Bagtech in Tax Court Canada April 2012
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Case name: Bioartificial gel technologies (Bagtech) inc. v. The Queen
Date: 2012-04-12
citation: 2012 TCC 120
File numbers: 2009-3734(IT)G
Judges: Paul Bédard
Subjects: Income Tax Act
Docket:
PRICE WATERHOUSE COOPERS INC.
ACTING IN THE CAPACITY OF TRUSTEE IN BANKRUPTCY
OF BIOARTIFICIAL GEL TECHNOLOGIES (BAGTECH) INC.,
and
HER MAJESTY THE QUEEN,
ENGLISH TRANSLATION]
Appeals heard on October 17, 2011, at Montréal, Quebec.
Before: The Honourable Justice Paul Bédard
Appearances:
Counsel for the Appellant: Isabelle Pillet
Marie-Aimée Cantin
JUDGMENT
reassessments made under the Income Tax Act for the 2004 and 2005 taxation years
with costs, in accordance with the attached Reasons for Judgment.
at Ottawa, Canada, this 12th day of April 2012.
“Paul Bédard”
Bédard J.
certified true
this 9th day of January 2013.
Brunet, Revisor
Citation: 2012 TCC
Date:
Docket:
PRICE WATERHOUSE COOPERS INC.
ACTING IN THE CAPACITY OF TRUSTEE IN BANKRUPTCY
OF BIOARTIFICIAL GEL TECHNOLOGIES (BAGTECH) INC.,
and
HER MAJESTY THE QUEEN,
ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
J.
During the taxation years ending on December 31, 2004 and 2005 (the relevant
Gel Technologies (BAGTECH) Inc. (Bagtech) incurred scientific research
development (SR&ED) expenses and SR&ED capital expenditures. To
‘s investment tax credit (ITC) for SR&ED for the relevant years, the Minister
Revenue (the Minister) concluded that Bagtech was not a
corporation” (CCPC) within the meaning of subsection 125(7) of the Income Tax
ITA). The Minister, therefore, concluded that, during the relevant years, Bagtech was
corporation” within the meaning of subsection 127(9) of the ITA and was
to the “refundable investment tax credit” provided for in subsection 127.1(1) of
The only issue in this case is whether Bagtech was a CCPC under subsection 125(7)
ITA. That definition reads as follows:
125(7) In this section,
…
“Canadian-controlled private corporation” means a private corporation that is a Canadian corporation other than
(a) a corporation controlled, directly or indirectly in any manner whatever, by one or more non-resident persons, by one or more public corporations (other than a prescribed venture capital corporation), by one or more corporations described in paragraph (c), or by any combination of them,
(b) a corporation that would, if each share of the capital stock of a corporation that is owned by a non-resident person, by a public corporation (other than a prescribed venture capital corporation), or by a corporation described in paragraph (c) were owned by a particular person, be controlled by the particular person,
(c) a corporation a class of the shares of the capital stock of which is listed on a designated stock exchange, or
(d) in applying subsection (1), paragraphs 87(2)(vv) and (ww) (including, for greater certainty, in applying those paragraphs as provided under paragraph 88(1)(e.2)), the definitions “excessive eligible dividend designation”, “general rate income pool” and “low rate income pool” in subsection 89(1) and subsections 89(4) to (6), (8) to (10) and 249(3.1), a corporation that has made an election under subsection 89(11) and that has not revoked the election under subsection 89(12);
shareholders’ agreement (the USA), which prevents them from electing a
Bagtech ‘s directors (see Appendix 1). However, the respondent contends that, for
of paragraph (b) of the definition of the expression “Canadian-controlled
in subsection 125(7) of the ITA, shareholders’ agreements or
agreements may not be taken into consideration. The respondent submits that,
event that the Court concludes that the existence of a unanimous shareholders’
be taken into consideration in determining whether the “control” referred to
(b) of the definition of the expression “Canadian-controlled private corporation” by the “particular person”, the “particular person” nonetheless had de jure
the relevant years. The respondent’s submission is that if the clauses in the nature of
shareholders’ agreement are taken into consideration, legal control was
from the non-resident shareholders, who together form the majority
(a) the clauses in the nature of a unanimous shareholders’ agreement did
operate to withdraw de jure control from the non-resident shareholders,
form the majority; and
(b) a majority of the clauses in the unanimous shareholders’ agreement
that they will be implemented by ordinary resolution. The
therefore, control the decision-making in relation to those clauses.
The parties agreed to an [TRANSLATION] “agreement as to the facts, issue
(Exhibit A-1), of which I reproduce the section on the facts in full here:
[TRANSLATION]
AGREEMENT AS TO THE FACTS, ISSUE AND DOCUMENTS
FILED BY CONSENT
1. RELEVANT FACTS ADMITTED BY THE PARTIES
1.1 Bioartificial Gel Technologies (BAGTECH) Inc. (“Bagtech”) was incorporated on March 8, 1996, under the Canada Business Corporations Act (“CBCA”). 1.2 It is a taxable Canadian corporation as defined in subsection 89(1) of the Income Tax Act (Canada) (“ITA”). 1.3 After it acquired patented technologies, Bagtech specialized in cutting-edge medical technologies, including the development of several ranges of moist bandages that assist in speeding the scarring process for various types of wounds. 1.4 Since it began operating, and throughout the 2004 and 2005 taxation years, each ending on December 31 (“2004 and 2005 taxation years”), Bagtech carried on scientific research and experimental development activities (“SR&ED”).
1.6 During the 2005 taxation year, Bagtech incurred SR&ED operating expenses in the
amount of $1,461,189 and SR&ED capital expenditures in the amount of $69,641.
1.7 Bagtech’s authorized capital stock is composed of Class A, B, C, D and E shares. 1.8 Only Class A shares are voting and participating. 1.9 Class B and C shares bear a non-cumulative dividend at a maximum rate of 8% and are redeemable in the amount of the stated capital. 1.10 Class D and E shares bear a non-cumulative dividend at a maximum rate of 8% and are redeemable at the stated amount plus a premium equivalent to the difference between the stated amount and the fair market value of property received by the company at the time the shares were issued. 1.11 Throughout the 2004 and 2005 taxation years, only one Class D share was issued and outstanding, at the time of incorporation, in the name of Guy Fortier (” Fortier “), a Canadian resident, in consideration for certain technologies. 1.12 All other issued and outstanding shares were Class A shares. 1.13 In the first round of financing, carried out in 1998, the Fonds régional de solidarité de l’île de Montréal (Quebec, Canada) (” FRSIM “) and the Fonds de Solidarité des travailleurs du Québec (F.T.Q.) (Quebec, Canada) (” FSTQ “) participated in the subscription for Class A shares of Bagtech. 1.14 The other investors were a group represented by the founders of Bagtech, and only investors resident in Canada were shareholders of Bagtech. 1.15 In 1999, two European “business angels” subscribed to the capital stock of Bagtech, and in 2000, two other venture capital corporations subscribed to the capital stock: SGF Santé Inc. (Quebec, Canada) (” SGF “) and Finedix B.V. (Amsterdam, Netherlands) (” Finedix “). 1.16 In 2002, the following venture capital corporations subscribed to the capital stock of Bagtech: Medco SA (Geneva, Switzerland) (” Medco “), Schroder &Co. Bank AG (Zurich, Switzerland) (” Schroder “) and Gutrafin Limited (London, England) (” Gutrafin”), with the result that 45.31% of the outstanding Class A shares were then held by non-residents of Canada. 1.17 In 2003, in an additional round of financing, a number of shareholders acquired new Class A shares of Bagtech: the venture capital corporation Auriga Ventures II (Paris, France) (” Auriga “) and two “business angels”, Youri Popowski (Geneva, Switzerland)
(” Popowski “) and Investissements Onami inc. (Quebec, Canada) (” Onami “).
1.18 On September 11, 2003, the Bagtech shareholders signed a document entitled [TRANSLATION] “unanimous shareholders’ agreement” (” USA “), which included the following clauses: “RULES OF INTERNAL GOVERNANCE Article 3.1 Subject to the following provisions, the Shareholders agree, during the term of this Agreement, to take the necessary measures and to use the voting rights associated with the Shares they hold to elect and continue seven Directors on the Board of Directors. Article 3.2 On the date of this Agreement, the Shareholders agree that the Board of Directors shall be composed of representatives appointed
by the Shareholders as hereinafter set out:
Group A 2 Directors (including Marie-Pierre Faure)
Group C 2 Directors (including André Lamotte)”
1.19 Under the definition set out in article 1.21 of the USA, Group A is composed of the following shareholders: Marie-Pierre Faure (” Faure “), Fortier, Richard J. Deckelbaum (” Deckelbaum “), Jean Emmanuel Raphael Guetta (” Guetta “), Amaze through its delegated director, Richard…mile Azera (” Amaze “), Jean-François Brisson (” Brisson “), Marie-Claude Lévesque (” Lévesque “), Marielle Robert (” Robert “), Popowski and Onami. 1.20 Under the definition set out in article 1.22 of the USA, Group B is composed of the following shareholders: SGF, FSTQ, FRSIM, Finedix and Auriga, of which SGF appoints one director and FSTQ and FRSIM jointly appoint a second director. 1.21 Under the definition set out in article 1.22 of the USA, Group C is composed of the following shareholders: Medco, Gutrafin and Schroder, which appoints two directors, including Collin Bier who is to act as chair of the board of directors. 1.22 On December 31, 2004, over 60% of the Class A shares outstanding were held by non- residents of Canada. 1.23 In the period from January 1 to July 21, 2005, the shareholders of Bagtech were the same as the shareholders on December 31, 2004. 1.24 On July 22, 2005, other investors subscribed to the capital stock of Bagtech: HSBC
(Switzerland), Auxitec (France), Ayman (Switzerland) and Bagadine (France).
1.25 Following the subscriptions of those investors for shares in the capital stock of Bagtech, clauses 3.1 and 3.2 of the USA were changed by amendment to the USA dated July 22, 2005, to indicate that the number of directors of Bagtech would be increased to eight from seven, and that the number of directors appointed by Group C would increase to three from two, one of whom would be appointed by Bagadine. 1.26 On December 31, 2005, over 70% of the Class A shares outstanding were held by non- residents of Canada. 1.27 When Bagtech’s original return for its 2004 and 2005 taxation years was filed, the corporation was not designated as a “Canadian-controlled private corporation” (“CCPC”). 1.28 On or about June 1, 2007, under subsection 127.1(1) of the ITA, an amended prescribed form was filed for the 2004 and 2005 taxation years, to have Bagtech’s status recorded as a CCPC and an “eligible corporation”, for it to be given the applicable refundable investment tax credits at the 35% rate instead of the 20% initially claimed, and to have a portion of that credit refunded to it. 1.29 On October 21, 2008, Bagtech made an assignment of property and Price Waterhouse Coopers Inc. was appointed as trustee in the bankruptcy of Bagtech. 1.30 On November 3, 2008, CRA issued its decision that Bagtech was not, in its opinion, a
Canadian-controlled private corporation during the 2004 and 2005 taxation years.
1.31 On April 9, 2009, CRA issued a “notice of determination of loss” for the 2004 and 2005 taxation years.
and Conclusion
Under paragraph (b) of the definition of a CCPC in subsection 125(7) of the ITA,
is not a CCPC where, if each share of the corporation that is owned by a
be controlled by the particular person.
As was held in Sedona Networks Corp. v. The Queen, 2007 FCA 169, the paragraph (b
must be done in two stages. First, it is necessary to determine who the
and public corporations are, and assume that their shares are owned by a
Second, once that attribution is made, it is necessary to determine whether
is controlled by that “particular person”. In the case, the evidence is that
31, 2004, 62.52% of the outstanding Class A shares of Bagtech (Class A
the only voting shares of Bagtech during that year) were held by non-residents
The evidence also is that on December 31, 2005, 70.42% of the outstanding Class
of Bagtech (Class A shares being the only voting shares of Bagtech during that
held by non-residents of Canada.
The question to be answered now is: while the “particular person” held 62.52%
of the outstanding Class A shares of Bagtech on December 31, 2004,
31, 2005, respectively, did the “particular person” actually control Bagtech
years? To answer that question, the meaning of the word “control” for the purposes
ITA must be determined.
The courts have had to rule on the issue of control a number of times, since there is
in the ITA.
The leading case with respect to control is Buckerfield’s Ltd. v. Minister of
, [1965] 1 Ex. C.R. 299, in which President Jackett wrote:
Many approaches might conceivably be adopted in applying the word “control” in a statute such as the Income Tax Act to a corporation. It might, for example, refer to control by “management”, where management and the board of directors are separate, or it might refer to control by the board of directors…. The word “control” might conceivably refer to de facto control by one or more shareholders whether or not they hold a majority of shares. I am of the view, however, that in Section 39 of the Income Tax Act [the former section dealing with associated companies], the word “controlled” contemplates the right of control that rests in ownership of such a number of shares as carries with it the right to a majority of the votes in the election of the board of directors. [Emphasis added.] See British American Tobacco Co. v. I.R.C., [1943] 1 All E.R. 13, where Viscount Simon L. C., at page 15, says:
The owners of the majority of the voting power in a company are the persons who
are in effective control of its affairs and fortunes.
That excerpt from the decision of the Exchequer Court was subsequently cited
on a number of occasions by the Supreme Court of Canada (the SCC), in
Minister of National Revenue v. Dworkin Furs (Pembroke) Ltd., [1967] S.C.R. 223, (Canada) Ltd. v. Minister of National Revenue, [1968] S.C.R. 193, R. v. Imperial
S.C.R. 795.
It is clear from that case law that, for the purposes the ITA, “control” of a
de jure control and not de facto control. In short, Buckerfield’s stands for
that the test consists in deciding whether the majority shareholder enjoys
over the “affairs and fortunes” of the corporation, as manifested in “ownership of
number of shares as carries with it the right to a majority of the votes in the election of
of directors”.
One important clarification was subsequently added to the comments made by
in Buckerfield’s. Indeed, in Imperial General Properties Ltd., supra, at para. 11, stated that, in determining de jure control, “the court is not limited to a highly
narrow interpretation of the legal rights attached to the shares of a corporation”. In
highest court in the land essentially reiterated what had been said by Thurlow J. in
Ltd. v. Minister of National Revenue, [1969] 2 Ex. C.R. 43, affirmed by
v, and held that “[n]either is the court constrained to examine those rights in
only of their immediate application in a corporate meeting”, and that, on the
rights must be assessed in their impact ‘over the long run'” (Imperial
Ltd., supra, at para. 11).
While under the legislation that governs the corporation, directors generally have
right to manage the corporation’s day-to-day activities, the majority
that control indirectly by virtue of their right to elect the board of
it is unquestionably the majority shareholder, and not the directors
exercise control of the corporation “over the long run”: see British American Tobacco I.R.C., [1943] 1 All E.R. 13, at p. 15.
The final important authority regarding the de jure control rule laid down is, of course, Duha Printers, a decision of the SCC.
In that case, the fact that the relevant test was de jure control was not really disputed
parties. The dispute related, rather, to the factors that may be taken into consideration
determination of whether there is de jure control.
Iacobucci J. commenced his analysis by reiterating that “to apply formalistically a
that set out in Buckerfield’s, without paying appropriate heed to the reason for the lead to an unfortunately artificial result” (Duha Printers, supra, at para. 37). On that should be recalled that the central objective of the Buckerfield’s test is to determine
control of the corporation lies.
The SCC then concluded that, as a general rule, “external agreements are not to be
The SCC’s reasoning is justified by the principle that de jure control is the
by the majority vote in a corporation. While the SCC has sometimes been
examine factors other than a corporation’s share register, its review has always
only to the constating documents, not external agreements. The only exception
in cases like Minister of National Revenue v. Consolidated Holding Co., [1974]
where the very capacity to act was limited by external documents, but that exeption
only in cases where the shares were held by trustees: at paras. 48 to 50.
Iacobucci J. also placed some weight on the fact that “taxpayers rely heavily
certainty and predictability can be gleaned from the Income Tax Act “.
the opinion of the SCC, “a simple test such as that which has been followed
“ is desirable: para. 52. “The de facto concept was rejected because it
control in fact, which can lead to a myriad of indicators which may exist
these sources”: para. 58.
