<PAGE> 1
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: JUNE 27, 1996
CVD FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE
(State of Incorporation)
1-12212 95-4426690
(Commission File Number) (I.R.S. Employer Identification No.)
400 BURRARD STREET, SUITE 1250, VANCOUVER, B.C., V6C 3A6
(Address of principal executive offices, including postal code)
(604) 683-5312
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
CVD Financial Corporation ("CVD") entered into an agreement with Logan
International Corp. ("Logan") dated for reference June 20, 1996, whereby CVD, or
a wholly-owned subsidiary, subscribed for and Logan agreed to create and issue
$6 million of preferred shares in the common stock of Logan (the "Logan
Preferred Stock"), subject to certain conditions which were satisfied on June
27, 1996. The Logan Preferred Stock provide for, among other things: (i) a
cumulative dividend of 5% per annum; (ii) interest on accrued and unpaid
dividends; (iii) redemption by Logan at any time and from time to time; (iv) an
issue price of $100 per share; (v) one vote per share; and (vi) a 10% premium on
the amount paid-up thereon on redemption, liquidation, dissolution or wind-up.
M.J. Smith, a director and the President of CVD, is a director and officer of
Logan and J.H.S. Lee, a director and Chairman of CVD, is also a director and
officer of Logan. The terms of the aforesaid agreement were approved by the
disinterested directors of CVD and Logan.
ITEM 5. OTHER EVENTS.
CVD entered into an agreement with Arbatax International Inc. ("Arbatax") dated
for reference June 20, 1996, whereby CVD agreed to create and issue and Arbatax
subscribed for $6 million of preferred shares in the common stock of CVD (the
"CVD Preferred Stock"), subject to certain conditions which were satisfied on
June 27, 1996. The CVD Preferred Stock provide for, among other things: (i) a
cumulative dividend of 5% per annum; (ii) interest on accrued and unpaid
dividends; (iii) redemption by CVD at any time and from time to time; (iv) an
issue price of $2.00 per share; (v) variable voting rights which limit the votes
thereon so that any holder or group has less than 34.6% of the total votes
attached to the outstanding voting shares of CVD, subject to certain
adjustments; and (vi) a premium of 10% on the amount paid-up thereon on
redemption, liquidation, dissolution or winding-up.
Arbatax is the holder of approximately 34.6% of CVD's issued and outstanding
common shares. M.J. Smith, a director and the President of CVD, is also a
director and officer of Arbatax. J.S.H. Lee, a director and Chairman of CVD, is
also a director and officer of Arbatax. The terms of the aforesaid agreement
were approved by the disinterested directors of CVD and Arbatax.
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C> <C>
2.1 Subscription Agreement between CVD Financial Corporation and
Logan International Corp. dated for reference June 20, 1996
2.2 Subscription Agreement between CVD Financial Corporation and
Arbatax International Inc. dated for reference June 20, 1996
</TABLE>
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.
CVD FINANCIAL CORPORATION
By: /s/ Michael J. Smith
------------------------------------
Michael J. Smith, President,
Chief Executive Officer and
Chief Financial Officer
Date: July 10, 1996
3
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
2.1 Subscription Agreement between CVD Financial Corporation and
Logan International Corp. dated for reference June 20, 1996
2.2 Subscription Agreement between CVD Financial Corporation and
Arbatax International Inc. dated for reference June 20, 1996
</TABLE>
4
<PAGE> 1
EXHIBIT 2.1
CVD FINANCIAL CORPORATION
c/o Suite 1250, 400 Burrard Street
Vancouver, British Columbia V6C 3A6
June 20, 1996
LOGAN INTERNATIONAL CORP.
c/o Suite 1250
400 Burrard Street
Vancouver, B.C. V6C 3A6
Dear Sirs:
CVD Financial Corporation or an affiliate (the "Purchaser") hereby offers to
purchase from Logan International Corp. (the "Company") and, by its acceptance
hereof, the Company agrees to create, issue and sell to the Purchaser 60,000
shares of Preferred Stock, Series B of the Company (the "Purchased Shares") for
an aggregate purchase price of $6,000,000 (U.S.). The Purchased Shares will:
(a) pay a cumulative dividend at the rate of 5% per annum;
(b) be entitled to interest on accrued and unpaid dividends;
(c) be subject to redemption by the Company at any time and from time
to time;
(d) have an issue price of U.S. $100 per share;
(e) have a par value of U.S. $0.01 per share;
(f) have one vote per share; and
(g) be substantially in the form set forth in Schedule "A" hereto.
This offer is conditional upon and subject to the terms and conditions described
below.
Covenants, Representations and Warranties
The Company covenants, represents and warrants to the Purchaser, and
acknowledges that the Purchaser is relying upon such covenants, representations
and warranties in purchasing the Purchased Shares, that:
(a) on the Closing Date (as herein defined), the authorized capital
of the Company will consist of 100,000,000 shares of common stock
with a par value of U.S. $0.01 per share and 25,000,000 shares of
Preferred Stock with a par value of U.S. $0.01 per share;
(b) on the Closing Date, the Purchased Shares shall be delivered to
the Purchaser free and clear of any mortgages, liens, charges,
restrictions, security interests, adverse claims, pledges,
encumbrances or demands, whatsoever and shall, upon receipt of
payment by the Company
<PAGE> 2
therefor, be validly and duly authorized, created and issued by
the Company as fully paid and non-assessable;
(c) the Company has good right, full corporate power and absolute
authority to enter into this agreement and to issue, sell, assign
and transfer the Purchased Shares to the Purchaser in the manner
contemplated herein and to perform all of the Company's
obligations under this agreement;
(d) the Company is a company duly incorporated and validly subsisting
in all respects under the laws of the State of Washington and is
in good standing with respect to the filing of annual returns;
(e) the execution and delivery of this agreement and the completion
of the transactions contemplated hereby will not conflict with,
result in a default under, or accelerate or permit the
acceleration of the performance required by, any agreement or
instrument to which the Company is a party;
(f) the Company is a registrant under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and has, on a timely basis,
duly filed or delivered all reports, filings, disclosures,
releases and other materials required to be filed with or
delivered to any regulatory authority having jurisdiction under
applicable law, including periodical or timely disclosure filings
or reports required pursuant to the Exchange Act;
(g) this agreement has been duly executed and delivered by and on
behalf of the Company and constitutes a valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms; and
(h) the Company shall file and cause to be filed all forms of
certification required to be filed by the Company in connection
with the purchase and sale of the Purchased Shares so that the
distribution of the Purchased Shares may lawfully occur without
the necessity of filing a prospectus or otherwise registering the
same in the United States.
