Assignment by Lessor. Lessor may assign, pledge or in any other way
transfer this Lease and the Equipment in whole or in part, or any interest
therein, without notice to Lessee, and Lessee shall execute such consents
thereto as may be required by Lessor. Should this Lease or any interest therein
be assigned or should the rentals hereunder be assigned, no breach or default by
Lessor of this Lease or any other agreement between Lessee and Lessor shall
excuse performance by Lessee of any provision hereof, and no assignee shall be
obligated to perform any covenant, condition or obligation required to be
performed by Lessor hereunder. The right of such assignee shall be free of all
defenses, setoffs and counterclaims which Lessee might now or hereafter be
entitled to assert against Lessor. In the event any assignee agrees to assume
the obligations of Lessor, Lessee shall look solely to such assignee, and Lessor
shall be released from all further liability hereunder.
19. Personal Property. The Equipment shall remain personal property
regardless of whether it becomes affixed or attached to real property or
permanently rests upon any real property or any improvement thereon, and Lessee
shall do all acts and enter into all agreements necessary to ensure that the
Equipment remains personal property.
Lessee shall keep the Equipment free and clear of any liens,
charges, encumbrances or claims of the owner(s) of any interest in the real
estate on which it is located and any purchaser of or present or future creditor
obtaining a lien on such real estate, and shall promptly obtain and deliver to
Lessor a waiver of any such liens or claims as to the Equipment in recordable
form satisfactory to Lessor.
20. Liens. Lessee shall not directly or indirectly create, incur, assume
or suffer to exist any mortgage, pledge, lien, charge, encumbrance, security
interest, right or claim of any kind ("Lien") on, or with respect to, any Item
of Equipment, title thereto or any interest therein.
Lessee will promptly notify Lessor in writing of the existence of
any Lien and will, at Lessee's expense, cause any such Lien to be duly
discharged, dismissed and removed or fully bonded within thirty (30) days after
the existence of the same shall have first become known to Lessee or sooner if
necessary to prevent the loss of possession of any Item of Equipment.
21. Prohibition Against Setoff, Counterclaim, Etc. Lessee's obligation to
pay all amounts due hereunder shall be absolute and unconditional and shall not
be affected by any circumstance whatever, including, without limitation (i) any
setoff, counterclaim, defense, or other right which Lessee may have against
Lessor, (ii) any defect in the title, condition, design, operation, or fitness
for use of, or any damage to or loss or destruction of, or breach of warranty
with respect to the Equipment, or any interruption or cessation in the use or
possession thereof by Lessee for any reason whatsoever, or (iii) any insolvency,
bankruptcy, reorganization or similar proceedings by or against Lessee or
Lessor.
22. Representations, Warranties and Covenants of Lessee. Lessee
represents, warrants and covenants: (i) that it is duly organized and existing
in good standing under the laws of the state in which it is organized, with the
necessary power and qualifications to perform this Lease, (ii) that this Lease
has been duly authorized by all necessary action on the part of Lessee and will
not contravene or breach any legal, organizational or contractual provision
binding upon Lessee, (iii) that this Lease constitutes valid, binding and
enforceable obligations of Lessee and is enforceable in accordance with its
terms, (iv) that as of the date of each IER there are no suits or proceedings
pending or threatened against Lessee which may have a material adverse effect on
Lessee's financial condition or business, (v) that as of the date of each IER no
material adverse change in Lessee's financial condition as represented in its
most recent financial statements submitted to Lessor has occurred and (vi) the
Lessee has reviewed the effect of the Year 2000 Issue on the computer software,
hardware and firmware systems and equipment containing embedded microchips owned
or operated by or for the Lessee or used or relied upon in the conduct of its
business (including systems and equipment supplied by others or with which such
computer systems of the Lessee interface) and that the costs to the
Equipment Lease Agreement Page 7 of 11
<PAGE>
Lessee of any reprogramming required as a result of the Year 2000 Issue to
permit the proper functioning of such systems and equipment and the proper
processing of data, and the testing of such reprogramming, and of the reasonably
foreseeable consequences of the Year 2000 Issue to the Lessee (including
reprogramming errors and the failure of systems or equipment supplied by others)
will not have a material adverse effect on the Lessee's earnings, cash flow or
financial condition. "Year 2000 Issue" shall mean the failure of the computer
software, hardware and firmware systems and equipment containing embedded
computer chips to properly receive, transmit, process, manipulate, store,
retrieve, re-transmit or in any other way utilize date and information due to
the occurrence of the year 2000 or the inclusion of dates on or after January 1,
2000.
23. Attorneys' Fees. Lessee shall pay all costs and reasonable attorneys'
fees incurred by Lessor in collecting or attempting to collect any sums owed
under this Lease or in enforcing any of Lessor's rights or remedies under this
Lease including without limitation obtaining possession of the Equipment or
seeking relief from stay or other remedies in bankruptcy court.
24. Notices. All notices, requests and demands to or upon any party hereto
shall be deemed duly given or made when sent if given by telecopier, when
delivered if given by personal delivery or overnight commercial carrier, on the
third calendar day after deposit in the United States mail, certified mail,
return receipt requested, addressed to such party at its address set forth
below. All notices required under the terms and provisions hereof shall be in
writing and addressed (i) if to Lessee:
Radiant Aviation Services, Inc.
40 Centre Drive
Orchard Park, NY 14127
Attention: Colin V. F. Digout
or at such other address as Lessee shall from time to time designate in writing
to Lessor, or (ii) if to Lessor:
MDFC Equipment Leasing Corporation
4060 Lakewood, Blvd., 6th Floor
Long Beach, California 90808-1700
Attention: Vice President -
Commercial Equipment Leasing
or at such other address as Lessor shall from time to time designate in writing
to Lessee.
25. Conditions Precedent. As conditions precedent to Lessor's duties under
this Lease, Lessee shall furnish to Lessor on or before the Acceptance Date for
each IER under this Lease the following, all of which shall be satisfactory to
Lessor: (a) an opinion of counsel for Lessee with respect to those
representations set forth in Section 22(i) through (iv) inclusive hereof and
with respect to such other matters as Lessor may require, (b) board of
directors' resolutions or partnership authorizations, as the case may be,
authorizing this Lease and Lessee's performance hereunder, (c) certificates of
insurance, (d) real property waivers, if applicable, and (e) such other
documents and evidence of authority for Lessee as Lessor may require.
26. Miscellaneous. No delay or omission to exercise any right, power or
remedy accruing to Lessor upon any breach or default by Lessee under this Lease
shall impair any such right, power or remedy; nor shall any such delay or
omission be construed as a waiver of any breach or default, or of any similar
breach or default thereafter occurring; nor shall any waiver of a single breach
or default be deemed a waiver of any subsequent breach or default; nor shall
consent by Lessor to any act of Lessee be deemed to be consent to any subsequent
similar act.
Any provision of this Lease which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
To the extent permitted by applicable law, Lessee hereby waives any
provision of law which renders any provision of this Lease prohibited or
unenforceable in any respect. Any action by Lessee against Lessor for any
default by Lessor under this Lease shall be barred unless commenced within one
(1) year after any such default occurs.
Equipment Lease Agreement Page 8 of 11
<PAGE>
This Lease shall be binding upon, and inure to the benefit of,
Lessee and Lessor and their respective successors and permitted assigns. If
there is more than one Lessee, the obligations of Lessee hereunder are joint and
several. Time is of the essence of each and every obligation under this Lease.
Lessee hereby authorizes Lessor to correct patent errors and to fill
in such blanks as serial numbers and dates herein and in the Individual
Equipment Records and in any document executed in connection herewith.
27. Recording, Registration and Filing. All searches, recordings,
registrations, and filings of this Lease, required by law or requested by Lessor
to protect Lessor's title and interest in the Equipment, shall be accomplished
at Lessee's expense in a manner satisfactory to Lessor. Lessee agrees to execute
all documents deemed necessary by Lessor to protect Lessor's interest in the
Equipment. Provided an Event of Default has occurred and is continuing, Lessee
hereby appoints Lessor as Lessee's irrevocable agent and attorney-in-fact to
execute all such documents.
28. Tax Indemnity.
(a) Lessee hereby represents and warrants to Lessor (such term for
the purpose of this Section 28 meaning Lessor and the corporations with which
Lessor consolidates its United States Federal income tax returns) that:
(1) the Term for each Item of Equipment (including extensions
thereof) does not exceed 80% of the useful life of such Item of Equipment;
(2) A reasonable estimate of the fair market value of each
Item of Equipment to Lessor, at the end of the Term, without including in such
value any increase or decrease for inflation or deflation during the Term and
after subtracting any costs of delivery of possession to Lessor, will not be
less than 20% of Lessor's cost for such Item of Equipment, as set forth in the
IER ("Equipment Cost");
(3) all of the Equipment has the Class Life, and is
depreciable under the method and over the recovery period, set forth in the IER
to the full extent of Equipment Cost pursuant to Section 168 of the Internal
Revenue Code of 1986, as amended from time to time, and any Regulations that are
or may be promulgated thereunder ("Code");
(4) the Equipment Cost does not exceed the fair market value
of the Equipment;
(5) each Item of Equipment will be placed in service on the
Acceptance Date; and
(6) this Lease is a true lease for all purposes, including but
not limited to Federal, state and local tax purposes;
(b) Lessee covenants to Lessor and agrees that:
(1) it will characterize the relationship herein established
as a lease and will treat it as such for all purposes;
(2) it shall not utilize or claim or attempt to utilize or
claim for any purposes whatsoever the accelerated cost recovery deductions equal
to 100% of Equipment Cost provided by Section 168 of the Code and computed under
the method and over the recovery period set forth in the IER ("MACRS
Deductions") and depreciation deductions equal to 100% of Equipment Cost based
on those allowable for property with a Class Life as set forth in the IER using
the most accelerated method available under applicable state or local law or
Federal alternative minimum tax law ("Depreciation Deductions");
(3) no Item of Equipment will be used predominantly outside
the United States within the meaning of Section 168(g) of the Code;
(4) during the Term, Lessor will not have to recognize any
item of income with respect to this Lease, except amounts received by Lessor as
they become due and which are characterized as rent or additional rent by this
Lease ("Other Income"); and
(5) it will neither take any action, nor fail to take any
action (including without limitation actions or failures to act otherwise
permitted hereunder), which will have the result of causing Lessor to recognize
Other Income or to lose
Equipment Lease Agreement Page 9 of 11
<PAGE>
or to recapture all or any part of the MACRS Deductions or Depreciation
Deductions attributable to the Equipment, or its ownership thereof.
