APPENDIX C EXAMPLE OF ESTATE FREEZE SHARE PROVISIONS INCLUDING PRICE ADJUSTMENT CLAUSE Corporation having two classes of shares: 1. Common Shares, and 2. Special Shares (non-voting, redeemable, retractable and including a price adjustment clause) Ontario Corporation Articles of Incorporation paragraph 7; Canada Corporation Articles of Incorporation paragraph 3: A. CLASS A SPECIAL SHARES (a) Voting: The Class A Special Shares are voting shares and the holders of Class A Special Shares are entitled to one vote per Class A Special Share. (b) Redemption: The Class A Special Shares are redeemable as follows: i. The directors may determine, at any time and from time to time, to redeem the whole or any part of the then outstanding Class A Special Shares (such share or shares are referred to as the "Redeemed Share" or "Redeemed Shares" as the case may be); ii. The procedure for such redemption, including the giving of notice, if any, shall be determined by the directors, acting reasonably; iii. The Class A Special Shares may be redeemed either on a pro-rata basis or otherwise; iv. The redemption price shall be an amount per Redeemed Share equal to: aa. the fair value of the property or past service in consideration of which the share was issued determined by the directors in accordance with section 23 of the Business Corporations Act; Plus bb. all declared and unpaid non-cumulative cash dividends on such share; the aggregate redemption price is referred to, in the case of each registered
holder, as the "Redemption Amount"; v. On or after the date specified for redemption (the "Redemption Date") the registered holders of the Redeemed Shares shall be entitled to payment of the Redemption Amount on presentation and surrender at the Corporation's registered office or other place designated by the directors in the notice of redemption, of certificates for the Redeemed Shares, endorsed for transfer to the Corporation; vi. If less than all of the Class A Special Shares represented by any certificate are redeemed, the registered holder shall be entitled to receive a new certificate for the number of shares represented by the original certificate which are not redeemed; vii. From and after the Redemption Date, the holders of the Redeemed Shares shall cease to be entitled to dividends and shall not be entitled to exercise any of the rights of shareholders in respect of the Redeemed Shares unless the Corporation has defaulted on payment of the Redemption Amount. (c) Retraction: The Class A Special Shares are retractable as follows: i. Any holder of Class A Special Shares shall be entitled to require the Corporation to redeem, at any time and from time to time, all or any of the Class A Special Shares registered in the name of such holder (such share or shares are referred to as the "Retracted Share" or "Retracted Shares" as the case may be); ii. A Certificate or Certificates for the Retracted Shares, endorsed for transfer to the Corporation, shall be tendered to the Corporation at the registered office of the Corporation together with a notice in writing specifying aa. bb. that the registered holder desires to have the Class A Special Shares represented by such certificate(s) redeemed, or the number of shares which the holder desires to have redeemed if such number is less than the total number of shares represented by the certificate(s), and the business day ("Retraction Date") on which the holder desires to have the Corporation redeem such shares; iii. The Retraction Date shall not, without the consent in writing of the Corporation, be less than 30 days after the day on which the notice in writing is given to the Corporation. iv. The Corporation shall redeem the Retracted Shares on the Retraction Date;
v. The retraction price shall be the Redemption Amount; vi. If less than all of the Class A Special Shares represented by any certificate are redeemed, the registered holder shall be entitled to receive a new certificate for the number of shares represented by the original certificate which are not redeemed; vii. From and after the Retraction Date, the holders of the Retracted Shares shall cease to be entitled to dividends and shall not be entitled to exercise any of the rights of shareholders in respect of the Retracted Shares unless the Corporation has defaulted on payment of the Redemption Amount. (d) Dividends: The Corporation may: i. from time to time and in the absolute discretion of the directors; ii. pay non-cumulative dividends on the Class A Special Shares at a rate per share per annum not to exceed 7% of the amount equal to the amount recorded in the stated capital account maintained in respect of the Class A Special Shares divided by the number of Class A Special Shares outstanding. The holders of the Class A Special Shares shall not be entitled to any dividends other than or in excess of the non-cumulative dividends provided for in this paragraph. B. PURCHASE FOR CANCELLATION The Common Share and the Class A Special Shares, or any of them, may be purchased, in whole or part, for cancellation by the Corporation at its option and at any time and from time to time as follows: (a) Such purchase may be pursuant to tenders or, with the unanimous consent of the holders of all issued Common Shares and Class A Special Shares, as applicable, by private contract; (b) The purchase price shall be the lowest price at which, in the opinion of the directors, such shares are obtainable but, in the case of the Class A Special Shares, not exceeding the Redemption Amount; (c) If, in response to an invitation for tenders, shareholders submit tenders at the same price for more shares than the directors propose to purchase, then such tenders shall be accepted, if at all, on a pro-rata basis.
E. PRICE ADJUSTMENT Where a person, firm or corporation subscribes for Class A Special Shares and the consideration for the issue of such shares is other than a cash payment, the subscription price for any such shares shall be the tax cost to the subscribing Shareholder of the property transferred to the Corporation by the subscribing shareholder in satisfaction of the subscription price (the "transferred property"). If, notwithstanding the manner in which the Corporation and subscribing shareholder have agreed to determine the tax cost of the transferred property: (a) There shall be issued to either the Corporation or the subscribing shareholder a notice of assessment or reassessment pursuant to any taxing statute, which assessment or reassessment is based upon an assumption of fact or a finding by any taxing authority that the subscribing shareholder's tax cost of any transferred property is different from that determined by the Corporation and the subscribing shareholder; or (b) Any taxing authority notifies either the Corporation or the subscribing shareholder that it intends to issue such notice of assessment or reassessment; then, subject to the rights of the Corporation or the subscribing shareholder, if any, to object to or appeal such assessment to any authority, the subscription price of the shares issued in consideration of the transferred property as at the date of the issue of such shares shall be deemed to be and to have always been the value of the transferred property as finally agreed to between such taxing authority and the Corporation or the subscribing shareholder, as the case may be, or where either the Corporation or the subscribing shareholder has objected to or appealed any such assessment or reassessment, as finally determined by such authority. Such value, however determined, shall be substituted for the value originally determined, and the subscription price and manner of payment shall be adjusted accordingly. F. LIQUIDATION, DISSOLUTION OR WINDING-UP In the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or other distribution of property of the Corporation among shareholders for the purpose of winding-up its affairs: (a) Class A Special Shares - Priority: The holders of the Class A Special Shares shall be entitled to receive from the property of the Corporation a sum equivalent to the aggregate Redemption Amount of all of the Class A Special Shares held by them respectively before any amount shall be paid or any property of the Corporation distributed to the holders of the Common Shares. The holders of the Class A Special Shares shall not be entitled to share in any further distribution of the property of the Corporation.
(b) Net Equity: The holders of the Common Shares shall be entitled to receive the remaining property of the Corporation.