The Purchaser covenants, represents and warrants to the Company, and
acknowledges that the Company is relying upon such covenants, representations
and warranties in connection with the sale by it of the Purchased Shares, that:
(a) the Purchaser is a corporation duly incorporated and validly
subsisting in all respects under the laws of Delaware;
<PAGE> 3
(b) the Purchaser has good right, full corporate power and absolute
authority to enter into this agreement and to purchase the
Purchased Shares from the Company in the manner contemplated
herein and to perform all of the Purchaser's obligations under
this agreement;
(c) this agreement has been duly executed and delivered by and on
behalf of the Purchaser and constitutes a valid and binding
obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms;
(d) the Purchaser acknowledges that the Purchased Shares have not
been registered by the Company under the Securities Act of 1933,
as amended (the "1933 Act"), that the Company does not plan, and
is under no obligation to provide for, registration of the
Purchased Shares, that the Purchased Shares are being offered and
sold in reliance upon an exemption from the registration
requirements of the 1933 Act, and that they cannot be sold unless
they are subsequently registered under the 1933 Act or are sold
pursuant to an exemption from the registration requirements
thereunder;
(e) the Purchaser shall file and cause to be filed all forms of
certification required to be filed by the Purchaser in connection
with the purchase and sale of the Purchased Shares so that the
distribution of the Purchased Shares may lawfully occur without
the necessity of filing a prospectus or otherwise registering the
same in the United States, and the Purchaser shall not request
that the Company provide it with an offering memorandum or
prospectus, or do anything which would require the Company to
provide such an offering memorandum or prospectus to the
Purchaser;
(f) the Purchased Shares are being subscribed for and any rights the
Purchaser may acquire as a shareholder of the Company will be
acquired for the Purchaser's own account and for investment
purposes and not with a view to a subsequent offering, sale or
distribution thereof, and the Purchaser may not participate,
directly or indirectly, in any plan or scheme involving the
resale or distribution of the Purchased Shares or any interest
therein;
(g) the Purchaser has knowledge and experience in financial and
business affairs as to be capable of evaluating the merits and
risks of the investment and is able to bear the economic risk of
loss of the investment; and
(h) the Purchaser has not received or been provided with an offering
memorandum or similar document, and its decision to enter into
this agreement and to purchase the Purchased Shares has not been
made upon any verbal or written representation as to fact or
otherwise by or on behalf of the Company or any other person and
its decision to enter into this agreement and purchase the number
of Purchased Shares set forth herein is based entirely upon
information concerning the Company which is publicly available.
<PAGE> 4
Conditions to Purchase Obligations
The following are conditions to the obligation of the Purchaser, and where
indicated of the Company, to complete the transaction contemplated hereby, which
conditions the Company covenants to exercise its best efforts to have fulfilled
on or prior to the Closing Date (or such earlier time as may be specified
herein):
(a) there will have been made and/or obtained all necessary filings,
approvals, consents and acceptances of appropriate regulatory
authorities in order to permit the Purchaser to purchase and the
Company to sell the Purchased Shares as herein provided on or
before June 28, 1996;
(b) the definitive terms attached to the Purchased Shares will have
been mutually approved and received;
(c) the Company shall have obtained all necessary approvals of its
board of directors on or before June 28, 1996;
(d) no order ceasing or suspending trading in any securities of the
Company or prohibiting the sale of the Purchased Shares is in
effect and no proceedings for such purpose are pending or
threatened; and
(e) the representations and warranties contained herein shall be true
and correct as of the Closing Date as if such representations and
warranties had been made on and as of the Closing Date, and all
of the terms and conditions herein contained and required to be
performed and complied with at that time have been performed and
complied with.
In the event that the foregoing conditions are not all satisfied and/or waived
by the parties, this agreement shall be terminated and the parties shall have no
further obligations to each other whatsoever.
Closing
The closing of the transaction herein provided for shall be completed on the
third business day following the satisfaction of the conditions set forth
herein, or on such other day as may be agreed to by the Company and the
Purchaser (the "Closing Date").
On the Closing Date, the Company shall deliver:
(a) definitive certificates for the Purchased Shares duly registered
as the Purchaser may request; and
<PAGE> 5
(b) such further documentation as the Purchaser may reasonably
require in a form satisfactory to the Purchaser,
against delivery by the Purchaser to the Company of a certified cheque or bank
draft made payable to, or to the order of, the Company in the amount of the
purchase price of the Purchased Shares. Notwithstanding the Closing Date, the
transaction herein provided for shall be deemed to be effective June 27, 1996.
All warranties, representations, covenants and agreements herein contained or
contained in any document submitted pursuant to this agreement and in connection
with the transaction herein contemplated shall survive the purchase and sale of
the Purchased Shares by the Purchaser and continue in full force and effect for
the benefit of the Purchaser.
This agreement shall be governed by and interpreted in accordance with the laws
of the Province of British Columbia and time shall be of the essence hereof.
This agreement constitutes the entire agreement between the parties and except
as stated herein and in the instruments and documents to be executed and
delivered pursuant hereto, contains all of the representations, warranties,
covenants and agreements of the respective parties hereto.
This agreement may be executed in any number of counterparts or by facsimile,
each of which shall together constitute one and the same instrument and be
deemed to be an original, notwithstanding that all of the parties are not
signatory to the same counterpart or facsimile.
If the Company is in agreement with the foregoing terms and conditions and
wishes to accept this offer, please so indicate by executing a copy of this
letter where indicated below and delivering the same to the Purchaser by 4:00
p.m. on June 27, 1996, at which time this offer will expire.
Yours very truly,
CVD FINANCIAL CORPORATION
By: /s/ Michael J. Smith
Name: Michael J. Smith
Title: President
<PAGE> 6
The offer referred to above is hereby accepted on the terms and conditions
therein set forth.
DATED this 21st day of June, 1996.
LOGAN INTERNATIONAL CORP.
By: /s/ Michael J. Smith
Name: Michael J. Smith
Title: Chief Financial Officer
<PAGE> 7
SCHEDULE "A"
SECTION 1
ISSUE PRICE
1.1 The issue price for the Preferred Stock, Series B shall be determined
by resolution of the board of directors of the Corporation.