In the event any of Lessee's representations, warranties or
covenants set forth in this Section 28 prove incorrect for any reason whatsoever
at any time, and as a result thereof Lessor recognizes Other Income or loses all
or any part of the benefit of the MACRS Deductions or Depreciation Deductions
attributable to the Equipment or is required to recapture all or any part of the
MACRS Deductions or Depreciation Deductions attributable to the Equipment
("Loss"), Lessee shall indemnify and shall pay to Lessor, with respect to each
Loss, a sum, which, after deduction of all taxes required to be paid by Lessor
in respect of the receipt of such sum under the laws of any Federal, state or
local government or taxing authority in the United States (or which would have
been required to be paid by Lessor upon such receipt had Lessor had sufficient
gross income within the meaning of Section 61 of the Code, or the applicable
state or local law, to actually pay such tax) shall be equal to (a) the amount
of additional Federal, state, or local income taxes required to be paid with
respect to such Loss (or which would have been required to be paid by Lessor for
such Loss had Lessor had sufficient gross income within the meaning of Section
61 of the Code, or the applicable state or local law, to actually pay such tax
or derive the benefit of such deduction), plus (b) the amount of any penalties,
interest, and other additions to tax (including, but not limited to, any
additions to tax because of underpayment of estimated tax) which may be payable
by Lessor in connection with the Loss. To the extent not taken into account in
computing the amount payable by Lessee with respect to the Loss, Lessor shall
pay Lessee the amount of any savings in Federal income taxes when and to the
extent realized by Lessor as a result of the Loss (such payments not to exceed
in the aggregate the amount of any indemnity previously paid by Lessee pursuant
to this Section 28); provided, however, that if Lessor loses such tax savings
subsequent to any payment to the Lessee with respect thereto, Lessee shall
indemnify Lessor with respect to such loss pursuant to the provisions of this
Section 28.
The liability of Lessee to make any indemnity payments hereunder
shall become fixed at the time Lessor makes payment of the tax attributable to
the Loss, or if Lessor is not required to make payment of tax with respect to
the Loss, the date on which Lessor files its tax return for the taxable year in
which such Loss occurs, and shall be due and payable within 15 days after
receipt by Lessee of written notice from Lessor as to the fixing of such
liability. Lessee shall pay interest on any indemnity payment not made when due
at the Overdue Rate.
In the event a written claim shall be made by the Internal Revenue
Service, Lessor agrees to notify the Lessee promptly in writing of such claim,
and agrees to cooperate with the Lessee in good faith in order that such claim
may be contested effectively; provided that Lessor shall control such contest.
In the event that Lessor waives its right to indemnification under this Section
28 with respect to such claim, Lessee shall have no further rights with respect
to the contest of such claim.
(c) The indemnification provided herein shall survive the expiration
or other termination of the Lease.
29. Counterparts. This Lease may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute the same
instrument.
30. Governing Law, Jurisdiction and Waiver of Jury Trial. THIS LEASE SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA. LESSEE HEREBY IRREVOCABLY CONSENTS AND AGREES
THAT ANY LEGAL ACTION RELATING TO ANY LEASE DOCUMENT MAY BE INSTITUTED IN THE
COURTS OF THE STATE OF CALIFORNIA, IN THE COUNTY OF LOS ANGELES OR THE UNITED
STATES COURTS FOR THE SOUTHERN DISTRICT OF CALIFORNIA, AS LESSOR MAY ELECT, AND
BY EXECUTION AND DELIVERY OF THIS LEASE, LESSEE HEREBY IRREVOCABLY ACCEPTS AND
SUBMITS TO, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, THE NON-EXCLUSIVE
JURISDICTION OF ANY SUCH COURT, AND TO ALL PROCEEDINGS IN SUCH COURTS. LESSEE
AND LESSOR ACKNOWLEDGE THAT JURY TRIALS OFTEN ENTAIL ADDITIONAL EXPENSES AND
DELAYS NOT OCCASIONED BY NONJURY TRIALS. LESSEE AND LESSOR AGREE AND STIPULATE
THAT A FAIR TRIAL MAY BE HAD BEFORE A STATE OR FEDERAL JUDGE BY MEANS OF A BENCH
TRIAL WITHOUT A JURY. IN VIEW OF THE FOREGOING, AND AS A SPECIALLY NEGOTIATED
PROVISION OF THIS LEASE, LESSEE AND LESSOR HEREBY EXPRESSLY WAIVE ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS
LEASE OR THE TRANSACTIONS RELATED HERETO, WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND LESSEE AND
LESSOR HEREBY AGREE AND CONSENT THAT LESSEE AND LESSOR MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS PROVISION WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
31. Written Amendments to Lease. This Lease, together with each IER and
any exhibits, amendments, riders, addenda or other documents or instruments
executed by Lessee and/or Lessor in connection herewith, constitutes the entire
agreement between Lessor and Lessee and shall supersede all prior or
contemporaneous discussions, negotiations and agreements, whether written or
oral, between Lessor and Lessee with respect to the lease of the Equipment
including, without limitation, any term sheet, proposal or commitment letter
prepared in connection with this Lease. This Lease may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which the enforcement of the change, waiver, discharge
Equipment Lease Agreement Page 10 of 11
<PAGE>
or termination is sought. By executing this provision below, Lessee agrees that
the provision concerning a separately signed document pursuant to California
Commercial Code Section 10208(b) (UCC Section 2A-208) has been complied with.
----------------------------------------
Lessee's signature
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed by their duly authorized officers on the date and year first written
above.
LESSOR: LESSEE:
MDFC Equipment Leasing Corporation Radiant Aviation Services, Inc.
By: /s/ James C. Hammersmith By: /s/ Colin V.F. Digout
------------------------------- ------------------------------------
Printed Name: James C. Hammersmith Printed Name: Colin V.F. Digout
--------------------- --------------------------
Title: Senior Documentation Officer Title: Chief Operations Officer
---------------------------- ---------------------------------
By: /s/ Timothy P. Seel
------------------------------------
Printed Name: Timothy P. Seel
--------------------------
Title: Vice President, Engineering
---------------------------------
Equipment Lease Agreement Page 11 of 11
<PAGE>
MDFC Equipment Leasing Corporation
Individual Equipment Record ("IER")
IER No. 3567-1-001
To that Equipment Lease Agreement ("Lease") dated as of December 20, 1999
between:
Lessor: MDFC Equipment Leasing Corporation Lessee: Radiant Aviation
Services, Inc.
40 Centre Drive
4060 Lakewood Blvd., 6th Floor Orchard Park, NY 14127
Long Beach, CA 90808
Contact: Colin V. F, Digout
Phone: (716) 662-0022
Location of Equipment: /x/ New Equipment // Used Equipment
Address at which the Equipment described below will be located during the
Term:
Newark Airport, Newark, NJ
Delivery location if different than the above address:
- --------------------------------------------------------------------------------
Sales and Use Tax: Insurance Requirements:
// Sales tax included in cost Liability:
// Use tax to be added to rentals Bodily Injury Liability: $5,000,000.00
// Exempt per ___________________ per person/per accident: $5,000,000.00
Property Damage Liability: $5,000,000.00
per accident: $5,000,000.00
All Risk: $2,600,000.00
- --------------------------------------------------------------------------------
Base Term: 84 Months
Acceptance Date: December 24, 1999
Base Term Commencement Date: December 24, 1999
Payment of 84 Base Term rental installments, each such installment to be in the
amount of $49,093.65, shall be payable on the 24th day of each month commencing
January 24, 2000. The Base Term rent shall be allocated to the rental period
immediately preceding the date such rent is due. In addition, contingent rent
equal to 10% of the monthly deicing revenue shall be due 90 days after the end
of each calendar month.
- --------------------------------------------------------------------------------
Equipment Description Serial Number Equipment Cost
================================ ============================ ==================
InfraTek Aircraft Deicing System $3,383,700.00
- --------------------------------------------------------------------------------
Page 1 of 7
<PAGE>
Stipulated Loss Values
AFTER S.L.V. AFTER S.L.V. AFTER S.L.V.
