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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: October 1, 1997
TURBOSONIC TECHNOLOGIES, INC.
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(Exact name of Registrant as specified in charter)
Delaware 0-21832 13-1949528
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(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification
incorporation) Number
11 Melanie Lane, East Hanover, New Jersey 07936
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 884-4388
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Sonic Environmental Systems, Inc.
141 New Road, Parsippany, New Jersey 07054
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(Former name or former address, if changed since last report)
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Item 3. Bankruptcy or Receivership
As reported in Registrant's Current Report on Form 8-K, dated July 29,
1997, on July 3, 1997 the United States Bankruptcy Court for the District of New
Jersey confirmed Registrant's first amended plan of reorganization, as modified
(the "Plan").
The Plan, among other matters, called for Registrant's consolidation
(the "Consolidation") with Turbotak Technologies, Inc. ("Turbotak"), a
privately-owned Canadian company engaged in the design, manufacture and
servicing of air pollution control equipment, to form a company to be called
TurboSonic Technologies, Inc. ("TurboSonic").
The Consolidation was consummated on August 27, 1997 following the
approval by Turbotak's shareholders of a plan of arrangement under Section 182
of the Ontario Business Corporations Act among Registrant, Registrant's wholly
owned subsidiary, Sonic Canada, Inc. ("Sonic Canada") and Turbotak. Such
approval was required by the terms of a Combination Agreement dated as of July
1, 1997 among Registrant, Sonic Canada and Turbotak.
Upon the effectiveness of the Combination, Registrant changed its name
to "TurboSonic Technologies, Inc." and all then outstanding shares of
Registrant's Common Stock, as well as all then outstanding options and warrants
to purchase shares of Registrant's Common Stock, were extinguished. The holders
of then outstanding shares of Registrant's Common Stock thereupon became
entitled to receive approximately 0.1328 of a share of TurboSonic Common Stock
for each one share of Registrant's Common Stock held immediately prior to the
effectiveness of the Combination.
Following consummation of the Combination, Turbotak's shareholders,
collectively, beneficially owned 82% of Registrant's then issued and outstanding
shares of Common Stock, Registrant's former stockholders, collectively,
beneficially owned approximately 12.6% of such outstanding Common Stock and
creditors and others, collectively, beneficially owned the remainder of such
Common Stock.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements - Not Applicable.
(b) Pro Forma Financial Information - Not Applicable.
(c) Exhibits
2.1 Combination Agreement dated as of July 1, 1997 (the
"Combination Agreement") among Registrant, Sonic Canada
and Turbotak.
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2.2 Plan of Arrangement under Section 182 of the Ontario
Business Corporations Act of Registrant, Sonic Canada
and Turbotak (Exhibit 2.1 to the Combination
Agreement).
2.3 Voting and Exchange Trust Agreement dated August 25,
1997 among Registrant, Sonic Canada and The Trust
Company of Bank of Montreal (Exhibit 2.2 to the
Combination Agreement).
2.4 Support Agreement dated August 27, 1997 between
Registrant and Sonic Canada (Exhibit 2.3 to the
Combination Agreement).
3.1 Certificate of Amendment to Registrant's Certificate of
Incorporation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: October 1, 1997 TURBOSONIC TECHNOLOGIES, INC.
(registrant)
By: /s/Patrick Forde
--------------------------------
Patrick Forde
Secretary
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EXHIBIT 2.1
COMBINATION AGREEMENT
DATED AS OF JULY 1, 1997
AMONG
SONIC ENVIRONMENTAL SYSTEMS, INC.,
SONIC CANADA INC.
AND
TURBOTAK TECHNOLOGIES, INC.
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CONTENTS
ARTICLE I DEFINITIONS.
1.1. Cross Reference Table of Certain
Defined Terms...................................................... 1
1.2. Definitions of Certain Additional Terms............................ 2
1.2.1. Code....................................................... 2
1.2.2. Effective Date............................................. 2
1.2.3. Exchange Date.............................................. 2
1.2.4. Turbotak Material Adverse Effect........................... 3
1.2.5. Sonic Material Adverse Effect.............................. 3
1.2.6. Securities Act............................................. 3
1.2.7. SEC........................................................ 3
1.2.8. Subsidiary................................................. 3
1.2.9. Tax........................................................ 3
ARTICLE II GENERAL.
2.1. Plan of Arrangement................................................ 3
2.1.1. Designation & Authorization of Class B Stock............... 3
2.1.2. Calculation of Share Exchange.............................. 4
2.1.3. Conversion of the Stock Option............................. 4
2.2. Voting & Exchange Trust Agreement.................................. 4
2.3. Support Agreement.................................................. 4
2.4. Closing, Closing Date, & Effective Time............................ 4
2.5. Contemporaneous Transactions....................................... 5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF TURBOTAK.
3.1. Due Organization, Authorization, and Good Standing of
Turbotak........................................................... 5
3.2. No Violation or Approval........................................... 6
3.3. Capital Stock...................................................... 6
3.4. Litigation......................................................... 6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
SONIC AND ACQUISITION.
4.1. Due Organization, Authorization, and Good
Standing of Sonic and Acquisition.................................. 7
4.2. No Violation or Approval........................................... 7
4.3. Capital Stock...................................................... 8
4.4. Litigation......................................................... 8
ARTICLE V CERTAIN COVENANTS.
5.1. Preparation of Proxy Statement and No Action Request;
Other Filings & Submissions........................................ 9
5.2. Shareholders' Meetings............................................. 9
5.3. Public Announcements............................................... 9
5.4. Notification of Certain Matters....................................10
5.5. Other Limitations on Conduct of Business Prior to the
Effective Date.....................................................10
5.6. Access to Information..............................................10
5.7. Amendment to Sonic Certificate of Incorporation....................10
5.8. Further Assurances.................................................11
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ARTICLE VI CERTAIN COVENANTS.
6.1. Conditions Precedent to Turbotak's Obligation to Effect
the Arrangement....................................................11
6.1.1. Representations; Covenants; Certificate....................11
6.2. Conditions Precedent to Obligations of
Sonic..............................................................11
6.2.1. Representations; Covenants; Certificate....................11
6.3. Conditions Precedent to Obligations of Each Parties................12
6.3.1. Shareholder Approval.......................................12
6.3.2. Bankruptcy Court Approval..................................12
6.3.3. Canadian Securities Issues.................................12
6.3.4. Injunctions................................................12
6.3.5. CVF Option.................................................13
ARTICLE VII MISCELLANEOUS.
7.1. Termination........................................................13
7.2. Amendments & Supplements...........................................13
7.3. Survival of Representations, Warranties, and
Agreements.........................................................14
7.4. Expenses...........................................................14
7.5. Governing Law......................................................14
7.6. Notice.............................................................14
7.7. Entire Agreement, Assignability, Etc...............................15
7.8. Counterparts.......................................................15
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EXHIBITS
Exhibit 2.1. Form of Plan of Arrangement
Exhibit 2.2. Form of Voting and Exchange Trust Agreement
Exhibit 2.3. Form of Support Agreement
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COMBINATION AGREEMENT
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COMBINATION AGREEMENT (the "Agreement") dated as of July 1, 1997, by and
among Sonic Environmental Systems, Inc., a corporation incorporated under the
laws of the State of Delaware, Sonic Canada, Inc., a corporation incorporated
under the laws of Province of Ontario and a wholly owned subsidiary of Sonic
("Acquisition"), and Turbotak Technologies, Inc., a corporation incorporated
under the laws of the Province of Ontario("Turbotak").
WHEREAS, on September 16, 1996, Sonic consented to the entry of an Order
for Relief under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the District of New Jersey (the "Bankruptcy Court").
WHEREAS, the Bankruptcy Court confirmed by Order dated July 3, 1997 ("the
Bankruptcy Order"), the Debtor's First Amended Plan of Reorganization (the
"Plan");
WHEREAS, pursuant to the Plan, Sonic and Turbotak are to combine their
operations in a reorganized company called TurboSonic Technologies, Inc.
WHEREAS, the respective Boards of Directors of Sonic, Acquisition and
Turbotak approved the transactions contemplated by the Plan and this Agreement
and the Board of Directors of Turbotak has agreed to submit the Plan of
Arrangement (as defined in Section 2.1) and the other transactions contemplated
hereby to its shareholders for approval.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements set forth herein, and intending to be legally bound
hereby, Sonic, Acquisition and Turbotak hereby agree as follows:
ARTICLE I
DEFINITIONS
Certain terms are used in this Agreement as specifically defined herein.
1.1 Cross Reference Table of Certain Defined Terms. The following terms
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are defined in the Sections set forth below, and shall have the respective
meanings therein defined:
Term Section
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"Acquisition" Preamble
"Agreement" Preamble
"Arrangement" Section 2.1.
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"Bankruptcy Court" Preamble
"Bankruptcy Order" Preamble
"CVF" Section 2.1.3.
"CVF Option" Section 2.1.3.
"Charter Documents" Section 3.1.
"Class A Shares" Section 4.3.
"Closing" Section 2.4.
"Closing Date" Section 2.4.
"Code" Section 1.2.1.
"Contemporaneous Transactions" Section 2.5.
"Court" Section 2.1.
"Effective Date" Section 1.2.2.
"Effective Time" Section 2.4.
"Exchange Date" Section 1.2.3.
"Exchangeable Shares" Section 2.1.1.
"Final Order" Section 2.1.3.
"Interim Order" Section 2.1.
"Notice" Section 7.6.
"OBCA" Preamble
"Plan" Preamble
"Plan of Arrangement" Section 2.1.
"Replacement Option" Section 2.1.3.
"SEC" Section 1.2.7.
"Securities Act" Section 1.2.6.
"Shareholder Approval" Section 6.3.1.
"Shareholder Meetings" Section 5.2.
"Shareholder Meeting Date" Section 5.2.
"Sonic" Preamble
"Sonic Material Adverse Effect" Section 1.2.5.
"Subsidiary" Section 1.2.8.
"Survival of Representations,
Warranties, and Agreements" Section 7.3.
"Tax" Section 1.2.9.
"Total Turbotak Outstanding Shares" Section 2.1.2.
"Trustee" Section 2.2.
"Turbotak" Preamble
"Turbotak Material Adverse Effect" Section 1.2.4.
"TurboSonic Technologies, Inc." Section 5.7.
"Voting Share" Section 2.2.
"Voting Trust Agreement" Section 2.2.
1.2 Definitions of Certain Additional Terms. The following terms shall
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have the meanings set forth below:
1.2.1. "Code" means the United States Internal Revenue Code of 1986,
as amended.
1.2.2. "Effective Date" shall mean the date on which the "Effective
Time" occurs.
1.2.3. "Exchange Date" shall mean the date on which the Effective
Time occurs.
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1.2.4. "Turbotak Material Adverse Effect" shall mean an effect that
does or would reasonably be expected to have a material adverse effect on the
financial condition or results of operations of Turbotak.
1.2.5. "Sonic Material Adverse Effect" shall mean an effect that does
or would reasonably be expected to have a material adverse effect on the
financial condition or results of operations of Sonic.
1.2.6. "Securities Act" shall mean the United States Securities Act
of 1933, as amended.
1.2.7. "SEC" shall mean the United States Securities and Exchange
Commission.
1.2.8. "Subsidiary" shall mean, with respect to any corporation, any
other corporation, association, or other business entity a majority (by number
of votes) of the shares of capital stock (or other voting interests) of which is
owned directly or indirectly by such corporation.
1.2.9. "Tax" means any Canadian or United States Federal, provincial,
state or local tax or any foreign tax (including, without limitation, any net
income, gross income, profits, premium, estimated, excise, sales, value added,
services, use, occupancy, gross receipts, franchise, license, ad valorem,
severance, capital levy, production, stamp, transfer, withholding, employment,
unemployment, payroll or property tax, customs duty, or any other governmental
charge or assessment), together with any interest, addition to tax, or penalty.
ARTICLE 2
GENERAL
2.1 Plan of Arrangement. Turbotak agrees that it shall, as soon as
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reasonably practical, apply to the Ontario Court General Division (the "Court")
pursuant to Section 182 of the Ontario Business Corporations Act, as amended
(the "OBCA"), for an interim order in form and substance reasonably satisfactory
to Sonic and Turbotak (the "Interim Order") providing for, among other things,
the calling and holding of a special meeting of the holders of Common Shares and
holders of Class B Shares of Turbotak (voting separately as two classes) for the
purpose of considering and, if deemed advisable, approving a plan of arrangement
involving Turbotak and Acquisition substantially in the form attached as Exhibit
2.1 (the "Arrangement" or "Plan of Arrangement"), the principal terms of which
include:
2.1.1. the designation and authorization of a Class B Exchangeable
Stock of Acquisition (the "Exchangeable Shares") that will have the rights,
privileges and restrictions, and be subject to the conditions, set forth in
Appendix A of the Plan of Arrangement;
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2.1.2. an exchange of shares whereby each holder of outstanding
Common Shares and Class B Shares of Turbotak shall receive a number of
Exchangeable Shares equal to the product obtained by multiplying 8,200,000 by a
fraction, the numerator of which is the number of Turbotak Common Shares or
Class B Shares, as the case may be, owned by such holder at the Closing and the
denominator of which is the total number of outstanding Turbotak Common Shares
and Class B Shares at Closing (the "Total Turbotak Outstanding Shares"), each
Exchangeable Shares to be thereafter exchangeable for Sonic Common Shares on a
one-for-one basis (subject to certain adjustments pursuant to the Plan of
Arrangement), at the option of the holder, during the periods, at the times and
subject to the conditions set forth in Article 2 of the Plan of Arrangement;
2.1.3. Acquisition shall change its name to TurboSonic Canada, Inc.
The foregoing is only a summary of the Plan of Arrangement. The terms,
conditions and procedures for accomplishing the exchange of shares are set forth
in the Plan of Arrangement and the Appendices thereto and the foregoing is
qualified by reference thereto.
If approval of the Plan of Arrangement by the shareholders of Turbotak is
obtained, Turbotak shall promptly take the necessary steps to submit the
Arrangement to the Court and apply for a final order approving the Arrangement
(the "Final Order").
2.2 Voting and Exchange Trust Agreement. Prior to the Closing, Sonic,
-----------------------------------
Acquisition and The Trust Company of Bank of Montreal or a bank ortrust company
to be selected by Turbotak (the "Trustee"), shall execute and deliver a Voting
and Exchange Trust Agreement in substantially the form set forth has Exhibit 2.2
hereto, with such changes and additions thereto as may be reasonably requested
by the Trustee (as so executed, the "Voting Trust Agreement"). Sonic shall
deposit with the Trustee one share of a newly created class of Sonic preferred
stock (the "Voting Share") to be held in accordance with the Voting Trust
Agreement having such voting rights, privileges and preferences as may be
required to secure the voting rights relating to the Sonic Common Shares granted
for the benefit of the holders of the Exchangeable Shares, as if the Sonic
Common Shares issuable on exchange of the Exchangeable Shares had been issued.
2.3 Support Agreement. Prior to the Closing, Sonic and Acquisition shall
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execute and deliver the Support Agreement (the "Support Agreement") in
substantially the form set forth as Exhibit 2.3.
2.4 Closing, Closing Date and Effective Time. The execution and delivery
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of the documents required to effectuate the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Ravin, Sarasohn,
Cook, Baumgarten, Fisch & Rosen, P.C., 103 Eisenhower Parkway, Roseland, New
Jersey 07068, or at such other place
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and at such time as the parties hereto may agree; provided, however, such
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Closing shall take place no later than the fifth business day after satisfaction
or waiver of the last to be fulfilled of the conditions set forth in ARTICLE 6
that by their terms are not to occur at the Closing (the "Closing Date"). The
Arrangement shall become effective as provided for in the Plan of Arrangement
(the "Effective Time").
2.5 Contemporaneous Transactions. The parties hereby agree that each of
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the transactions contemplated by this Agreement that is in fact consummated
shall, to the extent permitted by applicable law and not otherwise provided for
herein or in the Plan of Arrangement, be deemed consummated substantially
contemporaneously with any other transaction that is in fact consummated
pursuant to this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF TURBOTAK
In order to induce Sonic and Acquisition to enter into this Agreement,
Turbotak hereby represents and warrants as follows:
3.1 Due Organization, Authorization and Good Standing of Turbotak.
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Turbotak is a corporation duly organized, validly existing and in good standing
under the OBCA. Turbotak has the requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and, upon
receipt of any approvals required by the Order, to consummate all transactions
contemplated hereby. The execution, delivery and performance by Turbotak of
this Agreement, and the consummation by Turbotak of the transactions
contemplated hereby, have been duly and validly authorized and approved by all
necessary corporate action in respect thereof on the part of Turbotak, subject
only to any approvals required by the Order. This Agreement constitutes the
valid and binding obligation of Turbotak, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, moratorium, reorganization and similar
laws of general applicability affecting the rights and remedies of creditors and
to general principles of equity, regardless of whether enforcement is sought in
proceeding in equity or at law. Turbotak has full corporate power and authority
to carry on its business as now conducted and to own or lease and to operate its
properties an assets where such properties and assets are now owned, leased or
operated by it and where such business is now conducted by it. Turbotak is duly
qualified to do business and is in good standing as a foreign corporation and
licensed or qualified to transact business in the jurisdictions where such
qualification is required by reason of the nature of the business conducted by
it or the properties or assets owned, operated or leased by it. True, complete
and correct copies of the charter, By-laws and other analogous organizational
documents (the "Charter Documents") of Turbotak as in effect on the date hereof
have heretofore been delivered to Sonic.
5
<PAGE>
3.2 No Violation or Approval. The execution, delivery and performance by
------------------------
Turbotak of this Agreement and the consummation of the transactions contemplated
hereby will not result in a breach or violation of, or a default under, or the
acceleration of any payment obligation pursuant to, any law, rule or regulation
applicable to Turbotak, its Charter Documents, any material agreement or
instrument to which it is a party or by which any its properties are bound, or
any order, judgment or decree of any court or any governmental agency or body
having jurisdiction over it or its properties. No consent, approval, order or
authorization of, declarations or filing with, any governmental authority or
entity or other party is required to be obtained or made by Turbotak in
connection with the execution and delivery of this Agreement or the consummation
by Turbotak of the transactions contemplated hereby other than (i) any approvals
required by the Interim Order or Final Order, (ii) filings with the Director
under the OBCA and any filings or approvals required by provincial securities
commissions, and (iii) such failures to obtain or make such other consents,
approvals, orders, authorizations, declarations or filings as in the aggregate
would not have a Turbotak Material Adverse Effect.
3.3 Capital Stock. The authorized capital stock of Turbotak consists of
-------------
an unlimited number of Turbotak Common Shares and Class B Shares. As of July 1,
1997, there were ________ Turbotak Common Shares outstanding and _______
Turbotak Class B Shares, and 25,000 Turbotak Common Shares reserved for issuance
upon the exercise of the CVF Option. No Turbotak Common Shares or Class B
Shares are held as treasury stock. All of the outstanding Turbotak Common
Shares and Class B Shares have been, and any Turbotak Common Shares issued upon
exercise of the CVF Option will be, validly issued, fully paid and nonassessable
and free of preemptive rights. Except for the CVF Option, Turbotak has no
outstanding options, warrants, rights, other agreements or commitments
obligating it to issue or sell shares to its capital stock or any securities or
obligations convertible into, or exchangeable for, any shares of its capital
stock. Turbotak has no outstanding bonds, debentures, notes or other
indebtedness the holders of which have the right to vote (or that are
convertible or exercisable into securities having the right to vote) with
holders of Turbotak Common Shares on any matter. None of the outstanding shares
of capital stock of Turbotak have been issued in violation of Canadian
provincial securities laws, the Securities Act or the rules and regulations
promulgated thereunder or the securities or blue sky laws of any state or other
jurisdiction, which violations would have in the aggregate a Turbotak Material
Adverse Effect.
3.4 Litigation. There are no actions, claims, suits, investi gations or
----------
proceedings pending or to Turbotak's knowledge threatened against Turbotak that
question the validity of this Agreement or any action taken or to be taken
pursuant to or in connection with the provisions of this Agreement, nor to the
knowledge of Turbotak is there any basis for any such action, claim, suit,
proceeding or investigation.
6
<PAGE>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SONIC AND ACQUISITION
In order to induce Turbotak to enter into this Agreement, each of Sonic and
Acquisition jointly and severally represents and warrants as follows:
4.1 Due Organization, Authorization and Good Standing of Sonic and
--------------------------------------------------------------
Acquisition. Sonic is a corporation duly organized, validly existing and in
- -----------
good standing under the laws of the State of Delaware. Acquisition is a
corporation duly organized, validly existing and in good standing under the
OBCA. Each of Sonic and Acquisition has the requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and to consummate all transactions contemplated hereby. The execution, delivery
and performance of this Agreement by each of them, and the consummation of the
transactions contemplated hereby have been duly and validly authorized and
approved by all necessary corporate action in respect thereof on the part of
each of Sonic and Acquisition. This Agreement constitutes the valid and binding
obligation of each of Sonic and Acquisition, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, moratorium, reorganization and similar
laws of general applicability affecting the rights and remedies of creditors and
to general principles of equity, regardless of whether enforcement is sought in
proceedings in equity or at law. Each of Sonic and Acquisition has full
corporate or partnership power and authority to carry on its business as now
conducted and to own or lease and to operate its properties and assets where
such properties and assets are now owned, leased or operated by it and where
such business is now conducted by it. Sonic is duly qualified to do business
and in good standing as a foreign corporation and licensed or qualified to
transact business in each jurisdiction in which the nature of the business
conducted by it or the properties or assets owned, operated or leased by it
requires it to be so licensed or qualified, other than such failures to be so
licensed or qualified that, in the aggregate, would not have a Sonic Material
Adverse Effect. True, complete and correct copies of the Charter Documents of
Sonic and Acquisition as in effect on the date hereof have heretofore been
delivered to Turbotak.
4.2 No Violation or Approval. The execution, delivery and performance by
------------------------
Sonic and Acquisition of this Agreement and the consummation of the transactions
contemplated hereby will not result in a breach or violation of, or a default
under, any law, rule or regulation, order, judgment or decree applicable to
Sonic or Acquisition or any material agreement or instrument to which any of
them is a party or by which any of them or any of their respective properties
are bound, or any order, judgment or decree of any court or any governmental
agency or body having jurisdiction over any of them or their properties or under
their Charter documents other than any breach, violation or default that would
not have a Sonic Material Adverse Effect. No consent, approval, order or
authorization of, or declaration or filing with, any governmental authority or
entity or
7
<PAGE>
other party is required to be made or obtained by Sonic or Acquisition in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby other than (i) any approvals required by
the Interim Order or Final Order, (ii) the Bankruptcy Order, (iii) filings with
and approvals required by provincial securities commissions, and (iv) such
failures to obtain or make consents, approvals, orders, authorizations,
declarations or filings as in the aggregate would not have a Sonic Material
Adverse Effect.
4.3 Capital Stock. The authorization capital stock of Sonic consists of
-------------
(i) 30,000,000 shares of Sonic Common Shares, $.10 par value, of which, as of
July 1, 1997, approximately 9,847,374 shares are outstanding. Upon issuance of
the Sonic Common Shares in exchange for the Exchangeable Shares as provided in
the Plan of Arrangement, such shares shall be validly issued, fully paid and
nonassessable, free or preemptive rights and free of all Liens other than such
as arise under applicable securities laws. No class of capital stock of Sonic
is entitled to preemptive rights. As of the date hereof, there are no
outstanding options, warrants, rights or other agreements or commitments
obligating Sonic to issue or sell shares of its capital stock or any securities
or obligations convertible into or exchangeable for any shares of its capital
stock, except the Sonic Common Shares to be issued in exchange for the
Exchangeable Shares and as otherwise required under the Plan.
The authorized capital stock of Acquisition consists of 100 shares of
Common Shares (the "Class A Shares") and at the Effective Time such number of
shares of Class B Exchangeable Shares (the "Exchangeable Shares") as shall be
necessary to effect the Plan of Arrangement.
All of the outstanding Class A Shares have been, and any Exchangeable
Shares issued pursuant to the Plan of Arrangement will be, validly issued, fully
paid and nonassessable, and free of preemptive rights. The Exchangeable Shares
to be issued pursuant to the Plan of Arrangement will be issued in full
compliance with all applicable Canadian provincial securities laws and with the
Securities Act and the rules and regulations promulgated thereunder and all
other relevant securities or blue sky laws of any state. Acquisition does not
have any outstanding options, warrants, rights, other agreements or commitments
obligating Acquisition to issue or sell shares of its capital stock or any
securities or obligations convertible into, or exchangeable for, any shares of
its capital stock. None of the outstanding shares of capital stock of
Acquisition was issued in violation of any applicable Canadian provincial
securities laws, the Securities Act or the rules and regulations promulgated
thereunder or the securities or blue sky laws of any state which violation would
have a Sonic Material Adverse Effect.
4.4 Litigation. There are no actions, claims, suits, investigations or
----------
proceedings pending or to Sonic's knowledge
8
<PAGE>
threatened against Sonic that question the validity of this Agreement or any
action taken or to be taken pursuant to or in connection with the provisions of
this Agreement, nor to the knowledge of Sonic is there any basis for any such
action, claim, suit, proceeding or investigation.
ARTICLE 5
CERTAIN COVENANTS
5.1. Preparation of Proxy Statement and No Action Request; Other Filings
-------------------------------------------------------------------
and Submissions. Sonic, Acquisition and Turbotak shall cooperate in (i) the
- ---------------
preparation of any Proxy Circular, Information Circular, applications for orders
and any other documents reasonably deemed by Sonic or Turbotak to be necessary
to discharge their respective obligations under United States and Canadian
securities laws in connection with the Arrangement and the other transactions
contemplated hereby, (ii) the taking of all such action as may be required under
any applicable provincial laws in connection with the issuance of the
Exchangeable Shares and the Sonic Common Shares in the Arrangement; provided,
however, that with respect to Canadian provincial qualifications none of Sonic,
Acquisition or Turbotak shall be required to register or qualify as a foreign
corporation or to take any action that would subject it to service of process in
any jurisdiction where any such entity is not now so subject, except as to
matters and transactions arising solely from the offer and sale of the
Exchangeable Shares and the Sonic Common Shares, and (iii) the taking of all
such action as may be required under the OBCA in connection with the
transactions contemplated by this Agreement and the Plan of Arrangement.
5.2. Shareholders' Meeting. Turbotak shall duly call, give notice of,
---------------------
convene and hold a meeting of its Common and Class B shareholders as promptly as
practicable for the purpose of voting upon the Arrangement (the "Shareholder
Meeting"). Turbotak shall, through its Board of Directors, recommend to its
shareholders approval of the Arrangement and shall use all reasonable efforts to
hold such meeting as soon as practicable after the date hereof ("Shareholder
Meeting Date"), and shall use all reasonable efforts to secure the approval of
each class of its shareholders and the Court of the Arrangement.
5.3. Public Announcements. Neither Sonic nor Turbotak shall (and each
--------------------
party shall use all commercially reasonable efforts to cause its affiliates,
directors, officers, employees, agents and representatives not to), issue any
press release, make any public announcement or public filing or furnish any
written statement to its employees or shareholders generally concerning the
transactions contemplated by this Agreement without the consent of the other
party (which consent shall not be unreasonably withheld), except to the extent
required by the Plan, filings with the Court, Bankruptcy Court or provincial
securities commission, applicable law, rule or regulation or the applicable
requirements of the National Association of Securities Dealers, Inc. with
respect to the issuers whose securities are quoted
9
<PAGE>
on Nasdaq (and in any such case such party shall, to the extent consistent with
timely compliance with such requirement, consult with the other party prior to
making the required release, announcement, filing or statement).
5.4. Notification of Certain Matters. Between the date hereof and the
-------------------------------
Effective Time, each party shall give prompt notice in writing to the other
parties of: (1) any information that indicates that any of its representations
or warranties contained herein was not true and correct as of the date hereof or
will not be true and correct at and as of the Effective Time with the same force
and effect as if made at and as of the Effective Time (except for changes
permitted or contem plated by this Agreement); (ii) the occurrence of any event
that will result, or has a reasonable prospect of resulting, in the failure of
any condition specified in ARTICLE 6 hereof to be satisfied, and (iii) any
notice or other communication from any third party alleging the consent of such
third party is or may be required in connection with the transactions
contemplated by this Agreement or that such transactions otherwise may violate
the rights of or confer remedies upon such third party.
5.5. Other Limitations on Conduct of Business Prior to the
------------------------------------------------------
Effective Time. Sonic hereby covenants and agrees with Turbotak that, prior to
- --------------
the Effective Time: (i) unless the prior written consent of Turbotak shall have
been obtained and except as otherwise contemplated herein, it shall operate its
business, only in the usual, regular and ordinary course of business consistent
with past practices; (ii) use its reasonable efforts to preserve intact its
business organization and assets and maintain their rights and franchises; (iii)
not authorize for issuance,issue or obligate itself to issue any shares of its
capital stock or any options, warrants or rights, or enter into any other
agreements or commitments obligating it to use or sell shares of its capital
stock or any securities or obligations convertible into, or exchangeable for,
any shares of its capital stock; and (iv) to take no action that would (a)
materially or adversely affect the ability of Sonic or Turbotak to obtain any
necessary approvals of any third parties or any governmental authorities
required for the transactions contemplated hereby or materially increase the
period of time necessary to obtain such approvals, or (b) materially or
adversely affect its ability to perform its covenants and agreements under this
Agreement.