SECTION 2
DIVIDENDS
2.1 Payment of Dividends
The holders of the Preferred Stock, Series B shall be entitled to
receive, and the Corporation shall pay thereon, as and when declared by the
board of directors out of monies properly applicable to the payment of
dividends, fixed cumulative preferential cash dividends at the rate of 5% per
share per annum (the "Dividend Payment") on the amount paid-up thereon payable
in arrears on December 31 of each year (the "Dividend Payment Date"). Dividends
on the Preferred Stock, Series B shall accrue from and including the date of
issuance. Cheques of the Corporation or its dividend paying agent payable at par
at a chartered bank or trust company shall be issued in respect of such
dividends to the holders of the Preferred Stock, Series B entitled thereto. The
mailing of such cheques shall satisfy and discharge all liability for the
dividends represented thereby, unless the cheques are not paid on due
presentation. If on any Dividend Payment Date, the dividends payable on such
date are not paid in full on all of the Preferred Stock, Series B then issued
and outstanding, the dividends or the unpaid part thereof shall be paid on a
subsequent date or dates as determined by the board of directors. The holders of
the Preferred Stock, Series B shall not be entitled to any dividends other than
or in excess of the cash dividends provided for herein. A dividend which is
represented by a cheque which has not been presented for payment within six
years after it was issued shall be forfeited to the Corporation.
2.2 Dividend for Other than a Full Year
The amount per share of the dividend accrued for any period which is
less than a full year with respect to any Preferred Stock, Series B:
(a) which is issued, redeemed or purchased; or
(b) where the assets of the Corporation are distributed to the
holders of Preferred Stock, Series B on the liquidation,
dissolution or winding-up of the Corporation, whether
voluntary or involuntary, or on any other distribution of
assets of the Corporation among its shareholders for the
purpose of winding up its affairs,
shall be equal to the amount (rounded to the nearest 1/100th of 1 cent)
calculated by multiplying the Dividend Payment by a fraction of which the
numerator is the number of days during the year
<PAGE> 8
that the share has been outstanding (including the date of issuance or the first
day of the year as well as the Dividend Payment Date or date of redemption,
purchase, or distribution of assets, as applicable) and the denominator is 365.
2.3 Interest Payment
The holders of the Preferred Stock, Series B shall be entitled to
receive, as provided herein, an amount equivalent to interest at the rate of 8%
per annum on the amount of all Dividend Payments not paid on their respective
Dividend Payment Dates and which remain outstanding from time to time, which
shall be compounded annually on each Dividend Payment Date (the "Interest
Amount").
SECTION 3
REDEMPTION AND PURCHASE
3.1 General
Subject to Section 6, the Preferred Stock, Series B may be redeemed
or purchased by the Corporation as provided in this Section, but not otherwise.
3.2 Redemption Rights
(a) Subject to Section 6, the Corporation may at its option
redeem at any time all or from time to time any number of the
outstanding Preferred Stock, Series B on payment of the
Redemption Price as provided in Section 3.3.
(b) If less than all of the outstanding Preferred Stock, Series B
are to be redeemed, the shares to be redeemed shall be
selected by lot, in single shares or in units of 10 shares or
less, or pro rata (disregarding fractions) as the board of
directors or a committee thereof in its sole discretion shall
by resolution determine.
3.3 Redemption Price
The price at which any Preferred Stock, Series B is redeemable (the
"Redemption Price") shall be the aggregate of all accrued and unpaid dividends
up to and including the date fixed for redemption, the amount paid-up thereon,
any Interest Amount applicable thereto and a redemption premium of 10% of the
amount paid-up thereon.
3.4 Redemption Procedure
(a) Notice of redemption (the "Redemption Notice") of the
Preferred Stock, Series B shall be given by the Corporation
not less than 30 days prior to the date fixed for redemption
to each holder of any Preferred Stock, Series B to be
redeemed. Accidental failure or omission to give the
Redemption Notice to one or more of
<PAGE> 9
such holders shall not affect the validity of such redemption.
The Redemption Notice shall set out the Redemption Price, the
date fixed for redemption, the place of redemption and, in the
case of partial redemption, the number of the holder's shares
to be redeemed.
(b) On and after the date fixed for redemption, the Corporation
shall pay or cause to be paid the Redemption Price to or to
the order of the holders of the Preferred Stock, Series B
redeemed on presentation and surrender, at the place of
redemption, of the respective certificates representing such
shares, and the holders of the Preferred Stock, Series B
called for redemption shall cease to be entitled to dividends
or to exercise any of the rights of holders in respect
thereof, unless payment of the Redemption Price shall not be
made in accordance with the foregoing provisions, in which
case the rights and privileges of the holders shall remain
unimpaired.
(c) The Corporation shall have the right at any time after mailing
the Redemption Notice to deposit the Redemption Price of the
shares thereby called for redemption, or such part thereof as
at the time of deposit has not been claimed by the
shareholders entitled thereto, in a special account with a
chartered bank or trust company for the holders of such
shares, and upon the deposit being made or upon the date fixed
for redemption, whichever is the earlier, the Preferred Stock,
Series B in respect of which the deposit shall have been made
shall be deemed to be redeemed and the rights of each holder
thereof shall be limited to receiving, without interest, his
proportionate part of the Redemption Price so deposited upon
presentation and surrender of the certificates representing
his shares so redeemed.
(d) If less than all the Preferred Stock, Series B represented by
any certificate are redeemed, a new certificate for the
balance shall be issued without cost to the holder.
3.5 Purchase
Subject to Section 6, the Corporation may purchase at any time
all or from time to time any number of the outstanding Preferred Stock, Series B
in the open market (including purchases through or from an investment dealer or
firm holding membership on a stock exchange) or pursuant to tenders received by
the Corporation upon an invitation for tenders addressed to all holders of the
Preferred Stock, Series B, at a price per share not exceeding the Redemption
Price plus costs of purchase. If, upon any invitation for tenders, the
Corporation receives tenders for Preferred Stock, Series B at the same price in
an aggregate number greater than the number for which the Corporation is
prepared to accept tenders, the shares to be purchased shall be selected from
the shares offered at prices as nearly as may be pro rata (to the nearest 10
shares) according to the number of Preferred Stock, Series B offered in each
tender, in the manner as the board of directors or a committee thereof in its
sole discretion shall by resolution determine.
<PAGE> 10
3.6 Redeemed or Purchased Preferred Stock, Series B
Preferred Stock, Series B redeemed or purchased by the
Corporation shall remain as authorized but unissued Preferred Stock, Series B
and shall be available for issuance as such, unless payment for same is not made
by the Corporation in the ordinary course.
SECTION 4
VOTING RIGHTS
4.1 General
The holders of the Preferred Stock, Series B shall be entitled
to receive notice of and to attend at all meetings of shareholders of the
Corporation, other than separate meetings of the holders of another class or
series of shares. A holder of any Preferred Stock, Series B shall be entitled to
vote at such meetings on the basis of one vote per share.