Accordingly, Iacobucci J. dismissed the possibility of reviewing external agreements
de jure control analysis, and stated:
… agreements among shareholders, voting agreements, and the like are, as a general matter, arrangements that are not examined by courts to ascertain control. In my view, this is because they give rise to obligations that are contractual and not legal or constitutional in nature. (para. 59)
Iacobucci J. then examined the question of whether a unanimous
must be qualified as contractual in nature, or in the nature of a constating
The SCC settled the issue by deciding that a unanimous shareholders’ agreement is
law hybrid, part contractual and part constitutional in nature” (para. 66). That
the SCC was careful to go on to say that the constitutional element of the
agreement is even more potent than its contractual features: para. 67.
Accordingly, if an agreement can be considered to be a unanimous
(USA) within the meaning of the Canada Business Corporations Act (the
must be taken into consideration just like the corporation’s constating documents in order
de jure control. The legal reasoning underlying the principle that a
agreement may play a vital role in the de jure control analysis is
by the following comments of Iacobucci J.:
As I have said, the essential purpose of the Buckerfield’s test is to determine the locus of effective control of the corporation. To my mind, it is impossible to say that a shareholder can be seen as enjoying such control simply by virtue of his or her ability to elect a majority of a board of
dependent in a very real way on the control enjoyed by the majority of directors, whose election lies within the control of that shareholder. When a constating document such as a USA provides that the legal authority to manage the corporation lies other than with the board, the reality of de jure control is necessarily altered and the court must acknowledge that alteration. (para. 70)
In other words, the share register should be examined having regard to the
provisions governing the corporations (in this instance, the CBCA) and
constating documents (to which unanimous shareholders’ agreements must
as analogous). However, external agreements play no role in this analysis, since they
only to de facto control.
Lastly, the SCC concludes by cautioning that “the simple fact that the shareholders of
have entered into a USA does not have the automatic effect of removing de
from a shareholder who enjoys the majority of the votes in the election of the board
The extent to which the provisions of a unanimous shareholders’ agreement
abrogate the directors’ powers must be examined (para. 81): “it is possible to
de jure control has been lost as a result of a USA by asking whether the USA
way for the majority shareholder to exercise effective control over the affairs and
the corporation in a way analogous or equivalent to the power to elect the majority of
of directors (as contemplated by the Buckerfield’s test)” (para. 82).
Paragraph 85 of Duha Printers provides an excellent summary of the current
to the concept of “control”. That paragraph reads as follows:
[85] It may be useful at this stage to summarize the principles of corporate and taxation law considered in this appeal, in light of their importance. They are as follows:
(1) Section 111(5) of the Income Tax Act contemplates de jure, not de facto, control.
(2) The general test for de jure control is that enunciated in Buckerfield’s, supra:
whether the majority shareholder enjoys “effective control” over the “affairs and fortunes” of the corporation, as manifested in “ownership of such a number of shares as carries with it the right to a majority of the votes in the election of the board of directors”.
(3) To determine whether such “effective control” exists, one must consider:
(a) the corporation’s governing statute;
(b) the share register of the corporation; and
(c) any specific or unique limitation on either the majority shareholder’s power to control the election of the board or the board’s power to manage the
business and affairs of the company, as manifested in either:
(i) the constating documents of the corporation; or
(4) Documents other than the share register, the constating documents, and any
unanimous shareholder agreement are not generally to be considered for this purpose.
(5) If there exists any such limitation as contemplated by item 3(c), the majority
shareholder may nonetheless possess de jure control, unless there remains no other way for that shareholder to exercise “effective control” over the affairs and fortunes of the corporation in a manner analogous or equivalent to the Buckerfield’s test.
While Duha Printers clearly stands for the proposition that a unanimous
must be taken into consideration in determining de jure control, the
that an agreement of that nature must have no influence on the second stage of
(that is, the determination of control of a corporation by a “particular person”) for
of paragraph (b) of the definition of a CCPC. Paragraph 21 of
2008-0265902I7 –Canadian Controlled Private Corporation provides a
summary of the Minister’s argument on this point. That paragraph reads as follows:
[TRANSLATION]
21. In that specific case, indeed as a general proposition, we reiterate our position that a USA
has no impact on the second stage of the analysis (i.e. determination of control of a corporation by the hypothetical particular person) for the purposes of paragraph (b) of the definition of CPCC in subsection 125(7). It still seems to us that the determination provided for in the second stage of the analysis is purely arithmetical. The case law in no way rejects that approach; on the contrary, the Federal Court of Appeal unreservedly holds that mere possession of shares by a non-resident majority is sufficient to give the non- residents control for the purposes of paragraph (b) of the definition of CCPC in subsection 125(7). In any event, as stated in the Document, the hypothetical particular person is not a party to any unanimous shareholders’ agreement or deemed to be such for
the purposes of paragraph (b) of the definition of CCPC in subsection 125(7).
CRA, Technical Interpretation 2008-0265902I7, “Canadian-Controlled Private Corporation” (May 6, 2008), at para. 21.
At this point, I think it will be useful to summarize the circumstances in
added paragraph (b) to the definition of a CCPC. It was added by S.C. 1998, c.
145(2), and evidently runs counter to the decision of the Federal Court of Appeal
Graphics Ltd. v. The Queen, [2003] 1 F.C. 447, in which the Court held that
of a mathematical majority of shares by a random aggregation of shareholders in
held corporation with some common identifying feature (e.g. place of residence)
a common connection does not constitute de jure control as that term has been
the case law” (at para. 36). The comments by the Federal Court of Appeal were made in
of an analysis of the applicable law before new paragraph (b) was added to
of a CCPC.
In this regard, the purpose of the provision is, moreover, clearly laid out in the
notes published by the Minister of Finance:
Currently, a corporation is a CCPC if it is a private corporation and a Canadian corporation (both of which terms are defined in subsection 89(1) of the Act), and it is not controlled, directly or indirectly in any manner whatever by one or any combination of public corporations (other than prescribed venture capital corporations) or non-resident persons. This amendment ensures that two other types of corporation are not CCPCs. The first type are corporations that, if they are not actually controlled by non-residents, avoid that status only because their shares are widely held. The second type are corporations the shares of which are listed on a foreign stock exchange.
A corporation the voting shares of which are distributed among a large number of persons is usually not considered to be controlled by any group of its shareholders, provided the shareholders do not act together to exercise control. As a result, it may be argued that a private Canadian corporation that is owned by a number of non-residents or public corporations is not controlled by non-residents or public corporations, and is thus a CCPC. New paragraph (b) of the CCPC definition clarifies that this is not the case. Paragraph (b) requires non-residents’ and public corporations’ shareholdings -not only of the corporation in question, but of all corporations -to be notionally attributed to one hypothetical person. If that person would control the corporation, then the corporation is not a CCPC.
Department of Finance of Canada, Explanatory Notes Relating to Income Tax (December 8, 1997), s. 125(7), “Canadian-controlled private corporation”.
The practical result is, therefore, that paragraph (b) of the definition of a CCPC creates fiction. This kind of alteration of reality was thoroughly canvassed by the SCC in R.
, [1978] 2 S.C.R. 838. Writing for the Court, Mr. Justice Beetz characterized this
legal fiction as a “deeming provision” and explained its effect as follows:
A deeming provision is a statutory fiction; as a rule it implicitly admits that a thing is not what it is deemed to be but decrees that for some particular purpose it shall be taken as if
it were that thing although it is not or there is doubt as to whether it is. (p. 845)
The purpose and application of a deeming provision was then examined in detail by
Court of Appeal in Attorney General of Canada v. Scarola, 2003 FCA 157, [2003]
645, in which Létourneau J. based his explanation in part on the following
Fiction is a process that, as repeatedly noted, is part of the pragmatics of law. It consists first in misrepresenting the facts, stating them to be other than what they really are and extracting from that very adulteration and that false supposition the legal consequences that would flow from the dissembled truth, if that truth existed beyond the cloak of external appearances. (para. 19)
In Survivance v. Canada, 2006 FCA 129, at para. 55, the Court stated: “Insofar as
Indeed, those comments are consistent with those of the SCC in Shell Canada Ltd.
, [1999] 3 S.C.R. 622, in which Madam Justice McLachlin, as she then was, stated,
that have been repeatedly cited since then:
The Act is a complex statute through which Parliament seeks to balance a myriad of principles. This Court has consistently held that courts must therefore be cautious before finding within the clear provisions of the Act an unexpressed legislative intention:…. (par. 43)
Accordingly, I am of the opinion that, in spite of the particular characteristics
(b) of the definition of a CCPC, it must be read in its entire context and in
and grammatical sense harmoniously with the scheme of the Act, the object of
and the intention of Parliament: see Ludco Enterprises Ltd. v. The Queen, 2001 SCC
2 S.C.R. 1082, at para. 36.
Consequently, the legal effects of this legal fiction, which are superimposed on the
is being pushed aside, mean that the “particular person” to whom we are referring here
to have the same rights and to be subject to the same obligations as the
of the shares of the corporation in question.
Subsection 146(3) of the CBCA provides:
A purchaser or transferee of shares subject to a unanimous shareholder agreement is
deemed to be a party to the agreement.
Considering everything that has been discussed here, I therefore find it very difficult
the position that the “particular person” referred to in paragraph (b) of the definition CPCC cannot be deemed, in determining de jure control, having regard to the alteration
facts imposed by the provision, to be a party to the unanimous shareholders’
in effect.
The Minister contends that the effect of having regard to a unanimous
in effect at the time the test of the hypothetical shareholder is examined could be
the analysis of control of the corporation in question, since when the
agreement in question was written, the shareholders of the corporation
not have foreseen that the fictitious shareholder for which the provision
join in the future. Accordingly, in order to avoid unusual or undesirable results,
concludes that it is preferable not to deem the hypothetical shareholder to be a
the unanimous shareholders’ agreements then in effect. The Minister explains:
Where Canadian residents do not own enough shares to elect a majority of the board of directors,
hypothetical person as having the ability to exercise effective control over the affairs and fortunes of the corporation in a way analogous to the power to elect the majority of directors. That is so because the hypothetical person is not a party to a unanimous shareholder agreement nor is that person deemed to be a party to it. In our view, it would be contrary to both the text and the purpose of the provision to consider that the fiction of control created by the application of paragraph (b) of the CCPC definition could be diluted by an agreement that restricts the powers of the directors of a corporation to allocate them to shareholders that would never include the hypothetical shareholder.
See: Andrew W. Dunn, Ron Durand, Phil Jolie, and Mark Symes, “Canada Revenue Agency Round Table,” Report of the Proceedings of the Sixty First Tax Conference, 2009 Conference Report (Toronto; Canada Tax Foundation, 2009), at pages 3:14-3:15.
In my view, the answer is inescapable. The result appears incongruous only if we
to have regard to the fiction. It is not incongruous if the fiction is given full effect.
In my humble opinion, we need only imagine a situation where all of the
are non-residents or that are public corporations decided, for some reason, to sell all
in the corporation to the same purchaser. It is undeniable that, in such a case,
of the shares would be a party to any unanimous shareholders’ agreement then
I could not agree more with the Federal Court of Appeal, when it stated: “There
a risk of creating intolerable uncertainty if the courts could override a deeming provision
application solely because the result it produces in a particular case
to them. Parliament is well aware of the effect of the presumptions it enacts, and
up to Parliament to set limits on their scope.” (Survivance, supra, at para. 79).
In this case, paragraph (b) of the definition of a CCPC is a provision of
and it is the role of the courts to give effect to it.
In conclusion, I am of the opinion that the hypothetical shareholder contemplated
(b) of the definition of “Canadian-controlled private corporation”
125(7) of the ITA is bound by the Bagtech USA signed in 2003, and
the amendments made in 2005.
The question that should now be answered is: must the clauses of a USA governing
of a corporation’s directors be taken into consideration in the determination of de
of the corporation?
In my opinion, before answering that question, we need a clear understanding of
of a unanimous shareholders’ agreement for the purposes of the
An otherwise lawful written agreement among all the shareholders of a corporation, or among all the shareholders and one or more persons who are not shareholders, that restricts, in whole or in part, the powers of the directors to manage, or supervise the management of, the business and affairs of the corporation is valid.
Subsection 146(1) of the CBCA seems to be setting four requirements that an
meet in order to be qualified as a unanimous shareholders’ agreement. First,
obviously must be lawful and meet the general requirements for
Second, the agreement must be in writing, and it should be noted that this
indeed a prerequisite for validity and not merely evidentiary. It must also be entered into
the shareholders of a corporation, whether among themselves or with third parties.
it must restrict, in whole or in part, the powers of the directors to manage or
management of the business and affairs of the corporation. An agreement signed by all
that merely increases the number of votes required for certain actions to be
the shareholders, in accordance with subsection 6(3) of the CBCA, may, in
be a unanimous shareholders’ agreement, even if it does not restrict or abrogate
the directors’ powers. However, that is the only exception, under both Quebec and
see Paul MARTEL, Entreprises et sociétés, Collection de droit 2011 2012,…cole du Québec, vol. 9, 2011, pp. 41 et seq.
These four requirements that a unanimous shareholders’ agreement must meet in
be valid were also reiterated by the SCC in the only case that has examined
agreements in detail: Duha Printers, supra.
The CBCA, the Ontario Business Corporations Act and the Civil Code of Québec,
all provide for an express exception to the prohibition on fettering the power of
Thus the various Canadian statutes governing business corporations provide
shareholders’ agreements will be valid, notwithstanding the common law
shareholders, even acting unanimously, may not fetter the board’s power to manage
the management of the business and affairs of the corporation or prevent it
its legal duty to do so. (The prohibition on fettering the powers of the
to originate in Automatic Self Cleansing Filter Syndicate Co. Ltd. v. Cuninghame 2 Ch. 34 (C.A.). The principle was then reiterated in Motherwell v. Schoof, [1949] 812 (Alta. S.C.) and Atlas Development Co. v. Calof (1963), 41 W.W.R. 575
In fact, before there were unanimous shareholders’ agreements, the ability
to control the corporation was limited to the power to elect and dismiss
unanimous shareholders’ agreements became part of corporate law, they
the landscape by creating a mechanism whereby shareholders can strip directors
management powers in whole or in part.
It has a positive aspect in that it provides that the shareholders may exercise
they have taken away from the directors.
In and of themselves, unanimous shareholders’ agreements make it possible
to considerably depart from the standard rules of corporate law; they bring
of flexibility to the some of the rather rigid and arid old principles.
In addition, and as I noted earlier, regarding legal recognition of USAs, the
a number of aspects of a unanimous shareholders’ agreement in Duha Printers
. Writing for the SCC, Iacobucci J. said that a unanimous shareholders’ agreement is
law hybrid, part contractual and part constitutional in nature” (Duha Printers, supra
66).
That being said, the SCC was careful to go on to say that the “constitutional element
USA is even more potent than its contractual features”: paras. 67 and 68.
Another important element of a unanimous shareholders’ agreement is obviously that
be binding on future shareholders. In fact, a purchaser or transferee of shares is
an irrebutable presumption, to be a party to the unanimous shareholders’ agreement:
146(3) of the CBCA However, if the purchaser or transferee is not informed of
of the unanimous shareholders’ agreement, by an endorsement on the
or otherwise, the shareholder may, no later than 30 days after he becomes aware
existence of the unanimous shareholders’ agreement, rescind the transaction by which
acquired the shares: see subsection 146(4) of the CBCA.
It also seems to me to be essential to conclude this overview of unanimous
by stressing that the very nature of unanimous shareholders’ agreements is
the directors’ power and expand the power of shareholders in the management of
see Paul MARTEL, Entreprises et sociétés, Collection de droit 2011-2012, Barreau du Québec, vol. 9, 2011, p. 41 et seq.; Normand RATTI, La convention actionnaires, (1986) C.P. du N. 93. The SCC could not have been clearer on this
that “[u]nlike an ‘ordinary’ shareholder agreement, which cannot interfere with
of the directors’ powers, a USA can and must do so”. (Duha Printers, supra,
71). Ultimately, the effect of a unanimous shareholders’ agreement restricting
power must be to substitute the shareholders for the directors in the exercise of
powers and responsibilities, to the extent of the restriction: see subsection 146(5) of
Instead of removing the administrators, a unanimous shareholders’ agreement
them of their powers and rights and their associated responsibilities. The CBCA
that the directors shall manage the business of a corporation “[s]ubject to
shareholder agreement” (see subs. 102(1) of the CBCA), and expressly
the directors and officers comply with the provisions of such an agreement:
The question that should now be answered is: can a unanimous shareholders’
clauses other than clauses relating to the management of a corporation? If so, are
clauses restricting the directors’ power covered by the provisions of the
legislation relating to unanimous shareholders’ agreements? In other words,
the clauses that restrict the directors’ power create the presumption that they may be
against new shareholders?