5.6. Access to Information. Sonic shall, subject to applicable law, afford
---------------------
Turbotak and its accountants, counsel and other repre sentatives reasonable
access during the period prior to the Effective Time to (a) all of Sonic's
financial statement, properties, books, contracts, commitments and records, and
(b) all other information concerning the business, properties and personnel of
Sonic, as Turbotak may reasonably request.
5.7. Amendment of Sonic Certificate of Incorporation. At the Effective
-----------------------------------------------
Time, Sonic will file an amendment to its certificate of
10
<PAGE>
incorporation changing its name to "TurboSonic Technologies, Inc." and creating
a class of preferred shares for purposes of issuing the Voting Share.
5.8. Further Assurances. Subject to the terms and conditions herein
------------------
provided, and subject to its fiduciary obligations under law, each of the
parties agrees to use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the Arrangement and the other transactions contemplated by this Agreement,
including without limitation the taking of all reasonable actions necessary to
satisfy each condition precedent set forth in ARTICLE 6, to comply promptly with
all legal requirements that may be imposed on any of them with respect to the
Arrangement or to procure any consent, approval, order or authorization of, or
any exemption by, any governmental entity, or other third party, required to be
obtained or made in connection with the Arrangement or the taking of any action
contemplated thereby or by this Agreement.
ARTICLE 6
CERTAIN COVENANTS
6.1. Conditions Precedent to Turbotak's Obligation to Effect the
---- -----------------------------------------------------------
Arrangement. The obligations of Turbotak to effect the Arrangement and other
- -----------
transactions contemplated by this Agreement shall be subject to the
satisfaction, prior to or substantially contemporaneously with the Effective
Time, of the following conditions, compliance with which, or the occurrence of
which, may be waived in whole or in part by Turbotak in writing:
6.1.1. Representations; Covenants; Certificate. The representations
---------------------------------------
and warranties of Sonic contained in ARTICLE 4 hereof shall be true in all
material respects as of the date of this Agreement and as of the Effective
Date with the same effect as though made as of the Effective Time; Sonic
shall in all material respects have performed all obliga tions and complied
with all covenants required by this Agreement to be performed or complied
with by it to the Effective Time; and Sonic shall have delivered to
Turbotak a certificate, dated the Effective Date and signed by its
President or a Vice President, to each such effect.
6.2. Conditions Precedent to Obligations of Sonic. The obliga tions of
--------------------------------------------
Sonic to effect the Arrangement and the other transactions contemplated by this
Agreement shall be subject to the satisfaction, prior to or substantially
contemporaneously with the Effective Date, of the following conditions,
compliance with which, or the occurrence of which, may be waived in whole or in
part by Sonic in writing:
6.2.1. Representations; Covenants; Certificate. The representations
---------------------------------------
and warranties of Turbotak contained in
11
<PAGE>
ARTICLE 3 hereof shall be true in all material respects as of the date of
this Agreement and as of the Effective Date with the same effect as though
made as of the Effective Time; Turbotak shall in all material respects have
performed all obligations and complied with all covenants required by this
Agreement to be performed or complied with by it to the Effective Time; and
Turbotak shall have delivered to Sonic a certificate, dated the Effective
Date and signed by its President or a Vice President, to each such effect.
6.3. Conditions Precedent to Obligations of Each Party. The obligations of
-------------------------------------------------
the parties to effect the Arrangement and the other transactions contemplated by
this Agreement shall be subject to the satisfaction, prior to or substantially
contemporaneously with the Effective Date, of the following additional
conditions, compliance with which, or the occurrence of which, may be waived in
whole or in part in a writing executed by each of Sonic and Turbotak:
6.3.1 Shareholder Approval. The holders of the requisite number, as
--------------------
specified by the Court in its Interim Order, of outstanding shares of
Turbotak's Common Shares and Class B Shares voting as separate classes
shall have duly approved the Plan of Arrangement and the transactions
contemplated thereby and hereby, all in accordance with the requirements of
the OBCA and such Interim Order.
6.3.2 Bankruptcy Court Approval. The Bankruptcy Order shall have
-------------------------
become final and non-appealable.
6.3.3 Canadian Securities Issues. Canadian provincial securities
--------------------------
regulators in those provinces of Canada considered necessary by Canadian
counsel to Turbotak shall have granted rulings or orders, satisfactory to
such counsel acting reasonably, so that the registration and prospectus
provisions of applicable Canadian securities laws will not be applicable to
any of the issuance of securities (included without limitation the Sonic
Common Shares issuable on exchange of any Exchangeable Shares) contemp
lated by the Arrangement and such securities subject to the terms and
conditions imposed by any such ruling or order, will be freely tradable by
holders resident in such provinces.
6.3.4 Injunctions. No temporary restraining order, preliminary or
-----------
permanent injunction or other order by any Canadian or United States
Federal or provincial or state court or governmental body prohibiting the
consummation of the transactions contemplated by this Agreement shall have
been issued and shall not have expired or been withdrawn or reversed and
there shall be no pendent or threatened litigation or other proceeding
seeking to prohibit or impose
12
<PAGE>
any material limitations on the consummation of such transactions.
6.3.5. CVF Option. Canadian Venture Founders shall have exercised
----------
the option it holds to acquire 25,000 shares of Turbotak Common Shares.
ARTICLE 7
MISCELLANEOUS
7.1. Termination. Anything herein or elsewhere to the contrary
---- -----------
notwithstanding, this Agreement may be terminated and abandoned at any time
before the Effective Time, whether before or after adoption and approval of the
Arrangement by the shareholders of Turbotak as herein provided:
(a) By the mutual consent of Sonic and Turbotak;
(b) By either Sonic or Turbotak if (i) there has been a material
breach on the part of the other party of any repre sentation, warranty, covenant
or agreement contained herein that cannot be or has not been cured within ten
days after written notice of such breach to the breaching party or (ii)
Turbotak's shareholders or holder of the CVF Option fail to approve the Plan of
Arrangement, provided, however such failure is not due to Turbotak's breach of
-------- -------
its covenants contained in ARTICLE 5.
(c) By the Board of Directors of Turbotak, if the Effective Time shall
not have occurred by December 31, 1997 other than as a result of the failure of
Turbotak to satisfy its obligations.
(d) By the Board of Directors of Sonic, if the Effective Time shall
not have occurred by December 31, 1997 other than as a result of the failure of
Sonic to satisfy its obligations.
7.2. Amendments and Supplements. At any time before or after approval and
--------------------------
adoption of this Agreement and the Plan of Arrangement by the shareholders of
Turbotak and prior to the Effective Time, this Agreement and the Plan of
Arrangement may be amended or supplemented by a written instrument signed by
Turbotak, Sonic and Acquisition and approved by their respective Boards of
Directors, except that, after the shareholders of Turbotak shall have approved
the Plan of Arrangement, there shall be no amendment that (i) changes the
consideration to which the Turbotak Common Shares or Turbotak Class B Shares are
entitled to be converted upon consummation of the Arrangement as provided in the
Plan of Arrangement, (ii) otherwise would require the approval of the
shareholders of Turbotak in accordance with OBCA, or (iii) the approval of the
Bankruptcy Court or the Court.
13
<PAGE>
7.3. Survival of Representations, Warranties and Agreements. The
------------------------------------------------------
respective representations, warranties and agreements of Turbotak, Sonic and
Acquisition contained in ARTICLES 3 and 4 hereof and their respective agreements
contained in ARTICLE 5 hereof shall expire with, and be terminated by, the
consummation of the Arrangement, and neither Sonic nor Turbotak shall have any
liability whatsoever with respect to such representations, warranties or
agreements after the Effective Time.
7.4. Expenses. All costs and expenses incurred in connection with this
--------
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses; provided that Turbotak shall pay the fees and expenses
of Sonic's counsel in the preparation and negotiation of this Agreement, the
Plan of Arrangement and related documents and attendance at and preparation for
the Closing.
7.5. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the domestic substantive laws of the province of Ontario without
giving effect to any choice or conflict laws rule or provision that would cause
the application of the domestic substantive laws of any other jurisdiction.
7.6. Notice. All notices and other communications required or permitted
------
hereunder shall be in writing (including any facsimile transmission or similar
writing), and shall be sent either by telecopy, hand delivery, or reputable
overnight courier, addressed as follows or to such other address or addresses of
which the respective party shall have notified the other party. Each such
notice or other communication shall be effective (i) if given by telecopy, when
such telecopy is transmitted and the appropriate answer back is received (ii) if
given by reputable overnight courier, one business day after being delivered to
such courier, or (iii) if given by any other means which received at the address
specified in this Section.
To Sonic or Acquisition:
Sonic Environmental Systems, Inc.
11 Melanie Lane
Unit 22-A
East Hanover, New Jersey 07936
Attention: Richard H. Hurd, President
With a copy to:
Ravin, Sarasohn, Cook, Baumgarten, Fisch & Rosen
A Professional Corporation,
103 Eisenhower Parkway
Roseland, NJ 07068
Telecopier: (201) 228-9250
Attention: Marc P. Press, Esq.
14
<PAGE>
To Turbotak:
Turbotak Technologies, Inc.
550 Parkside Drive
Suite A-14
Waterloo, Ontario N2L 5V4
Canada
Telecopier: (519) 885-6992
Attention: Patrick J. Forde, Vice President
With a copy to:
Meighen, Demers
200 King Street West
Suite 1100
Toronto, Canada M5H 3T4
Telecopier: (416) 977-5239
Attention: Patrick Egan
7.7. Entire Agreement, Assignability, Etc. This Agreement (including the
------------------------------------
Schedules and Exhibits attached hereto) (i) constitutes the entire agreement,
and supersedes all other prior agreements and understandings, both written and
oral, among the parties, or any of them, with respect to the Arrangement (ii) is
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder and (iii) shall not be assignable by operation of law or
otherwise.
7.8. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers and their respective corporate seals to
be affixed hereto, the day and year first above written.
SONIC ENVIRONMENTAL SYSTEMS, INC.
By:_____________________________
Name
Title:
SONIC CANADA, INC.
By:_____________________________
Name
Title:
15
<PAGE>
TURBOTAK TECHNOLOGIES, INC.
By:_____________________________
Name
Title:
16
<PAGE>
EXHIBIT 2.2
PLAN OF ARRANGEMENT
UNDER SECTION 182
OF THE ONTARIO BUSINESS CORPORATIONS ACT
OF
SONIC ENVIRONMENTAL SYSTEMS, INC.,
SONIC CANADA, INC.
AND
TURBOTAK TECHNOLOGIES, INC.
<PAGE>
CONTENTS
--------
ARTICLE I - INTERPRETATION............................................ 1
1.1 Definitions............................................ 1
1.2 Sections and Headings.................................. 7
1.3 Number, Gender and Persons............................. 8
1.4 Withholding Tax........................................ 8
ARTICLE II - ARRANGEMENT................................................ 8
2.1 Arrangement............................................ 8
ARTICLE III - RIGHTS OF DISSENT......................................... 10
3.1 Rights of Dissent...................................... 10
ARTICLE IV - CERTIFICATES AND FRACTIONAL SHARES......................... 10
4.1 Issuance of Certificates Representing
Exchangeable Shares.................................... 10
4.2 Distributions with Respect to Unsurrendered
Certificates........................................... 11
4.3 No Fractional Shares................................... 11
4.4 Lost Certificates...................................... 12
4.5 Extinguishment of Rights............................... 12
ARTICLE V - CERTAIN RIGHTS OF SONIC TO ACQUIRE
EXCHANGEABLE SHARES................................. 13
5.1 Sonic Retraction Call Right............................ 13
5.2 Sonic Liquidation Call Right........................... 14
5.3 Sonic Redemption Call Right............................ 16
5.4 Consideration for Call Rights of Sonic................. 17
5.5 Fractional Sonic Common Shares......................... 18
5.6 Economic Equivalence................................... 18
5.7 Capital Reorganization of Sonic........................ 18
5.8 Other Change in Sonic Common Shares.................... 19
ARTICLE VI - AMENDMENT 19
6.1 Plan of Arrangement Amendment.......................... 19
APPENDIX A TO PLAN OF ARRANGEMENT
PROVISIONS ATTACHING TO THE EXCHANGEABLE SHARES......................... 1
<PAGE>
PLAN OF ARRANGEMENT
UNDER SECTION 182
OF THE ONTARIO BUSINESS CORPORATIONS ACT
ARTICLE I
INTERPRETATION
--------------
1.1 DEFINITIONS
-----------
In this Plan of Arrangement unless there is something in the subject
matter or context inconsistent therewith, the following terms shall have the
respective meanings set out below and grammatical variations of such terms shall
have the corresponding meanings.
"AFFILIATE" of any person means any other person directly or indirectly
controlling, controlled by, or under common control with, that person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling", "controlled by" and "under common control with"), as
applied to any person, means the possession by another person, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that first mentioned person whether through the ownership of voting
securities, by contract or otherwise;
"ARRANGEMENT" means the arrangement under Section 182 of the OBCA on the
terms and subject to the conditions set out in this Plan of Arrangement, subject
to any amendments thereto made in accordance with section 6.1 or made at the
direction of the Court in the Final Order;
"AUTOMATIC REDEMPTION DATE" means the date for the automatic redemption by
the Corporation of Exchangeable Shares pursuant to Article 6 of the Exchangeable
Share Provisions, which date shall be June 30, 2002.
"BOARD OF DIRECTORS" means the board of directors of the Corporation;
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day when
banks are not open for business in either or both of the State of New Jersey and
Waterloo, Ontario;
"CANADIAN DOLLAR EQUIVALENT" means in respect of an amount expressed in a
foreign currency (the "Foreign Currency Amount") at any date the product
obtained by multiplying (a) the Foreign Currency Amount by (b) the noon spot
exchange rate on such date for such foreign currency expressed in Canadian
dollars as reported by the Bank of Canada or, in the event such spot exchange
rate is not available, such exchange rate on such date for such foreign currency
expressed in Canadian dollars as may be deemed by the Board of Directors to be
appropriate for such purpose;
"CAPITAL REORGANIZATION" has the meaning ascribed thereto in section 5.7;
<PAGE>
"COMBINATION AGREEMENT" means the agreement by and among Sonic, the
Corporation and Turbotak, dated as of July 1, 1997, as the same may be amended
and restated, providing for, among other things, the Arrangement;
"CORPORATION" means Sonic Canada Inc., a corporation existing under the
OBCA;
"COURT" means the Ontario Court General Division;
"CURRENT MARKET PRICE" means, in respect of a Sonic Common Share on any
date, the Canadian Dollar Equivalent of the closing sales price of Sonic Common
Shares on each day (or, if no trades of Sonic Common Shares occurred on such
day, on the last trading day prior thereto on which such trades occurred)
reported on NASDAQ, or, if the Sonic Common Shares are not then quoted on
NASDAQ, on such other stock exchange or automated quotation system on which the
Sonic Common Shares are listed or quoted, as the case may be, as may be selected
by the Board of Directors for such purpose; provided, however, that if in the
opinion of the Board of Directors the public distribution or trading activity of
Sonic Common Shares during such time period does not create a market that
reflects the fair market value of a Sonic Common Share, then the Current Market
Price of a Sonic Common Share shall be determined by the Board of Directors
based upon the advice of such qualified independent financial advisors as the
Board of Directors may deem to be appro priate, and provided further that any
such selection, opinion or determination by the Board of directors shall be
conclusive and binding;
"CURRENT SONIC COMMON SHARE EQUIVALENT" means, on any date, the equivalent
as at such date of one Sonic Common Share as at the Effective Date, expressed to
four decimal places, determined by applying on a cumulative basis the following
adjustments, to the extent applicable by reason of any transactions occurring in
respect of Sonic Common Shares between the Effective Date and such date, the
Current Sonic Common Share Equivalent as at the Effective Date being 1.0000;
(i) if Sonic shall (A) subdivide, redivide or change its then
outstanding Sonic Common Shares into a greater number of Sonic
Common Shares, unless the Corporation is permitted under applicable
law without a vote of its shareholders to make, and shall
simultaneously make, the same or an economically equivalent change
to the rights of the holders of Exchangeable Shares, (B) reduce,
combine, consolidate or change its then outstanding Sonic Common
Shares into a lesser number of Sonic Common Shares, unless the
Corporation is permitted under applicable law without a vote of its
shareholders to make, and shall simultane ously make, the same or
an economically equivalent change to the rights of the holders of
Exchangeable Shares, or (C) issue Sonic Common Shares (or
securities exchangeable or convertible into Sonic Common Shares) to
the holders of all or substantially all of its then outstanding
Sonic
2
<PAGE>
Common Shares by way of stock dividend or other distribu tion
(other than to holders of Sonic Common Shares who exercise an
option to receive stock dividends in lieu of receiving cash
dividends), unless the Corporation is permitted under applicable
law without a vote of its shareholders to issue or distribute, and
shall simultane ously issue and distribute, equivalent numbers of
Sonic Common Shares or other securities (adjusted if necessary in
accordance with the Current Sonic Common Share Equivalent), or the
common equivalent on a per share basis, to the holders of the
Exchangeable Shares (any of such events being herein called a
"Sonic Common Share Reorganization"), the Current Sonic Common
Share Equivalent shall be adjusted effective immediately after the
record date at which the holders of Sonic Common Shares are
determined for the purpose of the Sonic Common Share Reorganization
by multiplying the Current Sonic Common Share Equivalent in effect
at such record date by the quotient obtained when:
(A) the number of Sonic Common Shares outstanding after the
completion of such Sonic Common Share Reorganization (but
before giving effect to the issue of any Sonic Common Shares
issued after such record date otherwise than as part of such
Sonic Common Share Reorganization) including, in the case
where securities exchangeable or convertible into Sonic Common
Shares are distributed, the number of Sonic Common Shares that
would have been outstanding had such securities been exchanged
for or converted into Sonic Common Shares on such record date,
(B) the number of Sonic Common Shares outstanding on such record
date before giving effect to the Sonic Common Share
Reorganization.
(ii) if at any time Sonic shall fix a record date for the issuance of
rights, options or warrants to the holders of all or substantially
all of the Sonic Common Shares entitling them to subscribe for or
to purchase Sonic Common Shares (or securities of Sonic convertible
into Sonic Common Shares) at a price per Sonic Common Share (or
having a conversion price per Sonic Common Share) of less than the
Current Market Price on such record date, unless the Corporation is
permitted under applicable law without a vote of its shareholders
to issue, and shall simultane ously issue, equivalent numbers of
such rights, options or warrants, adjusted if necessary in
accordance with the Current Sonic Common Share Equivalent at such
record date, or the economic equivalent thereof on a per share
basis, to the holders of Exchangeable Shares (any such event being
herein referred to as a "Rights Offering"), then the Current Sonic
Common Share Equivalent then in effect
3
<PAGE>
shall be adjusted immediately after such record date by multiplying
the Current Sonic Common Share Equivalent then in effect on such
record date by the quotient obtained when:
(A) the sum of the number of Sonic Common Shares outstanding on
such date and the number of additional Sonic Common Shares
offered for subscription or purchase under the Rights Offering
(or the number of Sonic Common Shares into which the
securities so offered are convertible)
is divided by
(B) the sum of the number of Sonic Common Shares outstanding on
such record date and the number determined by dividing the
aggregate price of the total number of additional Sonic Common
Shares offered for subscription or purchase under the Rights
Offering (or the aggregate conversion price of the convertible
securities so offered) by the Current Market Price on such
record date.
Any Sonic Common Share owned by or held for the account of Sonic
shall be deemed not to be outstanding for the purpose of any such
computation. If such rights, options or warrants are not so issued
or if, at the date of expiry of the rights, options or warrants
have been exercised, then the Current Sonic Common Share Equivalent
shall be readjusted effective immediately after the date of expiry
to the Current Sonic Common Share Equivalent which would have been
in effect of such record date had not been fixed or to the current
Sonic Common Share Equivalent which would then be in effect on the
date of expiry of the only rights, options or warrants issued had
been those that were exercised, as the case may be;
(iii) If Sonic shall fix a record date for the making of a distribution
(including a distribution by way of stock dividend) to the holders
of all or substantially all its outstanding Sonic Common Shares of
(A) shares of Sonic of any class other than Sonic Common Shares
(or shares convertible into Sonic Common Shares referred to in
(i)(C) above),
(B) rights, options or warrants (excluding a Rights Offering),
(C) evidences of its indebtedness (excluding indeb tedness
convertible into Sonic Common Shares referred to in (i)(C)
above), or
4
<PAGE>
(D) any other assets (other than any of the distri butions
referred to in (A), (B) or (C), dividends paid in the ordinary
course or a Sonic Common Share Reorganization)
unless the Corporation is permitted under applicable law without a
vote of its shareholders to distribute, and shall simultaneously
distribute, the same number of shares, rights, options or warrants,
evidences of indeb tedness or other assets, as the case may be,
adjusted if necessary in accordance with the Current Sonic Common
Share Equivalent as at such record date, or the economic equivalent
thereof on a per share basis, to the holders of Exchangeable Shares
(any such event being herein referred to as a "Special
Distribution") then, in each such case, the Current Sonic Common
Share Equivalent shall be adjusted effective immediately after the
record date at which the holders of Sonic Common Shares are
determined for the purposes of the Special Distribution by multiply
ing the Current Sonic Common Share Equivalent in effect on such
record date by the quotient obtained when:
(I) the product obtained when the number of Sonic Common
Shares outstanding on the record date is multiplied by
the Current Market Price on such date,
(II) the difference obtained when the amount by which the
aggregate fair market value (as determined by the Board
of Directors, which determination shall be conclusive) of
the shares, rights, options, warrants, evidences of
indebtedness or assets, as the case may be, distributed
in the Special Distribution exceeds the fair market value
(as determined by the Board of Directors, which
determination shall be conclusive) of the consideration,
if any, received therefor by Sonic, is subtracted from
the product obtained when the number of Sonic Common
Shares outstanding on the record date is multiplied by
the Current Market Price on such date,
provided that no such adjustment shall be made if the result of
such adjustment would be to decrease the Current Sonic Common Share
Equivalent in effect immediately before such record date. Any
Sonic Common Share owned by or held for the account of Sonic shall
be deemed not to be out standing for the purpose of any such
computation. Such adjustment shall be made successively whenever
such a record date is fixed. To the extent that such distri bution
is not so made, the Current Sonic Common Share Equivalent shall be
readjusted effective immediately to
5
<PAGE>
the Current Sonic Common Share Equivalent which would then be in
effect based upon such shares or rights, options or warrants or
evidences of indebtedness or assets actually distributed;
"DEPOSITARY" means The Trust Company of Bank of Montreal at its principal
offices in Toronto, Ontario;
"EFFECTIVE DATE" means the date shown on the certificate of arrangement
issued by the Director under the OBCA giving effect to the arrangement;
"EFFECTIVE TIME" means 12:01 A.M. on the Effective Date;
"EXCHANGEABLE SHARE PROVISIONS" means the rights, privileges,
restrictions and conditions attaching to the Exchangeable Shares, which are set
forth in Appendix A hereto;
"EXCHANGEABLE SHARES" means the Exchangeable Non-Voting Shares of the
Corporation having the rights, privileges, restrictions and conditions set forth
in the Exchangeable Share Provisions;
"FINAL ORDER" means the final order of the Court approving the
Arrangement a such order may be amended by the Court at any time prior to the
Effective Time;
"LIEN" means any lien, pledge, adverse claim, security interest,
mortgage, claim, charge or encumbrance;
"LIQUIDATION CALL PURCHASE PRICE" has the meaning ascribed thereto in
subsection 5.2(a);
"LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in subsection
5.2(a);
"LIQUIDATION DATE" has the meaning ascribed thereto in Section 4.1 of the
Exchangeable Share Provisions;
"MEETING" means the Special Meeting of the Common and Class B
shareholders of Turbotak (voting separately as two classes) and the holder of
the CVF Option to be held to consider the Arrangement.
"NASDAQ" means the NASDAQ National Market System;
"OBCA" means the Ontario Business Corporation Act, as amended from time
to time;
"REDEMPTION CALL PURCHASE PRICE" has the meaning ascribed thereto in
subsection 5.3(a);
"REDEMPTION CALL RIGHT" has the meaning ascribed thereto in subsection
5.3(a);
6
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"RETRACTED SHARES" has the meaning ascribed thereto in subsection 5.1(a)
of the Exchangeable Share Provisions;
"RETRACTION CALL PURCHASE PRICE" has the meaning ascribed thereto in
subsection 5.1(a);
"RETRACTION CALL RIGHT" has the meaning ascribed thereto in subsection
5.1(a);
"RETRACTION DATE" has the meaning ascribed thereto in subsection 5.2 of
the Exchangeable Share Provisions;
"RETRACTION REQUEST" has the meaning ascribed thereto in Section 5.1 of
the Exchangeable Share Provisions;
"SONIC" means Sonic Environmental Systems, Inc., a corporation existing
under the laws of the State of Delaware;
"SONIC CALL NOTICE" has the meaning ascribed thereto in subsection
5.1(b);
"SONIC COMMON SHARE REORGANIZATION" has the meaning ascribed thereto in
subsection 1.1 definition of Current Sonic Common Share Equivalent;
"SONIC COMMON SHARES" means the common stock, par value $.10 per share,
of Sonic;
"TRANSFER AGENT" means The Trust Company of Bank of Montreal or such
other person as may from time to time be the Registrar and Transfer Agent for
the Exchangeable Shares;
"TURBOTAK" means Turbotak Technologies, Inc., a corporation existing
under the OBCA;
"TURBOTAK COMMON SHARES" means the common shares in the capital of
Turbotak, including all rights associated therewith;
"TURBOTAK CLASS B SHARES" means the Class B shares in the capital of
Turbotak, including all rights associated therewith;
"VOTING AND EXCHANGE TRUST AGREEMENT" means the Voting and Exchange Trust
Agreement between the Corporation, Sonic and The Trust Company of Bank of
Montreal made as of ___________________, 1997.
Any capitalized terms that have not been otherwise defined above shall
have the meanings ascribed to them in the Combination Agreement.
1.2 SECTIONS AND HEADINGS
---------------------
The division of this Plan of Arrangement into sections and the insertion
of headings are for reference purposes only and shall not affect the
interpretation of this Plan of Arrangement. Unless other-
7
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wise indicated,any reference in this Plan of Arrangement to a section or an
Appendix refers to the specified section of or Appendix to this Plan of
Arrangement.
1.3 NUMBER, GENDER AND PERSONS
--------------------------
In this Plan of Arrangement, unless the context otherwise requires, words
importing the singular number include the plural and vice versa, words importing
any gender include all genders and words importing persons include individuals,
corporations, partnerships, associations, trusts, unincorporated organizations,
governmental bodies and other legal or business entities of any kind.
1.4 WITHHOLDING TAX
---------------
All amounts required to be paid, deposited or delivered under this Plan
of Arrangement shall be paid, deposited or delivered after deduction of any
amount required by applicable law to deducted or withheld on account of tax and
the deduction of such amounts and remittance to the applicable tax authorities
shall, to the extent thereof, satisfy such requirement to pay, deposit or
deliver hereunder.
ARTICLE II
ARRANGEMENT
-----------
2.1 ARRANGEMENT
-----------
At the Effective Time, the following shall occur and shall be deemed to
occur in the following order without any further act or formality:
(a) The authorized share of capital of the Corporation shall be amended
to authorize an unlimited number of Exchangeable Shares; as a
result of such amendment the Corporation shall have two classes of
authorized share capital, namely, an unlimited number of Class A
Common Shares and an unlimited number of Exchangeable Shares, the
rights, privileges, restrictions and conditions attaching to each
of which classes shall be set out in Appendix A.
(b) All of the outstanding Turbotak Common Shares and Turbotak Class B
Shares, except Turbotak Common Shares or Turbotak Class B Shares
held by holders who have exercised their rights of dissent in
accordance with section 3.1 hereof and who are ultimately entitled
to be paid fair market value for such shares (hereinafter
"Dissenters"), shall be exchanged by the holders thereof for
Exchangeable Shares, the number of which shall be in the case of
each holder, equal to the product obtained by multiplying 8,200,000
by a fraction, the numerator of which is the number of Turbotak
Common Shares or Class B Shares owned by such
8
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holder at Closing and the denominator of which is the total number
of outstanding Turbotak Common Shares and Class B Shares at Closing
(the "Total Turbotak Outstanding Shares").
(c) Upon the exchange referred to in subsection 2.1(b) above, each
holder of exchanged Turbotak Common Shares or Turbotak Class B
Shares shall cease to be such a holder, shall have his name removed
from the register of holders of Turbotak Common Shares and Class B
Shares and shall become a holder of the number of fully paid
Exchangeable Shares to which he is entitled as a result of such
exchange and such holder's name shall be added to the register of
holders of Exchangeable Shares accordingly.
(d) The Corporation shall add to its stated capital account in respect
of Exchangeable Shares issued pursuant to subsection 2.1(b) an
amount equal to the aggregate fair market value of the Turbotak
Common Shares and Turbotak Class B Shares exchanged pursuant to
subsection 2.1(b) and immediately thereafter such stated capital
shall be reduced to an amount equal to the aggregate of the paid-up
capital, for purposes of the Income Tax Act (Canada), of the
Turbotak Common Shares and Turbotak Class B Shares exchanged
pursuant to subsection 2.1(b), all as determined by the Board of
Directors of the Corporation.
(d) The name of the Corporation shall be changed to "TURBOSONIC CANADA,
INC."