SECTION 5
LIQUIDATION, DISSOLUTION OR WIND-UP
5.1 Priority of Distributions
In the event of the liquidation, dissolution or winding-up of
the Corporation or other distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs, whether voluntary or
involuntary, the holders of the Preferred Stock, Series B shall be entitled,
before any amounts shall be paid to or any property or assets of the Corporation
are distributed among the holders of the Common Stock, or any other share of the
Corporation ranking junior to the Preferred Stock, Series B, to receive an
amount equal to the amount paid-up thereon, together with all accrued and unpaid
dividends thereon, any Interest Amount applicable thereto and a premium of 10%
of the amount paid-up thereon. After payment to the holders of the Preferred
Stock, Series B of the amounts so payable to them, they shall not be entitled to
share in any further distribution of the assets of the Corporation.
5.2 Ratable Distribution
If any accrued and unpaid dividends, amounts payable on the
return of capital, any Interest Amount or any premium in respect of the
Preferred Stock, Series B are not paid in full, all series of Preferred Stock
shall participate ratably in respect of accrued and unpaid dividends, the return
of capital, any Interest Amount and the premium.
<PAGE> 11
SECTION 6
RESTRICTIONS ON DIVIDENDS AND
ISSUE OR RETIREMENT OF SHARES
6.1 The Corporation shall not at any time without, but may at any time with, the
approval of the holders of the Preferred Stock, Series B given in accordance
with Section 9, authorize or issue any shares, other than additional series of
Preferred Stock, ranking prior to or on a parity with the Preferred Stock,
Series B as to the payment of dividends or the distribution of the property or
assets of the Corporation. Furthermore, so long as any of the Preferred Stock,
Series B are outstanding, the Corporation shall not:
(a) declare, pay or set apart for payment any dividends (other
than stock dividends in shares of the Corporation ranking
junior to the Preferred Stock, Series B) on any shares of the
Corporation ranking junior to the Preferred Stock, Series B;
(b) call for redemption, redeem, purchase or otherwise retire for
value any shares ranking junior to the Preferred Stock, Series
B (except out of the net cash proceeds of a substantially
concurrent issue of shares of the Corporation ranking junior
to the Preferred Stock, Series B);
(c) call for redemption, redeem, purchase or otherwise retire for
value less than all of the Preferred Stock, Series B;
(d) except out of the net cash proceeds of a substantially
concurrent issue of shares of the Corporation ranking junior
to the Preferred Stock, Series B, call for redemption, redeem,
purchase or otherwise retire for value (i) any Preferred
Stock, other than the Preferred Stock, Series B or (ii) any
shares of a class or series ranking on a parity with the
Preferred Stock, Series B in respect of the payment of
dividends and the distribution of assets in the event of a
liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary, or in the event of any other
distribution of assets of the Corporation among its
shareholders for the purpose of winding up its affairs; or
(e) create or issue any additional Preferred Stock,
unless, in each such case, any Interest Amount and all accrued and unpaid
dividends on the outstanding Preferred Stock, Series B and on all other shares
ranking prior to or on a parity with the Preferred Stock, Series B, up to and
including all dividends payable on the last preceding Dividend Payment Date,
have been declared and paid or set apart for payment.
<PAGE> 12
SECTION 7
NOTICES AND INTERPRETATION
7.1 Notices
(a) Any notice, cheque, invitation for tenders or other
communication from the Corporation provided for herein shall
be sufficiently given if delivered or if sent by ordinary
first class mail, postage prepaid, to the holders of the
Preferred Stock, Series B at their respective addresses
appearing on the books of the Corporation or, in the event of
the address of any of such holders not so appearing, then at
the last address of such holder known to the Corporation.
Accidental failure to give any notice, invitation for tenders
or other communication to one or more holders of the Preferred
Stock, Series B shall not affect the validity of the notices,
invitations for tenders or other communications properly given
or any action taken pursuant to such notice, invitation for
tender or other communication, but upon a failure being
discovered, the notice, invitation for tenders or other
communication, as the case may be, shall be sent forthwith to
the holder or holders.
(b) If any notice, cheque, invitation for tenders or other
communication from the Corporation given to a holder of
Preferred Stock, Series B pursuant to Section 7.1(a) is
returned on three consecutive occasions because he cannot be
found, the Corporation shall not be required to give or mail
any further notices, cheques, invitations for tenders or other
communications to such shareholder until he informs the
Corporation in writing of his new address.
7.2 Interpretation
(a) In the event that any day on which any dividend on the
Preferred Stock, Series B is payable or on or by which any
other action is required to be taken hereunder is not a
business day, then such dividend shall be payable or such
other action shall be required to be taken on or before the
next succeeding day that is a business day. "Business day"
means a day other than a Saturday, a Sunday or any other day
that is a statutory or civic holiday in the place where the
Corporation has its head office.
(b) All references herein to a holder of Preferred Stock, Series B
shall be interpreted as referring to a registered holder of
the Preferred Stock, Series B.
SECTION 8
MODIFICATION
8.1 The provisions set out herein attaching to the Preferred Stock, Series B may
be deleted, varied, modified, amended or amplified with the prior approval of
the holders of Preferred Stock, Series B given in accordance with Section 9.
<PAGE> 13
SECTION 9
APPROVAL OF PREFERRED STOCK, SERIES B
9.1 Any approval required or permitted to be given by the holders of the
Preferred Stock, Series B with respect to any and all matters referred to herein
shall be deemed to have been sufficiently given by the holders of the Preferred
Stock, Series B if given in accordance with the Corporation's governing statute
and constating documents.
<PAGE> 1
EXHIBIT 2.2
ARBATAX INTERNATIONAL INC.
Brandschenke Strasse 64
8002 Zurich, Switzerland
June 20, 1996
CVD FINANCIAL CORPORATION
c/o Suite 1250, 400 Burrard Street
Vancouver, B.C. V6C 3A6
Dear Sirs:
Arbatax International Inc. or an affiliate (the "Purchaser") hereby offers to
purchase from CVD Financial Corporation (the "Company") and, by its acceptance
hereof, the Company agrees to create, issue and sell to the Purchaser 3,000,000
shares of Preferred Stock, Series 1 of the Company (the "Purchased Shares") for
an aggregate purchase price of $6,000,000 (U.S.). The Purchased Shares will:
(a) pay a cumulative dividend at the rate of 5% per annum;
(b) be entitled to interest on accrued and unpaid dividends;
(c) be subject to redemption by the Company at any time and from time to time;
(d) have an issue price of U.S. $2.00 per share;
(e) have a par value of U.S. $0.01 per share;
(f) have variable voting rights which limit the votes thereon so that any
holder thereof has less than 35% of the total votes attached to all
the outstanding voting shares of the Company, subject to certain
adjustments; and
(g) be substantially in the form set forth in Schedule "A" hereto.
This offer is conditional upon and subject to the terms and conditions described
below.