Although the agreement is described as a unanimous shareholders’ agreement, it must
in mind that an agreement signed by all shareholders, the only effect of which is
the directors’ power, cannot be considered to be a unanimous shareholders’
the meaning of the CBCA and cannot be set up against future shareholders: see
La société par actions au Québec, vol. 1, Les aspects juridiques, Montréal,
Lafleur, 2011, paras. 27-34.
Conversely, an agreement entered into by all shareholders of a corporation that
directors’ power can be qualified as a unanimous shareholders’ agreement
fact that it is called something else: see Paul MARTEL, La société par actions au Québec , paras. 27 34, Alteco v. The Queen, [1993] T.C.J. No. 213 (QL), [1993] 2 C.T.C.
para. 35.
Moreover, the question of whether an agreement is a unanimous
when some of its provisions restrict the directors’ powers, is still controversial:
BEAUREGARD and François AUGER, Les conventions entre actionnaires,
fiscales, (Montréal, Canadian Tax Foundation, 2010), p. 12.
Well before being appointed to the bench, Iacobucci J. had spoken on this point:
The statutory provision relating to unanimous shareholder agreements are found in ss. 2(1) and 146 of the CBCA, and ss. 1(1), 45 and 108 of the OBCA. Note that the distinguishing feature of a “unanimous shareholder agreement” in the statutes is that it “restricts, in whole or in part, the powers of the directors to manage [or, in the OBCA, to supervise the management of] the business and affairs of the corporation”. Suppose an agreement between all the shareholders of the corporation restricts the authority of the directors, but also contains other agreements, relating to such matters as buy-sell arrangements, requisite shareholders votes on the undertaking of fundamental changes, shareholder voting agreements, etc. Is the whole agreement a “unanimous shareholder agreement”, or only that part that relates to the authority of the directors? Do the words “in whole or in part” in CBCA s. 146(2) and OBCA s. 108(3) refer to the “written agreement”, or do they refer to the restriction of the powers of directors? The distinction may be important. For example, a transferee of shares with notice of a common law voting agreement is not bound by the agreement (because of the absence of privity of contract); see Greenhalgh v. Mallard, [1943] 2 All E.R. 234 (C.A.). However, a transferee of shares subject to a u.s.a. is bound by the u.s.a.; see CBCA s. 146(4), OBCA s. 108(4) (although note the limitation contained in CBCA s. 49(8), OBCA s. 56(3)).
The Cambridge Lecture 1981, complied by N. Eastham and B. Krivy, 1982, p. 88, at pages 92 to 95.
A number of authors, Paul Martel being just one, nonetheless maintain that a USA
clauses other than clauses relating to the management of the corporation, but that
RANSLATION] “only clauses restricting the directors’ power are covered by the provisions of
relating to unanimous agreements, and the presumption that those provisions
respect of new shareholders applies only to those clauses and not to the rest of
(see Paul MARTEL, Les conventions entre actionnaires, Montréal, Wilson
2007, pp. 340-341). Paul Martel also argues that it would be preferable to
two types of clauses in separate agreements:
[TRANSLATION]
In general, administration clauses should be treated, in practice, as apples, and other clauses as oranges, and they should be in two separate documents. Particularly at the provincial level, it is difficult to have purchase and sale clauses take the form of a restriction on the directors’ power, and it is virtually impossible to do so for voting and corporate clauses. Administration clauses, a “unanimous agreement” in the sense of the Act, will automatically be binding on new shareholders (mind that the share certificates are endorsed to that effect), while the other clauses will be binding on new shareholders who expressly adhere to them, with the authorization of the signatories.
See: Paul MARTEL, Les conventions entre actionnaires, supra, at page 341.
Daniel Lafortune shares that opinion and writes:
[TRANSLATION]
That being the case, is a stranger to the agreement who becomes a shareholder bound by the shareholders’ agreement? A distinction must be made in that regard. Are we dealing with provisions in the nature of a unanimous agreement or provisions of an entirely different nature?
For provisions that are not in the nature of a unanimous agreement, the rule is simple. By operation of the principle of the relative effect of contracts, strangers are not bound by the agreement, unless they agree to be.
See: Daniel LAFORTUNE, La convention d’actionnaires (2002), 36 R.J.T. 197, at page 217.
The Superior Court of Quebec also seems to be of the opinion that a
agreement is divisible, and, indeed, gives an excellent summary of that
Leblanc v. Fertek Inc., REJB 2000 20884, [2000] J.Q. No. 4045 (QL). In that
Justice Dalphond dealt differently with clauses in the nature of a unanimous
that appear in a simple shareholders’ agreement:
[TRANSLATION]
“Whereas”, has two objectives: to record the shareholders’ agreement regarding management of the corporation and regarding the ownership and transfer of their shares.
50 The first aspect is a unanimous shareholders’ agreement within the meaning of s. 146(2) of the CBCA, since it is an agreement in writing signed by all the shareholders relating to the management of the business and affairs of the corporation.
51 The purpose of a unanimous shareholders agreement, or a declaration by the sole shareholder to the same effect, is essentially to restrict the powers of the directors of the corporation, not the ownership of shares. Indeed, it is because that is the purpose of this kind of agreement that it can be made by a sole shareholder, as provided by subs. 146(3) of the CBCA. The directors and officers of the corporation, including Tassé, shall comply with the agreement (s. 122(2) of the CBCA).
52 The second aspect of the agreement deals with questions relating to ownership of shares and not the management of the corporation. That class of agreement does not need to be agreed to by all shareholders. Accordingly, we see agreements among shareholders representing only a majority, governing their right to vote at annual general meetings, for example, or granting them first refusal rights in the event that shares are sold. The validity of an agreement of that nature has long been recognized (Bergeron v. Ringuet, [1960] S.C.R. 672, [1958] B.R. 222) and it is government by the civil law of contracts, unless there are specific provisions in legislation that applies to the corporation, such as the CBCA or the Securities Act. Because it is a contract, there must be at least two parties, because a person cannot contract with themself.
53 To summarize, the two aspects of the agreement made between the shareholders in January 1996 must not be confused, even though they appear in the same document. (at paras. 49 to 53)
However, other authors believe that a unanimous shareholders’ agreement may deal
subjects that do not directly affect the internal management of the
P. McGuinness writes:
12.209 In addition, provisions are scattered throughout both the OBCA and the CBCA indicating various subjects that may be dealt with in a USA, aside from the general authority to restrict the power of the directors. …
12.212 … the question is sometimes raised as to whether a unanimous agreement may deal with matters outside the management of the corporation…. it is doubtful that the inclusion of any such collateral provisions would adversely affect the validity of a unanimous shareholder agreement or its status as such. It has always been open to the shareholders to regulate their own relationship.
See Kevin P. McGUINNESS, Canadian Business Corporations Law, 2nd ed., Markham, 2007, pages 1215 to 1218
After noting that, in his opinion, a unanimous shareholders’ agreement may
incidental provisions that are not intended to restrict directors’ powers,
the validity of the agreement, Mr. McGuinness lists a number of
of directors (pages 1215 to 1216).
The Alberta Court of Queen’s Bench also supported that position, to a certain extent,
v. Wood, [2004] A.J. No. 1230 (QL), 2004 ABQB 775, where it expressly
validity of a clause in a unanimous shareholders’ agreement relating to the election of
of directors:
8 The USA provided that the directors of the company would be Mr. Wood, Jennifer Wood and Mrs. Wood so long as each remained a shareholder. Two directors would constitute a quorum. If either Mr. Wood or Jennifer Wood ceased to be a director, the other would be “exclusively entitled to appoint a replacement director”. If Mrs. Wood should cease to be a director, she would not be replaced. (au par. 8)
Iacobucci J. made a very interesting observation before he was appointed to the
Frank IACOBUCCI, Canadian Corporation Law: Some Recent
, op. cit. In fact, he first just reminds us simply that a unanimous
appeared in the Canadian corporate law with section 146 of the CBCA, and
was subsequently adopted in a majority of corporations laws, including
146 of the Alberta act, the Alberta Business Corporations Act, RSA 2000, c. B 9.
Iacobucci J. noted that section 146 of the Alberta act seems to expand the scope of
beyond what is provided in the CBCA. Although the main purpose of a USA, at
the federal statute, is to restrict the directors’ power, section 146 of the Alberta
is set out in Appendix 2, does seem to have expanded its scope. Briefly, under
of the Alberta act, abrogating the powers of directors and assigning them to
is merely one possible purpose of a USA: see paragraph 146(1)(c). That
that a USA may provide for the manner of electing directors:
146(1)(b). After canvassing the issue, Iacobucci J. makes the following comments:
The new Alberta Business Corporations Act adopts and extends the u.s.a. concept [section 146]. After acknowledging that the primary approach of the CBCA u.s.a. provisions reflected a desire to have shareholders rather than directors manage a closely-held company, the designers of the Alberta statute felt that the u.s.a. should be expanded in scope to make the device even more useful and to clarify some of the problems which were felt to be present in the CBCA provisions.
With respect to the expanded scope of the u.s.a., the Alberta section allows the entrenchment of any provision concerning the internal affairs and organization of the corporation. The Alberta definition of a u.s.a. includes an agreement which does any one of the following:
(1) regulates the rights and liabilities of shareholders, as shareholders, among themselves or
between themselves and any other party to the agreement;
(2) regulates the election of directors;
(3) provides for the management of the business and affairs of the corporation, including the
(4) includes any other matter that may be contained in a u.s.a. pursuant to any of other
provision of the Alberta Business Corporations Act.
See: Frank IACOBUCCI, Canadian Corporation Law: Some Recent Shareholder Developments, op. cit., at pages 92 to 95.
On reading section 146 of the Alberta statute, we must conclude that the
intended to expand the scope of a unanimous shareholders’ agreement. The
provides that a shareholders’ agreement may include a number of elements
abrogating the powers of the board of directors: see subsection 146(1). Moreover,
act expressly provides that a unanimous shareholders’ agreement is binding on
even if it contains provisions that have nothing to do with restrictions on
power of management and oversight: see subsections 146(2) and (3).
Some useful conclusions can be drawn from this comparative examination of the
Alberta legislation.
First, if a unanimous shareholders’ agreement, as first provided for by the CBCA,
the outset, have included provisions other than restrictions on the power of the
did Alberta subsequently see fit to make substantial changes to the wording of
Other jurisdictions, such as Quebec and Manitoba, have merely reiterated the
section 146 of the CBCA (see the Business Corporations Act, RSQ, c. S 31.1, section The Corporations Act, C.C.S.M., c. C225, subsection 140(2)). Why would one
to the effort of specifying, in its corporations act, that a unanimous shareholders’
do more than restrict, in whole or in part, the powers of the board of directors, if
already permitted that?
Second, why did Parliament not make it clear, similarly to Alberta, that a
agreement may include provisions other than provisions abrogating the
of management and oversight, when it would have been easy to do so if that had
intention?
In another vein, I would briefly note that a number of doctrinal opinions are to the
if someone tried to take advantage of the benefits of unanimous shareholders’
incorporating minor restrictions on the powers of directors, simply to satisfy
a court could declare those restrictions to be insufficient and refuse
the document as a unanimous shareholders’ agreement: see
and François AUGER, Les conventions entre actionnaires, op. cit., page 12.
note immediately that in my opinion, that position must be rejected.
It is apparent from this analysis that the question of whether unanimous
may contain only clauses restricting the power of directors remains to be settled.
The question that should now be asked is: in examining de jure control, must
the right of the majority shareholder to elect the directors of a
under the CBCA be considered, if those clauses appear in a
agreement that also restricts the directors’ power?
One school of thought holds that in examining de jure control, a
agreement should be examined, as constituting a single instrument,
relation to clauses whose sole effect is to restrict the power of the majority shareholders
the directors. Referring expressly to Duha Printers, Nathalie Beauregard and
opine:
[TRANSLATION]
Accordingly, a unanimous shareholders’ agreement whose clauses restrict the ability of the majority shareholder to elect the members of the board of directors or that substantially fetters the directors’ power to manage the corporation may have an impact on the de jure control of the corporation. This type of clause will therefore have to be scrutinized closely at the time the unanimous shareholders’ agreement is signed.
See: Nathalie BEAUREGARD and François AUGER, Les conventions entre actionnaires, supra, p. 18
Other authors take a more nuanced approach, and say that in examining the de of a corporation, while Duha Printers may seem to support the proposition that
shareholders’ agreement must be read as inseverable, only the provisions
restrict the directors’ powers must be taken into consideration:
It may seem strange that the restriction of the powers of directors is the feature that permits other unrelated provisions of the agreement, namely, those dealing with the election of the directors, to be taken into account in determining de jure control, especially since the very restriction of the directors’ powers might make one wonder why the ability to elect them should continue to be the litmus test for “effective control”.
See: Robert COUZIN, Some Reflections on Corporate Control, 2005, vol. 53, Can. Tax. J., 305, p. 318
That line of thought, or at least the criticism it levels at the conclusions reached by
seems to better reflect certain fundamental principles of corporate law, and to
converge with the position advocated by Paul Martel, who contends that a
agreement may address subjects other than the management of the
[TRANSLATION] “only clauses that restrict the power of the directors are governed by
of the act relating to unanimous shareholders’ agreements, and the
create regarding new shareholders applies only to those clauses, and not to the rest of
(Paul Martel, Les conventions entre actionnaires, op. cit., pp. 340 341.).
shareholders’ agreement is severable; in fact, it gave an excellent summary of
in Leblanc v. Fertek Inc., supra. In that case, involving an application for
under section 247 of the CBCA because of failure to comply with a
agreement, Dalphond J. accorded different treatment to clauses in the nature of
shareholders’ agreement that appeared in a simple shareholders’ agreement.
be noted, however, that the case related to corporate law and not the application
Printers in determining de jure control.
For my part, I agree with both the interpretation of Duha Printers offered by and with his criticism of that decision: see Robert Couzin, Some Reflections Control, supra, at pages 317 to 320.
However, a careful reading of paragraph 85 of the decision in Duha Printers leads me
that any restriction on the power of the majority shareholder to elect the directors,
in the constating document of the corporation or in a unanimous shareholders’
be considered in the determination of de jure control.
I agree that this is an unusual result. A restriction on the election of directors will not
to the analysis of de jure control if it appears in a voting agreement, while the
will be relevant if it is in a unanimous shareholders’ agreement. That being said,
no choice but to follow the doctrine of the SCC, even though it may seem illogical.
It would have been an easy matter for the SCC to write that in deciding whether there
control”, both any restriction on the majority shareholder’s power to elect
as manifested in the constating document of the corporation and any restriction
power of the directors to manage the business and affairs of the corporation as
any unanimous shareholders’ agreement must be taken into consideration.
However, the SCC states, instead, that we must have regard to either of these
either of those documents.
I am, therefore, of the opinion that, as a general rule, a clause in a
agreement that restricts the ability of the majority shareholders to elect
must be taken into account in the determination of the de jure control of in the light of Duha Printers.
To summarize, I am of the opinion:
(i) that a unanimous shareholders’ agreement must be taken into consideration
the purposes of paragraph (b) of the definition of the expression
controlled private corporation” in subsection 125(7) of the ITA; and
(ii) that a restriction on the right of the majority shareholder to elect the
set out in a written unanimous shareholders agreement, must be taken
consideration in the determination of the de jure control of a corporation.
The analysis I have done of the clauses of the USA that are genuinely in the nature of
shareholders’ agreement (that is, that restrict the power of the directors), which
identified (see Appendix 3), has persuaded me that they are minor restrictions on
In my opinion, the clauses do not operate to strip the hypothetical shareholder of
control.