PAYMENT AS A PERCENT PAYMENT AS A PERCENT PAYMENT AS A PERCENT
NUMBER OF ORIGINAL COST NUMBER OF ORIGINAL COST NUMBER OF ORIGINAL COST
- ------- ---------------- ------- ---------------- ------- ----------------
0 100.7 28 83.7 56 61.9
1 100.2 29 83.0 57 61.1
2 99.7 30 82.3 58 60.2
3 99.2 31 81.6 59 59.4
4 98.6 32 80.9 60 58.5
5 98.1 33 80.1 61 57.6
6 97.6 34 79.4 62 56.8
7 97.0 35 78.7 63 55.9
8 96.5 36 77.9 64 55.0
9 95.9 37 77.2 65 54.1
10 95.3 38 76.4 66 53.2
11 94.8 39 75.6 67 52.4
12 94.2 40 74.9 68 51.5
13 93.6 41 74.1 69 50.6
14 93.0 42 73.3 70 49.7
15 92.3 43 72.6 71 48.8
16 91.7 44 71.8 72 47.9
17 91.1 45 71.0 73 47.1
18 90.4 46 70.2 74 46.2
19 89.8 47 69.4 75 45.3
20 89.2 48 68.6 76 44.4
21 88.5 49 67.7 77 43.5
22 87.8 50 66.9 78 42.6
23 87.2 51 66.1 79 41.7
24 86.5 52 65.3 80 40.9
25 85.8 53 64.4 81 40.0
26 85.1 54 63.6 82 39.1
27 84.4 55 62.8 83 38.3
84 37.5
THEREAFTER 37.5
CI LBW20008521
Page 2 of 7
<PAGE>
RETURN CONDITIONS
Infratek Deicing System
Upon the expiration or earlier termination of this Lease with respect to the
Item(s) of Equipment, the Lessee, at its own risk and expense, will return such
Item(s) of Equipment then subject to this Lease to the Lessor pursuant to the
Lessor's instructions to a location designated by Lessor. Such Equipment upon
redelivery shall be free and clear of all mortgages, liens, security interest
charges, encumbrances and claims. If Lessor shall so require, the Lessee shall
provide free storage and insurance for such Item(s) of Equipment for a period
not exceeding ninety (90) days. The storage of the Equipment will be at the
expense and risk of Lessee. Notwithstanding anything to the contrary contained
herein, commencing one hundred and fifty (150) days prior to the expiration of
the Lease Term and continuing throughout Lessor's ninety (90) day storage
period, Lessee shall provide Lessor or any person designated by it, access to
such Equipment and will allow Lessor to display the Equipment in operation to
any authorized representative or representatives of prospective purchasers or
lessees of such Equipment or Lessor's agent, and will permit said representative
or representatives or agent to examine the books and records of Lessee relating
to the Equipment. Lessor acknowledges that Lessee is entitled to use the
Equipment up to the expiration of the Lease Term, and as such, will exercise
reasonable care not to significantly interfere with Lessee's operation of the
Equipment during the one hundred and fifty (150) day period preceding the
expiration of the Lease Term. Lessee will provide personnel, power and other
operational requirements necessary to demonstrate the Equipment.
At least 150 (but not more than (220) days prior to expiration or earlier
termination of this Lease, Lessee shall provide or cause the Equipment
manufacturers or suppliers to provide Lessor, a detailed inventory of all
components of the Equipment. The inventory will include, but not be limited to,
a listing of model and serial numbers for all components.
Not more than 60 days prior to expiration or earlier termination of this Lease,
Lessee shall cause the manufacturer, or a qualified equipment maintenance
provider acceptable to Lessor, to perform a comprehensive physical inspection of
the Equipment and to provide an in-depth field report to Lessor. If during the
inspection, the authorized inspector finds that any of the Equipment is
defective or does not operate within the supplier's or manufacturer's
specifications, Lessee will make all necessary repairs and replace all defective
parts, with supplier or manufacturer approved parts, required to cause the
Equipment to satisfy the aforementioned conditions. After corrective measures
are completed, Lessee will arrange for a follow-up inspection of the Equipment
by the same inspector, with a copy of the follow-up inspection report provided
to Lessor. The report will certify that the Equipment has been properly
inspected, examined, and tested and that it operates within manufacturer's and
supplier's specifications.
Unless Lessor has requested that Lessee store the Equipment as provided herein,
upon expiration or earlier termination of this Lease, Lessee shall deinstall and
pack the Equipment according to the supplier's and manufacturer's specifications
and recommendation, including but not limited to: (1) removing all process
fluids from the Equipment, and (2) fill all internal fluids (excepting materials
that are considered hazardous waste by any regulatory authority) to operating
levels and secure all filler caps and seal all disconnect hoses to avoid
spillage. All maintenance records, plans, specifications, diagrams, maintenance
manuals and operating instructions necessary to properly install, operate and
maintain the Equipment shall be properly cataloged packaged and returned with
the Equipment.
At the time of return, the Item(s) of Equipment shall:
1. Be free of all advertising or insignia placed there on by Lessee.
2. Be in compliance with all applicable federal, state and local laws.
3. Be in good operating order, repair and condition, reasonable wear
and tear resulting solely from proper use excepted; free of any
hazardous waste material; free from rust and/or corrosion with no
missing parts or damaged parts.
4. Be mechanically and structurally sound, able to maintain such
precision tolerances and capable of performing such functions as the
manufacturer's recommended specifications would dictate.
5. With respect to all components including but not limited to drive
motors, hydraulic systems, electrical systems, fluid pumps,
pneumatic systems be able to operate normally with no loss of power
or fluid.
Page 3 of 7
<PAGE>
Upon return of such Item(s) of Equipment, Lessor or its agent shall inspect the
Equipment, and if in the Lessor's opinion the Equipment is not in compliance
with the conditions hereinafter described, a mutually acceptable independent
appraiser (or if no such appraiser has been selected within 15 days prior to the
expiration or earlier termination of the Lease, an inspector chosen by the
American Arbitration Association) shall be appointed by the Lessor to inspect
the equipment for the purpose of determining the repairs, additions or
replacements, if any, which are necessary to place the Equipment in the
condition hereinafter described.
Lessee agrees to pay all fees, charges, costs and expenses related to such
inspection and Lessee shall pay for all repairs and replacements. In the event
any necessary repairs or replacements are not completed within seven days from
the expiration or early termination date, Lessee shall pay to Lessor, interim
rent equal to the daily rent equivalent of the periodic rent set forth in the
IER covering the Equipment, for each day in excess of the Lease term, until such
repairs and replacements are completed and the units of Equipment involved are
returned to Lessor. Said payment shall be made on the date said units of
Equipment are returned to Lessor, (but not less frequently than monthly).
7/99
Page 4 of 7
<PAGE>
Early Termination Option:
Subject to compliance with all conditions of this provision, and provided no
Event of Default (or event which, with notice or passage of time, or both, would
constitute and Event of Default) shall have occurred and be continuing, Lessee
shall have the right to early terminate the Lease with respect to the Equipment
and purchase the Equipment after May 1, 2000 or before the later of (i) May 1,
2002 or (ii) 30 days after the date the Equipment is installed, on no less than
30 days' prior written notice to Lessor specifying a proposed date of
termination (which date shall be a date on which an installment of rent is due
and payable) and upon payment of: (1) the regular monthly rental payment due and
payable on the Termination Date, (2) an early termination amount equal to the
amount shown below, (3) any sales tax or similar charge related to the sale, (4)
break-funding, if any, calculated as set forth below and (5) any other amounts
then due and owing by Lessee to Lessor. The term Fair Market Value shall have
the meaning set forth in the third paragraph of Lease Addendum No. 1 on an
AS-IS-WHERE-IS basis.
For purposes of this option a breakfunding charge will apply if the three year
Treasury is less than 6.03% at that time. This charge will be equal to the
excess of the present value of all remaining rental payments discounted at
3-year Treasury yield as of the early termination, less the present value of all
remaining rental payments discounted at 3-year Treasury yield as of the date the
transaction was funded.
Date Amount Date Amount
---- ------ ---- ------
May 1, 2000 $3,322,793 May 1, 2001 3,089,318
June 1, 2000 3,305,875 June 1, 2001 3,065,632
July 1, 2000 3,285,573 July 1, 2001 3,041,946
August 1, 2000 3,268,654 August 1, 2001 3,021,644
September 1, 2000 3,248,352 September 1, 2001 2,997,958
October 1, 2000 3,228,050 October 1, 2001 2,977,656
November 1, 2000 3,211,131 November 1, 2001 2,953,970
December 1, 2000 3,190,829 December 1, 2001 2,930,284
January 1, 2001 3,170,527 January 1, 2002 2,906,598
February 1, 2001 3,150,225 February 1, 2002 2,886,296
March 1, 2001 3,126,539 March 1, 2002 2,862,610
April 1, 2001 3,106,237 April 1, 2002 2,838,924
May 1, 2002 2,815,238
Page 5 of 7
<PAGE>
Special Conditions
================================================================================
By execution of this IER Lessee hereby agrees that, as between Lessee and
Lessor, the Equipment described herein is accepted for all purposes of and
subject to all terms and conditions of the Lease ("Acceptance"), except to the
extent that the terms of this IER conflict with the terms of the Lease in which
case the terms of this IER shall prevail. The Lessee hereby acknowledges and
agrees, with respect to the Equipment described herein:
(1) That Lessee has inspected and accepted the Equipment fully and
completely as to size, model, function and conformity to Lessee's requirements.
(2) That the Equipment is of a size, design, function and manufacturer
selected by Lessee.