Covenants, Representations and Warranties
The Company covenants, represents and warrants to the Purchaser, and
acknowledges that the Purchaser is relying upon such covenants, representations
and warranties in purchasing the Purchased Shares, that:
(a) on the Closing Date (as herein defined), the authorized capital of the
Company will consist of, inter alia, 5,000,000 shares of Preferred Stock
with a par value of U.S. $0.01,
<PAGE> 2
of which only the Purchased Shares shall be issued and outstanding as fully
paid and non-assessable;
(b) on the Closing Date, the Purchased Shares shall be delivered to the
Purchaser free and clear of any mortgages, liens, charges, restrictions,
security interests, adverse claims, pledges, encumbrances or demands,
whatsoever and shall, upon receipt of payment by the Company therefor, be
validly and duly authorized, created and issued by the Company as fully
paid and non-assessable;
(c) the Company has good right, full corporate power and absolute authority to
enter into this agreement and to issue, sell, assign and transfer the
Purchased Shares to the Purchaser in the manner contemplated herein and to
perform all of the Company's obligations under this agreement;
(d) the Company is a company duly incorporated and validly subsisting in all
respects under the laws of the State of Delaware and is in good standing
with respect to the filing of annual returns;
(e) the execution and delivery of this agreement and the completion of the
transactions contemplated hereby will not conflict with, result in a
default under, or accelerate or permit the acceleration of the performance
required by, any agreement or instrument to which the Company is a party;
(f) the Company is a registrant under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and has, on a timely basis, duly filed or
delivered all reports, filings, disclosures, releases and other materials
required to be filed with or delivered to any regulatory authority having
jurisdiction under applicable law, including periodical or timely
disclosure filings or reports required pursuant to the Exchange Act;
(g) this agreement has been duly executed and delivered by and on behalf of the
Company and constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms; and
(h) the Company shall file and cause to be filed all forms of certification
required to be filed by the Company in connection with the purchase and
sale of the Purchased Shares so that the distribution of the Purchased
Shares may lawfully occur without the necessity of filing a prospectus or
otherwise registering the same in Canada or the United States.
The Purchaser covenants, represents and warrants to the Company, and
acknowledges that the Company is relying upon such covenants, representations
and warranties in connection with the sale by it of the Purchased Shares, that:
<PAGE> 3
(a) the Purchaser is a corporation duly incorporated and validly subsisting in
all respects under the laws of Canada and is in good standing with respect
to the filing of annual returns;
(b) the Purchaser has good right, full corporate power and absolute authority
to enter into this agreement and to purchase the Purchased Shares from the
Company in the manner contemplated herein and to perform all of the
Purchaser's obligations under this agreement;
(c) this agreement has been duly executed and delivered by and on behalf of the
Purchaser and constitutes a valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms;
(d) the Purchaser acknowledges that the Purchased Shares have not been
registered by the Company under the Securities Act of 1933, as amended (the
"1933 Act"), that the Company does not plan, and is under no obligation to
provide for, registration of the Purchased Shares, that the Purchased
Shares are being offered and sold in reliance upon an exemption from the
registration requirements of the 1933 Act, and that they cannot be sold
unless they are subsequently registered under the 1933 Act or are sold
pursuant to an exemption from the registration requirements thereunder;
(e) the Purchaser shall file and cause to be filed all forms of certification
required to be filed by the Purchaser in connection with the purchase and
sale of the Purchased Shares so that the distribution of the Purchased
Shares may lawfully occur without the necessity of filing a prospectus or
otherwise registering the same in Canada or the United States, and the
Purchaser shall not request that the Company provide it with an offering
memorandum or prospectus, or do anything which would require the Company to
provide such an offering memorandum or prospectus to the Purchaser;
(f) the Purchaser is not a U.S. person as that term is defined in Regulation S
adopted under the 1933 Act, the offer to purchase the Purchased Shares was
not made in the United States and this agreement was executed by the
Purchaser outside of the United States;
(g) the Purchased Shares are being subscribed for and any rights the Purchaser
may acquire as a shareholder of the Company will be acquired for the
Purchaser's own account and for investment purposes and not with a view to
a subsequent offering, sale or distribution thereof, and the Purchaser may
not participate, directly or indirectly, in any plan or scheme involving
the resale or distribution of the Purchased Shares or any interest therein;
(h) the Purchaser has knowledge and experience in financial and business
affairs as to be capable of evaluating the merits and risks of the
investment and is able to bear the economic risk of loss of the investment;
and
<PAGE> 4
(i) the Purchaser has not received or been provided with an offering memorandum
or similar document, and its decision to enter into this agreement and to
purchase the Purchased Shares has not been made upon any verbal or written
representation as to fact or otherwise by or on behalf of the Company or
any other person and its decision to enter into this agreement and purchase
the number of Purchased Shares set forth herein is based entirely upon
information concerning the Company which is publicly available.
Conditions to Purchase Obligations
The following are conditions to the obligation of the Purchaser, and where
indicated of the Company, to complete the transaction contemplated hereby, which
conditions the Company covenants to exercise its best efforts to have fulfilled
on or prior to the Closing Date (or such earlier time as may be specified
herein):
(a) there will have been made and/or obtained all necessary filings, approvals,
consents and acceptances of appropriate regulatory authorities in order to
permit the Purchaser to purchase and the Company to sell the Purchased
Shares as herein provided on or before June 27, 1996;
(b) the definitive terms attached to the Purchased Shares will have been
mutually approved and received on or before June 27, 1996;
(c) the Company shall have obtained all necessary approvals of its board of
directors on or before June 27, 1996;
(d) no order ceasing or suspending trading in any securities of the Company or
prohibiting the sale of the Purchased Shares is in effect and no
proceedings for such purpose are pending or threatened; and
(e) the representations and warranties contained herein shall be true and
correct as of the Closing Date as if such representations and warranties
had been made on and as of the Closing Date, and all of the terms and
conditions herein contained and required to be performed and complied with
at that time have been performed and complied with.
In the event that the foregoing conditions are not all satisfied and/or waived
by the parties, this agreement shall be terminated and the parties shall have no
further obligations to each other whatsoever.
Closing
The closing of the transaction herein provided for shall be completed on the
third business day following the satisfaction of the conditions set forth
herein, or on such other day as may be agreed to by the Company and the
Purchaser (the "Closing Date").
<PAGE> 5
On the Closing Date, the Company shall deliver:
(a) definitive certificates for the Purchased Shares duly registered as the
Purchaser may request; and
(b) such further documentation as the Purchaser may reasonably require in a
form satisfactory to the Purchaser,
against delivery by the Purchaser to the Company of a certified cheque or bank
draft made payable to, or to the order of, the Company in the amount of the
purchase price of the Purchased Shares. Notwithstanding the Closing Date, the
transaction herein provided for shall be deemed to be effective June 27, 1996.