We will now examine the provisions of the USA relating to the election of directors
in effect during the 2004 taxation year.
Under paragraph 3.2 of the USA, the directors are elected by three groups: Group
B and Group C. Because the “particular person” would have certain Class A
would be a member of each of those groups.
Because the directors chosen by Group A are elected by residents of Canada and two
three directors chosen by Group B are elected by residents of Canada, the
contemplated by paragraph (b) of the definition of a CCPC could appoint only one
five directors chosen by the members of those groups.
Because none of the three members of Group C is a resident of Canada, the
could appoint both directors elected by that group.
Accordingly, notwithstanding the fact that the “particular person” would hold
50% of the Class A shares of Bagtech, under the USA, it could not elect a majority
directors: under the USA, it is residents of Canada who elect a majority of the
is, four of the seven directors. As a result, the “particular person” could not, during
taxation year, have controlled Bagtech within the meaning of paragraph (b) of
of a CCPC in subsection 125(7) of the ITA.
We will now examine the clauses of the USA that were in effect during the
year.
Under paragraph 3.2 of the USA, the directors are elected by three groups: Group
B and Group C. Because the “particular person” would have certain Class A
would be a member of each of those groups.
Because none of the three members of Group C is a resident of Canada, the
could appoint the directors elected by the group: two directors, from January 1
Accordingly, notwithstanding the fact that the “particular person” would hold
50% of the Class A shares of Bagtech, under the USA, it could not elect a majority
directors: under the USA, it is residents of Canada who elect four of the seven
January 1 to July 21, and four of the eight directors, from July 22 to December 31. As
the “particular person” could not, during the 2005 taxation year, have
within the meaning of paragraph (b) of the definition of a CCPC in subsection
the ITA.
Accordingly, I am of the opinion that Bagtech was a “Canadian-controlled
within the meaning of subsection 125(7) of the ITA during the 2004 and
years and, therefore, that it was entitled to the “refundable investment tax
for in subsection 127.1(1) of the ITA.
For all these reasons, the appeal is allowed with costs.
at Ottawa, Canada, this 12th day of April 2012.
“Paul Bédard”
Bédard J.
certified true
this 9th day of January 2013.
Brunet, Revisor
Appendix 1
UNANIMOUS SHAREHOLDER AGREEMENT
(RELEVANT PORTION)
UNANIMOUS AGREEMENT AMONG THE SHAREHOLDERS
OF BIOARTIFICIAL GEL TECHNOLOGIES (BAGTECH) INC.
signed at Montréal, Quebec, on September 11, 2003
INVESTISSEMENTS ONAMI INC., having its principal place of business
285 avenue Clarke, suite 202, Westmount, Quebec, Canada H3Z 2E3,
herein by Hanan Ghraoui, who is duly authorized for the purposes hereof, as has declared;
(hereinafter ” Onami “)
AURIGA VENTURES II, Fonds Commun de Placements à Risques,
by the management company Auriga Partners, a limited liability company
management and supervisory boards and capital of 456,250 Euros, having its office at 18 avenue Matignon, 75008 Paris, represented herein by Jacques who is duly authorized for the purposes hereof;
(hereinafter ” Auriga “)
YOURI POPOWSKI, businessman, domiciled and residing at 16 rue
Servet, Geneva, Switzerland, 1206;
(hereinafter ” Popowski “)
MEDCO SA, a limited liability company duly constituted under the laws
Switzerland, having its head office at 11 rue de la Rôtisserie, CH-1204, Switzerland, represented herein by Ferdinand O. Walser, who is duly authorized the purposes hereof, as he has declared;
(hereinafter ” Medco “)
GUTRAFIN LIMITED, a limited liability company duly constituted under
laws of Switzerland, having a place of business at 40 Egerton Crescent,
England 5W3 2EB, represented herein by Francis C. Lang, who is duly
for the purposes hereof, as he has declared;
(hereinafter ” Gutrafin “)
SCHRODER &CO. BANK AG, acting on behalf of its clients, a
bank duly constituted under the laws of Switzerland, having its head office Central 2, Zurich, Switzerland, represented herein by Antonio Guicciardi, who is duly authorized for the purposes hereof, as he has declared;
(hereinafter ” Schroder “)
FONDS DE SOLIDARIT… DES TRAVAILLEURS DU QU…BEC (F.T.Q.),
legal person constituted under the Act to establish the Fonds de solidarité travailleurs du Québec (F.T.Q.), having its head office at 8717 rue Berri, Quebec H2M 2T9, represented by and acting through Daniel Laporte, who is authorized for the purposes hereof, as he has declared;
(hereinafter ” FSTQ “)
FONDS R…GIONAL DE SOLIDARIT… ÎLE DE MONTR…AL,
EN COMMANDITE, a limited partnership duly constituted under the laws
Quebec, acting through its general partner Gestion du fonds regional de
Île de Montréal Inc., having its principal place of business 255 rue
Ouest, 3rd floor, Montréal, Québec H2Y 1M6, itself represented by and
through André Savard, who is duly authorized for the purposes hereof, as he declared;
(hereinafter ” FRSIM “)
SGF SANT… INC., a company legally constituted under the laws of
having its head office at 600 rue de la Gauchetière Ouest, suite 1700,
Quebec, represented by and acting through Francis Bellido and Marc Paquet, are duly authorized for the purposes hereof, as they have declared;
2
(hereinafter ” SGF “)
FINECIX B.V., a limited liability company duly constituted under the laws of Netherlands, having its head office at (1043 EJ) Teleportboulevard Amsterdam, Netherlands, represented by and acting through Willem van general manager, who is duly authorized for the purposes hereof, as he declared;
(hereinafter ” Finedix “)
GUY FORTIER, residing and domiciled at 3428 rue Marcil, Montréal,
H4A 2Z3;
(hereinafter ” Fortier “)
MARIE-PIERRE FAURE, residing and domiciled at 1109 Place Guertin,
St-Laurent, Quebec H4M 1X5;
(hereinafter ” Faure “)
Hastings-on-Hudson, New York 10806, U.S.A.;
(hereinafter ” Deckelbaum “)
JEAN-FRANÇOIS BRISSON, residing and domiciled at 3020
Montréal, Quebec, H1L 3Z8
(hereinafter ” Brisson “)
9079-1039 QU…BEC INC., a company legally constituted under the laws
Quebec, having its head office at 1109 Place Guertin, Ville St-Laurent,
H4L 1X5, represented by and acting through Marie-Pierre Faure, its president, is duly authorized for the purposes hereof, as she has declared;
(hereinafter ” 9079 “)
3
AMAZE INTERNATIONAL SPRL, a corporation duly constituted under
laws of Belgium, having a place of business at 206 Avenue de Messidor,
1180, represented by and acting through Richard…mile Azera, its
director, who is duly authorized for the purposes hereof, as he has stated;
(hereinafter ” AMAZE “)
JEAN EMMANUEL RAPHAEL GUETTA, residing and domiciled at 19
Mount, London N2 0RW, United Kingdom;
(hereinafter ” Guetta “)
RICHARD…MILE AZERA, residing and domiciled at 206 Avenue
1180 Brussels, Belgium;
(hereinafter ” Azera “)
MEDICAL SCIENCE PARTNERS INTERNATIONAL (MSPI), a
general partnership, represented by and acting through André Lamotte,
who is duly authorized for the purposes hereof, as he has stated;
(hereinafter ” MSPI “)
MARIE-CLAUDE L…VESQUE, domiciled and residing at 3460 Peel
Montréal, Quebec H3A 2M1;
(hereinafter ” Lévesque “)
MARIELLE ROBERT, domiciled and residing at 6979 De Lanaudière
Montréal, Quebec H2B 1Y1;
(Onami, Auriga, POPOWSKI, Medco, Gutrafin, Schroder, MSPI,
FRSIM, Fortier, Deckelbaum, Brisson, 9079, AMAZE, Guetta, SGF
Finedix, Lévesque and Robert being hereinafter collectively referred to as ” Shareholders “)
4
BIOARTIFICIAL GEL TECHNOLOGIES (BAGTECH) INC., a
legally constituted under the Canada Business Corporations Act, having its office at 400 rue de Maisonneuve ouest, suite 1156, Montréal, Quebec H2A 1L4, represented by and acting Marie-Pierre Faure, its president, who is duly authorized for the purposes as she has declared;
(hereinafter the ” Corporation “)
the Corporation’s authorized capital stock is composed of an unlimited number of Class A, B, C, E shares without par value, of which there are 8,162,749 Class A shares and 1 Class D share issued
the shares of the Corporation that are outstanding (or reserved for issue) are divided among as of the date hereof, in the proportions set out below as among the shareholders, who are
owners thereof by good and valid title, free and clear of any priority, mortgage or
Shareholders Number and Class of Shares %
Faure 1,041,280 Class A shares 12.76
FRSIM 771,980 Class A shares 9.46
Fortier 547,610 Class A shares and 1 Class D share 6.71
SGF 540,541 Class A shares 6.62
Finedix 472,973 Class A shares 5.79
Schroder 837,897 Class A shares 10.27
Medco 761,031 Class A shares 9.32
Gutrafin 648,649 Class A shares 7.95
5
Shareholders Number and Class of Shares %
FSTQ 135,135 Class A shares 1.66
9079 90,037 Class A shares 1.10
Deckelbaum 61,804 Class A shares 0.76
AMAZE 47,393 Class A shares 0.58
Guetta 47,393 Class A shares 0.58
Brisson 2,000 Class A shares 0.03
MSPI 195,135 Class A shares 2.39
Auriga 1,621,621 Class A shares 19.87
Popowski 270,270 Class A shares 3.31
Lévesque 15,000 Class A shares 0.18
Robert 15,000 Class A shares 0.18
Onami 40,000 Class A shares 0.49
TOTAL 8,162,749 Class A shares, 1 Class D share 100.0
each of the Shareholders declares that it is the beneficial owner, directly or on behalf of its the case of Schroder), as of the date hereof, by good and valid title, free and clear of any charge, or encumbrance whatsoever, of the number of Class A or Class D shares indicated alongside its the foregoing table;
in addition to the 360,270 Class A shares of the capital of the Corporation reserved for of the Corporation for the purposes of its profit-sharing program, the 195,135 Class A shares of of the Corporation reserved for MSPI under a consultancy agreement made between MSPI and the 81,000 warrants (at $1.85 per share) issued to FRSIM and the share purchase option granted
Québec under a loan offer accepted by the Corporation on July 17, 2001, under which Garantie
purchase 75,502 common shares of the capital of the Corporation at a price of $1.85 per share (the ” Option “), no option or other right to purchase shares of the Corporation or other securities convertible has been authorized or is outstanding, and no agreement has been made to issue such option or other
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Faure declares that she is directly the owner, on the date hereof, by good and valid title, free of any priority, mortgage or encumbrance, of all of the currently issued and outstanding common shares capital stock of 9079;
Azera declares that he is directly the owner, on the date hereof, by good and valid title, free of any priority, mortgage or encumbrance, of all of the currently issued and outstanding common shares
no option or other right to purchase shares or other securities convertible into shares of 9079 authorized or is outstanding, and no agreement has been made to issue such option or other right;
no option or other right to purchase shares or other securities convertible into shares of AMAZE authorized or is outstanding, and no agreement has been made to issue such option or other right;
no option or other right to purchase shares or other securities convertible into shares of Finedix authorized or is outstanding, and no agreement has been made to issue such option or other right;
the parties hereto have agreed that it is in the best interests to agree to certain terms and
the ownership and transfer of the Shares in the capital stock of the Corporation, the issued shares in the capital stock of 9079 and the issued and outstanding shares in the capital stock and Finedix and all other voting or participating shares subsequently acquired in the capital stock of
9079, AMAZE and Finedix and the exercise of the rights associated with such shares; and
the parties have agreed to cancel and replace the Initial Shareholders Agreements (as defined in by this Agreement.
THEREFORE, THE PARTIES AGREE AS FOLLOWS:
DEFINITIONS
In this Agreement, the following expressions and words have the following meanings, unless indicated by the context:
1.1 ” Shareholders ” means the persons identified in the preamble and any natural or legal who may become a party to this Agreement as a registered holder or authorized transferee Shares in the Corporation (in which event, the provisions of this Agreement shall interpreted mutatis mutandis);
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1.2 ” Institutional Shareholders ” means, collectively, Auriga, Medco, Gutrafin, Schroder, SGF, FRSIM and Finedix, and ” Institutional Shareholder ” means any one of individually;
1.3 ” Shares ” means (i) the shares of the Corporation held by the Shareholders, (ii) the acquired by the treasury of the Corporation or by one of the Shareholders during the term this Agreement, and (iii) any share resulting from the consolidation, splitting or reorganization of the capital stock of the Corporation;
1.4 ” Voting Share ” means the issued and outstanding shares of the capital stock of
Corporation that give the right to vote at any meeting of the Shareholders of the
which are, on the date hereof, the Class A shares of the capital stock of the Corporation;
1.5 ” Offered Shares ” has the meaning assigned to that expression in paragraph 5.1;
1.6 ” Participating Shares ” means the shares of the capital stock of the Corporation that, at time, give the holders the right (i) to share in the residue of the Corporation’s property dissolution or upon voluntary or forced liquidation, and (ii) to participate in the profits
1.7 ” Director ” means a natural person who sits on the Board of Directors;
1.8 ” undiluted base ” means the total number of Voting Shares issued and outstanding;
1.9 ” Alienate ” (and ” Alienation “) means to mortgage, with or without dispossession, encumber by a charge, an option to purchase or an option to sell, or otherwise commit as or conventional security, or otherwise alienate in anyway whatsoever, or any attempt perform any such transaction;
1.10 ” Bank ” has the meaning assigned to that word in paragraph 10.2;
1.11 ” Transferor ” has the meaning assigned to that word in paragraph 4.2;
1.12 ” Transfer ” means to sell, transfer, exchange, give, dispose of or otherwise assign in manner whatsoever, or any attempt to perform any such transaction, and the act of doing of those things;
1.13 ” Committees ” means, collectively, any committee created by the Board of Directors;
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1.14 ” Board of Directors ” means the Board of Directors of the Corporation and of each of Subsidiaries, as the case may be;
1.15 ” Control ” (of) an entity means possession by a person, other than as creditor, of that carry more than 50% and thus enable that person to elect a majority of the directors of entity in question;
1.16 ” Agreement ” means this Shareholders’ Agreement and any rider, amendment or that may be made to it in writing, and the Agreement may also be referred to from time time by the expression ” this Agreement “;
1.17 ” Initial Shareholders’ Agreements ” means the agreements among the Shareholders of corporation signed on December 13, 2000, and December 4, 2002;
1.18 ” Subscription Agreement ” means the subscription agreement signed by Gutrafin,
Medco, Popowski, Schroder, Onami and the Corporation on the date hereof;
1.19 ” Founders ” means Faure, Fortier, Deckelbaum, Guetta, Azera and Brisson;
1.20 ” Subsidiary ” means any legal controlled, at present or in future, directly or indirectly, by Corporation;
1.21 ” Group A ” means the Founders, Lévesque, Robert, Popowski and Onami;
1.22 ” Group B ” means SGF, FSTQ, FRSIM, Finedix and Auriga;
1.23 ” Group C ” means Medco, Gutrafin and Schroder;
1.24 ” Permanent Incapacity ” means a physical or mental incapacity or any illness lasting for a consecutive period of more than six months, or 12 months, cumulatively, over consecutive period of 18 months, which prevents the person concerned from attending to usual business and performing their normal functions, tasks and responsibilities for Corporation, where there is no reason to believe that it will be resolved during the lifetime the person; or
1.25 ” Fair Market Value ” means, unless otherwise indicated in this Agreement, the fair value from time to time of all of the participating Shares or all of the shares of Corporation, as the case may be, as determined based on the value of the business (at the expense of the Corporation and with no discount for minority participation premium for controlling position) by an independent valuator who is a
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member of the Canadian Institute of Chartered Business Valuators chosen unanimously by members of the Board of Directors or, in the event that a unanimous decision is not on application by the vendor Shareholder, by a judge of the Superior Court of Quebec in the Judicial District of Montréal, within 60 days following the appointment of the or within such other time as may be provided in this Agreement; and where the Fair Value of any participating Share must be determined, it shall be equal to the fair market as determined by the independent valuator in accordance with the foregoing, divided by number of participating Shares then outstanding;
1.26 ” Good Faith Offer ” means an offer made to a Shareholder by a person other than a Person of the Shareholder for the Transfer in whole or in part of the Shares and Securities of which the Shareholder is the beneficial owner and where that person by producing an irrevocable bank letter of credit, that they have the necessary resources at the time the offer is made to complete the cash purchase of the Shares Convertible Securities;
1.27 ” Person ” includes a natural person, a legal person, including a company, a corporation or a cooperative, a partnership, including a partnership constituted under the Code of Québec, a trust, a succession, an association of persons whether or not incorporated, joint venture, a state or a regulatory or self-regulating body, or a board, office, commission other public body. Unless otherwise indicated by the context, any reference to a refers to any legal person, including a company, a business corporation, a cooperative or other incorporated entity, and any partnership;
1.28 ” Related Person ” means, in respect of any other Person, any Person who is not dealing such other Person at arm’s length, within the meaning assigned to that expression subsection 251(1) of the Income Tax Act (Canada);
1.29 ” Leaves Voluntarily ” means leaves of their own accord;
1.30 ” Convertible Security ” means any right, option, warrant or other security (within meaning of the Securities Act (Quebec) conferring the right to acquire Shares or that may converted into or exchanged for Shares;
1.31 ” Book Value ” means the book value of the Shares of the Corporation established accordance with the Corporation’s audited annual financial statements, consolidated applicable, for the fiscal year preceding the event that gave rise to the determination of book value, and adjusted to reflect subsequent events, such financial statements to be by the
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Auditors applying the generally accepted accounting principles, consistently applied, accompanied by a report by the Auditors; and
1.32 ” Auditors ” means the Corporation’s auditors on the date of the event in respect of which
GENERAL AGREEMENTS
2.1 The parties to this Agreement agree, mutually and irrevocably, for the term of the to do anything that is required and to govern themselves in all respects in such a way as give full effect to the provisions of the Agreement.