ARTICLE III
RIGHTS OF DISSENT
-----------------
3.1 RIGHTS OF DISSENT
-----------------
Holders of Turbotak Common shares or Turbotak Class B Shares may exercise
rights of dissent with respect to such Turbotak Common shares or Turbotak Class
B Shares held, as the class may be ("Dissenters' Shares"). All such rights of
dissent shall be exercised pursuant to and in the manner set forth in section
185 of the OBCA and this section 3.1 (the "Dissent Procedures") in connection
with the Arrangement and holder who duly exercise such right of dissent and who:
(a) are ultimately entitled to be paid fair value for their Dissenters'
Shares shall be deemed to have transferred such Dissenters Shares
to Turbotak for cancellation on the Effective Date; or
(b) are ultimately not entitled, for any reason, to be paid fair value
for their Dissenters' Shares shall be deemed to have participated
in the Arrangement on the same basis as
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any non-dissenting holder of Turbotak Common Shares or Turbotak
Class B Shares, as the case may be, and shall receive Exchangeable
Shares on the basis determined in accordance with subsection
2.1(b).
In no case shall Turbotak be required to recognize such holders as holders of
Turbotak Common Shares or Turbotak Class B Shares, as the case may be, on and
after the Effective Date, and the names of such holders of Turbotak Common
Shares or Turbotak Class B Shares, as the case may be, shall be deleted from the
register of holders of Turbotak Common Shares and Turbotak Class B Shares on the
Effective Date.
ARTICLE IV
CERTIFICATES AND FRACTIONAL SHARES
----------------------------------
4.1 ISSUANCE OF CERTIFICATES REPRESENTING EXCHANGEABLE SHARES
---------------------------------------------------------
At or promptly after the Effective Time, the Corporation shall deposit
with the Depositary, for the benefit of the holders of Turbotak and Turbotak
Class B Shares exchanged pursuant to subsection 2.1(b), certificates
representing the Exchangeable Shares issued pursuant to subsections 2.1(c).
Upon surrender to the Depositary for cancellation of a certificate which
immediately prior to the Effective Time representing outstanding Turbotak Common
Shares or Turbotak Class B Shares exchanged pursuant to subsection 2.1(b),
together with such other documents and instruments as would have been required
to effect the transfer of the shares formerly represented by such certificate
under the OBCA and the articles and by-laws of Turbotak, and such additional
documents and instruments as the Depositary may reasonably require, the holder
of such surrendered certificate shall be entitled to receive in exchange
therefor, and the Depositary shall deliver to such holder, a certificate
representing that number (rounded down to the nearest whole number) of
Exchangeable Shares with such holder has the right to receive (together with any
dividends or distributions with respect thereto pursuant to section 4.2) and the
certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of Turbotak Common Shares or Turbotak Class B Shares which
is not registered in the transfer records of Turbotak, a certificate
representing the proper number of Exchangeable Shares may be issued to a
transferee if the certificate representing Turbotak Common Shares or Turbotak
Class B Shares is presented to the Depositary, accompanied by all documents
required to evidence and effect such transfer. Until surrendered as
contemplated by this section 4.1, each certificate which immediately prior to
the Effective Date represented outstanding Turbotak Common Shares or Turbotak
Class B Shares, that were purchased for consideration consisting of Exchangeable
Shares, shall be deemed at any time after the Effective Time to represent only
the right to receive upon surrender (i) the certificate representing
Exchangeable Shares as contemplated by this section 4.1, and (ii) and dividends
or distributions with a record date after the Effective Time theretofore
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paid or payable with respect to Exchangeable Shares as contemplated by section
4.2.
4.2 DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED CERTIFICATES
--------------------------------------------------------
No dividends or other distributions declared or made after the Effective
Time with respect to Exchangeable Shares with a record date after the Effective
Time shall be paid to the holder of any unsur rendered certificate which,
immediately prior to the Effective Time, represented outstanding Turbotak Common
Shares or Turbotak Class B Shares that were exchanged pursuant to section 2.1,
unless and until such certificate shall be surrendered in accordance with 4.1.
Subject to applicable law and to section 4.5, at the time of such surrender of
any certificate (or, in the case of clause (iii) below, at the appro priate
payment date), there shall be paid to the record holder of the certificate
representing whole Exchangeable Shares into which the shares represented by the
surrendered certificate wer exchanged, without interest, (i) the amount of any
cash payable in lieu of a fractional Exchangeable Share to which such holder is
entitled pursuant to section 4.3, (ii) the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole Exchangeable Shares, and (iii) the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole Exchangeable Shares.
4.3 NO FRACTIONAL SHARES
--------------------
No certificates or scrip representing fractional Exchangeable Shares
shall be issued upon the surrender for exchange of certificates pursuant to
section 4.1 and no dividend, stock split or other change in the capital
structure of the Corporation shall relate to any such fractional security and
such fractional interests shall not entitle the owner thereof to vote or to
exercise any rights as a security holder of the Corporation. In lieu of any
such fractional securities, each person entitled to a fractional interest in an
Exchangeable Share will receive an amount of cash (rounded to the nearest whole
cent), without interest, equal to the Canadian Dollar Equivalent as of the
Effective Date of the product of (i) such fraction multiplied by (ii) the
Current Market Price of Sonic Common Stock.
4.4 LOST CERTIFICATES
-----------------
If any certificate that immediately prior to the Effective Time
represented outstanding Turbotak Common Shares or Turbotak Class B Shares that
were exchanged pursuant to section 2.1 has been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such certificate
to be lost, stolen or destroyed, the Depositary will issue in exchange for such
lost, stolen or destroyed certificate, certificates representing Exchangeable
Shares (and any dividends or distributions with respect thereto and any cash
pursuant to section 4.3) deliverable in respect thereof as determined in
accordance with section 2.1. When authorizing such payment in
11
<PAGE>
exchange for any lost, stolen or destroyed certificate, the person to whom
certificates representing Exchangeable Shares are to be issued, as a condition
precedent to the issuance thereof, give a bond satisfactory to Turbotak or the
Corporation, as the case may be, in such sum as Turbotak or the Corporation may
direct or otherwise indemnify Turbotak or the Corporation in a manner
satisfactory to the Corporation and Turbotak against any claim that may be made
against Turbotak or the Corporation with respect to the certificate alleged to
have been lost, stolen or destroyed.
4.5 EXTINGUISHMENT OF RIGHTS
------------------------
Any certificate that immediately prior to the Effective Time represented
outstanding Turbotak Common Shares or Turbotak Class B Shares that were
purchased pursuant to section 2.1 and not deposited, with all other documents
required by section 4.1, on or prior to the sixth anniversary of the Effective
Time, will cease to represent a claim or interest of any kind of nature as a
shareholder of Turbotak or the Corporation. On such date, the Turbotak Common
Shares or Turbotak Class B Shares to which the former registered holder of the
certificate referenced in the preceding sentence was ultimately entitled shall
be deemed to have been redeemed by the Corporation with all entitlement to
dividends or distributions thereon held for such former registered holder for no
consideration.
ARTICLE V
CERTAIN RIGHTS OF SONIC TO ACQUIRE EXCHANGEABLE SHARES
------------------------------------------------------
5.1 SONIC RETRACTION CALL RIGHT
---------------------------
(a) Sonic shall have the overriding right (the "Retraction Call Right")
notwithstanding the proposed redemption of Retracted Shares by the Corporation
on Retraction Date, to purchase from the holder of the Retracted Shares on the
Retraction Date the Retracted Shares upon payment by Sonic to the holder of an
Exchangeable Share an amount equal to (a) the Current Market Price multiplied by
the Current Sonic Common Share Equivalent, in each case determined on the
Retraction Date, which shall be satisfied in full in respect to the Retracted
Shares by causing to be delivered to the holder such whole number of Sonic
Common Shares as is equal to the amount obtained by multiplying the number of
Retracted Shares by the Current Sonic Common Share Equivalent (together with an
amount in lieu of any fractional Sonic Common Share resulting from such
calculation payable in accordance with section 5.5 and the aggregate of all
dividends declared and unpaid on such Retracted Shares (collectively, the
"Retraction Call Purchase Price"). In the event of the exercise of the
Retraction Call Right by Sonic, the holder of the Retracted Shares shall be
obligated to sell to Sonic, and Sonic shall be obligated to purchase, the
Retracted Shares on the Retraction Date upon payment by Sonic to such holder of
the Retraction Call Purchase Price for each Retracted Share.
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<PAGE>
(b) In order to exercise the Retraction Call Right, Sonic shall advise
the Transfer Agent in writing of its determination to do so (the "Sonic Call
Notice") on or prior to the expiry of the third Business Day after the receipt
by the Transfer Agent of the Retraction Request. If Sonic does not so notify
the Transfer Agent, the Transfer Agent will notify the holder as soon as
possible thereafter that Sonic has waived the Retraction Call Right. If Sonic
delivers the Sonic Call Notice before the expiry of such three Business Day
period, the Retraction Request shall thereupon be deemed only to be an offer by
the holder to sell the Retracted Shares to Sonic. In such event, the
Corporation shall not redeem the Retracted Shares and Sonic shall purchase from
such holder and such holder shall sell to Sonic on the Retraction Date the
Retracted Shares for the Retraction Call Purchase Price for each Retracted
Share.
(c) For the purposes of completing a purchase of the Retracted Shares
pursuant to the Retraction Call Right, Sonic shall deposit with the Transfer
Agent, on or before the Retraction Date, certificates representing the Sonic
Common Shares to be delivered to the holder of the Retracted Shares in payment
of the total Retraction Call Purchase Price for the Retracted Shares (or the
portion thereof payable in Sonic Common Shares, as the case may be) and a cheque
in the amount of the remaining portion, if any, of the total Retraction Call
Purchase Price (or, if any portion of the Retraction Call Purchase Price
consists of dividends payable in property, such property or property that is the
same as or economically equivalent to such property). Provided that such total
Retraction Call Purchase Price has been so deposited with the Transfer Agent,
the closing of the purchase and sale of the Retracted Shares pursuant to the
Retraction Call Right shall be deemed to have occurred as of the close of
business on the Retraction Date and, for greater certainty, no redemption by the
Corporation of such Retracted Shares shall take place on the Retraction Date.
Sonic shall cause the Transfer Agent to deliver to the holder of the Retracted
Shares, at the address of such holder recorded in the securities register of the
Corporation for the Exchangeable Shares or at the address specified in the
holder's Retraction Request or by holding for pick-up by the holder at the
office of the Transfer Agent to which the Retraction Request was delivered, in
payment of such total Retraction Purchase Price, certificates representing the
Sonic Common Shares to be delivered in respect of such payment (which shares
shall be dully issued as fully paid and non-assessable and shall be free and
clear of any Liens) registered in the name of the holder or in such other name
as the holder may request in payment of such and, if applicable, a cheque of
Sonic payable at par and in Canadian dollars at any branch of the bankers of
Sonic or the Corporation in Canada (or, if any part of the Retraction Call
Purchase Price consists of dividends payable in property, such property or
property that is the same as or economically equivalent to such property), and
such delivery of such certificates and cheque (and property, if any) to the
holder on behalf of Sonic by the Transfer Agent shall be deemed to be payment of
and shall satisfy and discharge all liability for the total Retraction Call
Purchase Price to the extent that the same is represented by such share
certificates and cheque (and property, if any), unless such cheque is
13
<PAGE>
not paid on due presentation. On and after the close of business on the
Retraction Date, the holder of the Retracted Shares shall cease to be a holder
of such Retracted Shares and shall not be entitled to exercise any of the rights
of a holder in respect thereof, other than the right to receive the Retraction
Call Purchase Price, unless upon presentation and surrender of certificates in
accordance with the foregoing provisions, payment of the total Retraction Call
Price shall not be made, in which case the rights of such holder shall remain
unaffected until the total Retraction Call Purchase Price has been paid in the
manner hereinbefore provided. On and after the close of busi ness on the
Retraction Date, provided that presentation and surrender of certificates and
payment of the total Retraction Call Purchase Price has been made in accordance
with the foregoing provisions, the holder of the Retracted Shares so purchased
by Sonic shall thereafter be considered and deemed for all purposes to be a
holder of the Sonic Common Shares delivered to such holder.
5.2 SONIC LIQUIDATION CALL RIGHT
----------------------------
(a) Sonic shall have the overriding right (the "Liquidation Call Right")
in the event of and notwithstanding the proposed liquida tion, dissolution or
winding-up of the Corporation, to purchase from all but not less than all of the
holders (other than Sonic) of Exchangeable Shares on the Liquidation Date all
but not less than all of the Exchangeable Shares held by each such holder on
payment by Sonic of an amount per share equal to (a) the Current Market Price
multiplied by the Current Sonic Common Share Equivalent, in each case determined
on the Liquidation Date, which shall be satisfied in full in respect of all of
the Exchangeable Shares held by such holder by Sonic causing to be delivered to
such holder such whole number of Sonic Common Shares as is equal to the product
obtained by multiplying the number of such Exchangeable Shares by the Current
Sonic Common Share Equivalent (together with an amount in lieu of any fractional
Sonic Common Share resulting from such calculation payable in accordance with
section 5.5), plus (b) the aggregate of all dividends declared and unpaid on
such Exchangeable Share up to the Liquidation Date (collectively the
"Liquidation Call Purchase Price"). In the event of the exercise of the
Liquidation Call Right by Sonic, each holder shall be obligated to sell all the
Exchangeable Shares held by the holder to Sonic on the Liquidation Date on
payment by Sonic to the holder of the Liquidation Call Purchase Price for each
such share.
(b) To exercise the Liquidation Call Right, Sonic must notify the
Transfer Agent and the Corporation of Sonic's intention to exercise such right
at least 30 days before the Liquidation Date in the case of a voluntary
liquidation, dissolution or winding up of the Corporation and at least five
Business Days before the Liquidation Date in the case of an involuntary
liquidation, dissolution or winding up of the Corporation. The Transfer Agent
will notify the holders of Exchangeable Shares as to whether or not Sonic has
exercised the Liquidation Call Right forthwith after the expiry of the date by
which the same may be exercised by Sonic. If Sonic exercises the Liquidation
Call Right, on the Liquidation Date Sonic will purchase and the holders
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<PAGE>
shall sell all of the Exchangeable Shares then outstanding for a price per share
equal to the Liquidation Call Purchase Price.
(c) For the purposes of completing the purchase of the Exchangeable
Shares pursuant to the Liquidation Call Right, Sonic shall deposit with the
Transfer Agent, on or before the Liquidation Date, certificates representing the
aggregate number of Sonic Common Shares deliverable by Sonic (which shares shall
be duly issued as fully paid and non-assessable and shall be free and clear of
any Liens) in payment of the total Liquidation Call Purchase Price (or the
portion thereof payable in Sonic Common Shares, as the case may be) and a cheque
or cheques in the amount of the remaining portion, if any, of the total
Liquidation Call Purchase Price (or, if any part of the Liquidation Call
Purchase Price consists of dividends payable in property, such property or
property that is the same as or economically equivalent to such property).
Provided that such total Liquidation Call Purchase Price has been so deposited
with the Transfer Agent, on and after the Liquidation Date the rights of each
holder of Exchangeable Shares will be limited to receiving such holder's
proportionate part of the total Liquidation Call Purchase Price payable by Sonic
upon presentation and surrender of certificates representing the Exchangeable
Shares held by such holder and the holder shall on and after the Liquidation
Date be considered and deemed for all purposes to be the holder of the Sonic
Common Shares delivered to it. Upon surrender to the Transfer Agent of a
certificate or certificates representing Exchangeable Shares, together with such
other documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the OBCA and the articles and by-laws of the
Corporation and such additional documents and instruments as the Transfer Agent
may reasonably require, the holder of such surrendered certificate or
certificates shall be entitled to receive in exchange therefor, and the Transfer
Agent on behalf of Sonic shall deliver to such holder, certificates representing
the Sonic Common Shares to which the holder is entitled and a cheque and or
cheques of Sonic payable at par and in and in Canadian dollars at any branch of
the bankers of Sonic or of the Corporation in Canada in payment of the remaining
portion, if any, of the total Liquidation Call Purchase Price (or, part of the
Liquidation Call Purchase Price consists of dividends payable in property, such
property or property that is the same as or economically equivalent to such
property). If Sonic does not exercise the Liquidation Call Right in the manner
described above, on the Liquidation Date the holders of the Exchangeable Shares
will be entitled to receive in exchange therefor the Liquidation Amount
otherwise payable by the Corporation in connection with the liquidation,
dissolution or winding-up of the Corporation pursuant to sections 4.1 to 4.3 of
the Exchangeable Share Provisions.
5.3 SONIC REDEMPTION CALL RIGHT
---------------------------
(a) Sonic shall have the overriding right (the "Redemption Call Right")
notwithstanding the proposed redemption of the Exchangeable Shares by the
Corporation on the Automatic Redemption Date, to purchase from all but not less
than all of the holders (other
15
<PAGE>
than Sonic) of the Exchangeable Shares on the Automatic Redemption Date all but
not less than all of the Exchangeable Shares held by each such holder on payment
by Sonic to the holder of an amount per share equal to (a) the Current Market
Price multiplied by the Current Sonic Common Share Equivalent, in each case
determined on the Automatic Redemption Date, which shall be satisfied in full in
respect of all of the Exchangeable Shares held by such holder by causing to be
delivered to such holder such whole number of such Sonic Common Shares as is
equal to the product obtained by multiplying the number of Exchangeable Shares
by the Current Sonic Common Share Equivalent (together with an amount in lieu of
any fractional Sonic Common Share resulting from such calculation payable in
accordance with section 5.5) plus (b) the aggregate of all dividends declared
and unpaid on such Exchangeable Share (collectively, the "Redemption Call
Purchase Price"). In the event of the exercise of the Redemption Call Right by
Sonic, each holder shall be obligated to sell to Sonic, and Sonic shall be
obligated to purchase, all the Exchangeable Shares held by the holder on the
Automatic Redemption Date on payment by Sonic to the holder of the Redemption
Call Purchase Price for each such share.
(b) To exercise the Redemption Call Right, Sonic must notify the Transfer
Agent, as agent for the holders of the Exchangeable Shares, and the Corporation
of Sonic's intention to exercise such right at least 75 days before the
Automatic Redemption Date. The Transfer Agent will notify the holders of the
Exchangeable Shares as to whether or not Sonic has exercised the Redemption Call
Right forthwith after the date by which the same may be exercised by Sonic. If
Sonic exercises the Redemption Call Right, on the Automatic Redemption Date
Sonic will purchase and the holders will sell all of the Exchangeable Shares
then outstanding for a price per share equal to the Redemption Call Purchase
Price.
(c) For the purposes of completing the purchase of the Exchangeable
Shares pursuant to the Redemption Call Right, Sonic shall deposit with the
Transfer Agent, on or before the Automatic Redemption Date certificates
representing the aggregate number of Sonic Common Shares deliverable by Sonic
(which shares shall be duly issued as fully paid and non-assessable and shall be
free and clear of any Liens) in payment of the total Redemption Call Purchase
Price (or the portion thereof payable in Sonic Common Shares, as the case may
be) and a cheque or cheques in the amount of the remaining portion, if any, of
the total Redemption Call Purchase Price (or, if part of the Redemption Call
Purchase Price consists of dividends payable in property, such property or
property the same as or economically equivalent to such property). Provided that
such total Redemption Call Purchase Price has been so deposited with the
Transfer Agent, on and after the Automatic Redemption Date the rights of each
holder of Exchangeable Shares will be limited to receiving such holder's
proportionate part of the total Redemption Call Purchase Price payable by Sonic
upon presentation and surrender by the holder of certificates representing
Exchangeable Shares held by such holder and the holder shall on and after the
Automatic Redemption Date be considered and deemed for all purposes to be the
holder of the Sonic Common Shares delivered to such holder. Upon
16
<PAGE>
surrender to the Transfer Agent of a certificate or certificates representing
Exchangeable Shares, together with such other documents and instruments as may
be required to effect a transfer of Exchangeable Shares under the OBCA and the
articles and by-laws of the Corporation and such additional documents and
instruments as the Transfer Agent may reasonably require, the holder of such
surrendered certificate or certificates shall be entitled to receive in exchange
therefor, and the Transfer Agent on behalf of Sonic shall deliver to such
holder, certificates representing the Sonic Common Shares to which the holder is
entitled and a cheque or cheques of Sonic payable at par and in Canadian dollars
at any branch of the bankers of Sonic or of the Corporation in Canada in payment
of the remaining portion, if any, of the total Redemption Call Purchase Price
(or, if part of the Redemption Call Purchase Price consists of dividends payable
in property, such property or property the same as or economically equivalent to
such property). If Sonic does not exercise the Redemption Call Right in the
manner described above, on the Automatic Redemption Date the holders of the
Exchangeable Shares will be entitled to receive in exchange therefor the
redemption price otherwise payable by the Corporation in connection with the
redemption of the Exchangeable Shares pursuant to sections 6.1 and 6.2 of the
Exchangeable Share Provisions.
5.4 CONSIDERATION FOR CALL RIGHTS OF SONIC
--------------------------------------
The Retraction Call Right, the Liquidation Call Right and the Redemption
Call Right are granted to Sonic by the holders of Exchangeable Shares in
consideration of the grant by Sonic of the Voting Rights, Automatic Exchange
Rights and Exchange Right (as such terms are respectively defined in the Voting
and Exchange Trust Agreement) to the Trustee (as defined in the Exchangeable
Share Provisions) for the benefit of the holders of Exchangeable Shares.
5.5 FRACTIONAL SONIC COMMON SHARES
------------------------------
No certificates or scrip representing fractional Sonic Common Shares
shall be delivered to holders of Exchangeable Shares pursuant to the provisions
hereof. In lieu of any such fractional security, each person entitled to a
fractional interest in an Sonic Common Share will receive an amount of cash
(rounded to the nearest whole cent), without interest, equal to the Canadian
Dollar Equivalent as of the fourth Business Day prior to the relevant date of
delivery of certificates representing Sonic Common Shares (the "Fractional Share
Calculation Date") of the product of (i) such fraction, multiplied by (u) the
closing sale price of Sonic Common Shares as reported on NASDAQ on the
Fractional Share Calculation Date.
5.6 ECONOMIC EQUIVALENCE
--------------------
The Board of Directors shall determine, in good faith and in its sole
discretion (with the assistance of such reputable and qualified independent
financial advisors and/or other experts as the Board of Directors may require)
economic equivalence for the purposes of any provision herein that requires such
a determination and each such
17
<PAGE>
determination shall be conclusive and binding on Sonic and the holders of
Exchangeable Shares, where applicable.
5.7 CAPITAL REORGANIZATION OF SONIC
-------------------------------
If at any time there is a capital reorganization of Sonic that is not
provided for in the definition of Current Sonic Common Share Equivalent or a
consolidation, merger, arrangement or amalgamation (statutory or otherwise) of
Sonic with or into another entity (any such event being called a "Capital
Reorganization"), any holder of Exchangeable Shares whose Exchangeable Shares
have not been exchanged for Sonic Common Shares in accordance with the
provisions hereof prior to the record date for such Capital Reorganization shall
be entitled to receive and shall accept, upon any such exchange occurring
pursuant to the provisions hereof at any time after the record date for such
Capital Reorganization, in lieu of the Sonic Common Shares that he would
otherwise have been entitled to receive pursuant to the provisions hereof, the
number of shares or other securities of Sonic or of the body corporate
resulting, surviving or continuing from the Capital Reorganization, or other
property, that such holder would have been entitled to receive as a result of
such Capital Reorganization if, on the record date, he had been the registered
holder of the number of Sonic Common Shares to which he was then entitled upon
any exchange of his Exchangeable Shares into Sonic Common Shares in accordance
with the provisions hereof, subject to adjustment thereafter in the same manner,
as nearly as may be possible, as is provided for in the definition of Current
Sonic Common Share Equivalent provided that no such Capital Reorganization shall
be carried into effect unless all necessary steps shall have been taken so that
each holder of Exchangeable Shares shall thereafter be entitled to receive, upon
any exchange of his Exchangeable Shares pursuant to the provisions hereof, such
number of shares or other securities of Sonic or of the body corporate
resulting, surviving or continuing from the Capital Reorganization, or other
property.
5.8 OTHER CHANGE IN SONIC COMMON SHARES
-----------------------------------
In the case of any reclassification of, or other change in, the
outstanding Sonic Common Shares other than a Sonic Common Share Reorganization
or a Capital Reorganization, such changes shall be made in the rights attaching
to the Exchangeable Shares, without any action on the part of the Corporation or
the holders of the Exchangeable Shares to the extent permitted by applicable
law, effective immediately following the record date for such reclassification
or other change, to the extent necessary to ensure that holders of Exchangeable
Shares shall be entitled to receive, upon the occurrence at any time after such
record date of any event whereby they would receive Sonic Common Shares pursuant
to the provisions hereof, such shares, securities or rights as they would have
received if their Exchangeable Shares had been exchanged for Sonic Common Shares
pursuant to the provisions hereof immediately prior to such record date, subject
to adjustment thereafter in the same manner, as nearly as may be possible, as is
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provided for in the definition of Current Sonic Common Share Equivalent.
ARTICLE VI
AMENDMENT
---------
6.1 PLAN OF ARRANGEMENT AMENDMENT
-----------------------------
(a) By instrument in writing the Corporation and Turbotak may amend,
modify and/or supplement this Plan of Arrangement at any time and from time to
time provided that any such amendment, modification, or supplement must be (if
agreed to by Sonic, (ii) filed with the Court and, if made following the
Meeting, approved by the Court and (iii) communicated to holders of Turbotak
Common Shares and Turbotak Class B Shares in the manner required by the Court
(if so required).
(b) Any amendment, modification or supplement to this Plan of Arrangement
that is approved by the Court following the Meeting shall be effective only if
(i) it is consented to by each of the Corporation, Turbotak and Sonic and (ii)
it is consented to by the holders of the Turbotak Common Shares and the holders
of the Turbotak Class B Shares, in each case to the extent so required by the
Court.
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APPENDIX A TO PLAN OF ARRANGEMENT
---------------------------------
PROVISIONS ATTACHING TO THE EXCHANGEABLE SHARES
The Exchangeable Shares in the capital of the Corporation shall have the
following rights, privileges, restrictions and conditions.
ARTICLE 1
INTERPRETATION
--------------
1.1 For the purposes of these share provisions:
(a) "AFFILIATE" of any person means any other person directly or
indirectly controlling, controlled by, or under common control with, that
person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling" "controlled by" and "under common
control with"), as applied to any person, means the possession by another
person, directly or indirectly, of the power to direct or cause the direction of
the management and policies of that first mentioned person, whether through the
ownership of voting securities, by contract or otherwise.
(b) "AUTOMATIC REDEMPTION DATE" means the date for the automatic
redemption by the Corporation of Exchangeable Shares pursuant to Article 6 of
these share provisions, which date shall be June 30, 2002.
(c) "BOARD OF DIRECTORS" means the board of directors of the Corporation.
(d) "BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
when banks are not open for business in one or both of the State of New Jersey
and Waterloo, Ontario.
(e) "CANADIAN DOLLAR EQUIVALENT" means in respect of an amount expressed
in a foreign currency (the "Foreign Currency Amount") at any date the product
obtained by multiplying (a) the Foreign Currency Amount by (b) the noon spot
exchange rate on such date for such foreign currency expressed in Canadian
dollars as reported by the Bank of Canada or, in the event such spot exchange
rate is not available, such exchange rate on such date for such foreign currency
expressed in Canadian dollars as may be deemed by the Board of Director; to be
appropriate for such purpose.
(f) "CAPITAL REORGANIZATION" has he meaning ascribed thereto in section
9.2 of these share provisions.
(g) "CORPORATION" means Sonic Canada, Inc., a corporation incorporated
under the OBCA.
(h) "CURRENT MARKET PRICE" means, in respect of an Sonic Common Share on
any date, the Canadian Dollar Equivalent of the closing
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sale price of Sonic Common Shares on such day (or, if no trades of Sonic Common
Shares occurred on such day, on the last trading day prior thereto on which such
trades occurred) reported on NASDAQ, or, if the Sonic Common Shares are not then
quoted on NASDAQ, on such other stock exchange or automated quotation system on
which the Sonic Common Shares are listed or quoted, as the case may be, as may
be selected by the Board of Directors for such purpose; provided, however, that
if in the opinion of the Board of Directors the public distribution or trading
activity of Sonic Common Shares during such period does not create a market that
reflects the fair market value of a Sonic Common Share, then the Current Market
Price of a Sonic Common Share shall be determined by the Board of Directors
based upon he advice of such qualified independent financial advisors as the
Board of Directors may deem to be appropriate, and provided further that any
such selection, opinion or determination by the Board of Directors shall be
conclusive and binding.