All warranties, representations, covenants and agreements herein contained or
contained in any document submitted pursuant to this agreement and in connection
with the transaction herein contemplated shall survive the purchase and sale of
the Purchased Shares by the Purchaser and continue in full force and effect for
the benefit of the Purchaser.
This agreement shall be governed by and interpreted in accordance with the laws
of the Province of British Columbia and time shall be of the essence hereof.
This agreement constitutes the entire agreement between the parties and except
as stated herein and in the instruments and documents to be executed and
delivered pursuant hereto, contains all of the representations, warranties,
covenants and agreements of the respective parties hereto.
This agreement may be executed in any number of counterparts or by facsimile,
each of which shall together constitute one and the same instrument and be
deemed to be an original, notwithstanding that all of the parties are not
signatory to the same counterpart or facsimile.
If the Company is in agreement with the foregoing terms and conditions and
wishes to accept this offer, please so indicate by executing a copy of this
letter where indicated below and delivering the same to the Purchaser by 4:00
p.m. on June 20, 1996, at which time this offer will expire.
Yours very truly,
ARBATAX INTERNATIONAL INC.
By: /s/Michael J.Smith
-------------------------------
Name: Michael J. Smith
-------------------------------
Title: President
-------------------------------
<PAGE> 6
The offer referred to above is hereby accepted on the terms and conditions
therein set forth.
DATED this 20th day of June, 1996.
CVD FINANCIAL CORPORATION
By: /s/Leonard Petersen
-----------------------------
Name: Leonard Petersen
-----------------------------
Title: Director
-----------------------------
<PAGE> 7
SCHEDULE "A"
SECTION 1
ISSUE PRICE
1.1 The issue price for the Preferred Stock, Series 1 shall be
determined by resolution of the board of directors of the Corporation.
SECTION 2
DIVIDENDS
2.1 Payment of Dividends
The holders of the Preferred Stock, Series 1 shall be entitled
to receive, and the Corporation shall pay thereon, as and when declared by the
board of directors out of monies properly applicable to the payment of
dividends, fixed cumulative preferential cash dividends at the rate of 5% per
share per annum (the "Dividend Payment") on the amount paid-up thereon payable
in arrears on December 31 of each year (the "Dividend Payment Date"). Dividends
on the Preferred Stock, Series 1 shall accrue from and including the date of
issuance. Cheques of the Corporation or its dividend paying agent payable at par
at a chartered bank or trust company shall be issued in respect of such
dividends to the holders of the Preferred Stock, Series 1 entitled thereto. The
mailing of such cheques shall satisfy and discharge all liability for the
dividends represented thereby, unless the cheques are not paid on due
presentation. If on any Dividend Payment Date, the dividends payable on such
date are not paid in full on all of the Preferred Stock, Series 1 then issued
and outstanding, the dividends or the unpaid part thereof shall be paid on a
subsequent date or dates as determined by the board of directors. The holders of
the Preferred Stock, Series 1 shall not be entitled to any dividends other than
or in excess of the cash dividends provided for herein. A dividend which is
represented by a cheque which has not been presented for payment within six
years after it was issued shall be forfeited to the Corporation.
2.2 Dividend for Other than a Full Year
The amount per share of the dividend accrued for any period
which is less than a full year with respect to any Preferred Stock, Series 1:
(a) which is issued, redeemed or purchased; or
(b) where the assets of the Corporation are distributed to the
holders of Preferred Stock, Series 1 on the liquidation,
dissolution or winding-up of the Corporation, whether
voluntary or involuntary, or on any other distribution of
assets of the Corporation among its shareholders for the
purpose of winding up its affairs,
shall be equal to the amount (rounded to the nearest 1/100th of 1 cent)
calculated by multiplying the Dividend Payment by a fraction of which the
numerator is the number of days during the year
<PAGE> 8
that the share has been outstanding (including the date of issuance or the first
day of the year as well as the Dividend Payment Date or date of redemption,
purchase, or distribution of assets, as applicable) and the denominator is 365.
2.3 Interest Payment
The holders of the Preferred Stock, Series 1 shall be entitled
to receive, as provided herein, an amount equivalent to interest at the rate of
8% per annum on the amount of all Dividend Payments not paid on their respective
Dividend Payment Dates and which remain outstanding from time to time, which
shall be compounded annually on each Dividend Payment Date (the "Interest
Amount").
SECTION 3
REDEMPTION AND PURCHASE
3.1 General
Subject to Section 6, the Preferred Stock, Series 1 may be
redeemed or purchased by the Corporation as provided in this Section, but not
otherwise.
3.2 Redemption Rights
(a) Subject to Section 6, the Corporation may at its option redeem
at any time all or from time to time any number of the
outstanding Preferred Stock, Series 1 on payment of the
Redemption Price as provided in Section 3.3.
(b) If less than all of the outstanding Preferred Stock, Series 1
are to be redeemed, the shares to be redeemed shall be
selected by lot, in single shares or in units of 10 shares or
less, or pro rata (disregarding fractions) as the board of
directors or a committee thereof in its sole discretion shall
by resolution determine.
3.3 Redemption Price
The price at which any Preferred Stock, Series 1 is redeemable
(the "Redemption Price") shall be the aggregate of all accrued and unpaid
dividends up to and including the date fixed for redemption, the amount paid-up
thereon, any Interest Amount applicable thereto and a redemption premium of 10%
of the amount paid-up thereon.
3.4 Redemption Procedure
(a) Notice of redemption (the "Redemption Notice") of the
Preferred Stock, Series 1 shall be given by the Corporation
not less than 30 days prior to the date fixed for redemption
to each holder of any Preferred Stock, Series 1 to be
redeemed. Accidental failure or omission to give the
Redemption Notice to one or more of
<PAGE> 9
such holders shall not affect the validity of such redemption.
The Redemption Notice shall set out the Redemption Price, the
date fixed for redemption, the place of redemption and, in the
case of partial redemption, the number of the holder's shares
to be redeemed.
(b) On and after the date fixed for redemption, the Corporation
shall pay or cause to be paid the Redemption Price to or to
the order of the holders of the Preferred Stock, Series 1
redeemed on presentation and surrender, at the place of
redemption, of the respective certificates representing such
shares, and the holders of the Preferred Stock, Series 1
called for redemption shall cease to be entitled to dividends
or to exercise any of the rights of holders in respect
thereof, unless payment of the Redemption Price shall not be
made in accordance with the foregoing provisions, in which
case the rights and privileges of the holders shall remain
unimpaired.