2.2 The Shareholders shall guarantee compliance with section 13 by the persons whom
Shareholders, respectively, put forward to sit on the Board of Directors.
2.3 Every Shareholder who is entitled to appoint one or more Director and who Transfers all their Shares shall immediately secure the resignation of the persons they appointed to Board of Directors and to Committees.
RULES OF INTERNAL GOVERNANCE
3.1 Subject to the following provisions, the Shareholders agree, during the term of Agreement, to take the necessary measures and to use the voting rights associated with
Shares they hold to elect and continue seven Directors on the Board of Directors.
3.2 On the date of this Agreement, the Shareholders agree that the Board of Directors shall
composed of representatives appointed by the Shareholders as hereinafter set out:
Group A 2 Directors (including Marie-Pierre Faure)
Group B 3 Directors (including one appointed jointly by FSTQ and FRSIM, one
by SGF and one appointed by Auriga)
Group C 2 Directors (including André Lamotte)
In addition, FSTQ and FRSIM may jointly appoint an observer to the Board of Directors shall be entitled to receive all notices of meetings and all documents accompanying such notices.
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On the date of this Agreement and for as long as the majority of the Shareholders so agree, Bier shall act as Chair of the Board of Directors. Colin Bier is a Director appointed by the C Shareholders.
3.3 The Shareholders further agree that each of the Institutional Shareholders may, at its be represented on any Committee by a number of representatives proportional to percentage of Voting Shares of the capital stock of the Corporation that it holds, on
undiluted basis, provided that there shall be a minimum of one representative.
3.4 The Shareholders agree to take the necessary measures and to use the voting rights with the Shares they hold to make a by-law providing:
3.4.1 that at least six meetings of the Board of Directors will be held each year with a of two months between meetings;
3.4.2 that a notice of meeting shall be delivered by hand or sent by registered or certified or by facsimile, provided that, if sent by facsimile, receipt by the addressees is and as soon as possible thereafter an original copy of the notice of meeting is sent special delivery, at least 10 business days before the date of a meeting;
notice. Such notice shall contain the place, date and time of the meeting and shall accompanied by a detailed agenda, the minutes of the previous meeting and any that will enable the Directors to form an informed opinion about the proposed items. In addition, the general by-laws of the Corporation shall provide that meetings the Board of Directors may be held by telephone;
3.4.3 that the presence of a representative of each of Group A, Group B and Group C who is office at the time is needed in order to establish quorum for any meeting of the Board Directors. If, as a result of the absence of the representative of any of those groups, is no quorum, the meeting shall be adjourned to a date no earlier than five business or in the case of an emergency meeting, two business days, from the date of the meeting. Quorum for the resumed meeting shall be a majority of the Directors present;
3.4.4 the by-laws shall provide that each of the Directors appointed by the Shareholders may convene a meeting of the Board of Directors or of any Committee;
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3.4.5 that quorum at any Shareholders’ meeting may not be achieved unless the who together hold 50% plus one of the voting rights associated with the Shares, and quorum shall require that the Institutional Shareholders be present. If there no quorum at a Shareholders’ meeting, the meeting shall be adjourned to a date no than five business days from the date of the initial meeting. Quorum for the meeting shall be a majority of the Shareholders present;
3.4.6 that the Shareholders on the Board of Directors or any Committee of the other than a person paid or employed by the Corporation, shall be entitled reimbursement for their travel expenses and to an honorarium of $500.00 (plus GST QST) for each meeting that they attend, it being agreed that before a first public issue the Corporation, any employee of an Institutional Shareholder shall waive honorarium.
3.5 In the event that a vacancy arises on the Board of Directors (whether by reason of death illness or any other similar reason) or that a Shareholder decides to withdraw a that it is entitled to appoint to be elected to the Board of Directors, the other agree to fill the vacant position or remove that representative in accordance with instructions given by the Shareholder that is entitled to fill the position under this Agreement.
3.6 Notwithstanding paragraph 13.1.3 of this Agreement, the Shareholders agree to create management committee that will be composed of Marie-Pierre Faure, the general manager the Corporation (who will be appointed from time to time by the Board of Directors accordance with the by-laws of the Corporation), a representative appointed by a vote of the votes held by the members of Group B (it being agreed that Group B may that representative from time to time at its own option) and a representative appointed by majority vote of the votes held by the members of Group C (it being agreed that Group C replace that representative from time to time at its own option). The committee shall have its primary function advising the Board of Directors, ensuring that decisions made by Board of Directors are carried out, and performing any duty that may be delegated to it time to time by the Board of Directors. The decisions of the Committee shall be made unanimous vote of the members present, provided that there is quorum. Quorum at meeting of the management committee shall be achieved if there are two members present,
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PROHIBITION ON TRANSFER OR ALIENATION
4.1 The Shareholders agree that they are not entitled to Transfer any Share or Convertible held by them, or any right or interest thereunder, or to Alienate any such Share or Security or any right or interest thereunder, unless the Transfer is made or the Alienation in accordance with the provisions of the Agreement. In addition, by reason of the strategic played by Faure in the Corporation, Faure or 9079 further agree not to Transfer or Alienate Shares or Convertible Securities they hold on the date of this Agreement, or may later hold in Corporation, before June 30, 2009.
Notwithstanding the foregoing, Faure and/or 9079 shall be at liberty to Transfer their Shares, the same basis as the other Shareholders, if (i) the Transfer or successive Transfers cumulatively, to fewer than 282,829 Class A shares and Faure and 9079 together continue to a minimum of 848,488 Class A shares after such Transfer or successive Transfers, or (ii) Transfer results from the application of the provisions set out in any of the following sections this Agreement: -section 7 (Option); -section 8 (Drag-Along Right); -section 10 (Put Option); and -section 11 (Exit).
4.2 Notwithstanding section 6, a Shareholder (the ” Transferor “) may at any time Transfer its or Convertible Securities, in whole or in part, without having to offer them first to the Shareholders, provided that such Transfer is made to a legal person the Shareholder controls the sole objects and activities of which are to hold shares and securities. The Directors shall required to authorize such Transfer notwithstanding any other provision of the charter or of the Corporation, provided: 4.2.1 that the Transferee (i) confirms to the other Shareholders its irrevocable consent to bound by the provisions of the Agreement in the form of Schedule 4.2, (ii) succeeds and substituted for the Transferor in all of the Transferor’s rights, benefits, obligations responsibilities, and (iii) agrees not to issue shares or convertible securities of its stock to persons other than the Transferor; and 4.2.2 that the Shares or Convertible Securities that are Transferred become subject to provisions of the Agreement.
4.3 Notwithstanding the provisions of this Agreement, the parties acknowledge that each of and FRSIM may at any time Transfer its Shares and Convertible Securities, as the case may in whole or in part, without having to offer them to the other Shareholders, provided that Transfer is made to 14 a regional solidarity fund, a specialized fund or any other investment fund that it shall in all post as a member of its network and in which it holds the majority of voting and shares or membership shares. The Directors shall be required to authorize such notwithstanding any other provision of the charter or by-laws of the Corporation, without authorization by the Shareholders, provided: 4.3.1 that the Transferee or Transferees confirm in writing to the other Shareholders irrevocable consent to be bound by the provisions of this Agreement, in the form Schedule 4.2;
case may be, in all its rights, benefits, obligations and responsibilities; and
4.3.3 that the Shares and Convertible Securities remain subject to the provisions of Agreement.
4.4 Notwithstanding the provisions of this Agreement, the parties acknowledge that SGF may at time Transfer the Shares and Convertible Securities that it holds, in whole or in part, as the may be, without having to offer them to the other Shareholders, provided that such Transfer made (i) to any successor or assign designated in accordance with the provisions of incorporating statute or incorporating document or any other legislation to which it may subject, (ii) to any Person belonging to the same group as the Société Générale de Financement Québec or having similar objects, as such objects are set out in its incorporating statute incorporating document, and to which the Shares and Convertible Securities held by SGF, as case may be, maybe Transferred, whether free of charge or for onerous consideration, by of the Government of Quebec or SGF, or (iii) to any Person under the Control of SGF, or (iv) any Person in which the Government of Quebec, directly or indirectly, holds a participation or of which the Government of Quebec appoints a majority of the members of board, or any person ultimately controlled by such Person, provided, however, in all cases set in this section, 4.4.1 that the transferee of such shares confirms to the Shareholders its irrevocable consent to
bound by the provisions of this Agreement in the form of Schedule 4.2;
4.4.2 that the transferee succeeds and is substituted for SGF in all its rights, benefits, and responsibilities; and 4.4.3 that the Shares and Convertible Securities transferred by SGF remain subject to provisions of the Agreement.
4.5 Notwithstanding the provisions of this Agreement, Schroder may at any time transfer his and Convertible Securities, in whole or in part, as the case 15 may be, that he holds without having to offer them to the other Shareholders, provided that Transfer is made to any beneficiary who is a client of Schroder on behalf of whom the said and Convertible Securities are held on this date by Schroder as trustee, provided: 4.5.1 that the transferee of the said Shares confirms to the Shareholders its irrevocable to be bound by the provisions of this Agreement in the form of Schedule 4.2; and 4.5.2 that the Shares and Convertible Securities transferred by Schroder remain subject to provisions of the Agreement.
4.6 Without prejudice to any other remedy, any Transfer made or Alienation effected contrary to Agreement, whether directly or indirectly, shall be null, void and of no effect, both as against other Shareholders and as against the Corporation, and may not be entered in the registers.
4.7 Faure agrees that certain of her ownership rights in the shares of 9079 and securities into voting shares that she holds or may hold in the capital stock of 9079 shall be restricted in she is not entitled to Transfer or Alienate, directly or indirectly, any shares of 9079, or any right or interest in or under those shares, unless she has obtained the prior written agreement each of the Institutional Shareholders, which consent may be denied at the discretion of Institutional shareholder. In addition, Faure agrees to ensure that no share in the capital stock 9079 shall be issued unless 9079 has obtained the prior written consent of each of the Shareholders, which consent may be denied at the discretion of each Institutional Shareholder.
restricted in that he is not entitled to Transfer or Alienate, directly or indirectly, any shares AMAZE, or any other right or interest in or under those shares, to any natural or legal doing research, development or marketing in the field of hydrogel. Azera further agrees to that no share in the capital stock of AMAZE, or security convertible into voting shares AMAZE, shall be issued to any natural or legal person doing research, development or in the field of hydrogel.
4.9 Notwithstanding paragraph 4.8 above, Azera and AMAZE agree to offer all Voting Shares Convertible Securities held by AMAZE, in the event that a change of control of AMAZE place, it being agreed that the Voting Shares and Convertible Securities will be offered accordance with the procedure described in section 6.
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4.10 The Share certificates issued or that may be issued by the Corporation, and the representing the shares issued or that may be issued by 9079, by AMAZE and by Finedix, bear a notice that they are subject to the terms and conditions of this Agreement and that may not be Transferred or Alienated otherwise than in accordance with this Agreement.
4.11 In the event that, at any time during the period beginning on the date hereof and ending December 13, 2005 (inclusive), a change of the direct, indirect or ultimate Control of were to take place in favour of any Person who is not a member of the group (as that is defined in the Canada Business Corporations Act) of which Finedix is a member on the hereof (the “Group”) and that Person is not engaged in research, development or marketing in field of hydrogel, Finedix shall, immediately upon such change of Control becoming effective without the need for any further formality, cease to enjoy the rights provided in section 3 Governance), sections 10 and 11 (Put Option and Exit) and section 13 (Conduct of hereof, provided, however, that if the other Institutional Shareholders consent, at their discretion, such rights may be reassigned to it. Finedix acknowledges that this paragraph reasonable for the protection of the rights of the other Institutional Shareholders.
4.12 In the event that a change of the direct, indirect or ultimate Control of Finedix were to take in favour of any Person who is not a member of the Group and that Person is engaged in development or marketing in the field of hydrogel, Finedix shall give prior notice in writing to Corporation, and upon receipt of such notice by the Corporation, the Corporation and the shall negotiate, in good faith, an agreement in respect of scientific collaboration and, applicable, an agreement in respect of the sharing of new intellectual property, which shall be approved by the other Institutional Shareholders, whose approval shall not be except for valid reason.
4.13 In the event that a change of the direct, indirect or ultimate Control of Finedix were to take in favour of any Person who is not a member of the Group and that Person is engaged in development or marketing in the field of hydrogel, Finedix shall, immediately upon such of Control becoming effective and without the need for any further formality, cease to enjoy rights provided in section 3 (Internal Governance), section 5 (Right of First Refusal), sections 8 11 (Drag-along Right, Put Option, Public Issue and Exit) and section 13 (Conduct of hereof, provided, however, that if the other Institutional Shareholders consent, at their discretion, such rights may be reassigned to it. Finedix acknowledges that this paragraph reasonable for the protection of the rights of the other Institutional Shareholders.
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RIGHT OF FIRST REFUSAL
follows:
5.1 The Board of Directors shall determine the number and class of Shares to be issued, and the terms and conditions and attributes of the Shares or Convertible Securities (the ” Offered “). The secretary shall communicate that information in writing, together with a copy the resolution adopted by the Directors, to the Institutional Shareholders and shall inform them the number of Shares Offered for which each of them is entitled to subscribe (the ” Offer “);
5.2 The Shares Offered shall be offered first to all Institutional Shareholders, Guetta, Popowski and Onami, who may subscribe for them, by preference, within 30 days receipt of the Offer, pro rata to the number of Voting Shares they hold as a proportion of the number of Voting Shares held among them on that date;
5.3 If an Institutional Shareholder, Guetta, AMAZE, Popowski or Onami wishes to exercise right of first refusal, they shall so inform the Corporation, in writing, within the said 30 days; notice shall state the number of Shares Offered that the Institutional Shareholder, AMAZE, Popowski or Onami wishes to acquire;
5.4 If, on the expiry of the said 30 days, FRSIM has not served notice of its intention to acquire all the Shares Offered to which it is entitled (for greater certainty, the parties confirm that provisions of this paragraph 5.4 cannot apply if FRSIM were to serve notice of such the secretary shall immediately so notify FSTQ in writing, and send a copy of the notice to other Institutional Shareholders. FSTQ may then, within 5 business days following receipt of notice from the Secretary, acquire the Shares Offered to which FRSIM would have been entitled;
5.5 If, on the expiry of the said 30 days, Guetta, AMAZE, Popowski, Onami or an Shareholder other than FRSIM has not served notice of its intention to acquire all of the Offered to which it is entitled, the secretary shall immediately so notify, in writing, Institutional Shareholders who have fully subscribed for their quota, and the said Shareholders may then, within 5 business days following receipt of the notice from the acquire the Shares Offered that have not found a taker, pro rata to the number of Voting that the Shareholders wishing to acquire them hold among them on that date.