(3) That Lessee is satisfied that the Equipment is suitable for its
intended purposes and any special purposes of Lessee.
(4) THAT THE EQUIPMENT IS NEW AND UNUSED AND HAS BEEN DELIVERED TO, IS OW
IN THE POSSESSION OF, AND IS ACCEPTABLE TO LESSEE, AND THAT ALL OF THE EQUIPMENT
HAS A CLASS LIFE OF 7 YEARS AND IS DEPRECIABLE OVER A RECOVERY PERIOD OF 5 YEARS
USING THE 200% DECLINING BALANCE METHOD SWITCHING TO THE STRAIGHT LINE METHOD AT
SUCH TIME AS WILL MAXIMIZE THE PRESENT VALUE OF THE DEDUCTIONS.
Lessee hereby represents and warrants that:
(1) The representations and warranties of the Lessee contained in the
Lease are true and correct on and as of the date hereof as though made on and as
of this date.
(2) No event has occurred and is continuing or will result from the lease
of Equipment described herein which constitutes an Event of Default or with
notice or lapse of time, or both would constitute an Event of Default.
Dated as of the Acceptance Date.
Lessor: Lessee:
MDFC Equipment Leasing Corporation Radiant Aviation Services Inc.
By: /s/ James C. Hammersmith By: /s/ Colin V.F. Digout
--------------------------------- ----------------------------------
Printed Name: James C. Hammersmith Printed Name: Colin V.F. Digout
----------------------- ------------------------
Title: Senior Documentation Officer Title: Chief Operations Officer
------------------------------ -------------------------------
By: /s/ Timothy P. Seel
----------------------------------
Printed Name: Timothy P. Seel
------------------------
Title: Vice President, Engineeing
-------------------------------
Page 6 of 7
<PAGE>
Page7 of 7
<PAGE>
MDFC Equipment Leasing Corporation
Lease Addendum No. 1
to
Equipment Lease Agreement No. 3567-1
In connection with that certain Equipment Lease Agreement dated as of
December 20, 1999 ("Lease") between MDFC Equipment Leasing Corporation
("Lessor") and Radiant Aviation Services, Inc. ("Lessee") covering the items of
equipment ("Equipment") described in any and all existing or future Individual
Equipment Records ("IERs") thereto, it is agreed that upon execution hereof by
the parties hereto, this Lease Addendum No. 1 shall constitute a part of the
Lease. Capitalized terms used and not defined herein shall have the meanings
assigned to them in the Lease.
Lessee is hereby granted an option, which option shall not be assignable,
to purchase "AS-IS, WHERE-IS" all, but not less than all, of the Equipment
covered by all of the IERs, at the expiration of the Base Term of each IER, for
its then fair market value ("FMV") as hereinafter defined not to exceed 37.5% of
the original Equipment Cost.
FMV shall mean the selling price that would be obtained in an arms-length
transaction between an informed and willing buyer and an informed and willing
seller each under no compulsion to buy or sell. FMV shall be determined on the
basis that the Equipment is in complete compliance with all conditions specified
in the Lease and IER and that the Equipment is installed and/or in service and
any cost of removal, preparation for shipment or transportation, or diminution
in value caused by removal or transportation shall not be deducted in
determining the FMV of the Equipment.
Lessee's right to exercise this option is subject to the following
conditions precedent: (a) Lessee shall have performed all of the terms and
conditions of the Lease and of all other agreements between Lessor and Lessee at
the time and in the manner required therein and neither an Event of Default nor
an event which with notice and/or lapse of time would constitute an Event of
Default under the Lease or default under any other such agreement shall have
occurred and be continuing; (b) Lessor shall have received written notice of the
election to exercise said option at least 120 days prior to the expiration of
the Base Term of the first expiring IER; and (c) Lessee shall have paid to
Lessor the FMV of the Equipment covered by any expired IER together with all
Taxes due under the Lease or arising from or related to the sale of the
Equipment.
The FMV for each IER shall be determined as follows:
(1) Between 150 and 120 days prior to the expiration of the Base Term,
Lessee shall send its reasonable estimate of the FMV of the applicable Equipment
to the Lessor;
(2) At least 60 days prior to expiration of the Base Term, Lessor shall
either (i) accept such estimate, (ii) negotiate a mutually acceptable FMV with
Lessee or (iii) employ a recognized independent appraiser consented to by
Lessee, which consent shall not be unreasonably withheld, to determine the FMV;
(3) At least 30 days prior to the expiration of the Base Term, if an
appraiser has not been so selected and consented to, the Lessor and Lessee shall
each appoint a recognized independent appraiser to determine the FMV;
FMV Purchase Option Page 1 of 2
<PAGE>
(4) At least 15 days prior to the expiration of the Base Term, if the
appraisers appointed under (3) above have not agreed upon the FMV, the two
appraisers shall by mutual consent choose a third party independent appraiser
who shall determine the FMV. If the appraisers cannot agree on a mutually
acceptable third party appraiser at least 10 days prior to the expiration of the
Base Term, Lessor shall submit the determination of FMV to the American
Arbitration Association (or any successor thereto) which shall appoint an
appraiser whose determination shall be final and binding. Lessee shall pay to
Lessor the FMV of the Equipment covered by any expired IER on the date of such
expiration, together with all Taxes due under the Lease or arising from or
related to the sale of the Equipment. The FMV, as finally determined, and any
other amounts due under this Lease Addendum No. 1, shall bear interest at the
Overdue Rate for the period, if any, from the date of expiration of the IER to
the date of payment, and the cost of all appraisals shall be borne by Lessee.
By Lessee's purchase of the Equipment covered by the first expiring IER
entered into pursuant to the Lease, Lessee agrees that it shall thereafter
purchase, upon the terms and conditions set forth herein, the remainder of the
Equipment covered by the Lease.
Lessor: Lessee:
MDFC Equipment Leasing Corporation Radiant Aviation Services, Inc.
By: /s/ James C. Hammersmith By: /s/ Colin V.F. Digout
------------------------------ ----------------------------------
Printed Name: James C. Hammersmith Printed Name: Colin V.F. Digout
-------------------- ------------------------
Title: Senior Documentation Officer Title: Chief Operations Officer
---------------------------- -------------------------------
By: Timothy P. Seel
----------------------------------
Printed Name: Timothy P. Seel
------------------------
Title: Vice President, Engineering
-------------------------------
FMV Purchase Option Page 2 of 2
<PAGE>
MDFC Equipment Leasing Corporation
Lease Addendum No. 2
to
Equipment Lease Agreement No. 3567-1
In connection with that certain Equipment Lease Agreement dated as of
December 20, 1999, (the "Lease") between MDFC Equipment Leasing Corporation
("Lessor") and Radiant Aviation Services, Inc. ("Lessee") covering the items of
equipment ("Equipment") described in any and all existing or future Individual
Equipment Records ("IERs") thereto, it is agreed that upon execution hereof by
the parties hereto, this Lease Addendum No. 2 shall constitute a part of the
Lease. Capitalized terms used and not defined herein shall have the meanings
assigned to them in the Lease.
Lessee is hereby granted an option, which option shall not be assignable,
to renew the Base Term with respect to all, but not less than all, of the
Equipment covered by all of the IERs, commencing for each Item of Equipment at
the expiration of the Base Term of each IER and ending one year thereafter for
the Equipment's then "Fair Rental Value" (as hereinafter defined).
The Fair Rental Value shall mean the monthly rental that would be obtained
in an arms-length lease transaction for the Equipment for the renewal term
between an informed and willing lessor and an informed and willing lessee each
under no compulsion to lease. Fair Rental Value shall be determined on the basis
that the Equipment is in complete compliance with all conditions specified in
the Lease and IER and that the Equipment is installed and/or in service and any
cost of removal, preparation for shipment or transportation or diminution in
value caused by removal or transportation shall not be deducted in determining
the Fair Rental Value of the Equipment.
Lessee's right to exercise this option is subject to the following
conditions precedent: (a) Lessee shall have performed all of the terms and
conditions of the Lease and of all other agreements between Lessor and Lessee at
the time and in the manner required therein and neither an Event of Default nor
an event which with notice and/or lapse of time would constitute an Event of
Default under the Lease or default under any other such agreement shall have
occurred and be continuing; and (b) Lessor shall have received written notice of
the election to exercise said option at least one hundred twenty (120) days
prior to the date upon which the Base Term of the first expiring IER under the
Lease expires.
The Fair Rental Value for each IER shall be determined as follows:
(1) Between 150 and 120 days prior to the expiration of the Base Term,
Lessee shall send its reasonable estimate of the Fair Rental Value of the
applicable Equipment to the Lessor;
(2) At least 60 days prior to the expiration of the Base Term, Lessor
shall either (i) accept such estimate, (ii) negotiate a mutually acceptable Fair
Rental Value with Lessee or (iii) employ a recognized independent appraiser
consented to by Lessee, which consent shall not be unreasonably withheld, to
determine the Fair Rental Value;
(3) At least 30 days prior to the expiration of the Base Term, if the
appraiser has not been so selected and consented to, Lessor and Lessee shall
each appoint a recognized independent appraiser to determine the Fair Rental
Value;
(4) At lease 15 days prior to the expiration of the Base Term, if the
appraisers appointed under (3) above have not agreed upon the Fair Rental Value,
the two appraisers shall by mutual consent choose a third party independent
appraiser who shall determine the Fair Rental Value. If the appraisers cannot
agree
FMV Renewal Option Page 1 of 2
<PAGE>
on a mutually acceptable third party appraiser at least 10 days prior to the
expiration of the Base Term, Lessor shall submit the determination of the Fair
Rental Value to the American Arbitration Association (or any successor thereto)
which shall appoint an appraiser whose determination shall be final and binding.