(i) "CURRENT SONIC COMMON SHARE EQUIVALENT" means, on any date, the
equivalent as at such date of one Sonic Common Share as at the Effective Date,
expressed to four decimal places, determined by applying on a cumulative basis
the following adjustments, to the extent applicable by reason of any
transactions occurring in respect of Sonic Common Shares between the Effective
Date and such date, the Current Sonic Common Share Equivalent as at the
Effective Date being 1.0000:
(i) if Sonic shall (A) subdivide, redivide or change its then
outstanding Sonic Common Shares into a greater number of Sonic
Common Shares, unless the Corporation is permitted under
applicable law without a vote of its shareholders to make, and
shall simultaneously make, the same or an economically
equivalent change to the rights of the holders of Exchangeable
Shares, (B) reduce, combine, consolidate or change its then
outstanding Sonic Common Shares into a lesser number of Sonic
Common Shares, unless the Corporation is permitted under
applicable law without a vote of its shareholders to make, and
shall simultaneously make, the same or an economically
equivalent change to the rights of the holders of Exchangeable
Shares, or (C) issue Sonic Common Shares (or securities
exchangeable or convertible into Sonic Common Shares) to the
holders of all or substantially all of its then outstanding
Sonic Common Shares by way of stock dividend or other
distribution (other than to holders of Sonic Common Shares who
exercise an option to receive stock dividends in lieu of
receiving cash dividends), unless the Corporation is permitted
under applicable law without a vote of its shareholders to
issue or distribute, and shall simultaneously issue and
distribute, equivalent numbers of Sonic Common Shares or other
securities (adjusted if necessary in accordance with the
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Current Sonic Common Share Equivalent), or the economic
equivalent on a per share basis, to the holders of the
Exchangeable Shares (any of such events being herein called an
"Sonic Common Share Reorganization"), the Current Sonic Common
Share Equivalent shall be adjusted effective immediately after
the record date at which the holders of Sonic Common Shares
are determined for the purpose of the Sonic Common Share
Reorganization by multiplying the Current Sonic Common Share
Equivalent in effect on such record date by the quotient
obtained when:
(A) the number of Sonic Common Shares outstanding after the
completion of such Sonic Common Share Reorganization (but
before giving effect to the issue of any Sonic Common
Shares issued after such record date otherwise than as
part of such Sonic Common Share Reorganization)
including, in the case where securities exchangeable or
convertible into Sonic Common Shares are distributed, the
number of Sonic Common Shares that would have been
outstanding had such securities been exchanged for or
converted into Sonic Common Shares on such record date,
is divided by
(B) the number of Sonic Common Shares outstanding on such
record date before giving effect to the Sonic Common
Share Reorganization;
(ii) if at any time Sonic shall fix a record date for the issuance
of rights, options or warrants to the holders of all or
substantially all of the Sonic Common Shares entitling them to
subscribe for or to purchase Sonic Common Shares (or
securities of Sonic convertible into Sonic Common Shares) at a
price per Sonic Common Share (or having a conversion price per
Sonic Common Share) of less than the Current Market Price on
such record date, unless the Corporation is permitted under
applicable law without a vote of its shareholders to issue,
and shall simultaneously issue, equivalent numbers of such
rights, options or warrants, adjusted if necessary in
accordance with the Current Sonic Common Share Equivalent at
such record date, or the economic equivalent thereof on a per
share basis, to the holders of Exchangeable Shares (any such
event being herein referred to as a"Rights Offering"), then
the Current Sonic Common Share Equivalent then in effect shall
be adjusted immediately after such record date by multiplying
the Current Sonic Common Share Equivalent in effect on such
record date by the quotient obtained when:
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(A) the sum of the number of Sonic Common Shares outstanding
on such record date and the number of additional Sonic
Common Shares offered for subscription or purchase under
the Rights Offering (or the number of Sonic Common Shares
into which the securities so offered are convertible)
is divided by
(B) the sum of the number of Sonic Common Shares outstanding
on such record date and the number determined by dividing
the aggregate price of the total number of additional
Sonic Common Shares offered for subscription or purchase
under the Rights Offering (or the aggregate conversion
price of the convertible securities so offered) by the
Current Market Price on such record date.
Any Sonic Common Share owned by or held for the account of Sonic
shall be deemed not to be outstanding for the purpose of any such
computation. If such rights, options or warrants are not so issued
or if, at the date of expiry of the rights, options or warrants
subject to the Rights Offering, less than all the rights, options
or warrants have been exercised, then the Current Sonic Common
Share Equivalent shall be readjusted effective immediately after
the date of expiry to the Current Sonic Common Share Equivalent
which would have been in effect if such record date had not been
fixed or to the Current Sonic Common Share Equivalent which would
then be in effect on the date of expiry if the only rights, options
or warrants issued had been those that were exercised, as the case
may be;
(iii) if Sonic shall fix a record date for the making of a
distribution (including a distribution by way of stock
dividend) to the holders of all or substantially all its
outstanding Sonic Common Shares of
(A) shares of Sonic of any class other than Sonic Common Shares
(or shares convertible into Sonic Common Shares referred to
(i)(C) above),
(B) rights, option or warrants (excluding a Rights Offering),
(C) evidence of its indebtedness (excluding indebtedness
convertible into Sonic Common Shares referred to in (i) (C)
above) or
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<PAGE>
(D) any other assets (other than any of the distributions
referred to in (A), (B) or (C), dividends paid in the
ordinary course or an Sonic Common Share Reorganization)
unless the Corporation is permitted under applicable law without
a vote of its shareholders to distribute, and shall
simultaneously distribute, the same number of shares, rights,
options or warrants, evidences of indebtedness or other assets,
as the case may be, adjusted if necessary in accordance with the
Current Sonic Common Share Equivalent, as at such record date,
or the economic equivalent thereof on a per share basis, to the
holders of Exchangeable Shares (any such event being herein
referred to as a "Special Distribution") then, in each such
case, the Current Sonic Common Share Equivalent shall be
adjusted effective immediately after the record date at which
the holders of Sonic Common Shares are determined for the
purposes of the Special Distribution by multiplying the Current
Sonic Common Share Equivalent in effect on such record date by
the quotient obtained when:
(I) the product obtained when the number of Sonic Common
Shares outstanding on the record date is multiplied by
the Current Market Price on such date,
is divided by
(II) the difference obtained when the amount by which the
aggregate fair market value (as determined by the
Board of Directors, which determination shall be
conclusive) of the shares, rights, options, warrants,
evidences of indebtedness or assets, as the case may
be, distributed in the Special Distribution exceeds
the fair market value (as determined by the Board of
Directors, which determination shall be conclusive) of
the consideration, if any, received therefor by Sonic,
is subtracted from the product obtained when the
number of Sonic Common Shares outstanding on the
record date is multiplied by the Current Market Price
on such date,
provided that no such adjustment shall be made if the result of such
adjustment would be to decrease the Current Sonic Common Share
Equivalent in effect immediately before such record date. Any Sonic
Common Share owned by or held for the account of Sonic shall be deemed
not to be outstanding for the purpose of any such computation. Such
adjustment shall be
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<PAGE>
made successively whenever such a record date is fixed. To the extent
that such distribution is not so made, the Current Sonic Common Share
Equivalent shall be readjusted effective immediately to the Current
Sonic Common Share Equivalent which would then be in effect based upon
such shares or rights, options or warrants or evidences of
indebtedness or assets actually distributed.
(j) "EFFECTIVE DATE" has the meaning ascribed thereto in the Plan of
Arrangement.
(k) "EXCHANGEABLE SHARES" mean the Exchangeable Non-Voting Shares of the
Corporation having the rights, privileges, restrictions and conditions set forth
herein.
(l) "LIEN" has the meaning ascribed thereto in the Plan of Arrangement.
(m) "LIQUIDATION AMOUNT" has the meaning ascribed thereto in section 4.1 of
these share provisions.
(n) "LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in section
5.2 of the Plan of Arrangement.
(o) "NASDAQ" means the NASDAQ National Market System;
(p) "LIQUIDATION DATE" has the meaning ascribed thereto in section 4.1 of
these share provisions.
(q) "OBCA" means the Ontario Business Corporations Act, as amended from
time to time.
(r) "PLAN OF ARRANGEMENT" means the plan of arrangement relating to the
arrangement of the Corporation under section 182 of the OBCA, to which plan
these share provisions are attached.
(s) "REDEMPTION CALL RIGHT" has the meaning ascribed thereto in section 5.3
of the Plan of Arrangement
(t) "REDEMPTION PRICE" has the meaning ascribed thereto in section 6.1 of
these share provisions.
(u) "RETRACTED SHARES" has the meaning ascribed thereto in section 5.1 of
these share provisions.
(v) "RETRACTION CALL RIGHT" has the meaning ascribed thereto in section 5.1
of the Plan of Arrangement.
(w) "RETRACTION DATE" has the meaning ascribed thereto in section 5.2 of
these share provisions.
(x) "RETRACTION PERIOD" means, subject to the power of Sonic to postpone
any such period as provided in section 5.1, any one of the
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following periods (and including the beginning and ending dates of each): from
the Effective Date until the date which is June 30, 2002.
(y) "RETRACTION PRICE" has the meaning ascribed thereto in section 5.1 of
these share provisions.
(z) "RETRACTION REQUEst" has the meaning ascribed thereto in section 5.1 of
these share provisions.
(aa) "RIGHTS OFFERING" has the meaning ascribed thereto in subsection these
share provisions.
(ab) "SONIC" means Sonic Environmental Systems, Inc., a corporation
organized and existing under the laws of the State of Delaware, and any
successor corporation.
(ac) "SONIC CALL NOTICE" has the meaning ascribed thereto in subsection
5.1(b) of the Plan of Arrangement.
(ad) "SONIC COMMON SHARE REORGANIZATION" has the meaning ascribed thereto
in subsection 1.1(i) of these share provisions.
(ae) "SONIC COMMON SHARES" mean the shares of common stock of Sonic, with a
par value of U.S.$.10 per share and having one vote per share, and any other
securities into which such shares may be changed.
(af) "SONIC DIVIDEND DECLARATION DATE" means the date on which the Board of
Directors of Sonic declares any dividend on the Sonic Common Shares.
(ag) "SONIC SPECIAL SHARE" means the one share of Special Voting Preferred
Stock of Sonic with a par value of U.S.$.01 and having voting rights at meetings
of holders of Sonic Common Shares equal to the number of Exchangeable Shares
outstanding from time to time (other than Exchangeable Shares held by Sonic) to
be issued to, and voted by, the Trustee pursuant to the Voting Trust Agreement.
(ah) "SPECIAL DISTRIBUTION has the meaning ascribed thereto in subsection
1.1(i) of these share provisions.
(ai) "SUPPORT AGREEMENT" means the Support Agreement between Sonic and the
Corporation, made as of ___________, 1997.
(aj) "TRANSFER AGENT" means The Trust Company of Bank of Montreal or such
other person as may from time to time be the registrar and transfer agent for
the Exchangeable Shares.
(ak) "TRUSTEE" means The Trust Company of Bank of Montreal, a trust company
existing under the laws of Canada, and any successor trustee appointed under the
Voting and Exchange Trust Agreement.
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<PAGE>
(al) "VOTING AND EXCHANGE TRUST AGREEMENT" means the Voting and Exchange
Trust Agreement between the Corporation, Sonic and the Trustee, made as of
_____________, 1997.
1.2 All amounts required to be paid, deposited or delivered hereunder shall be
paid, deposited or delivered after deduction of any amount required by
applicable law to be deducted or withheld on account of tax and the deduction of
such amounts and remittance to the applicable tax authorities shall, to the
extent thereof, satisfy such requirement to pay, deposit or deliver hereunder.
ARTICLE 2
RANKING OF EXCHANGEABLE SHARES
------------------------------
2.1 The Exchangeable Shares shall rank senior to the Common Shares and any
other shares ranking junior to the Exchangeable Shares, with respect to the
payment of dividends and the distribution of assets in the event of the
liquidation, dissolution or winding-up of the Corporation, whether voluntary or
involuntary, or any other distribution of the assets of the Corporation among
its shareholders for the purpose of winding up its affairs.
ARTICLE 3
DIVIDENDS
---------
3.1 A holder of an Exchangeable Share shall be entitled to receive and the
Board of Directors shall, subject to applicable law, declare a dividend on each
Exchangeable Share (a) in the case of a cash dividend declared on the Sonic
Common Shares, in an amount in cash for each Exchangeable Share equal to the
Canadian Dollar Equivalent on the Sonic Dividend Declaration Date of the cash
dividend declared on such number of Sonic Common Shares as is equal to the
Current Sonic Common Share Equivalent on the Sonic Dividend Declaration Date or
(b) in the case of a stock dividend declared on the Sonic Common Shares to be
paid in Sonic Common Shares, in such whole number of Exchangeable Shares for the
Exchangeable Shares held by each holder as is equal to the number of Sonic
Common Shares to be paid as a dividend on an equivalent number of Sonic Common
Shares divided by the Current Sonic Common Share Equivalent on the Sonic
Dividend Declaration Date (if such calculation results in a fraction of an
Exchangeable Share, the holder shall receive in lieu of such fraction an amount
in cash equal to the product obtained by dividing the amount that would be
payable in respect of an equal fraction of an Sonic Common Share as at the Sonic
Dividend Declaration Date, calculated in accordance with section 9.4, by the
Current Sonic Common Share Equivalent as at such date) or (c) in the case of a
dividend declared on the Sonic Common Shares to be paid in property other than
cash or Sonic Common Shares (including without limitation other securities of
Sonic), in such type and amount of property for each Exchangeable Share as is
the same as or economically
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<PAGE>
equivalent (as determined by the Board of Directors in accordance with section
9.1) to the type and amount of property, to be paid as a dividend on such number
of Sonic Common Shares as is equal to the Current Sonic Common Share Equivalent
on the Sonic Dividend Declaration Date. Such dividends shall be paid out of
money, assets or property of the Corporation properly applicable to the payment
of dividends, or out of authorized but unissued Exchangeable Shares.
3.2 Cheques of the Corporation payable at par at any branch of the bankers of
the Corporation shall be issued in respect of any cash dividends contemplated by
subsection 3.1(a) hereof or in respect of any cash amount payable in lieu of a
fractional Exchangeable Share in connection with any stock dividends
contemplated by subsection 3.1(b) hereof and the sending of such a cheque to
each holder of an Exchangeable Share shall satisfy the cash dividend represented
thereby unless the cheque is not paid on presentation. Certificates registered
in the name of the registered holder of Exchangeable Shares shall be issued or
transferred in respect of any stock dividends contemplated by subsection 3.1(b)
hereof and the sending of such a certificate to each holder of an Exchangeable
Share shall satisfy the stock dividend represented thereby. Such other type and
amount of property in respect of any dividends contemplated by subsection 3.1(c)
hereof shall be issued, distributed or transferred by the Corporation in such
manner as it shall determine and the issuance, distribution or transfer thereof
by the Corporation to each holder of an Exchangeable Share shall satisfy the
dividend represented thereby. No holder of an Exchangeable Share shall be
entitled to recover by action or other legal process against the Corporation any
dividend that is represented by a cheque that has not been duly presented to the
Corporation's bankers for payment or that otherwise remains unclaimed for a
period of six years from the date on which such dividend was payable.
3.3 The record date for the determination of the holders of Exchangeable Shares
entitled to receive payment of, and the payment date for, any dividend declared
on the Exchangeable Shares under section 3.1 hereof shall be the same dates as
the record date and payment date, respectively, for the corresponding dividend
declared on the Sonic Common Shares.
3.4 If on any payment date for any dividends declared on the Exchangeable
Shares under section 3.1 hereof the dividends are not paid in full on all of the
Exchangeable Shares then outstanding, any such dividends that remain unpaid
shall be paid on a subsequent date or dates determined by the Board of Directors
on which the Corporation shall have sufficient moneys, assets or property
properly applicable to the payment of such dividends.
3.5 So long as any of the Exchangeable Shares are outstanding, the Corporation
shall not at any time without, but may at any time with, the approval of the
holders of the Exchangeable Shares given as specified in section 8.2 of these
share provisions:
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<PAGE>
(a) pay any dividends on the Common Shares, or any other shares ranking
junior to the Exchangeable Shares, other than stock dividends payable
in Common Shares or any such other shares ranking junior to the
Exchangeable Shares, as the case may be;
(b) redeem or purchase or make any capital distribution in respect of
Common Shares or any other shares ranking junior to the Exchangeable
Shares;
(c) redeem or purchase any other shares of the Corporation ranking equally
with the Exchangeable Shares with respect to the payment of dividends
or on any liquidation distribution;
(d) issue any Exchangeable Shares other than (i) by way of stock dividends
to the holders of such Exchangeable Shares, (ii) otherwise pro rata to
holders of Exchangeable Shares, (iii) as contemplated by the Support
Agreement or (iv) pursuant to any agreements or rights in existence at
the Effective Date; or
(e) issue any other shares of the Corporation ranking equally with or
senior to the Exchangeable Shares;
provided that the restrictions in subsections 3.5(a), 3.5(b) and 3.5(c) shall
not apply if all dividends on the outstanding Exchangeable Shares corresponding
to dividends declared to date on the Sonic Common Shares shall have been
declared on the Exchangeable Shares and paid in full.
ARTICLE 4
DISTRIBUTION ON LIQUIDATION
---------------------------
4.1 In the event of the liquidation, dissolution or winding-up of the
Corporation or any other distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs, a holder of Exchangeable
Shares shall be entitled, subject to applicable law, to receive from the assets
of the Corporation in respect of each Exchangeable Share held by such holder on
the effective date (the "Liquidation Date") of such liquidation, dissolution or
winding-up, before any distribution of any part of the assets of the Corporation
among the holders of the Common Shares or any other shares ranking junior to the
Exchangeable Shares, an amount per share equal to (a) the Current Market Price
multiplied by the Current Sonic Common Share Equivalent, in each case determined
on the Liquidation Date, which shall be satisfied in full in respect of all of
the Exchangeable Shares held by such holder by the Corporation causing to be
delivered to such holder such whole number of Sonic Common Shares as is equal to
the product obtained by multiplying the number of such Exchangeable Shales by
the Current Sonic Common Share Equivalent (together with an amount in lieu of
any fractional Sonic Common Share resulting from such calculation payable in
accordance with section 9.4), plus (b) the
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aggregate of all declared and unpaid dividends on each such Exchangeable Share
up to the Liquidation Date (collectively the "Liquidation Amount").
4.2 On or promptly after the Liquidation Date, and subject to the exercise by
Sonic of the Liquidation Call Right, the Corporation shall cause to be delivered
to the holders of the Exchangeable Shares the Liquidation Amount for each such
Exchangeable Share upon presentation and surrender of the certificates
representing such Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
the OBCA and the by-laws of the Corporation and such additional documents and
instruments as the Transfer Agent may reasonably require, at the registered
office of the Corporation or at any office of the Transfer Agent as may be
specified by the Corporation by notice to the holders of the Exchangeable
Shares. Payment of the total liquidation Amount for such Exchangeable Shares
shall be made by delivery to each holder, at the address of the holder recorded
in the securities register of the Corporation or the Exchangeable Shares or by
holding for pick-up by the holder at the registered office of the Corporation or
at any office of the Transfer Agent as may be specified by the Corporation by
notice to the holders of Exchangeable Shares, on behalf of the Corporation of
certificates representing the Sonic Common Shares to be delivered in payment
thereof (which shares shall be duly issued as fully paid and non-assessable and
shall be free and clear of any Liens) and a cheque of the Corporation payable at
par at any branch of the bankers of the Corporation in respect of any fractional
Sonic Common Share and all declared and unpaid dividends comprising part of the
total Liquidation Amount (or, if any of such dividends were payable in property,
such property or property that is the same as or economically equivalent to such
property). On and after the Liquidation Date, the holders of the Exchangeable
Shares shall cease to be holders of such Exchangeable Shares and shall not be
entitled to exercise any of the rights of holders in respect thereof, other than
the right to receive the total Liquidation Amount in respect of their
Exchangeable Shares, unless payment of the total Liquidation Amount for such
Exchangeable Shares shall not be made upon presentation and surrender of share
certificates in accordance with the foregoing provisions, in which case the
rights of the holders shall remain unaffected until the total Liquidation Amount
has been paid in the manner hereinbefore provided. The Corporation shall have
the right at any time on or after the Liquidation Date to deposit or cause to be
deposited the total Liquidation Amount in respect of the Exchangeable Shares
represented by certificates that have not at the Liquidation Date been
surrendered by the holders thereof in a custodial account with any chartered
bank or trust company in Canada. Upon such deposit being made, the rights of the
holders of Exchangeable Shares after such deposit shall be limited to receiving
the total Liquidation Amount (without interest) for such Exchangeable Shares so
deposited, against presentation and surrender of the said certificates held by
them, respectively, in accordance with the foregoing provisions. Upon such
payment or deposit of the total Liquidation Amount, the holders of the
Exchangeable Shares shall
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thereafter be considered and deemed for all purposes to be the holders of the
Sonic Common Shares delivered to them.
4.3 After the Corporation has satisfied its obligations to pay the holders of
the Exchangeable Shares the Liquidation Amount per Exchangeable Share pursuant
to section 4.1 of these share provisions, such holders shall not be entitled to
share in any further distribution of the assets of the Corporation.
ARTICLE 5
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
-------------------------------------------
5.1 A holder of Exchangeable Shares shall be entitled during any Retraction
Period, subject to the exercise by Sonic of the Retraction Call Right and
otherwise upon compliance with the provisions of this Article 5, to require the
Corporation to redeem any or all of the Exchangeable Shares registered in the
name of such holder (the "Retracted Shares") for an amount for each Retracted
Share equal to (a) the Current Market Price multiplied by the Current Sonic
Common Share Equivalent, in each case determined on the Retraction Date, which
shall be satisfied in full in respect of the Retracted Shares by the Corporation
causing to be delivered to such holder such whole number of Sonic Common Shares
as is equal to the product obtained by multiplying the number of Retracted
Shares by the Current Sonic Common Share Equivalent (together with an amount in
lieu of any fractional Sonic Common Share resulting from such calculation
payable in accordance with section 9.4), plus (b) the aggregate of all dividends
declared and unpaid on each Retracted Share up to the Retraction Date
(collectively the "Retraction Price", provided that if the record date for any
such declared and unpaid dividend occurs on or after the Retraction Date the
Retraction Price shall not include such declared and unpaid dividends). To
effect such redemption, the holder shall present and surrender at any office of
the Transfer Agent listed on Schedule A hereto the certificate or certificates
representing the Exchangeable Shares which the holder desires to have the
Corporation redeem, together with such other documents and instruments as may be
required to effect a transfer of Exchangeable Shares under the OBCA and the by-
laws of the Corporation and such additional documents and instruments as the
Transfer Agent may reasonably require, and together with a duly-executed
statement (the "Retraction Request) in the form of Schedule A hereto or in such
other form as may be acceptable to the Transfer Agent:
(a) specifying that the holder desires to have the Retracted Shares
represented by such certificate or certificates redeemed by the
Corporation; and
(b) acknowledging the Retraction Call Right of Sonic to purchase all but
not less than all the Retracted Shares directly from the holder and
that the Retraction Request shall be deemed to
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be an irrevocable offer by the holder to sell the Retracted Shares to
Sonic in accordance with the Retraction Call Right.
If any Retraction Request is received on a date that is not within a Retraction
Period, such Retraction Request shall be of no force or effect and the
Corporation, the Transfer Agent and Sonic shall have no obligations as a result
of the delivery of such Retraction Request, unless and until the holder
delivering such Retraction Request shall reconfirm at a subsequent time, in such
manner as may be required by the Transfer Agent, that such holder desires the
Retracted Shares to be redeemed by the Corporation in accordance with such
Retraction Request on a Retraction Date in a subsequent Retraction Period. If
such holder does not provide such reconfirmation, the Corporation shall cause
the Transfer Agent to return to such holder the certificate or certificates
representing Exchangeable Shares delivered to such holder to the Transfer Agent
with the Retraction Request.
5.2 Subject to the exercise by Sonic of the Retraction Call Right, upon receipt
by the Transfer Agent in the manner specified in section 5.1 hereof of a
certificate or certificates representing the number of Exchangeable Shares which
the holder desires to have the Corporation redeem, together with such other
documents and instruments as may be required pursuant to section 5.1 and a
Retraction Request, the Corporation shall redeem the Retracted Shares effective
at the close of business on the sixth Business Day after the Retraction Request
is received (the "Retraction Date") and shall cause to be delivered to such
holder the total Retraction Price with respect to such shares. If only a part of
the Exchangeable Shares represented by any certificate are redeemed (or
purchased by Sonic pursuant to the Retraction Call Right), a new certificate for
the balance of such Exchangeable Shares shall be issued to the holder at the
expense of the Corporation.
5.3 Upon receipt by the Transfer Agent of a Retraction Request, the Transfer
Agent shall forthwith notify Sonic thereof. In order to exercise the Retraction
Call Right, Sonic must deliver a Sonic Call Notice to the Transfer Agent prior
to the expiry of the third Business Day after the receipt by the Transfer Agent
of the Retraction Request. If Sonic does not so notify the Transfer Agent, the
Transfer Agent will notify the holder as soon as possible thereafter that Sonic
will not exercise the Retraction Call Right. If Sonic delivers the Sonic Call
Notice before the end of such three Business Day period, the Retraction Request
shall thereupon be considered only to be an offer by the holder to sell the
Retracted Shares to Sonic in accordance with the Retraction Call Right. In such
event, the Corporation shall not redeem the Retracted Shares and Sonic shall
purchase from such holder and such holder shall sell to Sonic on the Retraction
Date the Retracted Shares pursuant to the Retraction Call Right.
5.4 If a Retraction Request is received by the Transfer Agent pursuant to
section 5.1 and Sonic has not exercised the Retraction Call Right, the
Corporation shall cause the Transfer Agent to deliver to the holder of the
Retracted Shares, at the address of the holder recorded in the securities
register of the Corporation for the Exchangeable Shares or
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at the address specified in the holder's Retraction Request or by holding for
pick-up by the holder at the office of the Transfer Agent to which the
Retraction Request was delivered, certificates representing the Sonic Common
Shares to be delivered to the holder in payment of the total Retraction Price
for the Retracted Shares (or the portion thereof payable in Sonic Common Shares,
as the case may be) (which shares shall be duly issued as fully paid and non
assessable and shall be free and clear of any Liens) registered in the name of
the holder or in such other name as the holder may request and a cheque of the
Corporation payable at par at any branch of the bankers of the Corporation in
payment of the remaining portion, if any, of the total Retraction Price (or, if
any part of the Retraction Price consists of dividends payable in property, such
property or property that is the same as or economically equivalent to such
property), and such delivery of such certificates and cheque (and property, if
any) on behalf of the Corporation by the Transfer Agent shall be deemed to be
payment of and shall satisfy and discharge all liability for the total
Retraction Price, to the extent that the same is represented by such share
certificates and cheque (and property, if any), unless such cheque is not paid
on due presentation.
5.5 On and after the close of business on the Retraction Date, the holder of
the Retracted Shares shall cease to be a holder of such Retracted Shares and
shall not be entitled to exercise any of the rights of a holder in respect
thereof, other than the right to receive his proportionate part of the total
Retraction Price, unless upon presentation and surrender of certificates in
accordance with the foregoing provisions, payment of the total Retraction Price
shall not be made, in which case the rights of such holder shall remain
unaffected until the Total Retraction Price has been paid in the manner
hereinbefore provided. On and after the close of business on the Retraction
Date, provided that presentation and surrender of certificates and payment of
the total Retraction Price has been made in accordance with the foregoing
provisions, the holder of the Retracted Shares so redeemed by the Corporation
shall thereafter be considered and deemed for all purposes to be a holder of the
Sonic Common Shares delivered to it.
5.6 Notwithstanding any other provision of this Article 5, the Corporation
shall not be obligated to redeem Retracted Shares specified by a holder in a
Retraction Request to the extent that such redemption of Retracted Shares would
be contrary to solvency requirements or other provisions of applicable law. If
the Corporation believes that on any Retraction Date it would not be permitted
by any of such provisions to redeem the Retracted Shares tendered for redemption
on such date, and provided that Sonic shall not have exercised the Retraction
Call Right with respect to the Retracted Shares, the Corporation shall be
obligated to redeem Retracted Shares specified by a holder in a Retraction
Request only to the extent of the maximum number that may be so redeemed
(rounded down to a whole number of shares) as would not be contrary to such
provisions on a pro rata basis and shall notify the holder at least two Business
Days prior to the Retraction Date as to the number of Retracted Shares which
will not be redeemed by the
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<PAGE>
Corporation and the Corporation shall issue to each holder of Retracted Shares a
new certificate, at the expense of the Corporation, representing the Retracted
Shares not redeemed by the Corporation pursuant to section 5.2 hereof. The
holder of any such Retracted Shares not redeemed by the Corporation pursuant to
section 5.2 of these share provisions as a result of solvency requirements of
applicable law shall be deemed by giving the Retraction Request to require Sonic
to purchase such Retracted Shares from such holder pursuant to the Exchange
Right (as defined in the Voting and Exchange Trust Agreement).
ARTICLE 6
REDEMPTION OF EXCHANGEABLE SHARES
---------------------------------
6.1 Subject to applicable law and if Sonic does not exercise the Redemption
Call Right, the Corporation shall on the Automatic Redemption Date redeem the
whole of the then outstanding Exchangeable Shares for an amount per share equal
to (a) the Current Market Price multiplied by the Current Sonic Common Share
Equivalent, in each case determined on the Automatic Redemption Date, which
shall be satisfied in full in respect of all of the Exchangeable Shares held by
each holder of Exchangeable Shares by the Corporation causing to be delivered to
such holder such whole number of Sonic Common Shares as is equal to the product
obtained by multiplying the number of such Exchangeable Shares by the Current
Sonic Common Share Equivalent (together with an amount in lieu of any fractional
Sonic Common Share resulting from such calculation payable in accordance with
section 9.4), plus (b) the aggregate of all declared and unpaid dividends
thereon up to the Automatic Redemption Date (collectively the "Redemption
Price").