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5.6 If the provisions of paragraph 5.4 are applicable and FSTQ waives its right to acquire the of the Shares Offered to FRSIM, the said Shares Offered, and the Shares Offered in respect which any other Institutional Shareholder, Guetta, AMAZE, Popowski or Onami has not notice, in accordance with paragraph 5.3, of its intent to acquire, shall be offered to Institutional Shareholders, Guetta, AMAZE, Popowski or Onami, which have subscribed for quota, by the secretary of the Corporation sending them notice in writing on the expiry of 5 days provided for in paragraph 5.4 hereof, and they may then, within 5 business days receipt of such notice, acquire the Shares Offered that have not found a taker, pro rata to number of Voting Shares that the Shareholders wishing to acquire them hold among them on
date;
5.7 If the provisions of paragraph 5.4 are applicable and FSTQ acquires the Shares Offered to FRSIM would have been entitled, the Shares Offered in respect of which any Shareholder (other than FRSIM), Guetta, AMAZE, Popowski or Onami has not served notice its intent to acquire shall be offered to the Institutional Shareholders, Guetta, AMAZE, or Onami, which have subscribed for their quota, by the secretary of the Corporation notice in writing to that effect immediately after the expiry of the 5 days provided for paragraph 5.4 hereof, and they may, within 5 business days following receipt of such
5.8 If the issue of Shares Offered has not been subscribed in full in the manner provided in section, the unsubscribed Shares Offered may be issued by the Corporation to the Shareholders who hold Voting Shares and then to third parties, provided that such third agree to be bound by this Agreement, in the form of Schedule 4.2;
5.9 The provisions of this section 5 shall not apply to issues of Shares to: (i) employees of Corporation under the Share purchase option plan adopted by the Corporation December 4, for a maximum of 360,270 Shares; (ii) FRSIM, if and only if such issue is pursuant to exercise of 81,000 warrants issued to FRSIM; (iii) MSPI, if and only if such issue is pursuant the consultation agreement between MSPI and the Corporation dated November 11, 2002, for maximum of 195,135 Class A shares of the capital stock of the Corporation; (iv) the referred to in section 21 of this agreement for the purposes of exercising the Options granted them; (v) any of the Institutional Shareholders of Popowski or Onami, under the Agreement; and (vi) Garantie Québec, if and only if such issue is pursuant to the exercise Option GQ-2001;
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5.10 Except in respect of paragraph 5.4 and solely for the purposes of this section 5, it is agreed for the purposes of calculating the Voting Shares and Shares held by FSTQ, the Voting held by FRSIM shall be added to the Voting Shares held by FSTQ.
PRIORITY RIGHT TO PURCHASE
6.1 In cases in which a Shareholder (hereinafter the ” Vendor “) wishes to Transfer its Shares where applicable, its Convertible Securities, the Vendor shall offer all and not a portion of Shares and, where applicable, its Convertible Securities (hereinafter the ” Securities Offered “), priority, subject to the following, to the other Shareholders who hold Voting Shares the ” Beneficiaries “) in accordance with the provisions of this section. If the decision of Vendor to Transfer the Securities Offered is prompted by a Good Faith Offer, again relating to of the Securities Offered, the Vendor shall then so inform the Beneficiaries, communicate to the full content of the offer made to it and the identity of the interested purchaser ” Acquirer “), and confirm to them in writing its intent to accept the said offer if the priority to purchase provided in this section are not exercised by the Beneficiaries (the offer initiated the Vendor or, where applicable, the Good Faith Offer, hereinafter the ” Offer “);
6.2 The Offer shall be made by the Vendor by notice given to the Beneficiaries, stipulating (i) in case of an Offer initiated by the Vendor, the asking price (which shall be payable only in cash by bank note) and the terms and conditions applicable to the proposed Transfer, or (ii) in the of a Good Faith Offer, the terms of the offer and a copy of the Good Faith Offer (collectively, both cases, the ” Terms of Transfer “). The notice of Offer shall constitute an irrevocable offer the Vendor in respect of the Transfer of the Securities Offered to the Beneficiaries;
6.3 Each of the Beneficiaries shall then have the exclusive right (the ” Priority Right to Purchase to purchase the Securities Offered, unconditionally, in whole and not in part, pro rata to the number of Shares it then holds as a proportion of the total number of Shares then held by Beneficiaries (excluding the Shares held by the Vendor);
6.4 A Beneficiary’s Priority Right to Purchase shall be exercised by giving notice to the within 45 days following receipt of the Offer and agreeing (i) to abide by each and every one the Terms of Transfer, and (ii) to complete the transaction within 30 days following the date which all of the Securities Offered by the Vendor find takers among the Beneficiaries; in the
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6.5 If one of the Beneficiaries does not exercise or waive its Priority Right to Purchase and one more of the other Beneficiaries has duly exercised it (” Beneficiary Purchasers “), the shall then give a new notice of offer in writing (the ” Second Notice “) to the Purchasers within three business days following the expiry of the time allowed for response paragraph 6.4 to inform them that if they wish, they may acquire the balance of the Offered, pro rata to the total number of Shares that each of the Beneficiary Purchasers holds as proportion of the total number of Shares held by the Beneficiary Purchasers (excluding the held by the Vendor and the Shares that are part of the balance of the Securities Offered);
6.6 The provisions of paragraphs 6.3 and 6.4 shall apply, mutatis mutandis, to the exercise of rights of the Beneficiary Purchasers under paragraph 6.5, with the exception of the time for response, which shall be 10 days;
6.7 If all of the Securities Offered have not been accepted on the terms set out in paragraph 6.5, Security Offered shall be deemed to have been purchased, and subject to the Right of provided in section 7 and the provisions of paragraph 6.8, the Vendor may Transfer all of Securities Offered, but not part thereof only, to any person other than a party hereto, provided they are Transferred in exact compliance with the Terms of Transfer. However, if the Transfer not completed within 30 days following the expiry of the final time applicable under paragraph 6.7 or if, where applicable, the Transfer may not be made in full compliance with Terms of Transfer, the Vendor may not then Transfer the Securities Offered and shall, if it wishes to Transfer them, offer them again in accordance with the provisions of this paragraph 6.7;
6.8 If the Transfer is made to the Acquirer, it may not be completed by the Vendor unless Acquirer agrees to be bound by each of the provisions hereof as if it had been an original party the Agreement and in compliance with all of the terms and conditions, in the agreement attached in Schedule 4.2; the Securities Offered that are then purchased shall continue to “Shares” or “Convertible Securities”, as the case may be, within the meaning of this If these agreements are not obtained, the Transfer shall be void and of no effect;
6.9 For the purposes of section 6, if the Vendor receives a proposal for the Transfer of Offered and the proposal cannot be considered to be a “Good Faith Offer” because it does meet the requirements set out in subparagraph 1.23, the Vendor may not accept the proposal shall obtain a new offer that meets the said requirements before presenting it again to Beneficiaries and triggering the Priority Rights to Purchase provided in section 6.
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RIGHT OF CO-SALE
7.1 Notwithstanding the provisions of section 6, if a Vendor or Vendors who together hold more 50.1% of the issued and outstanding Voting Shares, on an undiluted basis, agree to Transfer all their Shares under a Good Faith Offer, each of the Beneficiaries may, within 45 days of receipt the notice provided in 6.1, instead of exercising the Priority Right to Purchase provided in 6, give notice to the Vendor(s) that they also wish to dispose (the ” Right of Co-sale ” of all their Shares (the ” Drag-along Shares “) to the Acquirer pursuant to the offer provided in 6.1. such a case and subject to 7.2, the Vendor(s) can only dispose of their Shares to said Acquirer the Acquirer proceeds with the simultaneous acquisition of all Shares held by the who will have given the notice provided for above under the terms of the offer provided for 6.1. The exercise of said Right of Co-sale and the sale of the Shares to the Acquirer following
7.2 The Shareholders acknowledge and agree that the representations and warranties imposed or undertakings that may be agreed to by the Vendor may not and must not be imposed on Medco, Gutrafin, Schroder, FSTQ, Finedix, FRSIM, AMAZE, Guetta, Popowski, Onami or Without limiting the generality of the foregoing, each of the Institutional Shareholders, Guetta, Popowski or Onami may not be required to give, to anyone other then representations or warranties stating: (i) that it is the sole registered and beneficial owner of Shares and Convertible Securities, with the exception of the Shares and Convertible held by Schroder as trustee for its clients, where applicable; (ii) that such Shares and Securities, if applicable, are free and clear of any appropriation; and (iii) that it may Transfer on the terms stipulated above without restriction other than those set out in paragraph 7.2;
7.3 If a Beneficiary does not exercise its Right of Co-Sale by giving notice to the Vendor(s) the time allowed, that Beneficiary shall be deemed to have waived its Right of Co-Sale;
7.4 On the expiry of the time provided in paragraph 7.1, the Vendor(s) shall give notice to Acquirer of the number of Drag-along Securities which, by operation of the Right of Co-sale, added to the Shares covered by the Offer. The Vendor may not Transfer the Shares covered by Offer unless the Acquirer purchases the Drag-along Securities at the same time as it purchases Shares covered by the Offer;
7.5 If a Beneficiary does not exercise its Right of Co-sale under paragraph 7.1, no Transfer may made to an Acquirer before the Acquirer agrees to be bound by this Agreement, in the form attached in Schedule 4.2;
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7.6 If the Transfer to the Acquirer is not completed within 90 days following the expiry of the provided in paragraph 7.1, the Vendor(s) may no longer Transfer the Shares covered by the to the Acquirer, and if they still wish to Transfer them they shall offer them again in with the provisions of sections 6 and 7;
7.7 The rights of each of the Beneficiaries provided in this section 7 shall be exercised
DRAG-ALONG RIGHT
8.1 Notwithstanding the provisions of section 7, if Shareholders representing more than 60% of issued and outstanding Voting Shares (on an undiluted basis) (the ” Vendors “) agree to all of their Shares under a Good Faith Offer for the acquisition of all of the Shares (the ” Offer the Vendors may give notice to the Beneficiaries, within 45 days of receipt of the Offer, the Beneficiaries to sell all their Shares (the ” Drag-along Shares “) to the Acquirer (the ” along Right “), in which case the Beneficiaries shall be obliged to sell all the Drag-along to the Acquirer, on the terms and conditions of the Offer which shall apply mutatis mutandis. exercise of the Drag-along Right and the sale of the Shares of the Beneficiaries to the Acquire virtue of the exercise of the Drag-along Right shall not trigger the application of sections 6 and 7;
8.2 The Shareholders acknowledge and agree that the representations and warranties imposed or undertaking that may be given by the Vendor(s) may not and must not be imposed on Medco, Gutrafin, Schroder, FSTQ, Finedix, FRSIM, AMAZE, Guetta, Popowski, Onami or Without limiting the generality of the foregoing, each of the Institutional Shareholders, Guetta, Popowski or Onami may not be required to give, to anyone other then representations or warranties stating: (i) that it is the sole registered and beneficial owner of Shares and Convertible Securities, with the exception of the Shares and Convertible held by Schroder as trustee for its clients, where applicable; (ii) that such Shares and Securities, if applicable, are free and clear of any appropriation; and (iii) that it may Transfer
8.3 If the Vendor(s) do not exercise their Drag-along Right by giving notice to the within the time allowed, that Vendors shall be deemed to have waived their Drag-along Right;
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8.4 If the Transfer to the Acquirer is not completed within 90 days following the expiry of the provided in paragraph 8.1, the Vendor(s) may no longer Transfer the Shares covered by the
to the Acquirer, and if they still wish to Transfer them they shall offer them again in
with the provisions of sections 6 and 7.
PUBLIC ISSUE
9.1 In the event that the Corporation intends to make a public issue by prospectus, it shall inform Institutional Shareholders, AMAZE, Guetta, Popowski and Onami as soon as possible and later than 30 days before the scheduled date for filing any preliminary prospectus or
prospectus with the Commission des valeurs mobilières du Québec or any other
regulator that may have jurisdiction;
9.2 The notice given by the Corporation shall, inter alia, offer the Institutional AMAZE, Guetta, Popowski and Onami the opportunity to qualify the Shares they then hold
order to allow them to be resold under the terms of the prospectus or otherwise, in the
described in paragraph 9.3 hereof, subject to the provisions of paragraph 9.4 hereof;
9.3 In the event that the Corporation enters into a firm underwriting agreement or best
commitment in relation to such public issue by prospectus, it shall allow the
Shareholders, AMAZE, Guetta, Popowski and Onami to sell 75% of their Shares to the underwriter or through the agent;
9.4 In the event that the firm underwriter or agent is of the opinion that it cannot reasonably sell Shares of the Institutional Shareholders, AMAZE, Guetta, Popowski and Onami and of Corporation, the Institutional Shareholders shall be deemed to have waived their resale rights
respect of their Shares, for the portion that cannot reasonably be sold, each pro rata to the
of shares held by it as a proportion of the total number of shares held by the
Shareholders, AMAZE, Guetta, Popowski and Onami;
9.5 In addition, where the Institutional Shareholders, AMAZE, Guetta, Popowski and Onami
Shares following a public issue by prospectus, it is understood and agreed that the
and the other Shareholders shall make reasonable efforts to ensure that no Share held by Institutional Shareholders, AMAZE, Guetta, Popowski and Onami is placed in escrow, and Shares to be placed in escrow shall be taken from the block held by the other Shareholders the Shares held by the Institutional Shareholders, AMAZE, Guetta, Popowski and Onami placed in escrow and, in so far as is acceptable to the regulatory authorities concerned, all
held by the Institutional Shareholders, AMAZE, Guetta, Popowski and Onami shall be
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released from escrow before the Shares held by the other Shareholders are released from escrow;
9.6 It is agreed that in any public issue covered by this section, all costs associated with preparation of the prospectus and all related costs and the fees of the firm underwriter or
shall be borne by the Corporation, and the Institutional Shareholders, AMAZE, Guetta,
PUT OPTION
10.1 The Parties hereby declare their common intention to provide the Shareholders with liquidity later than December 31, 2008, by transferring all of the Shares or assets of the Corporation or public issue;
In the event of a public issue, the Institutional Shareholders (and their successors) shall be to a priority right for the placement of their Shares for up to 75% of their participation, subject the applicable legislation and regulations and the requirements that may be imposed by the (as hereinafter defined);
10.2 In the event that the public issue has not been made by December 31, 2008, and the transfer of of the Shares or assets of the Corporation has not taken place, the Parties agree that a bank of international repute specializing in high-level transactions and independent of the (the ” Bank “) and selected by majority vote of the Institutional Shareholders shall be retained the mission of assisting them and studying (i) the possibility of the Shares being accepted listing on a regulated financial instrument market or (ii) a transfer of all of the Shares or assets the Corporation. The Parties agree to make their best efforts for the success of the mandate to the Bank, and the Corporation agrees in this respect to disclose all necessary information to Bank and give it access to its premises. The Bank shall account regularly on the progress of mission to the Chair of the Board of Directors who shall so inform the Institutional and the other Shareholders. If the Bank does not complete the mission assigned under its within six months, the mandate shall be null and void;
10.3 In the event that neither a public issue nor a transfer of all of the Shares or assets of Corporation has taken place by June 30, 2009, and that an Institutional Shareholder Shareholders receives a cash offer to purchase from a Third Party (the ” Offeror “) for all of Shares of the Corporation existing on the date of such offer, for a price corresponding to 100% the stated capital of the Corporation (the ” Offer to Purchase “), which Offer to Purchase has approved by a two-thirds vote of the Institutional
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Shareholders within one month of receipt by them, the other Shareholders expressly agree (i) to transfer to the Offeror with the Institutional Shareholders all of their Shares, on the terms as the Institutional Shareholders, or (ii) to make an alternative offer to purchase ” Alternative Offer “) to the Institutional Shareholders, within three months of the notice given the Institutional Shareholders and their acceptance of the offer to Purchase, relating to all of Shares of the Institutional Shareholders, provided that in the case referred to in subparagraph the Institutional Shareholders shall transfer all of their Shares to the maker of, and on the and conditions of, the Alternative Offer, where the Alternative Offer is higher than the Offer to Purchase;
In the event that the other Shareholders do not give notice to the Institutional Shareholders of Alternative Offer within the aforesaid three months, the other Shareholders shall transfer to Institutional Shareholders, on the same terms as the Institutional Shareholders, all of their to the Offeror [sic Tr.];
10.4 In the interests of the Parties and the Corporation, the Institutional Shareholders and the Shareholders agree, in order to give effect to the liquidity provided in the foregoing paragraphs the best terms, to inform each other in good faith of the initiation and progress of all talks that of them may engage in with a third party with a view to a Share Transfer. In addition, starting
a Share Transfer otherwise than through that Bank and in cooperation with the other Parties.