Lessee shall pay to Lessor applicable rental, based on the Fair Rental Value of
the Equipment covered by any expired IER on the due date(s) of such rent,
together with all Taxes due under the Lease or arising from or related to the
rental of the Equipment. The Fair Rental Value, as finally determined, and any
other amounts due under this Lease Addendum No. 2, shall bear interest at the
Overdue Rate for the period, if any, from the date of expiration of the IER to
the date of payment, and the cost of all appraisals shall be borne by Lessee.
By Lessee's renewal of the Lease Term for the Equipment covered by the
first expiring IER entered into pursuant to the Lease, Lessee agrees that it
shall thereafter renew the Lease Term, upon the terms and conditions set forth
herein, for the remainder of the Equipment covered by the Lease. If the Lease is
renewed, all terms of the Lease shall remain in full force and effect unamended,
except that the rental shall be as set forth herein.
Lessor: Lessee:
MDFC Equipment Leasing Corporation Radiant Aviation Services, Inc.
By: /s/ James C. Hammersmith By: /s/ Colin V.F. Digout
------------------------------ ----------------------------------
Printed Name: James C. Hammersmith Printed Name: Colin V.F. Digout
-------------------- ------------------------
Title: Senior Documentation Officer Title: Chief Operations Officer
---------------------------- -------------------------------
By: Timothy P. Seel
----------------------------------
Printed Name: Timothy P. Seel
------------------------
Title: Vice President, Engineering
-------------------------------
FMV Renewal Option Page 2 of 2
<PAGE>
MDFC LEASING CORPORATION
Equipment Lease Agreement No. 3567-1
Unconditional Guaranty
For value received and in order to induce MDFC, a Deleware corporation
("Lessor"), to enter into, accept or acquire a certain Equipment Lease Agreement
dated as of the December 20, 1999 (hereinafter with all present and future
Individual Equipment Records, amendments, addenda and riders thereto referred to
as the "Lease") with Radient Energy Corporation, a Canadian corporation
("Lessee"), and/or to advance monies or extend or continue to extend credit to
or for the benefit of Lessee, under the Lease or otherwise, the undersigned
hereby absolutely, irrevocably and unconditionally guarantees to Lessor (i) the
prompt and full payment when due, by acceleration or otherwise, of all sums now
or at any time hereafter due from Lessee to Lessor, under the Lease or otherwise
and agrees to pay any and all expenses (including counsel fees and expenses)
incurred by Lessor in enforcing any rights under this Guaranty, and (ii) the
prompt, full and faithful performance and discharge by Lessee of each and every
obligation and warranty of Lessee set forth in the Lease (collectively "Lessee's
Obligations").
This Guaranty is absolute, unconditional and continuing and shall remain in
effect until all of Lessee's Obligations have been paid, performed and
discharged regardless of the enforceability of Lessee's Obligations and
regardless of any law, regulation or decree now or hereafter in effect which
might in any manner affect Lessee's Obligations. The death or bankruptcy of the
undersigned or of Lessee shall not terminate this Guaranty or any obligations
hereunder. The liability of the undersigned hereunder shall in no event be
affected or impaired by any renewals, amendments, modifications or supplements
of or to the Lease, or by any extensions, forebearances, compromises or releases
of any of Lessee's Obligations, any of Lessor's rights under the Lease or any
lack of validity or enforceability of Lessee's Obligations or any agreement or
instrument relating thereto or any other circumstance which might otherwise
constitute a defense available to, or a discharge of, Lessee or the undersigned
and the undersigned hereby consents to and waives notice of any of the
foregoing. The undersigned further expressly waives (i) all diligence in
collection and any failure or delay by Lessor in protection or perfection of
Lessor's rights under the Lease or in or to any collateral securing any of
Lessee's Obligations, (ii) notice of acceptance by Lessor of this Guaranty or of
the Lease, (iii) notice of leasing of any additional property to Lessee under
the Lease, (iv) notice of advancement of any funds to or for the benefit of
Lessee, (v) presentment, demand for payment, protest and notice of protest,
default, non-payment or partial payment by Lessee, (vi) all other notices and
formalities to which Lessee and/or the undersigned might be entitled, by statute
or otherwise, (vii) any right of subrogation, reimbursement, exoneration,
contribution, indemnity or any other right that would result in Guarantor being
deemed a creditor of Lessee under the United States Bankruptcy Code or any other
law or any right to enforce any remedy which Lessor now has or may hereafter
have against Lessee and any benefit of, and any right to participate in, any
security now or hereafter held by Lessor, whether any of the foregoing arise in
equity, at law or by contract and (viii) any other action or any other
circumstance whatsoever which might constitute a defense to enforcement of this
Guaranty. This Guaranty shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Lessee's Obligations is
rescinded or must otherwise be returned by Lessor upon the insolvency,
bankruptcy or reorganization of Lessee or otherwise, all as though such payment
had not been made.
The undersigned further waives any right of setoff, recoupment or counterclaim
against Lessor with respect to any claim or demand the undersigned may at any
time have against Lessee, or against any other person or concern liable for
Lessee's Obligations, and as further security to Lessor, any and all debts or
liabilities now
Unconditional Guaranty Page 1 of 2
<PAGE>
or hereafter owing to the undersigned by Lessee, and/or such other person or
concern, and any lien, security or collateral given to the undersigned in
connection therewith, are hereby subordinated to the claims and liens of, and
assigned to, Lessor.
The obligations of the undersigned hereunder are and shall at all times be the
original, direct and primary obligations of the undersigned, as if the
undersigned were the lessee under the Lease. Lessor shall not in any event be
obligated to pursue or exhaust any rights or remedies against Lessee or others,
or resort to any security, prepayments or collateral, as a prerequisite to
enforcing this Guaranty against the undersigned. This Guaranty shall be binding
upon the undersigned and its, his or her respective heirs, personal
representatives, successors and assigns, and shall inure to the benefit of
Lessor and its successors and assigns. All of the obligations and agreements of
the undersigned in this Guaranty are joint and several.
If the undersigned is a corporation, each signatory on behalf of such
corporation warrants that he or she has the authority to sign on behalf of such
corporation and by so signing, to bind said corporation hereunder. If the
undersigned is married, it is the intent of such undersigned to bind to the
performance of this Guaranty any separate estate of such person together with
all joint and/or community property of such undersigned. No modification or
waiver of any of the provisions of this Guaranty shall be effective unless in
writing and signed by the undersigned and an officer of Lessor. The undersigned
agrees to furnish to Lessor such financial information concerning the
undersigned as Lessor may reasonably request from time to time, including,
without limitation, a certified audit report of any business operation owned in
part or in whole by the undersigned. If any provision of this Guaranty or the
application thereof is hereafter held invalid or unenforceable, the remainder of
this Guaranty shall not be affected thereby, and to this end the provisions of
this Guaranty are declared severable.
This Guaranty shall be governed in all respects by the laws of the State of
California and the undersigned hereby irrevocably consent to the jurisdiction of
the California State Courts and the United States Courts located in Los Angeles
County.
Dated this 20 day of December, 1999.
Witness: Guarantor(s):
__________________________________ Radiant Energy
By: _____________________________ By: /s/ Colin V.F. Digout
----------------------------------
Printed Name: ___________________ Printed Name: Colin V.F. Digout
------------------------
Title: __________________________ Title: Chief Operations Officer
-------------------------------
By: Timothy P. Seel
----------------------------------
Printed Name: Timothy P. Seel
------------------------
Title: Vice President, Engineering
-------------------------------
Unconditional Guaranty Page2 of 2
<PAGE>
RADIANT ENERGY CORPORATION
STOCK OPTION PLAN
ARTICLE ONE
PURPOSE AND INTERPRETATION
Section 1.01 Purpose. The purpose of this Plan is to advance the interests of
the Corporation by encouraging equity participation in the Corporation through
the acquisition of Common Shares of the Corporation.
Section 1.02 Definitions. In this Plan, the following capitalized words and
terms shall have the following meanings:
(a) "Act" the Business Corporations Act (Ontario), or the Canada Business
Corporations Act in the event that the Corporation is continued under that
Act, and any Act that may be substituted therefor, as from time to time
amended;
(b) "Affiliate" shall have the meaning ascribed thereto in the Securities Act.
(c) "Associate" shall have the meaning ascribed thereto in the Securities Act.
(d) "Board of Directors" means the board of directors of the Corporation as
constituted from time to time.
(e) "CDN" means The Canadian Dealing Network Inc. or such other quotation
system or stock exchange upon which the Common Shares are then quoted or
listed and posted for trading.
(f) "Common Shares" means the common shares of the Corporation as constituted
on the date hereof.
(g) "Compensation Committee" means the Compensation Committee of the Board of
Directors as constituted from time to time.
(h) "Corporation" means Radiant Energy Corporation, a corporation incorporated
under the Act, and its successors from time to time.
(i) "Designated Affiliate" means the Affiliates of the Corporation designated
by the Board of Directors for purposes of this Plan from time to time.
<PAGE>
(j) "Holding Company" shall have the meaning specified in Section 2.02 hereof.