6.2 On or after the Automatic Redemption Date and subject to the exercise by
Sonic of the Redemption Call Right, the Corporation shall cause to be delivered
to the holders of the Exchangeable Shares the Redemption Price for each such
Exchangeable Share upon presentation and surrender at any office of the Transfer
Agent of the certificates representing such Exchangeable Shares, together with
such other documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the OBCA and the by-laws of the Corporation and such
additional documents and instruments as the Transfer Agent may reasonably
require. Payment of the total Redemption Price for such Exchangeable Shares
shall be made by delivery to each holder, at the address of the holder recorded
in the securities register of the Corporation or by holding for pick up by the
holder at the registered office of the Corporation or at any office of the
Transfer Agent as may be specified by the Corporation in such notice, on behalf
of the Corporation of certificates representing the Sonic Common Shares to be
delivered to the holder in payment of the Redemption Price (or the portion
thereof payable in Sonic Common Shares, as the case may be) (which shares shall
be duly issued as fully paid and non-assessable and shall be free and clear of
any Liens) and a cheque of the Corporation payable at par at any branch of the
bankers of the Corporation in
15
<PAGE>
respect of any fractional Sonic Common Share and all declared and unpaid
dividends comprising part of the total Redemption Price (or, if any of such
dividends are payable in property, such property). On and after the Automatic
Redemption Date, the holders of the Exchangeable Shares called for redemption
shall cease to be holders of such Exchangeable Shares and shall not be entitled
to exercise any of the rights of holders in respect thereof, other than the
right to receive the total Redemption Price for their Exchangeable Shares,
unless payment of the total Redemption Price for such Exchangeable Shares shall
not be made upon presentation and surrender of certificates in accordance with
the foregoing provisions, in which case the rights of the holders shall remain
unaffected until the total Redemption Price has been paid in the manner
hereinafter provided. The Corporation shall have the right at any time to
deposit or cause to be deposited the total Redemption Price of the Exchangeable
Shares so called for redemption, or of such of the said Exchangeable Shares
represented by certificates that have not at the date of such deposit been
surrendered by the holders thereof in connection with such redemption, in a
custodial account with any chartered bank or trust company in Canada named in
such notice. Upon the later of such deposit being made and the Automatic
Redemption Date, the Exchangeable Shares in respect whereof such deposit shall
have been made shall be redeemed and the rights of the holders thereof after
such deposit or Automatic Redemption Date, as the case may be, shall be limited
to receiving the total Redemption Price for such Exchangeable Shares so
deposited, against presentation and surrender of the said certificates held by
them, respectively, in accordance with the foregoing provisions. Upon such
payment or deposit of the total Redemption Price, the holders of the
Exchangeable Shares shall thereafter be considered and deemed for all purposes
to be holders of the Sonic Common Shares delivered to them.
ARTICLE 7
VOTING RIGHTS
-------------
7.1 Except as required by applicable law and the provisions of sections 3.5,
8.1 and 10.2, the holders of the Exchangeable Shares shall not be entitled as
such to receive notice of or to attend any meeting of the shareholders of the
Corporation or to vote at any such meeting.
ARTICLE 8
AMENDMENT AND APPROVAL
----------------------
8.1 The rights, privileges, restrictions and conditions attaching to the
Exchangeable Shares may be added to, changed or removed but only with the
approval of the holders of the Exchangeable Shares given as hereinafter
specified.
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8.2 Any approval given by the holders of the Exchangeable Shares to add to,
change or remove any right, privilege, restriction or condition attaching to the
Exchangeable Shares or any other matter requiring the approval or consent of the
holders of the Exchangeable Shares shall be deemed to have been sufficiently
given if it shall have been given in accordance with applicable law subject to a
minimum requirement that such approval be evidenced by resolution passed by not
less than two-thirds of the votes cast on such resolution at a meeting of
holders of Exchangeable Shares duly called and held at which the holders of at
least 50% of the outstanding Exchangeable Shares at that time are present or
represented by proxy. If at any such meeting the holders of at least 50% of the
outstanding Exchangeable Shares at that time are not present or represented by
proxy within one-half hour after the time appointed for such meeting then the
meeting shall be adjourned to such date not less than 10 days thereafter and to
such time and place as may be designated by the Chairman of such meeting. At
such adjourned meeting the holders of Exchangeable Shares present or represented
by proxy thereat may transact the business for which the meeting was originally
called and a resolution passed thereat by the affirmative vote of not less than
two thirds of the votes cast on such resolution at such meeting shall constitute
the approval or consent of the holders of the Exchangeable Shares.
ARTICLE 9
ECONOMIC EQUIVALENCE; CHANGES RELATING TO SONIC
-----------------------------------------------
9.1 The Board of Directors shall determine, in good faith and in its sole
discretion (with the assistance of such reputable and qualified independent
financial advisors and/or other experts as the Board of Directors may require)
economic equivalence for the purposes of any provision herein that requires such
a determination and each such determination shall be conclusive and binding on
Sonic, where applicable.
9.2 If at any time there is a capital reorganization of Sonic that is not
provided for in subsection 1.1(i) or a consolidation, merger arrangement or
amalgamation (statutory or otherwise) of Sonic with or into another entity (any
such event being called a "Capital Reorganization"), any holder of Exchangeable
Shares whose Exchangeable Shares have not been exchanged for Sonic Common Shares
in accordance with the provisions hereof prior to the record date for such
Capital Reorganization shall be entitled to receive and shall accept, upon any
such exchange occurring pursuant to the provisions hereof at any time after the
record date for such Capital Reorganization in lieu of the Sonic Common Shares
that he would otherwise have been entitled to receive pursuant to the provisions
hereof, the number of shares or other securities of Sonic or of the body
corporate resulting, surviving or continuing from the Capital Reorganization, or
other property, that such holder would have been entitled to receive as a result
of such Capital Reorganization if, on the record date, he had been the
registered holder of the number of Sonic Common Shares to which he was
17
<PAGE>
then entitled upon any exchange of his Exchangeable Shares into Sonic Common
Shares in accordance with the provisions hereof, subject to adjustment
thereafter in the same manner, as nearly as may be possible, as is provided for
in subsection 1.1(i); provided that no such Capital Reorganization shall be
carried into effect unless all necessary steps shall have been taken so that
each holder of Exchangeable Shares shall thereafter be entitled to receive, upon
any exchange of his Exchangeable Shares pursuant to the provisions hereof, such
number of shares or other securities of Sonic or of the body corporate
resulting, surviving or continuing from the Capital Reorganization, or other
property.
9.3 In the case of any reclassification of, or other change in, the outstanding
Sonic Common Shares other than a Common Share Reorganization or a Capital
Reorganization, such changes shall be made in the rights attaching to the
Exchangeable Shares, without any action on the part of the Corporation or the
holders of the Exchangeable Shares to the extent permitted by applicable law,
effective immediately following the record date for such reclassification or
other change, to the extent necessary to ensure that holders of Exchangeable
Shares shall be entitled to receive, upon the occurrence at any time after such
record date of any event whereby they would receive Sonic Common Shares pursuant
to the provisions hereof, such shares, securities or rights as they would have
received if their Exchangeable Shares had been exchanged for Sonic Common Shares
pursuant to the provisions hereof immediately prior to such record date, subject
to adjustment thereafter in the same mariner, as nearly as may be possible, as
is provided for in subsection 1.1(i).
9.4 No certificates or scrip representing fractional Sonic Common Shares shall
be delivered to holders of Exchangeable Shares pursuant to the provisions
hereof. In lieu of any such fractional security, each person entitled to a
fractional interest in an Sonic Common Share will receive an amount of cash
(rounded to the nearest whole cent), without interest, equal to the Canadian
Dollar Equivalent as of the fourth Business Day prior to the relevant date of
delivery of certificates representing Sonic Common Shares (the "Fractional Share
Calculation Date") of the product of (i) such fraction, multiplied by (ii) the
closing sale price of Sonic Common Shares as reported on NASDAQ on the
Fractional Share Calculation Date.
ARTICLE 10
ACTIONS BY THE CORPORATION UNDER SUPPORT AGREEMENT
--------------------------------------------------
10.1 The Corporation will take all such actions and do all such things as shall
be necessary or advisable to perform and comply with and to ensure performance
and compliance by Sonic with all provisions of the Support Agreement and the
Voting and Exchange Trust Agreement applicable to the Corporation and Sonic,
respectively, in accordance with the terms thereof including, without
limitation, taking all such actions and doing all such things as shall be
necessary or advisable to
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<PAGE>
enforce to the fullest extent possible for the direct benefit of the Corporation
and the holders of Exchangeable Shares all rights and benefits in favour of the
Corporation under or pursuant to such agreement.
10.2 The Corporation shall not propose, agree to or otherwise give effect to any
amendment to, or waiver or forgiveness of its rights or obligations under, the
Support Agreement and the Voting and Exchange Trust Agreement without the
approval of the holders of the Exchangeable Shares given in accordance with
section 8.2 of these share provisions other than such amendments, waivers and/or
forgiveness as may be necessary or advisable for the purposes of:
(a) adding to the covenants of the other party or parties to such
agreement for the protection of the Corporation or the holders of
Exchangeable Shares; or
(b) making such provisions or modifications not inconsistent with such
agreements as may be necessary or desirable with respect to matters or
questions arising thereunder which, in the opinion of the Board of
Directors, it may be expedient to make, provided that the Board of
Directors shall be of the opinion, after consultation with counsel,
that such provisions and modifications will not be prejudicial to the
interests of the holders of the Exchangeable Shares; or
(c) making such changes in or corrections to such agreements which, on the
advice of counsel to the Corporation, are required for the purpose of
curing or correcting any ambiguity or defect or inconsistent provision
or clerical omission or mistake or manifest error contained therein,
provided that the Board of Directors shall be of the opinion, after
consultation with counsel, that such changes or corrections will not
be prejudicial to the interests of the holders of the Exchangeable
Shares.
ARTICLE 11
LEGEND
------
11.1 The certificates evidencing the Exchangeable Shares shall contain or have
affixed thereto a legend, in form and on terms approved by the Board of
Directors, with respect to the Support Agreement, the provisions of the Plan of
Arrangement relating to the Retraction Call Right, the Liquidation Call Right
and the Redemption Call Right, and the Voting and Exchange Trust Agreement
(including the provisions with respect to the voting rights, exchange right and
automatic exchange thereunder).
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ARTICLE 12
NOTICES
-------
12.1 Any notice, request or other communication to be given to the Corporation
by a holder of Exchangeable Shares shall be in writing and shall be valid and
effective if given by mail (postage prepaid) or by telecopy or by delivery to
the registered office of the Corporation and addressed to the attention of the
President. Any such notice, request or other communication, if given by mail,
telecopy or delivery, shall only be deemed to have been given and received upon
actual receipt thereof by the Corporation.
12.2 Any presentation and surrender by a holder of Exchangeable Shares to the
Corporation or the Transfer Agent of certificates representing Exchangeable
Shares in connection with the liquidation, dissolution or winding up of the
Corporation or the retraction or redemption of Exchangeable Shares shall be made
by registered mail (postage prepaid) or by delivery to the registered office of
the Corporation or to such office of the Transfer Agent as may be specified by
the Corporation, in each case addressed to the attention of the President of the
Corporation. Any such presentation and surrender of certificates shall only be
deemed to have been made and to be effective upon actual receipt thereof by the
Corporation or the Transfer Agent, as the case may be. Any such presentation and
surrender of certificates made by registered mail shall be at the sole risk of
the holder mailing the same.
12.3 Any notice, request or other communication to be given to a holder of
Exchangeable Shares by or on behalf of the Corporation shall be in writing and
shall be valid and effective if given by mail (postage prepaid) or by delivery
to the address of the holder recorded in the securities register of the
Corporation or, in the event of the address of any such holder not being so
recorded, then at the last known address of such holder. Any such notice,
request or other communication, if given by mail, shall be deemed to have been
given and received on the fifth Business Day following the date of mailing and,
if given by delivery, shall be deemed to have been given and received on the
date of delivery. Accidental failure or omission to give any notice, request or
other communication to one or more holders of Exchangeable Shares shall not
invalidate or otherwise alter or affect any action or proceeding to be taken by
the Corporation pursuant thereto.
PROVISIONS ATTACHING TO THE COMMON SHARES OF THE CORPORATION
The common shares in the capital of the Corporation shall have attached
thereto the following rights, privileges, restrictions and conditions:
20
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DIVIDENDS
- ---------
Subject to the prior rights of the holders of the Exchangeable Shares, and
any other shares ranking senior to the common shares with respect to priority in
the payment of dividends, the holders of common shares shall be entitled to
receive dividends and the Corporation shall pay dividends thereon, as and when
declared by the Board of Directors out of moneys properly applicable to the
payment of dividends, in such amount and in such form as the Board of Directors
may from time to time determine and all dividends which the Board of Directors
may declare on the common shares shall be declared and paid in equal amounts per
share on all common shares at the time outstanding.
DISSOLUTION
- -----------
In the event of the dissolution, liquidation or winding-up of the
Corporation, whether voluntary or involuntary, or any other distribution of
assets of the Corporation among its shareholders for the purpose of winding up
its affairs, subject to the prior rights of the holders of the Exchangeable
Shares and any other shares ranking senior to the common shares with respect to
priority in the distribu tion of assets upon dissolution, liquidation or
winding-up, the holders of the common shares shall be entitled to receive the
remaining property and assets of the Corporation.
VOTING RIGHTS
- -------------
The holders of the common shares shall be entitled to receive notice of and
to attend all meetings of the shareholders of the Corporation and shall have one
vote for each common share held at all meetings of the shareholders of the
Corporation, except for meetings at which only holders of another specified
class or series of shares of the Corporation are entitled to vote separately as
a class or series.
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SCHEDULE A
NOTICE OF RETRACTION
--------------------
To Sonic Canada, Inc. (the "Corporation") and TurboSonic Technologies, Inc.
("Sonic")
This notice is given pursuant to Article 5 of the provisions (the "Share
Provisions") attaching to the share(s) represented by this certificate and all
capitalized words and expressions used in this notice that are defined in the
Share Provisions have the meanings ascribed to such words and expressions in
such Share Provisions.
The undersigned hereby notifies the Corporation that, subject to the
Retraction Call Right referred to below, the undersigned desires to have the
Corporation redeem in accordance with Article 5 of the Share Provisions:
[ ] all share(s) represented by this certificate; or
[ ] ____________________ share(s) only.
The undersigned acknowledges the Retraction Call Right of Sonic to purchase
all but not less than all the Retracted Shares from the undersigned and that
this notice shall be deemed to be an irrevocable offer (subject as hereinafter
provided) by the undersigned to sell the Retracted Shares to Sonic in accordance
with the Retraction Call Right on the Retraction Date for the Retraction Call
Purchase Price and on the other terms and conditions set out in section 5.1 of
the Plan of Arrangement. If Sonic determines not to exercise the Retraction Call
Right, the Corporation will notify the undersigned of such fact as soon as
possible. If this notice is not effective pursuant to section 5.1 of the Share
Provisions, whether as a result of the postponement of a Retraction Period or
otherwise, the offer contained in this notice may be revoked by the undersigned
by a further notice in writing addressed to the Corporation and Sonic and
delivered to the Transfer Agent.
The undersigned acknowledges that if, as a result of solvency provisions of
applicable law or otherwise, the Corporation fails to redeem all Retracted
Shares, the undersigned will be deemed to have exercised the Exchange Right (as
defined in the Voting and Exchange Trust Agreement) so as to require Sonic to
purchase the unredeemed Retracted Shares.
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<PAGE>
The undersigned hereby represents and warrants to the Corporation and Sonic
that the undersigned has good title to, and owns, the share(s) represented by
this certificate to be acquired by the Corporation or Sonic, as the case may be,
free and clear of all Liens.
- ------------- ------------------------------- ---------------------------------
(Date) (Signature of Shareholder) (Guarantee of Signature)
[ ] Please check box if the securities and any cheque(s) resulting from the
retraction or purchase of the Retracted Shares are to be held for pick-up
by the shareholder at the principal transfer office of
_____________________________ (the "Transfer Agent") in __________, failing
which the securities and any cheque(s) will be mailed to the last address
of the shareholder as it appears on the register.
NOTE: This panel must be completed and this certificate, together with such
additional documents as the Transfer Agent may require, must be
deposited with the Transfer Agent at its principal transfer office in
Toronto. The securities and any cheque(s) resulting from the
retraction or purchase of the Retracted Shares will be issued and
registered in, and made payable to, respectively, the name of the
shareholder as it appears on the register of the Corporation and the
securities and cheque(s) resulting from such retraction or purchase
will be delivered to such shareholder as indicated above, unless the
form appearing immediately below is duly completed.
- ------------------------------------- ---------------------------------------
Name of Person in Whose Name Date
Securities or Cheque(s) Are To Be
Registered, Issued or Delivered
(please print)
- ------------------------------------- ---------------------------------------
Street Address or P.O. Box Signature of Shareholder
- ------------------------------------- ---------------------------------------
City-Province Signature Guaranteed by
NOTE: If the notice of retraction is for less than all of the share(s)
represented by this certificate, a certificate representing the
remaining shares of the Corporation will be issued and registered in
the name of the shareholder as it appears on the register of the
Corporation, unless the Share Transfer Power on the share certificate
is duly completed in respect of such shares.
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<PAGE>
EXHIBIT 2.3
VOTING AND EXCHANGE TRUST AGREEMENT
-----------------------------------
MEMORANDUM OF AGREEMENT made as of the 25th day of August, 1997, between
SONIC ENVIRONMENTAL SYSTEMS, INC., a Delaware corporation ("Sonic"), SONIC
CANADA, INC., an Ontario corporation (the "Corporation") and THE TRUST COMPANY
OF BANK OF MONTREAL, a trust company incorporated under the laws of Canada
("Trustee").
W I T N E S S E T H :
WHEREAS pursuant to a combination agreement dated as of July 1, 1997 (the
"Combination Agreement"), by and between Sonic, the Corporation and Turbotak
Technologies, Inc. ("Turbotak"), the parties agreed that on the Effective Date
(as defined in the Combination Agreement), Sonic and the Corporation would
execute and deliver a Voting and Exchange Trust Agreement containing the terms
and conditions set forth in Exhibit 2.2 to the Combination Agreement together
with such other terms and conditions as may be agreed to by the parties to the
Combination Agreement acting reasonably;
AND WHEREAS pursuant to an arrangement (the "Arrangement") effected by
articles of arrangement to be filed pursuant to the Ontario Business
Corporations Act, each issued and outstanding Common Share of Turbotak (a
"Turbotak Common Share") and each issued and outstanding Class B Share of
Turbotak (a "Turbotak Class B Share") will be exchanged directly or indirectly
for 4.23 of an issued and outstanding Exchangeable Non-Voting Share of the
Corporation (the "Exchangeable Shares");
AND WHEREAS the aforesaid articles of arrangement set forth the rights,
privileges, restrictions and conditions (collectively the "Exchangeable Share
Provisions") attaching to the Exchangeable Shares;
AND WHEREAS Sonic is to provide voting rights in Sonic to each holder
(other than Sonic) from time to time of Exchangeable Shares, such voting rights
per Exchangeable Share to be equivalent to the voting rights per share of the
common stock, par value U.S. $.10 per share, of Sonic (the "Sonic Common
Shares");
AND WHEREAS Sonic is to grant to and in favour of the holders (other than
Sonic) from time to time of Exchangeable Shares the right, in the circumstances
set forth herein, to require Sonic to purchase from each such holder all or any
part of the Exchangeable Shares held by the holder;
AND WHEREAS the parties desire to make appropriate provision and to
establish a procedure whereby voting rights in Sonic shall be exercisable by
holders (other than Sonic) from time to time of Exchangeable Shares by and
through the Trustee, which will hold
<PAGE>
legal title to one share of Sonic Special Voting Preferred Stock, U.S. $.01 par
value (the "Sonic Special Voting Stock"), to which voting rights attach for the
benefit of such holders and whereby the rights to require Sonic to purchase
Exchangeable Shares from the holders thereof shall be exercisable by such
holders from time to time of Exchangeable Shares by and through the Trustee,
which will hold legal title to such rights for the benefit of such holders;
AND WHEREAS these recitals and any statements of fact in this Agreement are
made by Sonic and the Corporation and not by the Trustee;
NOW THEREFORE in consideration of the respective covenants and agreements
provided in this Agreement and for other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties agree as
follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
------------------------------
1.1 DEFINITIONS. In this Agreement the following terms shall have the
-----------
following meanings:
"AFFILIATE" of any person means any other person directly or indirectly
controlling, controlled by, or under common control of, that person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling", "controlled by" and "under common control of"), as
applied to any person, means the possession by another person, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that first mentioned person, whether through the ownership of voting
securities, by contract or otherwise.
"ARRANGEMENT" has the meaning ascribed thereto in the recitals hereto.
"AUTOMATIC EXCHANGE RIGHTS" means the benefit of the obligation of Sonic to
effect the automatic exchange of shares of Sonic Common Shares for Exchangeable
Shares pursuant to subsection 5.12(c) hereof.
"BOARD OF DIRECTORS" means the Board of Directors of the Corporation.
"BUSINESS DAY" means a day other than a Saturday, a Sunday or a day when
banks are not open for business in one or both of Waterloo, Ontario and the
State of New Jersey.
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"CALL RIGHTS" means collectively the Liquidation Call Right, the Redemption
Call Right and the Retraction Call Right.
"CANADIAN DOLLAR EQUIVALENT" means in respect of an amount expressed in a
foreign currency (the "Foreign Currency Amount") at any date the product
obtained by multiplying (a) the Foreign Currency Amount by (b) the noon spot
exchange rate on such date for such foreign currency expressed in Canadian
dollars as reported by the Bank of Canada or, in the event such spot exchange
rate is not available, such exchange rate on such date for such foreign currency
expressed in Canadian dollars as may be deemed by the Board of Directors to be
appropriate for such purpose.
"CURRENT MARKET PRICE" means, in respect of Sonic Common Shares on any
date, the Canadian Dollar Equivalent of the closing sale price of Sonic Common
Shares on such date (or, if no trades of any Sonic Common Shares occurred on
such date, on the last trading day prior thereto on which such trades occurred)
reported on the NASDAQ National Market System, or, if the Sonic Common Shares
are not then quoted on the NASDAQ National Market System, on such other stock
exchange or automated quotation system on which the Sonic Common Shares are
listed or quoted, as the case may be, as may be selected by the Board of
Directors for such purpose; provided, however, that if in the opinion of the
Board of Directors the public distribution or trading activity of Sonic Common
Shares during such period does not create a market that reflects the fair market
value of Sonic Common Shares, then the Current Market Price of Sonic Common
Shares shall be determined by the Board of Directors based upon the advice of
such qualified independent financial advisors as the Board of Directors may deem
to be appropriate, and provided further that any such selection, opinion or
determination by the Board of Directors shall be conclusive and binding.
"CURRENT SONIC COMMON SHARE EQUIVALENT" has the meaning ascribed thereto in
the Exchangeable Share Provisions.
"DEFAULT EVENT" means any failure, other than by reason of an Insolvency
Event, of the Corporation to perform any of its obligations pursuant to the
Exchangeable Share Provisions, including without limitation its obligation to
redeem any Retracted Shares.
"EXCHANGE RIGHT" has the meaning ascribed thereto in section 5.1 hereof.
"EXCHANGEABLE SHARE PROVISIONS" has the meaning ascribed thereto in the
recitals hereto.
"EXCHANGEABLE SHARES" has the meaning ascribed thereto in the recitals
hereto.
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"HOLDER VOTES" has the meaning ascribed thereto in section 4.2 hereof.
"HOLDERS" means the registered holders from time to time of Exchangeable
Shares, other than Sonic.
"INSOLVENCY EVENT" means the institution by the Corporation of any
proceeding to be adjudicated a bankrupt or insolvent or to be dissolved or wound
up, or the consent of the Corporation to the institution of bankruptcy,
insolvency, dissolution or winding up proceedings against it, or the filing of a
petition, answer or consent seeking dissolution or winding up under any
bankruptcy, insolvency or analogous laws, including without limitation the
Companies Creditors' Arrangement Act (Canada) and the Bankruptcy and Insolvency
Act (Canada), and the failure by the Corporation to contest in good faith any
such proceedings commenced in respect of the Corporation within 15 days of
becoming aware thereof, or the consent by the Corporation to the filing of any
such petition or to the appointment of a receiver, or the making by the
Corporation of a general assignment for the benefit of creditors, or the
admission in writing by the Corporation of its inability to pay its debts
generally as they become due, or the Corporation not being permitted, pursuant
to solvency requirements of applicable law, to redeem any Retracted Shares
pursuant to section 5.6 of the Exchangeable Share Provisions.
"LIEN" has the meaning ascribed thereto in the Plan of Arrangement.
"LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in the Plan of
Arrangement.
"LIQUIDATION EVENT" has the meaning ascribed thereto in subsection 5.12(a)
hereof.
"LIQUIDATION EVENT EFFECTIVE DATE" has the meaning ascribed thereto in
subsection 5.12(c) hereof.
"LIST" has the meaning ascribed thereto in section 4.6 hereof.
"OBCA" means the Ontario Business Corporations Act, as amended;
"OFFICER'S CERTIFICATE" means, with respect to Sonic or the Corporation, as
the case may be, a certificate signed by any one of the Chairman of the Board,
the President, any Vice-President or any other senior officer of Sonic or the
Corporation, as the case may be.
"PERSON" includes an individual, partnership, corporation, company,
unincorporated syndicate or organization, trust trustee,
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executor, administrator and other legal representative.
"PLAN OF ARRANGEMENT" means the plan of arrangement of the Corporation
providing for the Arrangement.
"REDEMPTION CALL RIGHT" has the meaning ascribed thereto in the Plan of
Arrangement.
"RETRACTED SHARES" has the meaning ascribed thereto in section 5.7 hereof.
"RETRACTION CALL RIGHT" has the meaning ascribed thereto in the Plan of
Arrangement
"SONIC COMMON SHARES" has the meaning ascribed thereto in the recitals
hereto.
"SONIC CONSENT" has the meaning ascribed thereto in section 4.2 hereof.
"SONIC MEETING" has the meaning ascribed thereto in section 4.2 hereof.
"SONIC SPECIAL VOTING STOCK" has the meaning ascribed thereto in the
recitals hereto.
"SONIC SUCCESSOR" has the meaning ascribed thereto in subsection 10.1(a)
"SUPPORT AGREEMENT" means that certain support agreement made as of even
date herewith between the Corporation and Sonic.
"TRUST" means the trust created by this Agreement.
"TRUST ESTATE" means the Voting Share, any other securities, the Exchange
Right, the Automatic Exchange Rights and any money or other property that may be
held by the Trustee from time to time pursuant to this Agreement.
"VOTING RIGHTS" means the voting rights attached to the Voting Share.
"VOTING SHARE" means the one share of Sonic Special Voting Stock, issued by
Sonic to and deposited with the Trustee, which entitles the holder of record to
a number of votes at meetings of holders of Sonic Common Shares equal to the
number of Exchangeable Shares outstanding from time to time, other than
Exchangeable Shares held by Sonic, multiplied by the Current Sonic Common Share
Equivalent at the relevant time.
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1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC. The division of this
---------------------------------------------
Agreement into articles, sections and paragraphs and the insertion of headings
are for convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
1.3 NUMBER, GENDER, ETC. Words importing the singular number only shall include
--------------------
the plural and vice versa. Words importing the use of any gender shall include
all genders.
1.4 DATE FOR ANY ACTION. If any date on which any action is required to De
-------------------
taken under this Agreement is not a Business Day, such action shall be required
to be taken on the next succeeding Business Day.
1.5 WITHHOLDING OF TAX. All amounts required to be paid, deposited or
------------------
delivered hereunder shall be paid, deposited or delivered after deduction of any
amount required by applicable law to be deducted or withheld on account of tax
and the deduction of such amounts and remittance to the applicable tax
authorities shall, to the extent thereof, satisfy such requirement to pay,
deposit or deliver hereunder.
ARTICLE 2
PURPOSE OF AGREEMENT
--------------------
2.1 ESTABLISHMENT OF TRUST. The purpose of this Agreement is to create the
----------------------
Trust for the benefit of the Holders, as herein provided. The Trustee will hold
the Voting Share in order to enable the Trustee to exercise the Voting Rights
and will hold the Exchange Right and the Automatic Exchange Rights in order to
enable the Trustee to exercise such rights, in each case as trustee for and on
behalf of the Holders as provided in this Agreement.
ARTICLE 3
VOTING SHARE
------------
3.1 ISSUE AND OWNERSHIP OF THE VOTING SHARE. In consideration of the granting
---------------------------------------
of the Call Rights to Sonic, Sonic hereby issues to and deposits with the
Trustee the Voting Share to be hereafter held of record by the Trustee as
trustee for and on behalf of, and for the use and benefit of, the Holders and in
accordance with the provisions of this Agreement. Sonic hereby acknowledges
receipt from the Trustee as trustee for and on behalf of the Holders of good and
valuable consideration (and the adequacy thereof) for the issuance of the Voting
Share by Sonic to the Trustee. During the term of the Trust and subject to the
terms and conditions of this Agreement, the Trustee shall possess and be vested
with full legal ownership of the
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Voting Share and shall be entitled to exercise all of the rights and powers of
an owner with respect to the Voting Share, provided that the Trustee shall:
(a) hold the Voting Share and the legal title thereto as trustee
solely for the use and benefit of the Holders in accordance with
the provisions of this
Agreement; and
(b) except as specifically authorized by this Agreement, have no
power or authority to sell, transfer, vote or otherwise deal in
or with the Voting Share and the Voting Share shall not be used
or disposed of by the Trustee for any purpose other than the
purposes for which this Trust is created pursuant to this
Agreement.