EXIT
11.1 Notwithstanding any other provision hereof to the contrary, if 9079 or Faure (the ” Offeror “):
11.1.1 Voluntarily Leaves the service of the Corporation before November 30, 2005, or 11.1.2 Voluntarily Leaves the service of the Corporation on or after November 30, 2005, before November 30, 2006, or 11.1.3 is dismissed, with cause; or 11.1.4 ceases to be employed by the Corporation for any reason other than those referred to subparagraphs 11.1.1 to 11.1.3; or
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11.1.5 dies (in the case of Faure only); or
11.1.6 becomes affected by a Permanent Incapacity (in the case of Faure only); or 11.1.7 their Shares are seized and such seizure is not contested in good faith within five or if, where the seizure is contested and judgment is given, a third party acquirer possession of their Shares; or 11.1.8 becomes bankrupt or insolvent within the meaning of any insolvency legislation; or 11.1.9 is guilty of theft, fraud or embezzlement from the Corporation, or is guilty of any
criminal offence that harms the reputation of the Corporation; or
11.1.10 directly or indirectly does anything that violates any of the non-competition and solicitation undertakings set out in section 12, or that is prejudicial to the interests of Corporation, and such default is not remedied within five business days receipt of a notice in writing from any of the Shareholders stating the complained of; or 11.1.11 refuses, neglects or omits to comply with the provisions of this Agreement and default is not remedied within five business days following receipt of a notice in
signed by one of the Shareholders stating the default complained of;
an exclusive and irrevocable option to acquire all of the Shares held, directly or indirectly, by Offeror (the ” Shares Offered “) is granted on the date hereof by the Offeror (i) in the provided in subparagraphs 11.1.5, 11.1.6 and 11.1.8, to the Corporation and the Shareholders holding Voting Shares (the ” Beneficiary Shareholders “) (the Corporation and Beneficiary Shareholders being sometimes collectively designated hereinafter as ” Beneficiaries “) and (ii) in all cases other than those referred to in subparagraphs 11.1.5, and 11.1.8, to the Corporation alone, at the price and on the terms and conditions provided;
11.2 If the Offeror Voluntarily Leaves the service of the Corporation on or after November 30, an exclusive and irrevocable option to acquire all of the Shares held, directly or indirectly, by Offeror (the ” Shares Offered “) is granted on the date hereof by the Offeror to the Corporation, the price and on the terms hereinafter provided;
or the Beneficiary Shareholders become aware of the event (the ” Exercise Period “);
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11.4 In order to exercise the option, the Corporation or the Beneficiary Shareholders shall send in writing to the Offeror, during the Exercise Period, stating their intention to take up the option which they are entitled;
11.5 In the cases referred to in subparagraphs 11.1.5, 11.1.6 and 11.1.8, the Beneficiary shall determine, by majority vote, in a vote representing a majority of the votes for the Shares they hold among them, whether the option will be exercised by them personally or by Corporation. If they opt to exercise the option personally, the Shares Offered shall be among them pro rata to the number of Voting Shares they then hold as a proportion of all of Voting Shares then held by the Beneficiary Shareholders, unless all of the Shareholders agree to proceed otherwise;
11.6 The sale price of the Shares Offered shall be equal to:
11.6.1 in the case of the events referred to in subparagraphs 11.1.9, 10% of the Fair Value of the Shares Offered;
11.6.2 in the case of the events referred to in subparagraphs 11.1.1, 11.1.3, 11.1.10 and 25% of the Fair Market Value of the Shares Offered;
11.6.3 in the case of the event referred to in subparagraph 11.1.2, 50% of the Fair Market of the Shares Offered;
11.6.4 in the case of the event referred to in subparagraph 11.2, 75% of the Fair Market of the Shares Offered;
11.6.5 in the case of the events referred to in subparagraphs 11.1.4, 11.1.5, 11.1.6, 11.1.7 11.1.8, the Fair Market Value of the Shares Offered;
11.7 The sale price shall be payable upon completion of the transaction, which shall take place at head office of the Corporation, no later than 2:00 p.m. on the 30th day following the date which the option is taken up. However, in the event that the option to acquire the Shares belongs ab initio to the Corporation alone and, by reason of the financial tests set out in Canada Business Corporations Act, the Corporation is unable to purchase all of the Offered, the exercise of the option provided in paragraph 11.3 shall be postponed to the date which the Corporation is able to purchase all or part of the Shares Offered, but the shall have no more than two years to purchase all of the Shares Offered.
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NON-COMPETITION AND NON-SOLICITATION
12.1 Faure declares that she is a shareholder of a company known as Caprion Pharmaceuticals Ltd. holds no office or position as a director, manager or employee of that company, and Corporation agrees to this. In addition, the Corporation acknowledges and agrees that she is shareholder and director of the companies known as Valoribio Inc., EquiVision Inc. and S.A.;
Shares and for a period of 24 months following the year that follows the date when she voluntarily or involuntarily divested of her Shares, not to operate, directly or indirectly, any business that is engaged in research, development or marketing in the field of hydrogel, or engage in, be involved in or advise, or make loans to or guarantee the obligations of, any business. The territory to which this clause applies is defined as North America and Europe;
12.3 With the exception of the activities ordinarily engaged in as a professor at the Université Québec à Montréal, Fortier undertakes and agrees, throughout the period during which he Shares and for a period of 24 months following the year that follows the date when he voluntarily or involuntarily divested of his Shares, not to operate, directly or indirectly, any business that is engaged in research, development or marketing in the cosmetic, cosmeceutical medical/therapeutic industries relating to skin care in general, including, but not limited to, treatment of wounds, or to engage or be involved in such activities or advise any business similar areas, or make loans to or guarantee the obligations of any person involved in activities. The territory to which this clause applies is defined as North America and Europe;
12.4 Faure further undertakes and agrees, throughout the period during which she holds Shares and a period of 24 months following the year that follows the date when she is voluntarily involuntarily divested of her Shares, not to solicit, do business with or attempt to do with, anywhere whatsoever, directly or indirectly, any of the clients of the Corporation or Subsidiary of the Corporation;
12.5 Faure further undertakes and agrees, throughout the period during which she holds Shares and a period of 24 months following the year that follows the date when she is voluntarily involuntarily divested of her Shares, not to solicit or engage, directly or indirectly, as employee or consultant or in any other capacity, any employee, director or officer collectively the ” employees “) working full-time or part-time for the Corporation or for Subsidiary, or to attempt, directly or indirectly, to encourage any employee to leave employment with the Corporation or any Subsidiary;
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12.6 Each of Fortier and Faure further undertakes and agrees, throughout the period during which hold shares and for a period of 24 months following the date on which they are voluntarily involuntarily divested of their shares, not to attempt, directly or indirectly, to encourage persuade any supplier to terminate its business relationship, in whole or in part, with Corporation or with any Subsidiary of the Corporation;
12.7 In the event that either Fortier or Faure fails to comply with any of the foregoing they hereby agree, without prejudice to the other rights and remedies of the Corporation and Shareholders, to pay to the Corporation, on simple demand, immediately upon being in default, penalty of $2,000 per day of default, without further formality or notice;
12.8 Each of Fortier and Faure acknowledges that failure to comply with the provisions of this will cause serious and irreparable harm to the other Shareholders and the Accordingly, in the event of such breach, the other Shareholders or the Corporation immediately initiate injunction proceedings, in addition to the penalty that might be claimed paragraph 12.7;
12.9 Payment of any penalty under this section, or any legal action initiated by the Beneficiaries of undertakings set out in this section, may not in any way constitute permission for any default occur or continue;
unenforceable, the other restrictive clauses will not thereby be found to be unenforceable;
12.11 Each of Fortier and Faure expressly declares and acknowledges that the undertakings set out are an essential condition for their holding Shares, that the territories referred to extend territories where the Corporation actively does business, that the undertakings given by hereunder are reasonable in terms of the duration, the territory, the activities and the covered, and that they have had an opportunity to consult their legal advisor (or any other they may see fit to consult) in relation to the transactions and obligations set out herein, but not limited to, the obligations provided in this section 12.
CONDUCT OF BUSINESS
13.1 Beginning on the date hereof, and for as long as Auriga, Medco, Gutrafin, Schroder, SGF, and FSTQ, acting jointly with FRSIM, are Shareholders and hold at least 5% of the Shares on an undiluted basis
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(it being agreed, for greater certainty, that in the case of FSTQ, acting jointly with FRSIM, shall jointly (and not individually) hold at least 5% of the Voting Shares on an undiluted basis) are creditors of the Corporation, any act, decision, resolution or bylaw relating to the hereinafter described may not be taken, made or applied (i) without being first approved by Shareholders who hold at least 75% of the issued Voting Shares and (ii) without being consented to as provided by law or by the articles or bylaws of the Corporation;
13.1.1 any change to the charter of the Corporation;
13.1.2 the Transfer or Alienation of all or a substantial portion of the assets of the Corporation the granting of an option to that effect;
13.1.3 the dissolution or voluntary winding-up of the Corporation, or the consolidation, reorganization, association (by way of partnership, joint venture or otherwise) or merger
the Corporation with another person, or the creation of a Subsidiary;
13.1.4 a declaration of bankruptcy, assignment for the benefit of creditors or filing of a or notice of intent under the Bankruptcy and Insolvency Act of Canada or any other done by the Corporation under a law relating to insolvency or the filing of an or proposed arrangement under the Companies’ Creditors Arrangement Act (C-36), the selection of a trustee, where applicable;
13.1.5 any decision involving a significant change in the nature of the objectives of Corporation, and in particular any change in the place of the head office or the moving
establishment of any of its principal places of business outside Quebec;
13.2 To obtain the prior approval required under 13.1, the Corporation shall send a notice to Shareholders explaining the action, decision, resolution or bylaw that requires their together with all documents needed for making a decision, in accordance with the general of the Corporation. The approval or refusal of each Shareholder shall be exercised by notice to the Corporation within 21 days, or within 10 days if the Corporation specifies that it urgent, following receipt of the complete notice from the Corporation, failing which Shareholder who has not responded shall be deemed to have refused. Each of the Subsidiaries the Corporation shall be bound mutatis mutandis by this section, and the Corporation shall that each of its Subsidiaries complies with it;
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13.3 In the event that a Shareholder, one of the Persons designated by that Shareholder to hold position as a member of the Board of Directors or of the Committees under the provisions section 3 hereof, or any Person related to them within the meaning of Canadian tax (collectively, the ” Person Concerned “) is a party to a significant or substantial contract or contract with the Corporation or one of its subsidiaries (the ” Contract “), or the Concerned is a director, officer, manager or shareholder of a party to the Contract or is related one of them within the meaning of Canadian tax legislation, or the Person Concerned holds other significant or substantial interest in that party to the Contract, such interest shall disclosed to the Board of Directors or the Shareholders of the Corporation, as the case may be, accordance with the procedure set out in section 120 of the Canada Business Corporations Act, adapted to take into account the foregoing provisions, and the Person Concerned (including individual designated by it to sit on the Board of Directors) shall then abstain from voting on matter that might be submitted to the Board of Directors or the Shareholders of the Corporation relation to the signing, cancellation, extension or renal of the Contract, the enforcement of provisions of the Contract, or any recourse, arbitration, demand, action or other arising under the Contract, it being stipulated, however, that the prohibition on voting shall affect matters relating to the day-to-day management of the Contract in the ordinary course business, in respect of which the Person Concerned retains its right to vote after disclosing interest. For greater clarity, SGF is deemed to be related only to the Société Générale Financement du Québec and the corporations under its control.
13.4 No issue of a security of the Corporation shall be made without the prior express agreement of Shareholders representing at least 50% of the capital stock on an undiluted basis.
13.5 No issue of a security of the Corporation shall be made without the prior express agreement of Shareholders representing at least 50% of the capital stock on an undiluted basis.
ARBITRATION
14.1 Arbitration
Subject to their mandatory injunctive remedies, the parties hereto agree to submit to arbitration, the exclusion of the common law courts, any real or apprehended dispute relating to respective rights under this Agreement, in the following manner:
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14.1.1 the applicant shall designate an arbitrator and give notice to the arbitrator and respondent stating the identity of each of them and stating the general nature of the submitted and the remedies sought;
14.1.2 the respondent shall, within 10 days following receipt of the notice, appoint an and inform the applicant and the arbitrator designated under subparagraph 14.1.1, writing, failing which the arbitrator designated under subparagraph 14.1.1 shall sit and paragraphs 14.3 to 14.5 hereinafter shall apply mutatis mutandis to any such situation;
14.1.3 the two arbitrators so appointed shall, within 30 days following the appointment of second arbitrator, designate a third arbitrator who shall be a member in good standing the Barreau du Québec, who shall act as chairperson. If the two arbitrators are unable
within 10 days following the expiry of that time, make application to the court to the third arbitrator. In the event that the Corporation fails to do so within the time
one of the parties could make application at the expense of the Corporation;
14.2 Sole arbitrator
In order to minimize the costs associated with the arbitration, the parties may, by a agreement signed by each of them, agree to appoint a sole arbitrator;
14.3 Procedure
The arbitration procedure shall be as set out in Book VII of the Code of Civil Procedure Quebec. The notice of arbitration given by the applicant shall state whether the applicant that the arbitrators hear the dispute as conciliators and they shall act as such if the states in its written notice that the arbitrator chosen by the respondent consents;
14.4 Hearing and homologation
14.4.1 The arbitrators shall be authorized to set the places, dates and times of hearing and on their own initiative, before or during the hearing, allow any change to the request arbitration and any cross-claim; 14.4.2 Unless there is an agreement to the contrary between the parties, the hearing shall begin later than the 30th day following the appointment of the third arbitrator or, applicable, of the sole arbitrator, and the arbitral award shall be given no later 90 days after that appointment. The arbitrator or arbitrators, as the case may be, 33 subject to the 90 days allowed, shall release their decision in writing to the parties to dispute within 30 days following the conclusion of the hearing, and their award, unanimous or by majority vote, shall set out the reasons for decision and shall be by each of the arbitrators; 14.4.3 When the arbitral award has been duly homologated by the court in accordance article 946 of the Code of Civil Procedure it shall be final and binding on all parties to dispute and on their successors and assigns;
14.5 Replacement
In the event that an arbitrator refuses or is unable to act, another arbitrator shall be designated replace that arbitrator by the person or persons who appointed that arbitrator. If the replacement not made within 15 days following a notice to that effect given to the person or persons who to appoint that arbitrator, the vacancy shall be filled by the court on application by Corporation, or failing such application, on application by one of the parties;
14.6 Fees
The fees of the arbitrators and the other costs shall be borne by the party designated in the award.