(k) "Insider" shall have the meaning ascribed thereto in the Securities Act,
other than a person who is an Insider solely by virtue of being a director
or senior officer of a subsidiary of the Corporation and any Associate of
an Insider.
(l) "Issuer Bid" shall have the meaning ascribed thereto in the Securities
Act.
(m) "Option Period" means the period of time an option may be exercised as
specified in Subsection 2.07(a) of this Plan.
(n) "Participant" means a participant under this Plan.
(o) "Plan" means the stock option plan provided for herein.
(p) "RRSP" shall have the meaning specified in Section 2.02 hereof.
(q) "Securities Act" means the Securities Act (Ontario) or its successor, as
amended from time to time.
(r) "Share Compensation Arrangement" means a stock option, stock option plan,
employee stock purchase plan or any other compensation or incentive
mechanism involving the issuance or potential issuance of securities of
the Corporation to one or more service providers, including a share
purchase from treasury which is financially assisted by the Corporation by
way of a loan, guarantee or otherwise.
(s) "Take-over Bid" shall have the meaning ascribed thereto in the Securities
Act.
ARTICLE TWO
STOCK OPTION PLAN
Section 2.01 The Plan. The Plan is hereby established for certain directors,
senior officers and employees of and consultants to the Corporation and its
Designated Affiliates.
Section 2.02 Participants. Participants in the Plan shall be directors, senior
officers or employees of and consultants to the Corporation or any of its
Designated Affiliates (including officers thereof, whether or not directors)
who, by the nature of their positions or jobs are, in the opinion of the Board
of Directors, upon the recommendation of the Compensation Committee, in a
position to contribute to the success of the Corporation. At the request of any
Participant, options granted to such Participant may be issued to and registered
in the name of a personal holding company controlled by such Participant
("Holding Company") or to a registered retirement savings plan established by
such Participant ("RRSP") and, in such event, the provisions of this Plan shall
apply to such options mutatis mutandis as though they were issued to and
registered in the name of the Participant.
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<PAGE>
Section 2.03 Amount of Options. The determination regarding the aggregate number
of Common Shares subject to options in favour of any Participant will take into
consideration the Participant's present and potential contribution to the
success of the Corporation and shall be determined from time to time by the
Board of Directors upon the recommendation of the Compensation Committee. The
aggregate number of Common Shares reserved for issuance upon the exercise of
options pursuant to this Plan and any other Share Compensation Arrangements,
subject to adjustment or increase of such number pursuant to Section 2.10
hereof, shall be 15% of the total number of issued and outstanding common shares
of the Corporation. The maximum number of Common Shares reserved for issuance to
any one Participant upon the exercise of options shall not exceed 5% of the
total number of Common Shares outstanding immediately prior to such issuance.
Section 2.04 Limits with respect to Insiders.
(a) The number of Common Shares issuable to Insiders pursuant to options
granted under this Plan, together with Common Shares issuable to Insiders
under any other Share Compensation Arrangement of the Corporation, shall
not:
(i) exceed 10% of the number of Common Shares outstanding immediately
prior to the grant of any such option; or
(ii) result in the issuance to Insiders, within a one year period, of in
excess of 10% of the number of Common Shares outstanding immediately
prior to the grant of any such option.
(b) The number of Common Shares issuable to any Insider and such Insider's
Associates pursuant to options granted under this Plan, together with
Common Shares issuable to such Insider or such Insider's Associates under
any other Share Compensation Arrangement of the Corporation shall not,
within a one year period, exceed 5% of the number of Common Shares
outstanding immediately prior to the grant of any such option.
(c) Any Common Shares issuable pursuant to an option granted to a Participant
prior to the Participant becoming an Insider shall be excluded for the
purposes of the limits set out in Subsections 2.04(a) and 2.04(b) hereof.
Section 2.05 Price. The exercise price per Common Share shall be determined by
the Board of Directors at the time the option is granted, but such price shall
not be less than the closing price of the Common Shares on CDN or any stock
exchange on which the Common Shares may then be listed and posted for trading on
the last trading day preceding the date on which the grant of the option is
approved by the Board of Directors.
Section 2.06 Lapsed Options. In the event that options granted under this Plan
are surrendered, terminate or expire without being exercised in whole or in
part, the Common Shares reserved for issuance but not purchased under such
lapsed options shall be available for subsequent options to be granted under
this Plan.
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<PAGE>
Section 2.07 Consideration, Option Period and Payment.
(a) The period during which options may be exercised shall be determined by
the Board of Directors upon the recommendation of the Compensation
Committee, in its discretion, to a maximum of ten years from the date the
option is granted (the "Option Period"), except as the same may be reduced
with respect to any option as provided in Sections 2.08 and 2.09 hereof
respecting termination of employment or death of the Participant.
(b) Subject to any other provision of this Plan, an option may be exercised
from time to time during the Option Period by delivery to the Corporation
at its registered office of a written notice of exercise addressed to the
Secretary of the Corporation specifying the number of Common Shares with
respect to which the option is being exercised and accompanied by payment
in full of the exercise price therefor. Certificates for such Common
Shares shall be issued and delivered to the Participant as soon as
practicable following receipt of such notice and payment.
(c) Except as set forth in Sections 2.08 and 2.09 hereof, no option may be
exercised unless the Participant is, at the time of such exercise, a
director or senior officer of or in the employ of or a consultant to the
Corporation or any of its Designated Affiliates and shall have been
continuously a director, senior officer, so employed or a consultant since
the grant of his or her option. Absence on leave with the approval of the
Corporation or a Designated Affiliate shall not be considered an
interruption of employment for purposes of this Plan.
(d) The exercise of any option will be contingent upon receipt by the
Corporation of cash payment of the full exercise price of the Common
Shares which are the subject of the exercised option. No Participant or
his or her legal representatives, legatees or distributees will be, or
will be deemed to be, a holder of any Common Shares with respect to which
he or she was granted an option under this Plan, unless and until
certificates for such Common Shares are issued to him or her under the
terms of this Plan.
(e) Notwithstanding any other provision of this Plan or in any option granted
to a Participant, the Corporation's obligation to issue Common Shares to a
Participant pursuant to the exercise of an option shall be subject to:
(i) completion of such registration or other qualification of such
Common Shares or obtaining approval of such regulatory authorities
as the Corporation shall determine to be necessary or advisable in
connection with the authorization, issuance or sale thereof;
(ii) the admission of such Common Shares for quotation or listing and
posting for trading, as the case may be, on CDN or any stock
exchange on which the Common Shares may then be listed and posted
for trading; and
-4-
<PAGE>
(iii) the receipt from the Participant of such representations,
warranties, agreements and undertakings, including as to future
dealings in such Common Shares, as the Corporation or its counsel
determines to be necessary or advisable in order to ensure
compliance with all applicable securities laws.
(f) A Participant may, rather than exercise options which he or she is
entitled to exercise under Subsection 2.07(b), elect in lieu of receiving
the Common Shares to which such Participant would have been entitled on
exercise of such options ("Designated Shares"), receive instead the number
of Common Shares, disregarding fractions which, when multiplied by the
fair value per share (which shall be the weighted average trading price of
the Common Shares on CDN during the five (5) days preceding the date of
determination) of the Designated Shares, is equal to the product of the
number of Designated Shares times the difference between the fair value
and the exercise price per share of the Designated Shares.
(g) If there is a Take-over Bid or Issuer Bid made for all or any of the
issued and outstanding Common Shares, then the Board of Directors may, by
resolution, permit all options outstanding under the Plan to become
immediately exercisable in order to permit Common Shares issuable under
such options to be tendered to such bid.
Section 2.08 Termination of Employment. If a Participant shall:
(a) cease to be a director or senior officer of the Corporation or any of its
Designated Affiliates (and is not or does not continue to be an employee
thereof); or
(b) cease to be employed by or act as a consultant to the Corporation or any
of its Designated Affiliates (and is not or does not continue to be a
director or senior officer thereof) for any reason (other than death) or
shall receive notice from the Corporation or any of its Designated
Affiliates of the termination of his or her employment;
(collectively, "Termination") he or she may, but only within 60 days next
succeeding such Termination, exercise his or her options to the extent that he
or she was entitled to exercise such options at the date of such Termination,
including the rights under Subsection 2.07(f); provided that in no event shall
such right extend beyond the Option Period. This section is subject to any
agreement with any director or senior officer of the Corporation or any of its
Designated Affiliates with respect to the rights of such director or senior
officer upon Termination or change in control of the Corporation.
Section 2.09 Death of Participant. In the event of the death of a Participant
who is a director or senior officer of the Corporation or any of its Designated
Affiliates or who is an employee or consultant having been continuously in the
employ of or retained by (as the case may be) the Corporation or any of its
Designated Affiliates for one year from and after the date of the granting of
his or her option, the option theretofore granted to him or her shall be
exercisable within the six months next succeeding such death (including the
rights under Subsection 2.07(f)) and then only:
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<PAGE>
(a) by the person or persons to whom the Participant's rights under the option
shall pass by the Participant's will or the laws of descent and
distribution; and
(b) to the extent that he or she was entitled to exercise the option at the
date of his or her death, provided that in no event shall such right
extend beyond the Option Period.