3.2 LEGENDED SHARE CERTIFICATES. The Corporation shall cause each certificate
---------------------------
representing Exchangeable Shares to bear an appropriate legend notifying the
Holders of their right to instruct the Trustee with respect to the exercise of
the Voting Rights with respect to the Exchangeable Shares held by Holders.
3.3 SAFE KEEPING OF CERTIFICATE. The certificate representing the Voting Share
---------------------------
shall at all times be held in safe keeping by the Trustee.
ARTICLE 4
VOTING RIGHTS
-------------
4.1 VOTING RIGHTS. The Trustee, as the holder of record of the Voting Share,
-------------
shall be entitled to all of the Voting Rights, including the right to consent to
or to vote in person or by proxy the Voting Share, on any matter, question or
proposition whatsoever that may properly come before the stockholders of Sonic
for their vote at an Sonic Meeting or in connection with an Sonic Consent. The
Voting Rights shall be and remain vested in and exercised by the Trustee.
Subject to section 6.15 hereof, the Trustee shall exercise the Voting Rights
only on the basis of instructions received pursuant to this Article 4 from
Holders entitled to instruct the Trustee as to the voting thereof at the time at
which an Sonic Consent is sought or an Sonic Meeting is held. To the extent that
no instructions are received from a Holder with respect to the Voting Rights to
which such Holder is entitled, the Trustee shall not exercise or permit the
exercise of such Holder's Voting Rights.
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<PAGE>
4.2 NUMBER OF VOTES. With respect to all meetings of stockholders of Sonic at
---------------
which holders of Sonic Common Shares are entitled to vote (an"Sonic Meeting")
and with respect to all written consents sought from the holders of Sonic Common
Shares (a "Sonic Consent"), each Holder shall be entitled to instruct the
Trustee to cast and exercise, in the manner instructed, such number of votes
comprised in the Voting Rights as is equal to the Current Sonic Common Share
Equivalent on the record date established by Sonic or by applicable law for such
Sonic Meeting or Sonic Consent, as the case may be, for each Exchangeable Share
owned of record by such Holder on such record date (the "Holder Votes") in
respect of each matter, question or proposition to be voted on at such Sonic
Meeting or to be consented to in connection with such Sonic Consent.
4.3 MAILINGS TO SHAREHOLDERS. With respect to each Sonic Meeting and Sonic
------------------------
Consent, the Trustee shall mail or cause to be mailed (or otherwise communicate
in the same manner as Sonic utilizes in communications to holders of Sonic
Common Shares) to each of the Holders named in the List on the same day as the
initial mailing of notice (or other communication) with respect thereto is given
by Sonic or any third party to its stockholders:
(a) a copy of such notice, together with any proxy or information
statement and related materials to be provided to stockholders of
Sonic;
(b) a statement that such Holder is entitled to instruct the Trustee as to
the exercise of the Holder Votes with respect to such Sonic Meeting or
Sonic Consent, as the case may be, or, pursuant to section 4.7 hereof,
to attend such Sonic Meeting and to exercise personally the Holder
Votes thereat;
(c) a statement as to the manner in which such instructions may be given
to the Trustee, including an express indication that instructions may
be given to the Trustee to give:
(i) a proxy to such Holder or his designee to exercise personally the
Holder Votes; or
(ii) a proxy to a designated agent or other representative of the
management of Sonic to exercise such Holder Votes;
(d) a statement that if no such instructions are received from the Holder,
the Holder Votes to which such Holder is entitled will not be
exercised;
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(e) a form of direction whereby the Holder may so direct and instruct the
Trustee as contemplated herein; and
(f) a statement of (i) the time and date by which such instructions must
be received by the Trustee in order to be binding upon it, which in
the case of a Sonic Meeting shall not be earlier than the close of
business on the second Business Day prior to such meeting, and (ii)
the method for revoking or amending such instructions.
For the purpose of determining Holder Votes to which a Holder is entitled in
respect of any such Sonic Meeting or Sonic Consent, the number of Exchangeable
Shares owned of record by the Holder shall be determined at the close of
business on the record date established by Sonic or by applicable law for
purposes of determining stockholders entitled to vote at such Sonic Meeting or
to give written consent in connection with such Sonic Consent. Sonic shall
notify the Trustee of any decision of the board of directors of Sonic with
respect to the calling of any such Sonic Meeting or the seeking by Sonic of any
such Sonic Consent and shall provide all necessary information and materials to
the Trustee in each case promptly and in any event in sufficient time to enable
the Trustee to perform its obligations contemplated by this section 4.3.
4.4 COPIES OF STOCKHOLDER INFORMATION. Sonic shall deliver to the Trustee
---------------------------------
copies of all proxy materials, (including notices of Sonic Meetings but
excluding proxies to vote Sonic Common Shares), information statements, reports
(including without limitation all interim and annual financial statements) and
other written communications that are to be distributed by Sonic from time to
time to holders of Sonic Common Shares in sufficient quantities and in
sufficient time so as to enable the Trustee to send those materials to each
Holder at the same time as such materials are first sent to holders of Sonic
Common Shares. The Trustee shall mail or otherwise send to each Holder, at the
expense of Sonic, copies of all such materials (and all materials specifically
directed to the Holders or to the Trustee for the benefit of the Holders by
Sonic) received by the Trustee from Sonic at the same time as such materials are
first sent to holders of Sonic Common Shares. The Trustee shall make copies of
all such materials available for inspection by any Holder at the Trustee's
principal office.
4.5 OTHER MATERIALS. Immediately after receipt by Sonic or any stockholder of
---------------
Sonic of any material sent or given generally to the holders of Sonic Common
Shares by or on behalf of a third party, including without limitation dissident
proxy and information circulars (and related information and material) and
tender and exchange offer circulars (and related information and material),
Sonic shall use all commercially reasonable efforts to obtain and deliver to the
Trustee copies thereof in sufficient quantities so as
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to enable the Trustee to forward such material (unless the same has been
provided directly to Holders by such third party) to each Holder as soon as
possible thereafter. As soon as practicable after receipt thereof, the Trustee
shall mail or otherwise send to each Holder at the expense of Sonic, copies of
all such materials received by the Trustee from Sonic. The Trustee shall also
make copies of all such materials available for inspection by any Holder at the
Trustee's principal office.
4.6 LIST OF PERSONS ENTITLED TO VOTE. The Corporation shall, (a) prior to each
--------------------------------
annual, general and special Sonic Meeting or the seeking of any Sonic Consent
and (b) forthwith upon each request made at any time by the Trustee in writing,
prepare or cause to be prepared a list (a "List") of the names and addresses of
the Holders arranged in alphabetical order and showing the number of
Exchangeable Shares held of record by each such Holder, in each case at the
close of business on the date specified by the Trustee in such request or, in
the case of a List prepared in connection with a Sonic Meeting or a Sonic
Consent, at the close of business on the record date established by Sonic or
pursuant to applicable law for determining the holders of Sonic Common Shares
entitled to receive notice of and/or to vote at such Sonic Meeting or to give
consent in connection with such Sonic Consent. Each such List shall be delivered
to the Trustee promptly after receipt by the Corporation of such request or the
record date for such meeting or seeking of consent, as the case may be, and in
any event within sufficient time as to enable the Trustee to perform its
obligations under this Agreement. Sonic agrees to give the Corporation notice
with a copy to the Trustee) of the calling of any Sonic Meeting or the seeking
of any Sonic Consent, together with the record dates therefor, sufficiently
prior to the date of the calling of such meeting or seeking of such consent so
as to enable the Corporation to perform its obligations under this section 4.6.
4.7 ENTITLEMENT TO DIRECT VOTES. Any Holder named in a List prepared in
---------------------------
connection with any Sonic Meeting or a Sonic Consent shall be entitled (a) to
instruct the Trustee in the manner described in section 4.3 hereof with respect
to the exercise of the Holder Votes to which such Holder is entitled or (b) to
attend such meeting and personally to exercise thereat or to exercise with
respect to any written consent), as the proxy of the Trustee, the Holder Votes
to which such Holder is entitled.
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4.8 VOTING BY TRUSTEE, AND ATTENDANCE OF TRUSTEE REPRESENTATIVE, AT MEETING.
-----------------------------------------------------------------------
(a) In connection with each Sonic Meeting and Sonic Consent, the Trustee
shall exercise, either in person or by proxy, in accordance with the
instructions received from a Holder pursuant to section 4.3 hereof,
the Holder Votes as to which such Holder is entitled to direct the
vote (or any lesser number thereof as may be set forth in the
instructions); provided, however, that such written instructions are
received by the Trustee from the Holder prior to the time and date
fixed by it for receipt of such instructions in the notice given by
the Trustee to the Holder pursuant to section 4.3 hereof.
(b) The Trustee shall cause such representatives as are empowered by it to
sign and deliver, on behalf of the Trustee, proxies for Voting Rights
to attend each Sonic Meeting. Upon submission by a Holder (or its
designee) of identification satisfactory to the Trustee's
representatives, and at the Holder's request, such representatives
shall sign and deliver to such Holder (or its designee) a proxy to
exercise personally the Holder Votes as to which such Holder is
otherwise entitled hereunder to direct the vote, if such Holder either
(i) has not previously given the Trustee instructions pursuant to
section 4.3 hereof in respect of such meeting, or (ii) submits to the
Trustee's representatives written revocation of any such previous
instructions. At such meeting, the Holder exercising such Holder Votes
shall have the same rights as the Trustee to speak at the meeting in
respect of any matter, question or proposition, to vote by way of
ballot at the meeting in respect of any matter, question or
proposition and to vote at such meeting by way of a show of hands in
respect of any matter, question or proposition.
4.9 DISTRIBUTION OF WRITTEN MATERIALS. Any written materials to be distributed
---------------------------------
by the Trustee to the Holders pursuant to this Agreement shall be delivered or
sent by mail (or otherwise communicated in the same manner as Sonic utilizes in
communications to holders of Sonic Common Shares) to each Holder at its address
as shown on the books of the Corporation. The Corporation shall provide or cause
to be provided to the Trustee for this purpose on a timely basis and without
charge or other expense:
(a) a List; and
(b) mailing labels to enable the Trustee to carry out its duties under
this Agreement.
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4.10 TERMINATION OF VOTING RIGHTS. Except with respect to a Sonic Meeting
----------------------------
or Sonic Consent for which the record date has occurred, all of the rights of a
Holder with respect to the Holder Votes exercisable in respect of the
Exchangeable Shares held by such Holder, including the right to instruct the
Trustee as to the voting of or to vote personally such Holder Votes, shall be
deemed to be surrendered by the Holder to Sonic and such Holder Votes and the
Voting Rights represented thereby shall cease immediately upon the delivery by
such Holder to the Trustee of the certificates representing such Exchangeable
Shares in connection with the exercise by the Holder of the Exchange Right or
the occurrence of the automatic exchange pursuant to the Automatic Exchange
Rights (unless in either case Sonic shall not have delivered the requisite Sonic
Common Shares issuable in exchange therefor to the Trustee for delivery to the
Holders), or upon the redemption of Exchangeable Shares pursuant to Article 5 or
Article 6 of the Exchangeable Share Provisions, or upon the effective date
of the liquidation, dissolution or winding-up of the Corporation pursuant to
Article 4 of the Exchangeable Share Provisions, or upon the purchase of
Exchangeable Shares from the holder thereof by Sonic pursuant to the exercise by
Sonic of the Retraction Call Right, the Redemption Call Right or the Liquidation
Call Right.
4.11 ISSUE OF ADDITIONAL SHARES. During the term of this Agreement, Sonic will
--------------------------
not issue any shares of Sonic Special Voting Stock, in addition to the Voting
Share.
ARTICLE 5
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
-------------------------------------
5.1 GRANT AND OWNERSHIP OF THE EXCHANGE RIGHT. In consideration of the
-----------------------------------------
granting of the Call Rights to Sonic, Sonic hereby grants to the Trustee as
trustee for and on behalf of, and for the use and benefit of, the Holders (a)
the right (the "Exchange Right"), upon the occurrence and during the continuance
of an Insolvency Event or Default Event, to require Sonic to purchase from each
Holder all or any part of the Exchangeable Shares held by such Holder and (b)
the Automatic Exchange Rights, all in accordance with the provisions of this
agreement. Sonic hereby acknowledges receipt from the Trustee as trustee for and
on behalf of the Holders of good and valuable consideration (and the adequacy
thereof) for the grant of the Exchange Right and the Automatic Exchange Rights
by Sonic to the Trustee. During the term of the Trust and subject to the terms
and conditions of this Agreement, the Trustee shall possess and be vested with
full legal ownership of the Exchange Right and the Automatic Exchange Rights and
shall be entitled to exercise all of the rights and powers of an owner with
respect to the Exchange Right and the Automatic Exchange Rights, provided that
the Trustee shall:
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(a) hold the Exchange Right and the Automatic Exchange Rights and the
legal title thereto as trustee solely for the use and benefit of the
Holders in accordance with the provisions of this Agreement; and
(b) except as specifically authorized by this Agreement, have no power or
authority to exercise or otherwise deal in or with the Exchange Right
or the Automatic Exchange Rights, and the Trustee shall not exercise
any such rights for any purpose other than the purposes for which this
Trust is created pursuant to this Agreement.
5.2 LEGENDED SHARE CERTIFICATES. The Corporation shall cause each certificate
---------------------------
Exchangeable Shares to bear an appropriate legend notifying the Holders of:
(a) their right to instruct the Trustee with respect to the exercise of
the Exchange Right in respect of the Exchangeable Shares held by a
Holder; and
(b) the Automatic Exchange Rights.
5.3 GENERAL EXERCISE OF EXCHANGE RIGHT. The Exchange Right shall be and remain
----------------------------------
vested in and exercisable by the Trustee. Subject to section 6.15 hereof, the
Trustee shall exercise the Exchange Right only on the basis of instructions
received pursuant to this Article 5 from Holders entitled to instruct the
Trustee as to the exercise thereof. To the extent that no instructions are
received from a Holder with respect to the Exchange Right, the Trustee shall not
exercise or permit the exercise of the Exchange Right.
5.4 PURCHASE PRICE The purchase price payable by Sonic for each Exchangeable
--------------
Share to be purchased by Sonic under the Exchange Right shall be an amount per
share equal to (a) the Current Market Price multiplied by the Current Sonic
Common Share Equivalent, in each case determined on the day of closing of the
purchase and sale of such Exchangeable Share under the Exchange Right, which
shall be satisfied in full in respect of the Exchangeable Shares in regard to
which a Holder has exercised the Exchange Right by causing to be delivered to
such Holder such whole number of Sonic Common Shares as is equal to the product
obtained by multiplying the number of such Exchangeable Shares by the Current
Sonic Common Share Equivalent (together with an amount in lieu of any fractional
Sonic Common Share resulting from such calculation payable in accordance with
section 9.4 of the Exchangeable Share Provisions), plus (b) the aggregate of all
dividends declared and unpaid on each such Exchangeable Share (provided that if
the record date for any such declared and unpaid dividends occurs on or after
the day of closing of such purchase and sale the purchase price shall not
include such declared and unpaid dividends).
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5.5 EXERCISE INSTRUCTIONS. Subject to the terms and conditions herein set
---------------------
forth, a Holder shall be entitled, upon the occurrence and during the
continuance of an Insolvency Event, to instruct the Trustee to exercise the
Exchange Right with respect to all or any part of the Exchangeable Shares
registered in the name of such Holder on the books of the Corporation. To cause
the exercise of the Exchange Right by the Trustee, the Holder shall deliver to
the Trustee, in person or by certified or registered mail, at its principal
office or at such other place as the Trustee may from time to time designate by
written notice to the Holders, the certificates representing the Exchangeable
Shares that such Holder desires Sonic to purchase, duty endorsed in blank, and
accompanied by such other documents and instruments as may be required to effect
a transfer of Exchangeable Shares under the OBCA and the by-laws of the
Corporation and such additional documents and instruments as the Trustee may
reasonably require together with (a) a duly completed form of notice of exercise
of the Exchange Right, in the form attached hereto as Schedule A, or attached to
the Exchangeable Share certificates, stating (i) that the Holder thereby
instructs the Trustee to exercise the Exchange Right so as to require Sonic to
purchase from the Holder the number of Exchangeable Shares specified therein,
(ii) that such Holder has good title to and owns all such Exchangeable Shares to
be acquired by Sonic free and clear of all Liens, (iii) the names in which the
certificates representing Sonic Common Shares issuable in connection with the
exercise of the Exchange Right are to be issued and (iv) the names and addresses
of the persons to whom such new certificates should be delivered and (b) payment
(or evidence satisfactory to the Trustee, the Corporation and Sonic of payment)
of the taxes (if any) payable as contemplated by section 5.8 of this Agreement.
If only a part of the Exchangeable Shares represented by any certificate or
certificates delivered to the Trustee are to be purchased by Sonic under the
Exchange Right, a new certificate for the balance of such Exchangeable Shares
shall be issued to the holder at the expense of the Corporation.
5.6 DELIVERY OF SONIC COMMON SHARES: EFFECT OF EXERCISE. Promptly after receipt
---------------------------------------------------
of the certificates representing the Exchangeable Shares that the Holder desires
Sonic to purchase under the Exchange Right (together with such documents and
instruments of transfer and a duly completed form of notice of exercise of the
Exchange Right (and payment of taxes, if any, or evidence thereof in accordance
with section 5.8)), duly endorsed for transfer to Sonic, the Trustee shall
notify Sonic and the Corporation of its receipt of the same, by notice in the
form of Schedule B hereto, which notice to Sonic and the Corporation shall
constitute exercise of the Exchange Right by the Trustee on behalf of the holder
of such Exchangeable Shares and Sonic shall immediately thereafter deliver or
cause to be delivered to the Trustee, for delivery to the Holder of such
Exchangeable Shares (or to such other persons, if any, properly
14
<PAGE>
designated by such Holder), the certificates for the number of Sonic Common
Shares issuable in connection with the exercise of the Exchange Right, which
shares shall be duly issued as fully paid and non-assessable and shall be free
and clear of any Liens, and cheques for the balance, if any, of the total
purchase price therefor (or, if part of the purchase price consists of dividends
payable in property, such property or property the same as or economically
equivalent to such property). Immediately upon the giving of notice by the
Trustee to Sonic and the Corporation of the exercise of the Exchange Right, as
provided in this section 5.6, the closing of the transaction of purchase and
sale contemplated by the Exchange Right shall be deemed to have occurred, and
the Holder of such Exchangeable Shares shall be deemed to have transferred to
Sonic all of its right, title and interest in and to such Exchangeable Shares
and in the related interest in the Trust Estate and shall cease to be a holder
of such Exchangeable Shares and shall not be entitled to exercise any of the
rights of a holder in respect thereof, other than the right to receive the
purchase price therefor, unless the requisite number of Sonic Common Shares
(together with a cheque for the balance, if any, of the purchase price therefor
or, if part of the purchase price consists of dividends payable in property,
such property or property the same as or economically equivalent to such
property) is not allotted, issued and delivered by Sonic to the Trustee for
delivery to such Holder (or to other persons, if any, properly designated by
such Holder) within five Business Days of the date of the giving of such notice
by the Trustee, in which case the rights of the Holder shall remain unaffected
until such Sonic Common Shares are so allotted, issued and delivered by Sonic
and any such cheque is so delivered and paid. Concurrently with such Holder
ceasing to be a holder of Exchangeable Shares, the Holder shall be considered
and deemed for all purposes to be the holder of the Sonic Common Shares
delivered to it pursuant to the Exchange Right.
5.7 EXERCISE OF EXCHANGE RIGHT SUBSEQUENT TO RETRACTION. In the event that a
---------------------------------------------------
Holder has exercised its right under Article 5 of the Exchangeable Share
Provisions to require the Corporation to redeem any or all of the Exchangeable
Shares held by the Holder (the "Retracted Shares") and is notified by the
Corporation pursuant to section 5.6 of the Exchangeable Share Provisions that
the Corporation is not permitted as a result of solvency requirements of
applicable law to redeem all of such Retracted Shares, and provided that Sonic
shall not have exercised the Retraction Call Right with respect to the Retracted
Shares, the retraction request shall constitute and shall be deemed to
constitute notice from the Holder to the Trustee instructing the Trustee to
exercise the Exchange Right with respect to those Retracted Shares that the
Corporation is unable to redeem. In any such event, the Corporation hereby
agrees with the Trustee and in favour of the Holder immediately to notify the
Trustee of such prohibition against the Corporation redeeming all of the
Retracted Shares and immediately to forward or cause to
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be forwarded to the Trustee all relevant materials delivered by the Holder to
the Corporation or to the transfer agent of the Exchangeable Shares (including
without limitation a copy of the retraction request delivered pursuant to
section 5.1 of the Exchangeable Share Provisions) in connection with such
proposed redemption of the Retracted Shares and the Trustee shall thereupon
exercise the Exchange Right with respect to the Retracted Shares that the
Corporation is not permitted to redeem and will require Sonic to purchase such
shares in accordance with the provisions of this Article
5.8 STAMP OR OTHER TRANSFER TAXES. Upon any sale of Exchangeable Shares to
-----------------------------
Sonic pursuant to the Exchange Right or the Automatic Exchange Rights, the share
certificate or certificates representing Sonic Common Shares to be delivered in
connection with the payment of the purchase price therefor shall be issued in
the name of the Holder of the Exchangeable Shares so sold or in such names as
such Holder may otherwise direct in writing without charge to the holder of the
Exchangeable Shares so sold, provided, however, that such Holder (a) shall pay
(and neither Sonic, the Corporation nor the Trustee shall be required to pay)
any documentary, stamp, transfer or other similar taxes that may be payable in
respect of any transfer involved in the issuance or delivery of such shares to a
person other than such Holder or (b) shall establish to the satisfaction of the
Trustee, Sonic and the Corporation that such taxes, if any, have been paid.
5.9 NOTICE OF INSOLVENCY EVENT OR DEFAULT EVENT. Immediately upon the
-------------------------------------------
occurrence of an Insolvency Event or Default Event or any event that with the
giving of notice or the passage of time or both would be an Insolvency Event or
Default Event, the Corporation and Sonic shall give written notice thereof to
the Trustee. As soon as practicable after receiving notice from the Corporation
and Sonic or from any other person of the occurrence of an Insolvency Event or
Default Event, the Trustee shall mail to each Holder, at the expense of Sonic, a
notice of such Insolvency Event or Default Event, which notice shall contain a
brief statement of the right of the Holders with respect to the Exchange Right.
5.10 QUALIFICATION OF SONIC COMMON SHARES. Sonic shall use all reasonable
------------------------------------
efforts to obtain all orders required from the applicable Canadian securities
authorities to permit the issuance of the Sonic Common Shares upon any such
exchange of the Exchangeable Shares without registration or qualification with
or approval of or the filing of any document including any prospectus or similar
document or the taking of any proceeding with or the obtaining of any order,
ruling or consent from any governmental or regulatory authority under any
Canadian federal or provincial law or regulation or pursuant to the rules and
regulations of any regulatory authority or the fulfillment of any other legal
requirement before such Sonic
16
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Common Shares may be issued and delivered by the Corporation or Sonic to the
holder thereof or in order that such Sonic Common Shares may be freely traded
thereafter (other than any restrictions on transfer by reason of a holder being
a "control person" of the Corporation or Sonic for purposes of Canadian federal
or provincial securities law or an "affiliate" for purposes of the United States
Federal or state securities law).
5.11 RESERVATION OF SONIC COMMON SHARES. Sonic hereby represents and warrants
----------------------------------
that it has irrevocably reserved for issuance out of its authorized and unissued
capital stock such number of Sonic Common Shares as is equal to the number of
Exchangeable Shares outstanding at the date hereof and covenants that it will at
all times keep available, free from pre-emptive and other rights, out of its
authorized and unissued capital stock such number of Sonic Common Shares (or
other shares or securities into which Sonic Common Shares may be reclassified or
changed) as is necessary to enable Sonic and the Corporation to perform their
respective obligations pursuant to this Agreement, the Exchangeable Share
Provisions and the Support Agreement.
5.12 AUTOMATIC EXCHANGE ON LIQUIDATION OF SONIC.
------------------------------------------
(a) Sonic shall give the Trustee notice of each of the following events (a
"Liquidation Event") at the time set forth below:
(i) in the event of any determination by the Board of Directors of
Sonic to institute voluntary liquidation, dissolution or winding-
up proceedings with respect to Sonic or to effect any other
distribution of assets of Sonic among its stockholders for the
purpose of winding up its affairs, at least 60 days prior to the
proposed effective date of such liquidation, dissolution,
winding-up or other distribution; and
(ii) immediately, upon the earlier of (A) receipt by Sonic of notice
of and (B) Sonic otherwise becoming aware of any threatened or
instituted claim, suit, petition or other proceedings with
respect to the involuntary liquidation, dissolution or winding up
of Sonic or to effect any other distribution of assets of Sonic
among its stockholders for the purpose of winding up its affairs.
(b) Immediately following receipt by the Trustee from Sonic of notice of
any Liquidation Event, the Trustee shall give notice thereof to the Holders.
Such notice shall include a brief description of the automatic exchange of
Exchangeable Shares for
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Sonic Common Shares provided for in subsection 5.12(c) below.
(c) In order that the Holders will be able to participate on a pro rata
basis with the holders of Sonic Common Shares in the distribution of assets of
Sonic in connection with a Liquidation Event, on the fifth Business Day prior to
the effective date of a Liquidation Event (the "Liquidation Event Effective
Date") all of the then outstanding Exchangeable Shares shall be automatically
exchanged for Sonic Common Shares. To effect such automatic exchange, Sonic
shall purchase each Exchangeable Share outstanding on the fifth Business Day
prior to the Liquidation Event Effective Date and held by Holders, and each
Holder shall sell the Exchangeable Shares held by it at such time, for a
purchase price per share equal to (a) the Current Market Price multiplied by the
Current Sonic Common Share Equivalent on such fifth Business Day prior to the
Liquidation Event Effective Date, which shall be satisfied in full in respect of
the Exchangeable Shares held by each Holder by Sonic issuing to such Holder such
whole number of Sonic Common Shares as is equal to the product obtained by
multiplying the number of such Exchangeable Shares by the Current Sonic Common
Share Equivalent (together with an amount in lieu of any fractional Sonic Common
Share resulting from such calculation payable in accordance with section 9.4 of
the Exchangeable Share Provisions), plus (b) an additional amount equal to the
aggregate of all dividends declared and unpaid on each such Exchangeable Share
(provided that if the record date for any such declared and unpaid dividends
occurs on or after the day of closing of such purchase and sale, the purchase
price shall not include such additional amount equal to such declared and unpaid
dividends).
(d) On the fifth Business Day prior to the Liquidation Event Effective
Date, the closing of the transaction of purchase and sale contemplated by the
automatic exchange of Exchangeable Shares for Sonic Common Shares shall be
deemed to have occurred, and each Holder of Exchangeable Shares shall be deemed
to have transferred to Sonic all of the Holder's right, title and interest in
and to such Exchangeable Shares and the related interest in the Trust Estate and
shall cease to be a Holder of such Exchangeable Shares and Sonic shall issue to
the Holder the Sonic Common Shares issuable upon the automatic exchange of
Exchangeable Shares for Sonic Common Shares and shall deliver to the Trustee for
delivery to the Holder a cheque for the balance, if any, of the purchase price
for such Exchangeable Shares (or, if any part of the purchase price consists of
dividends payable in property, such property or property that is the same as or
economically equivalent to such property). Concurrently with such Holder ceasing
to be a holder of Exchangeable Shares, the Holder shall be considered and deemed
for all purposes to be the holder of the Sonic Common Shares issued to it
pursuant to the automatic exchange of Exchangeable Shares for Sonic Common
Shares and the certificates held by the Holder previously representing the
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Exchangeable Shares exchanged by the Holder with Sonic pursuant to such
automatic exchange shall thereafter be deemed to represent the Sonic Common
Shares issued to the Holder by Sonic pursuant to such automatic exchange. Upon
the request of a Holder and the surrender by the Holder of Exchangeable Share
certificates deemed to represent Sonic Common Shares, duly endorsed in blank and
accompanied by such instruments of transfer as Sonic may reasonably require,
Sonic shall deliver or cause to be delivered to the Holder certificates
representing the Sonic Common Shares of which the Holder is the holder.
5.13 WITHHOLDING RIGHTS. Sonic and the Trustee shall be entitled to deduct and
------------------
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of Exchangeable Shares such amounts as Sonic or the Trustee is
required or permitted to deduct and withhold with respect to the making of such
payment under the Income Tax Act (Canada) or any provision of provincial tax
law. To the extent that amounts are so withheld, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the Exchangeable Shares in respect of which such deduction and withholding was
made, provided that such withheld amounts are actually remitted to the
appropriate taxing authority. To the extent that the amount so required or
permitted to be deducted or withheld from any payment to a holder exceeds the
cash portion of the consideration otherwise payable to the holder, Sonic or the
Trustee is hereby authorized to sell or otherwise dispose of at fair market
value such portion of the consideration as is necessary to provide sufficient
funds to Sonic or the Trustee, as the case may be, in order to enable it to
comply with such deduction or withholding requirement and shall account to the
relevant Holder for any balance of any such sale proceeds.