(c) The Corporation shall have the right at any time after mailing
the Redemption Notice to deposit the Redemption Price of the
shares thereby called for redemption, or such part thereof as
at the time of deposit has not been claimed by the
shareholders entitled thereto, in a special account with a
chartered bank or trust company for the holders of such
shares, and upon the deposit being made or upon the date fixed
for redemption, whichever is the earlier, the Preferred Stock,
Series 1 in respect of which the deposit shall have been made
shall be deemed to be redeemed and the rights of each holder
thereof shall be limited to receiving, without interest, his
proportionate part of the Redemption Price so deposited upon
presentation and surrender of the certificates representing
his shares so redeemed.
(d) If less than all the Preferred Stock, Series 1 represented by
any certificate are redeemed, a new certificate for the
balance shall be issued without cost to the holder.
<PAGE> 10
3.5 Purchase
Subject to Section 6, the Corporation may purchase at any time
all or from time to time any number of the outstanding Preferred Stock, Series 1
in the open market (including purchases through or from an investment dealer or
firm holding membership on a stock exchange) or pursuant to tenders received by
the Corporation upon an invitation for tenders addressed to all holders of the
Preferred Stock, Series 1, at a price per share not exceeding the Redemption
Price plus costs of purchase. If, upon any invitation for tenders, the
Corporation receives tenders for Preferred Stock, Series 1 at the same price in
an aggregate number greater than the number for which the Corporation is
prepared to accept tenders, the shares to be purchased shall be selected from
the shares offered at prices as nearly as may be pro rata (to the nearest 10
shares) according to the number of Preferred Stock, Series 1 offered in each
tender, in the manner as the board of directors or a committee thereof in its
sole discretion shall by resolution determine.
3.6 Indenture
In the event that an "Event of Default", as such term is
defined in a master indenture made between the Corporation and Harris Trust
Corporation of New York, as trustee, dated as of August 23, 1993, as amended
from time to time (the "Indenture"), occurs and is not remedied by the
Corporation within any applicable curative periods and either the "Trustee" or
"Holders" (as such terms are defined in the Indenture) provide written notice
to the Corporation declaring the principal amount of "Outstanding" "Securities"
(as such terms are defined in the Indenture) plus accrued interest to be due
and payable as provided for and pursuant to Section 502 of the Indenture, a
holder of any Preferred Stock, Series 1 may require the Corporation to redeem,
at any time and from time to time, the number of Preferred Stock, Series 1 as
may be presented for redemption by the holder as provided herein. The
Corporation need not redeem the Preferred Stock, Series 1 pro rata, among all
holders of Preferred Stock, Series 1. The price per share (the "Retraction
Price") at which the Corporation is required to redeem Preferred Stock, Series
1 pursuant to the exercise of the right of retraction herein shall be the
aggregate of all accrued and unpaid dividends up to and including the dated
fixed for redemption, the amount paid-up thereon, any Interest Amount
applicable thereto and a retraction premium of 10% of the amount paid-up
thereon. The holder of Preferred Stock, Series 1 desiring to exercise his
retraction right shall tender his Preferred Stock, Series 1 to be redeemed by
depositing with the Secretary of the Corporation a certificate or certificates
representing such Preferred Stock, Series 1 together with a notice of
retraction (the "Retraction Notice") requesting redemption of a specified
number of Preferred Stock, Series 1 and stating the place at which the
Retraction Price is to be paid. Such deposit shall be irrevocable unless the
Corporation shall fail to make payment of the Retraction Price for the
Preferred Stock, Series 1 to be redeemed within 30 days of receipt of the
Retraction Notice. The payment of the Retraction Price shall be made by cheque
<PAGE> 11
payable at par at a United States or Canadian chartered bank or trust company
and at the place stated in the Retraction Notice. The Preferred Stock, Series
1 shall then be and be deemed to be redeemed unless such cheque fails to clear
in the ordinary course. The Corporation shall use its best efforts to pay the
Retraction Price for the Preferred Stock, Series 1 to be redeemed within 30
days of receipt of the Retraction Notice, or so soon thereafter as liquid funds
become available, to a holder of Preferred Stock, Series 1 who has tendered
his shares as provided herein and shall cancel his certificates which were
tendered subject to the terms hereof and issue new certificates in respect of
the unredeemed shares, if any. Upon payment of the Retraction Price as
provided herein, the Preferred Stock, Series 1 shall cease to be entitled to
dividends and the holder shall not be entitled to exercise any of the rights of
the shareholder in respect thereof.
3.7 Redeemed or Purchased Preferred Stock, Series 1
Preferred Stock, Series 1 redeemed or purchased by the
Corporation shall remain as authorized but unissued Preferred Stock, Series 1
and shall be available for issuance as such, unless payment for same is not made
by the Corporation in the ordinary course.
SECTION 4
VOTING RIGHTS
4.1 General
The holders of the Preferred Stock, Series 1 shall be entitled
to receive notice of and to attend at all meetings of shareholders of the
Corporation, other than separate meetings of the holders of another class or
series of shares. Subject to Sections 4.2 and 4.3 hereof, a holder of any
Preferred Stock, Series 1 shall be entitled to vote at such meetings on the
basis of a vote per share that is equal to the lesser of:
(a) one; and
(b) such fractional vote per share that results in the holder and
any other entity that may together with the holder be considered
a "person" or "group" (respectively, a "Person" or a "Group") as
such terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1933, as amended (the "Exchange Act")
becoming the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act), directly or indirectly, of 34.6%
(the "Threshold Amount") of the total votes attached to all
outstanding voting shares of the Corporation outstanding from
time to time, provided that in no event, except as provided in
Section 4.3 hereof, shall any votes attach to the Preferred
Stock, Series 1 which would trigger a mandatory redemption of
all of the variable rate
<PAGE> 12
bonds (the "Bonds") issued pursuant to the Indenture. For greater certainty,
if at anytime and only during such time a Person or Group is or becomes the
beneficial owner, directly or indirectly, of the Threshold Amount of the total
votes attaching to all outstanding voting shares of the Corporation, excluding
any Preferred Stock, Series 1, then if such Person or Group is or becomes the
beneficial owner, directly or indirectly, of any Preferred Stock, Series 1, the
same shall have no votes per share, except: (i) as provided in sections 4.2 or
4.3 hereof; or (ii) in the event the Person or Group subsequently is or becomes
the beneficial owner, directly or indirectly, of less than the Threshold Amount
of the total votes attaching to all Voting Shares of the Corporation.