Section 2.10 Adjustment in Shares Subject to the Plan. In the event that:
(a) there is any change in the Common Shares of the Corporation through
subdivisions or consolidations of the share capital of the Corporation, or
otherwise;
(b) the Corporation declares a dividend on Common Shares payable in Common
Shares or securities convertible into or exchangeable for Common Shares;
or
(c) the Corporation issues Common Shares, or securities convertible into or
exchangeable for Common Shares, in respect of, in lieu of, or in exchange
for, existing Common Shares,
the number of Common Shares available for option, the Common Shares subject to
any option, and the option price thereof, shall be adjusted appropriately by the
Board of Directors and such adjustment shall be effective and binding for all
purposes of this Plan.
Section 2.11 Record Keeping. The Corporation shall maintain a register in which
shall be recorded:
(a) the name and address of each Participant in this Plan; and
(b) the number of options granted to a Participant and the number of options
outstanding.
ARTICLE THREE
GENERAL
Section 3.01 Transferability. The benefits, rights and options accruing to any
Participant in accordance with the terms and conditions of this Plan shall not
be transferable by the Participant except (i) from the Participant to his or her
Holding Company or RRSP or from a Holding Company or RRSP to the Participant
and, in either such event, the provisions of this Plan shall apply mutatis
mutandis as though they were originally issued to and registered in the name of
the Participant, or (ii) as otherwise specifically provided herein. During the
lifetime of a Participant, all benefits, rights and options shall only be
exercised by the Participant or by his or her guardian or legal representative.
Section 3.02 Employment. Nothing contained in this Plan shall confer upon any
Participant any right with respect to employment or continuance of employment
with the Corporation or any Affiliate, or interfere in any way with the right of
the Corporation or any Affiliate to terminate the Participant's employment at
any time. Participation in this Plan by a Participant shall be voluntary.
-6-
<PAGE>
Section 3.03 Delegation to Compensation Committee. All of the powers exercisable
by the Board of Directors under this Plan may, to the extent permitted by
applicable law and authorized by resolution of the Board of Directors of the
Corporation, be exercised by a Compensation Committee of not less than three (3)
directors. A majority of the members of any such Compensation Committee shall
not be employees or senior officers of the Corporation. In addition, if
determined appropriate by the Board of Directors of the Corporation, the Board
of Directors may delegate any or all of the powers of the Board of Directors of
the Corporation under the Plan to an independent consultant.
Section 3.04 Administration of the Plan. This Plan shall be administered by the
Board of Directors of the Corporation. The Board of Directors shall be
authorized to interpret and construe this Plan and may, from time to time,
establish, amend or rescind rules and regulations required for carrying out the
purposes, provisions and administration of this Plan and determine the
Participants to be granted options, the number of Common Shares covered thereby,
the exercise price therefor and the time or times when they may be exercised.
Any such interpretation or construction of this Plan shall be final and
conclusive. All administrative costs of this Plan shall be paid by the
Corporation. The directors and senior officers of the Corporation are hereby
authorized and directed to do all things and execute and deliver all
instruments, undertakings and applications and writings as they, in their
absolute discretion, consider necessary for the implementation of this Plan and
of the rules and regulations established for administering this Plan.
Section 3.05 Amendment, Modification or Termination of the Plan. Subject to
Section 3.03, the Board of Directors reserves the right to amend, modify or
terminate this Plan at any time if and when it is advisable in the absolute
discretion of the Board of Directors. However, any amendment of this Plan which
would:
(a) materially increase the benefits under this Plan;
(b) materially increase the number of Common Shares which may be issued under
this Plan; or
(c) materially modify the requirements as to the eligibility for participation
in this Plan;
shall be effective only upon the approval of the shareholders of the
Corporation. Any material amendment to any provision of this Plan shall be
subject to any necessary approvals by CDN or any stock exchange or regulatory
body having jurisdiction over the securities of the Corporation.
Section 3.06 Consolidation, Merger, etc. If there is a consolidation, merger or
statutory amalgamation or arrangement of the Corporation with or into another
corporation, a separation of the business of the Corporation into two or more
entities or a transfer of all or substantially all of the assets of the
Corporation to another entity, upon the exercise of an option under this Plan,
the holder thereof shall be entitled to receive the securities, property or cash
which the holder would have received upon such consolidation, merger,
amalgamation, arrangement, separation or transfer if the holder had exercised
the option immediately prior to such event, unless the
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<PAGE>
directors of the Corporation otherwise determine the basis upon which such
option shall be exercisable.
Section 3.07 No Representation or Warranty. The Corporation makes no
representation or warranty as to the future market value of any Common Shares
issued in accordance with the provisions of this Plan.
Section 3.08 Interpretation. This Plan shall be governed by and construed in
accordance with the laws of the Province of Ontario.
Section 3.09 Approval and Effective Date. This Plan shall be effective as of the
date it is approved by the shareholders of the Corporation and any regulatory
body having jurisdiction over the securities of the Corporation.
Dated: As amended, April 3, 1998.
-8-
<PAGE>
PATENT ROYALTY AGREEMENT
Agreement made and entered into this 29th day of January, 1995 by and
between RADIANT ENERGY CORPORATION, 79 Truman Road, North York, Ontario, Canada
M2L 2L7 (hereinafter called "the Company"), and CHARLES J. CHEW ("Chew") and
TIMOTHY P. SEEL ("Seel"), of Ellicotville and Tonawanda, New York, respectively;
WITNESSETH:
WHEREAS, CHEW and SEEL have made certain inventions relating to the
"Method of, and Apparatus for, De-icing an Aircraft by Means of Infrared
Radiation" (the "Inventions") for which they have made application for Letters
Patent of the United States, the said application having been filed on the 7th
day of March, 1994, bearing U.S. Serial No. 08/207,883; as a continuation of an
earlier-filed Application being U.S. Serial No. 08/020,215, filed on the 19th
day of July, 1993 (now abandoned) and an Application for Letters Patent in
Canada in respect of which was filed in the Canadian Patent Office on November
14, 1994 (collectively the "Application") and
WHEREAS, the Company is desirous of acquiring rights in and to the
Invention(s), Application(s) any Letters Patent which may issue therefor and
related Know-How (collectively the "Assets"); and MESSRS. CHEW and SEEL are
desirous of transferring said Assets to the Company, subject to the terms and
conditions set forth herein and in the Assignment annexed hereto.
NOW, THEREFORE, for and in consideration of the premises and the covenants
hereinafter recited to be faithfully performed and the sum of One Dollar ($1.00)
and more by the Company to CHEW and SEEL in hand paid, the receipt of which is
hereby acknowledged, it is understood and agreed as follows:
1. CHEW and SEEL jointly and severally warrant that they are the sole and
exclusive owners of the Assets, that they have full right to enter into this
Agreement and that the Assets are transferred to the Company free and clear of
all liens, charges, security interest and encumbrances of any nature or kind,
except a security interest to Chew and Seel. The warranties in this Section 1
shall survive the closing of the purchase of the Assets by the Company from CHEW
and SEEL.
2. CHEW and SEEL shall execute all necessary and lawful
<PAGE>
papers to enable the Company, at its own expense, to file and prosecute
applications for letters patent in all countries in which the Company shall
elect or be able to secure patent protection for said Inventions and all,
modifications and improvements thereto, and shall also execute all necessary and
lawful papers to vest in the Company the entire right, title and interest in, to
and under the Assets, modifications and improvements and the letters patent that
have issued or may issue thereon in all countries in which the Company elects to
secure patent protection.
3. The Company covenants to pay to CHEW and SEEL collectively during the
life of this Agreement, a royalty of two per cent (2.00%) of the gross sales
price of each apparatus or device intended and adapted for use in aircraft
de-icing (but not including the actual cost of the building housing the patented
product) embodying a claim in the Application or Patent which it or its
licensees may sell or use in the World. It is agreed said royalty shall be net
of any applicable taxes payable to any governmental authority. At such time or
the royalties payable hereunder shall aggregate a total of $1,000,000.00 (US)
CHEW and SEEL shall cease to receive royalties under this Agreement.
The obligation to pay royalties shall expire with the last to expire of
any Letters Patent granted in respect of the Inventions hereunder, or when the
royalties payable hereunder total $1,000,000.00 (US), whichever occurs first.
4. All royalties provided for by this Agreement shall be due and payable
quarterly, and Company agrees to pay to CHEW and SEEL on or before the last day
of each of the months of January, April, July and October of each year during
which this Agreement is in force, the total amount of royalties due and payable
on account of its operations under this Agreement during the calendar quarter
immediately preceding said dates.
5. The Company agrees that it will render to CHEW and SEEL with each such
royalty payment a written statement setting forth the total gross receipts from
its sales during the period covered by such statement less applicable taxes,
credits for any returned products and allowances for returned defective products
and Company agrees to keep adequate records in sufficient detail to enable the
royalties payable hereunder to be determined, and further agrees that it will
permit such book or set of books to be examined by an auditor or accountant,
authorized by CHEW and SEEL at any reasonable time during business hours to the
extent necessary to permit such records to be examined, it being agreed
<PAGE>
that such auditor or accountant shall make his report to CHEW and SEEL in such
manner that names of customers or other information deemed confidential by
Company will not be disclosed to CHEW and SEEL.
The Company shall not be liable for royalties upon the patented product
returned by purchasers for credit and shall have the right to deduct the amount
of any such royalties already paid from the amount of the royalties that may
subsequently accrue. The Company shall also have no right to deduct allowances
for unreturned defective patented products from royalties that may subsequently
accrue.