If upon the occurrence of an Insolvency event, a non-Canadian resident
Holder instructs the Trustee to exercise the Exchange Right, Sonic shall provide
the Trustee, in cash, with sufficient funds to satisfy any withholding taxes
applicable in connection with the sale of such Holder's Exchangeable Shares to
Sonic, otherwise such exchange shall not have occurred or be deemed to have
occurred. The "fair market value" of the Sonic Common Shares at a particular
date shall, for the purposes of calculating any applicable withholding taxes, be
the Current Market Price or shall be determined by such other method of
valuation which has been recommended or suggested by Revenue Canada as providing
a satisfactory assessment of such fair market value. Prior to making any
distribution to Holders of Exchangeable Shares, Sonic or the Corporation, as the
case may be, shall ensure that the Trustee has access to sufficient funds (by
directly providing, if necessary, such funds to the Trustee) to enable the
Trustee to comply with any applicable withholding taxes in connection with such
distribution.
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ARTICLE 6
CONCERNING THE TRUSTEE
----------------------
6.1 POWERS AND DUTIES OF THE TRUSTEE. The rights, powers and authorities of the
--------------------------------
Trustee under this Agreement, in its capacity as trustee of the Trust, shall
include:
(a) purchasing the Voting Share from Sonic as trustee for and on behalf of
the Holders in accordance with the provisions of this Agreement;
(b) granting proxies and distributing materials to Holders as provided in
this Agreement;
(c) voting the Holder Votes in accordance with the provisions of this
Agreement;
(d) receiving the grant of the Exchange Right and the Automatic Exchange
Rights from Sonic as trustee for and on behalf of the Holders in
accordance with the provisions of this Agreement;
(e) exercising the Exchange Right and enforcing the benefit of the
Automatic Exchange Rights, in each case in accordance with the
provisions of this Agreement and in connection therewith receiving
from Holders Exchangeable Shares and other requisite documents and
distributing to such Holders the Sonic Common Shares and cheques, if
any, to which such Holders are entitled upon the exercise of the
Exchange Right or pursuant to the Automatic Exchange Rights, as the
case may be;
(f) holding title to the Trust Estate:
(g) investing any moneys forming, from time to time, a part of the Trust
Estate as provided in this Agreement;
(h) taking action on its own initiative or at the direction of a Holder or
Holders to enforce the obligations of Sonic under this Agreement; and
(i) taking such other actions and doing such other things as are
specifically provided in this Agreement.
In the exercise of such rights powers and authorities the Trustee shall
have (and is granted) such incidental and additional rights, powers and
authority not in conflict with any of the provisions of this Agreement as the
Trustee, acting in good faith and in the reasonable exercise of its discretion,
may deem
20
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necessary, appropriate or desirable to effect the purpose of the Trust. Any
exercise of such discretionary rights, powers and authorities by the Trustee
shall be final, conclusive and binding upon all persons. For greater certainty,
the Trustee shall have only those duties as are set out specifically in this
Agreement.
The Trustee in exercising its rights, powers, duties and authorities
hereunder shall act honestly and in good faith with a view to the best interests
of the Holders and shall exercise the care, diligence and skill that a
reasonably prudent trustee would exercise in comparable circumstances.
6.2 NO CONFLICT OF INTEREST. The Trustee represents to the Corporation and
-----------------------
Sonic that at the date of execution and delivery of this Agreement there exists
no material conflict of interest in the role of the Trustee as a fiduciary
hereunder and the role of the Trustee in any other capacity. The Trustee shall,
within 30 days after it becomes aware that such a material conflict of interest
exists, either eliminate such material conflict of interest or resign in the
manner and with the effect specified in Article 9 hereof. If, notwithstanding
the foregoing provisions of this section 6.2, the Trustee has such a material
conflict of interest, the validity and enforceability of this Agreement shall
not be affected in any manner whatsoever by reason only of the existence of such
material conflict of interest. If the Trustee contravenes the foregoing
provisions of this section 6.2, any interested party may apply to the Supreme
Court of Ontario (Trial Division) for an order that the Trustee be replaced as
trustee hereunder.
6.3 DEALINGS WITH TRANSFER AGENTS, REGISTRARS, ETC. The Corporation and Sonic
-----------------------------------------------
irrevocably authorize the Trustee, from time to time, to:
(a) consult, communicate and otherwise deal with the respective registrars
and transfer agents, and with any such subsequent registrar or
transfer agent, of the Exchangeable Shares and Sonic Common Shares;
and
(b) requisition, from time to time, (i) from any such registrar or
transfer agent any information readily available from the records
maintained by it which the Trustee may reasonably require for the
discharge of its duties and responsibilities under this Agreement and
(ii) from the transfer agent of Sonic Common Shares, and any
subsequent transfer agent of such shares, the share certificates
issuable upon the exercise from time to time of the Exchange Right and
pursuant to the Automatic Exchange Rights in the manner specified in
Article 5 hereof.
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The Corporation and Sonic irrevocably authorize their respective registrars and
transfer agents to comply with all such requests. Sonic covenants that it will
supply its transfer agent with duly executed share certificates for the purpose
of completing the exercise from time to time of the Exchange Right and the
Automatic Exchange Rights, in each case pursuant to Article 5 hereof.
6.4 BOOKS AND RECORDS. The Trustee shall keep available for inspection by Sonic
-----------------
and the Corporation, at the Trustee's principal office, correct and complete
books and records of account relating to the Trustee's actions under this
Agreement, including without limitation all information relating to mailings and
instructions to and from Holders and all transactions pursuant to the Voting
Rights, the Exchange Right and the Automatic Exchange Rights for the term of
this Agreement. On or before March 31, 1998, and on or before March 31 in every
year thereafter, so long as the Voting Share is on deposit with the Trustee, the
Trustee shall transmit to Sonic and the Corporation a brief report, dated as of
the preceding December 31, with respect to:
(a) the property and funds comprising the Trust Estate as of that date;
(b) the number of exercises of the Exchange Right, if any, and the
aggregate number of Exchangeable Shares received by the Trustee on
behalf of Holders in consideration of the issue and delivery by Sonic
of Sonic Common Shares in connection with the Exchange Right, during
the calendar year ended on such date; and
(c) all other actions taken by the Trustee in the performance of its
duties under this Agreement that it had not previously reported.
6.5 INTENTIONALLY DELETED.
6.6 INDEMNIFICATION PRIOR TO CERTAIN ACTIONS BY TRUSTEE. The Trustee shall
---------------------------------------------------
exercise any or all of the rights, duties, powers or authorities vested in it by
this Agreement at the request, order or direction of any, Holder upon such
Holder furnishing to the Trustee
22
<PAGE>
reasonable funding, security and indemnity against the costs, expenses and
liabilities that may be incurred by the Trustee therein or thereby, provided
that no Holder shall be obligated to furnish to the Trustee any such funding,
security or indemnity in connection with the exercise by the Trustee of any of
its rights, duties, powers and authorities with respect to (i) the Voting Share
pursuant to Article 4 hereof, subject to section 6.15 hereof, (ii) the Exchange
Right pursuant to Article 5 hereof, subject to section 6.15 hereof, and (iii)
the Automatic Exchange Rights pursuant to Article 5 hereof.
None of the provisions contained in this Agreement shall require the
Trustee to expend or risk its own funds or otherwise incur financial liability
in the exercise of any of its rights, powers, duties or authorities unless
funded and given security and indemnity as aforesaid.
6.7 ACTIONS BY HOLDERS. No Holder shall have the right to institute any action,
------------------
suit or proceeding or to exercise any other remedy authorized by this Agreement
for the purpose of enforcing any of its rights or for the execution of any trust
or power hereunder unless the Holder has requested the Trustee to take or
institute such action, suit or proceeding and furnished the Trustee with the
funding, security and indemnity referred to in section 6.6 hereof and the
Trustee shall have failed to act within a reasonable time thereafter. In such
case, but not otherwise, the Holder shall be entitled to take proceedings in any
court of competent jurisdiction such as the Trustee might have taken, it being
understood and intended that no one or more Holders shall have any right in any
manner whatsoever to affect, disturb or prejudice the rights hereby created by
any such action, or to enforce any right hereunder or under the Voting Rights,
the Exchange Right or the Automatic Exchange Rights except subject to the
conditions and in the manner herein provided, and that all powers and trusts
hereunder shall be exercised and all proceedings at law shall be instituted, had
and maintained by the Trustee, except only as herein provided, and in any event
for the equal benefit of all Holders.
6.8 RELIANCE UPON DECLARATIONS. The Trustee shall not be considered to be in
--------------------------
contravention of any of its rights, powers duties and authorities hereunder if,
when required, it acts and relies in good faith upon lists, mailing labels,
notices, statutory declarations, certificates, opinions, reports or other papers
or documents furnished pursuant to the provisions hereof or required by the
Trustee to be furnished to it in the exercise of its rights, powers, duties and
authorities hereunder and such lists, mailing labels, notices, statutory
declarations, certificates, opinions, reports or other papers or documents
comply with the provisions of section 6.9 hereof, if applicable, and with any
other applicable provisions of this Agreement.
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6.9 EVIDENCE AND AUTHORITY TO TRUSTEE. The Corporation and/or Sonic shall
---------------------------------
furnish to the Trustee evidence of compliance with the conditions provided for
in this Agreement relating to any action or step required or permitted to be
taken by the Corporation and/or Sonic or the Trustee under this Agreement or as
a result of any obligation imposed under this Agreement, including, without
limitation, in respect of the Voting Rights, the Exchange Right or the Automatic
Exchange Rights and the taking of any other action to be taken by the Trustee at
the request of or on the application of the Corporation and/ Sonic forthwith if
and when:
(a) such evidence is required by any other section of this Agreement to be
furnished to the Trustee in accordance with the terms of this section
6.9; or
(b) the Trustee, in the exercise of its rights, powers, duties and
authorities under this Agreement, gives the Corporation and/or Sonic
written notice requiring it to furnish such evidence in relation to
any particular action or obligation specified in such notice.
Such evidence shall consist of an Officer's Certificate of the Corporation
and/or Sonic or a statutory declaration or a certificate made by persons
entitled to sign an Officer's Certificate stating that any such condition has
been complied with in accordance with the terms of this Agreement.
Whenever such evidence relates to a matter other than the Voting Rights,
the Exchange Right or the Automatic Exchange Rights, and except as otherwise
specifically provided herein, such evidence may consist of a report or opinion
of any solicitor, auditor, accountant, appraiser, valuer, engineer or other
expert or any other person whose qualifications give authority to a statement
made by him, provided that if such report or opinion is furnished by a director,
officer or employee of the Corporation and/or Sonic it shall be in the form of
an Officer's Certificate or a statutory declaration.
Each statutory declaration, certificate, opinion or report furnished to the
Trustee as evidence of compliance with a condition provided for in this
Agreement shall include a statement by the person giving the evidence:
(a) declaring that he has read and understands the provisions of this
Agreement relating to the condition in question;
(b) describing the nature and scope of the examination or investigation
upon which he based the statutory declaration, certificate, statement
or opinion; and
24
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(c) declaring that he has made such examination or investigation as he
believes is necessary to enable him to make the statements or give the
opinions contained or expressed therein.
6.10 EXPERTS, ADVISERS AND AGENTS.
----------------------------
The Trustee may:
(a) in relation to this Agreement act and rely on the opinion or advice of
or information obtained from any solicitor, auditor, accountant,
appraiser, valuer, engineer or other expert, whether retained by the
Trustee or by the Corporation and/or Sonic or otherwise, and may
employ such assistants as may be necessary to the proper discharge of
its powers and duties and determination of its rights hereunder and
may pay proper and reasonable compensation for all such legal and
other advice or assistance as aforesaid; and
(b) employ such agents and other assistants as it may reasonably require
for the proper discharge of its powers and duties hereunder, and may
pay reasonable remuneration for all services performed for it in the
discharge of the trusts hereof and compensation for all disbursements,
costs and expenses made or incurred by it in the discharge of its
duties hereunder and in the management of the Trust.
6.11 INVESTMENT OF MONEYS HELD BY TRUSTEE. Unless otherwise provided in this
------------------------------------
Agreement, any moneys held by or on behalf of the Trustee that under the terms
of this Agreement may or ought to be invested or which may be on deposit with
the Trustee or that may be in the hands of the Trustee may be invested and
reinvested in the name or under the control of the Trustee in securities in
which, under the laws of Canada, trustees are authorized to invest trust moneys,
provided that such securities are stated to mature within two years after their
purchase by the Trustee, and are invested in such specific securities as
directed in writing by the Corporation and Sonic. Pending the receipt of any
direction and investment of any moneys as hereinbefore provided, such moneys may
be deposited in the name of the Trustee in an interest-bearing account at The
Bank of Montreal or, with the consent of the Corporation, in the deposit
department of the Trustee at the rate of interest then current on similar
deposits.
6.12 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, rights,
duties, powers and authorities of this Agreement.
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6.13 TRUSTEE NOT BOUND TO ACT ON CORPORATION'S REQUEST. Except as in this
-------------------------------------------------
Agreement otherwise specifically provided, the Trustee shall not be bound to act
in accordance with any direction or request of the Corporation and/or Sonic or
of the directors thereof until a duly authenticated copy of the instrument or
resolution containing such direction or request shall have been delivered to the
Trustee, and the Trustee shall be empowered to act and rely upon any such copy
purporting to be authenticated and believed by the Trustee to be genuine.
6.14 AUTHORITY TO CARRY ON BUSINESS. The Trustee represents to the Corporation
------------------------------
and Sonic that at the date of execution and delivery by it of this Agreement it
is authorized to perform its obligations pursuant to this Agreement under all
applicable laws but if, notwithstanding the provisions of this section 6.14, it
ceases to be so authorized, the validity and enforceability of this Agreement
and the Voting Rights, the Exchange Right and the Automatic Exchange Rights
shall not be affected in any manner whatsoever by reason only of such event but
the Trustee shall, within 30 days after ceasing to be so authorized, either
become so authorized or resign in the manner and with the effect specified in
Article 9 hereof.
6.15 CONFLICTING CLAIMS. If conflicting claims or demands are made or asserted
------------------
with respect to any interest of any Holder in any Exchangeable Shares, including
any disagreement between the heirs, representatives successors or assigns
succeeding to all or any part of the interest of any Holder in any Exchangeable
Shares resulting in conflicting claims or demands being made in connection with
such interest, then the Trustee shall be entitled, at its sole discretion, to
refuse to recognize or to comply with any such claim or demand. In so refusing,
the Trustee may elect not to exercise any Voting Rights, Exchange Right or
Automatic Exchange Rights subject to such conflicting claims or demands and, in
so doing, the Trustee shall not be or become liable to any person on account of
such election or its failure or refusal to comply with any such conflicting
claims or demands. The Trustee shall be entitled to continue to refrain from
acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to the Voting Rights,
Exchange Right or Automatic Exchange Rights subject to such
conflicting claims or demands have been adjudicated by a final
judgment of a court of competent jurisdiction; or
(b) all differences with respect to the Voting Rights, Exchange Right or
Automatic Exchange Rights subject to such conflicting claims or
demands have been conclusively settled by a valid written agreement
binding on all such adverse claimants, and the Trustee shall have been
furnished with an executed copy of such agreement.
26
<PAGE>
If the Trustee elects to recognize any claim or comply with any demand made by
any such adverse claimant, it may in its discretion require such claimant to
furnish such surety bond or other security satisfactory to the Trustee as it
shall deem appropriate fully to indemnify it as between all conflicting claims
or demands.
6.16 ACCEPTANCE OF TRUST. The Trustee hereby accepts the Trust created and
-------------------
provided for by and in this Agreement and agrees to perform the same upon the
terms and conditions herein set forth and to hold all rights, privileges and
benefits conferred hereby and by law in trust for the various persons who shall
from time to time be Holders, subject to all the terms and conditions herein set
forth.
6.17 NOTICE TO TRUSTEE. 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 to do so under the terms of
this Agreement; nor shall the Trustee be required to take notice of, be deemed
to have actual or constructive notice or knowledge of any matter under this
Agreement, or take any action in connection with any notice of any Sonic Meeting
or the seeking of any Sonic Consent or any prohibition of the Corporation
against redeeming any Retracted Shares as set out in Section 5.6 of the
Exchangeable Share Provisions or of any Insolvency Event or Liquidation Event as
set out in Article 5 of this Agreement, respectively (collectively, a "Notice
Event"), unless and until notified in writing of such Notice Event in accordance
with this Agreement, which notice shall distinctly specify the Notice Event
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 Agreement conclusively
assume that no such Notice Event has occurred.
6.18 MERGER OR CONSOLIDATION OF TRUSTEE. Any corporation into or which the
----------------------------------
Trustee may be merged or consolidated or amalgamated, or any corporation
resulting therefrom to which the Trustee may be a party, or any corporation
succeeding to the trust business of the Trustee shall be the successor to the
Trustee under this Agreement without any further act on its part or any of the
parties hereto, provided that such corporation would be eligible for appointment
as a successor trustee under the provisions of this Agreement.
6.19 NO PERSONAL LIABILITY. In the exercise of the powers, authorities or
---------------------
discretion conferred upon the Trustee under this Agreement, the Trustee is and
shall be conclusively deemed to be acting as trustee of the Trust and shall not
be subject to any personal liability for any of the liabilities, obligations,
claims, demands, judgments, costs or expenses against or with respect to the
Trust.
6.20 INCUMBENCY CERTIFICATE. Each of the Corporation and Sonic
----------------------
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shall file with the Trustee a certificate of incumbency setting forth the names
of the individuals authorized to give instructions, directions or other
instruments to the Trustee ("Authorized Persons"), together with specimen
signatures of such persons, and the Trustee shall be entitled to rely on the
latest certificate of incumbency filed with it unless it receives notice, in
accordance with Section 13.3, of a change in Authorized Persons with updated
specimen signatures.
ARTICLE 7
COMPENSATION
------------
7.1 FEES AND EXPENSES OF THE TRUSTEE. Sonic and the Corporation jointly and
--------------------------------
severally agree to pay to the Trustee reasonable compensation for all of the
services rendered by it under this Agreement and will reimburse the Trustee for
all reasonable expenses and disbursements, including the cost and expense of any
suit or litigation of any character and any proceedings before any governmental
agency reasonably incurred by the Trustee in connection with its rights and
duties under this Agreement; provided that Sonic and the Corporation shall have
no obligation to reimburse the Trustee for any expenses or disbursements paid,
incurred or suffered by the Trustee in any suit or litigation in which the
Trustee is determined to have acted fraudulently, in bad faith or with gross
negligence or wilful misconduct.
28
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ARTICLE 8
INDEMNIFICATION AND LIMITATION OF LIABILITY
-------------------------------------------
8.1 INDEMNIFICATION OF THE TRUSTEE. Sonic and the Corporation jointly and
------------------------------
severally agree to indemnify and hold harmless the Trustee and each of its
directors, officers, employees and agents appointed and acting in accordance
with this Agreement (collectively the "Indemnified Parties") against all claims,
losses, damages, costs, penalties, fines and reasonable expenses (including
reasonable expenses of the Trustee's legal counsel) which, without fraud, gross
negligence, willful misconduct or bad faith on the part of such Indemnified
Party, may be paid, incurred or suffered by the Indemnified Party by reason of
or as a result of the Trustee's acceptance or administration of the Trust, its
compliance with its duties set forth in this Agreement, or any written or oral
instructions delivered to the Trustee by Sonic or the Corporation pursuant
hereto. In no case shall Sonic or the Corporation be liable under this indemnity
for any claim against any of the Indemnified Parties unless Sonic and the
Corporation shall be notified by the Trustee of the written assertion of a claim
or of any action commenced against the Indemnified Parties, promptly after any
of the Indemnified Parties shall have received any such written assertion of a
claim or shall has been served with a summons or other first legal process
giving information as to the nature and basis of the claim. Subject to (ii),
below, Sonic and the Corporation shall be entitled to participate at their own
expense in the defense and, if Sonic or the Corporation so elect at any time
after receipt of such notice, either of them may assume the defense of any suit
brought to enforce any such claim. The Trustee shall have the right to employ
separate counsel in any such suit and participate in the defense thereof but the
fees and expenses of such counsel shall be at the expense of the Trustee unless:
(i) the employment of such counsel has been authorized by Sonic or the
Corporation or (ii) the named parties to any such suit include both the Trustee
and Sonic or the Corporation and the Trustee shall have been advised by counsel
acceptable to Sonic or the Corporation that there may be one or more legal
defenses available to the Trustee that are different from or in addition to
those available to Sonic or the Corporation and that an actual or potential
conflict of interest exists (in which case Sonic and the Corporation shall not
have the right to assume the defense of such suit on behalf of the Trustee but
shall be liable to pay the reasonable fees and expenses of counsel for the
Trustee).
8.2 LIMITATION OF LIABILITY. The Trustee shall not be held liable for any loss
-----------------------
that may occur by reason of depreciation of the value of any part of the Trust
Estate or any loss incurred on any investment of funds pursuant to this
Agreement, except to the extent that such loss is attributable to the fraud,
gross negligence, willful misconduct or bad faith on the part of the Trustee.
29
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ARTICLE 9
CHANGE OF TRUSTEE
-----------------
9.1 RESIGNATION. The Trustee, or any trustee hereafter appointed, may at any
-----------
time resign by giving written notice of such resignation to Sonic and the
Corporation specifying the date on which it desires to resign, provided that
such notice shall never be given less than 60 days before such desired
resignation date unless Sonic and the Corporation otherwise agree and provided
further that such resignation shall not take effect until the date of the
appointment of a successor trustee and the acceptance of such appointment by the
successor trustee. Upon receiving such notice of resignation, Sonic and the
Corporation shall promptly appoint a successor trustee by written instrument in
duplicate, one copy of which shall be delivered to the resigning trustee and one
copy to the successor trustee. Failing acceptance by a successor trustee, a
successor trustee may be appointed by an order of the Supreme Court of Ontario
(Trial Division) upon application of one or more of the parties hereto.
9.2 REMOVAL. The Trustee, or any trustee hereafter appointed, may be removed
-------
with or without cause, at any time on 60 days' prior notice by written
instrument executed by Sonic and the Corporation, in duplicate, one copy of
which shall be delivered to the trustee so removed and one copy to the successor
trustee.
9.3 SUCCESSOR TRUSTEE. Any successor trustee appointed as provided under this
-----------------
Agreement shall execute, acknowledge and deliver to Sonic and the Corporation
and to its predecessor trustee an instrument accepting such appointment.
Thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor under this Agreement, with like effect as if
originally named as trustee in this Agreement. However, on the written request
of Sonic and the Corporation or of the successor trustee, the trustee ceasing to
act shall, upon payment of any amounts then due it pursuant to the provisions of
this Agreement, execute and deliver an instrument transferring to such successor
trustee all the rights and powers of the trustee so ceasing to act. Upon the
request of any such successor trustee, Sonic, the Corporation and such
predecessor trustee shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor trustee all such
rights and powers.
9.4 NOTICE OF SUCCESSOR TRUSTEE. Upon acceptance of appointment by a successor
---------------------------
trustee as provided herein, Sonic and the Corporation shall cause to be mailed
notice of the succession of such trustee hereunder to each Holder specified in a
List. If Sonic or the
30
<PAGE>
Corporation shall fail to cause such notice to be mailed within 10 days after
acceptance of appointment by the successor trustee, the successor trustee shall
cause such notice to be mailed at the expense of Sonic and the Corporation.
ARTICLE 10
SONIC SUCCESSORS
----------------
10.1 CERTAIN REQUIREMENTS IN RESPECT OF COMBINATION. ETC. Sonic shall not enter
----------------------------------------------------
into any transaction (whether by way of reconstruction, reorganization,
consolidation, merger, transfer, sale, lease or otherwise) whereby all or
substantially all of its undertaking, property and assets would become the
property of any other person or, in the case of a merger, of the continuing
corporation resulting therefrom, unless:
(a) such other person or continuing corporation is a corporation (herein
called the "Sonic Successor") incorporated under the laws of any state
of the United States or the laws of Canada or any province thereof;
and
(b) Sonic Successor, by operation of law, becomes, without more, bound by
the terms and provisions of this Agreement or, if not so bound,
executes, prior to or contemporaneously with the consummation of such
transaction an agreement supplemental hereto and such other
instruments (if any) as are satisfactory to the Trustee acting
reasonably to evidence the assumption by Sonic Successor of liability
for all moneys payable and property deliverable hereunder and the
covenant of such Sonic Successor to pay and deliver or cause to be
delivered the same and its agreement to observe and perform all the
covenants and obligations of Sonic under this Agreement.
10.2 VESTING OF POWERS IN SUCCESSOR. Whenever the conditions of section 10.1
------------------------------
hereof have been duly observed and performed, the Trustee, if required, by
section 10.1 hereof, Sonic Successor and the Corporation shall execute and
deliver the supplemental agreement provided for in Article 11 hereof and
thereupon Sonic Successor shall possess and from time to time may exercise each
and every right and power of Sonic under this Agreement in the name of Sonic or
otherwise and any act or proceeding by any provision of this Agreement required
to be done or performed by the board of directors of Sonic or any officers of
Sonic may be done and performed with like force and effect by the directors or
officers of such Sonic Successor.
10.3 WHOLLY-OWNED SUBSIDIARIES. Nothing herein shall be construed
-------------------------
31
<PAGE>
as preventing the amalgamation or merger of any wholly-owned subsidiary of Sonic
with or into Sonic.
ARTICLE 11
AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS
--------------------------------------------
11.1 AMENDMENTS, MODIFICATIONS, ETC. This Agreement may not be amended or
-------------------------------
modified except by an agreement in writing executed by the Corporation, Sonic
and the Trustee and approved by the Holders in accordance with section 8.2 of
the Exchangeable Share Provisions.
11.2 MINISTERIAL AMENDMENTS. Notwithstanding the provisions of section 11.1
----------------------
hereof, the parties to this Agreement may in writing, at any time and from time
to time, without the approval of the Holders, amend or modify this Agreement for
the purposes of:
(a) adding to the covenants of any or all of the parties hereto for the
protection of the Holders hereunder;
(b) making such amendments or modifications not inconsistent with this
Agreement as may be necessary or desirable with respect to matters or
questions that, in the opinion of the Board of Directors of each of
Sonic and Corporation and in the opinion of the Trustee, on the advice
of counsel having in mind the best interests of the Holders as a
whole, such amendments and modifications will not be prejudicial to
the interests of the Holders as a whole; or
(c) making such changes or corrections required for the purpose of curing
or correcting any ambiguity or defect or inconsistent provision or
clerical omission or mistake or manifest error, provided that the
Trustee and the Board of Directors of each of the Corporation and
Sonic shall be of the opinion, on the advice of counsel, that such
changes or corrections will not be prejudicial to the interests of the
Holders as a whole.
11.3 MEETING TO CONSIDER AMENDMENTS. The Corporation, at the request of Sonic,
------------------------------
shall call a meeting or meetings of the Holders for the purpose of considering
any proposed amendment or modification requiring approval pursuant hereto. Any
such meeting or meetings shall be called and held in accordance with the by-laws
of the Corporation, the Exchangeable Share Provisions and all applicable laws.
11.4 CHANGES IN CAPITAL OF SONIC AND THE CORPORATION. Notwithstanding section
-----------------------------------------------
11.1, at all times after the occurrence of any Sonic Common Share Reorganization
or Capital Reorganization (as
32
<PAGE>
such terms are respectively defined in the Exchangeable Share Provisions) or
other change in either the Sonic Common Shares or the Exchangeable Shares or
both, this Agreement shall forthwith be amended and modified as necessary in
order that it shall apply with full force and effect, mutatis mutandis, to all
new securities into which orbital Common Shares or the Exchangeable Shares or
both are so changed and the parties hereto shall execute and deliver a
supplemental agreement giving effect to and evidencing such necessary amendments
and modifications.
11.5 EXECUTION OF SUPPLEMENTAL TRUST AGREEMENTS. Notwithstanding section 11.1,
------------------------------------------
from time to time the Corporation (when authorized by a resolution of the Board
of Directors), Sonic (when authorized by a resolution of its board of directors)
and the Trustee may, subject to the provisions hereof, and they shall, when so
directed by these presents, execute and deliver by their proper officers,
Agreements or other instruments supplemental hereto, which thereafter shall form
part hereof, for any one or more of the following purposes:
(a) evidencing the succession of Sonic Successors to Sonic and the
covenants of and obligations assumed by each such Sonic Successor in
accordance with the provisions of Article 10 and the succession of any
successor trustee in accordance with the provisions of Article 9;
(b) making any additions to, deletions from or alterations of the
provisions of this Agreement or the Voting Rights, the Exchange Right
or the Automatic Exchange Rights that, in the opinion of counsel to
the Trustee are necessary or advisable in order to incorporate,
reflect or comply with any legislation the provisions of which apply
to Sonic, the Corporation, the Trustee or this Agreement; and
(c) for any other purposes not inconsistent with the provisions of this
Agreement including, without limitation, to make or evidence any
amendment or modification to this Agreement as contemplated hereby,
provided that, in the opinion of the Trustee, on the advice of
counsel, the rights of the Trustee and the Holders as a whole will not
be prejudiced thereby.
ARTICLE 12
TERMINATION
12.1 TERM. The Trust created by this Agreement shall continue until the
----
earliest to occur of the following events:
(a) no outstanding Exchangeable Shares are held by any Holder;
33
<PAGE>
(b) each of the Corporation and Sonic elects in writing to terminate the
Trust and such termination is approved by the Holders of the
Exchangeable Shares in accordance with Section 8.2 of the Exchangeable
Share Provisions;
(c) 21 years after the death of the last survivor of the descendants of
His Majesty King George VI of the United Kingdom of Great Britain and
Northern Ireland living on the date of the creation of the Trust; and
(d) the agreement between the Trustee and the Corporation in respect to
registrar and transfer agency services for the Corporation is
terminated.