TERM OF THE AGREEMENT
15.1 With respect to each of the Shareholders, this Agreement shall be in force and have full provided that (i) all of the Shareholders have signed this Agreement and (ii) the Shareholder Shares; when a Shareholder ceases to hold Shares, this Agreement shall automatically and become void and of no effect with respect to that Shareholder, subject to the then obligations to the Corporation, the Subsidiaries and the other Shareholders under this Agreement;
15.2 This Agreement shall automatically terminate and become void and of no effect with respect all of the Shareholders: (i) if the Corporation declares bankruptcy or makes an authorized assignment of its assets for benefit of its creditors in general, or is dissolved or voluntarily winds up; (ii) if the Shareholders agree to terminate it, by consent; or (iii) if the Corporation completes a public issue of its Shares by prospectus and the Shares are on a recognized North American stock exchange.
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UNDERTAKINGS BY FAURE
16.1 Faure undertakes to comply with each and everyone of the undertakings given by 9079 under Agreement as if the undertakings were given by her, and Faure shall be solidarily liable for said undertakings with 9079.
16.2 Faure undertakes not to do anything that could, directly or indirectly, violate the provisions or spirit of this Agreement.
UNDERTAKINGS BY AZERA
17.1 Azera undertakes to comply with each and everyone of the undertakings given by AMAZE this Agreement as if the undertakings were given by him, Azera Faure shall be solidarily for the said undertakings with AMAZE.
17.2 Azera undertakes not to do anything that could, directly or indirectly, violate the provisions or spirit of this Agreement.
COMPULSORY REDEMPTION
18.1 Notwithstanding any other provision of this Agreement to the contrary, if a Shareholder, than Faure or Gestion (the ” Offeror “):
18.1.1 dies (as the case may be); or
18.1.2 becomes affected by a Permanent Incapacity (in the case of Brisson only); or
18.1.3 becomes bankrupt or insolvent within the meaning of any legislation
insolvency;
the other Shareholders who hold Voting Shares (the ” Co-shareholders “) may then require, notice sent to the Offeror within 30 days following the date on which the applicable event
brought to the attention of the Co shareholders, that the Corporation or the
purchase all of the Participating Shares and Voting Shares held by the Offeror (the ” Redeemed “), for a purchase price equal to the Fair Market Value of the Shares Redeemed on
date of that event, in accordance with the procedure described in section 6. The
shall then determine, within 15 days of the said notice, by a majority of the votes associated the Voting Shares they hold among them, whether the Shares Redeemed will be purchased them personally or by the Corporation. If the Co-shareholders opt to purchase personally,
Shares Redeemed shall be divided pro rata among them in proportion to the number of
Shares they then hold;
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Shares shall be completed within 30 days following the receipt of the notice of exercise of right. On that occasion, the parties concerned must sign all the documents and do everything is appropriate or necessary for that purpose;
18.3 The sale price of a bankrupt Shareholder’s Shares will then be payable to that trustee in bankruptcy within 10 days of receipt by the Corporation of the valuation report the Fair Market Value of the Shares;
18.4 Accordingly, each Shareholder binds and obliges its legal representatives or liquidators or trustee in bankruptcy of that Shareholder, in advance, to Transfer the absolute title to its and to sign and deliver all documents and do everything that is appropriate or necessary in to Transfer its Shares fully and without reservation in accordance with paragraph 18.2 above.
CONFIDENTIALITY
19.1 Each of the Shareholders agrees to maintain the confidentiality of all confidential intelligence information concerning the Corporation and its subsidiaries, as the case may be, to which it have access as a Shareholder or otherwise, and even if it subsequently ceases to be a bound by the provisions of this Agreement, subject to the rights of the Shareholders:
19.1.1 to present all relevant information to any potential acquirer of their Shares, with exception of industrial secrets and any information relating to intellectual property to the Corporation or its subsidiaries, for the purpose of enabling it to determine to acquire the Shares; and
19.1.2 to publish or otherwise advertise, for advertising disclosure purposes, the existence of participation in the capital stock of the Corporation, the nature of the activities, their respective size according to various criteria such as their turnover, or number of their employees;
19.1.3 provide such intelligence and information to their controlling Shareholders and whose functions require that they be aware of it;
without having to obtain the prior written consent of the Corporation, provided that in the referred to in paragraph 19.1.1 hereof, the Shareholder in question shall obtain a agreement from any Person to whom the information is disclosed prior to disclosure;
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19.2 The above undertakings do not apply to intelligence or information that (i) is or becomes in public domain, (ii) is provided to a Shareholder by any third party bound by a confidentiality agreement, or (iii) must be disclosed by law or pursuant to a judgment, decision order or a court of competent jurisdiction.
REDEMPTION OF CLASS DSHARE ISSUED TO FORTIER
20.1 In the exercise of the right of redemption associated with the Class D share of the capital stock the Corporation issued to Fortier, the Corporation shall pay the redemption price of the Class share (the ” Redemption Price “) within 10 days following the delivery of the audited annual financial statements to the Corporation by the Auditors for the year during the right is exercised (the ” Year of Exercise “), it being agreed, however, that any contrary provision in the bylaws of the Corporation, Fortier may not require the to redeem the said Class D share before December 20, 2003. Payment of the Redemption shall be made in several instalments if the Redemption Price is greater than 7.5% of the
statements (the ” Maximum Payment “). In that case, the Corporation shall pay Fortier Maximum Payment and the payment of the balance of the full Redemption Price upon receipt
the audited annual financial statements of the Corporation for the year in question;
20.2 The Class D share redeemed by the Corporation under paragraph 20.1 shall be delivered to
Corporation and cancelled upon payment of the first instalment of the Redemption Price.
ANTI-DILUTION OPTION
21.1 In the event that the Corporation issues Voting Shares, one or more times, for a total
greater than $2,000,000 at an average Share price lower than $1.85 (excluding any issue of
Shares reserved for employees of the Corporation, under a remuneration policy of Corporation, that being 360,270 Class A Shares to date) until the transfer or listing of all Shares the Corporation, each of Medco, Auriga, Schroder, Popowski, Gutrafin and Onami ” Beneficiaries “) will then have the option (the ” Option “) to subscribe and purchase, in whole in part, a number of Voting Shares of the capital of the Corporation determined for each of according to the following formula (the ” Shares under Option “): (A/B) -C = D or:
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A = the total amount invested by the Beneficiary for the subscription of Voting Shares the subscription agreement between Medco, Auriga, Schroder, Popowski, Gutrafin, and the Corporation dated September 11, 2003 (the ” 2003 Subscription Agreement “); B = the share price for the new Voting Share issue; C = the total number of Voting Shares subscribed by that Beneficiary under the Subscription Agreement; and D = the number of Shares under Option.
21.2 Once the Corporation issues Voting Shares, one or more times, for a total amount greater $2,000,000, the Option may be exercised by the Beneficiaries as many times as there are issues Voting Shares by the Corporation at a price lower than $1.85, whether it is below or above $2,000,000 threshold;
21.3 The price for exercising the Option, that is, the issue price for the Shares under Option, shall be total par value of $1.00, for each exercise of an Option, with no other consideration or cost for Beneficiaries;
21.4 If the terms of article 21.1 are met, the Option may be exercised by the Beneficiaries on the of any new issue of Voting Shares;
21.5 To exercise the Option, each Beneficiary shall give the notice in writing to the Corporation
attach $1.00 to the notice in payment of the issue price of the Shares under Option;
21.6 On the date of receipt by the Corporation of the notice of exercise and payment of the issue of the Shares under Option, the Corporation shall issue the Shares under Option, in the same
as the shares issued to a new entrant, to the Beneficiaries, and shall forthwith deliver a
representing the Shares to them.
21.7 If, at any time before any exercise of the Option, the Voting Shares of the capital stock of
21.7.1 by a reduction or adjustment to the number of outstanding Voting Shares, as a result of consolidation; 21.7.2 by an increase in the number of outstanding Voting Shares, as a result of a split; 21.7.3 by a change, reclassification, redesignation, conversion or consolidation of Voting with the result that they are then another class of shares;
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21.7.4 by a merger or joining with another legal person or the transfer of all or virtually all of assets of the Corporation to another legal person, the effect of which is the issue of and participating shares in the legal person resulting from the merger or joining or in transferee of the assets of the Corporation; or 21.7.5 by any other reorganization of the capital,
a proportional adjustment or change will be made in the number and price of the securities to issued at the time of exercise of the Option, to ensure that after the occurrence of such an the Beneficiaries are in a position that is no more or less favourable than immediately before occurrence of the event. Fractions of shares resulting from the changes referred to above will be taken into account.
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Amendments to the Unanimous Shareholders Agreement
RANSLATION]
TO THE BIOARTIFICIAL GEL TECHNOLOGIES (BAGTECH) INC.
SHAREHOLDERS AGREEMENT
dated September 11, 2003
(the “Unanimous Agreement”)
undersigned shareholders agree to amend the Unanimous Agreement as follows:
sections 3.1 and 3.2 of the Unanimous Agreement with the following:
3.1 `Subject to the following provisions, the Shareholders agree, during the term of this to take the necessary measures and to use the voting rights associated with the Shares they hold elect and continue eight Directors on the Board of Directors.
3.2 On the date of this Agreement, the Shareholders agree that the Board of Directors shall
composed of representatives appointed by the Shareholders as hereinafter set out:
Group A 2 Directors (including Marie-Pierre Faure)
Group B 3 Directors (including one appointed jointly by FSTQ and FRSIM,
appointed by SGF and one appointed by Auriga)
Group C 2 Directors (including André Lamotte) and 1 designated by Bagadine
In addition, FSTQ and FRSIM may jointly appoint an observer to the Board of
who shall be entitled to receive all notices of meetings and all documents
such notices.
On the date of this Agreement and for as long as the majority of the Shareholders agree, Colin Bier shall act as Chair of the Board of Directors. Colin Bier is a appointed by the Group C Shareholders.
section 4.6(a) to the Unanimous Agreement:
4.6(a) Notwithstanding the provisions of this Agreement, Bagadine may, at any time, transfer its and Convertible Securities, in whole or in part, as the case may be, that it holds without having offer them to the other Shareholders, provided that such Transfer is made to the Chevrillon &Associés and the natural persons or legal persons that are (i) members of the Chevrillon &Associés; (ii) shareholders of the Groupe Chevrillon &Associés; or (iii) members a management body of the Groupe Chevrillon &Associés or having a management body
hereby as the partnership Chevrillon &Associés, the natural persons or legal persons that direct or indirect shareholders, or members of a management body of the partnership Chevrillon Associés or its parent, sibling or children companies, provided that:
4.6.1 the transferee of the said Shares confirms to the Shareholders its irrevocable consent to
bound by the provisions of this Agreement in the form of Schedule 4.2;
4.6.2 the Shares and Convertible Securities transferred by Bagadine remain subject to provisions of the Agreement; and
4.6.3 that the assignment does not operate to affect the status of private company within meaning of the Securities Act (Quebec);
Appendix 2
Corporations Act, RSA 2000, c B-9
146 “ Unanimous shareholder agreement”
A unanimous shareholder agreement may provide for any or all of the following:
(a) the regulation of the rights and liabilities of the shareholders,
shareholders, among themselves or between themselves and any other party
the agreement;
(b) the regulation of the election of directors;
(c) the management of the business and affairs of the corporation,
the restriction or abrogation, in whole or in part, of the powers of the directors;
(d) any other matter that may be contained in a unanimous
agreement pursuant to any other provision of this Act.
If a unanimous shareholder agreement is in effect at the time a share is issued by
corporation to a person other than an existing shareholder,
(a) that person is deemed to be a party to the agreement whether or not
person had actual knowledge of it when the share certificate was issued,
(b) the issue of the share certificate does not operate to terminate
agreement, and
unanimous shareholder agreement, that person may rescind the contract
which the shares were acquired by giving a notice to that effect to
corporation within a reasonable time after the person receives
knowledge of the unanimous shareholder agreement.
If a unanimous shareholder agreement is in effect when a person who is not a party
the agreement acquires a share of a corporation, other than under subsection (2),
(a) the person who acquired the share is deemed to be a party to
agreement whether or not the person had actual knowledge of it when
person acquired the share, and
(b) neither the acquisition of the share nor the registration of that person as
shareholder operates to terminate the agreement.
If
(a) a person referred to in subsection (3) is a protected purchaser as
in the Securities Transfer Act and did not have actual knowledge of
unanimous shareholder agreement, and
(b) the person’s transferor’s share certificate did not contain a reference
the unanimous shareholder agreement,
that person may, within 30 days after the person acquires actual knowledge of
existence of the agreement, send to the corporation a notice of objection to
agreement.
If a person sends a notice of objection under subsection (4),
(a) the person is entitled to be paid by the corporation the fair value of
shares held by the person, determined as of the close of business on the day
which the person became a shareholder, and
(b) section 191(4) and (6) to (20) apply, with the necessary changes, as if
notice of objection under subsection (4) were a written objection sent to
corporation under section 191(5).
A transferee who is entitled to be paid the fair value of the transferee’s shares
subsection (5) also has the right to recover from the transferor by action the amount
which the value of the consideration paid for the transferee’s shares exceeds the
value of those shares.
A shareholder who is a party or is deemed to be a party to a unanimous
agreement has all the rights, powers and duties and incurs all the liabilities of a
of the corporation to which the agreement relates to the extent that the
corporation, and the directors are thereby relieved of their duties and
including any liabilities under section 119 or any other enactment, to the same extent.
A unanimous shareholder agreement may not be amended without the written consent
all those who are shareholders at the effective date of the amendment.
A unanimous shareholder agreement may exclude the application to the agreement of
but not part of this section.
Appendix 3
list of provisions of the Bagtech Unanimous Shareholders Agreement
limit the directors’ power:
· Under paragraph 3.2, “for as long as the majority of the Shareholders so agree,
Bier shall act as Chair of the Board of Directors.” This means that the power
appoint the Chair of the Board is at least temporarily removed from the directors.
· Subparagraph 3.4.1 requires that the directors hold “at least six meetings of
Board of Directors each year with a maximum of two months between meetings.”
· Subparagraph 3.4.3 provides that “the presence of a representative of each of
A, Group be and Group C is needed in order to establish quorum for any meeting
the Board of Directors.”
· Paragraphs 4.2 and 4.3 provide for two situations in which certain shareholders
be authorized, on certain conditions, to transfer their shares, and “the Directors
be required to authorize such Transfer notwithstanding any other provision of
charter or bylaws of the Corporation.”
· Paragraph 10.2 provides that “in the event that the public issue has not been made
December 31, 2008, and the transfer of all of the Shares or assets of the
Institutional Shareholders shall be retained with the mission of assisting them
studying” certain issues.
· Paragraphs 11.5 and 18.1 provide that if a shareholder dies, becomes affected by
permanent incapacity or becomes bankrupt or insolvent, “the Co-shareholders
then determine… by a majority of the votes… whether the Shares Redeemed
be purchased by them personally or by the Corporation.”
· Paragraph 13.4 stipulates that “no issue of a security of the Corporation shall
made without the prior express agreement of the Shareholders representing at
50% of the capital stock on an undiluted basis.”
list of the provisions of the agreement that are in the nature of a USA
6(3) of the CBCA
that under subsection 6(3) of the CBCA, an agreement signed by all the shareholders
the number of votes required in order for the shareholders to adopt certain
as an exception, enjoy the status of a USA, even if it does not restrict or remove
of the administrators. However, this is the only exception, under both the
and the Canadian legislation.
· Paragraph 13.1 provides that several decisions that should ordinarily be ratified
special resolution of the shareholders (and thus by a two-thirds vote,
subsection 2(1) of the CBCA) must be agreed to by a three-quarters vote.
2012 TCC 120
FILE NO.: 2009-3734(IT)G
OF CAUSE: PRICE WATERHOUSE COOPERS INC. ACTING
THE CAPACITY OF TRUSTEE IN
OF BIOARTIFICIAL GEL
(BAGTECH) INC. v. HER MAJESTY THE QUEEN
OF HEARING: Montréal, Quebec
OF HEARING: October 17, 2011
FOR JUDGMENT BY: The Honourable Justice Paul Bédard
OF JUDGMENT: April 12, 2012
Counsel for the Appellant: Isabelle Pillet
Counsel for the Respondent: Anne-Marie Boutin
Marie-Aimée Cantin
OF RECORD:
For the Appellant:
Name: Isabelle Pillet
Firm: De Man, Pilotte
Montréal, Quebec
For the Respondent: Myles J. Kirvan
Deputy Attorney General of Canada
Ottawa, Canada
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