6. In the event the Company fails to perform any of its obligations herein
prescribed, or in the event of any adjudication of bankruptcy, appointment of a
Receiver by a Court of competent jurisdiction, assignment for the benefit of
creditors or judgment against the Company, all letters patent and all
applications previously assigned by CHEW and SEEL to the Company in respect of
the Inventions shall revert automatically to CHEW and SEEL without further cost
or expense to CHEW and SEEL; provided, however, that the Company shall be
provided a period of 10 calendar days to cure a default under this Paragraph,
such period to commence upon written notice of such default being sent by Chew
and/or Seel to the Company at the address listed herein.
7. The Company shall also have the option to pay to CHEW and SEEL, at any
time during the existence of this Agreement, in lieu of further royalties, the
sum of Five Hundred Thousand Dollars (US) $500,000.00 (US), in addition to all
amounts paid and accrued prior to such payments, and such payment shall relieve
the Company of all further obligations hereunder. This paragraph shall be
effective only until such time as the shares of stock in the Company are listed
for sale on a stock exchange in Canada or the United States.
8. The Company shall keep, and shall require its nominees and licensees to
keep, proper books of account with reference to all apparatus which it or they
may manufacture and sell for use in accordance with the aforesaid Inventions,
modifications and improvements and shall render annual statments or extracts
from such books to CHEW and SEEL giving the gross selling prices of such
apparatus as may have been manufactured and sold during the preceeding year the
credits for any returned products and allowances for unreturned defective
products, and the amount of royalties payable to CHEW and SEEL, the said
statements to be
<PAGE>
rendered at the time of making the royalty payments for the last calendar
quarter of such year.
9. The Company shall use every reasonable endeavor to mark, and to have
its nominees and licensees mark, all apparatus covered by patents for the
Inventions during the lives of the respective patents.
10. CHEW and SEEL covenant they will not raise or cause to be raised any
question concerning or any objection to the validity of any claim in the Letters
Patent granted in respect of the Inventions on any grounds whatsoever and agree
not to aid others in doing so.
11. Each of CHEW and SEEL will assign and transfer to the Company any and
all modifications and improvements on the Inventions and for the patents,
applications, processes and know-how related thereto discovered or invented by
CHEW and SEEL, or either of them.
12. The parties agree that the rights and obligations of the parties under
the Agreement shall be governed by the laws of the State of New York without
regard to its Conflict of Laws.
13. This Agreement and the covenants herein contained shall be binding
upon, and inure to the benefit of, the heirs, executors, administrators,
successors and assigns of the parties hereto.
14. Any notice to be sent hereunder shall be sent to the parties at the
addresses set forth in this Agreement.
15. This Agreement and the assignments annexed hereto constitute the
entire understanding between the parties, and no modification or alteration
thereof shall be effective unless in writing and duly executed by both parties.
16. In the event any provision hereof is declared by a court of competent
jurisdiction to be unenforceable, the remaining provisions of this Agreement
shall still be binding and effective on the parties.
17. Any dispute arising hereunder shall be litigated in the Supreme Court
of the State of New York in and for the County of Erie.
<PAGE>
18. "Know How" as used herein shall include, without limitation,
engineering and scientific information, processes and formulae; manufacturing
data and procedures; machinery, plant, apparatus and equipment design; report,
drawings, specifications and blueprints relating to any method, product,
apparatus or article falling within the scope of said Application or any Patent
issuing therefrom.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
the day and year first above written.
RADIANT ENERGY CORPORATION
BY: /s/ John Shepherd
------------------------------------
JOHN SHEPHERD, PRESIDENT
/s/ Charles J. Chew
----------------------------------------
CHARLES J. CHEW
/s/ Timothy P. Seel
----------------------------------------
TIMOTHY P. SEEL
STATE OF NEW YORK )
COUNTY OF ERIE )SS:
On this day of January, 1995, before me personally came JOHN SHEPHERD,
to me personally known, who being by me duly sworn, did depose and say that he
resides in Toronto, Ontario, Canada that he is the President of RADIANT ENERGY
CORPORATION, the corporation described in, and which executed, the within
Instrument; that he knows the seal of said corporation; that the seal affixed to
said Instrument is such corporate seal; that it was so affixed by order of the
Board of Directors of said corporation; and that he signed his name by like
order.
----------------------------------------
Notary Public
<PAGE>
STATE OF NEW YORK )
COUNTY OF ERIE )SS:
On this 19th day of January, 1995, before me, the subscriber, personally
appeared, CHARLES J. CHEW and TIMOTHY P. SEEL, to me known and known to me to be
the persons described in and who executed the within instrument, and they
acknowledged to me that they executed the same for the purposes therein
mentioned.
----------------------------------------
Notary Public
<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM F-X
APPOINTMENT OF AGENT FOR SERVICE OF PROCESS AND UNDERTAKING
A. Name of issuer or person filing ("Filer"): Radiant Energy Corporation
B. This is [check one]
/X/ an original filing for the Filer
// an amended filing for the Filer
C. Identify the filing in conjunction with which this Form is being filed:
Name of registrant: Radiant Energy Corporation
Form type: 10-SB
File Number (if known)
Filed by: Radiant Energy Corporation
Date Filed: Concurrently
D. The Filer is incorporated or organized under the laws of Canada and has its
principal place of business at:
40 Centre Drive, Orchard Park, New York 14127
Telephone No. (716) 662-0022
E. The Filer designates and appoints: James Berns ("Agent"), located at: Berns &
Berns, One Rockefeller Plaza, New York, New York 10020
Telephone Number: (212) 332-3320
as the agent of the Filer upon whom may be served any process, pleadings,
subpoenas, or other papers in
(a) any investigation or administrative proceeding conducted by the
Commission; and
<PAGE>
(b) any civil suit or action brought against the Filer or to which the
Filer has been joined as defendant or respondent, in any appropriate court in
any place subject to the jurisdiction of any state or of the United States or of
any of its territories or possessions or of the District of Columbia, where the
investigation, proceeding or cause of action arises out of or relates to or
concerns (i) any offering made or purported to be made in connection with the
securities registered or qualified by the Filer on Form (Name of form) on
(Date)or any purchases or sales of any security in connection therewith; (ii)
the securities in relation to which the obligation to file an annual report on
Form 40-F arises, or any purchases or sales of such securities; (iii) any tender
offer for the securities of a Canadian issuer with respect to which filings are
made by the Filer with the Commission on Schedule 13E-4F, 14D-1F or 14D-9F; or
(iv) the securities in relation to which the Filer acts as trustee pursuant to
an exemption under Rule 10a-5 under the Trust Indenture Act of 1939. The Filer
stipulates an agrees that any such civil suit or action or administrative
proceeding may be commenced by the service of process upon, and that service of
an administrative subpoena shall be effected by service upon such agent for
service of process, and that service as aforesaid shall be taken and held in all
courts and administrative tribunals to be valid and binding as if personal
service thereof had been made.
F. Each person filing this Form in connection with:
(a) the use of Form F-9, F-10, 40-F, or SB-2 or Schedule 13K-4F, 14D-1F or
14D-9F stipulates and agrees to appoint a successor agent for service of
process and file an amended Form F-X if the Filer discharges the Agent or the
Agent is unwilling or unable to accept service on behalf of the Filer at any
time until six years have elapsed from the date the issuer of the securities to
which such Forms and Schedules relate has ceased reporting under the Exchange
Act;
(b) the use of Form F-8 or Form F-80 stipulates and agrees to appoint a
successor agent for service of process and file an amended Form F-X if the Filer
discharges the Agent or the Agent is unwilling or unable to accept service on
behalf of the Filer at any time until six years have elapsed following the
effective date of the latest amendment to such Form F-8 or Form F-80;
(c) its status as trustee with respect to securities registered on Form
F-7, F-8, F-9, F-10, F-80, or SB-2 stipulates and agrees to appoint a successor
agent for service of process and file an amended Form F-X if the Filer
discharges the Agent or the Agent is unwilling or unable to accept service on
behalf of the Filer at any time during which any of the securities subject to
the indenture remain outstanding; and
(d) the use of Form I-A or other Commission form for an offering pursuant
to
<PAGE>
Regulation A stipulates and agrees to appoint a successor agent for service of
process and file an amended Form F-X if the Filer discharges the Agent or the
Agent is unwilling or unable to accept service on behalf of the Filer at any
time until six years have elapsed from the date of the last sale of securities
in reliance upon the Regulation A exemption.
Each filer further undertakes to advise the Commission promptly of any change to
the Agent's name and address during the applicable period by amendment of this
Form, referencing the file number of the relevant form in conjunction with which
the amendment is being filed.
G. Each person filing this Form, other than a trustee filing in accordance
with General Instruction I. (e) of this Form, undertakes to make available, in
person or by telephone, representatives to respond to inquiries made by the
Commission staff, and to furnish promptly, when requested to do so by the
Commission staff, information relating to: the Forms, Schedules and offering
statements described in General Instructions I. (a), I. (b), I. (c), I. (d) and
I. (f) of this Form, as applicable; the securities to which such Forms,
Schedules and offering statements relate; and the transactions in such
securities.
The Filer certifies that it has duly caused this power of attorney,
consent, stipulation and agreement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Toronto, Country of
Canada this day of February, 2000.
Filer: Radiant Energy Corporation
By: /s/ Colin V.F. Digout
-----------------------------
Colin V.F. Digout
Chief Operating Officer
This statement has been signed by the following persons in the capacities
and on the dates indicated.
Signature /s/ Colin V.F. Digout
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Title: Colin V.F. Digout
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Date: February 17, 2000
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