12.2 SURVIVAL. The provisions of Article 7 and 8 hereof shall survive any
--------
termination of the Trust pursuant to section 12.1.
ARTICLE 13
GENERAL
-------
13.1 SEVERABILITY. If any provision of this Agreement is held to be invalid,
------------
illegal or unenforceable, the validity, legality or enforceability of the
remainder of this Agreement shall not in any way be affected or impaired thereby
and this Agreement shall he carried out as nearly as possible in accordance with
its original terms and conditions; provided, however, that if the provision or
provisions so held to be invalid, in the reasonable judgment of the parties, is
or are so fundamental to the intent of the parties and the operation of this
Agreement that the enforcement of the other provisions hereof, in the absence of
such invalid provision or provisions, would damage irreparably the intent of the
parties in entering into this Agreement, the parties shall agree (i) to
terminate this Agreement, or (ii) to amend or otherwise modify this Agreement so
as to carry out the intent and purposes hereof and the transactions contemplated
hereby.
13.2 INUREMENT. This Agreement shall be binding upon and inure to the benefit
---------
of the parties hereto and their respective successors and permitted assigns and
to the benefit of the Holders.
13.3 NOTICES TO PARTIES. All notices and other communications between the
------------------
parties hereunder shall be in writing and shall be deemed to have been given if
delivered personally or by confirmed telecopy to the parties at the following
addresses (or at such other address for such party as shall be specified in like
notice):
(a) if to Sonic at:
Sonic Environmental Systems, Inc.
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<PAGE>
11 Melanie Lane
Suite 22A
East Hanover, New Jersey 07936
Attention: Richard H. Hurd
(b) if to the Corporation at:
Sonic Canada, Inc.
c/o Turbotak Technologies, Inc.
550 Parkside Drive
Suite A-14
Waterloo, Ontario N2L 5V4 Canada
Attention: Patrick Forde, Vice President
(c) if to the Trustee at:
The Trust Company of Bank of Montreal
Suite 5104, 1 First Canadian Place
Toronto, Ontario M5X 1A1
Attention: Trust Officer
Telecopy No. (416) 867-6264
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of receipt thereof unless
such day is not a Business Day in which case it shall be deemed to have been
given and received upon the immediately following Business Day.
13.4 NOTICE TO HOLDERS. Any and all notices to be given and any documents to be
-----------------
sent to any Holders may be given or sent to the address of such Holder shown on
the register of Holders in any manner permitted by the by-laws of the
Corporation from time to time in force in respect of notices to shareholders and
shall be deemed to be received (if given or sent in such manner) at the time
specified in such by-laws, the provisions of which bylaws shall apply mutatis
mutandis to notices or documents as aforesaid sent to such Holders.
13.5 RISK OF PAYMENTS BY POST. Whenever payments are to be made or documents are
------------------------
to be sent to any Holder by the Trustee or by the Corporation, or by such Holder
to the Trustee or to Sonic or the Corporation, the making of such payment or
sending of such document sent through the post shall be at the risk of the
Corporation, in the case of payments made or documents sent by the Trustee or
the Corporation, and the Holder, in the case of payments made or documents sent
by the Holder.
13.6 COUNTERPARTS. This Agreement may be executed in counterparts, each of which
------------
shall be deemed an original, but all of which taken
35
<PAGE>
together shall constitute one and the same instrument.
13.7 JURISDICTION. This Agreement shall be construed and enforced in accordance
------------
with the laws of the Province of Ontario and the laws of Canada applicable
therein.
36
<PAGE>
13.8 ATTORNMENT. Sonic agrees that any action or proceeding arising out of or
----------
relating to this Agreement may be instituted in the courts of Ontario, waives
any objection which it may have now or hereafter to the venue of any such action
or proceeding, irrevocably submits to the jurisdiction of the said court in any
such action or proceeding, agrees to be bound by any judgment of the said courts
and agrees not to seek, and hereby waives, any review of the merits of any such
judgment by the courts of any other jurisdiction and hereby appoints the
Corporation at its registered office in the Province of Ontario as Sonic's
attorney for service of process.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed the day and year first above written.
ATTEST: SONIC ENVIRONMENTAL SYSTEMS, INC.
_____________________ By: _____________________________
ATTEST: SONIC CANADA, INC.
_____________________ By: ______________________________
ATTEST: THE TRUST COMPANY OF BANK OF MONTREAL
_____________________ By: ______________________________
37
<PAGE>
SCHEDULE A
NOTICE OF EXERCISE OF EXCHANGE RIGHT
------------------------------------
TO: The Trust Company of Bank of Montreal
Corporate Trust Department
Suite 5104
1 First Canadian Place
Toronto, Ontario M5X 1A1
RE: VOTING AND EXCHANGE TRUST AGREEMENT BETWEEN SONIC ENVIRONMENTAL SYSTEMS,
INC. (NOW KNOWN AS TURBOSONIC TECHNOLOGIES, INC. ("SONIC")), SONIC CANADA,
INC. (THE "CORPORATION"), AND THE TRUST COMPANY OF BANK OF MONTREAL, AS
TRUSTEE (THE "TRUST AGREEMENT").
The undersigned holder of Exchangeable Shares instructs The Trust Company
of Bank of Montreal (the "Trustee") to exercise the Exchange Right in accordance
with Section 5.5 of the Trust Agreement so as to require the Corporation to
purchase from the undersigned Exchangeable Shares and to issue and deliver
certificates representing Sonic Common Shares as follows:
Name in full:
------------------------------------------------------
(Please state full names in which certificates are to be issued)
Address in full:
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
Number of
Exchangeable Shares:
------------------------------------------------------
The undersigned hereby represents and warrants as follows:
(i) the undersigned has good title to and owns all such Exchangeable Shares to
be acquired by the Corporation free and clear of all liens, claims and
encumbrances.
(ii) the undersigned shall pay any documentary, stamp, transfer or other taxes
that may be payable in respect of any transfer involved in the issuance or
delivery of shares.
38
<PAGE>
All capitalized terms not defined herein shall have the meanings ascribed to
them in the Voting and Exchange Trust Agreement.
DATED this day of , 1997.
-----------------------------
Name
-----------------------------
Signature
39
<PAGE>
SCHEDULE B
NOTICE OF EXERCISE OF EXCHANGE RIGHT
------------------------------------
To Sonic Canada, Inc. (the "Corporation") and TurboSonic Technologies, Inc.
("Sonic")
This notice is given pursuant to Section 5.6 of the Voting and Exchange
Trust Agreement (the "Trust Agreement") between Sonic Environmental Systems,
Inc. (now known as TurboSonic Technologies, Inc. ("Sonic")), Sonic Canada, Inc.
and The Trust Company of Bank of Montreal, as Trustee (the "Trust Agreement").
All capitalized words and expressions used in this notice that are defined in
the Trust Agreement have the meanings ascribed to such words and expressions in
such Trust Agreement.
The Trustee hereby notifies Sonic that it is exercising the Exchange Right
on behalf of the Holder of the Exchangeable Shares referred to in the notice
received from such Holder, a copy of which is attached hereto (the "Holder
Notice"). Please issue the Sonic Common Shares issuable in connection with the
exercise of the Exchange Right in accordance with the instructions set forth in
the attached Holder Notice.
THE TRUST COMPANY OF BANK OF MONTREAL
By: _____________________________________
Name:
Title:
Date:________________
40
<PAGE>
EXHIBIT 2.4
SUPPORT AGREEMENT
-----------------
MEMORANDUM OF AGREEMENT made as of the 27th day of August, 1997, between
SONIC ENVIRONMENTAL SYSTEMS, INC., a Delaware corporation ("Sonic"), and SONIC
CANADA, INC., an Ontario corporation (the "Corporation").
W I T N E S S E T H :
WHEREAS pursuant to a combination agreement dated as of July 1, 1997 (the
"Combination Agreement") by and between Sonic, the Corporation and Turbotak
Technologies, Inc. ("Turbotak") the parties agreed that on the Effective Date
(as defined in the Combination Agreement), Sonic and the Corporation would
execute and deliver a Support Agreement containing the terms and conditions set
forth in Exhibit 2.3 to the Combination Agreement together with such other terms
and conditions as may be agreed to by the parties to the Combination Agreement
acting reasonably;
AND WHEREAS pursuant to an arrangement (the "Arrangement") effected by
articles of arrangement to be filed pursuant to the Ontario Business
Corporations Act, each issued and outstanding Common Share of Turbotak (a
"Turbotak Common Share") and each issued and outstanding Class B Share of
Turbotak (a "Turbotak Class B Share") is being exchanged directly or indirectly
with the Corporation for 4.2303 issued and outstanding Exchangeable Shares of
the Corporation (the "Exchangeable Shares");
AND WHEREAS the aforesaid articles of arrangement set forth the rights,
privileges, restrictions and conditions (collectively the "Exchangeable Share
Provisions") attaching to the Exchangeable Shares;
AND WHEREAS the parties hereto desire to make appropriate provision and to
establish a procedure whereby Sonic will take certain actions and make certain
payments and deliveries necessary to ensure that the Corporation will be able to
make certain payments and to deliver or cause to be delivered shares of Sonic
Common Shares in satisfaction of the obligations of the Corporation under the
Exchangeable Share Provisions with respect to the payment and satisfaction of
dividends, Liquidation Amounts, Retraction Prices and Redemption Prices all in
accordance with the Exchangeable Share Provisions;
NOW THEREFORE in consideration of the respective covenants in this
agreement and for other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), the parties agree as follows:
<PAGE>
ARTICLE 1
DEFINITIONS AND INTERPRETATION
------------------------------
1.1 DEFINED TERMS. Each term denoted herein by initial capital letters and not
-------------
otherwise defined herein shall have the meaning ascribed thereto in the
Exchangeable Share Provisions, unless the context requires otherwise.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC. The division of this
---------------------------------------------
agreement into articles, sections and paragraphs and the insertion of headings
are for convenience of reference only and shall not affect the construction or
interpretation of this agreement.
1.3 NUMBER, GENDER, ETC. Words importing the singular number only shall
--------------------
include the plural and vice versa. Words importing the use of any gender shall
include all genders.
1.4 DATE FOR ANY ACTION. If any date on which any action is required to be
-------------------
taken under this agreement is not a Business Day. such action shall be required
to be taken on the next succeeding Business Day.
ARTICLE 2
COVENANTS OF SONIC AND THE CORPORATION
--------------------------------------
2.1 COVENANTS OF SONIC REGARDING EXCHANGEABLE SHARES. So long as any
------------------------------------------------
Exchangeable Shares are outstanding, Sonic will:
(a) not declare or pay any dividend on Sonic Common Shares unless (i) the
Corporation shall have sufficient assets, funds and other property
(including, where applicable, Sonic Common Shares or other securities
of Sonic) available to enable the due declaration and the due and
punctual payment in accordance with applicable law, of an equivalent
dividend on the Exchangeable Shares in accordance with the
Exchangeable Share Provisions and (ii) the Corporation shall
simultaneously declare or pay, as the case may be, an equivalent
dividend on the Exchangeable Shares in accordance with the
Exchangeable Share Provisions;
(b) cause the Corporation to declare simultaneously with the declaration
of any dividend on Sonic Common Shares an equivalent dividend on the
Exchangeable Shares and, when such dividend is paid on Sonic Common
Shares, cause the Corporation to pay simultaneously therewith such
equivalent dividend on the Exchangeable Shares, in each
2
<PAGE>
case in accordance with the Exchangeable Share Provisions;
(c) advise the Corporation sufficiently in advance of the declaration by
Sonic of any dividend on Sonic Common Shares and take all such other
actions as are necessary, in cooperation with the Corporation, to
ensure that the declaration date, record date and payment date for any
dividend on the Exchangeable Shares shall be the same as the record
date, declaration date and payment date for the corresponding dividend
on Sonic Common Shares and such dates in respect of dividends on the
Exchangeable Shares shall be in accordance with any requirement of the
Exchangeable Share Provisions and the stock exchange n which the
Exchangeable Shares are listed;
(d) ensure that the record date for any dividend declared on Sonic Common
Shares, Sonic Common Share Reorganization, Rights Offering, Special
Distribution or Capital Reorganization is not less than 10 Business
Days after the declaration date for such dividend, Sonic Common Share
Reorganization, Rights Offering, Special Distribution or Capital
Reorganization;
(e) take all such actions and do all such things as are necessary or
desirable to enable and permit the Corporation, in accordance with
applicable law, to pay and otherwise perform its obligations with
respect to the satisfaction of the Liquidation Amount in respect of
each issued and outstanding Exchangeable Share upon the liquidation,
dissolution or winding-up of the Corporation, including without
limitation all such actions and all such things as are necessary or
desirable to enable and permit the Corporation to cause to be
delivered shares of Sonic Common Shares to the holders of Exchangeable
Shares in satisfaction of the Liquidation Amount for each such
Exchangeable Share, in accordance with the provisions of Article 4 of
the Exchangeable Share Provisions:
(f) take all such actions and do all such things as are necessary or
desirable to enable and permit the Corporation, in accordance with
applicable law, to pay and otherwise perform its obligations with
respect to the satisfaction of the Retraction Price and the Redemption
Price, including without limitation all such actions and all such
things as are necessary or desirable to enable and permit the
Corporation to cause to be delivered shares of Sonic Common Shares to
the holders of Exchangeable Shares, upon the retraction or redemption
of the Exchangeable Shares in accordance with the provisions
3
<PAGE>
of Article 5 or Article 6 of the Exchangeable Share Provisions, as the
case may be;
(g) not exercise its vote as a shareholder of the Corporation to initiate,
consent to or approve the voluntary liquidation, dissolution or
winding-up of the Corporation nor take any action or omit to take any
action that is designed to result in the liquidation, dissolution or
winding-up of the Corporation; and
(h) not exercise its vote as a shareholder of the Corporation to authorize
the continuance or other transfer of the corporate existence of the
Corporation to any jurisdiction outside Canada
2.2 SEGREGATION OF FUNDS. Sonic will cause the Corporation to deposit a
--------------------
sufficient amount of funds in a separate account and segregate a sufficient
amount of such assets and other property as is necessary to enable the
Corporation to pay or otherwise satisfy the applicable dividends, Liquidation
Amount, Retraction Price or Redemption Price, in each case for the benefit of
holders from time to time of the Exchangeable Shares, and will cause the
Corporation to use such funds, assets and other property so segregated
exclusively for the payment of dividends and the payment or other satisfaction
of the Liquidation Amount, the Retraction Price or the Redemption Price, as
applicable, in each case in accordance with the Exchangeable Share Provisions.
2.3 RESERVATION OF SHARES OF SONIC COMMON SHARES. Sonic hereby represents and
--------------------------------------------
warrants that it has irrevocably reserved for issuance out of its authorized and
unissued capital stock such number of Sonic Common Shares as is equal to the
number of Exchangeable Shares outstanding immediately following the Effective
Date and covenants that at all times in the future while any Exchangeable Shares
are outstanding it will keep available, free from pre-emptive and other rights,
out of its authorized and unissued capital stock such number of Sonic Common
Shares (or other shares or securities into which Sonic Common Shares may be
reclassified or changed) as is necessary to enable Sonic and the Corporation to
perform their respective obligations pursuant to this agreement, the
Exchangeable Share Provisions and the Voting and Exchange Trust Agreement.
2.4 NOTIFICATION OF CERTAIN EVENTS. In order to assist Sonic to comply with its
------------------------------
obligations hereunder, the Corporation will give, or cause the Transfer Agent to
give, Sonic notice of each of the following events at the time set forth below:
(a) in the event of any determination by the Board of Directors of the
Corporation to institute voluntary liquidation, dissolution or winding
up proceedings with respect to the Corporation or to effect any other
4
<PAGE>
distribution of the assets of the Corporation among its shareholders
for the purpose of winding up its affairs at least 60 days prior to
the proposed effective date of such liquidation dissolution, winding
up or other distribution;
(b) immediately, upon the earlier of (i) receipt by the Corporation of
notice of, and (ii) the Corporation otherwise becoming aware of, any
threatened or instituted claim, suit, petition or other proceedings
with respect to the involuntary liquidation, dissolution or winding up
of the Corporation or to effect any other distribution of the assets
of the Corporation among its shareholders for the purpose of winding
up its affairs;
(c) immediately, upon receipt by the Transfer Agent of a Retraction
Request; and
(d) as soon as practicable upon the issuance by the Corporation of any
Exchangeable Shares or rights to acquire Exchangeable Shares.
2.5 DELIVERY OF SONIC COMMON SHARES. In furtherance of its obligations under
-------------------------------
subsections 2.1(e) and (f) hereof, upon notice of any event that requires the
Corporation to cause to be delivered Sonic Common Shares to any holder of
Exchangeable Shares, Sonic shall forthwith issue and deliver the requisite Sonic
Common Shares to or to the order of the former holder of the surrendered
Exchangeable Shares, as the Corporation shall direct. All such Sonic Common
Shares shall be duly issued as fully paid and non-assessable and shall be free
and clear of any Liens. In consideration of the issuance of each such Sonic
Common Share by Sonic, the Corporation shall issue to Sonic, or as Sonic shall
direct, such number of common shares of the Corporation as is equal to the fair
value of such Sonic Common Shares.
2.6 QUALIFICATION OF SONIC COMMON SHARES. Sonic shall use all reasonable
------------------------------------
efforts to obtain and comply with all orders required from the applicable
Canadian securities authorities to permit the issuance of the Sonic Common
Shares upon any such exchange of the Exchangeable Shares without registration or
qualification with or approval of or the filing of any document including any
prospectus or similar document or the taking of any proceeding with or the
obtaining of any order, ruling or consent from any governmental or regulatory
authority under any Canadian federal or provincial law or regulation or pursuant
to the rules and regulations of any regulatory authority or the fulfillment of
any other legal requirement before such Sonic Common Shares may be issued and
delivered by the Corporation or Sonic to the holder thereof or in order that
such Sonic Common Shares may be freely traded thereafter (other than any
restrictions on transfer by reason of a holder being a "control person" of the
Corporation or Sonic for purposes
5
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of Canadian federal or provincial securities lay/ or an "affiliate" for purposes
of United States Federal or state securities law).
2.7 TENDER OFFERS, ETC. In the event that a tender offer, share exchange offer,
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issuer bid, take-over bid or similar transaction with respect to Sonic Common
Shares (an "Offer") is proposed by Sonic or is proposed to Sonic or its
stockholders and is recommended by the Board of Directors of Sonic, or is
otherwise effected or to be effected with the consent or approval of the Board
of Directors of Sonic, Sonic will use all commercially reasonable efforts
expeditiously and in good faith to take all such actions and do all such things
as are necessary or desirable to enable and permit holders of Exchangeable
Shares to participate in such Offer to the same extent and on an economically
equivalent basis as the holders of Sonic Common Shares, without discrimination.
Without limiting the generality of the foregoing, Sonic will use all
commercially reasonable efforts expeditiously and in good faith to ensure that
holders of Exchangeable Shares may participate in all such Offers without being
required to retract Exchangeable Shares as against the Corporation (or, if so
required, to ensure that any such retraction shall be effective only upon, and
shall be conditional upon, the closing of the Offer and only to the extent
necessary to tender or deposit to the Offer).
2.8 OWNERSHIP OF OUTSTANDING SHARES. Sonic covenants and agrees in favour of
-------------------------------
the Corporation that, as long as any outstanding Exchangeable Shares are owned
by any person or entity other than Sonic or any of its Affiliates, Sonic will be
and remain the direct or indirect beneficial owner of all issued and outstanding
shares in the capital of the Corporation (other than Exchangeable Shares) and
all outstanding securities of the Corporation carrying or otherwise entitled to
voting rights in any circumstances (other than Exchangeable Shares), unless
Sonic shall have obtained the prior approval of the Corporation and the holders
of the Exchangeable Shares given in accordance with section 8.2 of the
Exchangeable Share Provisions.
2.9 SONIC NOT TO VOTE EXCHANGEABLE SHARES. Sonic covenants and agrees that it
-------------------------------------
will appoint and cause to be appointed proxyholders with respect to all
Exchangeable Shares held by Sonic and its Affiliates for the sole purpose of
attending each meeting of holders of Exchangeable Shares in order to be counted
as part of the quorum for each such meeting. Sonic further covenants and agrees
that it will not, and will cause its Affiliates not to, exercise any voting
rights that may be exercisable by holders of Exchangeable Shares from time to
time pursuant to the Exchangeable Share Provisions or pursuant to the provisions
of the OBCA with respect to any Exchangeable Shares held by it or by its
Affiliates in respect of any matter considered at any meeting of holders of
Exchangeable Shares, including without limitation any approval to be given by
holders of Exchangeable Shares pursuant to section 8.2 of the Exchangeable Share
Provision.
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2.10 DUE PERFORMANCE. On and after the Effective Date, Sonic shall duly and
---------------
timely perform all of its obligations provided for in the Plan of Arrangement,
including any obligations that may arise upon the exercise of Sonic's rights
under the Exchangeable Share Provisions.
2.11 ECONOMIC EQUIVALENCE. Sonic hereby acknowledges that it will be bound by
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any determination of economic equivalence made by the Board of Directors
pursuant to section 5.6 of the Plan of Arrangement or section 9.1 of the
Exchangeable Share Provisions, where applicable.
ARTICLE 3
GENERAL
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3.1 TERM. This agreement shall come into force and be effective as of the date
----
hereof and shall terminate and be of no further force and effect at such time as
there are no Exchangeable Shares (or securities or rights convertible into or
exchangeable for or carrying rights to acquire Exchangeable Shares) held by any
party other than Sonic and its Affiliates.
3.2 CHANGES IN CAPITAL OF SONIC AND THE CORPORATION. Notwithstanding the
-----------------------------------------------
provisions of section 3.4 hereof, at all times after the occurrence of any event
effected pursuant to section 2.7 hereof as a result of which either Sonic Common
Shares or the Exchangeable Shares or both are in any way changed, this agreement
shall forthwith be amended and modified as necessary in order that it shall
apply with full force and effect, mutatis mutandis, to all new securities into
which Sonic Common Shares or the Exchangeable Shares or both are so changed and
the parties hereto shall execute and deliver an agreement in writing giving
effect to and evidencing such necessary amendments and modifications.
3.3 SEVERABILITY. If any provision of this agreement is held to be invalid,
------------
illegal or unenforceable, the validity, legality or enforceability of the
remainder of this agreement shall not in any way be affected or impaired thereby
and this agreement shall be carried out as nearly as possible in accordance with
its original terms and conditions.
3.4 AMENDMENTS, MODIFICATIONS, ETC. This agreement may not be amended or
-------------------------------
modified except by an agreement in writing executed by the Corporation and Sonic
and approved by the holders of the Exchangeable Shares in accordance with
section 10.2 of the Exchangeable Share Provisions.
3.5 MINISTERIAL AMENDMENTS. Notwithstanding the provisions of section 3.4, the
----------------------
parties to this agreement may without the approval of the holders of the
Exchangeable Shares, at any time and from
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time to time, amend or modify this agreement in writing for the purposes of:
(a) adding to the covenants of either or both parties for the protection
of the holders of the Exchangeable Shares;
(b) making such amendments or modifications not inconsistent with this
agreement as may be necessary or desirable with respect to matters or
questions which, in the opinion of the Board of Directors of each of
the Corporation and Sonic, it may be expedient to make, provided that
each such board of directors shall be of the opinion that such
amendments or modifications will not be prejudicial to the interests
of the holders of the Exchangeable Shares; or
(c) making such changes or corrections which, on the advice of counsel to
the Corporation and Sonic, are required for the purpose of curing or
correcting any ambiguity or defect or inconsistent provision or
clerical omission or mistake or manifest error herein, provided that
the boards of directors of each of the Corporation and Sonic shall be
of the opinion that such changes or corrections will not be
prejudicial to the interests of the holders of the Exchangeable
Shares.
3.6 MEETING TO CONSIDER AMENDMENTS. The Corporation, at the request of Sonic,
------------------------------
shall call a meeting or meetings of the holders of the Exchangeable Shares for
the purpose of considering any proposed amendment or modification requiring
approval pursuant to section 3.4 hereof. Any such meeting or meetings shall be
called and held in accordance with the by-laws of the Corporation and the
Exchangeable Share Provisions.
3.7 WAIVERS ONLY IN WRITING. No waiver of any of the provisions of this
-----------------------
agreement otherwise permitted hereunder shall be effective unless made in
writing and signed by both of the parties hereto.
3.8 INUREMENT. This agreement shall be binding upon and inure to the benefit
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of the parties hereto and their respective successors and permitted assigns.
3.9 SONIC SUCCESSORS. Sonic shall not enter into any transaction (whether by
----------------
way of reconstruction, reorganization, consolidation, merger, transfer, sale,
lease or otherwise) whereby all or substantially all its undertaking, property
and assets would become the property of any other person or in the case of a
merger, of the continuing corporation resulting therefrom, unless:
(a) such other person or continuing corporation is a corporation (the
"Sonic Successor") incorporated under
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the laws of any state of the United States or the laws of Canada or
any province thereof; and
(b) the Sonic Successor, by operation of law, becomes, without more, bound
by the terms and provisions of this agreement or, if not so bound,
executes, prior to or contemporaneously with the consummation of such
transaction, an agreement to be bound by the provisions hereof as if
it were an original party hereto and to observe and perform all of the
covenants and obligations of Sonic pursuant to this agreement, in form
satisfactory to the Corporation, acting reasonably.
Nothing herein shall be construed as preventing the amalgamation or merger of
any wholly-owned subsidiary of Sonic with or into Sonic.
3.10 NOTICES TO PARTIES. All notices and other communications between the
------------------
parties shall be in writing and shall be deemed to have been given if delivered
personally or by confirmed telecopy to the parties at the following addresses
(or at such other address for either such party as shall be specified in like
notice):
(a) if to Sonic at:
TurboSonic Environmental Systems, Inc.
11 Melanie Lane
Unit 22-A
East Hanover, New Jersey 07936
Attention: Richard H. Hurd
(b) if to the Corporation at:
TurboSonic Canada, Inc.
c/o Turbotak Technologies, Inc.
550 Parkside Drive
Suite A-14
Waterloo, Ontario N2L 5V4 Canada
Attention: Patrick Forde, Vice President
Telecopier No. 519-885-6992
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of confirmed receipt thereof
unless such day is not a Business Day in which case it shall be deemed to have
been given and received upon the immediately following Business Day.
3.11 COUNTERPARTS. This agreement may be executed in counterparts, each of
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which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
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3.12 JURISDICTION. This agreement shall be construed and enforced in accordance
------------
with the laws of the Province of Ontario and the laws of Canada applicable
therein.
3.13 ATTORNMENT. Sonic agrees that any action or proceeding arising out of or
----------
relating to this agreement may be instituted in the courts of Ontario, waives
any objection which it may have now or hereafter to the venue of any such action
or proceeding, irrevocably submits to the jurisdiction of the said courts in any
such action or proceeding, agrees to be bound by any judgment of the said courts
and not to seek, and hereby waives, any review of the merits of any such
judgment by the courts of any other jurisdiction and hereby appoints the
Corporation at its registered office as Sonic's attorney for service of process.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
duly executed as of the date first above written.
ATTEST: SONIC ENVIRONMENTAL SYSTEMS, INC.
_____________________ By: _____________________________
ATTEST: SONIC CANADA, INC.
_____________________ By: ______________________________
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EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SONIC ENVIRONMENTAL SYSTEMS, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation") is:
Sonic Environmental Systems, Inc.
2. The Certificate of Incorporation of the Corporation is hereby amended
by striking out Articles First and Fourth thereof and by substituting in lieu of
said Articles the following new Articles:
FIRST: The name of the Corporation is "TurboSonic Technologies,
Inc."
FOURTH: The total number of shares of all classes of stock which the
Corporation is authorized to issue is thirty one million (31,000,000) shares, of
which thirty million (30,000,000) shares shall be common stock with a par value
of ten cents ($.10) per share, and one million (1,000,000) shares shall be
preferred stock, with no par value. The preferred stock may be issued in
classes or series from time to time with such voting powers, full or limited, or
no voting powers, and such designations, preferences and relative,
participating, optional, or other special rights, and qualifications,
limitations or restrictions thereof, as shall be stated and expressed in the
certificate of incorporation or any amendment thereto, or in the resolutions or
resolutions providing for the issue of such stock adopted by the board of
directors pursuant to authority expressly vested in it by the provisions of its
certificate of incorporation, and to the full extent permitted by Section 151 of
the General Corporation Law of the State of Delaware.
3. The amendments of the Certificate of Incorporation herein certified
have been duly adopted in accordance with the provisions of Sections 303 and 242
of the General Corporation Law of the State of Delaware.
The undersigned, Richard Hurd, President of the Corporation, does hereby
make, file and record this Certificate of Amendment of Certificate of
Incorporation, amending the Certificate of Incorporation of Sonic Environmental
Systems, Inc. filed on April 14, 1961, as amended, and does hereby certify that
the facts stated herein are true and that provision for the making of this
Certificate of Amendment of Certificate of Incorporation is contained in an
order entered on July 3, 1997 by the United States Bankruptcy Court for the
District of New Jersey pursuant to the
<PAGE>
provisions of Chapter 11 of Title 11 of the United States Code, Confirming
Debtor's First Amended Plan of Reorganization, as modified. The Corporation
consented to the entry of an Order for Relief under Chapter 11 of Title 11 of
the United States Code, 11 U.S.C. (S)(S)101, et seq., on September 16, 1996
-- ----
and the confirmation date of the Corporation's Plan of Reorganization was July
3, 1997.
Dated: August ___, 1997
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RICHARD H. HURD
2