4.2 Amendments to Master Indenture
If the Indenture is amended so that a Person or Group can
become the beneficial owner of a percentage of the total votes attached to all
outstanding voting shares of the Corporation in excess of the Threshold Amount
without triggering a mandatory redemption of the Bonds, the Threshold Amount
shall be amended in Section 4.1(b) to be equal to the lesser of: (i) the amended
percentage which triggers the mandatory redemption of the Bonds pursuant to the
Indenture minus 0.1%; and (ii) 47.9%.
4.3 Fully Voting
If any Person or Group becomes the beneficial owner, directly
or indirectly, of a percentage of the total votes attached to all outstanding
voting shares of the Corporation from time to time in excess of the Threshold
Amount, as amended from time to time, (excluding any Preferred Stock Series 1),
then a holder of any Preferred Stock, Series 1 shall be entitled to one vote per
share.
4.4 Determination
In the event of any dispute or uncertainty, the votes per
share of Preferred Stock Series 1 shall be determined from time to time as
required and as provided herein exclusively by the board of directors of the
Corporation, whose decision and calculation shall be final and binding upon all
parties and for all purposes.
SECTION 5
LIQUIDATION, DISSOLUTION OR WIND-UP
5.1 Priority of Distributions
In the event of the liquidation, dissolution or winding-up of
the Corporation or other distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs, whether voluntary or
involuntary, the holders of the Preferred Stock, Series
<PAGE> 13
1 shall be entitled, before any amounts shall be paid to or any property or
assets of the Corporation are distributed among the holders of the Common Stock,
or any other share of the Corporation ranking junior to the Preferred Stock,
Series 1, to receive an amount equal to the amount paid-up thereon, together
with all accrued and unpaid dividends thereon, any Interest Amount applicable
thereto and a premium of 10% of the amount paid-up thereon. After payment to the
holders of the Preferred Stock, Series 1 of the amounts so payable to them, they
shall not be entitled to share in any further distribution of the assets of the
Corporation.
5.2 Ratable Distribution
If any accrued and unpaid dividends, amounts payable on the
return of capital, any Interest Amount or any premium in respect of the
Preferred Stock, Series 1 are not paid in full, all series of Preferred Stock
shall participate ratably in respect of accrued and unpaid dividends, the return
of capital, any Interest Amount and the premium.
SECTION 6
RESTRICTIONS ON DIVIDENDS AND
ISSUE OR RETIREMENT OF SHARES
6.1 The Corporation shall not at any time without, but may at
any time with, the approval of the holders of the Preferred Stock, Series 1
given in accordance with Section 9, authorize or issue any shares, other than
additional series of Preferred Stock, ranking prior to or on a parity with the
Preferred Stock, Series 1 as to the payment of dividends or the distribution of
the property or assets of the Corporation. Furthermore, so long as any of the
Preferred Stock, Series 1 are outstanding, the Corporation shall not:
(a) declare, pay or set apart for payment any dividends (other
than stock dividends in shares of the Corporation ranking
junior to the Preferred Stock, Series 1) on any shares of the
Corporation ranking junior to the Preferred Stock, Series 1;
(b) call for redemption, redeem, purchase or otherwise retire for
value any shares ranking junior to the Preferred Stock, Series
1 (except out of the net cash proceeds of a substantially
concurrent issue of shares of the Corporation ranking junior
to the Preferred Stock, Series 1);
(c) call for redemption, redeem, purchase or otherwise retire for
value less than all of the Preferred Stock, Series 1;
(d) except out of the net cash proceeds of a substantially
concurrent issue of shares of the Corporation ranking junior
to the Preferred Stock, Series 1, call for redemption, redeem,
purchase or otherwise retire for value (i) any Preferred
Stock, other than the Preferred Stock, Series 1 or (ii) any
shares of a class or series ranking on a parity with the
Preferred Stock, Series 1 in respect of the payment of
dividends and the distribution of assets in the event of a
liquidation, dissolution or
<PAGE> 14
winding-up of the Corporation, whether voluntary or
involuntary, or in the event of any other distribution of
assets of the Corporation among its shareholders for the
purpose of winding up its affairs; or
(e) create or issue any additional Preferred Stock,
unless, in each such case, any Interest Amount and all accrued and unpaid
dividends on the outstanding Preferred Stock, Series 1 and on all other shares
ranking prior to or on a parity with the Preferred Stock, Series 1, up to and
including all dividends payable on the last preceding Dividend Payment Date,
have been declared and paid or set apart for payment.
SECTION 7
NOTICES AND INTERPRETATION
7.1 Notices
(a) Any notice, cheque, invitation for tenders or other
communication from the Corporation provided for herein shall
be sufficiently given if delivered or if sent by ordinary
first class mail, postage prepaid, to the holders of the
Preferred Stock, Series 1 at their respective addresses
appearing on the books of the Corporation or, in the event of
the address of any of such holders not so appearing, then at
the last address of such holder known to the Corporation.
Accidental failure to give any notice, invitation for tenders
or other communication to one or more holders of the Preferred
Stock, Series 1 shall not affect the validity of the notices,
invitations for tenders or other communications properly given
or any action taken pursuant to such notice, invitation for
tender or other communication, but upon a failure being
discovered, the notice, invitation for tenders or other
communication, as the case may be, shall be sent forthwith to
the holder or holders.
(b) If any notice, cheque, invitation for tenders or other
communication from the Corporation given to a holder of
Preferred Stock, Series 1 pursuant to Section 7.1(a) is
returned on three consecutive occasions because he cannot be
found, the Corporation shall not be required to give or mail
any further notices, cheques, invitations for tenders or other
communications to such shareholder until he informs the
Corporation in writing of his new address.
7.2 Interpretation
(a) In the event that any day on which any dividend on the
Preferred Stock, Series 1 is payable or on or by which any
other action is required to be taken hereunder is not a
business day, then such dividend shall be payable or such
other action shall be required to be taken on or before the
next succeeding day that is a business day. "Business day"
means a day other than a Saturday, a Sunday or any other day
that
<PAGE> 15
is a statutory or civic holiday in the place where the
Corporation has its head office.
(b) All references herein to a holder of Preferred Stock, Series 1
shall be interpreted as referring to a registered holder of
the Preferred Stock, Series 1.
SECTION 8
MODIFICATION
8.1 The provisions set out herein attaching to the Preferred
Stock, Series 1 may be deleted, varied, modified, amended or amplified with the
prior approval of the holders of Preferred Stock, Series 1 given in accordance
with Section 9.
SECTION 9
APPROVAL OF PREFERRED STOCK, SERIES 1
9.1 Any approval required or permitted to be given by the
holders of the Preferred Stock, Series 1 with respect to any and all matters
referred to herein shall be deemed to have been sufficiently given by the
holders of the Preferred Stock, Series 1 if given in accordance with the
Corporation's governing statute and constating documents.
